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, 2022
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(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value
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 | ☒ |
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| 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
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, 2022, the aggregate market value of its shares (based on a closing price of $0768 per share on June 30, 2022 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 22, 2023: 193,127,726.
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 cloud-based software and technology company focused on increasing workflow productivity and customer profitability through its enterprise platform of applications and services.
Recent Developments
On January 5, 2023, the Company entered into a Merger Agreement and Plan of Reorganization (the “Merger Agreement”), by and among the Company, FG Merger Corp., a Delaware corporation (“FGMC”), and FG Merger Sub Inc., a Nevada corporation and a direct, wholly-owned subsidiary of FGMC (“Merger Sub”). The Merger Agreement provides that, among other things, at the closing (the “Closing”) of the transactions contemplated by the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving as a wholly-owned subsidiary of FGMC. In connection with the Merger, FGMC will change its name to “iCoreConnect Inc.” The Merger and the other transactions contemplated by the Merger Agreement are hereinafter referred to as the “Business Combination.”
The Business Combination is expected to close in the second quarter of 2023, subject to customary closing conditions, including the receipt of certain governmental approvals and the required approval by the stockholders of FGMC and iCoreConnect.
Prior to the Closing, (i) each vested issued and outstanding option to purchase the Company’s common stock shall be exercised into shares of the Company’s common stock (ii) each issued and outstanding warrant to purchase the Company’s common stock shall be exercised into shares of the Company’s common stock and (iii) the outstanding principal together with all accrued and unpaid interest under each convertible promissory note shall be converted into shares of the Company’s common stock.
Prior to the Closing, each share of FGMC common stock par value $0.0001 (“FGMC Common Stock”) shall be converted into shares of newly issued FGMC preferred stock, par value $0.0001 (“FGMC Preferred Stock”). The FGMC Preferred Stock shall have the following rights, preferences, powers, privileges and restrictions, qualifications and limitations:
· | The holders of Preferred Stock shall not be entitled to vote on any matters submitted to the stockholders of FGMC. |
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· | From and after the date of the issuance of any shares of FGMC Preferred Stock, dividends shall accrue at the rate per annum of 12% of the original issue price for each share of FGMC Preferred Stock, prior and in preference to any declaration or payment of any other dividend (subject to appropriate adjustments). |
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· | From the closing of the Business Combination until the second anniversary of the date of the original issuance of the FGMC Preferred Stock, FGMC may, at its option, pay all or part of the accruing dividends on the FGMC Preferred Stock by issuing and delivering additional shares of FGMC Preferred Stock to the holders thereof. |
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· | FGMC shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of FGMC the holders of the FGMC Preferred Stock then outstanding shall first receive dividends due and owing on each outstanding share of FGMC Preferred Stock. |
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· | In the event of any liquidation, dissolution or winding up of FGMC, the holders of shares of FGMC Preferred Stock then outstanding shall be entitled to be paid out of the assets of FGMC available for distribution to its stockholders an amount per share equal to the greater of (i) one times the applicable original issue price, plus any accrued and unpaid dividends, and (ii) such amount as would have been payable had all shares of FGMC Preferred Stock been converted into FGMC Common Stock pursuant to the following paragraph immediately prior to such liquidation, dissolution or winding up, before any payment shall be made to the holders of FGMC Common Stock. |
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· | After 24 months from the closing of the Business Combination, in the event the closing share price of the FGMC Common Stock shall exceed 140% of the Conversion Price (as defined in the Merger Agreement) then in effect, then (i) each outstanding share of FGMC Preferred Stock shall automatically be converted into such number of shares of FGMC Common Stock as is determined by dividing the original issue price by the Conversion Price in effect at the time of conversion and (ii) such shares may not be reissued by FGMC, subject to adjustment. At the time of such conversion, FGMC shall declare and pay all of the dividends that are accrued and unpaid as of the time of the conversion by either, at the option of FGMC, (i) issuing additional FGMC Preferred Stock or (ii) paying cash. |
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· | Each share of FGMC Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of FGMC Common Stock as is determined by dividing the original issue price by the Conversion Price in effect at the time of conversion, subject to adjustment. |
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· | Immediately prior to any such optional conversion FGMC shall pay all dividends on the FGMC Preferred Stock being converted that are accrued and unpaid as of such time by, either, at the option of FGMC: (i) issuing additional FGMC Preferred Stock or (ii) paying cash. |
The aggregate consideration to be received by the Company’s stockholders is based on a pre-transaction equity value of $98,000,000 (subject to usual and customary working capital adjustments and any adjustments to reflect the effect of any stock split, reverse stock split, stock dividend, reorganization, recapitalization, reclassification, combination, merger, sale or exchange of shares or other like change with respect to shares of FGMC Common Stock, occurring prior to the Closing date). In accordance with the terms and subject to the conditions of the Merger Agreement, immediately prior to the effective time of the Closing each share of issued and outstanding the Company’s common stock, shall be converted into a number of shares of FGMC Common Stock, based on the Exchange Ratio (as defined in the Merger Agreement).
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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, 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 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 and iCoreVerify+ - iCoreVerify is a HIPAA compliant SaaS solution that automatically retrieves a patients insurance eligibility breakdown to verify their benefits seven (7) days in advance of their appointment and on-demand using iCoreConnect’s real time technology. Automation runs daily to verify insurance every patient on the schedule a full week in advance of their appointment date. 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. iCoreVerify+ adds a unique add-on service that augments iCoreConnect’s automation with a concierge service that turns around requests traditionally in less than 24 hours. It includes all carriers including non-digital ones and is customized to the client's specialty.
iCoreHuddle and iCoreHuddle+ – iCoreHuddle is a powerful HIPAA compliant SaaS solution to instantly reveal the revenue potential of each patient. This product is currently limited to dental practices. 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.
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 –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.
Managed IT Services (MSP and MSaaS)
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 scale their business without extensive capital investment or disruption in services.
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The Company believes it is well 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 and MSaaS MRR (monthly recurring revenue) 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, billing 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 90 major healthcare association endorsements in 26 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.
Customers
We had no significant customers (greater than 10% of total revenue) for the years ended December 31, 2022 and 2021, respectively. Customer concentration is not significant as the Company has a large number of individual customers. In addition, concentration is reduced by the number of new customers generated through the acquisitions during 2021, as well as through organic growth in both the number of customers and number of services being purchased by new and existing customers. We had accounts receivable concentration with one customer representing 31% of total accounts receivables outstanding as of December 31, 2022 and one customer that represented 33% of accounts receivable outstanding as of December 31, 2021.
Intellectual Property
Our success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this, we currently rely on a combination of trade secrets, including know-how, employee and third-party nondisclosure agreements, and other contractual rights to establish and protect our proprietary rights in our technology. We do not currently own any patents or trademarks.
Government Regulations
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.
EMPLOYEES
As of December 31, 2022 the Company had 44 employees of which 41 were full-time employees.
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 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, 2022 and December 31, 2021, were $7,987,902 and $4,956,552, 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 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.
As of December 31, 2022, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were not effective due to a material weakness related to our accounting for complex financial instruments and related to our inability to adequately segregate responsibilities over the financial reporting process. In addition, in the future 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.
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We may engage in merger and acquisition activity from time to time and may not achieve the contemplated benefits from such activity.
We have engaged in recent merger and acquisition 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.
Our software may not operate properly, which could damage its reputation, give rise to claims against us, or divert application of our resources from other purposes, any of which could harm its business and operating results.
Software development is time-consuming, expensive, and complex. Unforeseen difficulties can arise. We may encounter technical obstacles, and it is possible that we discover additional problems that prevent our applications from operating properly. If our systems do not function reliably or fail to achieve client expectations in terms of performance, clients could assert liability claims against us or attempt to cancel their contracts with us. This could damage our reputation and impair its ability to attract or retain clients.
Information services as complex as those we offer have in the past contained, and may in the future develop or contain, undetected defects, vulnerabilities, or errors. We cannot assure that material performance problems or defects in our services will not arise in the future. Errors may result from sources beyond our control, including the receipt, entry, or interpretation of patient information; interface of our services with legacy systems that we did not develop; or errors in data provided by third parties. It is challenging for us to test our software for all potential problems because it is difficult to simulate the wide variety of computing environments or treatment methodologies that its clients may deploy or rely upon. Therefore, despite testing, defects or errors may arise in our existing or new software or service processes following introduction to the market.
In light of this, defects, vulnerabilities, and errors and any failure by us to identify and address them could result in loss of revenue or market share; liability to clients, their patients, or others; failure to achieve market acceptance or expansion; diversion of development and management resources; delays in the introduction of new services; injury to our reputation; and increased service and maintenance costs. Defects, vulnerabilities, or errors in our software and service processes might discourage existing or potential clients from purchasing services from us. Correction of defects, vulnerabilities, or errors could prove to be impossible or impracticable. The costs incurred in correcting any defects, vulnerabilities, or errors or in responding to resulting claims or liability may be substantial and could adversely affect our operating results.
If our services fail to provide accurate and timely information, or if its content or any other element of any of its services is associated with faulty clinical decisions or treatment, we could have liability to clients, clinicians, or patients, which could adversely affect its results of operations.
Some of our software, content, and services are used to support clinical decision-making by providers and deliver information about patient medical histories, treatment plans, medical conditions, and the use of particular medications. If our software, content, or services fail to provide accurate and timely information or it is associated with faulty clinical decisions or treatment, then clients, clinicians, or their patients could assert claims against it that could result in substantial costs to us, harm our reputation in the industry, and cause demand for our services to decline.
Our iCoreRX service provide healthcare professionals with access to clinical information, including information regarding particular medical conditions and the use of particular medications. If our content, or content we obtain from third parties, contains inaccuracies, or we introduce inaccuracies in the process of implementing third-party content, it is possible that patients, physicians, consumers, the providers of the third-party content, or others may sue us if they are harmed as a result of such inaccuracies. We cannot assure that our quality control procedures will be sufficient to ensure that there are no errors or omissions in particular content.
The assertion of such claims and ensuing litigation, regardless of its outcome, could result in substantial cost to us, divert management’s attention from operations, damage our reputation, and decrease market acceptance of our services. We attempt to limit by contract our liability for damages and requires that our clients assume responsibility for medical care. Despite these precautions, the allocations of responsibility and limitations of liability set forth in our contracts may not be enforceable, be binding upon patients, or otherwise protect us from liability for damages. Furthermore, general liability and errors and omissions insurance coverage may not continue to be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims against us. In addition, the insurer might disclaim coverage as to any future claim. One or more large claims could exceed our available insurance coverage. If any of these risks occur, they could materially adversely affect our business, financial condition, or results of operations.
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 a 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 was 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
On August 18, 2021, iCoreConnect 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 its assets that were previously pledged as security to Sonoran Pacific Resources, LLP, an Arizona limited liability partnership (“SPR”) and Jerry Smith (“Smith”) (collectively, the “lender”). On August 24, 2021, iCoreConnect received a default notice from the lender asserting that iCoreConnect 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 iCoreConnect beginning approximately in March of 2009 that was secured by all of the assets of iCoreConnect. iCoreConnect initiated an investigation into the matter and concluded that it had repaid all of the loans and any loans that had not been repaid were released under the terms of a Recapitalization Agreement dated November 1, 2016. iCoreConnect 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.
On November 1, 2022, iCoreConnect entered into a settlement agreement and release (the “Settlement Agreement”) with SPR and Smith in connection with the above litigation. In order to resolve all matters subject to the dispute, the Settlement Agreement provided that on, or before, the 60th day following the effective date of the Settlement Agreement, which was November 1, 2022 (such 60th day, the “Payment Date”), iCoreConnect shall redeem, and/or or iCoreConnect’s designees shall acquire, a total of 9,000,000 shares of iCoreConnect Common Stock from SPR and certain shareholders or affiliates of SPR at a purchase price of $0.08 per share. The Settlement Agreement further provided that in addition to the purchase of the foregoing 9,000,000 shares, iCoreConnect or its designee will have the option, but not the obligation, to acquire or redeem any or all of the remaining 5,401,887 shares held by certain shareholders or affiliates of SPR on, or before, the Payment Date, at the cost of $0.08 per share. In connection with the dispute, iCoreConnect had previously posted a cash bond of $200,000 with the court. Pursuant to the Settlement Agreement, $100,000 was released to SPR upon execution of the Settlement Agreement, which amount will be credited toward the payment of the 9,000,000 shares described above. The foregoing share purchase obligation was satisfied on December 30, 2022. Upon the payment for the shares, the remaining $100,000 of the bond was released to SPR in consideration for the release of all claims and liens and the dismissal of the litigation. Upon iCoreConnect’s compliance with the above share repurchase obligations, J.D. Smith, the son of Jerry Smith, resigned as a director and chairman of Board of Directors. The Settlement Agreement provides that upon the performance of each of the parties of their obligations thereunder, SPR and Smith, on the one hand, and iCoreConnect, on the other hand, each agrees to a complete release of the other party or parties. The Settlement Agreement was fully completed on December 30, 2022 and a full release received from the courts.
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. Upon completion of arbitration in October 2022 the Complainant was awarded an Interim Award of Arbitration in the amount of $270,020 which excluded any interest and fee. Subsequent to year end, in February 2023, a final Arbitration award in the amount of $523,415 was issued which includes interest and fees.
On February 21, 2023, the Company received a notice under section 21 of Indian Arbitration and Conciliation Act, 1996 related to a dispute pursuant to a contract between the Company and a service provider, pursuant to which the service provider has asserted the Company has violated the terms of the contract and has claimed damages of approximately $635,000. The Company is evaluating the claims asserted against it and intends to defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.
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.
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”.
Holders
As of December 31, 2022, there were 547 holders of record of our common stock, with 181,320,528 shares of our common stock issued and outstanding.
Dividend Policy
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.
Sale of Unregistered Securities
During the quarter ended December 31, 2022 the Company issued 1,000,000 shares of common stock at $0.10 per share to an accredited investor. The issuance was 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.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On November 1, 2022, the Company entered into a settlement agreement and release (the “Settlement Agreement”) with Sonoran Pacific Resources, LLP, an Arizona limited liability partnership (“SPR”) and Jerry Smith (“Smith”) in connection with certain ongoing litigation. The Settlement Agreement, which was a result of mediation between the parties, relates to (i) claims made by SPR and Smith that the Company owed the parties certain amounts, (ii) a Notice of Disposition of Collateral under section 9-611 of the Uniform Commercial Code (“UCC”) purporting to set a foreclosure sale, under the UCC, of the Company’s assets that were previously pledged as security in connection with the amounts owed, and (iii) claims and counterclaims by the parties of breach of contract.
In order to resolve all matters subject to the dispute, the Settlement Agreement provided that on, or before, the 60th day following the effective date of the Settlement Agreement, which was November 1, 2022 (such 60th day, the “Payment Date”), the Company shall redeem, and/or or the Company’s designees shall acquire, a total of 9,000,000 shares of the Company’s common stock from SPR and certain shareholders or affiliates of SPR at a purchase price of $0.08 per share.
SPR and certain shareholders or affiliates of SPR assert that they hold an aggregate of 14,401,887 shares of Company common stock. The Settlement Agreement further provides that in addition to the purchase of the foregoing 9,000,000 shares, the Company or its designee will have the option, but not the obligation, to acquire or redeem any or all of the remaining 5,401,887 shares held by certain shareholders or affiliates of SPR on, or before, the Payment Date, at the cost of $0.08 per share.
On December 30, 2022, the Company purchased 1,250,000 shares of Company common stock from SPR and certain shareholders or affiliates of SPR for $0.08 per share.
Except as set forth above, we did not repurchase any of our equity securities during the year ended December 31, 2022.
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Item 6. [Reserved]
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 cloud-based software and technology company focused on increasing workflow productivity and customer profitability through its enterprise platform of applications and services.
During 2022 we developed our newest product iCoreVerify+.
iCoreVerify+ - iCoreVerify+ adds a unique add-on service to iCoreVerify that augments iCoreConnect’s automation with a concierge service that turns around special requests in less than 24 hours. It includes all carriers including non-digital ones and is customized to the client's specialty.
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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 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 6 primary sources of revenue as of December 31, 2022:
| 1. | Electronic Prescription Software |
| 2. | Insurance Verifications |
| 3. | ICD-10 Medical Coding Software |
| 4. | Encrypted and HIPAA Compliant Secure email |
| 5. | Analytics |
| 6. | 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) Analytics automatically compiles real-time KPI data on an intuitive dashboard which saves time and helps focus the team during the morning huddle. Additionally, the Practice Metrics page provides custom reporting with rich graphics helping management to view revenue, claims, AR, scheduling and more.
6) 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, 2022 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, 2022 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:
|
| For Years Ended |
| |||||
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Revenue |
| $ | 7,987,902 |
|
| $ | 4,956,552 |
|
Cost of sales |
|
| 2,243,253 |
|
|
| 1,580,390 |
|
Gross profit |
|
| 5,744,649 |
|
|
| 3,376,162 |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 9,254,670 |
|
|
| 5,232,839 |
|
Depreciation and amortization |
|
| 1,292,085 |
|
|
| 1,430,805 |
|
Total operating expenses |
|
| 10,546,755 |
|
|
| 6,663,644 |
|
Loss from operations |
|
| (4,802,106 | ) |
|
| (3,287,482 | ) |
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
Interest expense |
|
| (785,406 | ) |
|
| (500,878 | ) |
Financing costs |
|
| (426,419 | ) |
|
| (1,513,366 | ) |
Other income (expense) |
|
| (65,893 | ) |
|
| 7,497 |
|
PPP loan forgiveness |
|
| - |
|
|
| 330,047 |
|
Total other income (expense) |
|
| (1,277,718 | ) |
|
| (1,676,700 | ) |
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (6,079,824 | ) |
| $ | (4,964,182 | ) |
Year ended December 31, 2022 compared to the year ended December 31, 2021
Revenues. Net revenues grew to $8.0MM for 2022 compared to $5.0MM for the 2021 period, an increase of approximately 60% year on year. Revenue growth was attributed to the growth in the number of subscribers both in terms of new sales as well as additional product uptake, the full year results of the Company’s asset acquisitions completed in Q2 and Q3 of 2021 as well as a moderate price increase on existing users.
Cost of sales. Cost of sales increased to $2.2MM for 2022 compared to $1.6MM for 2021, an increase of approximately 42% year on year. While overall costs of sales increased, it did not do so in the same proportion to revenue growth. Overall gross margin improved to 72% in 2022 from 68% in 2021, as costs related to SaaS serving remained flat due to additional capacity available in system to absorb the growth incurred.
Selling, general and administrative expenses. The Company incurred $9.3MM in selling, general and administrative expenses for the 2022 period an increase of $4.0MM or 77% when compared to $5.2MM for the 2021 period. The increase in expenses year on year were due to higher labor costs need to manage and maintain both the organic growth along with serving the additional customers related to three asset acquisitions completed in 2021. The Company also incurred $0.7MM in related legal costs associated with its two completed legal actions.
Depreciation and amortization expenses. Depreciation and amortization expenses of $1.3MM for the 2022 period decreased $0.1MM or (10)% compared to $1.4MM for the 2021 period. The decrease in expenses is due to no new additions being added to intangible assets and a moderate increase in capitalized software in 2022 compared to 2021, such that depreciation and amortization out pace additions.
Interest expense. Interest expense of $0.8MM for the 2022 period increased $0.3MM or approximately 60% when compared to $0.5MM for the 2021 period. The primary driver for the increase in interest expense was due to the increase in debt and the rate of interest on debt taken out by the Company to help fund the asset acquisitions and operating expenses.
Other income (expense). Other expense increased moderately in the 2022 period when compared to Other Income in the 2021 period.
Financing costs. The Company incurred financing costs of $0.4MM in 2022 compared to $1.5MM for 2021.The decrease of $1.1MM was due to the decrease in warrants and inducement shares costs on issued debt in 2022 in comparison to 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 2022.
| 18 |
| Table of Contents |
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 |
| 2022 |
|
| 2021 |
|
| (Decr) |
| |||
Total Current Assets |
| $ | 1,091,668 |
|
| $ | 1,013,140 |
|
|
| 8 | % |
Total Current Liabilities |
|
| 6,798,969 |
|
|
| 4,054,246 |
|
|
| 68 | % |
Working capital (deficit) |
|
| (5,707,301 | ) |
|
| (3,041,106 | ) |
|
| 88 | % |
Deferred Revenue |
|
| 13,847 |
|
|
| 20,419 |
|
|
| (32 | )% |
Weighted Average Common Shares Outstanding |
|
| 172,123,855 |
|
|
| 146,726,959 |
|
|
|
|
|
The increase in shares outstanding was driven by issuance of Common Stock for cash, the conversion of convertible notes payable and stock based compensation.
The following table summarizes the impact of operating, investing and financing activities on our cash flows for the years ended December 31, 2022 and 2021.
|
| Twelve Months Ended |
| |||||
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Net cash used in operating activities |
| $ | (1,272,995 | ) |
| $ | (2,896,248 | ) |
Net cash used in investing activities |
|
| (293,965 | ) |
|
| (3,518,504 | ) |
Net cash provided by financing activities |
|
| 1,691,306 |
|
|
| 6,478,940 |
|
Net Increase / (Decrease) in cash |
|
| 124,346 |
|
|
| 64,188 |
|
Cash and cash equivalents at the beginning of the year |
|
| 71,807 |
|
|
| 7,619 |
|
Cash and cash equivalents at the end of the year |
| $ | 196,153 |
|
| $ | 71,807 |
|
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 software development, and ongoing capital raise efforts.
Operating Activities: Net cash required by operating activities for the year ended December 31, 2022 decreased by $1.6MM to $1.3MM compared to $2.9MM utilized in the 2021 period. The decrease in cash utilized by operating activities is primarily attributable to the increase in accounts payable and accrued expenses which grew by $0.6MM and the reduction in outstanding accounts receivable which contributed an additional $0.4MM. Future spending on operating activities are 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, 2022 decreased by $3.2MM to $0.3MM compared to $3.5MM utilized in the 2021 period. The decrease in cash utilized by investing activities was primarily due to the purchases of Advantech, Business Technology Solutions and Spectrum Technology Solutions which were completed in 2021. 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 was $1.7MM for the year ended December 31, 2022 was $4.8MM lower than the $6.5MM for the year ended 2021, due to a decrease in proceeds received on the issuance of common stock of $0.5MM in 2022 compared to $2.8MM received in 2021 and a greater payments on debt of $2.3MM in 2022 versus $0.5MM in 2021.
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, 2022, the Company generated an operating loss of $4.8MM. In addition, the Company has an accumulated deficit, and net working capital deficit of $88.9MM and $5.7MM. 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.
| 19 |
| Table of Contents |
Our material cash requirements from known contractual and other obligations primarily relate to our content, debt and lease obligations. As of December 31, 2022, the expected timing of those payments are as follows:
|
| Total |
|
| Next 12 |
|
| Beyond 12 Months |
| |||
Debt (1) |
| $ | 5,728,792 |
|
| $ | 4,279,531 |
|
| $ | 1,449,261 |
|
Operating lease obligations (2) |
|
| 978,875 |
|
|
| 169,417 |
|
|
| 809,458 |
|
Total |
| $ | 6,707,667 |
|
| $ | 4,448,948 |
|
| $ | 2,258,719 |
|
| (1) | Debt obligations include our Notes consisting of principal and interest payments. See Note 6 Long-Term Debt in the accompanying notes to our financial statements for further details. |
|
|
|
| (2) | See Note 9 Commitments and Contingencies in the accompanying notes to our financial statements for further details regarding leases. |
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide information required under this item.
| 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.
|
|
| Page |
|
|
|
|
|
|
FINANCIAL STATEMENTS – AS OF DECEMBER 31, 2022 AND 2021 |
|
|
|
|
|
|
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 688; |
|
| F-2 |
|
|
| F-3 |
| |
|
| F-4 |
| |
|
| F-5 |
| |
|
| F-6 |
| |
|
| F-7 |
|
| 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 balance sheets of iCoreConnect Inc. (the “Company”) as of December 31, 2022 and 2021, the related statements of operations, stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, 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 audits. 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 audits 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 audits 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
March 22, 2023
| F-2 |
| Table of Contents |
iCoreConnect Inc.
BALANCE SHEETS
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
ASSETS |
|
|
|
|
|
| ||
Cash |
| $ | 196,153 |
|
| $ | 71,807 |
|
Accounts receivable, net |
|
| 414,809 |
|
|
| 629,047 |
|
Prepaid expenses and other current assets |
|
| 480,706 |
|
|
| 312,286 |
|
Total current assets |
|
| 1,091,668 |
|
|
| 1,013,140 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 74,194 |
|
|
| 92,562 |
|
Right of use lease asset - operating |
|
| 944,487 |
|
|
| 99,054 |
|
Software development costs, net |
|
| 531,061 |
|
|
| 592,781 |
|
Acquired technology, net |
|
| 79,428 |
|
|
| 277,966 |
|
Customer relationships, net |
|
| 2,350,380 |
|
|
| 3,069,874 |
|
Goodwill |
|
| 1,484,966 |
|
|
| 1,484,966 |
|
Total long-term assets |
|
| 5,464,516 |
|
|
| 5,617,203 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 6,556,184 |
|
| $ | 6,630,343 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | 2,336,174 |
|
| $ | 1,641,750 |
|
Operating lease liability, current portion |
|
| 169,417 |
|
|
| 66,738 |
|
Current maturities of long-term debt, net of discounts |
|
| 4,279,531 |
|
|
| 2,325,339 |
|
Deferred revenue, current portion |
|
| 13,847 |
|
|
| 20,419 |
|
Total current liabilities |
|
| 6,798,969 |
|
|
| 4,054,246 |
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current maturities |
|
| 1,449,261 |
|
|
| 1,538,488 |
|
Operating lease liability, net of current portion |
|
| 809,458 |
|
|
| 32,318 |
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities |
|
| 2,258,719 |
|
|
| 1,570,806 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
| 9,057,688 |
|
|
| 5,625,052 |
|
|
|
|
|
|
|
|
|
|
COMMITEMENTS AND CONTINGENCIES (NOTE 9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
Preferred Stock, par value $0.001; 10,000,000 shares authorized; Issued and Outstanding: 0 as of December 31, 2022 and 0 as of December 31, 2021. |
|
| - |
|
|
| - |
|
Common Stock par value $0.001; 600,000,000 shares authorized; Issued and Outstanding: 181,320,528 as of December 31, 2022 and 167,493,479 as of December 31, 2021 |
|
| 181,321 |
|
|
| 167,493 |
|
Additional paid-in-capital |
|
| 86,192,262 |
|
|
| 83,633,061 |
|
Accumulated deficit |
|
| (88,875,087 | ) |
|
| (82,795,263 | ) |
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) |
|
| (2,501,504 | ) |
|
| 1,005,291 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
| $ | 6,556,184 |
|
| $ | 6,630,343 |
|
The accompanying notes are an integral part of these financial statements
| F-3 |
| Table of Contents |
iCoreConnect Inc.
STATEMENTS OF OPERATIONS
|
| For the Years Ended |
| |||||
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Revenue |
| $ | 7,987,902 |
|
| $ | 4,956,552 |
|
Cost of sales |
|
| 2,243,253 |
|
|
| 1,580,390 |
|
Gross profit |
|
| 5,744,649 |
|
|
| 3,376,162 |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 9,254,670 |
|
|
| 5,232,839 |
|
Depreciation and amortization |
|
| 1,292,085 |
|
|
| 1,430,805 |
|
Total operating expenses |
|
| 10,546,755 |
|
|
| 6,663,644 |
|
Loss from operations |
|
| (4,802,106 | ) |
|
| (3,287,482 | ) |
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
Interest expense |
|
| (785,406 | ) |
|
| (500,878 | ) |
Finance charges |
|
| (426,419 | ) |
|
| (1,513,366 | ) |
Other income (expense) |
|
| (65,893 | ) |
|
| 7,497 | |
Gain on cancellation of PPP loan |
|
| - |
|
|
| 330,047 |
|
Total other expense |
|
| (1,277,718 | ) |
|
| (1,676,700 | ) |
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (6,079,824 | ) |
| $ | (4,964,182 | ) |
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted |
| $ | (0.04 | ) |
| $ | (0.03 | ) |
|
|
|
|
|
|
|
|
|
Weighted average number of shares, basic and diluted |
|
| 172,123,855 |
|
|
| 146,726,959 |
|
The accompanying notes are an integral part of these financial statements
| F-4 |
| Table of Contents |
iCoreConnect Inc.
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, 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 |
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Total |
| |||||
|
| Common stock |
|
| Paid In |
|
| Accumulated |
|
| Stockholders' |
| ||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity (Deficit) |
| |||||
Balances as at January 1, 2022 |
|
| 167,493,479 |
|
| $ | 167,493 |
|
| $ | 83,633,061 |
|
| $ | (82,795,263 | ) |
| $ | 1,005,291 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for cash |
|
| 5,722,844 |
|
|
| 5,723 |
|
|
| 444,277 |
|
|
|
|
|
|
| 450,000 |
|
Stock repurchased and cancelled |
|
| (1,250,000 | ) |
|
| (1,250 | ) |
|
| (98,750 | ) |
|
|
|
|
|
| (100,000 | ) |
Stock compensation expense |
|
| 8,426,837 |
|
|
| 8,428 |
|
|
| 1,808,695 |
|
|
|
|
|
|
| 1,817,123 |
|
Stock issued as origination fee in convertible debt agreement |
|
|
|
|
|
|
|
|
|
| 426,419 |
|
|
|
|
|
|
| 426,419 |
|
Stock issued for exercise of Common Stock Options |
|
| 700,000 |
|
|
| 700 |
|
|
| 1,400 |
|
|
|
|
|
|
| 2,100 |
|
Repurchase of common stock warrants |
|
|
|
|
|
|
|
|
|
| (45,000 | ) |
|
|
|
|
|
| (45,000 | ) |
Stock issued for conversion of convertible debt |
|
| 227,368 |
|
|
| 227 |
|
|
| 22,160 |
|
|
|
|
|
|
| 22,387 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (6,079,824 | ) |
|
| (6,079,824 | ) |
Balances as at December 31, 2022 |
|
| 181,320,528 |
|
| $ | 181,321 |
|
| $ | 86,192,262 |
|
| $ | (88,875,087 | ) |
| $ | (2,501,504 | ) |
The accompanying notes are an integral part of these financial statements
| F-5 |
| Table of Contents |
iCoreConnect Inc.
STATEMENTS OF CASH FLOWS
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
| ||
Net loss |
| $ | (6,079,824 | ) |
| $ | (4,964,182 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation expense |
|
| 22,521 |
|
|
| 143,406 |
|
Amortization expense |
|
| 1,269,564 |
|
|
| 1,287,853 |
|
Finance charges |
|
| 426,419 |
|
|
| 1,513,366 |
|
Forgiveness of PPP loan |
|
|
|
|
|
| (330,047 | ) |
Change in allowance for doubtful accounts |
|
| 261,717 |
|
|
| - |
|
Stock compensation expense |
|
| 1,717,123 |
|
|
| 331,945 |
|
Non-cash interest expense |
|
| 603,146 |
|
|
| 106,555 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (47,479 | ) |
|
| (467,353 | ) |
Prepaid expenses and other current assets |
|
| (26,420 | ) |
|
| (292,183 | ) |
Right of use asset, net of lease liability |
|
| 34,386 |
|
|
| (136,659 | ) |
Accounts payable and accrued expenses |
|
| 552,424 |
|
|
| (33,560 | ) |
Deferred revenue |
|
| (6,572 | ) |
|
| (55,389 | ) |
NET CASH USED IN OPERATING ACTIVITIES |
|
| (1,272,995 | ) |
|
| (2,896,248 | ) |
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Cash portion of consideration paid to acquire Advantech |
|
| - |
|
|
| (1,773,056 | ) |
Cash portion of consideration paid to acquire Business Computer Systems |
|
| - |
|
|
| (94,880 | ) |
Cash portion of consideration paid to acquire Spectrum Technology Solutions |
|
| - |
|
|
| (1,350,000 | ) |
Purchases of capital assets |
|
| (4,153 | ) |
|
| (55,027 | ) |
Additions to capitalized software |
|
| (289,812 | ) |
|
| (245,541 | ) |
NET CASH USED IN INVESTING ACTIVITIES |
|
| (293,965 | ) |
|
| (3,518,504 | ) |
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITES |
|
|
|
|
|
|
|
|
Net proceeds from debt |
| 3,585,000 |
|
|
| 3,261,488 |
| |
Payments on debt |
|
| (2,323,181 | ) |
|
| (510,650 | ) |
Proceeds from issuance of common stock |
|
| 450,000 |
|
|
| 2,776,230 |
|
Conversion of convertible debt into common stock |
|
| 22,387 |
|
|
| 319,057 |
|
Conversion of fees for services payable |
|
| - |
|
|
| 632,815 |
|
Proceeds from exercise of employee stock options |
|
| 2,100 |
|
|
| - |
|
Repurchase of warrants for common stock |
|
| (45,000 | ) |
|
| - |
|
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
| 1,691,306 |
|
|
| 6,478,940 |
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH |
|
| 124,346 |
|
|
| 64,188 | |
CASH AT BEGINNING OF THE PERIOD |
|
| 71,807 |
|
|
| 7,619 |
|
CASH AT END OF THE PERIOD |
| $ | 196,153 |
|
| $ | 71,807 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
| $ | 696,355 |
|
| $ | - |
|
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 notes payable |
| $ | 22,387 |
|
| $ | 63,846 |
|
The accompanying notes are an integral part of these financial statements
| F-6 |
| Table of Contents |
Notes to Financial Statements
1. NATURE OF OPERATIONS
iCoreConnect Inc., (the “Company”), a Nevada Corporation, is a 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
The accompanying 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, 2022 and 2021, approximated their fair value due to their short-term nature.
Cash
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 $65,000 and $36,142 as of December 31, 2022 and 2021, 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) leasehold improvements (5years) and for office furniture and fixtures (7 years). The cost of repairs and maintenance is charged to operations in the period incurred.
| F-7 |
| 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, 2022 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, 2022 there is no impairment of the Company’s Goodwill.
Revenue Recognition
We have 6 primary sources of revenue as of December 31, 2022
| 1. | Electronic Prescription Software |
| 2. | Insurance Verifications |
| 3. | ICD-10 Medical Coding Software |
| 4. | Encrypted and HIPAA Compliant Secure email |
| 5. | Analytics |
| 6. | MSaaS software |
| F-8 |
| 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) Analytics automatically compiles real-time KPI data on an intuitive dashboard which saves time and helps focus the team during the morning huddle. Additionally, the Practice Metrics page provides custom reporting with rich graphics helping management to view revenue, claims, AR, scheduling and more.
6) 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 90% 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 Statement of Operations. Amounts billed to a customer for shipping and handling are reported as revenue on the 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 $525,533 and $350,318 for the years ended December 31, 2022 and 2021, 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-9 |
| 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. The Company accounts for instruments with Most Favored Nations (the “MFN”) terms or conditions similar to that of a down round feature. The impact of such terms or conditions will be accounted for when the event occurs. 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, and shares issuable on conversion of promissory 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-10 |
| Table of Contents |
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-11 |
| Table of Contents |
Recently Issued Accounting Pronouncements
In October 2021, the FASB issued Accounting Standards Update No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contract with Customers” (“ASU 2021-08”). The Company is currently evaluating the potential impact the adoption of this ASU will have on its Financial Statements.
The Company does not believe that any other issued, but not yet effective accounting standards, if currently adopted, will have a material effect on the Company’s financial position, results of operations and cash flows.
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, 2022, the Company generated an operating loss of $4,802,106. In addition, the Company has an accumulated deficit, and net working capital deficit of $88,875,087 and $5,707,301. 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 continues to develop its healthcare communications system and continues to develop alliances with strategic partners to generate revenues that will sustain the Company. Management will also seek to raise additional funds. 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, 2022, the Company issued 13,827,049 shares of common stock. of which 5,722,844 shares of common stock were issued for cash of $450,000. The Company also issued 227,368 shares of common stock for the conversion of $22,387 of convertible debt. 700,000 shares of common stock were issued for the exercise of common stock options for a value of $2,100. 8,426,837 shares of common stock were issued related to stock-based compensation for a value of $1,817,123. The Company also repurchased and cancelled 1,250,000 shares of common stock with a value of $100,000.
