Filing identity and reporting period
Important identity mismatch: The supplied filing is Verb Technology Company, Inc.’s Form 10-Q for the three and six months ended June 30, 2021—not a filing identified as TON Strategy Co. The filing was signed August 16, 2021. Confirm the intended issuer before relying on this summary.
Verb develops subscription-based, interactive video sales-enablement software, including verbCRM, verbLEARN, verbLIVE and verbTEAMS. It also reports legacy digital and non-digital fulfillment-related revenue. The statements are unaudited.
Financial performance and condition
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $2.392 million | $2.652 million | $4.918 million | $5.006 million |
| Gross margin dollars | $1.273 million | $1.517 million | $2.584 million | $2.808 million |
| Gross margin percentage | 53.3% | 57.2% | 52.5% | 56.1% |
| Operating loss | $(8.882) million | $(4.485) million | $(18.212) million | $(8.345) million |
| Net loss | $(11.812) million | $(3.424) million | $(20.157) million | $(5.370) million |
| Operating cash flow | Not separately presented for the quarter | $(13.620) million | $(4.673) million |
- Q2 SaaS recurring subscription revenue rose 26% to $1.601 million; six-month SaaS recurring revenue increased 31% to $3.062 million. Total revenue declined 2% for the six-month period, largely reflecting lower non-digital revenue as the company shifted focus toward SaaS.
- For the six months, operating expenses increased to $20.796 million from $11.153 million. Research and development rose to $6.097 million; general and administrative expense rose to $13.885 million.
- At June 30, cash was $6.449 million, compared with $1.815 million at year-end. Current assets were $8.649 million and current liabilities $19.432 million. Total liabilities were $22.935 million; stockholders’ equity was $13.487 million.
- Balance-sheet debt included $3.783 million of advances on future receipts, net of discount, $877,000 of related-party notes, and $150,000 of other notes. Operating lease liabilities totaled $3.213 million. A $7.911 million derivative liability was also reported.
- Financing provided $18.243 million in the first half, including $14.129 million net proceeds from a public offering, $1.103 million from warrant exercises, $377,000 from option exercises, and advances on future receipts. Common shares outstanding rose from 47.8 million at December 31, 2020, to 63.8 million at June 30, 2021.
- Modified EBITDA, a non-GAAP measure, was a loss of $7.218 million for Q2 and $13.732 million for the first half, versus losses of $2.519 million and $5.074 million, respectively, in 2020.
Changes, outlook, risks and unusual items
- Going concern: Management said the first-half net loss and $13.620 million operating cash use raise substantial doubt about the company’s ability to continue as a going concern within one year after issuance. It expects to seek further debt or equity financing; availability and terms are uncertain, and equity financing could dilute existing holders.
- Management’s focus: The company attributed recurring SaaS growth to new and expanding customers and said it was prioritizing higher-margin subscription products over legacy printing, fulfillment and shipping. It reported increased customer interest during the period but gave no quantified revenue or earnings guidance.
- Cash use and financing risk: Advances on future receipts carried stated/imputed rates including 28% on certain arrangements, were secured in some cases by company assets, and involved automatic withdrawals from operating cash. The filing reports $4.796 million outstanding before $1.013 million of unamortized discount.
- Noncash volatility: The six-month net loss included a $1.945 million derivative fair-value charge and $1.040 million amortization of debt discounts; it also included $1.317 million of PPP loan forgiveness gains and a $287,000 debt-extinguishment loss. Derivative fair-value changes contributed materially to period-to-period earnings swings.
- COVID-19 and execution: Management said pandemic effects had not been material to date, but prolonged economic weakness could reduce customer demand. It expected most employees to remain remote at least through year-end 2021. Product development, customer adoption, competition, cybersecurity, reliance on third parties and access to capital remain risks.
- Legal matters: The EMA litigation was settled in June 2021 with 600,000 shares issued. A securities class action was settled for $640,000, payable over 12 months; a derivative action settlement included governance changes and $75,000 in legal fees. A former employee’s approximately $300,000 bonus claim remained disputed.
- Subsequent events: After quarter-end, the company reported further warrant and option exercises and conversion of all remaining Series A preferred shares into 1.706 million common shares. It also issued additional shares for services and vested restricted stock.
- Management concluded disclosure controls were effective as of June 30, 2021; it reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm whether Verb Technology Company, Inc. is the intended issuer; the request names TON Strategy Co, while the supplied 10-Q names Verb.
- Review the going-concern disclosure, cash runway, and subsequent financing or capital-raising activity.
- Assess the cost, repayment mechanics, collateral and remaining balances of future-receipts advances, as well as upcoming obligations.
- Reconcile the reported growth in SaaS subscriptions with declining total revenue, lower gross margin percentage and increased operating losses.
- Evaluate potential dilution from shares issued, outstanding options and warrants, and post-quarter conversions and exercises.
- Check subsequent developments in the disputed employee claim, settlement payments and other contingencies.