Verb Technology Company, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2024

15. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through November 5, 2024, the date these financial statements are available to be issued. The Company believes there were no material events or transactions discovered during this evaluation that requires recognition or disclosure in the financial statements other than the items discussed below.

Series C Preferred Shares Redeemed in Exchange for Common Shares

On December 29, 2023, the Company issued 3,000 Series C Preferred Shares to an institutional investor pursuant to a securities purchase agreement and certificate of designation previously filed. The Series C Preferred Shares carried a 10% annual dividend.

Subsequent to September 30, 2024, the Company redeemed 895 Series C Preferred Shares in exchange for 196,856 common shares to fully redeem the Series C Preferred Shares that were outstanding. On October 14, 2024, the Company redeemed 187 Series C Preferred Shares in exchange for 32,913 common shares to fully repay the amount accrued for preferred dividends. The transaction was done at the Nasdaq at-the-market price. No broker was involved in the transaction and no fees or commissions were paid or incurred by the Company.

Nasdaq Compliance and Reverse Stock Split

On August 2, 2024, the Company filed a preliminary proxy statement on Schedule 14A in connection with the Company’s annual meeting of stockholders scheduled for September 26, 2024 (the “September 26, 2024 annual meeting”). On August 6, 2024, the Company filed an amended proxy statement on Schedule PRER14A indicating that in the event the Company does not regain compliance with the Bid Price Rule on or before September 26, 2024, then at the annual meeting, the Company intends to seek the approval of its stockholders to implement a reverse stock split in the range within a range of one-for-five (1-for-5) to a maximum of a one-for-two hundred (1-for-200).

On August 6, 2024, the Company received notice from the Staff indicating that the bid price for the Company’s common stock had closed below $0.10 per share for the 10-consecutive trading day period ended August 5, 2024 and, accordingly, the Company is subject to the provisions contemplated under Nasdaq Listing Rule 5810(c)(3)(A)(iii) (the “Low Priced Stock Rule”) and its securities were subject to delisting from Nasdaq unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”).

On August 12, 2024, the Company timely requested a hearing before the Panel, which request automatically stayed any further action by Nasdaq until the hearing was held and the expiration of any extension period that may have been granted by the Panel. The Company’s common stock continued to trade on Nasdaq under the symbol “VERB” pending completion of the hearing process.

On August 28, 2024, the Panel determined to grant the Company a temporary exception until October 21, 2024, to effect a reverse stock split of its common stock and thereafter regain compliance with The Nasdaq Stock Market LLC’s Listing Rule 5550(a)(2). On October 2, 2024, the Panel amended the exception granted to the Company to provide that the Company has until October 22, 2024, to effect a reverse stock split to regain compliance with Nasdaq Listing Rule 5550(a)(2).

At the September 26, 2024 annual meeting, the Company’s stockholders voted to approve a reverse stock split within a range of one-for-five (1-for-5) to a maximum of a one-for-two hundred (1-for-200). Given the then price of the Company’s shares and the limited time frames established by the Panel, on October 8, 2024 the Board implemented a 1 for 200 reverse stock split (the “Reverse Stock Split”) and on October 9, 2034 the Company’s shares began trading on post-split basis.

On October 23, 2024, after the elapse of ten trading days, the Company received a letter from the Nasdaq Stock Market stating that the Company had regained compliance with the minimum bid price requirement of $1.00 per share for continued listing on the Nasdaq Stock Market, as set forth in Nasdaq Listing Rule 5550(a)(2). As is customary, the Company will be subject to a mandatory panel monitor for a period of one year from October 23, 2024. If, within that one-year monitoring period, the Nasdaq Listing Qualifications staff (the “Staff”) finds the Company is again out of compliance with the minimum bid price requirement, notwithstanding Nasdaq Listing Rule 5810(c)(2), then the Staff will issue a delist determination letter and the Company will have an opportunity to request a new hearing with the initial Nasdaq Panel or a newly convened hearing panel if the initial Panel is unavailable.

