UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal Year ended
or
For the transition period from ________ to ________.
Commission file number:
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbols(s) |
| Name of each exchange on which registered |
|
| The |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
|
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of voting and non-voting stock held by non-affiliates of FG Merger Corp. (“FG”), our predecessor, on June 30, 2023, based on the closing price of $210.60 for shares of FG’s common stock, was approximately $
The number of shares outstanding of the Registrant’s Common Stock as of May 29, 2025:
DOCUMENTS INCORPORATED BY REFERENCE
None
Table of Contents
| 2 |
| Table of Contents |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report and the documents we have filed with the Securities and Exchange Commission (the “SEC”) that are incorporated by reference herein contain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve significant risks and uncertainties. Any statements contained, or incorporated by reference, in this Report that are not statements of historical fact may be forward-looking statements. When we use the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and other similar terms and phrases, including references to assumptions, we are identifying forward-looking statements. Forward-looking statements involve risks and uncertainties which may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward-looking statements.
Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, the factors discussed in the sections entitled “Item 1A. Risk Factors” and under the heading “Critical Accounting Policies and Estimates” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All forward-looking statements attributable to us are expressly qualified in their entirety by the factors that may cause actual results to differ materially from anticipated results. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date hereof. We undertake no duty or obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the risk factors described in Item 1A of this document as well as in other documents we file from time to time with the SEC for an understanding of the variables that can affect our business and results of operations.
Note Regarding Reverse Stock Split
The Company effected a reverse stock split of its outstanding common stock at a ratio of 1-for-20, effective as of December 23, 2024, for the purpose of complying with Nasdaq Listing Rule 5550(a)(2) and satisfying the bid price requirements. We have reflected the reverse stock splits herein, unless otherwise indicated.
| 3 |
| Table of Contents |
PART I
Item 1. Business.
Overview
Company History
iCoreConnect Inc., (the “Company”), a Delaware Corporation, is a cloud-based software and technology company focused on increasing workflow productivity and customer profitability through its enterprise platform of applications and services.
Business Combination
On January 5, 2023, the Company entered into a Merger Agreement and Plan of Reorganization (the “Merger Agreement”), by and among the Company, iCoreConnect, Inc.., a Nevada corporation (“Old iCore”), and FG Merger Sub Inc., a Nevada corporation and a direct, wholly-owned subsidiary of the Company (“Merger Sub”). The Merger Agreement provided that, among other things, at the closing (the “Closing”) of the transactions contemplated by the Merger Agreement, Merger Sub will merge with and into Old iCore (the “Merger”), with Old iCore surviving as a wholly-owned subsidiary of the Company. In connection with the Merger, the Company changed its name from FG Merger Corp. to “iCoreConnect Inc.” The Merger and the other transactions contemplated by the Merger Agreement are hereinafter referred to as the “Business Combination.” On August 25, 2023, Old iCore and FGMC consummated the Business Combination, with Old iCore surviving as a wholly owned subsidiary of FGMC.
On October 1, 2024, the Company sold the assets of its Managed IT Services (MSP and MSaaS).
| 4 |
| Table of Contents |
Software as a Service (SaaS) Offerings
The Company currently markets secure Health Insurance Portability and Accountability Act (HIPAA) compliant cloud-based software as a service (SaaS) offerings under the names of iCoreRx, iCorePDMP, iCoreEPCS, iCoreVerify, iCoreVerify+, iCoreHuddle+, iCoreCodeGenius, iCoreExchange, iCoreCloud, iCorePay, iCoreSecure, iCoreClaims and iCoreIT. The Company’s software is sold under annual recurring revenue subscriptions.
iCoreRx - iCoreRx is a HIPAA compliant electronic prescription SaaS solution that integrates with popular practice management and electronic health record systems. It saves time by selecting exact medications at available doses with built-in support from a drug directory and provides full support for Electronic Prescriptions for Controlled Substances (iCoreEPCS). Additional functionality to iCoreRx to extend your electronic prescribing capabilities to include controlled substances as defined by the DEA schedule. iCorePDMP is an add-on for iCoreRx that seamlessly integrates with state databases to automate prescription drug monitoring. Providers in many states are required to check the patient’s Prescription Drug Monitoring Program (PDMP) history before prescribing controlled substances. This service provides one-click real-time access to the state databases without the need to manually enter data. This tool also generates patient risk scores and an interactive visualization of usage patterns to help the prescriber identify potential risk factors. The prescriber can then use this report to make decisions on objective insight into potential drug misuse or abuse which will ultimately lead to improved patient safety and better patient outcomes.
iCoreVerify and iCoreVerify+ - iCoreVerify is a HIPAA compliant SaaS solution that automatically retrieves a patients insurance eligibility breakdown to verify their benefits seven (7) days in advance of their appointment and on-demand using iCoreConnect’s real time technology. Automation runs daily to verify insurance for every patient on the schedule a full week in advance of their appointment date. The system returns results typically in less than one second for most responses. This substantially reduces the phone calls and labor hours for the practice. This tool integrates with most popular practice management systems. iCoreVerify+ adds a unique add-on service that augments iCoreConnect’s automation with a concierge service that turns around requests traditionally in less than 24 hours. It includes all carriers including non-digital ones and is customized to the client's specialty.
iCoreClaims - iCoreClaims is responsible for processing and managing claims submitted by policyholders or dental care providers and typically involves: (a) Claim Submission: Dental care providers (such as dentists or orthodontists) submit claims to the insurance company on behalf of patients after providing dental services. The claim includes details such as the type of treatment provided, codes for procedures performed, patient information, and provider details; (b) Verification and Eligibility: iCoreClaims service verifies the patient's eligibility for coverage based on the terms of their insurance policy. This involves checking if the patient's policy covers the specific dental treatment or procedure being claimed; (c) Adjudication: Once the claim is submitted and eligibility is confirmed, iCoreClaims processes the claim by reviewing it against the terms of the policy. This includes checking for any exclusions or limitations on coverage, ensuring the services rendered are medically necessary, and determining the applicable co-pays, deductibles, and coverage limits; (d) Communication: Throughout the claims process, iCoreClaims communicates with both the dental care provider and the policyholder to resolve any issues, provide explanations of benefits (EOBs), and answer any questions related to the claim; (e) Record Keeping: iCoreClaims maintains records of all claims processed, payments made, and communications related to each claim for auditing, reporting, and customer service purposes; (f) iCoreClaims service plays a crucial role in facilitating the reimbursement process for dental care services covered under insurance policies, ensuring that policyholders receive the benefits they are entitled to and that dental care providers are appropriately compensated for their services; (g) From a technology standpoint, the use of cloud software for documentation and U.S.-based billing specialists highlights iCoreConnect's strategy to combine advanced software with expert human intervention. This hybrid approach can be particularly appealing to healthcare providers who are seeking technological solutions without completely forgoing the human touch that is often necessary for complex billing and coding scenarios.
| 5 |
| Table of Contents |
iCoreHuddle and iCoreHuddle+ - iCoreHuddle is a powerful HIPAA compliant SaaS solution to instantly reveal the revenue potential of each patient. This product is currently limited to dental practices. The service connects to most popular practice management and electronic health record systems to optimize revenue realization. It provides the practice with a dashboard containing various metrics, analytics, and key performance indicators (“KPIs”). iCoreHuddle provides a daily view of patient schedules, including their outstanding balances, unscheduled treatment plans, recall information, procedure information and the amount of remaining insurance benefits. The software also provides one-click access to each patient’s insurance eligibility, including a detailed benefits and deductibles report. This tool aims to increase the workflow efficiency of the dentist’s practice by reducing the number of required lookups and clicks for each patient. iCoreHuddle+ offers enhanced analytical tools for practices to optimize their revenue generation process and workflows.
iCoreCodeGenius - iCoreCodeGenius is a medical coding reference SaaS solution that provides the coding standards for the 10th revision of the International Classification of Diseases and Related Health Problems (ICD-10), a medical classification list published by the World Health Organization (WHO). It contains codes for diseases, signs and symptoms, abnormal findings, complaints, social circumstances, and external causes of injury and diseases. This year the company added CPT codes to the software. CPT Codes (Current Procedural Terminology Codes) are a set of medical codes used by healthcare providers to describe medical, surgical, and diagnostic services and procedures. They are maintained by the American Medical Association (AMA) and are essential for billing and documentation in the healthcare system, iCoreCodeGenius includes a full ICD-10 code lookup and guidance, automatic prompting of comorbidities and Hierarchical Condition Category’s (HCC) to aid in obtaining the appropriate reimbursement with a high degree of accuracy, and the ability to reduce or eliminate queries and denials.
iCoreExchange - iCoreExchange provides a secure, HIPAA compliant SaaS email solution using the direct protocol that allows doctors to send and receive secure email with attachments to and from other healthcare professionals in the network. iCoreExchange also provides a secure email mechanism to communicate with users outside the exchange e.g., patients and referrals. Users can build a community, access other communities and increase referrals and collaboration. Users can email standard office documents, JPEG, PDF as well as patient files with discrete data, which can then be imported and accessed on most Electronic Health Record (EHR) and Practice Management (PM) systems in a HIPAA compliant manner.
iCoreCloud - iCoreCloud offers customers the ability to back up their on-premise servers and computers to the cloud. iCoreCloud is a fully HIPAA compliant and automated backup solution. The data backed up is encrypted both in transit and while at rest. In case of full data loss, the mirrored data in the cloud can be seamlessly restored back to the practice on a new computer or a server. The data is stored encrypted in HIPAA compliant data centers with multiple layers of redundancy. The data centers are physically secure with restricted personnel and biometric access. The locations are also guarded by security 24 hours a day, 365 days a year.
iCorePay - iCorePay is a cloud-based financial technology (FinTech) solution designed to streamline the billing and payment processes for healthcare providers, offering a modern and efficient way to manage patient payments. The platform integrates with existing healthcare management systems, allowing for easy creation and sending of HIPAA-compliant billing statements, as well as accepting various digital payment methods like Apple Pay, Google Pay, and PayPal. This system aims to improve patient experience by making payments easier and more convenient, while also boosting revenue collection for healthcare providers. Additionally, iCorePay helps reduce costs and administrative burdens by automating much of the billing process.
iCoreSecure -We used our expertise and development capabilities from our HIPAA compliant iCoreExchange and developed iCoreSecure, an encrypted email solution for anyone that needs encrypted email to protect personal and financial data. iCoreSecure is a secure SaaS solution that solves privacy concerns in insurance, real estate, financial and many other industry sectors that have a need for secure encrypted email.
| 6 |
| Table of Contents |
Competition - The Company experiences competition from a variety of sources with respect to virtually all of its products and services. The Company knows of no single entity that competes with it across the full range of its products and services; however, each of the lines of business in which the Company is engaged is highly competitive. Competition in the markets served is based on several considerations, which may include price, technology, applications, experience, know-how, reputation, service, and distribution. While we believe we offer a unique combination of products and services, a few competitors offer one or more similar products and services in one or more of our niche markets.
Competitive Strengths
The key advantages of our products and services include:
1. Secure, private, scalable, and reliable.
Our services have been designed to provide our customers with privacy and high levels of performance, reliability, and security. We have built, and continue to invest in, a comprehensive security infrastructure, including firewalls, intrusion detection systems, and encryption for transmission over the Internet, which we monitor and test on a regular basis. We have designed, built, and continue to maintain a multi-tenant application architecture that has been designed to enable our service to scale securely, reliably and cost effectively. Our multi-tenant application architecture maintains the integrity and separation of customer data while still permitting all customers to use the same application functionality simultaneously.
2. Rapid deployment and lower total cost of ownership.
Our services can be deployed rapidly since our customers do not have to spend time procuring, installing, or maintaining the servers, storage, networking equipment, security products or other hardware and software. We enable customers to achieve up-front savings relative to the traditional enterprise software model. Customers benefit from the predictability of their future costs since they generally pay for the service on a per subscriber basis for the term of the subscription contract.
3. High levels of user adoption.
We have designed our products and services to be intuitive and easy to use. Our products and services contain many tools and features recognizable to users of popular consumer web services, so users have a more familiar user experience than typical EHR applications. As a result, our users can often use and gain benefit from our solutions with minimal training. We have also designed our products and services to be used on popular mobile devices, making it possible for people to conduct business from their smartphones or tablets.
| 7 |
| Table of Contents |
Competitive Strategy
Key elements of our strategy include:
1. Extending existing service offerings. We continue to innovate based on customer feedback and have designed our solutions to easily accommodate new features and functionality, especially in underserved areas of compliance and improved workflow/profitability for dental and physician practices. We continually look to improve our products and services by adding new features, functions and increased security through our own development, acquisitions, and partnerships.
2. Expanding existing customer relationships. We see significant opportunities to deepen our relationships with our existing customers. As our customers realize the benefits of our products and services, we aim to provide additional value-added products and services.
3. Expanding into new horizontal markets. As part of our growth strategy, we are delivering innovative solutions in new categories, including analytics, claims, coding, billing processing, and electronic prescribing. We drive innovation both organically and through acquisitions.
4. Extending go to market capabilities. We believe that our offerings provide significant value for businesses of any size. We continue to pursue businesses of all sizes and industries through our direct sales force and partnerships. In the past several years we have competed and won over 100 major healthcare association endorsements in 33 states. We plan to increase the number of direct sales professionals we employ and intend to develop additional distribution channels for our products and services.
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.
| 8 |
| Table of Contents |
Customers
We had no significant customers (greater than 10% of total revenue) for the years ended December 31, 2024 and 2023, respectively. Customer concentration is not significant as the Company has a large number of individual customers. In addition, concentration is reduced by the number of new customers generated through the acquisitions we completed during 2024 and 2023 respectively, as well as through organic growth in both the number of customers and number of services being purchased by new and existing customers. We had accounts receivable concentration with one customer representing 26% of total accounts receivables outstanding as of December 31, 2024 and one customer that represented 25% of accounts receivable outstanding as of December 31, 2023.
Intellectual Property
Our success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this, we currently rely on a combination of trade secrets, including know-how, employee and third-party nondisclosure agreements, and other contractual rights to establish and protect our proprietary rights in our technology. We do not currently own any patents or trademarks.
Government Regulations
We are not currently subject to direct regulation by any government agency, other than regulations applicable to businesses generally, and there are currently few laws or regulations directly applicable to the access of or commerce on the Internet. However, it is possible that a number of laws and regulations will be adopted with respect to the Internet, covering issues such as user privacy, pricing, characteristics, e-mail marketing and quality of products and services. Such laws and regulations could dampen the growth and use of the Internet generally and decrease the acceptance of the Internet as a communication and commercial medium and could thereby have a material adverse effect on our business, results of operations and financial condition.
EMPLOYEES
As of December 31, 2024 the Company had 72 employees of which 68 were full-time employees.
AVAILABLE INFORMATION
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports are filed with the SEC pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the SEC. Such reports and other information that we file with the SEC are available free of charge on our website at https://www.icoreconnect.com/sec-filings when such reports are available on the SEC website. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. The contents of these websites are not incorporated into this filing. Further, the foregoing references to the URLs for these websites are intended to be textual references only.
Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. Before purchasing our common stock, you should carefully consider the following risk factors as well as all other information contained in this Report, including our financial statements and the related notes. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may become important factors that affect us. If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline, and you may lose some or all of your investment.
| 9 |
| Table of Contents |
Risks Related to Our Business
Our business is difficult to evaluate because we have a limited operating history.
Because we have a limited operating and revenue generating history, we do not have significant historical financial information on which to base planned revenues and operating expenses. Revenues for the years ended December 31, 2024 and December 31, 2023, were $10,746,466 and $8,151,587, respectively. We expect to experience fluctuations in future quarterly and annual operating results that may be caused by many factors, including: merger and acquisition activity; our ability to achieve significant sales for our products and services; the cost of technology, software and other costs associated with the production and distribution of our products and services; the size and rate of growth of the market for Internet products and online content and services; the potential introduction by others of products that are competitive with our products; the unpredictable nature of online businesses and e-commerce in general; and the general economic conditions in the United States and worldwide.
Investors should evaluate us considering the delays, expenses, problems and uncertainties frequently encountered by companies developing markets for new products, services and technologies. We may never overcome these obstacles.
Our board of directors recently concluded that we needed to restate previously issued financial statements as a result of a change in accounting for debt with embedded derivatives.
Our audit committee concluded, after consultation with management, that our previously issued unaudited financial statements for the periods ended September 30, 2024, included in the Company’s Quarterly Reports of Form 10-Q for the period ended September 30, 2024, should no longer be relied upon as a result of the change in accounting for debt with embedded derivatives. The Company valued the warrant and conversion features using a Black Scholes model and recognized the value of the warrants as equity and expense over the term of the loan and had expensed the value of the conversion feature and increased the value of its debt over the term of the loan. The Company concluded that conversion features and warrants should have been recognized as embedded derivatives, bifurcated from the host instruments and presented and valued at fair value. The adjustments resulting therein, change to current liabilities, paid-in-capital, other expenses – finance fee, other expenses – change in fair value of warrants, other expenses – change in fair value of embedded derivatives, net loss, and net loss attributable to common stockholders that we previously reported, but has no impact on previously reported cash.
One of our secured creditors has commenced an auction of substantially all of our assets in order to satisfy a debt obligation and we if are unable to satisfy the obligations subject to the auction and prevent the auction for being completed, our business will be irreparably harmed.
On March 10, 2025, we received notice from PIGI Solutions, LLC (“PIGI”) that PIGI was exercising its purported right as a secured creditor under the Uniform Commercial Code (Del. UCC § 9-613) to conduct a public auction of substantially all of our personal property. PIGI has indicated that the closing of the auction is to occur on or after May 9, 2025. PIGI claims the Company owes $2,434,243 in principal and interest, which we dispute. The disputed amounts arise out of a finder’s fee agreement discussed below.
On April 4, 2025, we and our wholly-owned subsidiary, iCore Midco Inc., a Nevada corporation (“Midco”) filed a complaint in the United States District Court Middle District of Florida initiating a civil action against PIGI and John Schneller (the “Defendants”). In the complaint, we and Midco assert, among other claims, that the Defendants fraudulently induced Midco into a finder’s fee agreement, under which PIGI allegedly acted as an unregistered broker-dealer, and that the finder’s fee agreement is voidable under Section 29(b) of the Securities Exchange Act of 1934. The relief requested includes, among other things, rescission of the finder’s fee agreement and related loan documents, injunctive relief against PIGI taking any further action to enforce the finder’s fee agreement, and monetary damages.
On May 6, 2025, the Company, Midco, the Defendants, and the bidder of the assets entered into a Settlement and Mutual Release Agreement (the “Settlement Agreement”) pursuant to which the parties agreed that the Company will have the right until May 30, 2025, to effectively terminate the auction and retain control of the Company’s assets by making a payment of $3,099,747, which includes the satisfaction of amounts owed to PIGI and the payment of certain expenses related to the auction, and a payment of $50,000 to the bidder of the assets. Upon the payment of the foregoing amounts, the Company and Midco have agreed to dismiss the above lawsuit with prejudice and the parties have agreed to mutual releases. The Company expects to satisfy the payment obligations pursuant to the Settlement Agreement prior to May 30, 2025. However, if we are unsuccessful in preventing the sale of our assets, our business will be irreparably harmed.
Under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), we could face potential liability related to the privacy of health information we obtain.
Most health care providers, from which we may obtain patient information, are subject to privacy regulations promulgated under the Health Insurance Portability and Accountability Act of 1996, or HIPAA. Although we are not directly regulated by HIPAA, we could face substantial criminal penalties if we knowingly receive individually identifiable health information from a health care provider that has not satisfied HIPAA’s disclosure standards. Further, we may face civil liability if our HIPAA compliant system fails to satisfy its disclosure standards. Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensive and time consuming to defend and could result in adverse publicity that could harm our business.
| 10 |
| Table of Contents |
We believe that we meet the HIPAA requirements currently in effect that are applicable to our internal operations and our clients. However, if we are unable to deliver application solutions that achieve or maintain compliance with the applicable HIPAA rules in effect, or as they may be modified or implemented in the future, then customers may move their businesses to application solution providers whose systems are, or will be, HIPAA compliant. As a result, our business could suffer.
If our security measures or those of our third-party data center hosting facilities, cloud computing platform providers, or third-party service partners, are breached, and unauthorized access is obtained to a customer’s data, our data or our IT systems, our services may be perceived as not being secure, customers may curtail or stop using our services, and we may incur significant legal and financial exposure and liabilities.
Our services involve the storage and transmission of our customers’ patient’s health and other sensitive data, including personally identifiable information. Security breaches could expose us to a risk of loss of this information, litigation and possible liability. While we have security measures in place, they may be breached as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise and result in someone obtaining unauthorized access to our IT systems, our customers’ data or our data, including our intellectual property and other confidential business information. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information in order to gain access to our customers’ data, our data or our IT systems. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, our customers may authorize third-party technology providers to access their customer data, and some of our customers may not have adequate security measures in place to protect their data that is stored on our services. Because we do not control our customers or third-party technology providers, or the processing of such data by third-party technology providers, we cannot ensure the integrity or security of such transmissions or processing. Malicious third parties may also conduct attacks designed to temporarily deny customers access to our systems and supporting services. Any security breach could result in a loss of confidence in the security of our software, damage our reputation, negatively impact our future sales, disrupt our business and lead to legal liability.
Our ability to deliver our software is dependent on the development and maintenance of the infrastructure of the Internet by third parties.
The Internet’s infrastructure is comprised of many different networks and services that are highly fragmented and distributed by design. This infrastructure is run by a series of independent third-party organizations that work together to provide the infrastructure and supporting services of the Internet under the governance of the Internet Corporation for Assigned Numbers and Names (ICANN) and the Internet Assigned Numbers Authority (IANA), now under the stewardship of ICANN.
Even though the Internet has never experienced an outage, some providers to portions of its infrastructure have experienced outages and other delays as a result of damages, denial of service attacks or related cyber incidents, and it could face outages and delays in the future. These outages and delays could reduce the level of Internet usage or result in fragmentation of the Internet, resulting in multiple separate Internets. These scenarios are not under our control and could reduce the availability of the Internet to us or our customers for delivery of our Internet-based services. Any resulting interruptions in our services or the ability of our customers to access our services could result in a loss of potential or existing customers and harm our business.
| 11 |
| Table of Contents |
Our business may not succeed if we are unable to keep pace with rapid technological changes.
Our services and products are impacted by rapidly changing technology, evolving industry standards, emerging competition and frequent new use, software and other product introductions. There can be no assurance that we can successfully identify new business opportunities or develop and bring new services or products to market in a timely and cost-effective manner, or those services, products or technologies developed by others will not render our services or products non-competitive or obsolete. In addition, there can be no assurance that our services, products or enhancements will achieve or sustain market acceptance or be able to address compatibility, interoperability or other issues raised by technological changes or new industry standards.
If we suffer system failures or overloading of computer systems, our business and prospects could be harmed. The success of our online offerings is highly dependent on the efficient and uninterrupted operation of our computer and communications hardware systems. Fire, floods, earthquakes, power fluctuations, telecommunications failures, hardware “crashes,” software failures caused by “bugs” or other causes, and similar events could damage or cause interruptions in our systems. Computer viruses, electronic break-ins or other similar disruptive problems could also adversely affect our websites. If our systems, or the systems of any of the websites on which we advertise or with which we have material marketing agreements, are affected by any of these occurrences, our business, results of operations and financial condition could be materially and adversely affected.
The establishment of our brand is important to our future success.
Establishing and maintaining a brand name and recognition is critical for attracting and expanding our client base. The promotion and enhancement of our name depends on the effectiveness of our marketing and advertising efforts and on our success in continuing to provide high-quality services, neither of which can be assured. If our brand marketing efforts are unsuccessful, our business could fail.
Our business could suffer if we are unable to protect our intellectual property rights or are liable for infringing the intellectual property rights of others.
We have certain trade secrets and other similar intellectual property which are significant to our success, and we rely upon related law, trade secret protection, and other confidentiality and license agreements with our employees, strategic partners, and others to protect our proprietary rights to the extent such protection is available and enforceable. Such protection has only limited effectiveness. The development of the Internet has also increased the ease with which third parties can distribute our copyrighted material without our authorization.
We may seek to pursue the registration of trademarks, trade dress and trade secrets in the United States and, based upon anticipated use, in certain other countries. We may not be entitled to the benefits of any such registration for an extended period due to the cost and delay in effecting such registration. In addition, effective trademark and trade secret protection may not be available in every country in which our products are available. We expect that we may license, in the future, elements of our trademarks, trade dress and other similar proprietary rights to third parties. Further, we may be subject to claims in the ordinary course of our business, including claims of alleged infringement of the trademarks and intellectual property rights of third parties by us and our licensees.
Other parties may assert claims of infringement of intellectual property or other proprietary rights against us. These claims, even if without merit, could require us to expend significant financial and managerial resources. Furthermore, if claims like this were successful, we might be required to change our trademarks, alter our content or pay financial damages, any of which could substantially increase our operating expenses. We also may be required to obtain licenses from others to refine, develop, market and deliver new services. We may be unable to obtain any needed license on commercially reasonable terms or at all, and rights granted under any licenses may not be valid and enforceable.
Our success will be limited if we are unable to attract, retain and motivate highly skilled personnel.
Our future success will depend on our ability to attract, retain and motivate highly skilled programming, management, sales and other key personnel. Competition for such personnel is intense in the Internet industry, and we may be unable to successfully attract, integrate or retain sufficiently qualified personnel. In addition, our ability to generate revenues relates directly to our personnel in terms of both the numbers and expertise of the personnel we have available to work on our projects. Moreover, competition for qualified employees may require us to increase our cash or equity compensation, which may have an adverse effect on earnings.
| 12 |
| Table of Contents |
We are also dependent on the services of our executive officers and key consultants and independent agents. There can be no assurance, however, that we can obtain executives of comparable expertise and commitment in the event of death, or that our business would not suffer material adverse effects as the result of a death, disability or voluntary departure of any such executive officer. Further, the loss of the services of any one or more of our key employees or consultants could have a materially adverse effect on our business and our financial condition. In addition, we will also need to attract and retain other highly skilled technical and managerial personnel for whom competition is intense. If we are unable to do so, our business, results of operations and financial condition could be materially adversely affected.
Any system failure or slowdown could significantly harm our reputation and damage our business.
System failures would harm our reputation and reduce our attractiveness to customers. In addition, the users of the services we maintain for our customers depend on Internet service providers, online service providers and other web site operators for access to our web sites. Some of these providers and operators have experienced significant outages in the past, and they could experience outages, delays and other difficulties due to system failures unrelated to our systems.
We compete in a highly competitive market and many of our competitors have greater financial resources and established relationships with major corporate customers.
Our future profitability depends on our ability to compete successfully by continuing to differentiate our products and services from the products and services of our competitors. If one or more of our competitors begins to offer integrated, Internet Based, HIPAA Compliant healthcare information collaboration solutions, there may be a material adverse effect on our business, financial condition or operating results. We believe that our ability to compete successfully depends on a number of factors, including: our ability to produce products that are superior in quality to that of our competitors and get those products and services to market quickly; our ability to deliver our products and services at a price that remains competitive with that of our competitors; our ability to respond promptly and effectively to the challenges of technological change, evolving standards, and our competitors’ innovations; the scope of our products and services and the rate at which we and our competitors introduce them; customer service and satisfaction; and industry and general economic trends.
Regulatory developments in the future related to the Internet could create a legal uncertainty; such developments could materially harm our business.
