Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The information in this Management's Discussion and Analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and notes.

Cautionary Note Regarding Forward-Looking Statements

This report includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. The words "believe," "may," "estimate," "continue," "intended," "plan," "could," "target," "potential," "will," "would," "expect" and similar expressions are intended to identify forward-looking statements. All statements other than statements of historical facts contained in this report, including among others, our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements.

Our actual results and financial condition may differ materially from those expressed or implied in such forward-looking statements. Therefore, you should not rely on any of these forward-looking statements.

For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections in this report, our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and our other filings with the Securities and Exchange Commission (the "SEC"). All forward-looking statements in this report are made only as of the date hereof or as indicated and represent our views as of the date of this report. 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 or revise any forward-looking statements, whether as the result of new information, future events or otherwise, except as required by law.

Overview

VerifyMe, Inc. ("VerifyMe," the "Company," "we," "us," or "our"), is a logistics company that specializes in time and temperature sensitive products, as well as providing brand protection and enhancement solutions. We operate a Precision Logistics segment which includes the operations of our subsidiary PeriShip Global and accounts for nearly all VerifyMe revenue, and an Authentication segment. Through our Precision Logistics segment, we provide a value-added service for sensitive parcel management driven by a proprietary software platform that provides predictive analytics from key metrics such as pre-shipment weather analysis, flight-tracking, sort volumes, and traffic, delivered to customers via a secure portal. The portal provides real-time visibility into shipment transit and last-mile events which is supported by a service center. Through our Authentication segment our technologies enable brand owners to deter counterfeit and diversion activities. Further information regarding our business segments is discussed below:

Precision Logistics: The Precision Logistics segment specializes in predictive analytics for optimizing delivery of time and temperature sensitive perishable products. We manage complex industry-specific shipping logistic processes that require critical time, temperature control and handling to prevent spoilage and delayed delivery times and brand impairment. Utilizing predictive analytics from multiple data sources including flight-tracking, weather, traffic, major carrier feeds, and time of day data, we provide our clients an end-to-end vertical approach for their most critical service delivery needs. Using our proprietary IT platform, we provide real-time information and analysis to mitigate supply chain flow interruption, as well as delivering last-mile resolution for key markets, including the perishable healthcare and food industries.

Through our proprietary PeriTrack® customer dashboard, we provide an integrated tool that gives our customers an in-depth look at their shipping activities and allows them access to critical information in support of the specific needs of the supply chain stakeholders. We offer post-delivery services such as customized reporting for trend analysis, system performance reports, power outage maps, and other tailored reports.

Precision Logistics generates revenue from two business service models.

·

ProActive Service - clients pay us directly for carrier service coupled with our proactive logistics assistance.

·

Premium Service - clients pay us directly or through our carrier partner for our complete white-glove shipping monitoring and predictive analytics service. This service includes customer web portal access, weather monitoring, temperature control, full-service center support and last mile resolution.

Products: The Precision Logistics segment includes the following bundled services as part of our service offerings to our customers:

·

PeriTrack®: Our proprietary PeriTrack® customer dashboard was developed utilizing our extensive logistics operational knowledge. This integrated web portal tool gives our customers an in-depth look at their shipping activities based on real-time data. The PeriTrack® dashboard was designed to provide critical information in support of the specific needs of supply chain stakeholders and gives our customer resolution specialists a 360° view of shipping activity. PeriTrack® features tools tailored for shippers of perishable goods, which includes the In-Transit Shipment Tracker. This tool provides details on the unique shipper's in-transit shipments, with the ability to select and analyze data on individual shipments.

·

Service Center: We have assembled a team of customer resolution specialists based in the U.S. This service team resolves shipping problems on behalf of our customers. The service center acts as a help desk and monitors shipping to delivery for our customers.

·

Pre-Transit Service: We help clients prepare their products for shipments by advising clients on packaging requirements for various types of perishable products. Each product type requires its own particular packaging to protect it during shipment, and we utilize our extensive knowledge and research to provide our customers with packaging recommendations to meet their unique needs.

·

Post-Delivery: We provide customized reporting for trend analysis, system performance reports, power outage maps, and many other reports to help our customers improve their processes and customer service outcomes.

·

Weather/Traffic Service: We have full-time meteorologists on staff to monitor weather. A package may experience a variety of weather conditions between the origin and destination, and our team actively monitors these conditions to maximize the number of timely and safely transmitted shipments. Similarly, traffic and construction also create unpredictable delays which our team works diligently to mitigate. If delays or other issues occur, we inform clients and work with them to proactively resolve such shipment issues.

