VerifyMe, Inc. (VRME) Q3 2022 Earnings Report, Transcript and Summary

Good morning, and welcome to the VerifyMe Third Quarter 2022 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Nancy Meyers, Senior Vice President, Finance and Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us today for our earnings call presentation. On the call today we have; Scott Greenberg, Executive Chairman; Patrick White, CEO; Margaret Gezerlis, CFO; and Curt Kole, Executive Vice President, Sales and Global Strategy, to give you an update on our third quarter 2022 results. Following our management presentation, we will have a Q&A session. I would like to bring your attention to the note on forward-looking statements on slide 3. Today's presentation and the answers to questions include forward-looking statements. It should be understood that actual results could differ materially from those projected due to a number of factors, including those described under the forward-looking statements caption and on the risk factors of the company's annual report on Form 10-K and quarterly reports on Form 10-Q. I will now turn the call over to Scott Greenberg for some opening remarks.

Thank you, Nancy. Good morning, and welcome to our third quarter 2022 earnings conference call. The results and future outlook clearly show that we are making progress in transforming the company from a technology start-up to a revenue-generated operating company, focused on logistics, systems, customer engagement and authentication. Today, Patrick will give an operations update, Margaret will give a financial review, and new to our mix, Curt Kole will give an introduction and a further update on PeriShip. Then we will follow with a Q&A session. Next slide, please. The next slide really just shows the financial and equity snapshot. The symbols [ph] VerifyMe, we currently have 9 million shares outstanding. Our cash balance at the end of September was $3.7 million, and Margaret will talk about this in detail. But the good news on our debt, even though our debt is roughly the same as it was last quarter, it has now been turned over to a long-term debt, and we have a commercial relationship with PNC Bank. Our revenue trailing 12 months is $10.1 million, and the Insider Beneficial Ownership is approximately 20%. We did announce a share repurchase program on our last call and is approximately $1.4 billion remaining under the plan. With that being said, I'll now turn it over to Patrick.

Thank you, Scott. Good morning, everyone. Thank you for joining us today. Let's review our third quarter financial performance. Our quarterly consolidated revenue was an all-time record of $5.2 million, an increase of 1,638% compared to $0.3 million for the three months ended September of 2021. This, of course, was primarily attributable to the acquisition of the PeriShip Global Logistics business, which we acquired in April 2022. Gross profit from operation was also a record $1.9 million. That equates to an overall gross margin of 36% for the three months ended September of 2022 compared to $0.2 million or 62% from our legacy business for the three months ended in September 2021. The net loss was just $0.6 million or $0.06 fully diluted loss per share for the three months ended September 2022. That compares to a net income of $7.2 million or 95% fully diluted earnings per share for the three months ended in September of 2021. Now on 2021, the profit we recorded last year was included approximately $8.2 million non-cash fair value gain related to the SPAC, which we wrote off in the second quarter of this year. Adjusted EBITDA was almost breakeven as we report a small $198,000 loss or a 35% improvement over the second quarter of 2022. Scott will discuss this very positive outlook for this key metric during today's presentation. Our cash, as Scott mentioned, at the end of the quarter was a healthy $3.7 million. And it's also important to note that we entered into a banking facility that paid off a note from the purchase of PeriShip in which we were able to record a negotiating line canceling gain of $300,000. As part of that transaction, we also obtained a $1 million revolving line of credit to back our cash position for operations. Let's now turn to the next slide of business highlights. First and foremost, we entered into a multiyear contract extension with our Global Logistics strategic partner, FedEx, which is also our largest customer of PeriShip. This extension now covers our relationship through 2026. Secondly, historically, PeriShip has never really amortized before. So if you rolled out a social media campaign focused on increased visibility and engagement to attract new proactive PeriShip customers. The initiative is already providing leads and new customer sign-ups. I also think it's important to note that these new PeriShip of global customers we are on-boarding will positively impact our revenue in Q4 and beyond. The PeriShip business has an immediate sales cycle. For your information of typical new account takes only one to two weeks to begin a new client relationship. We also reported that our VerifyMe division, who is a growing mature pipeline of prospects signed a new contract from that prospect list, which provides brand protection for an international $3.4 billion luxury apparel company. This is our second win in the apparel industry this year. The initial order is for one SKU was for 3.8 million units. And that particular order is in process and will be reflected in our Q4 numbers. Finally, as Scott mentioned, we have taken advantage of the very undermanned stock price as we repurchased 74,530 shares of our common stock under the share repurchase program during the quarter. Let's go to the next slide, and I'm very pleased to introduce you to Curt Kole, the Executive Vice President of Sales & Global Strategy at PeriShip Global. Curt will walk you through some of the exciting PeriShip Global highways. Curt, floor is here.

