Cover
Cover - shares | 9 Months Ended | |
Oct. 31, 2021 | Dec. 08, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Oct. 31, 2021 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2022 | |
Current Fiscal Year End Date | --01-31 | |
Entity File Number | 000-28132 | |
Entity Registrant Name | STREAMLINE HEALTH SOLUTIONS, INC. | |
Entity Central Index Key | 0001008586 | |
Entity Tax Identification Number | 31-1455414 | |
Entity Incorporation, State or Country Code | DE | |
Entity Address, Address Line One | 11800 Amber Park Drive | |
Entity Address, Address Line Two | Suite 125 | |
Entity Address, City or Town | Alpharetta | |
Entity Address, State or Province | GA | |
Entity Address, Postal Zip Code | 30009 | |
City Area Code | (888) | |
Local Phone Number | 997-8732 | |
Title of 12(b) Security | Common Stock, $0.01 par value per share | |
Trading Symbol | STRM | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 47,600,634 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Oct. 31, 2021 | Jan. 31, 2021 | ||
Current assets: | ||||
Cash and cash equivalents | $ 10,409,000 | $ 2,409,000 | ||
Accounts receivable, net of allowance for doubtful accounts of $99,000 and $65,000, respectively | 3,287,000 | 2,929,000 | ||
Contract receivables | 581,000 | 174,000 | ||
Assets held in escrow | 800,000 | |||
Prepaid and other current assets | 876,000 | 416,000 | ||
Current assets of discontinued operations | 587,000 | |||
Total current assets | 15,153,000 | 7,315,000 | ||
Non-current assets: | ||||
Property and equipment, net of accumulated depreciation of $176,000 and $452,000, respectively | 116,000 | 104,000 | ||
Right-of use asset for operating lease | 262,000 | 391,000 | ||
Capitalized software development costs, net of accumulated amortization of $4,937,000 and $3,507,000, respectively | 5,563,000 | 5,945,000 | ||
Intangible assets, net of accumulated amortization of $5,494,000 and $4,773,000, respectively | 17,323,000 | 624,000 | ||
Goodwill | 23,089,000 | 10,712,000 | ||
Other | 908,000 | 873,000 | ||
Long-term assets of discontinued operations | 13,000 | |||
Total non-current assets | 47,261,000 | 18,662,000 | ||
Total assets | 62,414,000 | 25,977,000 | ||
Current liabilities: | ||||
Accounts payable | 689,000 | 272,000 | ||
Accrued expenses | 2,024,000 | 908,000 | ||
Current portion of term loan, less deferred financing cost | 125,000 | [1] | 1,534,000 | [2] |
Deferred revenue | 4,395,000 | 3,862,000 | ||
Current portion of operating lease obligation | 202,000 | 198,000 | ||
Current liabilities of discontinued operations | 595,000 | |||
Total current liabilities | 7,435,000 | 7,369,000 | ||
Non-current liabilities: | ||||
Term loan, less current portion | 9,759,000 | 767,000 | ||
Deferred revenue, less current portion | 156,000 | 130,000 | ||
Acquisition earnout liability | 11,101,000 | |||
Operating lease obligation, less current portion | 82,000 | 222,000 | ||
Other Non-Current Liabilities | 280,000 | |||
Total non-current liabilities | 21,378,000 | 1,119,000 | ||
Total liabilities | 28,813,000 | 8,488,000 | ||
Stockholders’ equity: | ||||
Common stock, $.01 par value per share, 65,000,000 shares authorized; 47,639,650 and 31,597,975 shares issued and outstanding, respectively | 476,000 | 316,000 | ||
Additional paid in capital | 118,754,000 | 96,290,000 | ||
Accumulated deficit | (85,629,000) | (79,117,000) | ||
Total stockholders’ equity | 33,601,000 | 17,489,000 | ||
Total liabilities and stockholders' equity | $ 62,414,000 | $ 25,977,000 | ||
[1] | The term loan, as of October 31, 2021, is related to the new term loan agreement that the Company entered into on August 26, 2021 with Bridge Bank (see description above). | |||
[2] | The term loan, as of January 31, 2021, is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021. |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Oct. 31, 2021 | Jan. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 99,000 | $ 65,000 |
Accumulated amortization, Property and equipment | 176,000 | 452,000 |
Accumulated amortization, capitalized software development costs | 4,937,000 | 3,507,000 |
Accumulated amortization, intangible assets | $ 5,494,000 | $ 4,773,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 65,000,000 | 65,000,000 |
Common stock, shares issued | 47,639,650 | 31,597,975 |
Common stock, shares outstanding | 47,639,650 | 31,597,975 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Oct. 31, 2021 | Oct. 31, 2020 | Oct. 31, 2021 | Oct. 31, 2020 | ||
Revenue: | |||||
Total revenue | $ 5,514,000 | $ 2,641,000 | $ 11,333,000 | $ 8,372,000 | |
Operating expenses: | |||||
Cost of software licenses | 133,000 | 183,000 | 412,000 | 385,000 | |
Cost of professional services | 936,000 | 268,000 | 1,411,000 | 779,000 | |
Cost of audit services | 409,000 | 425,000 | 1,174,000 | 1,158,000 | |
Cost of maintenance and support | 57,000 | 160,000 | 223,000 | 528,000 | |
Cost of software as a service | 1,088,000 | 443,000 | 2,276,000 | 1,250,000 | |
Selling, general and administrative expense | 3,439,000 | 2,283,000 | 8,507,000 | 6,859,000 | |
Research and development | 1,339,000 | 753,000 | 3,280,000 | 1,946,000 | |
Non-routine costs | 1,933,000 | 2,710,000 | |||
Loss on exit from membership agreement | 105,000 | ||||
Total operating expenses | 9,334,000 | 4,515,000 | 19,993,000 | 13,010,000 | |
Operating loss | (3,820,000) | (1,874,000) | (8,660,000) | (4,638,000) | |
Other income (expense): | |||||
Interest expense | (85,000) | (12,000) | (107,000) | (39,000) | |
Loss on Extinguishment of Debt | (43,000) | (43,000) | |||
Other | (427,000) | 14,000 | (421,000) | (68,000) | |
Forgiveness of PPP loan and accrued interest | 2,327,000 | ||||
Loss from continuing operations before income taxes | (4,375,000) | (1,872,000) | (6,904,000) | (4,745,000) | |
Income tax benefit (expense) | (4,000) | 803,000 | (9,000) | 1,536,000 | |
Loss from continuing operations | (4,379,000) | (1,069,000) | (6,913,000) | (3,209,000) | |
Income from discontinued operations: | |||||
Gain on sale of discontinued operations | 6,013,000 | ||||
Income from discontinued operations | 69,000 | 64,000 | 401,000 | 305,000 | |
Income tax expense | (50,000) | (1,626,000) | |||
Income from discontinued operations, net of tax | 69,000 | 14,000 | 401,000 | 4,692,000 | |
Net (loss) income | $ (4,310,000) | $ (1,055,000) | $ (6,512,000) | $ 1,483,000 | |
Basic Earnings Per Share: | |||||
Continuing operations | $ (0.10) | $ (0.04) | $ (0.17) | $ (0.11) | |
Discontinued operations | 0.01 | 0.16 | |||
Net (loss) income per share | $ (0.10) | $ (0.04) | $ (0.16) | $ 0.05 | |
Weighted average number of common shares – basic | [1] | 45,709,952 | 30,286,197 | 41,498,873 | 30,026,890 |
Diluted Earnings Per Share: | |||||
Continuing operations | $ (0.10) | $ (0.04) | $ (0.17) | $ (0.11) | |
Discontinued operations | 0.01 | 0.15 | |||
Net (loss) income per share | $ (0.10) | $ (0.04) | $ (0.16) | $ 0.04 | |
Weighted average number of common shares – diluted | 46,063,803 | 30,892,526 | 41,995,266 | 30,450,572 | |
Software Licenses [Member] | |||||
Revenue: | |||||
Total revenue | $ 150,000 | $ 19,000 | $ 285,000 | $ 234,000 | |
Professional Services [Member] | |||||
Revenue: | |||||
Total revenue | 944,000 | 161,000 | 1,052,000 | 473,000 | |
Audit Services [Member] | |||||
Revenue: | |||||
Total revenue | 513,000 | 491,000 | 1,460,000 | 1,498,000 | |
Maintenance and Support [Member] | |||||
Revenue: | |||||
Total revenue | 1,082,000 | 1,070,000 | 3,226,000 | 3,556,000 | |
Software Service [Member] | |||||
Revenue: | |||||
Total revenue | $ 2,825,000 | $ 900,000 | $ 5,310,000 | $ 2,611,000 | |
[1] | Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of October 31, 2021 and 2020, there were 1,030,600 1,166,325 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Balance at Jan. 31, 2020 | $ 305,000 | $ 95,113,000 | $ (79,413,000) | $ 16,005,000 |
Balance, shares at Jan. 31, 2020 | 30,530,643 | |||
Restricted stock issued | $ 4,000 | (4,000) | ||
Restricted stock issued, shares | 440,000 | |||
Restricted stock forfeited | ||||
Restricted stock forfeited, shares | (34,790) | |||
Surrender of shares | (22,000) | (22,000) | ||
Surrender of shares, shares | (21,027) | |||
Share-based compensation | 263,000 | 263,000 | ||
Net loss | 3,673,000 | 3,673,000 | ||
Balance at Apr. 30, 2020 | $ 309,000 | 95,350,000 | (75,740,000) | 19,919,000 |
Balance, shares at Apr. 30, 2020 | 30,914,826 | |||
Balance at Jan. 31, 2020 | $ 305,000 | 95,113,000 | (79,413,000) | 16,005,000 |
Balance, shares at Jan. 31, 2020 | 30,530,643 | |||
Net loss | 1,483,000 | |||
Balance at Oct. 31, 2020 | $ 316,000 | 95,989,000 | (77,930,000) | 18,375,000 |
Balance, shares at Oct. 31, 2020 | 31,577,692 | |||
Balance at Apr. 30, 2020 | $ 309,000 | 95,350,000 | (75,740,000) | 19,919,000 |
Balance, shares at Apr. 30, 2020 | 30,914,826 | |||
Restricted stock issued | $ 9,000 | (9,000) | ||
Restricted stock issued, shares | 855,543 | |||
Restricted stock forfeited | $ (1,000) | 1,000 | ||
Restricted stock forfeited, shares | (100,000) | |||
Surrender of shares | $ (1,000) | (35,000) | (36,000) | |
Surrender of shares, shares | (33,704) | |||
Share-based compensation | 349,000 | 349,000 | ||
Net loss | (1,135,000) | (1,135,000) | ||
Balance at Jul. 31, 2020 | $ 316,000 | 95,656,000 | (76,875,000) | 19,097,000 |
Balance, shares at Jul. 31, 2020 | 31,636,665 | |||
Restricted stock issued | ||||
Restricted stock issued, shares | 7,331 | |||
Restricted stock forfeited | ||||
Restricted stock forfeited, shares | (10,000) | |||
Surrender of shares | (109,000) | (109,000) | ||
Surrender of shares, shares | (56,304) | |||
Share-based compensation | 442,000 | 442,000 | ||
Net loss | (1,055,000) | (1,055,000) | ||
Balance at Oct. 31, 2020 | $ 316,000 | 95,989,000 | (77,930,000) | 18,375,000 |
Balance, shares at Oct. 31, 2020 | 31,577,692 | |||
Balance at Jan. 31, 2021 | $ 316,000 | 96,290,000 | (79,117,000) | 17,489,000 |
Balance, shares at Jan. 31, 2021 | 31,597,975 | |||
Restricted stock issued | $ 7,000 | (7,000) | ||
Restricted stock issued, shares | 740,752 | |||
Surrender of shares | $ (1,000) | (160,000) | (161,000) | |
Surrender of shares, shares | (78,562) | |||
Share-based compensation | 565,000 | 565,000 | ||
Issuance of Common Stock | $ 101,000 | 15,999,000 | 16,100,000 | |
Issuance of common stock, shares | 10,062,500 | |||
Offering Expenses | (1,293,000) | (1,293,000) | ||
Net loss | (2,142,000) | (2,142,000) | ||
Balance at Apr. 30, 2021 | $ 423,000 | 111,394,000 | (81,259,000) | 30,558,000 |
Balance, shares at Apr. 30, 2021 | 42,322,665 | |||
Balance at Jan. 31, 2021 | $ 316,000 | 96,290,000 | (79,117,000) | 17,489,000 |
Balance, shares at Jan. 31, 2021 | 31,597,975 | |||
Net loss | (6,512,000) | |||
Balance at Oct. 31, 2021 | $ 476,000 | 118,754,000 | (85,629,000) | 33,601,000 |
Balance, shares at Oct. 31, 2021 | 47,639,650 | |||
Balance at Apr. 30, 2021 | $ 423,000 | 111,394,000 | (81,259,000) | 30,558,000 |
Balance, shares at Apr. 30, 2021 | 42,322,665 | |||
Restricted stock issued | $ 1,000 | (1,000) | ||
Restricted stock issued, shares | 112,500 | |||
Restricted stock forfeited | ||||
Restricted stock forfeited, shares | (10,000) | |||
Surrender of shares | (130,000) | (130,000) | ||
Surrender of shares, shares | (69,289) | |||
Share-based compensation | 557,000 | 557,000 | ||
Offering Expenses | (25,000) | (25,000) | ||
Net loss | (60,000) | (60,000) | ||
Balance at Jul. 31, 2021 | $ 424,000 | 111,795,000 | (81,319,000) | 30,900,000 |
Balance, shares at Jul. 31, 2021 | 42,355,876 | |||
Restricted stock issued | $ 3,000 | (3,000) | ||
Restricted stock issued, shares | 348,415 | |||
Restricted stock forfeited | ||||
Restricted stock forfeited, shares | (40,100) | |||
Exercise of Stock Options | 4,000 | 4,000 | ||
Exercise of Stock Options | 3,300 | |||
Surrender of shares | $ (1,000) | (88,000) | (89,000) | |
Surrender of shares, shares | (49,813) | |||
Share-based compensation | 537,000 | 537,000 | ||
Issuance of Common Stock | $ 50,000 | 6,504,000 | 6,554,000 | |
Issuance of common stock, shares | 5,021,972 | |||
Offering Expenses | 5,000 | 5,000 | ||
Net loss | (4,310,000) | (4,310,000) | ||
Balance at Oct. 31, 2021 | $ 476,000 | $ 118,754,000 | $ (85,629,000) | $ 33,601,000 |
Balance, shares at Oct. 31, 2021 | 47,639,650 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Oct. 31, 2021 | Oct. 31, 2020 | |
Statement of Cash Flows [Abstract] | ||
Net (Loss) Income | $ (6,512,000) | $ 1,483,000 |
LESS: Income from discontinued operations, net of tax | 401,000 | 4,692,000 |
Loss from continuing operations | (6,913,000) | (3,209,000) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Depreciation | 53,000 | 35,000 |
Amortization of capitalized software development costs | 1,430,000 | 1,128,000 |
Amortization of intangible assets | 721,000 | 370,000 |
Amortization of other deferred costs | 369,000 | 242,000 |
Valuation adjustments | 417,000 | 31,000 |
Benefit for income taxes | (1,536,000) | |
Loss on early extinguishment of debt | 43,000 | |
Loss on exit from membership agreement | 105,000 | |
Share-based compensation expense | 1,659,000 | 1,004,000 |
Provision (Benefit) for accounts receivable allowance | 14,000 | (15,000) |
Forgiveness of PPP loan and accrued interest | (2,327,000) | |
Changes in assets and liabilities: | ||
Accounts and contract receivables | 666,000 | 1,151,000 |
Other assets | (551,000) | (514,000) |
Accounts payable | (72,000) | (489,000) |
Accrued expenses and other liabilities | 774,000 | (386,000) |
Deferred revenue | (305,000) | (1,600,000) |
Net cash used in operating activities | (4,022,000) | (3,683,000) |
Net cash from (used in) operating activities – discontinued operations | 406,000 | (2,319,000) |
Cash flows from investing activities: | ||
Investment in Avelead, Net of Cash | (12,354,000) | |
Proceeds from sale of ECM Assets | 800,000 | 11,288,000 |
Purchases of property and equipment | (18,000) | (42,000) |
Capitalization of software development costs | (1,048,000) | (1,495,000) |
Net cash provided by investing activities | (12,620,000) | 9,751,000 |
Cash flows from financing activities: | ||
Repayment of bank term loan | (4,000,000) | |
Proceeds from issuance of term loan | 10,000,000 | 2,301,000 |
Proceeds from issuance of common stock | 16,100,000 | |
Payments for costs directly attributable to the issuance of common stock | (1,313,000) | |
Payments related to settlement of employee share-based awards | (380,000) | (168,000) |
Payment for deferred financing costs | (168,000) | |
Payment on royalty liability | (500,000) | |
Other | (3,000) | |
Net cash provided by (used in) financing activities | 24,236,000 | (2,367,000) |
Net increase in cash and cash equivalents | 8,000,000 | 1,382,000 |
Cash and cash equivalents at beginning of period | 2,409,000 | 1,649,000 |
