| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of the Business VerifyMe, Inc. (“VerifyMe”) was incorporated
in the State of Nevada November 10, 1999 0.001 VerifyMe, is a traceability and customer support
services provider using specialized software and process technology. The Company operates a Precision Logistics Segment and an Authentication
Segment to provide specialized logistics for time-and-temperature sensitive products, as well as item level traceability, anti-diversion
and anti-counterfeit protection, brand protection and enhancement technology solutions. Through our Precision Logistics segment, we provide
a value-added service for sensitive parcel management driven by a proprietary software platform that provides predictive analytics from
key metrics such as pre-shipment weather analysis, flight-tracking, sort volumes, and traffic, delivered to customers via a secure portal.
The portal provides real-time visibility into shipment transit and last-mile events which is supported by a service center. Through our
Authentication segment our technologies enable brand owners to gather business intelligence through the supply chain, cross-sell products,
detect counterfeit activities, monitor product diversion, and build brand loyalty utilizing our unique dynamic codes which are read by
consumers with their smart phones. The significant majority of VerifyMe revenue is within the Precision Logistics Segment. The Company’s
activities are subject to significant risks and uncertainties. See the “Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” sections in this report. Reclassifications Certain amounts presented
for the three and nine months ended September 30, 2023, reflect reclassifications made to conform to the presentation
in our current reporting period. These reclassifications had no effect on the previously reported net loss. Basis of Presentation The accompanying unaudited interim consolidated
financial statements (the “Interim Statements”) include the accounts of VerifyMe and its wholly owned subsidiaries PeriShip
Global and Trust Codes Global. All significant intercompany balances and transactions have been eliminated upon consolidation. The consolidated
financial statements 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, 2023, as filed with the Securities and Exchange Commission
(the “SEC”) on March 29, 2024. The accompanying Interim Statements are unaudited; however, in the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The interim
results for the three and nine months ended September 30, 2024, are not necessarily indicative of the results to be expected for the year
ending December 31, 2024, or for any future interim periods. Restricted Cash The following table provides a reconciliation
of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts
in the consolidated statements of cash flows (dollars in thousands):
Schedule of cash, cash equivalents and restricted cash
As of
September 30, 2024 December 31, 2023
Cash and cash equivalents $ 2,610 $ 3,032
Restricted cash - 63
Total cash and cash equivalents including restricted cash $ 2,610 $ 3,095 The Company classifies cash and cash equivalents
that are restricted from operating use for the next twelve months as restricted cash. No 63 Segment Reporting Operating segments are defined as components of
an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or
decision-making group, in deciding the method by which to allocate resources and assess performance. The Company has two reportable segments,
namely, (i) Precision Logistics and (ii) Authentication. See Note 11 - Segment Reporting, for further discussion of the Company’s
segment reporting structure. Foreign Currency Translation The functional currency of our New Zealand operations
is the local currency, New Zealand dollar (NZD). The translation of the foreign currency into U.S. dollars is performed for balance sheet
accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using the weighted average
exchange rates prevailing during the year. The unrealized gains and losses resulting from such translation are included as a component
of comprehensive income. Translation gains and losses arising from currency exchange rate fluctuations on transactions denominated in
a currency other than the local functional currency are included in “General and administrative” on our Consolidated Statements
of Operations. The foreign currency transaction gains for the three and nine months ended September 30, 2024, was $ 67 21 16 30 Use of Estimates The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates. Recent Accounting Pronouncements In November
2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): “ Improvements
to Reportable Segment Disclosures Fair Value of Financial Instruments The Company’s financial instruments consist
of accounts receivable, unbilled revenue, accounts payable, notes payable and accrued expenses, contingent consideration and long-term
derivative assets or liabilities. The carrying value of accounts receivable, accounts payable and accrued expenses approximate their fair
value because of their short maturities. The Company believes the carrying amount of its notes payable approximates fair value based
on rates and other terms currently available to the Company for similar debt instruments. The Company follows FASB ASC 820, “Fair
Value Measurements and Disclosures,” and applies it to all assets and liabilities that are being measured and reported on a fair
value basis. The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following
three categories: Level 1: Quoted market prices in active markets
for identical assets or liabilities Level 2: Observable market-based inputs or unobservable
inputs that are corroborated by market data Level 3: Unobservable inputs that are not corroborated by market data The level in the fair value within which a fair
value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The following table presents the Company’s
financial instruments that are measured and recorded at fair value on the Company’s balance sheets on a recurring basis, and their
level within the fair value hierarchy as of September 30, 2024, and December 31, 2023. Amounts in Thousands ('000)
Schedule of fair value assets measured on recurring basis
Derivative Asset Contingent Consideration
(Level 2) (Level 3)
Balance as of December 31, 2023 $ 4 $ (924 )
Change in fair value of Contingent Consideration - 839
Payments - 36
Currency - 27
Change in fair value to interest rate, SWAP, recognized in other comprehensive loss 7 -
Balance at September 30, 2024 $ 11 $ (22 ) Revenue Recognition The Company accounts for revenues according to Accounting Standards
Codification (“ASC”) Topic 606, “ Revenue from Contracts with Customers The Company applies the following five steps,
separated by reportable segments, in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations
under each of its agreements.
