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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C.
20549   FORM 10-Q þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended March 31, 2005 OR o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
 For the transition period from _________ to _________ Commission File Number 0-23315 enherent Corp.  Delaware
(State or Other Jurisdiction of Incorporation)
    
    No. 13-3914972
(I.R.S. Employer Identification No.)
 192 Lexington Avenue
New York, NY 10016
(Address of Principal Executive Offices) (212) 889-7722
(Registrants Telephone Number, Including Area Code)   Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. þ o
 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). YES o NO þ Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date: Class
    
    Shares outstanding as of April 29, 2005Common stock, par value $.001
    
    50,465,717




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enherent Corp. and Subsidiaries INDEX PagePART I. FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Condensed Consolidated Balance Sheets as of March 31, 2005
and December 31, 2004
    
    
    1Condensed Consolidated Statements of Operations for the three
months ended March 31, 2005 and 2004
    
    
    2Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2005 and 2004
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    9Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    13Item 4. Controls and Procedures
    
    
    13PART II. OTHER INFORMATION
    
    
    14Item 1. Legal Proceedings
    
    
    14Item 4. Submission of Matters to a Vote of Security Holders
    
    
    14Item 5. Other Information
    
    
    14Item 6. Exhibits
    
    
    15SIGNATURES
    
    
    S-1EXHIBIT INDEX
    
    
    E-1Letter from Ersnt & Young LLPCertification of Chief Executive Officer Pursuant to Section 302Certification of Principal Financial Officer Pursuant to Section 302Certification of Chief Executive Officer Pursuant to Section 302Certification of Principal Financial Officer Pursuant to Section 906
  i




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PART I. FINANCIAL INFORMATION 
 Item 1. Financial Statements enherent Corp. and Subsidiaries 
  (In thousands, except number of shares)
 March 31,
    
    
    December 31,2005
    
    
    2004(unaudited)
    
    
    (Note 1)AssetsCurrent assets:Cash and equivalents
    
    $
    892
    
    
    $
    1,448Accounts receivable, net of allowance of
$59 at March 31, 2005 and $13 at
December 31, 2004
    
    
    2,590
    
    
    
    2,059Prepaid expenses and other current assets
    
    
    169
    
    
    
    127Total current assets
    
    
    3,651
    
    
    
    3,634Fixed assets, net
    
    
    14
    
    
    
    16Other assets
    
    
    50
    
    
    
    50Total assets
    
    $
    3,715
    
    
    $
    3,700Liabilities and stockholders equityCurrent liabilities:Current portion of long term debt
    
    $
    50
    
    
    $
    50Accounts payable
    
    
    864
    
    
    
    939Accrued compensation
    
    
    897
    
    
    
    372Accrued expenses
    
    
    526
    
    
    
    318Deferred revenue
    
    
    
    
    
    
    20Total current liabilities
    
    
    2,337
    
    
    
    1,699Long term debt
    
    
    100
    
    
    
    100Total liabilities
    
    
    2,437
    
    
    
    1,799Commitments and contingenciesSeries A senior participating redeemable
convertible preferred stock, $0.001 par
value; authorized - 10,000,000 shares;
issued and outstanding  4,250,000 shares
at March 31, 2005 and December 31, 2004
    
    
    4,214
    
    
    
    4,109Common stockholders equity (deficit):Common stock, $0.001 par value;
authorized - 50,000,000 shares; issued -
20,297,977 shares; outstanding -
18,448,854 shares at March 31, 2005 and
December 31, 2004
    
    
    20
    
    
    
    20Additional paid-in capital
    
    
    94,502
    
    
    
    94,455Treasury stock, at cost - 1,849,123
shares at March 31, 2005 and December
31, 2004
    
    
    (366
    )
    
    
    (366
    )Accumulated deficit
    
    
    (97,092
    )
    
    
    (96,317
    )Total common stockholders deficit
    
    
    (2,936
    )
    
    
    (2,208
    )Total liabilities and stockholders deficit
    
    $
    3,715
    
    
    $
    3,700
 See accompanying notes to condensed consolidated financial statements. 1




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enherent Corp. and Subsidiaries 
  (In thousands, except per share data)
 Three MonthsEnded March 31,2005
    
    
    2004Revenues
    
    $
    3,729
    
    
    $
    2,912Cost of revenues
    
    
    2,768
    
    
    
    2,181Gross profit
    
    
    961
    
    
    
    731Selling, general and administrative expenses
    
    
    1,630
    
    
    
    925Loss from operations
    
    
    (669
    )
    
    
    (194
    )Other income (expense):Interest expense
    
    
    (1
    )
    
    
    Net loss
    
    
    (670
    )
    
    
    (194
    )Accretion of preferred stock
    
    
    (105
    )
    
    
    (154
    )Net loss applicable to common stockholders
    
    $
    (775
    )
    
    $
    (348
    )Basic and diluted net loss per share
applicable to common stockholders
    
