10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

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)

Nevada	90-1118043
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

2210 Newport Boulevard

Suite 200

Newport Beach, California 92663

(Address of Principal Executive Offices including 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	Name of each Exchange on which registered
Common Stock, par value of $0.0001 per share	The Nasdaq Stock Market LLC
Common Stock Purchase Warrants	The Nasdaq Stock Market LLC

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 [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 [X] 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	[X]	Smaller reporting company	[X]
		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 with the registrant is a shell company (as defined in Rule 12b-2 of the Act). [  ] Yes [X] No

As of August 14, 2019, there were 23,263,187 shares of common stock, $0.0001 par value per share, outstanding.

VERB TECHNOLOGY COMPANY, INC.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	3
ITEM 1 - FINANCIAL STATEMENTS	3
ITEM 1A - RISK FACTORS	27
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
ITEM 4 - CONTROLS AND PROCEDURES	38
PART II - OTHER INFORMATION	38
ITEM 1 - LEGAL PROCEEDINGS	38
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	40
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES	40
ITEM 4 - MINE SAFETY DISCLOSURES	40
ITEM 5 - OTHER INFORMATION	40
ITEM 6 - EXHIBITS	41
SIGNATURES	46

2

PART I — FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS (UNAUDITED)

Condensed Consolidated Balance Sheets (unaudited)	4
Condensed Consolidated Statements of Operations (unaudited)	5
Condensed Consolidated Statements of Stockholders Equity (Deficit) (unaudited)	6
Condensed Consolidated Statements of Cash Flows (unaudited)	7
Notes to Condensed Consolidated Financial Statements (unaudited)	8-26

3

VERB TECHNOLOGY COMPANY, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

	June 30, 2019			December 31, 2018
	(Unaudited)
ASSETS
Current assets:
Cash	$	412,000		$	634,000
Accounts receivable, net		1,255,000			1,000
Inventory, net		165,000			-
Prepaid expenses		320,000			83,000
Total current assets		2,152,000			718,000
Right-of-use assets		1,219,000			-
Deferred offering costs		-			162,000
Property and equipment, net		56,000			11,000
Intangible assets, net (provisional)		9,835,000			-
Goodwill (provisional)		12,347,000			-
Other assets		71,000			7,000
Total assets	$	25,680,000		$	898,000
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	3,126,000		$	1,148,000
Accrued officers’ salary		159,000			188,000
Accrued interest (including $48,000 and $41,000 payable to related parties)		55,000			46,000
Note payable, net of discount of $1,000 and $0, respectively		709,000			-
Notes payable - related party		112,000			112,000
Convertible notes payable, net of discount of $0 and $1,082,000, respectively		-			818,000
Operating lease liability, current		227,000			-
Deferred revenue		237,000			-
Derivative liability		219,000			2,576,000
Customer deposits		167,000			-
Total current liabilities		5,011,000			4,888,000
Long Term liabilities:
Note payable - related party		1,065,000			1,065,000
Operating lease liability, non-current		1,003,000			-
Total liabilities		7,079,000			5,953,000
Commitments and contingencies
Stockholders’ equity (deficit)
Preferred stock, $0.0001 par value, 15,000,000 shares authorized, none issued or outstanding		-			-
Common stock, $0.0001 par value, 200,000,000 shares authorized, 22,655,185 and 12,055,491 shares issued and outstanding as of June 30, 2019 and December 31, 2018		2,000			1,000
Additional paid-in capital		64,617,000			35,611,000
Accumulated Deficit		(46,018,000	)		(40,667,000	)
Total stockholders’ equity (deficit)		18,601,000			(5,055,000	)
Total liabilities and stockholders’ equity (deficit)	$	25,680,000		$	898,000

The accompanying notes are an integral part of these condensed consolidated financial statements

4

VERB TECHNOLOGY COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Statement of Operations
	Three Months Ended June 30, 2019			Three Months Ended June 30, 2018			Six Months Ended June 30, 2019			Six Months Ended June 30, 2018
Revenue, net	$	3,733,000		$	8,000		$	3,742,000		$	16,000
Cost of revenue		2,042,000			7,000			2,072,000			8,000
Gross margin		1,691,000			1,000			1,670,000			8,000
Operating Expenses:
Research and development		1,335,000			105,000			1,899,000			236,000
Depreciation and amortization		567,000			5,000			570,000			10,000
General and administrative		3,262,000			(495,000	)		5,448,000			4,769,000
Total operating expenses		5,164,000			(385,000	)		7,917,000			5,015,000
Income / (Loss) from operations		(3,473,000	)		386,000			(6,247,000	)		(5,007,000	)
Other income (expense)
Other income / (expense)		(1,000	)		1,000			(1,000	)		(4,000	)
Financing costs		(55,000	)		-			(139,000	)		(172,000	)
Interest expense - amortization of debt discount		(572,000	)		-			(1,626,000	)		(748,000	)
Change in fair value of derivative liability		(426,000	)		1,444,000			518,000			(1,181,000	)
Debt extinguishment, net		2,227,000			-			2,227,000			652,000
Interest expense		(43,000	)		(59,000	)		(83,000	)		(263,000	)
Total other income / (expense)		1,130,000			1,386,000			896,000			(1,716,000	)
Net Income / (Loss)	$	(2,343,000	)	$	1,772,000		$	(5,351,000	)	$	(6,723,000	)
Income (Loss) per share - basic and diluted	$	(0.11	)	$	0.17		$	(0.32	)	$	(0.71	)
Weighted average number of common shares outstanding - basic and diluted		21,624,240			10,169,332			16,946,065			9,489,017

The accompanying notes are an integral part of these condensed consolidated financial statements

5

VERB TECHNOLOGY COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

					Additional
	Common Stock				Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance at December 31, 2018		12,055,491	$	1,000	$	35,611,000	$	(40,667,000	)	$	(5,055,000	)
Sale of common stock from Public Offering		6,549,596		1,000		18,452,000		-			18,453,000
Fair value of common stock issued for acquisition		3,327,791		-		7,820,000		-			7,820,000
Fair value of common stock issued to settle accounts payable		4,142		-		10,000		-			10,000
Conversion of convertible debt		182,333		-		410,000		-			410,000
Common shares issued upon exercise of warrants		173,714		-		45,000		-			45,000
Common stock upon issuance of convertible debt		25,272		-		182,000		-			182,000
Fair value of common shares issued for services		197,810		-		728,000		-			728,000
Issuance of fractional shares due to reverse split		139,036		-		-		-			-
Fair value of vested stock options and warrants		-		-		1,359,000		-			1,359,000
Net loss		-		-		-		(5,351,000	)		(5,351,000	)
Balance at June 30, 2019		22,655,185	$	2,000	$	64,617,000	$	(46,018,000	)	$	18,601,000

						Additional
	Common Stock					Paid-in			Accumulated
	Shares			Amount		Capital			Deficit			Total
Balance at December 31, 2017		7,941,235		$	12,000	$	22,739,000		$	(28,540,000	)	$	(5,789,000	)
Common shares issued upon exercise of warrants		113,621			-		22,000			-			22,000
Common shares issued upon exercise of options		32,508			-		34,000			-			34,000
Proceeds from sale of common stock		1,163,938			2,000		2,977,000			-			2,979,000
Fair value of common shares issued for services		319,346			-		2,627,000			-			2,627,000
Fair value of common stock issued upon conversion of debt		492,201			1,000		2,277,000			-			2,278,000
Fair value of common stock issued upon conversion of accrued expenses		27,149			-		582,000			-			582,000
Common shares issued upon exercise of put option		203,206			-		1,000,000			-			1,000,000
Fair value of vested stock options		-			-		829,000			-			829,000
Stock repurchase		(46,667	)		-		(20,000	)		-			(20,000	)
Net loss					-		-			(6,723,000	)		(6,723,000	)
Balance at June 30, 2018		10,246,537		$	15,000	$	33,067,000		$	(35,263,000	)	$	(2,181,000	)

					Additional
	Common Stock				Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Total
Balance at March 31, 2019		12,344,451	$	1,000	$	36,590,000		$	(43,675,000	)	$	(7,084,000	)
Sale of common stock from Public Offering		6,549,596		1,000		18,452,000			-			18,453,000
Fair value of common stock issue for acquisition		3,327,791		-		7,820,000			-			7,820,000
Fair value of common stock issued to settle accounts payable		4,142		-		10,000			-			10,000
Fair value of common stock upon issuance of convertible debt		16,667		-		(128,000	)		-			(128,000	)
Conversion of convertible debt		165,666		-		410,000			-			410,000
Common shares issued upon exercise of warrants		25,000		-		45,000			-			45,000
Common stock upon issuance of convertible debt		8,605		-		182,000			-			182,000
Fair value of common shares issued for services		157,812		-		340,000			-			340,000
Issuance of fractional shares due to reverse split		55,455		-		-			-			-
Fair value of vested stock options and warrants				-		896,000			-			896,000
Net loss		-		-		-			(2,343,000	)		(2,343,000	)
Balance at June 30, 2019		22,655,185	$	2,000	$	64,617,000		$	(46,018,000	)	$	18,601,000

						Additional
	Common Stock					Paid-in			Accumulated
	Shares			Amount		Capital			Deficit			Total
Balance at March 31, 2018		10,141,753		$	15,000	$	34,230,000		$	(37,035,000	)	$	(2,790,000	)
Common shares issued upon exercise of warrants		46,165			-		-			-			-
Common shares issued upon exercise of options		32,508			-		34,000			-			34,000
Derivative liability extinguished upon exercise of warrants		-			-		(723,000	)		-			(723,000	)
Proceeds from sale of common stock		70,000			-		700,000			-			700,000
Fair value of common shares issued services		2,778			-		(642,000	)		-			(642,000	)
Fair value of vested stock options		-			-		(512,000	)		-			(512,000	)
Stock repurchase		(46,667	)		-		(20,000	)		-			(20,000	)
Net Income		-			-		-			1,772,000			1,772,000
Balance at June 30, 2018		10,246,537		$	15,000	$	33,067,000		$	(35,263,000	)	$	(2,181,000	)

The accompanying notes are an integral part of these condensed consolidated financial statements

6

VERB TECHNOLOGY COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended
	June 30, 2019			June 30, 2018
Operating Activities:
Net loss	$	(5,351,000	)	$	(6,723,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Fair value of common shares issued for services and vested stock options and warrants		2,087,000			3,457,000
Financing costs		164,000			172,000
Amortization of debt discount		1,601,000			748,000
Change in fair value of derivative liability		(518,000	)		1,181,000
Debt extinguishment, net		(2,227,000	)		(652,000	)
Depreciation and amortization		13,000			10,000
Amortization of right-of-use assets		62,000			-
Amortization of intangible assets		495,000			-
Inventory reserve		7,000			-
Allowance for doubtful accounts		(15,000	)		-
Effect of changes in assets and liabilities:
Accounts receivable		(150,000	)		-
Inventory		44,000			-
Prepaid expenses		(95,000	)		(7,000	)
Other assets		(43,000	)		(8,000	)
Accounts payable, accrued expenses, and accrued interest		829,000			(68,000	)
Operating lease liability		(58,000	)		-
Deferred revenue		(84,000	)		-
Customer deposits		(296,000	)		-
Net cash used in operating activities		(3,535,000	)		(1,890,000	)
Investing Activities:
Acquisition of subsidiary		(15,000,000	)		-
Cash acquired upon acquisition of subsidiary		557,000			-
Net cash used in investing activities		(14,443,000	)		-
Financing Activities:
Proceeds / (payment) on convertible note payable		432,000			(845,000	)
Proceeds from notes payable		1,000,000			-
Proceeds from related party note payable		58,000			-
Proceeds from sale of common stock		18,614,000			2,979,000
Proceeds from exercise of put option		-			1,000,000
Proceeds from option exercise		-			34,000
Proceeds from warrant exercise		45,000			22,000
Payment of convertible notes payable		(2,025,000	)		130,000
Payment of notes payable		(310,000	)		-
Payment of related party notes payable		(58,000	)		-
Repurchase common stock		-			(20,000	)
Net cash provided by financing activities		17,756,000			3,300,000
Net change in cash		(222,000	)		1,410,000
Cash - beginning of period		634,000			11,000
Cash - end of period	$	412,000		$	1,421,000
		-			-
Supplemental disclosures of cash flow information:
Cash paid for interest	$	64,000		$	314,000
Cash paid for income taxes		-			800
Supplemental disclosure of non-cash investing and financing activities:
Fair value of common stock issued upon acquisition of subsidiary	$	7,820,000		$	-
Conversion of note payable and accrued interest to common stock	$	410,000		$	2,277,000
Fair value of derivative liability from issuance of convertible debt, inducement shares and warrant features	$	388,000		$	302,000
Fair value of warrants issued and beneficial conversion feature to extinguish debt	$	-		$	723,000
Fair value of common shares, warrants and beneficial conversion feature of issued convertible note	$	182,000		$	-
Common stock issued to settle accounts payable	$	10,000		$	582,000
Derecognition of deferred offering costs	$	161,000		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements

7

VERB TECHNOLOGY COMPANY, INC.

Notes to Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2019 and 2018
(Unaudited)

1. DESCRIPTION OF BUSINESS

Organization

References in this document to the “Company,” “Verb,” “we,” “us,” or “our” are intended to mean Verb Technology Company, Inc., individually, or as the context requires, collectively with its subsidiary on a consolidated basis.

Cutaia Media Group, LLC (“CMG”) was organized on December 12, 2012, as a limited liability company under the laws of the State of Nevada. On May 19, 2014, bBooth, Inc. was incorporated under the laws of the State of Nevada. On May 19, 2014, CMG merged into bBooth, Inc. and, thereafter, bBooth, Inc. changed its name to bBooth (USA), Inc., effective as of October 16, 2014.

On October 16, 2014, bBoothUSA was acquired by Global System Designs, Inc. (“GSD”), pursuant to a Share Exchange Agreement entered into with GSD (the “Share Exchange Agreement”). GSD was incorporated in the State of Nevada on November 27, 2012. The acquisition was accounted for as a reverse merger transaction. In connection with the closing of the transactions contemplated by the Share Exchange Agreement, GSD’s management was replaced by bBoothUSA’s management, and GSD changed its name to bBooth, Inc. The operations of CMG and bBooth (USA), Inc. became known as, and are referred to herein, as “bBoothUSA.”

Effective April 21, 2017, we changed our corporate name from bBooth, Inc. to nFüsz, Inc. The name change was effected through a parent/subsidiary short-form merger of nFüsz, Inc., our wholly-owned Nevada subsidiary, formed solely for the purpose of the name change, with and into us. We were the surviving entity. To effectuate the name-change merger, we filed Articles of Merger and a Certificate of Correction (relative to the effective date of the name-change merger) with the Secretary of State of the State of Nevada on April 4, 2017 and April 17, 2017, respectively. The name-change merger became effective on April 21, 2017. Our board of directors approved the name-change merger, which resulted in the name change on that date. In accordance with Section 92A.180 of the Nevada Revised Statutes (the “NRS”), stockholder approval of the name-change merger was not required.

Effective February 1, 2019, we changed our corporate name from nFüsz, Inc. to Verb Technology Company, Inc. The name change was effected through a parent/subsidiary short-form merger of Verb Technology Company, Inc., our wholly-owned Nevada subsidiary, formed solely for the purpose of the name change, with and into us. We were the surviving entity. To effectuate the name-change merger, we filed Articles of Merger and a Certificate of Correction (relative to the effective date of the name-change merger) with the Secretary of State of the State of Nevada on January 31, 2019 and February 22, 2019, respectively. The name-change merger became effective on February 1, 2019. Our board of directors approved the name-change merger, which resulted in the name change on that date. In accordance with Section 92A.180 of the NRS, stockholder approval of the name-merger was not required.

On February 1, 2019, we implemented a 1-for-15 reverse stock split (the “Reverse Stock Split”) of our common stock, $0.0001 par value per share (the “Common Stock”). The Reverse Stock Split became effective upon commencement of trading of our Common Stock on February 4, 2019. As a result of the Reverse Stock Split, every fifteen (15) shares of our pre-Reverse Stock Split Common Stock were combined and reclassified into one share of our Common Stock. The number of shares of Common Stock subject to outstanding options, warrants, and convertible securities were also reduced by a factor of fifteen as of February 1, 2019. All historical share and per-share amounts reflected throughout our consolidated financial statements and other financial information in this Quarterly Report on Form 10-Q have been adjusted to reflect the Reverse Stock Split as if the split occurred as of the earliest period presented. The par value per share of our Common Stock was not affected by the Reverse Stock Split.

On April 12, 2019, we completed our acquisition of Sound Concepts Inc.  (“Sound Concepts”) pursuant to the Agreement and Plan of Merger (the “Merger Agreement), by and among Sound Concepts, NF Merger Sub, Inc., a Utah corporation (“Merger Sub 1”), NF Acquisition Company, LLC, a Utah limited liability company (“Merger Sub 2”), the shareholders of Sound Concepts (the “Shareholders’), the Shareholders’ representative, and us. Pursuant to the Merger Agreement, we acquired Sound Concepts through a two-step merger, consisting of merging Merger Sub 1 with and into Sound Concepts, with Sound Concepts surviving the “first step” of the merger as our wholly-owned subsidiary (and the separate corporate existence of Merger Sub 1 ceased) and, immediately thereafter, merging Sound Concepts with and into Merger Sub 2, with Merger Sub 2 surviving the “second step” of the merger, such that, upon the conclusion of the “second step” of the merger, the separate corporate existence of Sound Concepts ceased and Merger Sub 2 continued its limited liability company existence under Utah law as the surviving entity and as our wholly-owned subsidiary under the name “Verb Direct, LLC.” (“Verb Direct”). On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the closing, each share of Sound Concepts’ capital stock issued and outstanding immediately prior to the effective time (the “Sound Concepts Capital Stock”), was cancelled and converted into the right to receive a proportionate share of (i) a cash payment by us of an aggregate of $15,000,000 (the “Acquisition Cash Payment”), and (ii) 3,327,791 restricted shares of our Common Stock. The Acquisition Cash Payment was paid using a portion of the net proceeds we received as a result of our public offering that closed on April 9, 2019. The fair market value of the 3,327,791 restricted shares on April 12, 2019 was $7,820,000.

Nature of Business

Verb Technology Company

We are an applications services provider, offering cloud-based business software products under the brand name “Verb” on a subscription basis. Our flagship product, Verb Go, is a Customer Relationship Management (“CRM”) application that is distinguishable from other CRM programs because it utilizes our proprietary interactive video technology as the primary means of communication between sales and marketing professionals and their customers or prospects. The data collection and analytics capabilities of our application inform our users right on their device how long the prospects watched the video, how many times they watched it, and what they clicked-on. It then displays information within the application to immediately separate hot leads or interested customers from those that have not seen the video or otherwise expressed interest in the content. These capabilities provide for a much more efficient and effective sales process, resulting in increased sales conversion rates.

Through Verb Go, users can quickly, simply, and easily create, distribute, and post videos on social media to which they can add a choice of on-screen clickable “tags,” which are interactive icons, buttons, and other on-screen elements. When clicked, these clickable “tags” allow a user’s prospects and customers to respond to its 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 buy it, or to click on a calendar icon in the video to make an appointment with a salesperson, among many other features and functionality. Verb Go interactive videos can be distributed via email or text messaging or posted directly to social media, and no software download is required to view the Verb interactive videos. Verb Go is available by subscription for individual and enterprise users. We developed the proprietary patent-pending interactive video technology that serves as the basis for all of our cloud, Software-as-a-Service (“SaaS”) Verb applications.

Our client base consists primarily of enterprise customers in the global direct sales industry. We also have begun to provide our application services on a SaaS basis to clients in other business sectors, including large professional associations such as the National Association of Health Underwriters; educational institutions, such as the Sachem School District in New York; auto leasing, such as D & M Auto Leasing, the largest auto leasing business in the country; as well as to clients in health care, and the burgeoning CBD industry, among others business sectors. Currently, we provide services to approximately 100 clients in the direct sales industry, which include Young Living Essential Oils, LC, Isagenix International, LLC, Vasayo, LLC, Nerium International, LLC, Forever Living Products International, LLC, Seacret Spa, LLC, among many others. For the direct sales industry, our application provides recruiting tools, sales representative training, and education tools, as well as instant notification capabilities to notify users when a prospect has watched an interactive video or other content shared through our application. The application also tracks customer purchases and provides tools for corporate management to monitor field activity for tracking the effectiveness of campaigns, as well as compliance. Our application is currently in use in over 59 different countries, in 48 languages, and currently has approximately 700,000 individual users.

8

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2018 included herein was derived from the audited consolidated financial statements as of that date.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.

Principles of Consolidation

The consolidated financial statements include the accounts of Verb Technology Company, Inc. and Verb Direct, LLC, its wholly owned subsidiary. Intercompany transactions have been eliminated in the consolidation.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the six months ended June 30, 2019, the Company incurred a net loss of $5,351,000 and used cash in operations of $3,535,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2018 consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

In April 2019, the Company completed an underwritten public offering of units, which offering was made pursuant to the Company’s Registration Statement on Form S-1, as amended (File No. 333-226840) (the “Registration Statement”). The Company raised net proceeds of approximately $18,614,000, after taking into account offering costs, of which $15,000,000 was used to pay the cash portion of the purchase price to acquire Sound Concepts, Inc. (“Sound Concepts”), $2,025,000 was applied towards the payment of certain notes payable, and the remaining balance was used for working capital purposes.

Our continuation as a going concern is dependent on our ability to obtain additional financing until we can generate sufficient cash flows from operations to meet our obligations. We intend to continue to seek additional debt or equity financing to continue our operations. There is no assurance that we will ever be profitable or that debt or equity financing will be available to us. The 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.

9

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Significant estimates include assumptions made in analysis of reserves for allowance of doubtful accounts, inventory, purchase price allocations, impairment of long-term assets, realization of deferred tax assets, determining fair value of derivative liabilities, and valuation of equity instruments issued for services. Amounts could materially change in the future.

Concentration of Credit and Other Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable. Cash is deposited with a limited number of financial institutions. The balances held at any one financial institution at times may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits of up to $250,000.

The Company extends limited credit to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral or other security to support accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains an allowance for doubtful accounts and sales credits. The Company believes that any concentration of credit risk in its accounts receivable is substantially mitigated by the Company’s evaluation process, relatively short collection terms and the high level of credit worthiness of its customers.

The Company’s concentration of credit risk includes its concentrations from key customers and vendors. The details of these significant customers and vendors are presented in the following table for six months ended June 30, 2019:

	Six Months Ended	Six Months Ended	Year Ended
	June 30, 2019	June 30, 2018	December 31, 2018
	Unaudited	Unaudited
Verb’s largest customers are presented below as a percentage of Verb’s aggregate:
Revenue	2 major customers account for 11% and 10% of revenue individually, or 21% of revenue in the aggregate	Not applicable	Not applicable
Accounts receivable	3 major customers account for 11%, 12% and 17% of accounts receivable individually, or 40% of accounts receivable in the aggregate	Not applicable	Not applicable
Verb’s largest vendors are presented below as a percentage of Verb’s aggregate:
Purchase	3 major vendors account for 11%, 14% and 19% of purchases individually, or 44% of purchases in the aggregate	Not applicable	Not applicable
Accounts payable	18% of accounts payable to one vendor	Not applicable	Not applicable

Leases

We lease certain corporate office space and office equipment under lease agreements with monthly payments over a period of 36 to 84 months. We determine if an arrangement is a lease at inception. Lease assets are presented as operating lease right-of-use assets and the related liabilities are presented as lease liabilities in our consolidated balance sheets.

Prior to January 1, 2019, the Company accounted for leases under ASC 840, Accounting for Leases. Effective January 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. See Note 7, Right-of-Use Assets and Operating Lease Liabilities, for additional information.

10

Revenue Recognition

The Company derives its revenue primarily from providing application services through the SaaS application, digital marketing and sales support services, from the sale of customized print products and training materials, branded apparel, and digital tools, as demanded by its customers. The subscription revenue from the application services are recognized over the life of the estimated subscription period. The Company also charges certain customers setup or installation fees for the creation and development of websites and phone application. These fees are accounted as part of deferred revenues and amortized over the estimated life of the agreement. Amounts related to shipping and handling that are billed to customers are reflected as part of revenues, and the related costs are reflected in cost of revenues in the accompanying Statements of Operations.

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Pursuant to ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to our customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer.

The products sold by us are distinctly individual. The products are offered for sale solely as finished goods, and there are no performance obligations required post-shipment for customers to derive the expected value from them. Other than promotional activities, which can vary from time to time but nevertheless are entirely within the Company’s control, contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time.

The control of products we sell transfers to our customers upon shipment from our facilities, and our performance obligations are satisfied at that time. Shipping and handling activities are performed before the customer obtains control of the goods and, therefore, represent a fulfillment activity rather than promised goods to the customer. Payment for sales are generally made by check, credit card, or wire transfer. Historically, we have not experienced any significant payment delays from customers.

We allow returns within 30 days of purchase from end-users. Our customers may return purchased products to us under certain circumstances.

Customers setup or installation fees for the creation and development of websites and phone application are recognized as revenues over the estimated subscription period. Design assets of the websites and phone application are recognized when the work is completed. Licensing revenue is recognized over the estimated subscription period. In addition, certain revenue is recorded based upon stand-alone selling prices and is primarily recognized when the customer uses these services, based on the quantity of services rendered, such as number of customer usage.

Revenues for the three months ended June 30, 2019 and 2018 were as follows:

	Three Months Ended June 30, 2019 (Unaudited)						Three Months Ended June 30, 2018 (Unaudited)
	Revenue		Cost of Revenues		Gross Margin		Revenue		Cost of Revenues		Gross Margin
Digital	$	1,454,000	$	176,000	$	1,278,000	$	8,000	$	7,000	$	1,000
Welcome Kits & Fulfillment		1,784,000		1,385,000		399,000		-		-		-
Shipping		495,000		481,000		14,000		-		-		-
Total	$	3,733,000	$	2,042,000	$	1,691,000	$	8,000	$	7,000	$	1,000

11

Revenues for the six months ended June 30, 2019 and 2018 were as follows:

	Six Months Ended June 30, 2019 (Unaudited)						Six Months Ended June 30, 2018 (Unaudited)
	Revenue		Cost of Revenues		Gross Margin		Revenue		Cost of Revenues		Gross Margin
Digital	$	1,463,000	$	206,000	$	1,257,000	$	16,000	$	8,000	$	8,000
Welcome Kits & Fulfillment		1,784,000		1,385,000		399,000		-		-		-
Shipping		495,000		481,000		14,000		-		-		-
Total	$	3,742,000	$	2,072,000	$	1,670,000	$	16,000	$	8,000	$	8,000

Cost of Revenues

Cost of revenues primarily consists of the salaries of certain employees, purchase price of consumer products, digital content costs, packaging supplies, and customer shipping and handling expenses. Shipping costs to receive products from our suppliers are included in our inventory and recognized as cost of sales upon sale of products to our customers.

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

The Company uses Level 3 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using a probability weighted average Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjusted to fair value of derivatives.

Share Based Payments

The Company issues stock options and warrants, shares of Common Stock, and equity interests as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation to employees in accordance with FASB ASC 718, Compensation – Stock Compensation. Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period.

12

From January 1, 2018 until December 31, 2018, the Company accounted for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity - Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received or (b) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date. For interim periods, the fair value is estimated, and the percentage of completion is applied to that estimate to determine the cumulative expense recorded.

In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The guidance was issued to simplify the accounting for share-based transactions by expanding the scope of ASU 2018-07 from only being applicable to share-based payments to employees to also include share-based payment transactions for acquiring goods and services from nonemployees. As a result, nonemployee share-based transactions will be measured by estimating the fair value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance conditions. We adopted ASU 2018-07 on January 1, 2019. The adoption of the standard did not have a material impact on our financial statements for the six months ended June 30, 2019 or the previously reported financial statements.

Net Loss Per Share

Basic net loss per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed giving effect to all dilutive potential shares of Common Stock that were outstanding during the period. Dilutive potential shares of Common Stock consist of incremental shares of Common Stock issuable upon exercise of stock options. No dilutive potential shares of Common Stock were included in the computation of diluted net loss per share because their impact was anti-dilutive. As of June 30, 2019, and 2018, the Company had total outstanding options of 2,832,807 and 1,456,374, respectively, and warrants of 7,779,602 and 1,535,397, respectively, which were excluded from the computation of net loss per share because they are anti-dilutive.

Acquisitions and Business Combinations

The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from, acquired technology, trade-marks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is the period needed to gather all information necessary to make the purchase price allocation, not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill

In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, the Company reviews the recoverability of the carrying value of goodwill at least annually or whenever events or circumstances indicate a potential impairment. The Company’s impairment testing will be done annually at December 31 (its fiscal year end). Recoverability of goodwill is determined by comparing the fair value of Company’s reporting units to the carrying value of the underlying net assets in the reporting units. If the fair value of a reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities.

Intangible Assets with Finite Useful Lives

We have certain finite lived intangible assets that were initially recorded at their fair value at the time of acquisition. These intangible assets consist of developed technology. Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful life of five years.

We review all finite lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, we recognize an impairment loss for the excess carrying value over the fair value in our consolidated statements of operations.

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB ASC for disclosures about the fair value of its financial instruments and paragraph 820-10-35-37 of the FASB ASC (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1:	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2:	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3:	Pricing inputs that are generally observable inputs and not corroborated by market data.

13

The carrying amount of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, and accounts payable and accrued expenses approximate their fair value due to their short-term nature. The carrying values financing obligations approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest rates. The Company uses Level 3 inputs for its valuation methodology for the derivative liabilities.

Long-Lived Assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. No impairment of long-lived assets was required for the year ended December 31, 2018 and for the period ended June 30, 2019.

Segments

The Company has three revenue channels: (1) SaaS, (2) welcome kits, (3) fulfillments. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker (the Company’s Chief Executive Officer) reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to (i) their similar customer base and (ii) the Company having a single sales team, marketing department, customer service department, operations department, finance department and accounting department to support all revenue channels. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements.

Recent Accounting Pronouncements

Management does not believe that recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC will have a material impact on the Company’s present or future consolidated financial statements.

14

3. ACQUISITION OF VERB DIRECT

On April 12, 2019, Verb completed its previously announced acquisition of Verb Direct through a two-step merger, consisting of merging Merger Sub 1 with and into Sound Concepts, with Sound Concepts surviving the “first step” of the merger as a wholly-owned subsidiary of Verb (and the separate corporate existence of Merger Sub 1 then having ceased) and, immediately thereafter, merging Sound Concepts (as of the closing of the first step, then known as Verb Direct, Inc.) with and into Merger Sub 2, with Merger Sub 2 surviving the “second step” of the merger, such that, upon the conclusion of the “second step” of the merger, the separate corporate existence of Verb Direct, Inc. (formerly Sound Concepts) then having ceased and Merger Sub 2 continued its limited liability company existence under Utah law as the surviving entity and as a wholly-owned subsidiary of Verb, then known as Verb Direct. On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the merger, each share of Sound Concepts Capital Stock issued and outstanding immediately prior to the effective time, was cancelled in exchange for cash payment by Verb of an aggregate of $15,000,000, and the issuance of an aggregate of 3,327,791 restricted shares of Verb’s Common Stock. The Acquisition Cash Payment was paid using a portion of the net proceeds Verb received as a result of the public offering of the units. Pursuant to the requirements of current accounting guidance, Verb valued the acquisition shares at $7,820,000, the fair value of the shares at the closing date of the transaction.

The acquisition was intended to augment and diversify Verb’s internet and SaaS business. Key factors that contributed to the recorded provisional goodwill and intangible assets in the aggregate of $22,677,000 were the opportunity to consolidate and complement existing operations of Verb, certain software and customer list, and the opportunity to generate future synergies within the internet and SaaS business.

Verb is required to allocate the purchase price to the acquired tangible assets, identifiable intangible assets, and assumed liabilities based on their fair values. At the date of the acquisition and of this Quarterly Report on Form 10-Q, management has not yet finalized its valuation analysis. The fair values of the assets acquired, as set forth below, are considered provisional and subject to adjustment as additional information is obtained through the purchase price measurement period (a period of up to one year from the closing date). Any prospective adjustments would change the fair value allocation as of the acquisition date. The Company is still in the process of reviewing underlying models, assumptions and discount rates used in the valuation of provisional goodwill and intangible assets. The following table summarizes the provisional fair value of the assets assumed and liabilities acquired in the acquisition:

	As of March 31, 2019
	Fair Value
Assets Acquired:
Other current assets	$	2,004,000
Property and equipment		58,000
Other assets		1,302,000		$	3,364,000
Liabilities Assumed:
Current liabilities		(2,153,000	)
Long term liabilities		(1,068,000	)		(3,221,000	)
Intangible assets (provisional)					10,330,000
Goodwill (provisional)					12,347,000
Purchase Price				$	22,820,000

15

The following unaudited pro forma statements of operations present the Company’s pro forma results of operations after giving effect to the purchase of Verb Direct based on the historical financial statements of the Company and Verb Direct. The unaudited pro forma statements of operations for the three and six months ended June 30, 2019 and 2018 give effect to the transaction to the merger as if it had occurred on January 1, 2018.

	Statement of Operations (Unaudited)
	Three Months Ended June 30, 2019			Three Months Ended June 30, 2018			Six Months Ended June 30, 2019			Six Months Ended June 30, 2018
				(Proforma)			(Proforma)			(Proforma)
Digital	$	1,454,000		$	928,000		$	2,513,000		$	1,850,000
Welcome Kits & Fulfillment		1,784,000			1,814,000			4,049,000			3,373,000
Shipping		495,000			367,000			1,172,000			649,000
Revenue		3,733,000			3,109,000			7,734,000			5,872,000
Digital Cost of Revenue		176,000			160,000			343,000			263,000
Welcome Kits & Fulfillment Cost of Revenue		1,385,000			995,000			2,860,000			2,060,000
Shipping cost of Revenue		481,000			351,000			1,087,000			644,000
Cost of revenue		2,042,000			1,506,000			4,290,000			2,967,000
Digital Gross Margin		1,278,000			768,000			2,170,000			1,587,000
Welcome Kits & Fulfillment Gross Margin		399,000			819,000			1,189,000			1,313,000
Shipping Gross Margin		14,000			16,000			85,000			5,000
Gross margin		1,691,000			1,603,000			3,444,000			2,905,000
Operating Expenses:
Research and development		1,335,000			605,000			2,590,000			1,247,000
Depreciation and amortization		567,000			508,000			1,003,000			1,018,000
General and administrative		3,262,000			281,000			6,525,000			6,230,000
Total operating expenses		5,164,000			1,394,000			10,118,000			8,495,000
Income / (Loss) from operations		(3,473,000	)		209,000			(6,674,000	)		(5,590,000	)
Other income (expense)
Other income / (expense)		(1,000	)		19,000			(17,000	)		8,000
Financing costs		(55,000	)		-			(139,000	)		(172,000	)
Interest expense - amortization of debt discount		(572,000	)		-			(1,626,000	)		(748,000	)
Change in fair value of derivative liability		(426,000	)		1,444,000			518,000			(1,181,000	)
Gain on extinguishment of derivative liability, net		2,227,000			-			2,227,000			652,000
Interest expense		(43,000	)		(59,000	)		(83,000	)		(263,000	)
Total other income (expense)		1,130,000			1,404,000			880,000			(1,704,000	)
Net Income / (Loss)	$	(2,343,000	)	$	1,613,000		$	(5,794,000	)	$	(7,294,000	)
Income per share		(0.11	)		0.12			(0.34	)		(0.57	)
Weighted average number of common shares outstanding - basic and diluted		21,624,240			13,497,123			16,946,065			12,816,808

4. ACCOUNTS RECEIVABLE

Accounts receivable, net consisted of the following:

	June 30, 2019			December 31, 2018
		(Unaudited)
Accounts receivable	$	1,271,000		$	1,000
Less allowance for doubtful accounts		(16,000	)		-
Total accounts receivable, net	$	1,255,000		$	1,000

16

5. INVENTORY

	June 30, 2019			December 31, 2018
		(Unaudited)
Raw materials	$	64,000		$	-
Finished goods		124,000			-
Total inventory		188,000			-
Less inventory reserve		(23,000	)		-
Total inventory, net	$	165,000		$	-

6. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of June 30, 2019 and December 31, 2018.

	June 30, 2019			December 31, 2018
		(Unaudited)
Computers	$	47,000		$	28,000
Furniture and fixture		83,000			56,000
Machinery and equipment		165,000			24,000
Software		113,000			-
Vehicles		17,000			-
Leasehold improvement		30,000			-
Total property and equipment		455,000			108,000
Accumulated Depreciation		(399,000	)		(97,000	)
Total property and equipment, net	$	56,000		$	11,000

Depreciation expense amounted to $13,000 and $10,000 for six months ended June 30, 2019 and 2018, respectively.

7. RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

Effective January 1, 2019, the Company adopted the guidance of ASC 842, Leases (“ASC 842”), which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 on January 1, 2019 resulted in the recognition of operating lease right-of-use assets of and lease liabilities for operating lease of $1,219,000 and $1,230,000, respectively. There was no cumulative-effect adjustment to retained earnings.

17

	Three Months Ended June 30, 2019
Lease Cost
Operating lease cost (included in general and administration in the Company’s unaudited condensed statement of operations)	$	170,000
Other Information
Cash paid for amounts included in the measurement of lease liabilities for the second quarter 2019	$	—
Weighted average remaining lease term – operating leases (in years)		4.05
Average discount rate – operating leases		8.5	%

	At June 30, 2019
Operating leases
Long-term right-of-use assets	$	1,219,000
Short-term operating lease liabilities	$	227,000
Long-term operating lease liabilities		1,003,000
Total operating lease liabilities	$	1,230,000

Year Ending	Operating Leases
2019 (remaining 6 months)	$	170,000
2020		348,000
2021		341,000
2022		304,000
2023		313,000
Total lease payments		1,476,000
Less: Imputed interest/present value discount		(246,000	)
Present value of lease liabilities	$	1,230,000

In February 2019, the Company entered into a new lease agreement to move and expand the Company’s corporate headquarters (the “Original Lease”). In March 2019, the Company elected to exercise its right to extend the term of the Original Lease by an additional 24 months, for a total of 89 months (the “Extension”). In July 2019, the Company amended the Original Lease (the “Amended Lease”; and, together with the Original Lease and the Extension, the “Lease”). The Lease is for approximately 6,700 square feet of new construction space, comprised of approximately 4,880 square feet (the “Initial Premises”) and approximately 1,850 square feet (the “Must-Take Space”) located at 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663, on the Balboa Peninsula. The Lease has a term of 89 months, beginning on the date that the Company occupies the Must-Take Space.

