UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal Year ended December 31, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission file number: 000-52765
iCoreConnect Inc. |
(Exact name of registrant as specified in its charter) |
Nevada |
| 13-4182867 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
529 E Crown Point Road, Suite 250 Ocoee, FL 34761
(Address of principal executive offices) (Zip Code)
(888) 810-7706
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Common Stock, $.001 par value | ICCT | The OTCQB Venture Market |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated Filer | ☒ | Smaller reporting company | ☒ |
|
| Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Based on the closing price of the Registrant’s Common Stock on the last business day of the Registrant’s most recently completed second fiscal quarter, which was June 30, 2020, the aggregate market value of its shares (based on a closing price of $0.21 per share on June 30, 2021 as reported on the OTCQB Exchange) held by non-affiliates was approximately $9.7 million.
The number of shares outstanding of the Registrant’s Common Stock as of March 31, 2022: 172,216,323.
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report and the documents we have filed with the Securities and Exchange Commission (the “SEC”) that are incorporated by reference herein contain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve significant risks and uncertainties. Any statements contained, or incorporated by reference, in this Report that are not statements of historical fact may be forward-looking statements. When we use the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and other similar terms and phrases, including references to assumptions, we are identifying forward-looking statements. Forward-looking statements involve risks and uncertainties which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements.
Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, the factors discussed in the sections entitled “Item 1A. Risk Factors” and under the heading “Critical Accounting Policies and Estimates” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All forward-looking statements attributable to us are expressly qualified in their entirety by the factors that may cause actual results to differ materially from anticipated results. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date hereof. We undertake no duty or obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the risk factors described in Item 1A of this document as well as in other documents we file from time to time with the SEC for an understanding of the variables that can affect our business and results of operations.
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PART I
Item 1. Business.
Overview
Company History
iCoreConnect Inc., (the “Company”), a Nevada Corporation, is a market leading cloud-based software and technology company focused on increasing workflow productivity and customer profitability through its enterprise platform of applications and services.
Software as a Service (SaaS) Offerings
The Company currently markets secure Health Insurance Portability and Accountability Act (HIPAA) compliant cloud-based software as a service (SaaS) offering under the names of iCoreRx, iCorePDMP, iCoreEPCS, iCoreVerify, iCoreHuddle, iCoreHuddle+, iCoreCodeGenius, iCoreExchange, iCoreCloud, iCorePay, iCoreSecure, and iCoreIT. The Company’s software is sold under annual recurring revenue subscriptions.
iCoreRx – iCoreRx is a HIPAA compliant electronic prescription SaaS solution that integrates with popular practice management and electronic health record systems. It saves time by selecting exact medications at available doses with built-in support from a drug directory and provides full support for Electronic Prescriptions for Controlled Substances (iCoreEPCS). It protects both the patient and provider by viewing the patient’s complete medication history. It also speeds up the process by allowing the doctor to create a “favorites” list for commonly used medication sets. iCorePDMP is an add-on for iCoreRx that seamlessly integrates with state databases to automate prescription drug monitoring. Providers in many states are required to check the patient’s Prescription Drug Monitoring Program (PDMP) history before prescribing controlled substances. This service provides a one-click real-time access to the state databases without the need to manually enter data. This tool also generates patient risk scores and an interactive visualization of usage patterns to help the prescriber identify potential risk factors. The prescriber can then use this report to make decisions on objective insight into potential drug misuse or abuse which will ultimately lead to improved patient safety and better patient outcomes.
iCoreVerify - iCoreVerify is a HIPAA compliant SaaS solution that allows practices to verify patient insurance benefits automatically and on-demand using our real time technology. It provides the practice with the ability to check available patient benefits directly from the payer’s in real-time. The system returns results typically in less than one second for most responses. This substantially reduces the phone calls and labor hours for the practice. This tool integrates with most popular practice management systems.
iCoreHuddle and iCoreHuddle+ – iCoreHuddle is a powerful HIPAA compliant SaaS solution to instantly reveal the revenue potential of each patient. The service connects to most popular practice management and electronic health record systems to optimize revenue realization. It provides the practice with a dashboard containing various metrics, analytics, and Key Performance Indicators (“KPIs”). iCoreHuddle provides a daily view of patient schedules, including their outstanding balances, unscheduled treatment plans, recall information, procedure information and the amount of remaining insurance benefits. The software also provides one-click access to each patient’s insurance eligibility, including a detailed benefits and deductibles report. This tool aims to increase the workflow efficiency of the dentist’s practice by reducing the number of required lookups and clicks for each patient. iCoreHuddle+ offers enhanced analytical tools for practices to optimize their revenue generation process and workflows.
iCoreCodeGenius – iCoreCodeGenius is a medical coding reference SaaS solution that provides the coding standards for the 10th revision of the International Classification of Diseases and Related Health Problems (ICD-10), a medical classification list published by the World Health Organization (WHO). It contains codes for diseases, signs and symptoms, abnormal findings, complaints, social circumstances, and external causes of injury and diseases.
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iCoreCodeGenius includes a full ICD-10 code lookup and guidance, automatic prompting of comorbidities and Hierarchical Condition Category’s (HCC) to aid in obtaining the appropriate reimbursement with a high degree of accuracy, and the ability to reduce or eliminate queries and denials.
iCoreExchange – iCoreExchange provides a secure, HIPAA compliant SaaS email solution using the Direct Protocol that allows doctors to send and receive secure email with attachments to and from other healthcare professionals in the network. iCoreExchange also provides a secure email mechanism to communicate with users outside the exchange e.g., patients and referrals. Users have the ability to build a community, access other communities and increase referrals and collaboration. Users can email standard office documents, JPEG, PDF as well as patient files with discrete data, which can then be imported and accessed on most Electronic Health Record (EHR) and Practice Management (PM) systems in a HIPAA compliant manner.
iCoreCloud - iCoreCloud offers customers the ability to backup their on-premise servers and computers to the cloud. iCoreCloud is a fully HIPAA compliant and automated backup solution. The data backed up is encrypted both in transit and while at rest. In case of full data loss, the mirrored data in the cloud can be seamlessly restored back to the practice on a new computer or a server. The data is stored encrypted in HIPAA compliant data centers with multiple layers of redundancy. The data centers are physically secure with restricted personnel and biometric access. The locations are also guarded by security 24 hours a day, 365 days a year.
iCorePay – iCorePay offers a seamless patient payment processing solutions for customers. iCorePay integrates into the practice workflow for payment and revenue cycle tracking.
iCoreSecure – Recent newscasts have been replete with reporting regarding many breaches of consumer personal information. We used our expertise and development capabilities from our HIPAA compliant iCoreExchange and developed iCoreSecure, an encrypted email solution for anyone that needs encrypted email to protect personal and financial data. iCoreSecure is a secure SaaS solution that solves privacy concerns in the insurance, real estate, financial and many other industry sectors that have a need for secure encrypted email.
iCoreIT - The trend in IT Services companies for over a decade has been to move away from a “Break/Fix '' model to a “Managed Service Provider (MSP)” and “Managed Software as a Service (MSaaS)” model with recurring revenue.
The MSP/MSaaS approach, by using preventative measures, keeps computers and networks up and running while data is accessible and safeguarded. Installation of critical patches and updates to virus protection are automated. Systems are monitored and backed up in real-time. They are fixed or upgraded before they cause a service disruption. A Unified Threat Management solution is deployed to protect against virus, malware, SPAM, phishing and ransomware attacks. Remote technical support is a click away. All support is delivered at a predictable monthly cost.
Going forward, by leveraging MSP/MSaaS with our expertise in cloud computing, our customers can easily scale their business without extensive capital investment or disruption in services.
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The Company is competitively positioned to address the growing need for MSaaS: Our current and future customers need managed IT services, along with cloud computing, storage and HIPAA compliant backup and encryption; Managed service providers that can support the migration to cloud computing are in high demand; The decision makers for our current technology and those for managed services are, in many cases, the same person or group of people; Our management team has decades of experience operating successful IT companies; and The MSaaS revenue model matches our SaaS and MRR models.
Competition - The Company experiences competition from a variety of sources with respect to virtually all of its products and services. The Company knows of no single entity that competes with it across the full range of its products and services; however, each of the lines of business in which the Company is engaged is highly competitive. Competition in the markets served is based on several considerations, which may include price, technology, applications, experience, know-how, reputation, service, and distribution. While we believe we offer a unique combination of products and services, a few competitors offer one or more similar products and services in one or more of our niche markets.
Competitive Strengths
The key advantages of our products and services include:
1. Secure, private, scalable, and reliable.
Our services have been designed to provide our customers with privacy and high levels of performance, reliability, and security. We have built, and continue to invest in, a comprehensive security infrastructure, including firewalls, intrusion detection systems, and encryption for transmission over the Internet, which we monitor and test on a regular basis. We have designed, built, and continue to maintain a multi-tenant application architecture that has been designed to enable our service to scale securely, reliably and cost effectively. Our multi-tenant application architecture maintains the integrity and separation of customer data while still permitting all customers to use the same application functionality simultaneously.
2. Rapid deployment and lower total cost of ownership.
Our services can be deployed rapidly since our customers do not have to spend time procuring, installing, or maintaining the servers, storage, networking equipment, security products or other hardware and software. We enable customers to achieve up-front savings relative to the traditional enterprise software model. Customers benefit from the predictability of their future costs since they generally pay for the service on a per subscriber basis for the term of the subscription contract.
3. High levels of user adoption.
We have designed our products and services to be intuitive and easy to use. Our products and services contain many tools and features recognizable to users of popular consumer web services, so users have a more familiar user experience than typical EHR applications. As a result, our users can often use and gain benefit from our solutions with minimal training. We have also designed our products and services to be used on popular mobile devices, making it possible for people to conduct business from their smartphones or tablets.
Competitive Strategy
Key elements of our strategy include:
1. Extending existing service offerings. We continue to innovate based on customer feedback and have designed our solutions to easily accommodate new features and functionality, especially in underserved areas of compliance and improved workflow/profitability for dental and physician practices. We continually look to improve our products and services by adding new features, functions and increased security through our own development, acquisitions, and partnerships.
2. Expanding existing customer relationships. We see significant opportunities to deepen our relationships with our existing customers. As our customers realize the benefits of our products and services, we aim to provide additional value-added products and services.
3. Expanding into new horizontal markets. As part of our growth strategy, we are delivering innovative solutions in new categories, including analytics, claims coding and processing, and electronic prescribing. We drive innovation both organically and through acquisitions.
4. Extending go to market capabilities. We believe that our offerings provide significant value for businesses of any size. We continue to pursue businesses of all sizes and industries through our direct sales force and partnerships. In the past several years we have competed and won over 81 major healthcare association endorsements in 25 states. We plan to increase the number of direct sales professionals we employ and intend to develop additional distribution channels for our products and services.
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In addition to the key elements of our business strategy described above, from time to time, we evaluate opportunities to acquire or invest in complementary businesses, services and technologies, and intellectual property rights.
EMPLOYEES
As of December 31, 2021, and December 31, 2020, the Company had 55 and 25 full-time employees, respectively.
AVAILABLE INFORMATION
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports are filed with the SEC pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the SEC. Such reports and other information that we file with the SEC are available free of charge on our website at https://www.icoreconnect.com/sec-filings when such reports are available on the SEC website. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. The contents of these websites are not incorporated into this filing. Further, the foregoing references to the URLs for these websites are intended to be textual references only.
Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. Before purchasing our common stock, you should carefully consider the following risk factors as well as all other information contained in this Report, including our consolidated financial statements and the related notes. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may become important factors that affect us. If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline, and you may lose some or all of your investment.
Risks Related to Our Business
Our business is difficult to evaluate because we have a limited operating history.
Because we have a limited operating and revenue generating history, we do not have significant historical financial information on which to base planned revenues and operating expenses. Revenues for the years ended December 31, 2021 and December 31, 2020, were $4,956,552 and $2,123,587, respectively. We expect to experience fluctuations in future quarterly and annual operating results that may be caused by many factors, including: merger and acquisition activity; our ability to achieve significant sales for our products and services; the cost of technology, software and other costs associated with the production and distribution of our products and services; the size and rate of growth of the market for Internet products and online content and services; the potential introduction by others of products that are competitive with our products; the unpredictable nature of online businesses and e-commerce in general; and the general economic conditions in the United States and worldwide.
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Investors should evaluate us considering the delays, expenses, problems and uncertainties frequently encountered by companies developing markets for new products, services and technologies. We may never overcome these obstacles.
Under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), we could face potential liability related to the privacy of health information we obtain.
Most health care providers, from which we may obtain patient information, are subject to privacy regulations promulgated under the Health Insurance Portability and Accountability Act of 1996, or HIPAA. Although we are not directly regulated by HIPAA, we could face substantial criminal penalties if we knowingly receive individually identifiable health information from a health care provider that has not satisfied HIPAA’s disclosure standards. Further, we may face civil liability if our HIPAA compliant system fails to satisfy its disclosure standards. Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensive and time consuming to defend and could result in adverse publicity that could harm our business.
We believe that we meet the HIPAA requirements currently in effect that are applicable to our internal operations and our clients. However, if we are unable to deliver application solutions that achieve or maintain compliance with the applicable HIPAA rules in effect, or as they may be modified or implemented in the future, then customers may move their businesses to application solution providers whose systems are, or will be, HIPAA compliant. As a result, our business could suffer.
If our security measures or those of our third-party data center hosting facilities, cloud computing platform providers, or third-party service partners, are breached, and unauthorized access is obtained to a customer’s data, our data or our IT systems, our services may be perceived as not being secure, customers may curtail or stop using our services, and we may incur significant legal and financial exposure and liabilities.
Our services involve the storage and transmission of our customers’ patient’s health and other sensitive data, including personally identifiable information. Security breaches could expose us to a risk of loss of this information, litigation and possible liability. While we have security measures in place, they may be breached as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise and result in someone obtaining unauthorized access to our IT systems, our customers’ data or our data, including our intellectual property and other confidential business information. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information in order to gain access to our customers’ data, our data or our IT systems. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, our customers may authorize third-party technology providers to access their customer data, and some of our customers may not have adequate security measures in place to protect their data that is stored on our services. Because we do not control our customers or third-party technology providers, or the processing of such data by third-party technology providers, we cannot ensure the integrity or security of such transmissions or processing. Malicious third parties may also conduct attacks designed to temporarily deny customers access to our systems and supporting services. Any security breach could result in a loss of confidence in the security of our software, damage our reputation, negatively impact our future sales, disrupt our business and lead to legal liability.
Our ability to deliver our software is dependent on the development and maintenance of the infrastructure of the Internet by third parties.
The Internet’s infrastructure is comprised of many different networks and services that are highly fragmented and distributed by design. This infrastructure is run by a series of independent third-party organizations that work together to provide the infrastructure and supporting services of the Internet under the governance of the Internet Corporation for Assigned Numbers and Names (ICANN) and the Internet Assigned Numbers Authority (IANA), now under the stewardship of ICANN.
Even though the Internet has never experienced an outage, some providers to portions of its infrastructure have experienced outages and other delays as a result of damages, denial of service attacks or related cyber incidents, and it could face outages and delays in the future. These outages and delays could reduce the level of Internet usage or result in fragmentation of the Internet, resulting in multiple separate Internets. These scenarios are not under our control and could reduce the availability of the Internet to us or our customers for delivery of our Internet-based services. Any resulting interruptions in our services or the ability of our customers to access our services could result in a loss of potential or existing customers and harm our business.
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Our business may not succeed if we are unable to keep pace with rapid technological changes.
Our services and products are impacted by rapidly changing technology, evolving industry standards, emerging competition and frequent new use, software and other product introductions. There can be no assurance that we can successfully identify new business opportunities or develop and bring new services or products to market in a timely and cost-effective manner, or those services, products or technologies developed by others will not render our services or products non-competitive or obsolete. In addition, there can be no assurance that our services, products or enhancements will achieve or sustain market acceptance or be able to address compatibility, interoperability or other issues raised by technological changes or new industry standards.
If we suffer system failures or overloading of computer systems, our business and prospects could be harmed. The success of our online offerings is highly dependent on the efficient and uninterrupted operation of our computer and communications hardware systems. Fire, floods, earthquakes, power fluctuations, telecommunications failures, hardware “crashes,” software failures caused by “bugs” or other causes, and similar events could damage or cause interruptions in our systems. Computer viruses, electronic break-ins or other similar disruptive problems could also adversely affect our websites. If our systems, or the systems of any of the websites on which we advertise or with which we have material marketing agreements, are affected by any of these occurrences, our business, results of operations and financial condition could be materially and adversely affected.
The establishment of our brand is important to our future success.
Establishing and maintaining a brand name and recognition is critical for attracting and expanding our client base. The promotion and enhancement of our name depends on the effectiveness of our marketing and advertising efforts and on our success in continuing to provide high-quality services, neither of which can be assured. If our brand marketing efforts are unsuccessful, our business could fail.
Our business could suffer if we are unable to protect our intellectual property rights or are liable for infringing the intellectual property rights of others.
We have certain trademarks, trade dress, trade secrets and other similar intellectual property which are significant to our success, and we rely upon related law, trade secret protection, and other confidentiality and license agreements with our employees, strategic partners, and others to protect our proprietary rights to the extent such protection is available and enforceable. Such protection has only limited effectiveness. The development of the Internet has also increased the ease with which third parties can distribute our copyrighted material without our authorization.
We may seek to pursue the registration of trademarks, trade dress and trade secrets in the United States and, based upon anticipated use, in certain other countries. We may not be entitled to the benefits of any such registration for an extended period due to the cost and delay in effecting such registration. In addition, effective trademark and trade secret protection may not be available in every country in which our products are available. We expect that we may license, in the future, elements of our trademarks, trade dress and other similar proprietary rights to third parties. Further, we may be subject to claims in the ordinary course of our business, including claims of alleged infringement of the trademarks and intellectual property rights of third parties by us and our licensees.
Other parties may assert claims of infringement of intellectual property or other proprietary rights against us. These claims, even if without merit, could require us to expend significant financial and managerial resources. Furthermore, if claims like this were successful, we might be required to change our trademarks, alter our content or pay financial damages, any of which could substantially increase our operating expenses. We also may be required to obtain licenses from others to refine, develop, market and deliver new services. We may be unable to obtain any needed license on commercially reasonable terms or at all, and rights granted under any licenses may not be valid and enforceable.
Our success will be limited if we are unable to attract, retain and motivate highly skilled personnel.
Our future success will depend on our ability to attract, retain and motivate highly skilled programming, management, sales and other key personnel. Competition for such personnel is intense in the Internet industry, and we may be unable to successfully attract, integrate or retain sufficiently qualified personnel. In addition, our ability to generate revenues relates directly to our personnel in terms of both the numbers and expertise of the personnel we have available to work on our projects. Moreover, competition for qualified employees may require us to increase our cash or equity compensation, which may have an adverse effect on earnings.
We are also dependent on the services of our executive officers and key consultants and independent agents. There can be no assurance, however, that we can obtain executives of comparable expertise and commitment in the event of death, or that our business would not suffer material adverse effects as the result of a death, disability or voluntary departure of any such executive officer. Further, the loss of the services of any one or more of our key employees or consultants could have a materially adverse effect on our business and our financial condition. In addition, we will also need to attract and retain other highly skilled technical and managerial personnel for whom competition is intense. If we are unable to do so, our business, results of operations and financial condition could be materially adversely affected.
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Any system failure or slowdown could significantly harm our reputation and damage our business.
System failures would harm our reputation and reduce our attractiveness to customers. In addition, the users of the services we maintain for our customers depend on Internet service providers, online service providers and other web site operators for access to our web sites. Some of these providers and operators have experienced significant outages in the past, and they could experience outages, delays and other difficulties due to system failures unrelated to our systems.
We compete in a highly competitive market and many of our competitors have greater financial resources and established relationships with major corporate customers.
Our future profitability depends on our ability to compete successfully by continuing to differentiate our products and services from the products and services of our competitors. If one or more of our competitors begins to offer integrated, Internet Based, HIPAA Compliant healthcare information collaboration solutions, there may be a material adverse effect on our business, financial condition or operating results. We believe that our ability to compete successfully depends on a number of factors, including: our ability to produce products that are superior in quality to that of our competitors and get those products and services to market quickly; our ability to deliver our products and services at a price that remains competitive with that of our competitors; our ability to respond promptly and effectively to the challenges of technological change, evolving standards, and our competitors’ innovations; the scope of our products and services and the rate at which we and our competitors introduce them; customer service and satisfaction; and industry and general economic trends.
Regulatory developments in the future related to the Internet could create a legal uncertainty; such developments could materially harm our business.
We are not currently subject to direct regulation by any government agency, other than regulations applicable to businesses generally, and there are currently few laws or regulations directly applicable to the access of or commerce on the Internet. However, it is possible that a number of laws and regulations will be adopted with respect to the Internet, covering issues such as user privacy, pricing, characteristics, e-mail marketing and quality of products and services. Such laws and regulations could dampen the growth and use of the Internet generally and decrease the acceptance of the Internet as a communication and commercial medium and could thereby have a material adverse effect on our business, results of operations and financial condition.
We are vulnerable to changes in general economic conditions.
We are affected by certain economic factors that are beyond our control, including changes in the overall economic environment and systemic events such as the Covid-19 Pandemic which impact our operations as well as our customers.
Legal proceedings could lead to unexpected losses.
From time to time during the normal course of carrying on our business, we may be a party to various legal proceedings through private actions, class actions, administrative proceedings, regulatory actions or other litigations or proceedings. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify. In the event that management determines that the likelihood of an adverse judgment in a pending litigation is probable and that the exposure can be reasonably estimated, appropriate reserves are recorded at that time pursuant to the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 450, “Contingencies.” The final outcome of any litigation could adversely affect operating results if the actual settlement amount exceeds established reserves and insurance coverage.
We have identified material weaknesses in internal control over financial reporting. If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.
We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Any failure of these controls could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial fraud.
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In addition, management’s assessment of internal controls over financial reporting may identify additional weaknesses and conditions that need to be addressed or other potential matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.
We may engage in merger and acquisition activity from time to time and may not achieve the contemplated benefits from such activity.
Achieving the contemplated benefits from such activity may be subject to a number of significant challenges and uncertainties, including integration issues, coordination between geographically separate organizations, and competitive factors in the marketplace. We could also encounter unforeseen transaction and integration-related costs or other circumstances such as unforeseen liabilities or other issues. Any of these circumstances could result in increased costs, decreased revenue, decreased synergies and the diversion of management time and attention. If we are unable to achieve our objectives within the anticipated time frame, or at all, the expected benefits may not be realized fully or at all, or may take longer to realize than expected, which could have an adverse effect on our business, financial condition and results of operations, or cash flows. Any of these risks could harm our business. In addition, to facilitate these acquisitions or investments, we may seek additional equity or debt financing, which may not be available on terms favorable to us or at all, which may affect our ability to complete subsequent acquisitions or investments, and which may affect the risks of owning our common stock.
A system failure or breach of system or network security could delay or interrupt services to our customers or subject us to significant liability.
We have implemented security measures such as firewalls, virus protection, intrusion detection and access controls to address the risk of computer viruses and unauthorized access. However, there can be no assurances that any of these efforts will be adequate to prevent a system failure, accident or security breach, any of which could result in a material disruption to our business. In addition, substantial costs may be incurred to remedy the damages caused by any such disruptions.
Because we generally recognize revenues from our subscription service over the subscription term, a decrease in new subscriptions or renewals during a reporting period may not be immediately reflected in our operating results for that period.
We generally recognize revenues from customers ratably over the terms of their subscriptions. Net new annual contract value from new subscriptions, expanded contracts and contract renewals entered into during a period can generally be expected to generate revenues for the duration of the subscription term. As a result, a small portion of the revenues we report in each period are derived from the recognition of deferred revenues relating to subscriptions entered into during previous periods. Consequently, a decrease in new or renewed subscriptions in any single reporting period will have a limited impact on our revenues for that period. In addition, our ability to adjust our cost structure in the event of a decrease in new or renewed subscriptions may be limited.
Further, a decline in new subscriptions, expanded contracts or renewals in a given period may not be fully reflected in our revenues for that period, but they will negatively affect our revenues in future periods. Accordingly, the effect of significant downturns in sales and market acceptance of our services, and changes in our rate of renewals, may not be fully reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as revenues from new customers are generally recognized over the applicable subscription term. Additionally, due to the complexity of certain customer contracts, the actual revenue recognition treatment required under Accounting Standard Codification Topic 606, “Revenue from Contracts with Customers (“Topic 606”)” depends on contract-specific terms and may result in greater variability in revenues from period to period. In addition, a decrease in new subscriptions, expansion contracts or renewals in a reporting period may not have an immediate impact on billings for that period due to factors that may offset the decrease, such as an increase in billings duration, the dollar value of contracts with future start dates, or the dollar value of collections in the current period related to contracts with future start dates.
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The COVID-19 pandemic could continue to materially adversely affect our business, financial condition, results of operations, cash flows and day-to-day operations.
The outbreak of COVID-19, a novel strain of coronavirus first identified in China, which has spread across the globe including the U.S., has had an adverse impact on our operations and financial condition. The response to this coronavirus by federal, state and local governments in the U.S. has resulted in significant market and business disruptions across many industries and affecting businesses of all sizes. This pandemic has also caused significant stock market volatility and further tightened capital access for most businesses. Given that the COVID-19 pandemic and its disruptions are of an unknown duration, they could have an adverse effect on our liquidity and profitability.
As a result of these events, we assessed our near-term operations, working capital, finances and capital formation opportunities, and implemented, in late March 2020, a downsizing of our operations to preserve cash resources and focus our operations on client-centric sales and project management activities. The pandemic and its effects resulted in significant impact on our customers operations, specifically medical and dental practices ability to operate. Other factors related to this coronavirus that could negatively impact our ability to continue operations include the market demand for our products and services, our ability to service the needs of our clients and prospects, potential contract cancellations, project scope reductions and project delays, our ability to fulfill our current backlog, and the ability of our vendors to continue to provide us with product to fulfill our customers’ orders. In light of these extenuating circumstances, there is no assurance that we will be successful in growing and maintaining our business with our clients. If our clients or prospects are unable to obtain project financing and we are unable to increase revenues, or otherwise generate cash flows from operations, we will not be able to successfully execute on the various strategies and initiatives we have set forth in this Report to grow our business.
The ultimate magnitude of COVID-19, including the extent of its impact on our financial and operational results, which could be material, will depend on the length of time that the pandemic continues, its effect on the demand for our products and our supply chain, the effect of governmental regulations imposed in response to the pandemic, as well as uncertainty regarding all of the foregoing. We cannot at this time predict the full impact of the COVID-19 pandemic, but it could have a larger material adverse effect on our business, financial condition, results of operations and cash flows beyond what is discussed within this Report.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
The Company operates from its new 7,650 square foot headquarters located in Ocoee, Florida which has been leased on a six year and one month lease beginning January 2022, with an optional five-year renewal term. This office replaces its 4,100 square foot office located in Winter Garden, Florida which is leased by the Company through May 31, 2022. The Company also operates from a 2,100 square foot office space in Concord, NC which is leased by the Company through August 31, 2023.The Company also operates from a 630 square foot office space in Scottsdale, AZ which is leased by the Company to May 12, 2023.
Item 3. Legal Proceedings
The Company from time to time, may be a party to various litigation, claims and disputes, arising in the ordinary course of business. While the ultimate impact of such actions cannot be predicted with certainty, we believe the outcome of these matters, except for that noted below, will not have a material adverse effect on our financial condition or results of operations.
On August 18, 2021 the Company received a Notice of Disposition of Collateral under section 9-611 of the Uniform Commercial Code (“UCC”) (Arizona Revised Statutes 47-611) purporting to set a foreclosure sale, under the UCC, of the Company’s assets that were previously pledged as security to a Lender. On August 24, 2021 the Company received a Default Notice from the Lender asserting that the Company was obligated to pay $863,274. The Lender alleged that it had made certain loans and other financial accommodations in the form of guaranties to our Company beginning in approximately of March of 2009 that was secured by all of the assets our Company. We initiated an investigation into the matter and concluded that we had repaid all of the loans (including tendering payment of $28,577.82 for various credit card obligations with JP Morgan Chase Bank which the Lender rejected on August 4, 2021) and any loans that had not been repaid were released under the terms of a Recapitalization Agreement dated November 1, 2016. We then retained Arizona counsel to prepare an Emergency Application for Temporary Restraining Order and Preliminary Injunction against the Lender in order to stop the foreclosure sale. We are currently in negotiations with Lender to resolve the dispute. We believe the claims of the Lender are without merit and intend to vigorously defend the matter.
On June 15, 2021, the Company received a Complaint filed with the Circuit Court of the Ninth Judicial Circuit for Orange County, Florida. The Complaint alleges a breach of a previously entered into 2018 Settlement Agreement for which payments have not been made. The Complainant agreed to begin arbitration on August 31, 2021. We believe these claims are without merit.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a) Market Information
Our common stock is quoted on OTC Link (previously “Pink Sheets”) operated by OTC Markets Group Inc. (“OTC Link”) and was eligible for the “piggyback” exception of Exchange Act Rule 15c2-11(f)(3) under the symbol “ICCT”.
(b) Holders.
As of December 31, 2021, there were 526 holders of record of our common stock, with 167,493,479 shares of our common stock issued and outstanding.
We have not declared or paid dividends on our Common Stock since our formation, and we do not anticipate paying dividends in the foreseeable future.
(e) Sale of Unregistered Securities
Information with respect to sales of unregistered shares of the Common Stock of the Company during the fiscal year ended December 31, 2021 and 2020 is set forth in the Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2021 and 2020, contained in Item 8. Financial Statements and Supplementary Data. All such sales were to accredited investors and were made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. The proceeds were used by the Company for working capital purposes and funding acquisitions.
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Item 6. Selected Financial Data (in thousands except per share data)
As a smaller reporting company, we are not required to provide disclosure pursuant to this item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the notes to those financial statements included elsewhere in this annual report. This discussion contains forward-looking statements, which are based on our assumptions about the future of our business. Our actual results will likely differ materially from those contained in the forward-looking statements. Please read “Cautionary Note Regarding Forward-Looking Statements” included at the beginning of this annual report for additional information.
About the Company
iCoreConnect Inc., (the “Company”), a Nevada Corporation, is a market leading cloud-based software and technology company focused on increasing workflow productivity and customer profitability through its enterprise platform of applications and services.
During 2021 we developed our newest products iCoreVerify and iCoreCloud and enhanced our iCoreRx product.
iCoreVerify is a HIPAA compliant SaaS solution that allows practices to verify patient insurance benefits automatically and on-demand using our real time technology. It provides the practice with the ability to check available patient benefits directly from the payer’s in real-time. The system returns results typically in less than one second for most responses. This substantially reduces the phone calls and labor hours for the practice. This tool integrates with most popular practice management systems.
iCoreCloud offers customers the ability to backup their on-premise servers and computers to the cloud. iCoreCloud is a HIPAA compliant and automated backup solution. The data backed up is encrypted both in transit and while at rest. In case of full data loss, the mirrored data in the cloud can be seamlessly restored back to the practice on a new computer or a server. The data is stored encrypted in HIPAA compliant data centers with multiple layers of redundancy. The data centers are physically secure with restricted personnel and biometric access. The locations are also guarded by security 24 hours a day, 365 days a year.
iCoreRx is a HIPAA compliant electronic prescription software that integrates with popular Practice Management and EHR systems. The software can also be a stand-alone product. The software is cloud based allowing providers flexibility and freedom to access the software anytime or anywhere they have an internet connection. There is a built-in drug and medication directory that provides clear, concise, point-of-care drug information including dosing, warning, and precautions, as well as clinical content. iCoreRx provides a doctor’s “favorites” list (templates) and warns the doctor when there is the potential for drug interactions, and drug allergy interactions. Within the software we provide a medication and drug history giving the doctor a more complete picture of a patient’s medication history for better informed, efficient, and safer care decisions. iCorePDMP - is an add-on to our iCoreRx software that seamlessly integrates with state databases to automate prescription drug monitoring. Providers in many states are required to check the patient’s Prescription Drug Monitoring Program (PDMP/PMP) medication history before prescribing controlled substances. This service provides a one-click real-time access to the state databases without the need to manually enter data. The state PDMP sites may provide Narx Scores and an interactive visualization of usage patterns to help the prescriber identify potential risk factors.
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SaaS Offerings
The Company currently markets secure Health Insurance Portability and Accountability Act (HIPAA) compliant cloud-based software as a service (SaaS) offering under the names of iCoreRx, iCorePDMP, iCoreEPCS, iCoreVerify, iCoreHuddle, iCoreHuddle+, iCoreCodeGenius, iCoreExchange, iCoreCloud, iCorePay, iCoreSecure, and iCoreIT. The Company’s software is sold under annual recurring revenue subscriptions.
Managed IT Services (MSP and MSaaS)
The trend in IT Services companies for over a decade has been to move away from a “Break/Fix '' model to a “Managed Service Provider (MSP)” model with recurring revenue. TrinIT was an early adopter operating in the MSP and MSaaS market.
The MSP/MSaaS approach, by using preventative measures, keeps computers and networks up and running while data is accessible and safeguarded. Installation of critical patches and updates to virus protection are automated. Systems are monitored and backed up in real-time. They are fixed or upgraded before they cause a service disruption. A Unified Threat Management solution is deployed to protect against virus, malware, SPAM, phishing and ransomware attacks. Remote technical support is a click away. All support is delivered at a predictable monthly cost. By leveraging managed services with our expertise in cloud computing, our customers can easily scale their business without extensive capital investment or disruption in services.
The Company is positioned to address the growing need for managed services: Our current and future customers need managed IT services, along with cloud computing, storage and HIPAA compliant backup and encryption; Managed service providers that can support the migration to cloud computing are in high demand; The decision makers for our current technology and those for managed services are, in many cases, the same person or group of people; Our management team has decades of experience operating successful IT companies; and the MSP revenue model matches our SaaS, MSaaS MRR (monthly recurring revenue) models.
Financing
We are currently funding our business capital requirements through revenues from product sales and services and sales of our Common Stock and debt arrangements. While we intend to seek additional funding, if revenue increases to a point where we are able to sustain ourselves and increase our budget to match our growth needs, we may significantly reduce the amount of investment capital we seek. The amount of funds raised, and revenue generated, if any, will determine how aggressively we can grow and what additional projects we will be able to undertake. No assurance can be given that we will be able to raise additional capital when needed or at all, or that such capital, if available, will be on terms acceptable to us. If we are unable to, or do not raise additional capital in the near future or if our revenue does not begin to grow as we expect, we will have to curtail our spending and downsize our operations.
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Critical Accounting Policies and Estimates
Our financial statements, which were prepared in accordance with generally accepted accounting principles as recognized in the United States of America. The preparation of these financial statements required that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities. We based our estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Revenue Recognition
We have 5 primary sources of revenue as of December 31, 2021:
| 1. | Electronic Prescription Software |
| 2. | Insurance Verifications |
| 3. | ICD-10 Medical Coding Software |
| 4. | Encrypted and HIPAA Compliant Secure email |
| 5. | MSaaS software |
1) Electronic Prescription software services are provided an annual subscription basis using the software as a service (‘SaaS’) model with revenue recognized ratably over the contract term.
2) Insurance verification services are provided on an annual subscription basis using the software as a service (‘SaaS’) model with revenue recognized ratably over the contract term.
3) ICD-10 Medical Coding services are provided on an annual subscription basis using the software as a service (“SaaS”) model with revenues recognized ratably over the contract term.
4) Encrypted and HIPAA compliant and secure email services are provided on an annual subscription basis using the software as a service (“SaaS”) model with revenues recognized ratably over the contract term.
5) MSaaS software services are provided on an annual subscription basis using the software as a service (‘SaaS’) model with revenue recognized ratably over the contract term.
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Software Development Capitalization and Amortization
We account for software development costs, including costs to develop software products or the software component of products to be marketed to external users.
In accordance with ASC 350, Internal-Use-Software, research and planning phase costs are expensed as incurred and development phase costs including direct materials and services, payroll and benefits and interest costs are capitalized.
We have determined that technological feasibility for our products to be marketed to external users was reached before the release of those products and, as a result, the development costs and related acquisition costs after the establishment of technological feasibility were capitalized as incurred. Capitalized costs for software to be marketed to external users are amortized based on current and projected future revenue for each product with an annual minimum cost equal to the straight-line amortization of the costs over three years.
Income Taxes
The Company follows the asset and liability approach to accounting for income taxes. Under this method, deferred tax assets and liabilities are measured based on differences between the financial reporting and tax bases of assets and liabilities measured using enacted tax rates and laws that are expected to be in effect when differences are expected to reverse. Valuation allowances are established when it is necessary to reduce deferred income tax assets to the amount, if any, expected to be realized in future years.
ASC 740, Accounting for Income taxes (‘ASC 740’), requires that deferred tax assets be evaluated for future realization and reduced by a valuation allowance to the extent we believe a portion more likely than not will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent cumulative loss experience and expectations of future taxable income by taxing jurisdictions, the carry-forwarding periods available to us for tax reporting purposes and other relevant factors.
Stock Based Compensation
The Company estimates the fair value of each option award on the date of grant using a Black-Scholes option pricing model that uses the following assumptions. The Company estimates the fair value of its shares of restricted Common Stock using the closing stock price of its common stock on the date of the award. The Company estimates the volatility of its Common Stock at the date of grant based on its historical stock prices. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. The Company uses the risk-free interest rate of the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. The Company has never paid cash dividends on its Common Stock and does not anticipate paying any cash dividends in the foreseeable future.
Long-Lived Assets and Goodwill
The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35, Property, Plant and Equipment, Impairment or Disposal of Long-lived Assets. This accounting standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. As of December 31, 2021 there is no impairment of Long-lived Assets.
The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other. Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed. ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. During the fourth quarter of 2020, the Company adopted ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which the carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. As of December 31, 2021 there is no impairment of the Company’s Goodwill.
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Results of Operations
The following table sets forth our selected financial data for the periods indicated below:
iCoreConnect Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| Twelve Months Ended |
| |||||
|
| December 31, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Revenue |
| $ | 4,956,552 |
|
| $ | 2,123,587 |
|
Cost of sales |
|
| 1,580,390 |
|
|
| 1,008,843 |
|
Gross profit |
|
| 3,376,162 |
|
|
| 1,114,744 |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 5,232,839 |
|
|
| 3,447,014 |
|
Depreciation and amortization |
|
| 1,430,805 |
|
|
| 906,060 |
|
Total operating expenses |
|
| 6,663,644 |
|
|
| 4,353,074 |
|
Loss from operations |
|
| (3,287,482 | ) |
|
| (3,238,330 | ) |
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
Interest expense |
|
| (500,878 | ) |
|
| (238,820 | ) |
Financing costs |
|
| (1,513,366 | ) |
|
| - |
|
Other income (expense) |
|
| 7,497 |
|
|
| (50,733 | ) |
PPP loan forgiveness |
|
| 330,047 |
|
|
| - |
|
Gain on cancellation of liabilities |
|
| - |
|
|
| 36,642 |
|
Total other income (expense) |
|
| (1,676,700 | ) |
|
| (252,911 | ) |
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (4,964,182 | ) |
| $ | (3,491,241 | ) |
|
|
|
|
|
|
|
|
|
Net loss per share available to common stockholders, basic and diluted |
| $ | (0.03 | ) |
| $ | (0.05 | ) |
|
|
|
|
|
|
|
|
|
Weighted average number of shares, basic and diluted |
|
| 146,726,959 |
|
|
| 76,459,645 |
|
The accompanying notes are an integral part of these consolidated financial statements
Twelve months ended December 31, 2021 compared to the twelve months ended December 31, 2020
Revenues. Net revenues grew to $4,956,552 for 2021 compared to $2,123,587 for the 2020 period, an increase of 133%. Revenue growth was driven by a combination of strong organic growth in both new and existing products as well as with the asset acquisitions of Advantech IT, Business Computer Solutions and Spectrum Technology Solutions.
Cost of sales. Cost of sales of $1,580,390 for the 2021 period increased $571,547 when compared to $1,008,843 for the 2020 period. The increase between periods was primarily due to the additional costs of servicing the organic growth, the addition of the three asset acquisitions.
Selling, general and administrative expenses. Selling, general and administrative expenses of $5,232,839 for the 2021 period increased $1,785,825 or 52% when compared to $3,447,014 for the 2020 period. The increase in expenses year on year we due to higher labor costs need to manage and maintain both the organic growth along with serving the additions related to three asset acquisition customers.
Depreciation and amortization expenses. Depreciation and amortization expenses of $1,430,805 for the 2021 period increased $524,745 or 58% compared to $906,060 for the 2020 period. The increase between periods was primarily due to $421,667 amortization of capitalized software and $866,186 amortization of goodwill and intangibles associated with the acquisition of Advantech IT, Business Computer Solutions and Spectrum Technology Solutions.
Interest expense. Interest expense of $500,878 for the 2021 period increased $262,058 or approximately 110% when compared to $238,820 for the 2020 period. The primary driver for the increase in interest expense was due to the increase in debt taken out by the Company to help fund the asset acquisitions and operating expenses.
Other income (expense). Other income of $7,497 for the 2021 period increased by $58,230 when compared to Other expense of $50,733 for the 2020 period.
Financing costs. The Company incurred financing costs of $1,513,366 in 2021 compared to $nil for 2020.The loss was driven by the issuance of convertible debt coupled with warrants and inducement shares related to the asset acquisitions during 2021.
PPP loan forgiveness. The Company received notice of forgiveness for its Paycheck Protection Plan loan in 2021 including all related interest in the amount of $330,047 in comparison to $nil for 2020.
Gain on cancellation of debt. The Company did not incur a cancellation of other debts in 2021 compared $36,642 for the 2020 period.
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GOING CONCERN AND LIQUIDITY
The following table sets forth our selected financial data for the periods indicated below and the percentage dollar increase (decrease) of such items from period to period:
|
| December 31, |
|
| December 31, |
|
| % Incr/ |
| |||
Balance Sheet Data |
| 2021 |
|
| 2020 |
|
| (Decr) |
| |||
Total Current Assets |
| $ | 1,013,140 |
|
| $ | 154,194 |
|
|
| 557 | % |
Total Current Liabilities |
|
| 4,054,246 |
|
|
| 3,185,195 |
|
|
| 33 | % |
Working capital (deficit) |
|
| (3,041,106 | ) |
|
| (3,031,001 | ) |
|
| 6 | % |
Deferred Revenue |
|
| - |
|
|
| 73,033 |
|
|
| (100 | )% |
Weighted Average Common Shares Outstanding |
|
| 146,726,959 |
|
|
| 76,459,645 |
|
|
|
|
|
The increase in shares outstanding was driven by issuance of Common Stock for cash and asset acquisitions, the conversion of convertible notes payable and stock compensation expense.
The following table summarizes the impact of operating, investing and financing activities on our cash flows for the years ended December 31, 2021 and 2020.
|
| Twelve Months Ended |
| |||||
|
| December 31, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Net cash used in operating activities |
| $ | (2,896,248 | ) |
| $ | (1,270,491 | ) |
Net cash used in investing activities |
|
| (3,518,504 | ) |
|
| (917,900 | ) |
Net cash provided by financing activities |
|
| 6,478,940 |
|
|
| 1,751,010 |
|
Net Increase / (Decrease) in cash |
|
| 64,188 |
|
|
| (437,381 |
|
Cash and cash equivalents at the beginning of the year |
|
| 7,619 |
|
|
| 445,000 |
|
Cash and cash equivalents at the end of the year |
| $ | 71,807 |
|
| $ | 7,619 |
|
The primary factors that influence our liquidity include, but are not limited to, the amount and timing of our revenues, cash collections from our clients, investments in research and development, and ongoing capital raise efforts.
Operating Activities: Net cash required by operating activities for the year ended December 31, 2021 increased by $1,625,757 to $2,896,248 compared to $1,270,491 utilized in the 2020 period. The increase in cash utilized by operating activities compared to the 2020 period was attributable to a $467,353 change in accounts receivable and $292,183 in prepaid expenses during the 2021 period. Future spending on operating activities is expected to be funded by the revenues realized by the Company and the sale of additional shares of common stock.
Investing Activities: Net cash used by investing activities for the year ended December 31, 2021 increased by $2,600,604 to $3,518,504 compared to $917,900 utilized in the 2020 period. The increase in cash utilized by investing activities was primarily due to the purchases of Advantech, Business Technology Solutions and Spectrum Technology Solutions. Future spending on investing activities is expected to be funded by the sale of additional shares of common stock.
Financing Activities: Net cash provided by financing activities of $6,478,940 for the year ended December 31, 2021 was $4,727,930 higher than the $1,751,010 for the year ended 2020, primarily due to a change in proceeds from the issuance of common stock of $2,776,230 in 2021 versus $676,000 in proceeds in 2020. Net proceeds from debt increased to $3,261,488 in 2021 versus $1,050,488 in 2020. Payments on debt increased to $510,650 in 2021 from $70,793 in 2020.
U. S. GAAP requires management to assess a company’s ability to continue as a going concern within one year from the financial statement issuance and to provide related note disclosures in certain circumstances.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
For the fiscal year period ended December 31, 2021, the Company generated an operating loss of $4,964,182. In addition, the Company has an accumulated deficit, and net working capital deficit of $82,795,263 and $3,041,106. The Company’s activities were primarily financed through private placements of equity securities and issuance of debt. The Company intends to raise additional capital through the issuance of debt and/or equity securities to fund its operations. The Company is reliant on future fundraising to finance operations in the near future. The financing may not be available on terms satisfactory to the Company, if at all. In light of these matters, there is substantial doubt that the Company will be able to continue as a going concern.
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In October of 2020, the Company signed a $53,000 convertible promissory note payable to a different finance company due twelve (12) months after issuance and received $50,000 net of closing fees. Interest at 10% per annum is not due until maturity. One hundred eighty (180) days following the date of funding and thereafter, the note is convertible into common stock of the Company ("Common Stock"). The conversion price of the note is 61% of the Market Price (as defined in the note) for the Common Stock (a discount of 39%) determined on the basis of the average of the two (2) lowest traded prices for the Common Stock during the prior twenty (20) trading day period. There is an ascending prepayment penalty percentage applied should the Company prepay the note during the first one hundred eighty (180) days after which the Company shall have no right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding Common Stock at the time of conversion at any one time. This note was paid in 2021.
The Company issued a note payable to a related party on December 31, 2018 with a principal amount of $714,000, bearing interest at a rate of 18% per annum, with monthly principal and accrued interest payments and with a balloon payment due by the maturity date of December 31, 2019. The balloon payment due on December 31, 2019 was not made and the Company issued, in exchange for the original note, a new note dated December 31, 2019 with a principal amount of $556,000, bearing interest at a rate of 18% per annum, with monthly principal and accrued interest payments and a balloon payment due by the maturity date of December 31, 2020.The amounts owing on the note as of December 31, 2019 were $556,000 of principal plus a nominal amount of accrued interest. As of December 31, 2020, $535,021 of principal was outstanding on this note payable. Subsequent to the end of fiscal 2020, the maturity on note payable to the related party was extended to a new 2-year term note payable bearing interest rate payable of 18% per annum with a maturity date of December 31, 2023. The note will pay monthly cash interest only in the first year (12 months) of note payable term. In the 2nd year, the note payable will be repaid with 12 monthly installment payments of interest and principal until fully repaid. This note has been paid subsequent to year end.
In April 2021, the Company signed a $150,000 convertible promissory note with a maturity date twelve months after issuance and received in exchange $150,000 from a finance company (the “Investor” or “Holder”). An Interest charge of 12% per annum shall accrue and be paid on the maturity date. The note is convertible into the Company’s Common Stock at fixed conversion price $0.10 per common share. The Company has right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding Common Stock at the time of conversion at any one time. The Company also issued to the Holder 780,000 restricted shares of the Company’s Common Stock and 2,600,000 cash Warrant Shares with a 5-year term. The exercise price per share of Common Stock under this Warrant is $0.20 per share for the first 1,300,000 Warrant Shares and $0.25 for the next 1,300,000 Warrant Shares.
In April 2021, the Company signed a $350,000 convertible promissory note with a maturity date twelve months after issuance and received in exchange $350,000 from the same finance company (the “Investor” or “Holder”). An Interest charge of 12% per annum shall accrue and be paid on the maturity date. The note is convertible into the Company’s Common Stock at a fixed conversion price of $0.10 per common share. The Company has right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding Common Stock at the time of conversion at any one time.
In April 2021, the Company signed a $250,000 convertible promissory note with a maturity date twelve months after issuance and received in exchange $250,000 from a third finance company (the “Investor” or “Holder”). An Interest charge of 12% per annum shall accrue and be paid on the maturity date. The note is convertible into the Company’s Common Stock at fixed conversion price $0.10 per common share. The Company has right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding Common Stock at the time of conversion at any one time. The Company also issued to the Holder 390,000 restricted shares of the Company’s Common Stock and 1,300,000 cash Warrant Shares with a 5-year term. The exercise price per share of Common stock under this Warrant is $0.20 per share for the first 650,000 Warrant Shares and $0.25 for the next 650,000 Warrant Shares. During the year the Investor converted $125,000 of outstanding principal and interest into 1,250,000 shares of the Company’s common stock.
