NASDAQ: VRME

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

Precision Logistics generates revenue from two
business service models.

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

·Premium Services – clients use our shipping monitoring,
predictive analytics, or exception management services. Shippers use their own transportation rates, provided and charged directly by
their carrier, with our added services charged (i) directly by the carrier, under a “white label”
arrangement, which we refer to as our Premium service, or (ii) by us, which we refer to as our Direct Premium service. These services
include customer web portal access, weather monitoring, temperature control, full-service center support and last mile resolution.

As discussed in the section “Partnerships”
below, we ceased providing ProActive services to our prior carrier partner in September 2025. In February 2026, we ceased providing Premium
services to our prior carrier partner. While we no longer provide ProActive and Premium services to our prior carrier partner we can and
continue to provide Direct Premium services to our customers who use our prior carrier partner for their shipping needs.

Beginning in September 2025, we began providing
ProActive services to our new Strategic Partner. We are currently establishing the ability to offer our Premium
services to our Strategic Partner. We expect to begin broadly offering Premium and Direct Premium services to customers of our new Strategic
Partner in the second quarter of 2026.

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

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

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

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

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

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

Authentication: The Authentication segment
specializes in anti-counterfeit and brand protection. We are not actively pursuing business in the Authentication segment but continue
to service existing customers.

Recent Developments

Merger Agreement

On January 2, 2026, we entered into a letter agreement
(the “LOI”) with Open World Ltd., a Cayman Islands exempted company (“Open World”), regarding a proposed merger
transaction. On February 11, 2026, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with VRME Subsidiary
Corp., a Nevada corporation and our wholly owned subsidiary (the “Merger Sub”) and Open World. Upon the terms and subject
to the satisfaction of the conditions described in the Merger Agreement, Merger Sub will merge with and into Open World, Merger Sub will
cease to exist and Open World will become our wholly-owned subsidiary (the “Merger”). At the effective time of the Merger
(the “Effective Time”), (i) each holder of ordinary shares of Open World outstanding immediately prior to the Effective Time
(excluding holders of Excluding Shares and Dissenting Shares, as defined in the Merger Agreement) will be entitled to receive the number
of shares of our common stock, based on the Exchange Ratio as defined in the Merger Agreement (the “Exchange Ratio”), (ii)
each investor in Open World Simple Agreements for Future Equity (“Open World SAFEs”) outstanding immediately prior to the
Effective Time will be entitled to receive a right to a number of shares of our common stock based on the Exchange Ratio and (iii) any
outstanding option to purchase shares of Open World shall be converted into an option to purchase the number of shares of our common stock
based on the Exchange Ratio.

Immediately following the closing of the Merger
(the “Closing”), our pre-Closing stockholders are expected to collectively retain approximately 10% of the post-Closing aggregate
number of shares of our common stock and holders of Open World ordinary shares and Open World SAFEs will receive as merger consideration
newly issued shares of our common stock representing approximately 90% of the post-Closing aggregate number of shares of our common stock.

The Merger Agreement contains customary representations,
warranties and covenants, including, among others, (i) covenants requiring each of us and Open World to conduct its business in the ordinary
course during the period between the execution of the Merger Agreement and the Closing or earlier termination of the Merger Agreement,
subject to certain exceptions, (ii) covenants prohibiting us and Open World from engaging in certain kinds of transactions during such
period (without the prior written consent of the other), and (iii) a covenant restricting us and Open World from activities relating to
the soliciting, initiating, encouraging, inducing or facilitating the communication, making, submission or announcement of any alternative
acquisition proposals or inquiries.

The Merger Agreement also requires us, in cooperation
with the Open World, to prepare and file with the SEC a registration statement on Form S-4 that will contain a proxy statement relating
to a Company stockholder meeting to be held in connection with the Merger (the “Registration Statement”) and pursuant to which
our shares of common stock will be registered under the Securities Act of 1933, as amended (the “Securities Act”), to be issued
by virtue of the Merger and the contemplated transactions thereunder. We shall use its reasonable best efforts to (i) cause the Registration
Statement to comply with applicable rules and regulations promulgated by the SEC, (ii) cause the Registration Statement to become effective
as promptly as practicable, and (iii) keep the Registration Statement effective as long as is necessary to consummate the Merger and the
contemplated transactions thereunder. In addition, under the Merger Agreement, the parties agreed to other customary provisions including
(i) obtaining requisite stockholder approval to consummate the Merger and the contemplated transactions thereunder, (ii) obtaining regulatory
approvals from relevant governmental authorities, (iii) indemnifying our directors and officers for a period of six years following the
Closing, (iv) completing certain disclosure obligations required by the SEC and listing requirements promulgated by the Nasdaq Capital
Market (“Nasdaq”), (v) electing or appointing to the positions of officers and directors of Company and the surviving corporation
certain persons designated by Open World, and (vi) executing employment agreements between us and Adam Stedham and Jennifer Cola.

