UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended: December 31, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ____________ to ____________
Commission
file number: 001-38834
Verb
Technology Company, Inc.
(Exact
name of registrant as specified in its charter)
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
782 Auto Mall Dr. American Fork, Utah 84003
(Address of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code: (855)250-2300
Securities
registered pursuant to Section 12(b) of the Act
Title of each class Trading Symbol(s) Name of each exchange on which registered
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes
☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Yes
☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The
aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates based on the closing price
of the registrant’s common stock as quoted on The NASDAQ Capital Market as of the last business day of the registrant’s most
recently completed second fiscal quarter was approximately $119,638,000.
As
of March 25, 2022, there were 80,167,176shares of common stock, $0.0001 par value
per share, outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the registrant’s proxy statement for its 2022 annual meeting of stockholders, to be filed with the Securities and Exchange Commission
no later than 120 days after the end of the registrant’s fiscal year
ended December 31, 2021, are incorporated by reference into Part III, Items 10–14 of this Annual Report on Form 10-K.
TABLE
OF CONTENTS
PART I 1
ITEM 1. BUSINESS 1
ITEM 1A. RISK FACTORS 8
ITEM 2. PROPERTIES 18
ITEM 3. LEGAL PROCEEDINGS 18
ITEM 4. MINE SAFETY DISCLOSURES 18
ITEM 6. SELECTED FINANCIAL DATA 22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 37
ITEM 9A. CONTROLS AND PROCEDURES 37
ITEM 9B. OTHER INFORMATION 38
PART III 38
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 38
ITEM 11. EXECUTIVE COMPENSATION 38
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 39
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 39
CAUTIONARY
NOTE REGARDING Forward-Looking Statements
This
Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (this “Annual Report”) contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements are subject to considerable risks and
uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not statements of historical facts
and can be identified by words such as “anticipates,” “believes,” “could,” “estimates,”
“expects,” “intends,” “may,” “plans,” “potential,” “predicts,”
“projects,” “seeks,” “should,” “will,” “would” or similar expressions and
the negatives of those expressions. Forward-looking statements also include the assumptions underlying or relating to such statements.
Our
forward-looking statements are based on our management’s current beliefs, assumptions and expectations about future events and
trends, which affect or may affect our business, strategy, operations, financial performance or liquidity. Although we believe these
forward-looking statements are based upon reasonable assumptions, they are subject to numerous known and unknown risks and uncertainties
and are made in light of information currently available to us. Some of the risks and uncertainties that may impact our forward-looking
statements include, but are not limited to, the following factors:
●
our incursion of significant net losses and uncertainty whether we will achieve or maintain profitable operations;
●
our ability to continue as a going concern;
●
our ability to grow and compete in the future, which is dependent upon whether capital is available to us on favorable terms;
●
our ability to maintain and expand our customer base and our ability to convince our customers to increase the use of our services and/or
platform;
●
the competitive market in which we operate;
●
our ability to increase the number of our strategic relationships or grow the revenues received from our current strategic relationships;
●
our ability to develop enhancements and new features to our existing service or acceptable new services that keep pace with technological
developments;
●
the novel coronavirus (“COVID-19”) pandemic, which has had a sustained impact on our business, sales, results of operations
and financial condition;
●
our ability to deliver our services, as we depend on third party Internet providers;
●
our ability to pay our debt obligations as they become due; and
●
our susceptibility to security breaches and other disruptions.
The
forward-looking statements contained in this Annual Report are based on management’s current plans, estimates and expectations
in light of information currently available to us, and they are subject to uncertainty and changes in circumstances. There can be no
assurance that future developments affecting us will be those we have anticipated. Actual results may differ materially from these expectations
due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of
which are beyond our control, as well as the other factors described in the section entitled “Risk Factors” within
this Annual Report and in the other reports we file with the Securities and Exchange Commission (“SEC”). These risks and
uncertainties include those described in the section entitled “Risk Factors.”
You
should not place undue reliance on these forward-looking statements. Our forward-looking statements are based on the information currently
available to us and speak only as of the date on which they were made. Additional factors or events that could cause our actual results
to differ may also emerge from time to time, and it is not possible for us to predict all of them. Over time, our actual results, performance,
or achievements may differ from those expressed or implied by our forward-looking statements, and such difference might be significant
and materially adverse to our security holders. Comparisons of results for current and any prior periods are not intended to express
any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data. Except
as required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information,
future events, or otherwise. We have identified some of the important factors that could cause future events to differ from our current
expectations and they are described in this Annual Report under the captions “Risk Factors,” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” as well as in other documents that we may file with
the SEC, all of which you should review carefully. We qualify all of our forward-looking statements by these disclaimers.
