UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 AMERI Holdings, Inc. (Exact name of registrant as specified in its charter)
Registrant's telephone number, including area Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value per share ( Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
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 7(a)(2)(B) of the Securities Act. ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐☐ No ☑
AMERI Holdings, Inc.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERQUARTERLY PERIOD ENDED MARCH 31, 20162017
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| 2016 | 4 | ||||
| 2016 | 5 | ||||
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| PART II - OTHER INFORMATION | |||||
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PART I
| ITEM 1. | FINANCIAL STATEMENTS |
AMERI HOLDINGS, INC.
| March 31, 2016 | December 31, 2015 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 505,173 | $ | 1,878,034 | ||||
| Accounts receivable | 4,929,298 | 4,872,082 | ||||||
| Investments | - | 82,908 | ||||||
| Other current assets | 318,826 | 343,809 | ||||||
| Total current assets | 5,753,297 | 7,176,833 | ||||||
| Other assets: | ||||||||
| Property and equipment, net | 134,914 | 73,066 | ||||||
| Intangible assets, net | 3,072,617 | 3,114,513 | ||||||
| Acquired goodwill | 3,670,522 | 3,470,522 | ||||||
| Total other assets | 6,878,053 | 6,658,101 | ||||||
| Total assets | $ | 12,631,350 | $ | 13,834,934 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 2,587,069 | $ | 2,597,385 | ||||
| Other accrued expenses | 2,236,466 | 1,093,814 | ||||||
| Consideration payable | 1,630,490 | 3,649,267 | ||||||
| Short term notes | 1,477,386 | 1,235,935 | ||||||
| Total current liabilities | 7,931,411 | 8,576,401 | ||||||
| Long term liabilities | ||||||||
| Convertible notes | 5,000,000 | 5,000,000 | ||||||
| Long term acquisition consideration | 500,000 | - | ||||||
| Total long term liabilities | 5,500,000 | 5,000,000 | ||||||
| Total liabilities: | 13,431,411 | 13,576,401 | ||||||
| Stockholders' equity: | ||||||||
| Preferred stock, $0.01 par value; 1,000,000 authorized, none issued and outstanding | - | - | ||||||
| Common stock, $0.01 par value; 100,000,000 shares authorized, 11,874,361 and 11,874,361 issued and outstanding as of March 31, 2016 and December 31, 2015, respectively | 118,743 | 118,743 | ||||||
| Additional paid-in capital | 1,294,369 | 1,192,692 | ||||||
| Retained earnings | (2,213,173 | ) | (1,052,902 | ) | ||||
| Total stockholders' equity | (800,061 | ) | 258,533 | |||||
| Total liabilities and stockholders' equity | $ | 12,631,350 | $ | 13,834,934 | ||||
March 31, 2017 | December 31, 2016 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,812,600 | $ | 1,379,887 | ||||
| Accounts receivable | 9,590,446 | 8,059,910 | ||||||
| Investments | 82,908 | 82,908 | ||||||
| Other current assets | 866,505 | 542,237 | ||||||
| Total current assets | 12,352,459 | 10,064,942 | ||||||
| Other assets: | ||||||||
| Property and equipment, net | 113,505 | 100,241 | ||||||
| Intangible assets, net | 11,845,910 | 8,764,704 | ||||||
| Acquired goodwill | 21,879,572 | 17,089,076 | ||||||
| Deferred income tax assets, net | 3,488,960 | 3,488,960 | ||||||
| Total other assets | 37,327,947 | 29,442,981 | ||||||
| Total assets | $ | 49,680,406 | $ | 39,507,923 | ||||
| Current liabilities: | ||||||||
| Line of credit | 3,956,494 | 3,088,890 | ||||||
| Accounts payable | 4,468,533 | 5,130,817 | ||||||
| Other accrued expenses | 3,147,210 | 2,165,088 | ||||||
| Bank Term Loan | 399,996 | 405,376 | ||||||
| Consideration payable – Cash | 4,199,238 | 1,854,397 | ||||||
| Consideration payable – Equity | 596,763 | 64,384 | ||||||
| Dividend Payable | 499,965 | - | ||||||
| Total current liabilities | 17,268,199 | 12,708,952 | ||||||
| Long term liabilities: | ||||||||
| Convertible notes | 1,250,000 | - | ||||||
| Bank Term Loan – Net of Current Portion | 1,023,474 | 1,536,191 | ||||||
| Consideration payable – Cash | 3,375,000 | 2,711,717 | ||||||
| Consideration payable – Equity | 11,993,723 | 10,887,360 | ||||||
| Total Long-term Liabilities | 17,642,197 | 15,135,268 | ||||||
| Total liabilities | 34,910,396 | 27,844,220 | ||||||
| Stockholders' equity: | ||||||||
| Preferred stock, $0.01 par value; 1,000,000 authorized, 363,611 issued and outstanding as of March 31, 2017 and as of December 31, 2016 | 3,636 | 3,636 | ||||||
| Common stock, $0.01 par value; 100,000,000 shares authorized, 14,579,417 and 13,885,972 issued and outstanding as of March 31, 2017 and December 31, 2016 respectively. | 145,794 | 138,860 | ||||||
| Additional paid-in capital | 19,850,002 | 15,358,839 | ||||||
| Accumulated deficit | (5,226,646 | ) | (3,833,588 | ) | ||||
| Accumulated other comprehensive income (loss) | 740 | (7,426 | ) | |||||
| Non-Controlling Interest | (3,516 | ) | 3,382 | |||||
| Total stockholders' equity | 14,770,010 | 11,663,703 | ||||||
| Total liabilities and stockholders' equity | $ | 49,680,406 | $ | 39,507,923 | ||||
See accompanying notes to the unaudited condensed consolidated financial statements.
AMERI HOLDINGS, INC.
Three Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Net revenue | $ | 12,340,927 | $ | 7,012,964 | ||||
| Cost of revenue | 9,039,577 | 5,365,561 | ||||||
| Gross profit | 3,301,350 | 1,647,403 | ||||||
| Operating expenses: | ||||||||
| Selling and marketing | 332,310 | 31,350 | ||||||
| General and administration | 2,701,145 | 2,110,336 | ||||||
| Acquisition related expenses | 209,344 | 375,405 | ||||||
| Depreciation and amortization | 689,100 | 111,628 | ||||||
| Operating expenses | 3,931,899 | 2,628,719 | ||||||
| Operating income (loss): | (630,549 | ) | (981,316 | ) | ||||
| Interest expense | (90,806 | ) | (113,746 | ) | ||||
| Interest income/other income | - | 2,005 | ||||||
| Other expense | (4,149 | ) | (2,304 | ) | ||||
| Total other income (expenses) | (94,955 | ) | (114, 045 | ) | ||||
| Income (loss) before income taxes | (725,504 | ) | (1,095,361 | ) | ||||
| Income tax benefit (provision) | (2,020 | ) | ||||||
| Net income (loss) after tax | (725,504 | ) | (1,097,381 | ) | ||||
| Dividend on Preference Shares | (499,965 | ) | - | |||||
| Net income (loss) attributable to the Company | (1,225,469 | ) | (1,097,381 | ) | ||||
| Non-Controlling Interest | 3,516 | |||||||
| Foreign exchange translation adjustment | 5,335 | (62,890 | ) | |||||
| Net income (loss) | $ | (1,216,618 | ) | (1,160,271 | ) | |||
| Basic income (loss) per share attributable to the Company | $ | (0.09 | ) | $ | (0.09 | ) | ||
| Diluted income (loss) per share attributable to the Company | $ | (0.09 | ) | $ | (0.09 | ) | ||
| Basic weighted average number of shares | 14,094,536 | 11,874,361 | ||||||
| Diluted weighted average number of shares | 14,094,536 | 11,874,361 | ||||||
| Three Months Ended March 31, 2016 | Three Months Ended March 31, 2015 | |||||||
| Net revenue | $ | 7,012,964 | $ | 4,284,750 | ||||
| Cost of services | 3,865,561 | 3,166,080 | ||||||
| Gross profit | 3,147,403 | 1,118,670 | ||||||
| Operating expenses: | ||||||||
| Selling and marketing | 31,350 | - | ||||||
| General and administration | 3,610,336 | 33,720 | ||||||
| Nonrecurring expenditures | 375,405 | - | ||||||
| Depreciation and amortization | 111,628 | 8,267 | ||||||
| Operating expenses | 4,128,719 | 41,987 | ||||||
| Operating income (loss): | (981,316 | ) | 1,076,683 | |||||
| Interest expense | (113,746 | ) | - | |||||
| Interest income/other income | 2,005 | - | ||||||
| Other expense | (2,304 | ) | - | |||||
| Income before income taxes | (1,095,361 | ) | 1,076,683 | |||||
| Tax provision | (2,020 | ) | - | |||||
| Foreign exchange translation | (62,890 | ) | - | |||||
| Net income (loss) | $ | (1,160,271 | ) | $ | 1,076,683 | |||
| Net and comprehensive income (loss) for the period | $ | (1,160,271 | ) | $ | 1,076,683 | |||
| Basic income (loss) per share | (0.10 | ) | $ | 0.11 | ||||
| Diluted income (loss) per share | (0.10 | ) | $ | 0.11 | ||||
| Basic weighted average number of shares | 11,874,361 | 9,992,828 | ||||||
| Diluted weighted average number of shares | 11,874,361 | 9,992,828 | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
AMERI HOLDINGS, INC.
