Executive Summary / Key Takeaways

• Strategic Pivot to Precision Logistics: VerifyMe has decisively shifted its core focus to its high-potential Precision Logistics segment (PeriShip), divesting underperforming Authentication assets to concentrate resources on a cash-generating business with a clear growth roadmap.
• Technological Edge and Market Expansion: PeriShip's proprietary PeriTrack platform, offering predictive analytics and real-time visibility, provides a significant competitive advantage. Strategic integrations with e-commerce platforms and new partnerships with two major freight carriers are set to unlock substantial organic growth, particularly from 2026.
• Strengthened Financial Position: A recent $4.7 million warrant exercise, full repayment of bank debt, and a new treasury strategy (including a $2.0 million loan at 16% interest) have fortified VerifyMe's balance sheet, providing ample capital for organic investments and potential strategic acquisitions.
• Near-Term Headwinds, Long-Term Catalysts: While revenue comparisons remain challenging through 2025 due to prior customer losses and market softening, aggressive cost management and strategic initiatives are expected to drive positive operating cash flow and set the stage for meaningful revenue growth in 2026.
• M&A as a Value Driver: With a strong balance sheet and experienced leadership, VerifyMe is actively evaluating transformative and tuck-in acquisitions, signaling a commitment to external growth as a key component of its shareholder value creation strategy.

The Focused Horizon: Precision Logistics Takes Center Stage

VerifyMe, Inc. (NASDAQ:VRME) is undergoing a profound transformation, shedding its historical diversification to concentrate on its core strength: Precision Logistics. Once a company grappling with the complexities of anti-counterfeit solutions, VerifyMe has strategically reoriented itself around PeriShip, a cash-generating business specializing in time and temperature-sensitive parcel management. This pivot is not merely a change in business lines; it represents a deliberate effort to leverage proprietary technology, a fortified balance sheet, and a disciplined operational approach to unlock substantial shareholder value in a dynamic logistics market.

The company's journey began in 1999 as LaserLock Technologies, Inc., eventually rebranding to VerifyMe in 2015. For many years, its focus on anti-counterfeit technologies, despite numerous promising partnerships, yielded limited tangible shareholder returns. A pivotal shift commenced with CEO Adam Stedham's arrival in 2023, who recognized the inherent value and cash-generating potential of the PeriShip business. This led to a strategic re-evaluation of the Authentication segment, which had become a drag on overall company growth.

PeriShip's Technological Moat: Predictive Analytics and Real-Time Control

At the heart of VerifyMe's renewed strategy is its Precision Logistics segment, powered by the proprietary PeriTrack software platform. This technology offers a significant competitive advantage in the specialized niche of time and temperature-sensitive shipments. PeriTrack provides predictive analytics by integrating crucial data points such as pre-shipment weather analysis, real-time flight-tracking, sort volumes, and traffic conditions. This intelligence is delivered to customers via a secure portal, offering unparalleled real-time visibility into shipment transit and last-mile events.

The tangible benefits of PeriTrack are substantial and directly impact customer operations and VerifyMe's value proposition. The system's ability to anticipate and mitigate potential supply chain interruptions, prevent spoilage of sensitive goods, and facilitate last-mile resolution translates into significant cost savings and reduced product replacement needs for clients in the perishable healthcare and food industries. This proactive approach, coupled with human intervention from VerifyMe's dedicated service center, differentiates PeriShip from other third-party platforms that often rely solely on basic carrier data feeds.

VerifyMe is not resting on its technological laurels. The company is actively engaged in strategic R&D initiatives to expand PeriTrack's reach and capabilities. This includes completing integrations with major e-commerce platforms like Shopify and WooCommerce, allowing PeriShip's specialized services to be offered directly at the point of sale. Furthermore, the technology team is now focusing on deeper integrations with shipping carrier relationships. This strategic move, including new agreements with UPS for specialized logistics management and relationships with two additional major freight carriers, aims to enable customers to leverage PeriShip's value-added services regardless of their preferred freight provider. This expansion is expected to unlock substantial organic revenue growth, with material impact anticipated more noticeably in 2026.

Strategic Reorientation: Shedding the Authentication Segment's Drag

The strategic pivot involved a decisive move away from the underperforming codes portion of the Authentication segment. Despite initial robust growth expectations for 2024, particularly from the 2023 acquisition of Trust Codes and an Amazon Transparency agreement, organic growth in this area failed to materialize. Management concluded that the sale of serialized codes and cloud technology for traceability was a complex proposition in the U.S. market, and the segment lacked the necessary scale to compete effectively in the enterprise space.

The financial burden of this segment was disproportionate to its contribution: it required approximately $1 million per year in cash investment, representing about 8% of the company's market capitalization, while generating only about 1% of annual revenues. This led to a $2.3 million goodwill and intangible asset impairment in Q3 2024. Consequently, VerifyMe divested the Trust Codes Global business in December 2024, which had incurred an operating loss of $1.2 million that year. This strategic divestiture eliminates a significant drain on company resources, allowing VerifyMe to reallocate capital and focus on areas with higher growth potential and clearer paths to profitability. The remaining Authentication segment, primarily the ink business, is being reviewed with the goal of achieving adjusted EBITDA positivity in 2025, though its revenue contribution is not expected to be material to the company as a whole.

Financial Fortitude and Operational Discipline

VerifyMe's financial performance in 2024 and the first half of 2025 reflects a company in transition, yet one demonstrating increasing operational discipline. While 2024 annual revenue of $24.21 million was a 4% decrease from 2023, the company achieved significant improvements in profitability metrics. Gross margin expanded to 36% in 2024, up from 32% in 2023, and adjusted EBITDA improved to $0.9 million, compared to $0.4 million in the prior year.