    $
    (.04
    )
    
    $
    (.02
    )Number of shares used in computing basic
and diluted net loss per share (000s)
    
    
    18,449
    
    
    
    17,699
 See accompanying notes to condensed consolidated financial statements. 2




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enherent Corp. and Subsidiaries 
  (In thousands)
  Three Months Ended March 31,2005
    
    
    2004Cash flows from operating activitiesNet loss
    
    $
    (670
    )
    
    $
    (194
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    3
    
    
    
    40Provision for doubtful accounts
    
    
    52
    
    
    
    3Deferred rent
    
    
    
    
    
    
    (8
    )Stock option compensation
    
    
    5
    
    
    
    Amortization of deferred restricted stock compensation
    
    
    42
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (583
    )
    
    
    (465
    )Prepaid expenses and other current assets
    
    
    (42
    )
    
    
    (91
    )Accrued compensation
    
    
    525
    
    
    
    89Accounts payable and other accrued expenses
    
    
    133
    
    
    
    110Deferred revenue
    
    
    (20
    )
    
    
    (10
    )Net cash used in operating activities
    
    
    (555
    )
    
    
    (526
    )Cash used for investing activitiesPurchased of fixed assets
    
    
    (1
    )
    
    
    Net cash used investing activities
    
    
    (1
    )
    
    
    Cash flows from financing activitiesProceeds from exercise of stock options
    
    
    
    
    
    
    4Principal payments under capital lease obligations
    
    
    
    
    
    
    (1
    )Net cash used in financing activities
    
    
    
    
    
    
    3Net decrease in cash and equivalents
    
    
    (556
    )
    
    
    (523
    )Cash and cash equivalents at beginning of period
    
    
    1,448
    
    
    
    2669Cash and cash equivalents at end of period
    
    $
    892
    
    
    $
    2,146
 See accompanying notes to condensed consolidated financial statements. 3




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enherent Corp. and Subsidiaries 
    1.
    Basis of PresentationThe unaudited condensed consolidated financial statements presented herein have been prepared in
accordance with generally accepted accounting principles for interim financial information and
the instructions to Form 10-Q and Item 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements include all adjustments (consisting only
of normal recurring entries, except as disclosed) considered necessary for a fair presentation
of the financial condition and results of operations for the periods presented. The results of
operations for the three-month period ended March 31, 2005 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2005. The condensed consolidated
balance sheet as of December 31, 2004 was derived from the audited consolidated balance sheet as
of that date. The statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the enherent Corp. (enherent or the
Company) Annual Report on Form 10-K for the year ended December 31, 2004.On April 1, 2005 the Company completed the Merger (the Merger) with Dynax Solutions, Inc.
(Dynax). See Note 3. The Merger was completed upon the majority approval of shareholders in
separate shareholder meetings as required by the Agreement and Plan of Merger, executed on
October 12, 2004, as amended.The Merger will be accounted for using the purchase method of accounting for financial reporting
purposes, See Note 4. In a merger-of-equals transaction, the purchase method requires the
identification of the acquiring entity. Financial statements issued after the consummation of
an acquisition accounted for as a purchase would reflect such values and not be restated
retroactively to reflect the historical financial position or results of operations of the
acquired company. The historical financial statements of the surviving corporation will be
those of the accounting acquirer (Dynax) and comparative statements of the surviving corporation
will be those of the accounting acquirer (Dynax) rather than the legal acquirer (enherent).The holders of the Companys Series A Senior Participating Redeemable Convertible Preferred
Stock (the Preferred Stock), discussed in Note 5, had agreed that, upon consummation of the
Merger, the Preferred Stock and related warrants would be transferred to enherent in exchange
for an aggregate of 8,500,000 shares of common stock and subordinated secured notes with an
aggregate principal amount of $1,600,000. With the completion of the Merger on April 1, 2005,
this transfer and exchange occurred. See Note 4.2.
    Principles of ConsolidationThe accompanying condensed consolidated financial statements include the accounts of enherent
and its wholly owned subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation. 4




