VerifyMe, Inc. 10-K

ITEM 1. BUSINESS. Overview VerifyMe, Inc. (“VerifyMe”) together with its subsidiaries PeriShip Global, LLC (“PeriShip Global”) and Trust Codes Global Limited (“Trust Codes Global”), (together the “Company,” “we,” “us,” or “our”), is a software driven predictive analytics logistics provider of high-touch end-to-end logistics management, which represents most of our current revenue stream. In addition, VerifyMe technologies provide product traceability, brand protections services, and consumer engagement solutions. Our operations are split into two segments: PeriShip Global Solutions and VerifyMe Solutions. Through our PeriShip Global Solutions segment we provide a value-added service for time and temperature sensitive parcel management driven by a proprietary software platform that provides predictive analytics from key metrics such as flight-tracking, weather, and traffic, all delivered to customers via a secure portal. The portal provides real-time visibility into shipment transit and last-mile events, with dynamic dashboards. All aspects of the of the shipping journey is managed by a dedicated call center. Using our proprietary logistics solution, we provide real-time information and analysis to mitigate supply chain flow interruption, delivering last-mile resolution for key markets, including the perishable healthcare and food industries. Through our VerifyMe Solutions segment, our technologies provide unit level traceability, brand protection, unit level traceability and consumer engagement solutions allowing brand owners to gather business intelligence, cross-sell products, monitor product diversion through the supply chain and build brand loyalty through interaction utilizing our unique dynamic codes which are read by consumers with their smart phones. Further information regarding our business segments is discussed below: Business Update Recent Developments On March 1, 2023, the Company entered into an Asset Purchase Agreement (the “APA”) effective as of February 28, 2023 by and among the Company, Trust Codes Global, Trust Codes Limited, a New Zealand limited liability company (“Trust Codes”) and Signum Holdings Limited. Pursuant to the terms of the APA Trust Codes Global agreed to purchase from Trust Codes and Trust Codes agreed to sell to Trust Codes Global substantially all of the assets of Trust Codes and certain specified liabilities (the “Transaction”). The Transaction closed simultaneously with the execution of the APA on March 1 , 2023. Trust Codes Global is based in New Zealand and provides brand protection based on a digital identity assigned at the unique item level delivered to customers through a software as a service model. The use of unique QR codes or IoT, coupled with GS1 standards, connects brands to consumers. Trust Codes Global leverages advanced algorithms to protect authenticity and brand value and provides data-driven storytelling which allows visibility of the journey for each item through the supply chain to the consumer’s hands. We believe combining the solutions of Trust Codes Global and PeriShip Global will allow the Company to provide a competitive advantage in the software logistics space, securing supply chains from products manufacture all way to the point of delivery, elevating a consumer’s trust and their brand experience. Please refer to Note 17 – Subsequent Events – to the Audited Consolidated Financial Statements appended to this Report and incorporated by reference into Item 8 in this Annual Report on Form 10-K. In January 2023 we signed a mutual sales referral agreement with The Agrarian Group. The agreement is structured to help advance food safety and customer loyalty, as well as increase revenue for both companies. The food industry is a focus area for our VerifyMe Solutions segment and perishable food has been a long-standing focus of our PeriShip Global segment. In November 2022 we entered into an amended five-year renewal agreement with HP Indigo to provide VerifyInk TM security ink taggants for HP Indigo digital presses. This amended agreement also increases the scope of cooperation, in which HP Indigo will refer opportunities for additional VerifyMe technologies. In September 2022 we entered into a $2 million term loan agreement and a $1 million line of credit with PNC Bank and repaid the $2 million promissory note from the acquisition of PeriShip LLC. In August 2022, we entered into a multi-year contract extension with our strategic partner and largest customer of PeriShip Global to continue to provide proactive customer service to their customers. The term of the agreement has been extended to March 1, 2026. Our Solutions PeriShip Global Solutions: The PeriShip Global Solutions segment specializes in predictive analytics through its proprietary software platform for optimizing delivery of time and temperature sensitive perishable products. We manage complex industry-specific shipping logistic processes that require critical time, temperature control and handling to prevent spoilage and extended delivery times. Utilizing predictive analytics from multiple data sources including weather, traffic, flight data, major carrier feeds, and time of day data, we provide our clients an end-to-end vertical approach for their most critical service delivery needs. Using the IT platform, we provide real-time information and analysis to mitigate supply chain flow interruption, delivering last-mile resolution for key markets, including the perishable healthcare and food industries. 