UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q

☒          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, 20222023

OR

☐          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-40146

FORIAN INC.
(Exact name of registrant as specified in its charter)

Delaware
 85-3467693
(State of Other Jurisdiction of incorporation or Organization) (I.R.S. Employer Identification No.)

41 University Drive, Suite 400, Newtown, PA 18940
(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (267) 225-6263

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.001 par value per share
 FORA
 The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:  None

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. Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically; every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.0405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b 2 of the Exchange Act.

Large accelerated filer ☐Accelerated filer ���☐Non-accelerated filer ☒Smaller reporting company ☒
   Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b 2 of the Act). Yes ☐ No ☒

As of May 11, 2022,10, 2023, there were 32,626,71432,583,971 shares outstanding of the registrant’s common stock, including shares of unvested restricted stock.


TABLE OF CONTENTS

PART IFINANCIAL INFORMATION 
   
Item 1.
Financial Statements
31
   
 
Condensed Consolidated Balance Sheets as of March 31, 20222023 (unaudited) and December 31, 20212022
3
1
   
 
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 20222023 and 20212022 (unaudited)
42
   
 
Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 20222023 and 20212022 (unaudited)
53
   
 
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 20222023 and 20212022 (unaudited)
64
   
 
Notes to Unaudited Condensed Consolidated Financial Statements
75
   
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
3128
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
4137
   
Item 4.
Controls and Procedures
4137
   
PART II
OTHER INFORMATION

38
   
Item 1.
Legal Proceedings
4238
   
Item 1A.
Risk Factors
4338
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
4339
   
Item 3.
Defaults Upon Senior Securities
4339
   
Item 4.
Mine Safety Disclosures
4339
   
Item 5.
Other Information
4339
   
Item 6.
Exhibits
4439
   
Signatures
4540

FORIAN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 20222023 AND DECEMBER 31, 20212022

Item 1.Financial Statements and Supplementary Unaudited Data

 March 31,
  December 31,  March 31,
  December 31, 
 2022
  2021
  2023
  2022
 
 Unaudited     Unaudited    
ASSETS            
Current assets:            
Cash and cash equivalents $14,753,394  $18,663,805  $839,715  $2,795,743 
Marketable securities  12,393,430   12,399,361   39,164,720   17,396,487 
Accounts receivable, net  3,193,881   1,947,540   3,795,284   1,809,028 
Proceeds receivable from sale of discontinued operations, net  8,811,708   — 
Contract assets  1,687,813   1,056,891   1,840,714   2,252,958 
Prepaid expenses  935,907   1,017,927   425,986   835,786 
Other assets
  368,712   900,242   435,736   432,338 
Current assets of discontinued operations  —   1,393,688 
Total current assets  33,333,137   35,985,766   55,313,863   26,916,028 
                
Property and equipment, net  2,386,533   1,531,959   112,093   75,030 
Intangible assets, net  8,482,349   9,051,184 
Goodwill  9,099,372   9,099,372 
Right of use assets, net
  798,016   859,637   27,346   32,560 
Deposits and other assets  322,159   314,443   181,436   196,675 
Non-current assets of discontinued operations  —   19,037,874 
Total assets $54,421,566  $56,842,361  $55,634,738  $46,258,167 

                
LIABILITIES AND STOCKHOLDERS' EQUITY        
LIABILITIES AND STOCKHOLDERS’ EQUITY        
                
Current liabilities:                
Accounts payable  1,256,232   1,125,067   350,784   316,105 
Accrued expenses  3,559,286   4,068,109   6,423,536   3,766,789 
Short-term operating lease liabilities
  246,920   247,325   21,952   21,600 
Notes payable
  0   13,122 
Warrant liability  149,394   369,234   10,106   4,547 
Deferred revenues  2,964,222   976,268   3,100,682   2,581,287 
Current liabilities of discontinued operations  —   1,662,247 
Total current liabilities  8,176,054   6,799,125   9,907,060   8,352,575 
                
Long-term liabilities:                
Long-term operating lease liabilities  551,970   611,523   5,394   10,960 
Convertible notes payable, net of debt issuance costs ($6,000,000 in principal is held by a related party. Refer to Note 15)
  24,471,781
   24,260,448
 
Convertible notes payable, net of debt issuance costs (Note 10) ($6,000,000 in principal is held by a related party. Refer to Note 14)
  25,315,003
   25,106,547
 
Non-current liabilities of discontinued operations  —   365,609 
Total long-term liabilities  25,023,751   24,871,971   25,320,397   25,483,116 
                
Total liabilities  33,199,805   31,671,096   35,227,457   33,835,691 
                
Commitments and contingencies (Note 17)  0
   0
   —
   —
 
Stockholders' equity:        
Preferred Stock; par value $0.001; 5,000,000 Shares authorized; 0 issued and outstanding as of March 31, 2022 and December 31, 2021
  0   0 
Common Stock; par value $0.001; 95,000,000 Shares authorized; 31,928,701 issued and outstanding as of March 31, 2022 and 31,773,154 issued and outstanding as of December 31, 2021
  31,929   31,773 
Stockholders’ equity:        
Preferred Stock; par value $0.001; 5,000,000 Shares authorized; 0 issued and outstanding as of March 31, 2023 and December 31, 2022
  —   — 
Common Stock; par value $0.001; 95,000,000 Shares authorized; 32,418,842 issued and outstanding as of March 31, 2023 and 32,251,326 issued and outstanding as of December 31, 2022
  32,419   32,251 
Additional paid-in capital  65,864,050   57,959,622   72,668,484   71,182,326 
Accumulated deficit  (44,674,218)  (32,820,130)  (52,293,622)  (58,792,101)
Total stockholders' equity  21,221,761   25,171,265 
Total liabilities and stockholders' equity $54,421,566  $56,842,361 
Total stockholders’ equity  20,407,281   12,422,476 
Total liabilities and stockholders’ equity $55,634,738  $46,258,167 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.

3
1
FORIAN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 For the Three Months Ended March 31,  For the Three Months Ended March 31, 
 2022
  2021
  2023
  2022
 
      
Revenues:      
Information and Software $5,809,094  $1,408,978 
Services  428,706   96,311 
Other  153,479   115,320 
Total revenues  6,391,279   1,620,609 
Revenue $
4,870,387   3,534,861 
                
Costs and Expenses:                
Cost of revenues  1,567,549   457,886   1,252,215   1,243,030 
Research and development  3,222,871   1,497,838   531,689   1,089,879 
Sales and marketing  1,411,314   598,975   1,196,192   820,594 
General and administrative  6,088,454   2,784,562   3,639,826   5,273,968 
Separation expenses  5,611,857   0   599,832   5,417,043 
Gain on sale of assets  (202,159)  0 
Depreciation and amortization  605,674   187,584   38,430   15,349 
Transaction related expenses  0   1,210,279 
Total costs and expenses  18,305,560   6,737,124   7,258,184   13,859,863 
                
Loss From Operations  (11,914,281)  (5,116,515)
Loss From Continuing Operations
  (2,387,797)  (10,325,002)
                
Other Income (Expense):                
Change in fair value of warrant liability  219,840   623,627   (5,559)  219,840 
Interest and investment income
  4,488   1,241   382,922   3,795 
Interest expense  (237,111)  0   (208,456)  (211,333)
Foreign currency related gains (losses)  77,976   (24,006)
Total other income, net  65,193   600,862   168,907   12,302 
                
Net loss before income taxes  (11,849,088)  (4,515,653)
Loss from continuing operations before income taxes
  (2,218,890)  (10,312,700)
Income tax expense  (5,000)  0   (29,909)  (5,000)
                
Net Loss $(11,854,088) $(4,515,653)
Loss from continuing operations, net of tax
  (2,248,799)  (10,317,700)
                
Basic and diluted net loss per common share $(0.37) $(0.19)
Loss from discontinued operations
  (94,427)  (1,738,547)
Gain on sale of discontinued operations
  11,531,849   202,159 
Income tax effect on discontinued operations
  (2,690,144)  — 
Income (loss) from discontinued operations, net of tax
  8,747,278   (1,536,388)
        
Net Income (Loss) $6,498,479  $(11,854,088)
        
Net income (loss) per share:        
Basic and diluted        
Continuing operations $(0.08) $(0.32)
Discontinued operations  0.27   (0.05)
Net income (loss) per share - basic and diluted $0.19  $(0.37)
        
Weighted-average shares outstanding:  31,857,685   24,033,512   32,300,237   31,857,685 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.

42
FORIAN INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)

  Preferred Stock  Common Stock          
  Shares  Par Value @ $0.001 per share  Shares  Par Value @ $0.001 per share  Additional Paid In Capital  Accumulated Deficit  Stockholders’ Equity 
Balance at January 1, 2023  —  $—   32,251,326  $32,251  $71,182,326  $(58,792,101) $12,422,476 
Vesting of Restricted Stock and Stock Awards, net of shares surrendered for taxes  —   —   166,615   167   (94,766)  —   (94,599)
Issuance of Forian common stock upon exercise of stock options  —   —   901   1   (1)  —   — 
Stock based compensation expense  —   —   —   —   1,580,925   —   1,580,925 
Net income
  —   —   —   —   —   6,498,479   6,498,479 
Balance at March 31, 2023
  —  $—   32,418,842  $32,419  $72,668,484  $(52,293,622) $20,407,281 

  Preferred Stock  Common Stock          
  Shares  Par Value @ $0.001 per share  Shares  Par Value @ $0.001 per share  Additional Paid In Capital  Accumulated Deficit  Stockholders’ Equity 
Balance at January 1, 2022
  —  $—   31,773,154  $31,773  $57,959,622  $(32,820,130) $25,171,265
Vesting of Restricted Stock and Stock Awards, net of shares surrendered for taxes  —   —   155,547   156   1,900   —   2,056 
Stock based compensation expense  —   —   —   —   7,902,528   —   7,902,528 
Net loss  —   —   —   —   —   (11,854,088)  (11,854,088)
Balance at March 31, 2022
  —  $—   31,928,701  $31,929  $65,864,050  $(44,674,218) $21,221,761

  Preferred Stock  Common Stock          
  Shares  
Par Value
@$0.001 per
share
  Shares  
Par Value
@$0.001 per
share
  
Additional
Paid In
Capital
  
Accumulated
Deficit
  
Stockholders’
Equity
 
Balance at January 1, 2022
 

  $0   31,773,154  $31,773  $57,959,622  $(32,820,130) $25,171,265 
Forian Restricted Stock Vesting from MOR unvested restricted stock          155,547   156   1,900       2,056 
Stock based compensation expense                  7,902,528       7,902,528 
Net loss
                      (11,854,088)  (11,854,088)
Balance at March 31, 2022
 
0  $0   31,928,701  $31,929  $65,864,050  $(44,674,218) $21,221,761 

  Preferred Stock  Common Stock          
  Shares  
Par Value
@$0.001 per
share
  Shares  
Par Value
@$0.001 per
share
  
Additional
Paid In
Capital
  
Accumulated
Deficit
  
Stockholders’
Equity
 
Balance at January 1, 2021
 
  $0   21,233,039  $21,233  $17,514,907  $(6,269,025) $11,267,115 
Issuance of Forian Common stock in Helix Acquisition
  0   0   8,408,383   8,408   18,446,376   0   18,454,784 
Forian Restricted Stock Vesting from MOR unvested restricted stock      
   172,835   173   2,570       2,743 
Forian shares issued upon exercise of MOR Class B options  0   0   10,167   10   292,820   0   292,830 
Stock based compensation expense  0   0           863,883   0   863,883 
Issuance of common stock warrants  
               389,976       389,976 
Net loss
  —   0               (4,515,653)  (4,515,653)
Balance at March 31, 2021
  0  $0   29,824,424  $29,824  $37,510,532  $(10,784,678) $26,755,678 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.

53
FORIAN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

 
For the Three Months Ended
March 31,
  For the Three Months Ended March 31, 
 2022
  2021
  2023
  2022
 
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net loss $(11,854,088) $(4,515,653)
Net income (loss) $6,498,479  $(11,854,088)
Less: Income (loss) from discontinued operations  8,747,278   (1,536,388)
Loss from continuing operations  (2,248,799)  (10,317,700)
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization  605,674   187,584   38,430   15,349 
Amortization on right of use asset
  61,621   115,191
   5,214   398
 
Gain on sale of assets
  (202,159)  0 
Amortization of debt issuance costs
  1,333   0
   1,333   1,333
 
Accrued interest on Convertible Notes
  210,000   0
 
Amortization of discount - proceeds from sale of discontinued operations  (55,041)  — 
Accrued interest on convertible notes
  208,456   210,000
 
Realized and unrealized gain on marketable securities  (3,399)  (2,156)  (320,530)  (3,399)
Provision for doubtful accounts  22,210   14,632   —   22,210 
Stock-based compensation expense  7,904,584   863,883   1,828,233   7,613,978 
Change in fair value of warrant liability  (219,840)  (623,627)  5,559   (219,840)
Issuance of warrants in connection with transaction expenses  0   389,976 
Change in operating assets and liabilities:                
Accounts receivable  (1,280,960)  (4,610)  (1,986,256)  (1,864,910)
Contract assets  
(630,922
)
  33,502   
412,244
   (630,922)
Prepaid expenses  82,020   (235,486)  409,800   6,435 
Changes in lease liabilities during the period
  (59,958)  (8,657)
Changes in lease liabilities during the year
  (5,214)  (398)
Deposits and other assets  523,814   (416,399)  11,841   523,814 
Accounts payable
  
131,165
   625,066   
33,346
   619,192 
Accrued expenses
  (508,823)  92,566
   (59,788)  (227,294)
Deferred revenues  
1,987,954
   (124,610)  
519,395
   1,852,302 
Other long-term liabilities
  0   (2)
Net cash used in operating activities - continuing operations  (1,201,777)  (2,399,452)
Net cash used in operating activities - discontinued operations  (26,649)  (1,426,426)
Net cash used in operating activities  (3,229,774)  (3,608,800)  (1,228,426)  (3,825,878)
                
CASH FLOWS FROM INVESTING ACTIVITIES:                
Additions to property and equipment  (902,420)  (64,041)  (75,493)  (74,527)
Proceeds from sale of assets  225,575   0 
Purchase of marketable securities  (12,390,670)  0   (39,704,579)  (12,390,670)
Net cash from sale of discontinued operations  20,890,193   225,575 
Sale of marketable securities  12,400,000   4,000,000   18,256,876   12,400,000 
Cash acquired as part of business combination  
0
   1,310,977 
Net cash (used in) provided by investing activities  
(667,515
)
  5,246,936 
Net cash provided by (used in) used in investing activities - continuing operations  (633,003)  160,378 
Net cash provided by (used in) investing activities - discontinued operations  —   (827,893)
Net cash used in investing activities  
(633,003
)
  (667,515)
                
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from exercise of MOR Class B options  0   292,830 
Payments on notes payable and financing arrangements  (13,122)  (682)  —   (13,122)
Net cash (used in) provided by financing activities  (13,122)  292,148 
        
Payment of employee withholding tax related to restricted stock units  (94,599)  — 
Net cash used in financing activities - continuing operations  (94,599)  (13,122)
Net cash used in financing activities
  (94,599)  (13,122)
                
Net change in cash  (3,910,411)  1,930,284   (1,956,028)  (4,506,515)
                
Cash and cash equivalents, beginning of period  18,663,805   665,463   2,795,743   17,938,490 
                
Cash and cash equivalents, end of period $14,753,394  $2,595,747  $839,715  $13,431,975 
                
Supplemental disclosure of cash flow information:                
Cash paid for interest $0  $724  $—  $— 
Cash paid for taxes $0  $0  $—  $— 
Non-cash Investing Activities:
        
Non-cash consideration for Helix acquisition $0  $18,454,784 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statementsstatements.

