VerifyMe, Inc. (Form: 10-Q, Received: 05/13/2021 16:33:38)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

¨	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.)

Clinton Square, 75 S. Clinton Ave, Suite 510 Rochester, NY		14604
(Address of Principal Executive Offices)		(Zip Code)

(585) 736-9400
(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal year, if Changed Since Last Report)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which

Registered

Common Stock, par value $0.001 per share

VRME

The Nasdaq Capital Market

Warrants to Purchase Common Stock

VRMEW

The Nasdaq Capital Market

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

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

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

Large accelerated filer	o	Accelerated filer	o

Non-accelerated filer	x	Smaller reporting company	x

Emerging growth company	o

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. o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 7,426,907 shares of common stock outstanding at May 11, 2020.

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PART I - FINANCIAL INFORMATION

ITEM 1.	Consolidated Financial Statements	4
Consolidated Balance Sheets (Unaudited)		4
Consolidated Statements of Operations (Unaudited)		5
Consolidated Statements of Cash Flows (Unaudited)		6
Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited)		7
Notes to Consolidated Financial Statements (Unaudited)		8
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	21
ITEM 4.	Controls and Procedures	22

PART II - OTHER INFORMATION
ITEM 1.	Legal Proceedings	23
ITEM 1A.	Risk Factors	23
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
ITEM 3.	Defaults Upon Senior Securities	23
ITEM 4.	Mine Safety Disclosures	23
ITEM 5.	Other Information	23
ITEM 6.	Exhibits	24
SIGNATURES		25

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CONSOLIDATED FINANCIAL STATEMENTS

ITEM 1.

VerifyMe, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)

	As of
	March 31, 2021			December 31, 2020
ASSETS	(Unaudited)

CURRENT ASSETS
Cash and cash equivalents	$	15,351		$	7,939
Accounts Receivable		163			31
Prepaid expenses and other current assets		190			177
Deferred Offering Costs		60			-
Inventory		49			54
TOTAL CURRENT ASSETS		15,813			8,201

PROPERTY AND EQUIPMENT
Equipment for lease, net of accumulated amortization of
$61 and $50 as of March 31, 2021 and December 31, 2020, respectively		234			200

INTANGIBLE ASSETS
Patents and Trademarks, net of accumulated amortization of
$327 and $320 as of March 31, 2021 and December 31, 2020, respectively		330			293
Capitalized Software Costs, net of accumulated amortization of
$25 and $20 as of March 31, 2021 and December 31, 2020, respectively		117			80
TOTAL ASSETS	$	16,494		$	8,774

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and other accrued expenses	$	433		$	383
TOTAL CURRENT LIABILITIES		433			383

LONG-TERM LIABILITIES
Term Note	$	72		$	72

TOTAL LIABILITIES	$	505		$	455

STOCKHOLDERS' EQUITY
Series A Convertible Preferred Stock, $.001 par value, 37,564,767 shares
authorized; 0 shares issued and outstanding as of March 31, 2021 and
0 shares issued and outstanding as of December 31, 2020		-			-

Series B Convertible Preferred Stock, $.001 par value; 85 shares
authorized; 0.85 shares issued and outstanding as of March 31, 2021 and		-			-
December 31, 2020, respectively

Common stock, $.001 par value; 675,000,000 authorized; 7,366,053 and 5,603,888 issued, 7,359,042 and 5,596,877 shares outstanding as of March 31, 2021 and December 31, 2020, respectively		7			6

Additional paid in capital		84,983			76,099

Treasury stock as cost (7,011 shares at March 31, 2021 and December 31, 2020)		(113	)		(113	)

Accumulated deficit		(68,888	)		(67,673	)

STOCKHOLDERS' EQUITY		15,989			8,319

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	16,494		$	8,774

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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VerifyMe, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

	Three Months Ended
	March 31, 2021			March 31, 2020

NET REVENUE
Sales	$	188		$	92

COST OF SALES		43			17

GROSS PROFIT		145			75

OPERATING EXPENSES
General and administrative (a)		789			538
Legal and accounting		126			69
Payroll expenses (a)		193			94
Research and development		5			-
Sales and marketing (a)		247			43
Total Operating expenses		1,360			744

LOSS BEFORE OTHER EXPENSE		(1,215	)		(669	)

OTHER EXPENSE, NET
Interest expenses, net		-			(143	)
Loss on extinguishment of debt		-			(280	)
TOTAL OTHER EXPENSE, NET		-			(423	)

NET LOSS	$	(1,215	)	$	(1,092	)

LOSS PER SHARE
BASIC	$	(0.19	)	$	(0.49	)
DILUTED	$	(0.19	)	$	(0.49	)

WEIGHTED AVERAGE COMMON SHARE OUTSTANDING
BASIC		6,561,222			2,240,285
DILUTED		6,561,222			2,240,285

(a)	Includes share based compensation of $438 and $323 for the three months ended March 31, 2021 and 2020, respectively.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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VerifyMe, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Three Months Ended
	March 31, 2021			March 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,215	)	$	(1,092	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Stock based compensation		10			40
Fair value of options in exchange for services		85			218
Fair value of restricted stock awards issued in exchange for services		215			65
Fair value of restricted stock units issued in exchange for services		128			-
Loss on Extinguishment of Debt		-			281
Amortization of debt discount		-			124
Amortization and depreciation		23			23
Changes in operating assets and liabilities:
Accounts Receivable		(132	)		15
Deferred Offering Costs		(60	)		-
Inventory		5			(11	)
Prepaid expenses and other current assets		(13	)		(15	)
Accounts payable and accrued expenses		50			17
Net cash used in operating activities		(904	)		(335	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Patents		(44	)		(7	)
Purchase of Equipment for lease		(45	)		(22	)
Capitalized Software Costs		(42	)		-
Net cash used in investing activities		(131	)		(29	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from public offering of securities		8,447			-
Repayment of bridge financing and early redemption fee		-			(750	)
Proceeds from convertible debt, net of costs		-			1,747

Net cash provided by financing activities		8,447			997

NET INCREASE IN CASH AND
CASH EQUIVALENTS		7,412			633
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		7,939			253

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	15,351		$	886

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	-		$	-
Income taxes	$	-		$	-

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Relative fair value of common stock issued in connection with 2020 Debentures	$	-		$	34
Relative fair value of warrants issued in connection with 2020 Debentures	$	-		$	1,063
Beneficial conversion feature in connection with 2020 Debentures	$	-		$	650

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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VerifyMe, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Equity (Deficit)

(Unaudited)

(In thousands, except share data)


	Series A				Series B
	Convertible				Convertible
	Preferred				Preferred				Common
	Stock				Stock				Stock				Additional
	Number of				Number of				Number of				Paid-In		Treasury			Accumulated
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Stock			Deficit			Total
Balance at December 31, 2019		-		-		0.85		-		2,232,112		2		61,815		(113	)		(61,771	)		(67	)
Fair value of stock option		-		-		-		-		-		-		217		-			-			217
Restricted Stock Awards		-		-		-		-		-		-		65		-			-			65
Common stock issued for services		-		-		-		-		1,333		-		8		-			-			8
Common stock issued in relation to Bridge Financing		-		-		-		-		19,207		-		66		-			-			66
Beneficial Conversion feature in connection with convertible debt		-		-		-		-		-		-		650		-			-			650
Fair value of warrants issued in connection with convertible debt		-		-		-		-		-		-		1,063		-			-			1,063
Net loss		-		-		-		-		-		-		-		-			(1,092	)		(1,092	)
Balance at March 31, 2020		-		-		0.85		-		2,252,652		2		63,884		(113	)		(62,863	)		910

	Series A				Series B
	Convertible				Convertible
	Preferred				Preferred				Common
	Stock				Stock				Stock				Additional
	Number of				Number of				Number of				Paid-In		Treasury			Accumulated
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Stock			Deficit			Total

Balance at December 31, 2020		-		-		0.85		-		5,596,877		6		76,099		(113	)		(67,673	)		8,319
Fair value of stock options		-		-		-		-		-		-		85		-			-			85
Restricted stock awards		-		-		-		-		10,000		-		215		-			-			215
Restricted Stock Units		-		-		-		-		-		-		128		-			-			128
Common stock issued for services		-		-		-		-		2,165		-		10		-			-			10
Common stock issued related to Public Offering		-		-		-		-		1,750,000		1		8,446		-			-			8,447
Net loss		-		-		-		-		-		-		-		-			(1,215	)		(1,215	)
Balance at March 31, 2021		-		-		0.85		-		7,359,042		7		84,983		(113	)		(68,888	)		15,989

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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VerifyMe, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business

VerifyMe, Inc. (together with its consolidated subsidiaries, “VerifyMe,” the “Company,” “we,” “us,” or “our”) was incorporated in the State of Nevada on November 10, 1999. The Company is based in Rochester, New York 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 is a technology solutions provider specializing in brand protection and supply chain functions such as counterfeit prevention, authentication, serialization, consumer engagement, track and trace features for labels, packaging and products. Until 2018, the Company primarily engaged in the research and development of its technologies. The Company began to commercialize its covert luminescent pigment, RainbowSecure®, in 2018 and 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. In April 2021 VerifyMe launched a rebranding and messaging campaign to more fully market all of their products and services to include a new website and marketing materials. What was previously known as RainbowSecure® is now called VerifyInk^TM and when coupled with VerifyCode^TM we believe it provides the only invisible covert serialization and authentication solution which can be deployed through variable digital printing on HP Indigo (a division of HP Inc.) printing systems and be authenticated and decoded using VerifyMe’s patented smartphone Authenticator, VerifyAuthenticator^TM for tracking and authentication. The VerifyAuthenticator™ is capable of fluorescing, decoding, and verifying invisible VerifyInk^TM printed codes in the field – designed to allow investigators to quickly and efficiently authenticate products 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 monitor the complete supply chain from product origination to the end user utilizing geo location mapping and intelligent programable alerts. Brand owners can then set rules of engagement, gather rich business intelligence, establish marketing programs for customer engagement and control and monitor and protect their products’ “life cycle.” We have derived minimal revenue from our authentication and track and trace software system and have derived limited revenue from the sale of our VerifyInk^TM and VerifyCode^TM technology.

The Company’s activities are subject to significant risks and uncertainties, including its ability to successfully commercialize its technologies and the need to further develop the Company’s intellectual property.

Reclassifications

Certain amounts presented for the three months ended March 31, 2020 reflect reclassifications made to conform to the presentation in our current reporting period.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements (the “Interim Statements”) have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements are not included herein. The Interim Statements should be read in conjunction with the financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (the “SEC”) on March 25, 2021. The accompanying Interim Statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The interim results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation.

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.