Corporate Action, Change of Control, and Extraordinary Performance Agreements

As of the date of this Form 10-Q, the Company’s shares have traded and are continuing to trade at a price that results in a market cap that is significantly less than the Company’s current net cash position. Accordingly, the Company’s Board of Directors has determined that the Company is vulnerable to hostile takeover action and that any such action at this time is not in the best interests of its stockholders. The Company does not currently have any poison pill type provisions and due to previous reverse stock splits and other capital markets activities, the Company’s management and board members currently own an insignificant number of shares and as such would be ineffective in voting such shares to thwart any hostile takeover actions. Until such time as the Board determines whether it is necessary or advisable to adopt a poison pill provision or other anti-takeover measure, on October 31, 2024 the Board determined to approve the entry into Corporate Action, Change of Control, and Extraordinary Performance Agreements (the “Agreement”) with Rory J. Cutaia, Founder, Chairman and CEO of the Company, and James Geiskopf, Lead Director, (the “Awardees”) pursuant to which the Company will issue fully vested restricted stock units (“RSU”) subject to certain triggering events (the “Triggering Events”), as described below. Each RSU represents the right to be issued one share of common stock (the shares upon vesting, are subject to the restrictions as set forth in the Agreement, under the Company’s 2019 Omnibus Incentive Plan, or the RSU award agreement).

The Triggering Events include, among other things, the following:

Acceleration Upon a Corporate Transaction or Change of Control

	a.	“Corporate Transaction” means any person or Group (as defined in the Agreement) acquires an ownership of Shares (or other voting securities of the Company then outstanding) of the Company possessing thirteen percent (13%) or more of the total voting power of the Shares (or other voting securities then outstanding) of the Company where such person or Group is required to file a Schedule 13D (Beneficial Ownership Report (for >5% ownership with intent to influence)) with the U.S. Securities and Exchange Commission within 10 days of such acquisition. In the event of either a Corporate Transaction or a Change of Control, on or prior to December 31, 2025, the Awardee shall be entitled to fully vested 80,000 Restricted Stock Units for each Measurement Date (as defined in the Agreement) that cannot be reached due to the Change of Control. For example, for clarity, if the Corporate Transaction or Change of Control closes on July 15, 2025, then the Awardee shall be entitled to 160,000 Restricted Stock Units (2 Measurement Dates x 80,000). Such accelerated Restricted Stock Units shall be fully vested to the Awardee and the Company shall grant and deliver the accelerated Restricted Stock Units Awards to Awardee on or prior to such closing of the Corporate Transaction or Change of Control.

	b.	“Change of Control” means and includes each of the following:

	i.	any one person, or group of owners of another corporation who, acting together through a merger, consolidation, purchase, acquisition of stock or the like (a “Group”), acquires ownership of Shares of the Company that, together with the Shares held by such person or Group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the Shares of the Company (or other voting securities of the Company then outstanding). However, if such person or Group is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the Shares (or other voting securities of the Company then outstanding) before this transfer of the Company’s Shares (or other voting securities of the Company then outstanding), the acquisition of additional Shares (or other voting securities of the Company then outstanding) by the same person or Group shall not be considered to cause a Change of Control of the Company; or
	ii.	any one person or Group acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such person or persons) ownership of Shares (or other voting securities of the Company then outstanding) of the Company possessing thirty percent (30%) or more of the total voting power of the Shares (or other voting securities then outstanding) of the Company where such person or Group is not merely acquiring additional control of the Company; or
	iii.	a majority of members of the Company’s Board is replaced during any twelve (12)-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board prior to the date of the appointment or election (the “Incumbent Board”), but excluding, for purposes of determining whether a majority of the Incumbent Board has endorsed any candidate for election to the Board, any individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or Group other than the Company’s Board; or
	iv.	any one person or Group acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such person or Group) all or substantially all of the assets from the Company that have a total gross fair market value equal to or more than forty percent (40%) of the total fair market value of all assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, “gross fair market value” means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

The Triggering Events also include partial issuances of RSU’s to the Awardees through the achievement of extraordinary performance-based quarterly revenue milestones as determined by the Board (the “Revenue Milestones”), and as measured on specific dates, each a “Measurement Date” defined as December 31, 2024, March 31, 2025, June 30, 2025, September 30, 2025, and December 31, 2025, and the Awardees providing continuous services through the achievement of such milestones. Pursuant to the Agreement, each Awardee may be entitled to receive between 40,000 and 80,000 RSU’s upon achieving the following Revenue Milestones (i) between $500,000 and $900,000 as of December 31, 2024, (ii) between $1.1M and $1.5M as of March 31, 2025, (iii) between $1.7M and $2.1M as of June 30, 2025, (iv) between $2.3M and $2.7M as of September 30, 2025, and (v) $2.9M and $3.3M as of December 31, 2025. The achievement of each of the applicable quarterly Revenue Milestones on each Measurement Date will be reasonably determined by the Company’s Board of Directors.

The foregoing description of the above Agreement is qualified in its entirety by reference to the Agreement, copies of which are attached hereto as Exhibit 10.1 and Exhibit 10.2 and incorporated herein by reference.