VerifyMe Reports Fourth Quarter and Full Year 2019 Results

Revenue Traction Accelerating with 42% of Total 2019 Revenue in Q4

ROCHESTER, NY / ACCESSWIRE / March 9, 2020 / VerifyMe, Inc. (OTCQB:VRME) (“VerifyMe” or the “Company”), a technology solutions company that markets invisible rare earth identifiers and codes for the prevention of counterfeiting and the authentication of products, today announced the Company’s financial results for the fourth quarter (“Q4 2019”) and year ended December 31, 2019.

Key Financial Highlights for Q4 2019:

  • Revenues increased 155% to $101,590, compared to $39,812 in the fourth quarter ended December 31, 2018 (“Q4 2018”)
  • Gross margins of 85.5% versus 63.5% in Q4 2018
  • Operating loss increased by 21% to $0.6 million (including $0.1 million of non-cash stock-based compensation)
  • Net loss increased by 16% to $0.6 million (including $0.1 million of non-cash stock-based compensation)
  • Adjusted EBITDA[1] loss decreased by 62% to $104,056

Key Financial Highlights for Full Year 2019:

  • Revenues increased 227% to $244,748, compared to $74,884 in 2018
  • Gross margins of 81.6% versus 61.5% in 2018
  • Operating loss decreased by 6% to $2.4 million (includes $0.8 million of non-cash stock-based compensation)
  • Net loss decreased by 14% to $2.5 million (includes $0.8 million of non-cash stock-based compensation)
  • Adjusted EBITDA[2] loss increased by 33% to $1.2 million

Key Business Highlights for Q4 and Full Year 2019:

  • Launched counterfeit prevention solution for Amazon retailers
  • First revenue generated by Forbes Top 50 Private Company customer
  • First Smart Phone Authenticator leases signed
  • Awarded initial contract from multi-billion-dollar global consumer products company
  • Formed strategic partnership with INX International ink company
  • Signed commercial technology license agreement with Niagara Label
  • Signed first European license agreement
  • Signed marketing and licensing agreement with Nosco

[1] Non-GAAP financial measure. Reconciliation to the most directly comparable GAAP measure is included as a schedule to this press release.
[2] Non-GAAP financial measure. Reconciliation to the most directly comparable GAAP measure is included as a schedule to this press release.

Management Commentary

Mr. Patrick White, the Chief Executive Officer of VerifyMe commented: “VerifyMe had a tremendously successful 2019 as we transitioned from a development stage company to commercialization. We believe we are at a major inflection point now with our fourth quarter revenue of greater than $100,000, which is nearly double any of our previous quarters. We anticipate that revenues will continue to grow in 2020 and beyond as we ramp our business with our strategic partners, existing clients and prospective new clients.”

Mr. White continued: “Our business traction with a well-known multi-billion-dollar global consumer products company that sells nutrition, personal care, beauty and home care products and another global consumer product client has ramped as expected, but could be just the tip of the iceberg, as we look to penetrate additional business segments and product lines within these companies. Additionally, our sales team has been feverishly following up on leads we obtained from attending various tradeshows in the latter part of 2019 with our strategic partner HP Indigo.”

Mr. White concluded: “Recent television news interviews with key Trump Administration trade and economic officials have made it known that counterfeiting of consumer products is growing rapidly and US citizens should be cautious of anything purchased on e-commerce websites. Trump officials publicly declared their effort to monitor, control and combat trafficking of counterfeit and pirated goods. Our shareholders should understand that VerifyMe is perfectly positioned to utilize our technologies and authenticating devices to help brand owners address the federal governments concerns. We are focused and excited for what 2020 has in store for us as we look forward to continuing to increase our high margined revenue which demonstrates our business model’s ability to generate profitable growth.”

Financial Results for the Three Months Ended December 31, 2019:

Revenue for the three months ended December 31, 2019 was $101,590, a 155% increase as compared to $39,812 for the three months ended December 31, 2018. The revenue primarily related to security printing with our authentication serialization technology for two large global brand owners.

Gross profit for the three months ended December 31, 2019 was $86,854, compared to $25,291 for the three months ended December 31, 2018. The resulting gross margin was 85.5% for the three months ended December 31, 2019, compared to 63.5% for the three months ended December 31, 2018.

