What changed in this filing

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Item 1. Business

2022-03-14 compared with 2021-03-25 · 527 added, 774 removed, 81 unchanged (94% of the section changed)

VerifyMe, Inc.

(“VerifyMe,”

or the “Company,”

“we,”

“us,”

or “our”) is a technology solutions provider specializing

in brand protection and supply chain functions such as counterfeit prevention, authentication, serialization, consumer engagement,

track and trace features for labels, packaging and products.

The Company was formed as LaserLock Technologies, Inc., in Nevada

on November 10, 1999.

Until 2018, we were primarily engaged in the research and development of our technologies.

We began to commercialize

our covert luminescent pigment, RainbowSecure®, in 2018, and we also developed the patented VeriPAS™

software system

in 2018 which covertly and overtly serializes products to track a product’s “life cycle”

for brand owners.

believe VeriPAS™

is the only invisible covert serialization and authentication solution deployed through variable digital

printing on HP Indigo printing systems with a smartphone tracking and authentication system.

VeriPAS™

is capable of fluorescing,

decoding, and verifying invisible RainbowSecure®

codes in the field designed to allow investigators to quickly and efficiently

authenticate product throughout the distribution chain, including warehouses, ports of entry, retail locations, and product purchased

over the Internet for inspection and investigative actions.

This technology is coupled with a secure cloud-based track and trace

software engine which allows brands and investigators to monitor the complete supply chain from product origination to the end

user utilizing geolocation mapping and intelligent programable alerts.

Brand owners access the VeriPAS™

software through

a web portal over the Internet.

Brand owners can then set rules of engagement, gather rich business intelligence, establish marketing

programs for customer engagement and control, monitor and protect their products’

“life cycle.”

We have derived

minimal revenue from our VeriPAS™

software system and have derived limited revenue from the sale of our RainbowSecure®

Our brand protection technologies involve

the utilization of invisible and/or color changing inks, which are compatible and printed with modern digital and standard printing

The inks may be used with certain printing systems such as digital, offset, flexographic, silkscreen, gravure, inkjet

and toner-based laser printers.

The inks can be used to print both static and variable images utilizing digital printing presses

and third-party digital inkjet systems which are attached to traditional printing presses.

Our invisible ink can be used in fixed

images, variable images or serialized codes, bar codes or QR codes.

We have developed a product which attaches to a smartphone

that reads our invisible ink codes into sophisticated cloud-based track and trace software.

We also have a product that informs

users that our invisible ink is present for authentication.

Based upon our experience, we believe that the ink technologies may

be incorporated into most existing manufacturing processes.

(“VerifyMe,” the “Company,”

“we” “us” or “our”) is a technology solutions provider specializing in products to connect brands

with consumers.

VerifyMe technologies give brand owners the ability to gather business intelligence while engaging directly with their

VerifyMe technologies also provide brand protection and supply chain functions such as counterfeit prevention, authentication,

serialization, and track and trace features for labels, packaging and products.

We are a Nevada corporation formed in 1999.

commercialize our covert luminescent pigment VerifyInk TM in 2018.

Prior to 2021 we completed the initial development stage

of our other current technologies and in 2021 we began to commercialize as a Brand Protection Solutions provider.

Our brand protection

technologies include consumer engagement capabilities, the custom printing of tamper proof secure labels, and utilization of invisible

and visible images, printed with our proprietary special composition inks comprised of a rare earth mineral.

These inks are compatible

and printed with modern digital and standard printing systems such as digital, offset, flexographic, silkscreen, gravure, inkjet and toner-based

laser printers.

The inks can be used to print both static labels on standard printing systems and variable labels utilizing digital printing

systems that include variable images, serialized codes, dynamic bar codes and dynamic QR codes that allow brand owners to engage directly

with customers.

We have developed and patented a dual-code technology that we believe can connect digital Non-Fungible Tokens (“NFTs”)

to physical products.

We have developed and patented a device that attaches to a smartphone that brand inspectors or law enforcement can

use to read our invisible ink codes into our cloud-based track and trace software that contains our patented verification technology along

with algorithms that analyze the label, package or product’s authenticity and diversion activity.

We also have a device that informs

users that our proprietary invisible ink is present, which can be used for authentication without the need for internet connectivity.

Business Update

Recent Developments

In March 2021, we signed a sales agency agreement with Syntax

Ltd., HP Indigo’s authorized channel partner for China.

Syntax is the only distributor authorized to sell and support HP

To increase our global presence, we signed two new agreements to market

and sell our products.

On December 5, 2021, we signed a reseller agreement with Kimoha Entrepreneurs in the United Arab Emirates and on

December 21, 2021, we signed a new Sales Consultant agreement with The AAB in South Africa.

In September 2021, we

received an initial order for 4 million brand protection labels from a new nutraceutical client.

This was one of our largest sales to

date after implementing a new sales and marketing plan in 2021.

On July 6, 2021, we co-sponsored

the initial public offering of G3 VRM Acquisition Corp, a special purpose acquisition company, or “SPAC,” through a contribution

into G3 VRM Holdings LLC, or the “Sponsor Entity.” The closing of the IPO of 10,626,000 Units, including 626,000 Units pursuant

to the partial exercise of the underwriter’s over-allotment, generated gross proceeds of $106,260,000.

G3 VRM commenced trading

on NASDAQ under the symbol “GGGVU” and is targeting businesses with enterprise values of approximately $250 million to $500

million within the technology and business services industry.

VerifyMe, indirectly through the Sponsor Entity beneficially owns approximately

9.42% of the common stock of the SPAC.

On June 4, 2021, VerifyMe

was added to the Russell Microcap Index.

Russell indexes are widely used by investment managers and institutional investors and as benchmarks

for active investment strategies.

Approximately $9 trillion in assets are benchmarked against Russell’s US indexes.

In April 2021, VerifyMe

launched a rebranding and messaging campaign to more fully market all of our products and services

to include a new website and marketing materials.

RainbowSecure TM was renamed to VerifyInk TM and when coupled with

VerifyMe Authenticate™ and VerifyMe Track & Trace™ product lines, we believe it provides the only covert serialization

and authentication solution on HP Indigo (a division of HP, Inc.) variable digital printing systems.

Our patented smartphone authenticator

device, VerifyAuthenticator TM is capable of fluorescing, decoding, and verifying invisible VerifyInk TM printed overt

and covert codes in the field.

This product allows investigators to authenticate product quickly and efficiently throughout the distribution

chain, including warehouses, ports of entry, retail locations, and product purchased over the internet.

This technology is coupled

with a secure cloud-based track and trace software engine which allows brands and investigators to monitor the complete supply chain from

product origination to the end user utilizing geolocation mapping and intelligent programable alerts.

Brand owners access the VerifyMe

Authenticate™ and VerifyMe Track & Trace™ software through a cloud-based web portal over the Internet.

Brand owners can

then set rules of engagement, gather rich business intelligence, establish marketing programs for customer engagement and control, monitor

and protect their products’ “life cycle.”

In March 2021, we signed a sales agency agreement

with an HP Indigo’s authorized channel partner in China.

This partner is the only distributor authorized to sell and support HP

Indigo products in China, and now has an exclusive agreement to sell our technology solutions for HP Indigo products in China.

We also granted Syntax a non-exclusive right to sell our other products in China.

In February 2021, David Sandello joined VerifyMe as Director

of Sales and Business Development of North America to focus on expanding our revenue operations and to accelerate growth.

brings 15 years of experience building, scaling and leading revenue organizations including new sales and growth through existing

account management teams.

granted them a non-exclusive right to sell our other products in China.

In February 2021, we

received an initial purchase order for 2 million pre-printed anti-counterfeiting labels.

The labels will be utilized for track and trace

and brand protection for 2 million boxes of surgical gloves, a personal protective equipment (“PPE”) necessity in fighting

the ongoing Covid-19 pandemic.

This initial purchase order for complete pre-printed tamper-evident labels with VeriPAS™

brand protection

and consumer engagement is the first order under our strategic partnership with Renavotio (OTC:

This is a custom-designed tamper

proof label containing multiple layered technologies embedded and printed by VerifyMe.

received a purchase order for 2 million pre-printed anti-counterfeiting labels.

The labels were utilized for track and trace and brand

protection for 2 million boxes of surgical gloves, a personal protective equipment (“PPE”) necessity in fighting the ongoing

Covid-19 pandemic.

This purchase order for complete pre-printed tamper-evident labels with VerifyMe™ brand protection and consumer

engagement solution was under our strategic partnership with Renavotio (OTC:

This is a custom-designed tamper proof label containing

multiple layered technologies embedded and printed by VerifyMe.

In February 2021, we

entered into a strategic partnership with INX International Ink Company (“INX”).

INX will supply us with conventional and

ink jet inks that incorporate our RainbowSecure®

marking technology for resale to our customers.

The inks are developed and ready

for market for metal container decorating, dry offset printing, gravure shrink sleeves, and flexographic fabric printing.

The inks developed,

and expected to be developed, under the supply agreement are applicable to a broad range of uses, including aluminum beverage cans and

bottles, labels and packaging for the cannabis industry, personal protective equipment, aerospace parts, motor vehicle parts, weapons

and ammunition, silicon chips and medical equipment.

ink jet inks that incorporate our VerifyInk TM marking technology for resale to

our customers.

