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UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended
September 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
transition period from ________ to ________
Commission file number:
001-38834
Verb Technology Company, Inc.
(Exact name
of registrant as specified in its charter)
|
Nevada |
|
90-1118043 |
|
(State or
other jurisdiction of
incorporation or
organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
|
782 S. Auto Mall Drive
American Fork,
Utah
|
|
84003
|
|
(Address of
principal executive offices) |
|
(Zip
Code) |
(855)
250-2300
(Registrant’s telephone
number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
Securities
registered pursuant to Section 12(b) of the Act:
|
Title of
each class |
|
Trading
Symbol(s) |
|
Name of each
exchange on which registered |
|
Common Stock, $0.0001 par value
Common Stock Purchase
Warrants
|
|
VERB
VERBW
|
|
The
Nasdaq Stock Market LLC
The
Nasdaq Stock Market
LLC
|
Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate by
check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes ☒ No ☐
Indicate by
check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Yes ☒ No ☐
Indicate by
check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act
|
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
| |
|
|
|
|
Non-accelerated filer |
☒ |
Smaller reporting
company |
☒ |
| |
|
|
|
|
|
Emerging growth
company |
☐ |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by
check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). ☐ Yes ☒
No
As of
November 10, 2021, there were
70,470,415 shares of common stock,
$0.0001 par value per share, outstanding.
VERB
TECHNOLOGY COMPANY, INC.
TABLE OF
CONTENTS
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This
Quarterly Report on Form 10-Q for the three and nine months ended
September 30, 2021 (this “Quarterly Report”), includes
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), which statements are subject to considerable risks
and uncertainties. These forward-looking statements are intended to
qualify for the safe harbor from liability established by the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements include all statements that are not statements of
historical facts and can be identified by words such as
“anticipates,” “believes,” “could,” “estimates,” “expects,”
“intends,” “may,” “plans,” “potential,” “predicts,” “projects,”
“seeks,” “should,” “will,” “would” or similar expressions and the
negatives of those expressions. Forward-looking statements also
include the assumptions underlying or relating to such
statements.
Our
forward-looking statements are based on our management’s current
beliefs, assumptions and expectations about future events and
trends, which affect or may affect our business, strategy,
operations, financial performance or liquidity. Although we believe
these forward-looking statements are based upon reasonable
assumptions, they are subject to numerous known and unknown risks
and uncertainties and are made in light of information currently
available to us. Some of the risks and uncertainties that may
impact our forward-looking statements include, but are not limited
to, the following factors:
● our
incursion of significant net losses and uncertainty whether we will
achieve or maintain profitable operations;
● our
ability to continue as a “going concern”;
● our ability to grow and compete in the future, which is dependent
upon whether capital is available to us on favorable terms;
● our
ability to maintain and expand our customer base and our ability to
convince our customers to increase the use of our services and/or
platform;
● the
competitive market in which we operate;
● our
ability to increase the number of our strategic relationships or
grow the revenues received from our current strategic
relationships;
● our
ability to develop enhancements and new features to our existing
service or acceptable new services that keep pace with
technological developments;
● the novel
coronavirus (“COVID-19”) pandemic, which has had a sustained impact
on our business, sales, results of operations and financial
condition;
● our
ability to deliver our services, as we depend on third party
Internet providers; and
● our
susceptibility to security breaches and other
disruptions.
The
foregoing list may not include all of the risk factors that impact
the forward-looking statements made in this Quarterly Report. Our
actual financial condition and results could differ materially from
those expressed or implied by our forward-looking statements as a
result of various additional factors, including those discussed in
the sections entitled “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and “Risk
Factors” in this Quarterly Report and in our Annual Report on
Form 10-K for the year ended December 31, 2020 (our “Annual
Report”), as well as in the other reports we file with the
Securities and Exchange Commission (the “SEC”). You should read
this Quarterly Report, and the other documents we file with the
SEC, with the understanding that our actual future results may be
materially different from the results expressed or implied by our
forward-looking statements.
We operate
in an evolving environment. New risks and uncertainties emerge from
time to time and it is not possible for our management to predict
all risks and uncertainties, nor can we assess the impact of all
factors on our business or the extent to which any factor, or
combination of factors, may cause actual future results to be
materially different from those expressed or implied by any
forward-looking statements.
Forward-looking
statements speak only as of the date they were made, and, except to
the extent required by law or the rules of the Nasdaq Capital
Market, we undertake no obligation to update or review any
forward-looking statement because of new information, future events
or other factors.
We qualify
all of our forward-looking statements by these cautionary
statements.
PART I — FINANCIAL
INFORMATION
ITEM 1 – FINANCIAL
STATEMENTS
VERB
TECHNOLOGY COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
| |
|
September 30, 2021 |
|
|
December 31, 2020 |
|
| |
|
(unaudited) |
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current
assets: |
|
|
|
|
|
|
|
|
| Cash |
|
$ |
3,658,000 |
|
|
$ |
1,815,000 |
|
| Accounts
receivable, net of allowance of $512,000
and $361,000,
respectively |
|
|
1,488,000 |
|
|
|
919,000 |
|
| Inventory, net of
allowance of $51,000 and $51,000, respectively |
|
|
5,000 |
|
|
|
34,000 |
|
|
Prepaid expenses and other current assets |
|
|
905,000 |
|
|
|
900,000 |
|
| Total current assets |
|
|
6,056,000 |
|
|
|
3,668,000 |
|
| |
|
|
|
|
|
|
|
|
| Right-of-use
assets |
|
|
2,305,000 |
|
|
|
2,730,000 |
|
| Property and
equipment, net of accumulated depreciation of $462,000
and $339,000,
respectively |
|
|
3,078,000 |
|
|
|
862,000 |
|
| Intangible assets,
net of amortization of $3,390,000
and $2,310,000,
respectively |
|
|
4,370,000 |
|
|
|
5,153,000 |
|
| Goodwill |
|
|
19,763,000 |
|
|
|
20,060,000 |
|
| Other
assets |
|
|
317,000 |
|
|
|
69,000 |
|
| |
|
|
|
|
|
|
|
|
| Total
assets |
|
$ |
35,889,000 |
|
|
$ |
32,542,000 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current
liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable
and accrued expenses |
|
$ |
7,282,000 |
|
|
$ |
5,097,000 |
|
| Accrued officers’
salary |
|
|
1,113,000 |
|
|
|
822,000 |
|
| Accrued interest
(including $0 and $102,000 payable to
related parties) |
|
|
8,000 |
|
|
|
114,000 |
|
| Advance on future
receipts, net of discount of $515,000 and
$67,000,
respectively |
|
|
1,853,000 |
|
|
|
110,000 |
|
| Notes payable -
related party |
|
|
40,000 |
|
|
|
1,077,000 |
|
| Deferred incentive
compensation, current |
|
|
521,000 |
|
|
|
521,000 |
|
| Operating lease
liability, current |
|
|
582,000 |
|
|
|
596,000 |
|
| Deferred revenue
and customer deposits |
|
|
902,000 |
|
|
|
272,000 |
|
|
Derivative liability |
|
|
5,839,000 |
|
|
|
8,266,000 |
|
| |
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
18,140,000 |
|
|
|
16,875,000 |
|
| |
|
|
|
|
|
|
|
|
| Long Term
liabilities: |
|
|
|
|
|
|
|
|
| Notes payable |
|
|
150,000 |
|
|
|
1,458,000 |
|
| Note payable -
related party, non-current |
|
|
725,000 |
|
|
|
- |
|
| Deferred incentive
compensation to officers |
|
|
- |
|
|
|
521,000 |
|
|
Operating lease liability, non-current |
|
|
2,464,000 |
|
|
|
2,943,000 |
|
| Total
liabilities |
|
|
21,479,000 |
|
|
|
21,797,000 |
|
| |
|
|
|
|
|
|
|
|
| Commitments and contingencies |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
| Stockholders’
equity |
|
|
|
|
|
|
|
|
Preferred stock,
$0.0001 par value,
15,000,000
shares authorized:
Series A Convertible Preferred Stock, 6,000
shares authorized; 0 and
2,006
issued and outstanding as of September 30, 2021 and December 31,
2020 |
|
|
- |
|
|
|
- |
|
| Class A units, 100
issued and authorized as of September 30, 2021 and December 31,
2020 |
|
|
- |
|
|
|
- |
|
| Class B units,
2,642,159
shares authorized, 0 and
2,642,159
issued and outstanding as of September 30, 2021 and December 31,
2020 |
|
|
- |
|
|
|
3,065,000 |
|
| Common stock, $0.0001 par value,
200,000,000
shares authorized, 70,169,666
and 47,795,009
shares issued and outstanding as of September 30, 2021 and December
31, 2020 |
|
|
7,000 |
|
|
|
5,000 |
|
| Additional paid-in capital |
|
|
124,906,000 |
|
|
|
89,216,000 |
|
| Accumulated
deficit |
|
|
(110,503,000 |
) |
|
|
(81,541,000 |
) |
| |
|
|
|
|
|
|
|
|
| Total
stockholders’ equity |
|
|
14,410,000 |
|
|
|
10,745,000 |
|
| |
|
|
|
|
|
|
|
|
| Total
liabilities and stockholders’ equity |
|
$ |
35,889,000 |
|
|
$ |
32,542,000 |
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements
VERB
TECHNOLOGY COMPANY, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
The
accompanying notes are an integral part of these condensed
consolidated financial statements
VERB
TECHNOLOGY COMPANY, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR
THE
THREE
MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND
2020
(Unaudited)
The
accompanying notes are an integral part of these condensed
consolidated financial statements
| |
|
Preferred Stock |
|
|
Class A Units |
|
|
Class B Units |
|
|
Common Stock |
|
|
Additional Paid-in |
|
|
Accumulated |
|
|
|
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