Cash and cash equivalents at end of period | $ 10,409,000 | $ 3,031,000 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Oct. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | NOTE 1 — BASIS OF PRESENTATION Streamline Health Solutions, Inc. and each of its wholly-owned subsidiaries, Streamline Health, LLC, Avelead Consulting, LLC, Streamline Consulting Solutions, LLC and Streamline Pay & Benefits, LLC, (collectively, unless the context requires otherwise, “we,” “us,” “our,” “Streamline,” or the “Company”), operate in one segment as a provider of healthcare information technology solutions and associated services. The Company provides these capabilities through the licensing of its Coding & CDI, eValuator Coding Analysis Platform, Financial Management and Patient Care solutions and other workflow software applications and the use of such applications by software as a service (“SaaS”). The Company also provides audit and coding services to help customers optimize their internal clinical documentation and coding functions, as well as implementation and consulting services to complement its software solutions. The Company’s software and services enable hospitals and integrated healthcare delivery systems in the United States and Canada to capture, store, manage, route, retrieve and process patient clinical, financial and other healthcare provider information related to the patient revenue cycle. The accompanying unaudited condensed consolidated financial statements have been prepared by us pursuant to the rules and regulations applicable to quarterly reports on Form 10-Q of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. The condensed consolidated financial statements include the accounts of Streamline Health Solutions, Inc. and each of its wholly-owned subsidiaries. In the opinion of the Company’s management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the condensed consolidated financial statements have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s most recent annual report on Form 10-K. Operating results for the nine months ended October 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2022. Refer to Note – 3 Business Combination and Divestiture. Under ASC 280-10-50-11, All amounts in the condensed consolidated financial statements, notes and tables have been rounded to the nearest thousand dollars, except share and per share amounts, unless otherwise indicated. All references to a fiscal year refer to the fiscal year commencing February 1 in that calendar year and ending on January 31 of the following calendar year. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Oct. 31, 2021 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company’s significant accounting policies are presented in “Note 2 – Significant Accounting Policies” in the fiscal year 2020 Annual Report on Form 10-K. Users of financial information for interim periods are encouraged to refer to the footnotes to the consolidated financial statements contained in the Annual Report on Form 10-K when reviewing interim financial results. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates and judgments, including those related to the recognition of revenue, share-based compensation, capitalization of software development costs, intangible assets, the allowance for doubtful accounts, and income taxes. Actual results could differ from those estimates. The Company wrote-off fully depreciated fixed assets during the first nine months of fiscal 2021 of $ 225,000 Reclassification ASC 606-10-25-19(a) provides guidance on the presentation of revenue as it relates to identifying distinct performance obligations in contracts containing multiple deliverables. As the Company has begun to shift to a primarily SaaS solution, the professional services revenue related to implementation of SaaS contracts has grown. With this growth, and expected continued growth, of professional services which are not determined to be a distinct performance obligation for the Company’s SaaS contracts, we have reclassified SaaS professional services from professional services revenue and cost of sales on the consolidated statement of operations to Software as a Service revenue and cost of sales. For the three and nine months ended October 31, 2020, the reclassification of revenue was $ 19,000 67,000 27,000 73,000 Fair Value of Financial Instruments The Financial Accounting Standards Board’s (“FASB”) authoritative guidance on fair value measurements establishes a framework for measuring fair value. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. Under this guidance, assets and liabilities carried at fair value must be classified and disclosed in one of the following three categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. Cash and cash equivalents are classified as Level 1. The carrying amount of the Company’s long-term debt approximates fair value since the variable interest rates being paid on the amounts approximate the market interest rate. The WSJ prime interest rate did not go below the “Floor” rate as described in the loan agreement. Accordingly, the interest rates charged were market rate. Long-term debt is classified as Level 2. There were no transfers of assets or liabilities between Levels 1, 2, or 3 during the nine months ended October 31, 2021 and 2020. The table below provides information on the fair value of our liabilities: SCHEDULE OF FAIR VALUE OF LIABILITIES Quoted Prices in Significant Other Significant Unobservable Total Fair Active Markets Observable Inputs Inputs Value (Level 1) (Level 2) (Level 3) At October 31, 2021 Acquisition earnout liability (1) $ 11,101,000 $ — $ — $ 11,101,000 At January, 31, 2021 PPP Loan (2) $ 2,301,000 $ — $ 2,301,000 $ — (1) The fair value of the acquisition earnout liability is based upon a probability-weighted discounted cash flow that was completed at the date of acquisition and updated as of October 31, 2021. The change in the valuation of the acquisition earnout liability was $ 417,000 (2) The fair value of the PPP loan was determined based on discounting the loan amount as of January 31, 2021. The fair value was determined using market interest rates that the Company believes would be available for similar types of financial instruments. The Company estimated that the impact of the fair value adjustment on the PPP loan would have resulted in a lower fair value of $ 2,231,000 2,301,000 70,000 Revenue Recognition We derive revenue from the sale of internally-developed software, either by licensing for local installation or by a SaaS delivery model, through the Company’s direct sales force or through third-party resellers. Licensed, locally-installed customers on a perpetual model utilize the Company’s support and maintenance services for a separate fee, whereas term-based locally installed license fees and SaaS fees include support and maintenance. We also derive revenue from professional services that support the implementation, configuration, training and optimization of the applications, as well as audit services provided to help customers review their internal coding audit processes. We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers We recognize revenue (Step 5 below) in accordance with that core principle after applying the following steps: ● Step 1: Identify the contract(s) with a customer ● Step 2: Identify the performance obligations in the contract ● Step 3: Determine the transaction price ● Step 4: Allocate the transaction price to the performance obligations in the contract ● Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation Contracts may contain more than one performance obligation. Performance obligations are the unit of accounting for revenue recognition and represent the distinct goods or services that are promised to the customer. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities. If we determine that we have not satisfied a performance obligation, we defer recognition of the revenue until the performance obligation is satisfied. Maintenance and support and SaaS agreements are generally non-cancelable or contain significant penalties for early cancellation, although customers typically have the right to terminate their contracts for cause if we fail to perform material obligations. However, if non-standard acceptance periods, non-standard performance criteria, or cancellation or a right of refund terms exist, revenue may not be recognized until the satisfaction of such criteria. The transaction price is allocated to the unit of account based on the standalone selling price of the performance obligations in the contract. Significant judgment is required to determine the standalone selling price (“SSP”) for each performance obligation and whether the amount allocated to each performance obligation depicts the amount that the Company expects to receive in exchange for the related product and/or service. As the selling prices of the Company’s software licenses are highly variable, the Company estimates the SSP of its software licenses using the residual approach when the software license is sold with other services and observable SSPs exist for the other services. The Company estimates the SSP for maintenance, professional services, and audit services based on observable standalone sales. Contract Combination The Company may execute more than one contract or agreement with a single customer. The Company evaluates whether the agreements should be combined and treated as a single contract by evaluating whether they were negotiated as a package with a single objective, whether the amount of consideration to be paid in one agreement depends on the price and/or performance of another agreement, or whether the goods or services promised in the agreements represent a single performance obligation. The conclusions reached can impact the allocation of the transaction price to each performance obligation and the timing of revenue recognition related to those arrangements. Software Licenses The Company’s software license agreements provide the customer with the right to use functional intellectual property. Implementation, support, and other services are typically considered distinct performance obligations when sold with a software license unless these services are determined to significantly modify the software. Revenue for software licenses is recognized at a point in time, typically, when the software is made available for electronic download. Maintenance and Support Services The Company’s maintenance and support obligations include multiple performance obligations, with the two largest being rights to unspecified product upgrades or enhancements, and technical support for software licenses. We believe that the multiple performance obligations within the Company’s overall maintenance and support services can be viewed as a single performance obligation since both the unspecified upgrades and technical support are comprised of promises to stand ready to fulfill the various underlying activities during the contract term. Maintenance and support agreements entitle customers to technology support, version upgrades, bug fixes and service packs. We recognize maintenance and support revenue ratably over the contract term. Professional Services The Company provides various professional services to customers with software licenses. These include project management, software implementation, consulting, and software modification services. Revenue from agreements to provide professional services are generally distinct from the other promises in the contract and are recognized as the related services are performed. Avelead’s SaaS-based contracts have implementation services that are a distinct performance obligation, and, accordingly, are recognized separately as professional services. Consideration payable under these agreements is either on a fixed fee or time-and-materials basis and is recognized over time as the services are performed. Software as a Service SaaS-based contracts include a right to use the Company’s platform, support, and other services which represent a single promise to provide continuous access to its software solutions. Additionally, implementation for the Company’s eValuator product is included as part of the single promise for its respective contracts. The Company recognizes revenue for implementation of the eValuator product over the contract term as it is determined that the implementation on eValuator is not a distinct performance obligation. Audit Services The Company provides technology-enabled coding audit services to help customers review and optimize their internal clinical documentation and coding functions across the applicable segment of the client’s enterprise. Audit services are a separate performance obligation. We recognize revenue as the services are performed. Disaggregation of Revenue The following table provides information about disaggregated revenue by type and nature of revenue stream: SCHEDULE OF DISAGGREGATION OF REVENUE Three Months Ended Nine Months Ended October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 Recurring revenue $ 3,907,000 $ 1,970,000 $ 8,536,000 $ 6,167,000 Non-recurring revenue 1,607,000 671,000 2,797,000 2,205,000 Total revenue: $ 5,514,000 $ 2,641,000 $ 11,333,000 $ 8,372,000 The Company includes revenue categories of (i) maintenance and support and (ii) software as a service as recurring revenue for the three and nine months ended October 31, 2021 and 2020. The Company includes revenue categories of (i) software licenses, (ii) professional services, and (iii) audit services as non-recurring revenue for the three and nine months ended October 31, 2021 and 2020. Business Combinations Acquisitions have been accounted for as business combinations, using the acquisition method and, accordingly, the results of operations of the acquired businesses have been included in the condensed consolidated financial statements since their dates of acquisition. The assets and liabilities assumed of these businesses were recorded in the financial statements at their respective estimated fair values as of the acquisition date. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions as a part of the purchase price allocation process to accurately value the assets acquired, including intangible assets, and the liabilities assumed at the acquisition date, the Company’s estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair values of the assets acquired and the liabilities assumed, with a corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or the liabilities assumed, whichever comes first, any subsequent adjustments are reflected in our consolidated statements of operations. Contract Receivables and Deferred Revenues The Company receives payments from customers based upon contractual billing schedules. Contract receivables include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Deferred revenue includes payments received in advance of performance under the contract. The Company’s contract receivables and deferred revenue are reported on an individual contract basis at the end of each reporting period. Contract receivables are classified as current or noncurrent based on the timing of when we expect to bill the customer. Deferred revenue is classified as current or noncurrent based on the timing of when we expect to recognize revenue. In the nine months ended October 31, 2021, the Company recognized approximately $ 3,267,000 in revenue from deferred revenues outstanding as of January 31, 2021. Revenue allocated to remaining performance obligations was $ 18,788,000 the Company expects to recognize approximately 66% over the next 12 months and the remainder thereafter. Deferred costs (costs to fulfill a contract and contract acquisition costs) The Company defers the direct costs, which include salaries and benefits, for professional services related to SaaS contracts as a cost to fulfill a contract. These deferred costs will be amortized on a straight-line basis over the period of expected benefit which is the contractual term. As of October 31, 2021 and January 31, 2021, the Company had deferred costs of $ 135,000 168,000 95,000 126,000 22,000 27,000 90,000 89,000 121,000 Contract acquisition costs, which consist of sales commissions paid or payable, is 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. As a practical expedient, the Company expenses sales commissions as incurred when the amortization period of related deferred commission costs is expected to be one year or less. As of October 31, 2021 and January 31, 2021, deferred commission costs paid and payable, which are included on the consolidated balance sheets within other non-current assets totaled $ 756,000 666,000 467,000 285,000 88,000 58,000 248,000 133,000 Equity Awards The Company accounts for share-based payments based on the grant-date fair value of the awards with compensation cost recognized as expense over the requisite service period. For awards to non-employees, the Company recognizes compensation expense in the same manner as if the entity had paid cash for the goods or services. The Company incurred total compensation expense related to share-based awards of $ 537,000 442,000 1,659,000 1,054,000 The fair value of the stock options granted was estimated at the date of grant using a Black-Scholes option pricing model. Option pricing model input assumptions such as expected term, expected volatility and risk-free interest rate impact the fair value estimate. Further, the forfeiture rate impacts the amount of aggregate compensation. These assumptions are subjective and are generally derived from external (such as, risk-free rate of interest) and historical data (such as, volatility factor, expected term and forfeiture rates). Future grants of equity awards accounted for as share-based compensation could have a material impact on reported expenses depending upon the number, value and vesting period of future awards. The Company issues restricted stock awards in the form of Company common stock. The fair value of these awards is based on the market close price per share on the grant date. The Company expenses the compensation cost of these awards as the restriction period lapses, which is typically a one- to four-year service period. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax credit and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing net deferred tax assets, the Company considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The Company establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. Refer to Note 6 – Income Taxes for further details. The Company provides for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether certain tax positions are more likely than not to be sustained upon examination by tax authorities. At October 31, 2021, the Company believes it has appropriately accounted for any uncertain tax positions. Net Earnings (Loss) Per Common Share The Company presents basic and diluted earnings per share (“EPS”) data for the Company’s common stock. The Company’s unvested restricted stock awards are considered non-participating securities because holders are not entitled to non-forfeitable rights to dividends or dividend equivalents during the vesting term. In accordance with ASC 260, securities are deemed not to be participating in losses if there is no obligation to fund such losses. Diluted EPS for the Company’s common stock is computed using the treasury stock method. The following is the calculation of the basic and diluted net earnings (loss) per share of common stock for the three and nine months ended October 31, 2021 and 2020: SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE OF COMMON STOCK Three Months Ended Nine Months Ended October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 Basic earnings (loss) per share: Continuing operations Loss from continuing operations, net of tax $ (4,379,000 ) $ (1,069,000 ) $ (6,913,000 ) $ (3,209,000 ) Basic net loss per share of common stock from continuing operations $ (0.10 ) $ (0.04 ) $ (0.17 ) $ (0.11 ) Discontinued operations Income available to common stockholders from discontinued operations $ 69,000 $ 14,000 $ 401,000 4,692,000 Basic net earnings per share of common stock from discontinued operations $ — $ — $ 0.01 $ 0.16 Diluted earnings (loss) per share: Continuing operations Loss available to common stockholders from continuing operations $ (4,379,000 ) $ (1,069,000 ) $ (6,913,000 ) $ (3,209,000 ) Diluted net loss per share of common stock from continuing operations $ (0.10 ) $ (0.04 ) $ (0.17 ) $ (0.11 ) Discontinued operations Income available to common stockholders from discontinued operations $ 69,000 $ 14,000 $ 401,000 $ 4,692,000 Diluted net earnings per share of common stock from discontinued operations $ — $ — $ 0.01 $ 0.15 Net (loss) earnings $ (4,310,000 ) $ (1,055,000 ) $ (6,512,000 ) $ 1,483,000 Weighted average shares outstanding – Basic (1) 45,709,952 30,286,197 41,498,873 30,026,890 Effect of dilutive securities – Stock options and Restricted stock (2) 353,851 606,329 496,393 423,682 Weighted average shares outstanding – Diluted 46,063,803 30,892,526 41,995,266 30,450,572 Basic net (loss) earnings per share of common stock $ (0.10 ) $ (0.04 ) $ (0.16 ) $ 0.05 Diluted net (loss) earnings per share of common stock $ (0.10 ) $ (0.04 ) $ (0.16 ) $ 0.04 (1) Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of October 31, 2021 and 2020, there were 1,030,600 1,166,325 (2) Diluted net loss per share excludes the effect of shares that are anti-dilutive. For the three and nine months ended October 31, 2021, diluted EPS excludes 1,146,963 1,030,600 624,330 1,166,325 Other Operating Costs Non-routine Costs SCHEDULE OF NON ROUTINE COSTS Three Months ended October 31, 2021 Nine Months ended October 31, 2021 Separation agreement expense $ 706,000 $ 706,000 Broker Fees 508,000 553,000 Professional Fees 358,000 740,000 Executive bonuses 355,000 705,000 Loss on exit from operating lease 22,000 22,000 Other (16,000 ) (16,000 ) Total non-routine costs $ 1,933,000 $ 2,710,000 For the three and nine months ended October 31, 2021, the Company incurred certain non-routine costs totaling $ 1,933,000 2,710,000 Loss on Exit from Membership Agreement As of October 31, 2020, minimum fees due under the Company’s former shared office arrangement totaled approximately $ 105,000 Non-Cash Items The Company had the following items that were non-cash items related to the condensed consolidated statements of cash flows: SCHEDULE OF NON-CASH ITEMS RELATED TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW October 31, 2021 2020 Forgiveness of PPP loan and accrued interest $ 2,327,000 $ — Working capital accrual 116,000 — Escrowed funds from sale of ECM Assets — 800,000 Right-of Use Assets from operating lease — 540,000 Capitalized software purchased with stock (Note 8 – Commitments and Contingencies) — 51,000 Accounting Pronouncements Recently Adopted In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities From Contracts With Customers 236,000 Recent Accounting Pronouncements Not Yet Adopted In November 2019, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments |
BUSINESS COMBINATION AND DIVEST
BUSINESS COMBINATION AND DIVESTITURE | 9 Months Ended |
Oct. 31, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
BUSINESS COMBINATION AND DIVESTITURE | NOTE 3 — BUSINESS COMBINATION AND DIVESTITURE Avelead Acquisition The Company acquired all of the units of Avelead as part of the Company’s strategic expansion into the revenue cycle management, acute-care healthcare space on August 16, 2021 (the “Transaction”). The acquisition was completed on August 16, 2021. The aggregate consideration for the purchase of Avelead was approximately $ 29.7 million (at fair value) consisting of (i) $ 12.4 million in cash, net of cash acquired, (ii) $ 0.1 million in holdback, (iii) $ 6.5 million in common stock, and (iv) approximately $ 10.7 million in contingent consideration (see below). The Company issued 5,021,972 shares of its restricted common stock (the “Acquisition Restricted Common Stock”). The Acquisition Restricted Common Stock has a fair value as of the closing date of the acquisition of $ 6.5 million. Additionally, the Company contracted two types of contingent consideration; the first is referred to herein as “SaaS Contingent Consideration” and the second is referred to herein as “Renewal Contingent Consideration.” The SaaS Contingent Consideration and Renewal Contingent Consideration have an aggregate value of approximately $10.7 million at the date of closing. The owners of Avelead are also referred to herein as “Sellers” and are enumerated in the UPA (as defined below). The Company acquired all of the outstanding units of Avelead, effective August 16, 2021, under a Unit Purchase Agreement (hereafter referred to as the “UPA”). The UPA stated that the purchase price for Avelead at closing included a cash payment of $ 11.9 285,000 169,000 116,000 6.5 The Company acquired Avelead on a cash-free and debt-free basis. The Transaction was structured as a purchase of units (equity), however, Avelead was taxed as a partnership. Accordingly, the Company realized a step-up in the tax basis of the assets acquired and the goodwill is tax deductible. The gross deferred tax assets and liabilities will be consolidated, and the gross deferred tax assets have a full valuation allowance. The contingent consideration is comprised of “SaaS Contingent Consideration” and “Renewal Contingent Consideration” which are described in more detail as follows: ● The SaaS Contingent Consideration is calculated based upon Avelead’s recurring SaaS revenue recognized during the first and second year following the acquisition. The Company will pay the SaaS Contingent Consideration as follows: (i) 50% 50% ● The first year of SaaS Contingent Consideration is calculated as 75% of Avelead’s recognized SaaS revenue from September 1, 2021 to August 31, 2022. The first-year payment is subject to a deduction of $665,000 spread equally between the cash and common stock portion of the earnout consideration. The first year earnout will be paid on or about October 15, 2022, subject to a dispute and resolution period. Assuming that Avelead is within 80% of its forecasted SaaS revenue in the first year earnout 1 ● The second year of SaaS Contingent Consideration is calculated as 40% of Avelead’s recognized SaaS revenue from September 1, 2022 to August 31, 2023. The second year earnout will be paid on or about October 15, 2023, subject to a dispute and resolution period. Assuming that Avelead is within 80% of its forecasted SaaS revenue in the second year earnout 1 1 If Avelead does not achieve 80% of its forecasted revenue, the price per share will revert back to the Company’s market price based upon a 30-day average. ● The Renewal Contingent Consideration is tied directly to a successful renewal of a specific customer of Avelead. To meet the definition of a renewal, Avelead must achieve a minimum threshold of contracted revenue in an updated, annual, renewed contract with the specified customer. The renewal occurs on or about June 1, 2022 and June 1, 2023. The Company will remit the Renewal Contingent Consideration on or about each of October 15, 2022 and 2023, respectively. The Renewal Contingent Consideration is payable in shares of Company restricted common stock valued as of the date of Closing. Accordingly, upon achieving the Renewal Contingent Consideration, the Company will issue 627,747 shares of restricted common stock on or about each of October 15, 2022 and October 15, 2023, subject to a dispute and resolution period. The components of the total consideration are as follows: COMPONENTS OF TOTAL CONSIDERATION (in thousands) Components of total consideration, net of cash acquired: Cash $ 11,900 Cash, seller expenses 285 Cash, estimated net working capital adjustment 169 Payable, holdback and final working capital adjustment 116 Restricted Common Stock 6,554 Acquisition earnout liabilities 10,684 (a) Total consideration $ 29,708 (a) Acquisition earnout liabilities represents the net present value and risk adjusted probability of the required future payments underlying the Company’s SaaS Contingent Consideration and Renewal Contingent Consideration as described above. Due to the dates that the Company is required to measure, report and agree on the calculations, all amounts of the acquisition earnout liability are shown as long-term as of October 31, 2021. The acquisition earnout liability is re-measured on a quarterly basis and the change to the liability is recorded as a valuation adjustment recorded through “other expenses” in the accompanying condensed consolidated statements of operations. The valuation adjustment recorded for the three months ended October 31, 2021 was $ 417,000 The Company is presenting the allocation of the total consideration to net tangible and intangible assets as of the date of the closing of Avelead as follows.: SCHEDULE OF ALLOCATION OF THE TOTAL CONSIDERATION (in thousands) Net tangible assets: Accounts receivable $ 1,246 Unbilled revenue 200 Prepaid expenses 178 Fixed assets 37 Accounts payable (490 ) Accrued expenses (397 ) Deferred revenues (863 ) Net tangible assets (89 ) Goodwill 12,377 Customer Relationships (SaaS) 8,370 Customer Relationships (Consulting) 1,330 Internally Developed Software 6,380 Trademarks and Tradenames 1,340 Net assets acquired and liabilities assumed $ 29,708 The intangible assets recorded as a result of the Avelead acquisition, and their related estimated useful lives are as follows: SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES Estimated Useful Lives Goodwill Indefinite Customer Relationships (SaaS) 10 Customer Relationships (Consulting) 8 Internally Developed Software 9 Trademarks and Tradenames 15 years The Company’s pro forma revenues and loss from continuing operations, assuming Avelead was acquired on February 1, 2020, are as follows. The unaudited pro forma information is not necessarily indicative of the results of operations that the Company would have reported had the acquisition actually occurred at the beginning of these periods nor is it necessarily indicative of future results. The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, including, but not limited to, anticipated costs savings from synergies or other operational improvements. The nature and amount of any material, nonrecurring pro forma adjustments directly attributable to the business combination are included in the pro forma revenue and net loss reflected below: SCHEDULE OF PRO FORMA REVENUE AND NET EARNINGS Three Months Ended Nine Months Ended October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 Revenues $ 6,064,000 $ 5,198,000 $ 16,585,000 $ 14,066,000 Operating expenses (7,787,000 ) (6,707,000 ) (23,271,000 ) (18,559,000 ) Non-routine costs (3,196,000 ) — (4,138,000 ) — Loss on exit from membership agreement — — — (105,000 ) Operating loss (4,919,000 ) (1,509,000 ) (10,824,000 ) (4,598,000 ) Other expenses (572,000 ) (150,000 ) (891,000 ) (556,000 ) PPP loan forgiveness 732,000 — 3,059,000 — Income tax (expense) benefit (4,000 ) 803,000 (9,000 ) 1,536,000 Loss from continuing operations $ (4,763,000 ) $ (856,000 ) $ (8,665,000 ) $ (3,618,000 ) Non-routine costs are primarily costs associated with the acquisition. Included in the pro forma schedule (above) for the three and nine months ended October 31, 2021 are $ 1,263,000 and $ 1,428,000 respectively, of expenses paid by the Sellers in the transaction. Included in the accompanying condensed consolidated statement of operations for the three and nine months ended October 31, 2021 (since the closing of the Avelead acquisition) are $ 2,045,000 (975,000) Refer to Note 2 – Summary of Significant Accounting Policies – Other operating costs -Non-routine costs. Costs related to the acquisition of Avelead are expensed as incurred. The Company entered into one employment agreement and one separation agreement with each of the two Sellers. Included in the transaction costs of Avelead is the cost of a two-year separation agreement with one Seller. This separation agreement was expensed at the closing of the transaction as there were no material future obligations of the Seller to the Company within Non-routine costs. See Note 2 – Summary of Significant Accounting Policies. The employment agreement is a two-year employment agreement that entitles the Seller to a six-month separation pay in the case of termination without cause. The Company granted options to purchase 583,333 shares of the Company’s common stock to the Sellers at the closing of the Transaction. These options have a strike price of $ 1.53 per share, the closing stock price on the trading date immediately preceding the closing. 500,000 options were awarded to one Seller that will vest, monthly, over a three ( 3 ) year service period. The remaining 83,333 options were awarded to another Seller and vested immediately upon issuance. The Company utilized the Black-Scholes method to determine the grant-date fair value of these options. The 83,333 options have a grant-date fair value of approximately $ 4,000 and are recorded in Non-routine cost in the accompanying condensed consolidated statement of operations. The 500,000 options have a grant-date fair value of approximately $ 333,000 and are expensed over the vesting period within selling, general, and administrative expense Additionally, the Company granted 100,000 restricted stock awards (RSAs) to certain Avelead employees as of the closing date. ECM Assets Divestiture On February 24, 2020, the Company sold a portion of its business (the “ECM Assets”). The Company signed the definitive agreement with respect to the sale of the ECM Assets in December 2019 and prepared and filed a proxy statement to obtain stockholder approval of the transaction. We applied Accounting Standards Codification (“ASC”) 205-20-1 (“ASC 205-20-1”) to determine the timing to begin reporting the discontinued operations. Based on ASC 205-20-1, the Company determined that it did not have the authority to sell the assets until the date of the stockholder approval, which was February 21, 2020. On February 21, 2020, the Company having the authority and ability to consummate the sale of the ECM Assets, met the criteria to present discontinued operations as described in ASC 205-20-1. Accordingly, the Company is reporting the results of operations and cash flows, and related balance sheet items associated with the ECM Assets in discontinued operations in the accompanying condensed consolidated statements of operations, cash flows and balance sheets for the current and comparative prior periods. Refer to Note 9 – Discontinued Operations for details of the Company’s discontinued operations. |
OPERATING LEASES
OPERATING LEASES | 9 Months Ended |
Oct. 31, 2021 | |
Operating Leases | |