Patrick, thank you, and welcome to everyone this morning. It's a pleasure to be joining you for the first time. Let's talk a little bit about the business we're in, how we got here, our relationship with existing customers and our outlook going forward. And with that, we've been in the business for 22 years, and this organization has been purpose-built for what we do. We occupy a space that straddles direct reporting on line of sight for in-transit shipments, as well as the alignment with our customers directly in the delivery of logistics management. We've been in the business, as I said, for over 20 years and have exclusively been partnered with FedEx for those 22 years. We're big believers in that relationship. We're well aligned. We're well in place with those folks, and we're proud of that relationship. We currently have about 400 active customers, that varies from a month-to-month basis. But we're very proud that the retention of those customers is north of 80%. I think that speaks to the relationship that we have with our customers. And it also talks a little bit about our support from them in partnering in their most critical business. We're fortunate to be the distributors and managers of the largest vaccine company in the United States for the production of flu. And we're happy to say that on a year-over-year basis, we've been able to help them reduce reshifts, which is a direct metric of how successful their outbound customer experiences. As we approach the fourth quarter, this becomes our busiest time of the year, which is the natural peak in the parcel business. That has been enhanced with the ability to align ourselves with the VerifyMe suite of services in an add-on basis, and we currently have several customers who were engaged in discussions with as to how we align with those folks in the addition of the VerifyMe suite of services from a customer experience perspective, serialization and dedication. We also have expanded in the nonperishable market, and we use the expression of our four-legged stool. If we can satisfy one of those four elements, which are time, temperature value and criticality, we believe that we can help the customers, and that is our approach to each of them. We're working with FedEx currently on the development of a program to address the small and medium customers, which constitute 50% of the opportunities that they address. It's a highly underserved segment. It's something that we're purpose-built to address and are in the process of aligning our strategies now to approach the SAN market, which we believe is going to yield considerable results going forward as a result of the downturn in e-commerce, fax's adjustment in terms of capital expenditure, expenses related to sales, which will allow PeriShip as an outsourced third-party relationship to attract those customers, to engage those customers at a cost much less than FedEx themselves can do so. That's a summary of the PeriShip highlights. And with that, I'm going to turn the speaker back to Scott and Patrick. Thank you.

Thank you, Curt. I would like to turn now to our PeriShip sales by market sector slide. This slide shows the various market sectors that PeriShip's clients are categorized. As you can see, 70% of PeriShip's 400-plus clients provide revenue from the food and beverage industry. The second largest segment is the pharmaceutical industry, which logs in at 17%. One of our strategic goals is the growth of 17% pharma and the 7% health care segments. We have strategically targeted those segments as they have built in protections from economic conditions, very large values, government backing and they have a need for all of our technologies. Curt's team is focusing on building those segments, and this chart gives us you a periodic view of their successful transition. Now, I want to turn the presentation back over to Scott who'll walk you through the outlook.

