Verb Technology Company, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

ACQUISITION OF SOLOFIRE

ACQUISITION OF SOLOFIRE

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

3.	ACQUISITION OF SOLOFIRE

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

On September 4, 2020, Verb Acquisition, a subsidiary of the Company, entered into a membership interest purchase agreement with 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 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 19) 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.

Key factors that contributed to the recorded 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.

The following table summarizes the fair value of the tangible assets acquired, identifiable intangible assets acquired, and liabilities assumed for SoloFire on the date of acquisition:

		Dec 31,2021
Cash	$	229,000
Accounts receivable		207,000
Current liabilities		(241,000	)
Long-term liabilities		(90,000	)
Net tangible assets		105,000
Intangible assets		1,418,000
Goodwill		3,427,000
Purchase price	$	4,950,000

See Note 6 for details regarding the amortization of intangible assets.

The 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 following unaudited pro forma statements of operations present the Company’s pro forma results of operations after giving effect to the purchase of SoloFire based on the historical financial statements of the Company and SoloFire. The unaudited pro forma statements of operations for the year ended December 31, 2020 give effect to the transaction as if they had occurred on January 1, 2020.

	2021			2020
	Years Ended December 31,
	2021			2020
				(Proforma, unaudited)
SaaS recurring subscription revenue	$	6,831,000		$	6,077,000
Other digital revenue		1,347,000			1,384,000
Design, printing, fulfilment, and shipping		2,346,000			3,467,000
Total revenue		10,524,000			10,928,000

Cost of revenue		4,504,000			4,980,000

Gross margin		6,020,000			5,948,000

Operating expenses		39,732,000			30,679,000

Other expense, net		(773,000	)		(218,000	)

Loss before income tax provision		(34,485,000	)		(24,949,000	)

Income tax provision		1,000			1,000

Net loss		(34,486,000	)		(24,950,000	)

Deemed dividend to Series A preferred stockholders		(348,000	)		(3,951,000	)

Net loss to common stockholders	$	(34,834,000	)	$	(28,901,000	)

The results of operations of SoloFire were included in the accompanying Consolidated Statements of Operations from September 4, 2020 through December 31, 2021. The amount of revenue and net loss of SoloFire in the Company’s consolidated statements of operations during the years ended December 31, 2021 and 2020, was $1,139,000 and $128,000, respectively for revenue and $(554,000) and $(900,000), respectively for net loss.