Three Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Cash flow from operating activities | ||||||||
| Net income/(loss) | $ | (1,216,618 | ) | $ | (1,160,271 | ) | ||
| Adjustment to reconcile income/(loss) to net cash used in operating activities | ||||||||
| Depreciation and amortization | 689,100 | 111,628 | ||||||
| Provision for Preference dividend | 499,965 | - | ||||||
| Stock, option, restricted stock unit and warrant expense | 566,427 | 101,677 | ||||||
| Foreign exchange translation adjustment | 5,335 | (62,890 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| Increase (decrease) in: | ||||||||
| Accounts receivable | (1,530,536 | ) | (57,216 | ) | ||||
| Other current assets | (324,267 | ) | 24,983 | |||||
| Increase (decrease) in: | ||||||||
| Accounts payable and accrued expenses | 472,661 | 1,195,226 | ||||||
| Net cash provided by (used in) operating activities | (837,933 | ) | 153,137 | |||||
| Cash flow from investing activities | ||||||||
| Acquisition of intangible and fixed assets | (10,493 | ) | (131,580 | ) | ||||
| Acquisition consideration payable | (311,470 | ) | (1,718,777 | ) | ||||
| Investments | - | 82,908 | ||||||
| Net cash used in investing activities | (321,963 | ) | (1,767,449 | ) | ||||
| Cash flow from financing activities | ||||||||
| Proceeds from bank and convertible notes | 1,599,507 | 241,451 | ||||||
| Non-Controlling Interests | (6,898 | ) | ||||||
| Net cash provided by financing activities | 1,592,609 | 241,451 | ||||||
| Net increase (decrease) in cash and cash equivalents | 432,713 | (1,372,861 | ) | |||||
| Cash and cash equivalents as at beginning of the period | 1,379,887 | 1,878,034 | ||||||
| Cash at the end of the period | $ | 1,812,600 | $ | 505,173 | ||||
| Three Months Ended March 31, 2016 | Three Months Ended March 31, 2015 | |||||||
| Cash flow from operating activities | ||||||||
| Net income | $ | (1,160,271 | ) | $ | 1,076,683 | |||
| Adjustment to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation | 111,628 | 8,343 | ||||||
| Stock, option, RSU and warrant expense | 101,677 | - | ||||||
| Changes in assets and liabilities | ||||||||
| Increase (decrease) in: | ||||||||
| Accounts receivable | (57,216 | ) | (1,247,104 | ) | ||||
| Other current assets | 24,983 | (805 | ) | |||||
| Increase (decrease) in: | ||||||||
| Accounts payable and accrued expenses | 1,132,336 | (68,123 | ) | |||||
| Consideration payable | (1,718,777 | ) | (100,000 | ) | ||||
| Net cash used in operating activities: | (1,565,640 | ) | (331,006 | ) | ||||
| Cash flow from investing activities | ||||||||
| Purchase of and intangible and fixed assets | (131,580 | ) | (9,431 | ) | ||||
| Investments | 82,908 | (340,000 | ) | |||||
| Net cash used in investing activities | (48,672 | ) | (349,431 | ) | ||||
| Cash flow from financing activities | ||||||||
| Net proceeds from debt issuance | 241,451 | - | ||||||
| Additional stock issued | - | 125,000 | ||||||
| Net cash provided by financing activities | 241,451 | 125,000 | ||||||
| Net decrease in cash and cash equivalents | (1,372,861 | ) | (555,437 | ) | ||||
| Cash and cash equivalents as at beginning of the period | 1,878,034 | 1,381,058 | ||||||
| Cash at the end of the period | $ | 505,173 | $ | 825,621 | ||||
See accompanying notes to the unaudited condensed consolidated financial statements.
AMERI HOLDINGS, INC.
MARCH 31, 2017
| NOTE 1. | ORGANIZATION: |
AMERI Holdings, Inc., along with its wholly owned subsidiaries ("AMERI", the "Company", "we", or "our"), is a strategic consulting firm that brings a synergistic blend of classic consultingfast-growing technology services company which provides SAP cloud, digital and product-based consultingenterprise services to its customer base.clients worldwide. Headquartered in Princeton, New Jersey we typically goAmeri100 has offices in New York, Atlanta, Dallas, Phoenix, Kansas City, Folsom, and Toronto. The Company additionally has global delivery centers in India. With its bespoke engagement model, Ameri100 delivers transformational value to market both vertically byits clients across industry and horizontally by product/technology specialties and provide our customers with a wide range of business and technology offerings. We work with customers, primarily within North America, to improve process, reduce costs and increase revenue through the judicious use of technology.
verticals.
| NOTE 2. | BASIS OF PRESENTATION: |
The accompanying auditedunaudited condensed consolidated financial statements have been prepared by AMERI pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Certain information and note disclosuresdisclosure notes normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to ensure the information presented is not misleading.
The accompanying auditedunaudited condensed consolidated financial statements reflect all adjustments (which were of a normal, recurring nature) that, in the opinion of management, are necessary to present fairly our financial position, results of operations and cash flows as of and for the interim periods presented. All intercompany transactions have been eliminated in the accompanying auditedunaudited condensed consolidated financial statements. These financial statements should be read in conjunction with the auditedunaudited financial statements and notes thereto.
Our comprehensive income (loss) consists of net income (loss) plus or minus any periodic currency translation adjustments.
The Company's year-end is December 31. Ameri and Partners Inc, the Company's wholly-owned operating subsidiary that was the accounting acquirer in connection with the Company's May 2015 reverse merger, changed its fiscal year end from March 31 to December 31 pursuant to the merger, so that all of the Company's subsidiaries' year-ends are consistent with the year-end of the Company.
| NOTE 3. | BUSINESS COMBINATIONS: |
Acquisition of Bellsoft, Inc.
On November 20, 2015, we completed the acquisition of Bellsoft, Inc. ("Bellsoft") isInc., a consulting company based in Lawrenceville, Georgia with over 175 consultants specialized in the areas of SAP software, business intelligence, data warehousing and other enterprise resource planning services. Following the acquisition, the name of Bellsoft, Inc. was changed to Ameri100 Georgia Inc. (“Ameri Georgia”). Ameri Georgia has operations in the United States, Canada and in India. On November 20, 2015, the Company completed the acquisition of Bellsoft for the consideration listed below. For financial accounting purposes, the Company recognizeswe recognized September 1, 2015 as the effective date of the acquisition.
The total consideration for the acquisition of Ameri Georgia was $9,910,817, consisting of:| A cash payment in the amount of $3,000,000, which was paid at |
| 235,295 shares of |
| $250,000 quarterly cash payments |
| A $1,000,000 cash reimbursement |
| Approximately |
| Earn-out payments of approximately $500,000 a year for 2016 and 2017, if earned through the achievement of annual revenue and |
The earn-out for 2016 was 30% higher than the previously agreed targets, resulting in a higher than anticipated earn-out payment, and the excess of the 2016 earn-out payment over what was planned was made as an adjustment to our income statement.
The valuation of Ameri Georgia was made on the basis of its projected revenues. The accounting acquisition date for Ameri Georgia was determined on the basis of the date when the Company acquired control of Ameri Georgia, in accordance with FASB codification ASU 805-10-25-6 for business combinations. That ASU provides that the date on which the acquirer obtains control of the acquiree generally is the date on which the acquirer legally transfers the consideration, acquires the assets, and assumes the liabilities of the acquiree—the closing date. However, the acquirer might obtain control on a date that is either earlier or later than the closing date. For example, the acquisition date precedes the closing date if a written agreement provides that the acquirer obtains control of the acquiree on a date before the closing date. An acquirer shall consider all pertinent facts and circumstances in identifying the acquisition date. The term sheet and the Share Purchase Agreement that were entered into by the Company and Ameri Georgia contained agreements by the parties that the Company acquired control of Ameri Georgia's accounts payable, accounts receivable and business decisions as of September 1, 2015. In addition, on that date, the Company became responsible for performance of Ameri Georgia's existing contracts. Accordingly, the Company has recognized September 1, 2015 as the accounting acquisition date.
The total purchase price of $9,910,817 was allocated to net working capital of $4.6 million, intangibles of $1.8 million, taking into consideration projected revenue from the acquired list of Ameri Georgia customers over a period of three years, and goodwill. The excess of total purchase price over the net working capital and intangibles allocations has been allocated to goodwill.
Acquisition of Bigtech Software Private Limited
On June 23, 2016, we entered into a definitive agreement to purchase Bigtech Software Private Limited ("Bigtech"), a pure-play SAP services company providing a complete range of SAP services including turnkey implementations, application management, training and basis ABAP support. Based in Bangalore, India, Bigtech offers SAP services to improve business operations at companies of all sizes and verticals. The acquisition of Bigtech was effective as of July 1, 2016, and the total consideration for the acquisition of Bigtech was $850,000, consisting of:
| (a) | A cash payment in the |
| (b) | Warrants for the |
| (c) | $255,000, which may become payable in cash earn-outs to |
Bigtech’s financial results are included in our condensed consolidated financial results starting July 1, 2016. The Bigtech acquisition did not constitute a significant acquisition for the Company. The valuation of Bigtech was made on the basis of its projected revenues.
