VerifyMe, Inc. — FY2023 Form 10-K Summary
Identity and period: The request metadata names Openworld, Inc., but the supplied filing is for VerifyMe, Inc. (Nasdaq: VRME; warrants: VRMEW). This is an annual report for the year ended December 31, 2023, not a standalone fourth-quarter report; Q4-only financial results are not clearly provided in the filing text. Filed March 29, 2024. Amounts below are in U.S. dollars.
Business context
VerifyMe operates two segments: Precision Logistics, which provides monitoring and predictive analytics for time- and temperature-sensitive shipments, and Authentication, which offers product traceability, anti-counterfeiting and brand-engagement solutions. Precision Logistics accounted for more than 95% of consolidated revenue. The Trust Codes brand-protection business was acquired in March 2023 and included in Authentication.
Key financial metrics
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $25.313 million | $19.576 million |
| Gross profit / margin | $9.003 million / 36% | $6.488 million / 33% |
| Operating expenses | $12.331 million | $10.235 million |
| Loss before other income/expense | $3.328 million | $3.747 million |
| Net loss | $3.390 million | $14.398 million |
| Diluted loss per share | $0.35 | $1.70 |
| Cash provided by (used in) operations | $0.244 million | $(2.551) million |
| Cash used in investing | $1.195 million | $7.884 million |
| Cash provided by financing | $0.634 million | $4.424 million |
Revenue rose 29%, principally reflecting a full year of PeriShip operations in 2023 compared with partial-year inclusion in 2022. Precision Logistics revenue increased to $24.652 million from $18.190 million; Authentication revenue declined to $0.661 million from $1.386 million, including lower nutraceutical-market orders. Gross-margin improvement reflected more higher-margin premium logistics services, process improvements and Trust Codes software.
The smaller 2023 net loss largely reflects the absence of the $10.932 million SPAC investment loss recorded in 2022; it does not indicate net profitability. General and administrative expense rose to $10.586 million, including Trust Codes acquisition costs and approximately $0.590 million of severance expense. Year-end cash, cash equivalents and restricted cash totaled $3.095 million, of which $0.063 million was restricted. Total assets were $20.705 million and total liabilities were $8.174 million.
Debt, liquidity and capital
At year-end, the PNC Term Note balance was $1.375 million ($0.500 million current and $0.875 million long-term); no amount was outstanding on the revolving line of credit. The company also had $1.100 million of unsecured convertible notes bearing 8% interest, maturing August 2026, convertible at $1.15 per share. The Term Note and PNC facility are secured by company and PeriShip assets; a default under either may trigger cross-default and lender remedies. VerifyMe reported covenant compliance at December 31, 2023, after receiving a waiver for certain prior defaults and amending the PNC loan documents.
Management stated that available cash, convertible-note proceeds, debt and the revolving facility were expected to fund operations and expected capital expenditures for the next 12 months. The filing also notes a history of losses and includes a going-concern basis of preparation. A $0.5 million share-repurchase program was authorized through December 14, 2024, subject to a $1.00 per-share price limit; no purchases were made under that new program during 2023. The company does not anticipate cash dividends in the foreseeable future.
Changes, outlook and risks
- The Trust Codes acquisition had approximately $1.0 million of stated purchase consideration plus contingent earn-out consideration. The acquisition-date estimate for the earn-out was $1.125 million; its maximum payment is unlimited. Year-end contingent consideration was $0.924 million.
- The company recorded a $0.100 million loss on an equity investment and $0.090 million of impairment on certain technology and patent assets in 2023. Its year-end qualitative goodwill assessment concluded that fair value was more likely than not above carrying value; goodwill totaled $5.384 million.
- No quantified company revenue or earnings guidance is provided. Management described growth opportunities in small and medium-sized businesses, healthcare, food and agriculture, and possible cross-selling between segments. These are expectations, not guaranteed outcomes.
- Management reported softer demand for some high-end perishable and cannabis-related services amid reduced discretionary spending. Its major carrier partner forecast a low-single-digit percentage revenue decline for 2024, as reported by VerifyMe.
- Concentration is material: one customer represented 17% of 2023 revenue; three customers represented 47% of year-end receivables. One vendor accounted for 99% of Precision Logistics transportation costs. The segment depends on one major carrier for shipping and partner-sourced business.
- Potential dilution is significant: approximately 8.286 million anti-dilutive shares were disclosed, including warrants, convertible debt, preferred stock and equity awards. The filing also identifies competition, economic sensitivity, cybersecurity and technology dependence, impairment, and debt-covenant risks.
- Management concluded disclosure controls and internal control over financial reporting were effective as of year-end. Trust Codes was excluded from the internal-control assessment under the recent-acquisition accommodation; the auditor did not provide an internal-control attestation. The financial-statement audit opinion was unqualified and reported no critical audit matters.
Important facts for investors to verify
- Confirm issuer identity: the supplied filing is VerifyMe, Inc., not Openworld, Inc.; confirm that this is the intended filing.
- Review the full audited financial statements and subsequent filings for cash availability, operating cash-flow sustainability, debt terms, covenant status and refinancing needs.
- Assess the carrier and transportation-vendor concentration, contract renewal or termination provisions, service performance and availability of alternatives.
- Track Authentication sales recovery, Trust Codes integration and earn-out measurements, and whether management’s cross-selling and growth opportunities convert into revenue.
- Evaluate potential share dilution from warrants, convertible notes and equity awards, alongside the conditions and actual use of the repurchase authorization.
- Check later disclosures for material cybersecurity events, goodwill or intangible-asset impairment, and any updated Section 382 analysis affecting tax-loss carryforwards.