BELLSOFT, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014 and 2013

 

 

 

 

BELLSOFT, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

Exhibit 99.1 -- Page 2

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CERTIFIED PUBLIC ACCOUNTANTS

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Bellsoft, Inc.

We have audited the accompanying consolidated balance sheets of Bellsoft, Inc. (the "Company") as of December 31, 2014 and 2013 and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2014 and 2013 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Ram Associates

Ram Associates

Hamilton, NJ January 21, 2016.

3240 EAST STATE STREET, HAMILTON, NJ 08619 (609) 631-9552/631-9553+ FAX   (888) 319-8898

PKRAM@RAMASSOCIATES.US

Exhibit 99.1 -- Page 3

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BELLSOFT, INC. AND SUBSIDIARIES

 

Consolidated Balance Sheets

Exhibit 99.1 -- Page 4

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Consolidated Statements of Income and Comprehensive Income

Years Ended December 31

- See accompanying notes to consolidated financial statements -

 

 

 

Consolidated Statements of Changes in Shareholders' Equity

Exhibit 99.1 -- Page 6

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Consolidated Statements of Cash Flows

Years Ended December 31,

Exhibit 99.1 -- Page 7

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BELLSOFT, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2014 and 2013

NOTE 1 - NATURE OF OPERATIONS

Bellsoft, Inc. ("Bellsoft"), was incorporated in the State of Georgia on March 19, 1996. The Company provides implementation and custom development services for Enterprise Resource Planning (ERP) software.

On February 7, 2005, Bellsoft acquired 72% ownership interest in Bellsoft India Solutions Private (Pvt) Limited (Ltd), a company incorporated under the laws of India ("Bellsoft India").  The primary purpose of Bellsoft India is to provide back office and marketing functions to Bellsoft, Inc. Bellsoft India's fiscal year ends on March 31st.  For consolidation purposes Bellsoft India prepares statements for the reporting period, which corresponds with the fiscal year of the parent.

On August 31, 2011, Bellsoft formed BSI Global IT Solutions, Inc. (Bellsoft Canada), a company incorporated under the laws of Canada. The primary purpose of Bellsoft Canada is to provide implementation and custom development services for ERP software for clients in Canada. Bellsoft owns 100% of Bellsoft Canada.

Bellsoft India and Bellsoft Canada are collectively referred to as the Subsidiaries. Bellsoft, Inc. and the Subsidiaries are collectively referred to as the Company.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of the Subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

BASIS OF PRESENTATION

The Company has adopted the Financial Accounting Standards Board ("FASB") Codification ("Codification" or "ASC"). The Codification is the single official source of authoritative accounting principles generally accepted in the United States of America ("U.S. GAAP") recognized by the FASB to be applied by nongovernmental entities. All of the Codification's content carries the same level of authority.

FOREIGN OPERATIONS AND FOREIGN CURRENCY

The Subsidiaries' foreign operations are subject to risks inherent in operating under different legal systems and various political and economic environments. Among the risks are changes in existing tax laws, possible limitations on foreign investment and income repatriation, government price or foreign exchange controls, and restrictions on currency exchange. Net assets of foreign operations were approximately 19% and 12% of the Company's total net assets at December 31, 2014 and 2013, respectively. Cash held in foreign based bank accounts totaled approximately $290,000 and $268,000 at December 31, 2014 and 2013.

The Subsidiaries transact business in their local currencies. The financial statements reflect the translation of the functional currency statements to U.S. Dollars. Financial statements use end-of-period exchange rates for assets and liabilities, weighted average exchange rates for revenues and expenses, and historical rates for equity. The resulting foreign currency translation adjustment is recorded in accumulated other comprehensive income (loss) as a component of equity.

 

 

BELLSOFT, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2014 and 2013

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

REVENUE RECOGNITION

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

ACCOUNTS RECEIVABLE

The Company routinely assesses the financial strength of its customers and debtors and believes that its accounts receivable credit risk exposure is limited. Accounts receivable are carried at the original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. An allowance is provided for known and anticipated credit losses, as determined by management in the course of regularly evaluating individual customer receivables. This evaluation takes into consideration a customer's financial condition  and credit history, as well as current economic conditions. Accounts receivable are considered delinquent when they are over 90 days past due and are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded in income when received.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets, which range from 3 to 7 years.