6
4
FORIAN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1
BUSINESS ORGANIZATION AND NATURE OF OPERATIONS


Forian Inc. (the “Company” or “Forian”) was incorporated in Delaware on October 15, 2020 as a wholly owned subsidiary of Medical Outcomes Research Analytics, LLC (“MOR”) for the purpose of effecting the Business Combination (as defined below)business combination with Helix Technologies Inc. (“Helix”). All activityForian provides a unique suite of the Company through March 2, 2021 relates only to MOR. MOR was established on May 6, 2019 in Delaware. The Company provides innovative softwaredata management capabilities and proprietary information and analytics solutions proprietary data and predictive analytics to optimize theand measure operational, clinical and financial performance of itsfor customers within the healthcare and cannabisrelated industries. The Company’s mission is to provide its customers with the best-in-class critical technology services through a single integrated platform that enables its customers to operate their businesses more safely, efficiently and profitably and to serve its customers and its customers’ stakeholders and constituencies more comprehensively. The Company represents the unique convergence of proprietary healthcare and consumer data, innovative data management capabilities and intelligent data science with a leading cannabis technology platform yielding the combined power to drive innovation and transparency across the industries it serves.

On March 2, 2021 (the “Merger Closing Date”), pursuant to the Agreement and Plan of Merger, dated as of October 16, 2020, as amended by Amendment to Agreement and Plan of Merger, dated as of December 31, 2020, as further amended by Amendment No. 2 to Agreement and Plan of Merger, dated February 9, 2021 (together, the “Merger Agreement”), by and among Helix Technologies, Inc. (“Helix”), the Company and DNA Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”), Merger Sub merged with and into Helix,
The business combination with Helix being the surviving corporation as a wholly owned subsidiary of the Company (the “Merger”). Each share of Helix common stock was exchanged for 0.05 shares of Company common stock in the Merger. Helix provides traceability and point of sale technology, analytics solutions and other products to customers within each vertical of the cannabis industry to help them improve the performance of their business.

Immediately prior to the Merger Closing Date, pursuant to the Equity Interest Contribution Agreement, dated March 2, 2021 (the “Contribution Agreement”), by and among the Company, MOR and each equity holder of MOR, such equity holders contributed their interests in MOR to the Company in exchange for shares of Company common stock (the “Contribution” and, together with the Merger, the “Business Combination”). Upon the closing of the Contribution, MOR became a wholly owned subsidiary of the Company. Each unit of MOR was exchanged for 1.7776 shares of Company common stock in the Merger, subject to adjustments pursuant to the Contribution Agreement.

Pursuant to the Merger Agreement, while the Company is the legal acquirer, the Merger was accounted for as a reverse acquisition using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). As such, MOR is, with the Company deemed to be the accounting acquirer for financial reporting purposes. Helix provides software and analytics solutions to state governments and licensed operators in the cannabis industry, primarily through its subsidiary, Bio-Tech Medical Software, Inc. (“BioTrack”), until its sale of BioTrack in 2023.


On February 10, 2023, Helix completed the sale of 100% of the outstanding capital stock of BioTrack, on March 3, 2022 Helix completed the sale of the assets of its security monitoring business, and on October 31, 2022 Helix completed the sale of 100% of the outstanding membership interest of its Engeni LLC subsidiary (these businesses together are referred to as the “Helix Businesses”). As a result of these transactions, Helix has no remaining active operations and the Company no longer provides products or services to the cannabis industry. The results of the Helix Businesses are presented as discontinued operations in the Condensed Consolidated Statements of Operations and, as such, have been excluded from continuing operations. Further, the Company reclassified the assets and liabilities of the Helix Businesses to discontinued operations in the Consolidated Balance Sheet as of December 31, 2022. The Company will continue to provide analytics solutions to customers within the healthcare and related industries. For further discussion on the discontinued operations, refer to Note 4.

Note 2BASIS OF PRESENTATION


The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain footnotes and other financial information normally required by U.S. GAAP have been condensed or omitted in accordance with instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, such statements include all adjustments which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of March 31, 2022.2023. The operating results presented herein are not necessarily an indication of the results that may be expected for the year. The condensed consolidated financial statements should be read in conjunction with the Company’s audited Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2021,2022, as filed with the Securities and Exchange Commission (“SEC”) on March 31, 2022.30, 2023.

7
The Contribution was completed on March 2, 2021 and the combination of MOR and Forian was accounted for as a transaction between entities under common control pursuant to ASC 805-50. Accordingly, the combination of Forian and MOR results in a change in reporting entity and the financial statements are presented as though the combination of Forian and MOR occurred as of the beginning of the periods presented. Additionally, the results of Helix are included in the accompanying condensed consolidated financial statements beginning on March 2, 2021, the Merger Closing Date.

Note 3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation


The condensed consolidated financial statements of the Company include the accounts of (i) Medical Outcomes Research Analytics, LLC and its wholly owned subsidiaries COR Analytics, LLC and MOR Analytics, LLC, and (ii) Helix Technologies, Inc. and its wholly owned subsidiaries including Helix TCS, LLC (through December 31, 2022), Security Consultants Group, LLC (through December 31, 2022), Helix Legacy, Inc. (f/k/a Security Grade Protective Services, Ltd.), Bio-Tech Medical Software, Inc (through February 10, 2023), Engeni, LLC (including Engeni S.A. (“Engeni SA”), which is 99% owned by Engeni, LLC), Green Tree International, Inc. and Boss Security Solutions, Inc., BT UCS, Inc. and AIE Exchange Canada, Inc. (through October 31, 2022). Effective October 7, 2021, AIE Exchange Canada, Inc.31, 2022, 100% of the outstanding membership interest of Engeni, LLC held by Helix was voluntarily dissolved.sold. Effective December 31, 2021,2022, (i) each of COR Analytics, LLC and MOR Analytics,Security Consultants Group, LLC was merged with and into Medical Outcomes Research Analytics,Helix TCS, LLC and (ii) each of BT UCS, Inc. and BOSS Security SolutionsHelix TCS, LLC was merged with and into Security Grade Protective Services, Ltd., which entity was re-domesticated from Colorado to Delaware and renamed Helix Legacy, Inc. On February 10, 2023, 100% of the capital stock of Bio-Tech Medical Software, Inc. was sold. All intercompany transactions have been eliminated in consolidation. The

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Discontinued Operations


On February 10, 2023, Helix completed the sale of 100% of the outstanding capital stock of its wholly owned subsidiary, BioTrack.



On March 3, 2022, the Company sold certain assets, consisting of customer contracts, accounts receivable and other property related to its security monitoring services. On October 31, 2022, the Company sold 100% of its outstanding membership interest of Engeni, LLC for a note with payments of up to $100,000 if certain conditions are met.


As the sale of BioTrack, the security monitoring business and Engeni, LLC, together, represented a strategic shift that will have a major effect on the Company’s operations and financial results, they have been presented in discontinued operations separate from continuing operations for the three months ended March 31, 2023 and 2022, as applicable. The results from operations and gain (loss) on sale of Helixthe security monitoring business and its subsidiaries are included inEngeni LLC, net, was previously classified as part of continuing operations as their disposition individually did not have a major impact on the condensed consolidated financial statements beginning on March 2, 2021,business prior to the Merger Closing Date.sale of BioTrack. For further discussion, refer to Note 4.


Foreign Currency


ASC Topic 830-10, Foreign Currency Matters (“ASC 830-10”), requires the use of highly inflationary accounting when a country has experienced a cumulative inflation of approximately 100% or more over a 3-year period. Under highly inflationary accounting, financial statements are remeasured into the reporting currency with resulting gains and losses included in earnings. The Company acquired a subsidiary as part of the Helix acquisition that operates in Argentina, which has been designated a highly inflationary economy. Accordingly, the Company has remeasured the financial statements of the subsidiary under ASC 830-10 as if the US dollar is its functional currency with resulting gains or losses as other income or expense. The Company sold all of the assets of its operations in Argentina, Engeni LLC and Engeni SA, during October 2022. The financial results of the Company’s Argentina operations are included in discontinued operations for the three months ended March 31, 2022. During the three months ended March 31, 2022, and 2021, sales in Argentina, representedwhich are included in discontinued operations, were less than 1% of the Company’s consolidated sales. Assets held in Argentina as of March 31, 2022 and December 31, 2021 represented less than 1% of the Company’s consolidated assets. While theThe hyperinflationary conditions did 0tnot have a material impact on the Company’s business during the three months ended March 31, 2022. On October 31, 2022 the Company sold 100% of its operations in the future, we may incur larger currency devaluations.Argentina.

Use of Estimates


Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses together with amounts disclosed in related notes to the financial statements. The significant areas of estimation include but are not limited to accounting for the allowance for doubtful accounts, income taxes, depreciation, amortization of intangible assets, contingencies, discontinued operations and stock-based compensation. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is possible that the external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.

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6
Reclassifications


Certain reclassifications have been made to the prior period financial statements to conform to the current period financial statement presentation. Foreign currency related gainsCertain personnel, information licensing and data processing costs that were previously classified in research and development expenses when the Company’s healthcare information business was in its start-up stage were reclassified from other comprehensive income to other income (expense) for Engeni SA,cost of revenues and general and administrative expenses in the Company’s Argentinian subsidiary, which operates in a highly inflationary country.condensed consolidated statements of operations.

Fair Value of Financial Instruments



The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.



ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an ordinary transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:



Level 1 — quoted prices in active markets for identical assets or liabilities;



Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable; and


Level 3 — inputs that are unobservable.



The carrying value of the Company’s financial instruments, such as cash, marketable securities, accounts receivable and accrued liabilities and other liabilities approximate fair values due to the short-term nature of these instruments. The estimated fair value of the Company’s warrant liabilityliabilities as of March 31, 20222023 and December 31, 20212022 was $149,394$10,106 and $369,234,$149,394, respectively, based on Level 3 inputs. Refer to Note 10.

Cash and Cash Equivalents and Credit Risk


The Company considers all cash accounts that are not subject to withdrawal restrictions and highly liquid investments with a maturity of three months or less, when purchased, as cash and cash equivalents.


The Company maintains cash with major financial institutions. Cash held at U.S. bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution. The portion of deposits in excess of FDIC coverage is not protected by such insurance and represents a credit risk to the Company. At times, the Company’s deposits exceed this coverage.

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Accounts Receivable and Allowance for Doubtful Accounts


Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

9

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Allowance for doubtful accounts was $278,810$0 and $350,991$78,422 at March 31, 20222023 and December 31, 2021,2022, respectively.



Management charges account balances against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Proceeds from sale of discontinued operations, net


Proceeds from sale of discontinued operations consists of eleven remaining monthly payments due through February 10, 2024 aggregating $9,166,667, less an unamortized discount of $354,959.

Long-Lived Assets, Including Definite Lived Intangible Assets


Long-lived assets, other than goodwill and other indefinite-lived intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such assets. Definite-lived intangible assets primarily consist of customer relationships, software technology and trade names. For long-lived assets used in operations, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value.

Goodwill


Goodwill which representsconsists of the excess of purchase pricecost over the fair value of net assets acquired is carried at cost.in business combinations. Goodwill is not amortized; rather,amortized. Instead, it is subject to a periodic assessmenttested annually for impairment, by applying a fair value-based test. The Company reviews goodwill for possible impairment annually during the fourth quarter, or whenevermore frequently if events occur or circumstances indicatechange that thewould more likely than not reduce its fair value below its carrying amount may not be recoverable.amount. All goodwill has been allocated to non-current assets of discontinued operations at December 31, 2022.


Goodwill is evaluated for impairment annually or whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. The qualitative factors considered by Forian may include, but are not limited to, general economic conditions, the Company’s outlook, market performance of the Company’s industry and recent and forecasted financial performance. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. Otherwise, no further impairment testing is required. The Company has the option to first assess qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount and to determine whether further action is needed. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the quantitative impairment test is unnecessary. An impairment charge is recognized when the implied fair value of the Company’s goodwill is less than its carrying amount. NaNNo impairment losses have been recognized during the periods presented.

Business Combinations

The Company accounts for its business combinations under the provisions of ASC Topic 805-10, which requires that the purchase method of accounting be used for all business combinations. Assets acquired and liabilities assumed, including non-controlling interests, are recorded at the date of acquisition at their respective fair values. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred. If the business combination provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date and any changes in fair value after the acquisition date are accounted for as measurement-period adjustments. Changes in fair value of contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows: (i) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity; or (ii) if the contingent consideration is classified as a liability, the changes in fair value are recognized in earnings.

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Revenue Recognition



The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).



Under ASC 606, the Company recognizes revenue when (or as) customers obtain control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company recognizes revenue following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenues when (or as) the Company satisfies a performance obligation. The Company applies the provisions of ASC 606 to an arrangement when a substantive contract exists and collectability is probable.

The Company generates revenue from the following categories of offerings: Information and Software subscriptions, Services and Other products.

The Company derives Information and Software revenue primarily from license fees for the Company’s Information products and subscription revenue for the Company’s Softwareinformation products. Information products contracts are generally for a period of one month to five years. Information products’ customers may access data analytics products through the use of tools provided by the Company or by utilizing their own tools per the contract. Data products may consist of historical information as it exists at the time of delivery or information that will be updated over a period of time as agreed with the customer. In most cases, the provision of information products is considered a single performance obligation. In cases where the Company is not obligated to update information over the access period and control over the use of the products passes to the customer when delivered, revenue is recognized when the information products are made available to the customer. In cases where information updates are provided over the contract term, they are considered highly interrelated with the information product delivered upon contract inception and revenue is recognized ratably over the life of non-cancellable periods of the contract. Customers are generally invoiced according to monthly, quarterly or annual amounts specified in the contract. Any amounts invoiced in excess of revenue recognized are recorded as deferred revenue. Revenue recognized in excess of amounts invoiced is recorded as a contract asset.

Software revenue is primarily comprised of subscriptions to point of sale and business intelligence products and related hosting services. Subscription revenue is considered a single performance obligation recognized ratably over the term of the contract, beginning when access to the applicable software is provided to the customer. Customers are typically billed at the beginning of each month under agreements, which the customer may cancel with 30 days’ notice. When collection of fees occurs in advance of service delivery, revenue recognition is deferred until such services commence. Revenue for implementation fees is recognized as training and installation services are performed.

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Services revenues are primarily from fixed price contracts with government agencies where amounts are billed upon completion of the milestones within the contract. Revenue is recognized as the company satisfies its performance obligations under the contract. In the event that a contract does not specifically allocate revenue to the satisfaction of specific performance obligations or milestones, the transaction price is allocated based on the percentage of time spent, or expected to be spent, to meet each performance obligation. Initial customization of the software to meet state specific requirements and the training to appropriately utilize the software are generally recognized upon completion of the customization and acceptance by the state agency. Support and service revenues are then recognized over a predetermined period of time as defined in the contract. Contract renewals may include an annual service fee that is recognized over the time period defined in the contract.

Other revenues are primarily from security monitoring services offerings and the provision of web marketing services. Contracts for these services have a stated transaction price for monthly services and are recognized as the services are provided.

In some cases, contracts provide for variable consideration that is contingent upon the occurrence of uncertain future events, which can either increase or decrease the transaction price, including sales of products by customers derived from data analytics products the Company provides. Variable consideration based on sales of products by customers is recognized in the period of sales, subject to minimum amounts specified in contracts. Variable consideration is estimated at the expected value or at the most likely amount depending on the type of consideration. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The estimate of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Company and reevaluated each reporting period. The effect of revisions in recognized estimated variable consideration in excess of minimums are recorded beginning in the period in which the estimates are revised. Actual results could differ from periodic estimates.



