OPNW 10-K & 10-Q changes, risk factors and insider trading

Any investment in our securities involves a high degree of risk. You should carefully consider carefully the risks and uncertainties described below and all information contained in this Report, before you decide whether to purchase our securities. If any of the following risks or uncertainties actually occur, our business, financial condition, results of operations and prospects would likely suffer, possibly materially. These disclosures reflect our beliefs and opinions as to factors that could materially and adversely affect us and our securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. In addition, the trading price of our common stock could decline due to any of these risks or uncertainties, and you may lose part or all of your investment.

We have engaged, and may engage in future,future acquisitions or strategic partnerships that increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expensesexpenses, and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.

We depend, to a significant degree, on the skills, experience and efforts of our management team, and other personnel, particularly in the management of our subsidiary PeriShip Global. Our failure to attract, integrate, motivatemotivate, and retain existing or additional personnel in a timely fashion, and develop successors with commensurate skills and talents, could disrupt or otherwise harm our operations and financial results. The loss of services of certain of our management team and key employees, or an inability to attract or retain qualified personnel in the futurefuture, could delay the development of and negatively impact the operations and profitability of our business.

Our future growth will depend upon the success of our Precision Logistics segment and future businesses we may acquire.segment. If we fail to effectively execute our strategy, our competitive position and financial performance could be materially harmed.

Our future growth will depend upon the success of our Precision Logistics segment and future businesses we may acquire. We are currently engaged in efforts to find and acquire businesses, which is intended to streamline operations, improve profitabilityprofitability, and improve our overall competitiveness. The successful execution of our strategy is subject to significant uncertainties and may require additional capital and operational expenditures. If we fail to execute our strategy effectively, our ability to realize the intended benefits may be compromised. Even if we successfully implement our strategy, we may not see the intended results, diminishing the expected improvements to efficiency or revenue generation. This could materially and adversely affect our competitive position, financial performance, and brand reputation.

Our Precision Logistics segment relies on oneour keyStrategic strategic partnerPartner for shipping services for our customers and as a source for customers representing a substantial percentage of our revenues.

Our business is dependent, and we believe that it will continue to depend on our relationship with one strategic partner. PeriShip Global partners with one major global carrier for all its customers’ shipping needs. While we work closely with thisour Strategic key strategic partnerPartner and have transportation services and pricing agreements in place covering the shipping services they provide to our customers, such agreements are subject to termination or modification from time to time. If our strategicStrategic partnerPartner is unwilling or unable to supply to us the shipping services we market and sell on acceptable terms, or at all, or otherwise elects to terminate its business relationship with us, we may not be able to obtain alternative shipping services from other providers on acceptable terms, in a timely manner, or at all, and our business may be materially and adversely impacted. We do not currently have any alternative shipping service suppliers from which we can obtain the shipping services we currently receive from our strategicStrategic partner.Partner. EstablishingIn addition, establishing the necessary information technology infrastructure and business relationship with anotherour Strategic Partner, or with other shipping and carrier services providerproviders, wouldmay be costly and time consuming and may ultimately not be successful or cost-effective. Further, any increase in the prices charged by our singleStrategic strategic partnerPartner or failure to perform by our strategic partnerStrategic Partner could cause our costs to increase or could cause us to experience short-term unavailability of shipping services on which our business relies.

In particular, delays and other shipping disruptions at our strategicStrategic partnerPartner may have a significantly negativelynegative impact our business. Our business involves the shipment shipment of time and temperature sensitive goods, so our customers are significantly negatively impacted by delays and other shipping disruptions disruptions that cause product loss, spoilagespoilage, and reputational harm. An increase in delays and other shipping disruptions on the part of our strategic partnerStrategic Partner could cause our clients to seek shipping solutions from our competitors who use alternative shipping service providers. If these events occur, it may reduce our profitability or may cause us to increase our prices. In addition, any material interruptions in shipping services by this strategicStrategic partnerPartner may result in significant cost increases and reduce sales, which could harm our business, financial financial condition and results of operations and may have a material adverse impact on our business.

In addition to relying on this strategic partner for shipping services,addition, a material portion of our revenuegross margin has been generated throughfrom aour serviceprior agreement pursuant to which this strategiccarrier partner resellsreselling our Premium services to its customerscustomers. underOur aprior “whitecarrier label”partner arrangement,is whichno welonger referreselling to as a Premium Service. Under this arrangement we provide our logisticsthese services to ourits strategiccustomers. partner’sWe are now directly selling these services to legacy customers in exchange for a pre-negotiated service fee per shipment. Sales throughof our strategicprior carrier partner and we are working to establish the ability to offer these services to customers of our Strategic Partner. Premium services accounted for approximately 16%19% of revenue of our Precision Logistics segment for each of the yearyears ended December 31, 2024,2025, and 17%2024, for the year ended December 31, 2023. respectively. Our strategicprior carrier partner has begun to provideprovides its own service offeringsoffering to its customers,customers that competes with our Premium services, and we expect revenue related fromto our prior carrier partner will decrease over time as it competes with us for these customers. Our goal is to offset these decreases by offering Premium Servicesservices associated with our Strategic Partner. If we fail to offset any reduction in business in our Precision Logistics segment will begin to decrease as we experience a reduction in business for these services. If we fail to offset a reduction in business forthrough our Premium Servicesservices in our Precision Logistics segment through ouror ProActive Services or other service offerings,Services, our business, financial condition and results of operations could be materially adversely affected.

Historically, our operating results in the Precision Logistics segment have been subject to seasonal trends when measured on a quarterly basis. Our first and second quarters have traditionally been the weakest compared to our third and fourth quarters. This trend is dependent on numerous factors including economic conditions, customer demanddemand, and weather. Because revenue is directly related to the available working days of shippers, national holidaysholidays, and the number of business days during a given period may also create seasonal impact on our results of operations. After the winter holiday season and during the remaining winter months, our freight volumes are typically lower because some customers reduce shipment levels. In addition, a substantial portion of our revenue is derived from customers in industries whose shipping patterns are tied closely to consumer demand which can sometimes be difficult to predict or are based on just-in-time production schedules. Therefore, our revenue is, to a large degree, affected by factors that are outside of our control. In addition, as a result of the change from our prior carrier partner to our Strategic Partner through which we provide our ProActive services, it is likely that our revenues from ProActive services will materially decline in the quarters ended March 31, 2026 and June 2026 as compared to the quarters ended March 31, 2025 and June 2025. There can be no assurance that our historic operating patterns will continue in future periods as we cannot influence or forecast many of these factors.