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.
| F-12 |
| 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, 2022 and 2021 are presented below:
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 |
|
| 1,775,000 |
|
| $ | 0.24 |
|
|
| 7.7 |
|
| $ | - |
|
Granted |
|
| 30,880,000 |
|
| $ | 0.12 |
|
|
| 9.9 |
|
|
|
|
|
Exercised |
|
| (10,000 | ) |
|
| 0.15 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
| - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
Balance Outstanding - December 31, 2021 |
|
| 32,645,000 |
|
| $ | 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 |
|
2022 Options Outstanding |
| Number of Options |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance Outstanding - January 1, 2022 |
|
| 32,645,000 |
|
| $ | 0.12 |
|
|
| 9.8 |
|
| $ | - |
|
Granted |
|
| 300,000 |
|
| $ | 0.12 |
|
|
| 9.0 |
|
|
| - |
|
Exercised |
|
| (700,000 | ) |
|
| 0.00 |
|
|
| 5.5 |
|
|
| - |
|
Forfeited |
|
| (10,000 | ) |
| $ | 0.15 |
|
|
| 6.2 |
|
|
| - |
|
Balance Outstanding - December 31, 2022 |
|
| 32,235,000 |
|
| $ | 0.13 |
|
|
| 8.8 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - December 31, 2022 |
|
| 9,891,666 |
|
| $ | 0.12 |
|
|
| 8.8 |
|
| $ | - |
|
2022 Nonvested Options |
| Number of Options |
|
| Weighted Average Grant Date Fair Value |
|
| Weighted Average Remaining Years to Vest |
| |||
|
|
|
|
|
|
|
|
|
| |||
Nonvested - January 1, 2022 |
|
| 30,880,000 |
|
| $ | - |
|
|
| 9.8 |
|
Granted |
|
| 300,000 |
|
| $ | - |
|
|
| 9.0 |
|
Vested |
|
| (8,126,666 | ) |
| $ | - |
|
|
| 8.3 |
|
Forfeited/expired |
|
| - |
|
|
| - |
|
|
| - |
|
Nonvested - December 31, 2022 |
|
| 23,053,334 |
|
| $ | - |
|
|
| 8.8 |
|
| F-13 |
| Table of Contents |
Restricted Stock Compensation
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.
On December 31, 2022, the Company’s Board of Directors approved the grant of 250,000 restricted share of common stock to each of the Directors of the Company, for services to be rendered during 2021 and 2022, all of which vested on December 31, 2022. Compensation expense related to this grant for the year 2022 was $122,375 based upon fair value of our common stock of $0.089 per share. The Company’s Board of Directors also approved the granting of restricted shares of common stock for employee performance related to 2021 performance with a fair value of $160,645. The Board also approved on January 3, 2023 4,000,000 shares of restricted stock related to the Chief Executive Officer for bonus related to 2022 service with a fair value of $356,000.
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%.
During the year ended December 31, 2022, the Company issued 392,438 Common Stock Warrants in connection with issuances of promissory notes, of which 42,438 were issued to related parties. 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, 2022, the number of shares issuable upon exercise of the Common Stock Warrants were 10,992,438 shares.
Type |
| Issue Date |
| Shares |
|
| 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 | |
Investors |
| 7/29/2022 |
|
| 87,500 |
|
| $ | 0.20 |
|
| 7/28/2027 | |
Investors |
| 7/29/2022 |
|
| 87,500 |
|
| $ | 0.25 |
|
| 7/28/2027 | |
Investors |
| 8/5/2022 |
|
| 43,750 |
|
| $ | 0.20 |
|
| 8/4/2027 | |
Investors |
| 8/5/2022 |
|
| 43,750 |
|
| $ | 0.25 |
|
| 8/4/2027 | |
Investors |
| 8/19/2022 |
|
| 43,750 |
|
| $ | 0.20 |
|
| 8/18/2027 | |
Investors |
| 8/19/2022 |
|
| 43,750 |
|
| $ | 0.25 |
|
| 8/18/2027 | |
Investors |
| 11/28/2022 |
|
| 9,407 |
|
| $ | 0.20 |
|
| 11/27/2027 | |
Investors |
| 11/28/2022 |
|
| 9,406 |
|
| $ | 0.25 |
|
| 11/27/2027 | |
Investors |
| 12/15/2022 |
|
| 11,812 |
|
| $ | 0.20 |
|
| 12/14/2027 | |
Investors |
| 12/15/2022 |
|
| 11,813 |
|
| $ | 0.25 |
|
| 12/14/2027 | |
Total |
|
|
|
| 10,992,438 |
|
|
|
|
|
|
| |
|
| Warrant Shares Outstanding |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Life |
|
| Intrinsic Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
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 |
|
| 718,223 |
| |
Granted |
|
| 392,438 |
|
| $ | 0.23 |
|
|
| 4.66 |
|
| 88,299 |
| |
Forfeited/expired |
|
| - |
|
| $ | - |
|
|
| - |
|
|
| - |
|
Outstanding – December 31, 2022 |
|
| 10,992,438 |
|
| $ | 0.23 |
|
|
| 3.45 |
|
| $ | 803,522 |
|
| F-14 |
| Table of Contents |
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.
In January 2022 the Company exercised its equity line of credit of an aggregate amount of $350,000 in exchange for 4,772,844 shares of common stock. The balance available as of December 31, 2022, to draw on the equity line of credit after the draw was $4,650,000.
4. PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and consist of the following:
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Furniture and fixtures |
| $ | 69,840 |
|
| $ | 69,840 |
|
Leasehold improvements |
|
| 30,298 |
|
|
| 26,145 |
|
Equipment |
|
| 22,240 |
|
|
| 22,240 |
|
Vehicles |
|
| 32,000 |
|
|
| 32,000 |
|
|
| $ | 154,378 |
|
| $ | 150,225 |
|
Less accumulated depreciation |
|
| (80,184 | ) |
|
| (57,663 | ) |
|
| $ | 74,194 |
|
| $ | 92,562 |
|
Depreciation expense on property and equipment for the years ended December 31, 2022 and 2021, were $22,521 and $6,745, respectively.
5. GOODWILL AND OTHER INTANGIBLE ASSETS
The following table sets forth the changes in the carrying amount of goodwill for the year ended 2022 and 2021:
|
| Total |
| |
Balance at December 31, 2021 |
| $ | 1,484,966 |
|
2022 activity |
|
| - |
|
Balance at December 31, 2022 |
| $ | 1,484,966 |
|
The following table sets forth the gross carrying amounts and accumulated amortization of the Company’s intangible assets as of December 31, 2022 and 2021:
|
| Gross Carrying Amount |
|
| Impairment |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
| ||||
Definite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
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 |
|
Capitalized software |
|
| 3,014,490 |
|
|
| - |
|
|
| (2,483,429 | ) |
|
| 531,061 |
|
Customer relationships |
|
| 3,713,443 |
|
|
| - |
|
|
| (1,363,054 | ) |
|
| 2,350,380 |
|
Acquired technology |
|
| 1,527,186 |
|
|
| - |
|
|
| (1,447,758 | ) |
|
| 79,428 |
|
Total definite-lived intangible assets at December 31, 2022 |
| $ | 8,255,110 |
|
| $ | - |
|
| $ | (5,294,241 | ) |
| $ | 2,960,869 |
|
| F-15 |
| Table of Contents |
Amortization expense of intangible assets was $1,269,564 and $1,287,853, respectively, for the years ended December 31, 2022 and 2021. 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 |
|
| 3.2 years |
|
Customer relationships |
|
| 4.0 years |
|
Acquired technology |
|
| 5.0 years |
|
All Intangible assets |
|
| 5.9 years |
|
As of December 31, 2022, 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 |
| |
2023 |
|
| 1,025,042 |
|
2024 |
|
| 838,140 |
|
2025 |
|
| 838,140 |
|
2026 |
|
| 259,547 |
|
2027 |
|
| - |
|
2028 |
|
| - |
|
2029 |
|
| - |
|
6. LONG-TERM DEBT
|
|
|
| December 31, |
|
| December 31, |
| |||
|
|
|
| 2022 |
|
| 2021 |
| |||
| (2) |
|
| Convertible Note bearing interest at 12% due July 31, 2022 |
| $ | - |
|
| $ | 162,625 |
|
| (2) |
|
| Convertible Note bearing interest at 12% due July 31, 2022 |
|
| - |
|
|
| 379,458 |
|
| (3) |
|
| Convertible Note bearing interest at 12% due May, 2023 |
|
| 578,802 |
|
|
| 541,589 |
|
| (4) |
|
| Convertible Note bearing interest at 12% due April 27, 2022 |
|
| - |
|
|
| 145,301 |
|
| (5) |
|
| Convertible Note bearing interest at 12% due April 25, 2022 |
|
| - |
|
|
| 235,548 |
|
| (6) |
|
| Convertible Note bearing interest at 12% due May 12, 2022 |
|
| - |
|
|
| 242,151 |
|
| (7) |
|
| Note bearing interest at 18% due October 1, 2023 |
|
| 1,012,500 |
|
|
| 1,012,637 |
|
| (7) |
|
| Note bearing interest at 18% due October 1, 2023 |
|
| 506,250 |
|
|
| 506,318 |
|
| (8) |
|
| Note bearing interest at 18% due October 1, 2023 |
|
| 32,752 |
|
|
| 38,488 |
|
| (9) |
|
| Secured Promissory Note bearing interest at 17.5% due February 28, 2026 |
|
| 1,960,965 |
|
|
| - |
|
| (10) |
|
| Promissory Note bearing interest at 14%, due January 15, 2023 |
|
| 50,892 |
|
|
| - |
|
| (11) |
|
| Promissory Note bearing interest at 14%, due April 21, 2023 |
|
| 329,227 |
|
|
| - |
|
| (12) |
|
| Related Party Promissory Note bearing interest at 14% due February 28, 2023 |
|
| 108,778 |
|
|
| - |
|
| (13) |
|
| Promissory Note bearing interest at 15%, due January 25, 2023 |
|
| 506,370 |
|
|
| - |
|
| (14) |
|
| Promissory Note bearing interest at 15%, due February 1, 2023 |
|
| 253,184 |
|
|
| - |
|
| (14) |
|
| Promissory Note bearing interest at 15%, due February 15, 2023 |
|
| 253,184 |
|
|
| - |
|
| (1) |
|
| Related Party Promissory Note bearing interest at 18%, due December 31, 2020 |
|
| - |
|
|
| 483,150 |
|
| (15) |
|
| Related Party Promissory Notes bearing interest at 18%, due March 31, 2023 |
|
| 135,888 |
|
|
| - |
|
| (16) |
|
| Related Party Long term debt bearing interest at 8%, due April 15, 2021 |
|
| - |
|
|
| 116,562 |
|
|
|
|
|
|
| 5,728,792 |
|
|
| 3,863,827 |
|
|
|
| Less current maturities |
|
| (4,279,531 | ) |
|
| (2,325,339 | ) |
|
|
| Total Long-Term Debt |
| $ | 1,449,261 |
|
| $ | 1,538,488 |
|
Total future minimum payments due on long-term debt as of:
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||
2022 |
| $ | - |
|
|
| 1,508,628 |
|
2023 |
|
| 573,401 |
|
|
| 8,628 |
|
2024 |
|
| 679,438 |
|
|
| 8,628 |
|
2025 |
|
| 196,422 |
|
|
| 8,628 |
|
2026 |
|
| - |
|
|
| 3,976 |
|
2027 |
|
| - |
|
|
| - |
|
TOTAL |
| $ | 1,449,261 |
|
| $ | 1,538,488 |
|
| F-16 |
| 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. After 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, 2022. 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 was fully repaid in February of 2022. |
|
|
2. | In April 2021, the Company signed a $150,000 convertible promissory note and a $250,000 convertible promissory note with two separate entities controlled by the same party. These notes have a maturity date twelve months after issuance and received in exchange $150,000 and $250,000 from these two finance companies (the “Investor” or “Holder”). An interest charge of 12% per annum shall accrue and be paid on the maturity date. The notes are convertible into the Company’s Common Stock at fixed conversion price $0.10 per common share. The Company has a 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 Holders collectively 780,000 restricted shares of the Company’s Common Stock and a warrant to purchase 2,600,000 shares of Company Common Stock 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. At Maturity these notes were renegotiated and extended to July 31, 2022, under the same terms and conditions. These notes were fully paid in July 2022. |
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3. | 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 a warrant to purchase 2,600,000 shares of Company Common Stock 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. At Maturity this note was renegotiated and term extended to June 2023 for an additional principal consideration of $55,400 under the same interest rate and conditions as the matured note. There was $18,467 remaining in debt discount to be amortized over the term of the loan. |
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4. | 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. In 2021 the Investor converted $35,000 of outstanding principal and interest into 350,000 shares of the Company’s common stock. This note was fully satisfied in May 2022.
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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 $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 a warrant to purchase 1,300,000 shares of Company Common Stock 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 ended December 31, 2021, the Investor converted $35,000 of outstanding principal and interest into 350,000 shares of the Company’s common stock. This note was fully satisfied in April 2022.
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6. | 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 a warrant to purchase 1,300,000 shares of Company Common Stock 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. After the issuance of the promissory note, the parties entered the First Amendment to Convertible Promissory Note which extended the term of the note by three months to August 2022. During the year ended December 31, 2021, the Investor converted $28,846 of outstanding principal and interest into 288,463 shares of the Company’s common stock. During the period ending June 30, 2022, the Investor converted an additional $22,387 of outstanding principal and interest plus $350 in fees into 227,368 shares of the Company’s common stock. This note was fully paid in August 2022.
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7. | 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. The promissory note is subordinated to the Company’s senior lender.
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8. | 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 principal and interest of $791 are due monthly.
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F-17 |
| Table of Contents |
9. | 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 principal 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. The Company is in compliance with its covenants as of December 31, 2022. |
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10. | In April 2022, the Company signed a $50,000 unsecured promissory note with a maturity date six (6) months after issuance with an interest charge of 14% per annum which shall accrue and be paid on the maturity date. The Company has the right to prepay this note without penalty. At maturity in October 2022, this note was reissued under the same term with a maturity of three (3) months. The promissory note is subordinated to the Company’s senior lender.
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11. | In April 2022, the Company signed a $300,000 unsecured promissory note with a maturity date six (6) months after issuance with an interest charge of 14% per annum which shall accrue and be paid on the maturity date. The Company has the right to prepay this note without penalty. At maturing in October 2022, this note was reissued under the same terms with a maturity of date of six (6) months. The promissory note is subordinated to the Company’s senior lender.
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12. | In June 2022, the Company signed a $100,000 unsecured promissory note with a maturity date six (6) months after issuance with an interest charge of 14% per annum which shall accrue and be paid on the maturity date. The Company has the right to prepay this note without penalty. At maturing in November 2022, this note was reissued under the same terms with a maturity of date of three (3) months. The Company also issued to the Holder a warrant to purchase 18,813 shares of Company Common Stock with a 5-year term. The exercise price per share of Common stock under this Warrant is $0.25 per share for 9,407 warrants and $0.20 per share for 9,406 warrants. There was $1,156 remaining in debt discount to be amortized over the term of the loan. The promissory note is subordinated to the Company’s senior lender. This note was entered into with a related party.
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13. | In July 2022, the Company signed a $500,000 unsecured promissory note with a maturity date six (6) months after issuance with an interest charge of 14% per annum. The note is callable by the Holder no earlier than 90 days from issue. The Company has the right to prepay this note without penalty. The Company issued to the Holder a warrant to purchase 175,000 shares of Company Common Stock with a 5-year term. The exercise price per share of Common stock under this Warrant is $0.25 per share for 87,500 warrants and $0.20 per share for 87,500 warrants. There was $2,775 remaining in debt discount to be amortized over the term of the loan. The promissory note is subordinated to the Company’s senior lender. |
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14. | In August 2022, the Company signed two $250,000 unsecured promissory notes with a maturity date six (6) months after issuance with an interest charge of 14% per annum to the same investor in 14 and 9. The notes are callable by the Holder no earlier than 90 days from issue. The Company has the right to prepay this note without penalty. The Company issued to the Holder a warrant to purchase 175,000 shares of Company Common Stock with a 5-year term. The exercise price per share of Common stock under this Warrant is $0.25 per share for 87,500 warrants and $0.20 per share for 87,500 warrants. There was $4,669 remaining in debt discount to be amortized over the term of these loans. The promissory note is subordinated to the Company’s senior lender. |
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15. | In December 2022, the Company entered into an unsecured promissory note with related party in exchange for $55,000. The maturity of the promissory note is four months from the date of issuance and carries an interest rate of 15% per annum. In conjunction with the promissory note, the Company also issued a warrant to purchase 23,625 shares of common stock which expires five years December 15, 2022 and has an exercise price of $0.20 with respect to 11,813 shares underlying the Warrant and $0.25 with respect to 11,812 shares underlying the Warrant. The promissory note is subordinated to the Company’s senior lender. In addition, in December 2022, the Company entered into an unsecured convertible promissory note with the same related party in exchange for $80,000. The maturity of the convertible note is March 31, 2023 and carries an interest rate of 15% per annum and is convertible into Company common stock at a conversion rate of $0.08 per share. There was $10,230 remaining in debt discounts to be amortized over the term of these loans. The promissory note is subordinated to the Company’s senior lender. |
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16. | In April 2018 the Company entered into a note with a related party which included a note payable in the amount of $87,500 bearing interest at 8% payable. This note was transferred to accounts payable and accrued expenses in August 2022 in conjunction with a non-binding arbitration settlement. |
7. INCOME TAXES
The Company has incurred net losses since inception. As of December 31, 2022, the Company had cumulative federal net operating loss carryforwards of approximately $18,645,000 which are available to be carried forward indefinitely and federal net operating loss carryforwards of approximately $51,128,000 which at the latter date may be carried forward for tax years ending through December 31, 2037. As of December 31, 2022, the Company had cumulative state net operating loss carryforward of approximately $5,900,000 which will begin expiring in 2031 if not utilized prior to then. 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, 2022 and 2021:
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Net Operating Losses |
|
| 14,849,000 |
|
|
| 14,986,000 |
|
Intangible assets |
|
| 74,000 |
|
|
|
|
|
Stock based compensation |
|
| 418,000 |
|
|
|
|
|
Property and equipment |
|
| (140,000 | ) |
|
|
|
|
Valuation Allowance |
|
| (15,201,000 | ) |
|
| (14,986,000 | ) |
Net Deferred Tax Asset |
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| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Reconciliation of the effective income tax rate to the federal statutory rate: |
|
|
|
|
|
|
|
|
Federal Income Tax Rate |
|
| 21 | % |
|
| 21 | % |
Permanent Differences |
|
| (2 | )% |
|
| - |
|
State Taxes, net |
|
| 3 | % |
|
| - |
|
Change in valuation allowance including the effect of the rate change |
|
| (22) | % |
|
| (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 2022 and 2021 revenue. The Company has accounts receivable concentration with one customer in 2022 representing 31% and two customers with concentrations of 12% and 11% respectively of total accounts receivables outstanding as of December 31, 2022 and one customers that represent 33% of accounts receivable outstanding as of December 31, 2021. Overall, the company decreased its accounts receivable ending balance approximately (34%) in 2022 from year-end 2021, compared to an over 61% growth in sales for 2022.
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 had 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 31, 2022, undiscounted future lease obligations for the office space are as follows:
Lease Commitments | ||||||||||||||
as of December 31, 2022 | ||||||||||||||
Less than 1 year |
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| 1-3 years |
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| 3-5 years |
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| Total |
| ||||
| $ | 268,532 |
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| $ | 752,235 |
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| $ | 288,707 |
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| $ | 1,309,474 |
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Lease costs for the year ended December 31, 2022 were $344,301 and cash paid for amounts included in the measurement of lease liabilities for the year ended December 31, 2022 were $285,786. As of December 31, 2022, the following represents the difference between the remaining undiscounted lease commitments under non-cancelable leases and the lease liabilities:
Undiscounted minimum lease commitments |
| $ | 1,309,474 |
|
Present value adjustment using incremental borrowing rate |
|
| (330,599 | ) |
Lease liabilities |
| $ | 978,875 |
|
| 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% (4,500,000) shares vest on December 16, 2023, another 25% (4,500,000) 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 Statements of Operations. For the year ended December 31, 2022, Mr. McDermott received an award of 4,000,000 restricted shares in early 2023 which has been reflected in compensation expense in the accompanying 2022 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 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. For the year ended December 31, 2022, Mr. Fidanza received an award of 250,000 restricted shares which has been reflected in compensation expense in the accompanying 2022 Statements of Operations.
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. For the year ended December 31, 2022, Mr. Chakravarthi received an award of 250,000 restricted shares which has been reflected in compensation expense in the accompanying 2022 Statements of Operations.
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. For the year ended December 31, 2022, Mr. Stellinga received an award of 250,000 restricted shares which has been reflected in compensation expense in the accompanying 2022 Statements of Operations.
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, iCoreConnect 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 its assets that were previously pledged as security to Sonoran Pacific Resources, LLP, an Arizona limited liability partnership (“SPR”) and Jerry Smith (“Smith”) (collectively, the “lender”). On August 24, 2021, iCoreConnect received a default notice from the lender asserting that iCoreConnect 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 iCoreConnect beginning approximately in March of 2009 that was secured by all of the assets of iCoreConnect. iCoreConnect initiated an investigation into the matter and concluded that it had repaid all of the loans and any loans that had not been repaid were released under the terms of a Recapitalization Agreement dated November 1, 2016. iCoreConnect 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.
On November 1, 2022, iCoreConnect entered into a settlement agreement and release (the “Settlement Agreement”) with SPR and Smith in connection with the above litigation. In order to resolve all matters subject to the dispute, the Settlement Agreement provided that on, or before, the 60th day following the effective date of the Settlement Agreement, which was November 1, 2022 (such 60th day, the “Payment Date”), iCoreConnect shall redeem, and/or or iCoreConnect’s designees shall acquire, a total of 9,000,000 shares of iCoreConnect Common Stock from SPR and certain shareholders or affiliates of SPR at a purchase price of $0.08 per share. The Settlement Agreement further provided that in addition to the purchase of the foregoing 9,000,000 shares, iCoreConnect or its designee will have the option, but not the obligation, to acquire or redeem any or all of the remaining 5,401,887 shares held by certain shareholders or affiliates of SPR on, or before, the Payment Date, at the cost of $0.08 per share. In connection with the dispute, iCoreConnect had previously posted a cash bond of $200,000 with the court. Pursuant to the Settlement Agreement, $100,000 was released to SPR upon execution of the Settlement Agreement, which amount will be credited toward the payment of the 9,000,000 shares described above. The foregoing share purchase obligation was satisfied on December 30, 2022. Upon the payment for the shares, the remaining $100,000 of the bond was released to SPR in consideration for the release of all claims and liens and the dismissal of the litigation. Upon iCoreConnect’s compliance with the above share repurchase obligations, J.D. Smith, the son of Jerry Smith, resigned as a director and chairman of Board of Directors. The Settlement Agreement provides that upon the performance of each of the parties of their obligations thereunder, SPR and Smith, on the one hand, and iCoreConnect, on the other hand, each agrees to a complete release of the other party or parties. The Settlement Agreement was fully completed on December 30, 2022 and a full release received from the courts.
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. Upon completion of arbitration in October 2022 the Complainant was awarded an Interim Award of Arbitration in the amount of $270,020 which excluded any interest and fee. Subsequent to year end, in February 2023, a final Arbitration award in the amount of $523,415 was issued which includes interest and fees and the Company has accrued for this amount in its financial statements.
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.
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:
|
| Advantech |
|
| BCS |
|
| STS |
| |||
Consideration Paid: |
| April 23, 2021 |
|
| May 31, 2021 |
|
| September 1, 2021 |
| |||
Cash |
| $ | 1,800,000 |
|
| $ | 100,000 |
|
| $ | 1,500,000 |
|
Common stock |
|
| 500,000 |
|
|
| 25,000 |
|
|
| 500,000 |
|
|
| $ | 2,300,000 |
|
| $ | 125,000 |
|
| $ | 2,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair values of identifiable assets acquired and liabilities assumed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
| $ | 26,944 |
|
| $ | 5,120 |
|
| $ | 150,000 |
|
Other current asset |
|
| - |
|
|
| - |
|
|
| 35,223 |
|
Right of Use - Lease |
|
| - |
|
|
| - |
|
|
| - |
|
Fixed Assets |
|
| 9,875 |
|
|
| - |
|
|
| 32,000 |
|
Customer relationships |
|
| 1,476,630 |
|
|
| 100,000 |
|
|
| 1,606,805 |
|
Total assets acquired |
| $ | 1,513,449 |
|
| $ | 105,120 |
|
| $ | 1,824,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities assumed: |
|
|
|
|
|
|
|
|
|
|
|
|
Due to Seller |
|
| - |
|
|
| - |
|
|
| - |
|
Accrued Liability |
|
| 11,185 |
|
|
| - |
|
|
| - |
|
Deferred revenue |
|
| - |
|
|
| - |
|
|
| - |
|
Lease Liability |
|
| - |
|
|
| - |
|
|
| - |
|
Total liabilities assumed |
| $ | 11,185 |
|
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired |
| $ | 1,502,264 |
|
| $ | 105,120 |
|
| $ | 1,824,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
| $ | 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:
|
| December 31, 2021 |
| |
|
| (unaudited) |
| |
|
|
|
| |
Revenue |
| $ | 6,771,946 |
|
|
|
|
|
|
Net Loss |
|
| (4,403,363 | ) ) |
|
|
|
|
|
Weighted average common shares outstanding |
|
| 146,726,959 |
|
Basic and diluted loss per common share |
| $ | 0.03 |
|
Effective income tax rate |
|
| 21 | % |
12. RELATED PARTY TRANSACTIONS
The Company incurred related party transactions of $561,975 for the year ended December 31, 2022 and $63,216 for the year ended December 31, 2021 in relation to payments of interest and principle on a Note Payable with its Chief Executive Officer and its Chief Operating Officer and consulting fees paid to a director.
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 and recorded $330,047 as other income a for the year ended December 31, 2021
| F-22 |
| Table of Contents |
14. SUBSEQUENT EVENTS
On January 5, 2023, the Company entered into a Merger Agreement and Plan of Reorganization (the “Merger Agreement”), by and among the Company, FG Merger Corp., a Delaware corporation (“FGMC”), and FG Merger Sub Inc., a Nevada corporation and a direct, wholly-owned subsidiary of FGMC (“Merger Sub”). The Merger Agreement provides that, among other things, at the closing (the “Closing”) of the transactions contemplated by the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving as a wholly-owned subsidiary of FGMC. In connection with the Merger, FGMC will change its name to “iCoreConnect Inc.” The Merger and the other transactions contemplated by the Merger Agreement are hereinafter referred to as the “Business Combination.”
The Business Combination is expected to close in the second quarter of 2023, subject to customary closing conditions, including the receipt of certain governmental approvals and the required approval by the stockholders of FGMC and iCoreConnect.
Prior to the Closing, (i) each vested issued and outstanding option to purchase the Company’s common stock shall be exercised into shares of the Company’s common stock (ii) each issued and outstanding warrant to purchase the Company’s common stock shall be exercised into shares of the Company’s common stock and (iii) the outstanding principal together with all accrued and unpaid interest under each convertible promissory note shall be converted into shares of the Company’s common stock.
Prior to the Closing, each share of FGMC common stock par value $0.0001 (“FGMC Common Stock”) shall be converted into shares of newly issued FGMC preferred stock, par value $0.0001 (“FGMC Preferred Stock”). The FGMC Preferred Stock shall have the following rights, preferences, powers, privileges and restrictions, qualifications and limitations:
· | The holders of Preferred Stock shall not be entitled to vote on any matters submitted to the stockholders of FGMC. |
|
|
· | From and after the date of the issuance of any shares of FGMC Preferred Stock, dividends shall accrue at the rate per annum of 12% of the original issue price for each share of FGMC Preferred Stock, prior and in preference to any declaration or payment of any other dividend (subject to appropriate adjustments). |
|
|
· | From the closing of the Business Combination until the second anniversary of the date of the original issuance of the FGMC Preferred Stock, FGMC may, at its option, pay all or part of the accruing dividends on the FGMC Preferred Stock by issuing and delivering additional shares of FGMC Preferred Stock to the holders thereof. |
|
|
· | FGMC shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of FGMC the holders of the FGMC Preferred Stock then outstanding shall first receive dividends due and owing on each outstanding share of FGMC Preferred Stock. |
|
|
· | In the event of any liquidation, dissolution or winding up of FGMC, the holders of shares of FGMC Preferred Stock then outstanding shall be entitled to be paid out of the assets of FGMC available for distribution to its stockholders an amount per share equal to the greater of (i) one times the applicable original issue price, plus any accrued and unpaid dividends, and (ii) such amount as would have been payable had all shares of FGMC Preferred Stock been converted into FGMC Common Stock pursuant to the following paragraph immediately prior to such liquidation, dissolution or winding up, before any payment shall be made to the holders of FGMC Common Stock. |
|
|
· | After 24 months from the closing of the Business Combination, in the event the closing share price of the FGMC Common Stock shall exceed 140% of the Conversion Price (as defined in the Merger Agreement) then in effect, then (i) each outstanding share of FGMC Preferred Stock shall automatically be converted into such number of shares of FGMC Common Stock as is determined by dividing the original issue price by the Conversion Price in effect at the time of conversion and (ii) such shares may not be reissued by FGMC, subject to adjustment. At the time of such conversion, FGMC shall declare and pay all of the dividends that are accrued and unpaid as of the time of the conversion by either, at the option of FGMC, (i) issuing additional FGMC Preferred Stock or (ii) paying cash. |
|
|
· | Each share of FGMC Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of FGMC Common Stock as is determined by dividing the original issue price by the Conversion Price in effect at the time of conversion, subject to adjustment. |
|
|
· | Immediately prior to any such optional conversion FGMC shall pay all dividends on the FGMC Preferred Stock being converted that are accrued and unpaid as of such time by, either, at the option of FGMC: (i) issuing additional FGMC Preferred Stock or (ii) paying cash. |
The aggregate consideration to be received by the Company’s stockholders is based on a pre-transaction equity value of $98,000,000 (subject to usual and customary working capital adjustments and any adjustments to reflect the effect of any stock split, reverse stock split, stock dividend, reorganization, recapitalization, reclassification, combination, merger, sale or exchange of shares or other like change with respect to shares of FGMC Common Stock, occurring prior to the Closing date). In accordance with the terms and subject to the conditions of the Merger Agreement, immediately prior to the effective time of the Closing each share of issued and outstanding the Company’s common stock, shall be converted into a number of shares of FGMC Common Stock, based on the Exchange Ratio (as defined in the Merger Agreement).
On January 23, 2023, the Convertible Note holder due in June 2023. exercised its option to convert all of its outstanding principal and interest totaling $603,788 into the Company’s Common Stock at the stated exercise price of $0.10 per common stock resulting in the issuance of 6,037,883 common stock shares.
On January 31, 2023, the related party Convertible Note holder due in March 2023 exercised its option to convert all of his outstanding principal and interest totaling $81,545 into the Company’s Common Stock at the stated exercise price of $0.08 per common stock resulting in the issuance of 1,019,315 common stock shares.
In January 2023, the Company issued 4,750,000 shares of common stock at $0.10 per share for cash proceeds of $475,000. These funds were raised for continued operations.
On February 21, 2023, the Company received a notice under section 21 of Indian Arbitration and Conciliation Act, 1996 related to a dispute pursuant to contract between the Company and a service provider, pursuant to which the service provider has asserted the Company has violated the terms of the contract and has claimed damages of approximately $635,000. The Company is evaluating the claims asserted against it and intends to defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.
On March 15, 2023, the Company entered into a twelve (12) month Convertible Secured Promissory Note (“Note”). The Note is for $2,500,000 with $500,000 paid to the Holder on issuance for net proceeds of $2,000,000. The Note carries and interest of 15% per annum which can be paid in cash or kind and it is convertible either into the Company’s Common Stock after six months from date of issuance at $0.10 per share, or if the Business Combination is completed the Note is convertible into common stock of FGMC. As a condition of the Note all existing outstanding Notes excluding our Senior Secured Note Payable had their term extended to September 1, 2023. In addition all vested option holders and all warrant holders were provided with a cashless purchase option at time of the Business Combination. The Note is superior to all notes in terms of security except of our Senior Secured Note Payable.
| F-23 |
| 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, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Based on this evaluation, our Chief Executive Officer who is our principal executive officer and our Chief Financial Officer, who is our 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 Executive Officer and our Chief Financial Officer were 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 Chief Financial 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 Chief Executive Officer and Chief Financial Officer 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, 2022, our internal control over financial reporting was not effective due to the material weakness described above.
This report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls over financial reporting for as long as we are a "non-accelerated filer."
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.
Not applicable.
| 21 |
| Table of Contents |
PART III
Items 10 Directors, 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 53) has been a member of our Board of Directors since May 2014 and Chief Operating Office since December 2021. 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.
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| Table of Contents |
Paul Jackson (age 59) 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.
Harry Travis (age 68) has been a director of iCoreConnect since January 2023. Mr. Travis has been president of The Travis Group, a pharmacy and health care consulting firm since June 2022, prior to which he was the Senior Vice President Member Service Operations for CVS Caremark where he over saw 30,000 employees and help manage over 200 plus insurance plans. Prior to this role, Mr. Travis was also the President and CEO of eTectRx a company specializing in medical adherence through microchip pill technology. Mr. Travis holds a BS in Pharmacy from the University of Pittsburgh, School of Pharmacy and an MBA from The Darden School at the University of Virginia.
Kevin McDermott (age 57) has been a director of iCoreConnect since January 2023. Mr. McDermott has been with SAP North America for over 20 years and has held various roles throughout his tenure including Director of Software Sales North America, Vice President of Sales and he currently the Head of Channel Sales.
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 |
| 60 |
| Chief Information Officer |
Muralidar Chakravarthi |
| 43 |
| Chief Technology Officer |
Jeffrey Stellinga |
| 53 |
| 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.
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| Table of Contents |
Corporate Governance
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. The current members are Harry Travis, Kevin McDermott and Paul Jackson. Our Board has determined that Paul Jackson 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 Paul Jackson 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 Kevin McDermott (Chair), Paul Jackson and Harry Travis. Our Compensation Committee held discussion in connection with the regular Board of Director meetings held during 2022.
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; |
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| 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.
Nomination of Director Candidates
We receive suggestions for potential director nominees from many sources, including members of the Board, advisors, and stockholders. Any such nominations, together with appropriate biographical information, should be submitted to the Secretary of the Company (the “Corporate Secretary”) in the manner discussed below. Any candidates submitted by a stockholder or stockholder group are reviewed and considered in the same manner as all other candidates.
Qualifications for consideration as a Board nominee may vary according to the particular areas of expertise being sought as a complement to the existing board composition. However, minimum qualifications include high level leadership experience in business activities, breadth of knowledge about issues affecting the Company, experience on other boards of directors, preferably public company boards, and time available for meetings and consultation on Company matters. Our Nominating and Governance Committee does not have a formal policy with regard to the consideration of diversity in identifying director candidates, but seeks a diverse group of candidates who possess the background, skills and expertise to make a significant contribution to the Board, to the Company and our stockholders. Candidates whose evaluations are favorable are recommended by our Nominating and Governance Committee to the full Board for consideration. The full Board selects and recommends candidates for nomination as directors for stockholders to consider and vote upon at the annual meeting.
A stockholder wishing to nominate a candidate for election to our Board of Directors at any annual meeting at which the Board has determined that one or more directors will be elected must submit a written notice of his or her nomination of a candidate to the Corporate Secretary, providing the candidates name, biographical data and other relevant information together with a consent from the nominee. The submission must comply with our Bylaws and must be received at our principal executive offices 120 days prior to the anniversary date of the mailing date of our previous year’s proxy statement so as to permit the Board of Directors time to evaluate the qualifications of the nominee.
We have not employed an executive search firm, or paid a fee to any other third party, to locate qualified candidates for director positions.
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth information concerning the compensation of our NEOs.
|
| Year |
| Salary |
|
| Stock Awards (1) (2) |
|
| Options Awards (1)(2) |
|
| All other compensation (3) |
|
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Robert McDermott |
| 2022 |
| $ | 270,417 |
|
| $ | 396,050 |
|
|
| 559,377 |
|
| $ | 308,562 |
|
| $ | 1,534,406 |
|
Chief Executive Officer and President |
| 2021 |
| $ | 289,250 |
|
| $ | 176,160 |
|
|
| 23,307 |
|
| $ | 266,872 |
|
| $ | 755,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Fidanza |
| 2022 |
| $ | 165,481 |
|
| $ | 22,250 |
|
|
| 93,230 |
|
| $ | 9,000 |
|
|
| 289,961 |
|
Chief Information Officer |
| 2021 |
| $ | 150,625 |
|
| $ | - |
|
|
| 3,885 |
|
| $ | 9,375 |
|
|
| 163,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Muralidar Chakravarthi |
| 2022 |
| $ | 165,481 |
|
| $ | 22,250 |
|
|
| 93,230 |
|
| $ | 9,000 |
|
| $ | 289,961 |
|
Chief Technology Officer |
| 2021 |
| $ | 131,458 |
|
| $ | - |
|
|
| 3,885 |
|
| $ | 6,000 |
|
| $ | 141,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Stellinga |
| 2022 |
| $ | 150,313 |
|
| $ | 40,050 |
|
|
| 82,871 |
|
| $ | 9,000 |
|
| $ | 282,234 |
|
Chief Operating Officer |
| 2021 |
| $ | 125,000 |
|
| $ | - |
|
|
| 3,453 |
|
| $ | 6,000 |
|
| $ | 134,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Archit Shah |
| 2022 |
| $ | 235,625 |
|
| $ | - |
|
|
| 115,200 |
|
| $ | 6,000 |
|
| $ | 356,825 |
|
Chief Financial Officer |
| 2021 |
| $ | 74,072 |
|
| $ | - |
|
|
| 38,400 |
|
| $ | 2,000 |
|
| $ | 114,472 |
|
Notes:
| 1. | Represents the aggregate grant date fair value of the shares of the Company’s Common Stock or options 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. |
|
|
|
| 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. |
|
|
|
| 3. | These amounts are for Health Care Insurance reimbursement and automobile allowances as per the terms of the respective employment agreements. |
| 27 |
| Table of Contents |
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.
