Item 3.03.
Material
Modification to Rights of Security Holders
On
March 30, 2017, stockholders of iCoreConnect Inc., formerly known
as iMedicor, Inc. (the “Company”), holding not less
than two thirds of the outstanding shares of each of the Series A
Preferred Stock of the Company (the “Series A Preferred
Stock”) and the Series B Preferred Stock of the Company
(the “Series B Preferred Stock”) and holders of
Common Stock of the Company (who, together with the holder of the
Series A Preferred Stock and the Series B Preferred Stock are
entitled to vote upon matters submitted to stockholders for a vote
in the same manner and with the same effect as the holders of
Common Stock, voting together on an as converted basis and,
therefore, represent a majority of the voting power of the
Company), as well as the holders of convertible debt of the Company
(the “Convertible Debt Holders”) who held as of
June 30, 2017 approximately $6,482,000 of indebtedness
(principal and accrued and unpaid interest thereon) of the Company
convertible into shares of Common Stock of the Company (the
“Convertible Debt”), entered into a Recapitalization
Agreement dated as of November 1, 2016 (the "Recapitalization
Agreement") for the purpose of recapitalizing the Company (the
"Recapitalization"). A copy of the Recapitalization Agreement is
attached to the Consent Statement filed by the Company with the SEC
on June 7, 2017 on Schedule 14A (the “Consent
Statement”).
Section
78.320 of the Nevada Statutes provides that an action permitted to
be taken at a meeting of stockholders may be taken by written
consent if it is signed by stockholders holding at least a majority
of the voting power. The Certificates of Designation of both the
Series A Preferred Stock and the Series B Preferred Stock provided
that the holders of shares of Series A Preferred Stock and Series B
Preferred Stock were entitled to vote upon matters submitted to
stockholders for a vote in the same manner and with the same effect
as the holders of shares of Common Stock, voting together with the
holders of Common Stock as a single class and that the holders of
such Series A Preferred Stock and Series B Preferred Stock would
have the number of votes equal to the number of shares of Common
Stock into which the Series A Preferred Stock or the Series B
Preferred Stock, as the case may be, was convertible on the date
upon which the consent in lieu of meeting was
executed.
The
parties to the Recapitalization Agreement agreed that, assuming the
Requisite Written Consents had been obtained, the Recapitalization
would take place on such date as the Company, in its sole
discretion, would designate in a written notice to all of the
parties to the Recapitalization Agreement (the "Recapitalization
Date”). The Board of Directors designated June 30, 2017 as
the Recapitalization Date and written notice thereof was given to
all of the parties to the Recapitalization Agreement.
Pursuant to the
Recapitalization:
1.
Amendment of Series
B Preferred Stock Certificate of Designation. Clause (b) of Section
4 of the Series B Preferred Stock Certificate of Designation was
amended to read as follows: “(b) at the option of the Company
at any time” and, in connection therewith, the Company
prepared, executed, and filed with the Secretary of State of the
State of Nevada an Amendment of Certificate of Designation amending
the Series B Preferred Stock Certificate of Designation. The
purpose of this amendment was to permit the Company at its option
to cause the conversion of all outstanding shares of Series B
Preferred Stock.
2.
Amendment
of Series A Preferred Stock Certificate of Designation
.
Clause (b) of Section 4 of the Series A Preferred Stock Certificate
of Designation was amended to read as follows: “(b) at the
option of the Company at any time” and, in connection
therewith, the Company prepared, executed, and filed with the
Secretary of State of the State of Nevada an Amendment of
Certificate of Designation amending the Series A Preferred Stock
Certificate of Designation. The purpose of this amendment was to
permit the Company at its option to cause the conversion of all
outstanding shares of Series A Preferred Stock.
3.
Conversion of Convertible
Debt.
The holders of the Convertible Debt (the
“Convertible Debt Holders”) converted all of the
Convertible Debt (consisting of approximately $6,482,325 aggregate
principal amount of indebtedness) held by the Convertible Debt
Holders at a price per share of $0.001 into approximately
6,482,325,000 shares of Common Stock, in the manner set forth in
the instruments relating to the Convertible Debt. The conversion of
the Convertible Debt into shares of Common Stock simplified and
added equity to the capitalization of the Company.
4.