The inks are developed and ready for market for metal container decorating, dry offset printing, gravure shrink sleeves,

and flexographic fabric printing.

The inks developed, and expected to be developed, under the supply agreement are applicable to a broad

range of uses, including aluminum beverage cans and bottles, labels and packaging for the cannabis industry, personal protective equipment,

aerospace parts, motor vehicle parts, weapons and ammunition, silicon chips and medical equipment.

In February 2021, as part of our public offering of an aggregate 1,750,000

shares of common stock, we generated aggregate gross proceeds of $9.2 million and net proceeds of $8.5 million, less underwriting discounts

and commissions and other offering expenses, including the partial exercise of the over-allotment option resulting in gross proceeds of

$530 thousand.

In January 2021,

we signed Authentik, a company registered in Pakistan, as an independent sales contractor.

Our relationship with Authentik will

expand our global reach across critical industries, including pharmaceutical and food.

December 31, 2020

In 2020, we focused our

efforts primarily on the completion of our products, and began the introduction of our products into the market and forging relationships

that could help generate revenue in future periods.

We continue to expand our business and grow organically.

We also plan to pursue acquisition

opportunities that will allow us to accelerate our growth plans.

In November 2020, we

announced a share repurchase program to spend up to $1.5 million to repurchase shares of our common stock over the next nine months.

date, no shares have been purchased, but the Company reserves the right to make purchases at any time under the terms set out in this

In June 2020,

we completed the closing of our underwritten public offering of an aggregate of 2,173,913 units at a price to the public of $4.60

Each unit issued in the offering consisted of one share of common stock and one warrant to purchase one share of common

stock at an exercise price of $4.60.

The common stock and warrants began trading on the Nasdaq Capital Market (“Nasdaq”)

on June 18, 2020, under the symbols “VRME”

and “VRMEW,”

respectively.

We received gross proceeds of $10.0

million, before deducting underwriting discounts and commissions and other estimated offering expenses.

Concurrent with the offering,

we also effectuated a reverse split of our issued and outstanding common stock and treasury stock at a ratio of 50-to-1.

In March 2020, we completed the private placement of $1,992,000

senior secured convertible debentures (the “2020 Debentures”).

We used $750,000 of the net proceeds to redeem prior

outstanding convertible debentures issued in 2019.

In connection with the issuance of the 2020 Debentures, we also issued warrants

(“2020 Warrants”) to purchase 498,000 shares of common stock.

Each of the 2020 Warrants had a three-year term and were

immediately exercisable at an exercise price of $7.50 per share.

On June 22, 2020, we cancelled the 2020 Warrants for twenty-three

of the twenty-five warrant holders and issued to the holders of the cancelled 2020 Warrants an aggregate of 179,200 shares of common

Also on such date, the 2020 Debentures were automatically converted into an aggregate of 637,513 shares of common stock

and warrants to purchase 573,479 shares of common stock upon closing of our listing on Nasdaq.

In January 2020, we received a Notice of

Allowance for the U.S.

Patent Application from the U.S.

Patent & Trademark Office for the dual code authentication process

relating to our invisible QR code and smartphone reading system “Dual Code Authentication Process.”

and commissions and other offering expenses, including the partial exercise of the over-allotment option.

COVID-19 Pandemic

The COVID-19 pandemic disrupted businesses

and affect production and sales across a range of industries, as well as caused volatility in the financial markets, which negatively

impacted our results of operations for 2020, and could further negatively impact our sales and results of operations.

has also caused a major spike in demand for safety products such as masks and gloves, COVID-19 test kits, medications, and vaccines

to treat the virus, which we believe has further caused an increase in counterfeit products.

Our suite of technology solutions

for global manufacturers, distributors and sellers are designed to allow consumers to prove authenticity and we have proactively

reached out to global manufacturers who are seeking to provide their customers authenticity in their products.

Please see Item

1A, “Risk Factors—Risks Relating to the COVID-19 Pandemic”

“Management’s Discussion and

Analysis of Financial Condition and Results of Operations—COVID-19 Pandemic”

in this Report for additional information

regarding certain risks associated with the pandemic and the pandemic’s effect on our results of operations.

Commercialization

of our Technologies

In 2020, we entered

into a number of strategic partnerships and agreements to accelerate the commercialization of our technology and announced a number

of commercial milestones achieved by the Company, including:

In October 2020, we entered into an agreement with OWS Capital to market, promote and sell our

security authentication technology solutions, including the VerifyMe®

as Authentic®

labels, in the United Arab Emirates

and Middle East.

In October 2020, we extended our agreement with Micro Focus

International PLC (“Micro Focus”) for three years.

The original agreement was entered into in December 2017.

Focus cross-sells our technology and supports our VeriPAS™

software platform.

To date, no sales have been made on our behalf

by Micro Focus, and limited revenue has been derived from our VeriPAS™

supply chain serialization, track and trace technology.

In September 2020, we were notified that a Forbes Top 50 Private Company that sells nutrition,

personal care, beauty and home care products, expects to add additional distribution in three additional countries;

Japan, Vietnam

The client also ordered RainbowSecure®

ink technology to meet required production volumes for products, in the

first quarter of 2021.

In June 2020, we entered into a new partnership with Corsearch, Inc.

(“Corsearch”),

a brand clearance and protection leader, pursuant to which we have the right to use and offer Corsearch’s technical search

platform ZERO®

to our customers and Corsearch will have the right to offer its brand clients the full suite of our technologies

to protect their e-commerce products.

is an online monitoring and enforcement platform that monitors and processes all

information relating to a brand’s products, trademarks, copyrights, designs and patents.

The initial term of the agreement

is two years and becomes auto renewable after the initial period.

To date, we have not derived revenue from this technology.

are beginning to demonstrate this technology to our customers as part of a broader strategy for a comprehensive provider of brand

protection solutions, for e-commerce as well as our proprietary physical and digital supply chain product offerings .

In June 2020, we executed a Technology Integration and Sales Referral Agreement with SmartGlyph

Limited (“SmartGlyph”), a U.K-based digital solutions provider, for a two-year term, to integrate technologies and

establish a sales referral relationship.

Under the agreement, the combined offering will include the VeriPAS™

Authenticator and its mobile app, VeriPAS™

serialization, track and trace technology and RainbowSecure®

ink and SmartGlyph’s

barcodes and multi-faceted, “software only”

coding platform.

In addition, the agreement includes a cross-selling agreement,

pursuant to which the receiving party will pay the referring party a referral fee equal to 10% of the purchase price of the products

purchased by a customer of the receiving party who was introduced by the referring party.

In June 2020, we received our first order for VeriPAS™

serialization, track and trace technology

in the cannabis industry, combined with our VerifyMe®

as Authentic®

The VeriPAS™

serialization, track

and trace technology is being utilized on pre-printed tamper-proof labels in order for the client to protect itself from counterfeit

products containing contaminants.

The solution also allows the end-consumer to download the compulsory certificate of origin, directly

from their smartphone, by scanning the overt barcode on the tamper-proof label.

We derived approximately $16 thousand in revenue

related to this order, and we received a similar reorder in the first quarter of 2021.

In June 2020, we entered into a strategic partnership with Techind Engineers & Consultants-Impex

(“Techind”), part of the Gohar Group, of India, with a two-year term, pursuant to which Techind provides our VeriPAS™

serialization, track and trace technology to a broad range of industries and clients of Techind, with a specific focus on the pharmaceutical

and food and beverage industries.

We have demonstrated our solution to a number of global companies with a presence in India through

our partnership with Techind.

Our Anti-Counterfeit Technologies and

In the areas of authentication and serialization of physical

goods, we offer clients the following brand protection security and anti-counterfeit technologies:

RainbowSecure®

VeriPAS™

supply chain serialization, track and trace technology

VeriPAS™

Smartphone Authenticator

VerifyMe Beeper

VerifyMe®

RainbowSecure®

technology was

our first technology to be patented.

It combines an invisible ink with a proprietary tuned laser to enable counterfeit products to be

In 2017, we signed a five-year contract with Indigo Division of HP Inc.

(“HP Indigo”) to print this technology on

packages and labels on their 6000 series presses.

Our technology has been tested and approved by HP Indigo 6000 series presses and

more recently was qualified on HP Indigo’s 6900 series presses.

In addition, we successfully trialed production on their 7900 press

series used for sheet-fed products like folded cartons and plastic cards.

HP Indigo informed us that other press models will be qualified

once clients formally request in writing the need for qualification for current unqualified models.

In addition, HP Indigo is producing

sample secure government products such as tax stamp samples for governments with our RainbowSecure®

invisible ink technology.

has showcased these samples at various global government and print service providers trade shows.

Customers can use a handheld beeping

device, our VerifyMe Beepers, tuned to authenticate the unique frequency of our RainbowSecure®

invisible ink, to broadcast a beeping

sound to confirm the authenticity when placed on products, labels and packaging containing our RainbowSecure®

VerifyMe Beepers

are being commercialized and leased to customers, typically for one year.

In December 2017, we signed a contract with Micro Focus to use

RainbowSecure®

in their Global Product Authentication Service (GPAS).

The technology also features a unique double layer of security

which remains entirely covert at all times and provides licensees with additional protection.

