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

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

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.

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).

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.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [X] No

As of ~~August 7,~~November 10, 2020, there were ~~43,947,638~~46,693,790 shares of common stock, $0.0001 par value per share, outstanding.

	June 30, 2020			December 31, 2019			September 30, 2020			December 31, 2019
		(unaudited)						(unaudited)
ASSETS

Current assets:
Cash	$	1,378,000		$	983,000		$	10,722,000		$	983,000
Accounts receivable, net of allowance of $119,000 and $230,000, respectively		1,124,000			1,271,000
Accounts receivable, net of allowance of $216,000 and $230,000, respectively								1,353,000			1,271,000
Inventory, net of allowance of $30,000 and $2,000, respectively		33,000			103,000			12,000			103,000
Prepaid expenses		597,000			236,000			675,000			236,000
Total current assets		3,132,000			2,593,000			12,762,000			2,593,000

Right-of-use assets, net of accumulated amortization of $619,000 and $349,000 respectively		3,005,000			3,275,000
Property and equipment, net of accumulated depreciation of $248,000 and $164,000, respectively		952,000			720,000
Intangible assets, net of accumulated amortization of $1,610,000 and $975,000 respectively		4,730,000			5,365,000
Goodwill		16,337,000			16,337,000
Deferred offering costs		150,000			-
Right-of-use assets, net of accumulated amortization of $756,000 and $349,000 respectively								2,868,000			3,275,000
Property and equipment, net of accumulated depreciation of $294,000 and $164,000, respectively								907,000			720,000
Intangible assets, net of accumulated amortization of $1,953,000 and $975,000 respectively								6,270,000			5,365,000
Goodwill (including provisional goodwill of $3,362,000 at September 30, 2020)								19,699,000			16,337,000
Other assets		69,000			69,000			69,000			69,000

Total assets	$	28,375,000		$	28,359,000		$	42,575,000		$	28,359,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	4,644,000		$	4,338,000		$	5,346,000		$	4,338,000
Accrued officers’ salary		207,000			207,000			207,000			207,000
Accrued interest (including $79,000 and $82,000 payable to related parties)		83,000			82,000
Advance on future receipts, net of discount of $284,000 and $274,000, respectively		728,000			732,000
Accrued interest (including $87,000 and $82,000 payable to related parties)								95,000			82,000
Advance on future receipts, net of discount of $176,000 and $274,000, respectively								418,000			732,000
Notes Payable								1,885,000			-
Notes payable - related party		1,177,000			112,000			1,177,000			112,000
Operating lease liability, current		559,000			391,000			595,000			391,000
Deferred incentive compensation to officers, current		521,000			-			521,000			-
Deferred revenue and customer deposits		172,000			306,000
Contract liabilities and customer deposits								685,000			306,000
Derivative liability		5,679,000			5,048,000			4,545,000			5,048,000

Total current liabilities		13,770,000			11,216,000			15,474,000			11,216,000

Long Term liabilities:
Notes payable, non-current		1,368,000			-			1,458,000			-
Note payable - related party, non-current		-			1,065,000			-			1,065,000
Deferred incentive compensation to officers, non-current		521,000			1,042,000			521,000			1,042,000
Deferred payroll taxes								247,000			-
Operating lease liability, non-current		3,269,000			3,591,000			3,101,000			3,591,000
Total liabilities		18,928,000			16,914,000			20,801,000			16,914,000

Commitments and contingencies

Stockholders’ equity
Preferred stock, $0.0001 par value, 15,000,000 shares authorized: Series A Convertible Preferred Stock, 6,000 shares authorized; 3,246 and 4,396 issued and outstanding as of June 30, 2020 and December 31, 2019		-			-
Common stock, $0.0001 par value, 200,000,000 shares authorized, 30,267,063 and 24,496,197 shares issued and outstanding as of June 30, 2020 and December 31, 2019		3,000			2,000
Class A units, 100 shares authorized, 100 issued and outstanding as of September 30, 2020								-			-
Class B units, 2,642,159 shares authorized, 2,642,159 issued and outstanding as of September 30, 2020								3,065,000			-
Preferred stock, $0.0001 par value, 15,000,000 shares authorized: Series A Convertible Preferred Stock, 6,000 shares authorized; 2,406 and 4,396 issued and outstanding as of September 30, 2020 and December 31, 2019								-			-
Common stock, $0.0001 par value, 200,000,000 shares authorized, 46,663,790 and 24,496,197 shares issued and outstanding as of September 30, 2020 and December 31, 2019								5,000			2,000
Additional paid-in capital		71,399,000			68,028,000			87,979,000			68,028,000
Accumulated deficit		(61,955,000	)		(56,585,000	)		(69,275,000	)		(56,585,000	)

Total stockholders’ equity		9,447,000			11,445,000			21,774,000			11,445,000

Total liabilities and stockholders’ equity	$	28,375,000		$	28,359,000		$	42,575,000		$	28,359,000

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

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

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

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

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

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.

~~Effective~~On 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.

~~Effective~~On 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.

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. The par value per share of our Common Stock was not affected by the Reverse Stock Split. All shares and per share amounts have been retroactively restated as if the reverse split occurred at the beginning of the earliest period presented.

We are a Software-as-a-Service (“SaaS”) applications platform developer. Our platform is comprised of a suite of interactive video-based sales enablement business software products marketed on a subscription basis. Our applications, available in both mobile and desktop versions, are offered as a fully integrated suite, as well as on a standalone basis, and include verbCRM, our Customer Relationship Management application, verbLEARN, our Learning Management System application, and verbLIVE, our Live ~~Broadcast Video Webinar~~Stream eCommerce application.

We also provided certain non-digital services to some of our enterprise clients such as printing and fulfillment services. We designed and printed welcome kits and starter kits for their marketing needs and provided fulfillment services, which consisted of managing the preparation, handling and shipping of our client’s custom-branded merchandise they use for marketing purposes at conferences and other events, and product sample packs that verbCRM users order through the app for automated delivery and tracking to their customers and prospects. We use the term “client” and “customer” interchangeably.

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/A for the fiscal year ended December 31, 2019 filed with the SEC on June 4, 2020. The ~~condensed~~ consolidated balance sheet as of December 31, 2019 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.

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

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~~nine months ended ~~June~~September 30, 2020, the Company incurred a net loss of ~~$5,370,000~~$12,690,000 and used cash in operations of ~~$4,673,000.~~$9,790,000. 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, 2019 consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

As of ~~June~~September 30, 2020, we had cash on hand of $1,378,000 and subsequently closed our public offering on July 24, 2020 and received net proceeds of $12.3 million after deducting underwriting discounts and commissions and estimated offering expenses.$10,772,000. We believe we have sufficient cash to sustain operations through ~~December~~September 2021. 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.

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 revenue 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.

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. As of ~~June~~September 30, 2020, we ~~have~~had no customers that accounted for 10% of our accounts receivable individually. As of December 31, 2019, we had one ~~major~~ customer that accounted for 10% of our accounts receivable individually and in aggregate. As of September 30, 2020 and 2019, we had no customers who accounted for 10% or more of our revenues.

As of September 30, 2020, we had two vendors that accounted for 10% or more of our accounts payable individually and 38% in aggregate. As of December 31, 2019, we had one vendor that accounted for 10% or more of our accounts payable individually and in aggregate. As of September 30, 2020 and 2019, we had one vendor that accounted 10% or more of our purchases.

Certain ~~revenues~~revenue amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications consist of ~~splitting~~reclassification of digital revenue between SaaS recurring subscription revenue and other digital revenue to provide additional clarity.

These reclassifications had no effect onto the previously reported net ~~(loss).~~loss.

The Company derives its revenue primarily from ~~providing~~subscriptions to its digital SaaS application services, ~~through~~though it also derives revenue from certain non-digital services, such as printing and fulfillment services, the ~~SaaS application, digital marketing and sales support services, from the sale~~Company provides to some of ~~customized print products and training materials, branded apparel, and digital tools, as demanded by~~ its ~~customers.~~larger enterprise clients. The subscription revenue from the application services are recognized over the life of the ~~estimated~~ subscription ~~period.~~contracts and any extensions thereto. While the Company has been offering subscription services for a limited period of time, to date, the Company estimates the life of the subscription period to be approximately 36 months. The Company also charges ~~certain~~ customers setup, ordesign, and installation fees for the ~~creation and~~ development of websites among other associated and ~~phone application.~~complimentary services. These fees are accounted as part of deferred revenue 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 non-digital revenue, and the related costs are reflected in cost of non-digital revenue in the accompanying Statements of Operations.

The Company recognizes revenue in accordance with 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~~the digital delivery of access to our ~~facilities,~~applications, and our performance obligations are satisfied at that time. Shipping and handling activities for our non-digital services 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 revenue over the estimated subscription period.~~ Design assets of the websites and ~~phone application~~applications 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.

~~Digital~~SaaS recurring subscription revenue – represents digital subscription-based SaaS recurring revenue associated with verbCRM, verbLEARN, and ~~VerbLIVE.~~verbLIVE. The revenue is recognized over the subscription period.

Other Digital – represents digital non-subscription-based revenue consisting of product sample revenue as well as design fees generated through or in connection with our applications. The revenue for samples is recognized upon completion and shipment, while the design fees are recognized when the service has been rendered and the app is ~~available~~delivered to the customer.

Welcome kits and fulfilment – We offer design and printing services to ~~create~~certain of our larger clients who request corporate starter kits for their new sales reps, and fulfillment of various customer products that our clients use for their marketing needs. The revenue is recognized upon completion and shipment of the starter kits or fulfillment ~~products.~~products to the customer.

Shipping – We charge our customers the costs plus a markup related to the shipping of their welcome kits and fulfillment products. The revenue is recognized when the corresponding welcome kits or fulfillment products are shipped.

Contract liabilities represents consideration received from customers under a revenue contract but the Company has not yet delivered or completed its performance obligation to the customer.

Cost of revenue 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.

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 2 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using a Binomial pricing model. 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.

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 the Financial Accounting Standards Board’s (“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.

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~~September 30, 2020, and 2019, the Company had total outstanding options of ~~4,510,358~~5,099,038 and ~~2,832,807,~~2,914,641, respectively, and warrants of ~~13,534,038~~13,351,245 and ~~7,779,602,~~11,132,960, respectively, ~~and~~ outstanding restricted stock awards of ~~2,039,078~~2,908,530 and 0, ~~which~~and 2,642,159 shares common shares potentially issuable from our Class B Units that were issued in August 2020, were excluded from the computation of net loss per share because they are anti-dilutive.

In accordance with FASB ASC Topic No. 350, Intangibles-Goodwill and Other, the Company reviews the recoverability of the carrying value of goodwill and other Intangible assets at least annually or whenever events or circumstances indicate a potential impairment. The Company’s impairment testing will be done annually. 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.

The acquisition of Verb Direct, formerly Sound Concepts, occurred on April 12, 2019. The Company will perform its first impairment test in December 2020.

The acquisition of Verb Acquisition Co formerly Ascend Certification, occurred on September 4, 2020. The Company will perform its first impairment test in fiscal 2021.

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. Based on Management’s assessment, there were no indicators of impairment at ~~June~~September 30, 2020 or December 31, 2019.

The Company follows the guidance of FASB ASC 825 for disclosures about fair value of its financial instruments and ASC 820 to measure the fair value of its financial instruments. ASC 820 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, ASC 820 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 ASC 820 are described below:

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 2 inputs for its valuation methodology for the derivative liabilities.

Deferred offering costs consist principally of legal, accounting, and underwriters’ fees incurred related to the underwritten public offering of the Company’s which was completed in July 2020. These deferred offering costs will be charged against the gross proceeds received in July 2020, concurrent with the closing of our public offering. For additional information, see Note 17, Subsequent Events, to these unaudited consolidated financial statements.

The Company has various revenue channels. 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 condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. As small business filer, the standard will be effective for us for interim and annual reporting periods beginning after December 15, 2022. Management is currently assessing the impact of adopting this standard on the Company’s financial statements and related disclosures.

