Verb Technology Company, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

6 Months Ended

Jun. 30, 2023

Convertible Notes Payable And Notes Payable

CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

7. CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

The Company has the following outstanding notes payable as of June 30, 2023 and December 31, 2022:

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2023			Balance at December 31, 2022
Related party note payable (A)	December 1, 2015	April 1, 2023		12.0	%	$	1,249	$	725		$	725
Related party note payable (B)	April 4, 2016	June 4, 2021		12.0	%		343		40			40
Note payable (C)	May 15, 2020	May 15, 2050		3.75	%		150		150			150
Convertible Notes Due 2023 (D)	January 12, 2022	January 12, 2023		6.0	%		6,300		-			1,350
Promissory note payable (E)	November 7, 2022	May 7, 2024		9.0	%		5,470		6,034			5,470
Debt discount									(246	)		(408	)
Debt issuance costs									(183	)		(309	)
Total notes payable									6,520			7,018
Non-current									(150	)		(1,215	)
Current								$	6,370		$	5,803

	(A)	On December 1, 2015, the Company issued a convertible note payable to Mr. Cutaia, the Company’s Chief Executive Officer and a director, to consolidate all loans and advances made by Mr. Cutaia to the Company as of that date. On May 19, 2021, the Company amended the note to allow for conversion of the note at any time at the discretion of the holder at a fixed conversion price of $41.20, which was the closing price of the common stock on the amendment date. On May 12, 2022, the maturity date of the note was extended to April 1, 2023. As of June 30, 2023 and December 31, 2022, the outstanding balance under the note was $854 and $811, respectively. As of June 30, 2023 and December 31, 2022, the portion of the outstanding balance that represents accrued interest was $129 and $86, respectively.

	(B)	On April 4, 2016, the Company issued a convertible note payable to Mr. Cutaia, in the amount of $343, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. On May 19, 2021, the Company amended the note to allow for conversion of the note at any time at the discretion of the holder at a fixed conversion price of $41.20, which was the closing price of the common stock on the amendment date. As of June 30, 2023 and December 31, 2022, the outstanding balance under the note was $47 and $45, respectively. As of June 30, 2023 and December 31, 2022, the portion of the outstanding balance that represents accrued interest was $7 and $5, respectively.

	(C)	On May 15, 2020, the Company executed an unsecured loan with the SBA under the Economic Injury Disaster Loan program in the amount of $150. Installment payments, including principal and interest, began on October 26, 2022. In September 2022, the SBA approved an additional loan of $350. As of August 14, 2023, the Company has not received these funds. As of June 30, 2023 and December 31, 2022, the outstanding balance under the note was $150.

	(D)	On January 12, 2022, the Company entered into a securities purchase agreement (the “January Note Purchase Agreement”) with three institutional investors (collectively, the “January Note Holders”) providing for the sale and issuance of an aggregate original principal amount of $6,300 in convertible notes due January 2023 (each, a “Note,” and, collectively, the “Notes,” and such financing, the “January Note Offering”). The Company and the January Note Holders also entered into a security agreement, dated January 12, 2022, in connection with the January Note Offering, pursuant to which the Company granted a security interest to the January Note Holders in substantially all of its assets. The January Note Purchase Agreement prohibits the Company from entering into an agreement to effect any issuance of common stock involving a Variable Rate Transaction (as defined therein) during the term of the agreement, subject to certain exceptions set forth therein. The January Note Purchase Agreement also gives the January Note Holders the right to require the Company to use up to 15% of the gross proceeds raised from future debt or equity financings to redeem the Notes, which redemptions have been elected by the January Note Holders. There are no financial covenants related to these notes payable.

		The Company received $6,000 in gross proceeds from the sale of the Notes. The Notes bear interest of 6.0% per annum, have an original issue discount of 5.0%, mature 12 months from the closing date, and have an initial conversion price of $120.00, subject to adjustment in certain circumstances as set forth in the Notes.

