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 UNITED STATES

 SECURITIES AND EXCHANGE
COMMISSION

 WASHINGTON, D.C. 20549

 FORM 10-K

 (Mark One)

 x

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended December 31, 2023

 OR

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 For the transition period from to

 Commission File Number 001-39332

 VERIFYME, INC.

 (Exact Name of Registrant as Specified in Its
Charter)

 Nevada

 23-3023677

 (State or Other Jurisdiction of

 Incorporation or Organization)

 (I.R.S. Employer

 Identification No.)

 801 International Parkway, Fifth Floor

 Lake Mary, FL

 32746

 (Address of Principal Executive Offices)

 (Zip Code)

 (585) 736-9400

 (Registrant's Telephone Number, Including Area Code)

 Securities registered pursuant to Section 12(b)
of the Act:

 Title of each class

 Trading

Symbol(s)

 Name of each exchange on which registered

 Common Stock, par value $0.001 per share

 VRME

 The Nasdaq Capital Market

 Warrants to Purchase Common Stock

 VRMEW

 The Nasdaq Capital Market

 Securities registered pursuant to Section 12(g)
of the Act: None

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
 No x

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No x

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes x
No

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes x No

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or, an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer",
"smaller reporting company," and "emerging growth company," in Rule 12b-2 of the Exchange Act.

 Large accelerated filer

 Accelerated filer

 Non-accelerated filer x

 Smaller reporting company x

 Emerging growth company

 If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

by check mark whether the registrant has filed a report on and attestation to its management's 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.

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 registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b).

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes x No

 The aggregate market
value of the voting stock held by non-affiliates of the registrant was $ 11,984,934 as of June 30, 2023. Shares of common stock
held by executive officers and directors of the registrant have been excluded from this computation in that such persons may be deemed
to be affiliates of the registrant. As of June 30, 2023, there were no persons known to the registrant to own 5% or more of the outstanding
common stock, and therefore no other persons have been deemed affiliates of the registrant. This determination of affiliate status is
not a conclusive determination for other purposes.

 The
registrant had 10,144,853 shares of common stock outstanding as of the close of business on March 18, 2024.

 DOCUMENTS INCORPORATED BY REFERENCE

 Portions of VerifyMe, Inc.'s definitive
proxy statement to be filed with the Securities and Exchange Commission in connection with its 2024 annual meeting of stockholders are
incorporated by reference into Part III Items 10, 11, 12, 13 and 14 of this Annual Report on Form 10-K.

 Page

 Item 1.

 Business

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal Proceedings

 Item 4.

 Mine Safety Disclosures

 Item 5.

 Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities

 Item 6.

 [Reserved]

 Item 7.

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A.

 Quantitative and Qualitative Disclosures About Market Risk

 Item 8.

 Financial Statements and Supplementary Data

 Item 9.

 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls and Procedures

 Item 9B.

 Other Information

 Item 9C.

 Disclosure Regarding Foreign Jurisdictions that prevent Inspection

 Item 10.

 Directors, Executive Officers and Corporate Governance

 Item 11.

 Executive Compensation

 Item 12.

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item 13.

 Certain Relationships and Related Transactions, and Director Independence

 Item 14.

 Principal Accountant Fees and Services

 Item 15.

 Exhibits and Financial Statement Schedules

 Item 16.

 Form 10-K Summary

 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," "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.

 ITEM 1. BUSINESS.

 Overview

 VerifyMe, Inc. ("VerifyMe") together
with its subsidiaries, including PeriShip Global, LLC ("PeriShip Global") and Trust Codes Global Limited ("Trust Codes
Global"), (together the "Company," "we," "us," or "our"), is a traceability and
customer support services provider using specialized software and process technology. The company operates a Precision Logistics Segment
and an Authentication Segment to provide specialized logistics for time-and-temperature sensitive products, as well as item level
traceability, anti-diversion and anti-counterfeit protection, brand protection and enhancement technology solutions. Through our Precision
Logistics segment, we provide a value-added service for sensitive parcel management driven by a proprietary software platform that provides
predictive analytics from key metrics such as pre-shipment weather analysis, flight-tracking, sort volumes, and traffic, delivered to
customers via a secure portal. The portal provides real-time visibility into shipment transit and last-mile events which is supported
by a service center. Through our Authentication segment our technologies enable brand owners to gather business intelligence through the
supply chain, cross-sell products, detect counterfeit activities, monitor product diversion, and build brand loyalty utilizing our unique
dynamic codes which are read by consumers with their smart phones. Further information regarding our business segments is discussed below:

 Precision Logistics: The Precision Logistics
(formerly PeriShip Global Solutions) segment specializes in predictive analytics for optimizing delivery of time and temperature sensitive
perishable products. We manage complex industry-specific shipping logistic processes that require critical time, temperature control and
handling to prevent spoilage and extreme delivery times and brand impairment. Utilizing predictive analytics from multiple data sources
including flight-tracking, weather, traffic, major carrier feeds, and time of day data, we provide our clients an end-to-end vertical
approach for their most critical service delivery needs. Using our proprietary IT platform, we provide real-time information and analysis
to mitigate supply chain flow interruption, as well as delivering last-mile resolution for key markets, including the perishable healthcare
and food industries.

 Through our proprietary PeriTrack customer
dashboard, we provide an integrated tool that gives our customers an in-depth look at their shipping activities and allows them access
to critical information in support of the specific needs of the supply chain stakeholders. We offer post-delivery services such as customized
reporting for trend analysis, system performance reports, power outage maps, and other tailored reports.

 Precision Logistics generates revenue from two
business service models.

 ProActive Service – clients pay us directly for carrier service coupled with our proactive
logistics assistance.

 Premium Service – clients pay us directly or through our carrier partner for our complete
white-glove shipping monitoring and predictive analytics service. This service includes customer web portal access, weather monitoring,
temperature control, full service center support and last mile resolution.

 Products: The Precision Logistics segment
includes the following bundled services as part of our service offerings to our customers:

 PeriTrack: Our proprietary PeriTrack customer dashboard was developed utilizing our
extensive logistics operational knowledge. This integrated web portal tool gives our customers an in-depth look at their shipping activities
based on real-time data. The PeriTrack dashboard was designed to provide critical information in support of the specific needs of
supply chain stakeholders and gives our customer resolution specialists a 360 view of shipping activity. PeriTrack features
tools tailored for shippers of perishable goods, which includes the In-Transit Shipment Tracker. This tool provides details on the unique
shipper's in-transit shipments, with the ability to select and analyze data on individual shipments.

 Service Center: We have assembled a team of customer resolution specialists based in the U.S. This
service team resolves shipping problems on behalf of our customers. The service center acts as a help desk and monitors shipping to delivery
for our customers.

 Pre-Transit Service: We help clients prepare their products for shipments by advising clients on
packaging requirements for various types of perishable products. Each product type requires its own particular packaging to protect it
during shipment, and we utilize our extensive knowledge and research to provide our customers with packaging recommendations to meet their
unique needs.

 Post-Delivery: We provide customized reporting for trend analysis, system performance reports,
power outage maps, and many other reports to help our customers improve their processes and customer service outcomes.

 Weather/Traffic Service: We have full-time meteorologists on staff to monitor weather. A package
may experience a variety of weather conditions between the origin and destination, and our team actively monitors these conditions to
maximize the number of timely and safely transmitted shipments. Similarly, traffic and construction also create unpredictable delays which
our team works diligently to mitigate. If delays or other issues occur, we inform clients and work with them to proactively resolve such
shipment issues.

 Authentication: The Authentication (formerly
VerifyMe Solutions) segment specializes in traceability to connect brands with consumers through their product. This is critical in the
current landscape of increased regulations, as well as increased counterfeit activity and product diversion. The ability to detect fraud
or abnormal behavior while tracing an item's journey from production through to the consumer's hands provides consumers and
brands the assurance they require. VerifyMe has custom software, patented technologies, and a cloud environment that combines machine
learning and data science to meet the needs of consumers and brands. In addition, the personalized consumer experience with the brand
creates a connection that increases brand perception and loyalty.

 Products: We have a custom suite of products
that offer clients traceability and brand solutions. These products are combined with "software as a service" or "SaaS"
which is stored in the cloud and accessed through the internet.

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

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

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

 Opportunities

 Precision Logistics: Traditionally,
most shipping businesses utilize the carrier's data platform for tracking which generally informs the shipping enterprise, and their
customers, when a package is in transit, when a package has been delivered, and some level of detail of the path which a package traveled.
We believe taking the data feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor
of our service center gives us a competitive advantage against other third-party platforms that solely rely on the carrier's data
feeds. We utilize a variety of input sources beyond the carrier's data feed. Our proprietary "Predictive Analytics"
technology is fed real-time meteorology data, traffic and road construction data, and power grid information to help predict issues before
they happen. If an alert is created the shipper and our service center will work to address the issue and save the perishable product
from spoiling, saving the shipper significant costs and reducing the need to replace products that are no longer viable. We have meteorologists
on staff that track world-wide weather patterns to address predicted issues before they happen. We believe the company has two significant
areas of opportunity. First, our services are specifically designed to address the needs of small and medium size agriculture, food and
beverage companies. Second, the pharmaceutical and healthcare industries represent significant opportunities due to the enhanced tracking
and customer service associated with distribution of these products. We are focusing our sales emphasis on those industries. In addition,
we believe that combining our authentication solutions into the product offering for Precision Logistics clientele, gives our Precision
Logistics segment a competitive advantage to generate revenue by enhancing clients' ability to grow revenue, gain business intelligence
and build brand loyalty.

 The U.S. logistics industry is facing an economic
slowdown. We believe this represents an opportunity since major global carriers are cutting internal staff. These carriers are looking
for lower cost alternatives to service their customers as well as partners that can help the carrier increase revenues. To maintain their
credibility in the market, these carriers will need to ensure they meet their customers' demands for time and temperature sensitive
shipments, while maintaining their overheads. We believe outsourcing this function to our Precision Logistics segment provides the ideal
solution for all parties involved.

 Building logistics infrastructure is a capital-intensive
process as the investment is locked in for a considerably long period. Due to the current economic environment, and our cost competitive
offering, we believe companies will opt to outsource their precision logistics services to reduce their operational costs. The outsourcing
of supply chain related and other logistics operations to service providers such as ours allows companies to improve the efficiency of
their businesses by focusing their resources on core competencies.

 Authentication: We believe the products
in our Authentication segment have applications in many areas. Currently, we are aggressively marketing opportunities in the following
areas:

 Agriculture, Food and Beverage – Food safety is becoming more common as supply chains become more
global and as imaging and manufacturing technology become more accessible. Food traceability, sustainability and carbon neutral production
is becoming a significant consideration for brand and governments. We believe our unit level traceability and authentication solutions
can help brands tell their story about sustainability and battle against tainted or substandard foods and beverages.

 Pharmaceuticals/nutraceuticals – We believe counterfeit prescription pharmaceuticals and nutraceuticals
are a growing problem, widely recognized as a public health risk and a serious concern to public health officials, private companies,
and consumers. Counterfeiting can apply to both branded and generic products and counterfeit pharmaceuticals may include products with
the correct ingredients but fake packaging, with the wrong ingredients, without active ingredients or with insufficient active ingredients.
The United States enacted legislation requiring the implementation of a comprehensive system designed to combat counterfeit, diluted or
falsely labelled pharmaceuticals, referred to as serialization or electronic pedigree (e-Pedigree). Our consumer facing visible codes
and unique pigments embedded in the ink of a unique serialized barcode can provide a layered security foundation for a customer solution
in this market. We are seeking to expand our business in this market and believe that as additional pharmaceutical companies seek to comply
with the legislation, our products will provide attractive alternatives to address the need for product identifiers.

 Consumer Products – We believe our technology solutions are particularly suited for the cosmetics,
health and beauty and apparel industries. We give the consumer the ability to test a product's authenticity instantly with a smartphone.
We can protect brand owners from liability litigation, product diversion and lost financial sales with our consumer facing visible codes
and unique ink pigments which can be incorporated in dyes and used by manufacturers in these industries to combat counterfeiting and piracy
of actual physical goods. Our pigments expressed as inks can also be used on packaging, as well as to track products that have been lost
in transit, whether misplaced or stolen.

 In addition,
in each of these markets, our SaaS software allows brand owners and consumers to track the products and will alert the consumer or brand
owner of product diversion with 24/7 monitoring. As each product has a unique code, this allows consumers and brand owners to authenticate
the product in real time and link directly to the brand owner's website for additional product information, discounts, and more.

 Synergies: We believe that Precision Logistics
and Authentication segments have synergistic product centric technology platforms and combined have a compelling technology offering for
brand owners. For example, currently our Precision Logistics segment ships vaccines for major pharmaceutical companies. With the addition
of our Authentication technology, we can add unit level traceability and authentication to protect clients' vaccines from product
diversion and sub-standard counterfeits. In addition, our Authentication segment brand enhancement solutions could give the Precision
Logistics food and beverage clients the ability to gather rich business intelligence and build customer loyalty with engagement functions
like videos, discounts, contests, recipes, etc.

 Partnerships:

 Precision Logistics has a direct partnership with
a major global carrier company. This partnership includes the ability for both companies to white label each partner's services.
In addition, Precision Logistics has data feeds directly from the carrier into our proprietary logistics optimization software which provides
shippers much more detailed information and predictive analytics on their shipment versus a standard shipping code look up which is provided
by the carrier.

 Our Authentication segment has a contract with
HP Indigo, and a strategic partnership with INX, the third largest producer of inks in North America. We believe these partnerships can
be used to enable brand owners to securely prevent counterfeiting, prevent product diversion and authenticate labels, packaging and products
alleviating liability from counterfeit products that harm consumers.

 Current Economic Environment

 In response to market conditions and lower demand
some carriers have implemented strategies to address a potential global recession. In April 2023, the major carrier that PeriShip Global
partners with laid out steps it was taking to slash $4 billion in permanent costs by the end of its 2025 fiscal year in response to these
market conditions and lower demand. In June 2023, the major carrier stated that due to ongoing demand its plans to ground 29 more aircraft
in its fiscal year that started in June 2024. In mid-December 2023, the carrier forecasted a low single digit percentage decline in revenue
year over year for 2024.

 We have seen a softening in demand for some services
related to high-end perishable items and cannabis products which seem to be impacted by reduced discretionary spending by U.S. consumers.
While a recession, whether global or more localized to the U.S., may decrease the demand for our services that are more discretionary
in nature, we believe that the internal cost cutting measures, if implemented by the major global carrier may benefit out-sourced service
providers. We are working with this major global carrier to address their small and medium-sized business clients, which we believe is
an underserved market and presents considerable growth opportunities for our Precision Logistics segment. 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.

 Business Combinations

 On March 1, 2023, we acquired, through Trust Codes
Global, the business and certain assets of Trust Codes, a company specializing in brand protection,
anti-counterfeiting and consumer engagement technology with an expertise in the food and agriculture industry. Trust Codes Global uses
unique QR codes or IoT, coupled with GS1 standards to deliver cloud-based brand protection based on a unique per-item digital identity
to protect brand and product authenticity, increase data visualization of a product through the end-to-end supply chain and creates a
data driven engine to inform and educate consumers of the product. The purchase price was approximately $1.0 million which consisted of
approximately $0.36 million in cash paid at closing, and 353,492 shares of restricted common stock of the Company, representing $0.65
million in stock consideration. In addition, the purchase agreement requires consideration contingent upon the achievement of earnings
targets during a five-year period subsequent to the closing of the acquisition. The earn-out consideration estimated at $1.1 million at
the acquisition date, however the maximum amount of the payment is unlimited. Trust Codes Global is included in the Authentication segment
and the results of its operations are included in the consolidated financial statement beginning March 1, 2023.

 On April 22, 2022, we acquired, through PeriShip
Global, the business and certain assets of PeriShip, LLC, a value-added service provider for time and temperature sensitive parcel management.
PeriShip Global provides shipping logistics services utilizing proprietary predictive analytics software and supporting service center
services. 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. The purchase price was $10.5
million which consisted of $7.5 million in cash paid at closing, a promissory note of $2.0 million with a fixed interest rate of
6% per annum on the unpaid principal balance, to be paid in three installments on the sixth, fifteenth, and eighteenth month anniversaries
of the closing, and 305,473 shares of restricted common stock of the Company, representing $1.0 million in stock consideration. We expect
that all of the goodwill recorded for financial statement purposes is deductible for tax purposes. The acquired PeriShip Global business
is included in the Precision Logistics segment and the results of its operations have been included in the consolidated financial statements
beginning April 22, 2022.

 Seasonality

 We experience seasonal fluctuations
in our net revenues from sales in our Precision Logistics segment. Revenues from sales are generally higher in the fourth quarter than
in other quarters due to increased holiday shipments. The seasonality of our business may cause fluctuations in our quarterly operating
results.

 Our Intellectual Property

 Intellectual property is important to our business. As
of December 31, 2023, our current patent and trademark portfolios consist of nine granted U.S. patents and two granted European patents,
one validated in four countries (France, Germany, United Kingdom, and Italy), and the second patent validated in three countries (France,
Germany, and United Kingdom), three pending U.S. and foreign patent applications, twenty-six registered U.S. trademarks (of which nineteen
are in the name of VerifyMe, Inc., and seven trademarks were acquired through our wholly owned subsidiary, PeriShip Global), two EU trademark
registrations, one Colombian trademark registration, one Australian trademark registration, one Japanese trademark registration, one Mexican
trademark registration, one Singaporean trademark registration, two UK trademark registrations, seven NZ trademark registration (of which
six are in the name of Trust Codes Limited and/or Trust Codes Global Limited), one OAPI (African Intellectual Property Organization) trademark
registration (in the name of Trust Codes Global Limited), and two pending US and foreign trademark applications. The Company abandoned
two patents during the year ended December 31, 2023.

 While some of our granted patents are commercially
ready, we believe that others may have commercial application in the future but will require additional capital and/or a strategic partner
in order to reach the potential markets. All of our patents are related to the inventions described above. Our registered patents expire
between the years 2024 and 2039. 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).

