Notes
to Condensed Consolidated Financial Statements
For
the Three Months Ended March 31, 2022 and 2021
(in
thousands, except share and per share data)
(unaudited)
1.
DESCRIPTION OF BUSINESS
Our
Business
References
in this document to the “Company,” “Verb,” “we,” “us,” or “our” are intended
to mean Verb Technology Company, Inc., individually, or as the context requires, collectively with its subsidiaries on a consolidated
basis.
The
Company is a SaaS applications platform developer. Our platform is comprised of a suite of interactive video-based sales enablement business
software products marketed on a subscription basis. Our applications, available in both mobile and desktop versions, are offered as a
fully integrated suite, as well as on a standalone basis, and include verbCRM, our Customer Relationship Management (“CRM”)
application, verbLEARN, our Learning Management System application, verbLIVE, our Live Stream eCommerce application, verbPULSE, our business/augmented
intelligence notification and sales coach application, and verbTEAMS, our self-onboarding video-based CRM and content management application
for professional sports teams, small business and solopreneurs, with seamless synchronization with Salesforce, that also comes bundled
with verbLIVE, and more recently, we introduced verbMAIL, our interactive video-based sales communication tool integrated into Microsoft
Outlook. Of note is our forthcoming MARKET, a multi-vendor, multi-presenter, livestream social shopping platform at the forefront of
the convergence of ecommerce and entertainment.
The
Company also provides certain non-digital services to some of its enterprise clients such as printing, fulfillment services,
design and print welcome kits and starter kits. We use the term “client” and “customer”
interchangeably.
COVID-19
As
of the date of this filing, there continues to be widespread concern regarding the ongoing impacts and disruptions caused by the COVID-19
pandemic in the regions in which the Company operates. Although the impacts of the COVID-19 pandemic have not been material to date,
a prolonged downturn in economic conditions could have a material adverse effect on our customers and demand for our services. The Company
has not observed any impairments of its assets or a significant change in the fair value of its assets due to the COVID-19 pandemic.
At this time, it is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its
effects on the Company’s business or results of operations, financial condition, or liquidity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND SUPPLEMENTAL DISCLOSURES
Basis
of Presentation
The
accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and
applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting.
Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed
or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2021 filed with the SEC on March 31, 2022 (the “2021 Annual Report”). The consolidated
balance sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date.
In
the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to
fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all
adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not
necessarily indicative of fiscal year-end results.
Principles
of Consolidation
The
consolidated financial statements have been prepared in accordance with GAAP and include the accounts of Verb, Verb Direct, LLC, Verb
Acquisition Co., LLC, and verbMarketplace, LLC. All intercompany accounts have been eliminated in the consolidation. Certain prior period
amounts have been reclassified to conform to the current presentation.
Going
Concern
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial
statements, during the three months ended March 31, 2022, the Company incurred a net loss of $6,989 and used cash in operations of $5,899.
These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date
of the financial statements being issued.
On
January 12, 2022, the Company entered into a common stock purchase agreement (the “Common Stock Purchase Agreement”)
with Tumim Stone Capital LLC (the “Investor”). Pursuant to the agreement, the Company has the right, but not the
obligation, to sell to the Investor, and the Investor is obligated to purchase, up to $50,000 of
newly issued shares (the “Total Commitment”) of the Company’s common stock, par value $0.0001 per
share (the “Common Stock”) from time to time during the term of the agreement, subject to certain limitations and
conditions. The Total Commitment is inclusive of 607,287 shares
of Common Stock (the “Commitment Shares”), issued to the Investor as consideration for its commitment to purchase shares
of Common Stock under the Common Stock Purchase Agreement.
On
January 12, 2022, the Company also entered into a securities purchase agreement with three institutional investors (collectively, the
“Note Holders”) providing for the sale and issuance of an aggregate original principal amount of $6,300 in convertible notes
due January 2023 (each, a “Note,” and, collectively, the “Notes,” and such financing, the “Note Offering”).
The Company and the Note Holders also entered into a security agreement, dated January 12, 2022, in connection with the Note Offering,
pursuant to which the Company granted a security interest to the Note Holders in substantially all of its assets.
On
April 20, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”), which provides for the
sale and issuance by the Company of an aggregate of (i) 14,666,667 shares of the Company’s common stock, $0.0001 par value per
share, at a purchase price of $0.75 per share, and (ii) warrants to purchase 14,666,667 shares of the common stock at an exercise price
of $0.75 per share, for aggregate gross proceeds of $11,000 before deducting placement agent commissions and other estimated offering
expenses (the “Registered Direct Offering”). The Purchase Agreement contains customary representations, warranties and agreements
by the Company, customary conditions to closing, and customary indemnification obligations of the Company. The Purchase Agreement amongst
other things restricts us from selling shares using at the market (“ATM”) agreement with Truist Securities and the Common
Stock Purchase Agreement. As a result of this transaction, certain of our Series A warrants priced at $1.10 per share were repriced to
$0.75 per share under the terms of such warrant agreements. The fair value of such warrants at this new exercise price is approximately
$500 and the Company will account for this change as a deemed dividend. In addition, as a result of entering into the Purchase Agreement,
the Company repaid $1,650 in principal payments to Note Holders pursuant to the terms of the Note Offering, thereby reducing the outstanding
principal balance from $6,300 to $4,650.
On
April 20, 2022, the Company also entered into a placement agency agreement (the “Placement Agency Agreement”) with A.G.P./Alliance
Global Partners (the “Placement Agent”). Pursuant to the terms of the Placement Agency Agreement, the Placement Agent agreed
to use its reasonable best efforts to arrange for the sale of the Securities in the Registered Direct Offering. See Note 14 – Subsequent
Events.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the
reported periods. Significant estimates include assumptions made in analysis of reserves for allowance of doubtful accounts, inventory,
assumptions made in purchase price allocations, impairment testing of long-term assets, realization of deferred tax assets, determining
fair value of derivative liabilities, and valuation of equity instruments issued for services. Amounts could materially change in the
future.