PART
I
ITEM
1. BUSINESS
Overview
We
are a Software-as-a-Service (“SaaS”) applications platform developer. Our platform is comprised of a suite of interactive
video-based sales enablement business software products marketed on a subscription basis. Our applications, available in both mobile
and desktop versions, are offered as a fully integrated suite, as well as on a standalone basis, and include verbCRM, our Customer Relationship
Management (“CRM”) application, verbLEARN, our Learning Management System application, verbLIVE, our Live Stream eCommerce
application, verbPULSE, our business/augmented intelligence notification and sales coach application, and verbTEAMS, our self-onboarding
video-based CRM and content management application for professional sports teams, small business, and solopreneurs, with seamless
synchronization with Salesforce, that also comes bundled with verbLIVE, and more recently, we introduced verbMAIL, our interactive video-based
sales communication tool integrated into Microsoft Outlook.
We
use the term “client” and “customer” interchangeably throughout this Annual Report.
Our
Technology
Our
suite of applications can be distinguished from other sales enablement applications because our applications utilize our proprietary
interactive video technology as the primary means of communication between sales and marketing professionals and their customers and
prospects. Moreover, the proprietary data collection and analytics capabilities of our applications inform our users on their devices
in real time, when and for how long their prospects have watched a video, how many times such prospects watched it, and what they clicked
on, which allows our users to focus their time and efforts on ‘hot leads’ or interested prospects rather than on those that
have not seen such video or otherwise expressed interest in such content. Users can create their hot lead lists by using familiar, intuitive
‘swipe left/swipe right’ on-screen navigation. Our clients report that these capabilities provide for a much more efficient
and effective sales process, resulting in increased sales conversion rates. We developed the proprietary patent-pending interactive video
technology, as well as several other patent-issued and patent-pending technologies that serve as the unique foundation for all our platform
applications.
Our
Products
verbCRM
combines the capabilities of CRM lead-generation, content management, and in-video ecommerce capabilities in an intuitive, yet powerful
tool for both inexperienced as well as highly skilled sales professionals. verbCRM allows users to quickly and easily create, distribute,
and post videos to which they can add a choice of on-screen clickable icons which, when clicked, allow viewers to respond to the user’s
call-to-action in real-time, in the video, while the video is playing, without leaving or stopping the video. For example, our technology
allows a prospect or customer to click on a product they see featured in a video and impulse buy it, or to click on a calendar icon in
the video to make an appointment with a salesperson, among many other features and functionalities designed to eliminate or reduce
friction from the sales process for our users. The verbCRM app is designed to be easy to use and navigate and takes little time and training
for a user to begin using the app effectively. It usually takes less than four minutes for a novice user to create an interactive video
from our app. Users can add interactive icons to pre-existing videos, as well as to newly created videos shot with practically any mobile
device. verbCRM interactive videos can be distributed via email, text messaging, chat app, or posted to popular social media directly
and easily from our app. No software download is required to view Verb interactive videos on virtually any mobile or desktop device,
including smart TVs.
verbLEARN
is an interactive, video-based learning management system that incorporates all of the clickable in-video technology featured in
our verbCRM application and adapts them for use by educators for video-based education. verbLEARN is used by enterprises seeking to educate
a large sales team or a customer base about new products, or elicit feedback about existing products. It also incorporates Verb’s
proprietary data collection and analytics capabilities that inform users in real time when and for how long the viewers watched the video,
how many times they watched it, and what they clicked on, in addition to adding gamification features that enhance the learning aspects
of the application.
verbLIVE
builds on popular video-based platforms such as Facebook Live, Zoom, WebEx, and Go2Meeting, among others, by adding Verb’s
proprietary interactive in-video ecommerce capabilities – including an in-video Shopify shopping cart integrated for Shopify account
holders - to our own live stream video broadcasting application. verbLIVE is a next-generation live stream platform that allows hosts
to utilize a variety of novel sales-driving features, including placing interactive icons on-screen that appear on the screens of all
viewers, providing in-video click-to-purchase capabilities for products or services featured in the live video broadcast, in real-time,
driving friction-free selling. verbLIVE also provides the host with real-time viewer engagement data and interaction analytics. verbLIVE
is entirely browser-based, allowing it to function easily and effectively on all devices without requiring the host or the viewers to
download software, and is secured through end-to-end encryption.
verbPULSE
is a business/augmented intelligence notification-based sales enablement platform feature set that tracks users’ interactions
with current and prospective customers and then helps coach users by telling them what to do next in order to close the sale, virtually
automating the selling process.
verbTEAMS
is our interactive, video-based CRM for professional sports teams, small-and medium-sized businesses, and solopreneurs. verbTEAMS
also incorporates verbLIVE as a bundled application. verbTEAMS features self-sign-up, self-onboarding, self-configuring, content management
system capabilities, user level administrative capabilities, and high-quality analytics capabilities in both mobile and desktop platforms
that sync with one another. It also has a built-in one-click sync capability with Salesforce.
