What changed in this filing

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Item 1A. Risk Factors

2023-03-28 compared with 2022-03-14 · 682 added, 470 removed, 193 unchanged (86% of the section changed)

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stock could decline due to any of these risks or uncertainties, and you may lose part or all of your investment.

Risks Relating to the COVID-19 Pandemic

Our business, results of operations and

financial condition may be adversely impacted by the coronavirus (“COVID-19”) pandemic .

The COVID-19 pandemic

has negatively affected the U.S.

and global economy, resulted in significant travel restrictions, including mandated closures and orders

to “shelter-in-place,” and created significant disruption of the financial markets.

We are closely monitoring the impact of

the COVID-19 pandemic on all aspects of our business, including how it will impact our customers, employees, suppliers and sales network.

To date, the COVID-19 pandemic has limited our attendance at trade shows and other in-person events that would allow us to expand our

customer base and increase global awareness.

Furthermore, while we capitalized on new market developments created by the COVID-19 pandemic,

our operations were affected by delays in orders and postponement of sales negotiations.

The extent to which our operations may continue

to be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately

predicted, including the duration and spread of the outbreak, the effectiveness of vaccines and speed of distribution of any.

the COVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting economic recession

or depression.

Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to and volatility

in the financial markets remain unknown.

The impact of the COVID-19 pandemic may also exacerbate

other risks discussed in this section, any of which could have a material effect on us.

The COVID-19 pandemic has resulted in prohibitions

of non-essential activities, disruption and shutdown of businesses, travel restrictions, and the cancellation and postponement of conferences

and in-person meetings, which could negatively impact our sales and results of operations .

After an approximately one-year

COVID-19 related hiatus we begun attending sales conferences and other in-person sales, events in September of 2021.

Such events are not

at full capacity due to the ongoing pandemic, and we cannot predict if we will need to suspend these activities again.

Our employees travel

frequently to establish and maintain relationships with our customers and partners and attend sales-conferences.

Currently, there are

still many work and travel restrictions related to the ongoing pandemic, requiring some activities to be conducted remotely which might

be less effective than in-person meetings.

We do not yet know the extent of the negative impact on our ability to attract, serve, or retain

We continue to monitor the situation and as restrictions start easing and safety measures are heightened globally, we will

continue to allow limited travel for key in-person business meetings.

The overall travel strictions could negatively impact our marketing

and business development efforts and create operational or other challenges, any of which could harm our business, financial condition

and results of operations.

The COVID-19 pandemic may decrease demand

for our products and any such decrease in demand would adversely affect our revenues and results of operations .

We are unsure

what actions our customers may take in response to the COVID-19 pandemic.

Health concerns, as well as political or governmental developments

in response to COVID-19, could result in economic, social or labor instability or prolonged contractions in the industries in which our

customers or partners operate, which could reduce the amount of packaging they print, which would reduce out sales.

Furthermore, existing

and potential customers may choose to reduce or delay spending in response to the COVID-19 pandemic, or attempt to renegotiate contracts

and obtain concessions, which may materially and negatively impact our operating results, financial condition and prospects.

We have a small management team and if any

of our employees or management suffer COVID-19 related illnesses, our business operations may be materially and adversely affected .

The COVID-19 pandemic could disrupt our operations due to absenteeism by infected or ill members of management or other employees because

of our limited staffing.

COVID-19 related illness could also impact members of our Board of Directors resulting in absenteeism from meetings

of the directors or committees of directors and making it more difficult to convene the quorums of the full Board of Directors or its

committees needed to conduct meetings for the management of our affairs.

Risks Relating to Our Business

Our investment

in G3 VRM Acquisition Corp.

(the “SPAC”) could be lost if the SPAC is unable to consummate a business combination or if its

business combination proves unsuccessful.

On July 6, 2021, we acted

as the sponsor for the initial public offering of G3 VRM Acquisition Corp, a special purpose acquisition company, or SPAC, through a contribution

into the SPAC’s sponsor, G3 VRM Holdings LLC, or the Sponsor Entity.

The Sponsor Entity holds founder shares equal to 20% of

the shares underlying the Units issued in the SPAC IPO (less 210,000 founder shares issued to the officers and certain directors of the

SPAC), plus 516,280 shares underlying private placement units purchase by the Sponsor Entity in connection with the SPAC’s IPO.

Our investment in the SPAC through the Sponsor Entity equaled approximately $2,593 thousand, and our ownership in the Sponsor Entity is

The Sponsor Entity and all holders of founder shares and private placement securities have agreed to waive any right to distributions

under the trust established for the benefit of the SPAC’s public shareholders.

Accordingly, if the SPAC is unable to complete its

initial business combination within 12 months from the closing of the IPO (or 15 or 18 months from the closing of the IPO, if we and the

co-sponsor extend the period of time to consummate a business combination by depositing additional funds into the trust account as described

in more detail in IPO prospectus), the SPAC will redeem 100% of the public shares for cash, the rights will expire worthless, and the

founder shares and the private placement securities will be worthless.

Even if the SPAC is able to complete a business combination within

the allotted time, if the combined company is unable to maintain adequate results from operations, then our investment in the SPAC could

lose value and may ultimately become worthless.

There can be no assurance that the SPAC will complete a business combination within the

allotted time or that any such business combination will be successful.

As a company with significant revenues deriving

from clients in the cannabis industry, we face many unique and evolving risks.

We currently derive significant revenues from

clients in the cannabis industry from use of our track and trace and customer engagement technologies.

As such, any risks related to the

cannabis industry may adversely impact our clients, and potential clients, which may in turn, impact the demand for our products and services.

Specific risks impacting the cannabis industry include, but are not limited, to the following:

United States federal law

prohibits Marijuana

Under the Controlled Substances

Act (“CSA”), marijuana is a Schedule-I controlled substance making it illegal under federal law to grow, cultivate, distribute,

sell or possess marijuana for any purpose or to assist or conspire with those who do so.

Although the use of marijuana is legal in certain

states under state law, since federal law supersedes state law, strict enforcement of federal law would likely result in adverse effects

on our clients’ operations, which would in turn, adversely impact our revenues.

Banking regulations could

limit access to banking services and expose us to risk

Funds received from our clients

in the cannabis industry, operating legally under state law, may subject us to a variety of federal laws and regulations involving money

laundering, financial record keeping and proceeds of crime, since the funds are considered illegal under the CSA and as such banks and

other financial institutions providing services to us risk violation of anti money laundering statutes and other applicable statutes.

Furthermore, banks often refuse to provide banking services to businesses involved in the cannabis industry due to the federal and state

laws and regulations governing financial institutions.

The difficulty and potential inability to open bank accounts that our clients in

the cannabis industry deal with, makes it difficult to conduct business and as such could affect our ability to collect revenues earned.

Furthermore, our clients in this industry are more susceptible to theft, and potentially lack the ability to insure themselves against

We may experience similar difficulties in obtaining banking and financial services because of the activities of our clients in

the cannabis industry.

The legality of cannabis

could be reversed in one or more states

The voters or legislatures

of states in which marijuana has already been legalized could potentially repeal applicable laws that permit the operation of both medical

and retail marijuana businesses.

These actions might force businesses, including those that are our clients, to cease operations in one or

more states entirely.

Additionally, these actions could negatively impact us and lead to a decrease of our revenue through the loss of

current and potential customers.

Recent and changing interpretations

of the law regarding medical and recreational use of marijuana

State laws and regulations

surrounding medical and recreational use of marijuana are fairly recent and constantly changing resulting in a potential challenge to

maintain compliance.

As such, violations of these laws, or allegations of such violations, could be disruptive to our clients’ business

and in return cause a disruption in our operations.

Future modifications of state and local laws surrounding marijuana, may limit operations

of our clients’ business in this industry, which could negatively impact our revenues.

Dependence on client licensing

Our clients in the cannabis

industry must obtain various licenses from various local and state licensing agencies.

As such, there is a risk that our existing clients

will not be able to retain their licenses going forward, should they violate applicable rules and regulations, or should renewal become

more stringent.

If our customers are not able to maintain or renew their licenses, this would adversely impact our operations.

Insurance Risk

Insurance companies may limit

policies to only cover claims legal under federal law.

As such our clients in the cannabis industry may not be properly insured.

against our clients may have a negative impact on our ability to collect revenues from our clients in the cannabis sector.