In April 2021, the Company signed a $250,000 convertible promissory note with a maturity date twelve months after issuance and received in exchange $245,000 from a third finance company (the “Investor” or “Holder”). An Interest charge of 12% per annum shall accrue and be paid on the maturity date. The note is convertible into the Company’s Common Stock at fixed conversion price $0.10 per common share. The Company has right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding Common Stock at the time of conversion at any one time. The Company also issued to the Holder 390,000 restricted shares of the Company’s Common Stock and 1,300,000 cash Warrant Shares with a 5-year term. The exercise price per share of Common stock under this Warrant is $0.20 per share for the first 650,000 Warrant Shares and $0.25 for the next 650,000 Warrant Shares. During the year the Investor converted $35,000 of outstanding principal and interest into 350,000 shares of the Company’s common stock.
In May 2021, the Company signed a $250,000 convertible promissory note with a maturity date twelve months after issuance and received in exchange $248,000 net of fees from a fifth finance company (the “Investor” or “Holder”). An Interest charge of 12% per annum shall accrue and be paid on the maturity date. The note is convertible into the Company’s Common Stock at fixed conversion price $0.10 per common share. The Company has right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding Common Stock at the time of conversion at any one time. The Company also issued to the Holder 390,000 restricted shares of the Company’s Common Stock and 1,300,000 cash Warrant Shares with a 5-year term. The exercise price per share of Common stock under this Warrant is $0.20 per share for the first 650,000 Warrant Shares and $0.25 for the next 650,000 Warrant Shares. During the year the Investor converted $28,846 of outstanding principal and interest into 288,463 shares of the Company’s common stock
In August 2021, the Company signed a $1,000,000 and $500,000 promissory note with a maturity date 24 months after issuance from the preliminary finance company in April 2021 (the “Investor” or “Holder”). An Interest charge of 15% per annum shall accrue and be paid on the maturity date. The Company also issued to the Holder 1,000,000 restricted shares of the Company’s Common Stock and 1,500,000 cash Warrant Shares with a 5-year term. The exercise price per share of Common stock under this Warrant is $0.25 per share.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable as a smaller reporting company, as defined by § 229.10(f)(1), is not required to provide the information required by Item 305 of Reg S-K.
| 20 |
| Table of Contents |
Item 8. Financial Statements and Supplementary Data.
A list of financial statements filed herewith is contained and is set forth on the financial statements that immediately follow this page of this Report and is incorporated by reference herein. The financial statement schedules have been omitted because they are not required, not applicable or the information has been included in the Exhibit Index beginning on Part IV of this Annual Report on Form 10-K and are incorporated herein by reference.
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FINANCIAL STATEMENTS – AS OF DECEMBER 31, 2021 AND 2020 |
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| F-2 |
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| F-3 |
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| F-4 |
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) |
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| F-5 |
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| F-6 |
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| F-7 |
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| F-1 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To Stockholders and Board of Directors of
iCoreConnect Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of iCoreConnect Inc. (the “Company”) as of December 31, 2021, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021, and the consolidated results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. We determined that there are no critical audit matters.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2021.
New York, NY
April 15, 2022
| F-2 |
To the Board of Directors and Shareholders of iCoreConnect Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of iCoreConnect Inc. (the “Company”) as of December 31, 2020 and the related consolidated statement of operations, shareholders’ equity (deficit), and cash flows for the period ended December 31, 2020, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue recognition in relation to fraud
As described in Note 2 to the consolidated financial statements, management applies FASB Topic 606, Revenue from Contacts with Customers (“ASC 606”) to recognize revenue. Management recognizes revenue upon transfer of control of promised products to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products. The Company’s revenue is divided into five sources, but the vast majority can be most simply described as Software as a Service (“SaaS”) revenue. SaaS revenue transactions are recognized ratably over the contract term.
The principal considerations for our determination that performing procedures over the ratable recognition of SaaS revenue contracts and subsequent payment collections is a critical audit matter are there are more significant risks associated with the ratable recognition of this revenue. This in turn led to significant effort in performing our audit procedures which were designed to evaluate whether the contractual terms, the timing of revenue recognition and the subsequent collections were appropriately identified and accounted for by management under ASC 606.
Our audit procedures included, among others, understanding of controls relating to management’s revenue recognition process, examining transaction related documents, confirming revenues and outstanding receivables at the balance sheet date with a sample of the SaaS customers, and testing collections subsequent to the balance sheet date.
BF Borgers CPA PC
We have served as the Company's auditor since 2021
Lakewood, CO
April 15, 2021
| F-3 |
| Table of Contents |
iCoreConnect Inc.
CONSOLIDATED BALANCE SHEETS
|
| December 31, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
ASSETS |
|
|
|
|
|
| ||
Cash |
| $ | 71,807 |
|
| $ | 7,619 |
|
Accounts receivable, net |
|
| 629,047 |
|
|
| 126,472 |
|
Prepaid expenses and other current assets |
|
| 312,286 |
|
|
| 20,103 |
|
Total current assets |
|
| 1,013,140 |
|
|
| 154,194 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 92,562 |
|
|
| 2,405 |
|
Right of use lease asset - operating |
|
| 99,054 |
|
|
| 150,477 |
|
Software development costs, net |
|
| 592,781 |
|
|
| 768,907 |
|
Acquired technology, net |
|
| 277,966 |
|
|
| 753,794 |
|
Customer relationships, net |
|
| 3,069,874 |
|
|
| 369,524 |
|
Goodwill |
|
| 1,484,966 |
|
|
| 491,376 |
|
Total long-term assets |
|
| 5,617,203 |
|
|
| 2,536,483 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 6,630,343 |
|
| $ | 2,690,677 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | 1,641,750 |
|
| $ | 1,664,125 |
|
Operating lease liability, current portion |
|
| 66,738 |
|
|
| 89,088 |
|
Current maturities of long-term debt |
|
| 2,325,339 |
|
|
| 1,429,207 |
|
Deferred revenue, current portion |
|
| 20,419 |
|
|
| 2,775 |
|
Total current liabilities |
|
| 4,054,246 |
|
|
| 3,185,195 |
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current maturities |
|
| 1,538,488 |
|
|
| - |
|
Operating lease liability, net of current portion |
|
| 32,318 |
|
|
| 61,389 |
|
Deferred revenue, net of current portion |
|
| - |
|
|
| 73,033 |
|
Total long-term liabilities |
|
| 1,570,806 |
|
|
| 134,422 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
| 5,625,052 |
|
|
| 3,319,617 |
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|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT) |
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|
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|
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|
|
Preferred Stock, par value $0.001; 10,000,000 shares authorized; Issued and Outstanding: 0 as of December 31, 2021 and 0 as of December 31, 2020. |
|
| - |
|
|
| - |
|
Common Stock par value $0.001; 600,000,000 shares authorized; Issued and Outstanding: 167,493,479 as of December 31, 2021 and 90,081,336 as of December 31, 2020 |
|
| 167,493 |
|
|
| 90,081 |
|
Additional paid-in-capital |
|
| 83,633,061 |
|
|
| 77,112,060 |
|
Accumulated deficit |
|
| (82,795,263 | ) |
|
| (77,831,081 | ) |
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) |
|
| 1,005,291 |
|
|
| (628,940 | ) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
| $ | 6,630,343 |
|
| $ | 2,690,677 |
|
The accompanying notes are an integral part of these consolidated financial statements
| F-4 |
| Table of Contents |
iCoreConnect Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| For the Years Ended |
| |||||
|
| December 31, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Revenue |
| $ | 4,956,552 |
|
| $ | 2,123,587 |
|
Cost of sales |
|
| 1,580,390 |
|
|
| 1,008,843 |
|
Gross profit |
|
| 3,376,162 |
|
|
| 1,114,744 |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 5,232,839 |
|
|
| 3,447,014 |
|
Depreciation and amortization |
|
| 1,430,805 |
|
|
| 906,060 |
|
Total operating expenses |
|
| 6,663,644 |
|
|
| 4,353,074 |
|
Loss from operations |
|
| (3,287,482 | ) |
|
| (3,238,330 | ) |
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
Interest expense |
|
| (500,878 | ) |
|
| (238,820 | ) |
Finance charges |
|
| (1,513,366 | ) |
|
| - |
|
Other income (expense) |
|
| 7,497 |
|
|
| (50,733 | ) |
Gain on cancellation of PPP loan |
|
| 330,047 |
|
|
| - |
|
Gain on cancellation of liabilities |
|
| - |
|
|
| 36,642 |
|
Total other income (expense) |
|
| (1,676,700 | ) |
|
| (252,911 | ) |
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (4,964,182 | ) |
| $ | (3,491,241 | ) |
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted |
| $ | (0.03 | ) |
| $ | (0.05 | ) |
|
|
|
|
|
|
|
|
|
Weighted average number of shares, basic and diluted |
|
| 146,726,959 |
|
|
| 76,459,645 |
|
The accompanying notes are an integral part of these consolidated financial statements
| F-5 |
| Table of Contents |
iCoreConnect Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
| Additional |
|
|
|
| Total |
| ||||||||
|
| Common stock |
|
| Paid In |
|
| Accumulated |
|
| Stockholders' |
| ||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity (Deficit) |
| |||||
Balances as at January 1, 2020 |
|
| 67,476,089 |
|
| $ | 67,476 |
|
| $ | 74,737,404 |
|
| $ | (74,339,840 | ) |
| $ | 465,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for cash |
|
| 7,128,002 |
|
|
| 7,128 |
|
|
| 1,032,872 |
|
|
| - |
|
|
| 1,040,000 |
|
Stock issued for conversion of convertible notes payable |
|
| 6,761,558 |
|
|
| 6,762 |
|
|
| 194,838 |
|
|
| - |
|
|
| 201,600 |
|
Stock compensation expense |
|
| 2,124,693 |
|
|
| 2,125 |
|
|
| 421,175 |
|
|
| - |
|
|
| 423,300 |
|
Stock issued as origination fee in convertible debt agreement |
|
| 50,000 |
|
|
| 50 |
|
|
| 4,450 |
|
|
| - |
|
|
| 4,500 |
|
Stock issued for asset acquisition of TrinIT (Note 8) |
|
| 730,000 |
|
|
| 730 |
|
|
| 182,270 |
|
|
| - |
|
|
| 183,000 |
|
Stock issued for conversion of accounts payable |
|
| 1,000,000 |
|
|
| 1,000 |
|
|
| 249,781 |
|
|
| - |
|
|
| 250,781 |
|
Stock issued for stock option exercises |
|
| 5,000 |
|
|
| 5 |
|
|
| 995 |
|
|
| - |
|
|
| 1,000 |
|
Stock issued as commitment fee on note |
|
| 250,000 |
|
|
| 250 |
|
|
| 37,250 |
|
|
|
|
|
|
| 37,500 |
|
Stock issued as true-up portion of purchase agreement for Claricare |
|
| 4,555,994 |
|
|
| 4,556 |
|
|
| 251,025 |
|
|
|
|
|
|
| 255,581 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,491,241 | ) |
|
| (3,491,241 | ) |
Balances as at December 31, 2020 |
|
| 90,081,336 |
|
| $ | 90,081 |
|
| $ | 77,112,060 |
|
| $ | (77,831,081 | ) |
| $ | (628,940 | ) |
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Total |
| |||||
|
| Common stock |
|
| Paid In |
|
| Accumulated |
|
| Stockholders' |
| ||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity (Deficit) |
| |||||
Balances as at January 1, 2021 |
|
| 90,081,336 |
|
| $ | 90,081 |
|
| $ | 77,112,060 |
|
| $ | (77,831,081 | ) |
| $ | (628,940 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for cash |
|
| 42,719,600 |
|
|
| 42,720 |
|
|
| 2,733,510 |
|
|
|
|
|
|
| 2,776,230 |
|
Stock issued for conversion of fees for services payable |
|
| 16,376,047 |
|
|
| 16,376 |
|
|
| 802,427 |
|
|
|
|
|
|
| 818,803 |
|
Stock compensation expense |
|
| 3,151,416 |
|
|
| 3,151 |
|
|
| 148,206 |
|
|
|
|
|
|
| 151,357 |
|
Stock issued as origination fee in convertible debt agreement |
|
| 3,980,000 |
|
|
| 3,980 |
|
|
| 1,509,386 |
|
|
|
|
|
|
| 1,513,366 |
|
Stock issued for asset acquisition of Advantech |
|
| 5,000,000 |
|
|
| 5,000 |
|
|
| 495,000 |
|
|
|
|
|
|
| 500,000 |
|
Stock issued for asset acquisition of Business Computer Solutions |
|
| 250,000 |
|
|
| 250 |
|
|
| 24,750 |
|
|
|
|
|
|
| 25,000 |
|
Stock issued for asset acquisition of Spectrum Technology Solutions |
|
| 4,046,617 |
|
|
| 4,047 |
|
|
| 495,953 |
|
|
|
|
|
|
| 500,000 |
|
Stock issued for conversion of convertible debt |
|
| 1,888,463 |
|
|
| 1,888 |
|
|
| 311,769 |
|
|
|
|
|
|
| 313,657 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (4,964,182 | ) |
|
| (4,964,182 | ) |
Balances as at December 31, 2021 |
|
| 167,493,479 |
|
| $ | 167,493 |
|
| $ | 83,633,061 |
|
| $ | (82,795,263 | ) |
| $ | 1,005,291 |
|
The accompanying notes are an integral part of these consolidated financial statements
| F-6 |
| Table of Contents |
iCoreConnect Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| December 31, |
| December 31, |
| |||
|
| 2021 |
| 2020 |
| |||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| |||
Net loss |
| $ | (4,964,182 | ) |
| $ | (3,491,241 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation expense |
|
| 143,406 |
|
|
| 6,595 |
|
Amortization expense |
|
| 1,287,853 |
|
|
| 898,622 |
|
Finance charges |
|
| 1,513,366 |
|
|
| - |
|
Forgiveness of PPP loan |
|
| (330,047) |
|
|
| - |
|
Change in allowance for doubtful accounts |
|
| - |
|
|
| 60,000 |
|
Gain on cancellation of liabilities |
|
| - |
|
|
| (12,642 | ) |
Stock compensation expense |
|
| 331,945 |
|
|
| 422,175 |
|
Non-cash interest expense |
|
| 106,555 |
|
|
| 55,000 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (467,353 | ) |
|
| (85,472 | ) |
Prepaid expenses and other current assets |
|
| (292,183 | ) |
|
| (6,103 | ) |
Right of use asset, net of lease liability |
|
| (136,659 | ) |
|
| (2,000 | ) |
Accounts payable and accrued expenses |
|
| (33,560 | ) |
|
| 922,767 |
|
Deferred revenue |
|
| (55,389 | ) |
|
| (38,192 | ) |
NET CASH USED IN OPERATING ACTIVITIES |
|
| (2,896,248 | ) |
|
| (1,270,491 | ) |
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Cash portion of consideration paid to acquire TrinIT |
|
| - |
|
|
| (374,900 | ) |
Cash portion of consideration paid to acquire Advantech |
|
| (1,773,056 | ) |
|
|
|
|
Cash portion of consideration paid to acquire BCS |
|
| (94,880 | ) |
|
|
|
|
Cash portion of consideration paid to acquire Spectrum Technology Solutions |
|
| (1,350,000 | ) |
|
|
|
|
Purchases of capital assets |
|
| (55,027 | ) |
|
|
|
|
Additions to capitalized software |
|
| (245,541 | ) |
|
| (543,000 | ) |
NET CASH USED IN INVESTING ACTIVITIES |
|
| (3,518,504 | ) |
|
| (917,900 | ) |
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITES |
|
|
|
|
|
|
|
|
Net proceeds from debt |
|
| 3,261,488 |
|
|
| 676,000 |
|
Payments on debt |
|
| (510,650 | ) |
|
| (70,793 | ) |
Proceeds from issuance of common stock |
|
| 2,776,230 |
|
|
| 1,050,488 |
|
Conversion of convertible debt into common stock |
|
| 319,057 |
|
|
|
|
|
Conversion of fees for services payable |
|
| 632,815 |
|
|
|
|
|
Proceeds from exercise of employee stock options |
|
| - |
|
|
| 1,000 |
|
Conversion of debt into common stock |
|
| - |
|
|
| 94,315 |
|
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
| 6,478,940 |
|
|
| 1,751,010 |
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH |
|
| 64,188 |
|
|
| (437,381 | ) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD |
|
| 7,619 |
|
|
| 445,000 |
|
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD |
| $ | 71,807 |
|
| $ | 7,619 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
| $ |
|
|
| $ | 94,126 |
|
Stock issued for acquisition of TrinIT |
|
|
|
|
| $ | 183,000 |
|
Stock issued for acquisition of Advantech |
|
| 500,000 |
|
|
|
|
|
Stock issued for acquisition of Business Computer Solutions |
|
| 25,000 |
|
|
|
|
|
Stock issued for acquisition of Spectrum Technology Solutions |
|
| 500,000 |
|
|
|
|
|
Stock issued for conversion of convertible notes payable |
| $ | 63,846 |
|
| $ | 240,315 |
|
Stock issued for conversion of notes payable |
| $ |
|
|
| $ | - |
|
Stock issued for conversion of accounts payable |
| $ |
|
|
| $ | 250,000 |
|
The accompanying notes are an integral part of these consolidated financial statements
| F-7 |
| Table of Contents |
Notes to Consolidated Financial Statements
1. NATURE OF OPERATIONS
iCoreConnect Inc., (the “Company”), a Nevada Corporation, is a market leading cloud-based software and technology company focused on increasing workflow productivity and customer profitability through its enterprise platform of applications and services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidations
The accompanying consolidated financial statements are presented in United States dollars and include the accounts of the Company’s wholly owned subsidiaries, with all intercompany transactions eliminated. They have been prepared on the accrual basis in accordance with accounting principles generally accepted in the United States (GAAP). Significant accounting principles followed by the Company and the methods of applying those principles, which materially affect the determination of financial position, results of operations and cash flows are summarized below.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). ASC 820 established a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement) as follows:
Level 1 – Observable inputs that reflect quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market corroborated inputs.
Level 3 – Unobservable inputs for which there is little, if any, market activity for the asset or liability being measured. These inputs may be used with standard pricing models or other valuation or internally-developed methodologies that result in management’s best estimate of fair value.
The Company utilizes fair value measurements primarily in conjunction with the valuation of assets acquired and liabilities assumed in a business combination. In addition, certain nonfinancial assets and liabilities are to be measured at fair value on a nonrecurring basis in accordance with applicable GAAP. In general, nonfinancial assets including goodwill, other intangible assets and property and equipment are measured at fair value when there is an indication of impairment and are recorded at fair value only when an impairment is recognized.
As allowed by applicable FASB guidance, the Company has elected not to apply the fair value option for financial assets and liabilities to any of its currently eligible financial assets or liabilities. The Company’s financial instruments consist of cash, accounts receivable, accounts payable and notes payable. The Company has determined that the book value of its outstanding financial instruments as of December 31, 2021 and 2020, approximated their fair value due to their short-term nature.
Cash and Cash Equivalents
The Company classifies highly liquid temporary investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash balances at various financial institutions. Balances at United States banks are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk for cash on deposit.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are customer obligations due under normal trade terms. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the potential inability of certain customers to make required future payments on amounts due. Management determines the adequacy of this allowance by periodically evaluating the aging and past due nature of individual customer accounts receivable balances and considering the customer’s current financial situation as well as the existing industry economic conditions and other relevant factors that would be useful in assessing the risk of collectability. If the future financial condition of our customers were to deteriorate, resulting in their inability to make specific required payments, additions to the allowance for doubtful accounts may be required. In addition, if the financial condition of our customers improves and collections of amounts outstanding commence or are reasonably assured, then we may reverse previously established allowances for doubtful accounts. The Company has estimated and recorded an allowance for doubtful accounts of $36,142 and $77,000 as of December 31, 2021 and 2020, respectively.
Property, Equipment and Depreciation
Property, equipment, and leasehold improvements are recorded at their historical cost. Depreciation and amortization have been determined using the straight-line method over the estimated useful lives of the assets which are computers and office equipment (3 years) and for office furniture and fixtures (7 years). The cost of repairs and maintenance is charged to operations in the period incurred.
| F-8 |
| Table of Contents |
Software Development Costs and Acquired Software
The Company accounts for software development costs, including costs to develop software products or the software component of products to be sold to external users. In accordance with ASC 985-730, Computer Software Research and Development, research and planning phase costs are expensed as incurred and development phase costs including direct materials and services, payroll and benefits and interest costs are capitalized.
We have determined that technological feasibility for our products to be marketed to external users was reached before the release of those products. As a result, the development costs and related acquisition costs after the establishment of technological feasibility were capitalized as incurred. Capitalized costs for software to be sold to external users and software acquired in a business combination are amortized based on current and projected future revenue for each product with an annual minimum equal to the straight-line amortization over three years.
Long-Lived Assets and Goodwill
The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35, Property, Plant and Equipment, Impairment or Disposal of Long-lived Assets. This accounting standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. As of December 31, 2021 there is no impairment of Long-lived Assets.
The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other. Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed. ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. During the fourth quarter of 2020, the Company adopted ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which the carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. As of December 31, 2021 there is no impairment of the Company’s Goodwill.
Revenue Recognition
We have 5 primary sources of revenue as of December 31, 2021
| 1. | Electronic Prescription Software |
| 2. | Insurance Verifications |
| 3. | ICD-10 Medical Coding Software |
| 4. | Encrypted and HIPAA Compliant Secure email |
| 5. | MSaaS software |
| F-9 |
| Table of Contents |
1) Electronic Prescription software services are provided an annual subscription basis using the software as a service (‘SaaS’) model with revenue recognized ratably over the contract term.
2). Insurance verification services are provided on an annual subscription basis using the software as a service (‘SaaS’) model with revenue recognized ratably over the contract term.
3) ICD-10 Medical Coding services are provided on an annual subscription basis using the software as a service (“SaaS”) model with revenues recognized ratably over the contract term.
4) Encrypted and HIPAA compliant and secure email services are provided on an annual subscription basis using the software as a service (“SaaS”) model with revenues recognized ratably over the contract term.
5) MSaaS software services are provided on an annual subscription basis using the software as a service (‘SaaS’) model with revenue recognized ratably over the contract term.
The Company accounts for revenue from contracts with customers in accordance with ASU No. 2017-09, Revenue from Contracts with Customers and a series of related accounting standard updates (collectively referred to as “Topic 606”). This guidance sets forth a five-step revenue recognition model which replaced the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance and to require more detailed disclosures. The five steps of the revenue recognition model are: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
At contract inception, the Company assesses the goods and services promised in the contract with customers and identifies a performance obligation for each. To determine the performance obligation, the Company considers all products and services promised in the contract regardless of whether they are explicitly stated or implied by customary business practices. The timing of satisfaction of the performance obligation is not subject to significant judgment. The Company measures revenue as the amount of consideration expected to be received in exchange for transferring goods and services. Revenue is recognized net of any taxes collected from customers that are subsequently remitted to governmental authorities.
We recognize revenue for our service in accordance with accounting standard ASC 606. Our customers are acquired through our own salesforce and through the referrals from our many state association marketing partners. We primarily generate revenue from multiple software as a service (SaaS) offering, which typically include subscriptions to our online software solutions. The Company’s secondary source of revenue is professional services and other revenue related to customer onboarding, IT services and equipment sales that often precede a subscription service offering purchased by the customer. Approximately 80% of our revenue is subscription based with the remainder being professional services and other IT related revenue. The geographic concentration of our revenue is 100% in North America.
Management has determined that it has the following performance obligations related to its products and services: multiple software as a service (SaaS) offering, which typically include subscriptions to our online software solutions. The Company’s secondary source of revenue is professional services and other revenue related to customer onboarding, IT services and equipment sales that often precede a subscription service offering purchased by the customer. Revenue from Software as a Service, hardware, service repairs, and support & maintenance are all recognized at a point in time when control of the goods is transferred to the customer, generally occurring upon shipment or delivery dependent upon the terms of the underlying contract, or services is completed. Our customers do not have the right to take possession of the online software solution. Revenue from subscriptions, including additional fees for items such as incremental contacts, is recognized ratably over the subscription period beginning on the date the subscription is made available to customers. Substantially all subscription contracts are one year. We recognize revenue from on-boarding services and equipment as the services are provided. Amounts billed that have not yet met the applicable revenue recognition criteria are recorded as deferred revenue.
For contracts with customers that contain multiple performance obligations, the Company accounts for the promised performance obligations separately as individual performance obligations if they are distinct. In determining whether performance obligations meet the criteria for being distinct, the Company considers several factors, including the degree of interrelation and interdependence between obligations and whether or not the good or service significantly modifies or transforms another good or service in the contract. After identifying the separate performance obligations, the transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company generally determines the standalone selling prices based on the prices charged to customers. Judgment may be used to determine the standalone selling prices for items that are not sold separately, including taking into consideration either historical pricing practices or an adjusted market assessment. Unsatisfied and partially unsatisfied performance obligations as of the end of the reporting period primarily consist of products and services for which customer purchase orders have been accepted and that are in the process of being delivered.
Transaction price is calculated as the selling price less any variable consideration, consisting of rebates and discounts. Discounts provided to customers are known at contract inception. Rebates are calculated on the “expected value” method where the Company (1) estimates the probability of each rebate amount which could be earned by the distributor, (2) multiplies each estimated amount by its assigned probability factor, and (3) calculates a final sum of each of the probability-weighted amounts calculated in step (2). The sum calculated in step (3) is the rebate amount, which along with discounts reduces the amount of revenue recognized.
The Company has elected to account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment cost rather than as an additional promised service. As a result, the Company accrues the costs of shipping and handling when the related revenue is recognized. Costs incurred for shipping and handling are included in costs of goods sold on the Consolidated Statement of Operations. Amounts billed to a customer for shipping and handling are reported as revenue on the Consolidated Statement of Operations.
Advertising Costs
Advertising costs are reported in general and administrative expenses and include advertising, marketing and promotional programs and are charged as expenses in the year in which they are incurred. Advertising costs were $350,318 and $70,000 for the years ended December 31, 2021 and 2020, respectively.
Accounting for Derivative Instruments
The Company accounts for derivative instruments in accordance with ASC 815, which requires additional disclosures about the Company’s objectives and strategies for using derivative instruments, how the derivative instruments and related hedged items are accounted for, and how the derivative instruments and related hedging items affect the financial statements.
| F-10 |
| Table of Contents |
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible debt and preferred stock instruments are reviewed to determine whether or not they contain embedded derivative instruments that are required under ASC 815 to be accounted for separately from the host contract and recorded on the balance sheet at fair value. The fair value of derivative liabilities, if any, is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results.
Freestanding warrants issued by the Company in connection with the issuance or sale of debt and equity instruments are considered to be derivative instruments. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required to be classified as equity or as a derivative liability.
Financial Instruments With Down Round Features
With respect to financial instruments, the Company follows the guidance of FASB ASU 2017-11, “Earnings per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. Whereby ASU 2017-11 simplifies the accounting for certain financial instruments with down round features, a provision in an equity-linked financial instrument (or embedded feature) that provides a downround adjustment of the current exercise price based on the price of the future equity offerings. The standard requires companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for the purposes of determining liability of equity classification. Companies that provide earning per share (“EPS”) data will adjust their diluted EPS calculation for the effect of the feature when triggered (i.e. when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature) and will also recognize the effect of the trigger within equity.
Income Taxes
The Company follows the asset and liability approach to accounting for income taxes. Under this method, deferred tax assets and liabilities are measured based on differences between the financial reporting and tax bases of assets and liabilities measured using enacted tax rates and laws that are expected to be in effect when differences are expected to reverse. Valuation allowances are established when it is necessary to reduce deferred income tax assets to the amount, if any, expected to be realized in future years.
ASC 740, Accounting for Income taxes (“ASC 740”), requires that deferred tax assets be evaluated for future realization and reduced by a valuation allowance to the extent we believe a portion more likely than not will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent cumulative loss experience and expectations of future taxable income by taxing jurisdictions, the carry forwarding periods available to us for tax reporting purposes and other relevant factors.
The Company has not recognized a liability for uncertain tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits or penalties has not been provided since there has been no unrecognized benefit or penalty. If there were an unrecognized tax benefit or penalty, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company files U.S. Federal income tax returns and various returns in state jurisdictions. The Company's open tax years subject to examination by the Internal Revenue Service and the state Departments of Revenue generally remain open for three years from the date of filing.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and to the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding for the period. Diluted net loss per share reflects the potential dilution of securities by adding other Common Stock equivalents, including stock options, shares issuable on exercise of warrants, convertible preferred stock and convertible notes in the weighted average number of common shares outstanding for a period, if dilutive. Common stock equivalents that are anti-dilutive were excluded from the computation of diluted earnings per share which consisted of all outstanding common stock options and warrants.
Stock-Based Compensation
The Company accounts for share-based compensation costs in accordance with ASC 718, Compensation – Stock Compensation. ASC 718 requires companies to measure the cost of awards of equity instruments, including stock options and restricted stock awards, based on the grant-date fair value of the award and to recognize it as compensation expense over the employee’s requisite service period or the non-employee’s vesting period. An employee’s requisite service period is the period of time over which an employee must provide service in exchange for an award under a share-based payment arrangement and generally is presumed to be the vesting period. Upon exercise of share purchase options, the consideration paid by the option holder, together with the amount previously recognized in additional capital surplus, is recorded as an increase to share capital.
The Company estimates the fair value of each option award on the date of grant using a Black-Scholes option pricing model. The Company estimates the fair value of its common stock using the closing stock price of its common stock on the option grant date. The Company estimates the volatility of its common stock at the date of grant based on its historical stock prices. The Company uses the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. The Company has never paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. The fair value of shares of restricted stock issued are determined by the Company based on the estimated fair value of the Company’s common stock.
| F-11 |
Beneficial Conversion Features and Warrants
The Company evaluates the conversion feature of convertible debt instruments to determine whether the conversion feature was beneficial as described in ASC 470-30, Debt with Conversion and Other Options. The Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt that has conversion features at fixed or adjustable rates that are in-the-money when issued and records the relative fair value of any warrants issued with those instruments. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds to the warrants and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features, both of which are credited to additional paid-in capital. The Company calculates the fair value of warrants with the convertible instruments using the Black-Scholes valuation model.
Under these guidelines, the Company first allocates the value of the proceeds received from a convertible debt transaction between the convertible debt instrument and any other detachable instruments included in the transaction (such as warrants) on a relative fair value basis. A BCF is then measured as the intrinsic value of the conversion option at the commitment date, representing the difference between the effective conversion price and the Company’s stock price on the commitment date multiplied by the number of shares into which the debt instrument is convertible. The allocated value of the BCF and warrants are recorded as a debt discount and accreted over the expected term of the convertible debt as interest expense. If the intrinsic value of the BCF is greater than the proceeds allocated to the convertible debt instrument, the amount of the discount assigned to the BCF is limited to the amount of the proceeds allocated to the convertible debt instrument.
Leases
The Company adopted ASU No. 2016-02, Leases and a series of related Accounting Standards Updates that followed (collectively referred to as “Topic 842”). Topic 842 requires organizations to recognize right-of-use (“ROU”) lease assets and lease liabilities on the balance sheet and to disclose key information about leasing arrangements. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous lease guidance. The FASB retained the distinction between finance leases and operating leases, leaving the effect of leases in the statement of comprehensive income and the statement of cash flows largely unchanged from previous U.S. GAAP. The Company utilized the transition method allowed under ASU 2018-11 in which an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, if any.
The Company determines, at contract inception, whether or not an arrangement contains a lease and evaluates the contract for classification as an operating or finance lease. For all leases, ROU assets and lease liabilities are recognized based on the present value of lease payments, including annual rent increases, over the lease term at commencement date. If the Company’s lease does not provide an implicit rate in the contract, the Company uses its incremental, secured borrowing rate based on lease term information available as of the adoption date or lease commencement date in determining the present value of lease payments. Any renewal periods are considered in the analysis of each lease to the extent that the Company considers them to be reasonably certain of being exercised.
Related Party Transactions
The Company accounts for related party transactions in accordance with FASB ASC 850, Related Party Disclosures. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries’ controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Reportable Segments
U.S. GAAP establishes standards for reporting financial and descriptive information about a company’s reportable segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The chief operating decision maker is the Company’s Chief Executive Officer, who currently reviews the financial performance and the results of operations of the Company’s operating subsidiaries on a consolidated basis when making decisions about allocating resources and assessing performance of the Company. Accordingly, the Company currently considers itself to be in a single reporting segment for reporting purposes focused on the North American market.
| F-12 |
| Table of Contents |
Recently Issued Accounting Pronouncements
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (ASU 2021-04). This guidance clarifies an issuer’s accounting for certain modifications of freestanding equity-classified written call options and provides a “principles-based” framework to determine whether an issuer should recognize the modification or exchange and an adjustment to equity or an expense. The Company is currently evaluating the potential impact ASU 2021-04 will have on our Consolidated Financial Statements.
In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This guidance simplifies the accounting for certain convertible instruments and contracts in an entity’s own equity. As a smaller reporting entity, this standard will become effective for fiscal years beginning after December 15, 2023, including interim periods within those years. The Company is currently evaluating the potential impact ASU 2020-06 will have on the Consolidated Financial Statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This guidance provides optional guidance related to reference rate reform, which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for borrowing instruments that use LIBOR as a reference rate and is effective upon issuance through December 31, 2022. The Company has performed an evaluation of and will continue to evaluate, through December 31, 2022, the impact of this ASU. This ASU does not currently and is not expected to have in the future, a material effect on the Consolidated Financial Statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740). This guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws and rate changes. ASU 2019-12 will be effective for the Company in the fiscal years beginning after December 15, 2020 and for interim periods within fiscal years beginning after December 15, 2021. The Company is currently evaluating the potential impact that adopting this ASU will have on the Consolidated Financial Statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13) and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2019-11 (collectively, Topic 326). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. This standard will become effective for interim and annual periods beginning after December 15, 2022 and earlier adoption is permitted. The Company is currently evaluating the potential impact the adoption of this ASU will have on the Condensed Consolidated Financial Statements.
Going Concern and Liquidity
U. S. GAAP requires management to assess a company’s ability to continue as a going concern within one year from the financial statement issuance and to provide related note disclosures in certain circumstances.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
For the fiscal year period ended December 31, 2021, the Company generated an operating loss of $4,964,182. In addition, the Company has an accumulated deficit, and net working capital deficit of $82,795,263 and $3,041,106. The Company’s activities were primarily financed through private placements of equity securities and issuance of debt. The Company intends to raise additional capital through the issuance of debt and/or equity securities to fund its operations. The Company is reliant on future fundraising to finance operations in the near future. The financing may not be available on terms satisfactory to the Company, if at all. In light of these matters, there is substantial doubt that the Company will be able to continue as a going concern.
Currently, management intends to develop a vastly improved healthcare communications system and intends to develop alliances with strategic partners to generate revenues that will sustain the Company. While management believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. Management’s ability to continue as a going concern is ultimately dependent upon its ability to continually increase the Company’s customer base and realize increased revenues from signed contracts. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
3. COMMON STOCK
Stock Issuances
During the year ended December 31, 2021 the Company issued 42,719,600 shares of common stock for cash of $2,776,230. The Company issued 3,980,000 shares of common stock to debt holders as inducements to issue debt valued at $1,513,366. Common stock of 9,296,617 was issued in conjunction with the acquisition of the assets of Advantech, BCS and Spectrum Technology Solutions with a value of $1,025,000. The Company issued common stock in the amount of 1,888,463 related to the conversion of $188,846 of convertible debt. The Company issued 3,151,416 shares of common stock for stock compensation expense of $331,945. The Company issued 16,376,047 shares of common stock for conversion of services related payables of $638,215.
During the year ended December 31, 2020, the Company issued 7,128,002 shares of common stock for cash of $1,040,000. The Company issued 6,761,558 shares of common stock for the conversion of notes payable of $201,600. The Company issued 730,000 shares of common stock for the acquisition of TrinIT (Note 8). The Company also issued 4,555,994 shares of common stock to acquire technology and certain other assets of ClariCare Inc. in accordance with the asset purchase agreement. The Company issued 1,000,000 shares of common stock for the conversion accounts payable of $250,781. The Company issued 250,000 shares of common stock for a commitment fee on note of $37,500. The Company issued 2,124,693 shares of common stock for stock compensation expense of $423,300. The Company issued 50,000 shares of common stock for an origination fee for a convertible debt agreement for $4,500. The Company issued 5,000 shares of common stock for the exercise of stock options of $1,000.
| F-13 |
| Table of Contents |
Stock Options
Certain employees and executives have been granted options or warrants that are compensatory in nature. A summary of option activity for the year ended December 31, 2021 and 2020 are presented below:
2020 Options Outstanding |
| Number of Options |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance Outstanding - January 1, 2020 |
|
| 1,410,000 |
|
| $ | 0.24 |
|
|
| 8.7 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
| - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
Exercised |
|
| (5,000 | ) |
| $ | 0.15 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
| - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
Balance Outstanding - December 31, 2020 |
|
| 1,405,000 |
|
| $ | 0.24 |
|
|
| 7.7 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - December 31, 2020 |
|
| 1,405,000 |
|
| $ | 0.24 |
|
|
| 7.7 |
|
| $ | - |
|
2020 Nonvested Options |
| Number of Options |
|
| Weighted Average Grant Date Fair Value |
|
| Weighted Average Remaining Years to Vest |
| |||
|
|
|
|
|
|
|
|
|
| |||
Nonvested - January 1, 2020 |
|
| 433,333 |
|
| $ | 0.13 |
|
|
| 0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
| - |
|
| $ | - |
|
|
|
|
|
Vested |
|
| (433,333 | ) |
| $ | 0.13 |
|
|
|
|
|
Forfeited/expired |
|
| - |
|
|
|
|
|
|
|
|
|
Nonvested - December 31, 2020 |
|
| - |
|
| $ | - |
|
|
| 0.00 |
|
2021 Options Outstanding |
| Number of Options |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance Outstanding - January 1, 2021 |
|
| 1,405,000 |
|
| $ | 0.24 |
|
|
| 7.7 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
| 30,880,000 |
|
| $ | 0.12 |
|
|
| 9.9 |
|
|
|
|
|
Exercised |
|
| (10,000) |
|
|
| 0.15 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
| - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
Balance Outstanding - December 31, 2021 |
|
| 32,275,000 |
|
| $ | 0.12 |
|
|
| 9.8 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - December 31, 2021 |
|
| 1,395,000 |
|
| $ | 0.24 |
|
|
| 6.7 |
|
| $ | - |
|
2021 Nonvested Options |
| Number of Options |
|
| Weighted Average Grant Date Fair Value |
|
| Weighted Average Remaining Years to Vest |
| |||
|
|
|
|
|
|
|
|
|
| |||
Nonvested - January 1, 2021 |
|
| - |
|
| $ | - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
| 30,880,000 |
|
| $ | 9.9 |
|
|
|
|
|
Vested |
|
|
|
|
| $ | - |
|
|
|
|
|
Forfeited/expired |
|
| - |
|
|
|
|
|
|
|
|
|
Nonvested - December 31, 2021 |
|
| 30,880,000 |
|
| $ | 9.9 |
|
|
| 0.00 |
|
| F-14 |
| Table of Contents |
Restricted Stock Compensation
On April 13, 2020, the Company’s Board of Directors approved the grant of 250,000 restricted share of common stock to Directors of the Company, for services to be rendered during 2020, all of which vested on December 31, 2020. Compensation expense related to this grant for the year 2020 was $50,000 based upon fair value of our common stock of $0.25 per share.
On March 29, 2021, the Company’s Board of Directors approved the grant of 1,300,000 restricted shares of common stock to the Chief Executive Officer for bonus related to 2020 service.
On March 29, 2021, the Company’s Board of Directors approved the grant of 200,000 restricted shares of common stock to Directors of the Company, for services to be rendered during 2020, all of which shares vested on December 31, 2021. Compensation expense related to this grant for the year 2021 was $10,000 based upon the estimated fair value of our common stock of $0.05 per share.
On March 29 2021 the Company’s Board of Directors approved the granting of restricted shares of common stock to the Chief Executive Officer for bonus related to 2021 service. The Chief Executive Officer could earn fully vested restricted stock based on revenue bands; 800,000 for revenues from $2,600,000 to $3,200,000; 1,200,000 for revenues of $3,200,001 to $4,500,000; 1,600,000 for revenues of $4,500,001 to $5,999,999; or 2,000,000 for revenues above $6,000,000. Based on revenues for 2021 the Chief Executive Officer earned 1,600,000 restricted shares of common stock which vested on December 31, 2021. The Company record the fair value of the compensation totaling $176,160 in 2021.
Warrants
The Company typically issues warrants to individual investors and institutions to purchase shares of the Company’s Common Stock in connection with public and private placement fundraising activities. Warrants may also be issued to individuals or companies in exchange for services provided for the Company. The warrants are typically exercisable six months after the issue date, expire in five years, and contain a cash exercise provision and registration rights.
During the year ended December 31, 2021, the Company issued 10,600,000 Common Stock Warrants in connection with the issuance of the Company’s Convertible Promissory Notes and Promissory Notes. These warrants were designated Common Stock Warrants with an initial term of 5 years and an exercise price of $0.20 and $0.25. The Company may not effect, and a holder will not be entitled to, convert the Common Stock Warrants, which, upon giving effect to such conversion or exercise, would cause the aggregate number of shares of common stock beneficially owned by the Purchaser (together with its affiliates) to exceed 4.99%.
As of December 31, 2021, the number of shares issuable upon exercise of the Common Stock Warrants were 10,600,000 shares.
Type |
| Issue Date |
| Shares |
|
| Exercise Price |
|
| Expiration |
| ||
Investors |
| 4/19/2021 |
|
| 1,300,000 |
|
| $ | 0.20 |
|
| 4/19/2026 |
|
Investors |
| 4/19/2021 |
|
| 1,300,000 |
|
| $ | 0.25 |
|
| 4/19/2026 |
|
Investors |
| 4/22/2021 |
|
| 1,300,000 |
|
| $ | 0.20 |
|
| 4/22/2026 |
|
Investors |
| 4/22/2021 |
|
| 1,300,000 |
|
| $ | 0.25 |
|
| 4/22/2026 |
|
Investors |
| 4/30/2021 |
|
| 650,000 |
|
| $ | 0.20 |
|
| 4/30/2026 |
|
Investors |
| 4/30/2021 |
|
| 650,000 |
|
| $ | 0.25 |
|
| 4/30/2026 |
|
Investors |
| 5/4/2021 |
|
| 650,000 |
|
| $ | 0.20 |
|
| 5/4/2026 |
|
Investors |
| 5/4/2021 |
|
| 650,000 |
|
| $ | 0.25 |
|
| 5/4/2026 |
|
Investors |
| 5/19/2021 |
|
| 650,000 |
|
| $ | 0.20 |
|
| 5/19/2026 |
|
Investors |
| 5/19/2021 |
|
| 650,000 |
|
| $ | 0.25 |
|
| 5/16/2026 |
|
Investors |
| 8/31/2021 |
|
| 1,500,000 |
|
| $ | 0.25 |
|
| 8/31/2026 |
|
Total |
|
|
|
| 10,600,000 |
|
|
|
|
|
|
|
|
|
| Warrant Shares Outstanding |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Life |
|
| Intrinsic Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Outstanding – December 31, 2019 |
|
| - |
|
| $ | - |
|
|
| - |
|
|
|
| |
Granted |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
| |
Forfeited/expired |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
| |
Outstanding – December 31, 2020 |
|
|
|
|
| $ | - |
|
|
|
|
|
|
|
| |
Granted |
|
| 10,600,000 |
|
| $ | 0.23 |
|
|
| 4.40 |
|
| $ | 715,223 |
|
Forfeited/expired |
|
| - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
Outstanding – December 31, 2021 |
|
| 10,600,000 |
|
| $ | 0.23 |
|
|
| 4.40 |
|
| $ | 715,223 |
|
Equity Line of Credit
In January 2021 the Company and one of its Convertible Debt Holders entered into a Purchase Agreement for up to $5,000,000 shares of the Company’s common stock for 24 months. The purchase price of the stock will be at 75% of the lowest individual daily weight average price of the past five (5) trading days with the amount to be drawn down as the lesser of $250,000 or 300% of the average shares traded for the ten (10) days prior to the Closing Request Date with a minimum $25,000 put allowance. As part of the agreement, the Company issued 250,000 shares of common stock as a commitment fee. The Company did not utilize the equity line of credit during the year end December 31, 2021.
| F-15 |
| Table of Contents |
4. PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and consist of the following:
|
| December 31, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Furniture and fixtures |
| $ | 69,840 |
|
| $ | 7,740 |
|
Leasehold improvements |
|
| 26,145 |
|
|
| 26,145 |
|
Equipment |
|
| 22,240 |
|
|
| 16,439 |
|
Vehicles |
|
| 32,000 |
|
|
| - |
|
|
| $ | 150,225 |
|
| $ | 50,324 |
|
Less accumulated depreciation |
|
| (57,663 | ) |
|
| (47,919 | ) |
|
| $ | 92,562 |
|
| $ | 2,405 |
|
Depreciation expense on property and equipment for the years ended December 31, 2021 and 2020, were $6,745 and $6,595, respectively.
