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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 September 30, 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
    
    No. 13-3914972(State or Other Jurisdiction of Incorporation)
    
    (I.R.S. Employer Identification No.)
 
 
 
  þ o
 o þ
 o þ
  Class
    
    Shares outstanding as of October 31, 2005Common stock, par value $.001
    
    50,341,451




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enherent Corp. and Subsidiaries
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    1Condensed Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004
    
    
    1Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2005 and 2004
    
    
    2Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 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
    
    
    17Item 4. Controls and Procedures
    
    
    17PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    18Item 6. Exhibits
    
    
    18Signatures
    
    
    S-1Exhibit Index
    
    
    E-1CertificationCertificationCertificationCertification
  ii




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Part I. Financial Information
 
 Item 1. Financial Statements
 ENHERENT CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2005
    
    
    2004(Unaudited)
    
    
    (Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    316,887
    
    
    $
    28,647Accounts receivable
    
    
    5,490,607
    
    
    
    3,033,280Prepaid and refundable taxes
    
    
    72,465
    
    
    
    9,733Prepaid expenses and other current assets
    
    
    176,618
    
    
    
    113,012Total current assets
    
    
    6,056,577
    
    
    
    3,184,672Furniture, equipment and improvements,
at cost, less accumulated depreciation
    
    
    250,417
    
    
    
    285,725Goodwill and other intangibles
    
    
    4,730,937
    
    
    
    383,049Deferred financing costs
    
    
    133,306
    
    
    
    Other assets
    
    
    24,689
    
    
    
    TOTAL
    
    $
    11,195,926
    
    
    $
    3,853,446LIABILITIESCurrent liabilities:Revolving credit facility
    
    $
    3,644,973
    
    
    $
    2,596,549Current portion of long-term debt
    
    
    343,582
    
    
    
    576,336Accounts payable and accrued expenses
    
    
    3,254,028
    
    
    
    2,042,811Deferred revenue
    
    
    187,328
    
    
    
    99,252Accrued compensation and benefits
    
    
    853,012
    
    
    
    222,639Total current liabilities
    
    
    8,282,923
    
    
    
    5,537,587Long-term liabilities:Long-term debt, net of current portion above
    
    
    3,858,288
    
    
    
    2,203,715Noncurrent rent payable
    
    
    33,210
    
    
    
    43,215Total long-term liabilities
    
    
    3,891,498
    
    
    
    2,246,930Total liabilities
    
    
    12,174,421
    
    
    
    7,784,517CAPITAL DEFICIENCYPreferred
stock,$.001 par value; authorized  10,000,000 shares,issued  none
    
    
    
    
    
    
    Common
stock, $.001 par value, authorized  100,000,000 shares in 2005
and 20,000,000 shares in 2004, issued and outstanding  50,341,451 shares
in 2005 and 5,908,259 shares in 2004
    
    
    50,341
    
    
    
    5,908Additional paid-in capital
    
    
    27,091,408
    
    
    
    23,348,657Unearned compensation on restricted stock
    
    
    (45,121
    )
    
    
    Accumulated deficit
    
    
    (28,075,123
    )
    
    
    (27,285,636
    )Total capital deficiency
    
    
    (978,495
    )
    
    
    (3,931,071
    )TOTAL
    
    $
    11,195,926
    
    
    $
    3,853,446
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ENHERENT CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Service revenue
    
    $
    6,896,120
    
    
    $
    3,769,305
    
    
    $
    16,823,591
    
    
    $
    10,841,496Equipment and software revenue
    
    
    730,890
    
    
    
    674,091
    
    
    
    2,087,799
    
    
    
    2,861,676
    *Total revenues
    
    
    7,627,010
    
    
    
    4,443,396
    
    
    
    18,911,390
    
    
    
    13,703,172Cost of revenues:Cost of services
    
    
    5,199,800
    
    
    
    2,724,800
    
    
    
    12,733,535
    
    
    
    7,946,733Cost of equipment and software
    
    
    430,653
    
    
    
    490,931
    
    
    
    1,433,370
    
    
    
    2,328,534
    *Cost of revenues
    
    
    5,630,453
    
    
    
    3,215,731
    
    
    
    14,166,905
    
    
    
    10,275,267Gross profit
    
    
    1,996,557
    
    
    
    1,227,665
    
    
    
    4,744,485
    
    
    
    3,427,905Operating expenses:Selling, general and administrative
    
    
    1,651,848
    
    
    
    1,001,052
    
    
    
