Form 8-K AMERI Holdings, Inc. For: Dec 23

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

Current Report

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): December 23, 2020

 

AMERI Holdings, Inc.

(Exact name of Registrant as specified in its charter)

 

Delaware		001-38286		95-4484725
(State or other jurisdiction of incorporation)		(Commission File No.)		(IRS Employer Identification No.)

 

5000 Research Court, Suite 750

Suwanee, Georgia 30024

(Address of principal executive offices and zip code)

 

Registrant’s telephone number, including area code: (770) 935-4152

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

	[X]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
	[  ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
	[  ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
	[  ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.01 per share		AMRH		The Nasdaq Stock Market LLC
Warrants to Purchase Common Stock		AMRHW		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

 

 

Explanatory Note

 

On August 12, 2020, AMERI Holdings, Inc. (“Ameri”), Jay Pharma Inc. (“Jay Pharma”) and certain other signatories thereto entered into a Tender Offer Support Agreement and Termination of Amalgamation Agreement (as may be amended from time to time, the “Tender Agreement”), which provides that, among other things, Ameri will make a tender offer (such offer, as it may be amended or supplemented from time to time as permitted under the Tender Agreement, the “Offer”) to purchase all of the outstanding common shares of Jay Pharma for the number of shares of Resulting Issuer common stock at the exchange ratio set forth in the Tender Agreement (the “Exchange Ratio”), and Jay Pharma will become a wholly-owned subsidiary of Ameri, on the terms and conditions set forth in the Tender Agreement. We refer to Ameri after giving effect to the Offer and the completion of the transactions contemplated by the Tender Agreement as the “Resulting Issuer.”

 

Item 8.01

Other Events

 

Adjournment of Special Meeting

 

On December 23, 2020, Ameri commenced its Special Meeting of Stockholders (the “Special Meeting”) as previously scheduled and adjourned the meeting until December 29, 2020 at 9:00 a.m., Eastern Standard Time.

 

The reconvened Special Meeting will be held at the same address at 7950 Legacy Dr., Suite 650 Plano, TX 75024. Stockholders who have already voted do not need to recast their votes. Proxies previously submitted in respect of the meeting will be voted at the adjourned meeting unless properly revoked.

 

A copy of the press release announcing the adjournment of the Special Meeting is attached hereto as Exhibit 99.3.

 

Exchange Ratio

 

Subsequent to the filing of Ameri’s Current Report on Form 8-K dated December 18, 2020, the conversion prices of certain Jay Pharma convertible notes decreased, and the number of shares underlying certain Jay Pharma options decreased. The resulting change to the number of Jay Pharma common shares outstanding on a fully-diluted basis impacts the Exchange Ratio, which determines the number of shares of Resulting Issuer Common Stock that holders of outstanding common shares of Jay Pharma will be entitled to receive at the completion of the Offer. As a result, and assuming that the proposal to approve, for purposes of Nasdaq Rules 5635, the issuance of shares of common stock upon the exchange of certain convertible debentures held by Alpha in one or more private placement transactions, described further in the proxy statement/prospectus on Form S-4 filed by Ameri (File No. 333-238742) (the “Form S-4”) in the section entited “PROPOSALS SUBMITTED TO AMERI STOCKHOLDERS – AMERI PROPOSAL 9 – APPROVAL OF THE CONVERSION PROPOSAL” on page 124 of the proxy statement/prospectus (the “Conversion Proposal”), is approved at the Special Meeting and the conversion price of the outstanding 1% debentures is reduced from $1.75 to $1.00 per share, the Exchange Ratio will change from 0.8320 to 0.8712.

 

As a result of the change in the Exchange Ratio from 0.8320 to 0.8712 (assuming the Conversion Proposal is approved), Ameri currently intends to issue 30,560,227 shares of Resulting Issuer Common Stock and 12,802,528 shares of Series B Preferred Stock of the Resulting Issuer (“Series B Preferred Stock”) that are convertible into up to 12,802,528 shares of common stock of the Resulting Issuer at the completion of the Offer, prior to giving effect to the proposed reverse stock split discussed in the Form S-4.

 

The conversion by Ameri investors of additional notes or exercise by Ameri investors of outstanding warrants, if any, between the date hereof and the completion of the Offer would result in further updates to the Exchange Ratio.

 

Forward-Looking Statements

 

This Current Report on Form 8-K may contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terms such as “anticipates,” “assumes,” “believes,” “can,” “could,” “estimates,” “expects,” “forecasts,” “guides,” “intends,” “is confident that,” “may,” “plans,” “seeks,” “projects,” “targets,” and “would” or the negative of such terms or other variations on such terms or comparable terminology. Such forward-looking statements include, but are not limited to, statements about the benefits of the proposed Offer pursuant to the Tender Agreement including future financial and operating results, the Resulting Issuer’s plans, objectives, expectations and intentions, the expected timing of completion of the Offer and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the respective managements of Ameri and Jay Pharma and are subject to significant risks and uncertainties that could cause actual outcomes and results to differ materially. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, without limitation: the occurrence of any event, change or other circumstances that could give rise to the termination of the Tender Agreement; the inability to complete the Offer due to the failure to obtain stockholder approvals or governmental or regulatory clearances or the failure to satisfy other conditions to the closing of the Offer or for any other reason; legal or regulatory proceedings or other matters that affect the timing or ability to complete the Offer as contemplated; the risk that the proposed Offer disrupts current plans and operations; fluctuations in the market value of Ameri common stock; the effects of the Offer on Ameri’s financial results; potential difficulties in employee retention as a result of the Offer; disruption from the Offer making it difficult to maintain business and operational relationships; diversion of management’s time on issues related to the Offer; the risk that cost savings and other synergies anticipated to be realized from the Offer may not be fully realized or may take longer to realize than expected; adverse developments in general market, business, economic, labor, regulatory and political conditions; the amount of any costs, fees, expenses, impairments and charges related to the Offer; the uncertainty regarding the adequacy of Ameri’s liquidity to pursue its business objectives; the impact of any outbreak or escalation of hostilities on a national, regional or international basis, acts of terrorism or natural disasters; changes in regulations and laws relating to cannabinoids and related products; competitive factors, including technological advances achieved and patents attained by competitors; the impact of any change to applicable laws and regulations affecting domestic and foreign operations, including those relating to trade, monetary and fiscal policies, taxes, price controls, regulatory approval of new products, licensing and healthcare reform; and the geographic, social and economic impact of COVID-19 on the Company’s business operations.

 

 

Ameri and Jay Pharma do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You are cautioned not to place undue reliance on these forward-looking statements, because, while the respective managements of Ameri and Jay Pharma believe the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. This cautionary statement is applicable to all forward-looking statements contained in this proxy statement/prospectus.

 

Additional Information

 

In connection with the proposed transaction, Ameri has filed with the SEC a registration statement on Form S-4 that includes a proxy statement of Ameri and also constitutes a prospectus of Ameri. The registration statement was declared effective by the SEC on November 12, 2020. Ameri commenced mailing the proxy statement/prospectus to stockholders of Ameri and AYRO on or about November 20, 2020. INVESTORS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of the definitive proxy statement/prospectus and other relevant documents filed by Ameri with the SEC at the SEC’s website at www.sec.gov. Copies of the documents filed by Ameri with the SEC are available free of charge on Ameri’s website at www.ameri100.com or by contacting 845-323-0434 or sending an e-mail to [email protected].

 

Participants in the Solicitation

 

Ameri and its directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding the special interests of these directors and executive officers in the proposed transaction has been included in the definitive proxy statement/prospectus referred to above. Additional information regarding the directors and executive officers of Ameri is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 30, 2020, as amended on April 10, 2020, and August 12, 2020. Investors should read the definitive proxy statement/prospectus carefully before making any voting or investment decisions. You may obtain free copies of these documents from Ameri using the sources indicated above.

 

No Offer or Solicitation

 

This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No public offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

 

Item 9.01.

Financial Statements and Exhibits.

 

(a)

Financial Statements of Business Acquired.

 

The unaudited condensed financial statements of Jay Pharma as of and for the nine months ended September 30, 2020 are included as Exhibit 99.1 hereto and are incorporated by reference herein.

 

(b)

Pro Forma Financial Information.

 

The unaudited pro forma condensed combined statements of operations as of and for the year ended December 31, 2019, and the nine months ended September 30, 2020, and unaudited pro forma balance sheet data for the nine months ended September 30, 2020 give effect to the proposed Offer and have been prepared under the acquisition method of accounting with Jay Pharma treated as the accounting acquirer. Such unaudited pro forma condensed combined statements of operations and unaudited pro forma balance sheet data are included as Exhibit 99.2 hereto and are incorporated by reference herein.

 

(d) Exhibits

 

Exhibit No.		Description
99.1		Unaudited condensed financial statements of Jay Pharma Inc. as of and for the nine months ended September 30, 2020
99.2		Unaudited pro forma condensed combined statements of operations of Jay Pharma, Inc. as of and for the year ended December 31, 2019 and balance sheets and statements of operations for the nine months ended September 30, 2020
99.3		Press Release, dated December 23, 2020

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	AMERI HOLDINGS, INC.
Date: December 23, 2020	By:	/s/ Barry Kostiner
	Name:	Barry Kostiner
	Title:	Chief Financial Officer

 

 

Exhibit 99.1

 

JAY PHARMA, INC.

 

UNAUDITED CONDENSED FINANCIAL STATEMENTS FOR THE NINE

MONTHS ENDED SEPTEMBER 30, 2020 AND 2019  

 

 

TABLE OF CONTENTS

 

Unaudited Condensed Balance Sheets	1
Unaudited Condensed Statements of Operations and Comprehensive Loss	2
Unaudited Condensed Statements of Changes in Shareholders’ Deficit	3
Unaudited Condensed Statements of Cash Flows	4
Notes to the Unaudited Condensed Financial Statements	5

 

 

JAY PHARMA, INC.

