EQUITY INVESTMENTS

6 Months Ended

Jun. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

EQUITY INVESTMENTS

NOTE 2 – EQUITY INVESTMENTS

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

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

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

The SPAC was unable to complete its initial business combination within 12 months from the closing of the IPO and the Company decided not to fund the extension and did not deposit additional funds into the trust account. As a result, the SPAC has dissolved and liquidated in accordance with its charter. The SPAC redeemed 100% of the public shares for cash on July 19, 2022, the rights have expired worthless, and after provisions are made for dissolution of the SPAC it is anticipated that the founder shares and private placement securities will be worthless. The documentation to liquidate the SPAC was filed on July 29, 2022, no distributions are currently anticipated to be made to the Sponsors, and final distributions to the Sponsors, if any, are expected to take place in the third quarter of 2022.

The fair value of the equity investment was $0 million as of June 30, 2022, and $11.0 million as of December 31, 2021. The fair value of the equity investment was classified as Level 3 in the fair value hierarchy as the calculation was dependent upon company specific adjustments to the observable trading price of the SPAC’s public units and shares, and related risk of forfeiture should no business combination occur. The Company recognized a loss on equity investments of $10,964 thousand for the six months ended June 30, 2022, included in the Loss on equity investments in the accompanying Consolidated Statements of Operations.

The following table presents summary financial information of the Sponsor Entity. Such summary information has been provided herein based upon the individual significance of the equity investment to the financial information of the Company.

	Amounts in Thousands ('000)
	June 30, 2022		December 31, 2021
Total Assets	$	108,403	$	109,043
Total Liabilities		23		3,730
Mezzanine Equity and Stockholders' Deficit		108,380		105,313

	Amounts in Thousands ('000)
	Six Months Ended June 30,
	2022		2021
Operating Loss		805		2
Net Loss		652		2

In December 2021, the Company acquired 8,841 10% cumulative convertible Series D preferred stock at a price of $10.00 as payment for a customer’s outstanding AR balance of $88,410. This instrument is considered an equity security within the scope of Topic 321 since the issuing entity has the option but no contractual obligation to redeem the preferred stock, and the Company can convert the preferred shares to common stock. For the three and six months ended June 30, 2022 a fair value loss of $48 thousand and a gain of $6 thousand, was recognized, respectively and included in loss on equity investments, in the accompanying Consolidated Statements of Operations. The fair value of the equity investment was $94 thousand as of June 30, 2022 and $88 thousand as of December 31, 2021. The fair value of the equity investment is classified as Level 1 in the fair value hierarchy as the calculation is dependent upon the quoted market price of the entity.