UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number: 001-38834

Verb Technology Company, Inc.

(Exact name of registrant as specified in its charter)

Nevada

90-1118043

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

782 S. Auto Mall Drive

American Fork, Utah

84003

(Address of principal executive offices)

(Zip Code)

(855) 250-2300

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value

Common Stock Purchase Warrants

VERB

VERBW

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

As of August 9, 2021, there were 67,520,919 shares of common stock, $0.0001 par value per share, outstanding.

VERB TECHNOLOGY COMPANY, INC.

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS	3
PART I - FINANCIAL INFORMATION	4
ITEM 1 - FINANCIAL STATEMENTS	4
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	46
ITEM 4 - CONTROLS AND PROCEDURES	47
PART II - OTHER INFORMATION	47
ITEM 1 - LEGAL PROCEEDINGS	47
ITEM 1A - RISK FACTORS	48
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	59
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES	59
ITEM 4 - MINE SAFETY DISCLOSURES	59
ITEM 5 - OTHER INFORMATION	59
ITEM 6 - EXHIBITS	60
SIGNATURES	61

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the three and six months ended June 30, 2021 (this “Quarterly Report”), includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not statements of historical facts and can be identified by words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” or similar expressions and the negatives of those expressions. Forward-looking statements also include the assumptions underlying or relating to such statements.

Our forward-looking statements are based on our management’s current beliefs, assumptions and expectations about future events and trends, which affect or may affect our business, strategy, operations, financial performance or liquidity. Although we believe these forward-looking statements are based upon reasonable assumptions, they are subject to numerous known and unknown risks and uncertainties and are made in light of information currently available to us. Some of the risks and uncertainties that may impact our forward-looking statements include, but are not limited to, the following factors:

● our incursion of significant net losses and uncertainty whether we will achieve or maintain profitable operations;

● our ability to continue as a “going concern”;

● the novel coronavirus (“COVID-19”) pandemic, which has had a sustained impact on our business, sales, results of operations and financial condition;

● our ability to grow and compete in the future, which is dependent upon whether capital is available to us on favorable terms;

● our ability to maintain and expand our customer base and our ability to convince our customers to increase the use of our services and/or platform;

● the competitive market in which we operate;

● our ability to increase the number of our strategic relationships or grow the revenues received from our current strategic relationships;

● our ability to develop enhancements and new features to our existing service or acceptable new services that keep pace with technological developments;

● our ability to deliver our services, as we depend on third party Internet providers; and

● our susceptibility to security breaches and other disruptions.

The foregoing list may not include all of the risk factors that impact the forward-looking statements made in this Quarterly Report. Our actual financial condition and results could differ materially from those expressed or implied by our forward-looking statements as a result of various additional factors, including those discussed in the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2020 (our “Annual Report”), as well as in the other reports we file with the Securities and Exchange Commission (the “SEC”). You should read this Quarterly Report, and the other documents we file with the SEC, with the understanding that our actual future results may be materially different from the results expressed or implied by our forward-looking statements.

We operate in an evolving environment. New risks and uncertainties emerge from time to time and it is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual future results to be materially different from those expressed or implied by any forward-looking statements.

Forward-looking statements speak only as of the date they were made, and, except to the extent required by law or the rules of the NASDAQ Capital Market, we undertake no obligation to update or review any forward-looking statement because of new information, future events or other factors.

We qualify all of our forward-looking statements by these cautionary statements.

PART I — FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020	5

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (unaudited)	6

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020 (unaudited)	7

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)	9

Notes to Condensed Consolidated Financial Statements (unaudited)	10-31

VERB TECHNOLOGY COMPANY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2021			December 31, 2020
	(unaudited)
ASSETS

Current assets:
Cash	$	6,449,000		$	1,815,000
Accounts receivable, net of allowance of $609,000 and $361,000, respectively		923,000			919,000
Inventory, net of allowance of $51,000 and $51,000, respectively		12,000			34,000
Prepaid expenses and other current assets		1,265,000			900,000
Total current assets		8,649,000			3,668,000

Right-of-use assets		2,449,000			2,730,000
Property and equipment, net of accumulated depreciation of $416,000 and $339,000, respectively		769,000			862,000
Intangible assets, net of amortization of $3,035,000 and $2,310,000, respectively (including provisional intangible assets of $982,000 and $1,042,000, respectively)		4,428,000			5,153,000
Goodwill (including provisional goodwill of $3,723,000, respectively)		20,060,000			20,060,000
Other assets		67,000			69,000

Total assets	$	36,422,000		$	32,542,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	4,750,000		$	5,097,000
Accrued officers’ salary		1,053,000			822,000
Accrued interest (including $129,000 and $102,000 payable to related parties)		135,000			114,000
Advance on future receipts, net of discount of $1,013,000 and $67,000, respectively		3,783,000			110,000
Notes payable - related party		152,000			1,077,000
Deferred incentive compensation, current		521,000			521,000
Operating lease liability, current		585,000			596,000
Deferred revenue and customer deposits		542,000			272,000
Derivative liability		7,911,000			8,266,000

Total current liabilities		19,432,000			16,875,000

Long Term liabilities:
Notes payable		150,000			1,458,000
Note payable - related party, non-current		725,000			-
Deferred incentive compensation to officers		-			521,000
Operating lease liability, non-current		2,628,000			2,943,000
Total liabilities		22,935,000			21,797,000

Commitments and contingencies		-			-

Stockholders’ equity
Preferred stock, $0.0001 par value, 15,000,000 shares authorized: Series A Convertible Preferred Stock, 6,000 shares authorized; 1,706 and 2,006 issued and outstanding as of June 30, 2021 and December 31, 2020		-			-
Class A units, 100 issued and authorized as of June 30, 2021 and December 31, 2020		-			-
Class B units, 2,642,159 shares authorized, 0 and 2,642,159 issued and outstanding as of June 30, 2021 and December 31, 2020		-			3,065,000
Common stock, $0.0001 par value, 200,000,000 shares authorized, 63,795,968 and 47,795,009 shares issued and outstanding as of June 30, 2021 and December 31, 2020		6,000			5,000
Additional paid-in capital		115,179,000			89,216,000
Accumulated deficit		(101,698,000	)		(81,541,000	)

Total stockholders’ equity		13,487,000			10,745,000

Total liabilities and stockholders’ equity	$	36,422,000		$	32,542,000

The accompanying notes are an integral part of these condensed consolidated financial statements

VERB TECHNOLOGY COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months			Three Months			Six Months			Six Months
	Statement of Operations
	Three Months Ended June 30, 2021			Three Months Ended June 30, 2020			Six Months Ended June 30, 2021			Six Months Ended June 30, 2020