OPERATING LEASES | NOTE 4 — OPERATING LEASES Alpharetta Office Lease On October 1, 2021, the Company entered into an agreement with a third-party to sublease its office space in Alpharetta, Georgia, (the “Sublease Agreement”). The sublease term is for 18 292,000 We determine whether an arrangement is a lease at inception. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since our lease arrangements do not provide an implicit rate, we use our incremental borrowing rate for the expected remaining lease term at commencement date for new leases and for existing leases, in determining the present value of future lease payments. Operating lease expense is recognized on a straight-line basis over the lease term. The Company has made the accounting policy election for building leases to not separate non-leases components. The Company entered into a lease for office space in Alpharetta, Georgia, on March 1, 2020. The lease terminates on March 31, 2023. At inception, the Company recorded a right-of use asset of $ 540,000 262,000 202,000 82,000 6.5 48,000 145,000 Maturities of operating lease liabilities associated with the Company’s operating lease as of October 31, 2021 are as follows for the fiscal years ended January 31: SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES 2021 $ 51,000 2022 210,000 2023 35,000 Total lease payments 296,000 Less present value adjustment (12,000 ) Present value of lease liabilities $ 284,000 Upon signing the new lease in March 2020, the Company abandoned its shared office space in Atlanta and recorded an expense and related liability of $ 105,000 Suwanee Office Lease Upon acquiring Avelead on August 16, 2021 (refer to Note 3 – Business Combination and Divestiture), the Company assumed an operating lease agreement for the corporate office space of Avelead. The term of the lease expires on February 28, 2022 7,000 |
DEBT
DEBT | 9 Months Ended |
Oct. 31, 2021 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE 5 — DEBT Term Loan Agreement and Discontinuance of Revolving Credit Facility On August 26, 2021, the Company and its subsidiaries entered into the Second Amended Loan and Security Agreement with Bridge Bank. Pursuant to the Second Amended Loan and Security Agreement, Bridge Bank agreed to provide the Company and its subsidiaries with a new term loan facility in the maximum principal amount of $ 10,000,000 1.5 3.25 3,000,000 no The Second Amended Loan and Security Agreement has a five-year term, and the maximum principal amount was advanced in a single-cash advance on or about the closing date. Interest accrued under the Second Amended Loan and Security Agreement is due monthly, and the Company shall make monthly interest-only payments through the one-year anniversary of the closing date. From the first anniversary of the closing date through the maturity date, the Company shall make monthly payments of principal and interest that increase over the term of the agreement. The Second Amended Loan and Security Agreement requires principal repayments of $ 500,000 1,000,000 2,000,000 3,000,000 The Company recorded $ 130,000 200,000 200,000 The Second Amended Loan and Security Agreement includes customary financial covenants as follows: a. Minimum Cash. Borrowers shall, at all times, maintain unrestricted cash of Borrowers at Bank in an amount not less than (i) on the Closing Date and for the first eleven (11) months immediately following the Closing Date, Five Million Dollars ($5,000,000) and (ii) at all times thereafter, Three Million Dollars ($3,000,000). b. Maximum Debt to ARR Ratio. SCHEDULE OF MAXIMUM DEBT TO ARR RATIO Quarter Ending Maximum Debt to October 31, 2021 0.80 1.00 January 31, 2022 0.75 1.00 April 30, 2022 0.65 1.00 July 31, 2022 0.55 1.00 October 31, 2022 0.50 1.00 January 31, 2023 0.45 1.00 c. Maximum Debt to Adjusted EBITDA Ratio. SCHEDULE OF MAXIMUM DEBT TO ADJUSTED EBITDA RATIO Quarter Ending Maximum Debt to Adjusted EBITDA Ratio April 30, 2023 11.30 1.00 July 31, 2023 4.15 1.00 October 31, 2023 2.50 1.00 January 31, 2024 and on the last day of each quarter thereafter 2.00 1.00 d. Fixed Charge Coverage Ratio 1.20 1.00 The Second Amended Loan and Security Agreement also includes customary negative covenants, subject to exceptions, which limit transfers, capital expenditures, indebtedness, certain liens, investments, acquisitions, dispositions of assets, restricted payments and the business activities of the Company, as well as customary representations and warranties, affirmative covenants and events of default, including cross defaults and a change of control default. The line of credit also is subject to customary prepayment requirements. For the period ended October 31, 2021, the Company was in compliance with the Second Amended Loan and Security Agreement covenants. Term Loan and Revolving Credit Facility with Bridge Bank On March 2, 2021, the Company entered into an Amended and Restated Loan and Security Agreement, which replaced and superseded the Loan and Security Agreement, consisting of a $ 3,000,000 43,000 Additionally, the Company’s Bank EBITDA, measured on a monthly basis over a trailing three month period then ended, could not deviate by more than 30% or $300,000. The Amended Loan and Security Agreement facility bore interest at a per annum rate equal to the higher of (a) the Prime Rate (as published in The Wall Street Journal) plus 1.00%, with a “floor” Prime Rate of 4.0%. On December 11, 2019, the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Bridge Bank, a division of Western Alliance Bank (“Bridge Bank”), consisting of a $ 4,000,000 2,000,000 4,000,000 The revolving credit facility had a maturity date of twenty-four months and advances bore interest at a per annum rate equal to the higher of (a) the Prime Rate (as published in The Wall Street Journal) plus 1.25% or (b) 6.25%. The revolving credit facility could be advanced based upon 80% of eligible accounts receivable, as defined in the Loan and Security Agreement. Term Loan related to “The Coronavirus Aid, Relief, and Economic Security Act” The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, was signed into law on March 17, 2020. Among other things, the CARES Act provided for a business loan program known as the Paycheck Protection Program (“PPP”). Qualifying companies were able to borrow, through the U.S. Small Business Administration (“SBA”), up to two months of payroll expenses. On April 21, 2020, the Company received approximately $ 2,301,000 The PPP loan carried an interest rate of 1.0 In June 2021, the Company was notified that the full $ 2,301,000 26,000 Outstanding principal balances on debt consisted of the following at: SCHEDULE OF OUTSTANDING DEBT, OTHER THAN PPP LOAN October 31, 2021 (a) January 31, 2021 (b) Term loan $ 10,000,000 $ 2,301,000 Deferred financing cost (116,000 ) — Total 9,884,000 2,301,000 Less: Current portion (125,000 ) (1,534,000 ) Non-current portion of debt $ 9,759,000 $ 767,000 (a) The term loan, as of October 31, 2021, is related to the new term loan agreement that the Company entered into on August 26, 2021 with Bridge Bank (see description above). (b) The term loan, as of January 31, 2021, is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Oct. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 6 — INCOME TAXES Income taxes consist of the following: SCHEDULE OF COMPONENTS OF INCOME TAX (EXPENSE) BENEFIT October 31, 2021 2020 Current tax benefit (expense): Federal $ — $ 997,000 State (9,000 ) 539,000 Total current provision $ (9,000 ) $ 1,536,000 The Company adopted ASU 2019-12 . At January 31, 2021, the Company had U.S. federal net operating loss carry forwards of $ 37,554,000 12,519,000 1,356,000 94,000 expire through fiscal 2039 The effective income tax rate on continuing operations of approximately ( 0.16 24.56 The Company has recorded $ 365,000 339,000 The Company and its subsidiaries are subject to U.S. federal income tax as well as income taxes in multiple state and local jurisdictions. The Company has concluded all U.S. federal tax matters for years through January 31, 2017. All material state and local income tax matters have been concluded for years through January 31, 2016. The Company is no longer subject to IRS examination for periods prior to the tax year ended January 31, 2017; however, carryforward losses that were generated prior to the tax year ended January 31, 2017 may still be adjusted by the IRS if they are used in a future period. |
EQUITY
EQUITY | 9 Months Ended |
Oct. 31, 2021 | |
Equity [Abstract] | |
EQUITY | NOTE 7 — EQUITY Capital Raise On February 25, 2021, the Company entered into an underwriting agreement with Craig-Hallum Capital Group LLC, as the sole managing underwriter, relating to the underwritten public offering of an aggregate of 10,062,500 0.01 1,312,500 1.60 16.1 Registration of Shares Issued to 180 Consulting On May 3, 2021, the Company filed a Registration Statement on Form S-3 (Registration No. 333-255723), which was subsequently amended on June 23, 2021, for purposes of registering for resale 248,424 Authorized Shares Increase On May 24, 2021, the Company amended its Certificate of Incorporation to increase the total number of authorized shares of the Company’s common stock from 45,000,000 65,000,000 At the Annual Meeting, the Company’s stockholders approved an amendment to the Streamline Health Solutions, Inc. Third Amended and Restated 2013 Stock Incentive Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder by 2,000,000 6,223,246 8,223,246 As described in the Company’s definitive proxy statement on Schedule 14A filed with the SEC on July 6, 2021, because there may have been uncertainty regarding the validity or effectiveness of the prior approval of the Charter Amendment, the authorized shares increase effected thereby and the Third Amended 2013 Plan Amendment at the Annual Meeting, the board of directors of the Company asked the Company’s stockholders to ratify the approval, filing and effectiveness of the Charter Amendment and the approval and effectiveness of the Third Amended 2013 Plan Amendment at a special meeting of the stockholders held on July 29, 2021 in order to eliminate such uncertainty (the “Special Meeting”). At the Special Meeting, the Company’s stockholders ratified the approval, filing and effectiveness of the Charter Amendment and the approval and effectiveness of the Third Amended 2013 Plan Amendment. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Oct. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 8 — COMMITMENTS AND CONTINGENCIES Royalty Liability On October 25, 2013, we entered into a Software License and Royalty Agreement (the “Royalty Agreement”) with Montefiore Medical Center (“Montefiore”) pursuant to which Montefiore granted us an exclusive, worldwide 15 3,000,000 3,000,000 nine and one-half years 24 1,000,000 On October 1, 2020, the Company agreed with Montefiore that it would pay, in cash, (i) $ 500,000 490,000 990,000 1,000,000 Consulting Agreement with 180 Consulting On March 19, 2020 the Company entered into a Master Services Agreement (the “MSA”) with 180 Consulting, pursuant to which 180 Consulting has provided and will continue to provide a variety of consulting services including product management, operational consulting, staff augmentation, internal systems platform integration and software engineering services, among others, through separate executed statements of work (“SOWs”). The Company has entered into ten SOWs under the MSA. Some of the SOWs include the ability to earn stock at a conversion rate to be calculated 20 days after the execution of the related SOW. 180 Consulting earned a cumulative number of shares through October 31, 2021 totaling 443,046 66,207 194,662 1,092,000 128,415 128,415 449,000 75,000 374,000 167,937 On September 20, 2021, the Company entered into an additional Master Services Agreement with 180 Consulting to provide a variety of consulting services including product management, operational consulting, staff augmentation, internal systems platform integration and software engineering services, among others, to the Company in support of the Avelead products acquired through separate executed SOW’s. As of October 31, 2021, the Company has entered into one SOW under the Avelead MSA. For services rendered by 180 Consulting during the three and nine month periods ending October 31, 2021, the Company incurred fees totaling $ 62,000 |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 9 Months Ended |
Oct. 31, 2021 | |
Discontinued Operations and Disposal Groups [Abstract] | |
DISCONTINUED OPERATIONS | NOTE 9 – DISCONTINUED OPERATIONS On February 24, 2020, the Company consummated the previously announced sale of the Company’s legacy Enterprise Content Management business (the “ECM Assets”) pursuant to that certain Asset Purchase Agreement, dated December 17, 2019, as amended (the “Asset Purchase Agreement”), to Hyland Software, Inc. (the “Purchaser”). Pursuant to the Asset Purchase Agreement, the Purchaser acquired the ECM Assets and assumed certain liabilities of the Company for a purchase price of $ 16.0 At closing, the Company realized approximately $ 5.4 4.0 800,000 SCHEDULE OF GAIN ON SALE OF ASSETS 2020 Net Proceeds, including escrowed funds $ 12,088,000 Net tangible assets sold: Accounts Receivable (1,130,000 ) Prepaid Expenses (576,000 ) Deferred Revenue 4,010,000 Net tangible assets sold 2,304,000 Capitalized software development costs (1,772,000 ) Goodwill (4,825,000 ) Transaction cost (1,782,000 ) Gain on sale of discontinued operations $ 6,013,000 The transaction costs were primarily broker cost and cost of legal and accounting to effect the transaction. The Company allocated $ 4,825,000 The Company recorded the following as discontinued operations on the accompanying condensed consolidated balance sheets as of October 31, 2021 and January 31, 2021: SCHEDULE OF DISCONTINUED OPERATIONS OF CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS As of October 31, 2021 January 31,2021 Current assets of discontinued operations: Accounts receivable $ — $ 587,000 Current assets of discontinued operations $ — $ 587,000 Long-term assets of discontinued operations: Property and equipment, net $ — $ 13,000 Long-term assets of discontinued operations $ — $ 13,000 Current liabilities of discontinued operations: Accrued expenses $ — $ 8,000 Deferred revenues — 587,000 Current liabilities of discontinued operations $ — $ 595,000 For the three and nine months ended October 31, 2021 and 2020, the Company recorded the following into discontinued operations in the accompanying condensed consolidated statements of operations: Three Months Ended Nine Months Ended October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 Revenues: Maintenance and support $ — $ — $ — $ 412,000 Software as a service — — — 138,000 Transition service fees 102,000 121,000 498,000 278,000 Total revenues 102,000 121,000 498,000 828,000 Expenses: Cost of Sales 1,000 2,000 5,000 292,000 Transition service cost 32,000 55,000 92,000 103,000 Deferred financing cost — — — 128,000 Total expenses 33,000 57,000 97,000 523,000 Income from discontinued operations $ 69,000 $ 64,000 $ 401,000 $ 305,000 The Company entered into an agreement with the Purchaser of the ECM Assets to maintain the current data center through a transition period. The transition services did not have a finite ending date at the signing of the agreement. However, the transition services were completed in the third quarter ended October 31, 2021. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Oct. 31, 2021 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 10 - RELATED PARTY TRANSACTIONS In the second quarter of fiscal year 2019, in connection with the appointment of Wyche T. “Tee” Green, III, Chairman of the Board of the Company and Managing Member of 121G, LLC (“121G”), as interim President and Chief Executive Officer of the Company, we entered into a consulting agreement with 121G Consulting, LLC (“121G Consulting”), to provide an assessment of the Company’s innovation and growth teams and strategies and to develop a set of prioritized recommendations to be consolidated into a strategic plan for the Company’s leadership team. Mr. Green is a “member” of 121G Consulting, and, accordingly, has a financial interest in that entity. In October 2019, Mr. Green was appointed as President and Chief Executive Officer of the Company on a full-time basis. Subsequent to Mr. Green joining the Company on a full-time basis, the Company’s relationship with 121G Consulting was terminated. No 70,000 Refer to Note 3 – Business Combination and Divestiture. The Company acquired Avelead on August 16, 2021. In addition to the related party lease agreement (refer to Note 4 – Operating Leases), the Company assumed a consulting agreement with AscendTek, LLC (“AscendTek”), a software development and system design company. AscendTek is owned by one of the Sellers of Avelead. The Company entered into a separation agreement with this Seller of Avelead on closing of the Avelead acquisition. From the acquisition date to the period ended October 31, 2021, the Company incurred approximately $ 39,000 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Oct. 31, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 11 — SUBSEQUENT EVENTS We have evaluated subsequent events occurring after October 31, 2021 and based on our evaluation we did not identify any events that would have required recognition or disclosure in these condensed consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Oct. 31, 2021 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates and judgments, including those related to the recognition of revenue, share-based compensation, capitalization of software development costs, intangible assets, the allowance for doubtful accounts, and income taxes. Actual results could differ from those estimates. The Company wrote-off fully depreciated fixed assets during the first nine months of fiscal 2021 of $ 225,000 |
