TON Strategy Co 10-K for FY2021

TON Strategy Co (TONX)

10-K 2022-03-31 For: 2021-12-31

Added on April 09, 2026

About this 10-K

TON Strategy Co filed this 10-K on March 31, 2022, covering the fiscal year ended December 31, 2021 (FY2021).

Headline figures

Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $10.52M; up 5.6% from $9.97M a year earlier
Net loss: $34.49M; compared with a net loss of $24.96M a year earlier

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Nevada		90-1118043
State or other jurisdiction of		(I.R.S. Employer
incorporation or organization		Identification No.)

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐

PART I	1
ITEM 1. BUSINESS	1
ITEM 1A. RISK FACTORS	8
ITEM 2. PROPERTIES	18
ITEM 3. LEGAL PROCEEDINGS	18
ITEM 4. MINE SAFETY DISCLOSURES	18
PART II	21
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	21
ITEM 6. SELECTED FINANCIAL DATA	22
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	37
ITEM 9A. CONTROLS AND PROCEDURES	37
ITEM 9B. OTHER INFORMATION	38
PART III	38
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	38
ITEM 11. EXECUTIVE COMPENSATION	38
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	39
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	39
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES	39
PART IV	39
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES	39

	a.	SaaS recurring digital revenue based on contract-based subscriptions to our verb app products and platform services which include verbCRM, verbLEARN, verbLIVE, verbPULSE, and verbTeams. The revenue is recognized over the subscription period.

	b.	Non-SaaS, non-recurring digital revenue, which is revenue generated by the use of our app products and in-app purchases, such as sampling and other services obtained through the app. 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 delivered to the customer.

	●	Prospective customers and clients can subscribe to our applications on a monthly or annual contract through a simple, web-based sign-up form accessible on our website (https://www.verb.tech), as well as through interactive sign-up links that we distribute via email, text messaging and through social media;

	●	Enterprise users that subscribe to our verbCRM software service can distribute custom-branded sign-up links to their internal and external staff via email or other electronic means;

	●	We have entered into partnership agreements with other CRM providers to incorporate our interactive video technology into such other CRM providers’ software platforms to be offered to their existing and prospective client base for an additional monthly recurring fee, which fee is shared with us. In January 2018, we entered into such an agreement with Oracle America, Inc. to integrate our interactive video technology into their NetSuite platform on a revenue-share basis. In February 2018, we entered into a similar agreement with Adobe Marketo to integrate our interactive video technology into their platform on a revenue-share basis. On January 23, 2019, we entered into an agreement with Microsoft to integrate our interactive video technology into Microsoft’s Office 365 services product line, beginning with its email platform Outlook and their internal communications platform TEAMS. On February 4, 2019, we entered into a revenue share partnership agreement with Salesforce.com to integrate our interactive video technology into the Salesforce.com CRM platform;

	●	We have entered into license and partnership agreements with digital marketing companies and advertising agencies to resell our Verb interactive video technology to their existing and prospective client bases for monthly fees which fees are shared with us. In March 2018, we entered into such an agreement with DR2Marketing, LLC to use and resell our applications to their clients on a revenue-share basis;

	●	We expect to enter into partnership agreements with large cloud services providers, to bundle our application with such providers’ other applications offered to their existing and prospective global customer base in order to generate greater utilization fees from such customers’ need for more data storage and bandwidth required by video-based applications. For example, under our agreement with Microsoft, their value-added cloud services resellers may choose to bundle our application for resale to their respective customer bases; and

	●	We employ a direct sales team, as well as outside sales consultants.

	●	the covenants contained in current or future agreements governing outstanding indebtedness may limit our ability to borrow additional funds, refinance debt, dispose of assets, and make certain investments;

	●	debt covenants may also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry;

	●	a high level of debt would increase our vulnerability to general adverse economic and industry conditions;

	●	a significant level of debt may place us at a competitive disadvantage compared to our competitors that are less leveraged and, therefore, may be able to take advantage of opportunities that our indebtedness would prevent us from pursuing; and

	●	a high level of debt may impair our ability to obtain additional financing in the future for working capital, debt service requirements, acquisitions, or other purposes.

