VERB TECHNOLOGY COMPANY, INC.

(VERB)
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VERB TECHNOLOGY COMPANY, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

05/16/2022 | 05:57pm EDT

Forward-Looking Statements




The following discussion and analysis of the results of operations and financial
condition of our company for the three-month periods ended March 31, 2022 and
2021 should be read in conjunction with the financial statements and related
notes and the other financial information that are included elsewhere this
Quarterly Report on Form 10-Q. This discussion includes forward-looking
statements based upon current expectations that involve risks and uncertainties,
such as our plans, objectives, expectations, and intentions. Forward-looking
statements are statements not based on historical fact and which relate to
future operations, strategies, financial results, or other developments.
Forward-looking statements are based upon estimates, forecasts, and assumptions
that are inherently subject to significant business, economic, and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to business decisions, are subject to change. These
uncertainties and contingencies can cause actual results to differ materially
from those expressed in any forward-looking statements made by us, or on our
behalf. We disclaim any obligation to update forward-looking statements. Actual
results and the timing of events could differ materially from those anticipated
in these forward-looking statements as a result of a number of factors. We use
words such as "anticipate," "estimate," "plan," "project," "continuing,"
"ongoing," "expect," "believe," "intend," "may," "will," "should," "could," and
similar expressions to identify forward-looking statements.



As used in this Quarterly Report on Form 10-Q, the terms "we," "us," "our," and
"Verb" refer to Verb Technology Company, Inc., a Nevada corporation,
individually, or as the context requires, collectively with its subsidiaries,
Verb Direct, LLC, or Verb Direct, Verb Acquisition Co., Inc., or Solofire, and
verbMarketplace, LLC, or MARKET, on a consolidated basis, unless otherwise
specified.



Overview



We are a Software-as-a-Service ("SaaS") applications platform developer. Our
platform is comprised of a suite of interactive video-based sales enablement
business software products marketed on a subscription basis. Our applications,
available in both mobile and desktop versions, are offered as a fully integrated
suite, as well as on a standalone basis, and include verbCRM, our Customer
Relationship Management ("CRM") application, verbLEARN, our Learning Management
System application, verbLIVE, our Live Stream eCommerce application, verbPULSE,
our business/augmented intelligence notification and sales coach application,
and verbTEAMS, our self-onboarding video-based CRM and content management
application for professional sports teams, small business and solopreneurs, with
seamless synchronization with Salesforce, that also comes bundled with verbLIVE,
and more recently, we introduced verbMAIL, our interactive video-based sales
communication tool integrated into Microsoft Outlook. Of note is our forthcoming
MARKET, a multi-vendor, multi-presenter, livestream social shopping platform at
the forefront of the convergence of ecommerce and entertainment.



Our Technology


Our suite of applications can be distinguished from other sales enablement
applications because our applications utilize our proprietary interactive video
technology as the primary means of communication between sales and marketing
professionals and their customers and prospects. Moreover, the proprietary data
collection and analytics capabilities of our applications inform our users on
their devices in real time, when and for how long their prospects have watched a
video, how many times such prospects watched it, and what they clicked on, which
allows our users to focus their time and efforts on 'hot leads' or interested
prospects rather than on those that have not seen such video or otherwise
expressed interest in such content. Users can create their hot lead lists by
using familiar, intuitive 'swipe left/swipe right' on-screen navigation. Our
clients report that these capabilities provide for a much more efficient and
effective sales process, resulting in increased sales conversion rates. We
developed the proprietary patent-pending interactive video technology, as well
as several other patent-issued and patent-pending technologies that serve as the
unique foundation for all our platform applications.



26







Our Products



verbCRM combines the capabilities of CRM lead-generation, content management,
and in-video ecommerce capabilities in an intuitive, yet powerful tool for both
inexperienced as well as highly skilled sales professionals. verbCRM allows
users to quickly and easily create, distribute, and post videos to which they
can add a choice of on-screen clickable icons which, when clicked, allow viewers
to respond to the user's call-to-action in real-time, in the video, while the
video is playing, without leaving or stopping the video. For example, our
technology allows a prospect or customer to click on a product they see featured
in a video and impulse buy it, or to click on a calendar icon in the video to
make an appointment with a salesperson, among many other features and
functionalities designed to eliminate or reduce friction from the sales process
for our users. The verbCRM app is designed to be easy to use and navigate and
takes little time and training for a user to begin using the app effectively. It
usually takes less than four minutes for a novice user to create an interactive
video from our app. Users can add interactive icons to pre-existing videos, as
well as to newly created videos shot with practically any mobile device. verbCRM
interactive videos can be distributed via email, text messaging, chat app, or
posted to popular social media directly and easily from our app. No software
download is required to view Verb interactive videos on virtually any mobile or
desktop device, including smart TVs.



verbLEARN is an interactive, video-based learning management system that
incorporates all of the clickable in-video technology featured in our verbCRM
application and adapts them for use by educators for video-based education.
verbLEARN is used by enterprises seeking to educate a large sales team or a
customer base about new products, or elicit feedback about existing products. It
also incorporates Verb's proprietary data collection and analytics capabilities
that inform users in real time when and for how long the viewers watched the
video, how many times they watched it, and what they clicked on, in addition to
adding gamification features that enhance the learning aspects of the
application.