General and administrative expenses for the three months ended December 31, 2019 were $357,020, an increase of $150,690, or 73%, compared to $206,330 for the three months ended December 31, 2018. The increase in expenses relates to higher costs for consulting services related to our financing activities.

Legal and accounting expenses for the three months ended December 31, 2019 were $73,579, an increase of $19,178, or 35%, compared to $54,401 for the three months ended December 31, 2018.

Payroll expenses for the three months ended December 31, 2019 were $94,649, an increase of $47,330, or 100%, compared to $47,319 for the three months ended December 31, 2018.

Research and development expenses for the three months ended December 31, 2019 were ($1,936), a decrease of $87,319, or 102%, compared to $85,383 for the three months ended December 31, 2018. The decline is primarily due to investments in developing our VeriPASTM Mobile Authenticator technology in 2018 while in the three months ended December 31, 2019, our products were nearly completely developed.

Sales and marketing expenses for the three months ended December 31, 2019 were $152,392, an increase of $34,319, or 29%, compared to $118,073 for the three months ended December 31, 2018. The increase in sales and marketing relates to the hiring of our VP of Global Business Development and our increased participation in global trade shows.

Operating loss for the three months ended December 31, 2019 was $588,850, an increase of $102,635, or 21%, compared to $486,215 for the three months ended December 31, 2018. Operating loss for the three months ended December 31, 2019 included $128,005 of non-cash stock-based compensation compared to $118,263 of non-cash stock-based compensation, for the three months ended December 31, 2018.

Net loss for the three months ended December 31, 2019 was $622,289, an increase of $88,131, or 16%, compared to $534,158 for the three months ended December 31, 2018. The resulting loss per share for the three months ended December 31, 2019 was $0.01 per diluted share, compared to $0.01 per diluted share for the three months ended December 31, 2018.

At December 31, 2019, VerifyMe had a $252,766 cash balance and 111.9 million shares issued and 111.5 million shares outstanding.

Financial Results for the Year Ended December 31, 2019:

Revenue for the year ended December 31, 2019 was $244,748, a 227% increase as compared to $74,884, for the year ended December 31, 2018. The revenue primarily related to security printing with our authentication serialization technology for two large global brand owners.

Gross profit for the year ended December 31, 2019 was $199,689, compared to $46,082 for the year ended December 31, 2018. The resulting gross margin was 81.6% for the year ended December 31, 2019, compared to 61.5% for the year ended December 31, 2018. This was a result of more efficient usage of our RainbowSecure® invisible ink. We believe our high gross profit margins demonstrate our business model’s ability to generate profitable growth.

General and administrative expenses for the year ended December 31, 2019 were $1,358,748, a decrease of $226,581, or 14%, compared to $1,585,329 for the year ended December 31, 2018. The decrease is attributable primarily to efficiencies within the Company.

Legal and accounting expenses for the year ended December 31, 2019 were $246,255, a decrease of $170,517, or 41%, compared to $416,772 for the year ended December 31, 2018. The decrease related primarily to a decrease in legal fees and a decrease in accounting fees as we replaced our accounting firm and hired our Chief Financial Officer on a part-time basis.

Payroll expenses for the year ended December 31, 2019 were $469,031, an increase of $152,194, or 48%, compared to $316,837 for the year ended December 31, 2018. The majority of the increase was the result of lower non-cash charges related to stock-based compensation and the transition of our Chief Financial Officer and Chief Technology Officer from consultants to part-time employees.

Research and development expenses for the year ended December 31, 2019 were $5,119, a decrease of $182,536, or 97%, compared to $187,655 for the year ended December 31, 2018. The decrease is primarily due to investments in developing our VeriPASTM Smartphone Authenticator technology in 2018, while in the year ended December 31, 2019, our products were nearly completely developed.

Sales and marketing expenses for the year ended December 31, 2019 were $553,109, an increase of $417,819, or 309%, compared to $135,290 for the year ended December 31, 2018. The increase was related to the hiring of our VP of Sales, and expenses for travel and costs related to various trade shows and other sales and marketing activities.

Operating loss for the year ended December 31, 2019 was $2,432,573, a decrease of $163,228, or 6%, compared to $2,595,801 for the year ended December 31, 2018 and was primarily related to efficiencies within the Company, decreases in research and development offset by the increase related to the hiring of our VP of Global business Development and increased participation in trade shows. Operating loss for the year ended December 31, 2019 included $799,654 of non-cash stock-based compensation, compared to $828,203 non-cash stock-based compensation for the year ended December 31, 2018.

