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Item 9A. Controls and Procedures

2025-03-12 compared with 2024-03-29 · 1487 added, 688 removed, 1145 unchanged (66% of the section changed)

AND PROCEDURES.

CONTROLS AND PROCEDURES.

(a) Evaluation of Disclosure Controls and Procedures

1 unchanged sentence

Our disclosure controls and procedures are designed

to ensure information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934,

as amended (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the

SEC’s rules and forms.

The Company’s Chief Executive Officer, our principal executive officer, and Chief Financial Officer,

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

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.

to ensure information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed,

summarized and reported, within the time periods specified in the SEC’s rules and forms.

The Company’s Chief Executive Officer,

our principal executive officer, and Chief Financial Officer, our principal financial officer, have evaluated the effectiveness of the

design and operation of the Company’s disclosure controls and procedures as of December 31, 2024.

Based on that evaluation, the

Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2024, 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

21 unchanged sentences

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

13 unchanged sentences

OFFICERS AND CORPORATE GOVERNANCE.

The information

required by this Item 10 is incorporated herein by reference from our proxy statement for our 2024 annual meeting of stockholders under

the headings “Questions and Answers About these Proxy Materials and Voting,” “Proposal One:

Election of Directors,”

“Corporate Governance,” “Management and Executive Officers” and, if necessary, “Delinquent Section 16(a)

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

H Stedham, age 56, has served as one of our directors since April 2022.

Stedham has served as our Chief Executive Officer since

June 2023 and as our President since August 2023.

Stedham was a senior executive of Learning Technologies Group plc and was CEO of

GP Strategies from June 2020 until June 2023.

He also served as President of GP Strategies from November 2017 to October 2021.

joined GP Strategies in 1997, after 6 years as a nuclear reactor operator in the US Navy.

He has held roles of increasing responsibility

during his tenure, including leading operational service lines, directing acquisitions and divestitures, heading business development,

and managing the Asia-Pacific region.

He was on the board of directors of GP Strategies from June 2020 until June 2023.

significant expertise in business strategy, mergers and acquisitions, learning and performance innovation, global operations, and strategic

relationship management.

He holds a Master of Business Administration from Anderson University, Master’s of Education from University

of Pennsylvania, and Master’s in Adult & Community Education from Ball State University.

Stedham’s prior experience

as the chief executive officer and president of a public company gives him the qualifications, skills to serve on our Board.

Geller, age 86, has served as one of our directors since July 2017.

Geller was a director and a member of the audit committee

of GP Strategies Corporation (formerly NYSE:GPX) from 2002 until October 2021.

Geller was a director of Wright Investors’ Service

Holdings Inc.

(OTCMKT:WISH), formerly National Patent Development Corporation, from January 2015 until October 2018.

director and member of the audit committee of G3 VRM Acquisition Corp.

(Nasdaq:GGGV) from June 2021 until July 2022.

He is currently a

Director of Easy Smart Pay, a public-private partnership of the California State Association of Counties Finance Corporation.

formerly served as a director of California Pizza Kitchen, Inc., (formerly Nasdaq:CPKI) from 2008 until 2011, and Hexcel Corporation (NYSE:HXL)

from 1994 until 2003.

Geller was a founder of St.

Cloud Capital, a Los Angeles based private equity fund, and Senior Investment Advisor

from December 2001 until September 2017.

He has spent more than 50 years in corporate finance and investment banking, including 21 years

as a Senior Managing Partner of Bear, Stearns & Co., with oversight of all operations in Los Angeles, San Francisco, Chicago, Hong

Kong and the Far East.

Geller is currently on the board of directors of UCLA Health System and on the Board of Governors of Cedars

Sinai Medical Center, Los Angeles.

Geller also serves on the Dean’s Advisory Council for the College of Business & Economics

at California State University, Los Angeles.

Geller’s financial and business experience, including as a managing partner of

a private equity fund, and his many years of experience and expertise as an investor in and adviser to companies in various sectors as

well as his experience with serving on the boards of directors of other public and private corporations give him the qualifications, skills

and financial expertise to serve on our Board.

Goldberg , age 79, has served as one of our directors since July 2017.

Goldberg has served as our Lead Independent director since

2020, having served from time to time in that capacity.

From 2003 through 2005, Mr.

Goldberg served as a part-time consultant to Laser

Lock Technologies, Inc., the predecessor to VerifyMe, and provided consulting service to us again from 2016 through December 2017.

Goldberg has been a private investor in both real estate and start-up companies and has provided consulting services to start-up companies

From 1994 through 1998, Mr.

Goldberg served as President, CEO and board member of Player’s International, a publicly

traded company in the gaming business prior to its sale to Harrah’s Entertainment Inc.

Goldberg served on the board of directors

and Audit Committee of Imall Inc., a publicly traded company that provided on-line shopping prior to its sale to Excite-at-Home.

served as a member of the Board of Trustees of Winthrop Realty Trust, a publicly traded real estate investment trust, from December 2003

to August 2016 when Winthrop’s assets were transferred to a liquidating trust.

Goldberg was a member of Winthrop’s Audit

Committee and Nominating and Corporate Governance Committee and was its lead independent trustee.

Goldberg served as a trustee for

Winthrop Realty Liquidating Trust until December 2019 when it was finally liquidated.

Goldberg was a director of New York REIT, Inc.

from March 2017 until October 2018, when it converted to a limited liability company called New York REIT LLC.

Goldberg was a manager

of New York REIT LLC from October 2018 until November 2022.

Goldberg has a law degree from New York University and was previously

the managing partner of a New Jersey law firm where he specialized in gaming regulatory law and real estate from 1970 through 1994.

Goldberg’s experience as a director of other public companies and his legal expertise gives him the qualifications, skills and financial

expertise to serve on our Board.

Greenberg , age 68, has served as one of our directors since November 2019.

Greenberg served as our Interim Chief Executive Officer

from March 15, 2023 to June 19, 2023 and Executive Chairman from April 7, 2022 to June 19, 2023.

Greenberg served as the Chairman

of the board of directors of GP Strategies Corporation (NYSE:GPX) from August 2018 until October 2021 when it was acquired by Learning

Technologies Group.

He previously served as Chief Executive Officer of GP Strategies from April 2005 until July 2020.

He was also the

President of GP Strategies from 2001 to 2006, Chief Financial Officer from 1989 until 2005, Executive Vice President from 1998 to 2001,

Vice President from 1985 to 1998, and held various other positions with GP Strategies since 1981.

Greenberg was also a Director of

Wright Investors’ Service Holdings, Inc.

(OTCMKT:WISH), formerly National Patent Development Corporation, from 2004 to 2015.

Greenberg’s significant experience and expertise in management, acquisitions and strategic planning, as well as many years of finance

and related transactional experience give him the qualifications, skills and financial expertise to serve on our Board.

Laffer , age 84, has served as one of our directors since March 2019.

Laffer is the founder and chairman of Laffer Associates,

an institutional economic research and consulting firm.

Laffer has served as a director of NexPoint Residential Trust Inc.

since May 2015, NexPoint Real Estate Finance Inc.

(NYSE:NREF) since February 2020, Melt Pharmaceuticals, Inc., a private company, since

February 2022, and NexPoint Diversified Real Estate Trust (NYSE:NXDT) since July 2022.

He was a director of EVO Transportation & Energy

Services, Inc.

(OTCPINK:EVOA) from August 2018 to December 2019 and the GEE Group Inc.

(NYSE American:JOB) from January 2015 to March

Laffer’s economic acumen and influence in triggering a world-wide tax-cutting movement in the 1980s have earned him the

distinction in many publications as “The Father of Supply-Side Economics.” Dr.

Laffer was a member of President Reagan’s

Economic Policy Advisory Board for both of his two terms (1981-1989).

Laffer also advised Prime Minister Margaret Thatcher on fiscal

policy in the UK during the 1980s.

In the early 1970s, Dr.

Laffer was the first to hold the title of Chief Economist at the Office of

Management and Budget under George Shultz.

Additionally, Dr.

Laffer served as Charles B.

Thornton Professor of Business Economics at the

University of Southern California and as Associate Professor of Business Economics at the University of Chicago.

In June 2019, Dr.

received the Presidential Medal of Freedom.

Laffer’s expertise in economics and his experience as a director of multiple companies

give him the qualifications, skills and financial expertise to serve on our Board.

Edmonds , age 67, has served as one of our directors since June 2023.

Edmonds has served as a member of the board of directors

of our wholly owned subsidiary PeriShip Global LLC since June 2022.

Prior to this he served as the Senior Vice President, Worldwide Services

at FedEx from April 2001 until his retirement in December 2020.

Prior to that, Mr.

Edmonds was actively involved in the merger between

Caliber System (FedEx Ground's former parent company) and FedEx Corporation and was responsible for bringing the two companies together

to compete collectively under the new FedEx Corporation umbrella.

Edmonds worked his entire 41-year career in the transportation and

logistics field.

He is a graduate of Kent State University, is a member of the American Management Association;

the Council for Logistics

and the Sales and Marketing Executive Council of the Advisory Board.

Edmond’s experience with the transportation

and logistics field and network of relationships which we believe are valuable assets to the Company and its growth give him the qualifications,

skills and financial expertise to serve on our Board.

Management and Executive Officers

We are currently served by four executive officers,

Stedman, Volk, and Wang and Ms.

Adam Stedham , age 56, is our Chief Executive

Officer and President, and a member of our Board of Directors.

Additional information about Mr.

Stedham can be found under “Directors,”

Nancy Meyers , age 55, has served as the

Company’s Chief Financial Officer and Executive Vice President since August 2023 and was the Company’s Senior Vice President

of Finance and Investor Relations from February 2022 until July 2023.

Prior to joining the Company in September 2021, Ms.

Meyers had several

accounting and financial reporting roles at GP Strategies Corporation, ultimately serving as Manager of Financial Reporting from October

2017 until May 2021.

Meyers is a Chartered Professional Accountant (CPA) and brings over 25 years of experience in finance, accounting,

and operations.

Volk, III , age 57, has been the

Vice President, Operations of the Company’s wholly owned subsidiary PeriShip Global, LLC since April 2022.

Prior to this Mr.

Volk served as Vice President of Operations of PeriShip, LLC from September 2001 until April 2022.

Volk has over 22 years of supply

chain expertise, which includes many years at FedEx®.

Throughout his tenure there, he worked in multiple leadership positions across

the Transportation, Logistics, and Customer Service spaces, allowing him to become intimately familiar with the principles required for

operational effectiveness.

With later experiences in leadership positions at various local law enforcement agencies, Mr.

acumen spans from supply chain management to compliance, and beyond.

Jack Wang , age 65, has served as the Company’s

Chief Information Officer and Senior Vice President of Technology since August 2023 and has been the Chief

Information Officer of the Company’s wholly owned subsidiary PeriShip Global, LLC since April 2022.

Prior to this Mr.

Wang served as Chief Information Officer of PeriShip, LLC from December 2011 to 2016 and from 2018 until April 2022.

From 2016 to 2018

Wang served as Chief Information Officer for IMEX Global Solutions, an international logistics company that distributes parcels, publication

and business mail worldwide.

Prior to joining PeriShip, Mr.

Wang served as the head of IT operations and development at the Package Portfolio

division of United Parcel Service.

Wang managed IT services for worldwide package operations.

Before UPS, Mr.

managing director of Continental Airlines, where he was responsible for strategic system architecture and development as well as providing

IT services for many of the airline's customer facing systems.

Many of the core systems that Mr.

Wang instituted at Continental Airlines

were eventually selected as the baseline systems for the new United Airlines.

Wang holds a Master's degree in Computer Science from

State University of New York at New Paltz.

Family Relationships

There are no family relationships between any

of our directors or executive officers.

Corporate Governance

Director Independence

The listing standards of The Nasdaq Stock Market

LLC (“Nasdaq”) require that a majority of our Board be independent.

No director will qualify as independent unless the board

affirmatively determines that the director has no relationship with us that would interfere with the exercise of independent judgment

in carrying out the responsibilities of a director.

Based upon the Nasdaq listing standards and applicable SEC rules and regulations,

our board has determined that each of Scott Greenberg, Marshall Geller, Howard Goldberg, Dr.

Arthur Laffer, and David Edmonds are independent.