verbLIVE builds on popular video-based platforms such as Facebook Live, Zoom,
WebEx, and Go2Meeting, among others, by adding Verb's proprietary interactive
in-video ecommerce capabilities - including an in-video Shopify shopping cart
integrated for Shopify account holders - to our own live stream video
broadcasting application. verbLIVE is a next-generation live stream platform
that allows hosts to utilize a variety of novel sales-driving features,
including placing interactive icons on-screen that appear on the screens of all
viewers, providing in-video click-to-purchase capabilities for products or
services featured in the live video broadcast, in real-time, driving
friction-free selling. verbLIVE also provides the host with real-time viewer
engagement data and interaction analytics. verbLIVE is entirely browser-based,
allowing it to function easily and effectively on all devices without requiring
the host or the viewers to download software, and is secured through end-to-end
encryption.



verbPULSE is a business/augmented intelligence notification-based sales
enablement platform feature set that tracks users' interactions with current and
prospective customers and then helps coach users by telling them what to do next
in order to close the sale, virtually automating the selling process.



verbTEAMS is our interactive, video-based CRM for professional sports teams,
small-and medium-sized businesses and solopreneurs. verbTEAMS also incorporates
verbLIVE as a bundled application. verbTEAMS features self-sign-up,
self-onboarding, self-configuring, content management system capabilities, user
level administrative capabilities, and high-quality analytics capabilities in
both mobile and desktop platforms that sync with one another. It also has a
built-in one-click sync capability with Salesforce.



We continue to invest in the future of interactive livestreaming. Following are some of our recent initiatives:

MARKET is akin to a virtual shopping mall, a centralized online destination
where shoppers could explore hundreds, and over time thousands, of shoppable
stores for their favorite brands, influencers, creators and celebrities, all of
whom can and will host livestream shopping events from their virtual stores that
can be seen by all shoppers at the virtual mall. Every store operator can host
livestream events, even simultaneously, and over time we expect there will be
thousands of such events, across numerous product and service categories, being
hosted by people from all over the world, always on - 24/7 - where shoppers
could communicate with the hosts and ask questions about products directly to
the host in real-time through an on-screen chat visible to all shoppers.
Shoppers can invite their friends and family to join them at any of the events
to share the experience - to communicate directly with each other in real time,
and then simply click on a non-intrusive - in-video overlay to place items in an
on-screen shopping cart for purchase - all without interrupting the video.
Shoppers can visit any number of other shoppable events to meet up and chat with
friends, old and new, and together watch, shop and chat with the hosts, discover
new products and services, and become part of an immersive entertaining shopping
experience. Throughout the experience, the shopping cart follows shoppers
seamlessly from event to event, shoppable video to shoppable video, host to
host, product to product.



27







The MARKET business model is a simple but next-level B to B play. It is a
multi-vendor platform, with a single follow-me style unified shopping cart, and
robust ecommerce capabilities with the tools for consumer brands, big box brick
and mortar stores, boutiques, influencers and celebrities to connect with their
clients, customers, their fans, followers, and prospects by providing a unique,
interactive social shopping experience that we believe could keep them coming
back and engaged for hours.


A big differentiator for MARKET is that it also provides an online meeting place
for friends and family to meet, chat, shop and enjoy a fun, immersive shopping
experience in real time together from anywhere and everywhere in the world.
MARKET will provide vendors with extensive business building analytics
capabilities not available on, and not shared by many operators of other social
media sites who regard that information as valuable proprietary property. All
vendors on MARKET will retain this valuable intelligence for their own,
unlimited use.



MARKET allows vendors an opportunity to reach not only the shoppers they invite
to the site from their own client and contact lists, but also those shoppers who
came to the site independently who will discover these vendors as they browse
through the many other shoppable events hosted simultaneously on MARKET 24/7,
from around the world. We believe our revenue model will be attractive to
vendors and will consist of SaaS recurring revenue as well as a share of revenue
generated through sales on the platform.



MARKET is simply a platform; we hold no inventory, we take no inventory risk,
and each vendor manages their own packing and fulfillment, as well as returns.
Only vendors that have a demonstrated ability to manage inventory and
fulfillment are selected to participate on MARKET.



As we continue onboarding vendors to the platform, we are seeing increased interest from product manufacturers seeking to embrace MARKET's direct-to-consumer selling capabilities, cutting-out distribution channel partners in order to reduce costs and increase profitability. As the economy tightens, we expect that trend to accelerate.

MARKET will also incorporate a modified version of our verbLIVE Attribution
technology, allowing vendors who so choose, to leverage extremely powerful,
built-in affiliate marketing capabilities. Non-vendor visitors to the site can
search for those vendors that have activated the Attribution feature for their
events and be compensated when people they referred to that vendor, purchase
products or services during that vendor's shopping event. We expect that this
feature, unique to MARKET, will drive many more shoppers who will be referred
from all over the world, producing a cross-pollination effect enhancing the
revenue opportunities for all MARKET vendors, while also creating an attractive
income generating opportunity for non-vendor MARKET patrons.