The Companytotal purchase price of $850,000 was allocated to intangibles of $595,000, taking into consideration projected revenue from the acquired list of Bigtech customers over a period of three years, and Bellsoft expect closinggoodwill. The excess of open items during 2016 withtotal purchase price over the exception of any 2017 earned-out payment.intangibles allocation has been allocated to goodwill. The Bigtech acquisition did not constitute a significant acquisition for the Company.
Acquisition of Virtuoso
The total purchase price paid to the Sole Member for the acquisition of Virtuoso was $1,831,881consisting of:
| (a) | A cash payment in the amount of $675,000 which was due within 90 days of closing and was paid on October 21, 2016; |
| (b) | 101,250 shares of our common stock at closing; and |
| (c) | Earn-out payments in cash and stock of $450,000 and approximately $560,807, respectively, to be paid, if earned, in 2017, 2018 and 2019. |
The valuation of Virtuoso was made on the basis of its projected revenues. The Virtuoso earn-out payment for 2016 amounted to $64,736 in cash and 12,408 shares of common stock.
The total purchase price of $1,831,881 was allocated to intangibles of $0.9 million, taking into consideration projected revenue from the acquired list of Virtuoso customers over a period of three years, and goodwill. The excess of total purchase price over intangibles allocation has been allocated to goodwill.
Acquisition of DC&M
On July 29, 2016, we acquired 100% of the Merger, we issued a 5% Unsecured Convertible Note (the "Note") due May 26, 2017, in the principal amountmembership interests of $5,000,000, together with a warrant to purchase shares of our common stock, in a private placement to Lone Star Value Investors, LPDC&M Partners, L.L.C. ("Lone Star Value"DCM"), an Arizona limited liability company, pursuant to the terms of a SecuritiesMembership Interest Purchase Agreement dated asby and among us, DCM, all of May 26, 2015. Priorthe members of DCM, Giri Devanur and Srinidhi “Dev” Devanur, our President and Chief Executive Officer and Executive Vice Chairman, respectively. DCM is a SAP consulting company headquartered in Chandler, Arizona. DCM provides its clients with a wide range of information technology development, consultancy and management services with an emphasis on the design, build and rollout of SAP implementations and related products. DCM is also a SAP-certified software partner, having launched its SAP reporting, extraction and distribution tool called “IRIS”. DCM services clients in diverse industries, including retail, apparel/footwear, third-party logistics providers, chemicals, consumer goods, energy, high-tech electronics, media/entertainment and aerospace.
The aggregate purchase price for the acquisition of DCM was $15,816,000 consisting of:
| (a) | A cash payment in the amount of $3,000,000 at closing; |
| (b) | 1,600,000 shares of our common stock, which are to be issued on July 29, 2018 or upon a change of control of our company (whichever occurs earlier); and |
| (c) | Earn-out payments of $1,500,000 payable in cash each year to be paid, if earned, in 2017 and 2018. |
The total purchase price of $15,816,000 was allocated to intangibles of $5.4 million, taking into consideration projected revenue from the acquired list of DCM customers over a period of three years, and goodwill. The excess of total purchase price over the intangibles allocation has been allocated to goodwill.
Payment of the DCM earn-out for 2016 was due on April 10, 2017 but has not yet been paid. We are currently in discussions with the former members of DCM regarding the timing and amount of the earn-out payment. The valuation of DCM was made on the basis of its projected revenues.
Acquisition of ATCG
On March 10, 2017, we acquired 100% of the shares of ATCG Technology Solutions, Inc. ("ATCG"), a Delaware corporation, pursuant to the Merger, Lone Star Value was our majority shareholder.terms of a Share Purchase Agreement among the Company, ATCG, all of the stockholders of ATCG (the "Stockholders"), and the Stockholders' representative. ATCG provides U.S. domestic, offshore and onsite SAP consulting services and has its main office in Folsom, California. ATCG specializes in providing SAP Hybris, SAP Success Factors and business intelligence services.
The aggregate purchase price for the acquisition of ATCG of $8,784,533, consisting of:
| (a) | 576,923 shares of our common stock; |
| (b) | Unsecured promissory notes issued to ATCG's selling Stockholders for the aggregate amount of $3,750,000 (which notes bear interest at a rate of 6% per annum with a payment schedule of 50% on December 31, 2017 and 50% on June 30, 2018); |
| (c) | Earn-out payments in shares of our common stock (up to an aggregate value of $1,200,000 worth of shares) to be paid, if earned, in each of 2018 and 2019; and |
| (d) | An additional cash payment of $55,687 for cash that was left in ATCG at closing. |
The total purchase price of $8,784,533 was allocated to intangibles of $3.75 million, taking into consideration projected revenue from the acquired list of ATCG customers over a period of three years, and goodwill. The excess of total purchase price over the intangibles allocation has been allocated to goodwill.
ATCG's financial statements will be filed by amendment of the Current Report on Form 8-K filed on March 13, 2017 to disclose the closing of the acquisition.
The Company has $20,164,724, in total towards consideration payable including contingent consideration payable for its acquisitions, consisting of $7,574,238 in cash obligations and $12,590,486 worth of common stock to be issued (assuming a per share price of $6.51). Out of $20,164,724, $5,743,724 is towards contingent consideration payable on earn outs.
| NOTE 4. | REVENUE RECOGNITION: |
The Company recognizes revenue primarily through the provision of consulting services. We generate revenue by providing consulting services under written service contracts with our customers. The service contracts we enter into generally fall into two specific categories: time(1) time-and-materials contracts and materials and fixed-price.(2) fixed-price contracts.
We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable and collectability is reasonably assured. We establish billing terms at the time at which the project deliverables and milestones are agreed. Our standard payment terms are 60 days from invoice date.
When a customer enters into a time and materials,time-and-materials or fixed-price or(or a periodic retainer-basedretainer-based) contract, the Company recognizes revenue in accordance with its evaluation of the deliverables in each contract. If the deliverables represent separate units of accounting, the Company then measures and allocates the consideration from the arrangement to the separate units, based on vendor specific objective evidence of the value for each deliverable.
The revenue under time and materials contracts is recognized as services are rendered and performed at contractually agreed upon rates. Revenue pursuant to fixed-price contracts is recognized under the proportional performance method of accounting. We routinely evaluate whether revenue and profitability should be recognized in the current period. We estimate the proportional performance on our fixed-price contracts on a monthly basis utilizing hours incurred to date as a percentage of total estimated hours to complete the project. This method is used because reasonably dependable estimates of costs and revenue earned can be made, based on historical experience and milestones identified in any particular contract. If we do not have a sufficient basis to measure progress toward completion, revenue is recognized upon completion of performance, subject to any warranty provisions or other project management assessments as to the status of work performed.
Estimates of total project costs are continuously monitored during the term of an engagement. There are situations where the number of hours to complete projects may exceed our original estimate, as a result of an increase in project scope, unforeseen events that arise, or the inability of the client or the delivery team to fulfill their responsibilities. Accordingly, recorded revenues and costs are subject to revision throughout the life of a project based on current information and historical trends. Such revisions may result in increases or decreases to revenue and income and are reflected in the consolidated financial statements in the periods in which they are first identified.
If our initial estimates of the resources required or the scope of work to be performed on a contract are inaccurate, or we do not manage the project properly within the planned time period, a provision for estimated losses on incomplete projects may be made. Any known or probable losses on projects are charged to operations in the period in which such losses are determined. A formal project review process takes place quarterly, although projects are continuously evaluated throughout the period. Management reviews the estimated total direct costs on each contract to determine if the estimated amounts are accurate, and estimates are adjusted as needed in the period identified. No losses were recognized on contracts during the period ended March 31, 2016.
2017.
| NOTE 5. | SHARE-BASED COMPENSATION: |
On April 20, 2015, our Board of Directors and the holder of a majority of our outstanding shares of common stock approved the adoption of our 2015 Equity Incentive Award Plan (the "Plan") and a grant of discretionary authority to the executive officers to implement and administer the Plan. The Plan allows for the issuance of up to 2,000,000 shares of our common stock for award grants (all of which can be incentive stock options).grants. The Plan provides equity-based compensation through the grant of cash-based awards, nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other stock-based awards. We believe that an adequate reserve of shares available for issuance under the Plan is necessary to enable us to attract, motivate and retain key employees and directors and to provide an additional incentive for such individuals through stock ownership and other rights that promote and recognize the financial success and growth of our Company. During the three months ended March 31, 2016,2017, we granted 60,000 options to purchase 105,000employees. As of March 31, 2017, aggregate grants under the Plan total to 1,614,898 shares of our common stock, to employees.
| NOTE 6. | INTANGIBLE ASSETS: |
We amortize our intangible assets that have finite lives using either the straight-line method or based on estimated future cash flows to approximate the pattern in which the economic benefit of the asset will be utilized.method. Amortization expense was $97,000 and $6,250$667,296 during the three months ended March 31, 2016 and 2015, respectively.2017. This amortization expense relates to customer lists and products capitalized on our balance sheet, which expire through 2020.