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective July 1, 2024, for the Company. Early adoption is permitted, but no earlier than July 1, 2021, including interim periods within that year. Management is currently evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements, but currently does not believe ASU 2020-06 will have a significant impact on the Company.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

On April 12, 2019, Verb completed its acquisition of Verb Direct (formerly known as Sound Concepts, Inc.) on the terms set forth in the Merger ~~Agreement, at~~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 a 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 with a fair value of $7,820,000 at the closing date of the ~~transaction.~~transaction for a total purchase price of $22,820,000.

The acquisition was intended to augment and diversify Verb’s internet and SaaS business. Key factors that contributed to the recorded 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. The following table summarizes the assets acquired, liabilities assumed and purchase price allocation:

The goodwill recognized in connection with the acquisition is primarily attributable to anticipated synergies from future growth and is not expected to be deductible for tax purposes. Goodwill is not amortized but will be tested for impairment on an annual basis.

The intangible assets, which consist of developed technology of $4,700,000 are being amortized over 5-years, customer relationships of $1,200,000 are being amortized on an accelerated basis over its estimated useful life of 5 years and domain names of $440,000 are determined to have infinite lives but will be tested for impairment on an annual basis.

During the ~~six~~nine months ended ~~June~~September 30, 2020, the Company recorded amortization expense of ~~$635,000.~~$945,000. As of ~~June~~September 30, 2020, the remaining unamortized balance of the intangible assets was ~~$4,730,000.~~$4,420,000.

Subsequent to its acquisition, Verb Direct recognized revenues in the aggregate of ~~$5.0~~$7.7 million and ~~$3.7~~$6.6 million during the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively and ~~$2.6~~$2.8 million and ~~$3.7~~$2.9 million during the three months ended ~~June~~September 30, 2020 and 2019, respectively.

On September 4, 2020, Verb Acquisition Co., LLC (“Verb Acquisition”), a subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Ascend Certification, LLC, dba SoloFire (“SoloFire”), the sellers party thereto (collectively, the “Sellers”), and Steve Deverall, solely in his capacity as the seller representative, under which Sellers agreed to sell their entire interest in SoloFire, representing all of the outstanding limited liability company membership interests of SoloFire, to Verb Acquisition for a base purchase price of $5,700,000, subject to certain post-closing adjustments totaling $750,000 for an adjusted purchase price of $4,950,000. As a result, Verb Acquisition issued to the Sellers an amended promissory note of $1,885,000 and 2,642,159 Class B Units of Verb Acquisition which are exchangeable for 2,642,159 shares of Verb’s Common Stock with an estimated fair value of $3,065,000 (see Note 16) for a total purchase price of $4,950,000. The promissory note is unsecured, bears interest at a rate of 0.14% per annum and will mature in October 2020. The amended promissory note was paid in full on October 1, 2020.

The acquisition was intended to augment and diversify Verb’s SaaS business. Key factors that contributed to the recorded provisional goodwill and intangible assets in the aggregate of $5,245,000 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 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 and the provisional purchase price allocation on the date of acquisition:

The provisional goodwill recognized in connection with the acquisition is primarily attributable to anticipated synergies from future growth and is not expected to be deductible for tax purposes. Goodwill is not amortized but will be tested for impairment on an annual basis.

The provisional intangible assets, which consist of developed technology of $1,700,000 are being amortized over 5-years, customer relationships of $120,000 are being amortized over 3 years, non-competition clause of $60,000 is being amortized over 3 years, and domain names of $3,000 are determined to have infinite lives but will be tested for impairment on an annual basis.

During the nine months ended September 30, 2020, the Company recorded amortization expense of $33,000. As of September 30, 2020, the remaining unamortized balance of the intangible assets was $1,850,000.

The following comparative unaudited statements of operations present the Company’s results of operations after giving effect to the purchase of Verb Direct and SoloFire based on the historical financial statements of the Company and Verb ~~Direct.~~Direct and SoloFire. The unaudited pro forma statements of operations for the ~~six~~nine and three months ended ~~June~~September 30, 2020 and 2019 give effect to the transaction to the merger as if it had occurred on January 1, 2019.

	Six Months Ended June 30, 2020			Six Months Ended June 30, 2019			Three months ended September 30, 2020			Three months ended September 30, 2019			Nine months ended September 30, 2020			Nine months ended September 30, 2019
	(unaudited)			(Proforma, unaudited)			(Proforma unaudited)			(Proforma unaudited)			(Proforma unaudited)			(Proforma, unaudited)
SaaS recurring subscription revenue	$	2,331,000		$	1,644,000		$	1,661,000		$	1,201,000		$	4,511,000		$	3,383,000
Other digital revenue		806,000			869,000			360,000			485,000			1,166,000			1,354,000
Welcome kits and fulfilment		1,441,000			4,049,000			836,000			1,164,000			2,277,000			5,213,000
Shipping		428,000			1,172,000			186,000			271,000			614,000			1,443,000
Total Revenue		5,006,000			7,734,000			3,043,000			3,121,000			8,568,000			11,393,000

Cost of revenue		2,198,000			4,290,000			1,344,000			1,548,000			3,661,000			5,951,000

Gross margin		2,808,000			3,444,000			1,699,000			1,573,000			4,907,000			5,442,000

Operating expenses		(11,153,000	)		(10,118,000	)		(9,771,000	)		(5,353,000	)		(21,615,000	)		(16,100,000	)

Other income, net		2,975,000			880,000			574,000			526,000			3,550,000			1,406,000

Net loss		(5,370,000	)		(5,794,000	)	$	(7,498,000	)	$	(3,254,000	)	$	(13,158,000	)	$	(9,252,000	)

Deemed dividends to Series A stockholders		(3,951,000	)		-

Net loss attributed to common stockholders	$	(9,321,000	)	$	(5,794,000	)

Loss per share	$	(0.33	)	$	(0.31	)
Weighted average number of common shares outstanding - basic and diluted		27,905,680			18,821,513

Property and equipment consisted of the following as of ~~June~~September 30, 2020 and December 31, 2019.

	June 30, 2020			December 31, 2019			September 30, 2020 (unaudited)			December 31, 2019

Computers	$	29,000		$	29,000		$	29,000		$	29,000
Furniture and fixture		75,000			75,000			75,000			75,000
Machinery and equipment		39,000			39,000			40,000			39,000
Leasehold improvement		1,057,000			741,000			1,057,000			741,000
Total property and equipment		1,200,000			884,000			1,201,000			884,000
Accumulated depreciation		(248,000	)		(164,000	)		(294,000	)		(164,000	)
Total property and equipment, net	$	952,000		$	720,000		$	907,000		$	720,000

Depreciation expense amounted to ~~$84,000~~$130,000 and ~~$13,000~~$35,000 for ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

The Company has entered into several leases that are accounted for as operating leases in accordance with ASC 842. The Company currently has four office and warehouse leases in American Fork, Utah related to the operation of Verb Direct with an aggregate lease payment of $31,000 per month. Each lease expires in December 2023. The lessor of the office and warehouse area is JMCC Properties, which is an entity owned and controlled by the former shareholders and certain current officers of the Company’s subsidiary, Verb Direct.

In addition, the Company leases ~~its corporate headquarters~~offices located ~~at 2210 Newport Boulevard, Suite 200,~~in Newport Beach, California ~~92663~~ under a lease with a term of 94 months. The average monthly base rent for the first 12 months of the Lease is approximately $7,000 after rent abatement. For the next 82 months of the Lease, the average monthly base rent will be approximately $39,000. As part of the agreement, the landlord provided leasehold incentive of $572,000 for the construction of the leasehold improvements. Pursuant to ASC 842, the lease incentive of $572,000 was recorded as a part of leasehold improvements and a reduction to the right of use assets. The Lease commenced in August 2019.

As ~~June~~September 30, 2020 and December 31, 2019, the Company had recorded right of use assets of ~~$3,005,000~~$2,868,000 and $3,275,000, respectively, net of amortization. As ~~June~~September 30, 2020 and December 31, 2019, the Company had recorded lease liabilities of ~~$3,828,000~~$3,696,000 and $3,982,000, respectively, related to these leases.

	Period Ended June 30, 2020			Period Ended June 30, 2019			Period Ended September 30, 2020 (unaudited)			Period Ended September 30, 2019 (unaudited)
Lease cost
Operating lease cost (included in general and administration in the Company’s statement of operations)	$	349,000		$	170,000		$	524,000		$	281,000

Other information

Cash paid for amounts included in the measurement of lease liabilities	$	—		$	—		$	383.000		$	281,000
Weighted average remaining lease term – operating leases (in years)		4.87			4.05			4.70			5.44
Average discount rate – operating leases		4.0	%		4.0	%		4.0	%		4.0	%

The Company has the following advances on future receipts as of ~~June~~September 30, 2020:

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2020			Balance at December 31, 2019			Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at September 30, 2020			Balance at December 31, 2019

Note 1	December 24, 2019	June 30, 2020		10	%	$	506,000	$	-		$	503,000		December 24, 2019	June 30, 2020		10	%	$	506,000	$	-		$	503,000
Note 2	December 24, 2019	June 30, 2020		10	%		506,000		-			503,000		December 24, 2019	June 30, 2020		10	%		506,000		-			503,000
Note 3	June 30, 2020	February 25, 2021		10	%		506,000		506,000			-		June 30, 2020	February 25, 2021		10	%		506,000		297,000			-
Note 4	June 30, 2020	February 25, 2021		10	%		506,000		506,000			-		June 30, 2020	February 25, 2021		10	%		506,000		297,000			-
Total						$	1,012,000		1,012,000			1,006,000							$	1,012,000		594,000			1,006,000
Debt discount									(284,000	)		(274,000	)									(176,000	)		(274,000	)
Net								$	728,000		$	732,000									$	418,000		$	732,000

On December 24, 2019, the Company received two secured advances from an unaffiliated third party totaling $728,000 for the purchase of future receipts/revenues of $1,012,000. Pursuant to the terms of the agreement the unaffiliated third-party ~~will~~ auto ~~withdraw~~withdrew an aggregate of $6,000 from the Company’s operating account each banking day. The term of the agreement ~~extends~~extended until the advances are paid in full. The notes dodid not bear any interest, however, the interest iswas imputed at a rate of 28% based on the face value of the note. These advances ~~are~~were secured by the Company’s tangible and intangible assets.

The Company accounted these advances on future receipts as a liability pursuant to current accounting guidelines. As a result, the Company recorded a liability of $1,012,000 to account for the future receipts sold and a debt discount of $285,000 to account for the difference between the future receipts sold and the cash received. The debt discount iswas being amortized over the term of the agreement. As of December 31, 2019, outstanding balance of the advances amounted to $1,006,000 and the unamortized debt discount of $274,000.

During the period ended ~~June~~September 30, 2020, the Company paid the entire amount due of $1,006,000 and amortized the corresponding debt discount for $274,000.

On June 30, 2020, the Company received two secured advances from the same unaffiliated third party totaling $728,000 for the purchase of future receipts/revenues of $1,012,000. Pursuant to the terms of the agreement the unaffiliated third-party will auto withdraw an aggregate of $6,000 from the Company’s operating account each banking day. The term of the agreement extends until the advances are paid in full. The Company may pay off either note for $446,000 if paid within 30 days of funding; for $465,000 if paid between 31 and 60 days of funding; or for $484,000 if paid within 61 to 90 days of funding. These advances are secured by the Company’s tangible and intangible assets. As a result, the Company recorded a liability of $1,012,000 to account for the future receipts sold and a debt discount of $284,000 to account for the difference between the future receipts sold and the cash received. The debt discount is being amortized over the term of the agreement.

~~As of June~~During the period ended September 30, 2020, the Company paid $418,000 the balance outstanding ~~was $1,012,000~~and amortized $108,000 of the debt discount. As of September 30, 2020 outstanding balance of the notes amounted to $594,000 and the unamortized balance of the debt discount was ~~$284,000.~~$176,000.

The Company has the following related parties notes payable as of ~~June~~September 30, 2020 and December 31, 2019:

Note		Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2020		Balance at December 31, 2019				Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at September 30, 2020		Balance at December 31, 2019
Note 1 (A)		December 1, 2015	February 8, 2021		12.0	%	$	1,249,000	$	825,000	$	825,000			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			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			April 4, 2016	June 4, 2021		12.0	%		343,000		240,000		240,000
Total notes payable – related parties	Total notes payable – related parties									1,177,000		1,177,000		Total notes payable – related parties									1,177,000		1,177,000
Non-current										-		(1,065,000	)										-		(1,065,000	)
Current									$	1,177,000	$	112,000										$	1,177,000	$	112,000

As of ~~June~~September 30, 2020, and December 31, 2019, the outstanding balance of the note amounted to $825,000, respectively.