Revenue
SaaS recurring subscription revenue	$	1,601,000		$	1,274,000		$	3,062,000		$	2,331,000
Other Digital		209,000			406,000			549,000			806,000
Welcome kits and fulfillment		477,000			713,000			1,092,000			1,441,000
Shipping		105,000			259,000			215,000			428,000
Total revenue		2,392,000			2,652,000			4,918,000			5,006,000

Cost of revenue
SaaS and other digital		569,000			264,000			1,109,000			494,000
Welcome kits and fulfillment		464,000			662,000			1,049,000			1,338,000
Shipping		86,000			209,000			176,000			366,000
Total cost of revenue		1,119,000			1,135,000			2,334,000			2,198,000

Gross margin		1,273,000			1,517,000			2,584,000			2,808,000

Operating Expenses:
Research and development		3,213,000			1,627,000			6,097,000			2,901,000
Depreciation and amortization		400,000			357,000			814,000			719,000
General and administrative		6,542,000			4,018,000			13,885,000			7,533,000
Total operating expenses		10,155,000			6,002,000			20,796,000			11,153,000

Loss from operations		(8,882,000	)		(4,485,000	)		(18,212,000	)		(8,345,000	)

Other income (expense), net
Other income (expense), net		20,000			9,000			74,000			3,000
Interest expense - amortization of debt discount		(565,000	)		(137,000	)		(1,040,000	)		(274,000	)
Change in fair value of derivative liability		(2,445,000	)		1,228,000			(1,945,000	)		3,320,000
Gain on extinguishment of PPP notes payable		91,000			-			1,317,000			-
Debt extinguishment, net		-			-			(287,000	)		-
Interest expense		(31,000	)		(39,000	)		(64,000	)		(74,000	)
Total other income (expense), net		(2,930,000	)		1,061,000			(1,945,000	)		2,975,000

Net loss		(11,812,000	)		(3,424,000	)		(20,157,000	)		(5,370,000	)

Deemed dividends to Series A stockholders		-			-			-			(3,951,000	)

Net loss to common stockholders	$	(11,812,000	)	$	(3,424,000	)	$	(20,157,000	)	$	(9,321,000	)

Net loss per share to common stockholders - basic and diluted	$	(0.19	)	$	(0.11	)	$	(0.35	)	$	(0.33	)
Weighted average number of common shares outstanding - basic and diluted		63,147,880			29,818,934			57,627,324			27,905,680

The accompanying notes are an integral part of these condensed consolidated financial statements

VERB TECHNOLOGY COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE

THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(Unaudited)

	Shares			Amount		Shares		Amount		Shares			Amount			Shares		Amount		Capital		Deficit			Total
	Preferred Stock					Class A Units				Class B Units						Common Stock				Additional Paid-in		Accumulated
	Shares			Amount		Shares		Amount		Shares			Amount			Shares		Amount		Capital		Deficit			Total
Balance at December 31, 2020		2,006		$	-		-	$	-		2,642,159		$	3,065,000			47,795,009	$	5,000	$	89,216,000	$	(81,541,000	)	$	10,745,000
Sale of common stock from private placement
Sale of common stock from private placement, shares
Fair value of warrants issued to Series A Preferred stockholders
Sale of common stock from public offering		-			-		-		-		-			-			9,375,000		1,000		14,128,000		-			14,129,000
Issuance of common stock from warrant exercise		-			-		-		-		-			-			1,036,600		-		1,103,000		-			1,103,000
Issuance of common stock from option exercise		-			-		-		-		-			-			332,730		-		377,000		-			377,000
Fair value of common shares issued to settle note payable – related party		-			-		-		-		-			-			194,175		-		200,000		-			200,000
Fair value of common shares issued to settle lawsuit		-			-		-		-		-			-			600,000		-		678,000		-			678,000
Conversion of Series A Preferred to common stock		(300	)		-		-		-		-			-			272,728		-		-		-			-
Fair value of common shares issued for services		-			-		-		-		-			-			1,117,467		-		1,769,000		-			1,769,000
Fair value of vested restricted stock awards		-			-		-		-		-			-			247,703		-		905,000		-			905,000
Fair value of vested stock options and warrants		-			-		-		-		-			-			-		-		870,000		-			870,000
Extinguishment of derivative liability upon exercise of warrants		-			-		-		-		-			-			-		-		2,300,000		-			2,300,000
Fair value of common shares issued to settle accrued expenses		-			-		-		-		-			-			182,397		-		281,000		-			281,000
Fair value of warrants issued to officer to modify note payable		-			-		-		-		-			-			-		-		287,000		-			287,000
Conversion of Class B Units to common shares		-			-		-		-		(2,642,159	)		(3,065,000	)		2,642,159		-		3,065,000		-			-
Net loss		-			-		-		-		-			-			-		-		-		(20,157,000	)		(20,157,000	)
Balance at June 30, 2021		1,706		$	-		-	$	-		-		$	-			63,795,968	$	6,000	$	115,179,000	$	(101,698,000	)	$	13,487,000

The accompanying notes are an integral part of these condensed consolidated financial statements

	Preferred Stock				Class A Units				Class B Units				Common Stock				Additional Paid-in		Accumulated
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Total
Balance at March 31, 2021		1,706	$	-		-	$	-		-	$	-		62,633,282	$	6,000	$	112,978,000	$	(89,886,000	)	$	23,098,000
Fair value of common shares issued to settle note payable – related party		-		-		-		-		-		-		194,175		-		200,000		-			200,000
Fair value of common shares issued to settle lawsuit		-		-		-		-		-		-		600,000		-		678,000		-			678,000
Fair value of common shares issued for services		-		-		-		-		-		-		307,956		-		355,000		-			355,000
Fair value of vested restricted stock awards		-		-		-		-		-		-		-		-		458,000		-			458,000
Fair value of vested stock options and warrants		-		-		-		-		-		-		-		-		422,000		-			422,000
Extinguishment of derivative liability upon exercise of warrants		-		-		-		-		-		-		-		-		14,000		-			14,000
Fair value of common shares issued to settle accrued expenses		-		-		-		-		-		-		60,555		-		74,000		-			74,000
Net loss		-		-		-		-		-		-		-		-		-		(11,812,000	)		(11,812,000	)
Balance at June 30, 2021		1,706	$	-		-	$	-		-	$	-		63,795,968	$	6,000	$	115,179,000	$	(101,698,000	)	$	13,487,000