Under the contract with Micro Focus, we

have a re-seller agreement where we sell the combined Micro Focus GPAS with our RainbowSecure®

identifier under our own trademarked

name, VeriPAS™.

In May 2019, we entered into a strategic partnership with INX, the third largest producer of inks in North America,

to co-develop inkjet inks to be used for inkjet printing in combination with high speed, high volume label and packaging printing presses.

In 2020 INX, in conjunction with Print Craft Inc., successfully-tested an appeal garment containing our RainbowSecure®

garment survived the 50 wash and dry cycle test.

Sales and marketing efforts for this new VerifyMe secure apparel technology are commencing

in 2021 in conjunction with INX and Print Craft Inc.

In February 2021, INX completed the development of a version of our RainbowSecure®

security ink for metal objects and INX is now co-marketing the new security ink to its global clients.

The specially formulated inks will

enable these printing presses to print our RainbowSecure®

invisible ink technology, which includes our variable VeriPAS™

serialization,

track and trace technology.

We believe RainbowSecure®

is particularly well-suited to closed and controlled environments that want

to verify transactions within a specific area, as well as labels, packaging, textiles, plastics and metal products which need authentication.

We have derived limited revenue from the sale of our RainbowSecure®

VeriPAS™

serialization, track and trace technology combines the covert identifier of RainbowSecure®

with the Micro Focus GPAS

which provides brand owners geographical business intelligence on counterfeiting as well as the ability to authenticate

labels, packaging and products.

Using information from a smartphone screen, our VeriPAS TM technology, can

The COVID-19 pandemic

disrupted businesses and affected production and sales across a range of industries, as well as caused volatility in the financial markets,

which negatively impacted our results of operations for the year ended December 31, 2021.

The full extent of the impact of the COVID-19

pandemic on our customer demand, sales and financial performance will depend on certain developments, including, among other things, the

continued duration and spread of the outbreak, the effectiveness of vaccines against new variants, the availability of vaccines and vaccination

rates, and the impact on our customers and employees, all of which are uncertain and cannot be predicted.

Please see Item 1A, “Risk

Factors- Risks Relating to the COVID-19 Pandemic” in this Report for additional information regarding certain risks associated with

the pandemic.

The COVID-19 pandemic

has caused an increase in demand for safety products such as masks and gloves, COVID-19 test kits, medications and vaccines to treat the

virus, which we believe has further caused an increase in counterfeit products.

Our suite of technology solutions for global manufacturers,

distributors and sellers are designed to allow consumers to prove authenticity and we have proactively reached out to global manufacturers

who are seeking to provide their customers authenticity in their products.

We believe we have a dynamic management and sales team in place

with the ability to seamlessly work remotely to minimize any operational disruption.

After an approximate

one-year COVD-19 related hiatus we begun attending sales conferences and other in-person sales initiatives in September 2021.

we have been attending in-person sales events, such events are not at full capacity due to the ongoing pandemic.

Since we have recently

begun face to face sales presentations and trade shows we are experiencing a small increase in travel related costs versus the 12 months

preceding September 2021.

We expect these travel related costs to grow.

VerifyMe has continued to be aggressive in regard to sales and

marketing efforts as we have completed a new website which is generating new leads and we have expanded our sales force.

started our first social media advertising campaign.

New leads are being generated due to these actions.

We continue to work with our

sales representatives to look for alternative ways to communicate effectively and promote sales both with our customers and potential

Further, we anticipate

that as a result of the continued COVID-19 pandemic, our customers may still require that their programs be cancelled, delayed or reduced.

We will continue to work in partnership with our customers to continually assess any potential impacts and opportunities to mitigate risk.

Our Solutions

VerifyMe has a custom

suite of products, that offer clients the brand protection security, anti-counterfeiting, protection from product diversion, consumer

engagement and a robust serialization, track and trace system.

These products are combined with “software as a service” or

“SAAS” which is stored in the cloud and accessed through the internet.

· VerifyMe Engage™ for consumer engagement

· VerifyMe Authenticate™ for product authentication

· VerifyMe Track & Trace™ for product supply chain control

· VerifyMe Online™ for on-line (web) brand monitoring

VerifyMe Engage™

services provide the ability for the brand owner to gather business intelligence and engage with the consumer using our authentication

test as the initial contact with the consumer.

For example, consumers can simply use their smart phone camera to scan our visible unique

codes and/or RFID/NFC chips included on products, labels and packages.

Once the consumer scans the code, an instant authenticity check

is made using algorithms stored in the cloud to determine the products authenticity on multiple factors.

This allows brands to understand

where their products are being scanned, whether they are legitimate, and form an immediate bridge for communication with the consumer.

After a product is authenticated, the brand owner can then engage with the consumer by, for example offering a gift or future discounts,

providing marketing materials, videos, product information and specifications, contest entries or cross selling other products through

the consumer engagement software.

This service allows to the brand owner to gather real-time actionable information on their customer

To date, we have derived limited revenue from VerifyMe Engage customers in the cannabis industry.

VerifyMe Authenticate™

services provide an assortment of tools through our patented products allowing brand owners to instantly authenticate a product, label

or package as genuine and or determine if a product has been fraudulently diverted and where such diversion occurred in the supply chain.

Brand owners can use our cloud-based web portal to easily order many types of serialization codes for their products, labels and packages.

Once the codes are applied to their products, brand owners can then monitor, control and protect their products during the product’s

complete life cycle through the supply chain.

Our customers use our patented invisible ink, VerifyInk TM which is combined with

a proprietary reader to easily identify counterfeit products.

Product investigators may then use our patented VerifyAuthenticator TM

technology, a device used with a smartphone and the VerifyMe app, to authenticate and decode VerifyInk TM codes.

The user attaches

this device to their smartphone, which reveals the hidden VerifyInk TM images that are then sent to our web portal in the cloud

for authentication and data submission.

We also have another device that does not require use the of a smartphone, our VerifyChecker™

which is a handheld device that is tuned to authenticate the unique frequency of our VerifyInk TM invisible ink.

The VerifyChecker™

is designed for use by customers who desire instant authentication on items without the need for an internet connection.

It is perfect

for field investigators, CBP officials, or as validation in practice such as scanning event tickets at an entry gate.

The device functionality

was upgraded in September 2021 by adding wireless connectivity to a mobile phone enabling authentication attempts to be recorded in the

cloud with geo-location, inspector’s names, and time and date stamp.

To date, we have derived limited recurring revenues from two

global brand owners who use VerifyMe Authenticate.

VerifyMe Track &

Trace™ supply chain serialization, track and trace technology utilize overt dynamic codes (QR codes or other barcode symbology),

such as our VerifyCode™, which is tied to our cloud-based authentication and track and trace system.

This technology provides brand

owners business intelligence on counterfeiting and diversion using distribution channel scans throughout the supply chain coupled with

consumer scan data.

All this data is consolidated on a system that allows brands to customize rules and parameters and establish sophisticated

alert systems allowing brands to be proactive, rather than reactive, in thwarting illicit activity.

Invisible codes can be added using

VerifyInk TM to increase brand protection security and provide inspectors a means to authenticate counterfeit or diverted product

if the visible codes have been defaced or removed.

Using information from a smartphone, our VerifyCode TM technology, can

provide authentication and data submission information.

A customer or end-user can scan information from a product label or

QR code and send it to the cloud where our VeriPAS TM software can verify authenticity of the product, as well

as track and trace the product from production through delivery.

Certain clients are in the testing stage with this product.

Revenue was received for the first time in 2020 and a new order was received in the first quarter of 2021.

To date, we have

recognized minimal revenue from this technology.

VeriPAS ™

Authenticator technology is a piece of hardware with a built-in lighting system and software that scans invisible RainbowSecure®

Product investigators attach their smartphone to this device which then reveals the hidden RainbowSecure®

the smartphone screen which are then sent to the VeriPAS TM software in the cloud for authentication and data submission.

These devices have been commercialized and are being leased to customers.

Leases are typically one year in length and are auto-renewable.

A Forbes Top 50 Private Company added additional leases in 2020 for its international brand inspector team.

Revenue from this product

is at an initial stage and minimal at this time.

VerifyMe Beeper technology

is an authentication tool which we are marketing to customers in conjunction with our RainbowSecure®

Beeper is a handheld beeping device is tuned to authenticate the unique frequency of our RainbowSecure®

invisible ink and will

broadcast a beeping sound to confirm the authenticity when placed on products, labels and packaging containing our RainbowSecure®

The VerifyMe Beeper is designed for use by customers who desire instant authentication on items, such as event tickets at

an entry gate.

Our customized beeper will only positively identify a product bearing our unique anti-counterfeit solution.

technology is being commercialized and leased to customers, typically for one year auto-renewable terms.

We are in the process

of upgrading the functionality of this device so that it connects to a mobile phone via Bluetooth allowing authentication attempts

to be recorded in the cloud by geo-location with time and date stamp.

VerifyMe®

as Authentic®

are dual-purpose pre-printed labels with a visible serialized QR code for consumer scanning purposes, and an invisible serialized

IR code for inspector scanning, authentication and tracking purposes.

This label can be either a standard label or designed

with tamper evident features.

It was developed to provide covert brand protection for e-commerce retailers, to enable consumer

product authentication, promotion, engagement and education through the visible serialized QR code.

