Filing summary
Issuer mismatch: The request identifies Enveric Biosciences, Inc., but the supplied filing is AMERI Holdings, Inc.’s Form 10-Q for the quarter ended September 30, 2016. This summary reflects the supplied filing, not Enveric’s.
Business context and reporting period
AMERI described itself as a technology consulting and solutions firm, primarily serving North American customers. It reported unaudited results for the three and nine months ended September 30, 2016, compared with the same 2015 periods; its fiscal year ends December 31. Revenue primarily came from consulting services. The 2016 results included acquisitions of Virtuoso, DC&M and Bigtech.
Financial performance and position
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | $10.06 million | $4.46 million | $23.76 million | $12.68 million |
| Gross profit / margin | $1.70 million / 16.9% | $1.44 million / 32.3% | $4.47 million / 18.8% | $3.54 million / 27.9% |
| Operating income (loss) | $(1.29) million | $(0.32) million | $(3.21) million | $0.94 million |
| Net income (loss) | $(1.72) million | $(0.16) million | $(4.09) million | $1.03 million |
| EPS, basic and diluted | $(0.13) | $(0.02) | $(0.32) | $0.10 |
For the nine months, operating cash flow was negative $3.00 million, investing cash flow was negative $5.43 million, and financing cash flow was positive $9.47 million. Cash increased by $1.04 million to $2.91 million from December 31, 2015. At September 30, current assets were $11.27 million and current liabilities $13.61 million; the resulting current ratio was approximately 0.83.
Total liabilities were $33.37 million. They included $5.00 million of convertible notes, $4.14 million of short-term notes, $1.57 million of long-term notes, and current and long-term acquisition consideration payable totaling $16.41 million. The company reported $5.30 million outstanding under Sterling National Bank term and revolving loans combined. Accounts receivable were $7.72 million.
Material changes versus prior periods
- Revenue increased 125.4% in Q3 and 87.4% for the nine months, which management attributed primarily to acquired businesses.
- Gross margin fell to 16.9% in Q3 from 32.3%; nine-month margin declined to 18.8% from 27.9%.
- Nine-month results shifted from $1.03 million net income to a $4.09 million net loss. Operating expenses rose substantially, including general and administrative expense, nonrecurring expenditures, and depreciation and amortization.
- Cash rose despite operating and investing outflows, supported by financing that included equity issuance, warrant exercise proceeds, and borrowing. Shares outstanding increased to 13,885,972 from 11,639,066 at year-end 2015.
- Acquisition-related goodwill rose to $17.38 million from $3.47 million at year-end; intangible assets, net, rose to $9.36 million from $3.11 million.
Outlook, risks, and unusual items
No quantified revenue or earnings guidance was provided. Management said it intended to pursue organic growth and strategic alternatives, including selective acquisitions, and continued to consider raising capital or incurring debt. The Sterling facility permits up to $10 million in aggregate borrowing, subject to its terms.
Q3 nonrecurring expenditures were $1.02 million, primarily related to an increased earn-out estimate, restructuring, and legal fees. Nine-month nonrecurring expenditures were $1.63 million and included financing costs, restructuring, and legal fees. The company also reported a $197,723 loss on sale of a fixed asset for the 2016 periods. Acquisition earn-outs and purchase-price valuations depend on estimates and could change.
Management identified risks including customer retention and collections, demand and project timing, converting the sales pipeline to billable work, recruiting and retaining skilled employees, integrating acquisitions, and meeting growth objectives. Management concluded that disclosure controls and internal control over financial reporting were not effective as of September 30, 2016, citing inadequacies associated with acquired privately held subsidiaries; the filing says corrective changes were made. No material changes to previously disclosed risk factors were reported. No legal proceedings or material subsequent events were reported in the filing.
Important facts for investors to verify
- Confirm the intended issuer: the supplied 10-Q is for AMERI Holdings, Inc., not Enveric Biosciences, Inc.
- Review acquisition-related consideration, earn-out obligations, and the outstanding balances and terms of the Sterling credit facility and other debt.
- Assess whether acquired revenue can support margins and cash generation, given lower margins, operating losses, and negative operating cash flow.
- Review the control weaknesses and remediation status, as well as the significant acquisition accounting estimates.
- Reconcile the cash flow statement’s investing line descriptions and amounts against the full filing; the text provided does not make every line item’s presentation clear.