ITEM 1. BUSINESS. 

Overview

VerifyMe, Inc. (“VerifyMe,” the “Company,” “we” or “us”) is a technology solutions provider specializing in brand protection functions such as counterfeit prevention, authentication, serialization, track and trace features for labels, packaging and products. The Company was formed in Nevada on November 10, 1999. Leveraging our covert luminescent pigment, RainbowSecure®, which we began commercializing in 2018, we also developed the patented VeriPAS™ software system in 2018 which covertly and overtly serializes products to remotely track a product’s “life cycle” for brand owners. We believe VeriPAS™ is the only invisible covert serialization and authentication solution deployed through variable digital printing on HP Indigo printing systems with a smartphone tracking and authentication system. VeriPAS™ is capable of fluorescing, decoding, and verifying invisible RainbowSecure® codes in the field – designed to allow investigators to quickly and efficiently authenticate product throughout the distribution chain, including warehouses, ports of entry, retail locations, and product purchased over the Internet for inspection and investigative actions. This technology is coupled with a secure cloud based track and trace software engine which allows brands and investigators to see where products originate and where they are deployed with geo location mapping and intelligent programable alerts. Brand owners access the VeriPAS™ software over the Internet. Brand owners can then set rules of engagement, establish marketing programs for customer engagement and control, and monitor and protect their products’ “life cycle.” We have derived minimal revenue from our VeriPAS™ software system and have derived limited revenue from the sale of our RainbowSecure® technology.

We believe the brand protection technologies we own, once fully developed, can be used to enable businesses to reconstruct their overall approaches to security—from brand protection, product diversion and counterfeit identification to employee or customer monitoring. The Company is currently testing a pre-printed labeling system containing VeriPAS™ for third party on-line retailers to affix to their products that allows the third party retailer to engage with their customer through marketing and data gathering. In addition these pre-printed labels containing VeriPAS™ labels will allow the receiving customer to authenticate the product with their personal smartphone. The Company is also developing a thread made of fabric containing covert RainbowSecure® Ink that will be sewn into clothing and apparel for authentication. A VeriPAS™ readable code for apparel labels is also being developed with a third party apparel manufacturer. Potential applications of our technologies are available in different types of products and industries—e.g., banking, gaming, apparel, tobacco, cosmetics, food, beverages, plastics, metal, event and transportation tickets, manufactured goods, tax stamps, fabrics, parts, driver’s licenses, insurance cards, passports, computer software, on-line retail and credit cards. We have had revenue generating sales through re-seller agreements of our technology and through direct sales of our technology to global brand owners, and label and packaging printers. 

Our brand protection technologies involve the utilization of invisible and/or color changing inks, which are compatible and printed with modern digital and standard printing presses. The inks may be used with certain printing systems such as digital, offset, flexographic, silkscreen, gravure, inkjet and toner based laser printers. The inks can be used to print both static and variable images utilizing digital printing presses and third party digital inkjet systems which are attached to traditional printing presses. Our invisible ink can be used in fixed images, variable images or serialized codes, bar codes or QR codes. We have developed a product which attaches to a smart-phone that reads our invisible ink codes into sophisticated cloud based track and trace software. We also have a product that informs users that our invisible ink is present for authentication. Based upon our experience, we believe that the ink technologies may be incorporated into most existing manufacturing processes.

Until 2018, we were primarily engaged in the research and development of our technologies. In order to penetrate the security printing market, we modernized our invisible ink technology, called RainbowSecure®. We created the ability to utilize RainbowSecure® as an invisible code that contained data that could be read into sophisticated software that resides in the cloud. To accomplish this task, we created our VeriPAS™ Smartphone Authenticator, a device that attaches to a smartphone. After several prototypes, this device was successfully tested in 2018 and is now being manufactured. The first units have been leased to one customer in Taiwan starting in June 2019 and one customer in the United States starting in September 2019 and are ready for leasing to brand owners, inspectors and print service providers around the world. See “Business Update: at page 2 for additional information.

In conjunction with our smartphone reading device, we finalized our VeriPAS^TM cloud-based software which gives brand owners the ability to monitor, control, track, engage with the customer, gather data from the end user and protect their products complete life cycle. This software resides in the cloud and can be accessed over the Internet. The software generates serialization codes available for purchase by brand owners. These codes are then printed on labels and packaging in both visible codes for consumers to engage and invisible codes known as RainbowSecure® which trained brand inspectors review with our reading device.

Business Update

In 2019, we focused our efforts primarily on the completion of our products and began the introduction of our products into the market and forging relationships that could help generate revenue in future periods.

Beginning on October 15, 2019, we entered into a consulting agreement with G Prime LLC for services involving the development of relationships with brand owners and others in the food, pharmaceutical, medical device, household good and industrial products packaging industry. This agreement continues until either party terminates at any time upon 30 days prior written notice to the other or as otherwise mutually agreed.

On October 1, 2019, we entered into a representative agreement with J.A.G. Associates, Ltd. to represent us in the sale of our products in the U.S. and globally. This two-year agreement can be terminated by either party upon 60 days prior written notice.

Effective as of May 30, 2019, we entered into a leasing agreement and purchase agreement with a Forbes Top 50 Private Company that sells nutrition, personal care, beauty and home care products around the globe. This is our first direct contract with a brand owner who prints some of its own packaging and labels using HP Indigo printing presses. They lease our equipment and software including VeriPAS™ technology products in conjunction with HP Indigo printing presses, our strategic partner. This one year leasing agreement can be terminated by either party upon 90 days’ prior notice. This client began printing labels that include our technology in the fourth quarter of 2019. In addition, the client leased six units of the Company’s VeriPAS™ Smartphone Authenticator to outfit their global brand inspectors’ team.

On May 28, 2019, pursuant to a memorandum of understanding, we began a strategic partnership with INX International Ink Company, the third largest producer of inks in North America, to co-develop inkjet inks to be used for inkjet printing in combination with high speed, high volume label and packaging printing presses. The specially formulated inks will enable these printing presses to print our RainbowSecure® invisible ink technology, which includes our variable VeriPAS™ serialization, track and trace technology. Pursuant to the memorandum of understanding, either party may terminate the strategic partnership at any time after September 1, 2019. Testing of the inkjet inks commenced in the third quarter of 2019and is still on-going.

On May 3, 2019, we entered into a one year leasing contract with Identity Management Systems Co., Ltd., for the lease of one of our new VeriPAS™ Smartphone Authenticators which includes the VeriPAS™ technology. This lease is expected to allow us to introduce and sell our products and services to the East Asia markets. The contract can be terminated by either party with 90 days’ prior notice.