The Lease commenced in August 2019 with respect to the Initial Premises and the Company anticipates that it will take control of the Must-Take Space in January 2020. Thus, the Company believes that the total term of the Lease will be 94 months.

The average monthly base rent for the first 12 months of the Lease is approximately $13,000 after rent abatement. For the next 82 months of the Lease, the average monthly base rent will be approximately $39,000. Pursuant to ASU 2016-02, the Company expects to record approximately $2.4 million as a right-of-use asset and corresponding liability once the Company takes possession and control of the leased premises.

The Company has four leases in American Fork, Utah related to the operation of Verb Direct with an aggregate lease payment of $31,000 per month. The lessor is JMCC Properties, which is an entity owned and controlled by the former shareholders and certain current officers of Verb Direct.

8. NOTE PAYABLE

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2019			Balance at December 31, 2018
Note 1 (A)	March 22, 2019	April 10, 2019		5.0	%	$	310,000	$	-		$	-
Note 2 (B)	March 29, 2019	July 10, 2019		5.0	%		53,000		53,000			-
Note 3 (C)	April 2, 2019	July 10, 2019		5.0	%		53,000		157,000
Note 4 (D)	April 30, 2019	April 29, 2020		5.0	%		500,000		500,000			-
Total notes payable – related parties									710,000			-
Debt discount									(1,000	)		-
Total notes payable, net of debt discount								$	709,000		$	-

18

(A) On March 22, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $310,000, in exchange for net proceeds of $300,000, representing an original issue discount of $10,000, which is included in the original principal amount. The note is unsecured and bears interest on the principal amount at a rate of 5% per annum. The note was due on demand at any time after April 10, 2019. As a result of the issuance of the note, the Company incurred aggregate costs of $10,000 related to the note’s original issue discount. The Company recorded these costs as a note discount and is being amortized over the term of the note. In April 2019, the Company paid off the balance of $310,000 and accrued interest totaling $1,000. As part of the payment, the Company amortized the remaining debt discount of $10,000. As of June 30, 2019, the outstanding balance of the note was $0.

(B)	On March 29, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $53,000, in exchange for net proceeds of $50,000, representing an original issue discount of $3,000, which is included in the original principal amount. The note is unsecured and bears interest on the principal amount at a rate of 5% per annum. The note is due on demand at any time after July 10, 2019. As a result of the issuance of the note, the Company incurred aggregate costs of $3,000 related to the note’s original issue discount. The Company recorded these costs as a note discount and is being amortized over the term of the note. As of June 30, 2019, the outstanding balance of the note amounted to $53,000. On July 10, 2019, we amended the note, pursuant to which, on July 10, 2019, the aggregate outstanding principal and all accrued and unpaid interest converted into 27,018 shares of our Common Stock, and a warrant to purchase up to 27,018 shares of our Common Stock at an exercise price of $3.44 per share.
(C)	On April 2, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $157,000, in exchange for net proceeds of $150,000, representing an original issue discount of $7,000, which is included in the original principal amount. The note is unsecured and bore interest on the principal amount at a rate of 5% per annum. The note was due demand at any time after July 10, 2019. As a result of the issuance of the note, the Company incurred aggregate costs of $7,000 related to the note’s original issue discount. The Company recorded these costs as a note discount and is being amortized over the term of the note. As of June 30, 2019, the outstanding balance of the note amounted to $157,000. On July 10, 2019, we amended the note, pursuant to which, on July 10, 2019, the aggregate outstanding principal and all accrued and unpaid interest converted into 81,178 shares of our Common Stock, and a warrant to purchase up to 81,178 shares of our Common Stock at an exercise price of $3.44 per share.
(D)	On April 30, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $500,000, in exchange for net proceeds of $500,000. The note was unsecured and bore interest on the principal amount at a rate of 5% per annum. The note was due on April 29, 2020. As of June 30, 2019, the outstanding balance of the note amounted to $500,000. On July 10, 2019, we amended the note, pursuant to which, on July 29, 2019, the aggregate outstanding principal and all accrued and unpaid interest converted into 490,090 shares of our Common Stock.

Total interest expense for notes payable was $7,000 and $0 for six months ended June 30, 2019 and 2018, respectively. The Company paid $1,000 and $0 in interest for the six months ended June 30, 2019 and 2018, respectively.

9. NOTES PAYABLE – RELATED PARTIES

The Company has the following related parties notes payable as of June 30, 2019 and December 31, 2018:

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2019			Balance at December 31, 2018
Note 1 (A)	December 1, 2015	February 8, 2021		12.0	%	$	1,249,000	$	825,000		$	825,000
Note 2 (B)	December 1, 2015	April 1, 2017		12.0	%		112,000		112,000			112,000
Note 3 (C)	April 4, 2016	June 4, 2021		12.0	%		343,000		240,000			240,000
Note 4 (D)	March 22, 2019	April 30, 2019		5.0	%		58,000		-			-
Total notes payable – related parties									1,177,000			1,177,000
Non-current									(1,065,000	)		(1,065,000	)
Current								$	112,000		$	112,000

19

(A) On December 1, 2015, the Company issued a convertible note payable to Mr. Rory J. Cutaia, the Company’s majority stockholder and Chief Executive Officer, to consolidate all loans and advances made by Mr. Cutaia to the Company as of that date. The note bears interest at a rate of 12% per annum, secured by the Company’s assets, and will mature on February 8, 2021, as amended.

As of June 30, 2019, and December 31, 2018, the outstanding balance of the note amounted to $825,000, respectively.

(B)	On December 1, 2015, the Company issued a note payable to a former member of the Company’s board of directors, in the amount of $112,000, representing unpaid consulting fees as of November 30, 2015. The note is unsecured, bears interest rate of 12% per annum, and matured in April 2017. As of June 30, 2019, and December 31, 2018, the outstanding principal balance of the note was equal to $112,000, respectively. As of June 30, 2019, the note was past due, and remains past due. The Company is currently in negotiations with the noteholder to settle the past due note.
(C)	On April 4, 2016, the Company issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. The note bears interest at a rate of 12% per annum, secured by the Company’s assets, and will mature on June 4, 2021, as amended. As of June 30, 2019, and December 31, 2018, the outstanding balance of the note amounted to $240,000, respectively.
(D)	On March 22, 2019, the Company issued a note payable to Mr. Jeff Clayborne, the Company’s Chief Financial Officer, in the amount of $58,000. The note was unsecured, bore interest at a rate of 5% per annum, and matured on April 30, 2019. On April 11, 2019, the Company paid off the balance of $58,000. As of June 30, 2019, the outstanding balance of the note was $0.

Total interest expense for notes payable to related parties was $70,000 and $117,000 for six months ended June 30, 2019 and 2018, respectively. The Company paid $63,000 and $182,000 in interest for the six months ended June 30, 2019 and 2018, respectively.

10. CONVERTIBLE NOTES PAYABLE

The Company has the following convertible notes payable as of June 30, 2019 and December 31, 2018:

Note	Note Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2019		Balance at December 31, 2018
Note payable (A)	October 19, 2018	April 19, 2019		10	%	$	1,500,000	$	-	$	1,500,000
Note payable (B)	October 30, 2018	April 29, 2019		5	%	$	400,000		-		400,000
Note payable (C)	February 1, 2019	August 2, 2019		10	%	$	500,000		-		-
Total notes payable									-		1,900,000
Debt discount									-		(1,082,000	)
Total notes payable, net of debt discount								$	-	$	818,000

(A) On October 19, 2018, the Company issued an unsecured convertible note to Bellridge Capital, LP (“Bellridge”), an unaffiliated third-party, in the aggregate principal amount of $1,500,000 in exchange for net proceeds of $1,242,000, representing an original issue discount of $150,000, and paid legal and financing expenses of $109,000. In addition, the Company issued 96,667 shares of its Common Stock with a fair value of $595,000. The note was unsecured and did not bear interest; however, the implied interest was determined to be 10% since the note was issued at 10% less than its face value. The note matured in April 2019. The note was also convertible into shares of the Company’s Common Stock only on or after the occurrence of an uncured “Event of Default.” Primarily, the Company would be in default if it did not repay the principal amount of the note, as required. The other events of default are standard for the type of transaction represented by the related securities purchase agreement and the note. In the event of a default, the conversion price in effect on any date on which some or all of the principal of the note is to be converted would be a price equal to 70% of the lowest VWAP during the ten trading days immediately preceding the date on which Bellridge provided its notice of conversion. Upon an Event of Default, the Company would owe Bellridge an amount equivalent to 110% of the then-outstanding principal amount of the note in addition to of all other amounts, costs, expenses, and liquidated damages that might also be due in respect thereof. The Company agreed that, on or after the occurrence of an Event of Default, it would reserve and keep available that number of shares of its Common Stock that equaled 200% of the number of such shares that potentially would be issuable pursuant to the terms of the securities purchase agreement and the note (assuming conversion in full of the note and on any date of determination). The Company determined that, because the conversion price is unknown, the Company could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the note created a derivative with a fair value of $1,273,000 at the date of issuance.

20

As a result of the issuance of the note, the Company incurred aggregate costs of $2,126,000 related to the note’s original issue discount, legal and financing expenses, the fair value of the Common Stock issued and the recognition of the derivative liability. The Company recorded these costs as a note discount up to the face value of the note of $1,500,000 and the remaining $626,000 as financing costs in October 2018. The note discount was being amortized over the six-month term of the note.

In April 2019, the Company paid the balance of $1,500,000. Prior to the payoff the Company recognized a change in fair market value in the derivative liability totaling $670,000. As part of the payoff the Company amortized the remaining debt discount of $144,000 and recognized a gain on extinguishment of the derivative liability totaling $1,396,000.

As of June 30, 2019, the outstanding balance of the note was $0 and unamortized debt discount was $0.

(B) On October 30, 2018, the Company issued two unsecured convertible notes to one current investor and one otherwise unaffiliated third-party in the aggregate principal amount of $400,000. The notes bore interest at a rate of 5% per annum and matured on April 29, 2019. Upon the Company’s consummation of its underwritten public offering of the Company’s units, all, and not less than all, of (i) the outstanding principal amount and (ii) the accrued interest thereunder were to be converted into shares of the Company’s Common Stock. The per-share conversion price equaled seventy-five percent (75%) of the effective offering price of the Common Stock in the Company’s recent underwritten public offering. The Company determined that, because the conversion price was unknown, that the Company could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the notes created a derivative with a fair value of $302,000 at the date of issuance and was accounted as a debt discount and was being amortized over the term of the notes payable.

On April 5, 2019, the Company converted the outstanding principal amount and accrued interest of $410,000 into 182,333 shares of Common Stock. Prior to the conversion, the Company recognized a change in fair market value in the derivative liability totaling $21,000. In addition, the Company amortized the remaining debt discount of $48,000 and recognized a gain on extinguishment of the derivative liability totaling $187,000.

As of June 30, 2019, the outstanding balance of the note was $0 and unamortized debt discount was $0.

(C) On February 1, 2019, the Company issued an unsecured convertible note to Bellridge, an unaffiliated third-party, in the aggregate principal amount of $500,000 in exchange for net proceeds of $432,000, representing an original issue discount of $25,000, and paid legal and financing expenses of $43,000. In addition, the Company issued 16,667 shares of its Common Stock with a fair value of $128,000. The note was unsecured and did not bear interest; however, the implied interest was determined to be 10% since the note was issued at 10% less than its face value. The note matured in August 2019. The note was also convertible into shares of the Company’s Common Stock only on or after the occurrence of an uncured “Event of Default.” Primarily, the Company would have been in default if it did not repay the principal amount of the note, as required. The other events of default were standard for the type of transaction represented by the related securities purchase agreement and the note. The conversion price in effect on any date on which some or all of the principal of the note would have been converted would be a price equal to 70% of the lowest VWAP during the ten trading days immediately preceding the date on which Bellridge provides its notice of conversion. Upon an Event of Default, the Company would have owed Bellridge an amount equivalent to 110% of the then-outstanding principal amount of the note in addition to of all other amounts, costs, expenses, and liquidated damages that would have been due in respect thereof. The Company agreed that, on or after the occurrence of an Event of Default, it would reserve and keep available that number of shares of its Common Stock that is at least equal to 200% of the number of such shares that potentially would be issuable pursuant to the terms of the securities purchase agreement and the note (assuming conversion in full of the note and on any date of determination). The Company determined that, because the conversion price was unknown, the Company could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the note created a derivative with a fair value of $388,000 at the date of issuance. As a result of the issuance of the note, the Company incurred aggregate costs of $584,000 related to the note’s original issue discount, legal and financing expenses, the fair value of the Common Stock issued and the recognition of the derivative liability. The Company recorded these costs as a note discount up to the face value of the note of $500,000 and the remaining $84,000 as financing costs. The note discount was being amortized over the six-month term of the note. On April 2, 2019, the Company increased the outstanding principal amount of the note by $25,000 to an aggregate of $525,000 and issued 8,606 shares of Common Stock with a fair value of $55,000. The Company accounted for the increase in principal and the fair value of the shares of Common Stock in the aggregate of $80,000 as part its financing costs. In April 2019, the Company paid off the outstanding principal balance of $525,000. Prior to the payoff, the Company recognized a change in fair market value in the derivative liability totaling $260,000. In addition, the Company amortized the remaining debt discount of $366,000 and recognized a gain on extinguishment of the derivative liability totaling $644,000. As of June 30, 2019, the outstanding balance of the note was $0 and unamortized debt discount was $0.

Total interest expense for convertible notes payable was $5,000 and $145,000 for the six months ended June 30, 2019 and 2018, respectively.

21

11. DERIVATIVE LIABILITY

Under authoritative guidance used by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments that do not have fixed settlement provisions are deemed to be derivative instruments. The Company has issued certain convertible notes whose conversion prices contains reset provisions based on a future offering price and/or whose conversion prices are based on future market prices. However, since the number of shares to be issued is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to share settle the conversion option. In addition, the Company also granted certain warrants that included a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder.

As a result, the conversion option and warrants are classified as liabilities and are bifurcated from the debt host and accounted for as a derivative liability in accordance with ASC 815 and will be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

The derivative liabilities were valued using a probability weighted average Black-Scholes-Merton pricing model with the following average assumptions:

	June 30, 2019			Upon Issuance			December 31, 2018
Stock Price	$	2.00		$	7.65		$	4.80
Exercise Price	$	1.88		$	5.63		$	2.70
Expected Life		3.48			0.50			1.78
Volatility		195	%		164	%		184	%
Dividend Yield		0	%		0	%		0	%
Risk-Free Interest Rate		2.43	%		2.46	%		2.46	%
Fair Value	$	219,000		$	388,000		$	2,576,000

The expected life of the conversion feature of the notes and warrants was based on the remaining contractual term of the notes and warrants. The Company uses the historical volatility of its Common Stock to estimate the future volatility for its Common Stock. The expected dividend yield was based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future. The risk-free interest rate was based on rates established by the Federal Reserve Bank. As of December 31, 2018, the Company had recorded a derivative liability of $2,576,000.

During the six months ended June 30, 2019, the Company recorded an additional derivative liability totaling $388,000 as a result of the issuance of a convertible note. The Company also recorded a change in fair value of $518,000 to account the changes in fair value of these derivative liabilities for the six months ended June 30, 2019. In addition, the Company also recorded a gain on extinguishment of $2,227,000 to account for the extinguishment of derivative liabilities associated with the payoff of convertible debt for the six months ended June 30, 2019. At June 30, 2019, the fair value of the derivative liability amounted to $219,000. The details of derivative liability transactions for the six months ended June 30, 2019 and 2018 are as follows:

	June 30, 2019
Beginning Balance	$	2,576,000
Fair value upon issuance of notes payable and warrants		388,000
Change in fair value		(518,000	)
Extinguishment		(2,227,000	)
Ending Balance	$	219,000

22

12. EQUITY TRANSACTIONS

The Company’s Common Stock activity for the six months ended June 30, 2019 is as follows:

Units – Common Stock and Warrants

Shares and Warrants Issued as Part of the Company’s Underwritten Public Offering

On April 4, 2019, we entered into an Underwriting Agreement (the “Underwriting Agreement”) with A.G.P./Alliance Global Partners, as representative of the several underwriters named therein (the “Underwriter” or “AGP”), relating to a firm commitment public offering (the “Public Offering”) of 6,389,776 units (the “Units”) consisting of an aggregate of (i) 6,389,776 shares (the “Firm Shares”) of Common Stock, and (ii) warrants to purchase up to 6,389,776 shares of Common Stock (the “Firm Warrants”; and the shares of Common Stock issuable from time to time upon exercise of the Firm Warrants, the “Firm Warrant Shares”), at a public offering price of $3.13 per Unit. Pursuant to the terms of the Underwriting Agreement, we also granted the Underwriters an option, exercisable for 45 days, to purchase up to 958,466 additional Units, consisting of an aggregate of (x) 958,466 shares of Common Stock (the “Option Shares”; and, together with the Firm Shares, the “Shares”) and (y) warrants to purchase up to 958,466 shares of Common Stock (the “Option Warrants”; and, together, with the Firm Warrants, the “Warrants”; and the shares of Common Stock issuable from time to time upon exercise of the Option Warrants, the “Option Warrant Shares”; and, together with the Firm Warrant Shares, the “Warrant Shares”). The Warrants have an initial per share exercise price of $3.443, subject to customary adjustments, are exercisable immediately, and will expire five years from the date of issuance, or April 9, 2024.

On April 9, 2019, we closed the Public Offering and issued 6,389,776 Units, consisting of an aggregate of 6,389,776 Firm Shares and Firm Warrants to purchase up to an aggregate of 6,389,776 Firm Warrant Shares. In connection with the closing, the Underwriter partially exercised its over-allotment option and purchased an additional 159,820 Units, consisting of an aggregate of 159,820 Option Shares and Option Warrants to purchase up to an aggregate of 159,820 Option Warrant Shares. We received net proceeds of approximately $18,614,000, net of underwriting commissions and other offering expenses in the aggregate of $2,047,000. Included in the offering expenses were $161,000 in various legal and professional expenses that were incurred and paid in fiscal 2018 and accounted for as a deferred offering costs as of December 31, 2018. This amount was derecognized upon close of the public offering in April 2019 and was recorded as a reduction to paid in capital.

In connection with the Public Offering, we also issued the Underwriter warrants to purchase up to 319,488 shares of our Common Stock (the “Underwriter Warrants”), at an exercise price of $3.913. The Underwriter Warrants are exercisable at any time, and from time to time, in whole or in part, during the four-year period commencing one year from the effective date of the Registration Statement.

Common Stock

Shares Issued for the Acquisition of Verb Direct – In April 2019, we issued 3,327,791 shares of Common Stock with a fair value of $7,820,000 as part of our acquisition of Verb Direct. See Note 3, Acquisition of Verb Direct, for additional information.

Shares Issued for Services – During the six months ended June 30, 2019, the Company issued 197,810 shares of Common Stock to vendors for services rendered with a fair value of $728,000. These shares of Common Stock were valued based on the market value of the Company’s Common Stock price at the issuance date or the date the Company entered into the agreement related to the issuance.

Shares Issued Upon Issuance of Convertible Note – During the six months ended June 30, 2019, the Company issued to a note holder 25,272 shares of Common Stock with a fair value of $182,000 as an inducement for the issuance of a note payable. See Note 10, Convertible Notes Payable, for additional information.

Conversion of Notes Payable – During the six months ended June 30, 2019, the Company issued 182,333 shares of Common Stock upon conversion of notes payable and accrued interest of $410,000. See Note 10, Convertible Notes Payable, for additional information.

Conversion of Accounts Payable – On April 30, 2019, the Company converted accounts payable in the amount of $10,000 into 4,142 shares of Common Stock with a fair value of $10,000 at the date of conversion.

Stock Options

Effective October 16, 2014, the Company adopted the 2014 Stock Option Plan (the “Plan”) under the administration of the board of directors to retain the services of valued key employees and consultants of the Company.

At its discretion, the Company grants share option awards to certain employees and non-employees under the Plan and accounts for it in accordance with ASC 718, Compensation – Stock Compensation.

23

A summary of option activity for the six months ended June 30, 2019 is presented below.

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Options			Price		Life (Years)		Value
Outstanding at December 31, 2018		2,478,974		$	5.25		2.93	$	2,660,000
Granted		590,500			4.41		-		-
Forfeited		(236,667	)		5.57		-		-
Exercised		-			-		-		-
Outstanding at June 30, 2019		2,832,807		$	5.10		2.80	$	480,000
Vested June 30, 2019		1,424,608		$	4.51			$	427,000
Exercisable at June 30, 2019		802,307		$	5.12			$	153,000

During the six months ended June 3, 2019, the Company granted stock options to employees and consultants to purchase a total of 590,500 shares of Common Stock for services to be rendered. The options have an average exercise price of $4.41 per share, expire in five years, and vests (i) 50% on the grant date and the remaining 50% on the 12-month anniversary of the grant date, (ii) in three equal installments during the three years from the grant date, (iii) in 4 equal installments during the four years from the grant date, or (iv) in 12 equal installments based on achieving performance targets during the three years from the grant date. The total fair value of these options at the grant date was approximately $1,991,000 using the Black-Scholes Option pricing model.

The total stock compensation expense recognized relating to vesting of stock options for the six months ended June 30, 2019 amounted to $920,000. As of June 30, 2019, total unrecognized stock-based compensation expense was $4.4 million, which is expected to be recognized as part of operating expense through June 2023.

The fair value of share option award is estimated using the Black-Scholes option pricing method based on the following weighted-average assumptions:

	Six Months Ended June 30,
	2019			2018
Risk-free interest rate		1.91 - 2.75	%		2.25 – 2.85	%
Average expected term (years)		5 years			5 years
Expected volatility		201.3 -241.7	%		184.5 – 190.2	%
Expected dividend yield		-			-

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award; the expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s Common Stock; and the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future.

Warrants

The Company has the following warrants outstanding as of June 30, 2019, all of which are exercisable:

	Warrants			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2018		940,412		$	3.60		2.32	$	1,974,000
Granted		7,032,823			3.47		-		-
Forfeited		(6,667)			6.00		-		-
Exercised		(186,969	)		1.15		-		-
Outstanding at June 30, 2019, all vested		7,779,602		$	3.54		4.61	$	158,000

During the six months ended June 30, 2019, the Company granted warrants to purchase a total of 6,869,084 shares of Common Stock as part of a public offering. The warrants are exercisable at an average price of $3.46 per share and will expire in January 2023 (see Note 12). See Note 12, Equity Transactions, for additional information.

During the six months ended June 30, 2019, the Company granted fully vested warrants to purchase a total of 163,739 shares of Common Stock for services rendered. The warrants are exercisable at an average price of $3.76 per share and will expire in January 2023. The total fair value of these warrants at the grant date was approximately $439,000 using the Black-Scholes Option pricing model and was expensed upon grant.

During the six months ended June 30, 2019, a total of 186,969 warrants were exercised and converted into 173,714 common shares at a weighted average exercise price of $1.15. The Company received $45,000 upon exercise of the warrants.

24

13. COMMITMENTS AND CONTINGENCIES

Litigation

On April 24, 2018, EMA  Financial, LLC, a New York limited liability company (“EMA”) commenced an action against us, styled EMA Financial, LLC, a New York limited liability company, Plaintiff, against nFUSZ, Inc., Defendant, United States District Court, Southern District of New York, case number 1:18-cv-03634-NRB. The Complaint sets forth four causes of action and seeks relief consisting of: (1) money damages, (2) injunctive relief, (3) liquidated damages, and (4) declaratory relief. All of the claims stem from our refusal to honor EMA’s exercise notice in connection with a common stock purchase warrant that we had granted to it. We believe EMA’s allegations are entirely without merit.

The circumstances giving rise to the dispute are as follows: on or about December 5, 2017, we issued a warrant to EMA as part of the consideration we were required to provide in connection with a contemporaneous convertible loan EMA made to us. The loan, which was evidenced by a convertible note, was for a term of one year. Our refusal to honor the warrant exercise notice was due to our good faith belief that EMA’s interpretation of the cashless exercise provision of the warrant was, inter alia, (1) contrary to our direct conversations and agreements made with EMA prior to, and during the preparation of the loan and warrant agreements; (2) contradictory to the plain language on the face and body of the warrant agreement drafted by EMA; (3) wholly inconsistent with industry norms, standards, and practices; (4) was contrary to the cashless exercise method actually adopted by EMA’s co-lender in the same transaction; and (5) was the result of a single letter mistakenly transposed in the cashless exercise formula drafted by EMA which if adopted, would result in a gross and unintended windfall in favor of EMA and adverse to us. Moreover, as set forth in our response to EMA’s allegations, EMA’s interpretation of the cashless exercise provision would have resulted in it being issued more shares of our Common Stock than it would have received if it exercised the warrant for cash (instead of less), and more than the amount of shares reflected on the face of the warrant agreement itself. The loan underlying the transaction was repaid, in full, approximately three months after it was issued, on March 8, 2018, together with all accrued interest, prior to any conversion or attempted conversion of the note.

On July 20, 2018, we filed an Answer to the Complaint, along with certain Affirmative Defenses, as well as Counterclaims seeking, inter alia, to void the entire transaction for violation of New York’s criminal usury laws and, alternatively, for reformation of the warrant conversion formula set forth in the Warrant Agreement so as to be consistent with the parties’ intent and custom and practice in the industry.

The parties have undergone depositions and exchanged document production. Discovery was scheduled to end on January 31, 2019. Neither party has requested to extend the discovery period. Notwithstanding the pending action, in December 2018, EMA attempted to exercise the warrant through the Company’s transfer agent utilizing the disputed cashless exercise formula. The transfer agent rejected EMA’s request and notified the Company who promptly filed a motion for a preliminary injunction to enjoin EMA from making any further attempts to exercise the warrant in this manner during the pendency of the action. The Company is awaiting a decision from the Court on its preliminary injunction motion. As of the date of this Quarterly Report on the Form 10-Q, the Court has not ruled on our motion. We intend to vigorously defend the action, as well as vigorously prosecute our counterclaims against EMA. The action is still pending.

In August 2014, a former employee and then current stockholder (the “Employee”) entered into that certain Executive Employment Agreement (the “Employment Contract”) with bBooth, Inc., our predecessor company. Section 3.1 of the Employment Contract provided, among other things, that Employee was employed to serve as our President and reported directly to Rory Cutaia, our Chief Executive Officer. Section 5.2 of Employment Contract provides, among other things, that Employee was entitled to receive a bonus (the “Bonus”) from us if certain conditions are met. These specified conditions were never met.

On or about May 15, 2015, Employee ceased employment at the Company. More than eight months later, on or about January 20, 2016, the parties entered into a certain Stock Repurchase Agreement (the “Repurchase Agreement”) pursuant to which we purchased all of Employee’s shares of Common Stock for a purchase price of $144,000. The Repurchase Agreement also provided, among other things, that Employee released us from all claims, causes of action, suits, and demands (the “Release”).

25

Approximately two years later, in April 2018, at a time when the Company’s share price was on the rise, Employee notified us by email that it is Employee’s position that on or about May 15, 2015: (1) Employee was terminated “without cause” pursuant to Section 6.2 of the Employment Contract; or (2) Employee terminated employment with Company “for good reason” pursuant to Section 6.3 of the Employment Contract. Employee sought approximately $300,000 in allegedly unpaid bonuses, plus 150,000 options priced at $0.50 per share, which expired prior to exercise. We responded in or about April 2018 that Employee’s claims lacked factual and legal merit, including that they are barred by the Release. The lack of response from Employee at that time appeared to indicate Employee’s tacit acknowledgment and ratification of our rationale underpinning our denial of Employee’s claims. Approximately eight (8) months later in December 2018, Employee resurfaced, renewing his claims. We responded by reminding Employee we consider his claims to be without merit, and that, in any event, they are barred by the Release. In our view, the Release set forth in the Repurchase Agreement coupled with the existing merger or integration clause likely shields the Company from liability, even assuming, arguendo, that the claims could be supported by credible evidence.

We know of no other material pending legal proceedings to which we or any of our subsidiaries is a party or to which any of our assets or properties, or the assets or properties of any of our subsidiaries, are subject and, to the best of our knowledge, no adverse legal activity is anticipated or threatened. In addition, we do not know of any such proceedings contemplated by any governmental authorities.

On July 9, 2019, a purported class action complaint was filed in the United States District Court, Central District of California, styled SCOTT C. HARTMANN, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. VERB TECHNOLOGY COMPANY, INC., and RORY J. CUTAIA, Defendant, Case Number 2:19-CV-05896. As of the date of this Quarterly Report on Form 10-Q, the plaintiff has not served either defendant. The complaint purports to be a “class action complaint for violations of the Federal Securities Laws.” The allegations relate to a January 3, 2018, announcement by the Company of its agreement with Oracle America, Inc., and the purchases of and sales of securities by the named plaintiff (and, purportedly, all of the members of the yet to be established class through and including approximately May 2, 2018). The Company and Mr. Cutaia deny all allegations contained in the Complaint and, if and when served, intends to defend vigorously.

We know of no material proceedings in which any of our directors, officers, or affiliates, or any registered or beneficial stockholder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries.

Board of Directors

The Company has committed an aggregate of $270,000 in annual compensation to its three independent board members commencing on the date the Company became listed on the Nasdaq Stock Market, LLC (“Nasdaq”). The members will serve on the board of directors until the annual meeting for the year in which their term expires or until their successors have been elected and qualified.

14. SUBSEQUENT EVENTS

Issuance of Common Stock

Subsequent to June 30, 2019, the Company issued 9,716 shares of Common Stock to vendors for services rendered with a fair value of $15,000. These shares of Common Stock were valued based on the market value of the Company’s stock price at the issuance date or the date the Company entered into the agreement related to the issuance.

Grant of Stock Options

Subsequent to June 30, 2019, the Company granted stock options to an employee to purchase a total 45,167 shares of Common Stock for services rendered. The options have an exercise price of $3.13 per share, expire in five years, and vest on grant date or over a period of four years from grant date. The total fair value of these options at the grant date was $91,000 using the Black-Scholes option pricing model.

Conversion of Notes Payable

Subsequent to June 30, 2019, the Company issued 598,286, shares of restricted Common Stock and warrants to purchase up to 108,196 shares of Common Stock, with an exercise price of $3.44, upon the conversion of the aggregate principal amount notes outstanding and accrued interest thereunder of $719,000. For additional information, please see Note 8, Notes Payable, to these unaudited consolidated financial statements.

Issuance of Notes Payable

Subsequent to June 30, 2019, we issued unsecured promissory notes to an unaffiliated third-party in the aggregate principal amount of $320,000, in exchange for net proceeds of $300,000, representing an original issue discount of $20,000, which is included in the original principal amount. The note is unsecured. The note is due three business days following an equity or debt offering (or combination) in excess of One Million Dollars ($1,000,000) by the Company.

Preferred Stock and Warrant Offering

On August 14, 2019, we entered into a Securities Purchase Agreement (the “SPA”) with certain purchasers named therein (collectively, the “Preferred Purchasers”), pursuant to which we agreed to issue and sell to the Preferred Purchasers up to an aggregate of 6,000 shares of our Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and warrants (the “Warrants”) to purchase an aggregate of up to 3.87 million shares of Common Stock (an amount equivalent to the number of shares of Common Stock into which the Series A Preferred Stock is initially convertible). Each share of Series A Preferred Stock is convertible, at any time and from time to time from and after the issuance date, at the holder’s option into that number of shares of Common Stock equal to the stated value per share (or $1,000) divided by the conversion price (initially, $1.55); thus, initially, each share of Series A Preferred Stock is convertible into approximately 645 shares of Common Stock. The Warrants have an initial exercise price of $1.88 per share, subject to customary adjustments, are exercisable from and after six months after the date of issuance, and will expire five years from the date of issuance. We closed the offering on August 14, 2019, and issued 5,030 shares of Series A Preferred Stock and granted warrants to issue up to 3,245,162 shares of Common Stock in connection therewith resulting in aggregate proceeds of $5,030,000. Both the conversion price of the Series A Preferred Stock and the exercise price of the Warrants are subject to downward price adjustments in the event of certain future equity sales or rights offerings.

26

ITEM 1A – RISK FACTORS

Not applicable to smaller reporting companies.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The following discussion and analysis of the results of operations and financial condition of Verb for the three and six-month periods ended June 30, 2019 and 2018, should be read in conjunction with the financial statements and related notes and the other financial information that are included elsewhere this Quarterly Report on Form 10-Q. This discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Forward-looking statements are statements not based on historical fact and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to business decisions, are subject to change. These uncertainties and contingencies can affect actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclaim any obligation to update forward-looking statements. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” and “Verb” refer to Verb Technology Company, Inc., a Nevada corporation, individually, or as the context requires, collectively with its subsidiary, Verb Direct, on a consolidated basis, unless otherwise specified.

Overview

CMG was organized as a limited liability company under the laws of the State of Nevada on December 12, 2012. On May 19, 2014, bBooth, Inc. was incorporated under the laws of the State of Nevada. On May 19, 2014, CMG merged into bBooth, Inc. and, thereafter, bBooth, Inc. changed its name to bBooth (USA), Inc., effective October 16, 2014. The operations of CMG and bBooth (USA), Inc., became known as, and are referred to in this Quarterly Report as, “bBoothUSA.”

On October 16, 2014, bBoothUSA was acquired by GSD, pursuant to the Share Exchange Agreement entered into with GSD. GSD was incorporated in the State of Nevada on November 27, 2012. The acquisition was accounted for as a reverse merger transaction. In connection with the closing of the transactions contemplated by the Share Exchange Agreement, GSD’s management was replaced by bBoothUSA’s management, and GSD changed its name to bBooth, Inc.

Effective April 21, 2017, we changed our corporate name from bBooth, Inc. to nFüsz, Inc. The name change was effected through a parent/subsidiary short-form merger of nFüsz, Inc., our wholly-owned Nevada subsidiary, formed solely for the purpose of the name change, with and into us. We were the surviving entity. To effectuate the name-change merger, we filed Articles of Merger and a Certificate of Correction (relative to the effective date of the name-change merger) with the Secretary of State of the State of Nevada on April 4, 2017 and April 17, 2017, respectively. The name-change merger became effective on April 21, 2017. Our board of directors approved the name-change merger, which resulted in the name change on that date. In accordance with Section 92A.180 of the NRS, stockholder approval of the name-change merger was not required.

Effective February 1, 2019, we changed our corporate name from nFüsz, Inc. to Verb Technology Company, Inc. The name change was effected through a parent/subsidiary short-form merger of Verb Technology Company, Inc., our wholly-owned Nevada subsidiary, formed solely for the purpose of the name change, with and into us. We were the surviving entity. To effectuate the name-change merger, we filed Articles of Merger and a Certificate of Correction (relative to the effective date of the name-change merger) with the Secretary of State of the State of Nevada on January 31, 2019 and February 22, 2019, respectively. The name-change merger became effective on February 1, 2019. Our board of directors approved the name-change merger, which resulted in the name change on that date. In accordance with Section 92A.180 of the NRS, stockholder approval of the name-merger was not required.

27

On February 1, 2019, we implemented a 1-for-15 Reverse Stock Split of our Common Stock. The Reverse Stock Split became effective upon commencement of trading of our Common Stock on February 4, 2019. As a result of the Reverse Stock Split, every fifteen (15) shares of our pre-Reverse Stock Split Common Stock were combined and reclassified into one share of our Common Stock. The number of shares of Common Stock subject to outstanding options, warrants, and convertible securities were also reduced by a factor of fifteen (15) as of February 1, 2019. All historical share and per share amounts reflected throughout our consolidated financial statements and other financial information in this Quarterly Report on Form 10-Q have been adjusted to reflect the Reverse Stock Split. The par value per share of our Common Stock was not affected by the Reverse Stock Split.

On April 12, 2019, we completed our acquisition of Sound Concepts through a two-step merger, consisting of merging Merger Sub 1 with and into Sound Concepts, with Sound Concepts surviving the “first step” of the merger as our wholly-owned subsidiary (and the separate corporate existence of Merger Sub 1 then having ceased) and, immediately thereafter, merging Sound Concepts with and into Merger Sub 2, with Merger Sub 2 surviving the “second step” of the merger, such that, upon the conclusion of the “second step” of the merger, the separate corporate existence of Sound Concepts ceased and Merger Sub 2 continued its limited liability company existence under Utah law as the surviving entity and as our wholly-owned subsidiary. As a result of the merger, Merger Sub 2’s corporate name changed to “Verb Direct, LLC.” On the terms and subject to the conditions set forth in the Merger Agreement, at the Effective Time, each share of Sound Concepts Capital Stock issued and outstanding immediately prior to the effective time, was cancelled in exchange for cash payment by us of an aggregate of $15,000,000, and the issuance of an aggregate of 3,327,791 restricted shares of our Common Stock, with an agreed value of $10,000,000 on the pricing date, which was at or about the date on which we priced our Public Offering. The Acquisition Cash Payment was paid using a portion of the net proceeds we received as a result of our recent Public Offering of Units that closed on April 9, 2019. Pursuant to the requirements of current accounting guidance, we valued the acquisition shares at $7,820,000 on the closing date of the transaction.

We are an applications services provider, offering cloud-based business software products under the brand name “Verb” on a subscription basis. Our flagship product, Verb Go, is a CRM application that is distinguishable from other CRM programs because it utilizes our proprietary interactive video technology as the primary means of communication between sales and marketing professionals and their customers or prospects. The data collection and analytics capabilities of our application inform our users right on their device how long the prospects watched the video, how many times they watched it, and what they clicked-on. It then displays information within the application to immediately separate hot leads or interested customers from those that haven’t seen the video or otherwise expressed interest in the content. These capabilities provide for a much more efficient and effective sales process, resulting in increased sales conversion rates.