We
continue to invest in the future of interactive livestreaming. Following are some of our recent initiatives:
MARKET
is a centralized online destination where shoppers could explore scores of shoppable livestream events, and over time - thousands,
across numerous product and service categories, being hosted by people from all over the world, always on - 24/7 - where shoppers could
communicate with the hosts, asking questions about products in real-time - through an on-screen chat visible to all shoppers –
that allows shoppers who have invited their friends and family to join them there to share the experience - to communicate directly with
each other in real time, and then simply click on a non-intrusive - in-video overlay to place items in an on-screen shopping cart for
purchase – all without interrupting the video. Shoppers can visit any number of other shoppable events to meet up and chat with
friends, old and new, and together watch, shop and chat with the hosts, discover new products and services, and become part of an immersive
entertaining shopping experience. Throughout the experience, the shopping cart follows shoppers seamlessly from event to event, shoppable
video to shoppable video, host to host, product to product.
The
MARKET business model is a simple but next-level B to B play. It is a multi-vendor platform, with a single follow-me style unified shopping
cart, and robust ecommerce capabilities with the tools for consumer brands, big box brick and mortar stores, boutiques, influencers and
celebrities to connect with their clients, customers, their fans, followers, and prospects by providing a unique, interactive social
shopping experience that we believe could keep them coming back and engaged for hours.
A
big differentiator for MARKET is that it also provides an online meeting place for friends and family to meet, chat, shop and enjoy a
fun, immersive shopping experience in real time together from anywhere and everywhere in the world. MARKET will provide vendors with
extensive business building analytics capabilities not available on, and not shared by many operators of other social media sites who
regard that information as valuable proprietary property. All vendors on MARKET will retain this valuable intelligence for their own,
unlimited use.
MARKET
allows vendors an opportunity to reach not only the shoppers they invite to the site from their own client and contact lists, but also
those shoppers who came to the site independently who will discover these vendors as they browse through the many other shoppable events
hosted simultaneously on MARKET 24/7, from around the world. We believe our revenue model will be attractive to vendors and will consist
of SaaS recurring revenue as well as a share of revenue generated through sales on the platform.
MARKET
will also incorporate a modified version of our verbLIVE Attribution technology, allowing vendors who so choose, to leverage extremely
powerful, built-in affiliate marketing capabilities. Non-vendor visitors to the site can search for those vendors that have activated
the Attribution feature for their events and be compensated when people they referred to that vendor, purchase products or services during
that vendor’s shopping event. We expect that this feature, unique to MARKET, will drive many more shoppers who will be referred
from all over the world, producing a cross-pollination effect enhancing the revenue opportunities for all MARKET vendors, while also
creating an attractive income generating opportunity for non-vendor MARKET patrons.
MARKET
is an entirely new platform, built wholly independently and separate from our verbLIVE sales platform, representing what we believe is
the state of the art of shoppable video technology. It will utilize an ultra-low latency private global CDN network that we control,
allowing us to deliver a high-quality experience and platform performance capabilities. We also believe that MARKET will expose vendors
to our entire suite of sales enablement products, such as verbMAIL, among others, that could drive new cross selling revenue opportunities.
verbTV
is an online destination for shoppable entertainment. Whereas MARKET is a social shopping experience, verbTV is a destination for
those seeking commercial-free television content, such as concerts, game shows, sports, including e-sports, sitcoms, podcasts, special
events, news, including live events, and other forms of video entertainment that is all interactive and shoppable. verbTV represents
an entirely new distribution channel for all forms of content by a new generation of content creators looking for greater freedom to
explore the creative possibilities that a native interactive video platform can provide for their audience. We believe content creators
may also enjoy greater revenue opportunities through the native ecommerce capabilities the platform provides to sponsors and advertisers
who will enjoy real-time monetization, data collection and analytics. Through verbTV, sponsors and advertisers will be able to accurately
measure the ROI from their marketing spend, instead of relying on decades-old, imprecise viewership information.
