ITEM 1A. RISK FACTORS 4
ITEM 1B. UNRESOLVED STAFF COMMENTS 15
ITEM 1C. CYBERSECURITY 16
ITEM 2. PROPERTIES 16
ITEM 3. LEGAL PROCEEDINGS 16
ITEM 4. MINE SAFETY DISCLOSURES 16
ITEM 6. [RESERVED] 17
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 28
ITEM 9A. CONTROLS AND PROCEDURES 29
ITEM 9B. OTHER INFORMATION 30
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 30
PART III 30
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 30
ITEM 11. EXECUTIVE COMPENSATION 37
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 53
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES 54
CAUTIONARY
NOTE REGARDING Forward-Looking Statements
This
Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (this “Annual Report”) includes “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, and to execute our business strategy;
●
our ability to maintain and expand our customer base and 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 and grow the revenues 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;
●
our ability to successfully launch new product platforms, including MARKET.live, the rate of adoption of these platforms and the revenue
generated from these platforms;
●
our ability to deliver our services, in light of our dependency on third party Internet providers;
●
our ability to raise additional capital or borrow additional funds to fund our operations and execute our business strategy, and the
impact of these transactions on our business and existing stockholders;
●
our ability to attract and retain qualified management personnel;
●
our ability to pay our debt obligations as they become due;
●
our susceptibility to security breaches and other disruptions;
●
our ability to maintain compliance with the listing requirements of the Nasdaq Capital Market; and
●
the impact of, and our ability to operate our business and effectively manage our growth under evolving and uncertain global economic,
political, and social trends, including inflation, rising interest rates, and recessionary concerns.
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
2023
Overview
Through
June 13, 2023, we operated three distinct lines of business through separate wholly owned subsidiaries: Verb Direct, LLC, a sales Software-as-a-Service
(“SaaS”) platform for the direct sales industry; Verb Acquisition Co., LLC, which was a sales SaaS platform for the Life
Sciences industry and sports teams; and verbMarketplace, LLC, which is a multi-vendor, multi-presenter, livestream social shopping platform
known as MARKET.live that combines ecommerce and entertainment.
We
determined that by focusing all of our resources solely on the development and operation of MARKET.live, our livestream shopping platform,
over time we could generate greater shareholder value than through the continued operation of our SaaS business platforms. Accordingly,
after an extensive seven-month process, managed by a prominent M&A advisory firm, to identify a buyer willing to pay the highest
price on the most favorable terms for the assets of the SaaS business on June 13, 2023 we disposed of all of the operating SaaS assets
of Verb Direct, LLC and Verb Acquisition Co., LLC pursuant to an asset purchase agreement for aggregate consideration of $6.5 million, $4.75 million
of which was paid in cash by the buyer at the closing of the transaction. Additional payments in the aggregate of $1.75 million will be paid
by the buyer if certain profitability and revenue targets are met within each of the two-year periods following the closing date as set forth
more particularly in the asset purchase agreement. During the seven-month period of the sales process, virtually all of our resources
were dedicated to facilitating the sale process and all operating budgets were suspended, including sales and marketing budgets for MARKET.live,
in order to preserve cash and minimize reliance on the capital markets until the asset sale process was complete.
Our
MARKET.live Business
The Company’s MARKET.live platform is a multi-vendor, multi-presenter,
livestream social shopping destination the leverages the current convergence of ecommerce and entertainment, where hundreds of retailers,
brands, creators and influencers can monetize their base of fans and followers across social media channels. Brands, retailers and creators
that join MARKET.live have the ability to broadcast livestream shopping events simultaneously on numerous social media channels, including
TikTok, as well as on MARKET.live, reaching exponentially larger audiences. The Company’s recent technological integrations with
META, created a seamless, native, friction-free checkout process for Facebook and Instagram users to purchase MARKET.live vendors’
products within each of those popular apps. This integration allows Facebook and Instagram users to browse products featured in MARKET.live
shoppable videos, place products in a native shopping cart and checkout – all without leaving Facebook or Instagram.
