VerifyMe, Inc.

Scott, you're doing a slide with the stock statistics.

Thank you. Welcome to the Verify Me second quarter 2022 results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Nancy Myers, Senior Vice President, Finance and Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us today on our earnings call presentation. On the call today, we have Scott Greenberg, Executive Chairman, Patrick White, CEO, and Margaret Guzzerli, CFO, to give an update on our second 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 three. Today's presentation and the answers to questions includes 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.

Good morning, everybody. I would like to thank you for participating on our second quarter 2022 earnings call. We expect that these calls will continue on a regular quarterly basis. Hopefully you were able to review our earnings release yesterday, which we believe clearly demonstrates the transformation of the company from a technology startup to a revenue generating entity with a specialty in supply chain logistics, anti-counterfeiting, and track and trace capabilities. We believe that these relate to each other and we're in a good position. And in addition, we do expect positive adjusted EBITDA in 2023. Next slide, please. A little bit about the financial and equity snapshot. The symbol being VRME. The stock price, approximately $1.86. We have received questions from many shareholders about the stock in the last few months. And we have seen as well the trading of the stock and the volatility in the stock. And we're just as miffed as you are on the reasons. But at the end of the day, we believe we're improving the company and it will eventually be reflected in the stock price. The shares outstanding is approximately $8.5 million, and our market cap is approximately $16 million. Our cash balance is $3.8 million as of June 30th, 2022, and that's after the perish of acquisition other than the note, which is $2 million as of June 30th, 2022. As I mentioned, in 2023, we projected Positive adjusted EBITDA. So we really think the balance sheet, the debt position, the cash flow position will be strong going into 2023. Our revenue trailing 12 months as of 6-30-2022 was $5.2 million. This is a company that had minimal revenue in 2020. And that leads to my opening statement that we now are an operating company with specific expertise in supply chain logistics. Our inside ownership is approximately 13%. And based upon the positive developments in the company, we just announced a new share of purchase program of $1.5 million as of July 1st, 2022. Now I'm going to hand it over to Patrick, who will go over our business update. Margaret will then go over the financial report, and then we will complete with a Q&A session. So thank you and enjoy the call.