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The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

identify the contract with a customer;

identify the performance obligations in the contract;

determine the transaction price;

allocate the transaction price to performance obligations in the contract; and

recognize revenue as the performance obligation is satisfied.

During the three months ended March 31, 2021, the Company’s revenues were primarily made up of revenue generated from our product authentication technology, as we expanded into the personal protective equipment industry.

Basic and Diluted Net Income 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 each of the three months ended March 31, 2021 and 2020, 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 three months ended March 31, 2021, there were approximately 4,397,000 anti-dilutive shares consisting of 474,000 shares issuable upon exercise of options, 3,779,000 shares issuable upon exercise of warrants, and 144,000 shares issuable upon conversion of preferred stock. For the three months ended March 31, 2020, there were approximately 2,038,000 anti-dilutive shares consisting of 452,000 shares issuable upon exercise of options, 943,000 shares issuable upon exercise of warrants, 144,000 shares issuable upon conversion of preferred stock and 498,000 shares issuable upon conversion of convertible debentures.

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NOTE 2 – DEFERRED OFFERING COSTS

In the three months ended March 31, 2021, the Company formed VMEA Holdings Inc. (the “Sponsor Entity”), a Delaware corporation and wholly owned subsidiary of the Company, that owns G3 VRM Acquisition Corp. (the “SPAC”), a Delaware corporation and special purpose acquisition company being co-sponsored by the Company. 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. On April 14, 2021 the SPAC, filed a Registration Statement on Form S-1 with the Securities and Exchange Commission in connection with a proposed initial public offering of units by the SPAC.

As of March 31, 2021, the Company has consolidated the Sponsor Entity and the SPAC, resulting in $60 thousand deferred offering costs.

NOTE 3 – PROPERTY AND EQUIPMENT

Equipment for Lease

During the three months ended March 31, 2021 and 2020, the Company capitalized $45 thousand and $22 thousand, respectively, in connection with the certification and production of the VerifyChecker™ and the VerifyAuthenticator^TMtechnology. The Company depreciates equipment for lease over its useful life of five years. Depreciation expense for Equipment for lease was $11 thousand and $11 thousand for the three months ended March 31, 2021 and 2020, respectively, included in General and administrative expense in the accompanying Statements of Operations.

NOTE 4 – INTANGIBLE ASSETS

Patents and Trademarks

As of March 31, 2021, the current patent and trademark portfolios consist of ten granted U.S. patents and one granted European patent validated in four countries, nine pending U.S. and foreign patent applications, six registered U.S. trademarks, two EU trademark registrations, one Colombian trademark registration, one Australian trademark registration, one Japanese trademark registration, one Mexican trademark registration, one Singaporean trademark registration, and seventeen pending US and foreign trademark applications. Our issued patents expire between the years 2022 and 2038. Costs associated with the prosecution and legal defense of the patents have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents which were determined to be 17 to 19 years. During the three months ended March 31, 2021 and 2020, the Company capitalized $44 thousand and $7 thousand, respectively, of patent and trademarks costs. During the three months ended March 31, 2021 and 2020, the Company amortized $7 and $7 thousand, respectively, of patent and trademarks costs.

Capitalized Software

Costs incurred in connection with the development of software related to our proprietary digital products are accounted for in accordance with FASB ASC 985 “Costs of Software to Be Sold, Leased or Marketed.” 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 costs begins once the product is available to the market. Capitalized software costs are amortized over the estimated life of the related product, generally five years, using the straight-line method. The Company will evaluate its software assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company capitalized $42 thousand and $0 for the three months ended March 31, 2021 and 2020, respectively. Amortization expense for capitalized software was $5 and $5 thousand for the three months ended March 31, 2021 and 2020, respectively, included in General and Administrative expense in the accompanying Statements of Operations.

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NOTE 5 – TERM NOTE

On May 17, 2020, the Company entered into a paycheck protection program term note for $72 thousand (the “SBA Loan”) with PNC Bank, N.A. under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) pursuant to the Paycheck Protection Program (the “PPP”), which is administered by the U.S. Small Business Administration. The SBA Loan is scheduled to mature on May 17, 2022, bears interest at a rate of 1.00% per annum and is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. Pursuant to the CARES Act and the PPP, all or a portion of the principal amount of the SBA Loan is subject to forgiveness so long as, over the eight-week period following the receipt of the SBA Loan, the Company used those proceeds for payroll costs, payment on rent obligations, utility costs, and costs of certain employee benefits as per Section 1106 of the CARES Act. As of March 31, 2020, the amount outstanding on the SBA Loan was $72 thousand classified as Long-Term Liabilities and included in the accompanying Balance Sheets.

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NOTE 6 – STOCKHOLDERS’ EQUITY

The Company expensed $215 and $65 thousand related to restricted stock awards for the three months ended March 31, 2021 and 2020, respectively.

During the three months ended March 31, 2021, the Company issued 2,165 shares of restricted common stock in relation to investor relation services with a stock based compensation expense of $10 thousand.

On March 6, 2020, the Company completed the offering of senior secured convertible debentures (the “2020 Debentures”) and warrants and raised $1,992,000 in gross proceeds from the sale of the 2020 Debentures and warrants. In connection to the 2020 Debentures, the Company issued 19,207 restricted shares of common stock during the three months ended March 31, 2020.

Effective January 1, 2021, the Company approved restricted stock units or restricted stock awards, for each non-employee director, with a grant date fair value equal to $100 thousand. If the non-employee director serves as a Board committee chair or Lead Independent director, he or she will also receive and an additional award of restricted stock units or restricted stock award with a grant date fair value equal to $25 thousand. These awards will vest in full on the earlier of the one-year anniversary of the date of grant subject to the non-employee director’s continued service on the Board of Directors. In January 2021, a total of 145,010 restricted stock units were issued to five non-employee directors for a fair value of $625 thousand, vesting one year from the date of issuance.

The Company expensed $128 thousand and $0 related to restricted stock units for the three months ended March 31, 2021 and 2020, respectively.

On February 9, 2021, the Company entered into an underwriting agreement with Maxim Group LLC (“Maxim”), as the representative of several underwriters pursuant to which the Company agreed to issue and sell to the underwriters in an underwritten public offering an aggregate of 1,650,000 shares of common stock, of the Company at a public offering price of $5.30 per share, less underwriting discounts and commissions. The public offering closed on February 12, 2021 resulting in gross proceeds of $8.7 million and net proceeds of $8.1 million, less underwriting discounts and commissions and other offering expenses.

In connection with the public offering that closed on February 12, 2021, the Company granted Maxim a 45-day option to purchase up to 247,500 shares of common stock to cover over-allotments, if any. On February 19, 2021 Maxim partially exercised its over-allotment option to purchase 100,000 shares of common stock for gross proceeds of $530 thousand and net proceeds of $493 thousand, less underwriting discounts and commissions. The total net proceeds from the public offering including partial exercise of the overallotment option, were $8,447 thousand.

Effective March 1, 2021, the Company amended and restated the Consulting Agreement it has with its Chief Operating Officer. The amended and restated agreement provides among other things, an annual fee of $214,400, a commission of 2% on all gross sales above $500 thousand, the issuance of 10,000 restricted stock awards and the extension of the expiration date for options previously granted to him to the five-year anniversary of the agreement’s effective date. As a result, 80,000 options previously granted to the Company’s Chief Operating Officer now expire on March 1, 2026. The Company applied FASB ASC 718, “Compensation—Stock Compensation,” modification accounting and calculated a change in fair value of $75 thousand.

NOTE 7 – 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.

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On August 10, 2020, the Company’s Board of Directors adopted the 2020 Equity Incentive Plan (the “2020 Plan”), subject to stockholder approval, which authorizes the potential issuance of up to 1,069,110 shares of common stock. On September 30, 2020, the Company’s stockholders approved the 2020 Plan, and upon such approval the 2020 Plan became effective and the 2017 Plan was terminated. Shares of common stock underlying existing awards under the 2017 Plan may become available for issuance pursuant to the terms of the 2020 Plan under certain circumstances. 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.

The 2020 Plan 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.

No stock options were granted during the three months ended March 31, 2021.

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.

Options Outstanding

Weighted -

Average

Aggregate

Remaining

Intrinsic

Weighted-

Contractual

Value

Number of

Average

Term

(in 000’s)

Shares

Exercise Price

(in years)

(1)

Balance as of December 31, 2020

473,771

4.48

Granted

Balance as of March 31, 2021

473,771

4.48

Exercisable as of March 31, 2021

473,771

4.48

3.5

$292

(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.

The following table summarizes the activities for the Company’s unvested stock options for the three months ended March 31, 2021:

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	Unvested Options

	Weighted - Average
	Number of Unvested			Grant Date
	Options			Exercise Price
Balance as of December 31, 2020		10,000		$	9.75

Granted		-			-

Vested		(10,000	)		9.75

Balance as of March 31, 2021		-		$	-

During the three months ended March 31, 2021 and 2020, the Company expensed $85 and $218 thousand, respectively, with respect to options.

Effective January 2020, the Company awarded its Chief Financial Officer Incentive Stock Options exercisable for 4,000 shares of common stock with an exercise price of $3.505 vesting quarterly over a one-year period and expiring on January 7, 2025 with a fair value of $14 thousand.

Effective January 2020, the Company awarded four directors Non-Qualified Stock Options exercisable for 40,000 shares in the aggregate, for services rendered to the Company in 2019 with an exercise price of $3.505 vesting immediately and expiring on January 7, 2025 with a fair value of $137 thousand

Effective January 2020, the Company awarded five of its directors Non-Qualified Stock Options exercisable for 50,000 shares in the aggregate, for services to be rendered to the Company in 2020 with an exercise price of $3.505 vesting quarterly over a one-year period and expiring on January 7, 2025 with a fair value of $171 thousand.

As of March 31, 2021, there was $0 unrecognized compensation cost related to outstanding stock options.

The following table summarizes the activities for the Company’s warrants for the three months ended March 31, 2021:

	Warrants Outstanding
	Number of Shares		Weighted- Average Exercise Price		Weighted - Average Remaining Contractual Term in years)		Aggregate Intrinsic Value (in 000's) (1)
Balance as of December 31, 2020		3,779,243	$	5.89

Granted		-		-

Balance as of March 31, 2021		3,779,243	$	5.89		3.8

Exercisable as of March 31, 2021		3,779,243	$	5.89		3.8	$	-

(1)

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $4.12 for our common stock on March 31, 2021.

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NOTE 8– CONCENTRATIONS

Revenue

For the three months ended March 31, 2021, and 2020, two customers represented 97% of revenues.

Accounts Receivable

As of March 31, 2021, two customers represented 90% of accounts receivable.

NOTE 9 – SUBSEQUENT EVENTS

In May 2021, the Company issued 1,087 shares of restricted common stock in relation to investor relation services.