Adam Stedham our Chief Executive Officer is not an independent director.

Board Leadership Structure

Although the board has not adopted a formal policy

regarding the separation of the roles of the Chairman and the Chief Executive Officer, we believe that our corporate governance is most

effective when these positions are not held by the same person.

The board recognizes the differences between the two roles and believes

that separating them allows each person to focus on his individual responsibilities.

Under this leadership structure, our Chief Executive

Officer can focus his attention on generating sales, overseeing sales and marketing, and managing the day-to-day company operations, while

our Chairman can focus his attention on board responsibilities.

Depending on the circumstances, other leadership

models, such as combining the role of Chairman with the role of Chief Executive Officer, might be appropriate.

For example, Patrick White

served as our Chief Executive Officer and as a director of the Company until March 14, 2023 at which time the board appointed Scott Greenberg

to serve as the Interim Chief Executive Officer in addition to his position as Executive Chairman.

Accordingly, the positions of Chief

Executive Officer and Executive Chairman were combined on an interim basis.

Greenberg served as both our Executive Chairman from April

7, 2022 to June 19, 2023 and Interim CEO from March 2023 to June 19, 2023 when Adam Stedham was appointed as our Chief Executive Officer,

at which time Mr.

Greenberg continued as our non-executive Chairman.

Our Board intends to periodically review our leadership structure.

Non-Executive Vice Chairman and Lead Independent

In addition to a non-executive Chairman, we have

appointed Marshall Geller to serve as our non-executive Vice Chairman of our board.

The Board has also appointed a lead independent director,

currently Howard Goldberg, in order to promote independent leadership of the board.

Our non-executive vice chairman or lead independent

director preside over the executive sessions of the independent directors.

Our lead independent director chairs board meetings in the

non-executive Vice Chairman’s absence and is available to engage directly with major stockholders where appropriate.

and direction provided by the lead independent director reinforce the board’s independent oversight of management and contribute

to communication among members of the Board.

Board Committees

The Board has established an Audit Committee,

Compensation Committee, and Nominating and Corporate Governance Committee Executive Committee, and Mergers & Acquisitions Committee.

committee acts pursuant to a written charter adopted by our Board.

The current charters for each board committee are available on our

website, www.verifyme.com under the heading, “Investor Hub” and the subheading, “Corporate Governance.”

Audit Committee

The Audit Committee monitors the integrity of

our financial statements, monitors the independent registered public accounting firm’s qualifications and independence, monitors

the performance of our internal audit function and the auditors, and monitors our compliance with legal and regulatory requirements.

Audit Committee has the sole authority and responsibility to select, evaluate and engage independent auditors for the Company.

Committee reviews with the auditors and with the Company’s financial management our annual and interim financial statements and

all matters relating to the annual audit of the Company.

The Audit Committee also prepares the audit committee report that the SEC requires

to be included in our annual proxy statement.

The Audit Committee is a separately designated

standing committee established in accordance with Section 3(a)(58)(A) of the Exchange Act.

The Board has determined that each member of

the Audit Committee meets the independence and financial literacy requirements applicable to audit committee members under the Nasdaq

listing standards and SEC rules.

The Board has further determined that Mr.

Geller qualifies as an “Audit Committee Financial Expert”

in accordance with the applicable rules and regulations of the SEC.

Compensation Committee

The Compensation Committee reviews, recommends

and approves salaries and other compensation of the Company’s executive officers, and administers the Company’s equity incentive

plans (including reviewing, recommending and approving stock option and other equity incentive grants to executive officers).

The Compensation Committee meets in executive

session to determine the compensation of the Chief Executive Officer of the Company.

In determining the amount, form, and terms of such

compensation, the committee considers the annual performance evaluation of the Chief Executive Officer conducted by the board in light

of our goals and objectives relevant to Chief Executive Officer compensation, competitive market data pertaining to Chief Executive Officer

compensation at comparable companies, and such other factors as it deems relevant, and is guided by, and seeks to promote, the best interests

of the Company and its stockholders.

In addition, subject to existing agreements, the

Compensation Committee determines the salaries, bonuses, and other matters relating to compensation of the executive officers of the Company

using similar parameters.

It sets performance targets for determining periodic bonuses payable to executive officers.

It also reviews

and makes recommendations to the board regarding executive and employee compensation and benefit plans and programs generally, including

employee bonus and retirement plans and programs (except to the extent specifically delegated to a board appointed committee with authority

to administer a particular plan).

In addition, the Compensation Committee approves the compensation of non-employee directors and reports

it to the full board.

The Compensation Committee also reviews and makes

recommendations with respect to stockholder proposals related to compensation matters.

The committee administers the Company’s equity

incentive plans, including the review and grant of stock options and other equity incentive grants to executive officers and other employees

and consultants.

The Compensation Committee may, in its sole discretion

and at the Company’s cost, retain or obtain the advice of a compensation consultant, legal counsel or other adviser.

The committee

is directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and

other adviser retained by the committee.

The Board has determined that each member of the

Compensation Committee meets the independence requirements applicable to compensation committee members under the Nasdaq listing standards.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee

identifies individuals qualified to become members of the board, consistent with criteria approved by the board;

recommends to the board

the director nominees for the next annual meeting of stockholders or special meeting of stockholders at which directors are to be elected;

recommends to the board candidates to fill any vacancies on the board;

develops, recommends to the board, and reviews the corporate governance

guidelines applicable to the Company;

and oversees the evaluation of the board and management.

In recommending director nominees for the next

annual meeting of stockholders, the Nominating and Corporate Governance Committee ensures the Company complies with its contractual obligations,

if any, governing the nomination of directors.

It considers and recruits candidates to fill positions on the board, including as a result

of the removal, resignation or retirement of any director, an increase in the size of the board or otherwise.

The committee conducts,

subject to applicable law, any and all inquiries into the background and qualifications of any candidate for the board and such candidate’s

compliance with the independence and other qualification requirements established by the committee.

The committee also recommends candidates

to fill positions on committees of the board.

In selecting and recommending candidates for election

to the board or appointment to any committee of the board, the Nominating and Corporate Governance Committee does not believe that it

is appropriate to select nominees through mechanical application of specified criteria.

Rather, the committee shall consider such factors

at it deems appropriate, including, without limitation, the following:

personal and professional integrity, ethics and values;

in corporate management, such as serving as an officer or former officer of a publicly-held company;

experience in the Company’s

experience as a board member of another publicly-held company;

diversity of expertise and experience in substantive matters

pertaining to the Company’s business relative to other directors of the Company;

practical and mature business judgment;

and composition

of the board (including its size and structure).

The Nominating and Corporate Governance Committee

develops and recommends to the board a policy regarding the consideration of director candidates recommended by the Company’s stockholders

and procedures for submission by stockholders of director nominee recommendations.

In appropriate circumstances, the Nominating and

Corporate Governance Committee, in its discretion, will consider and may recommend the removal of a director, in accordance with the applicable

provisions of our Amended and Restated Articles of Incorporation and Bylaws.

If we are subject to a binding obligation that requires director

removal structure inconsistent with the foregoing, then the removal of a director shall be governed by such instrument.

The Nominating and Corporate Governance Committee

oversees the evaluation of the board and management.

It also develops and recommends to the board a set of corporate governance guidelines

applicable to us, which the committee shall periodically review and revise as appropriate.

In discharging its oversight role, the committee

is empowered to investigate any matter brought to its attention.

The Board has determined that each member of the

Nominating and Corporate Governance Committee meets the director independence requirements of the Nasdaq listing standards.

Executive Committee

The Executive Committee acts on behalf of the

board between regularly scheduled board meetings, and subject to certain limitations imposed by applicable legal or regulatory requirements,

may exercise during such intervals, all of the powers of the board in the management of the business, affairs and property of our Company

(i) the filling of vacancies on the board;

(ii) approving or adopting, or recommending to the shareholders, any action or

(iii) adopting, amending or repealing the Amended and Restated Bylaws;

and (iv) those matters that are specifically delegated

to other committees of the board or that are under active review by the board or a board committee, unless the board specifically determines

Mergers & Acquisitions Committee

The Mergers & Acquisitions Committee is empowered

to review and assess, and assist the board in reviewing and assessing, potential mergers, acquisitions, joint ventures and strategic investments.

In addition, the committee is empowered to assist management in identifying and reviewing merger and acquisition opportunities and is

charged with assessing the associated risk to the Company and making recommendations with respect to the terms thereof to the board.

committee is also charged with planning of, and evaluating the execution of, integrations of merger and acquisition transactions.

Role of the Board in Risk Oversight

The Company’s risk management function is

overseen by the board.

This oversight is conducted in part through the board’s committees.

Our Audit Committee focuses on risks

associated with financial matters, particularly financial reporting and disclosures, accounting, internal control over financial reporting,

financial policies, and compliance with legal and regulatory matters related to accounting and financial reporting.

Our Nominating and

Corporate Governance Committee focuses on the oversight of risks associated with our corporate governance, including board membership

and structure.

Our Compensation Committee focuses on the oversight of risks arising from our compensation policies and programs.

While our board committees have certain oversight

responsibilities, the full board retains responsibility for monitoring and assessing strategic

risk exposure related to cybersecurity risks and general oversight of risk.

Our Chairman works closely together with other

members of the board when material risks are identified on how to best address such risks.

If the identified risk poses an actual or potential

conflict with management, our independent directors may conduct the assessment.

In addition, our management keeps the board apprised of

material risks and provides its directors access to all information necessary for them to understand and evaluate how these risks interrelate,

how they affect us, and how management addresses those risks.

Code of Business Conduct and Ethics

The board has adopted a Code of Business Conduct and Ethics (the

“Code of Ethics”) that applies to all of our employees, including our Chief Executive Officer and Chief Financial Officer.

Although not required, the Code of Ethics also applies to our directors.

The Code of Ethics provides written standards that we believe

are reasonably designed to deter wrongdoing and promote honest and ethical conduct, including the ethical handling of actual or apparent

conflicts of interest between personal and professional relationships, full, fair, accurate, timely and understandable disclosure and

compliance with laws, rules and regulations and the prompt reporting of illegal or unethical behavior, and accountability for adherence

to the Code of Ethics.

The Code of Ethics is available on our website at https://www.vrmeinvestor.com/investors/.

Insider Trading Policy

have adopted an insider trading policy designed to promote compliance with insider trading laws, rules and regulations, and any listing

standards applicable to the Company.

Insiders, who include our directors, executive officers, and certain employees who we may designate

from time to time (the “Designated Individuals”), may buy and sell our stock within an open “window period,” which

begins 24 hours after the release of the Company’s quarterly or annual financial results for that particular quarter and ends on

the close of business on the last day of the next fiscal quarter.

Designated Individuals are prohibited from purchasing or selling our

stock if they are in possession of material non-public information, even if it is within

the open “window period.” We reserve the right to impose event-specific black-out periods if we deem certain employees or

groups to be in possession of non-public information regarding potentially significant matters, regardless of if it is an open “window

period” and we may do so with little or no notice.

Employees subject to an event-specific black-out period

will be notified by our insider trading policy officer.

Anti-Hedging Policy

Our insider trading policy prohibits directors,

officers and employees from engaging in transactions that hedge or offset any decrease in the market value of equity securities granted

as compensation.

EXECUTIVE COMPENSATION.

The information

required by this Item 11 is incorporated herein by reference from our proxy statement for our 2024 annual meeting of stockholders under

the headings “Executive Compensation” and “Director Compensation,” which proxy statement will be filed within

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

This section contains information about the compensation

earned and paid to our named executive officers during fiscal year 2024 and fiscal year ended December 31, 2023 (“fiscal year 2023”),

or only fiscal year 2024 if the individual was not a named executive officer for fiscal year 2023.