Pursuant to Merger Agreement, we have also agreed
to enter into a Registration Rights Agreement and an Exchange Agent Agreement in forms reasonably acceptable to us and Open World at Closing.

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Closing of the Merger is subject to various customary
closing conditions. Each party’s obligations to effect the Merger and otherwise consummate the contemplated transactions thereunder
are conditioned upon (i) the effectiveness of the Registration Statement on Form S-4, (ii) expiration or termination of applicable regulatory
waiting periods, (iii) no restraints from any governmental authority preventing the consummation of the contemplated transactions under
the Merger Agreement, (iv) us and Open World obtaining the respective requisite stockholder votes to consummate the transactions contemplated
by the Merger Agreement, (v) us causing our PeriShip subsidiary to terminate its current credit facility, (vi) us effectuating a reverse
stock split upon the request of Open World, (vii) Nasdaq’s approval of our Nasdaq listing application for the post-Merger entity,
(viii) receipt of written approval of the Merger by the Cayman Islands Trade and Business Licensing Board, and (ix) execution of the Registration
Rights Agreement. Our and Merger Sub’s obligations to effect the Merger and otherwise consummate the contemplated transactions thereunder
are further conditioned upon customary closing conditions. Open World’s obligations to effect the Merger and otherwise consummate
the contemplated transactions thereunder are further conditioned upon customary closing conditions as well as (i) us having Closing Net
Cash, as defined in the Merger Agreement, of no less than $1 million, and (ii) our common stock having not been delisted from Nasdaq.

In connection with and subject to the Closing
of the Merger, outstanding time-based and performance-based restricted stock awards and restricted stock units held by certain of our
employees and directors at Closing will accelerate and vest, regardless of any performance conditions, at the Effective Time.

At the Closing of the Merger, pursuant to the
Merger Agreement, each of David Edmonds, Marshall Geller, Howard Goldberg, and Adam Stedham are expected to resign as directors of our
board of directors (our “Board of Directors”).

The foregoing description of the Merger Agreement
does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the full text of the Merger Agreement.

Stockholder Support Agreements

In connection with the Merger Agreement, certain
of our stockholders representing approximately 14% or more of the voting power in the aggregate of our common stock, including our directors
and officers (the “Supporting Stockholders”), executed Stockholder Support Agreements (the “Support Agreements”),
pursuant to which they agreed to vote their shares of our common stock, including any shares of our capital stock or other equity securities
that they purchase or with respect to which they otherwise acquire sole or shared voting power (including any proxy) (the “Support
Agreement Shares”) after the execution of Support Agreement and prior to its expiration pursuant to its terms, in favor of the issuance
of our common stock in accordance with Nasdaq Listing Rule 5635 (the “Issuance Proposal”), (ii) any matter that could reasonably
be expected to facilitate the Issuance Proposal, (iii) against any other proposed action, agreement, transaction or other matter that
is intended to, or would reasonably be expected to, impede, interfere with, delay, postpone, discourage or adversely affect the approval
or consummation of the Issuance Proposal or the consummation of any or all of the other transactions contemplated by the Merger Agreement;
and (iv) to approve any proposal to adjourn or postpone the meeting to a later date, if there are not sufficient votes for the approval
of the Issuance Proposal on the date on which such meeting is held.

The Support Agreements also contain restrictions
on transfer of Support Agreement Shares held by the Supporting Stockholders. The Support Agreements will terminate upon the earliest to
occur of the following events: (a) the effective time of the approval of the Issuance Proposal, (b) the termination of the Merger Agreement
in accordance with its terms or (c) upon mutual written agreement of the parties to the Support Agreements. The foregoing description
of the Support Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the full
text of the form of Support Agreement.

