Filing and business context
The supplied filing is AMERI Holdings, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2018—not an Enveric Biosciences filing. AMERI provides SAP cloud, digital and enterprise consulting services through subsidiaries. Its results depend on project activity and are concentrated among a small number of customers.
Financial performance
| Metric | Q1 2018 | Q1 2017 |
|---|---|---|
| Revenue | $11.06 million | $12.34 million |
| Gross profit / margin | $2.34 million / 21% | $3.30 million / 27% |
| Operating loss | $1.37 million | $0.63 million |
| Net loss attributable to common shareholders | $2.13 million | $1.22 million |
| Basic and diluted loss per share | $0.11 | $0.09 |
| Cash used in operating activities | $0.46 million | $0.84 million |
Revenue declined 10%, primarily because a large Q1 2017 project had no comparable project in Q1 2018. Management attributed lower gross margin to the end of that higher-margin project. SG&A was $2.88 million versus $3.03 million; depreciation and amortization increased to $0.82 million from $0.69 million, and interest expense increased to $0.21 million from $0.09 million.
Cash, liquidity and debt
Cash fell to $1.76 million at March 31 from $4.88 million at year-end. Net cash used was $3.12 million: $0.46 million in operating activities, $1.07 million in investing activities and $1.59 million in financing activities. The company reported negative working capital of approximately $15.2 million.
Current liabilities were $26.47 million, including $14.70 million of acquisition consideration payable ($3.43 million cash and $11.27 million in stock) and a $0.56 million accrued preferred dividend. Sterling National Bank balances included $2.94 million in revolving borrowings and approximately $1.42 million in term-loan principal. The company also had $1.25 million of 8% convertible notes and acquisition-related promissory notes; a Moneta note amendment extended maturity to August 31, 2018, but a $0.5 million payment due April 30 was not made. As of May 5, the company also reported being behind on interest due on one 2017 convertible note.
Material developments, outlook and risks
- Management stated that covenant noncompliance with Sterling continued; the bank declined to provide further waivers and reserved rights to stop advances, accelerate debt and claim collateral. Substantially all borrower assets secure the facility. AMERI was seeking replacement financing, with no assurance it could obtain it.
- The filing says substantial doubt exists about the company’s ability to continue as a going concern, citing recurring losses, limited cash and dependence on raising capital and improving operations.
- The company could not pay certain notes, acquisition earn-outs or the Series A preferred dividend because of limited cash. An Ameri Arizona former member sued on May 1, 2018 over approximately $236,950 of unpaid 2017 earn-out, plus fees and expenses.
- Management targeted future gross margins of 20%–25%, but gave no assurance of achieving them. It cited strategic alternatives, organic growth and possible financing or equity issuance; no specific revenue or earnings guidance was provided.
- Q1 restructuring to streamline acquired entities resulted in an approximately $127,100 charge. Five major customers represented 39% of revenue, versus 41% a year earlier.
- Management concluded disclosure controls and internal control over financial reporting were not effective, citing integration of acquired private companies.
Key facts investors should verify
- Whether the filing corresponds to the intended issuer: the document identifies AMERI Holdings, Inc., not Enveric Biosciences.
- Availability and terms of replacement financing, and whether Sterling continued lending or exercised default remedies.
- Status and payment terms of overdue notes, earn-outs and preferred dividends, including the Moneta payment and the Ameri Arizona litigation.
- Ability to restore covenant compliance, improve liquidity and sustain operations as a going concern.
- Customer/project concentration, gross-margin trajectory and integration of acquired subsidiaries and financial controls.
- The filing contains inconsistent figures: net loss attributable to the company is shown as $1,571,353 in one statement and $1,571,753 elsewhere; weighted-average shares are listed as both 18,654,197 and 18,564,197. These values should be checked against the filed financial statements.