	●	volatility in the trading markets generally and in our particular market segment;

	●	limited trading of our common stock;

	●	actual or anticipated fluctuations in our results of operations;

	●	the financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections;

	●	announcements regarding our business or the business of our customers or competitors;

	●	changes in accounting standards, policies, guidelines, interpretations, or principles;

	●	actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;

	●	developments or disputes concerning our intellectual property or our offerings, or third-party proprietary rights;

	●	announced or completed acquisitions of businesses or technologies by us or our competitors;

	●	new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

	●	any major change in our board of directors or management;

	●	sales of shares of our common stock by us or by our stockholders;

	●	lawsuits threatened or filed against us; and

	●	other events or factors, including those resulting from war, incidents of terrorism, pandemics (such as the COVID-19 pandemic) or responses to these events.

	●	to elect or defeat the election of our directors;

	●	to amend or prevent amendment to our articles of incorporation or bylaws;

	●	to effect or prevent a merger, sale of assets or other corporate transaction; and

	●	to control the outcome of any other matter submitted to our stockholders for a vote.

Name	Position Held with Our Company	Age	Date First Elected or Appointed

Rory J. Cutaia	Chairman of the Board, President, Chief Executive Officer, Secretary, and Director	66	October 16, 2014
Salman H. Khan	Chief Financial Officer and Treasurer	43	January 20, 2022
James P. Geiskopf	Lead Director	62	October 16, 2014
Philip J. Bond	Director	65	September 10, 2018
Kenneth S. Cragun	Director	61	September 10, 2018
Nancy Heinen	Director	65	December 20, 2019
Judith Hammerschmidt	Director	67	December 20, 2019
Jeffrey R. Clayborne	Former Chief Financial Officer and Treasurer	51	July 15, 2016

	Years Ended December 31,
	2021			2020			Change

Revenue
Digital revenue
SaaS recurring subscription revenue	$	6,831,000		$	5,114,000		$	1,717,000
Other digital revenue		1,347,000			1,384,000			(37,000	)
Total digital revenue		8,178,000			6,498,000			1,680,000

Non-digital revenue
Design, printing, fulfillment, and shipping		2,346,000			3,467,000			(1,121,000	)

Total revenue		10,524,000			9,965,000			559,000

Cost of Revenue
Digital		2,249,000			1,416,000			833,000
Non-digital		2,255,000			3,385,000			(1,130,000	)
Total cost of revenue		4,504,000			4,801,000			(297,000	)

Gross margin		6,020,000			5,164,000			856,000

Operating expenses
Research and development		12,345,000			7,933,000			4,412,000
Depreciation and amortization		1,677,000			1,510,000			167,000
General and administrative		25,710,000			20,458,000			5,252,000
Total operating expenses		39,732,000			29,901,000			9,831,000

Loss from operations		(33,712,000	)		(24,737,000	)		(8,975,000	)

Other income (expense), net
Other income, net		92,000			102,000			(10,000	)
Interest expense		(2,575,000	)		(894,000	)		(1,681,000	)
Change in fair value of derivative liability		598,000			574,000			24,000
Debt extinguishment, net		1,112,000			-			1,112,000
Total other expense, net		(773,000	)		(218,000	)		(555,000	)

Income tax		1,000			1,000			-

Net loss		(34,486,000	)		(24,956,000	)		(9,530,000	)

Deemed dividend to Series A preferred stockholders		(348,000	)		(3,951,000	)		3,603,000

Net loss to common stockholders	$	(34,834,000	)	$	(28,907,000	)	$	(5,927,000	)