MARKET is an entirely new platform, built wholly independently and separate from
our verbLIVE sales platform, representing what we believe is the state of the
art of shoppable video technology. It will utilize an ultra-low latency private
global CDN network that we control, allowing us to deliver a high-quality
experience and platform performance capabilities. We also believe that MARKET
will expose vendors to our entire suite of sales enablement products, such as
verbMAIL, among others, that could drive new cross selling revenue
opportunities.



verbTV is an online destination for shoppable entertainment. Whereas MARKET is a
social shopping experience, verbTV is a destination for those seeking
commercial-free television content, such as concerts, game shows, sports,
including e-sports, sitcoms, podcasts, special events, news, including live
events, and other forms of video entertainment that is all interactive and
shoppable. verbTV represents an entirely new distribution channel for all forms
of content by a new generation of content creators looking for greater freedom
to explore the creative possibilities that a native interactive video platform
can provide for their audience. We believe content creators may also enjoy
greater revenue opportunities through the native ecommerce capabilities the
platform provides to sponsors and advertisers who will enjoy real-time
monetization, data collection and analytics. Through verbTV, sponsors and
advertisers will be able to accurately measure the ROI from their marketing
spend, instead of relying on decades-old, imprecise viewership information.



At launch, verbTV will feature interactive, shoppable programming, including the
popular business pitch show "2 Minute Drill," the non-shoppable version of which
is currently shown on AppleTV. Each episode is a fast-paced reality show where
5-6 entrepreneurs competing for $50,000 in cash and prizes, have 2 minutes to
impress the judges with the best investor pitch. Our CEO is one of the judges on
the show. verbTV viewers will be able to click on-screen and purchase the
products and services of the contestants featured on the show, among other
contemplated interactive features. Dave Meltzer, the creator of the show, and
Co-founder of Sports 1 Marketing and the former CEO of the renowned Leigh
Steinberg Sports & Entertainment agency, has signed-on with Verb to produce
other interactive and shoppable entertainment for verbTV. Other such
partnerships, as well as a creator program, are currently in progress.



28






Verb Partnerships and Integrations




verbMAIL for Microsoft Outlook is a product of our partnership with Microsoft
and is available as an add-in to Microsoft Outlook for Outlook and Office 365
subscribers. verbMAIL allows users to create interactive videos seamlessly
within Outlook by clicking the verbMAIL icon in the Outlook toolbar. The videos
are automatically added to an email and can be sent easily through Outlook using
the user's contacts they already have in Outlook. The application allows users
to easily track viewer engagement and together with other features represents an
effective sales tool available for all Outlook users worldwide.



Salesforce Integration. We have completed and deployed the integration of
verbLIVE into Salesforce and have launched a joint marketing campaign with
Salesforce to introduce the verbLIVE plug-in functionality to current Salesforce
users. We have also developed a verbCRM sync application for Salesforce users
that is currently being utilized by at least one of our large enterprise clients
and the verbLIVE plug-in is now being offered to all Salesforce users on a
monthly subscription fee basis while we work to build adoption rates.



Popular Enterprise Back-Office System Integrations. We have integrated verbCRM
into systems offered by 19 of the most popular direct sales back-office system
providers, such as Direct Scale, Exigo, By Design, Thatcher, Multisoft,
Xennsoft, and Party Plan. Direct sales back-office systems provide many of the
support functions required for direct sales operations, including payroll,
customer genealogy management, statistics, rankings, and earnings, among other
direct sales financial tracking capabilities. The integration into these
back-office providers, facilitated through our own API development, allows
single sign-on convenience for users, as well as enhanced data analytics and
reporting capabilities for all users. Our experience confirms that our
integration into these back-end platforms accelerates the adoption of verbCRM by
large direct sales enterprises that rely on these systems and as such, we
believe this represents a competitive advantage.



Non-Digital Products and Services




Historically, we provided certain non-digital services to some of our enterprise
clients such as printing and fulfillment services. We designed and printed
welcome kits and starter kits for their marketing needs and provided fulfillment
services, which consisted of managing the preparation, handling and shipping of
our client's custom-branded merchandise they use for marketing purposes at
conferences and other events. We also managed the fulfillment of our clients'
product sample packs that verbCRM users order through the app for automated
delivery and tracking to their customers and prospects.



In May 2020, we executed a contract with Range Printing ("Range"), a company in
the business of providing enterprise class printing, sample assembly,
warehousing, packaging, shipping, and fulfillment services. Pursuant to the
contract, through an automated process we have established for this purpose,
Range receives orders for samples and merchandise from us as and when we receive
them from our clients and users, and print, assemble, store, package and ship
such samples and merchandise on our behalf. The Range contract provides for a
service fee arrangement based upon the specific services to be provided by Range
that is designed to maintain our relationship with our clients by continuing to
service their non-digital needs, while eliminating the labor and overhead costs
associated with the provision of such services by us.



Our Market


Historically, our client base consisted primarily of multi-national direct sales
enterprises to whom we provide white-labeled, client-branded versions of our
products. During the year ended December 31, 2021, our client base expanded to
include large enterprises in the life sciences sector, professional sports
franchises, educational institutions, and not-for-profit organizations, as well
as clients in the entertainment industry, and the burgeoning CBD industry, among
other business sectors. As of March 31, 2022, we provided subscription-based
application services to approximately 150 enterprise clients for use in over 100
countries, in over 48 languages, which collectively account for a user base
generated through more than 3.3 million downloads of our verbCRM application.
Among the new business sectors targeted for this year are medical equipment and
pharmaceutical sales, armed services and government institutions, small
businesses and individual entrepreneurs.