We are not currently subject to direct regulation by any government agency, other than regulations applicable to businesses generally, and there are currently few laws or regulations directly applicable to the access of or commerce on the Internet. However, it is possible that a number of laws and regulations will be adopted with respect to the Internet, covering issues such as user privacy, pricing, characteristics, e-mail marketing and quality of products and services. Such laws and regulations could dampen the growth and use of the Internet generally and decrease the acceptance of the Internet as a communication and commercial medium and could thereby have a material adverse effect on our business, results of operations and financial condition.
We are vulnerable to changes in general economic conditions.
We are affected by certain economic factors that are beyond our control, including changes in the overall economic environment and systemic events such as the Covid-19 Pandemic which impact our operations as well as our customers.
Legal proceedings could lead to unexpected losses.
From time to time during the normal course of carrying on our business, we may be a party to various legal proceedings through private actions, class actions, administrative proceedings, regulatory actions or other litigations or proceedings. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify. In the event that management determines that the likelihood of an adverse judgment in a pending litigation is probable and that the exposure can be reasonably estimated, appropriate reserves are recorded at that time pursuant to the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 450, “Contingencies.” The final outcome of any litigation could adversely affect operating results if the actual settlement amount exceeds established reserves and insurance coverage.
| 13 |
| Table of Contents |
Our results of operations could vary as a result of the methods, estimates, and judgments that we use in applying accounting policies.
The methods, estimates, and judgments that we use in applying accounting policies have a large impact on our results of operations. For further information, see “Critical Accounting Estimates” in Part II, Item 7 of this Form 10-K. These methods, estimates, and judgments are subject to large risks, uncertainties, and assumptions, and changes could affect our results of operations
We have identified material weaknesses in internal control over financial reporting. If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.
We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Any failure of these controls could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial fraud.
As of December 31, 2024, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were not effective as of December 31, 2024 due to a material weaknesses as follows:
| · | The Company lacks formal review and approval procedures, including lack of review of Service Organization Control (SOC) reports, and lack of controls over proper IT related change management, backup of data and privileged user assess. |
| · | Ineffective internal controls with respect to the valuation of intangible assets. Specifically, the Company's controls failed to demonstrate appropriate review over valuation methodologies, documentation, and other processes for intangible assets. |
| · | A lack of controls in place to correctly identify derivative liabilities as part of convertible notes, accounting implications for convertible notes with no floor, or ability to distinguish between equity or liability treatment for warrant and understand the accounting impact of instruments with down round features. |
| · | Lack of adequate segregation of duties over financial transaction processing and reporting due to a lack of a sufficient number of accounting personnel. |
| · | The Company lacks the ability to timely maintain accurate books and records, which impacts the Company's ability to file accurate financial reports in a timely manner. |
To address these material weaknesses, management has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of its internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate its research and understanding of the nuances of the complex accounting standards that apply to its financial statements. We plan to include providing enhanced access to accounting literature, research materials and documents and increased communication among its personnel and third-party professionals with whom it consults regarding complex accounting applications and we also plan to hire additional personnel to help provide adequate segregation of duties in the financial reporting process.
| 14 |
| Table of Contents |
We may engage in merger and acquisition activity from time to time and may not achieve the contemplated benefits from such activity.
We have engaged in recent merger and acquisition activity. Achieving the contemplated benefits from such activity may be subject to a number of significant challenges and uncertainties, including integration issues, coordination between geographically separate organizations, and competitive factors in the marketplace. We could also encounter unforeseen transaction and integration-related costs or other circumstances such as unforeseen liabilities or other issues. Any of these circumstances could result in increased costs, decreased revenue, decreased synergies and the diversion of management time and attention. If we are unable to achieve our objectives within the anticipated time frame, or at all, the expected benefits may not be realized fully or at all, or may take longer to realize than expected, which could have an adverse effect on our business, financial condition and results of operations, or cash flows. Any of these risks could harm our business. In addition, to facilitate these acquisitions or investments, we may seek additional equity or debt financing, which may not be available on terms favorable to us or at all, which may affect our ability to complete subsequent acquisitions or investments, and which may affect the risks of owning our common stock.
A system failure or breach of system or network security could delay or interrupt services to our customers or subject us to significant liability.
We have implemented security measures such as firewalls, virus protection, intrusion detection and access controls to address the risk of computer viruses and unauthorized access. However, there can be no assurances that any of these efforts will be adequate to prevent a system failure, accident or security breach, any of which could result in a material disruption to our business. In addition, substantial costs may be incurred to remedy the damages caused by any such disruptions.
Our software may not operate properly, which could damage our reputation, give rise to claims against us, or divert application of our resources from other purposes, any of which could harm our business and operating results.
Software development is time-consuming, expensive, and complex. Unforeseen difficulties can arise. We may encounter technical obstacles, and it is possible that we discover additional problems that prevent our applications from operating properly. If our systems do not function reliably or fail to achieve client expectations in terms of performance, clients could assert liability claims against us or attempt to cancel their contracts with us. This could damage our reputation and impair its ability to attract or retain clients.
Information services as complex as those we offer have in the past contained, and may in the future develop or contain, undetected defects, vulnerabilities, or errors. We cannot assure that material performance problems or defects in our services will not arise in the future. Errors may result from sources beyond our control, including the receipt, entry, or interpretation of patient information; interface of our services with legacy systems that we did not develop; or errors in data provided by third parties. It is challenging for us to test our software for all potential problems because it is difficult to simulate the wide variety of computing environments or treatment methodologies that its clients may deploy or rely upon. Therefore, despite testing, defects or errors may arise in our existing or new software or service processes following introduction to the market.
In light of this, defects, vulnerabilities, and errors and any failure by us to identify and address them could result in loss of revenue or market share; liability to clients, their patients, or others; failure to achieve market acceptance or expansion; diversion of development and management resources; delays in the introduction of new services; injury to our reputation; and increased service and maintenance costs. Defects, vulnerabilities, or errors in our software and service processes might discourage existing or potential clients from purchasing services from us. Correction of defects, vulnerabilities, or errors could prove to be impossible or impracticable. The costs incurred in correcting any defects, vulnerabilities, or errors or in responding to resulting claims or liability may be substantial and could adversely affect our operating results.
| 15 |
| Table of Contents |
If our services fail to provide accurate and timely information, or if its content or any other element of any of its services is associated with faulty clinical decisions or treatment, we could have liability to clients, clinicians, or patients, which could adversely affect its results of operations.
Some of our software, content, and services are used to support clinical decision-making by providers and deliver information about patient medical histories, treatment plans, medical conditions, and the use of particular medications. If our software, content, or services fail to provide accurate and timely information or it is associated with faulty clinical decisions or treatment, then clients, clinicians, or their patients could assert claims against it that could result in substantial costs to us, harm our reputation in the industry, and cause demand for our services to decline.
Our iCoreRX service provide healthcare professionals with access to clinical information, including information regarding particular medical conditions and the use of particular medications. If our content, or content we obtain from third parties, contains inaccuracies, or we introduce inaccuracies in the process of implementing third-party content, it is possible that patients, physicians, consumers, the providers of the third-party content, or others may sue us if they are harmed as a result of such inaccuracies. We cannot assure that our quality control procedures will be sufficient to ensure that there are no errors or omissions in particular content.
The assertion of such claims and ensuing litigation, regardless of its outcome, could result in substantial cost to us, divert management’s attention from operations, damage our reputation, and decrease market acceptance of our services. We attempt to limit by contract our liability for damages and requires that our clients assume responsibility for medical care. Despite these precautions, the allocations of responsibility and limitations of liability set forth in our contracts may not be enforceable, be binding upon patients, or otherwise protect us from liability for damages. Furthermore, general liability and errors and omissions insurance coverage may not continue to be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims against us. In addition, the insurer might disclaim coverage as to any future claim. One or more large claims could exceed our available insurance coverage. If any of these risks occur, they could materially adversely affect our business, financial condition, or results of operations.
Because we generally recognize revenues from our subscription service over the subscription term, a decrease in new subscriptions or renewals during a reporting period may not be immediately reflected in our operating results for that period.
We generally recognize revenues from customers ratably over the terms of their subscriptions. Net new annual contract value from new subscriptions, expanded contracts and contract renewals entered into during a period can generally be expected to generate revenues for the duration of the subscription term. As a result, a small portion of the revenues we report in each period are derived from the recognition of deferred revenues relating to subscriptions entered into during previous periods. Consequently, a decrease in new or renewed subscriptions in any single reporting period will have a limited impact on our revenues for that period. In addition, our ability to adjust our cost structure in the event of a decrease in new or renewed subscriptions may be limited.
Further, a decline in new subscriptions, expanded contracts or renewals in a given period may not be fully reflected in our revenues for that period, but they will negatively affect our revenues in future periods. Accordingly, the effect of significant downturns in sales and market acceptance of our services, and changes in our rate of renewals, may not be fully reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as revenues from new customers are generally recognized over the applicable subscription term. Additionally, due to the complexity of certain customer contracts, the actual revenue recognition treatment required under Accounting Standard Codification Topic 606, “Revenue from Contracts with Customers (“Topic 606”)” depends on contract-specific terms and may result in greater variability in revenues from period to period. In addition, a decrease in new subscriptions, expansion contracts or renewals in a reporting period may not have an immediate impact on billings for that period due to factors that may offset the decrease, such as an increase in billings duration, the dollar value of contracts with future start dates, or the dollar value of collections in the current period related to contracts with future start dates.
| 16 |
| Table of Contents |
Risks Related to Our Common Stock
The price of our common stock may be volatile.
The price of our common stock has been and is likely to continue to be volatile. Since our common stock began trading as iCoreConnect on August 28, 2023, our common stock has traded from a low price of $0.24 to a high price of $414.00. The market price for our common stock may be influenced by many factors, including the other risks described in this section of the prospectus. In addition, the stock markets in general, and the markets for former special purpose acquisition companies post-business combination businesses in particular, have experienced extreme volatility. This volatility can often be unrelated to the operating performance of the underlying business. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance.
We may incur significant costs from class action litigation due to the expected stock volatility.
The price of our common stock may fluctuate for many reasons, including as a result of public announcements regarding the progress of our business. When the market price of a stock has been volatile as our common stock, holders of that stock have occasionally brought securities class action litigation against the company that issued the stock. Additionally, there has recently been a general increase in litigation against companies that have recently completed a business combination with a special purpose acquisition company alleging fraud and other claims based on inaccurate or misleading disclosures. If any of our stockholders were to bring a lawsuit of this type against us, even if the lawsuit is without merit, we could incur substantial costs defending the lawsuit. Any such lawsuit could also divert the time and attention of management.
On May 20, 2025, we received a determination letter from the Nasdaq Hearings Panel that the Panel has determined to delist our common stock from Nasdaq. Suspension of trading of the common stock occurred at the opening of business on May 22, 2025.
As previously disclosed, we were notified by the Listing Qualifications Department of Nasdaq that we were not in compliance with certain listing requirements, including Listing Rule 5250(c)(1) since we had not yet filed our Form 10-K for the period ended December 31, 2024.
We requested a hearing with a Nasdaq Hearings Panel (“Panel”), which had the effect of staying any suspension or delisting action pending the conclusion of the hearings process. On April 24, 2025, we received notification from the Panel that it had granted an extension until May 15, 2025 to file our Form 10-K for the period ended December 31, 2024, and until June 30, 2025, to demonstrate compliance with all continued listing requirements for the Nasdaq Capital Market.
On May 20, 2025, we received a determination letter from the Panel informing us that the Panel has determined to delist our common stock from Nasdaq for failure by the Company to timely file its Form 10-K for the year ended December 31, 2024 and Form 10-Q for the quarter ended March 31, 2025. Suspension of trading of the common stock occurred at the opening of business on May 22, 2025.
The notification indicates that Nasdaq will effect the delisting by filing a Form 25 Notification of Delisting with the Securities and Exchange Commission after the applicable Nasdaq appeal and review periods have expired. We may appeal the delisting determination to the Nasdaq Listing and Hearing Review Council within the required 15 days from the date of the Panel’s decision. However, an appeal would not stay the suspension of the trading of our securities on Nasdaq.
Delisting from Nasdaq will adversely affect our ability to raise additional financing through the public or private sale of equity securities, may significantly affect the ability of investors to trade our securities and may negatively affect the value and liquidity of our common stock. Delisting can have other negative results, including the potential loss of employee confidence, the loss of institutional investors and general investors that will consider investing in our common stock, a reduction in the number of market makers in our common stock, a reduction in the availability of information concerning the trading prices and volume of our common stock, a reduction in the number of broker-dealers willing to execute trades in shares of our common stock or interest in business development opportunities. Further, we may become a “penny stock” in the future, which would make trading of our common stock more difficult.
We are an “emerging growth company” and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors, which may make it more difficult to compare our performance with other public companies.
We are an emerging growth company as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. To the extent we continue to take advantage of any of these exemptions, the information that we provide stockholders may be different than what is available with respect to other public companies. Investors may find our common stock less attractive because we will continue to rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for the common stock, and the stock price may be more volatile.
| 17 |
| Table of Contents |
An emerging growth company may elect to delay the adoption of new or revised accounting standards. Because we have made this election, Section 102(b)(2) of the JOBS Act allows us to delay adoption of new or revised accounting standards until those standards apply to non-public business entities. As a result, the financial statements contained in this prospectus and those that we will file in the future may not be comparable to companies that comply with public business entities revised accounting standards effective dates.
We are also a “smaller reporting company” as such term is defined in the Rule 12b-2 of the Exchange Act, meaning that the market value of our common stock held by non-affiliates plus any proposed aggregate amount of gross proceeds to us as a result of an offering is less than $700 million and our annual revenue is less than $100 million during the most recently completed fiscal year. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including exemption from compliance with the auditor attestation requirements of Section 404 and reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements. Investors could find our common stock less attractive because it may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the trading price may be more volatile.
Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our common stock.
We currently expect that securities research analysts will establish and publish their own periodic financial projections for our business. These projections may vary widely and may not accurately predict our results. Our stock price may decline if our actual results do not match the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on us downgrade our stock or publishes inaccurate or unfavorable research about our business, our stock price could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our stock price or trading volume could decline. While we expect research analyst coverage, if no analysts commence coverage of us, the trading price and volume for our common stock could be adversely affected.
Delaware law and provisions in our certificate of incorporation and bylaws could make a takeover proposal more difficult.
Our organizational documents are governed by Delaware law. Certain provisions of Delaware law and of our certificate of incorporation and bylaws could discourage, delay, defer or prevent a merger, tender offer, proxy contest or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares of the common stock held by our stockholders. These provisions include the ability of the Board to designate the terms of and issue new series of preference shares, supermajority voting requirements to amend certain provisions of our certificate of incorporation, and a prohibition on stockholder actions by written consent, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
These anti-takeover provisions as well as certain provisions of Delaware law could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. If prospective takeovers are not consummated for any reason, we may experience negative reactions from the financial markets, including negative impacts on the price of the common stock. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions that our stockholders desire.
| 18 |
| Table of Contents |
Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings and the federal district courts as the sole and exclusive forum for other types of actions and proceedings, in each case, that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with us or our directors, officers or other employees or increase our stockholders’ costs in bringing such a claim.
Our certificate of incorporation provides that, unless we consents to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company; (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or employee of the Company to the Company or its stockholders; (iii) any action asserting a claim against the Company or any director, officer or employee arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws; or (iv) any action asserting a claim against the Company or any director, officer or employee of the Company governed by the internal affairs doctrine, and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to (A) the personal jurisdiction of the state and federal courts within Delaware and (B) service of process on such stockholder’s counsel. The provision described in the immediately preceding sentence will not apply to (i) suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction and (ii) any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder, for which the federal courts will be the exclusive forum. Any person or entity purchasing or otherwise acquiring an interest in any shares of our capital stock will be deemed to have notice of and to have consented to the forum provisions in our certificate of incorporation. These choice-of-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that he, she or it believes to be favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers, or other employees and may result in increased litigation costs for our stockholders. We note that there is uncertainty as to whether a court would enforce these provisions and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Alternatively, if a court were to find these provisions of our certificate of incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and the Board.
The terms of the convertible notes we have issued may impose additional challenges on our ability to raise capital.
As of December 31, 2024, we have outstanding convertible notes in aggregate principal and interest amounts of $5,797,850 that are convertible into common stock at an average conversion price of $13.56. The additional shares of common stock issued upon the conversion of the convertible notes will result in dilution to the then existing holders of our common stock and increase the number of shares eligible for resale in the public market. Sales of a substantial number of such shares in the public market could adversely affect the market price of our common stock.
| 19 |
| Table of Contents |
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Risk Management and Strategy
We utilize a Cloud-only architecture which enables us to reduce risk by leveraging the scalability, high availability, and advanced security features of cloud platforms, thereby minimizing the potential for system downtime and data breaches while ensuring seamless disaster recovery options.
All 3rd party vendors' security policies are reviewed and updated as part of our annual Security Risk Assessment. Access to sensitive data is strictly regulated and provided on a need to know basis. Access is granted for the express purpose of assisting our customers with technical and training issues related to the use of our SaaS products; or for the purpose of research, design and development of product related features and bugfixes.
Risk management in software development involves
The Company’s’ Cybersecurity Policies are updated annually and reviewed by Independent
While there are significant threats of all types in the modern connected world, studies show that phishing attacks and social engineering through email and other electronic means are of high concern. With the vast majority (some say as high as 95%) of such attacks originating via email, employee education on how to identify and handle suspicious email and other forms of communication is critical in protecting the data and infrastructure.
To date, we have not experienced any cybersecurity incidents that have
Governance
The Board is
We engaged an outside
| 20 |
| Table of Contents |
Item 2. Properties.
The Company operates from a 7,650 square foot headquarters located in Ocoee, Florida which has been leased on a six year and one month lease beginning January 2022, with an optional five-year renewal term. In April 2023, the Company entered into a lease agreement with its existing landlord of its Florida location for a lease of an additional 2,295 square feet of space beginning at the earlier of June 1, 2023 or completion of build out for a five year term. This additional lease space was terminated by mutual agreement and returned to the landlord in April 2025.
Item 3. Legal Proceedings
On February 21, 2023, the Company received a notice under section 21 of Indian Arbitration and Conciliation Act, 1996 related to a dispute pursuant to a contract between the Company and a service provider, pursuant to which the service provider has asserted the Company has violated the terms of the contract and has claimed damages of approximately $635,000. The Company is evaluating the claims asserted against it and intends to defend itself vigorously in these proceedings; however, there can be no assurances that it will be successful in its efforts.
On March 10, 2025, the Company received notice from PIGI Solutions, LLC (“PIGI”) that PIGI was exercising its purported right as a secured creditor under the Uniform Commercial Code (Del. UCC § 9-613) to conduct a public auction of substantially all of the Company’s personal property. PIGI has indicated that the closing of the auction is to occur on or after May 9, 2025. PIGI claims the Company owes $2,434,243 in principal and interest, which the Company disputes. The disputed amounts arise out of a finder’s fee agreement discussed below. On April 4, 2025, the Company and its wholly-owned subsidiary, iCore Midco Inc., a Nevada corporation (“Midco”) filed a complaint in the United States District Court Middle District of Florida initiating a civil action against PIGI and John Schneller (the “Defendants”). In the complaint, the Company and Midco assert, among other claims, that the Defendants fraudulently induced Midco into a finder’s fee agreement, under which PIGI allegedly acted as an unregistered broker-dealer, and that the finder’s fee agreement is voidable under Section 29(b) of the Securities Exchange Act of 1934. The relief requested includes, among other things, rescission of the finder’s fee agreement and related loan documents, injunctive relief against PIGI taking any further action to enforce the finder’s fee agreement, and monetary damages.
On May 6, 2025, the Company, Midco, the Defendants, and the bidder of the assets entered into a Settlement and Mutual Release Agreement (the “Settlement Agreement”) pursuant to which the parties agreed that the Company will have the right until May 30, 2025, to effectively terminate the auction and retain control of the Company’s assets by making a payment of $3,099,747, which includes the satisfaction of amounts owed to PIGI and the payment of certain expenses related to the auction, and a payment of $50,000 to the bidder of the assets. Upon the payment of the foregoing amounts, the Company and Midco have agreed to dismiss the above lawsuit with prejudice and the parties have agreed to mutual releases.
Item 4. Mine Safety Disclosures.
Not applicable.
| 21 |
| Table of Contents |
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock was listed on the NASDAQ Capital Market under the symbol “ICCT” until May 22, 2205 and has been listed on the OTC market since May 22, 2025.
Holders
As of May 29, 2025, there were 266 holders of record of our common stock, with 4,877,080 shares of our common stock issued and outstanding.
Dividend Policy
We have never declared or paid dividends on our Common Stock since our formation, and we do not anticipate paying dividends in the foreseeable future. The payment of dividends in the future will be contingent upon our revenues and earnings, if any, capital requirements and general financial condition. We currently intend to retain earnings, if any, to finance the growth and development of our business. Payment of future dividends, if any, will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in any financing instruments, provisions of applicable law and other factors the board deems relevant.
Securities Authorized for Issuance under Equity Compensation Plans
The information required by this item will be incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A.
Sale of Unregistered Securities
All information related to equity securities sold by us during the period covered by this report that were not registered under the Securities Act have been included in our Form 10-Q filings or in a Form 8-K filing.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the year ended December 31, 2024.
| 22 |
| Table of Contents |
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our restated financial condition and results of operations should be read in conjunction with our financial statements and the notes to those financial statements included elsewhere in this annual report. This discussion contains forward-looking statements, which are based on our assumptions about the future of our business. Our actual results will likely differ materially from those contained in the forward-looking statements. Please read “Cautionary Note Regarding Forward-Looking Statements” included at the beginning of this annual report for additional information.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:
| · | Overview. Discussion of our business and overall analysis of financial and other highlights affecting the company in order to provide context for the remainder of MD&A. |
| · | Critical Accounting Estimates. Accounting estimates that we believe are most important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts. |
| · | Results of Operations. An analysis of our financial results are presented to compare 2024 to 2023. We also provide a discussion of our Liquidity and Capital Resource position and usage. |
Overview
We are a cloud-based software and technology company focused on increasing workflow productivity and customer profitability through our enterprise platform of applications and services.
On January 5, 2023, the Company entered into a Merger Agreement and Plan of Reorganization (the “Merger Agreement”), by and among the Company, iCoreConnect, Inc.., a Nevada corporation (“Old iCore”), and FG Merger Sub Inc., a Nevada corporation and a direct, wholly-owned subsidiary of the Company (“Merger Sub”). The Merger Agreement provided that, among other things, at the closing (the “Closing”) of the transactions contemplated by the Merger Agreement, Merger Sub will merge with and into Old iCore (the “Merger”), with Old iCore surviving as a wholly-owned subsidiary of the Company. In connection with the Merger, the Company changed its name from FG Merger Corp. to “iCoreConnect Inc.” The Merger and the other transactions contemplated by the Merger Agreement are hereinafter referred to as the “Business Combination.” On August 25, 2023, Old iCore and FGMC consummated the Business Combination, with Old iCore surviving as a wholly owned subsidiary of FGMC.
During 2024 we developed our newest products iCoreVerifyPro, iCorePay and iCoreAcademy.
iCoreVerifyPro is a comprehensive, full-service insurance verification solution. This service is designed to handle the entire insurance verification process on behalf of dental practices, ensuring that all insurance benefits are accurately entered directly into patient charts. This allows dental staff to focus on critical tasks, improve patient experience, and help patients maximize their insurance benefits. iCoreVerifyPro is part of a tiered offering that includes:
| · | iCoreVerify: Provides automated insurance verifications, handling approximately 80-90% of verifications through automation. |
| · | iCoreVerify+: Combines automation with concierge assistance, where a U.S.-based team addresses any outlying manual verifications, achieving 100% verification coverage. |
| · | iCoreVerifyPro: Offers a dedicated U.S.-based professional who manages all verifications, entering insurance benefits directly into patient charts, ensuring comprehensive and accurate insurance information. |
By utilizing iCoreVerifyPro, dental practices can eliminate the need for staff to perform manual insurance verifications, thereby enhancing efficiency, reducing errors, and improving overall patient satisfaction.
| 23 |
| Table of Contents |
iCorePay is a state-of-the-art patient payment and billing platform designed to streamline the billing process for healthcare providers while enhancing the patient payment experience. The key features of iCorePay:
| · | Simplified Billing Procedures: Allows healthcare providers to securely create and send HIPAA-compliant billing statements, reducing administrative burdens and potential errors. |
| · | Flexible Payment Options: Supports a wide variety of digital payment methods, including major digital wallets like Google Pay, Apple Pay, Venmo, and PayPal, enabling patients to pay using their preferred platforms. |
| · | Enhanced Revenue Cycle Management: Accelerates payment processes, leading to quicker collections and improved cash flow for practices. Users have reported significant increases in collections and reductions in costs after implementing iCorePay. |
| · | Improved Patient Experience: Offers an easy-to-use interface that allows patients to receive bills directly on their preferred devices and pay promptly, leading to higher satisfaction and engagement. |
By integrating iCorePay, healthcare practices can modernize their billing systems, reduce operational costs, and provide a seamless payment experience for their patients.
iCoreAcademy is a patient education video library designed to enhance patient understanding and improve treatment plan acceptance. It offers over 100 high-quality 4K, 3D educational videos covering a wide range of dental topics, including oral surgery, implants, pediatrics, and more. These videos are available in both English and Spanish, ensuring accessibility for a diverse patient population. The key features of iCoreAcademy:
| · | Comprehensive Video Library: Provides detailed explanations of dental conditions and procedures, aiding patients in making informed decisions about their oral health. |
| · | Enhanced Patient Understanding: Simplifies complex dental topics, reducing patient anxiety and improving satisfaction. |
| · | Flexible Access: Allows patients to view educational content both in-office and at home via text or email links, facilitating continuous learning and support. |
| · | Practice Branding: Offers customization options to include practice logos in videos, reinforcing brand identity and trust. |
By integrating iCoreAcademy into their practice, dental professionals can effectively educate patients, leading to higher treatment plan acceptance rates and improved overall patient outcomes.
| 24 |
| Table of Contents |
SaaS Offerings
The Company currently markets secure Health Insurance Portability and Accountability Act (HIPAA) compliant cloud-based software as a service (SaaS)offerings under the names of iCoreRx, iCorePDMP, iCoreEPCS, iCoreVerify, iCoreHuddle, iCoreHuddle+, iCoreCodeGenius, iCoreExchange, iCoreCloud, iCorePay, iCoreSecure, iCoreClaims and iCoreIT. The Company’s software is sold under annual recurring revenue subscriptions.
Managed IT Services (MSP and MSaaS)
The trend in IT Services companies for over a decade has been to move away from a “Break/Fix '' model to a “Managed Service Provider (MSP)” model with recurring revenue. This group of assets were sold in October 2024.