	Preferred Stock					Class A Units				Class B Units				Common Stock				Additional Paid-in			Accumulated
	Shares			Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Total
Balance at December 31, 2019		4,396		$	-		-	$	-		-	$	-		24,496,197	$	2,000	$	68,028,000		$	(56,585,000	)	$	11,445,000
Sale of common stock from private placement		-			-		-		-		-		-		4,237,833		1,000		4,443,000			-			4,444,000
Fair value of warrants issued to Series A Preferred stockholders		-			-		-		-		-		-		-		-		(3,951,000	)		-			(3,951,000	)
Conversion of Series A Preferred to common stock		(1,150	)		-		-		-		-		-		741,933		-		-			-			-
Fair value of common shares issued for services		-			-		-		-		-		-		769,050		-		896,000			-			896,000
Fair value of vested restricted stock awards		-			-		-		-		-		-		22,050		-		1,209,000			-			1,209,000
Fair value of vested stock options and warrants		-			-		-		-		-		-		-		-		774,000			-			774,000
Net loss		-			-		-		-		-		-		-		-		-			(5,370,000	)		(5,370,000	)
Balance at June 30, 2020		3,246		$	-		-	$	-		-	$	-		30,267,063	$	3,000	$	71,399,000		$	(61,955,000	)	$	9,447,000

	Preferred Stock				Class A Units				Class B Units				Common Stock				Additional Paid-in		Accumulated
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Total
Balance at March 31, 2020		3,246	$	-		-	$	-		-	$	-		28,962,589	$	3,000	$	68,449,000	$	(58,531,000	)	$	9,921,000
Sale of common stock from private placement		-		-		-		-		-		-		845,000		-		1,014,000		-			1,014,000
Fair value of common shares issued for services		-		-		-		-		-		-		448,449		-		575,000		-			575,000
Fair value of vested restricted stock awards		-		-		-		-		-		-		11,025		-		968,000		-			968,000
Fair value of vested stock options and warrants		-		-		-		-		-		-		-		-		393,000		-			393,000
Net loss		-		-		-		-		-		-		-		-		-		(3,424,000	)		(3,424,000	)
Balance at June 30, 2020		3,246	$	-		-	$	-		-	$	-		30,267,063	$	3,000	$	71,399,000	$	(61,955,000	)	$	9,447,000

The accompanying notes are an integral part of these condensed consolidated financial statements

VERB TECHNOLOGY COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended
	June 30, 2021			June 30, 2020

Operating Activities:
Net loss	$	(20,157,000	)	$	(5,370,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Fair value of common shares issued for services and vested stock options and warrants		3,666,000			2,552,000
Amortization of debt discount		1,040,000			274,000
Change in fair value of derivative liability		1,945,000			(3,320,000	)
Debt extinguishment		(1,029,000	)		-
Depreciation and amortization		813,000			719,000
Amortization of right-of-use assets		281,000			270,000
Allowance for inventory		-			28,000
Disposal of fixed assets		(6,000	)		-
Allowance for doubtful account		249,000			(111,000	)
Effect of changes in assets and liabilities:
Accounts receivable		(253,000	)		258,000
Prepaid expenses and other assets		(356,000	)		(34,000	)
Inventory		22,000			42,000
Deferred incentive compensation		(521,000	)		-
Accounts payable, accrued expenses, and accrued interest		740,000			307,000
Operating lease liability		(325,000	)		(154,000	)
Deferred revenue and customer deposits		271,000			(134,000	)
Net cash used in operating activities		(13,620,000	)		(4,673,000	)

Investing Activities:
Proceeds from the sale of fixed assets		11,000			-
Purchase of property and equipment		-			(316,000	)
Net cash provided (used) in investing activities		11,000			(316,000	)

Financing Activities:
Proceeds from sale of common stock		14,129,000			4,444,000
Proceeds from notes payable		-			1,368,000
Advances on future receipts		7,368,000			728,000
Proceeds from warrant exercise		1,103,000			-
Proceeds from option exercise		377,000			-
Payment of advances of future receipts		(4,734,000	)		(1,006,000	)
Deferred offering costs		-			(150,000	)
Net cash provided by financing activities		18,243,000			5,384,000

Net change in cash		4,634,000			395,000

Cash - beginning of period		1,815,000			983,000

Cash - end of period	$	6,449,000		$	1,378,000

Supplemental disclosures of cash flow information:
Cash paid for interest	$	34,000		$	72,000
Cash paid for income taxes		1,000
Supplemental disclosure of non-cash investing and financing activities:
Fair value of common stock issued for subscription agreement	$	-		$	340,000
Fair value of derivative liability extinguished	$	2,300,000		$	-
Fair value of common shares issued to settle accrued expenses	$	281,000		$	-
Reclassification of Class B upon conversion to common stock	$	3,065,000		$	-
Fair value of common stock issued to settle notes payable – related party	$	200,000
Fair value of common stock received in exchange for employee’s payroll taxes	$	130,000
Fair value of common stock issued for future services	$	164,000
Discount recognized from advances on future receipts	$	1,986,000		$	-
Fair value of derivative liability from issuance of warrants to Series A stockholders considered as a deemed dividend	$	-		$	3,951,000
Fair value of common stock issued to settle lawsuit	$	678,000		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements

VERB TECHNOLOGY COMPANY, INC.

Notes to Condensed Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Unaudited)

1. DESCRIPTION OF BUSINESS

Organization

References in this document to the “Company,” “Verb,” “we,” “us,” or “our” are intended to mean Verb Technology Company, Inc., individually, or as the context requires, collectively with its subsidiaries on a consolidated basis.

Cutaia Media Group, LLC (“CMG”) was organized as a limited liability company under the laws of the State of Nevada on December 12, 2012. On May 19, 2014, CMG merged into bBooth, Inc. and bBooth, Inc., thereafter, changed its name to bBooth (USA), Inc., effective as of October 16, 2014.

On October 16, 2014, bBoothUSA was acquired by Global System Designs, Inc. (“GSD”), pursuant to a Share Exchange Agreement entered into with GSD (the “Share Exchange Agreement”). GSD was incorporated in the State of Nevada on November 27, 2012. The acquisition was accounted for as a reverse merger transaction. In connection with the closing of the transactions contemplated by the Share Exchange Agreement, GSD’s management was replaced by bBoothUSA’s management, and GSD changed its name to bBooth, Inc.

On April 21, 2017, we changed our corporate name from bBooth, Inc. to nFüsz, Inc. The name change was effected through a parent/subsidiary short-form merger of nFüsz, Inc., our wholly-owned Nevada subsidiary, formed solely for the purpose of the name change, with and into us.

On February 1, 2019, we changed our corporate name from nFüsz, Inc. to Verb Technology Company, Inc. The name change was effected through a parent/subsidiary short-form merger of Verb Technology Company, Inc., our wholly-owned Nevada subsidiary, formed solely for the purpose of the name change, with and into us.

