UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10/A

 

GENERAL FORM FOR REGISTRATION OF SECURITIES

 

Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934

 

iCoreConnect Inc.

 

(Exact name of registrant as specified in its charter)

 

File No. 000-52765

 

Nevada	13-4182867
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

 

13506 Summerport Village Pkwy #160, Windermere, FL 34786

(Address of principal executive offices) (Zip Code)

 

(888) 810-7706

(Registrant’s Telephone Number, Including Area Code)

 

Securities to be registered pursuant to Section 12(b) of the Act: None

 

Securities to be registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. (Check one):

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☒
		Emerging growth company	☐

 

 

Item 1. Business.

 

The following information should be read in conjunction with the “Risk Factors” discussed in Item 1A of this Registration Form 10 for an understanding of the negative variables that can affect our business and results of operations.

 

Business Overview

 

iCoreConnect Inc., a Nevada corporation (the “Company”), builds cloud based software for healthcare records capture, storage, retrieval, transport and security related products. The Company’s focus presently is on four different revenue streams provided by: (1) iCoreConnect’s cloud-based messaging exchange, (the “iCoreExchange”), which allows physicians, patients and other members of the healthcare community to exchange patient-specific healthcare information securely via the internet, while maintaining compliance with all current Health Insurance Portability and Accountability Act (“HIPAA”) regulations, (2) customized electronic health record platform technology that is specifically tailored to provide specialized medical and dental practices with a technology that conforms to workflows of a particular medical discipline, (3) the Company’s Meaningful Use Consulting Division, that assists both medical and dental healthcare providers becoming “Meaningful Use” compliant to ultimately qualify for federal incentive funds under the Federal Meaningful Use Incentive Funds Program and (4) International Statistical Classification of Diseases and Related Health Problems (ICD) coding software, a medical classification list by the World Health Organization (WHO). iCoreConnect’s integrated software and service offering is unique in the healthcare space as it enables doctors to comply with the increasing regulatory burden associated with secure HIPAA compliant medical records transport with no change in healthcare delivery workflows.

 

 

On June 30, 2017, the Company effected a 1 for 1,781 reverse stock split of its issued and outstanding shares of common stock, $0.001 par value, whereby 17,807,298,401 outstanding shares of the Company’s common stock were combined into 10,000,000 shares of the Company's common stock. All per share amounts and number of shares (other than authorized shares) in the consolidated financial statements and related notes have been retroactively restated to reflect the reverse stock split. Also on June 30, 2017, immediately following the reverse split, the Company’s Articles of Incorporation were amended and restated to provide that the Company is authorized to issue 600,000,000 shares of Common stock, of which 45,124,853 shares were issued and outstanding at June 30, 2018, and 10,000,000 shares of Preferred stock, none of which were issued and outstanding at June 30, 2018.

 

 

OUR TECHNOLOGY-BASED SOLUTIONS

 

The Exchange is designed to place mission critical tools and features in the hands of physicians and their staff, especially in the areas of interoperability and secure communications. The Exchange allows medical practices to reduce cost and increase healthcare to patients through upgraded, HIPAA compliant modern communication technology. The Exchange provides a HIPAA compliant interoperable communications network that moves electronic patient health information and images regardless of the system in which they originated. It allows for peer collaboration, expansion of the physician’s referral network and the ability to create communities.

 

The Exchange offers hospital systems, State Health Information Exchanges (HIEs), Independent (Physician) Practice Associations (IPAs) and, stand-alone doctors and dentists the extensive functionality needed to demonstrate the Interoperability provisions of “Meaningful Use” as defined by the US Department of Health and Human Services Office of the National Coordinator (ONC). The Exchange provides an immediate, low-cost solution for an interoperable health information infrastructure that allows healthcare providers to become interconnected.

 

iCoreConnect employs a proprietary technology that allows for the exportation of documents and images from any Electronic Health Records system, thus addressing the issue of Interoperability. iCoreConnect also facilitates the exchange of CCDA’s (Continuity of Care Documents) and CCR’s (Continuity of Care Records), which have become the standard for Interoperability between Electronic Medical Records users. As a use-case-scenario, specialists can send a CCR / CCDA from their Electronic Health Records to a patient’s primary care physician instantaneously so that both physicians can immediately have available the most up-to-date records for the patient, and can collaborate on the patient’s care in a more efficient manner.

 

iCoreConnect incorporated a National Health Information Network (NHIN) Direct Project Solution within iCoreConnect’s HIPAA-compliant Exchange and now acts as a secure Health Information Service Provider (HISP). Thus, hospitals, health information exchanges (local, regional and statewide), physicians and other healthcare professionals who have access to iCoreConnect’s iCoreExchange will not only be able to send and receive secure messages within the iCoreExchange, but also will be able to communicate in a secure environment with other physicians and professionals outside the network. The NHIN Direct Project Solution assures that all point-to-point and point to multipoint transmittal of health information will adhere to the highest standards and specifications required by the Office of the National Coordinator for Health Information Technology (ONC). Now, with its advanced NHIN Direct service added to the core services of the iCoreExchange, any hospital, health information exchange or health organization can access our National HIE (Health Information Exchange) which is low cost and quick to disseminate health information, while also addressing 100% of the ONC Meaningful Use requirements for interoperability between disparate Electronic Health Record systems.

 

iCoreConnect's iCoreExchange provides a market leading secure, HIPAA-compliant solution for interoperable medical information exchanges, coupled with a professional network, for physicians, healthcare providers and patients. Using iCoreConnect’s iCoreExchange, health information can be exchanged across disparate Electronic Health Record systems to communicate with physicians, collaborate, make referrals and enhance communication with patients. With the addition of iCoreConnect’s Electronic Health Records and Meaningful Use divisions, we believe that iCoreConnect’s unique package of solutions does not exist anywhere else.

 

iCoreConnect determined that the current Electronic Health Records (EHR) systems in the marketplace were not meeting the expectations of the medical and dental community. The Company developed our own fully customizable, cloud-based, EHR system. This provides doctors with powerful tools at their fingertips to make management of healthcare delivery more efficient and less costly with reduced errors and, ultimately, generate better patient outcomes. Our customers continued to tell us that the “one-size-fits-all” Electronic Health Record systems available in the marketplace today were not serving their needs. They were too cumbersome or did not provide the specific functionality required by medical practice groups. iCoreConnect responded with its product, iCoreMD, that it launched July 31, 2014, and launched its second proprietary and customizable EHR system for the Dental community on August 5, 2014

 

iCoreMD is a cloud based Medical EHR that is customizable-on-demand, for a practice group's requests for specific functionality within the practice's EHR software. The ability to customize the platform for incremental and specific provider-group requirements is a key differentiator to other EHR systems currently available. iCoreMD includes a sophisticated practice management system, e-prescription functionality, an integrated laboratory information system, electronic claims processing, patient reminders, comprehensive medical billing, patient scheduling with notifications, rules-based clinical decision making algorithms and more. We believe, based on extensive research and discussions with customers and other healthcare professionals, that we have built a multi-faceted product with substantial marketplace demand. All sensitive patient information is transmitted securely in a HIPAA-compliant manner via iCoreExchange, iCoreConnect's flagship secure email transport network that uses NHIN DIRECT protocol, allowing providers to apply for Meaningful Use Federal Incentive funds, currently available to qualified doctors.

 

All development has been completed by our own in-house development team which gives us the ability to make changes very rapidly in order to facilitate customers’ requests. We intend to continue to build vertical, specialized EHR’s to meet the demand of the marketplace requesting alternatives to one size fits all products currently in the marketplace. iCoreConnect has its own in-house development team which gives iCoreConnect the ability to quickly adapt to market demands for present and future products.

 

Company History

 

iCoreConnect , a Nevada Corporation, was incorporated on July 17, 2001. The initial business model was a desk top video, audio and data delivery system using standard hardware and a broadband connection to the internet to deliver a proprietary broadcast quality, video/audio system through a personal computer. The Company decided to shift its focus to the medical community shortly thereafter based on the size and demographics of the medical community. In 2013 the Company decided after 10 years to bring in a new CEO with experience in building, developing and creating value in companies similar to iCoreConnect. Our new CEO restructured the financial structure and operations, and focused the Company on a few core competencies and brought in a new Management Team in the areas of Sales, Finance, Operations and Technology.

 

The Company continues to require substantial additional funding to execute the business plan. Therefore, the new CEO focused on restructuring the financial structure of the Company, that included issuance of additional common stock, bridge loan debt raises and a reverse stock split and Recapitalization completed on June 30, 2017.

 

iCoreConnect, Inc., builds secure cloud-based communications systems, currently focused on healthcare, although the core technology can be adopted to other vertical markets that require a high degree of secure data communication, such as the legal, financial and education fields. Our focus is threefold. First, iCoreConnect’s iCoreExchange (Health Information Exchange), allows physicians and other healthcare providers to exchange patient specific healthcare information via the internet while maintaining compliance with all Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) regulations and the current NHIN Direct protocol. Our solutions allow physicians to use the internet in ways previously unavailable to them due to HIPAA restrictions to quickly and cost-effectively exchange and share patient medical information.

 

iCoreConnect launched its iCoreExchange in May 2014 and can connect any healthcare organization to any other healthcare organization, regardless of which EMR, HIE or HIS (Hospital Information System) is used. The iCoreExchange is vendor agnostic and therefore can connect multiple disparate medical record and HIE applications. For many years, providers of Electronic Health Records Systems have been resistant in allowing or participating in Interoperability and will continue to do so until regulations force a change in behavior. iCoreConnect has solved this problem by allowing EHR systems to aggressively compete, while iCoreConnect provides the interoperable, secure network.