    4,248,770
    
    
    
    3,023,273Non-recurring merger related expenses
    
    
    
    
    
    
    
    
    
    
    573,227
    
    
    
    Depreciation and amortization expense
    
    
    86,857
    
    
    
    64,179
    
    
    
    243,744
    
    
    
    199,906Total operating expenses
    
    
    1,738,705
    
    
    
    1,065,231
    
    
    
    5,065,741
    
    
    
    3,223,179Operating income (loss)
    
    
    257,852
    
    
    
    162,434
    
    
    
    (321,256
    )
    
    
    204,726Interest expense
    
    
    (176,832
    )
    
    
    (111,586
    )
    
    
    (458,896
    )
    
    
    (346,906
    )Income (loss) before income taxes
    
    
    81,020
    
    
    
    50,848
    
    
    
    (780,152
    )
    
    
    (142,180
    )Provision for income taxes
    
    
    (425
    )
    
    
    (2,350
    )
    
    
    (9,984
    )
    
    
    (7,000
    )NET INCOME (LOSS)
    
    $
    80,595
    
    
    $
    48,498
    
    
    $
    (790,136
    )
    
    $
    (149,180
    )Basic net income (loss) per share
    
    $
    
    
    
    $
    
    
    
    $
    (.02
    )
    
    $
    (.01
    )Number of shares used in computing
basic net income (loss) per
share
    
    
    50,082,356
    
    
    
    20,745,541
    
    
    
    40,787,480
    
    
    
    20,745,541Diluted net income (loss) per share
    
    $
    
    
    
    $
    
    
    
    $
    (.02
    )
    
    $
    (.01
    )Number of shares used in computing
diluted net income (loss) per
share
    
    
    51,258,947
    
    
    
    21,481,788
    
    
    
    40,787,480
    
    
    
    20,745,541
 
 *
    
    Certain amounts for the three and nine months ended September 30, 2004 have been restated to
conform with the current year presentation.  2




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ENHERENT CORP. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 For the Nine Months EndedSeptember 30,2005
    
    
    2004NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTSCash flows from operating activities:Net loss
    
    $
    (790,136
    )
    
    $
    (149,180
    )Adjustments to reconcile net loss to net
cash provided by (used for) operating activities:Bad debt expense
    
    
    50,150
    
    
    
    45,600Depreciation and amortization
    
    
    243,744
    
    
    
    199,906Deferred compensation
    
    
    10,413
    
    
    
    Deferred rent
    
    
    (10,005
    )
    
    
    (14,294
    )Changes in assets and liabilities:Accounts receivable
    
    
    8,759
    
    
    
    51,496Prepaid expenses and other current assets
    
    
    69,279
    
    
    
    18,503Prepaid and refundable taxes
    
    
    (62,732
    )
    
    
    (12,803
    )Other assets
    
    
    25,311
    
    
    
    Accounts payable, accrued expense and
accrued compensation and benefits
    
    
    (334,694
    )
    
    
    (107,177
    )Deferred revenue
    
    
    88,076
    
    
    
    (3,978
    )Net cash provided by (used for) operating activities
    
    
    (701,835
    )
    
    
    28,073Cash flows from investing activities:Cash balance of merged entity
    
    
    892,309
    
    
    
    Purchase of furniture, fixtures, equipment and improvements
    
    
    (69,781
    )
    
    
    (10,845
    )Payments of direct merger costs
    
    
    (345,760
    )
    
    
    (118,235
    )Net cash provided by (used for) investing activities
    
    
    476,768
    
    
    
    (129,080
    )Cash flows from financing activities:Payments of deferred financing costs
    
    
    (152,556
    )
    
    
    Net proceeds (repayments) under revolving loan
    
    
    1,048,424
    
    
    
    (117,026
    )Principal repayments on term loan
    
    
    (225,000
    )
    
    
    (225,000
    )Principal payments on capital lease obligations
    
    
    (39,948
    )
    
    
    (34,747
    )Repayment of other notes payable
    
    
    (117,613
    )
    
    
    (104,392
    )Net cash provided by (used for) financing activities
    
    
    513,307
    
    
    
    (481,165
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS288,240
    
    
    
    (582,172
    )Cash and cash equivalents  January 1,
    
    
    28,647
    
    
    
    875,537CASH AND CASH EQUIVALENTS  September 30,
    
    $
    316,887
    
    
    $
    293,365Supplemental disclosure of cash flow information:Cash paid during the period for:Interest
    
    $
    402,242
    
    
    $
    348,497Income taxes
    
    $
    15,057
    
    
    $
    19,870Noncash investing and financing transactions:Equipment acquired under capital leases
    
    $
    55,389
    
    
    $
    35,414Accumulated deferred acquisition cost
    
    $
    
    
    
    $
    85,500Deferred compensation, restricted stock grant
    
    $
    10,413
    
    
    $
    
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ENHERENT CORP. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 1.
    