 It is cost prohibitive to register patents in
every country. We continue to develop new technologies and we apply for patent protection for these technologies in countries with the
most market potential and strong patent enforcement tools. When a new product or process is developed, we may seek to preserve the economic
benefit of the product or process by applying for a patent in each jurisdiction in which the product or process is likely to be exploited.

 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 not uncommon 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 VerifyMe TM brand
in the United States and have registered and pending applications with respect to our brand 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.

 Research and Development

 Current research and
development efforts are focused on expanding our technology into new areas of implementation and to develop unique customer applications.
We spent approximately $107 thousand and $89 thousand during the years ended December 31, 2023, and 2022, respectively, on research and
development.

 Research in our Precision
Logistics segment is currently focused on developing:

 the ability to print labels utilizing our own label printing software rather than relying on a carrier's
print engine;

 the imbedding of machine learning into our proprietary IT portal to expand and improve our predictive
analytics capabilities; and

 creating revenue from our weather analytics.

 Research in our Authentication
segment is currently focused on developing new innovative solutions, and enhancement of our existing solutions to counterfeiting and
traceability so that we continue to expand what we believe is our long-term competitive advantage:

 Novel new algorithms to combat counterfeit methods more effectively, including expanding the use of machine
learning techniques to better identify counterfeit behaviors;

 Improvement and enhancement of our smart production systems integration suite and its connection with
critical expert partners;

 New methods to verify and validate customers who onboard, including using deep learning models to validate
both identity and claims;

 Further development of our web app augmented reality/mixed reality capability, leveraging our unique technology
in this area which we acquired with Trust Codes; and

 New methods to detect and validate VerifyInk on customer packing to help expand the market for
the VerifyInk product, and in line with our dual factor related patents.

 VerifyMe continues to
monitor the market for state-of-the-art innovation and may either develop, partner to deploy or seek to acquire new technologies, products
and services in the future, if we believe it would provide a competitive market advantage and could be successfully monetized.

 Sales and Marketing
Strategy

 Business development and sales resources are aligned
to support existing customer accounts and new customer development. We use social media channels, such as Linked In, Facebook and Twitter
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 are currently revising and optimizing our websites to improve customer engagement
and SEO. We believe many of the clients of PeriShip Global will benefit from the legacy VerifyMe business consumer engagement and food
safety technologies. We will also continue to participate in trade show attendance which had declined during the height of the COVID pandemic.

 In lieu of building, training, and supporting
a world-wide internal sales force, we continue to have strategic partners who have existing relationships in their particular geographical
locations. For our Authentication segment, these strategic partners have relationships with government and brands and include both paid
and commissioned sales only contract arrangements.

 Competition

 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 world's 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. PeriShip Global is operating in all of the perishable 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, however we believe with the economic downturn, major carriers are seeking to outsource perishable shipping services
rather than invest additional funds to provide internal support.

 The market for protection from diversion, theft
and forgery is a highly fragmented industry that includes smaller companies as well as a number of large, well-established companies.
Security printing for currency production began in Europe over a century ago and has resulted in the establishment of old-line security
printers which have branched out into brand and product protection as well. In North America, brand protection products, such as tamper-resistant
packaging, security labels, and anti-theft devices are readily available and utilized on a widespread basis. In recent years, however,
demand has increased for more sophisticated overt and covert security technologies with a strong desire for technologies that can provide
variable images and data. Competitors can be segregated into the following groups: (i) security ink manufacturers who are generally well-established
companies whose core business is manufacturing and selling printing inks; (ii) system integrators who have often evolved from other sectors
in the printing industry, mainly security printing manufacturers, technology providers, or packaging and label manufacturers, and who
typically offer a range of security solutions that enable them to provide a complete suite of solutions tailored to the customer's
specific needs and requirements; (iii) system consultancy groups who offer a range of technologies from several different providers and
tailor specific solutions to end-users; (iv) traditional authentication technology providers which provide holograms and digital watermarking;
(v) product diversion tracking providers which provide on-product and in-product tagging technologies; and (vi) traditional security printers
whose core products are printing the world's currencies. In general, we believe competition in our principal markets is primarily
driven by product performance, features and liability; price; ease of implementation, technology effectiveness, digital instant verification;
new laws and regulations; 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; brand loyalty; applications support; and
breadth of product line.

 Amazon has an anti-counterfeit service with their
"Project Zero" brand protection system utilizing their "Transparency" serialization product. Amazon's product
serialization service provides a unique code for every unit that is manufactured, and the brand puts these codes on its products as part
of its manufacturing process, which Amazon scans and verifies. Our traceability and authentication solutions are interoperable with Amazon's
Transparency solutions. While Amazon's customers could use our solution when using Amazon, they would not be required to in order
to use Amazon's Transparency solutions. However, Amazon's solution must be used within the Amazon ecosystem. Competition is
building in the consumer engagement market as more companies enter the space but are using mainly NFC technology imbedded into apparel.
In addition to this technology, we have the ability to print labels on more applications including fabrics and metals.

 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

 During the year ended December 31, 2023, one customer
represented 17% of revenues and one customer represented 13% of revenues for the year ended December 31, 2022.

 As of December 31, 2023, three customers made
up 47% of accounts receivable. As of December 31, 2022, two customers accounted for 23% of total accounts receivable.

 During the year ended December 31, 2023, and December
31, 2022, one vendor accounted for 99% of transportation costs, in our Precision Logistics segment.

 Employees and External
Sales Force

 As of December 31, 2023, we employed approximately
fifty persons and eight consultants. Of these employees, approximately forty were employed in our Precision Logistics operations and 10
were employed by our Authentication operations. Because of the nature of our business, many of our employees and consultants can, and
do, conduct their work for us remotely.

 We have also entered
into commissioned sales contract arrangement with our strategic partner, HP Indigo.

 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.

 ITEM 1A. RISK
FACTORS

 Any investment in our securities involves a high
degree of risk. You should consider carefully 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. 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. For example,
in April 2022, we acquired the business of PeriShip, LLC ("PeriShip") through our wholly owned subsidiary PeriShip Global
and in March 2023, we acquired the business of Trust Codes Limited, ("Trust Codes") through our wholly owned subsidiary Trust
Codes Global Limited ("Trust Codes Global"). To realize the anticipated benefits of these acquisitions, we must successfully
integrate these businesses with ours. The integration of these businesses and 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 stockholder's 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 management's 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.

 Our Precision Logistics segment relies on one key strategic partner
for shipping services for our customers and as a source for customers representing a substantial percentage of our revenues.

 Our business is dependent, and we believe that
it will continue to depend, on our relationship with one strategic partner. PeriShip Global partners with one major global carrier for
all its customers' shipping needs. While we work closely with this key 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. Establishing the necessary information technology infrastructure and business relationship with another shipping
services provider would be costly and time consuming and may ultimately not be successful or cost-effective. Further, any increase in
the prices charged by our single 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 significantly negatively 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.

 In addition to relying on this strategic partner
for shipping services, a significant portion of our revenue is generated through a service agreement pursuant to which this strategic
partner resells our services to its customers under a "white label" arrangement. Under this arrangement we provide our logistics
services to our strategic partner's customers in exchange for a pre-negotiated service fee per shipment. Sales through our strategic
partner accounted for approximately 17% of revenue of our Precision Logistics segment for the year ended December 31, 2023. If we fail
to maintain certain minimum service level requirements related to our service with this strategic partner, it may terminate our agreement
to provide them with such service. If our strategic partner terminates our agreement, requires us to renegotiate the terms of our existing
agreement or we are unable to renew such agreement on mutually agreeable terms, no longer makes our services available to its customers,
replaces our services with one or more competitors, develops and supplants our services for its own service offerings, or we experience
a significant reduction in business from this strategic partner, our business, financial condition and results of operations would 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. 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.

 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, c ertain 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. The traceability and consumer engagement industry is also
highly competitive. 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, and companies providing traceability
and consumer engagement solutions, 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.

 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 Facebook, YouTube, Instagram, Linked In and 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.

 The Company has recorded significant goodwill
and other identifiable intangible assets on its balance sheet as a result of its acquisition of the PeriShip business in 2022 and Trust
Codes business in 2023. A number of factors may result in impairments to 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 may lead to fewer goods being transported. 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. 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. trade policy could lead to 'trade wars' impacting
the volume of economic activity in the United States, and as a result, shipping volumes may be materially reduced. Such a reduction may
materially and adversely affect our business.

 Reductions in discretionary 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 consumer's 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. In April 2023, the major carrier that PeriShip
Global partners with laid out steps it was taking to slash $4 billion in permanent costs by the end of its 2025 fiscal year in response
to these market conditions and lower demand. In June 2023, the major carrier stated that due to ongoing demand its plans to ground 29
more aircraft in its fiscal year that started in June 2024. In mid-December 2023 the carrier forecasted a low single digit percentage
decline in revenue year over year for 2024.

 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, are currently affecting a wide variety of businesses globally including one of 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 in 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 and may
continue to complete acquisitions in the future. We expect to continue to incur expenditures to develop and market our services and to
make acquisitions 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 shareholders 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 Code, 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 owning
directly or indirectly 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. 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.

 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 VerifyMe TM brand
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 deleted classifications
in our Canada trademark application for the VerifyMe name, in an effort to avoid confusion with the prior-registered SecureKey trademark.
We have also 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.

 Because many of our current and target customers
are large companies, their internal policies and resistance to change may impair our ability to successfully commercialize our products.

 Our ability to become successful and generate
positive cash flow will be dependent upon the extent of commercialization of products using our technology. Commercialization of new technology
products often has a very long lead time. This problem is exacerbated when customers are large entities. Our current and target customers
are large entities. These factors may adversely affect our ability to commercialize our technologies, or any products or services related
to our technologies. Further, we cannot assure you that commercialization will result in profitability.

 Our future growth will depend upon the success
of our strategic partners who integrate our solutions into their product offerings.

 We rely on strategic partnerships with one large
logistics carrier for our Precision Logistics segment and larger companies which integrate our technologies into their product offerings
for our legacy Authentication segment. These strategies leave us largely dependent upon the success of our partners. If any of our strategic
partners who include our technology in their products cease to do so, or we fail to obtain other partners who will incorporate, embed,
integrate or bundle our technology, or these partners are unsuccessful in their efforts, expanding deployment of our technology, our business
and future growth would be materially and adversely affected.

 If we cannot manage
our growth effectively, we may not become profitable.

 Businesses which grow
rapidly often have difficulty managing their growth. If we continue to grow as rapidly as we anticipate, we will need to expand our management
by recruiting and employing experienced key employees capable of providing the necessary support. We cannot assure you that our management
will be able to manage our growth effectively or successfully. Our failure to meet these challenges could harm our financial condition
and ability to become profitable.

 We will need to expand our sales, marketing
and support organizations and our distribution arrangements to increase market acceptance of our products and services.

 We currently have a limited number of sales, marketing,
customer service and support personnel and may need 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.

 Our patent rights, trade secrets, copyrights,
trademarks, domain names and other product rights are critical to our success. 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 will pursue the registration of our domain names, trademarks, and service marks in the U.S. and in certain locations outside the U.S.
We will 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.

 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 party's
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. In order 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, 2023. 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 also could 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.

 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 cohesively with our key strategic partner, and 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.

 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, 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.

 Fluctuations in labor costs, changes in
the availability of key suppliers, 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. In our Authentication segment (formerly VerifyMe Solutions segment), security pigments, ink canisters, labels
and bar codes are key elements in the cost of our products. Our inability to offset material price inflation could adversely affect our
results of operations. We rely on one global carrier for transportation services, one supplier to procure our raw materials, one strategic
partner to produce our ink canisters, and it is difficult to predict what effects shortages or price increases for the raw materials we
use to make our products may have in the future. Our ability to manage inventory and meet delivery requirements may be constrained by
our supplier's inability to scale production and adjust delivery during times of volatile demand. Our inability to fill our supply
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 industry trends, (ii) develop
and maintain competitive products, (iii) defend our market share against an ever-expanding number of competitors including many new and
non-traditional competitors, (iv) enhance our products by adding innovative features that differentiate our products from those of our
competitors and prevent commoditization of our products, (v) develop, manufacture and bring compelling new products to market quickly
and cost-effectively, (vi) monitor disruptive technologies and business models, (vii) achieve sufficient return on investment for new
products introduced based on capital expenditures and research and development spending, (viii) respond to changes in overall trends related
to end market demand, (ix) leverage our strategic partnerships to develop and commercialize new and existing products and (x) attract,
develop and retain individuals with the requisite skill, expertise and understanding of customers' needs to develop new technologies
and introduce new products and sell our current products. The failure of our technologies or products 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.

 The expenses or losses associated with lack
of widespread market acceptance of our solutions may harm our business, operating results and financial condition.

 Rapid technological changes and frequent new product
introductions are typical in the markets we serve. Our future success will depend in part on continuous, timely development and introduction
of new products that address evolving market requirements. To the extent we fail to introduce new and innovative products, we may lose
any market share we have to our competitors, which may be difficult or impossible to regain. Any inability, for technological or other
reasons, to successfully develop and introduce new products could harm our business. Additionally, we may experience delays in the development
and introduction of products, we may be unable keep pace with the rapid rate of change in anti-counterfeiting and security products'
research, and any new products acquired or developed by us may not meet the requirements of the marketplace or achieve market acceptance.
If we are unable to develop new products to meet market demands, our business could be materially adversely affected.

 Foreign Currency
Exchange Rate Risk

 We operate in the US and New Zealand, which exposes
us to market risk associated with foreign currency exchange rate fluctuations. Our foreign currency exposure primarily relates to intercompany
receivables and payables and third-party receivables and payables that are denominated in currencies other than the functional currency
of our legal entities. Our largest foreign currency exposure is unsettled intercompany payables and receivables which are reviewed on
a regular basis. Gains and losses from foreign currency transactions are included in "General and administrative" on our Consolidated
Statements of Operations.

 Our foreign subsidiary operates in a currency
other than the United States dollar; therefore, increases or decreases in the value of the U.S. dollar against other major currencies
will affect our operating results and the value of our balance sheet items denominated in foreign currencies. Our most significant exposures
to translation risk relates to functional currency assets and liabilities that are denominated in the New Zealand dollar. The changes
in the net investment of our foreign subsidiary are reflected in "Foreign currency translation adjustments" on our Consolidated
Statements of Comprehensive Loss. We have not used any exchange rate hedging programs to mitigate the effect of exchange rate fluctuations.

 Risks Relating to our Common Stock

 Upon exercise of our outstanding options
or warrants, conversion of our Series B Convertible Preferred Stock, conversion of our Convertible debt, vesting of our restricted stock
units, and issuance of shares relating to the Trust Codes earnout, we will be obligated to issue a substantial number of additional shares
of common stock which will dilute our present shareholders.

 We are obligated to issue additional shares of
our common stock in connection with our outstanding options, warrants and shares of our Series B Convertible Preferred Stock. For the
years ended December 31, 2023, there were approximately 8,286,000 anti-dilutive shares consisting 1,439,000 unvested performance restricted
stock units, 816,000 restricted stock units, restricted stock awards and options under the stock purchase plan, 301,000 shares issuable
upon exercise of stock options, 4,629,000 shares issuable upon exercise of warrants, 957,000 shares issuable upon conversion of convertible
debt, and 144,000 shares issuable upon conversion of preferred stock. As of December 31, 2023, there were no shares issuable related to
the Trust Codes earnout. 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 shareholders. 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 shareholders 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 shareholders 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.

 Because we may issue preferred stock without
the approval of our shareholders 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 shareholders, one or more additional series of preferred stock that have more than one vote per share, although
the Company's 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 shareholders 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 do not intend to pay cash dividends
on our shares of common stock, any returns will be limited to the value of our shares.

 We currently anticipate that we will retain future
earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for
the foreseeable future. Any return to shareholders 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 the Nasdaq Capital Market, a failure of which could result in a de-listing of our
common stock and certain warrants.

 The Nasdaq Capital Market requires that the trading
price of its listed stocks remain above one dollar in order for the 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 Capital Market. In addition, to maintain a
listing on the Nasdaq Capital Market, 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 publicly traded 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 our Debt

 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. The Term Note, among other things, requires high interest payments, and both the Term Note and the PNC
Facility place encumbrances on our assets, and subject us to restrictive covenants that limit our operating flexibility. Additionally,
under the terms of the Term Note, the Company is required to make monthly loan principal payments of $41,667 per month plus interest,
through September 15, 2026.

 The terms of the Term Note and the PNC Facility
have been structured in such a way that, if we default under one, we will also default under the other. 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. Any continuing default on the Term Note or the PNC Facility could result
in the outstanding principal balance under each such 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. 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. The terms of the Term Note and the PNC Facility have
been structured in such a way that, if we default under one, we will also default under the other. 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.

 ITEM 1B. UNRESOLVED STAFF COMMENTS.

 None.

 ITEM 1C. 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 begun to establish 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
detail 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 are in the process of establishing 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 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 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, our chief information officer
of our subsidiary PeriShip Global, has primary responsibility for managing material cybersecurity risks over our Precision Logistics Segment
while Paul Ryan, Executive Vice President, Authentication Segment, has the primary responsibility for assessing and managing material
cybersecurity risks over our Authentication Segment. Mr. Wang holds an undergraduate and master's degree in computer science. Our
CIO has served in various roles in information technology and security for over 20 years. Mr. Ryan has 30 years of experience in global
software and technology businesses. Both Mr. Wang and Mr. Ryan are 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 intend to review our current reporting structure and may implement other structures governing the day-to-day management and reporting
of cybersecurity risks.

 ITEM 2. PROPERTIES.

 We do not own any significant real property, but
one of our subsidiaries leases approximately 5,000 square feet of primarily office space in Connecticut used in connection with our Precision
Logistics segment. The lease expires in 2027. Our Trust Codes subsidiary leases premises approximately 2,000 square feet located in New
Zealand. The lease expires in 2026. We believe that our properties have been well maintained, are suitable and adequate for us to operate
and upon expiration of this lease, we do not anticipate any difficulty in obtaining renewals or alternative space.

