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PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

VerifyMe Reports Fourth Quarter and Full Year 2018 Results

April 2, 2019

ROCHESTER, N.Y., April 02, 2019 (GLOBE NEWSWIRE) -- via NEWMEDIAWIRE -- VerifyMe, Inc. (OTCQB: VRME ), a technology solutions company that markets products supported by patents, patent applications and trade secrets which provides identifiers and serialization for authenticating, tracking and tracing functions for labels, packaging and products, today announced the Company’s financial results for the fourth quarter and year ended December 31, 2018.

Key Financial Highlights for Q4 2018:

-- Revenues increased to $39,772, compared to $0 in Q4 2017 -- Operating loss decreased by 71% to $0.5 million -- Net loss decreased by 76% to $534,158 -- Adjusted EBITDA decreased by 33% to $0.4 million

Key Financial Highlights for Full Year 2018:

-- Revenues increased to $78,884, compared to $0 in 2017 -- Operating loss decreased by 8% to $2.6 million -- Net loss decreased by 13% to $2.9 million -- Adjusted EBITDA decreased by 1% to $1.3 million

Key Business Highlights for Q4 and Full Year 2018:

-- Executed three reseller agreements; a global label manufacturer and two print service providers -- Global contractual partnerships with HP Indigo, Micro Focus and S-One LP continued to progress and are expected to generate revenue in 2019 -- HP Indigo expanding RainbowSecure to its largest series of digital printers -- Placed order for Smartphone Enabled Cloud Connected Authentication devices -- FDA mandate for serialization, track and trace for all pharmaceutical packaging and labeling -- A top 10 global consumer products company has expanded its use of RainbowSecure to 2.5 million product labels in the month of January 2019

Subsequent to the end of 2018, the Company has been actively marketing with HP Indigo and S-One LP. These engagements have involved demonstrating the technology solutions at tradeshows and active discussions and meetings with prospective clients.

Given our business model involves royalty rates based on volume of impressions and software in the cloud, we are targeting gross margins in the 70-80% range for 2019.

Management Commentary“We had an extremely eventful and productive 2018, as we continued to lay the groundwork for commercializing our technology. We have now transitioned from research and development to the sales and marketing and revenue ramp stage,” commented, Patrick White, VerifyMe’s Chief Executive Officer. “Our security and authentication technology is applicable across a wide range of industries and applications. We have successfully aligned with partners such as HP Indigo, Micro Focus, S-One LP and others, which will now assist us in driving market adoption. Our pipeline of prospects is robust as we look to scale our business and ramp our revenue in 2019.

Mr. White concluded, “While 2018 was a success, we know this is just the beginning. There is much work to do in delivering our proprietary, patented and disruptive technology solutions for the global anti-counterfeit, piracy and brand protection markets, and continuing to build shareholder value.”

Financial Results for the Three Months Ended December 31, 2018:

Revenue for the three months ended December 31, 2018 was $39,772, compared to $0 for the three months ended December 31, 2017.

Gross profit for the three months ended December 31, 2018 was $25,251, compared to $0 for the three months ended December 31, 2017. The resulting gross margin was 63.5% for the three months ended December 31, 2018.

General and administrative expenses for the three months ended December 31, 2018 was $206,330, a decrease of $610,786 or 75%, compared to $817,116 for the three months ended December 31, 2017.

Legal and accounting expenses for the three months ended December 31, 2018 was $54,401, a decrease of $48,987 or 47%, compared to $103,388 for the three months ended December 31, 2017.

Payroll expenses for the three months ended December 31, 2018 was $47,319, a decrease of $604,978 or 93%, compared to $652,297 for the three months ended December 31, 2017.

Research and development expenses for the three months ended December 31, 2018 was $85,383, a decrease of $9,418 or 10%, compared to $94,801 for the three months ended December 31, 2017.

Sales and marketing expenses for the three months ended December 31, 2018 was $118,073, an increase of $114,273, compared to $3,800 for the three months ended December 31, 2017.

Operating loss for the three months ended December 31, 2018 was $486,215, a decrease of $1,185,579, or 71%, compared to $1,671,794 for the three months ended December 31, 2017.

Adjusted EBITDA loss for the three months ended December 31, 2018 was $416,157, a decrease of $209,428 or 33% compared to $625,585 for the three months ended December 31, 2017.

