Filed 2026-03-31 · Period ending 2025-12-31 · 70,841 words · SEC EDGAR
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# VerifyMe, Inc. (VRME) — 10-K
**Filed:** 2026-03-31
**Period ending:** 2025-12-31
**Accession:** 0001214659-26-004051
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/1104038/000121465926004051/)
**Origin leaf:** d10851412ee09f34f4838e4a8a69f04f5f65e334062fb5315bacaddf35339b40
**Words:** 70,841
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**
UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**
**WASHINGTON, D.C. 20549**
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**FORM 10-K**
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**(Mark One)**
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
**For the fiscal year ended December 31, 2025**
**OR**
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. | |
**For the transition period fromto**
**Commission File Number 001-39332**
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**VERIFYME, INC.**
**(Exact Name of Registrant as Specified in Its
Charter)**
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Nevada |
23-3023677 | |
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(State or Other Jurisdiction of
Incorporation or Organization) |
(I.R.S. Employer
Identification No.) | |
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801 International Parkway, Fifth Floor
Lake Mary, FL |
32746 | |
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(AddressofPrincipalExecutiveOffices) |
(Zip Code) | |
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(585) 736-9400 |
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(Registrants Telephone Number, Including Area Code) |
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Securities registered pursuant to Section 12(b)
of the Act:
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Title of each class |
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Trading
Symbol(s) |
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Name of each exchange on which registered | |
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Common Stock, par value $0.001 per share |
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VRME |
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The Nasdaq Capital Market | |
Securities registered pursuant to Section12(g)
of the Act: **None**
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes
Nox
Indicate by check mark if the
registrant is not required to file reports pursuant to Section13 or Section15(d) of the Act.YesNox
Indicate by check mark whether
the registrant (1)has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12months (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 90days.Yesx
No
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Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule405 of RegulationS-T
(232.405 of this chapter) during the preceding 12months (or for such shorter period that the registrant was required
to submit such files).YesxNo
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.
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Large accelerated filer |
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Accelerated filer | |
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Non-accelerated filer x |
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Smaller reporting company x | |
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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 has filed a report on and attestation to its managements assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.
If securities are registered
pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether
any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).
Indicate by check mark whether
the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).
Yesx No
The aggregate market value of the voting stock
held by non-affiliates of the registrant was $7,959,516 asofJune 30, 2025. The market value calculation was determined using
the closing sale price of the registrants common stock on June 30, 2025, as reported on the Nasdaq Capital Market.
The registrant had 13,119,065 shares of common
stock outstanding as of the close of business on March 23, 2026.
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**TABLE OF CONTENTS**
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PART I |
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Item1. |
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Business |
2 | |
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Item1A. |
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Risk Factors |
8 | |
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Item1B. |
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Unresolved Staff Comments |
27 | |
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Item 1C. |
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Cybersecurity |
27 | |
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Item 2. |
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Properties |
27 | |
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Item 3. |
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Legal Proceedings |
28 | |
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Item 4. |
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Mine Safety Disclosures |
28 | |
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PARTII |
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Item 5. |
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Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities |
29 | |
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Item 6. |
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[Reserved] |
29 | |
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Item 7. |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
29 | |
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Item 7A. |
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Quantitative and Qualitative Disclosures About Market Risk |
39 | |
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Item 8. |
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Financial Statements and Supplementary Data |
39 | |
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Item 9. |
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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
39 | |
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Item 9A. |
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Controls and Procedures |
39 | |
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Item 9B. |
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Other Information |
39 | |
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Item 9C. |
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Disclosure Regarding Foreign Jurisdictions that prevent Inspection |
39 | |
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PARTIII |
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Item 10. |
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Directors, Executive Officers and Corporate Governance |
40 | |
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Item 11. |
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Executive Compensation |
45 | |
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Item 12. |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
50 | |
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Item 13. |
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Certain Relationships and Related Transactions, and Director Independence |
53 | |
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Item 14. |
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Principal Accountant Fees and Services |
53 | |
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PARTIV |
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Item 15. |
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Exhibits and Financial Statement Schedules |
54 | |
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Item 16. |
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Form 10-K Summary |
56 | |
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**Cautionary
Note Regarding Forward-Looking Statements**
****
This Annual Report on Form 10-K (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, currently, establishing, anticipate, intend, should,
plan, could, target, potential, is likely, will, 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. Important factors that could cause our actual results and financial condition to differ materially from those indicated in
the forward-looking statements include, but are not limited to, those factors set forth under Item 1A - Risk Factors and those other risks
and uncertainties detailed in our periodic reports and registration statements filed with the Securities and Exchange Commission (SEC).
We caution that these risk factors may not be exhaustive.
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 or as indicated. 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.
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**PART I**
**ITEM1.BUSINESS.**
**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 LLC (PeriShip Global)and accounts for nearly all VerifyMe revenue, and an Authentication
segment. Through our Precision Logistics segment, we provide 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 are 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.
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| ProActive Service clients pay us directly for carrier service coupled with our proactive
logistics assistance. | |
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| Premium Services clients use our shipping monitoring,
predictive analytics, or exception management services. Shippers use their own transportation rates, provided and charged directly by
their carrier, with our added services charged (i) directly by the carrier, under a white label
arrangement, which we refer to as our Premium service, or (ii) by us, which we refer to as our Direct Premium service. These services
include customer web portal access, weather monitoring, temperature control, full-service center support and last mile resolution. | |
As discussed in the section Partnerships
below, we ceased providing ProActive services to our prior carrier partner in September 2025. In February 2026, we ceased providing Premium
services to our prior carrier partner. While we no longer provide ProActive and Premium services to our prior carrier partner we can and
continue to provide Direct Premium services to our customers who use our prior carrier partner for their shipping needs.
Beginning in September 2025, we began providing
ProActive services to our new Strategic Partner. We are currently establishing the ability to offer our Premium
services to our Strategic Partner. We expect to begin broadly offering Premium and Direct Premium services to customers of our new Strategic
Partner in the second quarter of 2026.
**Products:** The Precision Logistics segment
includes the following bundled services as part of our service offerings to our customers:
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| 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 shippers
in-transit shipments, with the ability to select and analyze data on individual shipments. | |
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| 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. | |
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| 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. | |
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| 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. | |
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| Table of Contents | |
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| 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. We are not actively pursuing business in the Authentication segment but continue
to service existing customers.
****
**Recent Developments**
**Merger Agreement**
On January 2, 2026, we entered into a letter agreement
(the LOI) with Open World Ltd., a Cayman Islands exempted company (Open World), regarding a proposed merger
transaction. On February 11, 2026, we entered into an Agreement and Plan of Merger (the Merger Agreement) with VRME Subsidiary
Corp., a Nevada corporation and our wholly owned subsidiary (the Merger Sub) and Open World. Upon the terms and subject
to the satisfaction of the conditions described in the Merger Agreement, Merger Sub will merge with and into Open World, Merger Sub will
cease to exist and Open World will become our wholly-owned subsidiary (the Merger). At the effective time of the Merger
(the Effective Time), (i) each holder of ordinary shares of Open World outstanding immediately prior to the Effective Time
(excluding holders of Excluding Shares and Dissenting Shares, as defined in the Merger Agreement) will be entitled to receive the number
of shares of our common stock, based on the Exchange Ratio as defined in the Merger Agreement (the Exchange Ratio), (ii)
each investor in Open World Simple Agreements for Future Equity (Open World SAFEs) outstanding immediately prior to the
Effective Time will be entitled to receive a right to a number of shares of our common stock based on the Exchange Ratio and (iii) any
outstanding option to purchase shares of Open World shall be converted into an option to purchase the number of shares of our common stock
based on the Exchange Ratio.
Immediately following the closing of the Merger
(the Closing), our pre-Closing stockholders are expected to collectively retain approximately 10% of the post-Closing aggregate
number of shares of our common stock and holders of Open World ordinary shares and Open World SAFEs will receive as merger consideration
newly issued shares of our common stock representing approximately 90% of the post-Closing aggregate number of shares of our common stock.
The Merger Agreement contains customary representations,
warranties and covenants, including, among others, (i) covenants requiring each of us and Open World to conduct its business in the ordinary
course during the period between the execution of the Merger Agreement and the Closing or earlier termination of the Merger Agreement,
subject to certain exceptions, (ii) covenants prohibiting us and Open World from engaging in certain kinds of transactions during such
period (without the prior written consent of the other), and (iii) a covenant restricting us and Open World from activities relating to
the soliciting, initiating, encouraging, inducing or facilitating the communication, making, submission or announcement of any alternative
acquisition proposals or inquiries.
The Merger Agreement also requires us, in cooperation
with the Open World, to prepare and file with the SEC a registration statement on Form S-4 that will contain a proxy statement relating
to a Company stockholder meeting to be held in connection with the Merger (the Registration Statement) and pursuant to which
our shares of common stock will be registered under the Securities Act of 1933, as amended (the Securities Act), to be issued
by virtue of the Merger and the contemplated transactions thereunder. We shall use its reasonable best efforts to (i) cause the Registration
Statement to comply with applicable rules and regulations promulgated by the SEC, (ii) cause the Registration Statement to become effective
as promptly as practicable, and (iii) keep the Registration Statement effective as long as is necessary to consummate the Merger and the
contemplated transactions thereunder. In addition, under the Merger Agreement, the parties agreed to other customary provisions including
(i) obtaining requisite stockholder approval to consummate the Merger and the contemplated transactions thereunder, (ii) obtaining regulatory
approvals from relevant governmental authorities, (iii) indemnifying our directors and officers for a period of six years following the
Closing, (iv) completing certain disclosure obligations required by the SEC and listing requirements promulgated by the Nasdaq Capital
Market (Nasdaq), (v) electing or appointing to the positions of officers and directors of Company and the surviving corporation
certain persons designated by Open World, and (vi) executing employment agreements between us and Adam Stedham and Jennifer Cola.
Pursuant to Merger Agreement, we have also agreed
to enter into a Registration Rights Agreement and an Exchange Agent Agreement in forms reasonably acceptable to us and Open World at Closing.
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Closing of the Merger is subject to various customary
closing conditions. Each partys obligations to effect the Merger and otherwise consummate the contemplated transactions thereunder
are conditioned upon (i) the effectiveness of the Registration Statement on Form S-4, (ii) expiration or termination of applicable regulatory
waiting periods, (iii) no restraints from any governmental authority preventing the consummation of the contemplated transactions under
the Merger Agreement, (iv) us and Open World obtaining the respective requisite stockholder votes to consummate the transactions contemplated
by the Merger Agreement, (v) us causing our PeriShip subsidiary to terminate its current credit facility, (vi) us effectuating a reverse
stock split upon the request of Open World, (vii) Nasdaqs approval of our Nasdaq listing application for the post-Merger entity,
(viii) receipt of written approval of the Merger by the Cayman Islands Trade and Business Licensing Board, and (ix) execution of the Registration
Rights Agreement. Our and Merger Subs obligations to effect the Merger and otherwise consummate the contemplated transactions thereunder
are further conditioned upon customary closing conditions. Open Worlds obligations to effect the Merger and otherwise consummate
the contemplated transactions thereunder are further conditioned upon customary closing conditions as well as (i) us having Closing Net
Cash, as defined in the Merger Agreement, of no less than $1 million, and (ii) our common stock having not been delisted from Nasdaq.
In connection with and subject to the Closing
of the Merger, outstanding time-based and performance-based restricted stock awards and restricted stock units held by certain of our
employees and directors at Closing will accelerate and vest, regardless of any performance conditions, at the Effective Time.
At the Closing of the Merger, pursuant to the
Merger Agreement, each of David Edmonds, Marshall Geller, Howard Goldberg, and Adam Stedham are expected to resign as directors of our
board of directors (our Board of Directors).
The foregoing description of the Merger Agreement
does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the full text of the Merger Agreement.
**Stockholder Support Agreements**
In connection with the Merger Agreement, certain
of our stockholders representing approximately 14% or more of the voting power in the aggregate of our common stock, including our directors
and officers (the Supporting Stockholders), executed Stockholder Support Agreements (the Support Agreements),
pursuant to which they agreed to vote their shares of our common stock, including any shares of our capital stock or other equity securities
that they purchase or with respect to which they otherwise acquire sole or shared voting power (including any proxy) (the Support
Agreement Shares) after the execution of Support Agreement and prior to its expiration pursuant to its terms, in favor of the issuance
of our common stock in accordance with Nasdaq Listing Rule 5635 (the Issuance Proposal), (ii) any matter that could reasonably
be expected to facilitate the Issuance Proposal, (iii) against any other proposed action, agreement, transaction or other matter that
is intended to, or would reasonably be expected to, impede, interfere with, delay, postpone, discourage or adversely affect the approval
or consummation of the Issuance Proposal or the consummation of any or all of the other transactions contemplated by the Merger Agreement;
and (iv) to approve any proposal to adjourn or postpone the meeting to a later date, if there are not sufficient votes for the approval
of the Issuance Proposal on the date on which such meeting is held.
The Support Agreements also contain restrictions
on transfer of Support Agreement Shares held by the Supporting Stockholders. The Support Agreements will terminate upon the earliest to
occur of the following events: (a) the effective time of the approval of the Issuance Proposal, (b) the termination of the Merger Agreement
in accordance with its terms or (c) upon mutual written agreement of the parties to the Support Agreements. The foregoing description
of the Support Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the full
text of the form of Support Agreement.
**Amended and Restated Employment Agreement
with Adam Stedham**
In connection with the Merger Agreement, on February
11, 2026, we entered into an Amended and Restated Employment Agreement with Adam Stedham, effective as of the Effective Time of the Merger.
As of the Effective Time, and subject to the Closing of the Merger, Mr. Stedham is expected to resign as a director, Chief Executive Officer
and President to become the President of Precision Logistics (the Stedham Employment Agreement). Mr. Stedhams expected
resignation as our director, Chief Executive Officer and President is not the result of any disagreement with us on any matter relating
to our operations, policies or practices.
Pursuant to the Stedham Employment Agreement,
should it become effective, Mr. Stedham will receive an annual base salary of $300,000 and be eligible for an annual bonus for each calendar
year, with a potential up to 50% of his base salary based on performance goals set by the Board of Directors each year. Mr. Stedham shall
be eligible to receive equity-based compensation award(s), as determined by the Board of Directors (or a subcommittee thereof), from time
to time.
The Stedham Employment Agreement is for an initial
term of one year and will thereafter be at-will, and may be terminated by either party during the initial term. If terminated
by Mr. Stedham for good reason, or by us without cause prior to the 6-month anniversary of the Effective Time, then Mr. Stedham shall
be entitled to an amount equal to his Base Salary that would have otherwise been paid until the conclusion of the initial term. If the
qualifying termination occurs after the 6-month anniversary of the Effective Time, then Mr. Stedham shall be entitled to an amount equal
to six (6) months of his Base Salary.
**Employment Agreement with Jennifer Cola**
In connection with the Merger Agreement, on February
11, 2026, we entered into an Employment Agreement with Jennifer Cola, effective as of the Effective Time. As of the Effective Time, and
subject to the Closing of the Merger, Ms. Cola is expected to continue in her position as our Chief Financial Officer (the Cola
Employment Agreement).
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Pursuant to the Cola Employment Agreement, should
it become effective, Ms. Cola will receive an annual base salary of $180,000 and be eligible for an annual bonus for each calendar year
ending during the employment period, with a potential up to 50% of her base salary based on performance goals set by the Board of Directors
each year. Ms. Cola shall be eligible to receive equity-based compensation award(s), as determined by the Board of Directors (or a subcommittee
thereof), from time to time. In addition, in connection with and subject to entering into the Cola Employment Agreement, the Compensation
Committee of the Board of Directors approved the grant on the Effective Time of 130,000 restricted stock awards under our 2020 equity
incentive plan, which shall vest on the Effective Time.
The Cola Employment Agreement is for an initial
term of one year and will thereafter be at-will, and may be terminated by either party during the initial term. If terminated
by Ms. Cola for good reason, or by us without cause prior to the 6-month anniversary of the Effective Time, then Ms. Cola shall be entitled
to an amount equal to her Base Salary that would have otherwise been paid until the conclusion of the initial term. If the qualifying
termination occurs after the 6-month anniversary of the Effective Time, then Ms. Cola shall be entitled to an amount equal to six (6)
months of her Base Salary.
**Jennifer Cola Severance Period**
****
In connection with the Merger, on February 11,
2026, the Board of Directors approved the grant of a severance period for Ms. Cola effective immediately and which will expire upon the
Effective Time of the Merger (the Severance Period), whereby Ms. Cola will receive a continuation of her base salary and
benefits for a period of six months if she is terminated without cause during the Severance Period.
**Termination of ATM Sales Agreement**
As previously disclosed, on March 6, 2025, we
entered into an At-The-Market Sales Agreement (the Sales Agreement) with Roth Capital Partners, LLC (the Sales Agent),
pursuant to which we could issue and sell, from time to time, shares of our common stock up to an aggregate offering price of $15.8 million
(the ATM Program).
On February 11, 2026, we provided the Sales Agent
written notice of its decision to terminate the ATM Program and pursuant to Section 12(b) of the Sales Agreement, the ATM Program and
Sales Agreement terminated on February 16, 2026.
During the year ended December 31, 2025, and through
the termination of the ATM Program, we sold 628,432 shares of common stock through the ATM Program for net proceeds of $483 thousand,
after deducting $15 thousand in offering costs.
**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 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 that matures on May 11, 2026.
**Opportunities**
**Precision Logistics:** Traditionally, most
shipping businesses utilize the carriers data platform for tracking which generally informs the shipping enterprise, and their
customers, when a package is in transit, when a package has been delivered, and some level of detail of the path which a package traveled.
We believe taking the data feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor
of our service center agents give us a competitive advantage against other third-party platforms that solely rely on the carriers
data feeds. We utilize a variety of input sources beyond the carriers data feeds. 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 agents work to address the issue, saving the perishable product
from spoiling, while 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 sized
health care, 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 and discovering other industries that need a high touch, white-glove exception management
team.
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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 competitive cost
offering, we believe companies may opt to outsource their precision logistics services to reduce their operational costs. The outsourcing
of supply chain related 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.
****
**Authentication:** We are not actively pursuing
business in the Authentication segment but continue to service existing customers.
****
**Partnerships:**
****
On August 26, 2025, FedEx Corporation, our prior
carrier partner, notified providers, including PeriShip Global, that it would be providing preferred shipping services through
its own internal platform and that the providers would no longer be approved as FedEx preferred shippers effective September 24, 2025.
As such, PeriShip Global is no longer a preferred shipper for our prior carrier partner and our
Precision Logistics segment ceased providing ProActive services to our prior carrier partners customers in September 2025. We continued
to provide Premium services to our prior carrier partner until we ceased providing Premium services in February 2026. While we
no longer provide ProActive and Premium services to our prior carrier partner we can and continue to provide Direct Premium services to
our customers who use our prior carrier partner for their shipping needs.
On September
24, 2025, we began offering ProActive services to the customers of an alternative Preferred Shipping Partner. We
are currently establishing the ability to offer our Premium services to our Strategic Partner. We expect to begin broadly offering Premium
and Direct Premium services to customers of our new Strategic Partner in the second quarter of 2026.
On July 29, 2025, PeriShip Global entered into
(i) a Digital Channel Program Agreement (the Program Agreement) and (ii) a Partner API Access Agreement (the Integration
Agreement and together with the Program Agreement, the Agreements) with an alternative Preferred Shipping Partner
(our Strategic Partner). The Agreements provide PeriShip Global access to designated Strategic Partner services at promotional
rates as part of a specialized logistics management service offering for time-sensitive and perishable shipments, including proactive
monitoring, weather tracking, and issue resolution through certain digital channel program applications. Pursuant to the Integration Agreement,
PeriShip Global will be permitted to develop Interfaces to certain Strategic Partner APIs, Access Services and 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.
**Current Economic Environment**
****
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. In response to uncertainty
in the global market and lower demand some carriers have implemented strategies to address a potential global recession. Additional changes
in U.S. or international trade policy, along with continued uncertainty surrounding such policies, could lead to further weakened business
conditions. Additionally, inflation and uncertainty and instability in the global economy and geopolitical events such as a war in Iran
and unrest in areas of the world that are dependent upon fuel production can negatively affect transportation costs and further reduce
consumer spending leading to fewer goods being transported globally. We can provide no assurances that a decline in discretionary consumer
spending for these or any reasons will not have a negative impact on our revenues and results of operations.
**Seasonality**
We experienceseasonalfluctuations
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. While the fourth quarter is historically our highest revenue quarter, revenues from
ProActive services declined in the quarter ended December 31, 2025 as compared to the quarter ended December 31, 2024 due to the previously
disclosed loss of our prior carrier partner as a shipping supplier integrating our service offerings, and larger shippers not wanting
to change shipping suppliers during the peak season. The seasonality of our business may cause fluctuations in our quarterly operating
results.
**Our Intellectual Property**
As of December 31, 2025, our current patent and
trademark portfolios consist of sixgranted U.S. patents and one pending foreign patent application and several foreign trademarks.
The Company abandoned four patents during the year ended December 31, 2025.
Our registered patents expire between the years
2027 and 2036. The expiration date of a pending application that matures into a registration depends upon the issuance date and any adjustment
under 35 U.S.C. 154(b). The issuance of a patent is considered prima facie evidence of validity. The granting of a patent does not
prevent a third party from seeking a judicial determination that the patent is invalid. Such challenges to the validity of a patent are
common and can be successful. There can be no assurance that a challenge will not be filed to one or more of our patents, if granted,
and that if filed, such a challenge will not be successful.
We have trademarked the VerifyMeTM brand
in the United States and internationally. However, our name and brand could be confused with brands that have similar names, including
but not limited to Verified.Me, a service offered to Canadians by SecureKey Technologies Inc. We are aware of names and marks similar
to our service marks being used from time to time by other persons that could result in confusion and may diminish the value of our brands
and adversely affect our business. See Item 1A Risk Factors for additional information regarding the risk of confusion of
our name with other brands and other intellectual property risks.
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**Research and Development**
Research and development efforts were focused
on expanding our technology into new areas of implementation and to develop unique customer applications. We spent approximately $20 thousand
and $70 thousand during the years ended December 31, 2025, and 2024, respectively, on research and development.
We do not expect to continue research and development
efforts for the foreseeable future but will continue to evaluate the need and appropriate use of research and development efforts as they
relate to our business and service offerings.
**Sales and Marketing Strategy**
****
Business development and sales resources are aligned
to support existing customer accounts and have been aligned to support new customer development. From time to time, we use social media
channels and attend trade shows as a means of marketing our services. By staying in contact and engaging with customers, we are able to
identify possible needs and look for opportunities to expand the services we are providing. We will also continue to participate in trade
show opportunities where the segment aligns with our core strategy or areas in which we are looking to expand our reach.
**Competition**
In general, we believe competition in our principal
markets is primarily driven by product performance and features; price; ease of implementation; technology effectiveness; product innovation
and timing of new product introductions; ability to develop, maintain and protect proprietary products and technologies; sales and distribution
capabilities; technical support and service; and applications support. PeriShip Global has developed its own software portal with predictive
analytics for weather, traffic, power grids, and data feeds it receives from one of the worlds largest logistics carriers. There
are other companies that operate a similar business model, however most of these companies specialize in a particular field such as healthcare
or non-perishable building materials. Our Precision Logistics segment operates in all of the perishable and time-sensitive segments. In
addition, the major carriers such as FedEx, UPS and DHL all have internal operations servicing the critical time, temperature, and cold
storage shipping segment.
Some of our competitors have substantially greater
financial, human and other resources than we have. As a result, we may not have sufficient resources to develop and market our services
to the market effectively. We expect competition with our products and services to continue and intensify in the future.
**Major Customers/Vendors**
For the year ended December 31, 2025, one customer
represented 13% of revenues and one customer represented 16% of revenues for the year ended December 31, 2024.
For the year ended December 31, 2025, two customers
made up 50% of accounts receivable. For the year ended December 31, 2024, two customers accounted for 36% of total accounts receivable.
****
For the year ended December 31, 2025, one vendor
accounted for 89% of transportation costs. For the year ended December 31, 2024, one vendor accounted for 99% of transportation costs,
in our Precision Logistics segment.
**Employees and External Sales Force**
****
As of December31, 2025, we employed approximately
thirty (30) persons and contracted with one (1) consultant. Because of the nature of our business, many of our employees and consultants
can, and do, conduct their work for us remotely.
****
**Available Information**
We make available free of charge on our website,
www.verifyme.com, all materials that we file electronically with the Securities and Exchange Commission (SEC), including
our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), as soon
as reasonably practicable after electronically filing such materials with, or furnishing them to, the SEC. We have not incorporated by
reference into this Report the information included, or that can be accessed through, our website and you should not consider it to be
part of this Report.
The SEC maintains an Internet website, www.sec.gov
that contains reports, proxy and information statements and other information that we file electronically with the SEC.
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**ITEM1A. RISK FACTORS**
Any investment in our securities involves a high
degree of risk. You should carefully consider the risks and uncertainties described below and all information contained in this Report,
before you decide whether to purchase our securities. If any of the following risks or uncertainties actually occur, our business, financial
condition, results of operations and prospects would likely suffer, possibly materially. These disclosures reflect our beliefs and opinions
as to factors that could materially and adversely affect us and our securities in the future. References to past events are provided by
way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred
in the past or their likelihood of occurring in the future. In addition, the trading price of our common stock could decline due to any
of these risks or uncertainties, and you may lose part or all of your investment.
**Risks Relating to Our Business**
**We have engaged, and may engage in future
acquisitions or strategic partnerships that increase our capital requirements, dilute our stockholders, cause us to incur debt or assume
contingent liabilities, and subject us to other risks. **
We may evaluate various acquisitions and strategic
partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies or businesses. To realize
the anticipated benefits of any potential acquisitions, we must successfully integrate those businesses with ours. The integration of
any potential acquisition or strategic partnership entails numerous risks, including:
|
| increased operating expenses and cash requirements; | |
|
| the assumption of indebtedness or contingent liabilities; | |
|
| dilution of our stockholders equity due to the issuance of additional equity securities; | |
|
| assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating
new personnel; | |
|
| the diversion of our managements attention from our existing product programs and initiatives in pursuing such a strategic
merger or acquisition; | |
|
| retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships; and | |
|
| our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition
or even to offset the associated acquisition and maintenance costs. | |
In addition, if we undertake acquisitions, we
may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses, and acquire intangible assets that could
result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this
inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our
business.
****
**Failure to attract and retain management, and develop successors
for management, may damage our operations and financial results and cause our stock price to decline.**
We depend, to a significant degree, on the skills,
experience and efforts of our management team, and other personnel, particularly in the management of our subsidiary PeriShip Global.
Our failure to attract, integrate, motivate, and retain existing or additional personnel in a timely fashion, and develop successors with
commensurate skills and talents, could disrupt or otherwise harm our operations and financial results. The loss of services of certain
of our management team and key employees, or an inability to attract or retain qualified personnel in the future, could delay the development
of and negatively impact the operations and profitability of our business.
**Our future growth will depend upon the success of our Precision
Logistics segment. If we fail to effectively execute our strategy, our competitive position and financial performance could be materially
harmed.**
Our future growth will depend upon the success
of our Precision Logistics segment and future businesses we may acquire. We are currently engaged in efforts to streamline operations,
improve profitability, and improve our overall competitiveness. The successful execution of our strategy is subject to significant uncertainties
and may require additional capital and operational expenditures. If we fail to execute our strategy effectively, our ability to realize
the intended benefits may be compromised. Even if we successfully implement our strategy, we may not see the intended results, diminishing
the expected improvements to efficiency or revenue generation. This could materially and adversely affect our competitive position, financial
performance, and brand reputation.
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**Our Precision Logistics segment relies on our Strategic Partner
for shipping services for our customers and as a source for customers representing a substantial percentage of our revenues.**
PeriShip
Global partners with our Strategic Partner, a major global carrier, for its customers shipping needs. Our business is dependent,
and we believe that it will continue to depend on our relationship with our Strategic Partner. On August 26, 2025, our prior carrier
partner notified providers, including PeriShip Global, that it would be providing preferred shipping services internally and that the
providers would no longer be approved preferred shippers effective September 24, 2025. As such, PeriShip Global is no longer a preferred
shipper with our prior carrier partner and our Precision Logistics segment ceased providing ProActive services to our prior carrier partners
customers in September 2025.We continued to provide Premium services to our prior carrier partner until we ceased providing Premium
services in February 2026. While we no longer provide ProActive and Premium services to our prior carrier partner we can and continue
to provide Direct Premium services to our customers who use our prior carrier partner for their shipping needs.
On September 24, 2025, we began
offering ProActive services to customers of our new Strategic Partner. We are currently establishing
the ability to offer our Premium services to our Strategic Partner. We expect to begin broadly offering Premium and Direct Premium services
to customers of our new Strategic Partner in the second quarter of 2026.
While we work closely with our
Strategic Partner and have transportation services and pricing agreements in place covering the shipping services they provide to our
customers, such agreements are subject to termination or modification from time to time. If our Strategic Partner is unwilling or unable
to supply to us the shipping services we market and sell on acceptable terms, or at all, or otherwise elects to terminate its business
relationship with us, we may not be able to obtain alternative shipping services from other providers on acceptable terms, in a timely
manner, or at all, and our business may be materially and adversely impacted. We do not currently have any alternative shipping service
suppliers from which we can obtain the shipping services we currently receive from our Strategic Partner. In addition, establishing the
necessary information technology infrastructure and business relationship with our Strategic Partner, or with other shipping and carrier
services providers, may be costly and time consuming and may ultimately not be successful or cost-effective. Further, any increase in
the prices charged by our Strategic Partner or failure to perform by our Strategic Partner could cause our costs to increase or could
cause us to experience short-term unavailability of shipping services on which our business relies.
In particular, delays and other
shipping disruptions at our Strategic Partner may have a significantly negative impact our business. Our business involves the shipment
of time and temperature sensitive goods, so our customers are significantly negatively impacted by delays and other shipping disruptions
that cause product loss, spoilage, and reputational harm. An increase in delays and other shipping disruptions on the part of our Strategic
Partner could cause our clients to seek shipping solutions from our competitors who use alternative shipping service providers. If these
events occur, it may reduce our profitability or may cause us to increase our prices. In addition, any material interruptions in shipping
services by this Strategic Partner may result in significant cost increases and reduce sales, which could harm our business, financial
condition and results of operations and may have a material adverse impact on our business.
As a result
of the change from our prior carrier partner to our Strategic Partner through which we provide our ProActive services, it is likely that
our revenues from ProActive services will materially decline in the quarters ended March 31, 2026 and June 30, 2026 as compared to the
quarters ended March 31, 2025 and June 30 2025. We expect our ProActive services revenues to substantially recover during 2026 as we transition
additional customers and increase our existing and new customer bases however, there can be no assurance that our ProActive service
revenue will return to historical levels.
In addition, a material portion of our gross margin
has been generated from our prior carrier partner reselling our Premium services to its customers. Our prior carrier partner is no longer
reselling these services to its customers. We are now directly selling these services to legacy customers of our prior carrier partner
and we are working to establish the ability to offer these services to customers of our Strategic Partner. Premium services accounted
for approximately 19% of revenue of our Precision Logistics segment for each of the years ended December 31, 2025, and 2024, respectively.
Our prior carrier partner provides its own service offering to its customers that competes with our Premium services, and we expect revenue
related to our prior carrier partner will decrease over time as it competes with us for these customers. Our goal is to offset these decreases
by offering Premium services associated with our Strategic Partner. If we fail to offset any reduction in business in our Precision Logistics
segment through our Premium services or ProActive Services, our business, financial condition and results of operations could be materially
adversely affected.
**Our business is subject to seasonal trends.**
Historically, our operating results in the Precision
Logistics segment have been subject to seasonal trends when measured on a quarterly basis. Our first and second quarters have traditionally
been the weakest compared to our third and fourth quarters. This trend is dependent on numerous factors including economic conditions,
customer demand, and weather. Because revenue is directly related to the available working days of shippers, national holidays, and the
number of business days during a given period may also create seasonal impact on our results of operations. After the winter holiday season
and during the remaining winter months, our freight volumes are typically lower because some customers reduce shipment levels. In addition,
a substantial portion of our revenue is derived from customers in industries whose shipping patterns are tied closely to consumer demand
which can sometimes be difficult to predict or are based on just-in-time production schedules. Therefore, our revenue is, to a large degree,
affected by factors that are outside of our control. In addition, as a result of the change from
our prior carrier partner to our Strategic Partner through which we provide our ProActive services, it is likely that our revenues from
ProActive services will materially decline in the quarters ended March 31, 2026 and June 2026 as compared to the quarters ended March
31, 2025 and June 2025. There can be no assurance that our historic operating patterns will continue in future periods as we cannot
influence or forecast many of these factors.
