PART I - FINANCIAL INFORMATION [Item 1 - Financial Statements](index=3&type=section&id=Item%201%20-%20Financial%20Statements) This section presents AMERI Holdings, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in stockholder equity, and cash flows, along with detailed explanatory notes [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets and liabilities from December 31, 2018, to September 30, 2019, while total stockholders' equity increased, primarily due to changes in cash and warrant liability | Metric | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $499,686 | $1,371,331 | | Total current assets | $8,688,346 | $10,061,353 | | Total assets | $26,656,309 | $29,637,450 | | Total current liabilities | $13,408,946 | $14,688,965 | | Total long-term liabilities | $- | $4,189,388 | | Total liabilities | $13,408,946 | $18,878,353 | | Total stockholders' equity | $13,247,363 | $10,759,097 | - Total assets decreased by approximately **$3 million**, primarily driven by a reduction in cash and cash equivalents and the elimination of warrant liability[12](index=12&type=chunk) - Total stockholders' equity increased by approximately **$2.5 million**, mainly due to an increase in additional paid-in capital[12](index=12&type=chunk) [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) The company shifted from operating income to a net loss attributable to common stockholders for both the three and nine months ended September 30, 2019, largely due to decreased revenue and the absence of significant income from changes in estimates for consideration payable | Metric | Three Months Sep 30, 2019 | Three Months Sep 30, 2018 | Nine Months Sep 30, 2019 | Nine Months Sep 30, 2018 | | :------------------------------------------ | :------------------------ | :------------------------ | :----------------------- | :----------------------- | | Revenue | $9,148,857 | $10,576,254 | $30,850,110 | $32,715,104 | | Gross profit | $1,899,451 | $2,345,798 | $6,421,590 | $7,077,682 | | Operating Income (loss) | $(1,565,000) | $6,100,378 | $(4,339,798) | $3,654,095 | | Net Income (loss) attributable to the Company | $41,299 | $5,699,467 | $(3,075,240) | $2,867,493 | | Net Income (loss) attributable to common stock holders | $(65,466) | $3,883,015 | $(3,393,944) | $389,488 | | Basic income (loss) per share | $(0.001) | $0.18 | $(0.07) | $0.02 | | Diluted income (loss) per share | $(0.001) | $0.16 | $(0.07) | $0.02 | - Revenue decreased by **13%** for the three months and **6%** for the nine months ended September 30, 2019, compared to the prior year periods[16](index=16&type=chunk) - Operating income shifted to a loss of **$1.565 million** for the three months and **$4.340 million** for the nine months ended September 30, 2019, primarily due to the absence of a **$7.275 million** (three months) and **$7.140 million** (nine months) income from changes in estimates for consideration payable recognized in 2018[16](index=16&type=chunk) [Unaudited Condensed Statement of Changes in Stockholder Equity](index=5&type=section&id=Unaudited%20Condensed%20Statement%20of%20Changes%20in%20Stockholder%20Equity) Stockholders' equity increased from December 31, 2018, to September 30, 2019, despite a net loss, driven by significant increases in common shares outstanding and additional paid-in capital from warrant exercises and earnout share issuances | Metric | Dec 31, 2018 | Sep 30, 2019 | | :-------------------------------- | :----------- | :----------- | | Common Shares | 42,329,121 | 62,820,789 | | Common Stock Par Value | $423,290 | $628,207 | | Additional paid-in capital | $44,722,856 | $50,417,513 | | Accumulated deficit | $(34,478,253) | $(37,872,197) | | Total stockholders' equity | $10,759,097 | $13,247,363 | - Common shares outstanding increased by over **20 million shares**, and additional paid-in capital increased by approximately **$5.7 million**, primarily due to the exercise of warrants and shares issued for earnouts[17](index=17&type=chunk)[18](index=18&type=chunk) - Accumulated deficit worsened by approximately **$3.4 million**, reflecting the net loss for the period[17](index=17&type=chunk)[18](index=18&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a net decrease in cash and cash equivalents for the nine months ended September 30, 2019, primarily due to cash used in operating and investing activities, partially offset by financing activities | Metric | Nine Months Sep 30, 2019 | Nine Months Sep 30, 2018 | | :------------------------------------------ | :----------------------- | :----------------------- | | Net cash provided by (used in) operating activities | $(1,974,286) | $(1,562,515) | | Net cash used in investing activities | $(246,805) | $(3,657,226) | | Net cash provided by financing activities | $1,349,446 | $2,401,347 | | Net increase (decrease) in cash and cash equivalents | $(871,645) | $(2,818,394) | | Cash at the end of the period | $499,686 | $2,063,690 | - Cash used in operating activities increased from **$1.56 million** in 2018 to **$1.97 million** in 2019[22](index=22&type=chunk) - Cash provided by financing activities decreased from **$2.40 million** in 2018 to **$1.35 million** in 2019, despite proceeds from issuance of common shares[22](index=22&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide critical context to the financial statements, detailing the company's business, accounting policies, significant acquisitions, revenue recognition, intangible assets, goodwill, earnings per share, debt, commitments, fair value measurements, and private offerings [NOTE 1. DESCRIPTION OF BUSINESS](index=8&type=section&id=NOTE%201.%20DESCRIPTION%20OF%20BUSINESS) AMERI Holdings, Inc. provides SAP TM cloud and digital enterprise services globally through its eleven subsidiaries, primarily generating revenue from North America and operating as a single segment - AMERI Holdings, Inc. provides SAP TM cloud and digital enterprise services through eleven subsidiaries[24](index=24&type=chunk) - The company's primary market is North America, where it earns almost all of its revenue[24](index=24&type=chunk) - The company operates as a single business segment[24](index=24&type=chunk) [NOTE 2. BASIS OF PRESENTATION](index=8&type=section&id=NOTE%202.