Filing Summary: AMERI Holdings, Inc. Form 10-Q
Entity discrepancy: The request identifies Enveric Biosciences, Inc., but the supplied filing is for AMERI Holdings, Inc. This summary reflects the filing text provided, not an Enveric filing.
Business context and reporting period
The filing covers the unaudited quarter ended March 31, 2019, compared with the three months ended March 31, 2018. AMERI provided SAP cloud, digital and enterprise technology services through subsidiaries, with most revenue generated in North America. The company reported one operating segment.
Key financial metrics
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $10.69 million | $11.06 million; down 3% |
| Gross profit / margin | $2.14 million / 20% | $2.34 million / 21% |
| Operating expenses | $3.44 million | $3.71 million |
| Operating loss | $1.30 million | $1.37 million |
| Net loss attributable to common stockholders | $1.97 million; $0.04 per share | $2.13 million; $0.11 per share |
| Cash used in operations | $0.98 million | $0.46 million |
| Cash and cash equivalents at period end | $1.72 million | $1.37 million at Dec. 31, 2018 |
| Current assets / current liabilities | $11.46 million / $14.71 million | Negative working capital of approximately $3.2 million, as reported by management |
Interest expense was $143,000, down from $211,000. A $450,000 noncash increase in the fair value of warrant liabilities contributed to higher other expense. The filing reports total liabilities of $19.34 million, including a $4.19 million line of credit, $1.00 million of convertible notes and $2.60 million of cash consideration payable. Stockholders’ equity was $11.16 million.
Material changes versus the prior comparable period
- Revenue declined by $377,000, which management attributed mainly to not pursuing certain low-margin professional-services work.
- Gross margin fell to 20% from 21%, attributed to a lower-margin solution-based project.
- Operating loss narrowed modestly, with lower depreciation and amortization partly offsetting lower gross profit.
- Net loss attributable to common stockholders improved, but the comparison includes a much smaller preferred-stock dividend in 2019. The warrant-liability remeasurement increased 2019 other expense.
- Weighted-average common shares rose to 45.2 million from 18.7 million. Period-end common shares increased to 50.3 million from 42.3 million at year-end, largely reflecting warrant exercises and earnout shares.
- Cash increased by $352,000 during the quarter, principally through financing activity, including $1.47 million from common-share issuance; operating activities used cash.
Outlook, risks and unusual items
- Management indicated a future gross-margin target range of 20%–25%, while noting there is no assurance it will be achieved. No specific revenue or earnings guidance is provided.
- Management stated that recurring losses, negative working capital and dependence on additional equity or debt financing raise substantial doubt about the company’s ability to continue as a going concern.
- A new North Mill Capital facility was entered into in January 2019, with a two-year initial term, a minimum interest rate of 7.25% and a first-priority security interest in borrower and company assets. The approximately $2.85 million initial advance was used in part to repay the prior Sterling National Bank facility. The filing lists a $4.19 million line-of-credit balance but does not clearly reconcile that balance to the new facility or disclose remaining borrowing availability.
- The company repaid $250,000 of its 8% convertible notes during the quarter; the remaining notes mature in March 2020 and are convertible at $2.80 per share.
- Five major customers represented 42% of quarterly revenue, up from 39% a year earlier, indicating customer concentration.
- Disclosure controls and internal control over financial reporting were reported not effective, primarily because acquired subsidiaries had not been fully integrated into company-wide control processes.
- A settlement with a former Ameri Arizona member required $200,000 in four installments from February through May 2019. The filing says the settlement resolves the dispute in its entirety.
Important facts for investors to verify
- Confirm the issuer and filing: the provided 10-Q is AMERI Holdings, Inc., not Enveric Biosciences, Inc.
- Review the going-concern disclosure, cash burn, negative working capital and the company’s financing needs.
- Verify the North Mill facility’s quarter-end balance, borrowing availability, collateral scope, fees and covenants against the underlying loan documents.
- Assess customer concentration, receivables growth and collections; accounts receivable increased to $8.90 million from $7.87 million at year-end.
- Review potential dilution from outstanding warrants, convertible notes and equity issuances; the filing reports 50.3 million common shares outstanding at May 3, 2019.
- Monitor remediation of the ineffective financial-reporting controls and the company’s ability to achieve its stated margin target.