 

The easy deployment of our iCoreExchange does not require partnering or permission of any kind from EHR, or HISP companies, but functions as an overall communication system that connects disparate end points into one cohesive, secure communication network. Our iCoreExchange offers the benefits of low-cost, ease-of-use and rapid deployment that meets the requirements of each stage of meaningful use as well as being HIPAA compliant. The Exchange operates seamlessly to send records with any ONC (Office of the National Coordinator) certified electronic health record vendor and is available without costly integration or upgrading of technical infrastructure and without any additional equipment costs, all within a HIPAA compliant structure. The iCoreExchange can send Electronic Patient Health information anytime, anywhere to anyone while maintaining a HIPAA compliant structure.

 

The technology represented by iCoreConnect’s iCoreExchange gives physicians and other healthcare professionals the ability to transfer personal health information electronically in a manner which satisfies federal HIPAA regulations and meets the new “Direct” national standards for Healthcare Communications and similar privacy regulations in targeted countries throughout the world. Until the launch of our iCoreExchange, federal regulations made it exceedingly difficult for records or images and discreet data to be transmitted using the Internet. Standard email services that all other vertical markets employ today are not HIPAA compliant and do not protect the privacy of individual patient records. This consideration has made the internet, as a communications tool, largely irrelevant to healthcare organizations except for limited use with the assistance of virtual private networks that may exist within a specific EMR / HIE / HIS system. iCoreConnect has set a precedent by opening up the internet to physicians and healthcare professionals to freely exchange personal health information within a HIPAA compliant environment, that includes the new national standards for healthcare communications.

 

The underlying proprietary technology used in launching iCoreExchange can be customized to address other similar vertical markets delivering the same professional secure portal services to the legal, financial, education, insurance and other industries. Wherever secure transmission of personal or professional records are required, the Company’s core technology will allow the Company to take a leadership role within these vertical markets in the future.

 

Our second focus, but directly related to our iCoreExchange, is consulting with medical practices and dental practices to assist them in becoming “Meaningful Use” compliant to receive the federal incentive funds to underwrite the transition from a paper to an electronic health records system. iCoreConnect began this service as an official agent of the NJ-HITEC / REC project working with primary care practices. Recently, iCoreConnect has expanded into specialists and dental practices. iCoreConnect provides this consulting service on a commission based success fee. The Company charges the customer 20% of the money received as a success fee. The fee is due within 7 days of the client receiving funds from the Meaningful Use program. We presently have four to six year agreements in place depending on whether the client is qualified to receive Medicaid or Medicare Meaningful Use incentive program funding.

 

The Company’s third focus is a customizable ONC (Office of National Coordinator) approved EHR (Electronic Heath Records) software that meets Meaningful Use guidelines and requirements and can provide practice management for a doctor or dentist. We presently have launched two EHR’s, our iCoreMD and iCoreDental.

 

Each of our products complement each of our other products and can be combined, but can also be purchased as separate products that create value and efficiency for our customer base.

 

Ultimately, we are offering productivity tools and “Must Have” services to physicians, an audience representing a highly desirable demographic with high disposable income. iCoreConnect is becoming a trusted source to this targeted market and has developed a non-intrusive manner to reach those members of this audience who would be willing to pay for that access.

 

SECURE COMMUNICATION

 

iCoreConnect’s iCoreExchange is an information exchange platform that offers NHIN Direct secure messaging services within a professional networking architecture. It is a flexible communication and health information transport system that features interoperability between disparate EHR, HIE and HISP systems, PPOs, and MCOs. The communication features of the exchange platform can easily be applied to establish a secure communication link between healthcare providers, healthcare facilities, and patients. This communications network can;

 

 

INTEROPERABILITY

 

iCoreConnect’s iCoreExchange provides a unique tool within today’s HIPAA compliant environment that enhances the use of EHR systems at all levels of the healthcare spectrum. In a word that tool is “interoperability.” With almost 2,400 disparate EHR systems currently in the market, it has become increasingly common for a practitioner to find that despite a significant fiscal and operational investment in an electronic health system, a practitioner is unable to use the EHR system to satisfy one of the most basic clinical care management functions: communicating with another provider. Why? Because most EHR systems are designed and built to be functional only for those providers using the same EHR system. If another practitioner (or hospital system or ancillary service) has a different EHR system, communication is difficult.

 

 

iCoreConnect has solved this problem with its design of its iCoreExchange. Recently, iCoreConnect has integrated the federal government’s “Direct” technology and placed it into its own network. By integrating the iCoreConnect iCoreExchange platform into the service set provided by any of its partners, providers have a cutting-edge tool for making intra-provider communication a reality.

 

Most EHR networks have semi-qualified secure systems that are mostly designed for those practices within their own network. The real challenge of efficiently transitioning to an EHR system is the ability to transmit medical data outside an established EHR network. For example, a hospital may have one of the Hospital Information Systems (HIS) that serves as a transport and communication network to its referral network of medical practices. Our EHR and /or HIE healthcare partner community can reap the direct benefits of iCoreConnect’s iCoreExchange which include:

 

 

 

Simply put, iCoreConnect can:

 

 

PATIENT PORTAL

 

The move to Electronic Health Records adds a new dimension that enhances patients as participants in their own decisions, treatments and care processes. As patients become more involved in the healthcare process they will need and want more immediate access to their records. Patient portals are in use today on a limited basis, but the real security and protection of patient specific information is still suspect within these portals. iCoreConnect has built a patient portal designed to provide secure access to patient records thereby assisting in the process of involving patients in their healthcare decisions and making access to their own records easier, efficient and timely. The iCoreConnect Portal uses encrypted communications within the portal that far exceed the current mandate by the ONC, making it the most secure solution for the transmission of patient’s records currently available in the marketplace.

 

The iCoreConnect iCoreMD and iCoreDental networks have patient portals already built into the basic service provided by the exchange. This portal has a basic design that provides the following:

 

 

 

ATTRIBUTES OF OUR PRODUCTS AND SERVICES

 

REVENUE

 

Revenue is derived from the following sources:

 

Network Subscriptions

 

The iCoreExchange is a HIPAA compliant messaging exchange that adheres to and exceeds industry compliancy for security and HIPAA regulations. It is a cloud based product with an annual subscription billed monthly.

 

EHR Sales and Service

 

We have developed two electronic health records software systems (EHR) and have added them to our product portfolio. iCoreMD is specific to medical doctors and has Practice Management tools as well as Meaningful Use reporting requirements embedded into the software. The doctor can purchase or lease the software, with software license pricing varying depending on the options selected, ranging from $12,000 - $50,000 per user.

 

Meaningful Use Consulting

 

iCoreConnect has developed a Meaningful Use Consulting Division assisting both medical and dental healthcare providers becoming “Meaningful Use” compliant to qualify for federal incentive funds under the Federal Meaningful Use Incentive Funds Program. The Meaningful Use program pays providers up to $63,750 and iCoreConnect receives approximately 20% of what the doctor is paid that year. The contract is generally for 6 years which correlates to the Meaningful Use time line.

 

ICD Coding Software

 

ICD Coding Software provides the 10th revision of the International Statistical Classification of Diseases and Related Health Problems (ICD), a medical classification list by the World Health Organization (WHO). It contains codes for diseases, signs and symptoms, abnormal findings, complaints, social circumstances, and external causes of injury or diseases.

 

Industry Overview and the Company’s Operating Environment

 

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 systems; however, each of the lines of business in which the Company is engaged is highly competitive. Competition in the markets served is based on a number of 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, such as the iCoreExchange and our customizable Practice Management software a number of competitors offer one or more similar products and services in one or more of our niche markets.

 

Health Information Exchanges (HIEs) are products that facilitate the dissemination of healthcare information electronically across organizations within a region or community. An HIE provides the capability to electronically move clinical information among disparate health care information systems while maintaining the data integrity of the information being exchanged. The goal of an HIE is to facilitate access to and retrieval of clinical data to provide safer, more timely, efficient, effective, equitable, patient centered care. An HIE is also useful to state public health authorities to assist in the analyses of the population.

 

We compete with most HIE companies in that their applications typically encapsulate certain of the functionality that iCoreConnect offers in addition to their core function of more primary data exchange. These products and services are secure messaging, electronic referrals and CCR/CCD exchange. The additional functions we offer are the ability to integrate fully with EMRs and to centralize data pulled from multiple, disparate information systems. Most HIE systems or projects are still focused on interoperability and exchange of patient specific information within their organizations. iCoreConnect offers HIEs the opportunity to provide a comprehensive interoperability that can extend beyond their membership thereby making the transition from paper to electronic health records more relevant to their membership. Although the HIEs could be considered competitors, we believe that we can work together with the HIEs to enhance their offerings to members and non-members by making their service valuable-added and function as originally intended.

 

 

Competitive Strengths

 

The key advantages of our products and services include:

 

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 transmissions over the Internet, which we monitor and test on a regular basis. We have built and 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.

 

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.

 

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 phones.

 

Competitive Strategy

 

Key elements of our strategy include:

 

Extending existing service offerings.

 

We offer multiple patient claims billings, processing and coding functions to meet the needs of customers with differing health care disciplines and we have designed our solutions to easily accommodate new features and functionality. We intend to continue to expand all of our products and services with new features, functions and increased security through our own development, acquisitions and partnerships.

 

Cross selling and upselling.

 

We see significant opportunity to deepen our relationships with our existing customers. As our customers realize the benefits of our products and services, we aim to upgrade the customer to sell more value-added products and services, ultimately becoming our customers' trusted advisors, inspiring health care service transformation.

 

Expanding into new horizontal markets.

 

As part of our growth strategy, we are delivering innovative solutions in new categories, including analytics, claims coding and processing. We drive innovation both organically and through acquisitions.

 

Targeting vertical markets.

 

In order to meet the needs of our customers in certain industries, we also provide solutions specifically built for certain vertical industries, such as financial services and government.

 

Extending go to market capabilities.

 

We believe that our offerings provide significant value for businesses of any size. We will continue to pursue businesses of all sizes in the health care, financial and government agency businesses, primarily through our direct sales force and partnerships. We have steadily increased and plan to continue to increase the number of direct sales professionals we employ, and we intend to develop additional distribution channels for our products and services.

 

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.