Our business involves the shipment of time and temperature sensitive goods, so our customers are significantly negatively impacted by delays and other shipping disruptions that cause product loss, spoilagespoilage, and reputational harm. Disasters, severe weather, public health issues, such as pandemics, earthquake, cyber-attack, heightened security measures, actual or threatened terrorist attack, strike, civil unrest, or other catastrophic event may cause shipment delays or an inability to ship, which could prevent, delay or reduce shipment volumes and could have an adverse impact on consumer spending and confidence levels, all of which could result in decreased revenues. In particular, certain weather-related conditions such as ice and snow can disrupt the operations of our carrier partners during the peak holiday season, which could have a disproportionately large negative impact on our business and revenues.

The shipping and logistics industry is rapidly evolving, including demands for faster deliveries and increased visibility into shipments. We expect to face significant competition on a local, regional, nationalnational, and international basis. Competitors include the U. S. and other international postal services, various motor carriers, express companies, freight forwarders, air couriers, large transportationtransportation, and e-commerce companies that have made and continue to make significant investments in their own logistics capabilities, some of whom are currently our customers. We also face competition from start-ups and other smaller companies that combine technologies with crowdsourcing to focus on local market needs. Competition may also come from other sources in the future as new technologies are developed. Competitors have cost, operational and organizational structures that differ from ours and may offer services or pricing terms that we are not willing or able to offer. Additionally, to sustain the level of service and value that we deliver to our customers, from time to time we may raise prices and our customers may not be willing to accept these higher prices. If we do not timely and appropriately respond to competitive pressures, including replacing any lost volume or maintaining our profitability, we could be materially adversely affected.

Our future growth will depend upon the success of our strategicStrategic partnersPartner whoto integrate our solutions into their productservice offerings.offerings and our ability to continue to provide Direct Premium services to legacy customers of our prior carrier.

We rely on strategic partnerships with one large logistics carrier for ourOur Precision Logistics segment andrelies largeron companiesthe integration which integrateof our technologiesProActive and Premium services solutions into theirour productStrategic Partner’s service offerings forto its customers. We also rely on the ability to continue to provide Direct Premium services to our legacycustomers who use our prior carrier partner for their shipping Authentication segment.needs. These strategies leave us largely dependent upon the success of our partners.Strategic IfPartner anyand prior carrier partner and their policies related to the use of our strategicservices partners whoin includeconnection with their shipping services. If our technologyStrategic inPartner theiror productsprior carrier partner cease to do so, or we fail to obtain other partners who will incorporate, embed, integrate integrate, or bundle our technology, or these partnerslogistics carriers are unsuccessful in their efforts, expanding deployment of our technology, our business and future growth would be materially and adversely affected.

Our success depends on our ability to consistently deliver operational excellence and strong customer service. Our inability to deliver our services and solutions as promised on a consistent basis, or our customers having a negative experience or otherwise becoming dissatisfied, can negatively impact our relationships with new or existing customers and adversely affect our brand and reputation, which could, in turn, adversely affect revenue and earnings growth. Adverse publicity (whether or not justified) relating to activities by our employees, contractors, suppliers, agentsagents, or others with whom we do business, such as customer service mishaps or noncompliance with laws, could tarnish our reputation and reduce the value of our brand. With the increase in the use of social media outlets such as Meta (f/k/a Facebook), YouTube, Instagram, LinkedIn and X (f/k/a Twitter), adverse publicity can be disseminated quickly and broadly, making it increasingly difficult for us to effectively respond. Damage to our reputation and loss of brand equity could have a material adverse effect on us, and could require additional resources to rebuild our reputation and restore the value of our brand.

As of the date of this Report, the Company has recorded significant goodwill and other identifiable intangible assets on its balance sheet as a result of its acquisition of the PeriShip Global business in 2022. As a result of a long-lived asset and goodwill asset impairment assessment performed in September 2025, an intangible asset impairment charge of $2,788 thousand and a goodwill impairment charge of $1,062 thousand was recorded for the year ended December 31, 2025 relating to the Precision Logistics segment. An intangible asset impairment charge of $964 thousand and a goodwill impairment charge of $1,351 thousand was recorded for the year ended December 31, 2024 relating to Authentication segment. A number of factors may result in future impairments to our remaining goodwill and other intangible intangible assets, including significant negative industry or economic trends, disruptions to our business, increased competitioncompetition, and significant significant changes in the use of the assets.

Adverse economic and other conditions, both in the United States and internationally, can negatively affect our customers’ business levels, the amount of logistics services they need, their ability to pay for our services and overall freight levels, any of which might impair our profitability. For example, inflation and uncertainty and instability in the global economy and geopolitical events maysuch leadas a war in Iran and unrest in areas of the world that are dependent upon fuel production can negatively affect transportation costs and further reduce consumer spending leading to fewer goods being transported.transported globally. Many of the products our clients ship are luxury or discretionary products and the demand for such products may decrease in adverse economic times. Further, when adverse economic times arise, customers may select competitors that offer lower rates or choose to ship their goods without logistical support in an attempt to lower their costs. In addition, changes in the United States’ or international trade policy, including tariffs, export controls, quotas, embargoes, or sanctions, could trigger additional retaliatory actions by affected countries, resulting in “trade wars” and further increased costs for goods transported globally, which may negatively impact our customers. These and other economic factors such as recessions could have an adverse effect on our business, financial conditions and results of operations and we might be forced to lower our rates or lose customers.