Through Verb Go, users can quickly, simply, and easily create, distribute, and post videos on social media to which they can add a choice of on-screen clickable “tags,” which are interactive icons, buttons, and other on-screen elements, that when clicked, allow their prospects and customers to respond to a users’ 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 the ability to click on a product they see featured in a video and buy it, or to click on a calendar icon in the video to make an appointment with a salesperson, among many other features and functionality. Verb Go interactive videos can be distributed via email or text messaging or posted directly to social media, and no software download is required to view the Verb interactive videos. Verb Go is available by subscription for individual and enterprise users. We developed the proprietary patent-pending interactive video technology that serves as the basis for all of our cloud, SaaS Verb applications.

Our client base consists primarily of enterprise customers in the $200 billion global direct sales industry¹, though we have begun to provide our application services on a SaaS basis to clients in other business sectors, including large professional associations such as the National Association of Health Underwriters; educational institutions, such as the Sachem School District in New York; auto leasing, such as D & M Auto Leasing, the largest auto leasing business in the country; as well as to clients in health care, and the burgeoning CBD industry, among others business sectors. Currently, we provide services to approximately 100 clients in the direct sales industry, which include Young Living Essential Oils, Isagenix International, Vasayo, Nerium International, Forever Living Products International, Seacret Spa, among many others. For the direct sales industry, our application provides recruiting tools, sales representative training, and education tools, as well as instant notification capabilities to notify users when a prospect has watched an interactive video or other content shared through our application. The application also tracks customer purchases and provides tools for corporate management to monitor field activity for tracking the effectiveness of campaigns, as well as compliance. Our application is currently in use in over 59 different countries, in 48 languages, and currently has approximately 700,000 individual users.

28

Results of Operations

Three Months Ended June 30, 2019 as Compared to the Three Months Ended June 30, 2018

The following is a comparison of our results of operations for the three months ended June 30, 2019 and 2018:

	Three Months Ended June 30, 2019			Three Months Ended June 30, 2018			Change
Revenue, net	$	3,733,000		$	8,000		$	3,725,000
Cost of revenue		2,042,000			7,000			2,035,000
Gross margin		1,691,000			1,000			1,690,000
Operating Expenses:
Research and development		1,335,000			105,000			1,230,000
Depreciation and amortization		567,000			5,000			495,000
General and administrative		3,262,000			(495,000	)		3,824,000
Total operating expenses		5,164,000			(385,000	)		5,549,000
Income / (Loss) from operations		(3,473,000	)		386,000			(3,859,000	)
Other income (expense)
Other income / (expense)		(1,000	)		1,000			(2,000	)
Financing costs		(55,000	)		-			(55,000	)
Interest expense - amortization of debt discount		(572,000	)		-			(572,000	)
Change in fair value of derivative liability		(426,000	)		1,444,000			(1,870,000	)
Gain on extinguishment of derivative liability, net		2,227,000			-			2,227,000
Interest expense		(43,000	)		(59,000	)		16,000
Total other income / (expense)		1,130,000			1,386,000			(256,000	)
Net Income / (Loss)	$	(2,343,000	)	$	1,772,000		$	(4,115,000	)

Revenues

Total revenues for the quarter ended June 30, 2019 were $3.7 million compared to $8,000 for the quarter ended June 30, 2018. The increase in revenues is attributed to sales of Verb Direct, our wholly-owned subsidiary that we acquired in April 2019. As a result of the acquisition of Verb Direct, Verb now has three revenue channels: (1) SaaS that is an interactive video CRM application, (2) welcome kits, which consists of “starter kits” for corporations to use for their marketing needs, and (3) fulfillments, which consists of various custom products used for marketing purposes at conferences and other events or sample packs ordered through the digital application. SaaS revenue for the quarter ended June 30, 2019 was $1.5 million compared to $8,000 for the quarter ended June 30, 2018. Revenue derived from welcome kits, fulfillment, and shipping for the quarter ended June 30, 2019 was $2.2 million compared to $0 for the quarter ended June 30, 2018.

Cost of Revenue

Total cost of revenue for the quarter ended June 30, 2019 was $2.0 million compared to $7,000 for the quarter ended June 30, 2018. The increase in cost of revenue is attributed to costs of Verb Direct. SaaS cost of revenue for the quarter ended June 30, 2019 was $176,000 compared to $7,000 for the quarter ended June 30, 2018. Cost of revenue derived from the welcome kits, fulfillments, and shipping for the quarter ended June 30, 2019 was $1.9 million compared to $0 for the quarter ended June 30, 2018.

29

Operating Expenses

Research and development expenses were $1.3 million for the quarter ended June 30, 2019, as compared to $105,000 for the quarter ended June 30, 2018. Research and development expenses primarily consisted of fees paid to employees and vendors contracted to perform research projects and develop technology. The increase in research and development is attributed to research and development expenses of Verb Direct and additional product development and testing to support the integration of Verb Direct plus enhancements to our core platform to facilitate native integrations with Salesforce.com, Inc. (“Salesforce.com”), Microsoft Corporation (“Microsoft”), Adobe Inc. (“Adobe”), and other channel partners.

Depreciation and amortization expense was $567,000 for the quarter ended June 30, 2019, as compared to $5,000 for the quarter ended June 30, 2018. The increase was associated with the $495,000 of amortization related to the intangible asset recorded as part of the acquisition of Verb Direct in April 2019 plus other depreciation and amortization attributed to Verb Direct.

General and administrative expenses for the quarter ended June 30, 2019 were $3.3 million as compared to ($495,000) for the quarter ended June 30, 2018. The increase to general and administrative expenses is related to an increase in stock compensation expense of $2.4 million, general and administration expenses attributed to Verb Direct of $1.0 million, an increase in labor to support growth of $323,000, and an increase in recruiting expense of $70,000. General and administrative expenses for the quarter ended June 30, 2018 were primarily attributed to a contra expense in stock-based compensation expense of $1.2 million. The credit in stock-based compensation was attributed to the prior year revaluation of our consultants’ unvested restricted stock and stock options.

Other income / (expense), net, for the quarter ended June 30, 2019 equaled $1.1 million, which represented a gain on extinguishment of derivative liability of $2.2 million, offset by interest expense for amortization of debt discount of ($572,000), a change in the fair value of derivative liability of ($426,000), financing costs of ($55,000), interest expense of ($43,000), and other expense of ($1,000). Other income, net, for the quarter ended June 30, 2018 equaled $1.4 million, which represented a change in the fair value of derivative liability of $1.4 million plus other income of $1,000, offset by interest expense of ($59,000).

30

Six Months Ended June 30, 2019 as Compared to the Six Months Ended June 30, 2018

The following is a comparison of our results of operations for the six months ended June 30, 2019 and 2018:

	Six Months Ended June 30, 2019			Six Months Ended June 30, 2018			Change
Revenue, net	$	3,742,000		$	16,000		$	3,726,000
Cost of revenue		2,072,000			8,000			2,064,000
Gross margin		1,670,000			8,000			1,662,000
Operating Expenses:
Research and development		1,899,000			236,000			1,663,000
Depreciation and amortization		570,000			10,000			560,000
General and administrative		5,448,000			4,769,000			679,000
Total operating expenses		7,917,000			5,015,000			2,902,000
Income / (Loss) from operations		(6,247,000	)		(5,007,000	)		(1,240,000	)
Other income (expense)
Other income / (expense)		(1,000	)		(4,000	)		3,000
Financing costs		(139,000	)		(172,000	)		33,000
Interest expense - amortization of debt discount		(1,626,000	)		(748,000	)		(878,000	)
Change in fair value of derivative liability		518,000			(1,181,000	)		1,699,000
Gain on extinguishment of derivative liability, net		2,227,000			652,000			1,575,000
Interest expense		(83,000	)		(263,000	)		180,000
Total other income / (expense)		896,000			(1,716,000	)		2,612,000
Net Income / (Loss)	$	(5,351,000	)	$	(6,723,000	)	$	1,372,000

Revenues

Total revenues for the six months ended June 30, 2019 were $3.7 million compared to $16,000 for the six months ended June 30, 2019. The increase in revenues is attributed to revenues generated by Verb Direct, our wholly-owned subsidiary that we acquired in April 2019. As a result of the acquisition, Verb now has three revenue channels: (1) SaaS that is an interactive video CRM application; (2) welcome kits, which consists of “starter kits” for corporations to use for their marketing needs; and (3) fulfillments, which consists of various custom products used for marketing purposes at conferences and other events or sample packs ordered through the digital application. SaaS revenue for the six months ended June 30, 2019 was $1.5 million compared to $16,000 for the six months ended June 30, 2018. Revenue derived from welcome kits, fulfillments, and shipping for the six months ended June 30, 2019 was $2.2 million compared to $0 for the six months ended June 30, 2018.

Cost of Revenue

Total cost of revenue for the six months ended June 30, 2019 was $2.1 million compared to $16,000 for the six months ended June 30, 2018. The increase in cost of revenue is attributed to cost of revenues of Verb Direct. SaaS cost of revenue for the six months ended June 30, 2019 was $206,000 compared to $8,000 for the six months ended June 30, 2018. Cost of revenue for the welcome kits, Fulfillment, and shipping for the quarter ended June 30, 2019 was $1.9 million compared to $0 for the six months ended June 30, 2018.

31

Operating Expenses

Research and development expenses were $1.9 million for the six months ended June 30, 2019, as compared to $236,000 for the six months ended June 30, 2018. Research and development expenses primarily consisted of fees paid to employees and vendors contracted to perform research projects and develop technology. The increase in research and development is attributed to research and development expenses of Verb Direct and additional product development and testing to support the integration of Verb Direct plus enhancements to our core platform to facilitate native integrations with Salesforce, Microsoft, Adobe, and other channel partners.

Depreciation and amortization expense was $570,000 for the six months ended June 30, 2019, as compared to $10,000 for the six months ended June 30, 2018. The increase was associated with the $495,000 of amortization related the intangible asset recorded as part of the acquisition of Verb Direct, in addition to depreciation and amortization for Verb Direct for the six months ended June 30, 2019.

General and administrative expenses for the six months ended June 30, 2019 were $5.4 million as compared to $4.8 million for the six months ended June 30, 2018. The increase to general and administrative expenses is related to the inclusion of general and administration expenses of Verb Direct, which totaled $1.0 million, an increase in professional services of $673,000 related to the up-listing of our Common Stock and warrants to Nasdaq, the acquisition of Verb Direct, and an increase in labor to support growth of $494,000, all offset by a decrease in stock compensation expense of $1.4 million.

Other income / (expense), net, for the six months ended June 30, 2019 equaled $896,000, which represented a gain on extinguishment of derivative liability of $2.2 million and a change in the fair value of derivative liability of $518,000, offset by interest expense for amortization of debt discount of ($1.6 million), financing costs of ($139,000), and interest expense of ($83,000) and other expense of ($1,000). Other income / (expense), net, for the six months ended June 30, 2018 equaled $1.7 million, which represented a change in the fair value of derivative liability of ($1.2 million), interest expense for amortization of debt discount of ($748,000), interest expense of ($263,000), financing costs of ($172,000), other expense of ($4,000), offset by a gain on extinguishment of derivative liability of $652,000.

Modified EBITDA

In addition to our GAAP results, we present modified EBITDA as a supplemental measure of our performance. However, modified EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of liquidity. We define modified EBITDA as net income (loss), plus interest expense, depreciation and amortization, stock-based compensation, financing costs and changes in fair value of derivative liability.

Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations that period. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. Readers are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating modified EBITDA, readers should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of modified EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

32

	For the Three Months Ended						For the Six Months Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
Net loss	$	(2,343,000	)	$	1,772,000			(5,351,000	)	$	(6,723,000	)
Adjustments:
Other (income) / expense		1,000			(1,000	)		1,000			(4,000	)
Stock compensation expense		1,236,000			(1,154,000	)		2,087,000			3,457,000
Financing costs		55,000			-			139,000			172,000
Amortization of debt discount		572,000			-			1,626,000			748,000
Change in fair value of derivative liability		426,000			(1,444,000	)		(518,000	)		1,181,000
Debt extinguishment, net		(2,227,000	)		-			(2,227,000	)		(652,000	)
Interest expense		43,000			59,000			83,000			263,000
Depreciation		7,000			5,000			13,000			10,000
Amortization of intangible assets		495,000			-			495,000			-
Total EBITDA adjustments		608,000			(2,535,000	)		1,699,000			5,175,000
Modified EBITDA	$	(1,735,000	)	$	(763,000	)		(3,652,000	)	$	(1,548,000	)

The $972,000 decrease in modified EBITDA for the three months ended June 30, 2019 compared to the same period in 2018, resulted from the increase in labor-related costs and professional services associated with our growth and the acquisition of Verb Direct.

The $2.1 million decrease in modified EBITDA for the six months ended June 30, 2019 compared to the same period in 2018, resulted from the increase in professional services and business-related expenses related to the up-listing our Common Stock and the warrants to Nasdaq, the acquisition of Verb Direct, and an increase in labor-related costs.

We present modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use modified EBITDA in developing our internal budgets, forecasts and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; and in making compensation decisions and in communications with our board of directors concerning our financial performance. Modified EBITDA has limitations as an analytical tool, which includes, among others, the following:

● Modified EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

● Modified EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

● Modified EBITDA does not reflect future interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and

● Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and the Modified EBITDA does not reflect any cash requirements for such replacements.

Liquidity and Capital Resources

Going Concern

We have incurred operating losses and negative cash flows from operations since inception. We incurred a net loss of $5.4 million during the six months ended June 30, 2019. We also utilized cash in operations of $3.5 million during the six months ended June 30, 2019. As a result, our continuation as a going concern is dependent on our ability to obtain additional financing until we can generate sufficient cash flows from operations to meet our obligations. We intend to continue to seek additional debt or equity financing to continue our operations.

33

Our consolidated financial statements have been prepared on a going concern basis, which implies we may not continue to meet our obligations and continue our operations for the next fiscal year. The continuation of our Company as a going concern is dependent upon our ability to obtain necessary debt or equity financing to continue operations until our Company begins generating positive cash flow.

There is 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. The 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.

Overview

As of June 30, 2019, we had cash of $412,000. We estimate our operating expenses for the next three months may continue to exceed any revenues we generate, and we may need to raise capital through either debt or equity offerings to continue operations. We are in the early stages of our business. We are required to fund growth from financing activities, and we intend to rely on a combination of equity and debt financings. Due to market conditions and the early stage of our operations, there is considerable risk that we will not be able to raise such financings at all, or on terms that are not dilutive to our existing stockholders. We can offer no assurance that we will be able to raise such funds. If we are unable to raise the funds we require for all of our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer, and we may be forced to reduce or discontinue operations.

In April 2019, we closed our Public Offering that provided the Company with gross proceeds of approximately $20,500,000 before deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company. The proceeds were used to pay the Acquisition Cash Payment of $15,000,000 in connection with the acquisition of Sound Concepts (now, Verb Direct), pay principal and interest amounts outstanding under convertible debt in the amount of $2,025,000, pay commissions and other offering expenses related to the Public Offering in the amount of $2,100,000, and pay other operating expenses.

On August 14, 2019, we entered into a Securities Purchase Agreement (the “SPA”) with certain purchasers named therein (collectively, the “Preferred Purchasers”), pursuant to which we agreed to issue and sell to the Preferred Purchasers up to an aggregate of 6,000 shares of our Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and warrants (the “Warrants”) to purchase an aggregate of up to 3.87 million shares of Common Stock (an amount equivalent to the number of shares of Common Stock into which the Series A Preferred Stock is initially convertible). Each share of Series A Preferred Stock is convertible, at any time and from time to time from and after the issuance date, at the holder’s option into that number of shares of Common Stock equal to the stated value per share (or $1,000) divided by the conversion price (initially, $1.55); thus, initially, each share of Series A Preferred Stock is convertible into approximately 645 shares of Common Stock. The Warrants have an initial exercise price of $1.88 per share, subject to customary adjustments, are exercisable from and after six months after the date of issuance, and will expire five years from the date of issuance. We closed the offering on August 14, 2019, and issued 5,030 shares of Series A Preferred Stock and granted warrants to issue up to 3,245,162 shares of Common Stock in connection therewith. We received gross proceeds equal to $5,030,000.

Subsequent to June 30, 2019, the Company closed unsecured debt financing totaling $300,000. The proceeds were used for working capital.

34

Cash Flows – Operating

For the six months ended June 30, 2019, our cash flows used in operating activities amounted to $3.5 million, compared to cash used for the six months ended June 30, 2018 of $1.9 million. The change is due to costs associated with the up-listing of our Common Stock and the listing of our warrants to Nasdaq, the acquisition of Verb Direct, and the growth of the business, which resulted in additional professional services, salary, and various operating expenses totaling $1.6 million for the six months ended June 30, 2019, compared to the six months ended June 30, 2018. The increase in business activity was offset by an increase in accounts payable of $829,000.

Cash Flows – Investing

For the six months ended June 30, 2019, our cash flows used in investing activities amounted to $14.4 million, compared to cash provided in investing activities for the six months ended June 30, 2018 of $0. The change is attributed to the Acquisition Cash Payment of $15 million paid for Verb Direct offset by Verb Direct’s cash on hand at the time of acquisition of $557,000.

Cash Flows – Financing

Our cash provided by financing activities for the six months ended June 30, 2019 amounted to $17.8 million, which represented $18.6 million of net proceeds from the issuance of shares of our Common Stock, $1.0 million of proceeds from notes payable, $432,000 of proceeds from the issuance of convertible debt, $58,000 of unsecured related party debt, $45,000 of proceeds from warrant exercises, partially offset by $2.0 million paid in connection with convertible notes outstanding, $311,000 paid in connection with notes outstanding, and $58,000 paid in connection with related party notes outstanding. Our cash provided by financing activities for the six months ended June 30, 2018 amounted to $3.3 million, which represented $3.0 million of proceeds received from the issuances of shares of our Common Stock, $1.0 million of proceeds from the issuance of shares of our Common Stock from the exercise of a put option, $130,000 of proceeds from the issuance of convertible debt, and $22,000 of proceeds from the exercise of warrants, partially offset by $845,000 paid in connection with convertible notes outstanding.

Notes Payable – Related Parties

The Company has the following outstanding notes payable to related parties at June 30, 2019 that are due in the current year:

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2019
Note 1 (A)	December 1, 2015	February 8, 2021		12.0	%	$	1,249,000	$	825,000
Note 2 (B)	December 1, 2015	April 1, 2017		12.0	%		112,000		112,000
Note 3 (C)	April 4, 2016	June 4, 2021		12.0	%		343,000		170,000
Total notes payable – related parties									1,177,000
Non-current									(1,065,000	)
Current								$	112,000

(A)	On December 1, 2015, the Company issued a convertible note payable to Rory J. Cutaia, the Company’s Chief Executive Officer and then-majority stockholder, to consolidate all loans and advances made by Mr. Cutaia to the Company as of that date. The note bears interest at a rate of 12% per annum, is secured by the Company’s assets, and will mature on February 8, 2021, as amended.
(B)	On December 1, 2015, the Company issued a note payable to a former member of the Company’s board of directors, in the amount of $112,000 representing unpaid consulting fees as of November 30, 2015. The note is unsecured, bears interest rate of 12% per annum, and matured in April 2017. As of June 30, 2019, the outstanding principal balance of the note was equal to $112,000.
(C)	On April 4, 2016, the Company issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. The note, as amended, bears interest at a rate of 12% per annum, is secured by the Company’s assets, and will mature on June 4, 2021.

35

Notes Payable

The Company has the following outstanding convertible notes payable June 30, 2019:

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2019
Note 1 (A)	March 29, 2019	July 10, 2019		5.0	%	$	53,000	$	53,000
Note 2 (B)	April 2, 2019	July 10, 2019		5.0	%		53,000		157,000
Note 3 (C)	April 30, 2019	April 29, 2020		5.0	%		500,000		500,000
Total notes payable – related parties									710,000
Debt discount									(1,000	)
Total notes payable, net of debt discount								$	709,000

(A)	On March 29, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $53,000, in exchange for net proceeds of $50,000, representing an original issue discount of $3,000, which is included in the original principal amount. The note was unsecured and bore interest on the principal amount at a rate of 5% per annum. The note was due on demand at any time after July 10, 2019. On July 10, 2019, the Company and the note holder entered into an amendment, pursuant to which, on July 10, 2019, the outstanding principal amount and all accrued but unpaid interest was converted into 27,018 shares of Common Stock and warrants to purchase up to 27,018 shares of Common Stock at an exercise price of $3.44 per share.
(B)	On April 2, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $157,000, in exchange for net proceeds of $150,000, representing an original issue discount of $7,000, which is included in the original principal amount. The note was unsecured and bore interest on the principal amount at a rate of 5% per annum. The note was due on demand at any time after July 10, 2019. On July 10, 2019, the Company and the note holder entered into an amendment, pursuant to which, on July 10, 2019, the outstanding principal amount and all accrued but unpaid interest was converted into 81,178 shares of Common Stock and warrants to purchase up to 81,178 shares of Common Stock at an exercise price of $3.44 per share.
(C)	On April 30, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $500,000, in exchange for net proceeds of $500,000. The note was unsecured and bore interest on the principal amount at a rate of 5% per annum. The note was due on April 29, 2020. On July 29, 2019, the Company and the note holder entered into an amendment pursuant to which, on July 29,2019, the outstanding principal amount and all accrued but unpaid interest was converted into 490,090 shares of Common Stock.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Contractual Obligations

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are not required to provide the information under this Item.

Critical Accounting Policies

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require that we make certain assumptions and estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses during each reporting period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Significant estimates include valuation of derivative liability, valuation of debt and equity instruments, share-based compensation arrangements, and realization of deferred tax assets. Amounts could materially change in the future.

36

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

The Company uses Level 3 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using a probability weighted average Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

Share-Based Payments

The Company issues stock options, Common Stock, and equity interests as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation to employees in accordance with FASB ASC 718 “Compensation – Stock Compensation.” Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period.

In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for employee share-based compensation. ASU 2018-07 is required to be adopted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU2018-07 on January 1, 2019. The adoption of this guidance did not have a material impact on our consolidated financial statements.

The Company values stock compensation based on the market price on the measurement date.

The Company values stock options using the Black-Scholes option pricing model. Assumptions used in the Black-Scholes model to value options issued during the six months ended June 30, 2019 and 2018 are as follows:

	Six Months Ended June 30,
	2019			2018
Risk-free interest rate		1.91 - 2.75	%		2.25 – 2.85	%
Average expected term (years)		5 years			5 years
Expected volatility		201.3 -241.7	%		184.5 – 190.2	%
Expected dividend yield		-			-

The risk-free interest rate is based on rates established by the Federal Reserve Bank. The expected term represents the weighted-average period of time that share option awards are expected to be outstanding giving consideration to vesting schedules and historical participant exercise before. The Company uses the historical volatility of its Common Stock to estimate the future volatility for its Common Stock. The expected dividend yield is based on the fact that the Company has not customarily paid dividends in the past and does not expect to pay dividends in the future.

Goodwill

In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, the Company reviews the recoverability of the carrying value of goodwill at least annually or whenever events or circumstances indicate a potential impairment. The Company’s impairment testing will be done annually at December 31 (its fiscal year end). Recoverability of goodwill is determined by comparing the fair value of Company’s reporting units to the carrying value of the underlying net assets in the reporting units. If the fair value of a reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities.

Intangible Assets with Finite Useful Lives

We have certain finite lived intangible assets that were initially recorded at their fair value at the time of acquisition. These intangible assets consist of developed technology. Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful life of five years.

We review all finite lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, we recognize an impairment loss for the excess carrying value over the fair value in our consolidated statements of operations.

37

Recently Issued Accounting Pronouncements

For a summary of our recent accounting policies, refer to Note 2 of our unaudited condensed consolidated financial statements included under Item 1 – Financial Statements in this Form 10-Q.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

We carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d- 15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as June 30, 2019.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the six months ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

On April 24, 2018, EMA, commenced an action against us, styled EMA Financial, LLC, a New York limited liability company, Plaintiff, against nFUSZ, Inc., Defendant, United States District Court, Southern District of New York, case number 1:18-cv-03634-NRB. The Complaint sets forth four causes of action and seeks relief consisting of: (1) money damages, (2) injunctive relief, (3) liquidated damages, and (4) declaratory relief. All of the claims stem from our refusal to honor EMA’s exercise notice in connection with a common stock purchase warrant that we had granted to it. We believe EMA’s allegations are entirely without merit.

The circumstances giving rise to the dispute are as follows: on or about December 5, 2017, we issued a warrant to EMA as part of the consideration we were required to provide in connection with a contemporaneous convertible loan EMA made to us. The loan, which was evidenced by a convertible note, was for a term of one year. Our refusal to honor the warrant exercise notice was due to our good faith belief that EMA’s interpretation of the cashless exercise provision of the warrant was, inter alia, (1) contrary to our direct conversations and agreements made with EMA prior to, and during the preparation of the loan and warrant agreements; (2) contradictory to the plain language on the face and body of the warrant agreement drafted by EMA; (3) wholly inconsistent with industry norms, standards, and practices; (4) was contrary to the cashless exercise method actually adopted by EMA’s co-lender in the same transaction; and (5) was the result of a single letter mistakenly transposed in the cashless exercise formula drafted by EMA which if adopted, would result in a gross and unintended windfall in favor of EMA and adverse to us. Moreover, as set forth in our response to EMA’s allegations, EMA’s interpretation of the cashless exercise provision would have resulted in it being issued more shares of our Common Stock than it would have received if it exercised the warrant for cash (instead of less), and more than the amount of shares reflected on the face of the warrant agreement itself. The loan underlying the transaction was repaid, in full, approximately three months after it was issued, on March 8, 2018, together with all accrued interest, prior to any conversion or attempted conversion of the note.

38

On July 20, 2018, we filed an Answer to the Complaint, along with certain Affirmative Defenses, as well as Counterclaims seeking, inter alia, to void the entire transaction for violation of New York’s criminal usury laws and, alternatively, for reformation of the warrant conversion formula set forth in the Warrant Agreement so as to be consistent with the parties’ intent and custom and practice in the industry.

The parties have undergone depositions and exchanged document production. Discovery was scheduled to end on January 31, 2019. Neither party has requested to extend the discovery period. Notwithstanding the pending action, in December 2018, EMA attempted to exercise the warrant through the Company’s transfer agent utilizing the disputed cashless exercise formula. The transfer agent rejected EMA’s request and notified the Company who promptly filed a motion for a preliminary injunction to enjoin EMA from making any further attempts to exercise the warrant in this manner during the pendency of the action. The Company is awaiting a decision from the Court on its preliminary injunction motion. As of the date of this Quarterly Report on Form 10-Q, the Court has not ruled on our motion. We intend to vigorously defend the action, as well as vigorously prosecute our counterclaims against EMA. The action is still pending.

In August 2014, the Employee entered into the Employment Contract with bBooth, Inc., our predecessor company. Section 3.1 of the Employment Contract provided, among other things, that Employee was employed to serve as our President and reported directly to Rory Cutaia, our Chief Executive Officer. Section 5.2 of Employment Contract provides, among other things, that Employee was entitled to receive the Bonus from us if certain conditions are met. These specified conditions were never met.

On or about May 15, 2015, Employee ceased employment at the Company. More than eight months later, on or about January 20, 2016, the parties entered into a certain Repurchase Agreement pursuant to which we purchased all of Employee’s shares of Common Stock for a purchase price of $144,000. The Repurchase Agreement also provided, among other things, that Employee released us from all claims, causes of action, suits, and demands.

Approximately two years later, in April 2018, at a time when the Company’s share price was on the rise, Employee notified us by email that it is Employee’s position that on or about May 15, 2015: (1) Employee was terminated “without cause” pursuant to Section 6.2 of the Employment Contract; or (2) Employee terminated employment with Company “for good reason” pursuant to Section 6.3 of the Employment Contract. Employee sought approximately $300,000 in allegedly unpaid bonuses, plus 150,000 options priced at $0.50 per share, which expired prior to exercise. We responded in or about April 2018 that Employee’s claims lacked factual and legal merit, including that they are barred by the Release. The lack of response from Employee at that time appeared to indicate Employee’s tacit acknowledgment and ratification of our rationale underpinning our denial of Employee’s claims. Approximately eight (8) months later in December 2018, Employee resurfaced, renewing his claims. We responded by reminding Employee we consider his claims to be without merit, and that, in any event, they are barred by the Release. In our view, the Release set forth in the Repurchase Agreement coupled with the existing merger or integration clause likely shields the Company from liability, even assuming, arguendo, that the claims could be supported by credible evidence.

We know of no other material pending legal proceedings to which we or any of our subsidiaries is a party or to which any of our assets or properties, or the assets or properties of any of our subsidiaries, are subject and, to the best of our knowledge, no adverse legal activity is anticipated or threatened. In addition, we do not know of any such proceedings contemplated by any governmental authorities.

On July 9, 2019, a purported class action complaint was filed in the United States District Court, Central District of California, styled Scott C. Hartmann, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. Verb Technology Company, Inc., and Rory J. Cutaia, Defendant, Case Number 2:19-CV-05896. As of the date of this Quarterly Report on Form 10-Q, plaintiff has not served either defendant. The complaint purports to be a “class action complaint for violations of the Federal Securities Laws.” The allegations relate to a January 3, 2018, announcement by the Company of its agreement with Oracle America, Inc., and the purchases of and sales of securities by the named plaintiff (and, purportedly, all of the members of the yet to be established class through and including approximately May 2, 2018). The Company and Mr. Cutaia deny all allegations contained in the complaint and, if and when served, intends to defend vigorously.

We know of no material proceedings in which any of our directors, officers, or affiliates, or any registered or beneficial stockholder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries.

39

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Common Stock

Shares Issued for the Acquisition of Verb Direct

On April 12, 2019, we completed our acquisition of Sound Concepts pursuant to the Merger Agreement, by and among Sound Concepts, Merger Sub 1, Merger Sub 2, the Shareholders, the shareholders’ representative, and us. Pursuant to the Merger Agreement, we acquired Sound Concepts through a two-step merger, consisting of merging Merger 1 Sub with and into Sound Concepts, with Sound Concepts surviving the “first step” of the merger as our wholly-owned subsidiary (and the separate corporate existence of Merger Sub 1 then having ceased) and, immediately thereafter, merging Sound Concepts with and into Merger Sub 2, with Merger Sub 2 surviving the “second step” of the merger, such that, upon the conclusion of the “second step” of the merger, the separate corporate existence of Sound Concepts ceased and Merger Sub 2 continued its limited liability company existence under Utah law as the surviving entity and as our wholly-owned subsidiary under the name Verb Direct. On the terms and subject to the conditions set forth in the Merger Agreement, at the effective Time, each share of Sound Concepts Capital Stock, was cancelled in exchange for cash payment by us of an aggregate of $15,000,000, and the issuance of an aggregate of 3,327,791 restricted shares of our Common Stock. The Acquisition Cash Payment was paid using a portion of the net proceeds we received as a result of our Public Offering of Units that closed on April 9, 2019.

Shares Issued for Services – During the six months ended June 30, 2019, the Company issued 197,810 shares of Common Stock to vendors for services rendered with a fair value of $728,000. Issuance date or the date the Company entered into the agreement related to the issuance.

Shares Issued Upon Issuance of Convertible Note – During the six months ended, the Company granted a note holder 25,272 shares of Common Stock with a fair value of $182,000 as an inducement for the issuance of a note payable. For additional information, please see Note 10, Convertible Notes Payable, to the unaudited consolidated financial statements.

Conversion of Notes Payable – During the six months ended June 30, 2019, the Company issued 182,333 shares of Common Stock upon conversion of notes payable and accrued interest of $410,000. See Note 10, Convertible Notes Payable, to the unaudited consolidated financial statements.

Conversion of Accounts Payable - On April 30, 2019, the Company converted accounts payable of $10,000 into 4,142 shares of Common Stock with a fair value of $10,000 at the date of conversion.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 - MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 - OTHER INFORMATION

On August 14, 2019, we entered into the SPA with the Preferred Purchasers, pursuant to which we agreed to issue and sell to the Preferred Purchasers up to an aggregate of 6,000 shares of Series A Preferred Stock (which, at the initial conversion price, are convertible into an aggregate of up to approximately 3.87 million shares of Common Stock) and Warrants to purchase up to an equivalent number of shares of Common Stock. We closed the offering on August 14, 2019, and issued 5,030 shares of Series A Preferred Stock and granted warrants to issue up to 3,245,162 shares of Common Stock in connection therewith. We received gross proceeds equal to $5,030,000. The offering was made in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, and Rule 506 promulgated thereunder, as a transaction by an issuer not involving any public offering.

The SPA grants the Preferred Purchasers a right to participate, up to a certain amount, in subsequent financings for a period of 24 months. The SPA also prohibits us from entering into any agreement to issue, or announcing the issuance or proposed issuance, of any shares of Common Stock or Common Stock equivalents for a period of 90 days after the date that the registration statement, registering the shares issuable upon conversion of the Series A Preferred Stock and exercise of the Warrants, is declared effective. We are also prohibited, until the date that the Preferred Purchasers no longer collectively hold at least 20% of the then-outstanding shares of Series A Preferred Stock issued pursuant to the SPA, from entering into an agreement to effect any issuance by us of Common Stock or Common Stock equivalents involving certain variable rate transactions. We also cannot enter into agreements related to “at-the-market” transactions for a period of 12 months. At the later of (i) the date that the Warrants are fully exercised, and (ii) 12 months from the date of the SPA, we cannot draw down on any existing or future agreement with respect to “at-the-market” transactions if the sale of the shares in such transactions has a per share purchase price that is less than $3.76 (two times the exercise price of the Warrants).

We have agreed to file a Registration Statement on Form S-1 with the SEC within 30 days after the closing date to register the shares of Common Stock underlying the Series A Preferred Stock and the Warrants and, once effective, to keep such Registration Statement continuously effective for a period of 24 months.

Each share of Series A Preferred Stock is convertible, at any time and from time to time from and after the issuance date, at the holder’s option in to that number of shares of Common Stock equal to the stated value per share (or $1,000) divided by the conversion price (initially, $1.55); thus, initially, each share of Series A Preferred Stock is convertible into approximately 645 shares of Common Stock. In certain circumstances, the Series A Preferred Stock is mandatorily convertible into shares of Common Stock after the Company obtains stockholder approval to issue a number of shares of Common Stock in excess of 19.99% and the closing price of the Common Stock is 100% greater than the then-base conversion price on each trading day for any 20 trading days during a consecutive 30-trading-day period.

The holders of the Series A Preferred Stock have no voting rights. However, we cannot, without the affirmative vote of the holders of a majority of the then-outstanding shares of the Series A Preferred Stock, (a) alter or change adversely the rights, preferences, or restrictions given to the Series A Preferred Stock or alter or amend the Certificate of Designation, (b) authorize or create any class of stock ranking as to dividends, redemption, or distribution of assets upon a liquidation senior to, or otherwise pari passu with, the Series A Preferred Stock, (c) amend our Articles of Incorporation, or other charter documents in any manner that materially and adversely affects any rights of the holders, (d) increase the number of authorized shares of Series A Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.

The holders of Series A Preferred Stock cannot convert the Series A Preferred Stock if, after giving effect to the conversion, the number of shares of our Common Stock beneficially held by the holder (together with such holder’s affiliates) would be in excess of 4.99% (or, upon election by a holder prior to the issuance of any shares, 9.99% of the number of shares of Common Stock issued and outstanding immediately after giving effect to the issuance of any shares of Common Stock issuance upon conversion of the Series A Preferred Stock held by the holder). The conversion price of the Series A Preferred Stock is subject to certain customary adjustments, including upon certain subsequent equity sales and rights offerings.

The Warrants have an initial exercise price of $1.88 per share, subject to customary adjustments, are exercisable six months after the date of issuance, and will expire five years from the date of issuance. The exercise price is subject to certain customary adjustments, including upon certain subsequent equity sales and rights offerings.

We are also prevented from issuing shares of Common Stock upon conversion of the Series A Preferred Stock or exercise of the Warrants, which, when aggregated with any shares of Common Stock issued on or after the issuance date and prior to such conversion date or exercise date, as applicable (i) in connection with any conversion of the Series A Preferred Stock issued pursuant to the SPA, (ii) in connection with the exercise of any Warrants issued pursuant to the SPA, and (iii) in connection with the exercise of any warrants issued to any registered broker-dealer as a fee in connection with the issuance of the securities pursuant to the SPA, would exceed 4,459,725 shares of Common Stock (the “19.99% Cap”). This prohibition will terminate upon the approval by our stockholders of a release from such 19.99% Cap.

The foregoing descriptions of the SPA, Series A Preferred Stock, and the Warrants are qualified in their entirety by reference to each of the SPA, the Certificate of Designation of Rights, Preferences, and Restrictions of Series A Convertible Preferred Stock, and form of the Warrants, a copy of each of which is filed as an exhibit to this Quarterly Report on Form 10-Q.