CONDENSED BALANCE SHEETS

 

		September 30, 2020				December 31, 2019
		(unaudited)
Assets
Current assets:
Cash		$	340,898			$	43,714
Due from related party			67,085				-
Prepaid expenses and other current assets			64,182				65,075
Total current assets			472,165				108,789
Total assets		$	472,165			$	108,789
Liabilities and Shareholders’ Deficit
Liabilities
Current liabilities:
Accounts payable and accrued liabilities		$	1,633,398			$	1,157,645
Advance from related party			-				22,409
Notes payable			2,077,925				446,415
Convertible notes payable			350,000				293,921
Total liabilities			4,061,323				1,920,390
Commitments (Note 5)
Shareholders’ Deficit
Common stock, no par value, unlimited authorized shares,
26,887,649 and 25,195,681 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively			-				-
Additional paid-in capital			3,829,609				3,094,902
Accumulated deficit			(7,377,068	)			(4,894,881	)
Accumulated other comprehensive loss			(41,699	)			(11,622	)
Total shareholders’ deficit			(3,589,158	)			(1,811,601	)
Total liabilities and shareholders’ deficit		$	472,165			$	108,789

 

 

JAY PHARMA, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

 

		For the Nine Months Ended September 30,
		2020				2019
Expenses
Operating expenses		$	2,094,044			$	1,895,355
Loss from operations			(2,094,044	)			(1,895,355	)
Other expense
Extinguishment of note payable			-				32,257
Interest expense			388,143				47,858
Total other expense			388,143				80,115
Net loss			(2,482,187	)			(1,975,470	)
Other comprehensive income
Foreign exchange (loss) gain			(30,077	)			5,204
Comprehensive loss		$	(2,512,264	)		$	(1,970,266	)
Net loss per share - basic and diluted		$	(0.10	)		$	(0.08	)
Weighted average shares outstanding, basic and diluted			25,916,419				25,060,193

 

 

JAY PHARMA, INC.

CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

(unaudited)

 

		Common Stock								Addition paid-in				Accumulated				Accumulated Other Comprehensive
		Shares				Amount				capital				Deficit				Loss				Total
Balance as of January 1, 2019			24,972,504			$	-			$	2,423,709			$	(2,484,208	)		$	(4,955	)		$	(65,454	)
Common stock issued for services			172,297				-				88,465				-				-				88,465
Warrants issued in conjunction with issuance of notes payable			-				-				24,875				-				-				24,875
Stock based compensation - stock options			-				-				535,587				-				-				535,587
Foreign exchange loss			-				-				-				-				5,204				5,204
Net loss			-				-				-				(1,975,470	)			-				(1,975,470	)
Balance as of September 30, 2019			25,144,801			$	-			$	3,072,636			$	(4,459,678	)		$	249			$	(1,386,793	)
Balance as of January 1, 2020			25,195,681			$	-			$	3,094,902			$	(4,894,881	)		$	(11,622	)		$	(1,811,601	)
September 2020 private placement			166,667				-				227,500				-				-				227,500
Conversion of related party advance and notes payable			1,081,818				-				238,000				-				-				238,000
Common stock issued for accounts payable			388,483				-				173,482				-				-				173,482
Common stock issued in conjuntion with note payable modification			-				-				45,725				-				-				45,725
Warrants issued in conjunction with notes payable			55,000				-				32,149				-				-				32,149
Beneficial conversion feature issued with note payable			-				-				17,851				-				-				17,851
Foreign exchange loss			-				-				-				-				(30,077	)			(30,077	)
Net loss			-				-				-				(2,482,187	)			-				(2,482,187	)
Balance as of September 30, 2020			26,887,649			$	-			$	3,829,609			$	(7,377,068	)		$	(41,699	)		$	(3,589,158	)

 

 

JAY PHARMA, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

 

		For the Nine Months Ended September 30,
		2020				2019
Cash Flows From Operating Activities:
Net loss		$	(2,482,187	)		$	(1,975,470	)
Adjustments to reconcile net loss to cash used in operating activities:
Extinguishment of notes payable			-				32,257
Accrued interest			102,285				8,874
Amortization of debt discount			285,858				38,985
Stock-based compensation			-				624,052
Change in operating assets and liabilities:
Due from related party			(65,075	)			-
Prepaid expenses and other current assets			(1,841	)			67,591
Accounts payable and accrued liabilities			522,162				571,121
Net cash used in operating activities			(1,638,798	)			(632,590	)
Cash Flows From Financing Activities:
Proceeds from convertible notes payable			50,000				300,000
Proceeds from note payable			1,812,410				198,000
Advances from related party			-				22,000
Proceeds from sale of common stock, net of offering costs			227,500				-
Repayment of note payable			(157,714	)			-
Net cash provided by financing activities			1,932,196				520,000
Effect of foreign exchange rate on cash			3,786				7,802
Net increase (decrease) in cash			297,184				(104,788	)
Cash - beginning of period			43,714				113,671
Cash - end of period		$	340,898			$	8,883
Supplemental non-cash financing activities:
Beneficial conversion feature issued with note payable		$	17,851			$	-
Warrants issued in conjunction with notes payable		$	32,149			$	24,875
Common stock issued for accounts payable		$	173,482			$	-
Common stock issued in conjuntion with note payable modification		$	45,725			$	-
Notes payable issued to consultant for prepaid services		$	-			$	150,000
Conversion of related party advances and notes payable into common stock		$	238,000			$	-

 

 

JAY PHARMA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

NOTE 1 - Business

 

Nature of operations

 

Jay Pharma Inc. (“Jay Pharma” or the “Company”) was incorporated under the Business Corporations Act (Canada) on April 19, 2017 as Jay Resources Inc. The Company is a pharmaceutical company developing innovative, evidence-based cannabinoid medicines. The head office of the Company is located in Naples, Florida.

 

Note 2 – Liquidity and going concern

 

The Company has incurred continuing losses from its operations and as of September 30, 2020, the Company had an accumulated deficit of $7,377,068 and working capital deficiency of $3,589,158. The Company also has negative operating cash flow and no revenue, with an insufficient amount of cash to sustain opertaions.

 

Since inception, the Company has met its liquidity requirements principally through the issuance of notes payable and the sale of its shares of common stock.

 

The Company has no present revenue and the Company’s ability to continue its operations and to pay its obligations when they become due is contingent upon the Company obtaining additional financing. Management’s plans include seeking to procure additional funds through debt and equity financings and to continue to develop its technologies and products.

 

There are no assurances that the Company will be able to raise capital on terms acceptable to the Company or at all, or that cash flows generated from its operations will be sufficient to meet its current operating costs and required debt service. If the Company is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned product development, which could harm its financial condition and operating results, or it may not be able to continue to fund its ongoing operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern to sustain operations for at least one year from the issuance date of these condensed financial statements. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 

Note 3 – SUMMARY OF Significant Accounting Policies

 

Basis of Presentation

 

The accompanying condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with the applicable rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial statements. Accordingly, they do not include all of the information and notes required by U.S. GAAP. However, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the financial position and operating results have been included in these unaudited condensed financial statements. These unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto for the fiscal year ended December 31, 2019. Operating results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

 

Use of Estimates

 

The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and expenses during the periods reported. By their nature, these estimates are subject to measurement uncertainty and the effects on the financial statements of changes in such estimates in future periods could be significant. Significant areas requiring management’s estimates and assumptions include determining the fair value of transactions involving common stock and valuation of stock-based compensation. Actual results could differ from those estimates.

 

 

JAY PHARMA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

Note 3 – SUMMARY OF Significant Accounting Policies, continued

 

Foreign Currency Translation

 

The reporting currency of the Company is the United States dollar. The financial statements of companies located outside of the U.S. are measured in their functional currency, which is the local currency. The functional currency of the Company is the Canadian dollar. Monetary assets and liabilities are translated using public exchange rates at the balance sheet date. Income and expense items are translated using average monthly exchange rates. Shareholders’ equity accounts and non-monetary assets are translated at their historical exchange rates. Translation adjustments are included in accumulated other comprehensive loss in the accompanying condensed balance sheets.

 

Cash and cash equivalents

 

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2020 and December 31, 2019.

 

Income Taxes

 

The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse.

 

The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

 

Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The

amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of September 30, 2020 and December 31, 2019, no liability for unrecognized tax benefits was required to be recorded.

 

The Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component of operating expenses. There were no amounts accrued for penalties and interest for the nine months ended September 30, 2020 and 2019. The Company does not expect its uncertain tax positions to change during the next twelve months. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

 

The Company has identified its Canadian federal tax return and its provincial tax returns in Ontario as its “major” tax jurisdictions. The

Company is in the process of filing its corporate tax returns for the years ended December 31, 2019 and December 31, 2018. Net operating losses for these periods will not be available to reduce future taxable income until the returns are filed.

 

Stock-Based Compensation

 

The Company follows Accounting Standards Codification (“ASC”) 718, Compensation - Stock Compensation, which addresses the accounting for stock-based payment transactions, requiring such transactions to be accounted for using the fair value method. Awards of shares for property or services are recorded at the more readily measurable of the fair value of the stock and the fair value of the service. The Company uses the Black-Scholes option-pricing model to determine the grant date fair value of stock-based awards under ASC 718. The fair value is charged to earnings depending on the terms and conditions of the award, and the nature of the relationship of the recipient of the award to the Company. The Company records the grant date fair value in line with the period over which it was earned. For employees and consultants, this is typically considered to be the vesting period of the award. The Company estimates the expected forfeitures and updates the valuation accordingly.

 

JAY PHARMA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

Note 3 – SUMMARY OF Significant Accounting Policies, continued

 

Net Loss per Share

 

Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and warrants (using the treasury stock method) and convertible notes. The computation of basic net loss per share for the nine months ended September 30, 2020 and 2019 excludes potentially dilutive securities. The computations of net loss per share for each period presented is the same for both basic and fully diluted.

 

Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive.

 

		For the nine months ended September 30, 2020				For the nine months ended September 30, 2019
Warrants to purchase shares of common stock			1,504,593				1,373,673
Convertible notes			631,579				500,000
Options to purchase shares of common stock			3,604,348				3,102,362
Total potentially dilutive securities			5,740,520				4,976,035

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

 

Fair Value

 

The carrying value of the Company’s financial instruments, including cash and accounts payable, approximate fair value because of the short-term nature of such financial instruments.

 

Subsequent Events

 

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Other than as described in these condensed financial statements, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.