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**Severe climate conditions and other catastrophic events can have
an adverse impact on our business.**
Our business involves the shipment of time and
temperature sensitive goods, so our customers are significantly negatively impacted by delays and other shipping disruptions that cause
product loss, spoilage, and reputational harm. Disasters, severe weather, public health issues, such as pandemics, earthquake, cyber-attack,
heightened security measures, actual or threatened terrorist attack, strike, civil unrest, or other catastrophic event may cause shipment
delays or an inability to ship, which could prevent, delay or reduce shipment volumes and could have an adverse impact on consumer spending
and confidence levels, all of which could result in decreased revenues. In particular, certain weather-related
conditions such as ice and snow can disrupt the operations of our carrier partners during the peak holiday season, which could have a
disproportionately large negative impact on our business and revenues.****
****
**We operate in a highly competitive industry and our business
may suffer if we are unable to adequately address potential downward pricing pressures and other competitive factors.**
The transportation and logistics industry is highly
competitive, cyclical, and is expected to remain so for the foreseeable future. We face competition in all geographic markets and each
industry sector in which we operate. We have and may face continued competition by strategic partners. Many of these competitors have
significantly more resources and are actively pursuing acquisition opportunities and are developing new technologies to gain competitive
advantages. The primary competitive factors are price and quality of service. Increased competition or our inability to compete successfully
may lead to a reduction in our volume, reduced revenues, reduced profit margins, increased pricing pressure, or a loss of customer relationships,
any one of which could affect our business and financial results. Numerous competitive factors could impair our ability to maintain our
current profitability, including the following:
|
| our competitors may periodically reduce their prices to gain business, especially during times of weak
economic conditions, which may limit our ability to maintain or increase prices or impede our ability to maintain or grow our customer
relationships; | |
|
| our inability to achieve expected customer retention levels or sales growth targets; | |
|
| we compete with many other transportation and logistics service providers, which has included and may
include our strategic partners, some of which have greater capital resources or lower cost structures than us; | |
|
| our strategic partners may take steps to position their own product offerings as a replacement or competitor
to our service offerings; | |
|
| our inability to compete with existing and new entrants in the market that may offer similar services
at lower cost or have greater technological capabilities; | |
|
| customers may choose to provide for themselves the services that we now provide; | |
|
| many customers periodically accept proposals from multiple carriers for their shipping needs, and this
process may depress rates or result in the loss of some of our business to competitors; and | |
|
| advances in technology require increased investments to remain competitive, and our customers may not
be willing to accept higher prices to cover the cost of these investments; and | |
|
| we may not have sufficient resources to develop and market our services effectively, or at all. | |
****
There can be no assurance that such competitive
factors will not increase our cost of delivering our services to our customers, hinder our ability to deliver our services to our customers,
entice our existing customers to discontinue using our services, or reduce the number of customers referred to us by strategic partners.
Any of these factors could harm our business, financial condition and results of operations and may have a material adverse impact on
our business.
**The shipping and logistics industry is rapidly
evolving. We expect to continue to face significant competition, which could materially adversely affect us.**
The shipping and logistics industry is rapidly
evolving, including demands for faster deliveries and increased visibility into shipments. We expect to face significant competition on
a local, regional, national, and international basis. Competitors include the U. S. and other international postal services, various motor
carriers, express companies, freight forwarders, air couriers, large transportation, and e-commerce companies that have made and continue
to make significant investments in their own logistics capabilities, some of whom are currently our customers. We also face competition
from start-ups and other smaller companies that combine technologies with crowdsourcing to focus on local market needs. Competition may
also come from other sources in the future as new technologies are developed. Competitors have cost, operational and organizational structures
that differ from ours and may offer services or pricing terms that we are not willing or able to offer. Additionally, to sustain the level
of service and value that we deliver to our customers, from time to time we may raise prices and our customers may not be willing to accept
these higher prices. If we do not timely and appropriately respond to competitive pressures, including replacing any lost volume or maintaining
our profitability, we could be materially adversely affected.
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**Our future growth will depend upon the success
of our Strategic Partner to integrate our solutions into their service offerings and our ability to continue to provide Direct Premium
services to legacy customers of our prior carrier.**
Our Precision Logistics segment relies on the
integration of our ProActive and Premium services solutions into our Strategic Partners service offerings to its customers. We
also rely on the ability to continue to provide Direct Premium services to our customers who use our prior carrier partner for their shipping
needs. These strategies leave us largely dependent upon the success of our Strategic Partner and prior carrier partner and their
policies related to the use of our services in connection with their shipping services. If our Strategic Partner or prior carrier partner
cease to do so, or we fail to obtain other partners who will incorporate, embed, integrate, or bundle our technology, or these logistics
carriers are unsuccessful in their efforts, expanding deployment of our technology, our business and future growth would be materially
and adversely affected.
****
**Damage to our brand image and corporate reputation could materially
adversely affect us.**
Our success depends on our ability to consistently
deliver operational excellence and strong customer service. Our inability to deliver our services and solutions as promised on a consistent
basis, or our customers having a negative experience or otherwise becoming dissatisfied, can negatively impact our relationships with
new or existing customers and adversely affect our brand and reputation, which could, in turn, adversely affect revenue and earnings growth.
Adverse publicity (whether or not justified) relating to activities by our employees, contractors, suppliers, agents, or others with whom
we do business, such as customer service mishaps or noncompliance with laws, could tarnish our reputation and reduce the value of our
brand. With the increase in the use of social media outlets such as Meta (f/k/a Facebook), YouTube, Instagram, LinkedIn and X (f/k/a Twitter),
adverse publicity can be disseminated quickly and broadly, making it increasingly difficult for us to effectively respond. Damage to our
reputation and loss of brand equity could have a material adverse effect on us, and could require additional resources to rebuild our
reputation and restore the value of our brand.
****
**The Company has significant goodwill and
other intangible assets, and future impairment of these assets could have a material adverse impact on the Company's financial results.**
As of the date of
this Report, the Company has recorded significant goodwill and other identifiable intangible assets on its balance sheet as a result of
its acquisition of the PeriShip Global business in 2022. As a result of a long-lived asset and goodwill asset impairment assessment
performed in September 2025, an intangible asset impairment charge of $2,788 thousand and a goodwill impairment charge of $1,062 thousand
was recorded for the year ended December 31, 2025 relating to the Precision Logistics segment. An intangible asset impairment charge of
$964 thousand and a goodwill impairment charge of $1,351 thousand was recorded for the year ended December 31, 2024 relating to Authentication
segment. A number of factors may result in future impairments to our remaining goodwill and other intangible
assets, including significant negative industry or economic trends, disruptions to our business, increased competition, and significant
changes in the use of the assets.
Impairment charges could adversely
affect the Company's financial condition or results of operations in the periods recognized.
****
**Our customers businesses may be negatively
affected by various economic and other factors such as recessions, downturns in the economy, inflation, global uncertainty and instability,
the effects of pandemics, changes in United States social, political, and regulatory conditions and/or a disruption of financial markets,
which may decrease demand for our services or increase our costs.**
Adverse economic and other conditions, both in
the United States and internationally, can negatively affect our customers business levels, the amount of logistics services they
need, their ability to pay for our services and overall freight levels, any of which might impair our profitability. For example, inflation
and uncertainty and instability in the global economy and geopolitical events such as a war in Iran and unrest in areas of the world that
are dependent upon fuel production can negatively affect transportation costs and further reduce consumer spending leading to fewer goods
being transported globally. Many of the products our clients ship are luxury or discretionary products and the demand for such products
may decrease in adverse economic times. Further, when adverse economic times arise, customers may select competitors that offer lower
rates or choose to ship their goods without logistical support in an attempt to lower their costs. In addition, changes in the United
States or international trade policy, including tariffs, export controls, quotas, embargoes, or sanctions, could trigger additional
retaliatory actions by affected countries, resulting in trade wars and further increased costs for goods transported globally,
which may negatively impact our customers. These and other economic factors such as recessions could have an adverse effect on our business,
financial conditions and results of operations and we might be forced to lower our rates or lose customers.
**Overall economic conditions that reduce
freight volumes could have a material adverse impact on our operating results and ability to achieve growth.**
We are sensitive to changes in overall economic
conditions that impact customer shipping volumes. The transportation and logistics industry historically has experienced cyclical fluctuations
in financial results due to economic recession, downturns in business cycles of our customers, interest, and currency rate fluctuations,
inflation, and other economic factors beyond our control. Changes in U.S. or international trade policy, including tariffs, export controls,
quotas, embargoes, or sanctions, could trigger additional retaliatory actions by effected countries, resulting in trade wars
impacting the volume of economic activity globally and in the United States, and as a result, shipping volumes may be materially reduced.
Such a reduction may materially and adversely affect our business.
****
****
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****
**Reductions indiscretionary consumer
spending could have an adverse effect on our business, financial condition, and results of operations.**
The services and products we provide are sensitive
to reductions from time to time in discretionary consumer spending. For example, demand for high-end perishable items, and subsequently
the demand for shipping, brand protection, and other services related to such, can be affected by changes in the economy and consumer
tastes, both of which are difficult to predict and beyond our control. Unfavorable changes in general economic conditions, including recessions,
economic slowdowns, sustained high levels of unemployment, and rising prices or the perception by consumers of weak or weakening economic
conditions, may reduce consumers disposable income or result in a decrease in demand for our services and products. As a result,
we cannot ensure that demand for our services and products will materialize or remain constant. In response to market conditions and lower
demand some carriers have implemented strategies to address a potential global recession.
We have seen a softening in demand for some services
related to high-end perishable items which seem to be impacted by reduced discretionary spending by U.S. consumers. While a recession,
whether global or more localized to the U.S., may decrease the demand for our services that are more discretionary in nature, we believe
that the internal cost cutting measures, if implemented by the major global carrier may benefit out-sourced service providers, including
PeriShip Global.Additionally, PeriShip Global is working with this major global carrier to address their small and medium sized
business clients, which we believe is an underserved segment and presents considerable growth opportunities for PeriShip Global. However,
we can provide no assurances that a decline in discretionary consumer spending will not have a negative impact on our revenues and results
of operations. Adverse developments affecting economies throughout the world, including a general tightening of availability of credit,
decreased liquidity in certain financial markets, increased interest rates, foreign exchange fluctuations, increased energy costs, acts
of war or terrorism, transportation disruptions, natural disasters, declining consumer confidence, sustained high levels of unemployment
or significant declines in stock markets, as well as concerns regarding pandemics, epidemics and the spread of contagious diseases, could
lead to a further reduction in consumer discretionary spending and have an adverse effect on our business, financial condition, and results
or operations.
****
**Global supply-chain delays and shortages
may adversely impact our customers or potential customers.**
****
Global supply-chain delays and shortages, which
are out of our control, can affect a wide variety of businesses globally including our customers. Supply-chain delays shortages may affect
our customers or potential customers which would adversely affect our operations.
**We have a history of losses and we may never
achieve or maintain profitability***.*
Since our inception, we have incurred operating
losses each year due to costs incurred in connection with research and development activities and general and administrative expenses
associated with our operations. In addition, we have made significant expenditures on acquisitions. We expect to continue to incur expenditures
to market our services and could continue to incur operating losses and negative operating cash flow. We may encounter unforeseen expenses,
difficulties, complications, delays, and other unknown factors that may adversely affect our business. Our ability to generate profits
will depend, in part, on our expenses and our ability to generate revenue. Our prior losses and any future losses have had and may continue
to have an adverse effect on our working capital. If we fail to generate revenue and become profitable, or if we are unable to fund our
continuing losses, our stockholders could lose all or part of their investments.
**Our ability to use our net operating losses
to offset future taxable income may be subject to certain limitations.**
Our net operating loss carryforwards ("NOLs"),
and certain other tax attributes could be unavailable to offset future income tax liabilities because of restrictions under U.S. tax law.
Under the Tax Cuts and Jobs Act, or the TCJA, federal NOLs generated in tax years ending after December 31, 2017, may be carried forward
indefinitely. The carryforwards are limited to 80% of each subsequent year's net income.
In addition, Sections 382 and 383 of the Internal
Revenue Code (IRC), contain rules that limit the ability of a corporation that undergoes an "ownership change"
(generally, any change in ownership of more than 50% of the corporation's stock over a three-year period) to utilize its pre-change NOLs
and tax credit carryforwards to offset future taxable income. These rules generally operate by focusing on ownership changes involving
stockholders directly or indirectly owning 5% or more of the stock of a corporation and any change in ownership arising from a new issuance
of stock by the company. Generally, if an ownership change occurs, the yearly taxable income limitation on the use of NOLs and tax credit
carryforwards and certain built-in losses is equal to the product of the applicable long-term, tax-exempt rate and the value of the corporation's
stock immediately before the ownership change. The Company completed an IRC Section 382 analysis in 2022 and determined that an ownership
change occurred sufficient to impose additional limitations on the use of NOL carryforwards. The Company has not completed an IRC Section
382 analysis in 2023, 2024 or 2025. In the event future ownership changes are determined, we might be unable to offset our taxable income
with losses, or our tax liability with credits, before such losses and credits expire, in which event we could incur larger federal and
state income tax liabilities than we would have had we not experienced an ownership change. In connection with the Merger Agreement and
Merger, we are analyzing whether that potential transaction, combined with other stock ownership changes, could trigger an ownership change
pursuant to IRS Section 382. If an ownership change is found as a result of the Merger pursuant to IRS Section 382, the amount of our
NOLs we can carryforward each year could be limited or eliminated.
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****
**Because our name and brand could be confused
with brands that have similar names, we may be adversely affected by any confusion or negative publicity related to others that use a
name similar to VerifyMe in their brand names***.*
We have trademarked the VerifyMeTMbrand
in the United States and have pending applications with respect to our brand internationally. However, our name and brand has been and
could be in the future confused with brands that have similar names, including but not limited to Verified.Me, a service offered to Canadians
by SecureKey Technologies Inc. and www.verifyme.ng, a website offering verification services in Nigeria. We have attempted to contact
the operators of the Nigeria website to resolve the confusion caused there but to date have been unsuccessful in our efforts. Further,
we have registered certain trademarks and service marks in the United States and foreign jurisdictions. We are aware of names and marks
similar to our service marks being used from time to time by other persons. Although we oppose any such infringement, further or unknown
unauthorized uses or other misappropriation of our trademarks or service marks may diminish the value of our brands and adversely affect
our business.
**If our technologies do not work as anticipated
once we achieve meaningful sales, we will not be successful***.*
Our business depends on our ability to market
and sell our technology. Without material sales and acceptance from customers with respect to our technologies, we will not be successful.
We can provide no assurances that the market will accept our products or that we will achieve any meaningful sales.
**If our technology cannot be used successfully
to proactively provide analytics logistics management, we may not be able to generate material revenue**.
Our proprietary technology is the core of our
PeriShip Global operations. The failure of our technology will result in the stoppage of our operation. Due to the fact our business is
the monitoring of time sensitive goods movement, any stoppage will result in the financial loss and service liability damage. In order
to stay competitive, we need to ensure the continuity and the timeliness of our service, it is essential that the technology platform
has redundancy built in, high performing and scalable.
**We are not currently expanding our sales,
marketing and support organizations and our distribution arrangements, which will limit our ability to increase market acceptance of our
products and services***.*
We are not currently expanding our sales, marketing
and support organizations or our distribution arrangements which will limit our ability to increase market acceptance of our products
and services. We will continue to evaluate the appropriate use of our sales and marketing strategies and may choose to expand our sales,
marketing and support organizations or our distribution arrangements in the future, which may require us to increase our staff, or further
outsource our sales process, to generate a greater volume of sales and to support any new customers or the expanding needs of existing
customers. The employment market for sales, marketing, customer service, and support personnel in our industry is very competitive, and
we may not be able to hire the kind and number of sales, marketing, customer service and support personnel we are targeting. Our inability
to hire or outsource qualified sales, marketing, customer service and support personnel may harm our business, operating results, and
financial condition. We may not be able to sufficiently build out our distribution network or enter into arrangements with qualified sales
personnel on acceptable terms or at all. If we are not able to develop greater distribution capacity, we may not be able to generate sufficient
revenue to continue our operations.
****
**If we fail to protect or enforce our intellectual
property rights, or if the costs involved in protecting and defending these rights are prohibitively high, our business and operating
results may suffer**.
We rely on intellectual property in order to maintain
a competitive advantage. As such, we strive to protect our intellectual property rights by relying on federal, state, and common law rights,
as well as contractual restrictions. We may enter into confidentiality and invention assignment agreements with our employees and confidentiality
agreements with parties with whom we conduct business to limit access to, and disclosure and use of, our proprietary information. However,
these contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation
of our proprietary information or deter independent development of similar technologies by others.
As management deems appropriate, we may pursue
the registration of our domain names, trademarks, and service marks in the U.S. and in certain locations outside the U.S. We may seek
to protect our trademarks, patents, and domain names in an increasing number of jurisdictions, a process that is expensive and time-consuming
and may not be successful or which we may not pursue in every location. It may be expensive and cost prohibitive to file patents worldwide
and we may be financially required to file patents in select countries where we see the greatest potential for our technologies. We may,
over time, increase our investment in protecting our innovations through increased patent filings that are expensive and time-consuming
and may not result in issued patents that can be effectively enforced.
****
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**If we are required to sue third parties
who we allege are violating our intellectual property rights, or if we are sued for violating a third partys patents or other intellectual
property rights, we may incur substantial expenses, and we could incur substantial damages, including amounts we cannot afford to pay***.*****
****
Litigation may be necessary to enforce our intellectual
property rights, protect our trade secrets or determine the validity and scope of proprietary rights claimed by others. Patent and intellectual
property litigation is extremely expensive and beyond our ability to pay.While third parties do, under certain circumstances, finance
litigation for companies that file suit, we cannot assure you that we could find a third party to finance any claim we choose to pursue.Moreover,
third parties frequently refuse to finance companies that are sued.Any litigation of this nature, regardless of outcome or merit,
could result in substantial costs, adverse publicity or diversion of management and technical resources, any of which could adversely
affect our business and operating results. If we fail to maintain, protect and enforce our intellectual property rights, our business
and operating results may be harmed.
From time-to-time, we may face allegations that
we have infringed the trademarks, copyrights, patents, and other intellectual property rights of third parties, including from our competitors
and inactive entities. Patent and other intellectual property litigation may be protracted and expensive, and the results are difficult
to predict. As the result of any court judgment or settlement, we may be obligated to cancel the launch of a new feature or product, stop
offering certain features or products, pay royalties or significant settlement costs, purchase licenses or modify our products and features.****
**If we fail to maintain an effective system
of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements
or comply with applicable regulations could be impaired**.
As a public company, we are subject to the reporting
requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002 (SOX). We expect that the requirements of these rules
and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult,
time-consuming and costly, and place significant strain on our personnel, systems, and resources.
SOX requires, among other things, that we maintain
effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our
disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that
we will file with SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that
information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and
financial officers. To maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial
reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs
and significant management oversight.
Our management concluded that our disclosure controls
and procedures were effective as of December 31, 2025. Any failure to develop or maintain effective controls or any difficulties encountered
in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and
may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control
over financial reporting could also adversely affect the results of periodic management evaluations and annual independent registered
public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually
be required to include in our periodic reports that will be filed with the SEC.
Material weaknesses in our disclosure controls
and internal control over financial reporting may be identified in the future. Any failure to maintain existing or implement required
new or improved controls, or any difficulties we encounter in their implementation, could result in additional material weaknesses, cause
us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements. If we are unable
to effectively remediate material weaknesses in a timely manner, investors could lose confidence in the accuracy and completeness of our
financial reports, which could have an adverse effect on our stock price.
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**Because we do business outside of the United
States, we may be exposed to liabilities under the Foreign Corrupt Practices Act, violations of which could have a material adverse effect
on our business***.*
We are subject to the Foreign Corrupt Practice
Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political
parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We have operations and
agreements with third parties and make sales in jurisdictions which may be subject to corruption. These activities create the risk of
unauthorized payments or offers of payments by one of the employees, consultants or agents of our Company, because these parties are not
always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing
safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents, or distributors
of our company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil
sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results, and financial condition.
**Our business depends on our ability to successfully
develop, implement, maintain, upgrade, enhance, protect, and integrate information technology systems.**
We rely heavily on the proper functioning and
availability of our information technology systems for our operations as well as for providing value-added services to our customers.
Our information systems are integral to the efficient operation of our business. We strive to be best in class, and in order to do so,
we must correctly interpret and address market trends and enhance the features and functionality of our technology platform in response
to these trends, which may lead to significant ongoing software development costs and capital investments in information technology infrastructure.
We may be unable to accurately determine the needs of our customers and integrate our technology and services cohesively with our key
Strategic Partner, our prior carrier partner, or other logistic carriers, or identify the trends in the transportation services industry,
in a timely and cost-effective manner, which could result in decreased demand for our services and a corresponding decrease in our revenues.
Despite testing, external and internal risks, such as malware, insecure coding, Acts of God, data leakage and human error
pose a direct threat to our information technology systems and operations. We may also be subject to cybersecurity attacks and other intentional
hacking. Any failure to identify and address such defects or errors or prevent a cyber-attack could result in service interruptions, operational
difficulties, loss of revenues or market share, liability to customers or others, diversion of resources, injury to our reputation and
increased service and maintenance costs. Addressing such issues could prove to be impossible or very costly and responding to resulting
claims or liability could similarly involve substantial cost. We must maintain and enhance the reliability and speed of our information
technology systems to remain competitive and effectively handle higher volumes of shipments. If our information technology systems are
unable to manage additional volume for our operations as our business grows, or if such systems are not suited to manage the various service
modes we offer or businesses we acquire, our service levels and operating efficiency could decline. If we fail to hire and retain qualified
personnel to implement, protect and maintain our information technology systems or if we fail to upgrade our systems to meet our customers
and strategic operating partners demands, our business and results of operations could be seriously harmed. This could result in
a loss of customers or a decline in the volume of shipments we receive from customers.
Our information technology systems also depend
upon the Internet, third-party service providers, global communications providers, satellite-based communications systems, the electric
utilities grid, electric utility providers, and telecommunications providers as well as their respective vendors. The services and service
providers have all experienced significant system failures and outages at some point in the past. We have minimal control over the operation,
quality, or maintenance of these services or whether vendors will improve their services or continue to provide services that are essential
to our business. Disruptions due to transitional challenges in upgrading or enhancing our technology systems; failures in the services
upon which our information technology platforms rely, including those that may arise from adverse weather conditions or natural calamities,
such as floods, hurricanes, earthquakes or tornadoes; illegal acts, including terrorist attacks; human error or systems modernization
initiatives; and/or other disruptions, may adversely affect our business, which could increase our costs or result in a loss of customers
that could have a material adverse effect on our results of operations and financial position.
**Our information technology systems are subject
to cyber and other risks some of which are beyond our control. A security breach, failure or disruption of these services could have a
material adverse effect on our business, results of operations and financial position.**
Our information systems are integral to the efficient
operation of our business and handle sensitive customer and shipment data. It is critical that the data processed by these systems remain
secure, as it often includes competitive customer information, confidential transaction data, employee records and key financial and operational
results and statistics. The sophistication of efforts by hackers, foreign governments, cyber-terrorists, and cyber-criminals, acting individually
or in coordinated groups, to launch distributed denial of service attacks, ransomware or other coordinated attacks that may cause service
outages, gain inappropriate or block legitimate access to systems or information, or result in other business interruptions has continued
to increase in recent years. We utilize third-party service providers who have access to our systems and certain sensitive data, which
exposes us to additional security risks, particularly given the complex and evolving laws and regulations regarding privacy and data protection.
While we and our third-party service providers have experienced cyber-attacks and attempted breaches of our and their information technology
systems and networks or similar events from time to time, no such incidents have been, individually or in the aggregate, material to us.
Cyber incidents that impact the security, availability, reliability, speed, accuracy or other proper functioning of our systems, information
and measures, including outages, computer viruses, theft or misuse by third parties or insiders, break-ins and similar disruptions, could
have a significant adverse impact on our operations.
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It is difficult to fully protect against the possibility
of power loss, telecommunications failures, cyber-attacks, ransomware and other cyber incidents in every potential circumstance that may
arise. A significant cyber incident, including system failure, security breach, disruption by malware or ransomware, or other damage,
could interrupt or delay our operations, damage our reputation and brand, cause a loss of customers, expose us to a risk of loss or litigation,
result in regulatory scrutiny, investigations, actions, fines or penalties and/or cause us to incur significant time and expense to remedy
such an event, any of which could have a material adverse impact on our results of operations and financial position. Furthermore, any
failure to comply with data privacy, biometric privacy, data security or other laws and regulations could result in claims, legal or regulatory
proceedings, inquiries or investigations. To comply with this changing landscape, we may be required to further segregate our systems
and operations, implement additional controls, or adopt new systems, all of which could increase the cost and complexity of our operations.
In addition, our insurance is intended to address costs associated with aspects of cyber incidents, network failures and privacy-related
concerns, and may not sufficiently cover all types of losses or claims that may arise.
**Evolving regulations concerning data privacy
may result in increased regulation and different industry standards, which could prevent us from providing our current products to our
users, or require us to modify our products, thereby harming our business.**
****
The regulatory framework for privacy issues worldwide
is currently in flux and is likely to remain so for the foreseeable future. Practices regarding the collection, use, storage, transmission
and security of personal information by companies operating over the Internet and mobile platforms have recently come under increased
public scrutiny, and civil claims alleging liability for the breach of data privacy have been asserted against companies. The U.S. government,
including the Federal Trade Commission and the Department of Commerce, has announced that it is reviewing the need for greater regulation
for the collection of information concerning consumer behavior on the Internet, including regulation aimed at restricting certain targeted
advertising practices.
Many jurisdictions have already taken steps to
restrict and penalize companies that collect and utilize information from their users and the general public. For example, in May 2018
the European Union made sweeping reforms to its existing data protection legal framework by enacting the General Data Protection Regulation
(the GDPR), which resulted in a greater compliance burden for many companies with users in Europe. The GDPR includes operational
requirements for companies that receive or process personal data of residents of the European Union that are broader and more stringent
than those previously in place in the European Union and in most other jurisdictions around the world. The GDPR also imposes significant
penalties for non-compliance, including fines of up to 20 million or 4% of total worldwide revenue.
Additionally, we may be subject to increasingly
complex and expansive data privacy regulations within the United States. For example, California enacted the California Consumer Privacy
Act (the CCPA), which became effective in 2020. The CCPA requires covered companies to provide California consumers with
disclosures and expands the rights afforded consumers regarding their data. Fines for noncompliance of the CCPA can be as high as $8 thousand
per violation. Since the CCPA was enacted, Nevada and Maine have enacted similar legislation designed to protect the personal information
of consumers and penalize companies that fail to comply, and other states have proposed similar legislation. The costs of compliance with,
and other burdens imposed by, the GDPR, CCPA, and similar laws may limit the use and adoption of our products and services and/or require
us to incur substantial compliance costs, which could have a material adverse impact on our business.
****
**We rely on the services of third-party data
center hosting facilities. Interruptions or delays in those services could impair the delivery of our service and harm our business.**
****
We utilize cloud computing technology. It is hosted
pursuant to agreements on technology platforms by third-party service providers. We do not control the operation of these providers or
their facilities, and the facilities are vulnerable to damage, interruption or misconduct. Unanticipated problems at these facilities
could result in lengthy interruptions in our services. If the services of one or more of these providers are terminated, disrupted, interrupted
or suspended for any reason, we could experience disruption in our ability to provide our services, which may harm our business and reputation.
Further, any damage to, or failure of, the cloud services we use could result in interruptions in our services. Interruptions in our service
may damage our reputation, reduce our revenue, cause customers to terminate their agreements and adversely affect our ability to attract
new customers. While we believe our strong partnerships reduce our risk, our business would be harmed if our customers and potential customers
believe our services are unreliable. Additionally, if our service providers fail to meet their obligations, provide poor, inaccurate or
untimely service, or we are unable to make alternative arrangements for these services, we may fail, in turn, to provide our services
or to meet our obligations to our users, and our business, financial condition and operating results could be materially and adversely
affected.
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**Fluctuations in labor costs, changes in
the availability of transportation service, or catastrophic events may increase the cost of our products and services.**
****
Increases in labor costs might be difficult to
pass on to our customers. We rely on our Strategic Partner, and for certain legacy customers our prior carrier partner, for transportation
services. Our ability to meet delivery requirements may be constrained by our Strategic Partners and prior carrier partners
inability to adjust delivery during times of volatile demand. Our inability to fill the needs of our customers regardless of whether they
use our Strategic Partner, our prior carrier partner, or another logistic carrier for their shipping needs would jeopardize our ability
to fulfill obligations under current contracts or enter new contracts to sell our products, which would, in turn, result in reduced sales
and profits, contract penalties or terminations, and damage to customer relationships.
****
**Our ability to become profitable is largely
dependent upon our ability to continually improve our platforms and acquiring new customers in increasingly competitive markets.**
Our ability to become profitable depends upon
a number of factors, including our ability to (i) identify and evolve with emerging technological and broader logistics industry trends,
(ii) develop and maintain competitive technologies, (iii) defend our market share against an ever-expanding number of competitors including
many new and non-traditional competitors, (iv) enhance our technologies by adding innovative features that differentiate our technologies
from those of our competitors and prevent commoditization of our technologies (v) monitor disruptive technologies and business models,
(vi) respond to changes in overall trends related to end market demand, (vii) leverage our current and any future strategic partnerships
to commercialize existing technologies and (viii) attract, develop and retain individuals with the requisite skill, expertise and understanding
of customers needs to sell our current technologies. The failure of our technologies to gain market acceptance due to more attractive
offerings by our competitors or the failure to address any of the above factors could significantly reduce our revenues and adversely
affect our competitive standing and prospects.****
**Risks Relating to our Common Stock**
**Upon exercise of our outstanding warrants,
conversion of our Series B Convertible Preferred Stock, conversion of our Convertible debt, and vesting of our restricted stock units,
we will be obligated to issue a substantial number of additional shares of common stock which will dilute our present stockholders***.*
We are obligated to issue additional shares of
our common stock in connection with our outstanding warrants and shares of our Series B Convertible Preferred Stock. For the year ended
December 31, 2025, there were approximately 3,976,000 anti-dilutive shares consisting 1,322,000 unvested performance restricted stock
units, 303,000 restricted stock units and restricted stock awards, 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. The exercise, conversion
or exchange of warrants or convertible securities, including for other securities, will cause us to issue additional shares of our common
stock and will dilute the percentage ownership of our stockholders. In addition, we have in the past, and may in the future, exchange
outstanding securities for other securities on terms that are dilutive to the securities held by other stockholders not participating
in such exchange.
**Offers or availability for sale of a substantial
number of shares of our common stock may cause the price of our common stock to decline***.*****
****
Sales of large blocks of our common stock could
depress the price of our common stock. The existence of these shares and shares of common stock issuable upon conversion of outstanding
shares of Series B Convertible Preferred Stock, warrants and options create a circumstance commonly referred to as an overhang
which can act as a depressant to our common stock price. The existence of an overhang, whether or not sales have occurred or are occurring,
also could make our ability to raise additional financing through the sale of equity or equity-linked securities more difficult in the
future at a time and price that we deem reasonable or appropriate. If our existing stockholders and investors seek to sell a substantial
number of shares of our common stock, such selling efforts may cause significant declines in the market price of our common stock.
**Our common stock may be affected by limited
trading volume and price fluctuations, which could adversely impact the value of our common stock***.*
Our common stock has experienced, and is likely
to experience, in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock
without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results
and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially.
These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future.
We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will
be stable or appreciate over time.
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**Because we may issue preferred stock without
the approval of our stockholders and have other anti-takeover defenses, it may be more difficult for a third party to acquire us and could
depress our stock price***.*
**
In general, our Board of Directors may issue,
without a vote of our stockholders, one or more additional series of preferred stock that have more than one vote per share, although
the Companys ability to designate and issue preferred stock is currently restricted by covenants under our agreements with prior
investors. Without these restrictions, our Board of Directors could issue preferred stock to investors who support us and our management
and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting
in both a drop in our stock price and a decline in interest of our common stock. This could make it more difficult for stockholders to
sell their common stock. This could also cause the market price of our common stock shares to drop significantly, even if our business
is performing well.
**Because we have not historically paid cash
dividends on our shares of common stock, any returns will be limited to the value of our shares***.*
We have never declared or paid a cash dividend.
Pursuant to the Merger Agreement, we may, but have no obligation to, declare, set aside, and pay on or after the closing date of the Merger
a cash dividend to holders of our capital stock insomuch as any dividend does not make us unable to comply with the closing net cash requirement
set forth in the Merger Agreement. We cannot be certain what our cash balance will be at the closing of the Merger and whether there will
be any amount above the closing net cash requirement set forth in the Merger Agreement available to be issued as a dividend. Even if a
dividend can be declared, our Board of Directors has no obligation and is not required to declare a dividend by the Merger Agreement.
Our Board of Directors currently anticipates declaring a cash dividend prior to the closing of the Merger. The declaration and payment
of dividends is subject to the discretion of our Board of Directors and will depend upon our earnings (if any), our financial condition,
and our capital requirements. Nevada law permits a corporation to pay dividends out of earnings or surplus. Any return to stockholders
will therefore be limited to the increase, if any, of our share price.
****
**There can be no assurance that we will be
able to comply with the continued listing standards of Nasdaq, a failure of which could result in a de-listing of our common stock and
certain warrants***.*
Nasdaq requires that the trading price of its
listed stocks remain above one dollar in order for stock to remain listed. If a listed stock trades below one dollar for more than 30
consecutive trading days, then it is subject to delisting from the Nasdaq. In addition, to maintain a listing on Nasdaq, we must satisfy
minimum financial and other continued listing requirements and standards, including those regarding director independence and independent
committee requirements, minimum stockholders equity, and certain corporate governance requirements. If we are unable to satisfy
these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our common stock
and warrants and would impair your ability to sell or purchase our common stock or warrants when you wish to do so. In the event of a
delisting, we would expect to take actions to restore our compliance with the listing requirements, but we can provide no assurance that
any such action taken by us would allow our common stock or warrants to become listed again, stabilize the market price or improve the
liquidity of our common stock, prevent our common stock from dropping below the minimum bid price requirement, or prevent future non-compliance
with the listing requirements.