Interest expense for the year ended December 31, 2019 was $96,891, as compared to a net interest income of $6,664, for the year ended December 31, 2018, a variance of $103,555. The variance is related primarily to amortization of our debt discount related to the issuance of our secured convertible debentures issued in 2019.

Net loss for the year ended December 31, 2019 was $2,507,799, a decrease of $424,663, or 14%, compared to $2,932,462 for the year ended December 31, 2018. The resulting loss per share for the year ended December 31, 2019 was $0.02 per diluted share, compared to $0.03 per diluted share for the year ended December 31, 2018.

About VerifyMe, Inc.

VerifyMe, Inc., is a technology solutions company that markets products supported by patents, patent applications and trade secrets which provides identifiers and serialization for authenticating, tracking and tracing functions for labels, packaging and products. The company also markets multi-factor biometric verification solutions to verify people. VerifyMe’s physical technology authenticates packaging, labels and documents with a suite of proprietary security inks and pigments, which work in conjunction with serialization and track-and-trace software. The company’s digital technologies authenticate people by performing strong, multi-factor biometric verification via its patented digital software platforms. To learn more, visit www.verifyme.com

Cautionary Note Regarding Forward-looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including those regarding potential revenue growth in 2020 and beyond, potential revenue increase from our two key customers and possible expansion to their other products and future gross margins. The words “believe,” “may”, “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Important factors that could cause actual results to differ from those in the forward-looking statements include the company’s ability to continue as a going concern and history of losses, its ability to work with partners in selling its technologies to businesses, production difficulties, our inability to enter into contracts and arrangements with future partners, issues which may affect the reluctance of companies to change their purchasing of products, acceptance of our technologies, and the efficiency of our authenticators in the field. Further information with respect to our risk factors is contained in our filings with the SEC, including under the heading “Risk Factors” in the Form 10-K for the year ended December 31, 2019. Any forward-looking statement made by us herein speaks only as of the date on which it is made. The Company’s actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Use of Non-GAAP Financial Measures

This press release includes both financial measures in accordance with GAAP, as well as a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to and should not be considered as alternatives to net income, operating income, and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of VerifyMe nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.

VerifyMe’s management uses and relies on Adjusted EBITDA, which is a non-GAAP financial measure. The Company believes that both management and shareholders benefit from referring to Adjusted EBITDA in planning, forecasting and analyzing future periods. The Company’s management uses this non-GAAP financial measure in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparison. The Company’s management recognizes that Adjusted EBITDA, as a non-GAAP financial measure has inherent limitations because of the described excluded items.

The Company defines Adjusted EBITDA as earnings (or loss) from operations before certain charges. Adjusted EBITDA is an important measure of VerifyMe’s operating performance because it allows management, investors and analysts to evaluate and assess VerifyMe’s core operating results from period-to-period after removing the impact of items of a non-operational nature that affect comparability.

A reconciliation of Adjusted EBITDA to the most comparable financial measure calculated in accordance with GAAP is included in this press release. The Company believes that providing the non-GAAP financial measure, together with the reconciliation to GAAP, helps investors make comparisons between VerifyMe and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.

For Licensing or Other Information Contact:

Company: VerifyMe, Inc.
Email: IR@verifyme.com
Website: http://www.verifyme.com

VerifyMe, Inc.
Balance Sheets

 
  As of  
 
  December 31, 2019     December 31, 2018  
 
           
 
           
ASSETS
           
 
           
CURRENT ASSETS
           
Cash and cash equivalents
  $ 252,766     $ 1,673,201  
Accounts Receivable
    81,113       30,373  
Deposits on Equipment
    51,494        
Prepaid expenses and other current assets
    31,801       25,781  
Inventory
    30,158       41,982  
TOTAL CURRENT ASSETS
    447,332       1,771,337  
 
               
PROPERTY AND EQUIPMENT
               
Equipment for lease, net
    177,021        
 
               
INTANGIBLE ASSETS
               
Patents and Trademarks, net of accumulated amortization of
               
$292,587 and $258,294 as of December 31, 2019 and December 31, 2018
    218,570       209,049  
Capitalized Software Costs, net of accumulated amortization of $0
               
and $0 as of December 31, 2019 and December 31, 2018
    100,231       70,231  
TOTAL ASSETS
  $ 943,154     $ 2,050,617  
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
               
