UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed
by the Registrant ☒
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
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Preliminary
Proxy Statement |
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☒ |
Definitive
Proxy Statement |
☐ |
Definitive
Additional Materials |
☐ |
Soliciting
Material under § 240.14a-12 |
VERB
TECHNOLOGY COMPANY, INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
☒ |
No
fee required |
☐ |
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Title
of each class of securities to which transaction applies: |
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Aggregate
number of securities to which transaction applies: |
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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Proposed
maximum aggregate value of transaction: |
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Total
fee paid: |
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Fees
paid previously with preliminary materials. |
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its
filing. |
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Amount
Previously Paid: |
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Form,
Schedule or Registration Statement No.: |
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Filing
Party: |
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NOTICE
OF THE 2024 VIRTUAL ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON SEPTEMBER 26, 2024
August
16, 2024
Dear
Fellow Verb Stockholders:
It
is my pleasure to invite you to the 2024 Virtual Annual Meeting of Stockholders (the “Annual Meeting”) of Verb Technology
Company, Inc., a Nevada corporation (the “Company,” “Verb,” “us,” or “our”). The Annual
Meeting will be held on September 26, 2024 at 11:00 a.m. Pacific Time virtually by means of remote communication and can be accessed
by visiting www.virtualshareholdermeeting.com/VERB2024AM where you will be able to listen to the meeting live, submit questions
and vote online. You will not be able to attend the meeting in person.
The
Annual Meeting is being held for the following purposes:
1. |
To
elect four directors to serve on our board of directors until their respective successors are duly elected and qualified, or until
their respective earlier death, resignation or removal; |
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2. |
To
grant discretionary authority to our board of directors to (i) amend our articles of incorporation to combine outstanding shares
of our common stock into a lesser number of outstanding shares, or a “reverse stock split,” at a specific ratio within
a range of one-for-five (1-for-5) to a maximum of a one-for-two hundred (1-for-200) split, with the exact ratio to
be determined by our board of directors in its sole discretion; and (ii) effect the reverse stock split, if at all, within one year
of the date the proposal is approved by stockholders; |
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3. |
To
ratify the selection of Grassi & Co., CPAs, P.C. as our independent registered public accounting firm; and |
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4. |
To
transact such other business as may properly come before the Annual Meeting virtually, or any postponement or adjournment thereof. |
Our
board of directors recommends that you vote “FOR” the election of each of the four director nominees; “FOR”
the reverse stock split; and “FOR” the ratification of the selection of Grassi & Co., CPAs, P.C. as our
independent registered public accounting firm.
Only
stockholders of record as of the close of business on July 29, 2024 will be entitled to receive notice of and to vote at the Annual Meeting,
or any postponement or adjournment thereof. The accompanying Proxy Statement contains details concerning the foregoing items, as well
as information on how to vote your shares. Other detailed information about our business and operations, including our audited financial
statements, are included in our Annual Report on Form 10-K. We urge you to read and consider these documents carefully.
Your
vote is very important. Whether or not you plan to attend the Annual Meeting, we encourage you to submit your proxy or voting instructions
as soon as possible. For specific instructions on how to vote your shares, please refer to the Notice of Internet Availability of Proxy
Materials you received in the mail, and the additional information in the accompanying Proxy Statement. If you requested to receive printed
proxy materials, you may also refer to the instructions on the proxy card enclosed with those materials.
On
behalf of the Board and the officers and employees of the Company, I would like to take this opportunity to thank you for your continued
support.
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Sincerely, |
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/s/
Rory J. Cutaia |
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Rory
J. Cutaia |
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Chairperson
of the Board, Chief Executive Officer,
President,
Treasurer and Secretary |
NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This
Proxy Statement contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may
relate to our future financial performance, business operations, and executive compensation decisions, or other future events. You can
identify forward-looking statements by the use of words such as “anticipate,” “believe,” “could,”
“expect,” “intend,” “may,” “will,” or the negative of such terms, or other comparable
terminology. Forward-looking statements also include the assumptions underlying or relating to such statements. We have based these forward-looking
statements on our current expectations and projections about future events that we believe may affect our business, results of operations
and financial condition.
The
outcomes of the events described in these forward-looking statements are subject to risks, uncertainties and other factors described
in the section titled “Risk Factors,” and elsewhere, in the Annual Report on Form 10-K for the fiscal year ended December
31, 2023, as well as the other reports we file with the Securities and Exchange Commission. We cannot assure you that the events and
circumstances reflected in the forward-looking statements will be achieved or occur, and actual results could differ materially from
those expressed or implied in the forward-looking statements. We undertake no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which the statement is made except as may be required under applicable securities law.
VERB
TECHNOLOGY COMPANY, INC.
PROXY
STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON SEPTEMBER 26, 2024
TABLE
OF CONTENTS
VERB
TECHNOLOGY COMPANY, INC.
PROXY
STATEMENT
FOR
THE 2024 VIRTUAL ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON SEPTEMBER 26, 2024
General
Information
This
Proxy Statement is solicited by the board of directors (our “Board”) of Verb Technology Company, Inc., a Nevada corporation
(the “Company,” “Verb,” “us,” or “our”), for use at our 2024 Virtual Annual Meeting of
Stockholders (the “Annual Meeting”) to be held on September 26, 2024 at 11:00 a.m. Pacific Time, or at any adjournment or
postponement thereof. The Annual Meeting will be held virtually by means of remote communication and can be accessed by visiting www.virtualshareholdermeeting.com/VERB2024AM
where you will be able to listen to the meeting live, submit questions and vote online. You will not be able to attend the meeting
in person. The Annual Meeting is being held for the purposes described herein and in the Notice of Internet Availability of Proxy Materials
you received in the mail.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2024 VIRTUAL ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 26,
2024
This
Proxy Statement, the enclosed proxy card, and the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Annual
Report”) are available at www.proxyvote.com. The Annual Report, however, is not a part of the proxy solicitation material.
Questions
and Answers About the Annual Meeting and Voting
Why
did I receive a Notice of Internet Availability of Proxy Materials in the mail?
Under
rules adopted by the Securities and Exchange Commission (the “SEC”), we are providing access to the proxy materials for the
Annual Meeting via the internet. Instead of mailing printed copies of our proxy materials to each of our stockholders, we have elected
to provide online access to the materials under the SEC’s “notice and access” rules. Accordingly, on or about August
20, 2024, we mailed a Notice of Internet Availability of Proxy Materials, or Notice, to each of our stockholders. The Notice contains
instructions on how to access our proxy materials, including this Proxy Statement and the Annual Report, and how to vote your shares.
We encourage you to read the proxy materials carefully prior to voting.
We
believe compliance with the SEC’s “notice and access” rules allows us to provide our stockholders with the materials
they need to make informed decisions, while lowering the costs of printing and delivering those materials and reducing the environmental
impact of the Annual Meeting. However, if you would prefer to receive printed proxy materials, please follow the instructions included
in the Notice.
The
Notice was sent on or about August 20, 2024 to each of our stockholders of record entitled to vote at the Annual Meeting.
Who
can vote at the Annual Meeting?
You
can vote if, as of the close of business on July 29, 2024 (the “Record Date”), you were a stockholder of record of our common
stock. On the Record Date, there were 145,597,352 shares of our common stock outstanding.
Stockholder
of Record: Shares Registered in Your Name
If,
on the Record Date, your shares were registered directly in your name with our transfer agent, VStock Transfer, LLC, then you are a stockholder
of record. As a stockholder of record, you may vote at the Annual Meeting or by proxy. Whether or not you plan to attend the Annual Meeting,
we urge you to provide your proxy to ensure your vote is counted. Even if you vote by proxy, you may still vote if you are able to attend
the Annual Meeting.
Beneficial
Owner: Shares Registered in the Name of a Broker or Other Nominee
If,
on the Record Date, your shares were held in an account at a brokerage firm, bank, dealer, or other nominee, then you are the “beneficial
owner” of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The
organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial
owner, you have the right to direct your broker or other nominee on how to vote the shares in your account. If you do not direct your
broker or other nominee how to vote your shares, the broker or other nominee will be entitled to vote the shares with respect to “routine”
items, but will not be permitted to vote the shares with respect to “non-routine” items. Where you do not direct your broker
or other nominee how to vote on “non-routine” items it is referred to as a “broker non-vote.”
Proposal
1, the election of directors, is considered to be a “non-routine” matter under applicable rules. Accordingly, any shares
held in “street name” through a broker or other nominee will not be voted on Proposal 1 unless you affirmatively provide
the nominee with instructions for how to vote. Accordingly, broker non-votes may result for this proposal.
Proposal
2, the reverse stock split, and Proposal 3, the ratification of the selection of our independent registered public accounting firm, are
considered to be “routine” matters under applicable rules. Accordingly, any shares held in “street name” through
a broker or other nominee may be voted by the nominee on Proposal 2 and Proposal 3 even if you do not provide the nominee with instructions
for how to vote. Accordingly, we do not expect any broker non-votes will result for these proposals.
As
a beneficial owner of shares, you are also invited to attend the Annual Meeting. However, since you are not the stockholder of record,
you may not vote your shares at the Annual Meeting unless you request and obtain a valid proxy from your broker or other nominee. Please
contact your broker or other nominee for additional information.
How
many votes do I have?
On
each matter to be voted upon, you have one vote for each share of common stock that you owned as of the Record Date.
What
is the quorum requirement?
One-third
of the outstanding shares of common stock entitled to vote at the Annual Meeting must be present at the Annual Meeting, either virtually
or represented by proxy, in order for us to hold the Annual Meeting. This is referred to as a quorum. On the Record Date, there were
145,597,352 outstanding shares of our common stock entitled to vote. Thus, 48,532,451 shares of our common stock must be present at the
Annual Meeting, either virtually or represented by proxy, to have a quorum.
Your
shares will be counted towards the quorum only if you submit a valid proxy or vote at the Annual Meeting. Abstentions and broker non-votes
will also be counted towards the quorum requirement.
What
proposals am I being asked to vote upon?
The
Annual Meeting is being held for the following purposes:
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1. |
to
elect four directors to serve on our Board until their respective successors are duly elected and qualified, or until their respective
earlier death, resignation or removal; and |
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2. |
to
grant discretionary authority to our board of directors to (i) amend our articles of incorporation to combine outstanding shares
of our common stock into a lesser number of outstanding shares, or a “reverse stock split,” at a specific ratio within
a range of one-for-five (1-for-5) to a maximum of a one-for-two hundred (1-for-200 split, with the exact ratio to be
determined by our board of directors in its sole discretion; and (ii) effect the reverse stock split, if at all, within one year
of the date the proposal is approved by stockholders; and |
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3. |
to
ratify the selection of Grassi & Co., CPAs, P.C. (“Grassi”) as our independent registered public accounting firm. |
A
vote may also be held on any other business as may properly come before the Annual Meeting, or any postponement or adjournment thereof.
However, as of the date of this Proxy Statement, we are not aware of any other business to be considered or acted upon at the Annual
Meeting.
What
are my voting choices for each of the items to be voted on at the Annual Meeting?
Proposal |
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Board
Recommendation |
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Voting
Choices |
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Vote
Required for
Adoption |
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Effect
of Abstentions |
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Effect
of Broker Non-Votes |
1
– Election of four directors |
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“FOR”
each nominee |
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Vote “For All” of the nominees listed
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Vote “Withhold All” to withhold for all of the nominees listed
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Vote “For All Except” to vote for all nominees except the nominee(s) written |
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Plurality
of the votes cast by the holders of shares present virtually or represented by proxy and entitled to vote at the Annual Meeting |
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No
effect |
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No
effect |
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2.
– Reverse Stock Split |
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“FOR” |
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Vote “For” this proposal
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Vote “Against” this proposal
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Abstain from voting on this proposal |
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Approved
if a majority of the votes cast “For” this proposal at the Annual Meeting exceeds the number of votes cast “Against”
this proposal |
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No
effect |
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No
broker non-votes; brokers have discretion to vote |
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3
– Ratification of the selection of Grassi as our independent registered public accounting firm |
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“FOR” |
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Vote “For” this proposal
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Vote “Against” this proposal
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Abstain from voting on this proposal |
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Approved
if a majority of the votes cast “For” this proposal at the Annual Meeting exceeds the number of votes cast “Against”
this proposal |
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No
effect |
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No
broker non-votes; brokers have discretion to vote |
How
do I vote?
Stockholder
of Record: Shares Registered in Your Name
If
you are a stockholder of record, you may vote using the following methods:
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At
the Annual Meeting. To vote at the Annual Meeting, attend the Annual Meeting via the Internet and follow the instructions. |
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By
Internet. To vote by proxy via the Internet, follow the instructions described on the Notice (or proxy card if you requested
printed proxy materials). |
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By
Telephone. To vote by proxy via telephone within the United States and Canada, use the toll-free number on the Notice (or proxy
card if you requested printed proxy materials). |
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By
Mail. If you requested printed proxy materials, to vote by mail, complete, sign, and date the proxy card and return it in the
envelope provided. |
Whether
or not you plan to attend the Annual Meeting, we urge you to vote by proxy using one of the methods described above to ensure your vote
is counted. You may still attend the Annual Meeting and vote even if you have already voted by proxy.
Beneficial
Owner: Shares Registered in the Name of Broker or Other Nominee
If
you are a beneficial owner of shares registered in the name of your broker or other nominee, you may vote using the following methods:
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At
the Annual Meeting. To vote at the Annual Meeting, you must obtain a valid proxy from your broker or other nominee. Follow the
instructions from your broker or other nominee, or contact them to request a proxy form. |
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By
Internet. You may vote through the Internet if your broker or other nominee makes this method available, in which case the instructions
will be included in the proxy materials provided to you. |
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By
Telephone. You may vote by telephone if your broker or other nominee makes this method available, in which case the instructions
will be included in the proxy materials provided to you. |
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By
Mail. If you received a proxy card and voting instructions from the broker or other nominee holding your shares rather than from
us, follow the instructions on the proxy card. |
What
if I am a stockholder of record and return a proxy card but do not make specific choices?
You
should specify your choice for each matter on the proxy card. If you return a signed and dated proxy card without marking voting selections
for the specific proposals, your shares will be voted:
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“FOR”
the four director nominees; |
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“FOR”
the reverse stock split; and |
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“FOR”
the ratification of the selection of Grassi as our independent registered public accounting firm. |
In
the event any other matters are properly presented at the Annual Meeting, or any postponement or adjournment thereof, the person named
as proxy will vote in accordance with his discretion with respect to those matters.
What
if I am a beneficial owner and do not give voting instructions to my broker or other nominee?
If
you fail to provide your broker with voting instructions before the Annual Meeting, your broker will be unable to vote on the non-routine
matters. Your broker may use his or her discretion to cast a vote on any routine matter for which you did not provide voting instructions.
Who
is paying for this proxy solicitation?
We
will pay for the entire cost of soliciting proxies. In addition to these mailed proxy materials, our directors, officers, and employees
may also solicit proxies by mail, in person, by telephone, or by other means of communication. Directors, officers, and employees will
not be paid any additional compensation for soliciting proxies. We will also reimburse brokerage firms, banks, and other agents for the
cost of forwarding proxy materials to beneficial owners.
What
is “householding”?
The
SEC has adopted rules that permit companies and intermediaries, such as brokers, to satisfy the delivery requirements for proxy statements
with respect to two or more security holders sharing the same address by delivering a single copy of a notice and, if applicable, a proxy
statement, to those security holders.
A
single copy of the Notice and, if applicable, this Proxy Statement will be delivered to multiple stockholders sharing an address unless
contrary instructions have been received from these stockholders. Once you have received notice from your broker, or from us, that they
will be “householding” communications to your address, “householding” will continue until you are notified otherwise
or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to
receive a separate Notice and Proxy Statement, please notify your broker and also notify us by sending your written request to: Verb
Technology Company, Inc., 3024 Sierra Juniper Court, Las Vegas, Nevada 89138, Attention: Investor Relations or by calling Investor Relations
at (855) 250-2300.
A
stockholder who currently receives multiple copies of the Notice or Proxy Statement at its address and would like to request “householding”
should also contact its broker and notify us using the contact information above.
Can
I revoke or change my vote after submitting my proxy?
Yes.
You can revoke your proxy at any time before the final vote at the Annual Meeting as discussed below.
If
you are a stockholder of record, you may revoke your proxy by:
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sending
written notice of revocation to Verb Technology Company, Inc., 3024 Sierra Juniper Court, Las Vegas, Nevada 89138, Attention: Corporate
Secretary, in time for it to be received before the Annual Meeting; |
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submitting
a new proxy with a later date using any of the voting methods described above (subject to the deadlines for voting with respect to
each method); or |
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voting
at the Annual Meeting (provided that attending the meeting will not, by itself, revoke your proxy). |
If
you are a beneficial owner of shares and have instructed your broker or other nominee to vote your shares, you may change your vote by
following the directions received from your nominee to change those voting instructions or by attending the Annual Meeting and voting.