 

 

SALES AND MARKETING

 

iCoreConnect Marketing

 

Our marketing strategy consists of building our brand by creating a company and product presence in the healthcare industry through our partner relationships as well as direct outreach to physicians, physician associations and dentists and our presence at conferences and events in order to raise our visibility within the industry. We conduct product demonstrations and consult with potential customers such as physicians and dentists by means of on-line presentations, in person sales calls, trade shows, speaking engagements, on-line seminars and national medical association meetings. We have also developed programs to expand the iCoreConnect user base through invitations by existing users to their colleagues to communicate through the iCoreConnect Exchange.

 

iCoreConnect markets with a direct sales force that covers the nation. Our target market ranges from a single doctor to hospital groups covering many states. We also have expanded our marketing efforts to trade shows as well as educational speaking engagements to educate the marketplace on the HIPAA regulations and security requirements in the healthcare field. Our products solve problems created by many of the HIPAA regulations and security concerns that are prevalent in our industry.

 

EMPLOYEES

 

As of June 30, 2018, December 31, 2017, June 30, 2017 and 2016, the Company had 19, 17, 12 and 16 full-time employees, respectively.

 

Item 1A. Risk Factors.

 

The risks and uncertainties described below are those that we believe are the material risks and uncertainties related to our business. If any of the following risks and uncertainties occur, our business, prospects, financial condition, operating results and cash flows could be adversely affected in amounts that could be material.

 

Risks Related to the Company’s Internal Control Over Financial Reporting

 

Our management has identified material weaknesses in the Company’s internal control over financial reporting which could, if not remediated, result in material misstatements in our financial statements. We may not be able to fully address the material weaknesses in our internal controls or provide assurance that remediation efforts will prevent future material weaknesses. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, and the Sarbanes-Oxley Act of 2002 and SEC rules require that our management report annually on the effectiveness of the Company’s internal control over financial reporting and our disclosure controls and procedures. Among other things, our management must conduct an assessment of the Company’s internal control over financial reporting to allow management to report on the effectiveness of the Company’s internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our management determined that we have material weaknesses in the Company’s internal control over financial reporting related to (i) the oversight and monitoring of operating unit compliance with accounting and reporting policies and procedures (ii) controls to ensure accurate and complete financial statement disclosures and (iii) lack of GAAP expertise.

 

A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We are conducting a thorough review of our internal controls procedures in order to develop a remediation plan to address our internal control weaknesses. However, future additional material weaknesses in the Company’s internal control over financial reporting may also be identified in the future. Any failure to implement or maintain required new or improved controls, or any difficulties we encounter in their implementation, could result in additional material weaknesses, or could result in material misstatements in our consolidated financial statements. The possibility of such future additional misstatements could cause us to delay filing our financial statements on a timely basis and result in noncompliance with covenants in our credit facilities, which could limit or suspend our access to working capital, which in turn could cause us to curtail or cease doing business altogether. Any such future misstatements in our publicly filed financial statements may impose upon us a requirement to restate such financial results. In addition, if we are unable to remediate successfully the material weaknesses in our internal controls or if we are unable to produce accurate and timely financial statements, our stockholders could lose confidence in our ability to effectively protect their investments in us.

 

 

Although we are working to remedy the ineffectiveness of the Company’s internal control over financial reporting, there can be no assurance as to when our changes in our internal controls will be fully implemented, the aggregate cost of implementation or whether the remediation plan will be adequate and effective. Prior to the filing of this Form 10, the Company had not filed financial statements with the SEC for any period following the quarter ended March 31, 2015 as a result of which the SEC revoked the registration of our securities on February 6, 2018. The Company’s audited financial statements for the six month period ended December 31, 2017 and the fiscal years ended June 30, 2017 and 2016, as well as its unaudited but reviewed financial statements for the three and six month periods ended June 30, 2018 are included in this Form 10/A.

 

However, until our remediation plan is fully implemented, our management will continue to devote significant time and attention to these efforts. If we do not complete our remediation in a timely fashion, or at all, or if our remediation plan is inadequate or ineffective, there will continue to be a risk that we may be unable to timely file future periodic reports with the SEC. Further and continued determinations that there are material weaknesses in the effectiveness of the Company’s internal control over financial reporting could also adversely affect our ability to attract new investments, as well as severely adversely affect our ability to retain existing financing or obtain, if at all, future financing on reasonable or acceptable terms.

 

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 six months ended June 30, 2018, and December 31, 2017 were $623,000 and $206,000, respectively, and revenues for the fiscal years ended June 30, 2017 and June 30, 2016 were $568,000 and $442,000, respectively. We expect to experience fluctuations in future quarterly and annual operating results that may be caused by many factors, including:

 

 

 

 

 

 

 

In view of the foregoing, our results of operations and projections of future operating results are not necessarily meaningful and should not be relied upon as an indication of future performance.

 

Our quarterly results are likely to fluctuate and our stock price and the value of our common stock could decline substantially.

 

Our quarterly results are likely to fluctuate. For example, some of the important factors that may cause our revenues, operating results and cash flows to fluctuate from quarter to quarter include:

 

 

 

Under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), we 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 applications 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 business 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 user names, 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 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.

 

Our business will not succeed if we are unable to keep pace with rapid technological changes.

 

Our services and products are impacted by rapidly changing technology, evolving industry standards, emerging competition and frequent new use, software and other product introductions. There can be no assurance that we can successfully identify new business opportunities or develop and bring new services or products to market in a timely and cost effective manner, or those services, products or technologies developed by others will not render our services or products non-competitive or obsolete. In addition, there can be no assurance that our services, products or enhancements will achieve or sustain market acceptance or be able to address compatibility, interoperability or other issues raised by technological changes or new industry standards.

 

 

If we suffer system failures or overloading of computer systems, our business and prospects could be harmed. The success of our online offerings is highly dependent on the efficient and uninterrupted operation of our computer and communications hardware systems. Fire, floods, earthquakes, power fluctuations, telecommunications failures, hardware “crashes,” software failures caused by “bugs” or other causes, and similar events could damage or cause interruptions in our systems. Computer viruses, electronic break-ins or other similar disruptive problems could also adversely affect our websites. If our systems, or the systems of any of the websites on which we advertise or with which we have material marketing agreements, are affected by any of these occurrences, our business, results of operations and financial condition could be materially and adversely affected.

 

The establishment of our brand is important to our future success.

 

Establishing and maintaining a brand name and recognition is critical for attracting and expanding our client base. The promotion and enhancement of our name depends on the effectiveness of our marketing and advertising efforts and on our success in continuing to provide high-quality services, neither of which can be assured. If our brand marketing efforts are unsuccessful, our business could fail.

 

Our business could suffer if we are unable to protect our intellectual property rights or are liable for infringing the intellectual property rights of others.

 

We have certain trademarks, trade dress, trade secrets and other similar intellectual property which are significant to our success, and we rely upon related law, trade secret protection, and other confidentiality and license agreements with our employees, strategic partners, and others to protect our proprietary rights to the extent such protection is available and enforceable. Such protection has only limited effectiveness. The development of the Internet has also increased the ease with which third parties can distribute our copyrighted material without our authorization.

 

We may seek to pursue the registration of additional 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 financial statements are prepared assuming we are a going concern. We require substantial additional capital to continue as a going concern which if not obtained could result in a need to curtail or cease operations.

 

The Company has historically funded operations through debt financing arrangements and the sale of stock. We require substantial additional funding to execute on our business plan successfully and provide for our future operating and capital expenditure requirements. The exact amount of funds raised, 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 not able to raise additional capital, our business will suffer or we could be forced to cease operations.

 

Our financial statements have been prepared assuming that we will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. We have sustained recurring net losses and have deficits in working capital and total stockholders’ equity. These factors raise substantial doubt about our ability to continue as a going concern.

 

 

 

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:

 

 

We may be exposed to liability for publishing or distributing content over the Internet.

 

We may be subject to claims relating to content that is published on or downloaded from our website or the websites we operate for our customers. We also could be subject to liability for content that is accessible from our website through links to other websites.

We presently carry no insurance policies that cover losses that may occur due to failures or interruptions in our systems.

 

The disclosure or misuse of data we collect could harm our business.

 

If third parties are able to penetrate our network security or otherwise misappropriate our users’ personal information, we might be subject to liability. These could include claims for impersonation or other similar fraud claims.

 

 

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 access to 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 in use of the Internet generally and decrease the acceptance of the Internet as an communications and commercial medium, and could thereby have a material adverse effect on our business, results of operations and financial condition.

 

We may be required to issue more shares of Common Stock upon the exercise of outstanding warrants, as part of raising additional capital, resulting in dilution of the ownership of our existing stockholders.

 

The exercise of outstanding warrants could result in substantial numbers of additional shares of Common Stock being issued, which will dilute existing stockholders’ potential ownership interests and may cause our stock price to decline.

 

As of June 30, 2018, we had issued warrants to purchase an aggregate of 8,837,980 shares of Common Stock. During the terms of the warrants, the holders thereof are given an opportunity to benefit from a rise in the market price of the Common Stock, with a resultant dilution of the interests of existing stockholders. The existence of these warrants could make it more difficult for us to obtain additional financing while such securities are outstanding.

 

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

 

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.

 

Risks Related to the Company’s Timely Filing of SEC filings including financial statements

 

Prior to 2018, the Company had not filed financial statements with the SEC for any period following the quarter ended March 31, 2015 and as a result the SEC revoked the registration of our securities. The Company’s management has taken actions to remedy the material weaknesses in our internal controls that were the cause of not being able to timely file reports with the SEC that include the hiring of a new Chief Financial Officer and a recapitalization of the Company in June 2017. However, there are no assurances that we have remediated all internal control issues fully and there is the risk that we may not be able to file reports on a timely basis in the future causing us not to be in compliance with the SEC filing requirements, limiting our ability to register our shares and possibly resulting in the SEC revoking the registration of our securities.

 

We may engage in merger and acquisition activity from time to time and may not achieve the contemplated benefits from such activity.