Revenue
Recognition
The
Company recognizes revenue in accordance with Financial Accounting Standard Board’s (“FASB”) ASC 606, Revenue from
Contracts with Customers (“ASC 606”). The Company derives its revenue primarily from providing application services through
the SaaS application, digital marketing and sales support services. The Company also derives revenue from the sale of customized print
products and training materials, branded apparel, and digital tools, as demanded by its customers.
A
description of our principal revenue generating activities is as follows:
|
1. |
Digital
Revenue which is divided into two main categories: |
|
a. |
SaaS
recurring digital revenue based on contract-based subscriptions to verb app products and platform services which include verbCRM,
verbLEARN, verbLIVE, verbTEAMS, and verbPULSE. The revenue is recognized straight-line over the subscription period. |
|
b. |
Non-SaaS,
non-recurring digital revenue, which is revenue generated by the use of app products and in-app purchases, such as sampling and other
services obtained through the app. The revenue for samples is recognized upon completion and shipment, while the design fees are
recognized when the service has been rendered and the app is delivered to the customer. |
Subscription
revenue from the application services is recognized over the life of the estimated subscription period. The Company also charges certain
customers setup or installation fees for the creation and development of websites and phone application. These fees are accounted for
as part of contract liabilities and amortized over the estimated life of the agreement. Revenue is measured as the amount of consideration
expected to be received in exchange for transferring the products or services to a customer
|
2. |
Non-digital
revenue, which is revenue generated from non-app, non-digital sources through ancillary services
provided as an accommodation to clients and customers. These services, which are now outsourced
to a strategic partner as part of a cost reduction plan instituted in 2020, include design,
printing services, fulfillment and shipping services. The revenue is recognized upon completion
and shipment of products or fulfillment to the customer.
|
The
products sold by us are distinctly individual. The products are offered for sale solely as finished goods, and there are no performance
obligations required post-shipment for customers to derive the expected value from them. Other than promotional activities, which can
vary from time to time but nevertheless are entirely within the Company’s control, contracts with customers contain no incentives
or discounts that could cause revenue to be allocated or adjusted over time. The control of products we sell transfers to our customers
upon shipment from our facilities, and our performance obligations are satisfied at that time. Amounts related to shipping and handling
that are billed to customers are reflected as part of revenue, and the related costs are reflected in cost of revenue in the accompanying
Consolidated Statements of Operations. Historically, we have not experienced any significant payment delays from customers. The Company
allows returns within 30 days of purchase from end-users. Customers may return purchased products under certain circumstances. Returns
from customers in the past and during the three months ended March 31, 2022 and 2021 are immaterial.
Revenues
during the three months ended March 31, 2022 and 2021 were substantially all generated from the United States of America.
Cost
of Revenue
Cost
of revenue primarily consists of the salaries of certain employees and contractors, digital content costs, purchase price of consumer
products, packaging supplies, and customer shipping and handling expenses. Shipping costs to receive products from our suppliers are
included in our inventory and recognized as cost of revenue upon sale of products to our customers.
Contract
Liabilities
Contract
liabilities represent consideration received from customers under revenue contracts for which the Company has not yet delivered or completed
its performance obligation to the customer. Contract liabilities are recognized over the contract period.
Capitalized
Software Development Costs
The
Company capitalizes internal and external costs directly associated with developing internal-use software, and hosting arrangements that
include an internal-use software license, during the application development stage of its projects. The Company’s internal-use
software is reported at cost less accumulated depreciation. Depreciation begins once the project has been completed and is ready for
its intended use. The Company will depreciate the asset on a straight-line basis over a period of three years, which is the estimated
useful life. Software maintenance activities or minor upgrades are expensed in the period performed. As of March 31, 2022 and December
31, 2021, the Company capitalized $6,207 and $4,348, respectively, in software development costs and recorded as capitalized software
development costs in our condensed consolidated balance sheets (see Note 3).
Depreciation
expense related to capitalized software development costs are recorded in Cost of revenue in the consolidated statements of operations.
There was no depreciation expense related to capitalized software development costs for the three months ended March 31, 2022 and 2021
as the software has not been completed and utilized.
Fair
Value of Financial Instruments
The
Company follows the guidance of FASB ASC 820 and ASC 825 for disclosure and measurement of the fair value of its financial instruments.
FASB ASC 820 establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements. To increase
consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes
the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest
priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable
inputs.
The
three (3) levels of fair value hierarchy defined by ASC 820 are described below:
|
Level
1: |
Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date. |
|
Level
2: |
Pricing
inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the
reporting date. |
|
Level
3: |
Pricing
inputs that are generally observable inputs and not corroborated by market data. |
The
carrying amount of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, and accounts
payable and accrued expenses approximate their fair value due to their short-term nature. The carrying values financing obligations approximate
their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest rates. The Company
uses Level 2 inputs for its valuation methodology for the derivative liabilities.
Derivative
Financial Instruments
The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded
at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements
of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or
as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as
current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of
the balance sheet date.
The
Company uses Level 2 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using
a Binomial pricing model. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any
increase or decrease in the fair value being recorded in results of operations as adjusted to fair value of derivatives.
Share-Based
Compensation
The
Company issues stock options and warrants, shares of common stock and restricted stock units as share-based compensation to employees
and non-employees. The Company accounts for its share-based compensation in accordance with FASB ASC 718, Compensation – Stock
Compensation. Share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is
recognized as expense over the requisite service period. The fair value of restricted stock units is determined based on the number of
shares granted and the quoted price of our common stock and is recognized as expense over the service period. Recognition of compensation
expense for non-employees is in the same period and manner as if the Company had paid cash for services.