Financing
We are currently funding our business capital requirements through revenues from product sales and services and sales of our common stock and debt arrangements. While we intend to seek additional funding, if revenue increases to a point where we are able to sustain ourselves and increase our budget to match our growth needs, we may significantly reduce the amount of investment capital we seek. The amount of funds raised, and revenue generated, if any, will determine how aggressively we can grow and what additional projects we will be able to undertake. No assurance can be given that we will be able to raise additional capital when needed or at all, or that such capital, if available, will be on terms acceptable to us. If we are unable to, or do not raise additional capital in the near future or if our revenue does not begin to grow as we expect, we will have to curtail our spending and downsize our operations.
| 25 |
| Table of Contents |
Critical Accounting Estimates
Our significant accounting policies are disclosed in Note 3 to the consolidated financial statements. The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the U.S., or GAAP, requires our management to make judgments, assumptions and estimates that affect the amounts of revenue, expenses, income, assets and liabilities, reported in our consolidated financial statements and accompanying notes. Understanding our accounting policies and the extent to which our management uses judgment, assumptions and estimates in applying these policies is integral to understanding our financial statements.
We have identified the following accounting policies as those that require significant judgments, assumptions and estimates and that have a significant impact on our financial condition and results of operations. These policies are considered critical because they may result in fluctuations in our reported results from period to period due to the significant judgments, estimates and assumptions about highly complex and inherently uncertain matters and because the use of different judgments, assumptions or estimates could have a material impact on our financial condition or results of operations. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as appropriate based on changing conditions.
Software Development Capitalization and Amortization
We account for software development costs, including costs to develop software products or the software component of products to be marketed to external users.
In accordance with ASC 350, Internal-Use-Software, research and planning phase costs are expensed as incurred and development phase costs including direct materials and services, payroll and benefits and interest costs are capitalized.
We have determined that technological feasibility for our products to be marketed to external users was reached before the development of those products and, as a result, the development costs and related acquisition costs after the establishment of technological feasibility were capitalized as incurred. Capitalized costs for software to be marketed to external users are amortized based on current and projected future revenue for each product with an annual minimum cost equal to the straight-line amortization of the costs over three years.
Stock-Based Compensation
The Company estimates the fair value of each option award on the date of grant using a Black-Scholes option pricing model that uses the following assumptions. The Company estimates the fair value of its shares of restricted Common Stock using the closing stock price of its common stock on the date of the award. The Company estimates the volatility of its Common Stock at the date of grant based on its historical stock prices. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. The Company uses the risk-free interest rate of the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. The Company has never paid cash dividends on its Common Stock and does not anticipate paying any cash dividends in the foreseeable future.
Long-Lived Assets and Goodwill
The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35, Property, Plant and Equipment, Impairment or Disposal of Long-lived Assets. This accounting standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. As part of its impairment assessment in 2024 the Company determined that the carrying value of an intangible asset for customer list and its acquired softwares were less than their fair value and therefore brought the carrying value down to the assets fair value.
The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles - Goodwill and Other. Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed. ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. As of December 31, 2024 there is no impairment of the Company’s Goodwill.
| 26 |
| Table of Contents |
Results of Operations
The following table sets forth our selected financial data for the periods indicated below:
|
| For Years Ended |
| |||||
|
| December 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Revenue |
| $ | 10,746,466 |
|
| $ | 8,151,587 |
|
Cost of sales |
|
| 2,496,486 |
|
|
| 2,029,145 |
|
Gross profit |
|
| 8,249,980 |
|
|
| 6,122,442 |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 20,754,205 |
|
|
| 15,124,081 |
|
Depreciation and amortization |
|
| 3,002,585 |
|
|
| 1,274,963 |
|
Total operating expenses |
|
| 23,756,790 |
|
|
| 16,399,044 |
|
Loss from operations |
|
| (15,506,810 | ) |
|
| (10,276,602 | ) |
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
Interest expense |
|
| (1,428,459 | ) |
|
| (1,109,388 | ) |
Financing costs |
|
| (1,835,077 | ) |
|
| (1,287,916 | ) |
Change in fair value of embedded derivative instruments |
|
| (2,562,027 | ) |
|
| - |
|
Change in fair value of warrants |
|
| 1,616,972 |
|
|
| - |
|
Other income (expense) |
|
| (439,622 | ) |
|
| (459,965 | ) |
Impairment of intangible asset |
|
| (6,631,862 | ) |
|
| (105,676 | ) |
Gain on sale of assets |
|
| 980,197 |
|
|
| - |
|
Change in fair value of forward purchase agreement |
|
| (5,350,129 | ) |
|
| (2,312,116 |
|
Total other income (expense) |
|
| (15,650,007 | ) |
|
| (5,275,061 | ) |
|
|
|
|
|
|
|
|
|
Net loss |
|
| (31,156,817 | ) |
|
| (15,551,663 | ) |
Preferred dividends |
|
| (2,044,866 | ) |
|
| (368,699 | ) |
Dividends to Common Stockholders |
|
| - |
|
|
| - |
|
Net loss attributable to Common Stockholders |
| $ | (33,201,683 | ) |
| $ | (15,920,362 | ) |
Year ended December 31, 2024 compared to the year ended December 31, 2023
Revenues. Net revenues increased 32% or $2,594,879 to $10,746,466 in 2024 from $8,151,587 in 2023. Revenue growth was attributed to strong growth in the number of recurring revenue subscribers both in terms of new customers as well as with new and existing product uptake along with price increases on existing customer base subscription prices. Recurring revenues increased $2,793,302 year on year while non-recurring revenues decreased $(198,423) flat year on year, reflecting the divesture of Managed IT Services assets in Q4 2024.
Cost of sales. Cost of sales increased 23% or $467,341 to $2,496,486 in 2024 from $2,029,145 in 2023. The increase in cost of sales is due to higher one-time costs associated with bringing on larger scale recurring revenue enterprise level customers coupled with higher costs associated with delivering non-recurring revenues during the year.
Selling, general and administrative expenses. Selling, general and administrative (“SGA”) expenses increased 37% or $5,630,124 to $20,754,205 in 2024 from $15,124,081 in 2023. The increase in SGA is largely driven by a one-time non-recurring $4,525,811 charge related to stock based compensation which accounted for 80% of the increase year on year coupled with an increase in salaries and wages of approximately $2,400,000 associated with the additional head count brought in with the acquisition of assets in January 2024. These costs were offset by a decrease in professional fees of approximately $2,200,000 with all other line expenses remaining relatively flat.
| 27 |
| Table of Contents |
Depreciation and amortization expenses. Depreciation and amortization expenses increased $1,727,622 or 136% to $3,002,585 in 2024 from $1,274,963 in 2023. The increase in expenses is due to several additions being added to intangible assets related to the asset acquisitions completed in January 2024 along with a moderate increase in capitalized software in 2024 compared to 2023.
Interest expense. Interest expense increased $319,071 or 29% to $1,428,459 in 2024 from $1,109,388 in 2023. The increase in interest expense is attributable to the increase in total debt outstanding in 2024 compared to 2023 which saw some of the Company’s debt equitized as part of its Business Combination thereby reducing the overall interest costs in that year.
Other income (expense). Other expenses decreased $20,343 or 4% to $439,622 in 2024 from $459,965 in 2023. The decrease is related to the charge for a make whole provision the Company entered into in 2023 with one of its lenders who converted their debt into common stock and provided the lender a make whole from the face value of $10.00 to the price they ultimately sold the common stock.
Financing costs. Financing costs increased $547,161 or 42% to $1,835,077 in 2024 from $1,287,916 in 2023. The increase in financing fees was a result of the Company issuing higher amounts of convertible debt with features including warrants and inducement shares in 2024 than in 2023.
Change in fair value of embedded derivative instruments. Change in fair value of embedded derivative instruments increased to $2,562,027 or 100% from nil in 2023. The expense relates to the changes in fair value of the Company’s derivative liabilities associated with its convertible debt which is bifurcated and valued at each reporting period.
Change in fair value of warrants. Change in fair value of warrants incurred a gain of $1,616,972 or 100% from nil in 2023. The gain relates to the changes in fair value of the Company’s fair value of its warrants associated with its convertible debt which is bifurcated and valued at each reporting period.
Change in fair value of forward purchase agreement. Change in fair value of forward purchase agreement expenses increased by $3,038,012 or 131% to $5,350,128 in 2024 from $2,312,116 in 2023. The expense relates to the derived fair value change of the shares underlying the forward purchase agreement market from the balance sheet date to estimated maturity date in February 2025.
Gain on sale of assets. Gain on sale of assets increased to $980,197 in 2024 from nil in 2023 from the sale of company’s Managed IT Services (MSP and MSaaS) contracts.
Impairment on intangible asset. The Company incurred $6,631,862 in impairment expense in 2024 consisting of $5,723,862 in impairment on the carrying value of its acquired technology purchased in 2024 and $908,000 on the carrying value of its customer lists purchased in 2023 in comparison to $105,676 expense in 2023 related to the carrying value of a customer list purchased in 2022 which was in excess of its fair value. The impairment charges are largely related to the Company’s continued decline in financial stability and lack of capital resources to further develop and market its technology and products. The Company has experienced a significant decline in market capitalization during 2024, indicating a decline in the value of its assets. Based upon these factors, the Company determined that the carrying value of its asset required adjustment.
Preferred dividends. Preferred dividends increased by $1,676,167 or 455% to $2,044,866 in 2024 from $368,699 in 2023 reflecting the full year accrual of dividends in 2024 versus only four months in 2023. The preferred dividend relates to dividends accrued for the Company’s issued and outstanding Series A Preferred Stock excluding Series A Preferred Stock held by the sponsor of the SPAC transaction and the shares underlying the Forward Purchase Agreement.
| 28 |
| Table of Contents |
GOING CONCERN AND LIQUIDITY
The following table sets forth our selected financial data for the periods indicated below and the percentage dollar increase (decrease) of such items from period to period:
|
| December 31, |
|
| December 31, |
|
| % Incr/ |
| |||
Balance Sheet Data |
| 2024 |
|
| 2023 |
|
| (Decr) |
| |||
Total Current Assets |
| $ | 1,183,238 |
|
| $ | 3,508,325 |
|
|
| (66 | )% |
Total Current Liabilities |
|
| 12,434,882 |
|
|
| 8,876,310 |
|
|
| 40 | % |
Working capital (deficit) |
| $ | (11,251,644 | ) |
| $ | (5,367,985 | ) |
|
| (110 | )% |
Deferred Revenue |
| $ | 138,053 |
|
| $ | 119,598 |
|
|
| 15 | % |
Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, contractual obligations and other commitments. We assess liquidity in terms of our cash flows from operations and their sufficiency to fund our operating and investing activities. As of December 31, 2024, we had cash totaling $202,177.
We expect our capital expenditures and working capital requirements to increase moderately in the near future, as we continue to innovate with new products, add enhancements and increase our sales force. Over the next two to three years, we expect to spend in excess of $2,000,000 on software development.
We will need to raise additional funds in the immediate short-term, including through the issuance of equity, equity-related or debt securities or by obtaining additional credit from financial institutions to fund, together with our principal sources of liquidity, ongoing costs, such as software development, expansion of our sales force, and new strategic investments. If such financings are not available, or if the terms of such financings are less desirable than we expect, we may be forced to take actions to reduce our capital or operating expenditures, including by not seeking potential acquisition opportunities, eliminating redundancies, or reducing or delaying our product development road map, which may adversely affect our business, operating results, financial condition and prospects. Further, any future debt or equity financings may be dilutive to our current stockholders.
The following table summarizes the impact of operating, investing and financing activities on our cash flows for the years ended December 31, 2024 and 2023.
|
| Year Ended |
| |||||
|
| December 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Net cash used in operating activities |
| $ | (3,230,688 | ) |
| $ | (8,824,972 | ) |
Net cash used in investing activities |
|
| (539,416 | ) |
|
| (10,214,715 | ) |
Net cash provided by financing activities |
|
| 2,752,923 |
|
|
| 20,062,892 |
|
Net (decrease) increase in cash |
|
| (1,017,181 | ) |
|
| 1,023,205 |
|
Cash at the beginning of the year |
|
| 1,219,358 |
|
|
| 196,153 |
|
Cash at the end of the year |
| $ | 202,177 |
|
| $ | 1,219,358 |
|
The primary factors that influence our liquidity include, but are not limited to, the amount and timing of our revenues, cash collections from our clients, investments in software development, and ongoing capital raise efforts.
| 29 |
| Table of Contents |
Operating Activities: Net cash required by operating activities decreased $5,594,284 or 63% to $3,230,688 in 2024 from $8,824,972 in 2023. The increase in cash utilized by operating activities is primarily attributable to the larger net loss year on year of $33,201,683 offset with non-cash add backs of $12,353,828 and $4,962,009 in working capital changes year on year, respectively. Future spending on operating activities are expected to be funded by the revenues realized by the Company, the issuance of notes payable and the sale of additional shares of either common stock or Series A Preferred Stock.
Investing Activities: Net cash used by investing activities decreased $9,675,299 or 95% to $539,416 in 2024 from $10,214,715 in 2023. The decrease in cash utilized by investing activities was primarily due to the Company entering into a Forward Purchase Agreement which accounted for $7,796,672 of the net change along with $1,559,144 used in the asset acquisition of Preferred Dental Services. Future spending on investing activities is expected to be funded by the issuance of notes payable and the sale of additional shares of either common stock or Series A Preferred Stock.
Financing Activities: Net cash provided by financing activities decreased $17,309,969 or 86% to $2,752,923 in 2024 from $20,062,892 in 2023. The Company raised $4,134,392 less in debt, raised $86,603 less in common stock and raised $18,312,897 less in Series A Preferred Stock than in 2023 coupled with the offset by $7,692,383 in merger transaction costs in 2023.
U.S. GAAP requires management to assess a company’s ability to continue as a going concern within one year from the financial statement issuance and to provide related note disclosures in certain circumstances.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
For the fiscal year period ended December 31, 2024, the Company generated an operating loss of $15,506,810. In addition, the Company has an accumulated deficit, and net working capital deficit of $148,240,441 and $11,251,644. The Company’s activities were primarily financed through private placements of equity securities and issuance of debt. The Company will be required to raise additional capital in the immediate short-term through the issuance of debt and/or equity securities to fund its operations. The Company is reliant on future fundraising to finance operations in the near future. The financing may not be available on terms satisfactory to the Company, if at all. Considering these matters, there is substantial doubt that the Company will be able to continue as a going concern.
| 30 |
| Table of Contents |
Our material cash requirements from known contractual and other obligations primarily relate to our content, debt and lease obligations. As of December 31, 2024, the expected timing of those payments are as follows:
|
| Total |
|
| Next 12 |
|
| Beyond 12 Months |
| |||
Debt (1) |
| $ | 7,912,802 |
|
| $ | 5,934,416 |
|
| $ | 1,978,386 |
|
Operating lease obligations (2) |
|
| 939,053 |
|
|
| 299,284 |
|
|
| 639,769 |
|
Total |
| $ | 8,851,855 |
|
| $ | 6,233,700 |
|
| $ | 2,618,155 |
|
| (1) | Debt obligations include our Notes and Notes to Related Party consisting of principal and interest payments. See Note 8 Debt and Note 13 Related Party in the accompanying notes to our financial statements for further details. |
|
|
|
| (2) | See Note 11 Commitments and Contingencies in the accompanying notes to our financial statements for further details regarding leases. |
Restatement of Previously Issued Financial Statements (Unaudited)
Our audit committee concluded, after consultation with management, that our previously issued unaudited financial statements for the periods ended September 30, 2024, included in the Company’s Quarterly Reports of Form 10-Q for the period ended September 30, 2024, should no longer be relied upon as a result of the change in accounting for debt with embedded derivatives. The Company valued the warrant and conversion features using a Black Scholes model and recognized the value of the warrants as equity and expense over the term of the loan and had expensed the value of the conversion feature and increased the value of its debt over the term of the loan. The Company concluded that conversion features and warrants should have been recognized as embedded derivatives, bifurcated from the host instruments and presented and valued at fair value starting in September 2024. The adjustments resulting therein, change to current liabilities, paid-in-capital, other expenses – finance fee, other expenses – change in fair value of warrants, other expenses – change in fair value of embedded derivatives, net loss, and net loss attributable to common stockholders that we previously reported, but has no impact on previously reported cash. For further information including the impact of this adjustment, please see Notes 16 to the audited consolidated financial statements included in this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
| 31 |
| Table of Contents |
Item 8. Financial Statements and Supplementary Data .
A list of financial statements filed herewith is contained and is set forth on the financial statements that immediately follow this page of this Report and is incorporated by reference herein. The financial statement schedules have been omitted because they are not required, not applicable or the information has been included in the Exhibit Index beginning on Part IV of this Annual Report on Form 10-K and are incorporated herein by reference.
|
| Page |
|
|
|
|
|
FINANCIAL STATEMENTS - AS OF DECEMBER 31, 2024 AND 2023 |
|
|
|
|
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID |
| F-1 |
|
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2024 AND 2023 |
| F-2 |
|
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 |
| F-3 |
|
| F-4 |
| |
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 |
| F-5 |
|
| F-6 |
|
| 32 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
iCoreConnect, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of iCoreConnect, Inc. (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 3, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum LLP
We have served as the Company’s auditor since 2021.
May 29, 2025
| F-1 |
| Table of Contents |
iCoreConnect Inc.
CONSOLIDATED BALANCE SHEETS
|
| As of |
| |||||
|
| December 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
ASSETS |
|
|
|
|
|
| ||
Cash |
| $ |
|
| $ |
| ||
Accounts receivable, net |
|
|
|
|
|
| ||
Prepaid expenses and other current assets |
|
|
|
|
|
| ||
Total current assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
|
|
|
| ||
Right of use lease asset - operating |
|
|
|
|
|
| ||
Software development costs, net |
|
|
|
|
|
| ||
Acquired technology, net |
|
|
|
|
|
| ||
Customer relationships, net |
|
|
|
|
|
| ||
Forward purchase agreement |
|
|
|
|
|
| ||
Goodwill |
|
|
|
|
|
| ||
Total long-term assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ |
|
| $ |
| ||
Operating lease liability, current portion |
|
|
|
|
|
| ||
Warrant and embedded derivative liability |
|
|
|
|
|
| ||
Notes payable, current portion |
|
|
|
|
|
| ||
Related party notes payable |
|
|
|
|
|
| ||
Deferred revenue |
|
|
|
|
|
| ||
Total current liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Warrant and embedded derivative liability, net current |
|
| |
|
|
| |
|
Long-term debt, net of current maturities |
|
|
|
|
|
| ||
Related party notes payable, net of current maturities |
|
|
|
|
|
| ||
Operating lease liability, net of current portion |
|
|
|
|
|
| ||
Total long-term liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 11) |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Preferred Stock par value $ |
|
|
|
|
|
| ||
Common Stock par value $ |
|
|
|
|
|
| ||
Additional paid-in-capital |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUIITY(DEFICIT) |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements
| F-2 |
| Table of Contents |
iCoreConnect Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| For the Years Ended |
| |||||
|
| December 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Revenue |
| $ |
|
| $ |
| ||
Cost of sales |
|
|
|
|
|
| ||
Gross profit |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
| ||
Depreciation and amortization |
|
|
|
|
|
| ||
Total operating expenses |
|
|
|
|
|
| ||
Loss from operations |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Other expense |
|
|
|
|
|
|
|
|
Interest expense |
|
| ( | ) |
|
| ( | ) |
Finance charges |
|
| ( | ) |
|
| ( | ) |
Change in fair value of embedded derivative instruments |
|
| ( | ) |
|
|
| |
Change in fair value of warrants |
|
|
|
|
|
| ||
Change in fair value of forward purchase agreement |
|
| ( | ) |
|
| ( | ) |
Gain on sale of assets |
|
| |
|
|
| |
|
Impairment of intangible asset |
|
| ( | ) |
|
| ( | ) |
Other expense |
|
| ( | ) |
|
| ( | ) |
Total other expense |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Net loss |
|
| ( | ) |
|
| ( | ) |
Dividends to Common Stock shareholders |
|
|
|
|
|
| ||
Preferred dividends |
|
| ( | ) |
|
| ( | ) |
Net loss attributable to common stockholders |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Weighted average number of shares, basic and diluted |
|
|
|
|
|
| ||
The accompanying notes are an integral part of these consolidated financial statements
| F-3 |
| Table of Contents |
iCoreConnect Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2024 and 2023
|
| Common stock |
|
| Convertible Preferred Stock |
|
| Additional Paid In |
|
| Accumulated |
|
| Total Stockholders' Equity |
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| (Deficit) |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balances at January 1, 2023 |
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Retroactive application of reverse capitalization (Note 2) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |
Balances at January 1, 2023 |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||
Stock issued for cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Origination fee in convertible debt agreement |
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Stock issued for conversion of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Issuance of Series A Convertible Preferred Stock on merger |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Common stock issued on exercise of options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ( | ) | ||
Conversion of Series A Convertible Preferred Stock to Common Stock |
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| ||||
Series A Preferred Stock issued for cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock issued for purchase of assets of Preferred Dental |
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Modification of warrant agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Origination fee on equity line of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock issued for the conversion of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ( | ) | ||
Preferred stock issued on exercise of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| - |
| ||
Merger transaction costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Balance at December 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| ||||||
Balances at January 1, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||||
Stock issued for cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock issued for inducement of STRATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Origination fee in convertible debt agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock issued for conversion of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock issued for purchase of FeatherPay |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock issued for the purchase of Verifi Dental |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock issued for the purchase of Teamworx |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock issued for the purchase of Healthcare Circle of Excellence |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock issued for dividend in kind |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common stock issued on exercise of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
| |||
Conversion of Series A Convertible Preferred Stock to Common Stock |
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| ||||
Stock compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock issued for rounding on reverse stock split |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Balance at December 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
The accompanying notes are an integral part of these consolidated financial statements
| F-4 |
| Table of Contents |
iCoreConnect Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| For the years ended |
| |||||
|
| December 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation expense |
|
|
|
|
|
| ||
Amortization expense |
|
|
|
|
|
| ||
Finance charges |
|
|
|
|
|
| ||
Change in fair value of embedded derivative instruments |
|
| ( | ) |
|
| |
|
Change in fair value of warrants |
|
| |
|
|
| |
|
Bad debt expense |
|
|
|
|
|
| ||
Change in value of forward purchase agreement |
|
|
|
|
|
| ||
Stock compensation expense |
|
|
|
|
|
| ||
Loss (gain) on sale of assets |
|
| ( | ) |
|
| ( | ) |
Dividend expense |
|
|
|
|
|
| ||
Non-cash interest expense |
|
|
|
|
|
| ||
Impairment of intangible assets |
|
|
|
|
|
| ||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| ( | ) |
|
| ( | ) |
Prepaid expenses and other current assets |
|
|
|
|
| ( | ) | |
Right of use asset, net of lease liability |
|
|
|
|
|
| ||
Accounts payable and accrued expenses |
|
|
|
|
|
| ||
Warrant and embedded derivative liability |
|
|
|
|
|
| ||
Deferred revenue |
|
|
|
|
|
| ||
NET CASH USED IN OPERATING ACTIVITIES |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Cash portion of consideration paid to acquire Preferred Dental |
|
|
|
|
|
| ( | ) |
Cash portion of consideration paid to acquire FeatherPay, LLC |
|
| ( | ) |
|
|
| |
Cash portion of consideration paid to acquire Verifi Dental LLC |
|
| ( | ) |
|
|
| |
Cash portion of consideration paid to acquire Teamworx, LLC |
|
|
|
|
|
|
| |
Investment in forward purchase agreement |
|
|
|
|
| ( | ) | |
Proceeds from sale of assets |
|
|
|
|
|
| ||
Purchases of capital assets |
|
|
|
|
| ( | ) | |
Additions to capitalized software |
|
| ( | ) |
|
| ( | ) |
NET CASH USED IN INVESTING ACTIVITIES |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITES |
|
|
|
|
|
|
|
|
Net proceeds from debt |
|
|
|
|
|
| ||
Payments on debt |
|
| ( | ) |
|
| ( | ) |
Proceeds from issuance of common stock |
|
|
|
|
|
| ||
Conversion of convertible debt into common stock |
|
|
|
|
|
| ||
Proceeds from issuance of series A convertible preferred stock |
|
| |
|
|
|
| |
Effect of merger, net of transactions |
|
|
|
|
| ( |
| |
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH |
|
| ( | ) |
|
|
| |
CASH AT BEGINNING OF THE YEAR |
|
|
|
|
|
| ||
CASH AT END OF THE YEAR |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
| $ |
|
| $ |
| ||
Stock issued for acquisitions |
| $ |
|
| $ |
| ||
Stock issued for conversion of notes payable |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements
| F-5 |
| Table of Contents |
Notes to Consolidated Financial Statements
1. NATURE OF OPERATIONS
iCoreConnect Inc., (the “Company”), a Delaware Corporation, is a cloud-based software and technology company focused on increasing workflow productivity and customer profitability through its enterprise platform of applications and services.
2. MERGER AND RECAPITALIZATION
On August 25, 2023, Old iCore and FGMC consummated the Business Combination, with Old iCore surviving as a wholly owned subsidiary of FGMC. As part of the Business Combination, FGMC changed its name to iCoreConnect Inc. Upon the closing of the Business Combination (the “Closing”), the Company’s certificate of incorporation provided for, among other things, a total number of authorized shares of capital stock of
The Business Combination is accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, FGMC is treated as the “acquired” company and Old iCore is treated as the acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Old iCore issuing stock for the net assets of FGMC, accompanied by a recapitalization. The net assets of FGMC are stated at historical cost, with no goodwill or intangible assets recorded.
Upon the consummation of the Business Combination, each issued and outstanding share of Old iCore Common Stock was canceled and converted into Company Common Stock based upon the Exchange Ratio (as defined in the Merger Agreement). The shares and corresponding capital amounts and loss per share related to Old iCore Common Stock prior to the Business Combination have been retroactively restated to reflect the Exchange Ratio. All non-redeemed shares of FGMC common stock were converted into new iCoreConnect Inc. Series A preferred stock (the “Preferred Stock”) on a one for one basis.
Unvested outstanding stock options to purchase shares of Old iCore Common Stock (“Old iCore Options”) granted under the iCoreConnect Inc 2016 Stock Incentive Plan (“2016 Plan”) converted into stock options for shares of Company Common Stock upon the same terms and conditions that were in effect with respect to such stock options immediately prior to the Business Combination, after giving effect to the Exchange Ratio (the “Exchanged Options”). Old iCore Options that were vested at the time of the merger converted into shares of Company Common Stock upon the same terms and conditions that were in effect with respect to such options immediately prior to the Business Combination, after giving effect to the Exchange Ratio.