| Balance at June 30, 2021 |
|
|
1,706 |
|
|
$ |
- |
|
|
|
100 |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
63,795,968 |
|
|
$ |
6,000 |
|
|
$ |
115,179,000 |
|
|
$ |
(101,698,000 |
) |
|
$ |
13,487,000 |
|
| Sale of
common stock from public offering |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,540,000 |
|
|
|
1,000 |
|
|
|
4,721,000 |
|
|
|
- |
|
|
|
4,722,000 |
|
| Issuance of common stock from warrant
exercise |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,217,811 |
|
|
|
- |
|
|
|
1,681,000 |
|
|
|
- |
|
|
|
1,681,000 |
|
| Conversion of Series A Preferred to common
stock |
|
|
(1,706 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,706,000 |
|
|
|
- |
|
|
|
348,000 |
|
|
|
- |
|
|
|
348,000 |
|
| Fair
value of warrants issued to Series A preferred stockholders –
deemed dividend |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(348,000 |
) |
|
|
- |
|
|
|
(348,000 |
) |
| Fair
value of common shares issued for services |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
81,143 |
|
|
|
- |
|
|
|
157,000 |
|
|
|
- |
|
|
|
157,000 |
|
| Fair
value of common shares issued to settle accounts
payable |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,500 |
|
|
|
- |
|
|
|
19,000 |
|
|
|
- |
|
|
|
19,000 |
|
| Fair
value of vested restricted stock awards |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
641,509 |
|
|
|
- |
|
|
|
380,000 |
|
|
|
- |
|
|
|
380,000 |
|
| Fair
value of vested stock options and warrants |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
364,000 |
|
|
|
- |
|
|
|
364,000 |
|
| Extinguishment of derivative liability upon
exercise of warrants |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,213,000 |
|
|
|
- |
|
|
|
2,213,000 |
|
| Issuance of common stock from option
exercise |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
176,735 |
|
|
|
- |
|
|
|
192,000 |
|
|
|
- |
|
|
|
192,000 |
|
| Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(8,805,000 |
) |
|
|
(8,805,000 |
) |
| Balance at September 30, 2021 |
|
|
- |
|
|
$ |
- |
|
|
|
100 |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
70,169,666 |
|
|
$ |
7,000 |
|
|
$ |
124,906,000 |
|
|
$ |
(110,503,000 |
) |
|
$ |
14,410,000 |
|
| |
|
Preferred Stock |
|
|
Class A Units |
|
|
Class B Units |
|
|
Common Stock |
|
|
|
|
|
Additional Paid-in |
|
|
Accumulated |
|
|
|
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
| Balance at December 31, 2019 |
|
|
4,396 |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
24,496,197 |
|
|
$ |
2,000 |
|
|
$ |
68,028,000 |
|
|
$ |
(56,585,000 |
) |
|
$ |
11,445,000 |
|
| Sale of
common stock from private placement |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,237,833 |
|
|
|
1,000 |
|
|
|
4,443,000 |
|
|
|
- |
|
|
|
4,444,000 |
|
| Sale of
common stock from public offering |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12,545,453 |
|
|
|
2,000 |
|
|
|
12,335,000 |
|
|
|
- |
|
|
|
12,337,000 |
|
| Issuance of common stock from warrant
exercise |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,965,594 |
|
|
|
- |
|
|
|
2,165,000 |
|
|
|
- |
|
|
|
2,165,000 |
|
| Fair
value of warrants issued to Series A Preferred
stockholders |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,951,000 |
) |
|
|
- |
|
|
|
(3,951,000 |
) |
| Conversion of Series A Preferred to common
stock |
|
|
(1,990 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,405,274 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Fair
value of common shares issued for services |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
962,583 |
|
|
|
- |
|
|
|
1,126,000 |
|
|
|
- |
|
|
|
1,126,000 |
|
| Fair
value of vested restricted stock awards |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,050,856 |
|
|
|
- |
|
|
|
2,211,000 |
|
|
|
- |
|
|
|
2,211,000 |
|
| Fair
value of vested stock options and warrants |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,463,000 |
|
|
|
- |
|
|
|
1,463,000 |
|
| Extinguishment of derivative
liability |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
159,000 |
|
|
|
- |
|
|
|
159,000 |
|
| Class A
units issued upon incorporation of Verb Acquisition Co. |
|
|
- |
|
|
|
- |
|
|
|
100 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Fair
value of Class B units issued for the acquisition of Ascend
Certification |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,642,159 |
|
|
|
3,065,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,065,000 |
|
| Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(12,690,000 |
) |
|
|
(12,690,000 |
) |
| Balance at September 30, 2020 |
|
|
2,406 |
|
|
$ |
- |
|
|
|
100 |
|
|
$ |
- |
|
|
|
2,642,159 |
|
|
$ |
3,065,000 |
|
|
|
46,663,790 |
|
|
$ |
5,000 |
|
|
$ |
87,979,000 |
|
|
$ |
(69,275,000 |
) |
|
$ |
21,774,000 |
|
|
|
|
Preferred
Stock |
|
|
Class A
Units |
|
|
Class B
Units |
|
|
Common
Stock |
|
|
Additional
Paid-in |
|
|
Accumulated |
|
|
|
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
|
Balance
at June 30, 2020 |
|
|
3,246 |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
30,267,063 |
|
|
$ |
3,000 |
|
|
$ |
71,399,000 |
|
|
$ |
(61,955,000 |
) |
|
$ |
9,447,000 |
|
| Sale of common stock
from public offering |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12,545,453 |
|
|
|
2,000 |
|
|
|
12,335,000 |
|
|
|
- |
|
|
|
12,337,000 |
|
| Issuance of common
stock from warrant exercise |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,965,594 |
|
|
|
|
|
|
|
2,165,000 |
|
|
|
|
|
|
|
2,165,000 |
|
| Conversion of Series A
Preferred to common stock |
|
|
(840 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
663,341 |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Fair value of common
shares issued for services |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
193,533 |
|
|
|
- |
|
|
|
230,000 |
|
|
|
- |
|
|
|
230,000 |
|
| Fair value of vested
restricted stock awards |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,028,806 |
|
|
|
- |
|
|
|
1,002,000 |
|
|
|
- |
|
|
|
1,002,000 |
|
| Fair value of vested
stock options and warrants |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
689,000 |
|
|
|
- |
|
|
|
689,000 |
|
| Extinguishment of
derivative liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
159,000 |
|
|
|
|
|
|
|
159,000 |
|
| Class A units issued
upon incorporation of Verb Acquisition Co. |
|
|
- |
|
|
|
- |
|
|
|
100 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
- |
|
| Fair value of Class B
Units issued for the acquisition of Ascend
Certification |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,642,159 |
|
|
|
3,065,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,065,000 |
|
| Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(7,320,000 |
) |
|
|
(7,320,000 |
) |
| Balance at September
30, 2020 |
|
|
2,406 |
|
|
$ |
- |
|
|
|
100 |
|
|
$ |
- |
|
|
|
2,642,159 |
|
|
$ |
3,065,000 |
|
|
|
46,663,790 |
|
|
$ |
5,000 |
|
|
$ |
87,979,000 |
|
|
$ |
(69,275,000 |
) |
|
$ |
21,774,000 |
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements
VERB
TECHNOLOGY COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
| |
|
|
2021 |
|
|
|
2020 |
|
| |
|
Nine Months Ended |
|
| |
|
September 30, 2021 |
|
|
September 30, 2020 |
|
| |
|
|
|
|
|
|
| Operating
Activities: |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(28,962,000 |
) |
|
$ |
(12,690,000 |
) |
| Adjustments to
reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Fair value of
common shares issued for services and vested stock options and
warrants |
|
|
4,652,000 |
|
|
|
4,796,000 |
|
| Financing
cost |
|
|
- |
|
|
|
248,000 |
|
| Amortization of
debt discount |
|
|
1,537,000 |
|
|
|
384,000 |
|
| Change in fair
value of derivative liability |
|
|
2,086,000 |
|
|
|
(4,295,000 |
) |
| Debt
extinguishment costs, net |
|
|
(1,112,000 |
) |
|
|
- |
|
| Depreciation and
amortization |
|
|
1,214,000 |
|
|
|
1,108,000 |
|
| Amortization of
right-of-use assets |
|
|
424,000 |
|
|
|
407,000 |
|
| Allowance for
inventory |
|
|
- |
|
|
|
28,000 |
|
| Disposal of
property and equipment |
|
|
(6,000 |
) |
|
|
- |
|
| Allowance for
doubtful accounts |
|
|
151,000 |
|
|
|
(14,000 |
) |
| Effect of changes
in assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts
receivable |
|
|
(721,000 |
) |
|
|
152,000 |
|
| Prepaid expenses
and other assets |
|
|
(330,000 |
) |
|
|
(175,000 |
) |
| Inventory |
|
|
29,000 |
|
|
|
63,000 |
|
| Deferred incentive
compensation |
|
|
(521,000 |
) |
|
|
- |
|
| Accounts payable,
accrued expenses, and accrued interest |
|
|
3,198,000 |
|
|
|
646,000 |
|
| Operating lease
liability |
|
|
(493,000 |
) |
|
|
(286,000 |
) |
|
Deferred revenue and customer deposits |
|
|
631,000 |
|
|
|
(162,000 |
) |
| Net cash used
in operating activities |
|
|
(18,223,000 |
) |
|
|
(9,790,000 |
) |
| |
|
|
|
|
|
|
|
|
| Investing
Activities: |
|
|
|
|
|
|
|
|
| Proceeds from the
sale of property and equipment |
|
|
11,000 |
|
|
|
- |
|
| Cash acquired upon
acquisition of subsidiary |
|
|
- |
|
|
|
229,000 |
|
| Capitalized
software development costs |
|
|
(2,329,000 |
) |
|
|
- |
|
|
Purchase of property and equipment |
|
|
(26,000 |
) |
|
|
(317,000 |
) |
| Net cash used
in investing activities |
|
|
(2,344,000 |
) |
|
|
(88,000 |
) |
| |
|
|
|
|
|
|
|
|
| Financing
Activities: |
|
|
|
|
|
|
|
|
| Proceeds from sale
of common stock |
|
|
18,851,000 |
|
|
|
16,781,000 |
|
| Proceeds from
notes payable |
|
|
- |
|
|
|
1,367,000 |
|
| Advances on future
receipts |
|
|
7,368,000 |
|
|
|
728,000 |
|
| Proceeds from
warrant exercise |
|
|
2,784,000 |
|
|
|
2,165,000 |
|
| Proceeds from
option exercise |
|
|
569,000 |
|
|
|
- |
|
|
Payment of advances of future receipts |
|
|
(7,162,000 |
) |
|
|
(1,424,000 |
) |
| |
|
|
|
|
|
|
|
|
| Net change in cash |
|
|
1,843,000 |
|
|
|
9,739,000 |
|
| |
|
|
|
|
|
|
|
|
| Cash - beginning of period |
|
|
1,815,000 |
|
|
|
983,000 |
|
| |
|
|
|
|
|
|
|
|
| Cash - end of period |
|
$ |
3,658,000 |
|
|
$ |
10,722,000 |
|
| |
|
|
|
|
|
|
|
|
| Supplemental
disclosures of cash flow information: |
|
|
|
|
|
|
|
|
| Cash paid for
interest |
|
$ |
112,000 |
|
|
$ |
100,000 |
|
| Cash paid for
income taxes |
|
|
1,000 |
|
|
|
- |
|
| Supplemental
disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
| Issuance of note
payable upon acquisition of subsidiary |
|
$ |
- |
|
|
$ |
1,885,000 |
|
| Fair value of