Net loss for the three months ended December 31, 2018 was $534,158, a decrease of $1,653,103, or 76%, compared to $2,187,261 for the three months ended December 31, 2017. The resulting EPS loss for the three months ended December 31, 2018 was $(0.00) per diluted share, compared to $(0.08) per diluted share for the three months ended December 31, 2017.

Financial Results for the Year Ended December 31, 2018:Revenue for the year ended December 31, 2018 was $74,884, compared to $0 for the year ended December 31, 2017.

Gross profit for the year ended December 31, 2018 was $46,082, compared to $0 for the year ended December 31, 2017. The resulting gross margin was 61.5% for the year ended December 31, 2018.

General and Administrative expenses for the year ended December 31, 2018 were $1,585,329, a decrease of $104,554 or 6%, compared to $1,689,883 for the year ended December 31, 2017. The decrease is attributable primarily to a decrease in non-cash stock-based compensation for consultants.

Legal and accounting expenses for the year ended December 31, 2018 was $416,772, an increase of $170,252 or 69%, compared to $246,520 for the year ended December 31, 2017. In the beginning of 2017, the Company had released its then attorneys and hired its current attorneys in the second quarter of 2017. Thus, charges in 2018 for legal fees include a full year, in comparison to half year charges in 2017.

Payroll expenses for the year ended December 31, 2018 was $316,837, a decrease of $450,420 or 59%, compared to $767,257 for the year ended December 31, 2017. The majority of the decrease was the result of lower non-cash charges related to stock-based compensation.

Research and development expenses for the year ended December 31, 2018 was $187,655, an increase of $59,611 or 47%, compared to $128,044 for the year ended December 31, 2017.

Sales and marketing expenses for the year ended December 31, 2018 was $135,290, an increase of $131,490, compared to $3,800 for the year ended December 31, 2017. The increase was related to hiring of the Company’s VP of Sales, and expenses for travel and costs related to various trade shows and other sales and marketing activities.

Operating loss for the year ended December 31, 2018 was $2,595,801, a decrease of $239,703 or 8%, compared to $2,835,504 for the year ended December 31, 2017.

Adjusted EBITDA loss for the year ended December 31, 2018 was $1,310,960, a decrease of $12,788, or 1%, compared to $1,323,748 for the year ended December 31, 2017.

Net loss for the year ended December 31, 2018 was $2,932,462, a decrease of $452,878, or 13%, compared to $3,385,340 for the year ended December 31, 2017. The resulting EPS loss for the year ended December 31, 2018 was $(0.03) per diluted share, compared to $(0.14) per diluted share for the year ended December 31, 2017.

About VerifyMe, Inc.VerifyMe, Inc., is a technology solutions company that markets products supported by patents, patent applications and trade secrets which provides identifiers and serialization for authenticating, tracking and tracing functions for labels, packaging and products. The company also markets multi-factor biometric verification solutions to verify people. VerifyMe’s physical technology authenticates packaging, labels and documents with a suite of proprietary security inks and pigments, which work in conjunction with serialization and track-and-trace software. The company’s digital technologies authenticate people by performing strong, multi-factor biometric verification via its patented digital software platforms. To learn more, visit www.verifyme.com

Non-GAAP – Financial Measure:

This press release includes both a financial measures in accordance with Generally Accepted Accounting Principles, or GAAP, as well as a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to net income (loss), operating income (loss), and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of VerifyMe nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.

Our management uses and relies on Adjusted EBITDA which is a non-GAAP financial measure. We believe that both management and shareholders benefit from referring to the following non-GAAP financial measure in planning, forecasting and analyzing future periods. Our management uses this non-GAAP financial measure in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management recognizes that the non-GAAP financial measure has inherent limitations because of the excluded items described below.

VerifyMe defines Adjusted EBITDA as earnings (or loss) from continuing operations before the items in the table below. VerifyMe excludes these expenses because they are non-cash or non-recurring in nature.

We have included a reconciliation of our non-GAAP financial measure to the most comparable financial measures calculated in accordance with GAAP. We believe that providing the non-GAAP financial measure, together with the reconciliation to GAAP, helps investors make comparisons between VerifyMe and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.

