Business Overview and History

VerifyMe, Inc. is a trailblazing company that provides brand owners with specialized solutions for supply chain traceability, authentication, anti-counterfeiting, and data-rich brand enhancement. Founded in 1999 and headquartered in Lake Mary, Florida, VerifyMe has emerged as a leading player in the brand protection and logistics industries, leveraging its proprietary software and cutting-edge technologies to empower its clients.

VerifyMe's journey began in 1999 when it was incorporated in the state of Nevada. The company's initial focus was on developing innovative technology solutions to combat counterfeiting and ensure product authenticity. Over the years, VerifyMe has expanded its portfolio, acquiring complementary businesses and enhancing its offerings to better serve its clients.

VerifyMe operates two primary business segments: Precision Logistics and Authentication. The Precision Logistics segment specializes in predictive analytics for optimizing the delivery of time and temperature-sensitive perishable products. The company's proprietary platform provides real-time information and analysis to mitigate supply chain disruptions and deliver last-mile resolution for customers in the perishable healthcare and food industries.

The Authentication segment focuses on solutions that connect brands with consumers through their products. VerifyMe's technologies enable brand owners to gather business intelligence, detect counterfeit activities, monitor product diversion, and build brand loyalty using unique digital codes.

In 2022, VerifyMe made a strategic move by acquiring PeriShip Global, a provider of value-added services for time-and-temperature sensitive product management. This acquisition allowed VerifyMe to strengthen its Precision Logistics segment, expanding its capabilities and customer base.

The company further diversified its capabilities in 2023 with the acquisition of Trust Codes Global, a specialist in brand protection, anti-counterfeiting, and consumer engagement technology. This transaction bolstered VerifyMe's Authentication segment, enabling the company to offer a comprehensive suite of solutions that connect brands with consumers through their products.

Throughout its history, VerifyMe has faced challenges in navigating industry changes and integrating acquisitions. In 2023, the company experienced a discontinued contract with a major customer in its Precision Logistics segment, which impacted revenue and profitability. In response, VerifyMe has worked to align its cost structure with the changing business environment and optimize its sales strategies.

Financial Performance and Ratios

VerifyMe's financial performance has shown both progress and challenges in recent years. For the fiscal year 2024, the company reported total revenue of $24.2 million, a decrease from the previous year. The company's net income for 2024 was a loss of $3.8 million. Despite the loss, VerifyMe generated positive operating cash flow of $0.9 million and free cash flow of $0.6 million for the year.

In the most recent quarter (Q4 2024), VerifyMe reported revenue of $7.7 million, representing a year-over-year decrease of 11.5% compared to Q4 2023. The net income for the quarter was a loss of $0.5 million. Quarterly operating cash flow was $0.6 million, demonstrating the company's ability to generate positive cash flow despite challenging market conditions.

The decrease in revenue was primarily attributed to the discontinuation of a customer contract in the Premium services portion of the Precision Logistics segment. This underscores the company's ongoing efforts to optimize its customer portfolio and focus on more profitable relationships.

Liquidity

As of December 31, 2024, VerifyMe had $2.8 million in cash and cash equivalents, with an additional $1 million available on their revolving credit line. The company's debt-to-equity ratio stood at 0.23, indicating a relatively low level of leverage. The current ratio and quick ratio were both 1.74, suggesting a strong ability to meet short-term obligations.

These liquidity metrics demonstrate VerifyMe's focus on maintaining a solid financial foundation, which provides flexibility for future growth initiatives and the ability to weather potential market uncertainties.

Operational Highlights and Segment Performance

VerifyMe's business is divided into two primary segments: Precision Logistics and Authentication.

The Precision Logistics segment specializes in predictive analytics and real-time visibility for the delivery of time-and-temperature sensitive products. This segment leverages VerifyMe's proprietary IT platform, PeriTrack, to provide clients with valuable insights and mitigation strategies for supply chain disruptions. The segment offers two business service models: ProActive Service, where clients pay VerifyMe directly for carrier service coupled with proactive logistics assistance, and Premium Service, which provides complete white-glove shipping monitoring and predictive analytics.

In the third quarter of 2024, the Precision Logistics segment accounted for 98% of VerifyMe's total revenue. The segment experienced a 9% year-over-year growth in Q3 2024, driven by an increase in Proactive services. However, this growth was more than offset by a previously disclosed discontinued contract with one customer in the Premium services, resulting in an overall 3% decrease in Precision Logistics revenue compared to Q3 2023. The segment's gross margin was 34% in Q3 2024, slightly down from 35% in the prior year period, primarily due to the discontinued higher-margin Premium services contract.

