VerifyMe(US:VRME)2023-11-08 21:01Financial Performance - For the three months ended September 30, 2023, total revenue was $5,604 thousand, an increase from $5,215 thousand in the same period of 2022, representing a growth of 7.5%[65] - Proactive services revenue for the nine months ended September 30, 2023, was $12,742 thousand, up from $7,341 thousand in 2022, indicating a significant increase of 73.5%[66] - Consolidated revenue increased by $6,727 thousand to $16,600 thousand for the nine months ended September 30, 2023, compared to $9,873 thousand for the same period in 2022, primarily due to the acquisition of PeriShip Global[191] - Gross profit for the three months ended September 30, 2023, was $2,292,000, up 23.5% from $1,855,000 in the same period of 2022[139] - Gross profit for the nine months ended September 30, 2023, was $5,866 thousand, resulting in a gross margin of 35%, down from 37% in 2022[192] - The company reported a net loss of $930,000 for the three months ended September 30, 2023, compared to a net loss of $557,000 for the same period in 2022[139] - Consolidated net loss for the nine months ended September 30, 2023, was $3,392 thousand, a significant decrease from $14,506 thousand in 2022, with loss per share improving from $1.76 to $0.35[198] Segment Information - VerifyMe operates through two segments: Precision Logistics and Authentication, with Precision Logistics being the primary revenue driver[34] - The company recognizes revenue in its Precision Logistics segment when packages are delivered, with no variable considerations in the transaction fee[53] - In the Authentication segment, revenue is recognized when products are shipped or delivered, with terms typically ranging between 30 and 90 days[54] - The Precision Logistics segment generated revenue of $5,457,000 for the three months ended September 30, 2023, compared to $5,036,000 in the same period of 2022, reflecting an 8.4% increase[139] - The Precision Logistics segment focuses on small and medium-sized agriculture, food, and beverage companies, as well as the pharmaceutical and healthcare industries, which represent significant growth opportunities[155] Acquisitions - The acquisition of Trust Codes Global on March 1, 2023, was valued at approximately $2,113 thousand, including $625 thousand in stock consideration and $1,125 thousand in contingent consideration[72][74] - Trust Codes Global generated $219 thousand in revenue from the acquisition date through September 30, 2023[72] - The company acquired assets and business from Trust Codes Limited on March 1, 2023, establishing intangible assets of $701 thousand and goodwill of $1,383 thousand[124] - The company acquired Trust Codes Global for approximately $1.0 million, including $0.36 million in cash and $0.65 million in stock, with potential earn-out consideration estimated at $1.1 million[168] - The acquisition of PeriShip Global was completed for $10.5 million, consisting of $7.5 million in cash, a $2.0 million promissory note, and $1.0 million in stock consideration, enhancing the Precision Logistics segment[169] Cash and Debt - As of September 30, 2023, cash and cash equivalents totaled $2,944,000, down from $3,348,000 as of December 31, 2022, representing a decrease of approximately 12.1%[37] - The company has a $1 million revolving line of credit with PNC Bank, which was extended to December 14, 2023, and incurs interest at Daily SOFR plus 2.85%[114] - As of September 30, 2023, the company had $0.5 million in short-term debt and $1.0 million in long-term debt outstanding under the Term Note, with a repayment of $375 thousand made during the nine months ended September 30, 2023[116] - The company entered into a Convertible Note Purchase Agreement on August 25, 2023, for $1,100 thousand, accruing interest at 8% per year, maturing on August 25, 2026[119] Expenses - General and administrative expenses rose by $541 thousand to $2,754 thousand in Q3 2023, primarily due to the acquisition of Trust Codes Global, severance expenses of $247 thousand, and additional stock compensation of $115 thousand[185] - Research and development expenses decreased to $5 thousand in Q3 2023 from $39 thousand in Q3 2022, indicating a significant reduction in investment in this area[186] - Research and development expenses decreased to $23 thousand for the nine months ended September 30, 2023, down from $73 thousand in 2022[194] - Interest expense, net increased to $127 thousand for the nine months ended September 30, 2023, compared to $54 thousand in 2022, due to increased borrowings[196] Stock and Compensation - The company has approximately 8,385,000 anti-dilutive shares for the three and nine months ended September 30, 2023, which includes 4,629,000 shares issuable upon exercise of warrants[59] - The company issued 506,194 restricted stock awards during the nine months ended September 30, 2023, with a grant date fair value of $1.45[108] - Total unrecognized share-based compensation cost related to unvested restricted stock awards is $411 thousand, expected to be recognized over a weighted-average period of less than one year[108] - The balance of unvested performance restricted stock units as of September 30, 2023, was 1,438,760 shares, with a total unrecognized share-based compensation cost of $1,373 thousand, to be recognized over a weighted-average period of 1.9 years[112] - The company expensed $177 thousand related to restricted stock awards for the three months ended September 30, 2023, compared to $33 thousand for the same period in 2022, indicating a significant increase of 436.4%[90] Risks and Uncertainties - The company’s operations are subject to significant risks and uncertainties, as detailed in the "Risk Factors" section of the report[34] - The current economic environment presents challenges, with major global carriers reducing costs and staff, which may create outsourcing opportunities for the company's Precision Logistics services[156] Management Changes - Changes in executive management included the appointment of Adam Stedham as CEO and President, effective June 19, 2023, following the resignation of Keith Goldstein and Margaret Gezerlis[171][172][173]