However, you may not vote your shares at the Annual Meeting unless you request and obtain a valid proxy from your broker or other nominee.
Who
will count votes at the Annual Meeting?
Votes
will be counted by the inspector of election appointed for the Annual Meeting. The inspector of election will also determine the number
of shares outstanding, the number of shares represented at the Annual Meeting, the existence of a quorum, and whether or not the proxies
and ballots are valid and effective.
How
can I find out the results of the voting at the Annual Meeting?
We
will announce preliminary voting results at the Annual Meeting. We will report the final voting results in a Current Report on Form 8-K
that we expect to file with the SEC within four business days following the date on which such results become final.
When
are stockholder proposals for the 2025 annual meeting due?
Stockholders
interested in presenting a proposal to be considered for inclusion in the proxy statement relating to the 2025 annual meeting of stockholders
may do so by following the procedures prescribed in Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and our Amended and Restated Bylaws (the “Bylaws”). To be considered for inclusion, stockholder proposals must
be submitted in writing to Verb Technology Company, Inc., 3024 Sierra Juniper Court, Las Vegas, Nevada 89138, Attention: Corporate Secretary,
before April 22, 2025, which is 120 calendar days prior to the anniversary of the mailing date of this Proxy Statement. Any such proposal
must meet the requirements of the Bylaws and all applicable laws and regulations.
Any
stockholder who wishes to have a proposal considered at the 2025 annual meeting of stockholders, or to nominate a director for election
at that meeting, but not submitted for inclusion in the proxy statement relating to that meeting, must give advance notice to us prior
to the deadline for such meeting. Under the Bylaws, in order for a proposal or nomination to be timely, it must be received by us no
earlier than 120 days prior to the anniversary date of the Annual Meeting, or May 29, 2025, and no later than 90 days prior to the anniversary
of the Annual Meeting, or June 28, 2025. In the event the 2024 annual meeting of stockholders is being held more than 30 days before
or more than 70 days after the anniversary of the Annual Meeting, or if directors are to be elected at a special meeting, you should
refer to the Bylaws for the specific requirements. We will not consider any proposal or nomination that is not timely or that otherwise
does not meet each of the requirements of the Bylaws.
PROPOSAL
1 – ELECTION OF DIRECTORS
General
Stockholders
are being asked to elect four directors, Rory J. Cutaia, Kenneth S. Cragun, James P. Geiskopf, and Edmund C. Moy, each to serve for a
term ending at the next annual meeting of stockholders following the Annual Meeting, or until their respective successors have been duly
elected and qualified, or until their respective earlier death, resignation or removal.
If
any of the director nominees becomes unable or unwilling to serve as a director before the Annual Meeting, an event which is not presently
anticipated, the person named as proxy will vote in accordance with his or her discretion for any substitute nominee proposed by our
Board or, if no substitute is selected by our Board at the Annual Meeting, for a motion to reduce the authorized number of directors
to the number of director nominees remaining available to serve.
Voting
Recommendation
OUR
BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE FOUR DIRECTOR NOMINEES.
INFORMATION
ABOUT OUR BOARD, BOARD COMMITTEES AND GOVERNANCE
Board
and Committee Composition
Currently,
we have four directors with each director serving until his or her successor is duly elected and qualified, or until his or her earlier
death, resignation or removal. All of the director nominees are existing directors.
The
table below sets forth the names, ages as of the date of this proxy statement, and certain other information for each of the nominees
for director at the Annual Meeting.
Name |
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Age |
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Position |
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Director
Since |
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Independent |
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Audit
Committee |
|
Compensation
Committee |
|
Governance
and
Nominating
Committee |
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Risk
and
Disclosure
Committee |
|
Fiscal
Oversight
Committee |
Rory
J. Cutaia |
|
68 |
|
Chairperson
of our Board, President, Chief Executive Officer, Secretary, and Treasurer |
|
2014 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
James
P. Geiskopf |
|
64 |
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Lead
Independent Director |
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2014 |
|
X |
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X |
|
Chairperson |
|
X |
|
X |
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Chairperson |
Kenneth
S. Cragun |
|
63 |
|
Director |
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2018 |
|
X |
|
Chairperson |
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X |
|
X |
|
Chairperson |
|
- |
Edmund
C. Moy |
|
66 |
|
Director |
|
2022 |
|
X |
|
X |
|
X |
|
Chairperson |
|
X |
|
- |
Board
Diversity Matrix
In
accordance with the rules of the Nasdaq Stock Market (“Nasdaq”), the following table reflects our Board diversity matrix
as of August 16, 2024:
Total
Number of Directors |
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4 |
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Female |
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Male |
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Non-Binary |
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Did
Not Disclose Gender |
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Part
I: Gender Identity |
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Directors |
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- |
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4 |
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- |
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- |
Part
II: Demographic Background |
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African
American or Black |
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- |
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- |
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- |
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- |
Alaskan
Native or Native American |
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- |
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- |
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- |
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- |
Asian |
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- |
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1 |
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- |
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- |
Hispanic
or Latinx |
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- |
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- |
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- |
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- |
Native
Hawaiian or Pacific Islander |
|
- |
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- |
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- |
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- |
White |
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- |
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3 |
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- |
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- |
Two
or More Races or Ethnicities |
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- |
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- |
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Business
Experience
Below
is a brief account of the business experience of each of the director nominees and executive officers.
Rory
J. Cutaia, Chairperson of our Board, President, Chief Executive Officer, Treasurer and Secretary
Rory
J. Cutaia serves as Chairman of the Board, Chief Executive Officer, President, and Secretary of Verb Technology Company, Inc. (“VERB”).
Mr. Cutaia has served in these roles since the inception and formation of VERB and its predecessor companies, including Cutaia Media
Group, LLC (“CMG”) in 2012, bBooth (USA), Inc. in 2014, and VERB in 2019. Mr. Cutaia was appointed Treasurer of VERB in June
2023. In these roles, Mr. Cutaia serves as our Principal Executive Officer. Mr. Cutaia is also the Founder of our Company having founded
CMG in 2012. Prior to that, from October 2006 to August 2011, Mr. Cutaia was a General Partner and Entrepreneur-in-Residence at Corinthian
Capital Group, Inc. (“Corinthian”), a private equity fund based in New York City that invests in middle-market, U.S. based
companies. During his tenure at Corinthian, from June 2008 to October 2011, Mr. Cutaia was the co-founder and Executive Chairman of Allied
Fiber, Inc., a company engaged in the construction of a nationwide fiber-optic network, and from June 2007 to August 2011, Mr. Cutaia
was the Chief Executive Officer of GreenFields Coal Company, a company engaged in the deployment of technology to recycle coal waste
and clean-up coal waste sites. Before joining Corinthian, from January 2000 to October 2006, Mr. Cutaia founded and was the Chairman
and Chief Executive Officer of The Telx Group, Inc. (“Telx”), a company engaged in the telecom carrier inter-connection,
co-location, and data center business, which he sold in 2006 for more than $200 million. Before founding Telx, Mr. Cutaia was a practicing
lawyer with Shea & Gould, a prominent New York City law firm. Mr. Cutaia earned his Juris Doctorate from the Fordham University School
of Law in 1985 and his Bachelor of Science, magna cum laude, in business management from the New York Institute of Technology
in 1982.
We
believe Mr. Cutaia is qualified to serve on our Board because of his extensive knowledge of our business and current operations, as well
as his education and the additional business experiences described above.
Bill
J. Rivard, Interim Chief Financial Officer
Bill
J. Rivard was appointed Interim Chief Financial Officer effective June 13, 2023. Prior to his appointment, he served as Corporate Controller
of the Company from November 2021, in which role he worked closely with the Company’s Chief Financial Officer in all accounting
and finance matters. Mr. Rivard maintains an active CPA certification and has more than 30 years of experience serving various corporate
accounting and finance management roles in companies including Minnesota Brewing Company, Innuity (an e-commerce and web development
company), Clean Energy (NASDAQ: CLNE), and Palace Entertainment where he served as Director of Financial Reporting from March 2011
to April 2019 and then was promoted to Executive Director of Finance in April 2019, serving in this capacity until March 2020. Mr. Rivard
began his technical audit, accounting and financial reporting experience at the accounting firm McGladrey & Pullen LLP (now,
RSM US LLP) where he served as an auditor, as well as the Securities and Exchange Commission where he served as a staff accountant. Mr.
Rivard earned his Bachelor’s of Accountancy at the University of North Dakota in 1992.
James
P. Geiskopf, Lead Independent Director
James
P. Geiskopf has served as one of our directors since the formation of bBooth in May of 2014, in which role he has continued to serve
through the October 2014 acquisition of bBooth by GSD to the present. He also serves as our Lead Independent Director, as the Chairperson
of the Compensation Committee, and as a member of the Audit Committee, Governance and Nominating Committee and Risk Committee. Mr. Geiskopf
has 32 years of experience leading companies in the services industry. From 1975 to 1986, Mr. Geiskopf served as the Chief Financial
Officer of Budget Rent a Car of Fairfield California and from 1986 to 2007, he served as its President and Chief Executive Officer. In
2007, he sold the franchise. Mr. Geiskopf served on the board of directors of Suisun Valley Bank from 1986 to 1993 and from 1991 to 1993
he also served on the board of directors of Napa Valley Bancorp, which was sold to a larger institution in 1993. From 2014 to June 2024,
Mr. Geiskopf served on the board of directors of MetaWorks Platforms, Inc. (formerly Currency Works, Inc.) (OTCQB: MWRK), a public company
that trades on the OTCQB. From June 2013 to March 2017, Mr. Geiskopf served as a director of Electronic Cigarettes International Group,
Ltd. (“ECIG”), a Nevada corporation, an OTC listed company. ECIG filed a voluntary petition for relief under the provisions
of Chapter 7 of Title 11 of the United States Code on March 16, 2017.
We
believe Mr. Geiskopf is qualified to serve on our Board because of his significant business experience including building, operating,
and selling companies, serving on the boards of directors for several banks, and serving as a director and officer of several public
companies. In these roles he acquired substantial business management, strategic, operational, human resource, financial, disclosure,
compliance, and corporate governance skills.
Kenneth
S. Cragun, Director
Kenneth
S. Cragun was appointed as one of our directors in September 2018, and also serves as the Chairperson of the Audit Committee, and as
a member of the Compensation Committee, Governance and Nominating Committee and Risk Committee. Mr. Cragun was appointed as Chief Financial
Officer of Ault Alliance, Inc. (NYSE American: AULT) on August 19, 2020. Prior to his appointment as Chief Financial Officer, Mr. Cragun
served as Chief Accounting Officer of Ault Alliance, Inc. since October 1, 2018. Mr. Cragun has served as the Chief Financial Officer
of Ault Disruptive Technologies Corporation, an NYSE listed special-purpose acquisition company (NYSE American: ADRT), since its incorporation
in February 2021. Mr. Cragun has been the Senior Vice President of Finance or Chief Financial Officer of Alzamend Neuro, Inc. (NASDAQ:
ALZN), an early clinical-stage entity seeking to prevent, treat and cure Alzheimer’s Disease, since October of 2018. He served
as a Chief Financial Officer Partner at Hardesty, LLC, a national executive services firm since October 2016. His assignments at Hardesty,
LLC included serving as Chief Financial Officer of CorVel Corporation, a $4.9 billion market cap publicly traded company (NASDAQ: CRVL).
Mr. Cragun is a three-time finalist for the Orange County Business Journal’s “CFO of the Year - Public Companies” and
has more than 30 years of experience, primarily in the technology industry. He served as Chief Financial Officer of two Nasdaq-listed
companies: Local Corporation, from April 2009 to September 2016, which operated a U.S. top 100 website “Local.com” and, in
June 2015, filed a voluntary petition seeking relief under the provisions of Chapter 11 of Title 11 of the United States Code, and Modtech
Holdings, Inc., from June 2006 to March 2009. Mr. Cragun serves on the board of directors of The Singing Machine Company, Inc. (NASDAQ:
MICS). Mr. Cragun earned his Bachelor of Science in Accounting from Colorado State University-Pueblo. Mr. Cragun began his professional
career at Deloitte.
We
believe Mr. Cragun is qualified to serve on our Board due to his extensive experience with fast-growth businesses and building teams
in more than 20 countries. Mr. Cragun has also led multiple financing transactions, including IPOs, PIPEs, convertible debt offerings,
term loans and lines of credit. We believe his experiences provide additional breadth and depth to our Board.
Edmund
C. Moy, Director
Edmund
C. Moy was appointed one of our directors on October 21, 2022 and serves on the Compensation Committee, Governance and Nominating Committee
and Risk and Disclosure Committee. Mr. Moy currently also serves as a director of MetaWorks Platforms (OTCQB:MWRK), and was a director
of Parsec Capital Acquisition Corp. (NASDAQ:PCXCU) and serves on the advisory board of Draganfly Inc. (NASDAQ:DFLY). He has provided
his autograph to Professional Coin Grading Service of Collectors Universe (NASDAQ:CLCT) and currently to Numismatic Guarantee Corporation
of Certified Collectibles Group. In addition, Mr. Moy has provided consulting services focused on investments in gold and silver and
precious metal Individual Retirement Accounts and his clients have included industry leaders, such as Morgan Gold, Fortress Gold Group,
and currently U.S. Money Reserve. Mr. Moy is the author of American Gold & Platinum Eagles: A Guide to the U.S. Bullion Coin Programs,
published by Whitman Publishing and is working on his next book, the history of the U.S. Bullion Depository at Fort Knox. Prior to 2014,
he served as Director of the United States Mint and was a Special Assistant to the President of the United States at the White House.
We
believe that Mr. Moy is qualified to serve on our Board because he has extensive and unique leadership experience in Washington D.C.,
where he is recognized for his leadership roles in the Executive Branch of the government of the United States, as well as the experience
gained from serving on the boards of several public companies.
Family
Relationships
There
are no family relationships among any of our directors, director nominees or executive officers.
Involvement
in Certain Legal Proceedings
Except
as set forth below, during the last ten years, none of our directors and executive officers have been involved in any of the following
events:
1. |
any
bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to that time; |
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2. |
any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor
offenses); |
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3. |
being
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking
activities or to be associated with any person practicing in banking or securities activities; |
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4. |
being
found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated
a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
5. |
being
subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed,
suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law
or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity; or |
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6. |
being
subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization,
any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members
or persons associated with a member. |
On
June 23, 2015, Local Corporation, a Delaware corporation, filed a voluntary petition for reorganization under Chapter 11 of the U.S.
Bankruptcy Code. Mr. Cragun, a Director of the Company, was chief financial officer of Local Corporation at the time of filing.
On
March 16, 2017, Electronic Cigarettes International Group, Ltd., a Nevada corporation filed a voluntary petition for relief under the
provisions of Chapter 7 of Title 11 of the United States Code. Mr. Geiskopf, a Director of the Company, was a director of Electronic
Cigarettes International Group, Ltd. at the time of filing.
Agreements
with Directors
None
of our directors or director nominees were selected pursuant to any arrangement or understanding, other than with our directors acting
within their capacity as such.
Meetings
of our Board and its Committees
Our
Board has a standing Audit Committee, Compensation Committee, Governance and Nominating Committee, Risk and Disclosure Committee, and
Fiscal Oversight Committee. Our Board met 13 times, including telephonic meetings, during the fiscal year ended December 31, 2023. Messrs.
Geiskopf, Bond, Cragun, and Moy attended 100% of our Board meetings with the exception of Ms. Hammerschmidt, a former Board member, who
attended 90% of the meetings held during her term. All Board members attended 100% of the meetings held by committees of our Board on
which they served during that period.
It
is our policy that all of our directors are required to make a concerted and conscientious effort to attend our annual meeting of stockholders
in each year during which that director serves as a member of our Board. All of our directors attended our 2023 annual meeting of stockholders.
Audit
Committee
The
Audit Committee charter can be found online at https://www.verb.tech/investor-relations/governance/audit.
The
Audit Committee charter requires that each member of the committee meet the independence requirements of Nasdaq, and requires the committee
to have at least one member that qualifies as an “audit committee financial expert.” Currently, Messrs. Geiskopf, Moy, and
Cragun (Chairperson) serve on the Audit Committee and each meets the independence requirements of Nasdaq. In addition, Mr. Cragun qualifies
as an “audit committee financial expert” under applicable SEC regulations.
In
addition to the enumerated responsibilities of the Audit Committee in the charter, the primary function of the committee is to assist
our Board in its general oversight of our accounting and financial reporting processes, audits of our financial statements, and internal
control and audit functions.
