VerifyMe(VRME) - 2025 Q4 - Annual Report

Revenue and Financial Performance - Consolidated revenue for the year ended December 31, 2025, was $16,398 thousand, a 32% decrease compared to $24,207 thousand for the year ended December 31, 2024 [240]. - Gross profit for the year ended December 31, 2025, was $6,321 thousand, with a gross margin of 38.5%, up from 35.8% in 2024 [241]. - The Precision Logistics segment revenue decreased to $16,242 thousand in 2025 from $23,766 thousand in 2024, primarily due to the termination of the ProActive services agreement [240]. - Net loss for the year ended December 31, 2025, was $4,905 thousand, compared to a net loss of $3,824 thousand in 2024, with a loss per share of $0.39 [248]. - Cash provided by financing activities for the year ended December 31, 2025, was $3,660 thousand, compared to cash used of $616 thousand in 2024 [251]. - Research and development expenses decreased to $20 thousand in 2025 from $70 thousand in 2024, reflecting fewer projects in the Authentication segment [244]. - Segment management and technology expenses decreased by $2,316 thousand to $3,138 thousand for the year ended December 31, 2025, compared to $5,454 thousand in 2024 [242]. - The company recorded an intangible asset impairment charge of $2,788 thousand and a goodwill impairment charge of $1,062 thousand for the year ended December 31, 2025 [246]. - The Company recorded a goodwill impairment charge of $1,062 thousand during the year ended December 31, 2025, due to a triggering event related to the Precision Logistics segment [269]. - An intangible impairment charge of $2,788 thousand was recorded during the year ended December 31, 2025, as certain intangible assets were deemed impaired [271]. Strategic Partnerships and Services - The company expects to begin broadly offering Premium and Direct Premium services to customers of its new Strategic Partner in Q2 2026 [208]. - The company ceased providing ProActive and Premium services to its prior carrier partner in 2025 but continues to offer Direct Premium services [207]. - The company anticipates ProActive services revenue to recover over several quarters following the new Program Agreement with a Strategic Partner [240]. - VerifyMe's service offerings include customized reporting for trend analysis and post-delivery services to enhance customer processes [205]. - The proprietary PeriTrack® dashboard provides real-time visibility into shipping activities and supports supply chain stakeholders [211]. - Over 95% of the Company's revenue is derived from logistics management for time and temperature-sensitive packages [266]. Mergers and Acquisitions - The merger with Open World Ltd. is expected to result in existing stockholders retaining approximately 10% of the post-merger shares, while Open World shareholders will receive about 90% [213]. - The merger agreement includes customary covenants, including conducting business in the ordinary course and restrictions on certain transactions [214]. - The company has agreed to maintain a Closing Net Cash of no less than $1 million as a condition for the merger [217]. Employment Agreements - Adam Stedham's new employment agreement includes an annual base salary of $300,000 with a potential bonus of up to 50% based on performance [224]. - Jennifer Cola's employment agreement includes an annual base salary of $180,000 with a potential bonus of up to 50% based on performance, along with 130,000 restricted stock awards [227]. Financial Obligations and Compliance - The Company is not in compliance with all covenants under the PNC Facility as of December 31, 2025, but received a waiver for certain events of default [260]. - The Company expects to fund operations for the next 12 months through current financial resources and future revenue, with potential for additional debt or equity issuance [263]. - The PNC Facility includes a $1 million Revolving Line of Credit (RLOC) with no scheduled principal payments until maturity, and as of December 31, 2025, $0 was outstanding on the RLOC [258]. - A four-year Term Note for $2 million under the PNC Facility was paid in full as of January 21, 2025, with no future principal payments due [259]. - The Company entered into a Convertible Note Purchase Agreement for the sale of convertible promissory notes totaling $1,100 thousand, with $475 thousand purchased by related parties [257]. - As of December 31, 2025, the outstanding amount on the convertible debt was $750 thousand, with an interest expense of $61 thousand for the year ended December 31, 2025 [257]. Future Growth and Strategy - The Company anticipates growth through key acquisitions and organic growth strategies [263].