UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM
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(Mark one)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number
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(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
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| (Address of Principal Executive Offices) | (Zip Code) | |
| (Registrant’s Telephone Number, Including Area Code) | ||
(Former Name, Former Address and Former Fiscal year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) |
Name of each exchange on which Registered |
| The Capital Market | ||
| The |
Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T §
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company,” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o | |
| x | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of common stock outstanding at August 6, 2024.
| 2 |
| PART I - FINANCIAL INFORMATION | ||
| ITEM 1. | Financial Statements | 4 |
| Consolidated Balance Sheets (Unaudited) | 4 | |
| Consolidated Statements of Operations (Unaudited) | 6 | |
| Consolidated Statements of Comprehensive Loss (Unaudited) | 7 | |
| Consolidated Statements of Cash Flows (Unaudited) | 8 | |
| Consolidated Statements of Stockholders' Equity (Unaudited) | 10 | |
| Notes to Consolidated Financial Statements (Unaudited) | 12 | |
| ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 29 |
| ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk | 37 |
| ITEM 4. | Controls and Procedures | 37 |
| PART II - OTHER INFORMATION | ||
| ITEM 1. | Legal Proceedings | 38 |
| ITEM 1A. | Risk Factors | 38 |
| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 39 |
| ITEM 3. | Defaults Upon Senior Securities | 39 |
| ITEM 4. | Mine Safety Disclosures | 39 |
| ITEM 5. | Other Information | 39 |
| ITEM 6. | Exhibits | 40 |
| SIGNATURES | 41 | |
| 3 |
PART I - FINANCIAL STATEMENTS
ITEM 1.
VerifyMe, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
| As of | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents including restricted cash | $ | $ | ||||||
| Accounts receivable, net of allowance for credit loss reserve, $ | ||||||||
| Unbilled revenue | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Inventory | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| PROPERTY AND EQUIPMENT, NET | $ | $ | ||||||
| RIGHT OF USE ASSET | ||||||||
| INTANGIBLE ASSETS, NET | ||||||||
| GOODWILL | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Term note, current | $ | $ | ||||||
| Accounts payable | ||||||||
| Other accrued expense | ||||||||
| Lease liability- current | ||||||||
| Contingent liability- current | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Contingent liability, non-current | $ | $ | ||||||
| Long-term lease liability | ||||||||
| Term note | ||||||||
| Convertible Note – related party | ||||||||
| Convertible Note | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Series A Convertible Preferred Stock, $ par value, shares authorized; shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| Series B Convertible Preferred Stock, $ par value; shares authorized; shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| 4 |
| Common stock, $ par value; authorized; and issued, and shares outstanding as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid in capital | ||||||||
| Treasury stock at cost; and shares at June 30, 2024 and December 31, 2023, respectively | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| STOCKHOLDERS' EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 5 |
VerifyMe, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except share data)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | |||||||||||||
| NET REVENUE | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUE(a) | ||||||||||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Segment management and Technology(a) | ||||||||||||||||
| General and administrative (a) | ||||||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing (a) | ||||||||||||||||
| Total Operating expenses | ||||||||||||||||
| LOSS BEFORE OTHER INCOME (EXPENSE) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER (EXPENSE) INCOME | ||||||||||||||||
| Interest expenses, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Unrealized gain (loss) on equity investment | ( | ) | ||||||||||||||
| Change in fair value of contingent consideration | ||||||||||||||||
| Other expense, net | ( | ) | ||||||||||||||
| TOTAL OTHER INCOME (EXPENSE), NET | ||||||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| LOSS PER SHARE | ||||||||||||||||
| BASIC | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| DILUTED | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| WEIGHTED AVERAGE COMMON SHARE OUTSTANDING | ||||||||||||||||
| BASIC | ||||||||||||||||
| DILUTED | ||||||||||||||||
| (a) |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 6 |
VerifyMe, Inc.