Net
Loss Per Share
Basic
net loss per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net loss
per share is computed giving effect to all dilutive potential shares of common stock that were outstanding during the period. Dilutive
potential shares of common stock consist of incremental shares of common stock issuable upon exercise of stock options. No dilutive potential
shares of common stock were included in the computation of diluted net loss per share because their impact was anti-dilutive.
As
of March 31, 2022, and 2021, the Company had total outstanding options of 5,877,643 and 5,799,013, respectively, and warrants of 10,984,740
and 12,422,562, respectively, and outstanding restricted stock awards of 2,211,525 and 2,751,508, respectively, which were excluded from
the computation of net loss per share because they are anti-dilutive.
Concentration
of Credit and Other Risks
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable. Cash is deposited
with a limited number of financial institutions. The balances held at any one financial institution at times may be in excess of Federal
Deposit Insurance Corporation (“FDIC”) insurance limits of up to $250.
The
Company extends limited credit to customers based on an evaluation of their financial condition and other factors. The Company generally
does not require collateral or other security to support accounts receivable. The Company performs ongoing credit evaluations of its
customers and maintains an allowance for doubtful accounts and sales credits. The Company believes that any concentration of credit risk
in its accounts receivable is substantially mitigated by the Company’s evaluation process, relatively short collection terms and
the high level of credit worthiness of its customers.
The
Company’s concentration of credit risk includes its concentrations from key customers and vendors. As of March 31, 2022, we have
one vendor that accounted for 33% of our purchases individually and in aggregate. In addition, we had one vendor that accounted for 49%
of accounts payable individually and in aggregate.
As
of March 31, 2022, we had no customers that accounted for 10% of our accounts receivable individually and in the aggregate.
During
the three months ended March 31, 2022 and 2021, we had no customers that accounted for 10% of our revenues individually and in the aggregate.
Supplemental
Cash Flow Information
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION
| |
| | |
| |
Supplemental disclosures of cash flow information: | |
| | |
| |
Cash paid for interest | |
$ | - | | |
$ | 34 | |
Cash paid for income taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Supplemental disclosure of non-cash investing and financing activities: | |
| | | |
| | |
Fair value of derivative liability extinguished | |
$ | - | | |
$ | 2,286 | |
Fair value of common shares issued to settle accrued expenses | |
| 350 | | |
| 207 | |
Reclassification of Class B upon conversion to common stock | |
| - | | |
| 3,065 | |
Discount recognized from advances on future receipts | |
| - | | |
| 1,133 | |
Accrued software development costs | |
| 1,675 | | |
| - | |
Discount recognized from notes payable | |
| 300 | | |
| - | |
Derecognition of operating lease right-of-use assets | |
| 543 | | |
| - | |
Derecognition of operating lease liabilities | |
| 521 | | |
| - | |
Debt issuance costs in accounts payable | |
$ | 80 | | |
$ | - | |
Recent
Accounting Pronouncements
Recently
Adopted Accounting Pronouncements
In
August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).” ASU 2020-06
reduces the number of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion
models. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost as long
as no other features require bifurcation and recognition as derivatives. By removing those separation models, the effective interest
rate of convertible debt instruments will be closer to the coupon interest rate. Further, the diluted net income per share calculation
for convertible instruments will require the Company to use the if-converted method. ASU 2020-06 will be effective January 1, 2024, for
the Company and is to be adopted through a cumulative-effect adjustment to the opening balance of retained earnings. Early adoption is
permitted, but no earlier than January 1, 2021, including interim periods within that year. Effective January 1, 2022, the Company early
adopted ASU 2020-06 and that adoption did not have any material impact on the Company’s financial statements and the related disclosures.
In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),
Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.
ASU 2021-04 provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding
equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. An issuer measures
the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value
of that warrant immediately before modification or exchange. ASU 2021-04 introduces a recognition model that comprises four categories
of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and
modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal
years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided
in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. The Company adopted ASU 2021-04
effective January 1, 2022. The adoption of ASU 2021-04 did not have any material impact on the Company’s consolidated financial
statement presentation or disclosures.
In
October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers. ASU 2021-08 will require companies to recognize and measure contract assets and contract liabilities
relating to contracts with customers that are acquired in a business combination in accordance with ASC 606. Under current GAAP, an acquirer
generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities
arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 will result in the acquirer recording
acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under
ASC Topic 606. The ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted
this ASU as of January 1, 2022 on a prospective basis and the adoption impact of the new standard will depend on the magnitude of future
acquisitions. The standard will not impact acquired contract assets or liabilities from business combinations occurring prior to the
adoption date.
In
November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832)—Disclosures by Business Entities about Government
Assistance. ASU 2021-10 increases the transparency of government assistance including the disclosure of (1) the types of assistance,
(2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements.
The ASU is effective for fiscal years beginning after December 15, 2021. The Company adopted this ASU as of January 1, 2022 on a prospective
basis. The adoption of this standard did not have any material impact on the Company’s financial statements.
Recently
Issued Accounting Pronouncements Not Yet Adopted
In
June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”).
The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes
receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model,
under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s
provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance
is effective. As a small business filer, ASU 2020-06 will be effective January 1, 2024, for the Company and the provisions of this update
can be adopted using either the modified retrospective method or a fully retrospective method. Management is currently assessing the
impact of adopting this standard on the Company’s financial statements and related disclosures.
Other
recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission (the “SEC”) did not or are not believed by management to have a material
impact on the Company’s present or future consolidated financial statements.