Significant judgments and estimates are sometimes necessary for the determination of whether performance obligations in a contract are distinct and whether they are delivered at a point in time or over time. Judgement is also necessary to assess revenue recognized under contingent revenue arrangements.


Contract acquisition costs, which consist of sales commissions paid or payable, are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial and renewal contracts are deferred and then amortized on a straight-line basis over the contract term.

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During November 2020, the Company entered into a Master Services Agreement (the “November 2020 Agreement”) with a customer to provide information services described in certain statements of work under the November 2020 Agreement. As part of the November 2020 Agreement, the Company was granted shares of restricted stock representing approximately 23.4% of the outstanding common stock of the customer at the time of issuance, vesting in quarterly increments specified in the November 2020 Agreement through December 2023. Concurrently, the Company entered into a Stockholders Agreement specifying its voting and other rights as a stockholder. As a result, the Company determined that it does not exert influence over the customer. ASC 606-10-32-21 requires an entity to measure the fair value of noncash consideration at contract inception. The fair value of the restricted stock was determined to be $0 on the date of inception. The Company recorded revenue from the customer of $651,762 and $377,190 for the three months ended March 31, 2023 and 2022, respectively. The Company has outstanding accounts receivable of $1,134,941 and $469,786 at March 31, 2023 and December 31, 2022, respectively.



Contract assets and deferred revenues consist of the following as of March 31, 2022:2023:

  Contract Assets  Contract Liability 
  Costs of obtaining contracts  Unbilled revenue  Total  Deferred Revenue 
Balance at January 1, 2021 $53,784  $142,917  $196,701  $158,884 
Acquired from Helix  0   20,128   20,128   320,936 
Acquired balances recognized during period  0   (20,128)  (20,128)  (263,787)
Beginning deferred revenue balance recognized during the period  0   0   0   (158,884)
Net change due to timing of billings, payments and recognition  16,494   843,696   860,190   919,119 
Balance at December 31, 2021  70,278   986,613   1,056,891   976,268 
Beginning deferred revenue balance recognized during the period  0   0   0   (595,296)
Net change due to timing of billings, payments and recognition  (12,929)  643,851   630,922   2,583,250 
Balance at March 31, 2022 $57,349  $1,630,464  $1,687,813  $2,964,222 
  Contract Assets  
Contract
Liability
 
  
Costs of
obtaining
contracts
  
Unbilled
revenue
  Total  
Deferred
Revenue
 
Balance at January 1, 2022
 $70,278  $986,613  $1,056,891  $637,563 
Beginning deferred revenue balance recognized during the period  —   —   —   (637,562)
Net change due to timing of billings, payments and recognition  87,738   1,108,329   1,196,067   2,581,286 
Balance at December 31, 2022
  158,016   2,094,942   2,252,958   2,581,287 
Beginning deferred revenue balance recognized during the period  —   —   —   (1,667,028)
Net change due to timing of billings, payments and recognition  7,373   (419,617)  (412,244)  2,186,423 
Balance at March 31, 2023
 $165,389  $1,675,325  $1,840,714  $3,100,682 

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Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes unearned revenue and unbilled amounts that will be recognized as revenue in future periods. The majority of the Company’s noncurrent remaining performance obligations will be recognized over the next 36 months.


The transaction price allocated to remaining performance obligations consisted of the following:

 March 31, 2022  December 31, 2021  March 31, 2023  December 31, 2022 
Estimated next twelve months
 $12,816,197  $8,525,736  $16,677,597$15,790,233
Thereafter
  13,039,803   11,424,934   20,637,96922,192,028
Total $25,856,000  $19,950,670 
 $37,315,566$37,982,261

Remaining performance obligations include $2,964,222 and $976,268 of billed and deferred revenue at March 31, 2022 and December 31, 2021, respectively.

The Company’s disaggregated revenue categories as of March 31, 2022 and 2021 are as follows:

  For the Three Months Ended March 31, 
  2022
  2021
 
Healthcare Information $3,534,861  $573,836 
Software Subscriptions  2,274,233   835,142 
Services  428,706   96,311 
Other  153,479   115,320 
Total $6,391,279  $1,620,609 

Segment Information


FASB ASC 280, Segment Reporting (“ASC 280”), establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the chief executive officer, who reviews the financial performance and the results of operations of the segments prepared in accordance with U.S. GAAP when making decisions about allocating resources and assessing performance of the Company.

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Customer Concentration

For

During the three months ended March 31, 2021,2023, the Company had a single customer that accounted for $237,500two customers representing 13.4% and 12.6% of revenue, which represented 15% of total revenue generated from customer sales. The contracts assets balance related to this customer at March 31, 2021 was $125,000. The concentration with this customer declined in 2021 as the Company added more customers and sources of revenue.


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The Company did 0t have any customers that exceeded 10% of total revenue forDuring the three months ended March 31, 2022.2022, the Company had four customers representing 14.5%, 14.4%, 11.7% and 10.7% of revenue.


Concentration of Vendors


The Company licenses certain information assets from third parties as a key input to certain Information and Software Products. While information licensing fees represented less than 10% of the Company’s operating expenses for the three months ended March 31, 2022, and 2021,products, any disruption associated with these suppliers could have a material short-term impact on the business while alternate sources are secured.

During the three months ended March 31, 2022, the Company had 2 vendors representing 20% and 16% of purchases for outside development and cloud computing services.

Property and Equipment, Net



Property and equipment are stated at cost, net of accumulated depreciation, which is recorded commencing at the in-service date using the straight-line method at rates sufficient to charge the cost of depreciable assets to operations over their estimated useful lives, which are 1 to 7 years. Maintenance and repairs are charged to operations as incurred.


The Company reviews for the impairment of long-lived assets annually and whenever events and or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Such indicators include, among others, the nature of the asset, the projected future economic benefit of the asset, historical and future cash flows and profitability measurements. An impairment loss would be recognized when the value of the undiscounted estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than the carrying value. There were 0no impairment losses recognized during the three months ended March 31, 20222023 and 2021.2022.


Software Development Costs


The Company accounts for costs incurred in the development of computer software in accordance with ASC Subtopic 350-40, Intangibles – Goodwill and Other – Internal-Use Software and ASC Subtopic 985-20, Software –Costs of Software to be Sold, Leased or Marketed. Costs incurred in the application development stage are subject to capitalization and subsequent amortization and possible impairment. Product development costs are primarily related to Company personnel and contractors for design and evaluating software development, testing, bug fixes and other maintenance activities. Product development costs incurred in the application development stage for internal use software are subject to capitalization and subsequent amortization and possible impairment. The Company begins to capitalize these costs when preliminary development efforts are successfully completed, management has authorized and committed project funding and it is probable that the project will be completed and the software would be used as intended. Capitalization ceases upon completion of all substantial testing. Such costs are amortized when placed in service, on a straight-line basis over the estimated useful life of the related asset, generally estimated to be three years. Product development costs not pertaining to the application development stage are expensed as incurred. The Company capitalized software development costs of $2,200,278 and $50,228 as of March 31, 2022 and 2021, respectively.


Contingencies


Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed consolidated financial statements. Contingencies are inherently unpredictable and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

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Advertising


Advertising costs are expensed as incurred and included in sales and marketing expenses and amounted to $32,182$15,125 and $4,935 $2,255for the three months ended March 31, 2023 and 2022, and 2021, respectively.


Net LossIncome (Loss) per Share


Net lossThe calculation of earnings per share of common stock is computed by dividing net loss bybased on the weighted average number of commonordinary shares or ordinary stock equivalents outstanding during the applicable period. At March 31, 2022,The dilutive effect of ordinary stock equivalents is excluded from basic earnings per share and is included in the calculation of diluted earnings per share, unless their impact is antidilutive to the “control number”, which is loss from continuing operations. Employee equity share options and similar equity instruments granted by the Company had potentially dilutive securitiesare treated as potential ordinary shares outstanding in computing diluted earnings per share. Diluted shares outstanding are calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that could be exercised or converted into common stock. Refer to Note 14 for the Company’s disclosure on such potential dilution. Further, as the Company has incurred net lossesnot yet recognized and the amount of benefits that would be recorded in ordinary shares when the award becomes deductible for the three months ended March 31, 2022 and 2021, the diluted loss per share is the same as basic loss per share for the periods presented.tax purposes are assumed to be used to repurchase shares.


Distinguishing Liabilities from Equity


The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity (“ASC 815-40”), to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.


Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.


Initial Measurement


The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received.


Subsequent Measurement – Financial instruments classified as liabilities


The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are recorded as other expense/income.

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Stock-based Compensation


The Company’s 2020 Equity Incentive Plan (“2020 Plan”) permits the grant of stock options, restricted stock awards and/or restricted stock units. A total of 4,000,000 shares of Company common stock arewere originally authorized and reserved for issuance under the 2020 Plan. On June 15, 2022, the Company’s stockholders approved an amendment to the 2020 Plan, which amended the 2020 Plan to increase the number of shares available for issuance by 2,400,000 shares to a total of 6,400,000 shares. Stock options represent the right to purchase Company common stock at the exercise price on the date of grant of the stock option at a future date. Restricted stock awards are grants of shares of Company common stock. Restricted stock units represent the right to receive shares of Company common stock on future specified dates. Stock options, restricted stock awards and restricted stock units granted contain restrictions that cause them to be subject to substantial risk of forfeiture and restrict their exercise, sale or other transfer by the grantee until they vest. The terms of the stock options, restricted stock awards and units granted under the 2020 Plan are determined by the Board of Directors in the agreement evidencing the award, including the number of shares, period of restriction or vesting schedule and other terms. The fair value of the stock options, restricted stock awards and restricted stock units is based on the underlying grant date fair value of Company common stock. The fair value is then expensed over the requisite service periods of the awards, net of forfeitures, which is generally the service period and the related amount is recognized in the condensed consolidated statements of operations.

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Income Taxes

MOR was organized as a limited liability company and became a wholly owned subsidiary of the Company upon completion of the Merger with Helix on March 2, 2021. As a result, the Company was treated as a partnership for federal and state income tax purposes through March 2, 2021. Accordingly, the Company’s taxable income, deductions, assets and liabilities are reported by the members on their respective income tax returns. Therefore, 0 provision for federal or state income tax has been made by the Company for all business activity from its inception through March 2, 2021.

After March 2, 2021, theThe Company accounts for income taxes in accordance with FASB ASC 740 (“ASC 740”). Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.


The provision for income taxes represents Federal and state and local income taxes. The effective rate differs from statutory rates due to the effect of state and local income taxes, tax benefit of R&D credits and certain nondeductible expenses. Our effective tax rate will change from quarter to quarter based on recurring and non-recurring factors including, but not limited to, the geographical mix of earnings, enacted tax legislation and state and local income taxes. In addition, changes in judgment from the evaluation of new information resulting in the recognition derecognition or re-measurement of a tax position taken in a prior annual period is recognized separately in the quarter of the change.


For the three months ended March 31, 2023 and March 31, 2022, the Company recognized net income tax expense of $29,909 and $5,000, respectively. The Company claims R&D tax credits on eligible R&D expenditures. The R&D tax credits are recognized as a reduction to income tax expense.


The Company recognized a taxable gain on sale of discontinued operations during the three months ended March 31, 2023, which resulted in utilization of certain available federal and state net operating loss carryforwards. As a result, the Company recorded income taxes related to discontinued operations of $2,690,144 after utilization of federal and state net operating losses during the three months ended March 31, 2023.


The Company files a consolidated U.S. income tax return and tax returns in certain state and local jurisdictions. As of March 31, 2023, the Company is not subject to examination in any tax jurisdictions.
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Tax contingencies are recorded, if needed, to address potential exposure involving tax positions the Company has taken that could be challenged by tax authorities. These potential exposures could result from applications of various statutes, rules, regulations and interpretations. Any estimates of tax contingencies contain assumptions and judgments about potential actions by taxing jurisdictions. Any interest and penalties related to uncertain tax positions would be included as part of the income tax provision. The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analysis of or changes in tax laws, regulations and interpretations thereof as well as other factors.


On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted and signed into law. Regarded as the reduced version of the proposed Build Back Better Act, the IRA contains two main corporate income tax provisions, including a 15% minimum tax on the average annual adjusted financial statement income of corporations with profits over $1 billion over a three-year period as well as a 1% excise tax on the corporate stock buybacks by domestic publicly traded corporations. The Company recordedis currently evaluating the impact of the IRA on its financial statements for tax year 2023 but does not expect a provisionmaterial impact to the Company’s tax position.


Separation Expenses


Effective February 10, 2023, the Company’s Chief Executive Officer, President and Class II member of the Board of Directors resigned. In connection with the resignation, the Company entered into a separation agreement providing for, state taxesamong other things (i) salary continuation for twelve months and (ii) accelerated vesting of $5,000 and $0106,656 unvested restricted shares of Company common stock. Separation expenses for the three months ended March 31, 2022 and 2021, respectively.

Gain on Sale of Assets

On March 3, 2022, the Company sold certain assets, consisting of customer contracts, accounts receivable, and other property2023 include $250,000 related to its security monitoring services for $225,575 resulting in a gainthe salary continuation and $349,832 related to the accelerated vesting of $202,159, which is included in operating expenses in the condensed consolidated statements of operations.stock.

Separation Expenses

During March 2022, the Company transferred certain development activities from its Engeni SA subsidiary to outsourced development facilities. As a result, the Company incurred $194,814 in severance and related costs to be recorded as a charge to operating expenses in 2022.

On March 2, 2022, the Company and 2two advisors mutually agreed not to renew special advisor agreements between the advisors and the Company. The advisors were the former chief executive officer and chief financial officer of Helix who were granted stock options in conjunction with their respective advisory agreements that were entered into upon the completion of the Helix acquisition. The Company and the advisors mutually agreed not to renew the advisory agreements. The services provided by these advisors included transition planning and consulting services related to integration of the business operations of Helix and Forian. Per the terms of the agreements, options to purchase 366,166 shares of common stock will continuecontinued to vest according to their original terms through March 2, 2023, and unvested stock options to purchase 732,332 shares of common stock were forfeited. The advisors were not required to perform services to the Company beyond the non-renewal date of March 2, 2022 non-renewal date.2022. As a result, the Company recorded $5,417,043 of stock compensation expensesexpense during March 2022 related to the options that will vest over the twelve months endingvested through March 2, 2023 during March 2022.2023.

16
In addition, the Company records normal course of business severance expenses in the operating expense line item related to the employee’s activities.
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Recent Accounting Pronouncements


In October 2021, the FASB issued Accounting Standards Update No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). The FASB issued ASU 2021-08 to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. The amendment is effective for financial statements for interim and annual periods beginning after December 15, 2022. ASU 2021-08 was adopted on January 1, 2023. The adoption of this standard isASU 2021-08 did not expected to have a material impact on the condensed consolidated financial statements.


The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.
 
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Note 4
BUSINESS COMBINATIONDISCONTINUED OPERATIONS


Helix Businesses Discontinued Operations



On March 2, 2021, pursuant toFebruary 10, 2023, Helix completed the Merger and the Merger Agreement, Forian acquiredsale of 100% of the issued and outstanding capital stock optionsof its wholly owned subsidiary, BioTrack, in exchange for $30.0 million, consisting of $20.0 million paid at closing and warrants$10.0 million paid in twelve unconditional monthly installments thereafter. In March 2022, Helix sold its security monitoring business and in October 2022, sold its Argentinian subsidiary Engeni LLC. The security monitoring business, BioTrack and Engeni are collectively referred to as the “Helix Businesses.” As a result of Helix.these transactions, as of February 10, 2023, the Company no longer provides products or services to the cannabis industry. The Company continues to provide analytics solutions to customers in the healthcare and related industries.