Compensation
Committee
The
Compensation Committee charter may be found online at https://www.verb.tech in the “Governance” section found under
the “Investor Relations” tab.
The
Compensation Committee charter requires that each member of the committee meet the independence requirements of Nasdaq. Currently, Messrs.
Geiskopf (Chairperson), Cragun, and Moy, serve as members of the Compensation Committee and each meets the independence requirements
of Nasdaq, qualifies as a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, and qualifies
as an outside director within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.
In
addition to the enumerated responsibilities of the Compensation Committee in the charter, the primary function of the committee is to
oversee the compensation of our executives, produce an annual report on executive compensation for inclusion in our proxy statement,
if and when required by applicable laws or regulations, and advise our Board on the adoption of policies that govern our compensation
programs.
Governance
and Nominating Committee
The
charter of the Governance and Nominating Committee may be found online at https://www.verb.tech in the “Governance”
section found under the “Investor Relations” tab.
The
Governance and Nominating Committee charter requires that each member of the committee meet the independence requirements of Nasdaq.
Currently, Messrs. Geiskopf, Cragun, and Moy (Chairman) serve as members of the Governance and Nominating Committee and each meets the
independence requirements of Nasdaq. The Governance and Nominating Committee charter requires that each member of the Governance and
Nominating Committee meet the independence requirements of Nasdaq.
In
addition to the enumerated responsibilities of the Governance and Nominating Committee in the charter, the primary function of the committee
is to determine the slate of director nominees for election to our Board, to identify and recommend candidates to fill vacancies occurring
between annual stockholder meetings, and to review our policies and programs that relate to matters of corporate responsibility.
Risk
and Disclosure Committee
The
charter of the Risk and Disclosure Committee may be found online at https://www.verb.tech in the “Governance” section
found under the “Investor Relations” tab.
The
Risk and Disclosure Committee charter requires that each member of the committee meet the independence requirements of Nasdaq. Currently,
Messrs. Geiskopf, Cragun (Chairman), and Moy serve as members of the Risk and Disclosure Committee and each meets the independence requirements
of Nasdaq and the SEC. The Risk and Disclosure Committee charter requires that each member of the Risk and Disclosure Committee meet
the independence requirements of Nasdaq.
In
addition to the enumerated responsibilities of the Risk and Disclosure Committee in the charter, the primary function of the committee
is to assist our Chief Executive Officer and Chief Financial Officer in fulfilling their responsibility for oversight of the accuracy
and timeliness of the disclosures made by us.
Fiscal
Oversight Committee
In
May 2024, our Board approved and adopted the Fiscal Oversight Committee charter. The charter of the Fiscal Oversight Committee may be
found online at https://www.verb.tech in the “Governance” section found under the “Investor Relations”
tab.
The
Fiscal Oversight Committee charter requires that each member of the committee meet the independence requirements of Nasdaq. Currently,
Mr. Geiskopf (Chairman) meets the independence requirements of Nasdaq and the SEC.
In
addition to the enumerated responsibilities of the Fiscal Oversight Committee in the charter, the primary function of the committee is
to assist our Chief Executive Officer and Chief Financial Officer in fulfilling their responsibility of managing the Company’s
excess non-operating cash assets with a view toward protecting and preserving the principal, while generating the highest return reasonably
and practically possible. The Fiscal Oversight Committee also assists with managing the Company’s capital markets initiatives.
Other
Board Committees
Other
than the Audit Committee, Compensation Committee, Governance and Nominating Committee, Risk and Disclosure Committee, and Fiscal Oversight
Committee, we have no standing committees of our Board.
Nominations
Process and Criteria
As
of August 16, 2024, we had not effected any material changes to the procedures by which our stockholders may recommend nominees
to our Board. Our Board does not have a formal policy with regard to the consideration of any director candidates recommended by our
stockholders. Our Board has determined it is in the best position to evaluate our requirements, as well as the qualifications of each
candidate when it considers the recommendation of a director nominee. Accordingly, we do not currently have any minimum criteria for
the election of director nominees, and we do not have any specific procedures for evaluating such nominees. Our Board assesses all candidates,
whether submitted by management or stockholders, and makes recommendations for election or appointment.
In
recommending director nominees for appointment to our Board, the Governance and Nominating Committee also actively considers diversity
characteristics, including diversity of professional experience, race, ethnicity, gender, age, education, cultural background and personal
background. However, we have not adopted a formal policy regarding the consideration of specific diversity characteristic, and instead
prefer to rely on the judgment of our committee members in recommending candidates with the most appropriate mix of experiences, skills
and expertise.
Any
stockholder wishing to propose that a person be nominated for or appointed to our Board may submit such a proposal to:
Verb
Technology Company, Inc.
3024
Sierra Juniper Court
Las
Vegas, Nevada 89138
(855)
250-2300
Attention:
Corporate Secretary
The
Corporate Secretary will forward any such correspondence to the Chairperson of the Governance and Nominating Committee for review and
consideration in accordance with the criteria described above and the requirements set forth in the Bylaws.
There
were no fees paid or due to third parties in the fiscal year ended December 31, 2023 to identify or evaluate, or to assist in evaluating
or identifying, potential director nominees.
Director
Independence
Our
Board is currently composed of four members. We have determined that the following three directors qualify as independent: James P. Geiskopf,
Kenneth S. Cragun, and Edmund C. Moy. We determined that Rory J. Cutaia, our Chairperson, President, Chief Executive Officer and Secretary,
is not independent due to his employment relationship with the Company. The Board evaluates the independence of each nominee for election
as a director of our Company in accordance with the Nasdaq Listing Rules.
Stockholder
Communications with our Board
Stockholders
and other parties interested in communicating directly with our Board, a committee thereof, or any individual director, may do so by
sending a written communication to the attention of the intended recipient(s) to: Verb Technology Company, Inc., 3024 Sierra Juniper
Court, Las Vegas, Nevada 89138, Attention: Corporate Secretary. The Corporate Secretary will forward all appropriate communications to
the Chairperson of the Audit Committee.
Orientation
and Continuing Education
We
have an informal process to orient and educate new directors regarding their role on our Board and committees, as well as the nature
and operations of our business. This process provides for an orientation with key members of the management staff, and further provides
access to materials necessary to inform them of the information required to carry out their responsibilities as Board members. This information
includes the most recent Board-approved budget, the most recent annual report, copies of the audited financial statements, and copies
of the interim quarterly financial statements.
As
a company with limited resources, we do not typically provide continuing education for our directors. Each director is responsible to
maintain the skills and knowledge necessary to meet his or her obligations as a director.
Director
Assessments
In
December 2022, the Board implemented individual director assessments. The director assessments involve each director performing a self-assessment,
as well as each director individually assessing other members of the Board, taking into account each director’s contributions at
Board meetings, service on committees, experience level, and their general ability to contribute to one or more of our major growth areas.
Investment
in Human Capital
We
believe our people are at the heart of our success and our customers’ success. We endeavor to not only attract and retain talented
employees, but also to provide a challenging and rewarding environment to motivate and develop our valuable human capital. We look to
our talented employees to lead and foster various initiatives that support our company culture including those related to diversity,
equity and inclusion. In addition, we rely heavily on our talented team to execute our growth plans and achieve our long-term strategic
objectives.
Compensation
Committee Interlocks and Insider Participation
As
of August 16, 2024, no member of the Compensation Committee is serving, and during the past year no member of the Compensation
Committee has served, as an officer or employee of the Company or any of its subsidiaries. None of our executive officers currently serves,
or during the past year has served, as a member of the board of directors or compensation committee (or other committee serving a similar
purpose) of any entity that has an executive officer serving on our Board or Compensation Committee. In addition, none of the Compensation
Committee members had any relationship, or participated in any transaction, with our Company during the fiscal year ended December 31,
2023 that requires disclosure under SEC rules. We have entered into indemnification agreements with each of our directors, including
each member of the Compensation Committee.
Code
of Ethics
In
2014, our Board approved and adopted a code of ethics and business conduct for directors, senior officers, and employees, or code of
ethics, that applies to all of our directors, officers, and employees, including our principal executive officer and principal financial
officer. The code of ethics is available on our website at https://www.verb.tech in the “Governance” section found
under the “Investor Relations” tab.
The
code of ethics addresses conduct with respect to, among other things, conflicts of interests; compliance with applicable laws, rules
and regulations; full, fair, accurate, timely and understandable disclosure by us; competition and fair dealing; corporate opportunities;
confidentiality; protection and proper use of our assets; and reporting suspected illegal or unethical behavior.
To
the extent required by law, any amendments to or waivers of any provision of the code of ethics will be promptly disclosed publicly on
our website.
Board
Leadership Structure and Role in Risk Oversight
Board
Leadership Structure
We
currently combine the positions of Chairperson and Chief Executive Officer into one position. We believe that this structure is appropriate
at this time and that this combined model has certain advantages over other leadership structures. This combined role allows Mr. Cutaia
to drive execution of our strategic plans and facilitates effective communication between management and our Board to bring key issues
to its attention, and to see that our Board’s guidance and decisions are implemented effectively by management.
Further,
our Board has designated Mr. Geiskopf as its Lead Independent Director. Our Board believes that his strong leadership and qualifications,
including his prior experience as a chief executive officer and chief financial officer and his tenure on our Board, among other factors,
contribute to his ability to fulfill the role of Lead Independent Director effectively.
Role
of our Board in Risk Oversight
Our
Board is responsible for the oversight of our operational risk management process. Our Board has delegated authority for addressing certain
risks, and assessing the steps management has taken to monitor, control, and report such risks to the Audit Committee. Such risks include
risks relating to execution of our growth strategy, the effects of the economy and general financial condition and outlook, our ability
to expand our client base, communication with investors, certain actions of our competitors, the protection of our intellectual property,
sufficiency of our capital, security of information systems and data, integration of new information systems, credit risk, product liability,
and costs of reliance on external advisors. The Audit Committee then reports such risks as appropriate to our Board, which then initiates
discussions with appropriate members of our senior management if, after discussion of such risks, our Board determines that such risks
raise questions or concerns about the status of operational risks then facing us.
Our
Board relies on the Compensation Committee to address significant risk exposures that we may face with respect to compensation, including
risks relating to retention of key employees, protection of partner relationships, management succession, and benefit costs, and, when
appropriate, reports these risks to the full Board.
Change
of Control Arrangements
We
do not know of any arrangements, which may, at a subsequent date, result in a change of control of the Company.
Director
Compensation Table
The
table below summarizes the compensation paid to our non-employee directors for the fiscal year ended December 31, 2023 (in thousands):
Name(1) | |
Fees earned or paid in cash ($) | | |
Stock awards ($) | | |
Total ($) | |
James P. Geiskopf | |
| 175 | | |
| 166 | (2) | |
| 341 | |
| |
| | | |
| | | |
| | |
Kenneth S. Cragun | |
| 75 | | |
| 78 | (3) | |
| 153 | |
| |
| | | |
| | | |
| | |
Edmund C. Moy(5) | |
| - | | |
| 146 | (4) | |
| 146 | |
(1) |
Rory
J. Cutaia, our Chairman of the Board, Chief Executive Officer, President, and Secretary during the fiscal year ending December 31,
2023, is not included in this table as he was an employee, and, thus, received no compensation for his services as a director. The
compensation received by Mr. Cutaia as an employee is disclosed in the section entitled “Executive Compensation –
Summary Compensation Table” appearing elsewhere in this Proxy Statement. |
|
|
(2) |
Represents
a grant of stock options on June 21, 2023, totaling 162,883 shares of our common stock valued at $0.955 per option, which was valued
using the Black-Scholes option methodology. The stock options expire in five years and vest on the first anniversary of the grant
date. On January 20, 2023, a grant of 3,236 stock options, which vested on the grant date, with an exercise price of $9.20 per share
were issued to replace forfeited restricted stock units. |
(3) |
Represents
a grant of stock options on June 21, 2023, totaling 81,441 shares of our common stock valued at $0.955 per option, which was valued
using the Black-Scholes option methodology. The stock options expire in five years and vest on the first anniversary of the grant
date. On January 20, 2023, a grant of 1,618 stock options, which vested on the grant date, with an exercise price of $9.20 per share
were issued to replace forfeited restricted stock units. |
|
|
(4) |
Represents
a grant of stock options on June 21, 2023, totaling 81,441 shares of our common stock valued at $0.955 per option, which was valued
using the Black-Scholes option methodology. The stock options expire in five years and vest on the first anniversary of the grant
date. On September 28, 2023, a grant of 102,740 stock options, which vested on the grant date, with an exercise price of $0.73 per
share were issued. The value per option of $0.661 was valued using the Black-Scholes option methodology. |
|
|
(5) |
Mr.
Moy was elected to serve on the board of directors on October 21, 2022. |
Narrative
Discussion of Director Compensation
The
annual board fee payable in cash and our common stock for our Lead Director and directors is $175 and $75, respectively. In addition,
we intend to provide a restricted stock unit or stock options based on recommendations from our independent compensation consultants.
Our directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance
at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special
services on their behalf other than services ordinarily required of a director.
James
P. Geiskopf
Mr.
Geiskopf earned total cash compensation for his services to us in the amount of $175 and $175 for fiscal years 2023 and 2022, respectively.
On
June 21, 2023, the Company granted Mr. Geiskopf 162,883 stock options, which expire in five years and vest on the first anniversary of
the grant date, with an exercise price of $1.11 per share. The value per option of $0.955 was determined using the Black-Scholes option
methodology.
On
June 21, 2023, we granted Mr. Geiskopf restricted stock units with an aggregate fair market value of $11, payable in 9,854 shares of
our common stock. The restricted stock units vested on the grant date. The price per share as reported by The Nasdaq Capital Market on
the day of issuance was $1.11.
On
January 20, 2023, the Company granted Mr. Geiskopf 3,236 stock options, which vested on the grant date, with an exercise price of $9.20
per share and were issued to replace forfeited restricted stock units that were issued on January 20, 2022.
On
January 20, 2022, the Company granted Mr. Geiskopf restricted stock units with an aggregate fair market value of $154, payable in 3,236
shares of its common stock. The restricted stock units vest on the first anniversary of the grant date. The price per share as reported
by the Nasdaq Capital Market on the day of issuance was $47.60 and was used to calculate fair market value.
On
November 17, 2022, the Company granted Mr. Geiskopf 3,315 stock options shares of its common stock as part of the Company’s Cost
Savings Plan where executive officers and directors agreed to accept a 25% reduction in cash compensation over a four-month period. The
restricted stock units vested at the end of each month over a four-month period. The price per share as reported by the Nasdaq Capital
Market on the day of issuance was $8.80 and was used to calculate fair market value.
On
November 17, 2022, Mr. Geiskopf returned to the Company 2,542 shares of common stock that were previously issued on January 4, 2021 as
part of a restricted stock unit grant that had vested. In exchange, Mr. Geiskopf was issued 5,083 stock options with an exercise price
of $8.80 per share. The stock options vested on the grant date.
Kenneth
S. Cragun
Mr.
Cragun earned total cash compensation for his services to us in the amount of $75 and $72 for the fiscal years ending December 31, 2023
and 2022, respectively.
On
June 21, 2023, the Company granted Mr. Cragun 81,441 stock options, which expire in five years and vest on the first anniversary of the
grant date, with an exercise price of $1.11 per share. The value per option of $0.955 was determined using the Black-Scholes option methodology.
On
January 20, 2023, the Company granted Mr. Cragun 1,618 stock options, which vested on grant, with an exercise price of $9.20 per share,
to replace forfeited 1,618 restricted stock units that were issued on January 20, 2022.
On
January 20, 2022, the Company granted Mr. Cragun restricted stock units totaling $77 payable in 1,618 shares of its common stock. The
restricted stock units vest on the first anniversary from the grant date. The price per share as reported by the Nasdaq Capital Market
on the day of issuance was $47.60 and was used to calculate fair market value.
On
November 17, 2022, the Company granted Mr. Cragun 1,421 stock options as part of the Company’s Cost Savings Plan where executive
officers and directors agreed to accept a 25% reduction in cash compensation over a four-month period. The stock options vested at the
end of each month over a four-month period. The price per share as reported by the Nasdaq Capital Market on the day of issuance was $8.80.
On
November 17, 2022, Mr. Cragun returned to the Company 1,271 shares of common stock that were previously issued on January 4, 2021 as
part of a restricted stock unit grant that had vested. In exchange, Mr. Cragun was issued 2,542 stock options with an exercise price
of $8.80 per share. The stock options vested on grant date.
Edmund
C. Moy
Mr.
Moy was elected to the board on October 21, 2022 and earned total cash compensation for his services to us in the amount of $0 and $0
for the fiscal years ending December 31, 2023 and 2022, respectively.
