UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from ________ to ________
Commission
file number:
(Exact name of registrant as specified in its charter)
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| (Address of principal executive offices) | (Zip Code) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
The
The
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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.
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| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
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As of November 10, 2022, there were shares of common stock, $0.0001 par value per share, outstanding.
VERB TECHNOLOGY COMPANY, INC.
TABLE OF CONTENTS
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the three months ended September 30, 2022 (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 be able to achieve or maintain profitable operations;
● our ability to continue as a going concern;
● our ability to grow and compete in the future, and to execute our business strategy;
● our ability to maintain and expand our customer base and 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 and grow the revenues 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 successfully launch new product platforms, including MARKET.live, the rate of adoption of these platforms and the revenue generated from these platforms;
● the novel coronavirus (“COVID-19”) pandemic, which has had a negative impact on our business, results of operations and financial condition;
● our ability to deliver our services, in light of our dependency on third-party Internet providers;
● our ability to raise additional capital or borrow additional funds to fund our operations and execute our business strategy, and the impact of these transactions on our business and existing stockholders;
● our ability to attract and retain qualified management personnel;
● our ability to pay our debt obligations as they become due;
● our susceptibility to security breaches and other disruptions; and
● global economic, political, and social trends, including inflation, rising interest rates, and recessionary concerns.
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 titled “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, 2021, as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022 (the “2021 Annual Report”), as well as in the other reports we file with 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.
| 3 |
PART I — FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
| 4 |
VERB TECHNOLOGY COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
| September 30, 2022 | December 31, 2021 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Capitalized software development costs, net | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued officers’ compensation | ||||||||
| Advances on future receipts, net | ||||||||
| Convertible notes payable, current | ||||||||
| Deferred incentive compensation to officers, current | ||||||||
| Operating lease liabilities, current | ||||||||
| Contract liabilities | ||||||||
| Derivative liability | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Notes payable, non-current | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 13) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ par value, shares authorized: Series A Convertible Preferred Stock, shares authorized; issued and outstanding as of September 30, 2022 and December 31, 2021 | ||||||||
| Class A units, shares issued and authorized as of September 30, 2022 and December 31, 2021 | ||||||||
| Class B units, shares authorized, issued and outstanding as of September 30, 2022 and December 31, 2021 | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding as of September 30, 2022 and December 31, 2021 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements
| 5 |
VERB TECHNOLOGY COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | ||||||||||||||||
| Digital revenue | ||||||||||||||||
| SaaS recurring subscription revenue | $ | $ | $ | $ | ||||||||||||
| Other digital revenue | ||||||||||||||||
| Total digital revenue | ||||||||||||||||
| Non-digital revenue | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of revenue | ||||||||||||||||
| Digital | ||||||||||||||||
| Non-digital | ||||||||||||||||
| Total cost of revenue | ||||||||||||||||
| Gross margin | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ||||||||||||
| Other income (expense), net | ( | ) | ||||||||||||||
| Debt extinguishment, net | ||||||||||||||||
| Total other income (expense), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Deemed dividends to Series A stockholders | ( | ) | ( | ) | ||||||||||||
| Net loss to common stockholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss per share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding - basic and diluted | ||||||||||||||||
See accompanying notes to the condensed consolidated financial statements
| 6 |
VERB TECHNOLOGY COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share and per share data)
(unaudited)
For the nine months ended September 30, 2022:
| 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 as of December 31, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Sale of common stock from public offering | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for commitment fee related to equity line of credit agreement | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock from option exercise | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Fair value of common shares issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Fair value of common shares issued to settle accrued expenses | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Fair value of vested restricted stock awards, stock options and warrants | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
For the three months ended September 30, 2022:
| 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 as of June 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Fair value of common shares issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Fair value of vested restricted stock awards, stock options and warrants | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| 7 |
For the nine months ended September 30, 2021:
| 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 as of December 31, 2020 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Sale of common stock from public offering | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock from warrant exercise | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock from option exercise | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Fair value of common shares issued to settle note payable – related party | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Fair value of common shares issued to settle lawsuit | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Conversion of Series A Preferred to common stock | ( | ) | - | - | ||||||||||||||||||||||||||||||||||||||||
| Fair value of warrants issued to Series A preferred stockholders – deemed dividend | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Fair value of common shares issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Fair value of common shares issued to settle accounts payable | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Fair value of vested restricted stock awards | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Fair value of vested stock options and warrants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Extinguishment of derivative liability upon exercise of warrants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Fair value of common shares issued to settle accrued expenses | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Fair value of warrants issued to officer to modify note payable | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B Units to common shares | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
For the three months ended September 30, 2021:
| 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 as of June 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Sale of common stock from public offering | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock from warrant exercise | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Conversion of Series A Preferred to common stock | ( | ) | - | - | ||||||||||||||||||||||||||||||||||||||||
| Fair value of warrants issued to Series A preferred stockholders – deemed dividend | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Fair value of common shares issued for services | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Fair value of common shares issued to settle accounts payable | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Fair value of vested restricted stock awards | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Fair value of vested stock options and warrants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Extinguishment of derivative liability upon exercise of warrants | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Fair value of common shares from option exercise | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
See accompanying notes to the condensed consolidated financial statements
| 8 |
VERB TECHNOLOGY COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Share-based compensation | ||||||||
| Amortization of debt discount | ||||||||
| Amortization of debt issuance costs | ||||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Debt extinguishment, net | ( | ) | ||||||
| Depreciation and amortization | ||||||||
| Loss on lease termination | ||||||||
| (Gain)/loss on disposal of property and equipment | ( | ) | ||||||
| Allowance for doubtful accounts | ||||||||
| Effect of changes in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Operating lease right-of-use assets | ||||||||
| Other assets | ( | ) | ||||||
| Accounts payable, accrued expenses, and accrued interest | ||||||||
| Contract liabilities | ||||||||
| Deferred incentive compensation | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing Activities: | ||||||||
| Proceeds from sale of property and equipment | ||||||||
| Capitalized software development costs | ( | ) | ( | ) | ||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Purchases of intangible assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities: | ||||||||
| Proceeds from sale of common stock | ||||||||
| Proceeds from convertible notes payable | ||||||||
| Advances on future receipts | ||||||||
| Proceeds from warrant exercise | ||||||||
| Payments of convertible notes payable | ( | ) | ||||||
| Payments of advances on future receipts | ( | ) | ( | ) | ||||
| Proceeds from option exercise | ||||||||
| Payments for debt issuance costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash - beginning of period | ||||||||
| Cash - end of period | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements
| 9 |
VERB TECHNOLOGY COMPANY, INC.
Notes to Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2022 and 2021
(in thousands, except share and per share data)
(unaudited)
1. DESCRIPTION OF BUSINESS
Our Business
References in this Quarterly Report to the “Company,” “Verb,” “we,” “us,” or “our” are to Verb Technology Company, Inc., together with its consolidated subsidiaries unless the context otherwise requires. Throughout this Quarterly Report, the terms “client” and “customer” are used interchangeably.
The Company is a SaaS applications platform developer. Our platform is comprised of a suite of interactive video-based sales enablement business software products marketed on a subscription basis. Our applications, available in both mobile and desktop versions, are offered as a fully integrated suite, as well as on a standalone basis, and include verbCRM, our Customer Relationship Management (“CRM”) application, verbLEARN, our Learning Management System application, verbLIVE, our Live Stream eCommerce application, verbPULSE, our business/augmented intelligence notification and sales coach application, and verbTEAMS, our self-onboarding video-based CRM and content management application for professional sports teams, small business and solopreneurs, with seamless synchronization with Salesforce, that also comes bundled with verbLIVE, and verbMAIL, our interactive video-based sales communication tool integrated into Microsoft Outlook. MARKET.live is our multi-vendor, multi-presenter, livestream social shopping platform that combines ecommerce and entertainment.
The Company also provides certain non-digital services to some of its enterprise clients such as printing and fulfillment services.