Consolidated Statements of Comprehensive Loss
(Unaudited)
(In thousands)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | |||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Change in fair value of interest rate, Swap | ||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ( | ) | ||||||||||
| Total Comprehensive Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 7 |
VerifyMe, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
| Six months ended | ||||||||
| June 30, 2024 | June 30, 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities : | ||||||||
| Allowance for bad debt | ||||||||
| Stock based compensation | ||||||||
| Unrealized loss on equity investment | ||||||||
| Change in fair value of contingent consideration | ( | ) | ( | ) | ||||
| Fair value of restricted stock awards and restricted stock units issued in exchange for services | ||||||||
| Loss on disposal of equipment | ||||||||
| Impairments | ||||||||
| Amortization and depreciation | ||||||||
| Unrealized loss on foreign currency transactions | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Unbilled revenue | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Accounts payable, other accrued expenses and net change in operating leases | ( | ) | ( | ) | ||||
| Net cash provided by (used) in operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of patents | ( | ) | ( | ) | ||||
| Purchase of office equipment | ( | ) | ( | ) | ||||
| Cash paid in business combination | ( | ) | ||||||
| Deferred implementation costs | ( | ) | ||||||
| Capitalized software costs | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from line of credit | ||||||||
| Proceeds from SPP Plan | ||||||||
| Contingent consideration payments | ( | ) | ||||||
| Tax withholding payments for employee stock-based compensation in exchange for shares surrendered | ( | ) | ( | ) | ||||
| Increase in treasury shares (share repurchase program) | ( | ) | ( | ) | ||||
| Repayment of debt and line of credit | ( | ) | ( | ) | ||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash | ( | ) | ( | ) | ||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | ( | ) | ( | ) | ||||
| CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH- BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH- END OF PERIOD | $ | $ | ||||||
| 8 |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Change in fair value of interest rate, swap | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 9 |
VerifyMe, Inc.
Consolidated Statements of Stockholders' Equity
(Unaudited)
(In thousands, except share data)
| Series
A Convertible | Series
B Convertible | |||||||||||||||||||||||||||||||||||||||||||||||
| Preferred | Preferred | Common | Treasury | |||||||||||||||||||||||||||||||||||||||||||||
| Stock | Stock | Stock | Additional | Stock | ||||||||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | Paid-In | Number of | Accumulated Other | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Comprehensive Loss | Deficit | Total | |||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Restricted stock awards, net of shares withheld for employee tax | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Restricted Stock Units, net of shares withheld for employee tax | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued in relation to Stock Purchase Plan | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Series
A Convertible | Series
B Convertible | |||||||||||||||||||||||||||||||||||||||||||||||
| Preferred | Preferred | Common | Treasury | |||||||||||||||||||||||||||||||||||||||||||||
| Stock | Stock | Stock | Additional | Stock | ||||||||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | Paid-In | Number of | Accumulated Other | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Comprehensive Loss | Deficit | Total | |||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Restricted stock awards | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Restricted Stock Units, net of shares withheld for employee tax | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Income | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| 10 |
| Series A | Series B | |||||||||||||||||||||||||||||||||||||||||||||||
| Convertible | Convertible | |||||||||||||||||||||||||||||||||||||||||||||||
| Preferred | Preferred | Common | Treasury | |||||||||||||||||||||||||||||||||||||||||||||
| Stock | Stock | Stock | Additional | Stock | Accumulated Other | |||||||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Loss | Deficit | Total | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Restricted stock awards, net of shares withheld for employee tax | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock units, net of shares withheld for employee tax | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued in relation to Stock Purchase Plan | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued in relation to Acquisition | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | |||||||||||||||||||||||||||||||||||||||||||||||
| Convertible | Convertible | |||||||||||||||||||||||||||||||||||||||||||||||
| Preferred | Preferred | Common | Treasury | |||||||||||||||||||||||||||||||||||||||||||||
| Stock | Stock | Stock | Additional | Stock | Accumulated Other | |||||||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | Paid-In | Number of | Comprehensive | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Shares | Amount | Loss | Deficit | Total | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Restricted stock awards | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Restricted stock units, net of shares withheld for employee tax | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued in relation to Stock Purchase Plan | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of Common Stock | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 11 |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements (unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Business
VerifyMe, Inc. (“VerifyMe”) was incorporated
in the State of
VerifyMe, is a traceability and customer support services provider using specialized software and process technology. The Company operates a Precision Logistics Segment and an Authentication Segment to provide specialized logistics for time-and-temperature sensitive products, as well as item level traceability, anti-diversion and anti-counterfeit protection, brand protection and enhancement technology solutions. 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 gather business intelligence through the supply chain, cross-sell products, detect counterfeit activities, monitor product diversion, and build brand loyalty utilizing our unique dynamic codes which are read by consumers with their smart phones. The Company’s activities are subject to significant risks and uncertainties. See the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in this report.