The total purchase consideration forCompany recognized a gain on sale of BioTrack of $11,531,849 and a loss from discontinued operations of $94,427 during the Merger was $18,454,784.three months ended March 31, 2023, which is included as part of discontinued operations. The purchase consideration is equalCompany also recorded income taxes related to discontinued operations of $2,690,144 during the product of (i) the total outstanding Helix common shares and common share equivalents for in-the-money warrants to purchase Helix common stock and vested stock options multiplied by the merger exchange ratio of 0.05 shares of Company common stock for 1 share of Helix common stock and (ii) $2.158 per share, which represented the fair value of Company common stock on the acquisition date.three months ended March 31, 2023.



The MergerCompany recorded a gain on the sale of assets related to its security monitoring business of $202,159 during the three months ended March 31, 2022. The amount was accounted forreclassified to discontinued operations in 2023 as it was part of a business combination in accordance with ASC 805. The Company has determined fair valuesstrategic shift which became significant to the Company’s operations upon the sale of the assets acquired and liabilities assumed in the Merger.BioTrack.


17

The following table summarizes the purchase price allocations relating tomajor classes of assets and liabilities of the Merger:Helix Businesses as reported on the consolidated balance sheets as of December 31, 2022:

Total purchase price $18,454,784 
     
Assets acquired:    
Cash  1,310,977 
Accounts receivable, net  488,453 
Prepaid expenses
  215,064 
Contract assets  20,128 
Other assets
  450,000 
Property and equipment
  146,559 
Software Technology  5,279,000 
Trade Names and Trademarks  386,000 
Customer Relationships  5,269,000 
Right of use assets
  1,082,684 
Deposits and other assets  58,950 
Total assets acquired $14,706,815 
     
Liabilities assumed:    
Accounts payable
 $681,879 
Accrued expenses  1,972,663 
Short-term lease liabilities  295,364 
Deferred revenues  320,936 
Warrant liability  1,247,715 
Notes payable and financing arrangements  20,801 
Other long-term liabilities  812,045 
Total liabilities assumed $5,351,403 
Estimated fair value of net assets acquired: $9,355,412 
     
Goodwill $9,099,372 

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  December 31, 2022 
Carrying amounts of assets associated with Helix Businesses included as part of discontinued operations:   
Cash and cash equivalents $524,155 
Accounts receivable, net  738,510 
Prepaid expenses  131,023 
Current assets of discontinued operations $1,393,688 
     
Property and equipment, net  2,500,376 
Intangible assets, net  6,775,841 
Goodwill  9,099,372 
Right of use assets, net  603,636 
Deposits and other assets  58,649 
Non-current assets of discontinued operations $19,037,874 
     
Carrying amounts of liabilities associated with Helix Businesses included as part of discontinued operations:    
Accounts payable $258,960 
Accrued expenses  661,981 
Short-term operating lease liabilities  243,888 
Deferred revenues  497,418 
Current liabilities of discontinued operations $1,662,247 
     
Long-term operating lease liabilities  365,609 
Non-current liabilities of discontinued operations $365,609 


The estimates for useful livesfollowing table summarizes the major income and expense line items of the identified intangibles are 8 years for Trade Names and Trademarks, 5 years for Customer Relationships and 2 and 7 years for Software Technology Intangibles with a weighted average useful lifeHelix Businesses as reported in the condensed consolidated statements of 5.47 years.

Transaction costs incurred in connection with the Business Combination amounted to $0 and $1,210,279operations for the three months ended March 31, 20222023 and 2021, respectively.2022:

Unaudited Pro Forma Financial Information

The following table represents the revenue, net loss and loss per share effect of the acquired company, as reported on a pro forma basis as if the acquisition occurred on January 1, 2020. These pro forma results are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the first day of the periods presented, nor does the pro forma financial information purport to represent the results of operations for future periods.

  
For the Three Months
Ended March 31,
 
Description 2021 
Revenues $3,629,521 
Net loss $(7,259,506)
Net loss per share:    
Basic and diluted-as pro forma (unaudited) $(0.24)

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The pro forma financial information for all periods presented above has been calculated after adjusting the results of the Company and Helix to reflect the business combination accounting effects resulting from this acquisition, including the amortization expense from acquired intangible assets included in the pro forma financial information presented above. The Forian historical condensed consolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are directly attributable to the business combination and factually supportable. The pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the periods presented.
  For the Three Months Ended March 31, 
  2023  2022 
Income and expense line items related to Helix Businesses:      
Revenues:      
Information and Software  1,121,677   2,274,233 
Services  179,798   428,706 
Other  —   153,479 
Total revenues  1,301,475   2,856,418 
         
Costs and Expenses:        
Cost of revenues  699,015   1,365,227 
Research and development  160,164   990,036 
Sales and marketing  35,005   559,344 
General and administrative  129,283   1,142,924 
Depreciation and amortization  372,435   590,325 
Total costs and expenses  1,395,902   4,647,856 
         
Loss from discontinued operations for Helix Businesses  (94,427)  (1,791,438)
         
Other Income (Expense):        
Interest and investment income  —   693 
Interest expense  —   (25,778)
Foreign currency related gains, net  —   77,976 
Total other income, net  —   52,891 
         
Net loss from discontinued operations for Helix Businesses before income taxes  (94,427)  (1,738,547)
Gain on sale of discontinued operations  11,531,849   202,159 
Income tax expense  (2,690,144)  — 
         
Net gain (loss) from discontinued operations, net of tax for Helix Businesses $8,747,278  $(1,536,388)

Note 5
MARKETABLE SECURITIES


Marketable securities are stated at estimated fair value based upon current market quotes (level 1 inputs) and are classified as available-for-sale. Realized gains and losses are included in investment income. Unrealized gains and losses are immaterial and therefore the Company has presented such amounts within Investmentinvestment income in the Statementcondensed consolidated statements of Operations. operations. The Company invests in short-term U.S. Treasuries and money market mutual funds. As of March 31, 2023 and December 31, 2022, and 2021,marketable securities consisted of the fair valuefollowing:
17
Table of these investments approximated cost.Contents

  March 31, 2023  December 31, 2022 
United States Treasury Bills      
Cost $38,854,166  $17,234,633 
Fair Market Value $39,164,720  $17,396,487 

Note 6PREPAID EXPENSES AND OTHER CURRENT ASSETS


The Company has various agreements which require upfront and periodic payments. The Company records the expenses related to these agreements ratably over the annual terms. As of March 31, 20222023 and December 31, 2021,2022, the Company’s balance sheet reflected other prepaid expenses of $935,907$425,986 and $1,017,927,$835,786, respectively, primarily relating to various software licenses and insurance policies with durations ranging from 3 months to 1 year.


Included in other current assets as of March 31, 20222023 are amounts receivable from employees totaling $368,712.$342,986.

Note 7
PROPERTY AND EQUIPMENT, NET


As of March 31, 20222023 and December 31, 2021,2022, property and equipment were comprised of the following:

 March 31, 2022  December 31, 2021 
 
     March 31, 2023  December 31, 2022 
Personal computing equipment $180,402  $131,137  $101,466  $160,079 
Furniture and equipment  
131,952
   119,381   
—
   7,991 
Software development costs  2,200,278   1,338,044   73,260   — 
Vehicles  0   25,876 
Total  
2,512,632
   1,614,438   
174,726
   168,070 
Less: Accumulated depreciation and amortization
  (126,099)  (82,479)
Less: Accumulated depreciation  (62,633)  (93,040)
Property and equipment, net $2,386,533  $1,531,959  $112,093  $75,030 

19

Depreciation and amortization expense was $36,839, and$10,711 for the three months ended March 31, 2023 and 2022 was $38,430 and 2021, respectively, including $33,259 and $0 of amortization of software development costs. $15,349,respectively.

Note 8INTANGIBLE ASSETS, NET

The following tables summarize the Company’s intangible assets as of March 31, 2022 and December 31, 2021:

  
Estimated
Useful Life
(Years)
  
Gross Carrying
Amount at
December 31,
2021
  
Accumulated
Amortization
  
Net Book
Value at
March 31,
2022
 
Customer Relationships  5  $5,269,000  $(1,136,278) $4,132,722 
Software Technology  2   1,170,000   (630,590)  539,410 
Software Technology  7   4,109,000   (632,765)  3,476,235 
Tradenames and Trademarks  8   386,000   (52,018)  333,982 
      $10,934,000  $(2,451,651) $8,482,349 

  
Estimated
Useful Life
(Years)
  
Gross Carrying
Amount at
March 2,
2021
  
Accumulated
Amortization
  
Net Book
Value at
December 31,
2021
 
Customer Relationships  5  $5,269,000  $(872,501) $4,396,499 
Software Technology  2   1,170,000   (484,355)  685,645 
Software Technology  7   4,109,000   (486,011)  3,622,989 
Tradenames and Trademarks  8   386,000   (39,949)  346,051 
      $10,934,000  $(1,882,816) $9,051,184 

The Company uses the straight-line method to determine the amortization expense for its definite lived intangible assets. Amortization expense related to the purchased intangible assets was $568,835 and $176,873 for the three months ended March 31, 2022 and 2021, respectively.

The estimated future amortization expense for the next five years and thereafter is as follows:

Years Ending December 31, Future amortization expense 
2022 (Remaining)
 $1,705,215 
2023  1,789,695 
2024  1,689,050 
2025  1,689,050 
2026  816,549 
Thereafter  792,790 
Total $8,482,349 

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Note 98
ACCRUED EXPENSES


As of March 31, 20222023 and December 31, 2021,2022, accrued expenses were comprised of the following:

 March 31, 2022  December 31, 2021  March 31, 2023  December 31, 2022 
Accrued salary, commission and bonus $
1,857,932
  $
2,046,584
  $1,659,762  $2,112,482 
Income taxes payable  2,746,515   —
 
Accrued expenses  1,701,354
  2,021,525   2,017,259   1,654,307 
Total $3,559,286  $4,068,109  $6,423,536  $3,766,789 

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Note 109
WARRANT LIABILITY


In conjunction with the Merger,business combination with Helix, outstanding warrants to purchase Helix common stock were converted to warrants to purchase Company common stock. As the warrant holders have the option to receive cash in lieu of common stock in certain circumstances, the Company determined that the warrants require classification as a liability pursuant to ASC 815-40. In accordance with the applicable accounting guidance, the outstanding warrants are recognized as a warrant liability on the condensed consolidated balance sheet and arewere measured at their inception date fair value (the closing date of the Merger) and subsequently re-measured at each reporting period with changes being recorded in the condensed consolidated statementstatements of operations. As of March 31, 2023 and 2022, the Company had 86,502 and 92,058 warrants outstanding classified as liabilities.liabilities, respectively. During the three months ended March 31, 2023, 5,556 warrants expired.


The fair value of the Company’s warrant liability, measured at Level 3 in the fair value hierarchy, was calculated using the Black-Scholes model and the following assumptions:inputs:

 As of March 31, 2022  As of December 31, 2021  As of March 31, 2023  As of December 31, 2022 
Fair value of company's common stock $6.96  $9.02
 
Fair value of Company's common stock $3.81  $2.73
 
Dividend yield 0% 0% 0% 0%
Expected volatility 86% - 121% 118% - 149% 79% - 95% 76% - 92%
Risk Free interest rate 1.58% - 2.41% 0.06% - 0.97%
Risk free interest rate 4.21% - 4.93% 4.34% - 4.75%
Expected life (years) 1.66  1.82  0.71  0.91 
Exercise price $8.00 - $28.00  $8.00 - $28.00  $8.00 - $28.00  $8.00 - $28.00 
Fair value of financial instruments - warrants $149,394  $369,234  $10,106  $4,547 


The change in fair value of the Company’s financial instruments – warrants, is as follows:measured at Level 3 in the fair value hierarchy, was calculated using the Black-Scholes model and the following inputs:

  Amount 
Balance as of January 1, 2023 $4,547 
     
Change in fair value of warrant liability  5,559 
     
Balance as of March 31, 2023 $10,106 

  Amount 
Balance at January 1, 2022 $369,234 
     
Change in fair value of warrant liability  (219,840)
     
Balance at March 31, 2022 $149,394 

  Amount 
Balance at January 1, 2021 $0 
     
Fair value of warrant liability assumed in connection with Helix Merger  1,247,715 
     
Change in fair value of warrant liability  (623,627)
     
Balance as of March 31, 2021 $624,088 
  Amount 
Balance as of January 1, 2022 $369,234 
     
Change in fair value of warrant liability  (219,840)
     
Balance as of March 31, 2022 $149,394 

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Note 1110CONVERTIBLE NOTES

 March 31, 2022  December 31, 2021  March 31, 2023  December 31, 2022 
Principal outstanding 
$
24,000,000
  
$
24,000,000
  
$
24,000,000
  
$
24,000,000
 
Add: accrued interest  
490,000
   
280,000
   
1,327,890
   
1,120,767
 
Less: unamortized debt issuance costs  
(18,219
)  
(19,552
)
  
(12,887
)  
(14,220
)
Convertible note payable, net of debt issuance costs 
$
24,471,781
  
$
24,260,448
  
$
25,315,003
  
$
25,106,547
 

On September 1, 2021, the Company entered into a Note Purchase Agreement with certain accredited investors and a director of the Company, pursuant to which the Company issued at 100% of par value $24,000,000 in aggregate principal balance of 3.5% Convertible Promissory Notes due September 1, 2025 (the “Notes”), convertible into (i) shares of Company common stock, and (ii) warrants to purchase shares of Company common stock equal to 20% of the principal amount of the Notes divided by the conversion price of the Notes (the “Warrants”). The Notes will mature on the fourth-year anniversary of the date of issuance, which time is also the termination date of the Warrants if issued. The conversion price of the Notes and the exercise price of the Warrants is $11.98 per share, which was the consolidated closing bid price of the Company common stock as reported by Nasdaq on August 31, 2021, the most recently completed trading day preceding the Company entering into the Note Purchase Agreement with investors with respect to the Notes. The holders of the Notes may, at any time, convert all or a portion of the Notes plus accrued interest (subject to a minimum principal amount of $100,000) at the conversion price. The Company may redeem all or a portion of any Notes then outstanding at any time after the first anniversary of issuance at a price of 112.5% of par value plus accrued interest. In the event of a change of control of the Company, the Company may redeem all Notes then outstanding at a price of 108% of par value plus accrued interest. Interest expense on the Notes is payable upon maturity or earlier redemption unless the Notes are converted prior to such time. In the event the holders of the Note convert all or a portion of the Notes, the related accrued interest is converted at the conversion price. Interest expense related to the Notes was $210,000$208,456 and $0$210,000 for the three months ended March 31, 2023 and 2022, and 2021, respectively.


The Company evaluated the embedded features in accordance with ASC 815-15-25 and determined embedded features are all clearly and closely related to the debt host instrument and therefore are not required to be bifurcated and separately measured at fair value. The Warrants were not issued in connection with the Notes and issuance of the Warrants is contingent upon conversion of the Notes at the option of the Holder, therefore no portion of the proceeds are allocated to the Warrants.


The Company incurred debt issuance costs associated with the Notes in the amount of $21,330, which will be deferred and amortized over the term of the Notes. During the three months ended March 31, 20222023 and 2021,2022, the Company recognized $1,333 and $0$1,333 in amortization of debt issuance costs, respectively.

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Note 1211STOCK-BASED COMPENSATION

Restricted Stock Awards and Restricted Stock Units

Unvested
The table below includes issuances of restricted stock awards and units under the 2020 Plan and unvested equity interests of MOR which were converted into restricted Company common stock based upon the exchange ratio of 1.7776 shares of Company common stock for each 1 MOR unit, subject to any adjustments required under the Contribution Agreement. The information regarding the 2020 Plan below is presented as though the combination occurred as of the beginning of the periods presented.stock.