Outstanding warrants to purchase shares of Old iCore Common Stock (“Old iCore warrants”) issued and outstanding converted into shares of Company Common Stock upon the same terms and conditions that were in effect with respect to such warrants immediately prior to the Business Combination, after giving effect to the Exchange Ratio.
| F-6 |
| Table of Contents |
The following table details the number of shares of Company Common Stock issued immediately following the consummation of the Business Combination:
|
| Common Stock |
|
| Preferred Stock |
| ||
|
|
|
|
|
|
| ||
Common stock of FGMC outstanding prior to business combination |
|
|
|
|
| - |
| |
Less: Redemptions of FGMC common stock |
|
| ( | ) |
|
| - |
|
Common stock held by former FGMC shareholders |
|
|
|
|
| - |
| |
FGMC sponsor shares |
|
|
|
|
| - |
| |
Underwriter shares |
|
|
|
|
| - |
| |
Sponsor shares transferred for services |
|
|
|
|
| - |
| |
Sponsor shares transferred for non-redemption |
|
|
|
|
| - |
| |
Shares issued related to extension note |
|
|
|
|
| - |
| |
Total FGMC common shares outstanding prior to conversion to preferred stock |
|
|
|
|
| - |
| |
Conversion of existing FGMC common stockholders to new convertible preferred stock |
|
| ( | ) |
|
|
| |
Shares issued to Old iCore stockholders for purchase consideration |
|
|
|
|
| - |
| |
Total |
|
|
|
|
|
| ||
The following table reconciles the elements of the Business Combination to the Company’s consolidated statement of changes in stockholders’ equity (deficit):
|
| Amount |
| |
Cash - FGMC trust (net of redemptions) |
| $ |
| |
Cash transferred to Forward Purchase Agreement |
|
| ( | ) |
Gross proceeds |
|
|
| |
Less: FGMC and Old iCore transaction costs paid |
|
| ( | ) |
Effect of Business Combination, net of redemptions and transaction costs |
| $ |
| |
All existing FGMC warrants were converted into Convertible Preferred Stock warrants with the same terms and conditions:
Holder |
| Number of Warrants |
|
| Strike Price |
| ||
Underwriter |
|
|
|
| $ |
| ||
Sponsor and Investors |
|
|
|
| $ |
| ||
Sponsor |
|
|
|
| $ |
| ||
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are presented in United States dollars and include the accounts of the Company’s wholly owned subsidiaries, with all intercompany transactions eliminated. They have been prepared on the accrual basis in accordance with accounting principles generally accepted in the United States (GAAP). Significant accounting principles followed by the Company and the methods of applying those principles, which materially affect the determination of financial position, results of operations and cash flows are summarized below.
Going Concern and Liquidity
U. S. GAAP requires management to assess a company’s ability to continue as a going concern within one year from the financial statement issuance and to provide related note disclosures in certain circumstances.
| F-7 |
| Table of Contents |
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
For the fiscal year period ended December 31, 2024, the Company generated an operating loss of $
In 2024 the Company experienced a continued decline in financial stability and lack of capital resources to further develop and market its technology and products. These factors contributed to the decline in market capitalization and to the value of its assets.
Currently, management continues to develop its healthcare communications system and continues to develop alliances with strategic partners to generate revenues that will sustain the Company. Management will also seek to raise additional funds. While management believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. Management’s ability to continue as a going concern is ultimately dependent upon its ability to continually increase the Company’s customer base and realize increased revenues from signed contracts. The consolidated 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.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). ASC 820 established a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement) as follows:
Level 1 - Observable inputs that reflect quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
| F-8 |
| Table of Contents |
Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market corroborated inputs.
Level 3 - Unobservable inputs for which there is little, if any, market activity for the asset or liability being measured. These inputs may be used with standard pricing models or other valuation or internally-developed methodologies that result in management’s best estimate of fair value.
The Company utilizes fair value measurements primarily in conjunction with the valuation of assets acquired and liabilities assumed in a business combination. In addition, certain nonfinancial assets and liabilities are to be measured at fair value on a nonrecurring basis in accordance with applicable GAAP. In general, nonfinancial assets including goodwill, other intangible assets and property and equipment are measured at fair value when there is an indication of impairment and are recorded at fair value only when an impairment is recognized.
As allowed by applicable FASB guidance, the Company has elected not to apply the fair value option for financial assets and liabilities to any of its currently eligible financial assets or liabilities. The Company’s financial instruments consist of cash, accounts receivable, accounts payable and notes payable. The Company has determined that the book value of its outstanding financial instruments as of December 31, 2024 and 2023, approximated their fair value due to their short-term nature.
Cash
The Company classifies highly liquid temporary investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash balances at various financial institutions. Balances at United States banks are insured by the Federal Deposit Insurance Corporation up to $
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are customer obligations due under normal trade terms. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the potential inability of certain customers to make required future payments on amounts due. Management determines the adequacy of this allowance by periodically evaluating the aging and past due nature of individual customer accounts receivable balances and considering the customer’s current financial situation as well as the existing industry economic conditions and other relevant factors that would be useful in assessing the risk of collectability. If the future financial condition of our customers were to deteriorate, resulting in their inability to make specific required payments, additions to the allowance for doubtful accounts may be required. In addition, if the financial condition of our customers improves and collections of amounts outstanding commence or are reasonably assured, then we may reverse previously established allowances for doubtful accounts. The Company has estimated and recorded an allowance for doubtful accounts of $
Property and Equipment, net
Property, equipment, and leasehold improvements are recorded at their historical cost. Depreciation and amortization have been determined using the straight-line method over the estimated useful lives of the assets which are computers and office equipment (
| F-9 |
| Table of Contents |
Software Development Costs and Acquired Software
The Company accounts for software development costs, including costs to develop software products or the software component of products to be sold to external users. In accordance with ASC 985-730, Computer Software Research and Development, research and planning phase costs are expensed as incurred and development phase costs including direct materials and services, payroll and benefits and interest costs are capitalized.
We have determined that technological feasibility for our products to be marketed to external users was reached before the release of those products. As a result, the development costs and related acquisition costs after the establishment of technological feasibility were capitalized as incurred. Capitalized costs for software to be sold to external users and software acquired in a business combination are amortized based on current and projected future revenue for each product with an annual minimum equal to the straight-line amortization over three years.
Long-Lived Assets and Goodwill
The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35, Property, Plant and Equipment, Impairment or Disposal of Long-lived Assets. This accounting standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. As of December 31, 2023, the Company determined that the carrying value of certain customer relationships exceed their fair value and impairment of long-lived assets existed. The Company recorded an impairment of $
The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles - Goodwill and Other. Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed. ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. During the fourth quarter of 2020, the Company adopted ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which the carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. As of December 31, 2024 and December 31, 2023, there is no impairment of the Company’s Goodwill.
Revenue Recognition
We have 7 primary sources of revenue as of December 31, 2024 and 6 primary sources of revenue as of December 31, 2023:
| 1. | Electronic Prescription Software |
| 2. | Insurance Verifications |
| 3. | ICD-10 Medical Coding Software |
| 4. | Encrypted and HIPAA Compliant Secure email |
| 5. | Analytics |
| 6. | MSaaS software |
| 7. | Patient Billing and Payment Processing |
| F-10 |
| Table of Contents |
1) | Electronic Prescription software services are provided on an annual subscription basis using the software as a service (‘SaaS’) model with revenue recognized ratably over the contract term. |
|
|
2) | Insurance verification services are provided on an annual subscription basis using the software as a service (‘SaaS’) model with revenue recognized ratably over the contract term. |
|
|
3) | ICD-10 Medical Coding services are provided on an annual subscription basis using the software as a service (“SaaS”) model with revenues recognized ratably over the contract term. |
|
|
4) | Encrypted and HIPAA compliant and secure email services are provided on an annual subscription basis using the software as a service (“SaaS”) model with revenues recognized ratably over the contract term. |
|
|
5) | Analytics automatically compiles real-time KPI data on an intuitive dashboard which saves time and helps focus the team during the morning huddle. Additionally, the Practice Metrics page provides custom reporting with rich graphics helping management to view revenue, claims, AR, scheduling and more. |
|
|
6) | MSaaS software services are provided on an annual subscription basis using the software as a service (‘SaaS’) model with revenue recognized ratably over the contract term. |
|
|
7) | Patient Billing and payment processing services are provided on an annual subscription basis using the software as a SaaS model with revenues recognized ratably over the contract term. |
The Company accounts for revenue from contracts with customers in accordance with ASU No. 2017-09, Revenue from Contracts with Customers and a series of related accounting standard updates (collectively referred to as “Topic 606”). This guidance sets forth a five-step revenue recognition model which replaced the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance and to require more detailed disclosures. The five steps of the revenue recognition model are: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
At contract inception, the Company assesses the goods and services promised in the contract with customers and identifies a performance obligation for each. To determine the performance obligation, the Company considers all products and services promised in the contract regardless of whether they are explicitly stated or implied by customary business practices. The timing of satisfaction of the performance obligation is not subject to significant judgment. The Company measures revenue as the amount of consideration expected to be received in exchange for transferring goods and services. Revenue is recognized net of any taxes collected from customers that are subsequently remitted to governmental authorities.
We recognize revenue for our service in accordance with accounting standard ASC 606. Our customers are acquired through our own salesforce and through the referrals from our many state association marketing partners. We primarily generate revenue from multiple software as a service (SaaS) offering, which typically include subscriptions to our online software solutions. The Company’s secondary source of revenue is professional services and other revenue related to customer onboarding, IT services and equipment sales that often precede a subscription service offering purchased by the customer. Approximately 90% of our revenue is subscription based with the remainder being professional services and other IT related revenue. The geographic concentration of our revenue is 100% in North America.
Management has determined that it has the following performance obligations related to its products and services: multiple software as a service (SaaS) offering, which typically include subscriptions to our online software solutions. The Company’s secondary source of revenue is professional services and other revenue related to customer onboarding, IT services and equipment sales that often precede a subscription service offering purchased by the customer. Revenue from Software as a Service, hardware, service repairs, and support & maintenance are all recognized at a point in time when control of the goods is transferred to the customer, generally occurring upon shipment or delivery dependent upon the terms of the underlying contract, or services is completed. Our customers do not have the right to take possession of the online software solution. Revenue from subscriptions, including additional fees for items such as incremental contacts, is recognized ratably over the subscription period beginning on the date the subscription is made available to customers. Substantially all subscription contracts are one year. We recognize revenue from on-boarding services and equipment as the services are provided. Amounts billed that have not yet met the applicable revenue recognition criteria are recorded as deferred revenue.
For the year ended December 31, 2024 and 2023, disaggregated revenues were recurring revenues of $
| F-11 |
| Table of Contents |
For contracts with customers that contain multiple performance obligations, the Company accounts for the promised performance obligations separately as individual performance obligations if they are distinct. In determining whether performance obligations meet the criteria for being distinct, the Company considers several factors, including the degree of interrelation and interdependence between obligations and whether or not the good or service significantly modifies or transforms another good or service in the contract. After identifying the separate performance obligations, the transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company generally determines the standalone selling prices based on the prices charged to customers. Judgment may be used to determine the standalone selling prices for items that are not sold separately, including taking into consideration either historical pricing practices or an adjusted market assessment. Unsatisfied and partially unsatisfied performance obligations as of the end of the reporting period primarily consist of products and services for which customer purchase orders have been accepted and that are in the process of being delivered.
Transaction price is calculated as the selling price less any variable consideration, consisting of rebates and discounts. Discounts provided to customers are known at contract inception. Rebates are calculated on the “expected value” method where the Company (1) estimates the probability of each rebate amount which could be earned by the distributor, (2) multiplies each estimated amount by its assigned probability factor, and (3) calculates a final sum of each of the probability-weighted amounts calculated in step (2). The sum calculated in step (3) is the rebate amount, which along with discounts reduces the amount of revenue recognized.
The Company has elected to account for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment cost rather than as an additional promised service. As a result, the Company accrues the costs of shipping and handling when the related revenue is recognized. Costs incurred for shipping and handling are included in costs of goods sold on the Statement of Operations. Amounts billed to a customer for shipping and handling are reported as revenue on the Statement of Operations.
Advertising Costs
Advertising costs are reported in general and administrative expenses and include advertising, marketing and promotional programs and are charged as expenses in the year in which they are incurred. Advertising costs were $
Accounting for Derivative Instruments
The Company accounts for derivative instruments in accordance with ASC 815, which requires additional disclosures about the Company’s objectives and strategies for using derivative instruments, how the derivative instruments and related hedged items are accounted for, and how the derivative instruments and related hedging items affect the financial statements.
| F-12 |
| Table of Contents |
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible debt and convertible preferred stock instruments are reviewed to determine whether or not they contain embedded derivative instruments that are required under ASC 815 to be accounted for separately from the host contract and recorded on the balance sheet at fair value. The fair value of derivative liabilities, if any, is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results.
Freestanding warrants issued by the Company in connection with the issuance or sale of debt and equity instruments are considered to be derivative instruments. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required to be classified as equity or as a derivative liability.
The allocated value of the conversion option of debt and warrants are recorded as a debt discount and accreted over the expected term of the convertible debt as interest expense. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether net cash settlement is expected within the next 12 months from the balance date.
Sequencing
In 2024, the Company adopted a sequencing policy under Accounting Standards Codification (“ASC”) 815-40-35 Derivatives and Hedging (“ASC 815”) whereby in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities convertible or exchangeable for a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuances of securities to the Company’s employees or directors are not subject to the sequencing policy.
Financial Instruments with Down Round Features
With respect to financial instruments, the Company follows the guidance of FASB ASU 2017-11, “Earnings per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. Whereby ASU 2017-11 simplifies the accounting for certain financial instruments with down round features, a provision in an equity-linked financial instrument (or embedded feature) that provides a down round adjustment of the current exercise price based on the price of the future equity offerings. The standard requires companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for the purposes of determining liability of equity classification. The Company accounts for instruments with Most Favored Nations (the “MFN”) terms or conditions similar to that of a down round feature. The impact of such terms or conditions will be accounted for when the event occurs. The Diluted EPS calculation for the effect of the feature when triggered (i.e. when the exercise price of the related equity-linked financial instrument is adjusted downward because of the down round feature) and will also recognize the effect of the trigger within equity.
Income Taxes
The Company follows the asset and liability approach to accounting for income taxes. Under this method, deferred tax assets and liabilities are measured based on differences between the financial reporting and tax bases of assets and liabilities measured using enacted tax rates and laws that are expected to be in effect when differences are expected to reverse. Valuation allowances are established when it is necessary to reduce deferred income tax assets to the amount, if any, expected to be realized in future years.
ASC 740, Accounting for Income taxes (“ASC 740”), requires that deferred tax assets be evaluated for future realization and reduced by a valuation allowance to the extent we believe a portion more likely than not will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent cumulative loss experience and expectations of future taxable income by taxing jurisdictions, the carry forwarding periods available to us for tax reporting purposes and other relevant factors.
The Company has not recognized a liability for uncertain tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits or penalties has not been provided since there has been no unrecognized benefit or penalty. If there were an unrecognized tax benefit or penalty, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company files U.S. Federal income tax returns and various returns in state jurisdictions. The Company's open tax years subject to examination by the Internal Revenue Service and the state Departments of Revenue generally remain open for three years from the date of filing.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and to the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
| F-13 |
| Table of Contents |
Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding for the period. Diluted net loss per share reflects the potential dilution of securities by adding other Common Stock equivalents, including stock options, shares issuable on exercise of warrants, and shares issuable on conversion of promissory notes in the weighted average number of common shares outstanding for a period, if dilutive. Common stock equivalents that are anti-dilutive were excluded from the computation of diluted earnings per share which consisted of all outstanding common stock options and warrants.
Stock-Based Compensation
The Company accounts for share-based compensation costs in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires companies to measure the cost of awards of equity instruments, including stock options and restricted stock awards, based on the grant-date fair value of the award and to recognize it as compensation expense over the employee’s requisite service period or the non-employee’s vesting period. An employee’s requisite service period is the period of time over which an employee must provide service in exchange for an award under a share-based payment arrangement and generally is presumed to be the vesting period. Upon exercise of share purchase options, the consideration paid by the option holder, together with the amount previously recognized in additional capital surplus, is recorded as an increase to share capital.
The Company estimates the fair value of each option award on the date of grant using a Black-Scholes option pricing model. The Company estimates the fair value of its common stock using the closing stock price of its common stock on the option grant date. The Company estimates the volatility of its common stock at the date of grant based on its historical stock prices. The Company uses the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. The Company has never paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. The fair value of shares of restricted stock issued are determined by the Company based on the estimated fair value of the Company’s common stock.
| F-14 |
| Table of Contents |
Leases
The Company adopted ASU No. 2016-02, Leases and a series of related Accounting Standards Updates that followed (collectively referred to as “Topic 842”). Topic 842 requires organizations to recognize right-of-use (“ROU”) lease assets and lease liabilities on the balance sheet and to disclose key information about leasing arrangements. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous lease guidance. The FASB retained the distinction between finance leases and operating leases, leaving the effect of leases in the statement of comprehensive income and the statement of cash flows largely unchanged from previous U.S. GAAP. The Company utilized the transition method allowed under ASU 2018-11 in which an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, if any.
The Company determines, at contract inception, whether or not an arrangement contains a lease and evaluates the contract for classification as an operating or finance lease. For all leases, ROU assets and lease liabilities are recognized based on the present value of lease payments, including annual rent increases, over the lease term at commencement date. If the Company’s lease does not provide an implicit rate in the contract, the Company uses its incremental, secured borrowing rate based on lease term information available as of the adoption date or lease commencement date in determining the present value of lease payments. Any renewal periods are considered in the analysis of each lease to the extent that the Company considers them to be reasonably certain of being exercised.
Related Party Transactions
The Company accounts for related party transactions in accordance with FASB ASC 850, Related Party Disclosures. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries’ controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
| F-15 |
| Table of Contents |
Business Combinations
The Company applies the principles provided in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (“ASC”) 805, Business Combinations, to determine whether an acquisition involves an asset or a business. In determining whether an acquisition should be accounted for as a business combination or asset acquisition, The Company first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the single identifiable asset or the group of similar assets is accounted for as an asset acquisition. If this is not the case, The Company then further evaluate whether the single identifiable asset or group of similar identifiable assets and activities includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If so, the transaction is accounted for as a business combination.
The Company accounts for business combinations using the acquisition method of accounting which requires that (i) identifiable assets acquired (including identifiable intangible assets) and liabilities assumed generally be measured and recognized at estimated fair value as of the acquisition date and (ii) the excess of the purchase price over the net estimated fair value of identifiable assets acquired and liabilities assumed be recognized as goodwill, which is not amortized for accounting purposes but is subject to testing for impairment at least annually.
The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets. Goodwill is not recognized in an asset acquisition with any consideration in excess of net assets acquired allocated to acquired assets on a relative estimated fair value basis. Transaction costs are expensed in a business combination and transaction costs directly attributable to an asset acquisition are considered a component of the cost of the asset acquisition.
Reportable Segments
The Company currently operates business as one operating segment which includes two revenue types: recurring and non-recurring. While the Company discloses recurring and non-recurring revenue separately, management does not consider these to be separate segments, as they are sold through the same sales channel and fulfilled by the same teams. Management’s analysis and determination for allocation of resources is not analyzed or broken out by revenue streams, but as one reporting unit. The determination of a single business segment is consistent with the consolidated financial information regularly provided to the Company’s chief operating decision maker (“CODM”). The Company’s CODMs is the Chief Executive Officer, who review and evaluate consolidated net income for purposes of assessing performance, making operating decisions, allocating resources, and planning and forecasting for future periods.
| F-16 |
| Table of Contents |
Recently Issued Accounting Pronouncements
Adopted
The Company adopted ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates, including accounts receivable. The standard replaces the existing incurred credit loss model with the Current Expected Credit Losses (“CECL”) model. It is required to measure credit losses based on the Company’s estimate of expected losses rather than incurred losses, which generally results in earlier recognition of allowances for credit losses. Under ASC 326, the Company evaluates specific criteria, including aging and historical write-offs, the current economic condition of customers, and future economic conditions of countries utilizing a consumption index to determine the appropriate allowance for credit losses. The Company completed its assessment of the new standard and did not adjust the opening balance of retained earnings relating to its trade receivables. The Company writes off receivables once it is determined that they are no longer collectible, as local laws allow.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting - Improving Reportable Segment Disclosures (Topic 280).” The standard is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The standard requires disclosure to include significant segment expenses that are regularly provided to the CODM, a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. The standard also requires all annual disclosures currently required by ASC Topic 280 to be included in interim periods. This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements.
Not Yet Adopted
In October 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-06, “Disclosure Improvements – Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” This standard affects a wide variety of Topics in the Codification. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective. Early adoption is prohibited. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures,” a final standard on improvements to income tax disclosures, The standard requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted and should be applied prospectively. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
| F-17 |
| Table of Contents |
4. STOCKHOLDERS’ EQUITY
Common Stock
The Company is authorized to issue up to
Stock Issuances
During the year ended December 31, 2024 the Company issued
During the year ended December 31, 2023, the Company issued
Convertible Preferred Stock
The Company is authorized to issue up to
| F-18 |
| Table of Contents |
| • | The conversion price (“Conversion Price”) |
|
|
|
| • | The holders of Convertible Preferred Stock shall not be entitled to vote on any matters submitted to the stockholders of the Company. |
|
|
|
| • | From and after the date of the issuance of any shares of Convertible Preferred Stock, dividends shall accrue at the rate per annum of |
|
|
|
| • | Dividends shall accrue from day to day and shall be cumulative and shall be payable within fifteen (15) business days after August 23 of each year to each holder of Convertible Preferred Stock as of such date. |
|
|
|
| • | From the Closing of the Business Combination until the second anniversary of the date of the original issuance of the Convertible Preferred Stock, the Company may, at its option, pay all or part of the accruing dividends on the Convertible Preferred Stock by issuing and delivering additional shares of Convertible Preferred Stock to the holders thereof. |
|
|
|
| • | The Company shall not declare, pay, or set aside any dividends on shares of any other class or series of capital stock of the Company, unless the holders of the iCoreConnect Convertible Preferred Stock then outstanding shall first receive dividends due and owing on each outstanding share of iCoreConnect Convertible Preferred Stock. |
|
|
|
| • | In the event of any liquidation, dissolution or winding up of the Company, the holders of shares of Convertible Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount per share equal to the greater of (i) one times the applicable original issue price, plus any accrued and unpaid dividends, and (ii) such amount as would have been payable had all shares of Preferred Stock been converted into the Company’s Common Stock pursuant to the following paragraph immediately prior to such liquidation, dissolution or winding up, before any payment shall be made to the holders of the Company’s Common Stock. |
|
|
|
| • | Each share of Convertible Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of the Company’s Common Stock as is determined by dividing the original issue price by the Conversion Price in effect at the time of conversion, subject to adjustment. |
|
|
|
| • | After 24 months from the Closing of the Business Combination, in the event the closing share price of the Company’s Common Stock shall exceed 140% of the Conversion Price (as defined in the Merger Agreement) then in effect, then (i) each outstanding share of Convertible Preferred Stock shall automatically be converted into such number of shares of the Company’s Common Stock as is determined by dividing the original issue price by the Conversion Price in effect at the time of conversion and (ii) such shares may not be reissued by the Company, subject to adjustment. At the time of such conversion, the Company shall declare and pay all of the dividends that are accrued and unpaid as of the time of the conversion by either, at the option of the Company, (i) issuing additional Preferred Stock or (ii) paying cash. |
|
|
|
| • | Immediately prior to any such optional conversion the Company shall pay all dividends on the Convertible Preferred Stock being converted that are accrued and unpaid as of such time by, either, at the option of the Company: (i) issuing additional Preferred Stock or (ii) paying cash. |
During the year ended December 31, 2024 the Company issued nil Series A Convertible Preferred stock for cash,
During the year ended December 31, 2024,
During the year ended December 31, 2023 the Company issued
During the year ended December 31, 2023,
| F-19 |
| Table of Contents |
Common Stock Options
As part of the merger, the Company’s 2016 Long Term Incentive Plan was cancelled and replaced with the 2023 Stock Plan (“Incentive Plan”) which is administered by the Company’s Board of Directors Compensation Committee.
Certain employees and executives have been granted options or warrants that are compensatory in nature. A summary of option activity for the year ended December 31, 2024 and 2023 are presented below:
2023 Options Outstanding |
| Number of Options |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance Outstanding - January 1, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Exercised |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| ||
Forfeited |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| ||
Balance Outstanding - December 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - December 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
2023 Nonvested Options |
| Number of Options |
|
| Weighted Average Grant Date Fair Value |
|
| Weighted Average Remaining Years to Vest |
| |||
|
|
|
|
|
|
|
|
|
| |||
Nonvested - January 1, 2023 |
|
|
|
| $ |
|
|
|
| |||
Granted |
|
|
|
|
|
|
|
| ||||
Vested |
|
| ( | ) |
|
|
|
|
| |||
Forfeited |
|
| ( | ) |
|
|
|
|
|
| ||
Nonvested - December 31, 2023 |
|
|
|
| $ |
|
|
|
| |||
2024 Options Outstanding |
| Number of Options |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance Outstanding - January 1, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
|
|
|
|
|
|
|
|
| - |
| ||||
Exercised |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Forfeited |
|
| ( | ) |
|
|
|
|
|
|
| - |
| |||
Balance Outstanding - December 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - December 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
2024 Nonvested Options |
| Number of Options |
|
| Weighted Average Grant Date Fair Value |
|
| Weighted Average Remaining Years to Vest |
| |||
|
|
|
|
|
|
|
|
|
| |||
Nonvested - January 1, 2024 |
|
|
|
| $ |
|
|
|
| |||
Granted |
|
|
|
|
|
|
|
|
| |||
Vested |
|
| ( | ) |
|
|
|
|
|
| ||
Forfeited/expired |
|
| ( | ) |
|
|
|
|
|
| ||
Nonvested - December 31, 2024 |
|
|
|
| $ |
|
|
|
| |||
As part of the
As of December 31, 2024, total unrecognized compensation cost related to unvested stock options was approximately $
| F-20 |
| Table of Contents |
Restricted Stock Compensation
In April 2023, the Company’s Board of Directors approved compensation for its Board Members and Committee Members for the year ended December 31, 2023. On an annual basis equivalent, Board Members are compensated $
On January 3, 2023 the board approved
In April 2023, the Company’s Board of Directors approved the granting of
Common Stock Warrants
The Company typically issues warrants to individual investors and institutions to purchase shares of the Company’s Common Stock in connection with public and private placement fundraising activities. Warrants may also be issued to individuals or companies in exchange for services provided for the Company. The warrants are typically exercisable six months after the issue date, expire in five years, and contain a cash exercise provision and registration rights.
During the year ended December 31, 2024 the Company issued
In May 2023, the Company entered into amendments with certain warrant holders whose warrants contained down round provisions and modified these warrants to remove such provisions from inception. As such the number and exercise of these warrants are set back to their original values as originally intended by the parties.