29







Revenue Generation


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, verbPULSE, and verbTeams. 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

design, printing services, fulfillment and shipping services. The revenue is

recognized upon completion and shipment of products or fulfillment to

customers.

3. MARKET will generate revenue through several sources as follows:

a. All sales run through our ecommerce facility on MARKET from which we deduct a

platform fee that ranges from 10% to 35% of gross sales, with an average of

between 15-20%, depending upon the pricing package the vendors select as well

as the product category and profit margins associated with such categories.

The revenue is derived from sales generated during livestream events, from

viewers of previously recorded events available in each vendor's store, as

well as from sales of product and merchandise done through the vendors'

stores, all of which are available 24/7.

b. Produced events. MARKET will offer fee-based services that range from full

production of a livestream event, to providing professional hosts and event

    consulting.



c. The MARKET site is designed to incorporate sponsorships and other advertising

    based on typical industry rates.



Impact of COVID-19 on Our Business and Industry




Governments and businesses around the world continue to take actions to mitigate
the spread of COVID-19 and its variants, including, but not limited to,
shelter-in-place orders, quarantines, significant restrictions on travel, as
well as restrictions that prohibit many employees from going to work.
Uncertainty with respect to the economic effects of the pandemic has introduced
significant volatility in the financial markets.



Despite increased vaccine distribution programs and loosening of COVID-19
related restrictions in the regions in which we operate during the three months
ended March 31, 2022, both the pandemic and ongoing containment and mitigation
measures have had, and are likely to continue to have, an adverse impact on the
global and U.S. economies, the severity and duration of which are uncertain. As
such, our business, operations and financial condition has been, and we
anticipate will continue to be, adversely impacted by reduced demand for our
applications and non-digital services, as well as reduced access to capital. To
mitigate the adverse impact COVID-19 may have on our business and operations, we
implemented a number of measures to strengthen our financial position, including
eliminating, reducing, or deferring non-essential expenditures. However, the
extent to which the COVID-19 pandemic will impact our business, financial
conditions, and results of operations in the future remains uncertain and will
be affected by a number of factors, including the duration and extent of the
pandemic, the emergence of variants to COVID-19 the duration and extent of
imposed or recommended containment and mitigation measures, the extent,
duration, and effective execution of government stabilization and recovery
efforts, including those from the successful distribution of effective vaccines.



The COVID-19 pandemic may have long-term effects on the nature of the office
environment and remote working. This may present operational and workplace
culture challenges that may adversely affect our business. Throughout the three
months ended March 31, 2022, we have encouraged safe practices designed to stem
the infection and spread of COVID-19 within our workforce and beyond and to
maintain the mental health and well-being of our employees.



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.



30







Results of Operations


Three Months Ended March 31, 2022 as Compared to the Three Months Ended March 31, 2021

The following is a comparison of our results of operations for the three months ended March 31, 2022 and 2021 (in thousands):



                                                   Three Months Ended March 31,
                                                  2022           2021        Change

Revenue
Digital revenue
SaaS recurring subscription revenue            $    2,003      $  1,461    
$    542
Other digital revenue                                 147           340         (193 )
Total digital revenue                               2,150         1,801          349

Non-digital revenue                                   541           725         (184 )

Total revenue                                       2,691         2,526          165

Cost of revenue
Digital                                               557           540           17
Non-digital                                           416           675         (259 )
Total cost of revenue                                 973         1,215         (242 )

Gross margin                                        1,718         1,311          407

Operating expenses
Research and development                            1,580         2,884       (1,304 )
Depreciation and amortization                         409           414           (5 )
General and administrative                          7,036         7,343         (307 )
Total operating expenses                            9,025        10,641       (1,616 )

Loss from operations                               (7,307 )      (9,330 )      2,023

Other income (expense)
Interest expense                                     (756 )        (508 )       (248 )
Change in fair value of derivative liability        1,138           500    
     638
Other income (expense)                                (64 )          54         (118 )
Debt extinguishment, net                                -           939         (939 )
Total other income, net                               318           985         (667 )

Net loss                                       $   (6,989 )    $ (8,345 )   $  1,356




Revenue



Our SaaS recurring subscription revenues continue to grow year over year, which
is a reflection of our systematic investment in our business. SaaS recurring
subscription revenue as a percentage of total revenue for the three months ended
March 31, 2022 was 74%, compared to 58% for the three months ended March 31,
2021.



For the three months ended March 31, 2022, our total digital revenue was 80% of
total revenue compared with 71% for the three months ended March 31, 2021. Total
digital revenue for the three months ended March 31, 2022 was $2.2 million, an
increase of 19% compared to $1.8 million for the three months ended March 31,
2021. The increase was primarily driven from SaaS recurring subscription-based
revenue associated with our verbCRM, verbLEARN, verbTEAMS, verbLIVE, and
verbPULSE applications totaling $2.0 million, an increase of 37% compared to
$1.5 million reported for the three months ended March 31, 2021.