 

Achieving the contemplated benefits from such activity may be subject to a number of significant challenges and uncertainties, including integration issues, coordination between geographically separate organizations, and competitive factors in the marketplace. We could also encounter unforeseen transaction and integration-related costs or other circumstances such as unforeseen liabilities or other issues. Any of these circumstances could result in increased costs, decreased revenue, decreased synergies and the diversion of management time and attention. If we are unable to achieve our objectives within the anticipated time frame, or at all, the expected benefits may not be realized fully or at all, or may take longer to realize than expected, which could have an adverse effect on our business, financial condition and results of operations, or cash flows. Any of these risks could harm our business. In addition, to facilitate these acquisitions or investments, we may seek additional equity or debt financing, which may not be available on terms favorable to us or at all, which may affect our ability to complete subsequent acquisitions or investments, and which may affect the risks of owning our common stock.

 

A system failure or breach of system or network security could delay or interrupt services to our customers or subject us to significant liability.

 

We have implemented security measures such as firewalls, virus protection, intrusion detection and access controls to address the risk of computer viruses and unauthorized access. However, there can be no assurances that any of these efforts will be adequate to prevent a system failure, accident or security breach, any of which could result in a material disruption to our business. In addition, substantial costs may be incurred to remedy the damages caused by any such disruptions.

 

 

Item 2. Financial Information.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FORWARD-LOOKING INFORMATION

 

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to expectations concerning matters that (a) are not historical facts, (b) predict or forecast future events or results, or (c) embody assumptions that may prove to have been inaccurate. These forward-looking statements involve risks, uncertainties and assumptions. When we use words such as “believe,” “expect,” “anticipate” or similar expressions, we are making forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give readers any assurance that such expectations will prove correct. The actual results may differ materially from those anticipated in the forward-looking statements as a result of numerous factors, many of which are beyond our control. 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 “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 negative variables that can affect our business and results of operations .

 

Company Overview

 

About the Company

 

The Company has continued the successful development and enhancement of our cloud based software solutions for medical and dental practices, the development of the Company's internal processes and staff, and the laying of a solid foundation for future market penetration and growth. The Company’s current focus is on four different revenue streams provided by: (1) iCoreConnect’s cloud based messaging exchange, iCoreExchange (the “Exchange”), which allows physicians, patients and other members of the healthcare community to exchange patient specific healthcare information securely via the internet, while maintaining compliance with all current Health Insurance Portability and Accountability Act (“HIPAA”) regulations, (2) customized electronic health record platform technology that is specifically tailored to provide specialized medical and dental practices with a technology that conforms to workflows of a particular medical discipline (3) the Company’s Meaningful Use Consulting Division, that assists both medical and dental healthcare providers becoming “Meaningful Use” compliant to ultimately qualify for federal incentive funds under the Federal Meaningful Use Incentive Funds Program, and (4) International Statistical Classification of Diseases and Related Health Problems (ICD) coding software, a medical classification list by the World Health Organization (WHO). iCoreConnect’s integrated software and service offering enables doctors to comply with the regulatory burden associated with secure HIPAAcompliant medical records transport with no change in healthcare delivery workflows.

 

Software Products and Services

 

Due to current HIPAA regulations, physicians and healthcare providers have been prohibited from electronically exchanging unencrypted personal health information. There has been no cost effective platform for transferring this information in a HIPAA compliant environment. We set out to solve this problem.

 

 

We provide customizable secure cloud based software. iCoreConnect currently markets four different software products: iCoreExchange, iCoreSecure, iCoreMD, and iCoreDental. In addition, the Company has a Meaningful Use division.

 

Meaningful Use - The American Recovery Act of 2009 allocated $45 Billion for Medicare and Medicaid Incentives. There is approximately 50% of the allocation remaining through 2018. This represents a huge opportunity to capture a large piece of market share. It is estimated that less than 50% of Physicians, who have the ability to do, so and less than 8% of Dentists have qualified for a Meaningful Use incentive. The Federal Government has extended the deadline for two additional years as they are unhappy with the deployment rate. This gives iCoreConnect an opportunity to capitalize on the large sum of Meaningful Use funds available. Further, we have developed a program for dentists which is largely being ignored by most other vendors.

 

With the feedback from all the Meaningful Use consulting we have done, we have determined that there is a huge opportunity to sell electronic health records (EHR) software to physicians and dentists. Practices that utilize an approved EHR software that is ONC certified, allows a physician or dentist to qualify for Meaningful Use incentive dollars up to a maximum of $63,750 per physician or dentist.

 

Our first product launch, our iCoreExchange, occurred in our fiscal quarter ended March 31 2014 and our iCoreDental and iCoreMD products were launched in our fiscal quarter ended September 30, 2014.

 

iCoreExchange – The Health Insurance Portability and Accountability Act of 1996 (HIPAA) precludes the electronic transfer of personal health information by unsecured means. Given that standard email has been deemed insecure, a huge bottleneck exists in the flow of patient information. Factor in the HIPAA fines that range from $50,000 up to $1,500,000 per violation virtually mandates the need for our iCoreExchange.

 

iCoreConnect’s iCoreExchange offers Hospitals, IPAs, State HIEs, and doctor and dental practices the extensive functionality needed to demonstrate Meaningful Use as defined by the Federal Department of Health and Human Services. Our iCoreExchange provides a secure, HIPAA compliant email solution using the NHIN Direct protocol required by Meaningful Use Stage 2, that allows doctors to send and receive secure email, with attachments, to and from other healthcare professionals in the network. Our iCoreExchange also provides a secure email mechanism to communicate with users outside the exchange - e.g. patients and referrals. The iCoreExchange gives its users the ability to build a community, access other communities and increase referrals and collaboration. Our exchange allows the end user to email in a HIPAA compliant manner while also sending a CCDA or CCR file with discrete data which then can be opened up on any EHR system.

 

After iCoreExchange, we launched our first fully developed EHR software for the medical community called iCoreMD. iCoreMD was launched in response to input from doctors telling us they wanted cloud based software that had more flexibility than the current medical products in the marketplace. We responded and launched iCoreMD in the summer of 2014. Shortly thereafter we released our third software product, iCoreDental, which was specifically tailored toward the dental market.

 

iCoreMD and iCoreDental are complete ONC, cloud based, certified ambulatory EHRs that allow full practice management for the provider. The software tracks patient demographics, scheduling, billing, electronic medical records, electronic claims, e-prescriptions and has multiple reporting capabilities.

 

We achieved ONC certification for both iCoreMD and iCoreDental in November of 2015. ONC certification allows our software to meet the current Meaningful Use guidelines which allows doctors and dentists to receive up to $63,750 from the Federal government. ONC certification also confirms that our software meets all currently required clinical measures as well as security measures and interoperability that are required by the government. The certificate number for our iCoreDental and iCoreMD software is 150120r0.

 

In November 2017, we purchased ICD Coding Software that provides the coding standards for the 10th revision of the International Statistical Classification of Diseases and Related Health Problems (ICD), a medical classification list by the World Health Organization (WHO). It contains codes for diseases, signs and symptoms, abnormal findings, complaints, social circumstances, and external causes of injury or diseases.

 

Recent newscasts have been replete with reporting regarding many breaches of consumers personal information. We used our expertise and development capabilities from our HIPAA compliant iCoreExchange and developed a fifth product - iCoreSecure. iCoreSecure is an encrypted email solution for anyone that needs encrypted email to protect personal and financial data. iCoreSecure could be used in the insurance, real estate, financial and many other industry sectors that have a need for secure encrypted email.

 

We will continue to develop and create cloud based products the marketplace is requesting as we deem them financially viable.

 

Operations

 

Financing

 

We are currently funding the business capital requirements through sales of our common stock and debt arrangements. While we intend to seek this 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.

 

 

The Company requires additional investment raised from the issuance of additional common stock or debt financing to continue operations for more than one month. Our cash needs are primarily attributable to funding and expanding our development capabilities, sales and marketing efforts, strengthening technical and helpdesk support, satisfying existing obligations and building administrative infrastructure, which includes the costs and professional fees associated with being a public company.

 

As of June 30, 2018, we required an investment of approximately $160,000 per month to fund our operations. This amount may increase as we expand our sales and marketing efforts and continue to develop new products and services; however, 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.

 

The Company obtained an investment of $1 million on August 9, 2018 for the sale of additional shares of our common stock. Additional information concerning this investment is also disclosed in Footnote 10, in the accompanying financial statements for the period ended June 30, 2018.

 

Critical Accounting Policies and Estimates

 

Our discussion and analysis of financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with generally accepted accounting principles as recognized in the United States of America. The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities. We base 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.

 

Going Concern

 

The accompanying audited 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. The Company has incurred operating losses to date and has an accumulated deficit, total stockholders’ deficit and net working capital deficit at June 30, 2018. The Company’s activities have been primarily financed through bridge loans, convertible debentures, and private placements of equity securities. The Company seeks to raise additional capital through the issuance of equity securities to fund its operations. Such financing may not be available on terms satisfactory to the Company, if at all.

 

Management has been able to develop an improved healthcare communications system and has been able to attract alliances with strategic partners to generate increased revenues which will sustain the Company. While management believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. Management’s ability to continue as a going concern is ultimately dependent upon its ability to continually increase the Company’s customer base and realize increased revenues from signed contracts. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Revenue Recognition

 

We have 4 primary sources of revenue:

 

 

Revenue from EHR software licensing arrangements include private cloud hosting services provided to clients that have purchased a perpetual or specific term license to our EHR software solution and are contracted with us to host the software. These arrangements provide the client with a contractual right to take possession of the software at any time during the private cloud hosting period without significant penalty and it is feasible for the client to either use the software on its own equipment or to contract with an unrelated third party to host the software. Private cloud hosting services are not deemed to be essential to the functionality of the software. The Company recognizes revenue from the sale of its EHR software license at the time the customer has access to use the software, with deferral of revenues associated with the cloud hosting and post contract support performance objectives, allocated based on relative fair value.