5. GOODWILL AND OTHER INTANGIBLE ASSETS
The following table sets forth the changes in the carrying amount of goodwill for the year ended 2021 and 2020:
|
| Total |
| |
Balance at December 31, 2019 |
| $ | 361,376 |
|
2020 Acquisitions |
|
| 130,000 |
|
Balance at December 31, 2020 |
| $ | 491,376 |
|
2021 Acquisitions |
|
| 1,005,008 |
|
Balance at December 31, 2021 |
|
| 1,496,384 |
|
The following table sets forth the gross carrying amounts and accumulated amortization of the Company’s intangible assets as of December 31, 2021 and 2020:
|
| Gross Carrying Amount |
|
| Impairment |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
| ||||
Definite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Capitalized software |
| $ | 2,479,137 |
|
| $ | - |
|
| $ | (1,710,230 | ) |
| $ | 768,907 |
|
Customer relationships |
|
| 1,203,529 |
|
|
| - |
|
|
| (70,476 | ) |
|
| 953,053 |
|
Acquired technology |
|
| 1,527,186 |
|
|
| - |
|
|
| (773,392 | ) |
|
| 753,794 |
|
Total definite-lived intangible assets at December 31, 2020 |
| $ | 5,029,851 |
|
| $ | - |
|
| $ | (2,554,098 | ) |
| $ | 2,475,753 |
|
Capitalized software |
|
| 2,724,678 |
|
|
| - |
|
|
| (2,131,897 | ) |
|
| 592,781 |
|
Customer relationships |
|
| 3,713,443 |
|
|
| - |
|
|
| (643,560 | ) |
|
| 3,069,874 |
|
Acquired technology |
|
| 1,527,186 |
|
|
| - |
|
|
| (1,249,220 | ) |
|
| 277,966 |
|
Total definite-lived intangible assets at December 31, 2021 |
| $ | 7,965,297 |
|
| $ | - |
|
| $ | (4,024,677 | ) |
| $ | 3,940,621 |
|
| F-16 |
Amortization expense of intangible assets was $1,470,579 and $809,732, respectively, for the years ended December 31, 2021 and 2020. The Company’s amortization is based on no residual value using the straight-line amortization method as it best represents the benefit of the intangible assets. The following table sets forth the weighted-average amortization period, in total and by major intangible asset class:
Asset Class |
| Weighted-Average Amortization period | |
Capitalized software |
|
| 6.8 years |
Customer relationships |
|
| 5.0 years |
Acquired technology |
|
| 6.0 years |
All Intangible assets |
|
| 5.9 years |
As of December 31, 2021, assuming no additional amortizable intangible assets, the expected amortization expense for the unamortized acquired intangible assets for the next five years and thereafter was as follows:
| Estimated |
| ||
2022 |
|
| 1,401,835 |
|
2023 |
|
| 911,998 |
|
2024 |
|
| 719,494 |
|
2025 |
|
| 719,494 |
|
2026 |
|
| 187,800 |
|
2027 |
|
|
|
|
2028 |
|
|
|
|
6. LONG-TERM DEBT
|
|
| December 31, 2021 |
|
| December 31, 2020 | |||||
| Note payable bearing interest at 12.0% per annum, due December 31, 2020 |
| $ | - |
|
| $ | 118,000 | |||
(9) | Related Party Long term debt bearing interest at 8%, due April 15, 2021 |
|
| 116,562 |
|
|
| 100,257 | |||
(1) | Related Party Promissory note bearing interest at 18%, due December 31, 2020 |
|
| 483,150 |
|
|
| 535,021 | |||
| Convertible note bearing interest at 10%, due July 15, 2021 |
|
| - |
|
|
| 156,438 | |||
| Convertible note bearing interest at 10%, due March 2, 2021 |
|
| - |
|
|
| 189,444 | |||
(5) | Convertible note bearing interest at 12% due April 27, 2022 |
|
| 270,301 |
|
|
|
| |||
(6) | Convertible note bearing interest at 12% due May 12, 2022 |
|
| 242,151 |
|
|
|
| |||
(8) | Convertible note bearing interest at 12% due April 25, 2022 |
|
| 110,548 |
|
|
|
| |||
(3) | Convertible note bearing interest at 12% due April 16, 2022 |
|
| 379,458 |
|
|
|
| |||
(2) | Convertible note bearing interest at 12% due April 16, 2022 |
|
| 162,625 |
|
|
|
| |||
(4) | Convertible note bearing interest at 12% due April 22, 2022 |
|
| 541,589 |
|
|
|
| |||
(7) | Note bearing interest at 18% due October 1, 2023 |
|
| 1,012,637 |
|
|
|
| |||
(7) | Note bearing interest at 18% due October 1, 2023 |
|
| 506,318 |
|
|
|
| |||
(9) | Note bearing interest at 3.7% due November 2026 |
|
| 38,488 |
|
|
|
| |||
|
|
|
| 3,863,827 |
|
|
| 1,099,160 | |||
| Less current maturities |
|
| (2,325,339) |
|
| (1,099,160) | ||||
| Total Long-term debt |
| $ | 1,538,488 |
|
| $ | - |
| ||
Total future minimum payments due on long-term debt as of :
|
| December 31, 2021 |
|
| December 31, 2020 |
| ||
2022 |
| $ | 1,508,628 |
|
|
| - |
|
2023 |
|
| 8,628 |
|
|
| - |
|
2024 |
|
| 8,628 |
|
|
| - |
|
2025 |
|
| 8,628 |
|
|
| - |
|
2026 |
|
| 3,976 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
TOTAL |
| $ | 1,538,488 |
|
| $ | 0 |
|
| F-17 |
| Table of Contents |
Our notes payable (including accrued interest) are summarized as follows:
1. | The Company issued a note payable to a related party on December 31, 2018 with a principal amount of $714,000, bearing interest at a rate of 18% per annum, with monthly principal and accrued interest payments and with a balloon payment due by the maturity date of December 31, 2019. The balloon payment due on December 31, 2019 was not made and the Company issued, in exchange for the original note, a new note dated December 31, 2019 with a principal amount of $556,000, bearing interest at a rate of 18% per annum, with monthly principal and accrued interest payments and a balloon payment due by the maturity date of December 31, 2020. As of December 31, 2020, $535,021 of principal was outstanding on this note payable. Subsequent to the end of fiscal 2020, the maturity on note payable to the related party was extended to a new 2-year term note payable bearing interest rate payable of 18% per annum with a maturity date of December 31, 2023. The note will pay monthly cash interest only in the first year (12 months) of note payable term. In the 2nd year, the note payable will be repaid with 12 monthly installment payments of interest and principal until fully repaid. |
|
|
2. | In April 2021, the Company signed a $150,000 convertible promissory note with a maturity date twelve months after issuance and received in exchange $150,000 from a finance company (the “Investor” or “Holder”). An Interest charge of 12% per annum shall accrue and be paid on the maturity date. The note is convertible into the Company’s Common Stock at fixed conversion price $0.10 per common share. The Company has right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding Common Stock at the time of conversion at any one time. The Company also issued to the Holder 780,000 restricted shares of the Company’s Common Stock and 2,600,000 cash Warrant Shares with a 5-year term. The exercise price per share of Common Stock under this Warrant is $0.20 per share for the first 1,300,000 Warrant Shares and $0.25 for the next 1,300,000 Warrant Shares. |
|
|
3. | In April 2021, the Company signed a $350,000 convertible promissory note with a maturity date twelve months after issuance and received in exchange $350,000 from the same finance company (the “Investor” or “Holder”). An Interest charge of 12% per annum shall accrue and be paid on the maturity date. The note is convertible into the Company’s Common Stock at a fixed conversion price of $0.10 per common share. The Company has right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding Common Stock at the time of conversion at any one time. |
|
|
4. | In April 2021, the Company signed a $500,000 convertible promissory note with a maturity date twelve months after issuance and received in exchange $500,000 from a second finance company (the “Investor” or “Holder”). An Interest charge of 12% per annum shall accrue and be paid on the maturity date. The note is convertible into the Company’s Common Stock at a fixed conversion price of $0.10 per common share. The Company has right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding Common Stock at the time of conversion at any one time. The company also issued to the Holder 788,000 restricted shares of the Company’s Common Stock and 2,600,000 cash Warrant Shares with a 5-year term. The exercise price per share of Common stock under this Warrant is $0.20 per share for the first 1,300,000 Warrant Shares and $0.25 for the next 1,300,000 Warrant Shares. During the year the Investor converted $125,000 of outstanding principal and interest into 1,250,000 shares of the Company’s common stock.
|
5. | In April 2021, the Company signed a $250,000 convertible promissory note with a maturity date twelve months after issuance and received in exchange $245,000 from a third finance company (the “Investor” or “Holder”). An Interest charge of 12% per annum shall accrue and be paid on the maturity date. The note is convertible into the Company’s Common Stock at fixed conversion price $0.10 per common share. The Company has right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding Common Stock at the time of conversion at any one time. The Company also issued to the Holder 390,000 restricted shares of the Company’s Common Stock and 1,300,000 cash Warrant Shares with a 5-year term. The exercise price per share of Common stock under this Warrant is $0.20 per share for the first 650,000 Warrant Shares and $0.25 for the next 650,000 Warrant Shares. During the year the Investor converted $35,000 of outstanding principal and interest into 350,000 shares of the Company’s common stock.
|
6. | In April 2021, the Company signed a $250,000 convertible promissory note with a maturity date twelve months after issuance and received in exchange $230,000 net of fees from a fourth finance company (the “Investor” or “Holder”). An Interest charge of 12% per annum shall accrue and be paid on the maturity date. The note is convertible into the Company’s Common Stock at fixed conversion price $0.10 per common share. The Company has right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding Common Stock at the time of conversion at any one time. The Company also issued to the Holder 390,000 restricted shares of the Company’s Common Stock and 1,300,000 cash Warrant Shares with a 5-year term. The exercise price per share of Common stock under this Warrant is $0.20 per share for the first 650,000 Warrant Shares and $0.25 for the next 650,000 Warrant Shares. During the year the Investor converted $28,846 of outstanding principal and interest into 288,463 shares of the Company’s common stock.
|
7. | In May 2021, the Company signed a $250,000 convertible promissory note with a maturity date twelve months after issuance and received in exchange $248,000 net of fees from a fourth finance company (the “Investor” or “Holder”). An Interest charge of 12% per annum shall accrue and be paid on the maturity date. The note is convertible into the Company’s Common Stock at fixed conversion price $0.10 per common share. The Company has right of prepayment. The note holder is limited to receive upon conversion no more than 4.99% of the issued and outstanding Common Stock at the time of conversion at any one time. The Company also issued to the Holder 390,000 restricted shares of the Company’s Common Stock and 1,300,000 cash Warrant Shares with a 5-year term. The exercise price per share of Common stock under this Warrant is $0.20 per share for the first 650,000 Warrant Shares and $0.25 for the next 650,000 Warrant Shares.
|
8. | In August 2021, the Company signed a $1,000,000 and $500,000 promissory note with a maturity date 24 months after issuance from the preliminary finance company in April 2021 (the “Investor” or “Holder”). An Interest charge of 15% per annum shall accrue and be paid monthly. The Company also issued to the Holder 1,000,000 restricted shares of the Company’s Common Stock and 1,500,000 cash Warrant Shares with a 5-year term. The exercise price per share of Common stock under this Warrant is $0.25 per share.
|
9. | In November 2021, the Company signed a $40,071 equipment finance agreement with a maturity date 60 months after issuance from a third-party financing company. Payments of principle and interest of $791 are due monthly. |
7. INCOME TAXES
The Company has incurred net losses since inception. As of December 31, 2021, the Company had cumulative federal net operating loss carryforwards of approximately $16,086,459 which are available to be carried forward indefinitely and federal net operating loss carryforwards of approximately $55,275,953 which at the latter date may be carried forward for tax years ending through December 31, 2036. Utilization of NOL carryforwards may be limited under various sections of the Internal Revenue Code depending on the nature of the Company’s operations. The Company’s income tax returns are subject to examination by the Internal Revenue Service and applicable state taxing authorities, generally for a period of three years from the date of filing.
| F-18 |
| Table of Contents |
Deferred taxes comprise the following as of December 31, 2021 and 2020:
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Net Operating Losses |
|
| 14,986,000 |
|
|
| 13,692,000 |
|
Valuation Allowance |
|
| (14,986,000 | ) |
|
| (13,692,000 | ) |
Net Deferred Tax Asset |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Reconciliation of the effective income tax rate to the federal statutory rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Income Tax Rate |
|
| 21 | % |
|
| 21 | % |
Permanent Differences |
|
| 5 | % |
|
|
|
|
Change in valuation allowance including the effect of the rate change |
|
| -26 | % |
|
| -21 | % |
Effective income tax rate |
|
| 0 | % |
|
| 0 | % |
8. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and trade accounts receivables. The Company places its cash with high-credit-quality financial institutions. At times, such cash may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance coverage limit of $250 thousand per depositor. As a result, there could be a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company has not experienced any losses due to these excess deposits and believes the risk is not significant. With respect to trade receivables, management routinely assesses the financial strength of its customers and, as a consequence, believes that the receivable credit risk exposure is limited.
The Company has historically provided financial terms to customers in accordance with what management views as industry norms. Access to the Company’s software products usually requires immediate payment but can extend several months under certain circumstances. Management periodically and regularly reviews customer account activity in order to assess the adequacy of allowances for doubtful accounts, considering such factors as economic conditions and each customer’s payment history and creditworthiness. If the financial condition of our customers were to deteriorate, or if they were otherwise unable to make payments in accordance with management’s expectations, we might have to increase our allowance for doubtful accounts, modify their financial terms and/or pursue alternative collection methods.
The Company has no significant customers (greater than 10% of total revenue) in its 2021 revenue. The Company has one significant customer that represented 13% of revenue in 2020. Customer concentration was diminished in 2021 due to the increase in number of customers generated through the acquisitions of Advantech, Business Computer Solutions and Spectrum Technology Solutions as well as through organic growth in the both the number of customers and number of services being purchased by new and existing customers. The Company has accounts receivable concentration with one customer in 2021 representing 33% of total accounts receivables outstanding as of December 31, 2021 and two customers that represent 21% and 16% of accounts receivable outstanding as of December 31, 2020. Overall, the company grew its accounts receivable approximately ending balance 460% in 2021 from year-end 2020, compared to an over 137% growth in sales for 2021.
9. COMMITMENTS AND CONTINGENCIES
(A) LEASE COMMITMENTS
On November 15, 2017, the Company signed a three-year lease agreement for approximately 4,100 square feet of office space located in Winter Garden, Florida in which the Company has its headquarters. The lease provided for a one-year renewal term at the option of the Company that the company exercised. An amendment to this lease was signed on October 26, 2020 which extended the lease term through October 31, 2021. On September 10, 2021 an additional seven month extension was signed extending the lease term to May 30, 2022. On September 22, 2021 the Company signed a six year and one month lease agreement for approximately 7,650 square feet for its new headquarters commencing on January 1, 2022 located in Ocoee, Florida. The lease provides for a five year renewal term at the option of the Company. The company signed a three-year lease agreement for approximately 2.100 square feet of office space located in Concord, NC on July 16, 2020. With the acquisition of Advantech, the Company signed a two-year lease on May 12, 2021 for an office in Scottsdale, AZ.
As of December, 2021, undiscounted future lease obligations for the office space are $99,054 for year ending December 31, 2021.
Lease Commitments | ||||||||||||
as of 12/31/2021 | ||||||||||||
Less than 1 year |
|
| 1-3 years |
|
| 3-5 years |
| Total |
| |||
| $ | 158,804 |
|
| $ | 497,131 |
| $ | 481,744 |
| $ | 1,137,681 |
|
Lease costs for the year ended December 31, 2021 were $148,497 and cash paid for amounts included in the measurement of lease liabilities for the year ended December 31, 2020 were $123,500. As of December 31, 2021, the following represents the difference between the remaining undiscounted lease commitments under non-cancelable leases and the lease liabilities:
Undiscounted minimum lease commitments |
| $ | 1,595,260 |
|
Present value adjustment using incremental borrowing rate |
|
| (1,496,206 | ) |
Lease liabilities |
| $ | 99,054 |
|
| F-19 |
| Table of Contents |
(B) EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
On December 16, 2021, Robert McDermott, the President and Chief Executive Officer of the Company, entered into an employment agreement with the Company pursuant to which the Company employed Mr. McDermott for a term of three years. Mr. McDermott received a starting annual base salary of $295,000 per annum which increased to $317,500 per annum on December 16, 2022 and will increase to $348,000 per annum on December 31, 2023. In addition, Mr. McDermott is eligible to receive incentive bonus compensation pursuant to an executive bonus plan approved by the Board of Directors or the Compensation Committee of the Board of Directors of up to 30% of base salary. Mr. McDermott was awarded an option to purchase 18,000,000 shares of the Company’s Common Stock of which 25% (4,500,000) shares vest on December 16, 2022, another 25% (45,000,000)shares vest on December 16, 2023, another 25% (45,000,000)shares vest on December 16, 2024, and the remaining 25% (4,500,000) shares vest on December 16, 2025. In the event of termination of Mr. McDermott’s employment due to a change in control, by reason of his death or disability or by the Company without cause, his stock options that have not already vested will fully vest on the date of termination and any restrictions on any restricted stock owned by Mr. McDermott shall be lifted. Further, in the event of the termination of Mr. McDermott’s employment (i) due to a change in control Mr. McDermott will continue to receive his base salary and his annual bonus computed at 100% of his base salary for the 24 month period following the date of termination, (ii) due to death or disability Mr. McDermott or his estate will continue to receive his base salary during the six month period following the date of termination and (iii) by the Company without cause Mr. McDermott will continue to receive his base salary for the 18 month period following the date of termination or through the end of the employment period, whichever is longer. For the year ended December 31, 2020, Mr. McDermott received an award 600,000 restricted shares in early 2021 which has been reflected as compensation expense in the accompanying 2020 Consolidated Statements of Operations. For the year ended December 31, 2021, Mr. McDermott received an award of 1,600,000 restricted shares in early 2022 which has been reflected in compensation expense in the accompanying 2021 Consolidated Statements of Operations.
On December 16, 2021, David Fidanza, the Chief Information Officer of the Company, entered into an employment agreement with the Company, pursuant to which the Company employed Mr. Fidanza for a term of three years. Mr. Fidanza received a starting annual base salary of $165,000 per annum which increases to $176,555 per annum on December 16, 2022, and to $190,000 per annum on December 16, 2023. Mr. Fidanza was awarded an option to purchase 3,000,000 shares of the Company’s Common Stock. 25% of the option award (750,000 shares) vest on December 16, 2022, another 25% (750,000 shares) vest on December 16, 2023, another 25% (750,000 shares) vest on December 16, 2024 and the remaining 25% (750,000 shares) vest on December 16, 2025. In the event of termination of Mr. Fidanza’s employment due to a change in control, by reason of his death or disability or by the Company without cause, the stock option will become fully vested on the date of termination and any restrictions on any restricted stock owned by Mr. Fidanza shall be lifted. Further, in the event of the termination of Mr. Fidanza’s employment (i) due to a change in control Mr. Fidanza will continue to receive his base salary and his annual bonus computed at 100% of his base salary for the six month period following the date of termination, (ii) due to death or disability Mr. Fidanza or his estate will continue to receive his base salary during the six month period following the date of termination and (iii) by the Company without cause Mr. Fidanza will continue to receive his base salary for the six month period following the date of termination or through the end of the employment period, whichever is longer.
On December 16, 2021, Muralidar Chakravarthi, the Chief Technology Officer of the Company, entered into an employment agreement with the Company, pursuant to which the Company employed Mr. Chakravarthi for three years. Mr. Chakravarthi is to receive an annual base salary of $165,000 per annum which increases to $176,555 per annum on December 16, 2022 and to $190,000 per annum on December 16, 2023. Mr. Chakravarthi was awarded an option to purchase 3,000,000 shares of the Company’s Common Stock. 25% of the option award (750,000 shares) vest on December 16, 2022, another 25% (750,000 shares) vest on December 16, 2023 another 25% (750,000 shares) vest on December 16, 2024 and the remaining 25% (750,000 shares) vest on December 16, 2025. In the event of termination of Mr. Chakravarthi’s employment due to a change in control, by reason of his death or disability or by the Company without cause, the stock option will become fully vested on the date of termination and any restrictions on any restricted stock owned by Mr. Chakravarthi shall be lifted. Further, in the event of the termination of Mr. Chakravarthi’s employment (i) due to a change in control Mr. Chakravarthi will continue to receive his base salary and his annual bonus computed at 100% of his base salary for the six month period following the date of termination, (ii) due to death or disability Mr. Chakravarthi or his estate will continue to receive his base salary during the six month period following the date of termination and (iii) by the Company without cause Mr. Chakravarthi will continue to receive his base salary for the six month period following the date of termination or through the end of the employment period, whichever is longer.
On December 16, 2021, Mr. Jeffrey Stellinga was promoted to Chief Operating Officer of the Company and entered into an employment agreement with the Company, pursuant to which the Company employed Mr. Stellinga for two years. Mr. Stellinga is to receive an annual base salary of $150,000 per annum which increases to $157,500 per annum on December 16, 2022 . Mr. Stellinga was awarded an option to purchase 2,000,000 shares of the Company’s Common Stock. 33% of the option award (666,666 shares) vest on December 16, 2022, another 33% (666,666 shares) vest on December 16, 2023 and the remaining 34% (666,668 shares) vest on December 16, 2024. In the event of termination of Mr. Stellinga’s employment due to a change in control, by reason of his death or disability or by the Company without cause, the stock option will become fully vested on the date of termination and any restrictions on any restricted stock owned by Mr. Stellinga shall be lifted. Further, in the event of the termination of Mr. Stellinga’s employment (i) due to a change in control Mr. Stellinga will continue to receive his base salary and his annual bonus computed at 100% of his base salary for the six month period following the date of termination, (ii) due to death or disability Mr. Stellinga or his estate will continue to receive his base salary during the six month period following the date of termination and (iii) by the Company without cause Mr. Stellinga will continue to receive his base salary for the six month period following the date of termination or through the end of the employment period, whichever is longer.
On August 18, 2021, Mr. Archit Shah, Chief Financial Officer of the Company entered into an employment agreement with the Company, pursuant to which the Company employed Mr. Shah for three years. Mr. Shah is to receive an annual base salary of $232,500 per annum beginning September 7, 2021 which increases to $242,500 per annum on September 7, 2022 and increases to $255,000 on September 7, 2023 . Mr. Shah was awarded an option to purchase 2,880,000 shares of the Company’s Common Stock. 33% of the option award (960,000 shares) vest on September 7, 2022, another 33% (960,000 shares) vest on September 7, 2023 and the remaining 34% (960,000 shares) vest on September 7, 2024. In the event of termination of Mr. Shah’s employment due to reason of his death or disability or by the Company without cause, the stock option will become fully vested on the date of termination and any restrictions on any restricted stock owned by Mr. Shah shall be lifted. Further, in the event of the termination of Mr. Shah’s employment due to death or disability Mr. Shah or his estate will continue to receive his base salary during the six month period following the date of termination and (iii) by the Company without cause Mr. Shah will continue to receive his base salary for the six month period following the date of termination or through the end of the employment period, whichever is longer.
| F-20 |
| Table of Contents |
(C) LITIGATION
The Company from time to time, may be a party to various litigation, claims and disputes, arising in the ordinary course of business. While the ultimate impact of such actions cannot be predicted with certainty, we believe the outcome of these matters, except for that noted below, will not have a material adverse effect on our financial condition or results of operations.
On August 18, 2021 the Company received a Notice of Disposition of Collateral under section 9-611 of the Uniform Commercial Code (“UCC”) (Arizona Revised Statutes 47-611) purporting to set a foreclosure sale, under the UCC, of the Company’s assets that were previously pledged as security to a Lender. On August 24, 2021 the Company received a Default Notice from the Lender asserting that the Company was obligated to pay $863,274. The Lender alleged that it had made certain loans and other financial accommodations in the form of guaranties to our Company beginning in approximately of March of 2009 that was secured by all of the assets our Company. We initiated an investigation into the matter and concluded that we had repaid all of the loans (including tendering payment of $28,577.82 for various credit card obligations with JP Morgan Chase Bank which the Lender rejected on August 4, 2021) and any loans that had not been repaid were released under the terms of a Recapitalization Agreement dated November 1, 2016. We then retained Arizona counsel to prepare an Emergency Application for Temporary Restraining Order and Preliminary Injunction against the Lender in order to stop the foreclosure sale. We are currently in negotiations with Lender to resolve the dispute. We believe the claims of the Lender are without merit and intend to vigorously defend the matter.
On June 15, 2021, the Company received a Complaint filed with the Circuit Court of the Ninth Judicial Circuit for Orange County, Florida. The Complaint alleges a breach of a previously entered into 2018 Settlement Agreement for which payments have not been made. The Complainant agreed to begin arbitration on August 31, 2021. We believe these claims are without merit.
10. BUSINESS COMBINATIONS
The Company accounts for business combinations under the acquisition method of accounting, in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, which requires assets acquired and liabilities assumed to be recognized at their fair values on the acquisition date. Any excess of the fair value of purchase consideration over the fair value of the assets acquired less liabilities assumed is recorded as goodwill. The fair values of the assets acquired and liabilities assumed are determined based upon the valuation of the acquired business and involves management making significant estimates and assumptions.
TrinIT
On January 3, 2020 the Company acquired substantially all of the assets and business of Computer Plumber, LLC, a North Carolina limited liability company doing business as TrinIT (“Seller”), in exchange for (i) 730,000 shares of Common Stock of Buyer, (ii) $400,000 in cash, and (iii) the assumption of certain specified debts, liabilities and obligations, all upon the terms and conditions set forth in an Asset Purchase Agreement dated as of January 3, 2020 (the “Computer Plumber LLC Asset Purchase Agreement”).
Advantech
On April 23, 2021 iCoreConnect Inc., a Nevada corporation (“Buyer”), acquired substantially all of the assets and business of Heyns Unlimited LLC, an Arizona limited liability company, doing business as Advantech (“Seller”), in exchange for (i) 5,000,000 shares of restricted Common Stock of Buyer, (ii) $1,800,000 in cash and (iii) the assumption of certain liabilities and obligations of Seller.
For the period April 1, 2021 through May 17, 2021, the Company issued 10,420,000 shares of Common Stock for cash proceeds totaling $1,042,000 The proceeds were used for the acquisition of Advantech and general corporate purposes. The Company also issued 5,000,000 shares of common stock during the period to acquire the assets of Advantech.
Business Computer Solutions (BCS)
On May 31, 2021 the Company acquired substantially all of the assets and business of BCS Tech Center, Inc., an Arizona corporation doing business as Business Computer Solutions (“Seller”), in exchange for (i) 250,000 shares of Common Stock of Buyer, (ii) $100,000 in cash, and (iii) the assumption of certain specified debts, liabilities and obligations, all upon the terms and conditions set forth in an Asset Purchase Agreement dated as of May 31, 2021 (the “BCS Tech Center, Inc. Asset Purchase Agreement”).
Spectrum Technology Solutions (STS)
On September 1, 2021 the Company acquired substantially all of the assets and business of Spectrum Technology Solutions, LLC, an Arizona limited liability company doing business as STS (“Seller”), in exchange for (i) 4,046,617 shares of common stock of Buyer and; (ii) $1,350,000 in cash all upon the terms and conditions set forth in an Asset Purchase Agreement dated as of September 1, 2021 (the “Spectrum Technology Solutions, LLC Asset Purchase Agreement”).
| F-21 |
| Table of Contents |
Pursuant to the guidance in FASB Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, the Company calculated the estimated fair value of the acquired customer relationships using the discounted cash flow approach. The key assumptions and inputs into the cash flow model used were: (1) an annual customer attrition rate of 8%, (2) a gross margin percentage of 55%, (3) a tax rate of 23.50% and (4) a discount rate of 12%.
Certain fair values of acquired assets and assumed liabilities may be estimated at the acquisition date pending confirmation or completion of the valuation process. Where provisional values are used in accounting for a business combination, they may be adjusted retrospectively in subsequent periods within the measurement period when it reflects new information obtained about facts and circumstances that were in existence at the acquisition date. The measurement period cannot exceed one year from the acquisition date.
The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed as of the dates detailed in the table:
|
| TrinIT |
|
| Advantech |
|
| BCS |
|
| STS |
| ||||
Consideration Paid: |
| January 3, 2020 |
|
| April 23, 2021 |
|
| May 31, 2021 |
|
| September 1, 2021 |
| ||||
Cash |
| $ | 400,000 |
|
| $ | 1,800,000 |
|
| $ | 100,000 |
|
| $ | 1,500,000 |
|
Common stock |
|
| 183,000 |
|
|
| 500,000 |
|
|
| 25,000 |
|
|
| 500,000 |
|
|
| $ | 583,000 |
|
| $ | 2,300,000 |
|
| $ | 125,000 |
|
| $ | 2,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair values of identifiable assets acquired and liabilities assumed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
| $ | 25,000 |
|
| $ | 26,944 |
|
| $ | 5,120 |
|
| $ | 150,000 |
|
Other current asset |
|
| 6,000 |
|
|
| - |
|
|
| - |
|
|
| 35,223 |
|
Right of Use - Lease |
|
| 14,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Fixed Assets |
|
| 3,000 |
|
|
| 9,875 |
|
|
| - |
|
|
| 32,000 |
|
Customer relationships |
|
| 450,000 |
|
|
| 1,476,630 |
|
|
| 100,000 |
|
|
| 1,606,805 |
|
Total assets acquired |
| $ | 498,000 |
|
| $ | 1,513,449 |
|
| $ | 105,120 |
|
| $ | 1,824,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities assumed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to Seller |
|
| 10,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Accrued Liability |
|
| 15,000 |
|
|
| 11,185 |
|
|
| - |
|
|
| - |
|
Deferred revenue |
|
| 6,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Lease Liability |
|
| 14,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total liabilities assumed |
| $ | 45,000 |
|
| $ | 11,185 |
|
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired |
| $ | 453,000 |
|
| $ | 1,502,264 |
|
| $ | 105,120 |
|
| $ | 1,824,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
| $ | 130,000 |
|
| $ | 797,736 |
|
| $ | 19,880 |
|
| $ | 175,972 |
|
11. PRO FORMA INFORMATION
The following information represent the unaudited pro forma combined results of operations, including acquisitions giving effect to the acquisition as if they occurred at the beginning of years ended December 31, 2021 and 2022:
|
| December 31, 2021 |
|
| December 31, 2020 |
| ||
|
| (unaudited) |
|
| (unaudited) |
| ||
|
|
|
|
|
|
| ||
Revenue |
| $ | 6,771,946 |
|
| $ | 5,734,212 |
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| (4,403,363 | ) |
|
| (2,502,354 | ) |
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
| 146,726,959 |
|
|
| 76,459,645 |
|
Basic and diluted loss per common share |
| $ | 0.03 |
|
| $ | 0.03 |
|
Effective income tax rate |
|
| 21% |
|
|
| 21% |
|
12. RELATED PARTY TRANSACTIONS
The Company incurred related party transactions of $63,216 for the year ended December 31, 2021 and 41,635 for the year ended December 31, 2020 in relation to payments of interest and principle on a Note Payable with its Chief Executive Officer.
13. PAYROLL PROTECTION PLAN
The Company received loan proceeds in the amount of approximately $330,000 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The Company received forgiveness of this loan in 2021.
14. SUBSEQUENT EVENTS
On January 7, 2022 the Company exercised its equity line of credit in the amount of $100,000 in exchange for 1,236,094 shares of common stock at an average issue price of $0.0809 per share. The balance available to draw on the equity line of credit after the draw was $4,900,000.
On January 28, 2022 the Company exercised its equity line of credit in the amount of $250,000 in exchange for 3,486,750 shares of Common Stock at an average issue price of $0.0717. The balance available to draw on the equity line of credit after the draw was $4,650,000.
On February 28, 2022, the Company signed a $2,000,000 secured promissory note with a maturity date 48 months after issuance and received in exchange $1,970,000 net of fees. An Interest charge of 17.5% per annum shall accrue, with interest only payments being made for the first six months after which both interest and principle will be due. The Company has right of prepayment subject to certain minimum interest payments being made. The Prepayment Fee shall be (i) equal to 6 months' interest that would have accrued with regard to the prepaid principal, if prepaid prior to the 2nd anniversary of the date of the Initial Advance or Subsequent Advance, as applicable, and (ii) equal to 3 months' interest that would have accrued with regard to the prepaid principal, if prepaid on or after the 2nd anniversary and prior to the 3rd anniversary of the date of the Initial Advance or Subsequent Advance, as applicable. Additionally, the Company has the following covenant requirements; maintaining a minimum cash balance of $150,000 in its combined bank accounts as well as entering into a Deposit Account Control Agreement; monthly financial reporting requirements and certifications; obtaining other indebtedness without consent; merge, consolidate or transfer assets; pledge assets as collateral; or guarantee without consent of the Lender.
In conjunction with the Secured Promissory Note, the Company paid off a note from its related party in the amount of $497,309 including accrued interest.
| F-22 |
| Table of Contents |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal year ended December 31, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective due to a material weakness in internal controls over financial reporting related to the Company’s accounting for complex financial instruments and material weakness related to our inability to adequately segregate responsibilities over the financial reporting process. To address this material weakness, management has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of its internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate its research and understanding of the nuances of the complex accounting standards that apply to its financial statements. We plan to include providing enhanced access to accounting literature, research materials and documents and increased communication among its personnel and third-party professionals with whom it consults regarding complex accounting applications and we also plan to hire additional personnel to help provide adequate segregation of the financial reporting process
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal period that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
Our Chief Financial Officer was responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting refers to the processes designed by, or under the supervision of, our Chief Executive Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
1. | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
|
|
2. | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and |
|
|
3. | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of preventing and detecting misstatements on a timely basis. It is possible to design into the process safeguards to reduce, though not eliminate, the risk that misstatements are not prevented or detected on a timely basis.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in the report entitled Internal Control—Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO (2013 Framework). Based on this assessment, management has concluded that, as of December 31, 2021, our internal control over financial reporting was not effective.
This report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which exempts smaller reporting companies from the auditor attestation requirement.
Item 9B. Other Information.
None.
| 21 |
| Table of Contents |
PART III
Items 10, 11, 12, 13 and 14
DIRECTORS AND NAMED EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
The Board of Directors of the Company is composed of the following seven persons:
Robert P. McDermott (age 55) has been Chief Executive Officer and President of iCoreConnect and is a member of the Company’s board of directors since July 2013. He is a 30-year veteran in sales, operations and finance. Mr. McDermott has had a successful career as an entrepreneur while demonstrating strong leadership skills in running these organizations. Mr. McDermott's Company (AXSA Document Solutions Inc.) made the prestigious Inc. 500 list and was listed as the 173rd fastest growing Company in America while he was CEO. He joined iCoreConnect in 2013, bringing more than 25 years of technology industry leadership, and executive management experience to his role with the Company. Mr. McDermott has held positions in various companies as either CEO or President. He has a bachelor’s degree majoring in Finance from Dowling College, NY.
Jeffrey W. Stellinga (age 52) has been a member of our Board of Directors since May 2014. Mr. Stellinga is responsible for growing and expanding revenue on existing products and creating new programs to increase sales and productivity. Mr. Stellinga is a 25-year veteran of sales and finance and has spent most of his career in finance and capital markets. Mr. Stellinga spent 18 years at US Bank rising through the ranks and becoming a Senior Regional Sales Director. After a successful 18 years, Mr. Stellinga took a job with Saxon Business Systems – A Xerox company as a Branch Manager for two years. He has since worked for CoActiv Capital Partners as Regional Sales Director for their Southeast Territory and is presently employed at Everbank Commercial Finance as it’s Eastern Sales Manager. Mr. Stellinga is also serves as a Director on the Company’s Board of Directors. ADD COO
| 22 |
| Table of Contents |
Robert A. DeSanti (age 55) has been a Director of the Company since August 2018. Mr. DeSanti has more than 30 years’ experience in sales, operations and accounting. In 2011, Mr. DeSanti was a founder of Planestocks LLC, a Company specializing in the international purchase of aircraft parts for subsequent sale in the United States. After developing Planestocks for seven years and serving as its Managing Director, in 2018 he sold his interest in Planestocks to his partners. From 2002 to 2014, Mr. DeSanti served as Financial Controller and then General Manager for LabSource, Inc. and High Five Products, Inc. Both are laboratory supply companies located in Chicago. Previously, he held positions as Controller for Sports Awards and was an Audit Senior Associate for Grant Thornton. He holds a B.A. in Accounting from the University of Illinois.
John Schneller (age 56) served on the Board of Directors from July 2013 through December 2014. Mr. Schneller is the founder and Managing Partner of CSW Advisors, Inc. (“CSW”), a financial advisory firm. Prior to founding CSW, Mr. Schneller served as a Director and Chief Financial Officer of the Company and before that he was a partner at Scura Partners, LLC, a boutique investment banking firm, from 2007 to 2013. Prior to joining Scura Partners, LLC Mr. Schneller was an investment analyst at Knott Partners, LP, a New York based hedge fund. From 2009 to 2019 Mr. Schneller served as a Director and Chairman of the Compensation Committee of Command Center, Inc., a publicly traded Company.
Paul Jackson (age 59) after starting his investing career with Wellington Management, is currently a Global Equity Analyst and Portfolio Manager at Amundi Pioneer Asset Management and before then was a Portfolio Manager of Pentucket Capital, LLC and the Chief Investment Officer of Cedrus Investments LTD. Previously he had served as an Equity Analyst at Fidelity Investments. Mr. Jackson earned a Master of Business Administration from The Wharton School, University of Pennsylvania, a Master of Science in Information and Computer Science from the Georgia Institute of Technology and a Bachelor of Science (Honors) in Electrical and Electronic Engineering from Newcastle upon Tyne Polytechnic, United Kingdom.
Named Executive Officers
The following table sets forth the names and ages of each of our Named Executive Officers (NEO).
NAME |
| AGE |
| POSITION |
Robert P McDermott |
| 55 |
| President, Chief Executive Officer and Director |
David Fidanza |
| 59 |
| Chief Information Officer |
Muralidar Chakravarthi |
| 42 |
| Chief Technology Officer |
Jeffrey Stellinga |
| 52 |
| Chief Operating Officer |
Archit Shah |
| 47 |
| Chief Financial Officer |
| 23 |
| Table of Contents |
Executive Officer Backgrounds
See Directors for the biography, name and age of Mr. McDermott who is a named executive officer (President, Chief Executive Officer) and a director of the Company as well as Mr. Stellinga who is a named executive officer (Chief Operating Officer) and director of the Company.
All of our officers are elected annually by our Board and serve as officers of the Company at the pleasure of the Board.
David Fidanza, Chief Information Officer. Mr. Fidanza is a 35-year veteran in technology. His focus over the past 15 years has been on the design, implementation and support of enterprise level software solutions that focus on managing, securing, and delivering data. Over the last few years, Mr. Fidanza held two different positions. In April 2015, Mr. Fidanza started working with the Company as the Director of Software Implementation. In September 2017, he was promoted to Chief Information Officer. Mr. Fidanza oversees the MSaaS IT Department, and Content Development Initiatives.
Muralidar Chakravarthi, Chief Technology Officer. Mr. Chakravarthi brings nearly 20 years in research and development experience to iCoreConnect. Mr. Chakravarthi joined iCoreConnect Inc. in October 2013 and is currently responsible for understanding the business needs and managing the successful design, development and deployment of iCoreConnect’s products and services. Mr. Chakravarthi has extensive experience in designing, developing and deploying multiple products and solutions to market. He was previously the Chief Software Architect for Nasplex Datacenters, LLC from 2010 through 2013, which was acquired by Transformyx Technologies, Inc. His job duties at Nasplex were to manage the design and development of various products and services. His role also included identifying key solutions for certain market spaces. He was also a cofounder of Team Cajunbot (University of Louisiana) - one of the teams that participated and was selected to run in the finals in the DARPA grand challenge for autonomous vehicle research (2004 - 2006). He holds a Master of Science in Computer Science from Southern Illinois University.
Archit Shah, Chief Financial Officer. Mr. Shah bring over 20 years of finance and accounting experience to the Company. Mr. Shah joined iCoreConnect Inc. in September 2021 and is responsible for the Company’s financial reporting, budgeting, forecasting, SEC filings, audits and investor relations. Mr. Shah has extensive experience as a finance and operations consultant focused on start-ups, turnarounds and restructurings in a variety of industries ranging from pharmaceutical companies to consumer health products to fitness concepts. Mr. Shah has run several franchise concepts as well as his own financial consulting practice, prior to which he was the Chief Financial Officer for XOS Digital Inc. Mr. Shah holds a Bachelor of Commerce (Honors) from the University of Manitoba and is a designated Chartered Professional Accountant (CPA, CA) from the Chartered Professional Accountants of Manitoba. He is also a Certified Public Accountant by the State of Illinois.
All of our executive officers have entered into employment agreements with the Company. See the Compensation Discussion and Analysis section for summarized terms of these agreements.
| 24 |
| Table of Contents |
Corporate Governance
Board Independence
Our Board has determined that our directors, John P. Schneller, Paul Jackson and Robert A. DeSanti are independent directors under the listing standards of The OTC Stock Market. Robert P. McDermott is our President and Chief Executive Officer and Jeff Stellinga is our Chief Operating Officer and are not considered to be independent directors. Our independent directors and our governance practices provide independent oversight of management.
The independent directors meet in periodic executive sessions, the results of which are discussed by our independent directors with the Chief Executive Officer.
Board Oversight of Risk
Our Board bears the responsibility for maintaining oversight over our exposure to risk. Our Board, itself and through its committees, meets with various members of management regularly and discusses our material risk exposures, the potential impact on us and the efforts of management it deems appropriate to deal with the risks that are identified. The Audit Committee considers our risk assessment and risk management practices including those relating to regulatory risks, financial liquidity and accounting risk exposure, reserves and our internal controls. The Nominating and Governance Committee considers the risks associated with our corporate governance principles and procedures with the guidance of our counsel. Our Compensation Committee, in connection with the performance of its duties, considers risks associated with our compensation programs.
Audit Committee
Our Audit Committee is composed of three directors, with Robert A. DeSanti identified as independent, as required by the Audit Committee charter, the Exchange Act and the SEC rules. The current members are Robert A. DeSanti (Chair), Paul Jackson and John Schneller. Our Board has determined that Robert A. DeSanti is an “Audit Committee Financial Expert,” as defined by the SEC rules.
Our Audit Committee, among other things is responsible for:
| · | Considering the qualifications of and appoints and oversees the activities of our independent registered public accounting firm, i.e., our independent auditor; |
|
|
|
| · | Reviewing with the independent auditor any audit problems or difficulties encountered in the course of audit work; |
|
|
|
| · | Pre-approving all audit and non-audit services provided by the independent auditor; |
|
|
|
| · | Discussing with the independent auditor the overall scope and plans for their respective audits, including the adequacy of staffing and budget or compensation; |
|
|
|
| · | Reviewing our financial statements and reports and meets with management and the independent auditor to review, discuss and approve our financial statements ensuring the completeness and clarity of the disclosures in the financial statements; |
|
|
|
| · | Monitoring compliance with our internal controls, policies, procedures and practices; |
|
|
|
| · | Reviewing management’s report on its assessment of the effectiveness of internal control over financial reporting as of the end of each fiscal year and the independent auditor’s report on the effectiveness of internal control over financial reporting; |
|
|
|
| · | Discussing our policies on risk assessment and risk management, our major financial risk exposures and the steps management has taken to monitor and control such exposures; |
|
|
|
| · | Reviewing our compliance and ethics programs, including legal and regulatory requirements, and reviews with management our periodic evaluation of the effectiveness of such programs; |
|
|
|
| · | Reviewing and approving related-party transactions; and |
|
|
|
| · | Undertaking such other activities as our Board from time to time may delegate to it. |
| 25 |
| Table of Contents |
Nominating and Governance Committee
Our Nominating and Governance Committee is composed of two directors. The current members are John Schneller and Jeffrey Stellinga.
The nominating duties and responsibilities of the Committee are as follows:
| · | To evaluate the qualifications of candidates for Board membership and, following consultation with the Chief Executive Officer, recommend to the Board nominees for open or newly created director positions; |
| · | To consider nominees recommended by stockholders as long as such recommendations are received at least 120 days before the stockholders meet to elect directors; |
| · | To periodically review the composition of the Board to determine whether it may be appropriate to add individuals with different backgrounds or skill sets from those already on the Board, and submit to the Board on an annual basis a report summarizing its conclusions regarding these matters; |
| · | To provide an orientation and education program for Directors; and To perform such other duties as the Board may assign to the Committee. |
The governance duties and responsibilities of the Committee are as follows:
| · | To periodically assess the current structure and operations of the committees of the Board and recommend changes to the Board; |
| · | To develop and recommend to the Board corporate governance guidelines and to review such guidelines at least annually and recommend to the Board changes as necessary; |
| · | To develop and recommend to the Board procedures for the evaluation and self-evaluation of the Board and its committees and to oversee the evaluation process; |
| · | To perform an evaluation of the Committee’s performance at least annually to determine whether it is functioning effectively; and |
| · | To periodically review the compensation of the Board and recommend changes to the Board. |
Compensation Committee
Our Compensation Committee is composed of three directors. The current members are Jeffrey Stellinga (Chair), Paul Jackson and John M. Schneller. Our Compensation Committee held discussion in connection with the regular Board of Director meetings held during 2021.
Our Compensation Committee advises our Board with respect to our compensation practices and administers our 2016 Long-Term Incentive Plan. The principal duties and responsibilities of our Compensation Committee include:
| · | Reviewing and approving compensation principles that apply generally to our employees; |
| · | Establishing and reviewing corporate goals and objectives relevant to the compensation of the Chief Executive Officer and evaluating his performance in light of the established goals and objectives and approving their annual compensation; |
| 26 |
| Table of Contents |
| · | Reviewing, based primarily on the evaluations and recommendations of the Chief Executive Officer, the performance of the other executive officers and all direct reports of our Chief Executive Officer; |
| · | Overseeing our compliance with the requirements under trading market regulatory rules with respect to our long-term incentive compensation plan; and |
| · | Reviewing and discussing compensation programs that may create incentives that can affect our risk and management of that risk. |
Code of Ethics
We have adopted a Code of Ethics, as supplemented by a Code of Conduct, which applies to all of our directors, officers (including our Chief Executive Officer, and Chief Financial Officer) and employees. The Code of Financial Ethics has been posted to our Internet website at http://www.iCoreConnect.com. The Company satisfies disclosure requirements regarding amendments to, or waivers from, any provisions of its Code of Financial Ethics on its website.
Executive Compensation
Compensation Discussion and Analysis
Our compensation program has been designed to attract, reward, and retain capable executives and to provide incentives for the attainment of short-term performance objectives and strategic long-term performance goals. A number of key principles guide management and our Compensation Committee in determining compensation for hiring, motivating, rewarding, and retaining executive officers who create both short- and long-term stockholder value for us, including:
| · | A significant amount of compensation should be linked to measurable success in business performance; |
| · | Management's interests should be aligned with those of the stockholders'; |
| · | Both short and long-term financial and business objectives should be incentivizing; and |
| · | Compensation should be set at levels that will be competitive with the compensation offered by the local market, and to the extent possible, companies against whom we compete for executive talent so that we are able to attract and retain talented and experienced executives. |
In an effort to balance the need to retain executive talent yet motivate executives to achieve superior performance, we have adopted a compensation philosophy that contains both fixed and variable elements of compensation. Our compensation philosophy is to reward executives with compensation aligned with our short-term and long-term financial goals and the establishment of performance targets that do not promote excessive risk-taking. The elements of our total executive compensation are base salary, cash bonus and stock incentives. The compensation program was designed to create a substantial percentage of variable compensation for executives, subject to increases or decreases based on the attainment of specified achievements and targets.
Our Compensation Committee uses its judgment in allocating compensation between long- and short- term incentives and cash and non-cash components. Although long-term incentives are considered of great significance in aligning performance with stockholder interests, they have traditionally been a smaller component of aggregate compensation. The Compensation Committee has historically awarded long-term incentive compensation, in the form of equity awards, as consideration for Named Executive Officers (NEOs) entering into a new employment agreement.
| 27 |
| Table of Contents |
Our Compensation Committee has the authority to review and approve compensation principles and practices that apply generally to our executives and senior employees. Our Compensation Committee reviews corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluates their performance in light of the established goals and objectives and approves their annual compensation. It also reviews the corporate goals and objectives established by our Chief Executive Officer relevant to the compensation of all other executive officers and all direct reports of the Chief Executive Officer. Based primarily on the evaluations and recommendations of our Chief Executive Officer of the performance of such executive officers and direct reports in light of the established goals and objectives, our Compensation Committee approves their annual compensation. It also reviews the evaluation process and compensation structure for the other members of our senior management and provides oversight regarding management’s decisions concerning the performance and compensation of such members of senior management.
Elements of Compensation
Salary
Salary is intended to compensate our executives for performance of their core job responsibilities and duties.
The base salaries of Robert McDermott, Dave Fidanza, Muralidar Chakravarthi, Jeffrey Stellinga and Archit Shah are also set forth in their employment agreements. The employment agreements were negotiated between Messrs. Fidanza, Chakravarthi, Stellinga and Shah with the Chief Executive Officer in consultation with our Compensation Committee. The salaries set forth in their employment agreements were determined by the Chief Executive Officer, in consultation with our Compensation Committee, taking into consideration their roles and responsibilities within the Company, as well as the amount and components of aggregate compensation for comparable positions in our geographical market.
Equity Compensation
Equity compensation is intended to incentivize employees and to promote alignment between our employees and our stockholders. Additionally, stock options and restricted stock are also aimed at retention as the vesting period or the period during which the restrictions lapse generally ranges from one to three years.
Our Compensation Committee granted stock options and/or restricted stock to Robert McDermott, David Fidanza, Muralidar Chakravarthi, Jeffrey Stellinga and Archit Shah in connection with their entering into their respective employment agreements. In addition, certain NEO generally receives an equity compensation grant once a year in connection with annual performance reviews based on an assessment of such person’s individual performance, as well as our overall performance and the dilutive effect of the equity awards.
| 28 |
| Table of Contents |
Summary Compensation Table
The following table sets forth information concerning the compensation of our NEOs.
|
| Fiscal Year |
| Base Salary |
|
| Stock Awards (1) |
|
| Commissions |
|
| Options (2) |
|
| All other (3) |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Robert McDermott |
| 2021 |
| $ | 289,250 |
|
| $ | 176,160 |
|
| $ | 227,824 |
|
| $ | - |
|
| $ | 39,048 |
|
| $ | 732,282 |
|
Chief Executive Officer and President |
| 2020 |
| $ | 269,000 |
|
| $ | - |
|
| $ | 113,839 |
|
| $ | - |
|
| $ | 39,048 |
|
| $ | 421,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Fidanza |
| 2021 |
| $ | 150,625 |
|
| $ | - |
|
| $ | 375 |
|
| $ | - |
|
| $ | 9,000 |
|
|
| 160,000 |
|
Chief Information Officer |
| 2020 |
| $ | 140,417 |
|
| $ | - |
|
| $ | 1,874 |
|
| $ | - |
|
| $ | 9,000 |
|
|
| 151,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Muralidar Chakravarthi |
| 2021 |
| $ | 131,458 |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | 6,000 |
|
| $ | 137,458 |
|
Chief Technology Officer |
| 2020 |
| $ | 125,000 |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | 6,000 |
|
| $ | 131,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Stellinga |
| 2021 |
| $ | 125,000 |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | 6,000 |
|
| $ | 131,000 |
|
Chief Operating Officer |
| 2020 |
| $ | 125,000 |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | 6,000 |
|
| $ | 131,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Archit Shah |
| 2021 |
| $ | 74,072 |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | 2,000 |
|
| $ | 76,072 |
|
Chief Financial Officer |
| 2020 |
| $ | - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
Notes:
| 1. | Represents the aggregate grant date fair value of the shares of the Company’s Common Stock awarded as determined under Financial Accounting Standards Board Accounting Standards Codification Topic No. 718-20, Awards Classified as Equity. For information, regarding the valuation of these awards, including assumptions, refer to Note 4 to the Company's Financial Statements as a part of this filing. |
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|
|
| 2. | The grant date fair value of the performance award options, and restricted Common Stock included in this column is the awarded employment agreement terms determined as of the grant date. |
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|
|
| 3. | These amounts are for Health Care Insurance reimbursement and automobile allowances as per the terms of the respective employment agreements. |
Employment Agreements with Named Executive Officers
On December 16, 2021, Robert McDermott, the President, and Chief Executive Officer of the Company, entered into an employment agreement with the Company pursuant to which the Company employed Mr. McDermott for a term of three years. Mr. McDermott received a starting annual base salary of $295,000 per annum which increased to $317,500 per annum on December 16,, 2022 and will increase to $348,000 per annum on December 31, 2023. In addition, Mr. McDermott is eligible to receive incentive bonus compensation pursuant to an executive bonus plan approved by the Board of Directors or the Compensation Committee of the Board of Directors of up to 30% of base salary. Mr. McDermott was awarded an option to purchase 18,000,000 shares of the Company’s Common Stock of which 25% (4,500,000 shares) vest on December 16, 2022, another 25% (4,5000,000 shares) vest on December 16, 2023, another 25% (4,5000,000 shares) vest on December 16, 2024, and the remaining 25% (4,500,000 shares) vest on December 16, 2025. In the event of termination of Mr. McDermott’s employment due to a change in control, by reason of his death or disability or by the Company without cause, his stock options that have not already vested will fully vest on the date of termination and any restrictions on any restricted stock owned by Mr. McDermott shall be lifted. Further, in the event of the termination of Mr. McDermott’s employment (i) due to a change in control Mr. McDermott will continue to receive his base salary and his annual bonus computed at 100% of his base salary for the 24 month period following the date of termination, (ii) due to death or disability Mr. McDermott or his estate will continue to receive his base salary during the six month period following the date of termination and (iii) by the Company without cause Mr. McDermott will continue to receive his base salary for the 18 month period following the date of termination or through the end of the employment period, whichever is longer. For the year ended December 31, 2020, Mr. McDermott received an award 600,000 restricted shares in early 2021 which has been reflected as compensation expense in the accompanying 2020 Consolidated Statements of Operations. For the year ended December 31, 2021, Mr. McDermott received an award of 1,600,000 restricted shares in early 2022 which has bene reflected in compensation expense in the accompanying 2021 Consolidated Statements of Operations.