Thank you, Scott, and good morning, everyone. It is my absolute pleasure to be speaking with you today on Verify Me in its transformational second quarter. As Scott mentioned, VerifyMe completed the acquisition of Pariship Global, a cutting edge logistics management company. I will give you a broader description of the Pariship business later in this presentation. But first, let me summarize this quarter's results. With Pariship, our combined second quarter revenue reached $4.5 million, which represents an approximately a 3,500% increase over 2021. primarily related to the acquisition of the Perryship business. The Perryship acquisition closed in late April, so Perryship's results were only recorded for approximately nine of the 12 weeks in the quarter. Also, historically, Perryship's peak quarters are the third and fourth quarters, which are driven by large vaccine distributions for major pharmaceutical companies, and of course, the holiday gift-giving season. The fourth quarter historically accounts for approximately one-third of the annual Perryship revenue. Turning now to the VerifyMe legacy business, revenue continues its year-over-year growth trend by recording a 115% increase in sales. Our adjusted EBITDA for the quarter improved 66% year-over-year to a small loss of approximately $300,000 compared to an adjusted EBITDA loss of approximately $900,000 for the prior year period. As we previously reported, during the quarter we recorded a one-time non-cash $11.2 million impairment write-down of a SPAC asset that increased our net loss to $12.5 million for the quarter. Finally, we are reaffirming our previously recorded guidance that our new combined company will generate at least 25 million annual revenue with a positive adjusted EBITDA in 2023. Now to the next slide, please. Let's now turn to the second quarter business highlights. The most impactful event, of course, is the acquisition of Pariship. In today's world, anything can be shipped. There are many types of perishable products ranging from vaccines to fresh seafood and even cakes and pizza that require extreme care as well as time and temperature control when being shipped long distances. Major carriers are great at handling massive volumes of packages to all parts of the world. To support this, they have built a sophisticated and effective network of ground and air transportation to facilitate quick, voluminous deliveries. But these same carriers deal with internal costs and time constraints that are often incompatible with providing the extra time and customer care required to meet the needs of clients whose businesses rely on quality time and temperature perishable type product shipping. Pariship specializes in critical time and temperature perishable product shipping logistics. Pariship therefore fills a service void for major carriers. Also, for your information, Perry Ship is headquartered in a lovely seaside town of Brantford, Connecticut, and has approximately 45 employees housed in their call center, including two full-time meteorologists and multiple IT people. who develop and constantly improve the proprietary predictive analytic software designed to prevent and mitigate client shipping issues and improve Paryship's overall customer experience. Pariship services over 400 clients, which includes some of the largest global vaccine manufacturers, as well as Alaskan, Hawaiian, and Maine seafood distributors, and even the best deep dish pizza providers in Chicago. To support its clients, Pariship internally developed a sophisticated proprietary predictive analytics IT platform that is populated with major carrier data feeds and other databases such as package and flight tracking data, weather, flight status monitoring systems, and road traffic. Pariship's algorithms then analyzes this data to provide shippers with web-based dynamic dashboards with real-time visibility into shipment transit warnings, weather alerts, and last mile events which are managed by the Perryship call center. Let me give you an example. A vaccine manufacturer can worry less that their critical vaccines that they just shipped will get lost or deal with temperature issues because Perryship is there to manage that whole process on their behalf. Pariship is an assigned 24-7 team who is familiar with the client's shipping needs and its call center, whom the client can easily and quickly access for questions and decision-making, thus improving outcomes, saving critical time, and significantly reducing the bureaucratic frustration of a large carrier. One vaccine client of Pariship told me that they used to experience $38 million of spoilage per year as a result of carrier shipping delays and other incidents. Switching to Pariship, that same client significantly reduced their annual spoilage, saving this particular client millions of dollars per year. In addition to Perryship's 400 plus direct customer relationships, we have also contracted with FedEx to service some of its selected time and temperature clients for a contractual fee. FedEx is therefore not only Perryship's exclusive carrier, but also Perryship's largest customer. I am pleased to inform you that we have formed a Perryship board of directors that includes two former senior FedEx managers. Mr. David Edmonds, retired senior VP of FedEx Worldwide Services, and Mr. Kurt Cole, who worked at FedEx for 17 years, where he helped develop FedEx's highly specialized cold chain suite of services, which led to FedEx's entry into the pharmaceutical market. I am also pleased to inform you that Kurt also serves as Perryship's executive vice president in charge of sales and business development. Another highlight for the quarter is that VerifyMe has had new research coverage initiated by Barrington Research, who is an investment bank that specializes in research for institutional investors. And finally, to take advantage of our severely undervalued stock price, I am pleased and happy to inform you that VerifyMe's board of directors initiated a $1.5 million share repurchase program. Let's go to slide eight, please. So why Pariship and what are the synergies with VerifyMe? VerifyMe and Pariship have a very strong synergistic product-centric technology platforms. VerifyMe specializes in authenticating and serializing products, as well as using those same products to engage with customers and gather rich business intelligence for the brand owner. Pariship, on the other hand, manages the logistics of critical time and temperature shipping of products. Both Pariship and VerifyMe's technologies therefore revolve around products. We believe combining these technologies platforms is a compelling suite of services that companies should embrace to protect critical exposures, as well as drive data and increase sales. As I mentioned previously, Pariship has approximately 400 clients, which are a perfect starting point for cross-selling. Verify Me sales personnel have already engaged with some of the pharmaceutical clients of Pariship. Meetings have been set to explain how we can help this industry meet the forthcoming 2023 Drug Supply Chain Security Act requirements, as well as protect them from product diversion and the counterfeiting issues. We believe the reception has been very positive and we hope to win additional revenue from these cross-selling efforts. In addition to cross-selling, each company has certain market segments, which they sell into. Combining these segments provides both Pariship and VerifyMe new entry ways to address the special needs of these segments. For example, we believe FedEx itself has many areas in which VerifyMe can offer technologies to improve tracking and protection of FedEx packaging. Another synergy is that we believe VerifyMe can help Perryship expand its reach outside of the continental U.S. through the VerifyMe Global Reseller Network. In summation, we believe VerifyMe and Pariship complement each other's technologies in many ways, which we hope will drive new sales for the combined organization. Go to slide nine, please. This slide shows what market segments our combined company is operating in. We wanted to share this with you so you can understand the segments and what percentage of our sales are in each. The largest of all of our collective segments is food and beverages, which represents 69% of total sales. The second largest segment is pharmaceuticals, which comes in at 18%. We believe this segment has the potential to grow into the number one position as we continue to gather wins in this space. Agriculture, which includes cannabis, comes in at the number three segment with 6%. followed by health and beauty, apparel, and all other. Apparel is another area of expected growth, and spare parts may also become a new segment in the future. That concludes my portion of the presentation. I will now turn it over to our CFO, Margaret Gieserleis, to walk you through the financials.