At
launch, verbTV will feature the popular business pitch show “2 Minute Drill” currently shown on Amazon Prime and Bloomberg
TV. However, verbTV will host a shoppable version of the 12 episodes of the upcoming Season 3. Each episode is a fast-paced reality show
where 5-6 entrepreneurs competing for $50,000 in cash and prizes, have 2 minutes to impress the judges with the best investor pitch.
Our CEO is one of the judges on the show. Expected to air in early 2022, verbTV viewers will be able to click on-screen and purchase
the products and services of the contestants featured on the show, among other contemplated interactive features. Dave Meltzer, the creator
of the show, and Co-founder of Sports 1 Marketing and the former CEO of the renowned Leigh Steinberg Sports & Entertainment agency,
has signed-on with Verb to produce other interactive and shoppable entertainment for verbTV. Other such partnerships, as well as a creator
program, are currently in progress.
Verb
Partnerships and Integrations
verbMAIL
for Microsoft Outlook is a product of our partnership with Microsoft and is available as an add-in to Microsoft Outlook for Outlook
and Office 365 subscribers. verbMAIL allows users to create interactive videos seamlessly within Outlook by clicking the verbMAIL icon
in the Outlook toolbar. The videos are automatically added to an email and can be sent easily through Outlook using the user’s
contacts they already have in Outlook. The application allows users to easily track viewer engagement and together with other features
represents an effective sales tool available for all Outlook users worldwide. Currently offered without charge, a subscription-based
paid version with a suite of enhanced features for sales and marketing professionals is slated for release later this year.
Salesforce
Integration. We have completed and deployed the integration of verbLIVE into Salesforce and have launched a joint marketing campaign
with Salesforce to introduce the verbLIVE plug-in functionality to current Salesforce users. We have also developed a verbCRM sync application
for Salesforce users that is currently being utilized by at least one of our large enterprise clients and the verbLIVE plug-in is now
being offered to all Salesforce users on a monthly subscription fee basis while we work to build adoption rates.
Popular
Enterprise Back-Office System Integrations. We have integrated verbCRM into systems offered by 19 of the most popular direct sales
back-office system providers, such as Direct Scale, Exigo, By Design, Thatcher, Multisoft, Xennsoft, and Party Plan. Direct sales back-office
systems provide many of the support functions required for direct sales operations, including payroll, customer genealogy management,
statistics, rankings, and earnings, among other direct sales financial tracking capabilities. The integration into these back-office
providers, facilitated through our own API development, allows single sign-on convenience for users, as well as enhanced data analytics
and reporting capabilities for all users. Our experience confirms that our integration into these back-end platforms accelerates the
adoption of verbCRM by large direct sales enterprises that rely on these systems and as such, we believe this represents a competitive
advantage.
Non-Digital
Products and Services
Historically,
we provided certain non-digital services to some of our enterprise clients such as printing and fulfillment services. We designed and
printed welcome kits and starter kits for their marketing needs and provided fulfillment services, which consisted of managing the preparation,
handling and shipping of our client’s custom-branded merchandise they use for marketing purposes at conferences and other events.
We also managed the fulfillment of our clients’ product sample packs that verbCRM users order through the app for automated delivery
and tracking to their customers and prospects.
In
May 2020, we executed a contract with Range Printing (“Range”), a company in the business of providing enterprise class printing,
sample assembly, warehousing, packaging, shipping, and fulfillment services. Pursuant to the contract, through an automated process we
have established for this purpose, Range receives orders for samples and merchandise from us as and when we receive them from our clients
and users, and print, assemble, store, package and ship such samples and merchandise on our behalf. The Range contract provides for a
service fee arrangement based upon the specific services to be provided by Range that is designed to maintain our relationship with our
clients by continuing to service their non-digital needs, while eliminating the labor and overhead costs associated with the provision
of such services by us.
Our
Market
Historically,
our client base consisted primarily of multi-national
direct sales enterprises to whom we provide white-labeled, client-branded versions of our products. During the year ended December
31, 2021, our client base expanded to include large enterprises in the life sciences sector, professional sports franchises,
educational institutions, and not-for-profit organizations, as well as clients in the entertainment industry and the burgeoning
CBD industry, among other business sectors. As of December 31, 2021, we provided subscription-based application services to approximately
150 enterprise clients for use in over 100 countries, in over 48 languages, which collectively account for a user base generated
through more than 3.1 million downloads of our verbCRM application. Among the new business sectors targeted for this year are medical
equipment and pharmaceutical sales, armed services and government institutions, small businesses and individual entrepreneurs.