Economic Disruption
Our business is dependent in part on general economic conditions. Many jurisdictions in which our customers are located and our products are sold have experienced and could continue to experience unfavorable general economic conditions, such as inflation, increased interest rates and recessionary concerns, which could negatively affect demand for our products. Under difficult economic conditions, customers may seek to cease spending on our current products or fail to adopt our new products, which could negatively affect our financial performance. We cannot predict the timing or magnitude of an economic slowdown or the timing or strength of any economic recovery. These and other economic factors could have a material adverse effect on our business, financial condition, and results of operations.
COVID-19
As of the date of this filing, there continues to be concern regarding the ongoing impacts and disruptions caused by the COVID-19 pandemic in the regions in which the Company operates. Although the impacts of the pandemic on our business have not been material to date, a prolonged downturn in economic conditions as a result of the pandemic could have a material adverse effect on our customers and demand for our products. At this time, it is not possible for the Company to predict the duration or magnitude of the impacts of the pandemic, or other outbreaks of communicable diseases, on the Company’s business, financial condition and results of operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND SUPPLEMENTAL DISCLOSURES
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 31, 2022 (the “2021 Annual Report”). The consolidated balance sheet as of December 31, 2021 included herein was derived from the audited consolidated financial statements as of that date.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.
Principles of Consolidation
The condensed consolidated financial statements have been prepared in accordance with GAAP and include the accounts of Verb, Verb Direct, LLC, Verb Acquisition Co., LLC, and verbMarketplace, LLC. All intercompany accounts have been eliminated in the consolidation.
| 10 |
Going Concern
The
accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed
consolidated financial statements, during the nine months ended September 30, 2022, the Company incurred a net loss of $
On
January 12, 2022, the Company entered into a common stock purchase agreement (the “January Purchase Agreement”) with
Tumim Stone Capital LLC (the “Investor”). Pursuant to the agreement, the Company has the right, but not the obligation,
to sell to the Investor, and the Investor is obligated to purchase, up to $
On
January 12, 2022, the Company also entered into a securities purchase agreement (the “January Note Purchase Agreement”)
with three institutional investors (collectively, the “January Note Holders”) providing for the sale and issuance of an
aggregate original principal amount of $
On
April 20, 2022, the Company entered into a securities purchase agreement, which provides for the sale and issuance by the Company of
an aggregate of (i)
shares of Common Stock, and (ii) warrants to purchase
As
of September 30, 2022, the Company had cash of $
The Company,
through its Professional Employer Organization, filed for federal government assistance for the second and third quarters of 2021 in
the aggregate amount of approximately $
Prior to September
30, 2022, the U.S. Small Business Administration (“SBA”) approved an additional loan of $
On
October 25, 2022, the Company entered into a securities purchase agreement (the “October Purchase Agreement”), which
provides for the sale and issuance by the Company of an aggregate of (i) shares
of Common Stock, at a purchase price of $per
share, and (ii) warrants to purchase
On
November 7, 2022, the Company entered into a note purchase agreement (the “November Note Purchase Agreement”) and promissory
note with an institutional investor (the “November Note Holder”) providing for the sale and issuance of an unsecured, non-convertible
promissory in the original principal amount of $
If the Company is unable to generate sufficient cash flow from operations to operate its business and pay its debt obligations as they become due, it will need to seek to raise additional capital, borrow additional funds, dispose of subsidiaries or assets, reduce or delay capital expenditures, or change its business strategy. However, in light of the restrictive covenants imposed by certain of the Company’s prior financing arrangements, in combination with the recent decline in the trading price of the Common Stock, the Company may be unable to raise additional capital in sufficient amounts when needed to operate its business, service its debt or execute on its strategic plans. Further, notwithstanding such restrictions, there can be no assurance that debt or equity financing will be available in the amounts, on terms, or at times deemed acceptable by the Company. The issuance of additional equity securities would result in significant dilution in the equity interests of the Company’s current stockholders and could include rights or preferences senior to those of the current stockholders. Borrowing additional funds would increase the Company’s liabilities and future cash commitments and potentially impose significant operational or financial restrictions and require the Company to further encumber its assets. If the Company is unable to obtain financing in the amounts and on terms deemed acceptable, the Company may be unable to continue to operate its business or pay its obligations as they become due, and as a result may be required to curtail or cease operations, which may result in stockholders or noteholders losing some or all of their investment.