Global supply-chain delays and shortages may adversely impact

our customers or potential customers

We have engaged, and may engage in future,

acquisitions or strategic partnerships that increase our capital requirements, dilute our stockholders, cause us to incur debt or assume

contingent liabilities, and subject us to other risks.

We may evaluate various acquisitions and strategic

partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies or businesses.

in April 2022, we acquired the business of PeriShip, LLC (“PeriShip”) through our wholly owned subsidiary PeriShip Global

and in March 2023, we acquired the business of Trust Codes Limited, (“Trust Codes”) through our wholly owned subsidiary Trust

Codes Global Limited (“Trust Codes Global”).

To realize the anticipated benefits of these acquisitions, we must successfully

integrate these businesses with ours.

The integration of these businesses and any potential acquisition or strategic partnership entails

numerous risks, including:

increased operating expenses and cash requirements;

the assumption of indebtedness or contingent liabilities;

dilution of our stockholder’s equity due to the issuance of additional equity securities;

assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating

new personnel;

the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger

or acquisition;

retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;

our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition

or even to offset the associated acquisition and maintenance costs.

In addition, if we undertake acquisitions, we

may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could

result in significant future amortization expense.

Moreover, we may not be able to locate suitable acquisition opportunities and this

inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our

Our PeriShip Global Solutions segment relies on one key strategic

partner for shipping services for our customers and as a source for customers representing a substantial percentage of our revenues.

Our business is dependent, and we believe that

it will continue to depend, on our relationship with one strategic partner.

PeriShip Global partners with one major global carrier for

all its customers’ shipping needs.

While we work closely with this key strategic partner and have transportation services and pricing

agreements in place covering the shipping services they provide to our customers, such agreements are subject to termination or modification

from time to time.

If our strategic partner is unwilling or unable to supply to us the shipping services we market and sell on acceptable

terms, or at all, or otherwise elects to terminate its business relationship with us, we may not be able to obtain alternative shipping

services from other providers on acceptable terms, in a timely manner, or at all, and our business may be materially and adversely impacted.

We do not currently have any alternative shipping service suppliers from which we can obtain the shipping services we currently receive

from our strategic partner.

Establishing the necessary information technology infrastructure and business relationship with another shipping

services provider would be costly and time consuming and may ultimately not be successful or cost-effective.

Further, any increase in

the prices charged by our single strategic partner or failure to perform by our strategic partner could cause our costs to increase or

could cause us to experience short-term unavailability of shipping services on which our business relies.

In particular, delays and other shipping disruptions

at our strategic partner significantly negatively impact our business.

Our business involves the shipment of time and temperature sensitive

goods, so our customers are significantly negatively impacted by delays and other shipping disruptions that cause product loss, spoilage

and reputational harm.

An increase in delays and other shipping disruptions on the part of our strategic partner could cause our clients

to seek shipping solutions from our competitors who use alternative shipping service providers.

If these events occur, it may reduce our

profitability or may cause us to increase our prices.

In addition, any material interruptions in shipping services by this strategic partner

may result in significant cost increases and reduce sales, which could harm our business, financial condition and results of operations

and may have a material adverse impact on our business.

In addition to relying on this strategic partner

for shipping services, a significant portion of our revenue is generated through a service agreement pursuant to which this strategic

partner resells our services to its customers under a “white label” arrangement.

Under this arrangement we provide our logistics

services to our strategic partner’s customers in exchange for a pre-negotiated service fee per shipment.

Sales through our strategic

partner accounted for approximately 13% of revenue of our PeriShip Global Solutions segment for the year ended December 31, 2022.

fail to maintain certain minimum service level requirements related to our service with this strategic partner, it may terminate our agreement

to provide them with such service.

If our strategic partner terminates our agreement, requires us to renegotiate the terms of our existing

agreement or we are unable to renew such agreement on mutually agreeable terms, no longer makes our services available to its customers,

replaces our services with one or more competitors, develops and supplants our services for its own service offerings, or we experience

a significant reduction in business from this strategic partner, our business, financial condition and results of operations would be

materially adversely affected.

Our key strategic partner has announced that it is developing

a service that may be competitive to our own, and others may do the same.

In the second quarter of 2020 our key strategy

partner publicly announced that it plans to develop an inhouse software solution in collaboration with a multinational software company

that may ultimately be competitive with our service offerings.

In January 2022, our key strategy partner announced the development of

a logistics as a service solution as a result of this collaboration.

The details regarding this product offering, and whether this inhouse

solution will ultimately be developed and successfully launched commercially, are unclear.

To date we do not believe that this product

offering has been adopted by our existing clients or adversely impacted our results in a material way.

However, if our key strategic partner

takes steps to position this product offering as a replacement or competitor to our service offerings, there can be no assurance that

such steps would not increase our cost of delivering our services to our customers, hinder our ability to deliver our services to our

customers, entice our existing customers to discontinue using our services, or reduce the number of customers referred to us by our strategic

In addition, other carriers or companies, such as Amazon, may develop services that compete with ours.

Further, some of our existing

customers may develop their own logistics capabilities such that they no longer require our services.

Any of these events could harm our

business, financial condition and results of operations and may have a material adverse impact on our business.

Our business is subject to seasonal trends.

Historically, our operating results in the PeriShip

Global Solutions segment have been subject to seasonal trends when measured on a quarterly basis.

Our first and second quarters have traditionally

been the weakest compared to our third and fourth quarters.

This trend is dependent on numerous factors including economic conditions,

customer demand and weather.

Because revenue is directly related to the available working days of shippers, national holidays and the

number of business days during a given period may also create seasonal impact on our results of operations.

After the winter holiday season

and during the remaining winter months, our freight volumes are typically lower because some customers reduce shipment levels.

a substantial portion of our revenue is derived from customers in industries whose shipping patterns are tied closely to consumer demand

which can sometimes be difficult to predict or are based on just-in-time production schedules.

Therefore, our revenue is, to a large degree,

affected by factors that are outside of our control.

There can be no assurance that our historic operating patterns will continue in future

periods as we cannot influence or forecast many of these factors.

Severe climate conditions and other catastrophic events can have

an adverse impact on our business.

Our business involves the shipment of time and

temperature sensitive goods, so our customers are significantly negatively impacted by delays and other shipping disruptions that cause

product loss, spoilage and reputational harm.

Disasters, severe weather, public health issues, such as pandemics, earthquake, cyber-attack,

heightened security measures, actual or threatened terrorist attack, strike, civil unrest, or other catastrophic event may cause shipment

delays or an inability to ship, which could prevent, delay or reduce shipment volumes and could have an adverse impact on consumer spending

and confidence levels, all of which could result in decreased revenues.

In particular, c ertain weather-related

conditions such as ice and snow can disrupt the operations of our carrier partners during the peak holiday season, which could have a

disproportionately large negative impact on our business and revenues.

We operate in a highly competitive industry and our business

may suffer if we are unable to adequately address potential downward pricing pressures and other competitive factors.

The transportation and logistics industry is highly

competitive and cyclical, and is expected to remain so for the foreseeable future.

The traceability and consumer engagement industry is

also highly competitive.

We face competition in all geographic markets and each industry sector in which we operate.

Many of these competitors

have significantly more resources and are actively pursuing acquisition opportunities and are developing new technologies to gain competitive

The primary competitive factors are price and quality of service.

Increased competition or our inability to compete successfully

may lead to a reduction in our volume, reduced revenues, reduced profit margins, increased pricing pressure, or a loss of customer relationships,

any one of which could affect our business and financial results.

Numerous competitive factors could impair our ability to maintain our

current profitability, including the following:

our competitors may periodically reduce their prices to gain business, especially during times of weak economic conditions, which may

limit our ability to maintain or increase prices or impede our ability to maintain or grow our customer relationships;

our inability to achieve expected customer retention levels or sales growth targets;

we compete with many other transportation and logistics service providers, and companies providing traceability and consumer engagement

solutions, some of which have greater capital resources or lower cost structures than us;

our inability to compete with new entrants in the market that may offer similar services at lower cost or have greater technological capabilities;

customers may choose to provide for themselves the services that we now provide;

many customers periodically accept proposals from multiple carriers for their shipping needs, and this process may depress rates or result

in the loss of some of our business to competitors;

advances in technology require increased investments to remain competitive, and our customers may not be willing to accept higher prices

to cover the cost of these investments;

we may not have sufficient resources to develop and market our services effectively, or at all.