Conversion of the Series B Preferred
Stock and, immediately thereafter conversion of the Series A
Preferred Stock
. Immediately following the conversion of the
Convertible Debt into shares of Common Stock, the Company converted
the Series B Preferred Stock and immediately thereafter the Series
A Preferred Stock into shares of Common Stock in the manner set
forth in section 4(b) of the Series B Preferred Stock Certificate
of Designation, as amended, and section 4(b) of the Series A
Preferred Stock Certificate of Designation, as amended,
respectively. The purpose of causing all outstanding shares of
Series B Preferred Stock and all outstanding shares of Series A
Preferred Stock to be converted into shares of Common Stock was to
simplify the capitalization of the Company and eliminate the
potential dilution that the outstanding shares of Series B
Preferred Stock and Series A Preferred Stock represented which the
Company believed depressed the value of the Common Stock and
restricted the ability of the Company to raise funds to conduct its
operations and to add value to the Company and its Common
Stock.
5.
Reverse
Split of Shares of Common Stock
. Immediately following the
conversion of the Convertible Debt, the Series B Preferred Stock
and the Series A Preferred Stock, the Company combined its
outstanding shares of Common Stock by a ratio of one (1) share of
Common Stock for each 1,749.3119 shares of Common Stock, as
determined by the Company’s Board of Directors, so that
immediately following such reverse split the number of outstanding
shares of Common Stock would be 10,000,000 shares (the
“Reverse Split”); provided, however, no fractional
share of Common Stock would remain outstanding and in lieu of any
fractional share of Common Stock that otherwise would be
outstanding, the holder thereof is entitled to receive and the
Company shall pay to such holder of such fraction that amount equal
to such fraction times the amount that the Board determines in good
faith to be the value of a share of Common Stock on June 30,
2017.
In
order for a stockholder to receive a new stock certificate
evidencing the shares of Common Stock of the Company into which the
shares of Common Stock owned by such stockholder on the
Recapitalization Date were converted as a result of the Reverse
Split and the Cash Payment which such stockholder is entitled to
receive in lieu of any fractional share of Common Stock which such
stockholder otherwise would have been entitled to receive, such
stockholder should complete the Letter of Transmittal attached to
the Consent Statement as Exhibit II and return it, accompanied by
the stock certificates evidencing such stockholder’s shares
in the Company, to Pacific Stock Transfer Company.
6.
Dissenter’s Rights
.
Nevada Revised Statutes (“NRS”) 78.2055 provides that
any proposed corporate action that would result in only money being
paid or scrip being issued to stockholders who:
(i)
before the proposed
corporate action becomes effective, hold 1 percent or more of the
outstanding shares of the affected class or series,
and
(ii)
would otherwise be
entitled to receive a fraction of a share in exchange for the
cancellation of all their outstanding shares, is subject to the
provisions of NRS 92A.300 to 92A.500, inclusive. If the proposed
corporate action is subject to those provisions, any stockholder
who is obligated to accept money or scrip rather than receive a
fraction of a share resulting from the action taken pursuant to
Section 78.2055 may dissent in accordance with those provisions and
obtain payment of the fair value of the fraction of a share to
which the stockholder would otherwise be entitled. Copies of NRS
78.2055 and NRS 92A.300 to 92A.500 are attached as Exhibit III to
the Consent Statement.
Accordingly,
because the Reverse Split could conceivably result in the payment
of cash to a stockholder in lieu of the issuance of a fractional
share as provided in NRS 78.2055 and was approved by a written
consent of stockholders without a meeting, it is possible that a
stockholder may be entitled to the notice prescribed by NRS 92A.430
of such stockholder’s dissenter’s rights
(“Dissenter’s Rights”) as set forth in NRS
92A.300 to 92A.500. If such a stockholder of record exists, the
Company will give to such stockholder the notice prescribed by NRS
92A.430. The Company considers the cash payment that any such
stockholder would receive to satisfy the requirements of Nevada law
to pay “fair value” in lieu of the fractional share.
If, however, a stockholder does not agree that such payment
represents “fair value,” such stockholder may assert
Dissenter’s Rights.
7.
Amendment
and Restatement of Articles of Incorporation
. The Articles
of Incorporation were amended and restated in their entirety to
read as set forth in Exhibit 2.8 of the Recapitalization Agreement
(the "Reverse Split Amendment") to provide that, following the
filing of the Reverse Split Amendment, the Company is authorized to
issue six hundred ten million (610,000,000) shares, consisting
of six hundred million (600,000,000) shares of Common Stock, of
which, following the Reverse Split Amendment but before the
conversion of the Series A Bridge Notes and the Series B Bridge
Notes (see the Bridge Financings (below)), approximately ten
million (10,000,000) shares were outstanding, and ten million
(10,000,000) shares of Preferred Stock, none of which were
outstanding. The Recapitalization was effective upon the filing of
the Reverse Split Amendment.