40

ITEM 6 - EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into this Report:

Exhibit No.	Description
2.1	Share Exchange Agreement dated as of August 11, 2014 by and among Global System Designs, Inc., bBooth (USA), Inc. (formerly bBooth, Inc.), and the stockholders of bBooth (USA), Inc. (formerly bBooth, Inc.), which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on August 15, 2014, and is incorporated herein by reference thereto.
3.1	Articles of Incorporation as filed with the Secretary of State of the State of Nevada on November 27, 2012, which was filed as Exhibit 3.1 to our Registration Statement on Form S-1 (File No. 333-187782) filed with the SEC on April 8, 2013, and is incorporated herein by reference thereto.
3.2	Bylaws, which were filed as Exhibit 3.2 to our Registration Statement on Form S-1 (File No. 333-187782) filed with the SEC on April 8, 2013, and is incorporated herein by reference thereto.
3.3	Certificate of Change as filed with the Secretary of State of the State of Nevada on October 6, 2014, which was filed as Exhibit 3.3 to our Current Report on Form 8-K filed with the SEC on October 22, 2014, and is incorporated herein by reference thereto.
3.4	Articles of Merger as filed with the Secretary of State of the State of Nevada on October 6, 2014, which was filed as Exhibit 3.4 to our Current Report on Form 8-K filed with the SEC on October 22, 2014, and is incorporated herein by reference thereto.
3.5	Articles of Merger as filed with the Secretary of State of the State of Nevada on April 4, 2017, which was filed as Exhibit 3.5 to our Current Report on Form 8-K filed with the SEC on April 24, 2017, and is incorporated herein by reference thereto.
3.6	Certificate of Correction as filed with the Secretary of State of the State of Nevada on April 17, 2017, which was filed as Exhibit 3.6 to our Current Report on Form 8-K filed with the SEC on April 24, 2017, and is incorporated herein by reference thereto.
3.7	Certificate of Change as filed with the Secretary of State of the State of Nevada on February 1, 2019, which was filed as Exhibit 3.7 to our Annual Report on Form 10-K filed with the SEC on February 7, 2019, and is incorporated herein by reference thereto.
3.8	Articles of Merger as filed with the Secretary of State of the State of Nevada on January 31, 2019, which was filed as Exhibit 3.8 to our Annual Report on Form 10-K filed with the SEC on February 7, 2019, and is incorporated herein by reference thereto.
3.9	Certificate of Correction as filed with the Secretary of State of the State of Nevada on February 22, 2019, which was filed as Exhibit 3.9 to Amendment No. 4 to our Registration Statement on Form S-1 (File No. 333-226840) filed with the SEC on March 14, 2019, and is incorporated herein by reference thereto.
3.10	Articles of Merger of Sound Concepts, Inc. with and into NF Merger Sub, Inc. as filed with the Utah Division of Corporations and Commercial Code on April 12, 2019, which was filed as Exhibit 3.10 to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2019, and is incorporated herein by reference thereto.
3.11	Statement of Merger of Verb Direct, Inc., a Utah corporation with and into NF Acquisition Company, LLC as filed with the Utah Division of Corporations and Commercial Code on
3.12*	Certificate of Designation of Rights, Preferences, and Restrictions of Series A Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on August 12, 2019.
4.1	Common Stock Purchase Warrant (First Warrant) dated September 15, 2017, issued to Kodiak Capital Group, LLC, which was filed as Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on October 2, 2017, and is incorporated herein by reference thereto.
4.2	Common Stock Purchase Warrant (Second Warrant) dated September 15, 2017, issued to Kodiak Capital Group, LLC, which was filed as Exhibit 4.2 to our Current Report on Form 8-K filed with the SEC on October 2, 2017, and is incorporated herein by reference thereto.
4.3	Common Stock Purchase Warrant (Third Warrant) dated September 15, 2017, issued to Kodiak Capital Group, LLC, which was filed as Exhibit 4.3 to our Current Report on Form 8-K filed with the SEC on October 2, 2017, and is incorporated herein by reference thereto.
4.4	Promissory Note (Commitment Note), dated September 15, 2017, issued by the Company in favor of Kodiak Capital Group, LLC, which was filed as Exhibit 4.4 to our Current Report on Form 8-K filed with the SEC on October 2, 2017, and is incorporated herein by reference thereto.
4.5	Promissory Note (First Note), dated September 15, 2017, issued by the Company in favor of Kodiak Capital Group, LLC, which was filed as Exhibit 4.5 to our Current Report on Form 8-K filed with the SEC on October 2, 2017, and is incorporated herein by reference thereto.
4.6	Promissory Note (Second Note), dated September 15, 2017, issued by the Company in favor of Kodiak Capital Group, LLC, which was filed as Exhibit 4.6 to our Current Report on Form 8-K filed with the SEC on October 2, 2017, and is incorporated herein by reference thereto.
4.7	Form of Warrant Certificate dated March 20, 2015, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on March 27, 2015, and is incorporated herein by reference thereto.
4.8	12% Secured Convertible Note dated December 1, 2015, issued by the Company in favor of Rory J. Cutaia, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on December 7, 2015, and is incorporated herein by reference thereto.
4.9	12% Unsecured Convertible Note dated December 1, 2015, issued by the Company in favor of Rory J. Cutaia, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on December 7, 2015, and is incorporated herein by reference thereto.
4.10	12% Unsecured Note dated December 1, 2015, issued by the Company in favor of Audit Prep Services, LLC, which was filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on December 7, 2015, and is incorporated herein by reference thereto.
4.11	Form of 12% Secured Convertible Note dated April 4, 2016, issued by the Company in favor of Rory J. Cutaia, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on April 11, 2016, and is incorporated herein by reference thereto.
4.12	Form of Warrant Certificate dated April 4, 2016 issued to Rory J. Cutaia, which was filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on April 11, 2016, and is incorporated herein by reference thereto.
4.13	Form of 12% Unsecured Convertible Note dated April 4, 2016, issued by the Company in favor of Rory J. Cutaia, which was filed as Exhibit 10.5 to our Current Report on Form 8-K filed with the SEC on April 11, 2016, and is incorporated herein by reference thereto.
4.14	Form of 12% Unsecured Convertible Note dated April 4, 2016, issued by the Company in favor of Oceanside Strategies, Inc., which was filed as Exhibit 10.6 to our Current Report on Form 8-K filed with the SEC on April 11, 2016, and is incorporated herein by reference thereto.
4.15	Form of Warrant Certificate dated April 4, 2016 issued to Oceanside Strategies, Inc., which was filed as Exhibit 10.7 to our Current Report on Form 8-K filed with the SEC on April 11, 2016, and is incorporated herein by reference thereto.
4.16	Amendment to 12% Unsecured Convertible Note dated December 30, 2016, issued by the Company in favor of Oceanside Strategies, Inc., which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on January 9, 2017, and is incorporated herein by reference thereto.
4.17	Warrant Certificate dated December 30, 2016 issued to Oceanside Strategies, Inc., which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on January 9, 2017, and is incorporated herein by reference thereto.

41

4.18	Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on February 13, 2017, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on February 21, 2017, and is incorporated herein by reference thereto.
4.19	Amendment to Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on July 28, 2017, which was filed as Exhibit 10.37 to our Quarterly Report on Form 10-Q filed with the SEC on August 10, 2017, and is incorporated herein by reference thereto.
4.20	8% Unsecured Convertible Note dated December 5, 2017 issued by the Company in favor of EMA Financial, LLC, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on December 14, 2017, and is incorporated herein by reference thereto.
4.21	Common Stock Purchase Warrant dated December 5, 2017 issued to EMA Financial, LLC, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on December 14, 2017, and is incorporated herein by reference thereto.
4.22	8% Unsecured Convertible Note dated December 5, 2017 issued by the Company in favor of Auctus Fund, LLC, which was filed as Exhibit 10.5 to our Current Report on Form 8-K filed with the SEC on December 14, 2017, and is incorporated herein by reference thereto.
4.23	Common Stock Purchase Warrant dated December 5, 2017 issued to Auctus Fund, LLC, which was filed as Exhibit 10.6 to our Current Report on Form 8-K filed with the SEC on December 14, 2017, and is incorporated herein by reference thereto.
4.24	8% Unsecured Convertible Note dated December 13, 2017 issued by the Company in favor of PowerUp Lending Group, LTD., which was filed as Exhibit 10.8 to our Current Report on Form 8-K filed with the SEC on December 14, 2017, and is incorporated herein by reference thereto.
4.25	8% Unsecured Convertible Note dated January 11, 2018 issued by the Company in favor of EMA Financial, LLC, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on January 26, 2018, and is incorporated herein by reference thereto.
4.26	Common Stock Purchase Warrant dated January 11, 2018 issued to EMA Financial, LLC, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on January 26, 2018, and is incorporated herein by reference thereto.
4.27	8% Unsecured Convertible Note dated January 10, 2018 issued by the Company in favor of Auctus Fund, LLC, which was filed as Exhibit 10.5 to our Current Report on Form 8-K filed with the SEC on January 26, 2018, and is incorporated herein by reference thereto.
4.28	Common Stock Purchase Warrant dated January 10, 2018 issued to Auctus Fund, LLC, which was filed as Exhibit 10.6 to our Current Report on Form 8-K filed with the SEC on January 26, 2018, and is incorporated herein by reference thereto.
4.29	Amendment to Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on September 1, 2017, which was filed as Exhibit 4.27 to our Registration Statement on Form S-1 (File No. 333-226840) filed with the SEC on August 14, 2018, and is incorporated herein by reference thereto.
4.30	Certificate of Withdrawal of Certificate of Designation of Series A Convertible Preferred Stock as filed with the Secretary of State of the State of Nevada on August 10, 2018, which was filed as Exhibit 4.28 to our Registration Statement on Form S-1 (File No. 333-226840) filed with the SEC on August 14, 2018, and is incorporated herein by reference thereto.
4.31	Convertible Promissory Note dated October 30, 2018 issued in favor of Ira Gains, which was filed as Exhibit 4.31 to our Annual Report on Form 10-K filed with the SEC on February 7, 2019, and is incorporated herein by reference thereto.
4.32	Convertible Promissory Note dated October 30, 2018 issued in favor of Gina Trippiedi, which was filed as Exhibit 4.32 to our Annual Report on Form 10-K filed with the SEC on February 7, 2019, and is incorporated herein by reference thereto.
4.33	5% Original Issue Discount Promissory Note due August 1, 2019 issued in favor of Bellridge Capital, LP, which was filed as Exhibit 4.33 to our Annual Report on Form 10-K filed with the SEC on February 7, 2019, and is incorporated herein by reference thereto.
4.34	Form of Investor Common Stock Purchase Warrant, which was filed as Exhibit 4.34 to Amendment No. 8 to our Registration Statement on Form S-1 (File No. 333-226840) filed with the SEC on April 2, 2019, and is incorporated herein by reference thereto.
4.35	Form of Underwriter’s Common Stock Purchase Warrant, which was filed as Exhibit 4.35 to Amendment No. 8 to our Registration Statement on Form S-1 (File No. 333-226840) filed with the SEC on April 2, 2019, and is incorporated herein by reference thereto.
4.36	Form of Common Stock Purchase Warrant granted in favor of A.G.P./Alliance Global Partners, which was filed as Exhibit 4.36 to Amendment No. 4 to our Registration Statement on Form S-1 (File No. 333-226840) filed with the SEC on March 14, 2019, and is incorporated herein by reference thereto.
4.37*	Form of Common Stock Purchase Warrant.
10.1	2014 Stock Option Plan, which is filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on October 22, 2014, and is incorporated herein by reference thereto.
10.2	Employment Agreement dated November 1, 2014, by and between the Company and Rory Cutaia, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on November 24, 2014, and is incorporated herein by reference thereto.

42

10.3	Secured Promissory Note dated December 11, 2014 issued by Songstagram, Inc. in favor of the Company, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on December 17, 2014, and is incorporated herein by reference thereto.
10.4	Secured Promissory Note dated December 11, 2014 issued by Rocky Wright in favor of the Company, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on December 17, 2014, and is incorporated herein by reference thereto.
10.5	Security Agreement dated December 11, 2014 executed by Songstagram, Inc. in favor of the Company, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on December 17, 2014, and is incorporated herein by reference thereto.
10.6	Security Agreement dated December 11, 2014 executed Rocky Wright in favor of the Company, which was filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on December 17, 2014, and is incorporated herein by reference thereto.
10.7	Acquisition Agreement dated January 20, 2015 among Songstagram, Inc., Rocky Wright, and us, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on January 26, 2015, and is incorporated herein by reference thereto.
10.8	Surrender of Collateral, Consent to Strict Foreclosure and Release Agreement dated January 20, 2015, by and between Songstagram, Inc. and the Company, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on January 26, 2015, and is incorporated herein by reference thereto.
10.9	Form of Termination Agreement and Release dated January 20, 2015, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on January 26, 2015, and is incorporated herein by reference thereto.
10.10	Settlement and Release Agreement dated February 6, 2015, by and among Songstagram, Inc., Jeff Franklin, and the Company, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on March 9, 2015, and is incorporated herein by reference thereto.
10.11	Engagement letter dated March 20, 2015, by and among DelMorgan Group LLC, Globalist Capital, LLC, and the Company, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on March 27, 2015, and is incorporated herein by reference thereto.
10.12	Form of Note Purchase Agreement dated March 20, 2015, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on March 27, 2015, and is incorporated herein by reference thereto.
10.13	Security Agreement issued by the Company in favor of Rory J. Cutaia, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on December 7, 2015, and is incorporated herein by reference thereto.
10.14	Form of Stock Repurchase Agreement, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on February 16, 2016, and is incorporated herein by reference thereto.
10.15	Form of Private Placement Subscription Agreement, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on April 11, 2016, and is incorporated herein by reference thereto.
10.16.	Form of Security Agreement issued by the Company in favor of Rory J. Cutaia, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on April 11, 2016, and is incorporated herein by reference thereto.
10.17	Form of Private Placement Subscription Agreement, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on May 19, 2016, and is incorporated herein by reference thereto.
10.18	Form of Option Agreement for Messrs. Geiskopf and Cutaia, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on May 19, 2016, and is incorporated herein by reference thereto.
10.19	Term Sheet dated July 12, 2016, between Nick Cannon and the Company, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on May 19, 2016, and is incorporated herein by reference thereto.
10.20	Form of Stock Option Agreement between Jeffrey R. Clayborne and the Company, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on May 19, 2016, and is incorporated herein by reference thereto.

43

10.21	Form of Consulting Agreement dated August 8, 2016, by and between International Monetary and the Company, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on August 15, 2016, and is incorporated herein by reference thereto.
10.22	Form of Private Placement Subscription Agreement, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on September 19, 2016, and is incorporated herein by reference thereto.
10.23	Securities Purchase Agreement dated February 13, 2017, by and between the Company and certain purchasers named therein, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on February 21, 2017, and is incorporated herein by reference thereto.
10.24	Equity Purchase Agreement, as corrected, dated September 15, 2017, by and between the Company and Kodiak Capital Group, LLC, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on October 27, 2017, and is incorporated herein by reference thereto.
10.25	Registration Rights Agreement dated September 15, 2017, by and between the Company and Kodiak Capital Group, LLC, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on October 2, 2017, and is incorporated herein by reference thereto.
10.26	Securities Purchase Agreement dated December 5, 2017, by and between the Company and EMA Financial, LLC, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on December 14, 2017, and is incorporated herein by reference thereto.
10.27	Securities Purchase Agreement, dated December 5, 2017, by and between the Company and Auctus Fund, LLC, which was filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on December 14, 2017, and is incorporated herein by reference thereto.
10.28	Securities Purchase Agreement dated December 13, 2017, by and between the Company and PowerUp Lending Group, LTD, which was filed as Exhibit 10.7 to our Current Report on Form 8-K filed with the SEC on December 14, 2017, and is incorporated herein by reference thereto.
10.29	Securities Purchase Agreement dated January 11, 2018, by and between the Company and EMA Financial, LLC, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on January 26, 2018, and is incorporated herein by reference thereto.
10.30	Securities Purchase Agreement, dated January 10, 2018, by and between the Company and Auctus Fund, LLC, which was filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on January 26, 2018, and is incorporated herein by reference thereto.
10.31	SuiteCloud Developer Network Agreement, dated January 2, 2018, by and between the Company and Oracle, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on April 23, 2018, and is incorporated herein by reference thereto.
10.32	Lease Agreement, dated June 22, 2017, by and between La Park La Brea B LLC and the Company, which was filed as Exhibit 10.33 to our Registration Statement on Form S-1 (File No. 333-226840) filed with the SEC on August 14, 2018, and is incorporated herein by reference thereto.
10.33	Renewal Amendment of Lease Agreement, dated May 1, 2018, by and between La Park La Brea B LLC and the Company, which was filed as Exhibit 10.34 to our Registration Statement on Form S-1 (File No. 333-226840) filed with the SEC on August 14, 2018, and is incorporated herein by reference thereto.
10.34	Adobe Marketo LaunchPoint Accelerate Program Agreement, dated April 1, 2018, by and between the Company and Adobe Marketo, which was filed as Exhibit 10.35 to our Registration Statement on Form S-1 (File No. 333-226840) filed with the SEC on August 14, 2018, and is incorporated herein by reference thereto.
10.35	Securities Purchase Agreement, dated October 19, 2018, which was filed as Exhibit 10.36 to our Current Report on Form 8-K filed with the SEC on October 25, 2018, and is incorporated herein by reference thereto.
10.36	10% Original Issue Discount Promissory Note, dated October 19, 2018, which was filed as Exhibit 10.37 to our Current Report on Form 8-K filed with the SEC on October 25, 2018, and is incorporated herein by reference thereto.
10.37	Agreement and Plan of Merger, dated November 8, 2018, by and among the Company, Sound Concepts, Inc., NF Merger Sub, Inc., NF Acquisition Company, LLC, the shareholders of Sound Concepts, Inc., and the shareholders’ representative, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on November 14, 2018, and is incorporated herein by reference thereto.

44

10.38	Letter Agreement dated November 8, 2018, by and among the Company, Sound Concepts, Inc., NF Merger Sub, Inc., NF Acquisition Company, LLC, the shareholders of Sound Concepts, Inc., and the shareholders’ representative, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on November 14, 2018, and is incorporated herein by reference thereto.
10.39	Letter Agreement dated November 12, 2018, by and among the Company, Sound Concepts, Inc., NF Merger Sub, Inc., NF Acquisition Company, LLC, the shareholders of Sound Concepts, Inc., and the shareholders’ representative, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on November 14, 2018, and is incorporated herein by reference thereto.
10.40	Securities Purchase Agreement dated February 1, 2019 by and between the Company and Bellridge, which was filed as Exhibit 10.40 to our Annual Report on Form 10-K filed with the SEC on February 7, 2019, and is incorporated herein by reference thereto.
10.41	Lock-Up Agreement dated October 30, 2018, by and between the Company and Gina Trippiedi, which was filed as Exhibit 10.41 to our Annual Report on Form 10-K filed with the SEC on February 7, 2019, and is incorporated herein by reference thereto.
10.42	Lock-Up Agreement dated October 30, 2018, by and between the Company and Ira Gaines, which was filed as Exhibit 10.42 to our Annual Report on Form 10-K filed with the SEC on February 7, 2019, and is incorporated herein by reference thereto.
10.43	Partner Application Distribution Agreement dated February 4, 2019, by and between the Company and Salesforce, which was filed as Exhibit 10.43 to our Annual Report on Form 10-K filed with the SEC on February 7, 2019, and is incorporated herein by reference thereto.
10.44	Service Agreement dated December 21, 2018, by and between the Company and Major Tom, which was filed as Exhibit 10.44 to our Annual Report on Form 10-K filed with the SEC on February 7, 2019, and is incorporated herein by reference thereto.
10.45	Lease Agreement dated February 5, 2019, by and between the Company and NPBeach Marina LLC, which was filed as Exhibit 10.45 to Amendment No. 3 to our Registration Statement on Form S-1 (File No. 333-226840) filed with the SEC on February 19, 2019, and is incorporated herein by reference thereto.
10.46	Form of Warrant Agent Agreement by and between the Company and VStock Transfer, LLC, which was filed as Exhibit 10.46 to Amendment No. 4 to our Registration Statement on Form S-1 (File No. 333-226840) filed with the SEC on March 14, 2019, and is incorporated herein by reference thereto.
10.47	Short-Term Demand Promissory Note of the Company in favor of David Martin, dated March 22, 2019, which was filed as Exhibit 10.47 to Amendment No. 8 to our Registration Statement on Form S-1 (File No. 333-226840) filed with the SEC on April 2, 2019, and is incorporated herein by reference thereto.
10.48	Short-Term Demand Promissory Note of the Company in favor of Amin Somani, dated April 2, 2019, which was filed as Exhibit 10.48 to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2019, and is incorporated herein by reference thereto.
10.49	Demand Promissory Note of the Company in favor of Adam Wolfson, dated April 30, 2019, which was filed as Exhibit 3.10 to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2019, and is incorporated herein by reference thereto.
10.50*	Short-Term Demand Promissory Note of the Company in favor of Amin Somani, dated March 29, 2019.
10.51*	Amendment to Short-Term Demand Promissory Note of the Company in favor of Amin Somani, dated July 10, 2019.
10.52*	Amendment to Short-Term Demand Promissory Note of the Company in favor of Amin Somani, dated July 10, 2019.
10.53*	Amendment to Short-Term Demand Promissory Note of the Company in favor of Adam Wolfson, dated July 29, 2019.
10.54*	First Amendment to Lease dated June 26, 2019, by and between the Company and NPBeach Marina LLC.
10.55*	Extension Letter from the Company to NPBeach Marina LLC, dated March 26, 2019.
10.56*	Securities Purchase Agreement dated August 14, 2019, between the Company and certain purchasers identified therein.
31.1*	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2*	Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to Rule 13a-14(a) of the Securities Act of 1934
32.1*	Certification of Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
32.2*	Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code

101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.

45

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	VERB TECHNOLOGY COMPANY, INC.
August 14, 2019	By:	/s/ Rory Cutaia
		Rory J. Cutaia
		President, Chief Executive Officer,
		Secretary, and Director
		(Principal Executive Officer)
August 14, 2019	By:	/s/ Jeff Clayborne
		Jeff Clayborne
		Chief Financial Officer (Principal Accounting Officer)

46

EX-3.12

 

EX-4.7

EXHIBIT C

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT

Verb technology company, Inc.

Warrant Shares: [_______]1	Initial Exercise Date: February [__], 20202
	Issue Date: August [__], 2019

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ or its assigns (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after February, [_], 2020³ (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on August [__], 2024⁴ (the “Termination Date”) but not thereafter, to subscribe for and purchase from Verb Technology Company, Inc., a Nevada corporation (the “Company”), up to [______]⁵ shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

Section 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated August 14 , 2019, among the Company and the purchasers signatory thereto.

Section 2. Exercise.

1 100% warrant coverage

2 6-month anniversary of Issue Date.

3 6-month anniversary of Issue Date.

4 Insert the date that is the 5-year anniversary of the issuance date, provided that, if such date is not a Trading Day, insert the immediately following Trading Day.

5 100% warrant coverage.

a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $1.88, subject to adjustment hereunder (the “Exercise Price”).

c) Cashless Exercise. If at any time after the six (6)-month anniversary of the Closing Date, there is no effective Registration Statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;

(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the characteristics of the Warrants being exercised, and the holding period of the Warrant Shares being issued may be tacked on to the holding period of this Warrant. The Company agrees not to take any position contrary to this Section 2(c). For the avoidance of doubt, so long as there is an effective Registration Statement registering, or current prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant may not be exercised by means of a “cashless exercise”.

“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB^® or OTCQX^® is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB^® or OTCQX^®, as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB^® or OTCQX^® and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the Common Stock is not then listed or quoted for trading on OTCQB^® or OTCQX^® and if prices for the Common Stock are then reported in the Pink Sheets^® published by OTC Markets Group Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (c) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority-in-interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

d) Mechanics of Exercise.

i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company (“DTC”) through its Deposit and Withdrawal at Custodian service (“DWAC”) if the Company is then a participant in such service and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 (assuming cashless exercise of the Warrants), and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company, and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise and the Exercise Price (other than in the case of a cashless exercise), the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000.00 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10.00 per Trading Day (increasing to $20.00 per Trading Day on the fifth (5^th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in DTC’s FAST Automated Securities Transfer Program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.

ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares that the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue by (2) the price at which the sell order giving rise to such purchase obligation was executed and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored timely or at all (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000.00 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000.00, under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000.00. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to deliver shares of Common Stock timely upon exercise of the Warrant as required pursuant to the terms hereof.

v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

vi. Charges, Taxes, and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant, when surrendered for exercise, shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to DTC (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

vii. Closing of Books. The Company will not close its stockholder books or records in any manner that prevents the timely exercise of this Warrant, pursuant to the terms hereof.

e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that, after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, the “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock that would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company, or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one (1) Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be four and 99/100^ths percent (4.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event shall exceed nine and 99/100^ths percent (9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61^st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) that may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to each successor holder of this Warrant.

(f) Issuance Limitations. Notwithstanding anything herein to the contrary, if the Company has not obtained Stockholder Approval, then the Company may not issue, upon exercise of this Warrant, a number of shares of Common Stock, which, when aggregated with any shares of Common Stock issued on or after the Issue Date and prior to such date of exercise of this Warrant (i) in connection with any exercise of Warrants issued pursuant to the Purchase Agreement, (ii) in connection with the conversion of any Preferred Stock issued pursuant to the Purchase Agreement, and (iii) in connection with the exercise of any warrants issued to any registered broker-dealer as a fee in connection with the issuance of the Securities pursuant to the Purchase Agreement, would exceed 4,459,725 shares of Common Stock (subject to adjustment for forward and reverse stock splits, recapitalizations, and the like) (such number of shares, the “Issuable Maximum”). Each Holder shall be entitled to a portion of the Issuable Maximum based on the percentage derived from the formula provided in Section 6(e) of the Certificate of Designation (as defined in the Purchase Agreement). In addition, each Holder may allocate its pro-rata portion of the Issuable Maximum among Warrants and Preferred Stock held by it in its sole discretion. Such portion shall be adjusted upward ratably in the event a Holder no longer holds any Warrants or Preferred Stock and the amount of shares issued to such Holder pursuant to such Holder’s Warrants and Preferred Stock was less than such Holder’s pro-rata share of the Issuable Maximum. For avoidance of doubt, unless and until any required Stockholder Approval is obtained and effective, warrants issued to any registered broker-dealer as a fee in connection with the Securities issued pursuant to the Purchase Agreement as described in clause (iii) above shall provide that such warrants shall not be allocated any portion of the Issuable Maximum and shall be unexercisable unless and until such Stockholder Approval is obtained and effective.

Section 3. Certain Adjustments.

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction, of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b) Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant, or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective price per share less than the Exercise Price then in effect (such lower price, the “Base Share Price”; and such issuances, collectively, a “Dilutive Issuance”) (it being understood and agreed that if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices, or otherwise, or due to warrants, options, or rights per share that are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the then-Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance at such effective price), then, simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive Issuance, the Exercise Price shall be reduced and only reduced to equal the Base Share Price (subject to adjustment for reverse and forward stock splits, recapitalizations, and similar transactions following the date of the Purchase Agreement). Notwithstanding the foregoing, no adjustments shall be made, paid, or issued under this Section 3(b) in respect of an Exempt Issuance. The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price, and other pricing terms (such notice, the “Dilutive Issuance Notice”). If the Company enters into a Variable Rate Transaction, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.

c) Subsequent Rights Offerings. If the Company, at any time while the Warrant is outstanding, shall issue rights, options, or warrants to all holders of Common Stock (and not to the Holder) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the VWAP on the record date mentioned below, then the Exercise Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights, options, or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights, options, or warrants plus the number of shares that the aggregate offering price of the total number of shares so offered (assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP. Such adjustment shall be made whenever such rights, options, or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options, or warrants.

d) Pro-Rata Distributions. If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 3(b)), then, in each such case, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction, of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then-per share fair market value at such record date of the portion of such assets or evidence of indebtedness or rights or warrants so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case, the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance, or other disposition of all or substantially all of its assets in one or more related transactions, (iii) any, direct or indirect, purchase offer, tender offer, or exchange offer (whether by the Company or another Person) is completed, pursuant to which holders of Common Stock are permitted to sell, tender, or exchange their shares for other securities, cash, or property and has been accepted by the holders of fifty percent (50%) or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization, or recapitalization of the Common Stock or any compulsory share exchange, pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash, or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger, or scheme of arrangement) with another Person or group of Persons, whereby such other Person or group acquires more than fifty (50%) of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each, a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash, or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it would receive upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal the 100-day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365-day annualization factor) as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction (but in no event shall such expected volatility be greater than one hundred percent (100%)), (C) the underlying price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the greater of (x) the last VWAP immediately prior to the public announcement of such Fundamental Transaction and (y) the last VWAP immediately prior to the consummation of such Fundamental Transaction, and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date and (E) a zero cost of borrow. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds within five Business Days of the Holder’s election (or, if later, on the effective date of the Fundamental Transaction). The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant that is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price that applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock, and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and that is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100^th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) then issued and outstanding.

g) Notice to Holder.

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or e-mail a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or e-mail to the Holder at its last facsimile number or e-mail address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

h) Voluntary Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company.

Section 4. Transfer of Warrant.

a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto, duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to surrender this Warrant to the Company physically unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within two (2) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer that may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the original Issue Date and shall be identical to this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, comply with the provisions of Section 5.7 of the Purchase Agreement.

e) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

Section 5. Miscellaneous.

a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends, or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.

b) Loss, Theft, Destruction, or Mutilation of Warrant. The Company covenants that, upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction, or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft, or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

d) Authorized Shares.

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares that may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid, and nonassessable and free from all taxes, liens, and charges created by the Company in respect of the issuance thereof (other than taxes in respect of any transfer occurring contemporaneously with such issuance).

Except and to the extent waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be reasonably necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions, or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action that would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

e) Jurisdiction. All questions concerning the construction, validity, enforcement, and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers, or remedies. Without limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses, including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

(Signature Page Follows)

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

verb technology company, inc.
By:
Name:	Rory J. Cutaia
Title:	Chief Executive Officer

NOTICE OF EXERCISE

To: Verb technology company, inc.

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2) Payment shall take the form of (check applicable box):

[  ] in lawful money of the United States; or

[  ] [if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

The Warrant Shares shall be delivered to the following DWAC Account Number:

_______________________________

_______________________________

_______________________________

(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity: _______________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: _______________________________________________________________________________________

EXHIBIT B

ASSIGNMENT FORM

(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

Name:
	(Please Print)
Address:
	(Please Print)
Phone Number:
E-mail Address:
Dated: _______________ __, ______
Holder’s Signature:
Holder’s Address:________________

EX-10.50

 

EX-10.52

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCIAL ARRANGEMENT SECURED BY SUCH SECURITIES.

AMENDMENT TO SHORT-TERM DEMAND PROMISSORY NOTE

This Amendment to Short-Term Promissory Note issued on April 2, 2019 (the “Amendment”) is entered into by and between Verb Technology Company, Inc., a Nevada corporation (the “Borrower”), and Amin Somani, an individual (the “Lender”), effective as of July 10, 2019 (the “Effective Date”).

WHEREAS, the Borrower previously issued to the Lender that certain Short-Term Promissory Note, dated April 2, 2019, in the original principal amount of $157,500 (the “Existing Note”);

WHEREAS, the Borrower and the Lender desire to amend the terms of the Existing Note as set forth herein; and

WHEREAS, Paragraph 5 of the Existing Note provides that any modification requires the written consent of the Lender.

NOW, THEREFORE, in consideration of the foregoing premises and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Lender, intending to be legally bound, agree as follows:

1. Amendments to Existing Note. Paragraph 1 of the Existing Note is hereby deleted in its entirety and replaced with the following:

“Mandatory Conversion.

(a) On July 10, 2019 (the “Mandatory Conversion Date”), (i) the aggregate outstanding principal amount of One Hundred Fifty-Seven Thousand Five Hundred Dollars ($157,500), and (ii) the accrued and unpaid interest as of the Mandatory Conversion Date, or Two Thousand One Hundred Thirty-Five and 96/100ths Dollars ($2,135.96), shall automatically convert into (1) 81,178 shares (the “Conversion Shares”) of the Borrower’s common stock, $0.0001 par value per share (the “Common Stock”), and (2) a warrant to purchase up to 81,178 shares of Common Stock (the “Conversion Warrant”), at an exercise price of $3.44 per share. The Conversion Warrant shall be subject to the terms and conditions set forth in the form of Conversion Warrant attached hereto as Exhibit A. The Borrower shall issue the Conversion Shares and grant the Conversion Warrant to the Lender, and/or his designees, as soon as reasonably practicable after execution of this Amendment by the parties.

(b) The Conversion Shares may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Securities Act, (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance, and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, (iii) such shares are sold or transferred pursuant to Rule 144 under the Securities Act (or a successor rule) (“Rule 144”), or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower, who agrees to sell or otherwise transfer the shares only in accordance with this Paragraph 1(b) and who is an accredited investor. Until such time as the Conversion Shares have been registered under the Securities Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for Conversion Shares that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE LENDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

The legend set forth above shall be removed and the Borrower shall issue to the Lender a new certificate therefor free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance, and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Conversion Shares may be made without registration under the Securities Act, which opinion shall be reasonably accepted by the Borrower so that the sale or transfer is effected or (ii) in the case of the Conversion Shares, such shares being registered for sale by the Lender under an effective registration statement filed under the Securities Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold.”

2. Satisfied in Full. Following the issuance of the Conversion Shares and the grant of the Conversion Warrant, the Existing Note shall be deemed to have been satisfied in full.

3. No Other Changes. Except as specifically amended by this Amendment, all other terms of the Existing Note shall remain unchanged and in full force and effect.

4. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Borrower and the Lender have executed this Amendment as of the Effective Date.

“Borrower”
Verb Technology Company, Inc.
By:	/s/ Jeffrey R. Clayborne
	Jeffrey R. Clayborne, CFO
“Lender”
	/s/ Amin Somani
	Amin Somani

EXHIBIT A

Form of Conversion Warrant

See attached.

EX-10.53

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCIAL ARRANGEMENT SECURED BY SUCH SECURITIES.

AMENDMENT TO SHORT-TERM DEMAND PROMISSORY NOTE

This Amendment to Short-Term Promissory Note issued on April 30, 2019 (the “Amendment”) is entered into by and between Verb Technology Company, Inc., a Nevada corporation (the “Borrower”), and Adam Wolfson, an individual (the “Lender”), effective as of July 10, 2019 (the “Effective Date”).

WHEREAS, the Borrower previously issued to the Lender that certain Short-Term Promissory Note, dated April 30, 2019, in the original principal amount of $500,000 (the “Existing Note”);

WHEREAS, the Borrower and the Lender desire to amend the terms of the Existing Note as set forth herein; and

WHEREAS, Paragraph 5 of the Existing Note provides that any modification requires the written consent of the Lender.

NOW, THEREFORE, in consideration of the foregoing premises and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Lender, intending to be legally bound, agree as follows:

1. Amendments to Existing Note. Paragraph 1 of the Existing Note is hereby deleted in its entirety and replaced with the following:

“Mandatory Conversion.

(a) On July 29, 2019 (the “Mandatory Conversion Date”), (i) the aggregate outstanding principal amount of Five Hundred Thousand Dollars ($500,000), and (ii) the accrued and unpaid interest as of the Mandatory Conversion Date, or Six Thousand One Hundred Sixty-Four and 38/100ths Dollars ($6,164.3), shall automatically convert into 490,090 shares (the “Conversion Shares”) of the Borrower’s common stock, $0.0001 par value per share (the “Common Stock”). The Borrower shall issue the Conversion Shares to the Lender as soon as reasonably practicable after execution of this Amendment by the parties.

(b) The Conversion Shares may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Securities Act, (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance, and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, (iii) such shares are sold or transferred pursuant to Rule 144 under the Securities Act (or a successor rule) (“Rule 144”), or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower, who agrees to sell or otherwise transfer the shares only in accordance with this Paragraph 1(b) and who is an accredited investor. Until such time as the Conversion Shares have been registered under the Securities Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for Conversion Shares that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE LENDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

The legend set forth above shall be removed and the Borrower shall issue to the Lender a new certificate therefor free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance, and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Conversion Shares may be made without registration under the Securities Act, which opinion shall be reasonably accepted by the Borrower so that the sale or transfer is effected or (ii) in the case of the Conversion Shares, such shares being registered for sale by the Lender under an effective registration statement filed under the Securities Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold.”

2. Satisfied in Full. Following the issuance of the Conversion Shares, the Existing Note shall be deemed to have been satisfied in full.

3. No Other Changes. Except as specifically amended by this Amendment, all other terms of the Existing Note shall remain unchanged and in full force and effect.

4. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Borrower and the Lender have executed this Amendment as of the Effective Date.

“Borrower”
Verb Technology Company, Inc.
By:	/s/ Rory Cutaia
	Rory Cutaia, CEO
“Lender”
	/s/ Adam Wolfson
	Adam Wolfson

EX-10.54

 

 

 

 

 

 

 

EX-10.55

 

EX-31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Rory J. Cutaia, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q Verb Technology Company, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 14, 2019

/s/ Rory Cutaia

Rory Cutaia

President, Secretary, Chief Executive Officer, Director, and Principal Executive Officer

EX-31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeff Clayborne, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Verb Technology Company, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 14, 2019

/s/ Jeff Clayborne

Jeff Clayborne

Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer

EX-32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Rory J. Cutaia, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that

1.	the Quarterly Report on Form 10-Q of Verb Technology Company, Inc. for the quarterly period ended June 30, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Verb Technology Company, Inc.

August 14, 2019

/s/ Rory Cutaia

Rory J. Cutaia

President, Secretary, Chief Executive Officer,

Director, and Principal Executive Officer

EX-32.2

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Jeff Clayborne, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that

1.	the Quarterly Report on Form 10-Q of Verb Technology Company, Inc. for the quarterly period ended June 30, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Verb Technology Company, Inc.