Total interest expense for notes payable to related parties was ~~$70,000~~$106,000 for ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively. The Company paid ~~$72,000~~$100,000 and ~~$63,000~~$96,000 in interest for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2020		Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at September 30, 2020
Note A	April 17, 2020	April 17, 2022		1.00	%	$	1,218,000	$	1,218,000	April 17, 2020	April 17, 2022		1.00	%	$	1,218,000	$	1,218,000
Note B	May 15, 2020	May 15, 2030		3.75	%		150,000		150,000	May 15, 2020	May 15, 2050		3.75	%		150,000		150,000
Total						$	1,368,000	$	1,368,000
Note C										May 1, 2020	May 1, 2022		3.75	%		90,000		90,000
Note D										September 4, 2020	October 1, 2020		0.14	%		1,982,000		1,885,000
Total notes payable																3,440,000		3,343,000
Non-current																1,458,000		1,458,000
Current															$	1,982,000	$	1,885,000

Note	Date		Payment Date	Balance at June 30, 2020			Balance at December 31, 2019			Date	Payment Date	Balance at September 30, 2020			Balance at December 31, 2019

Rory Cutaia (A)		December 23, 2019	50% on January 10, 2021 and 50% on January 10, 2022	$	430,000		$	430,000		December 23, 2019	50% on January 10, 2021 and 50% on January 10, 2022	$	430,000		$	430,000
Rory Cutaia (B)		December 23, 2019	50% on January 10, 2021 and 50% on January 10, 2022		324,000			324,000		December 23, 2019	50% on January 10, 2021 and 50% on January 10, 2022		324,000			324,000
Jeff Clayborne (A)		December 23, 2019	50% on January 10, 2021 and 50% on January 10, 2022		125,000			125,000		December 23, 2019	50% on January 10, 2021 and 50% on January 10, 2022		125,000			125,000
Jeff Clayborne (B)		December 23, 2019	50% on January 10, 2021 and 50% on January 10, 2022		163,000			163,000		December 23, 2019	50% on January 10, 2021 and 50% on January 10, 2022		163,000			163,000

Total					1,042,000			1,042,000					1,042,000			1,042,000
Non-current					(521,000	)		(1,042,000	)				(521,000	)		(1,042,000	)
Current				$	521,000		$	-				$	521,000		$	-

On August 14, 2019, we entered into ~~the SPA~~a Securities Purchase Agreement (the “SPA”) with ~~the Preferred Purchasers,~~certain accredited investors (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 ~~the August Warrants~~warrants (the “August 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 the August Warrants to purchase up to 3,245,162 shares of Common Stock in connection therewith. We received proceeds of $4,688,000, net of direct costs of $342,000.

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 August 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 August 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).

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.

During the ~~period~~three months ended ~~June~~September 30, 2020, ~~1,150~~1,990 shares of Preferred Stock were converted into ~~741,933~~1,405,274 shares of Common Stock. As of ~~June~~September 30, 2020, ~~3,246~~2,406 shares Series A Preferred stock are outstanding and potentially convertible tointo approximately ~~1.8~~2.2 million shares of ~~common stock.~~Common Stock.

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 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 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.As of December 31, 2019, the Company had recorded a derivative liability of $5,048,000.

During the period ended September 30, 2020, the Company recorded a derivative liability of $3,951,000 as a result of the issuance of 2,303,861 warrants to acquire common stock to Series A Preferred stockholders (see Note 12). The Company also recorded a change in fair value of ($4,295,000) to account for the changes in the fair value of these derivative liabilities during the nine months ended September 30, 2020. In addition, 95,000 shares of the Series A warrants that were accounted as derivative liability were exercised. As result, the Company computed the fair value of the corresponding derivate liability one last time which amounted to $159,000 and the pursuant to current accounting guidelines, the extinguishment was accounted as part of equity.

At September 30, 2020, the fair value of the derivative liability amounted to $4,545,000. The details of derivative liability transactions as of and for the periods ended September 30, 2020 and 2019 are as follows:

The derivative liabilities were valued using a Binomial pricing model with the following average assumptions:

	June 30, 2020			Upon Issuance			December 31, 2019			September 30, 2020			Upon Issuance			December 31, 2019
Stock Price	$	1.11		$	1.70		$	1.55		$	1.08		$	1.70		$	1.55
Exercise Price	$	1.65		$	1.55		$	1.88		$	1.62		$	1.55		$	1.88
Expected Life		3.03			5.0			3.53			2.78			5.0			3.53
Volatility		131	%		212	%		216	%		107	%		212	%		216	%
Dividend Yield		0	%		0	%		0	%		0	%		0	%		0	%
Risk-Free Interest Rate		0.17	%		2.47	%		1.64	%		0.14	%		2.47	%		1.64	%

Fair Value	$	5,679,000		$	3,951,000		$	5,048,000		$	4,545,000		$	3,951,000		$	5,048,000

The expected life of the warrants was based on the remaining contractual term. 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, 2019, the Company had recorded a derivative liability of $5,048,000.~~

During the period ended June 30, 2020, the Company recorded derivative liability of $3,951,000 as a result of the issuance of warrants to Series A Preferred stockholders (see Note 12). The Company also recorded a change in fair value of ($3,320,000) to account for the changes in the fair value of these derivative liabilities during the six months ended June 30, 2020. At June 30, 2020, the fair value of the derivative liability amounted to $5,679,000. The details of derivative liability transactions as of and for the periods ended June 30, 2020 and 2019 are as follows:

The Company’s Common Stock activity for the ~~six~~nine months ended ~~June~~September 30, 2020 is as follows:

On February 5, 2020, the Company initiated a private placement, which is for the sale and issuance of up to five million shares of its Common Stock at a per-share price of $1.20, which amount represents a 20% discount to the $1.50 closing price of the Company’s Common Stock on that day.

The Company’s private placement is exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) thereof and/or Rule 506 of Regulation D and Regulation S thereunder, each as promulgated by the SEC. The Company’s private placement was managed by the Company; however, in connection with the closings, the Company paid a non-U.S. based consultant (i) as a cash fee, an aggregate amount of $499,000 (or 10% of the gross proceeds of the closings), (ii) as a non-accountable expense allowance, an aggregate of $100,000 (or 2% of the gross proceeds of the closings), (iii) five-year warrants, exercisable for an aggregate of up to 416,199 shares of the Company’s Common stock at a cash-only exercise price of $1.92 per share, and (iv) 100,000 shares of the Company’s Common Stock. The Company made the above-referenced payments only in respect of that portion of the gross proceeds from the closings for investors introduced to the Company by the consultant. In addition, the Company also incurred various expenses totaling $42,000 that are directly related to this private placement.

As a result of this private placement, from February through April 2020, a total of 4,237,833 shares of Common Stock were sold in exchange for cash proceeds of $4,444,000, net of direct fees and expenses in the aggregate of $641,000.

In preparation for this private placement offering, the Company separately negotiated with certain Series A stockholders to waive their rights in order not to ratchet down the conversion price of their Series A preferred shares (see Note 9). In return for the waiver, the Company granted these Series A stockholders warrants to purchase 2,303,861 shares of Common Stock. The warrants are exercisable in August 2020, expire in 5 years and are exercisable at $1.20 per share, as adjusted. The exercise price is subject to certain customary adjustments, including subsequent equity sales and rights offerings. In addition, the warrants also included a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder. As a result of this fundamental transaction provision, the warrants were accounted as derivative liability with a fair value upon issuance of $3,951,000 upon issuance. The Company accounted the fair value of $3,951,000 as a deemed dividend since if the down round provision of the Series A preferred shares had occurred, it would have been accounted as a deemed dividend due to it providing additional value to the Series A stockholders.

On July 24, 2020, the Company concluded its public offering pursuant to a registration statement on Form S-1 (File No. 333-239055) and issued and sold 12,545,453 shares of Common Stock (which included 1,636,363 shares of Common Stock sold pursuant to the exercise by the underwriters of an overallotment option). The net proceeds to the Company, after deducting the underwriting discounts and commissions and direct offering expenses was $12,337,000.

During the ~~six~~nine months ended ~~June~~September 30, 2020, the Company issued ~~669,050~~962,583 shares of Common Stock to vendors for services rendered and to be rendered with a fair value of ~~$895,000.~~$1,126,000. 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. As previously discussed, the Company also issued an additional 100,000 shares of common stock to a consultant for services rendered as a result of a private placement offering in February through April 2020.

Pursuant to the Company’s December 2019 Omnibus Incentive Plan, a summary of restricted stock award activity for the ~~six~~nine months ended ~~June~~September 30, 2020 is presented below.

							Weighted- Average Grant Date								Weighted- Average Grant Date
	Shares			Fair Value			Fair Value		Shares			Fair Value			Fair Value

Non-vested at December 31, 2019		1,486,354		$	1,999,000		$	1.36		1,486,354		$	2,021,000		$	1.36
Granted		589,098			866,000			1.47		2,871,471			3,379,000			1.18
Vested/deemed vested		(22,050	)		(1,209,000	)		1.28		(1,050,856	)		(2,696,000	)		1.26
Returned										(336,533	)		485,000			1.31
Forfeited		(14,324	)		(21,000	)		1.47		(61,906	)		(91,000	)		1.47
Non-vested at June 30, 2020		2,039,078		$	1,635,000		$	1.39
Non-vested at September 30, 2020										2,908,530		$	3,544,000		$	1.22

On April 10, 2020, the board of directors of the Company, approved management’s COVID-19 Full Employment and Cash Preservation Plan (the “Plan”), pursuant to which all directors and senior level management would reduce their cash compensation by 25%, and all other employees and consultants would reduce their cash compensation by 20% (the “Cash Reduction Amount”) for a period of three months from April 16, 2020 through July 15, 2020 for one category of plan participants, and April 26, 2020 through July 18, 2020 for the other category of participants. The Plan was designed to promote the continued growth of the Company and avoid the lay-offs and staff cut-backs experienced by many companies affected by the COVID-19 economic crisis. The Cash Reduction Amount is to be paid in shares of the Company’s common stock (the “Shares”) through an allocation of shares from the Company’s 2019 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) and granted pursuant to stock award agreements entered into effective as of April 10, 2020 (the “Grant Date”) between the Company and each of the Company’s directors, executive officers, employees, and consultants. The stock award agreements provide that the Shares will vest on July 18, 2020 (the “Vesting Date”) as long as the recipient remains in continuous service to the Company during the time from the Grant Date through the Vesting Date. The number of Shares issued were determined in accordance with the provisions of the Omnibus Incentive Plan, which provides that the value shall be determined based on the volume weighted average price of the Company’s common stock during a period of up to the 30-trading days prior to the Grant Date. Total Common Stock granted as part of the Cash Preservation Plan on April 10, 2020 was 589,098 with a fair value of $866,000. The shares were valued based on the market value of the Company’s stock price on the grant date and will be amortized over its vesting term. As

During the period ended September 30, 2020, the Company granted an additional 2,871,471 shares of its restricted stock to employees and members of Board of Directors. The Restricted Stock Awards vest in various dates, starting on grant date up to July 2024. These Restricted Stock Awards were valued based on market value of the Company’s stock price at the respective date of ~~this report~~grant and had aggregate fair value of $3,379,000, which is being amortized as stock compensation expense over its vesting term.

During the ~~restricted~~period ended September 30, 2020 336,533 shares ~~have not been issued~~granted to various employees that vested were returned to the ~~respective employees.~~Company in exchange for the Company paying the corresponding income and payroll taxes of these employees amounting $485,000. Pursuant to current accounting guidelines, the Company accounted the return of the 336,533 shares and the payment of $485,000 for income and payroll taxes paid on behalf the employees as a reduction in additional paid in capital.

