10-K: VerifyMe Faces Revenue Decline, Major Merger & Dilution

VerifyMe, Inc. reports a 32% revenue drop and increased net loss for 2025, driven by a key carrier partnership loss and significant impairment charges, while pursuing a highly dilutive merger with Open World Ltd.

Summary

• Consolidated revenue for the year ended December 31, 2025, decreased by 32% to $16,398 thousand from $24,207 thousand in 2024.
• The Precision Logistics segment's revenue decline is primarily due to the termination of the prior carrier partner agreement for ProActive services, effective September 24, 2025.
• The Authentication segment's revenue decreased as the company is not actively pursuing new business in this area, focusing instead on servicing existing customers.
• Net loss increased to $4,905 thousand in 2025 from $3,824 thousand in 2024, resulting in a loss per share of $0.39 compared to $0.37.
• The company recorded significant goodwill and intangible asset impairment charges totaling $3,850 thousand in 2025, primarily related to the Precision Logistics segment due to the carrier partner change.
• A merger agreement with Open World Ltd. was entered into on February 11, 2026, where VerifyMe's pre-Closing stockholders are expected to collectively retain approximately 10% of the post-Closing aggregate common stock, with Open World securityholders receiving approximately 90%.
• The At-The-Market (ATM) Sales Agreement with Roth Capital Partners, LLC, under which 628,432 shares were sold for $483 thousand net proceeds in 2025, was terminated on February 16, 2026.
• VerifyMe loaned ZenCredit Ventures, LLC $2 million on August 11, 2025, at a 16% annual interest rate, with the promissory note maturing on May 11, 2026.
• The company's subsidiary, PeriShip Global LLC, terminated its Connecticut office lease effective February 15, 2026.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing with a highly negative sentiment due to the significant revenue decline, increased net loss, substantial impairment charges, and the highly dilutive nature of the proposed merger, which fundamentally alters the company's business model and introduces considerable new risks.

Positives

• Gross profit percentage increased to 38.5% in 2025 from 35.8% in 2024, attributed to process improvements in ProActive services margins.
• The company secured a new Strategic Partner for ProActive services starting September 24, 2025, with expectations to broadly offer Premium and Direct Premium services in Q2 2026.
• Interest income, net, improved to $214 thousand in 2025 from an expense of $130 thousand in 2024, due to Term Note repayment and interest from warrant exercise proceeds and the ZenCredit loan.
• Cash and cash equivalents increased to $4,353 thousand at December 31, 2025, from $2,823 thousand at December 31, 2024, largely due to proceeds from warrant exercises and the ATM program prior to its termination.
• Management believes outsourcing precision logistics services presents an opportunity for companies to reduce operational costs, benefiting VerifyMe's Precision Logistics segment.

Negatives

• Consolidated revenue decreased by 32% year-over-year, from $24,207 thousand in 2024 to $16,398 thousand in 2025.
• Net loss increased to $4,905 thousand in 2025 from $3,824 thousand in 2024.
• The company incurred significant goodwill and intangible asset impairment charges of $3,850 thousand in 2025, primarily in the Precision Logistics segment, following the loss of its prior carrier partner.
• The loss of the prior carrier partner for ProActive and Premium services is expected to cause a material decline in ProActive services revenue in Q1 and Q2 2026.
• The proposed merger with Open World Ltd. will result in substantial dilution, with current VerifyMe stockholders expected to own only approximately 10% of the combined company.
• The company has a history of operating losses and may not achieve or maintain profitability.
• Research and development efforts are not expected to continue for the foreseeable future, indicating a potential halt in new technology development.
• The company was not in compliance with all affirmative and restrictive covenants under the PNC Facility at December 31, 2025, requiring a waiver.

