| 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, 2023 filed with the SEC on April 1, 2024 (the “2023 Annual Report”). The consolidated
balance sheet as of December 31, 2023 included herein was derived from the audited consolidated financial statements as of that date. On
June 10, 2023, the board of directors approved the sale of the SaaS Assets to an unrelated third party, SW Direct Sales LLC (“SW
Sales” or the “buyer”), for $ 6,500 4,750 1,750 Accordingly,
the Company’s consolidated financial statements are being presented pursuant to ASC 360-10-45-9 which requires that a disposal
group be classified as held for sale in the period in which all of the held for sale criteria are met. In addition to held for sale accounting,
the Company had also met the criterion pursuant to ASC 205-20, Discontinued Operations In
the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to
fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all
adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not
necessarily indicative of fiscal year-end results. Principles
of Consolidation The
consolidated financial statements have been prepared in accordance with GAAP and include the accounts of Verb, Verb Direct, LLC, Verb
Acquisition Co., LLC, and verbMarketplace, LLC. All intercompany accounts have been eliminated in the consolidation. 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 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: MARKET.live
generates revenue through several sources as follows:
a. All
sales run through our ecommerce facility on MARKET.live from which we deduct a platform fee that ranges from 10% to 20% of gross
sales, with an average of approximately 15
b. Produced
events. MARKET.live offers fee-based services that range from full production of livestream events, to providing professional hosts
and event consulting.
c. Drop
Ship and Creator programs. MARKET.live is expected to generate recurring fee revenue from soon to be launched new drop ship programs
for entrepreneurs and its Creator program.
d. The
Company’s TikTok Shop store and affiliate program.
e. The
MARKET.live site is designed to incorporate sponsorships and other advertising based on typical industry rates.
f. The
Company’s recently announced partnership with TikTok Shop. Pursuant to the terms of the partnership, MARKET.live has become
a service provider for TikTok Shop and is officially designated as a TikTok Shop Partner (TSP). Under the terms of the partnership,
TikTok Shop refers consumer brands, retailers, influencers and affiliates leads to MARKET.live for a menu of paid services that include,
among other things, assistance in onboarding to TikTok Shop and establishing a TikTok Shop store, hosting training sessions and webinars
for prospective TikTok Shop sellers, MARKET.live studio space rental in both the West Coast and East Coast MARKET.live studios, content
creation and production services, and TikTok Shop maintenance, including enhancements to existing TikTok Shop seller stores. The
partnership also contemplates TikTok Shop sponsored studio rentals, as well as a paid-for “day pass” for use of MARKET.live
studio services by TikTok creators, influencers and affiliates. It is expected that MARKET.live will generate revenue through fees,
including monthly recurring fees, paid directly to MARKET.live by the brands, retailers, influencers and affiliates referred to MARKET.live
by TikTok. In addition, it is contemplated that MARKET.live will receive a percentage of monthly revenue generated through the TikTok
Shop stores MARKET.live establishes for the brands, retailers, influencers and affiliates that TikTok Shop refers to MARKET.live.
The
partnership also contemplates the use of MARKET.live studios as TikTok “Sample Centers” where TikTok creators will have
access to product samples for use in their TikTok Shop videos produced at MARKET.live studios. In addition to the compensation referenced
above, TikTok will compensate MARKET.live directly for the attainment of certain pre-established performance goals and objectives
agreed-to between the parties. A
performance obligation is a promise in a contract to transfer a distinct product. Performance obligations promised in a contract are
identified based on the goods that will be transferred that are both capable of being distinct and are distinct in the context of the
contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. Performance obligations include
establishing and maintaining customer online stores, providing access to the Company’s e-commerce platform and customer service
support. The
Company’s revenue is comprised of commission fees derived from contractually committed gross revenue processed by customers on
the Company’s e-commerce platform as well as from services it provides as referenced above in sub-paragraph (f) of the Revenue
Recognition section concerning the TikTok Shop partnership. Customers do not have the contractual right to take possession of the Company’s
software. Revenue is recognized in an amount that reflects the consideration that the Company expects to ultimately receive in exchange
for those promised goods, net of expected discounts for sales promotions and customary allowances, and its services. Revenue
is recognized on a net basis from maintaining e-commerce platforms and online orders, as the Company is engaged primarily in an agency
relationship with its customers and earns defined amounts based on the individual contractual terms for the customer and the Company
does not take possession of the customers’ inventory or any credit risks relating to the products sold. Sales
taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded
from net sales in the consolidated statements of operations. Revenues during the three and six months ended June 30, 2024 and 2023, were
substantially all generated from clients and customers located within the United States of America. Cost
of Revenue Cost
of revenue primarily consists of processing fees associated with the MARKET.live platform. 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 is recorded in depreciation and amortization in the condensed consolidated
statements of operations. Preferred
Stock The
Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement
of its preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at
fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within
the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control)
are classified as temporary equity. At all other times, preferred shares are classified as part of stockholders’ equity. Accordingly,
the Series C Preferred Stock offering on December 29, 2023 is classified as part of stockholders’ equity as of June 30, 2024 and
December 31, 2023. 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 amount of notes payable approximates
the fair value due to the fact that the interest rates on these obligations are based on prevailing market interest rates. The Company
uses Level 2 inputs for its valuation methodology for the derivative liabilities. Derivative
Financial Instruments The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded
at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements
of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or
as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as
current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of
the balance sheet date. The
Company uses Level 2 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using
a Binomial pricing model. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any
increase or decrease in the fair value being recorded in results of operations as adjusted to fair value of derivatives. Share-Based
Compensation The
Company issues stock options and warrants, shares of common stock and restricted stock units as share-based compensation to employees
and non-employees. The Company accounts for its share-based compensation in accordance with FASB ASC 718, Compensation – Stock
Compensation 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 June 30, 2024, and 2023, the Company had total outstanding options of 2,038,965 1,099,523 740,368 951,804 148,227 21,535 0 21,874 41.20 At
the close of business on April 5, 2024, the Company’s unexercised publicly traded warrants under the symbol VERBW expired pursuant
to their original terms and as such Nasdaq suspended trading the 175,823 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’s concentration of credit risk includes its concentrations from key customers and vendors. The details of these significant
customers and vendors are presented in the following table for the six months ended June 30, 2024 and 2023: SCHEDULE
OF CONCENTRATION RISK
Six
Months Ended June 30,
2024 2023
The
Company’s largest customers are presented below as a percentage of the aggregate
Revenues One
customer that accounted for 52 No
customers individually over 10
The
Company’s largest vendors are presented below as a percentage of the aggregate
Purchases One
vendor that accounted for 18 One
vendor that accounted for 32 Supplemental
Cash Flow Information SCHEDULE
OF SUPPLEMENTAL CASH FLOW INFORMATION
2024 2023
Six Months Ended June 30,
2024 2023
Supplemental disclosures of cash flow information:
Cash paid for interest $ 1 $ 234
Cash paid for income taxes $ 1 $ 2
Supplemental disclosure of non-cash investing and financing activities attributable to continuing operations:
Fair value of common shares issued as payment on notes payable $ 2,777 $ 300
Fair value of common shares issued to redeem Series C preferred shares 656 -
Fair value of common shares issued to settle accrued expenses - 146
Supplemental disclosure of non-cash investing and financing activities attributable to discontinued operations:
Discount recognized from advances on future receipts $ - $ 558 Recent
Accounting Pronouncements Recently
Adopted Accounting Pronouncements In
June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”).
Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards
Board (FASB) issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), Other
recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission (the “SEC”) did not or are not believed by management to have a material
impact on the Company’s present or future consolidated financial statements. |