The total fair value of restricted stock award that vested or deemed vested during the ~~six~~nine months ended ~~June~~September 30, 2020 was ~~$1,209,000~~$2,696,000 and is included in selling, general and administrative expenses in the accompanying statements of operations. As of ~~June~~September 30, 2020, the amount of unvested compensation related to issuances of restricted stock award was ~~$1,635,000~~$3,544,000 which will be recognized as an expense in future periods as the shares vest.

Effective October 16, 2014, the Company adopted the 2014 Stock Option Plan (the ~~“Plan”~~“2014 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~~nine months ended ~~June~~September 30, 2020 is presented below.

						Weighted-									Weighted-
				Weighted-		Average							Weighted-		Average
				Average		Remaining		Aggregate					Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic					Exercise		Contractual		Intrinsic
	Options			Price		Life (Years)		Value		Options			Price		Life (Years)		Value

Outstanding at December 31, 2019		4,233,722		$	1.75		2.54	$	995,000		4,233,722		$	1.73		2.54	$	995,000
Granted		346,637			1.39		-		-		1,035,637			1.37		-		-
Forfeited		(70,000	)		1.36		-		-		(170,321	)		3.53		-		-
Exercised		-			-		-		-		-			-		-		-
Outstanding at June 30, 2020		4,510,358		$	1.71		2.54	$	2,000
Outstanding at September 30, 2020											5,099,038		$	1.59		2.54	$	-

Vested June 30, 2020		2,175,383		$	2.33			$	-
Vested September 30, 2020											2,563,321		$	1.89			$	-

Exercisable at June 30, 2020		1,447,626		$	2.16			$	-
Exercisable at September 30, 2020											1,644,015		$	2.16			$	-

At September 30, 2020, there was no intrinsic value as the exercise price of these stock options were greater than the market price.

During the ~~six~~nine months ended ~~June~~September 30, 2020 the Company granted stock options to employees to purchase a total of ~~346,637~~1,035,637 shares of Common Stock for services to be rendered. The options have an average exercise price of ~~$1.39~~$1.37 per share, expire in five years, and ~~vests in~~cliff vest over a period of 0.4 to 4 ~~equal installments during the four~~ years from the grant date. The total fair value of these options at the grant date was approximately ~~$463,000~~$1,242,000 using the Black-Scholes Option pricing model.

The total stock compensation expense recognized relating to vesting of stock options for the ~~six~~nine months ended ~~June~~September 30, 2020 amounted to ~~$773,000.~~$1,215,000. As of ~~June~~September 30, 2020, total unrecognized stock-based compensation expense was ~~$3.6~~$3.8 million, which is expected to be recognized as part of operating expense through ~~March~~August 2024.

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,						Nine months ended September 30,
	2020			2019			2020		2019
Risk-free interest rate		0.29% - 0.39	%		1.91% - 2.75	%	0.17% - 0.39	%	1.55% - 2.75	%
Average expected term		5 years			5 years		1 to 5 years		3.6 to 5 years
Expected volatility		270.10 - 270.41	%		201.30 - 241.77	%	270.10 - 270.57	%	180 – 275.29	%
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.

The Company has the following warrants outstanding as of ~~June~~September 30, 2020, all of which are exercisable:

	Warrants			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value		Warrants			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value

Outstanding at December 31, 2019		10,930,991		$	3.07		4.25	$	-		10,930,991		$	3.07		4.25	$	-
Granted		2,720,060			1.61		-		-		4,630,654			1.17		-		-
Forfeited		(117,013	)		5.33		-		-		(244,800	)		3.53		-		-
Exercised		-			-		-		-		(1,965,594	)		1.10		-		-
Outstanding at June 30, 2020, all vested		13,534,038		$	2.59		3.90	$	-
Outstanding at September 30, 2020, all vested											13,351,251		$	2.50		3.63	$	-

At ~~June~~September 30, 2020, there was no intrinsic value as the exercise price of these stock warrants were greater than the market price.

During the period ended ~~June~~September 30, 2020, the Company granted 416,199 warrants to a consultant as part of a private placement offering and 2,303,861 warrants to Series A stockholders (see Note 12). In addition, the Company also granted warrants to certain shareholders to purchase 1,910,594 shares of common stock as part of settlement with regards to the Company’s public offering that occurred in July 2020 (see Note 12) . The warrants are fully vested upon grant, exercisable at $1.10 per share, expire in 0.01 year with an estimated fair value of $248,000 using the Black-Scholes Option pricing model. The Company accounted the estimated fair value of $248,000 as a financing costs.

During the period ended September 30, 2020, a total of 1,965,594 warrants were exercised into 1,965,594 shares of Common Stock at a weighted average exercise price of $1.10. The Company received cash of $2,165,000 upon exercise of the warrants.

As the Class B Units are exchangeable for the Company’s Common Stock, for valuation purposes, the Company determined to use the trading price of the Company’s Common Stock at the date of the acquisition of SoloFire which amounted to $3,065,000.

On April 24, 2018, EMA Financial, LLC (“EMA”), commenced an action against the Company, styled as 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 money damages, injunctive relief, liquidated damages, and declaratory relief related to the Company’s refusal to agree to EMA’s interpretation of a cashless exercise provision in a common stock warrant we granted to EMA in December 2017. The Company interposed several counterclaims, including a claim for reformation of the underlying agreements to reflect the Company’s interpretation of the cashless exercise provision. Both parties moved for summary judgment.

On March 16, 2020, the United States District Court entered a decision agreeing with the Company’s position, denying EMA’s motion for declaratory judgement on its interpretation of the cashless exercise formula, and stating, inter alia, that “the Agreements read in their entirety reveal that nFUSZ, Inc.’s position regarding the proper cashless exercise formula is the only sensible one and that the cashless exercise formula must be enforced accordingly.” The court went on to order that in light of this finding, the parties should submit a proposal for future proceedings. Accordingly, the Company has instructed its counsel to prosecute the Company’s claims for reimbursement of all of the costs it incurred in connection with this action, including all attorneys’ fees as well as all damages it incurred as a result of EMA’s conduct.

The Company is currently in a dispute with a former employee of its predecessor bBooth, Inc. who has interposed a breach of contract claim in which he alleges that he is entitled to approximately $300,000 in unpaid bonus compensation from 2015. The Company does not believe his claims have any merit as they are contradicted by documentary evidence, and barred by the applicable statute of limitations, and barred by a release executed by the former employee when the Company purchased all of his shares of stock more than 4 years ago in January 2016. The Company intends to seek dismissal of the former employee’s ~~claims through arbitration.~~claims.

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. The complaint purports to be brought on behalf of a class of persons or entities who purchased or otherwise acquired the Company’s Common Stock between January 3, 2018 and May 2, 2018, and alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, arising out of the January 3, 2018, announcement by the Company of its agreement with Oracle America, Inc. The complaint seeks unspecified costs and damages. The Company believes the complaint is without ~~merit and the Company intends to vigorously defend the action.~~merit.

On May 15, 2020, we executed a binding Memorandum of Understanding with the lead plaintiff in the class action lawsuit to settle that action and release the claims asserted therein. The terms of the settlement are confidential pending submission to the court, and subject to several contingencies, including but not limited to court approval. We believe we have established an appropriate reserve to account for the potential settlement.

By Order dated October 27, 2020, the court granted preliminary approval of the class action settlement.

On September 27, 2019, a derivative action was filed in the United States District Court, Central District of California, styled Richard Moore, Individually and on Behalf of All Others Similarly Situated, Plaintiff, v. Verb Technology Company, Inc., and Rory J. Cutaia, James P. Geiskopf, and Jeff Clayborne, Defendants, Case Number 2:19-CV-08393-AB-SS. The derivative action also arises out of the January 3, 2018, announcement by the Company of its agreement with Oracle America, Inc. The derivative action alleges claims for breach of fiduciary duty, unjust enrichment, and waste of corporate assets due to the costs associated with the defense of the above referenced class action complaint. The derivative complaint seeks a declaration that the individual defendants have breached their duties, unspecified damages, and certain purportedly remedial measures. The Company contends that the class action is without merit and as such, this derivative action, upon which it relies, is likewise without ~~merit~~merit.

On November 5, 2020, we executed a binding settlement term sheet with the lead plaintiff in the derivative action to settle that action and release all claims asserted therein. The terms of the ~~Company intends~~settlement are confidential pending submission to ~~vigorously defend this suit.~~the court, and subject to several contingencies, including but not limited to court approval.

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

The Company knows of no material proceedings in which any of its directors, officers, or affiliates, or any registered or beneficial stockholder is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.

The Company believes it has adequately reserved for all litigation within its ~~financials.~~

The Company has committed an aggregate of ~~$450,000~~$475,000 in annual board fees to its five board members over the term of their appointment for services to be rendered. Board fees are accrued and paid monthly. The members will serve on the board until the annual meeting for the year in which their term expires or until their successors has been elected and qualified.

Total board fees expensed during the period ended ~~June~~September 30, 2020 was ~~$199,000.~~$309,000 As of ~~June~~September 30, 2020, total board fees to be recognized in future period amounted to ~~$188,000~~$90,000 and will be recognized once the service has been rendered.

~~The recent outbreak of~~ COVID-19 ~~may have a significant negative impact on our business, sales, results of operations and financial condition.~~

In March 2020, the World Health Organization declared that the rapidly spreading COVID-19 outbreak was a global pandemic (the “COVID-19 pandemic”). In response to the COVID-19 pandemic, many governments around the world have implemented, and continue to implement, a variety of measures to reduce the spread of COVID-19, including travel restrictions and bans, instructions to residents to practice social distancing, quarantine advisories, ~~shelter-inplace~~shelter-in place orders and required closures of non-essential businesses.

The global outbreak of COVID-19 has led to severe disruptions in general economic activities, as businesses and federal, state, and local governments take increasingly broad actions to mitigate this public health crisis. We have experienced disruption to our business, both in terms of disruption of our operations and the adverse effect on overall economic conditions. These conditions will significantly negatively impact all aspects of our business. Our business is dependent on the continued health and productivity of our employees, including our software engineers, sales staff and corporate management team. Individually and collectively, the consequences of the COVID-19 outbreak could have a material adverse effect on our business, sales, results of operations and financial condition.

Additionally, our liquidity could be negatively impacted if these conditions continue for a significant period of time and we may be required to pursue additional sources of financing to obtain working capital, maintain appropriate inventory levels, and meet our financial obligations. Currently, capital and credit markets have been disrupted by the crisis and our ability to obtain any required financing is not guaranteed and largely dependent upon evolving market conditions and other factors. Depending on the continued impact of the crisis, further actions may be required to improve our cash position and capital structure.

The extent to which the COVID-19 outbreak ultimately impacts our business, sales, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, we may continue to experience significant impacts to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.

On July 24, 2020, the Public Offering closed, and the Company issued and sold in an underwritten public offering 12,545,453 shares of Common Stock (which includes 1,636,363 shares of Common Stock sold pursuant to the exercise by the underwriters of an overallotment option) pursuant to a registration statement on Form S-1 (File No. 333-239055), and the amendment thereto, which was initially filed with the SEC on June 9, 2020 and declared effective by the SEC on July 21, 2020, a registration statement on Form S-1 (File No. 333-239997) filed with the SEC on July 22, 2020 pursuant to Rule 462(b) under the Securities Act, which was effective immediately upon filing, and pursuant to the underwriting agreement between the Company and its underwriter. The net proceeds to the Company, after deducting the underwriting discounts and commissions and offering expenses payable by the Company, was $12.3 million.

~~The following proforma information details the effect of the public offering as if it occurred at June 30, 2020.~~

Subsequent to ~~June~~September 30, 2020, the Company issued ~~174,746~~30,000 shares of Common Stock to vendors for services rendered with a fair value of ~~$206,000.~~$33,000. 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.

Subsequent to ~~June~~September 30, 2020, the Company granted stock options to an employee to purchase a total of ~~182,800~~914,171 shares of Common Stock for services rendered. The options have an average exercise price of ~~$1.36~~$1.33 per share, expire in five years, and vest over a period of ~~0.4, 3.4 years, and~~0.5 to 4 years from grant date. The total fair value of these options at the grant date was ~~$197,000~~$1,016,000 using the Black-Scholes option pricing model.