common stock issued for subscription agreement |
|
|
- |
|
|
|
340,000 |
|
| Fair value of
restricted awards returned |
|
|
- |
|
|
|
485,000 |
|
| Fair value of
derivative liability extinguished |
|
|
4,513,000 |
|
|
|
- |
|
| Fair value of
class B units issued upon acquisition of subsidiary |
|
|
- |
|
|
|
3,065,000 |
|
| Fair value of
common shares issued to settle accounts payable |
|
|
19,000 |
|
|
|
- |
|
| Fair value of
common shares issued to settle accrued expenses |
|
|
281,000 |
|
|
|
- |
|
| Reclassification
of Class B upon conversion to common stock |
|
|
3,065,000 |
|
|
|
- |
|
| Fair value of
common stock issued to settle notes payable – related party |
|
|
200,000 |
|
|
|
- |
|
| Fair value of
common stock received in exchange for employee’s payroll taxes |
|
|
130,000 |
|
|
|
- |
|
| Fair value of
common stock issued for future services |
|
|
164,000 |
|
|
|
- |
|
| Discount
recognized from advances on future receipts |
|
|
2,484,000 |
|
|
|
- |
|
| Fair value of
derivative liability from issuance of warrants to Series A
stockholders considered as a deemed dividend |
|
|
- |
|
|
|
3,951,000 |
|
| Fair value of debt forgiveness |
|
|
1,400,000 |
|
|
|
- |
|
| Assets acquired
from the acquisition of subsidiary |
|
|
- |
|
|
|
449,000 |
|
| Liabilities
assumed from the acquisition of subsidiary |
|
|
- |
|
|
|
743,000 |
|
| Fair value of
warrants issued to Series A preferred stockholders - deemed
dividend |
|
|
348,000 |
|
|
|
-
|
|
| Fair value of
common stock issued to settle lawsuit |
|
$ |
678,000 |
|
|
$ |
- |
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements
VERB
TECHNOLOGY COMPANY, INC.
Notes to Condensed Consolidated
Financial Statements
For the
three and nine months ended September 30, 2021 and
2020
(Unaudited)
1.
DESCRIPTION OF
BUSINESS
Organization
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.
Cutaia Media
Group, LLC (“CMG”) was organized as a limited liability company
under the laws of the State of Nevada on December 12, 2012. On May
19, 2014, CMG merged into bBooth, Inc. and bBooth, Inc.,
thereafter, changed its name to bBooth (USA), Inc., effective as of
October 16, 2014.
On October
16, 2014, bBoothUSA was acquired by Global System Designs, Inc.
(“GSD”), pursuant to a Share Exchange Agreement entered into with
GSD (the “Share Exchange Agreement”). GSD was incorporated in the
State of Nevada on November 27, 2012. The acquisition was accounted
for as a reverse merger transaction. In connection with the closing
of the transactions contemplated by the Share Exchange Agreement,
GSD’s management was replaced by bBoothUSA’s management, and GSD
changed its name to bBooth, Inc.
On April 21,
2017, we changed our corporate name from bBooth, Inc. to nFüsz,
Inc. The name change was effected through a parent/subsidiary
short-form merger of nFüsz, Inc., our wholly-owned Nevada
subsidiary, formed solely for the purpose of the name change, with
and into us.
On February
1, 2019, we changed our corporate name from nFüsz, Inc. to Verb
Technology Company, Inc. The name change was effected through a
parent/subsidiary short-form merger of Verb Technology Company,
Inc., our wholly-owned Nevada subsidiary, formed solely for the
purpose of the name change, with and into us.
On February
4, 2019, we implemented a 1-for-15 reverse stock split
(the “Reverse Stock Split”) of our common stock, $0.0001 par value per share
(the “Common Stock”). As a result of the Reverse Stock Split, every
fifteen (15) shares of our pre-Reverse Stock Split Common Stock
were combined and reclassified into one share of our Common Stock.
The number of shares of Common Stock subject to outstanding
options, warrants, and convertible securities were also reduced by
a factor of fifteen as of February 1, 2019. The par value per share
of our Common Stock was not affected by the Reverse Stock
Split.
On April 12,
2019, we acquired Sound Concepts Inc. (“Sound Concepts”). The
acquisition was intended to augment and diversify Verb’s internet
and Software-as-a-Service (“SaaS”) business (see Note
3).
On September
4, 2020, Verb Acquisition Co., LLC (“Verb Acquisition”), a
subsidiary of the Company, acquired Ascend Certification, LLC, dba
SoloFire (“SoloFire”) The acquisition was intended to augment and
diversify Verb’s internet and SaaS business (see Note
3).
Nature
of Business
We are 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 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.
We
provide
certain non-digital services to some of our enterprise clients such
as printing and fulfillment services. We design and print welcome
kits and starter kits for their marketing needs and provide
fulfillment services, which consist of managing the preparation,
handling and shipping of our client’s custom-branded merchandise
they use for marketing purposes at conferences and other events,
and product sample packs that verbCRM users order through the app
for automated delivery and tracking to their customers and
prospects. We use the term “client” and “customer”
interchangeably.
COVID-19
As of the
date of this filing, there continue to be widespread concerns
regarding the ongoing impacts and disruptions caused by the
COVID-19 pandemic in the regions in which the Company operates. Our
sales team reported a higher level of interest in our digital
products and services during the three and nine months ended
September 30, 2021 compared to the same period in 2020. However,
our non-digital services have been negatively impacted during the
three and nine months ended September 30, 2021 compared to the same
period in 2020. 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.
As of
September 30, 2021, we continue to actively communicate with and
listen to our customers to ensure we are responding to their needs
in the current environment with innovative solutions that will not
only be beneficial now but also over the long-term. We monitor
developments related to COVID-19 and remain flexible in our
response to the challenges presented by the pandemic. To mitigate
the adverse impact COVID-19 may have on our business and
operations, we implemented a number of measures in the year ended
December 31, 2020 to protect the health and safety of our
employees, as well as to strengthen our financial position. These
efforts include eliminating, reducing, or deferring non-essential
expenditures, as well as complying with local and state government
recommendations to protect our workforce.
2.
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
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,
2020 filed with the SEC on March 31, 2021 (the “2020 Annual
Report”). The consolidated balance sheet as of December 31, 2020
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
(including normal recurring adjustments) necessary to fairly
present the Company’s financial position and results of operations
for the interim periods reflected. 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 include the accounts of Verb
Technology Company, Inc., Verb Direct, LLC, and Verb Acquisition
Co., LLC. Intercompany accounts have been eliminated in the
consolidation.
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 nine months ended
September 30, 2021, the Company incurred a net loss of $28,962,000
and used
cash in operations of $18,223,000.
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. In addition, our independent
registered public accounting firm, in their report on our audited
financial statements for the year ended December 31, 2020, raised
substantial doubt about the Company’s ability to continue as a
going concern.
The ability
of the Company to continue as a going concern is dependent upon the
Company’s ability to raise additional funds and implement its
business plan. The financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern.
Our
continuation as a going concern is dependent on our ability to
obtain additional financing until we can generate sufficient cash
flows from operations to meet our obligations. We intend to
continue to seek additional debt or equity financing to continue
our operations. There is no assurance that we will ever be
profitable or that debt or equity financing will be available to
us. The consolidated financial statements do not include any
adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and
classifications of liabilities that may result should we be unable
to continue as a going concern.
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
derives its revenue primarily from providing application services
through the SaaS application, digital marketing and sales support
services, from the sale of customized print products and training
materials, branded apparel, and digital tools, as demanded by its
customers. The 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 as part of deferred revenue
and amortized over the estimated life of the agreement. 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 Condensed Consolidated
Statements.
The Company
recognizes revenue in accordance with ASC 606, Revenue from
Contracts with Customers (“ASC 606”). The underlying principle of
ASC 606 is to recognize revenue to depict the transfer of goods or
services to customers at the amount expected to be collected. ASC
606 creates a five-step model that requires entities to exercise
judgment when considering the terms of contract(s), which includes
(1) identifying the contract(s) or agreement(s) with a customer,
(2) identifying our performance obligations in the contract or
agreement, (3) determining the transaction price, (4) allocating
the transaction price to the separate performance obligations, and
(5) recognizing revenue as each performance obligation is
satisfied. Pursuant to ASC 606, revenue is recognized when
performance obligations under the terms of a contract are
satisfied, which occurs for the Company upon shipment or delivery
of products or services to our customers based on written sales
terms, which is also when control is transferred. Revenue is
measured as the amount of consideration we expect to receive in
exchange for transferring the products or services to a
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. Shipping and handling activities are performed before
the customer obtains control of the goods and, therefore, represent
a fulfillment activity rather than promised goods to the customer.