This technology has been successfully

launched with tamper evident features and is being used in the cannabis sector by one customer, without the covert IR component.

VerifyMe®

Web TM includes,

through our collaboration with Corsearch, a brand clearance and protection leader, technologies and services that better enable

customers to effectively tackle counterfeit websites, domains and e-commerce platforms offering counterfeit products.

we have not derived revenue from this technology.

We believe that our brand protection security

technologies, coupled with our contract with HP Indigo, can be used to enable brand owners to securely prevent counterfeiting,

prevent product diversion and authenticate labels, packaging and products and alleviate the brand owner’s liability from

counterfeit products which physically harm consumers.

Our covert technologies give brand owners the ability to control, monitor

and protect their products life cycle.

Also, our technologies allow brand owners to prove whether the product causing an issue

is authentic or counterfeit.

Brand Protection Technology

Our brand protection technologies include

(i) a technology utilizing invisible ink taggant that can be revealed by use of a special calibrated laser light for authentication

purposes, (ii) an ink technology, which allows invisible codes to be printed, and (iii) a color changing technology that is activated

by certain types of lights.

Based on our knowledge and test results, we believe none of these technologies can be copied or scanned

by counterfeiters.

We believe the useful life of our technologies on a label or package is at least 20 years.

In 2017, we signed a five-year contract

with the HP Indigo to print this technology on packages and labels on their 6000 series digital presses.

The 6000 series digital

qualified presses are mainly used to print both static and variable high-quality images such as personalized labels and packaging

for brand owners.

In 2020, our technology was qualified on HP Indigo’s 6900 series presses, and we also successfully trialed

production on their 7900 press series used for sheet-fed products like folded cartons and plastic cards.

HP Indigo informed us

that other press models will be qualified once clients formally request in writing the need for qualification for current unqualified

In addition, HP Indigo is producing sample secure government products such as tax stamp samples for governments with our

RainbowSecure®

invisible ink technology.

HP Indigo has showcased these samples at various global government and print service

providers trade shows.

This solution is marketed as RainbowSecure®

The solution includes an HP Indigo security ElectroInk as

well as our readers and authentication tools that can be used in conjunction with the security ElectroInk.

Both companies provide

support to HP Indigo customers that use the RainbowSecure®

solution on HP Indigo’s digital printing presses.

The HP security ElectroInk containing RainbowSecure®

is in an ink canister that is mounted into the digital HP Indigo printing press along with the other traditional ink stations.

Since the HP Indigo is a digital press, the RainbowSecure®

technology prints covert serialization numbers, codes or images

either fixed or variable mainly on labels and packaging which are revealed when using our hand-held authentication devices, we

call our VeriPAS™

Smartphone Authenticators.

In combination with a smartphone, these authenticators utilize special calibrated

laser light for authentication purposes.

VeriPAS™

Smartphone Authenticators are being commercialized and leased to customers,

typically for one year.

In addition, in 2020, HP Indigo increased

their own marketing of our RainbowSecure®

invisible ink technology.

We collaborated with HP Indigo at the Asia Security Group

Virtual High Security Printing & Brand Protection Conference & Exhibition in December 2020 to showcase our RainbowSecure®

solution on HP Indigo’s digital printing presses.

HP Indigo also highlighted our RainbowSecure®

invisible ink and VeriPAS™

Smartphone Authenticator in a webinar in July 2020.

HP Indigo has trained their world-wide sales force on our technology to show

to both print service providers and brand owners.

HP Indigo has also installed our technology offerings in their HP Experience

Centers located in Tel Aviv, Israel, Singapore, Barcelona, Spain and Alpharetta, Georgia where customers can perform tests and

get hands on experience with our technologies.

We also believe business will be generated

from both internal sales efforts as well as from our strategic partners.

S-One Labels and Packaging LLC, a division of S-One LP

(“S-One”), has agreed to provide us with global sales, distribution, shipping, warehousing and promotion support for

our products and employs representatives on an as needs basis to promote our products.

Under the terms of our agreement with S-One,

S-One will act as a sales and marketing contractor for our printed products and services on a global basis and will assist us in

fulfilling our obligations under our signed current and future reseller agreements with global and domestic print providers and

brand owners.

In addition, in 2020 we entered into a consulting arrangement to develop relationships with brand owners, converters

and other stakeholders in the food, pharmaceutical, medical device, fashion, apparel, household good and industrial products packaging

industry, focusing on markets in the United Kingdom, European Union, Middle East and Asia.

As an add-on track and trace feature of

our RainbowSecure®

covert imaging, we have contracted with Micro Focus, a global software developer to utilize their visible

QR code system, GPAS, which is printed on labels and packaging along with our covert RainbowSecure®

to store our hidden covert

serial number in the cloud for product diversion investigators to authenticate with a proprietary application on a mobile device.

The Micro Focus GPAS allows customers to use their smartphone to scan a product’s QR code or send the code via a text message.

Immediate results help verify whether the product is real or counterfeit.

This helps save customers from potential physical harm

and businesses from facing lawsuits, loss of revenue and brand erosion.

In addition to the anti-counterfeiting image, the Micro

Focus GPAS has a “big data”

gathering system with real-time analytics which geographically locate and identify counterfeiting

activity by using an easily configured rules engine.

Our covert or invisible RainbowSecure®

system works as an extra layer

of protection for the GPAS.

When a professional product investigator scans the Micro Focus visible QR code with a special application

on a smartphone it brings him or her to our secure cloud application to see what the hidden serialization number printed by the

HP Indigo is for that particular label or package.

The product investigator uses the RainbowSecure®

reading device, the smartphone

authenticator, to compare the hidden serialization number against the cloud number to prove authenticity.

Under the contract with Micro Focus, VerifyMe

has a re-seller agreement where we sell the combined Micro Focus GPAS with our RainbowSecure®

identifier under our own trademarked

name, VeriPAS™.

Minimal revenue has been recognized from VeriPAS™.

We also have a strategic partnership with INX,

the third largest producer of inks in North America, to co-develop inkjet inks to be used for inkjet printing in combination with high

speed, high volume label and packaging printing presses.

The specially formulated inks enable these printing presses to print our RainbowSecure®

invisible ink technology, which includes our variable VeriPAS™

serialization, track and trace technology.

The inks are developed

and ready for market for metal container decorating, dry offset printing, gravure shrink sleeves, and flexographic fabric printing.

inks developed, and expected to be developed, under our partnership agreement are applicable to a broad range of uses, including aluminum

beverage cans and bottles, labels and packaging for the cannabis industry, personal protective equipment, aerospace parts, motor vehicle

parts, weapons and ammunition, silicon chips, and medical equipment.

This development has significantly expanded the market and availability

of our technology to the broader and more voluminous label and packaging manufacturing industry.

In addition, in May 2019, we entered into

an equipment and software leasing contract with a Forbes Top 50 Private Company that sells nutrition, personal care, beauty and

home care products around the globe.

In September 2020, we received notice that this client plans to expand to cover additional

products and three additional countries;

Japan, Vietnam and Taiwan.

We believe that our brand protection security

technologies, coupled with our contract with HP Indigo, can be used to enable brand owners to securely prevent counterfeiting,

prevent product diversion and authenticate labels, packaging and products and alleviate the brand owner’s liability from

counterfeit products which physically harm consumers.

Our covert technologies give brand owners the ability to control, monitor

and protect their products life cycle.

Also, our technologies allow brand owners to prove whether the product causing an issue

is authentic or counterfeit.

Our technologies can be printed on labels

and packaging and can also be applied to metals, plastics and textiles.

In addition to packaging and labels, our brand protection

security printing technologies can be applied to authenticate important credentials such as tax stamps, driver’s licenses,

plastics, metal, apparel, birth certificates, immigration documents, gaming, apparel, currency, event and transportation tickets,

passports, computer software, and credit cards.

A customer or end-user can scan codes printed on labels and packaging and send

it to the cloud where our software can verify authenticity of the product, as well as track and trace the product from production through

To date, we have derived limited revenues from the use of this technology in the personal protective equipment industry and

in the cannabis industry.

VerifyMe® Online™ includes,

through our collaboration with a strategic partner, a brand clearance and protection leader, technologies and services that better enable

customers to effectively tackle counterfeit websites, domains and e-commerce platforms, and social media sites offering or promoting counterfeit

To date, we have not derived revenue from this technology.

To optimize our security

for our customers, we are seeking to add a blockchain architecture version to our brand protection platform which currently uses a centralized

cloud-based data architecture.

Our plan is to develop the ability to connect physical products to NFTs in the blockchain.

a patented dual-code technology that we believe will facilitate this process for clients requesting this service.

We are exploring opportunities

to gain the skillsets needed either through mergers and acquisitions or through strategic partnerships with blockchain specialists that

will help us create this product.

We believe that our brand

protection security technologies, coupled with our contract with HP Indigo, can be used to enable brand owners to securely prevent counterfeiting,

prevent product diversion and authenticate labels, packaging and products and alleviate the brand owner’s liability from counterfeit

products that physically harm consumers.

Our covert technologies give brand owners the ability to control, monitor and protect their products

In cases where the brand owner may be subject to liability brought forth by counterfeit products, our tools allow the brand

owner to prove whether the product causing an issue is authentic or counterfeit.