 

 

 

JAY PHARMA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

NOTE 4 – NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE

 

As of September 30, 2020, the Company’s notes payable and convertible notes payable consisted of the following:

 

		Gross				Discount				Net
April 2019 Convertible Notes		$	300,000			$	-			$	300,000
July 2019 Note			33,925				-				33,925
December 2019 Note			44,000				-				44,000
February 2020 Note			50,000				-				50,000
Alpha Note			2,000,000				-				2,000,000
Total		$	2,427,926				-			$	2,427,925
Notes payable		$	2,077,926			$	-			$	2,077,925
Convertible notes payable		$	350,000			$	-			$	350,000

 

As of December 31, 2019, the Company’s notes payable and convertible notes payable consisted of the following:

 

		Gross				Discount				Net
February 2019 Note		$	66,000			$	-			$	66,000
March 2019 Note			150,000				-				150,000
April 2019 Convertible Notes			300,000				(6,079	)			293,921
July 2019 Note			191,640				(2,700	)			188,940
December 2019 Note			44,000				(2,525	)			41,475
Total		$	751,640				(11,304	)		$	740,336
Notes payable		$	451,640			$	(5,225	)		$	446,415
Convertible notes payable		$	300,000			$	(6,079	)		$	293,921

 

 

JAY PHARMA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

NOTE 4 – NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE, CONTINUED

 

For the nine months ended September 30, 2020 and 2019, the Company’s interest expense and amortization of debt discount consisted of the following:

 

 

		For the Nine Months Ended September 30,
		2020												2019
		Interest Expense				Amortization of Debt Discount				Total				Interest Expense				Amortization of Debt Discount				Total
February 2019 Note		$	-			$	3,803			$	3,803			$	-			$	5,998			$	5,998
April 2019 Convertible Notes			5,785				13,836				19,621				8,874				11,161				20,035
July 2019 Note			-				44,275				44,275				-				21,826				21,826
December 2019 Note			-				1,414				1,414				-				-				-
February 2020 Note			2,520				50,423				52,943
Alpha Note			93,980				172,107				266,087				-				-				-
Total		$	102,285			$	285,858			$	388,143			$	8,874			$	38,985			$	47,859

 

Notes Payable

 

On February 7, 2019, the Company received $60,000 in exchange for a promissory note with a director for $66,000, including an original issue discount of $6,000 (the “February 2019 Note”). The note had no stated interest rate and was due on May 8, 2019. The Company amortized the full $6,000 original issue discount in the statement of operations and comprehensive loss through December 31, 2019. On July 21, 2020, the Company converted the February 2019 Note into common stock, as further described in Note 6.

 

On February 1, 2019, the Company entered into a consulting agreement with its executive director. In connection with the consulting agreement, on March 5, 2019, the Company issued a note payable to its executive director for $150,000 (the “March 2019 Note”). The note had no interest and was due and payable on March 4, 2020. The consulting agreement expired on February 1, 2020. On July 21, 2020, the Company converted the March 2019 Note into common stock, as further described in Note 6.

 

On July 8, 2019, the Company entered into a note agreement (the “July 2019 Note”) with a limited liability company (the “Lender”). One of the principals of the Lender is the brother of a member of the Company’s Board of Directors. The Note’s face value was $157,714 and the original issue discount was $19,714 for total gross proceeds of $138,000, implying an interest rate of 12.5% per annum. The Company may, without premium or penalty, at any time and from time to time, prepay all or any portion of the Note. The maturity date of the Note was September 8, 2019. On September 20, 2019, the Company entered into an amendment to the July 2019 Note (the “Amendment”). The Amendment extends the maturity date for the Note until the earlier of (a) the completion of a bridge financing of greater than or equal to $1,500,000, or (b) November 7, 2019. On November 21, 2019, the Company entered into an amendment for the July 2019 Note that extends the maturity date for the Note until the earlier of (a) the completion of a bridge financing of greater than or equal to $1,500,000, or (b) December 9, 2019. In consideration for this amendment, the Company agreed to pay an aggregate extension fee of $33,926, which was added to the principal balance of the note. On December 9, 2019, the Company entered into an additional amendment for the July 2019 Note that extends the maturity date for the Note until the earlier of (a) the completion of a bridge financing of greater than or equal to $1,500,000, or (b) January 7, 2020. The Company also agreed to pay the previously outstanding extension fees of $33,926 on or before March 1, 2020.

 

 

JAY PHARMA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

NOTE 4 – NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE, CONTINUED

 

Notes Payable, continued

 

On January 8, 2020 the Company entered into an amendment to the July 2019 Note (the “January 8 Amendment”). The January 8 Amendment extends the maturity date for the July 2019 Note until the (a) the completion of a bridge financing of greater than or equal to $1,500,000, or (b) April 1, 2020. In consideration for the January 8 Amendment, the Company granted 55,000 shares of the Company’s common stock. The Company accounted for this amendment as a modification, where the shares paid as a fee were valued at $45,725 and recorded as a discount against the note payable and amortization over the term. On May 6, 2020, the Company entered into an amendment (the “May 2020 Amendment”) whereby both parties agreed to extend the maturity date of the July 2019 Note to September 30, 2020. The Company accounted for this amendment as a modification, as the present value of the future cash flows pre-modification and post-modification were not greater than or equal to 10%. On January 12, 2020, the Company repaid $157,714 of the July 2019 Note. The remaining balance of the July 2019 Note remains unpaid and is currently in default.

 

On December 12, 2019, the Company received $40,000 in exchange for a promissory note with a lender, including an original issue

discount of $4,000 (“December 2019 Note”). The December 2019 Note bears interest at a rate of ten percent (10%) on its face value per annum. In the case of an event of default, the interest rate shall increase to 24% per year. The December 2019 Note matured on January 31, 2020. The Company is currently in default on the December 2019 Note and is in discussions with the lender on amending the terms of the December 2019 Note.

 

On February 24, 2020, the Company received $50,000 in exchange for a promissory note with a lender (the “February 2020 Note”). The February 2020 Note bears interest at a rate of ten percent (10%) on its face value per annum. In the case of an event of default, the interest rate shall increase to 24% per year. The note matured on July 31, 2020, and the Company is currently in discussions with the lender on amending the terms of the February 2020 Note. The February 2020 Note is convertible into the Company’s common stock at any time at a conversion price of $0.38 per share. The Company also issued the holder of the February 2020 Note warrants to purchase 130,920 shares, as further described in Note 6. The Company recorded a beneficial conversion feature of $17,851 and valued the warrants issued (using relative fair value) at $32,149. The Company recorded the total value as a note discount and is amortizing the discount over the term of the February 2020 Note using the effective interest method. The Company valued the beneficial conversion feature and warrants using the following assumptions:

 

		Beneficial Conversion Feature				Warrants
Stock Price			CAD $ 1.10				CAD $ 1.10
Exercise Price			CAD $ 0.51				CAD $ 0.51
Dividend Yield			N/A				0.00	%
Expected Volatility			N/A				96.0	%
Weighted Average Risk-Free Interest Rate			N/A				2.31
Number of Shares			N/A				130,920
Value (USD)		$	17,851			$	32,149
Term (in years)			N/A				5.0

 

Jay Pharma entered into a Secured Promissory Note, dated January 10, 2020 (the “Note”), by and among Jay Pharma and certain lenders, pursuant to which, on January 10, 2020, Jay Pharma received aggregate gross proceeds of $1,500,000. Pursuant to the Note, the aggregate obligations of Jay Pharma under the Note are to automatically, immediately prior to the consummation of the Amalgamation, convert into shares of Jay Pharma common stock, subject to the terms and provisions of the Note. Pursuant to Note, upon conversion of the term loans made by the lenders subject to the terms of the Note, Jay Pharma is required to cause Ameri to issue each lender warrants to purchase Ameri Common Stock. Upon consummation of the Amalgamation, Jay Pharma has agreed to cause Ameri to register the resale of the warrant shares. The Note bears interest at 7% per annum and was due on March 31, 2020.

 

 

JAY PHARMA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

NOTE 4 – NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE, CONTINUED

 

Notes Payable, continued

 

On May 6, 2020, the Company entered into an amendment to the Note (the “First Note Amendment”). Pursuant to the First Note Amendment, Alpha waived previous defaults on the Note, and extended the maturity date of the Note to June 30, 2020. In exchange for the First Note Amendment, the Company and Alpha agreed that (i) at the Effective Time, Ameri Holdings, Inc. shall issue to the holder of a certain note issued by Jay Pharma, series B warrants (the “Series B Warrants”) to acquire 8,100,000 shares of common stock of the company resulting from the amalgamation, and (ii) providing for certain registration rights, pursuant to a Registration Statement on Form S-4, of the Series B Warrants and the shares issuable upon exercise of the Series B Warrants. The Series B Warrants shall be exercisable for a period of five years commencing on the ninetieth (90th) day after the later of the last day of the Lock-up Period and leak-out Period (accelerated or otherwise) set forth in the Lock-up agreement to be executed by the holders of Jay Pharma securities in connection with the Amalgamation, at a price of $0.01 per share, and shall also be exercisable on a cashless basis.

 

On June 23, 2020, the Company and Alpha entered into a second amendment to the Note (the “Second Note Amendment”). The Second Note Amendment revised the principal amount of the Note from $1,500,000 to $2,000,000, which was advanced as of the date of the Second Note Amendment. The rights and securities granted to Alpha under the terms of the Note were extended to the additional $500,000 advance contemplated by the Second Note Amendment pursuant to the terms of the Second Note Amendment.

 

On August 12, 2020, the Company and Alpha entered into the Third Note Amendment. The Third Note Amendment extended the maturity date to be the earlier of (a) January 1, 2021 and (b) an event of default that accelerates the maturity of the Note. The Third Note Amendment also revised the Note to account for the change in structure from an amalgamation to a stock-for-stock exchange offer. As a result, references to the Original Amalgamation Agreement and the amalgamation were revised to be references to the Tender Agreement and the Offer. The Third Note Amendment also revised the event of default regarding a failure of the amalgamation to be consummated by March 31, 2020 to be an event of default if the Offer was not consummated by January 1, 2021.

 

NOTE 5 – COMMITMENTS

 

On January 5, 2019, the Company entered into a business advisor services agreement. Pursuant to the terms of the agreement, the consultant will provide business advisory, marketing, and investor relations services in exchange for $15,000 per month, of which $7,500 is payable in cash and $7,500 is payable in the Company’s common shares. On January 6, 2020, the Company terminated its business advisory services agreement and agreed to settle the amounts due under the agreement by (a) paying $12,500 in cash upon the completion of a bridge financing; and (b) issuing 127,856 shares of the Company’s common stock, as described in Note 6.

 

On January 1, 2020, the Company entered into an agreement with Mr. David Stefansky to serve as President and Secretary of the Company to serve until the closing Amalgamation Agreement. The Company agreed to pay Mr. Stefansky $15,000 per month and future issuance of options to purchase 650,000 shares of common stock subject to the approval of the Board of Directors. On May 1, 2020, this agreement was terminated (see Note 8).

 

On January 8, 2020, the Company’s Interim Chief Financial Officer resigned, and the Company amended its consulting and advisory agreement to reflect that resignation. The agreement, as amended, remains in effect and may be terminated with 60 days’ notice. The consulting and advisory firm will continue to provide accounting and consulting services through 2020.