For additional information, refer to Note 1 to the condensed consolidated financial statements, and the section titled “Risk Factors,” within the 2021 Annual Report.
| 11 |
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported periods. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, and other factors that management believes to be reasonable. In addition, the Company has considered the potential impact of the pandemic, as well as certain macroeconomic factors, including inflation, rising interest rates, and recessionary concerns, on its business and operations.
Significant estimates include assumptions made in analysis of reserves for allowance of doubtful accounts, inventory, assumptions made in purchase price allocations, impairment testing of long-term assets, realization of deferred tax assets, determining fair value of derivative liabilities, and valuation of equity instruments issued for services. Some of those assumptions can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions.
Revenue Recognition
The Company recognizes revenue in accordance with Financial Accounting Standard Board’s (“FASB”) ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company derives its revenue primarily from providing application services through the SaaS application, digital marketing and sales support services.
A description of our principal revenue generating activities is as follows:
| 1. | Digital Revenue which is divided into two main categories: |
| a. | SaaS recurring digital revenue based on contract-based subscriptions to Verb app products and platform services which include verbCRM, verbLEARN, verbLIVE, verbTEAMS, and verbPULSE. The revenue is recognized straight-line over the subscription period. | |
| b. | Non-SaaS, non-recurring digital revenue, which is revenue generated by the use of app products and in-app purchases, such as sampling and other services obtained through the app. The revenue for samples is recognized upon completion and shipment, while the design fees are recognized when the service has been rendered, collectability is reasonably assured, and the app is delivered to the customer. |
Subscription revenue from the application services is recognized over the life of the estimated subscription period. The Company also charges certain customers setup or installation fees for the creation and development of websites and mobile applications. These fees are accounted for as part of contract liabilities and amortized over the estimated life of the agreement. Revenue is measured as the amount of consideration expected to be received in exchange for transferring the products or services to a customer.
| 2. | Non-digital revenue, which is revenue generated from non-app, non-digital sources through ancillary services provided as an accommodation to clients and customers. These services include design, printing services, fulfillment and shipping services. The revenue is recognized upon completion and shipment of products or fulfillment to the customer. Effective April 1, 2022, the Company entered into a customer referral agreement with a third party for its cart site and printing business. Under the agreement, the Company earns a certain percentage for customer referrals and merchandise sales as well as cart site design fees, all of which will be recognized as non-digital revenue on a net basis. |
The non-digital products sold by us are distinctly individual. The products are offered for sale solely as finished goods, and there are no performance obligations required post-shipment for customers to derive the expected value from them. Amounts related to shipping and handling that are billed to customers are reflected as part of revenue, and the related costs are reflected in cost of revenue in the accompanying condensed consolidated statements of operations. Historically, we have not experienced any significant payment delays from customers. The Company allows returns within 30 days of purchase from end-users. Customers may return purchased products under certain circumstances. Returns from customers during the three and nine months ended September 30, 2022 and 2021 were immaterial.
Revenue during the three and nine months ended September 30, 2022 and 2021 were substantially all generated from clients and customers located within the United States of America, though some utilize the Company’s applications outside the United States of America.
| 12 |
Cost of Revenue
Cost of revenue primarily consists of the salaries of certain employees and contractors, digital content costs, purchase price of consumer products, packaging supplies, and customer shipping and handling expenses. Shipping costs to receive products from our suppliers are included in our inventory and recognized as cost of revenue upon sale of products to our customers.
Contract Liabilities
Contract liabilities represent consideration received from customers under revenue contracts for which the Company has not yet delivered or completed its performance obligation to the customer. Contract liabilities are recognized over the contract period.
Capitalized Software Development Costs
The Company capitalizes internal and external costs directly associated with developing internal-use software, and hosting arrangements that include an internal-use software license, during the application development stage of its projects. The Company’s internal-use software is reported at cost less accumulated amortization. Amortization begins once the project has been completed and is ready for its intended use. The Company will amortize the asset on a straight-line basis over a period of three years, which is the estimated useful life. Software maintenance activities or minor upgrades are expensed in the period performed.
Amortization expense related to capitalized software development costs are recorded in depreciation and amortization in the condensed consolidated statements of operations.