Revenue
Generation
A
description of our principal revenue generating activities is as follows:
1. Digital Revenue which is divided into two main categories:
Distribution
Methods
We
distribute our services through the following methods:
● We employ a direct sales team, as well as outside sales consultants.
Our
Historical Background
Verb
Technology Company, Inc. is a SaaS application platform developer, incorporated in 2012 in the state of Nevada.
On February 1, 2019, we implemented
a 1-for-15 reverse stock split of our common stock, $0.0001 par value per share (our “common stock”). As a result
of the reverse stock split, every 15 shares of our pre-split common stock were combined and reclassified into one share of our
common stock. Our consolidated financial statements have been recast to reflect the 1-for-15 reverse stock split of our common stock.
In
April 2019, we acquired Sound Concepts Inc. (“Sound Concepts”) pursuant to an agreement and plan of merger. As a result of
the merger, Sound Concepts merged with and into our wholly owned subsidiary, NF Acquisition Company, LLC. Upon completion of the merger,
NF Acquisition Company, LLC changed its name to Verb Direct, LLC (“Verb Direct”).
On September 4, 2020, Verb Acquisition
Co., LLC (“Verb Acquisition”), a subsidiary of the Company, entered into a membership interest purchase agreement
(the “Purchase Agreement”) with Ascend Certification, LLC, dba SoloFire (“SoloFire”).
On
October 18, 2021, we established verbMarketplace, LLC (“Market LLC”), a Nevada limited liability company. Market LLC is a
wholly owned subsidiary of the Company established for our MARKET platform.
Our
common stock and common stock purchase warrants trade on The Nasdaq Capital Market under the symbols “VERB” and “VERBW,”
respectively. Our Internet website address is https://www.verb.tech.
Marketing
We
utilize our own proprietary interactive video platform as the foundation of our ongoing marketing initiatives. Our initiatives include,
among other things, daily, broad-based social media engagement by a dedicated team of full-time employees and outside consultants; management
of our interactive video-based website; and interactive video-based email campaigns and television commercials. In addition, the 19 direct
sales back-office systems providers with whom we have integrated verbCRM, market our applications to their customers and prospects
in exchange for finders’ fees.
Competition
CRM
software generated more than $69 billion in sales revenue throughout the world in 2020, accounts for the largest share in the overall
enterprise software market, and is the third fastest growing according to a 2020 market share update from Gartner. We compete in the
CRM applications industry, as well as in the video conferencing/webinar industry. We believe that CRM applications that incorporate our
proprietary Verb interactive video technology provide significant competitive advantages over the CRM applications that do not. Salesforce,
Microsoft, Oracle, SAP, and Adobe, the long-term leaders in the CRM sector, collectively account for approximately 36% of industry sales.
These companies, as well as many others, have numerous differences in feature sets and functionality, but all share certain basic attributes.
Most of them were designed before the advent and proliferation of mobile phones, social media, and the technology behind the current
ubiquity of video over the internet and more recently on mobile devices. While many of them have attempted to incorporate video capabilities
into their respective CRM platforms, sometimes in ‘‘bolt-on’’ fashion, we do not believe any of them has done
so in a manner that is as effective as our interactive in-video ecommerce platform that allows users to place clickable calls-to-action
right in the video, including into users’ pre-existing sales and product videos. In addition, Verb’s interactive videos are
viewable on both mobile and desktop devices regardless of operating system and without the need to download a proprietary player or program.
We
also compete in the video webinar and ecommerce solution provider sectors. The webinar sector is dominated by Zoom, WebEx, and Go2Meeting,
among others. The ecommerce solution provider sector is dominated by Shopify, among others. However, we believe our verbLIVE application
provides a superior solution for users seeking to use video webinars as a sales tool because our in-video clickable icons provide seamless
in-video ecommerce capabilities that are not offered by either Zoom (or other large webinar providers) or Shopify. We believe verbLIVE
represents a unique solution that combines the best features of Zoom and Shopify in a single application, offering users a more friction-free
and effective selling experience. Notwithstanding the foregoing, the market share, marketing strength, and established positions in the
marketplace of our competitors may prevent us from obtaining a large share of these markets.
Intellectual
Property
Our
policy is to protect our technology through, among other things, a combination of patents, trade secrets and copyrights. We primarily
rely upon trade secrets and copyrighted proprietary software, code, and know-how to protect our interactive video technology platform
and associated applications. We have taken security measures to protect our trade secrets and proprietary know-how, to the extent possible.