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enherent Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)  3.
    Recent Accounting PronouncementsIn December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment. SFAS No.
123(R) will require that the compensation cost relating to share-based payment transactions be
recognized in financial statements. That cost will be measured based on the fair value of the
equity or liability instruments issued. SFAS No. 123(R) covers a wide range of share-based
compensation arrangements including share options, restricted share plans, performance-based
awards, share appreciation rights, and employee share purchase plans. SFAS No. 123(R) replaces
FASB Statement No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No.
25, Accounting for Stock Issued to Employees. SFAS No. 123, as originally issued in 1995,
established as preferable a fair value-based method of accounting for share-based payment
transactions with employees. That Statement, however, permitted entities the option of
continuing to apply the guidance in APB Opinion No. 25, as long as the footnotes to financial
statements disclosed what net income would have been had the preferable fair value-based method
been used. Pursuant to an amendment to SFAS No. 123(R) adopted by the SEC in April 2005, public
entities will be required to apply SFAS No. 123(R) as of the first annual reporting period that
begins after June 15, 2005. The impact of the adoption of Statement No. 123(R) cannot be
predicted at this time because it will depend on levels of share-based payments granted in the
future. Had the Company adopted Statement No. 123(R) in prior periods, however, the impact of
that Statement would have approximated the impact of Statement No. 123 as described in the
disclosure of pro forma net income (loss) and net income (loss) per share in the stock based
compensation accounting policy included in Note 5 below.4.
    Merger with Dynax Solutions, Inc.On October 12, 2004, enherent had entered into a definitive Agreement and Plan of Merger (the
Merger Agreement) with Dynax to combine in a stock-for-stock exchange. The Merger was
completed on April 1, 2005. Following the Merger, the former stockholders of Dynax own
approximately 50% of the common stock of enherent on a fully diluted basis. enherent Corp. was
the surviving legal entity.The Merger will be accounted for using the purchase method of accounting for financial reporting
purposes. In a merger-of-equals transaction, the purchase method requires the identification of
the acquiring entity based on the criteria of Financial Accounting Standard Board (FASB)
Financial Accounting Standards No. 141, Accounting for Business Combinations (FAS141). Based
on an analysis of minority interests in the surviving corporation and the composition of the
board of directors and senior management of the surviving corporation, for accounting purposes
Dynax has been identified as the acquiring entity, and enherent as the acquired entity. Under
purchase accounting, the assets and liabilities of an acquired company (enherent) as of the
effective time of the acquisition are recorded at their respective fair values and added to
those of the acquiring company (Dynax). Financial statements issued after the consummation of
an acquisition accounted for as a purchase would reflect such values and not be restated
retroactively to reflect the historical financial position or results of operations of the
acquired company. The historical financial statements of the surviving corporation will be
those of the accounting acquirer (Dynax) and 5




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enherent Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)  comparative statements of the surviving corporation will be those of the accounting acquirer
(Dynax) rather than the legal acquirer (enherent).5.
    Stock-Based Compensationenherent accounts for employee stock compensation and stock options using the intrinsic value
method set forth in Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees (APB No. 25). enherent accounts for stock option grants to outside
directors for services as directors under APB No. 25 and FASB Interpretation No. 44 and,
accordingly, recognizes compensation expense only if the fair value of the underlying common
stock exceeds the exercise price of the stock option on the date of grant. As permitted by
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS 123), enherent continues to account for stock-based compensation in accordance with APB
No. 25 and has elected the pro forma disclosure alternative of SFAS No. 123.The following table illustrates the effect on net loss and loss per share if enherent had
applied the fair value recognition provisions of SFAS 123 instead of APB Opinion No. 25s
intrinsic value method to account for stock-based employee compensation (in thousands, except
per share amounts): Three months endedMarch 31,2005
    
    
    2004Net loss available to common stockholders
as reported
    
    $
    (775
    )
    
    $
    (348
    )Total stock option expense determined under
fair value base method
    
    
    (20
    )
    
    
    (25
    )Pro forma net loss
    
    $
    (795
    )
    
    $
    (373
    )Net loss per common share as reported:Basic and diluted
    
    $
    (.04
    )
    
    $
    (.02
    )Net loss per common share pro forma:Basic and diluted
    
    $
    (.04
    )
    
    $
    (.02
    )
 6




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enherent Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited) Pro forma information regarding net loss and loss per share is required by SFAS No. 123 and
has been determined as if enherent had accounted for its employees stock options under the fair
value method provided by SFAS No. 123. The fair value of the options was estimated at the date
of grant using the Black-Scholes option pricing model with the following assumptions for vested
and non-vested options: March 31,Assumption
    
    2005
    
    
    2004Risk-free interest rate
    
    
    3.50
    %
    
    
    2.00
    %Dividend yield
    
    
    0
    %
    
    
    0
    %Volatility factor of the expected
market price of enherent common
stock
    
    
    1.97
    
    
    
    1.340Average life years
    
    
    5
    
    
    
    5
  6.
    Series A Senior Participating Redeemable Convertible Preferred StockThe 4,250,000 outstanding shares of Preferred Stock are being accreted to their liquidation
value of $4,250,000. In the three-month periods ending March 31, 2005 and 2004, accretion of
approximately $105,000 and $154,000 respectively, was recognized.The holders of the Preferred Stock had agreed, upon consummation of the Merger with Dynax
described in Note 3, to convert or transfer back to enherent all of the shares of outstanding
Preferred Stock and cancel all warrants to purchase shares of enherent common stock issued to
such holders in connection with the Preferred Stock in exchange for 8,500,000 shares of enherent
common stock and subordinated secured notes in the aggregate principal amount of $1,600,000.
This transfer and exchange became effective on April 1, 2005, with the consummation of the
Merger.7.
    Loss Per ShareThe following table sets forth the computation of basic and diluted loss per share (in
thousands, except per share data): Three months endedMarch 31,2005
    