On April 16, 2021, upon vesting of the restricted stock awards held by our Chief Executive Officer, the Company withheld 12,843 shares of common stock in order to satisfy his tax obligations.

Effective April 15, 2021, Norman Gardner, the Chairman of the board of directors of the Company retired from the board of directors. The Company and Mr. Gardner have entered into a new two-year Consulting Agreement, dated April 15, 2021, with a term commencing June 30, 2021. Pursuant to the new Consulting Agreement, Mr. Gardner was given the honorary title of Founder and Chairman Emeritus, an annual consulting fee of $175,000 in the first year, and $87,500 in the second year, an award of 69,284 shares of restricted stock, half of which vest immediately and the balance vesting in equal installments on June 30, 2022 and June 30, 2023, and a $1,000 monthly health insurance stipend. In addition, Mr. Gardner has agreed to cancel options to purchase 8,300 shares that expire on December 21, 2026, and agreed to certain trading volume limitations on sales of his shares of the Company. The Company is accelerating the vesting of 40,000 restricted shares held by Mr. Gardner that are currently scheduled to vest in August 2021. Payments and vesting of restricted stock awards under the agreement will be accelerated upon Mr. Gardner’s death or termination other than for cause. The agreement is subject to other customary terms, including release of claims, non-competition and confidentiality.

Upon the retirement of Mr. Gardner on April 15, 2021, the board of directors of the Company appointed Scott Greenberg to serve as Chairman of the board of directors. As a result, Mr. Greenberg also became the chair of the Executive Committee of the board.

On April 15, 2021, the board of directors granted Margaret Gezerlis, the Company’s Chief Financial Officer, an award of 5,000 shares of restricted stock, half of which vested on April 15, 2021, and half of which vests on April 15, 2022. The Company withheld 750 shares of common stock in order to satisfy her tax obligations.

In April 2021, the Company issued 1,087 shares of restricted common stock in relation to investor relation services.

In April 2021, the Company granted an employee, an award of 5,000 shares of restricted stock, vesting annually over a two-year period from the date of grant.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The information in this Management’s Discussion and Analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and notes.

Cautionary Note Regarding Forward-Looking Statements

This report includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. The words “believe,” “may,” “estimate,” “continue,” “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 express 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, among others, the following:

the ongoing coronavirus (“COVID-19”) pandemic;

our relatively new business model and lack of significant revenues;

our ability to prosecute, maintain or enforce our intellectual property rights;

disputes or other developments relating to proprietary rights and claims of infringement;

the accuracy of our estimates regarding expenses, future revenues and capital requirements;

the implementation of our business model and strategic plans for our business and technology;

the successful development of our sales and marketing capabilities;

the potential markets for our products and our ability to serve those markets;

the rate and degree of market acceptance of our products and any future products;

our ability to retain key management personnel;

regulatory developments and our compliance with applicable laws; and

our liquidity.

For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in this report, our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and our other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements in this report are made only as of the date hereof or as indicated and represent our views as of the date of this report. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise, except as required by law.

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Overview

VerifyMe, Inc. (together with its consolidated subsidiaries, “VerifyMe,” the “Company,” “we” “us” or “our”) is a technology solutions provider specializing in brand protection and supply chain functions such as counterfeit prevention, authentication, serialization, consumer engagement, track and trace features for labels, packaging and products. The Company was formed in Nevada on November 10, 1999. Until 2018, we were primarily engaged in the research and development of our technologies. We began to commercialize our covert luminescent pigment, RainbowSecure®, in 2018, and 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. In April 2021 VerifyMe launched a rebranding and messaging campaign to more fully market all of their products and services to include a new website and marketing materials. What was previously known as RainbowSecure^TM is now called VerifyInk^TM and when coupled with VerifyMe Authenticate™ and VerifyMe Track & Trace™ we believe it provides is the only invisible covert serialization and authentication solution which can be deployed through variable digital printing on HP Indigo (a division of HP, Inc.) printing systems and be authenticated and decoded using VerifyMe’s patented smartphone Authenticator, VerifyAuthenticator^TM for tracking and authentication. The VerifyAuthenticator ™ is capable of fluorescing, decoding, and verifying invisible VerifyInk^TM printed 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 monitor the complete supply chain from product origination to the end user utilizing geolocation mapping and intelligent programable alerts. Brand owners access the VerifyMe Authenticate™ and VerifyMe Track & Trace™ software through a web portal over the Internet. Brand owners can then set rules of engagement, gather rich business intelligence, establish marketing programs for customer engagement and control, monitor and protect their products’ “life cycle.” We have derived minimal revenue from our authentication and track and trace ™ software system and have derived limited revenue from the sale of our VerifyInk^TM, VerifyMe Authenticate™ and VerifyMe Track & Trace™ technology.

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 smartphone 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.

In the areas of authentication and serialization of physical goods, we offer clients the following brand protection security and anti-counterfeit product lines:

VerifyMe Authenticate™ for product authentication

VerifyMe Track & Trace™ for product supply chain control

VerifyMe Engage™ for consumer engagement

VerifyMe Online™ for on-line (web) brand monitoring

These four productions lines are powered by one or more of the following technologies:

VerifyCode™

VerifyInk™

VerifyLabel™

VerifyChip™

VerifyMe Online™

VerifyInk^TM 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 Indigo Division of HP Inc. (“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 was qualified on HP Indigo’s 6900 series presses. In addition, we successfully trialed production on their 7900 press series used for sheet-fed products like folded cartons and plastic cards. HP Indigo informed us 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 VerifyInk^TM invisible ink technology. HP Indigo has showcased these samples at various global government and print service providers trade shows. Customers can use a handheld beeping device, our VerifyChecker™, tuned to authenticate the unique frequency of our VerifyInk^TM invisible ink, to broadcast a beeping sound to confirm the authenticity when placed on products, labels and packaging containing our VerifyInk^TM ink. VerifyChecker™ are being commercialized and leased to customers, typically for one year. In December 2017, we signed a contract with Micro Focus to use VerifyInk^TM in their Global Product Authentication Service (GPAS). The technology also features a unique double layer of security which remains entirely covert at all times and provides licensees with additional protection. Under the contract with Micro Focus, we have a re-seller agreement where we sell the combined Micro Focus GPAS with our VerifyInk^TM identifier under our own trademarked name, VerifyCode™. In May 2019, we entered into a strategic partnership with INX, 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. In 2020, INX, in conjunction with Print Craft Inc., successfully-tested an appeal garment containing our VerifyInk^TM ink. This secured garment survived the 50 wash and dry cycle test. Sales and marketing efforts for this new VerifyMe secure apparel technology are commencing in 2021 in conjunction with INX and Print Craft Inc. In February 2021, INX completed the development of a version of our VerifyInk^TM security ink for metal and plastic objects and INX is now co-marketing the new security ink to its global clients. The specially formulated inks will enable these printing presses to print our VerifyInk^TM invisible ink technology, which includes our variable VerifyCode™ serialization, track and trace technology. We believe VerifyInk^TM is particularly well-suited to closed and controlled environments that want to verify transactions within a specific area, as well as labels, packaging, textiles, plastics and metal products which need authentication. We have derived limited revenue from the sale of our VerifyInk^TM technology.

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VerifyMe Track & Trace™ supply chain serialization, track and trace technology combines the covert identifier of VerifyInk^TM and a dynamic code, VerifyCode™, with the Micro Focus GPAS which provides brand owners geographical business intelligence on counterfeiting as well as the ability to authenticate labels, packaging and products. Using information from a smartphone screen, our VerifyCode^TM technology, can provide authentication and data submission information. A customer or end-user can scan information from a product label or QR code and send it to the cloud where our VerifyMe Authenticate™ and VerifyMe Track & Trace™ software can verify authenticity of the product, as well as track and trace the product from production through delivery. Certain clients are in the testing stage with this product. Revenue for this product was received for the first time in 2020 and a reorder was received in the first quarter of 2021. To date, we have recognized minimal revenue from this technology.

VerifyAuthenticator^TM technology is a piece of hardware with a built-in lighting system and software that scans invisible VerifyInk^TM codes. Product investigators attach their smartphone to this device which then reveals the hidden VerifyInk^TM images on the smartphone screen which are then sent to the VerifyMe Authenticate™ and VerifyMe Track & Trace™ 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 and are auto-renewable. A Forbes Top 50 Private Company added additional leases in 2020 for its international brand inspector team. Revenue from this product is at an initial stage and minimal at this time.

VerifyMeChecker™ technology is an authentication tool which we are marketing to customers in conjunction with our VerifyInk^TM . The VerifyChecker™ is a handheld beeping device is tuned to authenticate the unique frequency of our VerifyInk^TM invisible ink and will broadcast a beeping sound to confirm the authenticity when placed on products, labels and packaging containing our VerifyInk^TM . The VerifyChecker™ is designed for use by customers who desire instant authentication on items, such as event tickets at an entry gate. Our customized checker will only positively identify a product bearing our unique anti-counterfeit solution. This technology is being commercialized and leased to customers, typically for one year auto-renewable terms. We are in the process of upgrading the functionality of this device so that it connects to a mobile phone via Bluetooth allowing authentication attempts to be recorded in the cloud by geo-location with time and date stamp. We expect to be able to commercialize this update by the end of the Q2 2021.

VerifyLabel™ labels are dual-purpose pre-printed labels with a visible serialized QR code for consumer scanning purposes, and an invisible serialized code for inspector scanning, authentication and tracking purposes. This label can be either a standard label or designed with tamper evident features. It was developed to provide covert brand protection for e-commerce retailers to enable consumer product authentication, promotion, engagement and education through the visible serialized QR code. This technology has been successfully launched with tamper evident features and is being used in personal protective equipment and in the cannabis sector, without the covert component.

VerifyMe® Online™includes, through our collaboration with Corsearch, a brand clearance and protection leader, technologies and services that better enable customers to effectively tackle counterfeit websites, domains and e-commerce platforms offering counterfeit products. To date, we have not derived revenue from this technology.

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.

Our digital technologies are contained in a web portal known as VerifyMe Authenticate™ and VerifyMe Track & Trace™, built on the Micro Focus centralized cloud- based GPAS platform. Utilizing Micro Focus’s software team, we have embedded our patented invisible code system into the GPAS platform that allows inspectors to utilize our smartphone attachment to read unique invisible, serial codes, barcodes, NFC, RFID and QR codes for every label, package and or product into the VerifyMe Authenticate™ and VerifyMe Track & Trace™, cloud-based software portal. GPS locations of the scans of inspectors and end users are captured for the brand owner to monitor. In addition, this software is integrated with “iot”, NFC and RFID (our VerifyChip™ product) , SAP enterprise systems.