 

The Company defers revenue from the sale of its EHR software products associated with cloud hosting and post contract support performance objectives over the term of the license agreement. Cloud hosting performance objective revenues are deferred based on forecasted cloud storage costs, encrypted secure email performance objective revenues are deferred based on the forecasted sales price of those services to other customers of the Company and customer support performance objective revenues are deferred based on forecasted customer support costs based on Company experience.

 

Encrypted Secure email services are provided on a fee basis as software as a service (“SaaS”) arrangements and are recognized as revenue ratably over the contract terms beginning on the date our solutions are made available to clients. The length of a client service period is monthly over which such client has the right to use our SaaS Encrypted Secure email solution.

 

Meaningful Use Consulting service revenues are recognized for consulting services provided to physician and dental practices at the successful submission of the Meaningful Use application to the appropriate governmental agency. Revenue is recognized at the contracted percentage of the Meaningful Use incentive program on each annual government award received by the client and is required to be paid when payment is received by the physician or dental practice.

 

 

ICD Coding Software provides the 10th revision of the International Statistical Classification of Diseases and Related Health Problems (ICD), a medical classification list by the World Health Organization (WHO). It contains codes for diseases, signs and symptoms, abnormal findings, complaints, social circumstances, and external causes of injury or diseases. ICD coding services are provided on a fee basis as software as a service (“SaaS”) arrangements and are recognized as revenue ratably over the contract terms beginning on the date our solutions are made available to clients. The length of a client service period varies from multi-year annually renewed to monthly over which such client has the right to use our ICD coding software solution.

 

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 985-730, Computer Software Research and Development, research and planning phase costs should be expensed as incurred and development phase costs including direct materials and services, payroll and benefits and interest costs may be 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 marketed to external users 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.

 

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.

 

Stock Based Compensation

 

The Company estimates the fair value of each option award on the date of grant generally using a Black-Scholes option pricing model that uses the following assumptions. The Company estimates the fair value of its restricted common stock units 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 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 cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future.

 

Impairment of Long-Lived Assets

 

We review long-lived assets for impairment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, in accordance with recently adopted accounting practices. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future 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 reducing the carrying amount of the asset by the amount by which its carrying amount exceeds its fair value.

 

 

Recently Issued Accounting Pronouncements

 

In April 2015, the Financial Accounting Standards Board issued ASU No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). ASU 2015-03 requires debt issuance costs to be presented as a direct deduction from the carrying amount of the related debt rather than as an asset. The Company has retrospectively adopted this update, as required, and the amounts reclassified from other assets to a reduction of the carrying amount of the related debt in the accompanying Balance Sheets.

 

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) intended to improve financial reporting about leasing transactions. The new guidance will require entities that lease assets to recognize on their balance sheets the assets and liabilities for the rights and obligations created by those leases and to disclose key information about the leasing arrangements. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018 with early adoption permitted. We are currently evaluating the impact of this accounting guidance, including the timing of adoption.

 

In January 2017, the Financial Accounting Standards Board issued ASU 2017-01, “Business Combinations” (“Topic 805”), Clarifying the Definition of a Business. This update provides guidance concerning elements of an acquisition to qualify as a business combination. The Company has followed this guidance to analyze an acquisition that occurred in January 2018, as disclosed in Footnote 9, in the accompanying financial statements for the period ended June 30, 2018.

 

In July 2017, the Financial Accounting Standards Board issued ASU No. 2017-11, “Accounting for Certain Financial Instruments with Down Round Features” (“Topic 480 ” ). This update changes the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. ASU 2017-11 is effective for interim and annual periods beginning after December 15, 2018. The Company has begun to evaluate the impact of the pronouncement on the financial reports and has determined that it will not have a significant impact on the financial reports.

 

In June 2018, the Financial Accounting Standards Board issued ASU No. 2018-07, “Compensation ・ Stock Compensation (“TOPIC 718”): Improvements to Nonemployee Share-Based Payment Accounting .”   This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to nonemployees. ASU 2018-07 is effective for interim and annual periods beginning after December 15, 2018. We are currently evaluating the impact of this accounting guidance, including the timing of adoption.

 

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 consolidated financial position, results of operations and cash flows.

 

 

 

The accompanying “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” provides a comparison of the amounts listed above.

 

Three Month Period Ended June 30, 2018 ( “ 2Q 2018 ” ) Compared to Three Month Period Ended June 30, 2017 ( “ 2Q 2017 ” )

 

Revenues. Net revenues of $272 for the 2Q 2018 increased $102 or 60% compared to $170 for the 2Q 2017. The increase was primarily due to a 234% increase in EHR software revenues and a 6% increase in iCoreExchange revenues, somewhat offset by a 99% decrease in Meaningful Use revenues, compared to the 2Q 2017.

 

Cost of sales. Cost of sales of $122 for the 2Q 2018 increased 28% compared to the 2Q 2017 cost of sales of $95. The primary reason for the increase was due to a 24% increase in software implementation wages and related expenses compared to the 2Q 2017.

 

General and administrative expenses. General and administrative expenses of $1,573 for the 2Q 2018 increased $1,027 or 188% compared to$546 for the 2Q 2017. The increase was primarily due to a 294% increase in employee salaries and stock compensation expense and a 53% increase in Professional and Legal fees somewhat offset by a 58% decrease in advertising expenses compared to the 2Q 2017.

 

Depreciation and amortization expenses. Depreciation and amortization expenses of $99 for the 2Q 2018 were $24 higher than the $75 for the 2Q 2017. The increase is primarily due to amortization of acquired technology assets.

 

Interest Expense. Interest expense in the 2Q 2018 of $56 was a decrease of $554 or 91% compared to $610 in the 2Q 2017. The decrease is due to the decrease of long term debt to $1,529 as of June 30, 2018 compared to long term debt of $15,133 as of June 30, 2017.

 

 

Six Month Period Ended June 30, 2018 Compared to Six Month Period Ended June 30, 2017

 

Revenues.   Net revenues of $623 for the six month period ended June 30, 2018 increased $269 or 76% compared to $354 for the six month period ended June 30, 2017. The increase was primarily due to a 344% increase in EHR software revenues and a 8% increase in iCoreExchange revenues, somewhat offset by a 90% decrease in Meaningful Use revenues compared to the six month period ended June 30, 2017.

 

Cost of sales. Cost of sales of $228 for the six month period ended June 30, 2018 increased 36% compared to the six month period ended June 30, 2017 cost of sales of $168. The primary reason for the increase was due to a 35% increase in software implementation wages and related expenses compared to the six month period ended June 30, 2017.

 

General and administrative expenses. General and administrative expenses of $2,213 for the six month period ended June 30, 2018 increased $1,036 or 88% compared to $1,177 for the six month period ended June 30, 2017. The increase was primarily due to a 142% increase in employee salaries and stock compensation expense and a 88% increase in Professional and Legal fees somewhat offset by a 75% decrease in advertising expenses compared to the six month period ended June 30, 2017.

 

Depreciation and amortization expenses. Depreciation and amortization expenses of $200 for the six month period ended June 30, 2018 were $56 higher than the $144 for the six month period ended June 30, 2017. The increase is primarily due to amortization of acquired technology assets.

 

Interest Expense. Interest expense in the six month period ended June 30, 2018 of $110 was a decrease of $1,087 or 91% compared to $1,197 in the six month period ended June 30, 2017. The decrease is due to the decrease of long term debt to $1,529 as of June 30, 2018 compared to long term debt of $15,133 as of June 30, 2017.

 

Other Expense. Other expense of $1,750 in the six month period ended June 30, 2018 is due to the acquisition of the Electro-Fish Stock. See Note 9 of the accompanying condensed consolidated financial statements.

 

LIQUIDITY AND CAPITAL

 

The primary factors that influence our liquidity include, but are not limited to, the amount and timing of our revenues, cash collections from our customers, capital expenditures and investments in research and development efforts. The change in our cash and cash equivalents balance is reflective of the fact that we generated positive cash flow from financing activities during the six month period ending June 30, 2018 and 2017. Cash from financing activities was used to fund operating activities, including investing in software product development and general and administrative expenses.

 

The following table summarizes the impact of operating, investing and financing activities on our cash flows for the six month periods ending June 30, 2018 and June 30, 2017 related to our operations:

 

 

Operating Activities: Net cash used by operating activities for the six month period ending June 30, 2018 of $984 was $64 more than the $920 for the six month period ended June 30, 2017. The decrease in cash utilized by operating activities compared to the six month period June 30, 2017 was attributable to a $1,113 decrease in net loss and non cash adjustments to net loss, offset by a $1,176 increase in the cash impact of changes in operating assets and liabilities.

 

Investing Activities: Net cash used by investing activities for the six month period ending June 30, 2018 of $161 was primarily due to software development costs compared to $161 for the June 30, 2017 period. Future spending on investing activities is expected to be funded by additional borrowings.

 

Financing Activities: Net cash provided by financing activities was $1,188 for the six month period ending June 30, 2018, due to the issuance of additional common stock. Net cash provided by financing activities was $938 for the six months ended June 30, 2017, primarily the result of Bridge Loan financing that was converted to common stock in connection with the Recapitalization on June 30, 2017. Future cash provided by financing activities to meet capital spending requirements is expected to be funded by additional borrowings or the sale of additional common stock.

 

 

Credit Facilities

 

Effective October 29, 2013, the Company entered into a revolving line of credit agreement in the amount of $250,000 which was increased to $500,000 on March 12, 2014 and $750,000 on September 9, 2014. The line of credit was reduced to $500,000 in May 2016 leaving $2,000 of availability as of June 30, 2018. The line of credit is collateralized by all assets of the Company and a guarantee by a stockholder of the Company. The line carries interest at the Wall Street Journal Prime rate + 1.0% with a floor rate of 6.5% (6.5% at June 30, 2018). Interest is payable monthly with all outstanding principal and interest due on July 15, 2019.

 

Overview. 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:

 

 

The accompanying “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” provides a comparison of the amounts listed above.