    
    2004Numerator:Net loss available to common stockholders
 Basic and diluted
    
    $
    (775
    )
    
    $
    (348
    )Denominator:Weighted average of shares outstanding 
Basic and diluted
    
    
    18,449
    
    
    
    17,699Basic and diluted net loss per share
    
    $
    (.04
    )
    
    $
    (.02
    )
 7




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enherent Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)  In the three months ended March 31, 2005 and 2004, enherent has excluded the impact of its
Preferred Stock and related warrants and stock options outstanding under enherents stock option
plan because the effect would be anti-dilutive.8.
    ContingenciesIn the normal course of business, various claims are made against enherent. At this time, in
the opinion of management, there are no pending claims the outcome of which are expected to
result in a material adverse effect on the consolidated financial position or results of
operations of enherent. 8




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. Merger with Dynax On October 12, 2004, enherent Corp. (enherent or the Company) had entered into a definitive
merger agreement with Dynax Solutions, Inc. (Dynax) to combine in a stock-for-stock exchange (the
Merger). The Merger was completed on April 1, 2005. Following the Merger, the former
stockholders of Dynax own approximately 50% of the common stock of enherent on a fully diluted
basis. enherent was the surviving legal entity. The Merger will be accounted for using the purchase method of accounting for financial reporting
purposes. In a merger-of-equals transaction, the purchase method requires the identification of
the acquiring entity based on the criteria of Financial Accounting Standard Board (FASB)
Financial Accounting Standards No. 141, Accounting for Business Combinations (FAS141). Based on
an analysis of minority interests in the surviving corporation and the composition of the board of
directors and senior management of the surviving corporation, for accounting purposes Dynax has
been identified as the acquiring entity, and enherent as the acquired entity. Under purchase
accounting, the assets and liabilities of an acquired company (enherent) as of the effective time
of the acquisition are recorded at their respective fair values and added to those of the acquiring
company (Dynax). Financial statements issued after the consummation of an acquisition accounted
for as a purchase would reflect such values and not be restated retroactively to reflect the
historical financial position or results of operations of the acquired company. The historical
financial statements of the surviving corporation will be those of the accounting acquirer (Dynax)
and comparative statements of the surviving corporation will be those of the accounting acquirer
(Dynax) rather than the legal acquirer (enherent). Critical Accounting Policies Use of Estimates As described in Note 1, the condensed consolidated financial statements presented elsewhere in this
report have been prepared in conformity with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Item 10-01 of Regulation S-X. The
preparation of these financial statements requires management to make estimates and assumptions
that affect the reported amounts in the financial statements and accompanying notes. Actual
results could differ from those estimates. Revenue Recognition Revenues are primarily derived from consultants on engagements with clients for a period of time.
The revenues from these time and materials contracts are recognized during the period in which the
related services are provided. Revenue may also include fees earned on recruiting individuals for
positions in client companies as full time employees (permanent placements). Revenues from
permanent placements are recognized when the candidate has substantially satisfied any guarantee
period. Such guarantee periods range from 30 to 90 days. In the three-month period ending March
31, 2005, enherent recognized approximately $43,000 in revenue from permanent placements. In the
comparable period of 2004 there was no revenue from permanent placements. 9




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Accounts Receivable and Allowance for Doubtful Accounts enherents accounts receivable balance is reported net of estimated allowances for balances not
expected to be collectible. enherent regularly evaluates the collectability of amounts owed to it
based on the ability of the debtor to make payments. When enherents evaluation indicates that a
customer will be unable to satisfy its obligation, enherent will record a reserve to reflect this
anticipated loss. enherent periodically reviews the requirements, and adequacy of the reserve, for
doubtful accounts. Fixed Assets Fixed assets are stated at cost and depreciation on furniture and equipment, computer equipment and
software is calculated on the straight-line method over the estimated useful lives of the assets
ranging from three to seven years. Equipment held under capital leases and leasehold improvements
are amortized using the straight-line method over the shorter of the lease term or estimated useful
life of the asset. enherent evaluates long-lived assets for impairment and records charges in
operating results when events and circumstances indicate that assets may be impaired. The
impairment charge is determined based upon the amount by which the net book value of the asset
exceeds its estimated fair market value. No impairment charges have been recognized in any of the
periods presented herein. Results of Operations Revenues.Revenue of $3.7 million during the three-month period ended March 31, 2005 was $0.8
million higher then the $2.9 million in revenue for the 2004 period. Revenues have continued to
improve on a quarter-to-quarter comparative basis since the first quarter of 2004. The
quarter-to-quarter improvement reflects net increases in billable consulting hours and management
expects billable consulting hours to continue to increase on a net basis in the near term. Cost of Revenues.Cost of revenues was $2.8 million for the three-month period ended March 31,
2005, an increase of $0.6 million over the $2.2 million incurred in the three-month period ended
March 31, 2004. While cost of revenues for the current three-month period has increased compared
to the comparable prior years three-month period, as a percentage of revenues such costs have
decreased slightly. Cost of revenues as a percentage of revenues decreased from 74.9% for the
three-month period ended March 31, 2004 to 74.2% for the three-month period ended March 31, 2005. Gross Profit.Gross profit as a percentage of revenues for the three-month period ended March 31,
2005 was 25.8% versus 25.1% in the comparable prior year period. The increase in gross profit as a
percentage of revenues for the three-month period ended March 31, 2005 versus the comparable period
of 2004 reflects primarily a $43,000 increase in permanent placement revenues, which carry higher
margins, for the quarter. Selling, General & Administrative (SG&A) Expenses.SG&A expenses increased approximately $0.7
million, or 76.2% to $1.6 million in the three-month period ended March 31, 2005 from $0.9 million
for the comparable period in 2004. SG&A expenses as a percentage of revenue were 43.7% for the
three-month period ended March 31, 2005, compared to 31.8% for the three-month period ended March
31, 2004. 10




