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Item 7. Management’s Discussion and Analysis

2024-03-29 compared with 2023-03-28 · 262 added, 259 removed, 180 unchanged (74% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This Management’s Discussion and Analysis

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(“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.

our VerifyMe Solutions segment, our technologies provide unit level traceability, brand protection, 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:

PeriShip Global Solutions:

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.

with its subsidiaries, including PeriShip Global, LLC (“PeriShip Global”) and Trust Codes Global Limited (“Trust Codes

Global”), (together the “Company,” “we,” “us,” or “our”), is a traceability and

customer support services provider using specialized software and process technology.

The company operates a Precision Logistics Segment

and an Authentication Segment to provide specialized logistics for time-and-temperature sensitive products, as well as item level

traceability, anti-diversion and anti-counterfeit protection, brand protection and enhancement technology solutions.

Through our Precision

Logistics segment, we provide a value-added service for sensitive parcel management driven by a proprietary software platform that provides

predictive analytics from key metrics such as pre-shipment weather analysis, flight-tracking, sort volumes, and traffic, delivered to

customers via a secure portal.

The portal provides real-time visibility into shipment transit and last-mile events which is supported

by a service center.

Through our Authentication segment our technologies enable brand owners to gather business intelligence through the

supply chain, cross-sell products, detect counterfeit activities, monitor product diversion, and build brand loyalty utilizing our unique

dynamic codes which are read by consumers with their smart phones.

Further information regarding our business segments is discussed below:

Precision Logistics:

The Precision Logistics

(formerly PeriShip Global Solutions) segment specializes in predictive analytics for optimizing delivery of time and temperature sensitive

perishable products.

We manage complex industry-specific shipping logistic processes that require critical time, temperature control and

handling to prevent spoilage and extreme delivery times and brand impairment.

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.

including flight-tracking, weather, traffic, major carrier feeds, and time of day data, we provide our clients an end-to-end vertical

approach for their most critical service delivery needs.

Using our proprietary IT platform, we provide real-time information and analysis

to mitigate supply chain flow interruption, as well as delivering last-mile resolution for key markets, including the perishable healthcare

and food industries.

Through our proprietary PeriTrack ® customer

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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:

Global Solutions segment includes the following bundled services as part of our service offerings to our customers:

We offer post-delivery services such as customized

reporting for trend analysis, system performance reports, power outage maps, and other tailored reports.

Precision Logistics generates revenue from two

business service models.

· ProActive Service – clients pay us directly for carrier service coupled with our proactive

logistics assistance.

· Premium Service – clients pay us directly or through our carrier partner for our complete

white-glove shipping monitoring and predictive analytics service.

This service includes customer web portal access, weather monitoring,

temperature control, full service center support and last mile resolution.

The Precision Logistics 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.

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

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.

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

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.

· Service Center :

We have assembled a team of customer resolution specialists based in the U.S.

service team resolves shipping problems on behalf of our customers.

The service 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.

We help 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 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.

We provide 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

pro-actively resolve such shipment issues.

VerifyMe Solutions :

The VerifyMe Solutions

segment specializes in traceability to connect brands with consumers through their product.

Through VerifyMe technologies brand inspectors

can authenticate product with visible and invisible unique to product 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

We have full-time meteorologists on staff to monitor weather.

may experience a variety of weather conditions between the origin and destination, and our team actively monitors these conditions to

maximize the number of timely and safely transmitted shipments.

Similarly, traffic and construction also create unpredictable delays which

our team works diligently to mitigate.

If delays or other issues occur, we inform clients and work with them to proactively resolve such

shipment issues.

Authentication :

The Authentication (formerly

VerifyMe Solutions) segment specializes in traceability to connect brands with consumers through their product.

This is critical in the

current landscape of increased regulations, as well as increased counterfeit activity and product diversion.

The ability to detect fraud

or abnormal behavior while tracing an item’s journey from production through to the consumer’s hands provides consumers and

brands the assurance they require.

VerifyMe has custom software, patented technologies, and a cloud environment that combines machine

learning and data science to meet the needs of consumers and brands.

In addition, the personalized consumer experience with the brand

creates a connection that increases brand perception and loyalty.

We have a custom suite of products

that offer clients traceability and brand solutions.

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 brand enhancement allowing the brand owner to gather business intelligence and engage with customers

· VerifyMe Authenticate™ using rare earth-based ink taggants for instant authentication of labels, packaging and products

· VerifyMe Track & Trace™ for unit level traceability and supply chain control

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.