****
**Provisions of our warrants could discourage
an acquisition of us by a third party***.*
In addition to certain provisions of our amended
and restated articles of incorporation, as amended, and our amended and restated by-laws, certain provisions of our outstanding warrants
could make it more difficult or expensive for a third party to acquire us. The warrants prohibit us from engaging in certain transactions
constituting fundamental transactions unless, among other things, the surviving entity assumes our obligations under the
warrants. These and other provisions of the warrants could prevent or deter a third party from acquiring us even where the acquisition
could be beneficial to you.
**Risks Relating to Loan Agreement and our Debt**
**We are subject to credit risk related to the Loan Agreement and
related promissory note with ZenCredit which could lead to unexpected losses.**
On August 8, 2025, we entered into the Loan Agreement with ZenCredit,
pursuant to which 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 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 that matures on May 11, 2026. As of December 31, 2025, we reserved
$12 thousand allowance for expected credit loss on the Note.
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We are exposed to the risk that the principal of, or interest on, the
Loan Agreement and related promissory note will not be repaid timely or at all. In addition, while ZenCredit has represented to us that
it owns assets the present fair value of which are greater than the amount that will be required to pay the probable liabilities of its
then existing debts and liabilities as they become due and payable considering all financing alternatives and potential asset sales reasonably
available to it; and (ii) has capital that is not unreasonably small in relation to its respective business as presently conducted, the
promissory note under the Loan Agreement is not secured by any specific collateral and our remedies should a default occur will be limited
and may be insufficient to cover our outstanding exposure. Under the Loan Agreement we are required to attempt to resolve any disputes
arising under the Loan Agreement through informal mediation and then arbitration prior to seeking any judicial remedy.
The creditworthiness of ZenCredit may be affected by many factors,
including local market conditions and general economic conditions, and ZenCredit may be less able to withstand competitive, economic and
financial pressures than other businesses, which could affect its ability to repay amounts outstanding under the Loan Agreement. In addition,
our review of ZenCredit prior to issuing the loan may not have adequately assessed and reduced our credit risk, and we may not adequately
adapt to changes in economic or any other conditions affecting ZenCredit and the quality of the loan. These factors may result in unexpected
losses and adversely affect our business, financial condition, or results of operations.
**If we do not timely pay amounts due and
comply with the covenants under our debt facilities, our business, financial condition, and results of operations may be adversely impacted.**
Our consolidated financial statements have been
prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities
in the normal course of business. We have a facility with PNC Bank National Association (the PNC Facility), which 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. ThePNC Facility place encumbrances on our assets, and subject us to
restrictive covenants that limit our operating flexibility. As of January 21, 2025, the Term Note balance of the PNC Facility was paid
in full and no future principal payments are due. As of December 31, 2025, $0 was outstanding on the RLOC.
In the event of a continuing default, our senior
secured lenders would have the right to accelerate the then-outstanding amounts under the PNC Facility and to exercise their respective
rights and remedies to collect such amounts, which would include foreclosing on collateral constituting substantially all of our assets
and the assets of our PeriShip Global subsidiary. Any continuing default on the PNC Facility could result in the outstanding principal
balance under the facility becoming immediately due and payable, which could harm our business, financial condition and results of operations
and may have a material adverse impact on our business.
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 March 13, 2026, $350 thousand was converted to common stock. The notes
are subordinated unsecured obligations of the Company and accrue interest at a rate of 8% per year payable semiannually in arrears. 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.
Although we believe the majority of our investors will choose to convert into shares, if this does not occur, this may have a material
adverse impact on our cash and as a result, a material adverse impact on our business.
**Our cash flows and operating results could
be adversely affected by required payments of debt or related interest and other risks of our debt financing.**
We are generally subject to risks associated with
debt financing. These risks include: (1)our cash flow may not be sufficient to satisfy required payments of principal and interest;
(2)we may not be able to refinance existing indebtedness or the terms of any refinancing may be less favorable to us than the terms
of existing debt; (3)debt service obligations could reduce funds available for other uses such as growing our business; (4)any
default on our indebtedness could result in acceleration of those obligations and possible loss of assets or capital; and (5)the
risk that necessary capital expenditures cannot be financed on favorable terms. Any of these risks could place strains on our cash flows,
reduce our ability to grow, and adversely affect our results of operations.
**Covenants in our debt agreements may restrict
our operating activities and adversely affect our financial condition.**
Our existing debt agreements contain, and future
debt agreements may contain, financial and/or operating covenants including, among other things, certain coverage ratios, as well as limitations
on the ability to incur additional secured and unsecured debt, and/or otherwise affect our distribution and operating policies. These
covenants may limit our operational flexibility and acquisition and disposition activities. Moreover, if any of the covenants in these
debt agreements are breached and not cured within the applicable cure period, we could be required to repay the debt immediately, even
in the absence of a payment default. A default under one of our debt agreements could result in a cross-default under other debt agreements,
and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional
collateral, and enforce their respective interests against existing collateral. In the event of a continuing default, our senior secured
lenders would have the right to accelerate the then-outstanding amounts under each such facility and to exercise their respective rights
and remedies to collect such amounts, which would include foreclosing on collateral constituting substantially all of our assets and the
assets of our PeriShip Global subsidiary. As a result, a default under applicable debt covenants could have an adverse effect on our financial
condition or results of operations. These covenants may restrict our ability to engage in transactions that we believe would otherwise
be in the best interests of our stockholders.
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Risks Relating to the Merger
****
**The Merger is subject to closing conditions
and may not be completed, the Merger Agreement may be terminated in accordance with its terms, and we may be required to pay a termination
fee upon termination.**
The Merger is
subject to customary closing conditions that must be satisfied or waived prior to the consummation of the Merger, including, among other
things: (i) approval by our stockholders and Open Worlds shareholders necessary to consummate the Merger and the contemplated transactions
thereunder having been duly obtained; (ii) a registration statement on Form S-4 having been declared effective under the Securities Act
and not being subject to any stop order; (iii) our common stock issuable in the Merger having been approved for listing on Nasdaq; (iv)
any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act) having expired
or been terminated, and all other required regulatory approvals having been obtained; (v) Open World having received written approval
of the Merger by the Cayman Islands Trade and Business Licensing Board; (vi) the absence of any order by a governmental authority permanently
enjoining or otherwise prohibiting consummation of the Merger; (vii) the accuracy of the respective representations and warranties of
each party, subject to certain materiality qualifications; (viii) compliance by the parties with their respective covenants; and (ix)
the absence of any material adverse effect with respect to either party.
No assurance
can be given that the required stockholder and shareholder approvals will be obtained or that the required conditions to closing will
be satisfied or waived, and, if all required approvals are obtained and the conditions are satisfied or waived, no assurance can be given
as to the terms, conditions, and timing of such approvals. Any delay in completing the Merger could cause the combined company not to
realize, or to be delayed in realizing, some or all of the benefits that the parties expect to achieve if the Merger is successfully completed
within the expected time frame.
Additionally,
either party may terminate the Merger Agreement under certain circumstances, including, among other reasons, if the Merger is not completed
by June 30, 2026, subject to certain conditions. In the event the Merger Agreement is terminated by us under specified circumstances,
we may be required to pay Open World a termination fee of $500,000 or an expense reimbursement fee of $400,000, as applicable.
****
**The pendency of the Merger could adversely
affect our business and operations and the business operations of Open World.**
Prior to closing, the Merger Agreement requires
us and Open World to conduct our respective businesses in the ordinary course consistent with past practices. During the pendency of the
Merger, we have agreed to refrain from taking certain actions without Open World consent, including making certain acquisitions or dispositions,
incurring certain indebtedness, issuing equity securities (subject to limited exceptions), or entering into certain material contracts.
These restrictions may delay or prevent us from
pursuing business opportunities that may arise pending the completion of the Merger, which could have a material adverse effect on our
, financial condition, and results of operations, regardless of whether the Merger is ultimately consummated. These restrictions could
also have a material adverse effect on Open Worlds business, which could have a material adverse effect on the combined companys
business, financial condition, and results of operations should the Merger be consummated. The risk, and adverse effect, of such restrictions
could be exacerbated by any delay in consummation of the Merger or termination of the Merger Agreement.
****
**The announcement and pendency of the Merger
may create uncertainty that could adversely affect our business relationships and the business relationships of Open World.**
Parties with which we and Open World do business
may experience uncertainty associated with the Merger, including with respect to current or future business relationships with the combined
company following the Merger. Customers, suppliers, distributors, and other business partners may delay or defer entering into new business
relationships, seek to negotiate changes to existing relationships, or consider entering into relationships with parties other than us
or Open World.
In addition, uncertainty about the effect of the
Merger on employees may adversely affect the parties ability to attract, retain, and motivate key personnel during the pendency
of the Merger and for a period of time thereafter. Key employees may depart because of issues relating to the uncertainty and difficulty
of integration or a desire not to remain with the combined company following the Merger, which could have a material adverse effect on
the business, financial condition, and results of operations of either party or the combined company.
****
****
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****
**Securities class action and derivative lawsuits
may be filed challenging the Merger, and an adverse ruling in any such lawsuit may delay or prevent the Closing.**
Securities class action lawsuits and derivative
lawsuits are often brought against public companies that have entered into merger or business combination agreements. Such lawsuits may
be brought against us, Open World, or our respective directors, alleging that the boards of directors breached their fiduciary duties
to stockholders or shareholders by entering into the Merger Agreement.
There can be no assurance that such litigation
or legal proceedings will not be brought, and if brought, that we or Open World will be successful in defending against them. An adverse
outcome in such matters, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on the
business, results of operations, or financial position of the parties or the combined company, including through the possible diversion
of resources or distraction of key personnel. One of the conditions to the Closing is that no order by any court or governmental authority
has been entered that prohibits the Merger, and consequently, if a plaintiff is successful in obtaining such an order, the Merger may
be delayed or prevented from being completed.
****
**The Merger may be completed even though
a material adverse effect may result from the announcement of the Merger, industry-wide changes, or other causes.**
In general, neither we nor Open World are obligated
to complete the Merger if there is a material adverse effect affecting the other party between the date of the Merger Agreement and the
Closing. However, certain types of changes are excluded from the concept of a material adverse effect as defined in the
Merger Agreement.
Such exclusions include but are not limited to:
changes in general economic, business, financial, regulatory or domestic or international political conditions; natural disasters, pandemics,
or other public health events; changes in cryptocurrency or digital asset market conditions, regulatory developments affecting digital
assets, or volatility in cryptocurrency valuations; a decline in the market price or trading volume of our common stock; changes resulting
from the announcement or pendency of the Merger; changes in applicable laws or GAAP; and actions required by a governmental authority
pursuant to Antitrust Laws (as defined in the Merger Agreement). Therefore, if any of these events were to occur affecting either us or
Open World, the other party would still be obligated to effect the Closing, and the stock price of the combined company may suffer. This
in turn may reduce the value of the Merger to our stockholders or Open World securityholders, or both.
****
**If the Merger is not completed, our stock
price may decline significantly, and our business may be adversely affected.**
If the Merger is not completed for any reason,
including as a result of either partys stockholders or shareholders failure to approve the applicable proposals, our ongoing business
may be adversely affected. Without realizing any of the expected benefits of the Merger, we would be subject to a number of risks, including
the following:
|
| We may experience negative reactions from the financial markets, including negative impacts on the price
of our common stock. | |
|
| We may experience negative reactions from our customers, suppliers, business partners, and employees. | |
|
| We will be required to pay our costs relating to the Merger, such as financial advisory, legal, and accounting
fees, whether or not the Merger is completed. | |
|
| The market price of our common stock could decline to the extent that the current market price reflects
a market assumption that the Merger will be completed. | |
****
**The Exchange Ratio in the Merger is fixed
and will not be adjusted to reflect changes in the market price of our common stock or changes in the relative performance of the parties.**
Under the Merger Agreement, each ordinary shares
of Open World (other than excluded shares and dissenting shares), and certain other Open World securities, as set forth in the Merger
Agreement, will be converted or have the right to convert into a number of shares of our common stock equal to the Exchange Ratio. The
Exchange Ratio is fixed and will not be adjusted based on changes in the market price of our common stock or the economic performance
of either party prior to the Closing.
If the market price of our common stock increases
before the Closing, Open World securityholders may receive consideration with a higher dollar value than was negotiated at the time the
Merger Agreement was executed. Conversely, if the market price of our common stock decreases before the Closing, Open World securityholders
may receive consideration with a lower dollar value. The Merger Agreement does not contain a price-based termination right.
****
**Some of our and Open World officers and
directors have interests in the Merger that are different from yours and that may influence them to support or approve the Merger without
regard to your interests.**
Certain of our and Open World officers and directors
participate in arrangements that provide them with interests in the Merger that are different from yours, including, among others, the
continued service as an officer or director of the combined company, severance benefits, the acceleration of certain outstanding equity
awards, and continued indemnification.
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For example, after the Merger, Scott Greenberg,
our current Chairman will continue as a director of the combined company and may receive cash and other compensation from the combined
company. Additionally, Adam Stedham, our Chief Executive Officer and President, and Jennifer Cola, our Chief Financial Officer, will continue
as officers of the combined company pursuant to written employment agreements. Further, upon the Effective Time of the Merger, the vesting
of certain outstanding equity awards held by our directors and officers will accelerate.
These interests, among others, may influence our
and Open Worlds officers and directors to support or approve the Merger.
****
**The Merger will involve substantial costs,
whether or not the Merger is consummated.**
We and Open World have incurred and expect to
continue to incur substantial non-recurring costs associated with the Merger, including transaction fees and other costs related to completing
the transaction. These costs and expenses include fees paid to legal, financial, and accounting advisors, filing fees, printing costs,
and other costs and expenses. Portions of these transaction costs are contingent upon the Closing occurring, although some have been and
will be incurred regardless of whether the Merger is consummated.
**The Merger Agreement limits our and Open
Worlds ability to pursue alternatives to the Merger and includes the potential obligation to pay a Termination Fee.**
Under the Merger Agreement, both we and Open World
are subject to customary no-shop restrictions that limit our ability to solicit, initiate, or knowingly facilitate or encourage
alternative acquisition proposals. From the date of the Merger Agreement until the earlier of the Closing or the termination of the Merger
Agreement, each party has agreed not to engage in discussions or negotiations with, or furnish information to, any third party that is
seeking to make or has made an acquisition proposal.
However, under certain circumstances, our Board
of Directors may engage in negotiations with a third party that makes an unsolicited bona fide written acquisition proposal if our board
determines in good faith, after consultation with its financial advisor and outside legal counsel, that such proposal constitutes a superior
proposal and that failure to engage in such negotiations would be inconsistent with its fiduciary duties. If our Board of Directors changes
its recommendation to stockholders or terminates the Merger Agreement to enter into an alternative transaction, we may be required to
pay Open World a termination fee of $500,000.
These provisions
could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of VerifyMe from
considering or proposing that acquisition, even if it were prepared to pay a higher price than the implied value of the Merger, or might
result in a potential third-party acquirer proposing a lower price because of the added expense of the termination fee.
****
**We and Open World must obtain certain regulatory
approvals and clearances to consummate the Merger, which, if delayed, not granted, or granted with unacceptable conditions, could prevent,
substantially delay, or impair consummation of the Merger.**
Completion of the Merger is conditioned upon the
expiration or termination of the applicable waiting period under the HSR Act and receipt of all other required regulatory approvals, including
any approvals required by state or federal regulators for digital asset or cryptocurrency-related business activities. In addition, Open
World is required to receive written approval of the Merger from the Cayman Islands Trade and Business Licensing Board.
Both we and Open World have agreed to make any
necessary filings under the HSR Act and other applicable Antitrust Laws as promptly as practicable and to use reasonable best efforts
to obtain all necessary regulatory approvals. However, there can be no assurance that the relevant waiting periods will expire, or that
regulatory authorizations will be obtained. At any time before or after consummation of the Merger, the Department of Justice, the Federal
Trade Commission, any state attorney general, or a governmental authority in another jurisdiction could take action under applicable antitrust
laws, including seeking to enjoin completion of the Merger or requiring divestitures or other concessions as a condition to approval.
Any conditions, limitations, or delays in obtaining
regulatory approvals could have the effect of delaying or impeding consummation of the Merger or imposing additional costs or limitations
on the combined company following completion of the Merger.
Risks Relating to the Combined Company should
the Merger be effected
****
**Combining our and Open Worlds businesses
may be more difficult, costly or time-consuming than expected and the combined company may fail to realize the anticipated synergies and
other benefits of the Merger, which may adversely affect the combined companys business results and negatively affect the value
of the combined companys common stock following the Closing.**
The success of the Merger will depend, in part,
on the combined companys ability to realize the anticipated benefits and synergies from integrating our and Open Worlds
businesses. To realize these anticipated benefits and synergies, the combined company must successfully combine and integrate the operations
of both companies. If the combined company is unable to achieve these objectives, the anticipated benefits and synergies of the Merger
may not be realized fully, or at all, or may take longer to realize than expected.
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The integration process may involve unforeseen
difficulties and may require a disproportionate amount of management and financial resources. Potential difficulties the combined company
may encounter in the integration process include:
|
| combining the companies operations and corporate functions; | |
|
| integrating personnel from the two companies; | |
|
| harmonizing operating practices, employee development and compensation programs, internal controls, and other policies, procedures,
and processes; | |
|
| maintaining existing agreements with customers, suppliers, and vendors and leveraging relationships with such third parties for the
benefit of the combined company; | |
|
| addressing possible differences in business backgrounds, corporate cultures, and management philosophies; | |
|
| consolidating the companies administrative and information technology infrastructure; and | |
|
| coordinating distribution and marketing efforts. | |
It is possible that the integration process could
result in the loss of key employees, the loss of customers, the disruption of either companys or both companies ongoing
businesses, inconsistencies in standards, controls, procedures, and policies, unexpected integration issues, higher than expected integration
costs, and an overall post-completion integration process that takes longer than originally anticipated. The actual integration may result
in additional and unforeseen expenses. If the combined company is not able to adequately address integration challenges, we may be unable
to successfully integrate operations and the anticipated benefits of the integration plan may not be realized.
An inability to realize the full extent of the
anticipated benefits of the Merger, as well as any delays encountered in the integration process, could have an adverse effect upon the
revenues, level of expenses and operating results of the combined company, which may adversely affect the value of the combined companys
common stock following the consummation of the Merger. Moreover, if the combined company is unable to realize the full strategic and financial
benefits currently anticipated from the Merger, our stockholders will have experienced substantial dilution of their ownership interests
without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able
to realize only part of the strategic and financial benefits currently anticipated from the Merger.
****
**The combined company may not be able to
retain customers, suppliers, or business partners, or such third parties may seek to modify contractual relationships with the combined
company, which could have an adverse effect on the combined companys business and operations.**
Third parties may terminate or alter existing
contracts or relationships with the combined company as a result of the Merger. Certain customers, suppliers, or other business partners
may seek to terminate or modify contractual obligations following the Closing, whether or not contractual rights are triggered as a result.
There can be no guarantee that customers, suppliers, and business partners will remain with or continue to have a relationship with the
combined company or do so on the same or similar contractual terms following the Closing. If any customers, suppliers or distributors
seek to terminate or modify contractual obligations or discontinue the relationship with the combined company, then the combined companys
business and results of operations may be harmed.
If the combined companys suppliers or other
business partners seek to terminate or modify an arrangement with the combined company, the combined company may be unable to procure
necessary services from other providers in a timely and efficient manner and on acceptable and cost-effective terms, or at all. In addition,
we and Open World have contracts with third parties that may require consent from these parties in connection with the Merger. If these
consents cannot be obtained, the combined company may suffer a loss of potential future revenue, incur costs, and lose rights that may
be material to the combined company's business. In addition, third parties with whom we or OpenWorld currently have relationships may
terminate or otherwise reduce the scope of their relationship in anticipation of the Closing. Any such disruptions could limit the combined
companys ability to achieve the anticipated benefits of the Merger. The adverse effect of any such disruptions could also be exacerbated
by a delay in the Closing or by a termination of the Merger Agreement.
****
**If the combined company fails to attract
and retain management and other key personnel, it may be unable to successfully integrate the businesses or execute its business plan.**
The combined companys ability to compete
in its industry depends on its ability to attract and retain highly qualified managerial, financial, technical, and other personnel. The
combined company will be highly dependent on its management and key employees. Competition for qualified personnel is intense, and there
can be no assurance that the combined company will be able to attract and retain the personnel necessary for the development of its business.
In particular, the combined companys success will depend on the continued services of Open Worlds Chief Executive Officer,
Matthew Shaw, who will continue in such role following the Merger. Mr. Shaw, who brings extensive experience in the finance industry and
management of crypto and other digital asset companies, is critical to the combined companys strategic plan, and the loss of him
could significantly disrupt the combined companys operations.
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The combined company will operate in complex and
rapidly evolving segments of the digital assets industry that are not widely understood and that require highly specialized expertise
in areas such as blockchain infrastructure design, tokenomics, exchange and market structure, regulatory compliance across multiple jurisdictions,
real-world asset tokenization, and post-launch operations. The pool of individuals with the background and experience necessary to provide
Open Worlds infrastructure and launch services, including senior leaders with financial, crypto and regulatory expertise, is extremely
limited. The combined company will face intense competition for qualified personnel from other consulting and advisory firms, crypto-native
companies, software and other technology firms, financial institutions, and emerging Web3 projects, many of which have significantly greater
resources, brand recognition, or compensation flexibility than the combined company will.
Open Worlds executives, including Mr. Shaw,
are employed at will and may terminate employment at any time, and Open World does not currently maintain key-person life insurance for
its executive officers. The loss of any key personnel, or the inability to attract and retain key personnel, could delay or prevent the
achievement of the combined companys business objectives and could materially and adversely affect the combined companys
business, financial condition, and results of operations.
****
**Following the Merger, our current stockholders
will have a significantly reduced ownership and voting interest in the combined company compared to their ownership of VerifyMe prior
to the Merger.**
After the Closing, our current stockholders will
own a significantly smaller percentage of the combined company than their ownership of VerifyMe prior to the Merger. Immediately after
the Closing, our stockholders as of immediately prior to the Closing, are expected to own approximately 10% of the outstanding shares
of the combined company, and Open World securityholders are expected to own approximately 90% of the outstanding shares of the combined
company. The exact equity stake of our stockholders and Open World securityholders in the combined company immediately following the Effective
Time will depend on the Fully Diluted Parent Common Stock and Fully Diluted Company Shares (each as defined in the Merger Agreement) determined
immediately prior to the Closing.
As a result of this reduced ownership percentage,
our current stockholders will be able to exercise significantly less influence over the management and policies of the combined company
following the Merger than they currently exercise over VerifyMe. Similarly, Open World securityholders who become our stockholders will
own a majority of the outstanding shares of common stock of the combined company.
****
**The market price of the combined companys
common stock after the Merger may be affected by factors different from those currently affecting the shares of our common stock prior
to completion of the Merger.**
Upon completion of the Merger, Open World securityholders
will become our stockholders as stockholders of the combined company. Our business currently differs, and may differ in the future, in
certain respects from that of Open World and certain adjustments may be made to our business as a result of the Merger. Accordingly, the
results of operations of the combined company and the market price of the combined companys common stock after the completion of
the Merger may be affected by factors different from those currently affecting our results of operations and market price of our common
stock prior to completion of the Merger.
****
**The combined company may be unable to obtain
the additional capital, equity or debt financing required to fund its operations and growth, which could adversely affect its business,
prospects and ability to continue as a going concern.**
We and Open World expect the combined company
to require substantial additional capital to fund working capital needs and to support its growth initiatives. The combined companys
capital needs may increase due to factors outside its control, including regulatory changes affecting digital assets, volatility in crypto
markets that impacts client demand, elongated client sales cycles, delayed collections, or unanticipated operating or legal expenses.
The combined company may seek additional funds through dilutive equity offerings, debt financings, strategic investments, joint ventures
or other arrangements. However, market conditions, including periods of illiquidity or volatility in broader capital markets or in the
digital asset sector, may limit its ability to raise funds in a timely manner, in sufficient quantities, or on terms acceptable to the
combined company, if at all.
If the combined company raises additional equity
financing, holders of its equity securities may experience dilution, the per share value of its equity securities could decline, and new
securities may have rights, preferences or privileges that are senior to those of its existing stockholders. If the combined company incurs
indebtedness, the terms of any debt securities or credit facilities may contain restrictive covenants that limit its ability to incur
additional debt, pay dividends, repurchase shares, make investments, dispose of assets, or engage in certain business activities, including
entering new markets or consummating acquisitions. Debt instruments may also require the combined company to maintain specified financial,
liquidity or other ratios, grant security interests in its assets, and could include variable interest rates that increase its cost of
capital. In the event of a liquidation or bankruptcy, lenders would be repaid before holders of its equity securities. If the combined
company issues convertible or other derivative securities, they may contain anti-dilution or reset provisions that could result in additional
dilution to stockholders.
The combined companys ability to raise
capital may also be constrained by its operating performance, the perceived risks of its business model, its limited operating history
in public markets, and legal or regulatory developments affecting crypto-related businesses, including restrictions on certain activities,
enhanced compliance requirements, or adverse enforcement actions in jurisdictions where the combined company or its clients operate. Additionally,
counterparties may require terms that are costly or include governance, information or consent rights that limit its flexibility. If funds
are unavailable or insufficient, or are available only on unfavorable terms, the combined company may be forced to delay, scale back or
discontinue some or all of its growth plans, reduce headcount or marketing, forgo strategic opportunities, or alter its business model.
Any of these outcomes could materially and adversely affect its competitive position, client relationships and reputation, and could harm
its business, financial condition, results of operations and prospects. If the combined company cannot obtain sufficient capital to meet
its obligations as they come due, the combined company may be unable to continue as a going concern.
****
****
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****
**Open Worlds management has limited
experience in operating a public company and may not successfully or effectively manage the transition to a public company.**
The executive officers of Open World have limited
experience in the management of a publicly traded company. The Open World management team may not successfully or effectively manage its
transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities
laws. While members of the management team have extensive experience in the finance and digital asset and token industries, their limited
experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it
is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to
the management and growth of the combined company. The combined company may not have adequate personnel with the appropriate level of
knowledge, experience, and training in the accounting policies, practices or internal control over financial reporting required of public
companies in the United States. The development and implementation of the standards and controls necessary for the combined company to
achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It
is possible that the combined company will be required to expand its employee base and hire additional employees to support its operations
as a public company, which will increase its operating costs in future periods.
****
**The combined company is expected to be a
controlled company as defined under Nasdaq exchange listing rules and should it choose to rely on controlled company exemptions, you would
not have the same protections afforded to stockholders of companies that are subject to these corporate governance requirements.**
Immediately following this offering, we expect
that some Open World securityholders will beneficially own more than 50% of the voting power of the combined companys outstanding
common stock. Under the Nasdaq listing rules, a company of which more than 50% of the voting power is held by an individual, group, or
another company is a controlled company and is permitted to elect to rely, and may rely, on certain exemptions from corporate governance
requirements, including:
|
| an exemption from the requirement that a majority of its board of directors be independent directors;
and | |
|
| an exemption from the requirement that its compensation committee be comprised entirely of independent
directors and have a written charter addressing the committees purpose and responsibilities. | |
If the combined company relies on any such exemptions,
our current stockholders who remain stockholders of the combined company and the combined companys investors would not have the
same protections afforded to stockholders of companies that are subject to these corporate governance requirements. The combined companys
status as a controlled company could make the combined companys common stock less attractive to certain investors, could limit
the oversight of management by the combined companys board of directors, and could adversely affect the trading price or liquidity
of the combined companys common stock. In addition, the Open World securityholders holding more than 50% of the voting power of
the combined company, either individually or if applicable as a group, will be able to exert significant influence over the outcome of
matters requiring stockholder approval of the combined company, including the election of directors, mergers, acquisitions, dispositions,
financing transactions, and other significant corporate actions, which may conflict with the interests of its other stockholders. As a
company operating in the crypto infrastructure and token launch services industry, where regulatory expectations and market practices
continue to evolve, such concentration of control could also influence its approach to governance, compliance, or risk tolerance in ways
that other stockholders may not view as favorable.
****
**Upon and after completion of the Merger,
the combined company may be unable to meet the continued listing standards of Nasdaq, which could result in delisting, reduced liquidity,
increased volatility, and harm to its ability to raise capital.**
Upon completion of the Merger, the combined company
will be required to meet the initial and continuing listing requirements to maintain the listing and continued trading of its common stock
on Nasdaq. These initial listing requirements are more difficult to achieve than the continued listing requirements. Pursuant to the Merger
Agreement, we agreed to take, or cause to be taken, all actions, and to do or cause to be done all things, necessary, proper or advisable
under applicable laws and the rules and policies of Nasdaq and the SEC to cause the shares of our common stock being issued in the Merger
to be approved for listing on Nasdaq at or prior to the Effective Time. Based on information currently available to us, we anticipate
that our common stock will be unable to meet the $4.00 (or, to the extent applicable, $3.00) minimum bid price initial listing requirement
at the Closing unless we effect a reverse stock split. Pursuant to the Merger Agreement, upon Open Worlds request, our Board of
Directors would be required to effect a reverse stock split of our issued and outstanding common stock at a ratio ranging from any whole
number between 1-for-2 and 1-for-10, as determined by our Board of Directors in its discretion. At our annual meeting of stockholders
held on October 8, 2025, our stockholders authorized our Board of Directors to effect at any time until the
one-year anniversary date of the annual meeting, in its discretion, a reverse stock split of our outstanding and treasury shares
of common stock at a ratio ranging from 1-for-2 to 1-for 10, to be determined by our Board of Directors, without any corresponding change
in the number of authorized shares of our common stock and approved a corresponding amendment to our Amended and Restated Articles of
Incorporation, as amended, to effect the reverse stock split. Often times a reverse stock split will not result in a trading price for
the affected common stock that is proportional to the ratio of the split. Following the merger, if the combined company is unable to satisfy
Nasdaq listing requirements, Nasdaq may notify the combined company that its shares of common stock will not be listed on Nasdaq.
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Upon a potential delisting from Nasdaq, if the
common stock of the combined company is not then eligible for quotation on another market or exchange, trading of the shares could be
conducted in theover-the-countermarket or on an electronic bulletin board established for unlisted securities such as the
Pink Sheets or the OTC Bulletin Board. In such event, it is likely that there would be significantly less liquidity in the trading of
the common stock of the combined company; decreases in institutional and other investor demand for the shares, coverage by securities
analysts, market making activity and information available concerning trading prices and volume; and fewer broker dealers willing to execute
trades in the common stock of the combined company. Also, it may be difficult for the combined company to raise additional capital if
the combined companys common stock is not listed on a major exchange. The occurrence of any of these events could result in a further
decline in the market price of the common stock of the combined company and could have a material adverse effect on the combined company.
Even if the combined company remains listed, failure
to maintain compliance on a consistent basis or to timely cure any deficiency could divert significant management attention and resources,
subject it to public warnings or grace periods, and negatively affect the market price and liquidity of its securities. There can be no
assurance that the combined company will be able to regain or maintain compliance with the continued listing requirements, that any appeal
or plan of compliance would be successful, or that the combined companys securities will remain listed. Any of the foregoing could
materially and adversely affect the value of the combined companys common stock.
Risks Relating to a Reverse Stock Split
**Subject to the Merger Agreement, our Board of Directors currently
has discretion to effect a reverse stock split of our common stock at a ratio ranging from 1-for-2 to 1-for 10 without further stockholder
approval, which could adversely effect our stockholders and the value of our common stock.**
At our annual meeting of stockholders held on
October 8, 2025, our stockholders authorized our Board of Directors to effect at any time until the
one-year anniversary date of the annual meeting, in its discretion, a reverse stock split of our outstanding and treasury shares
of common stock at a ratio ranging from 1-for-2 to 1-for 10, to be determined by our Board of Directors, without any corresponding change
in the number of authorized shares of our common stock and approved a corresponding amendment to our Amended and Restated Articles of
Incorporation, as amended, to effect the reverse stock split. Pursuant to the Merger Agreement, we have agreed not to effect a reverse
stock split unless requested by Open World.
Based on information currently available to us,
we anticipate that our common stock will be unable to meet the $4.00 (or, to the extent applicable, $3.00) minimum bid price initial listing
requirement at the Closing of the Merger unless we effect a reverse stock split. There is no assurance that if a reverse stock split is
implemented it will result in:
|
| a share price that will comply with Nasdaqs minimum bid price initial listing requirement at the
Closing of the Merger; | |
|
| a share price of the combined company that will comply with Nasdaqs continued listing standards; | |
|
| a trading price for our common stock that is proportional to the ratio of the split; | |
|
| a share price that will attract new investors, including institutional investors, or that the market price
of our common stock will satisfy the investing requirements of those investors; or | |
|
| an improvement in the trading liquidity of our common stock. | |
Additionally, if a reverse
stock split is effected, it may:
|
| adversely effect the liquidity of the shares of our common stock, especially if the market price of our
common stock does not increase as a result of the reverse stock split; and | |
|
| may increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating
the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such
sales. | |
Any of the foregoing could adversely affect our
stockholders and value of our common stock.
| | 26 | | |
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**ITEM1B.UNRESOLVED STAFF COMMENTS.**
None.