Thank you, Patrick. As you can see from the results, the adjusted EBITDA in Q3 of a loss of $198,000 is approaching breakeven. And as Curt and Patrick mentioned, the fourth quarter is typically our strong this quarter. And now for the next statement, we say and that we add to that is due to seasonality of the business and the addition of new customers in Q4 is expected to show significant improvement in both revenue and adjusted EBITDA. So not only do we believe that we're gaining from the seasonality. But as Curt mentioned, some of the new customers onboard should be beneficial to us as well. In addition, the legacy business of VerifyMe is starting to gain traction it is now projected to grow at least 50% per annum in 2022 and in 2023. As opposed to our prior estimates of 100%, while this is less, if you review the numbers in order to get 50% in 2022, we need a very strong fourth quarter from the VerifyMe technology. Based upon these positive developments, the company will review forecast of revenue for 2023 after the completion of the fourth quarter, and we'll report back to our shareholders. And with that, I'd like to turn it back to Margaret.

Thanks, Scott, and good morning, everyone. Thank you for joining. As you have heard first from Scott and Patrick, we continue showing improved results and have a positive outlook for the next quarter. Our Q3 revenue showed an improvement of 16% when compared to Q2 2022, and we had a significant improvement on the bottom line. Our adjusted EBITDA loss improved by 35%, and as Scott said, that we're approaching breakeven. Our business is seasonal with the fourth quarter expected to be our strongest quarter this year and to have a positive adjusted EBITDA as a result in Q4. I'd like to note here that the significant loss in Q2 2022 related primarily to the Stack, which resulted in a loss of $11 million when we decided not to extend the time in which the Stack can complete an initial business combination. Next slide, please. The next slide shows revenue and gross profit margin in the last four years and illustrates our tremendous growth as a company. Revenue is near $10 million and only accounts for nine months out of the year. Our gross profit margin has decreased due to the nature of one of our new revenue streams that constitutes the majority of our revenue. However, gross profit has increased by $3 million or over 500%, and that's when comparing the nine months of 2022 to the full year of 2021. Next slide, please. Our key highlights here are that we are not burning cash and our cash and cash equivalents have remained steady since June 30th. The decrease since December 31, 2021, relates to our position of PeriShip. Additionally, we were able to refinance the promissory notes that we had issued in Q2 in connection with the PeriShip acquisition. Originally, that would have been due in full by October 2023. We were able to negotiate with the holder of the promissory note on its payoff, which resulted in a gain on extinguishment of debt of approximately $0.3 million, and we were able to pay it off with the proceeds from a new term loan with PNC Bank that is payable in monthly installments over a four-year period starting September 2022. Furthermore, we have a $1 million revolving debt facility with PNC of which we have not yet withdrawn any funds. We continue to believe that we have sufficient cash to cover our operations for the foreseeable future as our business starts to generate cash. We plan to grow the business organically, but are always looking for opportunities to increase our shareholders' value. Now with that, I'd like to thank you for your participation and open the floor to any questions you might have.

We will now begin the question-and-answer session [Operator Instructions] Our first question will come from Mike Petusky with Barrington Research. You may now go ahead.

Hi. Good morning, guys. So I guess I want to understand better, obviously, the fourth quarter and the revenue expectation and margin expectation is intuitive, but I was just curious if somebody new to this business, sort of how full year generally the seasonality sort of plays out? And then also sort of a second part concerns around recessionary -- how this business acts in a recession and just things that may -- you possibly could do to mitigate it? Thanks. A – Scott Greenberg: So let me start by answering the recession. While I can't claim that any business is recession proof, one is 18% of our revenues from pharmaceutical and an overall 25% of our revenue from Pharmaceutical and Healthcare. The second thing that we hope for, which Curt touched on today, as we are an outsourcing company that typically could do with cheap bucks [ph] companies that are doing this type of service in-house. When the economy is difficult and they look for ways to save money, typically a way to save money is by outsourcing services they currently do internally. So our goal is that if there is a downturn, is to get a higher percentage of their revenue stream. And Curt mentioned the small and medium accounts as well and add that into our mix of products offset any recession or any downturn. So sometimes, a company like ours, which is an outsourced based company could perform well despite the economic conditions due to our customers wanting to save money and using us instead of doing it internally. As far as the revenue and the percentages in gross margin, let me hand that section over to Margaret

Thanks, Scott. So as we move into Q4, we expect that it's going to be a strong business. Now -- in terms of exact percentages, we don't have that analysis yet. It's very difficult to understand because it's a new business for us. Historically, it has been around 33% to 35% internally. Gross profit margin, we do expect to have to -- for our gross profit margin to stay consistent to what it was this quarter, so around that 36%.