As of March 31, 2017, and December 31, 2016, capitalized intangible assets were as follows:
March 31, 2017 | December 31, 2016 | |||||||
| Capitalized intangible assets | $ | 12,513,206 | $ | 10,074,546 | ||||
| Accumulated amortization | 667,296 | 1,309,842 | ||||||
| Total intangible assets | $ | 11,845,910 | $ | 8,764,704 | ||||
Our amortization expense (including amortization expense associated with capitalized software costs) for the current year and the following four years ending December 31schedule is as follows:
Years ending December 31, | Amount | |||||||
| Amortization Expense | ||||||||
| (in thousands) | ||||||||
| 2016 | $ | 388,000 | ||||||
| 2017 | $ | 388,000 | $ | 2,258,388 | ||||
| 2018 | $ | 388,000 | 2,955,873 | |||||
| 2019 | $ | 363,000 | 2,727,968 | |||||
| 2020 | 2,652,000 | |||||||
| 2021 | 1,251,681 | |||||||
| Total | $ | 11,845,910 | ||||||
The Company has its own software products, namely Simple APO, Langer Index and IBP. Total costs incurred for developing these products during the three months ended March 31, 20162017 was $54,945$0 and have been capitalized. These costs will becapitalized and are being amortized over the useful life once all substantial testing has been completed.of the software products.
The Company's intangible assets consists of the customer lists acquired from the Company's acquisition of WinHire Inc, Ameri Georgia, DCM, Virtuoso, Bigtech and ATCG. The products acquired from the acquisition of Linear Logics. Corp. and the amount spent on improving those products are also categorized as intangible assets and are being amortized over the useful life of those products.
| NOTE 7. | GOODWILL: |
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| (in thousands, except per share data) | ||||||||
| Basic net income (loss) per share: | ||||||||
| Net income (loss) applicable to common shares | $ | (0.10 | ) | $ | 0.11 | |||
| Weighted average common shares outstanding | 11,874 | 9,992 | ||||||
| Basic net income (loss) per share of common stock | $ | (0.10 | ) | $ | 0.11 | |||
| Diluted net income (loss) per share: | ||||||||
| Net income (loss) applicable to common shares | $ | (0.10 | ) | $ | 0.11 | |||
| Weighted average common shares outstanding | 11,874 | 9,992 | ||||||
| Dilutive effects of convertible debt, stock options and warrants | - | - | ||||||
| Weighted average common shares, assuming dilutive effect of stock options | 11,874 | 9,992 | ||||||
| Diluted net income (loss) per share of common stock | $ | (0.10 | ) | $ | 0.11 | |||
March 31, 2017 | December 31, 2016 | |||||||
| Virtuoso | $ | 939,881 | $ | 939,881 | ||||
| DCM | 10,416,000 | 10,416,000 | ||||||
| Bigtech | 292,808 | 314,555 | ||||||
| Ameri Consulting Service Pvt. Ltd. | 1,948,118 | 1,948,118 | ||||||
| Ameri Georgia | 3,470,522 | 3,470,522 | ||||||
| ATCG | 4,812,243 | - | ||||||
| Total | $ | 21,879,572 | $ | 17,089,076 | ||||
As per Company policy, goodwill impairment tests will be conducted on an annual basis and any impairment will be reflected in the Company’s statements of March 31, 2016, there were approximately 338,189 share-based awards outstanding, respectively, under the Company's equity plans leaving 1,661,811 share-based units available under the Plan. During the three months ended March 31, 2016, we granted options to purchase 105,000 shares of our common stock to employees.
operations.| NOTE 8. | EARNINGS (LOSS) PER SHARE: |
Three Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Net income (loss) attributable to the Company | $ | (1,225,469 | ) | $ | (1,097,381 | ) | ||
| Weighted average common shares outstanding | 14,094,536 | 11,874,361 | ||||||
| Basic net income (loss) per share of common stock | $ | (0.09 | ) | $ | (0.09 | ) | ||
| Diluted net income (loss) per share of common stock | $ | (0.09 | ) | $ | (0.09 | ) | ||
Due to the Company's net loss, potential dilutive shares were not included in the calculation of diluted EPS onearnings per share for the periods ended March 31, 2017 and March 31 2016, as it willthey would have an antidilutive effect.
| NOTE 9. | OTHER ITEMS: |
On January 27, 2017, the Company issued 33,333 shares of its common stock to its legal counsel, Olshan Frome Wolosky LLP ("Olshan"), in exchange for the cancellation of a portion of accrued and unpaid legal fees owed by the Company to Olshan.
The Company is yet to make the dividend payment on its Series A Preferred Stock that was payable on March 31, 2017. The Company will pay the sole holder of the Series A Preferred Stock, the accrued dividend in-kind (common stock of AMRH) pursuant to the terms of the Certificate of Designation contemporaneously with the filing of the Quarterly Report of Form 10-Q for the quarter ended March 31, 2017.
| NOTE 10. | BANK DEBT: |
On July 1, 2016, the Company entered into that certain Loan and Security Agreement (the "Loan Agreement"), with its wholly-owned subsidiaries Ameri and Partners Inc and Bellsoft, Inc., as borrowers (the "Borrowers"), the Company and its wholly-owned subsidiaries Linear Logics, Corp. and WinHire Inc serving as guarantors, the Company's Chief Executive Officer, Giri Devanur, serving as a validity guarantor, and Sterling National Bank, N.A. (as lender and as agent, "Sterling"). The Company joined DCM, Virtuoso and ATCG as borrowers under the Loan Agreement following their respective acquisition.
Under the Loan Agreement, the Borrowers can borrow up to an aggregate of $10 million, which includes up to $8 million in principal for revolving loans (the "Revolving Loans") for general working capital purposes, up to $2 million in principal pursuant to a term loan (the "Term Loan") for the purpose of a permitted business acquisition and up to $200,000 for letters of credit. A portion of the proceeds of the Loan Agreement were also used to repay the November 20, 2015 credit facility that was entered into between the Company, its wholly-owned subsidiary Bellsoft, Inc. (Ameri Georgia) and Federal National Payables, Inc.
The maturity of the loans under the Loan Agreement are as follows:
Revolving Loan Maturity Date: July 1, 2019; provided, however, that the Revolving Loan Maturity Date will extend and renew automatically for successive one-year terms on each anniversary of the initial Revolving Loan Maturity Date (each an "Anniversary Date") thereafter, unless not less than sixty (60) days prior to any such Anniversary Date, written notice of non-renewal is given by either party to the other, in which case the Revolving Loan Maturity Date will be such next Anniversary Date.
Term Loan Maturity Date: The earliest of (a) the date following acceleration of the Term Loan and/or the Revolving Loans; (b) the Revolving Loan Maturity Date; or (c) July 1, 2019.
Interest under the Loan Agreement is payable monthly in arrears and accrues as follows:
| (a) | in the case of Revolving Loans, a rate per annum equal to the sum of (i) the Wall Street Journal Prime Rate plus (ii) 2.00%; |
| (b) | in the case of the Term Loan, a rate per annum equal to the sum of (i) the Wall Street Journal Prime Rate plus (ii) 3.75%; and |
| (c) | in the case of other obligations of the Borrowers, a rate per annum equal to the sum of (i) the greater of (A) 3.25% or (B) Wall Street Journal Prime Rate plus (ii) 3.75%. |
The Loan Agreement also requires the payment of certain fees, including, but not limited to letter of credit fees and an unused Revolving Loans fee.
The Loan Agreement contains financial and other covenant requirements, including, but not limited to, financial covenants that require the Borrowers to not permit capital expenditures above $150,000 in any fiscal year, maintain a fixed charge coverage ratio of not less than 2.00 to 1.00 and maintain certain debt to EBITDA ratios. The Loan Agreement also requires the Company and Borrowers to obtain Sterling's consent before making any permitted acquisitions. The amounts borrowed by the Borrowers under the Loan Agreement are guaranteed by the guarantors, and the Loan Agreement is secured by substantially all of the Borrowers’ assets.
The principal amount of the Term Loan will be repaid as follows: (i) equal consecutive monthly installments in the amount of $33,333.33 each, paid on the first day of each calendar month and (ii) one final payment of the entire remaining principal balance, together with all accrued unpaid interest on the Term Loan maturity date.
To date, the Company is not in conformance with the financial covenants contained in its Loan Agreement with Sterling National Bank. The Company received a waiver from Sterling National Bank for its non-compliance with the Loan Agreement through March 31, 2017 in exchange for the payment of a fee of $5,000. The Company is currently negotiating a waiver with Sterling National Bank to waive the Company's compliance with the Loan Agreement during the second quarter of 2017 in exchange for the payment of an additional fee that is to be determined. The Company does not expect to be in compliance with the terms of the Loan Agreement following the conclusion of the terms of the waivers granted by Sterling National Bank. The Company is continuing to work with Sterling National Bank to address its non-compliance.
Interest paid during the period ended March 31, 2017 amounted to $79,933 Principal repaid on the term loan during the period ended March 31, 2017 was $100,000.The short term and long term loan outstanding balances on the term loan as of March 31, 2017 is $399,996 and $1,023,474 respectively. The revolving line of credit outstanding balance as of March 31, 2017 was $2,440,971.