We are sensitive to changes in overall economic conditions that impact customer shipping volumes. The transportation and logistics industry historically has experienced cyclical fluctuations in financial results due to economic recession, downturns in business cycles of our customers, interestinterest, and currency rate fluctuations, inflationinflation, and other economic factors beyond our control. Changes in U.S. or international trade policy, including tariffs, export controls, quotas, embargoes, or sanctions, could trigger additional retaliatory actions by effected countries, resulting in “trade wars” impacting the volume of economic activity globally and in the United States, and as a result, shipping volumes may be materially reduced. Such a reduction may materially and adversely affect our business.

The services and products we provide are sensitive to reductions from time to time in discretionary consumer spending. For example, demand for high-end perishable items, and subsequently the demand for shipping, brand protection, and other services related to such, can be affected by changes in the economy and consumer tastes, both of which are difficult to predict and beyond our control. Unfavorable changes in general economic conditions, including recessions, economic slowdowns, sustained high levels of unemployment, and rising prices or the perception by consumers of weak or weakening economic conditions, may reduce consumer’s disposable income or result in a decrease in demand for our services and products. As a result, we cannot ensure that demand for our services and products will materialize or remain constant. In response to market conditions and lower demand some carriers have implemented strategies to address a potential global recession. In April 2023, the major carrier that PeriShip Global partners with laid out steps it was taking to slash $4 billion in permanent costs by the end of its 2025 fiscal year in response to these market conditions and lower demand. In June 2023, the major carrier stated that due to ongoing demand its plans to ground 29 more aircraft in its fiscal year that started in June 2024. In mid-December 2024 the carrier forecasted flat revenue year over year for 2025.

Global supply-chain delays and shortages, which are out of our control, arecan currently affectingaffect a wide variety of businesses globally including one of our customers. Supply-chain delays shortages may affect our customers or potential customers which would adversely affect our operations.

Since our inception, we have incurred operating losses each year due to costs incurred in connection with research and development activities and general and administrative expenses associated with our operations. In addition, we have made significant expenditures on acquisitions and may continue to complete acquisitions in the future.acquisitions. We expect to continue to incur expenditures to develop and market our services and to make acquisitions and could continue to incur operating losses and negative operating cash flow. We may encounter unforeseen expenses, difficulties, complications, delays delays, and other unknown factors that may adversely affect our business. Our ability to generate profits will depend, in part, on our expenses and our ability to generate revenue. Our prior losses and any future losses have had and may continue to have an adverse effect on our working capital. If we fail to generate revenue and become profitable, or if we are unable to fund our continuing losses, our shareholders stockholders could lose all or part of their investments.

In addition, Sections 382 and 383 of the Internal Revenue Code (“IRC”), contain rules that limit the ability of a corporation that undergoes an "ownership change" (generally, any change in ownership of more than 50% of the corporation's stock over a three-year period) to utilize its pre-change NOLs and tax credit carryforwards to offset future taxable income. These rules generally operate by focusing on ownership changes involving stockholders owning directly or indirectly owning 5% or more of the stock of a corporation and any change in ownership arising from a new issuance of stock by the company. Generally, if an ownership change occurs, the yearly taxable income limitation on the use of NOLs and tax credit carryforwards and certain built-in losses is equal to the product of the applicable long-term, tax-exempt rate and the value of the corporation's stock immediately before the ownership change. The Company completed an IRC Section 382 analysis in 2022 and determined that an ownership change occurred sufficient to impose additional limitations on the use of NOL carryforwards. The Company has not completed an IRC Section 382 analysis in 20232023, 2024 or 2024.2025. In the event future ownership changes are determined, we might be unable to offset our taxable income with losses, or our tax liability with credits, before such losses and credits expire, in which event we could incur larger federal and state income tax liabilities than we would have had we not experienced an ownership change. In connection with the Merger Agreement and Merger, we are analyzing whether that potential transaction, combined with other stock ownership changes, could trigger an ownership change pursuant to IRS Section 382. If an ownership change is found as a result of the Merger pursuant to IRS Section 382, the amount of our NOLs we can carryforward each year could be limited or eliminated.

We willare neednot tocurrently expandexpanding our sales, marketing marketing and support organizations and our distribution arrangementsarrangements, which will limit our ability to increase market acceptance of our products and services.

We are not currently haveexpanding aour limitedsales, numbermarketing and support organizations or our distribution arrangements which will limit our ability to increase market acceptance of our products and services. We will continue to evaluate the appropriate use of our sales and marketing strategies and may choose to expand our sales, marketing, customer servicemarketing and support personnelorganizations andor our distribution arrangements in the future, which may needrequire us to increase our staff, or further outsource our sales process, to generate a greater volume of sales and to support any new customers or the expanding needs of existing customers. The employment market for sales, marketing, customer serviceservice, and support personnel in our industry is very competitive, and we may not be able to hire the kind and number of sales, marketing, customer service and support personnel we are targeting. Our inability to hire or outsource qualified sales, marketing, customer service and support personnel may harm our business, operating resultsresults, and financial condition. We may not be able to sufficiently build out our distribution network or enter into arrangements with qualified sales personnel on acceptable terms or at all. If we are not able to develop greater distribution capacity, we may not be able to generate sufficient revenue to continue our operations.

We rely on intellectual property in order to maintain a competitive advantage. As such, we strive to protect our intellectual property rights by relying on federal, statestate, and common law rights, as well as contractual restrictions. We may enter into confidentiality and invention assignment agreements with our employees and confidentiality agreements with parties with whom we conduct business to limit access to, and disclosure and use of, our proprietary information. However, these contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others.

As management deems appropriate, we willmay pursue the registration of our domain names, trademarks, and service marks in the U.S. and in certain locations outside the U.S. We willmay seek to protect our trademarks, patentspatents, and domain names in an increasing number of jurisdictions, a process that is expensive and time-consuming and may not be successful or which we may not pursue in every location. It may be expensive and cost prohibitive to file patents worldwide and we may be financially required to file patents in select countries where we see the greatest potential for our technologies. We may, over time, increase our investment in protecting our innovations through increased patent filings that are expensive and time-consuming and may not result in issued patents that can be effectively enforced.

