| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND SUPPLEMENTAL DISCLOSURES | 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND SUPPLEMENTAL DISCLOSURES Basis
of Presentation The
accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and
applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting.
Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed
or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2021 filed with the SEC on March 31, 2022 (the “2021 Annual Report”). The consolidated
balance sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date. In
the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to
fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all
adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not
necessarily indicative of fiscal year-end results. Principles
of Consolidation The
condensed consolidated financial statements have been prepared in accordance with GAAP and include the accounts of Verb, Verb Direct,
LLC, Verb Acquisition Co., LLC, and verbMarketplace, LLC. All intercompany accounts have been eliminated in the consolidation. Going
Concern The
accompanying condensed 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 condensed
consolidated financial statements, during the nine months ended September 30, 2022, the Company incurred a net loss of $ 21,391 15,975 On
January 12, 2022, the Company entered into a common stock purchase agreement (the “January Purchase Agreement”) with
Tumim Stone Capital LLC (the “Investor”). Pursuant to the agreement, the Company has the right, but not the obligation,
to sell to the Investor, and the Investor is obligated to purchase, up to $ 50,000 0.0001 607,287 On
January 12, 2022, the Company also entered into a securities purchase agreement (the “January Note Purchase Agreement”)
with three institutional investors (collectively, the “January Note Holders”) providing for the sale and issuance of an
aggregate original principal amount of $ 6,300 The January Note Purchase
Agreement also gives the January Note Holders the right to require the Company to use up to 15% of the gross proceeds raised from future
debt or equity financings to redeem the Notes, which redemptions have been elected by the January Note Holders as described below. On
April 20, 2022, the Company entered into a securities purchase agreement, which provides for the sale and issuance by the Company of
an aggregate of (i) 14,666,667 14,666,667 0.75 11,000 1.10 2.10 0.75 1,650 As
of September 30, 2022, the Company had cash of $ 921 . The Company,
through its Professional Employer Organization, filed for federal government assistance for the second and third quarters of 2021 in
the aggregate amount of approximately $ 1,500 Prior to September
30, 2022, the U.S. Small Business Administration (“SBA”) approved an additional loan of $ 350 On
October 25, 2022, the Company entered into a securities purchase agreement (the “October Purchase Agreement”), which
provides for the sale and issuance by the Company of an aggregate of (i) 12,500,000 shares
of Common Stock, at a purchase price of $ 0.32 per
share, and (ii) warrants to purchase 12,500,000 shares
of the common stock at an exercise price of $ 0.34 per
share, for aggregate gross proceeds of $ 4,000 before
deducting placement agent commissions and other offering expenses (the “October Registered Direct Offering”). As a
result of this transaction, certain warrants which previously had an exercise price of $ 0.75 per
share, had the exercise price reduced to $ 0.34 per
share. Further, in connection with the October Purchase Agreement, the Company is restricted from (i) issuing or filing any
registration statement to offer the sale of any Common Stock or securities convertible into or exercisable for shares of Common
Stock until 75 days after the date thereof; and (ii) entering into an agreement to effect any issuance of Common Stock involving a
Variable Rate Transaction (as defined therein) during the term of the agreement, subject to certain exceptions set forth therein. As
a result of this transaction, the Company paid $ 1,172 towards
principal and accrued interest on the Notes. The Company and the January Note Holders also agreed to interest
only payments with a final principal payment of $ 2,545 due
on the maturity date. On
November 7, 2022, the Company entered into a note purchase agreement (the “November Note Purchase Agreement”) and promissory
note with an institutional investor (the “November Note Holder”) providing for the sale and issuance of an unsecured, non-convertible
promissory in the original principal amount of $ 5,470 470 5,000 The November Note matures eighteen months following the date of issuance. Commencing six months from the date of issuance, the Company is required to make monthly cash redemption payments in an amount not to exceed $600. The November Note may be repaid in whole or in part prior to the maturity date for a 10% premium. The November Note requires the Company to use 20% of the gross proceeds raised from future equity or debt financings, or the sale of any subsidiary or material asset, to prepay the November Note, subject to a cap on the aggregate prepayment amount. If
the Company is unable to generate sufficient cash flow from operations to operate its business and pay its debt obligations as they
become due, it will need to seek to raise additional capital, borrow additional funds, dispose of subsidiaries or assets, reduce or
delay capital expenditures, or change its business strategy. However, in light of the restrictive covenants imposed by certain of
the Company’s prior financing arrangements, in combination with the recent decline in the trading price of the Common Stock,
