[Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) VerifyMe's Q1 2025 revenue declined to **$4.5 million**, gross profit to **$1.5 million**, and gross margin to **33%** - CEO Adam Stedham highlighted ongoing technical improvements in the Precision Logistics Segment and enhanced sales efforts, noting the company's **operating cash flow** and **strong balance sheet** position it to create shareholder value[4](index=4&type=chunk) Q1 2025 vs Q1 2024 Key Financial Metrics | Metric | Q1 2025 (Millions USD) | Q1 2024 (Millions USD) | | :--- | :--- | :--- | | Revenue | 4.5 | 5.8 | | Gross Profit | 1.5 | 2.3 | | Gross Margin | 33% | 39% | | Net Loss | (0.6) | (0.6) | | Adjusted EBITDA | 0 | 0.1 | | Cash (as of quarter end) | 5.7 | N/A | [Financial Performance Analysis](index=2&type=section&id=Financial%20Performance%20Analysis) Q1 2025 revenue decreased to **$4.5 million** due to contract changes, impacting gross margin, but operating loss remained stable - The **$1.3 million** revenue decrease was attributed to reduced demand from proactive customers, a customer's shift in cold chain strategy, a discontinued premium services contract, and the divestiture of the Trust Codes Global business in December 2024[7](index=7&type=chunk) - Gross margin percentage decreased from **39%** to **33%** year-over-year, mainly due to the discontinued higher-margin contract in the Precision Logistics segment, while Proactive services gross margin improved[8](index=8&type=chunk) - Operating loss remained flat at **($0.6) million** for both Q1 2025 and Q1 2024, as the decrease in gross profit was fully offset by reduced operating expenses from cost-cutting measures and the Trust Codes divestiture[9](index=9&type=chunk) - As of March 31, 2025, the company had a cash balance of **$5.7 million**, working capital of **$6.0 million**, and **12,414,772** shares outstanding[11](index=11&type=chunk)[12](index=12&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) This section presents VerifyMe's unaudited Q1 2025 consolidated financial statements and non-GAAP EBITDA reconciliation [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, the balance sheet shows total assets of **$17.1 million**, total liabilities of **$2.5 million**, and cash at **$5.7 million** Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $5,707 | $2,823 | | Total Current Assets | $7,672 | $6,362 | | Total Assets | $17,095 | $16,067 | | **Liabilities & Equity** | | | | Total Current Liabilities | $1,648 | $4,239 | | Total Liabilities | $2,452 | $5,853 | | Stockholders' Equity | $14,643 | $10,214 | | Total Liabilities and Stockholders' Equity | $17,095 | $16,067 | [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2025 net revenue was **$4.46 million**, down from **$5.76 million**, with gross profit at **$1.49 million**, and net loss at **($571) thousand** Consolidated Statement of Operations (in thousands, except per share data) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Revenue | $4,455 | $5,759 | | Gross Profit | $1,490 | $2,260 | | Total Operating Expenses | $2,083 | $2,907 | | Net Loss | $(571) | $(553) | | Loss Per Share (Basic & Diluted) | $(0.05) | $(0.05) | | Weighted Average Shares Outstanding (Basic) | 12,292,150 | 10,073,445 | [Non-GAAP Reconciliation (EBITDA & Adjusted EBITDA)](index=8&type=section&id=Non-GAAP%20Reconciliation) Q1 2025 GAAP Net Loss of **($571) thousand** reconciled to **$0** Adjusted EBITDA, compared to **$114 thousand** Adjusted EBITDA in Q1 2024 Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Account | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | **Net loss (GAAP)** | **$(571)** | **$(553)** | | Interest (income) expense, net | (22) | 38 | | Amortization and depreciation | 286 | 299 | | **Total EBITDA (Non-GAAP)** | **$(307)** | **$(216)** | | Stock based compensation & services | 333 | 458 | | Severance expense | 57 | - | | Change in fair value of contingent consideration | - | (132) | | Gain on derecognized liability | (100) | - | | Other adjustments | 17 | 4 | | **Total Adjusted EBITDA (Non-GAAP)** | **$0** | **$114** | [Supplementary Information](index=2&type=section&id=Supplementary%20Information) This section includes earnings call details, company overview, forward-looking statements caution, and non-GAAP financial measures explanation - The company scheduled an earnings conference call and webcast for **11:00 a.m. ET on Tuesday, May 13, 2025**, to discuss financial and operational results[13](index=13&type=chunk) - The report includes a detailed 'Cautionary Note Regarding Forward-Looking Statements' outlining numerous risks and uncertainties that could cause actual results to differ from projections, including economic conditions, competition, and reliance on key partners[17](index=17&type=chunk) - VerifyMe uses non-GAAP measures like EBITDA and Adjusted EBITDA for internal planning and to help investors evaluate core operating performance by excluding non-operational items, defining Adjusted EBITDA as net loss before interest, taxes, depreciation, and amortization, further adjusted for items like stock compensation, severance, and one-time acquisition/divestiture expenses[19](index=19&type=chunk)[20](index=20&type=chunk)