On
September 5, 2023, the Company completed development work on a new MARKET.live capability that facilitated a deeper integration into
the TikTok social media platform, which could expose MARKET.live shoppable programming to tens of millions of potential viewers/purchasers.
This new capability allows shoppers watching a MARKET.live stream on TikTok to stay on that site and check out through that site, eliminating
the friction or reluctance of TikTok users to leave their TikTok feed in order to complete their purchase on MARKET.live. Our technology
integration allows the purchase data to flow back through MARKET.live and to the individual vendors and stores on MARKET.live seamlessly
for fulfillment of the orders.
On
March 27, 2024, the Company announced that it expanded its strategic relationship with TikTok and entered into a formal partnership with
TikTok Shop pursuant to which MARKET.live became a service provider for TikTok Shop and officially designated as a TikTok Shop Partner
(TSP) . Under the terms of the partnership, TikTok Shop refers consumer brands, retailers, influencers and affiliates leads to Market.live
for a menu of MARKET.live paid services that include, among other things, assistance in onboarding to TikTok and establishing a TikTok
store, hosting training sessions and webinars for prospective TikTok Shop sellers, studio space rental in both the West Coast and East
Coast MARKET.live studios, content creation and production services, and TikTok Shop maintenance and enhancements for existing TikTok
clients’ stores. The partnership also contemplates TikTok Shop sponsored studio rentals, as well as a paid-for “day pass”
for use of MARKET.live studio services by TikTok creators, influencers and affiliates. MARKET.live is expected to generate revenue through
fees, including monthly recurring fees, paid directly to MARKET.live by the brands, retailers, influencers and affiliates referred to
MARKET.live by TikTok. In addition, it is contemplated that MARKET.live will receive a percentage of monthly revenue generated through
the TikTok stores MARKET.live establishes for the brands, retailers, influencers and affiliates that TikTok Shop refers to MARKET.live.
The
partnership also contemplates the use of MARKET.live studios as TikTok “Sample Centers” where TikTok creators will have access
to product samples for use in their TikTok Shop videos produced at MARKET.live studios. In addition to the compensation referenced above,
TikTok will compensate MARKET.live directly for the attainment of certain pre-established performance goals and objectives agreed to
between the parties.
The
Company’s recent drop ship and affiliate programs are currently being revised to incorporate the benefits and implications of the
recent META integrations as well as the new TikTok partnership. The Company is actively engaged in completing development on integrations
into additional large social media platforms, as well as developing partnerships and strategic alliances that it believes will help foster
the growth of the Company’s business.
Our
Market
Revenue
Generation
A
description of our principal revenue generating activities is as follows:
1. MARKET.live generates revenue through several sources as follows:
d. The Company’s recently launched TikTok stores and affiliate programs.
A
performance obligation is a promise in a contract to transfer a distinct product. Performance obligations promised in a contract are
identified based on the goods that will be transferred that are both capable of being distinct and are distinct in the context of the
contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. Performance obligations include
establishing and maintaining customer online stores, providing access to the Company’s e-commerce platform and customer service
support.
The Company’s revenue is mainly commission fees derived
from contractually committed gross revenue processed by customers on the Company’s e-commerce platform as well as subscription-based
fees and other fees and commissions for services rendered by the Company to clients referred to the Company by TikTok. Customers do not
have the contractual right to take possession of the Company’s software. Revenue is recognized in an amount that reflects the consideration
that the Company expects to ultimately receive in exchange for those promised goods, net of expected discounts for sales promotions and
customary allowances.
Revenue
is recognized on a net basis from maintaining e-commerce platforms and online orders, as the Company is engaged primarily in an agency
relationship with its customers and earns defined amounts based on the individual contractual terms for the customer and the Company
does not take possession of the customers’ inventory or any credit risks relating to the products sold.
Sales
taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded
from net sales in the consolidated statements of operations.
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
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.
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 2023 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 28, 2024, we had 20 full-time statutory employees, three part-time
employees, and three 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
a 401(k) plan. These programs and our overall compensation packages seek to attract and retain talented employees.