Our means of protecting our proprietary rights may not prove to be adequate and our competitors may independently develop technology
or products that are similar to ours or that compete with ours. Trade secret and copyright laws afford only limited protection for our
technology and products. The laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the
United States. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to obtain and use information
that we regard as proprietary. Third parties may also design around our proprietary rights, which may render our protected technology
and products less valuable, if the design around is favorably received in the marketplace.
We
recently filed a provisional patent application with the U.S. Patent and Trademark Office (“PTO”) with respect to providing
interactive video streams involving interactive buttons which we utilize in our video products. However, our provisional patent application
may not result in the issuance of a patent, or may result in narrow claims, which may limit the protection we are attempting to obtain.
We also hold a number of granted patents in two families with pending continuations. A first family relates to systems and methods for
enhanced networking, conversion tracking, and conversion attribution. This family contains two issued patents (U.S. Pat. No. 9,792,380,
issued October 17, 2017; and U.S. Pat. No. 10,467,317, issued Nov. 5, 2019) and a pending continuation. A second family relates to systems
and methods for generating a custom campaign. This family contains one issued patent (U.S. Pat. No. 10,643,247, issued May 5, 2020) and
a pending continuation. These existing patents and any future patents that may be issued to us, may not protect commercially important
aspects of our technology. Furthermore, the validity and enforceability of such patents may be challenged by third parties, which may
result in our patents being invalidated or modified by the PTO, various legal actions against us, the need to develop or obtain alternative
technology or appropriate licenses under third-party patents, which may not be available on acceptable terms or at all.
We
control access to our proprietary technology by entering into confidentiality and invention assignment agreements with our employees
and contractors, and confidentiality agreements with third parties. Despite our precautions, we cannot assure you that our technology
platform and products do not infringe patents held by others or that they will not in the future. Litigation may be necessary to enforce
our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others,
or to defend against claims of infringement, invalidity, misappropriation, or other claims.
Research
and Development
We
incurred $12,345,000 and $7,933,000 of research and development expenses during the years ended December 31, 2021 and 2020, respectively.
In addition to the amounts expensed in 2021, the Company capitalized $4,348,000 of costs associated with the development of MARKET. These
costs consist of expenditures for the research and development of new products and technology. They are primarily expenses to vendors
contracted to perform research projects and development of our interactive video-based sales enablement platform and associated applications.
Suppliers
While
most of our design, development, and engineering team is U.S.-based, we currently utilize a small group of dedicated full-time and part-time
off-shore experienced professionals for some of the coding and maintenance of our software. We believe we have mitigated the risks associated
with managing an external team of software development professionals by incorporating experienced internal management and oversight,
as well as appropriate systems, protocols, controls, and procedures to ensure the protection and integrity of all our applications. We
have also ensured access to additional qualified professionals to provide like or complementary services on an as-needed basis.
Dependence
on Key Customers
Based
on our current business and anticipated future activities as described in this Annual Report, we do not have any customers that represent
more than 10% of our 2021 revenue.
Government
Regulation
Our
software and services are subject to certain legal, regulatory and other requirements. These laws are complex and evolving. Various U.S.
federal and state laws govern many of our business activities, including, without limitation, the processing of payments and handling
of consumer information. Despite our significant efforts to comply with all applicable requirements, there can be no guarantee that our
efforts will be sufficient or that existing laws, rules or other requirements will not be interpreted, revised, augmented or rewritten
in a way that adversely affects our regulated business activities, which comprise a significant majority of our overall business. For
additional information related to these risk-related issues, refer to the section entitled “Risk Factors” within
this Annual Report.
Human
Capital Management
As
of March 25, 2022, we had 107 full-time statutory employees, five part-time employees, and 55 independent
contractors. We engage independent contractors on an as-needed basis to provide specific expertise in areas of software design, development
and coding, content creation, audio and video editing, video production services, and other business functions, including marketing and
accounting. None of our employees are covered by a collective bargaining agreement. We have had no labor-related work stoppages and believe
our relationship with our employees, both full-time and part-time, consultants, and independent contractors, is satisfactory.
We
believe our people are at the heart of our success and our customers’ success. We endeavor to not only attract and retain talented
employees, but also to provide a challenging and rewarding environment to motivate and develop our valuable human capital. We look to
our talented employees to lead and foster various initiatives that support our company culture including those related to diversity,
equity and inclusion. In addition, we rely heavily on our talented team to execute our growth plans and achieve our long-term strategic
objectives.