During the year ended December 31, 2023, the Company issued
| F-21 |
| Table of Contents |
As part of the Merger, all outstanding warrants as of August 25, 2023 totaling
|
| Warrant Shares Outstanding |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Life |
|
| Intrinsic Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Outstanding - December 31, 2022 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Additions including Down Round feature |
|
| ( | ) |
|
|
|
|
|
|
|
| - |
| ||
Forfeited/expired |
|
| ( | ) |
|
|
|
|
|
|
|
| - |
| ||
Outstanding - December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Granted |
|
|
|
|
|
|
|
|
|
|
| - |
| |||
Exercised |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Cancelled |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Outstanding - December 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Preferred Stock Warrants
As part of the Merger, the Company assumed the following preferred stock warrants:
$2.00 Convertible Preferred Stock Warrants Outstanding |
| Number of Warrants |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding – December 31, 2022 |
|
| - |
|
| $ |
|
|
| - |
|
|
| - |
| |
Granted |
|
|
|
|
|
|
|
|
|
|
| - |
| |||
Exercised |
|
| ( | ) |
|
|
|
|
|
|
|
| - |
| ||
Expired |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Outstanding – December 31, 2023 |
|
|
|
|
|
|
|
|
| $ | - |
| ||||
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| ( | ) |
|
|
|
|
|
|
|
| - |
| ||
Expired |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Outstanding – December 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ | - |
| |||
| F-22 |
| Table of Contents |
During 2023 there was a modification of the $
$11.50 Convertible Preferred Stock Warrants Outstanding |
| Number of Warrants |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding – December 31, 2022 |
|
|
|
| $ |
|
|
|
|
|
| - |
| |||
Granted |
|
|
|
|
|
|
|
|
|
|
| - |
| |||
Exercised |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Expired |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Outstanding – December 31, 2023 |
|
|
|
|
|
|
|
|
| $ | - |
| ||||
Granted |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Exercised |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Expired |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Outstanding – December 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ | - |
| |||
$15.00 Preferred Stock Warrants Outstanding |
| Number of Warrants |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding – December 31, 2022 |
|
|
|
| $ |
|
|
|
|
|
| - |
| |||
Granted |
|
|
|
|
|
|
|
|
|
|
| - |
| |||
Exercised |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Expired |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Outstanding – December 31, 2023 |
|
|
|
|
|
|
|
|
| $ | - |
| ||||
Granted |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Exercised |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Expired |
|
| - |
|
|
|
|
|
| - |
|
|
| - |
| |
Outstanding – December 31, 2024 |
|
|
|
| $ |
|
|
|
|
| $ | - |
| |||
| F-23 |
| Table of Contents |
Equity Line of Credit
In January 2021 Old iCore and one of its Convertible Debt Holders entered into a Purchase Agreement for up to $
On September 12, 2023, the Company entered into a purchase agreement with Arena Business Solutions Global SPC II, Ltd (“Arena”), pursuant to which Arena has committed to purchase up to $
Unless earlier terminated as provided in the Purchase Agreement, the Purchase Agreement will terminate automatically on the earliest to occur of: (i) the first day of the month next following the 36-month anniversary of the date of the Purchase Agreement; and (ii) the date on which Arena shall have purchased shares of Common Stock under the Purchase Agreement for an aggregate gross purchase price equal to Commitment Amount under the Purchase Agreement. The Company has the right to terminate the Purchase Agreement at any time, at no cost or penalty, upon five trading days’ prior written notice to Arena, provided that there are no outstanding Advance Notices the shares of Common Stock under which have not yet been issued. The Company and Arena may also terminate the Purchase Agreement at any time by mutual written consent.
As consideration for Arena’s irrevocable commitment to purchase Common Stock upon the terms of and subject to satisfaction of the conditions set forth in the Purchase Agreement, upon execution of the Purchase Agreement, the Company agreed to issue a total of
As of December 31, 2023, the Company exercised this equity line of credit of an aggregate amount of $
| F-24 |
| Table of Contents |
On February 14, 2024, this agreement was terminated.
On August 16, 2024, the Company executed a Strata Purchase Agreement with Clearthink Capital Partners, LLC (“Clearthink”) (the “Strata Agreement”). Pursuant to the Strata Agreement, Clearthink has committed to purchase up to $
Such sales of common stock, if any, will be subject to certain limitations, and may occur from time to time at the Company’s sole discretion over the approximately 24-month period commencing on the date that a registration statement (the “Registration Statement”) covering the resale by Clearthink of the shares of common stock purchased from the Company (which the Company has agreed to file) is declared effective by the U.S. Securities and Exchange Commission (the “SEC”) and remains effective, and the other conditions set forth in the Strata Agreement are satisfied.
On August 16, 2024, the Company executed a Registration Rights Agreement with Clearthink (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company agreed to file a registration statement within 30 days registering the shares of Company common stock issuable pursuant to the Strata Agreement. The registration was filed in September 2024 and deemed effective October 21, 2024.
Clearthink has no right to require the Company to sell any shares of common stock to Clearthink, but Clearthink is obligated to make purchases at the Company’s direction subject to certain conditions. There is no upper limit on the price per share that Clearthink could be obligated to pay for the common stock under the Strata Agreement.
Actual sales of shares of common stock to Clearthink from time to time will depend on a variety of factors, including, among others, market conditions, the trading price of the Company’s common stock and determinations by the Company as to the appropriate sources of funding for its operations. The net proceeds that the Company may receive under the Strata Agreement cannot be determined at this time, since it will depend on the frequency and prices at which the Company sell shares of its common stock to Clearthink, the Company’s ability to meet the conditions of the Strata Agreement and the other limitations, terms and conditions of the Strata Agreement. The Company expects that any proceeds received by the Company from such sales to Clearthink will be used for working capital and general corporate purposes.
Under the applicable rules of Nasdaq and the Strata Agreement, the Company will not sell or issue to Clearthink shares of its common stock, other than the Commitment Fee Shares (defined below), in excess of 19.99% of the Company’s shares of common stock outstanding as of the date of the Strata Agreement (the “Exchange Cap”), unless the Company obtains stockholder approval to issue shares of common stock in excess of the Exchange Cap.
The Strata Agreement also prohibits the Company from directing Clearthink to purchase any shares of common stock if those shares, when aggregated with all other shares of the Company’s common stock then beneficially owned by Clearthink and its affiliates as a result of purchases under the Strata Agreement, would result in Clearthink and its affiliates having beneficial ownership of more than the 9.99% of the Company’s then outstanding common stock.
The Company may direct Clearthink to purchase amounts of its common stock under the Strata Agreement that it specifies from time to time in a written notice (a “Request Notice”) delivered to Clearthink on any trading day up to the Commitment Amount. The maximum amount that the Company may specify in any one Request Notice is equal to the lesser of $
The purchase price of the
Unless earlier terminated as provided in the Strata Agreement, the Strata Agreement will terminate automatically on the earliest to occur of: (i) the 24-month anniversary of the date of the Registration Statement becoming effective; and (ii) the date on which Clearthink shall have purchased shares of common stock under the Strata Agreement for an aggregate gross purchase price equal to Commitment Amount under the Strata Agreement. The Company has the right to terminate the Strata Agreement at any time, at no cost or penalty, upon one trading days prior written notice to Clearthink.
As consideration for Clearthink’s irrevocable commitment to purchase common stock upon the terms of and subject to satisfaction of the conditions set forth in the Strata Agreement, upon execution of the Strata Agreement, the Company agreed to issue a total of
On December 5, 2024, this agreement was terminated.
On December 5, 2024, the Company entered into an Equity Purchase Agreement with Crom Structured Opportunities Fund I, LP (“Crom”) (the “Equity Purchase Agreement”). Pursuant to the Equity Purchase Agreement, Crom has committed to purchase up to $
| F-25 |
| Table of Contents |
5. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
|
| December 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Furniture and fixtures |
| $ |
|
| $ |
| ||
Leasehold improvements |
|
|
|
|
|
| ||
Equipment |
|
|
|
|
|
| ||
Vehicles |
|
|
|
|
|
| ||
Computer software |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
Depreciation expense on property and equipment for the years ended December 31, 2024 and 2023, were $
6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
The following table sets forth the changes in the carrying amount of goodwill for the year ended December 31, 2024 and 2023:
|
| Total |
| |
Balance at December 31, 2022 |
| $ |
| |
2023 activity |
|
|
| |
Balance at December 31, 2023 |
|
|
| |
2024 activity |
|
| ||
Balance at December 31, 2024 |
| $ |
| |
The following table sets forth the gross carrying amounts and accumulated amortization of the Company’s intangible assets as of December 31, 2024 and 2023:
|
| Gross Carrying Amount |
|
| Impairment |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
| ||||
Definite-lived intangible assets at January 1, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Capitalized software |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||
Customer relationships |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
| ||
Acquired technology |
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||
Total definite-lived intangible assets at December 31, 2023 |
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
| ||
Capitalized software |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||
Customer relationships |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
| ||
Acquired technology |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
| ||
Total definite-lived intangible assets at December 31, 2024 |
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
| ||
| F-26 |
| Table of Contents |
The Company sold as part of the Asset Purchase Agreement for it Managed IT Services, net customer relationships of $
Amortization expense of intangible assets was $
The following table sets forth the weighted-average amortization period, in total and by major intangible asset class:
Asset Class |
| Weighted-Average Amortization period |
| |
Capitalized software |
|
|
| |
Customer relationships |
|
|
| |
Acquired technology |
|
|
| |
As of December 31, 2024, assuming no additional amortizable intangible assets, the expected amortization expense for the unamortized acquired intangible assets for the next five years and thereafter was as follows:
|
| Estimated |
| |
2025 |
| $ |
| |
2026 |
| $ |
| |
2027 |
| $ |
| |
2028 |
| $ |
| |
2029 |
| $ |
| |
7. FORWARD PURCHASE AGREEMENT
On August 14, 2023, the Company entered into Prepaid Forward Purchase Agreement (the “FPA”) with Old iCore and RiverNorth SPAC Arbitrage Fund, L.P., a Delaware limited partnership (the “Purchaser”).
In accordance with the FPA and subject to the terms and conditions set forth therein, the Purchaser purchased the lesser of (a) 1.5 million shares of FGMC Common Stock and (b) such number of shares of FGMC Common Stock as shall, following the Business Combination, not exceed 9.9% of the total number of shares of FGMC Common Stock to be outstanding (such shares to be purchased, the “Forward Purchase Shares”) from public shareholders for a price no greater than the redemption price per share as is indicated in FGMC’s most recently filed periodic report (the “Prepaid Forward Purchase Price”).
In accordance with the terms of the Business Combination, upon the consummation of the Business Combination, each Forward Purchase Share automatically converted into one share of Preferred Stock (including the shares of the Company’s Common Stock underlying the Preferred Stock, the “Purchased Shares”).
Upon the Business Combination closing,
Upon the closing of the Business Combination FGMC caused Purchaser to be paid directly out of the funds held in FGMC’s trust account, a cash amount (the “Prepayment Amount”) equal to the number of Purchased Shares multiplied by the amount paid to redeeming stockholders in connection with the Business Combination (the “Redemption Price”). The Redemption Price was $
Upon the sale of the Prepaid Forward Purchase Shares (or underlying FGMC Common Stock) by the Purchaser, the Purchaser will remit the Reference Price (as defined below) per share to FGMC. On the earlier to occur of:
| · | the occurrence of a “Registration Failure” (as defined in the FPA), and |
|
|
|
| · | the date that is twelve months after the closing of the Business Combination (the “Maturity Date”), then, for any Common Stock underlying the Prepaid Forward Purchase Shares not sold by the Purchaser, the Purchaser shall, on the 25th trading day after the Maturity Date (the “Payment Date”), pay the Company an amount equal to (i) the number of Prepaid Forward Purchase Shares that the Purchaser held on the Maturity Date, multiplied by (ii) the lowest daily volume weighted average price per share of FGMC Common Stock during the twenty trading days beginning on the day after the Maturity Date less $0.15. |
| F-27 |
| Table of Contents |
Between the Maturity Date and the Payment Date, the Purchaser may not sell more than a number of Prepaid Forward Purchase Shares per day equal to the greater of (i) 5% of the Purchased Shares owned by the Purchaser at the Maturity Date and (ii) 10% of the daily trading volume on such date.
The Purchaser has agreed that until the Maturity Date, the Common Stock underlying the Prepaid Forward Purchase Shares may not be sold for a price less than the Reference Price. The “Reference Price” will initially equal the Redemption Price and will be reduced (but never increased) each month commencing on the first day of the month starting 30 days after the Business Combination closing to the volume weighted average price of the FGMC Common Stock for the preceding 10 trading days, but in no event less than $10.00 per share (the “Floor”) unless in the Company’s sole discretion, the Floor is lowered. Any reduction of the Floor shall be accomplished through a written notice from the Company to Purchaser.
The FPA provides for certain registration rights. In particular, FGMC is required to, within 30 calendar days following written request by Purchaser, file with the SEC a registration statement registering the resale of all shares held by Purchaser and have such registration statement declared effective as soon as practicable after the filing thereof.
In August 2024, the parties entered into an amendment which extend the conversion date to the maturity date. In addition, the parties confirmed their agreement that the Prepaid Forward Purchase Shares would not be eligible for dividends or any downside protection while such shares remained as Preferred Stock.
In November 2024, the Company elected to convert the FPA Series A Preferred Shares into Common Stock on its agreed upon one for one basis resulting in
The FPA was extinguished in March of 2025 (refer to Note 18). The Company received $
8. DEBT
|
|
| December 31, |
|
| December 31, |
| ||
|
|
| 2024 |
|
| 2023 |
| ||
(1) | Convertible Note bearing interest at |
| $ |
|
| $ |
| ||
(1) | Convertible Promissory Note bearing interest at |
|
| |
|
|
|
| |
(1) | Convertible Promissory Note bearing interest at |
|
| |
|
|
|
| |
(2) | Note bearing interest at |
|
|
|
|
|
| ||
(3) | Secured Promissory Note bearing interest at |
|
|
|
|
|
| ||
(4) | Promissory Note bearing interest at |
|
|
|
|
|
| ||
(5) | Convertible Note bearing interest at |
|
|
|
|
|
| ||
(5) | Convertible Note bearing interest at |
|
|
|
|
|
| ||
(6) | Convertible Note bearing interest at |
|
|
|
|
|
| ||
(6) | Convertible Note bearing interest at |
|
|
|
|
|
| ||
(6) | Convertible Promissory Note bearing interest at |
|
| |
|
|
|
| |
(6) | Convertible Promissory Note bearing interest at |
|
| |
|
|
|
| |
(7) | Convertible Note bearing interest at |
|
|
|
|
|
| ||
(7) | Convertible Promissory Note bearing interest at |
|
|
|
|
|
| ||
(8) | Convertible Note bearing interest at |
|
|
|
|
|
| ||
(8) | Convertible Promissory Note bearing interest at |
|
|
|
|
|
| ||
(9) | Promissory Note bearing interest at |
|
|
|
|
|
| ||
(10) | Convertible Promissory Note bearing interest at |
|
| |
|
|
|
| |
(11) | Convertible Promissory Note bearing interest at |
|
| |
|
|
|
| |
(12) | Convertible Note bearing interest at |
|
|
|
|
|
| ||
(12) | Convertible Note bearing interest at |
|
| |
|
|
|
| |
(12) | Convertible Note bearing interest at |
|
|
|
|
|
| ||
(12) | Convertible Note bearing interest at |
|
|
|
|
|
| ||
(13) | Promissory Note bearing interest at |
|
|
|
|
|
| ||
(13) | Promissory Note bearing interest at |
|
| |
|
|
| |
|
(14) | Convertible Promissory Note bearing interest at |
|
| |
|
|
|
| |
(15) | Convertible Promissory Note bearing interest at |
|
|
|
|
|
| ||
(15) | Convertible Promissory Note bearing interest at |
|
|
|
|
|
| ||
| Total notes payable |
|
|
|
|
|
| ||
| Less: Unamortized debt discounts |
|
| ( | ) |
|
| |
|
| Less: unamortized financing costs |
|
| ( | ) |
|
| ( | ) |
| Total notes payable, net of financing costs |
|
|
|
|
| |
| |
| Less current maturities |
|
| ( | ) |
|
| ( | ) |
| Total Long-Term Debt |
| $ |
|
| $ |
| ||
| F-28 |
| Table of Contents |
1. | On February 9, 2024, the Company issued a convertible note and entered into a securities purchase agreement with an investor with an effective date of December 29, 2023, pursuant to which the Company in principal amount of $
On June 1, 2024, the Company issued a convertible note and entered into a securities purchase agreement with another related investor, pursuant to which the Company in principal amount of $ |
|
|
2. | In November 2021, the Company signed a $ |
|
|
3. | On February 28, 2022, the Company signed a $
|
| F-29 |
| Table of Contents |
4. | In September 2023 the Company entered into a sixty-day Promissory Note (“Note”) in the amount of $
|
5. | In October 2023, the Company entered into a promissory note for $
On December 28, 2023, the Company entered into a securities purchase agreement with the existing investor, pursuant to which the Company issued the investor a convertible note in principal amount of $
|
6. | In October 2023, the Company entered into a securities purchase agreement with an investor, pursuant to which the Company issued the investor a Convertible Promissory Note in principal amount of $
In December 2023, the Company entered into a securities purchase agreement with the existing investor, pursuant to which the Company issued the investor a convertible note in principal amount of $
On August 13, 2024, with an effective date of August 1, 2024 the Company entered into exchange agreements and convertible promissory notes with the note holder whose debt matured after July 31, 2024 totaling $
On April 2, 2024 the Company entered into a promissory note in the principal amount of $ |
|
|
7. | In December 2023, the Company entered into a securities purchase agreement pursuant to which the Company issued a convertible note in principal amount of $ |
|
|
8. | In December 2023, the Company entered into a securities purchase agreement pursuant to which the Company issued a convertible note in principal amount of $ |
| F-30 |
| Table of Contents |
9. | In December 2023, the Company issued a subordinated note to a service provider in principal amount of $ | |
|
| |
10. | On February 1, 2024, the Company entered into a securities purchase agreement with an investor, pursuant to which the Company issued the investor a convertible note in principal amount of $ | |
|
| |
11. | On February 1, 2024, the Company entered into a securities purchase agreement with an investor, pursuant to which the Company issued the investor a convertible note in principal amount of $ | |
| F-31 |
| Table of Contents |
12. | On February 26, 2024, The Company executed a securities purchase agreement (the “Purchase Agreement”) with certain institutional investors (the “Investors”). Pursuant to the terms and conditions of the Purchase Agreement, the Investors agreed to purchase from the Company unsecured convertible notes in the aggregate principal amount of up to $
On April 26, 2024, the Company and the Investors entered into an amendment to the Purchase Agreements (the “Amendment”) and related transaction documents, pursuant to which the terms of the Financing were amended. The amended terms include, but are not limited to, an increase in the total amount of the Notes issuable under the Financing to an aggregate principal amount of up to $8,250,000. Pursuant to the Amendment, the Company has the right to provide the Note holders a notice that permits the holders to voluntarily convert the Notes at any time at the Market Price (defined below) on the date of conversion (such notice “Voluntary Conversion Notice”) with no floor price.
On July 31, 2024, a second closing occurred (the “Second Closing”), pursuant to which an aggregate principal amount of $
| |
| F-32 |
| Table of Contents |
| On July 31, 2024, the parties entered into a registration rights agreement (the “Registration Rights Agreement”), which grants the Investors certain customary registration rights in connection with the Financing with respect to the shares of common stock underlying the July Notes. In accordance with the terms and conditions of the Registration Rights Agreement, the Company shall prepare and file with the SEC a registration statement on Form S-1 (the “Registration Statement”) registering the resale of the common stock underlying all of the Notes within 90 days and to have such registration statement effective by within 120 days after the execution of the Registration Rights Agreement. In compliance with Nasdaq Listing Rule 5635(d), the Company shall not issue any shares of common stock underlying the July Notes if the issuance of such shares of common stock would exceed the aggregate number of shares of common stock which the Company may issue upon conversion of the July Notes without breaching the Company’s obligations under the rules or regulations of the Nasdaq Stock Market. Pursuant to the Purchase Agreement, the Company agreed to hold a special stockholder seeking stockholder approval of the issuance of all of the common stock underlying the July Notes in compliance with the rules and regulations of the Nasdaq Stock Market. The Company obtained shareholder approval for such transaction on September 16, 2024.
On July 31, 2024, the Company and the Investors entered into a waiver agreement pursuant to which the Investors agreed to waive certain events of default under the Notes related to the Company’s failure to file its Form 10-K on a timely basis and delays in registering the resale of the common stock underlying the Notes issued in February 2024. In consideration for the waiver, the Company issued the investors warrants to purchase an aggregate of 84,028 shares (the “Warrants”). In compliance with Nasdaq Listing Rule 5635(d), the Company is not able to issue any shares of common stock upon exercise of the Warrants if the issuance of such shares of common stock would exceed the aggregate number of shares of common stock which the Company may without breaching the Company’s obligations under the rules or regulations of the Nasdaq Stock Market. The Company obtained shareholder approval for such transaction on September 16, 2024.
Each Warrant has an initial exercise price per share equal to $18.00. The Warrants are immediately exercisable and will expire on the five-year anniversary of the original issuance date. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our shares of common stock and the exercise price. Subject to certain exemptions outlined in the Warrant, for the life of the Warrant, if the Company sells or issues any common stock or convertible security, at an effective price per share less than the exercise price of the Warrant then in effect (a “Dilutive Issuance”), the exercise price of the Warrant will be reduced to the price per share in the Dilutive Issuance and the number of shares issuable upon exercise of the Warrant shall be proportionally adjusted so that the aggregate exercise price of the Warrant shall remain unchanged; provided that the exercise price of the Warrants may not be lowered below $2.70 per share. A holder (together with its affiliates) may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% (or, at the election of the holder, 9.99%) of the outstanding shares of common stock immediately after exercise. If at the time a holder exercises its Warrants, a registration statement registering the resale of the shares of common stock underlying the Warrants under the Securities Act is not then effective or available and an exemption from registration under the Securities Act is not available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the Warrants. The registration statement for the resale of the common stock underlying the warrants went effective on October 23, 2024. The warrants were initially valued using Black Scholes and then fair valued at each reporting period using the Black Scholes model. |
| F-33 |
| Table of Contents |
| On December 6, 2024, a third closing occurred (the “Third Closing”), pursuant to which an aggregate principal amount of $
During the year the holders converted a total of $ |
| F-34 |
| Table of Contents |
13. | On May 14, 2024, The Company executed a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Investor”). Pursuant to the terms and conditions of the Purchase Agreement, the Investors agreed to purchase from the Company unsecured convertible note in the aggregate principal amount of $
On September 4, 2024 the Company issued a second securities purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Investor”). Pursuant to the terms and conditions of the Purchase Agreement, the Investors agreed to purchase from the Company unsecured convertible note in the aggregate principal amount of $
The Company obtained waiver from its lender with respect to defaults on covenants related to financial restatement of its Form 10Q for the three and nine months ended September 30, 2024 as outlined in Note 17 and the untimely filing of its Form 10-K for the year ended December 31, 2024 and its Form 10-Q for the three months ended March 31, 2025. |
|
|
14. | On May 22, 2024, iCoreConnect, Inc. (the “Company”) issued an unsecured note in the aggregate principal amount of $
On August 13, 2024, with an effective date of August 1, 2024 the Company entered into an exchange agreement and new convertible promissory note with the holder totaling $ |
| F-35 |
| Table of Contents |
15. | On September 13, 2024 the Company executed a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Investor”). Pursuant to the terms and conditions of the Purchase Agreement, the Investor agreed to purchase from the Company unsecured convertible notes in the aggregate principal amount of $
On November 9, 2024, pursuant to the terms and conditions of the Purchase Agreement, the Investor issued its second unsecured convertible notes in the aggregate principal amount of $
The Company obtained waivers from its lenders with respect to defaults on covenants related to financial restatement of its Form 10Q for the three and nine months ended September 30, 2024 as outlined in Note 17. |
9. DEIVATIVE LIABILITIES
On July 31, 2024 the Company entered into a waivers related to certain conditions as part of two notes issued in February 2024 and the Company issued warrants as consideration for these waivers.
The warrants associated with the waiver are subject to anti-dilution adjustments outlined in the warrants. In accordance with FASB ASC 815, the warrants along all future warrants and all convertible features of convertible debt issued from February 2024 were classified as liabilities. In addition, the warrants and convertible features must be valued every reporting period and adjust to market with the increase or decrease being adjusted through earnings. As of December 31, 204 and December 31, 2023 the fair value of these liabilities was $
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivative Liabilities
For purposes of determining whether certain instruments are derivatives for accounting treatment, the Company follows the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock. The standard applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock.
Liabilities measured at fair value on a recurring basis are summarized as follows:
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Derivative liability related to fair value of beneficial conversion features | $ | |
| $ | |
|
| $ |
|
| $ |
| ||||
Derivative liability related to fair value of Warrants |
| |
|
| |
|
|
|
|
|
|
| ||||
|
| - |
|
| - |
|
|
|
|
|
|
|
|
| ||
Total | $ |
|
| $ |
|
|
| $ |
|
| $ |
| ||||
The following table details the approximate fair value measurements within the fair value hierarchy of the Company’s derivative liabilities using Level 3 inputs:
|
| Total |
| |
Balance at January 1, 2024 |
| $ |
| |
Beneficial conversion features Q1 |
|
|
| |
Warrants Q1 |
|
|
| |
Beneficial conversion features Q2 |
|
|
| |
Warrants Q2 |
|
| ( | ) |
Beneficial conversion features Q3 |
|
|
| |
Warrants Q3 |
|
|
| |
Beneficial conversion features Q4 |
|
| ( | ) |
Warrants Q4 |
|
|
| |
Balance at December 31, 2024 |
| $ |
| |
As of December 31, 2024, the beneficial conversion feature of convertible debt is treated as an embedded derivative liability and changes in the fair value were recognized in earnings. The convertible debt are convertible into shares of the Company’s common stock, which did traded in an active securities market, therefore the embedded derivative liability was valued using the following market based inputs:
Closing trade price of Common Stock |
| $ |
| |
Intrinsic value of conversion option per share |
| $ | - |
|
The Company has no assets that are measured at fair value on a recurring basis. There were no assets or liabilities measured at fair value on a non-recurring basis during the year ended December 31, 2024.
As of December 31, 2024, the Company’s outstanding warrants and conversion features were treated as derivative liabilities and changes in the fair value were recognized in earnings. These common stock purchase warrants did not trade in an active securities market, and as such, the Company estimated the fair value of these warrants using Black-Scholes and the Company's convertible debt features were fair valued using a Monte Carlo Simulation with the following assumptions:
Annual Dividend Yield | ||
Expected Life (Years) | ||
Risk-Free Interest Rate | ||
Expected Volatility |
Expected volatility was based primarily on historical volatility of a basket of similar sized public entities in the healthcare information space given the Company did not have sufficient trading history to determine volatility beyond 2 years. Historical volatility was computed using daily pricing observations for recent periods of the basket. The Company believes this method produced an estimate that was representative of the Company’s expectations of future volatility over the expected term of these warrants. The Company had no reason to believe future volatility over the expected remaining life was likely to differ materially from historical volatility. The expected life was based on the remaining contractual term of the warrants and convertible debt. The risk-free rate was based on the U.S. Treasury rate that corresponded to the expected term of the warrants.
11. INCOME TAXES
The Company has incurred net losses since inception. As of December 31, 2024, the Company had cumulative federal net operating loss carryforwards of approximately $
| F-36 |
| Table of Contents |
Deferred taxes comprise the following as of December 31, 2024 and 2023:
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Net Operating Losses |
| $ |
|
| $ |
| ||
Intangible assets |
|
|
|
|
|
| ||
Stock-based compensation-nonqualified |
|
|
|
|
|
| ||
Property and equipment |
|
| ( | ) |
|
| ( | ) |
Allowance for bad debts |
|
|
|
|
|
| ||
Forward purchase agreement |
|
|
|
|
|
| ||
Organizational costs |
|
|
|
|
|
| ||
ROU lease liability |
|
|
|
|
|
| ||
Net Deferred Tax Asset |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
ROU lease asset |
|
| ( | ) |
|
| ( | ) |
Total Deferred Tax Liability |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Valuation Allowance |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Reconciliation of the effective income tax rate to the federal statutory rate: |
|
|
|
|
|
|
|
|
Federal Income Tax Rate |
|
| % |
|
| % | ||
Permanent Differences |
|
| ( | )% |
|
| ( | )% |
State Taxes, net |
|
| % |
|
| % | ||
Cumulative adjustments |
|
| % |
|
| % | ||
Change in valuation allowance including the effect of the rate change |
|
| ( | )% |
|
| ( | )% |
Effective income tax rate |
|
| % |
|
| % | ||
12. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and trade accounts receivables. The Company places its cash with high-credit-quality financial institutions. At times, such cash may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance coverage limit of $
The Company has historically provided financial terms to customers in accordance with what management views as industry norms. Access to the Company’s software products usually requires immediate payment but can extend several months under certain circumstances. Management periodically and regularly reviews customer account activity in order to assess the adequacy of allowances for doubtful accounts, considering such factors as economic conditions and each customer’s payment history and creditworthiness. If the financial condition of our customers were to deteriorate, or if they were otherwise unable to make payments in accordance with management’s expectations, we might have to increase our allowance for doubtful accounts, modify their financial terms and/or pursue alternative collection methods.