Company Overview - VerifyMe, Inc. (NASDAQ: VRME) specializes in providing logistics for time and temperature sensitive products, as well as brand protection and enhancement solutions [3]. Financial Results Announcement - The company will release its financial results for the first quarter ended March 31, 2025, on May 13, 2025 [1]. - An investor conference call and webcast is scheduled for the same day at 11:00 a.m. Eastern Time, which will include prepared remarks followed by a Q&A session with the executive management team [1]. Accessing the Conference Call - The conference call can be accessed via a webcast link or by calling designated numbers for US and international participants [2]. - Presentation slides will be available on the Investors section of the VerifyMe website on the morning of the call, and the webcast will be archived for 90 days [2].

Financial Performance - Consolidated revenue for the year ended December 31, 2024, was $24,207 thousand, a 4% decrease from $25,313 thousand in 2023, primarily due to a discontinued contract in the Precision Logistics segment [154]. - Gross profit for the year ended December 31, 2024, was $8,662 thousand, resulting in a gross margin of 36%, up from 32% in 2023, attributed to process improvements in the Precision Logistics segment [155]. - The Precision Logistics segment generated revenue of $23,766 thousand in 2024, down from $24,652 thousand in 2023, reflecting challenges during the peak season [153]. - The Authentication segment's revenue decreased to $441 thousand in 2024 from $661 thousand in 2023, with no growth during the year [153]. - Net loss for the year ended December 31, 2024, was $3,824 thousand, compared to a net loss of $3,390 thousand in 2023, primarily due to impairment charges [163]. Expenses - Research and development expenses decreased to $70 thousand in 2024 from $107 thousand in 2023, mainly due to fewer projects in the Authentication segment [158]. - General and administrative expenses decreased by $564 thousand to $3,852 thousand in 2024, primarily due to lower deal costs related to the acquisition of Trust Codes Global [157]. - Segment management and technology expenses increased by $357 thousand to $5,454 thousand in 2024, primarily due to the acquisition of Trust Codes Global [156]. Shareholder Actions - The company repurchased 21,100 shares of common stock for $18 thousand under the share repurchase program during the year ended December 31, 2024 [168]. - The company has established a share repurchase program funded by cash and cash equivalents, along with proceeds from convertible notes [175]. Debt and Compliance - As of December 31, 2024, the company had short-term debt of $500 thousand and long-term debt of $375 thousand under a Term Note, with a total repayment of $500 thousand made during the year [171]. - The company is required to maintain a fixed charge coverage ratio of at least 1.10 to 1.00 at the end of each fiscal year, but was not in compliance with all covenants as of December 31, 2024 [173]. Impairment and Valuation - A goodwill impairment charge of $1,351 thousand was recorded during the year ended December 31, 2024, due to the carrying value of the Authentication reporting unit exceeding its estimated fair value [185]. - The Trust Codes acquisition in March 2023 involved significant estimates and assumptions impacting the financial statements [177]. Future Outlook - The company expects to fund operations primarily through current financial resources and future revenue, with potential for additional debt or equity issuance [176]. - The company anticipates growth through key acquisitions and organic means, aiming to accelerate business growth [176]. Contractual and Billing Information - Unbilled amounts are generally billed and collected within 30 to 60 days, with no significant changes in contract assets as of December 31, 2024 [179]. Interest Rate Management - The company entered into an interest rate swap agreement effective October 17, 2022, fixing the interest rate on outstanding debt at 7.602%, which was terminated on January 21, 2025 [174]. Revenue Sources - Over 95% of the company's revenue is derived from logistics management for time and temperature-sensitive packages, with the remaining from brand protection solutions [178].