%20BASIS%20OF%20PRESENTATION) The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC regulations, reflecting all necessary adjustments, with no material impact from recent ASU adoptions - Financial statements are prepared in accordance with U.S. GAAP and Article 10 of Regulation S-X[25](index=25&type=chunk) - The company adopted ASU No. 2016-02 (Leases) in the current quarter, with no material impact on financial statements[29](index=29&type=chunk) - The company does not expect any material impact from ASU No. 2017-04 (simplifying Goodwill Impairment test) upon its effective date (after December 15, 2019)[28](index=28&type=chunk) [NOTE 3. BUSINESS COMBINATIONS](index=9&type=section&id=NOTE%203.%20BUSINESS%20COMBINATIONS) The company completed several acquisitions, including Ameri Georgia, Bigtech Software, Virtuoso, Ameri Arizona, and Ameri California, with purchase prices ranging from $0.9 million to $15.8 million, allocated to working capital, intangibles, and goodwill, and still owes $2,496,000 in cash consideration payable | Asset Component | Ameri Georgia | Bigtech | Virtuoso | Ameri Arizona | Ameri California | | :------------------------ | :------------ | :------ | :------- | :------------ | :--------------- | | Intangible Assets | $1.8M | $0.6M | $0.9M | $5.4M | $3.8M | | Goodwill | $3.5M | $0.3M | $0.9M | $10.4M | $5.0M | | Net Working Capital Acquired | $4.6M | - | - | - | - | | Total Purchase Price | $9.9M | $0.9M | $1.8M | $15.8M | $8.8M | - As of the report date, the Company owed an aggregate of **$2,496,000** in consideration payable by cash related to the Ameri Arizona acquisition[48](index=48&type=chunk)[42](index=42&type=chunk) - Acquisitions like Ameri Georgia, Bigtech, Virtuoso, Ameri Arizona, and Ameri California were completed between 2015 and 2017, expanding the company's SAP consulting services[31](index=31&type=chunk)[34](index=34&type=chunk)[37](index=37&type=chunk)[40](index=40&type=chunk)[43](index=43&type=chunk) [NOTE 4. REVENUE RECOGNITION](index=11&type=section&id=NOTE%204.%20REVENUE%20RECOGNITION) Revenue is recognized when control of deliverables is transferred to customers, based on a five-step approach, with fixed-price contracts using the cost-to-cost method and time-and-materials contracts recognizing revenue as services are provided - Revenue is recognized following a five-step approach, transferring control of deliverables to customers[49](index=49&type=chunk) - Fixed-price contracts for application development and systems integration services use the cost-to-cost method for revenue recognition[51](index=51&type=chunk) - Time-and-materials, transaction-based, or volume-based contracts recognize revenue over the period services are provided[52](index=52&type=chunk) [NOTE 5. INTANGIBLE ASSETS](index=13&type=section&id=NOTE%205.%20INTANGIBLE%20ASSETS) The company's intangible assets primarily consist of customer lists acquired through various acquisitions, amortized over finite lives expiring through 2022, with amortization expense decreasing from $2.2 million in 2018 to $1.6 million in 2019 for the nine-month periods, and an impairment charge of $0.9 million recorded in 2018 - Intangible assets primarily consist of customer lists acquired through acquisitions, amortized using the straight-line method or based on estimated future cash flows[59](index=59&type=chunk) | Metric | Nine Months Sep 30, 2019 | Nine Months Sep 30, 2018 | | :------------------- | :----------------------- | :----------------------- | | Amortization expense | $1.6 million | $2.2 million | - An impairment charge of **$0.9 million** was recorded in 2018 for certain customer lists due to a triggering event[60](index=60&type=chunk) [NOTE 6. GOODWILL](index=13&type=section&id=NOTE%206.%20GOODWILL) Goodwill remained at $13.7 million as of September 30, 2019, and December 31, 2018, following $8.2 million in impairment charges recorded in 2018 due to declines in estimated future cash flows for specific reporting units - Total goodwill was **$13.7 million** as of September 30, 2019, and December 31, 2018[61](index=61&type=chunk) - In 2018, the company recorded **$8.2 million** in goodwill impairment charges[62](index=62&type=chunk) - Impairment was primarily driven by declines in estimated future cash flows for Virtuoso, Bigtech, Ameri Consulting Service Pvt. Ltd, and Ameri Arizona[62](index=62&type=chunk) [NOTE 7. EARNINGS (LOSS) PER SHARE](index=13&type=section&id=NOTE%207.%20EARNINGS%20(LOSS)%20PER%20SHARE) Basic and diluted income (loss) per share calculations are presented, with no dilutive effect considered for Equity Awards or 2017 Notes for the nine months ended September 30, 2019 and 2018, due to net losses attributable to common stockholders, making their inclusion anti-dilutive | Metric | Three Months Sep 30, 2019 | Three Months Sep 30, 2018 | Nine Months Sep 30, 2019 | Nine Months Sep 30, 2018 | | :------------------------------------------ | :------------------------ | :------------------------ | :----------------------- | :----------------------- | | Net income (loss) attributable to common stockholders | $(65,466) | $3,883,015 | $(3,393,944) | $389,488 | | Basic weighted average number of common shares outstanding | 53,776,825 | 21,657,181 | 49,984,757 | 19,683,610 | | Diluted weighted average number of common shares outstanding | 53,776,825 | 24,184,264 | 49,984,757 | 20,630,142 | | Basic income (loss) per share | $(0.001) | $0.18 | $(0.07) | $0.02 | | Diluted income (loss) per share | $(0.001) | $0.16 | $(0.07) | $0.02 | - No shares from Equity Awards or 2017 Notes were included in diluted loss per share calculations for the nine months ended September 30, 2019 and 2018, as the effect would be anti-dilutive[64](index=64&type=chunk) [NOTE 8. OTHER ITEMS](index=15&type=section&id=NOTE%208.%20OTHER%20ITEMS) The company did not grant any restricted stock units or stock options during the nine months ended September 30, 2019, but recorded stock compensation expenses of $0.6 million for the period, a decrease from $0.9 million in the prior year - No restricted stock units or stock options were granted during the nine months ended September 30, 2019[67](index=67&type=chunk) | Metric | Nine Months Sep 30, 2019 | Nine Months Sep 30, 2018 | | :-------------------------- | :----------------------- | :----------------------- | | Stock compensation expenses | $0.6 million | $0.9 million | [NOTE 9. BANK DEBT](index=16&type=section&id=NOTE%209.