    Basis of Presentation:The 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) considered necessary for a fair presentation of the financial
condition and results of operations for the periods presented. The results of operations for
the nine-month period ended September 30, 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 of Dynax
Solutions, Inc. (Dynax) as of that date (see below). The statements should be read in
conjunction with the audited condensed consolidated financial statements and notes thereto
included in the Form 8-K/A dated June 13, 2005 of enherent Corp. (enherent or Company).As further described in Note 3, on April 1, 2005, enherent completed the Merger (the Merger)
with Dynax. 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. As a result of the Merger, each outstanding share of Dynax stock was converted
into 3.8359 shares of enherent common stock.The Merger was 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. While enherent was the legal acquirer in the Merger, Dynax was deemed
the accounting acquirer. Accordingly, the historical financial statements presented for periods
prior to the Merger are those of Dynax. The operations of the former enherent business have been
included in the financial statements for the period subsequent to April 1, 2005, the date
of the Merger.enherent and Dynax each historically operated in a single business segment. Subsequent to the
Merger, enherents management reviewed its business operations and determined that the Company
continues to operate in a single business segment.
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2.
    
    Income (Loss) Per Share:The following table sets forth the computation of basic and diluted income (loss) per share:
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Numerator:Net income (loss)
    
    $
    80,595
    
    
    $
    48,498
    
    
    $
    (790,136
    )
    
    $
    (149,180
    )Denominator:Weighted average of shares
outstandingBasic
    
    
    50,082,356
    
    
    
    20,745,541
    
    
    
    40,787,480
    
    
    
    20,745,541Diluted
    
    
    51,258,947
    
    
    
    21,481,788
    
    
    
    40,787,480
    
    
    
    20,745,541Basic income (loss) per share
    
    $
    
    
    
    $
    
    
    
    $
    (.02
    )
    
    $
    (.01
    )Diluted income (loss) per share
    
    $
    
    
    
    $
    
    
    
    $
    (.02
    )
    
    $
    (.01
    )
 The weighted average outstanding shares of the Company prior to the merger are based on the
outstanding shares and dilutive stock options of Dynax after giving effect to the exchange ratio
of 3.8359 shares of enherent issued for each share of Dynax in the Merger. Dilution is caused
by issued and outstanding options.3.
    
    Merger with Dynax Solutions, Inc.:On October 12, 2004, enherent entered into a definitive Agreement and Plan of Merger (the Merger
Agreement) with Dynax to combine in a stock-for-stock exchange. The Merger Agreement was
subsequently amended as of November 4, 2004. The Merger was completed on April 1, 2005.
Immediately following the Merger, the former stockholders of Dynax owned approximately 50% of the
common stock of enherent on a fully diluted basis. enherent was the surviving legal entity.The Merger was 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 was 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 are those of
the accounting acquirer (Dynax) and comparative statements of the surviving corporation are those
of the accounting acquirer (Dynax) rather than the legal acquirer (enherent).enherent has followed the guidance of SFAS No. 141 to record this purchase. SFAS No. 141
requires that the purchase method of accounting be used for all business combinations initiated
after June 1, 2001 and that goodwill, as well as any intangible assets believed to have an
indefinite life, not be amortized for financial accounting purposes. enherent has recognized
goodwill and other intangibles of $4,780,937 in connection with this Merger.The following unaudited condensed combined pro forma results of operations reflect the pro forma
combination of the Dynax and enherent businesses as if the combination had occurred at the
beginning of the periods presented compared with the actual results of operations of Dynax for
the same period. The unaudited pro forma condensed combined results of operations do not purport
to represent what the companies combined results of
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operations would have been if such
transaction had occurred at the beginning of the periods presented, and are not necessarily
indicative of enherents future results.
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,Historical
    
    
    Pro forma
    
    
    Pro forma
    
    
    Pro forma2005
    
    
    2004
    
    
    2005
    
    
    2004Service revenue
    
    $
    6,896,120
    
    
    $
    7,025,305
    
    
    $
    20,552,412
    
    
    $
    20,160,933Equipment and
software revenue
    
    
    730,890
    
    
    
