VerifyMe Inc

Previous wording

Precision Logistics: Traditionally, most shipping businesses utilize the carrier’s data platform for tracking which generally informs the shipping enterprise, and their customers, when a package is in transit, when a package has been delivered, and some level of detail of the path which a package traveled. We believe taking the data feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor of our service center gives us a competitive advantage against other third-party platforms that solely rely on the carrier’s data feeds. We utilize a variety of input sources beyond the carrier’s data feed. Our proprietary “Predictive Analytics” technology is fed real-time meteorology data, traffic and road construction data, and power grid information to help predict issues before they happen. If an alert is created the shipper and our service center will work to address the issue and save the perishable product from spoiling, saving the shipper significant costs and reducing the need to replace products that are no longer viable. We have meteorologists on staff that track world-wide weather patterns to address predicted issues before they happen. We believe the company has two significant areas of opportunity. First, our services are specifically designed to address the needs of small and medium size agriculture, food and beverage companies. Second, the pharmaceutical and healthcare industries represent significant opportunities due to the enhanced tracking and customer service associated with distribution of these products. We are focusing our sales emphasis on those industries. In addition, we believe that combining our authentication solutions into the product offering for Precision Logistics clientele, gives our Precision Logistics segment a competitive advantage to generate revenue by enhancing clients’ ability to grow revenue, gain business intelligence and build brand loyalty.

Current wording

Precision Logistics: Traditionally, most shipping businesses utilize the carrier’s data platform for tracking which generally informs the shipping enterprise, and their customers, when a package is in transit, when a package has been delivered, and some level of detail of the path which a package traveled. We believe taking the data feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor of our service center gives us a competitive advantage against other third-party platforms that solely rely on the carrier’s data feeds. We utilize a variety of input sources beyond the carrier’s data feed. Our proprietary “Predictive Analytics” technology is fed real-time meteorology data, traffic and road construction data, and power grid information to help predict issues before they happen. If an alert is created the shipper and our service center will work to address the issue and save the perishable product from spoiling, saving the shipper significant costs and reducing the need to replace products that are no longer viable. We have meteorologists on staff that track world-wide weather patterns to address predicted issues before they happen. We believe the company has two significant areas of opportunity. First, our services are specifically designed to address the needs of small and medium size agriculture, food and beverage companies. Second, the pharmaceutical and healthcare industries represent significant opportunities due to the enhanced tracking and customer service associated with distribution of these products. We are focusing our sales emphasis on those industries.

Previous wording

Building logistics infrastructure is a capital-intensive process as the investment is locked in for a considerably long period. Due to the current economic environment, and our cost competitive offering, we believe companies will opt to outsource their precision logistics services to reduce their operational costs. The outsourcing of supply chain related and other logistics operations to service providers such as ours allows companies to improve the efficiency of their businesses by focusing their resources on core competencies.

Current wording

Building logistics infrastructure is a capital-intensive process as the investment is locked in for a considerably long period. Due to the current economic environment, and our cost competitive offering, we believe companies may opt to outsource their precision logistics services to reduce their operational costs. The outsourcing of supply chain related and other logistics operations to service providers such as ours allows companies to improve the efficiency of their businesses by focusing their resources on core competencies. We believe outsourcing this function to our Precision Logistics segment provides the ideal solution for all parties involved.

Previous wording

Precision Logistics has a direct partnership with a major global carrier company. This partnership includes the ability for both companies to white label each partner’s services. In addition, Precision Logistics has data feeds directly from the carrier into our proprietary logistics optimization software which provides shippers much more detailed information and predictive analytics on their shipment versus a standard shipping code look up which is provided by the carrier.

Current wording

Precision Logistics has a direct partnership with a major global carrier company and has data feeds directly from the carrier into our proprietary logistics optimization software which provides shippers much more detailed information and predictive analytics on their shipment versus a standard shipping code look up which is provided by the carrier. In addition to relying on this strategic partner for shipping services we have a service agreement pursuant to which this strategic partner resells our services to its customers under a “white label” arrangement. Under this arrangement we provide our logistics services to our strategic partner’s customers in exchange for a pre-negotiated service fee per shipment. Our strategic partner has begun to provide its own service offerings to its customers and while we will continue to offer our premium services, we expect a reduction in business for this service offering over time. This does not affect our proactive services, and we expect to see growth under that service offering as we focus on providing proactive services to customers directly.