%20BANK%20DEBT) In January 2019, certain subsidiaries entered into a two-year Credit Facility with North Mill Capital LLC for an initial advance of $2.85 million, collateralized by all borrower assets and guaranteed by the company, with approximately $2.75 million used to repay previous obligations, and a principal balance of $3.4 million as of September 30, 2019 - On January 23, 2019, subsidiaries entered into a two-year Credit Facility with North Mill Capital LLC[69](index=69&type=chunk) - An initial advance of approximately **$2.85 million** was received, with **$2.75 million** used to repay prior obligations[71](index=71&type=chunk)[70](index=70&type=chunk) - The Credit Facility is collateralized by all borrower assets and guaranteed by AMERI Holdings, Inc., with an interest rate of prime plus **1.75%** (minimum **7.25%**)[69](index=69&type=chunk)[70](index=70&type=chunk) - As of September 30, 2019, the principal balance and accrued interest under the Credit Facility amounted to **$3.4 million**[72](index=72&type=chunk) [NOTE 10. CONVERTIBLE NOTES](index=16&type=section&id=NOTE%2010.%20CONVERTIBLE%20NOTES) The company issued $1.25 million in 8% Convertible Unsecured Promissory Notes in March 2017, maturing in March 2020, with $0.25 million repaid in Q1 2019, and the notes convertible into common stock at $2.80 per share and ranking junior to the secured credit facility - Issued **$1.25 million** in **8%** Convertible Unsecured Promissory Notes in March 2017, maturing in March 2020[73](index=73&type=chunk) - Repaid **$0.25 million** towards the 2017 notes during the first quarter of 2019[74](index=74&type=chunk) - Notes are convertible into common stock at a conversion price of **$2.80 per share** and rank junior to the secured credit facility[75](index=75&type=chunk) [NOTE 11. COMMITMENTS AND CONTINGENCIES](index=17&type=section&id=NOTE%2011.%20COMMITMENTS%20AND%20CONTINGENCIES) The company has operating lease commitments for office space, with rent expense increasing from $199,579 in 2018 to $253,813 in 2019 for the nine-month periods, and future minimum lease payments totaling $254,600 through 2021 | Metric | Nine Months Sep 30, 2019 | Nine Months Sep 30, 2018 | | :------------------- | :----------------------- | :----------------------- | | Rent expense | $253,813 | $199,579 | | Year ending December 31, | Amount | | :----------------------- | :----- | | 2019 | $47,893 | | 2020 | $159,345 | | 2021 | $47,362 | | Total | $254,600 | [NOTE 12. FAIR VALUE MEASUREMENT](index=17&type=section&id=NOTE%2012.%20FAIR%20VALUE%20MEASUREMENT) The company uses a three-level hierarchy for fair value measurements, with no warrant or contingent consideration liabilities as of September 30, 2019, a significant change from December 31, 2018, when these Level 3 liabilities totaled $4.79 million due to settlements and reclassifications - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[79](index=79&type=chunk) | Metric | Sep 30, 2019 | Dec 31, 2018 | | :------------------------- | :----------- | :----------- | | Warrant Liability (Level 3) | $- | $4,189,388 | | Contingent consideration (Level 3) | $- | $605,223 | | Total (Level 3) | $- | $4,794,611 | - The closing balance of Level 3 instruments decreased from **$4,794,611** at December 31, 2018, to **$0** at September 30, 2019, due to payments/settlements[80](index=80&type=chunk) [NOTE 13. PRIVATE OFFERINGS](index=18&type=section&id=NOTE%2013.%20PRIVATE%20OFFERINGS) In 2018, the company raised $6.6 million through private placements of common stock and warrants, with warrants initially recorded as a liability due to reset features and down-round protection, and subsequently cancelled in September 2019 in exchange for 10,234,136 shares of Common Stock, reclassifying the remaining warrant liability to stockholders' equity - In July and August 2018, the company raised approximately **$6.6 million** through private placements of common stock and warrants[84](index=84&type=chunk)[85](index=85&type=chunk) - Purchaser Warrants were initially recorded as a derivative financial instrument liability due to reset features and down-round protection[91](index=91&type=chunk) - On September 19, 2019, all outstanding Purchaser Warrants were cancelled in exchange for **10,234,136 shares** of Common Stock, and the remaining warrant liability of **$4,984,573** was reclassified to Stockholder's Equity[91](index=91&type=chunk) [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of AMERI Holdings, Inc.'s business, history, and a detailed analysis of its financial performance for the three and nine months ended September 30, 2019, highlighting key financial trends, liquidity concerns, and critical accounting policies, emphasizing the shift to operating losses and ongoing capital needs [Company History and Overview](index=21&type=section&id=Company%20History%20and%20Overview) AMERI Holdings, Inc. was incorporated in 1994, became AMERI Holdings in 2015 through a reverse merger, and specializes in SAP cloud, digital, and enterprise services, primarily in North America, employing an acquisition strategy to disrupt the IT service provider model - AMERI Holdings, Inc. was incorporated in February 1994 and changed its name in May 2015 after a reverse merger[102](index=102&type=chunk) - The company specializes in delivering SAP cloud, digital, and enterprise services to clients worldwide, with a strong focus on North America[103](index=103&type=chunk)[24](index=24&type=chunk) - Revenue is generated from consulting services under time-and-materials and fixed-price contracts[104](index=104&type=chunk) [Matters that May or Are Currently Affecting Our Business](index=22&type=section&id=Matters%20that%20May%20or%20Are%20Currently%20Affecting%20Our%20Business) Key challenges affecting the business include the ability to raise additional capital, diversify the client base, expand geographically, attract skilled professionals, acquire and integrate other technology services companies, and control operating costs - Challenges include raising additional capital and diversifying the client base[110](index=110&type=chunk) - The company faces challenges in attracting skilled professionals and integrating acquired companies[110](index=110&type=chunk) - Controlling operating costs as the organization expands is a significant concern[110](index=110&type=chunk) [RESULTS OF OPERATIONS](index=22&type=section&id=RESULTS%20OF%20OPERATIONS) The company experienced a decline in revenue and a shift from operating income to significant operating losses for both the three and nine months ended September 30, 2019, compared to the prior year, primarily due to the completion of major