On April 24, 2019, we entered into a license agreement with Niagara, a western New York label manufacturer with 33 years’ experience. The license allows Niagara to offer our brand protection technology solutions to brand owners throughout the United States through the leasing of our VeriPAS™ Smartphone Authenticators. These VeriPAS™ Smartphone Authenticator read the invisible RainbowSecure® codes into the cloud and are recorded in our serialization, track and trace software platform, VeriPAS™. This license has a one year term that automatically renews for successive one year terms unless 90 days’ prior notice of non-renewal is given by either party. The agreement can also be terminated by either party with 90 days’ prior notice.

On April 11, 2019, we entered into a one-year reseller agreement with Arca, a leading label and packaging company based in Milan, Italy. Pursuant to the agreement, we offer our brand protection technology solutions to brand owners throughout Europe through the leasing of our patented VeriPAS™ Smartphone Authenticators which read the invisible codes into the cloud and are recorded in the Company’s VeriPAS™ platform. Our devices are expected to be leased to brand owners by Arca in exchange for recurring revenue. The agreement can be terminated by either party with 90 days’ prior notice.

Anti-Counterfeit Technologies and Products

Recent developments in copying and printing technologies have made it easier to counterfeit a wide variety of documents and products. Counterfeiting can be divided into the following two types:

Although Traditional Counterfeiting targets are extremely important and cause mainly financial harm, Modern Counterfeiting targets on the other hand are much more sophisticated.  Organized crime, consumers, small and large businesses, and even governments may partake in Modern Counterfeiting.

Not only are consumers at risk, but brand owners are also at risk.  Normally brand owners are financially impacted when someone is selling or diverting their products.  The financial impact seems to be the lesser of the risk factors.  We believe the additional, more impactful risk, facing brand owners and drug manufacturers is the liability issue.  A brand owner may be called to a court room to prove that a product is authentic or counterfeit to avoid major liability exposure in the form of judgements and fines, as well as the extremely severe negative marketing exposure for such issues.

Brand owners do not want their products published under the name of a product that injured or harmed a consumer.  Our covert RainbowSecure® technology can be utilized by brand owners to authenticate products, labels and packaging in those circumstances.  We believe that losses and liability from such counterfeiting is increasing substantially with improvements in counterfeiting technology as well as the proliferation of highly skilled and well-funded counterfeiters.  It is therefore imperative that all brand owners, beverages, food and drug manufacturers utilize the best counterfeit prevention technologies available for their products.

We believe that our brand protection security anti-counterfeit technologies may be useful to businesses desiring to authenticate a wide variety of materials and products. The best solution for brand owners and manufacturers is to layer as many technologies as they can to protect their products. 

Brand Protection Printing Technology

Our brand protection technologies include (i) a technology utilizing invisible ink taggant that can be revealed by use of a special calibrated laser light for authentication purposes, (ii) an ink technology, which allows invisible codes to be printed, and (iii) a color changing technology that is activated by certain types of lights. Based on our knowledge and test results, we believe none of these technologies can be copied or scanned by counterfeiters.  We believe the useful life of our technologies on a label or package is at least 20 years.  Our technologies can be printed on labels and packaging and can also be applied to metals, plastics and textiles. Other possible variations of our laser-based technology involve multiple color responses from a common laser, visible marks of one color that turn another color with a second laser, or visible and invisible marks that turn into a multicolored image. These technologies provide users with the ability to authenticate products and detect counterfeit documents. Applications include the authentication of documents having intrinsic value, such as currency, checks, travelers’ checks, gift certificates and event tickets, and the authentication of product labeling and packaging. When applied to product labeling and packaging, our technologies can be used to detect counterfeit products with labels and/or in packaging that do not contain the authenticating marks invisibly printed on the packaging or labels of legitimate products, as well as to combat product diversion (i.e., the sale of legitimate products through unauthorized distribution channels or in unauthorized markets). We believe that our technologies also could be used in a manner that permits manufacturers and distributors to track the movement or pinpoint geographically where counterfeiting of products is occurring. We can track and trace from production to ultimate consumption when coupled with our VeriPAS^™ proprietary software.

In 2017, we signed a five-year contract with the Indigo Division of HP Inc. (“HP Indigo”) to print this technology on packages and labels on their 6000 series digital presses. The 6000 series digital qualified presses are mainly used to print both static and variable high-quality images such as personalized labels and packaging for brand owners. We have also successfully run pilot production on the HP Indigo 7800 series press used for sheet-fed products like folded cartons and plastic cards. HP Indigo informed the Company that other press models will be qualified once clients formally request in writing the need for qualification for current unqualified models. In addition, HP Indigo is producing sample secure government products such as tax stamp samples for governments with our RainbowSecure® invisible ink technology. HP Indigo is showcasing these samples at various global government and print service providers trade shows. 

This solution is marketed as RainbowSecure® powered by HP Indigo and sold globally by us to HP Indigo customers. The solution includes an HP Indigo security ElectroInk as well as our readers and authentication tools that can be used in conjunction with the security ElectroInk. Both companies provide support to HP Indigo customers that use the RainbowSecure® solution on HP Indigo’s digital printing presses.

The HP security ElectroInk containing RainbowSecure® is in an ink canister that is mounted into the digital HP Indigo printing press along with the other traditional ink stations.  Since the HP Indigo is a digital press, the RainbowSecure® technology prints covert serialization numbers, codes or images either fixed or variable mainly on labels and packaging which are revealed when using our hand-held authentication devices.

In addition, in 2019, HP Indigo significantly increased their own marketing of our RainbowSecure® invisible ink technology. HP Indigo had VerifyMe, Inc. join them in their trade show booth in the Global LabelExpo trade show held in Brussels, Belgium in September 2019. HP Indigo has trained their world-wide sales force on VerifyMe’s technology to show to both print service providers and brand owners. HP Indigo has also installed the Company’s technology offerings in their HP Experience Centers located in Tel Aviv, Israel, Singapore, Barcelona, Spain and Alpharetta, Georgia where customers can perform tests and get hands on experience with the Company’s technologies. We also believe business will be generated from both internal sales efforts as well as from our strategic partner S-One Labels and Packaging LLC, a division of S-One LP (“S-One”) which has agreed to provide us with global sales, distribution, and promotion support for our products and employs representatives on an as needs basis to promote our products. Under the terms of our agreement with S-One, S-One will act as a sales and marketing contractor for our printed products and services on a global basis and will assist us in fulfilling our obligations under our signed current and future reseller agreements with global and domestic print providers and brand owners.