**ITEM1C.CYBERSECURITY.**
****
**Risk Management and Strategy**
Cyber criminals are becoming more sophisticated
and effective every day, and they are increasingly targeting enterprise software companies.All companies utilizing technology are
subject to threats of breaches of their cybersecurity programs. To mitigate the threat to our business, we have established a comprehensive
approach to cybersecurity risk management and hold securing the data customers and other stakeholders entrust to us as one of our top
priorities. As described in more detail below, we have established policies, standards, processes and practices for testing, training,
and monitoring material risks from cybersecurity threats. We have devoted financial and personnel resources to implement security measures
to meet regulatory requirements and customer expectations, and we intend to continue to make investments to maintain the security of our
data and cybersecurity infrastructure. There can be no guarantee that our policies and procedures will be properly followed in every instance
or that those policies and procedures will be effective. Although our Risk Factors include further details about the material cybersecurity
risks we face, we believe that risks have not materially affected our business to date. We can provide no assurance that there will not
be incidents in the future or that they will not materially affect us, including our business strategy, results of operations, or financial
condition.
We have established controls and procedures designed
to ensure prompt escalation of material cybersecurity incidents so that decisions regarding public disclosure and reporting of such incidents
can be made by management and the Board of Directors in a timely manner. We intend to continue to review and enhance our incident response
and recovery plan for the Company. Our policies require each of our employees to contribute to our data security efforts. We regularly
remind employees of the importance of handling and protecting customer and employee data, including through annual privacy and security
training to enhance employee awareness of how to detect and respond to cybersecurity threats. Our incident response and recovery plans
and policies will address and guide our employees, management, and the Board of Directors on our response to a cybersecurity incident.
Our cybersecurity policies, standards, processes
and practices are also assessed by third party cybersecurity providers. These assessments include a variety of activities including information
security maturity assessments, audits and independent reviews of our information security control environment and operating effectiveness.
**Governance**
Our Board
of Directors is responsible for monitoring and assessing strategic risk exposure related to cybersecurity risks, and our executive officers
are responsible for the day-to-day assessment and management of the material risks we face. Our Board of Directors administers its cybersecurity
risk oversight function directly as a whole.
Currently, Jack Wang senior advisor of our subsidiary
PeriShip Global, has primary responsibility for managing material cybersecurity risks. Mr. Wang holds an undergraduate and masters
degree in computer science and has served in various roles in information technology and security for over 20 years. Mr. Wang is responsible
for reporting any cybersecurity related incidents to our executive officers. Our executive officers are responsible for reporting material
cybersecurity related incidents to our Board of Directors. We may implement other reporting structures governing the day-to-day management
and reporting of cybersecurity risks.
**ITEM2.PROPERTIES.**
We do not own any significant real property, but
our subsidiary leased approximately 2,686 square feet of primarily office space in Connecticut used in connection with our Precision Logistics
segment for the year ended December 31, 2025. In January 2026 we entered into a lease termination agreement, whereby the lease was terminated
as of February 15, 2026 and our Precision Logistics segment is not currently leasing any real property. We do not anticipate any difficulty
in obtaining alternative space in the future, if we decide to lease space for our Precision Logistics segment.
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**ITEM3.LEGAL PROCEEDINGS.**
From time-to-time, we may be a party to, or otherwise
involved in, legal proceedings arising in the ordinary course of business. As of the date of this report, we are not aware of any proceedings,
threatened or pending, against us which, if determined adversely, would have a material effect on our business, results of operations,
cash flows, or financial position.
**ITEM4.MINE SAFETY DISCLOSURES.**
Not applicable.
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**PART II**
**ITEM5.MARKET FOR REGISTRANTS
COMMON EQUITY, RELATED STOCKHOLDER MATTERS,AND ISSUER PURCHASES OF EQUITY SECURITIES.**
Our common stock, par value $0.001 per share is,
traded on Nasdaq under the trading symbol VRME.
**Common Shareholders**
As of March 23, 2026, we had approximately 1,421
stockholders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf
of stockholders, this number is not indicative of the total number of stockholders represented by these stockholders of record.
**Dividends**
We have never declared or paid a cash dividend.
Pursuant to the Merger Agreement, we may, but have no obligation to, declare, set aside, and pay on or after the closing date of the Merger
a cash dividend to holders of our capital stock insomuch as any dividend does not make us unable to comply with the closing net cash requirement
set forth in the Merger Agreement. We cannot be certain what our cash balance will be at the closing of the Merger and whether there will
be any amount above the closing net cash requirement set forth in the Merger Agreement available to be issued as a dividend. Even if a
dividend can be declared, our Board of Directors has no obligation and is not required to declare a dividend by the Merger Agreement.
Our Board of Directors currently anticipates declaring a cash dividend prior to the closing of the Merger The declaration and payment
of dividends is subject to the discretion of our Board of Directors and will depend upon our earnings (if any), our financial condition,
and our capital requirements. Nevada law permits a corporation to pay dividends out of earnings or surplus.
**Share Repurchase Plan**
****
**The following table provides information about our share repurchase
activity for the three months ended December 31, 2025**
****
**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) | | |
|
10/01/2025-10/31/2025 | | |
| - | | |
$ | - | | |
| - | | |
$ | 262 | | |
|
11/01/2025-11/30/2025 | | |
| - | | |
| - | | |
| - | | |
| - | | |
|
12/01/2025-12/31/2025 | | |
| - | | |
| - | | |
| - | | |
| - | | |
|
Total | | |
| - | | |
$ | - | | |
| - | | |
$ | 262 | | |
|
(1) | In December 2023, the Companys 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 Companys common stock through December 31, 2025. The share repurchase program expired on December 31, 2025. | |
**ITEM 6. [RESERVED.]**
****
**ITEM7.MANAGEMENTS DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**
This Managements Discussion and Analysis
of Financial Condition and Results of Operation and other parts of this Report contain forward-looking statements that involve risks and
uncertainties.All forward-looking statements included in this Report are based on information available to us on the date hereof,
and except as required by law, we assume no obligation to update any such forward-looking statements.Our actual results may differ
materially from those anticipated in these forward-looking statements as a result of various factors. The following should be read in
conjunction with our annual financial statements contained elsewhere in this Report.
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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 Services clients use our shipping monitoring,
predictive analytics, or exception management services. Shippers use their own transportation rates, provided and charged directly by
their carrier, with our added services charged (i) directly by the carrier, under a white label
arrangement, which we refer to as our Premium service, or (ii) by us, which we refer to as our Direct Premium service. These services
include customer web portal access, weather monitoring, temperature control, full-service center support, and last mile resolution. | |
As discussed in the section Partnerships
below, we ceased providing ProActive services to our prior carrier partner in September 2025. In February
2026, we ceased providing Premium services to our prior carrier partner. While we no longer provide ProActive and Premium services to
our prior carrier partner we can and continue to provide Direct Premium services to our customers who use our prior carrier partner for
their shipping needs.
Beginning in September 2025, we began providing
ProActive services to our new Strategic Partner. We are currently establishing the ability to offer our Premium
services to our Strategic Partner. We expect to begin broadly offering Premium and Direct Premium services to customers of our new Strategic
Partner in the second quarter of 2026.
**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 shippers
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. We are not actively pursuing business in the Authentication segment but continue
to service existing customers.
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****
**Recent Developments**
**Merger Agreement**
On January 2, 2026, we entered into the LOI with
Open World Ltd. regarding a proposed merger transaction. On February 11, 2026, we entered into an Agreement and Plan of Merger (the Merger
Agreement) with VRME Subsidiary Corp., a Nevada corporation, and our wholly owned subsidiary (the Merger Sub) and
Open World. Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, Merger Sub will merge
with and into Open World, Merger Sub will cease to exist and Open World will become our wholly-owned subsidiary (the Merger).
At the effective time of the Merger (the Effective Time), (i) each holder of ordinary shares of Open World outstanding immediately
prior to the Effective Time (excluding holders of Excluding Shares and Dissenting Shares, as defined in the Merger Agreement) will be
entitled to receive the number of shares of our common stock, based on the Exchange Ratio as defined in the Merger Agreement (the Exchange
Ratio), (ii) each investor in Open World Simple Agreements for Future Equity (Open World SAFEs) outstanding immediately
prior to the Effective Time will be entitled to receive a right to a number of shares of our common stock based on the Exchange Ratio
and (iii) any outstanding option to purchase shares of Open World shall be converted into an option to purchase the number of shares of
our common stock based on the Exchange Ratio.
Immediately following the closing of the Merger
(the Closing), our pre-Closing stockholders are expected to collectively retain approximately 10% of the post-Closing aggregate
number of shares of our common stock and holders of Open World ordinary shares and Open World SAFEs will receive as merger consideration
newly issued shares of our common stock representing approximately 90% of the post-Closing aggregate number of shares of our common stock.
The Merger Agreement contains customary representations,
warranties and covenants, including, among others, (i) covenants requiring each of us and Open World to conduct its business in the ordinary
course during the period between the execution of the Merger Agreement and the Closing or earlier termination of the Merger Agreement,
subject to certain exceptions, (ii) covenants prohibiting us and Open World from engaging in certain kinds of transactions during such
period (without the prior written consent of the other), and (iii) a covenant restricting us and Open World from activities relating to
the soliciting, initiating, encouraging, inducing or facilitating the communication, making, submission or announcement of any alternative
acquisition proposals or inquiries.
The Merger Agreement also requires us, in cooperation
with the Open World, to prepare and file with the SEC a registration statement on Form S-4 that will contain a proxy statement relating
to a Company stockholder meeting to be held in connection with the Merger (the Registration Statement) and pursuant to which
our shares of common stock will be registered under the Securities Act of 1933, as amended (the Securities Act), to be issued
by virtue of the Merger and the contemplated transactions thereunder. We shall use its reasonable best efforts to (i) cause the Registration
Statement to comply with applicable rules and regulations promulgated by the SEC, (ii) cause the Registration Statement to become effective
as promptly as practicable, and (iii) keep the Registration Statement effective as long as is necessary to consummate the Merger and the
contemplated transactions thereunder. In addition, under the Merger Agreement, the parties agreed to other customary provisions including
(i) obtaining requisite stockholder approval to consummate the Merger and the contemplated transactions thereunder, (ii) obtaining regulatory
approvals from relevant governmental authorities, (iii) indemnifying our directors and officers for a period of six years following the
Closing, (iv) completing certain disclosure obligations required by the SEC and listing requirements promulgated by the Nasdaq Capital
Market (Nasdaq), (v) electing or appointing to the positions of officers and directors of Company and the surviving corporation
certain persons designated by Open World, and (vi) executing employment agreements between us and Adam Stedham and Jennifer Cola.
Pursuant to Merger Agreement, we have also agreed
to enter into a Registration Rights Agreement and an Exchange Agent Agreement in forms reasonably acceptable to us and Open World at Closing.
Closing of the Merger is subject to various customary
closing conditions. Each partys obligations to effect the Merger and otherwise consummate the contemplated transactions thereunder
are conditioned upon (i) the effectiveness of the Registration Statement on Form S-4, (ii) expiration or termination of applicable regulatory
waiting periods, (iii) no restraints from any governmental authority preventing the consummation of the contemplated transactions under
the Merger Agreement, (iv) us and Open World obtaining the respective requisite stockholder votes to consummate the transactions contemplated
by the Merger Agreement, (v) us causing our PeriShip subsidiary to terminate its current credit facility, (vi) us effectuating a reverse
stock split upon the request of Open World, (vii) Nasdaqs approval of our Nasdaq listing application for the post-Merger entity,
(viii) receipt of written approval of the Merger by the Cayman Islands Trade and Business Licensing Board, and (ix) execution of the Registration
Rights Agreement. Our and Merger Subs obligations to effect the Merger and otherwise consummate the contemplated transactions thereunder
are further conditioned upon customary closing conditions. Open Worlds obligations to effect the Merger and otherwise consummate
the contemplated transactions thereunder are further conditioned upon customary closing conditions as well as (i) us having Closing Net
Cash, as defined in the Merger Agreement, of no less than $1 million, and (ii) our common stock having not been delisted from Nasdaq.
| | 31 | | |
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In connection with and subject to the Closing
of the Merger, outstanding time-based and performance-based restricted stock awards and restricted stock units held by certain of our
employees and directors at Closing will accelerate and vest, regardless of any performance conditions, at the Effective Time.
At the Closing of the Merger, pursuant to the
Merger Agreement, each of David Edmonds, Marshall Geller, Howard Goldberg, and Adam Stedham are expected to resign as directors of our
Board of Directors.
The foregoing description of the Merger Agreement
does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the full text of the Merger Agreement.
**Stockholder Support Agreements**
In connection with the Merger Agreement, certain
of our stockholders representing approximately 14% or more of the voting power in the aggregate of our common stock, including our directors
and officers (the Supporting Stockholders), executed Stockholder Support Agreements (the Support Agreements),
pursuant to which they agreed to vote their shares of our common stock, including any shares of our capital stock or other equity securities
that they purchase or with respect to which they otherwise acquire sole or shared voting power (including any proxy) (the Support
Agreement Shares) after the execution of Support Agreement and prior to its expiration pursuant to its terms, in favor of the issuance
of our common stock in accordance with Nasdaq Listing Rule 5635 (the Issuance Proposal), (ii) any matter that could reasonably
be expected to facilitate the Issuance Proposal, (iii) against any other proposed action, agreement, transaction or other matter that
is intended to, or would reasonably be expected to, impede, interfere with, delay, postpone, discourage or adversely affect the approval
or consummation of the Issuance Proposal or the consummation of any or all of the other transactions contemplated by the Merger Agreement;
and (iv) to approve any proposal to adjourn or postpone the meeting to a later date, if there are not sufficient votes for the approval
of the Issuance Proposal on the date on which such meeting is held.
The Support Agreements also contain restrictions
on transfer of Support Agreement Shares held by the Supporting Stockholders. The Support Agreements will terminate upon the earliest to
occur of the following events: (a) the effective time of the approval of the Issuance Proposal, (b) the termination of the Merger Agreement
in accordance with its terms or (c) upon mutual written agreement of the parties to the Support Agreements. The foregoing description
of the Support Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the full
text of the form of Support Agreement.
**Amended and Restated Employment Agreement
with Adam Stedham**
In connection with the Merger Agreement, on February
11, 2026, we entered into an Amended and Restated Employment Agreement with Adam Stedham, effective as of the Effective Time of the Merger.
As of the Effective Time, and subject to the Closing of the Merger, Mr. Stedham is expected to resign as a director, Chief Executive Officer
and President to become the President of Precision Logistics (the Stedham Employment Agreement). Mr. Stedhams expected
resignation as our director, Chief Executive Officer and President is not the result of any disagreement with us on any matter relating
to our operations, policies or practices.
Pursuant to the Stedham Employment Agreement,
should it become effective, Mr. Stedham will receive an annual base salary of $300,000 and be eligible for an annual bonus for each calendar
year, with a potential up to 50% of his base salary based on performance goals set by the Board of Directors each year. Mr. Stedham shall
be eligible to receive equity-based compensation award(s), as determined by the Board of Directors (or a subcommittee thereof), from time
to time.
The Stedham Employment Agreement is for an initial
term of one year and will thereafter be at-will, and may be terminated by either party during the initial term. If terminated
by Mr. Stedham for good reason, or by us without cause prior to the 6-month anniversary of the Effective Time, then Mr. Stedham shall
be entitled to an amount equal to his Base Salary that would have otherwise been paid until the conclusion of the initial term. If the
qualifying termination occurs after the 6-month anniversary of the Effective Time, then Mr. Stedham shall be entitled to an amount equal
to six (6) months of his Base Salary.
**Employment Agreement with Jennifer Cola**
In connection with the Merger Agreement, on February
11, 2026, we entered into an Employment Agreement with Jennifer Cola, effective as of the Effective Time. As of the Effective Time, and
subject to the Closing of the Merger, Ms. Cola is expected to continue in her position as our Chief Financial Officer (the Cola
Employment Agreement).
Pursuant to the Cola Employment Agreement, should
it become effective, Ms. Cola will receive an annual base salary of $180,000 and be eligible for an annual bonus for each calendar year
ending during the employment period, with a potential up to 50% of her base salary based on performance goals set by the Board of Directors
each year. Ms. Cola shall be eligible to receive equity-based compensation award(s), as determined by the Board of Directors (or a subcommittee
thereof), from time to time. In addition, in connection with and subject to entering into the Cola Employment Agreement, the Compensation
Committee of the Board of Directors approved the grant on the Effective Time of 130,000 restricted stock awards under our 2020 equity
incentive plan, which shall vest on the Effective Time.
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The Cola Employment Agreement is for an initial
term of one year and will thereafter be at-will, and may be terminated by either party during the initial term. If terminated
by Ms. Cola for good reason, or by us without cause prior to the 6-month anniversary of the Effective Time, then Ms. Cola shall be entitled
to an amount equal to her Base Salary that would have otherwise been paid until the conclusion of the initial term. If the qualifying
termination occurs after the 6-month anniversary of the Effective Time, then Ms. Cola shall be entitled to an amount equal to six (6)
months of her Base Salary.
**Jennifer Cola Severance Period**
****
In connection with the Merger, on February 11,
2026, the Board of Directors approved the grant of a severance period for Ms. Cola effective immediately and which will expire upon the
Effective Time of the Merger (the Severance Period), whereby Ms. Cola will receive a continuation of her base salary and
benefits for a period of six months if she is terminated without cause during the Severance Period.
**Termination of ATM Sales Agreement**
As previously disclosed, on March 6, 2025, we
entered into an At-The-Market Sales Agreement (the Sales Agreement) with Roth Capital Partners, LLC (the Sales Agent),
pursuant to which we could issue and sell, from time to time, shares of our common stock up to an aggregate offering price of $15.8 million
(the ATM Program).
On February 11, 2026, we provided the Sales Agent
written notice of its decision to terminate the ATM Program and pursuant to Section 12(b) of the Sales Agreement, the ATM Program and
Sales Agreement terminated on February 16, 2026.
During the year ended December 31, 2025, and through
the termination of the ATM Program, we sold 628,432 shares of common stock through the ATM Program for net proceeds of $483 thousand,
after deducting $15 thousand in offering costs.
**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 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 that matures on May 11, 2026.
**Opportunities**
****
Traditionally, most shipping businesses utilize
the carriers data platform for tracking which generally informs the shipping enterprise, and their customers, when a package is
in transit, when a package has been delivered, and some level of detail of the path which a package traveled. We believe taking the data
feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor of our service center
agents give us a competitive advantage against other third-party platforms that solely rely on the carriers data feeds. We utilize
a variety of input sources beyond the carriers 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 agents work to address the issue saving the perishable product from spoiling,
while 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-sized health care, 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 and
discovering other industries that need a high touch, white glove exception management team.
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.
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**Partnerships:**
****
On August 26, 2025, our prior carrier partner,
notified providers, including PeriShip Global, that it would be providing preferred shipping services through its own internal platform
and that the providers would no longer be approved as preferred shippers effective September 24, 2025. As such, PeriShip Global is no
longer a preferred shipper for our prior carrier partner and our Precision Logistics segment ceased providing ProActive services to our
prior carrier partners customers in September 2025.We continued to provide Premium
services to our prior carrier partner until we ceased providing Premium services in February 2026. While we no longer provide ProActive
and Premium services to our prior carrier partner we can and continue to provide Direct Premium services to our customers who use our
prior carrier partner for their shipping needs.
On September
24, 2025, we began offering ProActive services to the customers of an alternative Preferred Shipping Partner. We
are currently establishing the ability to offer our Premium services to our Strategic Partner. We expect to begin broadly offering Premium
and Direct Premium services to customers of our new Strategic Partner in the second quarter of 2026.
**Seasonality**
We experienceseasonalfluctuations
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. While the fourth quarter is historically our highest revenue quarter, revenues from
ProActive services declined in the quarter ended December 31, 2025 as compared to the quarter ended December 31, 2024 due to the previously
disclosed loss of our prior carrier partner as a shipping supplier integrating our service offerings, and larger shippers not wanting
to change shipping suppliers during the peak season. The seasonality of our business may cause fluctuations in our quarterly operating
results.
**Results of Operations**
Comparison of the Years Ended December 31,
2025, and 2024
The following discussion analyzes our results
of operations for the years ended December 31, 2025, and 2024. The following information should be considered together with our financial
statements for such periods and the accompanying notes thereto.
*Revenue*
**
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
(In thousands) | | |
(In thousands) | | |
|
Precision Logistics | |
$ | 16,242 | | |
$ | 23,766 | | |
|
Authentication | |
| 156 | | |
| 441 | | |
|
Total Revenue | |
$ | 16,398 | | |
$ | 24,207 | | |
Consolidated revenue for the year ended December31,
2025, was $16,398 thousand, a 32% decrease compared to $24,207 thousand, for the year ended December 31, 2024. The
decrease in our Precision Logistics segment primarily relates to the termination of our agreement with our prior carrier partner to offer
our ProActive services effective September 24, 2025. During the fourth quarter of 2025 we began offering our ProActive services under
our new Program Agreement with our Strategic Partner. We anticipate our ProActive services revenue to take several quarters to recover
while our Premium services revenue increased by 5% in the fourth quarter 2025 compared to the fourth quarter 2024. The Authentication
segment did not grow during 2025, primarily due to the shift to servicing existing customers and the Company not actively pursuing
business in the Authentication segment.
*Gross Profit*
**
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
(In thousands) | | |
% of Revenue | | |
(In thousands) | | |
% of Revenue | | |
|
Precision Logistics | |
| 6,220 | | |
| 37.9 | % | |
| 8,268 | | |
| 34.2 | % | |
|
Authentication | |
| 101 | | |
| 0.6 | % | |
| 394 | | |
| 1.6 | % | |
|
Total Gross Profit | |
$ | 6,321 | | |
| 38.5 | % | |
$ | 8,662 | | |
| 35.8 | % | |
Consolidated gross profit for the years ended
December 31, 2025, and 2024, was $6,321 thousand and $8,662 thousand, respectively. The resulting gross margin was 38.5% for the year
ended December 31, 2025, compared to 35.8% for the year ended December 31, 2024. The gross profit percentage increase relates to process
improvements implemented to increase ProActive services margins in the Precision Logistics segment.
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**
*Segment Management and Technology*
Segment management and technology expenses decreased
by $2,316 thousand to $3,138 thousand for the year ended December 31, 2025, compared to $5,454 thousand for the year ended December 31,
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 $436 thousand to $3,416 thousand for the year ended December 31, 2025, compared to $3,852 thousand for the year ended December 31,
2024. The decrease relates primarily to a decrease in stock-based compensation from $1,386 thousand for the year ended December 31, 2024
to $545 thousand for the year ended December 31, 2025, partially offset by an increase in legal fees.
*Research and Development*
Research and development expenses were $20 thousand
for the year ended December 31, 2025, compared to $70 thousand for the year ended December 31, 2024, primarily due to fewer projects in
the Authentication segment in 2025.
*Sales and Marketing*
Sales and marketing expenses decreased by $394
thousand to $967 thousand for the year ended December 31, 2025, compared to $1,361 thousand for the year ended December 31, 2024. The
decrease primarily relates to a reduction in employees and consultants in the Authentication segment.
**
*Goodwill and Intangible Asset Impairment*
As a result of a long-lived asset and goodwill
asset impairment assessment performed in September 2025, an intangible asset impairment charge of $2,788 thousand and a goodwill impairment
charge of $1,062 thousand was recorded for the year ended December 31, 2025 relating to the Precision Logistics segment. An intangible
asset impairment charge of $964 thousand and a goodwill impairment charge of $1,351 thousand was recorded for the year ended December
31, 2024 relating to Authentication segment.
*Interest Income (Expense), net*
**
Interest income, net was $214 thousand for the
year ended December 31, 2025, compared to interest expense, net $130 thousand for the year ended December 31, 2024. This increase in interest
income 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 Companys investment of the proceeds from the warrants exercise in January 2025, and interest income
earned on the Promissory Note with ZenCredit entered on August 8, 2025
that matures on May 11, 2026.
**
*Net Loss*
Consolidated net loss for the year ended December
31, 2025, and 2024 was $4,905 thousand and $3,824 thousand, respectively. The increased loss was primarily related to the decline in revenue
resulting from the decline in ProActive services previously described, and the goodwill and intangible asset impairment noted above and
the gain on change in fair value of the contingent consideration related to the acquisition of Trust Codes Global of $844 thousand for
the year ended December 31, 2024 that did not recur for the year ended December 31, 2025. The resulting consolidated loss per share for
the year ended December 31, 2025, and year ended December 31, 2024, was $0.39 and $0.37 per diluted share, respectively.****
**Liquidity and Capital Resources**
Our operations provided $603 thousand of cash
during the year ended December 31, 2025, compared to $871 thousand cash during the year end December 31, 2024.
Net cash used in investing activities was $2,733
thousand for the year ended December 31, 2025, compared to $575 thousand for the year ended December 31, 2024.The increase in spending
in investing activities relates primarily to a Promissory Note of $2 million with ZenCredit entered into on August 8, 2025 and increased
capitalized software costs.
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Net cash provided by financing activities for
the year ended December 31, 2025, was $3,660 thousand compared to cash used in financing activities of $616 thousand for the year ended
December 31, 2024. The increased cash primarily relates to proceeds from the exercise of warrants and proceeds from the ATM, partially
offset by the repurchase of shares under the repurchase program and repayment of the Term Note during the year ended December 31, 2025.
On August 8, 2025, we entered into the Loan Agreement
with ZenCredit. Pursuant to the Loan Agreement, we agreed to loan ZenCredit up to $2 million and on August 11, 2025 we loaned ZenCredit
$2 million in exchange for a promissory note issued pursuant to the Loan Agreement that matures on May 11, 2026. 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 subject to the terms of the Loan Agreement.
As of December 31, 2025, we reserved $12 thousand allowance for expected credit loss on the Note.
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.
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
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
sales agent and is entitled to a 3.0% commission on gross proceeds from sales under the program.
On February 11, 2026, we provided the Sales Agent
written notice of our decision to terminate the ATM Program and pursuant to Section 12(b) of the Sales Agreement, the ATM Program and
Sales Agreement terminated on February 16, 2026.
During the year ended December 31, 2025, and through
the termination of the ATM Program on February 16, 2026, we have sold 628,432 shares of common stock through the ATM Program for net proceeds
of $483 thousand, after deducting $15 thousand in offering costs.
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 December 31, 2025, $400 thousand was held by related parties. The notes are subordinated unsecured obligations of the Company and
accrue interest at a rate of 8% per year payable semiannually in arrears on February 25 and August 25 of each year, beginning on February
25, 2024. The notes will mature on August 25, 2026, unless earlier converted or repurchased at a conversion price of $1.15 per share of
common stock. The Company may not redeem the notes prior to the maturity date. For the year ended December 31, 2025, interest expense
related to the convertible debt was $61 thousand. As of January 21, 2025, $350 thousand was converted to common stock, none of which was
related parties. As of December 31, 2025 the amount outstanding on the convertible debt was $750 thousand and included in Convertible
note and Convertible note related party on the accompanying Consolidated Balance Sheets.
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 December 31, 2025, $0 was outstanding
on the RLOC. On August 8, 2025, the Company extended the line of credit to September 30, 2026.
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 were not in compliance with
all affirmative and restrictive covenants under the PNC Facility at December 31, 2025. On March 26, 2026, we received a waiver as of December
31, 2025, for certain events of default.
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In connection with the Merger Agreement we have agreed that PeriShip
Global will not utilize the PNC Facility or RLOC from the execution of the Merger Agreement. Additionally, we have agreed that at least
three business days prior to closing of the merger to cause PeriShip Global to use its reasonable best efforts to obtain and deliver to
Open World, a customary payoff letter with respect to the PNC Facility. As such, we do not expect to be able to utilize the PNC Facility
or RLOC unless the merger is not completed pursuant to the terms of the merger agreement.
We believe that our cash and cash equivalents,
together with the proceeds from the warrant inducement and loan agreement, will fund our operations for the next 12 months including expected
capital expenditures.
We expect to grow our business organically and
through key acquisitions that will help accelerate the growth of our business. We expect to continue to fund our operations primarily
through utilization of our current financial resources and future revenue and may issue additional debt or equity.
**Critical Accounting Policies and Estimates**
Our financial statements are impacted by the accounting
policies used and the estimates and assumptions made by management during their preparation. We have identified below the accounting policies
that are of particular importance in the presentation of our financial position, results of operations and cash flows and which require
the application of significant judgment by management. We believe estimates and assumptions related to these accounting policies are appropriate
under the circumstances; however, should future events or occurrences result in unanticipated consequences, there could be a material
impact on our future financial position, results of operations or cash flows.
The critical accounting estimates of impairment
assessment of intangible assets and goodwill are estimates made in accordance with generally accepted accounting principles that involve
a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition
or results of operations.
**Revenue Recognition**
****
We recognize revenue based on the principals established
in the Financial Accounting Standards Board Accounting Standard Codification (ASC) Topic 606, Revenue from Contracts with
Customers. Revenue recognition is made when our performance obligation is satisfied at a point in time of delivery of the service. Over
95% of our revenue is derived from logistics management for time and temperature sensitive packages with the remaining from our brand
protection solutions. Our terms vary based on the solutions we offer and are examined on a case-by-case basis. For licensing our VerifyInkTM
technology we depend on the integrity of our clients reporting. Determining whether products and services in agreements with non-standard
terms are distinct performance obligations that should be accounted for separately or combined to one unit of accounting may require significant
judgement.
The timing of revenue recognition, billings and
cash collections results in billed accounts receivable and unbilled revenue when billings occur after the end of the month (contract assets)
on the consolidated balance sheets. Amounts charged to our clients become billable when the performance obligation has been met at a point
in time. Unbilled amounts will generally be billed and collected within 30 days but typically no longer than 60 days. These assets are
reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. Changes in the contract
assets have not significantly changed as of December 31, 2025. No other factors materially impacted the balances.
**Goodwill**
We have recorded goodwill as part of our acquisitions,
which represents the excess of purchase price over the fair value of net assets acquired in the business combinations. Pursuant to ASC
Topic 350, the Company will test goodwillfor 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 quantitativegoodwillimpairment 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.
On August 26, 2025, our prior carrier partner
notified providers, including PeriShip Global, that it would be providing preferred shipping services internally and that the providers
would no longer be approved FedEx preferred shippers effective September 24, 2025. As a result, the Company made revisions to our internal
forecasts and concluded that in accordance with ASC Topic 350 a triggering event occurred indicating that potential impairment exists,
which required us to conduct an interim test of the fair value of the goodwill for the Precision Logistics segment. We performed a quantitative
goodwill impairment test and determined the fair value of our reporting units using a combination of an income approach, and a market
approach, employing a guideline public company approach. The results of our goodwill impairment test indicated that the carrying value
of the Precision Logistics reporting unit exceeded its estimated fair value. As a result, we recorded a goodwill impairment charge of
$1,062 thousand during the year ended December 31, 2025, within goodwill and intangible asset impairment on the consolidated statement
of operations.
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**Intangibles**
We review long-lived assets for impairment when
performance expectations, events, or changes in circumstances indicate that the assets carrying value may not be recoverable. The
evaluation is performed at the lowest level of identifiable cashflows by comparing the carrying value of the asset to the undiscounted
cashflow. If the evaluation indicates that the carrying amount of the assets may not be recoverable, any potential impairment is measured
based upon the fair value of the related asset or asset group as determined by an appropriate market appraisal or other valuation technique.
On August 26, 2025, our prior carrier partner
notified providers, including PeriShip Global, that it would be providing preferred shipping services internally and that the providers
would no longer be approved FedEx preferred shippers effective September 24, 2025. As a result of the revised internal forecasts, the
Company concluded in accordance with Topic ASC 360 that this change was an interim triggering event for the three months ended September
30, 2025, indicating the carrying value of our long-lived assets including internally used software, deferred implementation, trademarks,
customer relationships, non-compete and developed technology may not be recoverable. Accordingly, the Company performed an interim impairment
test and assessed the recoverability of the related intangible assets by using level 3 inputs and comparing the carrying value to the
net undiscounted cashflow expected to be generated. The analysis indicated that certain intangible assets were impaired. We recorded an
intangible impairment charge of $2,788 thousand during the year ended December 31, 2025, within goodwill and intangible asset impairment
on the consolidated statement of operations.
**Stock-based Compensation**
We account for stock-based compensation under
the provisions of ASC Topic 718, CompensationStock 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.
For RSUs 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 RSUs 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.****
****
**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.
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**ITEM7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.**
Not applicable for smaller reporting companies.
**ITEM8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.**
The financial statements required to be filed pursuant to this Item8
are appended to this Report beginning on page F-1 located immediately after the signature page and incorporated by reference in this Item
8.
**ITEM9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.**
None.
