VerifyMe, Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-39332 VERIFYME, INC. (Exact Name of Registrant as Specified in Its Charter) Nevada 23-3023677 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 801 International Parkway , Fifth Floor Lake Mary , FL 32746 (Address of Principal Executive Offices) (Zip Code) ( 585 ) 736-9400 (Registrant’s Telephone Number, Including Area Code) (Former Name, Former Address and Former Fiscal year, if Changed Since Last Report) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which Registered Common Stock, par value $0.001 per share VRME The Nasdaq Capital Market Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T § 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company,” in Rule 12b-2 of the Exchange Act. Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x Smaller reporting company x Emerging growth company ¨ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 12,323,666 shares of common stock outstanding at August 6, 2025. 2 PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements 4 Consolidated Balance Sheets (Unaudited) 4 Consolidated Statements of Operations (Unaudited) 6 Consolidated Statements of Comprehensive Loss (Unaudited) 7 Consolidated Statements of Cash Flows (Unaudited) 8 Consolidated Statements of Stockholders' Equity (Unaudited) 10 Notes to Consolidated Financial Statements (Unaudited) 12 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 30 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 37 ITEM 4. Controls and Procedures 37 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings 38 ITEM 1A. Risk Factors 38 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 38 ITEM 3. Defaults Upon Senior Securities 39 ITEM 4. Mine Safety Disclosures 39 ITEM 5. Other Information 39 ITEM 6. Exhibits 39 SIGNATURES 40 3 Table of Contents PART I - FINANCIAL STATEMENTS ITEM 1. VerifyMe, Inc. Consolidated Balance Sheets (In thousands, except share data) June 30, 2025 December 31, 2024 (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 6,067 $ 2,823 Accounts receivable, net of allowance for credit loss reserve, $ 8 and $ 71 as of June 30, 2025 and December 31, 2024, respectively 1,100 2,636 Unbilled revenue 324 733 Prepaid expenses and other current assets 335 131 Inventory 41 39 TOTAL CURRENT ASSETS 7,867 6,362 PROPERTY AND EQUIPMENT, NET $ 80 $ 116 RIGHT OF USE ASSET 89 236 INTANGIBLE ASSETS, NET 5,142 5,365 GOODWILL 3,988 3,988 TOTAL ASSETS $ 17,166 $ 16,067 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Term note, current $ - $ 500 Accounts payable 1,559 2,971 Other accrued expense 327 660 Lease liability- current 51 108 TOTAL CURRENT LIABILITIES 1,937 4,239 LONG-TERM LIABILITIES Long-term lease liability 43 139 Term note - 375 Convertible note – related party 450 450 Convertible note 300 650 TOTAL LIABILITIES $ 2,730 $ 5,853 STOCKHOLDERS' EQUITY Series A Convertible Preferred Stock, $ 0.001 par value, 37,564,767 shares authorized; 0 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively - - Series B Convertible Preferred Stock, $ 0.001 par value; 85 shares authorized; 0.85 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively - - Common stock, $ 0.001 par value; 675,000,000 shares authorized; 12,734,425 and 10,829,908 shares issued, 12,323,668 and 10,539,441 shares outstanding as of June 30, 2025 and December 31, 2024, respectively 13 11 Additional paid in capital 101,392 96,344 4 Table of Contents Treasury stock as cost; 410,757 and 290,467 shares at June 30, 2025 and December 31, 2024, respectively ( 434 ) ( 480 ) Accumulated deficit ( 86,535 ) ( 85,673 ) Accumulated other comprehensive loss - 12 STOCKHOLDERS' EQUITY 14,436 10,214 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,166 $ 16,067 The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 Table of Contents VerifyMe, Inc. Consolidated Statements of Operations (Unaudited) (In thousands, except share data) Three Months Ended Six Months Ended June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 NET REVENUE $ 4,520 $ 5,352 $ 8,975 $ 11,111 COST OF REVENUE 2,929 3,262 5,894 6,761 GROSS PROFIT 1,591 2,090 3,081 4,350 OPERATING EXPENSES Segment management and Technology (a) 920 1,517 1,846 2,860 General and administrative (a) 716 894 1,572 2,015 Research and development 5 5 10 60 Sales and marketing (a) 272 210 568 598 Total Operating expenses 1,913 2,626 3,996 5,533 LOSS BEFORE OTHER INCOME (EXPENSE) ( 322 ) ( 536 ) ( 915 ) ( 1,183 ) OTHER (EXPENSE) INCOME Interest income (expenses), net 32 ( 42 ) 54 ( 80 ) Other expense, net ( 1 ) - ( 1 ) - Change in fair value of contingent consideration - 232 - 364 TOTAL OTHER INCOME (EXPENSE), NET 31 190 53 284 NET LOSS $ ( 291 ) $ ( 346 ) $ ( 862 ) $ ( 899 ) LOSS PER SHARE BASIC ( 0.02 ) ( 0.03 ) ( 0.07 ) ( 0.09 ) DILUTED ( 0.02 ) ( 0.03 ) ( 0.07 ) ( 0.09 ) WEIGHTED AVERAGE COMMON SHARE OUTSTANDING BASIC 12,643,791 10,238,717 12,469,118 10,156,081 DILUTED 12,643,791 10,238,717 12,469,118 10,156,081 (a) Includes share-based compensation of $259 thousand and $592 thousand for the three and six months ended June 30, 2025, respectively, and $239 thousand and $697 thousand for the three and six months ended June 30, 2024 respectively. The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 Table of Contents VerifyMe, Inc. Consolidated Statements of Comprehensive Loss (Unaudited) (In thousands) Three Months Ended Six Months Ended June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024 NET LOSS $ ( 291 ) $ ( 346 ) $ ( 862 ) $ ( 899 ) Change in fair value of interest rate, Swap - 2 ( 12 ) 5 Foreign currency translation adjustments - 18 - ( 49 ) Total Comprehensive Loss $ ( 291 ) $ ( 326 ) $ ( 874 ) $ ( 943 ) The accompanying notes are an integral part of these unaudited consolidated financial statements. 7 Table of Contents VerifyMe, Inc. Consolidated Statements of Cash Flows (Unaudited) (In thousands) Six months ended June 30, 2025 June 30, 2024 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 862 ) $ ( 899 ) Adjustments to reconcile net loss to net cash provided by operating activities: Allowance for doubtful accounts ( 5 ) 9 Stock based compensation 86 89 Change in fair value of contingent consideration - ( 364 ) Fair value of restricted stock awards and restricted stock units issued in exchange for services 506 608 Loss on disposal of equipment 1 - Impairments - 13 Amortization and depreciation 572 599 Gain on partial lease termination ( 6 ) - Unrealized loss on foreign currency transactions - 30 Changes in operating assets and liabilities: Accounts receivable 1,541 1,790 Unbilled revenue 409 530 Inventory 13 15 Prepaid expenses and other current assets ( 216 ) 47 Accounts payable, other accrued expenses and net change in operating leases ( 1,733 ) ( 2,155 ) Net cash provided by operating activities 306 312 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of patents - ( 12 ) Leasehold Improvements ( 6 ) - Purchase of office equipment - ( 5 ) Capitalized software costs ( 326 ) ( 174 ) Net cash used in investing activities ( 332 ) ( 191 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Warrants Exercise 4,348 - Proceeds from SPP Plan - 21 Contingent consideration payments - ( 36 ) Tax withholding payments for employee stock-based compensation in exchange for shares surrendered ( 50 ) ( 47 ) Increase in treasury shares (share repurchase program) ( 153 ) ( 1 ) Repayment of debt and line of credit ( 875 ) ( 250 ) Net cash provided by (used in) financing activities 3,270 ( 313 ) Effect of exchange rate changes on cash - ( 3 ) NET INCREASE(DECREASE) CASH AND CASH EQUIVALENTS 3,244 ( 195 ) CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH- BEGINNING OF PERIOD 2,823 3,095 CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH- END OF PERIOD $ 6,067 $ 2,900 8 Table of Contents SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 40 $ 94 Income taxes $ - $ - SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Lease modification $ 7 $ - Conversion of convertible note and accrued interest $ 360 $ - Change in fair value of interest rate, swap $ 12 $ 5 The accompanying notes are an integral part of these unaudited consolidated financial statements. 9 Table of Contents VerifyMe, Inc. Consolidated Statements of Stockholders' Equity (Unaudited) (In thousands, except share data) Series A Series B Convertible Convertible Preferred Preferred Common Treasury Stock Stock Stock Additional Stock Accumulated Other Number of Number of Number of Paid-In Number of Comprehensive Accumulated Shares Amount Shares Amount Shares Amount Capital Shares Amount Loss Deficit Total Balance at March 31, 2024 - - 0.85 - 10,176,603 10 95,438 308,462 ( 589 ) ( 66 ) ( 82,402 ) 12,391 Restricted stock awards - - - - 140,000 1 127 - - - - 128 Restricted Stock Units, net of shares withheld for employee tax - - - - 38,095 - ( 103 ) ( 38,095 ) 125 - - 22 Common stock issued for services - - - - 30,000 - 42 - - - - 42 Accumulated Other Comprehensive Income - - - - - - - - - 20 - 20 Net loss - - - - - - - - - - ( 346 ) ( 346 ) Balance at June 30, 2024 - - 0.85 - 10,384,698 11 95,504 270,367 ( 464 ) ( 46 ) ( 82,748 ) 12,257 Series A Series B Convertible Convertible Preferred Preferred Common Treasury Stock Stock Stock Additional Stock Accumulated Other Number of Number of Number of Paid-In Number of Comprehensive Accumulated Shares Amount Shares Amount Shares Amount Capital Shares Amount Loss Deficit Total Balance at March 31, 2025 - - 0.85 - 12,414,772 13 101,225 251,120 ( 351 ) - ( 86,244 ) 14,643 Restricted stock awards - - - - - - 41 - - - - 41 Restricted stock units, net of shares withheld for employee tax - - - - 50,382 - 81 ( 41,849 ) 70 - - 151 Common stock issued for services - - - - 60,000 - 45 - - - - 45 Repurchase of Common Stock - - - - ( 201,486 ) - - 201,486 ( 153 ) - - ( 153 ) Net loss - - - - - - - - - - ( 291 ) ( 291 ) Balance at June 30, 2025 - - 0.85 - 12,323,668 13 101,392 410,757 ( 434 ) - ( 86,535 ) 14,436 10 Table of Contents Series A Series B Convertible Convertible Preferred Preferred Common Treasury Stock Stock Stock Additional Stock Accumulated Other Number of Number of Number of Paid-In Number of Comprehensive Accumulated Shares Amount Shares Amount Shares Amount Capital Shares Amount Loss Deficit Total Balance at December 31, 2023 - - 0.85 - 10,123,964 10 95,031 329,351 ( 659 ) ( 2 ) ( 81,849 ) 12,531 Restricted stock awards - - - - 140,000 1 275 - - - - 276 Restricted stock units, net of shares withheld for employee tax - - - - 39,845 - 160 ( 38,095 ) 125 - - 285 Common stock issued in relation to Stock Purchase Plan - - - - 21,889 - ( 46 ) ( 21,889 ) 71 - - 25 Common stock issued for services - - - - 60,000 - 84 - - - - 84 Repurchase of Common Stock - - - - ( 1,000 ) - - 1,000 ( 1 ) - - ( 1 ) Accumulated other comprehensive loss - - - - - - - - - ( 44 ) - ( 44 ) Net loss - - - - - - - - - ( 899 ) ( 899 ) Balance at June 30, 2024 - - 0.85 - 10,384,698 11 95,504 270,367 ( 464 ) ( 46 ) ( 82,748 ) 12,257 Series A Series B Convertible Convertible Preferred Preferred Common Treasury Stock Stock Stock Additional Stock Accumulated Other Number of Number of Number of Paid-In Number of Comprehensive Accumulated Shares Amount Shares Amount Shares Amount Capital Shares Amount Loss Deficit Total Balance at December 31, 2024 - - 0.85 - 10,539,441 11 96,344 290,467 ( 480 ) 12 ( 85,673 ) 10,214 Warrants exercise - - - - 1,461,896 2 4,346 - - - - 4,348 Convertible note - - - - 313,520 - 285 ( 22,359 ) 75 - - 360 Restricted stock awards - - - - - - 96 - - - - 96 Restricted stock units, net of shares withheld for employee tax - - - - 90,297 - 235 ( 58,837 ) 124 - - 359 Common stock issued for services - - - - 120,000 - 86 - - - - 86 Repurchase of Common Stock - - - - ( 201,486 ) - - 201,486 ( 153 ) - - ( 153 ) Accumulated other comprehensive loss - - - - - - - - - ( 12 ) - ( 12 ) Net loss - - - - - - - - - - ( 862 ) ( 862 ) Balance at June 30, 2025 - - 0.85 - 12,323,668 13 101,392 410,757 ( 434 ) - ( 86,535 ) 14,436 The accompanying notes are an integral part of these unaudited consolidated financial statements. 