VerifyMe Reports Third Quarter 2019 Results

ROCHESTER, NY / ACCESSWIRE / November 15, 2019 / VerifyMe, Inc. (OTCQB:VRME) (“VerifyMe” or the “Company”), a technology solutions company that markets invisible ink identifiers and serialization codes for authenticating, tracking and tracing functions for labels, packaging and products, announced the Company’s financial results for the third quarter ended September 30, 2019 (“Q3 2019”).

Key Financial Highlights for Q3 2019:

  • Revenues increased to $56,225, compared to $28,273 in the third quarter ended September 30, 2018 (“Q3 2018”)
  • Gross margins of 85% versus 57% in Q3 2018
  • Operating loss increased by 17% to $0.7 million (includes $0.3 million of non-cash stock-based compensation)
  • Net loss increased by 47% to $0.7 million (includes $0.3 million on non-cash stock-based compensation)

Key Business Highlights for Q3 2019:

  • In conjunction with our strategic partner, Indigo Division of HP Inc. (“HP Indigo”), we presented our secure tax stamps at the Global Tax Stamp Forum in Budapest, Hungary in September;
  • VerifyMe, in conjunction with our strategic partners, HP Indigo and S-One LP, demonstrated its invisible QR code technology, known as “RainbowSecure®” and VeriPAS™ serialization, track and trace security system at Label Expo Europe 2019, in Brussels, Belgium in September;
  • Closed first tranche of bridge financing for $540,000 net proceeds;
  • First revenue generated by Forbes Top 50 Private Company customer;
  • First Smart Phone Authenticator leases signed;
  • New VerifyMe “As authentic” labels have been printed for internet retailers such as Amazon.com to allow their customers to authenticate their products with their personal smart phone; and

Management Commentary

“We are pleased that a well-known multi-billion-dollar consumer products company that sells nutrition, personal care, beauty and home care products around the globe has begun printing using VerifyMe’s RainbowSecure® Invisible Ink technology. We recorded our first revenue from this client during the third quarter of 2019. Utilizing HP Indigo digital printing presses, this client applied VerifyMe RainbowSecure® technology to approximately one million labels for one of their nutritional products. We anticipate that revenues will continue to grow in the fourth quarter of 2019 and beyond as we continue to ramp our business with this client and our other global consumer product client.”

White continued: “We believe our attendance at the Global Label Expo trade show and Tax Stamp Forum in September has provided significant leads and new relationships for our business,” commented, Patrick White, VerifyMe’s Chief Executive Officer. “Our strategic partner, HP Indigo, graciously had us locate in their security section of HP Indigo’s busy trade show booth at the Global Label Expo. I was pleased to see that the HP Indigo representatives in attendance had been trained in our security technology and are now educating their clients on the features, benefits and capabilities of our RainbowSecure® technology for labels and packaging deployed in connection with the HP Indigo 6000 series digital printing presses. During the show, HP Indigo representatives introduced us to clients from all over the world to see our demonstrations. Our sales team is now following up on multiple leads we obtained from the show.”

Mr. White concluded: “As of November 11, 2019, our customers have applied our technology to approximately 25 million consumer products that are now in the marketplace. We believe our 40% sequential quarterly revenue growth and our 99% year over year revenue growth reflects that we have retained, expanded and added customers. Most of our product development is completed and commercialization has begun. Finally, we believe that our high 3rd quarter 2019 gross margin of 85% demonstrates our business model’s ability to generate profitable growth.”

Financial Results for the Three Months Ended September 30, 2019:

Revenue for the three months ended September 30, 2019 was $56,225, a 99% increase as compared to $28,273 for the three months ended September 30, 2018. The revenue primarily related to security printing with our authentication serialization technology for a large global brand owner. Three customers represented 99% of the revenue for the three months ended September 30, 2019.

Gross profit for the three months ended September 30, 2019 was $47,754, compared to $15,992 for the three months ended September 30, 2018. The resulting gross margin was 84.9% for the three months ended September 30, 2019, compared to 56.6% for the three months ended September 30, 2018.