In addition, we have the ability to broadcast Bluetooth signals from our VerifyChecker^TM device when our VerifyInk^TM is found on a product or label. This signal then triggers a GPS location to be recorded in the cloud-based VerifyMe Authenticate™ and VerifyMe Track & Trace™ software application. Together, the handheld light sensor device (VerifyChecker^TM) and the smartphone attachment authenticator (VerifyAuthenticator^TM) provide the brand owner the ability to monitor their inspector team activities thru the VerifyMe Authenticate™ and VerifyMe Track & Trace™ web portal.

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Another feature of our digital technologies is the ability for the brand owner to gather rich business intelligence and engage with the consumer using our authentication test as the initial contact with the consumer. For example, consumers can simply scan a visible unique code generated by the VerifyCode™ web portal that is printed on labels and packages using their smartphone camera. Once the consumer scans the code, an instant authenticity check is made using algorithms stored in the cloud to determine the products authenticity on a multiple of factors. Once this test is completed, the brand owner can then engage with the consumer by providing marketing materials, videos, discount coupons, product specifications, or cross sell other products with this consumer engagement software we provide to the brand owner in the cloud-based VerifyCode™ software.

The COVID-19 pandemic disrupted businesses and affected production and sales across a range of industries, as well as caused volatility in the financial markets, which negatively impacted our results of operations for the first quarter of 2021, and could further negatively impact our sales and results of operations. The full extent of the impact of the COVID-19 pandemic on our customer demand, sales and financial performance will depend on certain developments, including, among other things, the duration and spread of the outbreak, the effectiveness of vaccines, and the impact on our customers and employees, all of which are uncertain and cannot be predicted. Please see Item 1A, “Risk Factors- Risks Relating to the COVID-19 Pandemic” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and our other filings with the SEC in this Report for additional information regarding certain risks associated with the pandemic.

The COVID-19 pandemic has caused a major spike in demand for safety products such as masks and gloves, COVID-19 test kits, medications and vaccines to treat the virus, which we believe has further caused an increase in counterfeit products. Our suite of technology solutions for global manufacturers, distributors and sellers are designed to allow consumers to prove authenticity and we have proactively reached out to global manufacturers who are seeking to provide their customers authenticity in their products. We believe we have a dynamic management and sales team in place with the ability to seamlessly work remotely to minimize any operational disruption.

In connection with the COVID-19 pandemic, sales conferences and other in-person sales events have been curtailed. This has resulted in a reduction of our sales-related transportation costs and limited our in-person sales efforts. However, during these challenging times, we have expanded our sales and marketing team and made changes to our social media branding strategy. We continue to work with our sales representatives to look for alternative ways to communicate effectively and promote sales both with our customers and potential customers.

Further, we anticipate that as a result of the COVID-19 pandemic, our customers may require that their programs be cancelled, delayed or reduced. We will continue to work in partnership with our customers to continually assess any potential impacts and opportunities to mitigate risk.

Results of Operations

Comparison of the three months ended March 31, 2021 and 2020

The following discussion analyzes our results of operations for the three months ended March 31, 2021 and 2020.

Revenue

Revenue for the three months ended March 31, 2021 was $188 thousand, a 104% increase as compared to $92 thousand for the three months ended March 31, 2020. The increase in revenue relates to a new application of our technology, in the personal protective equipment space.

Gross Profit

Gross profit for the three months ended March 31, 2021 was $145 thousand, compared to $75 thousand for the three months ended March 31, 2020. The resulting gross margin was 77% for the three months ended March 31, 2021, compared to 82% for the three months ended March 31, 2020. The decrease in our gross profit margin relates to a shift in product mix, with an increase in the use of our secure track and trace serialization technology. We believe our high gross profit margins demonstrate our business model’s ability to generate profitable growth.

General and Administrative Expenses

General and administrative expenses increased by $251 thousand to $789 thousand for the three months ended March 31, 2021 from $538 thousand for the three months ended March 31, 2020. The increase primarily related to increases in public company costs related to our listing on Nadsaq, as well as the launch of our new website and higher non-cash stock-based compensation expense, offset by lower travel expenses.

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Legal and Accounting

Legal and accounting fees increased by $57 thousand to $126 thousand for the three months ended March 31, 2021 from $69 thousand for the three months ended March 31, 2020. The increase related primarily to an increase in legal fees, and to an increase in audit fees due to more activity within the Company.

Payroll Expenses

Payroll expenses were $193 thousand for the three months ended March 31, 2021, an increase of $99 thousand from $94 thousand, for the three months ended March 31, 2020. The increase related primarily to an increase in stock-based compensation of $52 thousand.

Research and Development

Research and development expenses were $5 thousand and $0 for the three months ended March 31, 2021 and 2020, respectively.

Sales and Marketing

Sales and marketing expenses were $247 thousand and $43 thousand for the three months ended March 31, 2021 and 2020, respectively. The increase primarily related to an expansion of our sales team and marketing outreach. We expanded our sales team to address a growing pipeline of domestic and international opportunities.

Operating Loss

Operating loss for the three months ended March 31, 2021 was $1,215 thousand, an increase of $546 thousand compared to $669 thousand for the three months ended March 31, 2020. The increase primarily related to the expansion of our sales team and other sales and marketing expenses contributing to an increase of $204 thousand and a net increase in non-cash stock-based compensation of $115 thousand offset by increases in revenue.

Net Loss

Our net loss increased by $123 thousand to $1,215 thousand for the three months ended March 31, 2021 from $1,092 thousand for the three months ended March 31, 2020. The resulting loss per share for the three months ended March 31, 2021 was $0.19 per diluted share, compared to $0.49 per diluted share for the three months ended March 31, 2020.

Liquidity and Capital Resources

Our operations used $904 thousand of cash during the three months ended March 31, 2021 compared to $335 thousand during the comparable period in 2020, relating primarily to an expansion of our sales and marketing team and an increase in expenses related to operating as a public company.

Cash used in investing activities was $131 thousand during the three months ended March 31, 2021 compared to $29 thousand during the three months ended March 31, 2020. The increase relates to increases in legal fees related to our patents as well as an increase in investing in our technology and equipment as we add new features to our existing technology.

Cash provided by financing activities during the three months ended March 31, 2021, was $8,447 thousand compared to $997 thousand during the three months ended March 31, 2020. On February 12, 2021, as part of our public offering of an aggregate 1,750,000 shares of common stock, we generated aggregate gross proceeds of $9.3 million and net proceeds of $8.4 million, less underwriting discounts and commissions and other offering expenses, including the partial exercise of the over-allotment option resulting in gross proceeds of $530 thousand. We believe that our cash and cash equivalents, together with the net proceeds from this offering, will fund our operations through 2025.

In November 2020, we announced a share repurchase program to spend up to $1.5 million to repurchase shares of our common stock over the next nine months. To date, no shares have been purchased but the Company reserves the right to make purchases at any time under the terms set out in this program.

While we expect revenues to increase, we expect continued negative cash flows as we incur increased costs associated with expanding our business. We expect to continue to fund our operations primarily through utilization of our current financial resources, future revenue, and through the issuance of debt or equity.

Off-Balance Sheet Arrangements

None.

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Critical Accounting Policies and Estimates

Our consolidated financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows and which require the application of significant judgment by management. We believe estimates and assumptions related to these critical 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

Our revenue transactions include sales of our ink canisters, software, licensing, pre-printed labels, integrated solutions and leasing of our equipment. 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. 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.

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 expense over the requisite service periods using the straight-line method.

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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

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ITEM 4. CONTROLS AND PROCEDURES.

(a) Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the three months ended March 31, 2021, the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2021, our disclosure controls and procedures were ineffective 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. We have an inherit material weakness in controls due to a lack of segregation of duties, resulting from staffing in accordance with cost containment measures. As of May 10, 2021, we have hired a Corporate Financial Controller in an effort to address this inherit weakness and as part of our remediation efforts.

(b) Changes in internal control over financial reporting

Other than the remediation efforts underway, as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, there were no changes in our internal control over financial reporting during the quarter ended March 31, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

To address the material weaknesses identified, management performed additional analyses and other procedures to ensure that the consolidated financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

For a discussion of the Company’s potential risks or uncertainties, please see “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission, and “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein. There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On March 15, 2021, the Company issued 10,000 shares of restricted common stock in relation to services performed by its Chief Operating Officer.

In March 2021, the Company issued 1,078 shares of restricted common stock in relation to investor relation services.

In February 2021, the Company issued 1,087 shares of restricted common stock in relation to investor relation services.

These securities described above were issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), as set forth in Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder relative to transactions by an issuer not involving any public offering, to the extent an exemption from registration was required. The recipients of the securities described in the transactions above acquired the securities for their own account for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof.

Use of Proceeds

On June 17, 2020, our Registration Statement on Form S-1 (File No. 333-234155), as amended (the “Registration Statement”) relating to an underwritten public offering of an aggregate of 2,173,913 units consisting of one share of the Company’s common stock and a warrant to purchase one share of common stock at an exercise price equal to $4.60 per share of common stock was declared effective by the SEC. The cash proceeds from the offering were $9,023 thousand, net of underwriting discounts and commissions of approximately $800 thousand and fees and expenses of approximately $450 thousand. There has been no material change in the expected use of the net proceeds from the offering, as described in our final prospectus filed with the SEC on June 19, 2020 pursuant to Rule 424(b)(4). As of March 31, 2021 this offering has terminated.

Share Repurchase Plan

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

Table of Contents

ITEM 6: EXHIBITS

Exhibit No.		Description
10.1*		Form of Restricted Stock Award Agreement (Employees) pursuant to the 2020 Equity Incentive Plan
10.2*		Form of Restricted Stock Award Agreement (Non-employees) pursuant to the 2020 Equity Incentive Plan
10.3*		Form of Restricted Stock Unit Award Agreement (Employees) pursuant to the 2020 Equity Incentive Plan
10.4*		Form of Restricted Stock Unit Award Agreement (Non-Employees) pursuant to the 2020 Equity Incentive Plan
10.5		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)
10.6*		Amended and Restated Consulting Agreement dated March 17, 2021 for Keith Goldstein
31.1*		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

*Filed herewith

# Denotes management compensation plan or contract

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	VERIFYME, INC.

Date: May 13, 2021	By: /s/ Patrick White
	Patrick White
	Chief Executive Officer (Principal Executive Officer)

Date: May 13, 2021	By: /s/ Margaret Gezerlis
	Margaret Gezerlis
	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Exhibit 10.1

VERIFYME, INC.

2020 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT

This Restricted Stock Award Agreement (this “Award Agreement”) is made and entered into as of _______________, _______ (the “Date of Grant”), by and between VerifyMe, Inc. (the “Company”) and _______________________________ (the “Participant”). Capitalized terms not defined in this Award Agreement shall have the respective meanings given such terms by the VerifyMe, Inc. 2020 Equity Incentive Plan (the “Plan”).