From time-to-time, we may face allegations that we have infringed the trademarks, copyrights, patentspatents, and other intellectual property rights of third parties, including from our competitors and inactive entities. Patent and other intellectual property litigation may be protracted and expensive, and the results are difficult to predict. As the result of any court judgment or settlement, we may be obligated to cancel the launch of a new feature or product, stop offering certain features or products, pay royalties or significant settlement costs, purchase licenses or modify our products and features.

SOX requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. In order toTo maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs costs and significant management oversight.

Our management concluded that our disclosure controls and procedures were effective as of December 31, 2024.2025. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting could also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC.

We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We have operations and agreements with third parties and make sales in jurisdictions which may be subject to corruption. These activities create the risk of unauthorized payments or offers of payments by one of the employees, consultants or agents of our Company, because these parties are not always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agentsagents, or distributors of our company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating resultsresults, and financial condition.

Our business depends on our ability to successfully develop, implement, maintain, upgrade, enhance, protectprotect, and integrate information technology systems.

We rely heavily on the proper functioning and availability of our information technology systems for our operations as well as for providing value-added services to our customers. Our information systems are integral to the efficient operation of our business. We strive to be best in class, and in order to do so, we must correctly interpret and address market trends and enhance the features and functionality of our technology platform in response to these trends, which may lead to significant ongoing software development costs and capital investments in information technology infrastructure. We may be unable to accurately determine the needs of our customers and integrate our technology and services cohesively with our key Strategic strategicPartner, our prior carrier partner, andor other logistic carriers, or identify the trends in the transportation services industry, in a timely and cost-effective manner, which could result in decreased demand for our services and a corresponding decrease in our revenues. Despite testing, external and internal risks, such as malware, insecure coding, “Acts of God,” data leakage and human error pose a direct threat to our information technology systems and operations. We may also be subject to cybersecurity attacks and other intentional hacking. Any failure to identify and address such defects or errors or prevent a cyber-attack could result in service interruptions, operational difficulties, loss of revenues or market share, liability to customers or others, diversion of resources, injury to our reputation and increased service and maintenance costs. Addressing such issues could prove to be impossible or very costly and responding to resulting claims or liability could similarly involve substantial cost. We must maintain and enhance the reliability and speed of our information technology systems to remain competitive and effectively handle higher volumes of shipments. If our information technology systems are unable to manage additional volume for our operations as our business grows, or if such systems are not suited to manage the various service modes we offer or businesses we acquire, our service levels and operating efficiency could decline. If we fail to hire and retain qualified personnel to implement, protect and maintain our information technology systems or if we fail to upgrade our systems to meet our customers’ and strategic operating partners’ demands, our business and results of operations could be seriously harmed. This could result in a loss of customers or a decline in the volume of shipments we receive from customers.

Our information technology systems also depend upon the Internet, third-party service providers, global communications providers, satellite-based communications systems, the electric utilities grid, electric utility providersproviders, and telecommunications providers as well as their respective vendors. The services and service providers have all experienced significant system failures and outages at some point in the past. We have minimal control over the operation, quality, or maintenance of these services or whether vendors will improve their services or continue to provide services that are essential to our business. Disruptions due to transitional challenges in upgrading or enhancing our technology systems; failures in the services upon which our information technology platforms rely, including those that may arise from adverse weather conditions or natural calamities, such as floods, hurricanes, earthquakes or tornadoes; illegal acts, including terrorist attacks; human error or systems modernization initiatives; and/or other disruptions, may adversely affect our business, which could increase our costs or result in a loss of customers that could have a material adverse effect on our results of operations and financial position.

Fluctuations in labor costs, changes in the availability of keytransportation suppliers,service, or catastrophic events may increase the cost of our products and services.

Increases in labor costs might be difficult to pass on to our customers. In our Authentication segment security pigments, and ink canisters are key elements in the cost of our products. Our inability to offset material price inflation could adversely affect our results of operations. We rely on oneour globalStrategic Partner, and for certain legacy customers our prior carrier partner, for transportation services, one supplier to procure our raw materials, one strategic partner to produce our ink canisters, and it is difficult to predict what effects shortages or price increases for the raw materials we use to make our products may have in the future.services. Our ability to manage inventory and meet delivery requirements may be constrained by our supplier’sStrategic Partner’s and prior carrier partner’s inability to scale production and adjust delivery during times of volatile demand. Our inability to fill the needs of our supplycustomers regardless of whether they use our Strategic Partner, our prior carrier partner, or another logistic carrier for their shipping needs would jeopardize our ability to fulfill obligations under current contracts or enter new contracts to sell our products, which would, in turn, result in reduced sales and profits, contract penalties or terminations, and damage to customer relationships.

Our ability to become profitable depends upon a number of factors, including our ability to (i) identify and evolve with emerging technological and broader logistics industry trends, (ii) develop and maintain competitive products,technologies, (iii) defend our market share against an ever-expanding number of competitors including many new and non-traditional competitors, (iv) enhance our productstechnologies by adding innovative features that differentiate our products technologies from those of our competitors and prevent commoditization of our products,technologies (v) develop, manufacture and bring compelling new products to market quickly and cost-effectively, (vi) monitor disruptive technologies and business models, (vii) achieve sufficient return on investment for new products introduced based on capital expenditures and research and development spending, (viiivi) respond to changes in overall trends related to end market demand, (ixvii) leverage our current and any future strategic partnerships to develop and commercialize new and existing productstechnologies and (xviii) attract, develop and retain individuals with the requisite skill, expertise and understanding of customers’ needs to develop new technologies and introduce new products and sell our current products.technologies. The failure of our technologies or products to gain market acceptance due to more attractive offerings by our competitors or the failure to address any of the above factors could significantly reduce our revenues and adversely affect our competitive standing and prospects.

Upon exercise of our outstanding options or warrants, conversion of our Series B Convertible Preferred Stock, conversion of our Convertible debt, and vesting of our restricted stock units, we will be obligated to issue a substantial number of additional shares of common stock which will dilute our present shareholders.stockholders.