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

Currently most shipping businesses utilize the

carrier’s data platform for tracking which generally informs the shipping enterprise, and their customers, when a package is in

transit, when a package has been delivered, and some level of detail of the path which a package traveled.

We believe taking the data

feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor of 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 feel 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.

Opportunities

Precision Logistics:

Traditionally,

most shipping businesses utilize the carrier’s data platform for tracking which generally informs the shipping enterprise, and their

customers, when a package is in transit, when a package has been delivered, and some level of detail of the path which a package traveled.

We believe taking the data feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor

of our service center gives us a competitive advantage against other third-party platforms that solely rely on the carrier’s data

We utilize a variety of input sources beyond the carrier’s data feed.

Our proprietary “Predictive Analytics”

technology is fed real-time meteorology data, traffic and road construction data, and power grid information to help predict issues before

If an alert is created the shipper and our service 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.

We have meteorologists

on staff that track world-wide weather patterns to address predicted issues before they happen.

We believe the company has two significant

areas of opportunity.

First, our services are specifically designed to address the needs of small and medium size agriculture, food and

beverage companies.

Second, the pharmaceutical and healthcare industries represent significant opportunities due to the enhanced tracking

and customer service associated with distribution of these products.

We are focusing our sales emphasis on those industries.

we believe that combining our authentication solutions into the product offering for Precision Logistics clientele, gives our Precision

Logistics segment a competitive advantage to generate revenue by enhancing clients’ ability to grow revenue, gain business intelligence

and build brand loyalty.

logistics industry is facing an economic

We believe this represents an opportunity since major global carriers are cutting internal staff.

These carriers are looking

for lower cost alternatives to service their customers as well as partners that can help the carrier increase revenues.

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 our Precision Logistics segment provides the ideal

solution for all parties involved.

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

related and other logistics operations to service providers such as PeriShip Global which allows companies to improve the efficiency of

their businessed by focusing their resources on core competencies.

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.

Due to the current economic environment, and our cost competitive

offering, we believe companies will opt to outsource their precision logistics services to reduce their operational costs.

The outsourcing

of supply chain related and other logistics operations to service providers such as ours allows companies to improve the efficiency of

their businesses by focusing their resources on core competencies.

Authentication:

We believe the products

in our Authentication segment have applications in many areas.

Currently, we are aggressively marketing opportunities in the following

· Agriculture, 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

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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.

· 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 product’s authenticity instantly with a smartphone.

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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.

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.

We believe that Precision Logistics

and Authentication segments have synergistic product centric technology platforms and combined have a compelling technology offering for

brand owners.

For example, currently our Precision Logistics segment ships vaccines for major pharmaceutical companies.

With the addition

of our Authentication technology, we can add unit level traceability and authentication to protect clients’ vaccines from product

diversion and sub-standard counterfeits.

In addition, our Authentication segment brand enhancement solutions could give the Precision

Logistics food and beverage clients the ability to gather rich business intelligence and build customer loyalty with engagement functions

like videos, discounts, contests, recipes, etc.

Results of Operations

of the Years Ended December 31, 2022, and 2021

Comparison of the Years Ended December 31,

2023, and 2022

The following discussion analyzes our results

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statements for such periods and the accompanying notes thereto.

Twelve Months Ended

(In thousands)

PeriShip Global Solutions

VerifyMe Solutions

Precision Logistics

Authentication

Total Revenue

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2023, was $25,313 thousand, a 29% increase compared to $19,576 thousand, for the year ended December 31, 2022.

increase in revenue primarily relates to the acquisition of the PeriShip Global business on April 22, 2022, which contributed $18,190

thousand for the twelve months ended December 31, 2022.

VerifyMe Solutions segment increased revenue by $519 thousand, a 60% increase,

primarily driven by growth in our agriculture segment.

Twelve Months Ended

increase in revenue primarily relates to the acquisition of the PeriShip Global business on April 22, 2022, which increased revenue by

$6,462 thousand for the twelve months ended December 31, 2023, partially offset by a $725 thousand decline in the Authentication revenue.

The Authentication segment maintained its existing client base but had reduced orders in the nutraceutical market in 2023.

(In thousands)

PeriShip Global Solutions

VerifyMe Solutions

Precision Logistics

Authentication

Total Gross Profit

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December 31, 2023, compared to 33% for the year ended December 31, 2022.