**ITEM 9A. CONTROLS AND PROCEDURES.**
****
**(a) Evaluation of Disclosure Controls and Procedures**
**Conclusion
Regarding the Effectiveness 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 Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SECs rules and forms. The Companys 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 Companys disclosure controls and procedures as of December 31, 2025. Based on that evaluation, the
Companys Chief Executive Officer and Chief Financial Officer have concluded that,as of December 31, 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 SECs rules
and forms, and (ii)accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
**(b) Internal Control Over Financial Reporting**
**Managements Report on Internal Control
Over Financial Reporting**
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its
inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Our management, including our principal executive
and principal financial officers, conducted an evaluation of the effectiveness of our internal control over financial reporting as of
December31, 2025, using criteria established in Internal Control Integrated Framework (2013)issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Our management has concluded that our internal controls over
financial reporting was effective as of December31, 2025.
****
**Changes in Internal Control over Financial
Reporting**
There were no changes in internal control over
financial reporting during the three months ended December 31, 2025, that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
****
**Auditors Report on Internal Control
Over Financial Reporting**
This Report does not include an attestation report
of our independent registered public accounting firm regarding internal control over financial reporting. Managements report was
not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide
only managements report in this Report.
**ITEM9B. OTHER INFORMATION.**
During the three months ended December 31, 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.
**ITEM9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS.**
Not Applicable.
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**PART III**
**ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE.**
**Adam
H Stedham,** age 57, has served as one of our directors since April 2022. Mr. Stedham has served as our Chief Executive Officer since
June 2023 and as our President since August 2023. Mr. Stedham was a senior executive of Learning Technologies Group plc and was CEO of
GP Strategies from June 2020 until June 2023. He also served as President of GP Strategies from November 2017 to October 2021. Mr. Stedham
joined GP Strategies in 1997, after 6 years as a nuclear reactor operator in the US Navy. He has held roles of increasing responsibility
during his tenure, including leading operational service lines, directing acquisitions and divestitures, heading business development,
and managing the Asia-Pacific region. He was on the board of directors of GP Strategies from June 2020 until June 2023. Mr. Stedham has
significant expertise in business strategy, mergers and acquisitions, learning and performance innovation, global operations, and strategic
relationship management. He holds a Master of Business Administration from Anderson University, Master of Education from University of
Pennsylvania, and Masters in Adult & Community Education from Ball State University. Mr. Stedhams prior experience as
the chief executive officer and president of a public company gives him the qualifications, skills to serve on our Board of Directors.
**Marshall
Geller,** age 87, has served as one of our directors since July 2017. Mr. Geller was a director and a member of the audit committee
of GP Strategies Corporation (formerly NYSE:GPX) from 2002 until October 2021. Mr. Geller was a director of Wright Investors Service
Holdings Inc. (OTCMKT:WISH), formerly National Patent Development Corporation, from January 2015 until October 2018. Mr. Geller was a
director and member of the audit committee of G3 VRM Acquisition Corp. (Nasdaq:GGGV) from June 2021 until July 2022. He is currently a
Director of Easy Smart Pay, a public-private partnership of the California State Association of Counties Finance Corporation. Mr. Geller
formerly served as a director of California Pizza Kitchen, Inc., (formerly Nasdaq:CPKI) from 2008 until 2011, and Hexcel Corporation (NYSE:HXL)
from 1994 until 2003. Mr. Geller was a founder of St. Cloud Capital, a Los Angeles based private equity fund, and Senior Investment Advisor
from December 2001 until September 2017. He has spent more than 50 years in corporate finance and investment banking, including 21 years
as a Senior Managing Partner of Bear, Stearns & Co., with oversight of all operations in Los Angeles, San Francisco, Chicago, Hong
Kong and the Far East. Mr. Geller is currently on the board of directors of UCLA Health System and on the Board of Governors of Cedars
Sinai Medical Center, Los Angeles. Mr. Geller also serves on the Deans Advisory Council for the College of Business & Economics
at California State University, Los Angeles. Mr. Gellers financial and business experience, including as a managing partner of
a private equity fund, and his many years of experience and expertise as an investor in and adviser to companies in various sectors as
well as his experience with serving on the boards of directors of other public and private corporations give him the qualifications, skills,
and financial expertise to serve on our Board of Directors.
**Howard
Goldberg**, age 80, has served as one of our directors since July 2017. Mr. Goldberg has served as our Lead Independent director since
2020, having served from time to time in that capacity. From 2003 through 2005, Mr. Goldberg served as a part-time consultant to Laser
Lock Technologies, Inc., the predecessor to VerifyMe, and provided consulting service to us again from 2016 through December 2017. Mr.
Goldberg has been a private investor in both real estate and start-up companies and has provided consulting services to start-up companies
since 1999. From 1994 through 1998, Mr. Goldberg served as President, CEO and board member of Players International, a publicly
traded company in the gaming business prior to its sale to Harrahs Entertainment Inc. Mr. Goldberg served on the board of directors
and Audit Committee of Imall Inc., a publicly traded company that provided on-line shopping prior to its sale to Excite-at-Home. Mr. Goldberg
served as a member of the Board of Trustees of Winthrop Realty Trust, a publicly traded real estate investment trust, from December 2003
to August 2016 when Winthrops assets were transferred to a liquidating trust. Mr. Goldberg was a member of Winthrops Audit
Committee and Nominating and Corporate Governance Committee and was its lead independent trustee. Mr. Goldberg served as a trustee for
Winthrop Realty Liquidating Trust until December 2019 when it was finally liquidated. Mr. Goldberg was a director of New York REIT, Inc.
from March 2017 until October 2018, when it converted to a limited liability company called New York REIT LLC. Mr. Goldberg was a manager
of New York REIT LLC from October 2018 until November 2022. Mr. Goldberg has a law degree from New York University and was previously
the managing partner of a New Jersey law firm where he specialized in gaming regulatory law and real estate from 1970 through 1994. Mr.
Goldbergs experience as a director of other public companies and his legal expertise gives him the qualifications, skills, and
financial expertise to serve on our Board of Directors.
**Scott
Greenberg**, age 69, has served as one of our directors since November 2019. Mr. Greenberg served as our Interim Chief Executive Officer
from March 15, 2023 to June 19, 2023 and Executive Chairman from April 7, 2022 to June 19, 2023. Mr. Greenberg served as the Chairman
of the board of directors of GP Strategies Corporation (NYSE:GPX) from August 2018 until October 2021 when it was acquired by Learning
Technologies Group. He previously served as Chief Executive Officer of GP Strategies from April 2005 until July 2020. He was also the
President of GP Strategies from 2001 to 2006, Chief Financial Officer from 1989 until 2005, Executive Vice President from 1998 to 2001,
Vice President from 1985 to 1998, and held various other positions with GP Strategies since 1981. Mr. Greenberg was also a Director of
Wright Investors Service Holdings, Inc. (OTCMKT:WISH), formerly National Patent Development Corporation, from 2004 to 2015. Mr.
Greenbergs significant experience and expertise in management, acquisitions, and strategic planning, as well as many years of finance
and related transactional experience give him the qualifications, skills, and financial expertise to serve on our Board of Directors.
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**David
Edmonds**, age 68, has served as one of our directors since June 2023. Mr. Edmonds has served as a member of the board of directors
of our wholly owned subsidiary PeriShip Global LLC since June 2022. Prior to this he served as the Senior Vice President, Worldwide Services
at FedEx from April 2001 until his retirement in December 2020. Prior to that, Mr. Edmonds was actively involved in the merger between
Caliber System (FedEx Ground's former parent company) and FedEx Corporation and was responsible for bringing the two companies together
to compete collectively under the new FedEx Corporation umbrella. Mr. Edmonds worked his entire 41-year career in the transportation and
logistics field. He is a graduate of Kent State University, is a member of the American Management Association; the Council for Logistics
Management; and the Sales and Marketing Executive Council of the Advisory Board. Mr. Edmonds experience with the transportation
and logistics field and network of relationships which we believe are valuable assets to the Company and its growth give him the qualifications,
skills, and financial expertise to serve on our Board of Directors.
**Management and Executive Officers**
****
We are currently served by four executive officers,
Messrs. Stedman, Volk, and Wang and Ms. Cola.
**Adam Stedham**, age 57, is our Chief Executive
Officer and President, and a member of our Board of Directors. Additional information about Mr. Stedham can be found under Directors,
above.
**Jennifer Cola**, age 56, has served as the
Companys Chief Financial Officer since July 8, 2025 and was the Companys Vice President of Finance from May 2025. Prior
to joining the Company in May 2025, Ms. Cola served as Chief Financial Officer of GP Government Solutions Inc., a subsidiary of GP Strategies
Corporation from January 2024 until April 2025, and previously as Vice President of Internal Audit of LTG, plc, the parent company of
GP Strategies Corporation from 2018 through 2023. Ms. Cola is a Certified Public Accountant with more than 25 years of experience in financial
accounting, auditing, and operations.
**Fred G. Volk, III**, age 58, has been the
Vice President, Operations of the Companys wholly owned subsidiary PeriShip Global, LLC since April 2022. Prior to thisMr.
Volk served as Vice President of Operations of PeriShip, LLC from September 2001 until April 2022. Mr. Volk has over 22 years of supply
chain expertise, which includes many years at FedEx. Throughout his tenure there, he worked in multiple leadership positions across
the Transportation, Logistics, and Customer Service spaces, allowing him to become intimately familiar with the principles required for
operational effectiveness. With later experiences in leadership positions at various local law enforcement agencies, Mr. Volks
acumen spans from supply chain management to compliance, and beyond.
**Jack Wang**, age 66, has served as the Companys
Chief Information Officer and Senior Vice President of Technology since August 2023 and has been theChief
Information Officerof the Companys wholly owned subsidiary PeriShip Global, LLC since April 2022. Prior to thisMr.
Wang served as Chief Information Officer of PeriShip, LLC from December 2011 to 2016 and from 2018 until April 2022. From 2016 to 2018
Mr. Wang served as Chief Information Officer for IMEX Global Solutions, an international logistics company that distributes parcels, publication,
and business mail worldwide. Prior to joining PeriShip, Mr. Wang served as the head of IT operations and development at the Package Portfolio
division of United Parcel Service. At UPS, Mr. Wang managed IT services for worldwide package operations. Before UPS, Mr. Wang was the
managing director of Continental Airlines, where he was responsible for strategic system architecture and development as well as providing
IT services for many of the airline's customer facing systems. Many of the core systems that Mr. Wang instituted at Continental Airlines
were eventually selected as the baseline systems for the new United Airlines. Mr. Wang holds a Master's degree in Computer Science from
State University of New York at New Paltz.
****
**Family Relationships**
There are no family relationships between any
of our directors or executive officers.
****
**Corporate Governance**
****
**Director Independence**
The listing standards of Nasdaq require that a majority of our Board
of Directors be independent. No director will qualify as independent unless the Board of Directors affirmatively determines that the director
has no relationship with us that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Based upon the Nasdaq listing standards and applicable SEC rules and regulations, our Board of Directors has determined that each of Scott
Greenberg, Marshall Geller, Howard Goldberg, and David Edmonds are independent. Adam Stedham our Chief Executive Officer is not an independent
director.
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**Board of Directors Leadership Structure**
Although the Board of Directors has not adopted a formal policy regarding
the separation of the roles of the Chairman and the Chief Executive Officer, we believe that our corporate governance is most effective
when these positions are not held by the same person. The Board of Directors recognizes the differences between the two roles and believes
that separating them allows each person to focus on his individual responsibilities. Under this leadership structure, our Chief Executive
Officer can focus his attention on generating sales, overseeing sales and marketing, and managing the day-to-day company operations, while
our Chairman can focus his attention on board responsibilities.
Depending on the circumstances, other leadership models, such as combining
the role of Chairman with the role of Chief Executive Officer, might be appropriate. Our Board of Directors intends to periodically review
our leadership structure.
*Non-Executive Vice Chairman and Lead Independent Director*
In addition to a non-executive Chairman, we have appointed Marshall
Geller to serve as our non-executive Vice Chairman of our Board of Directors. The Board of Directors has also appointed a lead independent
director, currently Howard Goldberg, in order to promote independent leadership of the board. Our non-executive vice chairman or lead
independent director preside over the executive sessions of the independent directors. Our lead independent director chairs board meetings
in the non-executive Vice Chairmans absence and is available to engage directly with major stockholders where appropriate. The
guidance and direction provided by the lead independent director reinforce the Board of Directors independent oversight of management
and contribute to communication among members of the board.
****
**Board of Directors Committees**
****
The Board of Directors has established an Audit Committee, Compensation
Committee, and Nominating and Corporate Governance Committee Executive Committee, and Mergers & Acquisitions Committee.Each
committee acts pursuant to a written charter adopted by our Board of Directors. The current charters for each board committee are available
on our website, www.verifyme.com under the heading, Investor Hub and the subheading, Corporate Governance.
****
*Audit Committee*
The Audit Committee monitors the integrity of
our financial statements, monitors the independent registered public accounting firms qualifications and independence, monitors
the performance of our internal audit function and the auditors, and monitors our compliance with legal and regulatory requirements. The
Audit Committee has the sole authority and responsibility to select, evaluate and engage independent auditors for the Company. The Audit
Committee reviews with the auditors and with the Companys financial management our annual and interim financial statements and
all matters relating to the annual audit of the Company. The Audit Committee also prepares the audit committee report that the SEC requires
to be included in our annual proxy statement.
The Audit Committee is a separately designated
standing committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Board of Directors has determined that
each member of the Audit Committee meets the independence and financial literacy requirements applicable to audit committee members under
the Nasdaq listing standards and SEC rules. The Board of Directors has further determined that Mr. Geller qualifies as an Audit
Committee Financial Expert in accordance with the applicable rules and regulations of the SEC.
*Compensation Committee*
The Compensation Committee reviews, recommends,
and approves salaries and other compensation of the Companys executive officers, and administers the Companys equity incentive
plans (including reviewing, recommending and approving stock option and other equity incentive grants to executive officers).
The Compensation Committee meets in executive
session to determine the compensation of the Chief Executive Officer of the Company. In determining the amount, form, and terms of such
compensation, the committee considers the annual performance evaluation of the Chief Executive Officer conducted by the Board of Directors
in light of our goals and objectives relevant to Chief Executive Officer compensation, competitive market data pertaining to Chief Executive
Officer compensation at comparable companies, and such other factors as it deems relevant, and is guided by, and seeks to promote, the
best interests of the Company and its stockholders.
In addition, subject to existing agreements, the
Compensation Committee determines the salaries, bonuses, and other matters relating to compensation of the executive officers of the Company
using similar parameters. It sets performance targets for determining periodic bonuses payable to executive officers. It also reviews
and makes recommendations to the Board of Directors regarding executive and employee compensation and benefit plans and programs generally,
including employee bonus and retirement plans and programs (except to the extent specifically delegated to a Board of Directors appointed
committee with authority to administer a particular plan). In addition, the Compensation Committee approves the compensation of non-employee
directors and reports it to the full Board of Directors.
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The Compensation Committee also reviews and makes
recommendations with respect to stockholder proposals related to compensation matters. The committee administers the Companys equity
incentive plans, including the review and grant of stock options and other equity incentive grants to executive officers and other employees
and consultants.
The Compensation Committee may, in its sole discretion
and at the Companys cost, retain or obtain the advice of a compensation consultant, legal counsel or other adviser. The committee
is directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and
other adviser retained by the committee.
The Board of Directors has determined that each
member of the Compensation Committee meets the independence requirements applicable to compensation committee members under the Nasdaq
listing standards
****
*Nominating and Corporate Governance Committee*
The Nominating and Corporate Governance Committee identifies individuals
qualified to become members of the Board of Directors, consistent with criteria approved by the board; recommends to the board the director
nominees for the next annual meeting of stockholders or special meeting of stockholders at which directors are to be elected; recommends
to the board candidates to fill any vacancies on the board; develops, recommends to the board, and reviews the corporate governance guidelines
applicable to the Company; and oversees the evaluation of the board and management.
In recommending director nominees for the next
annual meeting of stockholders, the Nominating and Corporate Governance Committee ensures the Company complies with its contractual obligations,
if any, governing the nomination of directors. It considers and recruits candidates to fill positions on the Board of Directors, including
as a result of the removal, resignation or retirement of any director, an increase in the size of the board or otherwise. The committee
conducts, subject to applicable law, any and all inquiries into the background and qualifications of any candidate for the Board of Directors
and such candidates compliance with the independence and other qualification requirements established by the committee. The committee
also recommends candidates to fill positions on committees of the Board of Directors.
In selecting and recommending candidates for election
to the Board of Directors or appointment to any committee of the board, the Nominating and Corporate Governance Committee does not believe
that it is appropriate to select nominees through mechanical application of specified criteria. Rather, the committee shall consider such
factors at it deems appropriate, including, without limitation, the following: personal and professional integrity, ethics and values;
experience in corporate management, such as serving as an officer or former officer of a publicly-held company; experience in the Companys
industry; experience as a board member of another publicly-held company; diversity of expertise and experience in substantive matters
pertaining to the Companys business relative to other directors of the Company; practical and mature business judgment; and composition
of the Board of Directors (including its size and structure).
The Nominating and Corporate Governance Committee
develops and recommends to the Board of Directors a policy regarding the consideration of director candidates recommended by the Companys
stockholders and procedures for submission by stockholders of director nominee recommendations.
In appropriate circumstances, the Nominating and
Corporate Governance Committee, in its discretion, will consider and may recommend the removal of a director, in accordance with the applicable
provisions of our Articles of Incorporation and Bylaws. If we are subject to a binding obligation that requires director removal structure
inconsistent with the foregoing, then the removal of a director shall be governed by such instrument.
The Nominating and Corporate Governance Committee
oversees the evaluation of the Board of Directors and management. It also develops and recommends to the Board of Directors a set of corporate
governance guidelines applicable to us, which the committee shall periodically review and revise as appropriate. In discharging its oversight
role, the committee is empowered to investigate any matter brought to its attention.
The Board of Directors has determined that each
member of the Nominating and Corporate Governance Committee meets the director independence requirements of the Nasdaq listing standards.
*Executive Committee*
The Executive Committee acts on behalf of the
Board of Directors between regularly scheduled board meetings, and subject to certain limitations imposed by applicable legal or regulatory
requirements, may exercise during such intervals, all of the powers of the board in the management of the business, affairs and property
of our Company other than: (i) the filling of vacancies on the board; (ii) approving or adopting, or recommending to the stockholders,
any action or matter; (iii) adopting, amending or repealing our Bylaws; and (iv) those matters that are specifically delegated to other
committees of the board or that are under active review by the board or a board committee, unless the board specifically determines otherwise.
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*Mergers & Acquisitions Committee*
The Mergers & Acquisitions Committee is empowered
to review and assess and assist the Board of Directors in reviewing and assessing, potential mergers, acquisitions, joint ventures, and
strategic investments. In addition, the committee is empowered to assist management in identifying and reviewing merger and acquisition
opportunities and is charged with assessing the associated risk to the Company and making recommendations with respect to the terms thereof
to the Board of Directors. The committee is also charged with planning of, and evaluating the execution of, integrations of merger and
acquisition transactions.
**Role of the Board of Directors in Risk Oversight**
The Companys risk management function is
overseen by the Board of Directors. This oversight is conducted in part through the Board of Directors committees. Our Audit Committee
focuses on risks associated with financial matters, particularly financial reporting and disclosures, accounting, internal control over
financial reporting, financial policies, and compliance with legal and regulatory matters related to accounting and financial reporting.
Our Nominating and Corporate Governance Committee focuses on the oversight of risks associated with our corporate governance, including
board membership and structure. Our Compensation Committee focuses on the oversight of risks arising from our compensation policies and
programs.
While our Board of Directors committees
have certain oversight responsibilities, the full board retains responsibility for monitoring and assessing strategic risk exposure related
to cybersecurity risks and general oversight of risk. Our Chairman works closely together with other members of the Board of Directors
when material risks are identified on how to best address such risks. If the identified risk poses an actual or potential conflict with
management, our independent directors may conduct the assessment. In addition, our management keeps the Board of Directors apprised of
material risks and provides its directors access to all information necessary for them to understand and evaluate how these risks interrelate,
how they affect us, and how management addresses those risks.
**Code of Business Conduct and Ethics**
The Board of Directors has adopted a Code of Business
Conduct and Ethics (the Code of Ethics) that applies to all of our employees, including our Chief Executive Officer and
Chief Financial Officer. Although not required, the Code of Ethics also applies to our directors. The Code of Ethics provides written
standards that we believe are reasonably designed to deter wrongdoing and promote honest and ethical conduct, including the ethical handling
of actual or apparent conflicts of interest between personal and professional relationships, full, fair, accurate, timely and understandable
disclosure and compliance with laws, rules and regulations and the prompt reporting of illegal or unethical behavior, and accountability
for adherence to the Code of Ethics. The Code of Ethics is available on our website at https://www.vrmeinvestor.com/investors/.
**Insider Trading Policy**
****
We
have adopted an insider trading policy designed to promote compliance with insider trading laws, rules and regulations, and any listing
standards applicable to the Company. Insiders, who include our directors, executive officers, and certain employees who we may designate
from time to time (the Designated Individuals), may buy and sell our stock within an open window period, which
begins 24 hours after the release of the Companys quarterly or annual financial results for that particular quarter and ends on
the close of business on the last day of the next fiscal quarter. Designated Individuals are prohibited from purchasing or selling our
stock if they are in possession of materialnon-public information, even if it is within
the open window period. We reserve the right to impose event-specific black-out periods if we deem certain employees or
groups to be in possession of non-public information regarding potentially significant matters, regardless of if it is an open window
period and we may do so with little or no notice. Employees subject to an event-specificblack-out period
will be notified by our insider trading policy officer.
**Anti-Hedging Policy**
Our insider trading policy prohibits directors,
officers, and employees from engaging in transactions that hedge or offset any decrease in the market value of equity securities granted
as compensation.
**Delinquent Section 16(a) Reports**
Section 16(a) of the Exchange Act, requires directors,
officers and greater than 10% stockholders to file with the SEC reports of ownership and changes in ownership regarding their holdings
in company securities. During VerifyMes fiscal year ended December 31, 2025, all of its directors and officers timely complied
with the filing requirements of Section 16(a) of the Exchange Act, except for Ms. Cola who filed a late Form 3, and Mr. Geller and Ms.
Cola who each filed one late Form 4 each reporting one transaction. In making this statement, VerifyMe has relied upon the written representations
of its directors and officers, and copies of the reports that they have filed with the SEC.
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****
**ITEM 11. EXECUTIVE COMPENSATION.**
**Executive
Compensation**
This section contains information about the compensation
earned and paid to our named executive officers during fiscal year ended December 31, 2025 and fiscal year ended December 31, 2024, or
only fiscal year ended December 31, 2025 if the individual was not a named executive officer for fiscal year ended December 31, 2024.
For fiscal year ended December 31, 2025, in accordance with the executive compensation disclosure rules and regulations of the SEC, we
determined that the following officers were our named executive officers:
|
|
|
Adam Stedham, Chief Executive Officer and President | |
|
|
|
Fred G. Volk, III, VP of Operations, PeriShip Global | |
|
|
|
Jennifer Cola, Chief Financial Officer | |
**Summary Compensation Table**
The table below summarizes the compensation earned
for services rendered to us in all capacities, for the fiscal years indicated, by named executive officers:
**Summary Compensation Table**
|
Name
and
Principal
Position | |
Year | | |
Salary
($) | | |
Stock
Awards
($)(1) | | |
All
Other
Compensation
($)(2) | | |
Total
Compensation
($) | | |
|
Adam Stedham | |
2025 | | |
270,000 | | |
32,813 | | |
| 45,000 | | |
| 347,813 | | |
|
CEO and President | |
2024 | | |
285,000 | | |
12,844 | | |
| 14,250 | | |
| 312,094 | | |
|
| |
| | |
| | |
| | |
| | | |
| | | |
|
Fred G Volk, III | |
2025 | | |
144,692 | | |
21,875 | | |
| 7,256 | | |
| 173,823 | | |
|
VP of Operations, PeriShip Global | |
2024 | | |
190,000 | | |
81,763 | | |
| 9,327 | | |
| 281,090 | | |
|
| |
| | |
| | |
| | |
| | | |
| | | |
|
Jennifer Cola | |
2025 | | |
111,923 | | |
16,680 | | |
| 3,588 | | |
| 132,191 | | |
|
CFO | |
| | |
| | |
| | |
| | | |
| | | |
|
|
(1) |
The amounts shown in this column reflect time-based restricted stock units (RSUs) and performance-based restricted stock units (PSUs) granted to our named executive officers which are subject to certain vesting terms. The amounts in this column do not reflect the actual value realized by the recipient. Amounts in this column represent the grant date fair value of the awards, calculated in accordance with Financial Accounting Standards Board ASC Topic 718, Compensation Stock Compensation, or ASC 718. The assumptions used in calculating the grant date fair value of the awards are set forth Note 1 Summary of Significant Accounting Policies in the notes accompanying the financial statements. The value of the PSUs are based on the target level of the performance as of the date of grant. We granted no PSUs to our named executive officer in the year ended December 31, 2025. For fiscal year ended December 31, 2024, we only granted PSUs to Mr. Volk. If the highest level of performance is achieved, the value of the PSUs for Mr. Volk would be $105,750. | |
|
|
|
| |
|
|
(2) |
The amounts shown in this column reflect amounts paid by us to or on behalf of each named executive officer for company matching contributions to 401(k) and short term incentive plan. | |
****
**Employment Agreements with Named Executive
Officers**
**Adam Stedham - Chief Executive Officer and
President**
The Company entered into an employment agreement,
dated as of June 19, 2023, with Adam Stedham, the Chief Executive Officer of the Company, with an annual salary of $300,000. In connection
with the employment agreement, the Board of Directors granted Mr. Stedham an annual bonus potential of up to 50% of base salary to be
earned based on adjusted EBITDA performance goals to be set annually by the Compensation Committee. On
March 12, 2024, the Compensation Committee approved a change to the cash bonus for Mr. Stedham, which if achieved, will be payable at
Mr. Stedhams discretion in either cash or in an amount of the Companys common stock determined by dividing the cash value
of the earned bonus by the 30-day VWAP of the Companys shares on the day the Board of Directors approves the bonus. Mr.
Stedham was also awarded 34,014 shares of restricted stock pursuant to the Companys stockholder approved equity incentive plan
for a half year of service as a non-employee director of the Company. The restricted stock award vested in full on date of grant. Mr.
Stedham was awarded 204,082 RSUs pursuant to the Companys stockholder approved equity incentive plan that vest in three equal annual
increments over a three-year vesting term and 550,000 PSUs issued pursuant to the Companys stockholder approved equity incentive
plan based on performance criteria satisfied within 4 years of grant. In the event of Mr. Stedhams employment is terminated for
death or disability, the Company shall pay any accrued but unpaid base salary through the date of termination, accrued but unpaid expenses
required to be reimbursed under this agreement and any annual bonus for which the executive completed the appliable calendar performance
year but has not yet earned. If Mr. Stedham is terminated by the Company for cause or by the executive without good reason, the executive
shall have no right to compensation. If Mr. Stedham is terminated by the Company without cause or by executive for good reason, the executive
will be entitled to severance until the conclusion of the Initial term of two years. It will also include the accelerated vesting of RSUs
and retention of PSUs for remainder of performance period.
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On July 2, 2024, the Company entered into Salary
Reduction Agreement with Mr. Stedham, as part of a salary reduction program for certain employees of the Company and its subsidiaries
approved by the Compensation Committee of the Companys Board of Directors. Mr. Stedham had his annual base salary reduced by ten
percent (10%) during the term of the Salary Reduction Agreement. In return for the reduction in his annual base salary, Mr. Stedham was
entitled to receive a grant of restricted stock unit awards (RSUs) on July 1, 2024 and each 1st of January thereafter during
the term of the Salary Reduction Agreement, each such RSU representing the contingent right to receive one share of the Companys
common stock, par value $0.001 per share, subject to the terms of the Companys 2020 Equity Incentive Plan and form RSU award agreement,
with the number of shares underlying the RSU awards to be determined by dividing the projected amount of Mr. Stedhams base salary
reduction for the calendar year, respectively, by $1.60, rounded down to the nearest number of whole shares. Each RSU granted pursuant
to the Salary Reduction Agreement was to vest in full on the 1st of January following its grant date and is payable as soon as reasonably
practicable after vesting. The Salary Reduction Agreement terminated on December 31, 2025 and as of the date hereof all RSUs granted pursuant
to the Salary Reduction Agreement have fully vested. In connection with the Merger Agreement, on February 11, 2026, the Company entered
into an Amended and Restated Employment Agreement with Adam Stedham, effective as of the Effective Time of the Merger. As of the Effective
Time, and subject to the Closing of the Merger, Mr. Stedham is expected to resign as a director, Chief Executive Officer and President
to become the President of Precision Logistics (the Stedham Employment Agreement). Mr. Stedhams expected resignation
as a director, Chief Executive Officer and President is not the result of any disagreement with the Company on any matter relating to
the Companys operations, policies or practices.
Pursuant to the Stedham Employment Agreement,
should it become effective, Mr. Stedham will receive an annual base salary of $300,000 and be eligible for an annual bonus for each calendar
year, with a potential up to 50% of his base salary based on performance goals set by the Board of Directors each year. Mr. Stedham shall
be eligible to receive equity-based compensation award(s), as determined by the Board of Directors (or a subcommittee thereof), from time
to time. The Stedham Employment Agreement is for an initial term of one year and will thereafter be at-will, and may be
terminated by either party during the initial term. If terminated by Mr. Stedham for good reason, or by the Company without cause prior
to the 6-month anniversary of the Effective Time, then Mr. Stedham shall be entitled to an amount equal to his Base Salary that would
have otherwise been paid until the conclusion of the initial term. If the qualifying termination occurs after the 6-month anniversary
of the Effective Time, then Mr. Stedham shall be entitled to an amount equal to six (6) months of his Base Salary.
**Fred G Volk, III VP of Operations,
PeriShip Global**
On April 22, 2022, the Companys wholly
owned Subsidiary PeriShip Global, entered into an Employment Agreement with Mr. Volk with an initial term of two years, which automatically
renews for additional one-year terms until either party gives 60-day notice of non-renewal or otherwise terminated the agreement according
to its terms. Under the employment agreement, Mr. Volk is entitled to an annual base salary of $200,000.
Additionally, pursuant to the employment agreement, on April 22, 2022, Mr. Volk was awarded PSUs with a grant date value equal to his
annual base salary, each such unit representing the contingent right to receive one share of the Companys common stock, par value
$0.001 per share, subject to the terms of the 2020 Plan. These PSUs, except as otherwise provided in the award agreement, will vest,subject
to continuous employment and other conditions, as follows: 50% if the Companys common stock price exceeds $5.00 per share for a
period of 20 consecutive days, and the remaining 50% if the Companys common stock price exceeds $7.00 per share for a period of
20 consecutive days, in each case prior to the three-year anniversary of the grant date. Pursuant to the employment agreement Mr. Volk
will receive a commission of 1.0% on eligible annual sales in excess of $30,000,000. The employment agreement may be terminated by us
for cause, by Mr. Volk without good reason, or by delivering a non-renewal notice. If terminated by us without cause or by Mr. Volk with
good reason Mr. Volk will be entitled to accrued but unpaid base salary and expenses, a payment equal to 12 months of his then base salary
if the Employment Agreement is terminated during the initial two year term or a payment equal to 6 months of his then base salary if the
Employment Agreement is terminated after the initial two year term, and six months of benefits.If terminated upon a non-renewal
notice, Mr. Volk will be entitled to any accrued and unpaid salary and expenses prior to the effective date of his termination.
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On June 30, 2024, the Company entered into Salary
Reduction Agreement with Mr. Volk, as part of a salary reduction program for certain employees of the Company and its subsidiaries approved
by the Compensation Committee of the Companys Board of Directors . Mr. Volk had his annual base salary reduced by ten percent (10%)
during the term of the Salary Reduction Agreement. In return for the reduction in his annual base salary, Mr. Volk was entitled to receive
a grant of RSUs on July 1, 2024 and each 1st of January thereafter during the term of the Salary Reduction Agreement, each such RSU representing
the contingent right to receive one share of the Companys common stock, par value $0.001 per share, subject to the terms of the
Companys 2020 Equity Incentive Plan and form RSU award agreement, with the number of shares underlying the RSU awards to be determined
by dividing the projected amount of Mr. Volks base salary reduction for the calendar year, respectively, by $1.60, rounded down
to the nearest number of whole shares. Each RSU granted pursuant to the Salary Reduction Agreement was to vest in full on the 1st of January
following its grant date and is payable as soon as reasonably practicable after vesting. The Salary Reduction Agreement terminated on
December 31, 2025 and as of the date hereof all RSUs granted pursuant to the Salary Reduction Agreement have fully vested.
**Jennifer Cola Chief Financial Officer**
In connection with the Merger, on February 11,
2026, the Board of Directors approved the grant of a severance period for Ms. Cola effective immediately and which will expire upon the
Effective Time of the Merger (the Severance Period), whereby Ms. Cola will receive a continuation of her base salary and
benefits for a period of six months if she is terminated without cause during the Severance Period.
Also on February 11, 2026, the Company entered
into an Employment Agreement with Jennifer Cola, effective as of the Effective Time of the Merger. As of the Effective Time, and subject
to the Closing of the Merger, Ms. Cola is expected to continue in her position as Chief Financial Officer of the Company (the Cola
Employment Agreement).
