Filing identity and reporting period
Important identity mismatch: The supplied filing is AMERI Holdings, Inc.’s Form 10-Q for the quarter ended September 30, 2020, not an Enveric Biosciences filing. AMERI provided SAP cloud, digital and enterprise services, primarily to North American customers.
Financial performance and position
- Third quarter: Revenue was $8.48 million, down 7% from $9.15 million a year earlier. Gross profit was $1.89 million; gross margin was 22%, versus 21%. Operating loss narrowed to $1.12 million from $1.57 million, but net loss attributable to common shareholders was $1.07 million, compared with a $65,000 loss. Basic and diluted loss per share was $0.20.
- First nine months: Revenue was $26.34 million, down 15% from $30.85 million. Gross profit was $5.59 million, with a 21% gross margin, unchanged year over year. Operating loss improved to $3.91 million from $4.34 million; net loss attributable to common shareholders widened to $4.64 million from $3.39 million. Loss per share improved to $1.11 from $1.70, alongside a higher weighted-average share count.
- Cash flow: Operating cash use was $3.86 million and investing cash use was $46,000 for the nine months. Financing provided $6.31 million, including borrowing and share issuance. Cash increased to $2.84 million from $431,000 at December 31, 2019.
- Liquidity and debt: Current assets were $11.30 million and current liabilities $13.99 million, implying negative working capital of approximately $2.69 million. Debt-related balances included $3.10 million on the secured line of credit, a $1.73 million PPP loan, a $150,000 EIDL loan, and approximately $1.82 million of convertible debentures. The company also reported $887,000 of operating lease liabilities.
- Other balance-sheet items: Accounts receivable rose to $7.56 million from $6.38 million. Goodwill was $13.73 million; net intangible assets were $1.95 million. Accumulated deficit was $45.16 million.
Changes versus prior comparable period
Management attributed lower revenue chiefly to COVID-19-related reductions in customer work. SG&A fell to $2.45 million from $2.90 million for the quarter and to $7.85 million from $9.08 million for the nine months. The quarter’s operating loss narrowed, but the prior-year quarter included a $1.86 million gain from changes in warrant fair value, which helped produce a small pretax profit; no such gain was reported in 2020.
Outlook, risks and unusual items
- Management said results were expected to fall short of 2020 revenue goals and forecast approximately $3.5 million of lower revenue from existing customers over the next 12 months compared with full-year 2019. It cited COVID-19, delayed projects and SAP’s extension of the S/4HANA migration deadline beyond 2025. Target gross margin for future periods was 20%–25%, with no assurance it would be achieved.
- A major customer had ended most of its work, reducing third-quarter revenue by approximately $1.5 million; that customer historically generated $5–$7 million in annual revenue. Management also cited slower customer payments and reduced billable hours.
- The filing states that recurring losses, negative working capital and reliance on external financing raise substantial doubt about the company’s ability to continue as a going concern. Management believed available cash would cover expected working-capital needs over the next 12 months, but acknowledged that additional financing, cost efficiencies and revenue growth are important and not assured.
- The June convertible debenture was due December 31, 2020; September debentures were due by October 31, 2020 or earlier upon the specified offer. The filing reports subsequent conversions after quarter-end, as well as exercise of pre-funded warrants, creating potential dilution.
- AMERI reported that internal control over financial reporting was not effective as of September 30, 2020, while describing ongoing efforts to integrate and improve controls. It also revised prior-year financial statements for lease-accounting errors.
- Strategic transactions remained a risk: the filing describes a proposed sale of the Ameri100 business and a Jay Pharma transaction, with closing conditions, potential delays and possible termination fees. No assurance of completion was provided.
Important facts for investors to verify
- Confirm the issuer: this source is AMERI Holdings, Inc., not Enveric Biosciences.
- Reconcile the reported PPP loan amount: the note states proceeds of $1.7196 million, while the September 30 balance sheet lists $1.7296 million.
- Confirm the status, maturity, conversions and remaining balance of the June and September debentures, including post-quarter share issuances and warrant exercises.
- Assess cash runway and financing needs against negative working capital, operating cash burn and the going-concern disclosure.
- Track customer concentration, receivable collections and the revenue outlook following the major customer’s work reduction.
- Review remediation of ineffective financial-reporting controls and the effects of the prior-period lease-accounting revision.