the Company may be unable to raise additional capital in sufficient amounts when needed to operate its business, service its debt or
execute on its strategic plans. Further, notwithstanding such restrictions, there can be no assurance that debt or equity financing
will be available in the amounts, on terms, or at times deemed acceptable by the Company. The issuance of additional equity
securities would result in significant dilution in the equity interests of the Company’s current stockholders and could
include rights or preferences senior to those of the current stockholders. Borrowing additional funds would increase the
Company’s liabilities and future cash commitments and potentially impose significant operational or financial restrictions and
require the Company to further encumber its assets. If the Company is unable to obtain financing in the amounts and on terms deemed
acceptable, the Company may be unable to continue to operate its business or pay its obligations as they become due, and as a result
may be required to curtail or cease operations, which may result in stockholders or noteholders losing some or all of their
investment. For
additional information, refer to Note 1 to the condensed consolidated financial statements, and the section titled “Risk Factors,”
within the 2021 Annual Report. 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. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, and
other factors that management believes to be reasonable. In addition, the Company has considered the potential impact of the pandemic,
as well as certain macroeconomic factors, including inflation, rising interest rates, and recessionary concerns, on its business and
operations. 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. Some of those assumptions can be subjective and complex, and therefore, actual
results could differ materially from those estimates under different assumptions or conditions. Revenue
Recognition The
Company recognizes revenue in accordance with Financial Accounting Standard Board’s (“FASB”) ASC 606, Revenue from
Contracts with Customers A
description of our principal revenue generating activities is as follows:
1. Digital
Revenue which is divided into two main categories:
a. SaaS
recurring digital revenue based on contract-based subscriptions to Verb app products and platform services which include verbCRM,
verbLEARN, verbLIVE, verbTEAMS, and verbPULSE. The revenue is recognized straight-line over the subscription period.
b. Non-SaaS,
non-recurring digital revenue, which is revenue generated by the use of app products and in-app purchases, such as sampling and other
services obtained through the app. The revenue for samples is recognized upon completion and shipment, while the design fees are
recognized when the service has been rendered, collectability is reasonably assured, and the app is delivered to the customer. Subscription
revenue from the application services is recognized over the life of the estimated subscription period. The Company also charges certain
customers setup or installation fees for the creation and development of websites and mobile applications. These fees are accounted for
as part of contract liabilities and amortized over the estimated life of the agreement. Revenue is measured as the amount of consideration
expected to be received in exchange for transferring the products or services to a customer.
2. Non-digital
revenue, which is revenue generated from non-app, non-digital sources through ancillary services provided as an accommodation to
clients and customers. These services include design, printing services, fulfillment and shipping services. The revenue is recognized
upon completion and shipment of products or fulfillment to the customer. Effective April 1, 2022, the Company entered into a customer
referral agreement with a third party for its cart site and printing business. Under the agreement, the Company earns a certain
percentage for customer referrals and merchandise sales as well as cart site design fees, all of which will be recognized as non-digital
revenue on a net basis. The
non-digital 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. 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 of operations. Historically, we have not experienced any significant payment delays from
customers. The Company allows returns within 30 days of purchase from end-users. Customers may return purchased products under certain
circumstances. Returns from customers during the three and nine months ended September 30, 2022 and 2021 were immaterial. Revenue
during the three and nine months ended September 30, 2022 and 2021 were substantially all generated from clients and customers located
within the United States of America, though some utilize the Company’s applications outside the United States of America. Cost
of Revenue Cost
of revenue primarily consists of the salaries of certain employees and contractors, digital content costs, purchase price of consumer
products, packaging supplies, and customer shipping and handling expenses. Shipping costs to receive products from our suppliers are
included in our inventory and recognized as cost of revenue upon sale of products to our customers. Contract
Liabilities Contract
liabilities represent consideration received from customers under revenue contracts for which the Company has not yet delivered or completed
its performance obligation to the customer. Contract liabilities are recognized over the contract period. Capitalized
Software Development Costs The
Company capitalizes internal and external costs directly associated with developing internal-use software, and hosting arrangements that