 
Number of
Restricted Shares
and Units
  
Weighted Average
Grant Date Fair
Value Per Share
  
Number of Restricted
Shares and Units
  
Weighted Average
Grant Date Fair Value
Per Share
 
Unvested at January 1, 2021  1,699,676  $1.28 
Unvested at January 1, 2022  1,146,131  $1.28 
Issued  454,000   11.71   —   11.71 
Vested  (907,545)  0.03   (474,768)  0.03 
Canceled  (100,000)  12.18   (120,105)  12.18 
Unvested at December 31, 2021
  1,146,131   3.28 
Unvested at December 31, 2022
  551,258   3.28 
Issued  0   0   570,000   3.79 
Vested  (155,547)  2.07   (189,885)  4.39
Canceled  0   0   (20,653)  0.16 
Unvested at March 31, 2022
 $990,584  $3.07 
Unvested at March 31, 2023
 
910,720  $5.78 


The 990,584910,720 of unvested awards at March 31, 2022 consists2023 consisted of 300,760163,720 restricted stock units and 689,824747,000 shares of restricted stock.
Stock Options


As part of the Merger, (see Note 4), the Company assumed the Helix TCS, Inc. Omnibus Stock Incentive Plan and the Bio-Tech Medical Software, Inc. 2014 Stock Incentive Plan, each as amended, pursuant to which options exercisable at prices between $2.00 and $51.80 per share for 455,089 shares of Company common stock were outstanding. The value attributable to service subsequent to the Merger will beis recognized as compensation cost by the Company.


The fair value of the stock options was estimated at Level 3 in the fair value hierarchy using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgement. The assumptions used to calculate the grant date fair value of the options outstanding at March 31, 20222023 and December 31, 20212022 are as follows:

 March 31,  December 31,  March 31,  December 31, 
 2022  2021  2023  2022 
Exercise Price $2.00 to $51.80  $2.00 to $51.80  $2.00 to $51.80  $2.00 to $51.80 
Fair value of Company common stock $6.81 to $15.61  $7.85 to $22.90  $2.98 to $15.61  $2.98 to $15.61 
Dividend yield  0%

  0%

  0%

  0%

Expected volatility 117% to 188%  117% to 188%  79% to 188%  83% to 188% 
Risk Free interest rate 0.27% to 2.18%  0.27% to 1.59%  0.27% to 4.52%  0.27% to 4.52% 
Expected life (years) remaining 0.59 to 9.97  0.84 to 10.00  0.01 to 9.62  0.01 to 9.62 

23

Stock option activity for the periodthree months ended March 31, 2023 and 2022 is as follows:

 
Shares Underlying
Options
  
Weighted Average
Exercise Price
  
Weighted Average
Remaining
Contractual Term
(in years)
  
Shares Underlying
Options
  
Weighted Average
Exercise Price
  
Weighted Average
Remaining
Contractual Term
(in years)
 
Outstanding at January 1, 2021  0   0   — 
Options assumed in Helix Merger  455,089  $15.13   3.24 
Outstanding at January 1, 2022  4,046,973  $
14.25   8.75 
Granted  3,893,714  $12.73   9.31   1,203,250  $4.02   9.14 
Exercised  (29,937) $6.03   1.02   (33,334) $2.47   2.55 
Forfeited and expired  (271,893) $7.31   6.65   (1,233,081) $13.87   8.12 
Outstanding at December 31, 2021
  4,046,973  $14.25   8.75 
Outstanding at December 31, 2022
  3,983,808  $10.53   8.23 
Granted  320,250  $6.81   9.97   1,097,500  $3.79   8.70 
Exercised  0  $0   —   (2,452) $8.09   8.09 
Forfeited and expired  (899,332) $14.63   8.99   (444,554) $11.09   8.13 
Outstanding at March 31, 2022  3,467,891  $12.59   8.66 
Vested options at March 31, 2022
  713,179  $12.34   8.93 
Outstanding at March 31, 2023  4,634,302  $8.89   8.36 
Vested options at March 31, 2023
  2,076,200  $12.59   6.94 


The weighted average exercise price and remaining contractual life of exercisable options as of March 31, 20222023 is $12.34$12.59 and 8.936.94 years, respectively. The total aggregate intrinsic value of the exercisable options as of March 31, 20222023 was approximately $301,336.$161,817.

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Stock Compensation Expense


The weighted-average grant date fair value per share for the stock options granted was $6.17$3.42 and $13.36$6.17 for the three months ended March 31, 2023 and 2022, respectively.


On February 10, 2023, the Company’s Chief Executive Officer, President and 2021, respectively.Class II member of the Board of Directors resigned. In connection with the resignation, the Company entered into a separation agreement providing for, among other things, accelerated vesting of 106,656 unvested restricted shares of the Company common stock. Stock based compensation expense for the three months ended March 31, 2023 includes $349,832 related to the accelerated vesting of stock.


On March 2, 2022, the Company and 2 advisorsthe former chief executive officer and the former chief financial officer of Helix mutually agreed not to renew special advisor agreements between the advisors and the Company. Per the terms of the agreements, options to purchase 366,166 shares of common stock will continuecontinued to vest according to their original terms through March 2, 2023, and unvested stock options to purchase 732,332 shares of common stock were forfeited. The advisors were not required to perform services to the Company beyond the non-renewal date of March 2, 2022 non-renewal date.2022. As a result, the Company recorded $5,417,043 of stock compensation expensesexpense during March 2022 related to the options that will vest over the twelve months endingvested through March 2, 2023 during March 2022.2023.


At March 31, 2022,2023, the total unrecognized stock compensation expense related to unvested stock option awards and restricted stock awards and restricted stock units granted was $19,868,595,$15,390,535, which the Company expects to recognize over a weighted-average period of approximately 3.302.83 years. Stock compensation expense for the three months ended March 31, 20222023 and 20212022 is as follows:

 For the Three Months Ended March 31,  For the Three Months Ended March 31, 
 2022  2021  2023  2022 
Services $
23,907  $
0  $37,926  $19,629 
Research and development  85,619   54,890   38,192   47,441 
Sales and marketing  52,525   31,744   54,002   51,821 
General and administrative  
2,325,490
   777,249   
1,348,281
   2,078,044 
Separation expenses  5,417,043   0   349,832   5,417,043
 
Subtotal
  1,828,233   7,613,978 
Discontinued operations
  (247,308)  290,606 
Total $
7,904,584  $
863,883  $1,580,925  $7,904,584 


Total intrinsic value of options exercised during the period ended March 31, 2023 was $3,948. The total fair value of restricted shares vested during the period ended March 31, 20222023 was $1,193,231.
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$820,418.

Note 13
STOCKHOLDERS’ EQUITY

The Condensed Consolidated Statement of Stockholders’ Equity reflects the exchange of MOR Members Equity for Company common stock as of the beginning of the periods presented. See Note 2.

All of MOR’s Class A, Class B vested profit interests’ units, Series S, Series S-1, and vested Restricted Class B units were converted to Company common stock on March 2, 2021 based upon the exchange ratio of 1.7776 shares of Company common stock to 1 MOR member unit, subject to adjustment pursuant to the Contribution Agreement. Unvested Class B profit interest units, unvested restricted Class B units and options to acquire Restricted Class B Units were converted to unvested restricted Company common stock on March 2, 2021 based upon the exchange ratio of 1.7776 shares of Company common stock to 1 MOR member unit, subject to adjustment pursuant to the Contribution Agreement. The applicable vesting provisions of such MOR units carried over to the restricted Company common stock.

In March 2021, the Company issued warrants to purchase 17,031 shares of Company common stock at a per-share purchase price equal to $0.01. The warrants terminate after a period of 2 years from the issuance date. The warrants were issued in exchange for services provided with a fair value of $389,976 included in transaction related expenses for the year ended December 31, 2021.

On April 16, 2021, the Company raised proceeds of $11,968,652, net of transaction expenses of $31,348, resulting from the sale of 1,191,743 shares of Company common stock at an average purchase price equal to $10.21 per share to a select group of institutional and accredited investors. Investors included both unaffiliated investors as well as directors of the Company. Directors purchased 560,461 shares of common stock at a purchase price of $11.33 per share, which amount represented the consolidated closing bid price of Company common stock as reported by the Nasdaq on April 9, 2021, the last trading day prior to execution of the securities purchase agreement. Unaffiliated investors purchased 631,282 shares of Company common stock at a purchase price of $8.95 per share, which price was negotiated on April 9, 2021, and represents an approximately 15% discount to the preceding day’s volume weighted average price.

See Note 4 for additional details on shares issued pursuant to the Merger.

Note 1412NET LOSSINCOME (LOSS) PER SHARE

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The following table sets forth the computation of the basic and diluted net loss per share:

  For the Three Months Ended March 31, 
  2022
  2021
 
Net loss attributable to common shareholders $(11,854,088) $(4,515,653)
         
Net loss per share attributable to common shareholders:        
Basic $(0.37) $(0.19)
Diluted $(0.37) $(0.19)
         
Weighted average common shares outstanding:        
Basic  31,857,685   24,033,512 
Diluted  31,857,685   24,033,512 
  For the Three Months Ended March 31, 
  2023
  2022
 
Net income (loss):      
Loss from continuing operations $(2,248,799) $(10,317,700)
Income (loss) from discontinued operations  8,747,278   (1,536,388)
Net Income (Loss) $6,498,479  $(11,854,088)
         
Basic and diluted loss from continuing operations per share attributable to common shareholders: $(0.08) $(0.32)
Basic and diluted income (loss) from discontinued operations per share:  0.27
   (0.05)
Net loss per common share $0.19  $(0.37)
         
Weighted average common shares outstanding - basic and diluted  32,300,237
   31,857,685
 


The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share for the three months ended March 31, 2023 and 2022 because their inclusion would be anti-dilutive:anti-dilutive to the Company’s “control number”, which is loss from continuing operations.

 For the Three Months Ended March 31,  As of March 31, 
 2022
  2021
  2023
  2022
 
Potentially dilutive securities:            
Warrants  119,087   124,087   96,500   119,087 
Stock options  3,467,891   3,080,128   4,634,302   3,467,891 
Convertible notes
  2,453,088   0   2,514,849   2,453,088 
Unvested Restricted Stock Awards and Units  990,584   1,870,840   910,720   990,584 
Total
  7,030,650   5,075,055   8,156,371   7,030,650 

Note 1513RELATED PARTY TRANSACTIONS


Adam Dublin, the Company’s Chief Strategy Officer, was previously a consultant for a current vendor of the Company. Mr. Dublin’s consultancy with the vendor ended on December 11, 2020 and the parties have agreed not to renew the consulting agreement. Pursuant to Mr. Dublin’s consulting agreement with the vendor, Mr. Dublin received payments from the vendor for the three months ended March 31, 2023 and 2022 of $49,032 and 2021 of $92,369, and $106,084, respectively.


On April 16, 2021, the Company raised net proceeds of $11,968,652 resulting from the sale of Company common stock to a select group of institutional and accredited investors, which included directors of the Company. See Note 13 for additional information.


On September 1, 2021, the Company issued at 100% of par value $24,000,000 in aggregate principal balance of 3.5% Convertible Promissory Notes due 2025 convertible into (i) shares of Company common stock, and (ii) warrants to purchase shares of Company common stock equal to 20% of the principal amount of the Notes divided by the conversion price to a select group of institutional and accredited investors, which included a director of the Company who holds $6,000,000 of the Notes. See Note 1110 for additional information.
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Note 1614
SEGMENT RESULTS

ASC 280-10-50 requires use of the “management approach” model for segment reporting. The management approach is based on the way a company’s management organized segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision-making group is composed of the chief executive officer and the chief financial officer. The Company operates in 3 segments, Information & Software, Services and Other.

Asset information by operating segment is not presented below since the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in the preparation of the Company’s unaudited condensed consolidated financial statements.

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The following represents selectedCompany provides innovative solutions, proprietary data and predictive analytics to optimize the operational, clinical and financial performance of its customers.


ASC 280 requires that public companies report profits and losses and certain other information on their “reportable operating segments” in their annual and interim financial statements. The internal organization used by the public company’s Chief Operating Decision Maker (CODM) to assess performance and allocate resources determines the basis for reportable operating segments. The Company’s CODM is the Chief Executive Officer. The CODM evaluates financial performance based on revenues and operating income.


As discussed above, the Company disposed of its businesses servicing the cannabis industry in 2023, and has reclassified their historical results as discontinued operations. As such, the Company’s continuing operations are comprised of a singlereportable segments:segment providing analytic and information services to the healthcare and other industries.

Note 15LEASES

Operating Leases


The Company accounts for leases in accordance with ASC Topic 842, Leases (“ASC 842”). All contracts are evaluated to determine whether or not they represent a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company has operating leases primarily consisting of facilities with remaining lease terms of 1-5 years. The lease term represents the period up to the early termination date unless it is reasonably certain that the Company will not exercise the early termination option. Certain leases include rental payments that are adjusted periodically based on changes in consumer price and other indices.


Leases are classified as finance or operating in accordance with the guidance in ASC 842. The Company does not hold any finance leases.

  For the Three Months Ended March 31, 
  2022
  2021
 
Information and Software      
Revenue $5,809,094  $1,408,978 
Costs and expenses  7,443,215   3,637,602 
Loss from operations $(1,634,121) $(2,228,624)
Total other income/(expense)  0   0 
Loss before income taxes $(1,634,121) $(2,228,624)
         
Services        
Revenue $428,706  $96,311 
Costs and expenses  291,598   80,290 
Income from operations $137,108  $16,021 
Total other income/(expense)  0   0 
Income before income taxes $137,108  $16,021 
         
Other        
Revenue $153,479  $115,320 
Costs and expenses  217,063   79,887 
Income (loss) from operations $(63,584) $35,433 
Total other income/(expense)  50   (88)
Income (loss) before income taxes $(63,534) $35,345 
         
Centrally Managed Costs        
Revenue $0  $0 
Costs and expenses  10,353,684   2,939,345 
Loss from operations $(10,353,684) $(2,939,345)
Total other income/(expense)  65,143   624,956 
Loss before income taxes $(10,288,541) $(2,314,389)
Income tax expense
  (5,000)  0 
Net loss
 $(10,293,541) $(2,314,389)
         
Totals        
Revenue $6,391,279  $1,620,609 
Costs and expenses  18,305,560   6,737,124 
Loss from operations $(11,914,281) $(5,116,515)
Total other income/(expense)  65,193   600,862 
Loss before income taxes
 $(11,849,088) $(4,515,653)
Income tax expense
  (5,000)  0 
Net loss $(11,854,088) $(4,515,653)

Approximately 98%The Company is obligated under two short-term leases related to offices in Pennsylvania and Massachusetts. These short-term leases are currently leased on a month-to-month basis. A short-term lease is a lease with a term of 12 months or less and does not include the option to purchase the underlying asset that we would expect to exercise. The Company has elected to adopt the short-term lease exemption in ASC 842 and as such has not recognized a “right of use” asset or lease liability for these short-term leases.


The Company’s revenues were attributablelease agreements generally do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments.