Previous wording

Consolidated revenue increased $98 thousand or 2% during the first quarter of 2024 compared to the first quarter of 2023. The increase is primarily due to organic growth in our premium services in the Precision Logistics segment offsetting a decline in our proactive services related to a discontinued relationship with some lower margin customers. Revenue in our Authentication segment decreased due to timing of a significant customer order in 2023 that did not recur in the three months ended March 31, 2024.

Current wording

Consolidated revenue increased $17 thousand during the second quarter of 2024 compared to the second quarter of 2023 primarily due to an increase in organic growth in our premium services in the Precision Logistics segment offsetting a decline in our proactive services due to decline in volumes for customers. Revenue in our Authentication segment decreased due to the timing of shipments delayed until the third quarter of 2024.

Previous wording

Gross profit for the three months ended March 31, 2024, was $2,260 thousand, compared to $1,521 thousand for the three months ended March 31, 2023. The resulting gross margin was 39% for the three months ended March 31, 2024, compared to 27% for the three months ended March 31, 2023. The gross profit increase relates to the increased premium services revenue which has higher margins as well as process improvements to increase proactive services margins in the Precision Logistics segment. With the acquisition of Trust Codes in March 2023, providing custom software, our margins in the Authentication segment also increased.

Current wording

Gross profit for the three months ended June 30, 2024, was $2,090 thousand, compared to $1,586 thousand for the three months ended June 30, 2023. The resulting gross margin was 39% for the three months ended June 30, 2024, compared to 30% for the three months ended June 30, 2023. The gross profit increase relates to the increased premium services revenue which has higher margins as well as process improvements to increase proactive services margins in the Precision Logistics segment.

Previous wording

Research and development expenses were $55 thousand and $8 thousand for the three months ended March 31, 2024, and 2023, respectively.

Current wording

Research and development expenses were $5 thousand and $10 thousand for the three months ended June 30, 2024, and 2023, respectively.

Previous wording

Sales and marketing expenses decreased by $111 thousand to $388 thousand for the three months ended March 31, 2024, compared to $499 thousand for the three months ended March 31, 2023. The decrease is primarily related to a reduction in employees and consultants.

Current wording

Sales and marketing expenses decreased by $317 thousand to $210 thousand for the three months ended June 30, 2024, compared to $527 thousand for the three months ended June 30, 2023. The decrease is primarily related to a reduction in employees and consultants in the Authentication segment, a reduction in stock compensation in Precision Logistics, partially offset by an increase in employees in Precision Logistics.

Previous wording

Interest expense, net was $38 thousand for the three months ended March 31, 2024, compared to $42 thousand for the three months ended March 31, 2023.

Current wording

Interest expense, net was $42 thousand for the three months ended June 30, 2024, compared to $46 thousand for the three months ended June 30, 2023.

Previous wording

Consolidated net loss for the three months ended March 31, 2024, and 2023 was $553 thousand and $1,580 thousand, respectively. The decreased loss was primarily related to an increase in gross profit. The resulting consolidated loss per share for the three months ended March 31, 2024, and three months ended March 31, 2023, was $0.05 and $0.17 per diluted share, respectively.** **

Current wording

Consolidated net loss for the three months ended June 30, 2024, and 2023 was $346 thousand and $882 thousand, respectively. The decreased loss was primarily related to an increase in gross profit. The resulting consolidated loss per share for the three months ended June 30, 2024, and three months ended June 30, 2023, was $0.03 and $0.09 per diluted share, respectively.** **

Previous wording

Segment management and technology expenses increased by $238 thousand to $1,343 thousand for the three months ended March 31, 2024, compared to $1,105 thousand for the three months ended March 31, 2023. The increase relates primarily to the acquisition of Trust Codes Global in March 2023 and to lower capitalized labor costs. Amortization and depreciation expense of $299 thousand for Q1 2024 compared to $282 thousand in Q1 2023.

Current wording

Segment management and technology expenses increased by $504 thousand to $2,860 thousand for the six months ended June 30, 2024, compared to $2,356 thousand for the six months ended June 30, 2023. The increase relates primarily to the acquisition of Trust Codes Global in March 2023, lower capitalized labor costs and severance expense of $129 thousand. Amortization and depreciation expense of $599 thousand for the six months ended June 30, 2024 compared to $540 thousand for the six months ended June 2023.

Previous wording

General and administrative expenses decreased by $292 thousand to $1,121 thousand for the three months ended March 31, 2024, compared to $1,413 thousand for the three months ended March 31, 2023. The decrease relates primarily to the acquisition costs of Trust Codes Global and severance expense of $303 thousand in March 2023.