31







Total non-digital revenue for the three months ended March 31, 2022 was $0.5
million, a decrease of 25% compared to $0.7 million reported for the three
months ended March 31, 2021, which is consistent with the Company's strategy to
exit the low margin printing, fulfillment, and shipping aspects of the legacy
business to focus on digital revenue streams.



The table below sets forth our quarterly revenues from the three months ended
March 31, 2020 through the three months ended March 31, 2022, which reflects the
trend of revenue over the past nine fiscal quarters (in thousands):



                                                2020 Quarterly Revenue                          2021 Quarterly Revenue                 2022
                                        Q1          Q2          Q3         

Q4 Q1 Q2 Q3 Q4 Q1 SaaS recurring subscription revenue $ 1,057 $ 1,274 $ 1,478 $ 1,305 $ 1,461 $ 1,601 $ 1,846 $ 1,923 $ 2,003 Other digital

                             400         406         360       

218 340 209 510 288 147 Total digital revenue

                   1,457       1,680       1,838       

1,523 1,801 1,810 2,356 2,211 2,150

Total non-digital revenue                 897         972       1,022      
  576         725         582         544         495         541

Grand total                           $ 2,354     $ 2,652     $ 2,860     $ 2,099     $ 2,526     $ 2,392     $ 2,900     $ 2,706     $ 2,691




Cost of Revenue



Total cost of revenue for the three months ended March 31, 2022 was $1.0
million, compared to $1.2 million for the three months ended March 31, 2021. The
decrease in cost of revenue is primarily attributed to a decrease in non-digital
costs partially offset by increased digital costs to support additional
enterprise customers on the platform and increased users within our existing
customer base.



Gross Margin



Total gross margin for the three months ended March 31, 2022, was $1.7 million,
compared to $1.3 million for the three months ended March 31, 2021, representing
a 31% improvement. Gross margins improved as a result of our strategy to focus
on higher margin digital revenue and systematic reduction in non-digital
revenue.



Operating Expenses



Research and development expenses were $1.6 million for the three months ended
March 31, 2022, as compared to $2.9 million for the three months ended March 31,
2021. Research and development expenses primarily consisted of fees paid to
employees and vendors contracted to perform research projects and develop
technology. As our products move from research and development mode to operating
mode, we expect our research and development cost reductions to continue, as
experienced during the three months ended March 31, 2022.



Depreciation and amortization expenses were $0.4 million for the quarters ended March 31, 2022, and March 31, 2021.




General and administrative expenses for the three months ended March 31, 2022
were $7.0 million, as compared to $7.3 million for the three months ended March
31, 2021. The decrease in general and administrative expenses is primarily due
to lower spending on marketing and promotion of $(0.4) million along with a
decrease in share-based compensation of $(1.1) million, both partially offset by
an increase in labor costs of $0.9 million to support future growth with
anticipated product launches.



Other income, net, for the three months ended March 31, 2022 was $0.3 million,
which was primarily attributable to a change in the fair value of derivative
liability of $1.1 million, offset by interest expense of $(0.8) million.



32






Use of Non-GAAP Measures - Modified EBITDA




In addition to our results under generally accepted accounting principles
("GAAP"), we present Modified EBITDA as a supplemental measure of our
performance. However, Modified EBITDA is not a recognized measurement under GAAP
and should not be considered as an alternative to net income, income from
operations or any other performance measure derived in accordance with GAAP or
as an alternative to cash flow from operating activities as a measure of
liquidity. We define Modified EBITDA as net income (loss), plus interest
expense, depreciation and amortization, share-based compensation, financing
costs and changes in fair value of derivative liability.



Management considers our core operating performance to be that which our
managers can affect in any particular period through their management of the
resources that affect our underlying revenue and profit generating operations
that period. Non-GAAP adjustments to our results prepared in accordance with
GAAP are itemized below. You are encouraged to evaluate these adjustments and
the reasons we consider them appropriate for supplemental analysis. In
evaluating Modified EBITDA, you should be aware that in the future we may incur
expenses that are the same as or similar to some of the adjustments in this
presentation. Our presentation of Modified EBITDA should not be construed as an
inference that our future results will be unaffected by unusual or non-recurring
items.



                                                  Three Months Ended March 31,
(in thousands)                                      2022                 2021

Net loss                                       $       (6,989 )     $       (8,345 )

Adjustments
Depreciation and amortization                             409                  414
Share-based compensation                                1,301                2,402
Interest expense                                          756                  508
Change in fair value of derivative liability           (1,138 )            
  (500 )
Other (income) / expense                                   64                  (54 )
Debt extinguishment, net                                    -                 (939 )
Other non-recurring                                       126                    -

Total EBITDA adjustments                                1,518                1,831
Modified EBITDA                                $       (5,471 )     $       (6,514 )




The $1.0 million increase in Modified EBITDA for the three months ended March
31, 2022, compared to the same period in 2021, resulted from increased revenues,
decreases in cost of revenue, research and development, and marketing and
promotion, offset by an increase in labor related costs to support future
growth.