The second quarter of 2025 saw consolidated revenue decrease by 16% year-over-year to $4.52 million, primarily due to previously disclosed large customer losses in the Precision Logistics segment and the divestiture of the Authentication segment. However, VerifyMe's proactive cost management led to a 27% reduction in operating expenses, contributing to an improved net loss of $0.291 million and a positive adjusted EBITDA of $0.3 million for the quarter.

For the first half of 2025, the company generated $306 thousand in cash from operating activities.

Crucially, VerifyMe has significantly strengthened its balance sheet. Cash and cash equivalents surged to $6.067 million as of June 30, 2025, from $2.823 million at the end of 2024. This increase was largely driven by a $4.7 million warrant inducement capital raise in January 2025, which enabled the full repayment of bank debt. The company now operates with a $1 million revolving line of credit that has no outstanding balance.

Furthermore, VerifyMe has adopted a treasury strategy, including a $2.0 million short-term loan to ZenCredit Ventures at an attractive 16% annual interest rate, to enhance returns on its available cash. This robust liquidity, coupled with a $15.8 million At-The-Market (ATM) sales offering filed for discretionary use, positions VerifyMe with substantial capital to pursue its strategic objectives.

Competitive Landscape and Strategic Positioning

VerifyMe operates in a competitive landscape, particularly within the broader logistics and specialized services market. Its core competitive advantage lies in its proprietary PeriTrack platform, which offers a level of predictive analytics and human-backed intervention that differentiates it from other third-party platforms relying solely on raw carrier data. The recent UPS agreements and the establishment of relationships with two additional major freight carriers are critical steps in expanding this competitive moat, allowing PeriShip to service a much larger portion of the market previously inaccessible due to a single-carrier strategy.

Compared to larger, diversified players like 3M Company (MMM), Avery Dennison Corporation (AVY), and Honeywell International Inc. (HON) – which have a presence in authentication and supply chain solutions – VerifyMe is a niche player. These larger competitors benefit from immense scale, broader market reach, established brands, and significantly stronger financial health, including higher gross and operating margins (e.g., MMM's TTM Gross Profit Margin of 41% vs. VRME's 33.50%). While VerifyMe's specialized digital authentication and agility in addressing emerging threats are strengths, it lags in overall operational scale and financial performance. The strategic divestiture of the underperforming Authentication segment directly addresses this by eliminating a drag and allowing for focused investment where VerifyMe can truly differentiate.

The logistics industry itself is undergoing "tremendous change," with major carriers like UPS, FedEx, and Amazon constantly evolving their strategies. This dynamic environment, while presenting challenges such as FedEx insourcing services previously provided to a PeriShip premium customer, also creates a marketplace "receptive to looking at new ideas and receptive to looking at approaches to meet the specific needs of their business." VerifyMe's strategy to expand carrier relationships and integrate with e-commerce platforms is a direct response to these industry shifts, aiming to capture market share by offering a flexible, carrier-agnostic value-added service.

Outlook and Growth Catalysts

VerifyMe's management has provided a clear, albeit cautious, outlook. Revenue comparisons will remain challenging through 2025, particularly in Q2, due to the impact of customer losses from 2024 and an overall softening of the parcel shipment market. A "low double-digit decline on the topline" for the first half of 2025 is considered a reasonable modeling assumption, and positive organic revenue comparisons are not expected in the second half of the year. However, management anticipates "continued positive cash flow from operations in the second half of 2025."

The true inflection point for organic growth is projected for 2026. This is when the full benefits of new carrier integrations, expanded e-commerce platform reach, and refined sales and marketing strategies are expected to materialize, leading to "meaningful organic revenue growth." Gross margin for 2025 is expected to "flatten" year-over-year, as the growth in lower-margin proactive services as a percentage of total revenue will be offset by cost rationalization from technology and automation investments.

Beyond organic growth, VerifyMe's strong balance sheet positions it for strategic growth through "transformative and tuck-in acquisitions." Management is diligently evaluating opportunities, emphasizing a patient and disciplined approach to ensure any acquisition provides a "meaningful return" and helps address the challenges of operating as a smaller public company. The new treasury strategy, aiming to improve annualized interest income from approximately 4% to over 8%, further enhances the company's financial flexibility.

Key Risks to Monitor

Despite a clear strategic direction and strengthened financials, investors should monitor several key risks. The company received a Nasdaq Deficiency Notice in April 2025 for not meeting the minimum bid price requirement, with a compliance deadline of September 30, 2025. Failure to regain compliance could lead to delisting, negatively impacting liquidity and capital-raising capabilities.

Macroeconomic headwinds, including reduced discretionary spending by U.S. consumers and an overall softening of the parcel shipment market, could continue to pressure revenue in the near term. Furthermore, the successful execution of new carrier integrations and potential acquisitions carries inherent risks, including integration challenges and the ability to realize anticipated synergies. The competitive landscape, with larger players developing advanced solutions like AI, also presents ongoing pressure.

Conclusion

VerifyMe is undergoing a significant and well-articulated strategic pivot, transforming into a focused Precision Logistics powerhouse. By divesting its underperforming Authentication segment and concentrating on the proprietary PeriTrack platform, the company is leveraging its technological edge to capture a larger share of the specialized, time-sensitive parcel market. This strategic reorientation, coupled with a robust balance sheet fortified by recent capital raises and disciplined cost management, positions VerifyMe for a compelling future.

While near-term revenue comparisons present challenges, the groundwork laid through expanded carrier relationships, e-commerce integrations, and a clear M&A strategy sets the stage for meaningful organic growth and potential external value creation from 2026 onwards. The company's commitment to operational efficiency and strategic capital allocation underscores its intent to deliver substantial shareholder returns, making VerifyMe a compelling consideration for investors seeking exposure to a specialized logistics provider with a clear vision for growth.