Risks

• Future acquisitions or strategic partnerships may increase capital requirements, dilute stockholders, incur debt, or assume contingent liabilities.
• Failure to attract and retain management, and develop successors, may damage operations and financial results.
• Future growth is highly dependent on the success of the Precision Logistics segment and effective strategy execution.
• Reliance on the new Strategic Partner for shipping services and customer acquisition poses risks if the partner is unwilling or unable to supply services on acceptable terms or terminates the relationship.
• The business is subject to seasonal trends, with Q1 and Q2 traditionally being the weakest, and the recent carrier partner change exacerbates this.
• Severe climate conditions and other catastrophic events can significantly impact the shipment of time and temperature-sensitive goods, leading to product loss and reputational harm.
• Operating in a highly competitive transportation and logistics industry may lead to downward pricing pressures, reduced volumes, and loss of customer relationships.
• Damage to brand image and corporate reputation due to service failures or adverse publicity could materially affect the company.
• Future impairment of significant goodwill and other intangible assets could have a material adverse impact on financial results.
• Adverse economic conditions, including recessions, inflation, and global instability, may decrease demand for services or increase costs.
• Reductions in discretionary consumer spending could negatively impact demand for high-end perishable items, affecting revenues.
• Global supply-chain delays and shortages may adversely impact customers or potential customers.
• The company has a history of losses and may never achieve or maintain profitability.
• The ability to use net operating losses (NOLs) to offset future taxable income may be limited by Section 382 of the IRC, especially after the proposed merger.
• Brand confusion with similar names (e.g., Verified.Me, verifyme.ng) could diminish brand value.
• Failure of proprietary technology to work as anticipated could halt operations and result in financial loss and service liability damage.
• Not currently expanding sales, marketing, and support organizations, which may limit market acceptance and growth.
• Failure to protect or enforce intellectual property rights, or high costs of defense, could harm the business.
• Failure to maintain an effective system of disclosure controls and internal control over financial reporting could impair the ability to produce timely and accurate financial statements.
• Exposure to liabilities under the Foreign Corrupt Practices Act (FCPA) due to international business operations.
• Reliance on third-party data center hosting facilities and information technology systems exposes the company to service interruptions, cyber-attacks, and data breaches.
• Evolving regulations concerning data privacy (e.g., GDPR, CCPA) may increase compliance costs or require product modifications.
• Fluctuations in labor costs, changes in transportation service availability, or catastrophic events may increase the cost of products and services.
• The proposed merger is subject to various closing conditions and may not be completed, potentially requiring the company to pay a termination fee.
• The pendency of the merger could adversely affect business operations and relationships due to uncertainty.
• Securities class action and derivative lawsuits may be filed challenging the merger, potentially delaying or preventing its closing.
• The merger may be completed even if a material adverse effect occurs, as certain types of changes are excluded from the material adverse effect definition.
• If the merger is not completed, the stock price may decline significantly, and the business may be adversely affected.
• The fixed exchange ratio in the merger will not adjust for changes in the market price of common stock or relative performance of the parties.
• Interests of some officers and directors in the merger differ from those of stockholders, potentially influencing their support.
• The merger will involve substantial costs, regardless of consummation.
• The merger agreement limits the ability to pursue alternatives and includes a potential termination fee.
• Failure to obtain certain regulatory approvals and clearances could prevent, delay, or impair consummation of the merger.
• Combining businesses post-merger may be difficult, costly, or time-consuming, potentially failing to realize anticipated synergies.
• The combined company may be unable to retain customers, suppliers, or business partners post-merger.
• Failure to attract and retain management and other key personnel, especially Open World's CEO Matthew Shaw, could hinder business plan execution.
• The combined company may be unable to obtain additional capital, equity, or debt financing, which could affect its ability to continue as a going concern.
• Open World's management has limited experience operating a public company, posing risks to the transition.
• The combined company is expected to be a controlled company, potentially relying on Nasdaq exemptions, which could limit stockholder protections.
• The combined company may be unable to meet Nasdaq's continued listing standards, potentially requiring a reverse stock split and leading to delisting.
• A reverse stock split, if implemented, may not result in a proportional share price increase, could adversely affect liquidity, and increase odd lot ownership.

Future Outlook

The company's future growth is highly dependent on the success of its Precision Logistics segment and the integration with its new Strategic Partner, with expectations to broadly offer Premium and Direct Premium services to this partner's customers in the second quarter of 2026. ProActive services revenue is anticipated to take several quarters to recover following the loss of the prior carrier partner. The proposed merger with Open World Ltd. is expected to significantly alter the company's business focus and ownership structure, with current stockholders retaining only about 10% of the combined entity. The company does not expect to continue research and development efforts for the foreseeable future.

Management Comments

• "We believe taking the data feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor of our service center agents give us a competitive advantage against other third-party platforms that solely rely on the carriers data feeds."
• "We believe the company has two significant areas of opportunity. First, our services are specifically designed to address the needs of small and medium sized health care, agriculture, food and beverage companies. Second, the pharmaceutical and healthcare industries represent significant opportunities due to the enhanced tracking and customer service associated with distribution of these products."
• "We are focusing our sales emphasis on those industries and discovering other industries that need a high touch, white-glove exception management team."
• "Due to the current economic environment, and our competitive cost offering, we believe companies may opt to outsource their precision logistics services to reduce their operational costs."
• "Mr. Stedham's expected resignation as our director, Chief Executive Officer and President is not the result of any disagreement with us on any matter relating to our operations, policies or practices."
• "Our Board of Directors currently anticipates declaring a cash dividend prior to the closing of the Merger."

Industry Context

StockSavvy.ai notes that VerifyMe's significant revenue decline and strategic pivot highlight the intense competitive pressures and evolving dynamics within the logistics and brand protection sectors. The loss of a major carrier partner like FedEx underscores the vulnerability of businesses heavily reliant on single-source partnerships, a common challenge in the logistics industry. The shift towards a new strategic partner and the focus on small-to-medium sized businesses, healthcare, and pharmaceutical industries aligns with broader trends of specialized logistics and supply chain optimization for high-value, sensitive goods. However, the proposed merger with Open World Ltd., a digital assets company, represents a radical departure from VerifyMe's traditional business, indicating a strategic reorientation towards a rapidly evolving and highly speculative industry, potentially seeking to capitalize on the growth in digital asset infrastructure, a move that carries substantial new risks and opportunities compared to its peers in traditional logistics.