General and administrative expenses for the three months ended September 30, 2019 were $350,851, a decrease of $6,814 or 2%, compared to $357,665 for the three months ended September 30, 2018. The decrease primarily related to continued efficiencies within the Company offset by an increase in non-cash stock-based compensation.

Legal and accounting expenses for the three months ended September 30, 2019 were $41,977, a decrease of $22,920 or 35%, compared to $64,897 for the three months ended September 30, 2018. The decrease primarily related to a decrease in legal fees.

Payroll expenses for the three months ended September 30, 2019 were $167,807, an increase of $90,143 or 116%, compared to $77,664 for the three months ended September 30, 2018. The increase related primarily to non-cash stock-based compensation and the transition of the Chief Financial Officer and Chief Technology Officer from consultants to part-time employees.

Research and development expenses for the three months ended September 30, 2019 were $804, a decrease of $73,039 or 99%, compared to $73,843 for the three months ended September 30, 2018. The decline is primarily due to investments in developing our VeriPASTM Mobile Authenticator technology in 2018 while in the three months ended September 30, 2019, our products were nearly completely developed.

Sales and marketing expenses for the three months ended September 30, 2019 were $148,416, an increase of $139,266, compared to $9,150 for the three months ended September 30, 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 September 30, 2019 was $662,101, an increase of $94,874, or 17%, compared to $567,227 for the three months ended September 30, 2018. Operating loss for the three months ended September 30, 2019 included $322,641 of non-cash stock-based compensation compared to $363,000, which included $204,227 of non-cash stock-based compensation, for the three months ended September 30, 2018.

Net loss for the three months ended September 30, 2019 was $706,548, an increase of $227,072, or 47%, compared to $479,476 for the three months ended September 30, 2018. The increase primarily related to an increase in non-cash stock-based compensation and the addition of our VP of Global Business Development offset by lower research and development costs. The resulting loss per share for the three months ended September 30, 2019 was $0.01 per diluted share, compared to $0.00 per diluted share for the three months ended September 30, 2018.

At September 30, 2019, VerifyMe had a $671,011 cash balance and 111.3 million shares issued and 110.9 million shares outstanding.

Financial Results for the Nine Months Ended September 30, 2019:

Revenue for the nine months ended September 30, 2019 was $143,158, a 308% increase as compared to $35,072 for the nine months ended September 30, 2018. The revenue primarily related to security printing with our authentication serialization technology for a large global brand owner.

Gross profit for the nine months ended September 30, 2019 was $112,835, compared to $20,791 for the nine months ended September 30, 2018. The resulting gross margin was 78.8% for the nine months ended September 30, 2019, compared to 59.3% for the nine months ended September 30, 2019.

General and administrative expenses for the nine months ended September 30, 2019 were $1,001,728, a decrease of $377,271 or 27%, compared to $1,378,999 for the nine months ended September 30, 2018. The decrease resulted primarily from a decrease in non-cash charges related to restricted stock awards and stock options of approximately $50,000 while the remaining variance was primarily due to efficiencies within the Company.

Legal and accounting expenses for the nine months ended September 30, 2019 were $172,676, a decrease of $189,695 or 52%, compared to $362,371 for the nine months ended September 30, 2018. The decrease related primarily to a decrease in legal fees and a decrease in accounting fees related to the hiring of our Chief Financial Officer.

Payroll expenses for the nine months ended September 30, 2019 were $374,382, an increase of $104,864 or 39%, compared to $269,518 for the nine months ended September 30, 2018. The increase related primarily to non-cash stock-based compensation and the transition of the Chief Financial Officer and Chief Technology Officer from consultants to part-time employees.

Research and development expenses for the nine months ended September 30, 2019 were $7,055, a decrease of $95,217 or 93%, compared to $102,272 for the nine months ended September 30, 2018. The decline is primarily due to investments in developing our VeriPASTM Smart Phone Authenticator technology in 2018 while in the nine months ended September 30, 2019, our products were nearly completely developed.