Authentication: The Authentication segment specializes in anti-counterfeit and brand protection. This is critical in the current landscape of increased counterfeit activity and customer expectations. VerifyMe has patented technologies that address the needs of brands.

Opportunities

Traditionally, most shipping businesses utilize the carrier's data platform for tracking which generally informs the shipping enterprise, and their customers, when a package is in transit, when a package has been delivered, and some level of detail of the path which a package traveled. We believe taking the data feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor of our service center gives us a competitive advantage against other third-party platforms that solely rely on the carrier's data feeds. We utilize a variety of input sources beyond the carrier's data feed. Our proprietary "Predictive Analytics" technology is fed real-time meteorology data, traffic and road construction data, and power grid information to help predict issues before they happen. If an alert is created the shipper and our service center will work to address the issue and save the perishable product from spoiling, saving the shipper significant costs and reducing the need to replace products that are no longer viable. We have meteorologists on staff that track world-wide weather patterns to address predicted issues before they happen. We believe the company has two significant areas of opportunity. First, our services are specifically designed to address the needs of small and medium size agriculture, food and beverage companies. Second, the pharmaceutical and healthcare industries represent significant opportunities due to the enhanced tracking and customer service associated with distribution of these products. We are focusing our sales emphasis on those industries.

Building logistics infrastructure is a capital-intensive process as the investment is locked in for a considerably long period. Due to the current economic environment, and our cost competitive offering, we believe companies may opt to outsource their precision logistics services to reduce their operational costs. The outsourcing of supply chain related and other logistics operations to service providers such as ours allows companies to improve the efficiency of their businesses by focusing their resources on core competencies. We believe outsourcing this function to our Precision Logistics segment provides the ideal solution for all parties involved.

Partnerships:

Precision Logistics has a direct partnership with a major global carrier company and has data feeds directly from the carrier into our proprietary logistics optimization software which provides shippers much more detailed information and predictive analytics on their shipment versus a standard shipping code look up which is provided by the carrier. In addition to relying on this strategic partner for shipping services we have a service agreement pursuant to which this strategic partner resells our services to its customers under a "white label" arrangement, which we refer to as our Premium service. Under this arrangement we provide our logistics services to our strategic partner's customers in exchange for a pre-negotiated service fee per shipment. Our strategic partner has begun to provide its own service offerings to its customers and while we will continue to offer our Premium services, we expect our partner will prefer to offer their solution to customers as the primary recommendation and our solution will be offered as a secondary solution. This does not affect our Proactive services, and we expect to see growth under that service offering as we focus on providing Proactive services to customers directly.

Our Authentication segment has a contract with HP Indigo, and a strategic partnership with INX, the third largest producer of inks in North America. We believe these partnerships can be used to enable brand owners to securely prevent counterfeiting.

Current Economic Environment

In response to market conditions and lower demand some carriers have implemented strategies to address a potential global recession. The major carrier that PeriShip Global partners with laid out steps it has taken to significantly reduce permanent costs by the end of its 2025 fiscal year in response to these market conditions and lower demand. In mid-December 2024, the carrier forecasted flat revenue year over year for 2025.

We have seen a softening in demand for some services related to high-end perishable items which seem to be impacted by reduced discretionary spending by U.S. consumers. While a recession, whether global or more localized to the U.S., may decrease the demand for our services that are more discretionary in nature, we believe that the internal cost cutting measures, if implemented by the major global carrier, may benefit out-sourced service providers. We are working with this major global carrier to address their small and medium-sized business clients, which we believe is an underserved market and presents growth opportunities for our Precision Logistics segment. However, the U.S. presidential administration has imposed tariffs on goods imported into the U.S. In response, several foreign governments have imposed new tariffs on certain goods imported from the U.S. and additional retaliatory measures against U.S. goods are expected. These or additional changes in U.S. or international trade policy, along with continued uncertainty surrounding such policies, could lead to further weakened business conditions. We can provide no assurances that a decline in discretionary consumer spending will not have a negative impact on our revenues and results of operations.

Seasonality

We experience seasonal fluctuations in our net revenues from sales in our Precision Logistics segment. Revenues from sales are generally higher in the fourth quarter than in other quarters due to increased holiday shipments. The seasonality of our business may cause fluctuations in our quarterly operating results.