The shipping and logistics industry is rapidly

We expect to continue to face significant competition, which could materially adversely affect us.

The shipping and logistics industry is rapidly

evolving, including demands for faster deliveries and increased visibility into shipments.

We expect to face significant competition on

a local, regional, national and international basis.

Competitors include the U.

and other international postal services, various motor

carriers, express companies, freight forwarders, air couriers, large transportation and e-commerce companies that have made and continue

to make significant investments in their own logistics capabilities, some of whom are currently our customers.

We also face competition

from start-ups and other smaller companies that combine technologies with crowdsourcing to focus on local market needs.

Competition may

also come from other sources in the future as new technologies are developed.

Competitors have cost, operational and organizational structures

that differ from ours and may offer services or pricing terms that we are not willing or able to offer.

Additionally, to sustain the level

of service and value that we deliver to our customers, from time to time we may raise prices and our customers may not be willing to accept

these higher prices.

If we do not timely and appropriately respond to competitive pressures, including replacing any lost volume or maintaining

our profitability, we could be materially adversely affected.

Damage to our brand image and corporate reputation could materially

adversely affect us.

Our success depends on our ability to consistently

deliver operational excellence and strong customer service.

Our inability to deliver our services and solutions as promised on a consistent

basis, or our customers having a negative experience or otherwise becoming dissatisfied, can negatively impact our relationships with

new or existing customers and adversely affect our brand and reputation, which could, in turn, adversely affect revenue and earnings growth.

Adverse publicity (whether or not justified) relating to activities by our employees, contractors, suppliers, agents or others with whom

we do business, such as customer service mishaps or noncompliance with laws, could tarnish our reputation and reduce the value of our

With the increase in the use of social media outlets such as Facebook, YouTube, Instagram, LinkedIn and Twitter, adverse publicity

can be disseminated quickly and broadly, making it increasingly difficult for us to effectively respond.

Damage to our reputation and

loss of brand equity could have a material adverse effect on us, and could require additional resources to rebuild our reputation and

restore the value of our brand.

The Company has significant goodwill and

other intangible assets, and future impairment of these assets could have a material adverse impact on the Company's financial results.

The Company has recorded significant goodwill

and other identifiable intangible assets on its balance sheet as a result of its acquisition of the PeriShip business in 2022.

of factors may result in impairments to goodwill and other intangible assets, including significant negative industry or economic trends,

disruptions to our business, increased competition and significant changes in the use of the assets.

Impairment charges could adversely

affect the Company's financial condition or results of operations in the periods recognized.

Our customers’ businesses may be negatively

affected by various economic and other factors such as recessions, downturns in the economy, inflation, global uncertainty and instability,

the effects of pandemics, changes in United States social, political, and regulatory conditions and/or a disruption of financial markets,

which may decrease demand for our services or increase our costs.

Adverse economic and other conditions, both in

the United States and internationally, can negatively affect our customers’ business levels, the amount of logistics services they

need, their ability to pay for our services and overall freight levels, any of which might impair our profitability.

For example, inflation

and uncertainty and instability in the global economy and geopolitical events may lead to fewer goods being transported.

Many of the products

our clients ship are luxury or discretionary products and the demand for such products may decrease in adverse economic times.

when adverse economic times arise, customers may select competitors that offer lower rates or choose to ship their goods without logistical

support in an attempt to lower their costs.

These and other economic factors such as recessions could have an adverse effect on our business,

financial conditions and results of operations and we might be forced to lower our rates or lose customers.

Overall economic conditions that reduce

freight volumes could have a material adverse impact on our operating results and ability to achieve growth.

We are sensitive to changes in overall economic

conditions that impact customer shipping volumes.

The transportation and logistics industry historically has experienced cyclical fluctuations

in financial results due to economic recession, downturns in business cycles of our customers, interest and currency rate fluctuations,

inflation and other economic factors beyond our control.

Changes in U.S.

trade policy could lead to ‘trade wars’ impacting

the volume of economic activity in the United States, and as a result, shipping volumes may be materially reduced.

Such a reduction may

materially and adversely affect our business.

Reductions in discretionary consumer

spending could have an adverse effect on our business, financial condition, and results of operations.

The services and products we provide are sensitive

to reductions from time to time in discretionary consumer spending.

For example, demand for high-end perishable items and cannabis products,

and subsequently the demand for shipping, brand protection, and other services related to such, can be affected by changes in the economy

and consumer tastes, both of which are difficult to predict and beyond our control.

Unfavorable changes in general economic conditions,

including recessions, economic slowdowns, sustained high levels of unemployment, and rising prices or the perception by consumers of weak

or weakening economic conditions, may reduce consumer’s disposable income or result in a decrease in demand for our services and

As a result, we cannot ensure that demand for our services and products will materialize or remain constant.

In early September,

2022, the major global carrier company that PeriShip partners with disclosed that a global recession could be coming based on various

indicators in its business including the demand for packages weakening considerably in the final weeks of August 2022, a negative impact

on its express delivery business due to the weakening global economy, particularly in Asia and Europe, and a decline in the volume of

freight it handles in every region around the world.

The major global carrier stated that it expects business conditions to further weaken

during its current quarter and is responding by reducing flights, temporarily parking aircraft, trimming hours for its staff, delaying

some hiring plans and closing ninety office locations as well as five corporate offices.

It also stated it is cutting $500 million from

its capital expenditure budget for its fiscal year, which runs through May of 2023.

We have seen a softening in demand for some services

related to high-end perishable items which seem to be impacted by reduced discretionary spending by U.S.

While a recession,

whether global or more localized to the U.S., may decrease the demand for our services that are more discretionary in nature, we believe

that the internal cost cutting measures, if implemented by the major global carrier may benefit out-sourced service providers, including

PeriShip Global.

Additionally, PeriShip Global is working with this major global carrier to address their small and medium sized

business clients, which we believe is an underserved segment and presents considerable growth opportunities for PeriShip Global.

we can provide no assurances that a decline in discretionary consumer spending will not have a negative impact on our revenues and results

of operations.

Adverse developments affecting economies throughout the world, including a general tightening of availability of credit,

decreased liquidity in certain financial markets, increased interest rates, foreign exchange fluctuations, increased energy costs, acts

of war or terrorism, transportation disruptions, natural disasters, declining consumer confidence, sustained high levels of unemployment

or significant declines in stock markets, as well as concerns regarding pandemics, epidemics and the spread of contagious diseases, could

lead to a further reduction in consumer discretionary spending and have an adverse effect on our business, financial condition, and results

or operations.

Global supply-chain delays and shortages

may adversely impact our customers or potential customers.

Global supply-chain delays and shortages, which

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shortages may affect our customers or potential customers which would adversely affect our operations.

We are an early

commercialization stage company with a history of losses and we may never achieve or maintain profitability .

commercialization stage enterprise, we do not currently have sufficient revenues to generate cash flows to cover operating expenses.

our inception, we have incurred operating losses in each year due to costs incurred in connection with research and development activities

and general and administrative expenses associated with our operations.

We expect to continue to incur substantial expenditures to develop

and market our services and could continue to incur operating losses and negative operating cash flow.

We have a history

of losses and we may never achieve or maintain profitability .

Since our inception,

we have incurred operating losses in each year due to costs incurred in connection with research and development activities and general

and administrative expenses associated with our operations.

In addition, we have made significant expenditures on acquisitions and may

continue to complete acquisitions in the future.

We expect to continue to incur expenditures to develop and market our services and to

make acquisitions and could continue to incur operating losses and negative operating cash flow.

We may encounter unforeseen expenses,

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continuing losses, our shareholders could lose all or part of their investments.

Our ability to

use our net operating losses to offset future taxable income may be subject to certain limitations.

Our net operating loss

carryforwards ("NOLs"), and certain other tax attributes could be unavailable to offset future income tax liabilities because

of restrictions under U.S.

Under the Tax Cuts and Jobs Act, or the TCJA, federal NOLs generated in tax years ending after December

31, 2017 may be carried forward indefinitely.

The carryforwards are limited to 80% of each subsequent year's net income.

In addition, Sections

382 and 383 of the Code, contain rules that limit the ability of a corporation that undergoes an "ownership change" (generally,

any change in ownership of more than 50% of the corporation's stock over a three-year period) to utilize its pre-change NOLs and tax credit

carryforwards to offset future taxable income.