Current wording

General and administrative expenses decreased by $234 thousand to $2,015 thousand for the six months ended June 30, 2024, compared to $2,249 thousand for the six months ended June 30, 2023. The decrease relates primarily to the deal costs related to the acquisition of the Trust Codes Global business of $278 thousand, as well as severance expense in 2023, partially offset by an increase in stock-based compensation for the six months ended June 30, 2024.

Previous wording

Cash used in investing activities was $110 thousand during the three months ended March 31, 2024, compared to $621 thousand during the three months ended March 31, 2023. The decrease in spend in investing activities related to the acquisition of the Trust Codes Global business in the three months ended March 31, 2023.

Current wording

Cash used in investing activities was $191 thousand during the six months ended June 30, 2024, compared to $858 thousand during the six months ended June 30, 2023. The decrease in spending in investing activities related to a decrease in capitalized software costs and a decrease in acquisition costs. The acquisition of the Trust Codes Global business was in March 2023.

Previous wording

Cash used in financing activities during the three months ended March 31, 2024, was $106 thousand compared to cash provided by financing activities during the three months ended March 31, 2023 of $423 thousand. The decrease relates mainly to the proceeds from the line of credit of $500 thousand that occurred in the three months ended March 31, 2023.

Current wording

Cash used in financing activities during the six months ended June 30, 2024, was $313 thousand compared to cash provided by financing activities during the six months ended June 30, 2023 of $608 thousand. The decrease relates mainly to the proceeds from the line of credit of $800 thousand that occurred in the six months ended June 30, 2023.

Previous wording

On August 25, 2023, the Company entered into a Convertible Note Purchase Agreement with certain investors for the sale of convertible promissory notes for the aggregate principal amount of $1,100 thousandof which $475 thousand waspurchased by relating parties including certain members of management and the Board of Directors. The notes are subordinated unsecured obligations of the Company and accrue interest at a rate of 8% per year payable semiannually in arrears on February 25 and August 25 of each year, beginning on February 25, 2024. The notes will mature on August 25, 2026 unless earlier converted or repurchased at a conversion price of $1.15 per share of common stock. The Company may not redeem the notes prior to the maturity date. As of March 31, 2024 the amount outstanding on the convertible debt was $1,100 thousand and included in Convertible Note, and Convertible Note – related party on the accompanying Consolidated Balance Sheets. The Company has accrued interest expense of $9 thousand as of March 31, 2024.

Current wording

On August 25, 2023, the Company entered into a Convertible Note Purchase Agreement with certain investors for the sale of convertible promissory notes for the aggregate principal amount of $1,100 thousandof which $475 thousand waspurchased by relating parties including certain members of management and the Board of Directors. The notes are subordinated unsecured obligations of the Company and accrue interest at a rate of 8% per year payable semiannually in arrears on February 25 and August 25 of each year, beginning on February 25, 2024. The notes will mature on August 25, 2026 unless earlier converted or repurchased at a conversion price of $1.15 per share of common stock. The Company may not redeem the notes prior to the maturity date. As of June 30, 2024 the amount outstanding on the convertible debt was $1,100 thousand and included in Convertible Note, and Convertible Note – related party on the accompanying Consolidated Balance Sheets. The Company has accrued interest expense of $31 thousand as of June 30, 2024.

Previous wording

Of the proceeds of $2.0 million from the Term note, we used $1.8 million to settle debt outstanding issued in connection with the PeriShip Global acquisition, including the redemption of 61,000 shares of our common stock. As of March 31, 2024, our short-term debt outstanding under the Term note was $0.5 million and total long-term debt outstanding under the Term note was $0.8 million.

Current wording

Of the proceeds of $2.0 million from the Term note, we used $1.8 million to settle debt outstanding issued in connection with the PeriShip Global acquisition, including the redemption of 61,000 shares of our common stock. As of June 30, 2024, our short-term debt outstanding under the Term note was $0.5 million and total long-term debt outstanding under the Term note was $0.6 million.

Previous wording

In December 2023, the Company’s Board of Directors approved a new share repurchase program to allow the Company to spend up to $0.5 million to repurchase shares of its common stock so long as the price per share does not exceed $1.00 until December 14, 2024. During the three months ended March 31, 2024, the Company repurchased 1,000 shares of common stock for $1 thousand under the Company’s current program.

Current wording

In December 2023, the Company’s Board of Directors approved a new share repurchase program to allow the Company to spend up to $0.5 million to repurchase shares of its common stock so long as the price per share does not exceed $1.00 until December 14, 2024. During the six months ended June 30, 2024, the Company repurchased 1,000 shares of common stock for $1 thousand under the Company’s current program.