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: [email protected]
Website: https://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)

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