Filing summary
Entity and period mismatch: The supplied filing is AMERI Holdings, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2015 (the six-month period ended that date). It is not an Enveric Biosciences filing. The filing describes AMERI as a technology consulting firm.
Financial performance
| Metric | Three months ended September 30, 2015 | Six months ended September 30, 2015 |
|---|---|---|
| Revenue | $4.46 million, up 15.9% year over year | $8.39 million, up 7.0% |
| Gross profit / margin | $1.44 million / 32.3%; prior-year margin 7.1% | $2.42 million / 28.9%; prior-year margin 17.2% |
| Operating income (loss) | $(306,390), versus $(170,987) | $(118,365), versus $404,187 |
| Net income (loss) | $(249,364), versus $(116,810) | $(138,390), versus $291,556 |
| Operating cash flow | Not separately clear in the cash flow statement for the quarter | $(4.09) million, versus $734,448 |
For the six months, the substantial operating cash outflow was driven chiefly by a $5.97 million increase in accounts receivable. Cash rose to $5.07 million from $825,621 at March 31, 2015, supported by financing and acquisition-related cash flow entries. At September 30, current assets were $14.48 million and current liabilities $14.85 million. Total liabilities were $20.25 million; stockholders’ equity was $958,801.
Debt at September 30 included $5.0 million of convertible notes and a $250,000 line of credit. The notes are described in an exhibit as 5% convertible unsecured promissory notes due May 26, 2017. The filing also reports $8.9 million of current acquisition consideration payable and $400,000 of long-term contingent consideration.
Changes, acquisitions, and outlook
- Revenue and gross margin improved year over year, but higher selling, general and administrative and acquisition-related costs drove operating and net losses. Six-month acquisition costs were $553,835, compared with $11,024 a year earlier.
- Management attributed improved gross profit to synergies and cost efficiencies. Customers served increased to 23 from 7; management said Bellsoft added 14 customers during the six-month period.
- The filing says the Bellsoft acquisition closed November 20, 2015, after quarter-end, but also states September 1, 2015 as its accounting effective date. It reports $8.9 million of acquisition consideration payable and $3.47 million of goodwill at September 30. The timing and accounting treatment warrant verification.
- Bellsoft’s purchase terms included $3.0 million cash at closing, 235,295 AMERI shares, additional cash payments, and potential earn-outs. A subsequent Bellsoft credit facility permits advances of up to $6 million, bears interest at Prime plus 1%, includes a servicing fee, is secured by Bellsoft assets, and is guaranteed by AMERI.
- Management cited a larger customer base and a pipeline of engagements as providing “healthy revenue increase visibility” entering the last quarter of 2015. No quantified revenue or earnings guidance was provided.
- On October 26, AMERI announced an $8.50-per-share merger proposal for Edgewater Technology and a shareholder group with an approximately 5.5% stake in Edgewater.
Risks and other notable disclosures
Management identified risks including customer retention and collections, project timing and cost-estimate changes, converting the sales pipeline into billable work, recruiting and retaining skilled staff, acquisition integration and growth execution, utilization, and demand for IT services. The company reported no material off-balance-sheet arrangements and no legal proceedings against it during the quarter. It stated that disclosure controls were effective and that there were no material changes to internal control over financial reporting.
Key facts for investors to verify
- Confirm the filing identity and reporting period: the source is AMERI Holdings, not Enveric Biosciences.
- Reconcile Bellsoft’s stated post-quarter closing date with the September 1 accounting effective date and the September 30 balance-sheet amounts.
- Review the acquisition consideration payable, earn-out assumptions, and the cash-flow statement’s acquisition-related entries.
- Assess collection of receivables and working-capital needs given the $5.97 million six-month receivables increase and operating cash outflow.
- Verify the outstanding balance and terms of the convertible notes, line of credit, and subsequent Bellsoft facility, including AMERI’s guarantee.