UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 17, 2021
Commission file number: 000-53662
IronClad Encryption Corporation
(Exact name of registrant as specified in its charter)
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Delaware |
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81-0409475 |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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1 Riverway, Suite 1700, Houston, Texas |
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77056 |
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(Address of principal executive offices) |
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(Zip Code) |
(888) 362-7972
(Issuer's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
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Trading Symbol(s) |
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Name of Each Exchange on Which Registered |
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Common Stock, $0.001 par value |
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IRNC |
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OTCIQ |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b–2 of this chapter).
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. ☐
Item 1.03 Bankruptcy or Receivership.
Chapter 11 Reorganization Background and Developments
Background. On August 28, 2020, IronClad Encryption Corporation (“IronClad” or the “Company”) filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code, case number 20-34332 (the “Chapter 11 Case”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”).
The bankruptcy petition and other subsequent documents filed by IronClad as debtor and other parties-in-interest are available at the court’s Internet home page http://www.txs.uscourts.gov/ or at the Clerk’s Office, United States Bankruptcy Court, P. O. Box 61010, Houston, Texas 77208. If attempting to access the court’s records, one will need to have a PACER subscription.
Recent developments. On March 17, 2021, at a hearing conducted by the Bankruptcy Court, IronClad’s Second Amended Combined Plan of Reorganization and Disclosure Statement (the “Plan”), as modified, was confirmed by order of the Bankruptcy Court with a scheduled effective date of April 1, 2021. The court order confirming the Plan and a copy of the Plan are presented in full detail in Exhibits 2.1 and 2.2 and are incorporated by reference into this Item 1.03.
Summary points. Features of the Plan provide for the treatment of six classes for the claims and interests of creditors and equity holders. The points summarized below are not intended to be and are not a complete description of the Plan, and it is qualified in its entirety by reference to the full text of the Plan and related documents in the Exhibits.
·Class 1: The Internal Revenue Service
oClaim to be paid in cash if allowed.
·Class 2: Unsecured Creditors, Convenience Class
oClaims to be paid as allowed.
·Class 3: General Class of Unsecured Claims
oClaims to be paid by promissory note as allowed (see discussion below).
·Class 4: Allowed Unsecured Claims of the Lerner Class
oClaim to be paid in cash and promissory note (see below).
·Class 5: Allowed Interests of Holders of Classes A and B of Common Stock
oShareholder interests and stock certificates are cancelled (see below).
·Class 6: Allowed Interests of Holders of Preferred Stock, Series A
oShareholder interest and stock certificates are cancelled (see below).
Claims are deemed to be allowed unless a party-in-interest files an objection to a particular claim in which case a court order would be necessary to allow the claim.
Class 3. Each creditor shall receive a Class 3 Plan Note (the “Note”; see form of the note in Exhibit 10.1). The principal amount of each Note will be 50% of the amount of the underlying claim and as allowed by a final court order (the “Principal”).
Each Note is non-interest bearing, unsecured, and payable in quarterly installments of 1/20th of the original Principal with the first quarterly payment due on the first business day of the thirteenth month after the date of the Note. At its option, IronClad may prepay each Note and by so electing would
be entitled to take advantage of defined prepayment discounts ranging from 50% to 10% depending on the timing and election of any prepayment by IronClad.
Class 4. Proofs of claims were filed by a set of individuals referred to as the Lerner Parties. IronClad and the Lerner Parties mediated several disputes that were settled by a Mediated Settlement Agreement dated February 11, 2021 (a copy of which is included as Exhibit 9 within the Plan).
In exchange for assigning to IronClad the portfolio of patents granted and applied for since its inception, the Lerner Parties will receive $500,000 in cash and a note payable in the amount of $242,000 (the “Lerner Note”). The Lerner Note is secured by the patent portfolio, has an interest rate of zero percent, and is payable in twelve monthly installments beginning on the last day of the first month following the closing date of the Plan. IronClad, at its sole election, has the option to pay $142,000 of the loan Lerner Note within ninety days of the date of the note resulting in a waiver of any future payments and the loan deemed and marked as “paid in full”.
Class 5. The interests of holders of IronClad’s Class A and Class B Common Stock (which includes stock holdings, holdings of options and warrants, et al.) will be deemed cancelled. The Class A Common Stock will no longer exist and thus no longer be registered with the Securities and Exchange Commission or tradable on any stock exchange.
