Litigation

On April 24, 2018, EMA Financial, LLC, or 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 set forth four causes of action and sought 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 it 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.” On December 22, 2020, the court entered a Memorandum and Order partly granting, and partly denying, EMA’s motion for summary judgment on damages, awarding damages only in respect to the value of the warrant shares EMA would have received if it had used the proper formula in its March 2018 warrant exercise notice, plus certain prejudgment interest and per diem interest. On January 21, 2021, the court entered a final judgment in favor of EMA, in the amount of $463,571.98. The court did not award EMA any attorneys’ fees or expenses. While the court ruled in the Company’s favor by dismissing the majority of EMA’s suit on the finding that EMA attempted to utilize an improper warrant exercise formula, the court nevertheless found that the Company should have accepted the exercise notice and issued the shares the Company believed EMA was then due. Instead of ordering the Company to deliver those shares today, the court ordered the Company to pay the highest value of those shares on the relevant date, to which the Company has taken exception. Accordingly, on February 17, 2021, the Company’s counsel filed a notice of appeal to appeal the court’s judgment to the United States District Court for the Second Circuit. EMA filed a notice of cross-appeal and a hearing or briefing for this case is scheduled in June 2021. The Company has established an appropriate reserve to pay for the approximately $464,000 judgment in the event its appeal is not successful.

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. This former employee filed his complaint in the Superior Court of California for the County of Los Angeles on November 20, 2019, styled Meyerson v. Verb Technology Company, Inc., et al. (Case No. 19STCV41816). 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. On February 9, 2021, the former employee’s counsel filed a motion for summary judgment, or in the alternative, summary adjudication against the Company. The Company does not believe the court will grant this motion and it has instructed its counsel to continue its efforts in seeking a dismissal of the former employee’s 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 “Hartmann Class Action”). The complaint purported 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 alleged 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 sought unspecified costs and damages. For additional information, refer to the section entitled “Legal Proceedings” from the 2020 Annual Report.

On February 18, 2021, the Court entered a final order and judgment approving the class action settlement and dismissed the Hartmann Class Action with prejudice. The stipulation of settlement approved (the “Stipulation of Settlement”) by the court on February 18, 2021 provided for, amongst other things, a full and final release, settlement, and discharge of all claims arising from the Hartmann Class Action in consideration of the Company’s payment of a $640,000 settlement amount, which is payable over 12 months. Furthermore, among other things, the Stipulation of Settlement provided that (1) the Company denied each and all of the claims alleged by plaintiffs, (2) the Company denied any allegation of wrongdoing, fault, liability, violation of the law, or damage whatsoever arising out of its conduct, (3) the Company denied that it or any of its officers, directors, or employees made any material misstatements or omissions, (4) the Company maintained that it had a meritorious defense to all claims alleged in the Hartmann Class Action, and (5) the Company agreed that the basis of us entering into the Stipulation of Settlement was to avoid the uncertainties, burden, and expense of further litigation and to put the claims arising from the Hartmann Class Action to rest, finally and forever. The Company believes that the settlement of the Hartmann Class Action approved by the court is favorable to the Company and ultimately benefits its shareholders. The Company has established an appropriate reserve to account for the $640,000 settlement of the Hartmann Class Action.

During the period ended March 31, 2021, the Company paid $56,000 pursuant to the Stipulation of Settlement. As of March 31, 2021, outstanding balance due amounted to $468,000.

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 “Moore Derivative Action”). The Moore Derivative Action also arises out of the defense of the Hartmann Class Action described above. The Moore 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 Hartmann Class Action. 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.

On November 5, 2020, the Company 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 which were confidential and subject to several contingencies, including, without limitation, court approval. On March 1, 2021, the court preliminarily approved the settlement of the Moore Derivative Action. The stipulation and agreement of settlement preliminarily approved (the “Stipulation and Agreement of Settlement”) by the court on March 1, 2021 provided for, amongst others things, a full and final release, settlement, and discharge of all claims arising from the Moore Derivative Action in consideration of the Company’s agreement to institute certain changes and/or modifications to its corporate governance and business ethics practices and plaintiff’s counsel receiving its attorneys’ fees and expenses, which amounted to $75,000. Furthermore, amongst other things, the Stipulation and Agreement of Settlement preliminarily approved by the court provided that (1) the Company denied each and every claim alleged by plaintiff, and (2) the Company denied any allegation of wrongdoing, fault, and liability, (3) the Company denied committing any violation of the law or breach of fiduciary duty, and (4) the Company concluded that it is desirable that the Moore Derivative Action be settled on the terms and subject to the conditions of the Stipulation and Settlement Agreement to avoid the ongoing cost and distraction of litigation. The Company believes that the settlement of the Moore Derivative Action preliminarily approved by the court is favorable to the Company and ultimately benefits its shareholders. The court intends to set a hearing for the final approval of the settlement of the Moore Derivative Action approximately 60 days after March 1, 2021. On April 1, 2021, the Company paid $75,000 to cover the attorney fees and expenses that were due.

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 financial statements.

Board of Directors

The Company has committed an aggregate of $475,000 in 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 quarter ended March 31, 2021 was $119,000 As of March 31, 2021, total board fees to be recognized in future period amounted to $356,000 and will be recognized once the service has been rendered.