On December 16, 2021, David Fidanza, the Chief Information Officer of the Company, entered into an employment agreement with the Company, pursuant to which the Company employed Mr. Fidanza for a term of three years. Mr. Fidanza received a starting annual base salary of $165,000 per annum which increases to $176,555 per annum on December 16, 2022, and to $190,000 per annum on December 16, 2023. Mr. Fidanza was awarded an option to purchase 3,000,000 shares of the Company’s Common Stock. 25% of the option award (750,000 shares) vest on December 16, 2022, another 25% (750,000 shares) vest on December 16, 2023, another 25% (750,000 shares) vest on December 16, 2024 and the remaining 25% (750,000 shares) vest on December 16, 2025. In the event of termination of Mr. Fidanza’s employment due to a change in control, by reason of his death or disability or by the Company without cause, the stock option will become fully vested on the date of termination and any restrictions on any restricted stock owned by Mr. Fidanza shall be lifted. Further, in the event of the termination of Mr. Fidanza’s employment (i) due to a change in control Mr. Fidanza will continue to receive his base salary and his annual bonus computed at 100% of his base salary for the six month period following the date of termination, (ii) due to death or disability Mr. Fidanza or his estate will continue to receive his base salary during the six month period following the date of termination and (iii) by the Company without cause Mr. Fidanza will continue to receive his base salary for the six month period following the date of termination or through the end of the employment period, whichever is longer.
On December 16, 2021, Muralidar Chakravarthi, the Chief Technology Officer of the Company, entered into an employment agreement with the Company, pursuant to which the Company employed Mr. Chakravarthi for three years. Mr. Chakravarthi is to receive an annual base salary of $165,000 per annum which increases to $176,555 per annum on December 16, 2022, and to $190,000 per annum on December 16, 2023. Mr. Chakravarthi was awarded an option to purchase 3,000,000 shares of the Company’s Common Stock. 25% of the option award (750,000 shares) vest on December 16, 2022, another 25% (750,000 shares) vest on December 16, 2023, another 25% (750,000 shares) vest on December 16, 2024 and the remaining 25% (750,000 shares) vest on December 16, 2025. In the event of termination of Mr. Chakravarthi’s employment due to a change in control, by reason of his death or disability or by the Company without cause, the stock option will become fully vested on the date of termination and any restrictions on any restricted stock owned by Mr. Chakravarthi shall be lifted. Further, in the event of the termination of Mr. Chakravarthi’s employment (i) due to a change in control Mr. Chakravarthi will continue to receive his base salary and his annual bonus computed at 100% of his base salary for the six month period following the date of termination, (ii) due to death or disability Mr. Chakravarthi or his estate will continue to receive his base salary during the six month period following the date of termination and (iii) by the Company without cause Mr. Chakravarthi will continue to receive his base salary for the six month period following the date of termination or through the end of the employment period, whichever is longer.
On December 16, 2021, Mr. Jeffrey Stellinga was promoted to Chief Operating Officer of the Company and entered into an employment agreement with the Company, pursuant to which the Company employed Mr. Stellinga for two years. Mr. Stellinga is to receive an annual base salary of $150,000 per annum which increases to $157,500 per annum on December 16, 2022. Mr. Stellinga was awarded an option to purchase 2,000,000 shares of the Company’s Common Stock. 33% of the option award (666,666 shares) vest on December 16, 2022, another 33% (666,666 shares) vest on December 16, 2023, and the remaining 34% (666,668 shares) vest on December 16, 2024. In the event of termination of Mr. Stellinga’s employment due to a change in control, by reason of his death or disability or by the Company without cause, the stock option will become fully vested on the date of termination and any restrictions on any restricted stock owned by Mr. Stellinga shall be lifted. Further, in the event of the termination of Mr. Stellinga’s employment (i) due to a change in control Mr. Stellinga will continue to receive his base salary and his annual bonus computed at 100% of his base salary for the six month period following the date of termination, (ii) due to death or disability Mr. Stellinga or his estate will continue to receive his base salary during the six month period following the date of termination and (iii) by the Company without cause Mr. Stellinga will continue to receive his base salary for the six month period following the date of termination or through the end of the employment period, whichever is longer.
| 29 |
| Table of Contents |
On August 18, 2021, Mr. Archit Shah, Chief Financial Officer of the Company entered into an employment agreement with the Company, pursuant to which the Company employed Mr. Shah for three years. Mr. Shah is to receive an annual base salary of $232,500 per annum beginning September 7, 2021, which increases to $242,500 per annum on September 7, 2022, and increases to $255,000 on September 7, 2023. Mr. Shah was awarded an option to purchase 2,880,000 shares of the Company’s Common Stock. 33% of the option award (960,000 shares) vest on September 7, 2022, another 33% (960,000 shares) vest on September 7, 2023, and the remaining 34% (960,000 shares) vest on September 7, 2024. In the event of termination of Mr. Shah’s employment due to reason of his death or disability or by the Company without cause, the stock option will become fully vested on the date of termination and any restrictions on any restricted stock owned by Mr. Shah shall be lifted. Further, in the event of the termination of Mr. Shah’s employment due to death or disability Mr. Shah or his estate will continue to receive his base salary during the six-month period following the date of termination and (iii) by the Company without cause Mr. Shah will continue to receive his base salary for the six-month period following the date of termination or through the end of the employment period, whichever is longer.
Involvement in Certain Legal Proceedings
None of our directors and executive officers has been involved in any of the following events during the past ten years: any petition under the federal bankruptcy laws or any state insolvency laws filed by or against, or an appointment of a receiver, fiscal agent or similar officer by a court for the business or property of such person, or any partnership in which such person was a general partner at or within two years before the time of such filing, or any corporation or business association of which such person was an executive officer at or within two years before the time of such filing;
(a) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
(b) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining such person from, or otherwise limiting, the following activities: (i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment Company, bank, savings and loan association or insurance Company, or engaging in or continuing any conduct or practice in connection with such activity; engaging in any type of business practice; or (iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;
(c) being the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (c)(i) above, or to be associated with persons engaged in any such activity;
(d) being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission to have violated a federal or state securities or commodities law, and the judgment in such civil action or finding by the Securities and Exchange Commission has not been reversed, suspended, or vacated;
(e) Being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
(f) being the 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: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
(g) being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Principal Stockholders
| 30 |
| Table of Contents |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of our Common Stock as of March 31, 2022 (except where otherwise noted) based on a review of information filed with the SEC and our records with respect to (i) each person known to be the beneficial owner of more than 5% of the outstanding shares of our Common Stock, (ii) each of our directors, (iii) each of our named executive officers, and (iv) all our directors and named executive officers as a group.
|
| Number of Shares Beneficially Owned |
|
| Percent of Shares Beneficially Owned* |
| ||
Robert P. McDermott |
|
| 34,926,769 | (1) |
|
| 17.6 | % |
Robert A DeSanti |
|
| 11,761,149 | (2) |
|
| 5.9 | % |
Jeffrey W Stellinga |
|
| 10,883,845 | (3) |
|
| 5.5 | % |
Jerry Smith |
|
| 8,360,773 | (4) |
|
| 4.2 | % |
David Fidanza |
|
| 4,566,662 | (5) |
|
| 2.3 | % |
Muralidar Chakravarthi |
|
| 4,040,753 | (6) |
|
| 2.0 | % |
John M Schneller |
|
| 3,526,388 | (7) |
|
| 1.8 | % |
Archit Shah |
|
| 2,880,000 | (8) |
|
| 1.5 | % |
Paul Jackson |
|
| 800,000 | (9) |
|
| 0.4 | % |
|
|
|
|
|
|
|
|
|
All executive officers and directors as a group (9 persons) |
|
| 81,396,339 |
|
|
| 41.1 | % |
Notes:
* Calculated on the basis of 197,371,494 shares of Common Stock outstanding on March 31, 2022. Pursuant to the regulations of the SEC, shares are deemed to be “beneficially owned” by a person if such person directly or indirectly has or shares the power to vote or dispose of such shares. Each person is deemed to be the beneficial owner of securities which may be acquired through the exercise of options, warrants, and other rights, if any, and such securities are deemed to be outstanding for the purpose of computing the percentage of the class beneficially owned by such person.
| 1. | Consists of 15,908,068 unrestricted shares of Common Stock owned directly by Mr. McDermott, 318,701 shares owned by KRB Leasing, Inc. controlled by Mr. McDermott, and 18,700,000 shares issuable upon exercise of options. |
|
|
|
| 2. | Consists of 11,761,149 unrestricted shares of Common Stock owned by Mr. Robert DeSanti |
|
|
|
| 3. | Consists of 8,833,845 unrestricted shares of Common Stock owned by Mr. Stellinga and 2,000,000 shares issuable upon exercise of options. |
|
|
|
| 4. | Consists of 8,360,773 unrestricted shares of Common Stock owned by Jerry D. Smith, JD Investments, Inc., Sonoran Pacific Resources, LLP, High Sonoran Group Inc., Sonoran Pacific Foundation Inc., JDS Trust and WESCO Energy Corporation. |
|
|
|
| 5. | Consists of 1,266,662 unrestricted shares of Common Stock owned by Mr. Fidanza and 3,300,000 shares issuable upon exercise of options. |
|
|
|
| 6. | Consists of 740,753 unrestricted shares of Common Stock owned by Mr. Chakravarthi and 3,300,000 shares issuable upon exercise of options. |
|
|
|
| 7. | Consists of 3,526,388 unrestricted shares of Common Stock owned by Mr. Schneller. |
|
|
|
| 8. | Consists of 2,880,000 shares issuable upon exercise of options. |
|
|
|
| 9. | Consists of 800,000 unrestricted shares of Common Stock owned by Mr. Jackson |
| 31 |
| Table of Contents |
Executive Compensation
Retirement Benefits
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers, except that our directors and executive officers receive stock options and shares of restricted stock at the discretion of our Board. We do not have any material bonus or profit-sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our Board.
Warrants
The Company has not granted warrants to any director or officer of the Company.
Compensation Upon Termination of Employment
We have no plans or arrangements in respect of remuneration received or that may be received by any of our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement or change of control) or a change of responsibilities following a change of control.
Changes in Control
We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our Company.
Transactions with Related Persons, Promoters and Certain Control Persons and Corporate Governance
The Company had entered into a Note Payable with the Chief Executive Officer which has been subsequently paid.
There has not been, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, or holders of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.
Director Independence
We currently act with five directors consisting of Robert P. McDermott, Robert DeSanti, Jeffrey W. Stellinga, John M. Schneller, and Paul Jackson. Our Common Stock is quoted on the OTCQB, which does not impose any director independence requirements. Under NASDAQ Rule 5605(a)(2), a director is not independent if he or she is also an executive officer or employee of the corporation or was, at any time during the past three years, employed by the Company has accepted or compensation in excess of $120,000 doing any period of 12 consecutive months within the prior 5 years other than, among other reasons, for Board or Board Committee Service. Using the NASDAQ definition of an independent director, we have three independent directors, Robert DeSanti, John M. Schneller, and Paul Jackson.
| 32 |
| Table of Contents |
Item 14. Principal Accounting Fees and Services
Dismissal of BF Borgers CPA PC
On December 15, 2021, the Company dismissed BF Borgers CPA PC as our independent registered public accounting firm. The decision to change accountants was approved by our Audit Committee. BF Borgers CPA PC reports on our consolidated financial statements for the past fiscal year did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit report of BF Borgers CPA PC on our financial statements for fiscal year 2020 contained an explanatory paragraph which noted that there was substantial doubt about our ability to continue as a going concern.
During our fiscal year ended December 31, 2021 (i) there were no disagreements with BF Borgers CPA PC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to BF Borgers CPA PC’s satisfaction, would have caused BF Borgers CPA PC to make reference to the subject matter of such disagreements in its reports on our consolidated financial statements for such year, and (ii) there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
Engagement of Marcum LLP
On December 15, 2021, the Company, upon the Audit Committee’s approval, engaged the services of Marcum LLP as the Company’s new independent registered public accounting firm to audit the Company’s consolidated financial statements as of December 31, 2021 and for the year then ended.
During each of the Company’s two most recent fiscal years and through the date of this report, (a) the Company has not engaged Marcum LLP as either the principal accountant to audit the Company’s financial statements, or as an independent accountant to audit a significant subsidiary of the Company and on whom the principal accountant is expected to express reliance in its report; and (b) the Company or someone on its behalf did not consult Marcum LLP with respect to (i) either: the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements, or (ii) any other matter that was either the subject of a disagreement or a reportable event as set forth in Items 304(a)(1)(iv) and (v) of Regulation S-K.
Cost of Fees and Services
During fiscal years December 31, 2021 and 2020, the Company’s independent registered public accounting firms, rendered services to the Company for the following fees:
|
| 2021 |
|
| 2020 |
| ||
Audit Fees |
| $ | 182,900 |
|
| $ | 60,000 |
|
Tax Fees |
|
| - |
|
|
| 4,500 |
|
Total |
| $ | 182,900 |
|
| $ | 64,500 |
|
Audit Committee's Pre-Approval Practice
Section 10A(i) of the Securities Exchange act of 1934 prohibits our auditors from performing audit services for us as well as any services not considered to be “audit services” unless such services are pre-approved by the board of directors (in lieu of the Audit Committee) or unless the services meet certain de minimis standards.
| 33 |
| Table of Contents |
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) Financial Statements
The financial statements included in this Form 10-K are listed in Item 8.
(b) Exhibits*:
Notes to exhibits:
iCoreConnect Inc. will furnish a copy of any of the exhibits listed above upon payment of $5.00 per exhibit to cover the cost of the Company furnishing the exhibit.
| 34 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Name |
| Title |
| Date |
|
|
|
|
|
/s/ Robert P McDermott |
|
|
|
|
Robert P McDermott |
| Chief Executive Officer |
| April 15, 2022 |
|
| (Principal Executive Officer) |
|
|
/s/ Archit Shah |
|
|
|
|
Archit Shah |
| Chief Financial and Accounting Officer |
| April 15, 2022 |
|
| (Principal Financial and Accounting Officer) |
|
|
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Robert P McDermott |
|
|
|
|
Robert P McDermott |
| Director |
| April 15, 2022 |
|
|
|
|
|
/s/ Jeff Stellinga |
|
|
|
|
Jeff Stellinga |
| Director |
| April 15, 2022 |
|
|
|
|
|
/s/ Robert A DeSanti |
|
|
|
|
Robert A DeSanti |
| Director |
| April 15, 2022 |
|
|
|
|
|
/s/ Paul Jackson |
|
|
|
|
Paul Jackson |
| Director |
| April 15, 2022 |
|
|
|
|
|
/s/ John Schneller |
|
|
|
|
John Schneller |
| Director |
| April 15, 2022 |
| 35 |
EXHIBIT 1.2
AMENDED AND RESTATED BY-LAWS
OF
iCORECONNECT INC
A Nevada Corporation
As Amended and Restated on
December 21, 2021
TABLE OF CONTENTS
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|
| Page |
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| ARTICLE I | OFFICES |
| 1 |
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| ARTICLE II | STOCKHOLDERS |
| 1 |
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| Section 1. | ANNUAL MEETING |
| 1 |
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| Section 2. | SPECIAL MEETINGS |
| 1 |
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| Section 3. | NOTICE OF MEETINGS |
| 2 |
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| Section 4. | ADJOURNMENTS |
| 2 |
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| Section 5. | QUORUM |
| 2 |
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| Section 6. | ORGANIZATION |
| 2 |
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| Section 7. | CONDUCT OF MEETINGS |
| 3 |
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| Section 8. | VOTING |
| 3 |
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| Section 9. | VOTING PROCEDURES; INSPECTORS |
| 4 |
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| Section 10. | CONSENT OF STOCKHOLDERS IN LIEU OF MEETING |
| 4 |
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| Section 11. | FIXING OF RECORD DATE |
| 4 |
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| Section 12. | ADVANCE NOTICE OF STOCKHOLDER NOMINEES FOR DIRECTOR AND OTHER STOCKHOLDER PROPOSALS |
| 5 |
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| ARTICLE III | DIRECTORS |
| 9 |
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| Section 1. | NUMBER AND TERM OF OFFICE |
| 9 |
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| Section 2. | REMOVAL |
| 9 |
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| Section 3. | VACANCIES |
| 10 |
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| Section 4. | REGULAR MEETINGS |
| 10 |
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| Section 5. | SPECIAL MEETING |
| 10 |
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| Section 6. | NOTICE OF MEETINGS |
| 10 |
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| Section 7. | QUORUM |
| 10 |
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| Section 8. | ORGANIZATION |
| 10 |
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| Section 9. | INTERESTED DIRECTORS |
| 11 |
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| Section 10. | VOTING |
| 11 |
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| Section 11. | COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES |
| 11 |
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| -i- |
TABLE OF CONTENTS
(continued)
|
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| Page |
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| ARTICLE IV | COMMITTEES |
| 11 |
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| ARTICLE V | OFFICERS |
| 12 |
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| Section 1. | NUMBER AND DESIGNATION |
| 12 |
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| Section 2. | CHIEF EXECUTIVE OFFICER |
| 12 |
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| Section 3. | CHIEF FINANCIAL OFFICER |
| 12 |
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| Section 4. | CHAIRMAN AND VICE CHAIRMEN OF THE BOARD |
| 13 |
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| Section 5. | THE PRESIDENT AND VICE PRESIDENTS |
| 13 |
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| Section 6. | SECRETARY |
| 13 |
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| Section 7. | TREASURER |
| 13 |
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| Section 8. | OTHER OFFICERS |
| 13 |
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| Section 9. | BOND |
| 13 |
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| ARTICLE VI | CERTIFICATES FOR SHARES |
| 14 |
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| Section 1. | FORM AND ISSUANCE |
| 14 |
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| Section 2. | TRANSFER |
| 14 |
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| Section 3. | LOSS OF STOCK CERTIFICATES |
| 14 |
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| ARTICLE VII | DIVIDENDS |
| 14 |
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| Section 1. | DECLARATION AND FORM |
| 14 |
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| Section 2. | RECORD DATE |
| 14 |
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| ARTICLE VIII | INDEMNIFICATION |
| 15 |
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| Section 1. | INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGS |
| 15 |
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| Section 2. | INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION |
| 15 |
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| Section 3. | SUCCESSFUL DEFENSE |
| 15 |
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| Section 4. | INDEMNIFICATION OF EMPLOYEES AND AGENTS |
| 15 |
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| Section 5. | ADVANCE PAYMENT OF EXPENSES |
| 16 |
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| Section 6. | LIMITATIONS ON INDEMNIFICATION |
| 16 |
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| Section 7. | INDEMNIFICATION CLAIMS; DETERMINATION |
| 17 |
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| Section 8. | PROCEDURES FOR THE DETERMINATION OF WHETHER STANDARDS HAVE BEEN SATISFIED |
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| Section 9. | CONTRACT RIGHTS |
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| Section 10. | NON-EXCLUSIVITY OF RIGHTS |
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| Section 11. | SEVERABILITY |
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| Section 12. | SUBROGATION |
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TABLE OF CONTENTS
(continued)
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| Section 13. | NO DUPLICATION OF PAYMENTS |
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| Section 14. | INSURANCE |
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| Section 15. | NO IMPUTATION |
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| Section 16. | RELIANCE |
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| Section 17. | CERTAIN DEFINITIONS |
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| Section 18. | NOTICES |
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| ARTICLE IX | CORPORATE SEAL |
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| Section 1. | FORM |
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| ARTICLE X | FISCAL YEAR |
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| Section 1. | FISCAL YEAR |
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| ARTICLE XI | MISCELLANEOUS PROVISIONS |
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| Section 1. | CHECKS, NOTES, ETC |
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| Section 2. | LOANS |
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| Section 3. | CONTRACTS |
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| Section 4. | WAIVERS OF NOTICE |
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| ARTICLE XII | AMENDMENTS |
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| -iii- |
iCORECONNECT INC.
AMENDED AND RESTATED BYLAWS
As Amended and Restated on December 31, 2021
ARTICLE I
OFFICES
The principal place of business of iCoreConnect Inc.., corporation incorporated under the laws of the State of Nevada (the “Corporation”), shall be at such place or places as the directors shall from time to time determine. The Corporation may also have an office or offices at such other places within or without the State of Nevada as the Board of Directors (the “Board”) may from time to time appoint or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of stockholders of the Corporation shall be held on such date and at such time and place within or without the State of Nevada, as may be fixed from time to time by resolution of the Board adopted by a majority of the total number of authorized directors (whether or not there exists any vacancies in previously authorized directorships at the time such resolution is presented to the Board for adoption), for the purpose of electing directors and for transacting such other business as may properly be brought before the meeting. The Chairman of the Board or, in the Chairman’s absence, another person designated by the Board shall act as the Chairman of all annual meetings of stockholders.
Section 2. SPECIAL MEETINGS. A special meeting of the stockholders, for the purpose of taking any action permitted by the stockholders under the Nevada Revised Statutes (the “NRS”), and the Corporation’s Articles of Incorporation (the “Articles of Incorporation”), may be called at any time by the Board pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption). Except as may be set forth in the Articles of Incorporation, no other person or persons are permitted to call a special meeting. At any special meeting of the stockholders, only such business shall be conducted or considered as shall have been properly brought before the special meeting. To be properly brought before a special meeting, proposals of business must be (i) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board, or (ii) otherwise properly brought before the special meeting by or at the direction of the Board. If the Chairman of the special meeting determines that business was not properly brought before the special meeting in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.
Section 3. NOTICE OF MEETINGS. Notice of every annual and special meeting of stockholders, other than any meeting the giving of notice of which is otherwise prescribed by law or the Articles of Incorporation, stating the date, time, place and purpose thereof, and in the case of special meetings, the name of the person or persons at whose direction the notice is being issued, shall be given personally (including by telephone) or sent by mail, telegraph, cablegram, telex, telecopy, electronic mail or other means deemed appropriate by the Board at least fifteen (15) but not more than sixty (60) days before such meeting, to each stockholder of record entitled to vote thereat and to each stockholder of record who, by reason of any action proposed at such meeting would be entitled to have his or her shares appraised if such action were taken, and the notice shall include a statement of that purpose and to that effect. If mailed, notice shall be deemed to have been given when deposited in the mail, directed to the stockholder at his, her or its address as the same appears on the record of stockholders of the Corporation or at such address as to which the stockholder has given notice to the Secretary. Notice of a meeting need not be given to any stockholder who submits a signed waiver of notice, whether before or after the meeting, or who attends the meeting without protesting prior to the conclusion thereof the lack of notice to him or her.
Section 4. ADJOURNMENTS. Whether or not a quorum shall be present, any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the meeting is adjourned for lack of quorum, notice of the new meeting shall be given to each stockholder of record entitled to vote at the meeting. If after an adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record on the new record date entitled to notice in Section 3 of this Article II. The Board may postpone any meeting of stockholders or cancel any annual or special meeting of stockholders by public announcement or disclosure prior to the time scheduled for the meeting.
Section 5. QUORUM. At all meetings of stockholders, except as otherwise expressly provided by law or the Articles of Incorporation, there must be present either in person or by proxy stockholders of record holding at least a majority of the shares issued and outstanding and entitled to vote at such meetings in order to constitute a quorum, but if less than a quorum is present, a majority of those shares present either in person or by proxy shall have power to adjourn any meeting until a quorum shall be present. Notwithstanding the previous sentence, at any meeting of stockholders at which the holders of any class of stock of the Corporation shall be entitled to vote separately as a class, the holders of a majority in number of the total outstanding shares of such class, present in person or represented by proxy, shall constitute a quorum for purposes of such class vote unless the representation of a different number of shares of such class shall be required by law, by the Articles of Incorporation or by these Bylaws.
Section 6. ORGANIZATION. The Chief Executive Officer or, at the instance of the Chief Executive Officer, the Chairman of the Board, shall call all meetings of the stockholders to order, and shall preside over and act as chairman of all such meetings. In the absence of the Chief Executive Officer and the Chairman of the Board, the members of the Board who are present shall elect a chairman of the meeting. The Secretary or, in the Secretary’s absence, an Assistant Secretary, or in the absence of both the Secretary and Assistant Secretaries, a person appointed by the chairman of the meeting shall serve as secretary of the meeting. In the event that the Secretary presides at a meeting of the stockholders, an Assistant Secretary shall record the minutes of the meeting. It shall be the duty of the Secretary of the Corporation to prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of stockholders entitled to vote at such meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder.
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Section 7. CONDUCT OF MEETINGS. To the maximum extent permitted by law, the Board shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and take such action as, in the discretion of such chairman, are deemed necessary, appropriate or convenient for the proper conduct of the meeting. Such rules, regulations and procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) establishing an agenda for the meeting and the order for the consideration of the items of business on such agenda; (ii) restricting admission to the time set for the commencement of the meeting; (iii) limiting attendance at the meeting to stockholders of record of the Corporation entitled to vote at the meeting, their duly authorized proxies or other such persons as the chairman of the meeting may determine; (iv) limiting participation at the meeting on any matter to stockholders of record of the Corporation entitled to vote on such matter, their duly authorized proxies or other such persons as the chairman of the meeting may determine to recognize and, as a condition to recognizing any such participant, requiring such participant to provide the chairman of the meeting with evidence of his or her name and affiliation, whether he or she is a stockholder or a proxy for a stockholder, and the class and series and number of shares of each class and series of capital stock of the Corporation which are owned beneficially and/or of record by such stockholder; (v) limiting the time allotted to questions or comments by participants; (vi) determining when the polls should be opened and closed for voting; (vii) taking such actions as are necessary or appropriate to maintain order, decorum, safety and security at the meeting; (viii) removing any stockholder who refuses to comply with meeting procedures, rules or guidelines as established by the chairman of the meeting; (ix) adjourning the meeting to a later date, time and place announced at the meeting by the chairman; and (x) complying with any state and local laws and regulations concerning safety and security. Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
Section 8. VOTING. At any meeting of stockholders, with respect to a matter for which a stockholder is entitled to vote, each such stockholder shall be entitled to one vote for each share it holds, except as otherwise expressly provided by law or in the Articles of Incorporation. Each stockholder may exercise such voting right either in person or by proxy; provided, however, that no proxy shall be valid after the expiration of eleven months from the date such proxy was authorized unless otherwise provided in the proxy. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in the law of the State of Nevada to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. If a quorum is present, and except as otherwise expressly provided by law or the Articles of Incorporation and except with respect to the election of directors, the affirmative vote of a majority of the shares of stock represented at the meeting shall be the act of the stockholders. Subject to the rights of the holders of any series of preferred stock of the Corporation, directors shall be elected by a plurality of the votes cast at a meeting of stockholders by the stockholders entitled to vote in the election.
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Shares of the stock of the Corporation belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes.
Section 9. VOTING PROCEDURES; INSPECTORS. The Corporation may, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such person’s ability. The inspectors shall (a) ascertain the number of shares outstanding and the voting power of each; (b) determine the shares represented at the meeting and the validity of proxies and ballots; (c) count all votes and ballots; (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by them; and (e) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots.
Section 10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Any action required or permitted to be taken by the stockholders of the Corporation, or any action which may be taken at a meeting of the stockholders, may be taken without a meeting if a consent in writing, setting forth the actions so taken, is signed by all the stockholders entitled to vote with respect to the subject matter thereof. Such consent shall have the same effect as a unanimous vote of stockholders, and may be stated as such in any articles or documents filed with the Secretary of the State of Nevada. The consent shall be delivered to the Corporation by delivery to its registered office in the State of Nevada, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested.
Section 11. FIXING OF RECORD DATE. For the purpose of determining the stockholders entitled to notice of and to vote at any meeting of stockholders, or to express consent to or dissent from any proposal without a meeting, or for any other action, the Board may fix a time not more than sixty (60) days prior to the date of for any such determination of stockholders, nor, in the case of a meeting of stockholders, less than fifteen (15) days before the date of such meeting.
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Section 12. ADVANCE NOTICE OF STOCKHOLDER NOMINEES FOR DIRECTOR AND OTHER STOCKHOLDER PROPOSALS.
(a) The matters to be considered and brought before any meeting of stockholders of the Corporation, including the nomination and election of directors, shall be limited to only those matters that are brought properly before the meeting in compliance with the procedures set forth in this Section 12 of Article II.
(b) In order to be properly brought before any annual meeting of stockholders, a matter must be (i) specified in the notice of annual meeting (or any supplement thereto) given by or at the direction of the Board, (ii) otherwise brought before the annual meeting by or at the direction of the Board or (iii) properly and timely brought before the annual meeting in compliance with the notice procedures specified in this Section 12 of Article II by a stockholder who holds of record stock of the Corporation (or by a person who holds such stock through a nominee or “street name” holder of record of such stock and can demonstrate to the Corporation such indirect ownership), both at the time of giving the notice provided for in this Section 12 of Article II, as of the record date for the annual meeting and at the time of the annual meeting and is entitled to vote at the meeting on such matter (including any election of directors). In addition to any other requirements under applicable law, the Articles of Incorporation and these Bylaws, persons nominated by stockholders for election as directors of the Corporation and any other proposals by stockholders shall be properly brought before an annual meeting of stockholders only if notice of any such matter to be presented by a stockholder at such meeting (a “Stockholder Notice”) is delivered to the Secretary at the principal executive office of the Corporation not less than ninety (90) nor more than one hundred and twenty (120) days prior to the first anniversary date of the annual meeting for the preceding year. If (and only if) an annual meeting of stockholders is not scheduled to be held within a period that commences thirty (30) days before and ends sixty (60) days after such an anniversary date (an annual meeting date outside such period being referred to herein as an “Other Meeting Date”), the Stockholder Notice shall be given in the manner provided in these Bylaws by the later of (i) the close of business on the ninetieth (90th) day prior to such Other Meeting Date or (ii) the close of business on the tenth (10th) day following the date on which such Other Meeting Date is first publicly announced or disclosed by the Corporation.
(c) Any stockholder who gives a Stockholder Notice of any matter (including a nomination for director) proposed to be brought before an annual meeting of stockholders shall deliver, as part of the Stockholder Notice, the following: (i) the name and address of such stockholder and any Stockholder Associated Person (as herein defined); (ii) (A) the class or series and number of shares or other securities of the Corporation that are, directly or indirectly, owned of record or beneficially owned by such stockholder and any Stockholder Associated Person, documentary evidence of such record or beneficial ownership, and the date or dates such shares were acquired and the investment intent at the time such shares were acquired, (B) any option, warrant, convertible security, stock appreciation right, or other right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of securities of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by each such stockholder or any Stockholder Associated Person and any other direct or indirect right held by each such stockholder or any Stockholder Associated Person to profit from, or share in any profit derived from, any increase or decrease in the value of securities of the Corporation, (C) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder or any Stockholder Associated Person has a right to vote any securities of the Corporation, (D) any contract, arrangement, relationship or understanding pursuant to which each such stockholder or any Stockholder Associated Person has the opportunity, directly or indirectly, to profit or share in any profit derived from any decrease in the value of any security issued by the Corporation (a “Short Interest”), (E) any rights to dividends on the shares of the Corporation owned beneficially by such stockholder or any Stockholder Associated Person that are separated or separable from the underlying securities of the Corporation, (F) any proportionate interest in securities of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder or any Stockholder Associated Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner, and (G) any performance-related fees (other than an asset-based fee) that such stockholder or any Stockholder Associated Person is entitled to based on any increase or decrease in the value of securities of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of such stockholder’s or any Stockholder Associated Person’s immediate family sharing the same household (which information, in each case, shall be supplemented by such stockholder and any Stockholder Associated Person not later than ten (10) calendar days after the record date for the meeting to disclose such ownership as of the record date); (iii) a description of all arrangements or understandings between such stockholder and/or any Stockholder Associated Person and any other person or persons (naming such person or persons) in connection with the proposal of such business by such stockholder; (iv) whether and the extent to which any agreement, arrangement or understanding has been made, the effect or intent of which is to increase or decrease the voting power of such stockholder and/or any Stockholder Associated Person with respect to any securities of the Corporation, without regard to whether such transaction is required to be reported on a Schedule 13D or other form in accordance with Section 13(d) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any successor provisions thereto and the rules and regulations promulgated thereunder; and (v) any other information relating to such stockholder and/or any Stockholder Associated Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such stockholder and/or any Stockholder Associated Person in support of any business or director nominations proposed to be brought before the meeting pursuant to rules and regulations promulgated under Section 14(a) of the Exchange Act or any successor provisions (assuming, for purposes of the Stockholder Notice, that such rules and regulations were applicable even if they are not).
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(d) For purposes of these Bylaws, a “Stockholder Associated Person” shall mean with respect to any stockholder (A) any person controlling or controlled by, directly or indirectly, under common control with, or Acting in Concert with, such stockholder, (B) any beneficial owner of securities of the Corporation owned of record or beneficially by such stockholder, and (C) any person controlling, controlled by or under common control with such Stockholder Associated Person. For purposes of these Bylaws, a person shall be deemed to be “Acting in Concert” with another person if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or towards a common goal relating to the management, governance or control of the Corporation in parallel with, such other person where (A) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making processes and (B) at least one additional factor suggests that such persons intend to act in concert or in parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately and directly or indirectly, including through counsel), attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided, that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies from such other person in response to a solicitation of proxies. A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person.
(e) Any stockholder who wishes to nominate a person for election as a director of the Corporation at an annual meeting of stockholders shall deliver, as part of the Stockholder Notice, a statement in writing setting forth (i) the name of each person to be nominated, (ii) the number and class of all shares of stock of the Corporation each person owns of record and beneficially, as reported to the stockholder by the person, (iii) a description of all direct and indirect agreements, arrangements and understandings between the stockholder and/or any Stockholder Associated Person and each person being proposed as a nominee (or any of his or her respective affiliates and associates) and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, (iv) a description of all direct and indirect compensation, indemnification and other material agreements, arrangements, understandings or relationships between or among the stockholder and/ or any Stockholder Associated Person and each proposed nominee, his or her respective affiliates and associates and any other persons (naming such person or persons) with whom such proposed nominee (or any of his or her respective affiliates and associates) is Acting in Concert (as herein defined), including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K (assuming, for purposes of the Stockholder Notice, that such rules and regulations were applicable even if they are not) if such stockholder were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant, (v) the information regarding the person that would be required to be included in a proxy statement, by the rules and regulations of the U.S. Securities and Exchange Commission (assuming, for purposes of the Stockholder Notice, that such rules and regulations were applicable even if they are not), for a nominee for election as a director in an election contest, (vi) the person’s signed consent to being named in the proxy statement as a nominee and to serving as a director if elected or re-elected, as the case may be, as a director of the Corporation, and (vii) a statement whether such stockholder or Stockholder Associated Person intends or is part of a group that intends to solicit proxies from stockholders in support of the election or re-election of such nominee(s).
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(f) Any stockholder who gives a Stockholder Notice of any matter (other than a nomination for director) proposed to be brought before an annual meeting of stockholders shall deliver, as part of the Stockholder Notice, the following: (i) a description of the business desired to be brought before the meeting, including the text of the proposal or business and the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment, (ii) a brief written statement of the reasons why the stockholder favors the proposal, (iii) any material interest of such stockholder in the matter proposed (other than as a stockholder), if applicable, (iv) reasonably detailed description of all agreements, arrangements, understandings and relationships (A) between or among the stockholder and any Stockholder Associated Person or (B) between or among the stockholder or any Stockholder Associated Person and any other person or entity (including their names) in connection with the proposal of such business by such stockholder, including without limitation any agreements that would be required to be disclosed pursuant to Item 5 or Item 6 of a Schedule 13D that would be filed pursuant to the Exchange Act (regardless of whether the requirement to file a Schedule 13D is applicable to the stockholder or any Stockholder Associated Person or other person or entity), and (v) a representation whether such stockholder or any Stockholder Associated Person intends or is part of a group that intends (A) to deliver a proxy statement and/or form of proxy to the holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or (B) otherwise to solicit proxies from stockholders in support of such proposal.
(g) As used in these Bylaws, shares “beneficially owned” shall mean all shares which a person is deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall in all events be deemed to beneficially own any shares of any class or series of the Corporation as to which such person has a right to acquire beneficial ownership at any time in the future.
(h) If a stockholder is entitled to vote only for a specific class or category of directors at an annual or special meeting of stockholders, the stockholder’s right to nominate a person for election as a director at the meeting shall be limited to such class or category of directors.
(i) Notwithstanding any provision of this Section 12 of Article II to the contrary, in the event that the number of directors to be elected to the Board at the next annual meeting of stockholders is increased by virtue of an increase in the size of the Board and either all of the nominees for director at the next annual meeting of stockholders or the size of the increased Board is not publicly announced or disclosed by the Corporation at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a Stockholder Notice shall also be considered timely hereunder, but only with respect to nominees to stand for election at the next annual meeting as the result of any new positions created by such increase, if it is delivered to the Secretary at the principal place of business of the Corporation not later than the close of business on the tenth (10th) day following the first day on which all such nominees or the size of the increased Board shall have been publicly announced or disclosed by the Corporation.
(j) Except as provided in the immediately following sentence, no matter shall be properly brought before a special meeting of stockholders unless the matter shall have been brought before the meeting pursuant to the Corporation’s notice of such meeting. In the event the Corporation calls a special meeting of stockholders for the purpose of electing a director to the Board, any stockholder entitled to vote for the election of such director at such meeting may nominate a person for election to such position as is specified in the notice of such meeting, but only if the Stockholder Notice required by this Section 12 of Article II shall be delivered to the Secretary of the Corporation at the principal place of business of the Corporation not later than the close of business on the tenth (10th) day following the first day on which the date of the special meeting and either the names of all nominees proposed by the Board to be elected at such meeting or the number of directors to be elected shall have been publicly announced or disclosed.
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(k) A stockholder providing notice of any business proposed to be conducted, or the nomination of one or more candidates for election to the Board for consideration, at a meeting shall further update and supplement such notice, if necessary, from time to time, so that the information provided or required to be provided in such notice pursuant to this Section 12 of Article II shall be true and correct in all material respects, and such update and supplement shall be received by the Secretary of the Corporation not later than five (5) Business days following the occurrence of any event, development or occurrence which would cause the information provided to be not true and correct in all material respects.
(l) If the information submitted pursuant to this Section 12 of Article II by any stockholder proposing business for consideration at an annual or special meeting shall be or become inaccurate to any material extent, such information may be deemed not to have been provided in accordance with this Section 12 of Article II. Upon written request by the Secretary, the Board or any committee thereof, any stockholder proposing business for consideration at an annual or special meeting shall provide, within seven (7) business days of delivery of such request (or such other period as may be specified in such request), written verification, satisfactory in the discretion of the Board, any committee thereof or any authorized officer of the Corporation, to demonstrate the accuracy of any information submitted by the stockholder pursuant to this Section 12 of Article II. If a stockholder fails to provide such written verification within such period, the information as to which written verification was requested may be deemed not to have been provided in accordance with this Section 12 of Article II.
(m) For purposes of this Section 12 of Article II, a matter shall be deemed to have been “publicly announced or disclosed” if the matter is disclosed in a press release reported by the (i) Dow Jones News Service, the Associated Press or a comparable U.S. national news service or (ii) in a document publicly filed by the Corporation with the U.S. Securities and Exchange Commission.
(n) In no event shall the adjournment of an annual meeting or a special meeting of stockholders, or any announcement thereof, commence a new period for the giving of notice as provided in this Section 12 of Article II. This Section 12 of Article II shall not apply to any nomination of a director in an election in which only the holders of a particular class of stock of the Corporation (the holders of which may vote by written consent under the Articles of Incorporation), or a series thereof, are entitled to vote (unless otherwise provided in the terms of such stock).
(o) The chairman of any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall have the power and duty to determine whether notice of nominees and other matters proposed to be brought before a meeting have been duly given in the manner provided in this Section 12 of Article II and, if not so given, shall direct and declare at the meeting that such nominees and other matters shall not be considered.
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(p) Notwithstanding the foregoing provisions of this Section 12 of Article II, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be considered, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 12 of Article II, to be considered a qualified representative of the stockholder, a person must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. NUMBER AND TERM OF OFFICE. The affairs, business and property of the Corporation shall be managed by a Board to consist of such number of directors as shall be fixed from time to time by a resolution passed by a majority of the entire Board. Except as otherwise provided by law or in Section 3 of this Article III, the directors of the Corporation shall be elected at each annual meeting of stockholders, to replace those directors whose terms expire at such annual meeting. Except as otherwise provided in Section 1 of this Article III, each Director shall be elected to serve until the third anniversary of his or her election date, except in the event of his or her death, resignation, removal, or the earlier termination of his or her term of office. The three-year term limit shall not apply to the Chief Executive Officer of the Corporation. No decrease in the number of directors shall shorten the term of any incumbent director. The directors need not be residents of the State of Nevada or stockholders of the Corporation. Corporations may, to the extent permitted by law, be elected or appointed directors.
Section 2. REMOVAL. Any or all of the directors may be removed, with or without cause, by the affirmative vote of holders of two-thirds (2/3) of the voting power of all the outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, considered for this purpose as a single class. Notwithstanding the previous sentence, whenever any director shall have been elected by the holders of any class of stock of the Corporation voting separately as a class under the provisions of the Articles of Incorporation, such director may be removed and the vacancy filled only by the holders of eighty percent (80%) of the voting power of that class of stock voting separately as a class. Except as provided in the Articles of Incorporation, vacancies caused by any such removal or any vacancy caused by the death or resignation of any director or for any other reason, and any newly-created directorship resulting from any increase in the authorized number of directors, may be filled by, and only by, the affirmative vote of a majority of the directors then in office, although less than a quorum, and any director so elected to fill any such vacancy or newly created directorship shall hold office until the director’s successor is elected and qualified or until the director’s earlier resignation or removal. No director may be removed without cause by either the stockholders or the Board.
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Section 3. VACANCIES. Vacancies in the Board occurring by death, resignation, creation of new directorship, failure of the stockholders to elect the whole class of directors required to be elected at any annual election of directors or for any other reason, including removal of directors for cause, shall be filled only by the affirmative vote of a majority of the remaining directors then in office, although less than a quorum, at any special meeting called for that purpose or at any regular meeting of the Board.
Section 4. REGULAR MEETINGS. Regular meetings of the Board may be held at such time and place, within or without the Marshall Islands, as may be determined by resolution of the Board. No notice shall be required for any regular meeting. Except as otherwise provided by law, any business may be transacted at any regular meeting of the Board.
Section 5. SPECIAL MEETING. Special meetings of the Board may be called from time to time by the Chairman, the President, or any officer of the Corporation who is also a director. The President or the Secretary shall call a special meeting of the Board upon written request directed to either of them by any two directors stating the time, place and purpose of such special meeting. Special meetings of the Board shall be held on a date and at such time and at such place, within or without the Marshall Islands, as may be designated in the notice thereof by the officer calling the meeting.
Section 6. NOTICE OF MEETINGS. Notice of the date, time and place of each meeting of the Board shall be given to each Director at least forty-eight (48) hours prior to such meeting, unless the notice is given orally or delivered in person, in which case it shall be given at least twenty-four (24) hours prior to such meeting. For the purpose of this section, notice shall be deemed to be duly given to a Director if given to him or her personally (including by telephone) or if such notice be delivered to such Director by mail, telecopy, electronic mail or other electronic means to his or her last known address. Notice of a meeting need not be given to any Director who submits a signed waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior to the conclusion thereof, the lack of notice to him or her.
Section 7. QUORUM. Subject to the provisions of Section 3 of this Article III, a majority of the directors at the time in office (but, unless the Board shall consist solely of one director, in no case less than one-third of total number of directors nor less than two directors), present in person or by proxy or communications equipment, shall constitute a quorum for the transaction of business.
Section 8. ORGANIZATION. The Chairman of the Board or, in the absence of the Chairman of the Board, the Chief Executive Officer shall preside at all meetings of the Board. In the absence of the Chairman of the Board and the Chief Executive Officer, a Chairman shall be elected from among the Directors present. The Secretary of the Corporation shall act as secretary of all meetings of the directors. In the absence of the Secretary of the Corporation, the Chairman may appoint any person to act as secretary of the meeting.
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Section 9. INTERESTED DIRECTORS. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (i) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, or, if the votes of the disinterested directors are insufficient to constitute an act of the Board, by unanimous vote of the disinterested directors; or (ii) the material facts as to his or her relationship or interest and as to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.
Section 10. VOTING. The vote of the majority of the directors, present in person or by proxy or by means of communications equipment, at a meeting at which a quorum is present shall be the act of the directors. Unless otherwise restricted by the Articles of Incorporation or by these Bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee, as the case may be.
Section 11. COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES. Directors shall receive such compensation for their services as directors and such reimbursement for their expenses of attendance at meetings of the Board and its committees as may be determined from time to time by resolution of the Board. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefore.
ARTICLE IV
COMMITTEES
The Board may, by resolution or resolutions passed by a majority of the entire Board, designate from among its members an executive committee to consist of one or more of the directors of the Corporation, which, to the extent provided in said resolution or resolutions, or in these Bylaws, shall have and may exercise, to the extent permitted by law, the powers of the Board in the management of the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that no committee shall have the power or authority to (i) submit to stockholders of any action that requires stockholders’ approval by law, (ii) fill a vacancy in the Board or in a committee thereof, (iii) fix compensation of the directors for serving on the Board any other committee, (iv) amend or repeal any bylaw or adopt any new bylaw, or (v) amend or repeal any resolution of the entire Board which by its terms shall not be so amendable or repealable. In addition, the Board may designate from among its members other committees to consist of one or more of the directors of the Corporation, each of which shall perform such functions and have such authority and powers as shall be delegated to such committee by said resolution or resolutions or as provided for in these Bylaws subject to the prohibitions on the delegation of power and authority set forth in the preceding sentence. Members of the executive committee and any other committee shall hold office for such period as may be prescribed by the vote of the entire Board, subject, however, to removal at any time by the vote of the Board. Vacancies in membership of such committees shall be filled by vote of the Board. Committees may adopt their own rules of procedures and may meet at stated times or on such notice as they may determine. Each committee shall keep a record of its proceedings and report the same to the Board when required.
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ARTICLE V
OFFICERS
Section 1. NUMBER AND DESIGNATION. The officers of the Corporation shall include a Chief Executive Officer and a Secretary and may include a Chairman of the Board, one or more Vice Chairmen of the Board, a President, a Treasurer, a Chief Financial Officer, one or more Vice-Presidents and such other officers, if any, as the Board may deem necessary. Officers may be of any nationality and need not be residents of the Marshall Islands. The officers shall be elected annually by the Board at its first meeting following the annual election of directors, but in the event of the failure of the Board to so elect any officer, such officer may be elected at any subsequent meeting of the Board. The salaries of officers and any other compensation paid to them shall be fixed from time to time by the Board. The Board may at any meeting elect additional officers. Each Officer shall hold office at the pleasure of the Board and may hold more than one office. Any officer may be removed by the Board at any time with or without cause. Any vacancy in an office may be filled for the unexpired position of the term of such office by the Board at any regular or special meeting. In addition to the powers and duties of the officers of the Corporation as set forth in these Bylaws, the officers shall have such authority and shall perform such duties as from time to time may be determined by the Board.
Section 2. CHIEF EXECUTIVE OFFICER. The Board shall designate one of the officers of the Corporation to be the Chief Executive Officer of the Corporation. Subject to the control of the Board, the Chief Executive Officer shall have general charge and control of all the business and affairs of the Corporation and shall have all powers and shall perform all duties incident to the position of Chief Executive Officer which may be required by law and such other duties as are required by the Board. The Chief Executive Officer shall make reports to the Board and to the stockholders, and shall see that all orders and resolutions of the Board and of any committee thereof are carried into effect. The Chief Executive Officer shall have such other powers and perform such other duties as may from time to time be assigned by these Bylaws or by the Board. The Chief Executive Officer will be a member of the Board.
Section 3. CHIEF FINANCIAL OFFICER. The Board may designate one of the officers of the Corporation to be the Chief Financial Officer of the Corporation. Subject to the control of the Board and the Chief Executive Officer, the Chief Financial Officer shall have general charge and control of the financial affairs of the Corporation and shall have all powers and shall perform all duties incident to the position of Chief Financial Officer. The Chief Financial Officer shall act in a general executive capacity and assist the Chief Executive Officer in the administration and operation of the Corporation’s financial affairs. The Chief Financial Officer shall have such other powers and perform such other duties as may from time to time be assigned by these Bylaws or by the Board or the Chief Executive Officer.
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Section 4. CHAIRMAN AND VICE CHAIRMEN OF THE BOARD. The Board may elect a Chairman of the Board from among its members. The Chairman of the Board shall preside at all meetings of the Board and shall have all powers and may perform all duties incident to the office of Chairman of the Board which shall be required by law and shall have such other powers and perform such other duties as shall from time to time be assigned by these Bylaws or by the Board. The Board also may elect one or more Vice-Chairmen to act in the place of the Chairman upon his or her absence or inability to act.
Section 5. THE PRESIDENT AND VICE PRESIDENTS. The Board may elect a President and one or more Vice Presidents of the Corporation. Subject to the control of the Board and the Chief Executive Officer, the President and each Vice President shall have all powers and shall perform all duties incident to their respective offices which may be required by law and shall have such other powers and perform such other duties as may from time to time be assigned by these Bylaws or by the Board or the Chief Executive Officer.