Recent Developments

UPS Agreements

On July 29, 2025, PeriShip Global entered into (i) a UPS Digital Channel Program Agreement (the "Program Agreement") with United Parcel Service, Inc., an Ohio corporation ("UPS Ohio") and UPS Worldwide Forwarding, Inc., a Delaware corporation ("UPS WWF"), and (ii) a UPS Partner API Access Agreement (the "Integration Agreement" and together with the Program Agreement, the "Agreements") with UPS Digital, Inc., ("UPS Digital" and collectively with UPS Ohio and UPS WWF, "UPS"). The Agreements provide Periship Global access to designated UPS services at promotional rates as part of a specialized logistics management services for time-sensitive and perishable shipments, including proactive monitoring, weather tracking, and issue resolution through certain UPS digital channel program applications. Pursuant to the Integration Agreement, UPS will allow Periship Global to develop Interfaces to certain UPS APIs, access UPS Access Services and the use of UPS Information (as such terms are defined in the Integration Agreement). The Agreements have a term of three years, subject to customary termination and renewal provisions.

ZenCredit Agreement

On August 8, 2025, we entered into a Master Loan Agreement and Promissory Note (the "Loan Agreement") with ZenCredit Ventures, LLC ("ZenCredit"). Pursuant to the Loan Agreement, we agreed to loan ZenCredit up to $2 million. Pursuant to the terms of the Loan Agreement, ZenCredit will pay us regular quarterly interest payments at an annual interest rate of 16%. The term of the initial promissory note is nine months at which time all accrued principal and interest is due to us unless we elect to make an Additional Loan (as such term is defined in the Loan Agreement) subject to the terms of the Loan Agreement. On August 11, 2025, we loaned ZenCredit $2 million in exchange for a promissory note issued pursuant to the Loan Agreement.

Nasdaq Deficiency Notice

On April 3, 2025, we received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC ("Nasdaq") indicating that, based on the closing bid price of our common stock for 30 consecutive business days, we no longer meet Nasdaq Listing Rule 5550(a)(2), which requires listed companies to maintain a minimum bid price of at least $1 per share (the "Minimum Bid Price Rule"). The Nasdaq Listing Rules provide a compliance period of 180 calendar days, or until September 30, 2025, in which to regain compliance with the Minimum Bid Price Rule. If we evidence a closing bid price of at least $1 per share for a minimum of 10 consecutive business days during the 180-day compliance period, we will automatically regain compliance. If we fail to regain compliance with the Minimum Bid Price Rule, Nasdaq will provide notice that our common stock will be subject to delisting. We would then be entitled to appeal that determination to a Nasdaq hearings panel.

This notification has no immediate effect on the listing of our common stock on Nasdaq. We intend to monitor the closing bid price of our common stock and consider our available options in the event the closing bid price of our common stock remains below $1 per share.

Expiration of Uplist Warrants

On June 23, 2025, the Company's warrants listed on Nasdaq under the symbol "VRMEW" (the "Uplist Warrants") expired pursuant to the terms of the Form of Common Stock Purchase Warrant. On June 23, 2025, Nasdaq filed a Form 25 formalizing the suspension of the Uplist Warrants.

Results of Operations

Comparison of the three months ended June 30, 2025, and 2024

The following discussion analyzes our results of operations for the three months ended June 30, 2025 and 2024.

Revenue		Three Months Ended June 30,
		2025				2024
Precision Logistics		$	4,493			$	5,244
Authentication			27				108
Total Revenue		$	4,520			$	5,352

Consolidated revenue decreased $832 thousand or 16% during the second quarter of 2025 compared to the second quarter of 2024. The decrease is primarily due to a $585 thousand decrease from a discontinued contract with one customer in our Premium services, a $495 thousand decrease related to discontinued services with two customers in our Proactive services, partially offset by increased revenues from new and existing customers in the Precision Logistics segment. The decrease in revenue in our Authentication segment is primarily due to the divestiture of our Trust Codes Global business in December 2024.

Gross Profit		Three Months Ended June 30,
		2025								2024
						% of Revenue								% of Revenue
Precision Logistics		$	1,571				35	%		$	1,997				38	%
Authentication			20				74	%			93				86	%
Total Gross Profit		$	1,591				35	%		$	2,090				39	%

Gross profit for the three months ended June 30, 2025, was $1,591 thousand, compared to $2,090 thousand for the three months ended June 30, 2024. The resulting gross margin was 35% for the three months ended June 30, 2025, compared to 39% for the three months ended June 30, 2024. The gross profit decrease relates primarily to the decreased Premium services revenue which has higher margins, and the Authentication decrease from the divestiture of our Trust Codes Global business in December 2024. The Proactive services gross margin percentage improved in Q2 2025 compared to Q2 2024.