 

On May 1, 2020, the Company and Mr. David Stefansky terminated Mr. Stefansky’s agreement to serve as President and Secretary of the Company. Mr. Stefansky will continue to serve as an advisor to the Company until the consummation of the Amalgamation at a rate of $5,000 per month.

 

On May 1, 2020, the Company entered into an agreement with Mr. Henoch Cohn to serve as the Company’s President and Secretary until the consummation of the Amalgamation Agreement. The Company will pay Mr. Cohn $10,000 per month.

 

 

JAY PHARMA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

NOTE 6 - SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS

 

Authorized Capital

 

The holders of the Company’s common stock are entitled to one vote per share. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of legally available funds. Upon the liquidation, dissolution, or winding up of the Company, holders of common stock are entitled to share rateably in all assets of the Company that are legally available for distribution. As of September 30, 2020, an unlimited number of common shares were authorized for issuance.

 

Issuance of Common Stock for Accounts Payable

 

During the nine months ended September 30, 2020, the Company issued 388,483 shares to various vendors in connection with the payment of accounts payable of $173,482. The shares were valued at the book value of the accounts payable, as that value was more readily determinable.

 

Shares Issued in Exchange for Services

 

During the nine months ended September 30, 2019, the Company issued 172,297 shares to consultants in exchange for services. The Company valued these shares at $88,465.

 

September Private Placement

 

On September 25, 2020, the Company issued 166,667 shares of its common stock for gross proceeds of $250,000 ($1.50 per share) and net proceeds of $227,500.

 

Conversion of Related Party Advance

 

On July 21, 2020, the Company issued 1,081,818 shares of common stock in exchange for the February 2019 Note (face value of $66,000), the March 2019 Note (face value of $150,000) and related party advances in the amount of $22,000. Given that the holder of these notes and advances is a related party, this was treated as a capital transaction and no gain or loss was recognized.

 

 

JAY PHARMA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

NOTE 6 - SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS, CONTINUED

 

Stock Options

 

		Number of Shares				Weighted Average Exercise Price (USD)				Weighted Average Grant Date Fair Value (USD)				Weighted Average Remaining Contractual Term (years)				Aggregate Intrinsic Value (USD)
Outstanding – January 1, 2020			3,604,348			$	0.44			$	0.16
Outstanding – September 30, 2020			3,604,348			$	0.44			$	0.16				7.5			$	-
Exercisable at September 30, 2020			2,450,736			$	0.44			$	0.16				7.5			$	-

 

The Company’s stock based compensation expense related to stock options for the nine months ended September 30, 2020 and 2019 was $0 and $538,598, respectively. As of September 30, 2020, the Company had $166,734 in unamortized stock option expense. All unamortized stock option expense is related to performance obligations which have not yet been achieved.

 

Warrants

 

On February 24, 2020, the Company issued warrants to purchase 130,920 shares of common stock to the lender of the February 2020 Note. The warrants are exercisable at $0.38 USD ($0.50 CAD) per share, are fully vested at the date of issuance, and expire on February 24, 2025. The warrants were accounted for as a component of equity, as the instrument contains no features which would preclude such classification. As discussed in Note 4, the warrants were recorded as a discount on the note payable in the amount of $50,000 and amortized over the term of the note.

 

The following table summarizes information about shares issuable under warrants outstanding at September 30, 2020:

 

		Warrant shares outstanding				Weighted average exercise price (USD)				Weighted average remaining life				Intrinsic value
Outstanding at January 1, 2020			1,373,673			$	0.68
Issued			130,920			$	0.38
Outstanding at September 30, 2020			1,504,593			$	0.64				1.35			$	-
Exercisable at September 30, 2020			1,504,593			$	0.64				1.35			$	-

 

 

JAY PHARMA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

NOTE 7 – AMALGAMATION AGREEMENT

 

On January 10, 2020, the Company entered into an amalgamation agreement (the “Amalgamation Agreement”) with Jay Pharma Merger Sub, Inc. (“Merger Sub”), a wholly owned subsidiary of AmeriHoldings, Inc. (“Ameri”), and Jay Pharma Exchange Co, Inc. (“ExchangeCo”), a wholly owned subsidiary of Ameri. The Amalgamation Agreement provides that the Company will merge into Merger Sub and be amalgamated and operate as one company. The shareholders of the Company will own approximately 84% of the post-closing company’s issued and outstanding shares of common stock.

 

The Amalgamation Agreement will automatically be terminated if the amalgamation is not completed within 180 days.

 

Simultaneously with the execution of the Amalgamation Agreement, Jay Pharma entered into a Secured Promissory Note, dated January 10, 2020 (the “Note”), by and among Jay Pharma and certain lenders, pursuant to which, on January 10, 2020, Jay Pharma received aggregate gross proceeds of $1,500,000. Pursuant to the Note, the aggregate obligations of Jay Pharma under the Note are to automatically, immediately prior to the consummation of the Amalgamation, convert into shares of Jay Pharma common stock, subject to the terms and provisions of the Note. Pursuant to Note, upon conversion of the term loans made by the lenders subject to the terms of the Note, Jay Pharma is required to cause Ameri to issue each lender warrants to purchase Ameri Common Stock. Upon consummation of the Amalgamation, Jay Pharma has agreed to cause Ameri to register the resale of the warrant shares. The Note bears interest at 7% per annum and was due on March 31, 2020.

 

Prior to the execution and delivery of the Amalgamation Agreement, certain investors have entered into agreements with Jay Pharma pursuant to which such investors have agreed, subject to the terms and conditions of such agreements, to purchase, immediately prior to the consummation of the Amalgamation, shares of Jay Pharma’s common stock (or common stock equivalents) and warrants to purchase Jay Pharma’s common stock for an aggregate purchase price of $3.5 million. The consummation of the transactions contemplated by such agreements is conditioned upon the satisfaction or waiver of the conditions set forth in the Amalgamation Agreement. After consummation of the Amalgamation, Jay Pharma has agreed to cause Ameri to register the resale of the Ameri Common Stock issued and issuable pursuant to the warrants issued to the investors in the Jay Pre-Closing Financing.

 

Contemporaneously with the Amalgamation Agreement, the Company entered into sublicense agreements with Tikkun Pharma, Inc. (“Tikkun Pharma”). The sublicense agreements with Tikkun Pharma allows the Company to utilize (a) Tikkun Pharma’s sublicense with TOP for certain autoimmune applications, and (b) acquire and use Tikkun Pharma’s internally developing intellectual property, branding, and formulations in regards to Skincare.

 

In connection with the transaction with Tikkun Pharma, the Company advanced Tikkun Pharma $46,797 in order for them to pay for certain legal costs for the transaction. The advance will be repaid upon consummation of the transaction. This advance is included in Related Party Receivable on the Company’s unaudited condensed balance sheet.

 

On April 20, 2020, the Company received a notice from the lenders of the Note, stating that the Company was in default for not closing the amalgamation with Ameri by March 31, 2020, and that the entire Note was due in full. On May 6 and May 26, 2020, the Company and Alpha amended the Note and the Amalgamation Agreement, as described in below.

 

On May 6, 2020, the Company entered into an Amalgamation Amendment Agreement (the “Amendment”) to amend the Amalgamation Agreement described in Note 8. Pursuant to the Amendment, the parties agreed that (i) at the Effective Time, Ameri Holdings, Inc. shall issue to the holder of a certain note issued by Jay Pharma, series B warrants (the “Series B Warrants”) to acquire 8,100,000 shares of common stock of the company resulting from the amalgamation, and (ii) providing for certain registration rights, pursuant to a Registration Statement on Form S-4, of the Series B Warrants and the shares issuable upon exercise of the Series B Warrants. The Series B Warrants shall be exercisable for a period of five years commencing on the ninetieth (90th) day after the later of the last day of the Lock-up Period and leak-out Period (accelerated or otherwise) set forth in the Lock-up agreement to be executed by the holders of Jay Pharma securities in connection with the Amalgamation, at a price of $0.01 per share, and shall also be exercisable on a cashless basis.

 

On May 26, 2020, the Company entered into the second amendment to the Amalgamation Agreement (the “Second Amendment”) to amend the Amalgamation Agreement described in Note 7. The purpose of this amendment was to clarify that the Series B Warrants were to acquire 8,100,000 shares of common stock Jay Pharma (to be approximately 3,675,035 shares of common stock of the company resulting from the Amalgamation), as well as to clarify the exchange ratio already agreed upon.

 

 

JAY PHARMA, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

NOTE 7 – AMALGAMATION AGREEMENT, CONTINUED

 

On June 23, 2020, the Company and Alpha entered into a second amendment to the Alpha Note (the “Second Note Amendment”). The Second Note Amendment revised the principal amount of the Alpha Note from $1,500,000 to $2,000,000, which was advanced as of the date of the Second Note Amendment. The rights and securities granted to Alpha under the terms of the Alpha Note were extended to the additional $500,000 advance contemplated by the Second Note Amendment pursuant to the terms of the Second Note Amendment.

 

On August 12, 2020, Ameri, Jay Pharma, and certain other signatories thereto entered into a tender agreement (as may be amended from time to time, the “Tender Agreement”), which provides that, among other things, Jay Pharma will become a wholly-owned subsidiary of Ameri, on the terms and conditions set forth in the Tender Agreement. The Tender Agreement terminates and replaces in its entirety the original Amalgamation Agreement, dated as of January 10, 2020, previously entered into by and among the parties thereto, as described further in Note 7. If the Offer is completed, upon consummation, (i) holders of outstanding common shares of Jay Pharma other than Alpha will be entitled to receive the number of shares of Resulting Issuer common stock issuable in accordance with the Exchange Ratio, and (ii) Alpha will be entitled to receive shares of Series B Preferred Stock, which are convertible into shares of Resulting Issuer common stock subject to a 9.99% beneficial ownership blocker, pursuant to the Alpha Exchange Agreement. Each outstanding Jay Pharma option, whether vested or unvested, and warrant that has not previously been exercised will exchanged for Resulting Issuer stock options and Resulting Issuer warrants, in each case convertible into the number of shares of Resulting Issuer common stock equal to the Exchange Ratio. Each outstanding Jay Pharma option, whether vested or unvested, and warrant that has not previously been exercised will be exchanged for Resulting Issuer stock options and Resulting Issuer warrants, in each case, convertible into the number of shares of Resulting Issuer common stock equal to the Exchange Ratio.

 

NOTE 8 - SUBSEQUENT EVENTS

 

Private placement

 

On December 8, 2020, the Company completed a private placement whereby Alpha invested $300,000 in exchange for 1,000,000 shares of Jay Pharma common stock and 500,000 warrants to purchase Jay Pharma common stock at a price of $0.30.