customer assignments and the absence of a large income from changes in estimates for consideration payable recognized in 2018, coupled with increased SG&A expenses [Revenues](index=23&type=section&id=Revenues) Revenues decreased by 13% for the three months and 6% for the nine months ended September 30, 2019, primarily due to the completion of major customer assignments, with sales to five major customers accounting for 52% and 47% of total revenue for the respective periods | Metric | Three Months Sep 30, 2019 | Three Months Sep 30, 2018 | Nine Months Sep 30, 2019 | Nine Months Sep 30, 2018 | | :------- | :------------------------ | :------------------------ | :----------------------- | :----------------------- | | Revenue | $9,148,857 | $10,576,254 | $30,850,110 | $32,715,104 | - Revenue decreased by **$1.4 million (13%)** for the three months and **$1.9 million (6%)** for the nine months ended September 30, 2019, mainly due to the completion of major customer assignments[113](index=113&type=chunk)[115](index=115&type=chunk) - Sales to five major customers accounted for **52%** of total revenue for the three months and **47%** for the nine months ended September 30, 2019[114](index=114&type=chunk)[116](index=116&type=chunk) [Gross Margin](index=23&type=section&id=Gross%20Margin) Gross margin remained relatively stable at 21% for both the three and nine months ended September 30, 2019, a slight decrease from 22% in the comparable 2018 periods, with future gross margins anticipated to be in the range of 20% to 25% | Metric | Three Months Sep 30, 2019 | Three Months Sep 30, 2018 | Nine Months Sep 30, 2019 | Nine Months Sep 30, 2018 | | :---------- | :------------------------ | :------------------------ | :----------------------- | :----------------------- | | Gross margin | 21% | 22% | 21% | 22% | - Target gross margins in future periods are anticipated to be in the range of **20% to 25%**[117](index=117&type=chunk) [Selling, General and Administration Expenses](index=24&type=section&id=Selling,%20General%20and%20Administration%20Expenses) SG&A expenses increased to $2.9 million for the three months and $9.1 million for the nine months ended September 30, 2019, compared to $2.7 million and $8.1 million in the prior year periods, primarily due to new sales initiatives and recruiting a new sales team | Metric | Three Months Sep 30, 2019 | Three Months Sep 30, 2018 | Nine Months Sep 30, 2019 | Nine Months Sep 30, 2018 | | :----------------------------------- | :------------------------ | :------------------------ | :----------------------- | :----------------------- | | Selling, General and administration | $2,902,401 | $2,655,902 | $9,075,751 | $8,059,432 | - The increase in SG&A expenses was mainly due to new sales initiatives, including recruiting a new sales team[120](index=120&type=chunk)[121](index=121&type=chunk) [Depreciation and Amortization](index=24&type=section&id=Depreciation%20and%20Amortization) Depreciation and amortization expense was $0.6 million for the three months ended September 30, 2019, and decreased to $1.7 million for the nine months ended September 30, 2019, from $2.3 million in the prior year, reflecting the amortization of customer lists over 60 months | Metric | Three Months Sep 30, 2019 | Three Months Sep 30, 2018 | Nine Months Sep 30, 2019 | Nine Months Sep 30, 2018 | | :-------------------------- | :------------------------ | :------------------------ | :----------------------- | :----------------------- | | Depreciation and amortization | $562,050 | $636,495 | $1,685,637 | $2,266,513 | - Customer lists acquired during various acquisitions are amortized over a period of **60 months**[122](index=122&type=chunk) [Operating Income (Loss)](index=24&type=section&id=Operating%20Income%20(Loss)) The company reported an operating loss of $1.6 million for the three months and $4.3 million for the nine months ended September 30, 2019, a significant decline from operating income in the prior year, primarily attributed to the absence of a $7.3 million (three months) and $7.1 million (nine months) income from changes in estimates for consideration payable recognized in 2018, coupled with increased sales initiatives | Metric | Three Months Sep 30, 2019 | Three Months Sep 30, 2018 | Nine Months Sep 30, 2019 | Nine Months Sep 30, 2018 | | :-------------------- | :------------------------ | :------------------------ | :----------------------- | :----------------------- | | Operating Income (loss) | $(1,565,000) | $6,100,378 | $(4,339,798) | $3,654,095 | - The change to an operating loss was mainly due to the absence of a **$7.3 million** (three months) and **$7.1 million** (nine months) income from changes in estimates for consideration payable recognized in 2018[123](index=123&type=chunk)[124](index=124&type=chunk) - Increased losses were also attributed to new sales initiatives, including recruiting a new sales team[123](index=123&type=chunk)[124](index=124&type=chunk) [Interest Expense](index=24&type=section&id=Interest%20Expense) Interest expense increased to $0.25 million for the three months ended September 30, 2019, from $0.2 million in the prior year, while remaining stable at $0.6 million for the nine-month periods | Metric | Three Months Sep 30, 2019 | Three Months Sep 30, 2018 | Nine Months Sep 30, 2019 | Nine Months Sep 30, 2018 | | :-------------- | :------------------------ | :------------------------ | :----------------------- | :----------------------- | | Interest expenses | $(252,648) | $(190,394) | $(551,862) | $(584,074) | [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) The company's cash position decreased significantly to $0.5 million as of September 30, 2019, from $1.4 million at December 31, 2018, with negative working capital of $4.7 million, primarily due to cash used in operating and investing activities, raising substantial doubt about its ability to continue as a going concern without additional funding [Cash Position and Cash Flows](index=24&type=section&id=Cash%20Position%20and%20Cash%20Flows) Cash and cash equivalents decreased to $0.5 million as of September 30, 2019, from $1.4 million at December 31, 2018, with operating activities using $2 million, investing activities using $0.2 million, and financing activities providing $1.3 million during the nine months ended September 30, 2019 | Metric | Sep 30, 2019 | Dec 31, 2018 | | :----------------------- | :----------- | :----------- | | Cash position | $0.5 million | $1.4 million | - Cash used for operating activities was **$2 million** during the nine months ended September 30, 2019[127](index=127&type=chunk) - Cash provided by financing activities (predominantly by exercise of warrants) was **$1.3 million** during the nine months ended September 30, 2019[127](index=127&type=chunk) [Liquidity Concerns](index=25&type=section&id=Liquidity%20Concerns) As of September 30, 2019, the company had negative working capital of $4.7 million and cash of $0.5 million, raising substantial doubt about its ability to continue as a going concern, dependent on raising additional funding and achieving operating efficiencies, following recurring losses from selling, general, and administration activities and its acquisition strategy - As of September 30, 2019, the company had negative working capital of **$4.7 million** and cash of **$0.5 million**[129](index=129&type=chunk) - The company's ability to continue as a going concern is dependent on raising additional funding and generating additional revenues[130](index=130&type=chunk) - The company has incurred recurring losses due to selling, general, and administration activities and its acquisition strategy[129](index=129&type=chunk) [Available Credit Facility, Borrowings and Repayment of Debt](index=25&type=section&id=Available%20Credit%20Facility,%20Borrowings%20and%20Repayment%20of%20Debt) In January 2019, subsidiaries secured a new Credit Facility of $2.85 million from North Mill Capital LLC, using $2.75 million to repay previous obligations, with a balance of $3.4 million as of September 30, 2019, and the company also repaid $0.25 million of its 8% Convertible Unsecured Promissory Notes in Q1 2019 - A new Credit Facility was entered into on January 23, 2019, with an initial advance of approximately **$2.85 million**[131](index=131&type=chunk)[132](index=132&type=chunk) - Approximately **$2.75 million** of the initial advance was used to repay outstanding obligations under the Sterling National Bank Credit Facility[133](index=133&type=chunk) - As of September 30, 2019, the principal balance and accrued interest under the new Credit Facility amounted to **$3.4 million**[133](index=133&type=chunk) - The company repaid **$0.25 million** towards its **8%** Convertible Unsecured Promissory Notes during the first quarter of 2019[138](index=138&type=chunk) [Accounts Receivable, Accounts Payable, and Accrued Expense](index=26&type=section&id=Accounts%20Receivable,%20Accounts%20Payable,%20and%20Accrued%20Expense) Accounts receivable decreased slightly to $7.6 million as of September 30, 2019, from $7.9 million at December 31, 2018, while accounts payable increased to $4.7 million from $4.4 million, and accrued expenses decreased to $1.5 million from $1.7 million over the same period | Metric | Sep 30, 2019 | Dec 31, 2018 | | :----------------- | :----------- | :----------- | | Accounts receivable | $7.6 million | $7.9 million | | Accounts payable | $4.7 million | $4.4 million | | Accrued expenses | $1.5 million | $1.7 million | [Operating Activities, Off-Balance Sheet Arrangements, and Impact of Inflation](index=26&type=section&id=Operating%20Activities,%20Off-Balance%20Sheet%20Arrangements,%20and%20Impact%20of%20Inflation) Cash flows from operating activities are primarily driven by customer collections and used for personnel, facilities, and taxes, with no off-balance sheet arrangements, and inflation did not significantly impact results as the company actively manages costs - Primary sources of operating cash flows are cash collections from customers, with uses for personnel, leased facilities, and taxes[143](index=143&type=chunk) - The company does not have any off-balance sheet arrangements[144](index=144&type=chunk) - Inflation did not have a significant impact on results, and the company attempts to minimize its effects by controlling operating costs and adjusting billing rates[145](index=145&type=chunk) [Critical Accounting Policies](index=26&type=section&id=Critical%20Accounting%20Policies) Key accounting policies include revenue recognition (ASC 606), stock-based compensation, warrant liability classification and re-measurement, impairment testing for long-lived assets and goodwill, income tax accounting, allowance for doubtful accounts, and business combination accounting, with the valuation of contingent earn-out consideration involving significant judgment and estimates - Revenue is recognized in accordance with ASC 606, based on criteria such as persuasive evidence of an arrangement, delivery, fixed price, and collectability[148](index=148&type=chunk) - Warrants issued in private placements are classified as a liability and re-measured at fair value each reporting period, with changes recognized in the statement of operations[151](index=151&type=chunk) - Goodwill and purchased intangible assets are evaluated for impairment at least annually, or as circumstances warrant, using fair value comparisons[156](index=156&type=chunk) - Valuation of contingent earn-out consideration involves significant judgment based on financial projections and probability assessments, with changes in fair value impacting operating results[157](index=157&type=chunk) [Special Note Regarding Forward-Looking Information](index=28&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Information) This section cautions readers that the report contains forward-looking statements subject to known and unknown risks and uncertainties, which are based on current plans and assessments but do not guarantee future results, and the company undertakes no obligation to update them - The report contains forward-looking statements subject to known and unknown risks and uncertainties[159](index=159&type=chunk) - Forward-looking statements relate to future events, strategies, financial performance, and outlook, but future results cannot be guaranteed[160](index=160&type=chunk)[161](index=161&type=chunk) - The company undertakes no obligation to update any forward-looking statements after the report date[161](index=161&type=chunk) [Item 3 - Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no applicable quantitative and qualitative disclosures about market risk for the company - The company has no applicable quantitative and qualitative disclosures about market risk[162](index=162&type=chunk) [Item 4 - Controls and Procedures](index=28&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were not yet