    674,091
    
    
    
    2,087,799
    
    
    
    2,861,676Total revenues
    
    
    7,627,010
    
    
    
    7,699,396
    
    
    
    22,640,211
    
    
    
    23,022,609Net income loss
    
    $
    80,595
    
    
    $
    (125,566
    )
    
    $
    (1,506,086
    )
    
    $
    (1,664,663
    )Basic income (loss)
per share
    
    $
    
    
    
    $
    (.01
    )
    
    $
    (.03
    )
    
    $
    (.04
    )Diluted income
(loss) per share
    
    $
    
    
    
    $
    (.01
    )
    
    $
    (.03
    )
    
    $
    (.04
    )
 Upon consummation of the Merger, the enherent preferred
stockholders converted all preferred shares and canceled all outstanding warrants in exchange for 8,500,000 shares of common stock and
subordinated secured notes in the aggregate principal amount of $1,600,000. The above pro forma
amounts give effect to the elimination of the preferred shares and the inclusion of the interest
on the $1,600,000 subordinated secured notes.4.
    
    Stock-Based Compensation:enherent accounts for stock options using the intrinsic value method set forth in Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, 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 or the measurement
date, if otherwise. As permitted by Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123), the Company continues to account for
stock-based compensation in accordance with APB Opinion 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:
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Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss)
available to common
stockholders as reported
    
    $
    80,595
    
    
    $
    48,498
    
    
    $
    (790,136
    )
    
    $
    (149,180
    )Total stock option expense
determined under fair
value base method
    
    $
    32,000
    
    
    $
    19,000
    
    
    $
    77,000
    
    
    $
    155,000Pro forma net income (loss)
    
    $
    48,595
    
    
    $
    29,498
    
    
    $
    (867,136
    )
    
    $
    (304,180
    )Net income (loss) per
common share as reported:Basic
    
    $
    
    
    
    $
    
    
    
    $
    (.02
    )
    
    $
    (.01
    )Diluted
    
    $
    
    
    
    $
    
    
    
    $
    (.02
    )
    
    $
    (.01
    )Net income (loss) per
common share pro forma:Basic
    
    $
    
    
    
    $
    
    
    
    $
    (.02
    )
    
    $
    (.01
    )Diluted
    
    $
    
    
    
    $
    
    
    
    $
    (.02
    )
    
    $
    (.01
    )
 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:
 September 30,Assumption
    
    2005
    
    
    2004Risk-free interest rate (approximately)
    
    
    5
    %
    
    
    4
    %Dividend yield
    
    
    0
    %
    
    
    0
    %Volatility factor of the expected market price of
enherents Common Stock (average)
    
    
    118
    %
    
    
    186
    %Average life years
    
    
    10
    
    
    
    10
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5.
    
    Recent Accounting Pronouncements:In 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 (i.e., year ending December 31, 2006 for the Company). The impact of
the adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on
levels of share-based payments granted in the future. Had enherent adopted SFAS No. 123(R) in
prior periods, however, the impact of that Statement would have approximated the impact of SFAS
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 4 above.6.
    