So, I will say, in our model, while we build our revenue stream up, we have been able to increase, at least in the first few quarters, the gross margin percentage over the historic gross margin percentage. And now really, our goal is that we have that in good shape is to start increasing the revenue stream. But I think the mix where Margaret said that about 33% of the revenue is typically generated in the fourth quarter for PeriShip is correct. Now on the VerifyMe side, you heard in my presentation that said that we should get 50% overall growth for the year. So based upon that, if you run the numbers, we're expecting a very strong quarter from the PeriShip -- up from the -- from the VerifyMe business. And a lot of that has to do right now with the cannabis industry, which we're getting a lot of orders from. And the hope in that one is with the changes in the rules and the regulations of the cannabis industry going forward that, that could be a fast-growing sector for the company.

Okay. Can I just ask, what kind of step down -- and maybe any of the PeriShip folks on the call, what kind of step down is typical in terms of revs and margins and – from -- going from Q4 to Q1?

As far as margin goes, we don’t see -- we see the margin pretty much stable on a quarterly basis. So we haven't seen, at least in our ownership, great margin variations as a percentage on the quarter. But again, on the revenue side, I think, if you take out the 33 -- roughly the 33% that we have in Q4, the rest of the quarters there are less seasonality on.

Okay.

Let me just interject here that Q4, of course, is energized by the holiday gift giving. And then Q1 is energized with returns. So PeriShip has a pretty strong first quarter historically in their mix. But as far as margins, as Scott said, they're pretty consistent across all four quarters.

Okay. Sorry. And I'm new to this idea, and I'm brand new on the company. So if you're modeling on a quarterly basis, Q4 is strongest, Q1 is next strongest and the other two are roughly equivalent to each other. Is that fair?

That's fair. Curt, do you have any color on that?

No, Patrick. I think that you hit it pretty much in the head. We don't see a great deal of shutdown, if you will, from Q4 to -- restrict the activity in December versus January. We obviously have softer quarters in the summer when demand is less. So your assessment relative to Q2, Q3 being a relatively equal is on target.

Okay. Thank you so much, guys. Really, appreciate it.

Thank you, Mike.

Thanks, Mike.

Thanks, Mike.

Our next question will come from Dan Orlow [ph] with Shield Street [ph]. You may now go ahead.

Hey. Good morning. Congrats, nice quarter. Obviously, a huge strategic shift in the focus of the business. Hoping to sort of carry some questions here. In terms of the four-part element, I'm sorry I only got time, temperature, criticality, and what was the fourth one, sorry?

I think that would be value.

So, as you think about sort of the market opportunity set for you, as you described as a technology solution, could you give a sense of sort of how scalable the business model is and how large is that addressable market given the fact that you guys have been in operations are credible. How does that flow through over the course -- it's not from the sake of projections. Just trying to get a sense of how large is that market opportunity?

Well, I will say one thing, and then I'll hand it over to Curt and then Patrick. The area of the small and medium-sized customers has been in main area that's been ignored. And right now, we are focusing on that. And if you look at the total revenue and the total potential, that's a multiple of what we're currently doing. So in that regard, I think the opportunity is very significant and large. And since Curt is dealing with that day-to-day, let him expand on that.