As an add-on track and trace feature of our RainbowSecure® covert imaging, we have contracted with Micro Focus International PLC (“Micro Focus”), a global software developer to utilize their visible QR code system, GPAS, which is printed on labels and packaging along with our covert RainbowSecure® to store our hidden covert serial number in the cloud for product diversion investigators to authenticate with a proprietary app on a mobile device.  The Micro Focus GPAS allows customers to use their smartphone to scan a product’s QR code or send the code via a text message. Immediate results help verify whether the product is real or counterfeit. This helps save customers from potential physical harm and businesses from facing lawsuits, loss of revenue and brand erosion.  In addition to the anti-counterfeiting image, the Micro Focus Track and Trace software has a “big data” gathering system with real-time analytics which geographically locate and identify counterfeiting activity by using an easily configured rules engine. Our covert or invisible RainbowSecure® system works as an extra layer of protection for the GPAS system.  When a professional product investigator scans the Micro Focus visible QR code with a special app on a smartphone it brings him or her to our secure cloud application to see what the hidden serialization number printed by the HP Indigo is for that particular label or package.  The product investigator then uses the RainbowSecure® reading device to compare the hidden serialization number against the cloud number to prove authenticity.

Under the contract with Micro Focus, VerifyMe has a re-seller agreement where we sell the combined Micro Focus GPAS system with our RainbowSecure® identifier under our own trademarked name, VeriPAS^TM. The first pre-printed “VerifyMe As Authentic” labels were printed containing VeriPAS™ in the fourth quarter of 2019. These labels were tested with a third party Amazon retailer. No revenue has been received yet.

We also have a strategic partnership with INX International Ink Company, the third largest producer of inks in North America, to co-develop inkjet inks to be used for inkjet printing in combination with high speed, high volume label and packaging printing presses. The specially formulated inks will enable these printing presses to print our RainbowSecure® invisible ink technology, which includes our variable VeriPAS™ serialization, track and trace technology. Testing of the inkjet inks commenced in the third quarter of 2019 and is on-going.

In addition, effective as of May 30, 2019, we entered into an equipment and software leasing contract with a Forbes Top 40 Private Company that sells nutrition, personal care, beauty and home care products around the globe. See “Business Update” above for further information about this agreement.

We believe that our brand protection security technologies, coupled with our contract with HP Indigo, can be used to enable brand owners to securely prevent counterfeiting, prevent product diversion and authenticate labels, packaging and products and alleviate the brand owner’s liability from counterfeit products which physically harm consumers. Our covert technologies give brand owners the ability to control, monitor and protect their products life cycle. Also, our technologies allow brand owners to prove whether the product causing an issue is authentic or counterfeit.

In addition to packaging and labels, our brand protection security printing technologies can be applied to authenticate important credentials such as driver’s licenses, plastics, metal, apparel, birth certificates, immigration documents, gaming, apparel, currency, event and transportation tickets, passports, computer software, and credit cards.

Brand Protection and Physical Goods Anti-Counterfeit Industry

We believe one of the most important areas for our technology is authentication, which is the act of confirming that objects such as currency, passports, casino chips, credit cards, stock certificates, pharmaceuticals, stamps, identification cards, lottery tickets, and so forth, are real and not forgeries. With the advent of new technologies, including the color copier and other printing technologies and templates and the availability of the Internet, counterfeiters have had access to technologies which make it easier to produce counterfeit items. Counterfeiters are often located in foreign nations where counterfeiting is subject to little or no viable threat of prosecution.

While some currency and credit cards have introduced holograms, seals, and embedded strips in order to add a level of protection, most such methodologies are expensive and, in some cases involve a time-consuming production process. In other instances, such as when printing cigarette tax stamps or hundreds of millions of pieces used in a popular restaurant chain’s contest game pieces, the authentication process must be extremely inexpensive and easy to use or it will not be cost effective. Currently many national currencies lack a sufficient layer of protection to deter counterfeiting and can easily be counterfeited. 

We believe major shifts are occurring in how counterfeit products get in the hands of consumers. Many consumers are purchasing counterfeit products online. In addition, biometric technology is becoming increasingly popular which can tie individuals to their documents and transactions. We have multi-factor technology using biometrics in our digital verification technology. Our entry into the biometrics technology business is further described below under “Digital Authentication Technologies and Products.”

Counterfeiting is a continuously evolving economic crime. It presents companies, governments and individuals with a unique set of problems and has become a sophisticated network of counterfeiting. Counterfeiting devalues corporate reputations, hinders investment, and imposes costs upon many people every year. We believe counterfeiting is a serious threat to the global and U.S. economies and a threat to national security. The significance of this problem was recently recognized by the U.S. Department of Homeland Security which issued a Report to the U.S. President on January 24, 2020 entitled “Combating Trafficking in Counterfeit and Pirated Goods.” https://www.dhs.gov/sites/default/files/publications/20_0124_plcy_counterfeit-pirated-goods-report_01.pdf. Additionally, on February 7, 2020, Peter Navarro, director of the U.S. Office of Trade and Manufacturing, recently referred to the counterfeiting problem as it pertains to Chinese exports as an “epidemic” which the U.S. government is committed to stopping in 2020.

The anti-counterfeiting industry is segmented into four general categories: (i) Optical technologies – use of light, i.e. holograms; (ii) Electronic – magnetic strips and smart cards; (iii) Biotechnologies – uses characteristics of biological proteins such as antibodies, enzymes and DNA; and (iv) Chemical technologies - includes photochromic (or light-reactive) and thermochromic (or heat-reactive) inks.

We operate in the chemical technologies and security ink sectors of the industry. Products in this industry change color when exposed to either heat or light and revert to their original color when exposed again. Generally, the effect is reversible as often as required. Inks have also been developed that are invisible to the human eye, but which can be read by bar-code scanners. Other reactive inks change color when brought into contact with specific substances, such as ink from a felt-tipped pen.

Based on technology, the label and packaging market, including the anti-counterfeit packaging industry, has been segmented as follows:

We operate in the coding and printing technology, security labels segments in the anti-counterfeit packaging industry.

The Opportunity

Recent developments in printing technologies have made it easier to counterfeit a wide variety of documents. Lottery tickets, gift certificates, event and transportation tickets and travelers’ checks are all susceptible to counterfeiting, and we believe that losses from such counterfeiting have increased substantially due to improvements in technology. Counterfeiting has long caused losses to manufacturers of brand name products, and we believe that these losses have increased as the counterfeiting of labeling and packaging has become easier.

