strm20241031

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended October 31, 2024

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

For the transition period from __________ to ____________

Commission File Number: 000-28132

STREAMLINE HEALTH SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware

31-1455414

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2400 Old Milton Pkwy., Box 1353

Alpharetta, GA 30009

(Address of principal executive offices) (Zip Code)

(888) 997-8732

(Registrant’s telephone number, including area code)

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.01 par value per share		STRM		Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒

Emerging growth company ☐

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

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

The number of shares outstanding of the Registrant’s Common Stock, $0.01 par value per share, as of December 16, 2024, was 4,273,175.

Table of Contents

(rounded to the nearest thousand dollars, except share and per share information)

	*October 31, 2024*		*January 31, 2024*
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	754,000	$	3,190,000
Accounts receivable, net of allowance for credit losses of $59,000 and $86,000, respectively		2,824,000		4,237,000
Contract receivables		1,248,000		780,000
Prepaid and other current assets		567,000		629,000
Total current assets		5,393,000		8,836,000
Non-current assets:
Property and equipment, net of accumulated amortization of $328,000 and $291,000 respectively		52,000		88,000
Capitalized software development costs, net of accumulated amortization of $9,368,000 and $7,960,000, respectively		5,165,000		5,798,000
Intangible assets, net of accumulated amortization of $5,246,000 and $4,019,000, respectively		10,844,000		12,071,000
Goodwill		13,276,000		13,276,000
Other		1,236,000		1,666,000
Total non-current assets		30,573,000		32,899,000
Total assets	$	35,966,000	$	41,735,000

(rounded to the nearest thousand dollars, except share and per share information)

	*October 31, 2024*			*January 31, 2024*
	(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,610,000		$	1,253,000
Accrued expenses		1,518,000			2,023,000
Current portion of term loan		2,250,000			1,500,000
Deferred revenues		6,095,000			7,112,000
Acquisition earnout liability		377,000			1,794,000
Total current liabilities		11,850,000			13,682,000
Non-current liabilities:
Term loan, net of current portion and deferred financing costs		5,883,000			7,566,000
Line of credit		—			1,500,000
Notes payable, net of deferred financing costs		4,129,000			—
Deferred revenues, less current portion		190,000			173,000
Total non-current liabilities		10,202,000			9,239,000
Total liabilities		22,052,000			22,921,000
Commitments and contingencies – Note 8
Stockholders’ equity:
Common stock, $0.01 par value per share, 85,000,000 shares authorized; 4,265,821 and 3,929,446 shares issued and outstanding, respectively		43,000			39,000
Additional paid in capital		137,588,000			134,474,000
Accumulated deficit		(123,717,000	)		(115,699,000	)
Total stockholders’ equity		13,914,000			18,814,000
Total liabilities and stockholders’ equity	$	35,966,000		$	41,735,000

(rounded to the nearest thousand dollars, except share and per share information)

	*Three Months Ended October 31,*						*Nine Months Ended October 31,*
	*2024*			*2023*			*2024*			*2023*
Revenues:
Software as a service	$	2,933,000		$	3,924,000		$	8,734,000		$	10,630,000
Maintenance and support		878,000			1,070,000			2,651,000			3,327,000
Professional fees and licenses		608,000			1,139,000			1,841,000			3,278,000
Total revenues		4,419,000			6,133,000			13,226,000			17,235,000
Operating expenses:
Cost of software as a service		1,512,000			1,677,000			4,356,000			5,159,000
Cost of maintenance and support		42,000			129,000			127,000			250,000
Cost of professional fees and licenses		831,000			1,072,000			2,558,000			3,202,000
Selling, general and administrative expense		2,880,000			4,122,000			9,060,000			12,079,000
Research and development		1,134,000			1,304,000			3,569,000			4,310,000
Impairment of goodwill		—			9,813,000			—			9,813,000
Impairment of long-lived assets		—			963,000			—			963,000
Total operating expenses		6,399,000			19,080,000			19,670,000			35,776,000
Operating loss		(1,980,000	)		(12,947,000	)		(6,444,000	)		(18,541,000	)
Other (expense) income:
Interest expense		(496,000	)		(266,000	)		(1,457,000	)		(781,000	)
Valuation adjustments		—			1,182,000			(115,000	)		1,905,000
Other		—			—			(2,000	)		31,000
Loss before income taxes		(2,476,000	)		(12,031,000	)		(8,018,000	)		(17,386,000	)
Income tax benefit		—			120,000			—			59,000
Net loss	$	(2,476,000	)	$	(11,911,000	)	$	(8,018,000	)	$	(17,327,000	)
Basic and Diluted Earnings Per Share:
Net loss per common share – basic and diluted	$	(0.61	)	$	(3.15	)	$	(2.01	)	$	(4.61	)
Weighted average number of common shares – basic and diluted		4,055,268			3,780,689			3,981,406			3,756,420