Thanks, Scott. As we’ve stated, we are big believers in what's going to take place on a go-forward basis in, what we would call, our traditional markets. The time, temperature value and criticality, I think encompasses both the healthcare side of our business. But certainly, the driver and the experience that we come from, is in the perishable market. It's our belief that the e-commerce swell that took place during the COVID has now normalized, if you will. And so we're looking to get a greater share of that business. We're, as I mentioned earlier, purpose built for that in terms of scalability. The costs are covered at the outset. And then again, it is just onboarding existing opportunities in conjunction with the new opportunities that we're gaining through the VerifyMe services. We expect that we should see considerable growth in the perishable market. The healthcare market will continue to grow as we believe that's going to be one of the biggest drivers of our growth long-term. And I think we're perfectly -- we're set to accommodate an additional 30% to 40% of the business without adding additional CapEx. But we're very bullish on what's going to take place on a go-forward basis on Q2 and Q3 and our ability to service the SAM market, small and medium customer market, at a cost lower than our existing strategic partners.

That's really, really interesting. So are you implicitly saying that there's cross-sell opportunities, which I guess, Scott or Patrick alluded to between the legacy, VerifyMe --I'm sorry, go ahead, please to talk to...

We actually believe and we're seeing that now. If you look at the PeriShip deliverables, having the track and trace and the anti-counterfeiting and the customer engagement is another tool and another service to complete their portfolio of deliverables. So, while we did -- we didn't base the acquisition based upon this, this was -- the acquisition was based upon the standalone matters of PeriShip. We believe this is another opportunity or add on. Right now, there are some of PeriShip's long-term customers that are looking at the VerifyMe technology, particularly in the food and beverage business, how that could help them in addition to the perishable shipments that they do, how they help them with their company. And one of them is a large meat supplier right now. So, they are complementary and it is a good differentiator that now PeriShip has that it didn't have before.

How does this translate across the company in terms of legacy costs for VerifyMe in terms of reallocating sort of internal resources, I guess, towards potentially certain thing that additional -- let me finish the point versus what you're identifying as sort of in pipeline, obviously, a longer term piece. I'm just trying to understand how the cost curves are going unfold over the next couple of quarters.

When you look at the cost, there's three elements of the cost. One is you have the public company costs, which are there regardless of how we transform the company. And then two, you have to direct cost for VerifyMe, and then you have the direct cost for PeriShip for that product line. I think upper management is obviously working on the overall solution. And -- but right now, the sales force is differentiated between the two. We don't have a combined sales force. So other than the executive team, we're really able to track the cost and the workflow to the vision that it pertains to. When you look at VerifyMe, the -- I'll call it, everything is VerifyMe now. But if you look at the legacy technology, they have a much higher gross margin percentage. It could be 60% or more. So incremental revenue has a dramatic hit covering the overall expenses of the -- from technology.

So I guess when you say that it will be down 50% on legacy VerifyMe in terms of overall expectations, I'm just trying to understand what the expectations side is, if there's -- I'm just trying to understand how this sort of like flows through in terms of probability of closing new legacy VerifyMe business.

Well, I could only report on where we are today. So, last year, we did roughly $800,000 of revenue with the VerifyMe technology. Again, I'll define this as the VerifyMe technology, the anti [indiscernible] technology. Originally going into the year, we thought we could grow it by 100%, which would take you to $1.6 million, roughly. If you look at the three quarters and the numbers in the 10-Q, we haven't approached the doubling. But yet, we're expecting a very strong fourth quarter, which means that it should grow by overall for the year, 50% for the entire year based upon the strong fourth quarter. So, while not at 100% growth we originally anticipated, 50% in a year is not so terrible neither. So--

We expect 15%, but there's still the pipeline opportunity and maybe just timing differential for 2023, but you're not willing to discuss that yet until you reported 4Q numbers.

Yes. We're willing to discuss Q4 and I would say we're projecting a very strong Q4. And then once we see Q4 in the pipeline, well, at year-end, we'll project the next year in year.

Okay. One more housekeeping note here, I'll go back in queue. Can you discuss the consolidated rate on the PNC term facility in terms of or do you guys, locked in rate on term before rates backed up, or was it a variable and you're just on floating?