2 Table of Contents Through our proprietary PeriTrack ® customer dashboard, we provide an integrated tool that gives our customers an in-depth look at their shipping activities and allows them access to critical information in support of the specific needs of the supply chain stakeholders. In addition, we provide proactive alerts to address on-coming weather issues to make changes in scheduling to meet critical deadlines for shipments. We offer post-delivery services such as customized reporting for trend analysis, system performance reports, power outage maps, and other tailored reports. PeriShip Global generates revenue from three business service models. · Proactive Service – PeriShip Global clients pay us directly for carrier service coupled with our proactive logistics assistance. · Direct Premium Service –PeriShip Global clients pay us directly for carrier service coupled with our complete white-glove shipping monitoring and predictive analytics service. This service includes the customer web portal access, weather monitoring, temperature control, full call center support and last mile resolution. · Indirect Premium Service – Our carrier partner also offers a “white label” version of our Premium Service to its customers and pays us a fixed contractual fee. PeriShip Service Products: The PeriShip Global Solutions segment includes the following bundled services as part of our service offerings to our customers: PeriTrack ® : Our proprietary PeriTrack® customer dashboard was developed utilizing our extensive logistics operational knowledge. This integrated web portal tool gives our customers an in-depth look at their shipping activities and alerts based on real-time data. The PeriTrack® dashboard was designed to provide critical information in support of the specific needs of supply chain stakeholders and gives our customer resolution specialists a 360° view of shipping activity. PeriTrack® features tools tailored for shippers of perishable goods, which includes the In-Transit Shipment Tracker. This tool provides details on the unique shipper’s in-transit shipments, with the ability to select and analyze data on individual shipments. Call Center Service : PeriShip Global has assembled a team of customer resolution specialists based in the U.S. This human intervention service team resolves shipping problems on behalf of our customers. The call center acts as a help desk and monitors shipping to delivery for our customers. Pre-Transit Service : PeriShip Global helps clients prepare their products for shipments by advising clients on packaging requirements for various types of perishable products. Each product type requires its own particular packaging to protect it during the shipment, and we utilize our extensive knowledge and research to provide our customers with packaging recommendations to meet their unique needs. Post-Delivery : PeriShip Global provides customized reporting for trend analysis, system performance reports, power outage maps, and many other reports to help our customers improve their processes and customer service outcomes. Weather/Traffic Service : PeriShip Global has full-time meteorologists on staff to monitor weather. A package may experience a variety of weather conditions between the origin and destination, and our team actively monitors these conditions to minimize the changes of timely and safe transit of shipments. Similarly, traffic and construction also create unpredictable delays which our team works diligently to mitigate. If delays or other issues occur the PeriShip team informs clients and works with them to proactively resolve such shipment issues. VerifyMe Solutions: The VerifyMe Solutions segment in traceability to connect brands with consumers through their product. Brands can gain unit level traceability through the supply chain. Through VerifyMe technologies brand inspectors can authenticate product with visible and invisible unique serialized codes. Brand owners have the ability to gather business intelligence while engaging directly with their consumers and can receive programmable alerts related to counterfeit products or if their products are in unexpected geographical markets. Consumers can authenticate products with their smart phone prior to usage and engage with the brand in unique and innovative ways. Engagement can come in many forms such as free giveaways, product specifications, seed to table tracking, cross-selling of products, contests, videos, and recipes. VerifyMe Products: VerifyMe has a custom suite of products that offer clients traceability and consumer engagement. These products are combined with “software as a service” or “SAAS” which is stored in the cloud and accessed through the internet. · VerifyMe Engage™ for consumer engagement allowing the brand owner to gather business intelligence and engage with their customers · VerifyMe Authenticate™ using rare earth-based ink taggants for instant authentication of labels, packages and products · VerifyMe Track & Trace™ for unit level traceability and supply chain control 3 Table of Contents PeriShip Global and VerifyMe Synergies: We believe that PeriShip Global and our VerifyMe solutions have synergistic product centric technology platforms and combined have a compelling technology offering for brand owners. For