Goodwill and Intangible Assets
Management reviews goodwill and indefinite lived intangible assets for impairment at least annually or whenever events or circumstances indicate a potential impairment. Management reviews all finite lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable.
As of September 30, 2022, management concluded that there were no impairment indicators. If economic uncertainty increases and/or the global economy worsens, the Company’s business, financial condition and results of operations may be sufficiently impacted to result in future impairment charges in the short-term. Management will continue to monitor the effects that macroeconomic conditions have on its business and operations and will review impairment indicators to the extent necessary in the upcoming months.
Fair Value of Financial Instruments
The Company follows the guidance of FASB ASC 820 and ASC 825 for disclosure and measurement of the fair value of its financial instruments. FASB ASC 820 establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
The three levels of fair value hierarchy defined by ASC 820 are described below:
| Level 1: | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2: | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3: | Pricing inputs that are generally observable inputs and not corroborated by market data. |
The carrying amount of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, accounts payable and accrued expenses approximate their fair value due to their short-term nature. The carrying values of financing obligations approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest rates. The Company uses Level 2 inputs for its valuation methodology for derivative financial instruments.
| 13 |
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the condensed consolidated balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
The Company uses Level 2 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using a Binomial pricing model. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjusted to fair value of derivatives.
The Company issues stock options, warrants, shares of common stock and restricted stock units as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation in accordance with FASB ASC 718, Compensation – Stock Compensation. Share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period. The fair value of restricted stock units is determined based on the number of shares granted and the quoted price of our common stock and is recognized as expense over the service period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for services.
Basic net loss per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed giving effect to all dilutive potential shares of common stock that were outstanding during the period. Dilutive potential shares of common stock consist of incremental shares of common stock issuable upon exercise or conversion.
As
of September 30, 2022, and 2021, the Company had total outstanding options of and , respectively, outstanding warrants
of and , respectively, outstanding restricted stock units of and , respectively, the
Notes that are convertible into
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 $
The
Company evaluates the concentration of credit risk associated with key customers. During the three months ended September 30, 2022, we
had one customer that accounted for
The Company extends limited credit to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral or other security to support accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains an allowance for doubtful accounts and sales credits. The Company believes that any concentration of credit risk in its accounts receivable is substantially mitigated by the Company’s evaluation process, relatively short collection terms and credit worthiness of its customers.
As
of September 30, 2022 and December 31, 2021, we had no customers that accounted for
The
Company also evaluates the concentration of risk associated with key vendors. For the three and nine months ended September 30, 2022,
we had two vendors that accounted for
Reclassification Adjustment
The
Company reclassified $
| 14 |
Supplemental Cash Flow Information
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | ||||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Fair value of derivative liability extinguished | ||||||||
| Fair value of common shares issued to settle accounts payable | ||||||||
| Fair value of common shares issued to settle accrued expenses | ||||||||
| Reclassification of Class B Units upon conversion to common stock | ||||||||
| Fair value of common stock issued to settle notes payable – related party | ||||||||
| Fair value of common stock received in exchange for employee’s payroll taxes | ||||||||
| Fair value of common stock issued for future services | ||||||||
| Discount recognized from advances on future receipts | ||||||||
| Fair value of debt forgiveness | ||||||||
| Fair value of warrants issued to Series A preferred stockholders – deemed dividend | ||||||||
| Fair value of common stock issued to settle lawsuit | ||||||||
| Accrued software development costs | ||||||||
| Discount recognized from convertible notes payable | ||||||||
| Derecognition of operating lease right-of-use assets | ||||||||
| Derecognition of operating lease liabilities | ||||||||
| Recognition of operating lease right-of-use asset and related lease liability | ||||||||
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).” 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. Effective January 1, 2022, the Company early adopted ASU 2020-06 and that adoption did not have any material impact on the Company’s consolidated financial statements or the related disclosures.