I'll let Margaret do that. So why don't we have the.

Sure. So yes, we locked in the rate for the PNC loan. It's at 7.62%. We have a swap agreement to lock it in.

Okay. All right.

We wanted to make sure we knew our cost of money, for a company our size and our position, not having to do a private debt deal or anything like that and of course, in the equity involved. We felt a four-year lock-in at 7.6% for a company like ours really was great. And it really shows, if they're doing the due diligence, the confidence that they have in the company as well.

And if I adjust back the numbers to we were from Q2, I mean, it really looks like you guys are really expecting a very nice 4Q from 1Q PeriShip in September, based upon the original deal terms and what you have at this point. So it doesn't sound like there's any variation. In fact, it sounds like the pipelines in some regards continue to strengthen in terms of market opportunity as well as -- so the issues at FedEx haven't pulled it into any of your expectations.

That's correct. While our initial first few quarters of revenue was honestly less than anticipated. And those are the numbers if you compare it to the numbers of the company before. The pipeline is building. We're winning new customers. So this quarter's revenue, a slight was below expectations that we would have had. We still feel comfortable that the business should start growing again.

Yeah. Thanks for the time. I'll jump back in a queue.

Thank you.

Our next question will come from Jack Vander with Maxim Group. You may now go ahead.

Okay, great. Thanks guys. I appreciate the update. Thanks for taking my questions. I'll start with the couple of housekeeping questions. First question is on the third quarter revenue. And I think that the tendency is not out quite yet. So could you just parse out 3Q revenue between organic versus PeriShip revenue like you did last quarter?

Sure. So for the third quarter, we have -- sorry, we have $5 million for the PeriShip and $179 million for VerifyMe. Now if you compare to last year for VerifyMe, it was $300 that really relates to the timing that slipped into Q4. So aside from our newer opportunities, we expect that part of the reason why we expect a strong Q4 as well, because there are some sales that slipped into Q4.

Got you. Okay. That makes sense. And then in terms of PeriShip, can you talk about PeriShip's revenue year-over-year. So PeriShip is at $5 million in revenue in the third quarter. And then obviously, it's going to be a big jump in the fourth quarter. Are you expecting year-over-year growth in PeriShip?

We are not expecting year-over-year growth from PeriShip. When we first took over PeriShip, there were some losses of account in business. One of the areas that we have losses on is Alaska, Montana things. But now -- and also there's always some type of disruption in the transition and the sale and everything that was going on. But now that the team is in place, the transition has been published, we expect and new customers are coming in, we feel cautiously optimistic that the trend will start moving in the other direction. But in the past two quarters that we own on the revenues...

Okay. Got you. And then obviously, a lot of companies have followed been dealing with sorry, I have an echo on my line. Can you guys hear me okay?

Yes.

Okay. A lot of companies I've been following have been citing material FX headwinds recently, PeriShip a global supply chain company. But do you expect the FX headwinds to impact your business in the fourth quarter? And is it baked into your 2023 outlook at all?

Yes. Currently, we don't have a lot of FX exposure, while we do some outside – outside the majority of our revenue currently is all domestic in Canada, but primarily domestic. So we don't see -- we don't have the currency exposure that other companies have –but I think will happen. I just wanted to add your question on the -- when we were talking about revenue. The one thing that we didn't discuss, we discussed earlier is just that we’re being a little bit of parallel is that the margin profile although was actually so far been up from -- so while our revenue was down, we have had an increase in margin percentage from the prior year.

Okay. No, good, good positive– positive that there's no impact really from FX or not as much because you're domestic mostly. And then good margin expansion

Any employees, there's a pass-through from us to the clients.

Okay. So you have been raising your prices then to mitigate some of the inflationary pressure...

In the mark-ups, right?