3.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
In
2020, the Company began developing MARKET, the next generation of interactive livestream ecommerce, and has capitalized $6,207
and $4,348
of internal and external development costs as
of March 31, 2022 and December 31, 2021, respectively. In October 2021, the Company entered into a 10-year License and Services
Agreement with a third party (the “Primary Contractor”) engaged to develop certain components of MARKET. The Primary Contractor’s
fees for developing such components, including the 10-year license fee for such components, is $5,750.
At March 31, 2022, the Company’s remaining software development obligation to the Primary Contractor was $1,150,
which was subsequently paid in April 2022. The Primary Contractor was also paid an additional $500
bonus in April 2022. In addition, as of March
31, 2022 and December 31, 2021, the Company had paid or accrued $380
and $248,
respectively, of other capitalized software development costs.
There
has been no depreciation expense related to capitalized software development costs for the three months ended March 31, 2022 and 2021.
Option
to Acquire Primary Contractor
In
August 2021, the Company entered into an agreement providing the Company the option to purchase the Primary Contractor. In November 2021,
the Company exercised this option. During 2021, the Company and the Primary Contractor reached an agreement on the terms for
the Company’s acquisition of the Primary Contractor, which is subject to the execution of a share purchase agreement (the “SPA”)
and the completion of an audit of the Primary Contractor (the “Primary Contractor Audit”). The agreement stipulates that
if the Company enters into the SPA and successfully completes the Primary Contractor Audit before May 15, 2022 or such other mutually
agreed date and thereafter determines not to consummate the acquisition of the Primary Contractor, the Company may be liable for
a $1,000 break-up
fee payable to the Primary Contractor. As of the date of the issuance of these financial statements, the Primary Contractor Audit
is ongoing, the SPA has not been executed, and the parties are determining a mutually agreeable date to consummate the transaction.
The purchase price for the Primary Contractor is $12,000,
which can be paid in cash and/or stock, subject to the parties’ mutual agreement.
4.
INTANGIBLE ASSETS
Intangible
assets, net consisted of the following:
SCHEDULE
OF INTANGIBLE ASSETS
| |
March 31, 2022 | | |
December 31, 2021 | |
| |
| | | |
| | |
Amortizable finite-lived intangible assets | |
$ | 7,399 | | |
$ | 7,317 | |
Accumulated amortization | |
| (4,172 | ) | |
| (3,806 | ) |
Finite-lived intangible assets, net | |
| 3,227 | | |
| 3,511 | |
| |
| | | |
| | |
Indefinite-lived intangible assets | |
| 442 | | |
| 442 | |
| |
| | | |
| | |
Intangible assets,
net | |
$ | 3,669 | | |
$ | 3,953 | |
Amortizable
finite-lived intangible assets are being amortized over a period of 3 to 5 years. There were no impairment charges incurred
in the periods presented. During the three months ended March 31, 2022 and 2021, the Company recorded amortization expense of $366 and
$370, respectively.
The
expected future amortization expense for amortizable finite-lived intangible assets as of March 31, 2022 is as follows:
SCHEDULE OF ESTIMATED AMORTIZATION EXPENSE
Year ending | |
Amortization | |
2022 remaining | |
$ | 1,068 | |
2023 | |
| 1,386 | |
2024 | |
| 573 | |
2025 | |
| 200 | |
Total amortization | |
$ | 3,227 | |
5.
OPERATING LEASES
On
January 3, 2022, the Company terminated the lease agreements for our office and warehouse leases in American Fork, Utah. In accordance
with ASC 842, the Company derecognized the right of use asset of $1,287,
net of accumulated amortization of $744.
The Company has also derecognized the corresponding lease liabilities of $521,
resulting in a loss on lease termination of $22.
Effective
April 26, 2022, the Company entered into an office space sub-lease agreement. See Note 14 – Subsequent Events.
The
components of lease expense and supplemental cash flow information related to leases for the period are as follows:
SCHEDULE
OF LEASE COST
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Lease cost | |
| | | |
| | |
Operating lease cost (included in general and administrative expenses in the Company’s statement of operations) | |
$ | 107 | | |
$ | 175 | |
| |
| | | |
| | |
Other information | |
| | | |
| | |
Cash paid for amounts included in the measurement of lease liabilities | |
$ | 171 | | |
$ | 196 | |
Weighted average remaining lease term – operating leases (in years) | |
| 5.17 | | |
| 4.54 | |
Weighted average discount rate – operating leases | |
| 4.0 | % | |
| 4.0 | % |
SCHEDULE
OF OPERATING LEASES
| |
March 31, 2022 | | |
December 31, 2021 | |
Operating leases | |
| | | |
| | |
Right-of-use assets | |
$ | 1,548 | | |
$ | 2,177 | |
| |
| | | |
| | |
Short-term operating lease liabilities | |
$ | 337 | | |
$ | 592 | |
Long-term operating lease liabilities | |
| 1,874 | | |
| 2,299 | |
Total operating lease liabilities | |
$ | 2,211 | | |
$ | 2,891 | |
SCHEDULE
OF PRESENT VALUE OF LEASE LIABILITIES
Year ending | |
Operating Leases | |
2022 remaining | |
| 337 | |
2023 | |
| 460 | |
2024 | |
| 472 | |
2025 | |
| 484 | |
2026 and thereafter | |
| 705 | |
Total lease payments | |
| 2,458 | |
Less: Imputed interest/present value discount | |
| (247 | ) |
Present value of lease liabilities | |
$ | 2,211 | |
6.