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SG&A expenses for the three-month period ending March 31, 2005 included approximately $605,000 in
expenses and one-time charges related to the Merger between enherent and Dynax. Because Dynax is
the acquirer for accounting purposes, the merger related expenses incurred by enherent are
expensed. Loss from Operations.The Companys loss from operations for the three months ended March 31, 2005
was $669,000, an increase of approximately $475,000 from the $194,000 operating loss for the
three-months ended March 31, 2004. The increase in loss from operations resulted primarily from
the increased SG&A expense in the first quarter of 2005. Accretion of Preferred Stock.Accretion of Preferred Stock of approximately $105,000 and $154,000,
respectively, was recognized in the three-month periods ended March 31, 2005 and 2004. The
decrease reflects primarily the purchase and retirement of 2,750,000 shares of preferred stock in
the second quarter of 2004. Liquidity and Capital Resources Working Capital.enherents working capital was approximately $1.3 million at March 31, 2005
compared to $1.9 million at December 31, 2004. Cash and cash equivalents were $0.9 million at
March 31, 2005 compared to $1.4 million at December 31, 2004. The primary use of cash during the
three-month period ended March 31, 2005 was to pay costs related to the Merger of approximately
$0.2 million and to fund operating activities and finance working capital related to the growth of
the business of approximately $0.4 million. enherents accounts receivable were $2.7 million at
March 31, 2005 and $2.0 million at December 31, 2004. Billed days sales outstanding (DSO), net of
allowance for doubtful accounts, were 65 days at March 31, 2005 and 51 days at December 31, 2004.
The increase in DSO was primarily the result of delays in collection that the Company experienced
in the first few billings cycles with a new customer that has longer payment terms. In addition,
the Company was required to modify its billing processes to align with changes at another large
customer account. enherent anticipates that its primary uses of cash in the near term will be to fund enherents
operations and complete the Merger with Dynax. As of March 31, 2005, enherents obligations under
non-cancelable operating leases totaled $30,000. In April 2005, enherent entered into an amendment
to its lease whereby it has reduced the square footage occupied and extended the term for three
years starting May 1, 2005. Rent due over the lease term is approximately $326,000. As a result
of enherents repurchase of shares of its Preferred Stock in 2004 the Company is obligated to make
principal and interest payments on a three year $150,000 promissory note. Annual principal
payments of $50,000 are due commencing on April 15, 2005. Post-Merger Financing. The holders of the Preferred Stock (the Preferred Stockholders) had a
redemption right, exercisable at their option, after January 16, 2006, at a value of $1.00 per
share. With the consummation of the Merger, on April 1, 2005, all of the shares of outstanding
Preferred Stock have been converted in a non-cash exchange for an aggregate of 8,500,000 shares of
enherent common stock and subordinated, secured notes in the aggregate principal amount of
$1,600,000. On April 1, 2005, following the consummation of the Merger, the Company entered into an Amended and
Restated Credit Agreement, dated April 1, 2005, among the Company and Ableco Finance LLC (Ableco)
as lender and agent (the Amended Credit Agreement). The Amended 11