The following table presents a reconciliation of Adjusted EBITDA to net loss allocable to common shareholders, a GAAP financial measure:

ADJUSTED EBITDA (Non-GAAP) 2018 2017 ------------ ------------ Net loss $ (2,932,462 ) $ (3,385,340 ) Interest income (expenses), net (6,664 ) 218,316 Amortization and depreciation 20,963 43,095 - ---------- - ---------- Total EBITDA (Non-GAAP) (2,918,163 ) (3,123,929 ) Adjustments: Stock based compensation 44,120 139,808 Fair value of options and warrants issued in exchange for services 329,193 1,295,741 Fair value of restricted stock and restricted stock units issued in exchange 454,890 66,825 for services Common stock and warrants issued for services - 297,807 Share-based payment for settlement agreement with shareholders 279,000 - Cash payment for settlement agreement with shareholders 500,000 - - ---------- - ---------- Total Adjusted EBITDA (Non-GAAP) $ (1,310,960 ) $ (1,323,748 ) - ---------- - ----------

Cautionary Note Regarding Forward-looking Statements This release contains forward-looking statements regarding future revenue, our pipeline and our projected 2019 gross margins. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Important factors that could cause actual results to differ from those in the forward-looking statements include the company’s ability to work with partners in selling its technologies to businesses, production difficulties, our inability to enter into contracts and deals with future partners, and issues which may affect the reluctance of large companies to change their purchasing of products, acceptance of our technologies, the efficiency of our authenticators in the field and our patents including potential litigation. Further information on our risk factors is contained in our filings with the SEC, including the Form 10-K for the year ended December 31, 2018. Any forward-looking statement made by us herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

For Licensing or Other Information Contact:Company: VerifyMe, Inc.Email: IR@verifyme.com Website: http://www.verifyme.com

VerifyMe, Inc.Balance Sheets

As of December December 31, 2018 31, 2017 ------------- ------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,673,201 $ 693,001 Accounts Receivable 30,373 - Prepaid expenses and other current assets 25,781 18,668 Inventory 41,982 - - ----------- - ----------- TOTAL CURRENT ASSETS 1,771,337 711,669 OTHER ASSETS Patents and Trademarks, net of accumulated amortization of $258,294 and $237,331 as of December 31, 2018 and December 31, 2017 209,049 191,507 Capitalized Software Costs 70,231 - - ----------- - ----------- TOTAL ASSETS $ 2,050,617 $ 903,176 - ----------- - ----------- LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable and other accrued expenses $ 411,211 $ 923,202 Accrued Payroll $ 69,041 $ - Notes payable - 50,000 Common Stock payable - 122,478 - ----------- - ----------- TOTAL CURRENT LIABILITIES 480,252 1,095,680 STOCKHOLDERS’ EQUITY (DEFICIT) Series A Convertible Preferred Stock, $.001 par value, 37,564,767 shares authorized; 304,778 shares issued and outstanding as of December 31, 2018 and 324,778 shares issued and outstanding as of December 31, 2017 305 325 Series B Convertible Preferred Stock, $.001 par value; 85 shares authorized; 0.85 shares issued and outstanding as of December 31, 2018 and 0.92 shares issued and outstanding as of December 31, 2017 - - Common stock of $.001 par value; 675,000,000 authorized; 102,553,706 and 53,873,872 issued, 102,203,166 and 53,523,332 shares outstanding as of 102,203 53,522 December 31, 2018 and December 31, 2017 Additional paid in capital 60,844,796 56,198,126 Treasury stock as cost (350,540 shares at December 31, 2018 and December (113,389 ) (113,389 ) 31, 2017) Accumulated deficit (59,263,550 ) (56,331,088 ) - ----------- - ----------- STOCKHOLDERS’ EQUITY (DEFICIT) 1,570,365 (192,504 ) - ----------- - ----------- TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 2,050,617 $ 903,176 - ----------- - -----------