 ITEM 3. 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.

 ITEM 4. MINE
SAFETY DISCLOSURES.

 Not applicable.

 ITEM 5. MARKET
FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 Our common stock, par
value $0.001 per share, and warrants to purchase common stock are traded on The Nasdaq Capital Market under the trading symbols "VRME"
and "VRMEW," respectively.

 Common Shareholders

 As of March 18, 2024,
we had approximately 1,450 shareholders of record of our common stock. Because many of our shares of common stock are held by brokers
and other institutions on behalf of shareholders, this number is not indicative of the total number of shareholders represented by these
shareholders of record.

 Dividends

 We have never declared
or paid a cash dividend. At this time, we do not anticipate paying dividends in the foreseeable future. The declaration and payment of
dividends is subject to the discretion of Board 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. Accordingly, we cannot pay dividends as a matter of law.

 Share Repurchase Plan

 The following table provides information about our share repurchase
activity for the three months ended December 31, 2023

 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)

 10/01/2023-10/31/2023

 -

 -

 -

 $
 -

 11/01/2023-11/30/2023

 -

 -

 -

 -

 12/01/2023-12/31/2023

 -

 -

 -

 Total

 -

 -

 -

 $

 (1)
 Effective December 6, 2023, the Company's Board of Directors approved a new share repurchase
program to allow the Company to spend up to $0.5 million to repurchase shares of its common stock, so long as the price does not
exceed $1.00 until December 14, 2024. During the three months ended December 31, 2023, the Company did not repurchase shares of common
stock under the Company's program.

 ITEM 6. [RESERVED.]

 ITEM 7. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 This Management's 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.

 Overview

 VerifyMe, Inc. ("VerifyMe") together
with its subsidiaries, including PeriShip Global, LLC ("PeriShip Global") and Trust Codes Global Limited ("Trust Codes
Global"), (together the "Company," "we," "us," or "our"), is a traceability and
customer support services provider using specialized software and process technology. The company operates a Precision Logistics Segment
and an Authentication Segment to provide specialized logistics for time-and-temperature sensitive products, as well as item level
traceability, anti-diversion and anti-counterfeit protection, brand protection and enhancement technology solutions. Through our Precision
Logistics segment, we provide a value-added service for sensitive parcel management driven by a proprietary software platform that provides
predictive analytics from key metrics such as pre-shipment weather analysis, flight-tracking, sort volumes, and traffic, delivered to
customers via a secure portal. The portal provides real-time visibility into shipment transit and last-mile events which is supported
by a service center. Through our Authentication segment our technologies enable brand owners to gather business intelligence through the
supply chain, cross-sell products, detect counterfeit activities, monitor product diversion, and build brand loyalty utilizing our unique
dynamic codes which are read by consumers with their smart phones. Further information regarding our business segments is discussed below:

 Precision Logistics: The Precision Logistics
(formerly PeriShip Global Solutions) segment specializes in predictive analytics for optimizing delivery of time and temperature sensitive
perishable products. We manage complex industry-specific shipping logistic processes that require critical time, temperature control and
handling to prevent spoilage and extreme delivery times and brand impairment. Utilizing predictive analytics from multiple data sources
including flight-tracking, weather, traffic, major carrier feeds, and time of day data, we provide our clients an end-to-end vertical
approach for their most critical service delivery needs. Using our proprietary IT platform, we provide real-time information and analysis
to mitigate supply chain flow interruption, as well as delivering last-mile resolution for key markets, including the perishable healthcare
and food industries.

 Through our proprietary PeriTrack customer
dashboard, we provide an integrated tool that gives our customers an in-depth look at their shipping activities and allows them access
to critical information in support of the specific needs of the supply chain stakeholders. We offer post-delivery services such as customized
reporting for trend analysis, system performance reports, power outage maps, and other tailored reports.

 Precision Logistics generates revenue from two
business service models.

 ProActive Service – clients pay us directly for carrier service coupled with our proactive
logistics assistance.

 Premium Service – clients pay us directly or through our carrier partner for our complete
white-glove shipping monitoring and predictive analytics service. This service includes customer web portal access, weather monitoring,
temperature control, full service center support and last mile resolution.

 Products: The Precision Logistics segment
includes the following bundled services as part of our service offerings to our customers:

 PeriTrack: Our proprietary PeriTrack customer dashboard was developed utilizing our
extensive logistics operational knowledge. This integrated web portal tool gives our customers an in-depth look at their shipping activities
based on real-time data. The PeriTrack dashboard was designed to provide critical information in support of the specific needs of
supply chain stakeholders and gives our customer resolution specialists a 360 view of shipping activity. PeriTrack features
tools tailored for shippers of perishable goods, which includes the In-Transit Shipment Tracker. This tool provides details on the unique
shipper's in-transit shipments, with the ability to select and analyze data on individual shipments.

 Service Center: We have assembled a team of customer resolution specialists based in the U.S. This
service team resolves shipping problems on behalf of our customers. The service center acts as a help desk and monitors shipping to delivery
for our customers.

 Pre-Transit Service: We help clients prepare their products for shipments by advising clients on
packaging requirements for various types of perishable products. Each product type requires its own particular packaging to protect it
during shipment, and we utilize our extensive knowledge and research to provide our customers with packaging recommendations to meet their
unique needs.

 Post-Delivery: We provide customized reporting for trend analysis, system performance reports,
power outage maps, and many other reports to help our customers improve their processes and customer service outcomes.

 Weather/Traffic Service: We have full-time meteorologists on staff to monitor weather. A package
may experience a variety of weather conditions between the origin and destination, and our team actively monitors these conditions to
maximize the number of timely and safely transmitted shipments. Similarly, traffic and construction also create unpredictable delays which
our team works diligently to mitigate. If delays or other issues occur, we inform clients and work with them to proactively resolve such
shipment issues.

 Authentication: The Authentication (formerly
VerifyMe Solutions) segment specializes in traceability to connect brands with consumers through their product. This is critical in the
current landscape of increased regulations, as well as increased counterfeit activity and product diversion. The ability to detect fraud
or abnormal behavior while tracing an item's journey from production through to the consumer's hands provides consumers and
brands the assurance they require. VerifyMe has custom software, patented technologies, and a cloud environment that combines machine
learning and data science to meet the needs of consumers and brands. In addition, the personalized consumer experience with the brand
creates a connection that increases brand perception and loyalty.

 Products: We have a custom suite of products
that offer clients traceability and brand solutions. These products are combined with "software as a service" or "SaaS"
which is stored in the cloud and accessed through the internet.

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

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

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

 Opportunities

 Precision Logistics: Traditionally,
most shipping businesses utilize the carrier's data platform for tracking which generally informs the shipping enterprise, and their
customers, when a package is in transit, when a package has been delivered, and some level of detail of the path which a package traveled.
We believe taking the data feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor
of our service center gives us a competitive advantage against other third-party platforms that solely rely on the carrier's data
feeds. We utilize a variety of input sources beyond the carrier's data feed. Our proprietary "Predictive Analytics"
technology is fed real-time meteorology data, traffic and road construction data, and power grid information to help predict issues before
they happen. If an alert is created the shipper and our service center will work to address the issue and save the perishable product
from spoiling, saving the shipper significant costs and reducing the need to replace products that are no longer viable. We have meteorologists
on staff that track world-wide weather patterns to address predicted issues before they happen. We believe the company has two significant
areas of opportunity. First, our services are specifically designed to address the needs of small and medium size agriculture, food and
beverage companies. Second, the pharmaceutical and healthcare industries represent significant opportunities due to the enhanced tracking
and customer service associated with distribution of these products. We are focusing our sales emphasis on those industries. In addition,
we believe that combining our authentication solutions into the product offering for Precision Logistics clientele, gives our Precision
Logistics segment a competitive advantage to generate revenue by enhancing clients' ability to grow revenue, gain business intelligence
and build brand loyalty.

 The U.S. logistics industry is facing an economic
slowdown. We believe this represents an opportunity since major global carriers are cutting internal staff. These carriers are looking
for lower cost alternatives to service their customers as well as partners that can help the carrier increase revenues. To maintain their
credibility in the market, these carriers will need to ensure they meet their customers' demands for time and temperature sensitive
shipments, while maintaining their overheads. We believe outsourcing this function to our Precision Logistics segment provides the ideal
solution for all parties involved.

 Building logistics infrastructure is a capital-intensive
process as the investment is locked in for a considerably long period. Due to the current economic environment, and our cost competitive
offering, we believe companies will opt to outsource their precision logistics services to reduce their operational costs. The outsourcing
of supply chain related and other logistics operations to service providers such as ours allows companies to improve the efficiency of
their businesses by focusing their resources on core competencies.

 Authentication: We believe the products
in our Authentication segment have applications in many areas. Currently, we are aggressively marketing opportunities in the following
areas:

 Agriculture, Food and Beverage – Food safety is becoming more common as supply chains become more
global and as imaging and manufacturing technology become more accessible. Food traceability, sustainability and carbon neutral production
is becoming a significant consideration for brand and governments. We believe our unit level traceability and authentication solutions
can help brands tell their story about sustainability and battle against tainted or substandard foods and beverages.

 Pharmaceuticals/nutraceuticals – We believe counterfeit prescription pharmaceuticals and nutraceuticals
are a growing problem, widely recognized as a public health risk and a serious concern to public health officials, private companies,
and consumers. Counterfeiting can apply to both branded and generic products and counterfeit pharmaceuticals may include products with
the correct ingredients but fake packaging, with the wrong ingredients, without active ingredients or with insufficient active ingredients.
The United States enacted legislation requiring the implementation of a comprehensive system designed to combat counterfeit, diluted or
falsely labelled pharmaceuticals, referred to as serialization or electronic pedigree (e-Pedigree). Our consumer facing visible codes
and unique pigments embedded in the ink of a unique serialized barcode can provide a layered security foundation for a customer solution
in this market. We are seeking to expand our business in this market and believe that as additional pharmaceutical companies seek to comply
with the legislation, our products will provide attractive alternatives to address the need for product identifiers.

 Consumer Products – We believe our technology solutions are particularly suited for the cosmetics,
health and beauty and apparel industries. We give the consumer the ability to test a product's authenticity instantly with a smartphone.
We can protect brand owners from liability litigation, product diversion and lost financial sales with our consumer facing visible codes
and unique ink pigments which can be incorporated in dyes and used by manufacturers in these industries to combat counterfeiting and piracy
of actual physical goods. Our pigments expressed as inks can also be used on packaging, as well as to track products that have been lost
in transit, whether misplaced or stolen.

 In addition,
in each of these markets, our SaaS software allows brand owners and consumers to track the products and will alert the consumer or brand
owner of product diversion with 24/7 monitoring. As each product has a unique code, this allows consumers and brand owners to authenticate
the product in real time and link directly to the brand owner's website for additional product information, discounts, and more.

 Synergies: We believe that Precision Logistics
and Authentication segments have synergistic product centric technology platforms and combined have a compelling technology offering for
brand owners. For example, currently our Precision Logistics segment ships vaccines for major pharmaceutical companies. With the addition
of our Authentication technology, we can add unit level traceability and authentication to protect clients' vaccines from product
diversion and sub-standard counterfeits. In addition, our Authentication segment brand enhancement solutions could give the Precision
Logistics food and beverage clients the ability to gather rich business intelligence and build customer loyalty with engagement functions
like videos, discounts, contests, recipes, etc.

 Results of Operations

 Comparison of the Years Ended December 31,
2023, and 2022

 The following discussion analyzes our results
of operations for the years ended December 31, 2023, and 2022. The following information should be considered together with our financial
statements for such periods and the accompanying notes thereto.

 Revenue

 2023

 2022

 $
 24,652

 18,190

 1,386

 Total Revenue

 $
 25,313

 $
 19,576

 Consolidated revenue for the year ended December 31,
2023, was $25,313 thousand, a 29% increase compared to $19,576 thousand, for the year ended December 31, 2022. The
increase in revenue primarily relates to the acquisition of the PeriShip Global business on April 22, 2022, which increased revenue by
$6,462 thousand for the twelve months ended December 31, 2023, partially offset by a $725 thousand decline in the Authentication revenue.
The Authentication segment maintained its existing client base but had reduced orders in the nutraceutical market in 2023.

 Gross Profit

 2023

 2022

 % of Revenue

 % of Revenue

 8,475

 %

 5,505

 %

 %

 %

 Total Gross Profit

 $
 9,003

 %

 $
 6,488

 %

 Consolidated gross profit for the years ended
December 31, 2023, and 2022, was $9,003 thousand and $6,488 thousand, respectively. The resulting gross margin was 36% for the year ended
December 31, 2023, compared to 33% for the year ended December 31, 2022. The increase in our gross margin is due to the acquisition of
the PeriShip Global business acquired on April 22, 2022, which is included for the full twelve months of 2023. The Precision Logistics
segment had increased premium services revenue which has higher margins as well as process improvements to increase proactive services
margins. With the acquisition of Trust Codes in March 2023, providing custom software, our margins in the Authentication segment also
increased.

 General and Administrative Expenses

 General and administrative expenses were $10,586
thousand for the year ended December 31, 2023, compared to $8,428 thousand for the year ended December 31, 2022, an increase
of $2,158 thousand. The increase relates to the acquisition of the PeriShip Global business on April 22, 2022 included for the full
twelve months of 2023, the deal transaction costs related to the acquisition of the Trust Codes Global business of $278 thousand, operations
related to Trust Codes, as well as severance expense of approximately $590 thousand which has been paid in full by the end of January
2024, partially offset by costs related to the acquisition of the PeriShip Global business of $661 thousand in 2022 that did not recur
in 2023. Stock-based compensation was $1,509 thousand, including $121 thousand relating to severance in 2023, compared to $1,375 thousand
in 2022. Amortization and depreciation expense was $1,134 thousand and $770 thousand for the twelve months ended December 30, 2023, and
2022, respectively.

 Research and Development

 Research and development expenses increased by
$18 thousand to $107 thousand for the year ended December 31, 2023, from $89 thousand for the year ended December 31, 2022.
The increase was primarily related to research and development activities as a result of the acquisition of Trust Codes during the first
quarter of 2023.

 Sales and Marketing

 Sales and marketing expenses for the year ended
December 31, 2023, were $1,638 thousand compared to $1,718 thousand for the year ended December 31, 2022, a decrease of $80
thousand. The decrease is related to a reduction in employees and consultants in the Authentication segment partially offset by the
PeriShip Global business included for the full twelve months of 2023.

 Net Loss

 Our net loss for the year ended December 31, 2023,
was $3,390 thousand, compared to $14,398 thousand for the year ended December 31, 2022. The decreased loss was primarily due to the impairment
of the SPAC of $10,932 thousand during 2022. The resulting consolidated loss per diluted share for the year ended December 31, 2023, was
$0.35 compared to a consolidated loss per diluted share of $1.70 for the year ended December 31, 2022.

 Liquidity and Capital Resources

 Our operations provided $244 thousand of cash
during the year ended December 31, 2023, compared to $2,551 thousand cash used in operations during the year end December 31, 2022. The
increase in cash from operations is due to a favorable change in working capital accounts during 2023 compared to 2022 from our acquisition
of PeriShip Global in April of 2022.

 Net cash used in investing activities was $1,195
thousand for the year ended December 31, 2023, compared to $7,884 thousand for the year ended December 31, 2022. During the year
ended December 31, 2022, $7,500 thousand was used for the acquisition of the PeriShip Global business.

 Net cash provided by financing activities for
the year ended December 31, 2023, was $634 thousand compared to $4,424 thousand for the year ended December 31, 2022, related to proceeds
from issuance of convertible debt in 2023 and debt and offerings of our common stock in 2022.

 On December 8, 2023, we announced a new $0.5 million
share repurchase program to repurchase shares of the Company's common stock through December 14, 2024, but may be modified, suspended
or discontinued at the discretion of the Board at any time. To date, no shares have been purchased under the program.

 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 relating parties including certain members of management and the Board of Directors. The notes are subordinated unsecured obligations
of the Company and accrue interest at a rate of 8% per year payable semiannually in arrears on February 25 and August 25 of each year,
beginning on February 25, 2024. The notes will mature on August 25, 2026, unless earlier converted or repurchased at a conversion price
of $1.15 per share of common stock. The Company may not redeem the notes prior to the maturity date. As of December 31, 2023, the amount
outstanding on the convertible debt was $1,100 thousand and included in Convertible Note, and Convertible Note – related party on
the accompanying Consolidated Balance Sheets. The Company has accrued interest expense of $31 thousand related to the convertible note
as of December 31, 2023.

 On September 22, 2022, we entered into the PNC
Facility with PNC Bank, National Association. The PNC Facility includes a $1 million RLOC. The RLOC has no scheduled payments of principal
until maturity, and bears interest per annum at a rate equal to the sum of Daily SOFR plus 2.85% with monthly interest payments. The PNC
Facility also includes a four-year Term Note for $2 million which matures in September of 2026 and requires equal quarterly payments of
principal and interest. The Term Note incurs interest per annum at a rate equal to the sum of Daily SOFR plus 3.1%. The RLOC and
Term Note are guaranteed by the Company and secured by the assets of PeriShip and the Company.

 The PNC Facility includes a number of affirmative
and restrictive covenants applicable to PeriShip, 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 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 November 3, 2023, we entered into a waiver and amendment to loan documents and received
a waiver for certain events of default. We also entered into an amended and restated loan agreement with PNC effective October 31,
2023, which provided amendments to a number of affirmative and restrictive covenants applicable to PeriShip Global and extended the RLOC
to September 30, 2024.

 We were in compliance with all affirmative and
restrictive covenants under the PNC Facility at December 31, 2023.

 Effective October 17, 2022, we entered into an
interest rate swap agreement, with a notional amount of $1,958 thousand, effectively fixing the interest rate on our outstanding debt
at 7.602%.

 Of the proceeds of $2.0 million, we used $1.8
million to settle debt outstanding issued in connection with the PeriShip Global acquisition, including the redemption of 61,000 shares
of our common stock. As of December 31, 2023, our short-term debt outstanding under the Term Note was $0.5 million and total long-term
debt outstanding under the Term Note was $0.9 million.