Pursuant to the Cola Employment Agreement, should
it become effective, Ms. Cola will receive an annual base salary of $180,000 and be eligible for an annual bonus for each calendar year
ending during the employment period, with a potential up to 50% of her base salary based on performance goals set by the Board of Directors
each year. Ms. Cola shall be eligible to receive equity-based compensation award(s), as determined by the Board of Directors (or a subcommittee
thereof), from time to time. In addition, in connection with and subject to entering into the Cola Employment Agreement, the Compensation
Committee of the Board of Directors approved the grant on the Effective Time of 130,000 restricted stock awards under the Companys
2020 equity incentive plan, which shall vest on the Effective Time. The Cola Employment Agreement is for an initial term of one year and
will thereafter be at-will, and may be terminated by either party during the initial term. If terminated by Ms. Cola for
good reason, or by the Company without cause prior to the 6-month anniversary of the Effective Time, then Ms. Cola shall be entitled to
an amount equal to her Base Salary that would have otherwise been paid until the conclusion of the initial term. If the qualifying termination
occurs after the 6-month anniversary of the Effective Time, then Ms. Cola shall be entitled to an amount equal to six (6) months of her
Base Salary.
**
**Short
Term Incentive Plan**
On March 12, 2024, the Compensation
Committee approved a short term incentive cash bonus plan. The plan is available to nearly all of the Companys employees, including
our named executive officers except for Mr. Stedham and Ms. Cola. Under the plan, Mr. Volk is eligible to receive a cash bonus up to 6%
of his annual base salary as of January 1 each year, subject to upward adjustment. Under the Plan, 50% of the bonus is based on achieving
100% of an Adjusted EBITDA performance goal to be set annually by the Compensation Committee. Only if the Adjusted EBITDA target is achieved,
the remaining 50% of the bonus is based on achieving 100% of a revenue performance goal to be set annually by the Compensation Committee.
Under the plan, the bonus amount can be adjusted upward if the revenue performance goal is exceeded in an amount equal to the total target
bonus multiplied by the same percentage that revenue exceeds the revenue performance goal, up to a maximum of 150 percent. No amounts
were paid under the plan in fiscal year ended December 31, 2025.
| | 47 | | |
| Table of Contents | |
**Outstanding Equity Awards at Fiscal Year-End**
The following table sets forth
the outstanding equity awards for our named executive officers as of December31,2025.
|
|
|
Option Awards |
|
Stock Awards | |
|
|
|
|
|
|
|
|
|
| |
|
Name |
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable |
|
Option
Exercise
Price
($) |
|
Option
Expiration
Date |
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#) |
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1) |
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#) |
|
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or
Other Rights
That Have
Not Vested
($)(1) | |
|
Adam Stedham |
|
|
|
|
|
|
|
18,750 |
(2) |
11,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,028 |
(3) |
40,871 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
550,000 |
(4)(7) |
330,440 | |
|
Fred G. Volk III |
|
|
|
|
|
|
|
12,500 |
(2) |
7,510 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
(5)(7) |
45,060 | |
|
Jennifer Cola |
|
|
|
|
|
|
|
24,000 |
(6)(7) |
14,419 |
|
|
|
|
|
|
(1) |
The amounts in these columns are calculated by multiplying the number of shares by the closing market price of our Common Stock on December 31, 2025, of $0.60 per share. | |
|
(2) |
These RSUs, which convert into common stock on a one-for-one basis, were granted on January 1, 2025 pursuant to the Companys salary reduction program, pursuant to which the number of RSUs was determined by dividing the amount of the grantees salary reduction by $1.60. The RSUs will vest on January 1, 2026. | |
|
(3) |
These RSUs, which convert into common stock on a one-for-one basis, were granted on July 19, 2023. The first two tranches vested on June 19, 2024 and June 19, 2025 respectively, and the remaining tranche will vest on June 19, 2026, subject to the grantees continued service through the vesting date except as otherwise provided in the applicable award agreement. | |
|
(4) |
These PSUs were granted on June 19, 2023 and vest in three tranches, except as otherwise provided in the award notice. Tranche 1 will vest 150,000 shares on or after June 19, 2024 if our common stock trades at or above $2.21 per share for 20 consecutive days prior to June 19, 2027. Tranche 2 will vest 200,000 shares on or after June 19, 2025 if our common stock trades at or above $2.94 per share for 20 consecutive trading days prior to June 19, 2027. Tranche 3 will vest 200,000 shares on June 19, 2027 if our common stock trades at or above $3.68 per share for 20 consecutive trading days prior to June 19, 2027. | |
|
(5) |
These PSUs were granted on June 30, 2024 and vest in three tranches, except as otherwise provided in the award notice. Tranche 1 will vest 20,000 shares on or after June 18, 2025 if our common stock trades at or above $2.21 per share for 20 consecutive trading days prior to June 18, 2027. Tranche 2 will vest 25,000 shares on or after June 18, 2025 if our common stock trades at or above $2.94 per share for 20 consecutive trading days prior to June 18, 2027. Tranche 3 will vest 30,000 shares on June 18, 2027 if our common stock trades at or above $3.68 per share for 20 consecutive trading days prior to June 18, 2027. | |
|
(6) |
These RSUs, which convert into common stock on a one-for-one basis, were granted on May 19, 2025 and will vest on May 19, 2027, subject to the grantees continued service through each vesting date except as otherwise provided in the applicable award agreement. | |
|
(7) |
On February 11, 2026, the Compensation Committee of the Board of Directors approved the accelerated vesting of these awards which shall vest and be payable in shares of the Companys common stock upon the earliest to occur of (i) Effective Time of the Merger or (ii) September 30, 2026, regardless of whether any performance conditions of such awards have been met, unless such awards have vested prior to such time pursuant to their terms. | |
**Director Compensation**
Our directors are eligible to receive options,
restricted stock and other equity linked grants under our equity incentive plans. The Compensation Committee of the Board of Directors
has approved a director compensation policy (Director Compensation Policy) to govern the annual compensation payable to
directors for their service on our board. The Compensation Committee has reserved the right to make any necessary, appropriate, or desirable
changes to the terms of the Policy.
| | 48 | | |
| Table of Contents | |
Pursuant to our Director Compensation Policy,
as amended, starting in fiscal year ended December 31, 2024, and until such time that our Compensation Committee or Board of Directors
determines a change in director compensation is necessary, appropriate or desirable, each non-employee director shall receive an annual
award of 35,000 RSUs or 35,000 shares of restricted stock under the 2020 Plan (or a successor stockholder-approved plan thereto) on the
first business day following the date a quorum of stockholders meets and votes on proposals in an annual meeting of stockholders.
Under our Director Compensation Policy in place
during fiscal year ended December 31, 2024 and as of the date hereof, a non-employee director may specify before the date that is 15 days
preceding the annual meeting of stockholders of the year prior to the year of grant whether he or she would prefer to receive his or her
awards to be granted in the following year to be in the form of RSUs or restricted stock; provided, however, such choice will not be binding
on the Compensation Committee. The RSUs or restricted stock granted pursuant to the Director Compensation Policy will vest in full on
the earlier of the one-year anniversary of the date of grant subject to the non-employee directors continued service to the Board
of Directors through such date, or the death or disability of the non-employee director, and will be payable upon the earlier of the directors
separation from service as a director or, upon an earlier payment date elected by the director, provided that the election is made no
later than the date that is 15 days preceding the annual meeting of stockholders of the year prior to the year of grant.
The following table sets forth information about
the compensation earned by or paid to our directors during our fiscal year ended December 31, 2025. Please refer to the Summary
Compensation Table above for compensation earned by Mr. Stedham as a member of the Board of Directors during the fiscal year ended
December 31, 2025.
|
Name | |
Stock Awards ($)(1) (2) | |
Option
Awards
($)(2) | |
All Other Compensation ($)(3) | |
Total Compensation ($) | |
|
Scott Greenberg | |
36,400 | |
- | |
- | |
36,400 | |
|
David Edmonds | |
36,400 | |
- | |
- | |
36,400 | |
|
Marshall Geller | |
36,400 | |
- | |
- | |
36,400 | |
|
Howard Goldberg | |
36,400 | |
- | |
- | |
36,400 | |
|
Dr. Art Laffer(4) | |
- | |
- | |
- | |
- | |
|
(1) |
Amounts in this column represent the grant date fair value of the awards, calculated in accordance with ASC Topic 718. Mr. Geller and Mr. Goldberg received restricted stock awards and Mr. Edmonds and Mr. Greenberg received restricted stock units. The assumptions used in calculating the grant date fair value of the awards are set forth in Note 1 Summary of Significant Accounting Policies in the notes accompanying the financial statements. | |
|
|
| |
|
(2) |
The table below sets forth the number of unvested stock awards and the aggregate number of options outstanding held by each of our directors, except for Mr. Stedham, as of December 31, 2025. Please refer to the Outstanding Equity Awards at Fiscal Year End table above for the number of unvested stock awards and options outstanding held by Mr. Stedham as of December 31, 2025. Except for 56,819 PSUs held by Scott Greenberg, on February 11, 2026, the Board of Directors approved the accelerated vesting of the awards set forth below, which shall vest and be payable in shares of the Companys common stock upon the Effective Time of the Merger, if such awards are outstanding at the Effective Time. | |
|
Name | |
Aggregate
Number of
Unexercised Option Awards
Outstanding at December 31, 2025 | | |
Aggregate
Number of
Unvested Stock Awards
Outstanding at December 31, 2025 | | |
|
David Edmonds | |
| - | | |
| 35,000 | | |
|
Marshall Geller | |
| - | | |
| 35,000 | | |
|
Howard Goldberg | |
| - | | |
| 35,000 | | |
|
Scott Greenberg | |
| - | | |
| 91,819 | | |
|
Dr. Art Laffer(4) | |
| - | | |
| - | | |
|
(3) |
Does not include payments or benefits provided under the Companys 2021 Stock Purchase Plan which are generally available to all salaried employees. | |
|
|
| |
|
(4) |
Dr. Arthur Laffer resigned as a director of the Company on September 24, 2025, effective immediately. Dr. Laffers resignation was not the result of any disagreement with the Company on any matter relating to the Companys operations, policies or practices. Because Dr. Laffer resigned before the date a quorum of stockholders met and voted on proposals in the 2025 annual meeting of stockholders no compensation was paid to Dr. Laffer in 2025. | |
| | 49 | | |
| Table of Contents | |
****
**Policies and Practices Related to the Grant
of Certain Equity Awards**
We do not grant equity awards in anticipation
of the release of material nonpublic information, and we do not time the release of material nonpublic information based on grant dates
or for the purpose of affecting the value of executive compensation. In addition, we do not take material nonpublic information into account
when determining the timing and terms of grants. We do not currently have a formal policy with respect to the timing of option grants
as our current practice is to grant time- and performance-based RSUs to align executive compensation with stockholder return.
During the fiscal year ended December 31, 2025,
we did not grant any named executive officers option awards in the period beginning four business days before and ending one business
day after the filing of a periodic report on Form 10-Q or Form 10-K, or the filing or furnishing of a current report on Form 8-K that
disclosed material nonpublic information.
****
**ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS.**
**Equity Compensation Plan Information as of
December 31, 2025**
|
Plan Category | |
Number
of securities
to be issued upon
exercise of
outstanding options, warrants and rights | | |
Weighted
average
exercise price of
outstanding options, warrants and rights (1) | | |
Number
of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a)) | | |
|
| |
(a) | | |
(b) | | |
(c) | | |
|
Equity compensation plans approved
by security holders | |
|
- | | |
$ |
- | | |
|
1,402,138 (2) | | |
|
Equity compensation plans not
approved by security holders | |
|
- | | |
|
- | | |
|
- | | |
|
Total | |
| - | | |
| - | | |
| 1,402,138 | | |
|
(1) | Represents the weighted-average exercise price of outstanding stock options. The weighted-average exercise
price does not take into account the shares issuable upon vesting of outstanding restricted stock units under the 2020 Equity Incentive
Plan (the 2020 Plan). | |
|
(2) | Includes 1,047,969 shares remaining available for issuance under the 2020 Plan, 354,169 shares remaining
available for issuance under the 2021 Plan. (see Note 9 Stockholders Equity in the notes accompanying the financial statements
for further information on the 2021 Plan). | |
| | 50 | | |
| Table of Contents | |
****
**Security Ownership of Management and Certain
Beneficial Owners**
The following table sets forth the number of shares
of our common stock beneficially owned as of March 23, 2026, by: (i) those persons known by us to be owners of more than 5% of its common
stock; (ii) each director; (iii) our named executive officers (as disclosed in the Summary Compensation Table); and (iv) our executive
officers and directors as a group. Unless otherwise specified in the notes to this table, the address for each person is: VerifyMe, Inc.,
801 International Parkway, Fifth Floor, Lake Mary, Florida 32746. We also have 0.85 share of Series B Convertible Preferred Stock outstanding
held by the Estate of Claudio Ballard.
|
Beneficial Owner | |
Amount
of Beneficial
Ownership of
Common Stock(1) | | |
Percent
of Common Stock
Beneficially Owned(1) | | |
|
Named Executive Officers: | |
| | | |
| | | |
|
Adam H Stedham(2) | |
| 575,543 | (3) | |
| 4.3 | % | |
|
Fred G. Volk, III | |
| 73,108 | | |
| * | | |
|
Jennifer Cola | |
| | | |
| | |
|
Directors: | |
| | | |
| | | |
|
David Edmonds | |
| 119,662 | (4) | |
| * | | |
|
Marshall Geller | |
| 743,622 | (5) | |
| 5.6 | % | |
|
Howard Goldberg | |
| 373,662 | (6) | |
| 2.8 | % | |
|
Scott Greenberg | |
| 308,602 | (7) | |
| 2.3 | % | |
|
All directors and executive officers as a group (8 persons) | |
| 2,253,247 | | |
| 16.3 | % | |
**
** indicates less than 1%*
|
(1) |
Based on 13,119,065 shares of common stock issued and outstanding as of March 23, 2026. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days whether upon the exercise of options or warrants. Unless otherwise indicated in the footnotes to this table, we believe that each of the stockholders named in the table has sole voting and investment power with respect to the shares of common stock indicated as beneficially owned by them. This table does not include any unvested RSUs or PSUs, stock options or warrants except for those vesting within 60 days. As for the 5% stockholders, we are relying upon reports filed by each 5% stockholder with the SEC. | |
|
|
| |
|
(2) |
Mr. Stedham is also a director of the Company. | |
|
|
| |
|
(3) |
Includes (i) 28,592 vested RSUs that become payable in shares of common stock upon Mr. Stedhams separation from service as a director of the Company and (ii) 152,174 shares of common stock underlying a presently exercisable convertible promissory note in the principal amount of $175,000 with a conversation price of $1.15 per share. | |
|
|
| |
|
(4) |
Includes 50,217 vested RSUs that become payable in shares of common stock upon Mr. Edmonds separation from service as a director of the Company. | |
|
|
| |
|
(5) |
Includes (i)35,000 unvested shares of restricted stock held by Mr. Geller that will vest in full on upon the earlier of the Effective Time of the Merger or October 9, 2026, (ii) 405,034 shares of common stock held by the Geller Living Trust, dated July 26, 2002 (the Geller Trust), (iii) 68,310 vested RSUs held by the Geller Trust that become payable in shares of common stock upon Mr. Gellers separation from service as a director of the Company, (iv) 152,174 shares of common stock underlying a presently exercisable convertible promissory note held by the Geller Trust in the principal amount of $175,000 with conversation price of $1.15 per share, and (v)31,104 shares of common stock underlying warrants exercisable at $3.215 per share held by the Geller Trust. Mr. Geller is a co-trustee, along with his wife, of the Geller Trust and exercises voting and investment power over the shares held by the Geller Trust. | |
|
|
| |
|
(6) |
Includes (i) 35,000 unvested shares of restricted stock that will vest in full upon the earlier of the Effective Time of the Merger or October 9, 2026, and (ii) 89,310 vested RSUs that become payable in shares of common stock upon Mr. Goldbergs separation from service as a director of the Company. | |
|
|
| |
|
(7) |
Includes (i) 175,561 shares of common stock held by the Scott Greenberg Revocable Trust, (ii) 68,310 vested RSUs that become payable in shares of common stock upon Mr. Greenbergs separation from service as a director of the Company, (iii) 43,478 shares of common stock underlying a presently exercisable convertible promissory note in the principal amount of $50,000 with conversation price of $1.15 per share and (iv) 15,552 shares of common stock underlying warrants exercisable at $3.215 per share. | |
| | 51 | | |
| Table of Contents | |
The table above
does not include the following grants:
|
| 550,000 PSUs granted to our Chief Executive Officer, which convert into common stock on a one-for-one
basis, that were granted under the VerifyMe, Inc. 2020 Equity Incentive Plan on June 19, 2023 and vest upon the earlier of the Effective
Time of the Merger or September 30, 2026, regardless of whether any performance conditions of such
awards have been met, unless such awards have vested prior to such time pursuant to their terms. | |
|
| 75,000 PSUs granted to one member of management, which convert into common stock on a one-for-one basis,
that were granted under the VerifyMe, Inc. 2020 Equity Incentive Plan on July 20, 2023 and vest upon the earlier of the Effective
Time of the Merger or September 30, 2026, regardless of whether any performance conditions of such
awards have been met, unless such awards have vested prior to such time pursuant to their terms. | |
|
| 75,000 PSUs granted to one member of management, which convert into common stock on a one-for-one basis,
that were granted under the VerifyMe, Inc. 2020 Equity Incentive Plan on June 30, 2024 and vest upon the earlier of the Effective
Time of the Merger or September 30, 2026, regardless of whether any performance conditions of such
awards have been met, unless such awards have vested prior to such time pursuant to their terms. | |
|
| 24,000 RSUs granted to our Chief Financial Officer, which convert into common stock on a one-for-one basis,
that were granted under the VerifyMe, Inc. 2020 Equity Incentive Plan on May 19, 2025, which will vest upon the earlier of the Effective
Time of the Merger or September 30, 2026. | |
|
| 70,000 RSUs granted to two members of the Board of Directors, which convert into common stock on a one-for-one
basis, that were granted under the VerifyMe, Inc. 2020 Equity Incentive Plan on October 9, 2025, which will vest upon the earlier of the
Effective Time of the Merger or October 9, 2026. | |
|
| 68,028 RSUs granted to our Chief Executive Officer, which convert into common stock on a one-for-one basis,
that were granted under the VerifyMe, Inc. 2020 Equity Incentive Plan on June 19, 2023, which will vest on June
19, 2026. | |
| | 52 | | |
| Table of Contents | |
**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE**
****
The following is a summary of transactions since
January 1, 2024 to which we have been a party in which the amount involved exceeded the lesser of $120,000 or one percent of the average
of our total assets at the end of the last two recent fiscal years and in which any of our executive officers, directors, director nominees,
or beneficial holders of more than five percent of our capital stock, or relative or spouse of any of the foregoing persons or any relative
of such spouse who has the same house as such person or who is a director or officer of any parent or subsidiary of our Company, had or
will have a direct or indirect material interest during the specified period for which disclosure is required under Item 404(a) of regulation
S-K, other than compensation arrangements which are described under the sections entitled Executive Compensation and Director
Compensation.
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 and entities related
to related parties at the time or sale and who are considered a related person during the specified period for which
disclosure is required under Item 404(a) of regulation S-K, including Adam Stedham, the Companys
President and CEO; Scott Greenberg, the Companys Chairman; the Geller Trust; and the 1065 Institute, Inc., a non-profit entity
to which our past director Dr. Arthur Laffer serves as a director and secretary. As of December 31, 2025, $400 thousand was held by these
related parties. 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. The largest aggregate amount of principal outstanding on the notes since they were issued was $1,100
thousand. As of January 21, 2025, $350 thousand was converted to common stock, none of which was held by related parties.
As of December 31, 2025 the amount outstanding on the notes was $750 thousand. Between the date the notes were issued and February 25,
2026, the Company has paid a total of $0 and $178 thousand in principal and interest.
****
**ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**
**Policy on Pre-Approval of Retention of Independent
Registered Public Accounting Firm**
The Audit Committee pre-approves all audit and
permissible non-audit services on a case-by-case basis. In its review of non-audit services, the Audit Committee considers whether the
engagement could compromise the independence of our independent registered public accounting firm, and whether the reasons of efficiency
or convenience is in our best interest to engage our independent registered public accounting firm to perform the services. All of the
services provided, and fees charged by MaloneBailey, LLP (MaloneBailey) were approved by our Audit Committee.
**Independence Analysis by Audit Committee**
The Audit Committee considered whether the provision
of the services described above was compatible with maintaining the independence of MaloneBailey and determined that the provision of
these services was compatible with the firms independence.
****
**Fees for Professional Services Provided by
MaloneBailey, LLP**
The following table shows fees for professional
services provided by MaloneBailey during the fiscal year ended December 31, 2025, which we refer to as fiscal year 2025 and the fiscal
year ended December 31, 2024, which we refer to as fiscal year 2024.
|
| |
Fiscal Year 2025 | | |
Fiscal Year 2024 | | |
|
Audit Fees(1) | |
$ | 351,600 | | |
$ | 263,165 | | |
|
Audit-Related Fees(2) | |
| - | | |
| - | | |
|
Tax Fees(3) | |
| 20,600 | | |
| 24,546 | | |
|
Total | |
$ | 372,200 | | |
$ | 287,711 | | |
|
(1) |
Audit fees relate to services rendered for the audits of our annual financial statements, for the review of our quarterly financial statements, and for services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. | |
|
|
| |
|
(2) |
Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reporter under Audit Fees. | |
|
|
| |
|
(3) |
Tax fees relate to services performed in connection with the Companys annual tax return. | |
| | 53 | | |
| Table of Contents | |
**PART IV**
**ITEM15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.**
|
Exhibit No. |
|
Description | |
|
2.1+ |
|
Agreement and Plan of Merger dated February 11, 2026, by and among VerifyMe, Inc., VRME Subsidiary Corp., and Open World, Ltd. (incorporated herein by reference from Exhibit 2.1 to the Companys Current Report on Form 8-K filed on February 12, 2026) | |
|
3.1 |
|
Certificate of Amendment to Amended and Restated Articles of Incorporation (incorporated herein by reference from Exhibit 3.1 to the Companys Current Report on Form 8-K filed on June 22, 2020) | |
|
3.2 |
|
Second Amended Certificate of Designation for Series A Convertible Preferred Stock (incorporated herein by reference from Exhibit 3.2 to the Companys Current Report on Form 8-K filed on June 18, 2015) | |
|
3.3 |
|
Certificate of Designation for Series B Convertible Preferred Stock (incorporated herein by reference from Exhibit 3.3 to the Companys Current Report on Form 8-K filed on June 18, 2015) | |
|
3.4 |
|
Certificate of Withdrawal of Certificate of Designation for Series C and Series D Convertible Preferred Stock (incorporated herein by reference from Exhibit 4.5 to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2018) | |
|
3.5 |
|
Amended and Restated Bylaws of VerifyMe, Inc., as amended through July 8, 2025 (incorporated herein by reference from Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2025). | |
|
4.1 |
|
Form of Common Warrant (incorporated here by reference from Exhibit 4.1 to the Companys Current Report on Form 8-K filed on January 14, 2025) | |
|
4.2* |
|
Description of Securities | |
|
10.1# |
|
Form of Indemnification Agreement (incorporated herein by reference from Exhibit 10.1 to the Companys Current Report on Form 8-K filed on February 18, 2021) | |
|
10.2# |
|
Employment Agreement between PeriShip Global, LLC and Fred Volk III, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.6 to the Companys Current Report on Form 8-K filed on April 26, 2022) | |
|
10.3# |
|
Employment Agreement between PeriShip Global, LLC and Jack Wang, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.7 to the Companys Current Report on Form 8-K filed on April 26, 2022) | |
|
10.4# |
|
Employment Agreement with Adam Stedham, effective June 19, 2023 (incorporated herein by reference from Exhibit 10.1 to the Companys Current Report on Form 8-K filed on May 31, 2023) | |
|
10.5#+ |
|
Amended and Restated Employment Agreement with Adam Stedham dated February 11, 2026 and subject to effectiveness (incorporated herein by reference from Exhibit 10.2 to the Companys Current Report on Form 8-K filed on February 12, 2026) | |
|
10.6#+ |
|
Employment Agreement with Jennifer Cola dated February 11, 2026 and subject to effectiveness (incorporated herein by reference from Exhibit 10.3 to the Companys Current Report on Form 8-K filed on February 12, 2026) | |
|
10.7# |
|
Restricted Stock Unit Award Agreement between the Company and Keith Goldstein dated July 31, 2023 (incorporated herein by reference from Exhibit 10.2 to the Companys Current Report on Form 8-K filed on July 21, 2023) | |
|
10.8# |
|
Restricted Stock Unit Award Agreement between the Company and Margaret Gezerlis dated July 31, 2023 (incorporated herein by reference from Exhibit 10.4 to the Companys Current Report on Form 8-K filed on July 21, 2023) | |
|
10.9# |
|
Restricted Stock Unit Award Agreement between the Company and Adam Stedham dated June 19, 2023 (incorporated herein by reference from Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2023) | |
|
10.10# |
|
2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 4.4 to the Companys Registration Statement on Form S-8 (File No. 333-249520) filed on October 16, 2020) | |
|
10.10.1# |
|
First Amendment to the VerifyMe, Inc. 2020 Equity Incentive Plan (incorporated herein by reference to the Companys Definitive Proxy Statement filed Schedule 14A filed on April 4, 2022) | |
|
10.10.2# |
|
Second Amendment to the VerifyMe, Inc. 2020 Equity Incentive Plan (incorporated herein by reference from Appendix B to the Companys Definitive Proxy Statement on Schedule 14A filed on April 24, 2023) | |
|
10.10.3# |
|
Third Amendment to the VerifyMe, Inc. 2020 Equity Incentive Plan (incorporated herein by reference from Appendix B to the Companys Definitive Proxy Statement on Schedule 14A filed on April 25, 2024). | |
|
10.11# |
|
VerifyMe, Inc. 2021 Stock Purchase Plan (incorporated herein by reference from Appendix A to the Companys Definitive Proxy Statement on Schedule 14A filed on April 28, 2021) | |
|
10.12# |
|
Non-Qualified Stock Option Agreement dated April 17, 2018 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.13 to the Companys Registration Statement on Form S-1 (File No. 333-234155) filed on October 10, 2019) | |
|
10.13# |
|
Amendment to Non-Qualified Stock Option Agreements Non-Plan dated April 16, 2020 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.12 to the Companys Registration Statement on Form S-1 (File No. 333-237950) filed on May 1, 2020) | |
| | 54 | | |
| Table of Contents | |
|
10.14# |
|
Form of Restricted Stock Unit Agreement (immediate vesting) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.6 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2020) |
|
|
10.15# |
|
Form of Restricted Stock Award Agreement (Employees) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2021) |
|
|
10.16# |
|
Form of Restricted Stock Award Agreement (Non-employees) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2021) |
|
|
10.17# |
|
Form of Restricted Stock Unit Award Agreement (Employees) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2021) |
|
|
10.18# |
|
Form of Restricted Stock Unit Award Agreement (Non-employees) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2021) |
|
|
10.19# |
|
Form of Restricted Stock Unit Award Agreement (Subsidiary Employees) (incorporated herein by reference from Exhibit 10.8 to the Companys Current Report on Form 8-K filed on April 26, 2022) |
|
|
10.20# |
|
Form of Restricted Stock Unit Award Agreement (performance) pursuant to the 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2023) |
|
|
10.21 |
|
Revolving Line of Credit Note between PeriShip Global LLC and PNC Bank, National Association, effective September 15, 2022 (incorporated herein by reference from Exhibit 10.3 to the Companys Current Report on Form 8-K filed on September 27, 2022) |
|
|
10.22 |
|
Guaranty and Suretyship Agreement between VerifyMe, Inc., and PNC Bank, National Association, effective September 15, 2022 (incorporated herein by reference from Exhibit 10.4 to the Companys Current Report on Form 8-K filed on September 27, 2022) |
|
|
10.23 |
|
Security Agreement between PeriShip Global LLC and PNC Bank, National Association, effective September 15, 2022 (incorporated herein by reference from Exhibit 10.5 to the Companys Current Report on Form 8-K filed on September 27, 2022) |
|
|
10.24 |
|
Security Agreement between VerifyMe, Inc. and PNC Bank, National Association, effective September 15, 2022 (incorporated herein by reference from Exhibit 10.6 to the Companys Current Report on Form 8-K filed on September 27, 2022) |
|
|
10.25 |
|
Amended and Restated Loan Agreement between PeriShip Global LLC and PNC Bank, National Association, effective October 31, 2023 (incorporated herein by reference from Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2023) |
|
|
10.26 |
|
Waiver and Amendment to Loan Documents between PeriShip Global LLC and PNC Bank, National Association, effective October 31, 2023 (incorporated herein by reference from Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2023) |
|
|
10.27 |
|
Waiver and Amendment to Loan Documents between PeriShip Global LLC and PNC Bank National Association effective August 7, 2024 (incorporated herein by reference from Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2024) |
|
|
10.28 |
|
Waiver and Amendment to Loan Documents between PeriShip Global LLC and PNC Bank, National Association, effective March 28, 2025 (incorporated herein by reference from Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2025) |
|
|
10.29* |
|
Waiver and Amendment to Loan Documents between PeriShip Global LLC and PNC Bank, National Association, effective December 31, 2025 |
|
|
10.30 |
|
Form of Convertible Subordinated Promissory Note (incorporated herein by reference from Exhibit 10.2 to the Companys Current Report on Form 8-K filed on August 28, 2023) |
|
|
10.31 |
|
Employee Bonus Plan (incorporated herein by reference from Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2024) |
|
|
10.32 |
|
Consulting Agreement with Pentant LLC effective as of November 15, 2023 (incorporated herein by reference from Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2024) |
|
|
10.32.1 |
|
First Amendment to Consulting Agreement with Pentant LLC effective June 30, 2024 (incorporated herein by reference from Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2024) |
|
|
10.33 |
|
Form of Inducement Letter Agreement dated January 13, 2025 (incorporated herein by reference from Exhibit 10.1 to the Companys Current Report on Form 8-K filed on January 14, 2025) |
|
|
10.34 |
|
Sales Agreement, dated as of March 6, 2025, between VerifyMe, Inc. and Roth Capital Partners, LLC (incorporated herein by reference from Exhibit 1.1 to the Companys Current Report on Form 8-K filed on March 6, 2025) |
|
|
10.35+ |
|
Digital Channel Program Agreement (incorporated herein by reference from Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2025) |
|
|
10.36+ |
|
Partner API Access Agreement (incorporated herein by reference from Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2025) |
|
|
10.37 |
|
Master Loan Agreement and Promissory Note with ZenCredit Ventures, LLC (incorporated herein by reference from Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2025) |
|
| | 55 | | |
| Table of Contents | |
|
10.38 |
|
Promissory Note to ZenCredit Ventures, LLC (incorporated herein by reference from Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2025) |
|
|
10.39 |
|
Letter of Intent, dated January 2, 2026, between VerifyMe, Inc. and Open World Ltd.(incorporated by reference from Exhibit 10.1 to the Companys Current Report on Form 8-K filed on January 5, 2026) |
|
|
10.40+ |
|
Form of Company Stockholder Support Agreement dated February 11, 2026 (incorporated herein by reference from Exhibit 10.1 to the Companys Current Report on Form 8-K filed on February 12, 2026) |
|
|
19 |
|
Insider Trading Policy (incorporated herein by reference from Exhibit 19 to the Companys Annual Report on Form 10-K for the year ended December 31, 2024) |
|
|
21.1* |
|
Subsidiaries of VerifyMe, Inc. |
|
|
23* |
|
Consent of MaloneBailey, LLP |
|
|
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 |
|
|
97 |
|
Policy for the Recovery of Erroneously Awarded Compensation (incorporated herein by reference from Exhibit 97 to the Companys Annual Report on Form 10-K for the year ended December 31, 2024) |
|
|
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*
*# Denotes management compensation plan or contract*
*+ Schedules and similar attachments have been omitted pursuant to
Item 601(a)(5) of Regulation S-K of the Securities Act of 1933, as amended. The Company will furnish a copy of any omitted schedule or
similar attachment to the Securities and Exchange Commission upon request.*
*Certain portions of this exhibit have been omitted (indicated
by asterisks) pursuant to Item 601(b) of Regulation S-K of the Securities Act of 1933, as amended, because such omitted information is
(i) not material and (ii) would be competitively harmful if publicly disclosed.*
****
**ITEM 16. FORM 10-K SUMMARY**
None.
| | 56 | | |
| Table of Contents | |
**SIGNATURES**
Pursuant to the requirements of Section13
or 15(d) 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. |
| |
|
|
|
|
| |
|
|
By: |
/s/ Adam Stedham |
| |
|
|
|
Adam Stedham
Chief Executive Officer and President |
| |
|
|
|
Date: March 31, 2026 |
| |
Pursuant to the requirements of the Securities
Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated:
|
Signature |
|
Title |
|
Date | |
|
|
|
|
|
| |
|
/s/ Adam Stedham |
|
Chief Executive Officer, President and Director |
|
March 31, 2026 | |
|
Adam Stedham |
|
(Principal Executive Officer) |
|
| |
|
|
|
|
|
| |
|
|
|
|
|
| |
|
/s/ Jennifer Cola |
|
Chief Financial Officer |
|
March 31, 2026 | |
|
Jennifer Cola |
|
(Principal Financial Officer and |
|
| |
|
|
|
Principal Accounting Officer) |
|
| |
|
|
|
|
|
| |
|
|
|
|
|
| |
|
/s/ Scott Greenberg |
|
Director and Chairman |
|
March 31, 2026 | |
|
Scott Greenberg |
|
|
|
| |
|
|
|
|
|
| |
|
|
|
|
|
| |
|
/s/ Marshall Geller |
|
Director |
|
March 31, 2026 | |
|
Marshall Geller |
|
|
|
| |
|
|
|
|
|
| |
|
|
|
|
|
| |
|
/s/Howard Goldberg |
|
Director |
|
March 31, 2026 | |
|
Howard Goldberg |
|
|
|
| |
|
|
|
|
|
| |
|
|
|
|
|
| |
|
/s/ David Edmonds |
|
Director |
|
March 31, 2026 | |
|
David Edmonds |
|
|
|
| |
| | 57 | | |
| Table of Contents | |
INDEX TO
FINANCIAL STATEMENTS
CONTENTS
|
|
|
PAGE | |
|
|
|
| |
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 206) |
|
F-1 | |
|
|
|
| |
|
CONSOLIDATED BALANCE SHEETS |
|
F-2 | |
|
|
|
| |
|
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
F-3 | |
|
|
|
| |
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS |
|
F-4 | |
|
|
|
| |
|
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
F-5 | |
|
|
|
| |
|
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY |
|
F-6 | |
|
|
|
| |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
F-7 | |
| | 58 | | |
| Table of Contents | |
**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM**
To the Shareholders and Board
of Directors of
VerifyMe, Inc.