Comparison to Industry Standards

• The 32% revenue decline in 2025 for VerifyMe's Precision Logistics segment, primarily due to the loss of a major carrier partner, contrasts sharply with the general growth trends seen in specialized logistics for perishable goods, where companies like Lineage Logistics or Americold Logistics have shown consistent expansion, albeit through different business models and scales.
• The increase in gross margin to 38.5% in 2025, despite revenue decline, suggests internal operational efficiencies, which could be a positive indicator when compared to the often tighter margins of 15-25% in broader freight forwarding and transportation services, but this is offset by the overall revenue contraction.
• The substantial goodwill and intangible asset impairment charges of $3.85 million in 2025 reflect a significant re-evaluation of asset values, a common occurrence in industries undergoing rapid shifts or facing competitive setbacks, but the magnitude here indicates a material impact on the company's financial health, potentially worse than typical asset write-downs seen in stable logistics firms.
• The proposed merger with Open World Ltd., a digital assets company, is an unconventional strategic move for a logistics firm, making direct comparisons to industry standards difficult. This pivot suggests a recognition of limited growth potential in its current form and a high-risk, high-reward attempt to enter a new, volatile market, unlike traditional logistics companies that typically expand through organic growth, acquisitions of complementary logistics firms, or technology integration within their existing domain.

Management Changes

Corporate Governance

Legal Proceedings

• As of the date of this report, the company is not aware of any threatened or pending legal proceedings which, if determined adversely, would have a material effect on its business, results of operations, cash flows, or financial position.

Related Party Transactions

• On August 25, 2023, the company entered into a Convertible Note Purchase Agreement for $1,100 thousand, of which $475 thousand was purchased by related parties including Adam Stedham (President and CEO), Scott Greenberg (Chairman), the Geller Trust, and the 1065 Institute, Inc. As of December 31, 2025, $400 thousand of these notes were held by related parties.
• As of January 21, 2025, $350 thousand of the convertible notes were converted to common stock, none of which were held by related parties.

Stakeholder Impact

• **Shareholders:** Will experience significant dilution, with current stockholders expected to own only approximately 10% of the combined company post-merger. The stock price may decline if the merger is not completed, and a reverse stock split is likely, which may not proportionally increase share price or liquidity.
• **Employees:** Certain employees and directors will have outstanding equity awards accelerate and vest upon the merger's effective time. Key management, Adam Stedham and Jennifer Cola, have new employment agreements for the combined entity, but other directors are expected to resign.
• **Customers:** Customers of the Precision Logistics segment are impacted by the transition from the prior carrier partner to a new Strategic Partner, with potential service disruptions and revenue recovery expected over several quarters. The company aims to continue providing Direct Premium services to legacy customers.
• **Suppliers/Vendors:** The company's reliance on a single major vendor for a significant portion of transportation costs (89% in 2025) creates concentration risk. The termination of the prior carrier partner relationship impacts the supply chain for logistics services.
• **Creditors:** The company's PNC Facility covenants were not in compliance at December 31, 2025, requiring a waiver, indicating potential financial strain. The convertible notes mature in August 2026, posing a future repayment obligation.

Next Steps

• Prepare and file a registration statement on Form S-4 with the SEC, containing a proxy statement for a Company stockholder meeting related to the merger.
• Obtain requisite stockholder approval for the merger and related transactions.
• Obtain regulatory approvals from relevant governmental authorities, including the Cayman Islands Trade and Business Licensing Board.
• Cause the PeriShip subsidiary to terminate its current credit facility prior to the merger closing.
• Effectuate a reverse stock split upon the request of Open World to meet Nasdaq listing requirements for the post-Merger entity.
• Obtain Nasdaq's approval of the listing application for the post-Merger entity.
• Execute a Registration Rights Agreement and an Exchange Agent Agreement at the closing of the merger.
• Adam Stedham is expected to resign as a director, CEO, and President to become President of Precision Logistics upon the merger's effective time.
• Jennifer Cola is expected to continue as Chief Financial Officer upon the merger's effective time, with 130,000 restricted stock awards vesting.
• Broadly offer Premium and Direct Premium services to customers of the new Strategic Partner in the second quarter of 2026.

Key Dates

Recommendation

The filing reveals a company in significant distress, marked by a substantial 32% revenue decline, an increased net loss, and considerable impairment charges. The loss of a major carrier partner has severely impacted its core Precision Logistics business, with a prolonged recovery expected. The proposed merger with Open World Ltd. is highly dilutive, reducing existing shareholder ownership to a mere 10% of the combined entity, and introduces the company to the volatile and complex digital assets industry, a radical strategic pivot with inherent high risks. Given the severe financial deterioration, the high dilution, and the speculative nature of the new business direction, a seasoned investor would likely view this as a 'strong sell' due to the significant downside risk and uncertainty.

Keywords

Precision Logistics, Brand Protection, SEC Filing, Merger Agreement, Open World Ltd, VRME, Financial Performance, Goodwill Impairment, Intangible Assets, Carrier Partner, Dilution, Nasdaq Listing, Corporate Governance, Risk Factors, Supply Chain, Predictive Analytics, Anti-Counterfeit, Convertible Debt, ZenCredit, Stockholder Support