Okay, fantastic. And then Patrick, actually, can you maybe provide an update on your relationship with -- I asked this last quarter, but can you give an update on your relationship with the Hewlett-Packard and anything you're talking about them because I think they're going to help move the change and get some momentum for VerifyMe sales.

Yes. We just concluded the term sheet for a new agreement. It is at HP Legal and we're just waiting for them to do their finishing touches on getting the document for signature. It's a five-year renewal and their worldwide sales force will be compensated in the form of commissions to walk our products throughout the world. They are finally realizing that yellow UV ink that they've been selling is not really a counterfeit feature. It's more of a decoy and their higher-end clients. These are some of these guys are in the billions of units for like governments and pharma need a real counterfeiting technology such as our intakes. So yes, that the contract is forthcoming and is imminent.

Fantastic. Okay. And then just one more follow-up for me. Looking at 2023, I believe the guidance, which is very -- I would call it conservative, at least from your -- maybe I won't put words in your mouth, but it sounds like that doesn't bake in any cross on synergies, and you're still expecting $25 million of revenue, positive adjusted EBITDA. Given that you're winning -- you mentioned you're winning new parish customers, which have a pretty quick sales cycle and you're winning new verified my core customer deals. Are -- it sounds like -- I don't know, is there a room for upside without raising your guidance? And it seems like there's leverage for upside to it?

This is Scott. But we're going to come out with a new guidance after the fourth quarter. And all indications are that we'll have growth in both areas, Harris and VerifyMe.

Yeah. And as I mentioned earlier, we will update our guidance at the end of the year-end. But we wanted to, at the end, say, numbers that we think a dramatic improvement and we could hit compared to our loss and very minimal revenue to be EBITDA positive adjusted for the whole year. It's a big development for the company to be cash flow positive as well. But we will update the guidance when we see our first major quarter with the 33% plus revenue, we wanted to look at how the fourth quarter came out.

Okay. Fair enough. Makes sense. Thanks guys. That’s it for me.

Thanks, Jack.

[Operator Instructions] Our next question will come from Joel Dixon Matas [ph] a Private Investor. You may now go ahead. Q – Unidentified Analyst: Can you hear me all right, sir?

Yeah.

Yes. Q – Unidentified Analyst: Okay. I've got a number of questions, and I'll just go through them one by one. How much money do we have VerifyMe have for buyback since we purchased shares, how much is remaining from the…

$1.4 million. Q – Unidentified Analyst: We have $1.4 million left...

Yes. Yes. Q – Unidentified Analyst: So we've only spent $100,000 on buying back stock?

Well, the buyback was announced last -- in a period and then obviously, when you come out with your earnings or in a blackout period. So the buyback was only announced last quarter. Q – Unidentified Analyst: Okay. So we have $1.4 million in order to put the work if we need to, to buy back shares?

That's correct. Q – Unidentified Analyst: Okay. The next question would be the value of PeriShip as a standalone, if you had to sell it yesterday, what kind of ballpark figure, would it be worse because it got more than when you bought it?

The answer is, I'll leave that up to the analysts in the market. I will say we bought it for $10.5 million. It does $25 million in revenue. When we bought the company, it didn't have the extension with this large supplier and customer which we accomplished. So we think it's worth obviously, with that being accomplished in our positive future outlook, we think it's been increased value. What I can say here today is what it's worth what it's worth because it's part of our long-term growth plan, and we think it's going to be -- bring a lot of value to the company.

Well, I think it already has brought a lot of value to the company. I'm glad we have it. Next question. Is there an exit strategy, or you going to try to grow this thing or sell it or partner with bigger names or what?

So I believe we have a growth strategy that hopefully we talked about today, becoming a player in our overall market with new technology and organic growth and potential acquisitions. But we are employed by our shareholders, and we want to bring the shareholders the highest value. So we always have to look at different alternatives to give the shareholder value or the best value. But right now, the operating plan is to grow this business.