For fiscal year 2024, in accordance

with the executive compensation disclosure rules and regulations of the SEC, we determined that the following officers were our named

executive officers:

· Adam Stedham, Chief Executive Officer and President;

Volk, III, VP of Operations, PeriShip Global;

· Nancy Meyers, Chief Financial Officer;

· Paul Ryan, former Executive Vice President, Authentication Segment;

· Curt Kole, former Executive Vice President, Precision Logistics and Executive

Vice President, Global Sales and Strategy, PeriShip Global ;

Summary Compensation Table

The table below summarizes the compensation earned

for services rendered to us in all capacities, for the fiscal years indicated, by named executive officers:

Summary Compensation Table

Adam Stedham (3)

CEO and President

Fred G Volk, III

VP of Operations, PeriShip Global

Paul Ryan (4)

Former EVP, Authentication Segment

Curt Kole (5)

Former EVP, Precision Logistics;

EVP Global Sales and Strategy, PeriShip Global

(1) The amounts shown in this column reflect time-based restricted stock units (“RSUs”) and performance-based

restricted stock units (“PSUs”) granted to our named executive officers which are subject to certain vesting terms.

in this column do not reflect the actual value realized by the recipient.

Amounts in this column represent the grant date fair value of

the awards, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 718,

“Compensation – Stock Compensation,” or ASC 718.

The assumptions used in calculating the grant date fair value of the

awards are set forth Note 1 – Summary of Significant Accounting Policies in the notes accompanying the financial statements.

value of the PSUs are based on the target level of the performance as of the date of grant.

For fiscal year 2024, we only granted PSUs

If the highest level of performance is achieved, the value of the PSUs for Mr.

Volk would be $105,750.

(2) The amounts shown in this column reflect amounts paid by us to or on behalf of each named executive officer

for company matching contributions to 401(k) or to New Zealand’s retirement savings scheme, Kiwis aver,

as applicable .

(3) Adam Stedham served as a non- employee director

in fiscal year 2023 until June 19, 2023 when he was appointed Chief Executive Officer.

Stedham’s stock awards for fiscal year

2023 include a grant of 34,014 shares of restricted stock for his service as a

non-employee director during fiscal year 2023.

(4) Paul Ryan served as our Executive Vice President, Authentication

Segment until October 4, 2024 .

(5) Curt Kole served as our Executive Vice President

of Precision Logistics and as Executive Vice President, Global Sales and Strategy of PeriShip Global until June 4, 2024.

Employment and Consulting Agreements with Named

Executive Officers

Adam Stedham - Chief Executive Officer and

The Company entered into an employment agreement,

dated as of June 19, 2023, with Adam Stedham, the Chief Executive Officer of the Company, with an annual salary of $300,000.

In connection

with the employment agreement, the board granted Mr.

Stedham an annual bonus potential of up to 50% of base salary to be earned based

on adjusted EBITDA performance goals to be set annually by the Compensation Committee.

March 12, 2024, the Compensation Committee approved a change to the cash bonus for Mr.

Stedham, which if achieved, will be payable at

Stedham’s discretion in either cash or in an amount of the Company’s common stock determined by dividing the cash value

of the earned bonus by the 30-day VWAP of the Company’s shares on the day the Board of Directors approves the bonus.

Stedham was also awarded 34,014 shares of restricted stock pursuant to the Company’s stockholder approved equity incentive plan

for a half year of service as a non-employee director of the Company.

The restricted stock award vested in full on date of grant.

Stedham was awarded 204,082 RSUs pursuant to the Company’s stockholder approved equity incentive plan that vest in three equal annual

increments over a three-year vesting term and 550,000 PSUs issued pursuant to the Company’s stockholder approved equity incentive

plan based on performance criteria satisfied within 4 years of grant.

In the event of Mr.

Stedham’s employment is terminated for

death or disability, the Company shall pay any accrued but unpaid base salary through the date of termination, accrued but unpaid expenses

required to be reimbursed under this agreement and any annual bonus for which the executive completed the appliable calendar performance

year but has not yet earned.

Stedham is terminated by the Company for cause or by the executive without good reason, the executive

shall have no right to compensation.

Stedham is terminated by the Company without cause or by executive for good reason, the executive

will be entitled to severance until the conclusion of the Initial term of two years.

It will also include the accelerated vesting of RSUs

and retention of PSUs for remainder of performance period.

On July 2, 2024, the Company entered into Salary

Reduction Agreement with Mr.

Stedham, as part of a salary reduction program for certain employees of the Company and its subsidiaries

approved by the Compensation Committee of the Company’s Board of Directors.

Stedham will have his annual base salary reduced

by ten percent (10%) during the term of the Salary Reduction Agreement.

In return for the reduction in his annual base salary, Mr.

will be entitled to receive a grant of restricted stock unit awards (“RSUs”) on July 1, 2024 and each 1st of January thereafter

during the term of the Salary Reduction Agreement, each such RSU 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 Equity Incentive Plan and form RSU award agreement,

with the number of shares underlying the RSU awards to be determined by dividing the projected amount of Mr.

Stedham’s base salary

reduction for the calendar year, respectively, by $1.60, rounded down to the nearest number of whole shares.

Each RSU granted pursuant

to the Salary Reduction Agreement vests in full on the 1st of January following its grant date and is payable as soon as reasonably practicable

after vesting.

The term of the Salary Reduction Agreement is until December 31, 2025.

Pursuant to the Salary Reduction Agreement, a pro-rata

portion of RSUs granted will vest upon the early termination of the Salary Reduction Agreement, or any termination of the employment of

Stedham except for a termination for cause.

Any unvested RSUs will be forfeited in whole by Mr.

Stedham in the event he is terminated

by the Company for cause.

Fred G Volk, III – VP of Operations,

PeriShip Global

On April 22, 2022, the Company’s wholly

owned Subsidiary PeriShip Global, entered into an Employment Agreement with Mr.

Volk with an initial term of two years, which automatically

renews for additional one-year terms until either party gives 60-day notice of non-renewal or otherwise terminated the agreement according

to its terms.

Under the employment agreement, Mr.

Volk is entitled to an annual base salary of $200,000 .

Additionally, pursuant to the employment agreement, on April 22, 2022, Mr.

Volk was awarded PSUs with a grant date value equal to 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 2020 Plan.

These PSUs, except as otherwise provided in the award agreement, will vest, subject

to continuous employment and other conditions, as follows:

50% if the Company’s common stock price exceeds $5.00 per share for a

period of 20 consecutive days, and the remaining 50% if the Company’s common stock price exceeds $7.00 per share for a period of

20 consecutive days, in each case prior to the three-year anniversary of the grant date.

Pursuant to the employment agreement Mr.

will receive a commission of 1.0% on eligible annual sales in excess of $30,000,000.

The employment agreement may be terminated by us

for cause, by Mr.

Volk without good reason, or by delivering a non-renewal notice.

If terminated by us without cause or by Mr.

good reason Mr.

Volk will be entitled to accrued but unpaid base salary and expenses, a payment equal to 12 months of his then base salary

if the Employment Agreement is terminated during the initial two year term or a payment equal to 6 months of his then base salary if the

Employment Agreement is terminated after the initial two year term, and six months of benefits.

If terminated upon a non-renewal

Volk will be entitled to any accrued and unpaid salary and expenses prior to the effective date of his termination.

Nancy Meyers – Chief Financial Officer

On February 16, 2022, the Company entered into

an Employment Agreement with Ms.

Under the employment agreement, Ms.

Meyers is entitled to an annual base salary of $180 ,000.

Additionally, pursuant to the employment agreement, on February 16, 2022, Ms.

Meyers was awarded PSUs with a grant date value equal to

50% of her 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 2020 Plan.

These PSUs, except as otherwise provided in the award agreement, will

vest, subject to continuous employment and other conditions, as follows:

50% if the Company’s common stock price exceeds $5.00

per share for a period of 20 consecutive days, and the remaining 50% if the Company’s common stock price exceeds $7.00 per share

for a period of 20 consecutive days, in each case prior to the three-year anniversary of the grant date.

The employment agreement may

be terminated by us for cause, or by Ms.

Meyers without good reason.

If terminated by us without cause or by Ms.

Meyers with good reason

Meyers will be entitled to accrued but unpaid base salary and expenses, a payment equal to 6 months of her base salary and six months

On July 2, 2024, the Company entered into Salary

Reduction Agreement with Nancy Meyers, the Company’s Chief Financial Officer, as part of a salary reduction program for certain

employees of the Company and its subsidiaries approved by the Compensation Committee of the Company’s Board of Directors.

will have her annual base salary reduced by ten percent (10%) during the term of the Salary Reduction Agreement.

In return for the reduction

in her annual base salary, Ms.

Meyers will be entitled to receive a grant of restricted stock unit awards (“RSUs”) on July

1, 2024 and each 1st of January thereafter during the term of the Salary Reduction Agreement, each such RSU 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 Equity Incentive Plan and form RSU award agreement, with the number of shares underlying the RSU awards to be determined by dividing

the projected amount of Ms.

Meyers base salary reduction for the calendar year, respectively, by $1.60, rounded down to the nearest number

of whole shares.

Each RSU granted pursuant to the Salary Reduction Agreement vests in full on the 1st of January following its grant date

and is payable as soon as reasonably practicable after vesting.

The term of the Salary Reduction Agreement is until December 31, 2025.

Pursuant to the Salary Reduction Agreement, a pro-rata portion of RSUs granted will vest upon the early termination of the Salary Reduction

Agreement, or any termination of the employment of Ms.

Meyers except for a termination for cause.

Any unvested RSUs will be forfeited

in whole by Ms.

Meyers in the event she is terminated by the Company for cause.

Paul Ryan – Former Executive Vice

President, Authentication Segment

On March 1, 2023, the Company’s wholly owned

Subsidiary Trust Codes Global Limited (“Employer”) entered into an Employment Agreement with Mr.

Ryan with an initial term

of three years, until either party gives 90-day notice of non-renewal or otherwise terminated the agreement according to its terms.

the employment agreement, Mr.

Ryan is entitled to an annual base salary of NZD$ 160,000 until the

first month where Employer breaks even as determined by the Employe, and NZD$320,000 per annum gross thereafter.

In August 2023 Mr.

salary was increased to NZD$320,000 and reduced by ten percent (10%) with the salary reduction agreement.

On September 24, 2024, Mr.

notified us of his resignation and on October 4, 2024, we placed Mr.

Ryan on garden leave, meaning he remained employed by us but was

only working for us upon request.

Curt Kole – Former Executive Vice

President, Precision Logistics;

Executive Vice President, Global Sales and Strategy, PeriShip Global

On April 22, 2022, the Company’s wholly

owned Subsidiary PeriShip Global, LLC entered into an Employment Agreement with Mr.

Kole with an initial term of two years, which automatically

renews for additional one-year terms until either party gives 60-day notice of non-renewal or otherwise terminated the agreement according

to its terms.

Under the employment agreement, Mr.

Kole is entitled to an annual base salary of $ 230,000.

Additionally, pursuant to the employment agreement, on April 22, 2022, Mr.

Kole was awarded PSUs with a grant date value equal to 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 2020 Plan.

These PSUs, except as otherwise provided in the award agreement, will vest, subject

to continuous employment and other conditions, as follows:

50% if the Company’s common stock price exceeds $5.00 per share for a

period of 20 consecutive days, and the remaining 50% if the Company’s common stock price exceeds $7.00 per share for a period of

20 consecutive days, in each case prior to the three-year anniversary of the grant date.

Pursuant to the employment agreement Mr.

will receive a commission of 1.5% on eligible annual sales in excess of $30,000,000, increasing to 2.0% on eligible annual sales in excess

of $32,000,000.

The employment agreement may be terminated by us for cause, by Mr.

Kole without good reason, or by delivering a non-renewal

If terminated by us without cause or by Mr.

Kole with good reason Mr.

Kole will be entitled to accrued but unpaid base salary

and expenses, a payment equal to 12 months of his then base salary if the Employment Agreement is terminated during the initial two year

term or a payment equal to 6 months of his then base salary if the Employment Agreement is terminated after the initial two year term,

and six months of benefits.

If terminated upon a non-renewal notice, Mr.

Kole will be entitled to any accrued and unpaid salary

and expenses prior to the effective date of his termination.

June 4, 2024, we terminated Mr.

Kole’s employment effective June 30, 2024 from all positions with the Company and its subsidiaries.

Term Incentive Plan

March 12, 2024, the Compensation Committee approved a short term incentive cash bonus plan.

The plan is available to nearly all of the

Company’s employees, including our named executive officers except for Mr.

Stedham and Mr.

Under the plan, Ms.

Meyers is eligible

to receive a cash bonus up to 15% of her annual base salary as of January 1 each year, Mr.