 We believe that our cash and cash equivalents,
together with the proceeds from the convertible note, from debt issued and RLOC, will fund our operations for the next 12 months including
expected capital expenditures.

 We expect to grow our business organically and
through key acquisitions that will help accelerate the growth of our business. We expect to continue to fund our operations primarily
through utilization of our current financial resources and future revenue and may issue additional debt or equity.

 Critical Accounting Policies and Estimates

 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 have identified that the estimates used in the valuation of the assets of the
PeriShip acquisition, and the Trust Codes acquisition are critical and require significant judgment. We believe estimates and assumptions
related to these accounting policies are appropriate under the circumstances; however, should future events or occurrences result in unanticipated
consequences, there could be a material impact on our future financial position, results of operations or cash flows.

 Revenue Recognition

 We recognize revenue based on the principals established
in 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 traceability solutions. Our terms vary based on the solutions we offer and
are examined on a case-by-case basis. For licensing of our VerifyInk TM 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 increased as of December 31, 2023, due to the business combination. No other factors materially
impacted the balances.

 Business Combinations

 Accounting for business combinations requires
management to make significant estimates and assumptions to determine the fair values of assets acquired and liabilities assumed at the
acquisition date. Although we believe the assumptions and estimates we have made in relation to the acquisition of the PeriShip business
are appropriate, they are based, in part, on historical experience and information obtained from management of the acquired companies
and are inherently uncertain. Critical estimates in valuing certain acquired intangible assets include, but are not limited to, future
expected cash flows including revenue growth rate assumptions from product sales, customer contracts and acquired technologies, estimated
royalty rates used in valuing technology related intangible assets, and discount rates. The discount rates used to discount expected future
cash flows to present value are typically derived from a weighted-average cost of capital ("WACC") analysis and adjusted to
reflect inherent risks. Unanticipated events and circumstances may occur that could affect either the accuracy or validity of such assumptions,
estimates or actual results.

 We allocate the fair value of the purchase price
of our acquisitions to the tangible assets acquired, liabilities assumed, and intangible assets acquired, based on their estimated fair
values at acquisition date. The excess of the fair value of the purchase price over the fair values of these net tangible and intangible
assets acquired is recorded as goodwill. Management's estimates of fair value are based upon assumptions believed to be reasonable,
but our estimates and assumptions are inherently uncertain and subject to refinement. As a result, during the measurement period, which
will not exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the
corresponding offset to goodwill. After the conclusion of the measurement period or final determination of the fair value of the purchase
price of our acquisitions, whichever comes first, any subsequent adjustments are recorded to our Consolidated Statements of Operations.

 Acquisition-related expenses are recognized separately
from the business combination and are expensed as incurred.

 We have recorded goodwill as part of our acquisition
of the PeriShip business and Trust Codes business, which represents the excess of purchase price over the fair value of net assets acquired
in the business combinations. Pursuant to ASC 350, the Company will test goodwill for impairment on an annual basis in the fourth
quarter, or between annual tests, in certain circumstances. Under authoritative guidance, the Company first assessed qualitative factors
to determine whether it was necessary to perform the quantitative goodwill impairment test. The assessment considers factors
such as, but not limited to, macroeconomic conditions, data showing other companies in the industry and our share price. 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. For our annual goodwill impairment test as of December 31, 2023, we performed
a qualitative assessment as permitted by ASU 2017-04 for our reporting units and determined that it was more likely than not that the
fair value exceeded their respective carrying value.

 Stock-based Compensation

 We account for stock-based compensation under
the provisions of FASB ASC 718, "Compensation—Stock Compensation", which requires the measurement and recognition of
compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. 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 RSU's contractual life based on the appropriate probability distributions (which are based on commonly applied
Black Scholes inputs). The fair value was determined by taking the average of the grant date fair values under each Monte Carlo simulation
trial. We recognize compensation expense on a straight-line basis over the performance period and there is no ongoing adjustment or reversal
based on actual achievement during the period.

 We account for stock-based compensation awards
to non-employees in accordance with ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting ("ASU 2018-07"), which aligns accounting for share-based payments issued to nonemployees to
that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based
payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees.

 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 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.

 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.

 Not applicable for smaller reporting companies.

 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 The financial statements required to be filed pursuant to this Item 8
are appended to this Report beginning on page F-1 located immediately after the signature page and incorporated by reference in this Item
8.

 ITEM 9. 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 Securities Exchange Act of 1934,
as amended (the "Exchange Act") is recorded, processed, summarized and reported, within the time periods specified in the
SEC's rules and forms. The Company's Chief Executive Officer, our principal executive officer, and Chief Financial Officer,
our principal financial officer, have evaluated the effectiveness of the design and operation of the Company's disclosure controls
and procedures as of December 31, 2023. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer
have concluded that, as of December 31, 2023, our disclosure controls and procedures were effective to ensure that information we
are required to disclose in reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and (ii) accumulated and communicated to our management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 (b) Internal Control Over Financial Reporting

 Management's 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
December 31, 2023, 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 December 31, 2023.

 Changes in Internal Control over Financial
Reporting

 There were no changes in internal control over
financial reporting during the three months ended December 31, 2023, that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

 Trust Codes Acquisition

 On March
1, 2023, we acquired, through Trust Codes Global, the business and certain assets of Trust Codes Limited, a company specializing
in brand protection, anti-counterfeiting and brand enhancement technology with an expertise in the food and agriculture industry. For
additional information regarding the acquisition, refer to Note 4 to the Audited Consolidated Financial Statements appended to this Report
and incorporated by reference into Item 8 in this Annual Report on Form 10-K and Management's Discussion and Analysis of Financial
Condition and Results of Operations included in Item 7 in this Annual Report on Form 10-K. Based on the recent completion of this acquisition
and, pursuant to the Securities and Exchange Commission's guidance that an assessment of a recently acquired business may be omitted
from the scope of an assessment for a period not to exceed one year from the date of acquisition, the scope of our assessment of the effectiveness
of internal control over financial reporting as of December 31, 2023 does not include Trust Codes Global. We plan to include Trust Codes
Global in our assessment of the effectiveness of internal control over financial reporting within the timeframe set forth by the SEC's
guidance.

 Auditor's 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. Management's 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 management's report in this Report.

 ITEM 9B. OTHER INFORMATION.

 During the three months ended December 31, 2023, no director or officer
of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement,"
as each term is defined in Item 408(a) of Regulation S-K.

 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS.

 Not Applicable.

 ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE.

 The information
required by this Item 10 is incorporated herein by reference from our proxy statement for our 2024 annual meeting of stockholders under
the headings "Questions and Answers About these Proxy Materials and Voting," "Proposal One: Election of Directors,"
"Corporate Governance," "Management and Executive Officers" and, if necessary, "Delinquent Section 16(a)
Reports," which proxy statement will be filed within 120 days after the December 31, 2023, fiscal year end.

 ITEM 11. EXECUTIVE COMPENSATION.

 The information
required by this Item 11 is incorporated herein by reference from our proxy statement for our 2024 annual meeting of stockholders under
the headings "Executive Compensation" and "Director Compensation," which proxy statement will be filed within
120 days after the December 31, 2023, fiscal year end.

 ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 Except for the information regarding securities
authorized for issuance under equity compensation plans (which is set forth below), the information required by this Item 12 is incorporated
herein by reference from our proxy statement for our 2024 annual meeting of stockholders under the heading "Security Ownership of
Management and Certain Beneficial Owners," which proxy statement will be filed within 120 days after the December 31, 2023, fiscal
year end.

 The following table summarizes the number of shares
subject to currently outstanding equity awards, their weighted-average exercise price, and the number of shares available for future grants
under our equity compensation plans as of December 31, 2023.

 Equity Compensation Plan Information as of

 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

 121,000 (2)

 $
 5.83

 527,402 (3)

 Equity compensation
 plans not approved
 by security holders

 180,471 (4)

 5.27

 -

 Total

 301,471

 4.56

 527,402

 (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") or the 2013 Omnibus Equity Compensation Plan, as amended (the "2013 Plan"), which do not
have an exercise price.

 (2)
 Represents shares of common stock issuable upon exercise of stock options granted under the 2017 Equity
Incentive Plan (the "2017 Plan") and the 2013 Plan.

 (3)
 Includes 143,393 shares remaining available for issuance under the 2020 Plan, 348,009 shares remaining
available for issuance under the 2021 Plan, 36,000 shares remaining available for issuance under the 2017 Plan

 (4)
 Includes individual grants to employees and consultants for services rendered to the Company which were
not made under the Company's existing equity incentive plans.

 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

 The information required by this Item 13 is incorporated
herein by reference from our proxy statement for our 2024 annual meeting of stockholders under the heading "Certain Relationships
and Related Person Transactions," which proxy statement will be filed within 120 days after the December 31, 2023, fiscal year end.

 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 The information required by this Item 14 is incorporated
herein by reference from our proxy statement for our 2024 annual meeting of stockholders under the numbered proposal with the heading
"Ratification of the Appointment of our Independent Registered Public Accounting Firm," which proxy statement will be filed
within 120 days after the December 31, 2023, fiscal year end.

 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

 Exhibit No.

 Description

 3.1

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

 3.2

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

 3.3

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

 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 Company's 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 24, 2020 (incorporated herein by reference from Exhibit 3.1 to the Company's Current Report on Form 8-K filed on July 29, 2020)

 4.1

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

 4.2

 Form of Common Stock Purchase Warrant (incorporated herein by reference from Exhibit 4.3 to the Company's Registration Statement on Form S-1/A (File No. 333-234155) filed on May 22, 2020)

 4.3

 Form of Warrant for the Purchase of Shares of Common Stock (incorporated herein by reference from Exhibit 4.6 to the Company's Registration Statement on Form S-1/A (File No. 333-234155) filed on June 2, 2020)

 4.4

 Warrant Agent Agreement dated June 22, 2020 between the Company and West Coast Stock Transfer, Inc. (incorporated herein by reference from Exhibit 4.2 to the Company's Current Report on Form 8-K filed on June 22, 2020)

 4.5

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

 4.6

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

 4.7

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

 4.8*

 Description of Securities

 10.1#

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

 10.2#

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

 10.3#

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

 10.4#

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

 10.5#

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

 10.6#

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

 10.7#

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

 10.8#

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

 10.9#

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

 10.10#

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

 10.11#

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

 10.12#

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

 10.13#

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

 10.14#

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

 10.15#

 LaserLock Technologies, Inc. 2013 Omnibus Equity Compensation Plan (incorporated herein by reference from the Company's Definitive Proxy Statement filed on November 19, 2013)

 10.16#

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

 10.16.1#

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

 10.17#

 2020 Equity Incentive Plan (incorporated herein by reference from Exhibit 4.4 to the Company's Registration Statement on Form S-8 (File No. 333-249520) filed on October 16, 2020)

 10.17.1#

 First Amendment to the VerifyMe, Inc. 2020 Equity Incentive Plan (incorporated herein by reference to the Company's Definitive Proxy Statement filed Schedule 14A filed on April 4, 2022)

 10.17.2#

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

 10.18#

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

 10.19#

 Non-Qualified Stock Option Agreement dated August 2017 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.14 to the Company's Registration Statement on Form S-1 (File No. 333-234155) filed on October 10, 2019)

 10.20#

 Non-Qualified Stock Option Agreement dated April 17, 2018 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.13 to the Company's Registration Statement on Form S-1 (File No. 333-234155) filed on October 10, 2019)

 10.21#

 Amendment to Non-Qualified Stock Option Agreement dated April 16, 2020 to that Non-Qualified Stock Option Agreement dated August 2017 and that Non-Qualified Stock Option Agreement dated April 17, 2018 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.12 to the Company's Registration Statement on Form S-1 (File No. 333-237950) filed on May 1, 2020)

 10.22#

 Incentive Stock Option Agreement dated August 14, 2019 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.15 to the Company's Registration Statement on Form S-1 (File No. 333-234155) filed on October 10, 2019)

 10.23#

 Incentive Stock Option Agreement dated March 11, 2019 between the Company and Margaret Gezerlis (incorporated herein by reference from Exhibit 10.16 to the Company's Registration Statement on Form S-1 (File No. 333-234155) filed on October 10, 2019)

 10.24#

 Incentive Stock Option Agreement dated January 7, 2020 between the Company and Margaret Gezerlis (incorporated herein by reference from Exhibit 10.15 to the Company's Registration Statement on Form S-1 (File No. 333-237950) filed on May 1, 2020)

 10.25#

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

 10.26#

 Restricted Stock Agreement dated April 16, 2020 between the Company and Patrick White (incorporated herein by reference from Exhibit 10.19 to the Company's Registration Statement on Form S-1 (File No. 333-237950) filed on May 1, 2020)

 10.27#

 Form of Director Non-Qualified Stock Option Agreement (immediate vesting) (incorporated herein by reference from Exhibit 10.20 to the Company's Registration Statement on Form S-1 (File No. 333-237950) filed on May 1, 2020)

 10.28#

 Form of Director Non-Qualified Stock Option Agreement (quarterly vesting) (incorporated herein by reference from Exhibit 10.21 to the Company's Registration Statement on Form S-1 (File No. 333-237950) filed on May 1, 2020)

 10.29#

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

 10.30#

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

 10.31#

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

 10.32#

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

 10.33#

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

 10.34#

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

 10.35#

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

 10.36#

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

 10.37#

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

 10.38

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

 10.39

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

 10.40

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

 10.41

 Lease Guarantee between VerifyMe, Inc. and Mordo, LLC, dated April 22, 2022 (incorporated herein by reference from Exhibit 10.10 to the Company's Current Report on Form 8-K filed on April 26, 2022)

 10.42

 Professional Services Agreement between PeriShip Global (as successor to PeriShip, LLC) and FedEx Corporate Services, Inc. dated June 1, 2019 (incorporated herein by reference to Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q filed on August 15, 2022)

 10.43

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

 10.44

 Amendment to Professional Services Agreement with FedEx Corporate Services, Inc. dated August 25, 2022 (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on November 10, 2022)

 10.45

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

 10.46

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

 10.47

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

 10.48

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

 10.49

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

 10.50

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

 10.51

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

 10.52

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

 10.53

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

 21.1*

 Subsidiaries of VerifyMe, Inc.

 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

 101.INS*

 101.SCH*

 101.CAL*

 101.DEF*

 101.LAB*

 101.PRE*

 Cover Page Interactive Data File

 * Filed or furnished herewith, as applicable

 # Denotes management compensation plan or contract

 ITEM 16. FORM 10-K SUMMARY

 None.

 SIGNATURES

 Pursuant to the requirements of Section 13
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.

 By:

 /s/ Adam Stedham

 Adam Stedham

 Chief Executive Officer and President

 Date: March 29, 2024

 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

 Adam Stedham

 ( Principal Executive Officer)

 /s/ Nancy Meyers

 Executive Vice President and Chief Financial Officer

 Nancy Meyers

 ( Principal Financial Officer and

 Principal Accounting Officer)

 /s/ Scott Greenberg

 Director and Chairman

 Scott Greenberg

 /s/ Marshall Geller

 Director

 Marshall Geller

 /s/Howard Goldberg

 Director

 Howard Goldberg

 /s/ Arthur Laffer

 Director

 Arthur Laffer

 /s/ David Edmonds

 Director

 David Edmonds

 INDEX TO

 FINANCIAL STATEMENTS

 CONTENTS

 PAGE

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 206)

 CONSOLIDATED BALANCE SHEETS

 CONSOLIDATED STATEMENTS OF OPERATIONS

 CONSOLIDATED COMPREHENSIVE LOSS

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To the Shareholders and Board of Directors of

 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, 2023 and 2022, and
the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for the years then ended,
and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of their operations
and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 Basis for Opinion

 These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's 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

 The critical audit matters are matters arising
from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee
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

 F- 1

 Consolidated Balance Sheets

 (In thousands, except share data)

 ASSETS

 CURRENT ASSETS

 Cash and cash equivalents including restricted cash

 $
 3,095

 $
 3,411

 Accounts
 receivable, net of allowance for credit loss reserve, $ 165 and $ 37 as of December 31, 2023 and
 December 31, 2022, respectively

 3,017

 4,448

 Unbilled revenue

 1,282

 1,185

 Prepaid expenses and other current assets

 Inventory

 TOTAL CURRENT ASSETS

 7,686

 9,458

 PROPERTY AND EQUIPMENT, NET

 $

 $

 RIGHT OF USE ASSET

 INTANGIBLE ASSETS, NET

 6,927

 6,545

 GOODWILL

 5,384

 3,988

 TOTAL ASSETS

 $
 20,705

 $
 20,752

 LIABILITIES AND STOCKHOLDERS' EQUITY

 CURRENT LIABILITIES

 Term note, current

 $

 $

 Accounts payable

 3,310

 3,912

 Other accrued expense

 Lease liability- current

 Contingent liability-current

 -

 TOTAL CURRENT LIABILITIES

 5,141

 5,429

 LONG-TERM LIABILITIES

 Contingent liability, non-current

 $

 $
 -

 Long-term lease liability

 Long-term derivative liability

 -

 Term note

 1,375

 Convertible note – related party

 -

 Convertible note

 -

 TOTAL LIABILITIES

 $
 8,174

 $
 7,166

 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, 2023 and December 31, 2022, respectively

 -

 -

 Series B Convertible Preferred Stock, $ 0.001 par value; 85 shares authorized;
 0.85 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

 -

 -

 Common stock, $ 0.001 par value; 675,000,000 shares authorized; 10,453,315
and 9,341,002 shares issued, 10,123,964 and 8,951,035 shares outstanding as of December 31, 2023 and December 31, 2022, respectively

 Additional paid in capital

 95,031

 92,987

 Treasury
stock as cost; 329,351 and 389,967 shares at December 31, 2023 and December 31, 2022, respectively

 ( 659
)

 ( 949
)

 Accumulated deficit

 ( 81,849
)

 ( 78,459
)

 Accumulated other comprehensive loss

 ( 2
)

 ( 3
)

 STOCKHOLDERS' EQUITY

 12,531

 13,586

 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 $
 20,705

 $
 20,752

 F- 2

 Consolidated Statements of Operations

 (In thousands, except per share data)

 NET REVENUE

 $
 25,313

 $
 19,576

 COST OF REVENUE

 16,310

 13,088

 GROSS PROFIT

 9,003

 6,488

 OPERATING EXPENSES

 General and administrative (a)

 10,586

 8,428

 Research and development

 Sales and marketing (a)

 1,638

 1,718

 Total Operating expenses

 12,331

 10,235

 LOSS BEFORE OTHER INCOME (EXPENSE)

 ( 3,328
)

 ( 3,747
)

 OTHER (EXPENSE) INCOME

 Interest expenses, net

 ( 161
)

 ( 88
)

 Unrealized gain on equity investment

 -

 Change in fair value of contingent consideration

 -

 Loss on equity investment

 ( 100
)

 ( 10,932
)

 Other (expense) income, net

 ( 2
)

 Gain on extinguishment of debt

 -

 TOTAL OTHER EXPENSE, NET

 ( 62
)

 ( 10,651
)

 NET LOSS

 $
)

 $
)

 LOSS PER SHARE

 BASIC

 ( 0.35
)

 ( 1.70
)

 DILUTED

 ( 0.35
)

 ( 1.70
)

 WEIGHTED AVERAGE COMMON SHARE OUTSTANDING

 BASIC

 9,766,469

 8,466,075

 DILUTED

 9,766,469

 8,466,075

 (a)
 Includes share-based compensation of $1,675 thousand for the year ended December 31, 2023, and $1,468 thousand for the year ended
December 31, 2022.