1. Award. The Company hereby issues to the Participant a Restricted Stock Award (the “Award”) consisting of _____________ shares of restricted common stock (the “Restricted Stock”) under the Plan in exchange for the Participant’s continued service to the Company, on the terms and conditions set forth in the Plan and this Award Agreement.

2. Vesting. Subject to the provisions of the Plan and this Award Agreement, the Restricted Stock shall vest as follows: ______________________. The period over which the Restricted Stock vests is referred to as the “Restricted Period.” Except as otherwise provided by an employment or other agreement between the Company and the Participant, in the event of the termination of the Participant’s continued service to the Company during the Restricted Period for any reason, any unvested shares of Restricted Stock shall be forfeited as of the date of such termination.

3. Restrictions. Subject to any exceptions set forth in this Award Agreement or the Plan, during the Restricted Period, the Restricted Stock or the rights relating thereto may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant. Any attempt to assign, alienate, pledge, attach, sell or otherwise transfer or encumber the Restricted Stock or the rights relating thereto during the Restricted Period shall be wholly ineffective and, if any such attempt is made, the Restricted Stock will be forfeited by the Participant and all of the Participant’s rights to such shares shall immediately terminate without any payment or consideration by the Company.

4. Rights as Stockholder. The Participant shall be the record owner of the Restricted Stock until the shares of Common Stock are sold or otherwise disposed of, and shall be entitled to all of the rights of a stockholder of the Company including, without limitation, the right to vote such shares and receive all dividends or other distributions paid with respect to such shares. Notwithstanding the foregoing, any dividends or other distributions shall be subject to the same restrictions on transferability as the shares of Restricted Stock with respect to which they were paid, and any such dividends or other distributions shall vest on the same date as the shares of Restricted Stock to which such dividends or other distributions relate vest. The Company may issue stock certificates or evidence the Participant’s interest by using a restricted book entry account. Physical possession or custody of any stock certificates that are issued shall be retained by the Company until such time as the Restricted Stock vests. If the Participant forfeits any of his rights under this Award Agreement in accordance with Section 2 hereof, the Participant shall, on the date of such forfeiture, no longer have any rights as a stockholder with respect to the shares of Restricted Stock forfeited and shall no longer be entitled to vote or receive dividends on such shares.

5. Tax Withholding.

(a) The Participant shall be required to pay to the Company, and the Company shall have the right to deduct from any compensation paid to the Participant pursuant to the Plan, the amount of any required withholding taxes in respect of the Restricted Stock and to take all such other action as the Committee deems necessary to satisfy all obligations for the payment of such withholding taxes. The Committee may permit the Participant to satisfy any federal, state or local tax withholding obligation by any of the following means, or by a combination of such means:

(i) tendering a cash payment;

(ii) authorizing the Company to withhold shares of Stock from the shares of Stock otherwise issuable or deliverable to the Participant as a result of the vesting of the Restricted Stock; provided, however, that no shares of Stock shall be withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such greater amount that will not trigger adverse accounting consequences and is permitted under applicable tax withholding rules);

(iii) delivering to the Company for cancellation previously owned and unencumbered shares of Stock with a value equal to the minimum amount of tax required to be withheld by law (or such greater amount that will not trigger adverse accounting consequences and is permitted under applicable tax withholding rules); or

(iv) authorizing a third party to sell, on behalf of the Participant, the appropriate number of shares of Stock otherwise issuable or deliverable to the Participant as a result of the vesting of the Restricted Stock with a value sufficient to cover the minimum amount of tax required to be withheld by law and to remit to the Company the sale proceeds to cover such tax withholding; or

(v) any other method allowed by the Committee.

(b) Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (the “Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and the Company: (i) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant or vesting of the Restricted Stock or the subsequent sale of any shares of Stock; and (ii) does not commit to structure the Restricted Stock to reduce or eliminate the Participant’s liability for Tax-Related Items.

6. Section 83(b) Election. The Participant may be eligible to make an election under Section 83(b) of the Code (a “Section 83(b) Election”) with respect to the Restricted Stock. Any such election must be made within thirty (30) days after the Date of Grant. If the Participant chooses to make a Section 83(b) Election, the Participant shall provide the Company with a copy of an executed version and satisfactory evidence of the filing of the executed Section 83(b) Election with the Internal Revenue Service. The Participant agrees to assume full responsibility for ensuring that the Section 83(b) Election is actually and timely filed with the Internal Revenue Service and for all tax consequences resulting from the Section 83(b) Election. The Company makes no representations to the Participant regarding his ability to make a Section 83(b) Election or the tax consequences thereof, and the Participant is advised to consult with his individual tax advisor regarding such matters.

7. Miscellaneous.

(a) Compliance with Laws. If the Company, in its sole discretion, determines that the listing upon any securities exchange or registration or qualification under any federal, state or local law or any foreign law of any shares to be issued pursuant to an Award is necessary or desirable, issuance of such shares shall not be made until such listing, registration or qualification shall have been completed.

(b) Incorporation of Plan. The Restricted Stock is subject to the Plan and any interpretations by the Committee under the Plan, which are hereby incorporated into this Award Agreement by reference and made a part hereof. By the execution of this Award Agreement, the Participant acknowledges that the Plan document and the Plan prospectus, as in effect on the date of this Award Agreement, have been made available to the Participant for review. Any inconsistency between this Award Agreement and the Plan shall be resolved in favor of the Plan.

(c) Legends. A legend may be placed on any certificate(s) or other document(s) delivered to the Participant indicating the restrictions on transferability of the shares of Restricted Stock pursuant to this Award Agreement.

(d) No Right to Continued Employment or Service. The Participant’s right, if any, to continue to serve the Company or any Affiliate as an employee or otherwise will not be enlarged or otherwise affected by the Plan or this Award Agreement. This Award Agreement does not restrict the right of the Company or any Affiliate to terminate the Participant’s employment or service at any time, with or without cause.

(e) Cancellation of Award. Notwithstanding Section 13.1 of the Plan, if the Participant in any way violates the terms of any confidentiality, non-competition, or non-solicitation agreement, or other similar agreements entered into between the Company and the Participant, then the Committee in its sole discretion may cancel the Award.

(f) Administration, Interpretation, Etc. Any action taken or decision made by the Company, the Board or the Committee arising out of or in connection with the construction, administration, interpretation or effect of any provision of the Plan or this Award Agreement shall lie within its sole and absolute discretion, as the case may be, and shall be final, conclusive and binding on the Participant and all persons claiming under or through the Participant. By receipt of the Award or other benefit under the Plan, the Participant and each person claiming under or through the Participant shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken under the Plan or this Award Agreement by the Company, the Board or the Committee.

(h) Notices. Any notices necessary or required to be given under this Award Agreement shall be sufficiently given if in writing, and personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the last known addresses of the parties hereto, or to such other address or addresses as any of the parties shall have specified in writing to the other party hereto.

(i) Choice of Law. This Award Agreement and any dispute, disagreement, or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance shall be governed by the substantive laws, but not the choice of law rules, of the State of Nevada without regard to choice of law considerations.

8. Counterparts; Participant Acknowledgement. This Award Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same agreement. By the execution of this Award Agreement, the Participant signifies that the Participant has fully read, completely understands, and voluntarily agrees with this Award Agreement and knowingly and voluntarily accepts all of its terms and conditions.

* * * * *

IN WITNESS WHEREOF, the Company and the Participant have executed this Award Agreement as of the Date of Grant set forth above.

	VERIFYME, INC.


	By:
	Name: Title:



	Participant





	Address of the Participant:



	Email address:

Exhibit 10.2

VERIFYME, INC.

2020 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT

This Restricted Stock Award Agreement (this “Award Agreement”) is made and entered into as of __________ (the “Date of Grant”), by and between VerifyMe, Inc. (the “Company”) and _____________ (the “Participant”). Capitalized terms not defined in this Award Agreement shall have the respective meanings given such terms by the VerifyMe, Inc. 2020 Equity Incentive Plan (the “Plan”). [This Award Agreement is entered in to in connection with the Independent Contractor Consulting Agreement between the Company and the Participant, dated as of _________ (the “Consulting Agreement”), pursuant to which the Participant will provide services to the Company].

2. Vesting. Subject to the provisions of the Plan and this Award Agreement, the Restricted Stock shall vest as follows: _______________[; provided, however, any unvested shares of Restricted Stock shall immediately vest in full in the event of a Change in Control of the Company or a termination of the Participant’s continued service to the Company without Cause]. The period over which the Restricted Stock vests is referred to as the “Restricted Period.” [Except as otherwise provided by an agreement between the Company and the Participant, in the event of the termination of the Participant’s continued service to the Company during the Restricted Period for any reason, any unvested shares of Restricted Stock shall be forfeited as of the date of such termination.][For purposes of this Award Agreement, “Cause” has the meaning given such term by the Consulting Agreement. In the event of the termination of the Participant’s continued service to the Company during the Restricted Period for any reason other than Cause, or the Participant’s violation of the Consulting Agreement, any unvested shares of Restricted Stock shall be forfeited as of the date of such termination or violation.]

5. Section 83(b) Election. The Participant may be eligible to make an election under Section 83(b) of the Code (a “Section 83(b) Election”) with respect to the Restricted Stock. Any such election must be made within thirty (30) days after the Date of Grant. If the Participant chooses to make a Section 83(b) Election, the Participant shall provide the Company with a copy of an executed version and satisfactory evidence of the filing of the executed Section 83(b) Election with the Internal Revenue Service. The Participant agrees to assume full responsibility for ensuring that the Section 83(b) Election is actually and timely filed with the Internal Revenue Service and for all tax consequences resulting from the Section 83(b) Election. The Company makes no representations to the Participant regarding his ability to make a Section 83(b) Election or the tax consequences thereof, and the Participant is advised to consult with his individual tax advisor regarding such matters.

6. Miscellaneous.

(d) [No Right to Service. The Participant’s right, if any, to continue to serve the Company or any Affiliate will not be enlarged or otherwise affected by the Plan or this Award Agreement. This Award Agreement does not restrict the right of the Company or any Affiliate to terminate the Participant’s service at any time, with or without cause.]

(e) Taxes. The Company shall have the right to require the Participant to pay to the Company the amount of tax that the Company is required to withhold with respect to the grant or vesting of the Award, if any.

(g) Entire Agreement. This Award Agreement constitutes the entire agreement of the parties hereto with respect to the matters contained herein and constitutes the only agreement between the parties hereto with respect to the matters contained herein. [By executing this Award Agreement, the Participant hereby acknowledges and agrees that this Award satisfies in full the Company’s obligation under Section _____ of the Consulting Agreement.]