These rules generally operate by focusing on ownership changes involving stockholders owning

directly or indirectly 5% or more of the stock of a corporation and any change in ownership arising from a new issuance of stock by the

Generally, if an ownership change occurs, the yearly taxable income limitation on the use of NOLs and tax credit carryforwards

and certain built-in losses is equal to the product of the applicable long-term, tax-exempt rate and the value of the corporation's stock

immediately before the ownership change.

In 2022, we completed the IRC Section 382 analysis, and determined that an ownership change occurred

sufficient to impose additional limitations on the use of NOL carryforwards.

For the year ended December 31, 2022, Federal and state NOLs

of $23.1 million and $0, respectively, will expire unutilized due to the limitations of Section 382, leaving Federal and state NOL carryforwards

of $24.4 million and $13.1 million, respectively that may be offset against future taxable income.

In the event future ownership changes

are determined, we might be unable to offset our taxable income with losses, or our tax liability with credits, before such losses and

credits expire, in which event we could incur larger federal and state income tax liabilities than we would have had we not experienced

an ownership change.

Because our name and brand could be confused

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name similar to VerifyMe in their brand names .

We have trademarked the VerifyMe TM brand in the United

States and have pending applications with respect to our brand internationally.

However, our name and brand has been and could be in the

future 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 trademarked the VerifyMe TM brand

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

However, our name and brand has been and

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

by SecureKey Technologies Inc.

and www.verifyme.ng, a website offering verification services in Nigeria.

We have a pending application for the VerifyMe

name in Canada but can make no assurances regarding its approval.

We have also attempted to contact the operators of the Nigeria website

to resolve the confusion caused there but to date have been unsuccessful in our efforts.

Further, we have registered certain trademarks

and service marks in the United States and foreign jurisdictions.

We are aware of names and marks similar to our service marks being used

from time to time by other persons.

Although we oppose any such infringement, further or unknown unauthorized uses or other misappropriation

of our trademarks or service marks may diminish the value of our brands and adversely affect our business.

Because our competitors in the anti-counterfeiting

industry have much greater financial resources than we do and more functional technology offerings than we currently have, we may not

be able to successfully compete with them .

The market for protection from counterfeiting, diversion, theft and forgery is a mature

industry dominated by a number of large, well-established companies, as described in Item 1, “Business Competition”.

effectively, we will need to expend significant resources in technology and marketing.

Each of our competitors has substantially greater

financial, human and other resources than we do and may develop superior technology or more cost-effective alternatives to our products

and services.

We may not have sufficient resources to develop and market our services effectively, or at all.

If we cannot continue to

develop or market competitive, cost-effective products and services, we may not be able to compete effectively, which will harm our operating

We have deleted classifications

in our Canada trademark application for the VerifyMe name, in an effort to avoid confusion with the prior-registered SecureKey trademark.

We have also attempted to contact the operators of the Nigeria website to resolve the confusion caused there but to date have been unsuccessful

in our efforts.

Further, we have registered certain trademarks and service marks in the United States and foreign jurisdictions.

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

Although we oppose any such infringement,

further or unknown unauthorized uses or other misappropriation of our trademarks or service marks may diminish the value of our brands

and adversely affect our business.

If our technologies

do not work as anticipated once we achieve meaningful sales, we will not be successful .

Our business depends on our ability

to market and sell our ink technology.

Without material sales and acceptance from customers with respect to our technologies, we will

not be successful.

Further, we made a significant investment in our new authenticators, and if customers do not find them useful or decline

to lease them, our business may suffer.

We can provide no assurances that the market will accept our products or that we will achieve

any meaningful sales.

Our business depends

on our ability to market and sell our technology.

Without material sales and acceptance from customers with respect to our technologies,

we will not be successful.

We can provide no assurances that the market will accept our products or that we will achieve any meaningful

If our technology

cannot be used successfully to prevent counterfeiting, we may not be able to generate material revenue .

Our market is characterized

by new and evolving technologies.

Counterfeiting is constantly evolving in order to create items which appear to be legitimate and evade

regulations which would seize counterfeit items and penalize counterfeiters.

In order to stay competitive, our technologies will need

to be sufficiently complex so that they cannot be reproduced or copied by counterfeiters.

If we are unable to develop and integrate effective

anti-counterfeiting technologies to address the increasingly sophisticated technological needs of our customers in a timely and cost-effective

manner, we may not be successful in preventing counterfeiting and we may not be able to generate material revenue.

If the market does not accept or embrace

our technologies or product offering, our business may fail .

Our technologies and the products we are offering have not been tested

in the market on a large-scale basis.

As a result, we can only speculate as to the market acceptance of these products and services.

assurance can be given that the market will accept any of our technologies, products and services.

If the public fails to accept our technologies,

products and services to the degree necessary to generate sufficient revenues, our business may fail.

Because our current and target customers

cannot be used successfully to proactively provide analytics logistics management, we may not be able to generate material revenue .

Our proprietary technology

is the core of our PeriShip Global operations.

The failure of our technology will result in the stoppage of our operation.

fact our business is the monitoring of time sensitive goods movement, any stoppage will result in the financial loss and service liability

In order to stay competitive, we need to ensure the continuity and the timeliness of our service, it is essential that the technology

platform has redundancy built in, high performing and scalable.

Because many of our current and target customers

are large companies, their internal policies and resistance to change may impair our ability to successfully commercialize our products .

Our ability to become successful and generate positive cash flow will be dependent upon the extent of commercialization of products using

our technology.

Commercialization of new technology products often has a very long lead time.

This problem is exacerbated when customers

Our ability to become successful and generate

positive cash flow will be dependent upon the extent of commercialization of products using our technology.

Commercialization of new technology

products often has a very long lead time.

This problem is exacerbated when customers are large entities.

Our current and target customers

are large entities.

Our current and target customers are large entities.

These factors may adversely affect our ability to commercialize

our technologies, or any products or services related to our technologies.

Further, we cannot assure you that commercialization will result

in profitability.

Our reliance on HP Indigo to qualify additional

HP Indigo digital printing presses adversely affects our ability to sell our products and generate revenue .

In 2017, we signed

a five-year contract with HP Indigo, a division of HP Inc., to print our VerifyInk TM

technology on packages and labels on their 6000 series digital presses.

In 2020, VerifyInk TM

technology was qualified on HP Indigo’s 6900 series printing presses.

In addition, we successfully trialed production on their 7900

press series.

Notwithstanding, HP Indigo has yet to qualify more HP Indigo digital printing presses that include our technology which

hinders our ability to sell our products.

We believe that without further qualified HP Indigo presses, our ability to sell to a large

part of the label and packaging print manufacturing market is impeded, and as a result our business and revenues are adversely affected.

Severe price competition from similar ink

technologies may hinder our ability to sell our products .

Currently an ultraviolet ink is being sold and supported by HP, Inc.

for their HP Indigo digital presses that competes with our product.

This ink has been in the security ink industry for many years and

is therefore a wide-spread uncontrolled security product that sells for an extremely low cost.

The same ultraviolet ink has some similar

properties as our VerifyInk TM ink technology, but the cost is so low it is being

selected by some clients based on price which limits our ability to sell VerifyInk TM .

Ultraviolet ink is also readily available in many forms and locations, including Amazon.com.

This wide-spread availability of ink technologies

that are similar to ours limits our ability to market and sell VerifyInk TM .

Our success depends on the efforts, abilities

and continued service of Patrick White, our Chief Executive Officer, and if we are unable to continue to retain the services of Mr.

we may not be able to continue our operations .

Our success depends to a significant extent upon the continued service of

Patrick White, our Chief Executive Officer.

On February 15, 2022, we entered into an employment agreement with Mr.

employment agreement does not have a defined term.

The loss of Mr.

White’s services and any negative market or industry perception

arising from such loss could significantly harm our business, future prospects and the price of our common stock.

Because we are

relying on our small management team, we lack business development resources which may hurt our ability to increase revenue .

have a small management team that is focused on sales.

Because we have only a few people dedicated to business development, we lack the

resources to grow beyond certain levels.

We cannot assure you that we will generate cash flow from operations or from financings which

will enable us to grow our revenues.

If we are unable to hire an experienced

sales team, or our partners are not successful, we may not be able to generate material revenue .

Presently our

personnel consists of seven full-time employees, one part-time employee and several outside consultants.

We have several outside

partners and a licensed global label manufacturer (the “GLM”) who are working on sales of our products.