Following the
Recapitalization and the conversion of $6,212,890 aggregate
principal amount of the Series A Bridge Notes and the
conversion of all of the Series B Bridge Notes in the aggregate
principal amount of $275,811, the Company continued to have
outstanding convertible debt in the aggregate principal amount of
approximately $38,654 and unpaid interest thereon, through June 30,
2017, of $13,389 convertible into approximately 115,650 shares of
Common Stock and nonconvertible debt (exclusive of trade debt and
other payables incurred in the operation of the business of the
Company in the ordinary course) of approximately
$1,345,000.
8.
Amendment
of By-Laws
. The By-Laws of the Company were amended and
restated in their entirety to read as set forth in Exhibit 2.9 of
the Recapitalization Agreement. The purpose of amending the By-Laws
was to incorporate provisions commonly included in the by-laws of
public companies such as provisions relating to advance
notification of stockholder nominees for director and other
stockholder proposals.
II.
CHANGE
OF COMPANY NAME
Immediately
following the Recapitalization, the Company further amended and
restated its Articles of Incorporation to change the name of the
Company from iMedicor, Inc. to iCoreConnect Inc. The purpose of
this Amendment was to reflect the fact that the business of the
Company is expanding and is no longer limited to the medical field.
In connection therewith, the Company filed with the Secretary of
State of the State of Nevada amended and restated Articles of
Incorporation in the form attached hereto as Exhibit 3
(i).
III.
BRIDGE
FINANCINGS
1.
Series
A Bridge Financing
The
Company has been raising funds on a best efforts basis up to a
maximum amount of $10,000,000 for working capital by issuing Series
A 18% Convertible Promissory Notes (the “Series A Bridge
Notes”) with warrants to purchase shares of Common Stock (the
“Series A Bridge Warrants”). As of June 30, 2017 the
Company had issued and sold to investors Series A Bridge Notes in
the aggregate principal amount of $6,251,544 and Series A Bridge
Warrants exercisable to purchase 6,251,544 shares of Common Stock.
The Company entered into separate Conversion Agreements with the
holders of $6,212,890 aggregated principal amount of such Series A
Bridge Notes, which Series A Bridge Notes were converted pursuant
to such Conversion Agreements on June 30, 2017 immediately
following the Recapitalization into 17,502,623 shares of Common
Stock of the Company at a price equal to $0.45 per share. Series A
Bridge Notes in the aggregate principal amount of $38,654 were not
converted and continue to be outstanding.
The
Series A Bridge Notes in the aggregate principal amount of $38,654
that were not converted immediately following the Recapitalization
and continue to be outstanding bear interest at the rate of 18% per
annum and by their terms were payable at the earlier of December
31, 2016 (the “Maturity Date”) or conversion. These
Series A Bridge Notes (principal and accrued and unpaid interest)
are convertible into shares of Common Stock at a price equal to
$0.45 per share of Common Stock; provided, however, if the
Company’s fully diluted shares of Common Stock outstanding on
the date of conversion is greater or less than 10 million, the
Conversion Price shall be adjusted proportionately to equate to a
Conversion Price based upon a $4.5 million premoney valuation
of the Company on a fully diluted basis on the date of conversion
(i.e., a 10% discount to a $5.0 million pre-money valuation on a
fully diluted basis on the date of conversion).
Investors who
purchased Series A Bridge Notes also received one Series A Bridge
Warrant for every $1.00 in principal amount of Series A Bridge
Notes purchased in the Series A Bridge Offering. Each Series A
Bridge Warrant is exercisable until December 31, 2019 to purchase
one share of Common Stock at an exercise price equal to $1.35 per
share (the “Series A Bridge Warrant Exercise Price”),
subject to adjustment The Series A Bridge Warrants are
callable by the Company if (i) there exists a public trading market
for the shares of Common Stock, (ii) there is an effective
registration statement registering for resale under the Securities
Act of 1933, as amended (the “Securities Act”), the
shares of Common Stock issuable upon exercise of the Series A
Bridge Warrants ( the “Series A Bridge Warrant Shares”)
and (iii) the closing price of the Common Stock on an exchange
registered with the SEC has equaled at least 150% of the then
current Series A Bridge Warrant Exercise Price for 20 of the
preceding 30 trading days and the volume for such 30 trading days
has averaged 50,000 shares per day (for example, if the Series A
Bridge Warrant Exercise Price is $1.35 the Series A Bridge Warrants
are callable if the Common Stock closes above $2.02 per share for
20 of the preceding 30 trading days with the average volume in
excess of 50,000 shares per day for such 30 trading
days.