 F- 3

 Consolidated Statements of Comprehensive Loss

 NET LOSS

 $
)

 $
)

 Change in fair value of interest rate, swap

 ( 3
)

 Foreign currency translation adjustments

 ( 6
)

 -

 TOTAL COMPREHENSIVE LOSS

 $
 ( 3,389
)

 $
 ( 14,401
)

 F- 4

 Consolidated Statements of Cash Flows

 CASH FLOWS FROM OPERATING ACTIVITIES

 Net loss

 $
)

 $
)

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

 Allowance for bad debt

 Stock based compensation

 Loss on equity investment

 10,932

 Change in fair value of contingent consideration

 ( 201
)

 -

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

 1,475

 1,323

 Loss on disposal of equipment

 -

 Impairments

 -

 Unrealized gain on equity investment

 -

 ( 12
)

 Gain on extinguishment of debt

 -

 ( 326
)

 Amortization and depreciation

 1,134

 Unrealized gain on foreign currency transactions

 ( 25
)

 -

 Changes in operating assets and liabilities:

 Accounts receivable

 1,295

 ( 3,352
)

 Unbilled revenue

 ( 96
)

 ( 1,185
)

 Inventory

 ( 57
)

 ( 29
)

 Prepaid expenses and other current assets

 ( 77
)

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

 ( 531
)

 3,621

 Net cash provided by (used) in operating activities

 ( 2,551
)

 CASH FLOWS FROM INVESTING ACTIVITIES

 Equity received from SPAC equity investment

 -

 Purchase of patents

 ( 62
)

 ( 40
)

 Leasehold improvements

 ( 8
)

 -

 Purchase of office equipment

 ( 27
)

 -

 Cash paid in business combination

 ( 363
)

 ( 7,500
)

 Deferred implementation costs

 ( 58
)

 ( 140
)

 Capitalized software costs

 ( 677
)

 ( 236
)

 Net cash used in investing activities

 ( 1,195
)

 ( 7,884
)

 CASH FLOWS FROM FINANCING ACTIVITIES

 Proceeds from public offering of securities

 $
 -

 $
 4,528

 Proceeds from line of credit

 1,800

 -

 Proceeds from convertible debt

 1,100

 -

 Proceeds from issuance of note payable

 -

 2,000

 Exercise of pre-funded warrants

 -

 Proceeds from SPP Plan

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

 ( 36
)

 ( 34
)

 Increase in treasury shares (share repurchase program)

 ( 10
)

 ( 291
)

 Repayment of debt and line of credit

 ( 2,300
)

 ( 1,882
)

 Net cash provided by financing activities

 4,424

 Effect of exchange rate changes on cash

 -

 NET DECREASE IN CASH AND

 CASH EQUIVALENTS INCLUDING RESTRICTED CASH

 ( 316
)

 ( 6,011
)

 CASH AND CASH EQUIVALENTS INCLUDING RESTRICTED CASH- BEGINNING OF PERIOD

 3,411

 9,422

 CASH AND CASH EQUIVALENTS INCLUDNG RESTRICTED CASH - END OF PERIOD

 $
 3,095

 $
 3,411

 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 Cash paid during the period for:

 Interest

 $

 $

 Income taxes

 $
 -

 $
 -

 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

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

 $
 -

 $

 Change in fair value of interest rate, swap

 $

 $
 ( 3
)

 F- 5

 Consolidated Statements of Stockholders' Equity

 (In thousands, except share data)

 Preferred

 Preferred

 Common

 Treasury

 Stock

 Stock

 Stock

 Additional

 Stock

 Paid-In

 Accumulated Other

 Accumulated

 Capital

 Comprehensive
 Loss

 Deficit

 Total

 Balance at December 31, 2021

 -

 -

 0.85

 -

 7,196,677

 86,059

 223,956

 ( 838
)

 -

 ( 64,061
)

 21,167

 Restricted stock awards, net of shares withheld for employee tax

 -

 -

 -

 -

 29,688

 -

 -

 -

 -

 -

 Restricted stock units, net of shares withheld for employee tax

 -

 -

 -

 -

 -

 -

 1,084

 -

 -

 -

 -

 1,084

 Stock Purchase Plan

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Common stock issued in relation to Stock Purchase Plan

 -

 -

 -

 -

 53,895

 -

 ( 78
)

 ( 53,895
)

 -

 -

 Common stock issued in relation to private placement

 -

 -

 -

 -

 880,208

 4,526

 -

 -

 -

 -

 4,528

 Common stock issued for services

 -

 -

 -

 -

 30,000

 -

 -

 -

 -

 -

 Common stock issued in relation to Acquisition

 -

 -

 -

 -

 305,473

 -

 -

 -

 -

 -

 Repurchase of Common Stock

 -

 -

 -

 -

 ( 219,906
)

 -

 -

 219,906

 ( 291
)

 -

 -

 ( 291
)

 Exercise of Pre-funded Warrants

 -

 -

 -

 -

 675,000

 -

 -

 -

 -

 -

 Accumulated other comprehensive loss

 -

 -

 -

 -

 -

 -

 -

 -

 -

 ( 3
)

 ( 3
)

 Net loss

 -

 -

 -

 -

 -

 -

 -

 -

 -

)

)

 -

 -

 0.85

 -

 8,951,035

 92,987

 389,967

 ( 949
)

 ( 3
)

 ( 78,459
)

 13,586

 Preferred

 Preferred

 Common

 Treasury

 Stock

 Stock

 Stock

 Additional

 Stock

 Paid-In

 Accumulated Other

 Accumulated

 Capital

 Comprehensive Loss

 Deficit

 Total

 -

 -

 0.85

 -

 8,951,035

 92,987

 389,967

 ( 949
)

 ( 3
)

 ( 78,459
)

 13,586

 Restricted stock awards, net of shares withheld for employee tax

 -

 -

 -

 -

 499,444

 -

 -

 -

 -

 -

 Restricted Stock Units, net of shares withheld for employee tax

 -

 -

 -

 -

 123,989

 -

 -

 -

 -

 -

 Common stock issued in relation to Stock Purchase Plan

 -

 -

 -

 -

 70,047

 -

 ( 77
)

 ( 61,302
)

 -

 -

 Common stock issued for services

 -

 -

 -

 -

 133,654

 -

 -

 -

 -

 -

 Common stock issued in relation to Acquisition

 -

 -

 -

 -

 353,492

 -

 -

 -

 -

 -

 Repurchase of Common Stock

 -

 -

 -

 -

 ( 6,201
)

 -

 -

 6,201

 ( 10
)

 -

 -

 ( 10
)

 Treasury stock retired

 -

 -

 -

 -

 -

 -

 ( 89
)

 ( 5,515
)

 -

 -

 -

 Cancellation of Common stock

 -

 -

 -

 -

 ( 1,496
)

 -

 -

 -

 -

 -

 -

 -

 Accumulated other comprehensive Loss

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 Net loss

 -

 -

 -

 -

 -

 -

 -

 -

 -

)

)

 -

 -

 0.85

 -

 10,123,964

 95,031

 329,351

 ( 659
)

 ( 2
)

 ( 81,849
)

 12,531

 F- 6

 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Nature of the Business

 VerifyMe, Inc. ("VerifyMe") was incorporated
in the State of Nevada on November 10, 1999. VerifyMe, together with its subsidiaries, including PeriShip Global LLC ("PeriShip
Global") and Trust Codes Global Limited ("Trust Codes Global"), (together the "Company," "we,"
"us," or "our") is based in Lake Mary, Florida and its common stock, par value $ 0.001 per share, and warrants
to purchase common stock are traded on The Nasdaq Capital Market ("Nasdaq") under the trading symbols "VRME" and
"VRMEW," respectively.

 The company operates a Precision Logistics Segment
and an Authentication Segment to provide specialized logistics for time-and-temperature sensitive products, as well as item level
traceability, anti-diversion and anti-counterfeit protection, brand protection and enhancement technology solutions. Through our Precision
Logistics segment, we provide a value-added service for sensitive parcel management driven by a proprietary software platform that provides
predictive analytics from key metrics such as pre-shipment weather analysis, flight-tracking, sort volumes, and traffic, delivered to
customers via a secure portal. The portal provides real-time visibility into shipment transit and last-mile events which is supported
by a service center. Through our Authentication segment our technologies enable brand owners to gather business intelligence through the
supply chain, cross-sell products, detect counterfeit activities, monitor product diversion, and build brand loyalty utilizing our unique
dynamic codes which are read by consumers with their smart phones. Further information regarding our business segments is discussed below:

 The Company's activities are subject to
significant risks and uncertainties. See the "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections in this report.

 Reclassifications

 Certain amounts presented
for the year ended December 31, 2022, reflect reclassifications made to conform to the presentation in our current reporting
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 subsidiaries PeriShip Global and Trust Codes Global. All significant
intercompany balances and transactions have been eliminated upon consolidation. The consolidated financial statements are presented in
accordance with accounting principles generally accepted in the United States of America ("GAAP").

 Use of Estimates

 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 November
2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public
entities with a single reportable segment to provide all the disclosures required by this standard and all existing segment disclosures
in Topic 280 on an interim and annual basis, including new requirements to disclose significant segment expenses that are regularly provided
to the chief operating decision maker ("CODM") and included within the reported measure(s) of a segment's profit or loss,
the amount and composition of any other segment items, the title and position of the CODM, and how the CODM uses the reported measure(s)
of a segment's profit or loss to assess performance and decide how to allocate resources. The guidance is effective for annual periods
beginning after December 15, 2023, and interim periods beginning after December 15, 2024, applied retrospectively with early adoption
permitted. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements and disclosures.

 In October
2021, the FASB issued Accounting Standards Update No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts
with Customers ("ASU 2021-08"). ASU 2021-08 amends ASC 805 to require acquiring entities to apply Topic 606 to recognize
and measure contract assets and contract liabilities in a business combination. The Company adopted the new standard beginning January
1, 2023, and did not have an effect on its financial position, results of operations or cash flows.

 F- 7

 Fair Value of Financial Instruments

 The Company's financial instruments consist
of accounts receivable, unbilled revenue, accounts payable, notes payable and accrued expenses, equity investments, and long-term derivative
liabilities. The carrying value of accounts receivable, unbilled revenue, accounts payable and accrued expenses approximate their fair
value because of their short maturities. The Company believes the carrying amount of its notes payable approximates fair value based
on rates and other terms currently available to the Company for similar debt instruments.

 The Company follows FASB ASC 820, "Fair
Value Measurements and Disclosures," and applies it to all assets and liabilities that are being measured and reported on a fair
value basis. The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following
three categories:

 Level 1: Quoted market prices in active markets
for identical assets or liabilities

 Level 2: Observable market-based inputs or unobservable
inputs that are corroborated by market data

 Level 3: Unobservable inputs that are not corroborated by market data

 The level in the fair value within which a fair
value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

 The following table presents the Company's
financial instruments that are measured and recorded at fair value on the Company's balance sheets on a recurring basis, and their
level within the fair value hierarchy as of December 31, 2023 and December 31, 2022.

 Amounts in Thousands ('000)

 Schedule of fair value assets measured on recurring basis

 Short Term Investment

 Derivative Asset
(Liability)

 Contingent Consideration

 (Level 1)

 (Level 2)

 (Level 3)

 Balance as of December 31, 2022

 $

 ( 3
)

 -

 Loss on fair value recognized in other income (expense)

 ( 100
)

 -

 -

 Contingent consideration at issuance

 -

 -

 ( 1,125
)

 Change in fair value of contingent consideration

 -

 -

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

 -

 -

 $
 -

 $

 $
 ( 924
)

 F- 8

 Variable Interest Entity

 The Company
determined that G3 VRM Acquisition Corp. (NASDAQ: GGGVU) (the "SPAC", see Note 2 – Equity Investments), a Delaware corporation
and special purpose acquisition company, was a variable interest entity ("VIE") in which the Company had a variable interest
but was not the primary beneficiary. Making the determination as to whether a VIE should be consolidated requires judgement in assessing
if the Company is the primary beneficiary. To make this determination, the Company evaluated its power to direct the activities that most
significantly impacted the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the
VIE that could potentially be significant to the SPAC. The Company concluded that it was not the primary beneficiary of the VIE and as
such, did not consolidate the SPAC. The Company reassessed its evaluation of whether an entity is a VIE and if it continues to be a VIE,
whether the Company is the primary beneficiary of the VIE, on an ongoing basis based on the current facts and circumstances surrounding
the entity. The SPAC was unable to complete its initial business combination within 12 months from the closing of the IPO, and the Sponsor
Entity made the decision not to fund the extension and did not deposit additional funds into the trust account. As a result, the SPAC
was dissolved, and liquidated according to its charter. The SPAC redeemed 100% of the public shares for cash, the rights have expired
worthless, and the founder shares and the private placement securities have become worthless.

 Segment Reporting

 Operating segments are defined as components of
an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or
decision-making group, in deciding the method by which to allocate resources and assess performance. The Company has two reportable segments,
namely, (i) Precision Logistics (formerly PeriShip Global) and (ii) Authentication (formerly VerifyMe Solutions). See Note 16 Segment
Reporting, for further discussion of the Company's segment reporting structure.

 F- 9

 Business Combinations

 The Company applies the provisions of Accounting
Standard Codification ("ASC") Topic 805, Business Combinations, in the accounting for business acquisitions. ASC 805 requires
the Company to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values.
Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values
of the identifiable assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately
apply preliminary value to assets acquired and liabilities assumed at the acquisition date, where applicable, these estimates are inherently
uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition
date, the Company records adjustments in the current period, rather than a revision to a prior period. Upon the conclusion of the measurement
period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments
are recorded in the Consolidated Statements of Operations. Accounting for business combinations requires management to make significant
estimates and assumptions, especially at the acquisition date, including estimates for intangible assets where applicable. Although the
Company believes the assumptions and estimates made have been reasonable and appropriate, they are based in part on information obtained
from management of the acquired companies and are inherently uncertain. Unanticipated events and circumstances may occur that may affect
the accuracy or validity of such assumptions, estimates, or actual results.

 Basic and Diluted Net Loss per Share of Common Stock

 The Company follows Financial Accounting Standards
Board ("FASB") ASC 260, "Earnings Per Share," when reporting earnings per share resulting in the presentation
of basic and diluted earnings per share. Because the Company reported a net loss for each of the periods presented, common
stock equivalents, including preferred stock, stock options and warrants were anti-dilutive; therefore, the amounts reported for basic
and diluted loss per share were the same.

 For the year ended December 31, 2023, there
were shares potentially issuable, that could dilute basic earnings per share in the future that were excluded from the calculation
of diluted earnings per share because their inclusion would have been anti-dilutive to the Company's losses during the years
presented. For the year ended December 31, 2023, there were approximately 8,286,000
anti-dilutive shares consisting of 1,439,000
unvested performance restricted stock units, 816,000
restricted stock units, restricted stock awards and options under the stock purchase plan, 301,000
shares issuable upon exercise of stock options, 4,629,000 shares
issuable upon exercise of warrants, 957,000
shares issuable upon conversion of convertible debt, and 144,000
shares issuable upon conversion of preferred stock.

 F- 10

 Restricted Cash

 The following table provides a reconciliation
of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts
in the consolidated statements of cash flows (dollars in thousands):

 Schedule of restricted cash

 As of

 December 31,2022

 Cash and cash equivalents

 $
 3,032

 $
 3,348

 Restricted cash

 Total cash and cash equivalents including restricted cash

 $
 3,095

 $
 3,411

 The Company classifies cash and cash equivalents
that are restricted from operating use for the next twelve months as restricted cash. As of December 31, 2023, and December 31,
2022, the Company held $ 63 thousand subject to restrictions.

 Concentration of Credit Risk Involving
Cash and Cash Equivalents

 The Company's cash and cash equivalents
are held at various financial institutions. At times, the Company's 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 Company's customers were to deteriorate, resulting in an impairment of their ability
to make payments, such allowances may be required. The Company recognized $ 139 thousand and $ 37 thousand for allowance for credit losses
as of December 31, 2023, and 2022, respectively.