ADVANCES ON FUTURE RECEIPTS
The
Company has the following advances on future receipts as of March 31, 2022 and December 31, 2021:
SCHEDULE
OF ADVANCES ON FUTURE RECEIPTS
Note | |
Issuance Date | |
Maturity Date | |
Interest Rate | | |
Original Borrowing | | |
Balance at March 31, 2022 | | |
Balance at December 31, 2021 | |
| |
| |
| |
| | |
| | |
| | |
| |
Note 1 | |
October 29, 2021 | |
April 28, 2022 | |
| 5 | % | |
| 2,120 | | |
| 288 | | |
| 1,299 | |
Note 2 | |
October 29, 2021 | |
July 25, 2022 | |
| 28 | % | |
| 3,808 | | |
| 1,813 | | |
| 2,993 | |
Note 3 | |
December 23, 2021 | |
June 22, 2022 | |
| 5 | % | |
| 689 | | |
| 344 | | |
| 689 | |
Total | |
| |
| |
| | | |
$ | 6,617 | | |
| 2,445 | | |
| 4,981 | |
Debt discount | |
| |
| |
| | | |
| | | |
| (310 | ) | |
| (800 | ) |
Net | |
| |
| |
| | | |
| | | |
$ | 2,135 | | |
$ | 4,181 | |
Note
1
On
October 29, 2021, the Company received secured advances from an unaffiliated third party totaling $2,015 for the purchase of future receipts/revenues
of $2,120. During the three months ended March 31, 2022, the Company paid $982 and amortized $52 of the debt discount. As of March 31,
2022, the outstanding balance of the note amounted to $288 and the unamortized balance of the debt discount was $18, the note was paid
in full on April 28, 2022.
Note
2
On
October 29, 2021, the Company received secured advances from an unaffiliated third party totaling $2,744 for the purchase of future receipts/revenues
of $3,808. During the three months ended March 31, 2022, the Company paid $1,180 and amortized $419 of the debt discount. As of March
31, 2022, the outstanding balance of the note amounted to $1,813 and the unamortized balance of the debt discount was $275.
Note
3
On
December 23, 2021, the Company received secured advances from an unaffiliated third party totaling $651 for the purchase of future receipts/revenues
of $689. During the three months ended March 31, 2022, the Company paid $345 and amortized $19 of the debt discount. As of March 31,
2022, the outstanding balance of the note amounted to $344 and the unamortized balance of the debt discount was $17.
7.
NOTES PAYABLE
The
Company has the following outstanding notes payable as of March 31, 2022 and December 31, 2021:
SCHEDULE
OF NOTES PAYABLE RELATED PARTIES
Note | |
Issuance Date | |
Maturity Date | |
Interest Rate | | |
Original Borrowing | | |
Balance at March 31, 2022 | | |
Balance at December 31, 2021 | |
Related party note payable (A) | |
December 1, 2015 | |
April 1, 2023 | |
| 12.0 | % | |
$ | 1,249 | | |
$ | 725 | | |
$ | 725 | |
Related party note payable (B) | |
April 4, 2016 | |
June 4, 2021 | |
| 12.0 | % | |
| 343 | | |
| 40 | | |
| 40 | |
Note payable (C) | |
May 15, 2020 | |
May 15, 2050 | |
| 3.75 | % | |
| 150 | | |
| 150 | | |
| 150 | |
Notes payable (D) | |
January 12, 2022 | |
January 12, 2023 | |
| 6.0 | % | |
| 6,300 | | |
| 6,300 | | |
| - | |
Debt discount | |
| |
| |
| | | |
| | | |
| (226 | ) | |
| - | |
Debt issuance costs | |
| |
| |
| | | |
| | | |
| (347 | ) | |
| - | |
Total notes payable | |
| |
| |
| | | |
| | | |
| 6,642 | | |
| 915 | |
Non-current | |
| |
| |
| | | |
| | | |
| (875 | ) | |
| (875 | ) |
Current | |
| |
| |
| | | |
| | | |
$ | 5,767 | | |
$ | 40 | |
|
(A) |
On
December 1, 2015, the Company issued a convertible note payable to Mr. Rory J. Cutaia, the Company’s majority stockholder and
Chief Executive Officer, to consolidate all loans and advances made by Mr. Cutaia to the Company as of that date. On May 12,
2022, the maturity date of the note was extended to April 1, 2023. As of March 31, 2022, and December 31, 2021, the outstanding
balance of the note amounted to $725,
respectively. |
|
|
|
|
(B) |
On
April 4, 2016, the Company issued a convertible note payable to Mr. Cutaia, in the amount of $343, to consolidate all advances made
by Mr. Cutaia to the Company during the period December 2015 through March 2016. As of March 31, 2022 and December 31, 2021, the
outstanding balance of the note amounted to $40, respectively. |
|
(C) |
On
May 15, 2020, the Company executed an unsecured loan with the U.S. Small Business Administration
(SBA) under the Economic Injury Disaster Loan program in the amount of $150.
Installment payments, including principal and interest, will begin on October 15,
2022. As of March 31, 2022, and December 31, 2021, the outstanding balance of the note amounted
to $150,
respectively.
|
|
(D) |
On January 12, 2022, the Company entered into a securities purchase agreement with three institutional investors (collectively, the “Note Holders”) providing for the sale and issuance of an aggregate original principal amount of $6,300 in convertible notes due 2023 (each, a “Note,” and, collectively, the “Notes,” and such financing, the “Note Offering”). The Company and the Note Holders also entered into a security agreement, dated January 12, 2022, in connection with the Note Offering, pursuant to which the Company granted a security interest to the Note Holders in substantially all of its assets. There are no financial covenants related to these notes payable.
|
|
|
The
Company received $6,000
in gross proceeds from the sale of the Notes. The Note Offering closed on January 12, 2022. The Notes bear interest of 6.0%
per annum, have an original issue discount of 5.0%,
mature 12 months from the closing date, and have an initial conversion price of $3.00,
subject to adjustment in certain circumstances as set forth in the Notes.