Our agreement with

the GLM allows it to market our technologies to current and new clients.

Our strategic partner agreements are individualized.

two cross-selling agreements that provide that the partners are able to sell and mark-up certain of our technologies and we can sell and

mark-up certain of the strategic partners’ products.

Another strategic partner is selling our products globally as well as providing

marketing support, warehousing, shipping services, help desk services and billing for a fixed percentage of our sales.

Our potential customers

are large companies with long sales cycles.

Accordingly, we may be required to hire salespersons to bolster our current sales efforts.

If the efforts of our management team, the GLM, strategic partners, and any salespersons we hire are unsuccessful, we may be unable to

generate material revenue and those outside sales channels may end their relationship with us, thus ending their sales and services and

materially harming our financial condition and results of operations.

None of our strategic partners have sold our products under the

cross-selling arrangements, to date.

Our future growth

will depend upon the success of our strategic partners who integrate our solutions into their product offerings .

rely on strategic partnerships with larger companies which integrate our technologies into their product offerings.

This distribution

strategy leaves us largely dependent upon the success of our partners.

If any of our strategic partners who include our technology in

their products cease to do so, or we fail to obtain other partners who will incorporate, embed, integrate or bundle our technology, or

these partners are unsuccessful in their efforts, expanding deployment of our technology, our business and future growth would be materially

and adversely affected.

These factors may adversely affect our ability to commercialize our technologies, or any products or services related

to our technologies.

Further, we cannot assure you that commercialization will result in profitability.

Our future growth will depend upon the success

of our strategic partners who integrate our solutions into their product offerings .

We rely on strategic partnerships with one large

logistics carrier for our PeriShip Global Solutions segment and larger companies which integrate our technologies into their product offerings

for our legacy VerifyMe Solutions segment.

These strategies leave us largely dependent upon the success of our partners.

If any of our

strategic partners who include our technology in their products cease to do so, or we fail to obtain other partners who will incorporate,

embed, integrate or bundle our technology, or these partners are unsuccessful in their efforts, expanding deployment of our technology,

our business and future growth would be materially and adversely affected.

If we cannot manage

our growth effectively, we may not become profitable .

Businesses which grow rapidly often have difficulty managing

their growth.

Our staff presently consists of seven full-time employees, one part-time employee and several consultants.

If we continue

to grow as rapidly as we anticipate, we will need to expand our management by recruiting and employing experienced executives and key

employees capable of providing the necessary support.

We cannot assure you that our management will be able to manage our growth effectively

or successfully.

Our failure to meet these challenges could harm our financial condition and ability to become profitable.

Businesses which grow

rapidly often have difficulty managing their growth.

If we continue to grow as rapidly as we anticipate, we will need to expand our management

by recruiting and employing experienced key employees capable of providing the necessary support.

We cannot assure you that our management

will be able to manage our growth effectively or successfully.

Our failure to meet these challenges could harm our financial condition

and ability to become profitable.

Because a small number of customers account

for all of our revenue, the loss of any of these customers would have a material adverse impact on our operating results and cash flows .

We derive our revenue from a limited number of customers and our revenue in 2021 grew to $867 thousand compared to $343 thousand in 2020

and $245 thousand 2019.

Our principal revenue has been generated from five customers in 2021 compared to two customers in both 2020 and

Certain of our agreements with customers have short terms or can be terminated on short notice.

Any termination of a business relationship

with, or a significant sustained reduction in business received from, one of these customers could have a material adverse effect on our

operating results and cash flows.

We must materially increase the number of our customers and be able to have our customers increase the

number of products for which they use our service and if we cannot, it will adversely impact our financial condition and our business.

for most of our revenue, the loss of any of these customers would have a material adverse impact on our operating results and cash flows .

We derive our revenue from a limited number of

customers and our revenue in 2022 grew to $19,576 thousand with the acquisition of PeriShip Global, compared to $867 thousand in 2021.

Our principal revenue has been generated from thirty customers in 2022, compared to five customers in 2021.

Certain of our agreements

with customers have short terms or can be terminated on short notice.

Any termination of a business relationship with, or a significant

sustained reduction in business received from, one of these customers could have a material adverse effect on our operating results and

If we are unable to materially increase the number of our customers and the number of products for which they use our service,

it could adversely impact our financial condition and our business.

We will need to expand our sales, marketing

and support organizations and our distribution arrangements to increase market acceptance of our products and services .

We currently have a limited number of sales, marketing, customer service and support personnel and may need to increase our staff, or

further outsource our sales process, to generate a greater volume of sales and to support any new customers or the expanding needs of

existing customers.

The employment market for sales, marketing, customer service and support personnel in our industry is very competitive,

and we may not be able to hire the kind and number of sales, marketing, customer service and support personnel we are targeting.

Our inability

to hire or outsource qualified sales, marketing, customer service and support personnel may harm our business, operating results and financial

We may not be able to sufficiently build out our distribution network or enter into arrangements with qualified sales personnel

on acceptable terms or at all.

If we are not able to develop greater distribution capacity, we may not be able to generate sufficient

revenue to continue our operations.

We currently have a limited number of sales, marketing,

customer service and support personnel and may need to increase our staff, or further outsource our sales process, to generate a greater

volume of sales and to support any new customers or the expanding needs of existing customers.

The employment market for sales, marketing,

customer service and support personnel in our industry is very competitive, and we may not be able to hire the kind and number of sales,

marketing, customer service and support personnel we are targeting.

Our inability to hire or outsource qualified sales, marketing, customer

service and support personnel may harm our business, operating results and financial condition.

We may not be able to sufficiently build

out our distribution network or enter into arrangements with qualified sales personnel on acceptable terms or at all.

If we are not able

to develop greater distribution capacity, we may not be able to generate sufficient revenue to continue our operations.

If we fail to protect or enforce our intellectual

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results may suffer .

Our patent rights, trade secrets, copyrights, trademarks, domain names and other product rights are critical

to our success.

We strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual

restrictions.

We may enter into confidentiality and invention assignment agreements with our employees and confidentiality agreements

with parties with whom we conduct business to limit access to, and disclosure and use of, our proprietary information.

However, these

contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of

our proprietary information or deter independent development of similar technologies by others.

Our patent rights, trade secrets, copyrights,

trademarks, domain names and other product rights are critical to our success.

We strive to protect our intellectual property rights by

relying on federal, state and common law rights, as well as contractual restrictions.

We may enter into confidentiality and invention

assignment agreements with our employees and confidentiality agreements with parties with whom we conduct business to limit access to,

and disclosure and use of, our proprietary information.

However, these contractual arrangements and the other steps we have taken to protect

our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar

technologies by others.

As management deems appropriate,

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we cannot afford to pay .

Litigation may be necessary to enforce our intellectual property rights, protect our

trade secrets or determine the validity and scope of proprietary rights claimed by others.

Patent and intellectual property litigation

is extremely expensive and beyond our ability to pay.

While third parties do, under certain circumstances, finance litigation for

companies that file suit, we cannot assure you that we could find a third party to finance any claim we choose to pursue.

third parties frequently refuse to finance companies that are sued.

Any litigation of this nature, regardless of outcome or merit,

could result in substantial costs, adverse publicity or diversion of management and technical resources, any of which could adversely

affect our business and operating results.

If we fail to maintain, protect and enforce our intellectual property rights, our business

and operating results may be harmed.

Litigation may be necessary

to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights claimed

Patent and intellectual property litigation is extremely expensive and beyond our ability to pay.

While third parties

do, under certain circumstances, finance litigation for companies that file suit, we cannot assure you that we could find a third party

to finance any claim we choose to pursue.

Moreover, third parties frequently refuse to finance companies that are sued.

litigation of this nature, regardless of outcome or merit, could result in substantial costs, adverse publicity or diversion of management

and technical resources, any of which could adversely affect our business and operating results.

If we fail to maintain, protect and enforce

our intellectual property rights, our business and operating results may be harmed.

From time-to-time, we may face allegations that

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or comply with applicable regulations could be impaired .

As a public company, we are subject to the reporting requirements

of the Exchange Act and the Sarbanes-Oxley Act of 2002 (“SOX”).

We expect that the requirements of these rules and regulations

will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and

costly, and place significant strain on our personnel, systems, and resources.

As a public company, we are subject to the reporting

requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002 (“SOX”).

We expect that the requirements of these rules

and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult,

time-consuming and costly, and place significant strain on our personnel, systems, and resources.

