Filing identity and reporting period
Important metadata discrepancy: The request identifies Enveric Biosciences, Inc., but the supplied Form 10-Q is for AMERI Holdings, Inc. (NASDAQ: AMRH), for the quarter ended September 30, 2019. This summary reflects the supplied filing, not Enveric Biosciences.
AMERI provided SAP cloud, digital and enterprise consulting services, primarily to North American customers. The financial statements are unaudited and consolidated.
Financial results and condition
| Metric | Three months ended September 30, 2019 | Nine months ended September 30, 2019 |
|---|---|---|
| Revenue | $9.15 million | $30.85 million |
| Gross profit / margin | $1.90 million / 21% | $6.42 million / 21% |
| Operating income (loss) | $(1.57) million | $(4.34) million |
| Net income (loss) attributable to AMERI | $41,299 | $(3.08) million |
| Net income (loss) attributable to common stockholders | $(65,466) | $(3.39) million |
| Operating cash flow | Not presented for the quarter | $(1.97) million |
At September 30, 2019, cash was $0.50 million, current assets were $8.69 million and current liabilities were $13.41 million, implying negative working capital of approximately $4.72 million. The balance sheet reported a $3.43 million line-of-credit balance, $1.00 million in convertible notes and $2.50 million of cash consideration payable. Total liabilities were $13.41 million. The credit facility accrued interest at prime plus 1.75%, subject to a 7.25% floor; it was secured by company assets and included restrictive covenants. The notes bear 8% interest and mature in March 2020.
Cash declined from $1.37 million at December 31, 2018 to $0.50 million. Nine-month investing cash use was $0.25 million; financing provided $1.35 million. The filing reports nine-month basic and diluted loss per share of $0.07. The filing does not provide quarterly cash-flow figures.
Changes versus prior comparable periods
- Revenue declined 13% in the quarter and 6% for the first nine months, which management attributed mainly to the completion of major customer assignments.
- Gross margin eased to 21% from 22% in both comparable periods.
- SG&A rose to $2.90 million from $2.66 million for the quarter, and to $9.08 million from $8.06 million for nine months. Management attributed the increases mainly to sales initiatives, including hiring a sales team.
- Operating results were materially affected by a prior-year $7.27 million quarterly gain (and $7.14 million nine-month gain) from revised estimates of acquisition consideration. Excluding that gain, management said the prior-year operating loss was $1.2 million for the quarter and $3.5 million for nine months; 2019 losses were higher.
- Quarterly net income attributable to AMERI fell from $5.70 million to $41,299; nine-month results moved from $2.87 million income to a $3.08 million loss. The 2018 comparison included the consideration gain noted above.
Outlook, risks and unusual items
- Management gave no quantified revenue or earnings forecast. It said future gross margins were expected to be 20%–25%, while cautioning that the target was not assured, and described pursuing organic growth and strategic alternatives, including possible selective acquisitions and financing.
- Management stated that recurring losses, cash of $0.50 million and negative working capital raised substantial doubt about the company’s ability to continue as a going concern. Continued operations depend on additional equity or debt funding, operating efficiencies and revenue growth; the filing gives no assurance that funding will be sufficient.
- Five major customers generated 52% of quarterly revenue and 47% of nine-month revenue, up from 40% and 38%, respectively, in the 2018 periods, creating customer-concentration risk.
- In September, the company exchanged and cancelled all outstanding private-placement warrants for 10,234,136 common shares and granted the investors participation rights in future financings for 12 months. It recorded a $733,470 additional charge in connection with the exchange. No such warrants remained outstanding at quarter-end. Common shares outstanding were 62,820,789 as of November 6, 2019.
- Management reported that disclosure controls and internal control over financial reporting were not effective, citing the integration of acquired businesses and the need to harmonize controls.
- The company adopted lease-accounting guidance in the quarter and reported no material financial-statement impact. It reported no material pending legal proceeding beyond a previously settled dispute.
Key facts for investors to verify
- Confirm the issuer: the supplied filing is AMERI Holdings, Inc., not Enveric Biosciences, Inc.
- Assess near-term liquidity, the going-concern warning, debt maturity and availability of additional financing.
- Review the credit facility’s borrowing terms, collateral, covenants and default provisions, as well as the $2.50 million consideration payable.
- Evaluate the sustainability of revenue after major customer assignments ended, customer concentration and the ability to restore margins and control SG&A.
- Check the effects of the warrant exchange and other share issuances on dilution, and monitor remediation of ineffective financial reporting controls.