 
               
CURRENT LIABILITIES
               
Convertible Debt, net of unamortized debt discount
  $ 297,997     $  
Derivative Liability
    171,499        
Accounts payable and other accrued expenses
    422,297       411,211  
Accrued Payroll
    119,041       69,041  
TOTAL CURRENT LIABILITIES
    1,010,834       480,252  
 
               
STOCKHOLDERS’ EQUITY(DEFICIT)
               
Series A Convertible Preferred Stock, $.001 par value, 37,564,767 shares
               
authorized; 0 shares issued and outstanding as of December 31, 2019 and
               
304,778 shares issued and outstanding as of December 31, 2018
          305  
 
               
Series B Convertible Preferred Stock, $.001 par value; 85 shares
               
authorized; 0.85 shares issued and outstanding as of December 31, 2019 and
           
December 31, 2018
               
 
               
Common stock of $.001 par value; 675,000,000 authorized; 111,893,779 and
102,553,706 issued, 111,543,239 and 102,203,166 shares outstanding as of
December 31, 2019 and December 31, 2018
    111,544       102,203  
 
               
Additional paid in capital
    61,705,514       60,844,796  
 
               
Treasury stock as cost (350,540 shares at December 31, 2019 and December
31, 2018)
    (113,389 )     (113,389 )
 
               
Accumulated deficit
    (61,771,349 )     (59,263,550 )
 
               
STOCKHOLDERS’ EQUITY (DEFICIT)
    (67,680 )     1,570,365  
 
               
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
  $ 943,154     $ 2,050,617  

VerifyMe, Inc.
Statements of Operations

 
  Three Months Ended  
 
  December 31, 2019     December 31, 2018  
 
           
 
           
NET REVENUE
           
Sales
  $ 101,590     $ 39,812  
 
               
COST OF SALES
    14,736       14,521  
 
               
GROSS PROFIT
    86,854       25,291  
 
               
OPERATING EXPENSES
               
General and administrative (a)
    357,020       206,330  
Legal and accounting
    73,579       54,401  
Payroll expenses (a)
    94,649       47,319  
Research and development
    (1,936 )     85,383  
Sales and marketing (a)
    152,392       118,073  
Total Operating expenses
    675,704       511,506  
 
               
LOSS BEFORE OTHER INCOME (EXPENSE)
    (588,850 )     (486,215 )
 
               
OTHER (EXPENSE) INCOME
               
Interest income (expenses), net
    (91,213 )     5,297  
Change in fair value of embedded derivative
    57,774        
Gain on derecognition of note payable and accrued interest
          (3,000 )
Gain on accounts payable forgiveness
          (50,240 )
 
    (33,439 )     (47,943 )
 
               
NET LOSS
  $ (622,289 )   $ (534,158 )
 
               
LOSS PER SHARE
               
BASIC
  $ (0.01 )   $ (0.01 )
DILUTED
  $ (0.01 )   $ (0.01 )
 
               
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING
               
BASIC
    111,306,050       101,192,637  
DILUTED
    111,306,050       101,192,637  

(a) Includes share-based compensation of $128,005 and $118,263 for the three months ended December 31, 2019 and 2018, respectively.

VerifyMe, Inc.
Statements of Operations

 
  Year Ended  
 
  December 31, 2019     December 31, 2018  
 
           
 
           
NET REVENUE
           
Sales
  $ 244,748     $ 74,884  
 
               
COST OF SALES
    45,059       28,802  
 
               
GROSS PROFIT
    199,689       46,082  
 
               
OPERATING EXPENSES
               
General and administrative (a)
    1,358,748       1,585,329  
Legal and accounting
    246,255       416,772  
Payroll expenses (a)
    469,031       316,837  
Research and development
    5,119       187,655  
Sales and marketing (a)
    553,109       135,290  
Total Operating expenses
    2,632,262       2,641,883  
 
               
LOSS BEFORE OTHER INCOME (EXPENSE)
    (2,432,573 )     (2,595,801 )
 
               
OTHER (EXPENSE) INCOME
               
Interest income (expenses), net
    (96,891 )     6,664  
Change in fair value of embedded derivative
    21,665        
Gain on derecognition of note payable and accrued interest
          83,667  
Settlement agreement with shareholders
          (779,000 )
Gain on accounts payable forgiveness
          352,008  
 
    (75,226 )     (336,661 )
 
               
NET LOSS
  $ (2,507,799 )   $ (2,932,462 )
 
               
LOSS PER SHARE
               
BASIC
  $ (0.02 )   $ (0.03 )
DILUTED
  $ (0.02 )   $ (0.03 )
 
               
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING
               
BASIC
    107,455,581       93,851,170  
DILUTED
    107,455,581       93,851,170  

(a) Includes share-based compensation of $799,654 and $828,201 for the year ended December 31, 2019 and 2018, respectively.