Supplemental cash flow information and non-cash activity related to customers in the United Statesleases for the three months ended March 31, 2023 and 2022 and 2021.are as follows:

   Three Months Ended March 31, 
  2023
  2022
 
Cash used in operating leases $5,931  $450 
ROU assets obtained in exchange for new operating lease liabilities $—  $398 

ROU lease assets and lease liabilities for the Company’s operating leases were recorded in the condensed consolidated balance sheet as follows:

  March 31, 2023  December 31, 2022 
Right of use assets, net
 $27,346  $32,560 
         
Short-term operating lease liabilities
 $21,952  $21,600 
Long-term operating lease liabilities
  5,394   10,960 
Total lease liabilities $27,346  $32,560 
Weighted average remaining lease term (in years)  1.23   1.48 
Weighted average discount rate  9.3%

  9.3%



The components of lease expense were as follows for each of the periods presented, which are included in operating expenses in the condensed consolidated statements of operations:

   Three Months Ended March 31, 
  2023
  2022
 
Operating lease expense
 $5,931  $450 
Short-term lease expense
 $4,812  $— 
Total operating lease costs
 $10,743  $450 

Future lease payments included in the measurement of lease liabilities on the condensed consolidated balance sheet as of March 31, 2023, were as follows:

  March 31, 2023 
2023 (remaining)
 $17,794 
2024
  11,262 
Total future minimum lease payments $29,056 
Less imputed interest  (1,710)
Total $27,346 

Note 1716
COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company accounts for leases in accordance with ASC Topic 842, Leases (“ASC 842”). All contracts are evaluated to determine whether or not they represent a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company has operating leases primarily consisting of facilities with remaining lease terms of one year to five years. The lease term represents the period up to the early termination date unless it is reasonably certain that the Company will not exercise the early termination option. Certain leases include rental payments that are adjusted periodically based on changes in consumer price and other indices.

Leases are classified as finance or operating in accordance with the guidance in ASC 842. The Company does not hold any finance leases.

The Company is obligated under operating lease agreements for office facilities in (i) Florida (2), (ii) Washington, (iii) Colorado and (iv) Argentina that expire in (i) December 2024, (ii) December 2022, (iii) February 2026 and (iv) July 2024, respectively. The Company also has 2 short-term leases related to offices in Pennsylvania and Massachusetts. These short-term leases are currently leased on a month-to-month basis. A short-term lease is a lease with a term of 12 months or less and does not include the option to purchase the underlying asset that we would expect to exercise. The Company has elected to adopt the short-term lease exemption in ASC 842 and as such have not recognized a “right of use” asset or lease liability for these short-term leases.

The Company’s lease agreements generally do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments.

Supplemental cash flow information and non-cash activity related to leases for the three months ended March 31, 2022 and 2021 were as follows:

  For the Three Months Ended March 31, 
  2022
  2021
 
Cash used in operating leases $77,117
  $30,154
 
ROU assets obtained in exchange for new operating lease liabilities $0
  $1,082,684
 

ROU lease assets and lease liabilities for the Company’s operating leases were recorded in the condensed consolidated balance sheet as follows:

  March 31, 2022  December 31, 2021 
Right of use assets, net
 $798,016  $859,637 
         
Short-term operating lease liabilities
 $
246,920  $
247,325 
Long-term operating lease liabilities
 
551,970  
611,523 
Total lease liabilities $798,890  $858,848 
Weighted average remaining lease term (in years)  3.09   3.32 
Weighted average discount rate  8.5%

  8.5%


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The components of lease expense were as follows for each of the periods presented:

  For the Three Months Ended March 31,
 
  2022
  2021
 
Operating lease expense
 $78,781  $27,312 
Short-term lease expense
 $59,887  $391 
Total operating lease costs
 $138,668  $27,703 

Future lease payments included in the measurement of lease liabilities on the condensed consolidated balance sheet as of March 31, 2022, for the following five fiscal years and thereafter were as follows:

  March 31, 2022 
2022
 $231,352 
2023  286,670 
2024  291,161 
2025  85,726 
2026  14,288 
Thereafter  0 
Total future minimum lease payments $909,197 
Less imputed interest  (110,307)
Total $798,890 

Service and License Agreements


The Company entered into certain service and license agreements that provide for future minimum payments. The terms of these agreements vary in length. The following table shows the remaining payment obligations under these licensesagreements as of March 31, 2022:2023:

 March 31, 2022  March 31, 2023 
 
 
Year ending December 31, 2022
 $728,844 
Year ending December 31, 2023
  1,741,439  $1,137,595 
Year ending December 31, 2024  1,887,595   1,887,595 
Year ending December 31, 2025  1,600,000   1,600,000 
Year ending December 31, 2026  400,000   400,000 
Thereafter
  0 
 $6,357,878  $5,025,190 

Legal Proceedings

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From time to time, the Company may be involved in claims that arise during the ordinary course of business. For any matters where management currently believes it is probable that the Company will incur a loss and that the probable loss or range of loss can be reasonably estimated, the Company records reserves in the condensed consolidated financial statements based on its best estimates of such loss. In other instances, because of the uncertainties related to either the probable outcome or the amount or range of loss, management is unable to make a reasonable estimate of a liability, if any. Regardless of the outcome, litigation can be costly and time consuming and it can divert management’s attention from important business matters and initiatives, negatively impacting the Company’s overall operations. Although the results of litigation and claims cannot be predicted with certainty, the Company does not currently have any pending litigation to which it is a party or to which its property is subject that we believe to be material, except for the below.

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Audet v. Green Tree International, et. al.


On February 14, 2020, John Audet filed a complaint in 15th Judicial Circuit in and for Palm Beach County, Florida against multiple parties, including Green Tree International (“GTI”), an indirect subsidiary of the Company, claiming that he owned 10% of GTI. The complaint seeks unspecified monetary damages equivalent to the value a 10% shareholder of GTI would have received in the subsequent Helix and Forian transactions, along with an equitable accounting and constructive trust to determine if Audet suffered any loss of profit distributions. The case is in the process of discovery and no trial schedule has been established.is scheduled for June 2023. Each of the parties’ motions for summary judgment were recently denied. The Company believes the lawsuit is wholly without merit and willintends to defend vigorously defendagainst the claims in the lawsuit.

Nykiah Thomas v. Security Consultants Group, LLC d/b/a Helix TCS, Helix Technologies, Inc. and Shamson Sundra

On July 16, 2021, Nykiah Thomas, individually and on behalf of M’Seiya Thomas, a minor, filed a complaint in the District Court, City and County of Denver, Colorado, against Security Consultants Group, LLC d/b/a Helix TCS and Helix Technologies, Inc., subsidiaries of Forian, and Shamson Sundra, a former employee of Security Consultants Group, LLC, alleging negligence in the performance of security services in connection with a school shooting at STEM School Highlands Ranch that occurred on May 7, 2019. In January 2022, the parties reached an agreement in principle to settle this dispute. The settlement agreement required approval from the probate court because plaintiff M’Seiya Thomas is a minor, which order was granted by the probate court on May 6, 2022. As a result of this settlement, the Company anticipates dismissal of this case, with prejudice, during the second quarter of 2022.


Grant Whitus et al. v. Forian Inc., Zachary Venegas and Scott Ogur



On July 30, 2021, 4four former Helix employees filed a lawsuit in the Arapahoe County, Colorado District Court against the Company and Helix’s former managers asserting claims of breach of contract, promissory estoppel, breach of the covenant of good faith and fair dealing, civil theft and conversion, fraudulent misrepresentation, civil conspiracy and unjust enrichment / enrichment/quantum meruit, all relating to the plaintiffs’ claims that they were promised equity interest in Helix or compensation that they never received. The original complaint was never served and in November 2021 the plaintiffs filed and served an amended complaint adding a fifth plaintiff, and seeking over $27.5 million in damages as well as attorneys’ fees and costs. The Company removed the matter to the United States District Court for the District of Colorado in December 2021, and both the Company and the individual defendants filed motions to dismiss on January 20, 2022. Plaintiffs subsequently amended their complaint on April 21, 2022, adding Helix TCS LLC and Helix Technologies, Inc. as defendants and advancing additional claims for breach of fiduciary duty and violation of the Colorado Wage Claims Act. The Company and the individual defendants anticipate that they will renewfiled their separate motions to dismiss in advance of theon June 1, 2022, responsive pleading deadline. Discovery has not yet begun.and briefing of those motions was completed on July 13, 2022. Although the motions are still pending, the Court ordered the parties to begin discovery. Written discovery, which commenced in July 2022, is ongoing. The Company believes the lawsuit is wholly without merit and intends to defend vigorously against the claims in the lawsuit.

Note 1817
SUBSEQUENT EVENTS

On May 11, 2022,

The Company evaluated subsequent events and transactions that occurred after the Company’s Board of Directors approvedbalance sheet date up to the grant to certain employees ofdate that the financial statements were issued. Based upon this review, the Company underdid not identify any subsequent events that would have required adjustment or disclosure in the 2020 Planfinancial statements.

27
Table of nonqualified stock options to purchase an aggregate of 771,000 shares of common stock of the Company at an exercise price of $2.98 per share, which amount represents the closing price of the Company’s common stock on such date.Contents


Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement for Forward-Looking Information

The following discussion of our financial condition and results of operations for the three months ended March 31, 20222023 and 20212022 should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, as filed with the SEC on March 31, 2022.30, 2023. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Unless expressly indicated or the context requires otherwise, the terms “Forian”, the “Company”, “we”, “us”, and “our” refer to Forian Inc.

Overview

The CompanyForian Inc. (the “Company” or “Forian”) was initially incorporated in Delaware on October 15, 2020 as a wholly owned subsidiary of Medical Outcomes Research Analytics, LLC (“MOR”), which was founded in Delaware on May 6, 2019, in connection with for the Business Combination described below. On October 16, 2020,purpose of effecting the Company entered into a definitive agreementbusiness combination with Helix Technologies Inc. (“Helix”) and MOR, pursuant to which DNA Merger Sub, Inc.,. Forian provides a wholly owned subsidiaryunique suite of the Company (“Merger Sub”), merged with and into Helix, with Helix surviving the merger as a wholly owned subsidiary of the Company (the “Merger”). On March 2, 2021, the Company entered into a definitive agreement with the equity holders of MOR, pursuant to which the equity holders of MOR contributed their interests in MOR to the Company in exchange for shares of Company common stock (the “Contribution” and together with the Merger, the “Business Combination”). Following consummation of the Business Combination on March 2, 2021, the Company became the parent company of both Helix and MOR. Helix provides traceability and point of sale technology, analytics solutions and other products to customers within each vertical of the cannabis industry to help them improve the performance of their business.

The Company provides innovative software solutions, proprietary data and predictive analytics to optimize the operational and financial performance of our customers. Given the prior experience of our management team, our initial focus is on stakeholders within the healthcare and cannabis industries. However, we believe the application of our offerings across other verticals to enhance the transparency and efficacy of our customers’ relationships with their communities and customers is equally compelling.

The Company represents the unique convergence of proprietary healthcare, consumer and cannabis data, SaaS analytics, innovative data management capabilities and intelligent data science with a leading cannabis technology platform yielding the combined power to drive innovation and transparency across the industries we serve. In MOR, there was early recognition of the opportunity to bring the sophistication of proven data science technologyproprietary information and analytics solutions to a prominent cannabis technology platform provider, creating innovation in both the applications that are key to supporting customer success within the cannabis industryoptimize and to the data science powered insights that drive healthcaremeasure operational, clinical and other mature regulated growth industries. In Helix, there was realization that the capability set of a technology solutions provider within more evolved sectors together with the track record of the MOR management team offered a unique opportunity to enhance the value that Helix brings to its cannabis customers and to the industry generally.

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The Company’s mission is to provide our customers with the best-in-class critical technology services through a single integrated Forian platform that enables ourfinancial performance for customers within the healthcare and cannabis industries to operate their businesses more safely, efficiently and profitably and to serve our customers and our customers’ stakeholders and constituencies more comprehensively.related industries.

A novel strainThe business combination with Helix was accounted for as a reverse acquisition using the acquisition method of coronavirus (COVID-19) was first identifiedaccounting in December 2019,accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”), with the Company deemed the accounting acquirer for financial reporting purposes. Helix provides software and subsequently declared a pandemic byanalytics solutions to state governments and licensed operators in the World Health Organization. Our business has largely operatedcannabis industry, primarily through its subsidiary, Bio-Tech Medical Software, Inc. (“BioTrack”), until its sale of BioTrack in a work-from-home environment since2023.

On February 10, 2023, Helix completed the inceptionsale of 100% of the pandemicoutstanding capital stock of BioTrack, on March 3, 2022 Helix completed the sale of the assets of its security monitoring business, and on October 31, 2022 Helix completed the sale of 100% of the outstanding membership interest of its Engeni LLC subsidiary (these businesses together are referred to as the “Helix Businesses”). As a result of these transactions, Helix has no remaining active operations and the Company no longer provides products or services to the cannabis industry. The results of the Helix Businesses are presented as discontinued operations in the Condensed Consolidated Statements of Operations and, as a result, has experienced limited business disruptionsuch, have been excluded from continuing operations. Further, the Company reclassified the assets and liabilities of the Helix Businesses to date. Our management team continues to focus on the highest level of safety measures to protect our employees. We have not experienced a material impact to our financial results to date, however, COVID-19 continues to present significant uncertaintydiscontinued operations in the future economic outlook for ourConsolidated Balance Sheet as of December 31, 2022. The Company will continue to provide analytics solutions to customers within the healthcare and the markets we serve.related industries.

Financial Operations Overview

The following discussion sets forth certain components of our statements of operations as well as factors that impact those items.

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Revenues

Revenues are derived from Information and Software Products, Services and Other Products. Information and Software revenues are generated from licensing fees for our proprietary information and software products. The Company recognizes revenues from Information and Softwareinformation products as performance obligations under customer contracts are satisfied. Services revenues are primarily from contracts with government agencies and revenue is recognized upon completion of the various milestones within the contract. Other revenues are primarily from security monitoring services offerings and the provision of web marketing services. Contracts for these services have a stated transaction price for monthly services and are recognized as the services are provided.

Cost of Revenues

Cost of revenues is generated from direct costs associated with the delivery of our products and services to our customers. The cost of revenues relates primarily to labor costs, information licensing, hosting and infrastructure costs and client service team costs. We record the cost of direct fulfillment as cost of revenues. Infrastructure and licensed data costs, which are shared across all projects or groups of projects, are not charged to cost of revenues.

Research and Development

Research and development expenses consist primarily of employee-related expenses, subcontractor and third-party consulting fees data fees, and hosted infrastructure costs. We continue to focus our research and development efforts on adding new features and applications to our product offerings. Once our prototypes are proven, we begin to capitalize costs that qualify with the associated development rather than recording those costs as research and development.

Sales and Marketing

Sales and marketing expense is primarily salaries and related expenses, including commissions, for our sales, marketing and product management staff. Marketing program costs are also recorded as sales and marketing expense including advertising, market research and events (such as trade shows, corporate communications, brand building, etc.). The Company plans to continue to invest in marketing and sales by expanding our selling and marketing staff, building brand awareness, attracting new clients and sponsoring additional marketing events. The timing of these marketing events will affect our marketing costs in any particular quarter.

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General and Administrative Expenses

General and administrative expenses include salaries and benefits and other costs of departments serving administrative functions, such as executives, finance and accounting and human resources. In addition, general and administrative expense includes non-personnel costs, such as professional fees, legal fees, accounting and finance advisory fees and other supporting corporate expenses not allocated to cost of revenues, product and development or sales and marketing.

Depreciation and Amortization Expenses

Depreciation and Amortization relate to long lived assets used in our business. Depreciation expense relates primarily to furniture and equipment computers and vehicles. Amortization expense relates primarily to identifiable intangibles of acquired companies.computers.

Transaction Related Expenses
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Transaction related expenses relate to the acquisition of Helix on March 2, 2021 and include professional, legal, accounting and finance advisory fees and other direct expenses.