Reclassifications
Certain amounts presented for the three and six months ended June 30, 2023, reflect reclassifications made to conform to the presentation in our current reporting period. These reclassifications had no effect on the previously reported net loss.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements (the “Interim Statements”) include the accounts of VerifyMe and its wholly owned subsidiaries PeriShip Global and Trust Codes Global. All significant intercompany balances and transactions have been eliminated upon consolidation. The consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements are not included herein. The Interim Statements should be read in conjunction with the financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2024. The accompanying Interim Statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The interim results for the three and six months ended June 30, 2024, are not necessarily indicative of the results to be expected for the year ending December 31, 2024, or for any future interim periods.
Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts in the consolidated statements of cash flows (dollars in thousands):
| As of | ||||||||
| June 30, 2024 | December 31,2023 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash and cash equivalents including restricted cash | $ | $ | ||||||
The Company classifies cash and cash equivalents
that are restricted from operating use for the next twelve months as restricted cash.
| 12 |
Segment Reporting
Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding the method by which to allocate resources and assess performance. The Company has two reportable segments, namely, (i) Precision Logistics and (ii) Authentication. See Note 11 - Segment Reporting, for further discussion of the Company’s segment reporting structure.
Foreign Currency Translation
The functional currency of our New Zealand operations
is the local currency, New Zealand dollar (NZD). The translation of the foreign currency into U.S. dollars is performed for balance sheet
accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using the weighted average
exchange rates prevailing during the year. The unrealized gains and losses resulting from such translation are included as a component
of comprehensive income. Translation gains and losses arising from currency exchange rate fluctuations on transactions denominated in
a currency other than the local functional currency are included in “General and administrative” on our Consolidated Statements
of Operations. The foreign currency transaction for the three and six months ended June 30, 2024, was a $
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): “Improvements to Reportable Segment Disclosures”, which requires public entities with a single reportable segment to provide all the disclosures required by this standard and all existing segment disclosures in Topic 280 on an interim and annual basis, including new requirements to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within the reported measure(s) of a segment's profit or loss, the amount and composition of any other segment items, the title and position of the CODM, and how the CODM uses the reported measure(s) of a segment's profit or loss to assess performance and decide how to allocate resources. The guidance is effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, applied retrospectively with early adoption permitted. The Company adopted the new standard beginning January 1, 2024. Note 11 – Segment Reporting has been updated to reflect the new disclosure requirements and certain amounts have been reclassified in the Consolidated Statement of Operations. There is no other impact of adoption of this standard on the Company’s consolidated financial statements and disclosures.
Fair Value of Financial Instruments
The Company’s financial instruments consist of accounts receivable, unbilled revenue, accounts payable, notes payable and accrued expenses, contingent consideration and long-term derivative assets or liabilities. The carrying value of accounts receivable, accounts payable and accrued expenses approximate their fair value because of their short maturities. The Company believes the carrying amount of its notes payable approximates fair value based on rates and other terms currently available to the Company for similar debt instruments.
The Company follows FASB ASC 820, “Fair Value Measurements and Disclosures,” and applies it to all assets and liabilities that are being measured and reported on a fair value basis. The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs that are not corroborated by market data
The level in the fair value within which a fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.
| 13 |
The following table presents the Company’s financial instruments that are measured and recorded at fair value on the Company’s balance sheets on a recurring basis, and their level within the fair value hierarchy as of June 30, 2024 and December 31, 2023.
Amounts in Thousands ('000)
| Derivative Asset | Contingent Consideration | |||||||
| (Level 2) | (Level 3) | |||||||
| Balance as of December 31, 2023 | $ | $ | ( | ) | ||||
| Change in fair value of Contingent Consideration | ||||||||
| Payments | ||||||||
| Change in fair value to interest rate, SWAP, recognized in other comprehensive loss | ||||||||
| Balance at June 30, 2024 | $ | $ | ( | ) | ||||
Revenue Recognition
The Company accounts for revenues according to Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” which establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers.
| 14 |
The Company applies the following five steps, separated by reportable segments, in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements.
| · | identify the contract with a customer; |
| · | identify the performance obligations in the contract; |
| · | determine the transaction price; |
| · | allocate the transaction price to performance obligations in the contract; and |
| · | recognize revenue as the performance obligation is satisfied. |
For more detailed information about reportable segments, see Note 11 – Segment reporting. The Company generally considers completion of an agreement, or Statement of Work (“SOW”) and/or purchase order as a customer contract, provided collection is considered probable.
Precision Logistics
Our Precision Logistics segment consists of two service lines, Proactive and Premium. Under our Proactive service line, clients pay us directly for carrier service coupled with our proactive logistics service. Terms typically range 7 days and no longer than 30 days. The Company has determined it is the principal and recognizes shipment fees in gross revenue. Under our Premium service line, we provide complete white-glove shipping monitoring and predictive analytics services. This service includes customer web portal access, weather monitoring, temperature control, full service center support and last mile resolution. Payment terms are typically 30-45 days.