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Credit Agreement with Ableco provided the Company with a three-year extension of the revolving
credit facility previously maintained by Dynax, and assumed by enherent in the Merger, and an
increase in the revolving credit facility from $4.0 million to $6.0 million. The Amended Credit
Agreement also amended the terms of the Term Loan A and the Term Loan B previously maintained by
Dynax, and assumed by enherent in the Merger. The credit facility and the Term Loan A are secured
by a first lien on all tangible and intangible assets of the Company. The Term Loan B is secured
by a subordinated lien on all tangible and intangible assets of the Company. Borrowings under the revolving credit facility bear interest at 3% above the greater of: (a) the
prime rate; or (b) 7.75% a year, payable monthly and are limited, in general, to 85% of eligible
accounts receivable and 80% of the net amount of unbilled accounts receivable. As of April 1,
2005, the balance outstanding under the revolving credit facility was $2,418,507.91. The Term Loan
A is payable in monthly installments of $25,000 of principal, together with annual interest at a
rate of 12.25%, to September 30, 2005. As of April 1, 2005, the balance outstanding was
$150,102.98. The Term Loan B is payable in semi-annual installments of $212,500 commencing October
1, 2007, with such installments increasing to $425,000 on October 1, 2009, of principal together
with annual interest at a rate of 3%, to April 1, 2010. As of April 1, 2005, the outstanding
principal balance of Term Loan B was $1,700,000. The principal amount of the Term Loan B will be
reduced by $250,000 if the outstanding principal of the Term Loan B less such $250,000 reduction
has been repaid in full on or before April 1, 2006. The principal amount of the Term Loan B will
be reduced by $125,000 if the outstanding principal of the Term Loan B less such $125,000 reduction
has been repaid in full after April 1, 2006 but on or before April 1, 2007. The Company entered into an Intercreditor and Subordination Agreement dated April 1, 2005 among the
Company, certain subsidiaries listed therein, Ableco and the Preferred Stockholders to define the
rights of and evidence the priorities among those creditors. The credit facility, including the
Term Loan A, is secured by a first lien on all tangible and intangible assets of the Company. The
Term Loan B and the notes issued to the Preferred Stockholders are secured on a pari passu basis by
liens on all tangible and intangible assets of the Company, which liens are subordinated to the
lien securing the credit facility and the Term Loan A. Forward-looking and Cautionary Statements This report contains forward-looking statements as defined in Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements include information about possible or assumed future results of
enherents operations. Statements made in this SEC filing that are qualified with words such as
would, believes, expects, anticipates or similar expressions are forward-looking
statements. Many possible events or factors could affect enherents future financial results and
performance, causing enherents results or performance to differ materially from those expressed in
enherents forward-looking statements.Investors are cautioned that such forward-looking
statements involve risks and uncertainties including without limitation the following: (i) the
Companys plans, strategies, objectives, expectations and intentions are subject to change at any
time at the discretion of the Company; (ii) the Companys plans and results of operations will be
affected by the Companys ability to manage its growth and resources; (iii) competition in the
industry and the impact of competition on pricing, revenues and margins; (iv) the Companys ability
to recruit and retain IT professionals; (v) the Companys ability to successfully integrate the
business acquired in the Merger with Dynax; and (vi) other 12




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risks and uncertainties indicated from time to time in the Companys filings with the Securities
and Exchange Commission. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk. For the period ended March 31, 2005, the Company did not experience any material changes in market
risk exposures that affect the quantitative and qualitative disclosures presented in the Companys
Annual Report on Form 10-K for the fiscal year ended December 31, 2004. 
 Item 4. Controls and Procedures. The Company maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in its Exchange Act reports is recorded, processed, summarized
and reported within the time periods specified in the SECs rules and forms, and that such
information is accumulated and communicated to the Companys management, including the Companys
Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. Such controls and procedures, by their nature, can
provide only reasonable assurance regarding managements control objectives. The Company carried out an evaluation, under the supervision and with the participation of its
management, including its Principal Executive Officer and Principal Financial Officer, on the
effectiveness of the design and operation of its disclosure controls and procedures pursuant to
Exchange Act Rules 13a-15 and 15d-15 as of March 31, 2005. Based upon that evaluation, the
Companys Principal Executive Officer and Principal Financial Officer concluded that the Companys
disclosure controls and procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be included in the
Companys Exchange Act reports. While the Company believes that its existing disclosure controls and procedures have been effective
to accomplish its objectives, the Company intends to continue to examine, refine and formulize its
disclosure controls and procedures and to monitor ongoing developments in this area. There was no change in the Companys internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) during the fiscal quarter ended March 31, 2005 that has
materially affected, or is reasonably likely to materially affect, the Companys internal control
over financial reporting. 13