The decrease in our gross margin is due to the acquisition of

the PeriShip Global business which has significantly lower margins than the VerifyMe Solutions segment.

and Administrative Expenses

The increase in our gross margin is due to the acquisition of

the PeriShip Global business acquired on April 22, 2022, which is included for the full twelve months of 2023.

The Precision Logistics

segment had increased premium services revenue which has higher margins as well as process improvements to increase proactive services

With the acquisition of Trust Codes in March 2023, providing custom software, our margins in the Authentication segment also

General and Administrative Expenses

General and administrative expenses were $10,586

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of $2,158 thousand.

The increase related to the acquisition of the PeriShip Global business, and primarily made up of salaries and

related expenses for approximately 35 employees in the IT and operations department.

and Development

The increase relates to the acquisition of the PeriShip Global business on April 22, 2022 included for the full

twelve months of 2023, the deal transaction costs related to the acquisition of the Trust Codes Global business of $278 thousand, operations

related to Trust Codes, as well as severance expense of approximately $590 thousand which has been paid in full by the end of January

2024, partially offset by costs related to the acquisition of the PeriShip Global business of $661 thousand in 2022 that did not recur

Stock-based compensation was $1,509 thousand, including $121 thousand relating to severance in 2023, compared to $1,375 thousand

Amortization and depreciation expense was $1,134 thousand and $770 thousand for the twelve months ended December 30, 2023, and

2022, respectively.

Research and Development

Research and development expenses increased by

$18 thousand to $107 thousand for the year ended December 31, 2023, from $89 thousand for the year ended December 31, 2022.

increase related to the acquisition of the PeriShip Global business and research and development related to their IT platform.

and Marketing

The increase was primarily related to research and development activities as a result of the acquisition of Trust Codes during the first

quarter of 2023.

Sales and Marketing

Sales and marketing expenses for the year ended

December 31, 2022, were $1,718 thousand compared to $1,163 thousand for the year ended December 31, 2021, an increase of $555

The increase is related to the acquisition of the PeriShip Global business, primarily consisting of salaries and related

expenses for four employees.

Income (Loss)

December 31, 2023, were $1,638 thousand compared to $1,718 thousand for the year ended December 31, 2022, a decrease of $80

The decrease is related to a reduction in employees and consultants in the Authentication segment partially offset by the

PeriShip Global business included for the full twelve months of 2023.

Our net loss for the year ended December 31, 2023,

was $14,398 thousand, compared to net income of $3,612 thousand for the year ended December 31, 2021.

The decrease was primarily due to

the impairment of the SPAC of $10,932 thousand during 2022 compared to an unrealized gain on the SPAC of $8,371 in 2021, partially offset

by a gain on extinguishment of debt of $326 thousand and the changes discussed above for the acquisition of the PeriShip Global business.

The resulting consolidated loss per diluted share for the year ended December 31, 2022, was $1.70 compared to a consolidated income per

diluted share of $0.49 for the year ended December 31, 2021.

was $3,390 thousand, compared to $14,398 thousand for the year ended December 31, 2022.

The decreased loss was primarily due to the impairment

of the SPAC of $10,932 thousand during 2022.

The resulting consolidated loss per diluted share for the year ended December 31, 2023, was

$0.35 compared to a consolidated loss per diluted share of $1.70 for the year ended December 31, 2022.

Liquidity and Capital Resources

Our operations used $2,551 thousand of cash during

the year ended December 31, 2022, compared to $3,254 thousand during the year end December 31, 2021.

The decrease in cash used from operations

is due to a net change in non-cash addbacks to net income and the acquisition of PeriShip Global, which generates cash, that occurred

during the year ended December 31, 2022.

Our operations provided $244 thousand of cash

during the year ended December 31, 2023, compared to $2,551 thousand cash used in operations during the year end December 31, 2022.

increase in cash from operations is due to a favorable change in working capital accounts during 2023 compared to 2022 from our acquisition

of PeriShip Global in April of 2022.

Net cash used in investing activities was $1,195

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ended December 31, 2022, $7,500 thousand was used for the acquisition of the PeriShip Global business.

The use of cash in 2021 relates

primarily to the acquisition of sponsor units in the SPAC of $2,593 thousand.

Net cash provided by financing activities for

the year ended December 31, 2023, was $634 thousand compared to $4,424 thousand for the year ended December 31, 2022, related to proceeds

from debt and offerings of our common stock in 2022 and 2021.