						*Additional*						*Total*
	*Common stock*			*Common stock*		*paid in*			*Accumulated*			*stockholders’*
	*(Shares)*			*(Amount)*		*capital*			*deficit*			*equity*

Balance at January 31, 2024		3,929,446		$	39,000	$	134,474,000		$	(115,699,000	)	$	18,814,000
Restricted stock issued		81,000			1,000		(1,000	)		—			—
Restricted stock forfeited		(3,224	)		—		—			—			—
Surrender of shares		(9,273	)		—		(67,000	)		—			(67,000	)
Share-based compensation		—			—		529,000			—			529,000
Issuance of common stock		123,502			1,000		769,000			—			770,000
Offering expenses		—			—		(4,000	)		—			(4,000	)
Net loss		—			—		—			(2,739,000	)		(2,739,000	)
Balance at April 30, 2024		4,121,451		$	41,000	$	135,700,000		$	(118,438,000	)	$	17,303,000

Restricted stock issued		113,769			1,000		(1,000	)		—			—
Restricted stock forfeited		(18,817	)		—		—			—			—
Surrender of shares		(3,452	)		—		(10,000	)		—			(10,000	)
Share-based compensation		—			—		571,000			—			571,000
Cashless exercise of warrants		7,317			—		—			—			—
Warrant liability reclassification		—			—		837,000			—			837,000
Net loss		—			—		—			(2,803,000	)		(2,803,000	)
Balance at July 31, 2024		4,220,268		$	42,000	$	137,097,000		$	(121,241,000	)	$	15,898,000

Restricted stock issued		54,801			1,000		(1,000	)		—			—
Restricted stock forfeited		(8,445	)		—		—			—			—
Surrender of shares		(803	)		—		—			—			—
Share-based compensation		—			—		492,000			—			492,000
Net loss		—			—		—			(2,476,000	)		(2,476,000	)
Balance at October 31, 2024		4,265,821		$	43,000	$	137,588,000		$	(123,717,000	)	$	13,914,000

						*Additional*						*Total*
	*Common stock*			*Common stock*		*paid in*			*Accumulated*			*stockholders’*
	*(Shares)*			*(Amount)*		*capital*			*deficit*			*equity*

Balance at January 31, 2023		3,837,560		$	38,000	$	132,511,000		$	(97,038,000	)	$	35,511,000
Restricted stock issued		79,061			1,000		(1,000	)		—			—
Restricted stock forfeited		(1,893	)		—		—			—			—
Surrender of shares		(5,888	)		—		(179,000	)		—			(179,000	)
Share-based compensation		—			—		595,000			—			595,000
Adoption of ASU 2016-13		—			—		—			36,000			36,000
Net loss		—			—		—			(2,901,000	)		(2,901,000	)
Balance at April 30, 2023		3,908,840		$	39,000	$	132,926,000		$	(99,903,000	)	$	33,062,000

Restricted stock issued		25,714			—		—			—			—
Restricted stock forfeited		(5,133	)		—		—			—			—
Surrender of shares		(3,337	)		—		(73,000	)		—			(73,000	)
Share-based compensation		—			—		630,000			—			630,000
Net loss		—			—		—			(2,515,000	)		(2,515,000	)
Balance at July 31, 2023		3,926,084		$	39,000	$	133,483,000		$	(102,418,000	)	$	31,104,000

Restricted stock issued		11,736			—		—			—			—
Restricted stock forfeited		(15,940	)		—		—			—			—
Surrender of shares		(2,535	)		—		(19,000	)		—			(19,000	)
Share-based compensation		—			—		577,000			—			577,000
Net loss		—			—		—			(11,911,000	)		(11,911,000	)
Balance at October 31, 2023		3,919,345		$	39,000	$	134,041,000		$	(114,329,000	)	$	19,751,000