On
September 28, 2023, the Company granted Mr. Moy 102,740 stock options, which vested on the grant date, with an exercise price of $0.73
per share. The value per option of $0.661 was determined using the Black-Scholes option methodology.
On
June 21, 2023, the Company granted Mr. Moy 81,441 stock options, which expire in five years and vest on the first anniversary of the
grant date, with an exercise price of $1.11 per share. The value per option of $0.955 was determined using the Black-Scholes option methodology.
On
November 17, 2022, the Company granted Mr. Moy 1,421 stock options as part of the Company’s Cost Savings Plan where executive officers
and directors agreed to accept a 25% reduction in cash compensation over a four-month period. The stock options vested at the end of
each month over a four-month period. The price per share as reported by the Nasdaq Capital Market on the day of issuance was $8.80.
Equity
Awards Outstanding
The
following table sets forth, for each non-employee director, certain information concerning outstanding option awards as of December 31,
2023:
Name | |
Number of securities underlying unexercised options (exercisable) (#) | | |
Number of securities underlying unexercised options (unexercisable) (#) | | |
Option exercise price ($) | | |
Option expiration Date |
James P. Geiskopf | |
| 5,083 | | |
| - | | |
| 8.80 | | |
November 16, 2027(1) |
| |
| 3,236 | | |
| - | | |
| 9.20 | | |
January 19, 2028(1) |
| |
| - | | |
| 162,883 | | |
| 1.11 | | |
June 20, 2028(2) |
Kenneth S. Cragun | |
| 2,542 | | |
| - | | |
| 8.80 | | |
November 16, 2027(1) |
| |
| 1,421 | | |
| - | | |
| 8.80 | | |
November 16, 2027(1) |
| |
| 1,618 | | |
| - | | |
| 9.20 | | |
January 19, 2028(1) |
| |
| - | | |
| 81,441 | | |
| 1.11 | | |
June 20, 2028(2) |
Edmund C. Moy | |
| 1,421 | | |
| - | | |
| 8.80 | | |
November 16, 2027(1) |
| |
| - | | |
| 81,441 | | |
| 1.11 | | |
June 20, 2028(2) |
| |
| 102,740 | | |
| - | | |
| 0.73 | | |
September 27, 2028(1) |
(1) |
All
shares have fully vested. |
|
|
(2) |
Vesting
on the first anniversary of the grant date. |
Indemnification
of Directors and Officers
We
are a Nevada corporation governed by the Nevada Revised Statutes (the “NRS”).
Section
78.138 of the NRS provides that, unless the corporation’s articles of incorporation provide otherwise, a director or officer will
not be individually liable unless it is proven that (i) the director’s or officer’s acts or omissions constituted a breach
of his or her fiduciary duties, and (ii) such breach involved intentional misconduct, fraud, or a knowing violation of the law.
Section
78.7502 of the NRS permits a company to indemnify its directors and officers against expenses, judgments, fines, and amounts paid in
settlement actually and reasonably incurred in connection with a threatened, pending, or completed action, suit, or proceeding, if the
officer or director (i) is not liable pursuant to Section 78.138 of the NRS, or (ii) acted in good faith and in a manner the officer
or director reasonably believed to be in or not opposed to the best interests of the corporation and, if a criminal action or proceeding,
had no reasonable cause to believe the conduct of the officer or director was unlawful. Section 78.7502 of the NRS also precludes indemnification
by the corporation if the officer or director has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals,
to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court determines
that in view of all the circumstances, the person is fairly and reasonably entitled to indemnity for such expenses and requires a corporation
to indemnify its officers and directors if they have been successful on the merits or otherwise in defense of any claim, issue, or matter
resulting from their service as a director or officer.
Section
78.751 of the NRS permits a Nevada corporation to indemnify its officers and directors against expenses incurred by them in defending
a civil or criminal action, suit, or proceeding as they are incurred and in advance of a final disposition thereof, upon determination
by the stockholders, the disinterested board members, or by independent legal counsel. Section 78.751 of the NRS provides that the articles
of incorporation, the bylaws, or an agreement may require a corporation to advance expenses as incurred upon receipt of an undertaking
by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that
such officer or director is not entitled to be indemnified by the corporation if so provided in the corporation’s articles of incorporation,
bylaws, or other agreement. Section 78.751 of the NRS further permits the corporation to grant its directors and officers additional
rights of indemnification under its articles of incorporation, bylaws, or other agreement.
Section
78.752 of the NRS provides that a Nevada corporation may purchase and maintain insurance or make other financial arrangements on behalf
of any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another company, partnership, joint venture, trust, or other enterprise, for any liability
asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee, or agent, or arising
out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses. We
have obtained insurance policies insuring our directors and officers against certain liabilities they may incur in their capacity as
directors and officers. Under such policies, the insurer, on our behalf, may also pay amounts for which we have granted indemnification
to the directors or officers.
The
foregoing discussion of indemnification merely summarizes certain aspects of indemnification provisions and is limited by reference to
the above discussed sections of the NRS.
Our
articles of incorporation provide that, except in some specified instances, our directors and officers shall not be personally liable
to us or our stockholders for monetary damages for breach of their fiduciary duty as directors and officers, except liability for the
following:
|
● |
acts
or omissions which involve intentional misconduct, fraud or knowing violation of law; or |
|
● |
the
payment of distributions in violation of NRS 78.300, as amended. |
In
addition, our articles of incorporation and Bylaws provide that we must indemnify our directors and officers and may indemnify our employees
and other agents to the fullest extent permitted by the NRS. The Bylaws also authorize us to purchase and maintain insurance on behalf
of any of our directors or officers against any liability asserted against that person in that capacity, whether or not we would have
the power to indemnify that person against such liability and expenses. We have entered and expect to continue to enter into agreements
to indemnify our directors and executive officers as determined by our Board. In general, the indemnification agreements provide that
we will, to the fullest extent permitted by Nevada law and subject to certain limitations, indemnify the indemnitee against certain expenses
(including attorneys’ fees), judgments, fines, penalties, and settlement amounts that may be incurred in connection with the defense
or settlement of any claim, criminal, civil, or administrative action or proceeding to which the indemnitee becomes subject in connection
with his or her services as an executive officer, director, or both. We believe that these Bylaw provisions and indemnification agreements
are necessary to attract and retain qualified persons as directors and executive officers.
The
limitation of liability and indemnification provisions in our articles of incorporation and Bylaws may discourage stockholders from bringing
a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against
our directors and officers, even though an action, if successful, might benefit us and other stockholders. Furthermore, a stockholder’s
investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers
as required by these indemnification provisions.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”), may be permitted
to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
PROPOSAL
2 – REVERSE STOCK SPLIT
Our
board of directors has approved an amendment to our articles of incorporation, as amended, to combine the outstanding shares of our common
stock into a lesser number of outstanding shares (“Reverse Stock Split”).
If
approved by our stockholders, this proposal would permit (but not require) the board of directors to effect a Reverse Stock Split of
the outstanding shares of our common stock within one (1) year of the date the proposal is approved by stockholders, at a specific ratio
within a range of one-for-five (1-for-5) to a maximum of a one-for-two hundred (1-for-200) split, with the specific ratio
to be fixed within this range by the board of directors in its sole discretion without further stockholder approval. We believe that
enabling the board of directors to fix the specific ratio of the Reverse Stock Split within the stated range will provide us with the
flexibility to implement it in a manner designed to maximize the anticipated benefits for our stockholders.
In
fixing the ratio, the board of directors may consider, among other things, factors such as: the initial and continued listing requirements
of the Nasdaq Capital Market; the number of shares of our common stock outstanding; potential financing opportunities; and prevailing
general market and economic conditions.
The
Reverse Stock Split, if approved by our stockholders, would become effective upon the filing of the amendment to our articles of incorporation
with the Secretary of State of the State of Nevada, or at the later time set forth in the amendment. The exact timing of the amendment
will be determined by the board of directors based on its evaluation as to when such action will be the most advantageous to our Company
and our stockholders. In addition, the board of directors reserves the right, notwithstanding stockholder approval and without further
action by the stockholders, to abandon the amendment and the Reverse Stock Split if, at any time prior to the effectiveness of the filing
of the amendment with the Secretary of State of the State of Nevada, the board of directors, in its sole discretion, determines that
it is no longer in our best interest and the best interests of our stockholders to proceed.
The
proposed form of amendment to our articles of incorporation to effect the Reverse Stock Split is attached as Appendix A to this
Proxy Statement. Any amendment to our articles of incorporation to effect the Reverse Stock Split will include the Reverse Stock Split
ratio fixed by the board of directors, within the range approved by our stockholders.
Reasons
for the Reverse Stock Split
The
Company’s primary reasons for approving and recommending the Reverse Stock Split is to increase the per share price and bid price
of our common stock to regain compliance with the continued listing requirements of Nasdaq.
On
May 1, 2024, we received a written notice from Nasdaq notifying the Company that it was not in compliance with Nasdaq Listing Rule 5550(a)(2),
which requires listed companies to maintain a minimum bid price of $1.00 per share (the “Bid Price Requirement”). Under Nasdaq
Listing Rule 5810(c)(3)(A), the Company was granted a period of 180 calendar days, or until October 28, 2024, to regain compliance with
the Bid Price Requirement. To demonstrate compliance with this requirement, the closing bid price of our common stock will need to be
at least $1.00 per share for a minimum of 10 consecutive business days before October 28, 2024.
Reducing
the number of outstanding shares of common stock should, absent other factors, generally increase the per share market price of the common
stock. Although the intent of the Reverse Stock Split is to increase the price of the common stock, there can be no assurance, however,
that even if the Reverse Stock Split is effected, that the Company’s bid price of the Company’s common stock will be sufficient,
over time, for the Company to regain or maintain compliance with the Nasdaq minimum bid price requirement.
Additionally,
the Company believes the Reverse Stock Split will make its common stock more attractive to a broader range of investors, as it believes
that the current market price of the common stock may prevent certain institutional investors, professional investors and other members
of the investing public from purchasing stock. Many brokerage houses and institutional investors have internal policies and practices
that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks
to their customers. Furthermore, some of those policies and practices may function to make the processing of trades in low-priced stocks
economically unattractive to brokers. Moreover, because brokers’ commissions on low-priced stocks generally represent a higher
percentage of the stock price than commissions on higher-priced stocks, the current average price per share of common stock can result
in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case
if the share price were higher. The Company believes that the Reverse Stock Split will make our common stock a more attractive and cost
effective investment for many investors, which in turn would enhance the liquidity of the holders of our common stock.
Reducing
the number of outstanding shares of our common stock through the Reverse Stock Split is intended, absent other factors, to increase the
per share market price of our common stock. However, other factors, such as our financial results, market conditions and the market perception
of our business may adversely affect the market price of our common stock. As a result, there can be no assurance that the Reverse Stock
Split, if completed, will result in the intended benefits described above, that the market price of our common stock will increase following
the Reverse Stock Split, that as a result of the Reverse Stock Split we will be able to meet or maintain a bid price over the minimum
Bid Price Requirement of Nasdaq or that the market price of our common stock will not decrease in the future. Additionally, we cannot
assure you that the market price per share of our common stock after the Reverse Stock Split will increase in proportion to the reduction
in the number of shares of our common stock outstanding before the Reverse Stock Split. Accordingly, the total market capitalization
of our common stock after the Reverse Stock Split may be lower than the total market capitalization before the Reverse Stock Split.
The
Board believes that the Reverse Stock Split will result in a more appropriate and effective structure for the Company and the resultant
trading price would be more appealing to a wider range of investors.
In
evaluating whether to seek stockholder approval for the Reverse Stock Split, our Board took into consideration negative factors associated
with reverse stock splits. These factors include: the negative perception of reverse stock splits that investors, analysts and other
stock market participants may hold; the fact that the stock prices of some companies that have effected reverse stock splits have subsequently
declined, sometimes significantly, following their reverse stock splits; the possible adverse effect on liquidity that a reduced number
of outstanding shares could cause; and the costs associated with implementing a reverse stock split.
Even
if our stockholders approve the Reverse Stock Split, our Board reserves the right not to effect the Reverse Stock Split if in our Board’s
opinion it would not be in the best interests of the Company or our stockholders to effect such Reverse Stock Split.
Potential
Effects of the Proposed Amendment
If
our stockholders approve the Reverse Stock Split and the board of directors effects it, the number of shares of common stock issued and
outstanding will be reduced, depending upon the ratio determined by the board of directors. The Reverse Stock Split will affect all holders
of our common stock uniformly and will not affect any stockholder’s percentage ownership interest in the Company, except that as
described below in “Fractional Shares,” record holders of common stock otherwise entitled to a fractional share as a result
of the Reverse Stock Split because they hold a number of shares not evenly divisible by the Reverse Stock Split ratio will automatically
be entitled to receive an additional fraction of a share of common stock to round up to the next whole share. In addition, the Reverse
Stock Split will not affect any stockholder’s proportionate voting power (subject to the treatment of fractional shares).
The
Reverse Stock Split will not change the terms of the common stock. Additionally, the Reverse Stock Split will have no effect on the number
of shares of common stock that we are authorized to issue. After the Reverse Stock Split, the shares of common stock will
have the same voting rights and rights to dividends and distributions and will be identical in all other respects to the common stock
now authorized. The common stock will remain fully paid and non-assessable.
After
the effective time of the Reverse Stock Split, we will continue to be subject to the periodic reporting and other requirements of the
Exchange Act.
Registered
“Book-Entry” Holders of Common Stock
Our
registered holders of common stock hold some or all of their shares electronically in book-entry form with the transfer agent. These
stockholders do not have stock certificates evidencing their ownership of the common stock. They are, however, provided with statements
reflecting the number of shares registered in their accounts.
Stockholders
who hold shares electronically in book-entry form with the transfer agent will not need to take action to receive evidence of their shares
of post-Reverse Stock Split common stock.
Holders
of Certificated Shares of Common Stock
Stockholders
holding shares of our common stock in certificated form will be sent a transmittal letter by the transfer agent after the effective time
of the Reverse Stock Split. The letter of transmittal will contain instructions on how a stockholder should surrender his, her or its
certificate(s) representing shares of our common stock (the “Old Certificates”) to the transfer agent. Unless a stockholder
specifically requests a new paper certificate or holds restricted shares, upon the stockholder’s surrender of all of the stockholder’s
Old Certificates to the transfer agent, together with a properly completed and executed letter of transmittal, the transfer agent will
register the appropriate number of shares of post-Reverse Stock Split common stock electronically in book-entry form and provide the
stockholder with a statement reflecting the number of shares registered in the stockholder’s account. No stockholder will be required
to pay a transfer or other fee to exchange his, her or its Old Certificates. Until surrendered, we will deem outstanding Old Certificates
held by stockholders to be cancelled and only to represent the number of shares of post-Reverse Stock Split common stock to which these
stockholders are entitled. Any Old Certificates submitted for exchange, whether because of a sale, transfer or other disposition of stock,
will automatically be exchanged for appropriate number of shares of post-Reverse Stock Split common stock. If an Old Certificate has
a restrictive legend on its reverse side, a new certificate will be issued with the same restrictive legend on its reverse side.
STOCKHOLDERS
SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Fractional
Shares
We
will not issue fractional shares in connection with the Reverse Stock Split. Instead, stockholders who otherwise would be entitled to
receive fractional shares because they hold a number of shares not evenly divisible by the Reverse Stock Split ratio will automatically
be entitled to receive an additional fraction of a share of common stock to round up to the next whole share. In any event, cash will
not be paid for fractional shares.
Effect
of the Reverse Stock Split on Outstanding Stock Options and Warrants
Based
upon the Reverse Stock Split ratio, proportionate adjustments are generally required to be made to the per share exercise price and the
number of shares issuable upon the exercise of all outstanding options and warrants. This would result in approximately the same aggregate
price being required to be paid under such options or warrants upon exercise, and approximately the same value of shares of common stock
being delivered upon such exercise immediately following the Reverse Stock Split as was the case immediately preceding the Reverse Stock
Split. The number of shares reserved for issuance pursuant to these securities will be reduced proportionately based upon the Reverse
Stock Split ratio.
Accounting
Matters
The
proposed amendment to our articles of incorporation will not affect the par value of our common stock. As a result, at the effective
time of the Reverse Stock Split, the stated capital on our balance sheet attributable to the common stock will be reduced in the same
proportion as the Reverse Stock Split ratio, and the additional paid-in capital account will be credited with the amount by which the
stated capital is reduced. The net income or loss per share will be restated for prior periods to conform to the post-Reverse
Stock Split presentation.