 

Six Month Period Ended December 31, 2017 ( “ Stub 2017 ” ) Compared to Fiscal Year Ended June 30, 2017 ( “ FY 2017 Period ” )

 

Revenues. Net revenues of $206 for the Stub 2017 decreased $362 or 64% compared to $568 for the FY 2017 Period. The decrease was primarily due to a 99% decrease in Meaningful Use revenues, a 39% decrease in EHR software revenues and a 46% decrease in iCoreExchange revenues compared to FY 2017 Period.

 

Cost of sales. Cost of sales of $226 decreased 24% compared to the FY2017 Period cost of sales of $296. The primary reason for the decrease was due to a 5% decrease in software implementation wages and related expenses, a 25% decrease in amortization of the software development costs, somewhat offset by a 18% increase in royalty payments compared to the FY 2017 Period.

 

General and administrative expenses. Selling, general and administrative expenses of $1,410 decreased $909 or 39% for the Stub 2017 compared to $2,319 for the FY 2017 Period. The decrease was primarily due to lower employee salaries and stock compensation expense that were 28% lower, Professional and Legal fees that were 43% lower and advertising expenses that were 70% lower than in the FY 2017 Period.

 

Depreciation and amortization expenses. Depreciation and amortization expenses of $160 were $102 lower than the $262 for the FY 2017 period. The decrease is primarily due to shorter period of time for amortization of software development expenses in the stub period.

 

Interest Expense. Interest expense of $115 decreased $2,150 or 95% compared to $2,265 in the FY 2017 period. The decrease is due to the decrease of long term debt to $1,400 as of June 30, 2017 compared to long term debt of $16,200 prior to the Recapitalization.

 

Fiscal Year Ended June 30, 2017 (“FY 2017 Period”) Compared to Fiscal Year Ended June 30, 2016 (“FY 2016 Period”)

 

Revenues.   Net revenues of $568 for the FY 2017 Period increased $126 or 28% compared to $442 for the FY 2016 Period. The increase was primarily due to more than a 245% increase in EHR software revenues and a 61% increase in iCoreExchange revenues compared to the FY 2016 Period.

 

Cost of sales. Cost of sales of $296 increased 33% compared to the 2016 Period cost of sales of $222. The increase in the cost of sales as a percentage of revenues of 52% was a 2% increase compared to the 50% rate for the FY 2016 Period. The primary reason for the increase was due to higher software implementation costs.

 

 

General and administrative expenses. Selling, general and administrative expenses of $2,319 decreased $68 or 3% for the FY 2017 Period compared to $2,387 for the FY 2016 Period. The reduction was primarily due to lower salary and wage costs that were 16% lower than in the FY 2016 Period that were somewhat offset by a 45% increase in advertising costs.

 

Depreciation and amortization expenses. Depreciation and amortization expenses of $262 were $70 higher than the $192 for the FY 2016 Period. The increase is primarily due to amortization of software development costs associated with the iCoreExchange and EHR software systems.

 

Interest Expense. Interest expense of $2,265 increased $282 or 14% compared to $1,983 in the FY 2016 Period. The increase is due to an increase of pre-Recapitalization long term debt to $16,200 as of June 30, 2017 compared to $11,000 as of June 30, 2016.

 

LIQUIDITY AND CAPITAL

 

The primary factors that influence our liquidity include, but are not limited to, the amount and timing of our revenues, cash collections from our customers, capital expenditures and investments in research and development efforts. The change in our cash and cash equivalents balance is reflective of the following: We generated positive cash flow from financing activities during the six month period ending December 31, 2017 and the fiscal years ended June 30, 2017 and 2016. Cash from financing activities was used to fund operating activities, including investing in software product development and general and administrative expenses.

 

The following table summarizes the impact of operating, investing and financing activities on our cash flows for the six month period ending December 31, 2017 and the fiscal years ended June 30, 2017 and 2016 related to our operations:

 

		Fiscal years ended
(In thousands)	Stub 2017	June 30, 2017	June 30, 2016
Net cash used in operating activities	$ (850 )	$ (1,747 )	$ (1,614 )
Net cash used in investing activities	(194 )	(322 )	(261 )
Net cash provided by financing activities	1,053	1,998	1,740
Net increase (decrease) in cash	9	(71 )	(135 )
Cash and cash equivalents at beginning of the period	43	114	249
Cash and cash equivalents at the end of the period	52	43	114

 

Operating Activities: Net cash required by operating activities for the six month period ending December 31, 2017 decreased by $897 to $850 compared to $1,747 utilized in the FY 2017 period. The decrease in cash utilized by operating activities compared to the FY 2017 Period was attributable to a $3,083 decrease in net loss and non cash adjustments to net loss, offset by a $ 2,186 increase in the cash impact of changes in operating assets and liabilities.

 

Net cash required by operating activities increased by $133 to $1,747 utilized in the FY 2017 Period compared to $1,614 utilized in the FY 2016 Period. The increase in cash utilized by operating activities compared to the FY 2016 Period was attributable to a $452 decrease in the cash impact of changes in operating assets and liabilities, offset by a $585 increase in net loss and noncash adjustments to net loss.

 

Investing Activities: Net cash used by investing activities for the six month period ending December 31, 2017 of $194 was primarily due to software development costs of $193 compared to $322 for the FY 2017 period. Net cash used by investing activities of $322 and 261 for the fiscal years ended June 30, 2017 and 2016, respectively, were for software development costs of the company’s iCoreExchange, iCoreMD and iCoreDental software products. Spending on investing activities is expected to be funded by additional borrowings.

 

Financing Activities: Net cash provided by financing activities was $1,053 for the six month period ending December 31, 2017, was due to the issuance of additional common stock. Net cash provided by financing activities was $1,998 and $1,740 for the fiscal years June 30, 2017 and 2016 periods, respectively, primarily the result of convertible debt and Bridge Loan financing that was converted to common stock during the Recapitalization as of June 30, 2017. Future cash provided by financing activities to meet capital spending requirements is expected to be funded by additional borrowings or the sale of additional common stock.

 

 

Credit Facilities

 

Effective October 29, 2013, the Company entered into a revolving line of credit agreement in the amount of $250,000 which was increased to $500,000 on March 12, 2014 and $750,000 on September 9, 2014. The line of credit was reduced to $500,000 in May 2016 leaving $2,000 of availability as of June 30, 2018. The line of credit is collateralized by all assets of the Company and a guarantee by a stockholder of the Company. The line carries interest at the Wall Street Journal Prime rate + 1.0% with a floor rate of 6.5% (6.5% at June 30, 2018). Interest is payable monthly with all outstanding principal and interest due on July 15, 2019.

 

Long-Term Debt

 

The Company completed a Recapitalization Plan on June 30, 2017 that converted $273 of promissory notes, $6,624 of convertible debt, 35.75 shares of Series A Preferred Convertible Voting Stock, 63 shares of Series B Preferred Convertible Voting Stock and $8,236 of Bridge Loan debt to common equity.

 

Our notes payable are summarized as follows (In thousands):

 

	June 30	December 31
	2018	2017
Note payable bearing interest at 8.5 - 12.0% per annum, in default	$ 106	$ 106
Note bearing interest at 8% per annum, in default	482	471
Non-interest bearing note, in default	10	10
Related Party Promissory notes, bearing interest at 8%, due April 15, 2021	110	-
Related Party Convertible Promissory notes, bearing interest at 18%, due December 31, 2018	563	657
Stockholder Convertible notes bearing interest at 18%, due September 15, 2018	257	217
	1,529	1,461
Less current maturities	(1,419 )	(1,461 )
Total Long-term debt	$ 110	$ -

 

Item 3. Properties.

 

The Company operates from its 4,100 square foot office located in Winter Garden, Florida. The office space is leased by the Company through October 31, 2020 and the Company has an option to renew the lease for a period of one year. The Company intends to exercise the option for the additional year.

 

Item 4. Security Ownership of Certain Beneficial Owners and Management.

 

Prior to the Recapitalization event of June 30, 2017, we had three classes of voting securities: our common stock (“Common Stock”), Series A Preferred Convertible Voting Stock (the “Series A Preferred Stock”), and Series B Preferred Convertible Voting Stock (the “Series B Preferred Stock”) (collectively the Series A Preferred Stock and Series B Preferred Stock, the “Preferred Stock”). The Series B Preferred Stock was subordinated to the Series A Preferred Stock with respect to liquidation rights only. Each share of both series of the Preferred Stock was convertible into one percent of the then outstanding Common Stock Equivalents giving effect to the then outstanding: (i) Common Stock; (ii) Common Stock Purchase Warrants; and (iii) outstanding debt convertible into Common Stock. The voting rights of each series was equivalent to the number of shares of common stock into which each series could be converted.

 

 

At June 30, 2018, there were 45,124,853 shares of common stock issued and outstanding.

 

The following tables set forth information with respect to the beneficial ownership of shares of each class of our voting securities held as of June 30, 2018 by:

 

 

 

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power. In addition, under SEC rules, a person is deemed to be the beneficial owner of securities which may be acquired by such person upon the exercise of options and warrants or the conversion of convertible securities within 60 days from the date on which beneficial ownership is to be determined.

 

The term “named executive officers” is defined in the SEC rules as those persons who are required to be listed in the Summary Compensation Table provided under Item 5 of this Form 10/A .

 

Except as otherwise indicated in the notes to the following table, we believe that all shares are beneficially owned, and investment and voting power is held by, the persons named as owners, and the address for each beneficial owner listed in the tables in this Item 4 is c/o iCoreConnect, Inc., 13506 Summerport Village Parkway, #160, Windermere, FL 34786.