In
connection with the debt agreement, the Company incurred $460 of debt issuance costs. The debt issuance costs and the debt discount
of $300 are being amortized over the term of the agreement using the effective interest rate method. During the three months ended
March 31, 2022, the Company amortized $74 of debt discount and $113 of debt issuance costs. As of March 31, 2022, the amount of unamortized
debt discount and debt issuance costs was $226 and $347, respectively.
As
of March 31, 2022, and December 31, 2021, the outstanding balance of the notes amounted to $6,300, and $0, respectively. Subsequent
to March 31, 2022, the Company repaid $1,650 in principal payments to Note Holders pursuant to the terms of the Note Offering, thereby
reducing the outstanding principal balance from $6,300 to $4,650. See Note 14 – Subsequent Events.
Beginning
on May 12, 2022, the Company is required to make nine monthly principal payments of $246, plus accrued interest, to the Note Holders,
with the remaining principal amount of $2,436, plus accrued interest, due on the maturity date. |
The
following table provides a breakdown of interest expense:
SCHEDULE OF INTEREST EXPENSE
| |
2022 | | |
2021 | |
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Interest expense – amortization of debt discount | |
$ | (536 | ) | |
$ | (475 | ) |
Interest expense – amortization of debt issuance costs | |
| (113 | ) | |
| - | |
Interest expense – other | |
| (107 | ) | |
| (33 | ) |
| |
| | | |
| | |
Total interest expense | |
$ | (756 | ) | |
$ | (508 | ) |
Total
interest expense for notes payable to related parties (see Notes A and B above) was $23
and $32
for the three months ended March 31, 2022
and 2021, respectively. The Company paid $0
and $34
in interest for the three months ended March
31, 2022 and 2021, respectively.
8.
DERIVATIVE LIABILITY
Under
authoritative guidance used by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own
stock, instruments that do not have fixed settlement provisions are deemed to be derivative instruments. In prior years, the Company
granted certain warrants that included a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant
holder. As a result, the fundamental transaction clause of these warrants are accounted for as a derivative liability in accordance with
ASC 815 and are being re-measured every reporting period with the change in value reported in the statement of operations.
The
derivative liabilities were valued using a Binomial pricing model with the following average assumptions:
SCHEDULE OF DERIVATIVE LIABILITY USING BINOMIAL PRICING MODEL ASSUMPTIONS
| |
March 31, 2022 | | |
December 31, 2021 | |
Stock Price | |
$ | 0.95 | | |
$ | 1.24 | |
Exercise Price | |
$ | 1.11 | | |
$ | 1.11 | |
Expected Life | |
| 2.72 | | |
| 2.97 | |
Volatility | |
| 104 | % | |
| 119 | % |
Dividend Yield | |
| 0 | % | |
| 0 | % |
Risk-Free Interest Rate | |
| 2.45 | % | |
| 0.97 | % |
Total Fair Value | |
$ | 2,017 | | |
$ | 3,155 | |
The
expected life of the warrants was based on the remaining contractual term of the instruments. The Company uses the historical volatility
of its common stock to estimate the future volatility for its common stock. The expected dividend yield was based on the fact that the
Company has not paid dividends in the past and does not expect to pay dividends in the future. The risk-free interest rate was based
on rates established by the Federal Reserve Bank.
As
of December 31, 2021, the outstanding fair value of the derivative liability amounted to $3,155. During the three months ended March
31, 2022, the Company recorded income of $1,138 to account for the changes in the fair value of these derivative liabilities during the
period. At March 31, 2022, the fair value of the derivative liability amounted to $2,017.
During
the three months ended March 31, 2021, the Company recorded income of $500
to account for the changes in the fair value
of these derivative liabilities during the period. In addition, 1,027,578
shares of the Series A warrants that were accounted
for as a derivative liability were exercised. As result, the Company computed the fair value of the corresponding derivative liability
one last time which amounted to $(2,286)
and the extinguishment was accounted for as part
of equity.
The
details of derivative liability transactions for the three months ended March 31, 2022 and 2021 are as follows:
SCHEDULE OF DERIVATIVE LIABILITY TRANSACTIONS
| |
Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
Beginning balance | |
$ | 3,155 | | |
$ | 8,266 | |
Change in fair value | |
| (1,138 | ) | |
| (500 | ) |
Extinguishment | |
| - | | |
| (2,286 | ) |
Ending balance | |
$ | 2,017 | | |
$ | 5,480 | |
9.
COMMON STOCK
The
Company’s common stock activity for the three months ended March 31, 2022 is as follows:
Common
Stock
Issuances
of Common Stock
During
the three months ended March 31, 2022, the Company issued 7,396,683
shares of common stock as part of the common
stock purchase agreement in exchange for cash of $7,435,
net of offering costs of $155.
In addition, the Company issued 607,287
shares of common stock as a commitment fee to
consummate the common stock purchase agreement.
During
the three months ended March 31, 2022, the Company issued 372,446
shares of common stock to certain employees and
vendors for services rendered and to be rendered with an aggregate fair value of $510.
These shares of common stock were valued based on
the market value of the Company’s common stock price at the issuance date or the date the Company entered into the agreement related
to the issuance.
During
the three months ended March 31, 2022, the Company issued 227,136 shares of common stock to the former Chief Financial Officer as part
of a separation agreement, with an aggregate fair value of $277. These shares of common stock were valued based on the market value of
the Company’s common stock price at the issuance date.
During
the three months ended March 31, 2022, the Company issued 457,046 shares of common stock to officers and board members associated with
the vesting of a Restricted Stock Unit.
Exercise
of Options
During
the three months ended March 31, 2022, a total of 332,730 options were exercised into 332,730 shares of common stock at a weighted average
exercise price of $1.13. The Company received cash of $377 upon exercise of the options.