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 |
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% (4,500,000 shares) vest on December 16, 2023, another 25% (4,500-,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, 2022, Mr. McDermott received an award of 4,000,000 restricted shares in early 2023 which has been reflected in compensation expense in the accompanying 2022 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 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.
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.
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.
Outstanding Equity Awards
As of December 31, 2022, our NEOs had the following outstanding options:
Option Awards | |||||||||||||||||
Name |
| Grant Date of Equity Award |
| Number of Securities Underlying Unexercised Options (#) Exercisable |
|
| Number of Securities Underlying Unexercised Options (#) Unexercisable |
|
| Option Exercise Price ($) |
|
| Option Expiration Date | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Robert McDermott |
| 12/16/2021 |
|
| 4,500,000 | (1) |
|
| 13,500,000 | (1) |
| $ | 0.124306 |
|
| 12/14/2031 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
David Fidanza |
| 9/1/2017 |
|
| 180,000 |
|
|
| - |
|
| $ | 0.03 |
|
| 9/1/2028 | |
|
| 10/1/2018 |
|
| 300,000 |
|
|
| - |
|
| $ | 0.25 |
|
| 10/2/2028 | |
|
| 12/16/2021 |
|
| 750,000 | (1) |
|
| 2,250,000 | (1) |
| $ | 0.124306 |
|
| 12/14/2031 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Jeffery Stellinga |
| 12/16/2021 |
|
| 666,667 | (2) |
|
| 1,333,333 | (2) |
| $ | 0.124306 |
|
| 12/14/2031 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Murali Chakravarthi |
| 9/1/2017 |
|
| 200,000 |
|
|
| - |
|
| $ | 0.03 |
|
| 9/1/2028 | |
|
| 11/1/2018 |
|
| 300,000 |
|
|
| - |
|
| $ | 0.25 |
|
| 11/1/2028 | |
|
| 12/16/2021 |
|
| 750,000 | (1) |
|
| 2,250,000 | (1) |
| $ | 0.124306 |
|
| 12/14/2031 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Archit Shah |
| 9/7/2021 |
|
| 960,000 | (2) |
|
| 1,920,000 | (2) |
| $ | 0.128165 |
|
| 9/5/2031 | |
(1) The shares underlying the options vest in equal annual installments over a four-year period (i.e., one-quarter of each grant vests on the first, second, third, and fourth anniversary of the grant date).
(2) The shares underlying the options vest in equal annual installments over a three-year period (i.e., one-third of each grant vests on the first, second, and third anniversary of the grant date).
Compensation of Directors
Our directors are entitled to such compensation for their services as the Board may from time to time determine, and reimbursements for their reasonable expenses incurred in attending meetings of directors.
The following table shows for the fiscal year ended December 31, 2022 certain information with respect to the compensation of our non-employee directors:
Name |
| Stock Awards ($) (1) |
|
| Total ($) |
| ||
Paul Jackson |
| $ | 17,800 |
|
| $ | 17,800 |
|
JD Smith (2) |
|
| - |
|
|
| - |
|
Robert DeSanti |
| $ | 17,800 |
|
| $ | 17,800 |
|
John Schneller |
| $ | 17,800 |
|
| $ | 17,800 |
|
(1) Represents the full grant date fair value of the awards calculated in accordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that may be realized by the director. As of December 31, 2022, the aggregate number of stock awards outstanding held by our non-employee directors were: Mr. Jackson – 275,000 shares; Mr. Smith – 225,000 shares; Mr. DeSanti – 425,000 shares; and Mr. Schneller – 375,000 shares. None of our non-employee directors held options as of December 31, 2022.
(2) Mr. Smith resigned on December 27, 2022.
| 30 |
| Table of Contents |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information regarding beneficial ownership of our Common Stock as of March 15, 2023 (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* |
| ||
Executives Officers and Directors |
|
|
|
|
|
| ||
Robert P. McDermott |
|
| 37,006,229 | (1) |
|
| 17.4 | % |
Jeffrey W Stellinga |
|
| 11,555,228 | (2) |
|
| 5.9 | % |
David Fidanza |
|
| 4,489,862 | (3) |
|
| 2.3 | % |
Muralidar Chakravarthi |
|
| 4,190,753 | (4) |
|
| 2.1 |
|
Archit Shah |
|
| 2,945,250 | (5) |
|
| 1.5 | % |
Paul Jackson |
|
| 1,075,000 | (6) |
|
| 0.6 | % |
Harry Travis |
|
| 187,500 | (7) |
|
| 0.1 | % |
Kevin McDermott |
|
| 100,000 | (8) |
|
| 0 | % |
All executive officers and directors as a group (8 persons) |
|
| 61,549,822 |
|
|
| 31.9 | % |
|
|
|
|
|
|
|
|
|
Shareholders greater than 5% |
|
|
|
|
|
|
|
|
Robert A DeSanti |
|
| 12,301,320 | (9) |
|
| 6.4 |
|
%All shareholders greater than 5% |
|
| 12,301,320 |
|
|
| 6.4 | % |
Notes:
* Calculated on the basis of 193,127,726 shares of Common Stock outstanding on March 13, 2023. 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 13,236,389 restricted shares of Common Stock owned directly by Mr. McDermott, 318,701 shares owned by KRB Leasing, Inc. controlled by Mr. McDermott, 18,700,000 shares issuable upon exercise of options, 23,625 common stock warrants issuable upon exercise and 1,000,000 shares issuable upon conversion of convertible note. |
|
|
|
| 2. | Consists of 9,536,415 restricted shares of Common Stock owned by Mr. Stellinga and 2,000,000 shares issuable upon exercise of options and 18,813 common stock warrants issuable upon exercise |
|
|
|
| 3. | Consists of 1,309,862 restricted shares of Common Stock owned by Mr. Fidanza and 3,300,000 shares issuable upon exercise of options. |
|
|
|
| 4. | Consists of 990,753 restricted shares of Common Stock owned by Mr. Chakravarthi and 3,300,000 shares issuable upon exercise of options. |
|
|
|
| 5. | Consists of 65,250 restricted shares of Common Stock owned directly by Mr. Shah and 2,880,000 shares issuable upon exercise of options. |
|
|
|
| 6. | Consists of 1,075,000 restricted shares of Common Stock owned by Mr. Jackson |
|
|
|
| 7. | Consists of 187,500 restricted shares of Common Stock owned by Mr. Travis |
|
|
|
| 8. | Consists of 100,000 restricted shares of Common Stock owned by Mr. McDermott |
|
|
|
| 9. | Consists of 11,761,149 restricted shares of Common Stock owned by Mr. Robert DeSanti |
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth information regarding our equity compensation plans at December 31, 2022:
Plan category |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |
|
| Weighted-average exercise price of outstanding options, warrants and rights (b) |
|
| Number of securities (by class) remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
| |||
Equity compensation plans approved by security holders (1) |
|
| 43,227,438 |
|
| $ | 0.15 |
|
|
| - |
|
Equity compensation plans not approved by security holders |
|
| - |
|
| $ | - |
|
|
| – |
|
(1) | Represents shares of common stock issuable upon exercise of outstanding stock options and rights under our shareholder approved equity plan. |
| 31 |
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Item 13. Certain Relationships and Related Transactions, and Director Independence
For the year ended December 31, 2022 the Company repaid a Note Payable with its Chief Executive Officer in the amount of $497,309 including accrued interest and outstanding principal. Subsequent to this payment the Company also issued a Note Payable in the amount of $55,000 and issued warrants of 9,625 in relation to this note as well as a Convertible Promissory Note in the amount of $80,000 convertible at $0.08 to its Chief Executive Officer. In addition, the Company issued a Note Payable to its Chief Operating Officer in the amount to $100,000 that matured and was reissued for $107,500. The Company also incurred $55,000 in relation to consulting fees from one of its independent directors.
For the year ended December 31, 2021, the Company repaid a Note Payable with its Chief Executive Officer in the amount of $63,216 accrued interest and outstanding principal.
The Company has issued 23,625 common stock warrants to its Chief Executive Officer and 18,813 common stock warrants to its Chief Operating Officer in conjunction with issuances of the above promissory notes.
Except as set forth above, 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, Jeffrey W. Stellinga, Paul Jackson, Harry Travis and Kevin McDermott. 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 two independent directors, Harry Travis and Paul Jackson. . Kevin McDermott is related to Robert McDermott and our Board does not consider Kevin McDermott to be independent.
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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 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 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 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, 2022 and 2021, the Company’s independent registered public accounting firms, rendered services to the Company for the following fees:
|
| 2022 |
|
| 2021 |
| ||
Audit Fees |
| $ | 195,700 |
|
| $ | 182,900 |
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Tax Fees |
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| 17,510 |
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|
|
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Total |
| $ | 213,210 |
|
| $ | 182,900 |
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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.
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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*:
_________________
* Filed herewith.
** Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). FGMC agrees to furnish supplementally a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request.
+ Management contract or compensatory plan, contract or arrangement.
Item 16. Form 10-K Summary
None.
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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 |
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|
|
|
|
/s/ Robert P McDermott |
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Robert P McDermott |
| Chief Executive Officer |
| March 22, 2023 |
|
| (Principal Executive Officer) |
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/s/ Archit Shah |
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|
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Archit Shah |
| Chief Financial and Accounting Officer |
| March 22, 2023 |
|
| (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 |
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|
|
Robert P McDermott |
| Director |
| March 22, 2023 |
|
|
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/s/ Jeff Stellinga |
|
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|
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Jeff Stellinga |
| Director |
| March 22, 2023 |
|
|
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/s/ Harry Travis |
|
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|
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Harry Travis |
| Director |
| March 22, 2023 |
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/s/ Paul Jackson |
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Paul Jackson |
| Director |
| March 22, 2023 |
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/s/ Kevin McDermott |
|
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Kevin McDermott |
| Director |
| March 22, 2023 |
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EXHIBIT 4.1
DESCRIPTION OF THE COMPANY’S SECURITIES
The following summary is a description of the material terms of our capital stock. This summary is not complete, and is qualified by reference to our amended and restated articles of incorporation, and our amended and restated bylaws, which are filed as exhibits to this Annual Report on Form 10-K and are incorporated by reference herein. We encourage you to read our amended and restated articles of incorporation, our amended and restated bylaws and the applicable provisions of the Nevada Revised Statutes for additional information.
Common stock
iCoreConnect is authorized to issue 600,000,000 shares of common stock, $0.001 par value per share. Holders of shares of iCoreConnect Common Stock are entitled to one vote per share on all matters submitted to a vote of the stockholders and are not entitled to cumulative voting rights. iCoreConnect’s shares of common stock do not carry any preemptive, conversion or subscription rights, and there are no sinking fund or redemption provisions applicable to the shares of iCoreConnect’s common stock. Holders of common stock are entitled to receive dividends and other distributions in cash, stock or property as may be declared by iCoreConnect’s Board of Directors from time to time out of assets or funds legally available for dividends or other distributions, subject to dividend or distribution preferences that may be applicable to any then outstanding shares of preferred stock. In the event of iCoreConnect’s voluntary or involuntary liquidation, dissolution or winding up, holders of shares of iCoreConnect’s common stock are entitled to share ratably in the assets legally available for distribution to stockholders after payment of all debts and other liabilities and satisfaction of the liquidation preference, if any, granted to the holders of any preferred stock then outstanding. All outstanding shares of iCoreConnect’s common stock are fully paid and nonassessable.
Preferred Stock
iCoreConnect is authorized to issue 10,000,000 shares of preferred stock, $0.001 par value per share, of which no shares are outstanding. iCoreConnect’s articles of incorporation authorizes its Board of Directors to establish one or more series of preferred stock (including convertible preferred stock). Unless required by law, the authorized shares of preferred stock will be available for issuance without further action by iCoreConnect’s stockholders. iCoreConnect’s Board of Directors is able to determine, with respect to any series of preferred stock, the powers (including voting powers), preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof.
iCoreConnect could issue a series of preferred stock that could, depending on the terms of the series, impede or discourage an acquisition attempt or other transaction that some, or a majority, of the holders of common stock might believe to be in their best interests or in which the holders of common stock might receive a premium for the common stock over the market price of the common stock. Additionally, the issuance of preferred stock may adversely affect the holders of common stock by restricting dividends on the common stock, diluting the voting power of the common stock or subordinating the liquidation rights of the common stock. As a result of these or other factors, the issuance of preferred stock could have an adverse impact on the market price of iCoreConnect’s common stock.
Indemnification of Directors and Officers
Neither iCoreConnect’s articles of incorporation nor bylaws prevent it from indemnifying its officers, directors and agents to the extent permitted under the Nevada Revised Statutes (“NRS”). NRS Section 78.7502, provides that a corporation may indemnify any director, officer, employee or agent of a corporation against expenses, including fees, actually and reasonably incurred by him in connection with any defense to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to Section 78.7502(1) or 78.7502(2), or in defense of any claim, issue or matter therein.
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NRS 78.7502(1) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he 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 conduct was unlawful.
NRS Section 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
NRS Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.
iCoreConnect’s articles of incorporation provides that it will indemnify its directors and officers to the extent and in the manner permitted by the provisions of the NRS, as amended from time to time, subject to any permissible expansion or limitation of such indemnification, as may be set forth in any stockholders’ or directors’ resolution or by contract. Any repeal or modification of these provisions approved by iCoreConnect’s stockholders will be prospective only and will not adversely affect any limitation on the liability of any of iCoreConnect’s directors or officers existing as of the time of such repeal or modification. iCoreConnect is also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the NRS would permit indemnification.
Nevada Anti-Takeover Statutes
The following provisions of the Nevada Revised Statutes (“NRS”) could, if applicable, have the effect of discouraging takeovers of iCoreConnect.
Transactions with Interested Stockholders. The NRS prohibits a publicly-traded Nevada company from engaging in any business combination with an interested stockholder for a period of three years following the date that the stockholder became an interested stockholder unless, prior to that date, the board of directors of the corporation approved either the business combination itself or the transaction that resulted in the stockholder becoming an interested stockholder.
An “interested stockholder” is defined as any entity or person beneficially owning, directly or indirectly, 10% or more of the outstanding voting stock of the corporation and any entity or person affiliated with, controlling, or controlled by any of these entities or persons. The definition of “business combination” is sufficiently broad to cover virtually any type of transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise benefit its own interests rather than the interests of the corporation and its stockholders.
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In addition, business combinations that are not approved and therefore take place after the three year waiting period may also be prohibited unless approved by the board of directors and stockholders or the price to be paid by the interested stockholder is equal to the highest of (i) the highest price per share paid by the interested stockholder within the 3 years immediately preceding the date of the announcement of the business combination or in the transaction in which he or she became an interested stockholder, whichever is higher; (ii) the market value per common share on the date of announcement of the business combination or the date the interested stockholder acquired the shares, whichever is higher; or (iii) if higher for the holders of preferred stock, the highest liquidation value of the preferred stock.
Acquisition of a Controlling Interest. The NRS contains provisions governing the acquisition of a “controlling interest” and provides generally that any person that acquires 20% or more of the outstanding voting shares of an “issuing corporation,” defined as Nevada corporation that has 200 or more stockholders at least 100 of whom are Nevada residents (as set forth in the corporation’s stock ledger); and does business in Nevada directly or through an affiliated corporation, may be denied voting rights with respect to the acquired shares, unless a majority of the disinterested stockholder of the corporation elects to restore such voting rights in whole or in part.
The statute focuses on the acquisition of a “controlling interest” defined as the ownership of outstanding shares sufficient, but for the control share law, to enable the acquiring person, directly or indirectly and individually or in association with others, to exercise (i) one-fifth or more, but less than one-third; (ii) one-third or more, but less than a majority; or (iii) a majority or more of the voting power of the corporation in the election of directors.
The question of whether or not to confer voting rights may only be considered once by the stockholders and once a decision is made, it cannot be revisited. In addition, unless a corporation’s articles of incorporation or bylaws provide otherwise (i) acquired voting securities are redeemable in whole or in part by the issuing corporation at the average price paid for the securities within 30 days if the acquiring person has not given a timely information statement to the issuing corporation or if the stockholders vote not to grant voting rights to the acquiring person’s securities; and (ii) if voting rights are granted to the acquiring person, then any stockholder who voted against the grant of voting rights may demand purchase from the issuing corporation, at fair value, of all or any portion of their securities.
The provisions of this section do not apply to acquisitions made pursuant to the laws of descent and distribution, the enforcement of a judgment, or the satisfaction of a security interest, or acquisitions made in connection with certain mergers or reorganizations.
Listing
Our common stock is listed on the OTC Link (previously “Pink Sheets”) operated by OTC Markets Group Inc. under the symbol “ICCT.”
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EXHIBIT 4.2
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR APPLICABLE EXEMPTION OR SAFE HARBOR PROVISION.
COMMON STOCK PURCHASE WARRANT
ICORECONNECT, INC.
| Warrant Shares: 18,813 | Initial Issue Date: November 28, 2022 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Robert McDermott, or their assigns (the “Investor” or the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Initial Issue Date (the “Initial Exercise Date”) and on or prior to the close of business on the five (5) year anniversary of the Initial Exercise Date (as subject to adjustment hereunder, the “Termination Date”), to subscribe for and purchase from iCoreConnect, Inc., a Nevada corporation (the “Issuer” or the “Company”), 18,813 shares (as subject to adjustment herein, the “Warrant Shares”) of common stock, par value of $0.001, of the Company (the “Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 1.2.
ARTICLE 1 EXERCISE RIGHTS
The Holder will have the right to exercise this Warrant to purchase shares of Common Stock as set forth below.
1.1 Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, from and after the Initial Exercise Date, and then at any time, by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile or emailed copy of the Notice of Exercise form annexed hereto. Within three (3) Business Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or check drawn on a United States bank. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise form within seventy-two (72) hours of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof. “Business Day” shall mean any day on which the banks are open for business in New York, New York.
1.2 Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $0.20 per share for the first nine thousand four hundred and seven (9,407) Warrant Shares, and then $0.25 per share for the next nine thousand four hundred and six (9,406), all Warrant Shares subject to adjustment hereunder (the “Exercise Price”).
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1.3 Delivery of Warrant Shares. Warrant Shares purchased hereunder will be delivered to Holder by 2:30 pm EST within five (5) Business Days of Notice of Exercise by “DWAC/FAST” electronic transfer (such date, the “Warrant Share Delivery Date”). For example, if Holder delivers a Notice of Exercise to the Company at 5:15 pm eastern time on Monday January 1st, the Company’s transfer agent must deliver shares to Holder’s broker via “DWAC/FAST” electronic transfer by no later than 2:30 pm eastern time on Monday, January 8th. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date of delivery of the Notice of Exercise.
1.4 Delivery of Warrant. The Holder shall not be required to physically surrender this Warrant to the Company. If the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, this Warrant shall automatically be cancelled without the need to surrender the Warrant to the Company for cancellation. If this Warrant shall have been exercised in part, the Company shall, at the request of Holder and upon surrender of this Warrant, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant and, for purposes of Rule 144, shall tack back to the original date of this Warrant.
1.5 Warrant Exercise Rescission Rights. If the Warrant Shares are not delivered by DWAC/FAST electronic transfer or in accordance with the timeframe stated in Section 1.3, Holder may, at any time prior to selling those Warrant Shares rescind such exercise, in whole or in part, in which case the Company must, within three (3) days of receipt of notice from the Holder, repay to the Holder the portion of the exercise price so rescinded and reinstate the portion of the Warrant and equivalent number of Warrant Shares for which the exercise was rescinded and, for purposes of Rule 144, such reinstated portion of the Warrant and the Warrant Shares shall tack back to the original date of this Warrant. If Warrant Shares were issued to Holder prior to Holder’s rescission notice, upon return of payment from the Company, Holder will, within three (3) days of receipt of payment, commence procedures to return the Warrant Shares to the Company.
1.6 Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder. The Company shall pay all transfer agent fees required for same-day processing of any Notice of Exercise.
1.7 Holder’s Exercise Limitations. Unless otherwise agreed in writing by both the Company and the Holder, at no time will the Holder exercise any amount of this Warrant to purchase Common Stock that would result in the Holder owning more than 4.99% of the Common Stock outstanding of the Company (the “Beneficial Ownership Limitation”). Upon the written request of Holder, the Company shall within twenty-four (24) hours confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.
1.8 Physical Delivery of Warrant Shares. In the event that the Warrant Shares are required by securities laws to contain a restrictive legend, then the Holder shall be delivered a physical certificate representing the Warrant Shares within ten (10) business days, notwithstanding anything contained herein in Sections 1.3, 1.4 and 1.5, which sections shall be deemed inapplicable to the Warrant exercise being completed by the Holder.
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ARTICLE 2 ADJUSTMENTS
2.1 Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification (or issues by reorganization) of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 2.1 shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification (or reorganization).
2.2 Notice to Holder. Whenever the Exercise Price is adjusted pursuant to any provision of this Article 2, the Company shall promptly notify the Holder (by written notice) setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ARTICLE 3 COMPANY COVENANTS
3.1 No Adverse Actions. Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Warrant Shares upon the exercise of this Warrant, and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
ARTICLE 4 MISCELLANEOUS
4.1 Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
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4.2 Transferability. Subject to compliance with any applicable securities laws, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, by a written assignment of this Warrant duly executed by the Holder or its agent or attorney. If necessary to obtain a new warrant for any assignee, the Company, upon surrender of this Warrant, shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and such new Warrants, for purposes of Rule 144, shall tack back to the original date of this Warrant. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
4.3 Assignability. The Company may not assign this Warrant without prior written consent of the Holder. This Warrant will be binding upon the Company and its successors, and will inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder to anyone of its choosing without the Company’s approval.
4.4 Notices. Any notice required or permitted hereunder must be in writing and either personally served, sent by facsimile or email transmission, or sent by overnight courier. Notices will be deemed effectively delivered at the time of transmission if by facsimile or email, and if by overnight courier the Business Day after such notice is deposited with the courier service for delivery.
4.5 Governing Law, Legal Proceedings, and Arbitration. This Warrant will be governed by, construed and enforced in accordance with the substantive laws of the State of Florida, without regard to the conflict of laws principles thereof.
ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER ARISING OUT OF OR RELATED TO THIS WARRANT, OR ANY OTHER AGREEMENTS BETWEEN THE PARTIES, SHALL BE COMMENCED ONLY IN THE STATE OR FEDERAL COURTS OF GENERAL JURISDICTION LOCATED IN THE STATE OF FLORIDA, EXCEPT THAT ALL SUCH DISPUTES BETWEEN THE PARTIES SHALL BE SUBJECT TO ALTERNATIVE DISPUTE RESOLUTION THROUGH BINDING ARBITRATION UPON AGREEMENT BY PARTIES.
The Parties agree that, in connection with any such arbitration proceeding, each shall submit or file any claim which would constitute a compulsory counterclaim within the same proceeding as the claim to which it relates. Any such claim that is not submitted or filed in such proceeding shall be waived and such party will forever be barred from asserting such a claim. The Parties agree to submit to the jurisdiction of such courts or to such arbitration panel, as the case may be.
If the Investor elects alternative dispute resolution by arbitration, the arbitration proceedings shall be conducted in Florida and administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules and Mediation Procedures in effect on the Initial Issue Date of this Warrant, except as modified by this Warrant. The American Arbitration Association must receive the demand in writing and signed by both Parties for arbitration prior to the date when the institution of legal or equitable proceedings would be barred by the applicable statute of limitations, unless legal or equitable proceedings between the parties have already commenced, and the receipt by the American Arbitration Association of a written demand for arbitration also shall constitute the institution of legal or equitable proceedings for statute of limitations purposes. The parties shall be entitled to limited discovery at the discretion of the arbitrator(s) who may, but are not required to, allow depositions. The parties acknowledge that the arbitrators’ subpoena power is not subject to geographic limitations. The arbitrator(s) shall have the right to award individual relief which he or she deems proper under the evidence presented and applicable law and consistent with the parties’ rights to, and limitations on, damages and other relief as expressly set forth in this Warrant. The award and decision of the arbitrator(s) shall be conclusive and binding on the Parties, and judgment upon the award may be entered in any court of competent jurisdiction. The Investor reserves the right, but shall have no obligation, to advance the Issuer’s share of the costs, fees and expenses of any arbitration proceeding, including any arbitrator fees, in order for such arbitration proceeding to take place, and by doing so will not be deemed to have waived or relinquished its right to seek the recovery of those amounts from the arbitrator, who shall provide for such relief in the final award, in addition to the costs, fees, and expenses that are otherwise recoverable. The foregoing agreement to arbitrate shall be specifically enforceable under applicable law in any court having jurisdiction thereof.
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4.6 Delivery of Process by Holder to the Company. In the event of any action or proceeding by Holder against the Company, and only by Holder against the Company, service of copies of summons and/or complaint and/or any other process which may be served in any such action or proceeding may be made by Holder via U.S. Mail, overnight delivery service such as FedEx or UPS, email, fax, or process server upon mailing or delivering a copy of such process to the Company at its last known address as set forth in its most recent SEC filing.
4.7 No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 1.1. So long as this Warrant is unexercised, this Warrant carries no voting rights and does not convey to the Holder any “control” over the Company, as such term may be interpreted by the SEC under the Securities Act or the Exchange Act, regardless of whether the price of the Company’s Common Stock exceeds the Exercise Price.
4.8 Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
4.9 Attorney’s Fees. In the event any attorney is employed by either party to this Warrant with regard to any legal or equitable action, arbitration or other proceeding brought by such party for the enforcement of this Warrant or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Warrant, the prevailing party in such proceeding will be entitled to recover from the other party reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which the prevailing party may be entitled.
4.10 Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Warrant, Holder has the right to have any such opinion provided by its counsel.
4.11 Amendment; Waivers. The term “Warrant” and all references thereto, as used throughout this instrument, means this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented. No provision of this Warrant may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Holder, or in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Warrant shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any part to exercise any right hereunder in any manner impair the exercise of any such right.
4.12 Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies.
4.13 No Shorting. Holder agrees that so long as this Warrant remains unexercised in whole or in part, Holder will not enter into or effect any “short sale” of the common stock or hedging transaction which establishes a net short position with respect to the common stock of the Company. The Company acknowledges and agrees that as of the date of delivery to the Company of a fully and accurately completed Notice of Exercise, Holder immediately owns the common shares described in the Notice of Exercise and any sale of those shares issuable under such Notice of Exercise would not be considered short sales.
| 5 |
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| COMPANY: iCoreConnect, Inc. | |||
| By: | |||
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| Name: | Robert McDermott | |
| Title: | Chief Executive Officer | ||
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| HOLDER: JEFFREY STELLINGA |
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| Name: | Jeffrey Stellinga |
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NOTICE OF EXERCISE
| TO: | ICORECONNECT, INC. |
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
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The Warrant Shares shall be delivered to the following DWAC Account Number:
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| (4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended. | ||
[SIGNATURE OF HOLDER]
Name: _______________________________________
Date: ________________________________________
| 7 |
EXHIBIT 4.3
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR APPLICABLE EXEMPTION OR SAFE HARBOR PROVISION.
COMMON STOCK PURCHASE WARRANT
ICORECONNECT, INC.
| Warrant Shares: 9,625 | Initial Issue Date: December 15, 2022 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Robert McDermott, or their assigns (the “Investor” or the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Initial Issue Date (the “Initial Exercise Date”) and on or prior to the close of business on the five (5) year anniversary of the Initial Exercise Date (as subject to adjustment hereunder, the “Termination Date”), to subscribe for and purchase from iCoreConnect, Inc., a Nevada corporation (the “Issuer” or the “Company”), 9,625 shares (as subject to adjustment herein, the “Warrant Shares”) of common stock, par value of $0.001, of the Company (the “Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 1.2.
ARTICLE 1 EXERCISE RIGHTS
The Holder will have the right to exercise this Warrant to purchase shares of Common Stock as set forth below.
1.1 Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, from and after the Initial Exercise Date, and then at any time, by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile or emailed copy of the Notice of Exercise form annexed hereto. Within three (3) Business Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or check drawn on a United States bank. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise form within seventy-two (72) hours of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof. “Business Day” shall mean any day on which the banks are open for business in New York, New York.
1.2 Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $0.20 per share for the first eleven thousand eight hundred thirteen (4,813) Warrant Shares, and then $0.25 per share for the next eleven thousand eight hundred twelve (4,812), all Warrant Shares subject to adjustment hereunder (the “Exercise Price”).
| 1 |
1.3 Delivery of Warrant Shares. Warrant Shares purchased hereunder will be delivered to Holder by 2:30 pm EST within five (5) Business Days of Notice of Exercise by “DWAC/FAST” electronic transfer (such date, the “Warrant Share Delivery Date”). For example, if Holder delivers a Notice of Exercise to the Company at 5:15 pm eastern time on Monday January 1st, the Company’s transfer agent must deliver shares to Holder’s broker via “DWAC/FAST” electronic transfer by no later than 2:30 pm eastern time on Monday, January 8th. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date of delivery of the Notice of Exercise.
1.4 Delivery of Warrant. The Holder shall not be required to physically surrender this Warrant to the Company. If the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, this Warrant shall automatically be cancelled without the need to surrender the Warrant to the Company for cancellation. If this Warrant shall have been exercised in part, the Company shall, at the request of Holder and upon surrender of this Warrant, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant and, for purposes of Rule 144, shall tack back to the original date of this Warrant.
1.5 Warrant Exercise Rescission Rights. If the Warrant Shares are not delivered by DWAC/FAST electronic transfer or in accordance with the timeframe stated in Section 1.3, Holder may, at any time prior to selling those Warrant Shares rescind such exercise, in whole or in part, in which case the Company must, within three (3) days of receipt of notice from the Holder, repay to the Holder the portion of the exercise price so rescinded and reinstate the portion of the Warrant and equivalent number of Warrant Shares for which the exercise was rescinded and, for purposes of Rule 144, such reinstated portion of the Warrant and the Warrant Shares shall tack back to the original date of this Warrant. If Warrant Shares were issued to Holder prior to Holder’s rescission notice, upon return of payment from the Company, Holder will, within three (3) days of receipt of payment, commence procedures to return the Warrant Shares to the Company.
1.6 Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder. The Company shall pay all transfer agent fees required for same-day processing of any Notice of Exercise.
1.7 Holder’s Exercise Limitations. Unless otherwise agreed in writing by both the Company and the Holder, at no time will the Holder exercise any amount of this Warrant to purchase Common Stock that would result in the Holder owning more than 4.99% of the Common Stock outstanding of the Company (the “Beneficial Ownership Limitation”). Upon the written request of Holder, the Company shall within twenty-four (24) hours confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.
1.8 Physical Delivery of Warrant Shares. In the event that the Warrant Shares are required by securities laws to contain a restrictive legend, then the Holder shall be delivered a physical certificate representing the Warrant Shares within ten (10) business days, notwithstanding anything contained herein in Sections 1.3, 1.4 and 1.5, which sections shall be deemed inapplicable to the Warrant exercise being completed by the Holder.
| 2 |
ARTICLE 2 ADJUSTMENTS
2.1 Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification (or issues by reorganization) of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 2.1 shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification (or reorganization).
2.2 Notice to Holder. Whenever the Exercise Price is adjusted pursuant to any provision of this Article 2, the Company shall promptly notify the Holder (by written notice) setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ARTICLE 3 COMPANY COVENANTS
3.1 No Adverse Actions. Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Warrant Shares upon the exercise of this Warrant, and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
ARTICLE 4 MISCELLANEOUS
4.1 Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
| 3 |
4.2 Transferability. Subject to compliance with any applicable securities laws, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, by a written assignment of this Warrant duly executed by the Holder or its agent or attorney. If necessary to obtain a new warrant for any assignee, the Company, upon surrender of this Warrant, shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and such new Warrants, for purposes of Rule 144, shall tack back to the original date of this Warrant. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
4.3 Assignability. The Company may not assign this Warrant without prior written consent of the Holder. This Warrant will be binding upon the Company and its successors, and will inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder to anyone of its choosing without the Company’s approval.
4.4 Notices. Any notice required or permitted hereunder must be in writing and either personally served, sent by facsimile or email transmission, or sent by overnight courier. Notices will be deemed effectively delivered at the time of transmission if by facsimile or email, and if by overnight courier the Business Day after such notice is deposited with the courier service for delivery.
4.5 Governing Law, Legal Proceedings, and Arbitration. This Warrant will be governed by, construed and enforced in accordance with the substantive laws of the State of Florida, without regard to the conflict of laws principles thereof.
ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER ARISING OUT OF OR RELATED TO THIS WARRANT, OR ANY OTHER AGREEMENTS BETWEEN THE PARTIES, SHALL BE COMMENCED ONLY IN THE STATE OR FEDERAL COURTS OF GENERAL JURISDICTION LOCATED IN THE STATE OF FLORIDA, EXCEPT THAT ALL SUCH DISPUTES BETWEEN THE PARTIES SHALL BE SUBJECT TO ALTERNATIVE DISPUTE RESOLUTION THROUGH BINDING ARBITRATION UPON AGREEMENT BY PARTIES.
The Parties agree that, in connection with any such arbitration proceeding, each shall submit or file any claim which would constitute a compulsory counterclaim within the same proceeding as the claim to which it relates. Any such claim that is not submitted or filed in such proceeding shall be waived and such party will forever be barred from asserting such a claim. The Parties agree to submit to the jurisdiction of such courts or to such arbitration panel, as the case may be.
If the Investor elects alternative dispute resolution by arbitration, the arbitration proceedings shall be conducted in Florida and administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules and Mediation Procedures in effect on the Initial Issue Date of this Warrant, except as modified by this Warrant. The American Arbitration Association must receive the demand in writing and signed by both Parties for arbitration prior to the date when the institution of legal or equitable proceedings would be barred by the applicable statute of limitations, unless legal or equitable proceedings between the parties have already commenced, and the receipt by the American Arbitration Association of a written demand for arbitration also shall constitute the institution of legal or equitable proceedings for statute of limitations purposes. The parties shall be entitled to limited discovery at the discretion of the arbitrator(s) who may, but are not required to, allow depositions. The parties acknowledge that the arbitrators’ subpoena power is not subject to geographic limitations. The arbitrator(s) shall have the right to award individual relief which he or she deems proper under the evidence presented and applicable law and consistent with the parties’ rights to, and limitations on, damages and other relief as expressly set forth in this Warrant. The award and decision of the arbitrator(s) shall be conclusive and binding on the Parties, and judgment upon the award may be entered in any court of competent jurisdiction. The Investor reserves the right, but shall have no obligation, to advance the Issuer’s share of the costs, fees and expenses of any arbitration proceeding, including any arbitrator fees, in order for such arbitration proceeding to take place, and by doing so will not be deemed to have waived or relinquished its right to seek the recovery of those amounts from the arbitrator, who shall provide for such relief in the final award, in addition to the costs, fees, and expenses that are otherwise recoverable. The foregoing agreement to arbitrate shall be specifically enforceable under applicable law in any court having jurisdiction thereof.
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4.6 Delivery of Process by Holder to the Company. In the event of any action or proceeding by Holder against the Company, and only by Holder against the Company, service of copies of summons and/or complaint and/or any other process which may be served in any such action or proceeding may be made by Holder via U.S. Mail, overnight delivery service such as FedEx or UPS, email, fax, or process server upon mailing or delivering a copy of such process to the Company at its last known address as set forth in its most recent SEC filing.
4.7 No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 1.1. So long as this Warrant is unexercised, this Warrant carries no voting rights and does not convey to the Holder any “control” over the Company, as such term may be interpreted by the SEC under the Securities Act or the Exchange Act, regardless of whether the price of the Company’s Common Stock exceeds the Exercise Price.
4.8 Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
4.9 Attorney’s Fees. In the event any attorney is employed by either party to this Warrant with regard to any legal or equitable action, arbitration or other proceeding brought by such party for the enforcement of this Warrant or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Warrant, the prevailing party in such proceeding will be entitled to recover from the other party reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which the prevailing party may be entitled.
4.10 Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Warrant, Holder has the right to have any such opinion provided by its counsel.