 

	June 30,
Name and Address of Stockholder	2018	Percentage
Jerry Smith (1)	13,781,091	26.6 %
Robert McDermott (2)	7,027,956	13.6 %
JD Smith (3)	297,837	0.6 %
Jeff Stellinga (4)	527,343	1.0 %
Samuel B Fortenbaugh III (5)	1,225,172	2.4 %
Don Douglas (6)	448,647	0.9 %
David Fidanza (7)	496,256	1.0 %
Murali Chakravarthi (8)	325,462	0.6 %
Scott Malmanger (9)	258,125	0.5 %
All executive officers and directors as a group (8 persons)	10,606,798	20.5 %

 

 

 

Item 5. Directors and Executive Officers.

 

Set forth below are the names, ages, titles, principal occupations and certain biographical information, as of December 31, 2017, concerning the Company’s directors and executive officers. All of our officers are elected annually by our Board and hold office at the pleasure of the Board and serve until their successors are elected and qualified. Certain directors are executives of the Company for a contractual term pursuant to employment agreements. See the Compensation Discussion and Analysis section for summarized terms of these agreements.

 

 

J.D. Smith, Director , has been a member of our Board of Directors since April 2011 and has been Chairman of our Board of Directors since November 2013. Mr. Smith is the Chairman of WESCO Energy Corporation, a company owned by Sonoran Pacific Resources, LLP, one of the largest investors in iCoreConnect, Inc. WESCO owns the patents on a number of new technologies in the oil and gas business, such as the gas to liquid conversion of stranded gas, heavy oil upgrading, and a process for producing environmentally friendly tailings from oil and tar sands. He recently facilitated the negotiation and signing of agreements concerning projects in the USA, Canada, China, and Russia. He is presently overseeing new prospective projects in Thailand, Nigeria, Madagascar, Ecuador, Dubai and other parts of the world. Mr. Smith advises and assists Sonoran Pacific Resources on numerous projects in which it has venture capital and real estate investments. Mr. Smith is a Director and was recently elected the Chairman of the Board of Command Center Inc., a staffing company headquartered in Lakewood, Colorado.

 

Robert P McDermott, Chief Executive Officer and Director. Mr. McDermott is Chief Executive Officer and President of iCoreConnect and is a member of the company’s board of directors since July 2013. He is a 25-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.

 

Jeff Stellinga, Director , has been a member of our Board of Directors since May 2014. 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.

 

Samuel B Fortenbaugh III, Director , has been a member of our Board of Directors since August 2017. Mr. Fortenbaugh has over 50 years experience as a lawyer. He was Chairman of Morgan, Lewis & Bockius, one of the largest international law firms headquartered in the United States. He retired from Morgan, Lewis in 2002 and has continued to practice law specializing in general corporate matters with a particular emphasis on corporate acquisitions and mergers, general security matters and corporate governance. Mr. Fortenbaugh served on the Boards of Directors of Western Publishing Group, Inc. (NASDAQ), Baldwin Technology, Inc. (NYSE Amex) and Security Capital Corporation (Amex) as well as a number of privately held corporations. He is presently a member of the Board of Advisors of a private buy-out fund focused primarily on middle market companies and has served as counsel to the Company for a number of years.

 

Donald B Douglas, Chief Operating Officer and Secretary. Mr. Douglas is an established 20-year professional with a focus in operations and administration. Mr. Douglas joined iCoreConnect Inc. in January 2014. After serving in the United States Navy, Mr. Douglas began his career with Pitney Bowes. In 1996, he joined AXSA Document Solutions - an INC 500 company. During his 15-year tenure, Mr. Douglas was promoted to various positions and managed many departments including Customer Service, Training, Operations and Administration. Mr. Douglas’ last position held at AXSA was Vice President of Administration.

 

 

David Fidanza, Chief Information Officer. Mr. Fidanza is a 30-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 three different positions. In November 2010, he became the Regional Technology Specialist with Light Source Business Systems (Acquired by Total Document Management, Acquired by +ImageNet Consulting). In April 2015, Mr. Fidanza started working with iMedicor (now iCoreConnect) as the Director of Software Implementation. In September 2017, he was promoted to Chief Information Officer. Mr. Fidanza oversees the IT Department, Customer Support Team, Implementation Specialists and Content Development Initiatives.

 

Murali 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 from 2010 through 2013, wherein it was acquired by Transformyx Technologies. 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.

 

Scott A Malmanger, Chief Accounting and Financial Officer. Mr. Malmanger joined iCoreConnect in June 2017, after serving as Chief Accounting Officer and VP of Finance at American K-9 Detection Services, LLC. He resigned from American K-9 Detection after the sale of the business in January 2015. He was responsible for establishing accounting procedures, internal controls, financial reporting and treasury functions. Mr. Malmanger has served in various accounting, financial reporting and financial analyst capacities for companies such as Renewable Energy Group (NASDAQ), The Principal Financial Group (NASDAQ), Electrolux NA and Meredith Corporation (NYSE). He has both Certified Public Accountant and Certified Management Accountant professional designations, as well as an MBA with an emphasis in Finance from Minnesota State University, Mankato.

 

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 corporate and outside counsel. Our Compensation Committee, in connection with the performance of its duties, considers risks associated with our compensation programs.

 

Board Independence

 

Our Board has determined that our directors, J.D. Smith, the Chairman of the Board, and Jeff Stellinga are independent directors under the listing standards of The OTC Stock Market. Robert McDermott is our Chief Executive Officer and Samuel B Fortenbaugh serves as counsel to iCoreConnect. Neither are considered to be independent directors. Our independent directors and our governance practices provide independent oversight of management. The independent directors meet in periodic executive sessions, the results of which are discussed by the Chairman of the Board with the Chief Executive Officer.

 

Procedure for recommending nominees to the Board of Directors

 

The Company’s By-Laws state:

 

Section 3.7 Vacancies. Newly Created Directorships. Subject to the rights of the holders of preferred stock, if any, any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office, or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled by a majority vote of the directors then in office or by a sole remaining director, in either case though less than a quorum, and the director(s) so chosen shall hold office for a term expiring at the next annual meeting of stockholders and when their successors are elected or appointed, at which the term to which he or she has been elected expires, or until his or her earlier resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent directors.

 

Section 3.8 Annual and Regular Meetings. Immediately following the adjournment of, and at the same place as, the annual or any special meeting of the stockholders at which directors are elected, the Board of Directors, including directors newly elected, shall hold its annual meeting without call or notice, other than this provision, to elect officers and to transact such further business as may be necessary or appropriate. The Board of Directors may provide by resolution the place, date, and hour for holding regular meetings between annual meetings, and if the Board of Directors so provides with respect to a regular meeting, notice of such regular meeting shall not be required.

 

 

Audit Committee Members

Chairman – Jeff Stellinga

Member – J.D. Smith

 

Nominating/Corporate Governance Committee Members

Chairman – J.D. Smith

Member – Jeff Stellinga

 

Compensation Committee Members

Chairman – J.D. Smith

Member – Jeff Stellinga

 

AUDIT COMMITTEE

 

Our Audit Committee is composed of two directors, each of whom is independent, as required by the Audit Committee charter, the Securities Exchange Act of 1934 and the listing requirements for The OTC Stock Market and the SEC rules. The current members are Jeff Stellinga (Chair) and J.D. Smith.

 

Our Audit Committee, among other things:

 

 

NOMINATING AND GOVERNANCE COMMITTEE

 

Our Nominating and Governance Committee is composed of: J. D. Smith (Chair) and Jeff Stellinga. The Nominating and Governance Committee meets as often as necessary to perform its duties and responsibilities..

 

Our Nominating and Governance Committee has the following responsibilities:

 

 

COMPENSATION COMMITTEE

 

The Company has a Compensation Committee that presently consists of two directors. The current members are J.D. Smith (Chair) and Jeff Stellinga. The Board has determined that each member of the Committee is “independent” as that term is defined under the rules of the OTC Stock Market. The Compensation Committee meets as often as necessary to perform its duties and responsibilities.

 

 

The principal duties and responsibilities of our Compensation Committee include:

 

 

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, Chief Accounting and Financial Officer) and employees. The Code of Financial Ethics has been posted to our Internet website at http://www.iCoreConnect.com . The Company intends to satisfy disclosure requirements regarding amendments to, or waivers from, any provisions of its Code of Financial Ethics on its website.

 

Item 6. Executive Compensation.

 

Compensation Discussion and Analysis

 

Our compensation program has been designed to attract, reward and retain capable executives and to provide incentives for the attainment of short-term performance objectives and strategic long-term performance goals. A number of key principles guide management and our Compensation Committee in determining compensation for hiring, motivating, rewarding and retaining executive officers who create both short- and long-term stockholder value for us, including:

 

 

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 Committee uses its judgment in allocation of compensation between long- and short-term Incentives and cash and non-cash components. Although long-term incentive is considered of great significance in aligning performance with stockholder interests, it has traditionally been a smaller component of aggregate compensation. The elements of our total executive compensation are base salary, cash bonus and stock incentives.

 

Base Salary

 

Salary is intended to compensate our executives for performance of core job responsibilities and duties.

 

The salaries of Robert McDermott, Don Douglas and Scott Malmanger are fixed by employment agreements that were negotiated between Messrs. McDermott, Douglas, Fidanza, Chakravathi and Malmanger and our Compensation Committee. The amount and components of aggregate compensation for comparable positions in the local market as well as the preferences of Mr. McDermott, Douglas, Fidanza, Chakravathi and Malmanger were taken into account by our Compensation Committee in determining their compensation.

 

In determining Mr. McDermott's salary, our Compensation Committee took into account Mr. McDermott's long-standing executive role with us, his extensive knowledge of and experience in the software industry and his role in directing our growth. Our Compensation Committee views Mr. McDermott as the most successful and experienced executive with the ability to manage the profitable growth of the Company.

 

In determining Mr. Douglas's salary our Compensation Committee took into account his role in developing, structuring and implementing our administrative and operations functions and to enable profitable growth initiatives. Our Compensation Committee also considered Mr. Douglas's role in assisting Mr. McDermott in various aspects of our business growth.

 

In determining Mr. Fidanza's salary our Compensation Committee took into account his role in developing and structuring the technology platform hosting our software products and managing our product implementation functions to enable profitable growth. Our Compensation Committee also considered his role in assisting Mr. McDermott in various aspects of our product development strategy and business growth initiatives.