Results of Operations for the Three Months Ended March 31, 20222023 and 2021:2022:

The following table summarizes our condensed results of operations for the periods indicated:

 For the Three Months Ended,  For the Three Months Ended March 31, 
 March 31, 2022  March 31, 2021  2023  2022 
Revenues $6,391,279  $1,620,609  $4,870,387  $3,534,861 
Costs and Expenses              
Cost of Revenues 1,567,549  457,886 
Cost of revenues  1,252,215   1,243,030 
Research and development 3,222,871  1,497,838   531,689   1,089,879 
Sales and marketing 1,411,314  598,975   1,196,192   820,594 
General and administrative 6,088,454  2,784,562   3,639,826   5,273,968 
Separation expenses 5,611,857  —   599,832   5,417,043 
Gain on sale of assets (202,159) — 
Depreciation and amortization 605,674  187,584   38,430   15,349 
Transaction related expenses  —   1,210,279 
Loss from operations $(11,914,281) $(5,116,515)
Loss from continuing operations $(2,387,797) $(10,325,002)

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Comparison of Three Months Ended March 31, 20222023 and 20212022

Revenues

Revenuesfor the three months ended March 31, 2023 were $4,870,387, which represented an increase of $1,335,526, or 37.8%, compared to total revenue of $3,534,861 for the three months ended March 31, 2022 were $6,391,279, which represented an increase of $4,770,670 compared to total revenue of $1,620,609 for the three months ended March 31, 2021. These revenues were primarily from Information and Software products.. The increase is primarily due to the inclusionincreased sales of revenues from the Helix acquisition since March 2, 2021, which contributed 38% of the increase, and higher revenues from the Company’s healthcare information products which contributed 62% of the increase. Revenues from the Company’s Information products increased $2,961,025 or 416% compared to the three months ended March 31, 2021.healthcare industry to new and existing customers.

Cost of Revenues

Cost of revenues increased by $1,109,663for the three months ended March 31, 2023 was $1,252,215, which represented an increase of $9,185 compared to total cost of revenues of $1,243,030 for the three months ended March 31, 2022 from $457,886. Cost of revenues increased at a lower rate than revenue, as many of our data infrastructure costs are fixed or semi-variable in nature. As a result, gross profit as a percentage of revenues increased to 74.3% for the three months ended March 31, 2021. The increase is due2023, compared to higher cost of revenues from64.8% for the Company’s Information products.same period in 2022.

Research and Development

Research and development expenses for the three months ended March 31, 20222023 were $3,222,871,$531,689, which represented an increasedecrease of $1,725,033$558,190 compared to total research and development expenses of $1,497,838$1,089,879 for the three months ended March 31, 2021.2022. The increasedecrease is due to higherlower personnel, subcontracted labor data licensing and processing expensesinfrastructure costs related to scalingnew product development resulting from the Company’s products, which contributed 79% ofshift in focus to the increase, and the inclusion of the Helix acquisition since March 2, 2021, which contributed 21% of the increase.healthcare analytics market.

Sales and Marketing

Sales and marketing expenses for the three months ended March 31, 20222023 were $1,411,314,$1,196,192, which represented an increase of $812,339$375,598 compared to total sales and marketing expenses of $598,975$820,594 for the three months ended March 31, 2021.2022. The increase is due to higher salary, commission and consulting expenses related to scaling the Company’s products, which contributed 64%products.

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Table of the increase and the inclusion of the Helix acquisition since March 2, 2021, which contributed 36% of the increase.Contents

General and Administrative

General and administrative expenses for the three months ended March 31, 2023 were $3,639,826, which represented a decrease of $1,634,142 compared to general and administrative expenses of $5,273,968 for the three months ended March 31, 2022 were $6,088,454, which represented an increase of $3,303,892 compared to general and administrative expenses of $2,784,562 for the three months ended March 31, 2021.. The increasedecrease is primarily due to higher expenses related to scaling the Company’s management organization, which contributed 13%lower personnel costs, consulting and professional fees resulting from cost synergies, including a decrease of the increase,$729,763 in stock-based compensation expenses related to equity awards grantedthe departure of the former chief executive officer and the former chief financial officer of Helix, who were advisors to key Helix employees and newthe Company hires after we became a public company onthrough March 2, 2021, which contributed approximately 47% of the increase, and the inclusion of the Helix acquisition since March 2, 2021, which contributed 24% of the increase.2022, partially offset by increased expenses related to grants to employees.

Separation Expenses

Effective February 10, 2023, the Company’s Chief Executive Officer, President and Class II member of the Board of Directors resigned. In connection with the resignation, the Company entered into a separation agreement providing for, among other things (i) salary continuation for 12 months and (ii) accelerated vesting of 106,656 unvested restricted shares of the Company common stock. Separation expenses for the three months ended March 31, 2022 were $5,611,857, consisting of $194,814 of severance expenses2023 includes $250,000 related to the transfer of development activities from our Engeni SA subsidiarysalary continuation, fully recognized during the quarter, and $5,417,043$349,832 related to the continuedaccelerated vesting of stock.

On March 2, 2022, the Company and two advisors agreed not to renew special advisor agreements between the advisors and the Company. The advisors were the former chief executive officer and chief financial officer of Helix who were granted stock options in conjunction with their respective advisory agreements that were entered into upon the completion of the Helix acquisition. The Company and the advisors mutually agreed not to renew the advisory agreements. The services provided by these advisors included transition planning and consulting services related to integration of the business operations of Helix and Forian. Per the terms of the agreements, options to purchase 366,166 shares of common stock continued to vest according to their original terms through March 2, 2023, and unvested stock options to purchase 732,332 shares of common stock were forfeited. The advisors were not required to perform services to the Company beyond the non-renewal date of March 2, 2022. As a result, the Company recorded $5,417,043 of stock compensation expense during March 2022 related to the separation of two advisors to the Company in accordance with the terms of their original advisory agreements.

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Gain on Sale of Assets

On March 3, 2022, the Company sold certain assets, consisting of customer contracts, accounts receivable, and other property related to its security monitoring services for $225,575 resulting in a gain of $202,159, which is included in operating expenses in the condensed consolidated statements of operations.

Transaction Related Expenses

Transaction related expenses for the three months ended March 31, 2022 were $0, which represented a decrease of $1,210,279 compared to transaction related expenses of $1,210,279 for the three months ended March 31, 2021. These 2021 expenses related to the acquisition of Helix, which was completed onoptions that vested through March 2, 2021.2023.

Non-GAAP Financial Measures

In this Quarterly Report on Form 10-Q we have provided a non-GAAP measure, which we define as financial information that has not been prepared in accordance with U.S. GAAP. The non-GAAP financial measure provided herein is earnings before interest, taxes, non-cash and other items (“Adjusted EBITDA”), which should be viewed as supplemental to, and not as an alternative for, net income or loss calculated in accordance with U.S. GAAP (referred to below as “Net“net loss”).

Adjusted EBITDA is used by our management as an additional measure of our Company’s performance for purposes of business decision-making, including developing budgets, managing expenditures and evaluating potential acquisitions or divestitures. Period-to-period comparisons of Adjusted EBITDA help our management identify additional trends in our Company’s financial results that may not be shown solely by period-to-period comparisons of net income.loss. In addition, we may use Adjusted EBITDA in the incentive compensation programs applicable to some of our employees in order to evaluate our Company’s performance. Our management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items, particularly those items that are recurring in nature. In order to compensate for those limitations, management also reviews the specific items that are excluded from Adjusted EBITDA, but included in net income,loss, as well as trends in those items contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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We believe that the presentation of Adjusted EBITDA is useful to investors in their analysis of our results for reasons similar to the reasons why our management finds it useful and because it helps facilitate investor understanding of decisions made by management in light of the performance metrics used in making those decisions. In addition, as more fully described below, we believe that providing Adjusted EBITDA, together with a reconciliation of net loss to Adjusted EBITDA, helps investors make comparisons between our Company and other companies that may have different capital structures, different effective income tax rates and tax attributes, different capitalized asset values and/or different forms of employee compensation. However, Adjusted EBITDA is not intended as a substitute for comparisons based on net loss. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding U.S. GAAP measures provided by each company under applicable SEC rules.

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The following is an explanation of the items excluded by us from Adjusted EBITDA but included in net loss:loss from continuing operations:


•
Depreciation and Amortization. Depreciation and amortization expense is a non-cash expense relating to capital expenditures and intangible assets arising from acquisitions that are expensed on a straight-line basis over the estimated useful life of the related assets. We exclude depreciation and amortization expense from Adjusted EBITDA because we believe that (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods as a result of new acquisitions and full amortization of previously acquired tangible and intangible assets. Accordingly, we believe that this exclusion assists management and investors in making period-to-period comparisons of operating performance. Investors should note that the use of tangible and intangible assets contributed to revenue in the periods presented and will contribute to future revenue generation and should also note that such expense will recur in future periods.


•
Stock-Based Compensation Expense. Stock-based compensation expense is a non-cash expense arising from the grant of stock-based awards to employees. We believe that excluding the effect of stock-based compensation from Adjusted EBITDA assists management and investors in making period-to-period comparisons in our Company’s operating performance because (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods as a result of the timing of grants of new stock-based awards, including grants in connection with acquisitions. Additionally,Stock-based compensation expense includes certain separation expenses related to the vesting of stock options. Effective February 10, 2023, the Company’s Chief Executive Officer, President and Class II member of the Board of Directors resigned. In connection with the resignation, the Company entered into a separation agreement providing for, among other things, accelerated vesting of 106,656 unvested restricted shares of the Company common stock. Stock based compensation expense for the three months ended March 31, 2023 includes $349,832 related to the accelerated vesting of stock. On March 2, 2022, we and the former chief executive officer and the former chief financial officer of Helix mutually agreed not to renew special advisor agreements. Per the terms of the agreements, options to purchase 366,166 shares of common stock continued to vest according to their original terms through March 2, 2023, and unvested stock options to purchase 732,332 shares of common stock were forfeited. The advisors were not required to perform services to the Company beyond the non-renewal date of March 2, 2022. As a result, we recorded $5,417,043 of stock compensation expenses during March 2022 related to the options that vested through the twelve months ending March 2, 2023. We believe that excluding stock-based compensation from Adjusted EBITDA assists management and investors in making meaningful comparisons between our Company’s operating performance and the operating performance of other companies that may use different forms of employee compensation or different valuation methodologies for their stock-based compensation. Investors should note that stock-based compensation is a key incentive offered to employees whose efforts contributed to the operating results in the periods presented and are expected to contribute to operating results in future periods. Investors should also note that such expenses will recur in the future.

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•
Interest Expense. Interest expense is associated with the Notesconvertible notes entered into on September 1, 2021 in the amount of $24,000,000.$24,000,000, (the “Notes”). The Notes are due on September 1, 2025 and accrue interest at an annual rate of 3.5%. We exclude interest expense from Adjusted EBITDA (i) because it is not directly attributable to the performance of our business operations and, accordingly, its exclusion assists management and investors in making period-to-period comparisons of operating performance and (ii) to assist management and investors in making comparisons to companies with different capital structures. Investors should note that interest expense associated with the Notes will recur in future periods.


•
Investment Income. Investment income is associated with the level of marketable debt securities and other interest-bearing accounts in which we invest. Interest and investment income can vary over time due to a variety of financing transactions, changes in interest rates, cash used to fund operations and capital expenditures and acquisitions that we have entered into or may enter into in the future. We exclude interest and investment income from Adjusted EBITDA (i) because these items are not directly attributable to the performance of our business operations and, accordingly, their exclusion assists management and investors in making period-to-period comparisons of operating performance and (ii) to assist management and investors in making comparisons to companies with different capital structures. Investors should note that interest income will recur in future periods.


•
Foreign Currency Related Gains (Losses). Foreign currency related gains (losses) result from foreign currency transactions and translation gains and losses related to our Engeni SA subsidiary. We exclude foreign currency related gains (losses) from Adjusted EBITDA (i) because these items are not directly attributable to the performance of our business operations and, accordingly, their exclusion assists management and investors in making period-to-period comparisons of operating performance and (ii) to assist management and investors in making comparisons to companies with different capital structures. Investors should note that foreign currency related gains (losses) will recur in future periods.

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•
Other Items. We engage in other activities and transactions that can impact our net loss. In the periods being reported, these other items included (i) change in fair value of warrant liability which related to warrants assumed in the acquisition of Helix; (ii) transaction related expenses which consist of professional fees and other expenses incurred in connection with the acquisition of Helix; and (iii)(ii) other income which consists of profits on marketable security investments. We exclude these other items from Adjusted EBITDA because we believe these activities or transactions are not directly attributable to the performance of our business operations and, accordingly, their exclusion assists management and investors in making period-to-period comparisons of operating performance. Investors should note that some of these other items may recur in future periods.


•
Gain on sale of assets.Severance expenses. On March 3, 2022, we sold certain assets, consisting of customer contracts, accounts receivable,Effective February 10, 2023, the Company’s Chief Executive Officer, President and other property related to our security monitoring services for $225,575 resulting in a gain of $202,159, which is included in operating expenses in the condensed consolidated statements of operations.


•
Separation expenses. During March 2022, we transferred certain development activities from our Engeni SA subsidiary to outsourced development facilities. As a result, we incurred $194,814 in severance and related costs to be recorded as a charge to operating expenses in 2022. Additionally, on March 2, 2022, we and two advisors to our Company mutually agreed not to renew special advisor agreements. Per the termsClass II member of the agreements, options to purchase 366,166Board of Directors resigned. In connection with the resignation, the Company entered into a separation agreement providing for, among other things (i) salary continuation for twelve months and (ii) accelerated vesting of 106,656 unvested restricted shares of ourthe Company common stock will continue to vest according to their original terms throughstock. Severance expenses for the three months ended March 2,31, 2023 and unvested stock options to purchase 732,332 shares of our common stock were forfeited. The advisors were not required to perform services to our Company beyond the March 2, 2022 non-renewal date. As a result, we recorded $5,417,043 of stock compensation expensesincludes $250,000 related to the options that will vest over the twelve months ending March 2, 2023 during March 2022.salary continuation. We exclude these other items from Adjusted EBITDA because we believe these costs are not recurring and not directly attributable to the performance of our business operations and, accordingly, their exclusion assists management and investors in making period-to-period comparisons of operating performance. Investors should note that separationIn addition, the Company records normal course of business severance expenses are non-recurring.in the operating expense line item related to the employee’s activities.


•
Income tax expense. MOR was organized as a limited liability company until the completion of the Helix acquisition. As a result, we were treated as a partnership for federal and state income tax purposes through March 2, 2021, and our taxable income and losses are reported by our members on their individual tax returns for such period. Therefore, we did not record any income tax expense or benefit through March 2, 2021. We incurred a net loss for financial reporting and income tax reporting purposes for this year. Accordingly, any benefit for federal and state income taxes benefit has been entirely offset by a valuation allowance against the related deferred tax net assets. We exclude the income tax expense from Adjusted EBITDA (i) because we believe that the income tax expense is not directly attributable to the underlying performance of our business operations and, accordingly, its exclusion assists management and investors in making period-to-period comparisons of operating performance and (ii) to assist management and investors in making comparisons to companies with different tax attributes.

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Limitations on the use of non-GAAP financial measures

There are limitations to using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with U.S. GAAP and may be different from non-GAAP financial measures provided by other companies.

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The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which items are adjusted to calculate our non-GAAP financial measures. We compensate for these limitations by analyzing current and future results on a U.S. GAAP basis as well as a non-GAAP basis and also by providing U.S. GAAP measures in our public disclosures.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure to evaluate our business and to view our non-GAAP financial measures in conjunction with the most directly comparable U.S. GAAP financial measures.