Class 6. The interests of the holder of IronClad’s Preferred Stock, Series A will be deemed cancelled.
Important. On the effective date of the Plan, all rights and interests of the holders of any common or preferred stock will be terminated and those holders will not receive or retain any property or interest in property based on their holding of any common or preferred stock.
On the effective date, IronClad will become a private company and will no longer maintain an obligation to be registered with the Securities and Exchange Commission or to list the equity interest of the reorganized Company with any securities exchange.
Item 8.01 Other Events
Cautionary Note about Trading in IronClad’s Common Stock
The Company has previously cautioned and continues to caution that trading in its securities during the pendency of the Bankruptcy Petitions is highly speculative and poses substantial risks.
IronClad’s equity holders will experience a complete loss of the value of their investment due to the complete cancellation of IronClad’s Classes A and B of its Common Stock.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Exhibit No. |
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Description |
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2.1 * |
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Order Confirming Second Amended Plan of Reorganization and Approving Disclosure as filed, heard and confirmed by the court on March 17, 2021 in the United States Bankruptcy Court for the Southern District of Texas, Houston Division, Case Number 20-34332, Document 72 (including its Exhibits A, B and C; total pages: 69) |
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2.2 * |
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Second Amended Combined Plan of Reorganization and Disclosure Statement filed on February 15, 2021 in the United States Bankruptcy Court for the Southern District of Texas, Houston Division, Case Number 20-34332, Document 44 (total pages: 231) |
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2.3 * |
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Order Granting Debtor’s Motion to Approve Compromise of Controversies with Lerner Parties as filed and confirmed March 17, 2017 in the United States Bankruptcy Court for the Southern District of Texas, Houston Division, Case Number 20-34332, Document 73 (including its Exhibit 1 with sub-Exhibits A, B, C, and D; total pages: 42) |
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2.4 * |
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Debtor IronClad Encryption Corporation’s Motion to Approve Compromise of Controversies with Lerner Parties, dated February 11, 2021, and filed February 15, 2021 with The United States Bankruptcy Court for the Southern District of Texas, Houston Division, Case Number 20-34332, Document 45 and eventually approved by the court on March 17, 2021 (total pages: 56) |
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10.1 * |
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Form of Promissory Note to be issued to creditors in Class 3. General Class of Allowed Unsecured Claims |
* Filed with this Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized,
IronClad Encryption Corporation
Date: March 29, 2021
By:/s/ David G. Gullickson
David G. Gullickson
Vice President, Treasurer, and
Principal Financial and Accounting Officer
IronClad Encryption Corporation
Promissory Note
Principal Amount: $________Dated March __, 2021
FOR VALUE RECEIVED, the undersigned, IronClad Encryption Corporation, a Delaware corporation (“Maker”), hereby promises to pay to the order of _____ (“Payee”), the principal sum of U.S. $_____. This promissory note is made in furtherance of the Second Amended Combined Plan of Reorganization and Disclosure Statement (the “Plan”), as confirmed by Order of the United States Bankruptcy Court for the Southern District of Texas, on March 17, 2021, in the bankruptcy proceeding filed under Chapter 11 of the United States Bankruptcy Code and styled In re IronClad Encryption Corporation, case number 20-34332.
The unpaid principal amount of this Promissory Note shall bear interest prior to maturity at zero percent (0%). Interest on any installment payment that is not timely paid shall bear interest at the lesser of: (i) eighteen percent (18%) per annum, or (ii) the maximum legal rate permitted under Chapter 303, Subchapter A of the Texas Finance Code (the "Maximum Rate").
This Promissory Note shall be due and payable by the Maker in quarterly installments equal to one-twentieth (1⁄20th) of the principal amount of this Promissory Note first payable on the first business day of the thirteenth (13th) month following the date of this Promissory Note and continuing every quarter thereafter until paid in full. The Maker shall be entitled to pre-pay a discounted principal amount of this Promissory Note as follows:
1. If the outstanding principal amount is prepaid on, or before, the last business day of the twelfth (12th) month after the date of this Promissory Note, Maker shall be entitled to a fifty percent (50%) discount of the then principal amount then due;
2. If the outstanding principal amount is prepaid on, or before, the last business day of the twenty-fourth (24th) month after the date of this Promissory Note, Maker shall be entitled to a thirty-five percent (35%) discount of the then principal amount then due;
3. If the outstanding principal amount is prepaid on, or before, the last business day of the thirty-sixth (36th) month after the date of this Promissory Note, Maker shall be entitled to a twenty percent (20%) discount of the then principal amount then due; and
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4. If the outstanding principal amount is prepaid on, or before, the last business day of the forty-eighth (48th) month after the date of this Promissory Note, Maker shall be entitled to a ten percent (10%) discount of the then principal amount then due.