include an internal-use software license, during the application development stage of its projects. The Company’s internal-use
software is reported at cost less accumulated amortization. Amortization begins once the project has been completed and is ready for
its intended use. The Company will amortize 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. Amortization
expense related to capitalized software development costs are recorded in depreciation and amortization in the condensed consolidated
statements of operations. Goodwill and Intangible Assets Management reviews
goodwill and indefinite lived intangible assets for impairment at least annually or whenever events or circumstances indicate a potential
impairment. Management reviews all finite lived intangible assets for impairment when circumstances indicate that their carrying values
may not be recoverable. As of September
30, 2022, management concluded that there were no impairment indicators. If economic uncertainty increases and/or the global economy
worsens, the Company’s business, financial condition and results of operations may be sufficiently impacted to result in future
impairment charges in the short-term. Management will continue to monitor the effects that macroeconomic conditions have on its business
and operations and will review impairment indicators to the extent necessary in the upcoming months. 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 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 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, accounts
payable and accrued expenses approximate their fair value due to their short-term nature. The carrying values of 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 derivative financial instruments. 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 condensed 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 condensed consolidated
balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within
12 months of the balance sheet date. The
Company uses Level 2 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using
a Binomial pricing model. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any
increase or decrease in the fair value being recorded in results of operations as adjusted to fair value of derivatives. Share-Based
Compensation The
Company issues stock options, 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 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 or conversion. As
of September 30, 2022, and 2021, the Company had total outstanding options of 5,252,119 5,528,405 25,651,407 11,008,302 2,071,849 2,109,999 1,209,610 0 3.00 808,900 742,278 1.03 Concentration
of Credit and Other Risks Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable. Cash is deposited
with a limited number of financial institutions. The balances held at any one financial institution at times may be in excess of Federal
Deposit Insurance Corporation (“FDIC”) insurance limits of up to $ 250 The
Company evaluates the concentration of credit risk associated with key customers. During the three months ended September 30, 2022, we
had one customer that accounted for 11 10% 10 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
credit worthiness of its customers. As
of September 30, 2022 and December 31, 2021, we had no customers that accounted for 10 The
Company also evaluates the concentration of risk associated with key vendors. For the three and nine months ended September 30, 2022,
we had two vendors that accounted for 54 45 11 16 65 61 17 31 16 20 48 36 42 40 Reclassification
Adjustment The
Company reclassified $ 2,288 Supplemental
Cash Flow Information SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION
2022 2021
Nine Months Ended September 30,
2022 2021
Supplemental disclosures of cash flow information:
Cash paid for interest $ 203 $ 112
Cash paid for income taxes 1 1
Supplemental disclosure of non-cash investing and financing activities:
Fair value of derivative liability extinguished - 4,513
Fair value of common shares issued to settle accounts payable - 19
Fair value of common shares issued to settle accrued expenses 450 281
Reclassification of Class B Units upon conversion to common stock - 3,065
Fair value of common stock issued to settle notes payable – related party - 200
Fair value of common stock received in exchange for employee’s payroll taxes 8 130
Fair value of common stock issued for future services - 164
Discount recognized from advances on future receipts 900 2,484
Fair value of debt forgiveness - 1,400
Fair value of warrants issued to Series A preferred stockholders – deemed dividend - 348
Fair value of common stock issued to settle lawsuit - 678
Accrued software development costs 291 2,288
Discount recognized from convertible notes payable 300 -
Derecognition of operating lease right-of-use assets 543 -
Derecognition of operating lease liabilities 521 -
Recognition of operating lease right-of-use asset and related lease liability 212 - Recent
Accounting Pronouncements Recently
Adopted Accounting Pronouncements In
August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “ Debt—Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40 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 In
October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers In
November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832)—Disclosures by Business Entities about Government
Assistance Recently
Issued Accounting Pronouncements Not Yet Adopted In
June 2016, the FASB issued ASU No. 2016-13, Credit Losses – Measurement of Credit Losses on Financial Instruments (“ASC
326”). |