Under both service lines in our Precision Logistics segment, our performance obligation is met, and revenue is recognized, when the packages are delivered. The transaction fees consist of fixed consideration made up of amounts contractually billed to the customer. There are no variable considerations in the transaction fee, in either service line.
Authentication
Our Authentication segment primarily consists of our brand protection service line which consists of a custom suite of products that offer clients traceability and brand solutions. Terms typically range between 30 and 90 days. Our performance obligation is met, and revenue is recognized, when our products are shipped or delivered depending on the specific agreement with the customer. The transaction fee is made up of fixed consideration based on the related purchase order or agreement. Warranties and other variable considerations are analyzed by the Company, in terms of historical warranties, current economic trends, and changes in customer demand, and have been determined to be insignificant in the three and six months ended June 30, 2024.
Goodwill
Goodwill represents the excess of purchase price over the fair value of net assets acquired in business combinations. Pursuant to ASC 350, the Company tests goodwill for impairment on an annual basis in the fourth quarter, or between annual tests, in certain circumstances. Under authoritative guidance, the Company first assesses qualitative factors to determine whether it was necessary to perform the quantitative goodwill impairment test. The assessment considers factors such as, but not limited to, macroeconomic conditions, data showing other companies in the industry and our share price. An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. Events or changes in circumstances which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other entity specific events and sustained decrease in share price.
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The Company follows FASB ASC 260, “Earnings Per Share,” when reporting earnings per share resulting in the presentation of basic and diluted earnings per share. Because the Company reported a net loss for each of the periods presented, common stock equivalents, including preferred stock, stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and diluted loss per share were the same.
For the three and six months ended June 30, 2024, and 2023, there were shares potentially issuable, that could dilute basic earnings per share in the future that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive to the Company’s losses during the periods presented. For the three and six months ended June 30, 2024, there were approximately anti-dilutive shares consisting of unvested performance restricted stock units, restricted stock units, and restricted stock awards, shares issuable upon exercise of stock options, shares issuable upon exercise of warrants, shares issuable upon conversion of convertible debt, and shares issuable upon conversion of preferred stock. For the three and six months ended June 30, 2023, there were approximately anti-dilutive shares consisting of unvested performance restricted stock units, restricted stock units, restricted stock awards and options under the stock purchase plan, shares issuable upon exercise of stock options, shares issuable upon exercise of warrants, and shares issuable upon conversion of preferred stock.
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We account for stock-based compensation under the provisions of FASB ASC 718, “Compensation—Stock Compensation”, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. We estimate the fair value of stock options on the date of grant using the Black-Scholes model. The assumptions used in the Black-Scholes option pricing model include risk-free interest rates, expected volatility and expected life of the stock options. Changes in these assumptions can materially affect estimates of fair value stock-based compensation, and the compensation expense recorded in future periods. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line method. For performance restricted stock units with stock price appreciation targets (see Note 6 – Stock Options, Restricted Stock and Warrants), we applied a lattice approach that incorporated a Monte Carlo simulation, which involved random iterations that took different future price paths over the restricted stock unit’s contractual life based on the appropriate probability distributions (which are based on commonly applied Black Scholes inputs). The fair value was determined by taking the average of the grant date fair values under each Monte Carlo simulation trial. We recognize compensation expense on a straight-line basis over the performance period and there is no ongoing adjustment or reversal based on actual achievement during the period.
We account for stock-based compensation awards to non-employees in accordance with ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting , which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, “Equity – Equity-Based Payments to Non-Employees”.
All issuances of stock options or other equity instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. Non-employee equity-based payments are recorded as an expense over the service period, as if we had paid cash for the services. At the end of each financial reporting period, prior to vesting or prior to the completion of the services, the fair value of the equity-based payments will be re-measured, and the non-cash expense recognized during the period will be adjusted accordingly. Since the fair value of equity-based payments granted to non-employees is subject to change in the future, the amount of the future expense will include fair value re-measurements until the equity-based payments are fully vested or the service completed.