On April 12, 2022, we entered into a Securities

Purchase Agreement (the “Securities Purchase Agreement”) with the selling stockholder and certain directors, providing for

the issuance and sale to purchasers therein of an aggregate of 880,208 shares of our common stock, pre-funded warrants to purchase up

to 675,000 shares of our common stock, and warrants to purchase up to 1,555,208 shares of our common stock, for gross proceeds to us of

approximately $5.0 million and net proceeds of $4.6 million.

The pre-funded warrant was exercisable immediately and terminated when fully

exercised and had an exercise price of $0.001 per share.

The pre-funded warrant was fully exercised in August 2022, with an exercise price

of $0.001, and as a resulted, 675,000 shares of our common stock were issued.

The warrants are exercisable for a period of five years

commencing six months from the date of issuance and have an exercise price of $3.215 per share.

The warrants contain price adjustment

provisions which may, under certain circumstances, reduce the applicable exercise price.

The transaction closed on April 14, 2022.

from issuance of convertible debt in 2023 and debt and offerings of our common stock in 2022.

On December 8, 2023, we announced a new $0.5 million

share repurchase program to repurchase shares of the Company’s common stock through December 14, 2024, but may be modified, suspended

or discontinued at the discretion of the Board at any time.

To date, no shares have been purchased under the program.

25, 2023, the Company entered into a Convertible Note Purchase Agreement with certain investors for the sale of convertible promissory

notes for the aggregate principal amount of $1,100 thousand of which $475 thousand was purchased

by relating parties including certain members of management and the Board of Directors.

The notes are subordinated unsecured obligations

of the Company and accrue interest at a rate of 8% per year payable semiannually in arrears on February 25 and August 25 of each year,

beginning on February 25, 2024.

The notes will mature on August 25, 2026, unless earlier converted or repurchased at a conversion price

of $1.15 per share of common stock.

The Company may not redeem the notes prior to the maturity date.

As of December 31, 2023, the amount

outstanding on the convertible debt was $1,100 thousand and included in Convertible Note, and Convertible Note – related party on

the accompanying Consolidated Balance Sheets.

The Company has accrued interest expense of $31 thousand related to the convertible note

as of December 31, 2023.

On September 22, 2022, we entered into the PNC

Facility with PNC Bank, National Association.

The PNC Facility includes a $1 million RLOC with a term of one-year, expiring in September

The RLOC has no scheduled payments of principal until maturity, and bears interest per annum at a rate equal to the sum of Daily

SOFR plus 2.85% with monthly interest payments.

The PNC Facility also includes a four-year Term Note for $2 million which matures in September

of 2026 and requires equal quarterly payments of principal and interest.

The Term Note incurs interest per annum at a rate equal to the

sum of Daily SOFR plus 3.1%.

The RLOC and Term Note are guaranteed by the Company and secured by the assets of PeriShip and the Company.

The PNC Facility includes a $1 million RLOC.

The RLOC has no scheduled payments of principal

until maturity, and bears interest per annum at a rate equal to the sum of Daily SOFR plus 2.85% with monthly interest payments.

Facility also includes a four-year Term Note for $2 million which matures in September of 2026 and requires equal quarterly payments of

principal and interest.

The Term Note incurs interest per annum at a rate equal to the sum of Daily SOFR plus 3.1%.

Term Note are guaranteed by the Company and secured by the assets of PeriShip and the Company.

The PNC Facility includes a number of affirmative

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or would occur upon such declaration of dividend.

We were in compliance with all affirmative and restrictive covenants under the PNC Facility

at December 31, 2022.

On November 3, 2023, we entered into a waiver and amendment to loan documents and received

a waiver for certain events of default.

We also entered into an amended and restated loan agreement with PNC effective October 31,

2023, which provided amendments to a number of affirmative and restrictive covenants applicable to PeriShip Global and extended the RLOC

to September 30, 2024.

We were in compliance with all affirmative and

restrictive covenants under the PNC Facility at December 31, 2023.

Effective October 17, 2022, we entered into an

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We believe that our cash and cash equivalents,

together with the net proceeds from the April 12, 2022, offering and proceeds from debt issued, will fund our operations for the next

In June 2022, we announced a new $1.5 million

share repurchase program to repurchase shares of the Company’s common stock commencing July 1, 2022, for a period of 12 months.