 

 

 

Exhibit 99.2

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

Introduction

 

The unaudited pro forma condensed combined financial statements as of and for the nine months ended September 30, 2020, and for the year ended December 31, 2019, give effect to the proposed Offer, and have been prepared under the acquisition method of accounting with Jay Pharma treated as the accounting acquirer. Jay Pharma is anticipated to be the accounting acquirer based upon the terms of the Offer and other factors, such as the number of shares to be issued to Jay Pharma shareholders under the Tender Agreement, relative voting rights and the composition of the Resulting Issuer’s board and senior management. The following selected unaudited pro forma condensed financial data also give effect to the proposed spin-off of Ameri into a private entity (the “Spin-Off”).

 

You should read the unaudited pro forma condensed combined financial statements presented below in conjunction with:

 

● The accompanying notes to the unaudited pro forma condensed combined financial statements;

● Ameri’s unaudited condensed consolidated financial statements for the nine months ended September 30, 2020 and the notes relating thereto as filed with the Securities and Exchange Commission (“SEC”) on November 16, 2020

● Ameri’s consolidated financial statements for the year ended December 31, 2019 and the notes relating thereto as filed with SEC on August 12, 2020

● Jay Pharma’s unaudited condensed financial statements for the nine months ended September 30, 2020 and the notes relating thereto, filed as Exhibit 99.2 of this Current Report; and

● Jay Pharma’s financial statements for the year ended December 31, 2019 and the notes relating thereto included in the Form S-4

 

Ameri is providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the transactions.

 

The unaudited pro forma condensed combined balance sheet as of September 30, 2020 combines the unaudited condensed consolidated balance sheet of Ameri as of September 30, 2020 with the unaudited condensed balance sheet of Jay Pharma as of September 30, 2020, giving effect to the Offer and Spin-Off as if they had been consummated as of September 30, 2020.

 

The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 combines the unaudited condensed consolidated statement of operations of Ameri for the nine months ended September 30, 2020 with the unaudited condensed statement of operations of Jay Pharma for the nine months ended September 30, 2020, giving effect to the Offer and the Spin-Off as if they had been consummated on January 1, 2019.

 

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 combines the audited consolidated statement of operations of Ameri for the year ended December 31, 2019 with the audited statement of operations of Jay Pharma for the year ended December 31, 2019, giving effect to the Offer and Spin-Off as if they had occurred on January 1, 2019.

 

The historical financial information has been adjusted to give effect to the expected events that are related and/or directly attributable to the transactions, are factually supportable and are expected to have a continuing impact on the combined results. The adjustments presented in the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the Resulting Issuer upon consummation of the transactions.

 

The historical financial statements of Ameri and Jay Pharma have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The unaudited pro forma condensed combined financial statements included herein are prepared in accordance with GAAP. The application of the acquisition method of accounting is dependent upon certain valuations and other studies that have yet to be completed or have not progressed to a stage where there is sufficient information for a definitive measurement. Accordingly, the pro forma adjustments are preliminary, subject to further revision as additional information becomes available and additional analyses are performed, and have been made solely for the purpose of providing unaudited pro forma condensed combined financial statements. Upon consummation of the Offer, final valuations and studies will be performed. Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and the Resulting Issuer’s future financial position and results of operations. Fair values determined as of the assumed acquisition dates are based on the most recently available information. To the extent there are significant changes to Ameri’s or Jay Pharma’s business, or as new information becomes available, the assumptions and estimates herein could change significantly.

 

 

The Offer will be accounted for as a reverse acquisition in accordance with GAAP. Under this method of accounting, Ameri will be treated as the “acquired” company for financial reporting purposes. This determination was primarily based on Jay Pharma comprising the ongoing operations of the Resulting Issuer, Jay Pharma senior management comprising the senior management of the Resulting Issuer, and that the former owners and management of Jay Pharma will have control of the board of directors after the Offer. In accordance with guidance applicable to these circumstances, the Offer will be considered to be a capital transaction in substance. Accordingly, for accounting purposes, the Offer will be treated as the equivalent of Jay Pharma issuing shares for the net assets of Ameri, accompanied by a recapitalization. The net assets of Ameri will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Offer will be those of Jay Pharma.

 

The unaudited pro forma condensed combined statements of operations do not include (i) the impacts of any revenue, cost or other operating synergies that may result from the Offer or any related restructuring costs; (ii) certain amounts resulting from the Offer that were determined to be of a non-recurring nature; and (iii) the impact of the proposed reverse stock split described elsewhere in this joint proxy and consent solicitation statement/prospectus.

 

The unaudited pro forma condensed combined financial statements presented are based on the assumptions and adjustments described in the accompanying notes. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and do not purport to represent what the financial position or results of operations would have been if the proposed Offer or the Spin-Off had been completed as of the dates indicated in the unaudited pro forma condensed combined financial statements or that will be realized upon the consummation of the proposed transactions.

 

The Offer and the Spin-Off have not been consummated as of the date of the preparation of these pro forma financial statements, and there can be no assurances that the Offer or the Spin-Off will be consummated.

 

 

AMERI HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2020

 

										Pro forma merger adjustments												Pro forma as adjusted
		Historical AMERI Holdings				Historical Jay Pharma				Debit				Note		Credit				Note
		Note 1				Note 2
ASSETS
Current assets:
Cash and cash equivalents		$	2,840,097			$	340,898			$	2,650,000			7		$	2,190,097			6		$	2,865,898
											225,000			11			900,000			8
																	100,000			10
Accounts receivable			7,563,451				-										7,563,451			6			-
Related party receivable			-				67,085																67,085
Prepaid expenses and other current assets			901,451				64,182										901,451			6			64,182
Total current assets			11,304,999				472,165				2,875,000						11,654,999						2,997,165
Property, plant and equipment			91,289				-										91,289			6			-
Intangible assets, net			1,950,766				-				3,692,809			9			1,950,766			6			3,692,809
Goodwill			13,729,770				-										13,729,770			6			-
Operating lease right of use asset, net			874,606														874,606			6			-
Deferred income tax assets, net			42,181				-										42,181			6			-
Total assets		$	27,993,611			$	472,165			$	6,567,809					$	28,343,611					$	6,689,974
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit		$	3,097,009			$	-			$	3,097,009			6								$	-
Accounts payable and accrued liabilities			6,490,680				1,633,398				27,255			3									811,832
											2,532			4
											6,490,680			6
											85,189			7
											706,590			8
Operating lease liability			886,935				-				886,935			6									-
Advance from related party			-				-																-
Notes payable			1,879,500				2,077,925				44,000			4									33,925
											1,879,500			6
											2,000,000			7
Convertible notes payable			-				350,000				300,000			3									-
											50,000			4
Debentures			1,818,321				-				1,818,321			6									-
Dividend payable - Preferred stock			645,425				-				645,425			6									-
Total liabilities			14,817,870				4,061,323				18,033,436						-						845,757
Stockholders’ equity (deficit):
Preferred Stock			4,249				-				4,249			6			515,791			7			515,791
Common Stock			57,370				-				-						307,286			5			454,916
																	90,260			9
Additional paid-in capital			58,218,620				3,829,609				307,286			5			327,255			3			12,585,687
											57,625,990			6			96,532			4
																	4,219,398			7
																	3,602,549			9
																	225,000			11
Accumulated deficit			(45,156,263	)			(7,377,068	)			193,410			8			45,156,263			6			(7,670,478	)
											100,000			10
Accumulated other comprehensive income (loss)			51,765				(41,699	)			51,765			6									(41,699	)
Total stockholders’ equity (deficit)			13,175,741				(3,589,158	)			58,282,700						54,540,334						5,844,217
Total liabilities and stockholders’ equity (deficit)		$	27,993,611			$	472,165			$	76,316,136					$	54,540,334					$	6,689,974

 

See footnotes to unaudited pro forma condensed combined financial statements

 

 

AMERI HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020

 

		AMERI Holdings				Jay Pharma				Pro forma merger adjustments						Pro forma as adjusted
		Historical for the nine months ended September 30, 2020				Historical for the nine months ended September 30, 2020				Adjustment				Note
			Note A				Note B
Revenue			26,340,499				-				(26,340,499	)		C			-
Cost of revenue			20,753,306				-				(20,753,306	)		C			-
Gross profit			5,587,193				-				(5,587,193	)					-
Operating expenses:
Selling, General & Administrative		$	7,845,160			$	2,094,044				(7,845,160	)		C			2,206,544
											112,500			D
Depreciation and amortization			1,649,819				-				(1,649,819	)		C			692,402
											692,402			F
Loss from operations			(3,907,786	)			(2,094,044	)			3,102,885						(2,898,946	)
Other expense:
Interest expense			399,813				388,143				(399,813	)		C			-
											(388,143	)		E
Total other expense			399,813				(388,143	)			(787,956	)					-
Net income (loss) before income taxes			(4,307,599	)			(2,482,187	)			2,314,929						(2,898,946	)
Income tax benefit			11,520				-				(11,520	)		C			-
Net income (loss) after income taxes			(4,319,119	)			(2,482,187	)			2,303,409						(2,898,946	)
Dividend on preferred stock			325,127				-				(325,127	)		C			-
Net income (loss) attributable to common stock holders			(4,644,246	)			(2,482,187	)			1,978,282						(2,898,946	)
Foreign currency translation adjustment			(8,247	)			(30,077	)			8,247			C			(30,077	)
Comprehensive Loss		$	(4,652,493	)		$	(2,512,264	)		$	1,986,529					$	(2,929,023	)
Net loss and net loss attributable to common stockholders		$	(4,644,246	)		$	(2,482,187	)		$	1,978,282					$	(2,898,946	)
Net loss per share attributable to common stockholders - basic and diluted		$	(1.11	)		$	(0.10	)								$	(0.06	)
Weighted Average Common Shares Outstanding used in net loss per share attributable to common stock holders - basic and diluted			4,172,526				25,916,419				15,224,211			G			45,313,156

 

See footnotes to unaudited pro forma condensed combined financial statements

 

 

AMERI HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2019

 

