Business context and reporting period
The supplied filing is AMERI Holdings, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2020—not a filing identified as Enveric Biosciences, Inc. AMERI provided SAP cloud and digital enterprise services, primarily to North American customers, through its subsidiaries.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue | $9.60 million | $10.69 million |
| Gross profit / gross margin | $1.88 million / 19.6% | $2.14 million / 20.0% |
| Operating expenses | $3.48 million | $3.44 million |
| Operating loss | $1.60 million | $1.30 million |
| Net loss attributable to common stockholders | $1.89 million | $1.97 million |
| Loss per share, basic and diluted | $0.60 | $1.09 |
| Cash used in operating activities | $2.29 million | $0.98 million |
At March 31, 2020, cash was $1.27 million, versus $0.43 million at year-end 2019. Current assets were $10.24 million and current liabilities $16.91 million, implying negative working capital of about $6.67 million. Accounts receivable rose to $8.10 million from $6.38 million; management attributed the increase partly to slower customer payments during COVID-19.
Reported debt and financing obligations included $4.55 million under the North Mill credit facility, $1.00 million of convertible notes, $1.50 million of convertible debentures and a $1.00 million secured short-term note. Total liabilities were $16.91 million; the balance sheet reported no long-term liabilities.
Changes versus the prior period
- Revenue fell about 10%, mainly because major customer assignments that contributed revenue in Q1 2019 had concluded.
- Gross margin was broadly stable at approximately 20%, while operating loss widened to $1.60 million from $1.30 million. Net loss attributable to common shareholders narrowed, and reported loss per share improved, alongside a higher weighted-average share count.
- Operating cash outflow increased to $2.29 million. Financing provided $3.17 million in Q1 2020, compared with $1.45 million in Q1 2019.
- Common shares outstanding increased from 2.52 million at December 31, 2019 to 3.25 million at March 31, 2020, including shares issued to extinguish a liability and for accrued interest.
Outlook, risks and unusual items
- Management expected 2020 revenue to fall short of its goals and anticipated approximately $3.5 million less revenue from existing clients over the next 12 months compared with full-year 2019, citing COVID-19. It also described continued near-term negative cash flow and targeted future gross margins of 20%–25%, with no assurance of achieving that range.
- COVID-19 had caused consultant roll-offs at a major airline customer, some reductions in billable hours, delayed customer payments and projects put on hold. Management said no active customer had completely stopped using AMERI’s services and no projects had been cancelled at the time of the report.
- Five customers represented 59% of Q1 2020 revenue, up from 42% a year earlier. This concentration heightens exposure to customer-specific demand changes.
- The filing states that recurring losses and funding needs raise substantial doubt about AMERI’s ability to continue as a going concern. It also says the company had not repaid $1.00 million of 8% notes due in March 2020 and did not have sufficient funds to meet those obligations.
- After quarter-end, AMERI extended the debentures’ maturity to September 30, 2020 in exchange for a prepaid warrant to purchase up to 646,094 shares at $0.001 per share. It also received a $1.72 million PPP loan on May 11, 2020, potentially subject to forgiveness for qualifying use.
- The planned Jay Pharma amalgamation and AMERI operating-business spin-off remained subject to closing conditions, with no assurance of completion; termination in specified circumstances could trigger a $500,000 fee. A May 6 amendment contemplated Series B warrants for 8.1 million shares in the resulting company.
- Management reported disclosure controls and internal control over financial reporting were not effective as of March 31, 2020, citing integration of previously acquired businesses.
Important facts for investors to verify
- Confirm the issuer: the provided filing is for AMERI Holdings, Inc., not Enveric Biosciences, Inc.
- Review the maturity, repayment status and terms of the overdue 2017 notes, debentures, secured note and North Mill facility.
- Assess cash collections, receivable aging, negative working capital and the company’s stated going-concern uncertainty.
- Verify the actual COVID-19 impact on customer concentration, billable work, revenue and cash flow against management’s estimates.
- Track completion conditions and potential dilution from the proposed transactions, post-quarter warrants and PPP loan forgiveness eligibility.
- Review the company’s remediation of ineffective financial reporting controls.