We present Modified EBITDA because we believe it assists investors and analysts
in comparing our performance across reporting periods on a consistent basis by
excluding items that we do not believe are indicative of our core operating
performance. In addition, we use Modified EBITDA in developing our internal
budgets, forecasts and strategic plan; in analyzing the effectiveness of our
business strategies in evaluating potential acquisitions; and in making
compensation decisions and in communications with our board of directors
concerning our financial performance. Modified EBITDA has limitations as an
analytical tool, which includes, among others, the following:



  ? Modified EBITDA does not reflect our cash expenditures, or future
    requirements, for capital expenditures or contractual commitments;

? Modified EBITDA does not reflect changes in, or cash requirements for, our

working capital needs;

? Modified EBITDA does not reflect future interest expense, or the cash

requirements necessary to service interest or principal payments, on our

    debts; and




33

? Although depreciation and amortization are non-cash charges, the assets being

depreciated and amortized will often have to be replaced in the future, and

Modified EBITDA does not reflect any cash requirements for such replacements.

Liquidity and Capital Resources



Going Concern



We have incurred operating losses and negative cash flows from operations since
inception. We incurred a net loss of $7.0 million during the three months ended
March 31, 2022. We also utilized cash in operations of $5.9 million during the
three months ended March 31, 2022. As a result, 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.


On January 12, 2022, we entered into a common stock purchase agreement with
Tumim Stone Capital LLC. Pursuant to the agreement, the Company has the right,
but not the obligation, to sell to the Investor, and the Investor is obligated
to purchase, up to $50.0 million of newly issued shares of our common stock, par
value $0.0001 per share from time to time during the term of the agreement,
subject to certain limitations and conditions. The Total Commitment is inclusive
of 607,287 shares of common stock issued to the Investor as consideration for
its commitment to purchase shares of common stock under the Common Stock
Purchase Agreement.



On January 12, 2022, we also entered into a securities purchase agreement with
three institutional investors providing for the sale and issuance of an
aggregate original principal amount of $6.3 million in convertible notes due
2023. We also entered into a security agreement with the Note Holders, dated
January 12, 2022, in connection with the Note Offering, pursuant to which we
granted a security interest to the Note Holders in substantially all of its
assets.



On April 20, 2022, the Company entered into a securities purchase agreement (the
"Purchase Agreement"), which provides for the sale and issuance by the Company
of an aggregate of (i) 14,666,667 shares of the Company's common stock, $0.0001
par value per share, at a purchase price of $0.75 per share, and (ii) warrants
to purchase 14,666,667 shares of the common stock at an exercise price of $0.75
per share, for aggregate gross proceeds of $11,000 before deducting placement
agent commissions and other estimated offering expenses (the "Registered Direct
Offering"). The Purchase Agreement contains customary representations,
warranties and agreements by the Company, customary conditions to closing, and
customary indemnification obligations of the Company. The Purchase Agreement
amongst other things restricts us from selling shares using at the market
("ATM") agreement with Truist Securities and the Common Stock Purchase
Agreement. As a result of this transaction, certain of our Series A warrants
priced at $1.10 per share were repriced to $0.75 per share under the terms of
such warrant agreements. The fair value of such warrants at this new exercise
price is approximately $0.5 million and the Company will account for this change
as a deemed dividend. In addition, as a result of entering into the Purchase
Agreement, we have repaid $1.65 million in principal payments to Note Holders
pursuant to the terms of the Note Offering, thereby reducing our outstanding
principal balance from $6.3 million to $4.65 million.



On April 20, 2022, we also entered into a placement agency agreement (the
"Placement Agency Agreement") with A.G.P./Alliance Global Partners (the
"Placement Agent"). Pursuant to the terms of the Placement Agency Agreement, the
Placement Agent agreed to use its reasonable best efforts to arrange for the
sale of the Securities in the Registered Direct Offering. We will pay the
Placement Agent a cash fee equal to 6.0% of the aggregate gross proceeds from
the sale of the Securities, subject to certain exceptions described in the
Placement Agency Agreement, and will reimburse the Placement Agent for certain
expenses. The Placement Agency Agreement contains customary representations,
warranties and agreements by us, customary representations and warranties of the
Placement Agent, customary conditions to closing, and customary indemnification
obligations of the Company.


Our consolidated financial statements have been prepared on a going concern
basis, which implies we may not continue to meet our obligations and continue
our operations for the next twelve months. Our continuation as a going concern
is dependent upon our ability to obtain necessary debt or equity financing to
continue operations until we begin generating positive cash flow. In addition,
our independent registered public accounting firm, in its report on our December
31, 2021 consolidated financial statements, has raised substantial doubt about
our ability to continue as a going concern.



34







There is no assurance that we will ever be profitable or that debt or equity
financing will be available to us in the amounts, on terms, and at times deemed
acceptable to us, if at all. The issuance of additional equity securities by us
would result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, would increase our liabilities and future cash commitments. If we are
unable to obtain financing in the amounts and on terms deemed acceptable to us,
we may be unable to continue our business, as planned, and as a result may be
required to scale back or cease operations for our business, the results of
which would be that our stockholders would lose some or all of their investment.
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.