August 14, 2019

/s/ Jeff Clayborne

Jeff Clayborne

Chief Financial Officer, Principal Financial Officer, and Principal Accounting Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 14, 2019
Document And Entity Information
Entity Registrant Name	Verb Technology Company, Inc.
Entity Central Index Key	0001566610
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		23,263,187
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019

XML

Condensed Consolidated Balance Sheet - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash	$ 412,000	$ 634,000
Accounts receivable, net	1,255,000	1,000
Inventory, net	165,000
Prepaid expenses	320,000	83,000
Total current assets	2,152,000	718,000
Right-of-use assets	1,219,000
Deferred offering costs		162,000
Property and equipment, net	56,000	11,000
Intangible assets, net (provisional)	9,835,000
Goodwill (provisional)	12,347,000
Other assets	71,000	7,000
Total assets	25,680,000	898,000
Current liabilities:
Accounts payable and accrued expenses	3,126,000	1,148,000
Accrued officers' salary	159,000	188,000
Accrued interest (including $48,000 and $41,000 payable to related parties)	55,000	46,000
Note payable, net of discount of $1,000 and $0, respectively	709,000
Notes payable - related party	112,000	112,000
Convertible notes payable, net of discount of $0 and $1,082,000, respectively		818,000
Operating lease liability, current	227,000
Deferred revenue	237,000
Derivative liability	219,000	2,576,000
Customer deposits	167,000
Total current liabilities	5,011,000	4,888,000
Long Term liabilities:
Note payable - related party	1,065,000	1,065,000
Operating lease liability, non-current	1,003,000
Total liabilities	7,079,000	5,953,000
Commitments and contingencies
Stockholders' equity (deficit)
Preferred stock, $0.0001 par value, 15,000,000 shares authorized, none issued or outstanding
Common stock, $0.0001 par value, 200,000,000 shares authorized, 22,655,185 and 12,055,491 shares issued and outstanding as of June 30, 2019 and December 31, 2018	2,000	1,000
Additional paid-in capital	64,617,000	35,611,000
Accumulated Deficit	(46,018,000)	(40,667,000)
Total stockholders' equity (deficit)	18,601,000	(5,055,000)
Total liabilities and stockholders' equity (deficit)	$ 25,680,000	$ 898,000

XML

Condensed Consolidated Balance Sheet (Parenthetical) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Accrued interest, related parties	$ 48,000	$ 41,000
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	15,000,000	15,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	22,655,185	12,055,491
Common stock, shares outstanding	22,655,185	12,055,491
Notes Payable [Member]
Notes payable, discount	$ 1,000	$ 0
Convertible Notes Payable [Member]
Notes payable, discount	$ 0	$ 1,082,000

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Revenue, net	$ 3,733,000	$ 8,000	$ 3,742,000	$ 16,000
Cost of revenue	2,042,000	7,000	2,072,000	8,000
Gross margin	1,691,000	1,000	1,670,000	8,000
Operating Expenses:
Research and development	1,335,000	105,000	1,899,000	236,000
Depreciation and amortization	567,000	5,000	570,000	10,000
General and administrative	3,262,000	(495,000)	5,448,000	4,769,000
Total operating expenses	5,164,000	(385,000)	7,917,000	5,015,000
Income / (Loss) from operations	(3,473,000)	386,000	(6,247,000)	(5,007,000)
Other income (expense)
Other income / (expense)	(1,000)	1,000	(1,000)	(4,000)
Financing costs	(55,000)		(139,000)	(172,000)
Interest expense - amortization of debt discount	(572,000)		(1,626,000)	(748,000)
Change in fair value of derivative liability	(426,000)	1,444,000	518,000	(1,181,000)
Debt extinguishment, net	2,227,000		2,227,000	652,000
Interest expense	(43,000)	(59,000)	(83,000)	(263,000)
Total other income / (expense)	1,130,000	1,386,000	896,000	(1,716,000)
Net Income / (Loss)	$ (2,343,000)	$ 1,772,000	$ (5,351,000)	$ (6,723,000)
Income (Loss) per share - basic and diluted	$ (0.11)	$ 0.17	$ (0.32)	$ (0.71)
Weighted average number of common shares outstanding - basic and diluted	21,624,240	10,169,332	16,946,065	9,489,017

XML

Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2017	$ 12,000	$ 22,739,000	$ (28,540,000)	$ (5,789,000)
Balance, shares at Dec. 31, 2017	7,941,235
Common shares issued upon exercise of warrants		22,000		22,000
Common shares issued upon exercise of warrants, shares	113,621
Common shares issued upon exercise of options		34,000		34,000
Common shares issued upon exercise of options, shares	32,508
Proceeds from sale of common stock	$ 2,000	2,977,000		2,979,000
Proceeds from sale of common stock, shares	1,163,938
Fair value of common shares issued for services		(2,627,000)		(2,627,000)
Fair value of common shares issued for services, shares	319,346
Fair value of common stock upon issuance of convertible debt	$ 1,000	2,277,000		2,278,000
Fair value of common stock upon issuance of convertible debt, shares	492,201
Fair value of common stock issued upon conversion of accrued expenses		582,000		582,000
Fair value of common stock issued upon conversion of accrued expenses, shares	27,149
Common shares issued upon exercise of put option		1,000,000		1,000,000
Common shares issued upon exercise of put option, shares	203,206
Derivative liability extinguished upon exercise of warrants
Fair value of vested stock options and warrants		829,000		829,000
Stock repurchase		(20,000)		(20,000)
Stock repurchase, shares	(46,667)
Net loss			(6,723,000)	(6,723,000)
Balance at Jun. 30, 2018	$ 15,000	33,067,000	(35,263,000)	(2,181,000)
Balance, shares at Jun. 30, 2018	10,246,537
Balance at Mar. 31, 2018	$ 15,000	34,230,000	(37,035,000)	(2,790,000)
Balance, shares at Mar. 31, 2018	10,141,753
Conversion of convertible debt
Conversion of convertible debt, shares	46,165
Common shares issued upon exercise of warrants		34,000		34,000
Common shares issued upon exercise of warrants, shares	32,508
Proceeds from sale of common stock		700,000		700,000
Proceeds from sale of common stock, shares	70,000
Fair value of common shares issued for services		(642,000)		(642,000)
Fair value of common shares issued for services, shares	2,778
Common shares issued upon exercise of put option, shares
Derivative liability extinguished upon exercise of warrants		(723,000)		(723,000)
Fair value of vested stock options and warrants		(512,000)		(512,000)
Stock repurchase		(20,000)		(20,000)
Stock repurchase, shares	(46,667)
Net loss			1,772,000	1,772,000
Balance at Jun. 30, 2018	$ 15,000	33,067,000	(35,263,000)	(2,181,000)
Balance, shares at Jun. 30, 2018	10,246,537
Balance at Dec. 31, 2018	$ 1,000	35,611,000	(40,667,000)	(5,055,000)
Balance, shares at Dec. 31, 2018	12,055,491
Sale of common stock from Public Offering	$ 1,000	18,452,000		18,453,000
Sale of common stock from Public Offering, shares	6,549,596
Fair value of common stock issued for acquisition		7,820,000		7,820,000
Fair value of common stock issued for acquisition, shares	3,327,791
Fair value of common stock issued to settle accounts payable		10,000		10,000
Fair value of common stock issued to settle accounts payable, shares	4,142
Conversion of convertible debt		410,000		410,000
Conversion of convertible debt, shares	182,333
Common shares issued upon exercise of warrants		45,000		$ 45,000
Common shares issued upon exercise of warrants, shares	173,714
Common shares issued upon exercise of options, shares
Fair value of common shares issued for services		(728,000)		$ (728,000)
Fair value of common shares issued for services, shares	197,810
Common stock upon issuance of convertible debt		182,000		182,000
Common stock upon issuance of convertible debt, shares	25,272
Fair value of vested stock options and warrants		1,359,000		1,359,000
Issuance of fractional shares due to reverse split
Issuance of fractional shares due to reverse split, shares	139,036
Net loss			(5,351,000)	(5,351,000)
Balance at Jun. 30, 2019	$ 2,000	64,617,000	(46,018,000)	18,601,000
Balance, shares at Jun. 30, 2019	22,655,185
Balance at Mar. 31, 2019	$ 1,000	36,590,000	(43,675,000)	(7,084,000)
Balance, shares at Mar. 31, 2019	12,344,451
Sale of common stock from Public Offering	$ 1,000	18,452,000		18,453,000
Sale of common stock from Public Offering, shares	6,549,596
Fair value of common stock issued for acquisition		7,820,000		7,820,000
Fair value of common stock issued for acquisition, shares	3,327,791
Fair value of common stock issued to settle accounts payable		10,000		10,000
Fair value of common stock issued to settle accounts payable, shares	4,142
Conversion of convertible debt		410,000		410,000
Conversion of convertible debt, shares	165,666
Common shares issued upon exercise of warrants		45,000		45,000
Common shares issued upon exercise of warrants, shares	25,000
Fair value of common shares issued for services		(340,000)		(340,000)
Fair value of common shares issued for services, shares	157,812
Fair value of common stock upon issuance of convertible debt		(128,000)		(128,000)
Fair value of common stock upon issuance of convertible debt, shares	16,667
Common stock upon issuance of convertible debt		182,000		182,000
Common stock upon issuance of convertible debt, shares	8,605
Fair value of vested stock options and warrants		896,000		896,000
Issuance of fractional shares due to reverse split
Issuance of fractional shares due to reverse split, shares	55,455
Net loss			(2,343,000)	(2,343,000)
Balance at Jun. 30, 2019	$ 2,000	$ 64,617,000	$ (46,018,000)	$ 18,601,000
Balance, shares at Jun. 30, 2019	22,655,185

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating Activities:
Net loss	$ (5,351,000)	$ (6,723,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Fair value of common shares issued for services and vested stock options and warrants	2,087,000	3,457,000
Financing costs	139,000	172,000
Amortization of debt discount	1,601,000	748,000
Change in fair value of derivative liability	(518,000)	1,181,000
Debt extinguishment, net	(2,227,000)	(652,000)
Depreciation and amortization	13,000	10,000
Amortizationof right-of-use assets	62,000
Amortization of intangible assets	495,000
Inventory reserve	7,000
Allowance for doubtful accounts	(15,000)
Effect of changes in assets and liabilities:
Accounts receivable	(150,000)
Inventory	44,000
Prepaid expenses	(95,000)	(7,000)
Other assets	(43,000)	(8,000)
Accounts payable, accrued expenses, and accrued interest	829,000	(68,000)
Operating lease liability	(58,000)
Deferred revenue	(84,000)
Customer deposits	(296,000)
Net cash used in operating activities	(3,535,000)	(1,890,000)
Investing Activities:
Acquisition of subsidiary	(15,000,000)
Cash acquired upon acquisition of subsidiary	557,000
Net cash used in investing activities	(14,443,000)
Financing Activities:
Proceeds / (payment) on convertible note payable	432,000	(845,000)
Proceeds from notes payable	1,000,000
Proceeds from related party note payable	58,000
Proceeds from sale of common stock	18,614,000	2,979,000
Proceeds from exercise of put option		1,000,000
Proceeds from option exercise		34,000
Proceeds from warrant exercise	45,000	22,000
Payment of convertible notes payable	(2,025,000)	130,000
Payment of notes payable	(310,000)
Payment of related party notes payable	(58,000)
Repurchase common stock		(20,000)
Net cash provided by financing activities	17,756,000	3,300,000
Net change in cash	(222,000)	1,410,000
Cash - beginning of period	634,000	11,000
Cash - end of period	412,000	1,421,000
Supplemental disclosures of cash flow information:
Cash paid for interest	64,000	314,000
Cash paid for income taxes		800
Supplemental disclosure of non-cash investing and financing activities:
Fair value of common stock issued upon acquisition of subsidiary	7,820,000
Conversion of note payable and accrued interest to common stock	410,000	2,277,000
Fair value of derivative liability from issuance of convertible debt, inducement shares and warrant features	388,000	302,000
Fair value of warrants issued and beneficial conversion feature to extinguish debt		723,000
Fair value of common shares, warrants and beneficial conversion feature of issued convertible note	182,000
Common stock issued to settle accounts payable	10,000	582,000
Derecognition of deferred offering costs	$ 161,000

XML

Description of Business

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Description of Business

1. DESCRIPTION OF BUSINESS

Organization

References in this document to the “Company,” “Verb,” “we,” “us,” or “our” are intended to mean Verb Technology Company, Inc., individually, or as the context requires, collectively with its subsidiary on a consolidated basis.

Cutaia Media Group, LLC (“CMG”) was organized on December 12, 2012, as a limited liability company under the laws of the State of Nevada. On May 19, 2014, bBooth, Inc. was incorporated under the laws of the State of Nevada. On May 19, 2014, CMG merged into bBooth, Inc. and, thereafter, bBooth, Inc. changed its name to bBooth (USA), Inc., effective as of October 16, 2014.

On October 16, 2014, bBoothUSA was acquired by Global System Designs, Inc. (“GSD”), pursuant to a Share Exchange Agreement entered into with GSD (the “Share Exchange Agreement”). GSD was incorporated in the State of Nevada on November 27, 2012. The acquisition was accounted for as a reverse merger transaction. In connection with the closing of the transactions contemplated by the Share Exchange Agreement, GSD’s management was replaced by bBoothUSA’s management, and GSD changed its name to bBooth, Inc. The operations of CMG and bBooth (USA), Inc. became known as, and are referred to herein, as “bBoothUSA.”

Effective April 21, 2017, we changed our corporate name from bBooth, Inc. to nFüsz, Inc. The name change was effected through a parent/subsidiary short-form merger of nFüsz, Inc., our wholly-owned Nevada subsidiary, formed solely for the purpose of the name change, with and into us. We were the surviving entity. To effectuate the name-change merger, we filed Articles of Merger and a Certificate of Correction (relative to the effective date of the name-change merger) with the Secretary of State of the State of Nevada on April 4, 2017 and April 17, 2017, respectively. The name-change merger became effective on April 21, 2017. Our board of directors approved the name-change merger, which resulted in the name change on that date. In accordance with Section 92A.180 of the Nevada Revised Statutes (the “NRS”), stockholder approval of the name-change merger was not required.

Effective February 1, 2019, we changed our corporate name from nFüsz, Inc. to Verb Technology Company, Inc. The name change was effected through a parent/subsidiary short-form merger of Verb Technology Company, Inc., our wholly-owned Nevada subsidiary, formed solely for the purpose of the name change, with and into us. We were the surviving entity. To effectuate the name-change merger, we filed Articles of Merger and a Certificate of Correction (relative to the effective date of the name-change merger) with the Secretary of State of the State of Nevada on January 31, 2019 and February 22, 2019, respectively. The name-change merger became effective on February 1, 2019. Our board of directors approved the name-change merger, which resulted in the name change on that date. In accordance with Section 92A.180 of the NRS, stockholder approval of the name-merger was not required.

On February 1, 2019, we implemented a 1-for-15 reverse stock split (the “Reverse Stock Split”) of our common stock, $0.0001 par value per share (the “Common Stock”). The Reverse Stock Split became effective upon commencement of trading of our Common Stock on February 4, 2019. As a result of the Reverse Stock Split, every fifteen (15) shares of our pre-Reverse Stock Split Common Stock were combined and reclassified into one share of our Common Stock. The number of shares of Common Stock subject to outstanding options, warrants, and convertible securities were also reduced by a factor of fifteen as of February 1, 2019. All historical share and per-share amounts reflected throughout our consolidated financial statements and other financial information in this Quarterly Report on Form 10-Q have been adjusted to reflect the Reverse Stock Split as if the split occurred as of the earliest period presented. The par value per share of our Common Stock was not affected by the Reverse Stock Split.

On April 12, 2019, we completed our acquisition of Sound Concepts Inc.  (“Sound Concepts”) pursuant to the Agreement and Plan of Merger (the “Merger Agreement), by and among Sound Concepts, NF Merger Sub, Inc., a Utah corporation (“Merger Sub 1”), NF Acquisition Company, LLC, a Utah limited liability company (“Merger Sub 2”), the shareholders of Sound Concepts (the “Shareholders’), the Shareholders’ representative, and us. Pursuant to the Merger Agreement, we acquired Sound Concepts through a two-step merger, consisting of merging Merger Sub 1 with and into Sound Concepts, with Sound Concepts surviving the “first step” of the merger as our wholly-owned subsidiary (and the separate corporate existence of Merger Sub 1 ceased) and, immediately thereafter, merging Sound Concepts with and into Merger Sub 2, with Merger Sub 2 surviving the “second step” of the merger, such that, upon the conclusion of the “second step” of the merger, the separate corporate existence of Sound Concepts ceased and Merger Sub 2 continued its limited liability company existence under Utah law as the surviving entity and as our wholly-owned subsidiary under the name “Verb Direct, LLC.” (“Verb Direct”). On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the closing, each share of Sound Concepts’ capital stock issued and outstanding immediately prior to the effective time (the “Sound Concepts Capital Stock”), was cancelled and converted into the right to receive a proportionate share of (i) a cash payment by us of an aggregate of $15,000,000 (the “Acquisition Cash Payment”), and (ii) 3,327,791 restricted shares of our Common Stock. The Acquisition Cash Payment was paid using a portion of the net proceeds we received as a result of our public offering that closed on April 9, 2019. The fair market value of the 3,327,791 restricted shares on April 12, 2019 was $7,820,000.

Nature of Business

Verb Technology Company

We are an applications services provider, offering cloud-based business software products under the brand name “Verb” on a subscription basis. Our flagship product, Verb Go, is a Customer Relationship Management (“CRM”) application that is distinguishable from other CRM programs because it utilizes our proprietary interactive video technology as the primary means of communication between sales and marketing professionals and their customers or prospects. The data collection and analytics capabilities of our application inform our users right on their device how long the prospects watched the video, how many times they watched it, and what they clicked-on. It then displays information within the application to immediately separate hot leads or interested customers from those that have not seen the video or otherwise expressed interest in the content. These capabilities provide for a much more efficient and effective sales process, resulting in increased sales conversion rates.

Through Verb Go, users can quickly, simply, and easily create, distribute, and post videos on social media to which they can add a choice of on-screen clickable “tags,” which are interactive icons, buttons, and other on-screen elements. When clicked, these clickable “tags” allow a user’s prospects and customers to respond to its 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 buy it, or to click on a calendar icon in the video to make an appointment with a salesperson, among many other features and functionality. Verb Go interactive videos can be distributed via email or text messaging or posted directly to social media, and no software download is required to view the Verb interactive videos. Verb Go is available by subscription for individual and enterprise users. We developed the proprietary patent-pending interactive video technology that serves as the basis for all of our cloud, Software-as-a-Service (“SaaS”) Verb applications.

Our client base consists primarily of enterprise customers in the global direct sales industry. We also have begun to provide our application services on a SaaS basis to clients in other business sectors, including large professional associations such as the National Association of Health Underwriters; educational institutions, such as the Sachem School District in New York; auto leasing, such as D & M Auto Leasing, the largest auto leasing business in the country; as well as to clients in health care, and the burgeoning CBD industry, among others business sectors. Currently, we provide services to approximately 100 clients in the direct sales industry, which include Young Living Essential Oils, LC, Isagenix International, LLC, Vasayo, LLC, Nerium International, LLC, Forever Living Products International, LLC, Seacret Spa, LLC, among many others. For the direct sales industry, our application provides recruiting tools, sales representative training, and education tools, as well as instant notification capabilities to notify users when a prospect has watched an interactive video or other content shared through our application. The application also tracks customer purchases and provides tools for corporate management to monitor field activity for tracking the effectiveness of campaigns, as well as compliance. Our application is currently in use in over 59 different countries, in 48 languages, and currently has approximately 700,000 individual users.

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2018 included herein was derived from the audited consolidated financial statements as of that date.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.

Principles of Consolidation

The consolidated financial statements include the accounts of Verb Technology Company, Inc. and Verb Direct, LLC, its wholly owned subsidiary. Intercompany transactions have been eliminated in the consolidation.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the six months ended June 30, 2019, the Company incurred a net loss of $5,351,000 and used cash in operations of $3,535,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2018 consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

In April 2019, the Company completed an underwritten public offering of units, which offering was made pursuant to the Company’s Registration Statement on Form S-1, as amended (File No. 333-226840) (the “Registration Statement”). The Company raised net proceeds of approximately $18,614,000, after taking into account offering costs, of which $15,000,000 was used to pay the cash portion of the purchase price to acquire Sound Concepts, Inc. (“Sound Concepts”), $2,025,000 was applied towards the payment of certain notes payable, and the remaining balance was used for working capital purposes.

Our continuation as a going concern is dependent on our ability to obtain additional financing until we can generate sufficient cash flows from operations to meet our obligations. We intend to continue to seek additional debt or equity financing to continue our operations. There is no assurance that we will ever be profitable or that debt or equity financing will be available to us. The 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.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Significant estimates include assumptions made in analysis of reserves for allowance of doubtful accounts, inventory, purchase price allocations, impairment of long-term assets, realization of deferred tax assets, determining fair value of derivative liabilities, and valuation of equity instruments issued for services. Amounts could materially change in the future.

Concentration of Credit and Other Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable. Cash is deposited with a limited number of financial institutions. The balances held at any one financial institution at times may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits of up to $250,000.

The Company extends limited credit to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral or other security to support accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains an allowance for doubtful accounts and sales credits. The Company believes that any concentration of credit risk in its accounts receivable is substantially mitigated by the Company’s evaluation process, relatively short collection terms and the high level of credit worthiness of its customers.

The Company’s concentration of credit risk includes its concentrations from key customers and vendors. The details of these significant customers and vendors are presented in the following table for six months ended June 30, 2019:

	Six Months Ended	Six Months Ended	Year Ended
	June 30, 2019	June 30, 2018	December 31, 2018
	Unaudited	Unaudited
Verb’s largest customers are presented below as a percentage of Verb’s aggregate:
Revenue	2 major customers account for 11% and 10% of revenue individually, or 21% of revenue in the aggregate	Not applicable	Not applicable
Accounts receivable	3 major customers account for 11%, 12% and 17% of accounts receivable individually, or 40% of accounts receivable in the aggregate	Not applicable	Not applicable
Verb’s largest vendors are presented below as a percentage of Verb’s aggregate:
Purchase	3 major vendors account for 11%, 14% and 19% of purchases individually, or 44% of purchases in the aggregate	Not applicable	Not applicable
Accounts payable	18% of accounts payable to one vendor	Not applicable	Not applicable

Leases

We lease certain corporate office space and office equipment under lease agreements with monthly payments over a period of 36 to 84 months. We determine if an arrangement is a lease at inception. Lease assets are presented as operating lease right-of-use assets and the related liabilities are presented as lease liabilities in our consolidated balance sheets.

Prior to January 1, 2019, the Company accounted for leases under ASC 840, Accounting for Leases. Effective January 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. See Note 7, Right-of-Use Assets and Operating Lease Liabilities, for additional information.

Revenue Recognition

The Company derives its revenue primarily from providing application services through the SaaS application, digital marketing and sales support services, from the sale of customized print products and training materials, branded apparel, and digital tools, as demanded by its customers. The subscription revenue from the application services are recognized over the life of the estimated subscription period. The Company also charges certain customers setup or installation fees for the creation and development of websites and phone application. These fees are accounted as part of deferred revenues and amortized over the estimated life of the agreement. Amounts related to shipping and handling that are billed to customers are reflected as part of revenues, and the related costs are reflected in cost of revenues in the accompanying Statements of Operations.

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Pursuant to ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to our customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer.

The products sold by us are distinctly individual. The products are offered for sale solely as finished goods, and there are no performance obligations required post-shipment for customers to derive the expected value from them. Other than promotional activities, which can vary from time to time but nevertheless are entirely within the Company’s control, contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time.

The control of products we sell transfers to our customers upon shipment from our facilities, and our performance obligations are satisfied at that time. Shipping and handling activities are performed before the customer obtains control of the goods and, therefore, represent a fulfillment activity rather than promised goods to the customer. Payment for sales are generally made by check, credit card, or wire transfer. Historically, we have not experienced any significant payment delays from customers.

We allow returns within 30 days of purchase from end-users. Our customers may return purchased products to us under certain circumstances.

Customers setup or installation fees for the creation and development of websites and phone application are recognized as revenues over the estimated subscription period. Design assets of the websites and phone application are recognized when the work is completed. Licensing revenue is recognized over the estimated subscription period. In addition, certain revenue is recorded based upon stand-alone selling prices and is primarily recognized when the customer uses these services, based on the quantity of services rendered, such as number of customer usage.

Revenues for the three months ended June 30, 2019 and 2018 were as follows:

	Three Months Ended June 30, 2019 (Unaudited)						Three Months Ended June 30, 2018 (Unaudited)
	Revenue		Cost of Revenues		Gross Margin		Revenue		Cost of Revenues		Gross Margin
Digital	$	1,454,000	$	176,000	$	1,278,000	$	8,000	$	7,000	$	1,000
Welcome Kits & Fulfillment		1,784,000		1,385,000		399,000		-		-		-
Shipping		495,000		481,000		14,000		-		-		-
Total	$	3,733,000	$	2,042,000	$	1,691,000	$	8,000	$	7,000	$	1,000

Revenues for the six months ended June 30, 2019 and 2018 were as follows:

	Six Months Ended June 30, 2019 (Unaudited)						Six Months Ended June 30, 2018 (Unaudited)
	Revenue		Cost of Revenues		Gross Margin		Revenue		Cost of Revenues		Gross Margin
Digital	$	1,463,000	$	206,000	$	1,257,000	$	16,000	$	8,000	$	8,000
Welcome Kits & Fulfillment		1,784,000		1,385,000		399,000		-		-		-
Shipping		495,000		481,000		14,000		-		-		-
Total	$	3,742,000	$	2,072,000	$	1,670,000	$	16,000	$	8,000	$	8,000

Cost of Revenues

Cost of revenues primarily consists of the salaries of certain employees, purchase price of consumer products, digital content costs, packaging supplies, and customer shipping and handling expenses. Shipping costs to receive products from our suppliers are included in our inventory and recognized as cost of sales upon sale of products to our customers.

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

The Company uses Level 3 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using a probability weighted average Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjusted to fair value of derivatives.

Share Based Payments

The Company issues stock options and warrants, shares of Common Stock, and equity interests as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation to employees in accordance with FASB ASC 718, Compensation – Stock Compensation. Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period.

From January 1, 2018 until December 31, 2018, the Company accounted for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity - Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received or (b) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date. For interim periods, the fair value is estimated, and the percentage of completion is applied to that estimate to determine the cumulative expense recorded.

In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The guidance was issued to simplify the accounting for share-based transactions by expanding the scope of ASU 2018-07 from only being applicable to share-based payments to employees to also include share-based payment transactions for acquiring goods and services from nonemployees. As a result, nonemployee share-based transactions will be measured by estimating the fair value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance conditions. We adopted ASU 2018-07 on January 1, 2019. The adoption of the standard did not have a material impact on our financial statements for the six months ended June 30, 2019 or the previously reported financial statements.

Net Loss Per Share

Basic net loss per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed giving effect to all dilutive potential shares of Common Stock that were outstanding during the period. Dilutive potential shares of Common Stock consist of incremental shares of Common Stock issuable upon exercise of stock options. No dilutive potential shares of Common Stock were included in the computation of diluted net loss per share because their impact was anti-dilutive. As of June 30, 2019, and 2018, the Company had total outstanding options of 2,832,807 and 1,456,374, respectively, and warrants of 7,779,602 and 1,535,397, respectively, which were excluded from the computation of net loss per share because they are anti-dilutive.

Acquisitions and Business Combinations

The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from, acquired technology, trade-marks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is the period needed to gather all information necessary to make the purchase price allocation, not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill

In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, the Company reviews the recoverability of the carrying value of goodwill at least annually or whenever events or circumstances indicate a potential impairment. The Company’s impairment testing will be done annually at December 31 (its fiscal year end). Recoverability of goodwill is determined by comparing the fair value of Company’s reporting units to the carrying value of the underlying net assets in the reporting units. If the fair value of a reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities.

Intangible Assets with Finite Useful Lives

We have certain finite lived intangible assets that were initially recorded at their fair value at the time of acquisition. These intangible assets consist of developed technology. Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful life of five years.

We review all finite lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, we recognize an impairment loss for the excess carrying value over the fair value in our consolidated statements of operations.

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB ASC for disclosures about the fair value of its financial instruments and paragraph 820-10-35-37 of the FASB ASC (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1:	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2:	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3:	Pricing inputs that are generally observable inputs and not corroborated by market data.

The carrying amount of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, and accounts payable and accrued expenses approximate their fair value due to their short-term nature. The carrying values financing obligations approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest rates. The Company uses Level 3 inputs for its valuation methodology for the derivative liabilities.

Long-Lived Assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. No impairment of long-lived assets was required for the year ended December 31, 2018 and for the period ended June 30, 2019.

Segments

The Company has three revenue channels: (1) SaaS, (2) welcome kits, (3) fulfillments. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker (the Company’s Chief Executive Officer) reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to (i) their similar customer base and (ii) the Company having a single sales team, marketing department, customer service department, operations department, finance department and accounting department to support all revenue channels. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements.

Recent Accounting Pronouncements

Management does not believe that recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC will have a material impact on the Company’s present or future consolidated financial statements.

XML

Acquisition of Verb Direct

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Acquisition of Verb Direct

3. ACQUISITION OF VERB DIRECT

On April 12, 2019, Verb completed its previously announced acquisition of Verb Direct through a two-step merger, consisting of merging Merger Sub 1 with and into Sound Concepts, with Sound Concepts surviving the “first step” of the merger as a wholly-owned subsidiary of Verb (and the separate corporate existence of Merger Sub 1 then having ceased) and, immediately thereafter, merging Sound Concepts (as of the closing of the first step, then known as Verb Direct, Inc.) with and into Merger Sub 2, with Merger Sub 2 surviving the “second step” of the merger, such that, upon the conclusion of the “second step” of the merger, the separate corporate existence of Verb Direct, Inc. (formerly Sound Concepts) then having ceased and Merger Sub 2 continued its limited liability company existence under Utah law as the surviving entity and as a wholly-owned subsidiary of Verb, then known as Verb Direct. On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the merger, each share of Sound Concepts Capital Stock issued and outstanding immediately prior to the effective time, was cancelled in exchange for cash payment by Verb of an aggregate of $15,000,000, and the issuance of an aggregate of 3,327,791 restricted shares of Verb’s Common Stock. The Acquisition Cash Payment was paid using a portion of the net proceeds Verb received as a result of the public offering of the units. Pursuant to the requirements of current accounting guidance, Verb valued the acquisition shares at $7,820,000, the fair value of the shares at the closing date of the transaction.

The acquisition was intended to augment and diversify Verb’s internet and SaaS business. Key factors that contributed to the recorded provisional goodwill and intangible assets in the aggregate of $22,677,000 were the opportunity to consolidate and complement existing operations of Verb, certain software and customer list, and the opportunity to generate future synergies within the internet and SaaS business.

Verb is required to allocate the purchase price to the acquired tangible assets, identifiable intangible assets, and assumed liabilities based on their fair values. At the date of the acquisition and of this Quarterly Report on Form 10-Q, management has not yet finalized its valuation analysis. The fair values of the assets acquired, as set forth below, are considered provisional and subject to adjustment as additional information is obtained through the purchase price measurement period (a period of up to one year from the closing date). Any prospective adjustments would change the fair value allocation as of the acquisition date. The Company is still in the process of reviewing underlying models, assumptions and discount rates used in the valuation of provisional goodwill and intangible assets. The following table summarizes the provisional fair value of the assets assumed and liabilities acquired in the acquisition:

	As of March 31, 2019
	Fair Value
Assets Acquired:
Other current assets	$	2,004,000
Property and equipment		58,000
Other assets		1,302,000		$	3,364,000
Liabilities Assumed:
Current liabilities		(2,153,000	)
Long term liabilities		(1,068,000	)		(3,221,000	)
Intangible assets (provisional)					10,330,000
Goodwill (provisional)					12,347,000
Purchase Price				$	22,820,000

The following unaudited pro forma statements of operations present the Company’s pro forma results of operations after giving effect to the purchase of Verb Direct based on the historical financial statements of the Company and Verb Direct. The unaudited pro forma statements of operations for the three and six months ended June 30, 2019 and 2018 give effect to the transaction to the merger as if it had occurred on January 1, 2018.

	Statement of Operations (Unaudited)
	Three Months Ended June 30, 2019			Three Months Ended June 30, 2018			Six Months Ended June 30, 2019			Six Months Ended June 30, 2018
				(Proforma)			(Proforma)			(Proforma)
Digital	$	1,454,000		$	928,000		$	2,513,000		$	1,850,000
Welcome Kits & Fulfillment		1,784,000			1,814,000			4,049,000			3,373,000
Shipping		495,000			367,000			1,172,000			649,000
Revenue		3,733,000			3,109,000			7,734,000			5,872,000
Digital Cost of Revenue		176,000			160,000			343,000			263,000
Welcome Kits & Fulfillment Cost of Revenue		1,385,000			995,000			2,860,000			2,060,000
Shipping cost of Revenue		481,000			351,000			1,087,000			644,000
Cost of revenue		2,042,000			1,506,000			4,290,000			2,967,000
Digital Gross Margin		1,278,000			768,000			2,170,000			1,587,000
Welcome Kits & Fulfillment Gross Margin		399,000			819,000			1,189,000			1,313,000
Shipping Gross Margin		14,000			16,000			85,000			5,000
Gross margin		1,691,000			1,603,000			3,444,000			2,905,000
Operating Expenses:
Research and development		1,335,000			605,000			2,590,000			1,247,000
Depreciation and amortization		567,000			508,000			1,003,000			1,018,000
General and administrative		3,262,000			281,000			6,525,000			6,230,000
Total operating expenses		5,164,000			1,394,000			10,118,000			8,495,000
Income / (Loss) from operations		(3,473,000	)		209,000			(6,674,000	)		(5,590,000	)
Other income (expense)
Other income / (expense)		(1,000	)		19,000			(17,000	)		8,000
Financing costs		(55,000	)		-			(139,000	)		(172,000	)
Interest expense - amortization of debt discount		(572,000	)		-			(1,626,000	)		(748,000	)
Change in fair value of derivative liability		(426,000	)		1,444,000			518,000			(1,181,000	)
Gain on extinguishment of derivative liability, net		2,227,000			-			2,227,000			652,000
Interest expense		(43,000	)		(59,000	)		(83,000	)		(263,000	)
Total other income (expense)		1,130,000			1,404,000			880,000			(1,704,000	)
Net Income / (Loss)	$	(2,343,000	)	$	1,613,000		$	(5,794,000	)	$	(7,294,000	)
Income per share		(0.11	)		0.12			(0.34	)		(0.57	)
Weighted average number of common shares outstanding - basic and diluted		21,624,240			13,497,123			16,946,065			12,816,808

XML

Accounts Receivable

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Accounts Receivable

4. ACCOUNTS RECEIVABLE

Accounts receivable, net consisted of the following:

	June 30, 2019			December 31, 2018
		(Unaudited)
Accounts receivable	$	1,271,000		$	1,000
Less allowance for doubtful accounts		(16,000	)		-
Total accounts receivable, net	$	1,255,000		$	1,000

XML

Inventory

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Inventory

5. INVENTORY

	June 30, 2019			December 31, 2018
		(Unaudited)
Raw materials	$	64,000		$	-
Finished goods		124,000			-
Total inventory		188,000			-
Less inventory reserve		(23,000	)		-
Total inventory, net	$	165,000		$	-

XML

Property and Equipment

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment

6. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of June 30, 2019 and December 31, 2018.

	June 30, 2019			December 31, 2018
		(Unaudited)
Computers	$	47,000		$	28,000
Furniture and fixture		83,000			56,000
Machinery and equipment		165,000			24,000
Software		113,000			-
Vehicles		17,000			-
Leasehold improvement		30,000			-
Total property and equipment		455,000			108,000
Accumulated Depreciation		(399,000	)		(97,000	)
Total property and equipment, net	$	56,000		$	11,000

Depreciation expense amounted to $13,000 and $10,000 for six months ended June 30, 2019 and 2018, respectively.

XML

Right-of-Use Assets and Operating Lease Liabilities

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Right-of-Use Assets and Operating Lease Liabilities

7. RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

Effective January 1, 2019, the Company adopted the guidance of ASC 842, Leases (“ASC 842”), which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 on January 1, 2019 resulted in the recognition of operating lease right-of-use assets of and lease liabilities for operating lease of $1,219,000 and $1,230,000, respectively. There was no cumulative-effect adjustment to retained earnings.

	Three Months Ended June 30, 2019
Lease Cost
Operating lease cost (included in general and administration in the Company’s unaudited condensed statement of operations)	$	170,000
Other Information
Cash paid for amounts included in the measurement of lease liabilities for the second quarter 2019	$	—
Weighted average remaining lease term – operating leases (in years)		4.05
Average discount rate – operating leases		8.5	%

	At June 30, 2019
Operating leases
Long-term right-of-use assets	$	1,219,000
Short-term operating lease liabilities	$	227,000
Long-term operating lease liabilities		1,003,000
Total operating lease liabilities	$	1,230,000

Year Ending	Operating Leases
2019 (remaining 6 months)	$	170,000
2020		348,000
2021		341,000
2022		304,000
2023		313,000
Total lease payments		1,476,000
Less: Imputed interest/present value discount		(246,000	)
Present value of lease liabilities	$	1,230,000

In February 2019, the Company entered into a new lease agreement to move and expand the Company’s corporate headquarters (the “Original Lease”). In March 2019, the Company elected to exercise its right to extend the term of the Original Lease by an additional 24 months, for a total of 89 months (the “Extension”). In July 2019, the Company amended the Original Lease (the “Amended Lease”; and, together with the Original Lease and the Extension, the “Lease”). The Lease is for approximately 6,700 square feet of new construction space, comprised of approximately 4,880 square feet (the “Initial Premises”) and approximately 1,850 square feet (the “Must-Take Space”) located at 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663, on the Balboa Peninsula. The Lease has a term of 89 months, beginning on the date that the Company occupies the Must-Take Space.

The Lease commenced in August 2019 with respect to the Initial Premises and the Company anticipates that it will take control of the Must-Take Space in January 2020. Thus, the Company believes that the total term of the Lease will be 94 months.

The average monthly base rent for the first 12 months of the Lease is approximately $13,000 after rent abatement. For the next 82 months of the Lease, the average monthly base rent will be approximately $39,000. Pursuant to ASU 2016-02, the Company expects to record approximately $2.4 million as a right-of-use asset and corresponding liability once the Company takes possession and control of the leased premises.

The Company has four leases in American Fork, Utah related to the operation of Verb Direct with an aggregate lease payment of $31,000 per month. The lessor is JMCC Properties, which is an entity owned and controlled by the former shareholders and certain current officers of Verb Direct.

XML

Note Payable

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Note Payable

8. NOTE PAYABLE

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2019			Balance at December 31, 2018
Note 1 (A)	March 22, 2019	April 10, 2019		5.0	%	$	310,000	$	-		$	-
Note 2 (B)	March 29, 2019	July 10, 2019		5.0	%		53,000		53,000			-
Note 3 (C)	April 2, 2019	July 10, 2019		5.0	%		53,000		157,000
Note 4 (D)	April 30, 2019	April 29, 2020		5.0	%		500,000		500,000			-
Total notes payable – related parties									710,000			-
Debt discount									(1,000	)		-
Total notes payable, net of debt discount								$	709,000		$	-

(A) On March 22, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $310,000, in exchange for net proceeds of $300,000, representing an original issue discount of $10,000, which is included in the original principal amount. The note is unsecured and bears interest on the principal amount at a rate of 5% per annum. The note was due on demand at any time after April 10, 2019. As a result of the issuance of the note, the Company incurred aggregate costs of $10,000 related to the note’s original issue discount. The Company recorded these costs as a note discount and is being amortized over the term of the note. In April 2019, the Company paid off the balance of $310,000 and accrued interest totaling $1,000. As part of the payment, the Company amortized the remaining debt discount of $10,000. As of June 30, 2019, the outstanding balance of the note was $0.