We are obligated to issue additional shares of our common stock in connection with our outstanding options, warrants and shares of our Series B Convertible Preferred Stock. For the yearsyear ended December December 31, 2024,2025, there were approximately 7,971,0003,976,000 anti-dilutive shares consisting 1,606,0001,322,000 unvested performance restricted stock units, 414,000 303,000 restricted stock units and restricted stock awards, 221,0001,555,000 shares issuable upon exercise of stockwarrants, options, 4,629,000652,000 shares issuable upon exercise of warrants, 957,000 shares issuable upon conversion of convertible debt, and 144,000 shares issuable upon conversion of preferred stock. The exercise, conversion or exchange of warrants or convertible securities, including for other securities, will cause us to issue additional shares of our common stock and will dilute the percentage ownership of our shareholders.stockholders. In addition, we have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other shareholdersstockholders not participating in such exchange.

Sales of large blocks of our common stock could depress the price of our common stock. The existence of these shares and shares of common stock issuable upon conversion of outstanding shares of Series B Convertible Preferred Stock, warrants and options create a circumstance commonly referred to as an “overhang” which can act as a depressant to our common stock price. The existence of an overhang, whether or not sales have occurred or are occurring, also could make our ability to raise additional financing through the sale of equity or equity-linked securities more difficult in the future at a time and price that we deem reasonable or appropriate. If our existing shareholdersstockholders and investors seek to sell a substantial number of shares of our common stock, such selling efforts may cause significant declines in the market price of our common stock.

Our common stock has experienced, and is likely to experienceexperience, in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable or appreciate over time.

Because we may issue preferred stock without the approval of our shareholdersstockholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire us and could depress our stock price.

In general, our Board of Directors may issue, without a vote of our shareholders,stockholders, one or more additional series of preferred stock that have more than one vote per share, although the Company’s ability to designate and issue preferred stock is currently restricted by covenants under our agreements with prior investors. Without these restrictions, our Board of Directors could issue preferred stock to investors who support us and our management and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our common stock. This could make it more difficult for shareholdersstockholders to sell their common stock. This could also cause the market price of our common stock shares to drop significantly, even if our business is performing well.

Because we dohave not intendhistorically to paypaid cash dividends dividends on our shares of common stock, any returns will be limited to the value of our shares.

There can be no assurance that we will be able to comply with the continued listing standards of the Nasdaq Capital Market,Nasdaq, a failure of which could result in a de-listing of our common stock and certain warrants.

The Nasdaq Capital Market requires that the trading price of its listed stocks remain above one dollar in order for the stock to remain listed. If a listed stock trades below one dollar for more than 30 consecutive trading days, then it is subject to delisting from the Nasdaq Capital Market.Nasdaq. In addition, to maintain a listing on the Nasdaq Capital Market,Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements. If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our common stock and warrants and would impair your ability to sell or purchase our common stock or warrants when you wish to do so. In the event of a delisting, we would expect to take actions to restore our compliance with the listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock or warrants to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the minimum bid price requirement, or prevent future non-compliance with the listing requirements.

VerifyMe, Inc. (“VerifyMe,” the the “Company,” “we,” “us,” or “our”), is a specialized logistics company that specializes in time and temperature sensitive products, as well as providing brand protection and enhancement solutions. We operate a Precision Logistics segment which includes the operations of our subsidiary PeriShip Global and accounts for nearly all VerifyMe revenue, and an Authentication segment. Through our Precision Logistics segment, we provide a value-added service for sensitive parcel management driven by a proprietary software platform that provides predictive analytics from key metrics such as pre-shipment weather analysis, flight-tracking, sort volumes, and traffic, delivered to customers via a secure portal. The portal provides real-time visibility into shipment transit and last-mile events which is supported by a service center. Through our Authentication segment our technologies enable brand owners to deter counterfeit and diversion activities. Further information regarding our business segments is discussed below:

Precision Logistics: The Precision Logistics segment specializes in predictive analytics for optimizing delivery of time and temperature sensitive perishable products. We manage complex industry-specific shipping logistic processes that require critical time, temperature controlcontrol, and handling to prevent spoilage and extreme delayed delivery times and brand impairment. Utilizing predictive analytics from multiple data sources including flight-tracking, weather, traffic, major carrier feeds, and time of day data, we provide our clients an end-to-end vertical approach for their most critical service delivery needs. Using our proprietary IT platform, we provide real-time information and analysis to mitigate supply chain flow interruption, as well as delivering last-mile resolution for key markets, including the perishable healthcare and food industries.

Through our proprietary PeriTrack ® customer dashboard, we provide an integrated tool that gives our customers an in-depth look at their shipping activities and allows them access to critical information in support of the specific needs of the supply chain stakeholders. We offer post-delivery services such as customized reporting for trend analysis, system performance reports, power outage maps, and other tailored reports.

Authentication: The Authentication segment specializes in anti-counterfeit and brand protection. ThisWe isare criticalnot actively pursuing business in the currentAuthentication landscapesegment ofbut increasedcontinue to counterfeitservice activityexisting and customer expectations. VerifyMe has patented technologies that address the needs of brands.customers.

Precision Logistics: Traditionally, most shipping businesses utilize the carrier’s data platform for tracking which generally informs the shipping enterprise, and their customers, when a package is in transit, when a package has been delivered, and some level of detail of the path which a package traveled. 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 givesgive us a competitive advantage against other third-party platforms that solely rely on the carrier’s data feeds. We utilize a variety of input sources beyond the carrier’s data feed. Our proprietary “Predictive Analytics” technology is fed real-time meteorology data, traffic and road construction data, and power grid information to help predict issues before they happen. If an alert is created the shipper and our service center willagents work to address the issue and savesaving the perishable product from spoiling, while saving the shipper significant costs and reducing the need to replace products that are no longer viable. We have meteorologists on staff that track world-wide weather patterns to address predicted issues before they happen. We believe the company has two significant areas of opportunity. First, our services are specifically designed to address the needs of small and mediummedium-sized sizehealth care, agriculture, food and beverage companies. Second, the pharmaceutical and healthcare industries represent significant opportunities due to the enhanced tracking tracking and customer service associated with distribution of these products. We are focusing our sales emphasis on those industries.industries and discovering other industries that need a “high touch”, “white glove” exception management team.