We
provide competitive compensation and benefits for our employees. Our compensation packages may include base salary, commission or annual
performance-based bonuses, and share-based compensation. We also offer general employee medical, dental, and vision insurance,
health savings and flexible spending accounts, mental health resources, paid time off, paid family leave, life and disability insurance,
and 401(k) plan matching contributions. These programs and our overall compensation packages seek to attract and retain talented employees.
We
take the health and welfare of our employees very seriously and have encouraged safe practices designed to stem the infection and spread
of COVID-19 within our workforce and beyond and to maintain the mental health and well-being of our employees. Beginning in March 2020,
in an effort to protect our employees and comply with applicable government orders, we restricted non-essential employee travel and transitioned
our employees to a remote work environment. We currently expect the majority of our employees will continue working remotely at least
through the end of 2022. We are committed to our employees returning to the workplace in the long-term.
Impact of COVID-19 on Our Business and Industry
Governments and
businesses around the world continue to take actions to mitigate the spread of COVID-19 and its variants, including, but not limited
to, shelter-in-place orders, quarantines, significant restrictions on travel, as well as restrictions that prohibit many employees from
going to work. Uncertainty with respect to the economic effects of the pandemic has introduced significant volatility in the financial
markets.
Despite increased vaccine
distribution programs and loosening of COVID-19-related restrictions in the regions in which we operate during the year ended December
31, 2021, both the pandemic and ongoing containment and mitigation measures have had, and are likely to continue to have, an adverse
impact on the global and U.S. economies, the severity and duration of which are uncertain. As such, our business, operations and
financial condition has been, and we anticipate will continue to be, adversely impacted by reduced demand for our applications and non-digital
services, as well as reduced access to capital. To mitigate the adverse impact COVID-19 may have on our business and operations, we implemented
a number of measures to strengthen our financial position, including eliminating, reducing, or deferring non-essential expenditures.
However, the extent to which the COVID-19 pandemic will impact our business, financial conditions, and results of operations in the future
remains uncertain and will be affected by a number of factors, including the duration and extent of the pandemic, the emergence of variants
to COVID-19 the duration and extent of imposed or recommended containment and mitigation measures, the extent, duration, and effective
execution of government stabilization and recovery efforts, including those from the successful distribution of effective vaccines.
The COVID-19 pandemic may
have long-term effects on the nature of the office environment and remote working. This may present operational and workplace culture
challenges that may adversely affect our business. Throughout the year ended December 31, 2021 and through the filing of this Annual
Report, we have encouraged safe practices designed to stem the infection and spread of COVID-19 within our workforce and beyond and to
maintain the mental health and well-being of our employees.
We began the year ended December
31, 2021 with healthy demand for our products, including our SaaS products, many of which are designed to enable our customers to manage
their businesses virtually. Our non-digital business was negatively impacted in the year ended December 31, 2021 as events and sales
opportunities were cancelled or shifted to a virtual environment due to the pandemic. Although the impact has not been material to date,
a prolonged downturn in economic conditions could have a material adverse effect on our customers and demand for our services.
We continue to actively communicate with and listen to our customers
to ensure we are responding to their needs in the current environment with innovative solutions that will not only be beneficial now
but also over the long-term. We monitor developments related to COVID-19 and remain flexible in our response to the challenges presented
by the pandemic.
ITEM
1A. RISK FACTORS
Our
short and long-term success is subject to numerous risks and uncertainties, many of which involve factors that are difficult to predict
or beyond our control. As a result, investing in the Company’s common stock involves substantial risk. The Company’s stockholders
should carefully consider the risks and uncertainties described below, in addition to the other information contained in or incorporated
by reference into this Annual Report, as well as the other information we file with the SEC from time to time. The risks described below
are not the only ones we face. Additional risks not presently known to us or that we currently believe are immaterial may also impair
our business operations and financial results. If any of the following risks actually occurs, our business, financial condition or results
of operations could be adversely affected. In such case, the trading price of our common stock could decline and you could lose all or
part of your investment. Our filings with the SEC also contain forward-looking statements that involve risks or uncertainties. Our actual
results could differ materially from those anticipated or contemplated by these forward-looking statements as a result of a number of
factors, including the risks we face described below, as well as other variables that could affect our operating results. Past financial
performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends
to anticipate results or trends in future periods.
Risks
Related to Our Business
We
have incurred significant net losses and cannot assure you that we will achieve or maintain profitable operations.