Combined with our customer engagement product lines,

we offer a unique and comprehensive brand protection and promotion solution that can be tailored to any brand’s specifications.

At present, our strategic

partner, HP Indigo has the ability, with their Indigo 6000 series, to print our technology on a variable basis.

HP Indigo has produced

flexible packaging pouch samples, shrink sleeves samples, and tax stamp samples with our covert VerifyInk TM .

In May 2019, we

entered into a strategic partnership with INX, the third largest producer of inks in North America allowing us to successfully print our

covert VerifyInk™ on garments, metal and plastic objects, and INX is now co-marketing the new security ink to its

global clients.

We are continuing to work with our partners and INX international to develop inkjet ink for various print head, drop on

demand and continuous inkjet, that can be used independently or mounted to printing presses and finishing equipment.

We have successfully

developed VerifyInk™ for drop on demand inkjet printing and are carrying on with the development of a continuous

inkjet solution.

The specially formulated inks will enable these printing presses to print our VerifyInk TM invisible ink technology,

which includes our variable VerifyCode™ serialization, track and trace technology.

We believe VerifyInk TM is particularly

well-suited to closed and controlled environments that want to verify transactions within a specific area, as well as labels, packaging,

textiles, plastics and metal products that need authentication.

In addition to packaging and labels, our brand

protection security printing technologies can be applied to authenticate important credentials such as tax stamps, driver’s licenses,

plastics, metal, apparel, election ballots, birth certificates, immigration documents, gaming, apparel, currency, event and transportation

tickets, passports, computer software, and credit cards.

We can track and trace from production to ultimate consumption when coupled with

our VeriPAS™

proprietary software.

our proprietary brand protection software.

The Opportunity

We believe our brand protection products

have applications in many areas.

We believe our brand protection products have

applications in many areas.

Currently, we are aggressively marketing opportunities in the following:

Consumer Products –

Counterfeit items are a significant and growing

problem with all kinds of consumer-packaged goods, especially in the luxury retail and apparel industries.

We believe our technologies

are particularly suited for the cosmetics, health and beauty and apparel industries.

We give the consumer the ability to test a

products authenticity instantly with a smartphone.

We can protect brand owners from liability litigation, product diversion and

lost financial sales with our unique ink pigments which can be incorporated in dyes and used by manufacturers in these industries

to combat counterfeiting and piracy of actual physical goods.

Our pigments expressed as inks can also be used on packaging, as

well as to track products that have been lost in transit, whether misplaced or stolen.

We currently have a contract to assist with

securing certain cosmetic products.

Pharmaceuticals/nutraceuticals –

We believe counterfeit prescription

pharmaceuticals are a growing trend, widely recognized as a public health risk and a serious concern to public health officials,

private companies, and consumers.

Counterfeiting can apply to both branded and generic products and counterfeit pharmaceuticals

may include products with the correct ingredients but fake packaging, with the wrong ingredients, without active ingredients or

with insufficient active ingredients.

The United States enacted legislation requiring the implementation of a comprehensive system

designed to combat counterfeit, diluted or falsely labelled pharmaceuticals, referred to as serialization or electronic pedigree

(e-Pedigree).

Our unique pigments embedded in the ink of a unique serialized barcode can provide a layered security foundation

for a customer solution in this market.

We are seeking to expand our business in this market and believe that as additional pharmaceutical

companies seek to comply with the legislation we believe our products will provide attractive alternatives to address the need

for product identifiers.

We expect to engage third-party marketing and sales companies to present our solutions to the drug and

pharmaceutical industry.

Food and Beverage –

Counterfeit food threats are becoming more common

as supply chains become more global and as imaging and manufacturing technology become more accessible.

We believe our pigments

and authentication tools can help in the battle against counterfeit foods and beverages.

We are currently marketing our products

· Consumer Products – Counterfeit items are a significant and growing problem with all kinds of consumer-packaged

goods, especially in the luxury retail and apparel industries.

We believe our technologies are particularly suited for the cosmetics,

health and beauty and apparel industries.

We give the consumer the ability to test a products authenticity instantly with a smartphone.

We can protect brand owners from liability litigation, product diversion and lost financial sales with our consumer facing visible codes

and unique ink pigments which can be incorporated in dyes and used by manufacturers in these industries to combat counterfeiting and piracy

of actual physical goods.

Our pigments expressed as inks can also be used on packaging, as well as to track products that have been lost

in transit, whether misplaced or stolen.

· Pharmaceuticals/nutraceuticals – We believe counterfeit prescription pharmaceuticals and nutraceuticals

are a growing problem, widely recognized as a public health risk and a serious concern to public health officials, private companies,

and consumers.

Counterfeiting can apply to both branded and generic products and counterfeit pharmaceuticals may include products with

the correct ingredients but fake packaging, with the wrong ingredients, without active ingredients or with insufficient active ingredients.

The United States enacted legislation requiring the implementation of a comprehensive system designed to combat counterfeit, diluted or

falsely labelled pharmaceuticals, referred to as serialization or electronic pedigree (e-Pedigree).

Our consumer facing visible codes

and unique pigments embedded in the ink of a unique serialized barcode can provide a layered security foundation for a customer solution

in this market.

We are seeking to expand our business in this market and believe that as additional pharmaceutical companies seek to comply

with the legislation, we believe our products will provide attractive alternatives to address the need for product identifiers.

· Food and Beverage – Counterfeit food threats are becoming more common as supply chains become more

global and as imaging and manufacturing technology become more accessible.

We believe our pigments and authentication tools can help in

the battle against counterfeit foods and beverages.

We are currently marketing our products in this market.

In addition, in

each of these markets, our SaaS software allows brand owners and consumers to track the products and will alert the

consumer or brand

owner of counterfeit or product diversion with 24-7 monitoring.

As each product has a unique code, this allows

consumers and brand owners to authenticate the

product in real time and link directly to the brand owner’s website for additional product information, discounts, and more.

Our Raw Material Suppliers

Our security pigments are manufactured

from naturally occurring inorganic rare earth materials.

Our security pigments are manufactured from naturally

occurring inorganic rare earth materials.

The manufacturing process includes both chemical and mechanical elements.

In many cases, we produce pigments that are unique to a customer or product line.

This uniqueness can be achieved through a variety

of techniques, including custom formulation or combination of our proprietary pigments and/or incorporation of other specialized

There are many manufacturers of these types of specialized pigments and we intend to maintain multiple simultaneous relationships

to ensure ample sources of supply.

In many cases, we

produce pigments that are unique to a customer or product line.

This uniqueness can be achieved through a variety of techniques, including

custom formulation or combination of our proprietary pigments and/or incorporation of other specialized taggants.

There are many manufacturers

of these types of specialized pigments, and we intend to maintain multiple simultaneous relationships to ensure ample sources of supply.

Accordingly, we are not dependent on any principal suppliers.

Manufacturing and Distribution

We rely on third-party strategic partners

to manufacture and distribute our RainbowSecure®

We provide these strategic partners with pigment mixing instructions

for the specific uses of each client based on their existing equipment and processes.

We maintain policies and procedures to monitor,

track and log access to and disposition of all pigment.

Our customers are also required to agree to and implement these policies

and procedures.

In relation to our other products, such our hand held VerifyMe Beeper and VeriPAS™

Smartphone Authenticator devices,

as well as our VerifyMe®

as Authentic®

tamper-proof labels, we provide instructions for the design of these products

and rely on our strategic partners for manufacturing and distribution.

We rely on third-party strategic partners to manufacture

and distribute our VerifyInk TM products.

We provide these strategic partners with

pigment mixing instructions for the specific uses of each client based on their existing equipment and processes.

We maintain policies

and procedures to monitor, track and log access to and disposition of all pigment.

Our customers are also required to agree to and implement

these policies and procedures.

In relation to our other products, such our hand held VerifyChecker™

and VerifyAuthenticator TM Smartphone Authenticator devices, as

well as our VerifyLabel™ tamper-proof labels, we provide instructions for the design of these products and rely on our strategic

partners for manufacturing and distribution.

Our Intellectual Property

Intellectual property is important to our

The current patent and trademark portfolios consist of eleven granted US patents and one granted European patent

validated in four countries, nine pending US and foreign patent applications, six registered US trademarks, two EU trademark registrations,

one Colombian trademark registration, one Australian trademark registration, one Japanese trademark registration, one Mexican trademark

registration, one Singaporean trademark registration, and four pending US and foreign trademark applications.

In addition, seven patent applications

are abandoned.

We plan on considering filing for revival of some of the abandoned patent applications.

We have attempted to achieve sufficient

flexibility in our products and technologies so as to provide cost-effective solutions to a wide variety of counterfeiting problems.

We intend to generate revenues primarily by selling pigment to manufacturers who incorporate our technologies into their manufacturing

processes and their products as well as through licensing fees where we are providing unique or custom solutions.

Intellectual property is important to our business.

current patent and trademark portfolios consist of eleven granted US patents and one granted European patent validated in four countries,

seven pending US and foreign patent applications, six registered US trademarks, two EU trademark registrations, one Colombian trademark

registration, one Australian trademark registration, one Japanese trademark registration, one Mexican trademark registration, one Singaporean

trademark registration, two UK trademark registrations, and nineteen pending US and foreign trademark applications.