4.11 Amendment; Waivers. The term “Warrant” and all references thereto, as used throughout this instrument, means this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented. No provision of this Warrant may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Holder, or in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Warrant shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any part to exercise any right hereunder in any manner impair the exercise of any such right.
4.12 Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies.
4.13 No Shorting. Holder agrees that so long as this Warrant remains unexercised in whole or in part, Holder will not enter into or effect any “short sale” of the common stock or hedging transaction which establishes a net short position with respect to the common stock of the Company. The Company acknowledges and agrees that as of the date of delivery to the Company of a fully and accurately completed Notice of Exercise, Holder immediately owns the common shares described in the Notice of Exercise and any sale of those shares issuable under such Notice of Exercise would not be considered short sales.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| COMPANY: iCoreConnect, Inc. | |||
| By: | |||
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| Name: | Jeff Stellinga | |
| Title: | Board Member | ||
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| HOLDER: Robert McDermott |
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| Name: | Robert McDermott |
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NOTICE OF EXERCISE
| TO: | ICORECONNECT, INC. |
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
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The Warrant Shares shall be delivered to the following DWAC Account Number:
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(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
Name: _______________________________________
Date: ________________________________________
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EXHIBIT 10.6
ASSET PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 1, 2021
BETWEEN
ICORECONNECT, INC.
AND
SPECTRUM TECHNOLOGY SOLUTIONS, LLC.
INDEX
| ARTICLE I | DEFINITIONS |
| 1 |
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| 1.1 | Definitions |
| 1 |
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| ARTICLE II | PURCHASE AND SALE OF ASSETS |
| 5 |
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| 2.1 | Purchase and Sale |
| 5 |
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| 2.2 | Excluded Assets |
| 5 |
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| 2.3 | Assumption of Only Certain Specified Liabilities and Obligations |
| 6 |
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| 2.4 | No Assumption of Any Other Liability or Obligation |
| 6 |
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| 2.5 | Consideration |
| 6 |
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| 2.7 | Closing |
| 7 |
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| 2.8 | Deliveries by Seller |
| 7 |
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| 2.9 | Deliveries by Buyer |
| 7 |
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| 2.10 | Passage of Title at Closing |
| 7 |
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| 2.11 | Assignment of Contracts |
| 7 |
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| ARTICLE III | REPRESENTATIONS AND WARRANTIES OF SELLER |
| 8 |
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| 3.1 | Organization; Authorization |
| 8 |
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| 3.2 | No Violation |
| 9 |
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| 3.3 | Subsidiaries and Other Equity Investments |
| 9 |
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| 3.4 | Financial Statements |
| 9 |
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| 3.5 | No Undisclosed Liabilities |
| 9 |
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| 3.6 | Absence of Certain Changes |
| 10 |
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| 3.7 | Title to Properties and Assets |
| 10 |
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| 3.8 | Real Property; Real Property Leases |
| 10 |
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| 3.9 | Tax Matters |
| 11 |
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| 3.10 | Material Contracts |
| 11 |
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| 3.11 | Litigation |
| 12 |
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| 3.12 | Patents and Trademarks |
| 12 |
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| 3.13 | Compliance with Laws |
| 13 |
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| 3.14 | Environmental Matters |
| 13 |
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| 3.15 | Governmental Authorizations and Regulations |
| 13 |
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| 3.16 | Employee Benefit Plans and Arrangements |
| 14 |
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| 3.17 | Foreign Corrupt Practices Act |
| 14 |
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| 3.18 | Related Transactions |
| 14 |
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| 3.19 | Certain Disclosures |
| 15 |
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| 3.20 | No Other Representations |
| 15 |
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| ARTICLE IV | REPRESENTATIONS AND WARRANTIES OF BUYER |
| 15 |
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| 4.1 | Corporate Organization |
| 15 |
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| 4.2 | Capitalization; Stock Ownership |
| 15 |
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| 4.3 | Subsidiaries and Other Equity Investments |
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| 4.4 | Authorization of Agreement; No Violation |
| 16 |
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| 4.5 | Litigation |
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| 4.6 | Financial Statements |
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| 4.7 | Absence of Certain Changes |
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| 4.8 | No Other Representations |
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| ARTICLE V | COVENANTS OF SELLER |
| 17 |
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| 5.1 | Buyer Confidential Information |
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| 5.2 | Access, Information and Documents |
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| 5.3 | Conduct of Business Pending Closing |
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| 5.4 | Consents and Approvals |
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| ARTICLE VI | COVENANTS OF BUYER |
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| 6.1 | Seller Confidential Information |
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| 6.2 | Consents and Approvals |
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| 6.3 | Access to Records |
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| ARTICLE VII | CONDITIONS TO CLOSING AND TERMINATION |
| 20 |
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| 7.1 | Conditions Precedent to Seller’s Obligations |
| 20 |
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| 7.2 | Conditions Precedent to Buyer’s Obligations |
| 20 |
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| 7.3 | Mutual Conditions Precedent to Obligations |
| 21 |
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| 7.4 | Termination by Buyer |
| 21 |
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| 7.5 | Termination by Seller |
| 21 |
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| 7.6 | Effect of Termination |
| 21 |
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| ARTICLE VIII | INDEMNIFICATION |
| 22 |
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| 8.1 | Survival |
| 22 |
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| 8.2 | Indemnification by Seller |
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| 8.3 | Indemnification by Buyer |
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| 8.4 | Limitations on Indemnification |
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| 8.5 | Third Party Claims |
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| 8.6 | Direct Claims |
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| 8.7 | Exclusive Remedies |
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| ARTICLE IX | MISCELLANEOUS |
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| 9.1 | Further Assurances |
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| 9.2 | Expenses |
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| 9.3 | Waiver |
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| 9.4 | Notices |
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| 9.5 | Entire Agreement |
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| 9.6 | Rights Under this Agreement |
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| 9.7 | Governing Law |
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| 9.8 | Jurisdiction |
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| 9.9 | Waiver of Jury Trial |
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| 9.10 | Invalid Provisions |
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| 9.11 | Headings; References to Sections, Exhibits and Schedules |
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| 9.12 | Counterparts |
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| 9.13 | Specific Performance |
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| 9.14 | Non-recourse |
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| Acknowledgement and Signatures Exhibits |
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| A | Bill of Sale and Assignment and Assumption Agreement |
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| B | Seller Representation and Warranty Certificate |
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| C | Seller Corporate Matters Certificate |
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| D | Buyer Representation and Warranty Certificate |
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| E | Buyer Corporate Matters Certificate |
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this “Agreement”) is dated as of this 1st day of September, 2021 between ICORECONNECT INC., a Nevada corporation (“Buyer”), and SPECTRUM TECHNOLOGY SOLUTIONS, LLC., an Arizona corporation (“Seller”).
WHEREAS, Seller is engaged in the business of providing managed IT services to various sized businesses (the “Business”);
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, substantially all of the properties and assets of Seller used in the Business, all upon the terms and conditions hereinafter set forth; and
WHEREAS, Buyer desires to assume from Seller certain of the liabilities of Seller (as and only to the extent specifically described herein).
NOW, THEREFORE, the parties hereto agree as follows:
Article I
DEFINITIONS
1.1 Definitions. The following terms shall have the respective meanings set forth below throughout this Agreement:
“Affiliate” shall mean, with respect to a specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such specified Person. As used in this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
“Agreement” shall have the meaning set forth in the Preamble.
“Assets” shall have the meaning set forth in Section 2.1.
“Assumed Liabilities” shall have the meaning set forth in Section 2.3.
“Bill of Sale and Assignment and Assumption Agreement” shall mean an agreement by and between Buyer and Seller in the form attached hereto as Exhibit A .
“Business” shall have the meaning set forth in the Recitals.
“Business Day” shall mean a day (other than a Saturday or Sunday), on which commercial banks in New York, New York are required or permitted to open.
“Buyer” shall have the meaning set forth in the Preamble.
“Buyer Confidential Information” shall have the meaning set forth in Section 5.1.
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“Buyer Financial Statements” shall have the meaning set forth in Section 4.6.
“Closing” shall have the meaning set forth in Section 2.7 .
“Closing Date” shall have the meaning set forth in Section 2.7 .
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Contracts” shall mean all written or oral (but only to the extent enforceable) leases, licenses, contracts, agreements, indentures, promissory notes, guarantees, arrangements, commitments and understandings of any kind, and all amendments to any of the foregoing.
“Damages” shall mean losses, obligations, Liabilities, settlement payments, awards, judgments, fines, penalties, damages, deficiencies, Taxes and reasonable expenses and costs, including reasonable attorneys’ and experts’ fees and court costs. “Damages” shall not include any consequential, indirect, punitive or special damages, lost profits, or any damages calculated on the basis of any multiple.
“Deductible” shall have the meaning set forth in Section 8.4.
“Drop Dead Date” shall mean August 25 , 2021
“Eligible Market” means the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market, the New York Stock Exchange, the NYSE American, the OTC Bulletin Board, OTCQX Market, OTCQB Market or in the “pink sheets” published by the Pink OTC Market, Inc. and, in each case, any successor thereto.
“ERISA” shall have the meaning set forth in Section 3.16(A).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Excluded Assets” shall have the meaning set forth in Section 2.2.
“GAAP” shall mean generally accepted accounting principles in the United States of America, consistently applied.
“Governmental Authority” shall mean any supranational, U.S. or non-U.S. federal, state, local, municipal, county or other governmental, quasi-governmental, administrative or regulatory or self-regulatory authority, body, agency, court, tribunal, commission or other similar entity (including any branch, department, agency or political subdivision thereof).
“Indemnified Party” shall have the meaning set forth in Section 8.4.
“Indemnifying Party” shall have the meaning set forth in Section 8.4.
“IRS” shall have the meaning set forth in Section 3.9.
“Law” shall mean any constitution, treaty, law, statute, code, ordinance, regulation, rule, or injunction of any Governmental Authority.
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“Liabilities” shall mean any and all debts, liabilities and obligations, of any kind or nature, including those arising under common law, statute (or other Law), contract or otherwise, whether accrued or fixed, absolute or contingent, matured or unmatured, or determined or determinable.
“Lien” shall mean any mortgage, pledge, security interest, lien, adverse claim, levy, charge, or similar encumbrance.
“Litigation” shall have the meaning set forth in Section 3.11.
“Material Adverse Effect” means a material and adverse effect or change, in or upon, (i) the Business or the Assets or (ii) the ability of Seller to perform any of its obligations under this Agreement or, the Other Transaction Documents or to consummate the transactions contemplated by this Agreement or the Other Transaction Documents; provided, that changes or effects relating to any of the following shall not be considered in determining whether a Material Adverse Effect has occurred: (a) changes in economic or political conditions or the financing, banking, credit, currency or capital markets in general (including changes in interest or exchange rates); (b) changes in Laws or interpretations thereof or changes in accounting requirements or principles (including GAAP) or any other change or effect arising out of or relating to any action or order before a Governmental Entity; (c) changes in operating, business, regulatory or other conditions generally affecting industries, markets or geographical areas in which Seller conducts the Business; (d) any actions by Seller taken pursuant to this Agreement or in connection with the transactions contemplated hereby; (e) conduct by Seller after the date of this Agreement and prior to the Closing (i) not prohibited under Article V, (ii) prohibited under Article V but for which Buyer gave its prior written consent or (iii) prohibited under Article V which, if taken by Seller, would have prevented or mitigated any resulting material adverse effect on the results of operations or financial condition of Seller; (f) any natural disaster or any acts of terrorism, sabotage, military action. armed hostilities or war (whether or not declared) or any escalation, worsening or diminution thereof, whether or not occurring or commenced before or after the date hereof, political instability or other national or international calamity, crisis or emergency, or any governmental or other response to any of the foregoing, in each case, whether or not involving the United States; or (g) any action required to be taken under any Law by which Seller is bound. For the avoidance of doubt, a “Material Adverse Effect” shall be measured only against past performance of Seller, and not against any forward-looking statements, projections or forecasts of Seller or any other Person.
“Material Contract” shall have the meaning set forth in Section 3.10.
“Other Transaction Documents” shall mean, collectively, the Bill of Sale and Assignment and Assumption Agreement.
“Permitted Liens” shall mean with respect to any Person, (a) Liens for Taxes, special assessments or other governmental charges, not yet due or payable, (b) Liens for Taxes being contested in good faith and for which there are adequate reserves on the financial statements of such Person and (c) statutory Liens, contractual landlord’s Liens, carrier’s Liens, warehouse Liens and other Liens created by operation of Law arising in the ordinary course of business with respect to a Liability that is not yet due or that is being contested in good faith.
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“Person” shall mean any individual, corporation, partnership, limited liability company, limited partnership, limited liability partnership, firm, joint venture, trust, estate, association, or other entity or organization, including but not limited to, a Governmental Authority.
“Retained Liabilities” shall have the meaning set forth in Section 2.4.
“Sale Transaction” means any of the following: (A) a consolidation, merger, exchange of shares, recapitalization, reorganization, business combination or other similar event, following which the holders of Common Stock immediately preceding such transaction or event either (i) no longer hold at least 50% of the Common Stock or (ii) no longer have the ability to elect at least 50% of the members of the board of directors of Buyer; (B) the sale or transfer (other than to a wholly owned subsidiary of Buyer) of all or substantially all of the assets of Buyer; (C) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than Buyer or Jerry Smith or Robert McDermott or a group of which either Jerry Smith or Robert McDermott is a member, files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect “beneficial owner” as defined in Rule 13d-3 under the Exchange Act of Buyer’s Common Equity representing more than 50% of the voting power of Buyer’s voting equity securities; or (D) an issuance or a related series of issuances by Buyer, of an aggregate number of shares of Common Stock in excess of 50% of Buyer’s outstanding Common Stock as of the date of such issuance.
“Securities Act” shall mean the U.S. Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder.
“Seller” shall have the meaning set forth in the Preamble.
“Seller Confidential Information” shall have the meaning set forth in Section 6.1.
“Seller Deductible” shall have the meaning set forth in Section 8.4.
“Seller Financial Statements” shall have the meaning set forth in Section 3.4.
“Seller’s knowledge”, “knowledge of Seller”, “to the best of Seller’s knowledge” and any and all other similar phrases shall mean the actual knowledge of any of the officers of Seller, or the knowledge that any of the officers of Seller would have had after conducting a reasonable inquiry of all relevant facts and circumstances.
“Stock“ shall have the meaning set forth in Section 2.5.
“Stock Event” means any stock split, stock dividend, reclassification or similar transaction.
“Tax” or “Taxes” shall mean all (a) federal, state, local or foreign income, alternative or add-on minimum, gross receipts, escheat, capital, capital gains, ad valorem, profits, privilege, payroll, social, stamp, occupation, value added, environmental, windfall profits, severance, property, production, sales, use, license, excise, franchise, employment, withholding, premium or similar taxes, customs, duties or similar fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto, (b) any liability for payment of amounts described in clause (a) payable by reason of Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof) or any analogous or similar provision under law, as a result of successor or transferee liability, or being a member of an affiliated, combined, consolidated or unitary Tax group for Tax purposes for any period, or otherwise through operation of law, and (c) any liability for payment of amounts described in clauses (a) or (b) as a result of any tax sharing, tax indemnity or tax allocation agreement.
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“Tax Returns” shall mean any reports, returns, declarations, claims for refund or information return or statement of any kind required to be filed with any Taxing Authority with respect to Taxes.
“Taxing Authority” shall mean any foreign or domestic government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body or other authority exercising any taxing or Tax regulatory authority.
“Third-Party Claim” shall have the meaning set forth in Section 8.5.
Article II
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale. On the terms and subject to the conditions set forth herein, at the Closing, Seller shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall purchase, all of Seller’s right, title and interest in and to the assets of Seller used or held for use in the Business, whether real, personal or mixed, tangible or intangible, wherever located, including without limitation, all of Seller’s goodwill (collectively, the “Assets”), but excluding the Excluded Assets, free and clear of any Liens, other than Permitted Liens.
2.2 Excluded Assets. Notwithstanding anything else contained in this Agreement or in any Other Transaction Document, the following assets of Seller shall not be included in the Assets and shall not be sold, transferred, conveyed, or acquired pursuant to this Agreement (collectively, the “Excluded Assets”):
(A) the tax, medical and other records relating to the Business to the extent nontransferable to Buyer by Law;
(B) all personal effects, such as personal photographs, books, award certificates, memorabilia, artifacts, mementos, and other similar items of Seller’s stockholders, directors, officers, and employees;
(C) the contracts, if any, specified on Schedule 2.2;
(D) All cash in excess of $150,000 which may be contained in any Seller deposit accounts of the Business as of the Closing Date; and
(E) All accounts receivable for services rendered and/or products sold and installed (i) on or before August 31, 2021 and (ii) which are collected by or before September 30, 2021.
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2.3 Assumption of Only Certain Specified Liabilities and Obligations. The only Liabilities and obligations of Seller that Buyer will assume or be obligated to pay, perform or discharge are the following:
(A) any and all claims, suits, actions and Liabilities relating to or affecting the Assets or the Business arising, or occurring during, any period following the Closing, except to the extent such claims, suits, actions and Liabilities are directly attributable or related to a breach, default, negligence or other wrongful conduct taken or omitted to be taken by Seller prior to the Closing;
(B) the obligations of fulfilling the commitments of Seller with respect to any subscription products or services sold by Seller prior to the Closing and existing at the Closing and which have been prepaid to Seller prior to the Closing; and
(C) any and all obligations and Liabilities of Seller under the Contracts (i) included in the Assets, together with (ii) those existing Contracts set forth in Schedule 2.3.
The Liabilities and obligations assumed by Buyer pursuant to this Section 2.3 and Schedule 2.3 are referred to collectively as the “Assumed Liabilities”.
2.4 No Assumption of Any Other Liability or Obligation. Except as set forth in Section 2.3 of this Agreement, Buyer shall not assume or be obligated to pay, perform or discharge when due any Liability or obligation of Seller, whether matured or unmatured, fixed or unfixed, known or unknown, asserted or unasserted, liquidated or unliquidated, secured or unsecured, contingent or otherwise. Notwithstanding anything contained in this Agreement to the contrary, other than the Assumed Liabilities, Seller will retain and Buyer will not assume or be obligated to pay, perform or discharge, any Liability or obligation of Seller (the “Retained Liabilities”).
2.5 Consideration. As consideration for the Assets: (i) Buyer will pay to Seller USD $1,500,000 by wire transfer of immediately available funds to an account identified by Seller to Buyer not less than three days prior to the Closing, and (ii) Buyer will issue to Seller shares of Common Stock of Buyer worth not less than USD $500,000 as of the Closing Date (the “Stock”), with the per share price to be calculated according to the volume-weighted average price (“VWAP”) of Buyer’s share price for the 5 trading days prior to the Closing Date, and (iii) Buyer will assume the Assumed Liabilities. Notwithstanding the forgoing, at the Closing, stock certificates for the Stock shall be delivered by Buyer as follows:
(A) a restricted stock certificate for $500,000 worth of shares (as calculated in Section 2.5) shall be delivered to the Seller within 15 days of the Closing Date.
The consideration paid for the Assets hereunder shall be allocated as reasonably provided by the Seller and each party shall have completed Form 8594, as required under section 1060 of the Internal Revenue Code, using the exact allocation provided by the Seller and related information shall thereupon become binding upon the parties hereto for federal income tax purposes.
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2.7 Closing. Subject to the terms and conditions of this Agreement, the closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the office of ICORECONNECT Inc. (or at such other place as the parties may mutually agree) at 5:00 p .m. local time, on September 1, 2021 or on such other date as soon as practicable upon which the parties shall mutually agree (or as postponed as the parties shall mutually agree) (such date, the “Closing Date”). If agreed by the parties, the Closing may occur remotely by exchange of counterpart signatures (including by e-mail or electronic signature) and delivery of the various items required pursuant to Sections 2.7 and 2.8.
2.8 Deliveries by Seller. At the Closing, Seller shall:
(A) execute and deliver to Buyer the Bill of Sale and Assignment and Assumption Agreement in the form attached hereto as Exhibit A;
(B) deliver to Buyer all Seller’s contracts, books, records and other data relating to the Business and the Assets (except Seller’s minute books and all other records which Seller is required by law to keep in its possession, as to which Seller will furnish to Buyer, at Buyer’s cost, at any time or from time to time after the Closing Date, such copies or transcripts as Buyer shall request);
(C) deliver to Buyer a certificate of Seller Representation and Warranty Certificate in the form attached hereto as Exhibit B; and
(D) deliver to Buyer a Seller Corporate Matters Certificate in the form attached hereto as Exhibit C, together with all of the attachments referred to therein.
2.9 Deliveries by Buyer. At the Closing, Buyer shall:
(A) execute and deliver to Seller the Bill of Sale and Assignment and Assumption Agreement in the form attached hereto as Exhibit A;
(B) deliver to Seller a Buyer Representation and Warranty Certificate in the form attached hereto as Exhibit D;
(C) deliver to Seller a Buyer Corporate Matters Certificate in the form attached hereto as Exhibit E, together with all of the attachments referred to therein;
(D) deliver to Seller $1,500,000 by wire transfer of immediately available funds to an account identified by Seller to Buyer not less than 3 days prior to the Closing; and
2.10 Passage of Title at Closing. At the Closing, assuming due execution of this Agreement and the Other Transaction Documents, title to the Assets shall pass to Buyer. Seller will put Buyer in full, complete and quiet possession and enjoyment of all of the Assets and from and after the Closing the ownership and operation of the Assets and the Business of Seller to be sold to Buyer pursuant to this Agreement shall be for the account and risk of Buyer.
2.11 Assignment of Contracts. Nothing in this Agreement shall be deemed to constitute an assignment or an attempt to assign any Contract to which Seller is a party if the attempted assignment thereof without the consent of the other party to such Contract would constitute a breach thereof or affect in any way the rights of Seller thereunder. If, after Seller has used its commercially reasonable efforts to obtain the consent of any such other party to such Contract, such consent shall not be obtained at or prior to the Closing, or an attempted assignment thereof at the Closing would be ineffective and would affect the rights of Seller thereunder, Seller will reasonably cooperate with Buyer in any reasonable arrangement designed to provide for Buyer the benefits under any such Contract, including the enforcement, at the cost and for the benefit of Buyer, of any and all rights of Seller against such other party thereto arising out of the breach or cancellation thereof by such other party or otherwise.
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Article III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 Organization; Authorization.
(A) Seller is a limited liability company duly organized and validly existing under the laws of the State of Arizona and has the power and authority to enter into and perform this Agreement, to carry on the Business as now being conducted and to own and operate the properties and assets now owned and being operated by it. Seller has delivered to Buyer complete and correct copies of Seller’s articles of organization and operating agreement (if any), in each case, as amended. If applicable, Seller is duly qualified or licensed to do business and is in good standing as a foreign limited liability company in each of the jurisdictions set forth in Schedule 3.l(A). Seller is not required to be qualified or licensed to do business as a foreign limited liability company in any other jurisdiction except such jurisdictions, if any, in which the failure to be so qualified or licensed will not have a Material Adverse Effect. Schedule 3.l(A) sets forth a true and complete list of the names, addresses and titles of the membership and officers of Seller.
(B) The execution and delivery of this Agreement and the Other Transaction Documents by Seller and the performance by Seller of its obligations hereunder and thereunder have been duly and validly authorized by all necessary member action on the part of Seller, and no other member action or proceeding on the part of Seller is necessary to authorize this Agreement and the Other Transaction Documents. Upon the due execution and delivery by Buyer, this Agreement and each of the Other Transaction Documents are or will be legal, valid and binding obligations of Seller, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
(C) The members of Seller have duly authorized the execution and delivery of this Agreement and the Other Transaction Documents and the consummation of the other transactions contemplated hereby and thereby. Seller has delivered to Buyer true and complete copies, certified by Seller’s President, of the resolutions which have been adopted by its members authorizing such execution and delivery and the sale of the Assets and the consummation of such other transactions.
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3.2 No Violation. Except as provided in Schedule 3.2 or as would not have a Material Adverse Effect, neither the execution, delivery or performance of this Agreement by Seller nor the consummation by Seller of any of the transactions provided for in this Agreement or contemplated hereby (i) will violate or conflict with Seller’s articles of organization or operating agreement (if any), (ii) will conflict with or result in any breach of or default under any provision of any Contract of any kind to which Seller is a party or by which Seller is bound or to which any property or asset of Seller is subject, (iii) is prohibited by, or requires Seller to obtain or make any consent, authorization, approval, registration or filing under, any statute, law, ordinance, regulation, rule, judgment, decree or order of any court or Governmental Authority, board, bureau, body, department or authority, or of any other Person, in each case applicable to Seller or any of the Assets or the Business, or (iv) will result in the creation or imposition of any Lien, claim, charge, restriction, equity or encumbrance of any kind whatsoever upon or give to any other Person any interest or right (including any right of termination or cancellation) in or with respect to any of the Assets or the Business.
3.3 Subsidiaries and Other Equity Investments. Seller does not own, directly or indirectly, any shares of capital stock of any corporation or any equity investment in any partnership, association or other business organization.
3.4 Financial Statements. Seller has previously delivered to Buyer unaudited financial statements of Seller for the fiscal years ended December 31, 2018, December 31, 2019 and December 31 , 2020 (collectively, the “Seller Financial Statements”). Except as set forth in the notes thereto, and, in the case of the Seller Financial Statements for the twelve month period ended December 31 , 2020, the normal year-end adjustments, the Seller Financial Statements present fairly in all material respects the financial position of Seller at the respective dates of said balance sheets and the results of the operations and changes in financial position of Seller for the respective periods.
3.5 No Undisclosed Liabilities. Except for the transactions contemplated by, and Liabilities arising under, this Agreement and (i) Liabilities that are reflected, or for which accruals were established, on the Seller Financial Statements, (ii) Liabilities incurred in the ordinary course of business since December 31, 2020, and for the twelve month period ended December 31 , 2020 or (iii) Liabilities otherwise set forth in Schedule 3.5, since January 1, 2021, Seller has not incurred any Liabilities of any nature (whether accrued, absolute, contingent, direct, indirect, perfected, inchoate, unliquidated or otherwise and whether due or to become due) that are required to be reflected or reserved against in a balance sheet prepared in conformity with GAAP applied on a basis consistent with that used in the preparation of the balance sheet of Seller dated December 31, 2020 referred to in Section 3.4.
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3.6 Absence of Certain Changes. Since December 31, 2020 (except (i) for the execution and delivery of this Agreement, (ii) as set forth in Schedule 3.6, and as has not had or would not be reasonably likely to have had a Material Adverse Effect), Seller has not:
(A) suffered any damage, destruction or loss of physical property (whether or not covered by insurance) materially or adversely affecting its condition (financial or otherwise) or operations (present or prospective);
(B) incurred or agreed to incur any indebtedness for borrowed money;
(C) paid or obligated itself to pay in excess of $10,000 in the aggregate for any fixed assets;
(D) suffered any substantial loss or waived any substantial right;
(E) sold, transferred or otherwise disposed of, or agreed to sell, transfer or otherwise dispose of, any assets having a fair market value at the time of sale, transfer or disposition of $10,000 or more in the aggregate, or canceled, or agreed to cancel, any debts or claims, other than in the ordinary course of business;
(F) mortgaged, pledged or subjected to any charge, lien, claim or encumbrance, or agreed to mortgage, pledge or subject to any charge, lien, claim or encumbrance, any of its properties or assets;
(G) increased, or agreed to increase, the compensation or bonuses or special compensation of any kind of any of its directors, officers, employees or agents over the rate being paid to them on December 31, 2020, other than normal merit and/or cost-of-living increases pursuant to customary arrangements consistently followed, or adopted or increased any benefit under any insurance, pension or other employee benefit plan, payment or arrangement made to, for or with any such director, officer, employee or agent; lost any major customer or had any material order canceled other than in the ordinary course of business;
(H) made or permitted any material amendment or termination of any material contract, agreement or license to which it is a party other than in the ordinary course of business;
(I) had any resignation or termination of employment of any of its key officers or employees or knows of any impending or threatened resignation or resignations or termination or terminations of employment that would have a material adverse effect on its operations (present or prospective) or business (present or prospective); or
(J) made any charitable or political contributions or pledges in excess of $500 in the aggregate.
3.7 Title to Properties and Assets. Seller has good and marketable title to the Assets, subject to no Liens, except for Permitted Liens and as set forth in Schedule 3.7.
3.8 Real Property; Real Property Leases. Except as set forth in Schedule 3.8: (i) Seller does not own or lease any real property and (ii) Seller is not a party to any Contract or option to purchase or lease any real property or interest therein.
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3.9 Tax Matters.
(A) To Seller’s knowledge and belief, all federal, state, local and foreign Tax returns required to be filed by Seller with respect to the Assets or the Business have been properly and timely filed (taking into account applicable extensions) with the appropriate Governmental Authorities in all jurisdictions in which such returns, reports and statements are required to be filed, and all Taxes required to be paid with respect to the Assets or the Business, whether or not reflected on any such Tax returns, have been timely paid.
(B) Schedule 3.9 sets forth for Seller those taxable years for which Tax Returns of Seller related to the Assets or the Business are currently being audited by the Internal Revenue Service (“IRS”).
(C) Except as set forth in Schedule 3.9, Seller has not executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Taxes related to the Assets.
(D) To Seller’s knowledge and belief, Seller has withheld and paid each Tax required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, customer, shareholder, member, or other party and complied with all information reporting and backup withholding provisions of applicable Law.
(E) Except as set forth in Schedule 3.9, Seller has no obligation under any written Tax sharing agreement with respect to the Assets or the Business.
3.10 Material Contracts. Except as set forth in Schedule 3.10, Seller is not a party to any of the following Contracts (collectively, the “Material Contracts”):
(A) any Contract with any labor union;
(B) employment or consulting Contract or other Contract for services involving a payment of more than $10,000 annually;
(C) lease, whether as lessee or lessor, with respect to any property, real or personal, involving a payment of more than $10,000 annually;
(D) loan agreement or instrument relating to any indebtedness;
(E) Contract with respect to any subscription, products or services sold by Seller and which have been prepaid to Seller;
(F) Contract of purchase or sale involving more than $10,000;
(G) Contract with any agent, dealer or distributor that is necessary for the continued operation of the Business as currently conducted;
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(H) stand-by letter of credit, guarantee or performance bond involving more than $10,000;
(I) Contract restricting the ability of Seller from freely engaging in any business or competing anywhere in the world; or
(J) other Contract, except insubstantial Contracts for supplies or services not involving more than $10,000 and which can be terminated within one year without cost.
Except as set forth in Schedule 3.10 or as would not have a Material Adverse Effect, Seller is not a party to any Material Contract with any Governmental Authority. Each Material Contract listed in Schedule 3.10 is in full force and effect and is valid and enforceable by Seller in accordance with its terms, except as enforceability may be affected by bankruptcy, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. Seller is not in default in the observance or the performance of any term or obligation to be performed by it under any Material Contract, except where such default has not had or would not be reasonably likely to have a Material Adverse Effect. To the best of Seller’s knowledge, no other person is in default in the observance or the performance of any term or obligation to be performed by it under any Material Contract with Seller.
3.11 Litigation. Except as has not had or would not be reasonably likely to have a Material Adverse Effect, or as set forth on Schedule 3.11, there is no claim, legal action, suit, demand letter, arbitration, investigation or pending or possible enforcement action or other legal, administrative, regulatory or other governmental proceeding or hearing (“Litigation”) either at Law or in equity, or before any commission or other Governmental Authority in any state of the United States or in the United States or any foreign jurisdiction, of any kind now pending or, to the best of Seller’s knowledge, threatened or proposed in any manner, involving the Business or the Assets that (i) if asserted and decided adversely to Seller could materially and adversely affect the Business (present or prospective), (ii) questions the validity of this Agreement or any Other Transaction Document or (iii) seeks to delay, prohibit or restrict in any manner any action taken or to be taken by Seller under this Agreement or any Other Transaction Document. Except as set forth in Schedule 3.11, there is no arbitration proceeding pending or, to the knowledge of Seller, threatened in any manner under any collective bargaining agreement or other agreement or otherwise. Neither Seller nor the Business nor any of the Assets is subject to any judicial or administrative judgment, order, decree or restraint.
3.12 Patents and Trademarks. Schedule 3.12 is a complete and correct list of all patents, registered trademarks and registered copyrights used by Seller in connection with the operation of the Business. Except as set forth in Schedule 3.12, (i) Seller does not own any patent relating to any product which it produces or sells or any process used in the manufacture or development of any such product, nor has any license under any patent been issued to it relating to any such product or any such process, and there is no patent which would cover any such product or any such process, (ii) Seller does not own any registered copyright, registered trademark or trade name, nor has any license to use any copyright, trademark or trade name been issued to it and (iii) Seller does not use any registered copyright, registered trademark or trade name in the Business. Each of the patents, registered trademarks and trade names listed in Schedule 3.12 has been validly issued and is owned by Seller, and Seller has the exclusive rights to use all such patents, registered copyrights, registered trademarks and trade names in its business and operations. Except as set forth in Schedule 3.12, Seller does not know of any claim, or any basis of any claim, that Seller has infringed any patent, copyright, trademark, trade name, know-how, trade secret or other proprietary right of any other person. Seller does not know of any potential claim of infringement of any patent, copyright, trademark, trade name, know-how, trade secret or other proprietary right of any other person that has not been asserted but that, if asserted, would have a Material Adverse Effect.
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3.13 Compliance with Laws. To the knowledge of Seller, the operations of the Business are not being conducted in violation of any Law applicable to Seller or the Business or any of the Assets, except for violations that have not had and would not be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect. Seller is in material compliance with (i) all applicable requirements of all United States and foreign Governmental Authorities with respect to environmental protection, including, without limitation, regulations establishing quality criteria and standards for air, water, land and hazardous materials, (ii) all applicable requirements of the Occupational Safety and Health Act of 1970 within the United States and comparable workplace-safety laws of all other jurisdictions and all rules, regulations and orders thereunder and (iii) all applicable Laws and related rules and regulations of all United States and foreign jurisdictions affecting labor union activities, civil rights or employment, including without limitation, in the United States, the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Equal Employment Opportunity Act of 1972, the Employee Retirement Income Security Act of 1974, the Equal Pay Act and the National Labor Relations Act.
3.14 Environmental Matters. To Seller’s knowledge and belief, Seller (i) is and for the past three (3) years has been in compliance in all material respects with all federal, state, local and foreign statutes, laws, ordinances, regulations, rules, permits, judgments, orders and decrees applicable to it or its properties, assets, operations and businesses relating to environmental protection including, without limitation, standards relating to air, water, land and the generation, storage, transportation, treatment or disposal of Hazardous Wastes and Hazardous Substances (as such terms are defined in any applicable state or federal environmental law or regulation) (ii) holds and for the past three (3) years has held all necessary permits and other approvals, including, without limitation, interim status under the Federal Solid Waste Disposal Act, necessary to store, dispose of and otherwise handle Hazardous Wastes and Hazardous Substances and has reported, to the extent required by all federal, state, local and foreign statutes, laws, ordinances, regulations, rules, permits, judgments, orders and decrees other than immaterial local environmental permits. To the Seller’s knowledge and belief, there has been no release or threatened release of any hazardous substance at, in, on, under or from any real property currently or formerly owned, leased or operated by Seller during the period such property is or was owned, leased or operated by Seller. Seller has not received any written notice, directive, inquiry or request for information, and there is no litigation pending or, to the knowledge and belief of Seller, threatened against Seller alleging that Seller may be in violation of, not in compliance with or liable under any environmental law or in connection with any release or threatened release of Hazardous Substances.
3.15 Governmental Authorizations and Regulations. Schedule 3.15 lists all licenses, franchises, permits and other governmental authorizations held by Seller material to the conduct of the Business. Such licenses, franchises, permits and other governmental authorizations are valid, and Seller has not received any written notice or is otherwise aware that any Governmental Authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization.
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3.16 Employee Benefit Plans and Arrangements.
(A) Pension Benefit Plans Generally. Except for its employee 401K plan for which it matches contributions of eligible employees, Seller does not sponsor, maintain or contribute to any other plan program, fund or arrangement that constitutes an “employee pension benefit plan,” nor has Seller any obligation to contribute to or accrue or pay any benefit under any deferred compensation or retirement funding arrangement on behalf of any employee or employees (such as, for example, and without limitation, any individual retirement account or annuity, any “excess benefit plan” (within the meaning of section 3(36) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) or any non-qualified deferred compensation arrangement). For the purposes of this Agreement, the term “employee pension benefit plan” shall have the same meaning as is given that term in section 3(2) of ERISA. Except as stated above, to its knowledge and belief, Seller has not sponsored, maintained or contributed to any employee pension benefit plan, nor is Seller required to contribute to any retirement plan pursuant to the provisions of any collective bargaining agreement establishing the terms and conditions of employment of any of Seller’s employees.
(B) Stock Option Arrangements. Except as set forth in Schedule 3.16(B), Seller does not sponsor nor has it granted any option under any stock option arrangement for the benefit of any employee or former employee.