~~Subsequent to June 30, 2020, 25,000 warrants were exercised resulting in the issuance of 25,000 shares of Common Stock. The Company received cash of $30,000 upon the exercise of the warrants.~~

Subsequent to June 30, 2020, 561,102 Restricted Stock Awards vested as part of the Company’s payroll reduction plan, of which 148,287 shares were returned back to the Company in exchange for the Company paying the corresponding payroll taxes on behalf of the awardees.

~~Subsequent to June~~September 30, 2020, the Company issued a ~~33,078~~60,000 Restricted Stock Awards to ~~employees~~an advisory board member that ~~vested on~~cliff vest quarterly over one year from grant date with an aggregate fair value of ~~$34,000, of which 3,483 shares were returned back to the Company in exchange for the Company paying the corresponding payroll taxes on behalf of the awardees.~~

On July 29, 2020, the board of directors (the “Board”) of the Company approved the elements of the 2020 compensation payable to our executive officers and directors upon the recommendation of the Board’s Compensation Committee (the “Committee”) comprised of only independent directors. The key elements of our compensation program are summarized below. For the development of the 2020 compensation program, the Committee retained Compensation Advisory Partners LLC (“CAP”), a respected independent compensation consulting firm. CAP provided the Committee with compensation advisory services with respect to both executive and Board compensation. CAP reviewed the 2019 compensation paid to our executive officers and Board and compared our compensation with companies CAP identified as appropriate peer companies. The Committee’s recommendation and the Board’s approval of the 2020 compensation program was based primarily on the recommendations made by CAP.$68,000.

~~Base Salary~~Registration of Common Stock, Options of Common Stock, and ~~Target Bonus~~

~~On July 29, 2020, the Board approved an annual base salary equal to $490,000 for Rory J. Cutaia, the Company’s chairman~~Shares of the Board, President, Chief Executive Officer, Secretary and Director, and an annual base salary equal to $250,000 for Jeffrey Clayborne, the Company’s Chief Financial Officer. The Board also approved a target cash bonus for 2020 equal to $490,000 and $125,000 for Messrs. Cutaia and Clayborne, respectively.

On July 29, 2020, the Board granted annual restricted stock awards (“Annual RSAs”) under the Company’s 2019 Omnibus Incentive Plan (the “2019 Plan”) equal to 471,698 and 283,019 shares of our common stock for Messrs. Cutaia and Clayborne, respectively with an aggregate fair value of $800,000. The Annual RSAs represent the stock component of Messrs. Cutaia’s and Clayborne’s annual compensation and are subject to a four-year vesting period, with one quarter of the award vesting on the first, second, third and fourth anniversaries of the date of grant.

On July 29, 2020, the Board also approved a performance-based cash bonus equal to $100,000 and $25,000 payable to Messrs. Cutaia and Clayborne, respectively, effective as of July 29, 2020. The cash bonuses were granted in connection with the successful closings of our March 31, 2020 $5,000,000 private placement of our common stock and the July 24, 2020 $13,800,000 underwritten public offering of our common stock (the “Recent Offerings”).

On July 29, 2020, the Board approved annual cash compensation for each of its non-employee independent directors equal to $175,000 for James P. Geiskopf, the Company’s Lead Director, and annual cash compensation equal to $75,000 for each of Judith Hammerschmidt, Nancy Heinen, Kenneth S. Cragun and Phillip J. Bond, the Company’s other non-employee independent directors.

On July 29, 2020, the Board also granted Annual RSAs under the 2019 Plan equal to 150,943 shares of our common stock for Mr. Geiskopf and 75,472 shares of our common stock for each of Mses. Hammerschmidt and Heinen and Messrs. Cragun and Bond with an aggregate fair value of $480,000. The Annual RSAs represent the stock component of our non-employee directors’ compensation and vest on the one-year anniversary of the date of grant.

On July 29, 2020, the Board also approved common stock bonus grants equal to 166,365, 63,288 and 33,078 shares of our common stock to Messrs. Cutaia, Clayborne and Geiskopf, respectively, with an aggregate fair value of $268,000, of which 21,763 shares were returned back to the Company in exchange for the Company paying the corresponding payroll taxes on behalf of the awardees. The common stock bonus grants represent the stock component of Messrs. Cutaia’s, Clayborne’s and Geiskopf’s bonus and were issued in connection with the successful closing of the Recent Offerings. The officers and board member had an option between gross or net issuances resulting in the net issuance of 240,968 shares of Common Stock.

On August 5, 2020, the Company entered into a Settlement and Release Agreement with Iroquois Capital Investment Group LLC and Iroquois Master Fund Ltd. (collectively, “Iroquois”), and on August 6, 2020, the Company entered into a Settlement and Release Agreement with Kingsbrook Opportunities Master Fund LP (“Kingsbrook”) pursuant to which the Company issued (i) warrants to Iroquois exercisable for up to an aggregate 1,870,594 shares of Common Stock with an exercise price of $1.10 per share and (ii) a warrant to Kingsbrook exercisable for up to an aggregate 40,000 shares of Common Stock with an exercise price of $1.10 per share in an effort to resolve any claims, and without admission of wrongdoing or failures by the Company, Iroquois or Kingsbrook, of Iroquois’ right to participate in the Company’s public offering in July 2020 and Kingsbrook’s right to participate in the Company’s private placement in February 2020.

The warrants are exercisable from and after the date of issuance and at any time, in the case of the warrants issued to Iroquois, for the ten-trading-day period from the date the registration statement on Form S-3 is declared effective by the SEC, and in the case of the warrant issued to Kingsbrook, for the three-year period from the date of issuance. The warrants issued to Iroquois terminate ten trading days after the registration statement on Form S-3 is declared effective by the SEC, and the warrant issued to Kingsbrook terminates three years after issuance

~~On August 10,~~October 20, 2020, the Company filed a registration statement on Form S-3 with the SEC. The prospectus contained in the registration statement ~~relates~~ to the proposed resale by the selling security holders named ~~therein~~in the prospectus or their permitted assigns of an aggregate of up to ~~3,338,141~~8,393,387 shares of our Common Stock ~~issuable upon exercise of common stock purchase warrants~~ held by the selling security holders, which amount consists of ~~up to~~ (i) 5,087,326 shares of Common Stock outstanding as of the date of the registration statement, (ii) an aggregate of ~~1,319,351~~416,199 shares of Common Stock issuable upon exercise of common stock purchase warrants issued in connection with an Omnibus Waiver and Acknowledgment Agreement, (ii) an aggregate of 1,910,594 shares of common stock issuable upon exercise of common stock purchase warrants issued in connection with Settlement and Release Agreements, and (iii) an aggregate of 108,196 shares of common stock issuable upon exercise of common stockCommon Stock purchase warrants issued to ~~Meridian Newcastle Group, Inc.~~a non-U.S. consultant in connection with a private placement of Common Stock to certain of the Company’s selling security holders, (iii) 247,703 restricted stock units granted pursuant to a Restricted Stock Award Agreement, and (iv) an aggregate of 2,642,159 shares of Common Stock which will be issued in the future from time to time to those of the Company’s selling security holders that are holders of Class B Units of Verb Acquisition under an exchange agreement among the holders of Class B Units pursuant to which the holders of Class B Units may exchange their Class B Units for shares of the Company’s Common Stock on a one-for-one basis.

In October 2020, the Company paid in full the note payable of $1,885,000 issued in September 2020 for the acquisition of SoloFire (see Note 3 and 8).

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

The following discussion and analysis of the results of operations and financial condition of our company for the three-month period ended ~~June~~September 30, 2020 and 2019, 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 cause 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, LLC, or Verb Direct, on a consolidated basis, unless otherwise specified.

We are a Software-as-a-Service, or SaaS, applications platform developer. Our platform is comprised of a suite of interactive video-based sales enablement business software products marketed on a subscription basis. Our applications, available in both mobile and desktop versions, are offered as a fully integrated suite, as well as on a standalone basis, and include verbCRM, our Customer Relationship Management application; verbLEARN, our Learning Management System application; and verbLIVE, our Live ~~Broadcast Video Webinar~~Stream eCommerce application.

Our suite of applications can be distinguished from other sales enablement applications because our applications utilize our proprietary interactive video technology as the primary means of communication between sales and marketing professionals and their customers and prospects. Moreover, the proprietary data collection and analytics capabilities of our applications inform our users in real time, on their devices, when and for how long their prospects have watched a video, how many times such prospects watched it, and what they clicked-on, which allows our users to focus their time and efforts on ‘hot leads’ or interested prospects rather than on those that have not seen such video or otherwise expressed interest in such content. Users can create their hot lead lists by using familiar, intuitive ‘swipe left/swipe right’ on-screen navigation. Our clients report that these capabilities provide for a much more efficient and effective sales process, resulting in increased sales conversion rates. We developed the proprietary patent-pending interactive video technology, as well as several other patent-issued and patent-pending technologies that serve as the unique foundation for all of our platform applications.

verbCRM combines the capabilities of customer relationship management, or CRM, lead-generation, content management, and in-video ~~e-commerce~~ecommerce capabilities in an intuitive, yet powerful tool for both inexperienced as well as highly skilled sales professionals. verbCRM allows users to quickly and easily create, distribute, and post videos to which they can add a choice of on-screen clickable icons, which when clicked, allow viewers to respond to the user’s call-to-action in real-time, in the video, while the video is playing, without leaving or stopping the video. For example, our technology allows a prospect or customer to click on a product they see featured in a video and impulse buy it, or to click on a calendar icon in the video to make an appointment with a salesperson, which are among many novel features and functionalities designed to eliminate or reduce friction from the sales process for our users. The verbCRM app is designed to be easy to use and navigate, and takes little time and training for a user to begin using the app effectively. It usually takes less than four minutes for a novice user to create an interactive video from our app. Users can add interactive icons to pre-existing videos, as well as to newly created videos shot with practically any mobile device. verbCRM interactive videos can be distributed via email, text messaging, chat app, or posted to popular social media directly and easily from our app. No software download is required to view Verb interactive videos on virtually any mobile or desktop device, including smart TVs. For the ~~six~~nine months ended ~~June~~September 30, 2020, verbCRM was the primary source of subscription-based SaaS recurring digital revenue.

verbLEARN is an interactive video-based learning management system that incorporates all of the clickable in-video technology featured in our verbCRM application, however adapted for use by educators for video-based education. verbLEARN is used by enterprises seeking to educate a large sales team or a customer base about new products, or elicit feedback about existing products. It also incorporates Verb’s proprietary data collection and analytics capabilities that inform users in real time, when and for how long the viewers watched the video, how many times they watched it, and what they ~~clicked-on. Because~~clicked-on, and adds gamification features that enhance the learning aspects of the application. verbLEARN launched in the fourth quarter of 2019, and for the nine months ended September 30, 2020 it was not a significant source of subscription-based SaaS recurring digital revenue ~~for the six months ended June 30, 2020.~~because during that period it has been offered to our clients as a free-trial add-on service.

verbLIVE builds on popular video-based platforms such as Facebook Live, Zoom, WebEx, and Go2Meeting, among others, by adding Verb’s proprietary interactive in-video ecommerce capabilities – including an in-video Shopify shopping cart integrated for Shopify account holders - to our own live stream video broadcasting application. verbLIVE is a next-generation ~~webinar~~live stream platform that allows ~~webinar~~ hosts to utilize a variety of novel sales-driving features, including placing interactive icons on-screen that appear on the screens of all viewers, providing in-video click-to-purchase capabilities for products or services featured in the live video broadcast, in real-time, driving friction-free selling. verbLIVE also provides the host with real-time viewer engagement data and interaction analytics. verbLIVE is entirely browser-based, allowing it to function easily and effectively on all devices without requiring the host or the viewers to download software, and is secured through end-to-end encryption. verbLIVE is currently in ~~pre-sales, accepting customer deposits,~~final beta-testing, and is expected to launch commercially in ~~summer~~December 2020. A mobile app-based version of verbLIVE, with enhanced features, is currently in development and is expected to be released in early first quarter of 2021.

To more effectively and efficiently monetize our current large user base, we have developed and have begun to deploy in-app purchase capabilities for all verbCRM users. This feature is currently being distributed and deployed as an automatic software update to enterprise client users whose monthly subscription fees and use of the application are paid by their corporate employer, sponsor, or principal. The in-app purchase capability will allow these users to pay for subscriptions directly in the app with their own credit card in order to access upgraded or unlocked verbCRM features and additional functionality within the app.