We have attempted to achieve sufficient flexibility

in our products and technologies to provide cost-effective solutions.

We intend to generate revenues through our custom suite of products,

providing consumer engagement, authentication, track and trace and web brand monitoring.

We are developing the ability to link digital

NFTs to physical products using our patented dual-code technology, as part of our authentication solutions.

While some of our granted patents are commercially

ready, we believe that others may have commercial application in the future but will require additional capital and/or a strategic

partner in order to reach the potential markets.

ready, we believe that others may have commercial application in the future but will require additional capital and/or a strategic partner

in order to reach the potential markets.

All of our patents are related to the inventions described above.

Our registered

patents expire between the years 2021 and 2038.

The expiration date of a pending application that matures into a registration depends

upon the issuance date and any adjustment under 35 U.S.C.

It is cost prohibitive to register patents

in every country.

We continue to develop new anti-counterfeiting technologies and we apply for patent protection for these technologies

in countries with the most market potential and strong patent enforcement tools.

When a new product or process is developed, we

may seek to preserve the economic benefit of the product or process by applying for a patent in each jurisdiction in which the

product or process is likely to be exploited.

The issuance of

a patent is considered prima facie evidence of validity.

The granting of a patent does not prevent a third party from seeking

a judicial determination that the patent is invalid.

Our registered patents expire

between the years 2022 and 2039.

The expiration date of a pending application that matures into a registration depends upon the issuance

date and any adjustment under 35 U.S.C.

It is cost prohibitive to register patents in

every country.

We continue to develop new anti-counterfeiting technologies and we apply for patent protection for these technologies in

countries with the most market potential and strong patent enforcement tools.

When a new product or process is developed, we may seek

to preserve the economic benefit of the product or process by applying for a patent in each jurisdiction in which the product or process

is likely to be exploited.

The issuance of a patent

is considered prima facie evidence of validity.

The granting of a patent does not prevent a third party from seeking a judicial

determination that the patent is invalid.

Such challenges to the validity of a patent are not uncommon and can be successful.

There can be no assurance that a challenge will not be filed to one or more of our patents, if granted, and that if filed, such

a challenge will not be successful.

We have trademarked the VerifyMe TM

brand in the United States and have registered and pending applications with respect to our brand internationally.

our name and brand could be confused with brands that have similar names, including but not limited to Verified.Me, a service offered

to Canadians by SecureKey Technologies Inc.

We have a pending application for the VerifyMe name in Canada but can make no assurances

regarding its approval.

We are aware of names and marks similar to our service marks being used from time to time by other persons

that could result in confusion and may diminish the value of our brands and adversely affect our business.

See Item 1A “Risk

Factors”

for additional information regarding the risk of confusion of our name with other brands and other intellectual

property risks.

Prior to 2019,

we had been involved primarily in research and development since our inception.

Through 2012, our research and development focused

on pigment technologies.

be no assurance that a challenge will not be filed to one or more of our patents, if granted, and that if filed, such a challenge will

not be successful.

We have trademarked the VerifyMe TM brand

in the United States and have registered and pending applications with respect to our brand internationally.

However, our name and brand

could be confused with brands that have similar names, including but not limited to Verified.Me, a service offered to Canadians by SecureKey

Technologies Inc.

We have a pending application for the VerifyMe name in Canada but can make no assurances regarding its approval.

are aware of names and marks similar to our service marks being used from time to time by other persons that could result in confusion

and may diminish the value of our brands and adversely affect our business.

See Item 1A “Risk Factors” for additional information

regarding the risk of confusion of our name with other brands and other intellectual property risks.

Research and Development

Prior to 2019, we had

been involved primarily in research and development since our inception.

Through 2012, our research and development focused on pigment

technologies.

From 2012 through 2018, we allocated research and development efforts between digital and pigment technologies.

Since 2019 our primary focus has shifted from research and development to commercialization of our products.

Current research and

development efforts are focused on expanding our technology into new areas of implementation and to develop unique customer applications.

We spent approximately $19 thousand and $5 thousand during the years ended December 31, 2020 and 2019, respectively, on research

and development.

We are now researching the conversion of our VeriPAS™

cloud-based platform into an Ethereum de-centralized blockchain network to increase its security.

We are looking at an existing

Ethereum Blockchain-as-a-Service ("BaaS") platform system that we would upgrade with our patented digital features.

goal for the new platform will be to provide a comprehensive blockchain platform offering product lifecycle management, supply

chain process control, data mining, consumer engagement, product certification, and process certification.

We envision that this

new blockchain network could be utilized by any sized business, to further enhance brand protection and value as well as to possibly

enable us to expand into new business models.

our primary focus has shifted from research and development to commercialization of our products.

Current research and development efforts

are focused on expanding our technology into new areas of implementation and to develop unique customer applications.

We spent approximately

$51 thousand and $19 thousand during the years ended December 31, 2021, and 2020, respectively, on research and development.

We are now researching the development of a complimentary

blockchain version of our brand protection cloud-based platform into a de-centralized blockchain smart contract network such as Etherum,

Cardano, VeChain, Solana, Polygon or other De-Fi blockchains to increase security and allow for the linking of digital NFTs to physical

We are in early stages of scoping this Blockchain-as-a-Service ("BaaS") platform system that we would upgrade with

our patented digital features.

Our goal for the new platform will be to provide a comprehensive blockchain platform offering product lifecycle

management, supply chain process control, data mining, consumer engagement, product certification, and process certification.

that this new blockchain network could be utilized by any sized business, to further enhance brand protection and value as well as to

possibly enable us to expand into new business models.

Traditional QR codes are an open-source technology

and are being used in various financial scams and the loading of viruses into devices who scan the codes.

VerifyMe is researching the

development of a proprietary code that runs in a closed secure cloud-based environment that scammers and virus threats cannot compromise

or penetrate.

These proprietary codes are intended to replace QR codes for clients seeking additional security for their products.

Sales and Marketing

13 unchanged sentences

· Product images on a website are often all the consumer has, to view and inspect prior to the sale.

We view this is a major opportunity to

address this growing problem.

We view this is a major opportunity to address

this growing problem.

VerifyMe has developed two strategies to address the growing e-commerce counterfeiting issue.

VerifyMe®

as Authentic®

tamper proof labels.

This new pre-printed product is sold to large

and small brand owners who want to provide their customers with the ability to instantly authenticate their product upon receipt using

their customers own smartphone camera.

The brand owner works with us to design the label and its security features and we manufacture

the labels, through our strategic partnerships, and sell them to the brand owner to affix to their products for their customer to authenticate.

As a side benefit the brand owner has the ability to engage with its customer and gather business intelligence about them.

VerifyMe®

Web TM is another new e-commerce product line that VerifyMe markets

to brand owners.

This product is a search tool that brand owners subscribe to which reports back to the brand owner any counterfeit

websites and or counterfeit products that are found on the internet.

VerifyMe provides reports to the brand owner and shuts down

the counterfeiting sites and products by legal means.

In our opinion, standard historical optical security features

such as holograms and Yellow UV Ink are still used but their effectiveness and usage are declining.

VerifyLabel™ tamper proof labels.

This new pre-printed product is sold to large and small

brand owners who want to provide their customers with the ability to instantly authenticate their product upon receipt using their customers

own smartphone camera.

The brand owner works with us to design the label and its security features, and we manufacture the labels, through

our strategic partnerships, and sell them to the brand owner to affix to their products for their customer to authenticate.

benefit the brand owner has the ability to engage with its customer and gather business intelligence about them.

VerifyMe Online™ is another new e-commerce product

line that VerifyMe markets to brand owners.

This product is a search tool that brand owners subscribe to which reports back to the brand

owner any counterfeit websites and or counterfeit products that are found on the internet.

VerifyMe provides reports to the brand owner

and shuts down the counterfeiting sites and products by legal means.

We believe standard optical security features

such as holograms and Yellow UV Ink are still heavily used but are easily compromised and as a result have lost their effectiveness.

owners have advised us that counterfeiters are able to replicate or circumvent holograms and UV Ink technologies.

We therefore recommend

that holograms and UV Inks should only be used as decoys for more effective technologies such as VerifyInk™

Our product line has a standard optical feature

known as RainbowSecure®

Security Ink Taggant.

The differentiator between our standard ink taggant feature and existing products is

that our RainbowSecure®

feature can be printed on digital presses making each label, package, or product completely unique with its

own digital signature.

In addition, our invisible code can be read into the cloud with a smartphone.

This solution is invisible to the

human eye, and each code is unique and stored in the cloud for each product, thereby preventing a counterfeiter from matching the codes

to products that contain our RainbowSecure®

known as VerifyInk TM Security Ink Taggant.

The differentiator between our standard

ink taggant feature and existing products is that our VerifyInk TM feature can

be printed on digital presses making each label, package, or product completely unique with its own digital signature.

In addition, our

invisible code can be read into the cloud with a smartphone.

This solution is invisible to the human eye, and each code is unique and

stored in the cloud for each product, thereby preventing a counterfeiter from matching the codes to products that contain our VerifyInk TM

Our software also provides intelligent monitoring capabilities.

if a counterfeit is suspected or a product is not in the correct location (i.e.

For example, if a counterfeit is suspected or a product is not

in the correct location (i.e.

product diversion) the brand owner is alerted by our software.