NOTE 2 – REVENUE
Revenue by Category
The following series of tables present our revenue disaggregated by various categories (dollars in thousands).
| Authentication | Precision Logistics | Consolidated | ||||||||||||||||||||||
| Revenue | Three Months Ended June 30, | Three Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Proactive services | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Premium services | ||||||||||||||||||||||||
| Brand protection services | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| Authentication | Precision Logistics | Consolidated | ||||||||||||||||||||||
| Revenue | Six Months Ended June 30, | Six Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Proactive services | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Premium services | ||||||||||||||||||||||||
| Brand protection services | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
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Contract Balances
The timing of revenue recognition, billings and cash collections results in unbilled revenue (contract assets) and deferred revenue (contract liabilities) on the consolidated balance sheets. Amounts charged to our clients become billable according to the contract terms, which usually consider the delivery completion. Unbilled amounts will generally be billed and collected within 30 days but typically no longer than 60 days. When we advance bill clients prior to the work being performed, generally, such amounts will be earned and recognized in revenue within twelve months. These assets and liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. Changes in the contract asset and liability balances during the six-month period ended June 30, 2024, were not materially impacted by any other factors.
Applying the practical expedient in ASC Topic 606, we recognize the incremental costs of obtaining contracts (i.e. sales commissions) as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. As of June 30, 2024, we did not have any capitalized sales commissions.
For all periods presented, contract liabilities were not significant.
The following table provides information about contract assets from contracts with customers:
| Contract Asset | ||||||||
| June 30, | ||||||||
| In Thousands | 2024 | 2023 | ||||||
| Beginning balance, January 1 | $ | $ | ||||||
| Contract asset additions | ||||||||
| Reclassification to accounts receivable, billed to customers | ( | ) | ( | ) | ||||
| Ending balance (1) | $ | $ | ||||||
______________
| (1) |
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NOTE 3 – BUSINESS COMBINATIONS
Trust Codes Global Limited
On March 1, 2023, we acquired, through Trust Codes
Global, the business and certain assets of Trust Codes Limited (“Trust Codes”), specializing in brand protection, anti-counterfeiting,
and consumer engagement technology with an expertise in the food and agriculture industry. Trust Codes Global uses unique QR codes or
IoT, coupled with GS1 standards to deliver cloud-based brand protection based on a unique per-item digital identity to protect brand and
product authenticity, increase data visualization of a product through the end to end supply chain, and creates a data-drive engine to
inform and educate consumers of the product. The Company accounted for the transaction as an acquisition of a business under ASC 805 –
Business Combination. The purchase price was approximately $
The following table summarizes the purchase price allocation for the acquisition (dollars in thousands).
| Cash | $ | |||||
| Fair value of contingent consideration | ||||||
| Stock (issuance of 353,492 shares of common stock) (a) | ||||||
| Total purchase price | $ | |||||
| Amortization | ||||||
| Period | ||||||
| Purchase price allocation: | ||||||
| Prepaid expenses | $ | |||||
| Property and Equipment, net | ||||||
| ROU Asset | ||||||
| Developed Technology | ||||||
| Trade Names/Trademarks | ||||||
| Customer Relationships | ||||||
| Goodwill | ||||||
| Accounts payable and other accrued expenses | ( | ) | ||||
| Current lease liability | ( | ) | ||||
| Long term lease liability | ( | ) | ||||
| $ |
| (a) |
Contingent Consideration
ASC Topic 805 requires that contingent consideration to be recognized at fair value on the acquisition date and be re-measured each reporting period with subsequent adjustments recognized in the consolidated statement of operations. We estimate the fair value of contingent consideration liabilities using an appropriate valuation methodology, typically either an income-based approach or a simulation model, such as the Monte Carlo model, depending on the structure of the contingent consideration arrangement. Contingent consideration is valued using significant inputs that are not observable in the market which are defined as Level 3 inputs pursuant to fair value measurement accounting. We believe our estimates and assumptions are reasonable; however, there is significant judgment involved. At each reporting date, the contingent consideration obligation is revalued to estimated fair value, and changes in fair value subsequent to the acquisitions are reflected in income or expense in the consolidated statements of operations, and could cause a material impact to, and volatility in, our results. Changes in the fair value of contingent consideration obligations may result from changes in discount periods and rates and changes in the timing and amount of revenue and/or earnings projections.
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As of June 30, 2024, contingent consideration
presented as current liability totaled $
NOTE 4 – INTANGIBLE ASSETS AND GOODWILL
Goodwill
Goodwill represents costs in excess of values assigned to the underlying net assets of acquired businesses. Intangible assets acquired are recorded at estimated fair value. Goodwill is deemed to have an indefinite life and is not amortized but is tested for impairment annually, and at any time when events suggest an impairment more likely than not has occurred. We test goodwill at the reporting unit level.
