Verb Technology Company, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed March 31, 2022. The request metadata names TON Strategy Co, but the filing identifies Verb Technology Company, Inc. (Nasdaq: VERB, VERBW) as the registrant. This is an annual report, not a standalone Q4 filing.
Business context
Verb develops subscription-based SaaS sales and marketing applications centered on interactive video, including verbCRM, verbLEARN, verbLIVE, verbPULSE and verbTEAMS, and introduced verbMAIL. It also provides ancillary printing and fulfillment services. The company reported approximately 150 enterprise clients across more than 100 countries and 48 languages at year-end. Its MARKET platform was in development; MARKET and verbTV were described as growth initiatives, not established sources of material revenue.
Financial results and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Total revenue | $10.524 million | $9.965 million | +$0.559 million |
| SaaS subscription revenue | $6.831 million | $5.114 million | +$1.717 million |
| Total digital revenue | $8.178 million | $6.498 million | +$1.680 million |
| Gross profit / margin | $6.020 million / 57% | $5.164 million / 52% | Margin +5 percentage points |
| Operating loss | $(33.712) million | $(24.737) million | Loss increased |
| Net loss | $(34.486) million | $(24.956) million | Loss increased $9.530 million |
| Modified EBITDA (non-GAAP) | $(26.367) million | $(17.108) million | Loss increased $9.259 million |
| Cash used in operating activities | $(25.862) million | $(16.294) million | Use increased |
Digital revenue represented 78% of total revenue, compared with 65% in 2020. Non-digital revenue fell to $2.346 million from $3.467 million as the company shifted toward digital products. Total operating expenses rose to $39.732 million from $29.901 million, including R&D of $12.345 million and G&A of $25.710 million.
At December 31, 2021, cash was $937,000, current assets were $3.194 million, current liabilities were $17.935 million, total liabilities were $21.109 million, and stockholders’ equity was $13.322 million. Notes payable, including advances on future receipts, totaled approximately $5.096 million. The filing reports a $3.155 million derivative liability. The auditor cited substantial doubt about the company’s ability to continue as a going concern.
Investing cash outflow was $2.263 million, primarily for $2.248 million of capitalized software development costs. Financing provided $27.247 million, principally through stock issuance, warrant exercises and advances on future receipts. The filing does not provide a standalone cash-flow statement for Q4.
Material changes and unusual items
- Revenue growth was concentrated in SaaS subscriptions; the company said SaaS recurring revenue increased 34% year over year. Q4 total revenue was $2.706 million versus $2.099 million in Q4 2020; Q4 SaaS revenue was $1.923 million versus $1.305 million.
- Operating losses widened as R&D and G&A spending increased. Management attributed higher spending to product development, growth support, marketing, professional services, compliance and a full year of SoloFire operations.
- Interest expense rose to $2.575 million from $894,000, largely due to amortization of debt discounts on advances against future receipts. Debt extinguishment contributed a net gain of $1.112 million in 2021.
- The company capitalized $4.348 million of MARKET development costs; the software was not yet complete or in use at year-end. It reported a remaining $1.150 million commitment to the primary contractor, with a possible $500,000 bonus. The company had exercised an option to acquire that contractor, with a proposed $12 million purchase price subject to a share purchase agreement and audit; a $1 million breakup fee could apply under stated conditions.
- Post-year-end financing included a stock purchase facility of up to $50 million, subject to conditions and share limits, and $6.3 million principal amount of secured convertible notes (reported gross proceeds of $6 million). The notes bear 6% interest, mature in 12 months, and require monthly principal payments beginning May 2022. Through March 25, 2022, the company reported $5.542 million received for issuing 5,146,683 shares under the stock purchase agreement.
- Litigation includes a former employee claim for approximately $300,000 and a legal malpractice dispute in which outside counsel claimed approximately $915,000 in fees. Management stated it believed the matters would not have a material effect and had reserved for litigation.
Outlook, risks and management commentary
There is no formal revenue or earnings guidance in the provided filing text. Management reported 55 new client contracts signed in 2021 with a stated guaranteed base value of $3.3 million and expected annual recurring revenue of approximately $1.5 million. These are management expectations, not a guarantee of realized revenue. The company also described planned launches and adoption efforts for MARKET, verbTV, paid verbMAIL features and Salesforce integrations.
Management said COVID-19 increased interest in digital services but adversely affected non-digital activity, including event-related sales opportunities. Principal risks include recurring losses, operating cash burn, dependence on additional financing, potential dilution, debt-service obligations and secured claims on assets, competition, customer retention, execution and monetization of new products, cybersecurity and privacy, and reliance on third-party internet and technology providers. The filing reported effective disclosure controls and effective management assessment of internal control over financial reporting; the auditor did not issue an internal-control audit opinion.
Important facts for investors to verify
- Confirm the intended issuer: the supplied metadata says TON Strategy Co, while this 10-K is for Verb Technology Company, Inc.
- Assess the going-concern warning against current cash needs, subsequent financing proceeds, repayment schedule and availability of the stock purchase facility.
- Track actual SaaS growth, customer retention, conversion of the 55 signed contracts into recurring revenue, and progress toward the stated $1.5 million expected ARR.
- Review the economics and completion status of MARKET and verbTV, including capitalized development costs, contractor commitments and any acquisition or breakup-fee obligations.
- Evaluate dilution from equity facilities, convertible notes, warrants, options and share-based compensation, as well as the collateral and covenants securing debt.
- Monitor resolution and financial exposure from the disclosed legal disputes and any material changes to the company’s liquidity or product-launch plans.