Reclassification | Reclassification ASC 606-10-25-19(a) provides guidance on the presentation of revenue as it relates to identifying distinct performance obligations in contracts containing multiple deliverables. As the Company has begun to shift to a primarily SaaS solution, the professional services revenue related to implementation of SaaS contracts has grown. With this growth, and expected continued growth, of professional services which are not determined to be a distinct performance obligation for the Company’s SaaS contracts, we have reclassified SaaS professional services from professional services revenue and cost of sales on the consolidated statement of operations to Software as a Service revenue and cost of sales. For the three and nine months ended October 31, 2020, the reclassification of revenue was $ 19,000 67,000 27,000 73,000 |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Financial Accounting Standards Board’s (“FASB”) authoritative guidance on fair value measurements establishes a framework for measuring fair value. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. Under this guidance, assets and liabilities carried at fair value must be classified and disclosed in one of the following three categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. Cash and cash equivalents are classified as Level 1. The carrying amount of the Company’s long-term debt approximates fair value since the variable interest rates being paid on the amounts approximate the market interest rate. The WSJ prime interest rate did not go below the “Floor” rate as described in the loan agreement. Accordingly, the interest rates charged were market rate. Long-term debt is classified as Level 2. There were no transfers of assets or liabilities between Levels 1, 2, or 3 during the nine months ended October 31, 2021 and 2020. The table below provides information on the fair value of our liabilities: SCHEDULE OF FAIR VALUE OF LIABILITIES Quoted Prices in Significant Other Significant Unobservable Total Fair Active Markets Observable Inputs Inputs Value (Level 1) (Level 2) (Level 3) At October 31, 2021 Acquisition earnout liability (1) $ 11,101,000 $ — $ — $ 11,101,000 At January, 31, 2021 PPP Loan (2) $ 2,301,000 $ — $ 2,301,000 $ — (1) The fair value of the acquisition earnout liability is based upon a probability-weighted discounted cash flow that was completed at the date of acquisition and updated as of October 31, 2021. The change in the valuation of the acquisition earnout liability was $ 417,000 (2) The fair value of the PPP loan was determined based on discounting the loan amount as of January 31, 2021. The fair value was determined using market interest rates that the Company believes would be available for similar types of financial instruments. The Company estimated that the impact of the fair value adjustment on the PPP loan would have resulted in a lower fair value of $ 2,231,000 2,301,000 70,000 |
Revenue Recognition | Revenue Recognition We derive revenue from the sale of internally-developed software, either by licensing for local installation or by a SaaS delivery model, through the Company’s direct sales force or through third-party resellers. Licensed, locally-installed customers on a perpetual model utilize the Company’s support and maintenance services for a separate fee, whereas term-based locally installed license fees and SaaS fees include support and maintenance. We also derive revenue from professional services that support the implementation, configuration, training and optimization of the applications, as well as audit services provided to help customers review their internal coding audit processes. We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers We recognize revenue (Step 5 below) in accordance with that core principle after applying the following steps: ● Step 1: Identify the contract(s) with a customer ● Step 2: Identify the performance obligations in the contract ● Step 3: Determine the transaction price ● Step 4: Allocate the transaction price to the performance obligations in the contract ● Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation Contracts may contain more than one performance obligation. Performance obligations are the unit of accounting for revenue recognition and represent the distinct goods or services that are promised to the customer. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities. If we determine that we have not satisfied a performance obligation, we defer recognition of the revenue until the performance obligation is satisfied. Maintenance and support and SaaS agreements are generally non-cancelable or contain significant penalties for early cancellation, although customers typically have the right to terminate their contracts for cause if we fail to perform material obligations. However, if non-standard acceptance periods, non-standard performance criteria, or cancellation or a right of refund terms exist, revenue may not be recognized until the satisfaction of such criteria. The transaction price is allocated to the unit of account based on the standalone selling price of the performance obligations in the contract. Significant judgment is required to determine the standalone selling price (“SSP”) for each performance obligation and whether the amount allocated to each performance obligation depicts the amount that the Company expects to receive in exchange for the related product and/or service. As the selling prices of the Company’s software licenses are highly variable, the Company estimates the SSP of its software licenses using the residual approach when the software license is sold with other services and observable SSPs exist for the other services. The Company estimates the SSP for maintenance, professional services, and audit services based on observable standalone sales. Contract Combination The Company may execute more than one contract or agreement with a single customer. The Company evaluates whether the agreements should be combined and treated as a single contract by evaluating whether they were negotiated as a package with a single objective, whether the amount of consideration to be paid in one agreement depends on the price and/or performance of another agreement, or whether the goods or services promised in the agreements represent a single performance obligation. The conclusions reached can impact the allocation of the transaction price to each performance obligation and the timing of revenue recognition related to those arrangements. Software Licenses The Company’s software license agreements provide the customer with the right to use functional intellectual property. Implementation, support, and other services are typically considered distinct performance obligations when sold with a software license unless these services are determined to significantly modify the software. Revenue for software licenses is recognized at a point in time, typically, when the software is made available for electronic download. Maintenance and Support Services The Company’s maintenance and support obligations include multiple performance obligations, with the two largest being rights to unspecified product upgrades or enhancements, and technical support for software licenses. We believe that the multiple performance obligations within the Company’s overall maintenance and support services can be viewed as a single performance obligation since both the unspecified upgrades and technical support are comprised of promises to stand ready to fulfill the various underlying activities during the contract term. Maintenance and support agreements entitle customers to technology support, version upgrades, bug fixes and service packs. We recognize maintenance and support revenue ratably over the contract term. Professional Services The Company provides various professional services to customers with software licenses. These include project management, software implementation, consulting, and software modification services. Revenue from agreements to provide professional services are generally distinct from the other promises in the contract and are recognized as the related services are performed. Avelead’s SaaS-based contracts have implementation services that are a distinct performance obligation, and, accordingly, are recognized separately as professional services. Consideration payable under these agreements is either on a fixed fee or time-and-materials basis and is recognized over time as the services are performed. Software as a Service SaaS-based contracts include a right to use the Company’s platform, support, and other services which represent a single promise to provide continuous access to its software solutions. Additionally, implementation for the Company’s eValuator product is included as part of the single promise for its respective contracts. The Company recognizes revenue for implementation of the eValuator product over the contract term as it is determined that the implementation on eValuator is not a distinct performance obligation. Audit Services The Company provides technology-enabled coding audit services to help customers review and optimize their internal clinical documentation and coding functions across the applicable segment of the client’s enterprise. Audit services are a separate performance obligation. We recognize revenue as the services are performed. Disaggregation of Revenue The following table provides information about disaggregated revenue by type and nature of revenue stream: SCHEDULE OF DISAGGREGATION OF REVENUE Three Months Ended Nine Months Ended October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 Recurring revenue $ 3,907,000 $ 1,970,000 $ 8,536,000 $ 6,167,000 Non-recurring revenue 1,607,000 671,000 2,797,000 2,205,000 Total revenue: $ 5,514,000 $ 2,641,000 $ 11,333,000 $ 8,372,000 The Company includes revenue categories of (i) maintenance and support and (ii) software as a service as recurring revenue for the three and nine months ended October 31, 2021 and 2020. The Company includes revenue categories of (i) software licenses, (ii) professional services, and (iii) audit services as non-recurring revenue for the three and nine months ended October 31, 2021 and 2020. Business Combinations Acquisitions have been accounted for as business combinations, using the acquisition method and, accordingly, the results of operations of the acquired businesses have been included in the condensed consolidated financial statements since their dates of acquisition. The assets and liabilities assumed of these businesses were recorded in the financial statements at their respective estimated fair values as of the acquisition date. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions as a part of the purchase price allocation process to accurately value the assets acquired, including intangible assets, and the liabilities assumed at the acquisition date, the Company’s estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair values of the assets acquired and the liabilities assumed, with a corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or the liabilities assumed, whichever comes first, any subsequent adjustments are reflected in our consolidated statements of operations. Contract Receivables and Deferred Revenues The Company receives payments from customers based upon contractual billing schedules. Contract receivables include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Deferred revenue includes payments received in advance of performance under the contract. The Company’s contract receivables and deferred revenue are reported on an individual contract basis at the end of each reporting period. Contract receivables are classified as current or noncurrent based on the timing of when we expect to bill the customer. Deferred revenue is classified as current or noncurrent based on the timing of when we expect to recognize revenue. In the nine months ended October 31, 2021, the Company recognized approximately $ 3,267,000 in revenue from deferred revenues outstanding as of January 31, 2021. Revenue allocated to remaining performance obligations was $ 18,788,000 the Company expects to recognize approximately 66% over the next 12 months and the remainder thereafter. Deferred costs (costs to fulfill a contract and contract acquisition costs) The Company defers the direct costs, which include salaries and benefits, for professional services related to SaaS contracts as a cost to fulfill a contract. These deferred costs will be amortized on a straight-line basis over the period of expected benefit which is the contractual term. As of October 31, 2021 and January 31, 2021, the Company had deferred costs of $ 135,000 168,000 95,000 126,000 22,000 27,000 90,000 89,000 121,000 Contract acquisition costs, which consist of sales commissions paid or payable, is 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. As a practical expedient, the Company expenses sales commissions as incurred when the amortization period of related deferred commission costs is expected to be one year or less. As of October 31, 2021 and January 31, 2021, deferred commission costs paid and payable, which are included on the consolidated balance sheets within other non-current assets totaled $ 756,000 666,000 467,000 285,000 88,000 58,000 248,000 133,000 |
Equity Awards | Equity Awards The Company accounts for share-based payments based on the grant-date fair value of the awards with compensation cost recognized as expense over the requisite service period. For awards to non-employees, the Company recognizes compensation expense in the same manner as if the entity had paid cash for the goods or services. The Company incurred total compensation expense related to share-based awards of $ 537,000 442,000 1,659,000 1,054,000 The fair value of the stock options granted was estimated at the date of grant using a Black-Scholes option pricing model. Option pricing model input assumptions such as expected term, expected volatility and risk-free interest rate impact the fair value estimate. Further, the forfeiture rate impacts the amount of aggregate compensation. These assumptions are subjective and are generally derived from external (such as, risk-free rate of interest) and historical data (such as, volatility factor, expected term and forfeiture rates). Future grants of equity awards accounted for as share-based compensation could have a material impact on reported expenses depending upon the number, value and vesting period of future awards. The Company issues restricted stock awards in the form of Company common stock. The fair value of these awards is based on the market close price per share on the grant date. The Company expenses the compensation cost of these awards as the restriction period lapses, which is typically a one- to four-year service period. |
Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax credit and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing net deferred tax assets, the Company considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The Company establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. Refer to Note 6 – Income Taxes for further details. The Company provides for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether certain tax positions are more likely than not to be sustained upon examination by tax authorities. At October 31, 2021, the Company believes it has appropriately accounted for any uncertain tax positions. |