example, currently PeriShip Global ships vaccines for major pharmaceutical companies. With the addition of VerifyMe technology, PeriShip Global can add unit level traceability and authentication to protect clients’ vaccines from product diversion and sub-standard counterfeits. In addition, VerifyMe’s consumer engagement solutions could give PeriShip Global food and beverage clients the ability to gather rich business intelligence, turn “unknown consumers” into “known consumers” and build customer loyalty with engagement functions like videos, discounts, contests, etc. Strategic Partnerships PeriShip Global has a direct partnership with a major global carrier company. This partnership includes the ability for both companies to white label each partner’s services. In addition, PeriShip Global has data feeds directly from the carrier into our proprietary logistics optimization software which provides shippers much more detailed information and predictive analytics on their shipment versus a standard shipping code look up which is provided by the carrier. VerifyMe has a contract with HP Indigo, and a strategic partnership with INX International, the third largest producer of inks in North America. We believe these partnerships can be used to enable brand owners to securely prevent product diversion, engage with their consumers and authenticate labels, packaging and products, alleviating liability from counterfeit products that harm consumers. INX International manufactures VerifyInk™ for printing static images for labels, packaging and products such as aluminum twist caps for the spirits industry. INX International also successfully created ink jet variable images containing the VerifyInk™ which can be used with flexo, silkscreen and offset printing presses. Our security pigments are manufactured from naturally occurring inorganic rare earth materials. There are many manufacturers of these types of specialized pigments, and we intend to maintain multiple simultaneous relationships to ensure ample sources of supply. Accordingly, we are not dependent on any principal suppliers. We rely on third-party strategic partners to manufacture and distribute our VerifyInk TM products. We provide these strategic partners with pigment mixing instructions for the specific uses of each client based on their existing equipment and processes. We maintain policies and procedures to monitor, track and log access to and disposition of all pigment. Our customers are also required to agree to and implement these policies and procedures. In relation to our other products, such as our hand held VerifyChecker™ and VerifyAuthenticator TM Smartphone Authenticator devices, as well as our VerifyLabel™ tamper-proof labels, we provide instructions for the design of these products and rely on our strategic partners for manufacturing and distribution. PeriShip Global Opportunities According to a 2023 report entitled, “Perishable Goods Transportation Market in the US 2023-2027”, written by Infiniti research Limited, the Perishable Goods logistics market size was $4.0 billion in 2022 and is estimated to be $4.3 billion in 2023 and is expected to grow to $5.9 billion by 2027. That represents a compound average market acceleration with a growth rate of approximately 8% per year. This report is based on perishable product segments including meat, poultry, seafood, dairy, fruits and vegetables, and bakery and confectionary. PeriShip Global services all of these product segments. Currently most shipping businesses utilize the carriers’ data platform for tracking which generally informs the shipping enterprise, and their customers, when a package is in transit, when a package has been delivered, and some level of detail of the path which a package traveled. We believe taking the data feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor of PeriShip Global’s call center gives us a major competitive advantage against other third-party platforms that solely rely on the carrier’s data feeds. PeriShip Global utilizes a variety of input sources beyond just the carrier’s data feed. PeriShip Global’s proprietary “Predictive Analytics” technology is fed real-time meteorology data, traffic and road construction data, and power grid information to help predict issues before they happen. If an alert is created the shipper and our call center will work to address the issue and save the perishable product from spoiling, saving the shipper significant costs and reducing the need to replace products that are no longer viable. PeriShip Global has two meteorologists on staff that track world-wide weather patterns to address predicted issues before they happen. We believe the pharmaceutical and healthcare industries represent the biggest areas of opportunity and we are focusing our PeriShip Global sales emphasis on those industries. In addition, we believe that combining VerifyMe’s solutions into the product offering for PeriShip Global clientele, including food and beverage and healthcare industries, gives PeriShip Global a competitive advantage to generate revenue by enhancing PeriShip Global’s clients’ ability to grow revenue, gain business intelligence and build brand loyalty. The current global logistics industry worldwide is facing an economic slowdown. We believe this represents an opportunity for PeriShip Global since major global carriers are cutting internal staff and are reducing research and development investments. To maintain their credibility in the market, these carriers will need to ensure they meet their customers’ demands for time and temperature sensitive shipments, while maintaining their overheads. We believe outsourcing this function to PeriShip Global provides the ideal solution for all parties involved. 