(B)	On March 29, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $53,000, in exchange for net proceeds of $50,000, representing an original issue discount of $3,000, which is included in the original principal amount. The note is unsecured and bears interest on the principal amount at a rate of 5% per annum. The note is due on demand at any time after July 10, 2019. As a result of the issuance of the note, the Company incurred aggregate costs of $3,000 related to the note’s original issue discount. The Company recorded these costs as a note discount and is being amortized over the term of the note. As of June 30, 2019, the outstanding balance of the note amounted to $53,000. On July 10, 2019, we amended the note, pursuant to which, on July 10, 2019, the aggregate outstanding principal and all accrued and unpaid interest converted into 27,018 shares of our Common Stock, and a warrant to purchase up to 27,018 shares of our Common Stock at an exercise price of $3.44 per share.
(C)	On April 2, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $157,000, in exchange for net proceeds of $150,000, representing an original issue discount of $7,000, which is included in the original principal amount. The note is unsecured and bore interest on the principal amount at a rate of 5% per annum. The note was due demand at any time after July 10, 2019. As a result of the issuance of the note, the Company incurred aggregate costs of $7,000 related to the note’s original issue discount. The Company recorded these costs as a note discount and is being amortized over the term of the note. As of June 30, 2019, the outstanding balance of the note amounted to $157,000. On July 10, 2019, we amended the note, pursuant to which, on July 10, 2019, the aggregate outstanding principal and all accrued and unpaid interest converted into 81,178 shares of our Common Stock, and a warrant to purchase up to 81,178 shares of our Common Stock at an exercise price of $3.44 per share.
(D)	On April 30, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $500,000, in exchange for net proceeds of $500,000. The note was unsecured and bore interest on the principal amount at a rate of 5% per annum. The note was due on April 29, 2020. As of June 30, 2019, the outstanding balance of the note amounted to $500,000. On July 10, 2019, we amended the note, pursuant to which, on July 29, 2019, the aggregate outstanding principal and all accrued and unpaid interest converted into 490,090 shares of our Common Stock.

Total interest expense for notes payable was $7,000 and $0 for six months ended June 30, 2019 and 2018, respectively. The Company paid $1,000 and $0 in interest for the six months ended June 30, 2019 and 2018, respectively.

XML

Notes Payable - Related Parties

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Notes Payable - Related Parties

9. NOTES PAYABLE – RELATED PARTIES

The Company has the following related parties notes payable as of June 30, 2019 and December 31, 2018:

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2019			Balance at December 31, 2018
Note 1 (A)	December 1, 2015	February 8, 2021		12.0	%	$	1,249,000	$	825,000		$	825,000
Note 2 (B)	December 1, 2015	April 1, 2017		12.0	%		112,000		112,000			112,000
Note 3 (C)	April 4, 2016	June 4, 2021		12.0	%		343,000		240,000			240,000
Note 4 (D)	March 22, 2019	April 30, 2019		5.0	%		58,000		-			-
Total notes payable – related parties									1,177,000			1,177,000
Non-current									(1,065,000	)		(1,065,000	)
Current								$	112,000		$	112,000

(A) On December 1, 2015, the Company issued a convertible note payable to Mr. Rory J. Cutaia, the Company’s majority stockholder and Chief Executive Officer, to consolidate all loans and advances made by Mr. Cutaia to the Company as of that date. The note bears interest at a rate of 12% per annum, secured by the Company’s assets, and will mature on February 8, 2021, as amended.

As of June 30, 2019, and December 31, 2018, the outstanding balance of the note amounted to $825,000, respectively.

(B)	On December 1, 2015, the Company issued a note payable to a former member of the Company’s board of directors, in the amount of $112,000, representing unpaid consulting fees as of November 30, 2015. The note is unsecured, bears interest rate of 12% per annum, and matured in April 2017. As of June 30, 2019, and December 31, 2018, the outstanding principal balance of the note was equal to $112,000, respectively. As of June 30, 2019, the note was past due, and remains past due. The Company is currently in negotiations with the noteholder to settle the past due note.
(C)	On April 4, 2016, the Company issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. The note bears interest at a rate of 12% per annum, secured by the Company’s assets, and will mature on June 4, 2021, as amended. As of June 30, 2019, and December 31, 2018, the outstanding balance of the note amounted to $240,000, respectively.
(D)	On March 22, 2019, the Company issued a note payable to Mr. Jeff Clayborne, the Company’s Chief Financial Officer, in the amount of $58,000. The note was unsecured, bore interest at a rate of 5% per annum, and matured on April 30, 2019. On April 11, 2019, the Company paid off the balance of $58,000. As of June 30, 2019, the outstanding balance of the note was $0.

Total interest expense for notes payable to related parties was $70,000 and $117,000 for six months ended June 30, 2019 and 2018, respectively. The Company paid $63,000 and $182,000 in interest for the six months ended June 30, 2019 and 2018, respectively.

XML

Convertible Notes Payable

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Convertible Notes Payable

10. CONVERTIBLE NOTES PAYABLE

The Company has the following convertible notes payable as of June 30, 2019 and December 31, 2018:

Note	Note Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2019		Balance at December 31, 2018
Note payable (A)	October 19, 2018	April 19, 2019		10	%	$	1,500,000	$	-	$	1,500,000
Note payable (B)	October 30, 2018	April 29, 2019		5	%	$	400,000		-		400,000
Note payable (C)	February 1, 2019	August 2, 2019		10	%	$	500,000		-		-
Total notes payable									-		1,900,000
Debt discount									-		(1,082,000	)
Total notes payable, net of debt discount								$	-	$	818,000

(A) On October 19, 2018, the Company issued an unsecured convertible note to Bellridge Capital, LP (“Bellridge”), an unaffiliated third-party, in the aggregate principal amount of $1,500,000 in exchange for net proceeds of $1,242,000, representing an original issue discount of $150,000, and paid legal and financing expenses of $109,000. In addition, the Company issued 96,667 shares of its Common Stock with a fair value of $595,000. The note was unsecured and did not bear interest; however, the implied interest was determined to be 10% since the note was issued at 10% less than its face value. The note matured in April 2019. The note was also convertible into shares of the Company’s Common Stock only on or after the occurrence of an uncured “Event of Default.” Primarily, the Company would be in default if it did not repay the principal amount of the note, as required. The other events of default are standard for the type of transaction represented by the related securities purchase agreement and the note. In the event of a default, the conversion price in effect on any date on which some or all of the principal of the note is to be converted would be a price equal to 70% of the lowest VWAP during the ten trading days immediately preceding the date on which Bellridge provided its notice of conversion. Upon an Event of Default, the Company would owe Bellridge an amount equivalent to 110% of the then-outstanding principal amount of the note in addition to of all other amounts, costs, expenses, and liquidated damages that might also be due in respect thereof. The Company agreed that, on or after the occurrence of an Event of Default, it would reserve and keep available that number of shares of its Common Stock that equaled 200% of the number of such shares that potentially would be issuable pursuant to the terms of the securities purchase agreement and the note (assuming conversion in full of the note and on any date of determination). The Company determined that, because the conversion price is unknown, the Company could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the note created a derivative with a fair value of $1,273,000 at the date of issuance.

As a result of the issuance of the note, the Company incurred aggregate costs of $2,126,000 related to the note’s original issue discount, legal and financing expenses, the fair value of the Common Stock issued and the recognition of the derivative liability. The Company recorded these costs as a note discount up to the face value of the note of $1,500,000 and the remaining $626,000 as financing costs in October 2018. The note discount was being amortized over the six-month term of the note.

In April 2019, the Company paid the balance of $1,500,000. Prior to the payoff the Company recognized a change in fair market value in the derivative liability totaling $670,000. As part of the payoff the Company amortized the remaining debt discount of $144,000 and recognized a gain on extinguishment of the derivative liability totaling $1,396,000.

As of June 30, 2019, the outstanding balance of the note was $0 and unamortized debt discount was $0.

(B) On October 30, 2018, the Company issued two unsecured convertible notes to one current investor and one otherwise unaffiliated third-party in the aggregate principal amount of $400,000. The notes bore interest at a rate of 5% per annum and matured on April 29, 2019. Upon the Company’s consummation of its underwritten public offering of the Company’s units, all, and not less than all, of (i) the outstanding principal amount and (ii) the accrued interest thereunder were to be converted into shares of the Company’s Common Stock. The per-share conversion price equaled seventy-five percent (75%) of the effective offering price of the Common Stock in the Company’s recent underwritten public offering. The Company determined that, because the conversion price was unknown, that the Company could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the notes created a derivative with a fair value of $302,000 at the date of issuance and was accounted as a debt discount and was being amortized over the term of the notes payable.

On April 5, 2019, the Company converted the outstanding principal amount and accrued interest of $410,000 into 182,333 shares of Common Stock. Prior to the conversion, the Company recognized a change in fair market value in the derivative liability totaling $21,000. In addition, the Company amortized the remaining debt discount of $48,000 and recognized a gain on extinguishment of the derivative liability totaling $187,000.

As of June 30, 2019, the outstanding balance of the note was $0 and unamortized debt discount was $0.

(C) On February 1, 2019, the Company issued an unsecured convertible note to Bellridge, an unaffiliated third-party, in the aggregate principal amount of $500,000 in exchange for net proceeds of $432,000, representing an original issue discount of $25,000, and paid legal and financing expenses of $43,000. In addition, the Company issued 16,667 shares of its Common Stock with a fair value of $128,000. The note was unsecured and did not bear interest; however, the implied interest was determined to be 10% since the note was issued at 10% less than its face value. The note matured in August 2019. The note was also convertible into shares of the Company’s Common Stock only on or after the occurrence of an uncured “Event of Default.” Primarily, the Company would have been in default if it did not repay the principal amount of the note, as required. The other events of default were standard for the type of transaction represented by the related securities purchase agreement and the note. The conversion price in effect on any date on which some or all of the principal of the note would have been converted would be a price equal to 70% of the lowest VWAP during the ten trading days immediately preceding the date on which Bellridge provides its notice of conversion. Upon an Event of Default, the Company would have owed Bellridge an amount equivalent to 110% of the then-outstanding principal amount of the note in addition to of all other amounts, costs, expenses, and liquidated damages that would have been due in respect thereof. The Company agreed that, on or after the occurrence of an Event of Default, it would reserve and keep available that number of shares of its Common Stock that is at least equal to 200% of the number of such shares that potentially would be issuable pursuant to the terms of the securities purchase agreement and the note (assuming conversion in full of the note and on any date of determination). The Company determined that, because the conversion price was unknown, the Company could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the note created a derivative with a fair value of $388,000 at the date of issuance. As a result of the issuance of the note, the Company incurred aggregate costs of $584,000 related to the note’s original issue discount, legal and financing expenses, the fair value of the Common Stock issued and the recognition of the derivative liability. The Company recorded these costs as a note discount up to the face value of the note of $500,000 and the remaining $84,000 as financing costs. The note discount was being amortized over the six-month term of the note. On April 2, 2019, the Company increased the outstanding principal amount of the note by $25,000 to an aggregate of $525,000 and issued 8,606 shares of Common Stock with a fair value of $55,000. The Company accounted for the increase in principal and the fair value of the shares of Common Stock in the aggregate of $80,000 as part its financing costs. In April 2019, the Company paid off the outstanding principal balance of $525,000. Prior to the payoff, the Company recognized a change in fair market value in the derivative liability totaling $260,000. In addition, the Company amortized the remaining debt discount of $366,000 and recognized a gain on extinguishment of the derivative liability totaling $644,000. As of June 30, 2019, the outstanding balance of the note was $0 and unamortized debt discount was $0.

Total interest expense for convertible notes payable was $5,000 and $145,000 for the six months ended June 30, 2019 and 2018, respectively.

XML

Derivative Liability

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Liability

11. DERIVATIVE LIABILITY

Under authoritative guidance used by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments that do not have fixed settlement provisions are deemed to be derivative instruments. The Company has issued certain convertible notes whose conversion prices contains reset provisions based on a future offering price and/or whose conversion prices are based on future market prices. However, since the number of shares to be issued is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to share settle the conversion option. In addition, the Company also granted certain warrants that included a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder.

As a result, the conversion option and warrants are classified as liabilities and are bifurcated from the debt host and accounted for as a derivative liability in accordance with ASC 815 and will be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

The derivative liabilities were valued using a probability weighted average Black-Scholes-Merton pricing model with the following average assumptions:

	June 30, 2019			Upon Issuance			December 31, 2018
Stock Price	$	2.00		$	7.65		$	4.80
Exercise Price	$	1.88		$	5.63		$	2.70
Expected Life		3.48			0.50			1.78
Volatility		195	%		164	%		184	%
Dividend Yield		0	%		0	%		0	%
Risk-Free Interest Rate		2.43	%		2.46	%		2.46	%
Fair Value	$	219,000		$	388,000		$	2,576,000

The expected life of the conversion feature of the notes and warrants was based on the remaining contractual term of the notes and warrants. The Company uses the historical volatility of its Common Stock to estimate the future volatility for its Common Stock. The expected dividend yield was based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future. The risk-free interest rate was based on rates established by the Federal Reserve Bank. As of December 31, 2018, the Company had recorded a derivative liability of $2,576,000.

During the six months ended June 30, 2019, the Company recorded an additional derivative liability totaling $388,000 as a result of the issuance of a convertible note. The Company also recorded a change in fair value of $518,000 to account the changes in fair value of these derivative liabilities for the six months ended June 30, 2019. In addition, the Company also recorded a gain on extinguishment of $2,227,000 to account for the extinguishment of derivative liabilities associated with the payoff of convertible debt for the six months ended June 30, 2019. At June 30, 2019, the fair value of the derivative liability amounted to $219,000. The details of derivative liability transactions for the six months ended June 30, 2019 and 2018 are as follows:

	June 30, 2019
Beginning Balance	$	2,576,000
Fair value upon issuance of notes payable and warrants		388,000
Change in fair value		(518,000	)
Extinguishment		(2,227,000	)
Ending Balance	$	219,000

XML

Equity Transactions

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Equity Transactions

12. EQUITY TRANSACTIONS

The Company’s Common Stock activity for the six months ended June 30, 2019 is as follows:

Units – Common Stock and Warrants

Shares and Warrants Issued as Part of the Company’s Underwritten Public Offering

On April 4, 2019, we entered into an Underwriting Agreement (the “Underwriting Agreement”) with A.G.P./Alliance Global Partners, as representative of the several underwriters named therein (the “Underwriter” or “AGP”), relating to a firm commitment public offering (the “Public Offering”) of 6,389,776 units (the “Units”) consisting of an aggregate of (i) 6,389,776 shares (the “Firm Shares”) of Common Stock, and (ii) warrants to purchase up to 6,389,776 shares of Common Stock (the “Firm Warrants”; and the shares of Common Stock issuable from time to time upon exercise of the Firm Warrants, the “Firm Warrant Shares”), at a public offering price of $3.13 per Unit. Pursuant to the terms of the Underwriting Agreement, we also granted the Underwriters an option, exercisable for 45 days, to purchase up to 958,466 additional Units, consisting of an aggregate of (x) 958,466 shares of Common Stock (the “Option Shares”; and, together with the Firm Shares, the “Shares”) and (y) warrants to purchase up to 958,466 shares of Common Stock (the “Option Warrants”; and, together, with the Firm Warrants, the “Warrants”; and the shares of Common Stock issuable from time to time upon exercise of the Option Warrants, the “Option Warrant Shares”; and, together with the Firm Warrant Shares, the “Warrant Shares”). The Warrants have an initial per share exercise price of $3.443, subject to customary adjustments, are exercisable immediately, and will expire five years from the date of issuance, or April 9, 2024.

On April 9, 2019, we closed the Public Offering and issued 6,389,776 Units, consisting of an aggregate of 6,389,776 Firm Shares and Firm Warrants to purchase up to an aggregate of 6,389,776 Firm Warrant Shares. In connection with the closing, the Underwriter partially exercised its over-allotment option and purchased an additional 159,820 Units, consisting of an aggregate of 159,820 Option Shares and Option Warrants to purchase up to an aggregate of 159,820 Option Warrant Shares. We received net proceeds of approximately $18,614,000, net of underwriting commissions and other offering expenses in the aggregate of $2,047,000. Included in the offering expenses were $161,000 in various legal and professional expenses that were incurred and paid in fiscal 2018 and accounted for as a deferred offering costs as of December 31, 2018. This amount was derecognized upon close of the public offering in April 2019 and was recorded as a reduction to paid in capital.

In connection with the Public Offering, we also issued the Underwriter warrants to purchase up to 319,488 shares of our Common Stock (the “Underwriter Warrants”), at an exercise price of $3.913. The Underwriter Warrants are exercisable at any time, and from time to time, in whole or in part, during the four-year period commencing one year from the effective date of the Registration Statement.

Common Stock

Shares Issued for the Acquisition of Verb Direct – In April 2019, we issued 3,327,791 shares of Common Stock with a fair value of $7,820,000 as part of our acquisition of Verb Direct. See Note 3, Acquisition of Verb Direct, for additional information.

Shares Issued for Services – During the six months ended June 30, 2019, the Company issued 197,810 shares of Common Stock to vendors for services rendered with a fair value of $728,000. These shares of Common Stock were valued based on the market value of the Company’s Common Stock price at the issuance date or the date the Company entered into the agreement related to the issuance.

Shares Issued Upon Issuance of Convertible Note – During the six months ended June 30, 2019, the Company issued to a note holder 25,272 shares of Common Stock with a fair value of $182,000 as an inducement for the issuance of a note payable. See Note 10, Convertible Notes Payable, for additional information.

Conversion of Notes Payable – During the six months ended June 30, 2019, the Company issued 182,333 shares of Common Stock upon conversion of notes payable and accrued interest of $410,000. See Note 10, Convertible Notes Payable, for additional information.

Conversion of Accounts Payable – On April 30, 2019, the Company converted accounts payable in the amount of $10,000 into 4,142 shares of Common Stock with a fair value of $10,000 at the date of conversion.

Stock Options

Effective October 16, 2014, the Company adopted the 2014 Stock Option Plan (the “Plan”) under the administration of the board of directors to retain the services of valued key employees and consultants of the Company.

At its discretion, the Company grants share option awards to certain employees and non-employees under the Plan and accounts for it in accordance with ASC 718, Compensation – Stock Compensation.

A summary of option activity for the six months ended June 30, 2019 is presented below.

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Options			Price		Life (Years)		Value
Outstanding at December 31, 2018		2,478,974		$	5.25		2.93	$	2,660,000
Granted		590,500			4.41		-		-
Forfeited		(236,667	)		5.57		-		-
Exercised		-			-		-		-
Outstanding at June 30, 2019		2,832,807		$	5.10		2.80	$	480,000
Vested June 30, 2019		1,424,608		$	4.51			$	427,000
Exercisable at June 30, 2019		802,307		$	5.12			$	153,000

During the six months ended June 3, 2019, the Company granted stock options to employees and consultants to purchase a total of 590,500 shares of Common Stock for services to be rendered. The options have an average exercise price of $4.41 per share, expire in five years, and vests (i) 50% on the grant date and the remaining 50% on the 12-month anniversary of the grant date, (ii) in three equal installments during the three years from the grant date, (iii) in 4 equal installments during the four years from the grant date, or (iv) in 12 equal installments based on achieving performance targets during the three years from the grant date. The total fair value of these options at the grant date was approximately $1,991,000 using the Black-Scholes Option pricing model.

The total stock compensation expense recognized relating to vesting of stock options for the six months ended June 30, 2019 amounted to $920,000. As of June 30, 2019, total unrecognized stock-based compensation expense was $4.4 million, which is expected to be recognized as part of operating expense through June 2023.

The fair value of share option award is estimated using the Black-Scholes option pricing method based on the following weighted-average assumptions:

	Six Months Ended June 30,
	2019			2018
Risk-free interest rate		1.91 - 2.75	%		2.25 – 2.85	%
Average expected term (years)		5 years			5 years
Expected volatility		201.3 -241.7	%		184.5 – 190.2	%
Expected dividend yield		-			-

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award; the expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s Common Stock; and the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future.

Warrants

The Company has the following warrants outstanding as of June 30, 2019, all of which are exercisable:

	Warrants			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2018		940,412		$	3.60		2.32	$	1,974,000
Granted		7,032,823			3.47		-		-
Forfeited		(6,667)			6.00		-		-
Exercised		(186,969	)		1.15		-		-
Outstanding at June 30, 2019, all vested		7,779,602		$	3.54		4.61	$	158,000

During the six months ended June 30, 2019, the Company granted warrants to purchase a total of 6,869,084 shares of Common Stock as part of a public offering. The warrants are exercisable at an average price of $3.46 per share and will expire in January 2023 (see Note 12). See Note 12, Equity Transactions, for additional information.

During the six months ended June 30, 2019, the Company granted fully vested warrants to purchase a total of 163,739 shares of Common Stock for services rendered. The warrants are exercisable at an average price of $3.76 per share and will expire in January 2023. The total fair value of these warrants at the grant date was approximately $439,000 using the Black-Scholes Option pricing model and was expensed upon grant.

During the six months ended June 30, 2019, a total of 186,969 warrants were exercised and converted into 173,714 common shares at a weighted average exercise price of $1.15. The Company received $45,000 upon exercise of the warrants.

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

13. COMMITMENTS AND CONTINGENCIES

Litigation

On April 24, 2018, EMA  Financial, LLC, a New York limited liability company (“EMA”) commenced an action against us, styled EMA Financial, LLC, a New York limited liability company, Plaintiff, against nFUSZ, Inc., Defendant, United States District Court, Southern District of New York, case number 1:18-cv-03634-NRB. The Complaint sets forth four causes of action and seeks relief consisting of: (1) money damages, (2) injunctive relief, (3) liquidated damages, and (4) declaratory relief. All of the claims stem from our refusal to honor EMA’s exercise notice in connection with a common stock purchase warrant that we had granted to it. We believe EMA’s allegations are entirely without merit.

The circumstances giving rise to the dispute are as follows: on or about December 5, 2017, we issued a warrant to EMA as part of the consideration we were required to provide in connection with a contemporaneous convertible loan EMA made to us. The loan, which was evidenced by a convertible note, was for a term of one year. Our refusal to honor the warrant exercise notice was due to our good faith belief that EMA’s interpretation of the cashless exercise provision of the warrant was, inter alia, (1) contrary to our direct conversations and agreements made with EMA prior to, and during the preparation of the loan and warrant agreements; (2) contradictory to the plain language on the face and body of the warrant agreement drafted by EMA; (3) wholly inconsistent with industry norms, standards, and practices; (4) was contrary to the cashless exercise method actually adopted by EMA’s co-lender in the same transaction; and (5) was the result of a single letter mistakenly transposed in the cashless exercise formula drafted by EMA which if adopted, would result in a gross and unintended windfall in favor of EMA and adverse to us. Moreover, as set forth in our response to EMA’s allegations, EMA’s interpretation of the cashless exercise provision would have resulted in it being issued more shares of our Common Stock than it would have received if it exercised the warrant for cash (instead of less), and more than the amount of shares reflected on the face of the warrant agreement itself. The loan underlying the transaction was repaid, in full, approximately three months after it was issued, on March 8, 2018, together with all accrued interest, prior to any conversion or attempted conversion of the note.

On July 20, 2018, we filed an Answer to the Complaint, along with certain Affirmative Defenses, as well as Counterclaims seeking, inter alia, to void the entire transaction for violation of New York’s criminal usury laws and, alternatively, for reformation of the warrant conversion formula set forth in the Warrant Agreement so as to be consistent with the parties’ intent and custom and practice in the industry.

The parties have undergone depositions and exchanged document production. Discovery was scheduled to end on January 31, 2019. Neither party has requested to extend the discovery period. Notwithstanding the pending action, in December 2018, EMA attempted to exercise the warrant through the Company’s transfer agent utilizing the disputed cashless exercise formula. The transfer agent rejected EMA’s request and notified the Company who promptly filed a motion for a preliminary injunction to enjoin EMA from making any further attempts to exercise the warrant in this manner during the pendency of the action. The Company is awaiting a decision from the Court on its preliminary injunction motion. As of the date of this Quarterly Report on the Form 10-Q, the Court has not ruled on our motion. We intend to vigorously defend the action, as well as vigorously prosecute our counterclaims against EMA. The action is still pending.

In August 2014, a former employee and then current stockholder (the “Employee”) entered into that certain Executive Employment Agreement (the “Employment Contract”) with bBooth, Inc., our predecessor company. Section 3.1 of the Employment Contract provided, among other things, that Employee was employed to serve as our President and reported directly to Rory Cutaia, our Chief Executive Officer. Section 5.2 of Employment Contract provides, among other things, that Employee was entitled to receive a bonus (the “Bonus”) from us if certain conditions are met. These specified conditions were never met.

On or about May 15, 2015, Employee ceased employment at the Company. More than eight months later, on or about January 20, 2016, the parties entered into a certain Stock Repurchase Agreement (the “Repurchase Agreement”) pursuant to which we purchased all of Employee’s shares of Common Stock for a purchase price of $144,000. The Repurchase Agreement also provided, among other things, that Employee released us from all claims, causes of action, suits, and demands (the “Release”).

Approximately two years later, in April 2018, at a time when the Company’s share price was on the rise, Employee notified us by email that it is Employee’s position that on or about May 15, 2015: (1) Employee was terminated “without cause” pursuant to Section 6.2 of the Employment Contract; or (2) Employee terminated employment with Company “for good reason” pursuant to Section 6.3 of the Employment Contract. Employee sought approximately $300,000 in allegedly unpaid bonuses, plus 150,000 options priced at $0.50 per share, which expired prior to exercise. We responded in or about April 2018 that Employee’s claims lacked factual and legal merit, including that they are barred by the Release. The lack of response from Employee at that time appeared to indicate Employee’s tacit acknowledgment and ratification of our rationale underpinning our denial of Employee’s claims. Approximately eight (8) months later in December 2018, Employee resurfaced, renewing his claims. We responded by reminding Employee we consider his claims to be without merit, and that, in any event, they are barred by the Release. In our view, the Release set forth in the Repurchase Agreement coupled with the existing merger or integration clause likely shields the Company from liability, even assuming, arguendo, that the claims could be supported by credible evidence.

We know of no other material pending legal proceedings to which we or any of our subsidiaries is a party or to which any of our assets or properties, or the assets or properties of any of our subsidiaries, are subject and, to the best of our knowledge, no adverse legal activity is anticipated or threatened. In addition, we do not know of any such proceedings contemplated by any governmental authorities.

On July 9, 2019, a purported class action complaint was filed in the United States District Court, Central District of California, styled SCOTT C. HARTMANN, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. VERB TECHNOLOGY COMPANY, INC., and RORY J. CUTAIA, Defendant, Case Number 2:19-CV-05896. As of the date of this Quarterly Report on Form 10-Q, the plaintiff has not served either defendant. The complaint purports to be a “class action complaint for violations of the Federal Securities Laws.” The allegations relate to a January 3, 2018, announcement by the Company of its agreement with Oracle America, Inc., and the purchases of and sales of securities by the named plaintiff (and, purportedly, all of the members of the yet to be established class through and including approximately May 2, 2018). The Company and Mr. Cutaia deny all allegations contained in the Complaint and, if and when served, intends to defend vigorously.

We know of no material proceedings in which any of our directors, officers, or affiliates, or any registered or beneficial stockholder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries.

Board of Directors

The Company has committed an aggregate of $270,000 in annual compensation to its three independent board members commencing on the date the Company became listed on the Nasdaq Stock Market, LLC (“Nasdaq”). The members will serve on the board of directors until the annual meeting for the year in which their term expires or until their successors have been elected and qualified.

XML

Subsequent Events

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

14. SUBSEQUENT EVENTS

Issuance of Common Stock

Subsequent to June 30, 2019, the Company issued 9,716 shares of Common Stock to vendors for services rendered with a fair value of $15,000. These shares of Common Stock were valued based on the market value of the Company’s stock price at the issuance date or the date the Company entered into the agreement related to the issuance.

Grant of Stock Options

Subsequent to June 30, 2019, the Company granted stock options to an employee to purchase a total 45,167 shares of Common Stock for services rendered. The options have an exercise price of $3.13 per share, expire in five years, and vest on grant date or over a period of four years from grant date. The total fair value of these options at the grant date was $91,000 using the Black-Scholes option pricing model.

Conversion of Notes Payable

Subsequent to June 30, 2019, the Company issued 598,286, shares of restricted Common Stock and warrants to purchase up to 108,196 shares of Common Stock, with an exercise price of $3.44, upon the conversion of the aggregate principal amount notes outstanding and accrued interest thereunder of $719,000. For additional information, please see Note 8, Notes Payable, to these unaudited consolidated financial statements.

Issuance of Notes Payable

Subsequent to June 30, 2019, we issued unsecured promissory notes to an unaffiliated third-party in the aggregate principal amount of $320,000, in exchange for net proceeds of $300,000, representing an original issue discount of $20,000, which is included in the original principal amount. The note is unsecured. The note is due three business days following an equity or debt offering (or combination) in excess of One Million Dollars ($1,000,000) by the Company.

Preferred Stock and Warrant Offering

On August 14, 2019, we entered into a Securities Purchase Agreement (the “SPA”) with certain purchasers named therein (collectively, the “Preferred Purchasers”), pursuant to which we agreed to issue and sell to the Preferred Purchasers up to an aggregate of 6,000 shares of our Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and warrants (the “Warrants”) to purchase an aggregate of up to 3.87 million shares of Common Stock (an amount equivalent to the number of shares of Common Stock into which the Series A Preferred Stock is initially convertible). Each share of Series A Preferred Stock is convertible, at any time and from time to time from and after the issuance date, at the holder’s option into that number of shares of Common Stock equal to the stated value per share (or $1,000) divided by the conversion price (initially, $1.55); thus, initially, each share of Series A Preferred Stock is convertible into approximately 645 shares of Common Stock. The Warrants have an initial exercise price of $1.88 per share, subject to customary adjustments, are exercisable from and after six months after the date of issuance, and will expire five years from the date of issuance. We closed the offering on August 14, 2019, and issued 5,030 shares of Series A Preferred Stock and granted warrants to issue up to 3,245,162 shares of Common Stock in connection therewith resulting in aggregate proceeds of $5,030,000. Both the conversion price of the Series A Preferred Stock and the exercise price of the Warrants are subject to downward price adjustments in the event of certain future equity sales or rights offerings.

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2018 included herein was derived from the audited consolidated financial statements as of that date.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of Verb Technology Company, Inc. and Verb Direct, LLC, its wholly owned subsidiary. Intercompany transactions have been eliminated in the consolidation.

Going Concern

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the six months ended June 30, 2019, the Company incurred a net loss of $5,351,000 and used cash in operations of $3,535,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2018 consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

In April 2019, the Company completed an underwritten public offering of units, which offering was made pursuant to the Company’s Registration Statement on Form S-1, as amended (File No. 333-226840) (the “Registration Statement”). The Company raised net proceeds of approximately $18,614,000, after taking into account offering costs, of which $15,000,000 was used to pay the cash portion of the purchase price to acquire Sound Concepts, Inc. (“Sound Concepts”), $2,025,000 was applied towards the payment of certain notes payable, and the remaining balance was used for working capital purposes.

Our continuation as a going concern is dependent on our ability to obtain additional financing until we can generate sufficient cash flows from operations to meet our obligations. We intend to continue to seek additional debt or equity financing to continue our operations. There is no assurance that we will ever be profitable or that debt or equity financing will be available to us. The 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.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Significant estimates include assumptions made in analysis of reserves for allowance of doubtful accounts, inventory, purchase price allocations, impairment of long-term assets, realization of deferred tax assets, determining fair value of derivative liabilities, and valuation of equity instruments issued for services. Amounts could materially change in the future.

Concentration of Credit and Other Risks

Concentration of Credit and Other Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable. Cash is deposited with a limited number of financial institutions. The balances held at any one financial institution at times may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits of up to $250,000.

The Company extends limited credit to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral or other security to support accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains an allowance for doubtful accounts and sales credits. The Company believes that any concentration of credit risk in its accounts receivable is substantially mitigated by the Company’s evaluation process, relatively short collection terms and the high level of credit worthiness of its customers.

The Company’s concentration of credit risk includes its concentrations from key customers and vendors. The details of these significant customers and vendors are presented in the following table for six months ended June 30, 2019:

	Six Months Ended	Six Months Ended	Year Ended
	June 30, 2019	June 30, 2018	December 31, 2018
	Unaudited	Unaudited
Verb’s largest customers are presented below as a percentage of Verb’s aggregate:
Revenue	2 major customers account for 11% and 10% of revenue individually, or 21% of revenue in the aggregate	Not applicable	Not applicable
Accounts receivable	3 major customers account for 11%, 12% and 17% of accounts receivable individually, or 40% of accounts receivable in the aggregate	Not applicable	Not applicable
Verb’s largest vendors are presented below as a percentage of Verb’s aggregate:
Purchase	3 major vendors account for 11%, 14% and 19% of purchases individually, or 44% of purchases in the aggregate	Not applicable	Not applicable
Accounts payable	18% of accounts payable to one vendor	Not applicable	Not applicable

Leases

Leases

We lease certain corporate office space and office equipment under lease agreements with monthly payments over a period of 36 to 84 months. We determine if an arrangement is a lease at inception. Lease assets are presented as operating lease right-of-use assets and the related liabilities are presented as lease liabilities in our consolidated balance sheets.

Prior to January 1, 2019, the Company accounted for leases under ASC 840, Accounting for Leases. Effective January 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. See Note 7, Right-of-Use Assets and Operating Lease Liabilities, for additional information.

Revenue Recognition

Revenue Recognition

The Company derives its revenue primarily from providing application services through the SaaS application, digital marketing and sales support services, from the sale of customized print products and training materials, branded apparel, and digital tools, as demanded by its customers. The subscription revenue from the application services are recognized over the life of the estimated subscription period. The Company also charges certain customers setup or installation fees for the creation and development of websites and phone application. These fees are accounted as part of deferred revenues and amortized over the estimated life of the agreement. Amounts related to shipping and handling that are billed to customers are reflected as part of revenues, and the related costs are reflected in cost of revenues in the accompanying Statements of Operations.

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Pursuant to ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to our customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer.

The products sold by us are distinctly individual. The products are offered for sale solely as finished goods, and there are no performance obligations required post-shipment for customers to derive the expected value from them. Other than promotional activities, which can vary from time to time but nevertheless are entirely within the Company’s control, contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time.

The control of products we sell transfers to our customers upon shipment from our facilities, and our performance obligations are satisfied at that time. Shipping and handling activities are performed before the customer obtains control of the goods and, therefore, represent a fulfillment activity rather than promised goods to the customer. Payment for sales are generally made by check, credit card, or wire transfer. Historically, we have not experienced any significant payment delays from customers.

We allow returns within 30 days of purchase from end-users. Our customers may return purchased products to us under certain circumstances.

Customers setup or installation fees for the creation and development of websites and phone application are recognized as revenues over the estimated subscription period. Design assets of the websites and phone application are recognized when the work is completed. Licensing revenue is recognized over the estimated subscription period. In addition, certain revenue is recorded based upon stand-alone selling prices and is primarily recognized when the customer uses these services, based on the quantity of services rendered, such as number of customer usage.

Revenues for the three months ended June 30, 2019 and 2018 were as follows:

	Three Months Ended June 30, 2019 (Unaudited)						Three Months Ended June 30, 2018 (Unaudited)
	Revenue		Cost of Revenues		Gross Margin		Revenue		Cost of Revenues		Gross Margin
Digital	$	1,454,000	$	176,000	$	1,278,000	$	8,000	$	7,000	$	1,000
Welcome Kits & Fulfillment		1,784,000		1,385,000		399,000		-		-		-
Shipping		495,000		481,000		14,000		-		-		-
Total	$	3,733,000	$	2,042,000	$	1,691,000	$	8,000	$	7,000	$	1,000

Revenues for the six months ended June 30, 2019 and 2018 were as follows:

	Six Months Ended June 30, 2019 (Unaudited)						Six Months Ended June 30, 2018 (Unaudited)
	Revenue		Cost of Revenues		Gross Margin		Revenue		Cost of Revenues		Gross Margin
Digital	$	1,463,000	$	206,000	$	1,257,000	$	16,000	$	8,000	$	8,000
Welcome Kits & Fulfillment		1,784,000		1,385,000		399,000		-		-		-
Shipping		495,000		481,000		14,000		-		-		-
Total	$	3,742,000	$	2,072,000	$	1,670,000	$	16,000	$	8,000	$	8,000

Cost of Revenues

Cost of Revenues

Cost of revenues primarily consists of the salaries of certain employees, purchase price of consumer products, digital content costs, packaging supplies, and customer shipping and handling expenses. Shipping costs to receive products from our suppliers are included in our inventory and recognized as cost of sales upon sale of products to our customers. 

Derivative Financial Instruments

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

The Company uses Level 3 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using a probability weighted average Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjusted to fair value of derivatives.

Share Based Payments

Share Based Payments

The Company issues stock options and warrants, shares of Common Stock, and equity interests as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation to employees in accordance with FASB ASC 718, Compensation – Stock Compensation. Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period.

From January 1, 2018 until December 31, 2018, the Company accounted for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity - Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received or (b) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date. For interim periods, the fair value is estimated, and the percentage of completion is applied to that estimate to determine the cumulative expense recorded.

In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The guidance was issued to simplify the accounting for share-based transactions by expanding the scope of ASU 2018-07 from only being applicable to share-based payments to employees to also include share-based payment transactions for acquiring goods and services from nonemployees. As a result, nonemployee share-based transactions will be measured by estimating the fair value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance conditions. We adopted ASU 2018-07 on January 1, 2019. The adoption of the standard did not have a material impact on our financial statements for the six months ended June 30, 2019 or the previously reported financial statements.