Financial Data and Key Metrics Changes - The annual revenue for 2024 was 4% below the revenue in 2023, with Q4 revenue at $7.7 million compared to $8.7 million in Q4 2023, a decrease of $1 million [7][15] - Gross profit decreased by $0.5 million to $2.4 million in Q4 2024 versus $2.9 million in Q4 2023, with a gross margin of 32% in Q4 2024 compared to 33% in Q4 2023 [16][17] - Full-year gross margin improved to 36% in 2024 from 32% in 2023 [17] - The net loss for Q4 was $0.5 million, or a loss of $0.05 per diluted share, compared to net income of less than $0.1 million in Q4 2023 [18] Business Line Data and Key Metrics Changes - In the Precision Logistics segment, the number of proactive customers increased by 6% over 2023, but shipments by existing customers in the proactive service line were down 6% in 2024 [11][12] - The Authentication segment experienced a divestiture of the Trust Codes Global business, which had an operating loss of $1.2 million in 2024 [13] Market Data and Key Metrics Changes - The overall market conditions appear to be down slightly, with a decrease in the total number of shipments [32] - The loss of one significant customer continues to impact performance, particularly in the Premium services [31][36] Company Strategy and Development Direction - The company is focusing on reducing investments in areas that do not yield desired returns and is working on strategic investments to enhance shareholder value [8][10] - There is an emphasis on optimizing sales strategies and exploring avenues for expansion in the Precision Logistics segment [23] Management's Comments on Operating Environment and Future Outlook - Management indicated that 2024 was a transition year and expressed optimism about the foundation laid for future growth [45] - The company does not plan to provide guidance for 2025 due to unpredictable market conditions and the need to align costs with revenue changes [36][38] Other Important Information - The company completed a $4.7 million warrant inducement capital raise and retired its bank debt, reducing convertible debt from $1.1 million to $800,000 [8][9] - As of December 31, 2024, cash was $2.8 million, a decrease from $3.1 million on December 31, 2023 [19][20] Q&A Session Summary Question: Expected share count for Q1 - The expected share count for Q1 is about 12.5 million [29] Question: Commentary on logistics trends in Q1 - The loss of a significant customer will continue to impact Q1 and Q2, but the proactive business remains stable [31][32] Question: Guidance for 2025 - The company has not provided guidance for 2025 and does not plan to do so, citing stability in the business aside from the lost customer [36][38] Question: Modeling assumptions for Q1 and Q2 - It is reasonable to model a low double-digit decline on the topline through the first half due to the loss of the customer [39][40]

Offering and Sale of Shares - VerifyMe, Inc. has agreed to issue and sell shares of common stock with an aggregate offering price of up to $15,803,511[1] - The company has filed a registration statement on Form S-3 (File No. 333-284562) with the SEC, which includes a base prospectus for the Placement Shares[2] - The company will notify the agent of the number or dollar value of Placement Shares for each sale, specifying the time period and any limitations[3] - The agent will use commercially reasonable efforts to sell the Placement Shares as specified in the Placement Notice[5] - The settlement for sales of Placement Shares will occur on the first Trading Day following the date of sale, with net proceeds delivered to the company after deductions[10] - The company must not exceed the maximum amount of shares that can be sold under the agreement, which is subject to board authorization[12] - The Placement Shares will be duly authorized and validly issued, free of any encumbrances[28] - The Company will use the Net Proceeds from the offering as described in the Prospectus[76] - The Company will not offer or sell any Common Stock outside of the Placement Shares during the specified period without the Agent's consent[77] - The Company will disclose the amount of Placement Shares sold, Net Proceeds, and compensation payable to the Agent in its annual report on Form 10-K and quarterly reports on Form 10-Q[80] - The Company reported a gross proceeds commission of 3% on each sale of Placement Shares[154] - The Placement Shares will be sold at a minimum market price to be determined during the specified time period[151] Compliance and Legal Matters - The company represents that the registration statement and transactions comply with the conditions for the use of Form S-3 under the Securities Act[14] - The Company does not have any material liabilities or obligations not described in the Registration Statement or Prospectus[18] - The Company has not experienced any Material Adverse Effect since the dates of the financial information provided[24] - The Company possesses all necessary licenses and permits for its business