Issuances
of Restricted Stock Units
During
the three months ended March 31, 2022, the Company granted an additional 1,334,270 shares of its restricted stock to employees and members
of Board of Directors. The Restricted Stock Units vest in various dates, starting on January 20, 2023 up to March 30, 2026. These Restricted
Stock Units were valued based on market value of the Company’s stock price at the respective date of grant and had aggregate fair
value of $1,561, which is being amortized as stock compensation expense over its vesting term.
Issuances
of Stock Options
During
the three months ended March 31, 2022, the Company granted stock options to employees and consultants to purchase a total of 1,983,555
stock options for services to be rendered. The options have an average exercise price of $1.25 per share, expire in five years, and vest
between one and four years from grant date. The total fair value of these options at the grant date was $2,241 using the Black-Scholes
option pricing model.
10.
RESTRICTED STOCK UNITS
A
summary of restricted stock unit activity for the three months ended March 31, 2022 is presented below.
SUMMARY
OF RESTRICTED STOCK AWARD ACTIVITY
| |
| | |
Weighted- | |
| |
| | |
Average | |
| |
| | |
Grant Date | |
| |
Shares | | |
Fair Value | |
| |
| | |
| |
Non-vested at January 1, 2022 | |
| 1,821,833 | | |
$ | 1.41 | |
Granted | |
| 1,334,270 | | |
| 1.17 | |
Vested/deemed vested | |
| (457,046 | ) | |
| 1.67 | |
Forfeited | |
| (487,532 | ) | |
| 1.33 | |
Non-vested at March 31, 2022 | |
| 2,211,525 | | |
$ | 1.23 | |
During
the three months ended March 31, 2022, the Company granted 1,334,270 restricted stock units to officers, directors, and employees that
vest over four years. These restricted stock units were valued based on market value of the Company’s stock price at the date of
grants and had an aggregate fair value of $1,561.
The
total fair value of restricted stock units that vested or deemed vested during the three months ended March 31, 2022 was $247.
As of March 31, 2022 the amount of unvested compensation related to issuances of restricted stock units was $2,359
which will be recognized as an expense in future
periods as the shares vest. When calculating basic net loss per share, these shares are included in weighted average common shares outstanding
from the time they vest. When calculating diluted net loss per share, these shares are included in weighted average common shares outstanding
as of their grant date.
11.
STOCK OPTIONS
A
summary of option activity for the three months ended March 31, 2022 is presented below.
SCHEDULE OF STOCK OPTION ACTIVITY
| |
| | |
| | |
Weighted- | | |
| |
| |
| | |
Weighted- | | |
Average | | |
| |
| |
| | |
Average | | |
Remaining | | |
Aggregate | |
| |
| | |
Exercise | | |
Contractual | | |
Intrinsic | |
| |
Options | | |
Price | | |
Life (Years) | | |
Value | |
| |
| | |
| | |
| | |
| |
Outstanding at January 1, 2022 | |
| 5,404,223 | | |
$ | 1.72 | | |
| 2.24 | | |
$ | 107 | |
Granted | |
| 1,983,555 | | |
| 1.25 | | |
| - | | |
| - | |
Forfeited | |
| (1,177,405 | ) | |
| 1.54 | | |
| - | | |
| - | |
Exercised | |
| (332,730 | ) | |
| 1.13 | | |
| - | | |
| - | |
Outstanding at March 31, 2022 | |
| 5,877,643 | | |
$ | 1.64 | | |
| 2.29 | | |
| $ | |
| |
| | | |
| | | |
| | | |
| | |
Vested March 31, 2022 | |
| 2,993,429 | | |
$ | 1.86 | | |
| | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Exercisable at March 31, 2022 | |
| 1,982,249 | | |
$ | 2.08 | | |
| | | |
$ | - | |
At
March 31, 2022, the intrinsic value of the outstanding options was $0.
During
the three months ended March 31, 2022, the Company granted stock options to employees and consultants to purchase a total of 1,983,555
shares of common stock for services rendered. The options have an average exercise price of $1.25 per share, expire between one and five
years, vesting from zero and four years from grant date. The total fair value of these options at grant date was approximately $2,241
using the Black-Scholes Option Pricing model. The total stock compensation expense recognized relating to the vesting of stock options
for the three months ended March 31, 2022 amounted to $531. As of March 31, 2022, the total unrecognized share-based compensation expense
was $4,276, which is expected to be recognized as part of operating expense through March 2026.
In
addition, a total of 332,730 shares of stock options were exercised. As a result of the exercise of the option, the Company issued 332,730
shares of common stock and received cash of $377.
The
fair value of share option award is estimated using the Black-Scholes option pricing method based on the following weighted-average assumptions:
SCHEDULE
OF FAIR VALUE ASSUMPTIONS USING BLACK-SCHOLES METHOD
| |
Three
Months Ended March 31, | |
| |
2022 | | |
2021 | |
Risk-free
interest rate | |
| 1.24%
- 2.10 | % | |
| 0.10%
- 0.36 | % |
Average
expected term | |
| 5
years | | |
| 5
years | |
Expected
volatility | |
| 149.53 | % | |
| 240.03 | % |
Expected
dividend yield | |
| - | | |
| - | |
The
risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected
term of the share option award; the expected term represents the weighted-average period of time that share option awards granted are
expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility
is based upon historical volatility of the Company’s common stock; and the expected dividend yield is based on the fact that the
Company has not paid dividends in the past and does not expect to pay dividends in the future.
12. STOCK WARRANTS
The
Company has the following warrants outstanding as of March 31, 2022, all of which are exercisable:
SCHEDULE OF WARRANTS OUTSTANDING
| |
Warrants | | |
Weighted- Average Exercise
Price | | |
Weighted- Average Remaining
Contractual Life (Years) | | |
Aggregate Intrinsic Value | |
| |
| | |
| | |
| | |
| |
Outstanding at January 1, 2022 | |
| 10,984,740 | | |
$ | 2.67 | | |
| 2.38 | | |
$ | 507 | |
Granted | |
| - | | |
| - | | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | | |
| - | |
Outstanding at March 31, 2022, all vested | |
| 10,984,740 | | |
$ | 2.67 | | |
| 2.14 | | |
$ | - | |
At
March 31, 2022 the intrinsic value of the outstanding warrants was $0.