Section 6. SECRETARY. The Board shall elect a Secretary who shall act as Secretary of all meetings of the stockholders and of the Board at which he or she is present, shall have supervision over the giving and serving of notices of the Corporation, shall be the custodian of the corporate records of the corporate seal of the Corporation, shall be empowered to affix the corporate seal to those documents, the execution of which, on behalf of the Corporation under its seal, is duly authorized and when so affixed may attest the same, and shall exercise the powers and perform such other duties as may be assigned to him or her by the Board or the President.
Section 7. TREASURER. The Board may elect a Treasurer who shall have general supervision over the care and custody of the funds, securities, and other valuable effects of the Corporation and shall deposit the same or cause the same to be deposited in the name of the Corporation in such depositories as the Board may designate, shall disburse the funds of the Corporation as may be ordered by the Board, shall have supervision over the accounts of all receipts and disbursements of the Corporation, shall, whenever required by the Board, render or cause to be rendered financial statements of the Corporation, shall have the power and perform the duties usually incident to the office of Treasurer, and shall have such powers and perform other duties as may be assigned to him or her by the Board or President.
Section 8. OTHER OFFICERS. The Board may elect other officers of the Corporation who may exercise such powers and perform such duties as may be assigned to them by the Board or the Chief Executive Officer.
Section 9. BOND. The Board shall have power to the extent permitted by law to require any officer, agent or employee of the Corporation to give bond for the faithful discharge of his or her duties in such form and with such surety as the Board may deem advisable.
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ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. FORM AND ISSUANCE. The shares of the Corporation shall be represented by certificates in form meeting the requirements of law, and not inconsistent with the Articles of Incorporation, and approved by the Board, unless the Board provides, by resolution, that some or all shares of any or all classes or series of stock shall be uncertificated. Certificates shall be signed by the Chairman of the Board, the President or Chief Executive Officer or a Vice-President and by the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer. These signatures may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or its employee.
Section 2. TRANSFER. The Board shall have power and authority to make such rules and regulations as they may deem expedient concerning the issuance, registration and transfer of certificates representing shares of the Corporation’s stock, and may appoint transfer agents and registrars thereof.
Section 3. LOSS OF STOCK CERTIFICATES. The Board may direct a new certificate of stock to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed.
ARTICLE VII
DIVIDENDS
Section 1. DECLARATION AND FORM. Subject to the provisions of the Articles of Incorporation, dividends may be declared in conformity with applicable law by, and at the discretion of, the Board at any regular or special meeting. Dividends may be declared and paid in cash, stock or other property of the Corporation.
Section 2. RECORD DATE. The Board may fix a time not exceeding sixty (60) days preceding the date fixed for the payment of any dividend, the making of any distribution, the allotment of any rights or the taking of any other action, as a record time for the determination of the stockholders entitled to receive any such dividend, distribution, or allotment or for the purpose of such other action.
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ARTICLE VIII
INDEMNIFICATION
Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS IN THIRD PARTY PROCEEDINGS. Subject to the other provisions of this Article VIII, the Corporation shall indemnify and hold harmless, to the fullest extent permitted by the MBCA, as the same exists now or as it may be hereinafter amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) any person (and the heirs, executors, administrators and estate of such person) who was or is a party or is threatened to be made a party to, or otherwise becomes involved in, a Proceeding (as hereinafter defined), other than an action by or in the right of the Corporation, by reason of the fact that the person is or was or has agreed to become a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, manager, trustee or in any other capacity for another corporation, partnership, joint venture, limited liability company, trust, employee benefit plan or other enterprise, including service with respect to employee benefit plans maintained or sponsored by the Corporation (each, an “Other Enterprise”), or by reason of any action alleged to have been taken or omitted in such capacity (hereinafter, each of the foregoing persons, a “Covered Person”) against any and all Expenses (as defined in Section 17 of this Article VIII) actually and reasonably incurred by such person or on his or her behalf in connection with such Proceeding and any appeal therefrom, if the person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Section 2. INDEMNIFICATION OF DIRECTORS AND OFFICERS IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. Subject to the other provisions of this Article VIII, the Corporation shall indemnify and hold harmless, to the fullest extent permitted by the NRS, any Covered Person who was or is a party or is threatened to be made a party to, or otherwise becomes involved in, any Proceeding, by or in the right of the Corporation to procure judgment in its favor, against any and all Expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such Proceeding, and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the courts of the Marshall Islands or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the courts of the Marshall Islands or such other court shall deem proper.
Section 3. SUCCESSFUL DEFENSE. To the extent that a Covered Person has been successful on the merits or otherwise in defense of any Proceeding described in Section 1 or Section 2 of this Article VIII, or in defense of any claim, issue or matter therein, such person shall be indemnified against Expenses (as defined in Section 17 of this Article VIII) (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.
Section 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation may, to the extent authorized from time to time by the Board, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VIII to directors and officers of the Corporation to the extent not prohibited by the NRS or other applicable law. The Board shall have the power to delegate the determination of whether employees or agents shall be indemnified to such person or persons as the Board determines.
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Section 5. ADVANCE PAYMENT OF EXPENSES.
(a) Expenses (including attorneys’ fees) incurred by any Covered Person in defending any Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding. Such advances shall be paid by the Corporation within ten (10) calendar days after the receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; provided, that if applicable law requires, the payment of such expenses incurred by a Covered Person in his or her capacity as a director or officer shall be made only upon delivery to the Corporation of an undertaking in writing (the “Undertaking”) by or on behalf of such Covered Person to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right of appeal (a “final disposition”) that such Covered Person is not entitled to be indemnified for such expenses under this bylaw or otherwise. The Covered Person’s undertaking to repay the Corporation any amounts advanced for Expenses shall not be required to be secured and shall not bear interest.
(b) Except as otherwise provided in the NRS or this Section 5, the Corporation shall not impose on the Covered Person additional conditions to the advancement of Expenses or require from the Covered Person additional undertakings regarding repayment. Advancements of Expenses shall be made without regard to the Covered Person’s ability to repay the Expenses.
(c) Advancements of Expenses pursuant to this subsection shall not require approval of the Board or the stockholders of the Corporation, or of any other person or body. The Secretary shall promptly advise the Board in writing of the request for advancement of Expenses, of the amount and other details of the request and of the undertaking to make repayment provided pursuant to this Section 5.
(d) Advancements of Expenses to a Covered Person shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Corporation to support the advancements claimed.
(e) The right to advancement of Expenses shall not apply to (1) any action, suit or proceeding against an agent brought by the Corporation and approved by a majority of the authorized members of the Board which alleges willful misappropriation of corporate assets by such agent, wrongful disclosure of confidential information, or any other willful and deliberate breach in bad faith of such agent’s duty to the Corporation or its stockholders, or (2) any claim for which indemnification is excluded pursuant to these Bylaws including, but not limited to, Section 6 hereof.
Section 6. LIMITATIONS ON INDEMNIFICATION. Subject to the requirements in Section 3 of this Article VIII and the NRS, the Corporation shall not be obligated to indemnify any person pursuant to this Article VIII in connection with any Proceeding (or any part of any Proceeding):
(a) for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;
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(b) initiated by such person against the Corporation or its directors, officers, employees, agents or other indemnitees, unless (1) the Board authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (2) the Corporation provides the indemnification, in its sole discretion, pursuant to the powers vested in the Corporation under applicable law, (3) otherwise required to be made under Section 7 of this Article VIII or (d) otherwise required by applicable law; or
(c) if prohibited by applicable law; provided, however, that if any provision or provisions of this Article VIII shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this Article VIII (including, without limitation, each portion of any paragraph or clause containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this Article VIII (including, without limitation, each such portion of any paragraph or clause containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
Section 7. INDEMNIFICATION CLAIMS; DETERMINATION.
(a) To obtain indemnification under this Article VIII, a Covered Person shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to indemnification. Upon written request by a claimant for indemnification, a determination (the “Determination”), if required by applicable law, with respect to the claimant’s entitlement thereto shall be made as follows: (i) by the Board by majority vote of a quorum consisting of Disinterested Directors (as defined in Section 17 of this Article VIII); (ii) if such a quorum of Disinterested Directors cannot be obtained, by majority vote of a committee duly designated by the Board (in which all directors, whether or not Disinterested Directors, may participate) consisting solely of two or more Disinterested Directors; (iii) if such a committee cannot be designated, by any Independent Counsel (as defined in Section 17 of this Article VIII) selected by the Board prescribed in (i) above or by the committee of the Board prescribed in (ii) above, in a written opinion to the Board, a copy of which shall be delivered to the claimant; or if a quorum of the Board cannot be obtained for (a) above and the committee cannot be designated under (b) above, selected by majority vote of the full Board (in which directors who are parties may participate); or (iv) if such Independent Legal Counsel determination cannot be obtained, by majority vote of a quorum consisting of stockholders who are not parties to such Proceeding, or if no such quorum is obtainable, by a majority vote of stockholders who are not parties to the Proceeding. If it is so determined that the claimant is entitled to indemnification, payment to the claimant shall be made within ten (10) calendar days after such determination.
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(b) If a claim for indemnification under this Article VIII is not paid in full by the Corporation within thirty (30) calendar days after a written claim pursuant to Section 7(a) above has been received by the Corporation, or (ii) if a request for advancement of Expenses under this Article VIII is not paid in full by the Corporation within ten (10) calendar days after a statement pursuant to Section 5 above and the required Undertaking, if any, have been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation in a court of competent jurisdiction to recover the unpaid amount of the claim for indemnification or request for advancement of Expenses and, if successful in whole or in part, the claimant shall be entitled to be paid also any and all Expenses incurred in connection with prosecuting such claim. In any such suit, the Corporation shall, to the fullest extent not prohibited by law, have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of Expenses. It shall be a defense to any such action that, under the MBCA or other applicable law, the claimant has not met the standard of conduct which makes it permissible for the Corporation to indemnify the claimant for the amount claimed or that the claimant is not entitled to the requested advancement of Expenses, but (except where the required Undertaking, if any, has not been tendered to the Corporation) the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Disinterested Directors, Independent Counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth under the MBCA or other applicable law, nor an actual determination by the Corporation (including its Disinterested Directors, Independent Counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.
(c) The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.
(d) If a Determination shall have been made pursuant to Section 7(a) above that the claimant is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding commenced pursuant to Section 7(b) above.
(e) The Corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to Section 7(b) above that the procedures and presumptions of this Bylaw are not valid, binding and enforceable and shall stipulate in such proceeding that the Corporation is bound by all the provisions of this Bylaw.
Section 8. PROCEDURES FOR THE DETERMINATION OF WHETHER STANDARDS HAVE BEEN SATISFIED.
(a) Costs. All costs of making the Determination shall be borne solely by the Corporation, including, but not limited to, the costs of legal counsel, proxy solicitations and judicial determinations. The Corporation shall also be solely responsible for paying (i) all reasonable Expenses incurred by the indemnified person to enforce the indemnification rights provided pursuant to this Article Eight, including, but not limited to, the costs incurred by the indemnified person to obtain court-ordered indemnification pursuant to Section 7 hereof regardless of the outcome of any such application or Proceeding, and (ii) all costs of defending any suits or Proceedings challenging payments to the indemnified person under these Bylaws.
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(b) Timing of the Determination. The Corporation shall use its best efforts to make the Determination contemplated by Section 7 hereof promptly.
(1) if the Determination is to be made by the Board or a committee thereof, such Determination shall be made not later than fifteen (15) business days after a written request for a Determination (a “Request”) is delivered to the Corporation by the Indemnitee;
(2) if the Determination is to be made by Independent Counsel, such Determination shall be made not later than thirty (30) days after a Request is delivered to the Corporation by the indemnified person; and
(3) if the Determination is to be made by the stockholders of the Corporation, such Determination shall be made not later than ninety (90) days after a Request is delivered to the Corporation by the indemnified person.
Section 9. CONTRACT RIGHTS. All of the rights conferred in this Article VIII, as to indemnification, advancement of Expenses and otherwise, shall be contract rights between the Corporation and each indemnified person to whom such rights are extended that vest at the commencement of such indemnified person’s service to or at the request of the Corporation and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit, or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a contract right may not be modified retroactively without the consent of such indemnified person.
Section 10. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and advancement of expenses provided by this Article VIII shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, insurance policy, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors, administrators and estate of such a person. The Corporation is specifically authorized to enter into an agreement with any of its directors, officers, employees or agents providing for indemnification and advancement of expenses, including attorneys’ fees, that may change, enhance, qualify or limit any right to indemnification or advancement of expenses created by this Article VIII, to the fullest extent not prohibited by the MBCA or other applicable law.
Section 11. SEVERABILITY. If this Article VIII or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each present or former director or officer as to costs, charges and expenses (including attorneys’ fees), judgment, fines and amounts paid in settlement with respect to any Proceeding, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article VIII that shall not have been invalidated and to the fullest extent permitted by applicable law.
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Section 12. SUBROGATION. In the event of payment of indemnification to a person described in Section 1 of this Article VIII, the Corporation shall be subrogated to the extent of such payment to any right of recovery such person may have and such person, as a condition of receiving indemnification from the Corporation, shall execute all documents and do all things that the Corporation may deem necessary or desirable to perfect such right of recovery, including the execution of such documents necessary to enable the Corporation effectively to enforce any such recovery.
Section 13. NO DUPLICATION OF PAYMENTS. The Corporation shall not be liable under this Article VIII to make any payment in connection with any claim made against a person described in Section 1 of this Article VIII to the extent such person has otherwise received payment (under any insurance policy, bylaw, agreement or otherwise) of the amounts otherwise payable as indemnity hereunder.
Section 14. INSURANCE. The Corporation shall have the power to purchase and maintain, at its expense, insurance to protect itself and 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, partner, member, manager, trustee, employee, agent or other representative of an Other Enterprise against any expense, liability or loss asserted against such person and incurred by such person in any such capacity or arising out of such person’s status as such whether or not the Corporation would have the power to indemnify such person against such liability under applicable law or under the provisions of these Bylaws. To the extent that the Corporation maintains any policy or policies providing such insurance, each such current or former director or officer, and each such agent or employee to which rights to indemnification have been granted as provided in this Article VIII, shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such current or former director, officer, employee or agent. The Corporation may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to insure the payment of such sums as may become necessary to effect indemnification as provided herein.
Section 15. NO IMPUTATION. The knowledge and/or actions, or failure to act, of any other officer, director, employee or agent of the Corporation or an Other Enterprise shall not be imputed to an indemnified person for purposes of determining the right to indemnification under this Article VIII.
Section 16. RELIANCE. Persons who after the date of the adoption of Article VIII serve or continue to serve the Corporation in an Official Capacity or who, while serving in an Official Capacity, serve or continue to serve in an Official Capacity for an Other Enterprise, shall be conclusively presumed to have relied on the rights to indemnification and advancement of Expenses contained in this Article VIII.
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Section 17. CERTAIN DEFINITIONS.
(a) The term “agent” includes a volunteer.
(b) The term “Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
(c) The term “Disinterested Director” means a director of the Corporation who is not and was not a party to the matter in respect of which indemnification is sought by the claimant.
(d) The term “Expenses” shall be broadly construed and shall include, without limitation, all direct and indirect losses, liabilities, expenses, including fees and expenses of attorneys, fees and expenses of accountants, fees and expenses of public relations consultants and other advisors, court costs, transcript costs, fees and expenses of experts, witness fees and expenses, travel expenses, printing and binding costs, telephone charges, delivery service fees, the premium, security for, and other costs relating to any bond (including cost bonds, appraisal bonds, or their equivalents), judgments, fines (including excise taxes assessed on a person with respect to an employee benefit plan) and amounts paid in settlement and all other disbursements or expenses of the types customarily incurred in connection with (i) the investigation, prosecution, defense, appeal or settlement of a Proceeding, (ii) serving as an actual or prospective witness, or preparing to be a witness in a Proceeding, or other participation in, or other preparation for, any Proceeding, (iii) any voluntary or required interviews or depositions related to a Proceeding, and (iv) responding to, or objecting to, a request to provide discovery in any Proceeding. Expenses shall also include any federal, state, local and foreign taxes imposed on such person as a result of the actual or deemed receipt of any payments under this Article VIII.
(e) The term “Independent Counsel” means a law firm, a member of a law firm, or an independent practitioner, that is experienced in matters of corporation law and shall include any person who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the corporation or the claimant in an action to determine the claimant’s rights under this Article VIII.
(f) The term “Official Capacity” shall mean service as a director or officer of the Corporation or service, at the request of the Corporation while serving in an Official Capacity for the Corporation, as a director, officer, partner, member, manager, trustee, employee, agent or other representative of an Other Enterprise.
(g) The term “Proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit, investigation, inquiry, hearing, arbitration, other alternative dispute mechanism or any other proceeding, whether civil, criminal, administrative, investigative, legislative or otherwise and whether formal or informal.
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(h) The term “serving at the request of the Corporation” includes any service as a director, officer, employee, or agent of the Corporation that imposes duties on such persons, including duties relating to an employee benefit plan and its participants or beneficiaries.
(i) The term “not opposed to the best interest of the Corporation” describes the actions of a person who acts in good faith and in a manner he reasonably believes to be in the best interests of the participants and beneficiaries of an employee benefit plan.
Section 18. NOTICES. Any notice, request or other communication required or permitted to be given to the Corporation under this Article VIII shall be in writing and either delivered in person or sent by mail or other method of delivery, or by e-mail or other electronic transmission, to the Secretary of the Corporation and shall be effective only upon receipt by the Secretary.
ARTICLE IX
CORPORATE SEAL
Section 1. FORM. The Seal of the Corporation, if any, shall be circular in form, with the name of the Corporation in the circumference and such other appropriate legend as the Board may from time to time determine.
ARTICLE X
FISCAL YEAR
Section 1. FISCAL YEAR. The fiscal year of the Corporation shall be such period of twelve consecutive months as the Board may by resolution designate from time to time.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 1. CHECKS, NOTES, ETC. All checks, drafts, bills of exchange, acceptances, notes or other obligations or orders for the payment of money shall be signed and, if so required by the Board, countersigned by such officers of the Corporation and other persons as the Board from time to time shall designate. Checks, drafts, bills of exchange, acceptances, notes, obligations and orders for the payment of money made payable to the Corporation may be endorsed for deposit to the credit of the Corporation with a duly authorized depository by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Secretary, the Controller, any Assistant Controller and such other officers or persons, if any, as the Board from time to time may designate.
Section 2. LOANS. No loans and no renewals of any loans shall be contracted on behalf of the Corporation except as authorized by the Board. When authorized so to do, any officer or agent of the Corporation may effect loans and advances for the Corporation from any bank, trust company or other institution or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other evidences of indebtedness of the Corporation. When authorized so to do, any officer or agent of the Corporation may pledge, hypothecate or transfer, as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, any and all stocks, securities and other personal property at any time held by the Corporation, and to that end may endorse, assign and deliver the same. Such authority may be general or confined to specific instances.
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Section 3. CONTRACTS. Except as otherwise provided by law or in these Bylaws or as otherwise directed by the Board, the Chairman of the Board, the President, any Vice President or the Treasurer shall be authorized to execute and deliver, in the name and on behalf of the Corporation, all agreements, bonds, contracts, deeds, mortgages, security agreements and other instruments, either for the Corporation’s own account or in a fiduciary or other capacity, and the seal of the Corporation, if appropriate, shall be affixed thereto by any of such officers or the Secretary or an Assistant Secretary. The Board, the Chairman of the Board, any Vice Chairman, the President or any Vice President designated by the Board may authorize any other officer, employee or agent to execute and deliver, in the name and on behalf of the Corporation, agreements, bonds, contracts, deeds, mortgages, security agreements and other instruments, either for the Corporation’s own account or in a fiduciary or other capacity, and, if appropriate, to affix the seal of the Corporation thereto. The grant of such authority by the Board or any such officer may be general or confined to specific instances.
Section 4. WAIVERS OF NOTICE. Whenever any notice whatever is required to be given by law, by the Articles of Incorporation or by these Bylaws to any person or persons, a waiver thereof in writing or by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE XII
AMENDMENTS
These Bylaws and any amendment thereof may be altered, amended or repealed, or new bylaws may be adopted by (i) the Board by resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time such resolution is presented to the Board for adoption) acting at any special or regular meeting of the Board if, in addition to any other notice required by these Bylaws and other applicable requirements contained herein, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting, which notice shall also include, without limitation, the text of any such proposed amendment and/or any resolution calling for any such amendment, alteration or repeal, or (ii) the holders of two-thirds (66 2/3%) or more of the outstanding stock of the Corporation entitled to vote at any annual meeting or at any special meeting, provided, in the case of any special meeting only, in addition to any other notice required by these Bylaws and other applicable requirements contained herein, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting, which notice shall also include, without limitation, the text of any such proposed amendment and/or any resolution calling for any such amendment, alteration or repeal.
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EXHIBIT 5.3
AMENDMENT TO LEASE
Whereas, the parties desire to modify the terms of the Lease Agreement (herein called “Lease”) entered between Lake Butler Plaza Properties, LLC, a Florida limited liability company (herein called “Landlord”), as landlord, and ICOREConnect, Inc., a Nevada corporation (herein called “Tenant”), as tenant, dated October 23, 2017, concerning and pertaining to the property located at 3554 West Orange Country Club Drive, Suites 210, 220, 230 and 240, Winter Garden, FL 34787 (“Property”).
Whereas, the Lease was amended and restated by document dated October 23, 2020.
Whereas, Landlord and Tenant wish to extend the Lease Term of the Lease upon the same terms and conditions stated in the Lease except as set forth herein.
Now therefore, in consideration of the foregoing and mutual obligations contained herein, the Lease is hereby modified and amended as follows:
| 1. | RECITALS.The foregoing recital are true and correct. |
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| 2. | EXTENSIONOF LEASE TERM. The term of the Lease is hereby extended continuously from November 1, 2021 to May 30, 2022 upon the same terms and conditions stated in the Lease except as set forth herein. |
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| 3. | MINIMUMBASERENT. The Minimum Base Rent for each year of the foregoing Renewal Term shall be as follows during the extended Lease Term: |
| Lease Term Commencing |
| Monthly |
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| November 1, 2021 |
| $ | 6,231.43 |
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| 4. | ESTIMATED MONTHLY TOTAL RENT BEGINNING NOVEMBER 1, 2020: |
| Base Rent |
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| CAM |
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| Real Pro Tax |
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| sales tax |
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| Total |
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| Commencing | ||||||
| $ | 6,231.43 |
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| $ | 850.00 |
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| $ | 853.96 |
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| $ | 476.12 |
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| $ | 8,411.51 |
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| 11/1/2021 | |
| 5. | BINDING EFFECT, ENTIRE AGREEMENT, MODIFICATION. This Agreement shall be binding upon, and shall inure to the benefit of, the successors and assigns of the parties hereto. This Agreement embodies the entire agreement between the parties with respect to the Property and supersedes any and all prior agreements and understandings, written or oral, formal or informal. No modification or amendment to this Agreement, of any kind whatsoever, shall be made or claimed by any party hereto, and no notices of any extension, change, modification or amendment made or claimed by any of them shall have any force or effect whatsoever unless the same shall be endorsed in writing and fully signed by all of the parties hereto. |
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| 6. | The terms and provisions herein contained shall prevail over any and all prior agreements, arrangements or understandings, and the Lease is hereby ratified and confirmed as modified, all other terms of the Lease shall continue in effect unchanged. |
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WARNING: PLEASE TAKE NOTICE
THIS IS INTENDED TO BE A LEGALLY BINDING CONTRACT.
IF NOT FULLY UNDERSTOOD, SEEK THE ADVICE OF AN ATTORNEY PRIOR TO SIGNING
IN WITNESS WHEREOF, TENANT has executed this Lease Agreement on this the 10th day of September, 2021.
(Sign and Date)
| ICOREConnect, Inc., a Nevada corporation | |||
| By: | /s/ Robert McDermott | ||
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| Tenant - Signature | |
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| Robert McDermott President & CEO | |||
| Print Name and Title | |||
IN WITNESS WHEREOF, LANDLORD has executed this Agreement on this the 13th day of September, 2021.
(Sign and Date)
| Lake Butler Plaza Properties, LLC, a Florida limited liability company | |||
| By: | /s/ Ketan Pandya | ||
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| Landlord – Signature | |
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| Ketan Pandya / President | |||
| Print Name and Title | |||
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EXHIBIT 7.3
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this “Agreement”) is entered into as of February 28, 2022 (the “Effective Date”), by and between iCoreConnect, Inc., a Nevada corporation (“Borrower”), and Element SaaS Finance (USA), LLC, a Delaware limited liability company (“Lender”).
Recitals
A. Lender desires to make available a loan (the “Loan”) to Borrower in the amount set forth in the Loan Schedule attached to the Note, to be used for the specific purposes set forth in this Agreement.
B. Lender has required as a condition precedent to the Loan, and Borrower has agreed to grant, the Security Interest described below.
C. The parties hereto desire to enter into this Agreement in order to memorialize, and provide the terms and conditions with respect to, the Loan.
AGREEMENTS
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Borrower hereby agree as follows:
ARTICLE I.
DEFINITIONS AND INTERPRETATION
Section 1.01 Defined Terms. The following definitions are in addition to those stated elsewhere in this Agreement:
(a) “Borrower Parties” means Borrower.
(b) “Change in Control Transaction” shall mean (i) any “person” or “group” (within the meaning of Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of more than 50% of the outstanding voting securities of Borrower having the right to vote for the election of members of the board of directors; (ii) any reorganization, merger or consolidation of Borrower, other than a transaction or series of related transactions in which the holders of the voting securities of Borrower outstanding immediately prior to such transaction or series of related transactions retain, immediately after such transaction or series of related transactions, at least a majority of the total voting power represented by the outstanding voting securities of Borrower or such other surviving or resulting entity. An Initial Public Offering, as such, does not constitute a Change in Control Transaction unless it otherwise satisfies the preceding definition.
(c) “Code” means the Internal Revenue Code of 1986, as amended.
(d) “EBITDA” shall mean, for any period, earnings from continuing operations before payment of interest expense, federal, state and local income taxes, and deductions for depreciation and amortization, in each case for such period, computed and calculated in accordance with GAAP.
Loan and Security Agreement (iCoreConnect) (02282022)
(e) “Event of Default” has the meaning specified in Section 8.01.
(f) “GAAP” shall mean generally accepted accounting principles in effect from time to time in the United States.
(g) “Gross Revenue” means the total amount of sales recognized for a reporting period (monthly), prior to any deductions (e.g., commissions, customer credits or allowances) attributable solely from recurring monthly revenue sources including income statement line items described as SaaS, DaaS, and excluding any one-time fees, service revenues, customization fees, and other non-recurring items.
(h) “Initial Public Offering” shall mean the closing of Borrower’s first firm commitment underwritten initial public offering of Borrower’s common stock pursuant to a registration statement filed under the Securities Act.
(i) “Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, lien or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, affecting any property, including any agreement to grant any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature of a security interest, and/or the filing of or agreement to give any financing statement (other than a precautionary financing statement with respect to a lease that is not in the nature of a security interest) under the Uniform Commercial Code or comparable law of any jurisdiction with respect to any property.
(j) “Loan Amount” means the aggregate outstanding amount of Loans advanced in accordance with the terms hereof.
(k) “Loan Documents” means, collectively, this Agreement, the Note, the Deposit Account Control Agreement, the Payoff Letter, the Subordination Agreements, and each other agreement, document, and instrument entered into or delivered by Lender, Borrower, or their affiliates in connection with this Agreement or such agreements.
(l) “Loan Fee” means a non-refundable loan fee for the Loan payable by Borrower to Lender in immediately available funds in an amount equal to (i) a loan origination fee in the amount of 20,000 (1.0% of the initial loan amount, Borrower will pay an additional Loan Fee equal to 1% of each Subsequent Advance), plus (ii) a documentation fee in the amount of 10,000.00.
(m) “Loan Party” means Borrower, and any other Person (other than Lender) which at any applicable time becomes a party to any of the Loan Documents.
(n) “Loan Schedule” means the Loan Schedule attached to the Note.
(o) “Material Adverse Effect” means (i) the occurrence of an event or condition that would reasonably be expected to have a material adverse change in, or a material adverse effect upon, the business, operations or financial condition of the Loan Parties, taken as a whole; or (ii) a material impairment of the (A) rights and remedies (taken as a whole) of Lender under the Loan Documents, or (B) ability of the Loan Parties (taken as a whole) to perform their obligations under the Loan Documents to which they are a party, taken as a whole, but excluding any change, occurrence or development (i) resulting from general economic conditions (including prevailing interest rates, exchange rates, commodity prices and fuel costs) or political conditions (whether as a result of acts of terrorism, war (whether or not declared), armed conflicts or otherwise), (ii) resulting from the consummation of the transactions contemplated by this Agreement, or (iii) resulting from changes in GAAP or applicable laws after the date hereof.
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(p) “MRR” means the aggregate amount of Borrower’s Gross Revenues for a specified calendar month.
(q) “Note” means the Secured Promissory Note in the form attached hereto as Exhibit A issued by Borrower in favor of Lender.
(r) “Permitted Liens” shall have the meaning set forth in Section 7.04.
(s) “Person” means an individual, a corporation, a limited liability company, a limited partnership, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, a governmental, quasi-governmental, judicial or regulatory entity or any department, agency or political subdivision thereof, or any other entity.
(t) “Register” shall have the meaning set forth in Section 2.10
(u) “Securities Act” shall mean the Securities Act of 1933, as amended.
(v) “Solvent” means, with respect to any Person as of any date of determination, that, as of such date, (a) the value of the assets of such Person (both at fair value and present fair saleable value) is greater than the total amount of liabilities (including contingent and unliquidated liabilities) of such Person, (b) such Person is able to pay all liabilities of such Person as such liabilities mature and (c) such Person does not have unreasonably small capital. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
(w) “Subordinated Debt” shall mean indebtedness incurred by Borrower that is subordinated to all of Borrower’s indebtedness to Lender pursuant to a subordination, intercreditor, or other similar agreement in form and substance reasonably satisfactory to Lender, entered into between Lender and such other creditor), on terms reasonably acceptable to Lender.
(x) “Subordinated Lender” shall mean each of the Lenders listed on Exhibit F-1.
(y) “Subsequent Advance” shall have the meaning set forth in the Note, if applicable.
(z) “Subsequent Advance Conditions” shall have the meaning set forth in Section 5.02.
(aa) “Subsidiary” means any entity 50% or more of whose voting securities are at any applicable time owned, directly or indirectly, by Borrower and/or one or more Subsidiaries of Borrower.
(bb) “UCC” means the Uniform Commercial Code in effect in the state of Delaware.
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Section 1.02 Interpretation.
(a) Any defined term used in the plural in any Loan Document shall refer to all members of the relevant class and any defined term used in the singular shall refer to any number of the members of the relevant class.
(b) Any accounting term used and not specifically defined in any Loan Document shall be construed in conformity with, and all financial data required to be submitted under any Loan Document shall be prepared in conformity with, United States generally accepted accounting principles applied on a consistent basis.
(c) All exhibits to this Agreement, as now existing and as the same may from time to time be modified, are incorporated herein by this reference.
(d) Any reference to any Loan Document or other document shall include such document both as originally executed and as it may from time to time be supplemented, modified, amended, restated or extended. References herein to Articles, Sections and Exhibits shall be construed as references to this Agreement unless a different document is named. References to subparagraphs shall be construed as references to the same Section in which the reference appears.
(e) The term “document” is used in its broadest sense and encompasses agreements, certificates, opinions, consents, instruments and other written material of every kind. The terms “including” and “include” mean “including (include) without limitation.” The requirement that any party “deliver” any item to another party shall be construed to require that the first party “deliver or cause to be delivered” such item to the second party. The term “any,” as a modifier to any noun, shall be construed to mean “any and/or all” preceding the same noun in the plural. The terms “modify” and “modification,” when used with reference to any document or obligation, include amendments, supplements, renewals, extensions, waivers, terminations and other modifications of every kind. The terms “law” and “laws,” unless otherwise modified, mean, collectively, all federal, state and local laws, rules, regulations, codes and administrative and judicial precedents. The terms “herein,” “hereunder” and other similar compounds of the word “here” refer to the entire document in which the term appears and not to any particular provision or section of the document.
(f) Article and section headings are included in the Loan Documents for convenience of reference only and shall not be used in construing the Loan Documents.
(g) This Section 1.02 shall apply to all of the Loan Documents.
(h) Capitalized terms not otherwise defined herein shall have the meanings set forth in the Note.
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ARTICLE II.
THE LOAN
Section 2.01 Loan. Subject to the terms and conditions of this Agreement, Lender hereby agrees to make the Loan to Borrower on the dates and in the amounts set forth in the Loan Schedule, including (a) the Initial Advance to Borrower on the Effective Date, and (b) one or more Subsequent Advances to Borrower subject only to the satisfaction (or waiver by Lender) of the Subsequent Advance Conditions. Borrower’s obligation to repay the Loan shall be evidenced by the Note, all terms of which are incorporated herein by reference.
Section 2.02 Purpose of Loan. Borrower acknowledges and agrees that the purpose of the Loan is to fund the growth of Borrower’s business, including to continue and expand sales and marketing activities, provided, that Borrower shall use up to $497,309.38 of the Initial Advance (as defined in the Note) to pay off the entire outstanding amounts owing (other than contingent indemnity obligations) pursuant to the Loan between Borrower Robert McDermott in accordance with the Payoff Letter (defined below). Borrower acknowledges and agrees that Lender would not make the Loan absent Borrower’s estimated projections that it can achieve growth through the deployment of additional capital, it being understood and agreed by the Lender that (i) any financial or business projections are subject to uncertainties and contingencies which may be beyond the control of the Borrower, (ii) no assurance is given by the Borrower that the results or forecast in any such projections will be realized and (iii) the actual results may differ from the forecast results.
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Section 2.03 Payment Amounts. The Loan shall be repaid in accordance with the provisions of the payment schedule described in the Loan Schedule.
Section 2.04 Interest. Interest shall accumulate on the Loan Amount from and after the Effective Date at the rate provided in the Loan Schedule.
Section 2.05 Loan Fee. Borrower shall pay Lender the Loan Fee. The Loan Fee shall be due and payable in full on the Effective Date, is non-refundable in whole or in part and shall be deemed fully earned by Lender.
Section 2.06 Loan Administration. From and after the Effective Date, Lender may, with the consent of Borrower, establish certain reasonable administrative procedures to be satisfied from time to time by Borrower in connection with the administration of the Loan. Such procedures may include the periodic submission of information reasonably requested by the Lender not otherwise described herein.
Section 2.07 Permitted Prepayment. Borrower shall have the right to prepay all or any portion of the principal balance of the Loan then outstanding under the Note, together with all accrued and unpaid interest thereon to the date of prepayment and all other unpaid indebtedness; provided, however, that Borrower provides at least 3 months’ notice (or such shorter notice as may be reasonably agreed by the Lender), and provided, further, that if the prepayment is made prior to the 3rd anniversary of the Effective Date with regard to the Initial Advance, or, with regard to any Subsequent Advance, any payment made prior to the 3rd anniversary of the Subsequent Advance shall include a prepayment fee determined in accordance with Section 2.07(a) (the “Prepayment Fee”).
(a) Prepayment Fee. The Prepayment Fee shall be (i) equal to 6 months’ interest that would have accrued with regard to the prepaid principal, if prepaid prior to the 2nd anniversary of the date of the Initial Advance or Subsequent Advance, as applicable, and (ii) equal to 3 months’ interest that would have accrued with regard to the prepaid principal, if prepaid on or after the 2nd anniversary and prior to the 3rd anniversary of the date of the Initial Advance or Subsequent Advance, as applicable.
(b) Prohibited Prepayment. Any tender of payment by Borrower or any other Person of all or any portion of the Loan, other than as expressly provided in the Loan Documents, shall constitute a prohibited prepayment. If a prepayment of all or any portion of the Loan is made after the occurrence of an Event of Default causing acceleration under this Agreement or the Loan Documents, then, in such event, Borrower shall pay the Prepayment Fee which would otherwise be applicable hereunder.
(c) Waiver of Right to Prepay the Note Without Prepayment Fee.
(i) Borrower acknowledges that Lender has relied upon the anticipated investment return under this Agreement in entering into transactions with, and in making commitments to, third parties and that the tender of any prohibited prepayment, shall, to the extent permitted by law, include the Prepayment Fee. Borrower agrees that the Prepayment Fee represents the reasonable estimate of Borrower and Lender of a fair average compensation for the loss that may be sustained by Lender as a result of a prohibited prepayment of this Agreement and it shall be paid without prejudice to the right of Lender to collect any other amounts provided to be paid under the Loan Documents.
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(ii) BORROWER EXPRESSLY: (I) WAIVES ANY RIGHTS IT MAY HAVE TO PREPAY THE NOTE, IN WHOLE OR IN PART, WITHOUT FEE OR PENALTY, UPON ACCELERATION OF THE MATURITY DATE OF THE NOTE; AND (II) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT OF THE NOTE IS MADE, UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THE NOTE BY LENDER ON ACCOUNT OF ANY DEFAULT BY BORROWER UNDER ANY LOAN DOCUMENT, THEN BORROWER SHALL BE OBLIGATED TO PAY CONCURRENTLY THE PREPAYMENT FEE SPECIFIED IN THIS Section 2.07(c)(ii). BY EXECUTING THE NOTE, BORROWER AGREES THAT LENDER’S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THE NOTE CONSTITUTES ADEQUATE CONSIDERATION FOR THIS WAIVER AND AGREEMENT.
Section 2.08 Protective Advances. Any contrary provision of this Agreement or any other Loan Document notwithstanding, Lender hereby is authorized by Borrower, from time to time in such Lender’s reasonable discretion, after the occurrence and during the continuance of an Event of Default, to make advances to, or for the benefit of, Borrower on behalf of such Lender that such Lender, in its reasonable discretion deems necessary (a) to preserve or protect the Collateral, or any portion thereof, or (b) to enhance the likelihood of repayment of the Obligations (any of the advances described in this Section 2.08 shall be referred to as “Protective Advances”). Each Protective Advance shall be deemed to be an additional Loan hereunder. The Protective Advances shall be repayable on demand and secured by the Collateral and shall constitute Obligations hereunder. The provisions of this Section 2.08 are for the exclusive benefit of Lender and are not intended to benefit Borrower in any way.
Section 2.09 Seniority of Loan. The Loan shall be senior to all other debt, equity or other commitments of Borrower, subject to any Permitted Liens permitted to have priority in accordance with the terms of this Agreement and applicable law.
Section 2.10 Taxes.
(a) Lender shall provide Borrower with such forms, documents, and certifications as are reasonably necessary or advisable so as to permit Borrower to make payments under the Loan Documents without deduction or withholding. Without limiting the generality of the foregoing, Lender shall provide Borrower, upon the issuance of the Note and at such other times as Borrower may reasonably request, a validly executed and completed IRS Form W-9 or appropriate IRS Form W-8, as applicable. In the event that Lender intends to claim exemption from withholding under Sections 871(h) or 881(c) of the Code, Lender shall provide Borrower with documentation in form and substance reasonably satisfactory to Borrower certifying as to Lender’s entitlement to such exemption.
(b) Borrower shall be entitled to deduct and withhold any amounts otherwise payable under the Loan Documents such amounts as it is required to deduct and withhold pursuant to any provision of applicable law; provided, that if Borrower becomes aware that any payments hereunder may be subject to withholding when paid, Borrower shall provide Lender with commercially reasonably notice of such withholding obligation, so as to permit Lender to provide Borrower with any forms or other certifications as are necessary to reduce or eliminate such withholding. To the extent that any amounts are so deducted and withheld, such amounts shall be treated as having been paid to Lender for all purposes of this Agreement.
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(c) Lender (acting as a non-fiduciary agent of Borrower) shall maintain a register for the recordation of the name and address of Lender, and the principal amount (and stated interest thereon) of the Note owing to Lender pursuant to the terms hereof from time to time (the “Register”). Lender’s rights and obligations under the Note may be assigned only by registration of such assignment in the Register and otherwise in accordance with the terms of this Agreement. The entries in the Register shall be conclusive, absent manifest error, and Borrower and Lender may treat each person whose name is recorded in the Register pursuant to the terms hereof as Lender hereunder for all purposes of the Note, notwithstanding notice to the contrary. The Register shall be available for inspection with respect to the Note at any reasonable time and from time to time upon reasonable prior notice. The parties hereto acknowledge and agree that this Section 2.09 shall be interpreted such that the Loan Amount (and the Note evidencing the Loan Amount) is at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code.
ARTICLE III.
THE SECURITY INTEREST
Section 3.01 Grant of Security Interest.
(a) As security for the prompt and complete payment and performance when due of all of its obligations under this Agreement and any of the other Loan Documents (collectively, the “Obligations”), Borrower hereby grants to Lender a continuing security interest (the “Security Interest”) of first priority in all of the right, title and interest of Borrower in, whether now existing or hereafter from time to time acquired, all of the assets of Borrower currently owned or acquired hereafter (the “Collateral”); provided that the Collateral shall not include any Excluded Property (as defined herein or in any Loan Document). Collateral includes, but is not limited to the following:
(i) All of Borrower’s accounts, accounts receivables, contract rights, and general intangibles, including, without limitation, any and all franchise rights, leasehold interests, rights as lienholder, all present and future income, revenues, profits, rents, and causes of action, promissory notes, instruments, proceeds, and any other right to payment, including without limitation, payment of insurance proceeds, refunds, rebates, and credits, payments due under warranties or guarantees, and payment due for condemnation of property, goodwill, trademarks, trade names, trade secrets, patents, patent rights, licensing rights and income, royalties, copyrights, customer lists, business, accounting and customer records, including electronically stored data and metadata;
(ii) All goods, including, without limitation, equipment, machinery, tools, materials, parts and supplies, furniture, furnishings, computers and related accessories and equipment, appliances, and vehicles of all kinds;
(iii) All inventory, including without limitation, all merchandise and goods held for sale or lease, promotional catalogs and marketing materials, and all parts and supplies of all kinds;
(iv) All documents, deposit accounts, negotiable and nonnegotiable instruments, chattel paper, stocks, bonds, securities and investment property of any kind, documents of title, moneys held or to be collected, and letters of credit;
(v) All owned and leased real property; and
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(vi) All proceeds from any of the assets and property described above, including without limitation, insurance proceeds, awards in any eminent domain proceeding or settlement, proceeds of any noncommercial tort cause of action or settlement, and all replacements, substitutions, returns, additions, or renewals of same.
(b) The security interest of Lender under this Agreement extends to all Collateral of the kind described in preceding clause (a) which Borrower may acquire at any time during the continuation of this Agreement.
Section 3.02 Power of Attorney. Borrower hereby constitutes and appoints Lender its true and lawful attorney, irrevocably, with full power upon the occurrence of an Event of Default and the continuance thereof to act, require, demand, receive, compound and give acquittance for any and all monies and claims for monies due or to become due to Borrower under or arising out of the Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which Lender may deem to be necessary or advisable in the premises, which appointment as attorney is coupled with an interest. Notwithstanding the above, so long as Borrower is listed on a public exchange and current on its required 1934 Act obligations Lender shall not take any actions under this power of attorney.
Section 3.03 Special Provisions Regarding Intellectual Property. If Borrower owns any registered trademarks or patents, the special provisions related to trademarks and patents set forth in Exhibit B apply and are hereby incorporated by reference. The security interest granted herein shall not extend to and the term “Collateral” shall not include the following “Excluded Property”: (a) intellectual property in relation to which any applicable law or regulation, or any agreement with a domain name registrar or any other Person entered into by the Borrower in the ordinary course of business and existing on the Effective Date, prohibits the creation of a security interest therein or would otherwise invalidate such Borrower’s right, title or interest therein or (b) any United States intent-to-use trademark application prior to the filing of a “Statement of Use” or “Amendment to Allege Use” with respect thereto, to the extent, if any, that, and solely during the period, if any, in which, the grant of a security interest therein would impair the validity or enforceability, or resulting in the voiding, of such intent-to-use trademark application or any registration issuing therefrom under applicable federal law.
Section 3.04 Protection of Security Interest. Borrower will do nothing to materially impair the rights of Lender in the Collateral. Borrower shall not sell, convey or otherwise transfer all or any part of the Collateral or any rights therein, other than the sale of Collateral or rights to use the Borrower’s products and services (for example, but without limitation, membership agreements, subscription agreements, SaaS agreements or end-user licenses to customers), in each case in the ordinary course of Borrower’s business. Borrower will at all times keep the Collateral insured as required by Section 6.07; all policies or certificates with respect to such insurance shall be endorsed for the benefit of Lender (including, without limitation, by naming Lender as loss payee and/or additional insured). If Borrower fails to insure the Collateral, or if Borrower fails to so endorse all policies or certificates with respect thereto, in each case within 30 days of the Effective Date, Lender shall have the right (but shall be under no obligation) to procure such insurance and Borrower agrees to reimburse Lender for all costs and expenses of procuring such insurance, and Lender may apply any proceeds of such insurance when received by it toward the payment of any of the Obligations to the extent the same shall then be due. Borrower assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of Borrower to pay its Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to Borrower.
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Section 3.05 Further Actions. Borrower will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to Lender from time to time such lists, descriptions and designations of its Collateral, mortgages, deeds of trust, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which Lender deems reasonably necessary to perfect, preserve or protect its security interest in the Collateral.
Section 3.06 Financing Statements. Borrower agrees to execute and deliver to Lender such financing statements, including recordations in the applicable Patent and Mark registries, in form acceptable to Lender, as Lender may from time to time reasonably request or as are necessary in the opinion of Lender to establish and maintain a valid, enforceable and perfected security interest in the Collateral as provided herein and the other rights and security contemplated herein, all in accordance with the UCC or any other applicable law. Borrower will pay any applicable filing fees and related expenses. Borrower hereby authorizes Lender to file any such financing statements or recordations without the signature of Borrower.
Section 3.07 Chief Executive Office; Records. Borrower shall not establish a new location for its chief executive offices unless and until (a) it shall have given to Lender not more than thirty (30) business days’ notice thereafter, clearly describing such new location and providing such other information in connection therewith as Lender may reasonably request, and (b) with respect to such new location, it shall have taken all action, reasonably satisfactory to Lender, to maintain the security interest of Lender in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect.
Section 3.08 Location of Collateral. Borrower agrees that all tangible Collateral having an aggregate value in excess of $250,000 now held or subsequently acquired by it shall be kept at (or shall be in transport to) its chief executive office, any third-party, data centers, or any other third-party location as to which Borrower has notified Lender from time to time. Borrower may establish one or more new locations for such tangible Collateral only if (a) it shall have given to Lender written notice within thirty (30) business days of selecting such new location(s), clearly describing such new location and providing such other information in connection therewith as Lender may reasonably request, and (b) with respect to such new location, it shall have taken all action reasonably satisfactory to Lender to maintain the security interest of Lender in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect.
Section 3.09 Recourse. This Agreement is made with full recourse to Borrower and pursuant to and upon all the warranties, representations, covenants and agreements on the part of Borrower contained herein, and otherwise in the Loan Documents.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Lender, which representations and warranties shall survive the execution of this Agreement and shall continue in full force and effect until the full and final payment, satisfaction and discharge of all obligations of Borrower to Lender under this Agreement, the Note, and the other Loan Documents.
Section 4.01 Legal Status. Borrower is a corporation, duly existing and in good standing under the laws of the State of Nevada, and is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could have a Material Adverse Effect. The primary mailing address of Borrower is set forth on the signature page hereto.
Section 4.02 Authorization and Validity. This Agreement and the other Loan Documents to which each Borrower Party is a party have been duly authorized, and upon their execution and delivery in accordance with the provisions hereof will constitute legal, valid and binding agreements and obligations of such Borrower Party, enforceable against such Borrower Party in accordance with their respective terms.
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Section 4.03 Necessary Filings. All filings, registrations and recordings (including the recordation of the security interest granted hereunder in Patents and Marks (both as defined in Exhibit B hereto) in the applicable U.S. patent or trademark registries) necessary or appropriate to create, preserve, protect and perfect the security interest granted by Borrower Parties to Lender hereby in respect of the Collateral in U.S. jurisdictions have been accomplished (or will be accomplished upon the appropriate filings reasonably requested by Lender, which Borrower hereby authorizes Lender to make) and the security interest granted to Lender pursuant to this Agreement in and to the Collateral constitutes a valid and enforceable perfected (provided the foregoing perfection actions have been taken) security interest therein superior and prior to the rights of all other persons therein (other than to Permitted Liens permitted to have priority in accordance with the terms hereof) and subject to no other Liens other than Permitted Liens and is entitled to all the rights, priorities and benefits afforded by the UCC.
Section 4.04 No Violation. The execution, delivery and performance by each of the Borrower Parties of each of the Loan Documents to which it is a party does not violate any provision of any material law or regulation, or contravene any material provision of such Borrower Party’s certificate of incorporation, bylaws, charter, or other governing documents or result in any breach of or default under any material contract, obligation, indenture or other instrument to which such Borrower Party is a party or by which such Borrower Party may be bound.
Section 4.05 Litigation. There are no pending, or to the best of each Borrower Party’s knowledge threatened, actions, claims, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which could have a Material Adverse Effect other than those disclosed by such Borrower Party to Lender in writing prior to the Effective Date or from time to time in accordance with Section 6.08.
Section 4.06 No Subordination. There is no material agreement, indenture, contract or instrument to which Borrower is a party or by which any Borrower Party may be bound that requires the subordination in right of payment of any of such Borrower Party’s obligations subject to any Loan Document or to any other obligation of such Borrower Party other than those disclosed by such Borrower Party to Lender in writing prior to the Effective Date.