Payment for sales is generally made by check, credit card, or wire
transfer. Historically, we have not experienced any significant
payment delays from customers.
We allow
returns within 30 days of purchase from end-users. Our customers
may return purchased products to us under certain circumstances.
Returns from customers in the past and during the three and nine
months ended September 30, 2021 and 2020 are immaterial.
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
our verb app products and platform services which include verbCRM,
verbLEARN, verbLIVE, verbTEAMS, and verbPULSE. The revenue is
recognized over the subscription period. |
| |
|
|
| |
b. |
Non-SaaS,
non-recurring digital revenue, which is revenue generated by the
use of our 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. |
|
|
2. |
Non-digital
revenue, which is revenue we generate from non-app, non-digital
sources through ancillary services we provide as an accommodation
to our clients and customers. These services, which we now
outsource to a strategic partner as part of a cost reduction plan
we instituted in 2020, include: |
|
|
a. |
Design,
printing services, and fulfillment. The revenue is recognized upon
completion and shipment of products or fulfillment to the
customer. |
| |
|
|
| |
b. |
Shipping
services. The revenue is recognized when the corresponding products
or fulfillment are shipped. |
Revenues
during the three and nine months ended September 30, 2021 and 2020
were all generated from the United States of America.
Cost of
Revenue
Cost of
revenue primarily consists of the salaries of certain employees,
purchase price of consumer products, digital content costs,
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.
Assets
Recognized from the Costs to Obtain a Contract with a
Customer
The Company considered certain internal sales commissions as
incremental costs of obtaining the contract with a customer.
Internal sales commissions for subscription offerings where the
Company expect the benefit of those costs to continue throughout
the subscription are capitalized and amortized ratably over the
period of benefit, which generally ranges over a period of one
year. Total capitalized costs to obtain a contract are not
significant and are included in prepaid expenses and other current
assets and other assets on our consolidated balance sheets.
Deferred Revenue
and Customer Deposits - Contract Liabilities
Contract
liabilities represents consideration received from customers under
a revenue contract, but the Company has not yet delivered or
completed its performance obligation to the customer.
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 $250,000.
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 September 30, 2021, we had
two vendors that account for
20% and
16% of our purchases
individually and
36% in aggregate. In
addition, we had one vendor that accounted for
40% of accounts payable
individually and in aggregate as of September 30, 2021.
As of
September 30, 2021, we had one customer that
accounted for
10% of our accounts receivable individually and in the
aggregate.
During the
three and nine months ended September 30, 2021 and 2020, we had no
customer that accounted for 10% of our revenues individually and in
the aggregate.
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.
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
September 30, 2021, and 2020, the Company had total outstanding
options of
5,528,405 and
5,099,038, respectively, stock
warrants of
11,008,302 and
13,351,245, respectively,
outstanding restricted stock awards of
2,109,999 and
2,908,530, respectively, and
0 and
2,642,159 common shares issuable
from our Class B Units, respectively, which were excluded from the
computation of net loss per share because they are
anti-dilutive.
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 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. During the three and
nine months ended September 30, 2021 and 2020, the Company
capitalized $2,329,000
and $0,
respectively, in software development costs and recorded as part of
property and equipment.
Depreciation
expense related to capitalized software development costs will be
recorded in Cost of revenue on the consolidated statements of
operations. There has been
no
depreciation expense related to capitalized software development
costs for the three and nine months ended September 30, 2021 and
2020 as the software has not been completed and
utilized.
Goodwill
In
accordance with Financial Accounting Standards Board (“FASB”) ASC
Topic No. 350, Intangibles-Goodwill and Other, the Company reviews
the recoverability of the carrying value of goodwill at least
annually or whenever events or circumstances indicate a potential
impairment. The Company’s impairment testing is performed annually
at December 31 (its fiscal year end). Recoverability of goodwill is
determined by comparing the fair value of Company’s reporting unit
to the carrying value of the underlying net assets in the reporting
units. If the fair value of a reporting unit is determined to be
less than the carrying value of its net assets, goodwill is deemed
impaired and an impairment loss is recognized to the extent that
the carrying value of goodwill exceeds the difference between the
fair value of the reporting unit and the fair value of its other
assets and liabilities. As of September 30, 2021 and December 31,
2020, management determined there were no indications of
impairment. The Company will perform their next impairment analysis
in December 2021.
Intangible Assets with Finite
Useful Lives
We have
certain finite lived intangible assets that were initially recorded
at their fair value at the time of acquisition. These intangible
assets consist of developed technology. Intangible assets with
finite useful lives are amortized using the straight-line method
over their estimated useful life of five years.
We review
all finite lived intangible assets for impairment when
circumstances indicate that their carrying values may not be
recoverable. If the carrying value of an asset group is not
recoverable, we recognize an impairment loss for the excess
carrying value over the fair value in our consolidated statements
of operations. As of September 30, 2021, and December 31, 2020,
there was no impairment of intangible assets. The Company will
perform their next impairment analysis in December 2021.
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.
Segments
The Company
has acquired two operating subsidiaries, Verb Direct and Ascend
Certification (dba “SoloFire”) (see Note 3) with various revenue
channels. Operations of these two subsidiaries are integrated since
they have a similar customer base and the Company has a single
sales team, marketing department, customer service department,
operations department, finance and accounting department to support
its operations. In accordance with the “Segment Reporting” Topic of
the ASC, the Company’s chief operating decision maker (the
Company’s Chief Executive Officer) determined that the Company has
only one reporting unit or segment.
Recent Accounting
Pronouncements
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, the standard will be effective for us for interim
and annual reporting periods beginning after December 15, 2022.
Management is currently assessing the impact of adopting this
standard on the Company’s financial statements and related
disclosures.
In August
2020, 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. Management is currently evaluating the effect of the adoption
of ASU 2020-06 on the consolidated financial statements, but
currently does not believe ASU 2020-06 will have a significant
impact on the Company’s accounting for its convertible debt
instruments. The effect will largely depend on the composition and
terms of the financial instruments at the time of
adoption.
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. Early adoption is permitted for all entities, including
adoption in an interim period. If an entity elects to early adopt
ASU 2021-04 in an interim period, the guidance should be applied as
of the beginning of the fiscal year that includes that interim
period. The adoption of ASU 2021-04 is not expected to have a
material impact on the Company’s financial statements or
disclosures.
Other recent
accounting pronouncements issued by 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.
ACQUISITIONS
The
Company made the following acquisitions in order to augment and
diversify its internet and SaaS business:
|
a. |
ACQUISITION OF VERB
DIRECT |
On April 12,
2019, Verb completed the acquisition of Verb Direct (formerly Sound
Concepts, Inc.). As a result of this acquisition, the Company
recorded goodwill of $16,337,000 and
intangible assets of $6,340,000.
The goodwill recognized is primarily attributable to anticipated
synergies from future growth and is not expected to be deductible
for tax purposes. Goodwill is not amortized but will be tested for
impairment on an annual basis. The intangible assets, which consist
mostly of developed technology of $4,700,000 are being amortized
over five
years, customer relationships of $1,200,000 are being amortized on
an accelerated basis over its estimated useful life of
five
years and domain names of $440,000 are determined to have
infinite lives but will be tested
for impairment on an annual basis.
|
b. |
ACQUISITION OF ASCEND
CERTIFICATION |
On September
4, 2020, Verb Acquisition Co., LLC (“Verb Acquisition”), a
subsidiary of the Company, entered into a Membership Interest
Purchase Agreement (the “Purchase Agreement”) with Ascend
Certification, LLC, dba SoloFire (“SoloFire”), the sellers party
thereto (collectively, the “Sellers”), and Steve Deverall, solely
in his capacity as the seller representative, under which Sellers
sold their entire interest in SoloFire, representing all of the
outstanding limited liability company membership interests of
SoloFire, to Verb Acquisition for a base purchase price of
$5,700,000,
subject to certain post-closing adjustments totaling $750,000 for
an adjusted purchase price of $4,950,000. As a result, Verb
Acquisition issued to the Sellers an amended promissory note of
$1,885,000 and 2,642,159
Class B Units of Verb Acquisition which were exchangeable for
2,642,159 shares
of Verb’s Common Stock with an estimated fair value of $3,065,000
(see Note 16) for a total purchase price of $4,950,000.
The promissory note was unsecured, bore interest at a rate of
0.14%
per annum and was paid in full at maturity on October 1,
2020.
The
acquisition was intended to augment and diversify Verb’s SaaS
business. Key factors that contributed to the recorded goodwill and
intangible assets in the aggregate of $4,845,000
were the opportunity to consolidate and complement existing
operations of Verb, certain software and customer list, and the
opportunity to generate future synergies within the SaaS
business.
Verb is
required to allocate the purchase price to the acquired tangible
assets, identifiable intangible assets, and assumed liabilities
based on their fair values. Pursuant to current accounting
guidelines, the Company had one year to finalize the purchase price
allocation. As a result, in September 2021, management finalized
the purchase price allocation. The following table summarizes the
fair value of the assets assumed and liabilities acquired and the
purchase price allocation on the date of acquisition:
SCHEDULE
OF FAIR VALUE OF ASSETS ASSUMED AND LIABILITIES
ACQUIRED
| Assets
Acquired: |
|
|
|
|
|
|
|
|
| Cash |
|
$ |
229,000 |
|
|
|
|
|
| Accounts
receivable |
|
|
207,000 |
|
|
$ |
436,000 |
|
|
Liabilities Assumed: |
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
(241,000 |
) |
|
|
|
|
| Long-term
liabilities |
|
|
(90,000 |
) |
|
|
(331,000 |
) |
| Intangible assets |
|
|
|
|
|
|
1,419,000 |
|
| Goodwill |
|
|
|
|
|
|
3,426,000 |
|
| Purchase
Price |
|
|
|
|
|
$ |
4,950,000 |
|
The goodwill
recognized in connection with the acquisition is primarily
attributable to anticipated synergies from future growth and is not
expected to be deductible for tax purposes. Goodwill is not
amortized but will be tested for impairment on an annual
basis.