Bigtech, which was acquired as of July 1, 2016, had a term loan of $17,637 and a line of credit for $373,040 as of March 31, 2017. The Bigtech line of credit is with an Indian bank, HDFC Bank Limited and was entered into on June 3, 2015 for Bigtech’s working capital requirements. The line of credit is for up to $416,667 with an interest rate of 11.85% per annum and maturity in June 2020. The Bigtech term loan accrues interest at the rate of 10.30% per annum and matures in 2020. Both the term loan and the line of credit were already in place when the Company acquired Bigtech. Interest paid during the period ended March 31,2017 amounted to $10,873 for the term loan and line of credit held by Bigtech.
| NOTE 11. | CONVERTIBLE NOTES: |
On March 7, 2017, we completed the sale and issuance of 8% Convertible Unsecured Promissory Notes (the “2017 Notes”)for aggregate proceeds to us of $1,250,000 from four accredited investors, including one of the Company's directors, Dhruwa N. Rai. The 2017 Notes were issued pursuant to Securities Purchase Agreements between the Company and each investor. The 2017 Notes bear interest at 8% per annum until maturity in March 2020, with interest being paid annually on the first, second and third anniversaries of the issuance of the 2017 Notes beginning in March 2018. From and after an event of default and for so long as the event of default is continuing, the 2017 Notes will bear default interest at the rate of 10% per annum. The 2017 Notes can be prepaid by us at any time without penalty.
The 2017 Notes are convertible into shares of our common stock at a conversion price of (i) in the event that any registration statement for the public offering of common stock filed by the Company with the SEC in connection with an uplisting to a national stock exchange is declared effective by the SEC on or prior to December 31, 2017, such price per share that is equal to 68% of the price per share of common stock offered and sold pursuant to such registration statement, or (ii) if no such registration statement is declared effective by December 31, 2017, such price per share that is equal to the weighted average closing price per share of the Company's common stock for the 20 trading days immediately preceding December 31, 2017, subject to adjustment under certain circumstances. The 2017 Notes rank junior to our secured credit facility with Sterling National Bank. The 2017 Notes also include certain negative covenants including, without the investors' approval, restrictions on dividends and other restricted payments and reclassification of its stock.
| NOTE 12. | COMMITMENTS AND CONTINGENCIES: |
Operating Leases
The Company's principal facility is located in Princeton, New Jersey. The Company also leases office space in various locations with expiration dates between 2016 and 2018.2020. The lease agreements often include leasehold improvement incentives, escalating lease payments, renewal provisions and other provisions which require the Company to pay taxes, insurance, maintenance costs, or defined rent increases. All of the Company's leases are accounted for as operating leases. Rent expense is recorded over the lease terms on a straight-line basis. Rent expense was $26,222$62,878 and $3,312$26,222 for the three months ended March 31, 20162017 and March 31, 2015,2016, respectively. The increase during thesethe comparative periods is due to new office space that was leased by the Company in Princeton, New Jersey on July 1, 2015 and the addition of office space through the acquisition of Bellsoft.
| Years ending December 31, | (in thousands) | |||
| 2016 | $ | 90 | ||
| 2017 | 60 | |||
| 2018 | 20 | |||
| Total | $ | 170 | ||
DCM, Virtuoso, Bigtech and ATCG.
| Number of Shares | Weighted Avg. Exercise Price | |||||||
| Options outstanding at December 31, 2015 | 150,000 | 2.67 | ||||||
| Granted | 105,000 | $ | 6.02 | |||||
| Exercised | — | — | ||||||
| Outstanding at March 31, 2016 | 255,000 | $ | 4.05 | |||||
Average Exercise Price | Number of Shares | Remaining Average Contractual Life (in years) | Exercise Price times number of Shares | Weighted Average Exercise Price | Intrinsic Value | ||||||||||||||||||
| $ | 4.05 | 255,000 | 4.53 | $ | 1,032,600 | $ | 4.05 | $ | 84,660 | ||||||||||||||
| Weighted Avg. | ||||||||||||||||
| Number of | Weighted Avg. | Remaining | Intrinsic | |||||||||||||
| Shares | Exercise Price | Term | Value | |||||||||||||
| Outstanding at December 31, 2015 | 2,777,777 | 1.8 | 4.41 | $ | 13,333,330 | |||||||||||
| Granted | — | — | — | |||||||||||||
| Outstanding at March 31, 2016 | 2,777,777 | 1.8 | 4.15 | $13,333,330 | ||||||||||||
| ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following information should be read in conjunction with the information contained in the Unaudited Condensed Consolidated Financial Statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. See "Risk Factors" and "Special Note Regarding Forward-Looking Statements" included elsewhere herein.
We use the terms "we," "our," "us," "AMERI" and "the Company" in this report to refer to AMERI HOLDINGS, Inc. and its wholly-owned subsidiaries.
Company History
We were incorporated under the laws of the State of Delaware in February 1994 as Spatializer Audio Laboratories, Inc., which was a shell company immediately prior to the Merger, onMerger. On May 26, 2015, we completed the Merger, in which we caused Ameri100 Acquisition, Inc., a Delaware corporation and our newly created, wholly owned subsidiary, to be merged with and into Ameri and Partners (dba Ameri100), a Delaware corporation. As a result of the Merger, Ameri and Partners became our wholly owned operating subsidiary. The Merger was consummated under Delaware law, pursuant to the Merger Agreement, and in connection with the Merger we changed our name to AMERI Holdings, Inc. We are headquartered in Princeton, New Jersey.
Overview
We are a next generation technology-management solutions firm. We have built productsspecialize in delivering SAPTM cloud, digital and enterprise services to assist global 2000 companies by architectingclients worldwide. Our SAP focus allows us to provide technological solutions to a broad and delivering the best technology solutions enabling customers to transform their business processes.growing base of clients. We have built a new method of measuring the effectiveness of technology deployments across largeare headquartered in Princeton, NJ, and medium size companies. Through acquisitions, we have built deep consulting expertiseoffices across the United States, which are supported by offices in business process management,India. Our model inverts the conventional global delivery model wherein offshore information technology ("IT") service providers are based abroad and maintain a minimal presence in the United States. With a strong SAP focus, our client partnerships anchor around SAP cloud services, artificial intelligence, internet of things and robotic process automation, digital transformation services and enterprise resource planning particularly surrounding SAP software and technology.automation. We pursue an acquisition strategy that seeks to disrupt the established business model of offshore IT service providers.
When a customer enters into a time and materials,time-and-materials or fixed-price or(or a periodic retainer-basedretainer-based) contract, we recognizethe revenue is recognized in accordance with its evaluation of the deliverables inof each contract. If the deliverables representinvolve separate units of accounting, we then measure and allocate the consideration from the arrangement is measured and allocated to the separate units, based on vendor specific objective evidence of the value for each deliverable.
The revenue under time and materials contracts is recognized as services are rendered and performed at contractually agreed upon rates. Revenue pursuant to fixed-price contracts is recognized under the proportional performance method of accounting. We routinely evaluate whether revenue and profitability should be recognized in the current period. We estimate the proportional performance on our fixed-price contracts on a monthly basis utilizing hours incurred to date as a percentage of total estimated hours to complete the project.
For the three months ended March 31, 2017 and March 31,2016, sales to five major customers, accounted for 38.51% and 60.15% of our total revenue, respectively.
We continue to explore strategic alternatives to improve the market position and profitability of our product and service offerings in the marketplace, generate additional liquidity for the Company, and enhance our valuation. We expect to pursue our goals during the next twelve months through organic growth and through other strategic alternatives. Some of these alternatives have included, and could continue to include, selective acquisitions. The Company has obtained financing and additional capital from the sale of equity and incurrence of indebtedness in the past, and continues to consider capital raising and financing from the sale of various types of equity and incurrence of indebtedness to provide capital for our business plans and operations in the future. The Company has also provided, and may from time to time in the future provide, information to interested parties.