Section 4.07 Permits and Franchises; Intellectual Property. Each Borrower Party possesses, and will hereafter possess, all permits, franchises and licenses required and rights to all trademarks, trade names, patents, fictitious names, if any, and other intellectual property necessary to enable it to conduct the business in which it is now engaged in compliance with applicable law, and without conflict with the rights of others except for such permits, franchises, licenses and rights to intellectual property the failure of which to possess or otherwise have the right to use would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.
Section 4.08 Other Obligations.
(a) No Borrower Party has any obligations for borrowed money or any purchase money obligations except for the Permitted Indebtedness
(b) No Borrower Party is in default on any obligation for borrowed money or any purchase money obligation or any other material lease, commitment, contract, instrument or obligation, except to the extent such default, individually or in the aggregate; would not be expected to have a Material Adverse Effect.
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Section 4.09 Financial Status. Borrower has delivered to Lender each Borrower Party’s (a) balance sheet as of December 31, 2021, and statement of income and expense for the 12-month period ended December 31, 2021, and (b) balance sheet as of January 31, 2022, and statement of income and expense for the 9-month period ended (collectively, the “Financial Statements”). The Financial Statements are accurate and complete in all material respects, are consistent with the books and records of the each Borrower Party (which, in turn, are accurate and complete in all material respects), and have been prepared in accordance with such Borrower Party’s accounting practices consistently applied. The Financial Statements fairly present the financial condition and operating results of each Borrower Party as of the date, and for the period, indicated therein. Since the date of the Financial Statements, there has not occurred a material adverse event with regard to the business of any Borrower Party.
Section 4.10 Banking. All of Borrower Party’s bank accounts are listed on Schedule 4.10 attached hereto (the “Permitted Bank Accounts”). No Borrower Party is in default on any obligation with regard to the Permitted Bank Accounts. The Permitted Bank Accounts represent all of each Borrower Party’s banking relationships and accounts as of the Effective Date.
Section 4.11 Borrower Parties. Borrower has the knowledge necessary to make these representations and warranties regarding each Borrower Party. Borrower has the authority to commit to providing any report, information or document related to any other Borrower Party required by this Agreement.
Section 4.12 Use of Proceeds. All proceeds of the Loan shall be used by Borrower solely in the manner set forth in Section 2.02. Without limiting the scope of the immediately preceding sentence, Borrower understands and agrees NOT to use the proceeds of the Loan for personal, family, or household purposes. Borrower further understands that there are certain important duties imposed upon entities making loans to consumers for personal, family, or household purposes, and certain important rights conferred upon consumers, pursuant to federal or state law and that all of those laws, rules, and regulations concerning consumer loans do NOT apply to the Loan or this Agreement. Borrower hereby confirms that it has consulted with its own attorney or has had a fair opportunity to consult with an attorney, concerning this matter and that Borrower’s counsel has explained to Borrower or Borrower understands that these rules, regulations, and laws concerning consumer loans do not apply to the Loan or this Agreement. Borrower also understands that Lender will be unable to confirm whether Borrower’s actual use of the proceeds of the Loans conforms to the requirements of this Section 4.12. Borrower agrees that a breach by Borrower of the provisions of this Section 4.12 shall not affect any Lender’s right to: (a) enforce Borrower’s promise to pay all amounts owed under this Agreement, regardless of Borrower’s actual use of the proceeds of the Loan; or (b) use any remedy legally available to Lender, even if that remedy would not have been available had the Loan been made for consumer or personal purposes.
Section 4.13 Full Disclosure. Each Loan Party has disclosed to Lender all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect. All written information furnished by the Loan Parties, and all written information hereafter furnished by Loan Parties, taken as a whole, is true and accurate in all material respects, and does not and will not, as of the time of delivery of such information, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein or herein not misleading in light of the circumstances under which they were made. In the case of projections, the projections will be prepared in good faith and based on assumptions and methods that each Loan Party believes to be reasonable at the time made.
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Section 4.14 Solvency. Borrower, taken as a whole, is Solvent. No transfer of property is being made by any Loan Party or any Subsidiary and no obligation is being incurred by any Loan Party or any Subsidiary in connection with the transactions contemplated by this Agreement or the Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of any Loan Party or any Subsidiary.
ARTICLE V.
CONDITIONS PRECEDENT
Section 5.01 Conditions to Funding. The obligation of Lender to make the Loan contemplated by this Agreement is subject to the fulfillment to Lender’s satisfaction of all of the following conditions:
(a) Representations and Warranties of Borrower. The representations and warranties of the Borrower contained in this Agreement, the Loan Documents and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects).
(b) Covenants. The Borrower shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the Loan Documents to be performed or complied with by them prior to or on the Closing Date.
(c) No Action. No Action shall have been commenced against Borrower or Lender which would prevent the Closing. No injunction or restraining order shall have been issued by any governmental authority, and be in effect, which restrains or prohibits any transaction contemplated hereby.
(d) No Material Adverse Effect. From the date of this Agreement, there shall not have occurred any Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result in a Material Adverse Effect.
(e) Documentation. Lender shall have received, in form and substance satisfactory to Lender, each of the following, duly executed:
(i) this Agreement;
(ii) the Note;
(iii) a Blocked Account Control Agreement, in the form attached hereto as Exhibit D (the “Deposit Account Control Agreement”), pursuant to which Borrower grants to Lender certain rights to its primary operating account, the bank deposit account with PNC Bank. (the “Primary Operating Account”); provided however that Lender has agreed to temporarily waive this closing condition pursuant to the side letter agreement between Lender and Borrower attached hereto as Exhibit D-1 (the “Side Letter”);
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(iv) payoff letter, in the form attached hereto as Exhibit E (the “Payoff Letter”), pursuant to which Borrower’s third-party lender, Clearbanc, has agreed to be paid off;
(v) a Subordination Agreement, in the form attached hereto as Exhibit F (the “Subordination Agreement”), pursuant to which each of the Subordinated Lenders agrees to subordinates all of their debt obligations from Borrower to Borrower’s debt obligations to Lender;
(vi) with respect to Borrower, an Officer’s Certificate in the form attached as Exhibit G (the “Officer’s Certificate”) or in such form as Lender may reasonably require to establish the due organization, valid existence and good standing of such party, its qualification to engage in business in each jurisdiction in which it is engaged in business or required to be so qualified, its authority to execute, deliver and perform any Loan Documents to which it is a party, and the identity, authority and capacity of each responsible official thereof authorized to act on its behalf, including certified copies of charters and amendments thereto, bylaws and amendments thereto, and operating agreements and amendments thereto, certificates of good standing and/or qualifications to engage in business, certified entity resolutions, incumbency certificates, certificates of responsible officials, and the like;
(vii) with respect to each Loan Party, such documentation as Lender may require to establish the due organization, valid existence and good standing of such party, its qualification to engage in business in each jurisdiction in which it is engaged in business or required to be so qualified, its authority to execute, deliver and perform any Loan Documents to which it is a party, and the identity, authority and capacity of each responsible official thereof authorized to act on its behalf, including certified copies of charters and amendments thereto, bylaws and amendments thereto, and operating agreements and amendments thereto, certificates of good standing and/or qualifications to engage in business, certified entity resolutions, incumbency certificates, certificates of responsible officials, and the like; and
(viii) such other certificates, documents, instruments, consents and opinions as Lender may require.
(f) Loan Fee. Borrower shall have paid the Loan Fee to Lender.
(g) Financial Condition. There shall have been no Material Adverse Effect, as determined by Lender.
(h) No Event of Default. No Event of Default, and no event or act which with the giving of notice or the passage of time or both would constitute an Event of Default, shall have occurred hereunder.
Section 5.02 Conditions to Subsequent Advances. The obligation of Lender to make each Subsequent Advance is subject to the fulfillment to Lender’s satisfaction (or waiver by Lender) of all of the following conditions (collectively the “Subsequent Advance Conditions”):
(a) the representations and warranties of or on behalf of the Loan Parties contained in Article IV hereof or in any other Loan Documents shall be true and correct in all material respects (or in all respects if already by materiality or Material Adverse Effect) on and as of the date of the Subsequent Advance (in each case both before and immediately after giving effect thereto) except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects (or in all respects if already qualify by materiality or Material Adverse Effect) as of such earlier date, provided that such earlier date (for example an updated Financial Statements representation and warranty) shall be as close to the date of the Subsequent Advance as reasonably possible;
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(b) there is no outstanding Event of Default at the time of the Subsequent Advance;
(c) since the Effective Date, there has been no event or circumstance, either individually or in the aggregate, that has had or would reasonably be expected to have a Material Adverse Effect;
(d) the outstanding principal amount of the Loan, after giving effect to the funding of such Subsequent Advance, does not exceed six times (6X) the average MRR for the prior three-month period measured as of the most recently delivered financial statements;
(f) the Subsequent Advance occurs on or prior to the first anniversary of the Effective Date; and
(g) The Lender is satisfied with the performance of Borrower and that the financial condition of Borrower supports the Subsequent Advance.
With respect to each Subsequent Advance, Borrower shall provide a certificate of a duly-appointed officer of Borrower certifying that the Subsequent Advance Conditions have been met insubstantially the same form as attached here to as Exhibit H (the “Subsequent Advance Certificate”).
Section 5.03 Termination. If the conditions set forth in Section 5.01 are not met on or prior to the 15th day after the date of this Agreement, Lender may terminate this Agreement upon 3 days’ written notice. The provisions of Article X, below, shall survive any such termination.
ARTICLE VI.
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Lender remains committed to make the Loan to Borrower pursuant hereto, or any liabilities (whether liquidated or unliquidated) of Borrower to Lender under any of the Loan Documents remain outstanding, and until payment in full of all obligations (other than contingent indemnity obligations) of Borrower subject hereto, Borrower shall, and as applicable shall ensure that each other Borrower Party shall, unless Lender otherwise consents in writing:
Section 6.01 Punctual Payments. Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and places and in the manner specified therein.
Section 6.02 Maximum Outstanding Loan Amount/Monthly Recurring Revenue Ratio. Ensure that notwithstanding anything in this Agreement to the contrary, the outstanding Loan Amount shall not exceed (a) six times (6X) (b) Borrower’s average MRR for the prior trailing three-month period at any time (the “Maximum Outstanding Loan Amount”). In the event that the outstanding Loan Amount exceeds the Maximum Outstanding Loan Amount, Borrower shall make a special prepayment of the Loan Amount with the next Loan payment so that the Maximum Outstanding Loan Amount is no longer exceeded. Provided Borrower makes such payment, Borrower shall not be in default of this Section 6.02. Any prepayment required under this Section 6.02 shall not be subject to a prepayment fee, premium or penalty, notwithstanding anything herein to the contrary.
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Section 6.03 Minimum Cash Balance. Borrower shall maintain deposit accounts that are subject to a deposit account control agreement (“DACA”) in favor of Lender with terms reasonably acceptable to Lender and cause the balance of such accounts in the aggregate, measured on the last calendar day of each month, to not be less than $150,000.00 (collectively, the “Control Account”). Upon an Event of Default, Lender shall be entitled, among other things, to exercise its rights under the DACA and direct Borrower’s bank to turnover any and all funds in the Control Account. In the event that the minimum balance in the Control Account is lower than the required amount on the applicable measurement date, then no later than 5 days following the occurrence of the breach Borrower shall present a plan acceptable to Lender in its sole discretion to bring Borrower in compliance with this covenant.
Section 6.04 Accounting Records. Maintain adequate books and records in accordance with generally accepted accounting principles consistently applied, and permit Lender, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect the properties of Borrower.
Section 6.05 Financial Reporting. Provide Lender with the following:
(a) Annual Report. As soon as available, but in no event later than 90 days (provided that, solely with respect to any audited financials, such figure shall be 120 days) after and as of the end of each fiscal year, the consolidated balance sheet of Borrower and its Subsidiaries as of the end of such fiscal year and the consolidated statements of income and cash flows of Borrower and its Subsidiaries for such fiscal year, all in reasonable detail, and presented in a manner comparing such financial statements to corresponding figures from the preceding annual financial statements, and certified by an authorized financial officer of each Borrower Party as fairly presenting the financial condition, results of operations and cash flows of such parties in accordance with generally accepted accounting principles, consistently applied, as at such date and for such periods;
(b) Quarterly Reports. As soon as available (and in any event no later than forty-five (45) days after and as of the end of each fiscal quarter), (i) the consolidated balance sheet of Borrower and its Subsidiaries as at the end of such fiscal quarter and the consolidated statements of income, and cash flows of each Borrower Party and its Subsidiaries for the period from the beginning of the fiscal year to the end of such fiscal quarter, and (ii) the consolidating balance sheets and statements of income and cash flows of each Borrower Party and its Subsidiaries as at the end of such fiscal quarter, all in reasonable detail, and presented in a manner comparing such figures for the corresponding period in the preceding fiscal year, and certified by an authorized financial officer of Borrower as fairly presenting the financial condition, results of operations and cash flows of each Borrower Party and its Subsidiaries in accordance with generally accepted accounting principles, consistently applied, as at such date and for such periods, subject only to normal year-end-accruals and audit adjustments;
(c) Monthly Reports. As soon as available, but in no event later than 20 days after and as of the end of each calendar month, a monthly internally-prepared income statement and consolidated balance sheet of Borrower and its Subsidiaries. Such monthly reports shall be in a form reasonably acceptable to Lender and shall include comprehensive monthly performance metrics (including gross and net revenue, sales and churn statistics SaaS metrics on retention, churn, CAC, LTV, etc.), and bank statements;
(d) Certificate. Contemporaneously with each annual and quarterly financial statement of each Borrower Party required hereby, a certificate of the president or chief financial officer of each Borrower Party that said financial statements fairly present in all material respects the financial condition of the Loan Parties as of the date thereof and the period covered thereby and that there exists no Event of Default nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default;
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(e) Stockholder Reports; Board Minutes. Promptly after the same are available, copies of each annual report or financial statement or other report or, Board Minutes communication sent to the stockholders of Borrower, and minutes or actions by written consent of the board of directors, in each case other than attorney-client privileged material; and[1]
(f) Other Information. From time to time such other financial information as Lender may reasonably request.
Section 6.06 Compliance with Laws. Preserve and maintain all material licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its business; conduct its business in an orderly and regular manner; and comply in all material respects with the provisions of all material documents pursuant to which it is organized and/or which govern its continued existence and with the requirements of all material laws, rules, regulations and orders of any governmental authority applicable to it and/or its business.
Section 6.07 Insurance. Maintain and keep in force, with insurance companies that the Borrower believes (in the good faith judgment of the management of the Borrower) are financially sound reputable insurance companies that are not affiliates of the Borrower, insurance with respect to its properties and business against loss or damage of the kinds customarily (in the determination of the Borrower) insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily (in the determination of the Borrower) carried under similar circumstances by such other Persons and shall deliver to Lender, from time to time at Lender’s request (which, if no Event of Default shall have occurred and be continuing, shall be limited to once per calendar year), a report showing the insurance policies and coverages then in effect.
Section 6.08 Facilities. Keep all properties materially useful or necessary to keep its business in good repair and condition, and from time to time make necessary repairs, renewals and replacements thereto so that such properties shall be fully and efficiently preserved and maintained, except in each case to the extent that the failure to do so would not reasonably be expected tohave a Material Adverse Effect
Section 6.09 Taxes and Other Obligations; Tax Returns. Pay and discharge when due any and all material assessments and material taxes, both real or personal, except such (a) as a Borrower Party may in good faith contest or as to which a bona fide dispute may arise, and (b) for which a Borrower Party has made provision for eventual payment thereof in the event such Borrower Party is obligated to make such payment. Borrower agrees to deliver an executed IRS Form 8821 to be submitted to the Internal Revenue Service (“IRS”) which shall grant Lender access to receive Borrower’s tax information and otherwise be in form and substance reasonably satisfactory to Lender, and Borrower agrees to deliver additional executed IRS Forms 8821 as necessary if the form is cancelled, rejected, expired, or if it is no longer effective to grant Lender access to receive Borrower’s tax information. Each Lender agrees to exercise substantially the same degree of care in maintaining the confidentiality of Borrower’s tax information accessed pursuant to this Section 6.10 as it would accord to Lender’s own confidential information.
____________________________
1 NTD: We understand Borrower is sensitive to disclosing confidential information. Lender, as such, is entitled to any material nonpublic information it requests. We understand Borrower's need for confidentiality and will abide by NDAs and trading restrictions.
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Section 6.10 Litigation. Promptly give notice in writing to Lender of any litigation pending or threatened in writing against any Borrower Party which (a) have claimed damages in an aggregate amount in excess of $50,000 (which is not covered by insurance) or (b) as would reasonably be expected to have a Material Adverse Effect.
Section 6.11 Notices to Lender. Promptly (but in no event more than five (5) business days after the occurrence of each such event or matter) give written notice to Lender in reasonable detail of: (a) the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or the passage of time or both would constitute an Event of Default; (b) any change in the name or the organizational structure of Borrower, Borrower Party or any other Loan Party; (c) any termination or cancellation of any insurance policy which Borrower is required to maintain, or any material uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other cause affecting any Borrower Party’s property; (d) the acquisition by any Borrower Party of any other Loan Party or Subsidiary or other affiliate; or (e) the occurrence of any material default described in Section 8.01(e) and (f).
Section 6.12 Bank Accounts; Deposit Account Control Agreement. The Primary Account is the depository for substantially all of the revenue of the Borrower Parties, including but not limited to all revenue flowing through Stripe or similar processors. No Borrower Party shall deposit any payments into any bank account other than the Primary Account or any other account that is subject to a deposit account control agreement or similar agreement in favor of Lender securing Lender’s security interest in such account. No Borrower Party shall maintain any bank accounts that are not Permitted Bank Accounts provided that any Borrower Party shall be permitted to open a new bank account (to the extent permitted herein) if such Borrower Party shall concurrently therewith enter into a deposit account control agreement with Lender and such bank with respect to such new bank account.
Section 6.13 Disclosure of Employee Benefits. Borrower shall:
(a) Promptly, and no later than ten (10) Business Days after Borrower or any of its Subsidiaries know that an event has occurred relating to the requirements under the Employee Retirement Income Security Act of 1974, as the same now exists or may from time to time hereafter be amended, modified or supplemented (“ERISA”) with respect to any Plan that reasonably would be expected to result in a Material Adverse Effect, a written statement of the chief financial officer of Borrower or such Subsidiary shall be delivered to Lender describing such ERISA event and any action that is being taking with respect thereto by Borrower or any of its Subsidiaries or Affiliates, and any action taken or threatened by the IRS, the Department of Labor, or the Pension Benefit Guaranty Corporation (“PBGC”). Borrower and its Subsidiaries shall: (i) promptly, and no later than five (5) Business Days after the filing thereof with the IRS, deliver to Lender a copy of each funding waiver request filed with respect to any Plan and all communications received by Borrower or any of its Subsidiaries or Affiliates with respect thereto; and (ii) promptly, and no later than five (5) Business Days after receipt by Borrower or any of its Subsidiaries of any information that the PBGC has an intention to terminate any Plan or to have a trustee appointed to administer a Plan, deliver copies of each such notice to Lender.
(b) Cause to be delivered to Lender each of the following: (i) a copy of each Plan (or, where any such Plan is not in writing, complete description thereof) (and if applicable, related trust agreements or other funding instruments) and all amendments thereto, all material written descriptions thereof that are currently being distributed to employees or former employees of Borrower or any of its Subsidiaries at the time of the request; (ii) the most recent determination letter issued by the IRS with respect to each Plan; (iii) for the three most recent Plan years, annual reports on Form 5500 Series required to be filed with any governmental agency for each Plan; (iv) all actuarial reports prepared for the last three Plan years for each Plan; (v) a listing of all Multiemployer Plans, with the aggregate amount of the most recent annual contributions required to be made by Borrower or any of its Subsidiaries or any of their ERISA Affiliates to each such Plan and copies of the collective bargaining agreements requiring such contributions; (vi) any information that has been provided to Borrower or any of its Subsidiaries or any of their ERISA Affiliates regarding withdrawal liability under any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual payments made to former employees of Borrower or any of its Subsidiaries under any Plan providing for retiree health benefits.
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(c) Liens securing the liabilities of any Borrower Party subordinated to the Loan pursuant to the Subordination Agreements.
ARTICLE VII.
NEGATIVE COVENANTS
Borrower further covenants that so long as Lender remains committed to make the Loan to Borrower pursuant hereto, or any liabilities (whether liquidated or unliquidated) of Borrower to Lender under any of the Loan Documents remain outstanding, and until payment in full of all obligations (other than contingent indemnity obligations) of Borrower subject hereto, Borrower will not, and as applicable shall ensure that each other Borrower Party shall not, without Lender’s prior written consent:
Section 7.01 Other Indebtedness. Create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances, whether secured or unsecured, matured or unmatured, direct or contingent, liquidated or unliquidated, joint or several, except:
(a) the liabilities of Borrower to Lender;
(b) trade indebtedness incurred in the ordinary course of business;
(c) the liabilities of any Borrower Party subordinated to the Loan pursuant to the Subordination Agreements;
(d) unsecured indebtedness to employees for payroll, expense reimbursements or similar obligations incurred in the ordinary course of business;
(e) indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;
(f) indebtedness secured by Liens permitted under Sections 7.04(a), (c) and (f) hereof; and
(g) indebtedness provided by a Borrower Party or any Subsidiary to any Subsidiaries.
Section 7.02 Merger, Consolidation, Transfer of Assets. To the extent such transaction does not constitute a Change in Control Transaction, merge into or consolidate with any other entity; make any substantial change in the nature of its business as conducted as of the Effective Date; acquire all or substantially all of the assets of any other entity; sell, lease, transfer or otherwise dispose of all or a substantial or material portion of its assets except in the ordinary course of its business; nor sell or transfer more than 50% of its voting securities to an unaffiliated third party.
Section 7.03 Guaranties. Guarantee or become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of any Borrower Party as security for, any liabilities or obligations of any other Person, except (a) such obligations in existence as of, and disclosed to Lender prior to, the Effective Date, (b) guaranties of real property leases, equipment leases or similar interests held by any of Borrower’s affiliates, or (c) to the extent such liability constitutes indebtedness permitted under Sections 7.01(a) through (h) hereof.
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Section 7.04 Liens. Mortgage, pledge, grant or permit to exist a security interest in, or Lien upon, all or any portion of its assets now owned or hereafter acquired, except for the following (such Liens “Permitted Liens”):
(a) Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which such Borrower Party maintains adequate reserves on its books, provided that no notice of any such Lien has been filed or recorded under the Code, and the Treasury Regulations adopted thereunder;
(b) purchase money Liens (i) on equipment acquired or held by such Borrower Party incurred for financing the acquisition of the equipment securing no more than $50,000 in the aggregate amount outstanding, or (ii) existing on equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the equipment;
(c) Liens of carriers, warehousemen, suppliers, mechanics, contractors or other persons that are possessory in nature arising in the ordinary course of business;
(d) Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Section 8.01; and
(e) Liens securing the liabilities of any Borrower Party subordinated to the Loan pursuant to the Subordination Agreements.
Section 7.05 Restricted Payments. (a) Declare or pay or make any form of dividend or distribution other than dividends or distributions to equity holders (such term to include, without limitation, all members of Borrower) to meet their (or their respective equity holders) tax obligations on income realized by such holders (or their respective equity holders) attributable solely to such holders’ investment in Borrower in a timely manner; (b) make any payments of any indebtedness subordinated to the Obligations due to Lender or otherwise redeem, repurchase or retire any instrument evidencing such amount, or reduce or terminate any commitment in respect of such indebtedness, in each case except pursuant to the provisions of an intercreditor agreement acceptable to Lender; or (c) redeem, repurchase, or retire any capital stock or other equity, in each case for cash.
Section 7.06 Intercompany and Related-Party Transactions. Consummate any transaction with any other Borrower Party or any of such Borrower Party’s affiliates, Subsidiaries, officers, directors, shareholders, or other related Persons except for arm’s-length transactions or transactions that are in the ordinary course of business.
Section 7.07 Bank Accounts. Subject to the additional restrictions provided herein, open a bank account that is not subject to an agreement in favor of Lender securing Lender’s security interest in such account.
Section 7.08 Limitations on Investments. Other than as set forth in Section 2.02, purchase, own, invest in, or otherwise acquire, directly or indirectly, any equity securities, any interests in any partnership or joint venture (including the creation or capitalization of any subsidiary), evidence of indebtedness or other obligation or security, substantially all or a portion of the business or assets of any other person or entity, or any other investment or interest whatsoever in any other person or entity, or make or permit to exist, directly or indirectly, any loans, advances or extensions of credit to, or any investment in cash or by delivery of property in, any person or entity other than: (a) the extension of trade credit in the ordinary course of business and consistent with past practices; and (b) deposits with banks or other financial institutions.
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Section 7.09 No Transactions Prohibited by ERISA; Unfunded Liability. Directly or indirectly
(a) engage in any prohibited transaction which is reasonably likely to result in a civil penalty or excise tax described in sections 406 of ERISA or 4975 of the Internal Revenue Code for which a statutory or class exemption is not available or a private exemption has not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Plan any accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of the Internal Revenue Code) whether or not waived;
(c) fail to pay timely required contributions or annual installments due with respect to any waived funding deficiency to any Plan;
(d) terminate any Plan where such event would result in any liability of Borrower, any Subsidiary of Borrower, or any of their ERISA Affiliates under Title IV of ERISA which was not paid in connection with such termination;
(e) fail to make any required contribution or payment to any Multiemployer Plan;
(f) fail to pay any required installment or any other payment required under Section 412 of the Internal Revenue Code on or before the due date for such installment or other payment;
(g) amend a Plan resulting in an increase in current liability for the Plan year such that Borrower, any Subsidiary of Borrower, or any of their ERISA Affiliates is required to provide security to such Plan under Section 401(a)(29) of the Internal Revenue Code; or
(h) withdraw from any Multiemployer Plan where such withdrawal is reasonably likely to result in any liability of such entity under Title IV of ERISA;
any of which, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect.
ARTICLE VIII.
EVENTS OF DEFAULT
Section 8.01 Events of Default. The occurrence of any of the following shall constitute an “Event of Default” under this Agreement:
(a) Borrower shall fail to pay within five (5) business days of when due any principal, interest, fees or other amounts payable under the Note any Loan Document.
(b) Any financial statement or certificate furnished to Lender in connection with, or any representation or warranty made by Borrower or any other Loan Party under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made and is incapable of cure or, if capable of cure, is not cured within ten (10) business days after Borrower’s receipt of a notice of default with respect to the same.
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(c) Borrower shall fail to comply with any material term, covenant or condition contained in this Agreement or any of the other Loan Documents that is incapable of cure or, if capable of cure, is not cured within 10 days after Borrower’s receipt of a notice of default with respect to the same.
(d) Any default by Borrower or any Loan Party in the payment or performance of any obligation, or any defined event of default, under the terms of any contract or instrument (excluding any of the Loan Documents, which are provided for separately herein) pursuant to which Borrower or any other Loan Party has incurred any debt or other liability to Lender that is incapable of cure or, if capable of cure, is not cured within 10 days after Borrower’s receipt of a notice of default with respect to the same.
(e) Any default by Borrower or any Loan Party in the payment or performance of any obligation, or any defined event of default, under the terms of any contract or instrument pursuant to which Borrower or any other Loan Party has incurred any debt or other liability to any Person, whether such debt or other liability shall be for borrowed money, the purchase or lease of property or the guaranty of any present or future indebtedness for borrowed money or the purchase or lease of property, on its part to be paid and the effect of such default is to cause, or to permit such Person to cause, such debt or other liability to become due prior to any stated maturity.
(f) The (i) filing of a notice of judgment Lien against Borrower or any other Loan Party; or the recording of any abstract of judgment against Borrower or any other Loan Party in any county in which Borrower or such Loan Party has an interest in real property; or (ii) the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against the assets of Borrower or any other Loan Party; or (iii) the entry of a judgment against Borrower or any other Loan Party in an aggregate amount in excess of $50,000 that is not covered by insurance; provided, however, that such judgments, Liens, levies, writs, executions and other process involve debts of or claims against Borrower or such Loan Party that, within twenty (20) business days after the creation thereof, or at least ten (10) business days prior to the date on which any assets could be lawfully sold in satisfaction thereof, are not satisfied are stayed pending appeal or insured against in a manner reasonably satisfactory to Lender.
(g) Borrower or any other Loan Party shall no longer be Solvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower or any other Loan Party shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any other relief under any law granting relief to debtors, whether now or hereafter in effect; or any involuntary petition or proceeding pursuant to any applicable law relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower or any other Loan Party and is not dismissed within sixty (60) days of the filing thereof, or Borrower or any such Loan Party shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower or any other Loan Party shall be adjudicated a bankrupt, or an order for relief shall be entered against Borrower or any other Loan Party by any court of competent jurisdiction under any applicable law relating to bankruptcy, reorganization or other relief for debtors.
(h) [Intentionally Deleted].
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(i) A change of management of Borrower such that its management is cumulatively and materially different than as of the Closing Date, without the consent of Lender, which shall not be unreasonably withheld provided the Borrower presents to Lender prior to such change its business plan and rationale for such change.
Events or circumstances, individually or in the aggregate, that shall have or shall reasonably be expected to have a Material Adverse Effect on the Borrower.
(k) The dissolution or liquidation of Borrower or any other Loan Party or any of their directors, managers, stockholders or members shall take action seeking to effect the dissolution or liquidation of Borrower or such Loan Party.
(l) The actual or attempted revocation or termination of, or limitation or denial of liability under this Agreement or any other Loan Document by any Loan Party hereunder or any other Loan Document.
ARTICLE IX.
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
Section 9.01 Rights in Event of Default.
(a) Rights and Remedies. Lender shall have the following rights, privileges, powers and remedies whenever any Event of Default shall occur subject in all instances to the approval of Lender:
(i) the entire outstanding Loan Amount and all accrued and unpaid interest (A) may, at the option of Lender, be declared to be immediately due and payable without demand or additional notice of any kind to Borrower or any other person; and (B) shall, if the relevant Event of Default arises from the insolvency of Borrower, become due and payable immediately and without demand or notice of any kind to Borrower or any other person;
(ii) from and after the date of the occurrence of any Event of Default and continuing until such Event of Default is fully cured or until the Note is paid in full, Borrower shall, and promises to, in addition to the ordinary interest due under the Note, pay interest (the “Default Interest”) on the then-outstanding Loan Amount at a rate equal to 2% per annum or, if less, the maximum rate permitted under applicable law, accruing daily based on a year of 365 days; and Borrower agrees that such Default Interest which has accrued shall be paid at the time of and as a condition precedent to the curing of such Event of Default; and
(iii) Lender shall have, in addition to the rights, privileges, powers and remedies set forth herein, any and all rights, powers, privileges, options and remedies available at law or in equity and as provided in any of the other Loan Documents, including the right to resort to any or all security for the Loan and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law.
(b) Costs of Collection; Attorneys’ Fees. Upon the occurrence of an Event of Default, Borrower shall, and expressly agrees to, pay all costs of collection and enforcement of every kind, including without limitation, all reasonable and documented attorneys’ fees, court costs whether or not ordinarily recoverable or taxable. The occurrence of an Event of Default shall constitute a default under this Agreement, the Note, the Deposit Account Control Agreement, and each of the other Loan Documents.
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(c) Cumulative Remedies; No Waiver. The rights, powers, privileges, options and remedies of Lender as provided in this Agreement shall be cumulative and concurrent, and may be pursued singly, successively or together at the sole discretion of Lender, and may be exercised as often as occasion therefor shall occur. No delay or discontinuance in the exercise of any right, power, privilege, option or remedy hereunder shall be deemed a waiver of such right, power, privilege, option or remedy, nor shall the exercise of any right, power, privilege, option or remedy be deemed an election of remedies or a waiver of any other right, power, privilege, option or remedy. Acceleration of indebtedness due hereunder, once claimed hereunder by Lender, may, at Lender’s option, be rescinded by written acknowledgment to that effect, but the tender and acceptance of partial payment or partial performance alone shall not, by itself, in any way affect or rescind such acceleration. Lender shall not by any acts of omission or commission be deemed to waive any rights or remedies hereunder unless such waiver is in writing and signed by Lender, and then only to the extent specifically set forth therein. A waiver of one event shall not be construed as continuing or as a bar to or waiver of such right or remedy on a subsequent event.
(d) Borrower Waiver of Presentment, Demand, Notices. Borrower waives presentment for payment, demand, notice of nonpayment, notice of dishonor, protest of any dishonor, notice of protest and protest of the Note or Loan, notice of intent to accelerate, notice of acceleration of maturity, and all other notices in connection with the delivery, acceptance, performance, default or enforcement of the payment of the Loan, except as otherwise provided herein, and agrees that its liability hereunder shall be without regard to the liability of any other party and shall not be in any manner affected by any indulgence, extension of time, renewal or waiver granted or consented to by Lender, and Borrower consents to any and all extensions of time, renewals or waivers that may be granted by Lender with respect to the payment or other provisions of the Note or the Loan, and to the release of any collateral given to secure the payment hereof, or any part thereof, with or without substitution, and agrees that additional Borrowers or the guarantors may become parties hereto without notice to any of them or affecting any of their liability hereunder.
Section 9.02 Obtaining the Collateral Upon Default. Borrower agrees that, if any Event of Default shall have occurred and be continuing, then and in every such case, subject to any mandatory requirements of applicable law then in effect, Lender, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under the UCC in all relevant jurisdictions and may:
(a) personally, or by agents or attorneys, immediately take possession of the Collateral or any part thereof, from Borrower or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon Borrower’s premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of Borrower;
(b) instruct the obligor or obligors on any agreement, instrument or other obligation constituting the Collateral to render any performance required by the terms of such instrument or agreement directly to Lender;
(c) sell, assign or otherwise liquidate, or direct Borrower to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof, and take possession of the proceeds of any such sale or liquidation; and
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(d) take possession of the Collateral or any part thereof, by directing Borrower in writing to deliver the same to Lender at any place or places designated by Lender, at Borrower’s expense;
it being understood that Borrower’s obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, Lender shall be entitled to a decree requiring specific performance by Borrower of said obligation.
Section 9.03 Disposition of the Collateral. Any Collateral repossessed by Lender under or pursuant to Section 9.02, and any other Collateral whether or not so repossessed by Lender, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as Lender may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by Lender or after any overhaul or repair that Lender shall determine to be commercially reasonable. Any such disposition which shall be a private sale or other private proceeding permitted by such requirements shall be made upon not less than 10 days’ prior written notice to Borrower specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of Borrower or any nominee of Borrower to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days’ prior written notice to Borrower specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at Lender’s option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers in general circulation in the region in which the sale will take place. To the extent permitted by any such requirement of law, Lender may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section 9.03 without accountability to Borrower (except to the extent of surplus money received as provided in Section 9.05). If, under mandatory requirements of applicable law, Lender shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to Borrower as hereinabove specified, Lender need give Borrower only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law.
Section 9.04 Waiver of Claims. Except as otherwise provided in this Agreement, BORROWER HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH SECURED PARTY’S TAKING POSSESSION OR LENDER’S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH GRANTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and Borrower hereby further waives, to the extent permitted by law:
(a) all damages occasioned by such taking of possession except any damages which are the direct result of Lender’s gross negligence, bad faith or willful misconduct;
(b) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of Lender’s rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and Borrower, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws.
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Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of Borrower therein and thereto, and shall be a perpetual bar both at law and in equity against Borrower and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under Borrower.
Section 9.05 Application of Proceeds. The proceeds of any Collateral obtained pursuant to Section 9.02 or disposed of pursuant to Section 9.03 shall be applied as follows:
(a) first, to the payment of any and all expenses and fees (including reasonable and documented attorneys’ fees) incurred by Lender in obtaining, taking possession of, removing, insuring, repairing, storing and disposing of Collateral and any and all amounts incurred by Lender in connection therewith; and
(b) thereafter, any surplus then remaining to the payment of the Obligations in the following order of priority:
(i) all late charges and penalties due under the Loan;
(ii) all interest accrued and unpaid on the Loan;
(iii) the principal amount owing on the Loan; and
(iv) all other Obligations then owing;
(c) if this Agreement is then terminated and no other Obligation is outstanding, any surplus then remaining shall be paid to Borrower, subject, however, to the rights of the holder of any then-existing Lien of which Lender has actual notice (without investigation); provided, that Lender shall give written notice to Borrower of such third-party Lien;
it being understood that Borrower shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral and the aggregate amount of the sums referred to in clauses (a) and (b) of this Section 9.05 with respect to Borrower.
Section 9.06 Remedies Cumulative. The rights, powers and remedies herein or in any other Loan Document expressly provided are cumulative and not exclusive of any rights, powers or remedies which Lender would otherwise have. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of Lender to any other or further action in any circumstances without notice or demand.
Section 9.07 Discontinuance of Proceedings. In the case that Lender shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to Lender, then and in every such case Borrower, Lender and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of Lender shall continue as if no such proceeding had been instituted.
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ARTICLE X.
MISCELLANEOUS
Section 10.01 No Waiver. No delay, failure or discontinuance of Lender in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Lender of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing.
Section 10.02 Notices. All notices permitted or required by this Agreement shall be in writing, and shall be deemed to have been delivered and received (a) when personally delivered, (b) on the fifth (5th) business day after the date on which deposited in the United States mail, postage prepaid, certified or registered mail, return receipt requested, (c) on the date on which transmitted by facsimile or email or other electronic means producing a tangible receipt evidencing a successful transmission, or (d) on the next business day after the date on which deposited with a nationally-recognized private courier (e.g., FedEx, UPS, DHL, etc.) for overnight delivery, addressed to the party for whom intended at the mailing address, email address, or facsimile number set forth on the signature page of this Agreement for such party, or such other mailing address, email address, or facsimile number, notice of which has been delivered in a manner permitted by this Section 10.02.
Section 10.03 Costs, Expenses and Attorneys’ Fees. Borrower shall pay to Lender within thirty (30) days of Lender’s delivery of an invoice therefor the full amount of all reasonable and documented out-of-pocket payments, advances, charges, costs and expenses, including reasonable and documented attorneys’ fees incurred by Lender in connection with (a) the enforcement of Lender’s rights and/or the collection of any amounts which become due to Lender under any of the Loan Documents; and (b) the prosecution or defense of any action in any way related to any of the Loan Documents, including any action for declaratory relief, and including any of the foregoing incurred in connection with any bankruptcy proceeding relating to Borrower or any other Loan Party.
Section 10.04 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided, however, that Borrower may not assign or transfer its interest hereunder without Lender’s prior written consent. A merger or other transaction described in Section 7.02 shall be deemed an assignment by Borrower for the purpose of their Agreement. Lender reserves the right to sell, assign, or transfer all or any part of, or any interest in, Lender’s rights and benefits under each of the Loan Documents; provided further that nothing in this Section 10.04 shall prohibit Lender from granting participations in the Loan. In connection therewith, Lender may disclose all documents and information which Lender now has or may hereafter acquire relating to the Loan, Borrower or its business, any other Loan Party or the business of such Loan Party.
Section 10.05 Entire Agreement; Amendment. This Agreement and the other Loan Documents constitute the entire agreement between Borrower and Lender with respect to the Loan and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof. This Agreement may be amended or modified only by a written instrument executed by each party hereto.
Section 10.06 No Third Party Beneficiaries. This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and, subject to Section 10.11, no other Person shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party.
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Section 10.07 Time of the Essence. Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents.
Section 10.08 Usury Savings Clause; Severability.
(a) Borrower and Lender intend to contract in compliance with all applicable usury laws governing the Loan made hereunder. Borrower and Lender agree that none of the terms of this Agreement or the Note shall be construed as a contract for, or requirement to pay interest at a rate in excess of, the maximum interest rate allowed by any applicable usury laws. If Lender receives sums which constitute interest that would otherwise increase the effective interest rate on the Loan to a rate in excess of that permitted by any applicable law, then all such sums constituting interest in excess of the maximum lawful rate shall at Lender’s option either be credited to the payment of principal or returned to Borrower. The provisions of this paragraph control the other provisions of this Agreement, the Note and any other agreement between Borrower and Lender.
(b) In addition, and without duplication, if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement.
Section 10.09 Counterparts. This Agreement may be executed in counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Agreement.
Section 10.10 Choice of Law; Consent to Jurisdiction. This Agreement and the other Loan Documents shall be construed in accordance with the internal laws (and not the law of conflicts) of the State of Delaware. Borrower hereby irrevocably submits to the jurisdiction of any United States Federal or State court sitting in or serving San Antonio, Texas in any action or proceeding arising out of or relating to the Loan Documents and hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in any such court. Borrower hereby irrevocably waives, to the extent permitted by applicable law, any objection, including without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such respective jurisdictions in respect of the Loan Documents. Nothing herein shall affect the right of Lender to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against Borrower in any other jurisdiction.
Section 10.11 Indemnity by Borrower. Borrower agrees to indemnify, save and hold harmless Lender, Lender’s affiliates, and their respective directors, partners, officers, members, equity holders, agents, attorneys and employees (collectively, the “Indemnitees”) from and against: (a) any and all claims, demands, actions or causes of action that are asserted against any Indemnitee if the claim, demand, action or cause of action arises out of or relates to the relationship between Borrower and Lender under any of the Loan Documents or the transactions contemplated thereby; (b) any and all administrative or investigative proceedings by any governmental agency or authority arising out of or related to any claim, demand, action or cause of action described in clause (a) above; and (c) any and all liabilities, losses, costs or expenses (including reasonable and documented out-of-pocket attorneys’ fees and disbursements and other professional services) that any Indemnitee suffers or incurs as a result of the assertion of any of the foregoing; provided, that no Indemnitee shall be entitled to indemnification for any loss caused by its own or its employees’ or agents’ gross negligence, bad faith or willful misconduct. Each Indemnitee is authorized to employ counsel in enforcing its rights hereunder and in defending against any claim, demand, action, cause of action or administrative or investigative proceeding covered by this section; provided, that the Indemnitees as a group shall retain only one law firm to represent them with respect to any such matter unless there is, under applicable standards of professional conduct, an actual conflict of interest on any significant issue between the positions of any two or more Indemnitees. Any obligation or liability of Borrower to any Indemnitee under this section shall be and hereby is covered and secured by the Loan Documents and shall survive the expiration or termination of this Agreement and the repayment of the Loan and the payment and performance of all other obligations owed to Lender.
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Section 10.12 Further Assurances. Borrower shall, at its expense and without expense to Lender, do, execute and deliver such further acts and documents as Lender from time to time reasonably requires for the assuring and confirming unto Lender of the rights hereby created or intended now or hereafter so to be, or for carrying out the intention or facilitating the performance of the terms of any Loan Document.
Section 10.13 Conflicting Provisions. The provisions of this Agreement are not intended to supersede the provisions of the other Loan Documents but shall be construed as supplemental thereto. However, in the event of any actual irreconcilable conflict between the provisions hereof and any provisions of the other Loan Documents, it is intended that the provisions of this Agreement shall control; provided, that the inclusion of provisions in such other Loan Documents which are not addressed in this Agreement shall not be deemed a conflict with this Agreement. The foregoing shall apply with respect to all Loan Documents, whether executed and delivered by Borrower or by any third party.
Section 10.14 Termination; Release. After the termination of the Note, and any other Loan Documents (other than this Agreement), and when all Obligations (other than contingent indemnity and reimbursement obligations) have been paid in full, this Agreement shall terminate, and Lender, at the request and expense of Borrower, will execute and deliver to Borrower the proper instruments (including UCC termination statements) acknowledging the termination of this Agreement, and will duly assign, transfer and deliver to Borrower (without recourse and without any representation or warranty) such of the Collateral as may be in possession of Lender and has not theretofore been sold or otherwise applied or released pursuant to this Agreement.
Section 10.15 Confidentiality. Neither party shall publicly disclose Borrower and Lender’s relationship, including on websites such as Crunchbase, or use each other’s trade name and/or logo in promotional material, including on such party’s website. At Borrower’s discretion and with Borrower’s prior consent, Borrower may be contacted by Lender’s potential clients as a reference. Notwithstanding the above, Borrower may comply with its reporting obligations under applicable SEC rules and regulations and listing requirements.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Loan and Security Agreement to be executed as of the day and year first written above.
EXHIBIT A
SECURED PROMISSORY NOTE
[Attached]
EXHIBIT B
SPECIAL PROVISIONS
SPECIAL PROVISIONS CONCERNING TRADEMARKS
Additional Representations and Warranties. Borrower represents and warrants that it, Borrower, is the true and lawful exclusive owner of the trademarks listed on Exhibit B-1 registered in the United States Patent and Trademark Office and all foreign trademark registries that Borrower now owns or uses in connection with its business (the “Marks”). The Marks include all the trademarks and applications for trademarks within the Collateral registered in the United States Patent and Trademark Office. Borrower further warrants that it is aware of no third party claim that any aspect of Borrower’s present business operations infringes any trademark.
Future Registered Trademarks. If any trademark registration issues hereafter to Borrower as a result of any application now or hereafter pending before the United States Patent and Trademark Office, within 30 days of receipt of such certificate Borrower shall deliver a copy of such certificate, and a grant of security in such trademark, to Lender, confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially the same as the form hereof, and such trademarks shall be “Marks” hereunder.
Remedies. If an Event of Default (as such term is defined in each of this Agreement and the Note) shall occur and be continuing, Lender may, by written notice to Borrower, take any or all of the following actions: (a) declare the entire right, title and interest of Borrower in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested, in which event such rights, title and interest shall immediately vest, in Lender, in which case Borrower agrees to, upon written demand from Lender, execute an assignment in form and substance satisfactory to Lender of all its rights, title and interest in and to the Marks to Lender; (b) take and use or sell the Marks and the goodwill of Borrower’s business symbolized by the Marks and the right to carry on the business and use the assets of Borrower in connection with which the Marks have been used; and (c) direct Borrower to refrain, in which event Borrower shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and, if requested by Lender, change Borrower’s corporate name to eliminate therefrom any use of any Mark and execute such other and further documents that Lender may request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office or applicable foreign trademark registry to Lender.
SPECIAL PROVISIONS CONCERNINGPATENTS
Additional Representations and Warranties. Borrower represents and warrants that it is the true and lawful exclusive owner of all rights in the following patents [None] (the “Patents”), that the Patents constitute all the U.S. and foreign patents and applications for U.S. and foreign patents that Borrower now owns and uses in connection with its business. Borrower represents and warrants that it owns all the Patents. Borrower further warrants that it is aware of no third party claim that any aspect of Borrower’s present business operations infringes any patent.
Other Patents. Within 30 days of acquisition of a U.S. patent, or of filing of an application for a U.S. patent, Borrower shall deliver to Lender a copy of said patent, with a grant of security as to such patent confirming the grant thereof hereunder, the form of such confirmatory grant to be substantially the same as the form hereof, and such patents shall be “Patents” hereunder.
Remedies. If an Event of Default (as such term is defined in each of this Agreement and the Note) shall occur and be continuing, Lender may, by written notice to Borrower, take any or all of the following actions: (a) declare the entire right, title and interest of Borrower in each of the Patents vested, in which event such right, title and interest shall immediately vest in Lender, in which case Borrower agrees to, upon written demand from Lender, execute an assignment in form and substance satisfactory to Lender of all its right, title and interest to the Patents to Lender; (b) take and practice or sell the Patents; and (c) direct Borrower to refrain, in which event Borrower shall refrain, from practicing the Patents directly or indirectly, and Borrower shall execute such other and further documents as Lender may request further to confirm this and to transfer ownership of the Patents to Lender.
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EXHIBIT B-1
MARKS
iCore Exchange
EXHIBIT C
[Intentionally omitted]
EXHIBIT D
DEPOSIT ACCOUNT CONTROL AGREEMENT
[Attached]
EXHIBIT D-1
SIDE LETTER
[Attached]
EXHIBIT E
PAYOFF LETTER
[Attached]
EXHIBIT F
SUBORDINATION AGREEMENT
[Attached]
EXHIBIT F-1
SUBORDINATED LENDERS
SCHEDULE 4.10
PERMITTED BANK ACCOUNTS
PNC Bank Account to be formed pursuant to Side Agreement.
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EXHIBIT G
OFFICER’S CERTIFICATE
EXHIBIT H
SUBSEQUENT ADVANCE CERTIFICATE
SECURED PROMISSORY NOTE
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| February 28, 2022 San Antonio, Texas |
For Value Received iCoreConnect, Inc., a Nevada corporation (“Borrower”), hereby promises to pay Element SaaS Finance (USA), LLC, a Delaware limited liability company, or its assigns (“Lender”), at 122 E. Houston Street, Suite 105, San Antonio, Texas 78205, or at such other place designated in writing by Lender, the Loan Amount set forth in the attached Loan Schedule (the “Loan Schedule”) pursuant to the terms of this Secured Promissory Note (this “Note”). This Note is being issued pursuant to, and in connection with, a Loan and Security Agreement, dated as of the date hereof, by and between Borrower and Lender (the “Loan Agreement”). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreement.
1. Payment; Interest.
(a) Interest. Interest shall accrue on the outstanding Loan Amount at the interest rate provided in the Loan Schedule.
(b) Payment Amounts. Amortized monthly payments of principal and interest are required as provided on the Loan Schedule. Commencing on April 1, 2022, and on the 1st day of each calendar month thereafter and prior to the Maturity Date, Borrower shall pay to Lender the appropriate Payment Amount set forth in the Loan Schedule.
(c) Maturity Date. All amounts payable under this Note shall be paid no later than Maturity Date set forth in the Loan Schedule.