		AMERI Holdings				Jay Pharma				Pro forma merger adjustments						Pro forma as adjusted
		Historical for the year ended December 31, 2019				Historical for the year ended December 31, 2019				Adjustment				Note
			Note AA				Note BB
Revenue			39,914,675				-				(39,914,675	)		CC			-
Cost of revenue			31,763,955				-				(31,763,955	)		CC			-
Gross profit			8,150,720				-				(8,150,720	)					-
Operating expenses:
Selling, General & Administrative			12,210,317				2,296,534				(12,210,317	)		CC			2,546,534
											250,000			DD
Depreciation and amortization			2,265,297				-				(2,265,297	)		CC			923,202
											923,202			FF
Loss from operations			(6,324,894	)			(2,296,534	)			5,151,692						(3,469,736	)
Other expense:
Interest expense			694,926				81,823				(694,926	)		CC			-
											(81,823	)		EE
Loss on extinguishment			-				32,316				-			EE			32,316
Changes in fair value of warranty liability			(1,796,174	)			-				1,796,174			CC			-
Other income (expense), net			(4,540	)			-				4,540			CC			-
Total other expense			(1,105,788	)			(114,139	)			1,023,965						32,316
Net income (loss) before income taxes			(5,219,106	)			(2,410,673	)			6,175,657						(3,437,420	)
Income tax benefit			388,657				-				(388,657	)		CC			-
Net income (loss) after income taxes			(5,607,763	)			(2,410,673	)			5,787,000						(3,437,420	)
Dividend on preferred stock			426,003				-				(426,003	)		CC			-
Net income (loss) attributable to common stock holders			(6,033,766	)			(2,410,673	)			5,360,997						(3,437,420	)
Foreign currency translation adjustment			(26,985	)			(6,667	)			26,985			CC			(6,667	)
Comprehensive Loss		$	(6,060,751	)		$	(2,417,340	)		$	5,387,982					$	(3,444,087	)
Net loss and net loss attributable to common stockholders		$	(6,033,766	)		$	(2,410,673	)		$	5,360,997					$	(3,437,420	)
Net loss per share attributable to common stockholders - basic and diluted		$	(2.83	)		$	(0.10	)								$	(0.08	)
Weighted Average Common Shares Outstanding used in net loss per share attributable to common stock holders - basic and diluted			2,128,806				25,085,980				15,331,143			GG			42,545,929

 

See footnotes to unaudited pro forma condensed combined financial statements

 

 

I.       Business Combination

 

On August 12, 2020, AMERI Holdings, Inc. (“Ameri”), Jay Pharma Inc. (“Jay Pharma”) and certain other signatories thereto entered into a tender agreement (as may be amended from time to time, the “Tender Agreement”), which provides that, among other things, Jay Pharma will become a wholly-owned subsidiary of Ameri, on the terms and conditions set forth in the Tender Agreement. The Tender Agreement terminates and replaces in its entirety the Original Amalgamation Agreement, dated as of January 10, 2020, previously entered into by and among the parties thereto (the “Amalgamation Agreement”). We refer to Ameri after giving effect to the Offer and the completion of the transactions contemplated by the Tender Agreement, as the “Resulting Issuer.”

 

If the Offer is completed, (i) holders of outstanding common shares of Jay Pharma (referred to herein as the Jay Pharma equity holders) other than Alpha Capital Anstalt (“Alpha”) will be entitled to receive the number of shares of Resulting Issuer common stock issuable in accordance with the assumed exchange ratio of 0.8712 (which assumes that the Offer will be completed on December 31, 2020 and is subject to change depending on the number of shares outstanding for Jay Pharma and Ameri as of the completion of the Offer), as calculated in accordance with the Tender Agreement (the “Exchange Ratio”), and (ii) Alpha, as a significant investor, will be entitled to receive shares of Series B non-voting preferred stock, par value $0.01 per share, which are convertible into shares of Resulting Issuer common stock subject to a 9.99% beneficial ownership blocker (the “Series B Preferred Stock”), pursuant to the terms of an exchange agreement to be entered into by and between Ameri and Alpha (the “Alpha Exchange Agreement”). Each outstanding Jay Pharma option, whether vested or unvested, and warrant that has not previously been exercised will exchanged for Resulting Issuer stock options and Resulting Issuer warrants, in each case convertible into the number of shares of Resulting Issuer common stock equal to the Exchange Ratio.

 

Each share of Series B Preferred Stock is non-voting and will be convertible into one share of Resulting Issuer common stock (subject to adjustment and prior to giving effect to the proposed reverse stock split discussed below) at any time at the option of the holder, provided that each holder would be prohibited from converting Series B Preferred Stock into shares of Resulting Issuer common stock if, as a result of such conversion, any such holder, together with its affiliates, would own more than 9.99% of the total number of shares of Resulting Issuer common stock then issued and outstanding. This limitation may be waived with respect to a holder upon such holder’s provision of not less than 61 days’ prior written notice to the Resulting Issuer. In the event of liquidation, dissolution, or winding up, each holder of Series B Preferred Stock could elect to receive either (i) in preference to any payments made to the holders of Resulting Issuer common stock and any other junior securities, a payment for each share of Series B Preferred Stock then held equal $0.01, plus an additional amount equal to any dividends declared but unpaid on such shares, and any other fees or liquidated damages then due and owing thereon or (ii) the amount of cash, securities or other property to which such holder would be entitled to receive with respect to each share of Series B Preferred Stock if such share of Series B Preferred Stock had been converted to common stock immediately prior to such liquidation, dissolution, or winding up (without giving effect to any conversion limitations). Shares of Series B Preferred Stock will not be entitled to receive any dividends, unless and until specifically declared by the board of directors. However, holders of Series B Preferred Stock are entitled to receive dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-common-stock basis) to and in the same form as dividends actually paid on shares of the Resulting Issuer common stock when such dividends are specifically declared by the board of directors. The Resulting Issuer will not be obligated to redeem or repurchase any shares of Series B Preferred Stock. Shares of Series B Preferred Stock will not otherwise be entitled to any redemption rights, or mandatory sinking fund or analogous fund provisions.

 

Upon completion of the Offer and the transactions contemplated in the Tender Agreement, (i) Jay Pharma equity holders, including Alpha, who shall receive Series B Preferred Stock in the Offer, will own approximately 82.3% of the outstanding equity of the Resulting Issuer, assuming conversion of the Series B Preferred Stock, (ii) the Ameri equity holders at the time of the completion of the Offer, assuming the Offer is completed as of December 31, 2020, will own approximately 14.5% of the outstanding equity of the Resulting Issuer, assuming conversion of certain outstanding warrants of Ameri, and (iii) the financial advisor to Jay Pharma and Ameri will own approximately 3.2% of the outstanding equity of the Resulting Issuer. Immediately following the Offer, subject to the approval of the current Ameri stockholders, it is anticipated that the Resulting Issuer will effect a reverse stock split at a ratio between 1-for-2 and 1-for-25 with respect to its issued and outstanding common stock. The reverse stock split is intended to increase the Resulting Issuer’s stock price to at least $6.00 per share, which such reverse stock split is one of the conditions to the closing of the Offer.

 

As a significant investor in Jay Pharma, Alpha will receive Series B Preferred Stock in the Offer instead of common stock of the Resulting Issuer, as well as Series B Warrants with a nominal exercise price, which are being issued to Alpha to account for an adjustment in pricing of the transactions in light of global economic conditions. Alpha’s total potential ownership interest in the Resulting Issuer is 33.7% without giving effect to the beneficial ownership limitations in its Resulting Issuer securities. Because the Series B Preferred Stock is convertible into Resulting Issuer common stock at any time for no consideration, such shares have been included in basic earnings per share. The Series B Warrants will be accounted for as a cost of equity as part of the capital issuance. The estimated fair value implied for shares of the Resulting Issuer based on the series of transactions with Alpha is $0.41 per share, which is equal to the $5,300,000 investment made by Alpha divided by 12,802,528, or the number of Resulting Issuer shares (or securities convertible into Resulting Issuer common stock) that Alpha will receive in the transaction, based on the assumed per share price of $0.86, which was derived in accordance with the terms of the Note and the Alpha Investment (as defined below).

 

 

Simultaneously with the execution of the Original Amalgamation Agreement, Jay Pharma entered into the Secured Promissory Note, dated January 10, 2020 (the “Original Note”), by and among Jay Pharma and Alpha Capital Anstalt (“Alpha”), pursuant to which, on January 10, 2020, Jay Pharma received a $1,500,000 loan. The Note was amended by the Second Note Amendment to reflect an additional investment of $500,000, resulting in a total principal amount of $2,000,000. The Original Note was further amended on August 12, 2020, to account for the termination of the Original Amalgamation Agreement and the change in the structure of the transaction from an amalgamation to a stock-for-stock exchange offer (as amended, the “Note”). Upon the satisfaction of the closing conditions to the Offer, the Note will be converted into the right to receive 2,451,250 common shares of Jay Pharma and warrants to purchase 2,312,649 common shares of Jay Pharma at an exercise price of $1.03 per share immediately prior to the Offer, assuming that the Offer is consummated on December 31, 2020. In connection with the Offer, these common shares and warrants of Jay Pharma to be acquired by Alpha upon conversion of the Note shall be converted into the right to receive (i) 2,135,615 shares of Series B Preferred Stock that are convertible into up to 2,135,615 shares of common stock of the Resulting Issuer, prior to giving effect to the proposed reverse stock split discussed above, and (ii) warrants to purchase up to 2,014,861 shares of common stock of the Resulting Issuer at an exercise price of $1.18 per share, prior to giving effect to the proposed reverse stock split discussed above.

 

Alpha will also acquire 3,468,973 common shares of Jay Pharma and warrants to purchase 3,468,973 common shares of Jay Pharma at an exercise price of $1.03 per share, immediately prior to the Offer, in connection with the $3 million private placement completed prior to the filing of this Registration Statement on Form S-4 (the “Alpha Investment”). While the Alpha Investment shares have not been issued yet, Alpha is bound to purchase from Jay Pharma, and Jay Pharma is bound to sell to Alpha, the Jay Pharma common shares and warrants subject to the satisfaction of the conditions in the securities purchase agreement for the Alpha Investment. Such common shares and warrants of Jay Pharma acquired by Alpha in the Alpha Investment will then immediately be converted into, as applicable, the right to receive (i) 3,022,292 shares of Series B Preferred Stock of the Resulting Issuer that are convertible into up to 3,022,292 shares of common stock of the Resulting Issuer, prior to giving effect to the proposed reverse stock split discussed above, and (ii) warrants to purchase up to 3,022,292 shares of common stock of the Resulting Issuer at an exercise price of $1.18 per share, prior to giving effect to the proposed reverse stock split discussed above.

 

Additionally, at the effective time of the Offer, the Resulting Issuer will issue five-year warrants (the “Series B Warrants”) to purchase 7,057,005 shares of common stock of the Resulting Issuer at an exercise price of $0.01 to Alpha, prior to giving effect to the proposed reverse stock split discussed above. The number of shares of common stock of the Resulting Issuer issuable upon the exercise of the Series B Warrants is equal to the product of (i) 8,100,000 and (ii) the Exchange Ratio (which is currently assumed to be 0.8712).