Certain
Federal Income Tax Consequences of the Reverse Stock Split
The
following summary describes, as of the date of this proxy statement, certain U.S. federal income tax consequences of the Reverse Stock
Split to holders of our common stock. This summary addresses the tax consequences only to a U.S. holder, which is a beneficial owner
of our common stock that is either:
|
● |
an
individual citizen or resident of the United States; |
|
|
|
|
● |
a
corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the
laws of the United States or any state thereof or the District of Columbia; |
|
|
|
|
● |
an
estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
|
|
|
|
● |
a
trust, if: (i) a court within the United States is able to exercise primary jurisdiction over its administration and one or more
U.S. persons has the authority to control all of its substantial decisions or (ii) it was in existence before August 20, 1996 and
a valid election is in place under applicable Treasury regulations to treat such trust as a U.S. person for U.S. federal income tax
purposes |
This
summary is based on the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations,
administrative rulings and judicial authority, all as in effect as of the date of this proxy statement. Subsequent developments in U.S.
federal income tax law, including changes in law or differing interpretations, which may be applied retroactively, could have a material
effect on the U.S. federal income tax consequences of the Reverse Stock Split.
This
summary does not address all of the tax consequences that may be relevant to any particular investor, including tax considerations that
arise from rules of general application to all taxpayers or to certain classes of taxpayers or that are generally assumed to be known
by investors. This summary also does not address the tax consequences to (i) persons that may be subject to special treatment under U.S.
federal income tax law, such as banks, insurance companies, thrift institutions, regulated investment companies, real estate investment
trusts, tax-exempt organizations, U.S. expatriates, persons subject to the alternative minimum tax, persons whose functional currency
is not the U.S. dollar, partnerships or other pass-through entities, traders in securities that elect to mark to market and dealers in
securities or currencies, (ii) persons that hold our common stock as part of a position in a “straddle” or as part of a “hedging
transaction,” “conversion transaction” or other integrated investment transaction for federal income tax purposes or
(iii) persons that do not hold our common stock as “capital assets” (generally, property held for investment). This summary
does not address backup withholding and information reporting. This summary does not address U.S. holders who beneficially own common
stock through a “foreign financial institution” (as defined in Code Section 1471(d)(4)) or certain other non-U.S. entities
specified in Code Section 1472. This summary does not address tax considerations arising under any state, local or foreign laws, or under
federal estate or gift tax laws.
If
a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common
stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the
activities of the partnership. Partnerships that hold our common stock, and partners in such partnerships, should consult their own tax
advisors regarding the U.S. federal income tax consequences of the Reverse Stock Split.
Each
holder should consult his, her or its own tax advisors concerning the particular U.S. federal tax consequences of the Reverse Stock Split,
as well as the consequences arising under the laws of any other taxing jurisdiction, including any foreign, state, or local income tax
consequences.
General
Tax Treatment of the Reverse Stock Split
The
Reverse Stock Split is intended to qualify as a “reorganization” under Section 368 of the Code that should constitute a “recapitalization”
for U.S. federal income tax purposes. Assuming the Reverse Stock Split qualifies as a reorganization, a U.S. holder generally will not
recognize gain or loss upon the exchange of our ordinary shares for a lesser number of ordinary shares, based upon the Reverse Stock
Split ratio. A U.S. holder’s aggregate tax basis in the lesser number of ordinary shares received in the Reverse Stock Split will
be the same such U.S. holder’s aggregate tax basis in the shares of our common stock that such U.S. holder owned immediately prior
to the Reverse Stock Split. The holding period for the ordinary shares received in the Reverse Stock Split will include the period during
which a U.S. holder held the shares of our common stock that were surrendered in the Reverse Stock Split. The United States Treasury
regulations provide detailed rules for allocating the tax basis and holding period of the shares of our common stock surrendered to the
shares of our common stock received pursuant to the Reverse Stock Split. U.S. holders of shares of our common stock acquired on different
dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such
shares.
THE
FOREGOING IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT, AND DOES NOT CONSTITUTE
A TAX OPINION. EACH HOLDER OF OUR COMMON SHARES SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF THE REVERSE STOCK
SPLIT TO THEM AND FOR REFERENCE TO APPLICABLE PROVISIONS OF THE CODE.
Interests
of Officers and Directors in this Proposal
Our
officers and directors do not have any substantial interest, direct or indirect, in this proposal.
Required
Vote of Stockholders
Pursuant
to amendments to Nevada Revised Statutes adopted in May 2023, including an amendment to Section 78.2055 of the Nevada Revised Statutes,
a reverse stock split of publicly traded Nevada corporations, including the Company, will require approval of the voting standard established
in the governing documents of the corporation for “routine” matters, which according to the Company’s Bylaws, requires
approval of a majority of the total votes cast at the Annual Meeting. Failures to vote, or abstentions, if any, will have no effect on
the outcome of the Reverse Stock Split. Because this proposal is a routine matter, brokers will have discretionary voting on this matter
if they do not receive instructions.
Voting
Recommendation
OUR
BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE REVERSE STOCK SPLIT.
PROPOSAL
3 – RATIFICATION OF THE SELECTION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General
It
is the responsibility of the Audit Committee to select and retain our independent registered public accounting firm. The Audit Committee
has appointed Grassi & Co. CPAs, P.C. (“Grassi”) as our independent registered public accounting firm for our fiscal
year ending December 31, 2024. Although stockholder ratification of the selection of our independent registered public accounting firm
is not required by the Bylaws or applicable law, we are submitting the selection for ratification so our stockholders may participate
in this important corporate decision. If not ratified, the Audit Committee will reconsider the selection, although the Audit Committee
will not be required to select a different independent registered public accounting firm.
Representatives
of Grassi are expected to be present at the Annual Meeting and will have an opportunity to make a statement and respond to questions
from stockholders present at the meeting.
Audit
Fees and Services
The
following table sets forth the fees billed to us for the year ended December 31, 2023 and 2022 for professional services rendered by
our independent registered public accounting firms, Grassi & Co., CPAs, P.C. (“Grassi”) and Weinberg & Company, P.A.
(“Weinberg”) (in thousands):
Fees | |
2023 | | |
2022 | |
| |
Grassi | | |
Weinberg | | |
Grassi | | |
Weinberg | |
Audit Fees | |
$ | 257 | | |
$ | 168 | | |
$ | - | | |
$ | 213 | |
Audit-Related Fees | |
| 31 | | |
| 59 | | |
| - | | |
| 24 | |
Tax Fees | |
| 51 | | |
| 5 | | |
| - | | |
| 52 | |
All Other Fees | |
| - | | |
| 1 | | |
| - | | |
| 5 | |
Total Fees | |
$ | 339 | | |
$ | 233 | | |
$ | - | | |
$ | 294 | |
For
purposes of the preceding table, the professional fees are classified as follows:
|
● |
Audit
Fees – These are fees performed for the audit of our annual financial statements and the required review of our quarterly financial
statements and other procedures performed by the independent auditors to form an opinion on our financial statements. |
|
● |
Audit-Related
Fees – These are fees for expenses by the independent auditors that are associated with the audit, but don’t fall within
the above-described category. Fees for auditor consents for registration filings are included within this category. |
|
● |
Tax
Fees – These are fees for all professional services performed by professional staff in our independent auditor’s tax
group, except those services related to the audit of our financial statements. |
|
● |
All
Other Fees – These are fees for other permissible work, such as due diligence related to acquisitions and dispositions, audits
related to acquisitions, attestation services that are not required by statute or regulation, and for other permissible work performed
that does not meet the above-described categories. |
Pre-Approval
Policies and Procedures
The
Audit Committee has adopted policies and procedures to oversee the external audit process and pre-approves all services provided by our
independent registered public accounting firm. All of the above services and fees were reviewed and approved by the Audit Committee,
as applicable, before the respective services were rendered.
Voting
Recommendation
OUR
BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE SELECTION OF GRASSI AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2024.
AUDIT
COMMITTEE REPORT
The
Audit Committee is responsible for, among other things, reviewing and discussing our audited financial statements with management, discussing
with our independent registered public accounting firm information relating to its judgments about the quality of our accounting principles,
recommending to our Board that we include the audited financial statements in the Annual Report on Form 10-K, and overseeing compliance
with the SEC requirements for disclosure of our independent registered public accounting firm’s services.
Review
of Audited Financial Statements
The
Audit Committee reviewed our financial statements for the fiscal year ended December 31, 2023, as audited by Grassi & Co. CPAs, P.C.
(“Grassi”), our independent registered public accounting firm, and discussed these financial statements with management.
In addition, the Audit Committee has discussed with Grassi the matters required to be discussed by Auditing Standards No. 1301, Communications
with Audit Committees, as adopted by the Public Company Accounting Oversight Board, as may be modified or supplemented. Furthermore,
the Audit Committee has received the written disclosures and the letter from Grassi required by the Independence Standards Board Standard
No. 1, as may be modified or supplemented, and has discussed with Grassi its independence.
The
members of the Audit Committee are not professionally engaged in the practice of auditing or accounting and are not experts in the fields
of accounting or auditing, or in determining auditor independence. However, our Board has determined that each member of the Audit Committee
meets the independence criteria set forth in the applicable rules of Nasdaq, and that one member of the Audit Committee, Mr. Cragun,
qualifies as an “audit committee financial expert,” as defined by SEC regulations. Members of the Audit Committee rely, without
independent verification, on the information provided to them and on the representations made by management. Accordingly, the Audit Committee’s
oversight does not currently provide an independent basis to determine that management has maintained procedures designed to assure compliance
with accounting standards and applicable laws and regulations.
Recommendation
Based
upon the foregoing review and discussion, the Audit Committee recommended to our Board that the audited financial statements for the
fiscal year ended December 31, 2023 be included in the Annual Report on Form 10-K for such fiscal year.
|
Audit
Committee |
|
Kenneth
S. Cragun (Chairperson) |
|
James
P. Geiskopf |
|
Edmund
C. Moy |
The
Audit Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement
into any filing under the Securities Act or the Exchange Act except to the extent that we specifically incorporate this information by
reference, and shall not otherwise be deemed filed under the Securities Act or the Exchange Act.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
table and discussion below present compensation information for the following executive officers, which we refer to as our “named
executive officers”:
|
● |
Rory
J. Cutaia, our Chairman of the Board, President, Chief Executive Officer, Treasurer and Secretary; |
|
● |
Bill
J. Rivard, our interim Chief Financial Officer; and |
|
● |
Salman
H. Khan, our former Chief Financial Officer and Treasurer. |
Name and Principal Position | |
Year | |
Salary ($) | | |
Bonus ($) | | |
Stock Awards(1) ($) | | |
Option Awards(2) ($) | | |
All Other Compensation ($) | | |
Total ($) | |
Rory J. Cutaia(3) | |
2023 | |
| 459 | (5) | |
| - | | |
| 31 | (5) | |
| 486 | (6) | |
| - | | |
| 976 | (10) |
| |
2022 | |
| 480 | (5) | |
| - | (7) | |
| 563 | (8) | |
| 15 | (9) | |
| - | | |
| 1,058 | (10) |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Bill J. Rivard(4) | |
2023 | |
| 192 | (5) | |
| 3 | (11) | |
| 111 | (12) | |
| - | | |
| - | | |
| 306 | |
| |
2022 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Salman H. Khan(13) | |
2023 | |
| 107 | (5) | |
| - | | |
| 16 | (5) | |
| - | | |
| - | | |
| 123 | |
| |
2022 | |
| 245 | (5) | |
| 31 | (14) | |
| 342 | (15) | |
| 27 | (16) | |
| - | | |
| 645 | |
(1) |
For
valuation purposes, the dollar amount shown is calculated based on the market price of our common stock on the grant dates. The number
of shares granted, the grant date, and the market price of such shares for each named executive officer is set forth below. |
|
|
(2) |
For
valuation assumptions on stock option awards, refer to Note 2, “Summary of Significant Accounting Policies and Supplemental
Disclosures,” in the notes to our audited consolidated financial statements for the year ended December 31, 2023 in the
Company’s Annual Report. The disclosed amounts reflect the fair value of the stock option awards that were granted during
fiscal years ended December 31, 2023 and 2022 in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards
Codification, or ASC, Topic 718. |
|
|
(3) |
Mr.
Cutaia was appointed as Chairman of the Board, President, Chief Executive Officer, Secretary, and Treasurer on October 16, 2014. |
|
|
(4) |
Mr.
Rivard was appointed as interim Chief Financial Officer on June 13, 2023. |
|
|
(5) |
On
November 17, 2022, certain executive officers and directors agreed to accept a 25% reduction in cash compensation over a four-month
period commencing December 1, 2022 in exchange for equity award grants. The cost reduction plan was extended in March 2023 to April
2023 resulting in the issuance of 27,590, 10,135, and 14,076 restricted stock units to Mr. Cutaia, Mr. Rivard, and Mr. Khan, respectively. |
|
|
(6) |
On
June 21, 2023, the Company granted 360,300 incentive stock options and 148,648 non-qualified stock options with a fair value of $0.955
per option. |
|
|
(7) |
Due
to the Company’s cost savings plan, Mr. Cutaia was not paid his annual incentive target bonus of $490 for 2022. |
|
|
(8) |
Represents
an annual incentive bonus of 10,111 restricted stock units with a fair market value of $47.60 per restricted stock unit. Represents
9,281 restricted stock units with a fair market value of $8.80 per restricted stock unit associated with the 25% reduction in cash
compensation. |
(9) |
Represents
the return of 2,949 vested restricted stock units with a fair market value of $6.60 per restricted stock unit that were replaced
by a grant of 5,897 stock options with an exercise price of $8.80 per share and a fair market value of $34. |
|
|
(10) |
As
of December 31, 2023 and 2022, Mr. Cutaia had accrued but unpaid compensation equal to $648 and $764, respectively. |
|
|
(11) |
Represents
a discretionary bonus of $3 paid in December 2023. |
|
|
(12) |
Represents
a grant of 136,986 restricted stock units on September 28, 2023 with a fair market value of $0.73 per restricted stock unit. |
|
|
(13) |
Mr.
Khan was appointed as Chief Financial Officer and Treasurer on March 30, 2022. In connection with this appointment as the Company’s
Chief Financial Officer, the Company has agreed to provide Mr. Khan the following compensation: (1) annual base salary of $250 and
(2) 7,516 restricted shares of the Company’s common stock granted, 1,879 of which shall vest on March 30, 2023, 1,879 of which
shall vest on March 30, 2024, 1,879 of which shall vest on March 30, 2025, and 1,879 of which shall vest on March 30, 2026. Mr. Khan
was also eligible to receive an annual performance bonus of up to 50% of his base salary. Mr. Khan resigned as Chief Financial Officer
and Treasurer of the Company effective June 13, 2023. |
|
|
(14) |
Due
to the Company’s cost savings plan, Mr. Khan was not paid his annual incentive target bonus of $125 for 2022. A one-time incentive
bonus of $31 was paid in 681 shares of common stock with a fair market value of $45.20 per share. |
|
|
(15) |
Represents
an annual incentive bonus of 7,516 restricted stock units with a fair market value of $39.92 per restricted stock unit. Represents
4,735 restricted stock units with a fair market value of $8.80 per restricted stock unit associated with the 25% reduction in cash
compensation. |
|
|
(16) |
Represents
a grant of 2,500 stock options. |
Narrative
Disclosure to Summary Compensation Table
The
following is a discussion of the material information that we believe is necessary to understand the information disclosed in the foregoing
Summary Compensation Table.
Rory
J. Cutaia
On
December 20, 2019, we entered into an executive employment agreement with Mr. Cutaia. The employment agreement is for a four-year term
and can be extended for additional one-year periods. The employment agreement was extended on January 1, 2024 for an additional four-year
term. In addition to certain payments due to Mr. Cutaia upon termination of employment, the employment agreement contains customary non-competition,
non-solicitation, and confidentiality provisions. Mr. Cutaia is entitled to an annual base salary of $490, which shall not be subject
to reduction during the initial term, but will be subject to annual reviews and increases, if and as approved in the sole discretion
of our board of directors, after it has received and reviewed advice from the Compensation Committee (who may or may not utilize the
services of its outside compensation consultants, as it shall determine under the circumstances). In addition, Mr. Cutaia is eligible
to receive performance-based cash and/or stock bonuses upon attainment of performance targets established by our board of directors in
its sole discretion, after it has received and reviewed advice from the Compensation Committee (who may or may not utilize the services
of its outside compensation consultants, as it shall determine under the circumstances). We must make annual equity grants to Mr. Cutaia
as determined by our board of directors in its sole discretion, after it has received and reviewed advice from the Compensation Committee
(who may or may not utilize the services of its outside compensation consultants, as it shall determine under the circumstances). Finally,
Mr. Cutaia is eligible for certain other benefits, such as health, vision, and dental insurance, life insurance, and 401(k) matching.
Mr.