operations, with no known issues regarding their renewal[35] - The Company has not defaulted on any indebtedness or rental payments that would have a Material Adverse Effect[36] - There are no ongoing legal actions or regulatory investigations that would materially affect the Company's obligations[33] - The Company is duly organized and in good standing under the laws of its jurisdiction[21] - The Company is not an ineligible issuer under the Securities Act, ensuring compliance during the offering of Placement Shares[63] - There are no conflicts arising from the execution of the Agreement or the issuance of Placement Shares that would have a material adverse effect[65] - The Company has filed all required federal, state, local, and foreign tax returns and paid all taxes shown thereon, with no tax deficiency determined adversely that would have a material adverse effect[42] - The Company is in compliance with all applicable environmental laws and has not received notice of any actual or potential liability that would have a material adverse effect[46] - The Company is not aware of any failures to comply with the Sarbanes-Oxley Act provisions by its directors or officers[48] - The Company has not made any unlawful contributions to political candidates or failed to disclose contributions as required by law[61] - The Company and its subsidiaries are conducting business in compliance with all applicable laws, rules, and regulations, with no material adverse effects reported[62] Financial Reporting and Internal Controls - The financial statements of the Company present fairly its financial position and results of operations, prepared in compliance with GAAP[18] - The Company has established effective internal controls over financial reporting and has not identified any material weaknesses[47] - The Company will maintain accurate books and records and internal accounting controls to ensure reliable financial reporting in accordance with GAAP[91] - The Company must provide a Representation Date Certificate within five Trading Days of filing its annual report on Form 10-K or quarterly report on Form 10-Q[82] - The Company is required to furnish Comfort Letters from its independent accountants within five Trading Days of each Representation Date[86] Agreement Terms and Conditions - The Agreement will automatically terminate upon the issuance and sale of all Placement Shares[119] - The Agreement remains in effect unless terminated by mutual agreement or under specified sections[120] - The Agent is entitled only to reimbursement of out-of-pocket expenses if the Agreement is terminated prior to the sale of any Placement Shares[122] - The Company acknowledges that no fiduciary relationship is created with the Agent in connection with the transactions[135] - The Company must comply with the requirements of Rule 433 for any Permitted Free Writing Prospectus[134] - The Company and the Agent may execute the Agreement in counterparts, each considered an original[140] - The Registration Statement must be effective and available for the sale of all Placement Shares contemplated by any Placement Notice[94] - The Company must ensure that no material adverse changes occur that could affect the offering of Placement Shares[97] - The Agent must receive the required legal opinion and Comfort Letter on or before their respective due dates[99] - Trading in the Common Stock must not be suspended on the Exchange, and the Common Stock must not be delisted[101] - The Company has filed an application for listing quotation of the Placement Shares on the Exchange prior to issuance[104] - The Agent is required to be duly registered as a broker-dealer under FINRA and applicable state regulations during the term of the Agreement[113] Indemnification and Liability - The Company agrees to indemnify the Agent against any losses arising from untrue statements or omissions in the Registration Statement[106] - The Agent may terminate the Agreement if there is a Material Adverse Effect or significant changes in financial markets[115] - The Company has the right to terminate the Agreement with five days' written notice at its discretion[117] - The indemnity and contribution agreements will survive regardless of any investigations or acceptance of the Placement Shares[114] - The Agent agrees to contribute to total losses in proportion to the benefits received from the sale of Placement Shares[111] - The Company must notify the Agent promptly of any actions against it for which indemnification is sought[109] - The Agent will not be liable for any settlement of claims without its written consent[111] Miscellaneous - The Accountant, MaloneBailey, LLP, is an independent registered public accounting firm in compliance with the Sarbanes-Oxley Act[31] - The issued and outstanding shares of capital stock are fully paid and non-assessable, with no preemptive rights[26] - The Company maintains good and valid title to all material real and personal property, free of liens and encumbrances, except those that do not materially interfere with its business[43] - The Company owns adequate enforceable rights to all necessary intellectual property for its business operations, with no known claims of infringement that would result in a material adverse effect[44]