Margaret? Thanks, Patrick. Good morning, everyone. Thank you for joining. As you've heard from Patrick, We had a lot of changes this quarter. The acquisition of the parachute business has been a transformative deal. Next slide, please. As you can see from the trend indicated in this slide, it has made a huge impact on results with significant revenue growth for the second quarter of 2022. And we continue to believe that fiscal year 2023 will show positive adjusted EBITDA on a consolidated basis. To start, consolidated revenue was $4.5 million for the quarter ended June 30, 2022, an increase of over 3,500% when compared to the same quarter in the prior year. Of the $4.5 million, 94% was attributed to the barriship business. While we have strong revenues, historically the business does fluctuate seasonally. We expect stronger revenue in the second half of the year with the pickup starting at the end of August. On the Verify.me legacy side, we have approximately 0.3 million of revenue, which increased by 115% when compared to the same quarter in the prior year. We continue to show steady growth in our legacy business. Gross profit margin has decreased due to the nature of Parishift's business, which has lower margins, roughly at 36%, due to higher competition on prices. On the VerifyMe side, our gross profit margin decreased from 79% in Q2 2021 to 66% in Q2 2022 due to a shift in product mix. Operating expenses increased in the quarter, again, due primarily to our acquisition of Pariship. As of today, the Pariship business consists of roughly 45 employees, which make up the better portion of the operating expenses, including approximately 40 employees in IT and operations, and three in sales and marketing. Our net loss for the quarter relates primarily to the write-off of the SPAC investment and the amount of 11.2 million, or approximately 90% of the total net loss. In July, we had the option to extend the deadline for the SPAC to find a business acquisition. In order to do so, we would have needed to invest an additional amount of at least half a million and likely significantly more. Given the current climate for SPACs, we decided the best course of action was to cut our losses and keep our cash balance to support the growth of our company. Our initial cash investment was made in July of 2021 of approximately 2.6 million, which was lost, while the remaining loss of approximately 8.6 million was a fair value loss. Adjusted EBITDA loss shows an improvement of 600,000 when we exclude non-cash stock comp and transaction-related costs. the improvements are directly related to the increase of revenue. Next slide, please. As you can see illustrated on this slide, we have made a huge jump in revenues. And even though our gross profit margin has decreased, gross profit on an absolute basis has increased by 1.6 million, roughly a 640% increase. Next slide, please. Next, I... Wanted to discuss the balance sheet as of June 30th, 2022. We recognize goodwill and intangible assets of 10.6 million, including goodwill of 4.1 million related to the Parish Ship acquisition. As part of the transaction of 10.5 million, we assume a note payable of 2 million, which is payable in three installments over the next 14 months. Our cash as of June 30th was 3.8 million and our working capital was 3.9 million. Given that we expect Parishift to generate cash, we believe our cash can cover our operations for the foreseeable future. We believe we will grow organically, but we are always looking for opportunities to improve our shareholders' value in the company. Should such an opportunity arise, based on the improvements of our current financial outlook, we believe we can secure financing through other venues such as commercial banking. With that, I'd like to conclude our presentation and open the floor to questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. And our first question will come from Chris Howell with Barrington Research. Please go ahead.

Good morning, everyone. Thanks for taking my questions. Good morning. Thank you. I wanted to circle back to the pharmaceutical segment where you highlighted the potential for this line of business to grow, to become one of your largest as a percentage of the mix. If I think about that comment and also try to tie in your previous comments about working with a large pharmaceutical client and introducing the VerifyMe services into this client. Can you just kind of give an update on the pharmaceutical segment overall and how it ties into what you're seeing with the Drug Supply Security Act?