Our
Historical Background
Verb Technology Company, Inc. was incorporated in 2012 in the state of
Nevada.
On
April 12, 2019, we acquired Sound Concepts Inc. 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 Verb Technology, entered into a membership
interest purchase agreement with Ascend Certification, LLC, dba SoloFire.
On
October 18, 2021, we established verbMarketplace, LLC (“Market LLC”), a Nevada limited liability company. Market LLC is a
wholly owned subsidiary established for our MARKET.live platform.
On June 13, 2023, the Company disposed of all of its operating SaaS assets
of Verb Direct and Verb Acquisition, (referred to collectively as the “SaaS Assets”) pursuant to an asset purchase agreement
in consideration of the sum of $6.5 million, $4.75 million of which was paid in cash by the buyer at the closing of the transaction. Additional
payments in the aggregate of $1.75 million will be paid by the buyer if certain profitability and revenue targets are met within each
of the two-year periods following the closing date as set forth more particularly in the asset purchase agreement. The sale of the SaaS
Assets was undertaken to allow the Company to focus its resources on its burgeoning MARKET.live business unit which it expects over time
will create greater shareholder value.
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.
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 $22.0 million for the year ended December 31, 2023, and $37.4 million for the year ended December
31, 2022. 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, delays, and other unknown events.
To
implement our business strategy and achieve consistent profitability, we need to, among other things, continue to reduce operating expenses,
increase sales of our products and the gross profit associated with those sales, continue to reduce research and development expenses,
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 operating expenses. If we are forced to reduce
our expenses beyond our planned cost reduction initiatives, our growth strategy could be compromised. To offset our anticipated 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 reduce operating expenses, 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 report may raise
substantial doubt as to our ability to continue as a going concern.
Our independent registered public accounting firm may raise 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 and Management’s Plan,” as well as Note 1 to our consolidated financial statements included within this Annual Report.
Public
health threats, 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. 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 of financing to obtain working capital, maintain appropriate inventory levels, and meet our financial obligations.
Capital and credit markets have been disrupted by the crisis and our ability to obtain any required financing is not guaranteed and largely
dependent upon evolving market conditions and other factors. Depending on the continued impact of the crisis, further actions may be
required to improve our cash position and capital structure.
The
extent to which public health threats, natural disasters or catastrophic events, ultimately impacts our
business, sales, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot
be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus
or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.
Our
ability to grow and compete in the future will be adversely affected if adequate capital is not available to us or not available on terms
favorable to us.
We
have limited capital resources. We have financed our operations entirely through equity investments by founders and other investors and
the incurrence of debt, and we expect to continue to finance our operations in the same manner in the foreseeable future. Our ability
to continue our normal and planned operations, to grow our business, and to compete in our industry will depend on the availability of
adequate capital. We cannot assure you that we will be able to obtain additional funding from those or other sources when or in the amounts
needed, on acceptable terms, or at all. If we raise capital through the sale of equity, or securities convertible into equity, it would
result in dilution to our then-existing stockholders, which could be significant depending on the price at which we may be able to sell
our securities. If we raise additional capital through the incurrence of additional indebtedness, we would likely become subject to further
covenants restricting our business activities, and holders of debt instruments may have rights and privileges senior to those of our
then-existing stockholders. In addition, servicing the interest and principal repayment obligations under debt facilities could divert
funds that would otherwise be available to support development of new programs and marketing to current and potential new clients. If
we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce, or eliminate development of new
programs or future marketing efforts, or reduce or discontinue our operations. Any of these events could significantly harm our business,
financial condition, and prospects.
Our
indebtedness, and the agreements governing such indebtedness, subject us to required debt service payments, as well as financial restrictions
and operating covenants, any of which may reduce our financial flexibility and affect our ability to operate our business.
From
time to time, we have financed our liquidity needs in part from borrowings made under various credit agreements. As of December 31, 2023,
the aggregate outstanding balance of our notes payable was $2.9 million. As of March 28, 2024, the balance of our notes payable is $1.2 million.
The
agreements underlying these transactions contain certain financial restrictions, operating covenants, and debt service requirements.