Volk is eligible to receive a cash bonus up

to 6% of his annual base salary as of January 1 each year, and during his employment Mr.

Kole was eligible to receive a cash bonus equal

to 6% of his annual base salary as of January 1 each year, subject to upward adjustment.

Under the Plan, 50% of the bonus is based on

achieving 100% of an Adjusted EBITDA performance goal to be set annually by the Compensation Committee.

Only if the Adjusted EBITDA target

is achieved, the remaining 50% of the bonus is based on achieving 100% of a revenue performance goal to be set annually by the Compensation

Under the plan, the bonus amount can be adjusted upward if the revenue performance goal is exceeded in an amount equal to the

total target bonus multiplied by the same percentage that revenue exceeds the revenue performance goal, up to a maximum of 150 percent.

No amounts were paid under the plan in fiscal year 2024.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth

the outstanding equity awards for our Named Executive Officers as of December 31, 2024.

Option Awards

Shares, Units

Equity Incentive

Payout Value of

Shares, Units or

That Have Not

Paul Ryan (2)

Curt Kole (3)

(1) The amounts in these columns are calculated by multiplying the number of shares by the closing market

price of our Common Stock on December 31, 2024, of $1.36 per share.

(2) Paul Ryan served as our Executive Vice President, Authentication

Segment until October 4, 2024.

(3) Curt Kole served as our Executive Vice President

of Precision Logistics and as Executive Vice President, Global Sales and Strategy of PeriShip Global until June 4, 2024.

(4) These RSUs, which convert into common stock on a one-for-one basis, were granted on July 1, 2024 pursuant

to the Company’s salary reduction program, pursuant to which the number of RSUs was determined by dividing the amount of the grantee’s

salary reduction by $1.60.

The RSUs will vest on January 1, 2025.

(5) These RSUs, which convert into common stock on a one-for-one basis, were granted on July 19, 2023.

first tranche vested on June 19, 2024, and the remaining two tranches will vest in two equal installments on each of June 19, 2025 and

June 19, 2026, subject to the grantees’ continued service through each vesting date except as otherwise provided in the applicable

award agreement.

(6) These RSUs, which convert into common stock on a one-for-one basis, were granted on November 2, 2022.

The first and second tranches vested on each of November 2, 2023 and November 2, 2024, and the remaining tranche will vest on November

2, 2025, subject to the grantees’ continued service through each vesting date except as otherwise provided in the applicable award

(7) These PSUs were granted on June 19, 2023 and vest in three tranches, except as otherwise provided in the

award notice.

Tranche 1 will vest 150,000 shares on or after June 19, 2024 if our common stock trades at or above $2.21 per share for

20 consecutive days prior to June 19, 2027.

Tranche 2 will vest 200,000 shares on or after June 19, 2025 if our common stock trades at

or above $2.94 per share for 20 consecutive trading days prior to June 19, 2027.

Tranche 3 will vest 200,000 shares on June 19, 2027 if

our common stock trades at or above $3.68 per share for 20 consecutive trading days prior to June 19, 2027.

(8) These PSUs were granted on June 30, 2024 and vest in three tranches, except as otherwise provided in the

award notice.

Tranche 1 will vest 20,000 shares on or after June 18, 2025 if our common stock trades at or above $2.21 per share for 20

consecutive trading days prior to June 18, 2027.

Tranche 2 will vest 25,000 shares on or after June 18, 2025 if our common stock trades

at or above $2.94 per share for 20 consecutive trading days prior to June 18, 2027.

Tranche 3 will vest 30,000 shares on June 18, 2027

if our common stock trades at or above $3.68 per share for 20 consecutive trading days prior to June 18, 2027.

(9) These PSUs were granted on April 22, 2022 and vest in two equal tranches, except as otherwise provided

in the award notice.

Tranche 1 will vest on the earlier of April 22, 2024, or April 22, 2025 if our common stock during such period is

at or above $5.00 for 20 consecutive trading days.

Tranche 2 will vest on the earlier of April 22, 2024, or April 22, 2025 if our common

stock during such period is at or above $7.00 for 20 consecutive trading days.

(10) These PSUs were granted on July 20, 2023 and vest in three tranches, except as otherwise provided in the

award notice.

Tranche 1 will vest 35,000 shares on or after June 18, 2024 if our common stock trades at or above $2.21 per share for 20

consecutive trading days prior to June 18, 2027.

Tranche 2 will vest 40,000 shares on or after June 18, 2025 if our common stock trades

at or above $2.94 per share for 20 consecutive trading days prior to June 18, 2027.

Tranche 3 will vest 45,000 shares on June 18, 2027

if our common stock trades at or above $3.68 per share for 20 consecutive trading days prior to June 18, 2027.

(11) These PSUs were granted on February 16, 2022 and vest in two equal tranches, except as otherwise provided

in the award notice.

Tranche 1 will vest on the earlier of February 16, 2024, or February 16, 2025 if our common stock during such period

is at or above $5.00 for 20 consecutive trading days.

Tranche 2 will vest on the earlier of February 16, 2024, or February 16, 2025 if

our common stock during such period is at or above $7.00 for 20 consecutive trading days.

Director Compensation

Our directors are eligible to receive options,

restricted stock and other equity linked grants under our equity incentive plans.

The Compensation Committee of the Board has approved

a director compensation policy (“Director Compensation Policy”) to govern the annual compensation payable to directors for

their service on our Board.

The Compensation Committee has reserved the right to make any necessary, appropriate or desirable changes

to the terms of the Policy.

Pursuant to our Director Compensation Policy,

as amended, starting in fiscal year ended December 31, 2024, and until such time that our Compensation Committee or Board determines a

change in director compensation is necessary, appropriate or desirable, each non-employee director shall receive an annual award of 35,000

RSUs or 35,000 shares of restricted stock under the 2020 Plan (or a successor stockholder-approved plan thereto) on the first business

day following the date a quorum of stockholders meets and votes on proposals in an annual meeting of stockholders.

Under our Director Compensation Policy in place

during fiscal year 2024 and as of the date hereof, a non-employee director may specify before the date that is 15 days preceding the annual

meeting of stockholders of the year prior to the year of grant whether he or she would prefer to receive his or her awards to be granted

in the following year to be in the form of RSUs or restricted stock;

provided, however, such choice will not be binding on the Compensation

The RSUs or restricted stock granted pursuant to the Director Compensation Policy will vest in full on the earlier of the one-year

anniversary of the date of grant subject to the non-employee director’s continued service to the Board through such date, or the

death or disability of the non-employee director, and will be payable upon the earlier of the director’s separation from service

as a director or, upon an earlier payment date elected by the director, provided that the election is made no later than the date that

is 15 days preceding the annual meeting of stockholders of the year prior to the year of grant.

The following table sets forth information about

the compensation earned by or paid to our directors during our fiscal year ended December 31, 2024.

Please refer to the “Summary

Compensation Table” above for compensation earned by Mr.

Stedham as a member of the Board during fiscal year 2024.

Option Awards

Compensation ($) (3)

Total Compensation

Scott Greenberg

David Edmonds

Marshall Geller

Howard Goldberg

Arthur Laffer

(1) Amounts in this column represent the grant date fair value of the awards, calculated in accordance with

Each of our directors received restricted stock awards except Mr.

Edmonds who received restricted stock units.

The assumptions

used in calculating the grant date fair value of the awards are set forth in Note 1 – Summary of Significant Accounting Policies

in the notes accompanying the financial statements.

(2) The table below sets forth the number of unvested stock awards and the aggregate number of options outstanding

held by each of our directors, except for Mr.

Stedham, as of December 31, 2024.

Please refer to the “Outstanding Equity Awards at

Fiscal Year End” table above for the number of unvested stock awards and options outstanding held by Mr.

Stedham as of December

Aggregate Number of

Unexercised Option Awards

Outstanding at December 31, 2024

Aggregate Number of

Unvested Stock Awards

Outstanding at December 31, 2024

David Edmonds

Marshall Geller

Howard Goldberg

Scott Greenberg

Arthur Laffer

(3) Does not include payments or benefits provided under the Company’s 2021 Stock Purchase Plan which

are generally available to all salaried employees.

Policies and Practices Related to the Grant

of Certain Equity Awards

We do not grant equity awards in anticipation

of the release of material nonpublic information, and we do not time the release of material nonpublic information based on grant dates

or for the purpose of affecting the value of executive compensation.

In addition, we do not take material nonpublic information into account

when determining the timing and terms of grants.

We do not currently have a formal policy with respect to the timing of option grants

as our current practice is to grant time- and performance-based RSUs to align executive compensation with shareholder return.

During the fiscal ended December 31, 2024, we

did not grant any named executive officers option awards in the period beginning four business days before and ending one business day

after the filing of a periodic report on Form 10-Q or Form 10-K, or the filing or furnishing of a current report on Form 8-K that disclosed

material nonpublic information.

SECURITY OWNERSHIP

OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Except for the information regarding securities

authorized for issuance under equity compensation plans (which is set forth below), the information required by this Item 12 is incorporated

herein by reference from our proxy statement for our 2024 annual meeting of stockholders under the heading “Security Ownership of

Management and Certain Beneficial Owners,” which proxy statement will be filed within 120 days after the December 31, 2023, fiscal

The following table summarizes the number of shares

subject to currently outstanding equity awards, their weighted-average exercise price, and the number of shares available for future grants

under our equity compensation plans as of December 31, 2023.

Equity Compensation Plan Information as of

18 unchanged sentences

security holders

1,308,491 (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 the 2013 Omnibus Equity Compensation Plan, as amended (the “2013 Plan”), which do not

have an exercise price.

Plan (the “2020 Plan”).

(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.

Incentive Plan (the “2017 Plan”).

(3) Includes 954,322 shares remaining available for issuance under the 2020 Plan, 354,169 shares remaining

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

available for issuance under the 2021 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.

Security Ownership of Management and Certain

Beneficial Owners

The following table sets forth the number of shares

of our common stock beneficially owned as of February 27, 2025, by:

(i) those persons known by us to be owners of more than 5% of its

common stock;

(ii) each director;

(iii) our named executive officers (as disclosed in the Summary Compensation Table);

and (iv) our executive

officers and directors as a group.

Unless otherwise specified in the notes to this table, the address for each person is:

VerifyMe, Inc.,

801 International Parkway, Fifth Floor, Lake Mary, Florida 32746.

We also have 0.85 share of Series B Convertible Preferred Stock outstanding

held by the Estate of Claudio Ballard.

Beneficial Owner

Amount of Beneficial

Common Stock (1)

Named Executive Officers:

Adam H Stedham (2)

David Edmonds

Marshall Geller

Howard Goldberg

Scott Greenberg

Arthur Laffer

All directors and executive officers as a group (9 persons)

Greater than 5% Stockholders

Geller Living Trust, dated July 26, 2002

* indicates less than 1%

(1) Based on 12,354,772 shares of common stock issued and outstanding as of February 27, 2025.

ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities.

is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days whether upon the exercise of options

Unless otherwise indicated in the footnotes to this table, we believe that each of the stockholders named in the table has

sole voting and investment power with respect to the shares of common stock indicated as beneficially owned by them.

This table does not

include any unvested RSUs or PSUs, stock options or warrants except for those vesting within 60 days.

As for the 5% stockholders, we are

relying upon reports filed by each 5% stockholder with the SEC.

Stedham is also a director of the Company.

(3) Includes (i) 28,592 vested RSUs that become payable in shares of common stock upon Mr.

separation from service as a director of the Company and (ii) 152,174 shares of common stock underlying a presently exercisable convertible

promissory note in the principal amount of $175,000 with conversation price of $1.15 per share.

(4) Includes 48 shares of common stock held by Ms.

Meyers’ spouse.

(5) These shares of common stock are held by Trust Codes Limited.

Ryan may be deemed to have beneficial

ownership over the securities held by Trust Codes Limited.

(6) Includes 15,217 vested RSUs that become payable in shares of common stock upon Mr.

Edmonds’ separation

from service as a director of the Company.

(7) Includes (i) 35,000 unvested shares of restricted stock held by Mr.