Sales and marketing expenses for the nine months ended September 30, 2019 were $400,717, an increase of $383,500, compared to $17,217 for the nine months ended September 30, 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 nine months ended September 30, 2019 was $1,843,723, a decrease of $265,863, or 13%, compared to $2,109,586 for the nine months ended September 30, 2018. Operating loss for the nine months ended September 30, 2019 included $671,649 of non-cash stock-based compensation, , compared to $1,399,646, which included $709,940 of non-cash stock-based compensation for the nine months ended September 30, 2018.

Net loss for the nine months ended September 30, 2019 was $1,885,510, a decrease of $512,794, or 21%, compared to $2,398,304 for the nine months ended September 30, 2018. The resulting loss per share for the nine months ended September 30, 2019 was $0.02 per diluted share, compared to $0.03 per diluted share for the nine months ended September 30, 2018.

About VerifyMe, Inc.

VerifyMe, Inc., is a developmental stage technology solutions company specializing in brand protection functions such as counterfeit prevention, authentication, serialization, and track and trace features for labels, packaging and products. 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 business opportunities listed under “Key Business Highlights” and potential revenue growth in 2019, 2020 and beyond, our pipeline, sales leads, the leasing of authenticators and the related recurring revenue and gross margins and our projected 2019 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, 2018 and under the heading “Risk Factors” in the Registration Statement filed with the Securities and Exchange Commission on October 10, 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.

For Licensing or Other Information Contact:

Company: VerifyMe, Inc.
Email: IR@verifyme.com
Website: http://www.verifyme.com

VerifyMe, Inc.
Balance Sheets

 
  As of  
 
  September 30, 2019     December 31, 2018  
 
  (Unaudited)        
     
     
  ASSETS  
     
 
           
CURRENT ASSETS
           
Cash and cash equivalents
  671,011     1,673,201  
Accounts Receivable
    51,415       30,373  
Deposits on Equipment
    163,090        
Prepaid expenses and other current assets
    29,981       25,781  
Inventory
    37,962       41,982  
TOTAL CURRENT ASSETS
    953,459       1,771,337  
INTANGIBLE ASSETS
               
Patents and Trademarks, net of accumulated amortization of
               
$275,591 and $258,294 as of September 30, 2019 and December 31, 2018
    228,705       209,049  
Capitalized Software Costs
    141,656       70,231  
 
               
TOTAL ASSETS
  1,323,820     2,050,617  
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
 
               
CURRENT LIABILITIES
               
Convertible Debt, net of unamortized debt discount
  228,478      
Derivative Liability
    207,534        
Accounts payable and other accrued expenses
    354,766       411,211  
Accrued Payroll
    106,438       69,041  
TOTAL CURRENT LIABILITIES
    897,216       480,252  
 
               
STOCKHOLDERS’ EQUITY
               
Series A Convertible Preferred Stock, $.001 par value, 37,564,767 shares
               
authorized; 0 shares issued and outstanding as of September 30, 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 September 30, 2019 and
           
December 31, 2018
               
 
               
Common stock of $.001 par value; 675,000,000 authorized; 111,252,373 and
102,553,706 issued, 110,901,833 and 102,203,166 shares outstanding as of
September 30, 2019 and December 31, 2018
    110,902       102,203  
 
               
Additional paid in capital
    61,578,151       60,844,796  
 
               
Treasury stock as cost (350,540 shares at September 30, 2019 and December 31, 2018)
    (113,389 )     (113,389 )
 
               
Accumulated deficit
    (61,149,060 )     (59,263,550 )
 
               
STOCKHOLDERS’ EQUITY
    426,604       1,570,365  
 
               
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  1,323,820     2,050,617  

VerifyMe, Inc.
Statements of Operations
(Unaudited)

 
  Three months ended     Nine months ended  
 
  September 30, 2019     September 30, 2018     September 30, 2019     September 30, 2018  
 
                       
 