Core Insights - VerifyMe, Inc. reported a decrease in revenue for Q4 2024, totaling $7.7 million, down from $8.7 million in Q4 2023, primarily due to a discontinued contract in its Precision Logistics segment [4][8][9] - The company achieved an 8% year-over-year increase in gross profit and more than doubled its annual adjusted EBITDA compared to 2023 [2] - The decision to divest an unprofitable operation is expected to enhance cash flow from operations in 2025, with the company having retired most of its debt [2][12] Financial Performance - Q4 2024 revenue was $7.7 million, a decrease of $1.0 million from Q4 2023 [4][8] - Gross profit for Q4 2024 was $2.4 million, resulting in a gross margin of 32%, compared to $2.9 million and 33% in Q4 2023 [5][9] - The operating loss for Q4 2024 was ($0.3) million, compared to an operating income of $0.1 million in Q4 2023 [6] - The net loss for Q4 2024 was ($0.5) million, or ($0.05) per diluted share, compared to net income of less than $0.1 million in Q4 2023 [7][9] - Annual revenue for 2024 was $24.2 million, down from $25.3 million in 2023, while annual gross profit increased to $8.7 million, or 36%, compared to $8.0 million, or 32%, in 2023 [8][9] Cash Flow and Liquidity - Cash flow from operations in Q4 2024 was $0.6 million, down from $0.9 million for the year ended December 31, 2024 [8][9] - As of February 28, 2025, the company had $5.7 million in cash and access to additional low-cost capital [2][12] - The company has retired all debt except for $0.8 million of convertible notes held by affiliates and Board members [2] Strategic Decisions - The divestiture of the Trust Codes Global business on December 8, 2024, was part of the company's strategy to focus on more profitable areas [4] - The company is finalizing its strategy to maximize shareholder returns and is optimistic about future opportunities [2][12]

Core Viewpoint - VerifyMe, Inc. (VRME) is set to report its fourth-quarter 2024 results on March 6, with expectations of a marginal revenue decline and breakeven earnings per share [1][3][5]. Revenue Expectations - The Zacks Consensus Estimate for VRME's revenues in Q4 2024 is $8.6 million, reflecting a slight year-over-year decrease due to declining revenues in the precision logistics segment from discontinued contracts [3]. - Revenues in the authentication segment saw a minor decline in Q3 2024, but improvements are anticipated in the upcoming quarter due to strong sales and partnerships, including a successful agreement with Amazon [4]. Earnings Projections - The consensus estimate for the bottom line is breakeven, compared to earnings of 2 cents per share in the same quarter last year, with expectations of a decline attributed to rising operating expenses [5]. - The current Earnings ESP for VRME is 0.00%, and it holds a Zacks Rank of 3, indicating a neutral outlook for an earnings beat this time [6][7]. Peer Comparisons - Waste Connections, Inc. (WCN) reported mixed results for Q4 2024, with adjusted earnings of $1.16 per share missing estimates by 3.3% but showing a 4.5% year-over-year increase, while revenues of $2.3 billion exceeded estimates and grew 11% year-over-year [8]. - TransUnion (TRU) delivered strong Q4 2024 results, with adjusted earnings of 97 cents per share surpassing estimates by 1% and increasing 21.3% year-over-year, alongside total revenues of $1 billion, which outpaced estimates by 8.7% [9].

Core Viewpoint - VerifyMe, Inc. has announced an extension of its share repurchase plan, allowing the company to buy back up to $500,000 of its common stock until December 31, 2025, as market conditions permit [2][3]. Company Overview - VerifyMe, Inc. provides brand protection and enhancement solutions, operating in two segments: Authentication and Precision Logistics, focusing on anti-counterfeit and specialized logistics for time and temperature-sensitive products [4]. Share Repurchase Plan - The Board has approved the extension of the 2024 Share Repurchase Authorization to December 31, 2025, allowing for the repurchase of shares based on market conditions and legal considerations [2]. - The repurchase plan is flexible, with no obligation to acquire a specific number of shares, and can be modified or suspended at the Board's discretion [2]. - Repurchases will be funded from cash generated from operations, ensuring sufficient liquidity for strategic growth initiatives [2]. Management Commentary - The President and CEO of VerifyMe expressed satisfaction with operational efficiencies and highlighted the potential for delivering shareholder value through both organic and strategic initiatives [3]. - The company aims to maintain all capital allocation options to optimize short and long-term shareholder value creation [3].