In addition, these users will have in-app access to our forthcoming “app store” where users can subscribe for third-party apps that are complimentary to verbCRM user demographics, such as specialized expense tracking applications, tax software, among other third-party apps offered directly to our user base on a revenue share basis with the third-party developers. In addition, we are ~~expecting to introduce during 2020~~finalizing development and testing of an “Open API” architecture, allowing third-party developers to create specialized apps with features and functionality that integrate seamlessly into our verbCRM application. These will be offered directly to our user base through our verbCRM app store on a revenue-sharing basis.

We have completed and deployed the integration of verbLIVE into Salesforce and passed their security review process. In recent weeks we launched a joint marketing campaign with Salesforce to introduce the verbLIVE plug-in functionality to current Salesforce users. A verbCRM sync application for Salesforce users is currently being utilized by at least one of our large enterprise clients and the verbLIVE plug-in is now being offered to all Salesforce users on a monthly subscription fee basis.

We have also completed the integration of verbCRM into systems offered by 17 of the most popular direct sales back-office system providers, such as Direct Scale, Exigo, By Design, Thatcher, Multisoft, Xennsoft, and Party Plan. Direct sales back-office systems provide many of the support functions required for direct sales operations, including payroll, customer genealogy management, statistics, rankings, and earnings, among other direct sales financial tracking capabilities. The integration into these back-office providers, facilitated through our own API development, allows single sign-on convenience for users, as well as enhanced data analytics and reporting capabilities for all users. We believe that our integration into these back-end platforms accelerates the adoption of verbCRM by large direct sales enterprises that rely on these systems and as such, we believe this represents a competitive advantage.

We ~~are also~~intend to introduce an integration of verbLIVE and verbCORE into Microsoft Outlook before year-end, with a broader scale launch in ~~various stages of development, testing~~early first quarter 2021, pursuant to and ~~deployment for~~in accordance with our existing Microsoft partnership agreement. We expect to follow the Microsoft Outlook integration with the integration ~~of our latest generation interactive video and enhanced analytics and reporting technology, and more recently, a core package that includes verbLIVE,~~ into ~~popular CRM providers, including Salesforce,~~other Microsoft Oracle/NetSuite, and Adobe/Marketo, among others with whom we have executed partnership agreements. Each of these agreements provides for revenue share arrangements resulting from sales of our product to their respective clients. The integrations for Salesforce and Microsoft represent new build integrations, while those for Oracle/NetSuite and Adobe/Marketo represent replacement integrations. We have intentionally, though temporarily, delayed further action on and deployment of these integrations in order to allocate design, engineering and development resources to those initiatives that we believe will become revenue producing opportunities sooner, especially those that we believe will likely produce greater market demand due to the current and anticipated continued effects of the COVID-19 pandemic. The Salesforce integration is underway, and expect to resume action on and deployment of the remaining integrations in the summer of 2020.Office 365 products.

Historically, we have also provided certain non-digital services to some of our enterprise clients such as printing and fulfillment services. We designed and printed welcome kits and starter kits for their marketing needs and provided fulfillment services, which consisted of managing the preparation, handling and shipping of our client’s custom-branded merchandise they use for marketing purposes at conferences and other events. We also managed the fulfillment of our clients’ product sample packs that verbCRM users order through the app for automated delivery and tracking to their customers and prospects.

However, on May 20, 2020, we executed a contract with Range Printing, a company in the business of providing enterprise class printing, sample assembly, warehousing, packaging, shipping, and fulfillment services. Pursuant to the contract, through an automated process we have established for this purpose, Range will receive orders for samples and merchandise from us as and when we receive them from our clients and users, and print, assemble, store, package and ship such samples and merchandise on our behalf. The Range contract provides for a revenue share arrangement based upon the specific services to be provided by Range that is designed to maintain our relationship with our clients by continuing to service their non-digital needs, while eliminating the labor and overhead costs associated with the provision of such services by us. The transition to Range Printing is ~~in progress.~~now virtually complete.

Our client base consists primarily of multi-national direct sales enterprises to whom we provide white-labeled, client-branded versions of our products. Our clients also include large professional associations, educational institutions, including school districts, auto sales, auto leasing, insurance, real estate, home security, not-for-profits, as well as clients in the health care industry, and the burgeoning CBD industry, among other business sectors. Currently, we provide subscription-based application services to approximately 100 enterprise clients for use in over 60 countries, in over 48 languages, which collectively account for a user base generated through more than 1.6 million downloads of our verbCRM application. Among the new business sectors targeted for this year are pharmaceutical sales, government institutions, small businesses and ~~political parties and candidates.~~individual entrepreneurs.

verbLIVE is currently available to Salesforce users in the Salesforce App Exchange Marketplace under the Salesforce partner program. For a monthly subscription fee of $24.99 per user per month, every Salesforce user that subscribes will have the ability to click on their contacts icon in their Salesforce dashboard and from the drop-down menu they will see a verbLIVE icon. By clicking that, Salesforce users will be able to launch their own verbLIVE live stream ecommerce session and invite people to participate directly from their Salesforce contacts list. We ~~intend to work~~worked with Salesforce to develop a marketing campaign to promote itverbLIVE within the Salesforce ~~ecosystem.~~ecosystem that launched on October 1, 2020.

As previously disclosed, 17 of our existing clients have signed up for verbLIVE during the pre-launch marketing last quarter. We believe that these corporate clients have a combined potential individual user base of 465,350 users which represent the total addressable market among the existing clients that have already signed on. Historically, our penetration rates among our existing corporate clients vary but on the low end it is approximately 10%. Adopting that 10% rate, we believe that we have the potential to attract 46,000 users to subscribe and pay for verbLIVE. Currently, we charge $9.99 to $14.99 per user per month for verbLIVE depending on the features and package for existing verbCRM ~~users.~~users, though at launch, we may charge a lower price, including a free trial period. Applying the lower price of $9.99 per user and a penetration rate of 10% for this analysis, we believe that we could potentially capture approximately $460,000 of SaaS recurring revenue per month - or approximately $5.5 million of annual recurring revenue. We are encouraged by the fact that many of these prospective users already have our verbCRM app on their mobile device which allows us to send very targeted marketing messages promoting verbLIVE, including video demonstrations explaining what verbLIVE could do for their business. In addition, our platform is already integrated into many of our clients’ back-office providers making adoption for these clients and users much faster and easier. This is a small part of our internal modeling and should not be interpreted by anyone as a guarantee of performance or results. Notwithstanding the foregoing, which is an example only, our current projected usage models forecast far greater numbers than the 10% penetration rates for our existing signed customers, which we projected ~~6 months ago,~~earlier this year, and much greater numbers still when we add anticipated adoption rates from the as yet untapped market outside our existing business. ~~Accordingly,~~

Last quarter, we ~~are~~reported that we were working diligently to ramp up capacity before a larger launch to ensure that we do not face service outages from overloaded servers. Notwithstanding these efforts, we may nevertheless experience server overloads as it is difficult to predict the rate of adoption and usage. We now report that we have begun final testing on the platform enhancements that have been designed and built to accommodate tens of thousands of simultaneous live streams, logins, viewers, and interactions on a global basis. Upon satisfactory completion of the testing, we will begin satisfying our existing back-log of current verbCRM users as discussed above.

We also intend to release a new small business-focused version of our interactive video CRM application, that incorporates verbLIVE which we expect to release before year-end. This new application, called verbTEAMS, is designed to appeal to a larger target market than our verbCRM application as it incorporates self-sign-up, self-onboarding, self-configuring, content management system capabilities, user level administrative capabilities, and high quality analytics capabilities in both mobile and desktop platforms that sync with one another. It also has a built-in one-click synch capability with Salesforce. verbTEAMS is designed for small businesses and entrepreneurs with a feature set we believe is highly scalable and unique in the marketplace, that will be very competitive with the most popular CRM systems available today.

We are currently working on another product that will represent an entirely new vertical for our Company that we expect to disclose next quarter.

~~We recently executed~~On September 4, 2020 we completed the acquisition of Ascend Certification, LLC, dba SoloFire (“SoloFire”). SoloFire develops and markets leading SaaS-based sales enablement applications for sales representatives of medical device, diagnostics and life sciences companies. SoloFire’s platform empowers sales and marketing teams by allowing them to efficiently find, show, share and track regulatory and industry compliant, accurate and up-to-date content. With SoloFire, content can be locally stored, making it accessible without Wi-fi or mobile data, which is often a ~~letter of intent for a potential acquisition that we believe will allow us to expand more rapidly into a desirable new business vertical for our products and services.~~challenge in hospital environments. The letter of intent is only a mutual indication of interest in the potential acquisition by both parties and does not represent any legally binding commitment or obligation on the part of either party with respect to the potential acquisition. The terms of the potential acquisition are subjectsales tools can be tailored to a ~~number of contingencies,~~company’s unique medical products, while creating personalized sales conversations with physicians and other stakeholders. In addition, insights from in-depth analytics capabilities enable sales and marketing teams to identify and replicate the content that most resonates with clients, driving higher conversion rates. We have begun combining VERB’s sales enablement solutions, including ~~the performance of due diligence~~our interactive video and the negotiation and execution of a definitive agreement. The parties are currently performing due diligence and negotiating a definitive agreement. If executed, we intend to disclose the full details in a Current Report on Form 8-K filedinteractive livestream ecommerce features, with the ~~Securities~~SoloFire mobile and ~~Exchange Commission. The transaction could potentially close within the next 45 days. However, no assurances are, or can be, given that the parties will enter into a definitive agreement~~desktop applications to provide even more powerful tools for ~~the potential transaction, or that even if such agreement is entered into, that the potential acquisition will be consummated.~~

Three Months Ended ~~June~~September 30, 2020 as Compared to the Three Months Ended ~~June~~September 30, 2019

The following is a comparison of our results of operations for the three months ended ~~June~~September 30, 2020 and 2019:

	Three Months Ended June 30, 2020			Three Months Ended June 30, 2019			Change			Three Months Ended September 30, 2020			Three Months Ended September 30, 2019			Change
		(unaudited)			(unaudited)						(unaudited)			(unaudited)
Revenue
SaaS recurring subscription revenue	$	1,274,000		$	858,000		$	416,000		$	1,478,000		$	953,000		$	525,000
Other digital revenue		406,000			596,000			(190,000	)		360,000			485,000			(125,000	)
Welcome kits and fulfillment		713,000			1,784,000			(1,071,000	)		836,000			1,164,000			(328,000	)
Shipping		259,000			495,000			(236,000	)		186,000			271,000			(85,000	)
Total revenue		2,652,000			3,733,000			(1,081,000	)		2,860,000			2,873,000			(13,000	)

Cost of revenue
SaaS and other digital		264,000			176,000			88,000			349,000			221,000			128,000
Welcome kits and fulfillment		662,000			1,385,000			(723,000	)		768,000			990,000			(222,000	)
Shipping		209,000			481,000			(272,000	)		188,000			280,000			(92,000	)
Total cost of revenue		1,135,000			2,042,000			(907,000	)		1,305,000			1,491,000			(186,000	)

Gross margin		1,517,000			1,691,000			(174,000	)		1,555,000			1,382,000			173,000

Operating expenses:
Research and development		1,627,000			1,335,000			292,000			2,407,000			1,214,000			1,193,000
Depreciation and amortization		357,000			567,000			(210,000	)		388,000			518,000			(130,000	)
General and administrative		4,018,000			3,262,000			757,000			6,655,000			3,292,000			3,363,000
Total operating expenses		6,002,000			5,164,000			839,000			9,450,000			5,024,000			4,426,000

Loss from operations		(4,485,000	)		(3,473,000	)		(1,013,000	)		(7,895,000	)		(3,642,000	)		(4,253,000	)

Other income (expense), net
Other income / (expense), net		9,000			(1,000	)		10,000			(2,000	)		(9,000	)		7,000
Financing costs		-			(55,000	)		55,000			(248,000	)		(1,486,000	)		1,238,000
Interest expense - amortization of debt discount		(137,000	)		(572,000	)		435,000			(110,000	)		(21,000	)		(89,000	)
Change in fair value of derivative liability		1,228,000			(426,000	)		1,654,000			975,000			2,802,000			(1,827,000	)
Debt extinguishment, net		-			2,227,000			(2,227,000	)		-			(691,000	)		691,000
Interest expense		(39,000	)		(43,000	)		4,000			(40,000	)		(68,000	)		28,000
Total other income (expense), net		1,061,000			1,130,000			(69,000	)		575,000			527,000			207,000

Net loss	$	(3,424,000	)	$	(2,343,000	)	$	(1,082,000	)	$	(7,320,000	)	$	(3,115,000	)	$	(4,205,000	)

Total revenue for the quarter ended ~~June~~September 30, 2020 and September 30, 2019 was ~~$2.7 million, compared to $3.7 million for~~$2.9 million. While the ~~quarter ended June 30, 2019. The~~revenue was flat in total, the mix between digital and non-digital changed. Digital revenue increased $400,000 offset by a decrease in ~~revenue is attributed to~~ non-digital revenue of ~~$1.1 million offset by an increase in digital revenue of $226,000~~$413,000.