 Equity Investments

 When the Company does not have a controlling
financial interest in an entity but can exert influence over the entity's operations and financial policies, the investment is
accounted for either (i) under the equity method of accounting or (ii) at fair value by electing the fair value option available under
applicable generally accepted accounting policies. The Company has elected the fair value option for its equity security under prepaid
expenses and other current assets on the Consolidated Balance Sheets, as it has determined the fair value best reflects the economic
performance of the equity investment. Changes in unrecognized gain or loss of the fair value of the equity investments are included in
Other income (expense) on the accompanying Consolidated Statements of Operations.

 Inventory

 Inventory principally consists of canisters and
pigments and is stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds
the fair value of the assets. During the year ended December 31, 2023, the Company impaired $ 100 thousand related to inventory in our
Authentication segment, related to raw material to record at fair market value.

 Equipment for Lease

 Equipment for lease principally consists of costs
associated with the development, certification and production of the VerifyChecker and the VerifyAuthenticator TM Smartphone
Authenticator technology. These technologies are leased to customers typically for a period of one year in length with automatically renewable
leases cancellable by either party by written notice provided 90 days in advance. We examined the effect of Accounting Standards Update
("ASU") No. 2016-02- "Lease (Topic 842)" and determined the impact is not material. Our policy is to capitalize
the costs related to this equipment and depreciate on a straight-line basis over the estimated lives of the equipment which was determined
to be 5 years.

 F- 11

 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 the Financial
Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350 "Hosting Arrangements
and Internally Used Software." Costs incurred prior to the establishment of technological feasibility are charged to research and
development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in
the process of being developed for market. Amortization of capitalized software development costs begins once the product is available
to the market. Capitalized software development costs are amortized over the estimated life of the related product, generally six years,
using the straight-line method. The Company will evaluate its software assets for impairment whenever events or change in circumstances
indicate that the carrying amount of such assets may not be recoverable.

 Long-Lived Assets

 The Company evaluates the recoverability of its
long-lived assets in accordance with ASC 360 "Property, Plant, and Equipment." The Company reviews long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived
assets are measured by a comparison of the carrying amount of an asset to future cash flows expected to be generated by the asset, undiscounted
and without interest or independent appraisals. If such assets are considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the asset exceeds the fair value of the assets.

 Goodwill represents the excess of purchase price
over the fair value of net assets acquired in business combinations. Pursuant to ASC 350, the Company tests goodwill for impairment
on an annual basis in the fourth quarter, or between annual tests, in certain circumstances. Under authoritative guidance, the Company
first assessed qualitative factors to determine whether it was necessary to perform the quantitative goodwill impairment test.
The assessment considers factors such as, but not limited to, macroeconomic conditions, data showing other companies in the industry
and our share price. An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on
a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. Events or changes in
circumstances which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors,
overall financial performance, other entity specific events and sustained decrease in share price.

 Derivative Instruments

 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 Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") 480, "Distinguish by Liabilities from Equity" (FASB ASC 480), and FASB
ASC 815, "Derivatives and Hedging" ("FASB ASC 815"). The result of this accounting treatment is that the fair
value of the embedded derivative, if required to be bifurcated, is marked-to-market at each balance sheet date and recorded as an asset
or liability. The change in fair value is recorded in the Consolidated Statement of Operations as a component of other income or expense.
Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair
value is reclassified to equity.

 F- 12

 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 instrument as assets or liabilities will be
classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument is expected
within 12 months of the balance sheet date.

 Foreign Currency Translation

 The functional currency of our New Zealand operations
is the local currency, New Zealand dollar (NZD). The translation of the foreign currency into U. S. dollars is performed for balance
sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using the weighted
average exchange rates prevailing during the year. The unrealized gains and losses resulting from such translation are included as a
component of comprehensive income. Translation gains and losses arising from currency exchange rate fluctuations on transactions denominated
in a currency other than the local functional currency are included in "General and administrative" on our Consolidated Statements
of Operations. The unrealized foreign currency transaction losses for the years ended December 31, 2023 and December 31, 2022, were $ 5
thousand and $ 0 thousand, respectively.

 Revenue Recognition

 The Company accounts for revenues according to
Accounting Standards Codification ("ASC") Topic 606, " Revenue from Contracts with Customers" which
establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from
the entity's contracts to provide goods or services to customers.

 The Company applies the following five steps,
separated by reportable segments, in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations
under each of its agreements. For more detailed information about reportable segments, see Note 16 – Segment reporting.

 identify the contract with a customer;

 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.

 Our Precision Logistics segment consists of two
service lines, Proactive and Premium. Under our Proactive service line, clients pay us directly for carrier service coupled with our proactive
logistics service. Terms typically range 7 days and no longer than 30 days. The Company has determined it is the principal and recognizes
shipment fees in gross revenue. Under our Premium service line, we provide complete white-glove shipping monitoring and predictive analytics
services. This service includes customer web portal access, weather monitoring, temperature control, full service center support and last
mile resolution. Payment terms are typically 30 - 45 days.

 Under both service lines in our Precision Logistics
segment, our performance obligation is met, and revenue is recognized, when the packages are delivered. The transaction fees consist of
fixed consideration made up of amounts contractually billed to the customer. There are no variable considerations in the transaction fee,
in either service line.

 Our Authentication segment primarily consists
of our brand protection service line which consists of a custom suite of products that offer clients traceability and brand solutions.
Terms typically range between 30 and 90 days. Our performance obligation is met, and revenue is recognized, when our products are shipped
or delivered depending on the specific agreement with the customer. The transaction fee is made up of fixed consideration based on the
related purchase order or agreement. Warranties and other variable considerations are analyzed by the Company, in terms of historical
warranties, current economic trends, and changes in customer demand, and have been determined to be insignificant in the twelve months
ended December 31, 2023.

 F- 13

 Stock-Based Compensation

 We account for stock-based compensation under
the provisions of FASB ASC 718, "Compensation—Stock Compensation", which requires the measurement and recognition of
compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. 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 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 RSU's contractual life based on the appropriate probability distributions (which are based on commonly applied
Black Scholes inputs). The fair value was determined by taking the average of the grant date fair values under each Monte Carlo simulation
trial. We recognize compensation expense on a straight-line basis over the performance period and there is no ongoing adjustment or reversal
based on actual achievement during the period.

 F- 14

 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 ("ASU 2018-07"), which aligns accounting for share-based payments issued to nonemployees to
that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based
payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees.

 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 completed.

 Advertising Costs

 Advertising costs are expensed as incurred. Advertising
costs were $ 39 thousand and $ 60 thousand for the years ended December 31, 2023, and 2022, respectively, and are included in Sales and
Marketing on the Consolidated Statements of Operations.

 Research and Development Costs

 In accordance with FASB ASC 730, research and
development costs are expensed when incurred. Research and development costs for the years ended December 31, 2023, and 2022 were $ 107
thousand and $ 89 thousand, respectively.

 Income Taxes

 The Company follows FASB ASC 740, "Income
Taxes," when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements
and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in deferred tax assets and liabilities. Tax years from 2004 remain subject
to examination by major tax jurisdictions due the carryforward of unutilized NOLs.

 NOTE 2 – EQUITY INVESTMENTS

 In December 2021, the Company acquired 8,841 shares
of 10 % Cumulative Convertible Series D Preferred Stock at a price of $ 10.00 per share as payment for a customer's outstanding AR
balance of $ 88,410. This instrument is considered an equity security within the scope of Topic 321 since the issuing entity has the option
but no contractual obligation to redeem the preferred stock, and the Company can convert the preferred shares to common stock. During
the year ended December 31, 2023, the Company determined that it would not be able to redeem the value of its investment and recorded
a loss of $ 100 thousand bringing down the value of the equity investment to $ 0 as of December 31, 2023. The fair value of the equity investment
was $ 100 thousand as of December 31, 2022, and included in Prepaid expenses and other current assets on the accompanying Consolidated
Balance Sheets. The fair value of the equity investment is classified as Level 1 in the fair value hierarchy as the calculation is dependent
upon the quoted market price of the entity.

 On February 26, 2021, the Company formed VMEA
Holdings Inc. (the "Sponsor Entity"), a Delaware corporation that was the founder of G3 VRM Acquisition Corp. (the "SPAC")
that was being co-sponsored by the Company. The SPAC was formed for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

 On April 12, 2021, the Sponsor Entity converted
to a Delaware limited liability company, changed its name to "G3 VRM Holdings LLC" and a co-sponsor was added as a member
of the Sponsor Entity resulting in an equity interest of 44.40 % attributed to the Company. On July 6, 2021, the SPAC consummated
the IPO of 10,626,000 units (the "Units"), including 626,000 Units pursuant to the partial exercise of
the underwriter's over-allotment option, generating gross proceeds of $106,260 thousand. Each Unit consisted of one share of SPAC
common stock, $0.0001 par value, and one right to receive one-tenth (1/10) of a share of SPAC common stock upon the consummation of an
initial business combination. Simultaneously with the closing of the IPO, the SPAC consummated the Private Placement of an aggregate of 569,410 Units
with the Sponsor Entity purchasing 516,280 Units and Maxim Partners LLC purchasing 53,130 Units, generating total
proceeds of $ 5,694 thousand. Of this amount, the Company was the indirect beneficial owner of 229,228 Units purchased by
the Sponsor Entity for a total of $ 2,581 thousand. Upon consummation of the IPO, VerifyMe, as co-sponsor, indirectly through the
Sponsor Entity, beneficially owned approximately 9.42 % of the outstanding shares of the SPAC, which shares were subject to forfeiture
upon certain conditions and restrictions on transfer.

 F- 15

 As a result of ceasing to have a controlling financial
interest in the Sponsor Entity on April 12, 2021, the Company accounted for the Sponsor Entity as an equity investment and has elected
the fair value option.

 The SPAC was unable to complete its initial business
combination within 12 months from the closing of the IPO and the Sponsor Entity decided not to fund the extension and did not deposit
additional funds into the trust account. As a result, the SPAC was dissolved and liquidated in accordance with its charter. The SPAC redeemed
100% of the public shares for cash on July 19, 2022, the rights expired worthless, and the founder shares and private placement securities
became worthless. The SPAC was dissolved on July 29, 2022, and no distributions were made to the Sponsors. In December 2022, it was determined
that the costs to dissolve the SPAC were ultimately less than the remaining assets of the SPAC and the SPAC made a distribution to the
Company of $32 thousand.

 The fair value of the equity investment was $ 0 million
as of December 31, 2022. The fair value of the equity investment was classified as Level 3 in the fair value hierarchy as the calculation
was dependent upon company specific adjustments to the observable trading price of the SPAC's public units and shares, and related
risk of forfeiture should no business combination occur. The Company recognized a loss on equity investments of $ 10,932 thousand
for the year ended December 31, 2022, included in the Loss on equity investments in the accompanying Consolidated Statements of Operations.

 NOTE 3 – REVENUE

 Revenue by Category

 The following series of tables present our revenue disaggregated by
various categories (dollars in thousands).

 Schedule of disaggregation of revenue

 Consolidated

 Revenue

 2023

 2022

 2023

 2022

 2023

 2022

 Proactive services

 $
 -

 $
 -

 $
 19,879

 $
 15,202
 (a)

 $
 19,879

 $
 15,202

 Premium services

 -

 -

 4,773

 2,988
 (a)

 4,773

 2,988

 Brand protection services

 1,386

 -

 -

 1,386

 $

 $
 1,386

 $
 24,652

 $
 18,190

 $
 25,313

 $
 19,576

 (a)
 Revenue is our Precision Logistics Segment in 2022 includes revenue since the acquisition date of our PeriShip Global business, on
April 22, 2022.

 Contract Balances

 The timing of revenue recognition, billings and
cash collections results in unbilled revenue (contract assets) and deferred revenue (contract liabilities) on the consolidated balance
sheets. Amounts charged to our clients become billable according to the contract terms, which usually consider the delivery completion.
Unbilled amounts will generally be billed and collected within 30 days but typically no longer than 60 days. When we advance
bill clients prior to the work being performed, generally, such amounts will be earned and recognized in revenue within twelve months.
These assets and liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting
period. Changes in the contract asset and liability balances during the year ended December 31, 2023, were not materially impacted by
any other factors.

 Applying the practical expedient in ASC Topic
606, we recognize the incremental costs of obtaining contracts (i.e. sales commissions) as an expense when incurred if the amortization
period of the assets that we otherwise would have recognized is one year or less. As of December 31, 2023, we did not have any capitalized
sales commissions.

 For all periods presented, contract liabilities
were not significant.

 F- 16

 The following table provides information about
contract assets from contracts with customers:

 Schedule of contract assets

 Contract Asset

 In Thousands

 2023

 2022

 Beginning balance, January 1

 $
 1,185

 $
 -

 Contract asset additions

 3,598

 2,502

 Reclassification to accounts receivable, billed to customers

 ( 3,501
)

 ( 1,317
)

 Ending balance (1)

 $
 1,282

 $
 1,185

 ______________

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

 F- 17

 NOTE 4 – BUSINESS COMBINATION

 Trust Codes Global Limited

 On March 1, 2023, we acquired, through Trust
Codes Global, the business and certain assets of Trust Codes Limited ("Trust Codes"), specializing in brand protection,
anti-counterfeiting, and consumer engagement technology with an expertise in the food and agriculture industry. Trust Codes Global
uses unique QR codes or IoT, coupled with GS1 standards to deliver cloud-based brand protection based on a unique per-item digital
identity to protect brand and product authenticity, increase data visualization of a product through the end to end supply chain,
and creates a data-drive engine to inform and educate consumers of the product. The Company accounted for the transaction as an
acquisition of a business under ASC 805 – Business Combination. The purchase price was approximately $ 1.0
million which consisted of $ 0.36
million in cash paid at closing and 353,492
shares of common stock of the Company, representing $ 0.65
million in stock consideration. In addition, the purchase agreement requires consideration contingent upon the achievement of
earnings targets during a five-year period subsequent to the closing of the acquisition. The earn-out consideration is estimated at
$ 1.1
million at the acquisition date, however the maximum amount of the payment is unlimited. The preliminary purchase price allocation
is subject to change and was finalized in the fourth quarter of 2023. The goodwill recognized is due to the
expected synergies from combining the operations of the acquiree with the Company. All of the goodwill recorded for financial
statement purposes is deductible for tax purposes. The Company incurred $ 278
thousand in relation to acquisition related costs which have been included in General and administrative, in the accompanying
Consolidated Statements of Operations. Trust Codes Global is included in the Authentication segment and the results of its
operations have been included in the consolidated financial statements beginning March 1, 2023. Since the acquisition date,
the Company has recorded $ 314
thousand of revenue relating to Trust Codes. The pro-forma financial information is immaterial to our results of
operations and impractical to provide.

 The following table summarizes the purchase price
allocation for the acquisition (dollars in thousands).

 Schedule of business acquisitions

 Cash

 $

 Fair value of contingent consideration

 1,125

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

 Total purchase price

 $

 2,113

 Amortization

 Period

 Purchase price allocation:

 Prepaid expenses

 $

 Property and Equipment, net

 ROU Asset

 Developed Technology

 8 years

 Trade Names/Trademarks

 18 years

 Customer Relationships

 10 years

 1,383

 Accounts payable and other accrued expenses

 ( 14

)

 Current lease liability

 ( 63

)

 Long term lease liability

 ( 108

)

 $

 2,113

 (a)
 Stock issued was calculated based
on the 15 day volume-weighted average price ("VWAP") through February 28, 2023 calculated at $1.8388.

 Contingent Consideration

 ASC Topic 805 requires that contingent consideration
to be recognized at fair value on the acquisition date and be re-measured each reporting period with subsequent adjustments recognized
in the consolidated statement of operations. We estimate the fair value of contingent consideration liabilities using an appropriate valuation
methodology, typically either an income-based approach or a simulation model, such as the Monte Carlo model, depending on the structure
of the contingent consideration arrangement. Contingent consideration is valued using significant inputs that are not observable in the
market which are defined as Level 3 inputs pursuant to fair value measurement accounting. We believe our estimates and assumptions are
reasonable; however, there is significant judgment involved. At each reporting date, the contingent consideration obligation is revalued
to estimated fair value, and changes in fair value subsequent to the acquisitions are reflected in income or expense in the consolidated
statements of operations, and could cause a material impact to, and volatility in, our results. Changes in the fair value of contingent
consideration obligations may result from changes in discount periods and rates and changes in the timing and amount of revenue and/or
earnings projections.

 F- 18

 As of December 31, 2023, contingent consideration
presented as current liability totaled $ 173 thousand. As of December 31, 2023, the Company recorded a non-current contingent consideration
totaling $ 751 thousand related to the acquisition of Trust Codes on the Consolidated Balance sheets and represents the portion of contingent
consideration estimated to be payable greater than twelve months from the balance sheet date.

 PeriShip LLC

 On April 22, 2022, we acquired, through PeriShip
Global, the business and certain assets of PeriShip, LLC ("PeriShip"), a value-added service provider for time and temperature
sensitive parcel management. PeriShip Global provides shipping logistics services utilizing proprietary predictive analytics software
and supporting call center services. Using our proprietary software platform, we provide real-time information and analysis to mitigate
supply chain flow interruption, delivering last-mile resolution for key markets, including the perishable healthcare and food industries.
The purchase price was $ 10.5 million which consisted of $ 7.5 million in cash paid at closing, a promissory note of $ 2.0 million
with a fixed interest rate of 6 % per annum on the unpaid principal balance, to be paid in three installments on the sixth, fifteenth,
and eighteenth month anniversaries of the closing, and 305,473 shares of common stock of the Company, representing $1.0 million in stock
consideration. The goodwill recognized is due to the expected synergies from combining the operations of the acquire with the Company.
All of the goodwill recorded for financial statement purposes is deductible for tax purposes. The acquired PeriShip business is included
in the Precision Logistics (formerly PeriShip Global Solutions) segment and the results of its operations have been included in the consolidated
financial statements beginning April 22, 2022.

 On September 22, 2022, the Company entered into
an agreement with the owner of PeriShip, LLC to resolve certain disputes among the parties, reduce the principal and interest on the promissory
note, repay the amended promissory note in full, and repurchased 61,000 shares of the Company's common stock (see Note 9). The Company
accounted for the agreement in accordance with Topic 250, through earnings, with the full amount included as a Gain on extinguishment
of debt on the accompanying Consolidated Statements of Operations for a total of $ 326 thousand, for the year ended December 31, 2022.