Our failure to comply with obligations under these agreements, or inability to make required debt service payments, could result in an
event of default under the agreements. A default, if not cured or waived, could permit a lender to accelerate payment of the loan, which
could have a material adverse effect on our business, operations, financial condition, and liquidity. Further, if our debt is accelerated,
we cannot be certain that funds will be available to pay the debt or that we will have the ability to refinance the debt on terms satisfactory
to us or at all. If we are unable to repay or refinance the accelerated debt, we could become insolvent and seek to file for bankruptcy
protection, which would have a material adverse impact on our financial condition.
In
addition, the covenants in our credit agreements could limit our ability to engage in transactions that would be in our best interest,
or otherwise respond to changing business and economic conditions, and may therefore have a material impact on our business. For example,
our borrowings will require debt service payments, which could require us to divert funds identified for other purposes to such debt
service payments. Further, if we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance the
debt, dispose of its assets, or reduce or delay expenditures. Alternatively, we may be required to issue equity to obtain necessary funds,
which would be dilutive to our stockholders. We do not know whether we would be able to take any of these actions on a timely basis or
at all.
Our
current or future level of indebtedness could affect our operations in several ways, including the following:
For
additional information refer to the section entitled “Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Liquidity and Capital Resources,” as well as Note 1 in the section entitled “Going Concern and Management’s
Plan” to our consolidated financial statements included
elsewhere in this Annual Report.
The
success of our business is dependent upon 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. If we are unable to expand our customer base and/or the use of our services and/or
platform by our customers declines, our business will be harmed.
Our
ability to expand and generate revenue depends, in part, on our ability to maintain and expand our relationships with existing customers
and convince them to increase their use of our platform. If our customers do not increase their use of our platform, then our revenue
may not grow and our results of operations may be harmed. It is difficult to predict customers’ usage levels accurately and the
loss of customers or reductions in their usage levels may have a negative impact on our business, results of operations, and financial
condition. If a significant number of customers cease using, or reduce their usage of, our platform, then we may be required to spend
significantly more on sales and marketing than we currently plan to spend in order to maintain or increase revenue. These additional
expenditures could adversely affect our business, results of operations, and financial condition. Most of our customers do not have long-term
contractual financial commitments to us and, therefore, most of our customers could reduce or cease their use of our platform at any
time without penalty or termination charges.
The
market in which we operate is intensely competitive and, if we do not compete effectively, our operating results could be harmed.
The
market for livestream shopping platforms is intensely competitive and rapidly changing, barriers to entry are relatively low, and many
of our competitors, have greater name recognition, longer operating histories, and larger marketing budgets, as well as substantially
greater financial, technical, and other resources, than we do. In addition, many of our potential competitors have established marketing
relationships and access to larger customer bases, and have major distribution agreements with consultants, system integrators, and resellers.
As a result, our competitors may be able to respond more effectively than we can to new or changing opportunities, technologies, standards,
customer requirements, competitive pressures, or challenges within the financial markets. Furthermore, because of these advantages, even
if our products and services are more effective than the products and services that our competitors offer, potential customers might
accept competitive products and services in lieu of purchasing our products and services. If we do not compete effectively against our
current and future competitors, our operating results could be harmed.
We
may not be able to increase the number of our strategic relationships or grow the revenues received from our current strategic relationships.
We
have entered into certain strategic relationships with other individuals and enterprises and are actively seeking additional strategic
relationships. There can be no assurance, however, that these strategic relationships will result in material revenues for us or that
we will be able to generate any other meaningful strategic relationships. If we are not able to increase the number of our strategic
relationships or grow the revenues received from our current strategic relationships, our operating results could be harmed.
We
may not be able to develop enhancements and new features to our existing service or acceptable new services that keep pace with technological
developments.