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PART II. OTHER INFORMATION 
 Item 1. Legal Proceedings. In the normal course of business, various claims are made against enherent. At this time, in the
opinion of management, there are no pending claims the outcome of which are expected to result in a
material adverse effect on the consolidated financial position or results of operations of
enherent. 
 Item 4. Submission of Matters to a Vote of Security Holders. Information concerning the Special Stockholders Meeting held on April 1, 2005 is contained in Item
8.01 of the Companys Current Report on Form 8-K filed on April 6, 2005 and is incorporated herein
by reference. 
 Item 5. Other Information. Ernst & Young LLP, by letter dated May 10, 2005, confirmed its resignation as the principal
accountant to audit the Companys financial statements effective on May 10, 2005 following
completion of the review of the Companys unaudited financial statements for the quarter ended
March 31, 2005. The reports of Ernst & Young LLP on the Companys financial statements for the fiscal years ended
December 31, 2004 and December 31, 2003 contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting principles. The change in accountants was initiated by mutual agreement of Ernst & Young LLP and the Companys
Audit Committee, and was approved by the Companys Audit Committee and Board of Directors. In connection with the audits of the Companys financial statements for the fiscal years ended
December 31, 2004 and December 31, 2003 and the subsequent unaudited interim period ending March
31, 2005 through the effective date of Ernst & Young LLPs resignation, May 10, 2005, there have
been no disagreements with Ernst & Young LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of Ernst & Young LLP would have caused it to make reference thereto in its
reports. During the fiscal years ended December 31, 2004 and December 31, 2003 and the subsequent unaudited
interim period ending March 31, 2005 through the effective date of Ernst & Young LLPs resignation,
May 10, 2005, there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K. The Companys Board of Directors, upon recommendation from its Audit Committee approved engaging
Cornick, Garber & Sandler, LLP as the Companys auditor effective as of May 10, 2005. During the
fiscal years ended December 31, 2004 and December 31, 2003 and the subsequent interim period ended
March 31, 2005 and through May 10, 2005, the date of resignation of Ernst & Young LLP, prior to
engaging Cornick, Garber & Sandler, LLP, neither 14




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the Company nor anyone on the Companys behalf consulted with Cornick, Garber & Sandler, LLP
regarding the application of accounting principles to a specified transaction, either completed or
proposed; the type of audit opinion that might be rendered on the Companys financial statements,
and neither a written report nor oral advice was provided to the Company by Cornick, Garber &
Sandler, LLP that was an important factor considered by the Company in reaching a decision as to
any accounting, auditing or financial reporting issue; or any matter that was the subject of a
disagreement or a reportable event as defined in Item 304(a)(1)(v) of Regulation S-K. Cornick, Garber & Sandler, LLP was, until the completion of the Merger on April 1, 2005, the
auditor for Dynax, and as such, advised Dynax in connection with the Merger, including advising
Dynax, that, in a merger-of-equals transaction, the purchase method requires the identification of
the acquiring entity and that financial statements issued after the consummation of an acquisition
accounted for as a purchase would reflect such values and not be restated retroactively to reflect
the historical financial position or results of operations of the acquired company. Cornick,
Garber & Sandler, LLP also advised Dynax that the historical financial statements of the surviving
corporation would be those of the accounting acquirer (Dynax) and comparative statements of the
surviving corporation would be those of the accounting acquirer (Dynax) rather than the legal
acquirer (enherent). The Company provided each of Ernst & Young LLP and Cornick, Garber & Sandler, LLP with a copy of
this disclosure. A letter from Ernst & Young LLP is attached as Exhibit 16 to this Quarterly
Report on Form 10-Q. 
 Item 6. Exhibits. See Exhibit Index. 15




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. enherent Corp.DATE May 12, 2005
    
    By
    
    /s/ PAMELA FREDETTEPamela FredetteChairman, Chief Executive Officer and President
 DATE May 12, 2005
    
    By
    
    /s/ JAMES C. MINERLYJames C. MinerlyPrincipal Financial and Accounting Officer
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Exhibit Index: ExhibitNo.
    
    Description of Exhibits2.1
    
    Agreement and Plan of Merger dated as of October 12, 2004, by
and between the Company and Dynax Solutions, Inc.
(Incorporated by reference to Exhibit 2.1 of the Companys
Form 10-Q filed November 15, 2004).2.2
    
    First Amendment to Agreement and Plan of Merger dated as of
November 4, 2004, by and between the Company and Dynax
Solutions, Inc. (Incorporated by reference to Exhibit 2.2 of
the Companys Form 10-Q filed November 15, 2004).3.1
    
    Restated Certificate of Incorporation (Incorporated by
referenced to Exhibit 4.1 of the Companys Form S-8 filed
January 22, 1998).3.2
    
    Certificate of Amendment of Restated Certificate of
Incorporation of enherent Corp. (Incorporated by reference to
Exhibit 3.1 of the Companys Annual Report on Form 10-K filed
April 4, 2001).3.3
    
    Certificate of Amendment of Restated Certificate of
Incorporation of the Company as filed with the Secretary of
State of Delaware on April 1, 2005 (Incorporated by reference
to Exhibit 3.1of the Companys Annual Report on Form 10-K
filed March 30, 2004).3.4
    
    Certificate of Merger merging Dynax Solutions, Inc. into the
Company as filed with the Secretary of State of Delaware on
April 1, 2005 (Incorporated by reference to Exhibit 3.2 of the
Companys Annual Report on Form 10-K filed March 30, 2004).3.5
    
    Amended and Restated Bylaws, as amended through April 22, 2005
(Incorporated by reference to Exhibit 3.1 of the Companys
Current Report on Form 8-K filed April 27, 2005).4.1
    