The Company has no significant customers (greater than
| F-37 |
| Table of Contents |
13. COMMITMENTS AND CONTINGENCIES
(A) LEASE COMMITMENTS
On September 22, 2021,
The Company signed a three-year lease agreement for approximately 2,100 square feet of office space located in Concord, NC on July 16, 2020. In August 2023 and then in August 2024, the Company extended its lease for another year on similar terms and conditions as its current lease. This lease was assigned to the purchaser of the Managed IT Service assets on October 1, 2024.
With the acquisition of Advantech, the Company signed a two-year lease on May 12, 2021, for an office in Scottsdale, AZ. In May 2023, the Company extended its lease for an additional 24 months for this location beginning July 1, 2023 under similar terms and conditions as its current lease. This lease was renewed for another year on similar terms in 2024 and was assigned to the purchaser of the Managed IT Service assets on October 1, 2024.
As of December 31, 2024, undiscounted future lease obligations for the office space are as follows:
Lease Commitments | ||||||||||||||
as of December 31, 2024 | ||||||||||||||
Less than 1 year |
|
| 1-3 years |
|
| 3-5 years |
|
| Total |
| ||||
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Lease costs for the year ended December 31, 2023 were $
Undiscounted minimum lease commitments |
| $ |
| |
Less: Imputed Interest |
|
| ( | ) |
Lease liabilities |
| $ |
|
| F-38 |
| Table of Contents |
(B) EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Chief Executive Officer
We entered into an employment agreement, effective September 1, 2023, with Robert McDermott, pursuant to which he agreed to serve as our Chief Executive Officer for an initial term of three years, which will be automatically renewed for additional one-year terms unless either party chooses not to renew the agreement. Mr. McDermott’s agreement provided for an initial annual base salary of $
If Mr. McDermott’s employment is terminated at our election without “cause”, or by Mr. McDermott for “good reason,” Mr. McDermott shall be entitled to receive severance payments equal to 18 months of Mr. McDermott’s base salary; provided that such amounts shall be increased to 24 months of Mr. McDermott’s base salary if Mr. McDermott’s agreement is terminated without “cause” or by Mr. McDermott for “good reason” within three months prior to or twelve months after of a “change of control.” In addition, if Mr. McDermott’s agreement is terminated without “cause” or by Mr. McDermott for “good reason” within three months prior to or twelve months after of a “change of control,” any of the unvested equity awards shall also immediately vest. During any period that Mr. McDermott is entitled to severance payments, the Company will continue to pay the same portion of Mr. McDermott’s medical and dental insurance premiums under COBRA as during active employment until the earlier of (1) six months from the termination of employment, or (2) the date Mr. McDermott is eligible for medical and/or dental insurance benefits from another employer. Mr. McDermott agreed not to compete with us until 12 months after the termination of his employment.
Chief Financial Officer
We entered into an employment agreement, effective September 1, 2023, with Archit Shah, pursuant to which he agreed to serve as our Chief Financial Officer for an initial term of three years, which will be automatically renewed for additional one-year terms unless either party chooses not to renew the agreement. Mr. Shah’s agreement provided for an initial annual base salary of $
If Mr. Shah’s employment is terminated at our election without “cause”, or by Mr. Shah for “good reason,” Mr. Shah shall be entitled to receive severance payments equal to six months of Mr. Shah’s base salary; provided that such amounts shall be increased to 12 months of Mr. Shah’s base salary if Mr. Shah’s agreement is terminated without “cause” or by Mr. Shah for “good reason” within three months prior to or twelve months after of a “change of control.” In addition, if Mr. Shah’s agreement is terminated without “cause” or by Mr. Shah for “good reason” within three months prior to or twelve months after of a “change of control,” any of the unvested equity awards shall also immediately vest. During any period that Mr. Shah is entitled to severance payments, the Company will continue to pay the same portion of Mr. Shah’s medical and dental insurance premiums under COBRA as during active employment until the earlier of (1) six months from the termination of employment, or (2) the date Mr. Shah is eligible for medical and/or dental insurance benefits from another employer. Mr. Shah agreed not to compete with us until 12 months after the termination of his employment.
| F-39 |
| Table of Contents |
Chief Operating Officer
We entered into an employment agreement, effective September 1, 2023, with David Fidanza pursuant to which he agreed to serve as our Chief Operating Officer for an initial term of three years, which will be automatically renewed for additional one-year terms unless either party chooses not to renew the agreement. Mr. Fidanza’s agreement provided for an initial annual base salary of $
If Mr. Fidanza’s employment is terminated at our election without “cause”, or by Mr. Fidanza for “good reason,” Mr. Fidanza shall be entitled to receive severance payments equal to six months of Mr. Fidanza’s base salary; provided that such amounts shall be increased to 12 months of Mr. Fidanza’s base salary if Mr. Fidanza’s agreement is terminated without “cause” or by Mr. Fidanza for “good reason” within three months prior to or twelve months after of a “change of control.” In addition, if Mr. Fidanza’s agreement is terminated without “cause” or by Mr. Fidanza for “good reason” within three months prior to or twelve months after of a “change of control,” any of the unvested equity awards shall also immediately vest. During any period that Mr. Fidanza is entitled to severance payments, the Company will continue to pay the same portion of Mr. Fidanza’s medical and dental insurance premiums under COBRA as during active employment until the earlier of (1) six months from the termination of employment, or (2) the date Mr. Fidanza is eligible for medical and/or dental insurance benefits from another employer. Mr. Fidanza agreed not to compete with us until 12 months after the termination of his employment.
Chief Technology Officer
We entered into an employment agreement, effective September 1, 2023, with Murali Chakravarthi pursuant to which each officer agreed to serve as our Chief Technology Officer for an initial term of three years, which will be automatically renewed for additional one-year terms unless either party chooses not to renew the agreement. Mr. Chakravarthi’s agreement provided for an initial annual base salary of $
If Mr. Chakravarthi’s employment is terminated at our election without “cause”, or by Mr. Chakravarthi for “good reason,” Mr. Chakravarthi shall be entitled to receive severance payments equal to six months of Mr. Chakravarthi’s base salary; provided that such amounts shall be increased to 12 months of Mr. Chakravarthi’s base salary if Mr. Chakravarthi’s agreement is terminated without “cause” or by Mr. Chakravarthi for “good reason” within three months prior to or twelve months after of a “change of control.” In addition, if Mr. Chakravarthi’s agreement is terminated without “cause” or by Mr. Chakravarthi for “good reason” within three months prior to or twelve months after of a “change of control,” any of the unvested equity awards shall also immediately vest. During any period that Mr. Chakravarthi is entitled to severance payments, the Company will continue to pay the same portion of Mr. Chakravarthi’s medical and dental insurance premiums under COBRA as during active employment until the earlier of (1) six months from the termination of employment, or (2) the date Mr. Chakravarthi is eligible for medical and/or dental insurance benefits from another employer. Mr. Chakravarthi agreed not to compete with us until 12 months after the termination of his employment.
| F-40 |
| Table of Contents |
(C) LITIGATION
The Company from time to time, may be a party to various litigation, claims and disputes, arising in the ordinary course of business. While the ultimate impact of such actions cannot be predicted with certainty, we believe the outcome of these matters, except for that noted below, will not have a material adverse effect on our financial condition or results of operations.
On August 18, 2021, iCoreConnect received a Notice of Disposition of Collateral under section 9-611 of the Uniform Commercial Code (“UCC”) (Arizona Revised Statutes 47-611) purporting to set a foreclosure sale, under the UCC, of its assets that were previously pledged as security to Sonoran Pacific Resources, LLP, an Arizona limited liability partnership (“SPR”) and Jerry Smith (“Smith”) (collectively, the “lender”). On November 1, 2022, iCoreConnect entered into a settlement agreement and release (the “Settlement Agreement”) with SPR and Smith in connection with the above litigation. In order to resolve all matters subject to the dispute, the Settlement Agreement provided that on, or before, the 60th day following the effective date of the Settlement Agreement, which was November 1, 2022 (such 60th day, the “Payment Date”), iCoreConnect shall redeem, and/or or iCoreConnect’s designees shall acquire, a total of
On June 15, 2021, the Company received a Complaint filed with the Circuit Court of the Ninth Judicial Circuit for Orange County, Florida. The Complaint alleges a breach of a previously entered into 2018 Settlement Agreement for which payments have not been made. The Complainant agreed to begin arbitration on August 31, 2021. Upon completion of arbitration in October 2022 the Complainant was awarded an Interim Award of Arbitration in the amount of $
On February 21, 2023, the Company received a notice under section 21 of Indian Arbitration and Conciliation Act, 1996 related to a dispute pursuant to a contract between the Company and a service provider, pursuant to which the service provider has asserted the Company has violated the terms of the contract and has claimed damages of approximately $
| F-41 |
| Table of Contents |
14. ACQUISITIONS AND DIVESTITURES
The Company accounts for business combinations under the acquisition method of accounting, in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, which requires assets acquired and liabilities assumed to be recognized at their fair values on the acquisition date. Any excess of the fair value of purchase consideration over the fair value of the assets acquired less liabilities assumed is recorded as goodwill. The fair values of the assets acquired and liabilities assumed are determined based upon the valuation of the acquired business and involves management making significant estimates and assumptions.
Ally Commerce, Inc dba FeatherPay (“FeatherPay”)
On January 1, 2024, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Ally Commerce, Inc. dba FeatherPay (the “Seller”). The Seller was engaged in the business of healthcare billing and payment processing. Pursuant to the Agreement, the Company purchased the assets of the Seller utilized in the Seller’s business. As consideration for the acquired assets: (i) the Company paid to FeatherPay $
Teamworx LLC (“Teamworx”)
On January 1, 2024, the Company entered into an Asset Purchase Agreement with Teamworx LLC (“Teamworx”). Teamworx was engaged in the business of healthcare billing and payment processing. Pursuant to the Agreement, the Company purchased the assets of the Seller utilized in the Seller’s business. As consideration for the acquired assets: (i) the Company paid to Seller $
Verifi Dental Limited (“Verifi”)
On January 1, 2024, the Company entered into an Asset Purchase Agreement with Verifi Dental, Limited (the “Seller”). The Seller was engaged in the business of healthcare billing and payment processing. As consideration for the acquired assets: (i) the Company paid to Seller $
Preferred Dental Development, LLC (“Preferred Dental”)
On September 1, 2023, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Preferred Dental Development, LLC (the “Seller”). The Seller was engaged in the business of providing dental billing and claims services. Pursuant to the Agreement, the Company purchased the assets of the Seller utilized in the Seller’s business. As consideration for the acquired assets: (i) the Company issued a note to the Seller in the amount of $
Certain fair values of acquired assets and assumed liabilities may be estimated at the acquisition date pending confirmation or completion of the valuation process. Where provisional values are used in accounting for a business combination, they may be adjusted retrospectively in subsequent periods within the measurement period when it reflects new information obtained about facts and circumstances that were in existence at the acquisition date. The measurement period cannot exceed one year from the acquisition date.
Pursuant to the guidance in FASB ASC Topic 805, Business Combinations, the Company calculated the estimated fair value of the acquired customer relationships using the discounted cash flow approach. The key assumptions and inputs into the cash flow model used were: (1) an annual customer attrition rate of
| F-42 |
| Table of Contents |
The following table summarizes the consideration paid and the fair value of the assets acquired and liabilities assumed as of the dates detailed in the table:
|
| FeatherPay |
|
| Verifi Dental |
|
| Teamworx |
| |||
Consideration Paid: |
| January 1, 2024 |
|
| January 1, 2024 |
|
| January 1, 2024 |
| |||
Cash |
| $ |
|
| $ |
|
| $ |
| |||
Note payable |
|
|
|
|
|
|
|
|
| |||
Common stock |
|
|
|
|
|
|
|
|
| |||
Series A preferred stock |
|
|
|
|
|
|
|
|
| |||
|
| $ |
|
| $ |
|
| $ |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair values of identifiable assets acquired and liabilities assumed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
| $ |
|
| $ |
|
| $ |
| |||
Accounts receivable |
|
|
|
|
|
|
|
|
| |||
Acquired technology |
|
|
|
|
|
|
|
|
| |||
Deferred revenue |
|
|
|
|
|
|
|
|
| |||
Total assets acquired |
| $ |
|
| $ |
|
| $ |
| |||
|
| Preferred Dental |
| |
Consideration Paid: |
| September 1, 2023 |
| |
Note payable |
| $ |
| |
Common stock |
|
|
| |
|
| $ |
| |
|
|
|
|
|
Fair values of identifiable assets acquired: |
|
|
|
|
|
|
|
|
|
Assets acquired: |
|
|
|
|
Cash |
| $ |
| |
Customer relationships |
|
|
| |
Total assets acquired |
| $ |
| |
| F-43 |
| Table of Contents |
Divestiture of Assets
On October 1, 2024 the Company entered into an Asset Purchase Agreement (“APA”) pursuant to which the Company sold capital assets and customer contracts of its Managed IT Services (MSP and MSaaS) product offering to a Purchaser for approximately $
| F-44 |
| Table of Contents |
15. RELATED PARTY TRANSACTIONS
|
| December 31, |
|
| December 31, |
| |||
|
| 2024 |
|
| 2023 |
| |||
(2) | Related Party Promissory Note bearing interest at |
| $ |
|
| $ |
| ||
(1) | Related Party Promissory Note bearing interest at |
|
|
|
|
|
| ||
(1) | Related Party Promissory Note bearing interest at |
|
|
|
|
|
| ||
(1) | Related Party Promissory Note bearing interest at |
|
|
|
|
| |
| |
(1) | Related Party Convertible Promissory Note bearing interest at |
|
|
|
|
| |
| |
(1) | Related Party Convertible Promissory Note bearing interest at |
|
|
|
|
|
|
| |
| Total notes payable |
|
|
|
|
|
| ||
| Less: Unamortized debt discounts |
|
|
|
|
|
| ||
| Less: unamortized financing costs |
|
| ( | ) |
|
| ( | ) |
| Total notes payable, net of financing costs |
|
|
|
|
|
| ||
| Less current maturities |
|
| ( | ) |
|
| ( | ) |
| Total Long-Term Debt |
| $ |
|
| $ |
| ||
1. | In October 2023 the Company entered into two separate new notes with a related party; (a) $ |
|
|
2. | In June 2023 the Company entered into a promissory note with an entity controlled by its Chief Executive Officer, a related party. The Note is for $ |
| F-45 |
| Table of Contents |
16. SEGMENT REPORTING
The Company has one operating and reporting segment (iCoreConnect Inc), namely, the sales of Software as a Service. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. The chief operating decision maker (“CODM”), who is the Company’s chief executive officer, utilizes the Company’s financial information on an aggregate basis for purposes of making operating decisions, allocating resources and assessing financial performance, as well as for making strategic operations decisions and managing the organization. The measure of segment assets is reported on the balance sheet as total assets.
The Company’s significant expenses reviewed by the CODM for the years ended December 31, 2024 and 2023 are as follows:
|
| For the Years Ended |
| |||||
|
| December 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Revenue: |
|
|
|
|
|
| ||
Revenue |
| $ |
|
| $ |
| ||
Less: |
|
|
|
|
|
|
|
|
Cost of revenue |
|
| ( | ) |
|
| ( | ) |
Gross profit |
|
|
|
|
| ) | ||
Less: |
|
|
|
|
|
|
|
|
Selling General and Administrative: |
|
|
|
|
|
|
|
|
Personnel costs |
|
|
|
|
|
| ||
Occupancy costs |
|
|
|
|
|
| ||
Advertising and marketing |
|
|
|
|
|
| ||
Professional fees |
|
|
|
|
|
| ||
Office expenses |
|
|
|
|
|
| ||
Travel and entertainment |
|
|
|
|
|
| ||
Total Expense: |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Loss from Operations |
|
| ( | ) |
|
| ( |
|
|
|
|
|
|
|
|
|
|
Other (expense) income, net (1) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | ( | ) |
| $ | ( | ) |
(1) | All other items include depreciation, amortization, interest expense, financing costs, loss on sale of assets, change in fair value of forward purchase agreement, dividend expense for Series A Preferred and other non operating expenses. |
17. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (UNAUDITED)
In February 2024, the Company issued convertible debt with no floor which resulted in the conversion feature being deemed an embedded derivative since the issuer must determine if they have enough authorized and unissued shares to settle the potential conversion. As a result of the floorless conversion option, the debt conversion feature does not meet the scope exception under ASC 815-40 and therefore the conversion option and any related warrants must be recorded as a derivative liability. The Company adopted a sequencing policy which now requires all debt issued with warrants, conversion options and other embedded features to be recorded at fair value at each reporting period. The Company did not properly account for these instruments in its Form 10Q3 for 2024 and therefore was recorded in error.
The following table summarizes the effects of the restatement on the specific items presented in the Company’s historical unaudited interim consolidated financial statements previously included in the Company’s Quarterly Report on Form 10-Q as of and for the three and nine months ended September 2024 (unaudited):
CONSOLIDATED BALANCE SHEET
As At September 30, 2024
|
| As previously |
|
|
|
|
| |||||
|
| Report |
|
| Adjustment |
|
| As Restated |
| |||
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
| |||
Warrant and embedded derivative liability |
| $ |
|
| $ |
|
| $ |
| |||
Notes payable, current portion |
|
| |
|
|
| |
|
|
| |
|
Total current liabilities |
|
| |
|
|
| |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant and embedded derivative liability, net current |
|
| |
|
|
| |
|
|
| |
|
Total long-term liabilities |
|
| |
|
|
| |
|
|
| |
|
Total liabilities |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in-capital |
|
|
|
|
| ( | ) |
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Total Stockholders' deficit |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT |
| $ |
|
| $ | - |
|
| $ |
| ||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| Three Months Ended September 30, 2024 |
|
| Nine Months Ended September 30, 2024 |
| ||||||||||||||||||
|
| As previously |
|
|
|
|
|
|
|
| As previously |
|
|
|
|
|
|
| ||||||
|
| Report |
|
| Adjustment |
|
| As Restated |
|
| Report |
|
| Adjustment |
|
| As Restated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Finance charges |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Fair value change in warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Fair value change in embedded derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total other expenses |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders |
| $ | ( | ) |
|
| ( | ) |
| $ | ( | ) |
|
| ( | ) |
|
| ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share available to common stockholders, basic and diluted |
| $ | ( | ) |
|
|
|
|
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT)
As at September 30, 2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Stockholders' |
| |||||||
|
| Common stock |
|
| Preferred Stock |
|
| Paid In |
|
| Accumulated |
|
| Equity |
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| (Deficit) |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Previously Reported |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||||
Restatement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Balances at September 30, 2024 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
|
| Nine Months Ended September 30, 2024 |
| |||||||||
|
| As previously |
|
|
|
|
|
|
| |||
|
| Report |
|
| Adjustment |
|
| As Restated |
| |||
|
|
|
|
|
|
|
|
|
| |||
Net loss |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Financing Fee |
|
|
|
|
|
|
| |||||
Change in fair value of embedded derivatives |
|
| |
|
|
| ( | ) |
|
| ( | ) |
Change in fair value of warrants |
|
| |
|
|
| ( | ) |
|
| ( | ) |
Net cash used in Operating Activities |
| $ | ( | ) |
| $ |
| $ | ( | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
17. SUBSEQUENT EVENTS
On January 2, 2025, The Company executed a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Investor”). Pursuant to the terms and conditions of the Purchase Agreement, the Investors agreed to purchase from the Company unsecured convertible note in the aggregate principal amount of $
On March 2, 2025 debt holders, who collectively owned 142,690 common stock warrants, agreed to cancel them immediately without consideration. The canceled warrants included anti-dilution provisions that could have led to an increase in the number of warrants and a reduction in the exercise price if new shares were issued at a lower price.
On March 10, 2025, iCoreConnect, Inc. (the “Company”) received notice from PIGI Solutions, LLC (the “PIGI”) that it is exercising its purported right as a secured creditor under the Uniform Commercial Code (Del. UCC § 9-613) to conduct a public auction on or after May 9, 2025, of substantially all of the Company’s personal property. PIGI claims the Company owes $
| F-46 |
| Table of Contents |
On March 14, 2025 the Company issued
On March 19, 2025 the Company executed and Business Loan and Security Agreement (Agreement”) with a lender. Pursuant to the terms and conditions of the Agreement the Lender agreed to purchase from the Company a Secured Promissory Note in the aggregate principal amount of $
On March 19, 2025 the Company and two lenders whose notes matured March 19, 2025 extended these notes on the same terms until June 19, 2025.
On March 21, 2025 the Company and its landlord mutually agreed to cancel
On March 25, 2025 the Company exited the Forward Purchase Agreement for net proceeds of $
On April 1, 2025 the Company issued
On April 10, 2025, iCoreConnect, Inc. (the “Company”) entered into a Revolving Loan Agreement (the “Revolving Loan Agreement”) with Bowery Consulting Group, Inc.an institutional investor (the “Lender”). Pursuant to and under the terms of the Revolving Loan Agreement, the Company issued to the Lender a revolving note dated April 10, 2025 in the principal amount of up to $
The Revolving Note bears interest at the rate of
On the first anniversary of the Closing Date, the entire Payment Amount (or, if an Event of Default shall have previously occurred, the Default Amount) shall become due and payable (the “Maturity Date”). All outstanding Revolving Loans: (i) shall be payable in full on the Maturity Date or may be paid or pre-paid, in whole or in part, to the Lender prior to the Maturity Date, and (ii) may thereafter be borrowed or reborrowed, subject to the terms of the Revolving Loan Agreement. All payments of principal of any Revolving Loan or Revolving Loans thereunder shall be accompanied by the payment in full of all accrued and unpaid interest thereon. No Revolving Loans may be requested or made hereunder on any date that is after the tenth (10th) business day preceding the Maturity Date.
The Revolving Loan Agreement contains customary events of default. If an event of default occurs, the Lender may accelerate the indebtedness under the Revolving Loan Agreement, and an amount equal to
The Revolving Loan Agreement also provides that from the date of the Revolving Loan Agreement until the earlier to occur of (i) the Maturity Date and (ii) the repayment in full of any Revolving Loans in the Payment Amount, the Company will use its reasonable best efforts to consummate a public offering of not less than $
The Revolving Loan Agreement and the Revolving Note contain negative covenants on the part of the Company and customary representations, warranties, conditions and indemnification obligations of the parties. Among other things, the Company shall not directly or indirectly, with certain exceptions: (i) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its common stock or common stock equivalents; or (ii)
On April 23, 2025 and May 15, 2025, the Company received advances from the Revolving Loan totally $
On May 7, 2025 with an effective date of January 31, 2025 the Company entered into note extension agreements with its two related parties for notes that matured on January 31, 2025 these note were reissued under the same terms to July 31, 2025. The Company issued the investors a three-year warrant to purchase a combined
On May 15, 2025 the Company entered into an Agreement of Sale of Future Receipts (“Agreement” with a purchaser.
On May 20, 2025, we received a determination letter from the Panel informing us that the Panel has determined to delist our common stock from Nasdaq for failure by the Company to timely file its Form 10-K for the year ended December 31, 2024 and Form 10-Q for the quarter ended March 31, 2025. Suspension of trading of the common stock occurred at the opening of business on May 22, 2025.
During the period of January 1, 2025 to May 29, 2025, convertible note holders converted $
| F-47 |
| Table of Contents |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal year ended December 31, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Based on this evaluation, our Chief Executive Officer who is our principal executive officer and our Chief Financial Officer, who is our principal financial and accounting officer, have concluded that as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of December 31, 2024 due to a material weaknesses as follows:
| · | The Company lacks formal review and approval procedures, including lack of review of Service Organization Control (SOC) reports, and lack of controls over proper IT related change management, backup of data and privileged user assess. |
| · | Ineffective internal controls with respect to the valuation of intangible assets. Specifically, the Company's controls failed to demonstrate appropriate review over valuation methodologies, documentation, and other processes for intangible assets. |
| · | A lack of controls in place to correctly identify derivative liabilities as part of convertible notes, accounting implications for convertible notes with no floor, or ability to distinguish between equity or liability treatment for warrant and understand the accounting impact of instruments with down round features. |
| · | Lack of adequate segregation of duties over financial transaction processing and reporting due to a lack of a sufficient number of accounting personnel. |
| · | The Company lacks the ability to timely maintain accurate books and records, which impacts the Company's ability to file accurate financial reports in a timely manner. |
To address these material weaknesses, management has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of its internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate its research and understanding of the nuances of the complex accounting standards that apply to its financial statements. We plan to include providing enhanced access to accounting literature, research materials and documents and increased communication among its personnel and third-party professionals with whom it consults regarding complex accounting applications and we also plan to hire additional personnel to help provide adequate segregation of duties in the financial reporting process.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal period that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 33 |
| Table of Contents |
Management’s Annual Report on Internal Control Over Financial Reporting
Our Chief Executive Officer and our Chief Financial Officer were responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting refers to the processes designed by, or under the supervision of, our Chief Executive Officer, and Chief Financial Officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
1. | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
|
|
2. | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and |
|
|
3. | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of preventing and detecting misstatements on a timely basis. It is possible to design into the process safeguards to reduce, though not eliminate, the risk that misstatements are not prevented or detected on a timely basis.
Our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in the report entitled Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO (2013 Framework). Based on this assessment, management has concluded that, as of December 31, 2024, our internal control over financial reporting was not effective due to the material weaknesses described above.
This report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls over financial reporting for as long as we are a "non-accelerated filer."
Item 9B. Other Information.
During the year ended December 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
On April 10, 2025, the Company entered into a Revolving Loan Agreement (the “Revolving Loan Agreement”) with an institutional investor (the “Lender”), which is affiliated with Adam Chambers, one of our directors. Pursuant to and under the terms of the Revolving Loan Agreement, the Company issued to the Lender a revolving note dated April 10, 2025 in the principal amount of up to $2,180,000 (the “Revolving Note” and such amount, the “Maximum Outstanding Amount”), which the Company may draw upon at its discretion from time to time (the “Financing”). The Revolving Note bears interest at the rate of 18% per annum calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue interest daily commencing from the date of any draw down until paid in full. On the first anniversary of the closing date, the entire Payment Amount (or, if an Event of Default shall have previously occurred, the Default Amount) shall become due and payable (the “Maturity Date”). All outstanding Revolving Loans: (i) shall be payable in full on the Maturity Date or may be paid or pre-paid, in whole or in part, to the Lender prior to the Maturity Date, and (ii) may thereafter be borrowed or reborrowed, subject to the terms of the Revolving Loan Agreement. All payments of principal of any Revolving Loan or Revolving Loans thereunder shall be accompanied by the payment in full of all accrued and unpaid interest thereon. No Revolving Loans may be requested or made hereunder on any date that is after the tenth (10th) business day preceding the Maturity Date. The Revolving Loan Agreement contains customary events of default. If an event of default occurs, the Lender may accelerate the indebtedness under the Revolving Loan Agreement, and an amount equal to 120% of the outstanding principal amount and accrued and unpaid interest plus other amounts, costs, expenses and/or liquidated damages due under or in respect of the Loan Documents for the Financing, if any. On the closing date, the Company issued to Lender a number of shares of common stock equal to 4.99% of the outstanding shares of common stock on the closing date (after giving effect to such issuance to Lender).