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. The Company adopted ASU 2021-04 effective January 1, 2022. The adoption of ASU 2021-04 did not have any material impact on the Company’s consolidated financial statements or the related disclosures.
| 15 |
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 will require companies to recognize and measure contract assets and contract liabilities relating to contracts with customers that are acquired in a business combination in accordance with ASC 606. Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. The ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted ASU 2021-08 effective January 1, 2022 on a prospective basis and the adoption impact of the new standard will depend on the magnitude of future acquisitions. The standard will not impact acquired contract assets or liabilities from business combinations occurring prior to the adoption date.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832)—Disclosures by Business Entities about Government Assistance. ASU 2021-10 increases the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. The ASU is effective for fiscal years beginning after December 15, 2021. The Company adopted this ASU as of January 1, 2022 on a prospective basis. The adoption of this standard did not have any material impact on the Company’s consolidated financial statements or the related disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Credit Losses – Measurement of Credit Losses on Financial Instruments (“ASC 326”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. As a small business filer, ASU 2020-06 will be effective January 1, 2024, for the Company and the provisions of this update can be adopted using either the modified retrospective method or a fully retrospective method. Management is currently assessing the impact of adopting this standard on the Company’s consolidated financial statements or the related disclosures.
3. CAPITALIZED SOFTWARE DEVELOPMENT COSTS
In
2020, the Company began developing MARKET.live, a livestream ecommerce platform, and has capitalized $
For
the three and nine months ended September 30, 2022 and 2021, the Company amortized $
Capitalized software development costs, net consisted of the following:
| September 30, 2022 | December 31, 2021 | |||||||
| Beginning balance | $ | $ | ||||||
| Additions | ||||||||
| Amortization | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
| 16 |
Option to Acquire Primary Contractor
In
August 2021, the Company entered into a term sheet that provided the Company the option to purchase the Primary Contractor provided certain
conditions are met. In November 2021, the Company exercised this option. The Company and the Primary Contractor subsequently reached
an agreement-in-principle on the terms for the Company’s acquisition of the Primary Contractor, the final consummation of which
is subject to the execution of a share purchase agreement (the “SPA”) and the completion of an audit of the Primary Contractor
that is satisfactory to the Company (the “Primary Contractor Audit”), as well as the fulfillment by the Primary Contractor
of certain other conditions set forth in the term sheet. The term sheet stipulates that if the Company had entered into the SPA and the
Primary Contractor had the Primary Contractor Audit successfully completed prior to May 15, 2022 (or a subsequent mutually agreed upon
date) and the Company thereafter determines not to consummate the acquisition of the Primary Contractor, the Company would have been
liable for a $
4. INTANGIBLE ASSETS
Intangible assets, net consisted of the following:
September 30, 2022 | December 31, 2021 | |||||||
| Amortizable finite-lived intangible assets | $ | $ | ||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Finite-lived intangible assets, net | ||||||||
| Indefinite-lived intangible assets | ||||||||
| Intangible assets, net | $ | $ | ||||||
Amortizable
finite-lived intangible assets are being amortized over a period of to
The expected future amortization expense for amortizable finite-lived intangible assets as of September 30, 2022, is as follows:
| Year ending | Amortization | |||
| 2022 remaining | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Total amortization | $ | |||
5. OPERATING LEASES
On
January 3, 2022, the Company terminated the lease agreements relating to our office and warehouse leases in American Fork, Utah. In accordance
with ASC 842, the Company derecognized the right-of-use assets of $
On
April 26, 2022, the Company entered into an office space sub-lease agreement.