Financial Data and Key Metrics Changes - The third quarter revenue was $5.4 million, a decrease of $0.2 million from $5.6 million in the prior year [22] - Gross profit decreased by $0.2 million to $1.9 million in Q3 2024, with a gross margin of 35% compared to 37% in Q3 2023 [23] - The net loss for the quarter was $2.4 million, or a loss of $0.23 per diluted share, while adjusted EBITDA remained flat year-over-year at $0.2 million [28] Business Line Data and Key Metrics Changes - Revenue in the Authentication segment was down slightly year-over-year, while in the Precision Logistics segment, premium revenue decreased by $0.5 million due to discontinued contracts, partially offset by a $0.4 million increase in proactive services revenue [22] - The Precision Logistics segment saw a 6% increase in proactive services customers year-to-date compared to 2023 [20] Market Data and Key Metrics Changes - The company anticipates that 2024 revenue will be slightly below 2023 revenue, primarily due to the loss of a premium customer and lack of growth in the Authentication segment [8][9] - The company has identified that the Authentication segment lacks the size and scope to compete effectively in the enterprise customer market [13] Company Strategy and Development Direction - The company plans to exit the code portion of the Authentication segment and focus on its ink product, which currently represents about 23% of Authentication revenue [16] - A renewed focus on the ink product and exploring other strategic opportunities is expected to provide better returns for shareholders [19] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment over the lack of revenue growth in 2024 and acknowledged the challenges faced in the Authentication segment [8][9] - The company remains optimistic about the Precision Logistics business and believes it can create value through organic and strategic initiatives [18] Other Important Information - The company recorded a $2.3 million goodwill and intangible asset impairment due to the analysis of its competitive positioning in the Authentication segment [25] - Cash as of September 30, 2024, was $2.6 million, a decrease from $3.1 million at the end of 2023 [29] Q&A Session Summary Question: Is the remaining Authentication business adjusted EBITDA positive or negative? - The remaining Authentication business is currently adjusted EBITDA negative, but there is hope to achieve adjusted EBITDA positive status in 2025 [34] Question: Does it make sense for the Authentication segment to exist given its small contribution to revenue? - Management acknowledged the question and indicated that they are evaluating the future of the segment, considering its low revenue contribution [36][37] Question: What is the outlook for the premium business after the FedEx decision? - Management reported growth in direct premium customers and stable activity in the pipeline, indicating a positive outlook for this aspect of the business [42] Question: What pieces of the Authentication business are still in play? - Currently, the ink component and related patents and technology are in play, with a focus on partnerships that could create value [47] Question: Will there be revenue from the Authentication segment in 2025? - Management expects some revenue from the Authentication segment in 2025, but it will not be material for the company as a whole [49] Question: What is the mix of proactive services revenue? - Approximately 80% of the revenue comes from proactive services, with 20% from premium services [50] Question: What are the expectations for gross margin in the upcoming year? - Management does not anticipate a year-over-year gross margin uplift due to the shift in revenue mix towards lower-margin proactive services [56]

Revenue and Financial Performance - Revenue for the three months ended September 30, 2024, was $5,435 thousand, compared to $5,604 thousand in the same period in 2023, with Proactive services contributing $4,417 thousand and Premium services contributing $886 thousand[45] - For the nine months ended September 30, 2024, total revenue was $16,546 thousand, compared to $16,600 thousand in 2023, with Proactive services contributing $12,587 thousand and Premium services contributing $3,574 thousand[46] - Consolidated revenue decreased by $169 thousand in Q3 2024 compared to Q3 2023, with Precision Logistics segment accounting for 98% of total revenue[136] - For the nine months ended September 30, 2024, consolidated revenue decreased by $54 thousand compared to the same period in 2023[145] - Precision Logistics segment revenue for September 2024 was $5.303 million, a decrease of 2.8% compared to $5.457 million in September 2023[110] - Authentication segment revenue for September 2024 was $132,000, a decrease of 10.2% compared to $147,000 in September 2023[110] - Total revenue for September 2024 was $5.435 million, a