If
we are unable to develop enhancements to, and new features for, our platform that keep pace with rapid technological developments, our
business will be harmed. The success of enhancements, new features, and services depends on several factors, including the timely completion,
introduction, and market acceptance of the feature or edition. Failure in this regard may significantly impair our revenue growth or
harm our reputation. We may not be successful in either developing these modifications and enhancements or in timely bringing them to
market at a competitive price or at all. Furthermore, uncertainties about the timing and nature of new network platforms or technologies,
or modifications to existing platforms or technologies, could increase our research and development expenses. Any failure of our service
to operate effectively with future network platforms and technologies could reduce the demand for our service, result in customer dissatisfaction,
and harm our business.
Our
ability to deliver our services is dependent on third party Internet providers.
The
Internet’s infrastructure is comprised of many different networks and services that, by design, are highly fragmented and distributed.
This infrastructure is run by a series of independent, third-party organizations that work together to provide the infrastructure and
supporting services of the Internet under the governance of the Internet Corporation for Assigned Numbers and Names (“ICANN”)
and the Internet Assigned Numbers Authority (“IANA”), which is now related to ICANN.
The
Internet has experienced, and will continue to experience, a variety of outages and other delays due to damages to portions of its infrastructure,
denial-of-service attacks, or related cyber incidents. These scenarios are not under our control and could reduce the availability of
the Internet to us or our customers for delivery of our services. Any resulting interruptions in our services or the ability of our customers
to access our services could result in a loss of potential or existing customers and harm our business.
Security
breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation
to suffer.
In
the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information,
proprietary business information of our customers, including, credit card and payment information, and personally identifiable information
of our customers and employees. The secure processing, maintenance, and transmission of this information is critical to our operations
and business strategy.
In
addition, we are subject to numerous federal, state, provincial and foreign laws regarding privacy and protection of data. Some jurisdictions
have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data and our
agreements with certain customers require us to notify them in the event of a security incident. Evolving regulations regarding personal
data and personal information, including the General Data Protection Regulation, the California Consumer Privacy Act of 2018 (“CCPA”),
and the recently passed California Privacy Rights Act, which amends the CCPA and has many provisions that became effective on January
1, 2023, especially relating to classification of IP addresses, machine identification, location data and other information, may limit
or inhibit our ability to operate or expand our business. Such laws and regulations require or may require us or our customers to implement
privacy and security policies, permit consumers to access, correct or delete personal information stored or maintained by us or our customers,
inform individuals of security incidents that affect their personal information, and, in some cases, obtain consent to use personal information
for specified purposes.
We
believe that we take reasonable steps to protect the security, integrity and confidentiality of the information we collect, use, store,
and disclose, and we take steps to strengthen our security protocols and infrastructure, however, our information technology and infrastructure
may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. We also could be negatively
impacted by software bugs or other technical malfunctions, as well as employee error or malfeasance. Advanced cyber-attacks can be multi-staged,
unfold over time, and utilize a range of attack vectors with military-grade cyber weapons and proven techniques, such as spear phishing
and social engineering, leaving organizations and users at high risk of being compromised. Any such access, disclosure, or other loss
of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory
penalties, a disruption of our operations, damage to our reputation, a loss of confidence in our business, early termination of our contracts
and other business losses, indemnification of our customers, liability for stolen assets or information, increased cybersecurity protection
and insurance costs, financial penalties, litigation, regulatory investigations and other significant liabilities, any of which could
materially harm our business any of which could adversely affect our business, revenues, and competitive position.
Our
success depends, in part, on the capacity, reliability, and security of our information technology hardware and software infrastructure,
as well as our ability to adapt and expand our infrastructure.
The
capacity, reliability, and security of our information technology hardware and software infrastructure are important to the operation
of our current business, which would suffer in the event of system failures. Likewise, our ability to expand and update our information
technology infrastructure in response to our growth and changing needs is important to the continued implementation of our new service
offering initiatives. Our inability to expand or upgrade our technology infrastructure could have adverse consequences, including the
delayed provision of services or implementation of new service offerings, and the diversion of development resources. We rely on third
parties for various aspects of our hardware and software infrastructure. Third parties may experience errors or disruptions that could
adversely impact us and over which we may have limited control. Interruption and/or failure of any of these systems could disrupt our
operations and damage our reputation, thus adversely impacting our ability to provide our products and services, retain our current users,
and attract new users. In addition, our information technology hardware and software infrastructure may be vulnerable to unauthorized
access, misuse, computer viruses, or other events that could have a security impact. If one or more of such events occur, our customer
and other information processed and stored in, and transmitted through, our information technology hardware and software infrastructure,
or otherwise, could be compromised, which could result in significant losses or reputational damage. We may be required to expend significant
additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may
be subject to litigation and financial losses, any of which could substantially harm our business and our results of operations.