effective as of September 30, 2019, primarily due to challenges in integrating control procedures across multiple acquired privately held companies, and the company is actively working to improve and harmonize these controls [Management's Report on Disclosure Controls and Procedures](index=28&type=section&id=Management's%20Report%20on%20Disclosure%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were not yet effective as of September 30, 2019, largely attributed to the ongoing integration of control procedures for recently acquired privately held companies, and the company is working to improve and harmonize these controls - Disclosure controls and procedures were not yet effective as of September 30, 2019[164](index=164&type=chunk) - The ineffectiveness is largely due to the challenge of integrating control procedures across acquired privately held companies[164](index=164&type=chunk) - The company is working to improve and harmonize financial reporting controls and procedures across all its entities[164](index=164&type=chunk) [Management's Report on Internal Control Over Financial Reporting](index=29&type=section&id=Management's%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) Management assessed that internal control over financial reporting was not yet effective as of September 30, 2019, due to the ongoing integration of control procedures for multiple acquired subsidiaries, and the company is actively working to improve and harmonize these controls - Internal control over financial reporting was not yet effective as of September 30, 2019[168](index=168&type=chunk) - The primary reason for ineffectiveness is the ongoing integration of control procedures for multiple acquired privately held companies[168](index=168&type=chunk) - The company is working to improve and harmonize financial reporting controls and procedures[168](index=168&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=29&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) Internal control systems inherently have limitations, including human diligence, judgment lapses, human failures, collusion, and improper management override, meaning no system can provide absolute assurance against all errors or fraud, and effectiveness projections are subject to risks of inadequacy or deterioration - Internal control systems have inherent limitations, including human diligence, judgment lapses, and human failures[170](index=170&type=chunk) - Controls can be circumvented by collusion or improper management override[170](index=170&type=chunk) - No control system can provide absolute assurance against all errors or fraud, only reasonable assurance[170](index=170&type=chunk) [Changes in Internal Control Over Financial Reporting](index=29&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes in the company's internal control over financial reporting occurred during the third quarter ended in 2019 that materially affected, or are reasonably likely to materially affect, the internal control over financial reporting - No material changes in internal control over financial reporting occurred during the third quarter ended in 2019[171](index=171&type=chunk) PART II - OTHER INFORMATION [Item 1 - Legal Proceedings](index=29&type=section&id=Item%201%20-%20Legal%20Proceedings) The company settled a lawsuit with MACT Holdings LLC, a former member of Ameri Arizona, for $200,000 in February 2019, resolving disputes over earn-out payments and stock consideration, with no other material pending legal proceedings - The company settled a lawsuit with MACT Holdings LLC for **$200,000** in February 2019, resolving disputes over earn-out payments and stock consideration[172](index=172&type=chunk)[173](index=173&type=chunk) - No other material legal proceedings are currently pending[177](index=177&type=chunk) [Item 1A - Risk Factors](index=31&type=section&id=Item%201A%20-%20Risk%20Factors) This section states that there are no applicable risk factors to disclose - No applicable risk factors are disclosed in this report[178](index=178&type=chunk) [Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section indicates that there were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities and use of proceeds to report[179](index=179&type=chunk) [Item 3 - Defaults upon Senior Securities](index=31&type=section&id=Item%203%20-%20Defaults%20upon%20Senior%20Securities) This section states that there were no defaults upon senior securities to report - No defaults upon senior securities to report[180](index=180&type=chunk) [Item 4 - Mine Safety Disclosures](index=31&type=section&id=Item%204%20-%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[181](index=181&type=chunk) [Item 5 - Other Information](index=31&type=section&id=Item%205%20-%20Other%20Information) This section states that there is no other information to report - No other information to report[182](index=182&type=chunk) [Item 6 - Exhibits](index=31&type=section&id=Item%206%20-%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Form of Exchange Agreement, Section 302 Certifications of the Principal Executive and Financial Officers, and Section 906 Certifications - Exhibits include the Form of Exchange Agreement, Section 302 Certifications, and Section 906 Certifications[183](index=183&type=chunk) SIGNATURES The report is duly signed on behalf of AMERI Holdings, Inc. by its Chief Executive Officer, Brent Kelton, and Chief Financial Officer, Barry Kostiner, on November 8, 2019 - The report was signed by Brent Kelton, Chief Executive Officer, and Barry Kostiner, Chief Financial Officer, on November 8, 2019[186](index=186&type=chunk)[188](index=188&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of Each Class Trading Symbol Name of Each Exchange on Which Registered Common Stock $0.01 par value per share AMRH The NASDAQ Stock Market LLC Warrants to Purchase Common Stock AMRHW The NASDAQ Stock Market LLC FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 Commission file number 001-38286 AMERI Holdings, Inc. (Exact name of registrant ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of Each Class Trading Symbol Name of Each Exchange on Which Registered Common Stock $0.01 par value per share AMRH The NASDAQ Stock Market LLC Warrants to Purchase Common Stock AMRHW The NASDAQ Stock Market LLC FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 Commission file number 001-38286 AMERI Holdings, Inc. (Exact name of registrant ...