The Revolving Loan Agreement also provides that from the date of the Revolving Loan Agreement until the earlier to occur of (i) the Maturity Date and (ii) the repayment in full of any Revolving Loans in the Payment Amount, the Company will use its reasonable best efforts to consummate a public offering of not less than $5,000,000 as soon as practicable.
On May 21, 2025, the Company received notice from Element SaaS Finance (USA), LLC (“Element”) that it believed the fees paid in connection with the Settlement and Mutual Release Agreement (the “Settlement Agreement”) dated May 6, 2025 between the Company, PIGI Solutions, LLC (“PIGI”) and certain other parties constituted a breach by the Company of its obligations under its loan agreement with Element. Further, the notice stated that Element believed the payment of the amounts owed to PIGI by the Company pursuant to the Settlement Agreement represented an anticipatory breach of the Company’s loan documents with Element and violates Element's rights as the senior secured creditor of the Company. Element has demanded that PIGI disgorge the previously paid fees by the Company to PIGI to Element on or before Monday, June 2, 2025. If such amount is not paid to Element by June 2, 2025, Element has asserted that the loan shall be in default and all obligations under the loan agreements shall be accelerated. On such date, the loan amount payable would be $1,854,713.31.
As previously disclosed, the Company was notified by the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) that it was not in compliance with certain listing requirements, including Listing Rule 5250(c)(1) since it had not yet filed its Form 10-K for the period ended December 31, 2024. The Company requested a hearing with a Nasdaq Hearings Panel (“Panel”), which had the effect of staying any suspension or delisting action pending the conclusion of the hearings process. On April 24, 2025, the Company received notification from the Panel that it has granted an extension until May 15, 2025 to file its Form 10-K for the period ended December 31, 2024, and until June 30, 2025, to demonstrate compliance with all continued listing requirements for the Nasdaq Capital Market.
On May 20, 2025, the Company received a determination letter from the Panel informing the Company that the Panel has determined to delist the Company’s common stock from Nasdaq for failure by the Company to timely file its Form 10-K for the year ended December 31, 2024 and Form 10-Q for the quarter ended March 31, 2025. Suspension of trading of the common stock occurred at the opening of business on May 22, 2025.
The notification indicates that Nasdaq will effect the delisting by filing a Form 25 Notification of Delisting with the Securities and Exchange Commission after the applicable Nasdaq appeal and review periods have expired. The Company may appeal the delisting determination to the Nasdaq Listing and Hearing Review Council within the required 15 days from the date of the Panel’s decision. However, an appeal would not stay the suspension of the trading of the Company’s securities on Nasdaq. Following the delisting, the Company expects that the common stock will be quoted on the OTC Market.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.
Not applicable.
| 34 |
| Table of Contents |
PART III
Items 10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
The following table sets forth the names and ages of all of our directors and executive officers as of May 29, 2024. Our officers are appointed by, and serve at the pleasure of, the Board of Directors.
Name |
| Age |
| Position |
Robert P. McDermott |
| 58 |
| Chief Executive Officer and President |
Archit Shah |
| 50 |
| Chief Financial Officer |
David Fidanza |
| 62 |
| Chief Information Officer |
Muralidar Chakravarthi |
| 46 |
| Chief Technology Officer |
John Pasqual |
| 54 |
| Director |
Wayne Kalish |
| 63 |
| Director |
Adam Chambers |
| 50 |
| Director |
David Piedra |
| 32 |
| Director |
Angel Liriano |
| 29 |
| Director |
Joseph Tung |
| 42 |
| Director |
Set forth below is biographical information about each of the individuals named in the tables above:
Robert P. McDermott (age 58) has been Chief Executive Officer and President of iCoreConnect and is a member of the Company’s board of directors since August 2023. He is a 30-year veteran in sales, operations and finance. Mr. McDermott has had a successful career as an entrepreneur while demonstrating strong leadership skills in running these organizations. Mr. McDermott's Company (AXSA Document Solutions Inc.) made the prestigious Inc. 500 list and was listed as the 173rd fastest growing Company in America while he was CEO. He joined iCoreConnect Inc. (Nevada) (the predecessor to 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. Mr. R. McDermott is currently the Chair of the Board. We believe that Mr. McDermott’s history with our company and knowledge of our business provides him with the qualifications to serve as a director.
Archit Shah (age 50) has served as Chief Financial Officer of iCoreConnect Inc. (Nevada) (the predecessor to iCoreConnect) since September 2021. Mr. Shah brings over 20 years of finance and accounting experience to iCoreConnect. Mr. Shah has extensive experience as a finance and operations consultant focused on start-ups, turnarounds and restructurings in a variety of industries ranging from pharmaceutical companies to consumer health products to fitness concepts. Mr. Shah owned and operated several franchise concepts since 2016 as well as his running his own financial consulting practice since 2014, prior to which he was the Chief Financial Officer for XOS Digital Inc from 2012 to 2014. Mr. Shah holds a Bachelor of Commerce (Honors) from the University of Manitoba and is a designated Chartered Professional Accountant (CPA, CA) from the Chartered Professional Accountants of Manitoba. He is also a Certified Public Accountant by the State of Illinois.
David Fidanza (age 62) joined iCoreConnect Inc. (Nevada) (the predecessor to iCoreConnect) in April 2015 as the Director of Software Implementation and has served as Chief Information Officer September 2017. 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. Mr. Fidanza oversees the MSaaS IT Department, and Content Development Initiatives. Mr. Fidanza holds a Diploma in Computer Processing from The Computer Processing Institute Diploma in New Jersey as wells as over 30 technical and software certifications in various products and softwares.
| 35 |
| Table of Contents |
Muralidar Chakravarthi (age 46) has served as Chief Technology Officer of iCoreConnect Inc. (Nevada) (the predecessor to iCoreConnect) since October 2013 and is currently responsible for understanding the business needs and managing the successful design, development and deployment of iCoreConnect’s products and services. Mr. Chakravarthi has extensive experience in designing, developing and deploying multiple products and solutions to market. He was previously the Chief Software Architect for Nasplex Datacenters, LLC from 2010 through 2013, which was acquired by Transformyx Technologies, Inc. His job duties at Nasplex were to manage the design and development of various products and services. His role also included identifying key solutions for certain market spaces. He was also a cofounder of Team Cajunbot (University of Louisiana) — one of the teams that participated and was selected to run in the finals in the DARPA grand challenge for autonomous vehicle research (2004 – 2006). He holds a Master of Science in Computer Science from Southern Illinois University.
John Pasqual (age 54) has been a director of iCoreConnect since August 2023. Dr. Pasqual served as Clinical Associate Professor at the University of Florida from 2013 to 2015 and has practiced as a board-certified oral & maxillofacial surgeon in private practice since 2010. Dr. Pasqual brings extensive experience and expertise in healthcare to iCoreConnect. Dr. Pasqual holds a Doctor of Dental Medicine degree from the University of Pittsburgh and multiple certificates in Oral and Maxillofacial Surgery, Anesthesia and Dentistry from Case Western Reserve University. Dr. Pasqual earned his Bachelor of Arts in Biology & English Literature at the University of Denver. He is a Fellow of the American College of Oral and Maxillofacial Surgery, American Association of Oral and Maxillofacial Surgeons, and Diplomate of the American Board of Oral and Maxillofacial Surgery. Dr. Pasqual is past president of the Atlantic Coast Dental Association and South Palm Beach County Dental Association and maintains membership in a number of professional associations and societies. Dr. Pasqual is an independent director and chair of the Nominating and Governance Committee and sits on the Audit Committee and Compensation Committee. We believe that Dr. Pasqual’s experience in the dental industry provides him with the qualifications to serve as a director.
Wayne Kalish (age 63) has been a director of iCoreConnect since September 2024. A New York native, Mr. Kalish graduated from the University of Central Florida in 1984, with a Bachelor of Business Administration degree with an emphasis in Accounting. He began his career as a Certified Public Accountant with KPMG and moved on to various roles over the course of his career including being the Vice President, Accounting and Corporate Planning and Analysis at Darden (NYSE), Chief Financial Officer at Tavistock Corporation and Concord Management, Limited, along with holding the role of VP Controller and Chief Accounting Officer with Ruby Tuesday (former NYSE). Wayne is now a partner with The Florida CFO Group which is a contractor-based Chief Financial Officer practice focused on bringing value to small and middle market owner-managed businesses. Wayne and his partners provide services including Interim Financial and General Management, Financial Planning, Analysis and Forecasting, Treasury and Risk Management, Internal Controls, Mergers and Acquisitions support, Financing assistance, and Business Valuation. Wayne’s services often culminate with the successful sale of client businesses to Private Equity or Strategic Buyers, monetizing decades of dedicated business owner service to customers and communities. In addition to his work accomplishments, Wayne serves on several not for profit boards as well as guest speaks at University of Central Florida and Rollins Crummer Graduate School of Business on various business topics. Mr. Kalish is an independent director and chair of the Audit Committee and sits on the Nominating and Governance Committee and Compensation Committee. We believe that Mr. Kalish’s experience in the finance function and as outsource CFO provides him with the qualifications to serve as a director.
Mr. Adam V. Chambers (age 50) has been a director of iCoreConnect Since April 2025. Mr. Chambers’ professional experience includes founding a myriad of businesses, acting as a Senior Investment Advisor (developing significant books of business), spearheading capital raising initiatives for public and private entities, and for providing consulting services to organizations looking to build their investment viability profile. Over the past 19 years, Mr. Chambers is credited with raising well over $300 million on behalf of companies with assets around the globe, in the consumer goods, technology, natural resources, real estate, renewables and healthcare sectors. Mr. Chambers has worked with dozens of companies supporting IPO &RTOs, developing strategic partnerships, creating easy to understand market messaging, devising relevant acquisition strategies and capital raise campaigns that captured investor attention. Mr. Chambers’ work experience includes founding, and serving as Principal Consultant with GMFB Communications (2007 – 2014), a company that specialized in marketing initiatives for small to medium sized public and private entities in the natural resource space), co-founding 3P International Energy (2010 – 2012), co-founding and serving as Director of BFK Capital (2014 –2016), co-founding Hydropothecary (2014 – 2017), serving as Financier with Planet Shrimp (2015 – 2016), Managing Director/ Co-Head of Equity Capital Markets with Bellotti Capital Partners (2013 – 2017), where he raised significant capital for micro-cap companies, working closely with clients on accretive deal sourcing, corporate restructuring, and organizational analysis. From 2017 - 2021, Mr. Chambers partnered with The Charlton Group, Inc. at IA Securities, where he devised a marketing platform that supported growing his own advisory clientele. Mr. Chambers ultimately sold his book of business to Wellington Altus in October 2021. In November, 2021, Mr. Chambers went back to his merchant banking roots, focused on assisting public and private companies with capital markets advisory and corporate restructuring.
| 36 |
| Table of Contents |
Mr. Angel Liriano (age 29) has been a director of iCoreConnect Since April 2025. Mr. Liriano is a skilled professional with a background in real estate investment and civil engineering, having graduated from Ball State University. Specializing in the design, development and investment of high-end luxury homes. Angel has worked with selective clients to create custom, sophisticated commercial & residential projects. In addition to this, Angel is the owner of Biscayne Advisory, a company focused on real estate investment and advisory services, helping investors navigate and develop successful projects geared towards commercial and high end residential projects. With a blend of expertise in both management and real estate investment, Angel has built a reputation for excellence, innovation and a commitment to delivering top-tier results across various ventures.
Mr. David Piedra (age 32) has been a director of iCoreConnect Since April 2025. Mr. Piedra is a seasoned real estate investor and CEO of Stone Bros. Corporation. Backed by a generational legacy in property development, he leads the firm’s strategic growth across residential and commercial real estate. His expertise spans acquisitions, asset management, and market positioning, with a focus on maximizing long-term returns through innovative, results-driven leadership.
Mr. Joseph Tung (age 42), has served as a director of iCoreConnect Inc. since April 2025. He has been a Partner at Oakridge Law LLP since January 2025. From 2021 to 2024, he practiced securities law at Garfinkle Biderman LLP, advising on stock exchange listings, securities offerings, corporate governance and various business transactions. Prior to that, he worked at CC Corporate Counsel PC from 2020 to 2021 and at Beber PC from 2019 to 2020, where his practice included continuous disclosure and compliance matters as well as secured lending and commercial real estate transactions. Mr. Tung has also served as a director of Shuttle Pharmaceuticals Holdings, Inc. (Nasdaq: SHPH) since February 2025.
GOVERNANCE OF THE COMPANY
Board Oversight of Risk
Our Board bears the responsibility for maintaining oversight over our exposure to risk. Our Board, itself and through its committees, meets with various members of management regularly and discusses our material risk exposures, the potential impact on us and the efforts of management it deems appropriate to deal with the risks that are identified. The Audit Committee considers our risk assessment and risk management practices including those relating to regulatory risks, financial liquidity and accounting risk exposure, reserves and our internal controls. The Nominating and Governance Committee considers the risks associated with our corporate governance principles and procedures with the guidance of our counsel. Our Compensation Committee, in connection with the performance of its duties, considers risks associated with our compensation programs.
Audit Committee
Our Audit Committee is composed of three directors. The current members are Wayne Kalish (Chair), John Pasqual and Angel Liriano. Our Board has determined that Wayne Kalish is an “Audit Committee Financial Expert,” as defined by the SEC rules.
| 37 |
| Table of Contents |
Our Audit Committee, among other things is responsible for:
| · | Considering the qualifications of and appoints and oversees the activities of our independent registered public accounting firm, i.e., our independent auditor; |
|
|
|
| · | Reviewing with the independent auditor any audit problems or difficulties encountered in the course of audit work; |
|
|
|
| · | Pre-approving all audit and non-audit services provided by the independent auditor; |
|
|
|
| · | Discussing with the independent auditor the overall scope and plans for their respective audits, including the adequacy of staffing and budget or compensation; |
|
|
|
| · | Reviewing our financial statements and reports and meets with management and the independent auditor to review, discuss and approve our financial statements ensuring the completeness and clarity of the disclosures in the financial statements; |
|
|
|
| · | Monitoring compliance with our internal controls, policies, procedures and practices; |
|
|
|
| · | Reviewing management’s report on its assessment of the effectiveness of internal control over financial reporting as of the end of each fiscal year and the independent auditor’s report on the effectiveness of internal control over financial reporting; |
|
|
|
| · | Discussing our policies on risk assessment and risk management, our major financial risk exposures and the steps management has taken to monitor and control such exposures; |
|
|
|
| · | Reviewing our compliance and ethics programs, including legal and regulatory requirements, and reviews with management our periodic evaluation of the effectiveness of such programs; |
|
|
|
| · | Reviewing and approving related-party transactions; and |
|
|
|
| · | Undertaking such other activities as our Board from time to time may delegate to it. |
Nominating and Governance Committee
Our Nominating and Governance Committee is composed of three directors. The current members are John Pasqual (Chair), Wayne Kalish and Joseph Tung.
The nominating duties and responsibilities of the Committee are as follows:
| · | To evaluate the qualifications of candidates for Board membership and, following consultation with the Chief Executive Officer, recommend to the Board nominees for open or newly created director positions; |
| · | To consider nominees recommended by stockholders as long as such recommendations are received at least 120 days before the stockholders meet to elect directors; |
| · | To periodically review the composition of the Board to determine whether it may be appropriate to add individuals with different backgrounds or skill sets from those already on the Board, and submit to the Board on an annual basis a report summarizing its conclusions regarding these matters; |
| · | To provide an orientation and education program for Directors; and To perform such other duties as the Board may assign to the Committee. |
The governance duties and responsibilities of the Committee are as follows:
| · | To periodically assess the current structure and operations of the committees of the Board and recommend changes to the Board; |
| · | To develop and recommend to the Board corporate governance guidelines and to review such guidelines at least annually and recommend to the Board changes as necessary; |
| · | To develop and recommend to the Board procedures for the evaluation and self-evaluation of the Board and its committees and to oversee the evaluation process; |
| · | To perform an evaluation of the Committee’s performance at least annually to determine whether it is functioning effectively; and |
| · | To periodically review the compensation of the Board and recommend changes to the Board. |
| 38 |
| Table of Contents |
Compensation Committee
Our Compensation Committee is composed of three directors. The current members are David Piedra (Chair), John Pasqual and Wayne Kalish.
Our Compensation Committee advises our Board with respect to our compensation practices and administers our 2023 Stock Plan. The principal duties and responsibilities of our Compensation Committee include:
| · | Reviewing and approving compensation principles that apply generally to our employees; |
| · | Establishing and reviewing corporate goals and objectives relevant to the compensation of the Chief Executive Officer and evaluating his performance in light of the established goals and objectives and approving their annual compensation; |
| · | Reviewing, based primarily on the evaluations and recommendations of the Chief Executive Officer, the performance of the other executive officers and all direct reports of our Chief Executive Officer; |
| · | Overseeing our compliance with the requirements under trading market regulatory rules with respect to our long-term incentive compensation plan; and |
| · | Reviewing and discussing compensation programs that may create incentives that can affect our risk and management of that risk. |
Code of Ethics
We have adopted a Code of Ethics, as supplemented by a Code of Conduct, which applies to all of our directors, officers (including our Chief Executive Officer, and Chief Financial Officer) and employees. The Code of Financial Ethics has been posted to our Internet website at https://ir.icoreconnect.com/corporate-governance/governance-documents. The Company satisfies disclosure requirements regarding amendments to, or waivers from, any provisions of its Code of Financial Ethics on its website.
Nomination of Director Candidates
We receive suggestions for potential director nominees from many sources, including members of the Board, advisors, and stockholders. Any such nominations, together with appropriate biographical information, should be submitted to the Secretary of the Company (the “Corporate Secretary”) in the manner discussed below. Any candidates submitted by a stockholder or stockholder group are reviewed and considered in the same manner as all other candidates.
Qualifications for consideration as a Board nominee may vary according to the particular areas of expertise being sought as a complement to the existing board composition. However, minimum qualifications include high level leadership experience in business activities, breadth of knowledge about issues affecting the Company, experience on other boards of directors, preferably public company boards, and time available for meetings and consultation on Company matters. Our Nominating and Governance Committee does not have a formal policy with regard to the consideration of diversity in identifying director candidates, but seeks a diverse group of candidates who possess the background, skills and expertise to make a significant contribution to the Board, to the Company and our stockholders. Candidates whose evaluations are favorable are recommended by our Nominating and Governance Committee to the full Board for consideration. The full Board selects and recommends candidates for nomination as directors for stockholders to consider and vote upon at the annual meeting.
A stockholder wishing to nominate a candidate for election to our Board of Directors at any annual meeting at which the Board has determined that one or more directors will be elected must submit a written notice of his or her nomination of a candidate to the Corporate Secretary, providing the candidates name, biographical data and other relevant information together with a consent from the nominee. The submission must comply with the advance notice provisions of our Bylaws so as to permit the Board of Directors time to evaluate the qualifications of the nominee.
| 39 |
| Table of Contents |
We have not employed an executive search firm, or paid a fee to any other third party, to locate qualified candidates for director positions.
Insider Trading Policy
Our Board has adopted an Insider Trading Policy that applies to all of our directors, executive officers, and employees. The policy attempts to establish standards that will avoid even the appearance of improper conduct on the part of insiders by requiring, among other things, that insiders maintain the confidentiality of information about the Company and to not engage in transactions in the Company’s securities while aware of material nonpublic information.
Anti-Hedging Policy
Our policies prohibit directors, officers and other employees from purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of our equity securities without our prior approval.
Delinquent Section 16(A) Reports
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own more than 10% of the outstanding shares of common stock to file reports with the SEC disclosing their ownership of common stock at the time they become subject to Section 16(a) and changes in such ownership that occur during the year. Based solely on a review of copies of such reports furnished to us, or on written representations that no reports were required, we believe that all directors, executive officers and holders of more than 10% of the common stock complied in a timely manner with the filing requirements applicable to them with respect to transactions during the year ended December 31, 2024.
ITEM 11. EXECUTIVE COMPENSATION
Executive Officer Compensation
The following table presents summary information regarding the total compensation awarded to, earned by and paid to our named executive officers for the years ended December 31, 2024 and 2023:
|
| Year |
| Salary |
|
| Bonus(4) |
|
| Stock Awards (1) (2) |
|
| Options Awards (1)(2) |
|
| All other compensation (3) |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Robert McDermott |
| 2024 |
| $ | 500,000 |
|
| $ | - |
|
| $ | 80,000 |
|
| $ | 2,913,966 |
|
| $ | 39,048 |
|
| $ | 3,533,014 |
|
Chief Executive Officer and President |
| 2023 |
| $ | 365,104 |
|
| $ | 125,250 |
|
| $ | 58,919 |
|
|
| 1,978,226 |
|
| $ | 327,631 |
|
| $ | 2,855,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Fidanza |
| 2024 |
| $ | 296,000 |
|
| $ | - |
|
| $ | - |
|
|
| 615,460 |
|
| $ | 15,000 |
|
| $ | 926,460 |
|
Chief Information Officer |
| 2023 |
| $ | 216,370 |
|
| $ | 36,750 |
|
| $ | - |
|
|
| 399,158 |
|
| $ | 11,000 |
|
| $ | 663,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Muralidar Chakravarthi |
| 2024 |
| $ | 300,000 |
|
| $ | - |
|
| $ | - |
|
|
| 617,967 |
|
| $ | 15,000 |
|
| $ | 932,967 |
|
Chief Technology Officer |
| 2023 |
| $ | 217,703 |
|
| $ | 37,500 |
|
| $ | - |
|
|
| 401,665 |
|
| $ | 11,000 |
|
| $ | 667,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Archit Shah |
| 2024 |
| $ | 314,000 |
|
| $ | - |
|
| $ | 40,000 |
|
|
| 781,384 |
|
| $ | 15,000 |
|
| $ | 1,150,384 |
|
Chief Financial Officer |
| 2023 |
| $ | 253,250 |
|
| $ | 39,000 |
|
| $ | 26,234 |
|
|
| 308,228 |
|
| $ | 9,000 |
|
| $ | 635,712 |
|
(1) Represents the aggregate grant date fair value of the shares of iCoreConnect common stock or option awarded as determined under Financial Accounting Standards Board Accounting Standards Codification Topic No. 718-20, Awards Classified as Equity. For information, regarding the valuation of these awards, including assumptions, refer to the Financial Statements as a part of this filing.
(2) The grant date fair value of the performance award options, and restricted common stock included in the column is the awarded employment agreement terms determined as of the grant date.
(3) All Other compensation represents commissions and fringe benefits including car allowance and health care reimbursement.
(4) The Bonus pay out is subject to the Company raising funds in excess of $5,000,000.
| 40 |
| Table of Contents |
Narrative Disclosure to Summary Compensation Table
General
We have compensated our named executive officers through a combination of base salary, cash bonuses, equity awards and other benefits, including certain perquisites.
Base Salary
Our Compensation Committee reviews and approves base salaries of our named executive officers. In setting the base salary of each named executive officer for the periods presented above, the Compensation Committee relied on market data. Salary levels are typically considered annually as part of our regularly scheduled performance review process and otherwise upon a promotion or other change in job responsibility.
Bonus
Our named executive officers are also eligible to receive an annual bonus as a percentage of base salary. Historically, these bonuses have been discretionary based on general company performance. Commencing in 2024, our Compensation Committee will evaluate bonuses based on the Company’s achievement of various specified metrics. Annual incentive awards are intended to recognize and reward those named executive officers who contribute meaningfully to our performance for the corresponding year. Our Board has discretion to determine whether and in what amounts or form (cash or stock) any such bonuses will be paid in a given year.
Equity Awards
Our named executive officers are also eligible to receive an annual equity grant. The target amount of the grant is set forth in their employment agreement, although the final determination for any equity grants remain at the discretion of the Compensation Committee. For options, we set the option exercise price, and grant date fair value based on the closing price of our common stock on Nasdaq on the date of grant. For other equity awards, the grant date fair value is based on the closing price of our common stock on Nasdaq on the date of grant.
Equity Awards
The following table sets forth certain information concerning our outstanding equity awards for our named executive officers at December 31, 2024.
Outstanding Equity Awards At Fiscal Year-End
Name |
| Grant Date of Equity Award |
| Number of Securities Underlying Unexercised Options (#) Exercisable |
|
| Number of Securities Underlying Unexercised Options (#) Unexercisable |
|
| Option Exercise Price ($) |
| |||
Robert McDermott |
| 8/25/2023 |
|
| 22,621 |
|
|
| - |
|
| $ | 74.20 |
|
David Fidanza |
| 8/25/2023 |
|
| 3,771 |
|
|
| - |
|
| $ | 74.20 |
|
Muralidar Chakravarthi |
| 8/25/2023 |
|
| 3,771 |
|
|
| - |
|
| $ | 74.20 |
|
Archit Shah |
| 8/25/2023 |
|
| 3,218 |
|
|
| - |
|
| $ | 76.40 |
|
Robert McDermott |
| 5/31/2024 |
|
| 9,513 |
|
|
| 19,026 |
|
| $ | 33.60 |
|
David Fidanza |
| 5/31/2024 |
|
| 2,569 |
|
|
| 5,137 |
|
| $ | 32.20 |
|
Muralidar Chakravarthi |
| 5/31/2024 |
|
| 2,569 |
|
|
| 5,137 |
|
| $ | 32.20 |
|
Archit Shah |
| 5/31/2024 |
|
| 2,637 |
|
|
| 5,274 |
|
| $ | 32.20 |
|
Robert McDermott |
| 5/31/2024 |
|
| 90,088 |
|
|
| - |
|
| $ | 62.00 |
|
David Fidanza |
| 5/31/2024 |
|
| 17,621 |
|
|
| - |
|
| $ | 62.00 |
|
Muralidar Chakravarthi |
| 5/31/2024 |
|
| 17,621 |
|
|
| - |
|
| $ | 62.00 |
|
Archit Shah |
| 5/31/2024 |
|
| 24,113 |
|
|
| - |
|
| $ | 62.00 |
|
| 41 |
| Table of Contents |
Employment Agreements
Chief Executive Officer
We entered into an employment agreement, effective September 1, 2023, with Robert McDermott, pursuant to which he agreed to serve as our Chief Executive Officer for an initial term of three years, which will be automatically renewed for additional one-year terms unless either party chooses not to renew the agreement. Mr. McDermott’s agreement provided for an initial annual base salary of $500,000. Mr. McDermott is eligible to receive an annual bonus of up to 100% of his base salary, provided final determination on the amount of the annual bonus, if any, will be made by the Compensation Committee of the Board of Directors, based on criteria established by the Compensation Committee. Pursuant to his agreement, for each fiscal year during the term, Mr. McDermott will be entitled to an annual equity grant of up to $2,500,000; provided that the final determination on the amount of the annual grant, if any, will be made by the Compensation Committee of the Board of Directors, based on criteria established by the Compensation Committee.