Segment Management and Technology

Segment management and technology expenses decreased by $597 thousand to $920 thousand for the three months ended June 30, 2025, compared to $1,517 thousand for the three months ended June 30, 2024. The decrease relates primarily to the divestiture of Trust Codes Global in December 2024, a decrease in management wages and severance expense, and the capitalization of development expense related to internally used software in our Precision Logistics segment.

General and Administrative Expenses

General and administrative expenses decreased by $178 thousand to $716 thousand for the three months ended June 30, 2025, compared to $894 thousand for the three months ended June 30, 2024. The decrease relates primarily to a decrease in stock-based compensation from $358 thousand for the three months ended June 30, 2024 to $186 thousand for the three months ended June 30, 2025.

Research and Development

Research and development expenses were $5 thousand for the three months ended June 30, 2025, and 2024, respectively.

Sales and Marketing

Sales and marketing expenses increased by $62 thousand to $272 thousand for the three months ended June 30, 2025, compared to $210 thousand for the three months ended June 30, 2024. The increase is primarily related to a one-time reduction in stock compensation in Precision Logistics for the three months ended June 30, 2024. This improvement was partially offset by a decrease in headcount and travel expense in the Authentication segment.

Interest Income(Expense), net

Interest income, net was $32 thousand for the three months ended June 30, 2025, compared to interest expense, net of $42 thousand for the three months ended June 30, 2024. This decrease primarily relates to the repayment of the Term Note in the first quarter of 2025, reducing the interest expense as well as the increase in interest income from the Company's investment of proceeds from the warrants exercise in January 2025.

Net Loss

Consolidated net loss for the three months ended June 30, 2025, and 2024 was $291 thousand and $346 thousand, respectively. The decreased loss relates primarily to the improvement in loss before other expense noted above, partially offset by the fair value gain on contingent consideration for the three months ended June 2024. The resulting consolidated loss per share for the three months ended June 30, 2025, and three months ended June 30, 2024, was $0.02 and $0.03 per basic and diluted share, respectively.

Comparison of the six months ended June 30, 2025, and 2024

The following discussion analyzes our results of operations for the six months ended June 30, 2025, and 2024.

Revenue		Six Months Ended June 30,
		2025				2024
Precision Logistics		$	8,922			$	10,858
Authentication			53				253
Total Revenue		$	8,975			$	11,111

Consolidated revenue decreased $2,136 thousand for the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The decrease is primarily due to the decreased demand across several of our Proactive services customers, one customer's shift to use their cold chain strategy, and a discontinued contract with one customer in our Premium services. The decrease in revenue in our Authentication segment is primarily due to the divestiture of our Trust Codes Global business in December 2024.

Gross Profit		Six Months Ended June 30,
		2025								2024
						% of Revenue								% of Revenue
Precision Logistics		$	3,041				34	%		$	4,126				38	%
Authentication			40				75	%			224				89	%
Total Gross Profit		$	3,081				34	%		$	4,350				39	%

Gross profit for the six months ended June 30, 2025, was $3,081 thousand, compared to $4,350 thousand for the six months ended June 30, 2024. The resulting gross margin was 34% for the six months ended June 30, 2025, compared to 39% for the six months ended June 30, 2024. The gross profit decrease relates to the decrease in Premium services revenue which has higher margins than Proactive services, and the decrease in Authentication revenue from the divestiture of our Trust Codes Global business in December 2024. Our Proactive services gross margin percentage improved in 2025 compared to 2024.

Segment Management and Technology

Segment management and technology expenses decreased by $1,014 thousand to $1,846 thousand for the six months ended June 30, 2025, compared to $2,860 thousand for the six months ended June 30, 2024. The decrease relates primarily to the divestiture of Trust Codes Global in December 2024 and gain on derecognized liability in our Authentication segment and a decrease in management wages and severance expense in our Precision Logistics segment.

General and Administrative Expenses

General and administrative expenses decreased by $443 thousand to $1,572 thousand for the six months ended June 30, 2025, compared to $2,015 thousand for the six months ended June 30, 2024. The decrease relates primarily to a decrease in stock-based compensation from $724 thousand for the six months ended June 30, 2024 to $418 thousand for the six months ended June 30, 2025.

Research and Development

Research and development expenses were $10 thousand and $60 thousand for the six months ended June 30, 2025, and 2024, respectively.

Sales and Marketing

Sales and marketing expenses decreased by $30 thousand to $568 thousand for the six months ended June 30, 2025, compared to $598 thousand for the six months ended June 30, 2024. The decrease is primarily related to a reduction in employees and consultants in our Authentication segment partially offset by an increase in employees in our Precision Logistics segment and a one-time reduction in stock compensation in 2024.