The following table reconciles the specific items excluded from U.S. GAAP metrics in the calculation of non-GAAP metricsAdjusted EBITDA for the periods shown below:

  For the Three Months Ended March 31, 
  2022  2021 
Revenues:      
Information and Software $5,809,094  $1,408,978 
Services  428,706   96,311 
Other  153,479   115,320 
Total revenues $6,391,279  $1,620,609 
         
Net loss $(11,854,088) $(4,515,653)
         
Depreciation & amortization  605,674   187,584 
Stock based compensation expense  7,904,584   863,883 
Change in fair value of warrant liability  (219,840)  (623,627)
Transaction related expenses  —   1,210,279 
Interest and investment income (expense)  232,623   (1,241)
Foreign currency related (gains) losses  (77,976)  24,006 
Gain on sale of security monitoring assets  (202,159)  — 
Severance expense  194,814   — 
Income tax expense  5,000   — 
         
Adjusted EBITDA $(3,411,368) $(2,854,769)
  For the Three Months Ended March 31, 
  2023  2022 
Revenue $4,870,387  $3,534,861 
         
Net loss from continuing operations $(2,248,799) $(10,317,700)
         
Depreciation and amortization  38,430   15,349 
Stock based compensation expense  1,828,233   7,613,978 
Change in fair value of warrant liability  5,559   (219,840)
Interest and investment income  (382,922)  (3,795)
Interest expense  208,456   211,333 
Severance expense  250,000   — 
Income tax expense  29,909   5,000 
         
Adjusted EBITDA - continuing operations $(271,134) $(2,695,675)

For the Three Months Ended March 31, 20222023

Adjusted EBITDA - continuing operations

Adjusted EBITDAfor the three months ended March 31, 2023 was a loss of $271,134 compared to a loss of $2,695,675 for the three months ended March 31, 2022 was, a lossdecrease of $3,411,368 compared to a loss of $2,854,769 for the three months ended March 31, 2021, an increase of $556,599.$2,424,541. The increasedecrease is primarily due to investments in product development, customer service, infrastructure, and human capitalhigher revenues and the inclusion of Helix.lower research and development and general and administrative expenses discussed above.

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Revenues

Revenues for the three months ended March 31, 2022 were $6,391,279, which represented an increase of $4,770,670 compared to total revenue of $1,620,609 for the three months ended March 31, 2021. These revenues were primarily from Information and Software products. The increase is due to the inclusion of revenues from the Helix acquisition since March 2, 2021, which contributed 38% of the increase, and higher revenues from the Company’s healthcare information products, which contributed 62% of the increase. Revenues from the Company’s Information products increased $2,961,025 or 416% compared to the three months ended March 31, 2021.

Revenues for the three months ended March 31, 2022 was $6,391,279 compared to pro forma revenues adjusted to include revenues from Helix for the period, for the three months ended March 31, 2021 of $3,629,521. Helix pre-acquisition revenues during the three months ended March 31, 2021 were $2,008,912. The increase in pro forma revenue of $2,761,758 is primarily due to increased sales of healthcare information products.

Liquidity and Capital Resources

Since the Company’s inception in 2019,2020, most of the Company’s resources have been devoted to scaling itsour research and development, sales and marketing and management infrastructure. The Company’s operations have been financed primarily from the cash proceeds received from equity issuances and the issuance of convertible notes.the Notes. The Company expects to continue to fund its operations and potential future acquisitions through a combination of cash flow generated from operating activities, debt financing and/or additional equity issuances. To date, the Company has not generated sufficient revenues from the licensing of information products and software products to fund all of its operating expenses and as a result the Company has incurred losses and generated negative cash flows from operations since inception. On April 12, 2021February 10, 2023, the Company entered into a securities purchase agreement with certain accredited investorssold BioTrack for $30.0 million consisting of $20.0 million in cash at closing and certaintwelve unconditional monthly payments aggregating $10.0 million thereafter. As ofMarch 31, 2023, the Company’s directors, pursuant to which the Company issued 1,191,743 sharesbalance of common stock for aggregate gross proceeds of $12,000,000. On September 1, 2021, the Company raised proceeds of $24 million through the sale of 3.5% convertible promissory notes maturing on September 1, 2025. As of March 31, 2022, the Company’s principal source of liquidity was aggregate cash and marketable securities aggregated $40 million. Additionally, the Company has proceeds receivable from the BioTrack sale of $27,146,824.$8.8 million and principal and accrued interest on the Notes, due September 1, 2025 of $25.3 million outstanding at March 31, 2023.

Cash Flows

The following table summarizes selected information about our sources and uses of cash and cash equivalents for the periods presented:

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  For the Three Months Ended, 
  March 31, 2022  March 31, 2021 
Net cash used in operating activities $(3,229,774) $(3,608,800)
Net cash (used in) provided by investing activities  (667,515)  5,246,936 
Net cash (used in) provided by financing activities  (13,122)  292,148 
Net (decrease) increase in cash and cash equivalents $(3,910,411) $1,930,284 
  
For the Three Months Ended
March 31,
 
  2023  2022 
Net cash used in operating activities - continuing operations $(1,201,777) $(2,399,452)
Net cash provided by (used in) used in investing activities - continuing operations  (633,003)  160,378 
Net cash used in financing activities - continuing operations  (94,599)  (13,122)
Net increase in cash and cash equivalents - continuing operations $(1,929,379) $(2,252,196)

Net Cash Used in Operating Activities

Net cash used in operating activities decreased by $379,026$1,197,675 for the three months ended March 31, 20222023 compared to the three months ended March 31, 20212022. The decrease was primarily the result of increased revenues and decreased transaction related expenses, Adjusted EBITDA loss, partially offset by increased operating expensechanges in deferred revenue, accounts payable and other working capital accounts related to the scaling uptiming of the Company’s operations as well as a result of the Helix acquisition and itscash flows from operations.

Net Cash Provided byUsed in Investing Activities

Net cash used in investing activities of $667,515 decreased$633,003 increased by $5,914,451$793,381 for the three months ended March 31, 20222023 compared to cash provided byused in investing activities of $5,246,936$160,378 for the three months ended March 31, 2021.2022. This is primarily the result of an increase in additions to property and equipmentnet purchases of $838,379, a netmarketable securities of $21,447,703, offset by an increase in cash invested in marketable securitiesreceived from the sale of $3,990,670 and a decrease in cash acquired of $1,310,977.discontinued operations.

Net Cash Provided byUsed in Financing Activities

Net cash used in financing activities of $13,122$94,599 for the three months ended March 31, 2022 decreased2023 increased by $305,270$81,477 compared to cash provided by investingused in financing activities of $292,148$13,122 for the three months ended March 31, 2021.2022. The decreaseincrease was primarily related to a reduction in cash proceeds received fromused to fund income tax withholding payments on vesting of employee restricted stock which was settled by surrendering shares to the exercise of stock options.Company.

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Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).GAAP. We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates – which also would have been reasonable – could have been used. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies and estimates are further discussed in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, as filed with the SEC on March 31, 2022.
30, 2023. There have been no changes to these policies and estimates other than described below.

OffDiscontinued Operations

In accordance with ASC 205-20 Discontinued Operations, the results of the Helix Businesses are presented as discontinued operations in the Condensed Consolidated Statements of Operations and, as such, have been excluded from continuing operations. Further, the Company reclassified the assets and liabilities of the Helix Businesses as assets and liabilities of discontinued operations in the Consolidated Balance Sheet Arrangements

as of December 31, 2022, and recorded a gain on the sale of discontinued operations, net of tax during the three months ended March 31, 2023. The Company does not have relationshipsevaluated the divestitures in accordance with other organizations or process anyASC 205-20 and determined that transactions in aggregate represented a strategic shift that would constitute off balance sheet arrangements.had a major impact on the Company. Accounting for discontinued operations and the related gain on sale of discontinued operations requires us to make estimates and judgements regarding the allocation of costs and net asset values to discontinued operations.

Recent Accounting Pronouncements

In October 2021, the FASB issued Accounting Standards Update No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). The FASB issued ASU 2021-08 to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. The amendment is effective for financial statements for interim and annual periods beginning after December 15, 2022.ASU 2021-08 was adopted on January 1, 2023. The adoption of this standard isASU 2021-08 did not expected to have a material impact on the condensed consolidated financial statements.

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on itsour financial statements.

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JOBS Act

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company.” As an “emerging growth company,” the Company is electing to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards.

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Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” the Company is not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. These exemptions will apply until the fifth anniversary of the business combination or until we no longer meet the requirements for being an “emerging growth company,” whichever occurs first.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

This item is not required.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, 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 our management, including our chief executive officer (who is also the Company’s principal executive officer), and our chief financial officer (who is also the Company’s principal financial and accounting officer), to allow for timely decisions regarding required disclosure. In accordance with Rules 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as of March 31, 2022,2023, which is the end of the three-month period covered by this Quarterly Report on Form 10-Q.

The Company identified material weaknesses in our internal controls over financial reporting as disclosed in Item 9A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021,2022, as filed with the SEC on March 31, 2022.30, 2023. Our chief executive officer and chief financial officer therefore concluded that our disclosure controls and procedures as of the fiscal quarter ended March 31, 20222023 remain ineffective to the extent of the material weaknesses identified.

We have implemented several processes and control procedures in 2021,2022, including those outlined below, to remediate the deficiencies noted above.

We currently are assessing and improving the operating effectiveness of these controls to ensure they will operate at an acceptable level of assurance.

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We have hired additional personnel and outside consultants to fill accounting functions and expect to hire and train additional personnel. In addition, we are in the process of upgrading ourimplementing upgraded accounting and finance systems, which we expect will enhance our ability to implement appropriate internal controls.

We have contracted an outside consulting firm to assist in the overall evaluation and documentation of the design and operating effectiveness of our internal controls over financial reporting. We are implementing newly designed controls and testing their operating effectiveness.

We believe these actions, when complete, will remediate the control weaknesses. However, the weaknesses will not be considered fully remediated until the applicable controls operate for a sufficient period of time for management to test the results for operating effectiveness. Once implemented, we intend to continue periodic testing and reporting of the internal controls to ensure continuity of compliance.

Changes in Internal Control Over Financial Reporting

Except for the items described above, there has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the three months ended March 31, 2022,2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II – OTHER INFORMATION

Item 1.Legal Proceedings

From time to time, we may be involved in claims that arise during the ordinary course of business. For any matters where management currently believes it is probable that we will incur a loss and that the probable loss or range of loss can be reasonably estimated, we record reserves in our condensed consolidated financial statements based on our best estimates of such loss. In other instances, because of the uncertainties related to either the probable outcome or the amount or range of loss, management is unable to make a reasonable estimate of a liability, if any. Regardless of the outcome, litigation can be costly and time consuming and it can divert management’s attention from important business matters and initiatives, negatively impacting our overall operations. Although the results of litigation and claims cannot be predicted with certainty, we do not currently have any pending litigation to which we are a party or to which our property is subject that we believe to be material, except for the below.

Audet v. Green Tree International, et. al.

On February 14, 2020, John Audet filed a complaint in 15th Judicial Circuit in and for Palm Beach County, Florida against multiple parties, including Green Tree International (“GTI”), an indirect subsidiary of the Company, claiming that he owned 10% of GTI. The complaint seeks unspecified monetary damages equivalent to the value a 10% shareholder of GTI would have received in the subsequent Helix and Forian transactions, along with an equitable accounting and constructive trust to determine if Audet suffered any loss of profit distributions. The case is in the process of discovery and no trial schedule has been established.is scheduled for June 2023. Each of the parties’ motions for summary judgment were recently denied. The Company believes the lawsuit is wholly without merit and willintends to defend vigorously defendagainst the claims in the lawsuit.

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Nykiah Thomas v. Security Consultants Group, LLC d/b/a Helix TCS, Helix Technologies, Inc. and Shamson Sundra

On July 16, 2021, Nykiah Thomas, individually and on behalf of M’Seiya Thomas, a minor, filed a complaint in the District Court, City and County of Denver, Colorado, against Security Consultants Group, LLC d/b/a Helix TCS and Helix Technologies, Inc., subsidiaries of Forian, and Shamson Sundra, a former employee of Security Consultants Group, LLC, alleging negligence in the performance of security services in connection with a school shooting at STEM School Highlands Ranch that occurred on May 7, 2019. In January 2022, the parties reached an agreement in principle to settle this dispute. The settlement agreement required approval from the probate court because plaintiff M’Seiya Thomas is a minor, which order was granted by the probate court on May 6, 2022. As a result of this settlement, the Company anticipates  dismissal of this case, with prejudice, during the second quarter of 2022.

Grant Whitus et al. v. Forian Inc., Zachary Venegas and Scott Ogur

On July 30, 2021, four former Helix employees filed a lawsuit in the Arapahoe County, Colorado District Court against the Company and Helix’s former managers asserting claims of breach of contract, promissory estoppel, breach of the covenant of good faith and fair dealing, civil theft and conversion, fraudulent misrepresentation, civil conspiracy and unjust enrichment / quantum meruit, all relating to the plaintiffs’ claims that they were promised equity interest in Helix or compensation that they never received. The original complaint was never served and in November 2021, the plaintiffs filed and served an amended complaint adding a fifth plaintiff and seeking over $27.5 million in damages as well as attorneys’ fees and costs. The Company removed the matter to the United States District Court for the District of Colorado in December 2021, and both the Company and the individual defendants filed motions to dismiss on January 20, 2022.2022. Plaintiffs subsequently amended their complaint on April 21, 2022, adding Helix TCS LLC and Helix Technologies, Inc. as defendants and advancing additional claims for breach of fiduciary duty and violation of the Colorado Wage Claims Act. The Company and the individual defendants anticipate that they will renewfiled their separate motions to dismiss in advance of theon June 1, 2022, responsive pleading deadline. Discovery has not yet begun.and briefing of those motions was completed on July 13, 2022. Although the motions are still pending, the Court ordered the parties to begin discovery. Written discovery, which commenced in July 2022, is ongoing. The Company believes the lawsuit is wholly without merit and intends to defend vigorously against the claims in the lawsuit.

Item 1A.Risk Factors

This item is not required.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.Other Information

None.

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Item 6.Exhibits

2.1
Stock Purchase Agreement, dated February 10, 2023, by and among Helix Technologies, Inc., Bio-Tech Medical Software, Inc. and BT Assets Group, Inc. (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the SEC on February 13, 2023).
3.1
Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Company’s Form S-4 (Reg. No. 333-250938) filed with the SEC on November 24, 2020, as amended on December 31, 2020, January 19, 2021, February 1, 2021 and February 9, 2021).
3.2
Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the Company’s Form S-4 (Reg. No. 333-250938) filed with the SEC on November 24, 2020, as amended on December 31, 2020, January 19, 2021, February 1, 2021 and February 9, 2021).
10.1+
Separation Agreement, dated February 10, 2023, by and between the Company and Daniel Barton (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on February 13, 2023).
10.2
License Agreement, dated February 10, 2023, by and among the Company, Helix Technologies, Inc., BT Assets Group, Inc. and Bio-Tech Medical Software, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on February 13, 2023).
31.1*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
CertificationsCertification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSInline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.CAL
Inline XBRL Taxonomy Calculation Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*
Filed with this Quarterly Report on Form10‑Q.
*          Filed with this Quarterly Report on Form10‑Q.
+          Indicates management contract or compensatory plan.

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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, on May 13, 2022.15, 2023.

 FORIAN INC.
   
 
By:
/s/ Daniel BartonMax Wygod
  
Daniel BartonMax Wygod
  
Chief Executive Officer
  
(Principal Executive Officer)
   
 
By:
/s/ Michael Vesey
  
Michael Vesey
  
Chief Financial Officer
  
(Principal Financial Officer and Principal Accounting Officer)


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