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16. ISSUANCE OF CLASS A and B UNITS
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a. |
Class
A Units – During the year ended December 31, 2020, the Company created a separate class of equity instrument called Class A
Units. Concurrently, the Company formed a wholly owned subsidiary, Verb Acquisition, and issued 100 Class A units as part of the
organization of Verb Acquisition. The Class A Units have the following rights and privileges: |
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1. |
Class
A units are a standalone financial instrument; |
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2. |
Priority
on distributions; |
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3. |
Ability
to remove the manager; |
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4. |
Drag-along
rights; |
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5. |
Power
to dissolve Verb Acquisition provided that a majority of the Class B Units also approve the dissolution; |
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6. |
Ability
to appoint a liquidator to wind up the affairs of Verb Acquisition; |
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7. |
Entitled
to distributions; |
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8. |
Approve
board appointments; and |
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9. |
Approve
any amendments to Verb Acquisition’s operating agreement, provided that a majority of the Class B Units also approve the amendment. |
There
were 100 issued and outstanding shares of Class A Unit as of September 30, 2021 and December 31, 2020.
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b. |
Class
B Units – During the year ended December 31, 2020, the Company created a separate class of an equity instrument called Class
B Units. Concurrently, our wholly owned subsidiary, Verb Acquisition, issued 2,642,159 Class B Units as part of its acquisition of
SoloFire (see Note 3). The Class B Units have the following rights and privileges: |
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1. |
Class
B units are a standalone financial instrument; |
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2. |
Exchangeable
for shares of the Company’s Common Stock at a conversion rate of 1 to 1; |
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3. |
Power
to dissolve Verb Acquisition, provided that a majority of the Class A Units also approve the dissolution; |
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4. |
Entitled
to profit distributions; |
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5. |
Approve
board appointments made by the Class A Units; and |
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6. |
Approve
any amendments to Verb Acquisition’s operating agreement, provided that a majority of the Class A Units also approve the amendment. |
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. As of December 31,
2020, Class B shares issued and outstanding totaled 2,642,159 shares.
During
the period ended September 30, 2021, pursuant to the terms of the Class B shares, all holders of the Company’s Class B shares converted
their shares to common stock. As a result of these conversions, the Company reclassified the recorded fair value of the Class B shares
of $3,065,000 as part of additional paid in capital. As of the September 30, 2021, all 2,642,159 Class B units were converted into 2,642,159
shares of Verb Technology common stock.
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