 

In determining Mr. Chakravathi's salary our Compensation Committee took into account his role in designing and developing new software products to enable profitable growth initiatives. Our Compensation Committee also considered his role in assisting Mr. McDermott in various aspects of our business growth.

 

 

In determining Mr. Malmanger's salary our Compensation Committee took into account his role in developing, structuring and implementing internal controls and financial reporting functions to enable timely filing of our financial statements. Our Compensation Committee also considered his role in assisting Mr. McDermott in various aspects of our efforts to achieve profitable business growth.

 

Non-Equity Incentive Plan Compensation (Annual Cash Bonus)

 

Non-equity incentive plan compensation is intended to compensate an executive for achievement of specific performance goals for a specified performance period. Mr. McDermott's employment agreement included an annual cash bonus, with a minimum equal to 100% of his base salary. The annual bonus may be more than 100% of his base salary, if certain business performance metrics are achieved.

 

Equity Compensation

 

Equity compensation is intended to incentivize employees and to promote a closer identity of interest between our employees and our stockholders. Additionally, restricted stock is also aimed at retention as the vesting period generally ranges from one to three years. Our Compensation Committee granted restricted stock to Robert McDermott, Donald Douglas, David Fidanza, Murali Chakravarthi and Scott Malmanger in connection with the terms of their respective employment agreements.

 

		Base Salary	Stock Awards (1)	Commissions	Options (2)	All other (3)	Total
Robert McDermott	Stub 2017	$ 112,500	$ 291,875	$ 15,897	$ 14,223	$ 19,524	$ 454,019
Chief Executive Officer and
President	Fiscal 2017	225,000	49,137	43,233	57,255	38,070	412,695
Fiscal 2016		225,000	89,269	16,455	115,378	34,464	480,566
Donald Douglas	Stub 2017	$ 60,000	$ 45,000		$ -	$ 3,000	$ 108,000
Chief Operating Officer	Fiscal 2017	120,000			12,497	6,000	138,497
Fiscal 2016		120,000			24,995	6,000	150,995
David Fidanza	Stub 2017	$ 44,167	$ 15,000	$ 2,746		$ 3,000	$ 64,913
Chief Information Officer	Fiscal 2017	75,000		6,461		6,000	87,461
Fiscal 2016		75,000				6,000	81,000
Murali Chakravarthi	Stub 2017	$ 55,000	$ 16,667				$ 71,667
Chief Technology Officer	Fiscal 2017	110,000					110,000
Fiscal 2016		103,000					103,000
Scott Malmanger	Stub 2017	$ 60,000	$ 8,333			$ 7,500	$ 75,833
Chief Accounting and Financial
Officer	Fiscal 2017	6,364					6,364
Notes:

 

 

 

Item 7. Certain Relationships and Related Transactions, and Director Independence.

 

Certain Relationships

 

Effective October 29, 2013, the Company entered into a revolving line of credit agreement in the amount of $250,000 which was increased to $500,000 on March 12, 2014 and $750,000 on September 9, 2014. The line of credit was reduced to $500,000 in May 2016 leaving $2,000 availability as of June 30, 2018. The line of credit is collateralized by of the all assets of the Company and a guarantee by Jerry D Smith, and who owns approximately 27% of the shares of common stock and common stock equivalents of the Company as of June 30, 2018, and is the father of J. D. Smith, Chairman of the Company’s Board of Directors. The line carries interest at the Wall Street Journal Prime rate + 1.0% with a floor rate of 6.5% (6.5% at June 30, 2018). Interest is payable monthly and all outstanding principal and interest due on July 15, 2019.

 

Related-Party Transactions

 

Our policies and procedures regarding transactions with related persons are set forth in writing in our Code of Ethics, as supplemented by our Code of Conduct, which requires that our Audit Committee must review and approve any “related party” transaction, as defined in Item 404(a) of Regulation S-K, before it is consummated. The Audit Committee of our Board is responsible for reviewing such policies and procedures pursuant to its charter, which states that the Audit Committee will “review and approve related-party transactions submitted by management after management’s evaluation of the terms of such transaction.”

 

Item 8. Legal Proceedings.

 

The Company from time to time, may be party to various litigation, claims and disputes, arising in the ordinary course of business. While the ultimate effect of such actions cannot be predicted with certainty, we believe the outcome of these matters will not have a material adverse effect on our financial condition or results of operations.

 

Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters. (a) Market Information.

 

(a) Market Information.

 

Our common stock previously quoted on OTC Link (previously “Pink Sheets”) operated by OTC Markets Group Inc. (“OTC Link”), had 6 market makers and was eligible for the “piggyback” exception of Exchange Act Rule 15c2-11(f)(3) under the symbol “VMCI”. However, because we had not filed any periodic reports with the Securities and Exchange Commission since the period ended March 31, 2015, effective as of February 14, 2018, pursuant to Section 12(j) of the Securities and Exchange Act of 1934, the registration of our common stock pursuant to Section 12 of the Exchange Act was revoked.

 

(b) Holders.

 

As of June 30, 2018, there were 45,124,853 shares of our common stock issued and outstanding, held by 310 stockholders of record. Once this registration statement has been effective for 60 days, all shares held by shareholders that are not affiliates of the Company will be able to be sold, depending upon market conditions and market development.

 

(c) Warrants

 

We have issued warrants in connection with issuing common stock and raising bridge loan debt financing. We have also issued stock options as executive compensation described in the attached financial statements.

 

(d) Dividends.

 

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. Declaration or payment of dividends, if any, in the future, will be at the discretion of our Board of Directors and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the Board of Directors. There are no contractual restrictions on our ability to declare or pay dividends.

 

Item 10. Recent Sales of Unregistered Securities.

 

On January 19, 2018, iCoreConnect Inc. acquired all of the outstanding common stock of Electro Fish Media Inc., a Texas corporation, in exchange for 3,400,000 shares of our Common Stock.

 

On April 1, 2018, the Company reached an agreement with a Director of the Company, to issue 1,000,000 shares of restricted common stock as a retainer for future merger and acquisition services. The terms of the agreement include a vesting schedule through May 15, 2020, as defined.

 

 

On May 22, 2018, the Company’s Board of Directors approved the grant of 4,287,161 shares of restricted common stock to the Chief Executive Officer, for services rendered, of which 2,143,580 shares vested upon issuance and 2,143,581 shares vesting ratably through May 22, 2020.

 

On August 9, 2018, the Company reached an agreement with an investor for the sale of 4,000,000 shares of our common stock for an investment of $1 million. The agreement also included the issuance of warrants to purchase 2,365,000 shares of common stock with an exercise price of $1.35 per share that will expire on June 30, 2020 .

 

Item 11. Description of Registrant’s Securities to be Registered.

 

The following description of our capital stock is a summary and is qualified in its entirety by the provisions of our Amended Certificate of Incorporation, which has been filed as an exhibit to this registration statement.

 

Common Stock

 

This registration statement on Form 10/A is to register shares of our common stock. We are authorized to issue 600 ,000, 000 shares of common stock, par value $0.001, of which 45,124,853 shares are issued and outstanding as of June 30, 2018. Each holder of shares of our common stock is entitled to one vote for each share held of record on all matters submitted to the vote of stockholders, including the election of Directors. The holders of shares of common stock have no preemptive, conversion, subscription or cumulative voting rights. There is no provision in our Certificate of Incorporation or By-laws that would delay, defer, or prevent a change in control of our Company.

 

Non-cumulative Voting

 

Holders of shares of our common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in such event, the holders of the remaining shares will not be able to elect any of our directors.

 

Preferred Stock

 

We are authorized to issue 10,000,000 shares of undesignated preferred stock, par value $0.001, of which no shares are issued and outstanding as of June 30, 2018.

 

Transfer Agent

 

Pacific Stock Transfer, Inc.

6725 Via Austi Parkway, Suite 300

Las Vegas, NV 89119

Main: 800 785 - 7782

Fax: 702 433 - 1979

 

Item 12. Indemnification of Directors and Officers.

 

Our officers and directors are indemnified as provided by the Nevada Business Corporation Act and our Amended and Restated Articles of Incorporation. Under the Nevada Business Corporation Act, director immunity from liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited by a company’s Articles of Incorporation. Our Amended and Restated Articles of Incorporation contain provisions which:

 

Limits on Liability .

 

No Director or, to the extent specified from time to time by the Board of Directors, officer of the Corporation will be liable to the Corporation or its stockholders for damages for breach of fiduciary duty as a director or officer, excepting only (a) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (b) the payment of dividends in violation of Section 78.300 General Corporation Law.

 

Limits on Indemnification .

 

The Corporation shall indemnify its officers and directors to the full extent permitted by the laws of the State of Nevada. However, such indemnity shall not apply if the director (a) did not act in good faith and in a manner the director reasonably believed to be in or not opposed to the best interests of the Corporation, and (b) with respect to any criminal action or proceeding, had reasonable cause to believe the director's conduct was unlawful. The Corporation shall advance expenses for such persons pursuant to the terms set forth in the bylaws, or in a separate Board of Directors resolution or contract The Corporation may. in the sole discretion of the Board of Directors, indemnify any other person who may be indemnified pursuant to the laws of the State of Nevada to the extent the Board of Directors deems advisable.

 

We have entered into indemnification agreements with each of our executive officers and directors which provide that the Company will indemnify the indemnitee against expenses, including reasonable attorney fees, judgements, penalties, fines and amounts paid in settlement, actually and reasonably incurred by him or her in connection with any civil or criminal action or administrative proceeding arising out of the performance of his or her duties as our director, officer, employee or agent. Such indemnification is available if the acts of the indemnitee were in good faith, if the indemnitee acted in a manner he or she reasonably believed to be in or not opposed to the Company’s best interests and, with respect to any criminal proceeding, the indemnitee had no reasonable cause to believe his or her conduct was unlawful.