SEC filing summary
Issuer and period: The supplied filing is Verb Technology Company, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2022, not a filing identified as TON Strategy Co. The figures below are in USD thousands unless stated otherwise.
Business context
Verb develops subscription-based SaaS applications for interactive video sales enablement and livestream commerce, including verbCRM, verbLIVE and verbMAIL. It also provides ancillary printing and fulfillment services. The company was developing MARKET, a livestream social-shopping platform, and reported approximately 150 enterprise clients across more than 100 countries.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $2,691 | $2,526 | Up $165 (6.5%) |
| Gross profit | $1,718 | $1,311 | Up $407 |
| Gross margin | 63.8% | 51.9% | Up 11.9 percentage points |
| Operating loss | $(7,307) | $(9,330) | Improved $2,023 |
| Net loss | $(6,989) | $(8,345) | Improved $1,356 |
| Modified EBITDA, non-GAAP | $(5,471) | $(6,514) | Improved $1,043 |
| Cash used in operations | $(5,899) | $(6,923) | Improved $1,024 |
- SaaS subscription revenue increased 37% to $2,003 and represented 74% of total revenue, versus 58% a year earlier. Total digital revenue rose 19% to $2,150; non-digital revenue declined 25% to $541, consistent with the stated shift away from lower-margin services.
- Operating expenses fell 15% to $9,025, including research and development down $1,304 and general and administrative down $307. Management attributed the latter partly to lower marketing and share-based compensation, offset by increased labor costs.
- Cash and current assets were $3,718 and $5,968, respectively, at quarter-end; current liabilities were $19,524. Total liabilities were $22,273 and stockholders’ equity was $15,822. Cash was up from $937 at year-end, primarily reflecting financing.
- Cash used in investing was $2,363, mainly for MARKET software development. Financing provided $11,043, including $7,538 from stock sales and $6,000 gross proceeds from convertible notes, partly offset by repayment of advances and debt issuance costs.
- At March 31, notes payable were $6,642 net of discounts and costs, including $6,300 principal on new secured convertible notes; advances on future receipts were $2,135 net. Notes were secured by substantially all company assets. The notes carried 6% interest, matured in January 2023, and had an initial $3.00 conversion price. The filing reported $756 of interest expense.
Material changes, outlook and risks
- Management and the financial statements state that recurring losses and operating cash use raise substantial doubt about the company’s ability to continue as a going concern within one year. Management expected expenses to exceed revenue and said further debt or equity financing might be needed; no assurance of funding or profitability was provided.
- After quarter-end, an April 20 registered direct offering provided for 14,666,667 shares and warrants for the same number of shares at $0.75, for $11,000 gross proceeds before fees. The company repaid $1,650 of note principal, reducing the stated balance to $4,650. The 6% placement-agent fee and warrant repricing are relevant costs and dilution considerations. The offering also restricted use of the company’s ATM agreement and equity line.
- Common shares outstanding rose to 82,417,176 at quarter-end from 72,942,948 at year-end, largely reflecting financing and other stock issuances. Subsequent offering warrants and share-based awards add potential dilution.
- MARKET development costs capitalized were $6,207 at quarter-end. The company had a remaining $1,150 contractor obligation, paid in April, plus a $500 bonus paid that month. A proposed acquisition of the contractor had a $12,000 purchase price; the filing described an ongoing audit and unsigned purchase agreement, and a potential $1,000 break-up fee under specified circumstances.
- On May 12, Nasdaq notified the company that its share price had failed the $1 minimum bid requirement for 30 consecutive business days. The initial compliance period ran through November 8, 2022; failure to regain compliance could put continued listing at risk.
- Contingencies included a former employee’s approximately $300 bonus claim, which the company disputed, and a legal-services dispute in which the law firm sought approximately $915 in fees while the company pursued its own claims. Management said it did not expect either matter to have a material effect. The former employee case had a June 27, 2022 trial date.
- Management cited COVID-19-related uncertainty and possible adverse effects on demand and access to capital. It provided no quantified revenue or earnings guidance. MARKET and verbTV plans and expected commercial opportunities are forward-looking, not reported results.
- The company reported disclosure controls effective as of March 31, 2022 and no material change in internal control over financial reporting during the quarter. It reported no off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm the issuer identity: the filing is for Verb Technology Company, Inc. (Nasdaq: VERB), despite the request metadata naming TON Strategy Co.
- Review the going-concern disclosure and assess cash runway against operating cash burn, near-term obligations and the availability and terms of additional financing.
- Verify the closing and net proceeds of the April offering, debt repayment and remaining note terms, including scheduled amortization, conversion adjustments, security interests and warrant dilution.
- Assess MARKET launch progress, further development and acquisition costs, and whether the capitalized software balance and contractor commitments are recoverable and affordable.
- Monitor the Nasdaq minimum-bid compliance deadline and potential consequences for listing.
- Track customer adoption and recurring SaaS growth alongside the decline in non-digital revenue, operating costs and cash consumption; Modified EBITDA is non-GAAP and does not measure liquidity.