ASC Topic 350, “Intangibles - Goodwill and Other” (“ASC Topic 350”), permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. Under ASC Topic 350, an entity is not required to perform a quantitative goodwill impairment test for a reporting unit if it is more likely than not that its fair value is greater than its carrying amount. A reporting unit is an operating segment, or one level below an operating segment, as defined by U.S. GAAP.
Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable but are unpredictable and inherently uncertain. Actual future results may differ from those estimates. The timing and frequency of our goodwill impairment tests are based on an ongoing assessment of events and circumstances that would indicate a possible impairment. We will continue to monitor our goodwill and intangible assets for impairment and conduct formal tests when impairment indicators are present.
Each of our two reportable segments represents an operating segment under ASC Topic 280, Segment Reporting. We test our goodwill at the reporting unit level, or one level below an operating segment, under ASC Topic 350, “Intangibles - Goodwill and Other”. We determined that we have two reporting units for purposes of goodwill impairment testing, which represent our two reportable business segments, as discussed below.
Changes in the carrying amount of goodwill by reportable business segment for the six months ended June 30, 2024, were as follows (in thousands):
| Authentication | Precision Logistics | Total | ||||||||||
| Net book value at | ||||||||||||
| January 1, 2024 | $ | $ | $ | |||||||||
| 2024 Activity | ||||||||||||
| Foreign currency translation | ( | ) | ( | ) | ||||||||
| Net book value at | ||||||||||||
| June 30, 2024 | $ | $ | $ | |||||||||
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Intangible Assets Subject to Amortization
Our intangible assets include amounts recognized in connection with patents and trademarks, capitalized software and acquisitions, including customer relationships, tradenames, developed technology and non-compete agreements. Intangible assets are initially valued at fair market value using generally accepted valuation methods appropriate for the type of intangible asset. Amortization is recognized on a straight-line basis over the estimated useful life of the intangible assets. Intangible assets with definite lives are reviewed for impairment if indicators of impairment arise. Except for goodwill, we do not have any intangible assets with indefinite useful lives.
Intangible assets with finite lives are subject to amortization over their estimated useful lives. The primary assets included in this category and their respective balances were as follows (in thousands):
| June 30, 2024 | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted Average Remaining Useful Life (Years) | ||||||||||||
| Patents and Trademarks | $ | $ | ( | ) | $ | |||||||||||
| Capitalized Software | ( | ) | ||||||||||||||
| Customer Relationships | ( | ) | ||||||||||||||
| Developed Technology | ( | ) | ||||||||||||||
| Internally Used Software | ( | ) | ||||||||||||||
| Non-Compete Agreement | ( | ) | ||||||||||||||
| Deferred Implementation | ( | ) | ||||||||||||||
| Total Intangible Assets | $ | $ | ( | ) | $ | |||||||||||
| December 31, 2023 | ||||||||||||||||
| Patents and Trademarks | $ | $ | ( | ) | $ | |||||||||||
| Capitalized Software | ( | ) | ||||||||||||||
| Customer Relationships | ( | ) | ||||||||||||||
| Developed Technology | ( | ) | ||||||||||||||
| Internally Used Software | ( | ) | ||||||||||||||
| Non-Compete Agreement | ( | ) | ||||||||||||||
| Deferred Implementation | ( | ) | ||||||||||||||
| Total Intangible Assets | $ | $ | ( | ) | $ | |||||||||||
Amortization expense for intangible assets was
$
Patents and Trademarks
As of June 30, 2024, our current patent and trademark portfolios consist of eight granted U.S. patents and two granted European patents (one validated in four countries of France, Germany, United Kingdom, and Italy and one validated in three countries of France, Germany and United Kingdom), three pending U.S. and foreign patent applications, twenty-three registered U.S. trademarks, two EU trademark registrations, one Colombian trademark registration, one Australian trademark registration, one Japanese trademark registration, one Mexican trademark registration, one Singaporean trademark registration, two UK trademark registrations, seven NZ trademark registration, one OAPI (African Intellectual Property Organization) trademark registration, and one pending US and one foreign trademark application in Nigeria. The Company abandoned one patent during the six months ended June 30, 2024.
The Company expects to record amortization expense of intangible assets over the next 5 years and thereafter as follows (in thousands):
| Fiscal Year ending December 31, | ||
| 2024 (six months remaining) | $ | |
| 2025 | ||
| 2026 | ||
| 2027 | ||
| 2028 | ||
| Thereafter | ||
| Total | $ | |
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NOTE 5 – STOCKHOLDERS’ EQUITY
The Company expensed $
The Company expensed $
During the six months ended June 30, 2024, the Company issued shares of common stock upon vesting of restricted stock units, and shares of common stock from treasury shares, net of common stock withheld for taxes.