We
are dependent on third parties to, among other things, maintain our servers, provide the bandwidth necessary to transmit content, and
utilize the content derived therefrom for the potential generation of revenues.
We
depend on third-party service providers, suppliers, and licensors to supply some of the services, hardware, software, and operational
support necessary to provide some of our products and services. Some of these third parties do not have a long operating history or may
not be able to continue to supply the equipment and services we desire in the future. If demand exceeds these vendors’ capacity,
or if these vendors experience operating or financial difficulties or are otherwise unable to provide the equipment or services we need
in a timely manner, at our specifications and at reasonable prices, our ability to provide some products and services might be materially
adversely affected, or the need to procure or develop alternative sources of the affected materials or services might delay our ability
to serve our users. These events could materially and adversely affect our ability to retain and attract users, and have a material negative
impact on our operations, business, financial results, and financial condition.
We
may not be able to find suitable software developers at an acceptable cost or at all.
We
currently rely on certain key suppliers and vendors in the coding and maintenance of our software. We will continue to require such expertise
in the future. Due to the current demand for skilled software developers, we run the risk of not being able to find or retain suitable
and qualified personnel at an acceptable price, or at all. These risks may be greater now than in the past due to current general labor
shortages in the United States. Without these developers, we may not be able to further develop and maintain our software, which is the
most important aspect of our business development.
The
success of our business is highly correlated to general economic conditions.
Demand
for our products and services is highly correlated with general economic conditions, as a substantial portion of our revenue is derived
from discretionary spending by individuals, which typically declines during times of economic instability. Declines in economic conditions
in the United States or in other countries in which we operate and may operate
in the future may adversely impact our financial results. Because such declines in demand are difficult to predict, we or our industry
may have increased excess capacity as a result. An increase in excess capacity may result in declines in prices for our products and
services. Our ability to grow or maintain our business may be adversely affected by sustained economic weakness and uncertainty, including
the effect of wavering consumer confidence, high unemployment, and other factors. The inability to grow or maintain our business would
adversely affect our business, financial conditions, and results of operations, and thereby an investment in our common stock.
Our
failure to adequately protect our intellectual property rights could diminish the value of our products, weaken our competitive position
and reduce our revenue, and infringement claims asserted against us or by us, could have a material adverse effect.
We
regard the protection of our intellectual property, which includes patents, trade secrets, copyrights, trademarks and domain names, as
critical to our success. We strive to protect our intellectual property rights by relying on federal, state and common law rights, as
well as contractual restrictions. We enter into confidentiality and invention assignment agreements with our employees and contractors,
and confidentiality agreements with parties with whom we conduct business in order to limit access to, and disclosure and use of, our
proprietary information. However, these contractual arrangements and the other steps we have taken to protect our intellectual property
may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others.
We
have registered domain names and trademarks in the United States and have pursued additional registrations both in and outside the United
States. Effective trade secret, copyright, trademark, domain name and patent protection is expensive to develop and maintain, both in
terms of initial and ongoing registration requirements and the costs of defending our rights. Notwithstanding our efforts, third parties
may independently develop technology that is not covered by our patents, or that is similar to, or competes with, our technology. In
addition, our intellectual property may be infringed or misappropriated by third parties, particularly in foreign countries where the
laws and governmental authorities may not protect our proprietary rights as effectively as those in the United States. We may be required
to protect our intellectual property in an increasing number of jurisdictions, a process that is expensive and may not be successful
or which we may not pursue in every location.
