Business Context and Reporting Period
This Form 8-K Current Report was filed by Verb Technology Company, Inc. (trading symbol: VERB) on December 27, 2019, covering events occurring on December 20, 2019. The company is incorporated in Nevada and trades on The Nasdaq Stock Market LLC. The filing primarily addresses corporate governance changes, executive compensation approvals, and the results of the 2019 Annual Meeting of Stockholders.
Key Financial Metrics and Compensation
The filing does not report operational financial metrics such as revenue, profit, cash flow, or debt levels. Instead, it details significant compensation commitments and equity grants approved by the Board:
- Executive Base Salaries (2019): Rory J. Cutaia (CEO) at $430,000; Jeffrey Clayborne at $250,000.
- Executive Incentives: Mr. Cutaia received an annual incentive award of $430,000 and Mr. Clayborne $125,000, with portions deferred until 2021 and 2022.
- Equity Grants (VWAP $1.1337):
- Mr. Cutaia: 352,827 Annual RSAs (4-year vest) and 200,000 Additional RSAs (3-year vest).
- Mr. Clayborne: 264,620 Annual RSAs (4-year vest) and 100,000 Additional RSAs (3-year vest).
- Stock Options granted to both executives with an exercise price of $1.1337 per share.
- Director Compensation: New directors Judy Hammerschmidt and Nancy Heinen receive $75,000 annual fees plus $80,000 Annual RSAs and $100,000 Initial RSAs. Existing non-employee directors received fees ranging from $75,000 to $150,000 plus RSAs.
- Severance: CEO Mr. Cutaia's employment agreement includes a severance package of 36 months of base salary and 18 months of health insurance reimbursement upon termination without cause or for good reason.
Material Changes and Corporate Actions
The following material changes were reported for the period:
- Board Expansion: The Board expanded from four to six directors with the immediate appointment of Judy Hammerschmidt and Nancy Heinen, both deemed independent.
- Indemnification Agreements: The Board approved and executed indemnification agreements with all executive officers and directors, providing for the advancement of expenses and indemnification against claims.
- Employment Agreement: A new four-year Executive Employment Agreement was entered into with CEO Rory J. Cutaia, replacing his 2014 agreement.
- Stockholder Approvals: Stockholders approved the 2019 Omnibus Incentive Plan, the issuance of shares upon conversion of preferred stock and exercise of warrants, and the "Say-on-Pay" proposal.
Outlook, Risks, and Contingencies
The filing does not provide forward-looking financial guidance or discuss specific operational risks. However, it outlines contractual contingencies regarding executive compensation:
- Change in Control: Defined as a transaction resulting in a person owning more than 50% of voting equity, the sale of substantially all assets, or a merger where pre-transaction holders lose majority control. This triggers acceleration of certain compensation payments and option exercises.
- Permanent Disability: Defined as the inability to perform duties for 120 consecutive days or 180 aggregate days in a 12-month period, triggering severance and vesting acceleration.
- Future Compensation Reviews: The company intends to engage Marsh & McLennan Agency in 2020 to advise on executive and Board compensation.
Investor Verification Checklist
- Verify the total number of shares outstanding post-grant of the RSAs and options detailed in this filing.
- Review the full text of the 2019 Omnibus Incentive Plan (Exhibit 4.13 to Form S-8) to understand the total pool of shares available for future grants.
- Confirm the vesting schedules and cliff dates for the new director RSAs and executive options.
- Assess the impact of the deferred compensation payments (payable in 2021 and 2022) on future cash flow requirements.
- Check subsequent filings for the actual issuance of shares related to the approved conversion of Series A preferred stock and warrant exercises.