The
intangible assets, which consist of developed technology of
$1,400,000 are being amortized
over
five years, customer relationships of $17,000
are being amortized over
three years, and domain names of $2,000
are determined to have infinite lives but will be tested for
impairment on an annual basis.
During the
nine months ended September 30, 2021 and 2020, the Company recorded
amortization expense of $180,000
and
$33,000,
respectively, related to the intangibles discussed above. The
following table summarizes the amortization expense for both Verb
Direct and Ascend to be recorded in future periods for intangible
assets that are subject to amortization and excludes intangible
assets with infinite life (i.e., domain names) of $442,000:
SCHEDULE
OF AMORTIZATION EXPENSE FOR FUTURE PERIODS FOR INTANGIBLE
ASSETS
|
Year
ending |
|
Amortization |
|
|
2021
remaining (remaining 3 months) |
|
$ |
416,000 |
|
|
2022 |
|
|
1,466,000 |
|
|
2023 |
|
|
1,464,000 |
|
|
2024 |
|
|
395,000 |
|
|
2025 and
thereafter |
|
|
186,000 |
|
| Total
amortization |
|
$ |
3,927,000 |
|
The
following unaudited pro forma statement of operations present the
Company’s pro forma results of operations for the three and nine
months ended September 30, 2020, to give effect to the acquisition
of SoloFire as if it had occurred on January 1, 2020.
SCHEDULE
OF PRO FORMA STATEMENTS OF OPERATIONS
| |
|
Three
Months Ended
September
30, 2020
|
|
|
Nine
Months Ended
September
30, 2020
|
|
| |
|
(Proforma,
unaudited) |
|
|
(Proforma,
unaudited) |
|
| SaaS recurring
subscription revenue |
|
$ |
1,661,000 |
|
|
$ |
4,511,000 |
|
| Other digital |
|
|
360,000 |
|
|
|
1,166,000 |
|
| Welcome kits and fulfilment |
|
|
836,000 |
|
|
|
2,277,000 |
|
| Shipping |
|
|
186,000 |
|
|
|
614,000 |
|
| Total revenue |
|
|
3,043,000 |
|
|
|
8,568,000 |
|
| |
|
|
|
|
|
|
|
|
| Cost of revenue |
|
|
1,344,000 |
|
|
|
3,661,000 |
|
| |
|
|
|
|
|
|
|
|
| Gross margin |
|
|
1,699,000 |
|
|
|
4,907,000 |
|
| |
|
|
|
|
|
|
|
|
| Operating expenses |
|
|
(9,771,000 |
) |
|
|
(21,615,000 |
) |
| |
|
|
|
|
|
|
|
|
| Other income,
net |
|
|
574,000 |
|
|
|
3,550,000 |
|
| |
|
|
|
|
|
|
|
|
| Net loss |
|
|
(7,498,000 |
) |
|
|
(13,158,000 |
) |
| |
|
|
|
|
|
|
|
|
| Deemed
dividends to Series A stockholders |
|
|
- |
|
|
|
(3,951,000 |
) |
| |
|
|
|
|
|
|
|
|
| Net loss attributed
to common stockholders |
|
$ |
(7,498,000 |
) |
|
$ |
(17,109,000 |
) |
Pursuant to
the provisions of ASC 805, the following results of operations of
Verb Acquisition subsequent to the acquisition date included in the
consolidated statement of operations for the reporting
period:
SCHEDULE OF RESULTS OF OPERATION OF
SUBSIDIARY
|
|
|
Three
Months Ended
September
30, 2020
|
|
|
Nine
Months
Ended
September
30, 2020
|
|
|
Revenue |
|
$ |
276,000 |
|
|
$ |
795,000 |
|
| Cost of
revenue |
|
|
(65,000 |
) |
|
|
(184,000 |
) |
| Operating
expenses |
|
|
(897,000 |
) |
|
|
(1,474,000 |
) |
| Other income/
(expense) |
|
|
- |
|
|
|
- |
|
| Net
loss |
|
$ |
(686,000 |
) |
|
$ |
(863,000 |
) |
4.
PROPERTY AND
EQUIPMENT
Property and
equipment consisted of the following as of September 30, 2021 and
December 31, 2020.
SCHEDULE
OF PROPERTY AND EQUIPMENT
| |
|
September
30,
2021
|
|
|
December
31,
2020
|
|
| |
|
|
|
|
|
|
| Computers |
|
$ |
29,000 |
|
|
$ |
29,000 |
|
| Furniture and fixture |
|
|
75,000 |
|
|
|
75,000 |
|
| Machinery and equipment |
|
|
49,000 |
|
|
|
39,000 |
|
| Leasehold improvement |
|
|
1,058,000
|
|
|
|
1,058,000
|
|
| Software
development |
|
|
2,329,000 |
|
|
|
- |
|
| Total property and equipment |
|
|
3,540,000 |
|
|
|
1,201,000 |
|
| Accumulated
depreciation |
|
|
(462,000 |
) |
|
|
(339,000 |
) |
| Total property
and equipment, net |
|
$ |
3,078,000 |
|
|
$ |
862,000 |
|
During the
nine months ended September 30, 2021, the Company began developing
MARKETPLACE the next generation of interactive livestream ecommerce
and capitalized $2,329,000 of internal
and external development costs. The Company anticipates incurring
an additional $3,900,000 of internal
and external development costs to complete MARKETPLACE. In
addition, the Company purchased $26,000 of
machinery and equipment, sold certain machinery and equipment with
a cost of $16,000
and
accumulated depreciation of $11,000
for cash
proceeds of $11,000.
As a result, the Company recognized a gain of $5,000
that was
reported as part of other income. Depreciation expense amounted to
$134,000
and
$130,000
for the nine
months ended September 30, 2021 and 2020, respectively.
5.
RIGHT-OF-USE ASSETS
AND OPERATING LEASE LIABILITIES
The Company
leases certain warehouse, corporate office space and equipment
under an operating lease agreement. We determine if an arrangement
is a lease at inception. Lease assets are presented as operating
lease right-of-use assets and the related liabilities are presented
as lease liabilities in our consolidated balance sheets pursuant to
ASC 842, Leases.
Operating
lease right-of-use (“ROU”) assets and liabilities are recognized at
commencement date based on the present value of lease payments over
the lease term. ROU assets represent our right to use an underlying
asset for the lease term and lease liabilities represent our
obligation to make lease payments arising from the lease.
Generally, the implicit rate of interest in lease arrangements is
not readily determinable and the Company utilizes its incremental
borrowing rate in determining the present value of lease payments.
The Company’s incremental borrowing rate is a hypothetical rate
based on its understanding of what its credit rating would be. The
operating lease ROU asset includes any lease payments made and
excludes lease incentives.
The
components of lease expense and supplemental cash flow information
related to leases for the period are as follows:
SCHEDULE
OF LEASE COST
| |
|
Period
Ended
September
30, 2021
|
|
|
Period
Ended
September
30, 2020
|
|
| Lease
cost |
|
|
|
|
|
|
|
|
| Operating lease cost
(included in general and administration in the Company’s statement
of operations) |
|
$ |
524,000 |
|
|
$ |
524,000 |
|
| |
|
|
|
|
|
|
|
|
| Other
information |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Cash paid for amounts included in the
measurement of lease liabilities |
|
$ |
593,000 |
|
|
$ |
383,000 |
|
| Weighted average remaining lease term
– operating leases (in years) |
|
|
4.15 |
|
|
|
4.70 |
|
| Average discount rate – operating
leases |
|
|
4.0 |
% |
|
|
4.0 |
% |
SCHEDULE
OF OPERATING LEASES
|
|
|
September
30, 2021 |
|
|
December
31, 2020 |
|
| Operating leases |
|
|
|
|
|
|
|
|
|
Right-of-use
assets |
|
$ |
2,305,000 |
|
|
$ |
2,730,000 |
|
| |
|
|
|
|
|
|
|
|
| Short-term operating
lease liabilities |
|
$ |
582,000 |
|
|
$ |
596,000 |
|
| Long-term operating
lease liabilities |
|
|
2,464,000 |
|
|
|
2,943,000 |
|
| Total operating lease
liabilities |
|
$ |
3,046,000 |
|
|
$ |
3,539,000 |
|
SCHEDULE
OF PRESENT VALUE OF LEASE LIABILITIES
|
Year
ending |
|
Operating
Leases |
|
|
2021
(remaining 3 months) |
|
$
|
184,000 |
|
|
2022 |
|
|
751,000 |
|
|
2023 |
|
|
773,000 |
|
|
2024 |
|
|
472,000 |
|
|
2025 and
thereafter |
|
|
1,189,000 |
|
|
Total lease
payments |
|
|
3,369,000 |
|
|
Less:
Imputed interest/present value discount |
|
|
(323,000 |
) |
|
Present
value of lease liabilities |
|
$ |
3,046,000 |
|
6.