Yeah, let me start and then I'll hand this one over to Patrick. You know, when you look at the world in the last few years, vaccines, whether it's vaccines is playing a more and more important part of the healthcare. And basically what we do is make sure that the vaccines get shipped and the logistics are done on a timely basis in order to guarantee the efficacy of the product. So basically, you know, we're involved with a few large companies, but we hope to expand our relationship among other companies as well. But, you know, when you hear things in this world, whether it's COVID or now monkeypox, you see that the vaccines and the logistics of it are going to be playing a more important role in healthcare in the future. And that's why, you know, obviously we want good things to happen in the world, but at the same time we want to help the world get these vaccines delivered on a fast and timely basis. With that, Patrick, do you have anything else to add to that?

Yeah, sure. Thank you, Scott. Chris, the Drug Supply Chain Act of 2023, I think, goes into effect in November of next year. And it requires all pharmaceutical companies to serialize, have the ability to authenticate the products, track the products, and then have counterfeit prevention measures. Now, Verify Me is tailored for all four of those things, all with our current technology portfolio. And now Pariship, on the other hand, has the ability to ship vaccines in mass quantities to any parts of the continental United States at the moment and make sure that they're there in temperature control environments. Because I guess in two days, if they're not at temperature control, they lose their potency. And Pariship can even call the Walgreens and the CVSs of the world receiving these shipments and making sure that they know they're there and get them in refrigeration. I mean, that's the kind of tender, loving care that Pariship provides for these vaccine manufacturers. Now, one of their clients is one of the largest flu vaccine manufacturers in the world, Sanofi. And we have met with them, and we have meetings coming up in September to start showing the four technologies that Verify Me has to help them address their needs for the Drug Supply Chain Security Act. And they're very interested. They've seen a little bit, and they're bringing in a whole team to digest the information. And we're hoping to enhance their ability to address this and bring in additional sales for the total company. Now, there's two other pharmaceutical companies. I guess we just signed one in Japan that's starting up. They're one of the top 20 in the world through the Perryship sales process. And HP, our strategic partner, which makes the machines that gives us the ability to print our technologies on labels and packaging, has verified me working with some hardware manufacturers to create some hardware that will do the review of inline labels and packaging printing for the pharmaceutical industry. And they've mentioned additional clients, international clients that need this. So that process has begun. And HP, I can tell you, has embraced us with both hands. And they see the strength of our technologies for that type of product offering. There are a few other pharma companies, and Kirk Cole, who's a specialist in that, as I mentioned earlier, at FedEx, and he's driving the sales towards additional pharmaceutical clients.

Thank you, Patrick. Thank you. Thank you for the color. And just going along with this theme, As we think about the 400 customers at Paraship, the VerifyMe technology, can you talk about the process at which building the level of awareness for VerifyMe across the 400 customers? Where are you in that process? I'm sure it's a long process, but maybe you can kind of put that into context.

Yeah, I'll take that one. I mean, if you look at the conference, acquired the company in April. And we just want to make sure all the transitionary items are done properly and the company's up and running. And we've really been focused on that. As you can see, the results in the quarter demonstrated that. Now with that being accomplished, we are having team meetings and group meetings to discover the best way to market the joint. market to join technology. And that will be more seen, I believe, in 2023, Chris. Okay, perfect.

And I'll ask one more question here and leave the line open if there's any others. Just if you can provide an update on your progress with the large beverage company, switching over to the beverage part of the business. I remember you mentioned you pulled the trigger on a pilot test not too long ago. Maybe you can kind of give us an update on how that's moving along. Thanks.

Yeah, I'll take that, Scott. I spoke with the person in charge of that project on Friday. You know, this is a project that we've mentioned to shareholders previously. It's been literally two years in June that we started this sales process with this particular client. And they've shifted around the different types of aluminum caps and plastic caps and design engineering issues. But in speaking to him on Friday, he's going to give us more color as to when they are going to pull the trigger. uh on their first product line around the end of this month i don't want to give you a specific date and you know the track record of uh his information has been you know um you know it's it's it's uh as things occur during the business cycle. So that's the latest. It would be a huge win as far as the type of company it is. It's one of the largest in the world. It's global, and it's millions and millions of units. So we're really excited, and hopefully we'll get it over the finish line.

Perfect. Thanks for taking my questions. I appreciate it.

Our next question will come from Jack Vanderaarde with Maxim Group. Please go ahead.

Okay, great. Good morning, guys. Nice results. Thank you, Jack. So first on the strong organic growth of 115%, I think Margaret mentioned it earlier, but just to check my math, Does that imply about $267,000 of poor Verify Me revenue? And then I have a follow-up to that.

Margaret?