Consolidated gross profit for the years ended December 31, 2024,2025, and 2023,2024, was $8,662$6,321 thousand and 8,026$8,662 thousand, respectively. The resulting gross margin was 36%38.5% for the year ended ended December 31, 2024,2025, compared to 32%35.8% for the year ended December 31, 2023.2024. The gross profit percentage increase relates to theprocess improvements processimplemented improvements to increase ProactiveProActive services margins in the Precision Logistics segment.

Segment management and technology expenses increaseddecreased by $357$2,316 thousand to $3,138 thousand for the year ended December 31, 2025, compared to $5,454 thousand for the year ended December 31, 2024, compared to $5,097 thousand for the year ended December 31, 2023.2024. The increasedecrease relates primarily to the acquisitiondivestiture of Trust Codes Global in MarchDecember 2023,2024 lowerand capitalizedgain laboron costsderecognized liability in our Authentication segment and a decrease in management wages and severance expense of $163 thousand in 2024.our AmortizationPrecision andLogistics depreciation expense was $1,212 thousand for the year ended December 31, 2024, compared to $1,134 thousand for the year ended December 31, 2023.segment.

General and administrative expenses decreased by $564$436 thousand to $3,416 thousand for the year ended December 31, 2025, compared to $3,852 thousand for the year ended December 31, 2024. 2024,The compareddecrease relates primarily to $4,416a decrease in stock-based compensation from $1,386 thousand for the year ended December 31, 2024 2023.to The$545 decreasethousand relates primarily tofor the dealyear costsended relatedDecember to31, the2025, acquisitionpartially ofoffset theby Trustan Codes Global business of $278 thousand, and higher severance expenseincrease in 2023.legal fees.

Sales and marketing expenses decreased by $283$394 thousand to $967 thousand for the year ended December 31, 2025, compared to $1,361 thousand for the year ended December 31, 2024, compared to $1,644 thousand for the year ended December 31, 2023.2024. The decrease is primarily relatedrelates to a reduction in employees and consultants in the Authentication segment, a reduction in stock compensation in Precision Logistics, partially offset by an increase in employees in Precision Logistics.segment.

As a result of a long-lived asset and goodwill asset impairment assessment performed in 2024,September 2025, an intangible asset impairment chargescharge of $964$2,788 thousand and a goodwill impairment charge of $1,351 $1,062 thousand was recorded for the year ended December 31, 2024,2025 which primarily represents the amount by which the net carrying value in the Authentication segment exceeded the fair value of the segment, primary due to changesrelating to the forecastedPrecision cashflowsLogistics segment. An intangible asset impairment charge of $964 thousand and a goodwill impairment charge of $1,351 thousand was recorded for the segment. Onyear ended December 31, 8,2024 2024,relating we divested our Trust Codes business in theto Authentication segment.

Interest Expense,Income (Expense), net

Consolidated net loss for the year ended December 31, 2024,2025, and 20232024 was $3,824$4,905 thousand and $3,390$3,824 thousand, respectively. The increased loss was primarily related to the decline in revenue resulting from the decline in ProActive services previously described, and the goodwill and intangible asset impairment noted above partially offset by aand the gain on change in fair value of the contingent consideration related to the acquisition of Trust Codes Global of $844 thousand andfor the improvementyear inended gross profit.December 31, 2024 that did not recur for the year ended December 31, 2025. The resulting consolidated loss per share for the theyear ended December 31, 2025, and year ended December 31, 2024, was $0.39 and year ended December 31, 2023, was $0.37 and $0.35 per diluted share, respectively.

Our operations provided $871$603 thousand of cash during the year ended December 31, 2024,2025, compared to $244$871 thousand cash during the year end December 31, 2023. The increase in cash from operations is primarily due to the non-cash addbacks to net loss.2024.

Net cash used in investing activities was $575$2,733 thousand for the year ended December 31, 2024,2025, compared to $1,195$575 thousand for the year ended December 31, 2023.2024. The decreaseincrease in spending spending in investing activities relatedrelates primarily to a decreasePromissory inNote of $2 million with ZenCredit entered into on August 8, 2025 and increased capitalized software costs and the acquisition of the Trust Codes Global business in March 2023.costs.

Net cash provided by financing activities for the year ended December 31, 2025, was $3,660 thousand compared to cash used in financing activities for the year ended December 31, 2024, wasof $616 thousand for the year ended December 31, 2024. The increased cash primarily relatedrelates to repaymentsproceeds towardfrom the PNC Facility, compared to cash provided by financing activitiesexercise of $634warrants thousandand forproceeds from the ATM, partially offset by the repurchase of shares under the repurchase program and repayment of the Term Note during the year ended December 31, 2023, primarily related to proceeds from the PNC Facility and issuance of convertible debt in 2023 offset by repayments towards the PNC Facility.2025.

On January 13, 2025, we entered into an Inducement Inducement Letter Agreement with an institutional investor and holder of existing warrants to purchase up to 1,461,896 shares of our common stock, stock for $4.7 million in gross proceeds. The existing warrants were originally issued on April 14, 2022, with an exercise price of $3.215 per share, and became exercisable six months following issuance. Pursuant to the Inducement Letter Agreement, the holder agreed to exercise the existing warrants for cash at the exercise price of $3.215 per share in consideration for our agreement to issue a new unregistered warrant to purchase up to an aggregate of 1,461,896 shares of common stock at an exercise price of $4.00 per share. The new warrant was immediately exercisable upon issuance and has a term of five and one-half years from the issuance date.

For a discussion of the Company’s potential risks or uncertainties, please see “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC, and “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein. There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025,2025 exceptand assubsequent setQuarterly forthReports below.on Form 10-Q.

This report includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “may,” “estimate,” “continue,” “intended,” “plan,” “could,” “target,can,” “potential,” “will,” “would,” “expect,” “expectshall,” and similar expressions are intended to identify forward-looking statements. All statements other than statements of historical facts contained in this report, including among others, our strategy, future operations, future financial position, future revenue, sources of future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements.