	2019		2020 Quarterly Revenue								2021 Quarterly Revenue
	Q4		Q1		Q2		Q3		Q4		Q1		Q2		Q3		Q4
SaaS recurring subscription revenue	$	995,000	$	1,057,000	$	1,274,000	$	1,478,000	$	1,305,000	$	1,461,000	$	1,601,000	$	1,846,000	$	1,923,000
Other digital		344,000		400,000		406,000		360,000		218,000		340,000		209,000		510,000		288,000
Total digital revenue		1,339,000		1,457,000		1,680,000		1,838,000		1,523,000		1,801,000		1,810,000		2,356,000		2,211,000

Total non-digital revenue		1,146,000		897,000		972,000		1,022,000		576,000		725,000		582,000		544,000		495,000

Grand total	$	2,485,000	$	2,354,000	$	2,652,000	$	2,860,000	$	2,099,000	$	2,526,000	$	2,392,000	$	2,900,000	$	2,706,000

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

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

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

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

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at December 31, 2021

Note (A)	December 1, 2015	February 8, 2023		12.0	%	$	1,249,000	$	725,000
Note (B)	December 1, 2015	April 1, 2017		12.0	%		112,000		-
Note (C)	April 4, 2016	June 4, 2021		12.0	%		343,000		40,000
Total notes payable – related parties, net									765,000
Non-current									(725,000	)
Current								$	40,000

	(A)	On December 1, 2015, we issued a convertible note payable to Mr. Rory J. Cutaia, our majority stockholder and Chief Executive Officer, to consolidate all loans and advances made by Mr. Cutaia to the Company as of that date. The note bears interest at a rate of 12% per annum, secured by the Company’s assets, and matured on February 8, 2021, as amended. A total of 30% of the original note balance or $375,000 was convertible to common stock and was converted in 2018 while the remaining note balance of $825,000 is not convertible. During the year ended December 31, 2020, we made payments of $100,000. On February 25, 2021, we extended the note to February 8, 2023 with no changes to the other terms of the note agreement. On May 19, 2021, the Board approved the ability to convert the note into equity at the discretion of the holder. The conversion price is the fair market value of our common stock on the day of conversion. As of December 31, 2021, the outstanding balance of the note amounted to $725,000.

	(B)	On December 1, 2015, we issued a note payable to a former member of our board of directors, in the amount of $112,000 representing unpaid consulting fees as of November 30, 2015. The note is unsecured, bears interest rate of 12% per annum, and matured in April 2017. As of December 31, 2021, the outstanding principal balance of the note was $0.

	(C)	On April 4, 2016, we issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. A total of 30% of the original note balance or $103,000 was convertible to common stock and was converted in 2018 while the remaining note balance of $240,000 is not convertible. The note, as amended, bears interest at a rate of 12% per annum, is secured by our assets, and matured on June 4, 2021. On May 19, 2021, the Board approved the ability to convert the note into equity at the discretion of the holder. The conversion price is the fair market value of the Company’s common stock on the day of conversion. On May 19, 2021, $200,000 was converted into 194,175 shares of common stock. The conversion price was $1.03 that was the closing price of the Company’s common stock on the day of conversion. As of December 31, 2021, the outstanding balance of the note amounted to $40,000.

(A)	On October 29, 2021, the Company received secured advances from an unaffiliated third party totaling $2,015,000 for the purchase of future receipts/revenues of $2,120,000. Pursuant to the terms of the agreement the unaffiliated third-party will auto withdraw an average of $353,000 from the Company’s operating account each month. The term of the agreement extends until the advances are paid in full. The notes did not bear any interest, however, the interest was imputed at a rate of 5% based on the face value of the notes and the proceeds received. As a result, the Company recorded a liability of $2,120,000 to account for the future receipts sold and a debt discount of $105,000 to account for the difference between the future receipts sold and the cash received. The debt discount was amortized over the term of the agreement.