	*Nine Months Ended October 31,*
	*2024*			*2023*
Net loss	$	(8,018,000	)	$	(17,327,000	)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,594,000			3,264,000
Accrued interest expense - notes payable		507,000			—
Valuation adjustments		115,000			(1,905,000	)
Benefit for deferred income taxes		—			(104,000	)
Share-based compensation expense		1,483,000			1,626,000
Impairment of goodwill		—			9,813,000
Impairment of long-lived assets		—			963,000
Provision for credit losses		(58,000	)		—
Changes in assets and liabilities:
Accounts and contract receivables		1,003,000			4,299,000
Other assets		(116,000	)		(65,000	)
Accounts payable		357,000			109,000
Accrued expenses and other liabilities		(505,000	)		(417,000	)
Deferred revenue		(1,000,000	)		(2,417,000	)
Net cash used in operating activities		(2,638,000	)		(2,161,000	)
Cash flows from investing activities:
Purchases of property and equipment		—			(47,000	)
Capitalization of software development costs		(667,000	)		(1,562,000	)
Net cash used in investing activities		(667,000	)		(1,609,000	)
Cash flows from financing activities:
Repayment of bank term loan		(1,000,000	)		(500,000	)
Repayment of line of credit		(1,500,000	)		—
Proceeds from issuance of common stock		100,000			—
Proceeds from notes payable		4,400,000			—
Proceeds from line of credit		—			500,000
Payments of acquisition earnout liabilities		(886,000	)		—
Payments for deferred financing costs		(168,000	)		—
Repurchase of common shares to satisfy employee tax withholding		(77,000	)		(271,000	)
Net cash provided (used in) by financing activities		869,000			(271,000	)
Net decrease in cash and cash equivalents		(2,436,000	)		(4,041,000	)
Cash and cash equivalents at beginning of period		3,190,000			6,598,000
Cash and cash equivalents at end of period	$	754,000		$	2,557,000

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We make forward-looking statements in this Quarterly Report on Form 10-Q (this “Report”) and in other materials we file with the SEC or otherwise make public. This Report, therefore, contains statements about future events and expectations which are forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended (the “Securities Act”), and 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, our senior management makes forward-looking statements to analysts, investors, the media and others. Statements with respect to expected revenue, income, receivables, backlog, client attrition, acquisitions and other growth opportunities, sources of funding operations and acquisitions, the integration of our solutions, the performance of our channel partner relationships, the sufficiency of available liquidity, research and development, and other statements of our plans, beliefs or expectations are forward-looking statements. These and other statements using words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” and similar expressions also are forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement. The forward-looking statements we make are not guarantees of future performance, and we have based these statements on our assumptions and analyses in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such statements. Management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or historical earnings levels.

Among the factors that could cause actual future results to differ materially from our expectations are the risks and uncertainties described under “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024 and in our subsequent filings with the SEC, and include among others, the following:

Most of these risk factors are beyond our ability to predict or control. Any of these factors, or a combination of these factors, could materially affect our future financial condition or results of operations and the ultimate accuracy of our forward-looking statements. There also are other factors that we may not describe (generally because we currently do not perceive them to be material) that could cause actual results to differ materially from our expectations. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

On October 16, 2023, the Company announced it was executing a Strategic Restructuring designed to reduce expenses while maintaining the Company’s ability to expand its SaaS business. The Strategic Restructuring initiatives included a reduction in force, resulting in the termination of 26 employees, or approximately 24% of the Company’s workforce. To execute the Strategic Restructuring, the Company recorded $749,000 of expenses in the three months ending October 31, 2023, which consisted of approximately $731,000 in severance and other employee termination-related expenses and approximately $18,000 in incurred legal fees. As of October 31, 2024, the Company has recorded all expenses related to the Strategic Restructuring.

On September 25, 2024, the Company filed a Certificate of Amendment to the Company’s Certificate of Incorporation to effect a 1-for-15 reverse stock split pursuant to which each 15 shares of the Company’s issued and outstanding common stock immediately prior to the effective time, which was 12:01 am Eastern Daylight Time on October 4, 2024, were combined into one share of the Company’s common stock, without effecting a change to the par value per share of Common Stock (the “Reverse Stock Split”). The Company’s common stock began trading on a split-adjusted basis when the market opened on October 4, 2024.