Geller that will vest in full

on June 5, 2025, (ii) 370,034 shares of common stock held by the Geller Living Trust, dated July 26, 2002 (the “Geller Trust”),

(iii) 68,310 vested RSUs held by the Geller Trust that become payable in shares of common stock upon Mr.

Geller’s separation from

service as a director of the Company, (iv) 152,174 shares of common stock underlying a presently exercisable convertible promissory note

held by the Geller Trust in the principal amount of $175,000 with conversation price of $1.15 per share, (v) 3,000 shares of common stock

underlying stock options exercisable at $5.295 per share held by the Geller Trust and (vi) 7,000, 31,104 and 31,941 shares of common stock

underlying warrants exercisable at $4.60 per share, $3.215 per share and $4.60 per share, respectively, held by the Geller Trust.

(8) Includes (i) 35,000 unvested shares of restricted stock that will vest in full on June 5, 2025, (ii) 89,310

vested RSUs that become payable in shares of common stock upon Mr.

Goldberg’s separation from service as a director of the Company

and (iii) 5,000 shares of common stock underlying stock options exercisable at $5.295 per share.

(9) Includes (i) 35,000 unvested shares of restricted stock that will vest

in full on June 5, 2025, (ii) 68,310 vested RSUs that become payable in shares of common stock upon Mr.

Greenberg’s separation from

service as a director of the Company, (iii) 43,478 shares of common stock underlying a presently exercisable convertible promissory note

in the principal amount of $50,000 with conversation price of $1.15 per share and (iv) 6,403 and 15,552 shares of common stock underlying

warrants exercisable at $4.60 per share, and $3.215 per share, respectively.

(10) Includes (i) 35,000 unvested shares of restricted stock that will vest in full on June 5, 2025, (ii) 89,310

vested RSUs that become payable in shares of common stock upon Mr.

Laffer’s separation from service as a director of the Company,

(iii) 25,600 and 10,800 shares of common stock underlying warrants exercisable at $4.60 per share, (iv) 31,104 shares of common stock

underlying warrants exercisable at $3.215 per share held by Jama Land, LLC, (v) 3,000 shares of common stock underlying stock options

exercisable at $4.025 per share, and (vi) 47,925 shares of common stock held by Jama Land, LLC.

Laffer is the managing member of Jama

The amount also includes 43,478 shares of common stock underlying a presently exercisable convertible promissory note held

by the 1065 Institute, Inc.

in the principal amount of $50,000 with conversation price of $1.15 per share.

Laffer is a director and

the Secretary of the 1065 Institute, Inc.

and may be deemed to beneficially own the securities held by the 1065 Institute, Inc.

Geller is a co-trustee, along with his wife, of the Geller Trust and exercises voting and investment

power over the shares held by the Geller Trust.

This information is derived from the Amendment No.

2 to Schedule 13D filed by Marshall

Geller and the Geller Trust on January 30, 2025.

The address for Marshall Geller and the Geller Trust is c/o VerifyMe, Inc.

801 International Parkway, Fifth Floor, Lake Mary, FL 32746.

The table above

does not include the following grants:

• 60,000 PSUs granted to two members of the Board on April 7, 2022, which convert into common stock on a

one-for-one basis, that were granted under the VerifyMe, Inc.

2020 Equity Incentive Plan, vesting over a period of two to three years,

in two tranches, depending on certain criteria being met,

• 121,994 PSUs granted to two members of management on April 22, 2022, which convert into common stock on

a one-for-one basis, that were granted under the VerifyMe, Inc.

2020 Equity Incentive Plan, vesting over a period of two to three years,

in two tranches, depending on certain criteria being met,

• 56,819 PSUs granted to one member of the Board on March 15, 2023, which

convert into common stock on a one-for-one basis, that were granted under the VerifyMe, Inc.

2020 Equity Incentive Plan, vesting over

a period of two to three years, in two tranches, depending on certain criteria being met,

• 550,000 PSUs granted to our Chief Executive Officer, which convert into common stock on a one-for-one

basis, that were granted under the VerifyMe, Inc.

2020 Equity Incentive Plan on June 19, 2023 and vest over a period of four years, in

three tranches, depending on certain criteria being met,

• 195,000 PSUs granted to two members of management, which convert into common stock on a one-for-one basis,

that were granted under the VerifyMe, Inc.

2020 Equity Incentive Plan on July 20, 2023 and vest over a period of four years, in three

tranches, depending on certain criteria being met,

• 75,000 PSUs granted to one member of management, which convert into common stock on a one-for-one basis,

that were granted under the VerifyMe, Inc.

2020 Equity Incentive Plan on June 30, 2024 and vest over a period of three years, in three

tranches, depending on certain criteria being met, and

• 54,312 RSUs granted to four members of management, which convert into common stock on a one-for-one basis,

pursuant to the Company’s salary reduction program, which will vest on January 1, 2026.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

The information required by this Item 13 is incorporated

herein by reference from our proxy statement for our 2024 annual meeting of stockholders under the heading “Certain Relationships

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

The following is a summary of transactions since

January 1, 2023 to which we have been a party in which the amount involved exceeded the lesser of $120,000 or one percent of the average

of our total assets at the end of the last two recent fiscal years and in which any of our executive officers, directors, director nominees,

or beneficial holders of more than five percent of our capital stock, or relative or spouse of any of the foregoing persons or any relative

of such spouse who has the same house as such person or who is a director or officer of any parent or subsidiary of our Company, had or

will have a direct or indirect material interest, other than compensation arrangements which are described under the sections entitled

“Executive Compensation” and “Director Compensation.”

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 and entities related

to related parties including Adam Stedham, the Company’s President and CEO;

Scott Greenberg, the Company’s Chairman;

Kole, one of our named executive officers;

the Geller Trust;

and the 1065 Institute, Inc., a non-profit entity to which our director Dr.

Arthur Laffer serves as a director and secretary.

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.

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.

The largest aggregate amount of principal outstanding on the notes since

they were issued was $1,100 thousand.

As of April 17, 2024 the amount outstanding on the notes was $1,100 thousand.

Between the date the

notes were issued and April 17, 2024, the Company has paid a total of $0 and $44 thousand in principal and interest.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 is incorporated

herein by reference from our proxy statement for our 2024 annual meeting of stockholders under the numbered proposal with the heading

“Ratification of the Appointment of our Independent Registered Public Accounting Firm,” which proxy statement will be filed

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

Policy on Pre-Approval of Retention of Independent

Registered Public Accounting Firm

The Audit Committee pre-approves all audit and

permissible non-audit services on a case-by-case basis.

In its review of non-audit services, the Audit Committee considers whether the

engagement could compromise the independence of our independent registered public accounting firm, and whether the reasons of efficiency

or convenience is in our best interest to engage our independent registered public accounting firm to perform the services.

services provided, and fees charged by MaloneBailey were approved by our Audit Committee.

Independence Analysis by Audit Committee

The Audit Committee considered whether the provision

of the services described above was compatible with maintaining the independence of MaloneBailey and determined that the provision of

these services was compatible with the firm’s independence.

Fees for Professional Services Provided by

MaloneBailey, LLP

The following table shows fees for professional

services provided by MaloneBailey during the fiscal year ended December 31, 2024, which we refer to as fiscal year 2024 and the fiscal

year ended December 31, 2023, which we refer to as fiscal year 2023.

Audit Fees (1)

Audit-Related Fees (2)

All Other Fees (4)

(1) Audit fees relate to services rendered for the audits of our annual financial statements, for the review

of our quarterly financial statements, and for services that are normally provided by the auditor in connection with statutory and regulatory

filings or engagements.

(2) Audit-related fees consist of fees for assurance and related services that are reasonably related to the

performance of the audit or review of our financial statements and are not reporter under “Audit Fees.”

(3) Tax fees relate to services performed in connection with the Company’s annual tax return.

(4) All other fees relate to services rendered in connection with our registration statement filings with

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

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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)

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)

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)

Form of Common Warrant (incorporated here by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 14, 2025)

Description of Securities

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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)

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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)

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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)

Third 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 25, 2024) .

VerifyMe, Inc.

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333-234155) filed on October 10, 2019)

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)

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)

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)

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.

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333-237950) filed on May 1, 2020)

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)

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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.

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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)

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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)

Waiver and Amendment to Loan Documents between PeriShip Global LLC and PNC Bank National Association effective August 7, 2024 (incorporated herein by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024)

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)

Employee Bonus 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, 2024)

Consulting Agreement with Pentant LLC effective as of November 15, 2023 (incorporated herein by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024)

First Amendment to Consulting Agreement with Pentant LLC effective June 30, 2024 (incorporated herein by reference from Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024)

Form of RSU Award Agreement (incorporated herein by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 5, 2024)

Form of Salary Reduction Agreement (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 5, 2024)

Form of Inducement Letter Agreement dated January 13, 2025 (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 14, 2025)

Insider Trading Policy

Subsidiaries of VerifyMe, Inc.

Consent of MaloneBailey, LLP

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

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Cover Page Interactive Data File

* Filed or furnished herewith, as applicable

* Filed herewith

** Furnished herewith

# Denotes management compensation plan or contract

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CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF CASH FLOWS

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

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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,

(1) relates 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.

/s/ MaloneBailey, LLP

MaloneBailey, LLP

www.malonebailey.com

We have served as the Company's auditor since

Houston, Texas

have served as the Company's auditor since 2018

March 12, 2025

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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

Accounts receivable, net of allowance for credit loss reserve, $ 71 and $ 165 as of December 31, 2024 and December 31, 2023, respectively

Unbilled revenue

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Long-term lease liability

Long-term derivative liability

Convertible note – related party

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STOCKHOLDERS' EQUITY

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

shares authorized;

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

0 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively

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Additional paid in capital

stock as cost;

Treasury stock as cost;

290,467 and 329,351 shares at December 31, 2024 and December 31, 2023, respectively

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OPERATING EXPENSES

Segment management and Technology (a)

General and administrative (a)

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Sales and marketing (a)

Goodwill and Intangible asset impairment

Total Operating expenses

LOSS BEFORE OTHER INCOME (EXPENSE)

OTHER (EXPENSE) INCOME

OTHER INCOME (EXPENSE)

Interest expenses, net

Unrealized gain on equity investment

Change in fair value of contingent consideration

Loss on equity investment

Other (expense) income, net

Gain on extinguishment of debt

TOTAL OTHER EXPENSE, NET

Loss on sale of business

Other expense, net

TOTAL OTHER INCOME (EXPENSE), NET

LOSS PER SHARE

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CASH FLOWS FROM OPERATING ACTIVITIES

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

Adjustments to reconcile net loss to net cash provided by operating activities:

Allowance for bad debt

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Loss on equity investment

Loss on sale of business

Change in fair value of contingent consideration

1 unchanged sentence

Loss on disposal of equipment

Unrealized gain on equity investment

Gain on extinguishment of debt

Amortization and depreciation

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

Net cash provided by (used) in operating activities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Equity received from SPAC equity investment

Purchase of patents

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Capitalized software costs

Cash from sale of business assumed by the buyer

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from public offering of securities

Proceeds from line of credit

Proceeds from convertible debt

Proceeds from issuance of note payable

Exercise of pre-funded warrants

Proceeds from SPP Plan

Contingent consideration payments

Tax withholding payments for employee stock-based compensation in exchange for shares surrendered

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Repayment of debt and line of credit

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash

NET DECREASE IN CASH AND

CASH EQUIVALENTS INCLUDING RESTRICTED 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 INCLUDNG RESTRICTED CASH - END OF PERIOD

CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH - END OF PERIOD

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

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SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Initial recognition of right-of-use asset and lease liability during the period

Change in fair value of interest rate, swap

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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

1 unchanged sentence

Repurchase of common stock

Exercise of Pre-funded Warrants

Treasury stock retired

Cancellation of Common stock

Accumulated other comprehensive loss

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Accumulated Other

Comprehensive Loss

Comprehensive

Balance at December 31, 2023

Restricted stock awards, net of shares withheld for employee tax

Restricted stock awards

Restricted stock units, net of shares withheld for employee tax

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Common stock issued for services

Common stock issued in relation to Acquisition

Repurchase of Common Stock

Treasury stock retired

Cancellation of Common stock

Accumulated other comprehensive loss

Balance at December 31, 2024

The accompanying notes are an integral part of

these consolidated financial statements.