decrease of 3.0% compared to $5.604 million in September 2023[110] - Proactive services revenue in Precision Logistics grew 9% in Q3 2024 compared to Q3 2023[136] Gross Profit and Margins - Gross profit for Q3 2024 was $1,895 thousand, a decrease from $2,046 thousand in Q3 2023, with gross margin declining from 37% to 35%[137] - Gross profit for the nine months ended September 30, 2024, was $6,245 thousand, an increase from $5,153 thousand in the same period of 2023, with gross margin improving from 31% to 38%[146] - Precision Logistics gross profit for September 2024 was $1.777 million, a decrease of 6.9% compared to $1.909 million in September 2023[110] - Authentication gross profit for September 2024 was $118,000, a decrease of 13.9% compared to $137,000 in September 2023[110] - Total gross profit for September 2024 was $1.895 million, a decrease of 7.4% compared to $2.046 million in September 2023[110] Net Loss and Impairments - Net loss for September 2024 was $2.424 million, compared to a net loss of $930,000 in September 2023[110] - Consolidated net loss for Q3 2024 was $2,424 thousand, compared to $930 thousand in Q3 2023[143] - The company recorded a goodwill impairment charge of $1,351 thousand for the Authentication segment during the three and nine months ended September 30, 2024[169] - The company recorded an intangible impairment charge of $901 thousand for certain intangible assets during the three months ended September 30, 2024[171] - Goodwill impairment charge of $1,351 thousand was recorded for the Authentication segment during the three and nine months ended September 30, 2024, due to a triggering event indicating potential impairment[60][62] - Intangible asset impairment charges of $901 thousand and $914 thousand were recorded during the three and nine months ended September 30, 2024, respectively, due to revisions in internal forecasts[65] - The company impaired certain assets by $914 thousand during the nine months ended September 30, 2024, bringing the gross carrying amount related to these assets to zero[66] Cash and Debt - As of September 30, 2024, the company held $2.61 million in cash and cash equivalents, with no restricted cash, compared to $3.095 million in total cash and cash equivalents including $63,000 in restricted cash as of December 31, 2023[22] - The company's cash provided by operating activities was $302 thousand for the nine months ended September 30, 2024, compared to cash used by operating activities of $599 thousand in the same period of 2023[155] - The company's short-term debt outstanding under the Term Note was $0.5 million and total long-term debt outstanding under the Term Note was $0.5 million as of September 30, 2024[93] - The company repaid $375 thousand towards the principal of the outstanding Term Note during the nine months ended September 30, 2024[93] - The company entered into a Convertible Note Purchase Agreement for $1,100 thousand in August 2023, with $450 thousand held by related parties as of September 30, 2024[158] - The PNC Facility includes a $1 million RLOC extended to September 30, 2025, and a $2 million Term Note maturing in September 2026[159][160] - The company used $1.8 million of the $2.0 million proceeds from the Term Note to settle debt related to the PeriShip Global acquisition, including redeeming 61,000 shares of common stock[162] - The company entered into an interest rate swap agreement with a notional amount of $1,958 thousand, fixing the interest rate on outstanding debt at 7.602%[163] - The company's cash and cash equivalents are expected to fund operations for the next 12 months, with potential for additional debt or equity issuance to support growth[165] Stock and Share-Based Compensation - For the three and nine months ended September 30, 2024, there were approximately 8,256,000 anti-dilutive shares, including 2,305,000 unvested performance restricted stock units and 4,629,000 shares issuable upon exercise of warrants[40] - The company accounts for stock-based compensation using the Black-Scholes model for stock options and a lattice approach with Monte Carlo simulation for performance restricted stock units[42] - Stock-based compensation awards to non-employees are accounted for under ASU No. 2018-07, aligning with employee share-based payment accounting[43] - The company expensed $345 thousand related to restricted stock units for the three months ended September 30, 2024, and $678 thousand for the nine months ended September 30, 2024[70] - The company issued 1,750 shares of common stock upon vesting of restricted stock units and 38,095 shares of common stock from treasury shares during the nine months ended September 30, 2024[70] - The company repurchased 1,000 shares of common stock for $1 thousand under its share repurchase program during the nine months ended September 30, 2024[74] - The company had 270,367 shares held in