Counterfeiters have become so good at their unlawful activity that spotting the difference between legitimate and counterfeit products can be daunting. Counterfeiters have many ways to subvert legitimate brands. These may include taking an out-of-date product and selling it in packaging and labels that have been forged; sometimes, the packaging, labels and product itself are all counterfeited. Counterfeiters might also use legitimate packaging coupled with fake products. We believe our pigment security systems are a cost-effective solution for printer and packagers and are easily integrated into their existing manufacturing process.

As counterfeiting continues to increase and losses to manufacturers and others continue to escalate, we believe that those entities will seek better technologies to minimize their exposure. These technologies, however, must also be cost-effective, easy to integrate, and highly resistant to counterfeiting themselves. The Organization for Economic Cooperation and Development, or OECD, in its March 2019 press release, estimated that global trade related counterfeiting accounts for 3.3% of world trade or approximately $509 billion. 

We offer products in two related market segments. We offer security ink taggants in the anti-counterfeiting/authentication industry and a software product called VeriPAS^TM in the identifier/track and trace industry. We believe our brand protection products have applications in the following areas:

In connection with the development of our VeriPAS™ Smartphone Authenticator, we are currently seeking to expand our business in this market but have not yet generated sales in this area.

Based on this threat, many countries have started to address vulnerabilities in the supply chain by enacting legislation which, among other things, requires the implementation of a comprehensive system designed to combat counterfeit, diluted or falsely labelled pharmaceuticals. These systems are often referred to as serialization, or in the United States as e-Pedigree (electronic pedigree).

e-Pedigree and the Federal Drug Administration (“FDA”) mandated serialization requirements were implemented in November 2018 and are now required in all aspects of the pharmaceutical supply chain, from the manufacturer to the packager, wholesaler, distributor and final dispensing entity. The e-Pedigree provides an “audit trail,” or documented evidence, to help identify and catch counterfeiting and diversion. Serialization requires manufacturers, or third-party packagers in some virtual supply chains, to establish and apply to the smallest saleable unit package or immediate container a “unique identification number.” Our 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 expect all pharmaceutical companies will eventually comply with the legislation at some point in the future. Our RainbowSecure® technology as well as our VeriPAS™ track and trace system can address the need for product identifiers. We plan on selling directly to the pharmaceutical industry and their printers. We also expect to engage third party marketing and sales companies to present our solutions to the drug and pharmaceutical industry.

We have entered into a strategic partnership to assist us with marketing our products to the pharmaceutical industry.

We believe the fake-food problem is often due to product laundering, dilution and intentionally false labeling. We believe our pigments and authentication tools can help in the battle against counterfeit foods and beverages. We are currently marketing our products in this market.

Our Solutions

In the areas of authentication and serialization of physical goods, we offer clients the following products as anti-counterfeit systems:

RainbowSecure® technology was our first technology to be patented. It combines an invisible ink with a proprietary tuned laser to enable counterfeit products to be exposed. In 2017, we signed a five-year contract with HP Indigo to print this technology on packages and labels on their 6000 series presses.  Our technology has been tested and approved by HP Indigo 6000 series presses and more recently we have successfully run pilot production on the 7800 press which runs on HP Indigo’s newer series 4 platform, and will open up sheet-feed products like folded cartons and plastic cards. In December 2017, we signed a contract with Micro Focus to use RainbowSecure® in their Global Product Authentication, Track and Trace system (software). The technology also features a unique double layer of security which remains entirely covert at all times and provides licensees with additional protection. RainbowSecure® is particularly well-suited to closed and controlled environments, such as casinos that want to verify transactions within a specific area, as well as labels, packaging, textiles, plastics and metal products which need authentication. In May 2019, we entered into a strategic partnership with INX International Ink Company, the third largest producer of inks in North America, to co-develop inkjet inks to be used for inkjet printing in combination with high speed, high volume label and packaging printing presses. The specially formulated inks will enable these printing presses to print our RainbowSecure® invisible ink technology, which includes our variable VeriPAS™ serialization, track and trace technology. We have derived minimal revenue from our VeriPAS™ software system and have derived limited revenue from the sale of our RainbowSecure® technology. 

VeriPAS™ technology combines the covert identifier of RainbowSecure® with the Micro Focus Track and Trace software which provides brand owners geographical business intelligence on counterfeiting as well as the ability to authenticate labels, packaging and products. Based on our discussions with other serialization, track and trace software providers we expect to add alternatives to clients beyond the Micro Focus GPAS system. This technology is currently being co-marketed with RainbowSecure® and our VeriPAS™ Smartphone Authenticator product. Several clients are in the testing stage with this product. To date, we have not derived revenue from this technology.

SecureLight® technology was developed as a result of our investment in new proprietary color changing inks that could penetrate broader markets. During the past decade, we have refined our technology and its applications, and now have what we believe to be the easiest, most cost effective and efficient authentication technology available in the world today. Our technology, known as SecureLight®, takes advantage of the new ubiquitous energy efficient fluorescent lighting to change the color of ink, resulting in hundreds of new applications ranging from credit cards to driver’s licenses, passports, stock certificates, clothing labels, currency, ID cards, and tax stamps. The technology can also be used to protect apparel, pharmaceuticals, and virtually any other physical product, such as fabrics, plastics, ceramics and metal. In 2018, we received notice that patents involving this technology were approved in various European nations. We are attempting to commercialize this product.

SecureLight+® technology combines the covert characteristics of RainbowSecure® and the overt characteristics of SecureLight®. This provides a solution which can be authenticated in two different ways - by proprietary tuned laser devices, and also by anyone with fluorescent lighting, including end consumers. In 2018, we received notice that patents involving this technology were approved in various European nations. SecureLight+® has been successfully deployed in one country’s drivers’ licenses and another country’s voter registration card program. We have begun to commercialize this product.

VeriPAS™ Smartphone Authenticator technology is a piece of hardware with a built-in lighting system and software that scans invisible RainbowSecure® codes. Product investigators attach their smartphone to this device which then reveals the hidden RainbowSecure® images on the smartphone screen which are then sent to the VeriPAS^TM software in the cloud for authentication and data submission. These devices have been commercialized and are being leased to customers. Leases are typically one year in length.