· identify the contract with a customer;
· identify the performance obligations in the contract;
· determine the transaction price;
· allocate the transaction price to performance obligations in the contract; and
· recognize revenue as the performance obligation is satisfied. For more detailed information about reportable
segments, see Note 11 – Segment reporting. The Company generally considers completion of an agreement, or Statement of Work (“SOW”)
and/or purchase order as a customer contract, provided collection is considered probable. Precision Logistics Our Precision Logistics segment consists of two
service lines, Proactive and Premium. Under our Proactive service line, clients pay us directly for carrier service coupled with our Proactive
logistics service. Terms typically range 7 days and no longer than 30 days. The Company has determined it is the principal and recognizes
shipment fees in gross revenue. Under our Premium service line, we provide complete white-glove shipping monitoring and predictive analytics
services. This service includes customer web portal access, weather monitoring, temperature control, full service center support and last
mile resolution. Payment terms are typically 30-45 days. Under both service lines in our Precision Logistics
segment, our performance obligation is met, and revenue is recognized when the packages are delivered. The transaction fees consist of
fixed consideration made up of amounts contractually billed to the customer. There are no variable considerations in the transaction fee,
in either service line. Authentication Our Authentication segment primarily consists
of our brand protection service line which consists of a custom suite of products that offer clients traceability and brand solutions.
Terms typically range between 30 and 90 days. Our performance obligation is met, and revenue is recognized, when our products are shipped
or delivered depending on the specific agreement with the customer. The transaction fee is made up of fixed consideration based on the
related purchase order or agreement. Warranties and other variable considerations are analyzed by the Company, in terms of historical
warranties, current economic trends, and changes in customer demand, and have been determined to be insignificant in the three and nine
months ended September 30, 2024. Goodwill Goodwill represents the excess of purchase price
over the fair value of net assets acquired in business combinations. Pursuant to ASC 350, the Company tests goodwill for impairment
on an annual basis in the fourth quarter, or between annual tests, in certain circumstances. Under authoritative guidance, the Company
first assesses qualitative factors to determine whether it was necessary to perform the quantitative goodwill impairment test.
The assessment considers factors such as, but not limited to, macroeconomic conditions, data showing other companies in the industry and
our share price. An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative
assessment, that it is more likely than not that its fair value is less than its carrying amount. Events or changes in circumstances which
could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance,
other entity specific events and sustained decrease in share price. Basic and Diluted Net Loss per Share of Common Stock The Company follows FASB ASC 260, “ Earnings
Per Share For the three and nine months ended September
30, 2024, and 2023, there were shares potentially issuable, that could dilute basic earnings per share in the future that were excluded
from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive to the Company’s losses
during the periods presented. For the three and nine months ended September 30, 2024, there were approximately 8,256,000 2,305,000 221,000 4,629,000 957,000 144,000 8,385,000 2,348,000 307,000 4,629,000 957,000 144,000 Stock-Based Compensation We account for stock-based compensation under
the provisions of FASB ASC 718, “ Compensation—Stock Compensation We account for stock-based compensation awards
to non-employees in accordance with ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting, which aligns accounting for share-based payments issued to nonemployees to that of employees under the
existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees
under Subtopic 505-50, “ Equity – Equity-Based Payments to Non-Employees All issuances of stock options or other equity
instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair value
of the equity instruments issued. Non-employee equity-based payments are recorded as an expense over the service period, as if we had
paid cash for the services. At the end of each financial reporting period, prior to vesting or prior to the completion of the services,
the fair value of the equity-based payments will be re-measured, and the non-cash expense recognized during the period will be adjusted
accordingly. Since the fair value of equity-based payments granted to non-employees is subject to change in the future, the amount of
the future expense will include fair value re-measurements until the equity-based payments are fully vested or the service completed. |