4 Table of Contents Building logistics infrastructure is a capital-intensive process as the investment is locked in for a considerably long period. Due to the current economic downturn, we believe several companies will opt to outsource their logistics services to reduce their operational costs and maintain cash flows. The outsourcing of supply chain logistics operations to service providers such as PeriShip Global allows companies to improve the efficiency of their businesses by focusing their resources on core competencies. VerifyMe Opportunities We believe VerifyMe’s products have applications in many areas. Currently, we are aggressively marketing opportunities in the following areas: · Food and Beverage – Food safety is becoming more common as supply chains become more global and as imaging and manufacturing technology become more accessible. Food traceability, sustainability and carbon neutral production is becoming a significant consideration for brand and governments. We believe our unit level traceability and authentication solutions can help brands tell their story about sustainability and battle against tainted or substandard foods and beverages. · Pharmaceuticals/nutraceuticals – We believe counterfeit prescription pharmaceuticals and nutraceuticals are a growing problem, widely recognized as a public health risk and a serious concern to public health officials, private companies, and consumers. Counterfeiting can apply to both branded and generic products and counterfeit pharmaceuticals may include products with the correct ingredients but fake packaging, with the wrong ingredients, without active ingredients or with insufficient active ingredients. The United States enacted legislation requiring the implementation of a comprehensive system designed to combat counterfeit, diluted or falsely labelled pharmaceuticals, referred to as serialization or electronic pedigree (e-Pedigree). Our consumer facing visible codes and unique pigments embedded in the ink of a unique serialized barcode can provide a layered security foundation for a customer solution in this market. We are seeking to expand our business in this market and believe that as additional pharmaceutical companies seek to comply with the legislation, our products will provide attractive alternatives to address the need for product identifiers. · Consumer Products –We believe our technology solutions are particularly suited for the cosmetics, health and beauty and apparel industries. We give the consumer the ability to test a products authenticity instantly with a smartphone. We can protect brand owners from liability litigation, product diversion and lost financial sales with our consumer facing visible codes and unique ink pigments which can be incorporated in dyes and used by manufacturers in these industries to combat counterfeiting and piracy of actual physical goods. Our pigments expressed as inks can also be used on packaging, as well as to track products that have been lost in transit, whether misplaced or stolen. In addition, in each of these markets, our SaaS software allows brand owners and consumers to track the products and will alert the consumer or brand owner of product diversion with 24/7 monitoring. As each product has a unique code, this allows consumers and brand owners to authenticate the product in real time and link directly to the brand owner’s website for additional product information, discounts, and more. Current Economic Environment 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, laying off more than 10% of its officers and directors, 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. consumers. 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. However, 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. 5 Table of Contents Business Combination On March 1, 2023, we acquired, through Trust Codes Global, the business and certain assets of Trust Codes Limited, which provides unique item level codes for brand protection, data intelligence and consumer engagement technology with an expertise in the food and agriculture industry. Using unique QR codes or IoT, coupled with GS1 standards, we provide brand protection based on a digital identity assigned at the unique item level delivered to customers through a software as a service model. Leverages advanced algorithms to protect authenticity and brand value we provide data-driven storytelling which allows visibility of the journey for each item through the supply chain to the consumer’s hands. The purchase price was approximately $1,000,000, which consisted of approximately $350,000 in cash paid at closing, and 353,492 shares of restricted common stock of the Company, representing $650,000 in Stock Consideration. The acquired Trust Codes business is included in the VerifyMe Solutions segment and we expect the results of its operations will be included in the consolidated financial statement beginning March 1, 2023. Please refer to Note 17 – Subsequent Events – to the Audited Consolidated Financial Statements appended to this Report and