VerifyMe Beeper technology is an authentication tool which we are marketing to customers in conjunction with our RainbowSecure® ink pigment. Authentication is provided in the form of an LED indicator, a camera device which reveals the hidden serialization numbers and codes on a viewing screen and an audible beeping device when placed on a label, product or package containing the RainbowSecure® technology. The handheld beeping device is tuned to authenticate the unique frequency of our RainbowSecure® invisible ink and will broadcast a beeping sound to confirm the authenticity when placed on products, labels and packaging containing our RainbowSecure® ink technology. The VerifyMe Beeper is designed for use by customers who desire instant authentication on items, such as event tickets at an entry gate. Our customized beeper will only positively identify a product bearing our unique anti-counterfeit solution. This technology is being commercialized and leased to customers. 

VerifyMe® as Authentic™ technology is a dual-purpose pre-printed label with a visible serialized QR code for consumer scanning purposes, and an invisible serialized IR code for inspector scanning, authentication, and tracking purposes.  This label was developed to provide covert brand protection for on-line retailers, while enabling consumer product authentication, promotion, engagement and education through the visible serialized QR code. This technology is being commercialized to prospective customers.

Our Raw Material Suppliers

Our security pigments are manufactured from naturally occurring inorganic rare earth materials. The manufacturing process includes both chemical and mechanical elements. In many cases, we produce pigments that are unique to a customer or product line. This uniqueness can be achieved through a variety of techniques, including custom formulation or combination of our proprietary pigments and/or incorporation of other specialized taggants.

There are many manufacturers of these types of specialized pigments and we intend to maintain multiple simultaneous relationships to ensure ample sources of supply.

Distribution

We provide pigment mixing instructions for the specific uses of each client based on their existing equipment and processes. We maintain policies and procedures to monitor, track and log access to and disposition of all pigment. Our customers are also required to agree to and implement these policies and procedures.

Digital Authentication Technologies and Products

We believe accurate identification of human beings in electronic transactions, also known as Digital Identity Management, will continue to be a large and rapidly growing market. In today’s world the need for verification of the unique identity of human beings participating in those transactions has become more important. In general, every electronic transaction has a least two actors – a subject and a relying party. The relying party has a business need to eliminate or reduce risk associated with the identification of the subject.

Electronic financial theft and electronic theft of private information often make headlines. We believe the majority of this harm can be traced to weak authentication systems, such as username/password, yet these weak systems continue to be used in most of the world’s transactional systems. Cybersecurity is a growing threat requiring continuously evolving forms of electronic security.

Historically, stronger authentication solutions, such as biometric, two-factor and multi-factor solutions have been difficult to use and expensive to deploy and operate. The proliferation of smartphones and tablets provide an infrastructure for disruptive solutions that leverage the mobile nature of these devices and the multi-sensor computing capabilities.

VeriPAS™ Smartphone Authenticator is a digital identity management software platform that provides extensible authentication mechanisms that can be dynamically invoked to achieve a specified degree of identity assurance. The VeriPAS™ Smartphone Authenticator platform incorporates a risk engine that associates individual risk parameters and scores with every unique authentication mechanism. The risk engine then generates aggregate risk scores based on the specific combination of individual authentication mechanisms used to confirm the identity of the human being.

We are now enhancing this product and getting it ready for deployment into the financial services industry.  We cannot assure you we will generate any revenues from these efforts.

Digital Authentication Technology

We believe that the digital technologies we own will enable businesses and consumers to reconstruct their overall approaches to security—from identity and authentication to the management of legacy passwords and PINs. We empower our customers to take advantage of the full capabilities of smart mobile devices and provide solutions that are both simple to use and deliver the highest level of security. These solutions can be applied to corporate networks, financial services, e-gov services, digital wallets, mobile payments, entertainment, subscription services, and social media.

The challenges associated with digital access control and identity theft are problems that are highly relevant in the world today. Consumers, citizens, employees, governments and employers demand comprehensive solutions that are timely, reliable but not intrusive. The current widespread use of passwords and personal identification numbers, or PINs for authentication has proven to be unsecure and inadequate. Individuals increasingly expect anywhere-anytime experiences—whether they are making purchases, crossing borders, accessing services or logging into online accounts or corporate resources. They expect those experiences to ensure the protection of their privacy and to provide uncompromising confidentiality.

Verification is the front door of all access and transactions. The most fundamental action is to identify “who the person is and how you identify yourself.” We believe our VerifyMe digital authentication is the building block that answers that question. Our verification technology ensures that users are who they say they are.  Our technology becomes their virtual credentials which are protected from fraud and theft.  There are hundreds of millions of identities stolen annually. It is absolutely crucial to know which users have the right to access particular information or transactions, and whether or not unauthorized users have been prevented from accessing those same critically important items.

In today’s world we have global workforces, customers, systems and data. Unfortunately, we have the same global sophisticated cybercrime. Therefore, vetting users and access also means asking important questions about authentication, such as which authentication method is most appropriate given a resource, channel or specific risk factor.

We believe that our digital verification technology meets user expectations for ease of use, privacy and overall experiences especially in financial and healthcare enterprises. For connected organizations, the authentication process is like the front door. To users, it is important not only to smoothly reach the systems or data they need, but to know that their own account access and data is secured. Authentication is crucial, but it needs to be frictionless to avoid frustrating users whether they are customers, partners, or employees.

Passwords are no longer enough. It has been proven time and time again that even strong credentials can be stolen, cracked or coaxed from end users. Given today’s threat landscape, good security requires strong authentication practices, one of which is multi-factor authentication (“MFA”). Our MFA system requires no passwords at all.

By using multiple independent factors VerifyMe’s verification system significantly increases the effort that cybercriminals must exert to break in and access the protected transaction or data.  Also attempts that fail for lack of additional factors raise immediate red flags to end users and their financial or data system administrators.

Additionally, our MFA does not use tokens or complicated, tiered passwords. Passwords are replaced by our MFA technology. Passwords are lost, stolen, forgotten, constantly changed, etc. Our MFA removes the need for passwords. The person’s biometrics combined with other non-password factors become their password.

Our digital technologies involve the utilization of multiple authentication mechanisms, some of which we own. These mechanisms include biometric factors, knowledge factors, possession factors and location factors. Biometric factors include facial recognition with liveness detection, finger print and voice recognition. Knowledge factors include a personal gesture swipe and a safe and panic color choice. Possession factor includes devices that the user has in their possession such as a smartphone, smart watch, and other wearable computing devices. The location factor geo-locates the user during a secure login. We surround these authentication mechanisms with proprietary systems that improve the usability and the security of the solutions. Our solutions allow the assessment and quantification of risk using a sophisticated patented heuristic scoring mechanism. We have specialized systems that perform ‘liveness’ detection to insure the subject of authentication is in fact a live human being. We have software systems that introduce learning capabilities into our solutions to improve the ease of use and flexibility.