VerifyMe, Inc.Statements of Operations

Year Ended ---------------------------- December December 31, 2018 31, 2017 ------------ ------------ NET REVENUE Sales $ 74,884 $ - COST OF SALES 28,802 - - ---------- - ---------- GROSS PROFIT 46,082 - - ---------- - ---------- OPERATING EXPENSES General and administrative (a) 1,585,329 1,689,883 Legal and accounting 416,772 246,520 Payroll expenses (a) 316,837 767,257 Research and development 187,655 128,044 Sales and marketing 135,290 3,800 - ---------- - ---------- Total Operating expenses 2,641,883 2,835,504 - ---------- - ---------- LOSS BEFORE OTHER INCOME (EXPENSE) (2,595,801 ) (2,835,504 ) OTHER (EXPENSE) INCOME Interest income (expenses), net 6,664 (218,316 ) Gain on derecognition of note payable and accrued interest 83,667 - Settlement agreement with shareholders (779,000 ) - Gain on accounts payable forgiveness 352,008 - Loss on settlement of related party notes payable - (331,912 ) Other income - 392 - ---------- - ---------- (336,661 ) (549,836 ) - ---------- - ---------- NET LOSS $ (2,932,462 ) $ (3,385,340 ) - ---------- - ---------- Less: Deemed dividend on convertible preferred shares - (596,878 ) - ---------- - ---------- NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (2,932,462 ) $ (3,982,218 ) - ---------- - ---------- LOSS PER SHARE BASIC $ (0.03 ) $ (0.14 ) - ---------- - ---------- DILUTED $ (0.03 ) $ (0.14 ) - ---------- - ---------- WEIGHTED AVERAGE COMMON SHARE OUTSTANDING BASIC 93,851,170 28,244,361 - ---------- - ---------- DILUTED 93,851,170 28,244,361 - ---------- - ----------

(a) Includes share-based compensation of $828,203 and $1,800,181 for the years ended December 31, 2018 and 2017, respectively.

VerifyMe, Inc.Statements of Cash Flows

Year Ended ---------------------------- December December 31, 2018 31, 2017 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (2,932,462 ) $ (3,385,340 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock based compensation 44,120 139,808 Fair value of options and warrants issued in exchange for services 329,193 1,295,741 Fair value of restricted stock and restricted stock units issued in exchange 454,890 66,825 for services Common stock and warrants issued for services - 297,807 Gain on accounts payable forgiveness (352,008 ) - Share-based payment for settlement agreement with shareholders 279,000 - Gain on derecognition of note payable and accrued interest (83,667 ) - Amortization of debt discount - 174,517 Interest rolled into principal - 30,000 Loss on conversion of related party notes payable and accrued interest - 331,912 Amortization and depreciation 20,963 43,095 Changes in operating assets and liabilities: Accounts Receivable (30,373 ) - Inventory (41,982 ) 17,093 Prepaid expenses and other current assets (7,113 ) (9,243 ) Accounts payable and accrued expenses (57,275 ) 61,867 - ---------- - ---------- Net cash used in operating activities (2,376,714 ) (935,918 ) - ---------- - ---------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Patents (38,505 ) (2,650 ) Capitalized Software Costs (70,231 ) - - ---------- - ---------- Net cash used in investing activities (108,736 ) (2,650 ) - ---------- - ---------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of warrants 2,312,005 - Proceeds from issuance of related party notes payable - 281,000 Proceeds from sale of common stock 1,153,645 1,327,925 - ---------- - ---------- Net cash provided by financing activities 3,465,650 1,608,925 - ---------- - ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS 980,200 670,357 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 693,001 22,644 - ---------- - ---------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,673,201 $ 693,001 - ---------- - ----------

The following table presents a reconciliation of Adjusted EBITDA to net income (loss) allocable to common shareholders, a Non-GAAP financial measure:

Year Ended ----------------------------- ADJUSTED EBITDA (Non-GAAP) 2018 2017 ------------- ------------- Net loss $ (2,932,462) $ (3,385,340) Interest income (expenses), net (6,664) 218,316 Amortization and depreciation 20,963 43,095 - ----------- - ----------- Total EBITDA (Non-GAAP) (2,918,163) (3,123,929) Adjustments: Stock based compensation 44,120 139,808 Fair value of options and warrants issued in exchange for services 329,193 1,295,741 Fair value of restricted stock and restricted stock units issued in exchange 454,890 66,825 for services Common stock and warrants issued for services - 297,807 Share-based payment for settlement agreement with shareholders 279,000 - Cash payment for settlement agreement with shareholders 500,000 - - ----------- - ----------- Total Adjusted EBITDA (Non-GAAP) $ (1,310,960) $ (1,323,748) - ----------- - -----------