11 Table of Contents VerifyMe, Inc. Notes to the Consolidated Financial Statements (unaudited) NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of the Business VerifyMe, Inc. (“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 is traded on The Nasdaq Capital Market (“Nasdaq”) under the trading symbol “VRME”. The Company is a logistics company that specializes in time and temperature sensitive products, as well as providing brand protection and enhancement solutions. The Company operates a Precision Logistics segment which includes the operations of our subsidiary PeriShip Global, LLC (“PeriShip Global”) which 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. 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 deter counterfeit activities. Further information regarding our business segments is discussed below. The Company’s activities are subject to significant risks and uncertainties. See the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in this report. Reclassifications Certain amounts presented for the three and six months ended June 30, 2024, reflect reclassifications made to conform to the presentation in our current reporting period. These reclassifications had no effect on the previously reported net loss. Basis of Presentation The accompanying unaudited interim consolidated financial statements include the accounts of VerifyMe and its wholly owned subsidiary PeriShip Global. All significant intercompany balances and transactions have been eliminated upon consolidation. The consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements are not included herein. The Interim Statements should be read in conjunction with the financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2025. The accompanying Interim Statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The interim results for the three and six months ended June 30, 2025, are not necessarily indicative of the results to be expected for the year ending December 31, 2025, or for any future interim periods. Segment Reporting Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding the method by which to allocate resources and assess performance. The Company has two reportable segments, namely, (i) Precision Logistics and (ii) Authentication. See Note 11 Segment Reporting, for further discussion of the Company’s segment reporting structure. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Recent Accounting Pronouncements 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 disclosures. 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. 12 Table of Contents Notes to the Consolidated Financial Statements (unaudited) 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. Fair Value of Financial Instruments The Company’s financial instruments consist of accounts receivable, unbilled revenue, accounts payable, notes payable and accrued expenses, equity investments, and long-term derivatives. The carrying value of accounts receivable, unbilled revenue, accounts payable and accrued expenses approximate their fair value because of their short maturities. The Company believes the carrying amount of its notes payable approximates fair value based on rates and other terms currently available to the Company for similar debt instruments. 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: Level 1: Quoted market prices in active markets for identical assets or liabilities Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data Level 3: Unobservable inputs that are not corroborated by market data The level in the fair value within which a fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The following table presents the Company’s financial instruments that are measured and recorded at fair value on the Company’s balance sheets on a recurring basis, and their level within the fair value hierarchy as of June 30, 2025 and December 31, 2024. Amounts in Thousands ('000) Schedule of fair value assets measured on recurring basis Derivative Asset (Level 2) Balance as of December 31, 2024 12 Termination of SWAP, recognized in other comprehensive loss ( 12 ) Balance at June 30, 2025 $ - Revenue Recognition The Company accounts for revenues according to 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, separated by reportable segments, in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements. · identify the contract with a customer; · identify the performance obligations in the contract; · determine the transaction price; · allocate the transaction price to performance obligations in the contract; and · recognize revenue as the performance obligation is satisfied. 13 Table of Contents Notes to the Consolidated Financial Statements (unaudited) The Company generally considers completion of an agreement, or Statement of Work (“SOW”) and/or purchase order as a customer contract, provided collection is considered probable. For more detailed information about reportable segments, see Note 11 – Segment reporting. Precision Logistics Our Precision Logistics segment consists of two service lines, Proactive and Premium. Under our Proactive service line, clients pay us directly for carrier service coupled with our proactive logistics service. Terms typically range 7 days and no longer than 30 days. The Company has determined it is the principal and recognizes shipment fees in gross revenue. Under our Premium service line, we provide complete white-glove shipping monitoring and predictive analytics services. This service includes customer web portal access, weather monitoring, temperature control, full-service center support and last mile resolution. Payment terms are typically 30 - 45 days. Under both service lines in our Precision Logistics segment, our performance obligation is met, and revenue is recognized when the packages are delivered. The transaction fees consist of fixed consideration made up of amounts contractually billed to the customer. There are no variable considerations in the transaction fee, in either service line. Authentication Our Authentication segment primarily consists of anti-counterfeit and brand protection. Terms typically range between 30 and 60 days. Our performance obligation is met, and revenue is recognized when our products are shipped or delivered depending on the specific agreement with the customer. The transaction fee is made up of fixed consideration based on the related purchase order or agreement. Goodwill Goodwill represents the excess of purchase price over the fair value of net assets acquired in business combinations. 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. Under authoritative guidance, the Company first assessed qualitative factors to determine whether it was necessary to perform the quantitative goodwill impairment test. The assessment considers factors such as, but not limited to, macroeconomic conditions, data showing other companies in the industry and our share price. An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. Events or changes in circumstances which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other entity specific events and sustained decrease in share price. Basic and Diluted Net Loss per Share of Common 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. 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 three and six months ended June 30, 2025, and 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 periods presented. For the three and six months ended June 30, 2025, there were approximately 4,037,000 anti-dilutive shares consisting of 1,322,000 unvested performance restricted stock units, 224,000 restricted stock units and restricted stock awards, 140,000 shares issuable upon exercise of stock options, 1,555,000 shares issuable upon exercise of warrants, 652,000 shares issuable upon conversion of convertible debt, and 144,000 shares issuable upon conversion of preferred stock. For the three and six months ended June 30, 2024, there were approximately 8,208,000 anti-dilutive shares consisting of 2,177,000 unvested performance restricted stock units, restricted stock units, and restricted stock awards, 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. 