7. Counterparts; Participant Acknowledgement. This Award Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same agreement. By the execution of this Award Agreement, the Participant signifies that the Participant has fully read, completely understands, and voluntarily agrees with this Award Agreement and knowingly and voluntarily accepts all of its terms and conditions.

* * * * *

IN WITNESS WHEREOF, the Company and the Participant have executed this Award Agreement as of the Date of Grant set forth above.

	VERIFYME, INC.


	By:
	Name:
	Title:



	Participant





	Address of the Participant:



	Email address:

Exhibit 10.3

VERIFYME, INC.

2020 EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

This Restricted Stock Unit Award Agreement (this “Award Agreement”) is made and entered into as of [__________], 20[__] (the “Date of Grant”), by and between VerifyMe, Inc. (the “Company”) and ___________________ (the “Participant”). Capitalized terms not defined in this Award Agreement shall have the respective meanings given such terms by the VerifyMe, Inc. 2020 Equity Incentive Plan (the “Plan”).

1. Award. The Company hereby grants to the Participant an Award (the “Award”) of [__________]Restricted Stock Units (the “RSUs”) subject to the provisions of the Plan and to the terms and conditions of this Award Agreement.

2. Vesting and Payment. Subject to the provisions of the Plan and this Award Agreement, the RSUs shall vest [__________] (each, a “Vesting Date”)[; provided, however, in the event of the death or Disability of the Participant on or before the Vesting Date, the RSUs shall immediately vest in full]. Each vested RSU represents the right to receive one share of Common Stock, which, less the number of shares of Common Stock withheld to satisfy tax withholding pursuant to Paragraph 4 below, if any, will be issued to the Participant as soon as practicable following the applicable Vesting Date, but no later than 90 days thereafter.

3. Stockholder Rights. The Participant shall not be entitled, prior to the conversion of the RSUs into the right to receive shares of Common Stock and the issuance of such shares to the Participant, to any rights as a stockholder with respect to such shares of Common Stock, including the right to vote, sell, pledge, transfer or otherwise dispose of the shares.

4. Withholding of Taxes. The Company and its Affiliates shall have the right to deduct shares of Common Stock that would otherwise be distributed pursuant to this Award Agreement from any payment made under this Award Agreement in satisfaction of the federal, state, local or foreign income or other taxes required by law to be withheld with respect to such payment. Shares of Common Stock tendered as payment of required tax withholding shall be valued at the fair market value of the Company’s Common Stock on the date such tax withholding obligation arises. It shall be a condition to the obligation of the Company to issue shares of Common Stock or other property, or any combination thereof, upon payment of the Award, that the Participant pay to the Company or an Affiliate, upon its demand, such amount as may be requested by the Company or the Affiliate for the purpose of satisfying any liability to withhold federal, state, local or foreign income or other taxes. If the amount requested is not paid, the Company may refuse to issue or pay shares of Common Stock or other property, or any combination thereof.

5. Miscellaneous.

(b) Incorporation of Plan. The RSUs are subject to the Plan and any interpretations by the Committee under the Plan, which are hereby incorporated into this Award Agreement by reference and made a part hereof. By the execution of this Award Agreement, the Participant acknowledges that the Plan document and the Plan prospectus, as in effect on the date of this Agreement, have been made available to the Participant for review. Any inconsistency between this Award Agreement and the Plan shall be resolved in favor of the Plan.

(c) [No Right to Employment. The Participant’s right, if any, to continue to serve the Company or any Affiliate as an employee or otherwise will not be enlarged or otherwise affected by the Plan or this Award Agreement. This Award Agreement does not restrict the right of the Company or any Affiliate to terminate the Participant’s employment or service at any time, with or without cause.]

(d) Administration, Interpretation, Etc. Any action taken or decision made by the Company, the Board or the Committee arising out of or in connection with the construction, administration, interpretation or effect of any provision of the Plan or this Award Agreement shall lie within its sole and absolute discretion, as the case may be, and shall be final, conclusive and binding on the Participant and all persons claiming under or through the Participant. By receipt of the RSUs or other benefit under the Plan, the Participant and each person claiming under or through the Participant shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken under the Plan or this Award Agreement by the Company, the Board or the Committee.

(e) Entire Agreement. This Award Agreement constitutes the entire agreement of the parties hereto with respect to the matters contained herein and constitutes the only agreement between the parties hereto with respect to the matters contained herein.

(f) Notices. Any notices necessary or required to be given under this Award Agreement shall be sufficiently given if in writing, and personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the last known addresses of the parties hereto, or to such other address or addresses as any of the parties shall have specified in writing to the other party hereto.

(g) Choice of Law. This Award Agreement and any dispute, disagreement, or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance shall be governed by the substantive laws, but not the choice of law rules, of the State of Nevada without regard to choice of law considerations.

6. Section 409A. The RSUs are intended to [qualify for an exception from][comply with] Section 409A and this Award Agreement shall be interpreted and administered consistent with such intention. Notwithstanding the foregoing, in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with Section 409A. [Notwithstanding Section 2, if at the time of the Participant’s separation from service, the Participant is a “specified employee” for purposes of Section 409A, and the payment of the RSUs as a result of such separation from service is required to be delayed by six months pursuant to Section 409A, then the Company will make such payment on the day immediately following the date that is six months following the Participants separation from service with the Company.]

* * * * *

IN WITNESS WHEREOF, the Company and the Participant have executed this Award Agreement as of the Date of Grant set forth above.

	VERIFYME, INC.


	By:
	Name: Title:


	Participant





	Address of the Participant:



	Email address:

Exhibit 10.4

VERIFYME, INC.

2020 EQUITY INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

1. Award. The Company hereby grants to the Participant an Award (the “Award”) of [__________] Restricted Stock Units (the “RSUs”) subject to the provisions of the Plan and to the terms and conditions of this Award Agreement.

2. Vesting and Payment. Subject to the provisions of the Plan and this Award Agreement, the RSUs shall vest [__________] (the “Vesting Date”)[; provided, however, in the event of the death or Disability of the Participant on or before the Vesting Date, the RSUs shall immediately vest in full]. Each vested RSU represents the right to receive one share of Common Stock, which will be issued to the Participant as soon as practicable following [the Participant’s separation from service with the Company (within the meaning of Section 409A)][the Vesting Date], but no later than 90 days thereafter.

4. Miscellaneous.

(b) Incorporation of Plan. The RSUs are subject to the Plan and any interpretations by the Board of the Committee under the Plan, which are hereby incorporated into this Award Agreement by reference and made a part hereof. By the execution of this Award Agreement, the Participant acknowledges that the Plan document and the Plan prospectus, as in effect on the date of this Agreement, have been made available to the Participant for review. Any inconsistency between this Award Agreement and the Plan shall be resolved in favor of the Plan.

(c) [No Right to Service. The Participant’s right, if any, to continue to serve the Company or any Affiliate will not be enlarged or otherwise affected by the Plan or this Award Agreement. This Award Agreement does not restrict the right of the Company or any Affiliate to terminate the Participant’s service at any time, with or without cause.]

(d) [Taxes. The Company shall have the right to require the Participant to pay to the Company the amount of tax that the Company is required to withhold with respect to the grant or vesting of the Award, if any.]

(e) Administration, Interpretation, Etc. Any action taken or decision made by the Company, the Board or the Committee arising out of or in connection with the construction, administration, interpretation or effect of any provision of the Plan or this Award Agreement shall lie within its sole and absolute discretion, as the case may be, and shall be final, conclusive and binding on the Participant and all persons claiming under or through the Participant. By receipt of the RSUs or other benefit under the Plan, the Participant and each person claiming under or through the Participant shall be conclusively deemed to have indicated acceptance and ratification of, and consent to, any action taken under the Plan or this Award Agreement by the Company, the Board or the Committee.

(f) Entire Agreement. This Award Agreement constitutes the entire agreement of the parties hereto with respect to the matters contained herein and constitutes the only agreement between the parties hereto with respect to the matters contained herein.

(g) Notices. Any notices necessary or required to be given under this Award Agreement shall be sufficiently given if in writing, and personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the last known addresses of the parties hereto, or to such other address or addresses as any of the parties shall have specified in writing to the other party hereto.

(h) Choice of Law. This Award Agreement and any dispute, disagreement, or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance shall be governed by the substantive laws, but not the choice of law rules, of the State of Nevada without regard to choice of law considerations.

5. Section 409A. The RSUs are intended to [qualify for an exception from][comply with] Section 409A and this Award Agreement shall be interpreted and administered consistent with such intention. Notwithstanding the foregoing, in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with Section 409A. [Notwithstanding Section 2, if at the time of the Participant’s separation from service, the Participant is a “specified employee” for purposes of Section 409A, and the payment of the RSUs as a result of such separation from service is required to be delayed by six months pursuant to Section 409A, then the Company will make such payment on the day immediately following the date that is six months following the Participants separation from service with the Company. ]

6. Counterparts; Participant Acknowledgement. This Award Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same agreement. By the execution of this Award Agreement, the Participant signifies that the Participant has fully read, completely understands, and voluntarily agrees with this Award Agreement and knowingly and voluntarily accepts all of its terms and conditions.

* * * * *

IN WITNESS WHEREOF, the Company and the Participant have executed this Award Agreement as of the Date of Grant set forth above.

	VERIFYME, INC.


	By:
	Name:
	Title:



	Participant





	Address of the Participant:



	Email address:

Exhibit 10.6

AMENDED AND RESTATED CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT (the “Agreement”) is entered into as of March 1, 2021 (the “Effective Date”), between VerifyMe, Inc., a Nevada corporation (the “Company”), and POC Advisory Group, LLC (the “Consultant”).

WHEREAS, the Company desires to engage the Consultant (which is bound by a Non-Disclosure Agreement dated March 3, 2017) to perform certain services for the Company, and the Consultant is willing to perform such services, as an independent contractor, and not as an employee, all upon and subject to the terms and conditions contained in the Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, the Company and the Consultant agree as follows:

1. Representations and Warranties. The Consultant hereby represents and warrants to the Company that the Consultant will bring to the Company no trade secrets, confidential business information, documents, or other personal property of another client or prior employer.

2. Term. The Company hereby retains the Consultant, and the Consultant hereby agrees to perform consulting services for the Company for a period of twelve months commencing as of the Effective Date (such period, as it may be extended or renewed, the “Term”), unless sooner terminated in accordance with the provisions hereof.