(d) Prepayment Fee. Notwithstanding any other provision of this Note to the contrary, Borrower may prepay all or any part of the principal then outstanding at any time, without penalty or premium, provided that if such prepayment is made prior to the 3rd Anniversary of the date of this Note such payment is accompanied by payment of the Prepayment Fee (as defined in the Loan Agreement) and all accrued and unpaid interest on the principal of this Note. Maturity of this Note due to a Change in Control Transaction constitutes prepayment under Section 2.07 of the Loan Agreement.
2. Security Interest. This Note is secured by a security interest in certain of Borrower’s assets pursuant to the Loan Agreement.
3. Default.
(a) Events of Default. It is hereby expressly agreed by Borrower that time is of the essence hereof and that each of the following occurrences (an “Event of Default”) shall constitute a default under this Note:
(i) the failure of Borrower to pay any amounts due under this Note at the times such amounts become due or within five days thereafter pursuant to Section 1 hereof, or any other breach of the terms of this Note by Borrower; or
(ii) the occurrence of any other Event of Default as defined in this Note, the Loan Agreement or any of the other Loan Documents.
Element - Note - iCoreConnect (02092022)
4. Miscellaneous.
(a) Form of Payment. All payments due hereunder shall be made in lawful currency of the United States of America.
(b) Governing Law. This Note, and the rights and obligations of the parties hereunder, shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware without giving effect to the principles of conflict of laws.
(c) Captions. The section and subsection headings in this Note are included for purposes of convenience and reference only and shall not affect in any way the meaning or interpretation of this Note.
(d) Severability. If any provision of this Note is construed by a court of competent jurisdiction to be invalid, illegal or unenforceable, then the remaining provisions of this Note shall not be affected thereby and shall be enforceable without respect to such invalid, illegal or unenforceable provision.
(e) Other Miscellaneous Provisions. The provisions included in Article X of the Loan Agreement are hereby incorporated by reference and shall apply to this Note as if set forth herein in full.
[Signature Page Follows]
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IN WITNESS WHEREOF, Borrower and Lender have caused this Secured Promissory Note to be executed as of the day and year first written above.
| Borrower: | iCoreConnect, Inc., a Nevada corporation |
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| By: | /s/ Robert McDermott |
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| Name: Robert McDermott |
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| Title: Chief Executive Officer |
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| Lender: | Element SaaS Finance (USA), LLC, a Delaware limited liability company |
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| By: | /s/ Ed Byrne |
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| Name: Ed Byrne |
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| Title: Manager |
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Loan Schedule
iCoreConnect, Inc.
This Schedule forms an integral part of the Loan Agreement and Note between Lender and Borrower.
Preamble. Loan Amount. The loan amount of $2,000,000 will be advanced on the date of the Note (the "Initial Advance"). If Lender, in its sole and absolute discretion, agrees to increase the available Loan amount any subsequent Loan shall be made by Lender to Borrower upon the satisfaction (or waiver by Lender) of the Subsequent Advance Conditions (the "Subsequent Advance(s)"). For the avoidance of doubt, Borrower is not permitted to redraw amounts that have been prepaid on the Note.
Section 1(a) – Interest. Interest shall accrue on the outstanding Loan Amount at a rate of 17.5% per annum.
Section 1(b) – Payment Amounts:
Borrower shall make payments of the outstanding Loan Amount and accrued and unpaid interest as follows:
· With respect to the Initial Advance, for the first 6 full months following such advance, and with respect to any Subsequent Advances, for the first 6 full months following each such advance (each such period an "Interest-Only Period"), monthly interest-only payments;
· Following the applicable Interest-Only Period, monthly payments of the outstanding Loan Amount and accrued interest based on a 42 month amortization schedule, as calculated by Lender; and
· On the Maturity Date, the entire outstanding Loan Amount and all accrued interest shall be due and payable, as calculated by Lender.
Section 1(c) – Maturity Date: The final Maturity Date shall be the 4th anniversary of the date of this Note, with regard to the Initial Advance, and the 4th anniversary of each Subsequent Advance, with regard to such Subsequent Advance.
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iCoreConnect Inc.
529 E. Crown Point Road
Ocoee, FL 34761
February 28, 2022
Attn: Archit Shah, Chief Financial Officer
RE: Loan
This letter serves as confirmation that Monday, February 28, 2022, iCoreConnect Inc. will pay the full and outstanding loan balance in favor of Robert McDermott in the amount of $483,149.72 plus accrued and unpaid interest in the amount of $14,159.66 for a total amount of $497,309.38 (the "Payoff Amount"). This represents the full and final settlement of amounts due related to this note.
Wire (or ACH) instructions have been previously provided to iCoreConnect. I understand the Company is receiving a loan from Element SaaS Finance (USA), LLC, and will be using a portion of those loan proceeds to pay the Payoff Amount. I hereby authorize Element to wire the Payoff Amount directly to iCoreConnect., which will then pay me directly.
Upon receipt of the Payoff Amount by iCoreConnect in immediately available funds, all indebtedness and obligations of iCoreConnect. to me under or in respect to the note or any other agreement, (i) shall be deemed to be paid and discharged in full; (ii) all unfunded commitments to make credit extensions or financial accommodations to iCoreConnect shall be terminated; (iii) all security interests, mortgages, liens and encumbrances that iCoreConnect or any of its subsidiaries or affiliates has granted to me as collateral shall be automatically and permanently released, and (iv) my note and any other loan documents and the obligations of iCoreConnect will automatically terminate.
Please contact me with any questions or further information regarding your account and with the details of the wire transfer.
Sincerely,
Robert P. McDermott
EXHIBIT 3.9
EXECUTIVE EMPLOYMENT AGREEMENT
DATED AS OF December 16, 2021 BETWEEN
iCoreConnect Inc. and
Robert McDermott
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) made this 16th day of December 2021, by and between iCoreConnect, Inc., a Nevada corporation (hereinafter called “Company”), and Robert McDermott individual (hereinafter called “Executive”). The company and the Executive may collectively be referred to in this agreement as the “Parties” or individually as the “arty”
RECITALS
Company desires to employ Executive and Executive desires to accept such employment on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants set forth in this Agreement, the parties hereto agree as follows:
1. Employment.
Subject to the terms and conditions of this Agreement, Company hereby employs Executive, and Executive hereby accepts such employment as the Chief Executive Officer of Company, and in such other capacities and for such other duties and services as will from time to time be mutually agreed upon by Company and Executive, consistent with the position of the Chief Executive Officer and reporting directly to the company’s Board of Directors.
2. Full Time Occupation.
Executive will devote entire business time, attention, and efforts as reasonably necessary to the performance of Executive’s duties under this Agreement. Executive will serve Company faithfully and diligently, and will not engage in any other employment while employed by Company.
3. Compensation.
(a) Salary. During the Employment Period (as defined herein), Company will pay to Executive, as full compensation for the services rendered by Executive, a base salary at a rate of per annum (“Base Salary”) from attached schedule. Company will pay the Base Salary in accordance with Company’s established payroll procedures. Payments will be made in bi-monthly installments, or in such other periodic installments upon which Company and Executive will mutually agree.
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| Base Salary Schedule: |
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| December 16, 2021 | $295,000 |
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| December 16, 2022 | $317,500 |
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| December 16, 2023 | $348,000 |
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(b) Bonus. In addition to the Base Salary as put forth in Section 3 Compensation a) Salary, Executive will be eligible to receive an incentive bonus based on Executive’s performance (the “Bonus”) pursuant to an executive Bonus Plan approved by the company’s Board of Directors and/or the Compensation Committee of the Board of Directors of up to 30% of base salary as outlined in Section 3a), herein. The Bonus “Award” shall be at the discretion of the Compensation Committee of the Board of Directors and will be awarded no later than the last day of the first quarter following the last day of the prior fiscal year, with payment no later than the first Company regular pay period following the Award date.
(c) Withholding. The Company may withhold from any payments or benefits under this Agreement, all federal, state, and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. Executive shall bear all expense of, and be solely responsible for, all federal, state, and local taxes due with respect to any payment or benefit received hereunder.
4. Stock Option.
(a) Initial Grant. Executive is hereby awarded an option to acquire 18,000,000 shares the Company’s common stock or their equivalent, $0.001 par value, at the exercise price equal to the average of the closing prices of the shares for the ten (10) trading days prior to the Effective Date. The Effective Date shall be the date upon which this Executive Employment Agreement has been fully executed and delivered by both Executive and Company. The option shall vest as follows:
| Number of Shares | Vesting Date | Effective Date |
| 4,500,000 | 12/16/2022 | 12/16/2021 |
| 4,500,000 | 12/16/2023 | 12/16/2021 |
| 4,500,000 | 12/16/2024 | 12/16/2021 |
| 4,500,000 | 12/16/2025 | 12/16/2021 |
(b) Future Option Grants. In the sole and absolute discretion of the Board of Directors, Executive may become eligible for future option awards on such terms and conditions as the Board directs.
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5. Transportation Expense. The Company will pay Executive a non-reimbursable expense allowance of $1,000 per month to be used by Executive for local business travel on behalf of the company.
6. Other Benefits.
(a) Reimbursement. During the Employment Period, Company will reimburse Executive for all travel and entertainment expenses, and other ordinary and necessary business expenses incurred by Executive in connection with the business of Company and Executive’s duties under this Agreement. The term “business expenses” will not include any item not deductible by Company for federal income tax purposes. To obtain reimbursement, Executive will submit with accordance to Company’s policy all receipts, bills, or sales slips for the expenses incurred.
(b) Professional Memberships and Continuing Professional Education. Company will pay for dues and fees required for any professional licenses maintained by Executive, membership in professional or industry associations, continuing education requirements associated with any professional license, conferences, and seminars commonly attended by executives in similar positions in similar companies.
(c) Vacation. Executive will be entitled to four weeks of paid vacation each year. This will include 4 weeks of the Executive’s choice.
(d) Health Insurance. If the company does not provide a health insurance plan for its Executives, the company will reimburse Executive 100% of the premium that Executive pays for health Insurance comparable to the health insurance the Executive currently maintains.
7. Term of Employment.
(a) Employment Term. The term of Executive’s employment hereunder will commence on the Effective Date and will continue for a period of three years following the Effective Date, unless terminated by either party pursuant to the terms of this Agreement (such period and any extensions thereof, the “Employment Period”). The term of the Employment Period hereunder will automatically renew for successive one-year terms, unless terminated by either party giving written notice to the other not less than 30 days prior to the end of the then- current term or as otherwise set forth in this Agreement.
(b) Termination Under Certain Circumstances. Notwithstanding anything to the contrary herein contained:
(i) Death. Executive’s employment will be automatically terminated, without notice, effective upon the date of Executive’s death.
(ii) Disability. If Executive will fail to perform any of Executive’s duties or other obligations under this Agreement as the result of illness or other incapacity, with or without reasonable accommodation, for a period of more than eight consecutive weeks, or for more than eight weeks within any six-month period, as determined by Company, Company may, at it’s option, and upon notice to Executive, terminate Executive’s employment effective on the date of that notice.
(iii) Cause. Company may, without notice to Executive, terminate Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” will mean any of the following:
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(1) the failure of Executive to perform any of Executive’s duties or other obligations under this Agreement to the reasonable satisfaction of the Board of Directors, which remains uncured for 15 days after a written demand for performance is delivered to Executive by the Board of Directors of Company that specifically identifies the manner in which the Board of Directors believes that Executive has not performed Executive’s duties or other obligations. Executive shall have the right to cure such failure if such failure can be cured within the 15-day cure period, prior to any final termination.
(2) Executive’s indictment for, or conviction of, a crime involving moral turpitude whether or not relating to Company;
(3) gross negligence or willful misconduct by Executive in the performance of any of his duties or other obligations under this Agreement;
(4) the association, directly or indirectly, of Executive for his profit or financial benefit with any person, firm, partnership, association, corporation or other entity that competes with Company;
(5) the disclosing or using of any material Confidential Information (as hereinafter defined) of Company at any time by Executive, except as required in connection with his duties to Company;
(6) the breach by Executive of his fiduciary duty or duty of trust to Company, including, but not limited to, the commission by Executive of an act of fraud or embezzlement against Company;
(7) chronic absenteeism;
(8) substance abuse;
(9) misconduct or dishonesty toward or involving Company, which misconduct or dishonesty is injurious to the Company, monetarily or otherwise; or
(10) any other material breach by Executive of any of the terms or provisions of this Agreement, which other material breach is not cured within ten business days of notice by the Company.
(iv) Change of Control. In the event of a Change of Control (as defined below), Company or Executive may, each at their respective options upon written notice to the other, terminate Executive’s employment by providing the other party with written notice given no later than 30 days after the effective date of the Change of Control. For the purposes of this Agreement, a “Change of Control” will be deemed to have occurred if and when:
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(1) Tender Offer. A tender offer or exchange offer is made whereby the effect of such offer is to take over and control Company, and such offer is consummated for equity securities of Company representing 51% or more of the combined voting power of Company’s then outstanding voting securities;
(2) Merger or Consolidation. The shareholders of Company approve a merger, consolidation, recapitalization, or reorganization of Company, or consummation of any such transaction if shareholder approval is not obtained, or required to be obtained, other than any such transaction that would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by holders of outstanding voting securities of Company immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction;
(3) Sale of Assets. The shareholders of Company approve an agreement for the sale or disposition by Company of all or substantially all of Company’s assets to another person or entity, which is not a subsidiary of Company in which the Company owns securities representing not less than a majority of the voting power of such subsidiary; or
(4) Change of the Board of Directors. A change in the composition of the Board of Directors as a result of which fewer than a majority of the Directors are persons who had been Directors on the date 24 months prior to the date of such change in the composition of the Board or whose nomination for election or election to the Board of Directors shall have been approved in advance by two-thirds of the Directors who served on the Board of Directors on the date 24 months prior to the date of such change in the composition of the Board of Directors.
(v) Without Cause
(1) Executive may terminate the Employment Period at any time before the expiration of this agreement upon giving to Company written notice sixty days in advance of the proposed termination date.
(2) Company may terminate the Employment Period at any time before the expiration of this Agreement without cause by giving to Executive written notice sixty days in advance of the proposed termination date.
(vi) Result of Termination of Employment Period.
(1) In the event of the termination of the Employment Period pursuant to Section 7(b)(iii) [Cause] above, Executive will receive no further compensation under this Agreement following the date of termination.
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(2) In the event of the termination of the Employment Period pursuant to Section 7(b)(i) [Death] or 7(b)(ii) [Disability] above, Executive or Executive’s personal representative or estate will continue to receive Executive’s Base Salary during the six-month period following the date of termination and Executive’s stock options granted under Section 4(a) shall become fully vested at the date of termination.
(3) In the event of the termination of the Employment Period pursuant to Section 7 (iv) [change of control] Executive will continue to receive his Base Salary and his Annual Bonus computed at 100% of Base Salary for the 24-month period following the date of termination and Executive’s stock options granted under Section 4(a) shall become fully vested at the date of termination and the restrictions on any restricted stock granted to Executive under Section 4(a) shall be lifted at the date of termination.
(4) In the event of termination during the initial three-year term of the Employment Period pursuant to Section (7)(v)(2) [Without Cause] above, Executive will continue to receive his Base Salary for the 18-month period following date of termination or through the end of the Employment Period, whichever is longer. In the event of termination during any subsequent term of the Employment Period pursuant to Section 7(v)(2) [Without Cause] above, Executive will continue to receive his Base Salary for the 18 month period following the date of termination.
(5) Executive will continue to be bound by Sections 8 and 9 of this Agreement following termination of Executive’s employment on any basis set forth in this Section 7(b).
8. Competition and Confidential Information.
(a) Non-Competition. During the term of the Employment Period and for twelve months after the termination of the Employment Period , regardless of the reason therefore, or twelve months after the final payment of compensation by Company to Executive, whichever is later, Executive will not (whether directly or indirectly, as owner, principal, agent, stockholder, director, officer, manager, executive, partner, participant, or in any other capacity) engage or become financially interested in any competitive business conducted within the Restricted Territory or solicit, canvas, or accept, or authorize any other person, firm, or entity to solicit, canvas, or accept, from any customers of Company or any of its subsidiaries, any business within the Restricted Territory for Executive or for any other person, firm, or entity. As used herein, “customers of Company” will mean any persons, firms, or entities that purchased goods, products, or services from Company or any of its subsidiaries during the Employment Period; “competitive business” will mean any business which sells or provides or attempts to sell or provide goods, products, or services the same as or substantially similar to the goods, products, or services sold or provided by Company or any of its subsidiaries; and the “Restricted Territory” will mean the United States or, in the alternative, in the event any reviewing court finds the United States to be overbroad or unenforceable, within such area as the court determines to be reasonable under the circumstances then existing an alternative.
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(b) Confidential Information. Executive will maintain in strict secrecy all confidential or trade secret information relating to the business of Company or any of its subsidiaries (the “Confidential Information”) obtained by Executive in the course of Executive’s employment, and Executive will not, unless first authorized in writing by Company, disclose to or use for Executive’s benefit or for the benefit of any person, firm, or entity at any time either during or subsequent to the term of Executive’s employment with Company, any Confidential Information, except as required in the performance of Executive’s duties on behalf of Company. For purposes hereof, “Confidential Information” will include, without limitation, any trade secrets, knowledge, or information with respect to any goods, products, or services; any processes, procedures, plans, inventions, techniques, or know-how; any business methods or forms; any names or addresses of customers or data on customers or suppliers; and any business policies or other information relating to or dealing with the purchasing, sales, or distribution policies or practices of Company.
(c) Return of Books and Papers. Upon the termination of Executive’s employment with Company for any reason, Executive will deliver promptly to Company all catalogues, manuals, memoranda, drawings, and specifications; all cost, pricing, and other financial data; all customer information; all other materials, whether written, printed, or stored in any electronic media, which are the property of Company or any of its subsidiaries (and any copies of them); desktop or laptop computers, software, access cards, “passwords”, cellular phones, personal digital assistants and pagers; and all other materials which may contain Confidential Information relating to the business of Company or any of its subsidiaries (whether maintained in tangible, documentary form, computer memory, or other electronic or digital format), which Executive may then have in Executive’s possession or under Executive’s control, whether prepared by Executive or not.
(d) Disclosure of Information. Executive will disclose promptly to Company, or it’s nominee, any and all ideas, designs, processes, and improvements of any kind relating to the business of Company or any of it’s subsidiaries, whether patentable or not, conceived or made by Executive, either alone or jointly with others, during working hours or otherwise, during the entire period of Executive’s employment with Company, or within six months thereafter.
(e) Assignment. Executive hereby assigns to Company or it’s nominee, the entire right, title, and interest in and to all discoveries and improvements, whether patentable or not, which Executive may conceive or make during Executive’s employment with Company, or within six months thereafter, and which relate to the business of Company or any of it’s subsidiaries. All copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Executive during the Employment Period (collectively, the “Work Product”) shall belong exclusively to Company and shall be considered a work made by Executive for hire within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered work made for hire, Executive agrees to assign at the time of creation of the Work Product, without any requirement of further consideration, all right, title, and interest that Executive has or may have in such Work Product. Upon Company’s request, Executive will take such further actions, including execution and delivery of instruments of conveyance, as may be appropriate to give full and proper effect to such assignment.
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(f) Equitable Relief. In the event a violation of any of the restrictions contained in this Section 8 is established, Company will be entitled to preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits, and other benefits arising from such violation, which right will be cumulative and in addition to any other rights or remedies to which Company may be entitled. In the event of a violation of any provision of this Section 8, the period for which those provisions would remain in effect will be extended for a period of time equal to that period beginning when such violation commenced and ending when the activities constituting such violation will have been finally terminated in good faith.
(g) Restrictions Separable. Each and every restriction set forth in this Section 8 is independent and severable from the others, and no such restriction will be rendered unenforceable by virtue of the fact that, for any reason, any other or others of them may be unenforceable in whole or in part.
(h) No Violation. The execution and delivery of this Agreement and the performance of Executive’s services contemplated hereby will not violate or result in a breach by Executive of, or constitute a default under, or conflict with: (i) any provision or restriction of any employment, consulting, or other similar agreement; (ii) any agreement by Executive with any third party not to compete with, solicit from, or otherwise disparage such third party; (iii) any provision or restriction of any agreement, contract, or instrument to which Executive is a party or by which Executive is bound; or (iv) any order, judgment, award, decree, law, rule, ordinance, or regulation or any other restriction of any kind or character to which Executive is subject or by which Executive is bound.
(i) Non-Disparagement. Executive agrees that he will make no statement, oral or written, and which, by itself, may significantly or substantially damage the reputation of the Company or any director, officer or employee of the Company.
9. Miscellaneous.
(a) Notices. All notices, requests, demands, and other communications required or permitted under this Agreement will be in writing and will be deemed to have been duly given and received: (i) if mailed by registered or certified mail, three business days after deposit in the United States mail, postage prepaid, return receipt requested; (ii) if hand delivered, upon delivery against receipt or upon refusal to accept the notice; or (iii) if delivered by a standard overnight courier, one business day after deposit with such courier, postage prepaid, in each case, addressed to such party at the address set forth below:
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| (i) | If to Company:
iCoreConnect Inc |
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| Attn: CEO-Robert McDermott
13506 Summerport Parkway
Suite #160
Windermere FL 34786 |
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| (ii) | If to Executive: |
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| Robert McDermott |
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Either party may change the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 9(a) for the giving of notice.
(b) Waivers. Neither any failure nor any delay on the part of either party to exercise any right, remedy, power, or privilege under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right, remedy, power, or privilege preclude any other or further exercise of the same or of any other right, remedy, power, or privilege, nor will any waiver of any right, remedy, power, or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power, or privilege with respect to any other occurrence.
(c) Controlling Law, Jurisdiction and Venue. This Agreement and all questions relating to its validity, interpretation, performance, and enforcement will be governed by and construed in accordance with the internal laws of the State of Florida. Executive agrees that any and all claims arising between the parties out of this agreement shall be controlled by the laws of the State of Florida, as follows: any dispute, controversy arising out of, connected to, or relating to any matters herein of the transactions between Company and Executive, or this Agreement, which cannot be resolved by negotiation (including, without limitation, any dispute over the arbitrability of an issue), will be settled by binding arbitration. Company and Executive agree the prevailing party on any action to enforce rights hereunder shall be entitled, in addition to any awarded damages, their costs and reasonable attorney’s fees, whether at arbitration, or on appeal. The parties agree that this provision and the Arbitrator’s authority to grant relief are subject to the United States Arbitration Act, 9 U.S.C. 1- 16 et seq. (“USAA”) and the provisions of this Agreement. The parties agree that the arbitrator have no power or authority to make awards or issue orders of any kind except as expressly permitted by this Agreement, and in no event does the arbitrator have the authority to make any award that provides for punitive or exemplary damages. The award may be confirmed and enforced in any court of competent jurisdiction. All post-award proceedings will be governed by the USAA. Company and Executive irrevocably consent to the jurisdiction and venue of such arbitration and such courts.
(d) Binding Nature of Agreement. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors, and assigns except that no party may assign or transfer such party’s rights or obligations under this Agreement without the prior written consent of the other party.
(e) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original as against any party whose signature appears thereon, and all of which will together constitute one and the same instrument. This Agreement will become binding when one or more counterparts hereof, individually or taken together, will bear the signatures of the parties reflected hereon as the signatories.
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(f) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision will be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
(g) Entire Agreement. This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements, and conditions, expressed or implied, oral or written, except as herein contained. The expressed terms hereof control and supersede: (a) any course of performance and/or usage of the trade inconsistent with any of the terms hereof; and (b) any provision of any other plan or agreement maintained by Company for the benefit of its employees generally inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing signed by the parties hereto.
(h) Paragraph Headings. The paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and will not affect it’s interpretation.
(i) Gender. Words used herein, regardless of the number and gender specifically used, will be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine, or neutral, as the context requires.
(j) Number of Days. In computing the number of days for purposes of this Agreement, all days will be counted, including Saturdays, Sundays, and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday, or holiday, then the final day will be deemed to be the next day which is not a Saturday, Sunday, or holiday.
(k) Third Party Beneficiaries. This Agreement shall not inure to the benefit of anyone other than Executive and Company and their successors and assigns. No third party may bring an action to enforce any term hereof and no third-party beneficiary rights are created by this Agreement.
(l) Non-Transferability. This is a personal agreement. None of the Executive’s rights, benefits, or interests hereunder may be subject to sale, anticipation, alienation, assignment, encumbrance, charge, pledge hypothecation, transfer, or set off in respect of any claim, debt, or obligation, or to execution, attachment, levy, or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have executed this Executive Employment Agreement by evidence of the signatures below as of the Effective Date.
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| iCoreConnect, INC., a Nevada corporation |
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| By: |
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| Name: Robert McDermott |
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| Title: President & CEO |
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| Date: |
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| EXECUTIVE |
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| Robert McDermott, an individual |
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EXHIBIT 3.10
EXECUTIVE EMPLOYMENT AGREEMENT
DATED AS OF DECEMBER 16, 2021
BETWEEN
ICORECONNECT, INC.
AND
DAVID FIDANZA
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) made this 16th day of December, 2021, by and between iCoreConnect, Inc., a Nevada corporation (hereinafter called “Company”), and David Fidanza, individual (hereinafter called “Executive”). The Company and Executive may collectively be referred to in this Agreement as the “Parties” or individually as the “Party.”
RECITALS
WHEREAS, the Company desires to employ Executive and Executive desires to accept such employment on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants set forth in this Agreement, the Parties hereto agree as follows:
1. Employment.
Subject to the terms and conditions of this Agreement, Company hereby employs Executive, and Executive hereby accepts such employment as the Chief Information Officer of Company, and in such other capacities and for such other duties and services as will from time to time be mutually agreed upon by Company and Executive, consistent with the position of the Chief Information Officer and reporting directly to the CEO.
2. Full Time Occupation.
Executive will devote entire business time, attention, and efforts as reasonably necessary to the performance of Executive’s duties under this Agreement. Executive will serve Company faithfully and diligently, and will not engage in any other employment while employed by Company.
3. Compensation.
(a) Salary. During the Employment Period (as defined herein), Company will pay to Executive, as full compensation for the services rendered by Executive, a base salary at a rate of per annum (“Base Salary”) from attached schedule. Company will pay the Base Salary in accordance with Company’s established payroll procedures. Payments will be made in bi- monthly installments, or in such other periodic installments upon which Company and Executive will mutually agree.
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| Base Salary Schedule: |
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| December 16, 2021 | $165,000 |
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| December 16, 2022 | $176,555 |
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| December 16. 2023 | $190,000 |
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(b) Withholding. The Company may withhold from any payments or benefits under this Agreement, all federal, state, and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. Executive shall bear all expense of, and be solely responsible for, all federal, state, and local taxes due with respect to any payment or benefit received hereunder.
4. Stock Option.
(a) Initial Grant. Executive is hereby awarded an option to acquire 3,000,000 shares of the Company’s common stock or their equivalent, $0.001 par value, at the exercise price equal to the average of the closing prices of the shares for the ten (10) trading days prior to the Effective Date. The Effective Date shall be the date upon which this Executive Employment Agreement has been fully executed and delivered by both Executive and Company. The option shall vest as follows:
| Number of Shares | Vesting Date | Effective Date |
| 750,000 | 12/16/2022 | 12/16/2021 |
| 750,000 | 12/16/2023 | 12/16/2021 |
| 750,000 | 12/16/2024 | 12/16/2021 |
| 750,000 | 12/16/2025 | 12/16/2021 |
(b) Future Option Grants. In the sole and absolute discretion of the Board of Directors, Executive may become eligible for future option awards on such terms and conditions as the Board directs.
(c) Car Allowance. Company will reimburse Executive $500 per month for business transportation purposes.
(d) Health Allowance. Company will reimburse Executive $250 per month for health purposes.
5. Other Benefits.
(a) Reimbursement. During the Employment Period, Company will reimburse Executive for all travel and entertainment expenses, and other ordinary and necessary business expenses incurred by Executive in connection with the business of Company and Executive’s duties under this Agreement. The term “business expenses” will not include any item not deductible by Company for federal income tax purposes. To obtain reimbursement, Executive will submit with accordance to Company’s policy all receipts, bills, or sales slips for the expenses incurred.
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(b) Professional Memberships and Continuing Professional Education. Company will pay for dues and fees required for any professional licenses maintained by Executive, membership in professional or industry associations, continuing education requirements associated with any professional license and conferences and seminars commonly attended by executives in similar positions in similar companies.
(c) Vacation. Executive will be entitled to three weeks paid vacation each year. This will include 3 weeks of the Executive’s choice.
6. Term of Employment.
(a) Employment Term. The term of Executive’s employment hereunder will commence on the Effective Date and will continue for a period of three years following the Effective Date, unless terminated by either Party pursuant to the terms of this Agreement (such period and any extensions thereof, the “Employment Period”). The term of the Employment Period hereunder will automatically renew for successive one-year terms, unless terminated by either Party giving written notice to the other not less than 30 days prior to the end of the then- current term or as otherwise set forth in this Agreement.
(b) Termination Under Certain Circumstances. Notwithstanding anything to the contrary herein contained:
(i) Death. Executive’s employment will be automatically terminated, without notice, effective upon the date of Executive’s death.
(ii) Disability. If Executive will fail to perform any of Executive’s duties or other obligations under this Agreement as the result of illness or other incapacity, with or without reasonable accommodation, for a period of more than eight consecutive weeks, or for more than eight weeks within any six-month period, as determined by Company, Company may, at its option, and upon notice to Executive, terminate Executive’s employment effective on the date of that notice.
(iii) Cause. Company may, without notice to Executive, terminate Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” will mean any of the following:
(1) the failure of Executive to perform any of Executive’s duties or other obligations under this Agreement to the reasonable satisfaction of the Board of Directors, which remains uncured for 15 days after a written demand for performance is delivered to Executive by the Board of Directors or the CEO of Company that specifically identifies the manner in which the Board of Directors or the CEO believes that Executive has not performed Executive’s duties or other obligations. Executive shall have the right to cure such failure if such failure can be cured within the 15-day cure period, prior to any final termination;
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(2) Executive’s indictment for, or conviction of, a crime involving moral turpitude whether or not relating to Company;
(3) gross negligence or willful misconduct by Executive in the performance of any of his duties or other obligations under this Agreement;
(4) the association, directly or indirectly, of Executive for his profit or financial benefit with any person, firm, partnership, association, corporation or other entity that competes with Company;
(5) the disclosing or using of any material Confidential Information (as hereinafter defined) of Company at any time by Executive, except as required in connection with his duties to Company;
(6) the breach by Executive of his fiduciary duty or duty of trust to Company, including, but not limited to, the commission by Executive of an act of fraud or embezzlement against Company;
(7) chronic absenteeism;
(8) substance abuse;
(9) misconduct or dishonesty toward or involving Company, which misconduct or dishonesty is injurious to the Company, monetarily or otherwise; or
(10) any other material breach by Executive of any of the terms or provisions of this Agreement, which other material breach is not cured within ten business days of notice by the Company.
(iv) Change of Control. In the event of a Change of Control (as defined below), Company or Executive may, each at their respective options upon written notice to the other, terminate Executive’s employment by providing the other Party with written notice given no later than 30 days after the effective date of the Change of Control. For the purposes of this Agreement, a “Change of Control” will be deemed to have occurred if and when:
(1) Tender Offer. A tender offer or exchange offer is made whereby the effect of such offer is to take over and control Company, and such offer is consummated for equity securities of Company representing 51% or more of the combined voting power of Company’s then outstanding voting securities;
(2) Merger or Consolidation. The shareholders of Company approve a merger, consolidation, recapitalization, or reorganization of Company, or consummation of any such transaction if shareholder approval is not obtained, or required to be obtained, other than any such transaction that would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by holders of outstanding voting securities of Company immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or
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(3) Sale of Assets. The shareholders of Company approve an agreement for the sale or disposition by Company of all or substantially all of Company’s assets to another person or entity, which is not a subsidiary of Company in which the Company owns securities representing not less than a majority of the voting power of such subsidiary; or
(4) Change of the Board of Directors. A change in the composition of the Board of Directors as a result of which fewer than a majority of the Directors are persons who had been Directors on the date 24 months prior to the date of such change in the composition of the Board or whose nomination for election or election to the Board of Directors shall have been approved in advance by two-thirds of the Directors who served on the Board of Directors on the date 24 months prior to the date of such change in the composition of the Board of Directors.
(v) Without Cause
(1) Executive may terminate the Employment Period at any time before the expiration of this agreement upon giving to Company written notice sixty days in advance of the proposed termination date.
(2) Company may terminate the Employment Period at any time before the expiration of this Agreement without cause by giving to Executive written notice sixty days in advance of the proposed termination date.
(vi) Result of Termination of Employment Period.
(1) In the event of the termination of the Employment Period pursuant to Section 6(b)(iii) [Cause] or Section 6(b)(v)(1) [by Executive] above, Executive will receive no further compensation under this Agreement following the date of termination.
(2) In the event of the termination of the Employment Period pursuant to Section 6(b)(i) [Death] or 6(b)(ii) [Disability] above, Executive or Executive’s personal representative or estate will continue to receive Executive’s Base Salary during the six-month period following the date of termination and Executive’s stock options granted under Section 4(a) shall become fully vested at the date of termination.
(3) In the event of the termination of the Employment Period pursuant to Section 6 (b)(iv)[Change in Control] above, Executive will continue to receive his Base Salary computed at 100% of Base Salary for the 6-month period following the date of termination and Executive stock options granted under Section 4(a) shall become fully vested at date of termination.
(4) Executive will continue to be bound by Sections 8 and 9 of this Agreement following termination of Executive’s employment on any basis set forth in this Section 7(b).
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7. Competition and Confidential Information.
(a) Non-Competition. During the term of the Employment Period and for twelve months after the termination of the Employment Period , regardless of the reason therefore, or twelve months after the final payment of compensation by Company to Executive, whichever is later, Executive will not (whether directly or indirectly, as owner, principal, agent, stockholder, director, officer, manager, executive, partner, participant, or in any other capacity) engage or become financially interested in any competitive business conducted within the Restricted Territory or solicit, canvas, or accept, or authorize any other person, firm, or entity to solicit, canvas, or accept, from any customers of Company or any of its subsidiaries, any business within the Restricted Territory for Executive or for any other person, firm, or entity. As used herein, “customers of Company” will mean any persons, firms, or entities that purchased goods, products, or services from Company or any of its subsidiaries during the Employment Period; “competitive business” will mean any business which sells or provides or attempts to sell or provide goods, products, or services the same as or substantially similar to the goods, products, or services sold or provided by Company or any of its subsidiaries; and the “Restricted Territory” will mean the United States or, in the alternative, in the event any reviewing court finds the United States to be overbroad or unenforceable, within such area as the court determines to be reasonable under the circumstances then existing an alternative.
(b) Confidential Information. Executive will maintain in strict secrecy all confidential or trade secret information relating to the business of Company or any of its subsidiaries (the “Confidential Information”) obtained by Executive in the course of Executive’s employment, and Executive will not, unless first authorized in writing by Company, disclose to or use for Executive’s benefit or for the benefit of any person, firm, or entity at any time either during or subsequent to the term of Executive’s employment with Company, any Confidential Information, except as required in the performance of Executive’s duties on behalf of Company. For purposes hereof, “Confidential Information” will include, without limitation, any trade secrets, knowledge, or information with respect to any goods, products, or services; any processes, procedures, plans, inventions, techniques, or know-how; any business methods or forms; any names or addresses of customers or data on customers or suppliers; and any business policies or other information relating to or dealing with the purchasing, sales, or distribution policies or practices of Company.
(c) Return of Books and Papers. Upon the termination of Executive’s employment with Company for any reason, Executive will deliver promptly to Company all catalogues, manuals, memoranda, drawings, and specifications; all cost, pricing, and other financial data; all customer information; all other materials, whether written, printed, or stored in any electronic media, which are the property of Company or any of its subsidiaries (and any copies of them); desktop or laptop computers, software, access cards, “passwords”, cellular phones, personal digital assistants and pagers; and all other materials which may contain Confidential Information relating to the business of Company or any of its subsidiaries (whether maintained in tangible, documentary form, computer memory, or other electronic or digital format), which Executive may then have in Executive’s possession or under Executive’s control, whether prepared by Executive or not.
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(d) Disclosure of Information. Executive will disclose promptly to Company, or it’s nominee, any and all ideas, designs, processes, and improvements of any kind relating to the business of Company or any of its subsidiaries, whether patentable or not, conceived or made by Executive, either alone or jointly with others, during working hours or otherwise, during the entire period of Executive’s employment with Company, or within six months thereafter.
(e) Assignment. Executive hereby assigns to Company or its nominee, the entire right, title, and interest in and to all discoveries and improvements, whether patentable or not, which Executive may conceive or make during Executive’s employment with Company, or within six months thereafter, and which relate to the business of Company or any of its subsidiaries. All copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Executive during the Employment Period (collectively, the “Work Product”) shall belong exclusively to Company and shall be considered a work made by Executive for hire within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered work made for hire, Executive agrees to assign at the time of creation of the Work Product, without any requirement of further consideration, all right, title, and interest that Executive has or may have in such Work Product. Upon Company’s request, Executive will take such further actions, including execution and delivery of instruments of conveyance, as may be appropriate to give full and proper effect to such assignment.
(f) Equitable Relief. In the event a violation of any of the restrictions contained in this Section 8 is established, Company will be entitled to preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits, and other benefits arising from such violation, which right will be cumulative and in addition to any other rights or remedies to which Company may be entitled. In the event of a violation of any provision of this Section 8, the period for which those provisions would remain in effect will be extended for a period of time equal to that period beginning when such violation commenced and ending when the activities constituting such violation will have been finally terminated in good faith.
(g) Restrictions Separable. Each and every restriction set forth in this Section 8 is independent and severable from the others, and no such restriction will be rendered unenforceable by virtue of the fact that, for any reason, any other or others of them may be unenforceable in whole or in part.
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(h) No Violation. The execution and delivery of this Agreement and the performance of Executive’s services contemplated hereby will not violate or result in a breach by Executive of, or constitute a default under, or conflict with: (i) any provision or restriction of any employment, consulting, or other similar agreement; (ii) any agreement by Executive with any third party not to compete with, solicit from, or otherwise disparage such third party; (iii) any provision or restriction of any agreement, contract, or instrument to which Executive is a party or by which Executive is bound; or (iv) any order, judgment, award, decree, law, rule, ordinance, or regulation or any other restriction of any kind or character to which Executive is subject or by which Executive is bound.
(i) Non-Disparagement. Executive agrees that he will make no statement, oral or written, and which, by itself, may significantly or substantially damage the reputation of the Company or any director, officer or employee of the Company.
8. Miscellaneous.
(a) Notices. All notices, requests, demands, and other communications required or permitted under this Agreement will be in writing and will be deemed to have been duly given and received: (i) if mailed by registered or certified mail, three business days after deposit in the United States mail, postage prepaid, return receipt requested; (ii) if hand delivered, upon delivery against receipt or upon refusal to accept the notice; or (iii) if delivered by a standard overnight courier, one business day after deposit with such courier, postage prepaid, in each case, addressed to such Party at the address set forth below:
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| (i) | If to Company: |
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| iCoreConnect, Inc. | |
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| Attn: CEO-Robert McDermott | |
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| 13506 Summerport Parkway | |
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| Suite 160 | |
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| Windermere FL 34786 | |
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| (ii) | If to Executive: |
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| David Fidanza |
Either Party may change the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 9(a) for the giving of notice.
(b) Waivers. Neither any failure nor any delay on the part of either Party to exercise any right, remedy, power, or privilege under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right, remedy, power, or privilege preclude any other or further exercise of the same or of any other right, remedy, power, or privilege, nor will any waiver of any right, remedy, power, or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power, or privilege with respect to any other occurrence.
(c) Controlling Law, Jurisdiction and Venue. This Agreement and all questions relating to its validity, interpretation, performance, and enforcement will be governed by and construed in accordance with the internal laws of the State of Florida. Executive agrees that any and all claims arising between the Parties out of this agreement shall be controlled by the laws of the State of Florida and venue for such disputes shall be Orange County, Florida.
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(d) Binding Arbitration. Any dispute arising out of this Agreement between the Parties or anyone else claiming through or on their behalf, shall be subject to final and binding arbitration before a single arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect except that depositions and interrogatories shall not be permitted nor the right to a jury trial. Judgment upon any arbitration award may be entered in any court, state or federal, having jurisdiction. The prevailing Party in any arbitration and other legal proceeding under this section will be entitled to recover reasonable attorney’s fees and costs. The arbitration proceeding shall be held in Orlando, Florida.
(e) Binding Nature of Agreement. This Agreement will be binding upon and inure to the benefit of the Parties hereto and their respective heirs, personal representatives, successors, and assigns except that no Party may assign or transfer such Party’s rights or obligations under this Agreement without the prior written consent of the other party.
(f) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original as against any Party whose signature appears thereon, and all of which will together constitute one and the same instrument. This Agreement will become binding when one or more counterparts hereof, individually or taken together, will bear the signatures of the Parties reflected hereon as the signatories.
(g) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision will be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
(h) Entire Agreement. This Agreement contains the entire understanding between the Parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements, and conditions, expressed or implied, oral or written, except as herein contained. The expressed terms hereof control and supersede: (a) any course of performance and/or usage of the trade inconsistent with any of the terms hereof; and (b) any provision of any other plan or agreement maintained by Company for the benefit of its employees generally inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing signed by the Parties hereto.
(i) Paragraph Headings. The paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and will not affect its interpretation.
(j) Gender. Words used herein, regardless of the number and gender specifically used, will be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine, or neutral, as the context requires.
(k) Number of Days. In computing the number of days for purposes of this Agreement, all days will be counted, including Saturdays, Sundays, and holidays; provided, ________________________________________________.
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(l) No Presumption Against Drafter. The Parties hereto have jointly participated in the negotiation and drafting of this Agreement. In the event an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by each of the Parties hereto and no presumptions or burdens of proof shall arise favoring any Party by virtue of the authorship of any provisions of this Agreement.
(m) Number of Days. In computing the number of days for purposes of this Agreement, all days will be counted, including Saturdays, Sundays, and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday, or holiday, then the final day will be deemed to be the next day which is not a Saturday, Sunday, or holiday.
(n) Third Party Beneficiaries. This Agreement shall not inure to the benefit of anyone other than Executive and Company and their successors and assigns. No third party may bring an action to enforce any term hereof and no third-party beneficiary rights are created by this Agreement.
(o) Non-Transferability. This is a personal agreement. None of the Executive’s rights, benefits, or interests hereunder may be subject to sale, anticipation, alienation, assignment, encumbrance, charge, pledge hypothecation, transfer, or set off in respect of any claim, debt, or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect.
IN WITNESS WHEREOF, the Parties hereto have executed this Executive Employment Agreement by evidence of the signatures below as of the Effective Date.
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| ICORECONNECT, INC., |
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| a Nevada corporation |
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| By: |
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| Name: Robert McDermott |
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| Title: President and CEO |
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| EXECUTIVE |
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| David Fidanza, an individual |
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1934/Agmt1 Employment Agmt 12-16-21
| 11 |
EXHIBIT 3.11
EXECUTIVE EMPLOYMENT AGREEMENT
DATED AS OF DECEMBER 16, 2021
BETWEEN
ICORECONNECT, INC.
AND
Jeffrey Stellinga
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) made this 16th day of December, 2021, by and between iCoreConnect, Inc., a Nevada corporation (hereinafter called “Company”), and Jeffrey Stellinga, individual (hereinafter called “Executive”). The Company and Executive may collectively be referred to in this Agreement as the “Parties” or individually as the “Party.”
RECITALS
WHEREAS, the Company desires to employ Executive and Executive desires to accept such employment on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants set forth in this Agreement, the Parties hereto agree as follows:
1. Employment.
Subject to the terms and conditions of this Agreement, Company hereby employs Executive, and Executive hereby accepts such employment as the Chief Operation Officer of Company, and in such other capacities and for such other duties and services as will from time to time be mutually agreed upon by Company and Executive, consistent with the position of the Chief Operation Officer and reporting directly to the CEO.
2. Full Time Occupation.
Executive will devote entire business time, attention, and efforts as reasonably necessary to the performance of Executive’s duties under this Agreement. Executive will serve Company faithfully and diligently, and will not engage in any other employment while employed by Company.
3. Compensation.
(a) Salary. During the Employment Period (as defined herein), Company will pay to Executive, as full compensation for the services rendered by Executive, a base salary at a rate of per annum (“Base Salary”) from attached schedule. Company will pay the Base Salary in accordance with Company’s established payroll procedures. Payments will be made in bi- monthly installments, or in such other periodic installments upon which Company and Executive will mutually agree.
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| Base Salary Schedule: |
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| December 16, 2021 | $150,000 |
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| December 16, 2022 | $157,500 |
| 2 |
(b) Withholding. The Company may withhold from any payments or benefits under this Agreement, all federal, state, and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. Executive shall bear all expense of, and be solely responsible for, all federal, state, and local taxes due with respect to any payment or benefit received hereunder.
4. Stock Option.
(a) Initial Grant. Executive is hereby awarded an option to acquire 2,000,000 shares of the Company’s common stock or their equivalent, $0.001 par value, at the exercise price equal to the average of the closing prices of the shares for the ten (10) trading days prior to the Effective Date. The Effective Date shall be the date upon which this Executive Employment Agreement has been fully executed and delivered by both Executive and Company. The option shall vest as follows:
| Number of Shares | Vesting Date | Effective Date |
| 666,666 | 12/16/2022 | 12/16/2021 |
| 666,666 | 12/16/2023 | 12/16/2021 |
| 666,668 | 12/16/2024 | 12/16/2021 |
(b) Future Option Grants. In the sole and absolute discretion of the Board of Directors, Executive may become eligible for future option awards on such terms and conditions as the Board directs.
(c) Car Allowance. Company will reimburse Executive $500 per month for business transportation purposes.
(d) Health Allowance. Company will reimburse Executive $250 per month for health purposes.
5. Other Benefits.
(a) Reimbursement. During the Employment Period, Company will reimburse Executive for all travel and entertainment expenses, and other ordinary and necessary business expenses incurred by Executive in connection with the business of Company and Executive’s duties under this Agreement. The term “business expenses” will not include any item not deductible by Company for federal income tax purposes. To obtain reimbursement, Executive will submit with accordance to Company’s policy all receipts, bills, or sales slips for the expenses incurred.
| 3 |
(b) Professional Memberships and Continuing Professional Education. Company will pay for dues and fees required for any professional licenses maintained by Executive, membership in professional or industry associations, continuing education requirements associated with any professional license and conferences and seminars commonly attended by executives in similar positions in similar companies.
(c) Vacation. Executive will be entitled to three weeks paid vacation each year. This will include 3 weeks of the Executive’s choice.
6. Term of Employment.
(a) Employment Term. The term of Executive’s employment hereunder will commence on the Effective Date and will continue for a period of three years following the Effective Date, unless terminated by either Party pursuant to the terms of this Agreement (such period and any extensions thereof, the “Employment Period”). The term of the Employment Period hereunder will automatically renew for successive one-year terms, unless terminated by either Party giving written notice to the other not less than 30 days prior to the end of the then- current term or as otherwise set forth in this Agreement.
(b) Termination Under Certain Circumstances. Notwithstanding anything to the contrary herein contained:
(i) Death. Executive’s employment will be automatically terminated, without notice, effective upon the date of Executive’s death.
(ii) Disability. If Executive will fail to perform any of Executive’s duties or other obligations under this Agreement as the result of illness or other incapacity, with or without reasonable accommodation, for a period of more than eight consecutive weeks, or for more than eight weeks within any six-month period, as determined by Company, Company may, at its option, and upon notice to Executive, terminate Executive’s employment effective on the date of that notice.
(iii) Cause. Company may, without notice to Executive, terminate Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” will mean any of the following:
(1) the failure of Executive to perform any of Executive’s duties or other obligations under this Agreement to the reasonable satisfaction of the Board of Directors, which remains uncured for 15 days after a written demand for performance is delivered to Executive by the Board of Directors or the CEO of Company that specifically identifies the manner in which the Board of Directors or the CEO believes that Executive has not performed Executive’s duties or other obligations. Executive shall have the right to cure such failure if such failure can be cured within the 15-day cure period, prior to any final termination;
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(2) Executive’s indictment for, or conviction of, a crime involving moral turpitude whether or not relating to Company;
(3) gross negligence or willful misconduct by Executive in the performance of any of his duties or other obligations under this Agreement;
(4) the association, directly or indirectly, of Executive for his profit or financial benefit with any person, firm, partnership, association, corporation or other entity that competes with Company;
(5) the disclosing or using of any material Confidential Information (as hereinafter defined) of Company at any time by Executive, except as required in connection with his duties to Company;
(6) the breach by Executive of his fiduciary duty or duty of trust to Company, including, but not limited to, the commission by Executive of an act of fraud or embezzlement against Company;
(7) chronic absenteeism;
(8) substance abuse;
(9) misconduct or dishonesty toward or involving Company, which misconduct or dishonesty is injurious to the Company, monetarily or otherwise; or
(10) any other material breach by Executive of any of the terms or provisions of this Agreement, which other material breach is not cured within ten business days of notice by the Company.