Net Earnings (Loss) Per Common Share | Net Earnings (Loss) Per Common Share The Company presents basic and diluted earnings per share (“EPS”) data for the Company’s common stock. The Company’s unvested restricted stock awards are considered non-participating securities because holders are not entitled to non-forfeitable rights to dividends or dividend equivalents during the vesting term. In accordance with ASC 260, securities are deemed not to be participating in losses if there is no obligation to fund such losses. Diluted EPS for the Company’s common stock is computed using the treasury stock method. The following is the calculation of the basic and diluted net earnings (loss) per share of common stock for the three and nine months ended October 31, 2021 and 2020: SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE OF COMMON STOCK Three Months Ended Nine Months Ended October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 Basic earnings (loss) per share: Continuing operations Loss from continuing operations, net of tax $ (4,379,000 ) $ (1,069,000 ) $ (6,913,000 ) $ (3,209,000 ) Basic net loss per share of common stock from continuing operations $ (0.10 ) $ (0.04 ) $ (0.17 ) $ (0.11 ) Discontinued operations Income available to common stockholders from discontinued operations $ 69,000 $ 14,000 $ 401,000 4,692,000 Basic net earnings per share of common stock from discontinued operations $ — $ — $ 0.01 $ 0.16 Diluted earnings (loss) per share: Continuing operations Loss available to common stockholders from continuing operations $ (4,379,000 ) $ (1,069,000 ) $ (6,913,000 ) $ (3,209,000 ) Diluted net loss per share of common stock from continuing operations $ (0.10 ) $ (0.04 ) $ (0.17 ) $ (0.11 ) Discontinued operations Income available to common stockholders from discontinued operations $ 69,000 $ 14,000 $ 401,000 $ 4,692,000 Diluted net earnings per share of common stock from discontinued operations $ — $ — $ 0.01 $ 0.15 Net (loss) earnings $ (4,310,000 ) $ (1,055,000 ) $ (6,512,000 ) $ 1,483,000 Weighted average shares outstanding – Basic (1) 45,709,952 30,286,197 41,498,873 30,026,890 Effect of dilutive securities – Stock options and Restricted stock (2) 353,851 606,329 496,393 423,682 Weighted average shares outstanding – Diluted 46,063,803 30,892,526 41,995,266 30,450,572 Basic net (loss) earnings per share of common stock $ (0.10 ) $ (0.04 ) $ (0.16 ) $ 0.05 Diluted net (loss) earnings per share of common stock $ (0.10 ) $ (0.04 ) $ (0.16 ) $ 0.04 (1) Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of October 31, 2021 and 2020, there were 1,030,600 1,166,325 (2) Diluted net loss per share excludes the effect of shares that are anti-dilutive. For the three and nine months ended October 31, 2021, diluted EPS excludes 1,146,963 1,030,600 624,330 1,166,325 |
Other Operating Costs | Other Operating Costs Non-routine Costs SCHEDULE OF NON ROUTINE COSTS Three Months ended October 31, 2021 Nine Months ended October 31, 2021 Separation agreement expense $ 706,000 $ 706,000 Broker Fees 508,000 553,000 Professional Fees 358,000 740,000 Executive bonuses 355,000 705,000 Loss on exit from operating lease 22,000 22,000 Other (16,000 ) (16,000 ) Total non-routine costs $ 1,933,000 $ 2,710,000 For the three and nine months ended October 31, 2021, the Company incurred certain non-routine costs totaling $ 1,933,000 2,710,000 Loss on Exit from Membership Agreement As of October 31, 2020, minimum fees due under the Company’s former shared office arrangement totaled approximately $ 105,000 |
Non-Cash Items | Non-Cash Items The Company had the following items that were non-cash items related to the condensed consolidated statements of cash flows: SCHEDULE OF NON-CASH ITEMS RELATED TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW October 31, 2021 2020 Forgiveness of PPP loan and accrued interest $ 2,327,000 $ — Working capital accrual 116,000 — Escrowed funds from sale of ECM Assets — 800,000 Right-of Use Assets from operating lease — 540,000 Capitalized software purchased with stock (Note 8 – Commitments and Contingencies) — 51,000 |
Accounting Pronouncements Recently Adopted | Accounting Pronouncements Recently Adopted In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities From Contracts With Customers 236,000 |
Recent Accounting Pronouncements Not Yet Adopted | Recent Accounting Pronouncements Not Yet Adopted In November 2019, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Oct. 31, 2021 | |
Accounting Policies [Abstract] | |
SCHEDULE OF FAIR VALUE OF LIABILITIES | The table below provides information on the fair value of our liabilities: SCHEDULE OF FAIR VALUE OF LIABILITIES Quoted Prices in Significant Other Significant Unobservable Total Fair Active Markets Observable Inputs Inputs Value (Level 1) (Level 2) (Level 3) At October 31, 2021 Acquisition earnout liability (1) $ 11,101,000 $ — $ — $ 11,101,000 At January, 31, 2021 PPP Loan (2) $ 2,301,000 $ — $ 2,301,000 $ — (1) The fair value of the acquisition earnout liability is based upon a probability-weighted discounted cash flow that was completed at the date of acquisition and updated as of October 31, 2021. The change in the valuation of the acquisition earnout liability was $ 417,000 (2) The fair value of the PPP loan was determined based on discounting the loan amount as of January 31, 2021. The fair value was determined using market interest rates that the Company believes would be available for similar types of financial instruments. The Company estimated that the impact of the fair value adjustment on the PPP loan would have resulted in a lower fair value of $ 2,231,000 2,301,000 70,000 |
SCHEDULE OF DISAGGREGATION OF REVENUE | The following table provides information about disaggregated revenue by type and nature of revenue stream: SCHEDULE OF DISAGGREGATION OF REVENUE Three Months Ended Nine Months Ended October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 Recurring revenue $ 3,907,000 $ 1,970,000 $ 8,536,000 $ 6,167,000 Non-recurring revenue 1,607,000 671,000 2,797,000 2,205,000 Total revenue: $ 5,514,000 $ 2,641,000 $ 11,333,000 $ 8,372,000 |
SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE OF COMMON STOCK | The following is the calculation of the basic and diluted net earnings (loss) per share of common stock for the three and nine months ended October 31, 2021 and 2020: SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE OF COMMON STOCK Three Months Ended Nine Months Ended October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 Basic earnings (loss) per share: Continuing operations Loss from continuing operations, net of tax $ (4,379,000 ) $ (1,069,000 ) $ (6,913,000 ) $ (3,209,000 ) Basic net loss per share of common stock from continuing operations $ (0.10 ) $ (0.04 ) $ (0.17 ) $ (0.11 ) Discontinued operations Income available to common stockholders from discontinued operations $ 69,000 $ 14,000 $ 401,000 4,692,000 Basic net earnings per share of common stock from discontinued operations $ — $ — $ 0.01 $ 0.16 Diluted earnings (loss) per share: Continuing operations Loss available to common stockholders from continuing operations $ (4,379,000 ) $ (1,069,000 ) $ (6,913,000 ) $ (3,209,000 ) Diluted net loss per share of common stock from continuing operations $ (0.10 ) $ (0.04 ) $ (0.17 ) $ (0.11 ) Discontinued operations Income available to common stockholders from discontinued operations $ 69,000 $ 14,000 $ 401,000 $ 4,692,000 Diluted net earnings per share of common stock from discontinued operations $ — $ — $ 0.01 $ 0.15 Net (loss) earnings $ (4,310,000 ) $ (1,055,000 ) $ (6,512,000 ) $ 1,483,000 Weighted average shares outstanding – Basic (1) 45,709,952 30,286,197 41,498,873 30,026,890 Effect of dilutive securities – Stock options and Restricted stock (2) 353,851 606,329 496,393 423,682 Weighted average shares outstanding – Diluted 46,063,803 30,892,526 41,995,266 30,450,572 Basic net (loss) earnings per share of common stock $ (0.10 ) $ (0.04 ) $ (0.16 ) $ 0.05 Diluted net (loss) earnings per share of common stock $ (0.10 ) $ (0.04 ) $ (0.16 ) $ 0.04 (1) Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of October 31, 2021 and 2020, there were 1,030,600 1,166,325 (2) Diluted net loss per share excludes the effect of shares that are anti-dilutive. For the three and nine months ended October 31, 2021, diluted EPS excludes 1,146,963 1,030,600 624,330 1,166,325 |
SCHEDULE OF NON ROUTINE COSTS | SCHEDULE OF NON ROUTINE COSTS Three Months ended October 31, 2021 Nine Months ended October 31, 2021 Separation agreement expense $ 706,000 $ 706,000 Broker Fees 508,000 553,000 Professional Fees 358,000 740,000 Executive bonuses 355,000 705,000 Loss on exit from operating lease 22,000 22,000 Other (16,000 ) (16,000 ) Total non-routine costs $ 1,933,000 $ 2,710,000 |
SCHEDULE OF NON-CASH ITEMS RELATED TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | The Company had the following items that were non-cash items related to the condensed consolidated statements of cash flows: SCHEDULE OF NON-CASH ITEMS RELATED TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW October 31, 2021 2020 Forgiveness of PPP loan and accrued interest $ 2,327,000 $ — Working capital accrual 116,000 — Escrowed funds from sale of ECM Assets — 800,000 Right-of Use Assets from operating lease — 540,000 Capitalized software purchased with stock (Note 8 – Commitments and Contingencies) — 51,000 |
BUSINESS COMBINATION AND DIVE_2
BUSINESS COMBINATION AND DIVESTITURE (Tables) | 9 Months Ended |
Oct. 31, 2021 | |
Business Combination and Asset Acquisition [Abstract] | |
COMPONENTS OF TOTAL CONSIDERATION | The components of the total consideration are as follows: COMPONENTS OF TOTAL CONSIDERATION (in thousands) Components of total consideration, net of cash acquired: Cash $ 11,900 Cash, seller expenses 285 Cash, estimated net working capital adjustment 169 Payable, holdback and final working capital adjustment 116 Restricted Common Stock 6,554 Acquisition earnout liabilities 10,684 (a) Total consideration $ 29,708 (a) Acquisition earnout liabilities represents the net present value and risk adjusted probability of the required future payments underlying the Company’s SaaS Contingent Consideration and Renewal Contingent Consideration as described above. Due to the dates that the Company is required to measure, report and agree on the calculations, all amounts of the acquisition earnout liability are shown as long-term as of October 31, 2021. The acquisition earnout liability is re-measured on a quarterly basis and the change to the liability is recorded as a valuation adjustment recorded through “other expenses” in the accompanying condensed consolidated statements of operations. The valuation adjustment recorded for the three months ended October 31, 2021 was $ 417,000 |
SCHEDULE OF ALLOCATION OF THE TOTAL CONSIDERATION | The Company is presenting the allocation of the total consideration to net tangible and intangible assets as of the date of the closing of Avelead as follows.: SCHEDULE OF ALLOCATION OF THE TOTAL CONSIDERATION (in thousands) Net tangible assets: Accounts receivable $ 1,246 Unbilled revenue 200 Prepaid expenses 178 Fixed assets 37 Accounts payable (490 ) Accrued expenses (397 ) Deferred revenues (863 ) Net tangible assets (89 ) Goodwill 12,377 Customer Relationships (SaaS) 8,370 Customer Relationships (Consulting) 1,330 Internally Developed Software 6,380 Trademarks and Tradenames 1,340 Net assets acquired and liabilities assumed $ 29,708 |
SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES | The intangible assets recorded as a result of the Avelead acquisition, and their related estimated useful lives are as follows: SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES Estimated Useful Lives Goodwill Indefinite Customer Relationships (SaaS) 10 Customer Relationships (Consulting) 8 Internally Developed Software 9 Trademarks and Tradenames 15 years |
SCHEDULE OF PRO FORMA REVENUE AND NET EARNINGS | SCHEDULE OF PRO FORMA REVENUE AND NET EARNINGS Three Months Ended Nine Months Ended October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 Revenues $ 6,064,000 $ 5,198,000 $ 16,585,000 $ 14,066,000 Operating expenses (7,787,000 ) (6,707,000 ) (23,271,000 ) (18,559,000 ) Non-routine costs (3,196,000 ) — (4,138,000 ) — Loss on exit from membership agreement — — — (105,000 ) Operating loss (4,919,000 ) (1,509,000 ) (10,824,000 ) (4,598,000 ) Other expenses (572,000 ) (150,000 ) (891,000 ) (556,000 ) PPP loan forgiveness 732,000 — 3,059,000 — Income tax (expense) benefit (4,000 ) 803,000 (9,000 ) 1,536,000 Loss from continuing operations $ (4,763,000 ) $ (856,000 ) $ (8,665,000 ) $ (3,618,000 ) |
OPERATING LEASES (Tables)
OPERATING LEASES (Tables) | 9 Months Ended |
Oct. 31, 2021 | |
Operating Leases | |
SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES | Maturities of operating lease liabilities associated with the Company’s operating lease as of October 31, 2021 are as follows for the fiscal years ended January 31: SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES 2021 $ 51,000 2022 210,000 2023 35,000 Total lease payments 296,000 Less present value adjustment (12,000 ) Present value of lease liabilities $ 284,000 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Oct. 31, 2021 | |
Debt Disclosure [Abstract] | |
SCHEDULE OF MAXIMUM DEBT TO ARR RATIO | SCHEDULE OF MAXIMUM DEBT TO ARR RATIO Quarter Ending Maximum Debt to October 31, 2021 0.80 1.00 January 31, 2022 0.75 1.00 April 30, 2022 0.65 1.00 July 31, 2022 0.55 1.00 October 31, 2022 0.50 1.00 January 31, 2023 0.45 1.00 |
SCHEDULE OF MAXIMUM DEBT TO ADJUSTED EBITDA RATIO | SCHEDULE OF MAXIMUM DEBT TO ADJUSTED EBITDA RATIO Quarter Ending Maximum Debt to Adjusted EBITDA Ratio April 30, 2023 11.30 1.00 July 31, 2023 4.15 1.00 October 31, 2023 2.50 1.00 January 31, 2024 and on the last day of each quarter thereafter 2.00 1.00 |
SCHEDULE OF OUTSTANDING DEBT, OTHER THAN PPP LOAN | Outstanding principal balances on debt consisted of the following at: SCHEDULE OF OUTSTANDING DEBT, OTHER THAN PPP LOAN October 31, 2021 (a) January 31, 2021 (b) Term loan $ 10,000,000 $ 2,301,000 Deferred financing cost (116,000 ) — Total 9,884,000 2,301,000 Less: Current portion (125,000 ) (1,534,000 ) Non-current portion of debt $ 9,759,000 $ 767,000 (a) The term loan, as of October 31, 2021, is related to the new term loan agreement that the Company entered into on August 26, 2021 with Bridge Bank (see description above). (b) The term loan, as of January 31, 2021, is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021. |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 9 Months Ended |
Oct. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
SCHEDULE OF COMPONENTS OF INCOME TAX (EXPENSE) BENEFIT | Income taxes consist of the following: SCHEDULE OF COMPONENTS OF INCOME TAX (EXPENSE) BENEFIT October 31, 2021 2020 Current tax benefit (expense): Federal $ — $ 997,000 State (9,000 ) 539,000 Total current provision $ (9,000 ) $ 1,536,000 |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 9 Months Ended |
Oct. 31, 2021 | |
Discontinued Operations and Disposal Groups [Abstract] | |
SCHEDULE OF GAIN ON SALE OF ASSETS | SCHEDULE OF GAIN ON SALE OF ASSETS 2020 Net Proceeds, including escrowed funds $ 12,088,000 Net tangible assets sold: Accounts Receivable (1,130,000 ) Prepaid Expenses (576,000 ) Deferred Revenue 4,010,000 Net tangible assets sold 2,304,000 Capitalized software development costs (1,772,000 ) Goodwill (4,825,000 ) Transaction cost (1,782,000 ) Gain on sale of discontinued operations $ 6,013,000 |
SCHEDULE OF DISCONTINUED OPERATIONS OF CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS | The Company recorded the following as discontinued operations on the accompanying condensed consolidated balance sheets as of October 31, 2021 and January 31, 2021: SCHEDULE OF DISCONTINUED OPERATIONS OF CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS As of October 31, 2021 January 31,2021 Current assets of discontinued operations: Accounts receivable $ — $ 587,000 Current assets of discontinued operations $ — $ 587,000 Long-term assets of discontinued operations: Property and equipment, net $ — $ 13,000 Long-term assets of discontinued operations $ — $ 13,000 Current liabilities of discontinued operations: Accrued expenses $ — $ 8,000 Deferred revenues — 587,000 Current liabilities of discontinued operations $ — $ 595,000 For the three and nine months ended October 31, 2021 and 2020, the Company recorded the following into discontinued operations in the accompanying condensed consolidated statements of operations: Three Months Ended Nine Months Ended October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 Revenues: Maintenance and support $ — $ — $ — $ 412,000 Software as a service — — — 138,000 Transition service fees 102,000 121,000 498,000 278,000 Total revenues 102,000 121,000 498,000 828,000 Expenses: Cost of Sales 1,000 2,000 5,000 292,000 Transition service cost 32,000 55,000 92,000 103,000 Deferred financing cost — — — 128,000 Total expenses 33,000 57,000 97,000 523,000 Income from discontinued operations $ 69,000 $ 64,000 $ 401,000 $ 305,000 |
SCHEDULE OF FAIR VALUE OF LIABI
SCHEDULE OF FAIR VALUE OF LIABILITIES (Details) - USD ($) | Oct. 31, 2021 | Jan. 31, 2021 | ||
Defined Benefit Plan Disclosure [Line Items] | ||||
Acquisition earnout liability, Fair Value | [1] | $ 11,101,000 | ||
PPP Loan Total Fair Value | 2,231,000 | $ 2,301,000 | [2] | |
Fair Value, Inputs, Level 1 [Member] | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Acquisition earnout liability, Fair Value | [1] | |||
PPP Loan Total Fair Value | [2] | |||