3. Services.

(a) Scope of Services. The Consultant shall procure the services of Keith Goldstein to be Acting Chief Operating Officer for the Company with duties and responsibilities including, but not limited to, setting up sales and sales support operations for Company products and digital technologies; implementing, maintaining, and utilizing telemarketing to develop sales opportunities for the Company; performing, implementing, and supporting functions under the Company’s agreement with Hewlett-Packard; providing the Company with analysis and recommendations on future mergers and acquisitions; providing insight and recommendations for new propriety technology and the improvement of the Company’s existing proprietary technologies; maintaining Company materials and assets; conducting future research and development for the Company’s websites; and completing any and all other duties as may be delegated to the Consultant by the Company’s Chief Executive Officer (the “CEO”) and the Board of Directors (the “Board”). The Consultant shall report to the CEO. The Consultant shall also perform services for such subsidiaries of the Company as may be necessary. The Consultant shall use reasonable commercial efforts to perform the services pursuant to this Agreement competently and faithfully.

(b) Adherence to Insider Trading Policy. The Consultant acknowledges that the Company is publicly-held and, as a result, has implemented an insider trading policy designed to preclude its executives and those of its subsidiaries from violating the federal securities laws by trading on material, non-public information or passing such information on to others in breach of any duty owed to the Company, or any third party. The Consultant shall promptly execute any agreements generally distributed by the Company to its employees, contractors and/or consultants requiring such individuals to abide by its information trading policy.

(c) Location. The Consultant shall perform its duties remotely. The Company shall provide the Consultant with Regus meeting space, as needed by the Consultant, to engage in the services pursuant to this Agreement.

4. Payment for Services; Expenses.

(a) Fees. For the services of the Consultant to be rendered under this Agreement, it being understood that those services commenced on March 1, 2021, the Company shall pay the Consultant a fee of Two Hundred Thousand Dollars and No Cents ($200,000.00) payable in equal installments on the first calendar day (or the next business day) of each month. The Company shall pay the Consultant an additional monthly fee of Fourteen Thousand Four Hundred Dollars and No Cents ($14,400.00) payable in equal installments of One Thousand Two Hundred Dollars and No Cents ($1,200.00) on the first calendar day (or the next business day) of each month.

(b) Expenses. In addition to any compensation received pursuant to this Section, the Company will reimburse or advance funds to the Consultant for all reasonable documented travel (including travel expenses incurred by the Consultant related to travel to the Company’s offices), entertainment and miscellaneous expenses incurred in connection with the performance of the services under this Agreement, provided that the Consultant properly provides a written accounting of such expenses to the Company in accordance with the Company’s practices. Such reimbursement or advances will be made in accordance with the policies and procedures of the Company in effect from time to time relating to reimbursement or advancement of funds.

(c) Benefits. With the exception of the terms of this Section, the Consultant agrees and understands that as an independent contractor, neither the Consultant, nor any of its designees, are entitled to any other benefits and privileges established for Company executive officers or employees, such as life, accident or health insurance, vacation and sick leave with pay, paid holidays, or severance pay upon termination of this Agreement for any reason. In accordance with the Consultant’s independent contractor status, payments to the Consultant shall not constitute wages/salary and therefore, no amounts shall be deducted for United States Federal and State employment, Social Security or other taxes or employee benefit claims. The Consultant shall be individually responsible for filing and paying the Consultant’s own taxes, as applicable.

(d) Participation in ESOP as Consultant. If the Company should adopt an Employee Stock Ownership Plan (“ESOP”), the Consultant shall be eligible to participate in such ESOP to the same extent as other consultants, as determined by the terms and conditions of the ESOP.

(e) Restricted Stock Award. The Company will grant the Consultant 10,000 restricted shares of restricted common stock (the “Restricted Stock”) under the Company’s 2020 Equity Incentive Plan (the “Plan”), subject to all of the terms and conditions set forth in the Plan and this Agreement and any agreement signed in conjunction with the award of the Restricted Stock, except that the following terms shall control where they conflict with the terms and conditions of the Plan or any other agreement between the parties:

(1) Vesting. The shares of Restricted Stock shall vest quarterly during the Term, pursuant to the terms and conditions of the award agreement for the Restricted Stock. The Consultant acknowledges that each quarterly award shall trigger a taxable event. It is agreed and understood that all unvested shares will vest immediately upon a change of control of the Company or termination of the Consultant by the Company without cause.

(2) Section 83(b) Election. The Consultant hereby acknowledges that it may file a Section 83(b) election with the Internal Revenue Service within 30 days of the date the Restricted Stock is granted to the Consultant, electing thereby to be taxed on the fair market value of the Restricted Stock as of the date the Resticted Stock was granted. The Consultant is strongly encouraged to seek the advice of its own tax consultants in connection with the grant of the Restricted Stock.

(f) Extension of Current Stock Options. The Company and the Consultant acknowledge that the Company has granted the Consultant various stock option grants, both through this Agreement and previous agreements, pursuant to the Company’s standard Stock Option Agreement. Notwithstanding any other agreement to the contrary, the Company agrees to amend the Stock Option Agreements the Consultant is party to permit the Consultant to have five (5) years from the Effective Date of this Agreement to exercise its stock options.

(g) Sales Commission. The Company shall pay the Consultant a two (2) percent commission on any of the Company’s sales for the fiscal year ended December 31, 2021 that are above Five Hundred Thousand Dollars and No Cents ($500,000.00), as reported in the Company’s Annual Report on 10-K for the fiscal year ending December 31, 2021(the “Form 10-K”) filed with the U.S. Securities and Exchange Commission (“SEC”), excluding any sales arising from companies or businesses acquired during 2021. The sales commission shall be payable as soon as practicable following the filing of the Form 10-K with the SEC.

5. Independent Contractor. In the performance of the work, duties and obligations undertaken by the Consultant under this Agreement, it is mutually understood and agreed that the Consultant is at all times acting and performing as an independent contractor. Except for the establishment of standards and parameters for the provision of the services by the Consultant pursuant to this Agreement, the Company shall neither have nor exercise control over the methods by which the Consultant shall perform the services under this Agreement. However, this shall in no way interfere with the right of the Company to determine whether the Consultant is adequately, and in good faith, discharging the Consultant’s duties under this Agreement. In connection with the provision of services pursuant to this Agreement, the Consultant shall:

(a) Perform the services pursuant to this Agreement (i) in a professional and workmanlike manner; (ii) in compliance with this Agreement and all applicable specifications established by Company, and (iii) in compliance with all applicable statutes, acts, ordinances, laws, rules, regulations, codes and standards;

(b) At all times be solely responsible for all means, methods, techniques, sequences and procedures of the provision of services, and the acts and omissions of the Consultant and its designees;

(c) Have sole responsibility for the health, safety, and welfare of the designees of the Consultant in performing the services;

(d) Provide all equipment and materials necessary to provide the services. Any failure of equipment or materials shall be the responsibility of the Consultant, and the Consultant shall, at the Consultant’s expense, take such measures as are necessary to ensure that the services are provided pursuant to this Agreement;

(e) Except as otherwise provided by this Agreement, be solely responsible for all expenses associated with office space, meetings, travel and any other costs related to providing the services pursuant to this Agreement;

(f) Provide for, secure, and/or be solely responsible for any and all required fees, permits, insurance coverage, tax withholdings, and any other insurance or taxes, for the Consultant in performing the services pursuant to this Agreement;

(g) Comply with all applicable laws, including all equal employment opportunity and non-discrimination requirements;

(h) Be available at reasonable times to consult with appropriate representatives of the Company concerning any services performed or to be performed by the Consultant under this Agreement; and

6. Termination.

(a) Termination by Expiration. This Agreement shall automatically terminate following the end of the Term, as defined under Section 2, unless terminated sooner by either party, or extended in writing by the Company and the Consultant.

(b) Death. Except as otherwise provided in this Agreement, this Agreement shall automatically terminate upon the death of Keith Goldstein.

(c) Termination by the Company for Cause. The Company may terminate the Consultant pursuant to the terms of this Agreement at any time for Cause (as defined below) by giving the Consultant written notice of termination. Such termination shall become effective upon the giving of such notice. Upon any such termination for Cause, the Consultant shall have no right to compensation, or reimbursement under Section 4, for any period subsequent to the effective date of termination. For purposes of this Agreement, “Cause” shall mean (i) the Consultant or any of its designees, including but not limited to Keith Goldstein: (a) are convicted of, or plead guilty or nolo contendere to, a felony, or (b) in carrying out their duties hereunder, have acted with gross negligence or intentional misconduct resulting, in any case, in material harm to the Company; or (ii) Keith Goldstein fails to perform all services on behalf of the Consultant.

(d) Termination by the Consultant or the Company without Cause. This Agreement may be terminated: (i) by the Consultant without Cause by giving the Company thirty (30) days’ written notice of termination; or (ii) by the Company without Cause by giving the Consultant sixty (60) days’ written notice of termination. Upon notice of termination, the Consultant will continue to render the services under this Agreement until the effective date of termination, unless the parties mutually agree otherwise or the Company determines in its sole discretion that such continued services by the Consultant will pose a threat to the health and safety of its employees or customers and/or to the business of the Company. Prior to the termination date, the Consultant shall make a reasonable attempt to finish all work in progress.

(1) In the event this Agreement is terminated by the Consultant or the Company without Cause, the Consultant shall be entitled to the following:

(A) any accrued but unpaid consulting fees and sales commissions for services rendered to the date of termination; and

(B) any accrued but unpaid expenses required to be reimbursed under this Agreement.

Any sales commission pursuant to Section 6(d)(1)(A) above, will equal two (2) percent of the Company’s sales that are above Five Hundred Thousand Dollars and No Cents ($500,000.00) as reported in the Company’s quarterly report on Form 10-Q (“Form 10-Q”) filed with the Securities and Exchange Commission for the quarter in which the Consultant was terminated without Cause. Such commission will be paid within five days of the filing of the Company’s Form 10-Q.

(e) Return of Property. Upon expiration or termination of this Agreement, the Consultant shall promptly return all property, documents and materials furnished by the Company to the Consultant, including any materials that contain the Company’s trade secrets, intellectual property or confidential business information, which shall at all times remain the property of the Company.

7. Limitation of Liability. In no event shall the Company be liable for special, indirect, incidental or consequential damages to the full extent such may be disclaimed by law even if the Company has been advised of the possibility of such damages.

8. Non-Solicitation.

(a) Upon expiration of this Agreement, and for a period of eighteen (18) months, the Consultant agrees that neither it nor Mr. Goldstein nor any of their designees shall, directly or indirectly, request, recommend or advise any employee of the Company to terminate his or her employment with the Company, for the purposes of providing services for an enterprise engaged in two or more lines of business, one of which is the same or similar to the Company’s business (the “Prohibited Business”), or solicit for employment or recommend to any third party the solicitation for employment of any individual who was employed by the Company or any of its subsidiaries and affiliates at any time during the one year preceding the termination of this Agreement.