Cutaia earned total cash compensation for his services to us in the amount of $459 and $480 for the fiscal years ending December 31,
2023 and 2022, respectively. The lower amount in fiscal 2023 includes a 25% reduction in the cash compensation component over a four-month
period starting December 1, 2022.
On
June 21, 2023, we granted Mr. Cutaia restricted stock units with an aggregate fair market value of $31, payable in 27,590 shares of our
common stock. The restricted stock units vested on the grant date. The price per share as reported by The Nasdaq Capital Market on the
day of issuance was $1.11.
On
June 21, 2023 we granted Mr. Cutaia stock options with an aggregate fair market value of $486, valued using the Black-Scholes option
methodology, payable in 508,948 shares of our common stock. The stock options are subject to a four-year vesting period, with 25% of
the award vesting on each of the first, second, third, and fourth anniversaries from the grant date. The fair value per option of $0.955
was valued using the Black-Scholes option methodology.
On
January 20, 2022, we granted Mr. Cutaia restricted stock units with an aggregate fair market value of $481, payable in 10,111 shares
of our common stock. The restricted stock units are subject to a four-year vesting period, with 25% of the award vesting on each of the
first, second, third, and fourth anniversaries from the grant date. The price per share as reported by The Nasdaq Capital Market on the
day of issuance was $47.60 and was used to calculate fair market value.
On
November 17, 2022, we granted Mr. Cutaia restricted stock units with an aggregate fair market value of $82, payable in 9,281 shares of
our common stock. The restricted stock units vested at the end of each month over a four-month period. The price per share as reported
by The Nasdaq Capital Market on the day of issuance was $8.80 and was used to calculate fair market value.
On
November 17, 2022, Mr. Cutaia returned 2,949 shares that had been issued to him during the year. In exchange for those shares, we granted
Mr. Cutaia 5,897 stock options with an exercise price of $8.80 per share. The options vested on grant.
As
of December 31, 2023 and 2022, Mr. Cutaia had accrued but unpaid compensation equal to $648 and $764, respectively.
Bill
J. Rivard
Mr.
Rivard was appointed as interim Chief Financial Officer on June 13, 2023. Mr. Rivard earned total cash compensation for his services
to us in the amount of $195 for the fiscal year ending December 31, 2023.
In
fiscal 2023, Mr. Rivard received a one-time incentive bonus of $3 which was paid in cash.
On
June 21, 2023, we granted Mr. Rivard restricted stock units with an aggregate fair market value of $11, payable in 10,135 shares of our
common stock. The restricted stock units vested on the grant date. The price per share as reported by The Nasdaq Capital Market on the
day of issuance was $1.11 and was used to calculate fair market value.
On
September 28, 2023, we granted Mr. Rivard restricted stock units with an aggregate fair market value of $100, payable in 136,986 shares
of our common stock. The restricted stock units are subject to a four-year vesting period, with 25% of the award vesting on each of the
first, second, third, and fourth anniversaries from the grant date. The price per share as reported by The Nasdaq Capital Market on the
day of issuance was $0.73 and was used to calculate fair market value.
Salman
H. Khan
Mr.
Khan was appointed as Chief Financial Officer and Treasurer on March 30, 2022. Mr. Khan earned total cash compensation for his services
to us in the amount of $107 and $245 for the fiscal years ending December 31, 2023 and 2022, respectively. The lower amount includes
a 25% reduction in the cash compensation component over a four-month period starting December 1, 2022. Mr. Khan resigned as Chief Financial
Officer and Treasurer of the Company effective June 13, 2023.
On
June 21, 2023, we granted Mr. Khan restricted stock units with an aggregate fair market value of $16, payable in 14,076 shares of our
common stock. The restricted stock units vested on the grant date. The price per share as reported by The Nasdaq Capital Market on the
day of issuance was $1.11 and was used to calculate fair market value.
In
fiscal 2022, Mr. Khan received a one-time incentive bonus of $31, which was paid in 681 shares of common stock with a fair market value
of $45.20 per share.
On
March 30, 2022, we granted Mr. Khan restricted stock units with an aggregate fair market value of $300, payable in 7,516 shares of our
common stock. The restricted stock unit is subject to a four-year vesting period, with 25% of the award vesting on each of the first,
second, third, and fourth anniversaries from the grant date. The price per share as reported by The Nasdaq Capital Market on the day
of issuance was $39.92 and was used to calculate fair market value.
On
May 15, 2022, we granted Mr. Khan 2,500 stock options that vest annually over four years. The options have an exercise price of $12.00
per share and an aggregate fair market value of $27.
On
November 17, 2022, we granted Mr. Khan restricted stock units with an aggregate fair market value of $42, payable in 4,735 shares of
our common stock. The restricted stock units vested at the end of each month over a four-month period. The price per share as reported
by The Nasdaq Capital Market on the day of issuance was $8.80 and was used to calculate fair market value.
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth, for each Named Executive Officer, certain information concerning outstanding restricted stock unit awards
as of December 31, 2023. Market value was determined using the closing price of our common stock on December 29, 2023, which was $0.17.
Name | |
Number of Shares
or Units of Stock
That Have Not
Vested (#) | | |
Market value of
shares of units of
stock that have not
vested ($) | | |
Vest date |
Rory J. Cutaia | |
| 2,949 | | |
| 1 | | |
July 29, 2024(1) |
| |
| 3,972 | | |
| 1 | | |
January 4, 2025(1) |
| |
| 7,584 | | |
| 1 | | |
January 20, 2026(1) |
| |
| | | |
| | | |
|
Bill
J. Rivard(2) | |
| 136,986 | | |
| 23 | | |
September 28, 2027(1) |
| |
| | | |
| | | |
|
Salman H. Khan(3) | |
| - | | |
| - | | |
- |
(1) |
25%
vesting on the first, second, third, and fourth anniversaries from the grant date. |
|
|
(2) |
Mr.
Rivard was appointed as interim Chief Financial Officer on June 13, 2023. |
|
|
(3) |
Mr.
Khan resigned as Chief Financial Officer and Treasurer of the Company effective June 13, 2023. Upon Mr. Khan’s resignation,
Mr. Cutaia was appointed as Treasurer. |
The
following table sets forth, for each Named Executive Officer, certain information concerning outstanding option awards as of December
31, 2023:
Name | |
Number of securities underlying unexercised options
(exercisable)
(#) | | |
Number of securities underlying unexercised options
(unexercisable)
(#) | | |
Option Exercise price ($) | | |
Option
expiration
date |
Rory J. Cutaia | |
| 417 | | |
| - | | |
| 174.00 | | |
January 8, 2024(2) |
| |
| 5,897 | | |
| - | | |
| 8.80 | | |
November 16, 2027(2 |
| |
| - | | |
| 360,300 | | |
| 1.11 | | |
June 20, 2028(1) |
| |
| - | | |
| 148,648 | | |
| 1.11 | | |
June 20, 2028(1) |
| |
| | | |
| | | |
| | | |
|
Bill J. Rivard(3) | |
| 1,875 | | |
| 1,875 | | |
| 72.00 | | |
November 16, 2026(1) |
| |
| | | |
| | | |
| | | |
|
Salman H. Khan(4) | |
| - | | |
| - | | |
| - | | |
- |
(1) |
25%
vesting on the first, second, third, and fourth anniversaries from the grant date. |
|
|
(2) |
All
options have fully vested |
|
|
(3) |
Mr.
Rivard was appointed as interim Chief Financial Officer on June 13, 2023. |
|
|
(4) |
Mr.
Khan resigned as Chief Financial Officer and Treasurer of the Company effective June 13, 2023. Upon Mr. Khan’s resignation,
Mr. Cutaia was appointed as Treasurer. |
2019
Omnibus Incentive Plan
On
November 11, 2019, our board of directors approved our 2019 Omnibus Incentive Plan, or “Incentive Plan,” and on December
20, 2019, our stockholders approved and adopted the Incentive Plan. The material terms of the Incentive Plan are summarized below.
On
September 2, 2020, our board of directors approved an additional 200,000 shares of our common stock to be authorized for awards granted
under the Incentive Plan, and on October 16, 2020, our stockholders approved the additional 200,000 shares of our common stock to be
authorized for awards granted under the Incentive Plan.
On
February 17, 2023, our board of directors approved an additional 15,000,000 shares of common stock to be authorized under the Incentive
Plan, and on April 10, 2023, our stockholders approved the additional 15,000,000 shares of our common stock to be authorized for awards
granted under the Incentive Plan.
General
The
purpose of the Incentive Plan is to enhance stockholder value by linking the compensation of our officers, directors, key employees,
and consultants to increases in the price of our common stock and the achievement of other performance objections and to encourage ownership
in our company by key personnel whose long-term employment is considered essential to our continued progress and success. The Incentive
Plan is also intended to assist us in recruiting new employees and to motivate, retain, and encourage such employees and directors to
act in our stockholders’ interest and share in our success.
Term
The
Incentive Plan became effective upon approval by our stockholders on December 20, 2019 and will continue in effect from that date until
it is terminated in accordance with its terms.
Administration
The
Incentive Plan may be administered by our board of directors, a committee designated by it, and/or their respective delegates. Currently,
our Compensation Committee administers the Incentive Plan. The administrator has the power to determine the directors, employees, and
consultants who may participate in the Incentive Plan and the amounts and other terms and conditions of awards to be granted under the
Incentive Plan. All questions of interpretation and administration with respect to the Incentive Plan will be determined by the administrator.
The administrator also will have the complete authority to adopt, amend, rescind, and enforce rules and regulations pertaining to the
administration of the Incentive Plan; to correct administrative errors; to make all other determinations deemed necessary or advisable
for administering the Incentive Plan and any award granted under the Incentive Plan; and to authorize any person to execute, on behalf
of us, all agreements and documents previously approved by the administrator, among other items.
Eligibility
Any
of our directors, employees, or consultants, or any directors, employees, or consultants of any of our affiliates (except that with respect
to incentive stock options, only employees of us or any of our subsidiaries are eligible), are eligible to participate in the Incentive
Plan.
Available
Shares
Subject
to the adjustment provisions included in the Incentive Plan, a total of 16,000,000 shares of our common stock are authorized for awards
granted under the Incentive Plan. On February 17, 2023, our board of directors approved an additional 15,000,000 shares of common stock
to be authorized under the Incentive Plan, and on April 10, 2023, our stockholders approved the additional 15,000,000 shares of our common
stock to be authorized for awards granted under the Incentive Plan. Shares subject to awards that have been canceled, expired, settled
in cash, or not issued or forfeited for any reason (in whole or in part), will not reduce the aggregate number of shares that may be
subject to or delivered under awards granted under the Incentive Plan and will be available for future awards granted under the Incentive
Plan. As of July 29, 2024, the number of options remaining for future issuance under the Incentive Plan is 12,849,779.
Types
of Awards
We
may grant the following types of awards under the Incentive Plan: stock awards; options; stock appreciation rights; stock units; or other
stock-based awards.
Stock
Awards. The Incentive Plan authorizes the grant of stock awards to eligible participants. The administrator determines (i) the number
of shares subject to the stock award or a formula for determining such number, (ii) the purchase price of the shares, if any, (iii) the
means of payment for the shares, (iv) the performance criteria, if any, and the level of achievement versus these criteria, (v) the grant,
issuance, vesting, and/or forfeiture of the shares, (vi) restrictions on transferability, and such other terms and conditions determined
by the administrator.
Options.
The Incentive Plan authorizes the grant of non-qualified and/or incentive options to eligible participants, which options give the participant
the right, after satisfaction of any vesting conditions and prior to the expiration or termination of the option, to purchase shares
of our common stock at a fixed price. The administrator determines the exercise price for each share subject to an option granted under
the Incentive Plan, which exercise price cannot be less than the fair market value (as defined in the Incentive Plan) of our common stock
on the grant date. The administrator also determines the number of shares subject to each option, the time or times when each option
becomes exercisable, and the term of each option (which cannot exceed ten (10) years from the grant date).
Stock
Appreciation Rights. The Incentive Plan authorizes the grant of stock appreciation rights to eligible participants, which stock appreciation
rights give the participant the right, after satisfaction of any vesting conditions and prior to the expiration or termination of the
stock appreciation right, to receive in cash or shares of our common stock the excess of the fair market value (as defined in the Incentive
Plan) of our common stock on the date of exercise over the exercise price of the stock appreciation right. All stock appreciation rights
under the Incentive Plan shall be granted subject to the same terms and conditions applicable to options granted under the Incentive
Plan. Stock appreciation rights may be granted to awardees either alone or in addition to or in tandem with other awards granted under
the Incentive Plan and may, but need not, relate to a specific option granted under the Incentive Plan.
Stock
Unit Awards and Other Stock-Based Awards. In addition to the award types described above, the administrator may grant any other type
of award payable by delivery of our common stock in such amounts and subject to such terms and conditions as the administrator determines
in its sole discretion, subject to the terms of the Incentive Plan. Such awards may be made in addition to or in conjunction with other
awards under the Incentive Plan. Such awards may include unrestricted shares of our common stock, which may be awarded, without limitation
(except as provided in the Incentive Plan), as a bonus, in payment of director fees, in lieu of cash compensation, in exchange for cancellation
of a compensation right, or upon the attainment of performance goals or otherwise, or rights to acquire shares of our common stock from
us.
Award
Limits
Subject
to the terms of the Incentive Plan, the aggregate number of shares that may be subject to all incentive stock options granted under the
Incentive Plan cannot exceed the total aggregate number of shares that may be subject to or delivered under awards under the Incentive
Plan. Notwithstanding any other provisions of the Incentive Plan to the contrary, the aggregate amount of all awards granted to any non-employee
director during any single calendar year shall not exceed 200,000 shares.
New
Plan Benefits
The
amount of future grants under the Incentive Plan is not determinable, as awards under the Incentive Plan will be granted at the sole
discretion of the administrator. We cannot determine at this time either the persons who will receive awards under the Incentive Plan
or the amount or types of any such awards.
Transferability
Unless
determined otherwise by the administrator, an award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in
any manner other than by beneficiary designation, will, or by the laws of descent or distribution, including but not limited to any attempted
assignment or transfer in connection with the settlement of marital property or other rights incident to a divorce or dissolution, and
any such attempted sale, assignment, or transfer shall be of no effect prior to the date an award is vested and settled.