| 17 |
The components of lease expense and supplemental cash flow information related to leases for the period are as follows:
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Lease cost | ||||||||
| Operating lease cost (included in general and administrative expenses in the Company’s condensed consolidated statements of operations) | $ | $ | ||||||
| Other information | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term – operating leases (in years) | ||||||||
| Weighted average discount rate – operating leases | % | % | ||||||
| September 30, 2022 | December 31, 2021 | |||||||
| Operating leases | ||||||||
| Right-of-use assets | $ | $ | ||||||
| Short-term operating lease liabilities | $ | $ | ||||||
| Long-term operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Year ending | Operating Leases | |||
| 2022 remaining | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 and thereafter | ||||
| Total lease payments | ||||
| Less: Imputed interest/present value discount | ( | ) | ||
| Present value of lease liabilities | $ | |||
6. ADVANCES ON FUTURE RECEIPTS
The Company has the following advances on future receipts as of September 30, 2022 and December 31, 2021:
| Note | Issuance Date | Maturity Date | Interest Rate | Original Borrowing | Balance as of September 30, 2022 | Balance as of December 31, 2021 | ||||||||||||||
| Note 1 | % | $ | $ | $ | ||||||||||||||||
| Note 2 | % | |||||||||||||||||||
| Note 3 | % | |||||||||||||||||||
| Note 4 | % | |||||||||||||||||||
| Total | $ | |||||||||||||||||||
| Debt discount | ( | ) | ( | ) | ||||||||||||||||
| Debt issuance costs | ( | ) | ||||||||||||||||||
| Net | $ | $ | ||||||||||||||||||
| 18 |
Note 1
On
October 29, 2021, the Company received secured advances from an unaffiliated third party totaling $
Note 2
On
October 29, 2021, the Company received secured advances from an unaffiliated third party totaling $
Note 3
On
December 23, 2021, the Company received secured advances from an unaffiliated third party totaling $
Note 4
On
August 25, 2022, the Company received secured advances from an unaffiliated third party totaling $
7. CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE
The Company has the following outstanding notes payable as of September 30, 2022 and December 31, 2021:
| Note | Issuance Date | Maturity Date | Interest Rate | Original Borrowing | Balance as of September 30, 2022 | Balance as of December 31, 2021 | ||||||||||||||
| Related party convertible note payable (A) | % | $ | $ | $ | ||||||||||||||||
| Related party convertible note payable (B) | % | |||||||||||||||||||
| Note payable (C) | % | |||||||||||||||||||
| Convertible Notes Due 2023 (D) | % | $ | ||||||||||||||||||
| Debt discount | ( | ) | ||||||||||||||||||
| Debt issuance costs | ( | ) | ||||||||||||||||||
| Total notes payable | ||||||||||||||||||||
| Non-current | ( | ) | ( | ) | ||||||||||||||||
| Current | $ | $ | ||||||||||||||||||
| (A) | ||
| (B) |
| 19 |
| (C) |
| |
| (D) |
| |
| The
Company received $ | ||
| In
connection with the January Note Offering, the Company paid $ | ||
| As
of September 30, 2022, and December 31, 2021, the outstanding balance of the Notes amounted to $ | ||
| On
October 28, 2022, the Company paid $ |
The following table provides a breakdown of interest expense for the periods presented:
| Three Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Interest expense – amortization of debt discount | $ | $ | ||||||
| Interest expense – amortization of debt issuance costs | ||||||||
| Interest expense – other | ||||||||
| Total interest expense | $ | $ | ||||||
Total
interest expense for notes payable to related parties (see Notes A and B above) was $
The following table provides a breakdown of interest expense for the periods presented:
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Interest expense – amortization of debt discount | $ | $ | ||||||
| Interest expense – amortization of debt issuance costs | ||||||||
| Interest expense – other | ||||||||
| Total interest expense | $ | $ | ||||||
Total
interest expense for notes payable to related parties (see Notes A and B above) was $
8. DERIVATIVE LIABILITY
In prior years, the Company granted certain warrants that included a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder. As a result, the fundamental transaction clause of these warrants is accounted for as a derivative liability in accordance with ASC 815 and are being re-measured every reporting period with the change in value reported in the Company’s condensed consolidated statements of operations.
| 20 |
The derivative liabilities were valued using a Binomial pricing model with the following assumptions:
| September 30, 2022 | December 31, 2021 | |||||||
| Stock Price | $ | $ | ||||||
| Exercise Price | $ | $ | ||||||
| Expected Life | ||||||||
| Volatility | % | % | ||||||
| Dividend Yield | % | % | ||||||
| Risk-Free Interest Rate | % | % | ||||||
| Total Fair Value | $ | $ | ||||||
The expected life of the warrants was based on the remaining contractual term of the instruments. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected dividend yield was based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future. The risk-free interest rate was based on rates established by the Federal Reserve Bank.