Fair Value, Inputs, Level 2 [Member] | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Acquisition earnout liability, Fair Value | [1] | |||
PPP Loan Total Fair Value | [2] | 2,301,000 | ||
Fair Value, Inputs, Level 3 [Member] | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Acquisition earnout liability, Fair Value | [1] | $ 11,101,000 | ||
PPP Loan Total Fair Value | [2] | |||
[1] | The fair value of the acquisition earnout liability is based upon a probability-weighted discounted cash flow that was completed at the date of acquisition and updated as of October 31, 2021. The change in the valuation of the acquisition earnout liability was $ 417,000 | |||
[2] | The fair value of the PPP loan was determined based on discounting the loan amount as of January 31, 2021. The fair value was determined using market interest rates that the Company believes would be available for similar types of financial instruments. The Company estimated that the impact of the fair value adjustment on the PPP loan would have resulted in a lower fair value of $ 2,231,000 2,301,000 70,000 |
SCHEDULE OF FAIR VALUE OF LIA_2
SCHEDULE OF FAIR VALUE OF LIABILITIES (Details) (Parenthetical) - USD ($) | 2 Months Ended | |||
Oct. 31, 2021 | Jan. 31, 2021 | |||
Accounting Policies [Abstract] | ||||
Acquisition earnout liability, change in valuation | $ 417,000 | |||
Term loan fair value | 2,231,000 | $ 2,301,000 | [1] | |
Term loan | 10,000,000 | [2] | $ 2,301,000 | [3] |
Term loan reduction amount | $ 70,000 | |||
[1] | The fair value of the PPP loan was determined based on discounting the loan amount as of January 31, 2021. The fair value was determined using market interest rates that the Company believes would be available for similar types of financial instruments. The Company estimated that the impact of the fair value adjustment on the PPP loan would have resulted in a lower fair value of $ 2,231,000 2,301,000 70,000 | |||
[2] | The term loan, as of October 31, 2021, is related to the new term loan agreement that the Company entered into on August 26, 2021 with Bridge Bank (see description above). | |||
[3] | The term loan, as of January 31, 2021, is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021. |
SCHEDULE OF DISAGGREGATION OF R
SCHEDULE OF DISAGGREGATION OF REVENUE (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2021 | Oct. 31, 2020 | Oct. 31, 2021 | Oct. 31, 2020 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total revenue: | $ 5,514,000 | $ 2,641,000 | $ 11,333,000 | $ 8,372,000 |
Fair Value, Recurring [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total revenue: | 3,907,000 | 1,970,000 | 8,536,000 | 6,167,000 |
Fair Value, Nonrecurring [Member] | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Total revenue: | $ 1,607,000 | $ 671,000 | $ 2,797,000 | $ 2,205,000 |
SCHEDULE OF BASIC AND DILUTED N
SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE OF COMMON STOCK (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||||||
Oct. 31, 2021 | Jul. 31, 2021 | Apr. 30, 2021 | Oct. 31, 2020 | Jul. 31, 2020 | Apr. 30, 2020 | Oct. 31, 2021 | Oct. 31, 2020 | ||
Accounting Policies [Abstract] | |||||||||
Loss from continuing operations, net of tax | $ (4,379,000) | $ (1,069,000) | $ (6,913,000) | $ (3,209,000) | |||||
Basic net loss per share of common stock from continuing operations | $ (0.10) | $ (0.04) | $ (0.17) | $ (0.11) | |||||
Income available to common stockholders from discontinued operations | $ 69,000 | $ 14,000 | $ 401,000 | $ 4,692,000 | |||||
Basic net earnings per share of common stock from discontinued operations | $ 0.01 | $ 0.16 | |||||||
Loss available to common stockholders from continuing operations | $ (4,379,000) | $ (1,069,000) | $ (6,913,000) | $ (3,209,000) | |||||
Diluted net loss per share of common stock from continuing operations | $ (0.10) | $ (0.04) | $ (0.17) | $ (0.11) | |||||
Income available to common stockholders from discontinued operations | $ 69,000 | $ 14,000 | $ 401,000 | $ 4,692,000 | |||||
Diluted net earnings per share of common stock from discontinued operations | $ 0.01 | $ 0.15 | |||||||
Net (loss) earnings | $ (4,310,000) | $ (60,000) | $ (2,142,000) | $ (1,055,000) | $ (1,135,000) | $ 3,673,000 | $ (6,512,000) | $ 1,483,000 | |
Weighted average shares outstanding – Basic (1) | [1] | 45,709,952 | 30,286,197 | 41,498,873 | 30,026,890 | ||||
Effect of dilutive securities – Stock options and Restricted stock (2) | [2] | 353,851 | 606,329 | 496,393 | 423,682 | ||||
Weighted average shares outstanding – Diluted | 46,063,803 | 30,892,526 | 41,995,266 | 30,450,572 | |||||
Basic net (loss) earnings per share of common stock | $ (0.10) | $ (0.04) | $ (0.16) | $ 0.05 | |||||
Diluted net (loss) earnings per share of common stock | $ (0.10) | $ (0.04) | $ (0.16) | $ 0.04 | |||||
[1] | Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of October 31, 2021 and 2020, there were 1,030,600 1,166,325 | ||||||||
[2] | Diluted net loss per share excludes the effect of shares that are anti-dilutive. For the three and nine months ended October 31, 2021, diluted EPS excludes 1,146,963 1,030,600 624,330 1,166,325 |
SCHEDULE OF BASIC AND DILUTED_2
SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE OF COMMON STOCK (Details) (Parenthetical) - shares | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2021 | Oct. 31, 2020 | Oct. 31, 2021 | Oct. 31, 2020 | |
Accounting Policies [Abstract] | ||||
Unvested restricted shares of common stock outstanding | 1,030,600 | 1,166,325 | 1,030,600 | 1,166,325 |
Non vested Outstanding stock options | 1,146,963 | 624,330 | 1,146,963 | 624,330 |
Unvested restricted shares of common stock | 1,030,600 | 1,166,325 | 1,030,600 | 1,166,325 |
SCHEDULE OF NON ROUTINE COSTS (
SCHEDULE OF NON ROUTINE COSTS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2021 | Oct. 31, 2020 | Oct. 31, 2021 | Oct. 31, 2020 | |
Restructuring Cost and Reserve [Line Items] | ||||
Total non-routine costs | $ 1,933,000 | $ 2,710,000 | ||
Avelead Consulting LLC [Member] | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Separation agreement expense | 706,000 | 706,000 | ||
Broker Fees | 508,000 | 553,000 | ||
Professional Fees | 358,000 | 740,000 | ||
Executive bonuses | 355,000 | 705,000 | ||
Loss on exit from operating lease | 22,000 | 22,000 | ||
Other | (16,000) | (16,000) | ||
Total non-routine costs | $ 1,933,000 | $ 2,710,000 |
SCHEDULE OF NON-CASH ITEMS RELA
SCHEDULE OF NON-CASH ITEMS RELATED TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2021 | Oct. 31, 2020 | Oct. 31, 2021 | Oct. 31, 2020 | |
Accounting Policies [Abstract] | ||||
Forgiveness of PPP loan and accrued interest | $ 2,327,000 | |||
Working capital accrual | 116,000 | |||
Escrowed funds from sale of ECM Assets | 800,000 | |||
Right-of Use Assets from operating lease | 540,000 | |||
Capitalized software purchased with stock (Note 8 – Commitments and Contingencies) | $ 51,000 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Oct. 31, 2021 | Oct. 31, 2020 | Oct. 31, 2021 | Oct. 31, 2020 | Jan. 31, 2021 | |
Product Information [Line Items] | |||||
Wrote-off fully depreciated fixed assets | $ 225,000 | ||||
Total revenue | $ 5,514,000 | $ 2,641,000 | 11,333,000 | $ 8,372,000 | |
Deferred revenue | 18,788,000 | $ 18,788,000 | $ 3,267,000 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Explanation | the Company expects to recognize approximately 66% over the next 12 months and the remainder thereafter. | ||||
Deferred costs, net | 135,000 | $ 135,000 | 168,000 | ||
Deferred costs, accumulated amortization | 95,000 | 95,000 | 126,000 | ||
Deferred costs, amortization expense | 22,000 | 27,000 | 90,000 | 89,000 | |
Netted between capitalized cost and accumulated amortization | 121,000 | ||||
Deferred commission costs accumulated amortization | 467,000 | 467,000 | 285,000 | ||
Compensation expense | 537,000 | 442,000 | 1,659,000 | 1,054,000 | |
Acquisition, non routine costs | 1,933,000 | 2,710,000 | |||
Minimum fees under shared office arrangement | 105,000 | 105,000 | |||
Avelead Consulting LLC [Member] | |||||
Product Information [Line Items] | |||||
Total revenue | 2,045,000 | 2,045,000 | |||
Acquisition, non routine costs | 1,933,000 | 2,710,000 | |||
Discount on deferred revenue eliminated | 236,000 | 236,000 | |||
Selling, General and Administrative Expenses [Member] | |||||
Product Information [Line Items] | |||||
Amortization expense with deferred sales commissions | 88,000 | 58,000 | 248,000 | 133,000 | |
Other Noncurrent Assets [Member] | |||||
Product Information [Line Items] | |||||
Deferred commissions costs paid and payable | $ 756,000 | $ 756,000 | $ 666,000 | ||
SaaS Solution [Member] | |||||
Product Information [Line Items] | |||||
Total revenue | 19,000 | 67,000 | |||
Cost of sales | $ 27,000 | $ 73,000 |
COMPONENTS OF TOTAL CONSIDERATI
COMPONENTS OF TOTAL CONSIDERATION (Details) - Avelead Consulting LLC [Member] | Aug. 16, 2021USD ($) |
Business Acquisition [Line Items] | |
Cash | $ 12,400,000 |
Total consideration | 29,700,000 |
Unit Purchase Agreement [Member] | |
Business Acquisition [Line Items] | |
Cash | 11,900,000 |
Cash, seller expenses | 285,000 |
Cash, estimated net working capital adjustment | 169,000 |
Payable, holdback and final working capital adjustment | 116,000 |
Restricted Common Stock | 6,554,000 |
Acquisition earnout liabilities | 10,684,000 |
Total consideration | $ 29,708,000 |
COMPONENTS OF TOTAL CONSIDERA_2
COMPONENTS OF TOTAL CONSIDERATION (Details) (Parenthetical) - USD ($) | 2 Months Ended | 3 Months Ended |
Oct. 31, 2021 | Oct. 31, 2021 | |
Business Acquisition [Line Items] | ||
[custom:AcquisitionEarnoutLiabilityChangeInValuation] | $ 417,000 | |
Avelead Consulting LLC [Member] | ||
Business Acquisition [Line Items] | ||
[custom:AcquisitionEarnoutLiabilityChangeInValuation] | $ 417,000 |
SCHEDULE OF ALLOCATION OF THE T
SCHEDULE OF ALLOCATION OF THE TOTAL CONSIDERATION (Details) - USD ($) | Oct. 31, 2021 | Aug. 16, 2021 | Jan. 31, 2021 | Feb. 24, 2020 |
Business Acquisition [Line Items] | ||||
Goodwill | $ 23,089,000 | $ 10,712,000 | $ 4,825,000 | |
Avelead Consulting LLC [Member] | ||||
Business Acquisition [Line Items] | ||||
Accounts receivable | $ 1,246,000 | |||
Unbilled revenue | 200,000 | |||
Prepaid expenses | 178,000 | |||
Fixed assets | 37,000 | |||
Accounts payable | (490,000) | |||
Accrued expenses | (397,000) | |||
Deferred revenues | (863,000) | |||
Net tangible assets | (89,000) | |||
Goodwill | 12,377,000 | |||
Customer Relationships (SaaS) | 8,370,000 | |||
Customer Relationships (Consulting) | 1,330,000 | |||
Internally Developed Software | 6,380,000 | |||
Trademarks and Tradenames | 1,340,000 | |||
Net assets acquired and liabilities assumed | $ 29,708,000 |
SCHEDULE OF INTANGIBLE ASSETS E
SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES (Details) | Aug. 16, 2021 |
Customer Relationships [Member] | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Estimated useful lives | Indefinite |
Estimated useful life, intangible assets | 10 years |
Customer Relationships Consulting [Member] | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Estimated useful life, intangible assets | 8 years |
Computer Software, Intangible Asset [Member] | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Estimated useful life, intangible assets | 9 years |
Trademarks and Trade Names [Member] | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Estimated useful life, intangible assets | 15 years |
SCHEDULE OF PRO FORMA REVENUE A
SCHEDULE OF PRO FORMA REVENUE AND NET EARNINGS (Details) - Avelead Consulting LLC [Member] - USD ($) | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2021 | Oct. 31, 2020 | Oct. 31, 2021 | Oct. 31, 2020 | |
Business Acquisition [Line Items] | ||||
Revenues | $ 6,064,000 | $ 5,198,000 | $ 16,585,000 | $ 14,066,000 |
Operating expenses | (7,787,000) | (6,707,000) | (23,271,000) | (18,559,000) |
Non-routine costs | (3,196,000) | (4,138,000) | ||
Loss on exit from membership agreement | (105,000) | |||
Operating loss | (4,919,000) | (1,509,000) | (10,824,000) | (4,598,000) |
Other expenses | (572,000) | (150,000) | (891,000) | (556,000) |
PPP loan forgiveness | 732,000 | 3,059,000 | ||
Income tax (expense) benefit | (4,000) | 803,000 | (9,000) | 1,536,000 |
Loss from continuing operations | $ (4,763,000) | $ (856,000) | $ (8,665,000) | $ (3,618,000) |
BUSINESS COMBINATION AND DIVE_3
BUSINESS COMBINATION AND DIVESTITURE (Details Narrative) - USD ($) | Aug. 16, 2021 | Oct. 31, 2021 | Oct. 31, 2020 | Oct. 31, 2021 | Oct. 31, 2020 |
Business Acquisition [Line Items] | |||||
Revenue from Contract with Customer, Excluding Assessed Tax | $ 5,514,000 | $ 2,641,000 | $ 11,333,000 | $ 8,372,000 | |
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent | (4,379,000) | $ (1,069,000) | (6,913,000) | $ (3,209,000) | |
Avelead Consulting LLC [Member] | |||||
Business Acquisition [Line Items] | |||||
Business Combination, Consideration Transferred | $ 29,700,000 | ||||
Payments to Acquire Businesses, Net of Cash Acquired | 12,400,000 | ||||
Business combination holdback | 100,000 | ||||
Business Acquisition, Equity Interest Issued or Issuable, Value Assigned | 6,500,000 | ||||
Business Combination, Contingent Consideration, Liability | $ 10,700,000 | ||||
Business Combination, Contingent Consideration Arrangements, Description | Additionally, the Company contracted two types of contingent consideration; the first is referred to herein as “SaaS Contingent Consideration” and the second is referred to herein as “Renewal Contingent Consideration.” The SaaS Contingent Consideration and Renewal Contingent Consideration have an aggregate value of approximately $10.7 million at the date of closing. | ||||
Non-routine costs paid by sellers | 1,263,000 | 1,428,000 | |||
Revenue from Contract with Customer, Excluding Assessed Tax | 2,045,000 | 2,045,000 | |||
Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent | $ (975,000) | $ (975,000) | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 583,333 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price | $ 1.53 | ||||
Avelead Consulting LLC [Member] | Share-based Payment Arrangement, Tranche One [Member] | |||||
Business Acquisition [Line Items] | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 500,000 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period | 3 years | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value | $ 333,000 | ||||
Avelead Consulting LLC [Member] | Share-based Payment Arrangement, Tranche Two [Member] | |||||
Business Acquisition [Line Items] | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 83,333 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value | $ 4,000 | ||||
Avelead Consulting LLC [Member] | Unit Purchase Agreement [Member] | |||||
Business Acquisition [Line Items] | |||||
Business Combination, Consideration Transferred | 29,708,000 | ||||
Payments to Acquire Businesses, Net of Cash Acquired | 11,900,000 | ||||
Closing costs | 285,000 | ||||
Payment for estimated working capital adjustment | 169,000 | ||||
Anticipated payment of holdback | $ 116,000 | ||||
Payment of SaaS contingent consideration in cash, percentage | 50.00% | ||||
Payment of SaaS contingent consideration in shares, percentage | 50.00% | ||||
First year payemnt of SaaS contingent consideration, description | The first year of SaaS Contingent Consideration is calculated as 75% of Avelead’s recognized SaaS revenue from September 1, 2021 to August 31, 2022. The first-year payment is subject to a deduction of $665,000 spread equally between the cash and common stock portion of the earnout consideration. The first year earnout will be paid on or about October 15, 2022, subject to a dispute and resolution period. Assuming that Avelead is within 80% of its forecasted SaaS revenue in the first year earnout1, the Company agreed to a floor and ceiling on the value of the Company’s restricted common stock issued as consideration for the earnout. That collar has a floor of $3.50 per share and a ceiling of $5.50 per share for the first year earnout. | ||||
Second year payemnt of SaaS contingent consideration, description | The second year of SaaS Contingent Consideration is calculated as 40% of Avelead’s recognized SaaS revenue from September 1, 2022 to August 31, 2023. The second year earnout will be paid on or about October 15, 2023, subject to a dispute and resolution period. Assuming that Avelead is within 80% of its forecasted SaaS revenue in the second year earnout1, the Company agreed to a floor and ceiling on the Company’s restricted common stock issued as consideration for the earnout. That collar has a floor of $4.50 per share and a ceiling of $6.50 per share for the second year earnout. | ||||
Forecasted revenue description | If Avelead does not achieve 80% of its forecasted revenue, the price per share will revert back to the Company’s market price based upon a 30-day average. | ||||