Amended and Restated Employment Agreement
with Adam Stedham

In connection with the Merger Agreement, on February
11, 2026, we entered into an Amended and Restated Employment Agreement with Adam Stedham, effective as of the Effective Time of the Merger.
As of the Effective Time, and subject to the Closing of the Merger, Mr. Stedham is expected to resign as a director, Chief Executive Officer
and President to become the President of Precision Logistics (the “Stedham Employment Agreement”). Mr. Stedham’s expected
resignation as our director, Chief Executive Officer and President is not the result of any disagreement with us on any matter relating
to our operations, policies or practices.

Pursuant to the Stedham Employment Agreement,
should it become effective, Mr. Stedham will receive an annual base salary of $300,000 and be eligible for an annual bonus for each calendar
year, with a potential up to 50% of his base salary based on performance goals set by the Board of Directors each year. Mr. Stedham shall
be eligible to receive equity-based compensation award(s), as determined by the Board of Directors (or a subcommittee thereof), from time
to time.

The Stedham Employment Agreement is for an initial
term of one year and will thereafter be “at-will”, and may be terminated by either party during the initial term. If terminated
by Mr. Stedham for good reason, or by us without cause prior to the 6-month anniversary of the Effective Time, then Mr. Stedham shall
be entitled to an amount equal to his Base Salary that would have otherwise been paid until the conclusion of the initial term. If the
qualifying termination occurs after the 6-month anniversary of the Effective Time, then Mr. Stedham shall be entitled to an amount equal
to six (6) months of his Base Salary.

Employment Agreement with Jennifer Cola

In connection with the Merger Agreement, on February
11, 2026, we entered into an Employment Agreement with Jennifer Cola, effective as of the Effective Time. As of the Effective Time, and
subject to the Closing of the Merger, Ms. Cola is expected to continue in her position as our Chief Financial Officer (the “Cola
Employment Agreement”).

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Pursuant to the Cola Employment Agreement, should
it become effective, Ms. Cola will receive an annual base salary of $180,000 and be eligible for an annual bonus for each calendar year
ending during the employment period, with a potential up to 50% of her base salary based on performance goals set by the Board of Directors
each year. Ms. Cola shall be eligible to receive equity-based compensation award(s), as determined by the Board of Directors (or a subcommittee
thereof), from time to time. In addition, in connection with and subject to entering into the Cola Employment Agreement, the Compensation
Committee of the Board of Directors approved the grant on the Effective Time of 130,000 restricted stock awards under our 2020 equity
incentive plan, which shall vest on the Effective Time.

The Cola Employment Agreement is for an initial
term of one year and will thereafter be “at-will”, and may be terminated by either party during the initial term. If terminated
by Ms. Cola for good reason, or by us without cause prior to the 6-month anniversary of the Effective Time, then Ms. Cola shall be entitled
to an amount equal to her Base Salary that would have otherwise been paid until the conclusion of the initial term. If the qualifying
termination occurs after the 6-month anniversary of the Effective Time, then Ms. Cola shall be entitled to an amount equal to six (6)
months of her Base Salary.

Jennifer Cola Severance Period

In connection with the Merger, on February 11,
2026, the Board of Directors approved the grant of a severance period for Ms. Cola effective immediately and which will expire upon the
Effective Time of the Merger (the “Severance Period”), whereby Ms. Cola will receive a continuation of her base salary and
benefits for a period of six months if she is terminated without cause during the Severance Period.

Termination of ATM Sales Agreement

As previously disclosed, on March 6, 2025, we
entered into an At-The-Market Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (the “Sales Agent”),
pursuant to which we could issue and sell, from time to time, shares of our common stock up to an aggregate offering price of $15.8 million
(the “ATM Program”).

On February 11, 2026, we provided the Sales Agent
written notice of its decision to terminate the ATM Program and pursuant to Section 12(b) of the Sales Agreement, the ATM Program and
Sales Agreement terminated on February 16, 2026.

During the year ended December 31, 2025, and through
the termination of the ATM Program, we sold 628,432 shares of common stock through the ATM Program for net proceeds of $483 thousand,
after deducting $15 thousand in offering costs.

ZenCredit Agreement

On August 8, 2025, we entered into a Master Loan
Agreement and Promissory Note (the “Loan Agreement”) with ZenCredit Ventures, LLC (“ZenCredit”). Pursuant to the
Loan Agreement, we agreed to loan ZenCredit up to $2 million. Pursuant to the terms of the Loan Agreement, ZenCredit will pay us regular
quarterly interest payments at an annual interest rate of 16%. The term of the initial promissory note is nine months at which time all
accrued principal and interest is due to us subject to the terms of the Loan Agreement. On August 11, 2025, we loaned ZenCredit $2 million
in exchange for a promissory note issued pursuant to the Loan Agreement that matures on May 11, 2026.