 

After giving effect to the conversion of its Series B Preferred Stock, the warrants to be issued to Alpha in connection with the Alpha Investment and the Alpha Bridge Loan and the Series B Warrants, Alpha’s total potential ownership interest in the Resulting Issuer will be 19,651,170 common shares, or 33.7%. However, under the terms of each of such securities, Alpha may not convert such security to the extent such conversion would cause Alpha, together with its affiliates, to beneficially own a number of shares of common stock which would exceed 9.99% of the Resulting Issuer’s shares of common stock then issued and outstanding following such exercise.

 

Intellectual Property Acquisition

 

In connection with the Offer, Jay Pharma entered into a series of assignment and assumption agreements with affiliates of a third party, Tikkun Pharma, Inc. (“Tikkun”), pursuant to which, on October 2, 2020, Tikkun assigned to Jay Pharma all of Tikkun’s (i) rights to certain skin care treatment assets and (ii) intellectual property rights to certain formulations for the development of therapeutic candidates for the prevention, management and treatment of graft versus host disease (GVHD) in exchange for an aggregate of 10,360,007 common shares of Jay Pharma.

 

Because Alpha required additional shares of the Resulting Issuer, at no or a nominal cost, for Alpha to consummate the Alpha Bridge Loan and the Alpha Investment at the planned valuation, Alpha entered into an agreement with Tikkun pursuant to which, immediately following such assignment, Tikkun sold 7,774,463 of these common shares of Jay Pharma to Alpha for the nominal aggregate purchase price of $10.00 (the “Alpha Nominal Shares”), leaving Tikkun with 2,585,544 common shares of Jay Pharma (the “Tikkun Shares”). In connection with the Offer, the Tikkun Shares will be exchanged for 2,252,617 shares of common stock of the Resulting Issuer, prior to giving effect to the proposed reverse stock split discussed above, and the Alpha Nominal Shares will be exchanged for 6,773,386 shares of Series B Preferred Stock of the Resulting Issuer that are convertible into up to 6,773,386 shares of common stock of the Resulting Issuer, prior to giving effect to the proposed reverse stock split discussed above.

 

 

Ameri Transaction

 

On January 10, 2020, Ameri and Ameri100 Inc. (“Private Ameri”) entered into a Stock Purchase Agreement pursuant to which, among other things, Ameri will convey to Private Ameri one hundred percent (100%) of the outstanding equity interests of Ameri100 Holdco, Inc. (“Holdco”) (the “Spin-Off”). Prior to the Spin-Off Closing, Ameri will consummate a reorganization (the “Reorganization”) pursuant to which it will contribute, transfer and convey to Holdco all of the issued and outstanding equity interests of the existing operating subsidiaries of Ameri, constituting the entire business and operations of Ameri and its subsidiaries (the “Transferred Legacy Business”). At the Spin-Off Closing, in exchange for the Purchased Shares, all of the issued and outstanding shares of Series A preferred stock of the Company shall be redeemed for an equal number of shares of Series A preferred stock of Private Ameri. Additionally, it is anticipated that Ameri will complete a financing in an amount up to $3,000,000 prior to the completion of the Offer in order to repay certain currently outstanding indebtedness.

 

Accounting for the Offer

 

The Offer will be accounted for as a reverse acquisition in accordance with U.S. generally accepted accounting principles (“GAAP”). Under this method of accounting, Ameri will be treated as the “acquired” company for financial reporting purposes. This determination was primarily based on Jay Pharma comprising the ongoing operations of the Resulting Issuer, Jay Pharma senior management comprising the senior management of the Resulting Issuer, and that the former owners and management of Jay Pharma will have control of the board of directors after the Offer. In accordance with guidance applicable to these circumstances, the Offer will be considered to be a capital transaction in substance. Accordingly, for accounting purposes, the Offer will be treated as the equivalent of Jay Pharma issuing shares for the net assets of Ameri, accompanied by a recapitalization. The net assets of Ameri will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Offer will be those of Jay Pharma.

 

 

AMERI HOLDINGS, INC.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

II.       Basis of Pro Forma Presentation

 

The pro forma financial statements were derived from historical financial statements of Ameri and the historical consolidated financial statements of Jay Pharma.

 

The historical financial statements have been adjusted in the pro forma financial statements to give effect to pro forma events that are (1) directly attributable to the Offer, (2) factually supportable, and (3) with respect to the pro forma statement of operations, expected to have a continuing impact on the combined results. The pro forma financial statements reflect the impact of:

 

●

The Spin-Off;

 

●

The Offer, whereby the Resulting Issuer will issue 28,307,610 shares of Resulting Issuer common stock in exchange for 32,491,352 common shares of Jay Pharma (excluding the issuance of the Resulting Issuer securities issued in exchange for the Tikkun Shares, the Alpha Investment and the Alpha Nominal Shares);

 

●

The conversion of the Note and the securities issued upon closing of the Alpha Investment;

 

●

The acquisition of intellectual property by Jay Pharma from Tikkun in exchange for 10,360,007 common shares of Jay Pharma, of which the 2,585,544 Tikkun Shares will be exchanged for 2,252,617 shares of common stock of Resulting Issuer and the 7,774,463 Alpha Nominal Shares assigned to Alpha will be exchanged for 6,773,386 shares of the Series B Preferred Stock convertible into 6,773,386 shares of common stock of Resulting Issuer; and

 

●

Other adjustments described in the notes to this section.

 

The following matters have not been reflected in the pro forma financial statements as they do not meet the aforementioned criteria:

 

● Cost savings (or associated costs to achieve such savings) from operating efficiencies, synergies or other restructuring that could result from the Offer. The timing and effect of actions associated with integration are currently uncertain.

 

● The Resulting Issuer consummating a reverse stock split

 

The Offer is being accounted for as a reverse business combination and recapitalization of Jay Pharma, since the former owners of Jay Pharma will control the post-Offer company. Jay Pharma will be deemed the acquirer and Ameri will be deemed the acquired company for accounting purposes.

 

The Exchange Ratio of 0.8712 assumes that the proposal to approve, for purposes of Nasdaq Rules 5635, the issuance of shares of common stock upon the exchange of certain convertible debentures held by Alpha in one or more private placement transactions, described further in the Form S-4 in the section titled “PROPOSALS SUBMITTED TO AMERI STOCKHOLDERS – AMERI PROPOSAL 9 – APPROVAL OF THE CONVERSION PROPOSAL” on page 124 of the proxy statement/prospectus (the “Conversion Proposal”), is approved and the conversion price of the outstanding 1% debentures is reduced from $1.75 to $1.00 per share.

 

 

AMERI HOLDINGS, INC.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

III.	Pro Forma Adjustments

 

The following pro forma adjustments give effect to the Offer:

 

Pro Forma Condensed Combined Balance Sheet – as of September 30, 2020

 

Note 1 Derived from the Ameri financial statements as of September 30, 2020, as filed with the Securities and Exchange Commission (the “SEC”) on November 16, 2020.

 

Note 2 Derived from the Jay Pharma consolidated financial statements as of September 30, 2020, included as Exhibit 99.2 in this Current Report.

 

Pro forma adjustments:

 

Note 3 To record the conversion of Jay Pharma’s outstanding convertible notes with a face value of $300,000 and the related accrued interest of $22,671 into 856,698 shares of Jay Pharma common stock.

 

		Debit				Credit
Convertible notes payable		$	300,000
Accounts payable and accrued expenses			27,255
Additional paid-in capital							327,255

 

 

Note 4 To record the conversion of Jay Pharma’s notes payable issued in December of 2019 and February of 2020 outstanding with an aggregate principal amount of $94,000 into 360,337 shares of Jay Pharma common stock.

 

		Debit				Credit
Notes payable		$	44,000
Convertible notes payable			50,000
Accounts payable and accrued expenses			2,532
Additional paid-in-capital							96,532

 

Note 5 To record the issuance of 26,771,877 shares of Resulting Issuer common stock, par value $0.01, in exchange for 30,728,644 Jay Pharma common shares, at the exchange rate of 0.8712.

 

		Debit				Credit
Additional paid-in capital		$	307,286
Common stock						$	307,286

 

 

 

AMERI HOLDINGS, INC.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

Pro Forma Condensed Combined Balance Sheet – as of September 30, 2020 continued

 

Pro forma adjustments, continued

 

Note 6 To record the Spin-Off and the recapitalization of Ameri’s equity.

 

		Debit				Credit
Line of credit		$	3,097,009
Accounts payable and accrued liabilities			6,490,680
Operating lease liability			886,935
Notes payable			1,879,500
Debentures			1,818,321
Short term loans			1,000,000
Dividend payable – preferred stock			645,425
Preferred stock			4,249
Accumulated other comprehensive income			51,765
Additional paid-in capital			57,625,990
Cash and cash equivalents						$	2,190,097
Accounts receivable							7,563,451
Prepaid expenses and other current assets							901,451
Property, plant, and equipment							91,289
Intangible assets, net							1,950,766
Goodwill							13,729,770
Operating lease right of use asset, net							874,606
Deferred income tax assets, net							42,181
Accumulated deficit							45,156,263

 

Note 7 To record the proceeds from the sale of common stock to Alpha of $3,000,000, net of estimated offering and placement costs of $362,500 and the conversion of the Note of $2,000,000 (and related accrued interest of $85,189 as of September 30, 2020), in exchange for 5,157,907 shares of Resulting Issuer Series B Preferred Stock.

 

		Debit				Credit
Cash and cash equivalents		$	2,650,000
Accounts payable and accrued liabilities			85,189
Notes payable			2,000,000
Series B Preferred Stock						$	515,791
Additional paid-in capital							4,219,398

 

 

AMERI HOLDINGS, INC.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

Pro Forma Condensed Combined Balance Sheet – as of September 30, 2020 continued

 

Pro forma adjustments, continued

 

Note 8 To record the advisory, legal, accounting and other expenses of the Offer, not including offering and placement costs recorded in Note 7. These costs are estimated to be $700,000 of legal expenses, $300,000 of accounting and auditing expenses, and $200,000 of other expenses.