Termination
of Employment or Board Membership
At
the grant date, the administrator is authorized to determine the effect a termination from membership on the board of directors by a
non-employee director for any reason or a termination of employment (as defined in the Incentive Plan) due to disability (as defined
in the Incentive Plan), retirement (as defined in the Incentive Plan), death, or otherwise (including termination for cause (as defined
in the Incentive Plan)) will have on any award. Unless otherwise provided in the award agreement:
|
● |
Upon
termination from membership on our board of directors by a non-employee director for any reason other than disability or death, any
option or stock appreciation right held by such director that (i) has not vested and is not exercisable as of the termination effective
date will be subject to immediate cancellation and forfeiture or (ii) is vested and exercisable as of the termination effective date
shall remain exercisable for one year thereafter, or the remaining term of the option or stock appreciation right, if less. Any unvested
stock award, stock unit award, or other stock-based award held by a non-employee director at the time of termination from membership
on our board of directors for a reason other than disability or death will immediately be cancelled and forfeited. |
|
|
|
|
● |
Upon
termination from membership on our board of directors by a non-employee director due to disability or death will result in full vesting
of any outstanding option or stock appreciation rights and vesting of a prorated portion of any stock award, stock unit award, or
other stock-based award based upon the full months of the applicable performance period, vesting period, or other period of restriction
elapsed as of the end of the month in which the termination from membership on our board of directors by a non-employee director
due to disability or death occurs over the total number of months in such period. Any option or stock appreciation right that vests
upon disability or death will remain exercisable for one year thereafter, or the remaining term of the option or stock appreciation
right, if less. In the case of any stock award, stock unit award, or other stock-based award that vests on the basis of attainment
of performance criteria (as defined in the Incentive Plan), the pro rata vested amount will be based upon the target award. |
|
● |
Upon
termination of employment due to disability or death, any option or stock appreciation right held by an employee will, if not already
fully vested, become fully vested and exercisable as of the effective date of such termination of employment due to disability or
death, or, in either case, the remaining term of the option or stock appreciation right, if less. Termination of employment due to
disability or death shall result in vesting of a prorated portion of any stock award, stock unit award, or other stock-based award
based upon the full months of the applicable performance period, vesting period, or other period of restriction elapsed as of the
end of the month in which the termination of employment due to disability or death occurs over the total number of months in such
period. In the case of any stock award, stock unit award, or other stock-based award that vests on the basis of attainment of performance
criteria, the pro-rata vested amount will be based upon the target award. |
|
|
|
|
● |
Any
option or stock appreciation right held by an awardee at retirement that occurs at least one year after the grant date of the option
or stock appreciation right will remain outstanding for the remaining term of the option or stock appreciation right and continue
to vest; any stock award, stock unit award, or other stock based award held by an awardee at retirement that occurs at least one
year after the grant date of the award shall also continue to vest and remain outstanding for the remainder of the term of the award. |
|
|
|
|
● |
Any
other termination of employment shall result in immediate cancellation and forfeiture of all outstanding awards that have not vested
as of the effective date of such termination of employment, and any vested and exercisable options and stock appreciation rights
held at the time of such termination of such termination of employment shall remain exercisable for 90 days thereafter or the remaining
term of the option or stock appreciation right, if less. Notwithstanding the foregoing, all outstanding and unexercised options and
stock appreciation rights will be immediately cancelled in the event of a termination of employment for cause. |
Change
of Control
In
the event of a change of control (as defined in the Incentive Plan), unless other determined by the administrator as of the grant date
of a particular award, the following acceleration, exercisability, and valuation provisions apply:
|
● |
On
the date that a change of control occurs, all options and stock appreciation rights awarded under the Incentive Plan not previously
exercisable and vested will, if not assumed, or substituted with a new award, by the successor to us, become fully exercisable and
vested, and if the successor to us assumes such options or stock appreciation rights or substitutes other awards for such awards,
such awards (or their substitutes) shall become fully exercisable and vested if the participant’s employment is terminated
(other than a termination for cause) within two years following the change of control. |
|
|
|
|
● |
Except
as may be provided in an individual severance or employment agreement (or severance plan) to which an awardee is a party, in the
event of an awardee’s termination of employment within two years after a change of control for any reason other than because
of the awardee’s death, retirement, disability, or termination for cause, each option and stock appreciation right held by
the awardee (or a transferee) that is vested following such termination of employment will remain exercisable until the earlier of
the third anniversary of such termination of employment (or any later date until which it would have remained exercisable under such
circumstances by its terms) or the expiration of its original term. In the event of an awardee’s termination of employment
more than two years after a change of control, or within two years after a change of control because of the awardee’s death,
retirement, disability, or termination for cause, the regular provisions of the Incentive Plan regarding employment termination (described
above) will govern (as applicable). |
|
|
|
|
● |
On
the date that a change of control occurs, the restrictions and conditions applicable to any or all stock awards, stock unit awards,
and other stock-based awards that are not assumed, or substituted with a new award, by the successor to us will lapse and such awards
will become fully vested. Unless otherwise provided in an award agreement at the grant date, upon the occurrence of a change of control
without assumption or substitution of the awards by the successor, any performance-based award will be deemed fully earned at the
target amount as of the date on which the change of control occurs. All stock awards, stock unit awards, and other stock-based awards
shall be settled or paid within 30 days of vesting. Notwithstanding the foregoing, if the change of control would not qualify as
a permissible date of distribution under Section 409A(a)(2)(A) of the Internal Revenue Code, and the regulations thereunder, the
awardee shall be entitled to receive the award from us on the date that would have applied, absent this provision. If the successor
to us does assume (or substitute with a new award) any stock awards, stock unit awards, and other stock-based awards, all such awards
shall become fully vested if the participant’s employment is terminated (other than a termination for cause) within two years
following the change of control, and any performance based award will be deemed fully earned at the target amount effective as of
the termination of employment. |
|
● |
The
administrator, in its discretion, may determine that, upon the occurrence of a change of control of us, each option and stock appreciation
right outstanding will terminate within a specified number of days after notice to the participant, and/or that each participant
receives, with respect to each share subject to such option or stock appreciation right, an amount equal to the excess of the fair
market value of such share immediately prior to the occurrence of such change of control over the exercise price per share of such
option and/or stock appreciation right; such amount to be payable in cash, in one or more kinds of stock or property (including the
stock or property, if any, payable in the transaction), or in a combination thereof, as the administrator, in its discretion, determines
and, if there is no excess value, the administrator may, in its discretion, cancel such awards. |
|
|
|
|
● |
An
option, stock appreciation right, stock award, stock unit award, or other stock-based award will be considered assumed or substituted
for if, following the change of control, the award confers the right to purchase or receive, for each share subject to the option,
stock appreciation right, stock award, stock unit award, or other stock-based award immediately prior to the change of control, the
consideration (whether stock, cash, or other securities or property) received in the transaction constituting a change of control
by holders of shares for each share held on the effective date of such transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that, if such consideration
received in the transaction constituting a change of control is not solely shares of common stock of the successor company, the administrator
may, with the consent of the successor company, provide that the consideration to be received upon the exercise or vesting of an
option, stock appreciation right, stock award, stock unit award, or other stock-based award, for each share subject thereto, will
be solely shares of common stock of the successor company with a fair market value substantially equal to the per-share consideration
received by holders of shares in the transaction constituting a change of control. The determination of whether fair market value
is substantially equal shall be made by the administrator in its sole discretion and its determination will be conclusive and binding. |
Tax
and Accounting Considerations
Among
the factors it considers when making executive compensation decisions, the Compensation Committee considers the anticipated tax and accounting
impact to us (and to our executive officers) of various payments, equity awards and other benefits.
The
Compensation Committee considers the impact of the provisions of Section 162(m) of the Internal Revenue Code, or the “Code,”
as amended by the Tax Cuts and Jobs Act, or the “TCJA.” That section generally limits the deductibility of compensation paid
by a publicly held company to “covered employees” for a taxable year to $1.0 million. Effective for taxable years beginning
on and after January 1, 2018, “covered employees” generally include our Chief Executive Officer, Chief Financial Officer
and other highly compensated executive officers. Effective for taxable years beginning prior to January 1, 2018, an exception to this
deduction limit applied to “performance-based compensation,” such as cash incentive and stock option awards, that satisfied
certain criteria. This exception to the Section 162(m) deduction limit for “performance-based compensation” was repealed
by the TCJA. Thus, except for certain “performance-based compensation” payable pursuant to written contracts that were in
effect on November 2, 2017 and that are not modified in any material respect on or after that date, effective for taxable years beginning
on and after January 1, 2018 our tax deduction with regard to compensation of “covered employees” is limited to $1.0 million
per taxable year with respect to each executive officer. With respect to cash and equity awards that were in effect on November 2, 2017,
and that are not modified in any material respect on or after that date, the Committee is mindful of the benefit to us and our stockholders
of the full deductibility of compensation and have taken steps so that both the cash incentive and stock option awards that we granted
may qualify for deductibility under Section 162(m) of the Code. However, awards that we granted that were intended to qualify as “performance-based
compensation” may not necessarily qualify for such status under Section 162(m) of the Code. With respect to cash incentive and
equity awards that we may grant in the future, we do not anticipate that the $1.0 million deduction limitation set forth in Section 162(m)
of the Code will have a material impact on our results of operations.
The
Compensation Committee also considers the impact of Section 409A of the Code, and in general, our executive plans and programs are designed
to comply with the requirements of that section so as to avoid possible adverse tax consequences that may result from noncompliance.
We
account for equity awards in accordance with the requirements of Financial Accounting Standards Board Accounting Standards Codification,
or FASB ASC, Topic 718, Stock Compensation.
Our
change-of-control and severance agreements do not allow for excise tax gross up payments.
Amendment
and Termination
The
administrator may amend, alter, or discontinue the Incentive Plan or any award agreement, but any such amendment is subject to the approval
of our stockholders in the manner and to the extent required by applicable law. In addition, without limiting the foregoing, unless approved
by our stockholders and subject to the terms of the Incentive Plan, no such amendment shall be made that would (i) increase the maximum
aggregate number of shares that may be subject to awards granted under the Incentive Plan, (ii) reduce the minimum exercise price for
options or stock appreciation rights granted under the Incentive Plan, or (iii) reduce the exercise price of outstanding options or stock
appreciation rights, as prohibited by the terms of the Incentive Plan without stockholder approval.
No
amendment, suspension, or termination of the Incentive Plan will impair the rights of any participant with respect to an outstanding
award, unless otherwise mutually agreed between the participant and the administrator, which agreement must be in writing and signed
by the participant and us, except that no such agreement will be required if the administrator determines in its sole discretion that
such amendment either (i) is required or advisable in order for us, the Incentive Plan, or the award to satisfy any applicable law or
to meet the requirements of any accounting standard or (ii) is not reasonably likely to diminish the benefits provided under such award
significantly, or that any such diminution has been adequately compensated, except that this exception shall not apply following a change
of control. Termination of the Incentive Plan will not affect the administrator’s ability to exercise the powers granted to it
hereunder with respect to awards granted under the Incentive Plan prior to the date of such termination.
Severance
or Change of Control Arrangements
Other
than as disclosed below, we have no agreements that provide for payments to our directors or executive officers at, following, or in
connection with the resignation, retirement, or other termination of our directors or executive officers, or a change of control of the
Company.
Rory
J. Cutaia
Pursuant
to Mr. Cutaia’s employment agreement dated December 20, 2019, Mr. Cutaia is entitled to the following severance package in the
event he is “terminated without cause,” “terminated for good reason,” or “terminated upon permanent disability”:
(i) monthly payments of $35,833 or such sum equal to his monthly base compensation at the time of the termination, whichever is higher,
for a period of 36 months from the date of such termination and (ii) reimbursement for COBRA health insurance costs for 18 months from
the date of such termination and, thereafter, reimbursement for health insurance costs for Mr. Cutaia and his family during the immediately
subsequent 18-month period. In addition, all of Mr. Cutaia’s then-unvested restricted stock awards or other awards will immediately
vest, without restriction, and any unearned and unpaid bonus compensation, expense reimbursement, and all accrued vacation, personal,
and sick days, and related items shall be deemed earned, vested, and paid immediately. For purposes of the employment agreement, “terminated
without cause” means if Mr. Cutaia were to be terminated for any reason other than a discharge for cause or due to Mr. Cutaia’s
death or permanent disability. For purposes of the employment agreement, “terminated for good reason” means the voluntary
termination of the employment agreement by Mr. Cutaia if any of the following were to occur without his prior written consent, which
consent cannot be unreasonably withheld considering our then-current financial condition, and, in each case, which continues uncured
for 30 days following receipt by us of Mr. Cutaia’s written notice: (i) there is a material reduction by us in (A) Mr. Cutaia’s
annual base salary then in effect or (B) the annual target bonus, as set forth in the employment agreement, or the maximum additional
amount up to which Mr. Cutaia is eligible pursuant to the employment agreement; (ii) we reduce Mr. Cutaia’s job title and position
such that Mr. Cutaia (A) is no longer our Chief Executive Officer; (B) is no longer our Chairperson of our Board; or (C) is involuntarily
removed from our Board; or (iii) Mr. Cutaia is required to relocate to an office location outside of Orange County, California, or outside
of a 30-mile radius of Newport Beach, California. For purposes of the employment agreement, “terminated upon permanent disability”
means if Mr. Cutaia were to be terminated because he is then unable to perform his duties due to a physical or mental condition for (i)
a period of 120 consecutive days or (ii) an aggregate of 180 days in any 12-month period.
PAY
VERSUS PERFORMANCE
Pay
vs. Performance
The
following table sets forth compensation information for our chief executive officer, referred to below as our CEO, and our other named
executive officers, or NEOs, for purposes of comparing their compensation to the value of our shareholders’ investments and our
net income, calculated in accordance with SEC regulations, for fiscal years 2023, 2022 and 2021.
Year | |
Summary Compensation Table Total for CEO(1) | | |
Compensation Actually Paid to CEO(2) | | |
Average Summary Compensation Table Total for Non-CEO NEOs(3) | | |
Average Compensation Actually Paid to Non-CEO NEOs(4) | | |
Value of Initial Fixed $100 Investment Based On Total Shareholder Return(5) | | |
Net Income (Loss) | |
2023 | |
$ | 976 | | |
$ | 340 | | |
$ | 429 | | |
$ | 312 | | |
$ | 2.62 | | |
$ | (21,994 | ) |
2022 | |
$ | 1,058 | | |
$ | 501 | | |
$ | 670 | | |
$ | 409 | | |
$ | 13.23 | | |
$ | (37,437 | ) |
2021 | |
$ | 1,377 | | |
$ | 1,021 | | |
$ | 572 | | |
$ | 559 | | |
$ | 75.15 | | |
$ | (34,486 | ) |
(1) |
The
dollar amounts reported are the amounts of total compensation reported for our CEO, Rory J. Cutaia, in the Summary Compensation Table
for fiscal years 2023, 2022 and 2021. |
(2) |
The
dollar amounts reported represent the amount of “compensation actually paid”, as computed in accordance with SEC rules.
The dollar amounts reported are the amounts of total compensation reported for Mr. Cutaia during the applicable year, but also include
(i) the year-end value of equity awards granted during the reported year, (ii) the change in the value of equity awards that were
unvested at the end of the prior year, measured through the date the awards vested, or through the end of the reported fiscal year,
and (iii) value of equity awards issued and vested during the reported fiscal year. See Table below for further information. |
(3) |
The
dollar amounts reported are the average of the total compensation reported for our NEOs, other than our CEO, in the Summary Compensation
Table for fiscal years 2023, 2022 and 2021. |
(4) |
The
dollar amounts reported represent the average amount of “compensation actually paid”, as computed in accordance with
SEC rules, for our NEOs, other than our CEO. The dollar amounts reported are the average of the total compensation reported for our
NEOs, other than our CEO in the Summary Compensation Table for fiscal years 2023, 2022 and 2021, but also include (i) the year-end
value of equity awards granted during the reported year, (ii) the change in the value of equity awards that were unvested at the
end of the prior year, measured through the date the awards vested, or through the end of the reported fiscal year, and (iii) value
of equity awards issued and vested during the reported fiscal year. |
(5) |
Reflects
the cumulative shareholder return over the relevant fiscal year, computed in accordance with SEC rules, assuming an investment of
$100 in our common shares at a price per share equal to the closing price of our common stock on the last trading day before the
commencement of the applicable fiscal year and the measurement end point of the closing price of our common stock on the last trading
day in the applicable fiscal year. For 2023, the closing price of our common stock on December 31, 2022 was $6.56 and the closing
price of our common stock on December 31, 2023 was $0.17. For 2022, the closing price of our common stock on December 31, 2021 was
$49.60 and the closing price of our common stock on December 31, 2022 was $6.56. For 2021, the closing price of our common stock
on December 31, 2020 was $66.00 and the closing price of our common stock on December 31, 2021 was $49.60. |
To
calculate the amounts in the “Compensation Actually Paid to CEO” column in the table above, the following amounts were deducted
from and added to (as applicable) our CEO’s “Total” compensation as reported in the Summary Compensation Table:
Year | |
Summary Compensation Table Total for CEO | | |
Reported Value of Equity Awards for CEO(1) | | |
Fair Value as of Year End for Unvested Awards Granted During the Year | | |
Fair Value Year over Year Increase or Decrease in Unvested Awards Granted in Prior Years | | |
Fair Value of Awards Granted and Vested During the Year | | |
Fair Value Increase or Decrease from Prior Year end for Awards that Vested during the Year | | |
Compensation Actually Paid to CEO | |
2023 | |
$ | 976 | | |
$ | 517 | | |
$ | (398 | ) | |
$ | (185 | ) | |
$ | (26 | ) | |
$ | (27 | ) | |
$ | 340 | |
2022 | |
$ | 1,058 | | |
$ | 578 | | |
$ | (431 | ) | |
$ | (62 | ) | |
$ | 56 | | |
$ | (120 | ) | |
$ | 501 | |
2021 | |
$ | 1,377 | | |
$ | 537 | | |
$ | 394 | | |
$ | (238 | ) | |
$ | - | | |
$ | (162 | ) | |
$ | 1,021 | (2) |
|
(1) |
Represents
the grant date fair value of the equity awards to our CEO, as reported in the Summary Compensation Table |
|
(2) |
Includes
an adjustment for accrued bonus of $350 that was reported as compensation for CEO but not paid |
To
calculate the amounts in the “Compensation Actually Paid to Non-CEO NEOs” column in the table above, the following amounts
were deducted from and added to (as applicable) the average “Total” compensation of our Non-CEO NEOs as reported in the Summary
Compensation Table:
Year | |
Summary Compensation Table Total for Non-CEO NEOs | | |
Reported Value of Equity Awards for Non- CEO NEOs(1) | | |
Fair Value as of Year End for Unvested Awards Granted During the Year | | |
Fair Value Year over Year Increase or Decrease in Unvested Awards Granted in Prior Years | | |
Fair Value for Awards Granted and Vested During the Year | | |
Fair Value Increase or Decrease from Prior Year end for Awards that Vested during the Year | | |
Compensation Actually Paid to Non-CEO NEOs | |
2023 | |
$ | 429 | | |
$ | 127 | | |
$ | (76 | ) | |
$ | (6 | ) | |
$ | (23 | ) | |
$ | (12 | ) | |
$ | 312 | |
2022 | |
$ | 670 | | |
$ | 400 | | |
$ | (269 | ) | |
$ | - | | |
$ | 8 | | |
$ | - | | |
$ | 409 | |
2021 | |
$ | 572 | | |
$ | 322 | | |
$ | 236 | | |
$ | (152 | ) | |
$ | - | | |
$ | (97 | ) | |
$ | 559 | |
(1) |
Represents
the grant date fair value of the equity awards to our Non-CEO NEOs, as reported in the Summary Compensation Table |
Relationship
between Pay and Performance
Our
“total shareholder return,” as set forth in the above table, during the two-year period ended December 31, 2023 decreased
by 100% compared to (a) a decrease in “compensation actually paid” to our CEO from $501 in 2022 to $340 in 2023 and (b) a
decrease in average “compensation actually paid” to our non-CEO NEOs from $409 in 2022 to $312 in 2023. In addition, our
net loss during the two-year period ended December 31, 2023 decreased by 41%, from $37,437 in 2022 to $21,994 in 2023 compared to the
aforementioned changes in “compensation actually paid” to our CEO and non-CEO NEOs.