14 Table of Contents Notes to the Consolidated Financial Statements (unaudited) Stock-Based Compensation We account for stock-based compensation under 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 method. We recognize forfeitures as they occur with a reduction in compensation expense in the period of forfeiture. For performance restricted stock units (“RSU”) with stock price appreciation targets (see Note 6 – 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 price paths over the RSU’s contractual life based on the appropriate probability distributions (which are based on commonly applied Black Scholes inputs). The fair value was determined by taking the average of the grant date fair values under each Monte Carlo simulation trial. We recognize compensation expense on a straight-line basis over the performance period and there is no ongoing adjustment or reversal based on actual achievement during the period. We account for stock-based compensation awards to non-employees in accordance with ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee 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 instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. Non-employee equity-based payments are recorded as an expense over the service period, as if we had paid cash for the services. At the end of each financial reporting period, prior to vesting or prior to the completion of the services, the fair value of the equity-based payments will be re-measured, and the non-cash expense recognized during the period will be adjusted accordingly. Since the fair value of equity-based payments granted to non-employees is subject to change in the future, the amount of the future expense will include fair value re-measurements until the equity-based payments are fully vested or the service is completed. NOTE 2 – REVENUE Revenue by Category The following series of tables present our revenue disaggregated by various categories (dollars in thousands). Schedule of disaggregation of revenue Precision Logistics Authentication Consolidated Revenue Three Months Ended June 30, Three Months Ended June 30, Three Months Ended June 30, 2025 2024 2025 2024 2025 2024 Proactive services $ 3,829 $ 3,945 $ - $ - $ 3,829 $ 3,945 Premium services 664 1,299 - - 664 1,299 Brand protection services - - 27 108 27 108 $ 4,493 $ 5,244 $ 27 $ 108 $ 4,520 $ 5,352 Precision Logistics Authentication Consolidated Revenue Six Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 2025 2024 Proactive services $ 7,523 $ 8,170 $ - $ - $ 7,523 $ 8,170 Premium services 1,399 2,688 - - 1,399 2,688 Brand protection services - - 53 253 53 253 $ 8,922 $ 10,858 $ 53 $ 253 $ 8,975 $ 11,111 15 Table of Contents Notes to the Consolidated Financial Statements (unaudited) Contract Balances The timing of revenue recognition, billings and cash collections results in unbilled revenue (contract assets) and deferred revenue (contract liabilities) on the consolidated balance sheets. Amounts charged to our clients become billable according to the contract terms, which usually consider the delivery completion. Unbilled amounts will generally be billed and collected within 30 days but typically no longer than 60 days. When we advance bill clients prior to the work being performed, generally, such amounts will be earned and recognized in revenue within twelve months. These assets and liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. Changes in the contract asset and liability balances during the six-month period ended June 30, 2025, were not materially impacted by any other factors. Applying the practical expedient in ASC Topic 606, we recognize the incremental costs of obtaining contracts (i.e. sales commissions) as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. As of June 30, 2025, we did not have any capitalized sales commissions. For all periods presented, contract liabilities were not significant. The following table provides information about contract assets from contracts with customers: Schedule of contract assets from contracts with customers Contract Asset June 30, In Thousands 2025 2024 Beginning balance, January 1 $ 733 $ 1,282 Contract asset additions 3,290 4,329 Reclassification to accounts receivable, billed to customers ( 3,699 ) ( 4,860 ) Ending balance, June 30 (1) $ 324 $ 751 ______________ (1) Included within "Unbilled revenue" on the accompanying Consolidated Balance sheets. NOTE 3 – BUSINESS COMBINATIONS 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. We 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 segment. NOTE 4 – INTANGIBLE ASSETS AND GOODWILL Goodwill Goodwill represents costs in excess of values assigned to the underlying net assets of acquired businesses. Intangible assets acquired are recorded at estimated fair value. Goodwill is deemed to have an indefinite life and is not amortized but is tested for impairment annually, and at any time when events suggest an impairment more likely than not has occurred. 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. A reporting unit is an operating segment, or one level below an operating segment, as defined by U.S. GAAP. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable but are unpredictable and inherently uncertain. Actual future results may differ from those estimates. The timing and frequency of our goodwill impairment tests are based on an ongoing assessment of events and circumstances that would indicate a possible impairment. We will continue to monitor our goodwill and intangible assets for impairment and conduct formal tests when impairment indicators are present. 16 Table of Contents Notes to the Consolidated Financial Statements (unaudited) Each of our two reportable segments represents an operating segment under ASC Topic 280, Segment Reporting . We test our goodwill at the reporting unit level, or one level below an operating segment, under ASC Topic 350, “ Intangibles - Goodwill and Other” . We determined that we have two reporting units for purposes of goodwill impairment testing, which represent our two reportable business segments, as discussed below. Changes in the carrying amount of goodwill by reportable business segment for the six months ended June 30, 2025, were as follows (in thousands): Schedule of goodwill by reportable business segment Authentication Precision Logistics Total Net book value at January 1, 2025 $ - $ 3,988 $ 3,988 2025 Activity Net book value at - - - June 30, 2025 $ - $ 3,988 $ 3,988 Intangible Assets Subject to Amortization Our intangible assets include amounts recognized in connection with patents and trademarks, capitalized software and acquisitions, including customer relationships, tradenames, developed technology and non-compete agreements. Intangible assets are initially valued at fair market value using generally accepted valuation methods appropriate for the type of intangible asset. Amortization is recognized on a straight-line basis over the estimated useful life of the intangible assets. Intangible assets with definite lives are reviewed for impairment if indicators of impairment arise. Except for goodwill, we do not have any intangible assets with indefinite useful lives. Intangible assets with finite lives are subject to amortization over their estimated useful lives. The primary assets included in this category and their respective balances were as follows (in thousands): Schedule of intangible assets subject to amortization June 30, 2025 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Useful Life (Years) Patents and Trademarks $ 1,112 $ ( 273 ) $ 839 10 Customer Relationships 1,839 ( 587 ) 1,252 7 Developed Technology 3,143 ( 1,673 ) 1,470 3 Internally Used Software 1,738 ( 327 ) 1,411 5 Non-Compete Agreement 191 ( 122 ) 69 2 Deferred Implementation 135 ( 34 ) 101 7 Total Intangible Assets $ 8,158 $ ( 3,016 ) $ 5,142 December 31, 2024 Patents and Trademarks $ 1,112 $ ( 230 ) $ 882 10 Customer Relationships 1,839 ( 495 ) 1,344 7 Developed Technology 3,143 ( 1,411 ) 1,732 3 Internally Used Software 1,418 ( 207 ) 1,211 7 Non-Compete Agreement 191 ( 103 ) 88 2 Deferred Implementation 135 ( 27 ) 108 8 Total Intangible Assets $ 7,838 $ ( 2,473 ) $ 5,365 17 Table of Contents Notes to the Consolidated Financial Statements (unaudited) Amortization expense for intangible assets was $ 548 thousand and $ 540 thousand for the six months ended June 30, 2025, and 2024, respectively. During the six months ended June 30, 2024, the Company impaired certain assets related to its Patents by $ 13 thousand, to bring the gross carrying amount related to these assets to zero, as these technologies are no longer in use. Patents and Trademarks As of June 30, 2025, our current patent and trademark portfolios consist of six granted U.S. patents and one granted European patents, two pending foreign patent applications and several foreign trademarks. The Company expects to record amortization expense of intangible assets over the next 5 years and thereafter as follows (in thousands): Schedule of future amortization expense Fiscal Year ending December 31, 2025 (six months remaining) $ 567 2026 1,099 2027 1,072 2028 696 2029 537 Thereafter 1,171 Total $ 5,142 NOTE 5 – STOCKHOLDERS’ EQUITY The Company expensed $ 41 thousand and $ 96 thousand related to restricted stock awards for the three and six months ended June 30, 2025, respectively. The Company expensed $ 127 thousand and $ 275 thousand related to restricted stock awards for the three and six months ended June 30, 2024, respectively. The Company expensed $ 173 thousand and $ 410 thousand related to restricted stock units for the three and six months ended June 30, 2025, respectively. The Company expensed $ 69 thousand and $ 333 thousand related to restricted stock units for the three and six months ended June 30, 2024, respectively. On August 25, 2023, the Company entered into a Convertible Note Purchase Agreement with certain investors for the sale of convertible promissory notes for the aggregate principal amount of $ 1,100 thousand. 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 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. On March 31, 2025, the Company issued 60,000 shares of restricted common stock, vesting immediately with a value of $ 41 thousand, for consulting services. On June 30, 2025, the Company issued an additional 60,000 shares of restricted common stock, vesting immediately with a value of $ 45 thousand, for consulting services. On April 1, 2025, the Company issued 5,792 shares of common stock upon vesting of 7,000 restricted stock units, net of 1,208 shares withheld for taxes related to a stock grant on September 1, 2024. On June 19, 2025, the Company issued 41,849 shares of common stock from treasury, upon vesting of 68,027 restricted stock units, net of 26,178 shares withheld for taxes related to a stock grant on June 19, 2023. On June 30, 2025, the Company issued 2,741 shares of common, upon vesting of 4,000 restricted stock units, net of 1,259 shares withheld for taxes related to a stock grant on January 1, 2025. 18 Table of Contents Notes to the Consolidated Financial Statements (unaudited) Non-Qualified Stock Purchase Plan On June 10, 2021, the stockholders of the Company approved a non-qualified stock purchase plan (the “2021 Plan”). The 2021 Plan provides eligible participants, including employees, directors and consultants of the Company, the opportunity to purchase shares of the Company’s common stock thereby increasing their interest in the Company’s continued success. The maximum number of common stock reserved and available for issuance under the 2021 Plan is 500,000 shares. The purchase price of shares of common stock acquired pursuant to the exercise of an option will be the lesser of 85% of the fair market value of a share (a) on the enrollment date, and (b) on the exercise date. The 2021 Plan is not intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”). 