(B)	On October 29, 2021, the Company received secured advances from an unaffiliated third party totaling $2,744,000 for the purchase of future receipts/revenues of 3,808,000. Pursuant to the terms of the agreement the unaffiliated third-party will auto withdraw an aggregate of $19,040 from the Company’s operating account each banking day. The term of the agreement extends until the advances are paid in full. The notes did not bear any interest, however, the interest was imputed at a rate of 28% based on the face value of the note and the proceeds received. These advances are secured by the Company’s tangible and intangible assets. As a result, the Company recorded a liability of $3,808,000 to account for the future receipts sold and a debt discount of $1,064,000 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 using the effective interest rate method.

(C)	On December 23, 2021, the Company received secured advances from an unaffiliated third party totaling $651,000 for the purchase of future receipts/revenues of $689,000. Pursuant to the terms of the agreement the unaffiliated third-party will auto withdraw an average of $115,000 from the Company’s operating account each month. The term of the agreement extends until the advances are paid in full. The notes did not bear any interest, however, the interest was imputed at a rate of 5% based on the face value of the notes and the proceeds received. As a result, the Company recorded a liability of $689,000 to account for the future receipts sold and a debt discount of $38,000 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.

	Page

Report of Independent Registered Public Accounting Firms PCAOB ID NO: 572	F-1

Consolidated Balance Sheets	F-2

Consolidated Statements of Operations	F-3

Consolidated Statements of Changes in Stockholders’ Equity	F-4

Consolidated Statements of Cash Flows	F-6

Notes to Consolidated Financial Statements	F-7

	2021			2020
	As of December 31,
	2021			2020
ASSETS

Current assets
Cash	$	937,000		$	1,815,000
Accounts receivable, net		1,382,000			919,000
Inventory, net		28,000			34,000
Prepaid expenses and other current assets		847,000			900,000
Total current assets		3,194,000			3,668,000

Capitalized software development costs		4,348,000			-
Property and equipment, net		702,000			862,000
Operating lease right-of-use assets		2,177,000			2,730,000
Intangible assets, net		3,953,000			5,153,000
Goodwill		19,764,000			20,060,000
Other assets		293,000			69,000

Total assets	$	34,431,000		$	32,542,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
Accounts payable	$	3,751,000		$	2,566,000
Accrued expenses		3,500,000			2,645,000
Accrued officers’ salary		1,209,000			822,000
Advances on future receipts, net		4,181,000			110,000
Notes payable - related party		40,000			1,077,000
Deferred incentive compensation to officers, current		521,000			521,000
Operating lease liabilities, current		592,000			596,000
Contract liabilities		986,000			272,000
Derivative liability		3,155,000			8,266,000

Total current liabilities		17,935,000			16,875,000

Long-term liabilities
Notes payable, non-current		150,000			1,458,000
Notes payable - related party, non-current		725,000			-
Deferred incentive compensation to officers, non-current		-			521,000
Operating lease liabilities, non-current		2,299,000			2,943,000
Total liabilities		21,109,000			21,797,000

Commitments and contingencies (Note 21)		-

Stockholders’ equity
Preferred stock, $0.0001 par value, 15,000,000 shares authorized: Series A Convertible Preferred Stock, 6,000 shares authorized; 0 and 2,006 issued and outstanding as of December 31, 2021 and 2020		-			-
Class A units, 100 shares issued and authorized as of December 31, 2021 and 2020		-			-
Class B units, 2,642,159 shares authorized, 0 and 2,642,159 issued and outstanding as of December 31, 2021 and 2020		-			3,065,000
Common stock, $0.0001 par value, 200,000,000 shares authorized, 72,942,948 and 47,795,009 shares issued and outstanding as of December 31, 2021 and 2020		7,000			5,000
Additional paid-in capital		129,342,000			89,216,000
Accumulated deficit		(116,027,000	)		(81,541,000	)