Our
“total shareholder return,” as set forth in the above table, during the two-year period ended December 31, 2022 decreased
by 90% compared to (a) a decrease in “compensation actually paid” to our CEO from $1,021 in 2021 to $501 in 2022 and (b)
a decrease in average “compensation actually paid” to our non-CEO NEOs from $559 in 2021 to $409 in 2022. In addition, our
net loss during the two-year period ended December 31, 2022 increased by 9%, from $34,486 in 2021 to $37,437 in 2022 compared to the
aforementioned changes in “compensation actually paid” to our CEO and non-CEO NEOs.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of July 29, 2024, certain information with respect to the beneficial ownership of our voting stock by
(i) each of our current directors and director nominees, (ii) each of our named executive officers, (iii) our directors, director nominees
and executive officers as a group, and (iv) each stockholder known by us to be the beneficial owner of more than 5% of the outstanding
shares of our outstanding common stock.
We
have determined beneficial ownership in accordance with the rules of the SEC, which generally includes voting or investment power over
securities. Except in cases where community property laws apply or as indicated in the footnotes to this table, we believe, based on
the information furnished to us, that each stockholder identified in the table possesses sole voting and investment power over all shares
of common stock shown as beneficially owned by the stockholder. Shares of common stock issuable upon conversion of convertible notes,
exercise of options or warrants, or settlement of restricted stock units, or that may become issuable within 60 days of July 29, 2024,
are considered outstanding and beneficially owned by the person holding the convertible notes, options, warrants or restricted stock
units for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing
the percentage ownership of any other person.
Name and Address of Beneficial Owner(1)(2) | |
Title of Class | |
Amount and Nature of Beneficial Ownership | | |
Percent of Class(3) | |
Rory J. Cutaia | |
Common | |
| 310,015 | (4) | |
| * | % |
James P. Geiskopf | |
Common | |
| 204,976 | (5) | |
| * | |
Kenneth S. Cragun | |
Common | |
| 90,908 | (6) | |
| * | |
Bill J. Rivard | |
Common | |
| 15,419 | (7) | |
| * | |
Edmund C. Moy | |
Common | |
| 185,602 | (8) | |
| * | |
All directors and current executive officers as a group (5 persons) | |
Common | |
| 806,920 | | |
| * | % |
(1) |
Messrs.
Cutaia, Geiskopf, Cragun and Moy are current directors. Messrs. Cutaia and Rivard are our Named Executive Officers. |
|
|
(2) |
Unless
otherwise indicated, the address of each beneficial owner listed in the table above is: c/o Verb Technology Company, Inc., 3024 Sierra
Juniper Court, Las Vegas, Nevada 89138. |
|
|
(3) |
Percentage
of common stock is based on 145,597,352 shares of our common stock outstanding as of July 29, 2024. |
|
|
(4) |
Consists
of (i) 169,411 shares of common stock held directly by Mr. Cutaia, (ii) 6,006 shares of common stock held by Cutaia Media Group Holdings,
LLC (an entity over which Mr. Cutaia has dispositive and voting authority), (iii) 1,351 shares of common stock held by Mr. Cutaia’s
spouse (as to which shares, he disclaims beneficial ownership), (iv) 113 shares of common stock held jointly by Mr. Cutaia and his
spouse, and (v) 133,134 shares of common stock underlying stock options exercisable within 60 days of July 29, 2024. This amount
excludes 7,042 shares of common stock underlying restricted stock units and 381,711 shares of common stock underlying stock options
that will not vest within 60 days of July 29, 2024. |
(5) |
Consists
of (i) 33,640 shares of common stock held directly, and (ii) 134 shares of common stock held by Mr. Geiskopf’s children and
(ii) 171,202 shares of common stock underlying stock options exercisable within 60 days of July 29, 2024. |
|
|
(6) |
Consists
of (i) 3,886 shares of common stock held directly, and (ii) 87,022 shares of common stock underlying stock options exercisable within
60 days of July 29, 2024. |
|
|
(7) |
Consists
of (i) 13,544 shares of common stock held directly and (ii) 1,875 shares of common stock underlying stock options exercisable within
60 days of July 29, 2024. This amount excludes 136,986 shares of common stock underlying restricted stock units that will not vest
within 60 days of July 29, 2024. |
|
|
(8) |
Consists
of 185,602 shares of common stock underlying stock options exercisable within 60 days of July 29, 2024. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
General
Other
than the transactions discussed below, and the executive compensation arrangements described in the section titled “Executive Compensation,”
since January 1, 2022, there was not, and there is not currently proposed, any transaction or series of similar transactions to which
we were or will be a party for which the amount involved exceeds or will exceed the lesser of $120,000 and one percent of the average
of the Company’s total assets at year end for the fiscal years ended December 31, 2023 and 2022 and in which any director, executive
officer, holder of more than 5% of our common stock, or any member of the immediate family of any of the foregoing, had or will have
a direct or indirect material interest (any such transaction, a “related party transaction”).
Policies
and Procedures for Approval of Related Party Transactions
If
we contemplate entering into any transaction with a related party, regardless of the amount involved, the terms of such transaction are
required to be presented to our Board for approval in advance of the transaction. Any director, officer or employee who becomes aware
of a transaction or relationship that could reasonably be expected to give rise to a conflict of interest is required to disclose the
matter promptly to our Board. Our Board must then either approve or reject the transaction and may only approve the transaction if it
determines, based on all of the information presented, that the related party transaction is not inconsistent with the best interests
of the Company and its stockholders.
Related
Party Transactions
Unless
otherwise specified, all dollar amounts in this section are in thousands except per share amounts and par values. All historical share
and per-share amounts reflected throughout this section have been adjusted to reflect the Reverse Stock Split.
Notes
Payable to Related Parties
The
Company has the following outstanding notes payable to related parties on December 31, 2023 and 2022 (in thousands):
Note | |
Issuance Date | |
Maturity Date | |
Interest Rate | | |
Original Borrowing | | |
Largest Aggregate Amount Outstanding Since January 1, 2022 | | |
Amount Outstanding as of December 31, 2023 | | |
Interest Paid Since January 1, 2023 | | |
Interest Paid Since January 1, 2022 | |
Note 1(1) | |
December 1, 2015 | |
April 1, 2023 | |
| 12.0 | % | |
$ | 1,249 | | |
$ | 879 | | |
$ | - | | |
$ | 154 | | |
$ | 154 | |
Note 2(2) | |
April 4, 2016 | |
June 4, 2021 | |
| 12.0 | % | |
| 343 | | |
| 48 | | |
| - | | |
| 8 | | |
| 8 | |
Total notes payable – related parties | |
| | | |
| | | |
$ | 927 | | |
$ | - | | |
$ | 162 | | |
$ | 162 | |
(1) |
On
December 1, 2015, we issued a convertible note payable to Mr. Cutaia in the principal amount of $1,249 to consolidate all loans and
advances made by Mr. Cutaia to us as of that date. The note bears interest at a rate of 12% per annum, is secured by our assets,
and initially matured on February 8, 2021. 30% of the original principal amount of the note, or $375, was converted to common stock
in 2018, while the remaining balance of $825 was not initially convertible. |
|
In
February 2021, Mr. Cutaia and the Company amended the note to extend the maturity date from February 8, 2021 to February 8, 2023.
In exchange for the extension, the Company issued Mr. Cutaia warrants to purchase 3,473 shares of common stock with a grant date
fair value of $287. The warrants were fully vested upon issuance, are exercisable at $104.40 per share and have a term of three years.
There were no other changes to the original terms of the note. |
|
|
|
On
May 19, 2021, our Board approved an amendment to the note to allow for conversion of the note at any time at the discretion of the
holder at a fixed conversion price of $41.20, which was the closing price of the common stock on the amendment date. On May 12, 2022,
the maturity date of the note was extended to April 1, 2023. On October 12, 2023, the Company repaid all of the outstanding principal
and accrued interest amounting to $879. |
|
|
|
As
of December 31, 2023, the outstanding balance of the note was $0. |
|
|
(2) |
On
April 4, 2016, we issued a convertible note to Mr. Cutaia, in the principal amount of $343 to consolidate all loans and advances
made by Mr. Cutaia to us during the period December 2015 through March 2016. The note bears interest at a rate of 12% per annum,
is secured by our assets, and initially matured on June 4, 2021. 30% of the original principal amount of the note, or $103, was converted
to common stock in 2018, while the remaining balance of $240 was not initially convertible. |
|
|
|
On
May 19, 2021, our Board approved an amendment to the note to allow for conversion of the note at any time at the discretion of the
holder at a fixed conversion price of $41.20, which was the closing price of the common stock on the amendment date. On the same
date, $200 of the principal amount of the note was converted into 4,855 shares of common stock at the fixed conversion price. On
September 20, 2023, the Company repaid all of the outstanding principal and accrued interest amounting to $48. |
|
|
|
As
of December 31, 2023, the outstanding balance of the note was $0. |
2023
ANNUAL REPORT ON FORM 10-K
Copies
of our proxy materials, including this Proxy Statement and the Annual Report are available online at www.proxyvote.com. The Annual
Report, however, is not part of this proxy solicitation material.
Any
person who was our stockholder on the Record Date (including any beneficial owner of shares) may request a copy of the Annual Report,
and it will be furnished without charge upon receipt of a written request. Requests should be directed to Verb Technology Company, Inc.,
3024 Sierra Juniper Court, Las Vegas, Nevada 89138, Attention: Investor Relations, or by calling Investor Relations at (855) 250-2300.
In addition, copies of this Proxy Statement, the Annual Report, and all other documents filed electronically by us, may be reviewed on
the SEC’s website at: http://www.sec.gov.
OTHER
BUSINESS
As
of the date of this Proxy Statement, we are not aware of any other business to be considered or acted upon at the Annual Meeting. In
the event any other matters are properly presented at the Annual Meeting, or any postponement or adjournment thereof, the person named
as proxy will vote in accordance with his discretion with respect to those matters.
|
By
Order of the Board of Directors, |
|
|
|
/s/
Rory J. Cutaia |
|
Chairperson of our Board, Chief Executive Officer,
President,
Treasurer
and Secretary |
|
|
|
Las
Vegas, Nevada |
|
August
16, 2024 |
Appendix
A
CERTIFICATE
OF AMENDMENT
to
the
ARTICLES
OF INCORPORATION
of
VERB
TECHNOLOGY COMPANY, INC.
VERB
TECHNOLOGY COMPANY, INC., a corporation organized and existing under the General Corporation Law of the State of Nevada (the “Corporation”),
does hereby certify as follows:
FIRST:
The name of the Corporation is Verb Technology Company, Inc. The Corporation’s articles of incorporation was filed with the Secretary
of State of the State of Nevada on November 27, 2012 (the “Articles of Incorporation”).
SECOND:
The Board of Directors of the Corporation has duly adopted a resolution pursuant to Section 78.390 of the Nevada Revised Statutes setting
forth a proposed amendment to the Articles of Incorporation of the Corporation (the “Certificate of Amendment”) and declaring
said amendment to be advisable. The requisite stockholders of the Corporation have duly approved said proposed amendment in accordance
with Section 78.320 and 78.390 of the Nevada Revised Statutes of the State of Nevada. The amendment amends the Articles of Incorporation
of the Corporation as follows:
ARTICLE
III of the Corporation’s Articles of Incorporation shall be amended in its entirety and replaced with the following:
(a)
Authorized Capital Stock. The total number of shares of all classes of capital stock which the Corporation is authorized to
issue is 415,000,000 shares, consisting of 400,000,000 shares of common stock, par value $0.0001 per share (the “Common Stock”),
and 15,000,000 shares of preferred stock, par value $0.0001 per share (the “Preferred Stock”).
(b)
Reverse Stock Split. Upon the filing (the “Effective Time”) of this Certificate of Amendment pursuant to the Section
78.380 of the Nevada Corporation Law of the State of Nevada, each ( ) shares of the Corporation’s Common Stock, issued and outstanding
immediately prior to the Effective Time (the “Old Common Stock”) shall automatically without further action on the part of
the Corporation or any holder of Old Common Stock, be reclassified, combined, converted and changed into one (1) fully paid and nonassessable
shares of common stock, par value of $0.0001 per share (the “New Common Stock”), subject to the treatment of fractional share
interests as described below (the “Reverse Stock Split”). The conversion of the Old Common Stock into New Common Stock will
be deemed to occur at the Effective Time. From and after the Effective Time, certificates representing the Old Common Stock shall represent
the number of shares of New Common Stock into which such Old Common Stock shall have been converted pursuant to this Certificate of Amendment.
Holders who otherwise would be entitled to receive fractional share interests of New Common Stock upon the effectiveness of the reverse
stock split shall be entitled to receive a whole share of New Common Stock in lieu of any fractional share created as a result of such
Reverse Stock Split.
(c)
Classification of Preferred Stock. The Preferred Stock may be divided into and issued in series. The Board of Directors of
the Corporation is authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated
as to distinguish the shares thereof from the shares of all other series and classes. The Board of Directors of the Corporation is authorized,
within any limitations prescribed by law and this Article, to fix and determine the designations, rights, qualifications, preferences,
limitations and terms of the shares of any series of Preferred Stock including but not limited to the following:
| a. | The
rate of dividend, the time of payment of dividends, whether dividends are cumulative, and
the date from which any dividends shall accrue; |
| b. | Whether
shares may be redeemed, and, if so, the redemption price and the terms and conditions of
redemption; |
| c. | The
amount payable upon shares in the event of voluntary or involuntary liquidation; |
| d. | Sinding
fund or other provisions, if any, for the redemption or purchase of shares; |
| e. | The
terms and conditions on which shares may be converted, if the shares of any series are issued
with the privilege of conversion; |
| f. | Voting
powers, if any, provided that if any of the Preferred Stock or series thereof shall have
voting rights, such Preferred Stock or series shall vote only on a share for share basis
with the Common Stock on any matter, including but not limited to the election of directors,
for which such Preferred Stock or series has such rights; and |
| g. | Subject
to the foregoing, such other terms, qualifications, privileges, limitation, options, restrictions,
and special or relative rights and preferences, if any, of shares or such series as the Board
of Directors of the Corporation may, at the time so acting, lawfully fix and determine under
the laws of the State of Nevada. |
The
Corporation shall not declare, pay or set apart for payment any dividend or other distribution (unless payable solely in shares of Common
Stock or other class of stock junior to the Preferred Stock as to dividends upon liquidation) in respect of Common Stock, or other class
of stock junior to the Preferred Stock, nor shall it redeem, purchase or otherwise acquire for consideration shares of any of the foregoing,
unless dividends, if any, payable to holders of Preferred Stock for the current period (and in the case of cumulative dividends, if any,
for all past periods) have been paid, are being paid or have been set aside for payment, in accordance with the terms of the Preferred
Stock, as fixed by the Board of Directors.
In
the event of the liquidation of the Corporation, holders of Preferred Stock shall be entitled to receive, before any payment or distribution
on the Common Stock or any other class of stock junior to the Preferred Stock upon liquidation, ad distribution per share in the amount
of the liquidation preference, if any, fixed or determined in accordance with the terms of such Preferred Stock plus, if so provided
in such terms, an amount per share equal to accumulated and unpaid dividends in respect of such Preferred Stock (whether or not earned
or declared) to the date of such distribution. Neither the sale, lease or exchange of all or substantially all of the property and assets
of the Corporation, nor any consolidation or merger of the Corporation, shall be deemed to be a liquidation for the purposes of this
Article.
THIRD:
This Certificate of Amendment shall be effective as of [ ] p.m., Pacific Daylight Time on [ ], 2024.
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