 

		Debit				Credit
Accounts payable and accrued expenses		$	706,590
Accumulated deficit			205,910
Cash and cash equivalents						$	900,000

 

Note 9 To record the acquisition by Jay Pharma of the intellectual property from Tikkun in exchange for 9,026,003 shares of Resulting Issuer common stock. The fair value of the intellectual property was based on a weighted average third-party valuation of the intellectual property and the implicit value of the shares issued to Tikkun based on the price Alpha paid for their shares. The amount that will ultimately be recorded may differ materially from this preliminary estimate. The estimate useful life of the intellectual property is 4 years. The value of the intellectual property will be amortized on a straight-line basis over its estimated useful life.

 

		Debit				Credit
Intangible assets, net		$	3,692,809
Common stock						$	90,260
Additional paid-in capital							3,602,549

 

Note 10 To record the bonus to be paid to the Company’s chief executive officer upon the completion of the Offer.

 

		Debit				Credit
Accumulated deficit		$	100,000
Cash						$	100,000

 

Note 11 To record the December 2020 private placement of $250,000 (net of placement costs of $25,000) in exchange for 1,000,000 shares of Jay Pharma common stock.

 

		Debit				Credit
Cash		$	225,000
Additional paid-in capital						$	225,000

 

 

AMERI HOLDINGS, INC.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

Pro Forma Condensed Combined Statement of Operations - For the Nine Months Ended September 30, 2020

 

Note A Derived from Ameri’s unaudited condensed consolidated financial statements for the nine months ended September 30, 2020, filed with the SEC on November 16, 2020.

 

Note B Derived from Jay Pharma’s unaudited condensed financial statements for the nine months ended September 30, 2020, included as Exhibit 99.2 in this Current Report.

 

Pro forma adjustments:

 

Note C To record the effect of the Spin-Off.

 

Note D To record the pro forma change in compensation for the Company’s chief executive officer, consisting of an increase in salary of $112,500.

 

Note E To record the decrease in pro forma interest expense for the conversion of Jay Pharma’s notes payable and convertible notes payable.

 

Note F To record the amortization of the intellectual property acquired from Tikkun.

 

Note G To record the pro forma effect of the Offer on the weighted average shares outstanding as if the Offer was consummated on January 1, 2019.

 

Pro Forma Condensed Combined Statement of Operations - For the Year Ended December 31, 2019

 

Note AA Derived from Ameri’s audited consolidated financial statements for the year ended December 31, 2019, included in the Form S-4.

 

Note BB Derived from Jay Pharma’s audited financial statements for the year ended December 31, 2019, included in the Form S-4.

 

Pro forma adjustments:

 

Note CC To record the effect of the Spin-Off.

 

Note DD To record the pro forma change in compensation for the Company’s chief executive officer, consisting of an increase in salary of $250,000.

 

Note EE To record the decrease in pro forma interest expense for the conversion of Jay Pharma’s notes payable and convertible notes payable.

 

Note FF To record the amortization of the intellectual property acquired from Tikkun.

 

Note GG To record the pro forma effect of the business combination on the weighted average shares outstanding as if the business combination was consummated on January 1, 2019.

 

 

IV. Pro Forma Combined Net Loss Per Share

 

The pro forma combined weighted average share outstanding included in the calculation of basic and diluted pro forma combined earnings (loss) per share consists of the following:

 

		For the nine months ended September 30, 2020				For the Year Ended December 31, 2019
AMERI Holdings, Weighted Average Shares Outstanding			4,172,526				2,128,806
Jay Pharma, Weighted Average Shares Outstanding			25,916,419				25,085,980
Exchange Ratio			0.87				0.87
Resulting Issuer Shares Issued to Jay Pharma shareholders			22,579,296				21,855,789
Conversion of Jay Pharma advances and debt			1,077,708				1,077,708
Acquisition of Tikkun intellectual property			9,026,003				9,026,003
Shares issued to Alpha			6,920,223				6,920,223
Shares issued to placement agent			1,537,400				1,537,400
Weighted average shares outstanding, pro forma combined, basic and diluted			45,313,156				42,545,929

 

Following the completion of the Offer, warrants to purchase 8,292,701 shares of Resulting Issuer and stock options to purchase 3,176,422 shares of Resulting Issuer are expected to be outstanding. These instruments were not included in the pro forma combined weighted average shares outstanding, as their inclusion would be anti-dilutive. The Company did include the Series B Preferred Shares in the calculation of weighted average shares outstanding, as those shares are convertible into common stock at any time, for no consideration.

 

 

Exhibit 99.3

 

 

AMERI HOLDINGS ADJOURNS SPECIAL STOCKHOLDER MEETING TO DECEMBER 29^th

 

ATLANTA, GA - (December 23, 2020) – AMERI Holdings, Inc. (NASDAQ: AMRH) (“Ameri”, the “Company”), announced the adjournment of the Special Meeting of Shareholders that was scheduled to be held today to December 29, 2020 at 9:00 am EST.

 

Valid proxies that have already been submitted will continue to be valid for purposes of the Special Meeting rescheduled to be held on December 29, 2020. Stockholders who have not yet voted are encouraged to do so. Stockholders that own their shares in “street name” through a stock brokerage account or through a bank or nominee should consult the broker, bank or nominee about its procedures to vote the shares.

 

If Ameri stockholders approve the relevant proposals at the rescheduled Special Meeting, Ameri and Jay Pharma will target to complete the previously announced proposed tender offer (the “Offer”), whereby Ameri will purchase all of the outstanding common shares of Jay Pharma Inc. (“Jay Pharma”) in exchange for shares of Ameri common stock, or if applicable, shares of Ameri preferred stock, at the exchange ratio set forth in the Tender Offer Support Agreement and Termination of Amalgamation Agreement dated August 12, 2020, among Ameri, Jay Pharma and certain other signatories thereto (the “Tender Agreement”), and Jay Pharma will become a wholly-owned subsidiary of Ameri, on the terms and conditions set forth in the Tender Agreement, and the previously announced spin-off of the IT services business of Ameri prior to the end of this calendar year, subject to Nasdaq approval of the listing of the shares of the post-Offer entity and satisfaction or waiver of other closing conditions set forth in the Tender Agreement.

 

As soon as practicable following the announcement of the adjournment of the Special Meeting and prior to the rescheduled Special Meeting, Ameri intends to file a Current Report on Form 8-K with the SEC unaudited consolidated financial statements of Jay Pharma as of and for the nine months ended September 30, 2020, and unaudited pro forma condensed combined statements of operations for the year ended December 31, 2019, and for the nine months ended September 30, 2020, and unaudited pro forma balance sheet data for the nine months ended September 30, 2020, giving effect to the proposed Offer and spin-off, and which, once filed, will be available on the SEC’s website at http://www.sec.gov.

 

Upon completion of the spin-off and the Offer, subject to approval by Ameri stockholders of the relevant proposals at the rescheduled Special Meeting, Ameri will change its name to Enveric Biosciences, Inc. and change its trading symbol on The NASDAQ Stock Market to “ENVB”.

 

About Ameri100

 

Ameri is a specialized SAP® cloud, digital and enterprise solutions company that provides SAP® services to customers worldwide. Headquartered in Suwanee, Georgia, Ameri has offices in the U.S. and Canada. The Company also has global delivery centers in India. With its bespoke engagement model, Ameri delivers transformational value to its clients across industry verticals. For further information, visit www.ameri100.com

 

About Jay Pharma

 

Jay Pharma is a patient-centric biotechnology company focused on developing new-generation, naturally occurring chemical compounds, such as cannabinoids, to provide supportive care for targeted, unmet medical needs, both extending and enhancing patient quality of life. As a focused support care company, Jay Pharma leverages innovative clinical developments derived from cannabinoids and taps into its global network of scientists and oncology physicians. Additionally, Jay Pharma has licensed the exclusive global rights to a robust dataset and proprietary treatment database of naturally occurring cannabinoid derivatives as therapies for unmet medical needs in supportive care. Jay Pharma has a number of shots on goal in supportive care indications for cancer treatment side effects, initially focused on radiodermatitis and chemotherapy-induced peripheral neuropathy.

 

* * *

 

 

 

IMportant Information For Investors and STOCKholders

 

In connection with the proposed transaction, Ameri has filed with the SEC a registration statement on Form S-4 that includes a proxy statement of Ameri that also constitutes a prospectus of Ameri. The registration statement was declared effective by the SEC on November 12, 2020, and the proxy statement of Ameri and prospectus was mailed to stockholders of Ameri on or about November 20, 2020. Ameri may also file other relevant documents with the SEC regarding the proposed transaction. INVESTORS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of the definitive proxy/prospectus and other relevant documents filed by Ameri with the SEC at the SEC’s website at www.sec.gov. Copies of the documents filed by Ameri with the SEC are available free of charge on Ameri’s website at www.ameri100.com or by contacting Ameri Investor Relations.

 

Ameri and its directors and executive officers may be deemed to have been participants in the solicitation of proxies in respect of the proposed transaction. Information regarding the special interests of these directors and executive officers in the proposed transaction was included in the definitive proxy statement/prospectus referred to above. Additional information regarding the directors and executive officers of Ameri is included in its Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 2, 2020, as amended on April 30, 2020 and August 12, 2020. Investors should read the definitive proxy statement/prospectus carefully before making any voting or investment decisions. You may obtain free copies of these documents from Ameri using the sources indicated above.

 

This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

 

 

 

Forward-Looking Statements

 

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. These statements relate to future events or future performance. All statements other than statements of historical fact may be forward-looking statements or information. Generally, forward-looking statements and information may be identified by the use of forward-looking terminology such as “plans”, “ expects” or “does not expect”, “proposed”, “is expected”, “budgets”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases, or by the use of words or phrases which state that certain actions, events or results may, could, would, or might occur or be achieved. More particularly and without limitation, this news release contains forward-looking statements and information concerning the spin-off, Offer and other transactions contemplated in the Tender Agreement. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the Amalgamation will be consummated or that the parties other plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific that contribute to the possibility that the predictions, estimates, forecasts, projections and other forward-looking statements will not occur. Risks and uncertainties related to the Offer that may cause actual results to differ materially from those expressed or implied in any forward-looking statement include, without limitation, risks relating to the completion of the Offer, including the satisfaction of closing conditions, including Nasdaq approval; the cash balances of Ameri following the completion of the Offer; and the ability of Ameri to remain listed on the Nasdaq Capital Market.

 

The forward-looking statements contained in this press release are made as of the date of this press release. Except as required by law, Ameri disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, Ameri undertakes no obligation to comment on the expectations of, or statements made by, third parties in respect of the matters discussed above.

 

Corporate Contact:

Barry Kostiner, Chief Financial Officer

[email protected]

 

Ameri Holdings Investor Relations Contact:

Sanjay M. Hurry

LHA Investor Relations

(212) 838-3777

[email protected]

 

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