13. COMMITMENTS AND CONTINGENCIES
Litigation
The
Company is currently in a dispute with a former employee of its predecessor bBooth, Inc. who has interposed a breach of contract claim
in which he alleges that he is entitled to approximately $300 in unpaid bonus compensation from 2015. This former employee filed his
complaint in the Superior Court of California for the County of Los Angeles on November 20, 2019, styled Meyerson v. Verb Technology
Company, Inc., et al. (Case No. 19STCV41816). The Company does not believe his claims have any merit as they are contradicted by
documentary evidence, and barred by the applicable statute of limitations, and barred by a release executed by the former employee when
the Company purchased all of his shares of stock more than 4 years ago in January 2016. On February 9, 2021, the former employee’s
counsel filed a motion for summary judgment, or in the alternative, summary adjudication against the Company. On October 13, 2021, the
court issued an order (i) denying the former employee’s motion for summary judgment, (ii) partly granting the former employee’s
motion for summary adjudication, and (iii) partly denying the former employee’s motion for summary adjudication. The court has
set a trial date of June 27, 2022. The Company believes that the resolution of this matter will have no material effect on the Company
or its operations.
|
b. |
Legal
Malpractice Action |
The
Company is currently in a dispute with Baker Hostetler LLP (“BH”) relating to corporate legal services provided by BH to
the Company. The Company filed its complaint in the Superior Court of California for the County of Los Angeles on May 17, 2021, styled
Verb Technology Company, Inc. v. Baker Hostetler LLP, et al. (Case No. 21STCV18387). The Company’s complaint arises from
BH’s alleged legal malpractice, breach of fiduciary duties owed to the Company, breach of contract, and violations of California’s
Business and Professions Code Section 17200 et seq. The Company is seeking, amongst other things, compensatory damages from BH. On October
5, 2021, BH filed a cross-complaint against the Company alleging, amongst other things, that the Company owes it approximately $915 in
legal fees. The Company disputes owing this amount to BH. The Company believes that the resolution of these matters will have no material
effect on the Company or its operations.
The
Company knows of no material proceedings in which any of its directors, officers, or affiliates, or any registered or beneficial stockholder
is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.
The
Company believes it has adequately reserved for all litigation within its financial statements.
Board
of Directors
The
Company has committed an aggregate of $475 in board fees to its five board members over the term of their appointment for services to
be rendered. Board fees are accrued and paid monthly. The members will serve on the board until the annual meeting for the year in which
their term expires or until their successors has been elected and qualified.
Total
board fees expensed during the three months ended March 31, 2022 was $119. As of March 31, 2022, total board fees to be recognized in
future period amounted to $356 and will be recognized once the service has been rendered.
14. SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through May 16, 2022, the date these financial statements are available to be issued.
The Company believes there were no material events or transactions discovered during this evaluation that requires recognition or disclosure
in the financial statements other than the items discussed below.
Equity
Financing and Repayment of Notes
On
April 20, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”), which provides for the
sale and issuance by the Company of an aggregate of (i) 14,666,667 shares of the Company’s common stock, $0.0001 par value per
share, at a purchase price of $0.75 per share, and (ii) warrants to purchase 14,666,667 shares of the common stock at an exercise price
of $0.75 per share, for aggregate gross proceeds of $11,000 before deducting placement agent commissions and other estimated offering
expenses (the “Registered Direct Offering”). The Purchase Agreement contains customary representations, warranties and agreements
by the Company, customary conditions to closing, and customary indemnification obligations of the Company. The Purchase Agreement amongst
other things restricts us from selling shares using at the market (“ATM”) agreement with Truist Securities and the Common
Stock Purchase Agreement. As a result of this transaction, certain of our Series A warrants priced at $1.10 per share were repriced to
$0.75 per share under the terms of such warrant agreements. The fair value of such warrants at this new exercise price is approximately
$500 and the Company will account for this change as a deemed dividend. In addition, as a result of entering into the Purchase Agreement,
the Company repaid $1,650 in principal payments to Note Holders pursuant to the terms of the Note Offering, thereby reducing the outstanding
principal balance from $6,300 to $4,650.
On
April 20, 2022, the Company also entered into a placement agency agreement with A.G.P./Alliance Global Partners. Pursuant to the terms
of the Placement Agency Agreement, the Placement Agent agreed to use its reasonable best efforts to arrange for the sale of the Securities
in the Registered Direct Offering. The Company paid the Placement Agent a cash fee equal to 6.0% of the aggregate gross proceeds from
the sale of the Securities.
Issuance
of Common Stock
Subsequent
to March 31, 2022, the Company issued 656,996 shares of common stock to vendors for services rendered with a fair value of $486. These
shares of common stock were valued based on the market value of the Company’s stock price at the issuance date or the date the
Company entered into the agreement related to the issuance.
Issuances
of Stock Options
Subsequent
to March 31, 2022, the Company granted stock options to employees to purchase a total of 419,000
stock options for services to be rendered. The options have an average exercise price of $0.67
per share, expire in five years, and vest four years from grant date. The total fair value of these options at the grant date
was $224 using the Black-Scholes option pricing model.
Execution
of Lease Agreement
Subsequent
to March 31, 2022, the Company entered into a corporate office sub-lease agreement for its office in Utah. The agreement requires us
to pay $12 per month for an initial term of eighteen months, which increases by 3% per annum after twelve months.