Part I [Item 1. Business](index=4&type=section&id=ITEM%201.%20BUSINESS) AMERI Holdings, Inc, provides SAP cloud, digital, and enterprise services globally with a strong US presence supported by offshore capabilities - The company's business model inverts the conventional global delivery model by having a strong U.S. presence supported by offshore capabilities in India and Canada[12](index=12&type=chunk) - Growth is driven by strategic acquisitions to expand service offerings in areas like SAP S/4 HANA, SAP Success Factors, and SAP Hybris[13](index=13&type=chunk)[23](index=23&type=chunk) - Service offerings are categorized into three main areas: Cloud Services, Digital Services (including mobile solutions and Robotic Process Automation), and Enterprise Services (including Business Intelligence and analytics)[25](index=25&type=chunk)[28](index=28&type=chunk)[30](index=30&type=chunk) - For the fiscal year 2018, the top five customers accounted for approximately **39% of total revenue**, indicating a significant client concentration[39](index=39&type=chunk) - As of December 31, 2018, the company had a total headcount of 390, which includes **188 billable subcontractors**[49](index=49&type=chunk) [Item 1A. Risk Factors](index=10&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces substantial risks from a history of net losses, working capital constraints, intense competition, and potential Nasdaq delisting Historical Net Losses | Year | Net Revenue | Comprehensive Net Loss | | :--- | :--- | :--- | | 2018 | $43.0 million | $19.4 million | | 2017 | $48.6 million | $11.1 million | - The company faces working capital constraints and had outstanding cash payment obligations of approximately **$2.7 million** related to past acquisitions as of December 31, 2018[58](index=58&type=chunk) - On December 10, 2018, the company received a notice from Nasdaq for failing to meet the minimum **$1.00 per share bid price requirement**, posing a risk of delisting[160](index=160&type=chunk)[161](index=161&type=chunk) - A significant portion of revenue is concentrated in a limited number of clients, with the top five accounting for **39% of total revenue** in 2018[102](index=102&type=chunk)[103](index=103&type=chunk) - As of December 31, 2018, the company had approximately **$4 million in borrowings outstanding** under its senior secured credit facility[145](index=145&type=chunk) - Management concluded that as of December 31, 2018, the company's **internal control over financial reporting was not effective**, largely due to difficulties in integrating acquired private companies[195](index=195&type=chunk) [Item 1B. Unresolved Staff Comments](index=28&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved staff comments from the SEC - None[200](index=200&type=chunk) [Item 2. Properties](index=28&type=section&id=ITEM%202.%20PROPERTIES) The company's principal executive office is in Suwanee, Georgia, with additional leased offices in the US and India - The main executive office is in Suwanee, Georgia, with additional leased facilities in the U.S. and India totaling approximately **17,000 square feet**[200](index=200&type=chunk) [Item 3. Legal Proceedings](index=29&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) A lawsuit concerning unpaid earn-out payments from a subsidiary was settled in February 2019 for $200,000 - A lawsuit from a former member of Ameri Arizona regarding earn-out payments was **settled in February 2019 for $200,000**[202](index=202&type=chunk) [Item 4. Mine Safety Disclosures](index=29&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[204](index=204&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=30&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's stock trades on Nasdaq, it has never paid dividends, and it issued unregistered stock for acquisition-related payments in 2018 - Common stock trades on The Nasdaq Capital Market under the ticker **"AMRH"**[206](index=206&type=chunk) - The company has a policy of retaining earnings for business development and has **never paid cash dividends** on its common stock[208](index=208&type=chunk) - Multiple unregistered stock issuances occurred in 2018 to satisfy earn-out and other payment obligations from the acquisitions of Virtuoso, Bigtech, and Ameri Arizona[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk) [Item 6. Selected Financial Data](index=31&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section is not applicable as the company qualifies as a smaller reporting company - Not applicable for smaller reporting companies[216](index=216&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Fiscal 2018 revenue decreased 12% to $43.0 million and net loss widened to $19.5 million, driven by a $9.0 million goodwill impairment charge Results of Operations (Year Ended December 31) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | Net Revenue | $42,998,280 | $48,593,712 | | Gross Profit | $8,983,504 | $10,237,745 | | Operating Loss | ($7,146,460) | ($10,896,531) | | Net Loss | ($16,897,516) | ($9,074,813) | | Net Loss Attributable to Common Stockholders | ($19,480,701) | ($11,163,964) | | Basic & Diluted Loss Per Share | ($0.82) | ($0.75) | - Revenue decreased by **$5.6 million (12%)** in 2018 compared to 2017, mainly because the company chose not to pursue certain low-margin professional services business[232](index=232&type=chunk) - The company recorded a **$9.0 million impairment charge** on goodwill and intangible assets in 2018, which was a primary driver of the increased net loss[238](index=238&type=chunk) - The company's financial condition raises **substantial doubt about its ability to continue as a going concern** due to recurring operational losses and negative working capital of $4.7 million as of December 31, 2018[261](index=261&type=chunk)[262](index=262&type=chunk) - In January 2019, the company entered into a new Loan and Security Agreement with North Mill Capital LLC, using an initial advance of **~$2.85 million** to repay its previous credit facility[265](index=265&type=chunk)[268](index=268&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section is not required as the company qualifies as a smaller reporting company - As a "smaller reporting company," this information is not required[298](index=298&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=42&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This item refers to the consolidated financial statements and