Matters that May or Are Currently Affecting Our Business
The main challenges and trends that could affect or are affecting our financial results include:
| · | Our ability to enter into additional technology-management and consulting agreements, to diversify our client base and to expand the geographic areas we serve; |
| · | Our ability to attract competent, skilled professionals and on-demand technology partners for our operations at acceptable prices to manage our overhead; |
| · | Our ability to acquire other technology services companies and integrate them with our existing business; |
| · | Our ability to raise additional equity capital, if and when we needed; and |
| · | Our ability to control our costs of operation as we expand our organization and capabilities. |
RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended March 31, 20162017 Compared to the Three Months Ended March 31, 20152016
Three Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Net revenue | $ | 12,340,927 | $ | 7,012,964 | ||||
| Cost of revenue | 9,039,577 | 5,365,561 | ||||||
| Gross profit | 3,301,350 | 1,647,403 | ||||||
| Operating expenses: | ||||||||
| Selling and marketing | 332,310 | 31,350 | ||||||
| General and administration | 2,701,145 | 2,110,336 | ||||||
| Acquisition related expenses | 209,344 | 375,405 | ||||||
| Depreciation and amortization | 689,100 | 111,628 | ||||||
| Operating expenses | 3,931,899 | 2,628,719 | ||||||
| Operating income (loss): | (630,549 | ) | (981,316 | ) | ||||
| Interest expense | (90,806 | ) | (113,746 | ) | ||||
| Interest income/other income | - | 2,005 | ||||||
| Other expense | (4,149 | ) | (2,304 | ) | ||||
| Total other income (expenses) | (94,955 | ) | (114, 045 | ) | ||||
| Income (loss) before income taxes | (725,504 | ) | (1,095,361 | ) | ||||
| Income tax benefit (provision) | (2,020 | ) | ||||||
| Net income (loss) after tax | (725,504 | ) | (1,097,381 | ) | ||||
| Dividend on Preference Shares | (499,965 | ) | - | |||||
| Net income (loss) attributable to the Company | (1,225,469 | ) | (1,097,381 | ) | ||||
| Non-Controlling Interest | 3,516 | |||||||
| Foreign exchange translation adjustment | 5,335 | (62,890 | ) | |||||
| Net income (loss) | $ | (1,216,618 | ) | (1,160,271 | ) | |||
| Basic income (loss) per share attributable to the Company | $ | (0.09 | ) | $ | (0.09 | ) | ||
| Diluted income (loss) per share attributable to the Company | $ | (0.09 | ) | $ | (0.09 | ) | ||
| Basic weighted average number of shares | 14,094,536 | 11,874,361 | ||||||
| Diluted weighted average number of shares | 14,094,536 | 11,874,361 | ||||||
Three Months Ended March 31, | Three Months Ended March 31, | |||||||
| 2016 | 2015 | |||||||
| Net Revenue | $ | 7,012,964 | $ | 4,284,750 | ||||
| Cost of revenue | 3,865,561 | 3,166,080 | ||||||
| Gross profit | $ | 3,147,403 | $ | 1,118,670 | ||||
| Operating expenses: | ||||||||
| Selling and Marketing | $ | 31,350 | $ | - | ||||
| General and administrative | 3,610,336 | 33,720 | ||||||
| Nonrecurring expenditures | 375,405 | - | ||||||
| Depreciation and amortization | 111,628 | 8,267 | ||||||
| Operating expenses | $ | 4,128,719 | $ | 41,987 | ||||
| Income from operations | (981,316 | ) | 1,076,683 | |||||
| Interest expense | $ | (113,746 | ) | $ | - | |||
| Interest income | 2,005 | - | ||||||
| Other expense | (2,304 | ) | - | |||||
| Tax benefit/(provision) | (2,020 | ) | - | |||||
| Foreign exchange translation | (62,890 | ) | - | |||||
| Net income | $ | (1,160,271 | ) | $ | 1,076,683 | |||
15
Revenues
Revenues for the three months ended March 31, 20162017 increased by 63.7% from76% as compared to the three months ended March 31, 2015.2016. The increase in revenue is directlywas primarily attributable to our acquisition of Bellsoft, Inc. We derived 100% of ouradditional revenues from our acquisitions, with DCM contributing 73% percent of the total increase and ATCG, Virtuoso and Bigtech contributing 15%, 4% and 4%, respectively, of the total increase. Our existing customers locatedaccounted for the remaining 4% of the total increase in North Americarevenues.
Gross Margin
Our gross margin was 27% for the three months ended March 31, 2016.
During first quarter of 2016, the Company erroneously classified approximately $1.5 million of expenses as compared to 26.1%general and administrative expenses which should have been classified as cost of revenue. The Company has corrected this error in this quarterly report. The reclassification did not change the Company’s net income or loss for the periods reported.
Selling and Marketing Expenses
Selling and marketing expenses were $332,310 for the three months ended March 31, 2015.
General and Administration ("G&A") expenses ("SG&A") include all costs, including rent costs, which are not directly associated with revenue-generating activities.activities, as well as the non-cash expense for stock based compensation. These include employee costs, corporate costs and facilities costs. Employee costs include selling, marketing and administrative salaries and related employee benefits, travel, recruiting and training costs. Corporate costs include costs such as reorganization costs, legal, accounting and outside consulting fees. Facilities costs primarily include rent and communications costs.
Acquisition Related Expenses
Acquisition related expenditures of $209,344 and $375,405 occurred during the three months ended March 31, 2017 and March 31, 2016, and were primarily costs and expenses that are unlikely to occur again in the normal course of business.respectively. These expenditures included restructuring costslegal fees, integration expenses and legal fees. There were no nonrecurring expendituresother acquisition related costs. The decrease is due to the decline in acquisition related activities in the first quarter of 2017 as compared to the first quarter of 2016.
Depreciation and Amortization
Depreciation and amortization expense amounted to $689,100 for the three months ended March 31, 2015.
Operating incomeIncome
Our operating income percentage(loss) was (14.0)%(630,549) for the three months ended March 31, 2016,2017, as compared to 25.1%(981,316) for the three months ended March 31, 2015.2016. This changereduction was mainly due to an increase in SG&A expenses and nonrecurring expenditures.increased gross margins.
Interest Expense
Our provision for income taxesinterest expense for the three months ended March 31, 2016 and year2017 was $90,806 as compared to $113,746 for the three months ended March 31, 2015, amounted2016. The decrease is mainly due to approximately $2,020 and $0, respectively.
Liquidity and Capital Resources
Our cash position was $505,173$1,812,600 as of March 31, 20162017, as compared to $1,878,034$1,379,887 as of December 31, 2015, a decrease2016, an increase of $1,372,861$432,713 primarily as a resultdue to the sale and issuance of working capital uses. the 2017 Notes.
Cash used byfor operating activities was $1,565,640$837,933 during the three months ended March 31, 20162017 and was primarily a result of net decreases fromchanges in working capital.capital requirements. Cash used fromin investing activities was $48,672$321,963 during the three months ended March 31, 20162017 primarily due primarily to acquisitions and assets purchased for the purpose of providing future revenues.ATCG. Cash provided by financing activities was $241,451$1,592,609 during the three months ended March 31, 20162017 and was attributable to the issuance of additional shares for our ATCG acquisition, the 2017 Notes and increased borrowing under our line of credit with Sterling National Bank.
On July 1, 2016, the Company entered into that certain Loan and Security Agreement (the "Loan Agreement"), with its wholly-owned subsidiaries Ameri and Partners Inc and Ameri Georgia, as borrowers (the "Borrowers"), the Company and its wholly-owned subsidiaries Linear Logics, Corp. and WinHire Inc serving as guarantors, the Company's Chief Executive Officer, Giri Devanur, serving as a validity guarantor, and Sterling National Bank, N.A. (as lender and as agent, "Sterling"). The Company joined DCM, Virtuoso and ATCG as borrowers under the Loan Agreement following their respective acquisition.
Under the Loan Agreement, the Borrowers can borrow up to an aggregate of $10 million, which includes up to $8 million in principal for revolving loans (the "Revolving Loans") for general working capital purposes, up to $2 million in principal pursuant to a term loan (the "Term Loan") for the purpose of a permitted business acquisition and up to $200,000 for letters of credit. A portion of the proceeds of the Loan Agreement were also used to repay the November 20, 2015 credit facility with FNCC.
that was entered into between the Company, its wholly-owned subsidiary Bellsoft, Inc. (Ameri Georgia) and Federal National Payables, Inc.The maturity of the loans under the Loan Agreement are as follows:
Revolving Loan Maturity Date: July 1, 2019; provided, however, that the Revolving Loan Maturity Date will extend and renew automatically for successive one-year terms on each anniversary of the initial Revolving Loan Maturity Date (each an "Anniversary Date") thereafter, unless not less than sixty (60) days prior to any such Anniversary Date, written notice of non-renewal is given by either party to the other, in which case the Revolving Loan Maturity Date will be such next Anniversary Date.
Term Loan Maturity Date: The earliest of (a) the date following acceleration of the Term Loan and/or the Revolving Loans; (b) the Revolving Loan Maturity Date; or (c) July 1, 2019.
Interest under the Loan Agreement is payable monthly in arrears and accrues as follows:
| (a) | in the case of Revolving Loans, a rate per annum equal to the sum of (i) the Wall Street Journal Prime Rate plus (ii) 2.00%; |
| (b) | in the case of the Term Loan, a rate per annum equal to the sum of (i) the Wall Street Journal Prime Rate plus (ii) 3.75%; and |
| (c) | in the case of other obligations of the Borrowers, a rate per annum equal to the sum of (i) the greater of (A) 3.25% or (B) Wall Street Journal Prime Rate plus (ii) 3.75%. |
The Loan Agreement also requires the payment of certain fees, including, but not limited to letter of credit fees and an unused Revolving Loans fee.
The Loan Agreement contains financial and other covenant requirements, including, but not limited to, financial covenants that require the Borrowers to not permit capital expenditures above $150,000 in any fiscal year, maintain a fixed charge coverage ratio of not less than 2.00 to 1.00 and maintain certain debt to EBITDA ratios. The Loan Agreement also requires the Company and Borrowers to obtain Sterling's consent before making any permitted acquisitions. The amounts borrowed by the Borrowers under the Loan Agreement are guaranteed by the guarantors, and the Loan Agreement is secured by substantially all of the Borrowers’ assets.
The principal amount of the Term Loan will be repaid as follows: (i) equal consecutive monthly installments in the amount of $33,333.33 each, paid on the first day of each calendar month and (ii) one final payment of the entire remaining principal balance, together with all accrued unpaid interest on the Term Loan maturity date.
To date, the Company is not in conformance with the financial covenants contained in its Loan Agreement with Sterling National Bank. The Company received a waiver from Sterling National Bank for its non-compliance with the Loan Agreement through March 31, 2017 in exchange for the payment of a fee of $5,000. The Company is currently negotiating a waiver with Sterling National Bank to waive the Company's compliance with the Loan Agreement during the second quarter of 2017 in exchange for the payment of an additional fee that is to be determined. The Company does not expect to be in compliance with the terms of the Loan Agreement following the conclusion of the terms of the waivers granted by Sterling National Bank. The Company is continuing to work with Sterling National Bank to address its non-compliance.