SOX requires, among other things, that we maintain

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Our management concluded that our disclosure controls

and procedures were not effective as of December 31, 2021, as the result of the material weaknesses in our internal control over financial

reporting identified in Item 9A of this Report.

Any failure to develop or maintain effective controls or any difficulties encountered

in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and

may result in a restatement of our financial statements for prior periods.

Any failure to implement and maintain effective internal control

over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered

public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually

be required to include in our periodic reports that will be filed with the SEC.

While we have begun to implement a remediation plan to

address this material weakness, including hiring a Senior VP of Finance and a Financial Controller in 2021, we have not yet been able

to remediate the material weakness related to our internal control over financial reporting as of December 31, 2021.

Additional material weaknesses in our disclosure

controls and internal control over financial reporting may be identified in the future.

Any failure to maintain existing or implement

required new or improved controls, or any difficulties we encounter in their implementation, could result in additional material weaknesses,

cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements.

unable to effectively remediate material weaknesses in a timely manner, investors could lose confidence in the accuracy and completeness

of our financial reports, which could have an adverse effect on our stock price.

Because we do business outside of

the United States, we may be exposed to liabilities under the Foreign Corrupt Practices Act, violations of which could have a material

adverse effect on our business .

We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit

improper payments or offers of payments to foreign governments and their officials and political parties by U.S.

persons and issuers as

defined by the statute for the purpose of obtaining or retaining business.

We have operations and agreements with third parties and make

sales in jurisdictions which may be subject to corruption.

These activities create the risk of unauthorized payments or offers of payments

by one of the employees, consultants or agents of our Company, because these parties are not always subject to our control.

policy to implement safeguards to discourage these practices by our employees.

However, our existing safeguards and any future improvements

may prove to be less than effective, and the employees, consultants, sales agents or distributors of our company may engage in conduct

for which we might be held responsible.

Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject

to other liabilities, which could negatively affect our business, operating results and financial condition.

If our or our third-party vendors’

computer systems are hacked, or we experience any other cybersecurity incident, we may face a disruption to our operations, a compromise

or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business,

results of operations or financial condition .

We rely on information technology networks and systems, including the Internet,

to process, transmit and store electronic information, and to manage or support a variety of business processes and activities.

Additionally,

we collect and store certain data, including proprietary business information, and may have access to confidential or personal information

in certain of our businesses that is subject to privacy and security laws and regulations.

Furthermore, in the operation of our business

we also use third-party vendors that are subject to their own cybersecurity threats.

While our standard vendor terms and conditions include

provisions requiring the use of appropriate security measures to prevent unauthorized use or disclosure of our data, as well as other

safeguards, a breach may still occur.

In addition, if we select a vendor that uses cloud storage of information as part of their service

or product offerings our proprietary information could be misappropriated by third parties despite our attempts to validate the security

of such services.

These technology networks and systems may be susceptible

to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components;

telecommunications or system failures;

terrorist attacks;

natural disasters;

employee error or malfeasance;

server or cloud provider

and computer viruses or cyberattacks.

Cybersecurity threats and incidents can range from uncoordinated individual attempts to

gain unauthorized access to information technology networks and systems to more sophisticated and targeted measures, known as advanced

persistent threats, directed at us, our products, customers and/or our third-party service providers.

It is possible a security breach

could result in theft of trade secrets or other intellectual property or disclosure of confidential customer, supplier or employee information.

Should we be unable to prevent security breaches or other damage to our information technology systems, disruptions could have an adverse

effect on our operations, as well as expose us to costly litigation, liability or penalties under privacy laws, increased cybersecurity

protection costs, reputational damage and product failure.

and procedures were effective as of December 31, 2022, and the remediated material weaknesses in our internal control over financial reporting

identified in Item 9A of the Report covering the year ended December 31, 2021 have been remediated.

Any failure to develop or maintain

effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause

us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.

to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management

evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control

over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC.

Material weaknesses in our disclosure controls

and internal control over financial reporting may be identified in the future.

Any failure to maintain existing or implement required

new or improved controls, or any difficulties we encounter in their implementation, could result in additional material weaknesses, cause

us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements.

If we are unable

to effectively remediate material weaknesses in a timely manner, investors could lose confidence in the accuracy and completeness of our

financial reports, which could have an adverse effect on our stock price.

Because we do business outside of the United

States, we may be exposed to liabilities under the Foreign Corrupt Practices Act, violations of which could have a material adverse effect

on our business .

We are subject to the Foreign Corrupt Practice

Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political

parties by U.S.

persons and issuers as defined by the statute for the purpose of obtaining or retaining business.

We have operations and

agreements with third parties and make sales in jurisdictions which may be subject to corruption.

These activities create the risk of

unauthorized payments or offers of payments by one of the employees, consultants or agents of our Company, because these parties are not

always subject to our control.

It is our policy to implement safeguards to discourage these practices by our employees.

However, our existing

safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents or distributors

of our company may engage in conduct for which we might be held responsible.

Violations of the FCPA may result in severe criminal or civil

sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.

Our business depends on our ability to successfully

develop, implement, maintain, upgrade, enhance, protect and integrate information technology systems.

We rely heavily on the proper functioning and

availability of our information technology systems for our operations as well as for providing value-added services to our customers.

Our information systems are integral to the efficient operation of our business.

We strive to be best in class, and in order to do so,

we must correctly interpret and address market trends and enhance the features and functionality of our technology platform in response

to these trends, which may lead to significant ongoing software development costs and capital investments in information technology infrastructure.

We may be unable to accurately determine the needs of our customers and integrate cohesively with our key strategic partner, and identify

the trends in the transportation services industry, in a timely and cost-effective manner, which could result in decreased demand for

our services and a corresponding decrease in our revenues.

Despite testing, external and internal risks, such as malware, insecure coding,

“Acts of God,” data leakage and human error pose a direct threat to our information technology systems and operations.

may also be subject to cybersecurity attacks and other intentional hacking.

Any failure to identify and address such defects or errors

or prevent a cyber-attack could result in service interruptions, operational difficulties, loss of revenues or market share, liability

to customers or others, diversion of resources, injury to our reputation and increased service and maintenance costs.

Addressing such

issues could prove to be impossible or very costly and responding to resulting claims or liability could similarly involve substantial

We must maintain and enhance the reliability and speed of our information technology systems to remain competitive and effectively

handle higher volumes of shipments.

If our information technology systems are unable to manage additional volume for our operations as

our business grows, or if such systems are not suited to manage the various service modes we offer or businesses we acquire, our service

levels and operating efficiency could decline.

If we fail to hire and retain qualified personnel to implement, protect and maintain our

information technology systems or if we fail to upgrade our systems to meet our customers’ and strategic operating partners’

demands, our business and results of operations could be seriously harmed.

This could result in a loss of customers or a decline in the

volume of shipments we receive from customers.

Our information technology systems also depend

upon the Internet, third-party service providers, global communications providers, satellite-based communications systems, the electric

utilities grid, electric utility providers and telecommunications providers as well as their respective vendors.

The services and service

providers have all experienced significant system failures and outages at some point in the past.

We have minimal control over the operation,

quality, or maintenance of these services or whether vendors will improve their services or continue to provide services that are essential

to our business.

Disruptions due to transitional challenges in upgrading or enhancing our technology systems;

failures in the services

upon which our information technology platforms rely, including those that may arise from adverse weather conditions or natural calamities,

such as floods, hurricanes, earthquakes or tornadoes;

illegal acts, including terrorist attacks;

human error or systems modernization

and/or other disruptions, may adversely affect our business, which could increase our costs or result in a loss of customers

that could have a material adverse effect on our results of operations and financial position.

Our information technology systems are subject

to cyber and other risks some of which are beyond our control.

A security breach, failure or disruption of these services could have a

material adverse effect on our business, results of operations and financial position.

Our information systems are integral to the efficient

operation of our business and handle sensitive customer and shipment data.

It is critical that the data processed by these systems remain

secure, as it often includes competitive customer information, confidential transaction data, employee records and key financial and operational

results and statistics.

The sophistication of efforts by hackers, foreign governments, cyber-terrorists, and cyber-criminals, acting individually

or in coordinated groups, to launch distributed denial of service attacks, ransomware or other coordinated attacks that may cause service

outages, gain inappropriate or block legitimate access to systems or information, or result in other business interruptions has continued

to increase in recent years.