 The following table summarizes the purchase price
allocation for the acquisition (dollars in thousands).

 Schedule of
allocation for the acquisition

 Cash

 7,500

 Promissory note

 2,000

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

 Total purchase price

 10,474

 Amortization

 Period

 Purchase price allocation:

 Accounts receivable, net

 Prepaid expenses

 Developed Technology

 3,143

 6 years

 Trade Names/Trademarks

 1,111

 13 years

 Customer Relationships

 1,839

 10 years

 Non-Compete Agreement

 5 years

 Property and Equipment, net

 3,988

 Accounts payable and other accrued expenses

 ( 832

)

 10,474

 (1)
 Stock issued was calculated based on the 15 days prior to April 22, 2022, volume-weighted average price ("VWAP") calculated
at $3.2736.

 Unaudited Pro forma Financial Information

 The following unaudited proforma financial information
presents the combined results of operations of the Company and gives effect to the acquisition discussed above for the years ended December
31, 2022, as if the acquisition had occurred as of the beginning of the first period presented instead of on April 22, 2022.

 The pro forma financial information is presented
for illustrative purposes only and is not necessarily indicative of the results of operations that would have been realized if the acquisition
had been completed on January 1, 2022, nor does it purport to project the results of operations of the combined company in future periods.
The pro forma financial information does not give effect to any anticipated integration costs related to the acquired company during the
periods presented.

 F- 19

 The below table summarizes proforma financial
information for the Company, and the acquired PeriShip business, assuming the acquisition date of PeriShip occurred on January 1, 2022
(dollars in thousands):

 Schedule of financial information

 Description

 2022

 Revenues

 $
 25,397

 Net Income (loss)

 $
 ( 14,298
)

 NOTE 5 – INTANGIBLE ASSETS AND GOODWILL

 Goodwill represents costs in excess of values
assigned to the underlying net assets of acquired businesses. Intangible assets acquired are recorded at estimated fair value. Goodwill
is deemed to have an indefinite life and is not amortized but is tested for impairment annually, and at any time when events suggest an
impairment more likely than not has occurred. We test goodwill at the reporting unit level.

 ASC Topic 350, Intangibles - Goodwill
and Other (ASC Topic 350), permits an entity to first assess qualitative factors to determine whether it is more likely than
not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform
a quantitative goodwill impairment test. Under ASC Topic 350, an entity is not required to perform a quantitative goodwill
impairment test for a reporting unit if it is more likely than not that its fair value is greater than its carrying amount. A reporting
unit is an operating segment, or one level below an operating segment, as defined by U.S. GAAP.

 Determining the fair value of a reporting unit
is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue
growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market
conditions and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable
but are unpredictable and inherently uncertain. Actual future results may differ from those estimates. The timing and frequency of our
goodwill impairment tests are based on an ongoing assessment of events and circumstances that would indicate a possible impairment. We
will continue to monitor our goodwill and intangible assets for impairment and conduct formal tests when impairment indicators are present.

 Each of our two reportable segments represents
an operating segment under ASC Topic 280, Segment Reporting. We test our goodwill at the reporting unit level, or one level
below an operating segment, under ASC Topic 350, Intangibles - Goodwill and Other. We determined that we have two reporting
units for purposes of goodwill impairment testing, which represent our two reportable business segments, as discussed below.

 Changes in the carrying amount of goodwill by
reportable business segment for the year ended December 31, 2023, were as follows (in thousands):

 Schedule of goodwill by reportable business segment

 Total

 Net book value at

 January 1, 2023

 $
 -

 $
 3,988

 $
 3,988

 2023 Activity

 Acquisition of Trust Codes Global

 1,383

 -

 1,383

 Foreign currency translation

 -

 Net book value at

 $
 1,396

 $
 3,988

 $
 5,384

 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.

 F- 20

 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

 Gross
 Carrying

 Accumulated
 Amortization

 Net Carrying Amount

 Weighted
 Remaining
 Useful
Life (Years)

 Patents and Trademarks

 $
 2,002

 $
 ( 564
)

 $
 1,438

 Capitalized Software

 ( 109
)

 Customer Relationships

 1,908

 ( 317
)

 1,591

 Developed Technology

 3,632

 ( 938
)

 2,694

 Internally Used Software

 ( 62
)

 Non-Compete Agreement

 ( 65
)

 Deferred Implementation

 ( 24
)

 Total Intangible Assets

 $
 9,006

 $
 ( 2,079
)

 $
 6,927

 Patents and Trademarks

 $
 1,858

 $
 ( 445
)

 $
 1,413

 Capitalized Software

 ( 91
)

 Customer Relationships

 1,839

 ( 133
)

 1,706

 Developed Technology

 3,143

 ( 360
)

 2,783

 Internally Used Software

 ( 4
)

 Non-Compete Agreement

 ( 28
)

 Deferred Implementation

 ( 7
)

 Total Intangible Assets

 $
 7,613

 $
 ( 1,068
)

 $
 6,545

 Amortization expense for intangible assets was
$ 1,030 thousand and $ 657 thousand for the years ended December 31, 2023, and December 31, 2022, respectively. During the year ended December
31, 2023, the Company impaired certain assets related to its Developed Technology and Patents by $ 90 thousand, to bring the gross carrying
amount related to these assets to zero, as these technologies are no longer in use.

 Patents and Trademarks

 As of December 31, 2023, our current patent and
trademark portfolios consist of nine granted U.S. patents and two granted European patents, one validated in four countries (France,
Germany, United Kingdom, and Italy), and the second patent validated in three countries (France, Germany, and United Kingdom), three pending
U.S. and foreign patent applications, twenty-six registered U.S. trademarks (of which nineteen are in the name of VerifyMe, Inc., and
seven trademarks were acquired through our wholly owned subsidiary, PeriShip Global), two EU trademark registrations, one Colombian trademark
registration, one Australian trademark registration, one Japanese trademark registration, one Mexican trademark registration, one Singaporean
trademark registration, two UK trademark registrations, seven NZ trademark registration (of which six are in the name of Trust Codes Limited
and/or Trust Codes Global Limited), one OAPI (African Intellectual Property Organization) trademark registration (in the name of Trust
Codes Global Limited), and two pending US and foreign trademark applications. The Company abandoned two patents during the year ended
December 31, 2023.

 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,

 2024

 $
 1,134

 2025

 1,109

 2026

 1,105

 2027

 1,070

 2028

 Thereafter

 1,814

 Total

 $
 6,927

 As of December 31, 2023, our intangible assets
with definite lives had a weighted average remaining useful life of 8 years. We have no amortizable intangible assets with indefinite
useful lives.

 F- 21

 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, 2023, and 2022 is as follows (in thousands):

 Schedule of reconciliation of federal statutory tax rate

 Year Ended December 31,

 US

 2023

 2022

 Loss before income taxes

 Domestic

 $
 ( 2,612
)

 $
 ( 14,400
)

 Foreign

 ( 777
)

 -

 Total loss before income taxes

 ( 3,389
)

 ( 14,400
)

 Taxes under statutory US tax rates

 ( 712
)

 ( 3,024
)

 Increase (decrease) in taxes resulting from:

 Foreign taxes and rate differential

 ( 53
)

 -

 Increase (decrease) in valuation allowance

 ( 1,188
)

 Change in State tax rate

 ( 25
)

 ( 57
)

 Prior period true up

 5,045

 State taxes

 ( 119
)

 ( 776
)

 Income tax expense

 $
 -

 $
 -

 The increase in the valuation allowance during
the year ended December 31, 2023 was due primarily to the increase in our net operating losses which may not be utilized in the future.
The decrease in the Company's net valuation allowance in the year ended December 31, 2022 was due primarily to a realized loss in our
equity investment (See Note 2-Equity Investments), and to net operating losses which will expire unutilized due to limitations resulting
from application of Section 382 of the Internal Revenue Code of 1986, as amended ("IRC").

 Deferred income taxes reflect the net tax effects
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

 2023

 2022

 US

 Net operating loss carryforwards

 $
 6,318

 $
 6,495

 Restricted stock (RSA's, RSU's)

 Stock options

 Stock Purchase Plan (SPP)

 Depreciation

 ( 45
)

 ( 71
)

 Intangibles

 ( 27
)

 Acquisition transaction costs

 Capitalized research and development

 ( 1
)

 Unrealized gain on investment

 ( 1
)

 Bad debt

 Capital loss carryforward

 Accruals & other

 Dividend income

 ( 2
)

 Gross deferred tax assets

 $
 8,294

 $
 7,652

 Less valuation allowance

 ( 8,294
)

 ( 7,652
)

 Total deferred tax assets

 $
 -

 $
 -

 Deferred tax liabilities:

 Total deferred tax liabilities

 -

 -

 Net deferred tax assets / (liabilities)

 $
 -

 $
 -

 F- 22

 In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets may not be realized.
The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which
temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment. Based upon these factors, Management has placed a full valuation allowance
against all deferred tax assets, including net operating loss carryforwards, due to the uncertainty of future profitability.

 As of December 31, 2023, the Company has net operating
loss carryforwards of $ 22.7 million for tax purposes, which will be available to offset future taxable income. If not used, $7.5 million
of these carryforwards will expire beginning in 2024, and $15.2 million will carryforward indefinitely. As of the year ended December
31, 2022, Federal and state NOLs of $ 23.1 million and $ 0, respectively, will expire unutilized due to the limitations of Section 382,
leaving Federal and state NOL carryforwards of $24.4 million and $13.1 million, respectively.

 The Company completed the IRC Section 382 analysis,
in 2022, and determined that an ownership change occurred sufficient to impose additional limitations on the use of NOL carryforwards.
The Company has not completed the IRC Section 382 analysis in 2023 and is not aware of any indicators that may impose additional limitations
on the use of NOL carryforwards.

 Utilization of the net operating losses (NOL)
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.

 No tax benefit has been reported in the December
31, 2023, due to the uncertainty surrounding the realizability of the benefit.

 Uncertain Tax Positions

 As of December 31, 2023, and 2022 we had no uncertain
tax positions reflected on our balance sheet. The Company files income tax returns in U.S. federal, state and local jurisdictions, and
in one non-U.S. jurisdiction, and is subject to audit by tax authorities in those jurisdictions. The Company's tax years from 2004
are subject to examination by the United States and state taxing authorities due to the carryforward of unutilized NOLs.

 The Tax Cuts and Jobs Act of 2017 imposes a mandatory
repatriation tax on certain unremitted foreign earnings and provides a 100% deduction to domestic corporations for certain dividends received
from foreign corporations after Dec. 31, 2017. Therefore, we do not expect future dividends, if any, from the earnings of our foreign
subsidiary to result in U.S. federal income taxes. Deferred tax liabilities arising from the difference between the financial reporting
and income tax bases inherent in our foreign subsidiary, referred to as outside basis differences, have not been provided for U.S. income
tax purposes because we do not intend to sell, liquidate or otherwise trigger the recognition of U.S. taxable income with regard to our
investment in this foreign subsidiary. Determining the amount of U.S. deferred tax liabilities associated with outside basis differences
is not practicable at this time.

 In accordance with FASB
ASC 740 "Income Taxes", valuation allowances are provided against deferred tax assets, if based on the weight of available
evidence, some or all of the deferred tax assets may or will not be realized. The Company 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 $ 8.3 million at December
31, 2023. The Company did not utilize any NOL deductions for the year ended December 31, 2023.

 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, 2023, and December 31, 2022, respectively.

 The Company's 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, 2023,
and $ 0 in the fiscal year ended December 31, 2022.

 There are no taxes payable as of December 31,
2023, or December 31, 2022.

 F- 23

 NOTE 7— DEBT

 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 includes a four-year term note (the "Term
Note") for $2 million which matures in September of 2026 and requires equal quarterly payments of principal and interest. The Term
Note incurs interest per annum at a rate equal to the sum of Daily SOFR plus 3.1%. The RLOC and Term Note are guaranteed by 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 November 3, 2023, PeriShip Global
entered into a waiver and amendment to loan documents and received a waiver for certain events of default and entered into an amended
and restated loan agreement with PNC effective October 31, 2023, which provided amendments to a number of affirmative and restrictive
covenants applicable to PeriShip Global and extended the RLOC to September 30, 2024. PeriShip Global was in compliance with all
affirmative and restrictive covenants under the PNC Facility as of December 31, 2023.

 As of December 31, 2023, our short-term debt outstanding
under the Term Note was $ 500 thousand and total long-term debt outstanding under the Term Note was $ 875 thousand. During the year ended
December 31, 2023, the Company made a repayment of $ 500 thousand towards the principal of the outstanding Term Note. As
of December 31, 2022, our short-term debt outstanding under the Term Note was $ 0.5 million and total long-term debt outstanding under
the Term Note was $ 1.4 million.

 During the year ended December 31, 2023, $ 1,800
thousand was drawn on the RLOC, of which $ 1,800 thousand was repaid. As of December 31, 2023, $ 0 was outstanding on the RLOC.

 Effective
October 17, 2022, the Company entered into an interest rate swap agreement, with a notional amount of $ 1,958 thousand, effectively
fixing the interest rate on the Company's outstanding debt at 7.602 %. The Company has designated the intertest rate swap, expiring
September 2026, as a cash flow hedge and have applied hedge accounting. The fair value of the derivative asset and liability associated
with the interest rate swap are not significant as of December 31, 2023, and as of December 31, 2022, respectively.

 On April 22, 2022, the
Company issued a $ 2.0 million unsecured promissory note through our subsidiary PeriShip Global as part of the acquisition of the
PeriShip business. The note had a fixed interest rate of 6 % per annum on the unpaid principal balance, to be paid in three installments
on the sixth, fifteenth, and eighteenth month anniversaries of the closing. On September 22, 2022, the Company entered into an agreement
with the note holder whereby the Company repaid the outstanding principal balance and accrued interest outstanding on the note and redeemed
61,000 shares of its common stock from the holder of the note, for a total of $1.8 million, at which point the guarantee agreement entered
into by the Company in connection therewith was automatically terminated and has no further effect.

 The Company accounted
for the early extinguishment of debt in accordance with ASC 405-20 - Extinguishment of Liabilities, and recognized a gain
included in Gain on extinguishment of debt on the accompanying Consolidated Statements of Operations of $ 326 thousand for the year
ended December 31, 2022.

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. The notes are subordinated unsecured obligations
of the Company and accrue interest at a rate of 8% per year payable semiannually in arrears on February 25 and August 25 of each year,
beginning on February 25, 2024. The notes will mature on August 25, 2026, unless earlier converted or repurchased at a conversion price
of $1.15 per share of common stock. The Company may not redeem the notes prior to the maturity date. For the year ended December 31, 2023,
interest expense related to the convertible debt was $ 31 thousand. As of December 31, 2023, the amount outstanding on the convertible
debt was $ 1,100 thousand and included in Convertible note and Convertible note – related party on the accompanying Consolidated
Balance Sheets.

 NOTE 8
– CONVERTIBLE PREFERRED STOCK

 The Company
is authorized to issue Series A Convertible Preferred Stock, par value of $ 0.001 per share (the "Series A") and Series
B Convertible Preferred Stock, par value of $ 0.001 per share (the "Series B"). As of December 31, 2023, and 2022, there
were no shares of Series A outstanding and 0.85 of a share of Series B outstanding convertible into 144,444 shares
of common stock. Each share of Series A and Series B has limited voting rights, is entitled to participate with the common stock on liquidation
and holders of Series A and Series B are subject to beneficial ownership limitations.

 F- 24

 NOTE 9 – STOCKHOLDERS' EQUITY

 The Company expensed $ 477 thousand and $ 239 thousand
related to restricted awards for the years ended December 31, 2023 and December 31, 2022, respectively.

 The Company expensed $ 998 thousand and $ 1,084
thousand related to restricted stock units for the years ended December 31, 2023 and December 31, 2022, respectively.

 On November
2, 2023 the Company issued 56,272 shares of common stock upon vesting of 72,329 restricted stock units, net of 16,057 shares
of common stock withheld for taxes.

 On September
20, 2023, the Company issued 15,965 shares of common stock upon vesting of 22,807 restricted stock units, net of 6,842 shares of commons
stock withheld for taxes.

 On July
31, 2023, the Company issued 14,000 shares of common stock upon vesting of 20,000 restricted stock awards, net of 6,000 shares of common
stock withheld for taxes.

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

 On March
31, 2023, the Company issued 1,750 shares of common stock upon vesting of 2,500 restricted stock units, net of 750 shares of common stock
withheld for taxes.

 On February 28, 2023, 353,492 shares of common
stock were issued in relation to the acquisition of Trust Codes Global, see Note 4 – Business Combinations, for details.

 On December 31, 2023, the Company issued 133,654
of restricted common stock, vesting immediately, with a value of $ 147 thousand, for consulting services.

 During the year ended December 31, 2023, the Company
retired 5,515 shares of common stock held in Treasury and 1,496 shares of common stock outstanding, relating to issuances in prior periods
that have been forfeited or cancelled.

 During the year ended December 31, 2023, the Company
issued 50,002 shares of common stock issued upon the separation of a former director, relating to 50,002 shares of restricted stock units
that had previously vested.

 Non-Qualified Stock Purchase Plan

 On June 10, 2021, the stockholders of the Company
approved a non-qualified stock purchase plan (the "2021 Plan"). The 2021 Plan provides eligible participants, including employees,
directors and consultants of the Company, the opportunity to purchase shares of the Company's common stock thereby increasing their
interest in the Company's continued success. The maximum number of common stock reserved and available for issuance under the 2021
Plan is 500,000 shares. The purchase price of shares of common stock acquired pursuant to the exercise of an option will be the lesser
of 85% of the fair market value of a share (a) on the enrollment date, and (b) on the exercise date. The 2021 Plan is not intended to
qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
The Company applied FASB ASC 718, "Compensation-Stock Compensation" and estimated the fair value using the Black-Scholes model,
as the 2021 Plan is considered compensatory. In relation to the 2021 Plan the Company expensed $ 53 thousand and $ 122 thousand for the
years ended December 31, 2023 and December 31, 2022, respectively. During the years ended December 31, 2023, and December 31, 2022, the
Company received $ 80 thousand and $ 102 thousand, respectively, in proceeds related to the 2021 Plan.