Total stockholders’ equity		13,322,000			10,745,000

Total liabilities and stockholders’ equity	$	34,431,000		$	32,542,000


	Preferred Stock					Class A Units				Class B Units						Common Stock				Additional Paid-in			Accumulated
	Shares			Amount		Shares		Amount		Shares			Amount			Shares		Amount		Capital			Deficit			Total
Balance at December 31, 2020		2,006		$	-		100	$	-		2,642,159		$	3,065,000			47,795,009	$	5,000	$	89,216,000		$	(81,541,000	)	$	10,745,000
Sale of common stock from private placement
Sale of common stock from private placement, shares
Sale of common stock from public offering		-			-		-		-		-			-			14,076,696		2,000		22,064,000			-			22,066,000
Issuance of common stock from warrant exercise		-			-		-		-		-			-			2,254,411		-		2,784,000			-			2,784,000
Issuance of common stock from option exercise		-			-		-		-		-			-			676,715		-		802,000			-			802,000
Fair value of common shares issued upon conversion of note payable – related party		-			-		-		-		-			-			194,175		-		200,000			-			200,000
Fair value of common shares issued to settle lawsuit		-			-		-		-		-			-			600,000		-		678,000			-			678,000
Conversion of Series A preferred to common stock		(2,006	)		-		-		-		-			-			1,978,728		-		348,000			-			348,000
Fair value of shares issued to Series A preferred stockholders – deemed dividend		-			-		-		-		-			-			-		-		(348,000	)		-			(348,000	)
Fair value of common shares issued for services		-			-		-		-		-			-			1,344,499		-		2,188,000			-			2,188,000
Fair value of vested restricted stock awards		-			-		-		-		-			-			1,177,378		-		1,627,000			-			1,627,000
Fair value of vested stock options and warrants		-			-		-		-		-			-			-		-		1,596,000			-			1,596,000
Extinguishment of derivative liability
Class A units issued upon incorporation of Verb Acquisition Co.
Class A units issued upon incorporation of Verb Acquisition Co., shares
Fair value of Class B units issued for the acquisition of Ascend Certification
Fair value of Class B units issued for the acquisition of Ascend Certification,shares
Extinguishment of derivative liability upon exercise of warrants		-			-		-		-		-			-			-		-		4,513,000			-			4,513,000
Fair value of common shares issued to settle accounts payable and accrued expenses		-			-		-		-		-			-			203,178		-		322,000			-			322,000
Fair value of warrants issued to officer to modify note payable		-			-		-		-		-			-			-		-		287,000			-			287,000
Conversion of Class B Units to common shares		-			-		-		-		(2,642,159	)		(3,065,000	)		2,642,159		-		3,065,000			-			-
Net loss		-			-		-		-		-			-			-		-		-			(34,486,000	)		(34,486,000	)
Balance at December 31, 2021		-		$	-		100	$	-		-		$	-			72,942,948	$	7,000	$	129,342,000		$	(116,027,000	)	$	13,322,000

																		Additional
	Preferred Stock					Class A				Class B				Common Stock				Paid-in			Accumulated
	Shares			Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Total

Balance at December 31, 2019		4,396		$	-		-	$	-		-	$	-		24,496,197	$	2,000	$	68,028,000		$	(56,585,000	)	$	11,445,000

Sale of common stock from private placement		-			-		-		-		-		-		4,237,833		1,000		4,443,000			-			4,444,000
Sale of common stock from public offering		-			-		-		-		-		-		12,545,453		2,000		12,335,000			-			12,337,000
Issuance of common stock from warrant exercise		-			-		-		-		-		-		1,965,594		-		2,165,000			-			2,165,000
Fair value of warrants issued to Series A Preferred stockholders treated as a deemed dividend		-			-		-		-		-		-		-		-		(3,951,000	)		-			(3,951,000	)
Conversion of Series A Preferred to common stock		(2,390	)		-		-		-		-		-		1,768,909		-		-			-			-
Fair value of common shares issued for services		-			-		-		-		-		-		1,007,583		-		1,190,000			-			1,190,000
Fair value of vested restricted stock awards		-			-		-		-		-		-		1,773,440		-		2,870,000			-			2,870,000
Fair value of vested stock options and warrants		-			-		-		-		-		-		-		-		1,977,000			-			1,977,000
Extinguishment of derivative liability		-			-		-		-		-		-		-		-		159,000			-			159,000
Class A units issued upon incorporation of Verb Acquisition Co.		-			-		100		-		-		-		-		-		-			-			-
Fair value of Class B units issued for the acquisition of Ascend Certification		-			-		-		-		2,642,159		3,065,000		-		-		-			-			3,065,000
Net loss		-			-		-		-		-		-		-		-		-			(24,956,000	)		(24,956,000	)
Balance at December 31, 2020		2,006		$	-		100	$	- -		2,642,159	$	3,065,000		47,795,009	$	5,000	$	89,216,000		$	(81,541,000	)	$	10,745,000