On March 31, 2024, the Company issued of
restricted common stock, vesting immediately, with a value of $
Non-Qualified Stock Purchase Plan
On June 10, 2021, the stockholders of the Company
approved a non-qualified stock purchase plan (the “2021 Plan”). The 2021 Plan provides eligible participants, including employees,
directors and consultants of the Company, the opportunity to purchase shares of the Company’s common stock thereby increasing their
interest in the Company’s continued success. The maximum number of common stock reserved and available for issuance under the 2021
Plan is 500,000 shares. The purchase price of shares of common stock acquired pursuant to the exercise of an option will be the lesser
of 85% of the fair market value of a share (a) on the enrollment date, and (b) on the exercise date. The 2021 Plan is not intended to
qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”).
The Company applied FASB ASC 718, “Compensation-Stock Compensation” and estimated the fair value using the Black-Scholes
model, as the 2021 Plan is considered compensatory. In relation to the 2021 Plan the Company expensed $ and $ thousand for the three
and six months ended June 30, 2024, respectively. During the six months ended June 30, 2024 the Company received $
Shares Held in Treasury
As of June 30, 2024, and December 31, 2023, the
Company had and shares, respectively, held in treasury with a value of approximately $
On February 29, 2024, seven participants exercised
their option under the Company’s non-qualified stock purchase plan, and as a result,
Shares Repurchase Program
In December 2023, the Company’s Board of
Directors approved a new share repurchase program to allow the Company to spend up to $ million to repurchase shares of its common
stock so long as the price per share does not exceed $1.00 until December 14, 2024. During the six months ended June 30, 2024, the Company
repurchased shares of common stock for $
During 2013, the Company adopted the 2013 Omnibus Equity Compensation Plan (the “2013 Plan”). Under the 2013 Plan, the Company is authorized to grant awards of stock options, restricted stock, restricted stock units and other stock-based awards up to an aggregate of shares of common stock. The 2013 Plan is intended to permit certain stock options granted to employees under the 2013 Plan to qualify as incentive stock options. All options granted under the 2013 Plan, which are not intended to qualify as incentive stock options are deemed to be non-qualified stock options.
On November 14, 2017, the Executive Committee of the Company’s Board of Directors adopted the 2017 Equity Incentive Plan (the “2017 Plan”) which covered the potential issuance of shares of common stock. The 2017 Plan provided that directors, officers, employees, and consultants of the Company were eligible to receive equity incentives under the 2017 Plan at the discretion of the Board or the Board’s Compensation Committee.
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On August 10, 2020, the Company’s Board of Directors adopted the 2020 Equity Incentive Plan (the “2020 Plan”), subject to stockholder approval, which authorizes the potential issuance of up to shares of common stock. On September 30, 2020, the Company’s stockholders approved the 2020 Plan, and upon such approval the 2020 Plan became effective and the 2017 Plan was terminated. Shares of common stock underlying existing awards under the 2017 Plan may become available for issuance pursuant to the terms of the 2020 Plan under certain circumstances. Employees and non-employee directors of the Company or its affiliates, and other individuals who perform services for the Company or any of its affiliates, are eligible to receive awards under the 2020 Plan at the discretion of the Board of Directors or the Board’s Compensation Committee.
On March 28, 2022, the Company’s Board of Directors adopted the First Amendment to the 2020 Plan, subject to stockholder approval, which increased the shares authorized for potential issuance under the 2020 Plan to shares of common stock and extended the term of the 2020 Plan to June 9, 2023. On June 9, 2022, the Company’s stockholders approved the First Amendment to the 2020 Plan. On April 17, 2023, the Company’s Board of Directors adopted the Second Amendment to the 2020 Plan, subject to stockholder approval, which increased the shares authorized for potential issuance under the 2020 Plan to shares of common stock and extended the term of the 2020 Plan to June 6, 2033. On June 6, 2023, the Company’s stockholders approved the Second Amendment to the 2020 Plan. On March 18, 2024, the Company’s Board of Directors adopted the Third Amendment to the 2020 Plan, subject to stockholder approval, which increased the shares authorized for potential issuance under the 2020 Plan to shares of common stock and extended the term of the 2020 Plan to June 4, 2033. On June 4, 2024, the Company’s stockholders approved the Third Amendment to the 2020 Plan.
The 2020 Plan, as amended, is administered by the Compensation Committee which determines the persons to whom awards will be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof, subject to the provisions of the plan.