Sorry about that. I was on mute, and I was trying to find the unmute button. But, Jack, you're dead on. That's exactly correct.

Okay, great. And that's so many nice pickups. Just wondering, you know, you've provided this pretty solid 2023 guidance. I think you added the positive adjusted EBITDA to that. Just as I look at the rest of 2022 from an organic revenue perspective, do you expect that revenue? I know it can be lumpy for the core verifying business. Do you expect organic growth to continue getting traction in picking up from here?

We do.

Sorry, go ahead.

Yeah, we expect organic revenue, but the amounts can get lumpy depending on contract wins. So I would say the answer is we expect the trend to continue, but the percentages vary due to when and how you close the transactions. But I think the overall trend is in that direction.

Got you. Okay. It's good to hear. And then maybe in the past, you guys used to talk about the pipeline and size of the pipeline. Just wondering, can you provide some color on the growth and the size of the pipeline or the backlog today? And then maybe split that pipeline between Core VerifyMe and Parachip.

Yeah. I mean, when you look at Parachip, We measure now the pipeline by increasing customers. Patrick talked earlier about some of the wins we have, the new customer base. When you're dealing with the parachute side, you don't get more of a dollar value pipeline because it depends on the shipments. but you get the determination on new customer wins and expectations. And in the last month or so, we started adding some significant customers, so we believe it's in the right direction. You know, when you're talking about verifying a pipeline, the pipeline is a multiple of the current revenue. So it's a much larger pipeline, but so far as we've seen, some of the projects could take quite some time to come to fruition. And therefore, when we put it all together, we're saying, okay, going into 2023, we expect a positive adjusted EBITDA, a revenue over $25 million. And again, it's a company that did zero revenue two years ago, and now it has a combined revenue. And the one thing we don't know at this point, Jack, is, and we're not counting on it, but we are working on it, is the synergistic effect of the two companies or the technology together. And while we do expect synergies, That's not built in yet to our projections in 2025. So our projections is based just upon the core business, and it could improve if we have some synergistic impact.

Okay, great. That was going to be my next question. That guidance for 2023 still assumes no cross-selling synergies, despite there is definitely, it sounds like you guys are having some You seem to be pretty optimistic of cross-selling therapies, but it's not based on the guidance at all.

That's 100% correct. We're starting to feel optimistic, but the guidance does not include it. We try being constructive on our guidance.

Okay, great. Understood. And then Patrick was talking about this a little bit earlier. Just so I understand it clearly, and maybe just remind me, Patrick, can you talk about the relationship with HP and just how active or how involved they are in maybe beginning to promote and sell the Verify Me solutions? Are you seeing evidence of that? What are your expectations there?

Yeah, Jack, great question. I have had some very, quite a few new meetings with HP in the past few months. They are seeking to expand our contractual relationship into a much longer term of time across all of their press models. Right now we're only on one press model, the 6000 series. They wanted to put us on the much larger, the big giant ones that do the heavy duty label and packaging for the world. They've invited us to a trade show in Chicago in September to be in their booth. They want to highlight us. They've got a whole section for the Verify Me team to be stationed at. And I hope many of you like to visit us there. We can show you some technology demonstrations. And They are going to – I'm going to turn their sales force into an international sales force for VerifyMe. If we put a few of these things together that they're requesting, like this hardware I described, we can go after much larger government projects, pharmaceutical projects. that they are involved in, and we're going to incentivize their sales force to sell the VerifyMe technologies. So it's a huge win. I'm working on this project, and as soon as it's completed, we'll be able to share that with our shareholders.

Just a quick follow-up to that. The Chicago conference that they're inviting you guys to go to without, you know, maybe there's some details you can't share, but just so I understand, is that a new development? Is that a completely new privilege or involvement that you haven't been involved with them in the past on?

We have we have I've been in Brussels, Belgium, in the European version of the show. This particular show is called the Label Expo. One year it's in Europe. One year it's in the United States. They go back and forth. But the COVID years, it shut it down. And they're now bringing it back this year for the first time in a while. And I got to tell you, HP is the biggest presence in these shows. And it's the premier company for labels and packaging. And there's just hundreds of people going through this. So it's a real opportunity. You meet printers. You meet brand owners. You meet people on brand protection, security. It's a wonderful event. And for them to put their arms around us and have a station there for us to demonstrate and meet people, it's a huge win for our company. And it's credibility.