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


Supplemental disclosures of cash flow information
Cash paid for interest	$	135,000	$	120,000
Cash paid for income taxes	$	1,000	$	1,000

Supplemental disclosure of non-cash investing and financing activities
Far value of class B units issued upon acquisition of subsidiary	$	-	$	3,065,000
Fair value of derivative liability from issuance of convertible debt, inducement shares and warrant features		-		3,951,000
Fair value of derivative liability extinguished		4,513,000		-
Fair value of common shares issued to settle accounts payable and accrued expenses		322,000		-
Reclassification of Class B upon conversion to common stock		3,065,000		-
Fair value of common stock issued to settle notes payable – related party		200,000		-
Fair value of common stock received in exchange for employee’s payroll taxes		139,000		-
Fair value of common stock issued for future services		164,000		-
Fair value of debt forgiveness		1,399,000		-
Accrued capitalized software development costs		2,100,000		-
Fair value of common stock issued to settle lawsuit		678,000		-
Discount recognized from advances on future receipts		3,194,000		285,000
Fair value of common stock issued for prepaid subscription agreement		-		340,000
Fair value of restricted awards returned – payroll taxes		-		485,000
Goodwill and intangible assets acquired from acquisition		-		4,846,000
Assets acquired from the acquisition of subsidiary		-		207,000
Liabilities assumed from the acquisition of subsidiary		-		331,000
Issuance of note payable upon acquisition of subsidiary	$	-	$	1,885,000

		Dec 31,2021
Cash	$	229,000
Accounts receivable		207,000
Current liabilities		(241,000	)
Long-term liabilities		(90,000	)
Net tangible assets		105,000
Intangible assets		1,418,000
Goodwill		3,427,000
Purchase price	$	4,950,000

	2021			2020
	As of December 31,
	2021			2020

Beginning balance	$	5,153,000		$	5,366,000

Additions:
Acquisition (see Note 3)		-			1,122,000
Adjustment to provisional finite-lived intangible asset		296,000			-

Amortization of intangible assets		(1,496,000	)		(1,335,000	)

Ending balance	$	3,953,000		$	5,153,000

	December 31, 2021
	Gross carrying amount		Accumulated amortization			Net carrying amount		Weighted-average amortization period (years)
Finite-lived intangible assets
Developed technology	$	6,100,000	$	(2,958,000	)	$	3,142,000		5
Customer contracts		1,217,000		(848,000	)		369,000		5

Indefinite-lived intangible assets
Domain names		442,000		-			442,000

	$	7,759,000	$	(3,806,000	)	$	3,953,000

	December 31, 2020
	Gross carrying amount		Accumulated amortization			Net carrying amount		Weighted- average amortization period (years)
Finite-lived intangible assets
Developed technology	$	5,700,000	$	(1,712,000	)	$	3,988,000		5
Customer contracts		1,271,000		(592,000	)		679,000		5
Non-compete		50,000		(6,000	)		44,000		3

Indefinite-lived intangible assets
Domain names		442,000		-			442,000
	$	7,463,000	$	(2,310,000	)	$	5,153,000