    Form of Certificate of Common Stock (Incorporated by reference
to Exhibit 4.1 of the Companys Annual Report on Form 10-K
filed March 22, 2002).4.2
    
    Securities Purchase Agreement dated as of April 13, 2000, by
and among the Company and the Investors named therein
(Incorporated by reference to Exhibit 99.1 of the Companys
Current Report on Form 8-K filed April 14, 2000).4.3
    
    Form of Certificate of Designations (Incorporated by reference
to Exhibit 99.2 of the Companys Current Report on Form 8-K
filed April 14, 2000).4.4
    
    Form of Warrant (Incorporated by reference to Exhibit 99.3 of
the Companys Form 8-K filed April 14, 2000).4.5
    
    Preferred Stock Agreement dated as of October 28, 2004, by and
among the Company and the Preferred Stockholders named therein
(Incorporated by reference to Exhibit 4.5 of the Companys
Form 10-Q filed November 15, 2004).10.1
    
    Employment Agreement dated December 1, 2003, between James C.
Minerly and the Company (Incorporated by reference to Exhibit
10.1 of the Companys Annual Report on Form 10-K filed March
30, 2004).
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ExhibitNo.
    
    Description of Exhibits10.2
    
    Employment Agreement dated February 16, 2004, between Douglas
A. Catalano and the Company with Exhibit A and Amendment
(Incorporated by reference to Exhibit 10.2 of the Companys
Annual Report on Form 10-K filed March 30, 2004).10.3
    
    Form of Employment Agreement between Pamela Fredette and the
Company (Incorporated by reference to Exhibit 10.3 of the
Companys Form S-4/A filed December 22, 2004).10.4
    
    Employment Agreement dated April 1, 2005 between Lori Stanley
and the Company (Incorporated by reference to Exhibit 10.5 of
the Companys Current Report on Form 8-K filed April 6, 2005).10.5
    
    Employment Agreement dated April 1, 2005 between Roger DiPiano
and the Company (Incorporated by reference to Exhibit 10.6 of
the Companys Current Report on Form 8-K filed April 6, 2005).10.6
    
    Amended and Restated 1996 Stock Incentive Plan (Incorporated
by reference to Exhibit 10.1 of the Companys Form S-8 filed
January 22, 1998).10.7
    
    Stock Purchase Agreement dated as of April 1, 2004, by and
between the Company and Primesoft, LLC (Incorporated by
reference to Exhibit 10.4 of the Companys Quarterly Report on
Form 10-Q filed May 7, 2004).10.8
    
    Promissory Note dated April 1, 2004, by and between the
Company and Primesoft, LLC (Incorporated by reference to
Exhibit 10.5 of the Companys Quarterly Report on Form 10-Q
filed May 7, 2004).10.9
    
    Non-Qualified Stock Option Agreement dated September 14, 2004,
by and between the Company and Douglas Mellinger (Incorporated
by reference to Exhibit 10.4 of the Companys Form 10-Q filed
November 15, 2004).10.10
    
    Agreement dated September 14, 2004, by and between the Company
and Douglas Mellinger (Incorporated by reference to Exhibit
10.5 of the Companys Form 10-Q filed November 15, 2004).10.11
    
    Restricted Stock Agreement dated October 5, 2004, by and
between the Company and Douglas Catalano (Incorporated by
reference to Exhibit 10.6 of the Companys Form 10-Q filed
November 15, 2004).10.12
    
    Amended and Restated Credit Agreement among the Company,
certain subsidiaries listed therein, Ableco Finance LLC and
certain lenders party thereto dated as of April 1, 2005
(Incorporated by reference to Exhibit 10.2 of the Companys
Current Report on Form 8-K filed April 6, 2005).10.13
    
    Intercreditor and Subordination Agreement among the Company,
certain subsidiaries listed therein, Ableco Finance LLC and
certain lenders party thereto dated as of April 1, 2005
(Incorporated by reference to Exhibit 10.3 of the Companys
Current Report on Form 8-K filed April 6, 2005).10.14
    
    Consulting Agreement dated April 1, 2005 between Douglas A.
Catalano and the Company (Incorporated by reference to Exhibit
10.4 of the Companys Current Report on Form 8-K filed April
6, 2005).
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ExhibitNo.
    
    Description of Exhibits10.15
    
    Employment Agreement dated April 1, 2005 between David Green
and the Company (Incorporated by reference to Exhibit 10.6 of
the Companys Current Report on Form 8-K filed April 6, 2005).16.1
    
    Letter from Ernst & Young LLP (filed herewith)31.1
    
    Certification of the Chief Executive Officer pursuant to 15
U.S.C. Section 7241, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Filed herewith).31.2
    
    Certification of the Principal Financial Officer pursuant to
15 U.S.C. Section 7241, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (Filed herewith).32.1
    
    Certification of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Filed herewith).32.2
    
    Certification of the Principal Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (Filed herewith).
 E-3