We believe that by using a host of factors, our proprietary scoring system gives a 99% assurance that the person behind the transaction is the person they say they are.

The digital technologies we own will enable businesses and consumers to reconstruct their overall approaches to security—from identity and authentication to the management of legacy passwords and PINs. We empower our customers to take advantage of the full capabilities of smart mobile devices and provide solutions that are both simple to use and deliver the highest level of security of five or more factors and a patented scoring system.

Our digital multi-factor verification software solutions can be applied to:

Digital Authentication Industry

The growth in Internet banking and Internet commerce and the increasing use and reliance upon proprietary or confidential information that is remotely accessible by many users by businesses, government and educational institutions, has made information security a paramount concern. We believe that enterprises are seeking solutions that will continue to allow them to expand access to data and financial assets while maintaining network security.

A vendor in the user authentication market delivers on-premises software/hardware or a cloud-based service that makes real-time authentication decisions for users who utilize an arbitrary endpoint device (that is, not just Windows PCs or Macs) to access one or more applications, systems or services in a variety of use cases. Where appropriate to the authentication methods supported, a vendor in this market also delivers client-side software or hardware that end users utilize to make those real-time authentication decisions.

The market is mature, with several vendors offering products that have been continuously offered during the past three decades (although ownership has changed over that time). However, new methods and vendors continue to emerge, with the most rapid growth occurring within the past decade in response to the changing market needs for different trade-offs among trust, user experience and total cost of ownership. The greater adoption of user authentication over a wider variety of use cases, the impact of mobile, cloud and big data analytics, and the emergence of innovative methods continue to be disruptive.

While over 100 authentication vendors currently operate in the market, the vast majority deliver two-factor authentication solutions. Even the few vendors that market biometric solutions simply combine them with a password for two-factor security.

Internet and Enterprise Security. With the advent of personal computers and distributed information systems in the form of wide area networks, intranets, local area networks and the Internet, as well as other direct electronic links, many organizations have implemented applications to enable their workforce and third parties, including vendors, suppliers and customers, to access and exchange data and perform electronic transactions. As a result of the increased number of users having direct and remote access to such enterprise applications, data and financial assets have become increasingly vulnerable to unauthorized access and misuse.

Individual User Security. In addition to the need for enterprise-wide security, the proliferation of personal computers, personal digital assistants and mobile telephones in both the home and office settings, combined with widespread access to the Internet, have created significant opportunities for electronic commerce by individual users such as electronic bill payment, home banking and home shopping.

The continued reliance by most enterprises on passwords and PINs has resulted in daily identity theft and data breaches, with massive attacks being announced almost every week. The companies that have been attacked and compromised private data include top brands in finance, retail, entertainment, technology and governments.

Strong Digital Authentication Market

A strong authentication market has emerged, initially led by two-factor authentication solutions. Two-factor authentication solutions combine a password with a second factor, which typically involves proving possession of some object through a one-time password token that generates rotating secret codes, a telephone call via a callback or a SMS message, or an email address via emailing a secret code. We believe three-, four- and five-step methods are expensive and typically used by banks and high-level government operations. We believe biometric technology will play a larger role.

Password Manager/Digital Wallet Market

Until companies figure out a better way to protect their data in the cloud, we believe that the best solution is to enforce higher security with password managers. Password managers provide tools to encrypt text files that can store passwords that are not web based, such as Windows and Outlook passwords, Lotus Notes passwords, administration passwords including local and domain accounts, BIOS passwords, encrypted hard drive passwords, cell phone and voicemail passwords and iPad and iPhone passwords.  Password managers promise greater security while improving the user experience.

The best password managers sync to the cloud across all dominant platforms and require MFA. There are currently no password managers that utilize more than two-factor authentication and none that incorporate additional biometric mechanisms.

The Opportunity

Biometric Systems Market

According to researchandmarkets.com the biometric systems market is expected to reach $65.3 billion by 2024 from $33 billion in 2019 growing at a CAGR of 14.6%. We believe the biometric system market is expected to grow at a modest rate due to cohesive support by governments worldwide and regulations favorable to growth of the biometrics market. The main reason for the adoption of this technology is security. In today’s era, theft and breach of security is easily possible, which we believe supports the growth of demand in this market. Simultaneously, we believe, a growth in cyber-attacks and crimes are pushing the demand for biometric security.

By verticals, the biometric system market is segmented as Banking, Financial Services, Insurance (“BFSI”), consumer electronics, automotive, government and others. Due to economic growth across the globe, we believe demands for automotive vehicles is increasing, along with increasing vehicle thefts, thus the growing automotive production is anticipated to push the demand for biometric systems for vehicle security. In the BSFI sector we believe the biometric market is trending toward growth due to increased thefts and cybercrimes. We expect the consumer electronics market will dominate this market as manufacturers are investing heavily to make their devices more secure.

By geography, the market is segmented as the Americas, Europe, Middle East and Africa and Asia Pacific. In the Americas, this market is expected to grow due to security and scrutiny of employees. The Asia Pacific region is adopting the new technologies of biometrics for more security and efficiency. In North America, the implementation of various governmental initiatives has supported growth in the biometric system market. Major industry players according to researchandmarkets.com are NEC Corporation (Japan), Aware (US), Cross Match Technologies (US); Thales Group (France), Safran (France), ASSA ABLOY AB (Sweden), and Fujitsu Ltd. (Japan).

As identity theft and data breaches continue to increase and losses to service providers and individuals continue to escalate, we believe both enterprises and consumers will seek better solutions to protect their interests. These solutions must be cost effective, easy to integrate, and simple to use.

Any transaction or action which requires authentication of an individual is a potential opportunity for a strong multi-factor solution such as VeriPAS™ Smartphone Authenticator. We believe this is a large market opportunity, within which we are focused on five specific segments:

Our Solution

VerifyMe MFA delivers an electronic authentication solution for identifying individual human beings. When subject attempts to access an Internet resource and asserts an identity, VeriPAS™ Smartphone Authenticator attempts to authenticate the asserted identity. It does this utilizing multiple strong authentication mechanisms, involving at least three independent factors.  