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 $ 0 thousand for the three and six months ended June 30, 2025, respectively. During the three and six months ended June 30, 2024 the company expensed $ 0 and $ 4 thousand, respectively. During the six months ended June 30, 2025 and 2024, the Company received $ 0 thousand and $ 21 thousand, respectively, in proceeds related to the 2021 Plan. The Company has currently suspended new offering periods under the 2021 Plan. Shares Held in Treasury As of June 30, 2025, and December 31, 2024, the Company had 410,757 and 290,467 shares, respectively, held in treasury with a value of approximately $ 434 thousand and $ 480 thousand, respectively. On February 29, 2024, seven participants exercised their option 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. Shares Repurchase Program In December 2023, the Company’s Board of Directors approved a 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, the Company approved an extension of the $ 0.5 million share repurchase program to repurchase shares of the Company’s common stock through December 31, 2025. The share repurchase program may be modified, suspended or discontinued at the discretion of the Board at any time. During the six months ended June 30, 2025, the Company repurchased 201,486 shares for $ 153 thousand under the Company’s current plan. NOTE 6 – STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS On November 14, 2017, the Executive Committee of the Company’s Board of Directors adopted the 2017 Equity Incentive Plan (the “2017 Plan”) which covered the potential issuance of 260,000 shares of common stock. The 2017 Plan provided that directors, officers, employees, and consultants of the Company were eligible to receive equity incentives under the 2017 Plan at the discretion of the Board or the Board’s Compensation Committee. On August 10, 2020, the Company’s Board 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 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. 19 Table of Contents Notes to the Consolidated Financial Statements (unaudited) The 2020 Plan, as amended, is administered by the Compensation Committee which determines the persons to whom awards will be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof, subject to the provisions of the plan. In connection with incentive stock options, the exercise price of each option may not be less than 100% of the fair market value of the common stock on the date of the grant (or 110% of the fair market value in the case of a grantee holding more than 10% of the outstanding stock of the Company). The aggregate fair market value (determined at the time of the grant) of stock with respect to which incentive stock options are exercisable for the first time by any individual during any calendar year (under all plans of the Company and its affiliates) shall not exceed $100 thousand, and the options in excess of $100 thousand shall be deemed to be non-qualified stock options, including prices, duration, transferability and limitations on exercise. The maximum number of shares of common stock that may be issued under the 2020 Plan pursuant to incentive stock options may not exceed, in the aggregate, 1,000,000 . The Company has issued non-qualified stock options pursuant to contractual agreements with non-employees. Options granted under the agreements are expensed when the related service or product is provided. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value represent management’s best estimates and involve inherent uncertainties and judgements. Stock Options The following table summarizes the activities for the Company’s stock options as of June 30, 2025: Schedule of stock options Options Outstanding Weighted - Average Remaining Aggregate Weighted- Contractual Intrinsic Number of Average Term Value Shares Exercise Price (in years) (in thousands) (1) Balance as of December 31, 2024 221,000 $ 3.57 0.4 $ - Granted - - Forfeited/Cancelled/Expired ( 81,000 ) 3.70 Balance as of June 30, 2025 140,000 $ 3.50 0.1 $ - Exercisable as of June 30, 2025 140,000 $ 3.50 0.1 $ - (1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for options that were in-the-money at each respective period. 20 Table of Contents Notes to the Consolidated Financial Statements (unaudited) As of June 30, 2025, the Company had no unvested stock options. During the six months ended June 30, 2025, and 2024, the Company expensed $ 0 thousand, with respect to options. As of June 30, 2025, there was $ 0 unrecognized compensation cost related to outstanding stock options. Restricted Stock Awards and Restricted Stock Units The following table summarizes the unvested restricted stock awards as of June 30, 2025: Schedule of unvested restricted stock awards Weighted - Average Number of Grant Award Shares Date Fair Value Unvested at December 31, 2024 140,000 $ 1.60 Granted - - Vested ( 140,000 ) 1.60 Balance at June 30, 2025 - $ - As of June 30, 2025, total unrecognized share-based compensation cost related to unvested restricted stock awards is $ 0 thousand. The following table summarizes the unvested restricted stock units as of June 30, 2025: Schedule of unvested restricted stock units Weighted - Average Number of Grant Unit Shares Date Fair Value Unvested at December 31, 2024 273,736 $ 1.38 Granted 110,773 1.52 Vested ( 155,038 ) 1.44 Forfeited ( 5,000 ) 1.37 Balance at June 30, 2025 224,471 $ 1.41 As of June 30, 2025, total unrecognized share-based compensation cost related to unvested time-based restricted stock units was $ 259 thousand, which is expected to be recognized over a weighted-average period of less than one 1 year. 21 Table of Contents Notes to the Consolidated Financial Statements (unaudited) The following table summarizes the unvested performance-based restricted stock units as of June 30, 2025: Schedule of unvested performance restricted stock units Weighted - Average Number of Number of Unit Shares Unit Shares Unvested at December 31, 2024 1,606,660 $ 1.37 Granted - - Forfeited/Cancelled ( 285,069 ) 2.40 Balance at June 30, 2025 1,321,591 $ 1.15 For restricted stock units with stock price appreciation targets, we applied a lattice approach that incorporated a Monte Carlo simulation, which involved random iterations that took different future price paths over the restricted stock unit’s contractual life based on the appropriate probability distributions (which are based on commonly applied Black Scholes inputs). The fair value of each grant was determined by taking the average of the grant date fair values under each Monte Carlo simulation trial. We recognize compensation expense on a straight-line basis over the derived service period and there is no ongoing adjustment or reversal based on actual achievement during the period. As of June 30, 2025, total unrecognized share-based compensation cost related to unvested performance based restricted stock units was $ 513 thousand, which is expected to be recognized over a weighted-average period of less than a year. Warrants The following table summarizes the activities for the Company’s warrants as of June 30, 2025: Schedule of warrants outstanding Number of Warrant Shares Weighted- Average Exercise Price Weighted - Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) (1) Balance as of December 31, 2024 4,628,586 4.13 1.2 Granted 1,461,896 4.00 Exercised ( 1,461,896 ) 3.22 Expired ( 3,073,379 ) 4.60 Balance as of June 30, 2025 1,555,207 $ 3.95 4.9 Exercisable as of June 30, 2025 1,555,207 $ 3.95 4.9 $ - (1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.75 for our common stock on June 30, 2025. 22 Table of Contents Notes to the Consolidated Financial Statements (unaudited) On January 13, 2025, the Company entered into a warrant inducement agreement with an institutional investor and holder of existing warrants to purchase up to 1,461,896 shares of our common stock. 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. The net proceeds from the warrant exercise was $ 4.3 million. In exchange for the investor’s exercise of the existing warrants, the Company issued new warrants to purchase an equal number of shares at an exercise price of $ 4.00 per share. The new warrants were immediately exercisable and have a contractual term of five and one-half years from the issuance date. The Company recognized the fair value of the new warrants using the Black-Scholes option pricing model. The fair value of the new warrants were estimated at $ 3,971 thousand. The transaction was treated as an equity issuance, and the fair value of the new warrants was recorded in additional paid-in capital. Direct transaction costs totaling approximately $ 352 thousand, including legal fees and placement agent commissions, were also recorded as a reduction to additional paid-in capital. On June 23, 2025, the Company’s warrants listed on Nasdaq under the symbol “VRMEW” (the “Uplist Warrants”) expired pursuant to the terms of the Form of Common Stock Purchase Warrant. On June 23, 2025, Nasdaq filed a Form 25 formalizing the suspension of the Uplist Warrants. The following table presents the assumptions used to estimate the fair value of the new warrants on January 13, 2025: Schedule of assumptions used January 13, 2025 Risk free interest rate 4.34 % Expected life 2.75 years Expected volatility 171 % Expected dividend - At-the-Market Equity Offering Program On March 6, 2025, the Company entered into an At-The-Market Sales Agreement (“ATM”) with Roth Capital Partners, LLC (“Roth”), pursuant to which the Company may issue and sell, from time to time, shares of its common stock up to an aggregate offering price of $ 15.8 million. Roth acts as the Company’s sales agent and is entitled to a 3.0 % commission on gross proceeds from sales under the program. In connection with the ATM program, the Company incurred direct legal and audit fees totaling $ 150 thousand. These costs have been recorded as deferred offering costs within other current assets and will be reclassified to additional paid-in capital on a pro-rata basis as shares are issued. Deferred offering costs will be assessed for recoverability at each reporting period. If management determines that the ATM program is not probable to be utilized, the deferred costs will be expensed to general and administrative expenses. During the three and six months ended June 30, 2025, and as of the date of this filing, we have not sold any shares of common stock through the ATM. NOTE 7— DEBT PeriShip Global is a party to a debt facility with PNC Bank, National Association (the “PNC Facility”). The PNC Facility includes a $ 1 million revolving line of credit (the “RLOC”). The RLOC has no scheduled payments of principal until maturity, and bears interest per annum at a rate equal to the sum of Daily SOFR plus 2.85% with monthly interest payments. The PNC Facility also 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. The Term 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 PNC Facility is guaranteed by VerifyMe and secured by the assets of PeriShip Global and VerifyMe. The PNC Facility includes a number of affirmative and restrictive covenants applicable to PeriShip Global, including, among others, a financial covenant to maintain a fixed charge coverage ratio of at least 1.10 to 1.00 at the end of each fiscal year, affirmative covenants regarding delivery of financial statements, payment of taxes, and establishing primary depository accounts with PNC Bank, and restrictive covenants regarding dispositions of property, acquisitions, incurrence of additional indebtedness or liens, investments and transactions with affiliates. PeriShip Global is also restricted from paying dividends or making other distributions or payments on its capital stock if an event of default (as defined in the PNC Facility) has occurred or would occur upon such declaration of dividend. 