The accompanying notes are an integral

part of these unaudited consolidated financial statement

VerifyMe, Inc.

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VerifyMe, Inc.

(“VerifyMe”) was incorporated

in the State of Nevada on November 10, 1999.

VerifyMe, together with its subsidiaries, including PeriShip Global LLC (“PeriShip

Global”) and Trust Codes Global Limited (“Trust Codes Global”), (together the “Company,” “we,”

“us,” or “our”) is based in Lake Mary, Florida and its common stock, par value $ 0.001 per share, and warrants

to purchase common stock are traded on The Nasdaq Capital Market (“Nasdaq”) under the trading symbols “VRME” and

“VRMEW,” respectively.

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:

(“VerifyMe,” “we,”

“us,” “our,” or the “Company”) was incorporated in the State of Nevada on November 10, 1999.

VerifyMe, is based in Lake Mary, Florida and its common stock, par value $ 0.001 per share, and certain warrants to purchase common stock

are traded on The Nasdaq Capital Market (“Nasdaq”) under the trading symbols “VRME” and “VRMEW,” respectively.

The Company is a specialized logistics company

that specializes in time and temperature sensitive products, as well as providing brand protection and enhancement solutions.

operates a Precision Logistics segment which includes the operations of our subsidiary PeriShip Global, LLC (“PeriShip Global”)

and accounts for nearly all VerifyMe revenue and an Authentication segment.

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.

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 deter counterfeit activities.

Further information regarding our business segments is discussed

The Company’s activities are subject to

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The accompanying consolidated

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”).

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

(“Trust Codes Global”).

Trust Codes Global was divested on December 8, 2024.

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

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Actual results could differ from these estimates.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

Recent Accounting Pronouncements

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.

2023, the Financial Accounting Standards Board (“FASB”) issued Accounting

Standards Update (“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.

is effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, applied retrospectively

with early adoption permitted.

The Company adopted the new standard beginning January 1, 2024.

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

Note 15 – Segment Reporting has been

updated to reflect the new disclosure requirements and certain amounts have been reclassified in the Consolidated Statement of Operations.

There is no other impact of adoption of this standard on the Company’s consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09,

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

The guidance requires disclosure of disaggregated income taxes paid,

prescribes standardized categories for the components of the effective tax rate reconciliation, and modifies other income tax-related

ASU 2023-09 is effective for the Company’s annual periods beginning January 1, 2025, with early adoption permitted.

The Company is currently evaluating the potential effect that the updated standard will have on their financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03,

Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220).

This standard requires

disclosure of specific information about costs and expenses.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026

and interim reporting periods beginning after December 15, 2027.

The Company is currently evaluating the potential effect that the updated

standard will have on their financial statement disclosures.

VerifyMe, Inc.

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on rates and other terms currently available to the Company for similar debt instruments.

The Company follows FASB ASC 820, “Fair

Value Measurements and Disclosures,” and applies it to all assets and liabilities that are being measured and reported on a fair

The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following

three categories:

The Company follows FASB Accounting Standard Codification

(“ASC”) Topic 820, Fair Value Measurements and Disclosures, and applies it to all assets and liabilities that are being measured

and reported on a fair value basis.

The statement requires that assets and liabilities carried at fair value will be classified and disclosed

in one of the following three categories:

Quoted market prices in active markets

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Schedule of fair value assets measured on recurring basis

Short Term Investment

Derivative Asset

1 unchanged sentence

Balance as of December 31, 2023

Loss on fair value recognized in other income (expense)

Contingent consideration at issuance

Change in fair value of contingent consideration

Foreign currency adjustment

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

Balance at December 31, 2024

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

Variable Interest Entity

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

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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.

namely, (i) Precision Logistics and (ii) Authentication.

See Note 15 Segment Reporting, for further discussion of the Company’s

segment reporting structure.

VerifyMe, Inc.

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Business Combinations

The Company applies the provisions of Accounting

Standard Codification (“ASC”) Topic 805, Business Combinations, in the accounting for business acquisitions.

ASC 805 requires

the Company to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values.

Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values

of the identifiable assets acquired and the liabilities assumed.

While the Company uses its best estimates and assumptions to accurately

apply preliminary value to assets acquired and liabilities assumed at the acquisition date, where applicable, these estimates are inherently

uncertain and subject to refinement.

As a result, during the measurement period, which may be up to one year from the acquisition

date, the Company records adjustments in the current period, rather than a revision to a prior period.

Upon the conclusion of the measurement

period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments

are recorded in the Consolidated Statements of Operations.

Accounting for business combinations requires management to make significant

estimates and assumptions, especially at the acquisition date, including estimates for intangible assets where applicable.

Company believes the assumptions and estimates made have been reasonable and appropriate, they are based in part on information obtained

from management of the acquired companies and are inherently uncertain.

Unanticipated events and circumstances may occur that may affect

the accuracy or validity of such assumptions, estimates, or actual results.

The Company applies the provisions of ASC Topic

805, Business Combinations, in the accounting for business acquisitions.

ASC Topic 805 requires the Company to recognize separately from

goodwill the assets acquired and the liabilities assumed at their acquisition date fair values.

Goodwill as of the acquisition date is

measured as the excess of consideration transferred over the net of the acquisition date fair values of the identifiable assets acquired

and the liabilities assumed.

While the Company uses its best estimates and assumptions to accurately apply preliminary value to assets

acquired and liabilities assumed at the acquisition date, where applicable, these estimates are inherently uncertain and subject to refinement.

As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments

in the current period, rather than a revision to a prior period.

Upon the conclusion of the measurement period or final determination

of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the Consolidated

Statements of Operations.

Accounting for business combinations requires management to make significant estimates and assumptions, especially

at the acquisition date, including estimates for intangible assets where applicable.

Although the Company believes the assumptions and

estimates made have been reasonable and appropriate, they are based in part on information obtained from management of the acquired companies

and are inherently uncertain.

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions,

estimates, or actual results.

Basic and Diluted Net 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 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.

The Company follows ASC Topic 260, Earnings Per

Share, when reporting earnings per share resulting in the presentation of basic and diluted earnings per share.

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, 2024, 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 presented.

the year ended December 31, 2024, there were approximately 7,971,000 anti-dilutive shares consisting of 1,606,000 unvested performance

restricted stock units, 414,000 restricted stock units and restricted stock awards, 221,000 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.

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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.

No cash was subject to restriction as of December

As of December 31, 2023, the Company held $ 63 thousand of cash subject to restrictions.

Concentration of Credit Risk Involving

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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.

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

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leases cancellable by either party by written notice provided 90 days in advance.

We examined the effect of Accounting Standards Update

2016-02- “Lease (Topic 842)” and determined the impact is not material.

Our policy is to capitalize

the costs related to this equipment and depreciate on a straight-line basis over the estimated lives of the equipment which was determined

to be 5 years.

We examined the effect of ASU No.

2016-02 Leases (Topic

842) and determined the impact is not material.

Our policy is to capitalize the costs related to this equipment and depreciate on a straight-line

basis over the estimated lives of the equipment which was determined to be 5 years.

VerifyMe, Inc.

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Costs incurred in connection with the development

of software related to our proprietary proactive end-to-end logistics management products are accounted for in accordance with the Financial

Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350 “Hosting Arrangements

and Internally Used Software.” Costs incurred prior to the establishment of technological feasibility are charged to research and

development expense.

Software development costs are capitalized after a product is determined to be technologically feasible and is in

the process of being developed for market.

Amortization of capitalized software development costs begins once the product is available

to the market.

Capitalized software development costs are amortized over the estimated life of the related product, generally six years,

using the straight-line method.

of software related to our proprietary proactive end-to-end logistics management products are accounted for in accordance with ASC Topic

350 “Hosting Arrangements and Internally Used Software.” Costs incurred prior to the establishment of technological feasibility

are charged to research and development expense.

Software development costs are capitalized after a product is determined to be technologically

feasible and is in the process of being developed for market.

Amortization of capitalized software development costs begins once the product

is available to the market.

Capitalized software development costs are amortized over the estimated life of the related product, generally

six years, using the straight-line method.

The Company will evaluate its software assets for impairment whenever events or change in circumstances

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The Company evaluates the recoverability of its

long-lived assets in accordance with ASC 360 “Property, Plant, and Equipment.” The Company reviews long-lived assets for impairment

whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of long-lived

assets are measured by a comparison of the carrying amount of an asset to future cash flows expected to be generated by the asset, undiscounted

and without interest or independent appraisals.

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.

long-lived assets in accordance with ASC Topic 360 “Property, Plant, and Equipment.” The Company reviews long-lived assets

for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability

of long-lived assets are measured by a comparison of the carrying amount of an asset to future cash flows expected to be generated by

the asset, undiscounted and without interest or independent appraisals.

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.

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.

Pursuant to ASC Topic 350, Intangibles-Goodwill and Other, the Company

tests goodwill for impairment on an annual basis in the fourth quarter, or between annual tests, in certain circumstances.

authoritative guidance, the Company first assessed qualitative factors to determine whether it was necessary to perform the quantitative goodwill impairment

The assessment considers factors such as, but not limited to, macroeconomic conditions, data showing other companies in the industry

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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.

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

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long-term derivative liabilities, preferred stock, warrants or other contracts to determine if those contracts or embedded components

of those contracts qualify as derivatives to be separately accounted for in accordance with Financial Accounting Standards Board (“FASB”)

Accounting Standards Codification (“ASC”) 480, “Distinguish by Liabilities from Equity” (FASB ASC 480), and FASB

ASC 815, “Derivatives and Hedging” (“FASB ASC 815”).

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 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 to equity.

of those contracts qualify as derivatives to be separately accounted for in accordance with ASC Topic 480, Distinguish by Liabilities

from Equity and ASC Topic 815, Derivatives and Hedging.

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 an asset or liability.

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 to

VerifyMe, Inc.

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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

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.

The unrealized foreign currency transaction gain/losses for the years ended December 31, 2024 and December 31, 2023, were

$ 6 thousand loss and $ 5 thousand gain, respectively.

Revenue Recognition

The Company accounts for revenues according to

Accounting Standards Codification (“ASC”) Topic 606, “ Revenue from Contracts with Customers” which

establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from

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

ASC Topic 606, Revenue from Contracts with Customers which establishes principles for reporting information about the

nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers.

The Company applies the following five steps,

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in either service line.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

Authentication

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ended December 31, 2024.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

Stock-Based Compensation

We account for stock-based compensation under

the provisions of FASB ASC 718, “Compensation—Stock Compensation”, which requires the measurement and recognition of

compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date.

the fair value of stock-based awards on the date of grant using the Black-Scholes model.

The assumptions used in the Black-Scholes option

pricing model include risk-free interest rates, expected volatility and expected life of the stock options.

Changes in these assumptions

can materially affect estimates of fair value stock-based compensation, and the compensation expense recorded in future periods.

of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the

straight-line method.

the provisions of ASC Topic 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation

expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date.

We estimate the fair

value of stock-based awards on the date of grant using the Black-Scholes model.

The assumptions used in the Black-Scholes option pricing

model include risk-free interest rates, expected volatility and expected life of the stock options.

Changes in these assumptions can materially

affect estimates of fair value stock-based compensation, and the compensation expense recorded in future periods.

The value of the portion

of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line

We recognize forfeitures as they occur with a reduction in compensation expense in the period of forfeiture.

performance restricted stock units with stock price appreciation targets (see Note 10 – Stock Options, Restricted Stock and Warrants),

For performance restricted

stock units (“RSU”) with stock price appreciation targets (see Note 10 – Stock Options, Restricted Stock and Warrants),

we applied a lattice approach that incorporated a Monte Carlo simulation, which involved random iterations that took different future

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Improvements to Nonemployee

Share-Based Payment Accounting (“ASU 2018-07”), which aligns accounting for share-based payments issued to nonemployees to

that of employees under the existing guidance of Topic 718, with certain exceptions.

This update supersedes previous guidance for equity-based

payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees.

Share-Based Payment Accounting, which aligns accounting for share-based payments issued to nonemployees to that of employees under the

existing guidance of Topic 718, with certain exceptions.

This update supersedes previous guidance for equity-based payments to nonemployees

under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees.