Year ending	Amortization
2022	$	1,421,000
2023		1,359,000
2024		545,000
2025 and thereafter		186,000
Total amortization	$	3,511,000

Year ending	Operating Leases
2022	$	751,000
2023		773,000
2024		472,000
2025		484,000
2026 and thereafter		705,000
Total lease payments		3,185,000
Less: Imputed interest/present value discount		(294,000	)
Present value of lease liabilities	$	2,891,000

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at December 31, 2021			Balance at December 31, 2020

Note A	June 30, 2020	February 25, 2021		28	%	$	506,000	$	-		$	89,000
Note B	June 30, 2020	February 25, 2021		28	%		506,000		-			88,000
Note C	October, 29, 2021	April 28, 2022		5	%		2,120,000		1,299,000			-
Note D	October 29, 2021	July 25, 2022		28	%		3,808,000		2,993,000			-
Note E	December 23, 2021	June 22, 2022		5	%		689,000		689,000			-
Other	January 13,2021 – June 30, 2021	September 10, 2021 – March 1, 2022		3% – 28	%		9,355,000		-			-
Total						$	16,984,000		4,981,000			177,000
Debt discount									(800,000	)		(67,000	)
Net								$	4,181,000		$	110,000

Note	Issuance Date	Maturity Date	Interest Rate			Original Borrowing		Balance at December 31, 2021			Balance at December 31, 2020
Note 1 (A)	December 1, 2015	February 8, 2023		12.0	%	$	1,249,000	$	725,000		$	725,000
Note 2 (B)	December 1, 2015	April 1, 2017		12.0	%		112,000		-			112,000
Note 3 (C)	April 4, 2016	June 4, 2021		12.0	%	$	343,000		40,000			240,000
Total notes payable – related parties									765,000			1,077,000
Non-current									(725,000	)		-
Current								$	40,000		$	1,077,000

	(A)	On December 1, 2015, the Company issued a convertible note payable to Mr. Rory J. Cutaia, the Company’s majority stockholder and Chief Executive Officer, to consolidate all loans and advances made by Mr. Cutaia to the Company as of that date. The note bears interest at a rate of 12% per annum, secured by the Company’s assets, and matured on February 8, 2021, as amended. A total of 30% of the original note balance or $375,000 was convertible to common stock and was converted in 2018 while the remaining note balance of $825,000 was not convertible. During the year ended December 31, 2020, the Company made payments of $100,000. As of December 31, 2020, the outstanding balance of the note amounted to $725,000.

		In February 2021, Mr. Cutaia and the Company amended the note payable and extended the maturity date from February 8, 2021 to February 8, 2023 or an extension of two years. In exchange for the extension, the Company issued Mr. Cutaia warrants to purchase 138,889 shares of common stock with a fair value of $287,000. The warrants are fully vested, exercisable at $2.61 per share and will expire in three years. There were no other changes to the original terms of the note payable. As the fair value of the warrants granted amounted to $287,000 or approximately 40% of the outstanding note payable, pursuant to ASC 470, the Company accounted for the modification as an extinguishment of debt which required the measurement of the modified debt and additional consideration to be at fair value. As a result, the Company recognized a loss on debt extinguishment of $287,000 and a corresponding credit to contributed capital. On May 19, 2021 the Board approved the ability to convert the note payable into equity of the Company at the discretion of the holder. The conversion price is the fair market value of the Company’s common stock on the day of conversion.

		As of December 31, 2021, the outstanding balance of the note amounted to $725,000.

	(B)	On December 1, 2015, the Company issued a note payable to a former member of the Company’s board of directors, in the amount of $112,000, representing unpaid consulting fees as of November 30, 2015. The note is unsecured, bears interest at a rate of 12% per annum, and matured in April 2017. As of December 31, 2020, the outstanding principal balance of the note amounted to $112,000.

		On September 24, 2021 the Company settled the entire note payable and all corresponding accrued interest and accounts payable related to the former board member for $140,000, which resulted in a gain of $82,000.