 Shares Held in Treasury

 As of December 31, 2023, and December 31, 2022,
the Company had 329,351 and 389,967 shares, respectively, held in treasury with a value of approximately $ 659 thousand and $ 949 thousand,
respectively.

 On August 31, 2023, six participants exercised their
option under the Company's 2021 Plan, and as a result, 12,802 shares were issued from treasury, with an
exercise price of $ 0.96 per share.

 F- 25

 On February 28, 2023, fourteen participants exercised
their option under the Company's 2021 Plan, and as a result, 57,245 shares were issued, of which 48,500
were issued from treasury, with an exercise price of $ 1.19 per share.

 Shares Repurchase Program

 Effective July 1, 2022, the Company's Board
of Directors approved a share repurchase program to allow the Company to spend up to $ 1.5 million to repurchase shares of its
common stock, so long as the price does not exceed $5.00. This plan ended on July 1, 2023. During the year ended December 31, 2023, the
Company repurchased 6,201 shares of common stock for $ 10 thousand under the Company's repurchase program. In December 2023, the
Company's Board of Directors approved a new share repurchase program to allow the Company to spend up to $0.5 million to repurchase
shares of its common stock so long as the price does not exceed $1.00 until December 14, 2024. During the year ended December 31, 2023,
the Company did not repurchase shares of common stock under the Company's current program.

 NOTE 10– STOCK
OPTIONS, RESTRICTED STOCK AND WARRANTS

 During 2013, the Company adopted the 2013 Omnibus
Equity Compensation Plan (the "2013 Plan"). Under the 2013 Plan, the Company is authorized to grant awards of stock options,
restricted stock, restricted stock units and other stock-based awards up to an aggregate of 400,000 shares of common stock. The
2013 Plan is intended to permit certain stock options granted to employees under the 2013 Plan to qualify as incentive stock options. All
options granted under the 2013 Plan, which are not intended to qualify as incentive stock options are deemed to be non-qualified stock
options.

 On November 14, 2017, the Executive Committee
of the Company's Board of Directors adopted the 2017 Equity Incentive Plan (the "2017 Plan") which covered the potential
issuance of 260,000 shares of common stock. The 2017 Plan provided that directors, officers, employees, and consultants of the Company
were eligible to receive equity incentives under the 2017 Plan at the discretion of the Board or the Board's Compensation Committee.

 On August 10, 2020, the Company's Board
of Directors adopted the 2020 Equity Incentive Plan (the "2020 Plan"), subject to stockholder approval, which authorizes the
potential issuance of up to 1,069,110 shares of common stock. On September 30, 2020, the Company's stockholders approved the 2020
Plan, and upon such approval the 2020 Plan became effective and the 2017 Plan was terminated. Shares of common stock underlying existing
awards under the 2017 Plan may become available for issuance pursuant to the terms of the 2020 Plan under certain circumstances. Employees
and non-employee directors of the Company or its affiliates, and other individuals who perform services for the Company or any of its
affiliates, are eligible to receive awards under the 2020 Plan at the discretion of the Board of Directors or the Board's Compensation
Committee.

 On March 28, 2022, the Company's Board of
Directors adopted the First Amendment to the 2020 Plan, subject to stockholder approval, which increased the shares authorized for potential
issuance under the 2020 Plan to 2,069,100 shares of common stock and extended the term of the 2020 Plan to June 9, 2023. On June 9, 2022,
the Company's stockholders approved the First Amendment to the 2020 Plan. On April 17, 2023, the Company's Board of Directors
adopted the Second Amendment to the 2020 Plan, subject to stockholder approval, which increased the shares authorized for potential issuance
under the 2020 Plan to 3,069,110 shares of common stock and extended the term of the 2020 Plan to June 6, 2033, and increased the annual
cap on director compensation by $50 thousand. On June 6, 2023, the Company's stockholders approved the Second Amendment to the 2020
Plan.

 The 2020 Plan, as amended, is administered by
the Compensation Committee which determines the persons to whom awards will be granted, the number of awards to be granted and the specific
terms of each grant, including the vesting thereof, subject to the provisions of the plan.

 In connection with incentive stock options, the
exercise price of each option may not be less than 100% of the fair market value of the common stock on the date of the grant (or 110%
of the fair market value in the case of a grantee holding more than 10% of the outstanding stock of the Company). The aggregate fair market
value (determined at the time of the grant) of stock with respect to which incentive stock options are exercisable for the first time
by any individual during any calendar year (under all plans of the Company and its affiliates) shall not exceed $100 thousand, and the
options in excess of $100 thousand shall be deemed to be non-qualified stock options, including prices, duration, transferability and
limitations on exercise. The maximum number of shares of common stock that may be issued under the 2020 Plan pursuant to incentive stock
options may not exceed, in the aggregate, 1,000,000.

 The Company has issued non-qualified stock options
pursuant to contractual agreements with non-employees. Options granted under the agreements are expensed when the related service
or product is provided. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions. The
Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair
value represent management's best estimates and involve inherent uncertainties and judgements.

 F- 26

 Stock Options

 The following table summarizes the activities
for the Company's stock options as of December 31, 2023, and 2022:

 Schedule of stock options

 Options Outstanding

 Remaining

 Aggregate

 Weighted-

 Contractual

 Intrinsic

 Term

 Value

 Exercise Price

 (in years)

 (in thousands) (1)

 Balance as of December 31, 2021

 465,471

 $
 4.38

 -

 -

 Forfeited/Cancelled/Expired

 ( 128,000
)

 3.74

 Balance as of December 31, 2022

 337,471

 4.63

 Exercisable as of December 31, 2022

 337,471

 $
 4.63

 2.4

 $
 -

 -

 -

 Forfeited/Cancelled/Expired

 ( 36,000
)

 5.17

 Balance as of December 31, 2023

 301,471

 4.56

 Exercisable as of December 31, 2023

 301,471

 $
 4.56

 1.2

 $
 -

 (1)
 The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying
awards and the quoted price of the Company's common stock for options that were in-the-money at each respective period.

 As of December 31, 2023, and 2022, the Company had no unvested stock
options.

 F- 27

 During the year ended December 31, 2023, and 2022,
the Company expensed $ 0 thousand with respect to options.

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

 Schedule of unvested options

 Grant

 Award Shares

 Date Fair Value

 Unvested at December 31, 2021

 44,642

 4.31

 39,308

 3.18

 ( 42,142
)

 4.32

 41,808

 3.24

 506,194

 1.45

 ( 131,333
)

 2.06

 416,669

 $
 1.44

 As of December 31, 2023, and 2022, total unrecognized
share-based compensation cost related to unvested restricted stock awards was $ 260 thousand and $ 2 thousand respectively, which is expected
to be recognized over a weighted-average period of 0.44 years as of December 31, 2023.

 F- 28

 The following table summarizes the unvested restricted
stock units as of December 31, 2023 and 2022:

 Schedule of unvested restricted stock awards

 Unvested Restricted Stock Units

 Grant

 Unit Shares

 Date Fair Value

 Unvested at December 31, 2021

 187,010

 4.11

 418,041

 2.14

 ( 191,425
)

 4.07

 Unvested at December 31, 2022

 413,626

 2.14

 272,941

 1.35

 ( 294,261
)

 2.51

 Forfeited/Cancelled

 ( 21,053
)

 1.20

 $
 371,253

 $
 1.32

 As of December 31, 2023, and 2022, total unrecognized
share-based compensation cost related to unvested restricted stock units was $ 301 thousand and $ 284 thousand respectively, which is expected
to be recognized over a weighted-average period of 1.39 years as of December 31, 2022.

 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 RSU's contractual life based on the appropriate probability distributions (which are based on commonly applied
Black Scholes inputs). The fair value of each grant was determined by taking the average of the grant date fair values under each Monte
Carlo simulation trial. We recognize compensation expense on a straight-line basis over the derived service period and there is no ongoing
adjustment or reversal based on actual achievement during the period.

 The following table summarizes the unvested performance
restricted stock units as of December 31, 2023 and 2022:

 Schedule of unvested restricted stock units

 Unvested Performance Restricted Stock Units

 Grant

 Unit Shares

 Date Fair Value

 Unvested at December 31, 2021

 -

 -

 432,326

 2.95

 -

 -

 432,326

 2.95

 1,156,591

 1.16

 -

 -

 Forfeited/Cancelled

 ( 150,157

)

 2.95

 1,438,760

 $

 1.51

 As of December 31, 2023, and December 31, 2022
total unrecognized share-based compensation cost related to unvested restricted stock units was $ 1,778 thousand and $ 947 thousand, respectively,
which is expected to be recognized over a weighted-average period of 1.75 years as of December 31, 2023.

 F- 29

 Warrants

 The following table summarizes the activities
for the Company's warrants for the year ended December 31, 2023 and 2022:

 Schedule of warrants outstanding

 Warrants Outstanding (Excluding Pre-Funded Warrants)

Warrant Shares

 Weighted-

 Exercise

 Price

 Remaining

 Contractual

 Term

 in years)

 Aggregate

 Intrinsic

 Value

 (in thousands) (1)

 Balance at December 31, 2021

 3,779,243

 $

 5.89

 1,590,150

 3.22

 Expired

 ( 265,938

)

 19.21

 5,103,455

 4.34

 -

 -

 Expired

 ( 474,869

)

 6.34

 4,628,586

 4.13

 2.3

 Exercisable at December 31, 2023

 4,628,586

 4.13

 2.3

 $

 -

 (1)
 The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying
warrants and the closing stock price of $1.12 for our common stock on December 31, 2023.

 For the year ended December 31, 2023, and 2022,
the Company granted 0 warrants and 34,942 warrants to warrant holders pursuant to anti-dilution provisions, 0 warrants
and 1,555,208 warrants in conjunction with the Securities Purchase Agreement, respectively (see Note 9 – Stockholders' Equity).
As the fair value of the warrants granted would have had a net zero impact to equity (increasing additional paid in capital and offering
costs for the same amount), the Company did not break out or complete a separate valuation of the warrants granted in association with
either capital raise.

 Pre-funded Warrants

 On April 14, 2022, in connection with our Securities
Purchase Agreement, the Company issued 675,000 pre-funded warrants to purchase up to an aggregate of 675,000 shares
of common stock at a purchase price of $3.214 per pre-funded warrant, which represented the per share public offering price
for the common stock less the $0.001 per share exercise price for each pre-funded warrant. In August 2022, 675,000 pre-funded
warrants with an exercise price of $ 0.001 per share were exercised, and 675,000 shares of the Company's common stock were issued.
No pre-funded warrants are outstanding as of December 31, 2023 or December 31, 2022.

 F- 30

 NOTE 11— LOSS PER SHARE

 Basic loss per share (EPS) is computed by dividing
net loss by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution of
common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into
common stock.

 The dilutive common stock equivalent shares consist
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,

 2023

 2022

 Numerator:

 Net loss:

 $
)

 $
)

 Denominator:

 Weighted average shares of common stock – basic

 9,766,469

 8,466,075

 Loss per share:

 Basic

 $
 ( 0.35
)

 $
 ( 1.70
)

 Diluted

 $
 ( 0.35
)

 $
 ( 1.70
)

 F- 31

 The following table represents the weighted average
number of anti-dilutive instruments excluded from the computation of diluted loss per share:

 Schedule of anti-dilutiv e earnings per share

 2023

 2022

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

 Preferred Stock

 144,444

 144,444

 Stock Options

 301,471

 337,471

 Warrants

 4,628,586

 5,103,455

 Stock purchase plan

 28,065

 57,245

 Convertible note

 956,527

 -

 Restricted Stock Units and Restricted Stock Awards

 2,226,682

 887,760

 NOTE 12— LONG TERM DERIVATIVE LIABILITY

 On April 7, 2022, the Company granted two directors
11,250 restricted stock units each ("SPAC RSUs") with respect to the common stock, $ 0.0001 par value per share, of G3 VRM
Acquisition Corp. The SPAC RSUs were to vest upon the initial business combination of the SPAC (see Note 2 – Equity Investments)
subject to continuous service to the Company through the vesting date. Each vested SPAC RSU represented the right to receive the value
of one share of stock in G3 VRM Acquisition Corp., which would have been paid to the director as soon as practicable after the fifteen-month
anniversary of the vesting date.

 In June 2022, the Sponsor Entity decided not to
fund the extension for the time that the SPAC had to complete its initial business combination. As a result, the SPAC was dissolved and
liquidated in accordance with its charter and under ASC 815, and the derivative instrument was terminated. As a result, the SPAC RSUs
were forfeited. For the year ended December 31, 2022, the Company has recorded the effect of termination to reduce the fair value and
recorded a credit to share-based compensation expense of $71 thousand in relation to these awards. The fair value of the derivative liability
was $ 0 as of December 31, 2022.

 NOTE 13 – 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, 2023, and December 31, 2022, the Company contributed a value of approximately $ 137 thousand and $ 103 thousand respectively
and is recognized as compensation expense in the Consolidated Statements of Operations for matching contributions to the Plan.

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

 makes the
required by law contributions equal to three percent of each employee's salary. During the year ended December 31, 2023, the Company
contributed $ 10 thousand.

 NOTE 14 – LEASES

 The Company accounts for its leases under Accounting
Standard Codification ("ASC") Topic 842, Leases. The Company determines at its inception whether an arrangement that provides
us control over the use of an asset is a lease. We recognize at lease commencement a right-of-use (ROU) asset and lease liability based
on the present value of the future lease payments over the lease term. We have elected not to recognize a ROU asset and lease liability
for leases with terms of 12 months or less. Our current long-term leases include an option to extend the term of the lease prior to the
end of the initial term. It is not reasonably certain that we will exercise the option and have not included the impact of the option
in the lease term for purposes of determining total future lease payments. As our lease agreement does not explicitly state the discount
rate implicit in the lease, we use our promissory note borrowing rate to calculate the present value of future payments.

 F- 32

 In addition to the base rent, real estate leases
typically contain provisions for common-area maintenance and other similar services, which are considered non-lease components for accounting
purposes. For our real estate leases, we apply a practical expedient to include these non-lease components in calculating the ROU asset
and lease liability. For all other types of leases, non-lease components are excluded from our ROU assets and lease liabilities and expensed
as incurred.

 We have operating leases for office facilities.
We do not have any finance leases.

 Lease expense is included in General & Administrative
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,

 2023

 2022

 Operating lease cost

 $

 $

 Short-term lease cost

 Total lease costs

 $

 $

 Supplemental information related to leases was
as follows (dollars in thousands):

 Schedule of supplemental information related to leases

 Operating Lease right-of-use asset

 $

 $

 Current portion of operating lease liabilities

 Non-current portion of operating lease liabilities

 Total operating lease liabilities

 $

 $

 Cash paid for amounts included in the measurement of operating lease liabilities

 $

 $

 Right-of-use assets obtained in exchange for operating lease liabilities

 $
 -

 $

 Weighted-average remaining lease term for operating leases (years)

 3.0

 4.3

 Weighted average discount rate for operating leases

 6.4
 %

 6.0
 %

 F- 33

 The following is a reconciliation of future undiscounted
cash flows to the operating lease liabilities on our consolidated balance sheets as of December 31, 2023 (in thousands):

 Schedule of operating lease liabilities maturities

 Year ended December 31,

 2024

 $

 2025

 2026

 2027

 Thereafter

 -

 Total future lease payments

 Less: imputed interest

 ( 93

)

 Present value of future lease payments

 Less: current portion of lease liabilities

 ( 170

)

 Long-term lease liabilities

 $

 NOTE 15 – CONCENTRATIONS

 During the year ended December 31, 2023, one customer
represented 17 % of revenues and one customer represented 13 % of revenues for the year ended December 31, 2022.

 As of December 31, 2023, three customers made
up 47 % of accounts receivable. As of December 31, 2022, two customers accounted for 23 % of total accounts receivable.

 During the year ended December 31, 2023, and December
31, 2022, one vendor accounted for 99 % of transportation costs, in our Precision Logistics segment.

 NOTE 16 – SEGMENT REPORTING

 As of December 31, 2023, we operated through two reportable business
segments: (i) Precision Logistics (formerly PeriShip Global Solutions) and (ii) Authentication
(formerly VerifyMe Solutions).

 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 solutions that connect brands with consumers through their products. Consumers can authenticate products with their
smart phone prior to usage, and brand owners have the ability to gather business intelligence while engaging directly with their consumers.
Our Authentication segment also provides brand protection and supply chain functions such as counterfeit prevention.

 We do not allocate the following items to the segments: general and
administrative expenses, research and development expense, sales and marketing expenses, and other income (expense).

 F- 34

 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

 2023

 2022

 Revenue

 $
 24,652

 $
 18,190

 1,386

 Total Revenue

 $
 25,313

 $
 19,576

 Gross Profit

 $
 8,475

 $
 5,505

 Total Gross Profit

 9,003

 6,488

 General and administrative

 10,586

 8,428

 Research and development

 Sales and marketing

 1,638

 1,718

 LOSS BEFORE OTHER EXPENSE, NET

 ( 3,328
)

 ( 3,747
)

 TOTAL OTHER EXPENSE, NET

 ( 62
)

 ( 10,651
)

 NET LOSS

 $
)

 $
)

 Additional information relating to our business
segments is as follows (in thousands):

 Identifiable assets:

 2023

 2022

 $
 16,637

 $
 17,302

 4,068

 3,450

 Total Assets

 $
 20,705

 $
 20,752

 NOTE 17 – SUBSEQUENT EVENTS

 On February 17, 2024 we repurchased 1,000 shares
under the Share Repurchase program

 On February 29, 2024, seven participants exercised
their option under the Company's 2021 Plan, and as a result, 21,889 shares were issued with an exercise
price of $ 0.97.