VerifyMe Reports First Quarter 2020 Results

Two Large Global Brand Owners Drive 98% Increase in Revenue

Rochester, NY – May 13, 2020 – Accesswire — VerifyMe, Inc. (OTCQB: VRME) (“VerifyMe” or the “Company”), a technology solutions provider specializing in brand protection functions such as counterfeit prevention, authentication, serialization, track and trace features for labels, packaging and products, today announced the Company’s financial results for the first quarter ended March 31, 2020 (“Q1 2020”).

Key Financial Highlights for Q1 2020:

  • Revenues increased 98% to $91,846, compared to $46,454 in the first quarter ended March 31, 2019 (“Q1 2019”)
  • Gross margins of 81.7% versus 68.2% in Q1 2019
  • Operating loss increased by 30% to $668,994 (including $322,629 of non-cash stock-based compensation and adjustments)
  • Net loss increased by 113% to $1,092,163 (including $322,629 of non-cash stock-based compensation and adjustments)
  • Adjusted EBITDA loss decreased by 23% to $323,286
  • Closed $2 Million Financing of Senior Secured Convertible Debentures
  • Eliminated All Variable Priced Convertible Debt

Key Business Highlights for Q1 2020:

  • Granted Patent for Invisible QR Code System from the U.S. Patent & Trademark Office
  • Expanded Capabilities with HP Indigo
  • Opened New European Office with Appointment of Paul Vitali
  • Expanded VerifyMe As Authentic™ Labels Availability for All Legitimate Coronavirus Related Products

Management Commentary
Mr. Patrick White, the Chief Executive Officer of VerifyMe, commented, “I am pleased with our start to 2020 as we continue to ramp our revenue at nearly 100% year-over-year growth. We believe we are maintaining our momentum of gaining 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. Our team is hard at work trying to penetrate additional business segments and product lines within these companies. We anticipate that revenues will continue to grow in 2020 as we ramp our business with our strategic partners, existing clients and prospective new clients. We believe our high margined revenue demonstrates our business model’s ability to generate profitable growth.”

Financial Results for the Three Months Ended March 31, 2020:
Revenue for the three months ended March 31, 2020 was $91,846, an increase of $45,392, or 98%, as compared to $46,454 for the three months ended March 31, 2019. 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 March 31, 2020 was $75,044, compared to $31,687 for the three months ended March 31, 2019. The resulting gross margin was 81.7% for the three months ended March 31, 2020, compared to 68.2% for the three months ended March 31, 2019. This increase was a primarily a result of more efficient usage of our RainbowSecure® invisible ink allowing more output per canister.

General and administrative expenses for the three months ended March 31, 2020 were $570,582, an increase of $337,900, or 145%, compared to $232,682 for the three months ended March 31, 2019. The increase primarily related primarily to non-cash stock based compensation which increased by $233,544.

Legal and accounting expenses for the three months ended March 31, 2020 were $36,551, a decrease of $25,813, or 41%, compared to $62,364 for the three months ended March 31, 2019.

Payroll expenses for the three months ended March 31, 2020 were $93,995, a decrease of $10,794, or 10%, compared to $104,789 for the three months ended March 31, 2019. The decrease related primarily to a decrease in stock based compensation offset by the transition of the Chief Financial Officer from a consultant to a part-time employee.

Research and development expenses for the three months ended March 31, 2020 were $0, a decrease of $3,643, or 100%, compared to $3,643 for the three months ended March 31, 2019. The decrease is primarily due to our shift from research and development to commercialization of our products.

Sales and marketing expenses for the three months ended March 31, 2020 were $42,910, a decrease of $100,233, or 70%, compared to $143,143 for the three months ended March 31, 2019. The decrease primarily related to a decrease in non-cash stock-based compensation.

Operating loss for the three months ended March 31, 2020 was $668,994, an increase of $154,060, or 30%, compared to $514,934 for the three months ended March 31, 2019.  The increase primarily related to an increase in non-cash stock-based compensation offset by increases in revenue. Operating loss for the three months ended March 31, 2020 included $322,629 of non-cash stock-based compensation and adjustments compared to $989,085 of non-cash stock-based compensation, for the three months ended March 31, 2019.