ADVANCE OF FUTURE
RECEIPTS
The Company
has the following advances on future receipts as of September 30,
2021:
SCHEDULE
OF ADVANCES ON FUTURE RECEIPTS
|
Note |
|
Issuance
Date |
|
Maturity
Date |
|
Interest
Rate |
|
|
Original
Borrowing |
|
|
Balance at
September 30, 2021 |
|
|
Balance at
December 31, 2020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
A |
|
June 30, 2020 |
|
February 25, 2021 |
|
|
28 |
% |
|
$ |
506,000 |
|
|
$ |
- |
|
|
$ |
89,000 |
|
| Note B |
|
June 30, 2020 |
|
February 25, 2021 |
|
|
28 |
% |
|
|
506,000 |
|
|
|
- |
|
|
|
88,000 |
|
| Note C |
|
January 13, 2021 |
|
September 10, 2021 |
|
|
28 |
% |
|
|
844,000 |
|
|
|
- |
|
|
|
- |
|
| Note D |
|
January 13, 2021 |
|
September 10, 2021 |
|
|
28 |
% |
|
|
844,000 |
|
|
|
- |
|
|
|
- |
|
| Note E |
|
January 22, 2021 |
|
July 1, 2021 |
|
|
28 |
% |
|
|
2,040,000 |
|
|
|
- |
|
|
|
- |
|
| Note F |
|
February 18, 2021 – March 3, 2021 |
|
August 3, 2021 – August 15, 2021 |
|
|
3 |
% |
|
|
1,696,000 |
|
|
|
- |
|
|
|
- |
|
| Note G |
|
June 30, 2021 |
|
December 31, 2021 |
|
|
7 |
% |
|
|
1,210,000 |
|
|
|
618,000 |
|
|
|
|
|
| Note H |
|
June 30, 2021 |
|
March 1, 2022 |
|
|
28 |
% |
|
|
2,720,000 |
|
|
|
1,750,000 |
|
|
|
- |
|
| Total |
|
|
|
|
|
|
|
|
|
$ |
10,366,000 |
|
|
|
2,368,000 |
|
|
|
177,000 |
|
| Debt
discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(515,000 |
) |
|
|
(67,000 |
) |
| Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,853,000 |
|
|
$ |
110,000 |
|
Note A and B
On June 30,
2020, the Company received two secured advances from an
unaffiliated third party totaling $728,000 for the purchase of
future receipts/revenues of $1,012,000. Pursuant to the terms of the agreement the
unaffiliated third-party will auto withdraw an aggregate of
$6,000 from the Company’s operating
account each banking day. The term of the agreement extends until
the advances are paid in full. The notes did not bear any interest,
however, the average interest was imputed at a rate of 28% based on the face value of the
note and the proceeds received. As a result, the Company recorded a
liability of $1,012,000 to account
for the future receipts sold and a debt discount of $284,000 to account for the difference
between the future receipts sold and the cash received. The
debt discount is being amortized over the term of the
agreement.
During the
nine months ended September 30, 2021, the Company paid the entire
balance due of $177,000 and amortized the remaining
debt discount of $67,000.
Note C and D
On January
13, 2021, the Company received two secured advances from the same
unaffiliated third party (see Note 1 and 2) totaling $1,213,000 for the purchase of
future receipts/revenues of $1,688,000. Pursuant to the terms of the agreement the
unaffiliated third-party will auto withdraw an aggregate of
$11,000 from the Company’s
operating account each banking day. The term of the agreement
extends until the advances are paid in full. The notes did not bear
any interest, however, the average interest was imputed at a rate
of 28% based on the face value of the
note and proceeds received. The Company may pay off either note for
$744,000 if paid within 30 days of funding; for $775,000 if paid
between 31 and 60 days of funding; or for $806,000 if paid within
61 to 90 days of funding. These advances are secured by the
Company’s tangible and intangible assets. As a result, the Company
recorded a liability of $1,688,000 to account
for the future receipts sold and a debt discount of $475,000 to account for the difference
between the future receipts sold and the cash received. The debt
discount is being amortized over the term of the
agreement.
During the
nine months ended September 30, 2021, the Company paid the entire
balance due of $1,688,000 and amortized $475,000 of the debt
discount.
Note E
On January
22, 2021, the Company received proceeds from a secured advance from
an unaffiliated third party totaling $1,440,000
for the
purchase of future receipts/revenues of $2,040,000.
Pursuant to the terms of the agreement the unaffiliated third-party
will auto withdraw an aggregate of $13,000
from the
Company’s operating account each banking day. The term of the
agreement extends until the advances are paid in full. The notes
did not bear any interest, however, the interest was imputed at a
rate of
28% based on the face value
of the note and the proceeds received. The Company may pay off the
note for $1,725,000 if paid within 30 days of funding; for
$1,860,000 if paid between 31 and 60 days of funding; or for
$484,000 if paid within 61 to 90 days of funding. These advances
are secured by the Company’s tangible and intangible assets. As a
result, the Company recorded a liability of $2,040,000
to account
for the future receipts sold and a debt discount of $600,000
to account
for the difference between the future receipts sold and the cash
received. The debt discount is being amortized over the term of the
agreement.
During the
nine months ended September 30, 2021, the Company paid the entire
balance of $2,040,000 and amortized $600,000 of the debt
discount.
Note F
In February
and March of 2021, the Company received secured advances from an
unaffiliated third party totaling $1,637,000 for the
purchase of future receipts/revenues of $1,696,000.
Pursuant to the terms of the agreement the unaffiliated third-party
will auto withdraw an average of $283,000 from the Company’s
operating account each month. The term of the agreement extends
until the advances are paid in full. The notes did not bear any
interest, however, the interest was imputed at a rate of 3% based on the face value of
the notes and the proceeds received. As a result, the Company
recorded a liability of $1,696,000 to
account for the future receipts sold and a debt discount of
$59,000 to account for the
difference between the future receipts sold and the cash received.
The debt discount is being amortized over the term of the
agreement.
During the
nine months ended September 30, 2021, the Company paid the entire
balance of $1,696,000 and amortized $59,000 of the debt
discount.
Note G
On June 30,
2021, the Company received secured advances from an unaffiliated
third party totaling $1,118,000
for the
purchase of future receipts/revenues of $1,210,000.
Pursuant to the terms of the agreement the unaffiliated third-party
will auto withdraw an average of $197,000 from the Company’s
operating account each month. The term of the agreement extends
until the advances are paid in full. The notes did not bear any
interest, however, the interest was imputed at a rate
of 7%
based on the
face value of the notes and the proceeds received.
As a result,
the Company recorded a liability of $1,210,000
to account
for the future receipts sold and a debt discount of $92,000
to account
for the difference between the future receipts sold and the cash
received. The debt discount is being amortized over the term of the
agreement.
During the
nine months ended September 30, 2021, the Company paid $592,000 and amortized
$50,000 of the debt
discount. As of September 30, 2021, the outstanding balance of the
note amounted to $618,000 and the
unamortized balance of the debt discount was $42,000.
Note H
On June 30,
2021, the Company received secured advances from an unaffiliated
third party totaling $1,960,000 for the purchase of
future receipts/revenues of 2,720,000. Pursuant to the terms of the agreement the
unaffiliated third-party will auto withdraw an aggregate of $15,200
from the Company’s operating account each banking day. The term of
the agreement extends until the advances are paid in full. The
notes did not bear any interest, however, the interest was imputed
at a rate of 28% based on the face value of the
note and the proceeds received. The Company may pay off the note
for $2,200,000 if paid within 45 days of funding and for $2,380,000
if paid between 46 and 60 days of funding. These advances
are secured by the Company’s tangible and intangible assets. As a
result, the Company recorded a liability of $2,720,000 to account
for the future receipts sold and a debt discount of $760,000 to account for the difference
between the future receipts sold and the cash received. The debt
discount is being amortized over the term of the
agreement.
During the
nine months ended September 30, 2021, the Company paid $970,000 and amortized
$287,000 of the debt
discount. As of September 30, 2021, the outstanding balance of the
note amounted to $1,750,000 and the
unamortized balance of the debt discount was $473,000.
7.
NOTES PAYABLE – RELATED
PARTIES
The Company
had the following related party notes payable as of September 30,
2021 and December 31, 2020:
SCHEDULE
OF NOTES PAYABLE TO RELATED PARTIES
|
Note |
|
Issuance
Date |
|
Maturity
Date |
|
Interest
Rate |
|
|
Original
Borrowing |
|
|
Balance
at
September 30,
2021 |
|
|
Balance
at
December 31,
2020 |
|
|
Note 1 (A) |
|
December 1, 2015 |
|
February 8, 2023 |
|
|
12.0 |
% |
|
$ |
1,249,000 |
|
|
$ |
725,000 |
|
|
$ |
725,000 |
|
| Note 2 (B) |
|
December 1, 2015 |
|
April 1, 2017 |
|
|
12.0 |
% |
|
|
112,000 |
|
|
|
- |
|
|
|
112,000 |
|
|
Note 3
(C) |
|
April 4, 2016 |
|
June 4, 2021 |
|
|
12.0 |
% |
|
|
343,000 |
|
|
|
40,000 |
|
|
|
240,000 |
|
| Total notes payable –
related parties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
765,000 |
|
|
|
1,077,000 |
|
| Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(725,000 |
) |
|
|
- |
|
| Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
40,000 |
|
|
$ |
1,077,000 |
|
|
|
(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. The note bears interest at a rate
of 12%
per annum,
secured by the Company’s assets, and matured on February 8,
2021,
as amended. A total of 30%
of the
original note balance or $375,000
was
convertible to common stock and was converted in 2018 while the
remaining note balance of $825,000
is not
convertible. During the year ended December 31, 2020, the Company
made payments of $100,000.
On February 25, 2021 the Company extended the note to February 8,
2023 with no changes to the other terms of the note agreement. As
of December 31, 2020, the outstanding balance of the note amounted
to $725,000. |
| |
|
|
| |
|
In February
2021, the Mr. Cutaia and Company amended the note payable and
extended the maturity date from February 8, 2021 to
February 8, 2023 or an extension of two years. In exchange
for the extension, the Company issued Mr. Cutaia warrants to
purchase
138,889 shares of common stock with a fair value of
$287,000.