(b) Upon expiration of this Agreement, and for a period of eighteen (18) months, the Consultant agrees that neither it nor Mr. Goldstein nor any of their designees shall, without the Company’s prior express written consent, directly or indirectly solicit with a product that competes with the Company’s products or interfere with the Company’s relationship with, or attempt to divert or entice away, any customer, supplier or distributor of the Company at the time of the expiration of this Agreement.

(c) The Consultant acknowledges and agrees that: (i) the restrictive covenants set forth in this Section are essential elements of this Agreement and are necessary to protect the Company’s relationship with its customers which have been developed at the Company’s expense and based upon the Company’s efforts and goodwill; (ii) the time and other limitations of this Agreement are reasonable and properly required for adequate protection of the business and affairs of the Company and its affiliates; (iii) without limiting the generality of this Section, if any of the provisions of this Section are or become unenforceable, the remainder of this Section shall nevertheless remain binding to the fullest extent possible, taking into consideration the purposes and spirit hereof; and (iv) if a court of competent jurisdiction were to find the scope of the restrictive covenants set forth in this Section to be unreasonably broad, such court can and should use its equitable powers of reformation to reduce the scope of the restrictions and to enforce the restrictions as so reduced.

9. Non-Disparagement. The Consultant and Mr. Goldstein agree that, after the expiration of the Agreement, that they will refrain from making, in writing or orally, any unfavorable comments about the Company, its operations, policies, or procedures that would be likely to injure the Company’s reputation or business prospects; provided, however, that nothing herein shall preclude the Consultant or Mr. Goldstein from responding truthfully to a lawful subpoena or other compulsory legal process or from providing truthful information otherwise required by law.

10. Non-Exclusive Agreement. Except as provided in this Section, nothing contained in this Agreement shall preclude the Consultant’s engagement in another occupation or the Consultant’s ability to provide similar services to any other outside party. However, during the Term, as defined above, the Consultant will not engage in any work or business activity, paid or unpaid, enter into an agreement, or accept an obligation, that creates an actual conflict of interest with the Company.

11. Confidential Information. “Confidential Information” consists of information relating to the business or interests of the Company, including, but not limited to, information concerning operations, business plans, financial performance, processes and procedures, employees, clients/customers or prospective clients/customers (including mailing lists, marketing techniques, advertising, promotions, etc.), suppliers, and any information obtained through access to any information system (including computers, networks, voice mail, etc.) which, if not otherwise described above, is of such a nature that a reasonable person would believe it to be confidential or proprietary. The term “Confidential Information” also includes, but is not limited to, information expressly identified as confidential as well as any and all trade secrets, intellectual property (whether or not patented or registered), customer lists, supplier lists, details of customer contracts, customer or supplier databases, pricing policies, operational methods, marketing plans or strategies, processes, techniques, manufacturing methods, designs, materials, formulae, programs, contract forms, analyses, budgets, business or strategic plans, advertising formats, financial structures, program booklets, projections, training programs, recording systems, accounting reports, management systems, business acquisition plans and new personnel acquisition plans of Company or any of its parents or affiliates, and related materials which are unique to Company and used by and developed by or for Company in the conduct or promotion of its business, which is not generally known to the industry in which Company or its affiliates are or may become engaged. At all times, all Confidential Information shall remain the property of the Company. The term “Confidential Information” excludes information that (a) is made public by the Company, other than as the result of disclosure by the Consultant, (b) becomes generally available to the public, other than as the result of disclosure by the Consultant or other party in violation of any obligation of confidentiality to the Company, or (c) the Consultant obtains, after the Effective Date, from sources other than the Company and not under a confidentiality obligation to the Company.

(a)

The Consultant will not, directly or indirectly, at any time, without the prior written consent of the Company, disclose, use (other than in performing the services pursuant to this Agreement), copy, reproduce or retain in its possession, in any manner, any Confidential Information. On the termination of this Agreement or upon the prior request of the Company, the Consultant will return to Company all Confidential Information then in its possession or within its control, or in the possession or control of its designees, and will, on the reasonable request of Company, certify to the Company that it has returned all Confidential Information to the Company.

(b)

The Consultant will protect the confidentiality of and prevent unauthorized use, dissemination, reproduction or publication of Confidential Information. The Consultant will not use Confidential Information for any purpose other than performing services under this Agreement. The Consultant will only disclose Confidential Information to those agents or designees of the Consultant who have a need to know such information for purposes related to this Agreement, and who shall be advised of their individual obligation to comply with this Agreement. The Consultant will neither publish nor reveal any Confidential Information to anyone except authorized designees of the Consultant, nor shall the Consultant make any use, directly or indirectly, of Confidential Information without the prior written consent of the Company. The Consultant will protect the confidentiality of Confidential Information with the same degree of care as the Consultant uses for its own similar information. The restrictions on the Consultant using, publishing or revealing Confidential Information continue perpetually unless the Company agrees otherwise in writing.

(c)

The Consultant is hereby notified and understands that under the Defend Trade Secrets Act of 2016 (the “Act”), an individual shall not be held criminally or civilly liable under any United States Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a United States Federal, State or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual: (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

12. Ownership of Work Product. All work product (“Work Product”) generated in the course of the Consultant’s provision of the services pursuant to this Agreement will be deemed “work for hire.” To the extent any Work Product or intellectual property right in any Work Product does not qualify as, or otherwise fails to be, “work for hire,” the Consultant hereby assigns to the Company all right, title and interest in and to such Work Product and any and all related patents, copyrights, trademarks, trade names, and other intellectual property rights and applications therefore conceived or created by the Consultant, whether or not during normal work hours, that are within the scope of the business of the Company, or that relate to any of the services provided by the Consultant pursuant to this Agreement, or any of the Company’s products, services, work or projects for Company’s clients, customers or itself, and appoints the Company as its duly authorized attorney to execute, file, prosecute and protect the same before any government agency, court or authority. The Consultant shall execute such further assignments, documents and other instruments as may be necessary or desirable to fully and completely assign all Work Product to the Company and to assist the Company, at the Company’s expense, in applying for, obtaining and enforcing patents or copyrights or other rights with respect to any Work Product. The Consultant also hereby waives all claims to moral rights in any Work Product.

13. Assignability The rights and obligations of the Company under this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company, provided that such successor or assign shall acquire all or substantially all of the securities or assets and business of the Company. The Consultant acknowledges that the Services are unique and that its obligations hereunder may not be assigned or alienated and any attempt to do so by the Consultant will be void.

14. Severability. If any provision of this Agreement otherwise is deemed to be invalid or unenforceable or is prohibited by the laws of the state or jurisdiction where it is to be performed, this Agreement shall be considered divisible as to such provision and such provision shall be inoperative in such state or jurisdiction and shall not be part of the consideration moving from either of the parties to the other. The remaining provisions of this Agreement shall be valid and binding and of like effect as though such provisions were not included.

15. Remedies. The remedies of each party hereunder shall be cumulative and concurrent, and may be pursued singularly, successively, or together, in such party’s sole discretion. The Consultant agrees that any violation by the Consultant or Mr. Goldstein of Sections 8 or 9 would cause irreparable harm to the Company. Without limitation of the generality of the foregoing, if the Consultant or Mr. Goldstein violates any provision of Sections 8 or 9 then the Company shall be entitled, in addition to any other remedies that it may have, to specific, injunctive or other equitable relief (without the requirement of posting of a bond or other security) in order to enforce such provision.

16. Notices and Addresses. All notices, offers, acceptance and any other acts under this Agreement (except payment) shall be in writing, and shall be sufficiently given if delivered to the addressees in person, by FedEx or similar receipted delivery, or next business day delivery to the addresses detailed below (or to such other address, as either of them, by notice to the other may designate from time to time), or by e-mail delivery (in which event a copy shall immediately be sent by FedEx or similar receipted delivery), as follows:

To the Company:	Patrick White
	Chief Executive Officer
	VerifyMe, Inc.
	75 South Clinton Avenue, Suite 510
	Rochester, NY 14604
	Email: patrick@verifyme.com

With a copy to:	Harter Secrest & Emery LLP
	1600 Bausch & Lomb Place
	Rochester, NY 14604
	Attention: Alex R. McClean, Esq.
	Email: amcclean@hselaw.com

To the Consultant:	POC Advisory Group, LLC

	____________ Attention: Keith Goldstein
	Email: ____________

17. Survival. Sections 1, 4(f), 6(e), 7, 8, 9, 11, 12, 14, 15, 16, 17, 19, 20, and 21 shall survive the expiration or termination of this Agreement and/or the Term, as defined above.

18. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The execution of this Agreement may be by actual or facsimile signature.

19. Governing Law and Jurisdiction. This Agreement shall be governed or interpreted according to the internal laws of the State of New York without regard to choice of law considerations and all claims relating to or arising out of this Agreement, or the breach thereof, whether sounding in contract, tort, or otherwise, shall also be governed by the laws of the State of New York without regard to choice of law considerations.

20. Entire Agreement. This Agreement constitutes the entire Agreement between the parties and supersedes all prior oral and written agreements between the parties hereto with respect to the subject matter hereof, except that the following agreement shall remain in effect: Non-Disclosure Agreement, dated March 3, 2017, Indemnification Agreement, dated as of February 17, 2021 and all equity award agreements to which the Consultant is party. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, except by a statement in writing signed by the party or parties against which enforcement or the change, waiver discharge or termination is sought.

21. No Waiver. Any purported waiver of any default, breach or non-compliance under this Agreement is not effective unless in writing and signed by the party to be bound by the waiver. No amendment of this Agreement will be effective unless made in writing and signed by the parties.

22. Section and Paragraph Headings. The section and paragraph headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

[Signature Page To Follow]

IN WITNESS WHEREOF, the Company and the Consultant have executed this Agreement as of the date and year first above written.

Company VerifyMe, Inc.

By:	/s/ Patrick White
	Patrick White
	Chief Executive Officer


Consultant POC Advisory Group, LLC

By:	/s/ Keith Goldstein
	Keith Goldstein
	Manager

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Patrick White, certify that:

1. I have reviewed this quarterly report on Form 10-Q of VerifyMe, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2021

/s/ Patrick White

Patrick White

Chief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Margaret Gezerlis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of VerifyMe, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2021

/s/ Margaret Gezerlis

Margaret Gezerlis

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of VerifyMe, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof, I, Patrick White, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

The quarterly report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Patrick White

Patrick White

Chief Executive Officer

(Principal Executive Officer)

Dated: May 13, 2021

In connection with the quarterly report of VerifyMe, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof, I, Margaret Gezerlis, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

The quarterly report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Margaret Gezerlis

Margaret Gezerlis

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

Dated: May 13, 2021

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to VerifyMe, Inc. and will be retained by VerifyMe, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.