	(C)	On April 4, 2016, the Company issued a convertible note to Mr. Cutaia, in the amount of $343,000, to consolidate all advances made by Mr. Cutaia to the Company during the period December 2015 through March 2016. A total of 30% of the original note balance or $103,000 was convertible to common stock and was converted in 2018 while the remaining note balance of $240,000 was not convertible. The note bears interest at a rate of 12% per annum, is secured by the Company’s assets, and matured on June 4, 2021, as amended. On May 19, 2021 the Board approved the ability to convert the note payable into equity of the Company at the discretion of the holder. The conversion price is the fair market value of the Company’s common stock on the day of conversion. On May 19, 2021 $200,000 was converted into 194,175 shares of common stock. The conversion price was $1.03, which was the closing price of the Company’s common stock on the day of conversion.

		As of December 31, 2021, and December 31, 2020, the outstanding balance of the note amounted to $40,000 and $240,000, respectively.

	(A)	On April 17, 2020, the Company received loan proceeds in the amount of $1,218,000 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest were forgivable after December 31, 2020, as long as the borrower used the loan proceeds for qualifying expenses, including payroll, benefits, rent and utilities, and maintains its payroll levels. Management believes the entire loan amount has been used for qualifying expenses. The PPP loan was payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. As of December 31, 2020, the outstanding balance of the PPP loan was $1,218,000. On January 4, 2021 the entire PPP loan and accrued interest, totaling $1,226,000, was forgiven and accounted for as a gain on debt extinguishment.

	(B)	On May 15, 2020, the Company executed an unsecured loan with the U.S. Small Business Administration (“SBA”) under the Economic Injury Disaster Loan program in the amount of $150,000. The loan is secured by all tangible and intangible assets of the Company and payable over 30 years at an interest rate of 3.75% per annum. Installment payments, including principal and interest, begin on May 15, 2022. As part of the loan, the Company also received an advance of $10,000 from the SBA. While the SBA refers to this program as an advance, it was written into law as a grant. This means that the amount given through this program does not need to be repaid. As a result, the Company accounted for this $10,000 as part of “Other Income” in fiscal 2020.

	(C)	As a result of the acquisition of SoloFire in September 2020, the Company assumed SoloFire’s PPP loan of $90,000 it obtained in May 2020 under the same PPP (see discussion “A”). On May 17, 2021 the entire note and accrued interest, totaling $91,000, was forgiven and accounted for as a gain on debt extinguishment.

	2021			2020
	Years Ended December 31,
	2021			2020

Financing costs	$	-		$	(248,000	)
Interest expense - amortization of debt discount (see Note 9)		(2,461,000	)		(493,000	)
Interest expense- other (see Note 10)		(114,000	)		(153,000	)

Total interest expense	$	(2,575,000	)	$	(894,000	)

Note	Date	Payment Date	Balance at December 31, 2021		Balance at December 31, 2020

Rory Cutaia (A)	December 23, 2019	50% on January 10, 2021, 50% on January 10, 2022	$	215,000	$	430,000
Rory Cutaia (B)	December 23, 2019	50% on January 10, 2021, 50% on January 10, 2022		161,000		324,000
Jeff Clayborne (A)	December 23, 2019	50% on January 10, 2021, 50% on January 10, 2022		63,000		125,000
Jeff Clayborne (B)	December 23, 2019	50% on January 10, 2021, 50% on January 10, 2022		82,000		163,000

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

	December 31, 2021			Upon Extinguishment in 2021			December 31, 2020
Stock Price	$	1.24		$	2.47		$	1.65
Exercise Price	$	1.11		$	1.10		$	1.12
Expected Life		2.97			3.32			3.84
Volatility		119	%		144	%		162	%
Dividend Yield		0	%		0	%		0	%
Risk-Free Interest Rate		0.97	%		0.33	%		0.29	%
Total Fair Value	$	3,155,000		$	4,513,000		$	8,266,000