Principal repaid on the term loan during the period ended March 31, 2017 was $100,000. The short term and long term loan outstanding balances on the term loan as of March 31,2017 are $399,996 and $1,023,474, respectively. The revolving line of credit outstanding balance as of March 31, 2017 was $2,440,971.
Bigtech, which was acquired as of July 1, 2016, had a term loan of $17,637 and a line of credit for $373,040 as of March 31, 2017. The Bigtech line of credit is with an Indian bank, HDFC Bank Limited and was entered into on June 3, 2015 for Bigtech’s working capital requirements. The line of credit is for up to $416,667 with an interest rate of 11.85% per annum and maturity in June 2020. The Bigtech term loan accrues interest at the rate of 10.30% per annum and matures in 2020. Both the term loan and the line of credit were already in place when the Company acquired Bigtech.
On March 7, 2017, we completed the sale and issuance of the 2017 Notes for aggregate proceeds to us of $1,250,000 from four accredited investors, including one of the Company's directors, Dhruwa N. Rai. The 2017 Notes were issued pursuant to Securities Purchase Agreements between the Company and each investor. The 2017 Notes bear interest at 8% per annum until maturity in March 2020, with interest being paid annually on the first, second and third anniversaries of the issuance of the 2017 Notes beginning in March 2018. From and after an event of default and for so long as the event of default is continuing, the 2017 Notes will bear default interest at the rate of 10% per annum. The 2017 Notes can be prepaid by us at any time without penalty.
The 2017 Notes are convertible into shares of our common stock at a conversion price of (i) in the event that any registration statement for the public offering of common stock filed by the Company with the SEC in connection with an uplisting to a national stock exchange is declared effective by the SEC on or prior to December 31, 2017, such price per share that is equal to 68% of the price per share of common stock offered and sold pursuant to such registration statement, or (ii) if no such registration statement is declared effective by December 31, 2017, such price per share that is equal to the weighted average closing price per share of the Company's common stock for the 20 trading days immediately preceding December 31, 2017, subject to adjustment under certain circumstances. The 2017 Notes rank junior to our secured credit facility with Sterling. The 2017 Notes also include certain negative covenants including, without the investors' approval, restrictions on dividends and other restricted payments and reclassification of its stock.
Accounts Receivable
Accounts receivable for the period ended March 31, 2017 were $9,590,446 as compared to $8,059,910 as on December 31,2016. The increase is due to acquisition of ATCG during the period ended March 31, 2017.
Accounts Payable
Accounts payable for the period ended March 31, 2017 was $4,468,533 as compared to $5,130,817 as on December 31,2016. The decrease is primarily due to the payoff of accumulated accounts payable during the three months ended March 31, 2017.
Accrued Expenses
Accrued expenses for the period ended March 31, 2017 was $3,147,210 as compared to $2,165,088 as on December 31,2016. Our acquisition of ATCG led to an increase of accrued expenses of $819,574.
Operating Activities
Our largest source of operating cash flows is cash collections from our customers for different information technology services we render under various statements of work. Our primary uses of cash fromfor operating activities are for personnel-related expenditures, leased facilities and taxes.
Critical Accounting Policies
Purchase Price Allocation.We allocate the purchase price of our acquisitions to the assets and liabilities acquired, including identifiable intangible assets, based on their respective fair values at the date of acquisition. Some of the items, including accounts receivable, property and equipment, other intangible assets, certain accrued liabilities and other reserves require a degree of management judgment. Certain estimates may change as additional information becomes available. Goodwill is assigned at the enterprise level and is deductible for tax purposes for certain types of acquisitions. Management finalizes the purchase price allocation within the defined measurement period of the acquisition date as certain initial accounting estimates are resolved.
Valuation of Contingent Earn-out ConsiderationConsideration.. Acquisitions may include contingent consideration payments based on the achievement of certain future financial performance measures of the acquired company. Contingent consideration is required to be recognized at fair value as of the acquisition date. We estimate the fair value of these liabilities based on financial projections of the acquired companies and estimated probabilities of achievement. We believe our estimates and assumptions are reasonable, however, there is significant judgment involved. We evaluate, on a routine, periodic basis, the estimated fair value of the contingent consideration and changes in estimated fair value, subsequent to the initial fair value estimate at the time of the acquisition, will be reflected in income or expense in the consolidated statements of operations. Changes in the fair value of contingent consideration obligations may result from changes in discount periods and rates, changes in the timing and amount of revenue and/or earnings estimates and changes in probability assumptions with respect to the likelihood of achieving the various earn-out criteria. Any changes in the estimated fair value of contingent consideration may have a material impact on our operating results.
Revenue Recognition. We recognize revenue in accordance with the Accounting Standard Codification 605 "Revenue Recognition." Revenue is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the seller's price to buyer is fixed and determinable, and (4) collectability is reasonably assured. We recognize revenue from information technology services as the services are provided. Service revenues are recognized based on contracted hourly rates, as services are rendered or upon completion of specified contracted services and acceptance by the customer.
Accounts Receivable. We extend credit to clients based upon management's assessment of their credit-worthiness on an unsecured basis. We provide an allowance for uncollectible accounts based on historical experience and management evaluation of trend analysis. We include any balances that are determined to be uncollectible in allowance for doubtful accounts.
Intangible Assets. We capitalize the customer lists received from each of our acquisition considering projected revenue from the top 8 to 10 customers over a period of three years. The allowancescustomer lists from each acquisition are amortized over a period of 60 months.
Goodwill. We capitalize the excess of capitalized intangible assets of an acquisition over the purchase consideration as goodwill in for uncollectible accountseach of our acquisitions. Impairment of goodwill is analyzed on an annual basis as per Company policy.
Recent Accounting Pronouncements
On November 17, 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2016-18, Statement of March 31, 2016Cash Flows (Topic 230): Restricted Cash, which is intended to reduce diversity in the presentation of restricted cash and March 31, 2015 was $0. Basedrestricted cash equivalents in the statement of cash flows. The new standard requires that restricted cash and restricted cash equivalents be included as components of total cash and cash equivalents as presented on the information available, management believes our accounts receivable, netstatement of allowancecash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for doubtful accounts, are collectible.Property and Equipment. Property and equipmentannual periods beginning after December 15, 2017 including interim periods within those fiscal years, but earlier adoption is stated at cost.permitted. We provide for depreciation of property and equipment using the straight-line method over the estimated useful lives of the related assets ranging from 3 to 7 years. Leasehold improvements are amortized using the straight-line method over the shorter of the lease terms or the useful lives of the improvements. We charge repairs and maintenance costs that do not extendbelieve the livesadoption of the assets to expenses as incurred.
In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which clarifies and provides a more robust framework to use in determining when a set of assets and activities is a business. The amendments in this update should be applied prospectively on or after the effective date. This update is effective for annual periods beginning after December 15, 2017 and interim periods within those periods. Early adoption is permitted for acquisition or deconsolidation transactions occurring before the issuance date or effective date and only when the transactions have not been reported in issued or made available for issuance financial statements. We do not believe the adoption of this new standard will have a material impact on our consolidated financial statements.
19
Special Note Regarding Forward-Looking Information
Some of the statements in this Quarterly Report on Form 10-Q and elsewhere constitute forward-looking statements under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements involve known and unknown risks, uncertainties and other factors that may cause results, levels of activity, growth, performance, tax consequences or achievements to be materially different from any future results, levels of activity, growth, performance, tax consequences or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, those listed below.
The forward-looking statements included in this Form 10-Q and referred to elsewhere are related to future events or our strategies or future financial performance, including statements concerning our 20152017 outlook, future revenue and growth, customer spending outlook, general economic trends, IT service demand, future revenue and revenue mix, utilization, new service offerings, significant customers, competitive and strategic initiatives, growth plans, potential stock repurchases, future results, tax consequences and liquidity needs. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "believe," "anticipate," "anticipated," "expectation," "continued," "future," "forward," "potential," "estimate," "estimated," "forecast," "project," "encourage," "opportunity," "goal," "objective," "could," "expect," "expected," "intend," "plan," "planned," or the negative of such terms or comparable terminology. These forward-looking statements inherently involve certain risks and uncertainties, although they are based on our current plans or assessments which are believed to be reasonable as of the date of this Form 10-Q. Factors that may cause actual results, goals, targets or objectives to differ materially from those contemplated, projected, forecasted, estimated, anticipated, planned or budgeted in such forward-looking statements include, among others, the following possibilities: (1) failure to obtain new customers or retain significant existing customers; (2) the loss of one or more key executives and/or employees; (3) changes in industry trends, such as a decline in the demand for Enterprise Resource Planning and Enterprise Performance Management solutions, custom development and system integration services and/or declines in industry-wide information technology spending, whether on a temporary or permanent basis and/or delays by customers in initiating new projects or existing project milestones; (4) inability to execute upon growth objectives, including new services and growth in entities acquired by our Company; (5) adverse developments and volatility involving geopolitical or technology market conditions; (6) unanticipated events or the occurrence of fluctuations or variability in the matters identified as delays in, or the failure of, our sales pipeline being converted to billable work and recorded as revenue; (8) termination by clients of their contracts with us or inability or unwillingness of clients to pay for our services, which may impact our accounting assumptions; (9) inability to recruit and retain professionals with the high level of information technology skills and experience needed to provide our services; (10) failure to expand outsourcing services to generate additional revenue; (11) any changes in ownership of the Company or otherwise that would result in a limitation of the net operating loss carry forward under applicable tax laws; (12) the failure of the marketplace to embrace advisory and product-based consulting services; and (13) changes in our utilization levels. In evaluating these statements, you should specifically consider various factors described above. These factors may cause our actual results to differ materially from those contemplated, projected, anticipated, planned or budgeted in any such forward-looking statements.
