Business context and reporting period
The supplied filing is Verb Technology Company, Inc.’s Form 10-K for the fiscal year ended December 31, 2022, filed April 17, 2023. It does not identify TON Strategy Co. or report a standalone 2022 fourth quarter; the figures below are annual unless stated otherwise. Verb develops SaaS applications for interactive video-based sales and CRM, and launched its livestream-shopping platform MARKET.live in July 2022.
Financial performance and condition
Amounts are in millions of dollars except percentages and per-share data.
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $9.435 | $10.524 | Down $1.089, or about 10% |
| SaaS recurring subscription revenue | $7.663 | $6.831 | Up 12% |
| Total digital revenue | $8.274 | $8.178 | Up $0.096 |
| Gross profit / margin | $6.124 / 65% | $6.020 / 57% | Margin improved |
| Operating loss | $(38.792) | $(33.712) | Loss widened |
| Net loss | $(37.437) | $(34.486) | Loss widened |
| Modified EBITDA (non-GAAP) | $(18.915) | $(26.367) | Loss narrowed |
| Cash used in operating activities | $(19.406) | $(25.862) | Outflow decreased |
SaaS subscriptions were 81% of revenue, versus 65% in 2021; digital revenue was 88% of revenue, versus 78%. Non-digital revenue declined as the company intentionally wound down lower-margin printing, fulfillment, and shipping services. The filing reports total revenue of $9.435 million and non-digital revenue of $1.161 million in its financial tables; narrative text rounds the latter to about $1.0 million.
Operating expenses were $44.916 million, including $11.965 million of impairment charges and $2.529 million of depreciation and amortization. Other income included a $1.5 million Employee Retention Credit receivable that had not been collected by year-end. Modified EBITDA is a company-defined non-GAAP measure and should not be treated as cash flow or a substitute for GAAP results.
At December 31, 2022, cash was $2.429 million, current assets were $4.058 million, and current liabilities were $16.530 million, implying a working-capital deficit of about $12.472 million. Balance-sheet carrying amounts included $7.018 million of notes payable and $1.641 million of advances on future receipts, net of discounts and issuance costs. The company used $4.748 million in investing activities, principally for MARKET.live software development, and received $25.646 million net cash from financing activities.
Material changes versus the prior year
- Recurring SaaS revenue grew 12%, while total revenue declined as non-digital revenue fell and other digital revenue decreased.
- Gross margin rose from 57% to 65%, largely reflecting the shift toward digital services and reduced non-digital activity.
- Research and development expense fell to $5.188 million from $12.345 million. General and administrative expense was broadly lower, while total operating expenses increased due to the impairment charge.
- Goodwill and intangible-asset impairment totaled $11.965 million; goodwill impairment alone was $10.183 million. Goodwill ended the year at $9.581 million.
- Common shares outstanding increased from 72.9 million at year-end 2021 to 116.7 million at year-end 2022, largely reflecting equity financing and other share issuances.
Outlook, risks, contingencies, and unusual items
- Going concern and funding: The auditor and management report substantial doubt about the company’s ability to continue as a going concern. Management estimated that operating expenses over the next 12 months would exceed revenue and said it would need additional financing, asset sales, spending reductions, or strategic changes. No firm profitability guidance is provided.
- Subsequent financing and debt: In January 2023, the company raised approximately $6.6 million net through a common-stock offering, repaid the remaining January 2022 convertible notes, and terminated its $50 million equity line. The November 2022 note had $5.47 million original principal, 9% interest, and an 18-month maturity; it includes payment and financing restrictions. Shareholder approval for possible stock settlement did not constitute an agreement with the lender. Advances on future receipts were modified in February 2023 to reduce monthly payments by approximately 50% and extend them over 10 months.
- Cost reductions: A November 2022 plan included workforce and vendor reductions and a 25% reduction in senior-management cash compensation for four months in exchange for equity awards. Management expected R&D reductions to continue into 2023.
- MARKET.live: The platform and related creator program are new, and adoption, transaction volume, and revenue contribution are uncertain. MARKET.live revenue is not separately quantified in the provided results. The filing describes verbTV as a planned feature, not an established revenue stream.
- Listing and dilution: Nasdaq had notified the company that it did not meet the $1.00 minimum bid-price requirement and granted an extension through May 8, 2023 to regain compliance. Stockholders approved an increase in authorized common shares to 400 million and gave the board discretion to effect a 1-for-5 to 1-for-40 reverse split; the split had not been approved by the board as of April 17, 2023. A further 15 million shares were approved for the incentive plan.
- Contingencies: A former employee sought about $0.3 million in alleged unpaid bonuses, with trial scheduled for August 2023. Iroquois alleged $1.5 million in damages in a warrant-related dispute; the company disputed the claim. A separate legal-malpractice matter was settled in March 2023 for $0.1 million, which had been accrued at year-end.
- Other risks and controls: The filing highlights recurring losses, capital needs, debt-service constraints, competition, customer retention, cybersecurity and privacy, third-party technology dependence, macroeconomic conditions, and intellectual-property risks. Management stated that disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not express an opinion on internal-control effectiveness.
Important facts for investors to verify
- Confirm the registrant and reporting period: this document is Verb Technology Company, Inc.’s 2022 annual 10-K, not a TON Strategy Co. filing or a quarterly report.
- Review subsequent cash use, financing availability, debt maturities and covenants, and the company’s ability to meet obligations after the January 2023 offering and debt repayment.
- Track recurring SaaS growth, customer usage and retention, gross-margin progression, and whether MARKET.live produces material revenue relative to its costs.
- Assess dilution from future equity issuance, warrants, convertible or stock-settled debt, incentive-plan awards, and any reverse split or authorized-share changes.
- Check Nasdaq listing compliance and the status and outcome of the disclosed legal disputes and ERC receivable collection.