NOTE 8.

OTHER ITEMS:

During the quarter ended September 30 2018, the Company granted stock options to purchase an aggregate of 1,265,000 shares of the Company’s common stock to key employees, an aggregate of 45,000 restricted stock units and stock options to purchase 255,000 shares of the Company’s common stock to the Company’s non-executive directors, and an aggregate of stock options to purchase an aggregate of 50,000 shares of the Company’s common stock to the Company’s advisory board members. Each of these grants was made pursuant to the Company’s 2015 Equity Incentive Award Plan and vest within one year from the date of grant. The management stock options expire on the fifth anniversary of the date of grant and non-executive director and advisory board member stock options expire on the sixth anniversary of the date of grant. The non-executive director and advisory board member stock option grants include a change of control provision which provides for the acceleration of the options under certain change of control events. All of the foregoing option grants have been valued using the Black-Scholes model and will be amortized over a one-year period and the expense for the foregoing grants has been recognized in the current quarter and in the nine-month period ending September 30, 2018.

During the quarter ended September 30, 2018, the Company recognized a one-time non-cash gain of $7.3 million as a result of the Company’s change in estimate of its consideration payable related to its acquisition of Ameri Arizona. The Company had previously accounted for total equity consideration payable of $10.4 million, which was reduced to $3.3 million as a result of two former members of Ameri Arizona electing to receive approximately $2.5 million in cash and the issuance of equity valued at $0.8 million to the third former member Ameri Arizona who had not elected to receive cash.

As of the date of filing of this quarterly report, the Company has not yet paid the cash payments to the two former members of Ameri Arizona that were due on September 28, 2018 and is currently negotiating payment terms with the two former members of Ameri Arizona who elected to receive cash. On July 30, 2018, the Company issued 560,000 shares of common stock valued at $0.8 million to the third former member of Ameri Arizona who had not elected to receive cash in lieu of stock. Such former member has asserted that he had elected to receive cash instead of stock, but the Company disputes the assertion and is vigorously defending any claims related thereto.