All issuances of stock options or other equity

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Advertising costs are expensed as incurred.

costs were $ 39 thousand and $ 60 thousand for the years ended December 31, 2023, and 2022, respectively, and are included in Sales and

Marketing on the Consolidated Statements of Operations.

costs were $ 3 thousand and $ 39 thousand for the years ended December 31, 2024, and 2023, respectively, and are included in Sales and Marketing

on the Consolidated Statements of Operations.

Research and Development Costs

In accordance with FASB ASC 730, research and

In accordance with ASC Topic 730, research and

development costs are expensed when incurred.

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thousand and $ 107 thousand, respectively.

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.

The Company follows ASC Topic 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

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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.

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 2005 remain subject to examination

by major tax jurisdictions due the carryforward of unutilized NOLs.

NOTE 2 – EQUITY INVESTMENTS

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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

Holdings Inc.

(the “Sponsor Entity”), a Delaware corporation that was the founder of G3 VRM Acquisition Corp.

that was being co-sponsored by the Company.

The SPAC was formed for the purpose of effecting a merger, capital stock exchange, asset

acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

On April 12, 2021, the Sponsor Entity converted

to a Delaware limited liability company, changed its name to “G3 VRM Holdings LLC” and a co-sponsor was added as a member

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.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

As a result of ceasing to have a controlling financial

interest in the Sponsor Entity on April 12, 2021, the Company accounted for the Sponsor Entity as an equity investment and has elected

the fair value option.

The SPAC was unable to complete its initial business

combination within 12 months from the closing of the IPO and the Sponsor Entity decided not to fund the extension and did not deposit

additional funds into the trust account.

As a result, the SPAC was dissolved and liquidated in accordance with its charter.

The SPAC redeemed

100% of the public shares for cash on July 19, 2022, the rights expired worthless, and the founder shares and private placement securities

became worthless.

The SPAC was dissolved on July 29, 2022, and no distributions were made to the Sponsors.

In December 2022, it was determined

that the costs to dissolve the SPAC were ultimately less than the remaining assets of the SPAC and the SPAC made a distribution to the

Company of $32 thousand.

The fair value of the equity investment was $ 0 million

as of December 31, 2022.

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

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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

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______________

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

Consolidated Balance sheets.

(1) Included within "Unbilled revenue" on the accompanying Consolidated Balance sheets.

VerifyMe, Inc.

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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.

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 Topic

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 was estimated at $ 1.1 million at the acquisition date, however the maximum

amount of the payment is unlimited.

The preliminary purchase price allocation was subject to change and was finalized in the fourth quarter

The goodwill recognized was due to the expected synergies from combining the operations of the acquiree with the Company.

of the goodwill recorded for financial statement purposes was deductible for tax purposes.

The Company incurred $ 278 thousand in relation

to acquisition related costs which were 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.

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

Schedule of allocation for the acquisition

Fair value of contingent consideration

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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.

(a) Stock issued was calculated based on the 15-day volume-weighted average price (“VWAP”) through February 28, 2023 calculated

On December 8, 2024 the Company sold Trust

Codes Global pursuant to a Share Sale Agreement with a related party, Paul Ryan, former Executive Vice President of the

Authentication Segment and employee of Trust Codes Global Limited.

This divestiture did not qualify as a discontinued operation.

The purchase price per the agreement was $1 NZD.

recognized a loss of $ 0.1

million on the sale of the business.

Through his purchase, Mr.

Ryan assumed the remaining cash balance in the bank accounts of

$ 0.1 million and all

continuing obligations and liabilities of Trust Codes Global Limited.

The Trust Codes Global business was part of the Authentication

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

Contingent Consideration

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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

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 reasonable;

however, there is significant judgment involved.

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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

Global, the business and certain assets of PeriShip, LLC (“PeriShip”), a value-added service provider for time and temperature

sensitive parcel management.

PeriShip Global provides shipping logistics services utilizing proprietary predictive analytics software

and supporting call center services.

Using our proprietary software platform, we provide real-time information and analysis to mitigate

supply chain flow interruption, delivering last-mile resolution for key markets, including the perishable healthcare and food industries.

The purchase price was $ 10.5 million which consisted of $ 7.5 million in cash paid at closing, a promissory note of $ 2.0 million

with a fixed interest rate of 6 % per annum on the unpaid principal balance, to be paid in three installments on the sixth, fifteenth,

and eighteenth month anniversaries of the closing, and 305,473 shares of common stock of the Company, representing $1.0 million in stock

consideration.

The goodwill recognized is due to the expected synergies from combining the operations of the acquire with the Company.

All of the goodwill recorded for financial statement purposes is deductible for tax purposes.

The acquired PeriShip business is included

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

an agreement with the owner of PeriShip, LLC to resolve certain disputes among the parties, reduce the principal and interest on the promissory

note, repay the amended promissory note in full, and repurchased 61,000 shares of the Company’s common stock (see Note 9).

accounted for the agreement in accordance with Topic 250, through earnings, with the full amount included as a Gain on extinguishment

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

The following table summarizes the purchase price

allocation for the acquisition (dollars in thousands).

allocation for the acquisition

Promissory note

Stock (issuance of 305,473 shares of common stock) (1)

Total purchase price

Purchase price allocation:

Accounts receivable, net

Prepaid expenses

Developed Technology

Trade Names/Trademarks

Customer Relationships

Non-Compete Agreement

Property and Equipment, net

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

Unaudited Pro forma Financial Information

The following unaudited proforma financial information

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

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

for illustrative purposes only and is not necessarily indicative of the results of operations that would have been realized if the acquisition

had been completed on January 1, 2022, nor does it purport to project the results of operations of the combined company in future periods.

The pro forma financial information does not give effect to any anticipated integration costs related to the acquired company during the

periods presented.

The Company divested the Trust Codes business

on December 8, 2024.

As of December 31, 2024, we had no current or non-current contingent consideration related to the acquisition of

Trust Codes on the Consolidated Balance sheets.

In 2024, payments of $ 53 thousand was paid for contingent consideration.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

The below table summarizes proforma financial

information for the Company, and the acquired PeriShip business, assuming the acquisition date of PeriShip occurred on January 1, 2022

(dollars in thousands):

Schedule of financial information

Net Income (loss)

NOTE 5 – INTANGIBLE ASSETS AND GOODWILL

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We test goodwill at the reporting unit level.

ASC Topic 350, Intangibles - Goodwill

and Other (ASC Topic 350), permits an entity to first assess qualitative factors to determine whether it is more likely than

not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform

a quantitative goodwill impairment test.

Under ASC Topic 350, an entity is not required to perform a quantitative goodwill

impairment test for a reporting unit if it is more likely than not that its fair value is greater than its carrying amount.

unit is an operating segment, or one level below an operating segment, as defined by U.S.

ASC Topic 350, Intangibles Goodwill and

Other , permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of

a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill

impairment test.

Under ASC Topic 350, an entity is not required to perform a quantitative goodwill impairment test for a reporting

unit if it is more likely than not that its fair value is greater than its carrying amount.

A reporting unit is an operating segment,

or one level below an operating segment, as defined by U.S.

Determining the fair value of a reporting unit

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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.

September 24, 2024, Paul Ryan, Executive Vice President, Authentication Segment, notified us of his resignation.

During the third quarter

of fiscal year ended December 31, 2024, we identified concerns relating to the commercial viability of the Authentication segment.

a result, the Company made revisions to our internal forecasts and concluded that in accordance with ASC Topic 350 a triggering event

occurred indicating that potential impairment exists, which required the Company to conduct an interim test of the fair value of the goodwill

for the Authentication segment.

We performed a quantitative goodwill impairment test and determined the fair value of our reporting units

using a combination of an equity approach and a market approach, employing a guideline public company approach.

The results of our goodwill

impairment test indicated that the carrying value of the Authentication reporting unit exceeded its estimated fair value.

the Company recorded a goodwill impairment charge of $ 1,351 thousand during the year ended December 31, 2024, within goodwill and intangible

asset impairment on the consolidated statement of operations.

On December 8, 2024 we divested the Trust Codes business in the Authentication

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

Each of our two reportable segments represents

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2024 Activity

Acquisition of Trust Codes Global

Goodwill impairment charge

Foreign currency translation

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December 31, 2024

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

Intangible Assets Subject to Amortization

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for goodwill, we do not have any intangible assets with indefinite useful lives.

The revisions to our internal forecasts resulted

in an interim triggering event for the three months ended September 30, 2024, indicating the carrying value of our long-lived assets

including patents and trademarks, customer relationships, and developed technology may not be recoverable.

Accordingly, the Company performed

an interim impairment test and assessed the recoverability of the related intangible assets by using level 3 inputs and comparing the

carrying value to the net undiscounted cashflow expected to be generated.

The analysis indicated that certain intangible assets were impaired.

The Company further concluded as of September 30, 2024 the carrying value exceeded its estimated fair value, which resulted in an impairment

The Company recorded an intangible impairment charge of $ 964 thousand during the year ended December 31, 2024, within goodwill

and intangible asset impairment on the consolidated statement of operations.

On December 8, 2024 we divested the Trust Codes business

in the Authentication segment.

VerifyMe, Inc.

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Patents and Trademarks

Capitalized Software

Customer Relationships

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$ 1,097 thousand and $ 1,030 thousand for the years ended December 31, 2024, and December 31, 2023, 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.

During the year ended December 31, 2024,

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.

the Company impaired certain assets by $ 964 thousand, to bring the gross carrying amount related to these assets to zero as a result of

the impairment analysis of long-lived assets under ASC 360.

Patents and Trademarks

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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, 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.

patents and two granted European patents, two pending foreign patent applications

and several foreign trademarks.

The Company abandoned one patents during the year ended December 31, 2024.

The Company expects to record amortization expense

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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”).

the years ended December 31, 2024 and December 31, 2023 was due primarily to the increase in our net operating losses which may not be

utilized in the future.

Deferred income taxes reflect the net tax effects

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Net operating loss carryforwards

Restricted stock (RSA’s, RSU’s)

Restricted stock (RSAs, RSUs)

Stock options

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Accruals & other

Dividend income

Gross deferred tax assets

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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.

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.

Utilization of the net operating losses (NOL)

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

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 or 2024 and is not aware of any indicators that may impose additional

limitations on the use of NOL carryforwards.

No tax benefit has been reported in the December

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

31, 2024, financial statements due to the uncertainty surrounding the realizability of the benefit.

Uncertain Tax Positions

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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.

various non-U.S.

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

Tax years 2020 through 2024 remain

open to examination by these tax jurisdictions, and earlier years remain open to examination in certain of these jurisdictions which have

longer statues of limitations.

The Company’s tax years from 2005 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

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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.

The Company divested of its foreign subsidiary on December 8, 2024, therefore, there will

be no future dividends 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

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

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.

sheets and recognized $ 1 thousand in interest and/or penalties in the Statements of Operations for the year ended December 31, 2024, and

$ 2 thousand in interest and/or penalties in the Statements of Operations in the fiscal year ended December 31, 2023.

There are no taxes payable as of December 31,

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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 also included a four-year term note (the “Term

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

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

On January 21, 2025, the Term Note was paid

in full and no future principal payments are due.

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

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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.

On August 14, 2024, the Company signed a waiver

and amendment which provided a waiver for a certain event of default and extended the line of credit to September 30, 2025.

PeriShip Global

was not in compliance with all affirmative and restrictive covenants under the PNC Facility as of December 31, 2024.

On February 28, 2025,

we received a waiver as of December 31, 2024 for certain events of default.

As of December 31, 2024, our short-term debt outstanding

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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.

December 31, 2024, and December 31, 2023, the Company made a repayment of $ 500 thousand towards the principal of the outstanding Term

As of December 31, 2023, our short-term debt outstanding under the Term Note was $ 500 thousand

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

As of January 21, 2025 the Term Note was paid in full

and no future principal payments are due.

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

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with the interest rate swap are not significant as of December 31, 2024, and as of December 31, 2023, 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

As of January 21,

2025, we terminated our interest rate swap agreement.

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.

As of December 31, 2024, $ 450 thousand is held

by related parties after one member of management left the Company.

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

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.

For the year ended December 31, 2024, interest expense

related to the convertible debt was $ 88 thousand.