The aggregate fair market value (determined at the time of the grant) of stock with respect to which incentive stock options are exercisable for the first time by any individual during any calendar year (under all plans of the Company and its affiliates) shall not exceed $100 thousand, and the options in excess of $100 thousand shall be deemed to be non-qualified stock options, including prices, duration, transferability and limitations on exercise. The maximum number of shares of common stock that may be issued under the 2020 Plan pursuant to incentive stock options may not exceed, in the aggregate, .
The Company has issued non-qualified stock options pursuant to contractual agreements with non-employees. Options granted under the agreements are expensed when the related service or product is provided. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value represent management’s best estimates and involve inherent uncertainties and judgements.
Stock Options
The following table summarizes the activities for the Company’s stock options as of June 30, 2024:
| Options Outstanding | ||||||||||||||||
| Weighted - | ||||||||||||||||
| Average | ||||||||||||||||
| Remaining | Aggregate | |||||||||||||||
| Weighted- | Contractual | Intrinsic | ||||||||||||||
| Number of | Average | Term | Value | |||||||||||||
| Shares | Exercise Price | (in years) | (in thousands)(1) | |||||||||||||
| Balance as of December 31, 2023 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Forfeited/Cancelled/Expired | ( | ) | $ | |||||||||||||
| Balance as of June 30, 2024 | $ | |||||||||||||||
| Exercisable as of June 30, 2024 | $ | $ | ||||||||||||||
| (1) |
| 23 |
As of June 30, 2024, the Company had no unvested stock options.
During the six months ended June 30, 2024, and
2023, the Company expensed $
As of June 30, 2024, there was $
Restricted Stock Awards and Restricted Stock Units
The following table summarizes the unvested restricted stock awards as of June 30, 2024:
| Weighted - | ||||||||
| Average | ||||||||
| Number of | Grant | |||||||
| Award Shares | Date Fair Value | |||||||
| Unvested at December 31, 2023 | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Balance at June 30, 2024 | $ | |||||||
As of June 30, 2024, total unrecognized share-based
compensation cost related to unvested restricted stock awards is $
The following table summarizes the unvested time based restricted stock units as of June 30, 2024:
| Weighted - | ||||||||
| Average | ||||||||
| Number of | Grant | |||||||
| Unit Shares | Date Fair Value | |||||||
| Unvested at December 31, 2023 | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Balance at June 30, 2024 | $ | |||||||
As of June 30, 2024, total
unrecognized share-based compensation cost related to unvested restricted stock units was $
| 24 |
The following table summarizes the unvested performance restricted stock units as of June 30, 2024:
| Weighted - | ||||||||
| Average | ||||||||
| Number of | Number of | |||||||
| Unit Shares | Unit Shares | |||||||
| Unvested at December 31, 2023 | ||||||||
| Granted | ||||||||
| Forfeited/Cancelled | ( | ) | ||||||
| Balance at June 30, 2024 | $ | |||||||
For restricted stock units with stock price appreciation targets, we applied a lattice approach that incorporated a Monte Carlo simulation, which involved random iterations that took different future price paths over the restricted stock unit’s contractual life based on the appropriate probability distributions (which are based on commonly applied Black Scholes inputs). The fair value of each grant was determined by taking the average of the grant date fair values under each Monte Carlo simulation trial. We recognize compensation expense on a straight-line basis over the derived service period and there is no ongoing adjustment or reversal based on actual achievement during the period.
As of June 30, 2024, total unrecognized share-based
compensation cost related to unvested performance restricted stock units was $
Warrants
The following table summarizes the activities for the Company’s warrants as of June 30, 2024:
| Number of Warrant Shares | Weighted- Average Exercise Price | Weighted - Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands)(1) | |||||||||||||
| Balance as of December 31, 2023 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Expired | ||||||||||||||||
| Balance as of June 30, 2024 | $ | |||||||||||||||
| Exercisable as of June 30, 2024 | $ | $ | ||||||||||||||
| (1) |
NOTE 7—DEBT
PeriShip Global is a party to a debt facility with PNC Bank, National Association (the “PNC Facility”). The PNC Facility includes a $1 million revolving line of credit (the “RLOC”) with a term of one-year which expires in September 2024. 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 PNC Facility also includes a four-year term note (the “Term Note”) for $2 million which matures in September of 2026 and requires equal quarterly payments of principal and interest. The Term Note incurs interest per annum at a rate equal to the sum of Daily SOFR plus 3.1%. The RLOC and Term Note are guaranteed by VerifyMe and secured by the assets of PeriShip Global and VerifyMe.