If Mr. McDermott’s employment is terminated at our election without “cause”, or by Mr. McDermott for “good reason,” Mr. McDermott shall be entitled to receive severance payments equal to 18 months of Mr. McDermott’s base salary; provided that such amounts shall be increased to 24 months of Mr. McDermott’s base salary if Mr. McDermott’s agreement is terminated without “cause” or by Mr. McDermott for “good reason” within three months prior to or twelve months after of a “change of control.” In addition, if Mr. McDermott’s agreement is terminated without “cause” or by Mr. McDermott for “good reason” within three months prior to or twelve months after of a “change of control,” any of the unvested equity awards shall also immediately vest. During any period that Mr. McDermott is entitled to severance payments, the Company will continue to pay the same portion of Mr. McDermott’s medical and dental insurance premiums under COBRA as during active employment until the earlier of (1) six months from the termination of employment, or (2) the date Mr. McDermott is eligible for medical and/or dental insurance benefits from another employer. Mr. McDermott agreed not to compete with us until 12 months after the termination of his employment.
Chief Financial Officer
We entered into an employment agreement, effective September 1, 2023, with Archit Shah, pursuant to which he agreed to serve as our Chief Financial Officer for an initial term of three years, which will be automatically renewed for additional one-year terms unless either party chooses not to renew the agreement. Mr. Shah’s agreement provided for an initial annual base salary of $314,000. Mr. Shah is eligible to receive an annual bonus of up to 50% of his base salary, provided final determination on the amount of the annual bonus, if any, will be made by the Compensation Committee of the Board of Directors, based on criteria established by the Compensation Committee. Pursuant to his agreement, Mr. Shah for each fiscal year during the term, Mr. Shah will be entitled to an annual equity grant of up to $693,000; provided that the final determination on the amount of the annual grant, if any, will be made by the Compensation Committee of the Board of Directors, based on criteria established by the Compensation Committee.
If Mr. Shah’s employment is terminated at our election without “cause”, or by Mr. Shah for “good reason,” Mr. Shah shall be entitled to receive severance payments equal to six months of Mr. Shah’s base salary; provided that such amounts shall be increased to 12 months of Mr. Shah’s base salary if Mr. Shah’s agreement is terminated without “cause” or by Mr. Shah for “good reason” within three months prior to or twelve months after of a “change of control.” In addition, if Mr. Shah’s agreement is terminated without “cause” or by Mr. Shah for “good reason” within three months prior to or twelve months after of a “change of control,” any of the unvested equity awards shall also immediately vest. During any period that Mr. Shah is entitled to severance payments, the Company will continue to pay the same portion of Mr. Shah’s medical and dental insurance premiums under COBRA as during active employment until the earlier of (1) six months from the termination of employment, or (2) the date Mr. Shah is eligible for medical and/or dental insurance benefits from another employer. Mr. Shah agreed not to compete with us until 12 months after the termination of his employment.
| 42 |
| Table of Contents |
Chief Operating Officer
We entered into an employment agreement, effective September 1, 2023, with David Fidanza pursuant to which he agreed to serve as our Chief Operating Officer for an initial term of three years, which will be automatically renewed for additional one-year terms unless either party chooses not to renew the agreement. Mr. Fidanza’s agreement provided for an initial annual base salary of $296,000. Mr. Fidanza is eligible to receive an annual bonus of up to 50% of his base salary, provided final determination on the amount of the annual bonus, if any, will be made by the Compensation Committee of the Board of Directors, based on criteria established by the Compensation Committee. Pursuant to his agreement, Mr. Fidanza for each fiscal year during the term, Mr. Fidanza will be entitled to an annual equity grant of up to $666,000; provided that the final determination on the amount of the annual grant, if any, will be made by the Compensation Committee of the Board of Directors, based on criteria established by the Compensation Committee.
If Mr. Fidanza’s employment is terminated at our election without “cause”, or by Mr. Fidanza for “good reason,” Mr. Fidanza shall be entitled to receive severance payments equal to six months of Mr. Fidanza’s base salary; provided that such amounts shall be increased to 12 months of Mr. Fidanza’s base salary if Mr. Fidanza’s agreement is terminated without “cause” or by Mr. Fidanza for “good reason” within three months prior to or twelve months after of a “change of control.” In addition, if Mr. Fidanza’s agreement is terminated without “cause” or by Mr. Fidanza for “good reason” within three months prior to or twelve months after of a “change of control,” any of the unvested equity awards shall also immediately vest. During any period that Mr. Fidanza is entitled to severance payments, the Company will continue to pay the same portion of Mr. Fidanza’s medical and dental insurance premiums under COBRA as during active employment until the earlier of (1) six months from the termination of employment, or (2) the date Mr. Fidanza is eligible for medical and/or dental insurance benefits from another employer. Mr. Fidanza agreed not to compete with us until 12 months after the termination of his employment.
Chief Technology Officer
We entered into an employment agreement, effective September 1, 2023, with Murali Chakravarthi pursuant to which each officer agreed to serve as our Chief Technology Officer for an initial term of three years, which will be automatically renewed for additional one-year terms unless either party chooses not to renew the agreement. Mr. Chakravarthi’s agreement provided for an initial annual base salary of $300,000. Mr. Chakravarthi is eligible to receive an annual bonus of up to 50% of his base salary, provided final determination on the amount of the annual bonus, if any, will be made by the Compensation Committee of the Board of Directors, based on criteria established by the Compensation Committee. Pursuant to his agreement, Mr. Chakravarthi for each fiscal year during the term, Mr. Chakravarthi will be entitled to an annual equity grant of up to $675, 000; provided that the final determination on the amount of the annual grant, if any, will be made by the Compensation Committee of the Board of Directors, based on criteria established by the Compensation Committee.
If Mr. Chakravarthi’s employment is terminated at our election without “cause”, or by Mr. Chakravarthi for “good reason,” Mr. Chakravarthi shall be entitled to receive severance payments equal to six months of Mr. Chakravarthi’s base salary; provided that such amounts shall be increased to 12 months of Mr. Chakravarthi’s base salary if Mr. Chakravarthi’s agreement is terminated without “cause” or by Mr. Chakravarthi for “good reason” within three months prior to or twelve months after of a “change of control.” In addition, if Mr. Chakravarthi’s agreement is terminated without “cause” or by Mr. Chakravarthi for “good reason” within three months prior to or twelve months after of a “change of control,” any of the unvested equity awards shall also immediately vest. During any period that Mr. Chakravarthi is entitled to severance payments, the Company will continue to pay the same portion of Mr. Chakravarthi’s medical and dental insurance premiums under COBRA as during active employment until the earlier of (1) six months from the termination of employment, or (2) the date Mr. Chakravarthi is eligible for medical and/or dental insurance benefits from another employer. Mr. Chakravarthi agreed not to compete with us until 12 months after the termination of his employment.
| 43 |
| Table of Contents |
Recoupment Policy
We adopted the iCoreConnect, Inc. Dodd-Frank Restatement Recoupment Policy effective as of October 2, 2023. In the event that we are required to prepare a financial restatement, the Committee will recoup all erroneously awarded incentive-based compensation calculated on a pre-tax basis received after October 2, 2023, by a person (i) after beginning service as an executive officer, (ii) who served as an executive officer at any time during the performance period for that incentive-based compensation, and (iii) during the three completed fiscal years immediately preceding the date that the Company is required to prepare a restatement, and any transition period (that results from a change in the Company’s fiscal year) of less than nine months within or immediately following those three completed fiscal years. “Clawback” or recoupment policy in our executive compensation program contributes to creating and maintaining a culture that emphasizes integrity and accountability and reinforces the performance-based principles underlying our executive compensation program.
Granting of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information
We do not grant equity awards in anticipation of the release of material nonpublic information that is likely to result in changes to the price of our common stock, and do not time the public release of such information based on award grant dates. During the last completed fiscal year, we have not made awards to any named executive officer during the period beginning four business days before and ending one business day after the filing of a period report on Form 10-Q or Form 10-K or the filing or furnishing of a current report on Form 8-K, and we have not timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information, as of May 29, 2025, regarding beneficial ownership of our common stock by:
| · | each of our directors; |
|
|
|
| · | each of our named executive officers; |
|
|
|
| · | all directors and executive officers as a group; and |
|
|
|
| · | each person, or group of affiliated persons, known by us to beneficially own more than five percent of our shares of common stock. |
Beneficial ownership is determined according to the rules of the SEC, and generally means that person has beneficial ownership of a security if he or she possesses sole or shared voting or investment power of that security and includes options that are currently exercisable or exercisable within 60 days. Each director or officer, as the case may be, has furnished us with information with respect to beneficial ownership. Except as otherwise indicated, we believe that the beneficial owners of common stock listed below, based on the information each of them has given to us, have sole investment and voting power with respect to their shares, except where community property laws may apply. Except as otherwise noted below, the address for each person or entity listed in the table is c/o iCoreConnect Inc., 529 Crown Point Road, Suite 250, Ocoee, FL 34761.
| 44 |
| Table of Contents |
|
| As of May 29, 2025 |
| |||||
Name of Beneficial Owner |
| Shares beneficially owned |
|
| Percent of Class (1) |
| ||
|
|
|
|
|
| |||
Robert McDermott (2) |
|
| 233,775 |
|
|
| 4.65 | % |
|
|
|
|
|
|
|
|
|
Muralidar Chakravarthi (3) |
|
| 32,500 |
|
| Less than 1% |
| |
|
|
|
|
|
|
|
|
|
David Fidanza (4) |
|
| 43,128 |
|
| Less than 1% |
| |
|
|
|
|
|
|
|
|
|
Archit Shah (5) |
|
| 48,306 |
|
|
| 1.02 | % |
|
|
|
|
|
|
|
|
|
John Pasqual (6) |
|
| 34,176 |
|
| Less than 1% |
| |
|
|
|
|
|
|
|
|
|
Wayne Kalish (7) |
|
| 17,375 |
|
| Less than 1% |
| |
|
|
|
|
|
|
|
|
|
Adam Chambers (8) |
|
| 220,289 |
|
|
| 4.52 | % |
|
|
|
|
|
|
|
|
|
David Piedra |
|
| - |
|
| - | % | |
|
|
|
|
|
|
|
|
|
Angel Liriano |
|
| - |
|
| - | % | |
|
|
|
|
|
|
|
|
|
Joseph Tung |
|
| - |
|
| - | % | |
|
|
|
|
|
|
|
|
|
Directors and Executive Officers as a Group (8 persons) |
|
| 629,549 |
|
|
| 12.91 | % |
|
|
|
|
|
|
|
|
|
5% or greater shareholder |
|
|
|
|
|
|
|
|
(1) Based on 4,877,080 shares of common stock outstanding as of May 29, 2025.
(2) Consists of: (i) 80,424 shares of common stock; (ii) 1,950 shares of common stock underly warrants to purchase common stock at an exercise price of $27.20 and 4,332 shares of common stock underly warrants to purchase common stock at an exercise price of $10.65 (iii) 4,094 shares of common stock underlying the iCoreConnect Preferred Stock; (iv) 938 shares of common stock underlying Preferred Stock warrants to purchase common stock at an exercise price of $11.50 per share, and (v) 142,047 common stock options.
(3) Consists of: (i) 3,403 shares of common stock; and (ii) 29,097 common stock options.
(4) Consists of: (i) 3,889 shares of common stock; (ii) 10,235 shares of common stock underlying the iCoreConnect Preferred Stock; and (iii) 28,994 common stock options.
(5) Consists of: (i) 13,064 shares of common stock; and (ii) 35,242 common stock options.
(6) Consists of: (i) 33,007 shares of common stock; (ii) 700 shares of common stock underlying the iCoreConnect Preferred Stock; and (iii) 469 shares of common stock underlying Preferred Stock warrants to purchase common stock at an exercise price of $11.50 per share.
(7) Consists of 17,375 shares of common stock.
(8) Consists of 220,289 shares of common stock held by the Bowery Consulting Group, Inc. which entity is affiliated with Mr. Chambers.
| 45 |
| Table of Contents |
Item 13. Certain Relationships and Related Transactions, and Director Independence
In October 2023 the Company entered into two separate new notes with its Vice President of Acquisitions and Business Development; (a) $200,000 Promissory Note with 12% interest per annum which shall be paid on the maturity date which is December 31, 2023. In conjunction with the issuance of the Promissory Note, the Company also issued the investor a five-year warrant (the “Warrant”) to purchase 700 shares of Company common stock with an exercise price of $43.00 per share, which was 120% of the closing price of the Company’s common stock on the date of issuance; (b) the Company issued the investor a convertible promissory note in principal amount of $94,685.91 The maturity of the Convertible Promissory Note was May 26, 2024 and carries an interest rate of 12% per annum and is initially convertible into Company common stock at a conversion rate of $36.00 per share, which was the closing price of the Company’s common stock on the date of issuance. In conjunction with the Convertible Promissory Note, the Company also issued the investor 6,629 shares of Company common stock and a five-year warrant to purchase 6,629 shares of Company common stock with an exercise price of $2.15 per share, which was 120% of the closing price of the Company’s common stock on the date of issuance. In December 2023, the Company entered into an amendment with holder of an Amendment to Convertible Promissory Notes issued in October 2023 whereby the holder of the Note agreed that the Note would not be convertible into shares of Company Common Stock unless and until the Company’s shareholders approve such conversion per NASDAQ Listing Rule 5635(d) which was obtained on May 31, 2024. The Company and the Note holder also entered into amendments to the warrants to purchase common stock issued in connection with the issuance of the Note, pursuant to which the holder of the Warrants agreed that the Warrants would not become exercisable unless and until the Company’s shareholders approve the exercise of the Warrants pursuant to NASDAQ Listing Rule 5635(d) which was obtained on May 31, 2024. On April 8, 2024 with an effective date of January 1, 2024, the Company entered into a securities purchase agreement with the related party pursuant to which the Company issued the related party a convertible note in the principal amount of $200,000 in exchange for $200,000. The maturity of the convertible note was April 30, 2024 and carried an interest rate of 12% per annum and is initially convertible into Company common stock at a conversion rate equal to 120% of the closing price of the Company’s common stock on the date of issuance. In conjunction with the April 8, 2024 Note, we issued the investor a five-year warrant to purchase 1,500 shares of our common stock with an exercise price of $30.00. At maturity these notes were reissued under the same terms for a maturity date of July 31, 2024. On August 13, 2024, with an effective date of August 1, 2024 the Company entered into an new convertible promissory notes in the principal amounts of $103,475 and $213,998 respectively, inclusive of any and all unamortized OID, accrued interest and outstanding principal. Pursuant to the exchange agreements the Company issued a new note that extended the term of the original debt to August 1, 2027 and provide for a new conversion price of $16.00 with a mandatory conversion if the Company’s stock price is at $20.80 or above subject to there being at least 75,000 daily share trading volume over five consecutive days. The new note carries an interest rate of 12% per annum with all interest and principal due at maturity. The promissory notes are subordinated to the Company’s senior lenders.
In June 2023 the Company entered into a promissory note with an entity controlled by its Chief Executive Officer, a related party. The Note is for $250,000 with $50,000 paid to the Holder on issuance for net proceeds of $200,000 and matured on December 31, 2023. The Note carried an interest of 15% per annum as interest is payable monthly in arrears with principal due at maturity. There is no penalty for early payoff. If an event of default occurs, the Note along with any outstanding and accrued interest is convertible into the Company’s Common Stock at $149.00 at the sole discretion of the issuer. On April 8, 2024 with an effective date of January 1, 2024, the Company entered into a securities purchase agreement with a related party pursuant to which the Company issued the related party a promissory note in the principal amount of $260,000 in exchange for $260,000. The maturity of the promissory note was April 30, 2024 and carries an interest rate of 20% per annum. In conjunction with the April 8, 2024 Note, we issued the investor a five-year warrant to purchase 1,950 shares of our common stock with an exercise price of $30.00. On maturity this note was extended on the same terms until May 1, 2024. On May 13, 2024, the Company entered into a Note Amendment with an extension of a Convertible Promissory Note in the original amount of $350,000 with an original maturity date of May 13, 2024 to be extended to July 31, 2024. In consideration for the extension the Company issued the holder 2,577 restricted shares of common stock at maturity. The shares were subject to the Company’s ability to issue such shares in compliance with Nasdaq Listing Rule 5635(d) which will require the approval by the Company’s shareholders of certain proposals to be considered at the Company’s 2024 Annual Meeting to be held on May 31, 2024. At maturity this note was reissued under the same terms to July 31, 2024. At maturity this note was reissued under the same terms to September 30, 2024. At maturity the note was reissued under the same terms and the Company issued the investor a five-year warrant to purchase 4,322 shares of our common stock with an exercise price of $10.65. The convertible promissory note is subordinated to the Company’s senior lenders.
| 46 |
| Table of Contents |
On April 10, 2025, the Company entered into a Revolving Loan Agreement (the “Revolving Loan Agreement”) with an institutional investor (the “Lender”), which is affiliated with Adam Chambers, one of our directors. Pursuant to and under the terms of the Revolving Loan Agreement, the Company issued to the Lender a revolving note dated April 10, 2025 in the principal amount of up to $2,180,000 (the “Revolving Note” and such amount, the “Maximum Outstanding Amount”), which the Company may draw upon at its discretion from time to time (the “Financing”). The Revolving Note bears interest at the rate of 18% per annum calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue interest daily commencing from the date of any draw down until paid in full. On the first anniversary of the closing date, the entire Payment Amount (or, if an Event of Default shall have previously occurred, the Default Amount) shall become due and payable (the “Maturity Date”). All outstanding Revolving Loans: (i) shall be payable in full on the Maturity Date or may be paid or pre-paid, in whole or in part, to the Lender prior to the Maturity Date, and (ii) may thereafter be borrowed or reborrowed, subject to the terms of the Revolving Loan Agreement. All payments of principal of any Revolving Loan or Revolving Loans thereunder shall be accompanied by the payment in full of all accrued and unpaid interest thereon. No Revolving Loans may be requested or made hereunder on any date that is after the tenth (10th) business day preceding the Maturity Date. The Revolving Loan Agreement contains customary events of default. If an event of default occurs, the Lender may accelerate the indebtedness under the Revolving Loan Agreement, and an amount equal to 120% of the outstanding principal amount and accrued and unpaid interest plus other amounts, costs, expenses and/or liquidated damages due under or in respect of the Loan Documents for the Financing, if any. On the closing date, the Company issued to Lender a number of shares of common stock equal to 4.99% of the outstanding shares of common stock on the closing date (after giving effect to such issuance to Lender). The Revolving Loan Agreement also provides that from the date of the Revolving Loan Agreement until the earlier to occur of (i) the Maturity Date and (ii) the repayment in full of any Revolving Loans in the Payment Amount, the Company will use its reasonable best efforts to consummate a public offering of not less than $5,000,000 as soon as practicable.
Procedures for Approval of Related Party Transactions
Potential related party transactions are identified through an internal review process that includes a review of payments made in connection with transactions in which related persons may have had a direct or indirect material interest. Those transactions that are determined to be related party transactions under Item 404 of Regulation S-K are submitted for review by the Audit Committee for approval and to conduct a conflicts-of-interest analysis. The individual identified as the “related party” may not participate in any review or analysis of the related party transaction.
Director Independence
The Board has determined that each of Messrs. Kalish, Pasqual, and Liriano, are independent under the applicable rules of the SEC and the listing standards of the Nasdaq Stock Market; therefore, every member of the Audit Committee, Compensation Committee and Nominating and Governance Committee is an independent director in accordance with those standards.
Item 14. Principal Accounting Fees and Services
During fiscal years December 31, 2024 and 2023, the Company’s independent registered public accounting firms, rendered services to the Company for the following fees:
|
| 2024 |
|
| 2023 |
| ||
Audit Fees |
| $ | 473,367 |
|
| $ | 525,506 |
|
Tax Fees |
|
| 17,510 |
|
|
| 19,120 |
|
Total |
| $ | 490,877 |
|
| $ | 544,626 |
|
Audit Committee's Pre-Approval Practice
Section 10A(i) of the Securities Exchange act of 1934 prohibits our auditors from performing audit services for us as well as any services not considered to be “audit services” unless such services are pre-approved by the board of directors (in lieu of the Audit Committee) or unless the services meet certain de minimis standards.
| 47 |
| Table of Contents |
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) Financial Statements
The financial statements included in this Form 10-K are listed in Item 8.
(b) Exhibits*:
|
|
|
| Incorporated by Reference | |||||
Exhibit Number |
| Description |
| Form |
| Exhibit |
| Filing Date | |
|
|
|
| ||||||
|
| 8-K |
| 2.1 |
| 1/6/2023 | |||
| Second Amended and Restated Certificate of Incorporation of iCoreConnect Inc. |
| 8-K |
| 3.1 |
| 8/31/2023 | ||
|
| 8-K |
| 3.2 |
| 8/31/2023 | |||
| Amendment to Amended and Restated Certificate of Incorporation of iCoreConnect, dated May 31, 2024 |
| 8-K |
| 3.1 |
| 5/31/2024 |
| |
|
| S-1/A |
| 4.3 |
| 2/23/2022 | |||
|
| 8-K |
| 4.1 |
| 3/3/2022 | |||
|
| 8-K |
| 4.2 |
| 3/3/2022 | |||
|
| S-4/A |
| 4.6 |
| 4/17/2023 | |||
|
| S-4/A |
| 4.7 |
| 4/17/2023 | |||
| Form of Convertible Promissory Note issued December 29, 2023 |
| 8-K |
| 4.1 |
| 1/5/2024 | ||
|
| 8-K |
| 4.1 |
| 2/7/2024 | |||
|
| 8-K |
| 4.1 |
| 2/15/2024 | |||
|
| 8-K |
| 4.1 |
| 2/28/2024 | |||
|
| S-1 | 4.11 | 6/11/2024 |
| ||||
|
| 8-K |
| 10.1 |
| 5/28/2024 |
| ||
|
| 8-K |
| 4.1 |
| 6/17/2024 |
| ||
|
| 8-K |
| 4.1 |
| 8/21/2024 |
| ||
|
| 8-K |
| 4.2 |
| 8/21/2024 |
| ||
|
| 8-K |
| 4.3 |
| 8/21/2024 |
| ||
|
| 8-K |
| 4.1 |
| 12/10/2024 |
| ||
10.1 |
| [Reserved] |
|
|
|
|
|
| |
|
| 8-K |
| 10.3 |
| 1/6/2023 | |||
|
| 8-K |
| 10.3 |
| 8/31/2023 | |||
| Employment Agreement between iCoreConnect Inc. and Robert McDermott |
| 8-K |
| 10.4 |
| 8/31/2023 | ||
| 48 |
| Table of Contents |
| Employment Agreement between iCoreConnect Inc. and Archit Shah |
| 8-K |
| 10.5 |
| 8/31/2023 | ||
| Employment Agreement between iCoreConnect Inc. and David Fidanza |
| 8-K |
| 10.6 |
| 8/31/2023 | ||
| Employment Agreement between iCoreConnect Inc. and Murali Chakravarthi |
| 8-K |
| 10.7 |
| 8/31/2023 | ||
|
| 8-K |
| 10.1 |
| 8/14/2023 | |||
|
| 8-K |
| 10.1 |
| 9/14/2023 | |||
|
| 8-K |
| 10.1 |
| 1/5/2024 | |||
|
| 8-K |
| 10.2 |
| 1/5/2024 | |||
|
| 8-K |
| 10.3 |
| 1/5/2024 | |||
|
| 8-K |
| 10.4 |
| 1/5/2024 | |||
|
| 8-K |
| 10.5 |
| 1/5/2024 | |||
|
| 8-K |
| 10.6 |
| 1/5/2024 | |||
|
| 8-K |
| 10.1 |
| 2/7/2024 | |||
|
| 8-K |
| 4.2 |
| 2/15/2024 | |||
| Form of Securities Purchase Agreement dated February 26, 2024 |
| 8-K |
| 10.1 |
| 2/28/2024 | ||
| Form of Registration Rights Agreement dated February 26, 2024 |
| 8-K |
| 10.2 |
| 2/28/2024 | ||
|
| 10-Q |
| 10.10 |
| 5/15/2024 | |||
|
| 8-K |
| 10.1 |
| 6/17/2024 | |||
|
| 8-K |
| 10.1 |
| 8/21/2024 | |||
|
| 8-K |
| 10.2 |
| 8/21/2024 | |||
|
| 8-K |
| 10.3 |
| 8/21/2024 | |||
|
| 8-K |
| 10.4 |
| 8/21/2024 | |||
|
| 8-K |
| 10.5 |
| 8/21/2024 | |||
|
| 8-K |
| 10.2 |
| 8/27/2024 | |||
| Form of Securities Purchase Agreement dated December 5, 2024 |
| 8-K |
| 10.1 |
| 12/10/2024 |
| |
| Form of Registration Rights Agreement dated December 5, 2024 |
| 8-K |
| 10.2 |
| 12/10/2024 |
| |
|
| 8-K |
| 10.3 |
| 12/10/2024 |
| ||
|
| 8-K |
| 10.4 |
| 12/10/2024 |
| ||
|
| 8-K |
| 10.5 |
| 12/10/2024 |
| ||
| Letter dated September 11, 2023 from Plante & Moran, PLLC to the SEC |
| 8-K |
| 16.1 |
| 9/11/2023 | ||
|
| S-1 |
| 21.1 |
| 10/10/2023 | |||
|
|
|
|
|
|
| |||
101.INS |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
|
|
|
|
|
|
|
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
|
|
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
|
|
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
|
|
101.LAB |
| Inline XBRL Taxonomy Extension Labels Linkbase Document |
|
|
|
|
|
|
|
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
|
|
104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
|
|
|
|
|
|
_________________
* Filed herewith.
** Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). FGMC agrees to furnish supplementally a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request.
+ Management contract or compensatory plan, contract or arrangement.
Item 16. Form 10-K Summary
None.
| 49 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ICORECONNECT, INC. |
| |
|
|
|
|
| By: | /s/ Robert P McDermott |
|
|
| Robert P McDermott, |
|
|
| Chief Executive Officer |
|
Name |
| Title |
| Date |
|
|
|
|
|
/s/ Robert P McDermott |
|
|
|
|
Robert P McDermott |
| Chief Executive Officer |
| May 29, 2025 |
|
| (Principal Executive Officer) |
|
|
/s/ Archit Shah |
|
|
|
|
Archit Shah |
| Chief Financial and Accounting Officer |
| May 29, 2025 |
|
| (Principal Financial and Accounting Officer) |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
/s/ Robert P McDermott |
|
|
|
|
Robert P McDermott |
| Chief Executive Officer and Director |
| May 29, 2025 |
|
| (Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ Archit Shah |
|
|
|
|
Archit Shah |
| Chief Financial Officer |
| May 29, 2025 |
|
| (Principal Financial and Accounting Officer) |
|
|
|
|
|
|
|
/s/ Wayne Kalish |
|
|
|
|
Wayne Kalish |
| Director |
| May 29, 2025 |
|
|
|
|
|
/s/ John Pasqual |
|
|
|
|
John Pasqual |
| Director |
| May 29, 2025 |
|
|
|
|
|
/s/ Adam Chambers |
|
|
|
|
Adam Chambers |
| Director |
| May 29, 2025 |
|
|
|
|
|
/s/ David Piedra |
|
|
|
|
David Piedra |
| Director |
| May 29, 2025 |
|
|
|
|
|
/s/ Angel Liriano |
|
|
|
|
Angel Liriano |
| Director |
| May 29, 2025 |
|
|
|
|
|
/s/ Joseph Tung |
|
|
|
|
Joseph Tung |
| Director |
| May 29, 2025 |
| 50 |