Opportunities

Precision Logistics: Traditionally, most
shipping businesses utilize the carrier’s data platform for tracking which generally informs the shipping enterprise, and their
customers, when a package is in transit, when a package has been delivered, and some level of detail of the path which a package traveled.
We believe taking the data feeds from a carrier and adding real-time visibility with predictive analytics and the human intervention factor
of our service center agents give us a competitive advantage against other third-party platforms that solely rely on the carrier’s
data feeds. We utilize a variety of input sources beyond the carrier’s data feeds. Our proprietary “Predictive Analytics”
technology is fed real-time meteorology data, traffic and road construction data, and power grid information to help predict issues before
they happen. If an alert is created the shipper and our service center agents work to address the issue, saving the perishable product
from spoiling, while saving the shipper significant costs and reducing the need to replace products that are no longer viable. We have
meteorologists on staff that track world-wide weather patterns to address predicted issues before they happen. We believe the company
has two significant areas of opportunity. First, our services are specifically designed to address the needs of small and medium –sized
health care, agriculture, food and beverage companies. Second, the pharmaceutical and healthcare industries represent significant opportunities
due to the enhanced tracking and customer service associated with distribution of these products. We are focusing our sales emphasis on
those industries and discovering other industries that need a “high touch”, “white-glove” exception management
team.

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

Authentication: We are not actively pursuing
business in the Authentication segment but continue to service existing customers.

Partnerships:

On August 26, 2025, FedEx Corporation, our “prior
carrier partner”, notified providers, including PeriShip Global, that it would be providing preferred shipping services through
its own internal platform and that the providers would no longer be approved as FedEx preferred shippers effective September 24, 2025.
As such, PeriShip Global is no longer a preferred shipper for our prior carrier partner and our
Precision Logistics segment ceased providing ProActive services to our prior carrier partner’s customers in September 2025. We continued
to provide Premium services to our prior carrier partner until we ceased providing Premium services in February 2026. While we
no longer provide ProActive and Premium services to our prior carrier partner we can and continue to provide Direct Premium services to
our customers who use our prior carrier partner for their shipping needs.

On September
24, 2025, we began offering ProActive services to the customers of an alternative Preferred Shipping Partner. We
are currently establishing the ability to offer our Premium services to our Strategic Partner. We expect to begin broadly offering Premium
and Direct Premium services to customers of our new Strategic Partner in the second quarter of 2026.

On July 29, 2025, PeriShip Global entered into
(i) a Digital Channel Program Agreement (the “Program Agreement”) and (ii) a Partner API Access Agreement (the “Integration
Agreement” and together with the Program Agreement, the “Agreements”) with an alternative Preferred Shipping Partner
(our “Strategic Partner”). The Agreements provide PeriShip Global access to designated Strategic Partner services at promotional
rates as part of a specialized logistics management service offering for time-sensitive and perishable shipments, including proactive
monitoring, weather tracking, and issue resolution through certain digital channel program applications. Pursuant to the Integration Agreement,
PeriShip Global will be permitted to develop Interfaces to certain Strategic Partner APIs, Access Services and Information (as such terms
are defined in the Integration Agreement). The Agreements have a term of three years, subject to customary termination and renewal provisions.

Current Economic Environment

We have seen a softening in demand for some services
related to high-end perishable items which seem to be impacted by reduced discretionary spending by U.S. consumers. In response to uncertainty
in the global market and lower demand some carriers have implemented strategies to address a potential global recession. Additional changes
in U.S. or international trade policy, along with continued uncertainty surrounding such policies, could lead to further weakened business
conditions. Additionally, inflation and uncertainty and instability in the global economy and geopolitical events such as a war in Iran
and unrest in areas of the world that are dependent upon fuel production can negatively affect transportation costs and further reduce
consumer spending leading to fewer goods being transported globally. We can provide no assurances that a decline in discretionary consumer
spending for these or any reasons will not have a negative impact on our revenues and results of operations.

Seasonality

We experience seasonal fluctuations
in our net revenues from sales in our Precision Logistics segment. Revenues from sales are generally higher in the fourth quarter than
in other quarters due to increased holiday shipments. While the fourth quarter is historically our highest revenue quarter, revenues from
ProActive services declined in the quarter ended December 31, 2025 as compared to the quarter ended December 31, 2024 due to the previously
disclosed loss of our prior carrier partner as a shipping supplier integrating our service offerings, and larger shippers not wanting
to change shipping suppliers during the peak season. The seasonality of our business may cause fluctuations in our quarterly operating
results.