(iv) Change of Control. In the event of a Change of Control (as defined below), Company or Executive may, each at their respective options upon written notice to the other, terminate Executive’s employment by providing the other Party with written notice given no later than 30 days after the effective date of the Change of Control. For the purposes of this Agreement, a “Change of Control” will be deemed to have occurred if and when:
(1) Tender Offer. A tender offer or exchange offer is made whereby the effect of such offer is to take over and control Company, and such offer is consummated for equity securities of Company representing 51% or more of the combined voting power of Company’s then outstanding voting securities;
(2) Merger or Consolidation. The shareholders of Company approve a merger, consolidation, recapitalization, or reorganization of Company, or consummation of any such transaction if shareholder approval is not obtained, or required to be obtained, other than any such transaction that would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by holders of outstanding voting securities of Company immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or
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(3) Sale of Assets. The shareholders of Company approve an agreement for the sale or disposition by Company of all or substantially all of Company’s assets to another person or entity, which is not a subsidiary of Company in which the Company owns securities representing not less than a majority of the voting power of such subsidiary; or
(4) Change of the Board of Directors. A change in the composition of the Board of Directors as a result of which fewer than a majority of the Directors are persons who had been Directors on the date 24 months prior to the date of such change in the composition of the Board or whose nomination for election or election to the Board of Directors shall have been approved in advance by two-thirds of the Directors who served on the Board of Directors on the date 24 months prior to the date of such change in the composition of the Board of Directors.
(v) Without Cause
(1) Executive may terminate the Employment Period at any time before the expiration of this agreement upon giving to Company written notice sixty days in advance of the proposed termination date.
(2) Company may terminate the Employment Period at any time before the expiration of this Agreement without cause by giving to Executive written notice sixty days in advance of the proposed termination date.
(vi) Result of Termination of Employment Period.
(1) In the event of the termination of the Employment Period pursuant to Section 6(b)(iii) [Cause] or Section 6(b)(v)(1) [by Executive] above, Executive will receive no further compensation under this Agreement following the date of termination.
(2) In the event of the termination of the Employment Period pursuant to Section 6(b)(i) [Death] or 6(b)(ii) [Disability] above, Executive or Executive’s personal representative or estate will continue to receive Executive’s Base Salary during the six-month period following the date of termination and Executive’s stock options granted under Section 4(a) shall become fully vested at the date of termination.
(3) In the event of the termination of the Employment Period pursuant to Section 6 (b)(iv)[Change in Control] above, Executive will continue to receive his Base Salary computed at 100% of Base Salary for the 6-month period following the date of termination and Executive stock options granted under Section 4(a) shall become fully vested at date of termination.
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(4) In the event of termination during the initial one year term of the Employment Period pursuant to section 6(b)(v)(2)[Without Cause] above, Executive will continue to receive his base salary for the 6 month period following the date of termination through the end of the then -current Employment Period, whichever is longer and Executives stock options granted under Section 4(a) shall become fully vested at the date of termination.
(5) Executive will continue to be bound by Sections 8 and 9 of this Agreement following termination of Executive’s employment on any basis set forth in this Section 7(b).
7. Competition and Confidential Information.
(a) Non-Competition. During the term of the Employment Period and for twelve months after the termination of the Employment Period , regardless of the reason therefore, or twelve months after the final payment of compensation by Company to Executive, whichever is later, Executive will not (whether directly or indirectly, as owner, principal, agent, stockholder, director, officer, manager, executive, partner, participant, or in any other capacity) engage or become financially interested in any competitive business conducted within the Restricted Territory or solicit, canvas, or accept, or authorize any other person, firm, or entity to solicit, canvas, or accept, from any customers of Company or any of its subsidiaries, any business within the Restricted Territory for Executive or for any other person, firm, or entity. As used herein, “customers of Company” will mean any persons, firms, or entities that purchased goods, products, or services from Company or any of its subsidiaries during the Employment Period; “competitive business” will mean any business which sells or provides or attempts to sell or provide goods, products, or services the same as or substantially similar to the goods, products, or services sold or provided by Company or any of its subsidiaries; and the “Restricted Territory” will mean the United States or, in the alternative, in the event any reviewing court finds the United States to be overbroad or unenforceable, within such area as the court determines to be reasonable under the circumstances then existing an alternative.
(b) Confidential Information. Executive will maintain in strict secrecy all confidential or trade secret information relating to the business of Company or any of its subsidiaries (the “Confidential Information”) obtained by Executive in the course of Executive’s employment, and Executive will not, unless first authorized in writing by Company, disclose to or use for Executive’s benefit or for the benefit of any person, firm, or entity at any time either during or subsequent to the term of Executive’s employment with Company, any Confidential Information, except as required in the performance of Executive’s duties on behalf of Company. For purposes hereof, “Confidential Information” will include, without limitation, any trade secrets, knowledge, or information with respect to any goods, products, or services; any processes, procedures, plans, inventions, techniques, or know-how; any business methods or forms; any names or addresses of customers or data on customers or suppliers; and any business policies or other information relating to or dealing with the purchasing, sales, or distribution policies or practices of Company.
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(c) Return of Books and Papers. Upon the termination of Executive’s employment with Company for any reason, Executive will deliver promptly to Company all catalogues, manuals, memoranda, drawings, and specifications; all cost, pricing, and other financial data; all customer information; all other materials, whether written, printed, or stored in any electronic media, which are the property of Company or any of its subsidiaries (and any copies of them); desktop or laptop computers, software, access cards, “passwords”, cellular phones, personal digital assistants and pagers; and all other materials which may contain Confidential Information relating to the business of Company or any of its subsidiaries (whether maintained in tangible, documentary form, computer memory, or other electronic or digital format), which Executive may then have in Executive’s possession or under Executive’s control, whether prepared by Executive or not.
(d) Disclosure of Information. Executive will disclose promptly to Company, or it’s nominee, any and all ideas, designs, processes, and improvements of any kind relating to the business of Company or any of its subsidiaries, whether patentable or not, conceived or made by Executive, either alone or jointly with others, during working hours or otherwise, during the entire period of Executive’s employment with Company, or within six months thereafter.
(e) Assignment. Executive hereby assigns to Company or its nominee, the entire right, title, and interest in and to all discoveries and improvements, whether patentable or not, which Executive may conceive or make during Executive’s employment with Company, or within six months thereafter, and which relate to the business of Company or any of its subsidiaries. All copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Executive during the Employment Period (collectively, the “Work Product”) shall belong exclusively to Company and shall be considered a work made by Executive for hire within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered work made for hire, Executive agrees to assign at the time of creation of the Work Product, without any requirement of further consideration, all right, title, and interest that Executive has or may have in such Work Product. Upon Company’s request, Executive will take such further actions, including execution and delivery of instruments of conveyance, as may be appropriate to give full and proper effect to such assignment.
(f) Equitable Relief. In the event a violation of any of the restrictions contained in this Section 8 is established, Company will be entitled to preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits, and other benefits arising from such violation, which right will be cumulative and in addition to any other rights or remedies to which Company may be entitled. In the event of a violation of any provision of this Section 8, the period for which those provisions would remain in effect will be extended for a period of time equal to that period beginning when such violation commenced and ending when the activities constituting such violation will have been finally terminated in good faith.
(g) Restrictions Separable. Each and every restriction set forth in this Section 8 is independent and severable from the others, and no such restriction will be rendered unenforceable by virtue of the fact that, for any reason, any other or others of them may be unenforceable in whole or in part.
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(h) No Violation. The execution and delivery of this Agreement and the performance of Executive’s services contemplated hereby will not violate or result in a breach by Executive of, or constitute a default under, or conflict with: (i) any provision or restriction of any employment, consulting, or other similar agreement; (ii) any agreement by Executive with any third party not to compete with, solicit from, or otherwise disparage such third party; (iii) any provision or restriction of any agreement, contract, or instrument to which Executive is a party or by which Executive is bound; or (iv) any order, judgment, award, decree, law, rule, ordinance, or regulation or any other restriction of any kind or character to which Executive is subject or by which Executive is bound.
(i) Non-Disparagement. Executive agrees that he will make no statement, oral or written, and which, by itself, may significantly or substantially damage the reputation of the Company or any director, officer or employee of the Company.
8. Miscellaneous.
(a) Notices. All notices, requests, demands, and other communications required or permitted under this Agreement will be in writing and will be deemed to have been duly given and received: (i) if mailed by registered or certified mail, three business days after deposit in the United States mail, postage prepaid, return receipt requested; (ii) if hand delivered, upon delivery against receipt or upon refusal to accept the notice; or (iii) if delivered by a standard overnight courier, one business day after deposit with such courier, postage prepaid, in each case, addressed to such Party at the address set forth below:
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| (i) | If to Company: |
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| iCoreConnect, Inc. | |
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| Attn: CEO-Robert McDermott | |
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| 13506 Summerport Parkway | |
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| Suite 160 | |
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| Windermere FL 34786 | |
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| (ii) | If to Executive: |
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| Jeffrey Stellinga |
Either Party may change the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 9(a) for the giving of notice.
(b) Waivers. Neither any failure nor any delay on the part of either Party to exercise any right, remedy, power, or privilege under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right, remedy, power, or privilege preclude any other or further exercise of the same or of any other right, remedy, power, or privilege, nor will any waiver of any right, remedy, power, or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power, or privilege with respect to any other occurrence.
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(c) Controlling Law, Jurisdiction and Venue. This Agreement and all questions relating to its validity, interpretation, performance, and enforcement will be governed by and construed in accordance with the internal laws of the State of Florida. Executive agrees that any and all claims arising between the Parties out of this agreement shall be controlled by the laws of the State of Florida and venue for such disputes shall be Orange County, Florida.
(d) Binding Arbitration. Any dispute arising out of this Agreement between the Parties or anyone else claiming through or on their behalf, shall be subject to final and binding arbitration before a single arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect except that depositions and interrogatories shall not be permitted nor the right to a jury trial. Judgment upon any arbitration award may be entered in any court, state or federal, having jurisdiction. The prevailing Party in any arbitration and other legal proceeding under this section will be entitled to recover reasonable attorney’s fees and costs. The arbitration proceeding shall be held in Orlando, Florida.
(e) Binding Nature of Agreement. This Agreement will be binding upon and inure to the benefit of the Parties hereto and their respective heirs, personal representatives, successors, and assigns except that no Party may assign or transfer such Party’s rights or obligations under this Agreement without the prior written consent of the other party.
(f) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original as against any Party whose signature appears thereon, and all of which will together constitute one and the same instrument. This Agreement will become binding when one or more counterparts hereof, individually or taken together, will bear the signatures of the Parties reflected hereon as the signatories.
(g) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision will be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
(h) Entire Agreement. This Agreement contains the entire understanding between the Parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements, and conditions, expressed or implied, oral or written, except as herein contained. The expressed terms hereof control and supersede: (a) any course of performance and/or usage of the trade inconsistent with any of the terms hereof; and (b) any provision of any other plan or agreement maintained by Company for the benefit of its employees generally inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing signed by the Parties hereto.
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(i) Paragraph Headings. The paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and will not affect its interpretation.
(j) Gender. Words used herein, regardless of the number and gender specifically used, will be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine, or neutral, as the context requires.
(k) Number of Days. In computing the number of days for purposes of this Agreement, all days will be counted, including Saturdays, Sundays, and holidays; provided, ________________________________________________.
(l) No Presumption Against Drafter. The Parties hereto have jointly participated in the negotiation and drafting of this Agreement. In the event an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by each of the Parties hereto and no presumptions or burdens of proof shall arise favoring any Party by virtue of the authorship of any provisions of this Agreement.
(m) Number of Days. In computing the number of days for purposes of this Agreement, all days will be counted, including Saturdays, Sundays, and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday, or holiday, then the final day will be deemed to be the next day which is not a Saturday, Sunday, or holiday.
(n) Third Party Beneficiaries. This Agreement shall not inure to the benefit of anyone other than Executive and Company and their successors and assigns. No third party may bring an action to enforce any term hereof and no third-party beneficiary rights are created by this Agreement.
(o) Non-Transferability. This is a personal agreement. None of the Executive’s rights, benefits, or interests hereunder may be subject to sale, anticipation, alienation, assignment, encumbrance, charge, pledge hypothecation, transfer, or set off in respect of any claim, debt, or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect.
IN WITNESS WHEREOF, the Parties hereto have executed this Executive Employment Agreement by evidence of the signatures below as of the Effective Date.
| ICORECONNECT, INC., a Nevada corporation | |||
| By: | |||
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| Name: Robert McDermott | |
| Title: President and CEO | |||
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| EXECUTIVE |
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| Jeffrey Stellinga, an individual |
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1934/Agmt1 Employment Agmt 12-16-21
| 11 |
EXHIBIT 3.12
EXECUTIVE EMPLOYMENT AGREEMENT
DATED AS OF DECEMBER 16, 2021
BETWEEN
ICORECONNECT, INC.
AND
Muralidar Chakravarthi
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) made this 16th day of December, 2021, by and between iCoreConnect, Inc., a Nevada corporation (hereinafter called “Company”), and Muralidar Chakravarthi, individual (hereinafter called “Executive”). The Company and Executive may collectively be referred to in this Agreement as the “Parties” or individually as the “Party.”
RECITALS
WHEREAS, the Company desires to employ Executive and Executive desires to accept such employment on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants set forth in this Agreement, the Parties hereto agree as follows:
1. Employment.
Subject to the terms and conditions of this Agreement, Company hereby employs Executive, and Executive hereby accepts such employment as the Chief Technology Officer of Company, and in such other capacities and for such other duties and services as will from time to time be mutually agreed upon by Company and Executive, consistent with the position of the Chief Technology Officer and reporting directly to the CEO.
2. Full Time Occupation.
Executive will devote entire business time, attention, and efforts as reasonably necessary to the performance of Executive’s duties under this Agreement. Executive will serve Company faithfully and diligently, and will not engage in any other employment while employed by Company.
3. Compensation.
(a) Salary. During the Employment Period (as defined herein), Company will pay to Executive, as full compensation for the services rendered by Executive, a base salary at a rate of per annum (“Base Salary”) from attached schedule. Company will pay the Base Salary in accordance with Company’s established payroll procedures. Payments will be made in bi- monthly installments, or in such other periodic installments upon which Company and Executive will mutually agree.
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| Base Salary Schedule: |
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| December 16, 2021 | $165,000 |
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| December 16, 2022 | $176,555 |
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| December 16. 2023 | $190,000 |
| 2 |
(b) Withholding. The Company may withhold from any payments or benefits under this Agreement, all federal, state, and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. Executive shall bear all expense of, and be solely responsible for, all federal, state, and local taxes due with respect to any payment or benefit received hereunder.
4. Stock Option.
(a) Initial Grant. Executive is hereby awarded an option to acquire 3,000,000 shares of the Company’s common stock or their equivalent, $0.001 par value, at the exercise price equal to the average of the closing prices of the shares for the ten (10) trading days prior to the Effective Date. The Effective Date shall be the date upon which this Executive Employment Agreement has been fully executed and delivered by both Executive and Company. The option shall vest as follows:
| Number of Shares | Vesting Date | Effective Date |
| 750,000 | 12/16/2022 | 12/16/2021 |
| 750,000 | 12/16/2023 | 12/16/2021 |
| 750,000 | 12/16/2024 | 12/16/2021 |
| 750,000 | 12/16/2025 | 12/16/2021 |
(b) Future Option Grants. In the sole and absolute discretion of the Board of Directors, Executive may become eligible for future option awards on such terms and conditions as the Board directs.
(c) Car Allowance. Company will reimburse Executive $500 per month for business transportation purposes.
(d) Health Allowance. Company will reimburse Executive $250 per month for health purposes.
5. Other Benefits.
(a) Reimbursement. During the Employment Period, Company will reimburse Executive for all travel and entertainment expenses, and other ordinary and necessary business expenses incurred by Executive in connection with the business of Company and Executive’s duties under this Agreement. The term “business expenses” will not include any item not deductible by Company for federal income tax purposes. To obtain reimbursement, Executive will submit with accordance to Company’s policy all receipts, bills, or sales slips for the expenses incurred.
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(b) Professional Memberships and Continuing Professional Education. Company will pay for dues and fees required for any professional licenses maintained by Executive, membership in professional or industry associations, continuing education requirements associated with any professional license and conferences and seminars commonly attended by executives in similar positions in similar companies.
(c) Vacation. Executive will be entitled to three weeks paid vacation each year. This will include 3 weeks of the Executive’s choice.
6. Term of Employment.
(a) Employment Term. The term of Executive’s employment hereunder will commence on the Effective Date and will continue for a period of three years following the Effective Date, unless terminated by either Party pursuant to the terms of this Agreement (such period and any extensions thereof, the “Employment Period”). The term of the Employment Period hereunder will automatically renew for successive one-year terms, unless terminated by either Party giving written notice to the other not less than 30 days prior to the end of the then- current term or as otherwise set forth in this Agreement.
(b) Termination Under Certain Circumstances. Notwithstanding anything to the contrary herein contained:
(i) Death. Executive’s employment will be automatically terminated, without notice, effective upon the date of Executive’s death.
(ii) Disability. If Executive will fail to perform any of Executive’s duties or other obligations under this Agreement as the result of illness or other incapacity, with or without reasonable accommodation, for a period of more than eight consecutive weeks, or for more than eight weeks within any six-month period, as determined by Company, Company may, at its option, and upon notice to Executive, terminate Executive’s employment effective on the date of that notice.
(iii) Cause. Company may, without notice to Executive, terminate Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” will mean any of the following:
(1) the failure of Executive to perform any of Executive’s duties or other obligations under this Agreement to the reasonable satisfaction of the Board of Directors, which remains uncured for 15 days after a written demand for performance is delivered to Executive by the Board of Directors or the CEO of Company that specifically identifies the manner in which the Board of Directors or the CEO believes that Executive has not performed Executive’s duties or other obligations. Executive shall have the right to cure such failure if such failure can be cured within the 15-day cure period, prior to any final termination;
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(2) Executive’s indictment for, or conviction of, a crime involving moral turpitude whether or not relating to Company;
(3) gross negligence or willful misconduct by Executive in the performance of any of his duties or other obligations under this Agreement;
(4) the association, directly or indirectly, of Executive for his profit or financial benefit with any person, firm, partnership, association, corporation or other entity that competes with Company;
(5) the disclosing or using of any material Confidential Information (as hereinafter defined) of Company at any time by Executive, except as required in connection with his duties to Company;
(6) the breach by Executive of his fiduciary duty or duty of trust to Company, including, but not limited to, the commission by Executive of an act of fraud or embezzlement against Company;
(7) chronic absenteeism;
(8) substance abuse;
(9) misconduct or dishonesty toward or involving Company, which misconduct or dishonesty is injurious to the Company, monetarily or otherwise; or
(10) any other material breach by Executive of any of the terms or provisions of this Agreement, which other material breach is not cured within ten business days of notice by the Company.
(iv) Change of Control. In the event of a Change of Control (as defined below), Company or Executive may, each at their respective options upon written notice to the other, terminate Executive’s employment by providing the other Party with written notice given no later than 30 days after the effective date of the Change of Control. For the purposes of this Agreement, a “Change of Control” will be deemed to have occurred if and when:
(1) Tender Offer. A tender offer or exchange offer is made whereby the effect of such offer is to take over and control Company, and such offer is consummated for equity securities of Company representing 51% or more of the combined voting power of Company’s then outstanding voting securities;
(2) Merger or Consolidation. The shareholders of Company approve a merger, consolidation, recapitalization, or reorganization of Company, or consummation of any such transaction if shareholder approval is not obtained, or required to be obtained, other than any such transaction that would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by holders of outstanding voting securities of Company immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or
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(3) Sale of Assets. The shareholders of Company approve an agreement for the sale or disposition by Company of all or substantially all of Company’s assets to another person or entity, which is not a subsidiary of Company in which the Company owns securities representing not less than a majority of the voting power of such subsidiary; or
(4) Change of the Board of Directors. A change in the composition of the Board of Directors as a result of which fewer than a majority of the Directors are persons who had been Directors on the date 24 months prior to the date of such change in the composition of the Board or whose nomination for election or election to the Board of Directors shall have been approved in advance by two-thirds of the Directors who served on the Board of Directors on the date 24 months prior to the date of such change in the composition of the Board of Directors.
(v) Without Cause
(1) Executive may terminate the Employment Period at any time before the expiration of this agreement upon giving to Company written notice sixty days in advance of the proposed termination date.
(2) Company may terminate the Employment Period at any time before the expiration of this Agreement without cause by giving to Executive written notice sixty days in advance of the proposed termination date.
(vi) Result of Termination of Employment Period.
(1) In the event of the termination of the Employment Period pursuant to Section 6(b)(iii) [Cause] or Section 6(b)(v)(1) [by Executive] above, Executive will receive no further compensation under this Agreement following the date of termination.
(2) In the event of the termination of the Employment Period pursuant to Section 6(b)(i) [Death] or 6(b)(ii) [Disability] above, Executive or Executive’s personal representative or estate will continue to receive Executive’s Base Salary during the six-month period following the date of termination and Executive’s stock options granted under Section 4(a) shall become fully vested at the date of termination.
(3) In the event of the termination of the Employment Period pursuant to Section 6 (b)(iv)[Change in Control] above, Executive will continue to receive his Base Salary computed at 100% of Base Salary for the 6-month period following the date of termination and Executive stock options granted under Section 4(a) shall become fully vested at date of termination.
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(4) In the event of termination during the initial one year term of the Employment Period pursuant to section 6(b)(v)(2)[Without Cause] above, Executive will continue to receive his base salary for the 6 month period following the date of termination through the end of the then -current Employment Period, whichever is longer and Executives stock options granted under Section 4(a) shall become fully vested at the date of termination.
(5) Executive will continue to be bound by Sections 8 and 9 of this Agreement following termination of Executive’s employment on any basis set forth in this Section 7(b).
7. Competition and Confidential Information.
(a) Non-Competition. During the term of the Employment Period and for twelve months after the termination of the Employment Period , regardless of the reason therefore, or twelve months after the final payment of compensation by Company to Executive, whichever is later, Executive will not (whether directly or indirectly, as owner, principal, agent, stockholder, director, officer, manager, executive, partner, participant, or in any other capacity) engage or become financially interested in any competitive business conducted within the Restricted Territory or solicit, canvas, or accept, or authorize any other person, firm, or entity to solicit, canvas, or accept, from any customers of Company or any of its subsidiaries, any business within the Restricted Territory for Executive or for any other person, firm, or entity. As used herein, “customers of Company” will mean any persons, firms, or entities that purchased goods, products, or services from Company or any of its subsidiaries during the Employment Period; “competitive business” will mean any business which sells or provides or attempts to sell or provide goods, products, or services the same as or substantially similar to the goods, products, or services sold or provided by Company or any of its subsidiaries; and the “Restricted Territory” will mean the United States or, in the alternative, in the event any reviewing court finds the United States to be overbroad or unenforceable, within such area as the court determines to be reasonable under the circumstances then existing an alternative.
(b) Confidential Information. Executive will maintain in strict secrecy all confidential or trade secret information relating to the business of Company or any of its subsidiaries (the “Confidential Information”) obtained by Executive in the course of Executive’s employment, and Executive will not, unless first authorized in writing by Company, disclose to or use for Executive’s benefit or for the benefit of any person, firm, or entity at any time either during or subsequent to the term of Executive’s employment with Company, any Confidential Information, except as required in the performance of Executive’s duties on behalf of Company. For purposes hereof, “Confidential Information” will include, without limitation, any trade secrets, knowledge, or information with respect to any goods, products, or services; any processes, procedures, plans, inventions, techniques, or know-how; any business methods or forms; any names or addresses of customers or data on customers or suppliers; and any business policies or other information relating to or dealing with the purchasing, sales, or distribution policies or practices of Company.
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(c) Return of Books and Papers. Upon the termination of Executive’s employment with Company for any reason, Executive will deliver promptly to Company all catalogues, manuals, memoranda, drawings, and specifications; all cost, pricing, and other financial data; all customer information; all other materials, whether written, printed, or stored in any electronic media, which are the property of Company or any of its subsidiaries (and any copies of them); desktop or laptop computers, software, access cards, “passwords”, cellular phones, personal digital assistants and pagers; and all other materials which may contain Confidential Information relating to the business of Company or any of its subsidiaries (whether maintained in tangible, documentary form, computer memory, or other electronic or digital format), which Executive may then have in Executive’s possession or under Executive’s control, whether prepared by Executive or not.
(d) Disclosure of Information. Executive will disclose promptly to Company, or it’s nominee, any and all ideas, designs, processes, and improvements of any kind relating to the business of Company or any of its subsidiaries, whether patentable or not, conceived or made by Executive, either alone or jointly with others, during working hours or otherwise, during the entire period of Executive’s employment with Company, or within six months thereafter.
(e) Assignment. Executive hereby assigns to Company or its nominee, the entire right, title, and interest in and to all discoveries and improvements, whether patentable or not, which Executive may conceive or make during Executive’s employment with Company, or within six months thereafter, and which relate to the business of Company or any of its subsidiaries. All copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Executive during the Employment Period (collectively, the “Work Product”) shall belong exclusively to Company and shall be considered a work made by Executive for hire within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered work made for hire, Executive agrees to assign at the time of creation of the Work Product, without any requirement of further consideration, all right, title, and interest that Executive has or may have in such Work Product. Upon Company’s request, Executive will take such further actions, including execution and delivery of instruments of conveyance, as may be appropriate to give full and proper effect to such assignment.
(f) Equitable Relief. In the event a violation of any of the restrictions contained in this Section 8 is established, Company will be entitled to preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits, and other benefits arising from such violation, which right will be cumulative and in addition to any other rights or remedies to which Company may be entitled. In the event of a violation of any provision of this Section 8, the period for which those provisions would remain in effect will be extended for a period of time equal to that period beginning when such violation commenced and ending when the activities constituting such violation will have been finally terminated in good faith.
(g) Restrictions Separable. Each and every restriction set forth in this Section 8 is independent and severable from the others, and no such restriction will be rendered unenforceable by virtue of the fact that, for any reason, any other or others of them may be unenforceable in whole or in part.
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(h) No Violation. The execution and delivery of this Agreement and the performance of Executive’s services contemplated hereby will not violate or result in a breach by Executive of, or constitute a default under, or conflict with: (i) any provision or restriction of any employment, consulting, or other similar agreement; (ii) any agreement by Executive with any third party not to compete with, solicit from, or otherwise disparage such third party; (iii) any provision or restriction of any agreement, contract, or instrument to which Executive is a party or by which Executive is bound; or (iv) any order, judgment, award, decree, law, rule, ordinance, or regulation or any other restriction of any kind or character to which Executive is subject or by which Executive is bound.
(i) Non-Disparagement. Executive agrees that he will make no statement, oral or written, and which, by itself, may significantly or substantially damage the reputation of the Company or any director, officer or employee of the Company.
8. Miscellaneous.
(a) Notices. All notices, requests, demands, and other communications required or permitted under this Agreement will be in writing and will be deemed to have been duly given and received: (i) if mailed by registered or certified mail, three business days after deposit in the United States mail, postage prepaid, return receipt requested; (ii) if hand delivered, upon delivery against receipt or upon refusal to accept the notice; or (iii) if delivered by a standard overnight courier, one business day after deposit with such courier, postage prepaid, in each case, addressed to such Party at the address set forth below:
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| (i) | If to Company: |
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| iCoreConnect, Inc. Attn: CEO-Robert McDermott 13506 Summerport Parkway Suite 160 Windermere FL 34786 |
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| (ii) | If to Executive: |
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| Muralidar Chakravarthi |
Either Party may change the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 9(a) for the giving of notice.
(b) Waivers. Neither any failure nor any delay on the part of either Party to exercise any right, remedy, power, or privilege under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right, remedy, power, or privilege preclude any other or further exercise of the same or of any other right, remedy, power, or privilege, nor will any waiver of any right, remedy, power, or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power, or privilege with respect to any other occurrence.
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(c) Controlling Law, Jurisdiction and Venue. This Agreement and all questions relating to its validity, interpretation, performance, and enforcement will be governed by and construed in accordance with the internal laws of the State of Florida. Executive agrees that any and all claims arising between the Parties out of this agreement shall be controlled by the laws of the State of Florida and venue for such disputes shall be Orange County, Florida.
(d) Binding Arbitration. Any dispute arising out of this Agreement between the Parties or anyone else claiming through or on their behalf, shall be subject to final and binding arbitration before a single arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect except that depositions and interrogatories shall not be permitted nor the right to a jury trial. Judgment upon any arbitration award may be entered in any court, state or federal, having jurisdiction. The prevailing Party in any arbitration and other legal proceeding under this section will be entitled to recover reasonable attorney’s fees and costs. The arbitration proceeding shall be held in Orlando, Florida.
(e) Binding Nature of Agreement. This Agreement will be binding upon and inure to the benefit of the Parties hereto and their respective heirs, personal representatives, successors, and assigns except that no Party may assign or transfer such Party’s rights or obligations under this Agreement without the prior written consent of the other party.
(f) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original as against any Party whose signature appears thereon, and all of which will together constitute one and the same instrument. This Agreement will become binding when one or more counterparts hereof, individually or taken together, will bear the signatures of the Parties reflected hereon as the signatories.
(g) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision will be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
(h) Entire Agreement. This Agreement contains the entire understanding between the Parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements, and conditions, expressed or implied, oral or written, except as herein contained. The expressed terms hereof control and supersede: (a) any course of performance and/or usage of the trade inconsistent with any of the terms hereof; and (b) any provision of any other plan or agreement maintained by Company for the benefit of its employees generally inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing signed by the Parties hereto.
(i) Paragraph Headings. The paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and will not affect its interpretation.
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(j) Gender. Words used herein, regardless of the number and gender specifically used, will be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine, or neutral, as the context requires.
(k) Number of Days. In computing the number of days for purposes of this Agreement, all days will be counted, including Saturdays, Sundays, and holidays; provided, ________________________________________________.
(l) No Presumption Against Drafter. The Parties hereto have jointly participated in the negotiation and drafting of this Agreement. In the event an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by each of the Parties hereto and no presumptions or burdens of proof shall arise favoring any Party by virtue of the authorship of any provisions of this Agreement.
(m) Number of Days. In computing the number of days for purposes of this Agreement, all days will be counted, including Saturdays, Sundays, and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday, or holiday, then the final day will be deemed to be the next day which is not a Saturday, Sunday, or holiday.
(n) Third Party Beneficiaries. This Agreement shall not inure to the benefit of anyone other than Executive and Company and their successors and assigns. No third party may bring an action to enforce any term hereof and no third-party beneficiary rights are created by this Agreement.
(o) Non-Transferability. This is a personal agreement. None of the Executive’s rights, benefits, or interests hereunder may be subject to sale, anticipation, alienation, assignment, encumbrance, charge, pledge hypothecation, transfer, or set off in respect of any claim, debt, or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect.
IN WITNESS WHEREOF, the Parties hereto have executed this Executive Employment Agreement by evidence of the signatures below as of the Effective Date.
| ICORECONNECT, INC., a Nevada corporation | |||
| By: | |||
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| Name: Robert McDermott | |
| Title: President and CEO | |||
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| EXECUTIVE |
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| Muralidar Chakravarthi, an individual |
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1934/Agmt1 Employment Agmt 12-16-21
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EXHIBIT 3.13
EXECUTIVE EMPLOYMENT AGREEMENT
DATED AS OF August 18, 2021
BETWEEN
iCoreConnect Inc.
and
Archit Shah
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) made this 7tht day of September 2021, by and between iCoreConnect , Inc., a Nevada corporation (hereinafter called “Company”), and Archit Shah individual (hereinafter called “Executive”).
RECITALS
Company desires to employ Executive and Executive desires to accept such employment, all on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants set forth in this Agreement, the parties hereto agree as follows:
1. Employment.
Subject to the terms and conditions of this Agreement, Company hereby employs Executive, and Executive hereby accepts such employment, as the Chief Financial Officer of Company and in such other capacities and for such other duties and services as will from time to time be mutually agreed upon by Company and Executive, consistent with the position of the Chief Financial Officer and reporting directly to the CEO.
2. Full Time Occupation.
Executive will devote Executive's entire business time, attention, and efforts as reasonably necessary to the performance of Executive's duties under this Agreement and will serve Company faithfully and diligently and will not engage in any other employment while employed by Company.
3. Compensation.
(a) Salary. During the Employment Period (as defined herein), Company will pay to Executive, as full compensation for the services rendered by Executive, a base salary at a rate of per annum (“Base Salary”) from attached schedule. Company will pay the Base Salary in accordance with Company's established payroll procedures. Payments will be made in bi-monthly installments, or in such other periodic installments upon which Company and Executive will mutually agree.
Base Salary Schedule:
| September 7, 2021 |
| $ | 232,500 |
|
| September 7, 2022 |
| $ | 242,500 |
|
| September 7, 2023 |
| $ | 255,000 |
|
| 1 |
(b) Withholding. The Company may withhold from any payments or benefits under this Agreement, all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. Executive shall bear all expense of, and be solely responsible for, all federal, state and local taxes due with respect to any payment or benefit received hereunder.
4. Stock Option.
(a) Initial Grant. Executive is hereby awarded an option to acquire 2,880,000 shares of the Company’s common stock or their equivalent, $0.001 par value, at the exercise price equal to the average of the closing prices of the shares for the ten (10) trading days prior to the Effective Date. The Effective Date shall be the date upon which this Executive Employment Agreement has been fully executed and delivered by both Executive and Company. The option shall vest as follows:
| Number of Shares |
|
| Vesting Date |
| Effective Date | |
|
| 960,000 |
|
| 9/7/2022 |
| 9/7/2021 |
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| 960,000 |
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| 9/7/2023 |
| 9/7/2021 |
|
| 960,000 |
|
| 9/7/2024 |
| 9/7/2021 |
(b) Future Option Grants. In the sole and absolute discretion of the Compensation Committee, Executive may become eligible for future option awards on such terms and conditions as the Committee directs.
(c) Car Allowance – Company will reimburse Executive $500 per month for business transportation purposes.
6. Other Benefits.
(a) Reimbursement. During the Employment Period, Company will reimburse Executive for all travel and entertainment expenses and other ordinary and necessary business expenses incurred by Executive in connection with the business of Company and Executive's duties under this Agreement. The term “business expenses” will not include any item not deductible by Company for federal income tax purposes. To obtain reimbursement, Executive will submit with accordance to Company’s policy all receipts, bills, or sales slips for the expenses incurred.
(b) Professional Memberships and Continuing Professional Education. Company will pay for dues and fees required for any professional licenses maintained by Executive, membership in professional or industry associations, continuing education requirements associated with any professional license and conferences and seminars commonly attended by executives in similar positions in similar companies.
(c) Vacation. Executive will be entitled to three weeks paid vacation each year. This will include 3 weeks of the Executive’s choice.
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7. Term of Employment.
(a) Employment Term. The term of Executive's employment hereunder will commence on the Effective Date and will continue for a period of three years following the Effective Date, unless terminated by either party pursuant to the terms of this Agreement (such period and any extensions thereof, the “Employment Period”). The term of the Employment Period hereunder will automatically renew for successive one-year terms, unless terminated by either party giving written notice to the other not less than 30 days prior to the end of the then-current term or as otherwise set forth in this Agreement.
(b) Termination Under Certain Circumstances. Notwithstanding anything to the contrary herein contained:
(i) Death. Executive's employment will be automatically terminated, without notice, effective upon the date of Executive's death.
(ii) Disability. If Executive will fail to perform any of Executive’s duties or other obligations under this Agreement as the result of illness or other incapacity, with or without reasonable accommodation, for a period of more than eight consecutive weeks, or for more than eight weeks within any six-month period, as determined by Company, Company may, at its option, and upon notice to Executive, terminate Executive's employment effective on the date of that notice.
(iii) Cause. Company may, without notice to Executive, terminate Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” will mean any of the following:
(1) the failure of Executive to perform any of Executive’s duties or other obligations under this Agreement to the reasonable satisfaction of the Board of Directors, which remains uncured for 15 days after a written demand for performance is delivered to Executive by the Board of Directors or the CEO of Company that specifically identifies the manner in which the Board of Directors or the CEO believes that Executive has not performed Executive’s duties or other obligations. Executive shall have the right to cure such failure if such failure can be cured within the 15-day cure period, prior to any final termination;
(2) Executive’s indictment for, or conviction of, a crime involving moral turpitude whether or not relating to Company;
(3) gross negligence or willful misconduct by Executive in the performance of any of his duties or other obligations under this Agreement.
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(4) the association, directly or indirectly, of Executive, for his profit or financial benefit, with any person, firm, partnership, association, corporation or other entity that competes with Company;
(5) the disclosing or using of any material Confidential Information (as hereinafter defined) of Company at any time by Executive, except as required in connection with his duties to Company;
(6) the breach by Executive of his fiduciary duty or duty of trust to Company, including, but not limited to, the commission by Executive of an act of fraud or embezzlement against Company;
(7) chronic absenteeism;
(8) substance abuse;
(9) misconduct or dishonesty toward or involving Company, which misconduct or dishonesty is injurious to the Company, monetarily or otherwise; or
(10) any other material breach by Executive of any of the terms or provisions of this Agreement, which other material breach is not cured within ten business days of notice by the Company.
(iv) Change of Control. In the event of a Change of Control (as defined below), Company or Executive may, each at their respective options, upon written notice to the other, terminate Executive’s employment by providing the other party with written notice given no later than 30 days after the effective date of the Change of Control. For the purposes of this Agreement, a “Change of Control” will be deemed to have occurred if and when:
(1) Tender Offer. A tender offer or exchange offer is made whereby the effect of such offer is to take over and control Company, and such offer is consummated for equity securities of Company representing 51% or more of the combined voting power of Company’s then outstanding voting securities;
(2) Merger or Consolidation. The shareholders of Company approve a merger, consolidation, recapitalization, or reorganization of Company, or consummation of any such transaction if shareholder approval is not obtained, or required to be obtained, other than any such transaction that would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by holders of outstanding voting securities of Company immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or
(3) Sale of Assets. The shareholders of Company approve an agreement for the sale or disposition by Company of all or substantially all of Company's assets to another person or entity, which is not a subsidiary of Company in which the Company owns securities representing not less than a majority of the voting power of such subsidiary.
(4) A change in the composition of the Board of Directors as a result of which fewer than a majority of the Directors are persons who had been Directors on the date 24 months prior to the date of such change in the composition of the Board or whose nomination for election or election to the Board of Directors shall have been approved in advance by two-thirds of the Directors who served on the Board of Directors on the date 24 months prior to the date of such change in the composition of the Board of Directors.
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(v) Without Cause
(1) Executive may terminate the Employment Period at any time before the expiration of this agreement upon giving to Company written notice sixty days in advance of the proposed termination date.
(2) Company may terminate the Employment Period at any time before the expiration of this Agreement without cause by giving to Executive written notice sixty days in advance of the proposed termination date.
(vi) Result of Termination of Employment Period.
(1) In the event of the termination of the Employment Period pursuant to Section 7(b)(iii) [Cause] or Section 7(b)(v)(1) [by Executive] above, Executive will receive no further compensation under this Agreement following the date of termination.
(2) In the event of the termination of the Employment Period pursuant to Section 7(b)(i) [Death] or 7(b)(ii) [Disability] above, Executive or Executive’s personal representative or estate will continue to receive Executive’s Base Salary during the six-month period following the date of termination and Executive’s stock options granted under Section 4(a) shall become fully vested at the date of termination.
(3) Executive will continue to be bound by Sections 8 and 9 of this Agreement following termination of Executive’s employment on any basis set forth in this Section 7(b).
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8. Competition and Confidential Information.
(a) Non-Competition. During the term of the Employment Period and for twelve months after the termination of the Employment Period , regardless of the reason therefore, or twelve months after the final payment of compensation by Company to Executive, whichever is later, Executive will not (whether directly or indirectly, as owner, principal, agent, stockholder, director, officer, manager, executive, partner, participant, or in any other capacity) engage or become financially interested in any competitive business conducted within the Restricted Territory or solicit, canvas, or accept, or authorize any other person, firm, or entity to solicit, canvas, or accept, from any customers of Company or any of its subsidiaries, any business within the Restricted Territory for Executive or for any other person, firm, or entity. As used herein, “customers of Company” will mean any persons, firms, or entities that purchased goods, products or services from Company or any of its subsidiaries during the Employment Period; “competitive business” will mean any business which sells or provides or attempts to sell or provide goods, products or services the same as or substantially similar to the goods, products or services sold or provided by Company or any of its subsidiaries; and the “Restricted Territory” will mean the United States or, in the alternative, in the event any reviewing court finds the United States to be overbroad or unenforceable, within such area as the court determines to be reasonable under the circumstances then existing an alternative.
(b) Confidential Information. Executive will maintain in strict secrecy all confidential or trade secret information relating to the business of Company or any of its subsidiaries (the “Confidential Information”) obtained by Executive in the course of Executive’s employment, and Executive will not, unless first authorized in writing by Company, disclose to, or use for Executive's benefit or for the benefit of any person, firm, or entity at any time either during or subsequent to the term of Executive's employment with Company, any Confidential Information, except as required in the performance of Executive's duties on behalf of Company. For purposes hereof, “Confidential Information” will include, without limitation, any trade secrets, knowledge, or information with respect to any goods, products or services; any processes, procedures, plans, inventions, techniques, or know-how; any business methods or forms; any names or addresses of customers or data on customers or suppliers; and any business policies or other information relating to or dealing with the purchasing, sales, or distribution policies or practices of Company.
(c) Return of Books and Papers. Upon the termination of Executive's employment with Company for any reason, Executive will deliver promptly to Company all catalogues, manuals, memoranda, drawings, and specifications; all cost, pricing, and other financial data; all customer information; all other materials, whether written, printed or stored in any electronic media, which are the property of Company or any of its subsidiaries (and any copies of them); desktop or laptop computers, software, access cards, “passwords”, cellular phones, personal digital assistants and pagers; and all other materials which may contain Confidential Information relating to the business of Company or any of its subsidiaries (whether maintained in tangible, documentary form, computer memory or other electronic or digital format), which Executive may then have in Executive's possession or under Executive’s control, whether prepared by Executive or not.
(d) Disclosure of Information. Executive will disclose promptly to Company, or its nominee, any and all ideas, designs, processes, and improvements of any kind relating to the business of Company or any of its subsidiaries, whether patentable or not, conceived or made by Executive, either alone or jointly with others, during working hours or otherwise, during the entire period of Executive's employment with Company, or within six months thereafter.
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(e) Assignment. Executive hereby assigns to Company or its nominee, the entire right, title, and interest in and to all discoveries and improvements, whether patentable or not, which Executive may conceive or make during Executive's employment with Company, or within six months thereafter, and which relate to the business of Company or any of its subsidiaries. All copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Executive during the Employment Period (collectively, the "Work Product") shall belong exclusively to Company and shall be considered a work made by Executive for hire within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered work made for hire, Executive agrees to assign at the time of creation of the Work Product, without any requirement of further consideration, all right, title, and interest that Executive has or may have in such Work Product. Upon Company’s request, Executive will take such further actions, including execution and delivery of instruments of conveyance, as may be appropriate to give full and proper effect to such assignment.
(f)Equitable Relief. In the event a violation of any of the restrictions contained in this Section 8 is established, Company will be entitled to preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits, and other benefits arising from such violation, which right will be cumulative and in addition to any other rights or remedies to which Company may be entitled. In the event of a violation of any provision of this Section 8, the period for which those provisions would remain in effect will be extended for a period of time equal to that period beginning when such violation commenced and ending when the activities constituting such violation will have been finally terminated in good faith.
(g)Restrictions Separable. Each and every restriction set forth in this Section 8 is independent and severable from the others, and no such restriction will be rendered unenforceable by virtue of the fact that, for any reason, any other or others of them may be unenforceable in whole or in part.
(h) No Violation. The execution and delivery of this Agreement and the performance of Executive’s services contemplated hereby will not violate or result in a breach by Executive of, or constitute a default under, or conflict with: (i) any provision or restriction of any employment, consulting, or other similar agreement; (ii) any agreement by Executive with any third party not to compete with, solicit from, or otherwise disparage such third party; (iii) any provision or restriction of any agreement, contract, or instrument to which Executive is a party or by which Executive is bound; or (iv) any order, judgment, award, decree, law, rule, ordinance, or regulation or any other restriction of any kind or character to which Executive is subject or by which Executive is bound.
(i) Non-Disparagement. Executive agrees that he will make no statement, oral or written, and which, by itself, may significantly or substantially damage the reputation of the Company or any director, officer or employee of the Company.
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9.Miscellaneous.
(a) Notices. All notices, requests, demands, and other communications required or permitted under this Agreement will be in writing and will be deemed to have been duly given and received: i) if mailed by registered or certified mail, three business days after deposit in the United States mail, postage prepaid, return receipt requested; ii) if hand delivered, upon delivery against receipt or upon refusal to accept the notice; or iii) if delivered by a standard overnight courier, one business day after deposit with such courier, postage prepaid, in each case, addressed to such party at the address set forth below:
(i) If to Company:
iCoreConnect Inc
Attn: CEO-Robert McDermott
13506 Summerport Parkway
Suite #160
Windermere FL 34786
(ii) If to Executive:
Archit Shah
Either party may change the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 9(a) for the giving of notice.
(b) Waivers. Neither any failure nor any delay on the part of either party to exercise any right, remedy, power, or privilege under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right, remedy, power, or privilege preclude any other or further exercise of the same or of any other right, remedy, power, or privilege, nor will any waiver of any right, remedy, power, or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power, or privilege with respect to any other occurrence.
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(c) Controlling Law, Jurisdiction and Venue. This Agreement and all questions relating to its validity, interpretation, performance, and enforcement will be governed by and construed in accordance with the internal laws of the State of Florida. Executive agrees that any and all claims arising between the parties out of this agreement shall be controlled by the laws of the State of Florida, as follows: any dispute, controversy arising out of, connected to, or relating to any matters herein of the transactions between Company and Executive, or this Agreement, which cannot be resolved by negotiation (including, without limitation, any dispute over the arbitrability of an issue), will be settled by binding arbitration. Company and Executive agree the prevailing party on any action to enforce rights hereunder shall be entitled, in addition to any awarded damages, their costs and reasonable attorney's fees, whether at arbitration, or on appeal. The parties agree that this provision and the Arbitrator's authority to grant relief are subject to the United States Arbitration Act, 9 U.S.C. 1- 16 et seq. ("USAA") and the provisions of this Agreement. The parties agree that the arbitrator have no power or authority to make awards or issue orders of any kind except as expressly permitted by this Agreement, and in no event does the arbitrator have the authority to make any award that provides for punitive or exemplary damages. The award may be confirmed and enforced in any court of competent jurisdiction. All post-award proceedings will be governed by the USAA. Company and Executive irrevocably consent to the jurisdiction and venue of such arbitration and such courts.
(d) Binding Nature of Agreement. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors, and assigns except that no party may assign or transfer such party's rights or obligations under this Agreement without the prior written consent of the other party.
(e) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original as against any party whose signature appears thereon, and all of which will together constitute one and the same instrument. This Agreement will become binding when one or more counterparts hereof, individually or taken together, will bear the signatures of the parties reflected hereon as the signatories.
(f) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision will be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
(g) Entire Agreement. This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements, and conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede: (a) any course of performance and/or usage of the trade inconsistent with any of the terms hereof; and (b) any provision of any other plan or agreement maintained by Company for the benefit of its employees generally inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing signed by the parties hereto.
(h) Paragraph Headings. The paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and will not affect its interpretation.
(i) Gender. Words used herein, regardless of the number and gender specifically used, will be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine, or neuter, as the context requires.
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(j) Number of Days. In computing the number of days for purposes of this Agreement, all days will be counted, including Saturdays, Sundays, and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday, or holiday, then the final day will be deemed to be the next day which is not a Saturday, Sunday, or holiday.
(k) Third Party Beneficiaries. This Agreement shall not inure to the benefit of anyone other than Executive and Company and their successors and assigns. No third party may bring an action to enforce any term hereof and no third party beneficiary rights are created by this Agreement.
(l) Non-Transferability. This is a personal agreement. None of the Executive’s rights, benefits, or interests hereunder may be subject to sale, anticipation, alienation, assignment, encumbrance, charge, pledge hypothecation, transfer, or set off in respect of any claim, debt, or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect.
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IN WITNESS WHEREOF, the parties hereto have executed this Executive Employment Agreement by evidence of the signatures below as of the Effective Date.
| iCoreConnect, INC., a Nevada corporation | |||
| By: | |||
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| Name: | Robert McDermott | |
| Title: | President & CEO | ||
| Date: | ____________________________________ | ||
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| EXECUTIVE |
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| Archit Shah, an individual |
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| Date: | _____________________________________ |
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EXHIBIT 31.1
CERTIFICATION OF THE CEO PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a)
OR 15d-14(a) AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert P. McDermott, certify that:
| 1. | I have reviewed this annual report on Form 10-K of iCoreConnect Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: April 15, 2022 | By: | /s/ Robert P. McDermott |
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| Robert P. McDermott |
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| President and Chief Executive Officer |
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EXHIBIT 31.2
CERTIFICATION OF THE CFO PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a)
OR 15d-14(a) AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Archit Shah, certify that:
| 1. | I have reviewed this annual report on Form 10-K of iCoreConnect Inc.; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: April 15, 2022 | By: | /s/ Archit Shah |
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| Archit Shah |
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| Chief Financial Officer |
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of iCoreConnect Inc. (the “Company”) on Form 10-K for the period ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert P. McDermott, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: April 15, 2022 | By: | /s/ Robert P. McDermott |
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| Robert P. McDermott |
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| President and Chief Executive Officer |
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EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of iCoreConnect Inc. (the “Company”) on Form 10-K for the period ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Archit Shah, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: April 15, 2022 | By: | /s/ Archit Shah |
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| Archit Shah |
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| Chief Financial Officer |
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