treasury with a value of approximately $464 thousand as of September 30, 2024[73] - The company had 221,000 stock options outstanding with a weighted-average exercise price of $3.57 as of September 30, 2024[82] - Total unrecognized share-based compensation cost related to unvested restricted stock awards is $152 thousand as of September 30, 2024[84] - Unvested time-based restricted stock units as of September 30, 2024, totaled 363,403 shares with an average weighted grant date fair value of $1.35[85] - Total unrecognized share-based compensation cost related to unvested time-based restricted stock units was $198 thousand, expected to be recognized over less than one year[85] - Unvested performance-based restricted stock units as of September 30, 2024, totaled 1,801,660 shares with a weighted average grant date fair value of $1.35[87] - Total unrecognized share-based compensation cost related to unvested performance-based restricted stock units was $960 thousand, expected to be recognized over 1.2 years[88] - The company's warrants as of September 30, 2024, totaled 4,628,586 shares with a weighted average exercise price of $4.13 and a remaining contractual term of 1.5 years[89] - The company repurchased 1,000 shares of common stock for $1 thousand under a $0.5 million share repurchase program approved in December 2023[164] Intangible Assets and Goodwill - The company's intangible assets include patents, trademarks, customer relationships, and developed technology, with amortization periods ranging from 8 to 18 years[55][64] - The company's goodwill and intangible assets are tested for impairment annually or when triggering events occur, with significant judgment involved in determining fair value[58][59] - Intangible assets with finite lives totaled $7,730 thousand as of September 30, 2024, with a net carrying amount of $5,523 thousand after amortization[66] - Amortization expense for intangible assets was $277 thousand for the three months ended September 30, 2024, and $817 thousand for the nine months ended September 30, 2024[66] - The company expects to record amortization expense of intangible assets totaling $5,523 thousand over the next 5 years and thereafter[68] Foreign Currency and Derivatives - Foreign currency transaction gains for the three and nine months ended September 30, 2024, were $67,000 and $21,000 respectively, compared to losses of $16,000 and $30,000 for the same periods in 2023[24] - The company's fair value hierarchy shows a derivative asset (Level 2) of $11,000 and contingent consideration (Level 3) of ($22,000) as of September 30, 2024, compared to $4,000 and ($924,000) respectively as of December 31, 2023[29] Contracts and Customer Concentration - The Precision Logistics segment consists of Proactive and Premium service lines, with payment terms ranging from 7-30 days for Proactive and 30-45 days for Premium services[34] - Revenue in the Precision Logistics segment is recognized upon package delivery, with transaction fees consisting solely of fixed consideration[35] - The Authentication segment's revenue is recognized upon product shipment or delivery, with payment terms typically ranging between 30 and 90 days[36] - One customer represented 14% of revenues for the three months ended September 30, 2024, and one customer represented 23% of revenues for the same period in 2023[105] - Two customers made up 38% of accounts receivable as of September 30, 2024[105] Acquisitions and Contingent Consideration - The company acquired Trust Codes Global Limited on March 1, 2023, for a total purchase price of $2.113 million, including $363 thousand in cash, $625 thousand in stock, and $1.125 million in contingent consideration[52][54] - The company recognized $278 thousand in acquisition-related costs for the Trust Codes Global acquisition, included in General and administrative expenses for the nine months ended September 30, 2023[52] - Contingent consideration liabilities totaled $22 thousand as of September 30, 2024, with a payment of $36 thousand made on May 15, 2024[57] - The company plans to close the Trust Codes Global business by the end of November 2024 unless a purchaser is found[111] Operating Leases and Other Expenses - The company's operating lease cost for the nine months ended September 30, 2024, was $145 thousand, compared to $132 thousand for the same period in 2023[102] Partnerships and Strategic Alliances - The Precision Logistics segment has a direct partnership with a major global carrier company, providing detailed information and predictive analytics on shipments[129] - The Authentication segment has a contract with HP Indigo and a strategic partnership with INX, the third largest producer of inks in North America[130] Contract Assets and Liabilities - Contract assets increased by $6,464 thousand during the nine months ended September 30, 2024, with an ending balance of $786 thousand[50]