Our Intellectual Property

As of December 31, 2025, our current patent and
trademark portfolios consist of six granted U.S. patents and one pending foreign patent application and several foreign trademarks.
The Company abandoned four patents during the year ended December 31, 2025.

Our registered patents expire between the years
2027 and 2036. The expiration date of a pending application that matures into a registration depends upon the issuance date and any adjustment
under 35 U.S.C. 154(b). The issuance of a patent is considered prima facie evidence of validity. The granting of a patent does not
prevent a third party from seeking a judicial determination that the patent is invalid. Such challenges to the validity of a patent are
common and can be successful. There can be no assurance that a challenge will not be filed to one or more of our patents, if granted,
and that if filed, such a challenge will not be successful.

We have trademarked the VerifyMeTM brand
in the United States and internationally. However, our name and brand could be confused with brands that have similar names, including
but not limited to Verified.Me, a service offered to Canadians by SecureKey Technologies Inc. We are aware of names and marks similar
to our service marks being used from time to time by other persons that could result in confusion and may diminish the value of our brands
and adversely affect our business. See Item 1A “Risk Factors” for additional information regarding the risk of confusion of
our name with other brands and other intellectual property risks.

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Research and Development

Research and development efforts were focused
on expanding our technology into new areas of implementation and to develop unique customer applications. We spent approximately $20 thousand
and $70 thousand during the years ended December 31, 2025, and 2024, respectively, on research and development.

We do not expect to continue research and development
efforts for the foreseeable future but will continue to evaluate the need and appropriate use of research and development efforts as they
relate to our business and service offerings.

Sales and Marketing Strategy

Business development and sales resources are aligned
to support existing customer accounts and have been aligned to support new customer development. From time to time, we use social media
channels and attend trade shows as a means of marketing our services. By staying in contact and engaging with customers, we are able to
identify possible needs and look for opportunities to expand the services we are providing. We will also continue to participate in trade
show opportunities where the segment aligns with our core strategy or areas in which we are looking to expand our reach.

Competition

In general, we believe competition in our principal
markets is primarily driven by product performance and features; price; ease of implementation; technology effectiveness; product innovation
and timing of new product introductions; ability to develop, maintain and protect proprietary products and technologies; sales and distribution
capabilities; technical support and service; and applications support. PeriShip Global has developed its own software portal with predictive
analytics for weather, traffic, power grids, and data feeds it receives from one of the world’s largest logistics carriers. There
are other companies that operate a similar business model, however most of these companies specialize in a particular field such as healthcare
or non-perishable building materials. Our Precision Logistics segment operates in all of the perishable and time-sensitive segments. In
addition, the major carriers such as FedEx, UPS and DHL all have internal operations servicing the critical time, temperature, and cold
storage shipping segment.

Some of our competitors have substantially greater
financial, human and other resources than we have. As a result, we may not have sufficient resources to develop and market our services
to the market effectively. We expect competition with our products and services to continue and intensify in the future.

Major Customers/Vendors

For the year ended December 31, 2025, one customer
represented 13% of revenues and one customer represented 16% of revenues for the year ended December 31, 2024.

For the year ended December 31, 2025, two customers
made up 50% of accounts receivable. For the year ended December 31, 2024, two customers accounted for 36% of total accounts receivable.

For the year ended December 31, 2025, one vendor
accounted for 89% of transportation costs. For the year ended December 31, 2024, one vendor accounted for 99% of transportation costs,
in our Precision Logistics segment.

Employees and External Sales Force

As of December 31, 2025, we employed approximately
thirty (30) persons and contracted with one (1) consultant. Because of the nature of our business, many of our employees and consultants
can, and do, conduct their work for us remotely.

Available Information

We make available free of charge on our website,
www.verifyme.com, all materials that we file electronically with the Securities and Exchange Commission (“SEC”), including
our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon
as reasonably practicable after electronically filing such materials with, or furnishing them to, the SEC. We have not incorporated by
reference into this Report the information included, or that can be accessed through, our website and you should not consider it to be
part of this Report.

The SEC maintains an Internet website, www.sec.gov
that contains reports, proxy and information statements and other information that we file electronically with the SEC.

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