In conjunction with HP Indigo, we have modernized RainbowSecure®

by creating unique signatures in the form of invisible codes that can be imbedded onto labels, packages and products that can be

read with a smartphone into a supply chain management cloud-based software known as VeriPAS™.

We market directly with HP Indigo to owners

of the 6000 series and HP Indigo 7900 series digital presses as well as the label and packaging printing industry, including both

traditional and digital printers and users to address their clients’

needs for our covert serialization.

We expect those

printers to market and resell our technologies to both current and future brand owner clients.

HP Indigo has trained their international

digital press salesforce in various security printing technologies including our RainbowSecure®

and VeriPAS™

technologies.

HP Indigo sales people have generated multiple leads on our behalf.

In 2017, we entered into a five-year contract with HP to supply

HP Indigo digital press ink canisters containing our RainbowSecure®

pigment for use by HP Indigo digital press owners who print

our security feature on labels and packages for their brand owners.

Additionally, we enter into reseller agreements with print

service providers.

Pursuant to one of these agreements, a global label manufacturer began printing our technology in July 2018

and has major brand owners as clients which can utilize our technologies to protect their product labels and packaging from counterfeiting

and product diversion.

This label printer owns and operates printers and manufacturing equipment which can implement our technology.

In conjunction with HP Indigo, we have modernized

VerifyInk TM by creating unique signatures in the form of invisible codes that

can be imbedded onto labels, packages and products that can be read with a smartphone into a supply chain management cloud-based software

known as VerfiyMe™ brand authentication portal.

We market directly with HP Indigo to owners of

the 6000 series and HP Indigo 7900 series digital presses as well as the label and packaging printing industry, including both traditional

and digital printers and users to address their clients’ needs for our covert serialization.

We expect those printers to market

and resell our technologies to both current and future brand owner clients.

HP Indigo has trained their international digital press salesforce

in various security printing technologies including our VerifyInk TM and visible

brand protection technologies.

HP Indigo’s salespeople have generated multiple leads on our behalf.

In 2017, we entered into a five-year

contract with HP to supply HP Indigo digital press ink canisters containing our VerifyInk TM

pigment for use by HP Indigo digital press owners who print our security feature on labels and packages for their brand owners.

Additionally,

we enter into reseller agreements with print service providers.

Pursuant to one of these agreements, a global label manufacturer began

printing our technology in July 2018 and has major brand owners as clients which can utilize our technologies to protect their product

labels and packaging from counterfeiting and product diversion.

This label printer owns and operates printers and manufacturing equipment

which can implement our technology.

This reseller also has manufacturing facilities around the globe.

In addition to the printing industry,

we expect to market directly to all brand owners who utilize labels and packaging for their products.

Brand owners can be licensed

directly with us and direct their personal printer to print their labels and packaging with our printing technologies.

owner will therefore pay their royalties directly to us based on the number of labels and packages units to which their printer

applied the technology.

In 2019, we entered into a leasing agreement and purchase agreement with a major brand owner who is on

the Forbes Top 50 Private Companies list.

The brand owner began printing labels that include our product in the fourth quarter

of 2019 and, in 2020, we received notice that this client plans to add additional products and three additional countries Japan,

Vietnam and Taiwan.

To date, we have derived limited revenue from this contract.

In addition to the printing industry, we expect

to market directly to all brand owners who utilize labels and packaging for their products.

Brand owners can be licensed directly with

us and direct their personal printer to print their labels and packaging with our printing technologies.

The brand owner will therefore

pay their royalties directly to us based on the number of labels and packages units to which their printer applied the technology.

2019, we entered into a leasing agreement and purchase agreement with a major brand owner who is on the Forbes Top 50 Private Companies

The brand owner began printing labels that include our product in the fourth quarter of 2019 and, in 2020, we received notice that

this client plans to add additional products and three additional countries Japan, Vietnam and Taiwan.

To date, we have derived limited

revenue from this contract.

In lieu of building, training, and supporting

2 unchanged sentences

These strategic partnerships include both paid and commissioned sales only contract arrangements.

These strategic partners are located in the Middle East, Europe, United Kingdom, India, China and Pakistan.

We plan to continue to build

new strategic partnerships throughout the globe.

We have also established a network of commission only paid consultants within the United

These strategic partners are located in the Middle East, Europe, United Kingdom, India, South Africa, United Arab Emirates, China and

We plan to continue to build new strategic partnerships throughout the globe.

We have also established a network of commission

only paid consultants within the United States.

These consultants mainly focus on brand owners, and they are not constricted geographically.

We have also entered into commissioned

sales contract arrangements with the global sales staff of our vendors, HP Indigo and S-One.

We have also entered into commissioned sales contract arrangements with the global sales staff of our vendors, HP Indigo and S-One.

We have a strategic partnership with S-One pursuant

2 unchanged sentences

Under the terms of our agreement with S-One, S-One acts as a sales

and marketing contractor for our printed products and services on a global basis to mainly print service providers (“PSP”)

and assists us in fulfilling our obligations under our current and future reseller agreements with various global and domestic PSPs and

brand owners.

In addition, we have cross-selling agreements

with some of our strategic partners.

Micro Focus, our track and trace partner, has agreed to cross sell our technologies as part

of their GPAS.

We are also contracted with Micro Focus to re-sell their GPAS product with our RainbowSecure®

and our VeriPAS™

Smartphone Authenticator technology under our own trademarked name, VeriPAS™.

Additionally, entered into a cross-selling

agreement with SmartGlyph in 2020, pursuant to which we have agreed to integrate our technologies with their barcodes and multi-faceted,

“software only”

coding platform and sell to our respective customers.

We plan for our sales and marketing strategy

to include an outreach program and sales programs that tailor the product to the governmental body or merchant, as well as key

partnerships with authorities and merchants whose products or audiences can be complementary to our own.

In particular, we intend

to focus on building relationships with key partners who can deliver our products to their existing and prospective customers in

target markets, i.e., commercial printers/packagers, plastic card manufacturers and financial services intermediaries.

into an agreement with OWS Capital to market, promote and sell our security authentication technology solutions to the UAE government

and companies located in the Middle East.

HP Indigo’s Experience Centers located in Tel Aviv, Israel, Singapore, Barcelona,

Spain and Alpharetta, Georgia have all been trained and outfitted with samples, including our VerifyMe Beepers, and VeriPAS™

Smartphone Authenticators, to demonstrate the technology to customers who visit the centers.

Customers can perform tests and receive

hands on experience with our technologies.

In addition, we collaborated with HP Indigo

at the Asia Security Group Virtual High Security Printing & Brand Protection Conference & Exhibition in December 2020 to

showcase our RainbowSecure®

solution on HP Indigo’s digital printing presses.

HP Indigo also invited us to man a station

in the security printing sections of their trade show booths such as the global LabelExpo show held in Brussels, Belgium in September

2019 and in Singapore in March 2019.

HP Indigo has us display solutions at their annual VIP print service provider event held in

Tel Aviv every year as well as invited VerifyMe to attend other trade shows in 2020, however, due to the COVID-19 pandemic, these

shows were postponed or cancelled.

In addition, we have cross-selling agreements with some of our strategic partners.

We plan for our sales and marketing strategy to

include an outreach program and sales programs that tailor the product to the governmental body or merchant, as well as key partnerships

with authorities and merchants whose products or audiences can be complementary to our own.

In particular, we intend to focus on building

relationships with key partners who can deliver our products to their existing and prospective customers in target markets, i.e., commercial

printers/packagers, plastic card manufacturers and financial services intermediaries.

We entered into an agreement with OWS Capital to

market, promote and sell our security authentication technology solutions to the UAE government and companies located in the Middle East.

HP Indigo’s Experience Centers located in Tel Aviv, Israel, Singapore, Barcelona, Spain and Alpharetta, Georgia have all been trained

and outfitted with samples, including our VerifyChecker™ , and VerifyAuthenticator TM Smartphone

Authenticators, to demonstrate the technology to customers who visit the centers.

Customers can perform tests and receive hands on experience

with our technologies.

Due to the strong security background of our management

team, we have undertaken a major overhaul of our website to position us as a “one stop shop”

for brand protection technologies,

team, we have undertaken a major overhaul of our website to position us as a “one stop shop” for brand protection technologies,

and as an expert advisor to brand owners to consult with them on their brand protection issues.

Our new website is expected to launch

in mid-April 2021.

In addition to the website, a new social media advertising program will be launched to targeted customers.

In addition to the website and social media expansion, we have

recently signed on new salespeople from a large competitor to enhance our sales team.

We anticipate that additional hiring of experienced

salespeople will continue for the foreseeable future.

Our new website launched in mid-April

In addition to the website, a new social media advertising program was launched to targeted customers.

In addition to the website and social media expansion, we have recently

signed on new salespeople from a large competitor to enhance our sales team and believe we are now well positioned to grow our revenue.

The market for protection from counterfeiting,

diversion, theft and forgery is a mature industry dominated by a number of large, well-established companies, particularly in the

area of traditional overt security technologies where repeating static produced images are commonly used.

Security printing for

currency production began in Europe over a century ago and has resulted in the establishment of old-line security printers which

have branched out into brand and product protection as well.

In North America, brand protection products, such as tamper-resistant

packaging, security labels, and anti-theft devices are readily available and utilized on a widespread basis.