On February 4, 2019, we implemented a 1-for-15 reverse stock split (the “Reverse Stock Split”) of our common stock, $0.0001 par value per share (the “Common Stock”). As a result of the Reverse Stock Split, every fifteen (15) shares of our pre-Reverse Stock Split Common Stock were combined and reclassified into one share of our Common Stock. The number of shares of Common Stock subject to outstanding options, warrants, and convertible securities were also reduced by a factor of fifteen as of February 1, 2019. The par value per share of our Common Stock was not affected by the Reverse Stock Split.

On April 12, 2019, we acquired Sound Concepts Inc. (“Sound Concepts”). The acquisition was intended to augment and diversify Verb’s internet and SaaS business (see Note 3).

On September 4, 2020, Verb Acquisition Co., LLC (“Verb Acquisition”), a subsidiary of the Company, acquired Ascend Certification, LLC, dba SoloFire (“SoloFire”) The acquisition was intended to augment and diversify Verb’s internet and SaaS business (see Note 3).

Nature of Business

We are a 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 application, verbLEARN, our Learning Management System application, verbLIVE, our Live Stream eCommerce application, and verbTEAMS, our self-onboarding video-based CRM and content management application for small business and solopreneurs, with seamless synchronization with Salesforce, that also comes bundled with verbLIVE, and verbMAIL, our interactive video sales communication tool integrated into Microsoft Outlook.

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, and product sample packs that verbCRM users order through the app for automated delivery and tracking to their customers and prospects. We use the term “client” and “customer” interchangeably.

COVID-19

As of the date of this filing, there continue to be widespread concerns regarding the ongoing impacts and disruptions caused by the COVID-19 pandemic in the regions in which the Company operates. Our sales team reported a higher level of interest in our products and services during the period ended June 30, 2021 compared to the same period in 2020. Although the impacts of the COVID-19 pandemic have not been material to date, a prolonged downturn in economic conditions could have a material adverse effect on our customers and demand for our services. The Company has not observed any impairments of its assets or a significant change in the fair value of its assets due to the COVID-19 pandemic. At this time, it is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results of operations, financial condition, or liquidity.

As of June 30, 2021, the Company has followed the recommendations of local health authorities to minimize exposure risk for its employees, including the temporary closure of its corporate office and having employees work remotely. Most vendors have transitioned to electronic submission of invoices and payments.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on March 31, 2021 (the “2020 Annual Report”). The consolidated balance sheet as of December 31, 2020 included herein was derived from the audited consolidated financial statements as of that date.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (including normal recurring adjustments) necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.

Principles of Consolidation

The consolidated financial statements include the accounts of Verb Technology Company, Inc., Verb Direct, LLC, and Verb Acquisition Co., LLC. Intercompany accounts have been eliminated in the consolidation.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the six months ended June 30, 2021, the Company incurred a net loss of $20,157,000 and used cash in operations of $13,620,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. In addition, our independent registered public accounting firm, in their report on our audited financial statements for the year ended December 31, 2020, raised substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Our continuation as a going concern is dependent on our ability to obtain additional financing until we can generate sufficient cash flows from operations to meet our obligations. We intend to continue to seek additional debt or equity financing to continue our operations. There is no assurance that we will ever be profitable or that debt or equity financing will be available to us. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported periods. Significant estimates include assumptions made in analysis of reserves for allowance of doubtful accounts, inventory, assumptions made in purchase price allocations, impairment testing of long-term assets, realization of deferred tax assets, determining fair value of derivative liabilities, and valuation of equity instruments issued for services. Amounts could materially change in the future.

Revenue Recognition

The Company derives its revenue primarily from providing application services through the SaaS application, digital marketing and sales support services, from the sale of customized print products and training materials, branded apparel, and digital tools, as demanded by its customers. The subscription revenue from the application services are recognized over the life of the estimated subscription period. The Company also charges certain customers setup or installation fees for the creation and development of websites and phone application. These fees are accounted as part of deferred revenue and amortized over the estimated life of the agreement. Amounts related to shipping and handling that are billed to customers are reflected as part of revenue, and the related costs are reflected in cost of revenue in the accompanying Statements of Consolidated Operations.

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Pursuant to ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to our customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer.

The products sold by us are distinctly individual. The products are offered for sale solely as finished goods, and there are no performance obligations required post-shipment for customers to derive the expected value from them. Other than promotional activities, which can vary from time to time but nevertheless are entirely within the Company’s control, contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time.

The control of products we sell transfers to our customers upon shipment from our facilities, and our performance obligations are satisfied at that time. Shipping and handling activities are performed before the customer obtains control of the goods and, therefore, represent a fulfillment activity rather than promised goods to the customer. Payment for sales are generally made by check, credit card, or wire transfer. Historically, we have not experienced any significant payment delays from customers.

We allow returns within 30 days of purchase from end-users. Our customers may return purchased products to us under certain circumstances.

A description of our principal revenue generating activities is as follows:

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, and verbTeams. The revenue is recognized over the subscription period. verbMAIL was released after the reporting period covered by this Form 10-Q and as such no revenue is attributed to verbMAIL.

	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.

Non-digital revenue, which is revenue we generate from non-app, non-digital sources through ancillary services we provide as an accommodation to our clients and customers. These services, which we now outsource to a strategic partner as part of a cost reduction plan we instituted in 2020, include:

	a.	Design, printing services, and fulfillment. The revenue is recognized upon completion and shipment of products or fulfillment to the customer.

	b.	Shipping services. The revenue is recognized when the corresponding products or fulfillment are shipped.

Revenues during the three and six months ended June 30, 2021 and 2020 were all generated from the United States of America.

Cost of Revenue

Cost of revenue primarily consists of the salaries of certain employees, purchase price of consumer products, digital content costs, packaging supplies, and customer shipping and handling expenses. Shipping costs to receive products from our suppliers are included in our inventory and recognized as cost of revenue upon sale of products to our customers.

Concentration of Credit and Other Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable. Cash is deposited with a limited number of financial institutions. The balances held at any one financial institution at times may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits of up to $250,000.

The Company extends limited credit to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral or other security to support accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains an allowance for doubtful accounts and sales credits. The Company believes that any concentration of credit risk in its accounts receivable is substantially mitigated by the Company’s evaluation process, relatively short collection terms and the high level of credit worthiness of its customers.

The Company’s concentration of credit risk includes its concentrations from key customers and vendors. As of June 30, 2021, we had one vendor that accounted for 28% of our purchases individually and in aggregate. In addition, we had one vendor that account for 43% of accounts payable individually and in aggregate as of June 30, 2021.

We had no customer that accounted for 10% of our accounts receivable individually and in the aggregate as of June 30, 2021 and December 31, 2020, respectively.