incorporated by reference into Item 8 in this Annual Report on Form 10-K. On April 22, 2022, we acquired, through PeriShip Global, the business and certain assets of PeriShip, LLC, a value-added service provider for time and temperature sensitive parcel management. PeriShip Global provides shipping logistics services utilizing proprietary predictive analytics software and supporting call center services. Using our proprietary IT platform, we provide real-time information and analysis to mitigate supply chain flow interruption, delivering last-mile resolution for key markets, including the perishable healthcare and food industries. The purchase price was $10.5 million which consisted of $7.5 million in cash paid at closing, a promissory note of $2.0 million with a fixed interest rate of 6% per annum on the unpaid principal balance, to be paid in three installments on the sixth, fifteenth, and eighteenth month anniversaries of the closing, and 305,473 shares of restricted common stock of the Company, representing $1.0 million in stock consideration. We expect that all of the goodwill recorded for financial statement purposes is deductible for tax purposes. The acquired PeriShip business is included in the PeriShip Global Solutions segment and the results of its operations have been included in the consolidated financial statements beginning April 22, 2022. SPAC Investment On July 6, 2021, we co-sponsored the initial public offering of G3 VRM Acquisition Corp, a special purpose acquisition company, or “SPAC,” through a contribution into G3 VRM Holdings LLC, or the “Sponsor Entity.” The closing of the IPO of 10,626,000 Units, including 626,000 Units pursuant to the partial exercise of the underwriter’s over-allotment, generated gross proceeds of $106,260 thousand. G3 VRM commenced trading on NASDAQ under the symbol “GGGVU” and was targeting businesses with enterprise values of approximately $250 million to $500 million within the technology and business services industry. VerifyMe, indirectly through the Sponsor Entity beneficially owned approximately 9.42% of the common stock of the SPAC. The SPAC was unable to complete its initial business combination within 12 months from the closing of the IPO and the Sponsor Entity decided not to fund the extension and did not deposit additional funds into the trust account. As a result, the SPAC was dissolved and liquidated in accordance with its charter. The SPAC redeemed 100% of the public shares for cash, the rights expired worthless, and the founder shares and the private placement securities have become worthless. In December 2022, it was determined that the costs to dissolve the SPAC were ultimately less than the remaining assets of the SPAC and the SPAC made a distribution to the Company of $32 thousand. The fair value of the equity investment was $0 million as of December 31, 2022, and $11.0 million as of December 31, 2021. As of December 31, 2022, we have recognized the impairment loss of $10,932 thousand included in Loss on equity investments in the accompanying Consolidated Statements of Operations. Our Intellectual Property Intellectual property is important to our business. Our current patent and trademark portfolios consist of eleven granted U.S. patents and one granted European patent validated in four countries (France, Germany, United Kingdom, and Italy), six pending U.S. and foreign patent applications, fifteen registered U.S. trademarks (of which seven trademarks were acquired through our wholly owned subsidiary, PeriShip Global), two EU trademark registrations, one Colombian trademark registration, one Australian trademark registration, one Japanese trademark registration, one Mexican trademark registration, one Singaporean trademark registration, two UK trademark registrations, and twenty-one pending US and foreign trademark applications. While some of our granted patents are commercially ready, we believe that others may have commercial application in the future but will require additional capital and/or a strategic partner in order to reach the potential markets. All of our patents are related to the inventions described above. Our registered patents expire between the years 2023 and 2039. The expiration date of a pending application that matures into a registration depends upon the issuance date and any adjustment under 35 U.S.C. 154(b). 6 Table of Contents It is cost prohibitive to register patents in every country. We continue to develop new technologies and we apply for patent protection for these technologies in countries with the most market potential and strong patent enforcement tools. When a new product or process is developed, we may seek to preserve the economic benefit of the product or process by applying for a patent in each jurisdiction in which the product or process is likely to be exploited. The issuance of a patent is considered prima facie evidence of validity. The granting of a patent does not prevent a third party from seeking a judicial determination that the patent is invalid. Such challenges to the validity of a patent are not uncommon and can be successful. There can be no assurance that a challenge will not be filed to one or more of our patents, if granted, and that if filed, such a challenge will not be successful. We have trademarked the VerifyMe TM brand in the United States and have registered and pending applications with respect to our