Okay. Good. Next question, are there any new relations or new customers? And like our closing ratio, I think we've been talking to Hewlett Packard year or two. Is there anything that you can kind of light on there in terms of our progress with new areas for business development…

Yes. Yes, Patrick, why don't you take that?

Well, I was just going to say that Hewlett Packard, we're under a one-year extension, the original contract expired in August, and we've been talking since then, and it's been ramped up. The terms are approved and it's just made our paperwork at this point. But in regards to growth plans, there are so many, I can begin to tell you, with the meteorologists, we have a PeriShip. There's a need out there to generate revenue on selling - -here many companies pay for these days. It's a software play or is very low cost. We -- VerifyMe has a food safety technology that we are planning to put in the PeriShip to show their food and beverage clients. This technology will let the pharmaceutical or food and beverage company knows the temperature was too hot during the shipping of the product, therefore, making it rendering useless. There's cross-selling of the VerifyMe technologies to enhance the PeriShip offerings to our clients so they can do a consumer engagement and strong interest from a lot of their clients from that as well as building data intelligence. So as a software play, in PeriShip can get into many things beyond just time and temperature and criticality, they can get into non-perishable items. So there's a focus there and there's some opportunities there that we're exploring. It's a tighter weather tail, and software is very profitable.

You look at specific customers with specific. Just recently, we signed up at VerifyMe technology, a big apparel company, and we're doing our first project with them. Secondly, we got a major increase in scope of business with a cannabis company. And those that are two of the drivers of the projected strong fourth quarter of the VerifyMe technology. On the PeriShip side, some of their new customers are in the sea food and fish business, both in expansions -- both in Florida and in Hawaii. And then in addition, an alcohol company as well. So a lot of their expansions and new customers are coming in the food and beverage industry.

That's very good. Last question. I'm pretty sure, I'm correct in this, PeriShip based primarily at Connecticut and Texas. Is there any reason or expectation to expand those locations or just keep things where they are because they're doing so good?

Right now, the locations are fine. Based upon business expansion, we might need to add people at the locations, but we're not looking at any geographical changes.

Okay. The last question, VerifyMe, I think on the web page or something, you have an office in New York, UK, United Kingdom, China, India and Switzerland. Do we just have people in the United States that service those areas, or do we have physical brick-and-mortar or boots on the ground in those places because that would be overhead and is that overhead creating any revenue?

These are outside contractors working remotely. There is no brick-and-mortar outside the US. We have a corporate office in Rochester, New York, which is brick-and-mortar. But other than that, it's all remotely worked.

Okay. Good. Any action in Switzerland a long time ago, there was a customer called -- I might miss pronounce it or something that it was like DKSSH [ph] or something? Is there -- are they still in play, or that's just a dead end.

No, that DKSSH is a very large seller -- reseller of products into China. And they had been waiting for a new ink technology so that we can utilize flexo printing and web press printing, which is prevalent in those areas, which is non-digital. I mean, the HP is a digital press. These are your more traditional label and packaging. I mean, like 95% of the label and packaging market. I mean they do the big numbers. So now we have the ink technology in place with our strategic partner, INX International. We are working with DKSSH, and they have several prospects that we're working with them as we speak.

Well, I'm glad to hear that. You mentioned something that I didn't catch. It's something like that now we have new ink what – ink?

We have inkjet technology that is now able to be printed continuous inkjet for -- in products industry and the web industry.

Did you say weapons?

Web, W-E-B, it's a web press. It’s a lot of rolls of paper, high-speed.

Well, DK or -- whoever they are, please forgive me for scrambling up their name. They distribute throughout the Middle East and all parts of the globe, correct, or – they are based on Switzerland, right?

They're huge in the Pacific Rim. That's their real.

Hey, Patrick, I hate to interrupt. I think we are running out of time, so I think we have to cut off the questions at this point. But we are available for additional questions after the call. So, I'd like to thank everybody for being on the call. And again, we are available. And we look forward to updating you on the next quarter and other press releases as we go along the quarter. So thanks for joining us on the call today.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.