SEC Filing Summary
Filing identity: The request metadata names Enveric Biosciences, Inc., but the supplied Form 10-Q is for AMERI Holdings, Inc. (Nasdaq: AMRH/AMRHW), for the quarter and six months ended June 30, 2020. The figures below summarize the supplied filing, not an Enveric filing.
Business context and reporting period
AMERI provided SAP cloud, digital and enterprise technology consulting through subsidiaries, with most revenue generated in North America. The filing reports second-quarter and first-half 2020 results against the corresponding 2019 periods. It also describes proposed transactions involving Ameri100 and Jay Pharma; the Jay Pharma transaction was later replaced by a tender agreement signed August 12, 2020.
Key financial metrics
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $8.25 million | $11.02 million | $17.86 million | $21.70 million |
| Gross profit | $1.82 million | $2.38 million | $3.70 million | $4.52 million |
| Gross margin | 22% | 22% | 21% | 22% |
| Operating loss | $1.19 million | $1.48 million | $2.79 million | $2.77 million |
| Net loss attributable to common shareholders | $1.68 million | $1.36 million | $3.57 million | $3.33 million |
| Loss per common share | $0.48 | $0.67 | $1.03 | $1.73 |
- First-half operating cash use was $2.86 million, versus $1.47 million in 2019. Investing cash use was $0.04 million; financing provided $4.56 million. Cash increased to $2.09 million from $0.43 million at year-end 2019.
- At June 30, cash was $2.09 million, current assets $10.27 million and current liabilities $12.77 million, implying negative working capital of approximately $2.50 million. Total liabilities were $14.63 million.
- Reported borrowings and debt-related obligations included $2.34 million under the senior secured credit facility, a $1.00 million secured note due August 31, 2020, a $1.73 million PPP loan, a $0.15 million EIDL loan and convertible/debenture liabilities. The filing’s disclosures of convertible-debenture balances are inconsistent; see verification items.
- Total assets were $27.51 million, including $13.73 million of goodwill and $2.49 million of net intangible assets. Stockholders’ equity was $12.88 million.
Material changes versus prior comparable periods
- Revenue fell 26% year over year in Q2 and 22% in the first half. Management attributed the declines mainly to COVID-19-related customer work reductions.
- Gross margin was unchanged at 22% in Q2 and declined one percentage point to 21% for the first half.
- SG&A declined to $2.47 million in Q2 from $3.30 million and to $5.40 million in the first half from $6.17 million. Despite lower costs, first-half operating loss was broadly unchanged.
- First-half interest expense increased to $0.53 million from $0.30 million, which management attributed to new borrowing in 2020.
- Accounts receivable rose to $7.29 million from $6.38 million; the company cited delayed customer payments during the pandemic. Common shares outstanding increased substantially during the period, including a 862,500-share registered offering and shares issued to extinguish liabilities.
Outlook, risks and unusual items
- Management said the company expected to fall short of its 2020 revenue goals and anticipated approximately $3.5 million less revenue from existing clients over the next 12 months compared with full-year 2019, primarily due to COVID-19. Management’s target gross-margin range was 20%–25%, without assurance it would be achieved.
- A major customer, described as a top-five U.S. airline, terminated most of its work. The customer historically generated $5–$7 million of annual revenue; management estimated a roughly $1.5 million revenue reduction in Q2 and said some work might return as the airline industry recovers. Other pandemic effects included reduced billable hours, delayed payments and postponed new projects.
- The company reported recurring losses, a $44.1 million accumulated deficit and substantial doubt about its ability to continue as a going concern. It said it expected cash reserves, including government-program funding and equity proceeds, to cover anticipated working capital for 12 months, but also stated continued operations depended on financing, cost efficiencies and revenue growth, with no assurance these would be achieved.
- COVID-19 relief financing included a $1.72 million PPP loan at 1%, potentially forgivable subject to qualifying use, and a $149,900 EIDL loan at 3.75%. The $1.00 million secured note bore 7.25% interest and was due shortly after quarter-end.
- A June registered offering raised $1.725 million gross for 862,500 shares at $2.00 per share and included placement-agent warrants. A further $1.00 million financing closed July 31 and included shares and warrants.
- Management reported ineffective disclosure controls and internal control over financial reporting, citing integration of acquired private companies. The filing also revised prior-year financial statements for lease-accounting errors; it reports a $3,788 increase in 2019 net loss, while some displayed revision-table totals appear inconsistent.
Most important facts for investors to verify
- Confirm the issuer and filing: the supplied document is AMERI Holdings’ 2020 Q2 10-Q, not an Enveric Biosciences filing.
- Reconcile convertible-debt disclosures: Note 18 describes a $2.265 million 1% debenture, while MD&A reports $815,342 of 1% debentures outstanding; the balance sheet separately lists a $1.165 million debenture liability.
- Determine the status and repayment or refinancing of the $1.00 million secured note due August 31, 2020, and confirm the amount and potential forgiveness of the PPP loan.
- Track customer concentration, receivable collections and the realized impact of the airline customer’s reduced work, alongside the company’s stated going-concern funding needs.
- Verify share counts and potential dilution from offerings, convertible instruments and warrants. The filing gives differing June 30 common-share figures in separate sections and reports 5,737,001 shares outstanding as of August 12, 2020.
- Confirm the status and terms of the Ameri100/Jay Pharma transactions and any associated costs, conditions or dilution; the filing says the August 12 tender agreement replaced the earlier amalgamation agreement.