We have incurred recurring losses
since our inception in 2012. Our net loss was $34,486,000 for the year ended December 31, 2021 and $24,956,000 for
the year ended December 31, 2020. To date, we have funded our operations through cash collected from sales of our products and services,
offerings of our equity securities, and debt financing. We have devoted substantially all of our resources to the design, development
and commercialization of our products, the scaling of our technology and infrastructure, and our marketing and sales efforts. We
may continue to incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications,
and delays, and other unknown events.
To
implement our business strategy and achieve consistent profitability, we need to, among other things, increase sales of our products
and the gross profit associated with those sales, undertake increased technology
and production efforts to support our business and increase our marketing and sales efforts to drive an increase in the number of customers
and clients utilizing our services. These expenditures may make it more difficult to achieve and maintain profitability. In addition,
our efforts to grow our business may be more expensive than we expect, and we may not be able to generate sufficient revenue to offset
increased operating expenses. If we are forced to reduce our expenses, our growth strategy could be compromised. To offset these anticipated
increased operating expenses, we will need to generate and sustain significant revenue levels in future periods in order to become profitable,
and, even if we do, we may not be able to maintain or increase our level of profitability.
Accordingly,
we cannot assure you that we will achieve sustainable operating profits as we continue to expand our infrastructure, restructure our
balance sheet, further develop our marketing efforts, and otherwise implement our growth initiatives. Any failure to achieve and maintain
profitability would have a materially adverse effect on our ability to implement our business plan, our results and operations, and our
financial condition, and could cause the value of our common stock, to decline, resulting in a significant or complete loss of your investment.
Our
independent registered public accounting firm’s reports for the fiscal years ended December 31, 2021 and 2020 have raised substantial
doubt as to our ability to continue as a going concern.
Our
independent registered public accounting firm indicated in its report on our audited consolidated financial statements as of and for
the years ended December 31, 2021 and 2020 that there is substantial doubt about our ability to continue as a going concern. A “going
concern” opinion indicates that the financial statements have been prepared assuming we will continue as a going concern and do
not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts
and classification of liabilities that may result if we do not continue as a going concern. Therefore, you should not rely on our consolidated
balance sheet as an indication of the amount of proceeds that would be available to satisfy claims of creditors, and potentially be available
for distribution to stockholders, in the event of liquidation. The presence of the going concern note to our financial statements may
have an adverse impact on the relationships we are developing and plan to develop with third parties as we continue the commercialization
of our products and could make it challenging and difficult for us to raise additional financing, all of which could have a material
adverse impact on our business and prospects and result in a significant or complete loss of your investment.
If
we are unable to generate sufficient cash flow from operations to operate our business and pay our debt obligations as they become due,
we may need to seek to borrow additional funds, dispose of our assets, or reduce or delay capital expenditures.
There can be no assurance that we will ever be profitable or that debt or equity financing will be available to us in the amounts,
on terms, and at times deemed acceptable to us, if at all. The issuance of additional equity securities by us would result in a significant
dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, would
increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable
to us, we may be unable to continue our business, as planned, and as a result may be required to scale back or cease operations for our
business, the results of which would be that our stockholders would lose some or all of their investment. Our audited consolidated
financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern. For additional
information, please refer to the section entitled “Management’s Discussion and Analysis of Financial Condition and Results
of Operations – Liquidity and Capital Resources – Going Concern,” as well as Note 1 to our consolidated financial
statements included within this Annual Report.
Public
health threats, such as the COVID-19 pandemic, natural disasters and other events beyond our control, have had and may continue to
have a significant negative impact on our business, sales, results of operations and financial condition.
Public
health threats and other highly communicable diseases and outbreaks could adversely impact our operations, the operations of our customers,
suppliers, distributors and other business partners, as well as the healthcare system in general. For example, the
COVID-19 pandemic has led to severe disruptions in general economic activities, as businesses and federal, state, and local governments
take increasingly broad actions to mitigate this public health crisis. We have experienced disruption to our business, both in terms
of disruption of our operations and the adverse effect on overall economic conditions. These conditions have had significant negative
impacts on all aspects of our business. Our business is dependent on the continued health and productivity of our employees, including
our software engineers, sales staff and corporate management team. Individually and collectively, the consequences of the COVID-19 pandemic
have had, and may continue to have, a material adverse effect on our business, sales, results of operations and financial condition.
In addition, our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other
events beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or
impossible for us to deliver our services to our customers and could decrease demand for our services.
Additionally, our liquidity could
be negatively impacted if these conditions continue for a significant period of time and we may be required to pursue additional sources