MFA is based around mobile apps that incorporate a password manager and single sign on capability. In addition to facilitating strong authentication during the logon process to the enterprise resource or service, VeriPAS™ Smartphone Authenticator also lets the user conveniently integrate and protect all of their legacy username and passwords. VeriPAS™ Smartphone Authenticator has several advantages, including, among other things:

Factor 1 – Something you have – a possession device – typically this is a registered mobile device, which we can authenticate either via SMS or email round robin protocol.

Factor 2 – Something you know – a knowledge factor – we currently utilize a color gesture swipe. This requires the subject to confirm their secret color and appropriately connect dots on a matrix consistent with their registered gesture pattern.

Factor 3 – Something you are – we utilize facial recognition to authenticate images captured in real-time using the registered devices built in camera, with images that were stored in the subject’s profile during registration.

Our platform can be distinguished from competitors in that it is not limited to any of the above authentication mechanisms. MFA currently supports many more authentication mechanisms and we intend to continue expanding this list.  For example, our platform is not limited to facial recognition as a biometric mechanism. It currently supports voice, fingerprint and other mechanisms.

In addition, MFA includes a risk-scoring engine that is able to enforce complex, customer specific authentication policies and shield them from the underlying complexity of evaluating multiple, independent authentication mechanisms. This risk engine allows us to constantly add new authentication mechanisms as they emerge. We see the emerging market of wearable devices as providing new authentication mechanisms that will be very simple and reliable for the end-user. Because our risk engine insulates the enterprise from the complexity of having to interface with all these different platforms, they are available to benefit from and insure their customers can utilize these devices to their full potential.

MFA is platform agnostic (available for IOS, Android, Mac, Linux and Windows) and scalable for use on wearable personal devices. The digital platform is an enterprise solution, which combines multiple independent authentication factors and can also determine geo-location utilizing a number of mechanisms including GPS, cell tower triangulation and IP/WIFI address. Because the service utilizes biometrics and liveness detection, it eliminates the possibility that users might share their authentication credentials, or that user accounts can be accessed by other individuals. The combination of biometrics and geo-location provides extremely strong transactional evidence, making it nearly impossible for an end-user to refute having been part of a transaction.

During 2019, we spent approximately $36,000 on hosting of our MFA software and have spent approximately $300,000 on software and hardware development since the beginning of 2018. We had no sales in 2019 in relation to our MFA technologies due to further refinement to address new smartphone capabilities. Our MFA can now work on both Apple IOS and Android phone systems. In 2018 and 2019, we developed applications (“APPs”) which are used in conjunction with the MFA technology. These APPs are now fully functional however, we expect to enhance and upgrade the visual appearance and functionality of the APPs to enhance a customer’s experience.

Although this product is fully developed and ready for deployment, we have only passively marketed it with just a website presence. We have had no sales to date. The Company is concentrating most of its financial resources on security printing brand protection technology sales. The Company hired an independent consulting group, who reviewed the current MFA market and our MFA software system and concluded that the product is viable, marketable, and has the ability to increase the Company’s revenue. The Company intends to implement the product once adequate funding becomes available.

Our Intellectual Property

Intellectual property is important to our business. The current patent and trademark portfolios consist of 9 granted US patents and one granted European patent validated in four countries, four pending US and foreign patent applications, four registered US trademarks, one EU foreign registration and one Colombian foreign registration, and seven pending US and foreign trademark applications.

In addition, seven patent applications were abandoned. We plan on considering the filing for reinstatement on some of the abandoned patent applications.

We have attempted to achieve sufficient flexibility in our products and technologies so as to provide cost-effective solutions to a wide variety of counterfeiting problems. We intend to generate revenues primarily by selling pigment to manufacturers who incorporate our technologies into their manufacturing processes and their products as well as through licensing fees where we are providing unique or custom solutions.

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 patents expire between the years 2019 and 2033. 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 anti-counterfeiting 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 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 have a pending application for the VerifyMe name in Canada but can make no assurances regarding its approval. 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.” 

Research and Development

We have been involved in research and development since our inception and intend to continue our research and development activities, funds permitting. Through 2012, our research and development focused on pigment technologies. Since 2012, we have allocated research and development efforts between digital and pigment technologies. We hope to expand our technology into new areas of implementation and to develop unique customer applications. We spent approximately $5,000 and $188,000 during the years ended December 31, 2019 and 2018, respectively, on research and development.

Sales and Marketing Strategy

Brand Protection

We plan on marketing directly with HP Indigo 6000 series and HP Indigo 7800 series press owners as well as the label and packaging printing industry, including both traditional and digital printers and users to address their clients’ needs for our covert serialization. We expect those printers to market and resell our technologies to both current and future brand owner clients. HP Indigo has trained their international digital press salesforce in various security printing technologies including our RainbowSecure® and VeriPAS™ technologies. HP Indigo sales people have generated multiple leads on our behalf. In September 2017, we entered into a five-year contract with HP to supply HP Indigo Digital press ink canisters containing our technology pigment for use by HP Indigo digital press owners who print our security feature on labels and packages for their brand owners. Additionally, we enter into reseller agreements with print service providers (“PSP”). Pursuant to one of these agreements, a global label manufacturer began printing our technology in July 2018 and has major brand owners as clients which can utilize our technologies to protect their product labels and packaging from counterfeiting and product diversion. This label printer owns and operates printers and manufacturing equipment which can implement our technology. This reseller also has manufacturing facilities around the globe.

In addition to the printing industry, we expect to market directly to all brand owners who utilize labels and packaging for their products. Brand owners can be licensed directly by VerifyMe and direct their personal printer to print their labels and packaging with the VerifyMe printing technologies.  The brand owner will therefore pay their royalties directly to VerifyMe based on the number of labels and packages units that their printer applied the technology to. In 2019, the Company entered into a leasing agreement and purchase agreement with a major brand owner. This particular brand owner is on the “Forbes Top 50 Private Companies list”. The brand owner began printing labels that include our product in the fourth quarter 2019. 

Additionally, we intend to engage third parties to market, sell and support our brand protection security technologies on a global basis for a contracted fee based on their sales.  Our targeted third parties will already have a successful track record in supporting HP Indigo owners as well as traditional printing clients.

We have a strategic partnership with S-One. S-One provides VerifyMe with global sales, distribution, and promotion support for the Company’s products and employ multiple representatives on an as needs basis to promote the Company’s products. Under the terms of the Company’s agreement with S-One, S-One acts as a sales and marketing contractor for the Company’s printed products and services on a global basis and assists the Company in fulfilling the Company’s obligations under the Company’s signed current and future reseller agreements with various global and domestic print providers and brand owners.