Net loss for the three months ended March 31, 2020 was $1,092,163, an increase of $578,857, or 113%, compared to $513,306 for the three months ended March 31, 2019. The increase primarily related to an increase in non-cash stock-based compensation, loss on extinguishment of debt, amortization of debt discount and interest expense related to our convertible debentures offset by increases in revenue. The resulting loss per share for the three months ended March 31, 2020 was ($0.01) per diluted share, compared to ($0.01) per diluted share for the three months ended March 31, 2019.

Adjusted EBITDA loss for the three months ended March 31, 2020 was $323,286, a decrease of $96,856, or 23%, compared to $420,142 for the three months ended March 31, 2019. Adjusted EBITDA is a non-GAAP financial measure. Please see “Use of Non-GAAP Financial Measure for a discussion of this non-GAAP measure. A reconciliation to the most directly comparable GAAP measure, net loss, is included as a schedule to this release.

At March 31, 2020, VerifyMe had a $885,622 cash balance and 112.9 million shares issued and outstanding.

About VerifyMe, Inc.
VerifyMe, Inc., is a technology solutions provider specializing in brand protection functions such as counterfeit prevention, authentication, serialization, track and trace features 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 our ability to continue as a going concern and history of losses, our ability to obtain additional financing, the impact of the COVID-19 pandemic, intellectual property litigation, the successful development of our sales and marketing capabilities, our ability to retain key management personnel, our ability to work with partners in selling our 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 Annual Report on Form 10-K for the year ended December 31, 2019 and the Quarterly Report on Form 10-Q for the three months ended March 31, 2020. 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 or revise 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 Measure
This press release includes both financial measures in accordance with U.S. generally accepted accounting principles (“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 any other GAAP 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, net loss, 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:  https://www.verifyme.com

 

VerifyMe, Inc.
Balance Sheets
(unaudited)

As of
March 31, 2020December 31, 2019
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents$885,622$252,766
Accounts Receivable66,20881,113
Deposits on Equipment51,494
Prepaid expenses and other current assets46,80131,801
Inventory41,15830,158
TOTAL CURRENT ASSETS1,039,789447,332
PROPERTY AND EQUIPMENT
Equipment for Lease, net of accumulated depreciation of
$11,435 and $0 as of March 31, 2020 and December 31, 2019239,149177,021
INTANGIBLE ASSETS
Patents and Trademarks, net of accumulated amortization of
$299,220 and $292,587 as of March 31, 2020 and December 31, 2019218,983218,570
Capitalized Software Costs, net of accumulated amortization of
$5,011 and $0 as of March 31, 2020 and December 31, 201995,220100,231
TOTAL ASSETS$1,593,141$943,154
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES
Convertible Debt, net of unamortized debt discount$$297,997
Derivative Liability171,499
Accounts payable and other accrued expenses427,828422,297
Accrued Payroll131,507119,041
TOTAL CURRENT LIABILITIES559,3351,010,834
LONG – TERM LIABILITIES
Convertible Debt, net of unamortized debt discount$103,305$
Related Party Convertible Debt, net of unamortized debt discount20,512
TOTAL LONG – TERM LIABILITIES123,817
TOTAL LIABILITIES$683,152$1,010,834
STOCKHOLDERS’ EQUITY (DEFICIT)
Series A Convertible Preferred Stock, $.001 par value, 37,564,767 shares
 authorized; 0 shares issued and outstanding as of March 31, 2020 and
0 shares issued and outstanding as of December 31, 2019
Series B Convertible Preferred Stock, $.001 par value; 85 shares
  authorized; 0.85 shares issued and outstanding as of March 31, 2020 and
December 31, 2019
Common stock of $.001 par value; 675,000,000 authorized; 112,920,804 and
111,893,779 issued, 112,570,264 and 111,543,239 shares outstanding as of
March 31, 2020 and December 31, 2019
112,570111,544
Additional paid in capital63,774,32061,705,514
Treasury stock as cost (350,540 shares at March 31, 2020 and December 31, 2019)(113,389)(113,389)
Accumulated deficit(62,863,512)(61,771,349)
STOCKHOLDERS’ EQUITY (DEFICIT)909,989(67,680)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)$1,593,141$943,154