The warrants are fully vested, exercisable at $2.61 per share and
will expire in three years. There were no other changes to the
original terms of the note payable. In accordance with ASC 450-70,
modifications or exchanges are considered extinguishments with
gains or losses recognized in current earnings if the terms of the
new debt and original instrument are substantially different. The
instruments are considered “substantially different” when the
present value of the cash flows under the terms of the new debt
instrument is at least 10% different from the present value of the
remaining cash flows under the terms of the original instrument. As
the fair value of the warrants granted amounted to $287,000 for
which is approximately 40% of the outstanding note payable,
pursuant to ASC 470, the Company accounted the modification as an
extinguishment of debt which requires the measurement of the
modified debt and additional consideration to be at fair value. As
a result, the Company recognized a loss on debt extinguishment of
$287,000
and a corresponding credit to contributed capital. On May 19, 2021
the Board approved the ability to convert the note into equity at
the discretion of the holder. The conversion price is the fair
market value of the Company’s common stock on the day of
conversion. |
| |
|
|
| |
|
As of
September 30, 2021, the outstanding balance of the note amounted to
$725,000. |
| |
|
|
| |
(B) |
On December 1, 2015, the
Company issued a note payable to a former member of the Company’s
board of directors, in the amount of $112,000,
representing unpaid consulting fees as of November 30, 2015. The
note is unsecured, bears interest rate of 12%
per annum,
and matured in April
2017.
As of December 31, 2020, the outstanding principal balance of the
note amounted to $112,000.
On September
24, 2021 the Company settled the entire note payable and all
corresponding accrued interest and accounts payable related to the
former board member for $140,000,
which resulted in a gain of $82,000.
|
| |
|
|
| |
(C) |
On April 4, 2016, the
Company issued a convertible note to Mr. Cutaia, in the amount of
$343,000,
to consolidate all advances made by Mr. Cutaia to the Company
during the period December 2015 through March 2016. A total of
30% of the original note balance or $103,000
was convertible to common stock and was converted in 2018 while the
remaining note balance of $240,000
is not convertible. The note bears interest at a rate of
12% per annum, is secured by the Company’s assets, and
matured on
June 4, 2021, as amended. On May 19, 2021 the Board approved
the ability to convert the note into equity at the discretion of
the holder. The conversion price is the fair market value of the
Company’s common stock on the day of conversion. On May 19, 2021
$200,000
was converted into
194,175 shares of common stock. The conversion price was
$1.03
that was the closing price of the Company’s common stock on the day
of conversion. |
| |
|
|
| |
|
As of
September 30, 2021, and December 31, 2020, the outstanding balance
of the note amounted to $40,000
and $240,000,
respectively. |
Total
interest expense for notes payable to related parties was
$88,000 and
$106,000 for the
nine months ended September 30, 2021 and 2020, respectively. The
Company paid $112,000 and $100,000 in interest for the nine
months ended September 30, 2021 and 2020, respectively.
8.
NOTES
PAYABLE
The Company
had the following notes payable as of September 30,
2021:
SCHEDULE
OF NOTES PAYABLE
|
Note |
|
Issuance
Date |
|
Maturity
Date |
|
Interest
Rate |
|
|
Balance
at
September 30, 2021 |
|
|
Balance
at
December 31, 2020 |
|
|
Note A |
|
April 17, 2020 |
|
April 17, 2022 |
|
|
1.00 |
% |
|
$ |
- |
|
|
$ |
1,218,000 |
|
| Note B |
|
May 15, 2020 |
|
May 15, 2050 |
|
|
3.75 |
% |
|
|
150,000 |
|
|
|
150,000 |
|
| Note C |
|
May 1, 2020 |
|
May 1, 2022 |
|
|
3.75 |
% |
|
|
- |
|
|
|
90,000 |
|
| Total notes
payable |
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
|
1,458,000 |
|
| Non-current |
|
|
|
|
|
|
|
|
|
|
(150,000 |
) |
|
|
(1,458,000 |
) |
| Current |
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
$ |
- |
|
| |
(A) |
On April 17, 2020, the
Company received loan proceeds in the amount of $1,218,000
under the Paycheck Protection Program (“PPP”). The PPP, established
as part of the Coronavirus Aid, Relief and Economic Security Act
(“CARES Act”), provides for loans to qualifying businesses for
amounts up to 2.5 times of the average monthly payroll expenses of
the qualifying business. The loans and accrued interest are
forgivable after the earlier of (i) 24 weeks after the loan
disbursement date and (ii) December 31, 2020 as long as the
borrower uses the loan proceeds for eligible purposes, including
payroll, benefits, rent and utilities, and maintains its payroll
levels.
The PPP loan
was payable over two years at an interest rate of 1%, with a
deferral of payments for the first six months. As of December 31,
2020, the outstanding balance of the PPP loan was $1,218,000.
On January
4, 2021 the entire PPP loan and accrued interest, totaling
$1,226,000,
was forgiven and accounted as a gain on debt
extinguishment.
|
| |
|
|
| |
(B) |
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 $150,000.
The loan is secured by all tangible and intangible assets of the
Company and payable over 30 years
at an
interest rate of 3.75%
per annum.
Installment payments, including principal and interest, begin
on May 15,
2021.
As part of
the loan, the Company also received an advance of $10,000
from the SBA. While the SBA refers to this program as an advance,
it was written into law as a grant. This means that the amount
given through this program does not need to be repaid. As a result,
the Company accounted this $10,000
as part of “Other Income” in fiscal 2020.
|
| |
|
|
| |
(C) |
As a result of the
acquisition of SoloFire in September 2020, the Company assumed
SoloFire’s PPP loan of $90,000
it obtained
in May 2020 under the same PPP (see discussion “A”).
On May 17,
2021 the entire note and accrued interest, totaling $91,000,
was forgiven and accounted as a gain on debt
extinguishment.
|
9.
DEFERRED INCENTIVE COMPENSATION
TO OFFICERS
SCHEDULE
OF DEFERRED INCENTIVE COMPENSATION TO OFFICERS
|
Note |
|
Date |
|
|
Payment
Date |
|
Balance
at
September 30, 2021 |
|
|
Balance
at
December 31, 2020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Rory Cutaia
(A) |
|
|
December 23, 2019 |
|
|
50% on January 10, 2021 and 50% on January 10,
2022 |
|
$ |
215,000 |
|
|
$ |
430,000 |
|
| Rory Cutaia
(B) |
|
|
December 23, 2019 |
|
|
50% on January 10, 2021 and 50% on January 10,
2022 |
|
|
161,000 |
|
|
|
324,000 |
|
| Jeff Clayborne
(A) |
|
|
December 23, 2019 |
|
|
50% on January 10, 2021 and 50% on January 10,
2022 |
|
|
63,000 |
|
|
|
125,000 |
|
| Jeff Clayborne
(B) |
|
|
December 23, 2019 |
|
|
50% on January 10, 2021 and 50% on January 10,
2022 |
|
|
82,000 |
|
|
|
163,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
521,000 |
|
|
|
1,042,000 |
|
| Non-current |
|
|
|
|
|
|
|
|
- |
|
|
|
(521,000 |
) |
| Current |
|
|
|
|
|
|
|
$ |
521,000 |
|
|
$ |
521,000 |
|
| |
(A) |
On December
23, 2019, the Company awarded Rory Cutaia, Chief Executive Officer
and Jeff Clayborne, Chief Financial Officer Annual Incentive
Compensation of $430,000
and $125,000,
respectively for services rendered. The Company has determined that
it is in its best interest and in the best interest of its
stockholders to defer payments to these employees. The Company paid
50% of the Annual Incentive Compensation on
January 10, 2021 and will pay the remaining
50% on January 10, 2022.
During the
nine months ended September 30, 2021, the Company paid $278,000
of the outstanding balance. As of September 30, 2021, the
outstanding balance amounted to $278,000.
|
| |
|
|
| |
(B) |
On December
23, 2019, the Company awarded Rory Cutaia, Chief Executive Officer
and Jeff Clayborne, Chief Financial Officer received a bonus for
the successful Up-Listing to Nasdaq and Acquisition of Verb Direct
during fiscal 2019, totaling $324,000
and $163,000,
respectively. The Company has determined that it is in its best
interest and in the best interest of its stockholders to defer
payments to these employees. The Company paid
50% of the Nasdaq Up-Listing Award on January 10, 2021 and
the remaining
50% will be paid on January 10, 2022.
During the
nine months ended September 30, 2021, the Company paid $243,000
of the outstanding balance. As of September 30, 2021, the
outstanding balance amounted to $243,000.
|
10.
CONVERTIBLE SERIES A PREFERRED
STOCK AND WARRANT OFFERING
On August
14, 2019, we entered into the Securities Purchase Agreement (“SPA”)
with the Preferred Purchasers, pursuant to which we agreed to issue
and sell to the Preferred Purchasers up to an aggregate of
6,000 shares of Series A Preferred Stock (which, at the
initial conversion price, were convertible into an aggregate of up
to approximately
3.87 million shares of Common Stock) and the August Warrants
to purchase up to an equivalent number of shares of Common Stock.
We closed the offering on August 14, 2019 and issued
5,030 shares of Series A Preferred Stock and granted the
August Warrants to purchase up to
3,245,162 shares of Common Stock in connection therewith. We
received proceeds of $4,688,000,
net of direct costs of $342,000.
The offering was made in reliance upon an exemption from the
registration requirements of the Securities Act of 1933, as amended
(the “Securities Act”), pursuant to Section 4(a)(2) thereof, and
Rule 506 promulgated thereunder, as a transaction by an issuer not
involving any public offering.
On September
16, 2019, we filed a registration statement on Form S-3 with
the SEC to register the shares of Common Stock underlying the
August Warrants. The registration statement was declared effective
on September 19, 2019. We have agreed to keep such registration
statement continuously effective for a period of 24
months.
We are also
prevented from issuing shares of Common Stock upon exercise of the
August Warrants, which, when aggregated with any shares of Common
Stock issued on or after the issuance date and prior to such
exercise date, (i) in connection with the exercise of any August
Warrants issued pursuant to the SPA, and (ii) in connection with
the exercise of any warrants issued to any registered broker-dealer
as a fee in connection with the issuance of the securities pursuant
to the SPA, would exceed
4,459,725 shares of Common Stock (the “19.99%
Cap”). This prohibition will terminate upon the approval by our
stockholders of a release from such
19.99% Cap.