We utilize third-party service providers who have access to our systems and certain sensitive data, which

exposes us to additional security risks, particularly given the complex and evolving laws and regulations regarding privacy and data protection.

While we and our third-party service providers have experienced cyber-attacks and attempted breaches of our and their information technology

systems and networks or similar events from time to time, no such incidents have been, individually or in the aggregate, material to us.

Cyber incidents that impact the security, availability, reliability, speed, accuracy or other proper functioning of our systems, information

and measures, including outages, computer viruses, theft or misuse by third parties or insiders, break-ins and similar disruptions, could

have a significant adverse impact on our operations.

It is difficult to fully protect against the possibility

of power loss, telecommunications failures, cyber-attacks, ransomware and other cyber incidents in every potential circumstance that may

A significant cyber incident, including system failure, security breach, disruption by malware or ransomware, or other damage,

could interrupt or delay our operations, damage our reputation and brand, cause a loss of customers, expose us to a risk of loss or litigation,

result in regulatory scrutiny, investigations, actions, fines or penalties and/or cause us to incur significant time and expense to remedy

such an event, any of which could have a material adverse impact on our results of operations and financial position.

Furthermore, any

failure to comply with data privacy, biometric privacy, data security or other laws and regulations could result in claims, legal or regulatory

proceedings, inquiries or investigations.

To comply with this changing landscape, we may be required to further segregate our systems

and operations, implement additional controls, or adopt new systems, all of which could increase the cost and complexity of our operations.

In addition, our insurance is intended to address costs associated with aspects of cyber incidents, network failures and privacy-related

concerns, may not sufficiently cover all types of losses or claims that may arise.

Evolving regulations concerning data privacy

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Interruptions or delays in those services could impair the delivery of our service and harm our business.

VerifyMe Engage™, VerifyMe Authenticate™,

VerifyMe Track & Trace™, and VerifyMe Online™ utilize cloud computing technology.

It is hosted pursuant to agreements

on technology platforms by third-party service providers.

We do not control the operation of these providers or their facilities, and

the facilities are vulnerable to damage, interruption or misconduct.

Unanticipated problems at these facilities could result in lengthy

interruptions in our services.

If the services of one or more of these providers are terminated, disrupted, interrupted or suspended for

any reason, we could experience disruption in our ability to provide our services, which may harm our business and reputation.

any damage to, or failure of, the cloud services we use could result in interruptions in our services.

Interruptions in our service may

damage our reputation, reduce our revenue, cause customers to terminate their agreements and adversely affect our ability to attract new

We utilize cloud computing technology.

pursuant to agreements on technology platforms by third-party service providers.

We do not control the operation of these providers or

their facilities, and the facilities are vulnerable to damage, interruption or misconduct.

Unanticipated problems at these facilities

could result in lengthy interruptions in our services.

If the services of one or more of these providers are terminated, disrupted, interrupted

or suspended for any reason, we could experience disruption in our ability to provide our services, which may harm our business and reputation.

Further, any damage to, or failure of, the cloud services we use could result in interruptions in our services.

Interruptions in our service

may damage our reputation, reduce our revenue, cause customers to terminate their agreements and adversely affect our ability to attract

new customers.

While we believe our strong partnerships reduce our risk, our business would be harmed if our customers and potential customers

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or to meet our obligations to our users, and our business, financial condition and operating results could be materially and adversely

Fluctuations in the price of raw materials,

Fluctuations in labor costs, raw materials,

changes in the availability of key suppliers, or catastrophic events may increase the cost of our products and services.

pigments are manufactured from naturally occurring inorganic rare earth materials.

The cost of these raw materials is a key element in

Increases in labor costs might be difficult to

pass on to our customers.

In our VerifyMe Solutions segment, security pigments, ink canisters, labels and bar codes are key elements in

the cost of our products.

Our inability to offset material price inflation could adversely affect our results of operations.

one supplier to procure our raw materials, and it is difficult to predict what effects shortages or price increases for the raw materials

we use to make our products may have in the future.

Our ability to manage inventory and meet delivery requirements may be constrained

by our supplier’s inability to scale production and adjust delivery during times of volatile demand.

Our inability to fill our supply

needs would jeopardize our ability to fulfill obligations under current contracts or enter new contracts to sell our products, which would,

in turn, result in reduced sales and profits, contract penalties or terminations, and damage to customer relationships.

one global carrier for transportation services, one supplier to procure our raw materials, one strategic partner to produce our ink canisters,

and it is difficult to predict what effects shortages or price increases for the raw materials we use to make our products may have in

Our ability to manage inventory and meet delivery requirements may be constrained by our supplier’s inability to scale

production and adjust delivery during times of volatile demand.

Our inability to fill our supply needs would jeopardize our ability to

fulfill obligations under current contracts or enter new contracts to sell our products, which would, in turn, result in reduced sales

and profits, contract penalties or terminations, and damage to customer relationships.

Our ability to become profitable is largely

dependent upon our ability to develop new technologies and introduce new products that achieve market acceptance in increasingly competitive

Our ability to become profitable depends upon a number of factors, including our ability to (i) identify and evolve with

emerging technological and broader industry trends, (ii) develop and maintain competitive products, (iii) defend our market share against

an ever-expanding number of competitors including many new and non-traditional competitors, (iv) enhance our products by adding innovative

features that differentiate our products from those of our competitors and prevent commoditization of our products, (v) develop, manufacture

and bring compelling new products to market quickly and cost-effectively, (vi) monitor disruptive technologies and business models, (vii)

achieve sufficient return on investment for new products introduced based on capital expenditures and research and development spending,

(viii) respond to changes in overall trends related to end market demand, (ix) leverage our strategic partnerships to develop and commercialize

new and existing products and (x) attract, develop and retain individuals with the requisite skill, expertise and understanding of customers’

needs to develop new technologies and introduce new products and sell our current products.

The failure of our technologies or products

to gain market acceptance due to more attractive offerings by our competitors or the failure to address any of the above factors could

significantly reduce our revenues and adversely affect our competitive standing and prospects.

dependent upon our ability to continually improve our platforms and acquiring new customers in increasingly competitive markets.

Our ability to become profitable depends upon

a number of factors, including our ability to (i) identify and evolve with emerging technological and broader industry trends, (ii) develop

and maintain competitive products, (iii) defend our market share against an ever-expanding number of competitors including many new and

non-traditional competitors, (iv) enhance our products by adding innovative features that differentiate our products from those of our

competitors and prevent commoditization of our products, (v) develop, manufacture and bring compelling new products to market quickly

and cost-effectively, (vi) monitor disruptive technologies and business models, (vii) achieve sufficient return on investment for new

products introduced based on capital expenditures and research and development spending, (viii) respond to changes in overall trends related

to end market demand, (ix) leverage our strategic partnerships to develop and commercialize new and existing products and (x) attract,

develop and retain individuals with the requisite skill, expertise and understanding of customers’ needs to develop new technologies

and introduce new products and sell our current products.

The failure of our technologies or products to gain market acceptance due to

more attractive offerings by our competitors or the failure to address any of the above factors could significantly reduce our revenues

and adversely affect our competitive standing and prospects.

The expenses or losses associated with lack

of widespread market acceptance of our solutions may harm our business, operating results and financial condition .

technological changes and frequent new product introductions are typical in the markets we serve.

Our future success will depend in part

on continuous, timely development and introduction of new products that address evolving market requirements.

To the extent we fail to

introduce new and innovative products, we may lose any market share we have to our competitors, which may be difficult or impossible to

Any inability, for technological or other reasons, to successfully develop and introduce new products could harm our business.

Additionally, we may experience delays in the development and introduction of products, we may be unable keep pace with the rapid rate

of change in anti-counterfeiting and security products’ research, and any new products acquired or developed by us may not meet

the requirements of the marketplace or achieve market acceptance.

If we are unable to develop new products to meet market demands, our

business could be materially adversely affected.

Rapid technological changes and frequent new product

introductions are typical in the markets we serve.

Our future success will depend in part on continuous, timely development and introduction

of new products that address evolving market requirements.

To the extent we fail to introduce new and innovative products, we may lose

any market share we have to our competitors, which may be difficult or impossible to regain.

Any inability, for technological or other

reasons, to successfully develop and introduce new products could harm our business.