Expenditures for maintenance and repairs are charged to income as incurred. Additions and betterments are capitalized. The cost of properties sold or otherwise disposed of, and the accumulated depreciation thereon, is eliminated from the property and reserve accounts, and gains and losses are reflected in the consolidated statements of operations.

INCOME TAXES

Bellsoft has elected to be taxed as an S corporation for income tax purposes effective January 1, 2002. Accordingly, the shareholders are responsible for income taxes; therefore, no provision for income taxes is included in these financial statements for Bellsoft, Inc.

 

 

BELLSOFT, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2014 and 2013

Bellsoft's policy is to distribute dividends to provide funds for shareholders to pay income taxes on income reported by the Company.  Periodically, additional distributions are paid to reduce equity in excess of management's evaluation of the amount required for working capital. Management believes the payment of additional distributions will not negatively impact profitability or impair the operating needs of the Company. Equity distributions during the years ended December 31, 2014 and 2013 were $193,124 and $2,210,430, respectively.

The Company accounts for the effect of any uncertain tax positions based on a more likely than not threshold to the recognition of the tax positions being sustained based on the technical merits of the position under scrutiny by the applicable taxing authority. If a tax position or positions are deemed to result in uncertainties of those positions, the unrecognized tax benefit is estimated based on a cumulative probability assessment that aggregates the estimated tax liability for all uncertain tax positions. Interest and penalties assessed, if any, are accrued as income tax expense.

The Company has evaluated its tax positions and determined no uncertainty requires recognition. The Company files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions, as well as the required foreign countries. The Company is generally no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2011.

ADVERTISING COSTS

Advertising costs are charged to operations when incurred.  Advertising expense were $25,069 and $54,429 for the years ended December 31, 2014 and 2013.

NOTE 3 - ACCOUNTS RECEIVABLE

Accounts receivable as of December 31, 2014 and 2013 are summarized as follows:

 

 

 

 

BELLSOFT, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2014 and 2013

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31,

 

 

Depreciation expense for the years ended December  31, 2014 and 2013 were $24,040  and $47,320, respectively.

NOTE 5 - LINE OF CREDIT

Bellsoft had a revolving line of credit based on an agreement dated May 13, 2011 with a current maturity date of October 30, 2015. The line of credit had a maximum borrowing base of $2,000,000 with the interest rate at BBA Libor Daily Floating plus 2.75%.  The line was secured by (1) a shareholders' personal guaranty and (2) a lien on all business assets of the Borrower including, but not limited to, accounts receivable, fixed assets and general intangible assets. The line of credit required Bellsoft, Inc. to meet certain financial and non- financial covenants which is typical to such agreements.

The outstanding balance of the line of credit was $500,000 and $1,750,000 at December 31, 2014 and 2013, respectively. Interest was accrued at 2.919% at December 31, 2014 and 2013. Total interest expense for the years ended December 31, 2014 and 2013 were $28,578 and $26,970, respectively.

The outstanding balance of the line of credit was fully paid off and cancelled subsequent to the share purchase agreement entered into by the Company and Ameri Holdings, Inc. (See Note 11).

 

BELLSOFT, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2014 and 2013

NOTE 6 - INCOME TAXES

The Company accounts for income taxes under the provisions of the FASB ASC 740, Income Taxes. Current income tax expense consists of the following for the years ended December 31, 2014 and 2013:

In the ordinary course of business, there are many intercompany transactions that affect the calculation and estimation of the Company's tax liability. Although the Company's management believes that their tax estimates are reasonable, there is no assurance that the final determination of tax liability will not be different from what is reflected in the Company's income tax provisions and accruals.

NOTE 7 - EMPLOYEE BENEFIT PLAN

Bellsoft maintains a  defined contribution 401K plan covering all eligible employees of Bellsoft, Inc. Employees 21 years of age are eligible to participate in the plan after six months of service. Employees are allowed to contribute up to the maximum amount under the Internal Revenue Code. The plan allows Bellsoft to make a discretionary match of employee contributions.  During  2014 and 2013, Bellsoft contributed $12,164 and $17,209, respectively, to the Plan.

NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS

i) On May 28, 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers  (Topic 606), with an effective date for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, for public business entities, certain not-for-profit entities, and certain employee benefit plans. The effective date for all other entities was for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.

The amendments in this Update defer the effective date of Update 2014-09. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update

2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting

periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

 

 

BELLSOFT, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2014 and 2013

All other entities should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Earlier application is permitted only as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period, or an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which an entity first applies the guidance in Update 2014-09.

ii) In January 2015, the FASB issued Accounting Standard Update, or ASU, 2015-01-Income Statement-Extraordinary and Unusual Items, which seeks to simplify income statement presentation by eliminating the concept of Extraordinary Items. This Update eliminates from GAAP the concept of extraordinary items. Subtopic 225-20, Income Statement—Extraordinary and Unusual Items, required that an entity separately classify, present, and disclose extraordinary events and transactions. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption.

NOTE 9 - OPERATING LEASES

Bellsoft leases office space in Lawrenceville, Georgia under a net operating lease agreement. Lease expense for leased property has been accounted for under the operating lease method where ownership of the asset does not transfer to the lessee.  The lease agreement has expired and the Company is a tenant at will on a month to month basis.

Bellsoft India leases office facilities in Chennai, India under a month to month net operating lease agreement.

Bellsoft Canada does not maintain office space.

Operating lease expense was $107,377 and $150,809 for the years ended December 31, 2014 and 2013.

NOTE 10 - CONCENTRATION OF CREDIT RISK

For the years ended December 31, 2014 and 2013, approximately 80% and 88% of Bellsoft's revenue was derived from five customers.   As of December 31, 2014 and 2013, approximately 70% and 78% of the Bellsoft's accounts receivable were due from four and three customers respectively.

For the years ended December 31, 2014 and 2013, 100% of Bellsoft Canada's revenue was derived from two customers.   As of December 31, 2014 and 2013, 100% and 96% of the Bellsoft Canada's accounts receivable were due from two customers, respectively.

 

 

BELLSOFT, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2014 and 2013

At times the Company may have bank deposits in excess of the maximum amount of U.S. Federal or Canada deposit insured limits (FDIC and CDIC, respectively). As of December 31, 2014 and 2013, Bellsoft had approximately $671,000 and $1,795,000, respectively in unsecured cash reserves on deposit in excess of FDIC limit; Bellsoft Canada had approximately $127,000 and $130,000, respectively, in unsecured cash reserve on deposit in excess of CDIC limit.

NOTE 11 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events through January 21, 2016, the date the consolidated financial statements were available to be issued.

On November 20, 2015, the Company entered into a share purchase agreement with Ameri Holdings, Inc. ('"AMERI") based in Princeton, New Jersey, for the consideration listed below. For financial accounting purposes, the Company recognizes September 1, 2015 as the effective date of the disposition.

The purchase price for the acquisition of the Company consisted of:

 

Simultaneously with the acquisition of the Company, Bellsoft entered into a Revolving Credit and Security Agreement (the "Credit Facility") with Federal National Payables, Inc., a Delaware corporation doing business as Federal National Commercial Credit (the "Lender"). Up to $6 million principal amount of advances may be extended under the Credit Facility. The Credit Facility will be used to pay a portion of the costs associated with the acquisition of Bellsoft, with the balance being available for general working capital of Bellsoft. The Credit Facility has a term of two years, which will automatically renew unless a written notice of termination is given by Bellsoft or the Lender to the other at least 60 days prior to the end of the original or any renewed term. Interest under the Credit Facility will accrue on the higher of (a) the outstanding principal amount of advances under the Credit Facility and (b) $2,000,000 at a per annum rate equal to the Prime Rate plus 1.00%, which will be payable monthly in arrears.  With each payment of interest, Bellsoft will also pay a servicing fee of 0.38% multiplied by the higher of (a) the average daily principal amount of advances under the Credit Facility for the previous calendar month or portion thereof and (b) $2,000,000. The Credit Facility is secured by substantially all of Bellsoft's assets. The amounts borrowed by Bellsoft under the Credit Facility are guaranteed by AMERI.