Overview



As of March 31, 2022, we had cash of $3.7 million. We estimate our operating
expenses for the next twelve months may continue to exceed any revenue we
generate, and we may need to raise capital through either debt or equity
offerings to continue operations. Due to market conditions and the early stage
of our operations, there is considerable risk that we will not be able to raise
such financings at all, or on terms that are not dilutive to our existing
stockholders. We can offer no assurance that we will be able to raise such
funds. If we are unable to raise the funds we require for all of our planned
operations, we may be forced to reallocate funds from other planned uses and may
suffer a significant negative effect on our business plan and operations,
including our ability to develop new products and continue our current
operations. As a result, our business may suffer, and we may be forced to reduce
or discontinue operations.



The following is a summary of our cash flows from operating, investing, and
financing activities for the quarters ended March 31, 2022 and 2021 (in
thousands):



                                                            Three Months Ended March 31,
                                                              2022                 2021
Cash used in operating activities                        $       (5,899 )     $       (6,923 )
Cash (used in) / provided by investing activities                (2,363 )                  5
Cash provided by financing activities                            11,043    
          18,049
Increase in cash                                         $        2,781       $       11,131




Cash Flows - Operating


For the three months ended March 31, 2022, our cash flows used in operating
activities amounted to $5.9 million, compared to cash used for the three months
ended March 31, 2021 of $6.9 million. We generated $1.0 million additional cash
from operations due to higher revenues, decreases in research and development
expenses, marketing and promotion, which was offset by an increase in labor
related costs to support future growth.



Cash Flows - Investing


For the three months ended March 31, 2022, our cash flows used in investing activities amounted to $2.4 million, primarily due to our investment in capitalized software development costs related to MARKET.



Cash Flows - Financing


Our cash provided by financing activities for the three months ended March 31,
2022 amounted to $11.0 million, which represented $7.5 million of net proceeds
from the issuance of shares of our common stock, $6.0 million of gross proceeds
from the issuance of notes payable, and proceeds from option exercises of $0.4
million, all offset by $(2.5) million of payments on advances on future receipts
and payments for debt issuance costs of $(0.4) million.



35







Advances on Future Receipts



We have the following advances on future receipts as of March 31, 2022 (in
thousands):



                                                                           Original          Balance at
    Note          Issuance Date     Maturity Date     Interest Rate       Borrowing        March 31, 2022

Note 1          October 29, 2021    April 28, 2022                 5 %          2,120                  288
Note 2          October 29, 2021    July 25, 2022                 28 %          3,808                1,813
Note 3          December 23, 2021   June 22, 2022                  5 %            689                  344
Total                                                                    $      6,617                2,445
Debt discount                                                                                         (310 )
Net                                                                                       $          2,135




Note 1



On October 29, 2021, we received secured advances from an unaffiliated third
party totaling $2.0 million for the purchase of future receipts/revenues of $2.1
million. As of March 31, 2022, the outstanding balance of the note amounted to
$0.3 million, which we paid in full on April 28, 2022.



Note 2



On October 29, 2021, we received secured advances from an unaffiliated third
party totaling $2.7 million for the purchase of future receipts/revenues of $3.8
million. As of March 31, 2022, the outstanding balance of the note amounted
to
$1.8 million.



Note 3



On December 23, 2021, we received secured advances from an unaffiliated third
party totaling $0.7 million for the purchase of future receipts/revenues of $0.7
million. As of March 31, 2022, the outstanding balance of the note amounted
to
$0.3 million.



Notes Payable



We have the following outstanding notes payable as of March 31, 2022 (in
thousands):



                                                                                                 Balance at
                                                                                 Original        March 31,
       Note            Issuance Date      Maturity Date      Interest Rate       Borrowing          2022
Related party note
payable (A)           December 1, 2015   April 1, 2023                 12.0 %         1,249     $        725
Related party note
payable (B)           April 4, 2016      June 4, 2021                  12.0 %           343               40
Note payable (C)      May 15, 2020       May 15, 2050                  3.75 %           150              150
Notes payable (D)     January 12, 2022   January 12, 2023               6.0
%         6,300            6,300
Debt discount                                                                                           (226 )
Debt issuance costs                                                                                     (347 )
Total notes payable                                                                                    6,642
Non-current                                                                                             (875 )
Current                                                                                         $      5,767



(A) On December 1, 2015, we 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 us as of that date.

On May 12, 2022, the maturity date of the note was extended to April 1,

2023. As of March 31, 2022, the outstanding balance of the note amounted to

      $0.7 million.




36






(B) On April 4, 2016, we issued a convertible note to Mr. Cutaia, in the amount

of $0.3 million, to consolidate all advances made by Mr. Cutaia to us during

      the period December 2015 through March 2016. As of March 31, 2022, the
      outstanding balance of the note amounted to less than $0.1 million.



(C) On May 15, 2020, we executed an unsecured loan with the U.S. Small Business

Administration (SBA) under the Economic Injury Disaster Loan program in the

      amount of $0.15 million. Installment payments, including principal and
      interest, will begin on October 15, 2022. As of March 31, 2022, the
      outstanding balance of the note amounted to $0.15 million.

(D) On January 12, 2022, we entered into a securities purchase agreement with

three institutional investors (collectively, the "Note Holders") providing

for the sale and issuance of an aggregate original principal amount of $6.3

million in convertible notes due 2023 (each, a "Note," and, collectively,

the "Notes," and such financing, the "Note Offering"). We also entered into

a security agreement with the Note Holders dated January 12, 2022, in

connection with the Note Offering, pursuant to which the Company granted a

security interest to the Note Holders in substantially all of its assets.