Although we believe that the expectations in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, growth, earnings per share or achievements. However, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. Except as otherwise required, we undertake no obligation to update any of the forward-looking statements after the date of this Form 10-Q to conform such statements to actual results.
Not applicable.
Management's Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, 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 Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this quarterly report,Quarterly Report, being March 31, 2016,2017, we have carried out an evaluation of the effectiveness of the design and operation of our Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our Company's management, including our Company's Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our company's Chief Executive Officer and Chief Financial Officer concluded that our company's disclosure controls and procedures are not yet effective as atof the end of the period covered by this report as noted below in management's report on internal control over financial reporting. This is largely due to the fact that we are acquiring privately held companies as part of our growth strategy and our control procedures over all acquired subsidiaries will not be effective until such time as we are able to fully integrate the acquisition with our company and set processes and procedures for the acquired entities. We are working to improve and harmonize our financial reporting controls and procedures across all of our companies. There have been no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Our management has assessed the effectiveness of our internal control over financial reporting as of March 31, 2016,2017, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles; providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and our directors; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. As a result of this assessment, our management concluded that, as of March 31, 2016,2017, our internal control over financial reporting was not yet effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. This is largely due to the fact that we are acquiring privately held companies as part of our growth strategy and our control procedures over all acquired subsidiaries will not be effective until such time as we are able to fully integrate the acquisition with our company and set processes and procedures for the acquired entities. We are working to improve and harmonize our financial reporting controls and procedures across all of our companies.
This Quarterly Report does not include an attestation report of our independent auditors regarding internal control over financial reporting. Management's report was not subject to attestation by our independent auditors pursuant to temporary rules of the SEC that permit our company to provide only management's report in this Quarterly Report.
Inherent Limitations on Effectiveness of Controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization and personnel factors. Internal control over financial reporting is a process, which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There were no changes to correct certain internal control inadequacies, due to the privately held nature of acquired subsidiaries in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the period covered by this report that have not materially affected, or are not reasonably likely to materially affect, our internal control over financial reporting.
PART II –- OTHER INFORMATION
None.
We do not believe that there have been noany other material additions or changes to the risk factors previously disclosed in our 2015fiscal 2017 Annual Report on Form 10-KT.10-K, although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
| ITEM 2. |
The issuance of the shares of common stock to Mr. Rai, the New Warrantformer shareholders of ATCG and the sharesissuance of the Company's common stock exercisable for thereunder will be2017 Notes were each previously disclosed on our Current Reports on Form 8-K, filed with the SEC on March 13, 2017 and March 8, 2017, respectively, and such issuances were made in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), provided by Section 4(a)(2) of the Securities Act as a private offering. Such issuanceissuances of the 2017 Notes and the shares to Mr. Rai and the New Warrantformer shareholders of ATCG did not and the issuance of any shares of common stock exercisable under the New Warrant will not involve a public offering, and each was made and will be made without general solicitation or advertising.
| ITEM 3. |
The Company is yet to make the dividend payment on its Series A Preferred Stock that was payable on March 31, 2017. The Company will pay the sole holder of the Series A Preferred Stock, the accrued dividend in-kind (common stock of AMRH) pursuant to the terms of the Certificate of Designation contemporaneously with the filing of the Quarterly Report of Form 10-Q for the quarter ended March 31, 2017.
Not applicable.
None.
| Exhibit | Description | |
| 2.1 | Agreement of Merger and Plan of Reorganization, dated as of May 26, 2015, among Spatializer Audio Laboratories, Inc., Ameri100 Acquisition, Inc. and Ameri | |
| 2.2 | ||
| 2.3 | Share Purchase Agreement, dated as of November 20, 2015, by and among Ameri Holdings, Inc., Bellsoft, Inc., and all of the shareholders of Bellsoft, Inc. (filed as Exhibit 10.1 to Ameri Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on November 23, 2015 and incorporated herein by reference). | |
| 2.4 | Agreement of Merger and Plan of Reorganization, dated as of July 22, 2016, by and among Ameri Holdings, Inc., Virtuoso Acquisition Inc., Ameri100 Virtuoso Inc., Virtuoso, L.L.C. and the sole member of Virtuoso, L.L.C. (filed as Exhibit 2.1 to Ameri Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on July 27, 2016 and incorporated herein by reference). | |
| 2.5 | Membership Interest Purchase Agreement, dated as of July 29, 2016, by and among Ameri Holdings, Inc., DC&M Partners, L.L.C., all of the members of DCM, Giri Devanur and Srinidhi "Dev" Devanur (filed as Exhibit 2.1 to Ameri Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on August 1, 2016 and incorporated herein by reference). | |
| 2.6 | Share Purchase Agreement, dated as of March 10, 2017, by and among Ameri Holdings, Inc., ATCG Technology Solutions, Inc., all of the stockholders of ATCG, and the Stockholders' representative (filed as Exhibit 2.1 to Ameri Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on March 13, 2017 and incorporated herein by reference). | |
| 3.1 | Amended and Restated Certificate of Incorporation of Ameri Holdings, Inc. (filed as Exhibit 3.1 to Ameri Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on June 23, 2016 and incorporated herein by reference). | |
| 3.2 | Certificate of Designation of Rights and Preferences of 9.00% Series A Cumulative Preferred Stock (filed as Exhibit 3.1 to Ameri Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on January 4, 2017 and incorporated herein by reference). | |
| 3.3 | Corrected Certificate of Designation of Rights and Preferences of 9.00% Series A Cumulative Preferred Stock (filed as Exhibit 3.3 to Ameri Holdings, Inc.’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on April 18, 2017 and incorporated herein by reference). | |
| 3.4 | Amended and Restated Bylaws of Ameri Holdings, Inc. (filed as Exhibit 3.2 to Ameri Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on June 23, 2016 and incorporated herein by reference). | |
| 4.1 | Form of Certificate Representing Shares of common stock of Registrant (filed as Exhibit 4.1 to Ameri Holdings, Inc.'s Registration Statement on Form S-8 filed with the SEC on December 17, 2015 and incorporated herein by reference). | |
| 4.2 | Form of | |
| Common Stock Purchase Warrant, dated May 12, 2016, issued by | ||
| Amended and Restated Registration Rights Agreement, dated May 12, 2016, by and between | ||
| 4.5 | Form of 8% Convertible Unsecured Promissory Note due March 2020 (filed as Exhibit 10.2 to Ameri Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on March 8, 2017 and incorporated herein by reference). | |
| 4.7 | Form of 6% Unsecured Promissory Note (filed as Exhibit 10.1 to Ameri Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on March 13, 2017 and incorporated herein by reference). | |
| 10.2 | Employment Agreement, dated as of May 26, 2015, between Srinidhi "Dev" Devanur and Ameri Holdings, Inc. (filed as Exhibit 10.5 to Ameri Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on June 1, 2015 and incorporated herein by reference). | |
| 10.4 | Form of Securities Purchase Agreement for 2017 Notes Investors (filed as Exhibit 10.1 to Ameri Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on March 8, 2017 and incorporated herein by reference). | |
| 10.5 | Exchange Agreement, dated as of December 30, 2016, between Ameri Holdings, Inc. and Lone Star Value Investors, LP (filed as Exhibit 10.1 to Ameri Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on January 4, 2017 and incorporated herein by reference). | |
| 10.6 | Loan and Security Agreement, dated as of July 1, 2016, by and among Ameri and Partners Inc, Bellsoft, Inc., Ameri Holdings, Inc., Linear Logics, Corp., Winhire Inc, Giri Devanur, the lenders which become a party to the Loan and Security Agreement, and Sterling National Bank, N.A. (a lender and as agent for the lenders) (filed as Exhibit 10.1 to Ameri Holdings, Inc.'s Current Report on Form 8-K filed with the SEC on July 7, 2016 and incorporated herein by reference). | |
| Section 302 Certification of Principal Executive Officer | ||
| Section 302 Certification of Principal Financial and Accounting Officer | ||
| Section 906 Certification of Principal Executive Officer | ||
| Section 906 Certification of Principal Financial and Accounting Officer | ||
| 101** | The following materials from Ameri Holdings, Inc.'s Quarterly Report on Form 10-Q for the three months ended March 31, 2017 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statement of Stockholders' Equity (Deficit), (iv) the Consolidated Statements of Cash Flow, and (iv) Notes to the Consolidated Financial Statements. |
| * | Furnished herewith. | |
| ** | In accordance with |
Pursuant to the requirements of the Section 13 or 15 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.authorized on the 12th day of May 2017.
| AMERI Holdings, Inc. | ||||
| By: | /s/ Giri Devanur | |||
| Giri Devanur | ||||
President and Chief Executive Officer | ||||
| By: | /s/ Viraj Patel | |||
Chief Financial Officer | ||||