    Contingencies:In the normal course of business, various claims are made against the Company. 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 the Company.
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 The following discussion provides information that management believes is relevant to an
assessment and an understanding of the Companys operations and financial condition. This
discussion should be read in conjunction with the Companys audited condensed consolidated
financial statements and notes thereto included in the Form 8-K/A dated June 17, 2005.
 Overview
 General
 enherent is an information technology services firm with a primary focus of providing clients
with: (a) individual staffing and consultative resources on a temporary basis; and (b) teams of
technical consultants trained in the delivery of solutions related to systems integration,
network and security, and application services. Our temporary staffing services allow clients to
use enherent consultants to address resource demands. Our solutions services offerings combine
project management, technical and industry expertise, and as required, software product licenses
and computer equipment to deliver business value. enherents core competencies are project
management, business requirements definition, technical application, data architecture, system
design, application code development, test strategy, planning, execution and deployment.enherent is an IBM premier business partner. enherent leverages the IBM partnership to train and
certify sales personnel in the IBM solutions selling process and the functions, features and
benefits of the IBM products. enherent leverages IBMs technical training to train and certify
its consultants in the IBM products that we use to support our application and system integration
solutions. enherent purchases equipment products for resale from Agylysis, an IBM value added
distributor. IBM offers several incentive programs to its partners including purchase discounts,
vendor incentive programs and sales rebates. Incentive programs are at the discretion of IBM and
usually require achievement of a specific sales volume or growth rate within a specified time
period to qualify for all, or some, of the incentive programs.enherents client base is concentrated in Connecticut, New York, New Jersey, Washington, D.C.,
and North Carolina. enherent is headquartered in New York City with executive offices at 192
Lexington Avenue.
 Basis of Discussion/Merger:
 On October 12, 2004, enherent entered into the Merger Agreement with Dynax to combine in a
stock-for-stock exchange. The Merger Agreement was amended as of November 4, 2004. The Merger was
completed on April 1, 2005. Immediately following the Merger, the former stockholders of Dynax
owned approximately 50% of the common stock of enherent on a fully diluted basis. In the Merger,
enherent was the legal acquirer and Dynax was deemed the accounting acquirer. The historical
financial statements presented for periods prior to the Merger are the financial statements of
Dynax. The operations of the former enherent business have been included in the financial
statements from the date of Merger.
 Managements discussion and analysis addresses enherents historical results of operations and
financial condition as shown in its consolidated financial statements for the three months ended
and nine months ended September 30, 2005 and 2004. Consistent with the accounting treatment
applied to the Merger, the historical financial statements of enherent presented in this Form
10-Q for periods prior to the Merger date are the statements of Dynax. Therefore, the
consolidated historical financial statements included in this Form 10-Q differ from the
consolidated historical financial statements of enherent as previously reported. The operations
of the former enherent business have been included in the financial statements from the date of
the Merger.
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Critical Accounting Policies:
 Use of Estimates
  Revenue Recognition
  Consulting Services:The terms of service contracts generally are for periods of less than one year. Revenue from
time and material service contracts is recognized as the services are provided. Revenue from
services requiring the delivery of unique products and/or services is recognized using the
percentage-of-completion (POC) method of accounting. In using the POC method, the Company
records revenue by reference to the costs incurred to date and the estimated costs remaining to
fulfill the contracts. Provisions for losses are recognized during the period in which the loss
first becomes apparent. Revenue from service maintenance is recognized over the contractual
period or as the service is performed.In some of the Companys services contracts, the Company bills the customer prior to performing
the service. This situation gives rise to deferred income. In other services contracts, the
Company performs services prior to billing the customer. This situation gives rise to unbilled
accounts receivable, which are included in accounts receivable in the consolidated balance
sheet. In these circumstances, billing usually occurs shortly after the Company performs the
services. Unbilled accounts receivable are expected to be both billed and collected within six
months.Service 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 based upon managements assessment of the fees incurred relative to the
guarantee period provided to our clients. Such guarantee periods range from 30 to 90 days. The
Company recognized revenues from permanent placements of approximately $16,000 and $18,000 for
the three months ended September 30, 2005 and 2004, respectively. In the first quarter of 2005
and 2004, there were no permanent placements. In the second quarter of 2005 and 2004, the
Company recognized revenues from permanent placements of approximately $17,000 and $26,000,
respectively.Software:Revenue from the sale of one-time charge licensed software is recognized at the inception of
the license term. Revenue from maintenance, unspecified upgrades and technical support is
recognized over the period such items are delivered.
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Equipment:Revenue from the sale of equipment is recognized when the product is shipped to the customer
and there are no unfulfilled Company obligations that affect the customers final acceptance of
the equipment.
 Accounts Receivable and Allowance for Doubtful Accounts
  Fixed Assets
  Goodwill and Other Intangible Assets
   Results of Operations:
 Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004
 Service Revenues
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Equipment and Software Revenue:
      Operating Expenses:
  Interest Expense:
  Provision for Income Taxes:
  12




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Net Income (Loss)
  Loss Per Share:
  Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004
 Service Revenue:
    Equipment and Software Revenue:
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Operating Expenses:
  Interest Expense:
  Provision for Income Taxes:
  Net Income (Loss )
  Net Income (Loss) per share:
  Liquidity and Capital Resources:
   14




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15




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Off-Balance Sheet Arrangement:
  Contractual Obligations and Commercial Commitments:
  Payments due by PeriodLess than
    
    1-3
    
    3-5
    
    More thanContractual Obligations
    
    Total
    
    1 Year
    
    Years
    
    Years
    
    5 YearsLong-Term Debt Obligations
    
    
    7,759,680
    
    
    
    3,937,163
    
    
    