Net Loss Per Share

Net Loss Per Share

Basic net loss per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed giving effect to all dilutive potential shares of Common Stock that were outstanding during the period. Dilutive potential shares of Common Stock consist of incremental shares of Common Stock issuable upon exercise of stock options. No dilutive potential shares of Common Stock were included in the computation of diluted net loss per share because their impact was anti-dilutive. As of June 30, 2019, and 2018, the Company had total outstanding options of 2,832,807 and 1,456,374, respectively, and warrants of 7,779,602 and 1,535,397, respectively, which were excluded from the computation of net loss per share because they are anti-dilutive. 

Acquisitions and Business Combinations

Acquisitions and Business Combinations

The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from, acquired technology, trade-marks and trade names, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is the period needed to gather all information necessary to make the purchase price allocation, not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. 

Goodwill

Goodwill

In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, the Company reviews the recoverability of the carrying value of goodwill at least annually or whenever events or circumstances indicate a potential impairment. The Company’s impairment testing will be done annually at December 31 (its fiscal year end). Recoverability of goodwill is determined by comparing the fair value of Company’s reporting units to the carrying value of the underlying net assets in the reporting units. If the fair value of a reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities.

Intangible Assets with Finite Useful Lives

Intangible Assets with Finite Useful Lives

We have certain finite lived intangible assets that were initially recorded at their fair value at the time of acquisition. These intangible assets consist of developed technology. Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful life of five years.

We review all finite lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable. If the carrying value of an asset group is not recoverable, we recognize an impairment loss for the excess carrying value over the fair value in our consolidated statements of operations. 

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB ASC for disclosures about the fair value of its financial instruments and paragraph 820-10-35-37 of the FASB ASC (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1:	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2:	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3:	Pricing inputs that are generally observable inputs and not corroborated by market data.

The carrying amount of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, and accounts payable and accrued expenses approximate their fair value due to their short-term nature. The carrying values financing obligations approximate their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest rates. The Company uses Level 3 inputs for its valuation methodology for the derivative liabilities. 

Long-Lived Assets

Long-Lived Assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. No impairment of long-lived assets was required for the year ended December 31, 2018 and for the period ended June 30, 2019.

Segments

Segments

The Company has three revenue channels: (1) SaaS, (2) welcome kits, (3) fulfillments. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker (the Company’s Chief Executive Officer) reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to (i) their similar customer base and (ii) the Company having a single sales team, marketing department, customer service department, operations department, finance department and accounting department to support all revenue channels. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Management does not believe that recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC will have a material impact on the Company’s present or future consolidated financial statements.

XML

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Schedule of Revenue Recognition

Revenues for the three months ended June 30, 2019 and 2018 were as follows:

	Three Months Ended June 30, 2019 (Unaudited)						Three Months Ended June 30, 2018 (Unaudited)
	Revenue		Cost of Revenues		Gross Margin		Revenue		Cost of Revenues		Gross Margin
Digital	$	1,454,000	$	176,000	$	1,278,000	$	8,000	$	7,000	$	1,000
Welcome Kits & Fulfillment		1,784,000		1,385,000		399,000		-		-		-
Shipping		495,000		481,000		14,000		-		-		-
Total	$	3,733,000	$	2,042,000	$	1,691,000	$	8,000	$	7,000	$	1,000

Revenues for the six months ended June 30, 2019 and 2018 were as follows:

	Six Months Ended June 30, 2019 (Unaudited)						Six Months Ended June 30, 2018 (Unaudited)
	Revenue		Cost of Revenues		Gross Margin		Revenue		Cost of Revenues		Gross Margin
Digital	$	1,463,000	$	206,000	$	1,257,000	$	16,000	$	8,000	$	8,000
Welcome Kits & Fulfillment		1,784,000		1,385,000		399,000		-		-		-
Shipping		495,000		481,000		14,000		-		-		-
Total	$	3,742,000	$	2,072,000	$	1,670,000	$	16,000	$	8,000	$	8,000

XML

Acquisition of Verb Direct (Tables)

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Schedule of Fair Value of Assets Assumed and Liabilities Acquired

he following table summarizes the provisional fair value of the assets assumed and liabilities acquired in the acquisition:

	As of March 31, 2019
	Fair Value
Assets Acquired:
Other current assets	$	2,004,000
Property and equipment		58,000
Other assets		1,302,000		$	3,364,000
Liabilities Assumed:
Current liabilities		(2,153,000	)
Long term liabilities		(1,068,000	)		(3,221,000	)
Intangible assets (provisional)					10,330,000
Goodwill (provisional)					12,347,000
Purchase Price				$	22,820,000

Schedule of Pro Forma Statements of Operations

The unaudited pro forma statements of operations for the three and six months ended June 30, 2019 and 2018 give effect to the transaction to the merger as if it had occurred on January 1, 2018.

	Statement of Operations (Unaudited)
	Three Months Ended June 30, 2019			Three Months Ended June 30, 2018			Six Months Ended June 30, 2019			Six Months Ended June 30, 2018
				(Proforma)			(Proforma)			(Proforma)
Digital	$	1,454,000		$	928,000		$	2,513,000		$	1,850,000
Welcome Kits & Fulfillment		1,784,000			1,814,000			4,049,000			3,373,000
Shipping		495,000			367,000			1,172,000			649,000
Revenue		3,733,000			3,109,000			7,734,000			5,872,000
Digital Cost of Revenue		176,000			160,000			343,000			263,000
Welcome Kits & Fulfillment Cost of Revenue		1,385,000			995,000			2,860,000			2,060,000
Shipping cost of Revenue		481,000			351,000			1,087,000			644,000
Cost of revenue		2,042,000			1,506,000			4,290,000			2,967,000
Digital Gross Margin		1,278,000			768,000			2,170,000			1,587,000
Welcome Kits & Fulfillment Gross Margin		399,000			819,000			1,189,000			1,313,000
Shipping Gross Margin		14,000			16,000			85,000			5,000
Gross margin		1,691,000			1,603,000			3,444,000			2,905,000
Operating Expenses:
Research and development		1,335,000			605,000			2,590,000			1,247,000
Depreciation and amortization		567,000			508,000			1,003,000			1,018,000
General and administrative		3,262,000			281,000			6,525,000			6,230,000
Total operating expenses		5,164,000			1,394,000			10,118,000			8,495,000
Income / (Loss) from operations		(3,473,000	)		209,000			(6,674,000	)		(5,590,000	)
Other income (expense)
Other income / (expense)		(1,000	)		19,000			(17,000	)		8,000
Financing costs		(55,000	)		-			(139,000	)		(172,000	)
Interest expense - amortization of debt discount		(572,000	)		-			(1,626,000	)		(748,000	)
Change in fair value of derivative liability		(426,000	)		1,444,000			518,000			(1,181,000	)
Gain on extinguishment of derivative liability, net		2,227,000			-			2,227,000			652,000
Interest expense		(43,000	)		(59,000	)		(83,000	)		(263,000	)
Total other income (expense)		1,130,000			1,404,000			880,000			(1,704,000	)
Net Income / (Loss)	$	(2,343,000	)	$	1,613,000		$	(5,794,000	)	$	(7,294,000	)
Income per share		(0.11	)		0.12			(0.34	)		(0.57	)
Weighted average number of common shares outstanding - basic and diluted		21,624,240			13,497,123			16,946,065			12,816,808

XML

Accounts Receivable (Tables)

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Schedule of Accounts Receivable

Accounts receivable, net consisted of the following:

	June 30, 2019			December 31, 2018
		(Unaudited)
Accounts receivable	$	1,271,000		$	1,000
Less allowance for doubtful accounts		(16,000	)		-
Total accounts receivable, net	$	1,255,000		$	1,000

XML

Inventory (Tables)

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Schedule of Inventory

	June 30, 2019			December 31, 2018
		(Unaudited)
Raw materials	$	64,000		$	-
Finished goods		124,000			-
Total inventory		188,000			-
Less inventory reserve		(23,000	)		-
Total inventory, net	$	165,000		$	-

XML

Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment consisted of the following as of June 30, 2019 and December 31, 2018.

	June 30, 2019			December 31, 2018
		(Unaudited)
Computers	$	47,000		$	28,000
Furniture and fixture		83,000			56,000
Machinery and equipment		165,000			24,000
Software		113,000			-
Vehicles		17,000			-
Leasehold improvement		30,000			-
Total property and equipment		455,000			108,000
Accumulated Depreciation		(399,000	)		(97,000	)
Total property and equipment, net	$	56,000		$	11,000

XML

Right of Use Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Schedule of Lease Cost

	Three Months Ended June 30, 2019
Lease Cost
Operating lease cost (included in general and administration in the Company’s unaudited condensed statement of operations)	$	170,000
Other Information
Cash paid for amounts included in the measurement of lease liabilities for the second quarter 2019	$	—
Weighted average remaining lease term – operating leases (in years)		4.05
Average discount rate – operating leases		8.5	%

Schedule of Operating Leases

	At June 30, 2019
Operating leases
Long-term right-of-use assets	$	1,219,000
Short-term operating lease liabilities	$	227,000
Long-term operating lease liabilities		1,003,000
Total operating lease liabilities	$	1,230,000

Schedule of Present Value of Lease Liabilities

Year Ending	Operating Leases
2019 (remaining 6 months)	$	170,000
2020		348,000
2021		341,000
2022		304,000
2023		313,000
Total lease payments		1,476,000
Less: Imputed interest/present value discount		(246,000	)
Present value of lease liabilities	$	1,230,000

XML

Note Payable (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of Note Payable

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2019			Balance at December 31, 2018
Note 1 (A)	March 22, 2019	April 10, 2019		5.0	%	$	310,000	$	-		$	-
Note 2 (B)	March 29, 2019	July 10, 2019		5.0	%		53,000		53,000			-
Note 3 (C)	April 2, 2019	July 10, 2019		5.0	%		53,000		157,000
Note 4 (D)	April 30, 2019	April 29, 2020		5.0	%		500,000		500,000			-
Total notes payable – related parties									710,000			-
Debt discount									(1,000	)		-
Total notes payable, net of debt discount								$	709,000		$	-

(A) On March 22, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $310,000, in exchange for net proceeds of $300,000, representing an original issue discount of $10,000, which is included in the original principal amount. The note is unsecured and bears interest on the principal amount at a rate of 5% per annum. The note was due on demand at any time after April 10, 2019. As a result of the issuance of the note, the Company incurred aggregate costs of $10,000 related to the note’s original issue discount. The Company recorded these costs as a note discount and is being amortized over the term of the note. In April 2019, the Company paid off the balance of $310,000 and accrued interest totaling $1,000. As part of the payment, the Company amortized the remaining debt discount of $10,000. As of June 30, 2019, the outstanding balance of the note was $0.

(B)	On March 29, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $53,000, in exchange for net proceeds of $50,000, representing an original issue discount of $3,000, which is included in the original principal amount. The note is unsecured and bears interest on the principal amount at a rate of 5% per annum. The note is due on demand at any time after July 10, 2019. As a result of the issuance of the note, the Company incurred aggregate costs of $3,000 related to the note’s original issue discount. The Company recorded these costs as a note discount and is being amortized over the term of the note. As of June 30, 2019, the outstanding balance of the note amounted to $53,000. On July 10, 2019, we amended the note, pursuant to which, on July 10, 2019, the aggregate outstanding principal and all accrued and unpaid interest converted into 27,018 shares of our Common Stock, and a warrant to purchase up to 27,018 shares of our Common Stock at an exercise price of $3.44 per share.
(C)	On April 2, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $157,000, in exchange for net proceeds of $150,000, representing an original issue discount of $7,000, which is included in the original principal amount. The note is unsecured and bore interest on the principal amount at a rate of 5% per annum. The note was due demand at any time after July 10, 2019. As a result of the issuance of the note, the Company incurred aggregate costs of $7,000 related to the note’s original issue discount. The Company recorded these costs as a note discount and is being amortized over the term of the note. As of June 30, 2019, the outstanding balance of the note amounted to $157,000. On July 10, 2019, we amended the note, pursuant to which, on July 10, 2019, the aggregate outstanding principal and all accrued and unpaid interest converted into 81,178 shares of our Common Stock, and a warrant to purchase up to 81,178 shares of our Common Stock at an exercise price of $3.44 per share.
(D)	On April 30, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $500,000, in exchange for net proceeds of $500,000. The note was unsecured and bore interest on the principal amount at a rate of 5% per annum. The note was due on April 29, 2020. As of June 30, 2019, the outstanding balance of the note amounted to $500,000. On July 10, 2019, we amended the note, pursuant to which, on July 29, 2019, the aggregate outstanding principal and all accrued and unpaid interest converted into 490,090 shares of our Common Stock.

XML

Notes Payable - Related Parties (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of Notes Payable to Related Parties

The Company has the following related parties notes payable as of June 30, 2019 and December 31, 2018:

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2019			Balance at December 31, 2018
Note 1 (A)	December 1, 2015	February 8, 2021		12.0	%	$	1,249,000	$	825,000		$	825,000
Note 2 (B)	December 1, 2015	April 1, 2017		12.0	%		112,000		112,000			112,000
Note 3 (C)	April 4, 2016	June 4, 2021		12.0	%		343,000		240,000			240,000
Note 4 (D)	March 22, 2019	April 30, 2019		5.0	%		58,000		-			-
Total notes payable – related parties									1,177,000			1,177,000
Non-current									(1,065,000	)		(1,065,000	)
Current								$	112,000		$	112,000

(A) On December 1, 2015, the Company issued a convertible note payable to Mr. Rory J. Cutaia, the Company’s majority stockholder and Chief Executive Officer, to consolidate all loans and advances made by Mr. Cutaia to the Company as of that date. The note bears interest at a rate of 12% per annum, secured by the Company’s assets, and will mature on February 8, 2021, as amended.

As of June 30, 2019, and December 31, 2018, the outstanding balance of the note amounted to $825,000, respectively.

(B)	On December 1, 2015, the Company issued a note payable to a former member of the Company’s board of directors, in the amount of $112,000, representing unpaid consulting fees as of November 30, 2015. The note is unsecured, bears interest rate of 12% per annum, and matured in April 2017. As of June 30, 2019, and December 31, 2018, the outstanding principal balance of the note was equal to $112,000, respectively. As of June 30, 2019, the note was past due, and remains past due. The Company is currently in negotiations with the noteholder to settle the past due note.
(C)	On April 4, 2016, the Company issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. The note bears interest at a rate of 12% per annum, secured by the Company’s assets, and will mature on June 4, 2021, as amended. As of June 30, 2019, and December 31, 2018, the outstanding balance of the note amounted to $240,000, respectively.
(D)	On March 22, 2019, the Company issued a note payable to Mr. Jeff Clayborne, the Company’s Chief Financial Officer, in the amount of $58,000. The note was unsecured, bore interest at a rate of 5% per annum, and matured on April 30, 2019. On April 11, 2019, the Company paid off the balance of $58,000. As of June 30, 2019, the outstanding balance of the note was $0.

XML

Convertible Notes Payable (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of Convertible Notes Payable

The Company has the following convertible notes payable as of June 30, 2019 and December 31, 2018:

Note	Note Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2019		Balance at December 31, 2018
Note payable (A)	October 19, 2018	April 19, 2019		10	%	$	1,500,000	$	-	$	1,500,000
Note payable (B)	October 30, 2018	April 29, 2019		5	%	$	400,000		-		400,000
Note payable (C)	February 1, 2019	August 2, 2019		10	%	$	500,000		-		-
Total notes payable									-		1,900,000
Debt discount									-		(1,082,000	)
Total notes payable, net of debt discount								$	-	$	818,000

(A) On October 19, 2018, the Company issued an unsecured convertible note to Bellridge Capital, LP (“Bellridge”), an unaffiliated third-party, in the aggregate principal amount of $1,500,000 in exchange for net proceeds of $1,242,000, representing an original issue discount of $150,000, and paid legal and financing expenses of $109,000. In addition, the Company issued 96,667 shares of its Common Stock with a fair value of $595,000. The note was unsecured and did not bear interest; however, the implied interest was determined to be 10% since the note was issued at 10% less than its face value. The note matured in April 2019. The note was also convertible into shares of the Company’s Common Stock only on or after the occurrence of an uncured “Event of Default.” Primarily, the Company would be in default if it did not repay the principal amount of the note, as required. The other events of default are standard for the type of transaction represented by the related securities purchase agreement and the note. In the event of a default, the conversion price in effect on any date on which some or all of the principal of the note is to be converted would be a price equal to 70% of the lowest VWAP during the ten trading days immediately preceding the date on which Bellridge provided its notice of conversion. Upon an Event of Default, the Company would owe Bellridge an amount equivalent to 110% of the then-outstanding principal amount of the note in addition to of all other amounts, costs, expenses, and liquidated damages that might also be due in respect thereof. The Company agreed that, on or after the occurrence of an Event of Default, it would reserve and keep available that number of shares of its Common Stock that equaled 200% of the number of such shares that potentially would be issuable pursuant to the terms of the securities purchase agreement and the note (assuming conversion in full of the note and on any date of determination). The Company determined that, because the conversion price is unknown, the Company could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the note created a derivative with a fair value of $1,273,000 at the date of issuance.

As a result of the issuance of the note, the Company incurred aggregate costs of $2,126,000 related to the note’s original issue discount, legal and financing expenses, the fair value of the Common Stock issued and the recognition of the derivative liability. The Company recorded these costs as a note discount up to the face value of the note of $1,500,000 and the remaining $626,000 as financing costs in October 2018. The note discount was being amortized over the six-month term of the note.

In April 2019, the Company paid off the balance of $1,500,000. Prior to the payoff the Company recognized a change in fair market value in the derivative liability totaling $670,000. As part of the payoff the Company amortized the remaining debt discount of $144,000 and recognized a gain on extinguishment of the derivative liability totaling $1,396,000.

As of June 30, 2019, the outstanding balance of the note was $0 and unamortized debt discount was $0.

(B) On October 30, 2018, the Company issued two unsecured convertible notes to one current investor and one otherwise unaffiliated third-party in the aggregate principal amount of $400,000. The notes bore interest at a rate of 5% per annum and matured on April 29, 2019. Upon the Company’s consummation of its underwritten public offering of the Company’s units, all, and not less than all, of (i) the outstanding principal amount and (ii) the accrued interest thereunder were to be converted into shares of the Company’s Common Stock. The per-share conversion price equaled seventy-five percent (75%) of the effective offering price of the Common Stock in the Company’s recent underwritten public offering. The Company determined that, because the conversion price was unknown, that the Company could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the notes created a derivative with a fair value of $302,000 at the date of issuance and was accounted as a debt discount and was being amortized over the term of the notes payable.

On April 5, 2019, the Company converted the outstanding principal amount and accrued interest of $410,000 into 182,333 shares of Common Stock. Prior to the conversion, the Company recognized a change in fair market value in the derivative liability totaling $21,000. In addition, the Company amortized the remaining debt discount of $48,000 and recognized a gain on extinguishment of the derivative liability totaling $187,000.

As of June 30, 2019, the outstanding balance of the note was $0 and unamortized debt discount was $0.

(C) On February 1, 2019, the Company issued an unsecured convertible note to Bellridge, an unaffiliated third-party, in the aggregate principal amount of $500,000 in exchange for net proceeds of $432,000, representing an original issue discount of $25,000, and paid legal and financing expenses of $43,000. In addition, the Company issued 16,667 shares of its Common Stock with a fair value of $128,000. The note was unsecured and did not bear interest; however, the implied interest was determined to be 10% since the note was issued at 10% less than its face value. The note matured in August 2019. The note was also convertible into shares of the Company’s Common Stock only on or after the occurrence of an uncured “Event of Default.” Primarily, the Company would have been in default if it did not repay the principal amount of the note, as required. The other events of default were standard for the type of transaction represented by the related securities purchase agreement and the note. The conversion price in effect on any date on which some or all of the principal of the note would have been converted would be a price equal to 70% of the lowest VWAP during the ten trading days immediately preceding the date on which Bellridge provides its notice of conversion. Upon an Event of Default, the Company would have owed Bellridge an amount equivalent to 110% of the then-outstanding principal amount of the note in addition to of all other amounts, costs, expenses, and liquidated damages that would have been due in respect thereof. The Company agreed that, on or after the occurrence of an Event of Default, it would reserve and keep available that number of shares of its Common Stock that is at least equal to 200% of the number of such shares that potentially would be issuable pursuant to the terms of the securities purchase agreement and the note (assuming conversion in full of the note and on any date of determination). The Company determined that, because the conversion price was unknown, the Company could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the note created a derivative with a fair value of $388,000 at the date of issuance. As a result of the issuance of the note, the Company incurred aggregate costs of $584,000 related to the note’s original issue discount, legal and financing expenses, the fair value of the Common Stock issued and the recognition of the derivative liability. The Company recorded these costs as a note discount up to the face value of the note of $500,000 and the remaining $84,000 as financing costs. The note discount was being amortized over the six-month term of the note. On April 2, 2019, the Company increased the outstanding principal amount of the note by $25,000 to an aggregate of $525,000 and issued 8,606 shares of Common Stock with a fair value of $55,000. The Company accounted for the increase in principal and the fair value of the shares of Common Stock in the aggregate of $80,000 as part its financing costs. In April 2019, the Company paid off the outstanding principal balance of $525,000. Prior to the payoff, the Company recognized a change in fair market value in the derivative liability totaling $260,000. In addition, the Company amortized the remaining debt discount of $366,000 and recognized a gain on extinguishment of the derivative liability totaling $644,000. As of June 30, 2019, the outstanding balance of the note was $0 and unamortized debt discount was $0.

XML

Derivative Liability (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Liability Using Weighted Average Black-Scholes-Merton Pricing Model

The derivative liabilities were valued using a probability weighted average Black-Scholes-Merton pricing model with the following average assumptions:

	June 30, 2019			Upon Issuance			December 31, 2018
Stock Price	$	2.00		$	7.65		$	4.80
Exercise Price	$	1.88		$	5.63		$	2.70
Expected Life		3.48			0.50			1.78
Volatility		195	%		164	%		184	%
Dividend Yield		0	%		0	%		0	%
Risk-Free Interest Rate		2.43	%		2.46	%		2.46	%
Fair Value	$	219,000		$	388,000		$	2,576,000

Schedule of Derivative Liability Transactions

The details of derivative liability transactions for the six months ended June 30, 2019 and 2018 are as follows:

	June 30, 2019
Beginning Balance	$	2,576,000
Fair value upon issuance of notes payable and warrants		388,000
Change in fair value		(518,000	)
Extinguishment		(2,227,000	)
Ending Balance	$	219,000

XML

Equity Transactions (Tables)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Schedule of Stock Option Activity

A summary of option activity for the six months ended June 30, 2019 is presented below.

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Options			Price		Life (Years)		Value
Outstanding at December 31, 2018		2,478,974		$	5.25		2.93	$	2,660,000
Granted		590,500			4.41		-		-
Forfeited		(236,667	)		5.57		-		-
Exercised		-			-		-		-
Outstanding at June 30, 2019		2,832,807		$	5.10		2.80	$	480,000
Vested June 30, 2019		1,424,608		$	4.51			$	427,000
Exercisable at June 30, 2019		802,307		$	5.12			$	153,000

Schedule of Fair Value Assumptions Using Black-Scholes Method

The fair value of share option award is estimated using the Black-Scholes option pricing method based on the following weighted-average assumptions:

	Six Months Ended June 30,
	2019			2018
Risk-free interest rate		1.91 - 2.75	%		2.25 – 2.85	%
Average expected term (years)		5 years			5 years
Expected volatility		201.3 -241.7	%		184.5 – 190.2	%
Expected dividend yield		-			-

Schedule of Warrants Outstanding

The Company has the following warrants outstanding as of June 30, 2019, all of which are exercisable:

	Warrants			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2018		940,412		$	3.60		2.32	$	1,974,000
Granted		7,032,823			3.47		-		-
Forfeited		(6,667)			6.00		-		-
Exercised		(186,969	)		1.15		-		-
Outstanding at June 30, 2019, all vested		7,779,602		$	3.54		4.61	$	158,000

XML

Description of Business (Details Narrative) - USD ($)				6 Months Ended
	Apr. 12, 2019	Apr. 11, 2019	Feb. 01, 2019	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Reverse stock split			1-for-15 reverse stock split
Common stock par value			$ 0.0001	$ 0.0001		$ 0.0001
Cash payment of acquisition				$ 15,000,000
Merger Agreement [Member] | Sound Concepts, Inc. [Member]
Cash payment of acquisition	$ 15,000,000
Issuance of restricted shares	3,327,791	3,327,791
Issuance of shares of common stock with a fair market value	$ 7,820,000	$ 7,820,000

XML

Summary of Significant Accounting Policies (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Apr. 30, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net loss		$ 2,343,000	$ (1,772,000)	$ 5,351,000	$ 6,723,000
Net cash used in operating activities				(3,535,000)	(1,890,000)
Proceeds from private offering	$ 18,614,000
Payments to cash portion of purchase price	15,000,000
Payment of certain notes payable	$ 2,025,000			$ 310,000
Property and equipment of useful life				5 years
Outstanding Options [Member]
Number of options and warrants excluded from the computation of net loss per share as anti-dilutive				2,832,807	1,456,374
Outstanding Warrants [Member]
Number of options and warrants excluded from the computation of net loss per share as anti-dilutive				7,779,602	1,535,397
Revenue [Member] | Major Customer One [Member]
Concentration of credit risk				11.00%
Revenue [Member] | Major Customer Two [Member]
Concentration of credit risk				10.00%
Revenue [Member] | Two Major Customers [Member]
Concentration of credit risk				21.00%
Accounts Receivable [Member] | Major Customer One [Member]
Concentration of credit risk				11.00%
Accounts Receivable [Member] | Major Customer Two [Member]
Concentration of credit risk				12.00%
Accounts Receivable [Member] | Major Customer Three [Member]
Concentration of credit risk				17.00%
Accounts Receivable [Member] | Three Major Customers [Member]
Concentration of credit risk				40.00%
Purchase [Member] | Major Vendors One [Member]
Concentration of credit risk				11.00%
Purchase [Member] | Major Vendors Two [Member]
Concentration of credit risk				14.00%
Purchase [Member] | Major Vendors Three [Member]
Concentration of credit risk				19.00%
Purchase [Member] | Three Major Vendors [Member]
Concentration of credit risk				40.00%
Accounts Payable [Member] | One Vendors [Member]
Concentration of credit risk				18.00%
Maximum [Member]
Cash FDIC insured amount		$ 250,000		$ 250,000
Operating lease term		84 months		84 months
Minimum [Member]
Operating lease term		36 months		36 months

XML

Summary of Significant Accounting Policies -Schedule of Revenue Recognition (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue, net	$ 3,733,000	$ 8,000	$ 3,742,000	$ 16,000
Cost of revenue	2,042,000	7,000	2,072,000	8,000
Gross margin	1,691,000	1,000	1,670,000	8,000
Merger Agreement [Member]
Revenue, net	3,733,000	3,109,000	7,734,000	5,872,000
Cost of revenue	2,042,000	1,506,000	4,290,000	2,967,000
Gross margin	1,691,000	1,603,000	3,444,000	2,905,000
Merger Agreement [Member] | Digital Member]
Revenue, net	1,454,000	928,000	2,513,000	1,850,000
Cost of revenue	176,000	160,000	343,000	263,000
Gross margin	1,278,000	768,000	2,170,000	1,587,000
Merger Agreement [Member] | Welcome Kits & Fulfillment [Member]
Revenue, net	1,784,000	1,814,000	4,049,000	3,373,000
Cost of revenue	1,385,000	995,000	2,860,000	2,060,000
Gross margin	399,000	819,000	1,189,000	1,313,000
Merger Agreement [Member] | Shipping [Member]
Revenue, net	495,000	367,000	1,172,000	649,000
Cost of revenue	481,000	351,000	1,087,000	644,000
Gross margin	$ 14,000	$ 16,000	$ 85,000	$ 5,000

XML

Acquisition of Verb Direct (Details Narrative) - USD ($)			6 Months Ended
	Apr. 12, 2019	Apr. 11, 2019	Jun. 30, 2019	Jun. 30, 2018
Cash payment of acquisition			$ 15,000,000
Merger Agreement [Member] | Sound Concepts, Inc. [Member]
Cash payment of acquisition	$ 15,000,000
Issuance of restricted shares	3,327,791	3,327,791
Issuance of shares of common stock with a fair market value	$ 7,820,000	$ 7,820,000
Aggregated goodwill and intangible assets	$ 22,677,000

XML

Acquisition of Verb Direct - Schedule of Fair Value of Assets Assumed and Liabilities Acquired (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Goodwill (provisional)	$ 12,347,000
Merger Agreement [Member]
Other current assets	2,004,000
Property and equipment	58,000
Other assets	1,302,000	3,364,000
Current liabilities	(2,153,000)
Long term liabilities	$ (1,068,000)	(3,221,000)
Intangible assets (provisional)		10,330,000
Goodwill (provisional)		12,347,000
Purchase Price		$ 22,820,000

XML

Acquisition of Verb Direct -Schedule of Pro Forma Statements of Operations (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue	$ 3,733,000	$ 8,000	$ 3,742,000	$ 16,000
Cost of revenue	2,042,000	7,000	2,072,000	8,000
Gross margin	1,691,000	1,000	1,670,000	8,000
Research and development	1,335,000	105,000	1,899,000	236,000
Depreciation and amortization	567,000	5,000	570,000	10,000
General and administrative	3,262,000	(495,000)	5,448,000	4,769,000
Total operating expenses	5,164,000	(385,000)	7,917,000	5,015,000
Income / (Loss) from operations	(3,473,000)	386,000	(6,247,000)	(5,007,000)
Other income / (expense)	(1,000)	1,000	(1,000)	(4,000)
Financing costs	(55,000)		(139,000)	(172,000)
Interest expense - amortization of debt discount	(572,000)		(1,626,000)	(748,000)
Change in fair value of derivative liability	(426,000)	1,444,000	518,000	(1,181,000)
Gain on extinguishment of derivative liability, net	2,227,000		2,227,000	652,000
Interest expense	(43,000)	(59,000)	(83,000)	(263,000)
Total other income / (expense)	1,130,000	1,386,000	896,000	(1,716,000)
Net Income / (Loss)	$ (2,343,000)	$ 1,772,000	$ (5,351,000)	$ (6,723,000)
Income (loss) per share	$ (0.11)	$ 0.17	$ (0.32)	$ (0.71)
Weighted average number of common shares outstanding - basic and diluted	21,624,240	10,169,332	16,946,065	9,489,017
Merger Agreement [Member]
Revenue	$ 3,733,000	$ 3,109,000	$ 7,734,000	$ 5,872,000
Cost of revenue	2,042,000	1,506,000	4,290,000	2,967,000
Gross margin	1,691,000	1,603,000	3,444,000	2,905,000
Research and development	1,335,000	605,000	2,590,000	1,247,000
Depreciation and amortization	567,000	508,000	1,003,000	1,018,000
General and administrative	3,262,000	283,000	6,407,000	6,230,000
Total operating expenses	5,164,000	1,394,000	10,118,000	8,495,000
Income / (Loss) from operations	(3,473,000)	209,000	(6,674,000)	(5,590,000)
Other income / (expense)	(1,000)	19,000	(17,000)	8,000
Financing costs	(55,000)		(139,000)	(172,000)
Interest expense - amortization of debt discount	(572,000)		(1,626,000)	(748,000)
Change in fair value of derivative liability	(426,000)	1,444,000	518,000	(1,181,000)
Gain on extinguishment of derivative liability, net	2,227,000		2,227,000	652,000
Interest expense	(43,000)	(59,000)	(83,000)	(263,000)
Total other income / (expense)	1,130,000	1,404,000	880,000	(1,704,000)
Net Income / (Loss)	$ (2,343,000)	$ 1,613,000	$ (5,312,000)	$ (7,294,000)
Income (loss) per share	$ (0.11)	$ 0.12	$ (0.34)	$ (0.57)
Weighted average number of common shares outstanding - basic and diluted	21,624,240	13,497,123	16,946,065	12,816,808
Merger Agreement [Member] | Digital Member]
Revenue	$ 1,454,000	$ 928,000	$ 2,513,000	$ 1,850,000
Cost of revenue	176,000	160,000	343,000	263,000
Gross margin	1,278,000	768,000	2,170,000	1,587,000
Merger Agreement [Member] | Welcome Kits & Fulfillment [Member]
Revenue	1,784,000	1,814,000	4,049,000	3,373,000
Cost of revenue	1,385,000	995,000	2,860,000	2,060,000
Gross margin	399,000	819,000	1,189,000	1,313,000
Merger Agreement [Member] | Shipping [Member]
Revenue	495,000	367,000	1,172,000	649,000
Cost of revenue	481,000	351,000	1,087,000	644,000
Gross margin	$ 14,000	$ 16,000	$ 85,000	$ 5,000

XML

Accounts Receivable - Schedule of Accounts Receivable (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Receivables [Abstract]
Accounts receivable	$ 1,271,000	$ 1,000
Less allowance for doubtful accounts	(16,000)
Total accounts receivable, net	$ 1,255,000	$ 1,000

XML

Inventory - Schedule of Inventory (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Raw materials	$ 64,000
Finished goods	124,000
Total inventory	188,000
Less inventory reserve	(23,000)
Total inventory, net	$ 165,000

XML

Property and Equipment (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 13,000	$ 10,000

XML

Property and Equipment - Schedule of Property and Equipment (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 455,000	$ 108,000
Less: accumulated depreciation	(399,000)	(97,000)
Property and equipment, net	56,000	11,000
Computers [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	47,000	28,000
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	83,000	56,000
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	165,000	24,000
Software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	113,000
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	17,000
Leasehold Improvement [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 30,000

XML

Right-of-Use Assets and Operating Lease Liabilities (Details Narrative)			1 Months Ended	3 Months Ended	6 Months Ended
	Aug. 14, 2019 USD ($)	Feb. 02, 2019 USD ($)	Mar. 31, 2019	Jun. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)	Jul. 31, 2019 a	Dec. 31, 2018 USD ($)
Right-of-use assets				$ 1,219,000	$ 1,219,000
Lease liabilities for operating leases				1,230,000	$ 1,230,000
Lease extension description			In March 2019, the Company elected to exercise its right to extend the term of the Original Lease by an additional 24 months, for a total of 89 months (the "Extension"). In June 2019, the Company amended the Original Lease (the "Amended Lease" and, together with the Original Lease and the Extension, the "Lease").
Operating lease, description					The Lease commenced in August 2019 with respect to the Initial Premises and the Company anticipates that it will take control of the Must-Take Space in January 2020.
Lease				$ 170,000
Aggregate lease payment					$ 31,000
Accounting Standards Update 2016-02 [Member]
Lease		$ 2,400,000
Subsequent Event [Member]
Area of land | a						6,700
Lease term						89 months
Subsequent Event [Member] | First 12 Months of Lease [Member]
Lease	$ 13,000
Subsequent Event [Member] | Next 82 Months of the Lease [Member]
Lease	$ 39,000
Initial Premises [Member] | Subsequent Event [Member]
Area of land | a						4,880
Must-Take Space [Member] | Subsequent Event [Member]
Area of land | a						1,850

XML

Right-of-Use Assets and Operating Lease Liabilities - Schedule of Lease Cost (Details)	3 Months Ended
	Jun. 30, 2019 USD ($)
Leases [Abstract]
Operating lease cost (included in general and administration in the Company's unaudited condensed statement of operations)	$ 170,000
Cash paid for amounts included in the measurement of lease liabilities for the second quarter 2019
Weighted average remaining lease term - operating leases (in years)	4 years 18 days
Average discount rate - operating leases	8.50%

XML

Right-of-Use Assets and Operating Lease Liabilities - Schedule of Operating Leases (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Leases [Abstract]
Long-term right-of-use assets	$ 1,219,000
Short-term operating lease liabilities	227,000
Long-term operating lease liabilities	1,003,000
Total operating lease liabilities	$ 1,230,000

XML

Right-of-Use Assets and Operating Lease Liabilities - Schedule of Present Value of Lease Liabilities (Details)	Jun. 30, 2019 USD ($)
Leases [Abstract]
2019 (remaining 6 months)	$ 170,000
2020	348,000
2021	341,000
2022	304,000
2023	313,000
Total lease payments	1,476,000
Less: Imputed interest/present value discount	(246,000)
Present value of lease liabilities	$ 1,230,000

XML

Note Payable (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Interest expense for notes payable	$ 572,000		$ 1,626,000	$ 748,000
Note Payable [Member]
Interest expense for notes payable			7,000	0
Payments of interest			$ 1,000	$ 0

XML

Note Payable - Schedule of Note Payable (Details) - USD ($)		6 Months Ended
		Jun. 30, 2019	Dec. 31, 2018
Notes payable - related parties, net		$ 1,177,000	$ 1,177,000
Notes Payable Related Parties [Member]
Notes payable - related parties, net		710,000
Debt discount		(1,000)
Total notes payable, net of debt discount		$ 709,000
Unsecured Promissory Note 1 (A) [Member]
Issuance Date	[1]	Mar. 22, 2019
Maturity Date	[1]	Apr. 10, 2019
Interest Rate	[1]	5.00%
Original Borrowing	[1]	$ 310,000
Notes payable - related parties, net	[1]
Unsecured Promissory Note 2 (B) [Member]
Issuance Date	[2]	Mar. 29, 2019
Maturity Date	[2]	Jul. 10, 2019
Interest Rate	[2]	5.00%
Original Borrowing	[2]	$ 53,000
Notes payable - related parties, net	[2]	$ 53,000
Unsecured Promissory Note 3 (C) [Member]
Issuance Date	[3]	Apr. 02, 2019
Maturity Date	[3]	Jul. 10, 2019
Interest Rate	[3]	5.00%
Original Borrowing	[3]	$ 53,000
Notes payable - related parties, net	[3]	$ 157,000
Unsecured Promissory Note 4 (D) [Member]
Issuance Date	[4]	Apr. 30, 2019
Maturity Date	[4]	Apr. 29, 2020
Interest Rate	[4]	5.00%
Original Borrowing	[4]	$ 500,000
Notes payable - related parties, net	[4]	$ 500,000

[1] On March 22, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $310,000, in exchange for net proceeds of $300,000, representing an original issue discount of $10,000, which is included in the original principal amount. The note is unsecured and bears interest on the principal amount at a rate of 5% per annum. The note was due on demand at any time after April 10, 2019. As a result of the issuance of the note, the Company incurred aggregate costs of $10,000 related to the note's original issue discount. The Company recorded these costs as a note discount and is being amortized over the term of the note. In April 2019, the Company paid off the balance of $310,000 and accrued interest totaling $1,000. As part of the payment, the Company amortized the remaining debt discount of $10,000. As of June 30, 2019, the outstanding balance of the note amounted to $0.