 

VerifyMe, Inc.
Statements of Operations
(unaudited)

Three months ended
March 31, 2020March 31, 2019
NET REVENUE
Sales$91,846$46,454
COST OF SALES16,80214,767
GROSS PROFIT75,04431,687
OPERATING EXPENSES
General and administrative (a)570,582232,682
Legal and accounting36,55162,364
Payroll expenses (a)93,995104,789
Research and development3,643
Sales and marketing (a)42,910143,143
Total Operating expenses744,038546,621
LOSS BEFORE OTHER INCOME (EXPENSE)(668,994)(514,934)
OTHER (EXPENSE) INCOME
Interest (expenses) income, net(142,665)1,628
Loss on Extinguishment of debt(280,504)
 TOTAL OTHER (EXPENSE) INCOME(423,169)1,628
NET LOSS$(1,092,163)$(513,306)
LOSS PER SHARE
BASIC$(0.01)$(0.01)
DILUTED$(0.01)$(0.01)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC112,014,23394,092,049
DILUTED112,014,23394,092,049

(a)  Includes stock-based compensation of $322,629 and $89,085 for the three months ended March 31, 2020 and 2019, respectively.

 

VerifyMe, Inc.
Statements of Cash Flows
(unaudited)

Three months ended
March 31, 2020March 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(1,092,163)$(513,306)
Adjustments to reconcile net loss to net cash used in
  operating activities:
Stock-based compensation40,234
Fair value of options in exchange for services217,605123,711
Fair value of restricted stock awards issued in exchange for services64,790(34,626)
Loss on Extinguishment of Debt280,504
Amortization of debt discount123,817
Amortization and depreciation23,0785,707
Changes in operating assets and liabilities:
Accounts Receivable14,9052,111
Deposits on Equipment(163,090)
Inventory(11,000)11,608
Prepaid expenses and other current assets(15,000)(4,200)
Accounts payable and accrued expenses17,997(21,096)
Net cash used in operating activities(335,233)(593,181)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Patents(7,045)(24,435)
Purchase of Equipment for Lease(22,069)
Net cash used in investing activities(29,114)(24,435)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Bridge Financing and early redemption fee(750,000)
Proceeds from convertible debt, net of costs1,747,203
Net cash provided by financing activities997,203
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS632,856(617,616)
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD252,7661,673,201
CASH AND CASH EQUIVALENTS – END OF PERIOD$885,622$1,055,585
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$$800
Relative fair value of common stock issued in connection with 2020 Debentures$34,412$
Relative fair value of warrants issued in connection with 2020 Debentures$1,063,239$
Beneficial conversion feature in connection with 2020 Debentures$649,552$

 

VerifyMe, Inc.
GAAP to Non-GAAP Reconciliation
(unaudited)

Three Months Ended
March 31,
ADJUSTED EBITDA (Non-GAAP)20202019
Net loss$   (1,092,162)$       (513,306)
Interest income (expenses), net        142,665           (1,628)
Loss on Extinguishment of debt        280,504
Amortization and depreciation          23,078             5,707
Total EBITDA (Non-GAAP)      (645,915)       (509,227)
Adjustments:
Stock-based compensation          40,234                      –
Fair value of options and warrants issued in exchange for services        217,605        123,711
Fair value of restricted stock and restricted stock units issued in exchange for services          64,790         (34,626)
Total Adjusted EBITDA (Non-GAAP)$      (323,286) $       (420,142)

 


Non-GAAP financial measure. Please see “Use of Non-GAAP Financial Measure” for a discussion of this non-GAAP measure. A reconciliation to the most directly comparable GAAP measure is included as a schedule to this press release.

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