Absolutely. Well, excellent. I appreciate the update, guys. I'll hop back in the queue.

Okay. Thank you, Jack.

Again, if you have a question, please press star then one. Our next question will come from Daniel Corlow with Shield Street Capital. Please go ahead.

Good morning. Congratulations on the quarter. I had some sort of outlook questions here if we could cover them because I'm trying to get a little sense of what percentage of Perry Ships revenues are booked in the first half of the year versus the second half of the year? Do they run on a sort of a straight-line basis, or do they come into more seasonality towards the second half of the year?

Yeah, Margaret already discussed it. When you talk about bookings, we have customers, and I mentioned this earlier, but then the revenue is determined by their usage. So it's not get full-year bookings or whatever. We do have you know, historical what they do. For example, the pharmaceutical companies start shipping their vaccines in the third quarter, and obviously there's a big Thanksgiving, Christmas type of result. But I think Margaret mentioned earlier, and I'll have her do it, on how much is shipped in the fourth quarter and due to seasonality, which is our strongest quarter. But Margaret, why don't you just sort of go over those numbers that you did prior?

Sure. So we do expect more pickup in August. It's hard to predict exactly how much of the total revenue it will be. But to give you an example, in 2021, the fourth quarter made up about 35% of the revenue. So the last quarter is really the strongest quarter And then the second strongest quarter is the third quarter.

Okay. So I'm not trying to, you know, look. I'm just going to put out some numbers here, and I just want to sort of, like, frame this properly because we keep talking about 2023. But looking at this on that basis, I'm using roughly seeing 0.6 to 0.7. I'm coming in on a combined margin then for 23 of – looking to expect either the business to grow by $3 million either out of Pariship or by VerifyMe. And then we're looking at a combined margin in 2023 between 15% and 22%. But that means that on a cash flow basis, you guys are going to be operating cash flow positive this year. And I'm not sure why we're sort of waiting to 2023 as a public company to talk about something that could be making 22 cents the second half of this year. and on a run rate basis doing between 44 and 61 cents, meaning the stock starting roughly speaking like three to four times earnings on an outlook basis for 23. I'm not sure why we're being sort of careful about that. These are very strong numbers.

Historically, the company never gave guidance before. And when we looked at the results and the acquisition, we would only have the acquisition this year And the second half of, you know, a big chunk of it is in the second half of the year. It came in mid-April. So we felt that giving a full year for next year was more in the line of what we wanted to do. But, again, you know, this is a company that never gave guidance and we're giving this limited guidance for next year. But it's up to, you know, the analyst and the company to perform and demonstrate, you know, what it could do going forward. And, you know, without delving into your numbers at all, because, again, we don't give guidance, the company obviously thinks it's very positive going into next year.

Okay. Can we look at a combined margin of 20% to 22% from the combined basis into 23%? because of the revenue mix that you're looking at on an afford basis?

Yeah, we haven't looked at, again, we haven't given detailed margin going into next year. So I refrain from giving that additional guidance. What we have done is Margaret has showed the profitability is. She's given the profitability historically on the quarter on both companies. And, you know, I think you should use, you know, based upon what she's telling you.

Scott, I was just going to cut you off and just say, like, you know, historically the company never had revenue and there's always been an inception concept. So, like, you know, you should take credit for having been transformational here.

Oh, we are. What we're saying is if you look at the Verify Me revenue, the guidance in the past that while it had 70% margins in the past, based upon it getting more into some of the printing and everything else, you should look at a 60% margin in business. And, you know, we gave the guidance this quarter on, or we had the actual results saying what the actual verify me gross profit is, you know, with the parachute acquisition and what the parachute sign is. So you have those numbers on a historic basis that you could use in your, in, in, in your analysis.

I get it. But on a forward basis, we're looking at roughly speaking midpoint of the range using your numbers is about 50 cents in earnings for 23. So I would just encourage you to buy back as many shares as possible because that's not the correct cost of capital on a long-term basis for the business given the new business framework you've built.

Yeah. Again, without giving guidance, I do thank you for your input. So thanks, Rob.

Thank you for the time.

All right. Thank you, Dan. Our next question will come from Ron Basel with JB Financial. Please go ahead.