		In connection with the January Note Offering, the Company paid $461 of debt issuance costs. The debt issuance costs and the debt discount of $300 were amortized over the term of the Notes using the effective interest rate method. As of December 31, 2022, the amount of unamortized debt discount and debt issuance costs was $6 and $10, respectively. During the six months ended June 30, 2023, the Company amortized the remaining amount of debt discount and debt issuance costs.

		As of December 31, 2022, the outstanding principal balance of the Notes amounted to $1,350. On January 26, 2023, the Company repaid in full all outstanding obligations under the January Note Offering dated January 12, 2022.

	(E)	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 note in the original principal amount of $5,470, which has an original issue discount of $470, resulting in gross proceeds to the Company of approximately $5,000 (the “November Note,” and such financing, the “November Note Offering”). The November Note matures eighteen months following the date of issuance. Commencing six months from the date of issuance, the Company is required to make monthly cash redemption payments in an amount not to exceed $600. The November Note may be repaid in whole or in part prior to the maturity date for a 10% premium. The November Note requires the Company to use up to 20% of the gross proceeds raised from future equity or debt financings, or the sale of any subsidiary or material asset, to prepay the November Note, subject to a $2,000 cap on the aggregate prepayment amount. Until all obligations under the November Note have been paid in full, the Company is not permitted to grant a security interest in any of its assets, or to issue securities convertible into shares of common stock, subject in each case to certain exceptions. verbMarketplace, LLC entered into a guaranty, dated November 7, 2022, in connection with the November Note Offering, pursuant to which it guaranteed the obligations of the Company under the November Note in exchange for receiving a portion of the loan proceeds.

		In connection with the November Note Offering, the Company incurred $335 of debt issuance costs. The debt issuance costs and the debt discount of $450 are being amortized over the term of the November Notes using the effective interest rate method. As of December 31, 2022, the amount of unamortized debt discount and debt issuance costs was $402 and $299, respectively. During the six months ended June 30, 2023, the Company paid $375 in cash and $300 in shares; amortized $156 of debt discount and $116 of debt issuance costs. As of June 30, 2023, the amount of unamortized debt discount and debt issuance costs was $246 and $183, respectively.

		On May 16, 2023, the Company received a redemption notice under the terms of the November Note Purchase Agreement for $300. The Company missed two payments resulting in a Payment Failure Balance Increase of 10% on the outstanding principal balance per occurrence pursuant to the terms of the agreement totaling $1,205. These costs have been recorded as finance costs in the Company’s condensed consolidated statement of operations for the three and six months ended June 30, 2023.

		As of June 30, 2023 and December 31, 2022, the outstanding balance of the November Notes amounted to $6,375 and $5,544, respectively. See Note 14 for Subsequent Events.

The following table provides a breakdown of interest expense for the periods presented:

SCHEDULE OF INTEREST EXPENSE

	2023		2022
	Three Months Ended June 30,
	2023		2022

Interest expense – amortization of debt discount	$	77	$	98
Interest expense – amortization of debt issuance costs		57		151
Interest expense – other		165		119

Total interest expense	$	299	$	368

Total interest expense for notes payable to related parties (see Notes A and B above) was $23 and $23 for the three months ended June 30, 2023 and 2022, respectively. The Company paid $0 and $0 in interest to related parties for the three months ended June 30, 2023 and 2022, respectively.

The following table provides a breakdown of interest expense for the periods presented:

	2023		2022
	Six Months Ended June 30,
	2023		2022

Interest expense – amortization of debt discount	$	163	$	171
Interest expense – amortization of debt issuance costs		127		264
Interest expense – other		480		226

Total interest expense	$	770	$	661

Total interest expense for notes payable to related parties (see Notes A and B above) was $46 and $46 for the six months ended June 30, 2023 and 2022, respectively. The Company paid $0 and $0 in interest to related parties for the six months ended June 30, 2023 and 2022, respectively.