This new repurchase program replaces our existing share repurchase program that was due to expire in August 2022 and is now terminated.

To date, 158,906 shares have been purchased for a total of $215 thousand and a remaining $1,285 thousand may be purchased under the program.

We expect to grow our business

organically and through key acquisitions that will help accelerate the growth of our business.

We expect to continue to fund our operations

primarily through utilization of our current financial resources and future revenue and may issue additional debt or equity.

together with the proceeds from the convertible note, from debt issued and RLOC, will fund our operations for the next 12 months including

expected capital expenditures.

We expect to grow our business organically and

through key acquisitions that will help accelerate the growth of our business.

We expect to continue to fund our operations primarily

through utilization of our current financial resources and future revenue and may issue additional debt or equity.

Critical Accounting Policies and Estimates

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We have identified that the estimates used in the valuation of the assets of the

PeriShip acquisition are critical and require significant judgment.

We believe estimates and assumptions related to these accounting policies

are appropriate under the circumstances;

however, should future events or occurrences result in unanticipated consequences, there could

be a material impact on our future financial position, results of operations or cash flows.

PeriShip acquisition, and the Trust Codes acquisition are critical and require significant judgment.

We believe estimates and assumptions

related to these accounting policies are appropriate under the circumstances;

however, should future events or occurrences result in unanticipated

consequences, there could be a material impact on our future financial position, results of operations or cash flows.

Revenue Recognition

We recognize revenue based on the principals established

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For licensing of our VerifyInk TM technology we depend on the integrity of our clients’

Determining whether products and services in agreements with non-standard terms are distinct performance obligations that should

be accounted for separately or combined to one unit of accounting may require significant judgement.

The timing of revenue recognition, billings and

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assets are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period.

the contract assets increased significantly as of December 31, 2022, compared to December 31, 2021, due to the business combination.

No other factors materially impacted the balances.

the contract assets have not significantly increased as of December 31, 2023, due to the business combination.

No other factors materially

impacted the balances.

Business Combinations

Accounting for business combinations requires

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We have recorded goodwill as part of our acquisition

of the PeriShip business, which represents the excess of purchase price over the fair value of net assets acquired in the business combinations.

Pursuant to ASC 350, the Company will test goodwill for impairment on an annual basis in the fourth quarter, or between annual tests,

in certain circumstances.

Under authoritative guidance, the Company first assessed qualitative factors to determine whether it was necessary

to perform the quantitative goodwill impairment test.

The assessment considers factors such as, but not limited to, macroeconomic

conditions, data showing other companies in the industry and our share price.

An entity is not required to calculate the fair value of

a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value

is less than its carrying amount.

Events or changes in circumstances which could trigger an impairment review include macroeconomic conditions,

industry and market conditions, cost factors, overall financial performance, other entity specific events and sustained decrease in share

For our annual goodwill impairment test as of December 31, 2022, we performed a qualitative assessment as permitted by ASU 2017-04

for our reporting unit PeriShip Global and determined that it was more likely than not that the fair value exceeded their respective carrying

of the PeriShip business and Trust Codes business, which represents the excess of purchase price over the fair value of net assets acquired

in the business combinations.

Pursuant to ASC 350, the Company will test goodwill for impairment on an annual basis in the fourth

quarter, or between annual tests, in certain circumstances.

Under authoritative guidance, the Company first assessed qualitative factors

to determine whether it was necessary to perform the quantitative goodwill impairment test.

The assessment considers factors

such as, but not limited to, macroeconomic conditions, data showing other companies in the industry and our share price.

not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it

is more likely than not that its fair value is less than its carrying amount.

Events or changes in circumstances which could trigger an

impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other

entity specific events and sustained decrease in share price.

For our annual goodwill impairment test as of December 31, 2023, we performed

a qualitative assessment as permitted by ASU 2017-04 for our reporting units and determined that it was more likely than not that the

fair value exceeded their respective carrying value.

Stock-based Compensation

We account for stock-based compensation under

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discussed in Note 1 – Summary of Significant Accounting Policies in the notes accompanying the financial statements.

QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT

Not applicable for smaller reporting companies.

FINANCIAL STATEMENTS AND

SUPPLEMENTARY DATA.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements required to be filed pursuant to this Item 8

are appended to this Report beginning on page F-1 located immediately after the signature page and incorporated by reference in this Item

CHANGES IN AND DISAGREEMENTS

WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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 7. Management’s Discussion and Analysis