****
**Opinion on the Financial
Statements**
****
We have audited the accompanying consolidated
balance sheets of VerifyMe, Inc. and its subsidiaries (collectively, the Company) as of December 31, 2025 and 2024, and
the related consolidated statements of operations, comprehensive loss, stockholders equity, and cash flows for the years then ended,
and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of their operations
and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
**Basis
for Opinion**
****
These financial
statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted
our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we
are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits
included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable
basis for our opinion.
**Critical Audit Matters**
Critical audit matters are matters arising
from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee
and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. We determined that there are no critical audit matters.
*/s/
MaloneBailey, LLP*
www.malonebailey.com
We have
served as the Company's auditor since 2018
Houston,
Texas
March 30, 2026
| | F-1 | | |
| Table of Contents | |
VerifyMe, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
| |
| | |
| | |
|
| |
| | |
| | |
|
ASSETS | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
CURRENT ASSETS | |
| | | |
| | | |
|
Cash and cash equivalents | |
$ | 4,353 | | |
$ | 2,823 | | |
|
Accounts receivable, net of allowance for credit loss reserve, $10 and $71 as of December 31, 2025 and December 31, 2024, respectively | |
| 857 | | |
| 2,636 | | |
|
Note receivable, net of allowance for credit loss reserve, $12 and $0 as of December 31, 2025 and December 31, 2024, respectively | |
| 1,988 | | |
| - | | |
|
Unbilled revenue | |
| 338 | | |
| 733 | | |
|
Prepaid expenses and other current assets | |
| 154 | | |
| 131 | | |
|
Inventory | |
| 37 | | |
| 39 | | |
|
TOTAL CURRENT ASSETS | |
| 7,727 | | |
| 6,362 | | |
|
| |
| | | |
| | | |
|
PROPERTY AND EQUIPMENT, NET | |
$ | 20 | | |
$ | 116 | | |
|
| |
| | | |
| | | |
|
RIGHT OF USE ASSET | |
| - | | |
| 236 | | |
|
| |
| | | |
| | | |
|
INTANGIBLE ASSETS, NET | |
| 2,345 | | |
| 5,365 | | |
|
| |
| | | |
| | | |
|
GOODWILL | |
| 2,926 | | |
| 3,988 | | |
|
TOTAL ASSETS | |
$ | 13,018 | | |
$ | 16,067 | | |
|
| |
| | | |
| | | |
|
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
CURRENT LIABILITIES | |
| | | |
| | | |
|
Term note, current | |
$ | - | | |
$ | 500 | | |
|
Accounts payable | |
| 745 | | |
| 2,971 | | |
|
Other accrued expense | |
| 530 | | |
| 660 | | |
|
Lease liability- current | |
| - | | |
| 108 | | |
|
Convertible note related party, current | |
| 400 | | |
| - | | |
|
Convertible note, current | |
| 350 | | |
| - | | |
|
TOTAL CURRENT LIABILITIES | |
| 2,025 | | |
| 4,239 | | |
|
| |
| | | |
| | | |
|
LONG-TERM LIABILITIES | |
| | | |
| | | |
|
Long-term lease liability | |
$ | - | | |
$ | 139 | | |
|
Term note | |
| - | | |
| 375 | | |
|
Convertible note related party | |
| - | | |
| 450 | | |
|
Convertible note | |
| - | | |
| 650 | | |
|
TOTAL LIABILITIES | |
$ | 2,025 | | |
$ | 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 December 31, 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 December 31, 2025 and December 31, 2024, respectively | |
| - | | |
| - | | |
|
| |
| | | |
| | | |
|
Common stock,$0.001 par value; 675,000,000 shares authorized; 13,553,049 and 10,829,908 shares issued, 13,071,601 and 10,539,441 shares outstanding as of December 31, 2025 and December 31, 2024, respectively | |
| 14 | | |
| 11 | | |
|
| |
| | | |
| | | |
|
Additional paid in capital | |
| 102,059 | | |
| 96,344 | | |
|
| |
| | | |
| | | |
|
Treasury stock as cost; 481,448 and 290,467 shares at December 31, 2025 and December 31, 2024, respectively | |
| (502 | ) | |
| (480 | ) | |
|
| |
| | | |
| | | |
|
Accumulated deficit | |
| (90,578 | ) | |
| (85,673 | ) | |
|
| |
| | | |
| | | |
|
Accumulated other comprehensive loss | |
| - | | |
| 12 | | |
|
| |
| | | |
| | | |
|
STOCKHOLDERS' EQUITY | |
| 10,993 | | |
| 10,214 | | |
|
| |
| | | |
| | | |
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | |
$ | 13,018 | | |
$ | 16,067 | | |
The accompanying notes are an integral part of
these consolidated financial statements.
| | F-2 | | |
| Table of Contents | |
VerifyMe, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
|
| |
| | |
| | |
|
| |
Year Ended | | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
| |
| | |
| | |
|
| |
| | |
| | |
|
NET REVENUE | |
$ | 16,398 | | |
$ | 24,207 | | |
|
| |
| | | |
| | | |
|
COST OF REVENUE | |
| 10,077 | | |
| 15,545 | | |
|
| |
| | | |
| | | |
|
GROSS PROFIT | |
| 6,321 | | |
| 8,662 | | |
|
| |
| | | |
| | | |
|
OPERATING EXPENSES | |
| | | |
| | | |
|
Segment management and technology(a) | |
| 3,138 | | |
| 5,454 | | |
|
General and administrative (a) | |
| 3,416 | | |
| 3,852 | | |
|
Research and development | |
| 20 | | |
| 70 | | |
|
Sales and marketing (a) | |
| 967 | | |
| 1,361 | | |
|
Goodwill and Intangible asset impairment | |
| 3,850 | | |
| 2,315 | | |
|
Total operating expenses | |
| 11,391 | | |
| 13,052 | | |
|
| |
| | | |
| | | |
|
LOSS BEFORE OTHER INCOME (EXPENSE) | |
| (5,070 | ) | |
| (4,390 | ) | |
|
| |
| | | |
| | | |
|
OTHER INCOME (EXPENSE) | |
| | | |
| | | |
|
Interest income (expenses), net | |
| 214 | | |
| (130 | ) | |
|
Change in fair value of contingent consideration | |
| - | | |
| 844 | | |
|
Loss on sale of business | |
| - | | |
| (146 | ) | |
|
Other expense, net | |
| (49 | ) | |
| (2 | ) | |
|
TOTAL OTHER INCOME (EXPENSE), NET | |
| 165 | | |
| 566 | | |
|
| |
| | | |
| | | |
|
NET LOSS | |
$ | (4,905 | ) | |
$ | (3,824 | ) | |
|
| |
| | | |
| | | |
|
LOSS PER SHARE | |
| | | |
| | | |
|
BASIC | |
| (0.39 | ) | |
| (0.37 | ) | |
|
DILUTED | |
| (0.39 | ) | |
| (0.37 | ) | |
|
| |
| | | |
| | | |
|
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
BASIC | |
| 12,619,512 | | |
| 10,402,508 | | |
|
DILUTED | |
| 12,619,512 | | |
| 10,402,508 | | |
|
(a) | Includes share-based compensation of $801 thousand for the year ended December 31, 2025, and $1,555 thousand for the year ended December
31, 2024. | |
The accompanying notes are an integral part of
these consolidated financial statements.
| | F-3 | | |
| Table of Contents | |
VerifyMe, Inc.
Consolidated Statements of Comprehensive Loss
(In thousands)
|
| |
| | |
| | |
|
| |
Year Ended | | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
| |
| | |
| | |
|
NET LOSS | |
$ | (4,905 | ) | |
$ | (3,824 | ) | |
|
| |
| | | |
| | | |
|
Change in fair value of interest rate, swap | |
| (12 | ) | |
| 8 | | |
|
| |
| | | |
| | | |
|
Foreign currency translation adjustments | |
| - | | |
| 6 | | |
|
| |
| | | |
| | | |
|
TOTAL COMPREHENSIVE LOSS | |
$ | (4,917 | ) | |
$ | (3,810 | ) | |
The accompanying notes are an integral part of
these consolidated financial statements.
| | F-4 | | |
| Table of Contents | |
VerifyMe, Inc.
Consolidated Statements of Cash Flows
(In thousands)
|
| |
| | | |
| | | |
|
| |
Years Ended | | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | | |
| | | |
|
Net loss | |
$ | (4,905 | ) | |
$ | (3,824 | ) | |
|
Adjustments to reconcile net loss to net cash provided by operating activities: | |
| | | |
| | | |
|
Allowance for expected credit losses | |
| 8 | | |
| 49 | | |
|
Stock based compensation | |
| 86 | | |
| 255 | | |
|
Loss on sale of business | |
| - | | |
| 134 | | |
|
Change in fair value of contingent consideration | |
| - | | |
| (836 | ) | |
|
Fair value of restricted stock awards and restricted stock units issued in exchange for services | |
| 715 | | |
| 1,300 | | |
|
Loss on disposal of equipment | |
| 58 | | |
| - | | |
|
Impairment on goodwill and intangible assets | |
| 3,850 | | |
| 2,301 | | |
|
Amortization and depreciation | |
| 984 | | |
| 1,212 | | |
|
Gain on lease termination | |
| (8 | ) | |
| - | | |
|
Unrealized gain on foreign currency transactions | |
| - | | |
| (24 | ) | |
|
Changes in operating assets and liabilities: | |
| | | |
| | | |
|
Accounts receivable | |
| 1,782 | | |
| 298 | | |
|
Unbilled revenue | |
| 395 | | |
| 521 | | |
|
Inventory | |
| 17 | | |
| - | | |
|
Prepaid expenses and other current assets | |
| (33 | ) | |
| 115 | | |
|
Accounts payable, other accrued expenses and net change in operating leases | |
| (2,346 | ) | |
| (630 | ) | |
|
Net cash provided by operating activities | |
| 603 | | |
| 871 | | |
|
| |
| | | |
| | | |
|
CASH FLOWS FROM INVESTING ACTIVITIES | |
| | | |
| | | |
|
Purchase of patents | |
| - | | |
| (12 | ) | |
|
Issuance of note receivable | |
| (2,000 | ) | |
| - | | |
|
Purchase of office equipment | |
| (18 | ) | |
| (7 | ) | |
|
Capitalized software costs | |
| (715 | ) | |
| (504 | ) | |
|
Cash from sale of business assumed by the buyer | |
| - | | |
| (52 | ) | |
|
Net cash used in investing activities | |
| (2,733 | ) | |
| (575 | ) | |
|
| |
| | | |
| | | |
|
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | | |
|
Proceeds from warrant exercise | |
| 4,348 | | |
| - | | |
|
Proceeds from ATM | |
| 475 | | |
| - | | |
|
Proceeds from SPP Plan | |
| - | | |
| 21 | | |
|
Contingent consideration payments | |
| - | | |
| (53 | ) | |
|
Tax withholding payments for employee stock-based compensation in exchange for shares surrendered | |
| (67 | ) | |
| (66 | ) | |
|
Increase in treasury shares (share repurchase program) | |
| (221 | ) | |
| (18 | ) | |
|
Repayment of debt and line of credit | |
| (875 | ) | |
| (500 | ) | |
|
Net cash provided by (used in) financing activities | |
| 3,660 | | |
| (616 | ) | |
|
| |
| | | |
| | | |
|
Effect of exchange rate changes on cash | |
| - | | |
| 48 | | |
|
| |
| | | |
| | | |
|
NET DECREASE IN CASH AND CASH EQUIVALENTS | |
| 1,530 | | |
| (272 | ) | |
|
| |
| | | |
| | | |
|
CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH - BEGINNING OF PERIOD | |
| 2,823 | | |
| 3,095 | | |
|
| |
| | | |
| | | |
|
CASH AND CASH EQUIVALENTS - END OF PERIOD | |
$ | 4,353 | | |
$ | 2,823 | | |
|
| |
| | | |
| | | |
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |
| | | |
| | | |
|
Cash paid during the period for: | |
| | | |
| | | |
|
Interest | |
$ | 70 | | |
$ | 178 | | |
|
Income taxes | |
$ | 24 | | |
$ | 24 | | |
|
| |
| | | |
| | | |
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Lease modification | |
$ | 9 | | |
$ | - | | |
|
Conversion of convertible note to common stock and accrued interest | |
$ | 360 | | |
$ | - | | |
|
Change in fair value of interest rate, swap | |
$ | 12 | | |
$ | 8 | | |
The accompanying notes are an integral part of
these consolidated financial statements.
| | F-5 | | |
| Table of Contents | |
VerifyMe, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands, except share data)
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| |
Series A | | |
Series B | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| |
Convertible | | |
Convertible | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| |
Preferred | | |
Preferred | | |
Common | | |
| | |
Treasury | | |
| | |
| | |
| | |
|
| |
Stock | | |
Stock | | |
Stock | | |
| | |
Stock | | |
| | |
| | |
| | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
Additional | | |
| | |
| | |
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 | | |
| 388 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 389 | | |
|
Restricted stock units, net of shares withheld for employee tax | |
| - | | |
| - | | |
| - | | |
| - | | |
| 94,688 | | |
| - | | |
| 720 | | |
| (38,095 | ) | |
| 125 | | |
| - | | |
| - | | |
| 845 | | |
|
Common stock issued in relation to Stock Purchase Plan | |
| - | | |
| - | | |
| - | | |
| - | | |
| 21,889 | | |
| - | | |
| (46 | ) | |
| (21,889 | ) | |
| 72 | | |
| - | | |
| - | | |
| 26 | | |
|
Common stock issued for services | |
| - | | |
| - | | |
| - | | |
| - | | |
| 180,000 | | |
| - | | |
| 251 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 251 | | |
|
Repurchase of common stock | |
| - | | |
| - | | |
| - | | |
| - | | |
| (21,100 | ) | |
| - | | |
| - | | |
| 21,100 | | |
| (18 | ) | |
| - | | |
| - | | |
| (18 | ) | |
|
Accumulated other comprehensive loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 14 | | |
| - | | |
| 14 | | |
|
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,824 | ) | |
| (3,824 | ) | |
|
Balance at December 31, 2024 | |
| - | | |
| - | | |
| 0.85 | | |
| - | | |
| 10,539,441 | | |
| 11 | | |
| 96,344 | | |
| 290,467 | | |
| (480 | ) | |
| 12 | | |
| (85,673 | ) | |
| 10,214 | | |
|
| |
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 | | |
|
Shares issued under ATM | |
| - | | |
| - | | |
| - | | |
| - | | |
| 628,432 | | |
| 1 | | |
| 474 | | |
| | | |
| | | |
| | | |
| | | |
| 475 | | |
|
Restricted stock awards | |
| - | | |
| - | | |
| - | | |
| - | | |
| 70,000 | | |
| - | | |
| 112 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 112 | | |
|
Restricted stock units, net of shares withheld for employee tax | |
| - | | |
| - | | |
| - | | |
| - | | |
| 210,489 | | |
| - | | |
| 412 | | |
| (58,837 | ) | |
| 124 | | |
| - | | |
| - | | |
| 536 | | |
|
Common stock issued for services | |
| - | | |
| - | | |
| - | | |
| - | | |
| 120,000 | | |
| - | | |
| 86 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 86 | | |
|
Repurchase of Common Stock | |
| - | | |
| - | | |
| - | | |
| - | | |
| (272,177 | ) | |
| - | | |
| - | | |
| 272,177 | | |
| (221 | ) | |
| - | | |
| - | | |
| (221 | ) | |
|
Accumulated other comprehensive loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (12 | ) | |
| - | | |
| (12 | ) | |
|
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,905 | ) | |
| (4,905 | ) | |
|
Balance at December 31, 2025 | |
| - | | |
| - | | |
| 0.85 | | |
| - | | |
| 13,071,601 | | |
| 14 | | |
| 102,059 | | |
| 481,448 | | |
| (502 | ) | |
| - | | |
| (90,578 | ) | |
| 10,993 | | |
The accompanying notes are an integral part of these consolidated financial
statements.
| | F-6 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
****
**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 Companys activities are subject to significant risks and uncertainties.See the Risk Factors and
Managements Discussion and Analysis of Financial Condition and Results of Operations sections in this report.
**Reclassifications**
Certain amounts presented
for theyear endedDecember 31, 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 consolidated
financial statements include the accounts of VerifyMe and its wholly owned subsidiary PeriShip Global. All significant intercompany balances
and transactions have been eliminated upon consolidation. The consolidated financial statements are presented in accordance with accounting
principles generally accepted in the United States of America (GAAP).
**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 2025, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update (ASU) 2025-11, Interim Reporting (Topic 270): Narrow-Scope
Improvements, which clarifies the applicability of the interim reporting guidance, the types of interim reporting, and the form and content
of interim financial statements in accordance with U.S. generally accepted accounting principles. Per the FASB, the amendment does not
intend to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements but rather provide
clarity and improve navigability of the existing interim reporting requirements. The update will be effective for interim reporting periods
within annual reporting periods beginning after December 15, 2027. We are assessing the effect of this update on our consolidated financial
statements and related disclosures.
In November 2025, the FASB issued ASU 2025-09,
Derivatives and Hedging (Topic 815): Hedge Accounting Improvements, which introduces five targeted improvements to better align hedge
accounting with entities risk management activities. The update will be effective for annual reporting periods beginning after
December 15, 2026, and interim periods within those annual reporting periods. Early adoption is permitted. We are assessing the effect
of this update on our consolidated financial statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05, Financial
InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which simplifies
the application of the current expected credit loss model for current accounts receivable and current contract assets under Accounting
Standards Codification 606. The update will be effective for annual reporting periods beginning after December 15, 2025, and interim periods
within those annual reporting periods. Early adoption is permitted. We are assessing the effect of this update on our consolidated financial
statements and related disclosures
| | F-7 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
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 Companys annual periods beginning January 1, 2025, with early adoption permitted.
The Company adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025
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.
| | F-8 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**Fair Value of Financial Instruments**
The Companys financial instruments consist
of accounts receivable, note receivable, unbilled revenue, accounts payable, notes payable and accrued expenses, and equity investments.
The carrying value of accounts receivable, note 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 Companys
financial instruments that are measured and recorded at fair value on the Companys balance sheets on a recurring basis, and their
level within the fair value hierarchy as of December 31, 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 December 31, 2025 | |
$ | - | | |
****
| | F-9 | | |
| Table of Contents | |
****
****
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**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 15 Segment Reporting, for further discussion of the Companys
segment reporting structure.
| | F-10 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**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 year ended December 31, 2025, 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 Companys losses during the years presented.For
the year ended December 31, 2025, there were approximately 3,976,000 anti-dilutive shares consisting of 1,322,000 unvested performance
restricted stock units, 303,000 restricted stock units and restricted stock awards 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 year
ended December 31, 2024, there were approximately 7,971,000 anti-dilutive shares consisting of 1,606,000 unvested performance restricted
stock units, 414,000 restricted stock units and restricted stock awards, 221,000 shares issuable upon exercise of stock options, 4,629,000
shares issuable upon exercise of warrants, 957,000 shares issuable upon conversion of convertible debt, and 144,000 shares issuable upon
conversion of preferred stock.
****
**Concentration of Credit Risk Involving
Cash and Cash Equivalents**
The Companys cash and cash equivalents
are held at various financial institutions. At times, the Companys deposits may exceed Federal Deposit Insurance Corporation (FDIC)
coverage limits which are currently set at $250,000 per depositor. The Company has not experienced any losses from maintaining cash accounts
in excess of federally insured limits.
****
**Accounts Receivable**
Trade accounts receivable are periodically evaluated
for collectability based on past credit history with customers and their current financial condition. Bad debts expense or write offs
of receivables are determined on the basis of loss experience, known and inherent risks in the receivable portfolio and current economic
conditions. If the financial condition of the Companys customers were to deteriorate, resulting in an impairment of their ability
to make payments, such allowances may be required. The Company recognized $8 thousand and $22 thousand for allowance for credit losses
as of December 31, 2025, and 2024, respectively.
**Note Receivable**
****
Notes receivable are recorded at the principal
amount outstanding, plus accrued interest. The Company evaluates the credit quality of notes receivable in accordance with ASC Topic 310,
Receivables, and assesses collectability based on historical experience, the financial condition of borrowers, and other
relevant information. Interest income is recognized using the interest method when collection of principal and interest is considered
probable. Notes are considered past due when payments are not received in accordance with contractual terms.
**Inventory**
Inventory principally consists of canisters and
pigments and is stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds
the fair value of the assets.
**Capitalized Software**
Costs incurred in connection with the development
of software related to our proprietary proactive end-to-end logistics management products are accounted for in accordance with ASC Topic
350Hosting Arrangements and Internally Used Software. Costs incurred prior to the establishment of technological feasibility
are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically
feasible and is in the process of being developed for market. Amortization of capitalized software development costs begins once the product
is available to the market. Capitalized software development costs are amortized over the estimated life of the related product, generally
six years, using the straight-line method. The Company will evaluate its software assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be recoverable.
****
| | F-11 | | |
| Table of Contents | |
****
****
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**Long-Lived Assets**
The Company evaluates the recoverability of its
long-lived assets in accordance with ASC Topic 360 Property, Plant, and Equipment. The Company reviews long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of long-lived assets are measured by a comparison of the carrying amount of an asset to future cash flows expected to be generated by
the asset, undiscounted and without interest or independent appraisals. If such assets are considered to be impaired, the impairment to
be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the assets.
**Goodwill**
****
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 goodwillfor 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 quantitativegoodwillimpairment
test. The assessment considers factors such as, but not limited to, macroeconomic conditions, data showing other companies in the industry
and our share price. An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on
a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. Events or changes in circumstances
which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial
performance, other entity specific events, and sustained decrease in share price.
**Derivative Instruments**
The Company evaluates its equity investments,
long-term derivative liabilities, preferred stock, warrants or other contracts to determine if those contracts or embedded components
of those contracts qualify as derivatives to be separately accounted for in accordance with ASC Topic 480, Distinguish by Liabilities
from Equity and ASC Topic 815, Derivatives and Hedging. The result of this accounting treatment is that the fair value of the embedded
derivative, if required to be bifurcated, is marked-to-market at each balance sheet date and recorded as an asset or liability. The change
in fair value is recorded in the Consolidated Statement of Operations as a component of other income or expense. Upon conversion or exercise
of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to
equity.
| | F-12 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
In circumstances where the embedded conversion option in a convertible
instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are
required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
The classification of derivative instruments,
including whether such instruments should be recorded as assets, liabilities or as equity, is re-assessed at the end of each reporting
period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified as assets
or liabilities at the fair value of the instrument on the reclassification date. Derivative instruments as assets or liabilities will
be classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument is expected
within 12 months of the balance sheet date.
**Revenue Recognition**
The Company accounts for revenues according to
ASC Topic606, *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. For more detailed information about reportable segments, see Note 15 Segment reporting.
|
| 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. | |
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.
**
*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, clients use our shipping monitoring,
predictive analytics, or exception management services. Shippers use their own transportation rates, provided and charged directly by
their carrier, with our added services charged (i) directly by the carrier, under a white label
arrangement, which we refer to as our Premium service, or (ii) by us, which we refer to as our Direct Premium service. These services
include customer web portal access, weather monitoring, temperature control, full-service center support and last mile resolution.
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.
Warranties and other variable considerations are
analyzed by the Company, in terms of historical warranties, current economic trends, and changes in customer demand, and have been determined
to be insignificant in the twelve months ended December 31, 2025.
| | F-13 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**Stock-Based Compensation**
****
We account for stock-based compensation under
the provisions of ASC Topic 718, CompensationStock 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 10 Stock Options, Restricted
Stock and Warrants), we applied a lattice approach that incorporated a Monte Carlo simulation, which involved random iterations that took
different future price paths over the RSUs 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.
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.
**Advertising Costs**
Advertising costs are expensed as incurred. Advertising
costs were $33 thousand and $3 thousand for the years ended December 31, 2025, and 2024, respectively, and are included in Sales and Marketing
on the Consolidated Statements of Operations.
**Research and Development Costs**
In accordance with ASC Topic 730, research and
development costs are expensed when incurred. Research and development costs for the years ended December 31, 2025, and 2024 were $20
thousand and $70 thousand, respectively.
**Income Taxes**
The Company follows ASC Topic 740, Income
Taxes, when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements
and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for
the period plus or minus the change during the period in deferred tax assets and liabilities. Tax years from 2006 remain subject to examination
by major tax jurisdictions due the carryforward of unutilized NOLs.The Company adopted ASU 2023-09 on a prospective basis for the
year ended December 31, 2025
**NOTE 2 - NOTE RECEIVABLE**
****
*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 of16%. 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 $2million in exchange for a promissory note
issued pursuant to the Loan Agreement. As of December 31, 2025, the Company has received $80 thousand in interest payments. As of December
31, 2025, the Company reserved $12thousand allowance for credit loss on the note.
| | F-14 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**NOTE3 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 | |
Year Ended December 31, | | |
Year Ended December 31, | | |
Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
2025 | | |
2024 | | |
2025 | | |
2024 | | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
|
ProActive services | |
$ | 13,165 | | |
$ | 19,365 | | |
$ | - | | |
$ | - | | |
$ | 13,165 | | |
$ | 19,365 | | |
|
Premium services | |
| 3,077 | | |
| 4,401 | | |
| - | | |
| - | | |
| 3,077 | | |
| 4,401 | | |
|
Brand protection services | |
| - | | |
| - | | |
| 156 | | |
| 441 | | |
| 156 | | |
| 441 | | |
|
| |
$ | 16,242 | | |
$ | 23,766 | | |
$ | 156 | | |
$ | 441 | | |
$ | 16,398 | | |
$ | 24,207 | | |
**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 within30days 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 year ended December 31, 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 ofDecember 31, 2025, we did not have any capitalized
sales commissions.
For all periods presented, contract liabilities
were not significant.
| | F-15 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
The following table provides information about
contract assets from contracts with customers:
|
Schedule of contract assets | |
| | | |
| | | |
|
| |
Contract Asset | | |
|
| |
December 31, | | |
|
In Thousands | |
2025 | | |
2024 | | |
|
Beginning balance, January 1 | |
$ | 733 | | |
$ | 1,282 | | |
|
Contract assetadditions | |
| 5,841 | | |
| 8,572 | | |
|
Reclassification to accounts receivable, billed to customers | |
| (6,236 | ) | |
| (9,121 | ) | |
|
Ending balance(1) | |
$ | 338 | | |
$ | 733 | | |
______________
|
(1) | Included within "Unbilled revenue" on the accompanying Consolidated Balance Sheets. | |
| | F-16 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**NOTE4 BUSINESS COMBINATION**
****
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 $0.1million on the sale of the business. Through his purchase, Mr. Ryan assumed the remaining
cash balance in the bank accounts of $0.1million and all continuing obligations and liabilities of Trust Codes Global Limited. The
Trust Codes Global business was part of the Authentication segment.
| | F-17 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**NOTE5 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. On
August 26, 2025, FedEx Corporation notified providers, including PeriShip Global, that it would be providing preferred shipping services
internally and that the providers would no longer be approved FedEx preferred shippers effective September 24, 2025. As a result, we made
revisions to our internal forecasts and concluded that in accordance with ASC 350 a triggering event occurred indicating that potential
impairment exists, which required the Company to conduct an interim test of the fair value of the goodwill for the Precision Logistics
segment. We performed a quantitative goodwill impairment test and determined the fair value of our reporting units using a combination
of an income approach and a market approach, employing a guideline public company approach. The results of our goodwill impairment test
indicated that the carrying value of the Precision Logistics reporting unit exceeded its estimated fair value. As a result, the Company
recorded a goodwill impairment charge of $1,062 thousand during the year ended December 31, 2025, within goodwill and intangible asset
impairment on the consolidated statement of operations. We will continue to monitor our goodwill and intangible assets for impairment
and conduct formal tests when impairment indicators are present.
Each of our two reportable segments represents
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 theyear endedDecember 31, 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 | |
| | | |
| | | |
| | | |
|
Goodwill impairment charge | |
| - | | |
| (1,062 | ) | |
| (1,062 | ) | |
|
Net book value at | |
| | | |
| | | |
| | | |
|
December 31, 2025 | |
$ | - | | |
$ | 2,926 | | |
$ | 2,926 | | |
| | F-18 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
*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.
ASC Topic 360-10,*Impairment or
disposal of long-lived assets*(ASC Topic 360), providesguidanceonaccountingfortheimpairmentanddisposaloflong-lived
assets, covering both tangible and intangible finite-lived assets. The standard ensures that financial statements reflect the economic
reality of assets by properly accounting for declines in value or disposals. Under ASC Topic 360, an entity must perform an analysis to
determine whether it is more likely than not that the fair value of a long lived asset is less than its carrying amount based on estimates
of future cash flows.
Determining the fair value of long-lived assets
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. Our fair value estimates are based on assumptions that 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 long lived asset impairment tests are based on an ongoing assessment of events and circumstances that would indicate a possible
impairment.
On August 26, 2025, FedEx Corporation notified
providers, including PeriShip Global, that it would be providing preferred shipping services internally and that the providers would no
longer be approved FedEx preferred shippers effective September 24, 2025. As a result, we made revisions to our internal forecasts that
resulted in an interim triggering event for the year ended December 31, 2025, indicating the carrying value of our long-lived assets including
internally used software, deferred implementation, trademarks, customer relationships, and non-compete and developed technology may not
be recoverable. The analysis indicated that certain intangible assets were impaired. The Company further concluded during the year ended
December 31, 2025 the carrying value of the long-lived assets exceeded its estimated fair values, which resulted in an impairment charge.
We recorded an intangible asset impairment charge of $2,788 thousand during the year ended December 31, 2025, within goodwill and intangible
asset impairment on the consolidated statement of operations.
Intangible assets with finite lives are subject
to amortization over their estimated useful lives. The primary assets included in this category and their respective balances were as
follows (in thousands):
|
Schedule of intangible assets subject to amortization | |
| | | |
| | | |
| | | |
| | | |
|
December 31, 2025 | |
Gross Carrying Amount | | |
Accumulated Amortization | | |
Net Carrying Amount | | |
Weighted Average Remaining Useful Life (Years) | | |
|
Patents and Trademarks | |
$ | 699 | | |
$ | (18 | ) | |
$ | 681 | | |
| 9 | | |
|
Developed Technology | |
| 795 | | |
| (78 | ) | |
| 717 | | |
| 2 | | |
|
Internally Used Software | |
| 979 | | |
| (32 | ) | |
| 947 | | |
| 5 | | |
|
Total Intangible Assets | |
$ | 2,473 | | |
$ | (128 | ) | |
$ | 2,345 | | |
| | | |
|
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 | | |
| | | |
Amortization expense for intangible assets was
$946 thousand and $1,097 thousand for the years ended December 31, 2025, and December 31, 2024, respectively. During the years ended December
31, 2025, and 2024, the Company impaired certain assets by $2,788 thousand and $964 thousand, respectively, to bring the gross carrying
amount related to these assets to zero as a result of the impairment analysis of long-lived assets under ASC Topic 360.
****
| | F-19 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
*Patents and Trademarks*
As of December 31, 2025, our current patent and
trademark portfolios consist of sixgranted U.S. patents and one pending foreign patent application and several foreign trademarks.
The Company abandoned four patents during the year ended December 31, 2025.