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. On February 28, 2025, we received a waiver as of December 31, 2024 for certain events of default. PeriShip Global was in compliance with all affirmative and restrictive covenants under the PNC Facility at June 30, 2025. 23 Table of Contents Notes to the Consolidated Financial Statements (unaudited) As of January 21, 2025, the Term Note balance of $ 875 thousand was paid in full and no future principal payments are due. As of June 30, 2025, $ 0 was outstanding on the RLOC. Effective October 17, 2022, the Company entered into an interest rate swap agreement, with a notional amount of $ 1,958 thousand, effectively fixing the interest rate on the Company’s outstanding debt at 7.602 % . The Company had designated the intertest rate swap, expiring September 2026, as a cash flow hedge and have applied hedge accounting. The fair value of the derivative asset and liability associated with the interest rate swap are not significant. As of January 21, 2025, we terminated our interest rate swap agreement and $12 thousand was reclassified from accumulated other comprehensive loss. Convertible Debt On August 25, 2023, the Company entered into a Convertible Note Purchase Agreement with certain investors for the sale of convertible promissory notes for the aggregate principal amount of $ 1,100 thousand of which $ 475 thousand was purchased by related parties including certain members of management and the Board of Directors. As of June 30, 2025 and December 31, 2024, $ 450 thousand was 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 25, 2024. The notes will mature on August 25, 2026, unless earlier converted or repurchased at a conversion price of $1.15 per share of common stock. The Company may not redeem the notes prior to the maturity date. For the six months ended June 30, 2025 and June 30, 2024, interest expense related to the convertible debt was $ 30 thousand and $ 44 thousand, respectively. As of January 21, 2025, $350 thousand was converted to common stock, none of which was related parties. As of June 30, 2025 and December 31, 2024, the amount outstanding on the convertible debt was $ 750 thousand and $ 1,100 thousand, respectively and included in Convertible note and Convertible note related party on the accompanying Consolidated Balance Sheets. NOTE 8— INCOME TAXES There are no taxes payable as of June 30, 2025, or December 31, 2024. Some of the federal tax carry forwards will expire at various dates through 2037. Generally, these can be carried forward and applied against future taxable income at the tax rate applicable at that time. We are currently using an effective income tax rate of 21 % for our projected available net operating loss carry-forward. No tax benefit has been recognized in the six months ending June 30, 2025, due to the uncertainty surrounding the realizability of the benefit. As of June 30, 2025, the Company had no unrecognized tax benefits. Utilization of the net operating losses (NOL) carryforwards may be subject to a substantial annual limitation as required by Section 382 of the IRC, due to ownership changes of the company that could occur in the future, as well as similar state provisions. In general, an “ownership change” as defined by Section 382 results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income. In accordance with FASB ASC 740 “ Income Taxes ”, valuation allowances are provided against deferred tax assets, if based on the weight of available evidence, some or all, of the deferred tax assets may or will not be realized. The Company did not utilize any NOL deductions for the six months ended June 30, 2025. NOTE 9– 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. 24 Table of Contents Notes to the Consolidated Financial Statements (unaudited) In addition to the base rent, real estate leases typically contain provisions for common-area maintenance and other similar services, which are considered non-lease components for accounting purposes. For our real estate leases, we apply a practical expedient to include these non-lease components in calculating the ROU asset and lease liability. For all other types of leases, non-lease components are excluded from our ROU assets and lease liabilities and expensed as incurred. We have operating leases for office facilities. We do not have any finance leases. Lease expenses are included in Segment management and technology expenses on the accompanying Consolidated Statements of Operations. The components of lease expense were as follows (in thousands): Schedule of components of lease expense Three months ended June 30, Six months ended June 30, 2025 2024 2025 2024 Operating lease cost $ 13 $ 48 $ 39 $ 95 Short-term lease cost 4 4 8 9 Total lease costs $ 17 $ 52 $ 47 $ 104 Supplemental information related to leases was as follows (dollars in thousands): Schedule of supplemental information related to leases June 30, 2025 December 31, 2024 Operating Lease right-of-use asset $ 89 $ 236 Current portion of operating lease liabilities $ 51 $ 108 Non-current portion of operating lease liabilities 43 139 Total operating lease liabilities $ 94 $ 247 Cash paid for amounts included in the measurement of operating lease liabilities $ 39 $ 126 Right-of-use assets obtained in exchange for operating lease liabilities $ - $ - Weighted-average remaining lease term for operating leases (years) 1.8 2.3 Weighted average discount rate for operating leases 7.4 % 6.0 % The following is a reconciliation of future undiscounted cash flows to the operating lease liabilities on our consolidated balance sheets as of June 30, 2025 (in thousands): Schedule of operating lease liabilities maturities Year ending December 31, 2025 (Excluding six months ended June 30, 2025) $ 27 2026 55 2027 19 Total future lease payments 101 Less: imputed interest ( 7 ) Present value of future lease payments 94 Less: current portion of lease liabilities ( 51 ) Long-term lease liabilities $ 43 25 Table of Contents Notes to the Consolidated Financial Statements (unaudited) NOTE 10– CONCENTRATIONS For the three months ended June 30, 2025, one customer represented 11 % of revenues and one customer represented 22 % of revenues for the three months ended June 30, 2024. For the six months ended June 30, 2025, one customer represented 13 % of revenues and one customer represented 22 % of revenues for the six months ended June 30, 2024. During the three and six months ended June 30, 2025, one vendor accounted for 99 % of transportation cost, in our Precision Logistics segment. As of June 30, 2025, two customers made up 26 % of accounts receivable, net. As of December 31, 2024, two customers made up 36 % of accounts receivable. NOTE 11 – SEGMENT REPORTING As of June 30, 2025, we operated through two reportable business segments: (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. The CODM assesses performance by using revenue, gross margin, operating expenses and net earnings. These metrics are analyzed by reviewing budget and forecast versus actual and prior year versus current year reporting. The various income performance measures are reviewed to ensure proper pricing strategies, effective cost controls and cash management across the organization. Reported revenue includes only the revenue generated by sales to external customers. Precision Logistics: 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 industries. Authentication: This segment specializes in anti-counterfeit and brand protection. We do not allocate the following items to the segments: general & administrative expenses and other income (expense). 26 Table of Contents Notes to the Consolidated Financial Statements (unaudited) The following table sets forth the revenue and operating results attributable to each reportable segment and includes a reconciliation of segment revenue to consolidated revenue and operating results to consolidated loss before income tax expense (in thousands): Schedule of segment reporting information Three Months Ended Three Months Ended June 30, June 30, 2025 2024 Precision Logistics Authentication Consolidated Precision Logistics Authentication Consolidated NET REVENUE $ 4,493 $ 27 $ 4,520 $ 5,244 $ 108 $ 5,352 COST OF REVENUE 2,922 7 2,929 3,247 15 3,262 GROSS PROFIT 1,571 20 1,591 1,997 93 2,090 OPERATING EXPENSES Management and technology 557 9 566 795 296 1,091 Research and development - 5 5 - 5 5 Sales and marketing 247 1 248 239 97 336 Other Segment Items 378 - 378 251 49 300 Total Segment expenses 1,182 15 1,197 1,285 447 1,732 Segment Income $ 389 $ 5 $ 394 $ 713 $ ( 355 ) $ 358 General and Administrative ( 716 ) ( 894 ) Other Income (Expense) 31 190 NET LOSS $ ( 291 ) $ ( 346 ) 27 Table of Contents Notes to the Consolidated Financial Statements (unaudited) Six Months Ended Six Months Ended June 30, June 30, 2025 2024 Precision Logistics Authentication Consolidated Precision Logistics Authentication Consolidated NET REVENUE $ 8,922 $ 53 $ 8,975 $ 10,858 $ 253 $ 11,111 COST OF REVENUE 5,881 13 5,894 6,732 29 6,761 GROSS PROFIT 3,041 40 3,081 4,126 224 4,350 OPERATING EXPENSES Management and technology 1,153 37 1,190 1,573 515 2,088 Research and development - 10 10 - 60 60 Sales and marketing 515 3 518 422 261 683 Other Segment Items 806 ( 100 ) 706 588 99 687 Total Segment expenses 2,474 ( 50 ) 2,424 2,583 935 3,518 Segment Income $ 567 $ 90 $ 657 $ 1,543 $ ( 711 ) $ 832 General and Administrative ( 1,572 ) ( 2,015 ) Other Income (Expense) 53 284 NET LOSS $ ( 862 ) $ ( 899 ) 28 Table of Contents Notes to the Consolidated Financial Statements (unaudited) NOTE 12 – SUBSEQUENT EVENTS ZenCredit Agreement On August 8, 2025, we entered into a Master Loan Agreement and Promissory Note (the “Loan Agreement”) with ZenCredit Ventures, LLC (“ZenCredit”). Pursuant to the Loan Agreement, we agreed to loan ZenCredit up to $2 million. Pursuant to the terms of the Loan Agreement, ZenCredit will pay us regular quarterly interest payments at an annual interest rate of 16 % . The term of the initial promissory note is nine months at which time all accrued principal and interest is due to us unless we elect to make an Additional Loan (as such term is defined in the Loan Agreement) subject to the terms of the Loan Agreement. On August 11, 2025, we loaned ZenCredit $ 2 million in exchange for a promissory note issued pursuant to the Loan Agreement. 