As of December 31, 2024, 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.

of January 21, 2025, $ 350 thousand was converted to common stock, none of which was related parties.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

– CONVERTIBLE PREFERRED STOCK

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

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

NOTE 9 – STOCKHOLDERS’ EQUITY

1 unchanged sentence

related to restricted awards for the years ended December 31, 2024 and December 31, 2023, 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.

The Company expensed $ 912 thousand and $ 998 thousand

related to restricted stock units for the years ended December 31, 2024 and December 31, 2023, respectively.

On March 31, 2024, the Company issued 30,000 of

restricted common stock, vesting immediately, with a value of $ 42 thousand, for consulting services.

On June 30, 2024, the Company issued

an additional 30,000 of restricted common stock, vesting immediately, with a value of $ 42 thousand, for consulting services.

30, 2024, the Company issued an additional 60,000 of restricted common stock, vesting immediately, with a value of $ 86 thousand, for consulting

On December 31, 2024, the Company issued an additional 60,000 of restricted common stock, vesting immediately, with a value

of $ 81 thousand, for consulting services.

On November 4, 2024, the Company

issued 54,843 shares of common stock upon vesting of 69,667 restricted stock units, net of 14,824 shares of common

stock withheld for taxes.

During the year ended December 31, 2024, the Company

issued 1,750 shares of common stock upon vesting of restricted stock units, and 38,095 shares of common stock from treasury shares, net

of common stock withheld for taxes.

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

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that had previously vested.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

Non-Qualified Stock Purchase Plan

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qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”).

The Company applied FASB ASC 718, “Compensation-Stock Compensation” and estimated the fair value using the Black-Scholes model,

as the 2021 Plan is considered compensatory.

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.

The Company applied ASC Topic 718, Compensation-Stock Compensation and estimated the fair value using the Black-Scholes model, as the

2021 Plan is considered compensatory.

In relation to the 2021 Plan the Company expensed $ 4 thousand and $ 53 thousand for the years ended

December 31, 2024 and December 31, 2023, respectively.

During the years ended December 31, 2024, and December 31, 2023, the Company received

$ 21 thousand and $ 80 thousand, respectively, in proceeds related to the 2021 Plan.

Company has currently suspended new offering periods under the 2021 Plan.

Shares Held in Treasury

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respectively.

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.

On February 29, 2024, seven participants exercised

their options under the Company’s non-qualified stock purchase plan, and as a result, 21,889 shares were issued from treasury, with

an exercise price of $ 0.97 per share.

On August 31, 2023, six participants exercised

their options 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.

1 unchanged sentence

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.

their options 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

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.

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.

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.

On November 26,

2024, we announced an extension of the $ 0.5

million share repurchase program to repurchase shares of the Company’s common stock through December 31, 2025.

repurchase program may be modified, suspended or discontinued at the discretion of the Board at any time.

During the year

ended December 31, 2024, the Company repurchased 21,100

shares for $ 18 thousand of common stock under the Company’s current program.

NOTE 10– STOCK

OPTIONS, RESTRICTED STOCK AND WARRANTS

During 2013, the Company adopted the 2013 Omnibus

Equity Compensation Plan (the “2013 Plan”).

Under the 2013 Plan, the Company is authorized to grant awards of stock options,

restricted stock, restricted stock units and other stock-based awards up to an aggregate of 400,000 shares of common stock.

2013 Plan is intended to permit certain stock options granted to employees under the 2013 Plan to qualify as incentive stock options.

options granted under the 2013 Plan, which are not intended to qualify as incentive stock options are deemed to be non-qualified stock

On November 14, 2017, the Executive Committee

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On August 10, 2020, the Company’s Board

of Directors adopted the 2020 Equity Incentive Plan (the “2020 Plan”), subject to stockholder approval, which authorizes the

potential issuance of up to 1,069,110 shares of common stock.

On September 30, 2020, the Company’s stockholders approved the 2020

Plan, and upon such approval the 2020 Plan became effective and the 2017 Plan was terminated.

Shares of common stock underlying existing

awards under the 2017 Plan may become available for issuance pursuant to the terms of the 2020 Plan under certain circumstances.

and non-employee directors of the Company or its affiliates, and other individuals who perform services for the Company or any of its

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

of Directors adopted the 2020 Equity Incentive Plan (the “2020 Plan”) and on September 30, 2020, the Company’s stockholders

approved the 2020 Plan, which authorizes the potential issuance of up to 1,069,110 shares of common stock.

Upon effectiveness of the 2020

Plan the 2017 Plan was terminated.

Shares of common stock underlying existing awards under the 2017 Plan may become available for issuance

pursuant to the terms of the 2020 Plan under certain circumstances.

Employees and non-employee directors of the Company or its affiliates,

and other individuals who perform services for the Company or any of its affiliates, are eligible to receive awards under the 2020 Plan

at the discretion of the Board of Directors or the Board’s Compensation Committee.

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

Directors adopted the First Amendment to the 2020 Plan and on June 9, 2022, the Company’s stockholders approved the First Amendment

to the 2020 Plan, 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 April 17, 2023, the Company’s Board of Directors adopted the Second Amendment

to the 2020 Plan and on June 6, 2023, the Company’s stockholders approved the Second Amendment to the 2020 Plan, 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 March 18, 2024, the Company’s Board

of Directors adopted the Third Amendment to the 2020 Plan, which on June 4, 2024, was approved by the Company’s stockholders, which

increased the shares authorized for potential issuance under the 2020 Plan to 4,069,100 shares of common stock and extended the term of

the 2020 Plan to June 4, 2034.

The 2020 Plan, as amended, is administered by

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Unvested at December 31, 2022

Forfeit/Cancelled

Unvested at December 31, 2023

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adjustment or reversal based on actual achievement during the period.

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

The following table summarizes the unvested performance

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Unvested at December 31, 2022

Forfeited/Cancelled

Balance at December 31, 2023

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warrants and the closing stock price of $1.36 for our common stock on December 31, 2024.

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

the Company granted 0 warrants and 34,942 warrants to warrant holders pursuant to anti-dilution provisions, 0 warrants

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

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

either capital raise.

Pre-funded Warrants

On April 14, 2022, in connection with our Securities

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.

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

Schedule of anti-dilutiv e earnings per share

Schedule of anti-dilutive earnings per share

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

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Restricted Stock Units and Restricted Stock Awards

NOTE 12— LONG TERM DERIVATIVE LIABILITY

On April 7, 2022, the Company granted two directors

11,250 restricted stock units each (“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 would have been paid to the director as soon as practicable after the fifteen-month

anniversary of the vesting date.

In June 2022, the Sponsor Entity decided not to

fund the extension for the time that the SPAC had to complete its initial business combination.

As a result, the SPAC was dissolved and

liquidated in accordance with its charter and under ASC 815, and the derivative instrument was terminated.

As a result, the SPAC RSUs

were forfeited.

For the year ended December 31, 2022, the Company has recorded the effect of termination to reduce the fair value and

recorded a credit to share-based compensation expense of $71 thousand in relation to these awards.

The fair value of the derivative liability

was $ 0 as of December 31, 2022.

NOTE 12 – EMPLOYEE BENEFIT PLAN

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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.

The Company makes the required

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

In the years ended December 31, 2024, and December 31, 2023,

the Company contributed a value of approximately $ 19

thousand and $ 10

thousand, respectively.

NOTE 13 – LEASES

The Company accounts for its leases under Accounting

Standard Codification (“ASC”) Topic 842, Leases.

The Company determines at its inception whether an arrangement that provides

us control over the use of an asset is a lease.

We recognize at lease commencement a right-of-use (ROU) asset and lease liability based

on the present value of the future lease payments over the lease term.

We have elected not to recognize a ROU asset and lease liability

for leases with terms of 12 months or less.

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

end of the initial term.

It is not reasonably certain that we will exercise the option and have not included the impact of the option

in the lease term for purposes of determining total future lease payments.

As our lease agreement does not explicitly state the discount

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

The Company accounts for its leases under ASC

Topic 842, Leases.

The Company determines at its inception whether an arrangement that provides us control over the use of an asset is

We recognize at lease commencement a right-of-use (ROU) asset and lease liability based on the present value of the future lease

payments over the lease term.

We have elected not to recognize a ROU asset and lease liability for leases with terms of 12 months or less.

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

It is not reasonably

certain that we will exercise the option and have not included the impact of the option in the lease term for purposes of determining

total future lease payments.

As our lease agreement does not explicitly state the discount rate implicit in the lease, we use our promissory

note borrowing rate to calculate the present value of future payments.

VerifyMe, Inc.

7 unchanged sentences

We do not have any finance leases.

Lease expense is included in General & Administrative

Lease expense is included in Management and technology

Expenses on the accompanying Consolidated Statements of Operations.

5 unchanged sentences

Total lease costs

Supplemental information related to leases was

as follows (dollars in thousands):

Schedule of supplemental information related to leases

Supplemental information related to leases was as follows (dollars in thousands):

December 31, 2024

22 unchanged sentences

represented 16 % of revenues and one customer represented 17 % of revenues for the year ended December 31, 2023.

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.

As of December 31, 2024, two customers made up

36 % of accounts receivable.

As of December 31, 2023, three customers accounted for 47 % of total accounts receivable.

During the year ended December 31, 2024, and December

2 unchanged sentences

As of December 31, 2024, we operated through two reportable business

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

(formerly VerifyMe Solutions).

(i) Precision Logistics and (ii) Authentication.

The Chief Executive Officer is

the chief operating decision maker (“CODM”).

These segments reflect the way the CODM evaluates the Company’s business

performance and allocates resources.

Reported revenue includes only the revenue generated by sales to external customers.

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.

This 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

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:

administrative expenses, research and development expense, sales and marketing expenses, and other income (expense).

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.

Our Authentication

segment also provides brand protection and supply chain functions such as counterfeit prevention.

We do not allocate the following items to the

general & administrative expenses, research and development and other income (expense).

VerifyMe, Inc.

7 unchanged sentences

Total Revenue

Gross Profit:

Precision Logistics

1 unchanged sentence

Total Gross Profit

Segment Management and Technology - Precision Logistics

Segment Management and Technology - Authentication

Sales and marketing - Precision Logistics

Sales and marketing - Authentication

General and administrative

Research and development

Sales and marketing

LOSS BEFORE OTHER EXPENSE, NET

TOTAL OTHER EXPENSE, NET

Goodwill and Intangible asset impairment

LOSS BEFORE OTHER INCOME (EXPENSE)

OTHER INCOME (EXPENSE)

Additional information relating to our business

3 unchanged sentences

Authentication

VerifyMe, Inc.

Notes to the Consolidated Financial Statements

NOTE 16 – SUBSEQUENT EVENTS

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 .

On February 28, 2025, we received a waiver as of December 31, 2024, for certain events of default of restrictive covenants under the PNC Facility.

On January 1, 2025, the Company granted 70,773

restricted stock units pursuant to the salary reduction program that will vest on January 1, 2026.

On January 1, 2025, the Company granted 16,000

restricted stock units that will vest over the next two years.

On January 2, 2025, the Company issued 39,915

shares of common stock, of which 16,988 were issued from treasury, upon vesting of 61,011 restricted stock units, net of 21,096 shares withheld for taxes related to stock grants

on July 20, 2023 and July 1, 2024.

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.

As of January 21, 2025, $ 350 thousand was converted to 313,520 shares of

common stock, of which 22,359 were issued from treasury.

On January 13, 2025, we entered into an

Inducement Letter Agreement with an institutional investor and holder of existing warrants to purchase up to 1,461,896

shares of our common stock, for $ 4.7 million in gross proceeds.

The existing warrants were originally issued on April 14, 2022, with an

exercise price of $3.215 per share, and became exercisable six months following issuance.

Pursuant to the Inducement

Letter Agreement, the holder agreed to exercise the existing warrants for cash at the exercise price of $ 3.215

per share in consideration for our agreement to issue a new unregistered warrant to purchase up to an aggregate of 1,461,896

shares of common stock at an exercise price of $ 4.00

The new warrant was immediately exercisable upon issuance and has a term of five and one-half years from the issuance

On January 21, 2025, we paid in full all outstanding principal and

interest under the Term Note.

In connection with the repayment of the Term Note we terminated our interest rate swap agreement with PNC

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