In recent years, however,

demand has increased for more sophisticated overt and covert security technologies with a strong desire for technologies that can

provide variable images and data.

Competitors can be segregated into the following groups:

(i) security ink manufacturers who are

generally well-established companies whose core business is manufacturing and selling printing inks;

(ii) system integrators who

have often evolved from other sectors in the printing industry, mainly security printing manufacturers, technology providers, or

packaging and label manufacturers, and who typically offer a range of security solutions that enable them to provide a complete

suite of solutions tailored to the customer’s specific needs and requirements;

(iii) system consultancy groups who offer

a range of technologies from several different providers and tailor specific solutions to end-users;

(iv) traditional authentication

technology providers which provide holograms and digital watermarking;

(v) product diversion tracking providers which provide on-product

and in-product tagging technologies;

and (vi) traditional security printers whose core products are printing the world’s

In general, we believe competition in our principal markets is primarily driven by product performance, features and

diversion, theft and forgery is a mature industry dominated by a number of large, well-established companies, particularly in the area

of traditional overt security technologies where repeating static produced images are commonly used.

Security printing for currency production

began in Europe over a century ago and has resulted in the establishment of old-line security printers which have branched out into brand

and product protection as well.

In North America, brand protection products, such as tamper-resistant packaging, security labels, and

anti-theft devices are readily available and utilized on a widespread basis.

In recent years, however, demand has increased for more sophisticated

overt and covert security technologies with a strong desire for technologies that can provide variable images and data.

Competitors can

be segregated into the following groups:

(I) security ink manufacturers who are generally well-established companies whose core business

is manufacturing and selling printing inks;

(ii) system integrators who have often evolved from other sectors in the printing industry,

mainly security printing manufacturers, technology providers, or packaging and label manufacturers, and who typically offer a range of

security solutions that enable them to provide a complete suite of solutions tailored to the customer’s specific needs and requirements;

(iii) system consultancy groups who offer a range of technologies from several different providers and tailor specific solutions to end-users;

(iv) traditional authentication technology providers which provide holograms and digital watermarking;

(v) product diversion tracking

providers which provide on-product and in-product tagging technologies;

and (vi) traditional security printers whose core products are

printing the world’s currencies.

In general, we believe competition in our principal markets is primarily driven by product performance,

features and liability;

ease of implementation, technology effectiveness, digital instant verification;

new laws and regulations;

innovation and timing of new product introductions;

product innovation and timing of new product introductions;

ability to develop, maintain and protect proprietary products and technologies;

3 unchanged sentences

applications support;

and breadth of product

In 2020, new blockchain as a service (“BAAS”)

and breadth of product line.

In 2020, new blockchain as a service (“BAAS”)

technology companies have surfaced.

1 unchanged sentence

de-centralized blockchain networks to authenticate and validate products as well as traditional supply chain management including serialization,

track and trace and internet of things (“IoT”) connectivity using codes, near field communication and RFID chips.

that converting our VeriPAS™

cloud-based platform into a de-centralized blockchain network will allow us to compete in this space

track and trace and internet of things (“IoT”) connectivity using codes, near field communication and RFID chips.

that converting our brand protection cloud-based platform into a de-centralized blockchain network will allow us to compete in this space

with the advantage of blending our physical technologies for an enhanced product offering.

Amazon has become a competitor with their

new “Project Zero”

brand protection system utilizing their “Transparency”

serialization product.

Amazon’s

product serialization service provides a unique code for every unit that is manufactured, and the brand puts these codes on its

products as part of its manufacturing process, which Amazon scans and verifies.

This differs from our covert luminescent pigment

which is incorporated in the labeling process and our invisible covert serialization and authentication solution.

Amazon has become a competitor with their new

“Project Zero” brand protection system utilizing their “Transparency” serialization product.

Amazon’s product

serialization service provides a unique code for every unit that is manufactured, and the brand puts these codes on its products as part

of its manufacturing process, which Amazon scans and verifies.

This differs from our covert luminescent pigment which is incorporated

in the labeling process and our invisible covert serialization and authentication solution.

Also, HP Indigo is selling a yellow ultraviolet

ink and a color changing ink as a security product at inexpensive prices that directly competes with our products.

number of providers of inexpensive ultraviolet inks in the marketplace, however, we believe these inexpensive ultraviolet inks

do not provide the level of security and safety that our products provide.

New types of security competition are also

increasing, such as retail website monitoring, brand investigations, RFID and near field communications products using low powered

radio signals to connect to products.

To compete effectively, we are seeking

to establish key relationships with major digital solution equipment and distribution providers as we have done with HP Indigo.

While leveraging these relationships, we still expect that we will need to expend significant resources in sales and marketing.

Many of our competitors have substantially greater financial, human and other resources than we have.

As a result, we may not have

sufficient resources to develop and market our services to the market effectively.

We expect competition with our products and

services to continue and intensify in the future.

There are a number

of providers of inexpensive ultraviolet inks in the marketplace, however, we believe these inexpensive ultraviolet inks do not provide

the level of security and safety that our products provide.

New types of security competition are also increasing, such as retail website

monitoring, brand investigations, RFID and near field communications products using low powered radio signals to connect to products.

Competition is building in the consumer engagement

market as more companies enter the space but are using mainly NFC technology imbedded into apparel.

In addition to this technology, we

have the ability to print labels on more applications including fabrics and metals.

To compete effectively, we are seeking to establish

key relationships with major digital solution equipment and distribution providers as we have done with HP Indigo.

While leveraging these

relationships, we still expect that we will need to expend significant resources in sales and marketing.

Many of our competitors have

substantially greater financial, human and other resources than we have.

As a result, we may not have sufficient resources to develop

and market our services to the market effectively.

We expect competition with our products and services to continue and intensify in the

Major Customers/Vendors

During the year ended December 31, 2020,

two customers accounted for 92% of total sales.

During the year ended December 31, 2019, two customers accounted for

97% of total sales.

Generally, a substantial percentage of the Company's sales has been made to a small number of customers and

is typically on an open account basis.

During the years ended December 31, 2020 and 2019, the Company

purchased 100% of pigment from one vendor.

Additionally, during the years ended December 31, 2020 and 2019, the Company purchased

100% of canisters from one vendor.

As of December 31, 2020, two customers

accounted for 96% of total accounts receivable.

During the year ended December 31, 2021, five

customers accounted for 95% of total sales.

During the year ended December 31, 2020, two customers accounted for 92% of total

Generally, a substantial percentage of the Company's sales has been made to a small number of customers and is typically on an

open account basis.

During the years ended December 31, 2021, and

2020, the Company purchased 100% of pigment from one vendor.

Additionally, during the years ended December 31, 2021, and 2020, the Company

purchased 100% of canisters from one vendor.

As of December 31, 2021, three customers accounted

for 91% of total accounts receivable.

As of December 31, 2020, two customers accounted for 96% of total accounts receivable.

Employees and

External Sales Force

As of March 19, 2021, we had three full-time employees, our

Chief Executive Officer, our Chief Financial Officer, our Director of Sales and Business Development, North America, one part-time

employee, our Chief Technology Officer, and four paid consultants, including our Chief Operating Officer and our Chairman.

of the nature of our business, our employees and consultants can, and do, conduct their work for us remotely.

Employees and External

As of March 7, 2022,

we had seven full-time employees, one part-time employee, and several paid consultants.

Because of the nature of our business, our employees

and consultants can, and do, conduct their work for us remotely.

In lieu of building,

3 unchanged sentences

sales only contract arrangements.

These strategic partners are located in the Middle East, Europe, United Kingdom, India, China

and Pakistan.

These strategic partners are located in the Middle East, Europe, United Kingdom, India, South Africa,

United Arab Emirates, China and Pakistan.

We plan to continue to build new strategic partnerships throughout the globe.

We have also established a network of over a dozen commission-paid

sales consultants within the United States.

These consultants mainly focus on brand owners and they are not constricted geographically.

We have also entered into commissioned sales contract arrangements

with the global sales staff of our vendors, HP Indigo and S-One.

We have also established

a network of over a dozen commission-paid sales consultants within the United States.

These consultants mainly focus on brand owners,

and they are not constricted geographically.

We have also entered

into commissioned sales contract arrangements with the global sales staff of our vendors, HP Indigo and S-One.

Available Information

We make available

free of charge on our website, www.verifyme.com, all materials that we file electronically with the Securities and Exchange Commission

(“SEC”), including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and

amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended

(the “Exchange Act”), as soon as reasonably practicable after electronically filing such materials with, or furnishing

them to, the SEC.

We have not incorporated by reference into this Report the information included, or that can be accessed through,

our website and you should not consider it to be part of this Report.

The SEC maintains

an Internet website, www.sec.gov that contains reports, proxy and information statements and other information that we file electronically

We make available free

of charge on our website, www.verifyme.com, all materials that we file electronically with the Securities and Exchange Commission (“SEC”),

including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports,

filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),

as soon as reasonably practicable after electronically filing such materials with, or furnishing them to, the SEC.

We have not incorporated

by reference into this Report the information included, or that can be accessed through, our website and you should not consider it to

be part of this Report.

The SEC maintains an

Internet website, www.sec.gov that contains reports, proxy and information statements and other information that we file electronically

with the SEC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business