29 Table of Contents ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information in this Management’s Discussion and Analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and notes. Cautionary Note Regarding Forward-Looking Statements This report includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. The words “believe,” “may,” “estimate,” “continue,” “intended,” “plan,” “could,” “target,” “potential,” “will,” “would,” “expect” and similar expressions are intended to identify forward-looking statements. All statements other than statements of historical facts contained in this report, including among others, our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. Our actual results and financial condition may differ materially from those expressed or implied in such forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in this report, our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and our other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements in this report are made only as of the date hereof or as indicated and represent our views as of the date of this report. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise, except as required by law. Overview VerifyMe, Inc. (“VerifyMe,” the “Company,” “we,” “us,” or “our”), is a logistics company that specializes in time and temperature sensitive products, as well as providing brand protection and enhancement solutions. We operate a Precision Logistics segment which includes the operations of our subsidiary 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. 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 deter counterfeit and diversion activities. Further information regarding our business segments is discussed below: Precision Logistics: The Precision Logistics segment specializes in predictive analytics for optimizing delivery of time and temperature sensitive perishable products. We manage complex industry-specific shipping logistic processes that require critical time, temperature control and handling to prevent spoilage and delayed delivery times and brand impairment. Utilizing predictive analytics from multiple data sources including flight-tracking, weather, traffic, major carrier feeds, and time of day data, we provide our clients an end-to-end vertical approach for their most critical service delivery needs. Using our proprietary IT platform, we provide real-time information and analysis to mitigate supply chain flow interruption, as well as delivering last-mile resolution for key markets, including the perishable healthcare and food industries. Through our proprietary PeriTrack® customer dashboard, we provide an integrated tool that gives our customers an in-depth look at their shipping activities and allows them access to critical information in support of the specific needs of the supply chain stakeholders. We offer post-delivery services such as customized reporting for trend analysis, system performance reports, power outage maps, and other tailored reports. Precision Logistics generates revenue from two business service models. · ProActive Service – clients pay us directly for carrier service coupled with our proactive logistics assistance. · Premium Service – clients pay us directly or through our carrier partner for our complete white-glove shipping monitoring and predictive analytics service. This service includes customer web portal access, weather monitoring, temperature control, full-service center support and last mile resolution. 30 Table of Contents Products: The Precision Logistics segment includes the following bundled services as part of our service offerings to our customers: · PeriTrack® : Our proprietary PeriTrack® customer dashboard was developed utilizing our extensive logistics operational knowledge. This integrated web portal tool gives our customers an in-depth look at their shipping activities based on real-time data. The PeriTrack® dashboard was designed to provide critical information in support of the specific needs of supply chain stakeholders and gives our customer resolution specialists a 360° view of shipping activity. PeriTrack® features tools tailored for shippers of perishable goods, which includes the In-Transit Shipment Tracker. This tool provides details on the unique shipper’s in-transit shipments, with the ability to select and analyze data on individual shipments. · Service Center : We have assembled a team of customer resolution specialists based in the U.S. This service team resolves shipping problems on behalf of our customers. The service center acts as a help desk and monitors shipping to delivery for our customers. · Pre-Transit Service : We help clients prepare their products for shipments by advising clients on packaging requirements for various types of perishable products. Each product type requires its own particular packaging to protect it during shipment, and we utilize our extensive knowledge and research to provide our customers with packaging recommendations to meet their unique needs. · Post-Delivery : We provide customized reporting for trend analysis, system performance reports, power outage maps, and many other reports to help our customers improve their processes and customer service outcomes. · Weather/Traffic Service : We have full-time meteorologists on staff to monitor weather. A package may experience a variety of weather conditions between the origin and destination, and our team actively monitors these conditions to maximize the number of timely and safely transmitted shipments. Similarly, traffic and construction also create unpredictable delays which our team works diligently to mitigate. If delays or other issues occur, we inform clients and work with them to proactively resolve such shipment issues. Authentication : The Authentication segment specializes in anti-counterfeit and brand protection. This is critical in the current landscape of increased counterfeit activity and customer expectations. VerifyMe has patented technologies that address the needs of brands. Opportunities Traditionally, most shipping businesses utilize the carrier’s data platform for tracking which generally informs the shipping enterprise, and their customers, when a package is in transit, when a package has been delivered, and some level of detail of the path which a package traveled. We believe taking the data feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor of our service center gives us a competitive advantage against other third-party platforms that solely rely on the carrier’s data feeds. We utilize a variety of input sources beyond the carrier’s data feed. Our proprietary “Predictive Analytics” technology is fed real-time meteorology data, traffic and road construction data, and power grid information to help predict issues before they happen. If an alert is created the shipper and our service center will work to address the issue and save the perishable product from spoiling, saving the shipper significant costs and reducing the need to replace products that are no longer viable. We have meteorologists on staff that track world-wide weather patterns to address predicted issues before they happen. We believe the company has two significant areas of opportunity. First, our services are specifically designed to address the needs of small and medium size agriculture, food and beverage companies. Second, the pharmaceutical and healthcare industries represent significant opportunities due to the enhanced tracking and customer service associated with distribution of these products. We are focusing our sales emphasis on those industries. Building logistics infrastructure is a capital-intensive process as the investment is locked in for a considerably long period. Due to the current economic environment, and our cost competitive offering, we believe companies may opt to outsource their precision logistics services to reduce their operational costs. The outsourcing of supply chain related and other logistics operations to service providers such as ours allows companies to improve the efficiency of their businesses by focusing their resources on core competencies. We believe outsourcing this function to our Precision Logistics segment provides the ideal solution for all parties involved. Partnerships: Precision Logistics has a direct partnership with a major global carrier company and has data feeds directly from the carrier into our proprietary logistics optimization software which provides shippers much more detailed information and predictive analytics on their shipment versus a standard shipping code look up which is provided by the carrier. In addition to relying on this strategic partner for shipping services we have a service agreement pursuant to which this strategic partner resells our services to its customers under a “white label” arrangement, which we refer to as our Premium service. Under this arrangement we provide our logistics services to our strategic partner’s customers in exchange for a pre-negotiated service fee per shipment. Our strategic partner has begun to provide its own service offerings to its customers and while we will continue to offer our Premium services, we expect our partner will prefer to offer their solution to customers as the primary recommendation and our solution will be offered as a secondary solution. This does not affect our Proactive services, and we expect to see growth under that service offering as we focus on providing Proactive services to customers directly. 