VerifyMe, Inc.
Statements of Cash Flows

 
  Year Ended  
 
  December 31, 2019     December 31, 2018  
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
  $ (2,507,799 )   $ (2,932,462 )
Adjustments to reconcile net loss to net cash used in
               
operating activities:
               
Stock based compensation
    138,442       44,120  
Fair value of options in exchange for services
    422,682       329,193  
Fair value of restricted stock and restricted stock units issued in exchange for services
    238,530       454,890  
Gain on accounts payable forgiveness
          (352,008 )
Share-based payment for settlement agreement with shareholders
          279,000  
Gain on derecognition of note payable and accrued interest
          (83,667 )
Amortization of debt discount
    99,954        
Change in Fair Value of Embedded Derivative
    (21,665 )      
Amortization and depreciation
    34,294       20,963  
Changes in operating assets and liabilities:
               
Accounts Receivable
    (50,740 )     (30,373 )
Inventory
    11,824       (41,982 )
Prepaid expenses and other current assets
    (6,020 )     (7,113 )
Accounts payable and accrued expenses
    61,086       (57,275 )
Net cash used in operating activities
    (1,579,412 )     (2,376,714 )
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Purchase of Patents and Trademarks
    (43,815 )     (38,505 )
Purchase of Equipment for lease
    (177,021 )      
Deposits on Equipment
    (51,494 )      
Capitalized Software Costs
    (30,000 )     (70,231 )
Net cash used in investing activities
    (302,330 )     (108,736 )
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from convertible debt, net of costs
    461,307        
Proceeds from exercise of warrants
          2,312,005  
Proceeds from sale of common stock
          1,153,645  
 
               
Net cash provided by financing activities
    461,307       3,465,650  
 
               
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    (1,420,435 )     980,200  
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD
    1,673,201       693,001  
 
               
CASH AND CASH EQUIVALENTS – END OF PERIOD
  $ 252,766     $ 1,673,201  
 
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
               
Cash paid during the period for:
               
Interest
  $     $  
Income taxes
  $     $  
 
               
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
               
 
               
Series A Convertible Preferred Stock converted to common stock
  $ 6,096     $ 400  
Series B Convertible Preferred Stock converted to common stock
  $     $ 599  
Cashless Exercise of Stock Options
  $     $ 4,028  
Cashless Exercise of Warrants
  $ 72     $ 183  
Common Stock issued in relation to convertible debt
  $ 70,100     $  
Recognition of embedded derivative liability recorded as debt discount
  $ 193,164     $  
Common Stock and Warrants Issued for Common Stock Payable
  $     $ 122,478  

VerifyMe, Inc.
GAAP to Non-GAAP Reconciliation

 
  Three Months Ended
December 31,
    Year Ended
December 31,
 
 
  2019     2018     2019     2018  
 
                       
Net loss
  $ (706,548 )   $ (479,476 )   $ (1,885,510 )   $ (2,398,304 )
 
                               
Interest income (expenses), net (a)
    8,338       (1,084 )     5,678       (1,367 )
Amortization and depreciation
    11,590       5,034       17,297       15,928  
Total EBITDA (Non-GAAP)
    (686,620 )     (475,526 )     (1,862,535 )     (2,383,743 )
 
                               
Adjustments:
                               
 
                               
Stock based compensation
    103,167       1       103,167       44,119  
Fair value of options and warrants issued in exchange for services
    276,117       44,151       399,828       270,339  
Fair value of restricted stock and restricted stock units issued in exchange for services
    203,280       160,077       168,654       395,481  
Share-based payment for settlement agreement with shareholders
                      279,000  
Cash payment for settlement agreement with shareholders
                      500,000  
 
                               
Total Adjusted EBITDA (Non-GAAP)
  $ (104,056 )   $ (271,297 )   $ (1,190,886 )   $ (894,804 )
 

SOURCE: VerifyMe, Inc.

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