Interest Income(Expense), net

Interest income was $54 thousand for the six months ended June 30, 2025, compared to interest expense of $80 thousand for the six months ended June 30, 2024. This decrease primarily relates to the repayment of the Term Note in the first quarter of 2025 reducing interest expense as well as the increase in interest income from the Company's investment of the proceeds from the warrants exercise in January 2025.

Net Loss

Consolidated net loss for the six months ended June 30, 2025, and 2024 was $862 thousand and $899 thousand, respectively. The decreased loss relates primarily to the improvement in loss before other expense noted above, partially offset by the fair value gain on contingent consideration for the six months ended June 30, 2024. The resulting consolidated loss per share for the six months ended June 30, 2025, and six months ended June 30, 2024, was $0.07 and $0.09 per basic and diluted share, respectively.

Liquidity and Capital Resources

Our operations provided $306 thousand of cash during the six months ended June 30, 2025, compared to $312 thousand during the comparable period in 2024.

Cash used by investing activities was $332 thousand during the six months ended June 30, 2025, compared to $191 thousand during the six months ended June 30, 2024. The increase in spend in investing activities relates primarily to increased capitalized software costs in the six months ended June 30, 2025.

Cash provided by financing activities during the six months ended June 30, 2025, was $3,270 thousand compared to cash used in financing activities during the six months ended June 30, 2024 of $313 thousand. The increased cash primarily relates to proceeds from the exercise of warrants, partially offset by the repurchase of shares under the repurchase program and repayment of the Term Note during the six months ended June 30, 2025.

On January 13, 2025, we entered into an Inducement Letter Agreement with an institutional investor and holder of existing warrants to purchase up to 1,461,896 shares of our common stock for $4.7 million in gross proceeds. The existing warrants were originally issued on April 14, 2022, with an exercise price of $3.215 per share, and became exercisable six months following issuance. Pursuant to the Inducement Letter Agreement, the holder agreed to exercise the existing warrants for cash at the exercise price of $3.215 per share in consideration for our agreement to issue a new unregistered warrant to purchase up to an aggregate of 1,461,896 shares of common stock at an exercise price of $4.00 per share. The new warrant was immediately exercisable upon issuance and has a term of five and one-half years from the issuance date.

The Company recognized the fair value of the new warrants, calculated using the Black-Scholes option pricing model, as $3,971 thousand. The transaction was treated as an equity issuance, and the fair value of the new warrants was recorded in additional paid-in capital. Direct transaction costs totaling approximately $352 thousand, including legal fees and placement agent commissions, were also recorded as a reduction to additional paid-in capital.

On March 6, 2025, the Company entered into an ATM with Roth pursuant to which the Company may issue and sell, from time to time, shares of its common stock up to an aggregate offering price of $15.8 million. Roth acts as the sales agent and is entitled to a 3.0% commission on gross proceeds from sales under the program.

In connection with the ATM, we incurred direct legal and audit fees totaling $150 thousand. These costs have been recorded as deferred offering costs within other current assets and will be reclassified to additional paid-in capital and amortized over a period of one year once shares are issued. Deferred offering costs will be assessed for recoverability at each reporting period. If management determines that the ATM program is not probable to be utilized, the deferred costs will be expensed to general and administrative expenses.

During the six months ended June 30, 2025, and as of the date of this filing, we have not sold any shares of common stock through the ATM.

On September 22, 2022, we entered into the PNC Facility with PNC Bank, National Association. The PNC Facility includes a $1 million RLOC. The RLOC has no scheduled payments of principal until maturity, and bears interest per annum at a rate equal to the sum of Daily SOFR plus 2.85% with monthly interest payments. The RLOC is guaranteed by the Company and secured by the assets of PeriShip Global and the Company. As of June 30, 2025, $0 was outstanding on the RLOC.

The PNC Facility included a four-year Term Note for $2 million which matured in September of 2026 and required equal quarterly payments of principal and interest. The Term Note incurred interest per annum at a rate equal to the sum of Daily SOFR plus 3.1%. The PNC Facility is guaranteed by VerifyMe and secured by the assets of PeriShip Global and VerifyMe. As of January 21, 2025, the Term Note was paid in full and no future principal payments are due.

We believe that our cash and cash equivalents will fund our operations beyond the next 12 months. We may issue additional debt or equity as we grow our business which we expect to grow organically, and if the opportunity arises, through key acquisitions that will help accelerate the growth of our business.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

None.

Recently Adopted Accounting Pronouncements

Recently adopted accounting pronouncements are discussed in Note 1 - Summary of Significant Accounting Policies in the notes accompanying the financial statements.