31 Table of Contents Our Authentication segment has a contract with HP Indigo, and a strategic partnership with INX, the third largest producer of inks in North America. We believe these partnerships can be used to enable brand owners to securely prevent counterfeiting. Current Economic Environment In response to market conditions and lower demand some carriers have implemented strategies to address a potential global recession. The major carrier that PeriShip Global partners with laid out steps it has taken to significantly reduce permanent costs by the end of its 2025 fiscal year in response to these market conditions and lower demand. In mid-December 2024, the carrier forecasted flat revenue year over year for 2025. We have seen a softening in demand for some services related to high-end perishable items which seem to be impacted by reduced discretionary spending by U.S. consumers. While a recession, whether global or more localized to the U.S., may decrease the demand for our services that are more discretionary in nature, we believe that the internal cost cutting measures, if implemented by the major global carrier, may benefit out-sourced service providers. We are working with this major global carrier to address their small and medium-sized business clients, which we believe is an underserved market and presents growth opportunities for our Precision Logistics segment. However, the U.S. presidential administration has imposed tariffs on goods imported into the U.S. In response, several foreign governments have imposed new tariffs on certain goods imported from the U.S. and additional retaliatory measures against U.S. goods are expected. These or additional changes in U.S. or international trade policy, along with continued uncertainty surrounding such policies, could lead to further weakened business conditions. We can provide no assurances that a decline in discretionary consumer spending will not have a negative impact on our revenues and results of operations. Seasonality We experience seasonal fluctuations in our net revenues from sales in our Precision Logistics segment. Revenues from sales are generally higher in the fourth quarter than in other quarters due to increased holiday shipments. The seasonality of our business may cause fluctuations in our quarterly operating results. Recent Developments UPS Agreements On July 29, 2025, PeriShip Global entered into (i) a UPS Digital Channel Program Agreement (the “Program Agreement”) with United Parcel Service, Inc., an Ohio corporation (“UPS Ohio”) and UPS Worldwide Forwarding, Inc., a Delaware corporation (“UPS WWF”), and (ii) a UPS Partner API Access Agreement (the “Integration Agreement” and together with the Program Agreement, the “Agreements”) with UPS Digital, Inc., (“UPS Digital” and collectively with UPS Ohio and UPS WWF, “UPS”). The Agreements provide Periship Global access to designated UPS services at promotional rates as part of a specialized logistics management services for time-sensitive and perishable shipments, including proactive monitoring, weather tracking, and issue resolution through certain UPS digital channel program applications. Pursuant to the Integration Agreement, UPS will allow Periship Global to develop Interfaces to certain UPS APIs, access UPS Access Services and the use of UPS Information (as such terms are defined in the Integration Agreement). The Agreements have a term of three years, subject to customary termination and renewal provisions. ZenCredit Agreement On August 8, 2025, we entered into a Master Loan Agreement and Promissory Note (the “Loan Agreement”) with ZenCredit Ventures, LLC (“ZenCredit”). Pursuant to the Loan Agreement, we agreed to loan ZenCredit up to $2 million. Pursuant to the terms of the Loan Agreement, ZenCredit will pay us regular quarterly interest payments at an annual interest rate of 16%. The term of the initial promissory note is nine months at which time all accrued principal and interest is due to us unless we elect to make an Additional Loan (as such term is defined in the Loan Agreement) subject to the terms of the Loan Agreement. On August 11, 2025, we loaned ZenCredit $2 million in exchange for a promissory note issued pursuant to the Loan Agreement. Nasdaq Deficiency Notice On April 3, 2025, we received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based on the closing bid price of our common stock for 30 consecutive business days, we no longer meet Nasdaq Listing Rule 5550(a)(2), which requires listed companies to maintain a minimum bid price of at least $1 per share (the “Minimum Bid Price Rule”). The Nasdaq Listing Rules provide a compliance period of 180 calendar days, or until September 30, 2025, in which to regain compliance with the Minimum Bid Price Rule. If we evidence a closing bid price of at least $1 per share for a minimum of 10 consecutive business days during the 180-day compliance period, we will automatically regain compliance. If we fail to regain compliance with the Minimum Bid Price Rule, Nasdaq will provide notice that our common stock will be subject to delisting. We would then be entitled to appeal that determination to a Nasdaq hearings panel. 32 Table of Contents This notification has no immediate effect on the listing of our common stock on Nasdaq. We intend to monitor the closing bid price of our common stock and consider our available options in the event the closing bid price of our common stock remains below $1 per share. Expiration of Uplist Warrants On June 23, 2025, the Company’s warrants listed on Nasdaq under the symbol “VRMEW” (the “Uplist Warrants”) expired pursuant to the terms of the Form of Common Stock Purchase Warrant. On June 23, 2025, Nasdaq filed a Form 25 formalizing the suspension of the Uplist Warrants. Results of Operations Comparison of the three months ended June 30, 2025, and 2024 The following discussion analyzes our results of operations for the three months ended June 30, 2025 and 2024. Revenue Three Months Ended June 30, 2025 2024 Precision Logistics $ 4,493 $ 5,244 Authentication 27 108 Total Revenue $ 4,520 $ 5,352 Consolidated revenue decreased $832 thousand or 16% during the second quarter of 2025 compared to the second quarter of 2024. The decrease is primarily due to a $585 thousand decrease from a discontinued contract with one customer in our Premium services, a $495 thousand decrease related to discontinued services with two customers in our Proactive services, partially offset by increased revenues from new and existing customers in the Precision Logistics segment. The decrease in revenue in our Authentication segment is primarily due to the divestiture of our Trust Codes Global business in December 2024. Gross Profit Three Months Ended June 30, 2025 2024 % of Revenue % of Revenue Precision Logistics $ 1,571 35 % $ 1,997 38 % Authentication 20 74 % 93 86 % Total Gross Profit $ 1,591 35 % $ 2,090 39 % Gross profit for the three months ended June 30, 2025, was $1,591 thousand, compared to $2,090 thousand for the three months ended June 30, 2024. The resulting gross margin was 35% for the three months ended June 30, 2025, compared to 39% for the three months ended June 30, 2024. The gross profit decrease relates primarily to the decreased Premium services revenue which has higher margins, and the Authentication decrease from the divestiture of our Trust Codes Global business in December 2024. The Proactive services gross margin percentage improved in Q2 2025 compared to Q2 2024. Segment Management and Technology Segment management and technology expenses decreased by $597 thousand to $920 thousand for the three months ended June 30, 2025, compared to $1,517 thousand for the three months ended June 30, 2024. The decrease relates primarily to the divestiture of Trust Codes Global in December 2024, a decrease in management wages and severance expense, and the capitalization of development expense related to internally used software in our Precision Logistics segment. General and Administrative Expenses General and administrative expenses decreased by $178 thousand to $716 thousand for the three months ended June 30, 2025, compared to $894 thousand for the three months ended June 30, 2024. The decrease relates primarily to a decrease in stock-based compensation from $358 thousand for the three months ended June 30, 2024 to $186 thousand for the three months ended June 30, 2025. 33 Table of Contents Research and Development Research and development expenses were $5 thousand for the three months ended June 30, 2025, and 2024, respectively. Sales and Marketing Sales and marketing expenses increased by $62 thousand to $272 thousand for the three months ended June 30, 2025, compared to $210 thousand for the three months ended June 30, 2024. The increase is primarily related to a one-time reduction in stock compensation in Precision Logistics for the three months ended June 30, 2024. This improvement was partially offset by a decrease in headcount and travel expense in the Authentication segment. Interest Income(Expense), net Interest income, net was $32 thousand for the three months ended June 30, 2025, compared to interest expense, net of $42 thousand for the three months ended June 30, 2024. This decrease primarily relates to the repayment of the Term Note in the first quarter of 2025, reducing the interest expense as well as the increase in interest income from the Company’s investment of proceeds from the warrants exercise in January 2025. Net Loss Consolidated net loss for the three months ended June 30, 2025, and 2024 was $291 thousand and $346 thousand, respectively. The decreased loss relates primarily to the improvement in loss before other expense noted above, partially offset by the fair value gain on contingent consideration for the three months ended June 2024. The resulting consolidated loss per share for the three months ended June 30, 2025, and three months ended June 30, 2024, was $0.02 and $0.03 per basic and diluted share, respectively. Comparison of the six months ended June 30, 2025, and 2024 The following discussion analyzes our results of operations for the six months ended June 30, 2025, and 2024. Revenue Six Months Ended June 30, 2025 2024 Precision Logistics $ 8,922 $ 10,858 Authentication 53 253 Total Revenue $ 8,975 $ 11,111 Consolidated revenue decreased $2,136 thousand for the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The decrease is primarily due to the decreased demand across several of our Proactive services customers, one customer’s shift to use their cold chain strategy, and a discontinued contract with one customer in our Premium services. The decrease in revenue in our Authentication segment is primarily due to the divestiture of our Trust Codes Global business in December 2024. Gross Profit Six Months Ended June 30, 2025 2024 % of Revenue % of Revenue Precision Logistics $ 3,041 34 % $ 4,126 38 % Authentication 40 75 % 224 89 % Total Gross Profit $ 3,081 34 % $ 4,350 39 % Gross profit for the six months ended June 30, 2025, was $3,081 thousand, compared to $4,350 thousand for the six months ended June 30, 2024. The resulting gross margin was 34% for the six months ended June 30, 2025, compared to 39% for the six months ended June 30, 2024. The gross profit decrease relates to the decrease in Premium services revenue which has higher margins than Proactive services, and the decrease in Authentication revenue from the divestiture of our Trust Codes Global business in December 2024. Our Proactive services gross margin percentage improved in 2025 compared to 2024. 