During the three and six months ended June 30, 2021 and 2020, we had no customer that accounted for 10% of our revenues individually and in the aggregate.

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

The Company uses Level 2 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using a Binomial pricing model. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjusted to fair value of derivatives.

Deferred Revenue and Customer Deposits - Contract Liabilities

Contract liabilities represents consideration received from customers under a revenue contract, but the Company has not yet delivered or completed its performance obligation to the customer.

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, 2021, and 2020, the Company had total outstanding options of 5,875,190 and 4,510,358, respectively, and warrants of 12,389,228 and 13,534,038, respectively, and outstanding restricted stock awards of 2,751,508 and 2,039,078, respectively, which were excluded from the computation of net loss per share because they are anti-dilutive.

Goodwill

In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, the Company reviews the recoverability of the carrying value of goodwill at least annually or whenever events or circumstances indicate a potential impairment. The Company’s impairment testing is performed annually at December 31 (its fiscal year end). Recoverability of goodwill is determined by comparing the fair value of Company’s reporting unit to the carrying value of the underlying net assets in the reporting units. If the fair value of a reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities. As of June 30, 2021 and December 31, 2020, management determined there were no indications of impairment. The Company will perform their next impairment analysis in December 2021.

Intangible Assets with Finite Useful Lives

We have certain finite lived intangible assets that were initially recorded at their fair value at the time of acquisition. These intangible assets consist of developed technology. Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful life of five years.

We review all finite lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, we recognize an impairment loss for the excess carrying value over the fair value in our consolidated statements of operations. As of June 30, 2021, and December 31, 2020, there was no impairment of intangible assets. The Company will perform their next impairment analysis in December 2021.

Fair Value of Financial Instruments

The Company follows the guidance of FASB ASC 820 and ASC 825 for disclosure and measurement of the fair value of its financial instruments. FASB ASC 820 establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

The three (3) levels of fair value hierarchy defined by ASC 820 are described below:

	Level 1:	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
	Level 2:	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
	Level 3:	Pricing inputs that are generally observable inputs and not corroborated by market data.

The carrying amount of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, and accounts payable and accrued expenses approximate their fair value due to their short-term nature. The carrying values financing obligations approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest rates. The Company uses Level 2 inputs for its valuation methodology for the derivative liabilities.

Segments

The Company has acquired two operating subsidiaries, Verb Direct and Ascend Certification (dba “Solofire”) (see Note 3) with various revenue channels. Operations of these two subsidiaries are integrated since they have a similar customer base and the Company has a single sales team, marketing department, customer service department, operations department, finance and accounting department to support its operations. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker (the Company’s Chief Executive Officer) determined that the Company has only one reporting unit or segment.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. As small business filer, the standard will be effective for us for interim and annual reporting periods beginning after December 15, 2022. Management is currently assessing the impact of adopting this standard on the Company’s financial statements and related disclosures.

In August 2020, FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).” ASU 2020-06 reduces the number of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion models. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the effective interest rate of convertible debt instruments will be closer to the coupon interest rate. Further, the diluted net income per share calculation for convertible instruments will require the Company to use the if-converted method. ASU 2020-06 will be effective January 1, 2024, for the Company and is to be adopted through a cumulative-effect adjustment to the opening balance of retained earnings. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. Management is currently evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. An issuer measures the effect of a modification or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification or exchange. ASU 2021-04 introduces a recognition model that comprises four categories of transactions and the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2021-04 is not expected to have a material impact on the Company’s financial statements or disclosures.

Other recent accounting pronouncements issued by FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission (the “SEC”) did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

3. ACQUISITIONS

The Company made the following acquisitions in order to augment and diversify its internet and SaaS business:

a.	ACQUISITION OF VERB DIRECT

On April 12, 2019, Verb completed the acquisition of Verb Direct (formerly Sound Concepts, Inc.). As a result of this acquisition, the Company recorded goodwill of $16,337,000 and intangible assets of $6,340,000. The goodwill recognized is primarily attributable to anticipated synergies from future growth and is not expected to be deductible for tax purposes. Goodwill is not amortized but will be tested for impairment on an annual basis. The intangible assets, which consist mostly of developed technology of $4,700,000 are being amortized over five years, customer relationships of $1,200,000 are being amortized on an accelerated basis over its estimated useful life of five years and domain names of $440,000 are determined to have infinite lives but will be tested for impairment on an annual basis.

b.	ACQUISITION OF ASCEND CERTIFICATION

On September 4, 2020, Verb Acquisition Co., LLC (“Verb Acquisition”), a subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Ascend Certification, LLC, dba SoloFire (“SoloFire”), the sellers party thereto (collectively, the “Sellers”), and Steve Deverall, solely in his capacity as the seller representative, under which Sellers sold their entire interest in SoloFire, representing all of the outstanding limited liability company membership interests of SoloFire, to Verb Acquisition for a base purchase price of $5,700,000, subject to certain post-closing adjustments totaling $750,000 for an adjusted purchase price of $4,950,000. As a result, Verb Acquisition issued to the Sellers an amended promissory note of $1,885,000 and 2,642,159 Class B Units of Verb Acquisition which were exchangeable for 2,642,159 shares of Verb’s Common Stock with an estimated fair value of $3,065,000 (see Note 16) for a total purchase price of $4,950,000. The promissory note was unsecured, bore interest at a rate of 0.14% per annum and was paid in full at maturity on October 1, 2020.

The acquisition was intended to augment and diversify Verb’s SaaS business. Key factors that contributed to the recorded provisional goodwill and intangible assets in the aggregate of $4,845,000 were the opportunity to consolidate and complement existing operations of Verb, certain software and customer list, and the opportunity to generate future synergies within the SaaS business.

Verb is required to allocate the purchase price to the acquired tangible assets, identifiable intangible assets, and assumed liabilities based on their fair values. As of June 30, 2021, management has not yet finalized the purchase price allocation. The fair values of the assets acquired, as set forth below, are considered provisional and subject to adjustment as additional information is obtained through the purchase price measurement period (a period of up to one year from the September 2020 closing date). Any prospective adjustments would change the fair value allocation as of the acquisition date. The Company is still in the process of reviewing underlying models, assumptions and discount rates used in the valuation of provisional goodwill and intangible assets. The following table summarizes the provisional fair value of the assets assumed and liabilities acquired and the provisional purchase price allocation on the date of acquisition:

Assets Acquired:
Cash	$	229,000
Accounts receivable		207,000		$	436,000
Liabilities Assumed:
Current liabilities		(241,000	)
Long-term liabilities		(90,000	)		(331,000	)
Intangible assets (provisional)					1,122,000
Goodwill (provisional)					3,723,000
Purchase Price				$	4,950,000

The provisional goodwill recognized in connection with the acquisition is primarily attributable to anticipated synergies from future growth and is not expected to be deductible for tax purposes. Goodwill is not amortized but will be tested for impairment on an annual basis.