There are no financial covenants related to these notes payable.

We received $6.0 million in gross proceeds from the sale of the Notes. The

      Note Offering closed on January 12, 2022. The Notes bear interest of 6.0%
      per annum, have an original issue discount of 5.0%, mature 12 months from

the closing date, and have an initial conversion price of $3.00, subject to

      adjustment in certain circumstances as set forth in the Notes.

      In connection with the debt agreement, we incurred $0.5 million of debt
      issuance costs. The debt issuance costs and the debt discount of $0.3
      million are being amortized over the term of the agreement using the
      effective interest rate method. As of March 31, 2022, the amount of

unamortized debt discount and debt issuance costs was $0.2 million and $0.3

      million, respectively.

      As of March 31, 2022, the outstanding balance of the note amounted to $6.3

million. Subsequent to March 31, 2022, we repaid $1.65 million in principal

      and $0.1 million of accrued interest. As a result of the repayment, the
      outstanding principal balance was $4.65 million as of the date of the
      issuance of the financial statements.

Beginning on May 12, 2022, we are required to make nine monthly principal

payments of $0.2 million, plus accrued interest, to the Note Holders, with

the remaining principal amount of $2.4 million, plus accrued interest, due

      on the maturity date.



Critical Accounting Policies

Our financial statements have been prepared in accordance with GAAP, which
require that we make certain assumptions and estimates that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of net revenue and expenses during each reporting period.



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 revenues and expenses during the reported periods. Significant
estimates include assumptions made for reserves of uncollectible accounts
receivable, assumptions made in valuing assets acquired in business
combinations, impairment testing of goodwill and other long-lived assets, the
valuation allowance for deferred tax assets, assumptions used in valuing
derivative liabilities, assumptions used in valuing share-based compensation,
and accruals for potential liabilities. Amounts could materially change in
the
future.



37







Revenue Recognition



The Company derives its revenue primarily from providing application services
through the SaaS application, digital marketing and sales support services. The
Company also derives revenue from the sale of customized print products and
training materials, branded apparel, and digital tools, as demanded by its
customers.



The Company recognizes revenue in accordance with Financial Accounting Standard
Board's ("FASB") ASC 606, Revenue from Contracts with Customers ("ASC 606"). 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.



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 straight-line

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, includes

design, printing services, fulfillment and shipping services. The revenue is

     recognized upon completion and shipment of products or fulfillment to the
     customer.



Derivative Financial Instruments

We evaluate our 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.



We use Level 2 inputs for our valuation methodology for the derivative
liabilities as their fair values were determined by using a Binomial pricing
model. Our 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 adjustments to fair value of derivatives.



Share-Based Compensation



The Company issues stock options and warrants, shares of common stock and
restricted stock units as share-based compensation to employees and
non-employees. The Company accounts for its share-based compensation in
accordance with FASB ASC 718, Compensation - Stock Compensation. Share-based
compensation cost is measured at the grant date, based on the estimated fair
value of the award, and is recognized as expense over the requisite service
period. The fair value of restricted stock units is determined based on the
number of shares granted and the quoted price of our common stock and is
recognized as expense over the service period. Recognition of compensation
expense for non-employees is in the same period and manner as if the Company had
paid cash for services.



38







Goodwill


In accordance with FASB ASC 350, Intangibles-Goodwill and Other, we review
goodwill and indefinite lived intangible assets for impairment at least annually
or whenever events or circumstances indicate a potential impairment. Our
impairment testing is performed annually at December 31 (our fiscal year end).
Impairment of goodwill and indefinite lived intangible assets is determined by
comparing the fair value of our reporting units 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.



Intangible Assets



We have certain intangible assets that were initially recorded at their fair
value at the time of acquisition. The finite-lived intangible assets consist of
developed technology and customer contracts. Indefinite-lived intangible assets
consist of domain names. 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.


Recently Issued Accounting Pronouncements

For a summary of our recent accounting policies, refer to Note 2 - Summary of
Significant Accounting Policies, of our unaudited condensed consolidated
financial statements included under Item 1 - Financial Statements in this Form
10-Q.


Off-Balance Sheet Arrangements

As of March 31, 2022, we did not have any off-balance sheet arrangements.

© Edgar Online, source Glimpses

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Analyst Recommendations on VERB TECHNOLOGY COMPANY, INC.
More recommendations
Financials (USD)
Sales 2022 17,6 M - -
Net income 2022 -21,9 M - -
Net Debt 2022 - - -
P/E ratio 2022 -2,51x
Yield 2022 -
Capitalization 59,3 M 59,3 M -
Capi. / Sales 2022 3,38x
Capi. / Sales 2023 2,09x
Nbr of Employees 110
Free-Float 86,2%
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Mean consensus BUY
Number of Analysts 3
Last Close Price 0,59 $
Average target price 2,92 $
Spread / Average Target 399%
EPS Revisions
Managers and Directors
Rory J. Cutaia Chairman, President, CEO & Secretary
Salman H. Khan Treasurer, Chief Financial & Accounting Officer
James P. Geiskopf Lead Independent Director
Phillip J. Bond Independent Director
Kenneth S. Cragun Independent Director
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