Total digital revenue for the quarter ended ~~June~~September 30, 2020 was ~~$1.7~~$1.8 million, compared to ~~$1.5~~$1.4 million for the quarter ended ~~June~~September 30, 2019. Total digital revenue for the quarter ended ~~June~~September 30, 2020 consisted of subscription-based SaaS recurring revenue associated with our verbCRM, verbLEARN, and ~~verbLEARN~~SoloFire applications of ~~$1.3~~$1.5 million and non-subscription-based revenue of ~~$406,000.~~$360,000. Total digital revenue for the quarter ended ~~June~~September 30, 2019 consisted of subscription-based SaaS recurring revenue associated with our verbCRM application of ~~$858,000~~$953,000 million and non-subscription-based revenue of ~~$596,000.~~$485,000. The increase in our SaaS recurring subscription revenue of ~~$416,000~~$525,000 is attributed to a net increase of 2436 enterprise clients on our platform as of ~~June~~September 30, 2020 versus ~~June~~September 30, 2019, ~~and to~~ the expansion of our product offering with existing enterprise ~~clients.~~

Total non-digital revenue for the quarter ended ~~June~~September 30, 2020 was ~~$972,000,~~$1.0 million, compared to ~~$2.3~~$1.4 million for the quarter ended ~~June~~September 30, 2019. Total non-digital revenue for 2020 consisted of revenue generated from printing of welcome kits/starter kits that our clients use for new sales reps, fulfillment of various custom products our clients use for marketing purposes and at conferences of ~~$700,000;~~$836,000; and shipping fees associated with client welcome kits and fulfillment of ~~$259,000.~~186,000. The decrease in non-digital revenue versus 2019 is attributed to a shift in resources from non-digital to SaaS recurring subscription revenue.

The table below sets forth our quarterly revenues from the quarter ended March 31, 2019 through the quarter ended ~~June~~September 30, 2020, which reflects the trend of revenue since our acquisition of Verb Direct in April ~~2019~~2019.

	2019 Quarterly Revenue								2020				2019 Quarterly Revenue								2020 Quarterly Revenues
	Q1		Q2		Q3		Q4		Q1		Q2			Q1		Q2		Q3		Q4		Q1		Q2		Q3
SaaS recurring subscription revenue	$	9,000	$	858,000	$	953,000	$	995,000	$	1,057,000	$	1,274,000	$	9,000	$	858,000	$	953,000	$	995,000	$	1,057,000	$	1,274,000	$	1,478,000
Other digital revenue		-		596,000		485,000		344,000		400,000		406,000		-		596,000		485,000		344,000		400,000		406,000		360,000
Total digital revenue	$	9,000	$	1,454,000	$	1,438,000	$	1,339,000	$	1,457,000	$	1,680,000	$	9,000	$	1,454,000	$	1,438,000	$	1,339,000	$	1,457,000	$	1,680,000	$	1,838,000

Welcome kits and fulfillment		-		1,784,000		1,164,000		965,000		728,000		713,000		-		1,784,000		1,164,000		965,000		728,000		713,000		836,000
Shipping		-		495,000		271,000		181,000		169,000		259,000		-		495,000		271,000		181,000		169,000		259,000		186,000
Total non-digital revenue	$	-	$	2,279,000	$	1,435,000	$	1,146,000	$	897,000	$	972,000	$	-	$	2,279,000	$	1,435,000	$	1,146,000	$	897,000	$	972,000	$	1,022,000

Grand total	$	9,000	$	3,733,000	$	2,873,000	$	2,485,000	$	2,354,000	$	2,652,000	$	9,000	$	3,733,000	$	2,873,000	$	2,485,000	$	2,354,000	$	2,652,000	$	2,860,000

Total cost of revenue for the quarter ended ~~June~~September 30, 2020 was ~~$1.1~~$1.3 million, compared to ~~$2.0~~$1.5 million for the quarter ended ~~June~~September 30, 2019. The decrease in cost of revenue of ~~$0.9 million~~$186,000 is primarily attributed to lower non-digital revenue, offset by an increase digital costs of ~~$88,000~~$128,000 attributed to additional enterprise customers on the platform and increased users within our existing customer base.

The shift in resources to our SaaS recurring subscription revenue reflects an increase in gross margin to ~~57%~~54% for the quarter ended ~~June~~September 30, 2020 versus ~~45%~~48% for the quarter ended ~~June~~September 30, 2019. The shift had a material impact ~~on gross margin~~ as gross margin ~~only decreased~~increased $173,000 while gross revenue was ~~down $1.1 million~~flat for the quarter ended ~~June~~September 30, 2020 versus ~~June~~September 30, 2019.

Research and development expenses were ~~$1.6~~$2.4 million for the quarter ended ~~June~~September 30, 2020, as compared to ~~$1.3~~$1.2 million for the quarter ended ~~June~~September 30, 2019. 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 the development of verbLIVE, plus enhancements to verbCRM and our core platform to facilitate native integrations with Salesforce, Microsoft, ~~Adobe,~~ and other channel partners.

Depreciation and amortization expenses were ~~$357,000~~$388,000 for the quarter ended ~~June~~September 30, 2020, as compared to ~~$567,000~~$518,000 for the quarter ended ~~June~~September 30, 2019. The decrease is primarily attributed to lower amortization expense of intangible assets of ~~$185,000~~$152,000 for the quarter ended ~~June~~September 30, 2020 versus the quarter ended ~~June~~September 30, 2019. The decrease is attributed to the Company estimating the value of Verb Direct’s opening balance sheet for the quarter ended ~~June~~September 30, 2019, while the amortization for the quarter end ~~June~~September 30, 2020 was based on a revised value of the Verb Direct opening balance sheet provided by a third-party expert. This decrease is offset by incremental amortization associated with leasehold improvements related to our corporate headquarters, and other depreciation and amortization attributed to Verb Direct.

General and administrative expenses for the quarter ended quarter ended ~~June~~September 30, 2020 were ~~$4.0~~$6.7 million, as compared to $3.3 million for the quarter ended ~~June~~September 30, 2019. The increase in general and administrative expenses is related to an increase in stock compensation expense of ~~$373,000,~~$1.5 million, labor related costs to support growth of ~~$177,000,~~$606,000, SoloFire expenses of $582,000 primarily driven by retention bonuses, an increase in professional services of $432,000 primarily attributed to the acquisition of SoloFire, and ~~increased facility costs associated with our Corporate headquarters~~marketing and promotion of ~~$70,000.~~$232,000.

Other income (expense), net, for the quarter ended ~~June~~September 30, 2020 was ~~$1.1 million,~~$575,000, which was attributed to a change in the fair value of derivative liability of ~~$1.2 million and other income~~$975,000 offset by financing costs of ~~$9,000, offset by~~($248,000), interest expense for amortization of debt discount of ($~~137,000)~~110,000), ~~and~~ interest expense of ($~~39,000)~~40,000), and other income of ($2,000). Other income (expense), net, for the quarter ended ~~June~~September 30, 2019 was ~~$1.1 million,~~$527,000, which was attributed to ~~debt extinguishment 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),~~$2.8 million, offset by financing costs of ($~~55,000)~~1,486,000), debt extinguishment of ($691,000), interest expense of ($~~43,000)~~68,000), interest expense for amortization of debt discount of ($21,000), and other expense of ($~~1,000)~~9,000).

~~Six Months Ended June~~Nine months ended September 30, 2020 as Compared to the ~~Six Months Ended June~~Nine months ended September 30, 2019

The following is a comparison of our results of operations for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019:

	Six Months Ended June 30, 2020			Six Months Ended June 30, 2019			Change			Nine months ended September 30, 2020			Nine months ended September 30, 2019			Change
	(unaudited)			(unaudited)							(unaudited)			(unaudited)
Revenue
SaaS recurring subscription revenue	$	2,331,000		$	867,000		$	1,464,000		$	3,809,000		$	1,820,000		$	1,989,000
Other digital revenue		806,000			596,000			210,000			1,166,000			1,081,000			85,000
Welcome kits and fulfillment		1,441,000			1,784,000			(343,000	)		2,277,000			2,948,000			(671,000	)
Shipping		428,000			495,000			(67,000	)		614,000			766,000			(152,000	)
Total revenue		5,006,000			3,742,000			1,264,000			7,866,000			6,615,000			1,251,000

Cost of revenue
SaaS and other digital		494,000			206,000			288,000			843,000			427,000			416,000
Welcome kits and fulfillment		1,338,000			1,385,000			(47,000	)		2,106,000			2,375,000			(269,000	)
Shipping		366,000			481,000			(115,000	)		554,000			761,000			(207,000	)
Total cost of revenue		2,198,000			2,072,000			97,000			3,503,000			3,563,000			(60,000	)

Gross margin		2,808,000			1,670,000			1,138,000			4,363,000			3,052,000			1,311,000

Operating expenses:
Research and development		2,901,000			1,899,000			1,002,000			5,308,000			3,113,000			2,195,000
Depreciation and amortization		719,000			570,000			149,000			1,108,000			1,025,000			83,000
General and administrative		7,533,000			5,448,000			2,085,000			14,187,000			8,803,000			5,384,000
Total operating expenses		11,153,000			7,917,000			3,236,000			20,603,000			12,941,000			7,662,000

Loss from operations		(8,345,000	)		(6,247,000	)		(2,098,000	)		(16,240,000	)		(9,889,000	)		(6,351,000	)

Other income (expense), net
Other income (expense), net		3,000			(1,000	)		4,000			1,000			(10,000	)		11,000
Financing costs		-			(139,000	)		139,000			(248,000	)		(1,625,000	)		1,377,000
Interest expense - amortization of debt discount		(274,000	)		(1,626,000	)		1,352,000			(384,000	)		(1,647,000	)		1,263,000
Change in fair value of derivative liability		3,320,000			518,000			2,802,000			4,295,000			3,320,000			975,000
Debt extinguishment, net		-			2,227,000			(2,227,000	)		-			1,536,000			(1,536,000	)
Interest expense		(74,000	)		(83,000	)		9,000			(114,000	)		(151,000	)		37,000
Total other income (expense), net		2,975,000			896,000			2,079,000			3,550,000			1,423,000			2,127,000

Net loss	$	(5,370,000	)	$	(5,351,000	)	$	(19,000	)	$	(12,690,000	)	$	(8,466,000	)	$	(4,224,000	)

Total revenue for the ~~six~~nine months ended ~~June~~September 30, 2020 was ~~$5.0~~$7.9 million, compared to ~~$3.7~~$6.6 million for the ~~six~~nine months ended ~~June~~September 30, 2019. The increase in revenue is attributed to revenue generated by Verb Direct (formerly Sound Concepts), our wholly-owned subsidiary that we acquired in April 2019 and revenue we generated together following the merger of the two businesses and the marketing of our then newly combined sales enablement platform. As a result of the acquisition, we currently have four revenue streams: (1) digital subscription-based SaaS recurring revenue associated with verbCRM, ~~and verbLEARN;~~verbLEARN, SoloFire; (2) digital non-subscription-based revenue consisting of product sample revenue as well as design fees generated through or in connection with our applications; (3) non-digital revenue generated from printing of welcome kits, which consists of “starter kits” that clients use for new sales reps, and fulfillment of various custom products clients use for marketing purposes and at conferences; and (4) non-digital revenue we generate from shipping fees associated with client welcome kits and fulfillment.