Beginning in September 2025, we began providing ProActive services to our new Strategic Partner. WeIn areJune currently2026, establishingwe the ability to offer our Premium services to our Strategic Partner. We expect to begin broadlybegan offering Premium and Direct Premium services to the customers of our newPreferred Strategic PartnerShipping in the second quarter of 2026.Partner.

Immediately following the Closing, our pre-Closing stockholders are expected to collectively retain approximately 10% of the post-Closing aggregate number of shares of our common stock and holders of Open World ordinary shares and Open World SAFEs will receive as merger consideration newly issued shares of our common stock representing approximately 90%87.75% of the post-Closing aggregate number of shares of our common stock.stock and “Maxim Group”, financial advisor to Open World, will hold approximately 2.25% of the post-Closing aggregate number of shares of our common stock (to the extent any portion of the advisory fee due to Maxim Group by OpenWorld exceeding the required upfront cash fee, if any, is paid in shares of common stock of the combined company and assuming a $200 million enterprise value for the combined company pursuant to the M&A Advisory Agreement between Maxim Group and Open World dated October 26, 2025).

The Merger Agreement also requires us, in cooperation with the Open World, to prepare and file with the SEC a registration statement on Form S-4 that will contain a proxy statement relating to a Companyour stockholder meeting to be held in connection with the Merger (the “Registration Statement”) and pursuant to which our our shares of common stock will be registered under the Securities Act of 1933, as amended (the “Securities Act”), to be issued by virtue of the Merger and the contemplated transactions thereunder. We shall use itsour reasonable best efforts to (i) cause the Registration Statement to comply with applicable rules and regulations promulgated by the SEC, (ii) cause the Registration Statement to become effective as promptly as practicable, and (iii) keep the Registration Statement effective as long as is necessary to consummate the Merger and the contemplated transactions thereunder. In addition, under the Merger Agreement, the parties agreed to other customary provisions including (i) obtaining requisite stockholder approval to consummate the Merger and the contemplated transactions thereunder, (ii) obtaining regulatory approvals from relevant governmental authorities, (iii) indemnifying our directors and officers for a period of six years following the Closing, (iv) completing certain disclosure obligations required by the SEC and listing requirements promulgated by the Nasdaq Capital Market (“Nasdaq”), (v) electing or appointing to the positions of officers and directors of Company and the surviving corporation certain persons designated by Open World, and (vi) executing employment agreements between us and Adam Stedham and Jennifer Cola.

On April 15, 2026, we entered into the First Amendment to, Agreement and Planeffective as of Merger, effective April 13, 2026 (the “First Amendment”), with the Merger Sub and Open World, pursuant to which the outside date in the Merger Agreement, defined below,Agreement was extended from June 30, 2026 to August 31, 2026. The foregoing description of the First Amendment does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the full text of the First Amendment.

On September 24, 2025, we began offering ProActive services to the customers of an alternative Preferred Shipping Partner. In We areJune currently2026, establishingwe the ability to offer our Premium services to our Strategic Partner. We expect to begin broadlybegan offering Premium and Direct Premium services to the customers of our newPreferred StrategicShipping Partner in the second quarter of 2026.Partner.

We have seen a softening in demand for some services related to high-end perishable items which seem to be impacted by reduced discretionary spending by U.S. consumers. In response to uncertainty in the global market and lower demand some carriers have implemented strategies to address a potential global recession. Additional changes in U.S. or international trade policy, along with continued uncertainty surrounding such policies, could lead to further weakened business conditions. Additionally, inflation and uncertainty and instability in the global economy and geopolitical events such as athe war in Iran and unrest in areas of the world that are dependent upon fuel production can negatively affect transportation costs and further reduce consumer spending leading to fewer goods being transported globally. We can provide no assurances that a decline in discretionary consumer spending for these or any reasons will not have a negative impact on our revenues and results of operations.

We typically experience seasonal fluctuations in our net revenues from sales in our Precision Logistics segment. Revenues from sales are generally higher in the fourth quarter than in other quarters due to increased holiday shipments. While the fourth quarter is historically our highest revenue quarter, revenues from ProActive services declined in the quarter ended December 31, 2025 as compared to the quarter ended December 31, 2024 due to the previously disclosed loss of our prior carrier partner as a shipping supplier integrating our service offerings, and larger shippers not wanting to change shipping suppliers during the peak season. We anticipate that the historical seasonality trends of the business will return in 2026.The2026. The seasonality of our business may cause fluctuations in our quarterly operating results.

Comparison of the three months ended MarchJune 31,30, 2026, and 2025

The following discussion analyzes our results of operations for the three months ended MarchJune 31,30, 2026 and 2025.

Revenue decreased $2,683$2,612 thousand or 60%58% during the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025. The decrease inprimarily revenue primarilyrelates relates to the termination of our agreement, effective September 24, 2025, with our prior carrier partner to offer our ProActive services.services which resulted in erosion of our customer base, as previously disclosed, compared to the same period in the prior year.

Gross profit for the three months ended MarchJune 30, 31, 2026, was $960$1,021 thousand, compared to $1,490$1,591 thousand for the three months ended MarchJune 31,30, 2025. The resulting gross margin was 54% for for the three months ended MarchJune 31,30, 2026, compared to 33%35% for the three months ended MarchJune 31,30, 2025. The gross profit percentage increase relates relates to the mix of ProActive and Premium services provided during the quarter,current and process improvements implemented to increase ProActive services margins.quarter.

Management and technology expenses decreased by $356$313 thousand to $570$607 thousand for the three months ended MarchJune 31,30, 2026, compared to $926$920 thousand for the three months ended MarchJune 31,30, 2025. The decrease primarily relates to lower amortization of intangible assets as a result of the previously reported asset impairment in the third quarter of 2025, and a decrease in wages from reduced headcount.