The August
Warrants have an initial exercise price of $1.88
per share, subject to customary adjustments, are exercisable six
months after the date of issuance, and will expire five years from
the date of issuance. The exercise price is subject to certain
customary adjustments, including upon certain subsequent equity
sales and rights offerings. In addition, the August Warrants also
included a fundamental transaction provision that could give rise
to an obligation to pay cash to the warrant holder. As a result,
the August Warrants were accounted as a derivative liability
issuance in 2019 (see Note 11).
During the
nine months ended September 30, 2021, the entire
2,006 shares of Preferred Stock were converted into
1,978,728 shares of Common Stock, which included
155,087 shares of common stock issued as a contractual
inducement to convert with a fair value of $348,000.
Pursuant to current accounting guidelines, the Company recorded the
fair value of $348,000
as a deemed dividend. As of September 30, 2021, there are
no shares of Series A Preferred stock issued and
outstanding.
11.
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 is 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
| |
|
September
30,
2021
|
|
|
Upon
Extinguishment in
2021
|
|
|
December 31, 2020 |
|
| Stock Price |
|
$ |
1.92 |
|
|
$ |
2.47 |
|
|
$ |
1.65 |
|
| Exercise Price |
|
$ |
1.41 |
|
|
$ |
1.18 |
|
|
$ |
1.41 |
|
| Expected Life |
|
|
2.42 |
|
|
|
3.32 |
|
|
|
3.17 |
|
| Volatility |
|
|
122 |
% |
|
|
144 |
% |
|
|
107 |
% |
| Dividend Yield |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
| Risk-Free Interest Rate |
|
|
0.35 |
% |
|
|
0.33 |
% |
|
|
0.23 |
% |
| Total Fair
Value |
|
$ |
5,839,000 |
|
|
$ |
4,513,000 |
|
|
$ |
8,266,000 |
|
The expected
life of the note and 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, 2020, the outstanding fair value of the derivative
liability amounted to $8,266,000.
During the
nine months ended September 30, 2021, the Company recorded a charge
of $2,086,000
to account
for the changes in the fair value of these derivative liabilities.
In addition,
1,829,190 of the Series A warrants
that were accounted as a derivative liability were exercised to
common stock and
33,334 warrants that were
accounted as a derivative liability were forfeited as part of a
legal settlement (see Note 17). As a result, the Company computed
the fair value of the corresponding derivate liabilities one last
time that amounted to $4,513,000
and pursuant
to current accounting guidelines, the extinguishment was accounted
as part of equity.
At September
30, 2021, the fair value of the derivative liability amounted to
$5,839,000.
The details
of derivative liability transactions for the nine months ended
September 30, 2021 and 2020 are as follows:
SCHEDULE
OF DERIVATIVE LIABILITY TRANSACTIONS
| |
|
September
30, 2021 |
|
|
September
30, 2020 |
|
| Beginning balance |
|
$ |
8,266,000 |
|
|
$ |
5,048,000 |
|
| Fair value upon issuance of notes
payable and/or warrants |
|
|
- |
|
|
|
3,951,000 |
|
| Change in fair value |
|
|
2,086,000 |
|
|
|
(4,295,000 |
) |
| Extinguishment |
|
|
(4,513,000 |
) |
|
|
(159,000 |
) |
| Ending
balance |
|
$ |
5,839,000 |
|
|
$ |
4,545,000 |
|
12.
COMMON
STOCK
The
Company’s Common Stock activity for the nine months ended September
30, 2021 was as follows:
Common Stock
Shares
Issued as Part of the Company’s Public Offering
On March 15,
2021, the Company completed a registered direct offering with
institutional investors for the purchase and sale of 9,375,000 shares
of common stock at a purchase price of $1.60 per share which resulted
in net proceeds of $14,129,000. Included
in the $14,129,000 is a refund
of $144,000 from the
underwriter.
Shares
Issued as Part of the Company’s At-The Market
Issuances
In August
2021, the Company entered into an At-The-Market Issuance Sales
Agreement (the “Sales Agreement”) (“ATM”) with Truist Securities,
Inc. (the “Sales Agent”), pursuant to the Company’s Registration
Statement on Form S-3 (File No. 333-252167). The ATM offering is a
follow-on offering of securities utilized by the Company in order
to raise capital over a period of time. In an ATM offering, the
Company sells newly issued shares into the trading market through a
designated sales agent at prevailing market prices.
During the
nine months ended September 30, 2021, the Company received net
proceeds of $4,722,000.
The Company terminated the Sales Agreement in October
2021.
Shares
Issued for Services
During the
nine months ended September 30, 2021, the Company issued 1,198,610
shares of Common Stock to certain employees and vendors for
services rendered and to be rendered with a fair value of
$2,057,000. 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. In
addition,
104,790 shares granted to employees that vested were
returned to the Company in exchange for the Company paying the
corresponding income and payroll taxes of these employees amounting
$131,000.
Pursuant to current accounting guidelines, the Company accounted
the return of the
104,790 shares and the payment of $131,000
for income and payroll taxes paid on behalf the employees as a
reduction in additional paid in capital, or a net balance of
$1,926,000.
Shares
Issued for Debt
During the
nine months ended September 30, 2021, the Company issued 182,397
shares of Common Stock to employees as settlement of payroll of
$281,000
that was previously recorded as accrued payroll as of December 31,
2020 or March 31, 2021. These shares of Common Stock were valued
based on the market value of the Company’s Common Stock price at
the issuance date and approximates the carrying value of the
accrued payroll.
Shares
Issued for Accounts Payable
During the nine months ended, the Company converted an aggregate of
$19,000 in accounts payable to
Kimerling & Wisdom, LLC into 10,500
shares of its restricted Common Stock. Such securities were exempt
from registration pursuant to Section 4(a)(2) of the Securities Act
of 1933, as amended.
Shares
Issued from Conversion of Note Payable – Related
Party
During the
nine months ended, the Company issued
194,175 shares of Common Stock upon a partial conversion of
a note payable of the Company’s Chief Executive Officer totaling
$200,000.
The conversion price was $1.03,
which was closing price of the Company’s common stock on the day of
conversion.
Shares
Issued for Settlement of Litigation
During the
nine months ended September 30, 2021, the Company issued 600,000
shares to EMA Financial to settle a litigation. The fair market
value of the shares issued was based on the closing price of
Company’s stock on the day of settlement which amounted to
$678,000.
As of the settlement date the Company had previously accrued
$585,000 and as a
result the Company recorded an additional $93,000 in general
and administrative expenses to account for the difference between
the fair value of the common shares issued and amount
accrued.
13.
RESTRICTED STOCK
AWARDS
On December
20, 2019, the Company approved and adopted the Verb Technology
Company, Inc. 2019 Omnibus Incentive Plan (the “Plan”).
A summary of
restricted stock unit activity for the nine months ended September
30, 2021 is presented below.
SUMMARY
OF RESTRICTED STOCK AWARD ACTIVITY
| |
|
|
|
|
|
|
|
Weighted- |
|
| |
|
|
|
|
|
|
|
Average |
|
| |
|
|
|
|
|
|
|
Grant
Date |
|
| |
|
Shares |
|
|
Fair Value |
|
|
Fair Value |
|
| |
|
|
|
|
|
|
|
|
|
| Non-vested at December 31, 2020 |
|
|
2,185,946 |
|
|
$ |
1,943,000 |
|
|
$ |
1.17 |
|
| Granted |
|
|
813,265 |
|
|
|
1,374,000 |
|
|
|
1.69 |
|
| Vested/deemed vested |
|
|
(889,212 |
) |
|
|
(1,285,000 |
) |
|
|
1.09 |
|
| Forfeited |
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Non-vested at September 30,
2021 |
|
|
2,109,999 |
|
|
$ |
2,032,000 |
|
|
$ |
1.41 |
|
On January
4, 2021, the Company granted an additional 813,265
shares of its restricted stock to employees and members of Board of
Directors. The Restricted Stock Units vest in various dates up to
January 2025. 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 $1,374,000,
which is being amortized as stock compensation expense over its
vesting term.
The total
fair value of restricted stock units that vested or deemed vested
for the nine months ended September 30, 2021 was $1,285,000
and is
included in general and administrative expenses in the accompanying
condensed consolidated statements of operations. In addition,
during the nine months ended September 30, 2021, the Company issued
889,212 shares of its restricted
stock based upon its vesting. As of September 30, 2021 the amount
of unvested compensation related to issuances of restricted stock
units was $2,032,000
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.
14.
STOCK
OPTIONS
On December
20, 2019, the Company adopted its 2019 Omnibus Incentive Plan (the
“Plan”).
At its
discretion, the Company grants share option awards to certain
employees and non-employees under the Plan and accounts for it in
accordance with ASC 718, Compensation – Stock
Compensation.
A summary of
option activity for the nine months ended September 30, 2021 is
presented below.
SCHEDULE
OF STOCK OPTION ACTIVITY
| |
|
|
|
|
|
|
|
Weighted- |
|
| |
|
|
|
|
Weighted- |
|
|
Average |
|
| |
|
|
|
|
Average |
|
|
Remaining |
|
| |
|
|
|
|
Exercise |
|
|
Contractual |
|
| |
|
Options |
|
|
Price |
|
|
Life (Years) |
|
| |
|
|
|
|
|
|
|
|
|
| Outstanding at December 31, 2020 |
|
|
6,031,775 |
|
|
$ |
1.55 |
|
|
|
2.68 |
|
| Granted |
|
|
2,150,833 |
|
|
|
1.69 |
|
|
|
- |
|
| Forfeited |
|
|
(2,078,473 |
) |
|
|
2.52 |
|
|
|
- |
|
| Exercised |
|
|
(575,730 |
) |
|
|
1.28 |
|
|
|
- |
|
| Outstanding at September 30,
2021 |
|
|
5,528,405 |
|
|
$ |
1.70 |
|
|