    2,165,070
    
    
    
    1,657,447
    
    
    
    Capital Lease Obligations
    
    
    87,163
    
    
    
    51,392
    
    
    
    35,771
    
    
    
    
    
    
    
    Operating Lease Obligations
    
    
    783,123
    
    
    
    484,471
    
    
    
    298,652
    
    
    
    
    
    
    
    Total
    
    
    8,629,966
    
    
    
    4,473,026
    
    
    
    2,499,493
    
    
    
    1,657,447
    
    
    
    
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Forward-looking and Cautionary 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.
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 6. Exhibits.
  18




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SIGNATURES
  enherent Corp.DATE November 14, 2005
    BY:
    
    /s/  Pamela A. FredettePamela A. FredetteChairman, Chief Executive Officer and PresidentDATE November 14, 2005
    BY:
    
    /s/  Karl BrenzaKarl BrenzaChief Financial Officer




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EXHIBIT INDEX
 ExhibitNumber
    
    Description of Exhibit2.1
    
    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
Quarterly Report on 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 Quarterly Report on Form 10-Q filed November
15, 2004).3.1
    
    Restated Certificate of Incorporation (Incorporated by
reference 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 the Company (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 the Companys Current Report on Form 8-K filed on April 6,
2005).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 the Companys
Current Report on Form 8-K filed on April 6, 2005).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
    
    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 Quarterly Report on Form 10-Q filed November 15,
2004).10.1
    
    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 on April 6,
2005).10.2
    
    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 on
April 6, 2005).10.3
    
    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).




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ExhibitNumber
    
    Description of Exhibit10.4
    
    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).10.5
    
    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).10.6
    
    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
Quarterly Report on Form 10-Q filed November 15, 2004).10.7
    
    Agreement dated September 14, 2004, by and between the
Company and Douglas Mellinger (Incorporated by reference to
Exhibit 10.5 of the Companys Quarterly Report on Form 10-Q
filed November 15, 2004).10.8
    
    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 Quarterly Report
on Form 10-Q filed November 15, 2004).10.9
    
    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 on April 6, 2005).10.10
    
    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 on April 6, 2005).10.11
    
    Consulting Agreement dated April 1, 2005 between Douglas
Catalano and the Company (Incorporated by reference to
Exhibit 10.4 of the Companys Current Report on Form 8-K
filed on April 6, 2005).10.12
    
    Employment Agreement dated April 1, 2005 between David Green
and the Company (Incorporated by reference to Exhibit 10.7 of
the Companys Current Report on Form 8-K filed on April 6,
2005).10.13
    
    2005 Stock Incentive Plan, adopted June 2, 2005, including
forms of Grant Agreements (Incorporated by reference to
Exhibit 10.1 of the Companys Current Report on Form 8-K
filed on June 7, 2005).10.14
    
    Employment Agreement executed on June 8, 2005, but effective
April 1, 2005 between Pamela Fredette and the Company
(Incorporated by reference to Exhibit 10.1 of the Companys
Current Report on Form 8-K filed on June 10, 2005).10.15
    
    2005 Management Incentive Compensation Plan, adopted May 10,
2005 (Incorporated by reference to Exhibit 10.15 of the
Companys Quarterly Report on Form 10-Q filed on August 12,
2005).10.16
    
    Director Compensation Plan, adopted May 10, 2005
(Incorporated by reference to Exhibit 10.16 of the Companys
Quarterly Report on Form 10-Q filed on August 12, 2005).10.17
    
    Employment Agreement between the Company and Karl Brenza
executed on August 15, 2005 (Incorporated by reference to
Exhibit 10.1 of the Companys Current Report on Form 8-K
filed on August 19, 2005).




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ExhibitNumber
    
    Description of Exhibit10.18
    
    Restricted Stock Agreement between the Company and Karl
Brenza executed on August 15, 2005 (Incorporated by reference
to Exhibit 10.2 of the Companys Current Report on Form 8-K
filed on August 19, 2005).10.19
    
    Stock Option Award Agreement between the Company and Karl
Brenza executed on August 15, 2005 (Incorporated by reference
to Exhibit 10.3 of the Companys Current Report on Form 8-K
filed on August 19, 2005).10.20
    
    Form of Indemnification Agreement between the Company and
each of its directors entered into as of September 20, 2005
(Incorporated by reference to Exhibit 10.1 of the Companys
Current Report on Form 8-K filed on September 22, 2005).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. 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. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith).