What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-29 compared with 2023-03-28 · 903 added, 807 removed, 930 unchanged (65% of the section changed)

8 unchanged sentences

our principal financial officer, have evaluated the effectiveness of the design and operation of the Company’s disclosure controls

and procedures as of the year ended December 31, 2022.

Based on that evaluation, the Company’s Chief Executive Officer and Chief

Financial Officer have concluded that, as of December 31, 2022, our disclosure controls and procedures were effective to ensure that

information we are required to disclose in reports that we file or submit under the Exchange Act is:

(i) recorded, processed, summarized

and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management,

including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

and procedures as of December 31, 2023.

Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer

have concluded that, as of December 31, 2023, our disclosure controls and procedures were effective to ensure that information we

are required to disclose in reports that we file or submit under the Exchange Act is:

(i) recorded, processed, summarized and reported

within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including

our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Internal Control Over Financial Reporting

Management’s Report on Internal Control

16 unchanged sentences

financial reporting was effective as of December 31, 2023.

(b) Changes in Internal Control over Financial

2022 Remediation Activities

During the fiscal year ended December 31, 2022,

we implemented remediation actions to address a material weakness due to a lack of segregation of duties identified in our annual report

on Form 10-K for our fiscal year ended December 31, 2021.

Specifically, we defined key controls in accordance with the five components

and seventeen principles of the COSO 2013 Framework.

In addition to the VP of Finance and Financial Controller hired in 2021, we hired

an HR Manager in September 2022 to further enhance our segregation of duties controls.

Through our control testing of the applicable controls

over a sufficient period of time during the year ended December 31, 2022, management has concluded that these controls are operating effectively

and that as of December 31, 2022, we no longer have a material weakness due to a lack of segregation of duties.

Except as set forth above,

there were no other changes in internal control over financial reporting during the fiscal year ended December 31, 2022, that materially

affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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.

For additional information regarding the acquisition, refer to Note 4 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 and Management’s Discussion and Analysis of

Financial Condition and Results of Operations included in Item 7 in this Annual Report on Form 10-K.

Based on the recent completion of

this acquisition and, pursuant to the Securities and Exchange Commission’s guidance that an assessment of a recently acquired business

may be omitted from the scope of an assessment for a period not to exceed one year from the date of acquisition, the scope of our assessment

of the effectiveness of internal control over financial reporting as of December 31, 2022 does not include PeriShip Global.

include PeriShip Global within the timeframe set forth by the SEC’s guidance.

Changes in Internal Control over Financial

There were no changes in internal control over

financial reporting during the three months ended December 31, 2023, that materially affected, or are reasonably likely to materially

affect, our internal control over financial reporting.

Trust Codes Acquisition

1, 2023, we acquired, through Trust Codes Global, the business and certain assets of Trust Codes Limited, a company specializing

in brand protection, anti-counterfeiting and brand enhancement technology with an expertise in the food and agriculture industry.

additional information regarding the acquisition, refer to Note 4 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 and Management’s Discussion and Analysis of Financial

Condition and Results of Operations included in Item 7 in this Annual Report on Form 10-K.

Based on the recent completion of this acquisition

and, pursuant to the Securities and Exchange Commission’s guidance that an assessment of a recently acquired business may be omitted

from the scope of an assessment for a period not to exceed one year from the date of acquisition, the scope of our assessment of the effectiveness

of internal control over financial reporting as of December 31, 2023 does not include Trust Codes Global.

We plan to include Trust Codes

Global in our assessment of the effectiveness of internal control over financial reporting within the timeframe set forth by the SEC’s

Auditor’s Report on Internal Control

5 unchanged sentences

only management’s report in this Report.

REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

OTHER INFORMATION.

During the three months ended December 31, 2023, no director or officer

of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,”

as each term is defined in Item 408(a) of Regulation S-K.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT

Not Applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

DIRECTORS, EXECUTIVE

OFFICERS AND CORPORATE GOVERNANCE.

The information

9 unchanged sentences

120 days after the December 31, 2023, fiscal year end.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

SECURITY OWNERSHIP

OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Except for the information regarding securities

25 unchanged sentences

security holders

1,292,225 (3)

Equity compensation

4 unchanged sentences

price does not take into account the shares issuable upon vesting of outstanding restricted stock units under the 2020 Equity Incentive

Plan (the “2020 Plan”) or 2013 Plan, which do not have an exercise price.

Represents shares of common stock issuable upon exercise of stock options granted under the 2017 Equity Incentive

Plan (the “2017 Plan”) and the 2013 Omnibus Equity Compensation Plan, as amended (the “2013 Plan”)

Includes 877,511 shares remaining available for issuance under the 2020 Plan and 44,770 shares remaining for

issuance under the 2013 Plan and 369,944 shares remaining available for issuance under the 2021 Plan.

Includes individual grants to employees and consultants for services rendered to the Company which were not

made under the Company’s existing equity incentive plans.

CERTAIN RELATIONSHIPS AND RELATED

TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Plan (the “2020 Plan”) or the 2013 Omnibus Equity Compensation Plan, as amended (the “2013 Plan”), which do not

have an exercise price.

(2) Represents shares of common stock issuable upon exercise of stock options granted under the 2017 Equity

Incentive Plan (the “2017 Plan”) and the 2013 Plan.

(3) Includes 143,393 shares remaining available for issuance under the 2020 Plan, 348,009 shares remaining

available for issuance under the 2021 Plan, 36,000 shares remaining available for issuance under the 2017 Plan

(4) Includes individual grants to employees and consultants for services rendered to the Company which were

not made under the Company’s existing equity incentive plans.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

The information required by this Item 13 is incorporated

1 unchanged sentence

and Related Person Transactions,” which proxy statement will be filed within 120 days after the December 31, 2023, fiscal year end.

PRINCIPAL ACCOUNTANT

FEES AND SERVICES

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 is incorporated

2 unchanged sentences

within 120 days after the December 31, 2023, fiscal year end.

EXHIBITS AND FINANCIAL

STATEMENT SCHEDULES.

of Amendment to Amended and Restated Articles of Incorporation (incorporated herein by reference from Exhibit 3.1 to the Company’s

Current Report on Form 8-K filed on June 22, 2020)

Amended Certificate of Designation for Series A Convertible Preferred Stock (incorporated herein by reference from Exhibit 3.2 to the

Company’s Current Report on Form 8-K filed on June 18, 2015)

of Designation for Series B Convertible Preferred Stock (incorporated herein by reference from Exhibit 3.3 to the Company’s Current

Report on Form 8-K filed on June 18, 2015)

of Withdrawal of Certificate of Designation for Series C and Series D Convertible Preferred Stock (incorporated herein by reference from

Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018)

and Restated Bylaws of VerifyMe, Inc., as amended through July 24, 2020 (incorporated herein by reference from Exhibit 3.1 to the Company’s

Current Report on Form 8-K filed on July 29, 2020)

of Warrant for the Purchase of Shares of Common Stock (incorporated herein by reference from Exhibit 4.2 to the Company’s Current

Report on Form 8-K filed on March 3, 2020)

of Common Stock Purchase Warrant (incorporated herein by reference from Exhibit 4.3 to the Company’s Registration Statement on Form

S-1/A (File No.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Certificate of Amendment to Amended and Restated Articles of Incorporation (incorporated herein by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 22, 2020)

Second Amended Certificate of Designation for Series A Convertible Preferred Stock (incorporated herein by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on June 18, 2015)

Certificate of Designation for Series B Convertible Preferred Stock (incorporated herein by reference from Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on June 18, 2015)

Certificate of Withdrawal of Certificate of Designation for Series C and Series D Convertible Preferred Stock (incorporated herein by reference from Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018)

Amended and Restated Bylaws of VerifyMe, Inc., as amended through July 24, 2020 (incorporated herein by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on July 29, 2020)

Form of Warrant for the Purchase of Shares of Common Stock (incorporated herein by reference from Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on March 3, 2020)

Form of Common Stock Purchase Warrant (incorporated herein by reference from Exhibit 4.3 to the Company’s Registration Statement on Form S-1/A (File No.

333-234155) filed on May 22, 2020)

of Warrant for the Purchase of Shares of Common Stock (incorporated herein by reference from Exhibit 4.6 to the Company’s Registration

Statement on Form S-1/A (File No.

333-234155) filed on June 2, 2020)

Agent Agreement dated June 22, 2020 between the Company and West Coast Stock Transfer, Inc.

(incorporated herein by reference from Exhibit

4.2 to the Company’s Current Report on Form 8-K filed on June 22, 2020)

of Representative’s Warrant (incorporated herein by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K

Form of Warrant for the Purchase of Shares of Common Stock (incorporated herein by reference from Exhibit 4.6 to the Company’s Registration Statement on Form S-1/A (File No.

333-234155) filed on June 2, 2020)

of Pre-Funded Warrant (incorporated herein by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April

of Common Warrant (incorporated herein by reference from Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on April

Warrant Agent Agreement dated June 22, 2020 between the Company and West Coast Stock Transfer, Inc.

(incorporated herein by reference from Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on June 22, 2020)

Form of Representative’s Warrant (incorporated herein by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 22, 2020)

Form of Pre-Funded Warrant (incorporated herein by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 18, 2022)

Form of Common Warrant (incorporated herein by reference from Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on April 18, 2022)

Description of Securities

of Indemnification Agreement (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed

on February 18, 2021)

Agreement with Patrick White, dated February 15, 2022 (incorporated herein by reference from Exhibit 10.1 to the Company’s Current

Report on Form 8-K file on February 22, 2022)

Agreement with Margaret Gezerlis, dated February 15, 2022 (incorporated herein by reference from Exhibit 10.3 to the Company’s Current

Report on Form 8-K file on February 22, 2022)

Agreement with Keith Goldstein, dated February 15, 2022 (incorporated herein by reference from Exhibit 10.2 to the Company’s Current

Report on Form 8-K file on February 22, 2022)

Agreement with Nancy Meyers, dated February 15, 2022 (incorporated herein by reference from Exhibit 10.4 to the Company’s Current

Report on Form 8-K file on February 22, 2022)

Agreement between PeriShip Global, LLC and Curt Kole, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.5 to the

Company’s Current Report on Form 8-K filed on April 26, 2022)

Agreement between PeriShip Global, LLC and Fred Volk III, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.6 to

the Company’s Current Report on Form 8-K filed on April 26, 2022)

Agreement between PeriShip Global, LLC and Jack Wang, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.7 to the

Company’s Current Report on Form 8-K filed on April 26, 2022)

Technologies, Inc.

2013 Omnibus Equity Compensation Plan (incorporated herein by reference from the Company’s Definitive Proxy Statement

filed on November 19, 2013)

Form of Indemnification Agreement (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 18, 2021)

Employment Agreement with Nancy Meyers, dated February 15, 2022 (incorporated herein by reference from Exhibit 10.4 to the Company’s Current Report on Form 8-K file on February 22, 2022)

Employment Agreement between PeriShip Global, LLC and Curt Kole, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on April 26, 2022)

Employment Agreement between PeriShip Global, LLC and Fred Volk III, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on April 26, 2022)

Employment Agreement between PeriShip Global, LLC and Jack Wang, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on April 26, 2022)

Employment Agreement with Paul Ryan, effective March 1, 2023 (incorporated herein by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023)

Employment Agreement with Adam Stedham, effective June 19, 2023 (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 31, 2023)

Separation Agreement and Release of all Claims between the Company and Keith Goldstein dated July 17, 2023 (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 21, 2023)

Separation Agreement and Release of all Claims between the Company and Margaret Gezerlis dated July 17, 2023 (incorporated herein by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on July 21, 2023)

Restricted Stock Unit Award Agreement between the Company and Patrick White dated March 15, 2023 (incorporated herein by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 20, 2023)

Restricted Stock Unit Award Agreement between the Company and Keith Goldstein dated July 31, 2023 (incorporated herein by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 21, 2023)

Restricted Stock Unit Award Agreement between the Company and Margaret Gezerlis dated July 31, 2023 (incorporated herein by reference from Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on July 21, 2023)

Restricted Stock Unit Award Agreement between the Company and Adam Stedham dated June 19, 2023 (incorporated herein by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023)

Restricted Stock Unit Award Agreement between the Company and Scott Greenberg dated March 15, 2023 (incorporated herein by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 20, 2023)

LaserLock Technologies, Inc.

2013 Omnibus Equity Compensation Plan (incorporated herein by reference from the Company’s Definitive Proxy Statement filed on November 19, 2013)

2017 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 20, 2017)

to the 2017 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K

filed on April 29, 2019)

Equity Incentive Plan (incorporated herein by reference from Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (File

Amendment to the 2017 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 29, 2019)

2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (File No.

333-249520) filed on October 16, 2020)

2021 Stock Purchase Plan (incorporated herein by reference from Appendix A to the Company’s Definitive Proxy Statement on Schedule

14A filed on April 28, 2021)

Non-Qualified

Stock Option Agreement dated August 2017 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.14 to

the Company’s Registration Statement on Form S-1 (File No.

First Amendment to the VerifyMe, Inc.

2020 Equity Incentive Plan (incorporated herein by reference to the Company’s Definitive Proxy Statement filed Schedule 14A filed on April 4, 2022)

Second Amendment to the VerifyMe, Inc.

2020 Equity Incentive Plan (incorporated herein by reference from Appendix B to the Company’s Definitive Proxy Statement on Schedule 14A filed on April 24, 2023)

VerifyMe, Inc.

2021 Stock Purchase Plan (incorporated herein by reference from Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed on April 28, 2021)

Non-Qualified Stock Option Agreement dated August 2017 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.14 to the Company’s Registration Statement on Form S-1 (File No.

333-234155) filed on October 10, 2019)

Non-Qualified

Stock Option Agreement dated April 17, 2018 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.13

to the Company’s Registration Statement on Form S-1 (File No.

Non-Qualified Stock Option Agreement dated April 17, 2018 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.13 to the Company’s Registration Statement on Form S-1 (File No.

333-234155) filed on October 10, 2019)

to Non-Qualified Stock Option Agreement dated April 16, 2020 to that Non-Qualified Stock Option Agreement dated August 2017 and that Non-Qualified

Stock Option Agreement dated April 17, 2018 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.12

to the Company’s Registration Statement on Form S-1 (File No.

Amendment to Non-Qualified Stock Option Agreement dated April 16, 2020 to that Non-Qualified Stock Option Agreement dated August 2017 and that Non-Qualified Stock Option Agreement dated April 17, 2018 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.12 to the Company’s Registration Statement on Form S-1 (File No.

333-237950) filed on May 1, 2020)

Stock Option Agreement dated August 14, 2019 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.15

to the Company’s Registration Statement on Form S-1 (File No.

Incentive Stock Option Agreement dated August 14, 2019 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.15 to the Company’s Registration Statement on Form S-1 (File No.

333-234155) filed on October 10, 2019)

Stock Option Agreement dated March 11, 2019 between the Company and Margaret Gezerlis (incorporated herein by reference from Exhibit 10.16

to the Company’s Registration Statement on Form S-1 (File No.

Incentive Stock Option Agreement dated March 11, 2019 between the Company and Margaret Gezerlis (incorporated herein by reference from Exhibit 10.16 to the Company’s Registration Statement on Form S-1 (File No.

333-234155) filed on October 10, 2019)

Stock Option Agreement dated January 7, 2020 between the Company and Margaret Gezerlis (incorporated herein by reference from Exhibit

10.15 to the Company’s Registration Statement on Form S-1 (File No.

Incentive Stock Option Agreement dated January 7, 2020 between the Company and Margaret Gezerlis (incorporated herein by reference from Exhibit 10.15 to the Company’s Registration Statement on Form S-1 (File No.

333-237950) filed on May 1, 2020)

of Restricted Stock Agreement (incorporated herein by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q

for the quarter ended June 30, 2018)

Stock Agreement dated April 16, 2020 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.19 to the

Company’s Registration Statement on Form S-1 (File No.

Form of Restricted Stock Agreement (incorporated herein by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018)

Restricted Stock Agreement dated April 16, 2020 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.19 to the Company’s Registration Statement on Form S-1 (File No.

333-237950) filed on May 1, 2020)

of Director Non-Qualified Stock Option Agreement (immediate vesting) (incorporated herein by reference from Exhibit 10.20 to the Company’s

Registration Statement on Form S-1 (File No.

Form of Director Non-Qualified Stock Option Agreement (immediate vesting) (incorporated herein by reference from Exhibit 10.20 to the Company’s Registration Statement on Form S-1 (File No.

333-237950) filed on May 1, 2020)

of Director Non-Qualified Stock Option Agreement (quarterly vesting) (incorporated herein by reference from Exhibit 10.21 to the Company’s

Registration Statement on Form S-1 (File No.

Form of Director Non-Qualified Stock Option Agreement (quarterly vesting) (incorporated herein by reference from Exhibit 10.21 to the Company’s Registration Statement on Form S-1 (File No.

333-237950) filed on May 1, 2020)

of Restricted Stock Agreement pursuant to the 2013 Omnibus Equity Compensation Plan (incorporated herein by reference from Exhibit 10.4

to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020)

of Restricted Stock Agreement pursuant to the 2017 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.5 to the Company’s

Quarterly Report on Form 10-Q for the quarter ended September 30, 2020)

of Restricted Stock Unit Agreement (immediate vesting) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from

Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020)

of Restricted Stock Award Agreement (Employees) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit

10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021)

of Restricted Stock Award Agreement (Non-employees) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from

Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021)

of Restricted Stock Unit Award Agreement (Employees) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from

Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021)

of Restricted Stock Unit Award Agreement (Non-employees) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference

from Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021)

of Restricted Stock Unit Award Agreement (Subsidiary Employees) (incorporated herein by reference from Exhibit 10.8 to the Company’s

Current Report on Form 8-K filed on April 26, 2022)

dated as of June 15, 2020 (incorporated herein by reference from Exhibit 10.28 to the Company’s Registration Statement on Form S-1

333-234155) filed on June 15, 2020)

of Securities Purchase Agreement, dated April 12, 2022 (incorporated herein by reference from Exhibit 10.1 to the Company’s Current

Report on Form 8-K filed on April 18, 2022)

of Registration Rights Agreement, dated April 12, 2022 (incorporated herein by reference from Exhibit 10.2 to the Company’s Current

Report on Form 8-K filed on April 18, 2022)

of Lock-Up Agreement, dated April 12, 2022 (incorporated herein by reference from Exhibit 10.3 to the Company’s Current Report on

Form 8-K filed on April 18, 2022)

Purchase Agreement, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on

Form 8-K filed on April 26, 2022)

Note payable by PeriShip Global, LLC to PeriShip, LLC, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.2 to the

Company’s Current Report on Form 8-K filed on April 26, 2022)

dated April 22, 2022 (incorporated herein by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on April

Services Agreement, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.4 to the Company’s Current Report on

Form 8-K filed on April 26, 2022)

Agreement between PeriShip Global and Mordo, LLC, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.9 to the Company’s

Current Report on Form 8-K filed on April 26, 2022)

Guarantee between VerifyMe, Inc.

and Mordo, LLC, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.10 to the Company’s

Current Report on Form 8-K filed on April 26, 2022)

Services Agreement between PeriShip Global (as successor to PeriShip, LLC) and FedEx Corporate Services, Inc.

dated June 1, 2019 (incorporated

herein by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q filed on August 15, 2022)

of FedEx Transportation Services Agreement Pricing Agreement between PeriShip Global (as successor to PeriShip, LLC) and Federal Express

Corporation, et al (incorporated herein by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q filed on August

to Professional Services Agreement with FedEx Corporate Services, Inc.

dated August 25, 2022 (incorporated herein by reference to Exhibit

10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2022)

Agreement between PeriShip Global LLC and PNC Bank, National Association, effective September 15, 2022 (incorporated herein by reference

from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 27, 2022)

Note between PeriShip Global LLC and PNC Bank, National Association, effective September 15, 2022 (incorporated herein by reference

from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 27, 2022)

Line of Credit Note between PeriShip Global LLC and PNC Bank, National Association, effective September 15, 2022 (incorporated herein

by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on September 27, 2022)

and Suretyship Agreement between VerifyMe, Inc., and PNC Bank, National Association, effective September 15, 2022 (incorporated herein

by reference from Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on September 27, 2022)

Agreement between PeriShip Global LLC and PNC Bank, National Association, effective September 15, 2022 (incorporated herein by reference

from Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on September 27, 2022)

Agreement between VerifyMe, Inc.

and PNC Bank, National Association, effective September 15, 2022 (incorporated herein by reference from

Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on September 27, 2022)

Purchase Agreement, effective February 28, 2023 (incorporated herein by reference3 from Exhibit 10.1 to the Company’s Current Report

on Form 8-K filed on March 2, 2023)

Form of Restricted Stock Agreement pursuant to the 2013 Omnibus Equity Compensation Plan (incorporated herein by reference from Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020)

Form of Restricted Stock Agreement pursuant to the 2017 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020)

Form of Restricted Stock Unit Agreement (immediate vesting) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020)

Form of Restricted Stock Award Agreement (Employees) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021)

Form of Restricted Stock Award Agreement (Non-employees) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021)

Form of Restricted Stock Unit Award Agreement (Employees) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021)

Form of Restricted Stock Unit Award Agreement (Non-employees) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021)

Form of Restricted Stock Unit Award Agreement (Subsidiary Employees) (incorporated herein by reference from Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on April 26, 2022)

Form of Restricted Stock Unit Award Agreement (performance) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023)

Form of Registration Rights Agreement, dated April 12, 2022 (incorporated herein by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 18, 2022)

Asset Purchase Agreement, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 26, 2022)

Lease Agreement between PeriShip Global and Mordo, LLC, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on April 26, 2022)

Lease Guarantee between VerifyMe, Inc.

and Mordo, LLC, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on April 26, 2022)

Professional Services Agreement between PeriShip Global (as successor to PeriShip, LLC) and FedEx Corporate Services, Inc.

dated June 1, 2019 (incorporated herein by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q filed on August 15, 2022)

Form of FedEx Transportation Services Agreement Pricing Agreement between PeriShip Global (as successor to PeriShip, LLC) and Federal Express Corporation, et al (incorporated herein by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q filed on August 15, 2022)

Amendment to Professional Services Agreement with FedEx Corporate Services, Inc.

dated August 25, 2022 (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2022)

Term Note between PeriShip Global LLC and PNC Bank, National Association, effective September 15, 2022 (incorporated herein by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 27, 2022)

Revolving Line of Credit Note between PeriShip Global LLC and PNC Bank, National Association, effective September 15, 2022 (incorporated herein by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on September 27, 2022)

Guaranty and Suretyship Agreement between VerifyMe, Inc., and PNC Bank, National Association, effective September 15, 2022 (incorporated herein by reference from Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on September 27, 2022)

Security Agreement between PeriShip Global LLC and PNC Bank, National Association, effective September 15, 2022 (incorporated herein by reference from Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on September 27, 2022)

Security Agreement between VerifyMe, Inc.

and PNC Bank, National Association, effective September 15, 2022 (incorporated herein by reference from Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on September 27, 2022)

Amended and Restated Loan Agreement between PeriShip Global LLC and PNC Bank, National Association, effective October 31, 2023 (incorporated herein by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023)

Waiver and Amendment to Loan Documents between PeriShip Global LLC and PNC Bank, National Association, effective October 31, 2023 (incorporated herein by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023)

Asset Purchase Agreement, effective February 28, 2023 (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 2, 2023)

Form of Convertible Subordinated Promissory Note (incorporated herein by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 28, 2023)

Subsidiaries of VerifyMe, Inc.

Certification of Principal Executive Officer

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Principal Financial Officer

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Principal Executive Officer

and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Policy for the Recovery of Erroneously Awarded Compensation

XBRL Instance Document

8 unchanged sentences

FORM 10-K SUMMARY

Not applicable.

Pursuant to the requirements of Section 13

2 unchanged sentences

VerifyMe, Inc.

/s/ Scott Greenberg

Scott Greenberg

Interim Chief Executive Officer and Executive Chairman

/s/ Adam Stedham

Chief Executive Officer and President

March 29, 2024

2 unchanged sentences

on the dates indicated:

/s/ Scott Greenberg

Interim Chief Executive Officer,Executive Chairman and Director

/s/ Adam Stedham

Chief Executive Officer, President and Director

March 29, 2024

Scott Greenberg

( Principal Executive Officer )

/s/ Margaret Gezerlis

/s/ Nancy Meyers

Executive Vice President and Chief Financial Officer

March 29, 2024

Margaret Gezerlis

( Principal Financial Officer and

Principal Accounting Officer)

/s/ Chris Gardner

/s/ Scott Greenberg

Director and Chairman

March 29, 2024

Chris Gardner

Scott Greenberg

/s/ Marshall Geller

7 unchanged sentences

Arthur Laffer

/s/ Adam Stedham

/s/ David Edmonds

March 29, 2024

David Edmonds

FINANCIAL STATEMENTS

2 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED COMPREHENSIVE INCOME(LOSS)

CONSOLIDATED COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF CASH FLOWS

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

3 unchanged sentences

balance sheets of VerifyMe, Inc.

and its subsidiary (collectively, the “Company”) as of December 31, 2022 and 2021, and the

related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for the years then

ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements

present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of their

operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States

and its subsidiaries (collectively, the “Company”) as of December 31, 2023 and 2022, and

the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the years then ended,

and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present

fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of their operations

and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

6 unchanged sentences

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance

with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were

we engaged to perform, an audit of its internal control over financial reporting.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

2 unchanged sentences

Accordingly, we express no such opinion.

Our audits included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that

respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as

evaluating the overall presentation of the financial statements.

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current

period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex

The critical audit matters are matters arising

from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

We determined that there are no critical audit matters.

1 unchanged sentence

www.malonebailey.com

We have served as the Company's auditor

We have served as the Company's auditor since

Houston, Texas

1 unchanged sentence

VerifyMe, Inc.

Consolidated Balance

(In thousands, except

Consolidated Balance Sheets

(In thousands, except share data)

December 31, 2023

December 31, 2022

CURRENT ASSETS

Cash and cash equivalents, including restricted

Accounts receivable, net of allowance for credit loss

reserve, $ 37

as of December 31, 2022 and December 31, 2021, respectively

Cash and cash equivalents including restricted cash

receivable, net of allowance for credit loss reserve, $ 165 and $ 37 as of December 31, 2023 and

December 31, 2022, respectively

Unbilled revenue

1 unchanged sentence

TOTAL CURRENT ASSETS

Equity Investment

PROPERTY AND EQUIPMENT, NET

1 unchanged sentence

INTANGIBLE ASSETS, NET

DEFERRED IMPLEMENTATION COSTS

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Current portion of debt

Term note, current

Accounts payable

1 unchanged sentence

Lease liability- current

Contingent liability-current

TOTAL CURRENT LIABILITIES

LONG-TERM LIABILITIES

Contingent liability, non-current

Long-term lease liability

Long-term derivative liability

Convertible note – related party

Convertible note

TOTAL LIABILITIES

STOCKHOLDERS' EQUITY

Series A Convertible Preferred Stock, $ .001

par value, 37,564,767

Series A Convertible Preferred Stock, $ 0.001 par value, 37,564,767

shares authorized;

shares issued and outstanding as of December 31, 2022;

0 shares issued and outstanding

as of December 31, 2021

Series B Convertible Preferred Stock, $ .001

0 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

Series B Convertible Preferred Stock, $ 0.001 par value;

85 shares authorized;

0.85 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

Common stock, $ 0.001

and 7,420,633 issued,

and 7,196,677

shares outstanding as of December 31, 2022 and December 31, 2021, respectively

Common stock, $ 0.001 par value;

675,000,000 shares authorized;

and 9,341,002 shares issued, 10,123,964 and 8,951,035 shares outstanding as of December 31, 2023 and December 31, 2022, respectively

Additional paid in capital

Treasury stock as cost;

shares at December 31, 2022 and December 31, 2021, respectively

stock as cost;

329,351 and 389,967 shares at December 31, 2023 and December 31, 2022, respectively

Accumulated deficit

2 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

The accompanying

notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of

these consolidated financial statements.

VerifyMe, Inc.

10 unchanged sentences

LOSS BEFORE OTHER INCOME (EXPENSE)

OTHER INCOME (EXPENSE)

Interest income (expenses), net

Loss on equity investment

OTHER (EXPENSE) INCOME

Interest expenses, net

Unrealized gain on equity investment

Other income, net

Change in fair value of contingent consideration

Loss on equity investment

Other (expense) income, net

Gain on extinguishment of debt

Payroll protection program debt forgiveness

TOTAL OTHER INCOME (EXPENSE), NET

NET (LOSS)/ INCOME

EARNINGS / (LOSS) PER SHARE

TOTAL OTHER EXPENSE, NET

LOSS PER SHARE

WEIGHTED AVERAGE COMMON SHARE OUTSTANDING

4 unchanged sentences

VerifyMe, Inc.

Consolidated Statements of Comprehensive Income/(Loss)

Consolidated Statements of Comprehensive Loss

(In thousands)

1 unchanged sentence

December 31, 2022

NET (LOSS)/INCOME

Change in fair value of interest rate, swap

TOTAL COMPREHENSIVE (LOSS)/INCOME

Foreign currency translation adjustments

TOTAL COMPREHENSIVE LOSS

The accompanying notes are an integral part of

1 unchanged sentence

VerifyMe, Inc.

Consolidated Statements

of Cash Flows

Consolidated Statements of Cash Flows

(In thousands)

2 unchanged sentences

CASH FLOWS FROM OPERATING ACTIVITIES

Net (Loss) Income

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Allowance for bad debt

Stock based compensation

Fair value of options in exchange for services

Fair value of restricted stock awards issued in exchange for services

Fair value of restricted stock units issued in exchange for services

Payroll Protection Program Debt Forgiveness

Loss on equity investment

Change in fair value of contingent consideration

Fair value of restricted stock awards and restricted stock units issued in exchange for services

Loss on disposal of equipment

Unrealized gain on equity investment

1 unchanged sentence

Amortization and depreciation

Unrealized gain on foreign currency transactions

Changes in operating assets and liabilities:

3 unchanged sentences

Accounts payable, other accrued expenses and net change in operating leases

Net cash used in operating activities

Net cash provided by (used) in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Equity received from SPAC equity investment

Purchase of patents

Purchase of equipment for lease

Purchase of equity investment

Leasehold improvements

Purchase of office equipment

Acquisition of PeriShip

Equity received from SPAC Equity Investment

Cash paid in business combination

Deferred implementation costs

3 unchanged sentences

Proceeds from public offering of securities

Proceeds from issuance of notes payable

Proceeds from exercise of pre-funded warrant

Proceeds from line of credit

Proceeds from convertible debt

Proceeds from issuance of note payable

Exercise of pre-funded warrants

Proceeds from SPP Plan

1 unchanged sentence

Increase in treasury shares (share repurchase program)

Repayment of Debt

Repayment of debt and line of credit

Net cash provided by financing activities

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

Effect of exchange rate changes on cash

NET DECREASE IN CASH AND

CASH EQUIVALENTS INCLUDING RESTRICTED CASH

CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH- BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH - END OF PERIOD

CASH AND CASH EQUIVALENTS INCLUDNG RESTRICTED CASH - END OF PERIOD

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

3 unchanged sentences

Change in fair value of interest rate, swap

The accompanying

notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of

these consolidated financial statements.

VerifyMe, Inc.

Consolidated Statements

of Stockholders' Equity

(In thousands, except

Consolidated Statements of Stockholders' Equity

(In thousands, except share data)

Accumulated Other

Comprehensive

Balance at December 31, 2021

Fair value of stock options

Restricted stock awards, net of

shares withheld

for employee tax

Restricted Stock Units

Restricted stock awards, net of shares withheld for employee tax

Restricted stock units, net of shares withheld for employee tax

Stock Purchase Plan

Common stock issued in relation to Stock Purchase Plan

Common stock issued in relation to private placement

Common stock issued for services

Common stock issued in relation

offering of securities

Common stock issued in relation to Acquisition

Repurchase of Common Stock

Exercise of Pre-funded Warrants

Accumulated other comprehensive loss

Balance at December 31, 2022

Comprehensive

Accumulated Other

Comprehensive Loss

Balance at December 31, 2022

Restricted stock awards, net of

shares withheld

for employee tax

Restricted Stock Units

Stock Purchase Plan

Common stock issued in relation

Purchase Plan

Common stock issued in relation to private placement

Restricted stock awards, net of shares withheld for employee tax

Restricted Stock Units, net of shares withheld for employee tax

Common stock issued in relation to Stock Purchase Plan

Common stock issued for services

Common stock issued in relation

Common stock issued in relation to Acquisition

Repurchase of Common Stock

Exercise of Pre-funded Warrants

Accumulated other comprehensive

Treasury stock retired

Cancellation of Common stock

Accumulated other comprehensive Loss

Balance at December 31, 2023

The accompanying

notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of

these consolidated financial statements.

VerifyMe, Inc.

10 unchanged sentences

“VRMEW,” respectively.

VerifyMe, through PeriShip Global, is a software

driven predictive analytics logistics provider of high-touch, end-to-end logistics management, which represents most of our current revenue

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, which includes Trust Codes Global.

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, 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.

The Company’s activities are subject to significant risks and uncertainties.

See the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

sections in this report.

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:

The Company’s activities are subject to

significant risks and uncertainties.

See the “Risk Factors” and “Management’s Discussion and Analysis of

Financial Condition and Results of Operations” sections in this report.

Reclassifications

Certain amounts presented

for the year ended December 31, 2022, reflect reclassifications made to conform to the presentation in our current reporting

These reclassifications had no effect on the previously reported net loss.

Basis of Presentation

The accompanying consolidated

financial statements include the accounts of VerifyMe and its wholly owned subsidiary PeriShip Global.

All significant intercompany balances

and transactions have been eliminated upon consolidation.

The consolidated financial statements are presented in accordance with accounting

principles generally accepted in the United States of America (“GAAP”).

Segment Reporting

Operating segments are defined as components of

an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or

decision-making group, in deciding the method by which to allocate resources and assess performance.

The Company has two reportable segments,

namely, (i) PeriShip Global Solutions and (ii) VerifyMe Solutions.

See Note 16 Segment Reporting, for further discussion of the Company’s

segment reporting structure.

financial statements include the accounts of VerifyMe and its wholly owned subsidiaries PeriShip Global and Trust Codes Global.

All significant

intercompany balances and transactions have been eliminated upon consolidation.

The consolidated financial statements are presented in

accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Use of Estimates

5 unchanged sentences

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial

Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses of Financial Instruments , (“CECL”), which

changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded.

guidance was to be effective for reporting periods beginning after December 15, 2022, with early adoption permitted.

has elected to early adopt ASU 2016-13, as of January 1, 2022, and the impact has been disclosed on the face of the Consolidated Balance

The Company’s accounts receivable is currently the only financial instrument subject to the new CECL model.

has considered relevant internal and/or external information about past events, e.g., historical loss experience with similar assets,

current conditions, and reasonable and supportable forecasts that affect the expected collectability of the reported amount of financial

assets in determining the credit loss.

2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires public

entities with a single reportable segment to provide all the disclosures required by this standard and all existing segment disclosures

in Topic 280 on an interim and annual basis, including new requirements to disclose significant segment expenses that are regularly provided

to the chief operating decision maker (“CODM”) and included within the reported measure(s) of a segment's profit or loss,

the amount and composition of any other segment items, the title and position of the CODM, and how the CODM uses the reported measure(s)

of a segment's profit or loss to assess performance and decide how to allocate resources.

The guidance is effective for annual periods

beginning after December 15, 2023, and interim periods beginning after December 15, 2024, applied retrospectively with early adoption

The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements and disclosures.

2021, the FASB issued Accounting Standards Update No.

2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts

with Customers (“ASU 2021-08”).

ASU 2021-08 amends ASC 805 to require acquiring entities to apply Topic 606 to recognize

and measure contract assets and contract liabilities in a business combination.

The Company adopted the new standard beginning January

1, 2023, and did not have an effect on its financial position, results of operations or cash flows.

VerifyMe, Inc.

15 unchanged sentences

inputs that are corroborated by market data

Unobservable inputs that are not corroborated by market

Unobservable inputs that are not corroborated by market data

The level in the fair value within which a fair

6 unchanged sentences

Short Term Investment

Equity Investment

Derivative Liability

Derivative Asset

Contingent Consideration

Balance as of December 31, 2022

Realized loss on fair value recognized in other (expense)/income

Distribution from Sponsor Entity

Unrealized gain on fair value recognized in other (expense)/income

Realized gain on fair value recognized in share-based compensation

Loss on fair value recognized in other income (expense)

Contingent consideration at issuance

Change in fair value of contingent consideration

Change in fair value to interest rate, SWAP, recognized in other comprehensive loss

Balance at December 31, 2023

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

Variable Interest Entity

The Company determined that G3 VRM Acquisition

GGGVU) (the “SPAC”, see Note 2 – Equity Investments), a Delaware corporation and special purpose acquisition

company, was a variable interest entity (“VIE”) in which the Company had a variable interest but was not the primary beneficiary.

Making the determination as to whether a VIE should be consolidated requires judgement in assessing if the Company is the primary beneficiary.

To make this determination, the Company evaluated its power to direct the activities that most significantly impacted the VIE’s

economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant

The Company concluded that it was not the primary beneficiary of the VIE and as such, did not consolidate the SPAC.

reassessed its evaluation of whether an entity is a VIE and if it continues to be a VIE, whether the Company is the primary beneficiary

of the VIE, on an ongoing basis based on the current facts and circumstances surrounding the entity.

The SPAC was unable to complete its

initial business combination within 12 months from the closing of the IPO, and the Sponsor Entity made the decision not to fund the extension

and did not deposit additional funds into the trust account.

As a result, the SPAC was dissolved, and liquidated according to its charter.

The SPAC redeemed 100% of the public shares for cash, the rights have expired worthless, and the founder shares and the private placement

securities have become worthless.

determined that G3 VRM Acquisition Corp.

GGGVU) (the “SPAC”, see Note 2 – Equity Investments), a Delaware corporation

and special purpose acquisition company, was a variable interest entity (“VIE”) in which the Company had a variable interest

but was not the primary beneficiary.

Making the determination as to whether a VIE should be consolidated requires judgement in assessing

if the Company is the primary beneficiary.

To make this determination, the Company evaluated its power to direct the activities that most

significantly impacted the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits of the

VIE that could potentially be significant to the SPAC.

The Company concluded that it was not the primary beneficiary of the VIE and as

such, did not consolidate the SPAC.

The Company reassessed its evaluation of whether an entity is a VIE and if it continues to be a VIE,

whether the Company is the primary beneficiary of the VIE, on an ongoing basis based on the current facts and circumstances surrounding

The SPAC was unable to complete its initial business combination within 12 months from the closing of the IPO, and the Sponsor

Entity made the decision not to fund the extension and did not deposit additional funds into the trust account.

As a result, the SPAC

was dissolved, and liquidated according to its charter.

The SPAC redeemed 100% of the public shares for cash, the rights have expired

worthless, and the founder shares and the private placement securities have become worthless.

Segment Reporting

Operating segments are defined as components of

an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or

decision-making group, in deciding the method by which to allocate resources and assess performance.

The Company has two reportable segments,

namely, (i) Precision Logistics (formerly PeriShip Global) and (ii) Authentication (formerly VerifyMe Solutions).

See Note 16 Segment

Reporting, for further discussion of the Company’s segment reporting structure.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

Equity Investments

When the Company does not have a controlling financial

interest in an entity but can exert influence over the entity’s operations and financial policies, the investment is accounted for

either (i) under the equity method of accounting or (ii) at fair value by electing the fair value option available under applicable generally

accepted accounting policies.

The Company has elected the fair value option for its equity investment in the SPAC (see Note 2 –Equity

Investments) and its equity security under short term investment on the balance sheets, as it has determined the fair value best reflects

the economic performance of the equity investment.

Changes in unrealized gain on equity investment include unrealized gain of the fair

value of the equity investments and loss on equity investment includes realized loss on equity investments on the accompanying Consolidated

Statements of Operations.

Goodwill represents the excess of purchase price

over the fair value of net assets acquired in business combinations.

Pursuant to ASC 350, the Company tests 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 price.

Business Combinations

23 unchanged sentences

of basic and diluted earnings per share.

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company

considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and certificates of deposit and commercial

paper with original maturities of 90 days or less to be cash or cash equivalents.

As of December 31, 2022, the Company held $ 63 thousand

subject to restrictions.

Because the Company reported a net loss for each of the periods presented, common

stock equivalents, including preferred stock, stock options and warrants were anti-dilutive;

therefore, the amounts reported for basic

and diluted loss per share were the same.

For the year ended December 31, 2023, there

were shares potentially issuable, that could dilute basic earnings per share in the future that were excluded from the calculation

of diluted earnings per share because their inclusion would have been anti-dilutive to the Company’s losses during the years

For the year ended December 31, 2023, there were approximately 8,286,000

anti-dilutive shares consisting of 1,439,000

unvested performance restricted stock units, 816,000

restricted stock units, restricted stock awards and options under the stock purchase plan, 301,000

shares issuable upon exercise of stock options, 4,629,000 shares

issuable upon exercise of warrants, 957,000

shares issuable upon conversion of convertible debt, and 144,000

shares issuable upon conversion of preferred stock.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

Accounts Receivable

Trade accounts receivable are periodically evaluated

for collectability based on past credit history with customers and their current financial condition.

Bad debts expense or write offs

of receivables are determined on the basis of loss experience, known and inherent risks in the receivable portfolio and current economic

If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability

to make payments, such allowances may be required.

The Company recognized $ 37 thousand and $ 0 for allowance for credit losses as of December

31, 2022, and 2021, respectively.

Restricted Cash

The following table provides a reconciliation

of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts

in the consolidated statements of cash flows (dollars in thousands):

Schedule of restricted cash

December 31, 2023

December 31,2022

Cash and cash equivalents

Restricted cash

Total cash and cash equivalents including restricted cash

The Company classifies cash and cash equivalents

that are restricted from operating use for the next twelve months as restricted cash.

As of December 31, 2023, and December 31,

2022, the Company held $ 63 thousand subject to restrictions.

Concentration of Credit Risk Involving

6 unchanged sentences

in excess of federally insured limits.

Accounts Receivable

Trade accounts receivable are periodically evaluated

for collectability based on past credit history with customers and their current financial condition.

Bad debts expense or write offs

of receivables are determined on the basis of loss experience, known and inherent risks in the receivable portfolio and current economic

If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability

to make payments, such allowances may be required.

The Company recognized $ 139 thousand and $ 37 thousand for allowance for credit losses

as of December 31, 2023, and 2022, respectively.

Equity Investments

When the Company does not have a controlling

financial interest in an entity but can exert influence over the entity’s operations and financial policies, the investment is

accounted for either (i) under the equity method of accounting or (ii) at fair value by electing the fair value option available under

applicable generally accepted accounting policies.

The Company has elected the fair value option for its equity security under prepaid

expenses and other current assets on the Consolidated Balance Sheets, as it has determined the fair value best reflects the economic

performance of the equity investment.

Changes in unrecognized gain or loss of the fair value of the equity investments are included in

Other income (expense) on the accompanying Consolidated Statements of Operations.

Inventory principally consists of canisters and

pigments and is stated at the lower of cost (determined by the first-in, first-out method) or net realizable value.

If such assets are

considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds

the fair value of the assets.

During the year ended December 31, 2023, the Company impaired $ 100 thousand related to inventory in our

Authentication segment, related to raw material to record at fair market value.

Equipment for Lease

9 unchanged sentences

to be 5 years.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

Capitalized Software

21 unchanged sentences

by the amount by which the carrying amount of the asset exceeds the fair value of the assets.

Goodwill represents the excess of purchase price

over the fair value of net assets acquired in business combinations.

Pursuant to ASC 350, the Company tests 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 price.

Derivative Instruments

5 unchanged sentences

The result of this accounting treatment is that the fair

value of the embedded derivative, if required to be bifurcated, is marked-to-market at each balance sheet date and recorded as a liability.

value of the embedded derivative, if required to be bifurcated, is marked-to-market at each balance sheet date and recorded as an asset

or liability.

The change in fair value is recorded in the Consolidated Statement of Operations as a component of other income or expense.

Upon conversion

or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified

Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair

value is reclassified to equity.

VerifyMe, Inc.

4 unchanged sentences

The classification of derivative instruments,

including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

Equity instruments that are initially classified as equity that become subject to reclassification are reclassified as liabilities at

the fair value of the instrument on the reclassification date.

Derivative instrument liabilities will be classified in the balance sheet

as current or non-current based on whether net-cash settlement of the derivative instrument is expected within 12 months of the balance

Reclassifications

Certain accounts in the prior year financial statements

have been reclassified for comparative purposes to conform to the presentation in the current year financial statements.

These reclassifications

had no effect on the previously reported net income (loss).

including whether such instruments should be recorded as assets, liabilities or as equity, is re-assessed at the end of each reporting

Equity instruments that are initially classified as equity that become subject to reclassification are reclassified as assets

or liabilities at the fair value of the instrument on the reclassification date.

Derivative instrument as assets or liabilities will be

classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument is expected

within 12 months of the balance sheet date.

Foreign Currency Translation

The functional currency of our New Zealand operations

is the local currency, New Zealand dollar (NZD).

The translation of the foreign currency into U.

dollars is performed for balance

sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using the weighted

average exchange rates prevailing during the year.

The unrealized gains and losses resulting from such translation are included as a

component of comprehensive income.

Translation gains and losses arising from currency exchange rate fluctuations on transactions denominated

in a currency other than the local functional currency are included in “General and administrative” on our Consolidated Statements

of Operations.

The unrealized foreign currency transaction losses for the years ended December 31, 2023 and December 31, 2022, were $ 5

thousand and $ 0 thousand, respectively.

Revenue Recognition

3 unchanged sentences

the entity's contracts to provide goods or services to customers.

The Company applies the following five steps in

order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

The Company applies the following five steps,

separated by reportable segments, in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations

under each of its agreements.

For more detailed information about reportable segments, see Note 16 – Segment reporting.

· identify the contract with a customer;

3 unchanged sentences

· recognize revenue as the performance obligation is satisfied.

During the year ended December 31, 2022, over

90% of the Company’s revenues primarily consisted of revenue related to our logistics management for time and temperature sensitive

packages generated by our subsidiary PeriShip Global.

During the year ended December 31, 2021, the Company’s revenue primarily consisted

of VerifyInk TM and labels with our VerifyMe traceability solutions.

The Company follows FASB ASC 740, “Income

Taxes,” when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for

income taxes.

Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements

and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and

rates applicable to the periods in which the differences are expected to affect taxable income.

Valuation allowances are established when

necessary to reduce deferred tax assets to the amount expected to be realized.

Income tax expense is the tax payable or refundable for

the period plus or minus the change during the period in deferred tax assets and liabilities.

Tax years from 2003 remain subject to examination

by major tax jurisdictions due the carryforward of unutilized NOLs.

The Company generally considers completion of

an agreement, or Statement of Work (“SOW”) and/or purchase order as a customer contract, provided collection is considered

Precision Logistics

Our Precision Logistics segment consists of two

service lines, Proactive and Premium.

Under our Proactive service line, clients pay us directly for carrier service coupled with our proactive

logistics service.

Terms typically range 7 days and no longer than 30 days.

The Company has determined it is the principal and recognizes

shipment fees in gross revenue.

Under our Premium service line, we provide complete white-glove shipping monitoring and predictive analytics

This service includes customer web portal access, weather monitoring, temperature control, full service center support and last

mile resolution.

Payment terms are typically 30 - 45 days.

Under both service lines in our Precision Logistics

segment, our performance obligation is met, and revenue is recognized, when the packages are delivered.

The transaction fees consist of

fixed consideration made up of amounts contractually billed to the customer.

There are no variable considerations in the transaction fee,

in either service line.

Authentication

Our Authentication segment primarily consists

of our brand protection service line which consists of a custom suite of products that offer clients traceability and brand solutions.

Terms typically range between 30 and 90 days.

Our performance obligation is met, and revenue is recognized, when our products are shipped

or delivered depending on the specific agreement with the customer.

The transaction fee is made up of fixed consideration based on the

related purchase order or agreement.

Warranties and other variable considerations are analyzed by the Company, in terms of historical

warranties, current economic trends, and changes in customer demand, and have been determined to be insignificant in the twelve months

ended December 31, 2023.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

Stock-Based Compensation

45 unchanged sentences

thousand and $ 89 thousand, respectively.

Basic and Diluted Earnings (Loss) per Share of Common Stock

The Company follows Financial Accounting Standards

Board (“FASB”) ASC 260, “Earnings Per Share,” when reporting earnings per share resulting in the presentation

of basic and diluted earnings per share.

Because the Company reported a net loss for the year ended December 31, 2022, common

stock equivalents, including preferred stock, stock options and warrants were anti-dilutive;

therefore, the amounts reported for basic

and diluted loss per share were the same.

The Company follows FASB ASC 740, “Income

Taxes,” when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting

for income taxes.

Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements

and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and

rates applicable to the periods in which the differences are expected to affect taxable income.

Valuation allowances are established

when necessary to reduce deferred tax assets to the amount expected to be realized.

Income tax expense is the tax payable or refundable

for the period plus or minus the change during the period in deferred tax assets and liabilities.

Tax years from 2004 remain subject

to examination by major tax jurisdictions due the carryforward of unutilized NOLs.

NOTE 2 – EQUITY INVESTMENTS

In December 2021, the Company acquired 8,841 shares

of 10 % Cumulative Convertible Series D Preferred Stock at a price of $ 10.00 per share as payment for a customer’s outstanding AR

balance of $ 88,410 .

This instrument is considered an equity security within the scope of Topic 321 since the issuing entity has the option

but no contractual obligation to redeem the preferred stock, and the Company can convert the preferred shares to common stock.

the year ended December 31, 2023, the Company determined that it would not be able to redeem the value of its investment and recorded

a loss of $ 100 thousand bringing down the value of the equity investment to $ 0 as of December 31, 2023.

The fair value of the equity investment

was $ 100 thousand as of December 31, 2022, and included in Prepaid expenses and other current assets on the accompanying Consolidated

Balance Sheets.

The fair value of the equity investment is classified as Level 1 in the fair value hierarchy as the calculation is dependent

upon the quoted market price of the entity.

On February 26, 2021, the Company formed VMEA

7 unchanged sentences

of the Sponsor Entity resulting in an equity interest of 44.40 % attributed to the Company.

On July 6, 2021, the SPAC consummated the IPO

of 10,626,000 units (the “Units”), including 626,000 Units pursuant to the partial exercise of the underwriter’s over-allotment

option, generating gross proceeds of $106,260 thousand.

Each Unit consisted of one share of SPAC common stock, $0.0001 par value, and

one right to receive one-tenth (1/10) of a share of SPAC common stock upon the consummation of an initial business combination.

Simultaneously

with the closing of the IPO, the SPAC consummated the Private Placement of an aggregate of 569,410 Units with the Sponsor Entity purchasing

516,280 Units and Maxim Partners LLC purchasing 53,130 Units, generating total proceeds of $ 5,694 thousand.

Of this amount, the Company

was the indirect beneficial owner of 229,228 Units purchased by the Sponsor Entity for a total of $ 2,581 thousand.

Upon consummation of

the IPO, VerifyMe, as co-sponsor, indirectly through the Sponsor Entity, beneficially owned approximately 9.42 % of the outstanding shares

of the SPAC, which shares were subject to forfeiture upon certain conditions and restrictions on transfer.

On July 6, 2021, the SPAC consummated

the IPO of 10,626,000 units (the “Units”), including 626,000 Units pursuant to the partial exercise of

the underwriter’s over-allotment option, generating gross proceeds of $106,260 thousand.

Each Unit consisted of one share of SPAC

common stock, $0.0001 par value, and one right to receive one-tenth (1/10) of a share of SPAC common stock upon the consummation of an

initial business combination.

Simultaneously with the closing of the IPO, the SPAC consummated the Private Placement of an aggregate of 569,410 Units

with the Sponsor Entity purchasing 516,280 Units and Maxim Partners LLC purchasing 53,130 Units, generating total

proceeds of $ 5,694 thousand.

Of this amount, the Company was the indirect beneficial owner of 229,228 Units purchased by

the Sponsor Entity for a total of $ 2,581 thousand.

Upon consummation of the IPO, VerifyMe, as co-sponsor, indirectly through the

Sponsor Entity, beneficially owned approximately 9.42 % of the outstanding shares of the SPAC, which shares were subject to forfeiture

upon certain conditions and restrictions on transfer.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

As a result of ceasing to have a controlling financial

1 unchanged sentence

the fair value option.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

The SPAC was unable to complete its initial business

9 unchanged sentences

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.

The fair value of the equity investment was classified as Level

3 in the fair value hierarchy as the calculation was dependent upon company specific adjustments to the observable trading price of the

SPAC’s public units and shares, and related risk of forfeiture should no business combination occur.

The Company recognized a loss

on equity investments of $ 10,932 thousand for the year ended December 31, 2022, included in the Loss on equity investments in the accompanying

Consolidated Statements of Operations.

In December 2021, the Company acquired 8,841 shares

of 10 % Cumulative Convertible Series D Preferred Stock at a price of $ 10.00 per share as payment for a customer’s outstanding AR

balance of $88,410.

This instrument is considered an equity security within the scope of Topic 321 since the issuing entity has the option

but no contractual obligation to redeem the preferred stock, and the Company can convert the preferred shares to common stock.

year ended December 31, 2022, a fair value gain of $ 12 thousand, was recognized and included in Loss on equity investments, in the accompanying

Consolidated Statements of Operations.

The fair value of the equity investment was $ 100 thousand as of December 31, 2022, and $ 88 thousand

as of December 31, 2021, and included in Prepaid expenses and other current assets on the accompanying Consolidated Balance Sheets.

fair value of the equity investment is classified as Level 1 in the fair value hierarchy as the calculation is dependent upon the quoted

market price of the entity.

The fair value of the equity investment was $ 0 million

as of December 31, 2022.

The fair value of the equity investment was classified as Level 3 in the fair value hierarchy as the calculation

was dependent upon company specific adjustments to the observable trading price of the SPAC’s public units and shares, and related

risk of forfeiture should no business combination occur.

The Company recognized a loss on equity investments of $ 10,932 thousand

for the year ended December 31, 2022, included in the Loss on equity investments in the accompanying Consolidated Statements of Operations.

NOTE 3 – REVENUE

Revenue by Category

The following table presents our revenue disaggregated by various categories

(dollars in thousands).

The following series of tables present our revenue disaggregated by

various categories (dollars in thousands).

Schedule of disaggregation of revenue

PeriShip Global

Authentication

Precision Logistics

Proactive services

1 unchanged sentence

Brand protection services

(a) Revenue is our Precision Logistics Segment in 2022 includes revenue since the acquisition date of our PeriShip Global business, on

April 22, 2022.

Contract Balances

4 unchanged sentences

When we advance

bill clients prior to the work being performed, generally, such amounts will be earned and recognized in revenue within the 30 days.

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

Changes in the contract asset and liability balances during the year ended December 31, 2022, were not materially impacted by any other

bill clients prior to the work being performed, generally, such amounts will be earned and recognized in revenue within twelve months.

These assets and liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting

Changes in the contract asset and liability balances during the year ended December 31, 2023, were not materially impacted by

any other factors.

Applying the practical expedient in ASC Topic

4 unchanged sentences

sales commissions.

For all periods presented, contract liabilities

were not significant.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

The following table provides information about

contract assets from contracts with customers:

Schedule of contract assets

Contract Asset

Beginning balance, January 1

Contract asset additions

Reclassification to accounts receivable, billed to customers

Ending balance (1)

______________

(1) Included within "Unbilled revenue" on the accompanying

Consolidated Balance sheets.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

NOTE 4 – BUSINESS COMBINATION

Trust Codes Global Limited

On March 1, 2023, we acquired, through Trust

Codes Global, the business and certain assets of Trust Codes Limited (“Trust Codes”), specializing in brand protection,

anti-counterfeiting, and consumer engagement technology with an expertise in the food and agriculture industry.

Trust Codes Global

uses unique QR codes or IoT, coupled with GS1 standards to deliver cloud-based brand protection based on a unique per-item digital

identity to protect brand and product authenticity, increase data visualization of a product through the end to end supply chain,

and creates a data-drive engine to inform and educate consumers of the product.

The Company accounted for the transaction as an

acquisition of a business under ASC 805 – Business Combination.

The purchase price was approximately $ 1.0

million which consisted of $ 0.36

million in cash paid at closing and 353,492

shares of common stock of the Company, representing $ 0.65

million in stock consideration.

In addition, the purchase agreement requires consideration contingent upon the achievement of

earnings targets during a five-year period subsequent to the closing of the acquisition.

The earn-out consideration is estimated at

million at the acquisition date, however the maximum amount of the payment is unlimited.

The preliminary purchase price allocation

is subject to change and was finalized in the fourth quarter of 2023.

The goodwill recognized is due to the

expected synergies from combining the operations of the acquiree with the Company.

All of the goodwill recorded for financial

statement purposes is deductible for tax purposes.

The Company incurred $ 278

thousand in relation to acquisition related costs which have been included in General and administrative, in the accompanying

Consolidated Statements of Operations.

Trust Codes Global is included in the Authentication segment and the results of its

operations have been included in the consolidated financial statements beginning March 1, 2023.

Since the acquisition date,

the Company has recorded $ 314

thousand of revenue relating to Trust Codes.

The pro-forma financial information is immaterial to our results of

operations and impractical to provide.

The following table summarizes the purchase price

allocation for the acquisition (dollars in thousands).

Schedule of business acquisitions

Fair value of contingent consideration

Stock (issuance of 353,492 shares of common stock) (a)

Total purchase price

Purchase price allocation:

Prepaid expenses

Property and Equipment, net

Developed Technology

Trade Names/Trademarks

Customer Relationships

Accounts payable and other accrued expenses

Current lease liability

Long term lease liability

(a) Stock issued was calculated based

on the 15 day volume-weighted average price (“VWAP”) through February 28, 2023 calculated at $1.8388.

Contingent Consideration

ASC Topic 805 requires that contingent consideration

to be recognized at fair value on the acquisition date and be re-measured each reporting period with subsequent adjustments recognized

in the consolidated statement of operations.

We estimate the fair value of contingent consideration liabilities using an appropriate valuation

methodology, typically either an income-based approach or a simulation model, such as the Monte Carlo model, depending on the structure

of the contingent consideration arrangement.

Contingent consideration is valued using significant inputs that are not observable in the

market which are defined as Level 3 inputs pursuant to fair value measurement accounting.

We believe our estimates and assumptions are

however, there is significant judgment involved.

At each reporting date, the contingent consideration obligation is revalued

to estimated fair value, and changes in fair value subsequent to the acquisitions are reflected in income or expense in the consolidated

statements of operations, and could cause a material impact to, and volatility in, our results.

Changes in the fair value of contingent

consideration obligations may result from changes in discount periods and rates and changes in the timing and amount of revenue and/or

earnings projections.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

As of December 31, 2023, contingent consideration

presented as current liability totaled $ 173 thousand.

As of December 31, 2023, the Company recorded a non-current contingent consideration

totaling $ 751 thousand related to the acquisition of Trust Codes on the Consolidated Balance sheets and represents the portion of contingent

consideration estimated to be payable greater than twelve months from the balance sheet date.

On April 22, 2022, we acquired, through PeriShip

12 unchanged sentences

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.

in the Precision Logistics (formerly PeriShip Global Solutions) segment and the results of its operations have been included in the consolidated

financial statements beginning April 22, 2022.

On September 22, 2022, the Company entered into

5 unchanged sentences

allocation for the acquisition (dollars in thousands).

Schedule of business acquisitions

allocation for the acquisition

Promissory note

10 unchanged sentences

Accounts payable and other accrued expenses

(1) Stock issued was calculated based on the 15 days prior to April

22, 2022, volume-weighted average price (“VWAP”) calculated at $3.2736.

(1) Stock issued was calculated based on the 15 days prior to April 22, 2022, volume-weighted average price (“VWAP”) calculated

Unaudited Pro forma Financial Information

1 unchanged sentence

presents the combined results of operations of the Company and gives effect to the acquisition discussed above for the years ended December

31, 2022, and 2021, as if the acquisition had occurred as of the beginning of the first period presented instead of on April 22, 2022.

31, 2022, as if the acquisition had occurred as of the beginning of the first period presented instead of on April 22, 2022.

The pro forma financial information is presented

30 unchanged sentences

We base our fair value estimates on assumptions we believe to be reasonable

but that are unpredictable and inherently uncertain.

but are unpredictable and inherently uncertain.

Actual future results may differ from those estimates.

The timing and frequency of

our goodwill impairment tests are based on an ongoing assessment of events and circumstances that would indicate a possible impairment.

We will continue to monitor our goodwill and intangible assets for impairment and conduct formal tests when impairment indicators are

The timing and frequency of our

goodwill impairment tests are based on an ongoing assessment of events and circumstances that would indicate a possible impairment.

will continue to monitor our goodwill and intangible assets for impairment and conduct formal tests when impairment indicators are present.

Each of our two reportable segments represents

4 unchanged sentences

units for purposes of goodwill impairment testing, which represent our two reportable business segments, as discussed below.

For the year ended December 31, 2021, there were

no goodwill activities.

Changes in the carrying amount of goodwill by reportable business segment for the year ended December

31, 2022, were as follows (in thousands):

Changes in the carrying amount of goodwill by

reportable business segment for the year ended December 31, 2023, were as follows (in thousands):

Schedule of goodwill by reportable business segment

PeriShip Global

Authentication

Precision Logistics

Net book value at

1 unchanged sentence

2023 Activity

Acquisition of Trust Codes Global

Foreign currency translation

Net book value at

12 unchanged sentences

Notes to the Consolidated Financial Statements

Intangible assets with finite lives are

subject to amortization over their estimated useful lives.

The primary assets included in this category and their respective

balances were as follows (in thousands):

Intangible assets with finite lives are subject

to amortization over their estimated useful lives.

The primary assets included in this category and their respective balances were as

follows (in thousands):

Schedule of intangible assets subject to amortization

December 31, 2023

Gross Carrying

Net Carrying Amount

Patents and Trademarks

4 unchanged sentences

Non-Compete Agreement

Deferred Implementation

Total Intangible Assets

December 31, 2022

1 unchanged sentence

Capitalized Software

Customer Relationships

Developed Technology

Internally Used Software

Non-Compete Agreement

Deferred Implementation

Total Intangible Assets

Amortization expense for intangible assets was

$ 657 thousand and $ 64 thousand for the year ended December 31, 2022, and 2021, respectively.

$ 1,030 thousand and $ 657 thousand for the years ended December 31, 2023, and December 31, 2022, respectively.

During the year ended December

31, 2023, the Company impaired certain assets related to its Developed Technology and Patents by $ 90 thousand, to bring the gross carrying

amount related to these assets to zero, as these technologies are no longer in use.

Patents and Trademarks

As of December 31, 2022, the 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

As of December 31, 2023, our current patent and

trademark portfolios consist of nine granted U.S.

patents and two granted European patents, one validated in four countries (France,

Germany, United Kingdom, and Italy), and the second patent validated in three countries (France, Germany, and United Kingdom), three pending

and foreign patent applications, twenty-six registered U.S.

trademarks (of which nineteen are in the name of VerifyMe, Inc., and

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.

trademark registration, two UK trademark registrations, seven NZ trademark registration (of which six are in the name of Trust Codes Limited

and/or Trust Codes Global Limited), one OAPI (African Intellectual Property Organization) trademark registration (in the name of Trust

Codes Global Limited), and two pending US and foreign trademark applications.

The Company abandoned two patents during the year ended

December 31, 2023.

The Company expects to record amortization expense

13 unchanged sentences

Year Ended December 31,

Income (loss) before income taxes

Loss before income taxes

Total loss before income taxes

Taxes under statutory US tax rates

Increase (decrease) in taxes resulting from:

Foreign taxes and rate differential

Increase (decrease) in valuation allowance

Change in State tax rate

Prior period true up

Income tax expense

The decrease in the Company's net valuation allowance was due primarily

to a realized loss in our equity investment (See Note 2-Equity Investment), and to net operating losses which will expire unutilized due

to limitations resulting from application of Section 382 of the Internal Revenue Code of 1986, as amended (“IRC”).

The increase in the valuation allowance during

the year ended December 31, 2023 was due primarily to the increase in our net operating losses which may not be utilized in the future.

The decrease in the Company's net valuation allowance in the year ended December 31, 2022 was due primarily to a realized loss in our

equity investment (See Note 2-Equity Investments), and to net operating losses which will expire unutilized due to limitations resulting

from application of Section 382 of the Internal Revenue Code of 1986, as amended (“IRC”).

Deferred income taxes reflect the net tax effects

10 unchanged sentences

Unrealized gain on investment

Capital loss carryforward

Accruals & other

Dividend income

5 unchanged sentences

Net deferred tax assets / (liabilities)

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

In assessing the realizability of deferred tax

assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets may not be realized.

The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which

temporary differences are deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable

income and tax planning strategies in making this assessment.

Based upon these factors, Management has placed a full valuation allowance

against all deferred tax assets, including net operating loss carryforwards, due to the uncertainty of future profitability.

As of December 31, 2023, the Company has net operating

loss carryforwards of $ 22.7 million for tax purposes, which will be available to offset future taxable income.

If not used, $7.5 million

of these carryforwards will expire beginning in 2024, and $15.2 million will carryforward indefinitely.

As of 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.

The Company completed the IRC Section 382 analysis,

in 2022, and determined that an ownership change occurred sufficient to impose additional limitations on the use of NOL carryforwards.

The Company has not completed the IRC Section 382 analysis in 2023 and is not aware of any indicators that may impose additional limitations

on the use of NOL carryforwards.

Utilization of the net operating losses (NOL)

6 unchanged sentences

of NOL carryforwards that can be utilized annually to offset future taxable income.

In 2022, the Company 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.

Some of the Federal and state tax NOL carryforwards will expire at various dates through 2037.

these can be carried forward and applied against future taxable income at the tax rate applicable at that time.

We are currently using

an effective income tax rate of 26.6 % for our projected available net operating loss carry-forward.

No tax benefit has been reported in

the December 31, 2022, due to the uncertainty surrounding the realizability of the benefit.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

No tax benefit has been reported in the December

31, 2023, due to the uncertainty surrounding the realizability of the benefit.

Uncertain Tax Positions

As of December 31, 2023, and 2022 we had no uncertain

tax positions reflected on our balance sheet.

The Company files income tax returns in U.S.

federal, state and local jurisdictions, and

in one non-U.S.

jurisdiction, and is subject to audit by tax authorities in those jurisdictions.

The Company’s tax years from 2004

are subject to examination by the United States and state taxing authorities due to the carryforward of unutilized NOLs.

The Tax Cuts and Jobs Act of 2017 imposes a mandatory

repatriation tax on certain unremitted foreign earnings and provides a 100% deduction to domestic corporations for certain dividends received

from foreign corporations after Dec.

Therefore, we do not expect future dividends, if any, from the earnings of our foreign

subsidiary to result in U.S.

federal income taxes.

Deferred tax liabilities arising from the difference between the financial reporting

and income tax bases inherent in our foreign subsidiary, referred to as outside basis differences, have not been provided for U.S.

tax purposes because we do not intend to sell, liquidate or otherwise trigger the recognition of U.S.

taxable income with regard to our

investment in this foreign subsidiary.

Determining the amount of U.S.

deferred tax liabilities associated with outside basis differences

is not practicable at this time.

In accordance with FASB

10 unchanged sentences

The Company had no accrual for interest and penalties on the balance

sheets and has no t recognized interest and/or penalties in the Statements of Operations for the years ended December 31, 2022, and 2021.

The Company is subject to taxation in the United States and various

state jurisdictions.

The Company’s tax years from 2003 are subject to examination by the United States and state taxing authorities

due to the carryforward of unutilized NOLs.

sheets and recognized $ 2 thousand in interest and/or penalties in the Statements of Operations for the year ended December 31, 2023,

and $ 0 in the fiscal year ended December 31, 2022.

There are no taxes payable as of December 31,

2023, or December 31, 2022.

On April 22, 2022, the Company issued a $ 2.0 million

unsecured promissory note through our subsidiary PeriShip Global as part of the acquisition of the PeriShip business.

The note had 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.

On September 22, 2022, the Company entered into an agreement with the note holder whereby the Company

repaid the outstanding principal balance and accrued interest outstanding on the note and redeemed 61,000 shares of its common stock from

the holder of the note, for a total of $1.8 million, at which point the guarantee agreement entered into by the Company in connection

therewith was automatically terminated and has no further effect.

The Company accounted for the early extinguishment

of debt in accordance with ASC 405-20 - Extinguishment of Liabilities , and recognized a gain included in Gain on extinguishment

of debt on the accompanying Consolidated Statements of Operations of $ 326 thousand for the year ended December 31, 2022.

Contemporaneously, the Company entered into a

new debt facility with PNC Bank, National Association (the “PNC Facility”).

The PNC Facility includes a $1 million revolving

line of credit (the “RLOC”) with a term of one-year, expiring in September 2023.

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 (the “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 Global and the Company.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

PeriShip Global is a party to a debt facility

with PNC Bank, National Association (the “PNC Facility”).

The PNC Facility includes a $1 million revolving line of credit

(the “RLOC”).

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

to the sum of Daily SOFR plus 2.85% with monthly interest payments.

The PNC Facility also includes a four-year term note (the “Term

Note”) for $2 million which matures in September of 2026 and requires equal quarterly payments of principal and interest.

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 VerifyMe

and secured by the assets of PeriShip Global and VerifyMe.

The PNC Facility includes a number of affirmative

6 unchanged sentences

has occurred or would occur upon such declaration of dividend.

PeriShip Global was in compliance with all affirmative and restrictive

covenants under the PNC Facility at December 31, 2022.

Effective October 17, 2022, the Company entered

into an interest rate swap agreement, with a notional amount of $ 1,958 thousand, effectively fixing the interest rate on the Company’s

outstanding debt at 7.602 % .

The Company has designated the intertest rate swap, expiring September 2026, as a cash flow hedge and have

applied hedge accounting.

The fair value of the derivative liability associated with the interest rate swap was $3 thousand as of December

31, 2022, and is included in Long-term Derivative Liability on the Consolidated Balance Sheets.

On November 3, 2023, PeriShip Global

entered into a waiver and amendment to loan documents and received a waiver for certain events of default and 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.

PeriShip Global was in compliance with all

affirmative and restrictive covenants under the PNC Facility as of December 31, 2023.

As of December 31, 2023, our short-term debt outstanding

under the Term Note was $ 0.5 million and total long-term debt outstanding under the Term Note was $ 1.4 million.

No amounts were drawn on the RLOC as of December

under the Term Note was $ 500 thousand and total long-term debt outstanding under the Term Note was $ 875 thousand.

During the year ended

December 31, 2023, the Company made a repayment of $ 500 thousand towards the principal of the outstanding Term Note.

of December 31, 2022, our short-term debt outstanding under the Term Note was $ 0.5 million and total long-term debt outstanding under

the Term Note was $ 1.4 million.

During the year ended December 31, 2023, $ 1,800

thousand was drawn on the RLOC, of which $ 1,800 thousand was repaid.

As of December 31, 2023, $ 0 was outstanding on the RLOC.

October 17, 2022, the Company entered into an interest rate swap agreement, with a notional amount of $ 1,958 thousand, effectively

fixing the interest rate on the Company’s outstanding debt at 7.602 % .

The Company has designated the intertest rate swap, expiring

September 2026, as a cash flow hedge and have applied hedge accounting.

The fair value of the derivative asset and liability associated

with the interest rate swap are not significant as of December 31, 2023, and as of December 31, 2022, respectively.

On April 22, 2022, the

Company issued a $ 2.0 million unsecured promissory note through our subsidiary PeriShip Global as part of the acquisition of the

PeriShip business.

The note had 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.

On September 22, 2022, the Company entered into an agreement

with the note holder whereby the Company repaid the outstanding principal balance and accrued interest outstanding on the note and redeemed

61,000 shares of its common stock from the holder of the note, for a total of $1.8 million, at which point the guarantee agreement entered

into by the Company in connection therewith was automatically terminated and has no further effect.

The Company accounted

for the early extinguishment of debt in accordance with ASC 405-20 - Extinguishment of Liabilities , and recognized a gain

included in Gain on extinguishment of debt on the accompanying Consolidated Statements of Operations of $ 326 thousand for the year

ended December 31, 2022.

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

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

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

The notes are subordinated unsecured obligations

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

beginning on February 25, 2024.

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

of $1.15 per share of common stock.

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

For the year ended December 31, 2023,

interest expense related to the convertible debt was $ 31 thousand.

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.

– CONVERTIBLE PREFERRED STOCK

is authorized to issue Series A Convertible Preferred Stock, par value of $ 0.001 per share (the “Series A”) and Series

B Convertible Preferred Stock, par value of $ 0.001 per share (the “Series B”).

As of December 31, 2023, and 2022, there

were no shares of Series A outstanding and 0.85 of a share of Series B outstanding convertible into 144,444 shares

of common stock.

Each share of Series A and Series B has limited voting rights, is entitled to participate with the common stock on liquidation

and holders of Series A and Series B are subject to beneficial ownership limitations.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

2020, the Company entered into a paycheck protection program term note for $ 72 thousand (the “SBA Loan”) with PNC Bank, N.A.

under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) pursuant to the Paycheck Protection

Program (the “PPP”), which is administered by the U.S.

Small Business Administration.

The SBA Loan was scheduled to mature

on May 17, 2022 , and bore interest at a rate of 1.00 % per annum and is subject to the terms and conditions applicable to loans administered

Small Business Administration under the CARES Act.

Company applied for and was notified in June 2021 that $69 thousand in eligible payroll expenditures as described in the CARES Act, has

been forgiven.

Loan forgiveness is reflected in Other Income (Expense), Net in the accompanying Consolidated Statements of Operations.

The forgiveness recognized during the year ended December 31, 2021, included principal of $ 69 thousand, and interest payable of $ 1 thousand.

The remaining loan balance of $ 3 thousand was paid in full in June 2021.

NOTE 8 – CONVERTIBLE PREFERRED

The Company is authorized to issue Series A Convertible

Preferred Stock, par value of $0 .001 per share (the “Series A”) and Series B Convertible Preferred Stock, par value of $0 .001

per share (the “Series B”).

As of December 31, 2022, and 2021, there were no shares of Series A outstanding and 0.85 of a

share of Series B outstanding convertible into 144,444 shares of common stock.

Each share of Series A and Series B has limited voting

rights, is entitled to participate with the common stock on liquidation and holders of Series A and Series B are subject to beneficial

ownership limitations.

NOTE 9 – STOCKHOLDERS’ EQUITY

The Company expensed $ 477 thousand and $ 239 thousand

related to restricted stock awards for the years ended December 31, 2022, and December 31, 2021, respectively.

related to restricted awards for the years ended December 31, 2023 and December 31, 2022, respectively.

The Company expensed $ 998 thousand and $ 1,084

thousand related to restricted stock units for the years ended December 31, 2023 and December 31, 2022, respectively.

During the year ended December 31, 2022, and 2021,

the Company issued 30,000 and 9,774 shares of common stock in relation to services with a stock-based compensation expense of $ 96 thousand

and $ 39 thousand, respectively.

On August 11, 2022, we received an exercise notice

to exercise 675,000 pre-funded warrants with an exercise price of $ 0.001 per share.

Upon receipt of $ 675 the Company issued 675,000 shares

of its common stock.

On April 22, 2022, 305,473 shares of common stock

were issued in relation to the acquisition of the PeriShip business, see Note 4 – Business Combinations, for details.

15, 2022, the Company withheld and retired 750 shares of common stock in order to satisfy U.S.

payroll tax withholding obligations on

restricted stock awards held by our Chief Financial Officer.

On April 12, 2022, we entered into a Securities

Purchase Agreement (the “Securities Purchase Agreement”) with a 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 is exercisable immediately and shall terminate when fully exercised

and has an exercise price of $0.001 per share.

The pre-funded warrant was exercised in full on August 11, 2022.

The warrants will be 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.

Both the pre-funded

warrants and warrants contain price adjustment provisions which may, under certain circumstances, reduce the applicable exercise price.

The transaction closed on April 14, 2022.

On March 29, 2022, the Company withheld and retired

8,870 shares of common stock in order to satisfy U.S.

payroll tax withholding obligations on restricted stock awards held by our Chief

Executive Officer.

2, 2023 the Company issued 56,272 shares of common stock upon vesting of 72,329 restricted stock units, net of 16,057 shares

of common stock withheld for taxes.

20, 2023, the Company issued 15,965 shares of common stock upon vesting of 22,807 restricted stock units, net of 6,842 shares of commons

stock withheld for taxes.

31, 2023, the Company issued 14,000 shares of common stock upon vesting of 20,000 restricted stock awards, net of 6,000 shares of common

stock withheld for taxes.

22, 2023, 750 shares of common stock were retired to cover taxes on the vesting of 2,500 restricted stock award.

31, 2023, the Company issued 1,750 shares of common stock upon vesting of 2,500 restricted stock units, net of 750 shares of common stock

withheld for taxes.

On February 28, 2023, 353,492 shares of common

stock were issued in relation to the acquisition of Trust Codes Global, see Note 4 – Business Combinations, for details.

On December 31, 2023, the Company issued 133,654

of restricted common stock, vesting immediately, with a value of $ 147 thousand, for consulting services.

During the year ended December 31, 2023, the Company

retired 5,515 shares of common stock held in Treasury and 1,496 shares of common stock outstanding, relating to issuances in prior periods

that have been forfeited or cancelled.

During the year ended December 31, 2023, the Company

issued 50,002 shares of common stock issued upon the separation of a former director, relating to 50,002 shares of restricted stock units

that had previously vested.

Non-Qualified Stock Purchase Plan

4 unchanged sentences

interest in the Company’s continued success.

The maximum numbers of common stock reserved and available for issuance under the 2021

The maximum number of common stock reserved and available for issuance under the 2021

Plan is 500,000 shares.

5 unchanged sentences

as the 2021 Plan is considered compensatory.

In relation to the non-qualified stock purchase plan the Company expensed $ 122 thousand and $ 40

thousand for the years ended December 31, 2022 and December 31, 2021, respectively.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

In relation to the 2021 Plan the Company expensed $ 53 thousand and $ 122 thousand for the

years ended December 31, 2023 and December 31, 2022, respectively.

During the years ended December 31, 2023, and December 31, 2022, the

Company received $ 80 thousand and $ 102 thousand, respectively, in proceeds related to the 2021 Plan.

Shares Held in Treasury

2 unchanged sentences

respectively.

On February 28, 2022, five participants exercised

their option under the Company’s non-qualified stock purchase plan, and as a result, 25,000 shares were issued from treasury with

a purchase price of $ 2.69 per share.

On August 31, 2022, four participants exercised

their option under the Company’s non-qualified stock purchase plan, and as a result, 28,895 shares were issued from treasury with

a purchase price of $ 1.20 per share.

On September 22, 2022, the Company paid $1.8 million

of the $2.0 million principal amount promissory note issued to the seller in connection with the PeriShip acquisition, inclusive of the

Company redeeming 61,000 shares of its common stock from the seller, pursuant to an agreement with the seller, see Note 4.

On August 31, 2023, six participants exercised their

option under the Company’s 2021 Plan, and as a result, 12,802 shares were issued from treasury, with an

exercise price of $ 0.96 per share.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

On February 28, 2023, fourteen participants exercised

their option under the Company’s 2021 Plan, and as a result, 57,245 shares were issued, of which 48,500

were issued from treasury, with an exercise price of $ 1.19 per share.

Shares Repurchase Program

In November 2020, the Company’s Board of

Directors approved a share repurchase program for up to $1.5 million of the Company’s common stock until August 16, 2021.

August 12, 2021, the Company’s Board of Directors extended the share repurchase program to expire on August 16, 2022.

July 1, 2022, the Company’s Board of Directors terminated the existing share repurchase program and approved a new share repurchase

program to replace the existing program due to expire on August 16, 2022, to allow the Company to spend up to $ 1.5 million to repurchase

shares of its common stock, so long as the price does not exceed $5.00 until July 1, 2023.

During year ended December 31, 2022, the Company

repurchased 158,906 shares of common stock under the Company’s current program.

Effective July 1, 2022, the Company’s Board

of Directors approved a share repurchase program to allow the Company to spend up to $ 1.5 million to repurchase shares of its

common stock, so long as the price does not exceed $5.00.

This plan ended on July 1, 2023.

During the year ended December 31, 2023, the

Company repurchased 6,201 shares of common stock for $ 10 thousand under the Company’s repurchase program.

In December 2023, the

Company’s Board of Directors approved a new share repurchase program to allow the Company to spend up to $0.5 million to repurchase

shares of its common stock so long as the price does not exceed $1.00 until December 14, 2024.

During the year ended December 31, 2023,

the Company did not repurchase shares of common stock under the Company’s current program.

NOTE 10– STOCK

20 unchanged sentences

affiliates, are eligible to receive awards under the 2020 Plan at the discretion of the Board of Directors or the Board’s Compensation

The 2020 Plan is administered by the Compensation

Committee which determines the persons to whom awards will be granted, the number of awards to be granted and the specific terms of each

grant, including the vesting thereof, subject to the provisions of the plan.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

On March 28, 2022, the Company’s Board of

Directors adopted the First Amendment to the 2020 Plan, subject to stockholder approval, which increased the shares authorized for potential

issuance under the 2020 Plan to 2,069,100 shares of common stock and extended the term of the 2020 Plan to June 9, 2023.

On June 9, 2022,

the Company’s stockholders approved the First Amendment to the 2020 Plan.

On April 17, 2023, the Company’s Board of Directors

adopted the Second Amendment to the 2020 Plan, subject to stockholder approval, which increased the shares authorized for potential issuance

under the 2020 Plan to 3,069,110 shares of common stock and extended the term of the 2020 Plan to June 6, 2033, and increased the annual

cap on director compensation by $50 thousand.

On June 6, 2023, the Company’s stockholders approved the Second Amendment to the 2020

The 2020 Plan, as amended, is administered by

the Compensation Committee which determines the persons to whom awards will be granted, the number of awards to be granted and the specific

terms of each grant, including the vesting thereof, subject to the provisions of the plan.

In connection with incentive stock options, the

16 unchanged sentences

value represent management’s best estimates and involve inherent uncertainties and judgements.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

Stock Options

The following table summarizes the activities

for the Company’s stock options as of December 31, 2023, and 2022:

Schedule of stock options

14 unchanged sentences

Notes to the Consolidated Financial Statements

The following table summarizes the activities for the Company’s

unvested stock options for the year ended December 31, 2022, and 2021:

Schedule of Unvested Options

Unvested Options

Date Exercise Price

Balance at December 31, 2020

Balance at December 31, 2021

Balance at December 31, 2022

During the year ended December 31, 2023, and 2022,

the Company expensed $ 0 thousand and $ 85 thousand with respect to options.

the Company expensed $ 0 thousand with respect to options.

As of December 31, 2023, and 2022, there was $ 0

3 unchanged sentences

stock awards as of December 31, 2023 and 2022:

Schedule of unvested restricted stock awards

Unvested Restricted Stock Awards

Schedule of unvested options

Date Fair Value

Balance at December 31, 2020

Unvested at December 31, 2021

Balance at December 31, 2022

7 unchanged sentences

stock units as of December 31, 2023 and 2022:

Schedule of unvested restricted stock units

Schedule of unvested restricted stock awards

Unvested Restricted Stock Units

2 unchanged sentences

Unvested at December 31, 2022

Forfeited/Cancelled

Balance at December 31, 2023

11 unchanged sentences

The following table summarizes the unvested performance

restricted stock units as of December 31, 2022.

There were no performance restricted stock units prior to the year 2022.:

Schedule of unvested performance restricted stock units

restricted stock units as of December 31, 2023 and 2022:

Schedule of unvested restricted stock units

Unvested Performance Restricted Stock Units

2 unchanged sentences

Balance at December 31, 2022

As of December 31, 2022, total unrecognized share-based

compensation cost related to unvested restricted stock units was $ 947 thousand, which is expected to be recognized over a weighted-average

period of 2.23 years.

Forfeited/Cancelled

Balance at December 31, 2023

As of December 31, 2023, and December 31, 2022

total unrecognized share-based compensation cost related to unvested restricted stock units was $ 1,778 thousand and $ 947 thousand, respectively,

which is expected to be recognized over a weighted-average period of 1.75 years as of December 31, 2023.

VerifyMe, Inc.

15 unchanged sentences

and 1,555,208 warrants in conjunction with the Securities Purchase Agreement, respectively (see Note 9 – Stockholders’ Equity).

the fair value of the warrants granted would have had a net zero impact to equity (increasing additional paid in capital and offering

As the fair value of the warrants granted would have had a net zero impact to equity (increasing additional paid in capital and offering

costs for the same amount), the Company did not break out or complete a separate valuation of the warrants granted in association with

2 unchanged sentences

On April 14, 2022, in connection with our Securities

Purchase Agreement (see Note 9 – Stockholders’ Equity), the Company issued 675,000 pre-funded warrants to purchase

up to an aggregate of 675,000 shares of common stock at a purchase price of $3.214 per pre-funded warrant, which represented

the per share public offering price for the common stock less the $0.001 per share exercise price for each pre-funded warrant.

In August 2022, 675,000 pre-funded warrants with an exercise price of $ 0.001 per share were exercised, and 675,000 shares of the Company’s

common stock were issued.

No pre-funded warrants are outstanding as of December 31, 2022.

Purchase Agreement, the Company issued 675,000 pre-funded warrants to purchase up to an aggregate of 675,000 shares

of common stock at a purchase price of $3.214 per pre-funded warrant, which represented the per share public offering price

for the common stock less the $0.001 per share exercise price for each pre-funded warrant.

In August 2022, 675,000 pre-funded

warrants with an exercise price of $ 0.001 per share were exercised, and 675,000 shares of the Company’s common stock were issued.

No pre-funded warrants are outstanding as of December 31, 2023 or December 31, 2022.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

NOTE 11— EARNINGS (LOSS) PER SHARE

Basic earnings/(loss) per share (EPS) is computed

by dividing net income/(loss) by the weighted average number of common shares outstanding during the period.

Diluted EPS reflects the

potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised

or converted into common stock.

NOTE 11— LOSS PER SHARE

Basic loss per share (EPS) is computed by dividing

net loss by the weighted average number of common shares outstanding during the period.

Diluted EPS reflects the potential dilution of

common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into

common stock.

The dilutive common stock equivalent shares consist

2 unchanged sentences

The following table sets forth the computation

of basic and diluted earnings/(loss) per share (in thousands, except share and per share data):

of basic loss per share (in thousands, except share and per share data):

Schedule of basic and diluted earnings/(loss) per share

Years Ended December 31,

Net Income/(Loss)

Weighted average shares of common stock – basic

Effect of dilutive securities

Preferred Stock

Stock Options

Stock Purchase Plan

Restricted Stock Units & Restricted Stock Awards

Weighted average shares of common

stock – diluted

(Loss)/Earnings per share

Loss per share:

VerifyMe, Inc.

1 unchanged sentence

The following table represents the weighted average

number of anti-dilutive instruments excluded from the computation of diluted (loss)/earnings per share:

Schedule of anti-dilutiv e earnings per

Anti-dilutive instruments excluded from computation of diluted net income/(loss) per share:

number of anti-dilutive instruments excluded from the computation of diluted loss per share:

Schedule of anti-dilutiv e earnings per share

Anti-dilutive instruments excluded from computation of diluted net loss per share:

Preferred Stock

1 unchanged sentence

Stock purchase plan

Convertible note

Restricted Stock Units and Restricted Stock Awards

8 unchanged sentences

anniversary of the vesting date.

On September 17, 2021, the Company granted two

directors SPAC RSUs with respect to the common stock, $ 0.0001 par value per share, of G3 VRM Acquisition Corp.

The SPAC RSUs were to vest

upon the initial business combination of the SPAC (see Note 2 – Equity Investments) subject to continuous service to the Company

through the vesting date.

Each vested SPAC RSU represented the right to receive the value of one share of stock in G3 VRM Acquisition

Corp., which was to be paid to the director as soon as practicable after the fifteen-month anniversary of the vesting date.

date fair value of the SPAC RSUs for each director was $ 98 thousand.

As the underlying awards were not the Company’s stock but an

unrelated, publicly traded entity’s shares, the Company accounted for the awards under ASC 815 – Derivatives and Hedging,

with the expense included in stock-based compensation under General and Administrative expenses in the accompanying Consolidated Statements

of Operations.

In June 2022, the Sponsor Entity decided not to

7 unchanged sentences

The fair value of the derivative liability

was $ 0 as of December 31, 2022, and $ 71 thousand as of December 31, 2021.

Effective October 17, 2022, the Company entered

into an interest rate swap agreement (see Note 7 – Debt for details).

The fair value of the derivative liability associated with

the interest rate swap was $3 thousand as of December 31, 2022, and $0 as of December 31, 2021.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

was $ 0 as of December 31, 2022.

NOTE 13 – EMPLOYEE BENEFIT PLAN

We offer the VRME Retirement Savings Plan (the “Plan”)

to our employees.

Eligible employees can elect to participate in the Plan, as soon as administratively feasible after enrollment.

Plan permits pre-tax contributions to the Plan by participants pursuant to Section 401(k) of the Internal Revenue Code (IRC).

matching contributions at our discretion.

In 2022 and 2021 we contributed a value of approximately $ 103 thousand and $ 10 thousand respectively

We offer the VRME Retirement Savings Plan (the

“Plan”) to our employees located in the United States of America.

Eligible employees can elect to participate in the Plan,

as soon as administratively feasible after enrollment.

The Plan permits pre-tax contributions to the Plan by participants pursuant to

Section 401(k) of the Internal Revenue Code (IRC).

The Company makes the matching contributions at our discretion.

In the years ended

December 31, 2023, and December 31, 2022, the Company contributed a value of approximately $ 137 thousand and $ 103 thousand respectively

and is recognized as compensation expense in the Consolidated Statements of Operations for matching contributions to the Plan.

has a statutory retirement savings scheme, Kiwisaver, in which New Zealand employees may participate.

required by law contributions equal to three percent of each employee’s salary.

During the year ended December 31, 2023, the Company

contributed $ 10 thousand.

NOTE 14 – LEASES

7 unchanged sentences

for leases with terms of 12 months or less.

Our current long-term lease includes an option to extend the term of the lease prior to the

Our current long-term leases include an option to extend the term of the lease prior to the

end of the initial term.

3 unchanged sentences

rate implicit in the lease, we use our promissory note borrowing rate to calculate the present value of future payments.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

In addition to the base rent, real estate leases

39 unchanged sentences

During the year ended December 31, 2023, one customer

represented 13 % of revenues and five customers represented 95 % of revenues for the year ended December 31, 2021.

As of December 31, 2022, two customers made up

23 % of accounts receivable.

As of December 31, 2021, three customers accounted for 91 % of total accounts receivable.

During the year ended December 31, 2022, one vendor accounted for 99 %

of transportation costs, in our PeriShip Global Solutions segment.

represented 17 % of revenues and one customer represented 13 % of revenues for the year ended December 31, 2022.

As of December 31, 2023, three customers made

up 47 % of accounts receivable.

As of December 31, 2022, two customers accounted for 23 % of total accounts receivable.

During the year ended December 31, 2023, and December

31, 2022, one vendor accounted for 99 % of transportation costs, in our Precision Logistics segment.

NOTE 16 – SEGMENT REPORTING

As of December 31, 2023, we operated through two reportable business

(i) PeriShip Global Solutions and (ii) VerifyMe Solutions.

PeriShip Global Solutions:

offers a value-added service provider for time and temperature sensitive parcel management.

Through logistics management from a sophisticated

IT platform with proprietary databases, package and flight-tracking software, weather, traffic, and flight status monitoring systems,

as well as dynamic dashboards with real-time visibility into shipment transit and last-mile events that are managed by a call center 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.

VerifyMe Solutions .

This segment specializes

in solutions that connect brands with consumers through their products.

Consumers can authenticate products with their smart phone prior

to usage, and brand owners have the ability to gather business intelligence while engaging directly with their consumers.

Solutions also provide brand protection and supply chain functions such as counterfeit prevention.

(i) Precision Logistics (formerly PeriShip Global Solutions) and (ii) Authentication

(formerly VerifyMe Solutions).

Precision Logistics:

segment offers a value-added service provider for time and temperature sensitive parcel management.

Through logistics management from

a sophisticated IT platform with proprietary databases, package and flight-tracking software, weather, traffic, as well as dynamic dashboards

with real-time visibility into shipment transit and last-mile events that are managed by a service center 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, delivering last-mile resolution for key markets, including the perishable healthcare

and food industries.

Authentication:

segment specializes in solutions that connect brands with consumers through their products.

Consumers can authenticate products with their

smart phone prior to usage, and brand owners have the ability to gather business intelligence while engaging directly with their consumers.

Our Authentication segment also provides brand protection and supply chain functions such as counterfeit prevention.

We do not allocate the following items to the segments:

6 unchanged sentences

Schedule of segment reporting information

PeriShip Global Solutions

VerifyMe Solutions

Precision Logistics

Authentication

Total Revenue

PeriShip Global Solutions

VerifyMe Solutions

Precision Logistics

Authentication

Total Gross Profit

2 unchanged sentences

Sales and marketing

LOSS BEFORE OTHER (EXPENSE) INCOME

OTHER (EXPENSE) INCOME

NET (LOSS) INCOME

LOSS BEFORE OTHER EXPENSE, NET

TOTAL OTHER EXPENSE, NET

Additional information relating to our business

1 unchanged sentence

Identifiable assets:

PeriShip Global Solutions

VerifyMe Solutions

Precision Logistics

Authentication

NOTE 17 – SUBSEQUENT EVENTS

On March 1, 2023, the

Company entered into an Asset Purchase Agreement (the “APA”) effective as of February

28, 2023 (the “Effective Date”) by and among the Company, Trust Codes Global, Trust Codes Limited, a New Zealand limited liability

company that specializes in unique item level codes for brand protection, data intelligence and consumer engagement technology

with an expertise in the food and agriculture industry (“Trust Codes” or “Seller”)

and Signum Holdings Limited (“Seller’s Parent”).

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 (the “Closing”).

total consideration paid to the Seller at Closing in connection with the Transaction was approximately $ 1,000,000 , which consisted of

approximately $ 350,000 in cash (the “Cash Consideration”);

and the issuance of 353,492 shares of restricted common stock of

the Company at $ 1.84 per share (the “Stock Consideration”) (representing $ 650,000 in Stock Consideration).

The total consideration

due under the Transaction is subject to certain post-Closing adjustments, which shall be accounted for in the first cash earnout payment,

discussed below, if applicable.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

the APA, during the five-year period ending on the fifth anniversary of the Effective Date, Trust Codes Global shall pay the Seller quarterly

cash earnout payments equal to 18% of the gross margin earned on existing customers and the Company shall issue to the Seller annual equity

earnout payments of restricted shares of the Company’s common stock equal to 20% of gross margin earned on new customers during

the applicable 12 month period divided by the VWAP for the 30-day period ending on the last day of the 12-month period, inclusive.

If the value of equity earnout shares issued exceeds $3.1 million at any time during the earnout period, then any subsequent amount of

equity earnout shall be reduced to 10% of gross margin earned on new customers received during the applicable 12-month period.

circumstance Trust Codes Global may pay cash in lieu of the Company issuing restricted common stock for the equity earnout.

The APA is structured

to comply with the shareholder approval requirements of the Nasdaq listing rules and contains a blocker provision which prevents the Seller

from receiving any equity earnout shares should such earnout shares, in connection with the Stock Consideration, cause the Seller to beneficially

own more than 19.99% of the voting securities of the Company.

The APA contains customary confidentiality

and indemnification provisions and customary representations, warranties and covenants by the parties for transactions of this type and

also contains a five-year non-compete and non-solicitation provision applicable to the Seller, Seller’s Parent, and each of their

affiliates, in favor of the Company and Trust Codes Global.

On February 28, 2023, fourteen participants exercised

their option under the Company’s non-qualified stock purchase plan, and as a result, 57,245 shares were issued with an exercise

On February 17, 2024 we repurchased 1,000 shares

under the Share Repurchase program

On February 29, 2024, seven participants exercised

their option under the Company’s 2021 Plan, and as a result, 21,889 shares were issued with an exercise

price of $ 0.97 .

Effective March 15, 2023, the Company’s Chief Executive Officer, Patrick White, resigned as an officer and director of the

Scott Greenberg, the Company’s executive chairman of the Board, was appointed as Interim Chief Executive Officer.

connection with his resignation, Mr.

White will receive payments totaling $159 thousand.

In addition the Company awarded him 111,364

restricted stock units, with a grant date value equal to 70% of his annual base salary, each

such unit representing the contingent right to receive one share of the Company’s common stock, par value $0.001 per share,

subject to the terms of the Company’s 2020 Plan.

These restricted stock units, except as otherwise provided in the award

agreement, vest within three years in equal tranches provided the Company’s stock price exceeds $2.75 and $3.75

per share for twenty consecutive trading days.

In connection with the grant of the restricted stock units Mr.

White forfeited his

outstanding award of restricted stock units granted pursuant to a Restricted Stock Unit Award Agreement dated February 26, 2022.

In connection with his appointment

as Interim Chief Executive Officer, Mr.

was awarded 56,819 restricted stock units, with a grant date value equal to $ 100,000 , each such unit representing the contingent right

to receive one share of the Common Stock, subject to the terms of the 2020 Plan.

These restricted stock units, except as otherwise provided

in the award agreement, vest within three years in equal tranches provided the Company’s stock price exceeds $2.75 and $3.75

per share for twenty consecutive trading days.

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 9A. Controls and Procedures