(C) Other Employee Benefit Plans and Arrangements. Except as set forth in Schedule 3.16(C), Seller does not sponsor, maintain, support, is otherwise a party to, or has any liability or contingent liability under any plan, program, fund, arrangement or contractual undertaking, whether for the benefit of a single individual or for more than one individual, and whether or not funded, which is in the nature of (i) an employee pension benefit plan, (ii) an employee welfare benefit plan (as defined in section 3(1) of ERISA) or (iii) any incentive or other benefit arrangement for any of its employees, their dependents and/or their beneficiaries.
3.17 Foreign Corrupt Practices Act. Neither Seller nor, to Seller’s knowledge, any director, officer, agent, employee or other person associated with or acting on behalf of Seller has used any corporate funds for any unlawful contribution, gift, entertainment or other expense relating to political activity or made any direct or indirect unlawful payment to any United States or foreign government official or employee from corporate funds or violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977 or paid or made any bribe, rebate, payoff, influence payment, kickback, or other unlawful payment.
3.18 Related Transactions. Except as set forth in Schedule 3.18, Seller is not a party to any Contract in which any director or officer of Seller or any person owning of record or beneficially more than 10% of the outstanding shares of any class of Seller had or has a direct or indirect material interest.
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3.19 Certain Disclosures. Schedule 3.19 contains:
(A) a list of all directors, officers and other employees, agents and consultants of Seller whose current annual salary or rate of compensation (including bonus and incentive compensation) is $20,000 or more or to whom Seller has loaned $10,000 or more;
(B) a list of all of the outstanding purchase orders of Seller and on the date hereof in excess of $5,000; and
(C) a list of all of the outstanding sales orders of Seller on the date hereof in excess of $5,000.
3.20 No Other Representations. In entering into this Agreement, Seller acknowledges that it has not relied on any factual representation or opinion of Buyer or its affiliates or representatives (except the specific representations and warranties of Buyer set forth in Article IV). Seller hereby agrees and acknowledges that (a) other than the representations and warranties explicitly made in Article IV, none of Buyer, its Affiliates or any of their respective stockholders, directors, officers, employees or representatives make or have made any representation or warranty, express or implied, at law or in equity.
Article IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Corporate Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has the corporate power and authority to enter into, execute and deliver this Agreement and the Other Transaction Documents and to perform its obligations and to consummate the transactions contemplated hereby and thereby, to carry on its business as now being conducted and as proposed to be conducted and to own and operate the properties and assets now owned and being operated by it. Buyer delivered to Seller complete and correct copies of Buyer’s amended and restated articles of incorporation and amended and restated by-laws as in effect on the date hereof. Buyer is duly qualified or licensed to do business and is in good standing as a foreign corporation in each of the jurisdictions set forth in Schedule 4.1. Buyer is not required to be qualified or licensed to do business as a foreign corporation in any other jurisdiction except such jurisdictions, if any, in which the failure to be so qualified or licensed will not have a material adverse effect on the conduct of its business or the ownership or use of any of its properties or assets. Upon the due execution and delivery by Seller, this Agreement and each of the Other Transaction Documents are or will be legal, valid and binding obligations of Buyer, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
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4.2 Capitalization; Stock Ownership. The authorized capital stock of Buyer consists of 600,000,000 shares of Common Stock of the par value of $0.001 per share (the “Common Stock”), of which (as of September 1st, 2021 ) 112,919,520 shares were issued and outstanding) and 10,000,000 shares of preferred stock of the par value of $0.001 per share, none of which were issued and outstanding. All such issued shares have been duly authorized and validly issued and are fully paid and non-assessable and none of them was issued in violation of any preemptive or other right. Except as set forth in Schedule 4.2, Buyer is not a party to or bound by any contract, agreement or arrangement to issue, sell or otherwise dispose of or redeem, purchase or otherwise acquire any capital stock or any other security of Buyer or any other security exercisable or exchangeable for or convertible into any capital stock or any other security of Buyer, and, except for this Agreement and as set forth in Schedule 4.2, there is no outstanding option, warrant or other right to subscribe for or purchase, or contract, agreement or arrangement with respect to, any capital stock or any other security of Buyer or any other security exercisable or convertible into any capital stock or any other security of Buyer.
4.3 Subsidiaries and Other Equity Investments. Except and set forth in Schedule 4.3, Buyer does not own, directly or indirectly, any shares of capital stock of any corporation or any equity investment in any partnership, limited liability company, association or other business organization.
4.4 Authorization of Agreement; No Violation. The board of directors of Buyer has duly authorized the execution and delivery of this Agreement and the Other Transaction Documents and the consummation of the other transactions contemplated hereby. Buyer has delivered to Seller true and complete copies, certified by Buyer’s Secretary, of the resolutions which have been adopted by its board of directors authorizing such execution and delivery and the purchase of the Assets, and the consummation of such other transactions. Neither the execution, delivery or performance of this Agreement or the Other Transaction Documents nor the consummation of any of the transactions provided for hereby or thereby (including, without limitation, the issuance of the Stock and the True Up Shares and the issuance, execution and delivery of the Stock Certificates) (i) will violate or conflict with the amended and restated articles of incorporation or amended and restated by-laws of Buyer, (ii) will conflict with or result in any breach of or default under any provision of any contract or agreement of any kind to which Buyer is a party or by which Buyer is bound or to which any property or asset of Buyer is subject, (iii) is prohibited by or requires Buyer to obtain or make any consent, authorization, approval, registration or filing under any statute, law, ordinance, regulation, rule, judgment, decree or order of any court or governmental agency, board, bureau, body, department or authority, or of any other person or (iv) will result in the creation or imposition of any lien, claim, charge, restriction, equity or encumbrance of any kind whatsoever upon or give to any other person any interest or right (including any right of termination or cancellation) in or with respect to any of the properties, assets, business, agreements or contracts of Buyer.
4.5 Litigation. There is no Litigation before or by any court, public board or Governmental Authority pending or, to the knowledge of Buyer, threatened against or affecting Buyer or its properties, assets or business, or any director or officer of Buyer that, if adversely determined, would reasonably be expected to have a material adverse effect on Buyer’s ability to consummate the transactions contemplated by this Agreement and the Other Transaction Documents.
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4.6 Financial Statements. Buyer has previously delivered to Seller (i)audited financial statements of Buyer for the fiscal years ended and December 31, 2018 and December 31, 2019 and December 31, 2020 (collectively, the “Buyer Financial Statements”). Except as set forth in the notes thereto, in the case of the Buyer Financial Statements present fairly in all material respects the financial position of Buyer as at the respective dates of said balance sheets and the results of the operations and changes in financial position of Buyer for the respective periods presented in conformity with GAAP.
4.7 Absence of Certain Changes. Since December 31, 2020 (except (i) for the execution and delivery of this Agreement and (ii) as set forth in Schedule 4.7) Buyer has conducted its business in the ordinary course consistent with its prior practices and has not had any material and adverse effect or change in or upon its business or assets.
4.8 No Other Representations. In entering into this Agreement, Buyer acknowledges that it has not relied on any factual representation or opinion of Seller or its affiliates or representatives (except the specific representations and warranties of Seller set forth in Article III). Buyer hereby agrees and acknowledges that (a) other than the representations and warranties explicitly made in Article III, none of Seller, its Affiliates or any of their respective shareholders, directors, officers, directors, employees or representatives make or have made any representation or warranty, express or implied, at law or in equity.
Article V
COVENANTS OF SELLER
5.1 Buyer Confidential Information. Except as otherwise agreed to by Buyer in writing, Seller shall, and shall cause its stockholders, directors, officers, consultants, advisors, agents, employees and representatives to, treat the existence of and the terms of this Agreement as strictly confidential except (i) Seller may share this Agreement and its terms with Seller’s tax, legal or financial advisors, (ii) as necessary to enforce Seller’s rights hereunder or (iii) if Seller is compelled to disclose such information by judicial or administrative process or, based upon the advice of legal counsel, by other requirements of applicable Law. Seller agrees that at all times from and after the Closing Date, it will, and will cause its representatives to, keep secret and retain in the strictest confidence, and will not use for the benefit of itself or others, any Buyer Confidential Information. For purposes of this Agreement, “Buyer Confidential Information” means, any and all proprietary or confidential information regarding Buyer or its business or any of its assets or other properties, including, without limitation, know-how, trade secrets, vendor identities or lists, terms of vendor contracts, customer lists, terms of customer contracts, pricing policies, operational methods, marketing plans or strategies, product development techniques, plans or processes, other than any of the foregoing which (1) are in or become part of the public domain (except through the conduct of Seller, its Affiliates or any of their representatives which violates this Section 5.1), or (2) is required in connection with the preparation of a Tax Return or similar Tax-related filing.
5.2 Access, Information and Documents. From the date hereof until the Closing, Seller will give to Buyer and to its agents and representatives (including, but not limited to, accountants, lawyers and appraisers) full and complete access during normal working hours to any and all of the properties, assets, books, records and other documents of Seller to enable Buyer to make such examination of the Assets and Business and Seller will furnish to Buyer such information and copies of such documents and records in connection with the Assets and the Business as Buyer shall reasonably request. Such access shall be afforded by Seller upon receipt of reasonable advance notice and during normal business hours and shall be had or done in such a manner so as not to interfere with the normal conduct of business of Seller.
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5.3 Conduct of Business Pending Closing. From the date hereof until the Closing, except as consented to by Buyer in writing or as contemplated by this Agreement:
(A) Seller will maintain itself at all times as a limited liability company duly organized, validly existing and in good standing under the laws of Arizona;
(B) Seller will carry on the Business in the ordinary course of its business as heretofore conducted;
(C) Seller will not declare, authorize or pay any distribution to its shareholders and will not redeem, purchase or otherwise acquire, or agree to redeem purchase or otherwise acquire, any of its shares;
(D) Except for certain employees who were already scheduled to receive annual salary increases in August 2021, Seller will not pay or obligate itself to pay any compensation, commission or bonus to any director, officer, employee or independent contractor as such, except for the regular compensation and commissions payable to such director, officer, employee or independent contractor at the rate in effect on the date of this Agreement;
(E) Seller will use its commercially reasonable efforts to preserve the Business, to keep available to Buyer the services of its employees and independent contractors and to preserve for Buyer its relationships with suppliers, licensees, distributors and customers and others having business relationships with it;
(F) Seller will not, or obligate itself to, sell or otherwise dispose of or pledge or otherwise encumber, any of the Assets and Seller will maintain the Assets in commercially reasonable operating condition and repair, subject only to ordinary wear and tear; and
(G) Without limiting the foregoing, Seller will consult with Buyer regarding all significant developments, transactions and proposals relating to the Business or the Assets.
5.4 Consents and Approvals. Seller shall use all commercially reasonable efforts to obtain prior to the Closing all consents, authorizations and approvals under all statutes, laws, ordinances, regulations, rules, judgments, decrees and orders of any court or Governmental Authority, board, bureau, body, department or authority or of any other Person required to be obtained by Seller in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby.
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Article VI
COVENANTS OF BUYER
6.1 Seller Confidential Information. Except as otherwise agreed to by Seller in writing, Buyer shall, and shall cause its directors, officers, consultants, advisors, agents, employees and representatives to, treat the existence of and the terms of this Agreement as strictly confidential except (i) Buyer may disclose this Agreement and its terms to Buyer’s tax, legal or financial advisors, (ii) as necessary to enforce Buyer’s rights hereunder or (iii) if Buyer is compelled to disclose such information by judicial or administrative process or, based upon the advice of legal counsel, by other requirements of applicable Law. Buyer agrees that at all times from and after the date hereof until the Closing Date (or earlier cancellation or termination of this Agreement by either party), it will, and will cause its representatives to, keep secret and retain in the strictest confidence, and will not use for the benefit of itself or others, any Seller Confidential Information. For purposes of this Agreement, “Seller Confidential Information” means, any and all proprietary or confidential information regarding Seller or the Assets or the Business, including, without limitation, know-how, trade secrets, vendor identities or lists, terms of vendor contracts, customer lists, terms of customer contracts, pricing policies, operational methods, marketing plans or strategies, product development techniques, plans or processes, other than any of the foregoing which (1) are in or become part of the public domain (except through the conduct of Buyer, its Affiliates or any of their representatives which violates this Section 6.1), or (2) is required in connection with the preparation of a Tax Return or similar Tax-related filing.
6.2 Consents and Approvals. Buyer shall use commercially reasonable efforts to obtain prior to Closing all consents, authorizations and approvals under all statutes, laws, ordinances, regulations, rules, judgments, decrees and orders of any court or Governmental Authority, board, bureau, body, department or authority or of any other person required to be obtained by Buyer in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby.
6.3 Access to Records. For a period of six (6) years after the Closing Date, Buyer shall afford Seller and its representative’s reasonable access to all the books and records relating solely to the Assets or the Business that Buyer acquires from Seller for matters related to the preparation of Seller’s Tax Returns, a Tax investigation or audit of Seller. Such access shall be afforded by Buyer upon receipt of reasonable advance notice and during normal business hours and shall be had or done in such a manner so as not to interfere with the normal conduct of business of Buyer. Seller shall be responsible for any costs and expenses incurred by Buyer in retrieving and copying such books and records at Seller’s request. However, if Buyer shall desire to dispose of any of such books and records prior to the expiration of such six-year period, Buyer shall, prior to such disposition, give thirty (30) Business Days’ notice to Seller, and Seller shall have the right at its option and expense to segregate and remove such books and records as Seller may select from those Buyer desires to dispose of within twenty (20) Business Days after receipt of such notice.
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Article VII
CONDITIONS TO CLOSING AND TERMINATION
7.1 Conditions Precedent to Seller’s Obligations. The obligation of Seller to consummate the transactions contemplated hereby is subject to the fulfillment or waiver, at or prior to or at the Closing, of all of the following conditions:
(A) Buyer’s Performance. The representations and warranties of Buyer contained in this Agreement shall be true in all material respects at and as of the Closing as though such representations and warranties were made at and as of said time (except (i) as contemplated by this Agreement and (ii) to the extent, if any, Seller shall waive the same); and Buyer shall have performed and complied in all material respects with all the terms, provisions and conditions of this Agreement to be performed and complied with by Buyer at or before the Closing.
(B) Consents. Seller shall have obtained all consents, authorizations and approvals under all statutes, laws, ordinances, regulations, rules, judgments, decrees and orders of any court or governmental agency, board, bureau, body, department or authority or of any other person required to be obtained by Seller, as the case may be, in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby.
(C) Deliveries. Buyer shall have delivered those documents and other deliverables set forth in Section 2.9.
7.2 Conditions Precedent to Buyer’s Obligations. The obligation of Buyer to consummate the transactions contemplated hereby is subject to the fulfillment or waiver, at or prior to or at the Closing, of all of the following conditions:
(A) Seller’s Performance. The representations and warranties of Seller contained in this Agreement shall be true in all material respects at and as of the Closing as though such representations and warranties were made at and as of said time (except (i) as contemplated by this Agreement and (ii) to the extent, if any, Buyer shall waive the same); and Seller shall have performed and complied in all material respects with all the terms, provisions and conditions of this Agreement to be performed and complied with by Seller at or before the Closing.
(B) Consents. Buyer shall have obtained all consents, authorizations and approvals under all statutes, laws, ordinances, regulations, rules, judgments, decrees and orders of any court or governmental agency, board, bureau, body, department or authority or of any other person required to be obtained by Buyer, as the case may be, in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby.
(C) Deliveries. Seller shall have delivered those documents and other deliverables set forth in Section 2.8.
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7.3 Mutual Conditions Precedent to Obligations. The mutual obligations of Seller and Buyer under this Agreement to consummate the transactions contemplated hereby will be subject to the satisfaction, at or prior to the Closing, of all of the following conditions:
(A) No Legal Obstruction. No Law shall have been enacted, no suit, action or proceeding by any third party or Governmental Authority with respect to the transactions contemplated hereby shall be pending or threatened in writing and no order, judgment, injunction, decree or settlement shall have been entered in any such suit, action or proceeding that would have the effect, if adversely determined in the case of any suit, action or proceeding, of (i) making any of the transactions contemplated by this Agreement or the Other Transaction Documents illegal, (ii) otherwise prohibiting or enjoining the consummation of such transactions or (iii) imposing limitations on such transactions and/or the ability of any party hereto to perform its obligations hereunder or under any Other Transaction Document.
(B) Governmental Authorities’ Approvals and Filings. All consents, approvals, orders and authorizations of, and filings, registrations, qualifications, designations and declarations with, any Governmental Authorities required to consummate the transactions contemplated hereby and by each of the Other Transaction Documents, including under all applicable securities Laws, shall have been made and/or obtained, as applicable.
7.4 Termination by Buyer. Buyer may, without liability to Buyer, terminate this Agreement by notice to Seller (i) at any time prior to the Closing if material default shall be made by Seller in the observance or in the due and timely performance of any of the terms hereof to be performed by Seller that cannot be cured at or prior to the Closing, (ii) on the Closing Date if any of the conditions in Section 7.2 or Section 7.3 are not previously satisfied, or (iii) on the Drop Dead Date, if the Closing has not yet been consummated.
7.5 Termination by Seller. Seller may, without liability to Seller, terminate this Agreement by notice to Buyer (i) at any time prior to the Closing if material default shall be made by Buyer in the observance or in the due and timely performance of any of the terms hereof to be performed by Buyer that cannot be cured at or prior to the Closing, (ii) on the Closing Date if any of the conditions in Section 7.1 or Section 7.3 are not previously satisfied, or (iii) on the Drop Dead Date, if the Closing has not yet been consummated.
7.6 Effect of Termination. If this Agreement is terminated, this Agreement (except for Section 5.1, Section 6.1, this Section 7.6 and Article IX), shall no longer be of any force or effect and there shall be no liability on the part of any party or its respective directors, officers, or shareholders. If this Agreement shall be terminated, each party will (i) redeliver all documents, work papers and other materials of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution of this Agreement, to the party furnishing the same, and (ii) destroy all documents, work papers and other materials developed by its accountants, agents and employees in connection with the transactions contemplated hereby which embody proprietary information or trade secrets furnished by any party hereto or deliver such documents, work papers and other materials to the party furnishing the same or excise such information or secrets therefrom and all information received by any party hereto with respect to the business of any other party (other than information which is a matter of public knowledge or which has heretofore been or is hereafter published in any publication for public distribution or filed as public information with any governmental authority) shall not at any time be used for personal advantage or disclosed by such party to any third person to the detriment of the party furnishing such information.
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Article VIII
INDEMNIFICATION
8.1 Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties made by Seller or Buyer in this Agreement shall survive the Closing for a period of only twelve (12) months from the Closing Date, at which time such representations and warranties shall expire. None of the covenants or other agreements contained in this Agreement shall survive the Closing other than those by which their terms contemplate performance after the Closing, and each such surviving covenant and agreement shall survive the Closing for the period contemplated by its terms.
8.2 Indemnification by Seller. Subject to the limitations and other provisions contained in this Article VIII including, without limitation, Section 8.4, Seller will indemnify and hold harmless Buyer against any and all Damages incurred by Buyer arising from:
(A) any failure by Seller to perform any covenant or other obligation of Seller contained in this Agreement;
(B) any breach of any representation or warranty of Seller contained in Article III of this Agreement; or
(C) any failure of Seller to pay, perform or discharge any of the Retained Liabilities in accordance with the terms thereof.
8.3 Indemnification by Buyer. Subject to the limitations and other provisions contained in this Article VIII including, without limitation, Section 8.4, Buyer will indemnify and hold harmless Seller against any and all Damages incurred by Seller arising from:
(A) any failure by Buyer to perform any covenant or other obligation of Buyer contained in this Agreement;
(B) any breach of any representation or warranty of Buyer contained in Article IV of this Agreement; or
(C) any Assumed Liability.
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8.4 Limitations on Indemnification. The party making a claim under this Article VIII is referred to as the “Indemnified Party”, and the party against whom such claims are asserted is referred as the “Indemnifying Party”. The indemnification provided for in Section 8.2 and Section 8.3, as the case may be, shall be subject to the following limitations:
(A) The Indemnified Party shall not be entitled to be indemnified pursuant to Section 8.2(B) or Section 8.3(B), as the case may be, unless and until the aggregate of all Damages incurred by the Indemnified Party exceeds $25,000 (the “Deductible”) and, thereafter, the Indemnified Party shall only be entitled to payment for, and the Indemnifying Party shall only be liable and required to pay, Damages in excess of the Deductible; provided, however, that the limitation in this Section 8.4(A) shall not apply to Damages arising from a breach of the representations and warranties in Sections 3.1, 3.2, 3.7, 4.1, 4.2, 4.4, or4.6 .
(B) The aggregate amount of Damages for which the Indemnifying Party may be liable pursuant to Section 8.2(B) or Section 8.3(B), as the case may be, shall not exceed $2,300,000; provided, however, that the limitation in this Section 8.4(B) shall not apply to Damages arising from a breach of the representations and warranties in Sections 3.1, 3.2, 3.7, 4.1, 4.2, 4.4, or 4.6 .
(C) The amount of Damages incurred by any Indemnified Party shall be reduced by (i) amounts recovered or recoverable by the Indemnified Party under applicable insurance policies or from any other Person alleged to be responsible therefor, and (ii) any Tax benefit realized or realizable by the Indemnified Party arising from the incurrence or payment of any such Damages. In computing the amount of any such Tax benefit, the Indemnified Party shall be deemed to fully utilize, at the highest marginal tax rate then in effect, all Tax items arising from the incurrence or payment of any Damages. If an Indemnified Party receives any amounts under applicable insurance policies, or from any other Person alleged to be responsible for any damages, subsequent to an indemnification payment by the Indemnifying Party, then such Indemnified Party shall promptly reimburse the Indemnifying Party for any payment made or expense incurred by the Indemnifying Part in connection with providing such indemnification payment up to the amount received by the Indemnified Party, net of any expenses incurred by such Indemnified Party in collecting such amount.
(D) Seller shall not be liable under this Article VIII for any Damages arising out of any inaccuracy in or breach of any of the representations or warranties of Seller contained in this Agreement if Buyer had actual knowledge of such inaccuracy or breach prior to the Closing.
8.5 Third Party Claims.
(A) The Indemnified Party shall give prompt notice in writing to the Indemnifying Party of the assertion of any claim or the commencement of any suit, action or proceeding by any third party (“Third-Party Claim”) in respect of which indemnity may be sought under this Agreement. Such notice shall set forth in reasonable detail such Third-Party Claim and the basis for indemnification (taking into account the information then available to the Indemnified Party). The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have adversely prejudiced the Indemnifying Party.
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(B) The Indemnifying Party shall be entitled to participate in the defense of any Third-Party Claim and, subject to the limitations set forth in this Section 8.5, shall be entitled to control and appoint lead counsel for such defense, in each case at its own expense.
(C) If the Indemnifying Party shall assume the control of the defense of any Third-Party Claim (including the right to settle any Third-Party Claim) in accordance with the provisions of this Section 8.5 (i) the Indemnifying Party shall obtain the prior written consent of the Indemnified Party (which shall not be unreasonably withheld, conditioned or delayed) before entering into any settlement of such Third-Party Claim, if the settlement does not release the Indemnified Party and its Affiliates from all liabilities and obligations with respect to such Third-Party Claim or the settlement imposes injunctive or other equitable relief against the Indemnified Party or any of its Affiliates and (ii) the Indemnified Party shall be entitled to participate in the defense of any Third-Party Claim and to employ separate counsel of its choice for such purpose. The fees and expenses of such separate counsel shall be paid by the Indemnified Party.
(D) Each party shall cooperate, and cause their respective Affiliates to cooperate, in the defense or prosecution of any Third-Party Claim and shall furnish or cause to be furnished such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection therewith.
8.6 Direct Claims. In the event the Indemnified Party has a claim for indemnity under this Article VIII against the Indemnifying Party that does not involve a Third-Party Claim, the Indemnified Party shall give prompt notice in writing of such claim to the Indemnifying Party. Such notice shall set forth in reasonable detail such claim and the basis for indemnification (taking into account the information then available to the Indemnified Party). The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have actually prejudiced the Indemnifying Party. If, within the 30-day period following receipt of a claim notice, the Indemnifying Party provides written notice that the Indemnifying Party disputes its indemnity obligation for any Damages with respect to such claim, the parties shall proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations, such dispute shall be resolved by litigation in an appropriate court of jurisdiction determined pursuant to Section 9.8.
8.7 Exclusive Remedies. Subject to Section 9.13, the parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims arising from fraud on the part of a party hereto in connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions in this Article VIII. Nothing in this Section 8.7 shall limit any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled pursuant to Section 9.13 or to seek any remedy on account of fraud by any party hereto.
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Article IX
MISCELLANEOUS
9.1 Further Assurances. Following the Closing, each party hereto agrees that it shall, and shall cause its Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement and the Other Transaction Documents.
9.2 Expenses. Whether or not the Closing is consummated, each of the parties will pay all of its own legal and accounting fees and other expenses incurred in the preparation of this Agreement and the performance of the terms and provisions of this Agreement.
9.3 Waiver. The parties hereto may by written agreement (i) extend the time for or waive or modify the performance of any of the obligations or other acts of the parties hereto or (ii) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement.
9.4 Notices. All notices, requests or other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered (a) on the date of delivery if delivered personally or, upon confirmation, (b) on the third Business Day following the date of dispatch if delivered by an internationally recognized next-day courier service, or (c) on the tenth Business Day following the date of mailing if delivered by registered mail, first-class postage paid,
If to Seller, to:
SPECTRUM TECHNOLOGY SOLUTIONS, LLC.
Attn: Wayne Klug, President
If to Buyer. to:
ICORECONNECT Inc.
Attention: Robert McDermott, President and Chief Executive Officer
9.5 Entire Agreement. This Agreement, the Exhibits hereto and the Other Transaction Documents embody the entire agreement among the parties and there have been and are no agreements, representations or warranties, oral or written among the parties other than those set forth or provided for herein or therein. This Agreement may not be modified or changed, in whole or in part, except by a supplemental agreement signed by each of the parties hereto.
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9.6 Rights Under this Agreement. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but shall not be assignable by any party without the prior written consent of the other party. Nothing contained in this Agreement is intended to confer upon any person, other than the parties to this Agreement and their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
9.7 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Florida applicable to agreements made and to be performed in the State of Florida and shall be construed without regard to any presumption or other rule requiring the construction of an agreement against the party causing it to be drafted.
9.8 Jurisdiction. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the United States District Court for the Middle District of Florida or any Florida State court, so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Florida, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.
9.9 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.9.
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9.10 Invalid Provisions. In the event that any provision of this Agreement is held to be illegal, invalid or unenforceable in a final, unappealable order or judgment (each such provision, an “invalid provision”), then such provision shall be severed from this Agreement and shall be inoperative, and the parties promptly shall negotiate in good faith a lawful, valid and enforceable provision that is as similar to the invalid provision as may be possible and that preserves the original intentions and economic positions of the parties as set forth herein to the maximum extent feasible, while the remaining provisions of this Agreement shall remain binding on the parties hereto. Without limiting the generality of the foregoing sentence, in the event a change in any applicable Law, makes it unlawful for a party to comply with any of its obligations hereunder, the parties shall negotiate in good faith a modification to such obligation to the extent necessary to comply with such Law, that is as similar in terms to the original obligation as may be possible while preserving the original intentions and economic positions of the parties as set forth herein to the maximum extent feasible.
9.11 Headings; References to Sections, Exhibits and Schedules. The headings of the Sections, paragraphs and subparagraphs of this Agreement are solely for convenience and reference and shall not limit or otherwise affect the meaning of any of the terms or provisions of this Agreement. The references herein to Sections, Exhibits and Schedules, unless otherwise indicated, are references to sections of and exhibits and schedules to this Agreement.
9.12 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but which together constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other electronic transmission shall be effective as delivery of a mutually executed counterpart to this Agreement.
9.13 Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to any and all available equitable relief (including, without limitation, specific performance of the terms hereof).
9.14 Non-recourse. This Agreement may only be enforced against, and any claim, action, suit other legal proceeding based upon, arising out of, or related to this Agreement, or the negotiation, execution or performance of this Agreement, may only be brought against the entities that are expressly named as parties hereto and then only with respect to the specific obligations set forth herein with respect to such party. No past, present or future director, officer, employee, incorporator, manager, member, partner, shareholder, Affiliate, agent, attorney or other representative of any party hereto or any Affiliate of any party hereto, or any of their successors or permitted assigns, shall have any liability for any obligations or liabilities of any party hereto under this Agreement or for any claim, action, suit or other legal proceeding based on, in respect of or by reason of the transactions contemplated hereby.
[Remainder of page left intentionally blank.]
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IN WITNESS WHEREOF the parties have duly executed this Agreement as of the date first above written.
| ICORECONNECT INC. | ||
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| Robert McDermott | |
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| SPECTRUM TECHNOLOGY SOLUTIONS, LLC. | ||
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| Wayne Klug | |
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EXHIBIT A
BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Assignment”), dated as of September 1st, 2021, is entered into by and between ICORECONNECT INC., a Nevada corporation (“Buyer”), and SPECTRUM TECHNOLOGY SOLUTIONS, LLC., an Arizona limited liability company (“Seller”). Capitalized terms used but not otherwise defined herein shall have the respective meanings given to them in the Asset Purchase Agreement (as defined below).
RECITALS
WHEREAS, pursuant to that certain Asset Purchase Agreement, dated as of ___ (the “Asset Purchase Agreement”), by and between Seller and Buyer (i) Seller has agreed to sell, assign, transfer, convey and deliver to Buyer the Assets, free and clear of all Liens, other than Permitted Liens, and (ii) Seller has agreed to assign, and Buyer has agreed to assume the Assumed Liabilities (and no others).
NOW, THEREFORE, pursuant to the Asset Purchase Agreement, and in consideration of the above premises and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
(1) Assignment; Bill of Sale.
(a) Pursuant to the Asset Purchase Agreement, Seller does hereby irrevocably and unconditionally sell, assign, convey, transfer and deliver to Buyer, for itself and its successors and assigns forever, all of Seller’s right, title and interest in and to the Assets, free and clear of all Liens (other than Permitted Liens), as of the date hereof, to have and to hold the same and each and all thereof unto Buyer, for itself and its successors and assigns forever, to its and their own use and benefit forever.
(b) Notice of the assignment under this Assignment may be given at the option of either Buyer or Seller to any party to any Contract or to such party’s duly authorized agents.
(2) Acceptance and Assumption. Buyer does hereby irrevocably and unconditionally (i) purchase and accept from Seller all of Seller’s right, title, and interest in and to the Assets as of the date hereof, to have and to hold the same and each and all thereof unto Buyer, for itself and its successors and assigns forever, to its and their own use and benefit forever and (ii) assume the Assumed Liabilities (and no others) and agrees to discharge and perform such Assumed Liabilities as they come due on the terms and subject to the conditions set forth in the Asset Purchase Agreement. Notwithstanding anything in this Assignment to the contrary, Buyer shall not assume nor be deemed to have assumed any Retained Liabilities or any Liabilities other than the Assumed Liabilities. The assumption by Buyer of any Assumed Liabilities shall not enlarge the rights of any third party with respect to any Assumed Liabilities nor shall it prevent Buyer from contesting or disputing any such Assumed Liability.
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(3) Governing Law. The validity, interpretation and effect of this Assignment shall be governed by, and construed in accordance with, the laws of the State of Florida without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida.
(4) Titles and Headings. The titles, captions and headings in this Assignment are for reference purposes only and shall not in any way define, limit, extend or describe the scope of this Assignment or otherwise affect the meaning or interpretation of this Assignment.
(5) Asset Purchase Agreement Controlling. Notwithstanding any other provisions of this Assignment to the contrary, nothing contained herein shall in any way supersede, modify, replace, amend, change, rescind, waive, exceed, expand, enlarge, diminish, limit or in any way affect the provisions, including warranties, covenants, agreements, conditions, representations or, in general, any of the rights and remedies, or any of the obligations, of Seller or Buyer set forth in the Asset Purchase Agreement. This Assignment is subject to and controlled by the terms of the Asset Purchase Agreement.
(6) Successors and Assigns. This Assignment shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns and nothing herein is intended or shall be construed to confer upon any person other than the parties hereto and their respective successors and permitted assigns any rights, remedies or claims under, or by any reason of, this Assignment or any term, covenant or condition hereof.
(7) Counterparts. This Assignment may be executed in one or more counterparts for the convenience of the parties hereto, each of which shall be deemed an original and all of which together will constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Assignment by facsimile or other electronic transmission shall be effective as delivery of a mutually executed counterpart to this Assignment.
[Signature Page Follows]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Assignment to be executed by its duly authorized officer(s) as of the day and year first above written.
| ICORECONNECT INC. | |||
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| SPECTRUM TECHNOLOGY SOLUTIONS, LLC. |
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EXHIBIT B
SPECTRUM TECHNOLOGY SOLUTIONS, LLC.
SELLER REPRESENTATION AND WARRANTYCERTIFICATE
This Certificate is being executed and delivered pursuant to that certain Asset Purchase Agreement, dated as of September 1st, 2021 (the “Asset Purchase Agreement”) by and between ICORECONNECT INC., a Nevada corporation (“Buyer”), and SPECTRUM TECHNOLOGY SOLUTIONS, LLC. , an Arizona limited liability company (“Seller”). The undersigned duly authorized officer of Seller does hereby certify, for and on behalf of Seller and in its name, that:
(a) All representations and warranties by Seller contained in the Asset Purchase Agreement are true and correct in all material respects at and as of the date hereof as though such representations and warranties were made at and as of the date hereof (except as contemplated by the Asset Purchase Agreement).
(b) Seller has performed and complied in all material respects with all the terms, provisions and conditions of the Asset Purchase Agreement to be performed and complied with by Seller at or before the date hereof.
IN WITNESS WHEREOF, Seller has executed this Certificate as of this ______ day of __________ 2021.
| SPECTRUM TECHNOLOGY SOLUTIONS, LLC. | |||
| By | |||
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EXHIBIT C
SPECTRUM TECHNOLOGY SOLUTIONS, LLC.
SELLER CORPORATE MATTERSCERTIFICATE
Wayne Klug, President of SPECTRUM TECHNOLOGY SOLUTIONS, LLC., an Arizona limited liability company (“Seller”), hereby certifies, pursuant to that certain Asset Purchase Agreement, dated as of September 1st, 2021 (the “Asset Purchase Agreement”) by and between ICORECONNECT Inc. and Seller, for and on behalf of Seller and in its name, that:
a) Attached hereto as Exhibit A is a full, true and correct copy of the Articles of Organization of Seller, as amended, certified by the Corporation Commission of the State of Arizona on ________, ;
b) No proceeding for the amendment of the Articles of Organization of Seller referred to above has been taken or is pending;
c) No proceeding for the merger, consolidation, sale of assets and business (except as contemplated by the Asset Purchase Agreement) or dissolution of Seller (except as contemplated by the Asset Purchase Agreement) has been taken or is pending;
d) If available, attached hereto as Exhibit B is a full, true and correct copy of the Operating Agreement, as amended, of Seller as in full force and effect on ___, 2021 and at all times thereafter to and including the date hereof;
e) Attached hereto as Exhibit C is a full, true and correct copy of certain resolutions duly adopted by the Members of Seller on ________, 2021; and said resolutions have not been amended or revoked and are in full force and effect as of the date hereof;
f) The persons named below are and at all times since ___, 2021 have been duly elected and qualified incumbents of the respective offices of Seller set forth at the left of their respective names, and the signatures at the right of said names, respectively, are the genuine signatures of said officers:
| Title: |
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| Specimen Signature |
| President |
| Wayne Klug |
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IN WITNESS WHEREOF, I have hereunto signed this Certificate as of this _______ day of ___, 2021.
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EXHIBIT D
ICORECONNECT INC
BUYER REPRESENTATION AND WARRANTYCERTIFICATE
This Certificate is being executed and delivered pursuant to that certain Asset Purchase Agreement, dated as of September 1st, 2021 (the “Asset Purchase Agreement”) by and between ICORECONNECT INC., a Nevada corporation (“Buyer”), and SPECTRUM TECHNOLOGY SOLUTIONS, LLC., an Arizona corporation (“Seller”). The undersigned duly authorized officer of Buyer does hereby certify, for and on behalf of Buyer and in its name, that:
(a) All representations and warranties by Buyer contained in the Asset Purchase Agreement are true and correct in all material respects at and as of the date hereof as though such representations and warranties were made at and as of the date hereof (except as contemplated by the Asset Purchase Agreement).
(b) Buyer has performed and complied in all material respects with all the terms, provisions and conditions of the Asset Purchase Agreement to be performed and complied with by Buyer at or before the date hereof.