Renewal contingent consideration, description | The renewal occurs on or about June 1, 2022 and June 1, 2023. The Company will remit the Renewal Contingent Consideration on or about each of October 15, 2022 and 2023, respectively. The Renewal Contingent Consideration is payable in shares of Company restricted common stock valued as of the date of Closing. Accordingly, upon achieving the Renewal Contingent Consideration, the Company will issue 627,747 shares of restricted common stock on or about each of October 15, 2022 and October 15, 2023, subject to a dispute and resolution period. | ||||
Avelead Consulting LLC [Member] | Acquisition Restricted Common Stock [Member] | |||||
Business Acquisition [Line Items] | |||||
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares | 5,021,972 | ||||
Business acquisition equity fair value | $ 6,500,000 | ||||
Avelead Consulting LLC [Member] | Acquisition Restricted Common Stock [Member] | Unit Purchase Agreement [Member] | |||||
Business Acquisition [Line Items] | |||||
Business acquisition equity fair value | $ 6,500,000 |
SCHEDULE OF MATURITIES OF OPERA
SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES (Details) | Oct. 31, 2021USD ($) |
Operating Leases | |
2021 | $ 51,000 |
2022 | 210,000 |
2023 | 35,000 |
Total lease payments | 296,000 |
Less present value adjustment | (12,000) |
Present value of lease liabilities | $ 284,000 |
OPERATING LEASES (Details Narra
OPERATING LEASES (Details Narrative) - USD ($) | Oct. 02, 2021 | Aug. 16, 2021 | Oct. 31, 2021 | Oct. 31, 2021 | Jan. 31, 2021 | Mar. 31, 2020 |
Operating lease, right-of use asset | $ 262,000 | $ 262,000 | $ 391,000 | |||
Operating cost | 48,000 | 145,000 | ||||
Office Space [Member] | ||||||
Total minimum rentals due amount | $ 105,000 | |||||
Right of Use Asset [Member] | ||||||
Operating lease, right-of use asset | 262,000 | 262,000 | ||||
Current portion of operating lease obligation | 202,000 | 202,000 | ||||
Non-current portion of operating lease obligation | $ 82,000 | $ 82,000 | ||||
Lease discount rate | 6.50% | 6.50% | ||||
At inception [Member] | ||||||
Operating lease, right-of use asset | $ 540,000 | $ 540,000 | ||||
Sublease Agreement [Member] | ||||||
Sublease, term | 18 months | |||||
Sublease income | $ 292,000 | |||||
Suwanee Office Lease [Member] | ||||||
Lease expiration, date | Feb. 28, 2022 | |||||
Rent expenses | $ 7,000 |
SCHEDULE OF MAXIMUM DEBT TO ARR
SCHEDULE OF MAXIMUM DEBT TO ARR RATIO (Details) | Oct. 31, 2021 |
October Thirty One Two Thousand And Twenty One [Member] | Minimum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to ARR Ratio | 0.80% |
October Thirty One Two Thousand And Twenty One [Member] | Maximum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to ARR Ratio | 1.00% |
January 31, 2022 [Member] | Minimum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to ARR Ratio | 0.75% |
January 31, 2022 [Member] | Maximum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to ARR Ratio | 1.00% |
April 30, 2022 [Member] | Minimum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to ARR Ratio | 0.65% |
April 30, 2022 [Member] | Maximum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to ARR Ratio | 1.00% |
July 31, 2022 [Member] | Minimum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to ARR Ratio | 0.55% |
July 31, 2022 [Member] | Maximum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to ARR Ratio | 1.00% |
October 31, 2022 [Member] | Minimum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to ARR Ratio | 0.50% |
October 31, 2022 [Member] | Maximum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to ARR Ratio | 1.00% |
January 31, 2023 [Member] | Minimum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to ARR Ratio | 0.45% |
January 31, 2023 [Member] | Maximum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to ARR Ratio | 1.00% |
SCHEDULE OF MAXIMUM DEBT TO ADJ
SCHEDULE OF MAXIMUM DEBT TO ADJUSTED EBITDA RATIO (Details) | Oct. 31, 2021 |
April 30, 2023 [Member] | Minimum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to Adjusted EBITDA Ratio | 11.30% |
April 30, 2023 [Member] | Maximum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to Adjusted EBITDA Ratio | 1.00% |
July 31, 2023 [Member] | Minimum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to Adjusted EBITDA Ratio | 4.15% |
July 31, 2023 [Member] | Maximum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to Adjusted EBITDA Ratio | 1.00% |
October 31, 2023 [Member] | Minimum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to Adjusted EBITDA Ratio | 2.50% |
October 31, 2023 [Member] | Maximum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to Adjusted EBITDA Ratio | 1.00% |
January 31, 2024 and on the last day of each quarter thereafter [Member] | Minimum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to Adjusted EBITDA Ratio | 2.00% |
January 31, 2024 and on the last day of each quarter thereafter [Member] | Maximum [Member] | |
Debt Instrument [Line Items] | |
Maximum Debt to Adjusted EBITDA Ratio | 1.00% |
SCHEDULE OF OUTSTANDING DEBT, O
SCHEDULE OF OUTSTANDING DEBT, OTHER THAN PPP LOAN (Details) - USD ($) | Oct. 31, 2021 | [1] | Jan. 31, 2021 | [2] |
Debt Disclosure [Abstract] | ||||
Term loan | $ 10,000,000 | $ 2,301,000 | ||
Deferred financing cost | (116,000) | |||
Total | 9,884,000 | 2,301,000 | ||
Less: Current portion | (125,000) | (1,534,000) | ||
Non-current portion of debt | $ 9,759,000 | $ 767,000 | ||
[1] | The term loan, as of October 31, 2021, is related to the new term loan agreement that the Company entered into on August 26, 2021 with Bridge Bank (see description above). | |||
[2] | The term loan, as of January 31, 2021, is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021. |
DEBT (Details Narrative)
DEBT (Details Narrative) - USD ($) | Aug. 26, 2021 | Mar. 02, 2021 | Apr. 21, 2020 | Feb. 29, 2020 | Dec. 11, 2019 | Jun. 30, 2021 | Oct. 31, 2021 | Oct. 31, 2020 | Jan. 31, 2021 | [2] | |
Line of Credit Facility [Line Items] | |||||||||||
Loss on Extinguishment of Debt | $ 43,000 | $ 43,000 | |||||||||
Term loan | 10,000,000 | [1] | $ 2,301,000 | ||||||||
PPP Loan forgiven | $ 2,301,000 | ||||||||||
Accrued interest forgiveness | $ 26,000 | ||||||||||
Base Rate [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Debt Instrument, Basis Spread on Variable Rate | 1.50% | ||||||||||
Debt interest rate | 3.25% | ||||||||||
Bridge Bank [Member] | Revolving Credit Facility [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Discontinued extinguishment of debt | $ 3,000,000 | ||||||||||
Revolving credit facility | 0 | ||||||||||
Security Agreement [Member] | Bridge Bank [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Revolving line of credit | 10,000,000 | ||||||||||
Principal repayment in second year | 500,000 | ||||||||||
Principal repayment in third year | 1,000,000 | ||||||||||
Principal repayment in fourth year | 2,000,000 | ||||||||||
Principal repayment in fifth year | 3,000,000 | ||||||||||
Loan and Security Agreement [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Revolving line of credit | $ 2,000,000 | ||||||||||
Deferred financing costs | $ 130,000 | ||||||||||
Amortization of financing cost | 200,000 | ||||||||||
Accretion of interest expense | $ 200,000 | ||||||||||
Debt financial covenants, description | Borrowers shall, at all times, maintain unrestricted cash of Borrowers at Bank in an amount not less than (i) on the Closing Date and for the first eleven (11) months immediately following the Closing Date, Five Million Dollars ($5,000,000) and (ii) at all times thereafter, Three Million Dollars ($3,000,000). | ||||||||||
Line of credit facility description | The revolving credit facility had a maturity date of twenty-four months and advances bore interest at a per annum rate equal to the higher of (a) the Prime Rate (as published in The Wall Street Journal) plus 1.25% or (b) 6.25%. The revolving credit facility could be advanced based upon 80% of eligible accounts receivable, as defined in the Loan and Security Agreement. | ||||||||||
Term loan | $ 4,000,000 | ||||||||||
Repayment of term loan | $ 4,000,000 | ||||||||||
Loan and Security Agreement [Member] | Maximum [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Fixed charge coverage ratio | 1.20% | ||||||||||
Loan and Security Agreement [Member] | Minimum [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Fixed charge coverage ratio | 1.00% | ||||||||||
Amended and Restated Loan and Security Agreement [Member] | Revolving Credit Facility [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Revolving line of credit | $ 3,000,000 | ||||||||||
Line of credit facility description | Additionally, the Company’s Bank EBITDA, measured on a monthly basis over a trailing three month period then ended, could not deviate by more than 30% or $300,000. The Amended Loan and Security Agreement facility bore interest at a per annum rate equal to the higher of (a) the Prime Rate (as published in The Wall Street Journal) plus 1.00%, with a “floor” Prime Rate of 4.0%. | ||||||||||
Paycheck Protection Program [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Debt interest rate | 1.00% | ||||||||||
Term loan | $ 2,301,000 | ||||||||||
[1] | The term loan, as of October 31, 2021, is related to the new term loan agreement that the Company entered into on August 26, 2021 with Bridge Bank (see description above). | ||||||||||
[2] | The term loan, as of January 31, 2021, is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021. |
SCHEDULE OF COMPONENTS OF INCOM
SCHEDULE OF COMPONENTS OF INCOME TAX (EXPENSE) BENEFIT (Details) - USD ($) | 9 Months Ended | |
Oct. 31, 2021 | Oct. 31, 2020 | |
Current tax benefit (expense): | ||
Federal | $ 997,000 | |
State | (9,000) | 539,000 |
Total current provision | $ (9,000) | $ 1,536,000 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 3 Months Ended | |
Oct. 31, 2021 | Jan. 31, 2021 | |
Operating Loss Carryforwards [Line Items] | ||
Expire date description | expire through fiscal 2039 | |
Effective Income Tax Rate Reconciliation, Percent | 0.16% | |
Federal statutory income tax rates | 24.56% | |
Uncertain tax positions | $ 365,000 | $ 339,000 |
Domestic Tax Authority [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss carry forwards | 37,554,000 | |
Domestic Tax Authority [Member] | Research Tax Credit Carryforward [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss carry forwards | 1,356,000 | |
State and Local Jurisdiction [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss carry forwards | 12,519,000 | |
State and Local Jurisdiction [Member] | Research Tax Credit Carryforward [Member] | GEORGIA | ||
Operating Loss Carryforwards [Line Items] | ||
Operating loss carry forwards | $ 94,000 |
EQUITY (Details Narrative)
EQUITY (Details Narrative) - USD ($) | May 24, 2021 | Feb. 25, 2021 | Oct. 31, 2021 | Oct. 31, 2020 | May 23, 2021 | May 03, 2021 | Jan. 31, 2021 |
Subsidiary, Sale of Stock [Line Items] | |||||||
Common stock, par value | $ 0.01 | $ 0.01 | |||||
Proceeds from issuance of common stock | $ 16,100,000 | ||||||
Common stock, shares authorized | 65,000,000 | 65,000,000 | 45,000,000 | 65,000,000 | |||
2013 Incentive Compensation Plan [Member] | Stock Options [Member] | |||||||
Subsidiary, Sale of Stock [Line Items] | |||||||
Number of additional shares authorized to issue | 2,000,000 | ||||||
Number of shares authorized to issue | 8,223,246 | 6,223,246 | |||||
180 Consulting, LLC [Member] | |||||||
Subsidiary, Sale of Stock [Line Items] | |||||||
Common stock issued for resale | 248,424 | ||||||
Underwriting Agreement [Member] | Craig-Hallum Capital Group LLC [Member] | |||||||
Subsidiary, Sale of Stock [Line Items] | |||||||
Number of shares issued | 10,062,500 | ||||||
Common stock, par value | $ 0.01 | ||||||
Price per share | $ 1.60 | ||||||
Proceeds from issuance of common stock | $ 16,100,000 | ||||||
Underwriting Agreement [Member] | Craig-Hallum Capital Group LLC [Member] | Over-Allotment Option [Member] | |||||||
Subsidiary, Sale of Stock [Line Items] | |||||||
Number of shares of common stock sold | 1,312,500 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | Oct. 05, 2021 | Nov. 02, 2020 | Oct. 02, 2020 | Jul. 01, 2018 | Oct. 25, 2013 | Oct. 31, 2021 | Oct. 31, 2021 | Oct. 31, 2021 | Oct. 31, 2020 |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||||
Payments to Develop Software | $ 1,048,000 | $ 1,495,000 | |||||||
Software License and Royalty Agreement [Member] | |||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||||
Term of licensing agreement | 15 years | ||||||||
One-time initial base royalty fee | $ 3,000,000 | ||||||||
Minimum commitment for additional royalty payments | $ 3,000,000 | ||||||||
Royalty Agreement [Member] | |||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||||
Period of time over which additional royalty payments are to be made description | nine and one-half years | ||||||||
Term of maintenance and service | 24 months | ||||||||
Cash payment due per royalty agreement | $ 1,000,000 | ||||||||
Settlement and Release Agreement [Member] | |||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||||
Paid in cash | $ 500,000 | ||||||||
Payments for cash | $ 490,000 | 990,000 | |||||||
Payments obligations | $ 1,000,000 | ||||||||
Master Services Agreement [Member] | 180 Consulting, LLC [Member] | |||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||||
Stock Issued During Period, Shares, Issued for Services | 128,415 | 443,046 | 66,207 | 194,662 | 167,937 | ||||
Professional Fees | $ 1,092,000 | $ 449,000 | |||||||
Payments to Develop Software | 75,000 | ||||||||
Operating Costs and Expenses | $ 374,000 | ||||||||
Master Services Agreement [Member] | 180 Consulting, LLC [Member] | Private Placement [Member] | |||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||||
Stock Issued During Period, Shares, Issued for Services | 128,415 | ||||||||
Avelead Master Services Agreement [Member] | 180 Consulting, LLC [Member] | |||||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||||
Professional Fees | $ 62,000 | $ 62,000 |
SCHEDULE OF GAIN ON SALE OF ASS
SCHEDULE OF GAIN ON SALE OF ASSETS (Details) - USD ($) | Feb. 24, 2020 | Oct. 31, 2021 | Jan. 31, 2021 |
Discontinued Operations and Disposal Groups [Abstract] | |||
Net Proceeds, including escrowed funds | $ 12,088,000 | ||
Accounts Receivable | (1,130,000) | ||
Prepaid Expenses | (576,000) | ||
Deferred Revenue | 4,010,000 | ||
Net tangible assets sold | 2,304,000 | ||
Capitalized software development costs | (1,772,000) | $ (5,563,000) | $ (5,945,000) |
Goodwill | (4,825,000) | $ (23,089,000) | $ (10,712,000) |
Transaction cost | (1,782,000) | ||
Gain on sale of discontinued operations | $ 6,013,000 |
SCHEDULE OF DISCONTINUED OPERAT
SCHEDULE OF DISCONTINUED OPERATIONS OF CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Oct. 31, 2021 | Oct. 31, 2020 | Oct. 31, 2021 | Oct. 31, 2020 | Jan. 31, 2021 | |
Accounts receivable | $ 587,000 | ||||
Current assets of discontinued operations | 587,000 | ||||
Property and equipment, net | 13,000 | ||||
Long-term assets of discontinued operations | 13,000 | ||||
Accrued expenses | 8,000 | ||||
Deferred revenues | 587,000 | ||||
Current liabilities of discontinued operations | $ 595,000 | ||||
Total revenues | 102,000 | $ 121,000 | 498,000 | $ 828,000 | |
Cost of Sales | 1,000 | 2,000 | 5,000 | 292,000 | |
Transition service cost | 32,000 | 55,000 | 92,000 | 103,000 | |
Deferred financing cost | 128,000 | ||||
Total expenses | 33,000 | 57,000 | 97,000 | 523,000 | |
Income from discontinued operations | 69,000 | 64,000 | 401,000 | 305,000 | |
Maintenance and Support [Member] | |||||
Total revenues | 412,000 | ||||
Software Service [Member] | |||||
Total revenues | 138,000 | ||||
Transition Service Fees [Member] | |||||
Total revenues | $ 102,000 | $ 121,000 | $ 498,000 | $ 278,000 |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details Narrative) - USD ($) | Feb. 24, 2020 | Oct. 31, 2021 | Jan. 31, 2021 |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Escrow funds | $ 800,000 | ||
Goodwill | $ 4,825,000 | $ 23,089,000 | $ 10,712,000 |
Asset Purchase Agreement [Member] | Enterprise Content Management Business [Member] | |||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Purchase price | 16,000,000 | ||
Proceeds from debt | 5,400,000 | ||
Repayment for debt | 4,000,000 | ||
Escrow funds | 800,000 | ||
Goodwill | $ 4,825,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 2 Months Ended | 3 Months Ended | 9 Months Ended | ||
Oct. 31, 2021 | Oct. 31, 2021 | Oct. 31, 2020 | Oct. 31, 2021 | Oct. 31, 2020 | |
Research and development expenses | $ 39,000 | $ 1,339,000 | $ 753,000 | $ 3,280,000 | $ 1,946,000 |
121G Consulting, LLC [Member] | |||||
Consulting fees | $ 0 | $ 70,000 | $ 0 | $ 70,000 |