34 Table of Contents Segment Management and Technology Segment management and technology expenses decreased by $1,014 thousand to $1,846 thousand for the six months ended June 30, 2025, compared to $2,860 thousand for the six months ended June 30, 2024. The decrease relates primarily to the divestiture of Trust Codes Global in December 2024 and gain on derecognized liability in our Authentication segment and a decrease in management wages and severance expense in our Precision Logistics segment. General and Administrative Expenses General and administrative expenses decreased by $443 thousand to $1,572 thousand for the six months ended June 30, 2025, compared to $2,015 thousand for the six months ended June 30, 2024. The decrease relates primarily to a decrease in stock-based compensation from $724 thousand for the six months ended June 30, 2024 to $418 thousand for the six months ended June 30, 2025. Research and Development Research and development expenses were $10 thousand and $60 thousand for the six months ended June 30, 2025, and 2024, respectively. Sales and Marketing Sales and marketing expenses decreased by $30 thousand to $568 thousand for the six months ended June 30, 2025, compared to $598 thousand for the six months ended June 30, 2024. The decrease is primarily related to a reduction in employees and consultants in our Authentication segment partially offset by an increase in employees in our Precision Logistics segment and a one-time reduction in stock compensation in 2024. Interest Income(Expense), net Interest income was $54 thousand for the six months ended June 30, 2025, compared to interest expense of $80 thousand for the six months ended June 30, 2024. This decrease primarily relates to the repayment of the Term Note in the first quarter of 2025 reducing interest expense as well as the increase in interest income from the Company’s investment of the proceeds from the warrants exercise in January 2025. Net Loss Consolidated net loss for the six months ended June 30, 2025, and 2024 was $862 thousand and $899 thousand, respectively. The decreased loss relates primarily to the improvement in loss before other expense noted above, partially offset by the fair value gain on contingent consideration for the six months ended June 30, 2024. The resulting consolidated loss per share for the six months ended June 30, 2025, and six months ended June 30, 2024, was $0.07 and $0.09 per basic and diluted share, respectively. Liquidity and Capital Resources Our operations provided $306 thousand of cash during the six months ended June 30, 2025, compared to $312 thousand during the comparable period in 2024. Cash used by investing activities was $332 thousand during the six months ended June 30, 2025, compared to $191 thousand during the six months ended June 30, 2024. The increase in spend in investing activities relates primarily to increased capitalized software costs in the six months ended June 30, 2025. Cash provided by financing activities during the six months ended June 30, 2025, was $3,270 thousand compared to cash used in financing activities during the six months ended June 30, 2024 of $313 thousand. The increased cash primarily relates to proceeds from the exercise of warrants, partially offset by the repurchase of shares under the repurchase program and repayment of the Term Note during the six months ended June 30, 2025. 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 per share. The new warrant was immediately exercisable upon issuance and has a term of five and one-half years from the issuance date. 35 Table of Contents The Company recognized the fair value of the new warrants, calculated using the Black-Scholes option pricing model, as $3,971 thousand. The transaction was treated as an equity issuance, and the fair value of the new warrants was recorded in additional paid-in capital. Direct transaction costs totaling approximately $352 thousand, including legal fees and placement agent commissions, were also recorded as a reduction to additional paid-in capital. On March 6, 2025, the Company entered into an ATM with Roth pursuant to which the Company may issue and sell, from time to time, shares of its common stock up to an aggregate offering price of $15.8 million. Roth acts as the sales agent and is entitled to a 3.0% commission on gross proceeds from sales under the program. In connection with the ATM, we incurred direct legal and audit fees totaling $150 thousand. These costs have been recorded as deferred offering costs within other current assets and will be reclassified to additional paid-in capital and amortized over a period of one year once shares are issued. Deferred offering costs will be assessed for recoverability at each reporting period. If management determines that the ATM program is not probable to be utilized, the deferred costs will be expensed to general and administrative expenses. During the six months ended June 30, 2025, and as of the date of this filing, we have not sold any shares of common stock through the ATM. On September 22, 2022, we entered into the PNC Facility with PNC Bank, National Association. The PNC Facility includes a $1 million RLOC. The RLOC has no scheduled payments of principal until maturity, and bears interest per annum at a rate equal to the sum of Daily SOFR plus 2.85% with monthly interest payments. The RLOC is guaranteed by the Company and secured by the assets of PeriShip Global and the Company. As of June 30, 2025, $0 was outstanding on the RLOC. The PNC Facility included a four-year Term Note for $2 million which matured in September of 2026 and required equal quarterly payments of principal and interest. The Term Note incurred interest per annum at a rate equal to the sum of Daily SOFR plus 3.1%. The PNC Facility is guaranteed by VerifyMe and secured by the assets of PeriShip Global and VerifyMe. As of January 21, 2025, the Term Note was paid in full and no future principal payments are due. We believe that our cash and cash equivalents will fund our operations beyond the next 12 months. We may issue additional debt or equity as we grow our business which we expect to grow organically, and if the opportunity arises, through key acquisitions that will help accelerate the growth of our business. Off-Balance Sheet Arrangements None. Critical Accounting Policies and Estimates None. Recently Adopted Accounting Pronouncements Recently adopted accounting pronouncements are discussed in Note 1 – Summary of Significant Accounting Policies in the notes accompanying the financial statements. 36 Table of Contents ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not Applicable. ITEM 4. CONTROLS AND PROCEDURES. (a) Evaluation of Disclosure Controls and Procedures 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 June 30, 2025, the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2025, 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) Changes in Internal Control over Financial Reporting There have been no other changes in our internal controls over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) during the three months ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 37 Table of Contents PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None. ITEM 1A. RISK FACTORS. For a discussion of the Company’s potential risks or uncertainties, please see “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC, and “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein. There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent Quarterly Reports on Form 10-Q, except as noted herein. We are not currently in compliance with the Nasdaq continued listing requirements. If we are unable to regain compliance with Nasdaq’s listing requirements, our common stock will be delisted, which would negatively impact our common stock’s market price and liquidity and reduce our ability to raise capital. On April 3, 2025, we received a deficiency letter from Nasdaq notifying us that, because the bid price of our common stock closed below $1.00 per share for 30 consecutive business days, we were no longer in compliance with the Nasdaq’s Minimum Bid Price Rule, which is a requirement for continued listing on Nasdaq. We cannot assure you that we will be able to regain compliance with the Minimum Bid Price Rule and maintain compliance with Nasdaq’s other continued listing standards. Accordingly, our common stock could be delisted from Nasdaq. We and holders of our common stock could be materially adversely impacted if our common stock is delisted from Nasdaq. In particular: ● we may be unable to raise equity capital on acceptable terms or at all; ● we may lose the confidence of our business partners, which would jeopardize our ability to continue our business as currently conducted; ● the price of our common stock will likely decrease as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws; ● holders may be unable to sell or purchase our common stock when they wish to do so; ● we may become subject to stockholder litigation; ● we may lose the interest of institutional investors in our common stock; ● we may lose media and analyst coverage; ● our common stock could be considered a “penny stock,” which would likely limit the level of trading activity in the secondary market for our common stock; and ● we would likely lose any active trading market for our common stock, as it may only be traded on one of the over-the-counter markets, if at all. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. On June 30, 2025, the Company issued 60,000 shares of common stock for services rendered to the Company pursuant to a Consulting Agreement between the Company and Pentant LLC, effective November 15, 2023, as amended June 30, 2024 (the “Consulting Agreement”). The securities issued pursuant to the Consulting Agreement were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering. 38 Table of Contents Share Repurchase Plan ISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Units) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (In thousands) 04/01/2025-04/30/2025 - - - $483 05/01/2025-05/31/2025 89,992 $0.74 89,992 $417 06/01/2025-06/30/2025 111,494 $0.78 111,494 $330 Total 201,486 $0.76 201,486 $330 (1) In December 2023, the Company’s Board of Directors approved a 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, the Company approved an extension of the $0.5 million share repurchase program to repurchase shares of the Company’s common stock through December 31, 2025. The share repurchase program may be modified, suspended or discontinued at the discretion of the Board at any time. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. ITEM 5. OTHER INFORMATION. During the three months ended June 30, 2025, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K. ITEM 6. EXHIBITS Exhibit No. Description 3.1* Amended and Restated Bylaws of VerifyMe, Inc., as amended through July 8, 2025. 31.1* Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1** Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS* XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document. 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document. 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document. 104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). *Filed herewith **Furnished herewith 39 Table of Contents SIGNATURE S Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VERIFYME, INC. Date: August 13, 2025 By: /s/ Adam Stedham Adam Stedham Chief Executive Officer and President (Principal Executive Officer) Date: August 13, 2025 By: /s/ Jennifer Cola Jennifer Cola Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 40