During
the nine months ended September 30, 2022, the Company recorded a gain of $
During
the nine months ended September 30, 2021, the Company recorded expense of $
The details of derivative liability transactions for the nine months ended September 30, 2022 and 2021 are as follows:
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Beginning balance | $ | $ | ||||||
| Change in fair value | ( | ) | ||||||
| Extinguishment | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
9. COMMON STOCK
The Company’s common stock activity for the nine months ended September 30, 2022, was as follows:
During
the nine months ended September 30, 2022, the Company issued shares of common stock as part of the April Registered Direct
Offering, which resulted in proceeds of $
During
the nine months ended September 30, 2022, the Company issued shares of common stock pursuant to the January Purchase Agreement,
which resulted in proceeds of $
| 21 |
During
the nine months ended September 30, 2022, the Company issued shares of common stock to certain employees and vendors for services
rendered and to be rendered with an aggregate grant date fair value of $
During
the nine months ended September 30, 2022, the Company issued shares of common stock to the Company’s Chief Executive Officer
in lieu of the cash payment of a bonus accrued in a prior year, with an aggregate grant date fair value of $
During
the nine months ended September 30, 2022, the Company issued shares of common stock to the Company’s former Chief Financial
Officer as part of a separation agreement, with an aggregate grant date fair value of $
During the nine months ended September 30, 2022, the Company issued shares of common stock to certain officers, employees and directors associated with the vesting of restricted stock units.
10. RESTRICTED STOCK UNITS
| Weighted- | ||||||||
| Average | ||||||||
| Grant Date | ||||||||
| Shares | Fair Value | |||||||
| Non-vested as of January 1, 2022 | $ | |||||||
| Granted | ||||||||
| Vested/deemed vested | ( | ) | ||||||
| Forfeitures and other | ( | ) | ||||||
| Non-vested as of September 30, 2022 | $ | |||||||
During the nine months ended September 30, 2022, the Company granted restricted stock units to certain officers, employees and directors. . These restricted stock units were valued based on the closing price of the Company’s common stock on the respective dates of issuance and had an aggregate grant date fair value of $, which is being amortized as share-based compensation expense over the respective vesting terms.
| 22 |
The total fair value of restricted stock units that vested during the three and nine months ended September 30, 2022, was $ and $, respectively. As of September 30, 2022, the remaining share-based compensation expense associated with previously issued restricted stock units was $ which will be recognized in future periods as the units vest. When calculating basic net loss per share, these shares are included in weighted average common shares outstanding from the time they vest.
| Weighted- | ||||||||||||||||
| Weighted- | Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Exercise | Contractual | Intrinsic | ||||||||||||||
| Options | Price | Life (Years) | Value | |||||||||||||
| Outstanding as of January 1, 2022 | $ | $ | ||||||||||||||
| Granted | - | - | ||||||||||||||
| Forfeited | ( | ) | - | - | ||||||||||||
| Exercised | ( | ) | - | - | ||||||||||||
| Outstanding as of September 30, 2022 | $ | $ | ||||||||||||||
| Vested as of September 30, 2022 | $ | $ | - | |||||||||||||
| Exercisable as of September 30, 2022 | $ | $ | - | |||||||||||||
As of September 30, 2022, the intrinsic value of the outstanding options was $.
During
the nine months ended September 30, 2022, the Company granted stock options to certain employees and consultants to purchase a total
of shares of common stock for services rendered or to be rendered. The options have an average exercise price of $ per
share, terms between one and five years, and vest between zero and four years from the respective grant dates. The total grant date fair
value of these options was approximately $ using the Black-Scholes option pricing model. The total share-based compensation expense
recognized relating to the vesting of stock options for the three and nine months ended September 30, 2022, was $
During
the nine months ended September 30, 2022, a total of stock options were exercised. As a result of the exercise of the option,
the Company issued shares of common stock and received cash of $
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Risk-free interest rate | % - | % | % - | % | ||||
| Average expected term | years | years | ||||||
| Expected volatility | – | % | - | % | ||||
| Expected dividend yield | ||||||||
| 23 |
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award; the expected term represents the weighted-average period of time that option awards are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; and the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future.
12. STOCK WARRANTS
The Company has the following warrants outstanding as of September 30, 2022:
| Warrants | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding as of January 1, 2022, all vested | $ | $ | ||||||||||||||
| Granted, unvested as of September 30, 2022 | ||||||||||||||||