IN WITNESS WHEREOF, Buyer has executed this Certificate as of this ________ day of ___, 2021.
| ICORECONNECT INC. | |||
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EXHIBIT E
ICORECONNECT INC
BUYER CORPORATE MATTERSCERTIFICATE
Alyse Fidanza, Secretary of ICORECONNECT INC., a Nevada corporation (“Buyer”), hereby certifies, pursuant to that certain Asset Purchase Agreement, dated as of September 1st, 2021 (the “Asset Purchase Agreement”) by and between Buyer and SPECTRUM TECHNOLOGY SOLUTIONS, LLC. , a Arizona corporation, for and on behalf of Buyer and in its name, that:
(a) Attached hereto as Exhibit A is a full, true and correct copy of the Amended and Restated Articles of Incorporation of Buyer, certified by the Secretary of State of the State of Nevada on ___________, 2017;
(b) No proceeding for the amendment of the Amended and Restated Articles of Incorporation of Buyer referred to above has been taken or is pending;
(c) No proceeding for the merger, consolidation, sale of assets and business or dissolution of Buyer has been taken or is pending;
(d) Attached hereto as Exhibit B is a full, true and correct copy of the Amended and Restated By-Laws of Buyer as in full force and effect on ___ and at all times thereafter to and including the date hereof;
(e) Attached hereto as Exhibit C is a full, true and correct copy of certain resolutions duly adopted by the Board of Directors of Buyer on _____, 2021 and said resolutions have not been amended or revoked and are in full force and effect as of the date hereof;
(f) The persons named below are and at all times since ___, 2021 have been duly elected and qualified incumbents of the respective offices of Buyer set forth at the left of their respective names, and the signatures at the right of said names, respectively, are the genuine signatures of said officers:
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IN WITNESS WHEREOF, I have hereunto signed this Certificate as of this _____ day of ___, 2021.
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Robert McDermott, President and Chief Executive Officer, hereby certifies that Alyse Fidanza is and at all times since ___, 2021 has been the duly elected Secretary of Buyer and that the signature above at the right of her name is her genuine signature.
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EXHIBIT 10.27
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO an APPLICABLE EXEMPTION UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
| Principal Amount: $500,000.00 | Issue Date: August, 31st, 2021 |
PROMISSORY NOTE
FOR VALUE RECEIVED, ICORECONNECT, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of LUCAS VENTURES, LLC, an Arizona limited liability company, or registered assigns (the “Holder”), in the form of lawful money of the United States of America, the principal sum of $500,000.00 (the “Principal Amount”) and to pay interest on the Principal Amount under this Note at the rate of fifteen percent (15%) (the “Interest Rate”) per annum from the date that the Principal Amount is fully funded in accordance with the terms of this Note until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise, as further provided herein; with the understanding that Borrower shall make interest only payments each month while any portion of this Note remains outstanding. Interest payments shall be due monthly on the 15th day of each month commencing October 1st, 2021. The Holder shall pay the Consideration on the day of the full execution of the Note and all related transactional documents related to this Note, and the outstanding principal amount under this Note shall be $500,000.00. The maturity date for this Note shall be twenty-four (24) months from the effective date of the Holder’s payment of the Consideration (“Maturity Date”), and is the date upon which the principal sum as well as any accrued and unpaid interest and other fees shall be due and payable. Notwithstanding any other provision of this Note or any related transaction documents, Borrower may prepay this Note at any time without penalty.
Any Principal Amount or interest on this Note which is not paid when due shall bear interest at the rate the lesser of (a) eighteen percent (18%) per annum from the due date thereof until the same is paid (“Default Interest”); or (b) the maximum rate allowed by law.
All payments due hereunder shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.
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Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement, dated as of the Issue Date, pursuant to which this Note was originally issued (the “Purchase Agreement”). As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. As used herein, the term “Trading Day” means any day that shares of Common Stock are listed for trading or quotation on the Principal Market (as defined in the Purchase Agreement), any tier of the NASDAQ Stock Market, the New York Stock Exchange (including the NYSE American).
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall apply to this Note:
ARTICLE I. [RESERVED]
ARTICLE II. RANKING AND CERTAIN COVENANTS
2.1 Ranking and Security. The obligations of the Borrower under this Note shall be subordinate with respect to any and all Indebtedness incurred as of or following the Issue Date.
2.2 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease, or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition, but otherwise such consent shall not be unreasonably withheld, conditioned, or delayed.
2.3 Advances and Loans; Affiliate Transactions. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit, make advances to or except loans, credits or advances (a) in existence or committed on the Issue Date and which the Borrower has informed Holder in writing prior to the Issue Date, (b) in regard to transactions with unaffiliated third parties, made in the ordinary course of business, or (c) in regard to transactions with unaffiliated third parties, not in excess of $150,000.00. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, repay any affiliate (as defined in Rule 144) of the Borrower in connection with any indebtedness or accrued amounts owed to any such party outside the ordinary course of business.
2.4 Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(l0) of the Securities Act (a “3(a)(l0) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(l0) Transaction while this note is outstanding, a liquidated damages charge of twenty-five percent (25%) of the outstanding principal balance of this Note, but not less than Twenty-Five Thousand Dollars ($25,000), will be assessed and will become immediately due and payable to the Holder in the form of a cash payment.
2.5 Preservation of Business and Existence, etc. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, (a) change the nature of its business in a material respect; (b) sell, divest, change the structure of any material assets other than in the ordinary course of business; or (c) enter into any Variable Rate Transactions or Merchant Cash Advance transactions except as in effect the date hereof. In addition, so long as the Borrower shall have any obligation under this Note, the Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
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2.6 Non-circumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.7 Lost, Stolen or Mutilated Note. Upon receipt by the Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction, or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Borrower in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Borrower shall execute and deliver to the Holder a new Note.
ARTICLE III. EVENTS OF DEFAULT
It shall be considered an event of default if any of the following events listed in this Article III (each, an “Event of Default”) shall occur; provided however, that Borrower shall have three (3) calendar days to cure any Event of Default under this Note or any of the other Transaction Documents, unless another time period (whether longer or shorter) is specified therein:
3.1 [Reserved].
3.2 Breach of Agreements and Covenants. The Borrower breaches any material agreement, covenant or other material term or condition contained in the Purchase Agreement, this Note, the Warrant, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith.
3.3 Breach of Representations and Warranties. Any material representation or warranty of the Borrower made in the Purchase Agreement, this Note, the Warrant, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.4 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
3.5 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $500,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
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3.7 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of any tier of the OTC Markets, or any tier of the Nasdaq Stock Market or the New York Stock Exchange (including the NYSE American).
3.8 Failure to Comply with the 1934 Act. At any time after the Issue Date, the Borrower shall fail to comply with the reporting requirements of the 1934 Act or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act.
3.9 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.10 Cessation of Operations. Any cessation of operations by Borrower, or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.11 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
3.12 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two (2) years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.13 [Reserved].
3.14 [Reserved].
3.15 DTC “Chill”. The DTC places a “chill” (i.e., a restriction placed by DTC on one or more of DTC’s services, such as limiting a DTC participant’s ability to make a deposit or withdrawal of the security at DTC) on any of the Borrower’s securities.
3.16 Illegality. Any court of competent jurisdiction issues an order declaring this Note, the Purchase Agreement, or any provision hereunder or thereunder to be illegal.
3.17. DWAC Eligibility. In addition to the Event of Default in Section 3.15, the Common Stock is otherwise not eligible for trading through the DTC’s Fast Automated Securities Transfer or Deposit/Withdrawal at Custodian programs.
3.18 Variable Rate Transactions; Dilutive Issuances. The Borrower (i) issues shares of Common Stock (or convertible securities or Purchase Rights) pursuant to an equity line of credit of the Borrower or otherwise in connection with a Variable Rate Transaction except for existing lines of credit or Variable Rate Transactions existing as of the date hereof; (ii) adjusts downward the “floor price” at which shares of Common Stock (or convertible securities or Purchase Rights) may be issued under an equity line of credit or otherwise in connection with a Variable Rate Transaction (or entered into in the future) except for existing lines of credit or Variable Rate Transactions existing as of the date hereof; or (iii) a Dilutive Issuance is triggered as provided in this Note.
3.19 Bid Price. The Borrower shall subsequently lose the “bid” price for its Common Stock ($0.0001 on the “Ask” with zero market makers on the “Bid” per Level 2) or a market (including the OTC Pink, OTCQB or an equivalent replacement marketplace or exchange).
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3.20 Inside Information. Any attempt by the Borrower or its officers, directors, or affiliates to intentionally transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date
3.21 Suspension of Trading of Common Stock. If, at any time, the Borrower’s Common Stock (i) is suspended from trading; (ii) halted from trading; or (iii) fails to be quoted or listed (as applicable) on any level of the OTC Markets, any tier of the NASDAQ Stock Market, the New York Stock Exchange, (including the NYSE American).
3.23 Failure to Timely Register. If the Borrower shall fail to meet any of the deadlines or any of its other obligations under the Registration Rights Agreement entered into by the parties in connection herewith.
3.24 Rights and Remedies Upon an Event of Default. Upon the occurrence and during the continuation of any Event of Default specified in this Article III, this Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount (the “Default Amount”) equal to the Principal Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment multiplied by one hundred twenty-five percent (125%). Upon an uncured Event of Default, all amounts payable hereunder shall immediately become due and payable, all without demand, presentment, or notice, all of which hereby are expressly waived by the Borrower, together with all costs, including, without limitation, legal fees, and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity, including, without limitation.
ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Holder existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served; (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid; (iii) delivered by reputable air courier service with charges prepaid; or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received); or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
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If to the Borrower, to:
ICORECONNECT, INC.
13506 Summerport Parkway #160
Windermere, FL 34786
Attention: Robert McDermott
e-mail:
If to the Holder:
LUCAS VENTURES, LLC
Attention: Lucas Hoppel
e-mail:
With a copy by e-mail only to (which copy shall not constitute notice):
JDT LEGAL, PLLC
Attn: Jeff Turner
e-mail:
4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended, or supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder, or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following payment of a portion of this Note, the unpaid principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorney’s fees.
4.6 Governing Law; Venue; Attorney’s Fees. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note or any other agreement, certificate, instrument, or document contemplated hereby shall be brought only in the state courts located in the state of Nevada or federal courts located in the state of Nevada. The Borrower hereby irrevocably waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other agreement, certificate, instrument or document contemplated hereby or thereby by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. The prevailing party in any action or dispute brought in connection with this the Note or any other agreement, certificate, instrument, or document contemplated hereby or thereby shall be entitled to recover from the other party its reasonable attorney’s fees and costs.
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4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents mutually agreed upon stipulated damages and not a penalty and is intended to compensate the Holder in part for its losses.
4.8 Purchase Agreement. The Borrower and the Holder shall be bound by the applicable terms of the Purchase Agreement and the documents entered into in connection herewith and therewith.
4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any Change in Control or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
4.11 Construction; Headings. This Note shall be deemed to be jointly drafted by the Borrower and all the Holder and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.
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4.12 Usury. To the extent it may lawfully do so, the Borrower hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note. Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Borrower under this Note for payments which under the applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under the applicable law in the nature of interest that the Borrower may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by applicable law and applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the Issue Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Borrower to the Holder with respect to indebtedness evidenced by this the Note, such excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Borrower, the manner of handling such excess to be at the Holder’s election.
4.13 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law (including any judicial ruling), then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.
4.14 Prepayment. The Company may prepay this Note at any time without penalty.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer on August 31st, 2021.
ICORECONNECT, INC.
| By: |
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| Name: Robert McDermott |
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| Title: Chief Executive Officer |
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EXHIBIT 10.28
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO an APPLICABLE EXEMPTION UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
| Principal Amount: $1,000,000.00 | Issue Date: August 31st, 2021 |
PROMISSORY NOTE
FOR VALUE RECEIVED, ICORECONNECT, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of LGH INVESTMENTS, LLC, a Wyoming limited liability company, or registered assigns (the “Holder”), in the form of lawful money of the United States of America, the principal sum of $1,000,000.00 (the “Principal Amount”) and to pay interest on the Principal Amount under this Note at the rate of fifteen percent (15%) (the “Interest Rate”) per annum from the date that the Principal Amount is fully funded in accordance with the terms of this Note until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise, as further provided herein; with the understanding that Borrower shall make interest only payments each month while any portion of this Note remains outstanding. Interest payments shall be due monthly on the 1stth day of each month commencing October1st, 2021. The Holder shall pay the Consideration on the day of the full execution of the Note and all related transactional documents related to this Note, and the outstanding principal amount under this Note shall be $1,000,000.00. The maturity date for this Note shall be twenty-four (24) months from the effective date of the Holder’s payment of the Consideration (“Maturity Date”), and is the date upon which the principal sum as well as any accrued and unpaid interest and other fees shall be due and payable. Notwithstanding any other provision of this Note or any related transaction documents, Borrower may prepay this Note at any time without penalty.
Any Principal Amount or interest on this Note which is not paid when due shall bear interest at the rate the lesser of (a) eighteen percent (18%) per annum from the due date thereof until the same is paid (“Default Interest”); or (b) the maximum rate allowed by law.
All payments due hereunder shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.
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Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement, dated as of the Issue Date, pursuant to which this Note was originally issued (the “Purchase Agreement”). As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. As used herein, the term “Trading Day” means any day that shares of Common Stock are listed for trading or quotation on the Principal Market (as defined in the Purchase Agreement), any tier of the NASDAQ Stock Market, the New York Stock Exchange (including the NYSE American).
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall apply to this Note:
ARTICLE I. [RESERVED]
ARTICLE II. RANKING AND CERTAIN COVENANTS
2.1 Ranking and Security. The obligations of the Borrower under this Note shall be subordinate with respect to any and all Indebtedness incurred as of or following the Issue Date.
2.2 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease, or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition, but otherwise such consent shall not be unreasonably withheld, conditioned, or delayed.
2.3 Advances and Loans; Affiliate Transactions. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit, make advances to or (a) in existence or committed on the Issue Date and which the Borrower has informed Holder in writing prior to the Issue Date, (b) in regard to transactions with unaffiliated third parties, made in the ordinary course of business, or (c) in regard to transactions with unaffiliated third parties, not in excess of $150,000.00. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, repay any affiliate (as defined in Rule 144) of the Borrower in connection with any indebtedness or accrued amounts owed to any such party outside the ordinary course of business.
2.4 Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(l0) of the Securities Act (a “3(a)(l0) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(l0) Transaction while this note is outstanding, a liquidated damages charge of twenty-five percent (25%) of the outstanding principal balance of this Note, but not less than Twenty-Five Thousand Dollars ($25,000), will be assessed and will become immediately due and payable to the Holder in the form of a cash payment.
2.5 Preservation of Business and Existence, etc. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, (a) change the nature of its business in a material respect; (b) sell, divest, change the structure of any material assets other than in the ordinary course of business; or (c) enter into any Variable Rate Transactions or Merchant Cash Advance transactions except as in effect the date hereof. In addition, so long as the Borrower shall have any obligation under this Note, the Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
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2.6 Non-circumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.7 Lost, Stolen or Mutilated Note. Upon receipt by the Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction, or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Borrower in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Borrower shall execute and deliver to the Holder a new Note.
ARTICLE III. EVENTS OF DEFAULT
It shall be considered an event of default if any of the following events listed in this Article III (each, an “Event of Default”) shall occur; provided however, that Borrower shall have three (3) calendar days to cure any Event of Default under this Note or any of the other Transaction Documents, unless another time period (whether longer or shorter) is specified therein:
3.1 [Reserved].
3.2 Breach of Agreements and Covenants. The Borrower breaches any material agreement, covenant or other material term or condition contained in the Purchase Agreement, this Note, the Warrant, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith.
3.3 Breach of Representations and Warranties. Any material representation or warranty of the Borrower made in the Purchase Agreement, this Note, the Warrant, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.4 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
3.5 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $500,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
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3.7 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of any tier of the OTC Markets, or any tier of the Nasdaq Stock Market or the New York Stock Exchange (including the NYSE American).
3.8 Failure to Comply with the 1934 Act. At any time after the Issue Date, the Borrower shall fail to comply with the reporting requirements of the 1934 Act or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act.
3.9 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.10 Cessation of Operations. Any cessation of operations by Borrower, or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.11 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
3.12 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two (2) years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.13 [Reserved].
3.14 [Reserved].
3.15 DTC “Chill”. The DTC places a “chill” (i.e., a restriction placed by DTC on one or more of DTC’s services, such as limiting a DTC participant’s ability to make a deposit or withdrawal of the security at DTC) on any of the Borrower’s securities.
3.16 Illegality. Any court of competent jurisdiction issues an order declaring this Note, the Purchase Agreement, or any provision hereunder or thereunder to be illegal.
3.17. DWAC Eligibility. In addition to the Event of Default in Section 3.15, the Common Stock is otherwise not eligible for trading through the DTC’s Fast Automated Securities Transfer or Deposit/Withdrawal at Custodian programs.
3.18 Variable Rate Transactions; Dilutive Issuances. The Borrower (i) issues shares of Common Stock (or convertible securities or Purchase Rights) pursuant to an equity line of credit of the Borrower or otherwise in connection with a Variable Rate Transaction except for existing lines of credit or Variable Rate Transactions existing as of the date hereof; (ii) adjusts downward the “floor price” at which shares of Common Stock (or convertible securities or Purchase Rights) may be issued under an equity line of credit or otherwise in connection with a Variable Rate Transaction (or entered into in the future) except for existing lines of credit or Variable Rate Transactions existing as of the date hereof; or (iii) a Dilutive Issuance is triggered as provided in this Note.
3.19 Bid Price. The Borrower shall subsequently lose the “bid” price for its Common Stock ($0.0001 on the “Ask” with zero market makers on the “Bid” per Level 2) or a market (including the OTC Pink, OTCQB or an equivalent replacement marketplace or exchange).
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3.20 Inside Information. Any attempt by the Borrower or its officers, directors, or affiliates to intentionally transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date
3.21 Suspension of Trading of Common Stock. If, at any time, the Borrower’s Common Stock (i) is suspended from trading; (ii) halted from trading; or (iii) fails to be quoted or listed (as applicable) on any level of the OTC Markets, any tier of the NASDAQ Stock Market, the New York Stock Exchange, (including the NYSE American).
3.23 Failure to Timely Register. If the Borrower shall fail to meet any of the deadlines or any of its other obligations under the Registration Rights Agreement entered into by the parties in connection herewith.
3.24 Rights and Remedies Upon an Event of Default. Upon the occurrence and during the continuation of any Event of Default specified in this Article III, this Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount (the “Default Amount”) equal to the Principal Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment multiplied by one hundred fifteen percent (115%). Upon an uncured Event of Default, all amounts payable hereunder shall immediately become due and payable, all without demand, presentment, or notice, all of which hereby are expressly waived by the Borrower, together with all costs, including, without limitation, legal fees, and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity, including, without limitation.
ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Holder existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served; (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid; (iii) delivered by reputable air courier service with charges prepaid; or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received); or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
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If to the Borrower, to:
ICORECONNECT, INC.
13506 Summerport Parkway #160
Windermere, FL 34786
Attention: Robert McDermott
e-mail:
If to the Holder:
LGH INVESTMENTS, LLC
Attention: Lucas Hoppel
e-mail:
With a copy by e-mail only to (which copy shall not constitute notice):
JDT LEGAL, PLLC
Attn: Jeff Turner
4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended, or supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder, or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following payment of a portion of this Note, the unpaid principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorney’s fees.
4.6 Governing Law; Venue; Attorney’s Fees. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note or any other agreement, certificate, instrument, or document contemplated hereby shall be brought only in the state courts located in the state of Nevada or federal courts located in the state of Nevada. The Borrower hereby irrevocably waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other agreement, certificate, instrument or document contemplated hereby or thereby by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. The prevailing party in any action or dispute brought in connection with this the Note or any other agreement, certificate, instrument, or document contemplated hereby or thereby shall be entitled to recover from the other party its reasonable attorney’s fees and costs.
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4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents mutually agreed upon stipulated damages and not a penalty and is intended to compensate the Holder in part for its losses.
4.8 Purchase Agreement. The Borrower and the Holder shall be bound by the applicable terms of the Purchase Agreement and the documents entered into in connection herewith and therewith.
4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any Change in Control or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
4.11 Construction; Headings. This Note shall be deemed to be jointly drafted by the Borrower and all the Holder and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.
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4.12 Usury. To the extent it may lawfully do so, the Borrower hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note. Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Borrower under this Note for payments which under the applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under the applicable law in the nature of interest that the Borrower may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by applicable law and applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the Issue Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Borrower to the Holder with respect to indebtedness evidenced by this the Note, such excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Borrower, the manner of handling such excess to be at the Holder’s election.
4.13 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law (including any judicial ruling), then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.
4.14 .
4.15 Prepayment. The Company may prepay this Note at any time without penalty.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer on August 31st, 2021.
ICORECONNECT, INC.
| By: |
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| Name: Robert McDermott |
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| Title: Chief Executive Officer |
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EXHIBIT 10.35
PROMISSORY NOTE
| Principal Amount: $50,000.00 | Issue Date: October 15, 2022 |
FOR VALUE RECEIVED, ICORECONNECT, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of Gary Boyer, or registered assigns (the “Holder”), in the form of lawful money of the United States of America, the principal sum of $50,000.00 (the “Principal Amount”) and to pay interest on the Principal Amount under this Note at the rate of fifteen percent (15%) (the “Interest Rate”) per annum from the date that the Principal Amount is fully funded in accordance with the terms of this Note until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise, as further provided herein; with the understanding that Borrower shall make a single lump sum principal and interest payment on the maturity date of the Note. The Holder shall pay the Consideration on the day of the full execution of the Note and all related transactional documents related to this Note, and the outstanding principal amount under this Note shall be $50,000.00. The maturity date for this Note shall be three (3) months from the effective date of the Holder’s payment of the Consideration (“Maturity Date”), and is the date upon which the principal sum as well as any accrued and unpaid interest and other fees shall be due and payable. Notwithstanding any other provision of this Note or any related transaction documents, Borrower may prepay this Note at any time without penalty.
Any Principal Amount or interest on this Note which is not paid when due shall bear interest at the rate the lesser of (a) twenty percent (20%) per annum from the due date thereof until the same is paid (“Default Interest”); or (b) the maximum rate allowed by law.
All payments due hereunder shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.
As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. As used herein, the term “Trading Day” means any day that shares of Common Stock are listed for trading or quotation on the Principal Market (as defined in the Purchase Agreement), any tier of the NASDAQ Stock Market, the New York Stock Exchange (including the NYSE American).
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall apply to this Note:
ARTICLE I. [RESERVED]
ARTICLE II. RANKING AND CERTAIN COVENANTS
2.1 Ranking and Security. The obligations of the Borrower under this Note shall be subordinate with respect to any and all Indebtedness incurred as of or following the Issue Date.
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2.2 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease, or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition, but otherwise such consent shall not be unreasonably withheld, conditioned, or delayed.
2.3 Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(l0) of the Securities Act (a “3(a)(l0) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(l0) Transaction while this note is outstanding, a liquidated damages charge of twenty-five percent (25%) of the outstanding principal balance of this Note, but not less than Twenty-Five Thousand Dollars ($25,000), will be assessed and will become immediately due and payable to the Holder in the form of a cash payment.
2.4 Non-circumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.5 Lost, Stolen or Mutilated Note. Upon receipt by the Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction, or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Borrower in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Borrower shall execute and deliver to the Holder a new Note.
ARTICLE III. EVENTS OF DEFAULT
It shall be considered an event of default if any of the following events listed in this Article III (each, an “Event of Default”) shall occur; provided however, that Borrower shall have thirty(30) calendar days to cure any Event of Default under this Note or any of the other Transaction Documents, unless another time period (whether longer or shorter) is specified therein:
3.1 Breach of Agreements and Covenants. The Borrower breaches any material agreement, covenant or other material term or condition contained in this Note, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith.
3.2 Breach of Representations and Warranties. Any material representation or warranty of the Borrower made in Note or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.3 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
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3.4 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $500,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.5 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
3.6 Failure to Comply with the 1934 Act. At any time after the Issue Date, the Borrower shall fail to comply with the reporting requirements of the 1934 Act or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act.
3.7 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.8 Cessation of Operations. Any cessation of operations by Borrower, or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.9 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
3.10 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two (2) years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.18 Bid Price. The Borrower shall subsequently lose the “bid” price for its Common Stock ($0.0001 on the “Ask” with zero market makers on the “Bid” per Level 2) or a market (including the OTC Pink, OTCQB or an equivalent replacement marketplace or exchange).
3.19 Inside Information. Any attempt by the Borrower or its officers, directors, or affiliates to intentionally transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date
3.20 Suspension of Trading of Common Stock. If, at any time, the Borrower’s Common Stock (i) is suspended from trading; (ii) halted from trading; or (iii) fails to be quoted or listed (as applicable) on any level of the OTC Markets, any tier of the NASDAQ Stock Market, the New York Stock Exchange, (including the NYSE American).
3.24 Rights and Remedies Upon an Event of Default. Upon the occurrence and during the continuation of any Event of Default specified in this Article III, this Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount (the “Default Amount”) equal to the Principal Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment multiplied by one hundred five percent (105%). Upon an uncured Event of Default, all amounts payable hereunder shall immediately become due and payable, all without demand, presentment, or notice, all of which hereby are expressly waived by the Borrower, together with all costs, including, without limitation, legal fees, and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity, including, without limitation.
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ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Holder existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served; (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid; (iii) delivered by reputable air courier service with charges prepaid; or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received); or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
ICORECONNECT, INC.
529 E. Crown Point Road, Suite #250
Ocoee, FL 34781
Attention: Robert McDermott
e-mail:
If to the Holder:
GARY BOYER
Address:.
e-mail:
4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended, or supplemented.
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4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder, or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following payment of a portion of this Note, the unpaid principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorney’s fees.
4.6 Governing Law; Venue; Attorney’s Fees. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note or any other agreement, certificate, instrument, or document contemplated hereby shall be brought only in the state courts located in the state of Nevada or federal courts located in the state of Nevada. The Borrower hereby irrevocably waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other agreement, certificate, instrument or document contemplated hereby or thereby by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. The prevailing party in any action or dispute brought in connection with this the Note or any other agreement, certificate, instrument, or document contemplated hereby or thereby shall be entitled to recover from the other party its reasonable attorney’s fees and costs.
4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents mutually agreed upon stipulated damages and not a penalty and is intended to compensate the Holder in part for its losses.
4.8 Notice of Corporate Events. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any Change in Control or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
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4.9 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
4.10 Construction; Headings. This Note shall be deemed to be jointly drafted by the Borrower and all the Holder and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.
4.11 Usury. To the extent it may lawfully do so, the Borrower hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note. Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Borrower under this Note for payments which under the applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under the applicable law in the nature of interest that the Borrower may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by applicable law and applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the Issue Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Borrower to the Holder with respect to indebtedness evidenced by this the Note, such excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Borrower, the manner of handling such excess to be at the Holder’s election.
4.12 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law (including any judicial ruling), then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.
4.13 Prepayment. The Company may prepay this Note at any time without penalty.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer on November 4, 2022.
ICORECONNECT, INC.
| By: |
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| Name: Robert McDermott |
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| Title: Chief Executive Officer |
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GARY BOYER
| By: |
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| Name: Gary Boyer |
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| HOLDER |
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EXHIBIT 10.36
PROMISSORY NOTE
| Principal Amount: $300,000.00 | Issue Date: October 21, 2022 |
FOR VALUE RECEIVED, ICORECONNECT, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of Steve Wubker, or registered assigns (the “Holder”), in the form of lawful money of the United States of America, the principal sum of $300,000.00 (the “Principal Amount”) and to pay interest on the Principal Amount under this Note at the rate of fourteen percent (14%) (the “Interest Rate”) per annum from the date that the Principal Amount is fully funded in accordance with the terms of this Note until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise, as further provided herein; with the understanding that Borrower shall make a single lump sum principal and interest payment on the maturity date of the Note. The Holder shall pay the Consideration on the day of the full execution of the Note and all related transactional documents related to this Note, and the outstanding principal amount under this Note shall be $300,000.00. The maturity date for this Note shall be six (6) months from the effective date of the Holder’s payment of the Consideration (“Maturity Date”), and is the date upon which the principal sum as well as any accrued and unpaid interest and other fees shall be due and payable. Notwithstanding any other provision of this Note or any related transaction documents, Borrower may prepay this Note at any time without penalty.
Any Principal Amount or interest on this Note which is not paid when due shall bear interest at the rate the lesser of (a) twenty percent (20%) per annum from the due date thereof until the same is paid (“Default Interest”); or (b) the maximum rate allowed by law.
All payments due hereunder shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.
As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. As used herein, the term “Trading Day” means any day that shares of Common Stock are listed for trading or quotation on the Principal Market (as defined in the Purchase Agreement), any tier of the NASDAQ Stock Market, the New York Stock Exchange (including the NYSE American).
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
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The following terms shall apply to this Note:
ARTICLE I. [RESERVED]
ARTICLE II. RANKING AND CERTAIN COVENANTS
2.1 Ranking and Security. The obligations of the Borrower under this Note shall be subordinate with respect to any and all Indebtedness incurred as of or following the Issue Date.
2.2 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease, or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition, but otherwise such consent shall not be unreasonably withheld, conditioned, or delayed.
2.3 Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(l0) of the Securities Act (a “3(a)(l0) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(l0) Transaction while this note is outstanding, a liquidated damages charge of twenty-five percent (25%) of the outstanding principal balance of this Note, but not less than Twenty-Five Thousand Dollars ($25,000), will be assessed and will become immediately due and payable to the Holder in the form of a cash payment.
2.4 Non-circumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.5 Lost, Stolen or Mutilated Note. Upon receipt by the Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction, or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Borrower in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Borrower shall execute and deliver to the Holder a new Note.
ARTICLE III. EVENTS OF DEFAULT
It shall be considered an event of default if any of the following events listed in this Article III (each, an “Event of Default”) shall occur; provided however, that Borrower shall have thirty(30) calendar days to cure any Event of Default under this Note or any of the other Transaction Documents, unless another time period (whether longer or shorter) is specified therein:
3.1 Breach of Agreements and Covenants. The Borrower breaches any material agreement, covenant or other material term or condition contained in this Note, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith.
3.2 Breach of Representations and Warranties. Any material representation or warranty of the Borrower made in Note or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.3 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
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3.4 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $500,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.5 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
3.6 Failure to Comply with the 1934 Act. At any time after the Issue Date, the Borrower shall fail to comply with the reporting requirements of the 1934 Act or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act.
3.7 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.8 Cessation of Operations. Any cessation of operations by Borrower, or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.9 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
3.10 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two (2) years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.18 Bid Price. The Borrower shall subsequently lose the “bid” price for its Common Stock ($0.0001 on the “Ask” with zero market makers on the “Bid” per Level 2) or a market (including the OTC Pink, OTCQB or an equivalent replacement marketplace or exchange).
3.19 Inside Information. Any attempt by the Borrower or its officers, directors, or affiliates to intentionally transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date
3.20 Suspension of Trading of Common Stock. If, at any time, the Borrower’s Common Stock (i) is suspended from trading; (ii) halted from trading; or (iii) fails to be quoted or listed (as applicable) on any level of the OTC Markets, any tier of the NASDAQ Stock Market, the New York Stock Exchange, (including the NYSE American).
3.24 Rights and Remedies Upon an Event of Default. Upon the occurrence and during the continuation of any Event of Default specified in this Article III, this Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount (the “Default Amount”) equal to the Principal Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment multiplied by one hundred five percent (105%). Upon an uncured Event of Default, all amounts payable hereunder shall immediately become due and payable, all without demand, presentment, or notice, all of which hereby are expressly waived by the Borrower, together with all costs, including, without limitation, legal fees, and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity, including, without limitation.
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ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Holder existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served; (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid; (iii) delivered by reputable air courier service with charges prepaid; or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received); or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
ICORECONNECT, INC.
529 E. Crown Point Road, Suite #250
Ocoee, FL 34781
Attention: Robert McDermott
e-mail:
If to the Holder:
STEVE WUBKER
e-mail:
4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended, or supplemented.
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4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder, or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following payment of a portion of this Note, the unpaid principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorney’s fees.
4.6 Governing Law; Venue; Attorney’s Fees. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note or any other agreement, certificate, instrument, or document contemplated hereby shall be brought only in the state courts located in the state of Nevada or federal courts located in the state of Nevada. The Borrower hereby irrevocably waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other agreement, certificate, instrument or document contemplated hereby or thereby by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. The prevailing party in any action or dispute brought in connection with this the Note or any other agreement, certificate, instrument, or document contemplated hereby or thereby shall be entitled to recover from the other party its reasonable attorney’s fees and costs.
4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents mutually agreed upon stipulated damages and not a penalty and is intended to compensate the Holder in part for its losses.
4.8 Notice of Corporate Events. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any Change in Control or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
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4.9 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
4.10 Construction; Headings. This Note shall be deemed to be jointly drafted by the Borrower and all the Holder and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.
4.11 Usury. To the extent it may lawfully do so, the Borrower hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note. Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Borrower under this Note for payments which under the applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under the applicable law in the nature of interest that the Borrower may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by applicable law and applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the Issue Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Borrower to the Holder with respect to indebtedness evidenced by this the Note, such excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Borrower, the manner of handling such excess to be at the Holder’s election.
4.12 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law (including any judicial ruling), then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.
4.13 Prepayment. The Company may prepay this Note at any time without penalty.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer on November 4, 2022.
ICORECONNECT, INC.
| By: |
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| Name: Robert McDermott |
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| Title: Chief Executive Officer |
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STEVE WUBKER
| By: |
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| Name: Steve Wubker |
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| HOLDER |
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EXHIBIT 10.37
PROMISSORY NOTE
| Principal Amount: $107,500.00 | Issue Date: November 28, 2022 |
FOR VALUE RECEIVED, ICORECONNECT, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of Jeffrey Stellinga, or registered assigns (the “Holder”), in the form of lawful money of the United States of America, the principal sum of $107,500.00 (the “Principal Amount”) and to pay interest on the Principal Amount under this Note at the rate of fifteen percent (15%) (the “Interest Rate”) per annum from the date that the Principal Amount is fully funded in accordance with the terms of this Note until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise, as further provided herein; with the understanding that Borrower shall make a single lump sum principal and interest payment on the maturity date of the Note. The Holder shall pay the Consideration on the day of the full execution of the Note and all related transactional documents related to this Note, and the outstanding principal amount under this Note shall be $107,500.00. The maturity date for this Note shall be three (3) months from the effective date of the Holder’s payment of the Consideration (“Maturity Date”), and is the date upon which the principal sum as well as any accrued and unpaid interest and other fees shall be due and payable. Notwithstanding any other provision of this Note or any related transaction documents, Borrower may prepay this Note at any time without penalty.
Any Principal Amount or interest on this Note which is not paid when due shall bear interest at the rate the lesser of (a) twenty percent (20%) per annum from the due date thereof until the same is paid (“Default Interest”); or (b) the maximum rate allowed by law.
All payments due hereunder shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.
As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. As used herein, the term “Trading Day” means any day that shares of Common Stock are listed for trading or quotation on the Principal Market (as defined in the Purchase Agreement), any tier of the NASDAQ Stock Market, the New York Stock Exchange (including the NYSE American).
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall apply to this Note:
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ARTICLE I. [RESERVED]
ARTICLE II. RANKING AND CERTAIN COVENANTS
2.1 Ranking and Security. The obligations of the Borrower under this Note shall be subordinate with respect to any and all Indebtedness incurred as of or following the Issue Date.
2.2 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease, or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition, but otherwise such consent shall not be unreasonably withheld, conditioned, or delayed.
2.3 Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(l0) of the Securities Act (a “3(a)(l0) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(l0) Transaction while this note is outstanding, a liquidated damages charge of twenty-five percent (25%) of the outstanding principal balance of this Note, but not less than Twenty-Five Thousand Dollars ($25,000), will be assessed and will become immediately due and payable to the Holder in the form of a cash payment.
2.4 Non-circumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.5 Lost, Stolen or Mutilated Note. Upon receipt by the Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction, or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Borrower in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Borrower shall execute and deliver to the Holder a new Note.
ARTICLE III. EVENTS OF DEFAULT
It shall be considered an event of default if any of the following events listed in this Article III (each, an “Event of Default”) shall occur; provided however, that Borrower shall have thirty(30) calendar days to cure any Event of Default under this Note or any of the other Transaction Documents, unless another time period (whether longer or shorter) is specified therein:
3.1 Breach of Agreements and Covenants. The Borrower breaches any material agreement, covenant or other material term or condition contained in this Note, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith.
3.2 Breach of Representations and Warranties. Any material representation or warranty of the Borrower made in Note or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.3 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
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3.4 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $500,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.5 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
3.6 Failure to Comply with the 1934 Act. At any time after the Issue Date, the Borrower shall fail to comply with the reporting requirements of the 1934 Act or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act.