supplementary data beginning on page F-1 of the report - The response to this Item is submitted as a separate section of this report beginning on page F-1[299](index=299&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=42&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[299](index=299&type=chunk) [Item 9A. Controls and Procedures](index=42&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that both disclosure controls and internal control over financial reporting were not effective as of December 31, 2018 - Management concluded that **disclosure controls and procedures were not effective** as of December 31, 2018[302](index=302&type=chunk) - Management also concluded that **internal control over financial reporting was not effective** as of December 31, 2018[305](index=305&type=chunk) - The primary reason for the ineffectiveness is the difficulty in fully integrating acquired private companies and establishing consistent processes and procedures across all subsidiaries[302](index=302&type=chunk)[305](index=305&type=chunk) [Item 9B. Other Information](index=44&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company received and addressed a Nasdaq non-compliance letter in March 2019 regarding independent director requirements for its committees - Received a Nasdaq non-compliance letter on March 21, 2019, regarding independent director requirements for board committees[309](index=309&type=chunk) - The company appointed Thoranath Sukumaran to the audit and compensation committees on March 25, 2019, to regain compliance[310](index=310&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=45&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Required information is incorporated by reference from the company's forthcoming definitive proxy statement - Information is incorporated by reference from the company's proxy statement[312](index=312&type=chunk) [Item 11. Executive Compensation](index=45&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Required information is incorporated by reference from the company's forthcoming definitive proxy statement - Information is incorporated by reference from the company's proxy statement[314](index=314&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners, Management and Related Stockholder Matters](index=45&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%2C%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Required information is incorporated by reference from the company's forthcoming definitive proxy statement - Information is incorporated by reference from the company's proxy statement[315](index=315&type=chunk) [Item 13. Certain Relationships and Related Transactions and Director Independence](index=45&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%20AND%20DIRECTOR%20INDEPENDENCE) Required information is incorporated by reference from the company's forthcoming definitive proxy statement - Information is incorporated by reference from the company's proxy statement[316](index=316&type=chunk) [Item 14. Principal Accountants Fees and Services](index=45&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANTS%20FEES%20AND%20SERVICES) Required information is incorporated by reference from the company's forthcoming definitive proxy statement - Information is incorporated by reference from the company's proxy statement[317](index=317&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=46&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists all exhibits filed with the Form 10-K, including acquisition, financing, and corporate governance agreements - Lists various agreements including Share Purchase Agreements for acquisitions, Loan and Security Agreements, and forms of Warrants and Promissory Notes[319](index=319&type=chunk)[321](index=321&type=chunk) Financial Statements [Consolidated Financial Statements](index=51&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements for 2018 and 2017 reveal a significant decline in financial health, with decreased assets, a widened net loss, and severe liquidity challenges Consolidated Balance Sheet Highlights (As of Dec 31) | Account | 2018 | 2017 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $1,371,331 | $4,882,084 | | Goodwill | $13,729,770 | $21,898,323 | | Total Assets | $29,637,450 | $52,196,628 | | **Liabilities & Equity** | | | | Total current liabilities | $14,688,965 | $30,367,882 | | Warrant liability | $4,189,388 | $0 | | Total Liabilities | $18,878,353 | $32,748,445 | | Total stockholders' equity | $10,759,097 | $19,448,183 | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | Account | 2018 | 2017 | | :--- | :--- | :--- | | Net revenue | $42,998,280 | $48,593,712 | | Gross profit | $8,983,504 | $10,237,745 | | Impairment charges | $9,038,553 | $0 | | Net Income (loss) | ($16,897,516) | ($9,074,813) | Consolidated Cash Flow Highlights (Year Ended Dec 31) | Account | 2018 | 2017 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,565,495) | ($2,740,794) | | Net cash used in investing activities | ($3,639,246) | ($169,860) | | Net cash provided by financing activities | $2,693,988 | $6,412,851 | [Notes to Consolidated Financial Statements](index=56&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail a $9.0 million impairment charge, warrant liability classification, debt defaults, and a full valuation allowance against deferred tax assets - The company recorded an impairment charge of **$8.2 million on goodwill** and **$0.9 million on certain customer lists** during 2018 due to declining future cash flow projections[419](index=419&type=chunk)[422](index=422&type=chunk) - In July/August 2018, the company completed a private placement that included warrants classified as a **derivative liability of $4.2 million** on the balance sheet[389](index=389&type=chunk)[339](index=339&type=chunk) - The company was **in default on its credit facility** with Sterling National Bank as of year-end 2018 and subsequently entered into a new loan agreement with North Mill Capital LLC[447](index=447&type=chunk)[473](index=473&type=chunk) - A **full valuation allowance of $6.1 million** was recorded against the company's deferred tax assets at December 31, 2018, as management concluded they were not more likely-than-not to be realizable[462](index=462&type=chunk) - Subsequent to year-end, in March 2019, the company received gross proceeds of approximately **$1.5 million from the exercise of warrants**[478](index=478&type=chunk)