Financial Position - As of June 30, 2024, the company reported cash and cash equivalents of $2,900 thousand, down from $3,032 thousand as of December 31, 2023[24] - The company held $63 thousand in restricted cash as of December 31, 2023, which was released by June 30, 2024[24] - As of June 30, 2024, the company had $0.5 million in short-term debt and $0.6 million in long-term debt, with a repayment of $250 thousand made during the six months ended June 30, 2024[88] - The company has a $1 million revolving line of credit (RLOC) with PNC Bank, which expires in September 2024, and a $2 million term note maturing in September 2026[87] Revenue and Profitability - Revenue for the three months ended June 30, 2024, was $5,244 thousand, a slight decrease from $5,352 thousand in the same period of 2023, representing a decline of approximately 2.0%[47] - Proactive services revenue for the six months ended June 30, 2024, was $8,170 thousand, down from $8,704 thousand in 2023, indicating a decrease of about 6.1%[48] - The company reported a total of $10,858 thousand in revenue for the six months ended June 30, 2024, compared to $10,628 thousand in 2023, reflecting an increase of approximately 2.2%[48] - Total revenue for June 2024 was $5,352,000, a slight increase from $5,335,000 in June 2023, representing a growth of 0.32%[99] - Total revenue for the three months ended June 30, 2024, was $5,352 thousand, a slight increase of $17 thousand compared to $5,335 thousand for the same period in 2023[120] - Total revenue for the six months ended June 30, 2024, was $11,111 thousand, an increase of $115 thousand compared to $10,996 thousand for the same period in 2023[127] Segment Information - The company operates two reportable segments: Precision Logistics and Authentication, with significant intercompany balances eliminated upon consolidation[26] - The company recognized revenue in its Precision Logistics segment when packages are delivered, with transaction fees consisting of fixed consideration[36][37] - In the Authentication segment, revenue is recognized when products are shipped or delivered, based on fixed consideration from purchase orders[38] - The Precision Logistics segment provides time and temperature-sensitive parcel management services using a proprietary IT platform for real-time visibility into shipment transit[98] - The Authentication segment's revenue decreased to $108,000 in June 2024 from $121,000 in June 2023, a decline of 10.74%[99] Expenses and Costs - Segment management and technology expenses increased by $504 thousand to $2,860 thousand for the six months ended June 30, 2024, primarily due to the acquisition of Trust Codes Global[129] - Research and development expenses increased to $60 thousand for the six months ended June 30, 2024, compared to $18 thousand for the same period in 2023[131] - The company incurred $278 thousand in acquisition-related costs included in general and administrative expenses for the six months ended June 30, 2023[53] Goodwill and Intangible Assets - Goodwill is tested for impairment annually, with qualitative assessments determining the need for quantitative tests based on various factors[39] - Goodwill as of June 30, 2024, was $5,334 thousand, reflecting a decrease from $5,384 thousand at the beginning of the year, primarily due to foreign currency translation[62] - Total intangible assets as of June 30, 2024, amounted to $6,539 thousand, with accumulated amortization of $2,383 thousand[64] - Amortization expense for intangible assets was $540 thousand for the six months ended June 30, 2024, compared to $495 thousand for the same period in 2023[64] - The company expects to incur amortization expenses of intangible assets totaling $6,539 thousand over the next five years[66] Stock and Equity - The company reported approximately 8,208,000 anti-dilutive shares for the three and six months ended June 30, 2024, compared to 7,108,000 for the same period in 2023[42] - The company issued 1,750 shares of common stock upon vesting of restricted stock units during the six months ended June 30, 2024[67] - As of June 30, 2024, the company had 270,367 shares held in treasury, valued at approximately $464 thousand[69] - The company repurchased 1,000 shares of common stock for $1 thousand under its share repurchase program during the six months ended June 30, 2024[70] - As of June 30, 2024, the company had 301,000 stock options outstanding with a weighted average exercise price of $4.24[79] - The company had 140,000 unvested restricted stock awards with a weighted average grant date fair value of $1.60 as of June 30, 2024[81] - The total unrecognized share-based compensation cost related to unvested performance restricted stock units was $1,162 thousand, expected to be recognized over 1.4 years[85] - The company has suspended new offering periods under the 2021 non-qualified stock purchase plan, which has a maximum of 500,000 shares reserved for issuance[68] - As of June 30, 2024, the company had 4,628,586 warrants outstanding with a weighted average exercise price of $4.13 and a remaining contractual term of 1.8 years[86] Acquisition and Contingent Consideration - The company acquired Trust Codes Limited for a total purchase price of approximately $2,113 thousand, which includes $363 thousand in cash and $625 thousand in stock[53][55] - The contingent consideration related to the Trust Codes acquisition is estimated at $1.1 million, with $123 thousand classified as a current liability as of June 30, 2024[58] Cash Flow - Cash provided by operating activities was $312 thousand during the six months ended June 30, 2024, compared to cash used of $463 thousand in the same period of 2023[134] Strategic Focus - The company is focusing on expanding its services in the pharmaceutical and healthcare industries, which represent significant opportunities due to enhanced tracking and customer service[109] - The company has a strategic partnership with a major global carrier, enhancing its logistics optimization capabilities and providing detailed predictive analytics[114] - The Precision Logistics segment is expected to see growth in proactive services as the company focuses on direct customer engagement[114] - The Authentication segment is actively marketing its solutions in agriculture, food and beverage, and pharmaceuticals to combat counterfeiting and enhance traceability[111] Financial Instruments - The company’s financial instruments include accounts receivable and payable, with carrying values approximating fair value due to short maturities[30] - The company recognizes revenue based on ASC Topic 606, with performance obligations satisfied upon delivery of logistics management, ink canisters, software licensing, and equipment leasing[143] Stock-Based Compensation - Stock-based compensation is measured based on estimated fair values using the Black-Scholes model, with changes in assumptions potentially affecting future expense recognition[145] - Restricted stock units with price appreciation targets utilize a Monte Carlo simulation for fair value determination, with compensation expense recognized on a straight-line basis[146] - Non-employee equity-based payments are recorded as an expense over the service period, with fair value re-measurements until vesting or service completion[148]
VerifyMe(VRME) - 2024 Q2 - Quarterly Report