                       
NET REVENUE
                       
Sales
  56,225     28,273     143,158     35,072  
 
                               
COST OF SALES
    8,471       12,281       30,323       14,281  
 
                               
GROSS PROFIT
    47,754       15,992       112,835       20,791  
 
                               
OPERATING EXPENSES
                               
General and administrative (a)
    350,851       357,665       1,001,728       1,378,999  
Legal and accounting
    41,977       64,897       172,676       362,371  
Payroll expenses (a)
    167,807       77,664       374,382       269,518  
Research and development
    804       73,843       7,055       102,272  
Sales and marketing (a)
    148,416       9,150       400,717       17,217  
Total Operating Expenses
    709,855       583,219       1,956,558       2,130,377  
 
                             
LOSS BEFORE OTHER INCOME (EXPENSE)
    (662,101 )     (567,227 )     (1,843,723 )     (2,109,586 )
 
                               
OTHER (EXPENSE) INCOME
                               
Interest income (expenses), net (a)
    (8,338 )     1,084       (5,678 )     1,367  
Change in fair value of embedded derivative
    (36,109 )           (36,109 )      
Gain on derecognition of note payable and accrued interest
            86,667             86,667  
Settlement agreement with shareholders
                      (779,000 )
Gain on accounts payable forgiveness
                      402,248  
 
    (44,447 )     87,751       (41,787 )     (288,718 )
 
                             
NET LOSS
  (706,548 )   (479,476 )   (1,885,510 )   (2,398,304 )
 
                               
LOSS PER SHARE
                               
BASIC
  (0.01 )   (0.00 )   (0.02 )   (0.03 )
DILUTED
  (0.01 )   (0.00 )   (0.02 )   (0.03 )
 
                               
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING
                               
BASIC
    98,137,735       101,186,416       98,209,139       91,453,702  
DILUTED
    98,137,735       101,186,416       98,209,139       91,453,702  

(a)

Includes share-based compensation of $322,641 and $671,649 for the three and nine months ended September 30, 2019 and $204,227 and $709,940 for the three and nine months ended September 30, 2018.

VerifyMe, Inc.
Statements of Cash Flows
(Unaudited)

 
  Nine months ended  
 
  September 30, 2019     September 30, 2018  
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
  (1,885,510 )   (2,398,304 )
Adjustments to reconcile net loss to net cash used in
               
operating activities:
               
Stock based compensation
    103,167       44,120  
Fair value of options and warrants issued in exchange for services
    399,828       270,339  
Fair value of restricted stock and restricted stock units issued in exchange for services
    168,654       395,481  
Gain on accounts payable forgiveness
          (402,248 )
Share-based payment for settlement agreement with shareholders
          279,000  
Gain on derecognition of note payable and accrued interest
          (86,667 )
Amortization of debt discount
    8,696        
Change in Fair Value of Embedded Derivative
    36,109        
Amortization and depreciation
    17,297       15,928  
Changes in operating assets and liabilities:
               
Accounts Receivable
    (21,042 )     (28,462 )
Deposit on Equipment
    (163,090 )      
Inventory
    4,020       (35,102 )
Prepaid expenses and other current assets
    (4,200 )      
Accounts payable and accrued expenses
    (19,048 )     (41,550 )
Net cash used in operating activities
    (1,355,119 )     (1,987,465 )
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Purchase of Patents
    (36,953 )     (16,690 )
Capitalized Software Costs
    (71,425 )     (30,223 )
Net cash used in investing activities
    (108,378 )     (46,913 )
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from convertible debt, net of costs
    461,307        
Proceeds from exercise of warrants
          2,311,438  
Proceeds from sale of common stock
          1,154,211  
 
               
Net cash provided by financing activities
    461,307       3,465,649  
 
               
NET (DECREASE) INCREASE IN CASH AND
               
CASH EQUIVALENTS
    (1,002,190 )     1,431,271  
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD
    1,673,201       693,001  
 
               
CASH AND CASH EQUIVALENTS – END OF PERIOD
  671,011     2,124,272  
 
               
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  
Common Stock issued in relation to convertible debt
  70,100      
Recognition of embedded derivative liability
  171,425      
Cashless Exercise of Stock Options
      4,028  
Cashless Exercise of Warrants
  72     176  
Common Stock and Warrants Issued for Common Stock Payable
      122,478  

SOURCE: VerifyMe, Inc.

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