The Authentication segment focuses on solutions that enable brand owners to connect with consumers, detect counterfeiting activities, and monitor product diversion. This segment's offerings, such as VerifyInk and VerifyTrack, have been instrumental in helping clients protect their brand integrity and enhance customer engagement.

In Q3 2024, the Authentication segment's revenue decreased by 10% year-over-year to $132,000, accounting for only 2% of the company's total revenue during the quarter. The segment's gross margin was 89% in Q3 2024, compared to 94% in the prior year period.

Strategic Developments and Challenges

VerifyMe faced several strategic challenges and made important decisions in 2024. The company divested the Trust Codes Global business, which had been operating at a loss of $1.2 million excluding impairments. This decision was part of VerifyMe's efforts to streamline operations and focus on more profitable business lines.

On September 24, 2024, Paul Ryan, the Executive Vice President of the Authentication segment, notified the company of his resignation effective December 24, 2024. The company subsequently placed Mr. Ryan on "garden leave," meaning he remains employed but only working upon request. This change in leadership coincided with the company's reevaluation of the Authentication segment's commercial viability.

On November 8, 2024, VerifyMe's Board of Directors approved the closure of the Trust Codes Global business within the Authentication segment by the end of November 2024, unless a buyer could be found prior to that date. This decision was made to focus the company's resources on growth opportunities within the higher-revenue Precision Logistics segment.

In the Precision Logistics segment, VerifyMe increased the number of proactive customers by 6% in 2024 compared to 2023. However, the company also experienced a 6% decrease in shipments by existing customers in the proactive service line, highlighting the need for continued focus on customer retention and growth strategies.

Risks and Challenges

VerifyMe's business model is not without its risks and challenges. The company's reliance on a single strategic partner for a significant portion of its Precision Logistics revenue poses a potential vulnerability. Any disruption or changes in the relationship with this partner could have a material impact on the company's financial performance.

Additionally, the company's Authentication segment has faced headwinds in recent years, with the divestment of the Trust Codes Global business in 2024 due to underperformance. VerifyMe's ability to effectively manage and grow its Authentication offerings will be crucial for its long-term success.

The company also operates in a highly competitive landscape, with established players and emerging startups vying for market share. VerifyMe's ability to maintain its technological edge and provide innovative solutions will be essential in staying ahead of the competition.

Outlook and Strategic Initiatives

Despite the challenges, VerifyMe remains focused on driving growth and enhancing shareholder value. The company has taken steps to strengthen its financial position, including a $4.7 million warrant inducement capital raise in January 2025 and the retirement of its bank debt.

Looking ahead, VerifyMe is actively evaluating strategic options and initiatives to unlock the full potential of its Precision Logistics segment. The company is exploring ways to expand its customer base, optimize its sales strategies, and capitalize on the growing demand for time-and-temperature sensitive logistics services.

In the Authentication segment, VerifyMe is currently reviewing its strategy for the remaining Ink business, which accounts for less than 1% of the company's overall revenue. The company's ability to revitalize this segment or identify alternative growth opportunities will be crucial for its long-term success.

VerifyMe's CEO, Adam Stedham, has stated that the company is "relatively stable" and the business is expected to continue in a similar manner, aside from the impact of losing one large customer in their Premium services business. Stedham noted that the company is in a strong financial position with $0.46 per share in cash, and they are actively evaluating options to drive shareholder value, although the timing of any initiatives is difficult to predict.

While VerifyMe did not provide specific quantitative guidance for the 2025 fiscal year, the company met its previous guidance for improved full-year gross margin in 2024, achieving 36% compared to 32% in 2023. This demonstrates the company's ability to execute on its operational efficiency initiatives and provides a foundation for potential future growth.

Conclusion

VerifyMe, Inc. has carved out a unique position in the brand protection and logistics industries, leveraging its innovative technologies and strategic acquisitions to deliver comprehensive solutions to its clients. While the company has faced some challenges in recent years, it remains committed to transforming its business and creating value for its shareholders. With a strengthened financial profile and a renewed focus on operational excellence, VerifyMe is well-positioned to navigate the evolving market landscape and capitalize on the growing demand for its specialized services.

The company's decision to focus on its core Precision Logistics business while evaluating the future of its Authentication segment demonstrates a strategic approach to resource allocation and long-term value creation. As VerifyMe continues to optimize its cost structure and explore new growth opportunities, investors will be watching closely to see how the company navigates the dynamic market landscape and delivers on its potential for future success.