2.
Series
B Bridge Financing
The
Company has also been raising funds on a best efforts basis up to a
maximum amount of $4,000,000 for working capital by issuing Series
B Convertible Promissory Notes (the “Series B Bridge
Notes” and, together with the Series A Bridge Notes, the
“Bridge Notes”) with warrants to purchase shares of
Common Stock (the “Series B Bridge Warrants” and,
together with the Series A Bridge Warrants, the “Bridge
Warrants”). As of June 30, 2017 the Company had issued and
sold to investors Series B Bridge Notes in the aggregate principal
amount of $295,811 and Series B Bridge Warrants exercisable to
purchase 295,811 shares of Common Stock. The Company pursuant to
the terms of the Series B Bridge Notes converted on June 30, 2017
immediately following the Recapitalization all of the outstanding
Series B Bridge Notes into 657,308 shares of Common Stock of the
Company at a price equal to $0.45 per share of Common
Stock.
Investors who
purchased Series B Bridge Notes also received one Series B Bridge
Warrant for every $1.00 in principal amount of Series B Bridge
Notes purchased in the Series B Bridge Offering. Each Series B
Bridge Warrant is exercisable until December 31, 2019 to purchase
one share of Common Stock at an exercise price equal to $1.35 per
share, subject to adjustment (the “Series B Bridge Warrant
Exercise Price”), subject to adjustment. The Series B Bridge
Warrants are callable by the Company if (i) there exists a public
trading market for the shares of Common Stock, (ii) there is an
effective registration statement registering for resale under the
Securities Act of 1933, as amended (the “Securities
Act”), the shares of Common Stock issuable upon exercise of
the Series B Bridge Warrants (the “Series B Bridge Warrant
Shares”) and (iii) the closing price of the Common Stock on
an exchange registered with the SEC has equaled at least 150% of
the then current Series B Bridge Warrant Exercise Price for 20 of
the preceding 30 trading days and the volume for such 30 trading
days has averaged 50,000 shares per day (for example, if the Series
B Bridge Warrant Exercise Price (following the Reverse Split) is
$1.35 the Series B Bridge Warrants are callable if the Common Stock
closes above $2.02 per share for 20 of the preceding 30 trading
days with the average volume in excess of 50,000 shares per day for
such 30 trading days.
IV.
CAPITAL
STRUCTURE BEFORE AND AFTER RECAPITALIZATION AND BEFORE AND AFTER
CONVERSION OF BRIDGE NOTES
The
following tables set forth the number of shares of Common Stock,
Series A Preferred Stock and Series B Preferred Stock that is
authorized, issued and outstanding, reserved for issuance and
authorized but unissued, both before and after giving effect to the
Recapitalization and, after the Recapitalization, the conversion of
the Bridge Notes converted on June 30, 2017.
|
|
|
|
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AFTER CONVERSION
OF BRIDGE NOTES
|
|
|
|
|
|
|
|
|
|
|
Authorized
|
37.0000
|
63.0000
|
2,000,000,000
|
10,000,000
|
600,000,000
|
10,000,000
|
600,000,000
|
|
Issued
|
35.7500
|
63.0750
|
1,419,651,828
|
|
10,000,000
|
|
28,159,377
|
|
Outstanding
|
35.7500
|
63.0750
|
1,419,651,828
|
|
10,000,000
|
|
28,159,377
|
|
Reserved
for
issuance
|
|
5.0000
|
11,002,013,294
|
|
25,046,846
|
|
7,003,119
|
|
Authorized
but unissued
|
1.2500
|
-
|
580,348,172
|
10,000,000
|
590,000,000
|
10,000,000
|
571,840,623
|
|
|
Stock Reserved For
Issuance Before Recapitalization
|
Stock Reserved For
Issuance After Recapitalization
|
Stock Reserved For
Issuance After Conversion Of Bridge Notes
|
|
Warrants
|
106,457,230
|
6,604,520
|
6,604,520
|
|
Vested
options
|
494,966,666
|
282,949
|
282,949
|
|
Series A Preferred
Stock
|
507,525,529
|
|
|
|
Series B Preferred
Stock
|
895,445,391
|
|
|
|
Convertible
Debt
|
8,979,459,103
|
|
|
|
Bridge
notes
|
18,159,377
|
18,159,377
|
115,650
|
|
Total
|
11,002,013,294
|
25,046,846
|
7,003,119
|