Additionally, we may experience delays in the development

and introduction of products, we may be unable keep pace with the rapid rate of change in anti-counterfeiting and security products’

research, and any new products acquired or developed by us may not meet the requirements of the marketplace or achieve market acceptance.

If we are unable to develop new products to meet market demands, our business could be materially adversely affected.

As a company with revenues deriving from

clients in the cannabis industry, we face many unique and evolving risks.

We currently derive approximately 5% of revenues

from clients in the cannabis industry from use of our track and trace and customer engagement technologies.

As such, any risks related

to the cannabis industry may adversely impact our clients, and potential clients, which may in turn, impact the demand for our products

and services.

Specific risks impacting the cannabis industry include, but are not limited, to the following:

United States federal law

prohibits Marijuana

Under the Controlled Substances

Act (“CSA”), marijuana is a Schedule-I controlled substance making it illegal under federal law to grow, cultivate, distribute,

sell or possess marijuana for any purpose or to assist or conspire with those who do so.

Although the use of marijuana is legal in certain

states under state law, since federal law supersedes state law, strict enforcement of federal law would likely result in adverse effects

on our clients’ operations, which would in turn, adversely impact our revenues.

Banking regulations could

limit access to banking services and expose us to risk

Funds received from our clients

in the cannabis industry, operating legally under state law, may subject us to a variety of federal laws and regulations involving money

laundering, financial record keeping and proceeds of crime, since the funds are considered illegal under the CSA and as such banks and

other financial institutions providing services to us risk violation of anti money laundering statutes and other applicable statutes.

Furthermore, banks often refuse to provide banking services to businesses involved in the cannabis industry due to the federal and state

laws and regulations governing financial institutions.

The difficulty and potential inability to open bank accounts that our clients in

the cannabis industry deal with, makes it difficult to conduct business and as such could affect our ability to collect revenues earned.

Furthermore, our clients in this industry are more susceptible to theft, and potentially lack the ability to insure themselves against

We may experience similar difficulties in obtaining banking and financial services because of the activities of our clients in

the cannabis industry.

The legality of cannabis

could be reversed in one or more states

The voters or legislatures

of states in which marijuana has already been legalized could potentially repeal applicable laws that permit the operation of both medical

and retail marijuana businesses.

These actions might force businesses, including those that are our clients, to cease operations in one or

more states entirely.

Additionally, these actions could negatively impact us and lead to a decrease of our revenue through the loss of

current and potential customers.

Recent and changing interpretations

of the law regarding medical and recreational use of marijuana

State laws and regulations

surrounding medical and recreational use of marijuana are fairly recent and constantly changing resulting in a potential challenge to

maintain compliance.

As such, violations of these laws, or allegations of such violations, could be disruptive to our clients’ business

and in return cause a disruption in our operations.

Future modifications of state and local laws surrounding marijuana, may limit operations

of our clients’ business in this industry, which could negatively impact our revenues.

Dependence on client licensing

Our clients in the cannabis

industry must obtain various licenses from various local and state licensing agencies.

As such, there is a risk that our existing clients

will not be able to retain their licenses going forward, should they violate applicable rules and regulations, or should renewal become

more stringent.

If our customers are not able to maintain or renew their licenses, this would adversely impact our operations.

Insurance Risk

Insurance companies may limit

policies to only cover claims legal under federal law.

As such our clients in the cannabis industry may not be properly insured.

against our clients may have a negative impact on our ability to collect revenues from our clients in the cannabis sector.

Risks Relating to our Common Stock

2 unchanged sentences

issue a substantial number of additional shares of common stock which will dilute our present shareholders .

obligated to issue additional shares of our common stock in connection with our outstanding options, warrants and shares of our Series

B Convertible Preferred Stock.

As of December 31, 2021, there were options, warrants, shares of Series B Convertible Stock outstanding,

and restricted stock units convertible into 465,471, 3,779,243, 144,444 and 187,010 shares of common stock, respectively.

The exercise,

conversion or exchange of warrants or convertible securities, including for other securities, will cause us to issue additional shares

of our common stock and will dilute the percentage ownership of our shareholders.

In addition, we have in the past, and may in the future,

exchange outstanding securities for other securities on terms that are dilutive to the securities held by other shareholders not participating

in such exchange.

We are obligated to issue additional shares of

our common stock in connection with our outstanding options, warrants and shares of our Series B Convertible Preferred Stock.

As of December

31, 2022, there were options, warrants, shares of Series B Convertible Stock outstanding, and restricted stock units convertible into

and 413,626 shares of common stock, respectively.

The exercise, conversion or exchange of warrants or convertible

securities, including for other securities, will cause us to issue additional shares of our common stock and will dilute the percentage

ownership of our shareholders.

In addition, we have in the past, and may in the future, exchange outstanding securities for other securities

on terms that are dilutive to the securities held by other shareholders not participating in such exchange.

Offers or availability for sale of a substantial

1 unchanged sentence

Sales of large blocks

of our common stock over a short time in the fall of 2019 had a significant adverse effect on our common stock price.

Further sales could

depress the price of our common stock.

of our common stock over a short time in the spring of 2022 had a significant adverse effect on our common stock price.

Further sales

could depress the price of our common stock.

The existence of these shares and shares of common stock issuable upon conversion of outstanding

64 unchanged sentences

of the warrants could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.

UNRESOLVED STAFF COMMENTS.

We do not lease or own any property which are material to our business

or results of operations.

Risks Related to our Debt

If we do not timely pay amounts due and

comply with the covenants under our debt facilities, our business, financial condition and results of operations may be adversely impacted.

Our consolidated financial statements have been

prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities

in the normal course of business.

The Term Note, among other things, requires high interest payments, and both the Term Note and the PNC

Facility place encumbrances on our assets, and subject us to restrictive covenants that limit our operating flexibility.

Additionally,

under the terms of the Term Note, the Company is required to make monthly loan principal payments of $41,667 per month plus interest,

through September 15, 2026.

The terms of the Term Note and the PNC Facility

have been structured in such a way that, if we default under one, we will also default under the other.

In the event of a continuing default,

our senior secured lenders would have the right to accelerate the then-outstanding amounts under each such facility and to exercise their

respective rights and remedies to collect such amounts, which would include foreclosing on collateral constituting substantially all of

our assets and the assets of our PeriShip Global subsidiary.

Any continuing default on the Term Note or the PNC Facility could result

in the outstanding principal balance under each such facility becoming immediately due and payable, which could harm our business, financial

condition and results of operations and may have a material adverse impact on our business.

Our cash flows and operating results could

be adversely affected by required payments of debt or related interest and other risks of our debt financing.

We are generally subject to risks associated with

debt financing.

These risks include:

(1) our cash flow may not be sufficient to satisfy required payments of principal and interest;

(2) we may not be able to refinance existing indebtedness or the terms of any refinancing may be less favorable to us than the terms

of existing debt;

(3) debt service obligations could reduce funds available for other uses such as growing our business;

default on our indebtedness could result in acceleration of those obligations and possible loss of assets or capital;

risk that necessary capital expenditures cannot be financed on favorable terms.

Any of these risks could place strains on our cash flows,

reduce our ability to grow, and adversely affect our results of operations.

Covenants in our debt agreements may restrict

our operating activities and adversely affect our financial condition.

Our existing debt agreements contain, and future

debt agreements may contain, financial and/or operating covenants including, among other things, certain coverage ratios, as well as limitations

on the ability to incur additional secured and unsecured debt, and/or otherwise affect our distribution and operating policies.

covenants may limit our operational flexibility and acquisition and disposition activities.

Moreover, if any of the covenants in these

debt agreements are breached and not cured within the applicable cure period, we could be required to repay the debt immediately, even

in the absence of a payment default.

A default under one of our debt agreements could result in a cross-default under other debt agreements,

and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional

collateral, and enforce their respective interests against existing collateral.

The terms of the Term Note and the PNC Facility have

been structured in such a way that, if we default under one, we will also default under the other.

In the event of a continuing default,

our senior secured lenders would have the right to accelerate the then-outstanding amounts under each such facility and to exercise their

respective rights and remedies to collect such amounts, which would include foreclosing on collateral constituting substantially all of

our assets and the assets of our PeriShip Global subsidiary As a result, a default under applicable debt covenants could have an adverse

effect on our financial condition or results of operations.

These covenants may restrict our ability to engage in transactions that we

believe would otherwise be in the best interests of our stockholders.

STAFF COMMENTS.

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 1A. Risk Factors