The Company expects to record amortization expense
of intangible assets over the next 5 years and thereafter as follows (in thousands):
|
Schedule of finite-lived intangible assets, future amortization expense | | |
| | | |
|
Fiscal Year ending December 31, | | |
| | |
|
2026 | | |
$ | 513 | | |
|
2027 | | |
| 513 | | |
|
2028 | | |
| 297 | | |
|
2029 | | |
| 202 | | |
|
2030 | | |
| 202 | | |
|
Thereafter | | |
| 618 | | |
|
Total | | |
$ | 2,345 | | |
As of December 31, 2025, our intangible assets
with definite lives had a weighted average remaining useful life of 3 years. We have no amortizable intangible assets with indefinite
useful lives.
| | F-20 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**NOTE 6 INCOME TAXES**
The reconciliation of income tax expense computed
at the U.S. federal statutory rate to the income tax provision for the years ended December 31, 2025, and 2024 is as follows *(in thousands)*:
|
Schedule of income tax provision | |
| | | |
| | | |
|
US | |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Loss before income taxes | |
| | | |
| | | |
|
Domestic | |
$ | (4,905 | ) | |
$ | (4,602 | ) | |
|
Foreign | |
| - | | |
| 721 | | |
|
Total loss before income taxes | |
$ | (4,905 | ) | |
$ | (3,881 | ) | |
|
| |
| | | |
| | | |
|
Income tax expense (benefit): | |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Current: | |
| | |
| | |
|
Federal | |
$ | (181 | ) | |
$ | (562 | ) | |
|
State and local | |
| (16 | ) | |
| (114 | ) | |
|
Foreign | |
| - | | |
| - | | |
|
Total current | |
$ | (197 | ) | |
$ | (676 | ) | |
|
| |
| | | |
| | | |
|
Deferred: | |
| | | |
| | | |
|
Federal | |
$ | (847 | ) | |
$ | (413 | ) | |
|
State and local | |
| (76 | ) | |
| (84 | ) | |
|
Foreign | |
| - | | |
| (19 | ) | |
|
Total deferred | |
$ | (923 | ) | |
$ | (516 | ) | |
|
| |
| | | |
| | | |
|
Total income tax expense (benefit) | |
$ | (1,120 | ) | |
$ | (1,192 | ) | |
Beginning in2025annual reporting,
the Companyadopted ASU2023-09prospectively. See Note1- Organization and Summary of Significant Accounting
Policies for additional details on ASU2023-09.A reconciliation of the U.S. federal statutory income tax rate to our effective
tax rate for the yearendingDecember 31, 2025 and December 31, 2024is as follows (in thousands):
|
Schedule of reconciliation of federal statutory tax rate | |
| | | |
| | | |
| | | |
| | | |
|
| |
For the Year Ended December 31, 2025 | | |
For the Year Ended December 31, 2024 | | |
|
| |
| Tax Effect USD | | |
| Effective Tax Rate | | |
| Tax Effect USD | | |
| Effective Tax Rate | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Taxes under statutory US tax rates | |
$ | (1,030 | ) | |
| 21 | % | |
$ | (815 | ) | |
| 21 | % | |
|
Increase (decrease) in taxes resulting from: | |
| | | |
| | | |
| | | |
| | | |
|
Foreign taxes and rate differential | |
| - | | |
| - | | |
| 7 | | |
| - | | |
|
Increase (decrease) in valuation allowance | |
| 534 | | |
| (11 | %) | |
| 696 | | |
| (18 | %) | |
|
Permanent Differences | |
| 371 | | |
| (8 | %) | |
| 284 | | |
| (7 | %) | |
|
Change in State tax rate | |
| 217 | | |
| (4 | %) | |
| 25 | | |
| (1 | %) | |
|
State & local taxes net of federal benefit | |
| (92 | ) | |
| 2 | % | |
| (197 | ) | |
| 5 | % | |
|
Income tax expense | |
$ | - | | |
| - | | |
$ | - | | |
| - | | |
| | F-21 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
The increase in the valuation allowance during
the years ended December 31, 2025 and December 31, 2024 was due primarily to the increase in our net operating losses which may not be
utilized in the future.
Cash paid for income taxes, net of refunds received,
by jurisdiction for the years endedDecember 31, 2025are as follows (in thousands):
|
Schedule of paid for income taxes | |
| | | |
|
| |
Year Ended December 31, 2025 | | |
|
Federal | |
- | | |
|
State: | |
| | |
|
NYS | |
$ | 6.8 | | |
|
TN | |
| 3.8 | | |
|
TX | |
| 11.1 | | |
|
Other | |
| 2.4 | | |
|
Cash paid for income taxes, net of refunds received | |
$ | 24.1 | | |
Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income
tax purposes. Significant components of the Company's deferred tax assets and liabilities consist of the following (in thousands):
|
Schedule of deferred tax assets and liabilities | |
| | | |
| | | |
|
TAX ASSETS AND LIABILITIES | |
Years Ended December 31, | | |
|
Assets: | |
2025 | | |
2024 | | |
|
Net operating loss carryforwards | |
$ | 6,812 | | |
$ | 6,646 | | |
|
Restricted stock (RSAs, RSUs) | |
| 581 | | |
| 819 | | |
|
Stock options | |
| - | | |
| 159 | | |
|
Depreciation | |
| 75 | | |
| (22 | ) | |
|
Intangibles | |
| 697 | | |
| 93 | | |
|
Acquisition transaction costs | |
| 80 | | |
| 95 | | |
|
Capitalized research and development | |
| 141 | | |
| (18 | ) | |
|
Unrealized gain on investment | |
| 1 | | |
| 2 | | |
|
Bad debt | |
| 2 | | |
| 18 | | |
|
Capital loss limitation and cash flow used | |
| 840 | | |
| 930 | | |
|
Rents | |
| - | | |
| 3 | | |
|
Impairments | |
| - | | |
| 25 | | |
|
FV loss on equity investment | |
| (3 | ) | |
| (3 | ) | |
|
Accrued bonus compensation | |
| 55 | | |
| - | | |
|
Gross Deferred Tax Assets | |
| 9,281 | | |
| 8,747 | | |
|
Valuation allowance | |
| (9,281 | ) | |
| (8,747 | ) | |
|
Gross Deferred Tax Assets | |
$ | - | | |
$ | - | | |
|
Liabilities: | |
| | | |
| | | |
|
Intangibles and other deferred tax liabilities | |
| - | | |
| - | | |
|
Net Deferred Tax Assets | |
$ | - | | |
$ | - | | |
In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets may not be realized.
The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which
temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment. Based upon these factors, Management has placed a full valuation allowance
against all deferred tax assets, including net operating loss carryforwards, due to the uncertainty of future profitability.
As of December 31, 2025, the Company has net operating
loss carryforwards of $25.3 million for tax purposes, which, subject to the application of potential limitations, will be available to offset future taxable income. If not used, $6.6 million
of these carryforwards will expire beginning in 2026, and $18.9 million will carryforward indefinitely.
| | F-22 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
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 change 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. Assuming the Merger is consummated in accordance with the terms of the Merger Agreement, these limitations will apply for tax periods following the Merger.
The Company completed the IRC Section 382 analysis,
in 2022, and determined that an ownership change occurred sufficiently to impose additional limitations on the use of NOL carryforwards.
The Company has not completed the IRC Section 382 analysis in 2023, 2024 or 2025. The Merger is expected to result in an ownership change
and, consequently, application of these use limitation rules on the tax attributes of the Company for tax periods following the Merger.
As a result, following the Merger, we may incur larger federal and state income tax liabilities than we would have had we not experienced
an ownership change.
No tax benefit has been reported in the December
31, 2025, financial statements due to the uncertainty surrounding the realizability of the benefit.
**
*Uncertain Tax Positions*
As of December 31, 2025, and 2024 we had no uncertain
tax positions reflected on our balance sheet. The Company files income tax returns in U.S. federal, state and local jurisdictions, and
various non-U.S. jurisdictions, and is subject to audit by tax authorities in those jurisdictions. Tax years 2021 through 2025 remain
open to examination by these tax jurisdictions, and earlier years remain open to examination in certain of these jurisdictions which have
longer statues of limitations. The Companys tax years from 2006 are subject to examination by the United States and state taxing
authorities due to the carryforward of unutilized NOLs.
The Tax Cuts and Jobs Act of 2017 imposes a mandatory
repatriation tax on certain unremitted foreign earnings and provides a 100% deduction to domestic corporations for certain dividends received
from foreign corporations after December 31, 2017. The Company divested of its foreign subsidiary on December 8, 2024, therefore, there
will be no future dividends from the earnings of our foreign subsidiary to result in U.S. federal income taxes.
In accordance with FASB ASC Topic 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 has evaluated its ability to realize some or all of the deferred tax
assets on its balance sheet and has established a valuation allowance of approximately $9.3million at December 31, 2025. The Company
did not utilize any NOL deductions for the year ended December 31, 2025.
The Company applied the "more-likely-than-not"
recognition threshold to all tax positions taken or expected to be taken in a tax return, which resulted in no unrecognized tax benefits
as of December 31, 2025, and December 31, 2024, respectively.
The Companys practice is to recognize interest
and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest and penalties on the balance
sheets and recognized $2 thousand in interest and/or penalties in the Statements of Operations for the year ended December 31, 2025, and
$1 thousand in interest and/or penalties in the Statements of Operations in the fiscal year ended December 31, 2024.
There are no taxes payable as of December 31,
2025, or December 31, 2024.
| | F-23 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**NOTE 7DEBT**
*PNC Facility*
**
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 not in compliance with
all affirmative and restrictive covenants under the PNC Facility at December 31, 2025. On March 26, 2026, we received a waiver
as of December 31, 2025, for certain events of default. On August 8, 2025, the Company extended the line of credit to September 30, 2026.
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 December 31, 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 $1,958thousand, effectively fixing the interest rate on the Companys
outstanding debt at7.602%. 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 December 31, 2024, $450 thousand was held by related parties. As of December 31, 2025, $400 thousand was held by related parties
after a board member 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 year ended December 31, 2025 and December 31, 2024, interest expense related
to the convertible debt was $61 thousand and $88 thousand, respectively. As of January 21, 2025, $350 thousand was converted to common
stock, none of which was related parties. As of December 31, 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.
**NOTE8 CONVERTIBLE PREFERRED
STOCK**
The Company is authorized to issue Series A Convertible
Preferred Stock, par value of $0.001per share (the Series A) and Series B Convertible Preferred Stock, par value of
$0.001per share (the Series B). As of December 31, 2025, and 2024, there werenoshares of Series A outstanding
and0.85of a share of Series B outstanding convertible into144,444shares of common stock. Each share of Series
A and Series B has limited voting rights, is entitled to participate with the common stock on liquidation and holders of Series A and
Series B are subject to beneficial ownership limitations.
| | F-24 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**NOTE9 STOCKHOLDERS EQUITY**
The Company expensed $112 thousand and $388 thousand
related to restricted stock awards for the years ended December 31, 2025, and December 31, 2024, respectively.
The Company expensed $603 thousand and $912 thousand
related to restricted stock units for years ended December 31, 2025, and December 31, 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 September 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.
On November 3, 2025, the Company issued30,882shares
of common stock upon vesting of46,336restricted stock units, net of15,454 shares of common stock withheld for taxes.
During the year ended December 31, 2025, the Company
issued 89,310 shares of common stock upon the separation of a former director, relating to 89,310 shares of restricted stock units that
had previously vested.
On March 31, 2024, the Company issued 30,000 of
restricted common stock, vesting immediately, with a value of $42 thousand, for consulting services. On June 30, 2024, the Company issued
an additional 30,000 of restricted common stock, vesting immediately, with a value of $42 thousand, for consulting services. On September
30, 2024, the Company issued an additional 60,000 of restricted common stock, vesting immediately, with a value of $86 thousand, for consulting
services. On December 31, 2024, the Company issued an additional 60,000 of restricted common stock, vesting immediately, with a value
of $81 thousand, for consulting services.
On November 4, 2024, the Company issued54,843shares
of common stock upon vesting of69,667restricted stock units, net of14,824 shares of common stock withheld for taxes.
During the year ended December 31, 2024, the Company
issued 1,750 shares of common stock upon vesting of restricted stock units, and 38,095 shares of common stock from treasury shares, net
of common stock withheld for taxes.
**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 Companys common stock thereby increasing their
interest in the Companys 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 and $4 thousand for the years ended December
31, 2025 and December 31, 2024, respectively. During years ended December 31, 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.
****
| | F-25 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**Shares Held in Treasury**
As of December 31, 2025, and December 31, 2024,
the Company had 481,448 and 290,467 shares, respectively, held in treasury with a value of approximately $502 thousand and $480 thousand,
respectively.
On February 29, 2024, seven participants exercised
their options under the Companys 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.
| | F-26 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**Shares Repurchase Program**
In December 2023, the Companys 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 Companys common stock through December 31, 2025. The share repurchase
program may be modified, suspended, or discontinued at the discretion of the Board of Directors at any time. During the year ended
December 31, 2025, the Company repurchased 272,177 shares for $221 thousand under the share repurchase program, which expired December
31, 2025.
**NOTE 10 STOCK OPTIONS, RESTRICTED STOCK
AND WARRANTS**
On November 14, 2017, the Executive Committee
of the Companys 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 of Directors or the Boards Compensation
Committee.
On August 10, 2020, the Companys Board
of Directors adopted the 2020 Equity Incentive Plan (the 2020 Plan) and on September 30, 2020, the Companys 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 Boards Compensation Committee.
On March 28, 2022, the Companys Board of
Directors adopted the First Amendment to the 2020 Plan and on June 9, 2022, the Companys 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 Companys Board of Directors adopted the Second Amendment
to the 2020 Plan and on June 6, 2023, the Companys 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 Companys Board
of Directors adopted the Third Amendment to the 2020 Plan, which on June 4, 2024, was approved by the Companys stockholders, which
increased the shares authorized for potential issuance under the 2020 Plan to 4,069,100 shares of common stock and extended the term of
the 2020 Plan to June 4, 2034.
The 2020 Plan, as amended, is administered by
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 managements best estimates and involve inherent uncertainties and judgements.
| | F-27 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**Stock Options**
The following table summarizes the activities
for the Companys stock options as of December 31, 2025, and 2024:
|
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, 2023 | | |
| 301,471 | | |
$ | 4.56 | | |
| | | |
| | | |
|
| | |
| | | |
| | | |
| | | |
| | | |
|
Granted | | |
| - | | |
| - | | |
| | | |
| | | |
|
| | |
| | | |
| | | |
| | | |
| | | |
|
Forfeited/Cancelled/Expired | | |
| (80,471 | ) | |
| 7.27 | | |
| | | |
| | | |
|
| | |
| | | |
| | | |
| | | |
| | | |
|
Balance as of December 31, 2024 | | |
| 221,000 | | |
| 3.57 | | |
| 0.4 | | |
| - | | |
|
| | |
| | | |
| | | |
| | | |
| | | |
|
Exercisable as of December 31, 2024 | | |
| 221,000 | | |
$ | 3.57 | | |
| 0.4 | | |
$ | - | | |
|
| | |
| | | |
| | | |
| | | |
| | | |
|
Granted | | |
| - | | |
| - | | |
| | | |
| | | |
|
| | |
| | | |
| | | |
| | | |
| | | |
|
Forfeited/Cancelled/Expired | | |
| (221,000 | ) | |
| 3.57 | | |
| | | |
| | | |
|
| | |
| | | |
| | | |
| | | |
| | | |
|
Balance as of December 31, 2025 | | |
| - | | |
| - | | |
| - | | |
| - | | |
|
| | |
| | | |
| | | |
| | | |
| | | |
|
Exercisable as of December 31, 2025 | | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
|
(1) | The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying
awards and the quoted price of the Companys common stock for options that were in-the-money at each respective period. | |
As of December 31, 2025, the Company has no outstanding stock options.
| | F-28 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
During the year ended December 31, 2025, and 2024, the Company expensed
$0 thousand with respect to options.
As of December 31, 2025, and 2024, 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 December 31, 2025 and 2024:
|
Schedule of unvested options | | |
| | | |
| | | |
|
| | |
| | |
Weighted - | | |
|
| | |
| | |
Average | | |
|
| | |
Number of | | |
Grant | | |
|
| | |
Award Shares | | |
Date Fair Value | | |
|
| | |
| | |
| | |
|
Unvested at December 31, 2023 | | |
| 416,669 | | |
| 1.44 | | |
|
| | |
| | | |
| | | |
|
Granted | | |
| 140,000 | | |
| 1.60 | | |
|
| | |
| | | |
| | | |
|
Vested | | |
| (416,669 | ) | |
| 1.44 | | |
|
| | |
| | | |
| | | |
|
Balance at December 31, 2024 | | |
| 140,000 | | |
| 1.60 | | |
|
| | |
| | | |
| | | |
|
Granted | | |
| 70,000 | | |
| 1.04 | | |
|
| | |
| | | |
| | | |
|
Vested | | |
| (140,000 | ) | |
| 1.60 | | |
|
| | |
| | | |
| | | |
|
Balance at December 31, 2025 | | |
| 70,000 | | |
$ | 1.04 | | |
As of December 31, 2025, and 2024, total unrecognized
share-based compensation cost related to unvested restricted stock awards was $56 thousand and $96 thousand respectively, which is expected
to be recognized over a weighted-average period of 0.8 years as of December 31, 2025.
| | F-29 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
The following table summarizes the unvested restricted
stock units as of December 31, 2025 and 2024:
|
Schedule of unvested restricted stock awards | | |
| | | |
| | | |
|
| | |
Unvested Restricted Stock Units | | |
|
| | |
| | | |
| Weighted - | | |
|
| | |
| | | |
| Average | | |
|
| | |
| Number of | | |
| Grant | | |
|
| | |
| Unit Shares | | |
| Date Fair Value | | |
|
Unvested at December 31, 2023 | | |
| 371,253 | | |
| 1.32 | | |
|
| | |
| | | |
| | | |
|
Granted | | |
| 88,011 | | |
| 1.46 | | |
|
| | |
| | | |
| | | |
|
Vested | | |
| (160,194 | ) | |
| 1.31 | | |
|
| | |
| | | |
| | | |
|
Forfeit/Cancelled | | |
| (25,334 | ) | |
| 1.23 | | |
|
| | |
| | | |
| | | |
|
Unvested at December 31, 2024 | | |
| 273,736 | | |
| 1.38 | | |
|
| | |
| | | |
| | | |
|
Granted | | |
| 180,773 | | |
| 1.34 | | |
|
| | |
| | | |
| | | |
|
Vested | | |
| (201,374 | ) | |
| 1.39 | | |
|
| | |
| | | |
| | | |
|
Forfeited/Cancelled | | |
| (20,334 | ) | |
| 1.57 | | |
|
| | |
| | | |
| | | |
|
Balance at December 31, 2025 | | |
| 232,801 | | |
$ | 1.32 | | |
As of December 31, 2025, and 2024, total unrecognized
share-based compensation cost related to unvested restricted stock units was $83 thousand and $120 thousand respectively, which is expected
to be recognized over a weighted-average period of 0.5 years as of December 31, 2025.
For RSUs 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 RSUs 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.
The following table summarizes the unvested performance
restricted stock units as of December 31, 2025 and 2024:
|
Schedule of unvested restricted stock units | | |
| | | |
| | | |
|
| | |
Unvested Performance Restricted Stock Units | | |
|
| | |
| | | |
| Weighted - | | |
|
| | |
| | | |
| Average | | |
|
| | |
| Number of | | |
| Grant | | |
|
| | |
| Unit Shares | | |
| Date Fair Value | | |
|
Unvested at December 31, 2023 | | |
| 1,438,760 | | |
| 1.51 | | |
|
| | |
| | | |
| | | |
|
Granted | | |
| 555,000 | | |
| 1.08 | | |
|
| | |
| | | |
| | | |
|
Vested | | |
| - | | |
| - | | |
|
| | |
| | | |
| | | |
|
Forfeited/Cancelled | | |
| (387,100 | ) | |
| 1.47 | | |
|
| | |
| | | |
| | | |
|
Balance at December 31, 2024 | | |
| 1,606,660 | | |
| 1.37 | | |
|
| | |
| | | |
| | | |
|
Granted | | |
| - | | |
| - | | |
|
| | |
| | | |
| | | |
|
Vested | | |
| - | | |
| - | | |
|
| | |
| | | |
| | | |
|
Forfeited/Cancelled | | |
| (285,069 | ) | |
| 2.40 | | |
|
| | |
| | | |
| | | |
|
Balance at December 31, 2025 | | |
| 1,321,591 | | |
$ | 1.15 | | |
As of December 31, 2025, and December 31, 2024
total unrecognized share-based compensation cost related to unvested restricted stock units was $158 thousand and $577 thousand, respectively,
which is expected to be recognized over a weighted-average period of 0.5 years as of December 31, 2025.
****
| | F-30 | | |
| Table of Contents | |
****
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**Warrants**
The following table summarizes the activities
for the Companys warrants for the year ended December 31, 2025 and 2024:
|
Schedule of warrants outstanding | |
| | | |
| | | |
| | | |
| | | |
|
| |
Warrants Outstanding (Excluding Pre-Funded Warrants) | | |
|
| |
| Number of Warrant Shares | | |
| Weighted- Average Exercise Price | | |
| Weighted - Average Remaining Contractual Term in years) | | |
| Aggregate Intrinsic Value (in thousands)(1) | | |
|
Balance at December 31, 2023 | |
| 4,628,586 | | |
$ | 4.13 | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Granted | |
| - | | |
| - | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Expired | |
| - | | |
| - | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Balance at December 31, 2024 | |
| 4,628,586 | | |
| 4.13 | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Granted | |
| 1,461,896 | | |
| 4.00 | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Exercised | |
| (1,461,896 | ) | |
| 3.22 | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Expired | |
| (3,073,379 | ) | |
| 4.60 | | |
| | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Balance at December 31, 2025 | |
| 1,555,207 | | |
| 3.95 | | |
| 4.4 | | |
| | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Exercisable at December 31, 2025 | |
| 1,555,207 | | |
| 3.95 | | |
| 4.4 | | |
$ | - | | |
|
(1) | The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying
warrants and the closing stock price of $0.60 for our common stock on December 31, 2025. | |
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 investors 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 was 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 Companys 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 | |
| | | |
|
| |
January 13, 2025 | | |
|
Risk free interest rate | |
| 4.34 | % | |
|
Expected life | |
| 2.75 years | | |
|
Expected volatility | |
| 171 | % | |
|
Expected dividend | |
| - | | |
| | F-31 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**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 (ATM Program).
Roth acts as the Companys sales agent and is entitled to a 3.0% commission on gross proceeds from sales under the program.
During the year ended December 31, 2025, and through the date of this
filing, the Company sold an aggregate of 628,432 shares of its common stock pursuant to the ATM program. The Company provided notice on
February 11, 2026 to Roth of its election to terminate the ATM Program, which by the terms of the At-The-Market Sales Agreement became
effective on February 16, 2026, in connection with the Board of Directors approval of the Merger Agreement with Open World Ltd.
In connection with the ATM Program, the Company incurred direct legal
and audit fees totaling $209 thousand. The costs were recorded as deferred offering costs within other current assets to be reclassified
to additional paid-in capital on a pro-rata basis as shares are issued. For the year ended December 31, 2025, we reclassified $8 thousand
to additional paid-in capital on a pro-rata basis as shares were issued. Upon terminating the program on February 16, 2026, we expensed
$201 thousand remaining deferred costs to general and administrative expenses.
****
| | F-32 | | |
| Table of Contents | |
****
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**NOTE 11LOSS PER SHARE**
Basic loss per share (EPS) is computed by dividing
net loss by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution of
common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into
common stock.
The dilutive common stock equivalent shares consist
of preferred stock, stock options, warrants, restricted stock awards, and restricted stock units computed under the treasury stock method,
using the average market price during the period.
The following table sets forth the computation
of basic loss per share (in thousands, except share and per share data):
|
Schedule of basic and diluted earnings/(loss) per share | |
| | | |
| | | |
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Numerator: | |
| | |
| | |
|
Net loss: | |
$ | (4,905 | ) | |
$ | (3,824 | ) | |
|
Denominator: | |
| | | |
| | | |
|
Weighted average shares of common stock basic | |
| 12,619,512 | | |
| 10,402,508 | | |
|
Loss per share: | |
| | | |
| | | |
|
Basic | |
$ | (0.39 | ) | |
$ | (0.37 | ) | |
|
Diluted | |
$ | (0.39 | ) | |
$ | (0.37 | ) | |
| | F-33 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
The following table represents the weighted average
number of anti-dilutive instruments excluded from the computation of diluted loss per share:
|
Schedule of anti-dilutive earnings per share | |
| | | |
| | | |
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Anti-dilutive instruments excluded from computation of diluted net loss per share: | |
| | |
| | |
|
| |
| | |
| | |
|
Preferred Stock | |
| 144,444 | | |
| 144,444 | | |
|
| |
| | | |
| | | |
|
Stock Options | |
| - | | |
| 221,000 | | |
|
| |
| | | |
| | | |
|
Warrants | |
| 1,555,207 | | |
| 4,628,586 | | |
|
| |
| | | |
| | | |
|
Stock purchase plan | |
| - | | |
| - | | |
|
| |
| | | |
| | | |
|
Convertible note | |
| 652,174 | | |
| 956,527 | | |
|
| |
| | | |
| | | |
|
Restricted Stock Units and Restricted Stock Awards | |
| 1,624,392 | | |
| 2,020,396 | | |
**NOTE 12 EMPLOYEE BENEFIT PLAN**
We offer the VRME Retirement Savings Plan (the
Plan) to our employees located in the United States of America. Eligible employees can elect to participate in the Plan,
as soon as administratively feasible after enrollment. The Plan permits pre-tax contributions to the Plan by participants pursuant to
Section 401(k) of the Internal Revenue Code (IRC). The Company makes the matching contributions at our discretion. In the years ended
December 31, 2025, and December 31, 2024, the Company contributed a value of approximately $148 thousand and $172 thousand respectively
and is recognized as compensation expense in the Consolidated Statements of Operations for matching contributions to the Plan.
**NOTE 13 LEASES**
The Company accounts for its leases under ASC
Topic 842, Leases. The Company determines at its inception whether an arrangement that provides us control over the use of an asset is
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.
| | F-34 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
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.
During 2025, we maintained operating leases for
office facilities. We do not have any finance leases. In January 2026, we entered into a lease amendment to terminate a facility lease
effective February 15, 2026 and adjusted our right-of-use assets and liabilities.
Lease expense is included in 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 | |
| | | |
| | | |
|
| |
Years ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Operating lease cost | |
$ | 65 | | |
$ | 127 | | |
|
Short-term lease cost | |
| 14 | | |
| 18 | | |
|
Total lease costs | |
$ | 79 | | |
$ | 145 | | |
Supplemental information related to leases was
as follows (dollars in thousands):
|
Schedule of supplemental information related to leases | |
| | | |
| | | |
|
| |
December 31, 2025 | | |
December 31, 2024 | | |
|
Operating Lease right-of-use asset | |
$ | - | | |
$ | 236 | | |
|
| |
| | | |
| | | |
|
Current portion of operating lease liabilities | |
| - | | |
| 108 | | |
|
Non-current portion of operating lease liabilities | |
| - | | |
| 139 | | |
|
Total operating lease liabilities | |
$ | - | | |
$ | 247 | | |
|
| |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Cash paid for amounts included in the measurement of operating lease liabilities | |
$ | 65 | | |
$ | 126 | | |
|
| |
| | | |
| | | |
|
Right-of-use assets obtained in exchange for operating lease liabilities | |
$ | - | | |
$ | - | | |
|
| |
| | | |
| | | |
|
Weighted-average remaining lease term for operating leases (years) | |
| - | | |
| 2.3 | | |
|
Weighted average discount rate for operating leases | |
| - | | |
| 6.0 | % | |
| | F-35 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**NOTE 14 CONCENTRATIONS**
During the year ended December 31, 2025, one customer
represented 13% of revenues and one customer represented 16% of revenues for the year ended December 31, 2024.
As of December 31, 2025, two customers made up
50% of accounts receivable. As of December 31, 2024, two customers accounted for 36% of total accounts receivable.
****
During the year ended December 31, 2025, and December
31, 2024, one vendor accounted for 89% and 99% of transportation costs, in our Precision Logistics segment, respectively.
**NOTE 15 SEGMENT REPORTING**
****
As of December 31, 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 Companys 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).
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 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| |
Year Ended | | |
Year Ended | | |
|
| |
December 31, | | |
December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
Precision Logistics | | |
Authentication | | |
Consolidated | | |
Precision Logistics | | |
Authentication | | |
Consolidated | | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
|
NET REVENUE | |
$ | 16,242 | | |
$ | 156 | | |
$ | 16,398 | | |
$ | 23,766 | | |
$ | 441 | | |
$ | 24,207 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
COST OF REVENUE | |
| 10,022 | | |
| 55 | | |
| 10,077 | | |
| 15,498 | | |
| 47 | | |
| 15,545 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
GROSS PROFIT | |
| 6,220 | | |
| 101 | | |
| 6,321 | | |
| 8,268 | | |
| 394 | | |
| 8,662 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
OPERATING EXPENSES | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Management and technology | |
| 1,937 | | |
| 52 | | |
| 1,989 | | |
| 2,883 | | |
| 993 | | |
| 3,876 | | |
|
Research and development | |
| - | | |
| 20 | | |
| 20 | | |
| - | | |
| 70 | | |
| 70 | | |
|
Sales and marketing | |
| 879 | | |
| 8 | | |
| 887 | | |
| 944 | | |
| 459 | | |
| 1,403 | | |
|
Other Segment Items | |
| 1,329 | | |
| (100 | ) | |
| 1,229 | | |
| 1,359 | | |
| 177 | | |
| 1,536 | | |
|
Goodwill and Intangible asset impairment | |
| 3,850 | | |
| - | | |
| 3,850 | | |
| 49 | | |
| 2,266 | | |
| 2,315 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Total Segment expenses | |
| 7,995 | | |
| (20 | ) | |
| 7,975 | | |
| 5,235 | | |
| 3,965 | | |
| 9,200 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Segment (Expense) Income | |
$ | (1,775 | ) | |
$ | 121 | | |
$ | (1,654 | ) | |
$ | 3,033 | | |
$ | (3,571 | ) | |
$ | (538 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
General and Administrative | |
| | | |
| | | |
| (3,416 | ) | |
| | | |
| | | |
| (3,852 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Other Income | |
| | | |
| | | |
| 165 | | |
| | | |
| | | |
| 566 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
NET LOSS | |
| | | |
| | | |
$ | (4,905 | ) | |
| | | |
| | | |
$ | (3,824 | ) | |
| | F-36 | | |
| Table of Contents | |
VerifyMe, Inc.
Notes to the Consolidated Financial Statements
**Additional information relating to our business
segments is as follows (in thousands):**
****
**Identifiable assets:**
****
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
Precision Logistics | |
$ | 10,109 | | |
$ | 15,795 | | |
|
Authentication | |
| 2,909 | | |
| 272 | | |
|
Total Assets | |
$ | 13,018 | | |
$ | 16,067 | | |
**NOTE 16 SUBSEQUENT EVENTS**
****
On March 26, 2026, we received a waiver as of
December 31, 2025, for certain events of default under the PNC Facility.
Effective February 15, 2026, the lease held by
our subsidiary PeriShip Global in Connecticut used in connection with our Precision Logistics segment was terminated pursuant to a lease
termination agreement entered into in January 2026. See Item 2 Properties in this Form 10-K of VerifyMe, Inc. for the year
ended December 31, 2025 (the 2025 Form 10-K).
On February 11, 2026, we entered into an Agreement
and Plan of Merger (the Merger Agreement) with VRME Subsidiary Corp., a Nevada corporation, and our wholly owned subsidiary
(the Merger Sub) and Open World Ltd (Open World) pursuant to letter agreement previously entered into on January
2, 2026. Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, Merger Sub will merge with
and into Open World, Merger Sub will cease to exist and Open World will become our wholly-owned subsidiary (the Merger).
Also on February 11, 2026, and in connection with
the Merger Agreement, we entered into stockholder support agreements whereby certain stockholder of the Company representing approximately
14% or more of the voting power in the aggregate of our common stock, including our directors and officers have agreed to vote their shares,
and any shares obtained from the date of the agreement, in favor of the issuance of the Companys common stock in connection with
the Merger at a stockholders meeting.
Also on February 11, 2026, and in connection with
the Merger Agreement, we entered into an Amended and Restated Employment Agreement with Adam Stedham and an Employment Agreement with
Jennifer Cola, each agreement effective as of the Effective Time of the Merger.
Also on February 11, 2026, and in connection with
the Merger Agreement, our Board of Directors approved a severance period for Ms. Cola effective immediately and which will expire upon
the Effective Time of the Merger (the Severance Period), whereby Ms. Cola will receive a continuation of her base salary
and benefits for a period of six months if she is terminated without cause during the Severance Period.
Also on February 11, 2026, and in connection with
the Merger Agreement, we sent notice to Roth of our election to terminate the ATM Program, which by the terms of the At-The-Market Sales
Agreement became effective on February 16, 2026.
See Item 1 Business - Recent Developments
in the 2025 Form 10-K for additional information on the Merger Agreement, proposed Merger, consideration to be issued in connection with
the Merger, the stockholder support agreements, the employment agreements with Mr. Stedham and Ms. Cola, the Severance Period granted
to Ms. Cola, the termination of the ATM Program, and matters ancillary thereto.
On January 2, 2026, the Company issued 47,464
shares of common stock, of which 19,271 were issued from treasury, upon vesting of 70,773 restricted stock units, net of 23,309 shares
withheld for taxes related to stock grants on January 1, 2025.
F-37