Upon payment of a discounted amount as described above, this Promissory Note shall be deemed paid and satisfied in full.
The occurrence of any of the following events shall constitute an “Event of Default” hereunder:
1. Maker fails to pay any amount required to be paid under this Promissory Note and such failure continues for ten (10) days from the date of Payee’s written notice to Maker of such failure to pay;
2. Maker seeks conversion of the above-referenced bankruptcy proceeding to one filed under Chapter 7 of the United States Bankruptcy Code or commences any new “Insolvency Proceeding” (hereinafter defined) with respect to itself or takes any action to effectuate or authorize an Insolvency Proceeding; or
3. The above-referenced bankruptcy proceeding is converted to one under Chapter 7 of the United States Bankruptcy Code or any involuntary Insolvency Proceeding is commenced or filed against Maker or any writ, judgment, warrant of attachment, execution or similar process is issued or levied against all or a substantial part of Maker’s assets, and any such involuntary Insolvency Proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within sixty (60) days after commencement, filing, or levy.
The term “Insolvency Proceeding” means: (a) any case, action, or proceeding relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any collateral assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors undertaken under United States Federal, state of foreign law, including the United States Bankruptcy Code (11 U.S.C. §§ 101, et seq.).
At any time after an Event of Default has occurred and is continuing, Payee shall have the right to declare all amounts due and owing hereunder, including without limitation, principal and accrued, unpaid interest, immediately due and payable in full without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by Maker.
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If Maker fails to make any payment when due under this Promissory Note, then, in addition to any and all other relief to which Payee may be entitled, Maker agrees to pay—or reimburse Payee for—any and all reasonable costs, expenses and fees incurred by Payee to enforce this Note or otherwise collect indebtedness evidenced by this Promissory Note, including, but not limited to, reasonable attorney’s fees and court costs.
Any disputes regarding the interpretation of this Promissory Note and all legal proceedings seeking the enforcement of this Promissory Note shall be brought in the United States Bankruptcy Court for the Southern District of Texas, in the Houston Division as part of the above-referenced bankruptcy case.
This Promissory Note shall be interpreted, construed and enforced in accordance with the substantive laws of the State of Texas, without regard to the provisions of conflicts of law thereof. This Promissory Note may be changed, and waivers of any terms or provisions hereof shall be effective, only by an agreement in writing signed by Maker and Payee. If any provisions of this Promissory Note shall be judicially declared to be invalid, the remaining terms shall be binding and effective. Payee’s failure to exercise or delay in exercising any rights or remedies hereunder shall not constitute a waiver thereof nor of the right to exercise the same at any other time, or to exercise any other rights or remedies.
Notwithstanding anything to the contrary contained herein, no provision of this Note shall require the payment or permit the collection of interest in excess of the Maximum Rate. If any excess of interest in such respect is herein provided for, or shall be adjudicated to be so provided, in this Note or otherwise in connection with this loan transaction, the provisions of this paragraph shall govern and prevail, and Maker shall be obligated to pay the excess amount of such interest, or any other excess sum paid for the use, forbearance or detention of sums loaned pursuant hereto.
If for any reason interest in excess of the Maximum Rate shall be deemed charged, required or permitted by any court of competent jurisdiction, any such excess shall be applied as a payment and reduction of the principal of indebtedness evidenced by this Note; and, if the principal amount hereof has been paid in full, any remaining excess shall forthwith be paid to Maker.
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In determining whether or not the interest paid or payable exceeds the Maximum Rate, Maker and Payee shall, to the extent permitted by applicable law, (a) characterize any non-principal payment as an expense, fee, or premium rather than as interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the entire contemplated term of the indebtedness evidenced by this Note so that the interest for the entire term does not exceed the Maximum Rate.
IronClad Encryption Corporation
By:_________________________________
David G. Gullickson
Vice President, Treasurer, and
Chief Financial Officer
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