Hi. One of the questions, you've identified such a large market in counterfeiting, and there was a nice write-up that Scott did in Forbes. But it seems that over the years here, since I've been involved in the stock, It seems like you've got a lot of deals in the hopper, but you can't seem to really close any of the big ones after numerous, numerous interaction with them. So my question is, why is this market so difficult to penetrate with such a good product? If the market's so large, why can't we capture some of it in a more prompt manner?

You've hit it right on the head and myself being here only, you know, like two plus years, I've seen that as well. You know, one of the things that we're hoping for, Ron, is that the parish ship having the customer base already gives us an entree into selling additional products is always the hardest part. to get your foot in the door. In addition, it's been particularly hard to get the companies to switch from the hologram that they've been using all these years, even though it's easily duplicated, it's easily counterfeited. It's been very difficult to get them to switch to a newer technology regardless of the benefits. You know, we had no revenue for the first 15 to 20 years of the business when this team came in, and now we're expecting, you know, two years of growth. Is that, you know, is the overall history somewhat slow and disappointing? We'd have to say yes. But now it represents, if you're looking at it, less than 10%. of our total revenue, so while we expect it to grow and we expect it to be leveraged, we're not relying on this for our success going forward, and obviously add to our success, and we hope it does, but now we have an operating company that we project to do over $25 million, and we're hoping that the combination will accelerate the growth of the VerifyMe technology as well.

And regarding the Paraship, the growth over the past couple of years, what percentage of that was fueled by the vaccine and what are your plans if that market?

Well, overall, if you look at Paraship, they were in a transitionary period, so they did not have revenue growth the last few years before we got involved with them. But we're hoping that that the vaccine and some of the new contract wins and an expanded relationship with our partners will start fueling that revenue growth and also our concentration and putting, you know, more of an investment into marketing and sales. So we expect that the overall combination led by Parachip should give us good organic growth going forward.

But the growth is based on what percentage in vaccine?

I would say, you know, I don't know the exact percentage, but if you listen to Patrick's speech, he's saying he expects the pharmaceutical business to be the largest growth part of the company. So I would say significant amount of organic growth. will be done by pharmaceutical companies. Okay, thank you. Thank you, Rob.

Our next question will come from Jules Dixon Mappas, a private investor. Please go ahead.

Yes, sir. I'm kind of expanding on the last comments from Mr. Basil from JB Diversified, but The counterfeit market, according to that article, was massive. One point something to almost $5 trillion a year, I think. And the United States consumer having to eat 60% to 80% of it. And I think most of that is non-perishable. And from what I heard today, Paraship, most of their business that we generate through them, which I'm grateful for, is through perishables. So my question to you is, how are we going to get into the non-perishables, the wearables, the luxury items, and knockoff items through Paraship? Are we going to do that as time goes on with Verify Me, with whatever method they can find appropriate and profitable if they can even do it? Because there's a big opportunity there, isn't there?

That's what they've been focused on for the last few years, and that's what's giving them the current growth. So the current growth, is exactly in those areas that you discussed, Jules. And they're going to continue on with that. And they're looking at, I mean, we talked about the food and beverage potential, Patrick did earlier, which has nothing to do with the parachute technology or the logistical support. So we'll continue to do that and go on. Obviously, the 400 customers they have, it's not necessarily if they get the foot in the door that it will be in the perishable side. It's just that you can get the foot in the door with these customers as well. So I think we're not on marketing. We're still going to market and do it the same way and get our foot in the door of this large anti-counterfeiting market. But Parachip does give us the ability to go into customers that they have historical relationship with, whether it's perishable or non-perishable, and being able to discuss with them what we're able to offer. So we think that's a good process for us, but it's not going to affect what we've been doing in the pipeline all these years.

Okay. But it's fair to say that the driving revenue source for Verify Me right now is Parachat.

Well, I would say if you looked at this year, I mean, we expected a – we've had significant organic growth at Verify Me. But, you know, it's starting at a low base, obviously, but we've had significant organic growth. revenue growth and that to their marketing on their own, but we do expect that the combination will help in 2023.

Okay. Thank you, sir.

Thank you.

This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

You know, I'd like to thank everybody. The questions were very thoughtful, and we do appreciate them. You do see, you know, the impact of what has been done, and we hope to continue to positively update you on a quarterly basis. And thanks for joining. And, you know, as usual, if you have any additional questions or thoughts, please contact us to the extent that we could answer them, we will. And thanks for joining us and have a good day.

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