Filing summary
Entity and period: The supplied filing is Verb Technology Company, Inc.’s unaudited Form 10-Q for the three months ended March 31, 2021. This does not match the request metadata naming TON Strategy Co; verify that this is the intended filing.
Business context
Verb develops subscription-based SaaS sales-enablement applications featuring interactive video, including verbCRM, verbLEARN, verbLIVE and verbTEAMS. It also earns revenue from digital services and legacy printing, fulfillment and shipping activities. The company reported approximately 140 enterprise clients as of May 10, 2021, and had acquired SoloFire in September 2020.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $2.526 million | $2.354 million |
| Gross profit | $1.311 million | $1.291 million |
| Gross margin | 51.9% | 54.8% |
| Operating expenses | $10.641 million | $5.151 million |
| Operating loss | $9.330 million | $3.860 million |
| Net loss | $8.345 million | $1.946 million |
| Net cash used in operations | $6.923 million | $2.266 million |
The 2020 net loss attributable to common stockholders was $5.897 million, including a $3.951 million deemed dividend; the reported net loss itself was $1.946 million. Basic and diluted loss per share were $0.16 in 2021 and $0.23 in 2020.
Cash at March 31, 2021 was $12.946 million, up from $1.815 million at year-end 2020. Current assets were $15.281 million and current liabilities $16.745 million. Total liabilities were $20.496 million. These included $3.170 million of net advances on future receipts, $1.077 million of related-party notes, $240,000 of other notes, and a $5.480 million derivative liability. Operating leases added $3.377 million of liabilities.
Financing activities provided $18.049 million, mainly from a March registered direct offering that generated $14.129 million net proceeds, advances on future receipts, and warrant and option exercises. Cash flow was also supported by forgiveness of a $1.226 million PPP loan, recognized as a gain. Modified EBITDA, a non-GAAP measure, was a loss of $6.514 million versus a loss of $2.554 million.
Changes versus the prior comparable period
- Revenue grew 7%; SaaS subscription revenue rose 38% to $1.461 million, while other digital revenue fell 15% to $340,000.
- Non-digital revenue declined 19% to $725,000, consistent with the strategy to move away from lower-margin printing and fulfillment.
- Gross profit was nearly flat, but gross margin fell about 2.9 percentage points. Digital cost of revenue increased, partly reflecting customer growth and verbLIVE trials.
- Operating expenses more than doubled, driven by research and development, stock-based compensation, labor, marketing, professional services, and SoloFire operations. Operating and net losses widened.
- Operating cash use increased by $4.657 million year over year. The registered offering and other financing raised period-end cash, while common shares outstanding increased from 47.8 million at December 31, 2020 to 62.6 million at March 31, 2021.
Outlook, risks and unusual items
There is no numerical revenue or earnings guidance in the filing. Management said operating expenses may continue to exceed revenue over the next 12 months and that further debt or equity financing may be required. The filing states that the quarterly net loss and operating cash burn raise substantial doubt about the company’s ability to continue as a going concern within one year after issuance. Additional financing is uncertain; equity financing could materially dilute existing holders.
Management reported higher sales-team interest in its products during the quarter but warned that COVID-19-related demand variability and a prolonged economic downturn could hurt customers and demand. Product plans included a verbLIVE mobile app expected in early Q2 2021 and a broad Microsoft Outlook integration anticipated in summer 2021; these are expectations, not guaranteed outcomes. The company identified competition, customer retention, reliance on third-party providers, cybersecurity, and access to capital as significant risks.
Unusual items included PPP forgiveness income of $1.226 million, a $287,000 debt-extinguishment loss related to extending the CEO’s related-party note, and a $500,000 gain from the change in fair value of derivative liabilities. The company used high-cost advances secured by tangible and intangible assets, with stated imputed rates of 108% on certain advances. Litigation included a $640,000 class-action settlement payable over 12 months, a roughly $464,000 judgment under appeal, and a derivative-action settlement subject to final court approval; the filing says reserves were recorded.
Most important facts to verify
- Confirm the issuer: the filing is for Verb Technology Company, Inc., not TON Strategy Co.
- Assess going-concern disclosures, cash runway, and the company’s ability to obtain additional financing.
- Review the terms, effective cost, collateral, repayment schedule, and remaining balances of advances on future receipts.
- Evaluate the impact of the March share offering and outstanding options, warrants, and preferred-stock conversion rights on dilution.
- Check progress and commercial adoption of product launches and integrations, and confirm the status and costs of litigation settlements and appeals.