The provisional intangible assets, which consist of developed technology of $1,000,000 are being amortized over five years, customer relationships of $70,000 are being amortized over three years, non-competition clause of $50,000 is being amortized over three years, and domain names of $2,000 are determined to have infinite lives but will be tested for impairment on an annual basis.

During the six months ended June 30, 2021 and 2020, the Company recorded amortization expense of $725,000 and $635,000, respectively, related to the intangibles discussed above. The following table summarizes the amortization expense for both Verb Direct and Ascend to be recorded in future periods for intangible assets that are subject to amortization and excludes intangible assets with infinite life (i.e. domain names) of $442,000:

Year ending	Amortization
2021 remaining (remaining 6 months)	$	710,000
2022		1,375,000
2023		1,302,000
2024		465,000
2025 and thereafter		134,000
Total amortization	$	3,986,000

The following unaudited pro forma statement of operations present the Company’s pro forma results of operations for the three and six months ended June 30, 2020, to give effect to the acquisition of SoloFire as if it had occurred on January 1, 2020.

	Three Months Ended June 30, 2020			Six Months Ended June 30, 2020
	(Proforma, unaudited)			(Proforma, unaudited)
SaaS recurring subscription revenue	$	1,538,000		$	2,850,000
Other digital revenue		406,000			806,000
Welcome kits and fulfilment		713,000			1,441,000
Shipping		259,000			428,000
Total Revenue		2,916,000			5,525,000

Cost of revenue		1,195,000			2,317,000

Gross margin		1,721,000			3,208,000

Operating expenses		(6,347,000	)		(11,759,000	)

Other income, net		1,061,000			2,975,000

Net loss		(3,565,000	)		(5,576,000	)

Deemed dividends to Series A stockholders		-			(3,951,000	)

Net loss attributed to common stockholders	$	(3,565,000	)	$	(9,527,000	)

Pursuant to the provisions of ASC 805, the following results of operations of Verb Acquisition subsequent to the acquisition date included in the consolidated statement of operations for the reporting period:

	Three Months Ended June 30, 2020			Six Months Ended June 30, 2020
Revenue	$	274,000		$	484,000
Cost of revenue		33,000			96,000
Operating expenses		(465,000	)		(871,000	)
Gain on extinguishment of PPP note payable		91,000			91,000
Net loss	$	(133,000	)	$	(392,000	)

4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of June 30, 2021 and December 31, 2020.

SCHEDULE OF PROPERTY AND EQUIPMENT

	June 30, 2021			December 31, 2020

Computers	$	29,000		$	29,000
Furniture and fixture		75,000			75,000
Machinery and equipment		23,000			39,000
Leasehold improvement		1,058,000			1,058,000
Total property and equipment		1,185,000			1,201,000
Accumulated depreciation		(416,000	)		(339,000	)
Total property and equipment, net	$	769,000		$	862,000

During the six months ended June 30, 2021, the Company sold certain machinery and equipment with a cost of $16,000 and accumulated depreciation of $11,000 for cash proceeds of $11,000. As a result, the Company recognized a gain of $5,000 and was reported as part of other income. Depreciation expense amounted to $88,000 and $84,000 for the six months ended June 30, 2021 and 2020, respectively.

5. RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

The Company leases certain warehouse, corporate office space and equipment under an operating lease agreement. We determine if an arrangement is a lease at inception. Lease assets are presented as operating lease right-of-use assets and the related liabilities are presented as lease liabilities in our consolidated balance sheets pursuant to ASC 842, Leases.

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in lease arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.

The components of lease expense and supplemental cash flow information related to leases for the period are as follows:

SCHEDULE OF LEASE COST

	Period Ended June 30, 2021			Period Ended June 30, 2020
Lease cost
Operating lease cost (included in general and administration in the Company’s statement of operations)	$	349,000		$	349,000

Other information

Cash paid for amounts included in the measurement of lease liabilities	$	393,000		$	—
Weighted average remaining lease term – operating leases (in years)		4.26			4.87
Average discount rate – operating leases		4.0	%		4.0	%

SCHEDULE OF OPERATING LEASES

	June 30, 2021		December 31, 2020
Operating leases
Right-of-use assets	$	2,449,000	$	2,730,000

Short-term operating lease liabilities	$	585,000	$	596,000
Long-term operating lease liabilities		2,628,000		2,943,000
Total operating lease liabilities	$	3,213,000	$	3,539,000

Year ending	Operating Leases
2021 (remaining 6 months)		383,000
2022		751,000
2023		773,000
2024		472,000
2025 and thereafter		1,189,000
Total lease payments		3,568,000
Less: Imputed interest/present value discount		(355,000	)
Present value of lease liabilities	$	3,213,000

6. ADVANCE OF FUTURE RECEIPTS

The Company has the following advances on future receipts as of June 30, 2021:

SCHEDULE OF ADVANCES ON FUTURE RECEIPTS

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2021			Balance at December 31, 2020

Note 1	June 30, 2020	February 25, 2021		28	%	$	506,000	$	-		$	89,000
Note 2	June 30, 2020	February 25, 2021		28	%		506,000		-			88,000
Note 3	January 13, 2021	September 10, 2021		28	%		844,000		213,000			-
Note 4	January 13, 2021	September 10, 2021		28	%		844,000		213,000			-
Note 5	January 22, 2021	July 1, 2021		28	%		2,040,000		-			-
Note 6	February 18, 2021 – March 3, 2021	August 3, 2021 – August 15, 2021		3	%		1,696,000		440,000			-
Note 7	June 30, 2021	December 31, 2021		7	%		1,210,000		1,210,000
Note 8	June 30, 2021	March 1, 2022		28	%		2,720,000		2,720,000			-
Total						$	10,366,000		4,796,000			177,000
Debt discount									(1,013,000	)		(67,000	)
Net								$	3,783,000		$	110,000

Note 1 and 2

On June 30, 2020, the Company received two secured advances from an unaffiliated third party totaling $728,000 for the purchase of future receipts/revenues of $1,012,000. Pursuant to the terms of the agreement the unaffiliated third-party will auto withdraw an aggregate of $6,000 from the Company’s operating account each banking day. The term of the agreement extends until the advances are paid in full. The notes did not bear any interest, however, the average interest was imputed at a rate of 28% based on the face value of the note and the proceeds received. As a result, the Company recorded a liability of $1,012,000 to account for the future receipts sold and a debt discount of $284,000 to account for the difference between the future receipts sold and the cash received. The debt discount is being amortized over the term of the agreement.