General and administrative expenses increased by $160$99 thousand to $1,016$815 thousand for the three months ended MarchJune 31,30, 2026, compared to $856$716 thousand for the three months ended MarchJune 30, 31, 2025. The increase relates to an increase in legal expenses associated with the Company’s proposed merger with Open World, partially offset by a decrease in stock compensation and wages.

Research and development expenses were $0 and $5 thousand for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively.

Sales and marketing expenses decreased by $155$117 thousand to $141$155 thousand for the three months ended MarchJune 31,30, 2026, compared to $296$272 thousand for the three months ended MarchJune 31,30, 2025. The decrease primarily relates to a decrease in headcount.

Interest income, net was $88$51 thousand for the three months ended MarchJune 31,30, 2026, compared to $22$32 thousand for the three months ended MarchJune 31,30, 2025. ThisThe increase primarily relates to to a reduction of interest expense resultingearned from the repaymentZenCredit ofpromissory thenote, Termwhich Note in the first quarter of 2025, offset by interest income earnedmatured on theMay promissory11, note2026 withand ZenCreditwas enterednot on August 8, 2025.renewed.

Net loss for the three months ended MarchJune 31,30, 2026 2026 and 2025 was $679$505 thousand and $571$291 thousand, respectively. The increased loss primarily relates to the decrease in revenues resulting from the previously disclosed loss of the Company’s former carrier partner. The resulting consolidated loss per share for the three months ended MarchJune 31,30, 2026, and three months ended MarchJune 31,30, 2025, was $0.05$0.04 and $0.05$0.02 per basic and diluted share, respectively.

Cash usedprovided inby operationsinvesting activities was $711 $1,768 thousand during the threesix months ended MarchJune 31,30, 2026, compared to $404$332 thousand used in investing activities during the threesix months ended June March 31,30, 2025. The increase was primarily attributable to the collection of the ZenCredit promissory note receivable on May 11, 2026.

Cash used in financing activities during the threesix months ended MarchJune 31,30, 2026, was $14$27 thousand, compared to cash provided by financing activities during the threesix months ended MarchJune 31,30, 2025, 2025, of $3,444$3,270 thousand. The decreasechange was primarily relatesattributable to one-time proceeds received from the exercise of warrants during the threesix months months ended MarchJune 31,30, 2025.2025, with no comparable proceeds received in 2026.

On August 8, 2025, we entered into the Loan Agreement with ZenCredit. Pursuant to the Loan Agreement, we agreed to loan ZenCredit up to $2 million and on August 11, 20252025, we loaned ZenCredit $2 million in exchange for a promissory note issued pursuant to the Loan Agreement that maturesAgreement. onOn May 11, 2026.2026, Pursuantour to$2.0 themillion termspromissory note issued under our Loan Agreement with ZenCredit matured and became due and payable. On May 11, 2026, we received from ZenCredit our principal balance of the$2.0 Loanmillion Agreement,plus ZenCreditour will pay us regularfinal quarterly interest payments at an annual interest ratepayment of 16%.$80 The term of the initial promissory note is nine months at which time all accrued principal thousand, and interest is due to us subject to the terms of the Loan Agreement. As of March 31, 2026, we reservedreversed $12 thousand allowance for expecteda credit loss onreserve theof Note.$12 thousand.

On August 25, 2023, the Company entered into a Convertible Note Purchase Agreement with certain investors for the sale of convertible promissory notes for the aggregate principal amount of $1,100 thousand of which $475 thousand was purchased by related parties including certain members of management and the Board of Directors. As of December 31, 2025, $400 thousand was held by related parties. The notes are subordinated unsecured obligations of the Company and accrue interest at a rate of 8% per year payable semiannually in arrears on February 25 and August 25 of each year, beginning on February 25, 2024. The notes will mature on August 25, 2026, unless earlier converted or repurchased at a conversion price of $1.15 per share of common stock. The Company may not redeem the notes prior to the maturity date. For the year ended December 31, 2025, interest expense related to the convertible debt was $61 thousand. As of January 21, 2025, $350 thousand was converted to common stock, none of which was related parties. As of MarchJune 31,30, 2026, the amount outstanding on the convertible debt was $750 thousand and included in Convertible note and Convertible note related party on the accompanying Consolidated Balance Sheets.

On September 22, 2022, we entered into the PNC Facility with PNC Bank, National Association. The PNC Facility includes a $1 million RLOC. The RLOC has no scheduled payments of principal until maturity, and bears interest per annum at a rate equal to the sum of Daily SOFR plus 2.85% with monthly interest payments. The RLOC is guaranteed by the Company and secured by the assets of PeriShip Global and the Company. On August 8, 2025, the Company extended the line of credit to September 30, 2026. As of MarchJune 31,30, 2026, $0 was outstanding on the RLOC.

In connection with the Merger AgreementAgreement, we have agreed that PeriShip Global will not utilize the PNC Facility or RLOC from the execution of the Merger Agreement. Additionally, we have agreed that at least three business days prior to closing of the mergerMerger to cause PeriShip Global to use its reasonable best efforts to obtain and deliver to Open World, a customary payoff letter with respect to the PNC Facility. As such, we do not expect to be able to utilize the PNC Facility or RLOC unless the mergerMerger is not completed pursuant to the terms of the mergerMerger agreement.Agreement.

We recognize revenue based on the principals established in the Financial Accounting Standards Board Accounting Standard Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. The timing of revenue recognition, billings and cash collections results in unbilled revenue (contract assets) and deferred revenue (contract liabilities) on the consolidated balance sheets. Amounts charged to our clients become billable according to the contract terms, which usually consider the delivery completion. Unbilled amounts will generally be billed and collected within 30 days but typically no longer than 60 days. When we advance bill clients prior to the work being performed, generally, such amounts will be earned and recognized in revenue within twelve months. These assets and liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. Changes in the contract asset and liability balances during the three-monthsix-month period ended MarchJune 31,30, 2026, were not materially impacted by any other factors.

Applying the practical expedient in ASC Topic 606, we recognize the incremental costs of obtaining contracts (sales commissions) as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. As of MarchJune 31,30, 2026, we did not have any capitalized sales sales commissions.