Total digital revenue for the ~~six~~nine months ended ~~June~~September 30, 2020 was ~~$3.1~~$5.0 million, compared to ~~$1.5~~$2.9 million for the ~~six~~nine months ended ~~June~~September 30, 2019. Total digital revenue for the ~~six~~nine months ended ~~June~~September 30, 2020 consisted of subscription-based SaaS recurring revenue associated with our verbCRM, verbLEARN, and ~~verbLEARN~~SoloFire applications of ~~$2.3~~$3.8 million and non-subscription-based revenue of ~~$806,000.~~$1.2 million.

Total non-digital revenue for the ~~six~~nine months ended ~~June~~September 30, 2020 was ~~$1.9~~$2.9 million, compared to ~~$2.3~~$3.7 million for the ~~six~~nine months ended ~~June~~September 30, 2019. Total non-digital revenue for 2020 consisted of revenue generated from printing of welcome kits/starter kits that our clients use for new sales reps, fulfillment of various custom products our clients use for marketing purposes and at conferences of ~~$1.4~~$2.3 million; and shipping fees associated with client welcome kits and fulfillment of ~~$428,000.~~$614,000.

Total cost of revenue for the ~~six~~nine months ended ~~June~~September 30, 2020 was ~~$2.2~~$3.5 million, compared to ~~$2.1~~$3.6 for the ~~six~~nine months ended ~~June~~September 30, 2019. The ~~increase~~decrease in cost of revenue is primarily attributed toby lower non-digital revenue for the nine months ended September 30, 2020 versus September 30, 2019 offset by additional enterprise customers on the platform and increased users within our existing customer ~~base, offset by lower non-digital revenue for the six months ended June 30, 2020 versus June 30, 2019.~~base.

The shift in resources to our SaaS recurring subscription revenue reflects an increase in gross margin to ~~56%~~55% for the quarter ended ~~June~~September 30, 2020 versus ~~45%~~46% for the quarter ended ~~June~~September 30, 2019. The shift had a material impact on gross margin as gross margin increased ~~$1.1~~$1.3 million, while gross revenue increased $1.3 million for the quarter ended ~~June~~September 30, 2020 versus ~~June~~September 30, 2019.

Research and development expenses were ~~$2.9~~$5.3 million for the ~~six~~nine months ended ~~June~~September 30, 2020, as compared to ~~$1.9~~$3.1 million for the ~~six~~nine months ended ~~June~~September 30, 2019. 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, development of verbLIVE, plus enhancements to verbCRM and our core platform to facilitate native integrations with Salesforce, Microsoft, ~~Adobe,~~ and other channel partners.

Depreciation and amortization expenses were ~~$719,000~~$1.1 million for the ~~six~~nine months ended ~~June~~September 30, 2020, as compared to ~~$570,000~~$1.0 million for the ~~six~~nine months ended ~~June~~September 30, 2019. The increase is associated with an additional three months of amortization related to the intangible asset recorded as part of the acquisition of Verb Direct in April 2019 totaling $325,000, amortization of SoloFire intangible assets, amortization of leasehold improvements related to our corporate headquarters, other depreciation and amortization attributed to Verb Direct, offset by lower amortization of intangible assets for the quarter ended ~~June~~September 30, 2020 versus the quarter ended ~~June~~September 30, 2019 due to the change in the value of the Verb Direct’s opening balance sheet.

General and administrative expenses for the ~~six~~nine months ended ~~June~~September 30, 2020 were ~~$7.5~~$14.2 million, as compared to ~~$5.5~~$8.8 million for the ~~six~~nine months ended ~~June~~September 30, 2019. The increase in general and administrative expenses is primarily related to general and administration expenses attributed to ~~Verb Direct of $950,000,~~an increase in stock compensation expense of ~~$465,000,~~$1.9 million, labor related costs to support growth of ~~$421,000,~~$1.1 million, Verb Direct of $950,000, expenses from SoloFire of $582,000 primarily driven by retention bonuses, professional services of $507,000 primarily attributed to the SoloFire, marketing and promotion of $307,000, and increased facility costs associated with our corporate headquarters of ~~$140,000.~~$174,000.

Other income (expense), net, for the ~~six~~nine months ended ~~June~~September 30, 2020 was ~~$3.0~~$3.6 million, which was attributed to a change in the fair value of derivative liability of $4.3 million and other income (expense), net of $1,000, offset by interest expense for amortization of debt discount of ($384,000), financing costs of ($248,000), and interest expense of ($114,000). Other income (expense), net, for the nine months ended September 30, 2019 was $1.4 million, which was attributed to a change in the fair value of derivative liability of $3.3 million, and other income (expense), net of $3,000, offset by interest expense for amortization of debt discount of ($274,000), and interest expense of ($74,000). Other income (expense), net, for the six months ended June 30, 2019 was $896,000, which was attributed to debt extinguishment of ~~$2.2~~$1.5 million, ~~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),~~1.6) million, interest expense of ($~~83,000)~~151,000), and other income (expense), net of ($~~1,000)~~10,000).

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, changes in fair value of derivative liability, and other (income) / expense, net.

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.

	For the Three Months Ended						For the Six Months Ended						For the Three Months Ended						For the Nine months ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019			September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019

Net loss	$	(3,424,000	)	$	(2,343,000	)	$	(5,370,000	)	$	(5,351,000	)	$	(7,320,000	)	$	(3,115,000	)	$	(12,690,000	)	$	(8,466,000	)

Adjustments:
Other (income) / expense, net		(9,000	)		1,000			(3,000	)		1,000			2,000			9,000			(1,000	)		10,000
Stock compensation expense		1,609,000			1,236,000			2,552,000			2,087,000			2,244,000			792,000			4,796,000			2,880,000
Financing costs		-			55,000			-			139,000			248,000			1,486,000			248,000			1,625,000
Amortization of debt discount		137,000			572,000			274,000			1,626,000			110,000			21,000			384,000			1,647,000
Change in fair value of derivative liability		(1,228,000	)		426,000			(3,320,000	)		(518,000	)		(975,000	)		(2,802,000	)		(4,295,000	)		(3,320,000	)
Debt extinguishment, net		-			(2,227,000	)		-			(2,227,000	)		-			691,000			-			(1,536,000	)
Interest expense		39,000			43,000			74,000			83,000			40,000			68,000			114,000			151,000
Depreciation and amortization		357,000			567,000			719,000			570,000			388,000			518,000			1,108,000			1,025,000
Income tax provision														-			-			-			-
Total EBITDA adjustments		905,000			673,000			296,000			1,761000			2,057,000			783,000			2,354,000			2,482,000
Modified EBITDA	$	(2,519,000	)	$	(1,670,000	)	$	(5,074,000	)	$	(3,590,000	)	$	(5,263,000	)	$	(2,332,000	)	$	(10,336,000	)	$	(5,984,000	)

The ~~$849,000~~$2.9 million decrease in modified EBITDA for the three months ended ~~June~~September 30, 2020 compared to the same period in 2019, resulted from the increase in research and development, expenses related to SoloFire primarily driven by retention bonuses, an increase in professional services primarily attributed to the acquisition of SoloFire, labor related costs to support growth, ~~increased facility costs associated with our corporate headquarters,~~ and ~~lower~~marketing and promotion, offset by higher margin ~~primarily~~ attributed to ~~lower non-digital revenue offset by~~ an increase in digital revenue offset by lower non-digital revenue.

The ~~$1.5~~$4.4 million decrease in modified EBITDA for the ~~six~~nine months ended ~~June~~September 30, 2020 compared to the same period in 2019, resulted from increased research and development, ~~and~~expenses related to SoloFire primarily driven by retention bonuses, an increase in professional services primarily attributed to the acquisition of SoloFire, labor related costs to support growth, marketing and promotion, increased facility costs associated with our corporate headquarters, and ~~six~~nine months of Verb Direct general and administrative expenses for 2020 versus the ~~three~~six months of Verb Direct results in 2019, offset by an increase in gross margin.

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:

We have incurred operating losses and negative cash flows from operations since inception. We incurred a net loss of ~~$5.4~~$12.7 million during the ~~six~~nine months ended ~~June~~September 30, 2020. We also utilized cash in operations of ~~$4.7~~$9.8 million during the ~~six~~nine months ended ~~June~~September 30, 2020. 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.

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 twelve months. Our continuation as a going concern is dependent upon our ability to obtain necessary debt or equity financing to continue operations until we begin generating positive cash flow. In addition, our independent registered public accounting firm, in its report on our December 31, 2019 consolidated financial statements, has raised substantial doubt about our ability to continue as a going concern.

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.

As of ~~June~~September 30, 2020, we had cash of ~~$1.4~~$10.7 million. We estimate our operating expenses for the next three months may continue to exceed any revenue 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.

~~On July 24, 2020 we closed our public offering and received net proceeds of $12.3 million after deducting underwriting discounts and commissions and estimated offering expenses.~~

For the ~~six~~nine months ended ~~June~~September 30, 2020, our cash flows used in operating activities amounted to ~~$4.7~~$9.8 million, compared to cash used for the ~~six~~nine months ended ~~June~~September 30, 2019 of ~~$3.5~~$6.5 million. The change is attributed to the growth of the business, product development, inclusion of Verb Direct and SoloFire operating expenses, professional services, and a change in ~~accounts payable~~prepaid expenses of ($~~522,000), and operating leases of ($96,000), all~~212,000) compared to September 30, 2019, offset by an increase in gross margin, a change in accounts receivable of ~~$408,000,~~$430,000, deferred revenue and customer deposits of ~~$246,000, plus pre-paid expenses and other assets of $105,000~~$364,000, compared to ~~the six months ended June~~September 30, 2019.

For the ~~six~~nine months ended ~~June~~September 30, 2020, our cash flows used infrom investing activities amounted to ~~$317,000~~$88,000 compared to the cash used for the ~~six~~nine months ended ~~June~~September 30, 2019 of ~~$14.4~~$14.6 million. The change is attributed to the purchase of Verb Direct (formerly Sound Concepts) in April 2019 offset by fixed asset purchases associated with our new corporate headquarters in Newport Beach, ~~California.~~California and cash received of $229,000 related to the acquisition of SoloFire in September 2020.

Our cash provided by financing activities for the ~~six~~nine months ended ~~June~~September 30, 2020 amounted to ~~$5.4~~$19.6 million, which represented ~~$4.4~~$16.8 million of net proceeds from the issuance of shares of our common stock, proceeds from warrant exercises of $2.2 million, a paycheck protection program loan of $1.2 million, advances on future receipts of $728,000, and an economic injury disaster loan of $150,000, all offset by ~~$1,006,000~~$1,424,000 of payments against advance on future ~~receipts, and deferred offering costs of $150,000.~~receipts. Our cash provided by financing activities for the ~~six~~nine months ended ~~June~~September 30, 2019 amounted to ~~$17.8~~$22.3 million, which represented ~~$18.6~~$18.5 million of net proceeds from the issuance of shares of our ~~common stock, $1.0~~Common Stock, $4.7 million of net proceeds from the issuance of shares of our Series A Preferred Stock, $1.3 million of proceeds from notes payable, $432,000 of proceeds from the issuance of convertible debt, $58,000 of unsecured related party debt, and $45,000 of proceeds from warrant exercises, partially offset by $2.0 million paid in connection with convertible notes outstanding, ~~$310,000~~$630,000 paid in connection with notes outstanding, and $58,000 paid in connection with related party notes outstanding.

We have the following outstanding notes payable to related parties as of ~~June~~September 30, 2020:

Note		Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at June 30, 2020			Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at September 30, 2020
Note 1 (A)		December 1, 2015	February 8, 2021		12.0	%	$	1,249,000	$	825,000		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		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		240,000		April 4, 2016	June 4, 2021		12.0	%		343,000		240,000

Total notes payable – related parties	Total notes payable – related parties									1,177,000	Total notes payable – related parties									1,177,000
Non-current										-										-
Current									$	1,177,000									$	1,177,000

Note

Issuance Date

Maturity Date

Balance at
June 30, 2020

Issuance Date

Maturity Date

Balance at
September 30, 2020

Rory J. Cutaia (A)

December 23, 2019