During the six months ended June 30, 2021, the Company paid the entire balance due of $177,000 and amortized the remaining debt discount of $67,000.

Note 3 and 4

On January 13, 2021, the Company received two secured advances from the same unaffiliated third party (see Note 1 and 2) totaling $1,213,000 for the purchase of future receipts/revenues of $1,688,000. Pursuant to the terms of the agreement the unaffiliated third-party will auto withdraw an aggregate of $11,000 from the Company’s operating account each banking day. The term of the agreement extends until the advances are paid in full. The notes did not bear any interest, however, the average interest was imputed at a rate of 28% based on the face value of the note and proceeds received. The Company may pay off either note for $744,000 if paid within 30 days of funding; for $775,000 if paid between 31 and 60 days of funding; or for $806,000 if paid within 61 to 90 days of funding. These advances are secured by the Company’s tangible and intangible assets. As a result, the Company recorded a liability of $1,688,000 to account for the future receipts sold and a debt discount of $475,000 to account for the difference between the future receipts sold and the cash received. The debt discount is being amortized over the term of the agreement.

During the six months ended June 30, 2021, the Company paid $1,262,000 of the balance outstanding and amortized $329,000 of the debt discount. As of June 30, 2021 outstanding balance of the notes amounted to $426,000 and the unamortized balance of the debt discount was $147,000.

Note 5

On January 22, 2021, the Company received a secured advance from an unaffiliated third party totaling $1,440,000 for the purchase of future receipts/revenues of $2,040,000. Pursuant to the terms of the agreement the unaffiliated third-party will auto withdraw an aggregate of $13,000 from the Company’s operating account each banking day. The term of the agreement extends until the advances are paid in full. The notes did not bear any interest, however, the interest was imputed at a rate of 29% based on the face value of the note and the proceeds received. The Company may pay off the note for $1,725,000 if paid within 30 days of funding; for $1,860,000 if paid between 31 and 60 days of funding; or for $484,000 if paid within 61 to 90 days of funding. These advances are secured by the Company’s tangible and intangible assets. As a result, the Company recorded a liability of $2,040,000 to account for the future receipts sold and a debt discount of $600,000 to account for the difference between the future receipts sold and the cash received. The debt discount is being amortized over the term of the agreement.

During the six months ended June 30, 2021, the Company paid the entire balance of $2,040,000 and amortized $600,000 of the debt discount.

Note 6

In February and March of 2021, the Company received secured advances from an unaffiliated third party totaling $1,637,000 for the purchase of future receipts/revenues of $1,696,000. Pursuant to the terms of the agreement the unaffiliated third-party will auto withdraw an average of $283,000 from the Company’s operating account each month. The term of the agreement extends until the advances are paid in full. The notes did not bear any interest, however, the interest was imputed at a rate of 3% based on the face value of the notes and the proceeds received. As a result, the Company recorded a liability of $1,696,000 to account for the future receipts sold and a debt discount of $59,000 to account for the difference between the future receipts sold and the cash received. The debt discount is being amortized over the term of the agreement.

During the six months ended June 30, 2021, the Company paid $1,256,000 and amortized $45,000 of the debt discount. As of June 30, 2021, the outstanding balance on the note amounted to $440,000 and the unamortized balance of the debt discount was $14,000.

Note 7

On June 30, 2021, the Company received secured advances from an unaffiliated third party totaling $1,210,000 for the purchase of future receipts/revenues of $1,303,000. Pursuant to the terms of the agreement the unaffiliated third-party will auto withdraw an average of $197,000 from the Company’s operating account each month. The term of the agreement extends until the advances are paid in full. The notes did not bear any interest, however, the interest was imputed at a rate of 7% based on the face value of the notes and the proceeds received. As a result, the Company recorded a liability of $1,210,000 to account for the future receipts sold and a debt discount of $92,000 to account for the difference between the future receipts sold and the cash received. The debt discount is being amortized over the term of the agreement.

As of June 30, 2021, the outstanding balance of the note amounted to $1,210,000 and the unamortized balance of the debt discount was $92,000.

Note 8

On June 30, 2021, the Company received secured advances from an unaffiliated third party totaling $1,960,000 for the purchase of future receipts/revenues of 2,720,000. Pursuant to the terms of the agreement the unaffiliated third-party will auto withdraw an aggregate of $15,200 from the Company’s operating account each banking day. The term of the agreement extends until the advances are paid in full. The notes did not bear any interest, however, the interest was imputed at a rate of 28% based on the face value of the note and the proceeds received. The Company may pay off the note for $2,200,000 if paid within 45 days of funding and for $2,380,000 if paid between 46 and 60 days of funding. These advances are secured by the Company’s tangible and intangible assets. As a result, the Company recorded a liability of $2,720,000 to account for the future receipts sold and a debt discount of $760,000 to account for the difference between the future receipts sold and the cash received. The debt discount is being amortized over the term of the agreement.

As of June 30, 2021, the outstanding balance of the note amounted to $2,720,000 and the unamortized balance of the debt discount was $760,000.

7.	NOTES PAYABLE – RELATED PARTIES

The Company had the following related party notes payable as of June 30, 2021 and December 31, 2020:

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2021			Balance at December 31, 2020
Note 1 (A)	December 1, 2015	February 8, 2023		12.0	%	$	1,249,000	$	725,000		$	725,000
Note 2 (B)	December 1, 2015	April 1, 2017		12.0	%		112,000		112,000			112,000
Note 3 (C)	April 4, 2016	June 4, 2021		12.0	%		343,000		40,000			240,000
Total notes payable – related parties									877,000			1,077,000
Non-current									(725,000	)		-
Current								$	152,000		$	1,077,000

	(A)	On December 1, 2015, the Company issued a convertible note payable to Mr. Rory J. Cutaia, the Company’s majority stockholder and Chief Executive Officer, to consolidate all loans and advances made by Mr. Cutaia to the Company as of that date. The note bears interest at a rate of 12% per annum, secured by the Company’s assets, and matured on February 8, 2021, as amended. A total of 30% of the original note balance or $375,000 was convertible to common stock and was converted in 2018 while the remaining note balance of $874,000 is not convertible. During the year ended December 31, 2020, the Company made payments of $100,000. On February 25, 2021 the Company extended the note to February 8, 2023 with no changes to the other terms of the note agreement. As of December 31, 2020, the outstanding balance of the note amounted to $725,000.