brand internationally. However, our name and brand could be confused with brands that have similar names, including but not limited to Verified.Me, a service offered to Canadians by SecureKey Technologies Inc. We have a pending application for the VerifyMe name in Canada but can make no assurances regarding its approval. We are aware of names and marks similar to our service marks being used from time to time by other persons that could result in confusion and may diminish the value of our brands and adversely affect our business. See Item 1A “Risk Factors” for additional information regarding the risk of confusion of our name with other brands and other intellectual property risks. Research and Development Current research and development efforts are focused on expanding our technology into new areas of implementation and to develop unique customer applications. We spent approximately $89 thousand and $51 thousand during the years ended December 31, 2022, and 2021, respectively, on research and development. Research in our PeriShip Global Solutions segment is currently focused on developing: · multi-carrier software support so our services can be provided to clients no matter which carrier they choose to ship their packages; · the ability to print labels utilizing our own label printing software rather than relying on a carrier’s print engine; · an mobile app for smart phones so our clients can access our portal from their phones rather than a personal computer; · the imbedding of artificial intelligence into our proprietary IT portal to expand and improve our predictive analytics capabilities; · imbedding a new temperature sensitive ink solution that will give an indication if a temperature exceeded a certain level on packaging for vaccines, food and beverages, and other temperature sensitive packaging, that need constant cold storage temperatures during transit; · creating revenue from our weather analytics. Our legacy ink technology in our VerifyMe Solution Segment is effectively complete, and we are concentrating on the marketing of our technologies. VerifyMe continues to monitor the market for state-of-the-art innovation and may add new products and services in the future, if we believe it would provide a competitive market advantage and could be successfully monetized. Sales and Marketing Strategy Business development and sales resources are aligned to support existing customer accounts and new customer development. We use social media channels, such as LinkedIn, Facebook and Twitter as a means of marketing our services. By staying in contact and engaging with customers, we are able to identify possible needs and look for opportunities to expand the services we are providing. We are currently revising the PeriShip Global website, with an on-line chat system as well as aligning with the VerifyMe website to advertise our synergistic offerings. We believe many of the clients of PeriShip Global will benefit from the legacy VerifyMe business consumer engagement and food safety technologies. We will also continue to re-establish trade show attendance which had declined during the height of the COVID pandemic. In lieu of building, training, and supporting a world-wide internal sales force, we have engaged with multiple strategic partners who have existing relationships in their particular geographical locations. For our VerifyMe Solutions segment, these strategic partners have relationships with government and brands and include both paid and commissioned sales only contract arrangements. They are located in the Middle East, Europe, United Kingdom, India, South Africa, United Arab Emirates, China and Pakistan. We plan to continue to build new strategic partnerships throughout the globe. We have also established a network of commission only paid consultants within the United States. These consultants mainly focus on brand owners, and they are not constricted geographically. 7 Table of Contents Competition PeriShip Global has developed its own software portal with predictive analytics for weather, traffic, power grids, and data feeds it receives from one of the world’s largest logistics carriers. There are approximately 10 U.S. companies that operate a similar business model, however most of these companies specialize in a particular field such as healthcare or non-perishable building materials. PeriShip Global is operating in all of the perishable segments. In addition, the major carriers such as FedEx, UPS and DHL all have internal operations servicing the critical time, temperature, and cold storage shipping segment, however we believe with the economic downturn, major carriers are seeking to outsource perishable shipping services rather than invest additional funds to provide internal support. The market for protection from diversion, theft and forgery is a mature industry dominated by a number of large, well-established companies, particularly in the area of traditional overt security technologies where repeating static produced images are commonly used. Security printing for currency production began in Europe over a century ago and has resulted in the establishment of old-line security printers which have branched out into brand and product protection as well. In North America, brand protection products, such as tamper-resistant packaging, security labels, and anti-theft devices are readily available and utilized on a widespread