[2] On March 29, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $53,000, in exchange for net proceeds of $50,000, representing an original issue discount of $3,000, which is included in the original principal amount. The note is unsecured and bears interest on the principal amount at a rate of 5% per annum. The note is due on demand at any time after July 10, 2019. As a result of the issuance of the note, the Company incurred aggregate costs of $3,000 related to the note's original issue discount. The Company recorded these costs as a note discount and is being amortized over the term of the note. As of June 30, 2019, the outstanding balance of the note amounted to $53,000. On July 10, 2019, the Company converted the debt and accrued interest into 27,018 shares of common stock.

[3] On April 22, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $157,000, in exchange for net proceeds of $150,000, representing an original issue discount of $7,000, which is included in the original principal amount. The note is unsecured and bears interest on the principal amount at a rate of 5% per annum. The note is due on demand at any time after July 10, 2019. As a result of the issuance of the note, the Company incurred aggregate costs of $7,000 related to the note's original issue discount. The Company recorded these costs as a note discount and is being amortized over the term of the note. As of June 30, 2019, the outstanding balance of the note amounted to $157,000. On July 10, 2019, the Company converted the debt and accrued interest into 81,178 shares of common stock.

[4] On April 30, 2019, we issued an unsecured promissory note to an unaffiliated third-party in the aggregate principal amount of $500,000, in exchange for net proceeds of $500,000. The note is unsecured and bears interest on the principal amount at a rate of 5% per annum. The note is due on April 29, 2020. As of June 30, 2019, the outstanding balance of the note amounted to $500,000. On July 29, 2019 the Company converted the debt and accrued interest into 490,090 shares of common stock.

XML

Note Payable - Schedule of Note Payable (Details) (Parenthetical) - USD ($)										1 Months Ended	6 Months Ended
		Jul. 29, 2019	Jul. 10, 2019	Apr. 30, 2019	Apr. 05, 2019	Apr. 02, 2019	Mar. 28, 2019	Mar. 22, 2019	Oct. 30, 2018	Apr. 30, 2019	Jun. 30, 2019		Mar. 29, 2019
Note 2 [Member]
Debt principal amount									$ 400,000
Interest rate									5.00%		12.00%	[1]
Debt maturity date									Apr. 29, 2019		Apr. 01, 2021	[1]
Debt converted into common stock					182,333
Note 3 [Member]
Interest rate	[2]										12.00%
Debt maturity date	[2]										Jun. 04, 2021
Note 4 [Member]
Interest rate	[3]										5.00%
Debt maturity date	[3]										Apr. 30, 2019
Unaffiliated Third-Party [Member] | Note 1 [Member]
Debt principal amount								$ 310,000
Proceeds from issuance of unsecured promissory note								300,000
Original issue discount								$ 10,000
Interest rate								5.00%
Repayments of debt										$ 310,000
Accrued interest				$ 1,000						1,000
Amortized debt discount										10,000
Notes payable											$ 0
Unaffiliated Third-Party [Member] | Note 2 [Member]
Debt principal amount													$ 53,000
Proceeds from issuance of unsecured promissory note							$ 50,000
Original issue discount							$ 3,000
Interest rate													5.00%
Notes payable											53,000
Debt maturity date							Jul. 10, 2019
Unaffiliated Third-Party [Member] | Note 2 [Member] | Subsequent Event [Member]
Debt converted into common stock			27,018
Warrants to purchase common stock			27,018
Warrants exercise price			$ 3.44
Unaffiliated Third-Party [Member] | Note 3 [Member]
Debt principal amount						$ 157,000
Original issue discount						$ 7,000
Interest rate						5.00%
Notes payable											157,000
Proceeds from debt						$ 150,000
Debt maturity description						The note is due on demand at any time after July 10, 2019.
Unaffiliated Third-Party [Member] | Note 3 [Member] | Subsequent Event [Member]
Debt converted into common stock			81,178
Warrants to purchase common stock			81,178
Warrants exercise price			$ 3.44
Unaffiliated Third-Party [Member] | Note 4 [Member]
Debt principal amount				$ 500,000						$ 500,000
Interest rate				5.00%						5.00%
Notes payable											$ 500,000
Debt maturity date				Apr. 29, 2020
Proceeds from debt				$ 500,000
Unaffiliated Third-Party [Member] | Note 4 [Member] | Subsequent Event [Member]
Debt converted into common stock		490,090

[1] On December 1, 2015, the Company issued a note payable to a former member of the Company's board of directors, in the amount of $112,000 representing unpaid consulting fees as of November 30, 2015. The note is unsecured, bears interest rate of 12% per annum, and matured in April 2017. As of June 30, 2019, and December 31, 2018, the outstanding principal balance of the note was equal to $112,000, respectively. As of June 30, 2019, the note was past due, and remains past due. The Company is currently in negotiations with the noteholder to settle the past due note.

[2] On April 4, 2016, the Company issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. The note bears interest at a rate of 12% per annum, secured by the Company's assets, and will mature on June 4, 2021, as amended. As of June 30, 2019, and December 31, 2018, the outstanding balance of the note amounted to $240,000, respectively.

[3] On March 22, 2019, the Company issued a note payable to Mr. Jeff Clayborne, the Company's Chief Financial Officer, in the amount of $58,000. The note is unsecured, bears interest at a rate of 5% per annum, and matures on April 30, 2019. On April 11, 2019, the Company paid off the balance of $58,000. As of June 30, 2019, the outstanding balance of the note amounted to $0.

XML

Notes Payable - Related Parties (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Interest payable	$ 55,000		$ 46,000
Notes Payable [Member]
Interest expense, related parties	70,000	$ 117,000
Interest payable	$ 63,000	$ 182,000

XML

Notes Payable - Related Parties - Schedule of Notes Payable to Related Parties (Details) - USD ($)			6 Months Ended
		Oct. 30, 2018	Jun. 30, 2019		Dec. 31, 2018
Notes payable - related parties, net			$ 1,177,000		$ 1,177,000
Non-current			(1,065,000)		(1,065,000)
Current			$ 112,000		112,000
Unsecured Promissory Note 1 [Member]
Issuance Date	[1]		Dec. 01, 2015
Maturity Date	[1]		Feb. 08, 2021
Interest Rate	[1]		12.00%
Original Borrowing	[1]		$ 1,249,000
Notes payable - related parties, net	[1]		$ 825,000
Note 1 [Member]
Notes payable - related parties, net	[1]				825,000
Note 2 [Member]
Issuance Date	[2]		Dec. 01, 2015
Maturity Date		Apr. 29, 2019	Apr. 01, 2021	[2]
Interest Rate		5.00%	12.00%	[2]
Original Borrowing	[2]		$ 112,000
Notes payable - related parties, net	[2]		$ 112,000		112,000
Note 3 [Member]
Issuance Date	[3]		Apr. 04, 2016
Maturity Date	[3]		Jun. 04, 2021
Interest Rate	[3]		12.00%
Original Borrowing	[3]		$ 343,000
Notes payable - related parties, net	[3]		$ 240,000		240,000
Note 4 [Member]
Issuance Date	[4]		Mar. 22, 2019
Maturity Date	[4]		Apr. 30, 2019
Interest Rate	[4]		5.00%
Original Borrowing	[4]		$ 58,000
Notes payable - related parties, net	[4]

[1] On December 1, 2015, the Company issued a convertible note payable to Mr. Rory J. Cutaia, the Company's majority stockholder and Chief Executive Officer, to consolidate all loans and advances made by Mr. Cutaia to the Company as of that date. The note bears interest at a rate of 12% per annum, secured by the Company's assets, and will mature on February 8, 2021, as amended. As of June 30, 2019, and December 31, 2018, the outstanding balance of the note amounted to $825,000, respectively.

[2] On December 1, 2015, the Company issued a note payable to a former member of the Company's board of directors, in the amount of $112,000 representing unpaid consulting fees as of November 30, 2015. The note is unsecured, bears interest rate of 12% per annum, and matured in April 2017. As of June 30, 2019, and December 31, 2018, the outstanding principal balance of the note was equal to $112,000, respectively. As of June 30, 2019, the note was past due, and remains past due. The Company is currently in negotiations with the noteholder to settle the past due note.

[3] On April 4, 2016, the Company issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. The note bears interest at a rate of 12% per annum, secured by the Company's assets, and will mature on June 4, 2021, as amended. As of June 30, 2019, and December 31, 2018, the outstanding balance of the note amounted to $240,000, respectively.

[4] On March 22, 2019, the Company issued a note payable to Mr. Jeff Clayborne, the Company's Chief Financial Officer, in the amount of $58,000. The note is unsecured, bears interest at a rate of 5% per annum, and matures on April 30, 2019. On April 11, 2019, the Company paid off the balance of $58,000. As of June 30, 2019, the outstanding balance of the note amounted to $0.

XML

Notes Payable - Related Parties - Schedule of Notes Payable to Related Parties (Details) (Parenthetical) - USD ($)		Apr. 11, 2019	Apr. 04, 2016	Dec. 01, 2015	Jun. 30, 2019		Mar. 22, 2019	Dec. 31, 2018	Oct. 30, 2018
Notes payable - related parties, net					$ 1,177,000			$ 1,177,000
Note 1 [Member]
Notes payable - related parties, net	[1]							825,000
Note 2 [Member]
Debt interest rate					12.00%	[2]			5.00%
Notes payable - related parties, net	[2]				$ 112,000			112,000
Note 3 [Member]
Debt interest rate	[3]				12.00%
Notes payable - related parties, net	[3]				$ 240,000			240,000
Note 4 [Member]
Debt interest rate	[4]				5.00%
Notes payable - related parties, net	[4]
Mr. Cutaia [Member] | Note 1 [Member]
Debt interest rate				12.00%
Maturity date description				February 8, 2021
Outstanding balance					825,000			825,000
Mr. Cutaia [Member] | Note 2 [Member]
Debt interest rate				12.00%
Maturity date description				April 1, 2017
Outstanding balance					$ 112,000			$ 112,000
Notes payable - related parties, net				$ 112,000
Mr. Cutaia [Member] | Note 3 [Member]
Debt interest rate			12.00%
Maturity date description			June 4, 2021
Outstanding balance			$ 343,000
Mr. Jeff Clayborne [Member] | Note 4 [Member]
Debt interest rate							5.00%
Outstanding balance							$ 58,000
Repayments of debt		$ 58,000

[1] On December 1, 2015, the Company issued a convertible note payable to Mr. Rory J. Cutaia, the Company's majority stockholder and Chief Executive Officer, to consolidate all loans and advances made by Mr. Cutaia to the Company as of that date. The note bears interest at a rate of 12% per annum, secured by the Company's assets, and will mature on February 8, 2021, as amended. As of June 30, 2019, and December 31, 2018, the outstanding balance of the note amounted to $825,000, respectively.

[2] On December 1, 2015, the Company issued a note payable to a former member of the Company's board of directors, in the amount of $112,000 representing unpaid consulting fees as of November 30, 2015. The note is unsecured, bears interest rate of 12% per annum, and matured in April 2017. As of June 30, 2019, and December 31, 2018, the outstanding principal balance of the note was equal to $112,000, respectively. As of June 30, 2019, the note was past due, and remains past due. The Company is currently in negotiations with the noteholder to settle the past due note.

[3] On April 4, 2016, the Company issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. The note bears interest at a rate of 12% per annum, secured by the Company's assets, and will mature on June 4, 2021, as amended. As of June 30, 2019, and December 31, 2018, the outstanding balance of the note amounted to $240,000, respectively.

[4] On March 22, 2019, the Company issued a note payable to Mr. Jeff Clayborne, the Company's Chief Financial Officer, in the amount of $58,000. The note is unsecured, bears interest at a rate of 5% per annum, and matures on April 30, 2019. On April 11, 2019, the Company paid off the balance of $58,000. As of June 30, 2019, the outstanding balance of the note amounted to $0.

XML

Convertible Notes Payable (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Interest expense for convertible notes payable	$ 43,000	$ 59,000	$ 83,000	$ 263,000
Convertible Notes Payable [Member]
Interest expense for convertible notes payable			$ 5,000	$ 145,000

XML

Convertible Notes Payable - Schedule of Convertible Notes Payable (Details) - USD ($)			6 Months Ended
		Oct. 30, 2018	Jun. 30, 2019		Apr. 05, 2019	Dec. 31, 2018
Note 2 [Member]
Note Date	[1]		Dec. 01, 2015
Maturity Date		Apr. 29, 2019	Apr. 01, 2021	[1]
Interest Rate		5.00%	12.00%	[1]
Original Borrowing	[1]		$ 112,000
Total convertible notes payable			0
Debt discount			$ 0		$ (48,000)
Note 3 [Member]
Note Date	[2]		Apr. 04, 2016
Maturity Date	[2]		Jun. 04, 2021
Interest Rate	[2]		12.00%
Original Borrowing	[2]		$ 343,000
Total convertible notes payable			0
Debt discount			0
Convertible Notes Payable [Member]
Total convertible notes payable						$ 1,900,000
Debt discount						(1,082,000)
Total convertible notes payable , net of debt discount						818,000
Convertible Notes Payable [Member] | Note 1 [Member]
Note Date	[3]		Oct. 19, 2018
Maturity Date	[3]		Apr. 19, 2019
Interest Rate	[3]		10.00%
Original Borrowing	[3]		$ 1,500,000
Total convertible notes payable	[3]					1,500,000
Debt discount	[3]
Convertible Notes Payable [Member] | Note 2 [Member]
Note Date	[4]		Oct. 30, 2018
Maturity Date	[4]		Apr. 29, 2019
Interest Rate	[4]		5.00%
Original Borrowing	[4]		$ 400,000
Total convertible notes payable	[4]					400,000
Debt discount	[4]
Convertible Notes Payable [Member] | Note 3 [Member]
Note Date	[5]		Feb. 01, 2019
Maturity Date	[5]		Aug. 02, 2019
Interest Rate	[5]		10.00%
Original Borrowing	[5]		$ 500,000
Total convertible notes payable	[5]
Debt discount	[5]

[1] On December 1, 2015, the Company issued a note payable to a former member of the Company's board of directors, in the amount of $112,000 representing unpaid consulting fees as of November 30, 2015. The note is unsecured, bears interest rate of 12% per annum, and matured in April 2017. As of June 30, 2019, and December 31, 2018, the outstanding principal balance of the note was equal to $112,000, respectively. As of June 30, 2019, the note was past due, and remains past due. The Company is currently in negotiations with the noteholder to settle the past due note.

[2] On April 4, 2016, the Company issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. The note bears interest at a rate of 12% per annum, secured by the Company's assets, and will mature on June 4, 2021, as amended. As of June 30, 2019, and December 31, 2018, the outstanding balance of the note amounted to $240,000, respectively.

[3] On October 19, 2018, the Company issued an unsecured convertible note to Bellridge Capital, LP ("Bellridge"), an unaffiliated third-party, in the aggregate principal amount of $1,500,000 in exchange for net proceeds of $1,242,000, representing an original issue discount of $150,000, and paid legal and financing expenses of $109,000. In addition, the Company issued 96,667 shares of its Common Stock with a fair value of $595,000. The note was unsecured and did not bear interest; however, the implied interest was determined to be 10% since the note was issued at 10% less than its face value. The note matured in April 2019. The note was also convertible into shares of the Company's Common Stock only on or after the occurrence of an uncured Event of Default. Primarily, the Company would be in default if it did not repay the principal amount of the note, as required. The other events of default are standard for the type of transaction represented by the related securities purchase agreement and the note. In the event of a default, the conversion price in effect on any date on which some or all of the principal of the note is to be converted would be a price equal to 70% of the lowest VWAP during the ten trading days immediately preceding the date on which Bellridge provided its notice of conversion. Upon an Event of Default, the Company would owe Bellridge an amount equivalent to 110% of the then-outstanding principal amount of the note in addition to of all other amounts, costs, expenses, and liquidated damages that might also be due in respect thereof. The Company agreed that, on or after the occurrence of an Event of Default, it would reserve and keep available that number of shares of its Common Stock that equaled 200% of the number of such shares that potentially would be issuable pursuant to the terms of the securities purchase agreement and the note (assuming conversion in full of the note and on any date of determination). The Company determined that, because the conversion price is unknown, the Company could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the note created a derivative with a fair value of $1,273,000 at the date of issuance. As a result of the issuance of the note, the Company incurred aggregate costs of $2,126,000 related to the note's original issue discount, legal and financing expenses, the fair value of the Common Stock issued and the recognition of the derivative liability. The Company recorded these costs as a note discount up to the face value of the note of $1,500,000 and the remaining $626,000 as financing costs in October 2018. The note discount was being amortized over the six-month term of the note. In April 2019, the Company paid the balance of $1,500,000. Prior to the payoff the Company recognized a change in fair market value in the derivative liability totaling $670,000. As part of the payoff the Company amortized the remaining debt discount of $144,000 and recognized a gain on extinguishment of the derivative liability totaling $1,396,000. As of June 30, 2019, the outstanding balance of the note amounted to $0 and unamortized debt discount was $0.

[4] On October 30, 2018, the Company issued two unsecured convertible notes to one current investor and one otherwise unaffiliated third-party in the aggregate principal amount of $400,000. The notes bore interest at a rate of 5% per annum and matured on April 29, 2019. Upon the Company's consummation of its underwritten public offering of the Company's units, all, and not less than all, of (i) the outstanding principal amount and (ii) the accrued interest thereunder are to be converted into shares of the Company's Common Stock. The per-share conversion price equaled seventy-five percent (75%) of the effective offering price of the Common Stock in the Company's recent underwritten public offering. The Company determined that, because the conversion price was unknown, that the Company could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the notes created a derivative with a fair value of $302,000 at the date of issuance and was accounted as a debt discount and was being amortized over the term of the notes payable. On April 5, 2019 the Company converted the outstanding convertible notes payable and accrued interest of $410,000 thru the issuance of 182,333 shares of common stock. Prior to the conversion, the Company recognized a change in fair market value in the derivative liability totaling $21,000. In addition, the Company amortized the remaining debt discount of $48,000 and recognized a gain on extinguishment of the derivative liability totaling $187,000. As of June 30, 2019, the outstanding balance of the note amounted to $0 and unamortized debt discount was $0.

[5] On February 1, 2019, the Company issued an unsecured convertible note to Bellridge, an unaffiliated third-party, in the aggregate principal amount of $500,000 in exchange for net proceeds of $432,000, representing an original issue discount of $25,000, and paid legal and financing expenses of $43,000. In addition, the Company issued 16,667 shares of its Common Stock with a fair value of $128,000. The note is unsecured and does not bear interest; however, the implied interest was determined to be 10% since the note was issued at 10% less than its face value. The note matures in August 2019. The note is also convertible into shares of the Company's Common Stock only on or after the occurrence of an uncured "Event of Default". Primarily, the Company will be in default if it does not repay the principal amount of the note, as required. The other events of default are standard for the type of transaction represented by the related securities purchase agreement and the note. The conversion price in effect on any date on which some or all of the principal of the note is to be converted shall be a price equal to 70% of the lowest VWAP during the ten trading days immediately preceding the date on which Bellridge provides its notice of conversion. Upon an Event of Default, the Company will owe Bellridge an amount equivalent to 110% of the then-outstanding principal amount of the note in addition to of all other amounts, costs, expenses, and liquidated damages that might also be due in respect thereof. The Company has agreed that, on or after the occurrence of an Event of Default, it will reserve and keep available that number of shares of its Common Stock that is at least equal to 200% of the number of such shares that potentially would be issuable pursuant to the terms of the securities purchase agreement and the note (assuming conversion in full of the note and on any date of determination). The Company determined that, because the conversion price is unknown, the Company could not determine if it had enough authorized shares to fulfill the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the note created a derivative with a fair value of $388,000 at the date of issuance. In the event the note remains outstanding for sixty (60) calendar days subsequent to the original issue date, the Company is required to issue to Bellridge an aggregate of 8,606 shares of Common Stock. In addition, the principal amount of the note shall increase from $500,000 to $525,000. As a result of the issuance of the note, the Company incurred aggregate costs of $584,000 related to the note's original issue discount, legal and financing expenses, the fair value of the Common Stock issued and the recognition of the derivative liability. The Company recorded these costs as a note discount up to the face value of the note of $500,000 and the remaining $84,000 as financing costs. The note discount was being amortized over the six-month term of the note. On April 2, 2019, the Company increased the note by $25,000 to $525,000 and issued 8,606 shares of common stock with a fair value of $55,000. The Company accounted the increase in principal and the fair value of the common shares in the aggregate of $80,000 as part its financing costs. In April 2019, the Company paid off the balance of $525,000. Prior to the payoff the Company recognized a change in fair market value in the derivative liability totaling $260,000. In addition, the Company amortized the remaining debt discount of $366,000 and recognized a gain on extinguishment of the derivative liability totaling $644,000. As of June 30, 2019, the outstanding balance of the note amounted to $0 and unamortized debt discount was $0.

XML

Convertible Notes Payable - Schedule of Convertible Notes Payable (Details) (Parenthetical) - USD ($)							1 Months Ended		3 Months Ended			6 Months Ended
		Apr. 05, 2019	Apr. 02, 2019	Feb. 01, 2019	Oct. 30, 2018	Oct. 19, 2018	Apr. 30, 2019	Oct. 31, 2018	Jun. 30, 2019		Jun. 30, 2018	Jun. 30, 2019		Jun. 30, 2018
Proceeds from issuance of convertible notes												$ 432,000		$ (845,000)
Fair value of common shares											$ 700,000			2,979,000
Financing costs									$ 55,000			139,000		172,000
Change in fair market value of derivative liability									426,000		(1,444,000)	(518,000)		1,181,000
Gain on extinguishment of derivative liability									$ 2,227,000			2,227,000		$ 652,000
Note 2 [Member]
Debt principal amount					$ 400,000
Original issue discount	[1]											$ 112,000
Number of common stock shares issued upon conversion		182,333
Interest rate					5.00%				12.00%	[1]		12.00%	[1]
Maturity date					Apr. 29, 2019							Apr. 01, 2021	[1]
Debt conversion percentage of amount					75.00%
Fair value of derivatives					$ 302,000
Outstanding balance of debt									$ 0			$ 0
Change in fair market value of derivative liability		$ 21,000
Unamortized debt discount		48,000							$ 0			0
Gain on extinguishment of derivative liability		187,000
Debt conversion amount		$ 410,000
Note 3 [Member]
Original issue discount	[2]											$ 343,000
Interest rate	[2]								12.00%			12.00%
Maturity date	[2]											Jun. 04, 2021
Outstanding balance of debt									$ 0			$ 0
Unamortized debt discount									0			0
Bellridge Capital, LLC [Member] | Note 1 [Member]
Debt principal amount						$ 1,500,000
Proceeds from issuance of convertible notes						1,242,000
Original issue discount						150,000
Settlement of financing expense						$ 109,000
Number of common stock shares issued upon conversion						96,667
Fair value of common shares						$ 595,000
Interest rate						10.00%
Maturity date						Apr. 30, 2019
Debt conversion percentage of amount						70.00%
Event of default description						Upon an Event of Default, the Company would owe Bellridge an amount equivalent to 110% of the then-outstanding principal amount of the note in addition to of all other amounts, costs, expenses, and liquidated damages that might also be due in respect thereof. The Company agreed that, on or after the occurrence of an Event of Default, it would reserve and keep available that number of shares of its Common Stock that equaled 200% of the number of such shares that potentially would be issuable pursuant to the terms of the securities purchase agreement and the note (assuming conversion in full of the note and on any date of determination).
Fair value of derivatives						$ 1,273,000
Aggregate cost incurred						$ 2,126,000
Financing costs								$ 626,000
Outstanding balance of debt							$ 1,500,000		0			0
Change in fair market value of derivative liability							670,000
Unamortized debt discount							144,000		$ 0			$ 0
Gain on extinguishment of derivative liability							1,396,000
Bellridge Capital, LLC [Member] | Note 3 [Member]
Debt principal amount				$ 500,000
Proceeds from issuance of convertible notes				432,000
Original issue discount				25,000
Settlement of financing expense				$ 43,000
Number of common stock shares issued upon conversion				16,667
Fair value of common shares			$ 55,000	$ 128,000
Interest rate				10.00%
Maturity date				Aug. 31, 2019
Debt conversion percentage of amount				70.00%
Event of default description				Upon an Event of Default, the Company will owe Bellridge an amount equivalent to 110% of the then-outstanding principal amount of the note in addition to of all other amounts, costs, expenses, and liquidated damages that might also be due in respect thereof. The Company has agreed that, on or after the occurrence of an Event of Default, it will reserve and keep available that number of shares of its Common Stock that is at least equal to 200% of the number of such shares that potentially would be issuable pursuant to the terms of the securities purchase agreement and the note (assuming conversion in full of the note and on any date of determination).
Fair value of derivatives				$ 388,000
Aggregate cost incurred				584,000
Financing costs				$ 84,000
Outstanding balance of debt							525,000
Change in fair market value of derivative liability							260,000
Unamortized debt discount							366,000
Gain on extinguishment of derivative liability							$ 644,000
Number of shares issued			8,606
Bellridge Capital, LLC [Member] | Note 3 [Member] | Minimum [Member]
Debt principal amount			$ 25,000
Bellridge Capital, LLC [Member] | Note 3 [Member] | Maximum [Member]
Debt principal amount			$ 525,000

[1] On December 1, 2015, the Company issued a note payable to a former member of the Company's board of directors, in the amount of $112,000 representing unpaid consulting fees as of November 30, 2015. The note is unsecured, bears interest rate of 12% per annum, and matured in April 2017. As of June 30, 2019, and December 31, 2018, the outstanding principal balance of the note was equal to $112,000, respectively. As of June 30, 2019, the note was past due, and remains past due. The Company is currently in negotiations with the noteholder to settle the past due note.

[2] On April 4, 2016, the Company issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. The note bears interest at a rate of 12% per annum, secured by the Company's assets, and will mature on June 4, 2021, as amended. As of June 30, 2019, and December 31, 2018, the outstanding balance of the note amounted to $240,000, respectively.

XML

Derivative Liability (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Derivative liability	$ 219,000		$ 219,000		$ 2,576,000
Derivative liability from issuance of convertible debt			388,000
Change in fair value of derivative liability	(426,000)	$ 1,444,000	518,000	$ (1,181,000)
Gain on extinguishment of derivative liability	2,227,000		2,227,000	$ 652,000
Fair value of derivative liability	$ 219,000		$ 219,000		$ 2,576,000

XML

Derivative Liability - Schedule of Derivative Liability Using Weighted Average Black-Scholes-Merton Pricing Model (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2019 USD ($) $ / shares shares	Dec. 31, 2018 USD ($) $ / shares shares
Stock Price | $ / shares	$ 2.00	$ 4.80
Fair Value | $	$ 219,000	$ 2,576,000
Exercise Price [Member]
Fair value assumptions, measurement input, exercise price per share | shares	1.88	2.70
Expected Life [Member]
Fair value assumptions, measurement input, term	3 years 5 months 23 days	1 year 9 months 11 days
Volatility [Member]
Fair value assumptions, measurement input, percentage	1.95	1.84
Dividend Yield [Member]
Fair value assumptions, measurement input, percentage	0.00	0.00
Risk Free Interest Rate [Member]
Fair value assumptions, measurement input, percentage	0.0243	0.0246
Upon Issuance [Member]
Stock Price | $ / shares	$ 7.65
Fair Value | $	$ 388,000
Upon Issuance [Member] | Exercise Price [Member]
Fair value assumptions, measurement input, exercise price per share | shares	5.63
Upon Issuance [Member] | Expected Life [Member]
Fair value assumptions, measurement input, term	6 months
Upon Issuance [Member] | Volatility [Member]
Fair value assumptions, measurement input, percentage	1.64
Upon Issuance [Member] | Dividend Yield [Member]
Fair value assumptions, measurement input, percentage	0.00
Upon Issuance [Member] | Risk Free Interest Rate [Member]
Fair value assumptions, measurement input, percentage	0.0246

XML

Derivative Liability - Schedule of Derivative Liability Transactions (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Beginning Balance			$ 2,576,000
Fair value upon issuance of notes payable and warrants			388,000
Change in fair value	$ 426,000	$ (1,444,000)	(518,000)	$ 1,181,000
Extinguishment			(2,227,000)
Ending Balance	$ 219,000		$ 219,000

XML

Equity Transactions (Details Narrative) - USD ($)				1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Apr. 30, 2019	Apr. 09, 2019	Apr. 04, 2019	Apr. 30, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Value of shares issued for acquisition					$ 7,820,000		$ 7,820,000
Number of common stock shares issued for service, value					340,000	$ 642,000	$ 728,000	$ 2,627,000
Number of stock options granted							590,500
Exercise price of common stock granted							$ 4.41
Proceeds from warrant exercise							$ 45,000	$ 22,000
Note Holder [Member]
Number of stock options granted							25,272
Number of stock options granted, value							$ 182,000
Notes Payable [Member]
Number of common stock shares issued upon conversion							182,333
Debt conversion amount							$ 410,000
Accounts Payable [Member]
Debt conversion amount	$ 10,000
Conversion of accounts payable into common stock shares	4,142
Conversion of accounts payable into common stock	$ 10,000
Vendor [Member]
Number of common stock shares issued for service							197,810
Number of common stock shares issued for service, value							$ 728,000
Employees and Consultant [Member]
Number of stock options granted							590,500
Exercise price of common stock granted							$ 4.41
Expiration period							5 years
Stock option vesting period							The options have an average exercise price of $4.41 per share, expire in five years, and either (i) vest 50% on the grant date and the remaining 50% on the 12-month anniversary of the grant date (ii) vest in three equal installments during the three years from the grant date (iii) vest in 4 equal installments during the four years from the grant date or (iv) vest in 12 equal installments based on achieving performance targets during the three years from the grant date.
Fair value of stock options grants							$ 1,991,000
Expense recognized relating to stock options							920,000
Unrecognized stock based compensation expense					$ 4,400,000		$ 4,400,000
Common Stock [Member]
Number of shares issued under offering						70,000		1,163,938
Number of shares issued for acquisition				3,327,791	3,327,791		3,327,791
Value of shares issued for acquisition				$ 7,820,000
Number of common stock shares issued for service					157,812	2,778	197,810	319,346
Number of common stock shares issued for service, value
Warrant [Member]
Warrant to purchase of common stock					163,739		163,739
Warrant exercise price					$ 3.76		$ 3.76
Warrant expiration date					Jan. 31, 2023		Jan. 31, 2023
Fair value of warrants							$ 439,000
Warrant [Member]
Warrant to purchase of common stock					186,969		186,969
Warrant exercise price					$ 1.15		$ 1.15
Conversion of accounts payable into common stock shares							173,714
Proceeds from warrant exercise							$ 45,000
Public Offering [Member]
Proceeds from public offering		$ 18,614,000
Other offering expense		$ 2,047,000
Legal and professional expenses									$ 161,000
Public Offering [Member] | Underwriter Warrants [Member]
Warrant to purchase of common stock		319,488
Warrant exercise price		$ 3.913
Public Offering [Member] | Common Stock [Member]
Warrant to purchase of common stock					6,869,084		6,869,084
Warrant exercise price					$ 3.46		$ 3.46
Warrant expiration date					Jan. 31, 2023		Jan. 31, 2023
Underwriting Agreement [Member]
Number of units issued under offering		6,389,776
Number of shares issued under offering		6,389,776
Warrant to purchase of common stock		6,389,776
Underwriting Agreement [Member] | Over-allotment Option [Member]
Number of units issued under offering		159,820
Number of shares issued under offering		159,820
Warrant to purchase of common stock		159,820
Underwriting Agreement [Member] | Alliance Global Partners [Member]
Number of units issued under offering			6,389,776
Number of shares issued under offering			6,389,776
Warrant to purchase of common stock			6,389,776
Shares issued price per share			$ 3.13
Underwriting Agreement [Member] | Alliance Global Partners [Member] | Option Shares [Member]
Number of units issued under offering			958,466
Number of shares issued under offering			958,466
Warrant to purchase of common stock			958,466
Warrant exercise price			$ 3.443
Warrant term			5 years
Warrant expiration date			Apr. 09, 2024

XML

Equity Transactions - Schedule of Stock Option Activity (Details)	6 Months Ended
	Jun. 30, 2019 USD ($) $ / shares shares
Share-based Payment Arrangement [Abstract]
Number of options outstanding beginning balance | shares	2,478,974
Number of options granted | shares	590,500
Number of options forfeited | shares	(236,667)
Number of options exercised | shares
Number of options outstanding ending balance | shares	2,832,807
Number of options vested | shares	1,424,608
Number of options exercisable | shares	802,307
Weighted average exercise price outstanding beginning balance	$ 5.25
Weighted average exercise price granted	4.41
Weighted average exercise price forfeited	5.57
Weighted average exercise price exercised
Weighted average exercise price outstanding ending balance	5.10
Weighted average exercise price vested	4.51
Weighted average exercise price exercisable	$ 5.12
Weighted average remaining contractual term outstanding	2 years 11 months 4 days
Weighted average remaining contractual term outstanding	2 years 9 months 18 days
Aggregate intrinsic value outstanding beginning balance | $	$ 2,660,000
Aggregate intrinsic value granted
Aggregate intrinsic value forfeited
Aggregate intrinsic value exercised | $
Aggregate intrinsic value outstanding ending balance | $	480,000
Aggregate intrinsic value vested | $	427,000
Aggregate intrinsic value exercisable | $	$ 153,000

XML

Equity Transactions - Schedule of Fair Value Assumptions Using Black-Scholes Method (Details)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Equity [Abstract]
Risk-free interest rate, minimum	1.91%	2.75%
Risk-free interest rate, maximum	2.00%	2.85%
Average expected term (years)	5 years	5 years
Expected volatility, minimum	201.30%	184.50%
Expected volatility, maximum	241.70%	190.20%
Expected dividend yield	0.00%	0.00%

XML

Equity Transactions - Schedule of Warrants Outstanding (Details) - Warrants [Member]	6 Months Ended
	Jun. 30, 2019 USD ($) $ / shares shares
Number of warrants outstanding beginning balance | shares	940,412
Number of warrants granted | shares	7,032,823
Number of warrants forfeited | shares	(6,667)
Number of warrants exercised | shares	(186,969)
Number of warrants outstanding ending balance | shares	7,779,602
Weighted average exercise price outstanding beginning balance | $ / shares	$ 3.60
Weighted average exercise price granted | $ / shares	3.47
Weighted average exercise price forfeited | $ / shares	6.00
Weighted average exercise price exercised | $ / shares	1.15
Weighted average exercise price outstanding ending balance | $ / shares	$ 3.54
Weighted average remaining contractual term outstanding	2 years 3 months 26 days
Weighted average remaining contractual term outstanding	4 years 7 months 10 days
Aggregate intrinsic value outstanding beginning balance | $	$ 1,974,000
Aggregate intrinsic value outstanding ending balance | $	$ 158,000

XML

Commitments and Contingencies (Details Narrative) - USD ($)		1 Months Ended	6 Months Ended
	Jan. 20, 2016	Apr. 30, 2018	Jun. 30, 2019
Board of Directors [Member]
Annual compensation			$ 270,000
Employees [Member]
Employee sought value		$ 300,000
Number of stock options shares issued		150,000
Stock options price per share		$ 0.50
Stock Repurchase Agreement [Member]
Common stock for a purchase price	$ 144,000

XML

Subsequent Events (Details Narrative) - USD ($)		1 Months Ended	3 Months Ended		6 Months Ended
	Aug. 14, 2019	Aug. 12, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Feb. 01, 2019	Dec. 31, 2018
Number of common stock for services, value			$ 340,000	$ 642,000	$ 728,000	$ 2,627,000
Number of stock options granted					590,500
Exercise price of common stock granted					$ 4.41
Common stock stated value			$ 0.0001		$ 0.0001		$ 0.0001	$ 0.0001
Aggregate to proceeds of common stock					$ 18,614,000	$ 2,979,000
Notes Payable [Member]
Debt conversion of convertible notes payable shares					182,333
Value of conversion notes payable					$ 410,000
Vendor [Member]
Number of common stock for services					197,810
Number of common stock for services, value					$ 728,000
Subsequent Event [Member] | Securities Purchase Agreement [Member]
Debt conversion of convertible notes payable shares	645
Warrant exercise price per share	$ 1.88
Common stock stated value	1,000
Conversion price per shares	$ 1.55
Warrant term	5 years
Number of shares issued	5,030
Number of shares warrant grant issue	3,245,162
Aggregate to proceeds of common stock	$ 5,030,000
Subsequent Event [Member] | Securities Purchase Agreement [Member] | Maximum [Member]
Warrants to purchase common stock	3,870,000
Subsequent Event [Member] | Securities Purchase Agreement [Member] | Series A Convertible Preferred Stock [Member]
Number of shares sold	6,000
Subsequent Event [Member] | Notes Payable [Member]
Warrants to purchase common stock		108,196
Warrant exercise price per share		$ 3.44
Value of conversion notes payable		$ 719,000
Subsequent Event [Member] | Unsecured Promissory Note [Member] | Unaffiliated Third-Party [Member]
Debt instrument face amount		320,000
Proceeds from issuance of debt		300,000
Original issue discount, amount		$ 20,000
Debt instrument description		The note is due three business days following an equity or debt offering (or combination) in excess of one million dollars by the Company.
Proceeds from equity or debt offering		$ 1,000,000
Subsequent Event [Member] | Stock Options [Member]
Number of stock options granted		45,167
Exercise price of common stock granted		$ 3.13
Expiration period		5 years
Stock option vesting, description		Vest on grant date or over a period of four years from grant date.
Fair value of stock options grants		$ 91,000
Subsequent Event [Member] | Restricted Common Stock [Member] | Notes Payable [Member]
Debt conversion of convertible notes payable shares		598,286
Subsequent Event [Member] | Vendor [Member]
Number of common stock for services		9,716
Number of common stock for services, value		$ 15,000