		In February 2021, the Mr. Cutaia and Company amended the note payable and extended the maturity date from February 8, 2021 to February 8, 2023 or an extension of two years. In exchange for the extension, the Company issued Mr. Cutaia warrants to purchase 138,889 shares of common stock with a fair value of $287,000. The warrants are fully vested, exercisable at $2.61 per share and will expire in three years. There were no other changes to the original terms of the note payable. In accordance with ASC 450-70, modifications or exchanges are considered extinguishments with gains or losses recognized in current earnings if the terms of the new debt and original instrument are substantially different. The instruments are considered “substantially different” when the present value of the cash flows under the terms of the new debt instrument is at least 10% different from the present value of the remaining cash flows under the terms of the original instrument. As the fair value of the warrants granted amounted to $287,000 for which is approximately 40% of the outstanding note payable, pursuant to ASC 470, the Company accounted the modification as an extinguishment of debt which requires the measurement of the modified debt and additional consideration to be at fair value. As a result, the Company recognized a loss on debt extinguishment of $287,000 and a corresponding credit to contributed capital. On May 19, 2021 the Board approved the ability to convert the note into equity at the discretion of the holder. The conversion price is the fair market value of the Company’s common stock on the day of conversion.

		As of June 30, 2021, the outstanding balance of the note amounted to $725,000.

	(B)	On December 1, 2015, the Company issued a note payable to a former member of the Company’s board of directors, in the amount of $112,000, representing unpaid consulting fees as of November 30, 2015. The note is unsecured, bears interest rate of 12% per annum, and matured in April 2017.

		As of June 30, 2021 and December 31, 2020, the outstanding principal balance of the note amounted to $112,000, respectively. As of June 30, 2021, the note was past due, and remains past due. The Company is currently in negotiations with the noteholder to settle the past due note.

	(C)	On April 4, 2016, the Company issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. A total of 30% of the original note balance or $103,000 was convertible to common stock and was converted in 2018 while the remaining note balance of $240,000 is not convertible. The note bears interest at a rate of 12% per annum, is secured by the Company’s assets, and matured on June 4, 2021, as amended. On May 19, 2021 the Board approved the ability to convert the note into equity at the discretion of the holder. The conversion price is the fair market value of the Company’s common stock on the day of conversion. On May 19, 2021 $200,000 was converted into 194,175 shares of common stock. The conversion price was $1.03 that was the closing price of the Company’s common stock on the day of conversion.

		As of June 30, 2021, and December 31, 2020, the outstanding balance of the note amounted to $40,000 and $240,000, respectively.

Total interest expense for notes payable to related parties was $61,000 and $70,000 for six months ended June 30, 2021 and 2020, respectively. The Company paid $34,000 and $72,000 in interest for the six months ended June 30, 2021 and 2020, respectively.

8.	NOTES PAYABLE

The Company had the following notes payable as of June 30, 2021:

SCHEDULE OF NOTES PAYABLE

Note	Issuance Date	Maturity Date	Interest Rate			Balance at June 30, 2021			Balance at December 31, 2020
Note A	April 17, 2020	April 17, 2022		1.00	%	$	-		$	1,218,000
Note B	May 15, 2020	May 15, 2050		3.75	%		150,000			150,000
Note C	May 1, 2020	May 1, 2022		3.75	%		-			90,000
Total notes payable							150,000			1,458,000
Non-current							(150,000	)		(1,458,000	)
Current						$	-		$	-

(A)	On April 17, 2020, the Company received loan proceeds in the amount of $1,218,000 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after the earlier of (i) 24 weeks after the loan disbursement date and (ii) December 31, 2020 as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. The Company intends to use the proceeds for purposes consistent with the PPP. While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan, we cannot assure you that we will not take actions that could cause the Company to be ineligible for forgiveness of the loan, in whole or in part. As for the potential loan forgiveness, once the PPP loan is, in part or wholly, forgiven and a legal release is received, the liability would be reduced by the amount forgiven and a gain on extinguishment would be recorded. The terms of the PPP loan provide for customary events of default including, among other things, payment defaults, breach of representations and warranties, and insolvency events. The Company was in compliance with the terms of the PPP loan as of December 31, 2020. On January 4, 2021 the entire note and accrued interest, totaling $1,226,000, was forgiven and accounted as a gain on debt extinguishment.

(B)	On May 15, 2020, the Company executed an unsecured loan with the U.S. Small Business Administration (SBA) under the Economic Injury Disaster Loan program in the amount of $150,000. The loan is secured by all tangible and intangible assets of the Company and payable over 30 years at an interest rate of 3.75% per annum. Installment payments, including principal and interest, begin on May 15, 2021. As part of the loan, the Company also received an advance of $10,000 from the SBA. While the SBA refers to this program as an advance, it was written into law as a grant. This means that the amount given through this program does not need to be repaid. As a result, the Company accounted this $10,000 as part of “Other Income” in fiscal 2020.

(C)	As a result of the acquisition of Solofire in September 2020, the Company assumed Solofire’s PPP loan of $90,000 it obtained in May 2020 under the PPP (see discussion “A”). On May 17, 2021 the entire note and accrued interest, totaling $91,000, was forgiven and accounted as a gain on debt extinguishment.

9.	DEFERRED INCENTIVE COMPENSATION TO OFFICERS

Note	Date		Payment Date	Balance at June 30, 2021		Balance at December 31, 2020

Rory Cutaia (A)		December 23, 2019	50% on January 10, 2021 and 50% on January 10, 2022	$	215,000	$	430,000
Rory Cutaia (B)		December 23, 2019	50% on January 10, 2021 and 50% on January 10, 2022		161,000		324,000
Jeff Clayborne (A)		December 23, 2019	50% on January 10, 2021 and 50% on January 10, 2022		63,000		125,000
Jeff Clayborne (B)		December 23, 2019	50% on January 10, 2021 and 50% on January 10, 2022		82,000		163,000

Total					521,000		1,042,000
Non-current					-		(521,000	)
Current				$	521,000	$	521,000

(A)

On December 23, 2019, the Company awarded Rory Cutaia, Chief Executive Officer and Jeff Clayborne, Chief Financial Officer Annual Incentive Compensation of $430,000 and $125,000, respectively for services rendered. The Company has determined that it is in its best interest and in the best interest of its stockholders to defer payments to these employees. The Company paid 50% of the Annual Incentive Compensation on January 10, 2021 and will pay the remaining 50% on January 10, 2022.

During the six months ended June 30, 2021, the Company paid $278,000 of the outstanding balance. As of June 30, 2021, the outstanding balance amounted to $278,000.

(B)

On December 23, 2019, the Company awarded Rory Cutaia, Chief Executive Officer and Jeff Clayborne, Chief Financial Officer received a bonus for the successful Up-Listing to Nasdaq and Acquisition of Verb Direct during fiscal 2019, totaling $324,000 and $163,000, respectively. The Company has determined that it is in its best interest and in the best interest of its stockholders to defer payments to these employees. The Company paid