3.7 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.8 Cessation of Operations. Any cessation of operations by Borrower, or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.9 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
3.10 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two (2) years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.18 Bid Price. The Borrower shall subsequently lose the “bid” price for its Common Stock ($0.0001 on the “Ask” with zero market makers on the “Bid” per Level 2) or a market (including the OTC Pink, OTCQB or an equivalent replacement marketplace or exchange).
3.19 Inside Information. Any attempt by the Borrower or its officers, directors, or affiliates to intentionally transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date
3.20 Suspension of Trading of Common Stock. If, at any time, the Borrower’s Common Stock (i) is suspended from trading; (ii) halted from trading; or (iii) fails to be quoted or listed (as applicable) on any level of the OTC Markets, any tier of the NASDAQ Stock Market, the New York Stock Exchange, (including the NYSE American).
3.24 Rights and Remedies Upon an Event of Default. Upon the occurrence and during the continuation of any Event of Default specified in this Article III, this Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount (the “Default Amount”) equal to the Principal Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment multiplied by one hundred five percent (105%). Upon an uncured Event of Default, all amounts payable hereunder shall immediately become due and payable, all without demand, presentment, or notice, all of which hereby are expressly waived by the Borrower, together with all costs, including, without limitation, legal fees, and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity, including, without limitation.
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ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Holder existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served; (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid; (iii) delivered by reputable air courier service with charges prepaid; or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received); or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
ICORECONNECT, INC.
529 E. Crown Point Road, Suite #250
Ocoee, FL 34781
Attention: Robert McDermott
e-mail:
If to the Holder:
JEFFREY STELLINGA
e-mail:
4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended, or supplemented.
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4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder, or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following payment of a portion of this Note, the unpaid principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorney’s fees.
4.6 Governing Law; Venue; Attorney’s Fees. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note or any other agreement, certificate, instrument, or document contemplated hereby shall be brought only in the state courts located in the state of Nevada or federal courts located in the state of Nevada. The Borrower hereby irrevocably waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other agreement, certificate, instrument or document contemplated hereby or thereby by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. The prevailing party in any action or dispute brought in connection with this the Note or any other agreement, certificate, instrument, or document contemplated hereby or thereby shall be entitled to recover from the other party its reasonable attorney’s fees and costs.
4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents mutually agreed upon stipulated damages and not a penalty and is intended to compensate the Holder in part for its losses.
4.8 Notice of Corporate Events. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any Change in Control or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
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4.9 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
4.10 Construction; Headings. This Note shall be deemed to be jointly drafted by the Borrower and all the Holder and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.
4.11 Usury. To the extent it may lawfully do so, the Borrower hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note. Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Borrower under this Note for payments which under the applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under the applicable law in the nature of interest that the Borrower may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by applicable law and applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the Issue Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Borrower to the Holder with respect to indebtedness evidenced by this the Note, such excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Borrower, the manner of handling such excess to be at the Holder’s election.
4.12 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law (including any judicial ruling), then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.
4.13 Prepayment. The Company may prepay this Note at any time without penalty.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer on December 14, 2022.
ICORECONNECT, INC.
| By: |
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| Name: Robert McDermott |
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| Title: Chief Executive Officer |
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JEFFREY STELLINGA
| By: |
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| Name: Jeffrey Stellinga |
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| HOLDER |
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EXHIBIT 10.38
PROMISSORY NOTE
| Principal Amount: $55,000.00 | Issue Date: December 15, 2022 |
FOR VALUE RECEIVED, ICORECONNECT, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of Robert McDermott, or registered assigns (the “Holder”), in the form of lawful money of the United States of America, the principal sum of $55,000.00 (the “Principal Amount”) and to pay interest on the Principal Amount under this Note at the rate of fifteen percent (15%) (the “Interest Rate”) per annum from the date that the Principal Amount is fully funded in accordance with the terms of this Note until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise, as further provided herein; with the understanding that Borrower shall make a single lump sum principal and interest payment on the maturity date of the Note. The Holder shall pay the Consideration on the day of the full execution of the Note and all related transactional documents related to this Note, and the outstanding principal amount under this Note shall be $55,000.00. The maturity date for this Note shall be four (4) months from the effective date of the Holder’s payment of the Consideration (“Maturity Date”), and is the date upon which the principal sum as well as any accrued and unpaid interest and other fees shall be due and payable. Notwithstanding any other provision of this Note or any related transaction documents, Borrower may prepay this Note at any time without penalty.
Any Principal Amount or interest on this Note which is not paid when due shall bear interest at the rate the lesser of (a) twenty percent (20%) per annum from the due date thereof until the same is paid (“Default Interest”); or (b) the maximum rate allowed by law.
All payments due hereunder shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.
As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday, or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. As used herein, the term “Trading Day” means any day that shares of Common Stock are listed for trading or quotation on the Principal Market (as defined in the Purchase Agreement), any tier of the NASDAQ Stock Market, the New York Stock Exchange (including the NYSE American).
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall apply to this Note:
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ARTICLE I. [RESERVED]
ARTICLE II. RANKING AND CERTAIN COVENANTS
2.1 Ranking and Security. The obligations of the Borrower under this Note shall be subordinate with respect to any and all Indebtedness incurred as of or following the Issue Date.
2.2 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease, or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition, but otherwise such consent shall not be unreasonably withheld, conditioned, or delayed.
2.3 Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(l0) of the Securities Act (a “3(a)(l0) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(l0) Transaction while this note is outstanding, a liquidated damages charge of twenty-five percent (25%) of the outstanding principal balance of this Note, but not less than Twenty-Five Thousand Dollars ($25,000), will be assessed and will become immediately due and payable to the Holder in the form of a cash payment.
2.4 Non-circumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.
2.5 Lost, Stolen or Mutilated Note. Upon receipt by the Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction, or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Borrower in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Borrower shall execute and deliver to the Holder a new Note.
ARTICLE III. EVENTS OF DEFAULT
It shall be considered an event of default if any of the following events listed in this Article III (each, an “Event of Default”) shall occur; provided however, that Borrower shall have thirty(30) calendar days to cure any Event of Default under this Note or any of the other Transaction Documents, unless another time period (whether longer or shorter) is specified therein:
3.1 Breach of Agreements and Covenants. The Borrower breaches any material agreement, covenant or other material term or condition contained in this Note, or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith.
3.2 Breach of Representations and Warranties. Any material representation or warranty of the Borrower made in Note or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.3 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
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3.4 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $500,000.00, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.5 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
3.6 Failure to Comply with the 1934 Act. At any time after the Issue Date, the Borrower shall fail to comply with the reporting requirements of the 1934 Act or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act.
3.7 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.8 Cessation of Operations. Any cessation of operations by Borrower, or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.9 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
3.10 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two (2) years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.18 Bid Price. The Borrower shall subsequently lose the “bid” price for its Common Stock ($0.0001 on the “Ask” with zero market makers on the “Bid” per Level 2) or a market (including the OTC Pink, OTCQB or an equivalent replacement marketplace or exchange).
3.19 Inside Information. Any attempt by the Borrower or its officers, directors, or affiliates to intentionally transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date
3.20 Suspension of Trading of Common Stock. If, at any time, the Borrower’s Common Stock (i) is suspended from trading; (ii) halted from trading; or (iii) fails to be quoted or listed (as applicable) on any level of the OTC Markets, any tier of the NASDAQ Stock Market, the New York Stock Exchange, (including the NYSE American).
3.24 Rights and Remedies Upon an Event of Default. Upon the occurrence and during the continuation of any Event of Default specified in this Article III, this Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount (the “Default Amount”) equal to the Principal Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment multiplied by one hundred five percent (105%). Upon an uncured Event of Default, all amounts payable hereunder shall immediately become due and payable, all without demand, presentment, or notice, all of which hereby are expressly waived by the Borrower, together with all costs, including, without limitation, legal fees, and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity, including, without limitation.
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ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies of the Holder existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served; (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid; (iii) delivered by reputable air courier service with charges prepaid; or (iv) transmitted by hand delivery, telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received); or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
ICORECONNECT, INC.
529 E. Crown Point Road, Suite #250
Ocoee, FL 34781
Attention: Archit Shah
e-mail:
If to the Holder:
ROBERT MCDERMOTT
Address: 529 E Crown Point Rd, Suite #250
Ocoee, FL 34761
e-mail:
4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended, or supplemented.
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4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder, or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following payment of a portion of this Note, the unpaid principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorney’s fees.
4.6 Governing Law; Venue; Attorney’s Fees. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note or any other agreement, certificate, instrument, or document contemplated hereby shall be brought only in the state courts located in the state of Nevada or federal courts located in the state of Nevada. The Borrower hereby irrevocably waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note or any other agreement, certificate, instrument or document contemplated hereby or thereby by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. The prevailing party in any action or dispute brought in connection with this the Note or any other agreement, certificate, instrument, or document contemplated hereby or thereby shall be entitled to recover from the other party its reasonable attorney’s fees and costs.
4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents mutually agreed upon stipulated damages and not a penalty and is intended to compensate the Holder in part for its losses.
4.8 Notice of Corporate Events. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any Change in Control or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
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4.9 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
4.10 Construction; Headings. This Note shall be deemed to be jointly drafted by the Borrower and all the Holder and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.
4.11 Usury. To the extent it may lawfully do so, the Borrower hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce any right or remedy under this Note. Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability of the Borrower under this Note for payments which under the applicable law are in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums which under the applicable law in the nature of interest that the Borrower may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by applicable law and applicable to this Note is increased or decreased by statute or any official governmental action subsequent to the Issue Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Borrower to the Holder with respect to indebtedness evidenced by this the Note, such excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Borrower, the manner of handling such excess to be at the Holder’s election.
4.12 Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law (including any judicial ruling), then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.
4.13 Prepayment. The Company may prepay this Note at any time without penalty.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer on December 14, 2022.
ICORECONNECT, INC.
| By: |
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| Name: Jeff Stellinga |
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| Title: Board Member |
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ROBERT MCDERMOTT
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| Name: Robert McDermott |
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| HOLDER |
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EXHIBIT 10.39
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
ICORECONNECT, INC.
CONVERTIBLE PROMISSORY NOTE
| Issuance Date: December 15, 2022 | Original Principal Amount: $80,000 |
| Note No. | Consideration Paid at Close: $80,000 |
FOR VALUE RECEIVED, iCoreConnect, Inc. a Nevada corporation (the "Company"), hereby promises to pay to the order of Robert McDermott or registered assigns (the "Holder") the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the "Principal") when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest ("Interest") on any outstanding Principal at the applicable Interest Rate from the date set out above as the Issuance Date (the "Issuance Date") until the same becomes due and payable, upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof).
The Original Principal Amount is $80,000 (eighty thousand) plus accrued and unpaid interest and any other fees. The Consideration is $80,000 (eighty thousand) payable by wire transfer. The Holder shall pay $80,000 of Consideration upon closing of this Note. For purposes hereof, the term “Outstanding Balance” means the Original Principal Amount, as reduced or increased, as the case may be, pursuant to the terms hereof for conversion, breach hereof or otherwise, plus any accrued but unpaid interest, collection and enforcements costs, and any other fees, penalties, damages or charges incurred under this Note.
GENERAL TERMS
(a) Payment of Principal. The "Maturity Date" shall be March 31, 2023, as may be extended at the option of the Holder in the event that, and for so long as, an Event of Default (as defined below) shall not have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) or any event shall not have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) that with the passage of time and the failure to cure would result in an Event of Default.
(b) Interest. An interest charge of fifteen percent (15%) per annum (“Interest Rate”) shall accrue on any outstanding balance owing hereunder. Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Note is registered on the records of the Company regarding registration and transfers of Notes in cash or converted into Common Stock at the Conversion Price provided the Equity Conditions are satisfied.
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(2) EVENTS OF DEFAULT.
(a) An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
(i) The Company's failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Note (including, without limitation, the Company's failure to pay any redemption payments or amounts hereunder);
(ii) A Conversion Failure as defined in section 3(b)(ii)
(iii) The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency which remains undismissed for a period of sixty-one (61) days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty-one (61) days.
(iv) The Common Stock is suspended or delisted for trading on the Over-the-Counter OTCQB Venture Marketplace or OTCPink Open Marketplace (the “Primary Market”).
(v) The Company loses its ability to deliver shares via “DWAC/FAST” electronic transfer.
(vi) The Company loses its status as “DTC Eligible.”
(vii) The Company shall become late or delinquent in its filing requirements as a fully-reporting issuer registered with the Securities & Exchange Commission.
(viii) The Company shall fail to reserve and keep available out of its authorized Common Stock a number of shares equal to at least three (3) times the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Note.
(ix) The Company shall fail to meet all requirements to satisfy the availability of Rule 144 to the Investor or its assigns including but not limited to timely fulfillment of its filing requirements as a fully-reporting issuer registered with the SEC, requirements for XBRL filings, and requirements for disclosure of financial statements on its website.
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(b) Upon the occurrence of any Event of Default that has not been cured within thirty calendar days from the date of the Event of Default (a “Cure Failure”), the Outstanding Balance shall immediately increase to one hundred thirty percent (130%) of the Outstanding Balance immediately prior to the occurrence of the Event of Default (the “Default Effect”) and a penalty of $100.00 per day shall accrue until the default is remedied. The Default Effect shall automatically apply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action. In addition, all amounts due and payable under the Note shall, at the election of the holder, accelerate and become immediately due and payable upon notice from the Holder to the Company.
(3) CONVERSION OF NOTE. This Note shall be convertible into shares of the Company's Common Stock, on the terms and conditions set forth in this Section 3.
(a) Conversion Right. Subject to the provisions of Section 3(c), at any time after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(b), at the Conversion Price (as defined below). The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this Section 3(a) shall be equal to the quotient of dividing the Conversion Amount by the Conversion Price. The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer agent fees, legal fees, costs and any other fees or costs that may be incurred or charged in connection with the issuance of shares of the Company’s Common Stock to the Holder arising out of or relating to the conversion of this Note.
(i) "Conversion Amount" means the portion of the Original Principal Amount and Interest to be converted, plus any penalties, redeemed or otherwise with respect to which this determination is being made.
(ii) "Conversion Price" shall equal eight ($0.08) cents.
(b) Mechanics of Conversion.
(i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a "Conversion Date"), the Holder shall (A) transmit by email, facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York, NY Time, on such date, a copy of an executed notice of conversion (the "Conversion Notice") to the Company. On or before the third Business Day following the date of receipt of a Conversion Notice (the "Share Delivery Date"), the Company shall (A) if legends are not required to be placed on certificates of Common Stock pursuant to the then existing provisions of Rule 144 of the Securities Act of 1933 (“Rule 144”) and provided that the Transfer Agent is participating in the Depository Trust Company's ("DTC") Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system or (B) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant the Rule 144. If this Note is physically surrendered for conversion and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall, upon request of the Holder, as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock upon the transmission of a Conversion Notice.
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(ii) Company's Failure to Timely Convert. If within five (5) Trading Days after the Company's receipt of the facsimile or email copy of a Conversion Notice the Company shall fail to issue and deliver to Holder via “DWAC/FAST” electronic transfer the number of shares of Common Stock to which the Holder is entitled upon such holder's conversion of any Conversion Amount (a "Conversion Failure"), the Original Principal Amount of the Note shall increase by $100.00 per day until the Company issues and delivers a certificate to the Holder or credit the Holder's balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such holder's conversion of any Conversion Amount (under Holder’s and Company’s expectation that any damages will tack back to the Issuance Date). Company will not be subject to any penalties once its transfer agent processes the shares to the DWAC system. If the Company fails to deliver shares in accordance with the timeframe stated in this Section, resulting in a Conversion Failure, the Holder, at any time prior to selling all of those shares, may rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the Outstanding Balance with the rescinded conversion shares returned to the Company (under Holder’s and Company’s expectations that any returned conversion amounts will tack back to the original date of the Note).
(iii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.
(c) Limitations on Conversions or Trading.
(i) Beneficial Ownership. The Company shall not effect any conversions of this Note and the Holder shall not have the right to convert any portion of this Note or receive shares of Common Stock as payment of interest hereunder to the extent that after giving effect to such conversion or receipt of such interest payment, the Holder, together with any affiliate thereof, would beneficially own (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or receipt of shares as payment of interest. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of this Note is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of this Note that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with Section 3(a) and, any principal amount tendered for conversion in excess of the permitted amount hereunder shall remain outstanding under this Note.
(ii) Capitalization. So long as this as this Note is outstanding, upon written request of the Holder, the Company shall furnish to the Holder the then-current number of common shares issued and outstanding, the then-current number of common shares authorized, and the then-current number of shares reserved for third parties.
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(d) Other Provisions.
(i) Share Reservation. The Company shall at all times reserve and keep available out of its authorized Common Stock a number of shares equal to at least three (3) times the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Note; and within three (3) Business Days following the receipt by the Company of a Holder's notice that such minimum number of shares of Common Stock is not so reserved, the Company shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement. The Company will at all times reserve at least 10,000,000 shares of Common Stock for conversion of the Note and the Warrant.
(ii) Prepayment. The Borrower shall be able to prepay this Note at any time by sending notice to Lender (“Prepayment Notice”), provided however that if a Notice of Conversion has been submitted by the Lender, the Borrower shall not be able to prepay the amount in the Conversion Notice.
(iii) Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Company or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Company shall notify the Holder of such additional or more favorable term and such term, at Holder’s option, shall become a part of the Note. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, conversion lookback periods, interest rates, original issue discounts, stock sale price and private placement price per share.
(iv) All calculations under this Section 3 shall be rounded up to the nearest $0.00001 or whole share.
(v) Nothing herein shall limit a Holder's right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company's failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
(4) Charges and Expenses. Issuance of Common Stock to Holder, or any of its assignees, upon the conversion of this Note shall be made without charge to the Holder for any issuance fee, transfer tax, legal opinion and related charges, postage/mailing charge or any other expense with respect to the issuance of such Common Stock. The Company shall pay all Transfer Agent fees, legal opinion letter fees, as well as brokerage and clearing firm fees incurred by Holder for the issuance and deposit of the Common Stock to Holder pursuant to any conversion of this Note, as well as any and all other fees and charges required by the respective parties as a condition to effectuate such issuance or clear such deposit. Any such fees or charges, as noted in this Section that are paid by the Holder (whether from the Company’s delays, outright refusal to pay, or otherwise), will be automatically added to the Principal Sum of the Note and tack back to the Effective Date for purposes of Rule 144.
(5) REISSUANCE OF THIS NOTE.
(a) Assignability. The Company may not assign this Note. This Note will be binding upon the Company and its successors and will inure to the benefit of the Holder and its successors and assigns and may be assigned by the Holder to anyone of its choosing without Company’s approval.
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(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note representing the outstanding Principal.
(6) NOTICES. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) (iii) upon receipt, when sent by email; or (iv) one (1) Trading Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be those set forth in the communications and documents that each party has provided the other immediately preceding the issuance of this Note or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
The addresses for such communications shall be:
If to the Company, to:
iCoreConnect, Inc.
529 E Crown Point Road, Suite 250
Ocoee, FL 34761
Attn: Archit Shah
Email:
If to the Holder:
Robert McDermott
529 E Crown Point Road, Suite 250
Ocoee, FL 34761
Email:
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(7) APPLICABLE LAW AND VENUE. This Note shall be governed by and construed in accordance with the laws of the State of Florida, without giving effect to conflicts of laws thereof. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Florida or in the federal courts located in the city of Orlando in Orange County, in the State of Florida. Both parties and the individuals signing this Agreement agree to submit to the jurisdiction of such courts.
(8) WAIVER. Any waiver by the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver must be in writing.
(9) LIQUIDATED DAMAGES. Holder and Company agree that in the event Company fails to comply with any of the terms or provisions of this Note, Holder's damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties' inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Holder and Company agree that any fees, balance adjustments, default interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Holder's and Company's expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period under Rule 144).
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused this Convertible Note to be duly executed by a duly authorized officer as of the date set forth above.
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| iCoreConnect, Inc. |
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| Name: Jeffrey Stellinga |
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| Title: Board Member |
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| HOLDER: |
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| Robert McDermott |
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| Name: Robert McDermott |
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EXHIBIT 10.40
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
CONVERTIBLE SECURED PROMISSORY NOTE
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| March 15, 2023 $2,500,000 |
For Value Received iCoreConnect, Inc., a Nevada corporation (“Borrower”), hereby promises to pay to the order of FG Financial Group, Inc., a Nevada corporation, as administrative agent for the Lenders from time to time party to the Loan Agreement as hereinafter defined (as more particularly defined in the Loan Agreement, “Administrative Agent”), at 104 S. Walnut Street, Unit 1A, Itasca, IL 60143, or at such other place designated in writing by the Administrative Agent, the Loan Amount set forth in the attached Loan Schedule (the “Loan Schedule”), without offset, 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, Administrative Agent and the Lenders party thereto (the “Loan Agreement”). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreement.
1. Payment; Interest; Conversion.
(a) Interest. Interest shall accrue on the outstanding Loan Amount at the interest rate provided in the Loan Schedule.
(b) Payment Amounts. 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 the Maturity Date set forth in the Loan Schedule.
(d) Conversion. The Loan Amount plus all accrued and unpaid interest shall be subject to the conversion feature set forth in the Loan Schedule.
2. Security Interest. This Note is secured by a security interest in certain of Borrower's assets pursuant to the Loan Agreement.
2023-03-10 - Note - iCoreConnect - FGMC (execution)
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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 Section1 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.
4. Miscellaneous.
(a) Form of Payment. All payments due hereunder shall be made in immediately available and 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 Nevada 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) Successors and Assigns. The terms of this Note and of the other Loan Documents shall bind and inure to the benefit of the successors and assigns of the parties. The foregoing sentence shall not be construed to permit Borrower to assign the Loan except as otherwise permitted under the Loan Documents.
(f) 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.
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IN WITNESS WHEREOF, Borrower has 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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| Name: | Robert McDermott | |
| Title: | CEO | ||
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| Name: | Wes Schrader |
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| Title: | CEO |
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Loan Schedule
iCoreConnect, Inc.
This Schedule forms an integral part of the Loan Agreement between Borrower, Administrative Agent, and the Lenders party thereto, and the Note given by Borrower in favor of the Administrative Agent, for the benefit of the Lenders.
Preamble. Loan Amount. The loan amount will be $2,500,000.00 (the “Loan Amount”), of which $2,000,000.00 (representing an original issue discount of 20%, will be advanced on the date of the Note (the “Advance”).
Section 1(a) – Interest. Interest shall accrue on the outstanding Loan Amount at a rate of 15.0% per annum. During the existence of an Event of Default, interest shall accrue at the lesser of (i) the rate of 20% per annum, or (ii) the maximum amount permitted by law.
Section 1(b) – Payment Amounts:
Borrower shall make payments of the outstanding Loan Amount and accrued and unpaid interest as follows:
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| · | Monthly interest-only payments; provided the Borrower may, at its option, pay such interest payment by adding such interest to the outstanding Loan Amount on such interest payment date. |
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| · | On the Maturity Date, the entire outstanding Loan Amount and all accrued interest shall be due and payable, as calculated by the Administrative Agent. |
Section 1(c) – Maturity Date: The Maturity Date shall be March 15, 2024.
Section 1(d) – Optional Conversion: Commencing September 15, 2023, at any Lender’s option, such Lender may convert its Pro Rata Share of the outstanding and unpaid Loan Amount and all accrued and unpaid interest into fully paid and non-assessable shares of Borrower common stock (“Common Stock”) at a conversion price, subject to adjustment as provided in the following paragraph, of $0.10 per share of Common Stock (the “Conversion Price”). If the issuance would result in the issuance of a fraction of a share of Common Stock, Borrower shall round such fraction of a share of Common Stock up to the nearest whole share. The conversion right granted to the Lenders in this Section is several, and not joint, and may be exercised at any time by any Lender with respect to its Pro Rata Share of the outstanding and unpaid Loan Amount and all accrued and unpaid interest.
If the Borrower, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock equivalents, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Borrower, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Borrower) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this paragraph shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
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If, at any time while this Note is outstanding, the Borrower consummates the business combination between FG Merger Corp. (“FGMC”) and Borrower pursuant to the Merger Agreement and Plan of Reorganization by and among FG Merger Corp., FG Merger Sub Inc., and iCoreConnect, Inc. dated January 5, 2023, as such agreement may be amended from time to time (the “Business Combination”), then, upon any subsequent conversion of this Note by any Lender, the Lender shall no longer have the right to receive Common Stock upon conversion of the Note, but shall have the right to receive, for each share of Common Stock that would have been issuable upon such conversion immediately prior to the occurrence of the Business Combination, the number of shares of FGMC Common Stock receivable as a result of such Business Combination by a holder of the number of shares of Common Stock for which this Note is convertible immediately prior to such Business Combination.
Registration Rights. At any time after the exercise of the conversion rights set forth above, upon written notice of any Lender that has exercised such conversion rights, the Borrower shall use its best efforts to file, or cause FGMC to file, a registration statement on Form S-1, or any other appropriate form of registration statement, with the Securities and Exchange Commission (the “SEC”) as soon as practicable after receiving the written request, but in no event later than 60 days after the receipt of the request.
Registration Procedures. In connection with any registration pursuant to this Section, the Borrower or FGMC, as applicable, shall:
(i) Prepare and file with the SEC a registration statement and any amendments thereto and any other documents necessary to effect the registration of the securities of the Lender;
(ii) Use its best efforts to cause the registration statement to be declared effective by the SEC as soon as practicable;
(iii) Prepare and file with the SEC such amendments and supplements to the registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period not less than 180 days or until all securities covered by such registration statement have been sold, whichever is earlier;
(iv) Furnish to the Lender such number of copies of the registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such holder may reasonably request in order to facilitate the disposition of the securities owned by such Lender; and
(v) Take any and all other actions which may be necessary or advisable to enable the Lender to consummate the disposition of the securities owned by such holder in such jurisdictions.
The Company may require the Lender to provide information reasonably necessary to complete any registration and to execute any documents necessary to complete such registration.
All expenses incurred in connection with any registration, qualification or compliance pursuant to this Section, including, without limitation, all registration, filing, and qualification fees, printers' and accounting fees, and the fees and disbursements of counsel for the Borrower, FGMC, the Administrative Agent and the Lenders shall be borne by the Borrower.
* * * * *
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this “Agreement”) is entered into as of March 15, 2023 (the “Effective Date”), by and between iCoreConnect, Inc., a Nevada corporation (“Borrower”), FG Financial Group, Inc., a Nevada corporation, as administrative agent (in such capacity and together with its successors and permitted assigns, the “Administrative Agent”),and each lender party that executes the signature page hereto (each a “Lender” and collectively, the “Lenders”).
RECITALS
A. Each Lender desires to make available a loan (the “Loan”) to Borrower in the aggregate amount set forth in the Loan Schedule attached to the Note, to be used for the specific purposes set forth in this Agreement.
B. Each 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, Administrative Agent, Lenders 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) “Administrative Agent” shall have the meaning assigned to such term in the preamble.
(b) “Borrower Parties” means Borrower.
(c) “Commitment” shall mean, with respect to each Lender, the commitment, if any, of such Lender to make Loans hereunder as set forth in Exhibit C.
(d) “Code” means the Internal Revenue Code of 1986, as amended.
(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) “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.
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(h) “Loan Amount” means the aggregate outstanding amount of Loans advanced in accordance with the terms hereof.
(i) “Loan Documents” means, collectively, this Agreement, the Note, the Deposit Account Control Agreements (if any),, the Subordination Agreements, and each other agreement, document, and instrument entered into or delivered by Administrative Agent, Lender, Borrower, or their affiliates in connection with this Agreement or such agreements.
(j) “Loan Party” means Borrower and any other Person (other than Administrative Agent or any Lender) which at any applicable time becomes a party to any of the Loan Documents.
(k) “Loan Schedule” means the Loan Schedule attached to the Note.
(l) “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 Administrative Agent or any 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.
(m) “Note” means the Secured Promissory Note in the form attached hereto as Exhibit A issued by Borrower in favor of Administrative Agent for the benefit of the Lenders.
(n) “Option Holder” shall mean each of the Persons listed on Exhibit G-1.
(o) “Permitted Liens” shall have the meaning set forth in Section 7.04.
(p) “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.
(q) “Required Lenders” shall mean a majority-in-interest of the Lenders.
(r) “Securities Act” shall mean the Securities Act of 1933, as amended.
(s) “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.
_____________________
1Not used.
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(t) “Subordinated Lender” shall mean each of the Lenders listed on Exhibit F-1.
(u) “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.
(v) “UCC” means the Uniform Commercial Code in effect in the state of Nevada.
(w) “Warrant Holder” shall mean each of the Persons listed on Exhibit H-1.
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, each Lender agrees, severally and not jointly, to make a Loan to Borrower on the Closing Date in a principal amount equal to such Lender’s Commitment set forth in Exhibit C. 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 shall use the proceeds of the Loan only for the purposes set forth on Exhibit D, and for no other purpose.
Section 2.03 Payment Amounts. The Loan shall be repaid in accordance with the provisions of the payment schedule described in the Loan Schedule. All payments due hereunder shall be made in immediately available and lawful currency of the United States of America. Each such payment shall be made to an account designated by the Administrative Agent unless otherwise required herein. The Administrative Agent shall promptly distribute to each Lender any payments received by the Administrative Agent on behalf of such Lender.
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 Seniority of Loan. The Loan shall be junior to the debt owing by Borrower to Element SaaS Finance (USA), LLC, a Delaware limited liability company (“Element”), pursuant to that certain Loan and Security Agreement dated February 28, 2022 by and between Element and Borrower, evidenced by that certain Secured Promissory Note dated February 28, 2022 given by Borrower in favor of Element (together with any refinancing thereof in a principal amount not to exceed the principal amount on the date hereof, the “Element Debt”), and senior to all other debt, equity or other commitments of Borrower, including but limited to any and all debt owed to the Subordinated Lenders, subject to any Permitted Liens permitted to have priority in accordance with the terms of this Agreement and applicable law.
Section 2.06 Taxes.
(a) The Administrative Agent 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, the Administrative Agent shall provide Borrower, upon the issuance of the Note(s) 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 any Lender intends to claim exemption from withholding under Sections 871(h) or 881(c) of the Code, the Administrative Agent 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 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 Administrative Agent with commercially reasonably notice of such withholding obligation, so as to permit the Administrative Agent 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 Administrative Agent or the applicable Lender for all purposes of this Agreement.
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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 Administrative Agent, for the benefit of the Lenders, a continuing security interest (the “Security Interest”) 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
(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 granted to Administrative Agent 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 Reserved.
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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 the Administrative Agent 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 6.05. 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.
Section 3.05 Further Actions. Borrower will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Administrative Agent 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 the Administrative Agent 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 the Administrative Agent such financing statements, including recordations in the applicable Patent and Mark registries, in form acceptable to the Administrative Agent, as the Administrative Agent may from time to time reasonably request or as are necessary in the opinion of the Administrative Agent 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 the Administrative Agent 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 the Administrative Agent not more than thirty (30) business days’ notice thereafter, clearly describing such new location and providing such other information in connection therewith as Administrative Agent may reasonably request, and (b) with respect to such new location, it shall have taken all action, reasonably satisfactory to the Administrative Agent, to maintain the security interest of Administrative Agent 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 the Administrative Agent from time to time. Borrower may establish one or more new locations for such tangible Collateral only if (a) it shall have given to the Administrative Agent 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 the Administrative Agent may reasonably request, and (b) with respect to such new location, it shall have taken all action reasonably satisfactory to Administrative Agent to maintain the security interest of Administrative Agent 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.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to the Administrative Agent and the Lenders, 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 Lenders under this Agreement, the Notes, 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.
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 the Administrative Agent hereby in respect of the Collateral in U.S. jurisdictions have been accomplished (or will be accomplished upon the appropriate filings reasonably requested by the Administrative Agent, which Borrower hereby authorizes the Administrative Agent to make) and the security interest granted to the Administrative Agent 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 articles 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 the Lenders in writing prior to the Effective Date or from time to time in accordance with Section 6.06.
Section 4.06 No Subordination. Other than pursuant to this Agreement with respect to the Element Debt, 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.
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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.
(c) Marlin provides Borrower with equipment financing for Borrower’s cubicles (the “Marlin Debt”). Borrower has granted Marlin with a security interest solely in Borrower’s cubicles and in no other Collateral.
Section 4.09 Reserved.
Section 4.10 Reserved.
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 the Administrative Agent and the Lenders 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 Administrative Agent’s or 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 Administrative Agent or any Lender, even if that remedy would not have been available had the Loan been made for consumer or personal purposes.
Section 4.13 Reserved.
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.
Exhibits. Exhibits F-1, G-1 and H-1 to this Agreement are true, accurate and complete in all respects. None of the information set forth in Exhibits F-1, G-1 or H-1 contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary in order to make the statements contained herein, and therein, in light of the circumstances in which they are made, not misleading.
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ARTICLE V.
CONDITIONS PRECEDENT
Section 5.01 Conditions to Funding. The obligation of any Lender to make the Loan contemplated by this Agreement is subject to the fulfillment to such 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, investigation, suit or proceeding at law or in equity or before any arbitrator or governmental authority shall have been commenced against Borrower, Administrative Agent or any 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. The Administrative Agent and each Lender shall have received, in form and substance satisfactory to the Administrative Agent and each Lender, each of the following, duly executed:
(i) this Agreement;
(ii) the Note;
(iii) a Subordination Agreement, in the form attached hereto as Exhibit E (the “Senior Debt Subordination Agreement”), pursuant to which the Administrative Agent and each of the Lenders agrees to subordinate all of their Obligations from Borrower to Borrower’s debt obligations to Element.
(iv) a Subordination Agreement, in the form attached hereto as Exhibit F (the “Junior Debt Subordination Agreement”), pursuant to which each of the Subordinated Lenders agrees to subordinate all of their debt obligations from Borrower to Borrower’s Obligations to Lenders;
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(v) an Extension Amendment to Promissory Note, in the form attached hereto as Exhibit F-2 (the “Note Extension”), pursuant to which certain of the Subordinated Lenders as set forth in Exhibit F-1 agrees to extend the maturity date of all of their debt obligations from Borrower;
(vi) an Amendment to Option Grant Certificate, in the form attached hereto as Exhibit G (the “Option Amendment”), pursuant to which each Option Holder agrees to amend the terms of Borrower’s obligations pursuant to the option granted to such Option Holder;
(vii) an Amendment to Common Stock Purchase Warrant, in the form attached hereto as Exhibit H (the “Warrant Amendment”), pursuant to which each Warrant Holder agrees to amend the terms of Borrower’s obligations pursuant to the warrant granted to such Warrant Holder;
(viii) with respect to Borrower, an Officer’s Certificate in the form attached as Exhibit I (the “Officer’s Certificate”) or in such form as Administrative Agent or Lenders 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;
(ix) with respect to each Loan Party, such documentation as Administrative Agent or Lenders 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
(x) such other certificates, documents, instruments, consents and opinions as Administrative Agent or Lenders may require.
(f) 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 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, the Administrative Agent may terminate this Agreement upon 3 days’ written notice. The provisions of Article X, below, shall survive any such termination.
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ARTICLE VI.
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Lenders remain committed to make the Loan to Borrower pursuant hereto, or any liabilities (whether liquidated or unliquidated) of Borrower to Lenders 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 the Administrative Agent 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 Accounting Records. Maintain adequate books and records in accordance with generally accepted accounting principles consistently applied, and permit the Administrative Agent, 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 6.03 Reserved.
Section 6.04 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 6.05 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 the Administrative Agent, from time to time at the Administrative Agent’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 6.06 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 to have a Material Adverse Effect.
Section 6.07 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.
Section 6.08 Reserved.
Section 6.09 Notices to Administrative Agent. Promptly (but in no event more than five (5) business days after the occurrence of each such event or matter) give written notice to the Administrative Agent 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, except as contemplated by that certain Merger Agreement and Plan of Reorganization, dated as of January 5, 2023, by and among Borrower, FG Merger Corp. and FG Merger Sub Inc.; (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).
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ARTICLE VII.
NEGATIVE COVENANTS
Borrower further covenants that so long as any Lender remains committed to make the Loan to Borrower pursuant hereto, or any liabilities (whether liquidated or unliquidated) of Borrower to any 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 the Administrative Agent’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, which is senior to the Loan, except:
(a) the liabilities of Borrower to Lenders;
(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) hereof;
(g) the Element Debt
(h) the Marlin Debt; and
(i) indebtedness provided by a Borrower Party or any Subsidiary to any Subsidiaries.
Each of the foregoing, collectively, “Permitted Indebtedness”)
Section 7.02 Reserved.
Section 7.03 Reserved.
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;
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(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;
(e) Liens in connection with the Element Debt; and
(f) Liens securing the liabilities of any Borrower Party subordinated to the Loan pursuant to the Subordination Agreements.