basis. In recent years, however, demand has increased for more sophisticated overt and covert security technologies with a strong desire for technologies that can provide variable images and data. Competitors can be segregated into the following groups: (i) security ink manufacturers who are generally well-established companies whose core business is manufacturing and selling printing inks; (ii) system integrators who have often evolved from other sectors in the printing industry, mainly security printing manufacturers, technology providers, or packaging and label manufacturers, and who typically offer a range of security solutions that enable them to provide a complete suite of solutions tailored to the customer’s specific needs and requirements; (iii) system consultancy groups who offer a range of technologies from several different providers and tailor specific solutions to end-users; (iv) traditional authentication technology providers which provide holograms and digital watermarking; (v) product diversion tracking providers which provide on-product and in-product tagging technologies; and (vi) traditional security printers whose core products are printing the world’s currencies. In general, we believe competition in our principal markets is primarily driven by product performance, features and liability; price; ease of implementation, technology effectiveness, digital instant verification; new laws and regulations; product innovation and timing of new product introductions; ability to develop, maintain and protect proprietary products and technologies; sales and distribution capabilities; technical support and service; brand loyalty; applications support; and breadth of product line. Amazon has become a competitor with their new “Project Zero” brand protection system utilizing their “Transparency” serialization product. Amazon’s product serialization service provides a unique code for every unit that is manufactured, and the brand puts these codes on its products as part of its manufacturing process, which Amazon scans and verifies. Amazon’s solution must be used within the Amazon ecosystem. This differs from our visible unit level traceability codes and our covert luminescent pigment which may be incorporated in the labeling and packaging process as static or variable covert codes. Competition is building in the consumer engagement market as more companies enter the space but are using mainly NFC technology imbedded into apparel. In addition to this technology, we have the ability to print labels on more applications including fabrics and metals. Some of our competitors have substantially greater financial, human and other resources than we have. As a result, we may not have sufficient resources to develop and market our services to the market effectively. We expect competition with our products and services to continue and intensify in the future. Major Customers/Vendors During the year ended December 31, 2022, one customer accounted for 13% of total revenue. During the year ended December 31, 2021, five customers accounted for 95% of total revenue. During the years ended December 31, 2022, one vendor accounted for 99% of transportation cost in our PeriShip Global Solutions segment. As of December 31, 2022, two customers accounted for 23% of total accounts receivable. As of December 31, 2021, three customers accounted for 91% of total accounts receivable. Employees and External Sales Force As of December 31, 2022, we employed approximately 50 persons and several consultants. Of these employees, approximately 40 were employed in our PeriShip Global operations and 8 were employed by our legacy business, VerifyMe. Because of the nature of our business, many of our employees and consultants can, and do, conduct their work for us remotely. In lieu of building, training and supporting a world-wide internal sales force for our VerifyMe legacy business, we have engaged with multiple strategic partners who have existing government and brand owner relationships in their particular geographical locations. These strategic partnerships include both paid and commissioned sales only contract arrangements. These strategic partners are located in the Middle East, Europe, United Kingdom, India, South Africa, United Arab Emirates, Australia, New Zealand, China and Pakistan. We plan to continue to build new strategic partnerships throughout the globe. 8 Table of Contents We have also established a network of over a dozen commission-paid sales consultants within the United States. These consultants mainly focus on brand owners, and they are not constricted geographically. We have also entered into commissioned sales contract arrangement with our strategic partner, HP Indigo. Available Information We make available free of charge on our website, www.verifyme.com, all materials that we file electronically with the Securities and Exchange Commission (“SEC”), including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after electronically filing such materials with, or furnishing them to, the SEC. We have not incorporated by reference into this Report the information included, or that can be accessed through, our website and you should not consider it to be part of this Report. The SEC maintains an Internet website, www.sec.gov that contains reports, proxy and information statements and other information that we file electronically with the SEC.