Monitoring
unauthorized use of our intellectual property is difficult and costly. Our efforts to protect our proprietary rights may not be adequate
to prevent misappropriation of our intellectual property. Further, we may not be able to detect unauthorized use of, or take appropriate
steps to enforce, our intellectual property rights. In addition, our competitors may independently develop similar technology. The laws
in the United States and elsewhere change rapidly, and any future changes could adversely affect us and our intellectual property. Our
failure to meaningfully protect our intellectual property could result in competitors offering services that incorporate our most technologically
advanced features, which could seriously reduce demand for our products. In addition, we may in the future need to initiate infringement
claims or litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts
of our technical staff and managerial personnel, which could harm our business, whether or not such litigation results in a determination
that is unfavorable to us. In addition, litigation is inherently uncertain, and thus we may not be able to stop its competitors from
infringing upon our intellectual property rights.
Natural
disasters and other events beyond our control could materially adversely affect us.
Natural
disasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy,
and thus could have a strong negative effect on us. 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.
Our
future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel.
Our
future success largely depends upon the continued services of our executive officers and management team, especially our Chief Executive
Officer, Chairman of our board of directors, and President, Mr. Rory J. Cutaia. If one or more of our executive officers are unable or
unwilling to continue in their present positions, we may not be able to replace them readily, if at all. Additionally, we may incur additional
expenses to recruit and retain new executive officers. If any of our executive officers joins a competitor or forms a competing company,
we may lose some or all of our customers. Finally, we do not maintain “key person” life insurance on any of our executive
officers. Because of these factors, the loss of the services of any of these key persons could adversely affect our business, financial
condition, and results of operations, and thereby an investment in our stock.
Our
continuing ability to attract and retain highly qualified personnel will also be critical to our success because we will need to hire
and retain additional personnel as our business grows. There can be no assurance that we will be able to attract or retain highly qualified
personnel. We face significant competition for skilled personnel in our industries. This competition may make it more difficult and expensive
to attract, hire, and retain qualified managers and employees. Because of these factors, we may not be able to effectively manage or
grow our business, which could adversely affect our financial condition or business. As a result, the value of your investment could
be significantly reduced or completely lost.
Risks
Related to an Investment in Our Securities
If
we are not able to comply with the applicable continued listing requirements or standards of The NASDAQ Capital Market, The NASDAQ Capital
Market could delist and adversely affect the market price and liquidity of our common stock.
Our
common stock is currently traded on The NASDAQ Capital Market under the symbol “VERB”. We have in the past been, and may
in the future be, unable to comply with certain of the listing standards that we are required to meet to maintain the listing of our
common stock on The NASDAQ Capital Market. If we fail to meet any of the continued listing standards of The NASDAQ Capital Market, our
common stock will be delisted from The NASDAQ Capital Market.
These
continued listing standards include specifically enumerated criteria, such as a $1.00 minimum closing bid price and a requirement
that we maintain stockholders’ equity of at least $2,500,000. On November 2, 2023, we received a letter from The NASDAQ Stock
Market advising that the Company did not meet the minimum $1.00 per share bid price requirement for continued inclusion on The
NASDAQ Capital Market pursuant to NASDAQ Marketplace Listing Rule 5550(a)(2). To demonstrate compliance with this requirement, the
closing bid price of our common stock needs to be at least $1.00 per share for a minimum of 10 consecutive business days before
April 30, 2024. In order to satisfy this requirement, the Company intends to continue actively monitoring the bid price for its
common stock between now and April 30, 2024 and will consider available options to resolve the deficiency and regain compliance with
the minimum bid price requirement, including, but not limited to, seeking an additional six-month extension from The NASDAQ Capital
Market to do so.
While
we intend to regain compliance with the minimum bid price rule, there can be no assurance that we will be able to maintain continued
compliance with this rule or the other listing requirements of The NASDAQ Capital Market. If we were unable to meet these requirements,
we would receive another delisting notice from the Nasdaq Capital Market for failure to comply with one or more of the continued listing
requirements. If our common stock were to be delisted from The NASDAQ Capital Market, trading of our common stock most likely will be