The FDA implemented the identifier track and trace portion of the Title II of the Drug Quality and Security Act in November 2018, entitled the “Drug Supply Chain Security Act.” This regulation requires drug manufactures and re-packagers to add product identifiers, such as our RainbowSecure® technology as well as our VeriPAS^TM track and trace system, to certain prescription drug packages beginning in 2018. We expect to engage third party marketing and sales companies to present our solutions to the drug and pharmaceutical industry. The FDA intends to continue implementing the Drug Supply Chain Security Act to ensure that a full electronic identification system for prescription drugs is implemented by 2023. We believe that the pharmaceutical industry has been slow to adopt the mandates due to the low fines associated with the mandate versus the cost of the implementation.

In addition, our track and trace partner, Micro Focus has agreed to cross sell our technologies as part of their Global Product Authentication System called “GPAS”.  We are also contracted with Micro Focus to re-sell their GPAS product with our RainbowSecure® and our VeriPAS™ Smartphone Authenticator technology under our own trademarked name, VeriPAS^TM which stands for VerifyMe Global Product Authentication System.

An additional marketing strategy is to incorporate our technology into the high-speed inkjet hardware that traditional Flexo and Commercial Printers use to add a variable data feature for their clients. 

Some of the major brand segments that need our type of label, packaging and serialization identifier products are:

We plan for our sales and marketing strategy to include an outreach program and sales programs that tailor the product to the governmental body or merchant, as well as key partnerships with authorities and merchants whose products or audiences can be complementary to our own. In particular, we intend to focus on building relationships with key partners who can deliver our products to their existing and prospective customers in target markets, i.e., commercial printers/packagers, plastic card manufacturers and financial services intermediaries. HP Indigo’s Experience Centers located in Tel Aviv, Israel, Singapore, Barcelona, Spain and Alpharetta, Georgia have all been trained and outfitted with samples, including our VerifyMe Beepers, and VeriPAS™ Smartphone Authenticators to demonstrate the technology to customers who visit the centers. Customers can perform tests and receive hands on experience with our technologies.

HP Indigo also invited VerifyMe to man a station in the security printing sections of their trade show booths such as the global LabelExpo show held in Brussels, Belgium in September 2019 and in Singapore in March 2019. HP Indigo also has VerifyMe display their solutions at their annual VIP print service provider event held in Tel Aviv every year. HP Indigo has invited VerifyMe to attend additional trade shows in 2020 including one in Singapore, Dusseldorf, Germany and Orlando, Florida.

Multi-Factor Biometric Authentication

We expect to market our MFA digital software technology by our website only. We are taking a very passive marketing approach at this time and concentrating our resources on security printing products. When funding allows, we may expand marketing plan at that time.

 Our initial targeted market segment is the financial services industry.  This includes both the traditional banking and crypto financial transaction industries. Our second targeted market segment is expected to be the healthcare industry.  The third targeted market is expected to the gaming industry. The fourth target market segment we expect to market to will be governments.  Governments can be both foreign and domestic as well as federal, state and local levels.

We anticipate that all of these market outreaches will be made directly by us and we also plan to use third party marketing vendors who specialize in software sales. We are also seeking business partners with revenue and proven business models. In 2019 we invested in developing sales channels and pursuing opportunities in the digital authentication area.

Competition

The market for protection from counterfeiting, diversion, theft and forgery is a mature more than 25-year old industry dominated by a number of large, well-established companies, particularly in the area of traditional overt security technologies where repeating static produced images are commonly used. This is due to the fact that 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: These are generally well-established companies such as SICPA and Sun Chemical, whose core business is manufacturing and selling printing inks; (ii) System Integrators: These companies have often evolved from other sectors in the printing industry, mainly security printing manufacturers, technology providers, or packaging and label manufacturers. These companies offer a range of security solutions, enabling them to provide a complete suite of solutions tailored to the customer’s specific needs and requirements. The companies in this space include 3M, DuPont, Opsec, Honeywell, and Avery Dennison; (iii) System Consultancy Groups: These companies offer a range of technologies from several different providers and tailor specific solutions to end-users; (iv) Traditional Authentication Technology Providers: These purveyors include companies like American Banknote Holographics, Crown Roll Leaf and Digimarc, which provide holograms and digital watermarking, respectively; (v) Product Diversion Tracking Providers. Applied DNA Sciences Next-Generation Technology Providers LLC falls into this group, along with several companies such as Applied DNA Sciences, Authentix, DNA Technologies, and Identif, Kodak Traceless, which provide on-product and in-product tagging technologies; (vi) Traditional Security Printers: This group includes traditional security printers such as Thomas de la Rue, Canadian Banknote, and Banknote Corporation of America, and Portals, whose core products are printing the world’s currencies; and (vii) Biometric Solution Providers: These companies offer biometric authentication capabilities to be integrated with existing mobile device authentication, such as OT-Morpho and ImageWare Systems.

Amazon has recently become a competitor with their new “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. This differs from our covert luminescent pigment which is incorporated in the labeling process and our invisible covert serialization and authentication solution. 

Also HP Indigo, is selling a yellow ultra violet ink as a security product for an inexpensive price that directly competes with our products. There are a number of providers of inexpensive ultra violet inks in the marketplace, however, we believe these inexpensive ultra violet inks do not provide the level of security and safety that our products provide.

New types of security competition is also increasing, such as retail website monitoring, brand investigations, RFID and near field communications (“NFC”) products using low powered radio signals.

To compete effectively, we are seeking to establish key relationships with major digital solution equipment and distribution providers as we have done with HP Indigo.  While leveraging these relationships, we still expect that we will need to expend significant resources in sales and marketing. Many 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. We believe competition in our principal markets is primarily driven by:

If a competitor develops superior technology or cost-effective alternatives to our products, our business, financial condition and results of operations could be significantly harmed.

Major Customers/Vendors

During the year ended December 31, 2019, two customers accounted for 97% of total sales.  During the year ended December 31, 2018, four customers accounted for 100.0% of total sales. Generally, a substantial percentage of our sales have been made to a small number of customers and is typically on an open account basis.

During the years ended December 31, 2019 and 2018, we purchased 100% of our pigment from one vendor.

VerifyMe utilizes multiple vendors including the pigment vendor for engineered RainbowSecure® authentication devices.

Employees

As of March 6, 2020, we had one full-time employee, our Chief Executive Officer, three part-time employees, our Chief Financial Officer, our Chief Technology Officer, our Vice President of Sales and two outside contractors, including our Chief Operating Officer and our Chairman.

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.

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.