Section 7.05 Restricted Payments. At any time (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) except as authorized in Section 2.02, make any payments of any indebtedness subordinated to the Obligations due to Lenders 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 the Administrative Agent; or (c) redeem, repurchase, or retire any capital stock or other equity, in each case for cash.
Section 7.06 Reserved.
Section 7.07 Reserved.
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.
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;
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(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.
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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 Administrative Agent 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.
(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 any of the Lenders 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 the Administrative Agent. For the avoidance of doubt, the foregoing shall not apply to any judgements related to the lawsuit filed with the Circuit Court of the Ninth Judicial Circuit for Orange County, Florida styled Samuel B. Fortenbaugh III v. iCoreConnect, Inc.
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(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].
(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 the Administrative Agent, which shall not be unreasonably withheld provided the Borrower presents to Administrative Agent prior to such change its business plan and rationale for such change.
(j) 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.
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ARTICLE IX.
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
Section 9.01 Rights in Event of Default.
(a) Rights and Remedies. The Administrative Agent shall have, for the benefit of the Lenders, the following rights, privileges, powers and remedies whenever any Event of Default shall occur subject in all instances to the approval of the Administrative Agent:
(i) the entire outstanding Loan Amount and all accrued and unpaid interest (A) may, at the option of the Administrative Agent, 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) The Administrative Agent shall have, for the benefit of the Lenders and 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, and each of the other Loan Documents.
(c) Cumulative Remedies; No Waiver. The rights, powers, privileges, options and remedies of the Administrative Agent and the Lenders as provided in this Agreement shall be cumulative and concurrent, and may be pursued singly, successively or together at the sole discretion of the Administrative Agent, 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 the Administrative Agent, may, at the Administrative Agent’s option, be rescinded by written acknowledgment to that effect by the Administrative Agent, but the tender and acceptance of partial payment or partial performance alone shall not, by itself, in any way affect or rescind such acceleration. The Administrative Agent and the Lenders 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 the Administrative Agent, 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 the Administrative Agent, and Borrower consents to any and all extensions of time, renewals or waivers that may be granted by the Administrative Agent 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 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 the Administrative Agent or the Lenders 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 the Administrative Agent or the Lenders to any other or further action in any circumstances without notice or demand.
Section 9.03 Discontinuance of Proceedings. In the case that the Administrative Agent or the Lenders 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 the Administrative Agent or the Lenders, then and in every such case Borrower, Administrative Agent, Lenders 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 the Administrative Agent and the Lenders shall continue as if no such proceeding had been instituted.
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ARTICLE X.
MISCELLANEOUS
Section 10.01 Administrative Agent.
(a) Each of the Lenders hereby irrevocably appoints the Administrative Agent its agent and authorizes the Administrative Agent to take such actions on its behalf, including the execution of the other Loan Documents, and to exercise such powers as are delegated to such Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. Without limiting the generality of the foregoing, the Administrative Agent is hereby expressly authorized by the Lenders to execute any and all documents (including without limitation releases) with respect to the Collateral and the rights of the Lenders with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Loan Documents. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.
(b) The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity.
(c) The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Required Lenders, (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, nor shall it be liable for the failure to disclose, any information relating to the Borrower, any Borrower Party or any Loan Party, or any of their respective affiliates, that is communicated to or obtained by the Administrative Agent in any capacity; provided that the Administrative Agent shall not be required to take any action that, in its reasonable opinion or the reasonable opinion of its counsel, may expose the Administrative Agent to liability (which is not indemnified) or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law and (d) the Administrative Agent shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower, any Borrower Party, any Loan Party, or any of their respective affiliates, that is communicated to or obtained by the Administrative Agent or any of its affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or in the absence of its own (or its affiliates) gross negligence, bad faith or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall not be deemed to have knowledge of any Event of Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, (v) the creation, perfection or priority of Liens on the Collateral or the existence of the Collateral or (vi) the satisfaction of any condition set forth in Article V or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
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(d) The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent may also rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
(e) The Administrative Agent may perform any and all its duties and exercise its rights and powers under any Loan Document by or through any one or more sub-agents appointed by it. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers by or through their respective affiliates. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the affiliates of the Administrative Agent in such capacity and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the term facility provided for herein as well as activities as Administrative Agent.
(f) Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right, with the consent (not to be unreasonably withheld or delayed) of the Borrower, to appoint a successor; provided that during the existence and continuance of an Event of Default no such consent of the Borrower shall be required. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not be obligated to), on behalf of the Lenders, appoint a successor Administrative Agent with the prior consent (not to be unreasonably withheld or delayed) of the Borrower; provided that during the existence and continuance of an Event of Default no such consent of the Borrower shall be required. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date. After the Administrative Agent’s resignation hereunder, the provisions of this Article and Section 10.11 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective affiliates in respect of any actions taken or omitted to be taken by any of them while acting as Administrative Agent. In addition, notwithstanding the effectiveness of a resignation by the Administrative Agent hereunder, (a) the retiring Administrative Agent may, in its sole discretion, continue to provide the services of the Administrative Agent solely with respect to administering, collecting and delivering any payments of principal, interest, fees, premium or other amounts in respect of the Loans and maintaining the books and records relating thereto (such Administrative Agent acting in such capacity, the “Paying Agent”), (b) the term “Administrative Agent” when used in connection with any such functions shall be deemed to mean such retiring Administrative Agent in its capacity as the Paying Agent and (c) such retiring Administrative Agent shall, in its capacity as the Paying Agent, continue to be vested with and enjoy all of the rights and benefits of an Administrative Agent hereunder. With effect from the Resignation Effective Date, (1) the retiring Administrative Agent shall be discharged from its duties and obligations under the Loan Documents and (2) except for any indemnity payments owed to the retiring Administrative Agent, all payments, communications and determinations provided to be made by, to or through such Administrative Agent shall instead be made by or to each Lender directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Administrative Agent (other than any rights to indemnity payments owed to the retiring Administrative Agent), and the retiring Administrative Agent shall be discharged, to the extent not already discharged, from all of its duties and obligations hereunder or under the other Loan Documents. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent’s resignation under the Loan Documents, the provisions of this Article and Sections 10.04 and 10.11 shall continue in effect for the benefit of such retiring Administrative Agent, its sub agents and their respective affiliates in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as an Agent.
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(g) Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their respective affiliates and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their respective affiliates and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any other Loan Document, any related agreement or any document furnished hereunder or thereunder.
(h) In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to Borrower or any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise: (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts earned, due and payable to the Lenders and the Administrative Agent under Section 10.04 allowed in such judicial proceeding; and (b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and their respective agents and counsel, and any other amounts due the Administrative Agent under Section 10.04.
(i) The Lenders irrevocably authorize the Administrative Agent, at its option and in its discretion: (a) to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (i) upon payment in full of all Obligations, (ii) that is sold or otherwise disposed of or to be sold or otherwise disposed of as part of or in connection with any sale or other disposition permitted under the Loan Documents, or (iii) if approved, authorized or ratified in writing by the Required Lenders; (b) to subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Permitted Lien on such property; (c) to release any Borrower Party or Loan Party from its Obligations under the Loan Documents if such Person ceases to be a subsidiary of the Borrower as a result of a transaction permitted under the Loan Documents; and (d) to enter into each Loan Document (including the Subordination Agreements) and any customary intercreditor agreements as required herein for the benefit of the Lenders and the Lenders hereby agree to be bound thereby.
(j) Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release or the Administrative Agent’s authority to subordinate its interest in particular types or items of Collateral or other property.
(k) The Administrative Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent’s Lien thereon, or any certificate prepared by any Loan Party in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.
(l) To the extent required by any applicable law, the Administrative Agent may withhold from any interest payment to any Lender an amount equivalent to any applicable withholding tax. If the Internal Revenue Service or any other governmental authority asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender because the appropriate form was not delivered or was not properly executed or because such Lender failed to notify the Administrative Agent of a change in circumstance which rendered the exemption from, or reduction of, withholding tax ineffective or for any other reason, such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax or otherwise, including any penalties or interest and together with all expenses (including legal expenses, allocated internal costs and out-of-pocket expenses) incurred.
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Section 10.02 No Waiver. No delay, failure or discontinuance of Lenders 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 Lenders 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 10.03 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 10.03.
Section 10.04 Costs, Expenses and Attorneys’ Fees. Borrower shall pay to Administrative Agent or Lenders within thirty (30) days of 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 Administrative Agent or Lenders in connection with (a) the preparation and administration of this Agreement and the other Loan Documents or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions hereby or thereby contemplated shall be consummated); (b) the enforcement of Administrative Agent’s or Lenders’ rights and/or the collection of any amounts which become due to Administrative Agent or Lenders under any of the Loan Documents; and (c) 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 10.05 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.
Section 10.06 Entire Agreement; Amendment. This Agreement and the other Loan Documents constitute the entire agreement between Borrower and Lenders 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 10.07 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 10.12, 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.
Section 10.08 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 10.09 Usury Savings Clause; Severability.
(a) Borrower and Lenders intend to contract in compliance with all applicable usury laws governing the Loan made hereunder. Borrower and Lenders 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 Lenders receive 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 Lenders’ 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 Lenders.
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(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 10.10 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 10.11 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 Nevada. Borrower hereby irrevocably submits to the jurisdiction of any United States Federal or State court sitting in the State of Nevada 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 Lenders 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 10.12 Indemnity by Borrower. Borrower agrees to indemnify, save and hold harmless the Administrative Agent, the Lenders, each of their respective 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, Administrative Agent and Lenders 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 Lenders. To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent pursuant to this Section or Section 10.04, each Lender severally agrees to pay to the Administrative Agent such Lender’s Pro Rata Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Collateral Agent or the Arranger in its capacity as such. For purposes hereof, a Lender’s “Pro Rata Share” shall be determined based upon its share of the aggregate outstanding Loans.
Section 10.13 Further Assurances. Borrower shall, at its expense and without expense to the Administrative Agent or Lenders, do, execute and deliver such further acts and documents as the Administrative Agent from time to time reasonably require for the assuring and confirming unto the Administrative Agent and Lenders 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 10.14 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 10.15 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 Lenders, 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 Lenders and has not theretofore been sold or otherwise applied or released pursuant to this Agreement.
[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.
| Borrower: | iCoreConnect, Inc. |
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| Name: | Robert McDermott |
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| Title: | Chief Executive Officer |
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Address and Email for Notices:
Attn: Robert McDermott 529 E Crown Point Road, Suite 250 Ocoee, FL 34761 Email: |
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| Administrative Agent: | FG Financial Group, Inc. |
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| By: |
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| Name: | Larry Swets |
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| Title: | CEO |
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Borrower and Administrative Agent Signature Page
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| Lender: Metrolina Capital Investors, LLC | By: |
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| Name: | Harry M. Tsumas |
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| Commitment: $250,000 | Title: | Member/Manager |
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Lender Signature Page
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| Lender: Glenn A Wilson and Peggy M Wilson Revocable Trust | By: |
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| Name: | Glenn A. Wilson or Peggy M. Wilson |
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| Commitment: $200,000 | Title: | Trustee |
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Lender Signature Page
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| Lender: Waverider Partners SPV I-D LLC | By: |
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| Name: | Wes Schrader |
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| Commitment: $100,000 | Title: | Manager |
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Lender Signature Page
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| Lender: Lloyd R. Sams | By: |
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| Name: | Lloyd R. Sams |
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| Commitment: $100,000 | Title: | Lender |
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Lender Signature Page
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| Lender: Moglia Capital, LLC | By: |
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| Name: | Joseph H. Moglia |
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| Commitment: $250,000 | Title: | Managing Member |
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Lender Signature Page
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| Lender: Moglia Family Foundation | By: |
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| Name: | Joseph H. Moglia |
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| Commitment: $250,000 | Title: | Trustee |
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Lender Signature Page
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| Lender: Sequoia Financial LLC | By: |
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| Name: | Hassan Raza Baqar |
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| Commitment: $16,666 | Title: | Managing Member |
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Lender Signature Page
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| Lender: Itasca Financial LLC | By: |
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| Name: | Larry G. Swets, Jr. |
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| Commitment: $16,666 | Title: | Managing Member |
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Lender Signature Page
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| Lender: Cerminara Capital LLC | By: |
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| Name: | Kyle Cerminara |
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| Commitment: $16,666 | Title: | Managing Member |
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Lender Signature Page
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| Lender: Warberg WF X LP | By: |
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| Name: | Daniel Warsh |
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| Commitment: $100,000 | Title: | Manager |
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Lender Signature Page
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| Lender: Onward Consultants, LLC | By: |
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| Name: | Edward F. Ruberry |
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| Commitment: $200,000 | Title: | Member |
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Lender Signature Page
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| Lender: Fundamental Global Resinsurance Ltd., a Cayman Islands corporation |
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| Commitment: $500,000 | By: | ||
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| Name: | Hassan Raza Baqar | |
| Title: | Director | ||
Lender Signature Page
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EXHIBIT A
SECURED PROMISSORY NOTE
[Attached]
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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 Administrative Agent, 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, the Administrative Agent 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 the Administrative Agent, in which case Borrower agrees to, upon written demand from the Administrative Agent, execute an assignment in form and substance satisfactory to the Administrative Agent of all its rights, title and interest in and to the Marks to the Administrative Agent; (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 the Administrative Agent, change Borrower's corporate name to eliminate therefrom any use of any Mark and execute such other and further documents that Administrative Agent 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 Administrative Agent.
SPECIAL PROVISIONS CONCERNING PATENTS
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 Administrative Agent 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, the Administrative Agent 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 the Administrative Agent, in which case Borrower agrees to, upon written demand from the Administrative Agent, execute an assignment in form and substance satisfactory to the Administrative Agent 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 the Administrative Agent may request further to confirm this and to transfer ownership of the Patents to the Administrative Agent.
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EXHIBIT B-1
MARKS
None.
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EXHIBIT C
COMMITMENTS
| Lender | Commitment | Pro Rata Share |
| Fundamental Global Reinsurance Ltd. | $500,000 | 25.0% |
| Metrolina Capital Investors, LLC | $250,000 | 12.5% |
| Moglia Capital, LLC | $250,000 | 12.5% |
| Moglia Family Foundation | $250,000 | 12.5% |
| Glenn A Wilson and Peggy M Wilson Revocable Trust | $200,000 | 10.0% |
| Onward Consultants, LLC | $200,000 | 10.0% |
| Waverider Partners SPV I-D LLC | $100,000 | 5.0% |
| Lloyd R. Sams | $100,000 | 5.0% |
| Warburg WF X LP | $100,000 | 5.0% |
| Sequoia Financial LLC | $16,668 | 0.833% |
| Itasca Financial LLC | $16,666 | 0.833% |
| Cerminara Capital LLC | $16,666 | 0.833% |
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| TOTAL | $2,000,000 |
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EXHIBIT D
USE OF PROCEEDS
All proceeds of the Loan shall be used by Borrower solely for the following purposes, and for no other purpose without the consent of the Administrative Agent:
a. Original Issue Discount $500,000
b. New Sales Team $500,000
c. Working capital $500,000
d. Transaction expenses $200,000
e. Debt repayment $600,000, comprised of:
i. $50,000 to payoff indebtedness owing to Robert McDermott, and
ii. $550,000 to pay down indebtedness owing to Gary Boyer.
f. Dynamics launch $200,000
Loan Amount $2,500,000
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EXHIBIT E
SENIOR DEBT SUBORDINATION AGREEMENT
[Attached]
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EXHIBIT F
JUNIOR DEBT SUBORDINATION AGREEMENT
[Attached]
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EXHIBIT F-1
SUBORDINATED LENDERS
| · | LGH Investments LLC |
| · | Lucas Ventures, LLC |
| · | Gary Boyer |
| · | Steve Wubker |
| · | Jeffrey Stellinga |
| · | Robert McDermott |
SUBORDINATED LENDERS REQUIRED TO EXECUTE NOTE EXTENSIONS
| · | Gary Boyer |
| · | Steve Wubker |
| · | Jeffrey Stellinga |
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EXHIBIT F-2
NOTE EXTENSION
[Attached]
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EXHIBIT G
OPTION AMENDMENT
[Attached]
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EXHIBIT G-1
OPTION HOLDERS
| · | David Fidanza |
| · | Murali Chakravarthi |
| · | Carly Camp |
| · | Carly Garrison |
| · | Chris Elley |
| · | Cile Spelce |
| · | Eric Vasquez |
| · | Katherine Moody |
| · | Sahil Munawar |
| · | Tracy Palmer |
| · | Archit Shah |
| · | Robert McDermott |
| · | Jeffrey Stellinga |
| · | Aaron Lindsey |
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EXHIBIT H
WARRANT AMENDMENT
[Attached]
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EXHIBIT H-1
WARRANT HOLDERS
| · | Lucas Ventures, LLC |
| · | Tysadco Partners LLC |
| · | Jefferson Street Capital LLC |
| · | FirstFire Global Opportunity Fund LLC |
| · | GS Capital LLC |
| · | Gary Boyer |
| · | Jeffrey Stellinga |
| · | Robert McDermott |
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EXHIBIT I
OFFICER'S CERTIFICATE
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SUBORDINATION AGREEMENT
This Subordination Agreement (this “Agreement”) is made as of March __, 2023, between Element SaaS Finance (USA), LLC, a Delaware limited liability company, as lender under the Senior Loan Agreement referred to below (“Senior Lender”), [_________________] (“Subordinated Creditor”), and FG Financial Group, Inc., a Nevada corporation, as administrative agent for the "Junior Lenders" described below (the (“Administrative Agent”).
RECITALS
A. iCoreConnect, Inc., a Nevada corporation (“Borrower”), Administrative Agent, Subordinated Creditor (as a "Lender") and the other "Lenders" defined therein (such Lenders, including Subordinated Creditor, the “Junior Lenders”), have entered into a loan and security agreement (the “Junior Loan Agreement”).
B. Borrower has entered into a Loan and Security Agreement (the “Senior Loan Agreement”) and associated Loan Documents with Senior Lender (the “Senior Loan Documents”), which require all debt held by Subordinated Creditor to be subordinated in writing to the debt owing by Borrower to Senior Lender.
C. In order to induce the Senior Lender to make the loans, extensions of credit or other accommodations to Borrower pursuant to the Senior Loan Documents, the Subordinated Creditor is willing to subordinate all of Borrower’s indebtedness and obligations to Subordinated Creditor, whether presently existing or arising in the future (the “Subordinated Debt”) to the Senior Debt (defined below).
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Subordinated Creditor shall be entitled to receive (a) each regularly scheduled payment of interest and/or principal, if any, owing in connection with the Subordinated Debt, and (b) exercise its right thereunder to call each tranche of debt in accordance with the terms of the agreements evidencing the Subordinated Debt, provided that no payment of principal or interest on any Subordinated Debt shall be made by Borrower, or received by Subordinated Creditor, after (i) any default has occurred thereunder and is continuing or would exist immediately after giving effect to such payment, or (ii) notice from Senior Lender to Administrative Agent or Subordinated Creditor that a default, or any condition, event or act that with the giving of notice or the passage of time or both would constitute a default, has occurred with regard to the Senior Debt. Except as set forth in the previous sentence, neither Administrative Agent nor Subordinated Creditor will demand or receive from Borrower (and Borrower will not pay to Administrative Agent or Subordinated Creditor) all or any part of the Subordinated Debt, by way of payment, accelerated payment, prepayment, setoff, lawsuit or otherwise, nor will Administrative Agent or Subordinated Creditor commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against any Borrower, until the Senior Debt is repaid in cash in full. Borrower shall forward to Senior Lender a copy of any notice of a Subordinated Creditor's exercise of its right to call Subordinated Debt no later than 3 business days after receipt.
2. Subject to Section 1 above, all Subordinated Debt is subordinated in right of payment to all obligations of Borrower to Senior Lender now existing or hereafter arising, together with all costs of collecting such obligations (including attorneys’ fees), including, without limitation (i) all interest accruing after the commencement by or against Borrower of any bankruptcy, reorganization or similar proceeding, (ii) all obligations under the Senior Loan Documents, and (iii) any other additional or future indebtedness to Senior Lender (the “Senior Debt”).
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3. Administrative Agent and Subordinated Creditor shall promptly deliver to Senior Lender, at the address set forth below or as otherwise directed by Senior Lender, in the form received, for application to the Senior Debt, any payment, distribution, security or proceeds received by Administrative Agent or Subordinated Creditor with respect to the Subordinated Debt in violation of this Agreement.
4. In the event of Borrower’s insolvency, reorganization or any case or proceeding under any bankruptcy or insolvency law or laws relating to the relief of debtors, these provisions shall remain in full force and effect, and Senior Lender’s claims against Borrower and the estate of Borrower shall be paid in full before any payment is made to Administrative Agent or Subordinated Creditor.
5. No amendment of the documents evidencing or relating to the Subordinated Debt shall directly or indirectly modify the provisions of this Agreement in any manner which might terminate or impair the subordination of the Subordinated Debt. By way of example, such instruments shall not be amended to (i) increase the rate of interest with respect to the Subordinated Debt, or (ii) accelerate the payment of the principal or interest or any other portion of the Subordinated Debt.
6. This Agreement shall remain effective until the repayment of the Senior Debt in cash in full. If, at any time after repayment of the Senior Debt, any payments of the Senior Debt must be disgorged by Senior Lender for any reason (including, without limitation, the bankruptcy of Borrower), this Agreement and the relative rights and priorities set forth herein shall be reinstated as to all such disgorged payments as though such payments had not been made and Subordinated Creditor shall immediately pay over to Senior Lender all payments received with respect to the Subordinated Debt to the extent that such payments would have been prohibited hereunder.
7. This Agreement shall bind any successors or assignees of Administrative Agent and Subordinated Creditor and shall benefit any successors or assigns of Senior Lender. This Agreement is solely for the benefit of Subordinated Creditor and Senior Lender and not for the benefit of Borrower or any other party. Subordinated Creditor further agrees that if Borrower is in the process of refinancing a portion of the Senior Debt with a new lender, and if Senior Lender makes a request of Subordinated Creditor, Subordinated Creditor shall agree to enter into a new subordination agreement with the new lender on substantially the terms and conditions of this Agreement.
8. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
9. This Agreement shall be construed in accordance with the internal laws (and not the law of conflicts) of the State of Delaware. Each party hereby irrevocably submits to the jurisdiction of any United States Federal or State court sitting in or serving the San Antonio, Texas, in any action or proceeding arising out of or relating to this Agreement and hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in any such court. Each party 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 this Agreement.
10. This Agreement represents the entire agreement with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and commitments. Neither Administrative Agent nor Subordinated Creditor is relying on any representations by Senior Lender or Borrower in entering into this Agreement, and Subordinated Creditor has kept and will continue to keep itself fully apprised of the financial and other condition of Borrower. This Agreement may be amended only by written instrument signed by Senior Lender and Subordinated Creditor.
11. In the event of any legal action to enforce the rights of a party under this Agreement, the party prevailing in such action shall be entitled, in addition to such other relief as may be granted, all reasonable costs and expenses, including reasonable attorneys’ fees, incurred in such action.
12. Each of Administrative Agent and Subordinated Creditor represents and warrants to Senior Lender that the terms and conditions of this Agreement have been authorized by all necessary action on the part of each of Administrative Agent and Subordinated Creditor, respectively, and that the individual signing on behalf of Administrative Agent and Subordinated Creditor, respectively, has all necessary approval and authority to do so.
[Balance of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
[Acknowledgement of Administrative Agent follows]
Acknowledgement of Subordination Agreement
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The undersigned acknowledges the terms of this Agreement.
| Administrative Agent: | |||
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| FG Financial Group, Inc., a Nevada corporation |
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| By: | |||
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| Name: | Larry Swets | |
| Title: | CEO | ||
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| Address and Email for Notices: |
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| Address: | 104 S. Walnut Street |
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| Unit 1A |
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| Itasca, IL 60143 |
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| E-mail: |
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Acknowledgement of Subordination Agreement
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SUBORDINATION AGREEMENT
This Subordination Agreement (this “Agreement”) is made as of March __, 2023, between FG Financial Group, Inc., a Nevada corporation, as administrative agent for the lenders set forth on Exhibit A hereto (each, a “Second Lien Lender”) from time to time party to the Loan Agreement as hereinafter defined (as more particularly defined in the Loan Agreement, “Administrative Agent”), and [_______] (“Subordinated Creditor”).
RECITALS
A. iCoreConnect, Inc., a Nevada corporation (“Borrower”), has obtained certain unsecured debt from Subordinated Creditor.
B. Borrower is entering into or has entered into that certain Loan and Security Agreement (the “Second Lien Loan Agreement”) and associated Loan Documents with the Administrative Agent and the Second Lien Lenders (the “Second Lien Loan Documents”), which require existing debt held by Subordinated Creditor to be subordinated in writing to the debt owing by Borrower to Second Lien Lenders.
C. In order to induce the Second Lien Lenders to make the loans, extensions of credit or other accommodations to Borrower pursuant to the Second Lien Loan Documents, the Subordinated Creditor is willing to subordinate all of Borrower’s indebtedness and obligations to Subordinated Creditor, whether presently existing or arising in the future (the “Subordinated Debt”) to the Second Lien Debt (defined below).
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Subordinated Creditor shall be entitled to receive (a) each regularly scheduled payment of interest and/or principal, if any, owing in connection with the Subordinated Debt, and (b) exercise its right thereunder to call each tranche of debt in accordance with the terms of the agreements evidencing the Subordinated Debt, provided that no payment of principal or interest on any Subordinated Debt shall be made by Borrower, or received by Subordinated Creditor, after (i) any default has occurred thereunder and is continuing or would exist immediately after giving effect to such payment, or (ii) notice from the Administrative Agent to Subordinated Creditor that a default, or any condition, event or act that with the giving of notice or the passage of time or both would constitute a default, has occurred with regard to the Second Lien Debt. Except as set forth in the previous sentence, Subordinated Creditor will not demand or receive from Borrower (and Borrower will not pay to Subordinated Creditor) all or any part of the Subordinated Debt, by way of payment, accelerated payment, prepayment, setoff, lawsuit or otherwise, nor will Subordinated Creditor commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against any Borrower, until the Second Lien Debt is repaid in cash in full. Borrower shall forward to Administrative Agent a copy of any notice of a Subordinated Creditor's exercise of its right to call Subordinated Debt no later than 3 business days after receipt.
2. Subject to Section 1 above, all Subordinated Debt is subordinated in right of payment to all obligations of Borrower to Second Lien Lenders now existing or hereafter arising, together with all costs of collecting such obligations (including attorneys’ fees), including, without limitation (i) all interest accruing after the commencement by or against Borrower of any bankruptcy, reorganization or similar proceeding, (ii) all obligations under the Second Lien Loan Documents, and (iii) any other additional or future indebtedness to Second Lien Lenders (the “Second Lien Debt”).
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3. Subordinated Creditor shall promptly deliver to the Administrative Agent, at the address set forth below or as otherwise directed by the Administrative Agent, in the form received, for application to the Second Lien Debt, any payment, distribution, security or proceeds received by Subordinated Creditor with respect to the Subordinated Debt in violation of this Agreement.
4. In the event of Borrower’s insolvency, reorganization or any case or proceeding under any bankruptcy or insolvency law or laws relating to the relief of debtors, these provisions shall remain in full force and effect, and Second Lien Lenders’ claims against Borrower and the estate of Borrower shall be paid in full before any payment is made to Subordinated Creditor.
5. No amendment of the documents evidencing or relating to the Subordinated Debt shall directly or indirectly modify the provisions of this Agreement in any manner which might terminate or impair the subordination of the Subordinated Debt. By way of example, such instruments shall not be amended to (i) increase the rate of interest with respect to the Subordinated Debt, or (ii) accelerate the payment of the principal or interest or any other portion of the Subordinated Debt.
6. This Agreement shall remain effective until the repayment of the Second Lien Debt in cash in full. If, at any time after repayment of the Second Lien Debt, any payments of the Second Lien Debt must be disgorged by Second Lien Lenders for any reason (including, without limitation, the bankruptcy of Borrower), this Agreement and the relative rights and priorities set forth herein shall be reinstated as to all such disgorged payments as though such payments had not been made and Subordinated Creditor shall immediately pay over to Administrative Agent all payments received with respect to the Subordinated Debt to the extent that such payments would have been prohibited hereunder.
7. This Agreement shall bind any successors or assignees of Subordinated Creditor and shall benefit any successors or assigns of Administrative Agent and the Second Lien Lenders. This Agreement is solely for the benefit of Subordinated Creditor, Administrative Agent and Second Lien Lenders and not for the benefit of Borrower or any other party. Subordinated Creditor further agrees that if Borrower is in the process of refinancing a portion of the Second Lien Debt with a new lender, and if the Administrative Agent makes a request of Subordinated Creditor, Subordinated Creditor shall agree to enter into a new subordination agreement with the new lender on substantially the terms and conditions of this Agreement.
8. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
9. This Agreement shall be construed in accordance with the internal laws (and not the law of conflicts) of the State of Nevada. Each party hereby irrevocably submits to the jurisdiction of any United States Federal or State court sitting in or serving the state of Nevada, in any action or proceeding arising out of or relating to this Agreement and hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in any such court. Each party 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 this Agreement.
10. This Agreement represents the entire agreement with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and commitments. Subordinated Creditor is not relying on any representations by Administrative Agent, any Second Lien Lender or Borrower in entering into this Agreement, and Subordinated Creditor has kept and will continue to keep itself fully apprised of the financial and other condition of Borrower. This Agreement may be amended only by written instrument signed by the Administrative Agent and Subordinated Creditor.
11. In the event of any legal action to enforce the rights of a party under this Agreement, the party prevailing in such action shall be entitled, in addition to such other relief as may be granted, all reasonable costs and expenses, including reasonable attorneys’ fees, incurred in such action.
12. Subordinated Creditor represents and warrants to Administrative Agent and each Second Lien Lender that the terms and conditions of this Agreement have been authorized by all necessary action on the part of Subordinated Creditor, and that the individual signing on behalf of Subordinated Creditor has all necessary approval and authority to do so.
[Balance of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
[Acknowledgement of Borrower follows]
Acknowledgement of Subordination Agreement
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The undersigned acknowledges the terms of this Agreement.
| iCoreConnect, Inc., a Nevada corporation | |||
| By: | |||
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| Name: | Robert McDermott | |
| Title: | CEO | ||
Acknowledgement of Subordination Agreement
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EXHIBIT A
SECOND LIEN LENDERS
| · | Those lenders set forth in Exhibit C to that certain Loan Agreement dated March __, 2023, by and between iCoreConnect, Inc., a Nevada corporation, FG Financial Group, Inc., a Nevada corporation, as administrative agent (in such capacity and together with its successors and permitted assigns, the “Administrative Agent”), and the lenders party thereto. |
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EXTENSION AMENDMENT TO PROMISSORY NOTE
This extension amendment (“Amendment”), dated as of the date set forth below, is to that certain Promissory Note dated [___] (the “Note”), by and among iCoreConnect, Inc., a Nevada corporation (the “Company”) and the Note Holder listed on the signature page hereto (the “Note Holder”). The Company and the Note Holder are referred to collectively as the Parties and individually as a Party. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Note.
WHEREAS, the Company and Note Holder have agreed to amend the Maturity Date of the Note.
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties and mutual agreements herein contained, and intending to be legally bound herein, the Parties hereto agree as follows:
1. The term “Maturity Date” in the Note shall mean [________].
2. Except as expressly set forth herein, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Note, all of which are ratified and affirmed in all respects and shall continue in full force and effect.
3. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.
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IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be duly executed by their respective authorized signatories as of the date indicated below.
ICORECONNECT, INC.
By: ___________________________
Name:
Title:
Date: ________________________
NOTE HOLDER
Name of entity:
By:
Title:
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AMENDMENT TO
COMMON STOCK PURCHASE WARRANT
This Amendment to Stock Purchase Warrant (the “Amendment”) of iCoreConnect, Inc., a Nevada corporation (“Company”) is entered into as of the date set forth on the signature page hereto, by and between the undersigned holder (the “Holder”) of the original Warrant as set forth on the signature page hereto (the “Warrant”). Capitalized terms used herein, but not otherwise defined shall have the meanings ascribed to them in the Warrant.
For good and valuable consideration, the receipt of which is hereby acknowledged, the Company and Holder desire to amend the Warrant in the manner set forth below:
1. Amendments.
(a) Section 1.2 of the Warrant is hereby amended to add the following:
Immediately prior to the consummation of the business combination between FG Merger Corp. (“FGMC”) and the Company pursuant to the Merger Agreement and Plan of Reorganization by and among FG Merger Corp., FG Merger Sub Inc., and iCoreConnect, Inc. dated January 5, 2023 (the “Merger Agreement”), as such agreement may be amended from time to time, without any action on behalf of the Holder, this Warrant shall automatically be exercised, in whole, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the Company Reference Share Value (as defined in the Merger Agreement) as of the Closing Date (as defined in the Merger Agreement) as determined in good faith by the Company. For the purposes of calculating the Company Reference Share Value, the number of Fully Diluted Company Shares (as defined in the Merger Agreement) shall include all shares of Company common stock underlying options and warrants outstanding prior to the automatic exercise of such securities pursuant to agreements similar to this Amendment.
(B) = the Exercise Price; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
2. Terms of Warrant. Except as explicitly amended or modified hereunder, the terms of the Warrant shall remain in full force and effect.
3. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Nevada, without regard to its conflicts of law principles.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Amendment by their duly authorized representatives as of the date first written above.
COMPANY
iCoreConnect, Inc.
By: ___________________________
Name:
Title:
Date:__________________________
HOLDER
[INSERT]
By:___________________________
Name:______________________________
Title:
“Warrant” means:
Initial Issue Date:
Number of Warrant Shares:
Signature Page to the
Amendment to Common Stock Purchase Warrant
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AMENDMENT TO
OPTION GRANT CERTIFICATE
This Amendment to Option Grant Certificate (the “Amendment”) of iCoreConnect, Inc., a Nevada corporation (“Company”) is entered into as of the date set forth on the signature page hereto, by and between the undersigned grantee (the “Grantee”) of the original Option Grant Certificate as set forth on the signature page hereto (the “Award”). Capitalized terms used herein, but not otherwise defined shall have the meanings ascribed to them in the Award.
For good and valuable consideration, the receipt of which is hereby acknowledged, the Company and Grantee desire to amend the Award in the manner set forth below:
1. Amendments.
(a) The Award is hereby amended to add the following:
Acceleration and Automatic Exercise. Immediately prior to the consummation of the business combination between FG Merger Corp. (“FGMC”) and the Company pursuant to the Merger Agreement and Plan of Reorganization by and among FG Merger Corp., FG Merger Sub Inc., and iCoreConnect, Inc. dated January 5, 2023 (the “Merger Agreement”), as such agreement may be amended from time to time, without any action on behalf of the Grantee, this Award shall become fully vested and automatically be exercised, in whole, at such time by means of a “cashless exercise” in which the Grantee shall be entitled to receive a number of shares of Common Stock equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the Company Reference Share Value (as defined in the Merger Agreement) as of the Closing Date (as defined in the Merger Agreement) as determined in good faith by the Company. For the purposes of calculating the Company Reference Share Value, the number of Fully Diluted Company Shares (as defined in the Merger Agreement) shall include all shares of Company common stock underlying options and warrants outstanding prior to the automatic exercise of such securities pursuant to agreements similar to this Amendment.
(B) = the Exercise Price per Share; and
(X) = the number of shares of Common Stock that would be issuable upon exercise of this Award in accordance with the terms of this Award if such exercise were by means of a cash exercise rather than a cashless exercise.
2. Terms of Award. Except as explicitly amended or modified hereunder, the terms of the Award shall remain in full force and effect.
3. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Nevada, without regard to its conflicts of law principles.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Amendment by their duly authorized representatives as of the date first written above.
COMPANY
iCoreConnect, Inc.
By: ___________________________
Name:
Title:
Date: __________________________
GRANTEE
[INSERT]
By:___________________________
Name:______________________________
Title:
“Award” means:
Initial Issue Date:
Number of Option Shares:
Signature Page to the
Amendment to Option Grant Certificate
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EXHIBIT 31.1
CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Robert P. McDermott, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2022 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(s) 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(s) 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: March 22, 2023 | By: | /s/ Robert P. McDermott |
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| Robert P. McDermott |
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| Chief Executive Officer |
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| (Principal Executive Officer) |
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EXHIBIT 31.2
CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Archit Shah, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2022 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(s) 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(s) 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: March 22, 2023 | By: | /s/ Archit Shah |
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| Archit Shah |
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| Chief Financial Officer |
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| (Principal Financial and Accounting Officer) |
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(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 year ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert P. McDermott, 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, to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 22, 2023
| /s/ Robert P. McDermott |
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| Name: | Robert P. McDermott |
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| Title: | Chief Executive Officer (Principal Executive Officer) |
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EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(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 year ended December 31, 2022, 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, to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 22, 2023
| /s/ Archit Shah |
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| Name: | Archit Shah |
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| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) |
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