Filing identity and reporting period
Important identity mismatch: The supplied filing is AMERI Holdings, Inc.’s Form 10-Q, not an Enveric Biosciences filing. It covers the quarter and six months ended June 30, 2018; filed August 14, 2018. AMERI provides SAP consulting and enterprise technology services.
Financial results and position
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $11.08 million | $12.27 million | $22.14 million | $24.61 million |
| Gross profit / margin | $2.39 million / 22% | $2.33 million / 19% | $4.73 million / 21% | $5.63 million / 23% |
| Operating loss | $0.94 million | $3.51 million | $2.31 million | $4.14 million |
| Net loss attributable to common stockholders | $1.36 million | $3.78 million | $3.49 million | $5.01 million |
| Basic and diluted loss per share | $(0.07) | $(0.26) | $(0.19) | $(0.35) |
- Revenue declined 10% year over year in both the quarter and first half. Management cited the absence of a large prior-year project and a decision not to pursue certain low-margin professional-services work.
- Quarterly gross margin improved on a greater share of higher-margin project revenue; first-half margin fell as a high-margin 2017 project ended. Management’s anticipated future gross-margin range was 20%–25%, with no assurance it would be achieved.
- Cash was $0.92 million at June 30, down from $4.88 million at December 31, 2017. Six-month operating cash use was $0.28 million, investing cash use $1.08 million, and financing cash use $2.60 million. The filing attributes the cash decline mainly to working capital and earn-out payments.
- Current assets were $9.60 million and current liabilities $25.06 million, consistent with management’s reported negative working capital of approximately $15.3 million. Total liabilities were $27.24 million.
- June 30 borrowings included $2.03 million under the Sterling revolving facility, $1.32 million in Sterling term-loan principal, $1.25 million of 8% convertible notes, and approximately $0.33 million of Bigtech bank borrowings. The term loan and Bigtech line of credit were repaid in August using financing proceeds, according to the filing.
- Acquisition consideration payable at June 30 totaled $14.60 million: $3.33 million cash and $11.27 million in equity, including $1.39 million of contingent consideration. Goodwill was $21.90 million.
Material changes, outlook, and risks
- SG&A fell to $2.52 million in Q2 from $4.84 million, and to $5.40 million for the first half from $7.87 million. Management attributed lower operating losses mainly to reduced stock-based compensation and continued restructuring. A restructuring charge of approximately $127,100 was recorded in the first half.
- Management stated that recurring losses, limited cash and unpaid obligations raised substantial doubt about the company’s ability to continue as a going concern. It said continued operations depended on additional financing, operating efficiencies and revenue growth.
- On July 9, Sterling National Bank issued a default and acceleration notice citing covenant failures and impaired financial condition, requiring repayment by August 31, 2018. The bank could stop revolving advances at its discretion and potentially enforce its security over substantially all borrower assets. The filing does not establish in this text whether the obligations were subsequently resolved.
- On July 30, AMERI received approximately $6 million gross from a private placement involving 5 million shares or equivalents and warrants for 4 million shares. Proceeds were intended for debt, past-due acquisition obligations and working capital. The transaction included potential price adjustments and substantial dilution; shareholder approval was required. The company also agreed to placement-agent fees and warrants.
- AMERI reported it had been unable to pay certain notes, acquisition earn-outs and Series A preferred dividends because of insufficient cash. Approximately $0.6 million in preferred dividends accrued in the first half. A proposed preferred-stock amendment and warrants for 5 million shares required shareholder approval.
- Five major customers represented 40% of Q2 revenue and 39% of first-half revenue, creating customer-concentration exposure. Disclosure controls and internal control over financial reporting were both reported as not effective, primarily due to integration of acquired businesses.
- The filing disclosed a dispute with a former Ameri Arizona member over whether cash or stock consideration was elected; AMERI stated it would contest the claim. The filing also described a lawsuit concerning an earn-out, with the claimed earn-out amounts reported paid by August 3, 2018.
Important facts for investors to verify
- Confirm the issuer: this document is AMERI Holdings’ filing and does not appear to be the requested Enveric Biosciences filing.
- Check subsequent filings for the Sterling default, repayment or refinancing status, and whether the revolving facility remained available.
- Verify the use and sufficiency of the $6 million private-placement proceeds, shareholder approval, registration status, and resulting share and warrant dilution.
- Review the company’s subsequent liquidity, going-concern disclosures, payment of overdue obligations and preferred dividends.
- Assess customer concentration, progress in restoring effective financial controls, and the resolution of the Ameri Arizona consideration dispute.