The Reverse Stock Split did not change the Company's authorized number of shares of common stock. No fractional shares were issued in connection with the Reverse Stock Split, and stockholders who would otherwise have been entitled to receive a fractional share instead received a cash payment equal to the fraction of a share of common stock in lieu of such fractional share. Proportionate adjustments were made to the number of shares authorized under the Company’s equity incentive plans, the number of shares subject to any award or purchase right under the Company’s equity incentive plans, and the exercise price or purchase price with respect to any stock option award or purchase right under the Company’s equity incentive plans. All shares of the Company’s common stock, stock-based instruments and per-share data included in this Quarterly Report on Form 10-Q have been retrospectively adjusted as though the Reverse Stock Split had been effected prior to all periods presented.

On November 13, 2024, the Company executed the Fifth Modification to Second Amended and Restated Loan and Security Agreement. Refer to Item 1 – Subsequent Events for additional information regarding the Fifth Modification.

Software as a Service (SaaS) — Revenue from SaaS for the three and nine months ended October 31, 2024 decreased by $991,000 and $1,896,000, respectively, compared to the prior year periods. A previously announced client non-renewal contributed to a decrease of $1,156,000 and $3,053,000 for the three and nine months ended October 31, 2024, respectively. New clients on the Company’s eValuator and RevID products provided an offset to the negative impact of the client non-renewal. The Company expects relatively flat quarterly revenue through the fourth quarter of fiscal 2024 as the Company delivers on executed agreements to replenish the lost revenue related to the non-renewal of the client contract.

The Company had approximately $2.1 million of annualized contract value of SaaS contracts to be implemented as of October 31, 2024. The industry continues to be impacted by hospital personnel shortages and a backlog of hospital IT projects. The Company is seeing improvements in the contract-to-implementation timelines compared to the prior year. Despite this positive trend, the Company remains uncertain how long the broader industry challenges will continue to affect our implementation schedules.

Maintenance and support — For the three and nine months ended October 31, 2024, revenue from maintenance and support decreased by $192,000 and $676,000, respectively, compared to the prior year periods. As the Company continues to prioritize SaaS products, we anticipate maintenance and support revenue will continue to decline for the remainder of fiscal 2024 compared to fiscal 2023 due to expected contract non-renewals and limited new sales.

Professional fees and licenses — Revenues from professional fees and licenses include proprietary software, term license, professional services and audit and coding services revenue. Total professional fees and license revenues for the three and nine months ended October 31, 2024, decreased by $531,000 and $1,437,000, respectively, compared to the prior year periods. The Company has primarily shifted the business from perpetual software licenses to a SaaS model. Software license sales come solely from our channel partners; therefore, the periodic amounts are less predictable and consistent than recurring revenues.

For the three and nine months ended October 31, 2024, revenue from professional services decreased by $347,000 and $935,000, respectively, compared to the prior year periods. Professional services for a subset of the Company's solutions, are recognized as the services are performed. The Company expects professional services revenue to fluctuate based on the timing and combination of products currently being implemented. For the nine month period ending October 31, 2024, the Company saw an increase in license revenue of $61,000 compared to the same period in the prior year. The Company is primarily focused on growth of its SaaS products, and, accordingly, is not expecting growth in license revenue for the remainder of fiscal 2024.

For the three and nine months ended October 31, 2024, revenue from audit services decreased by $184,000 and $563,000, respectively, compared to the prior year periods. The decrease was driven primarily by three clients no longer requiring the Company's assistance with audit services. Increased demand for audit services from existing and new eValuator clients resulted in an increase of audit services revenue of $246,000 for the nine-month period ending October 31, 2024, compared to the prior year period. The Company believes demand for its onshore, technically proficient coders and auditors in the marketplace is strong and that it has a competitive edge in providing audit and coding services as an offering with the eValuator solution as a technology-enabled service. To support the shifting demand among clients, the Company anticipates the audit and coding services to remain relatively flat throughout the remainder of fiscal 2024.

Cost of software as a service (SaaS) – The cost of SaaS consists of expenses associated with (i) amortization of capitalized software, (ii) royalties payable to third-parties for use of their coding related content, and (iii) personnel and network infrastructure required to deploy and support applications for each client. For the three and nine months ended October 31, 2024, the cost of SaaS solutions decreased $165,000 and $803,000, compared to the prior year periods. The decrease is driven by lower infrastructure costs and lower contract and personnel costs. The amortization of capitalized software remained relatively unchanged. Certain expenses included in our cost of SaaS are tied to volumes. These expenses include coding tools supporting eValuator and a third-party system that translates data from the hospital system to the Company’s systems. The Company expects these costs of SaaS solutions to increase as revenue increases.

For the three and nine months ended October 31, 2024, the cost of SaaS solutions includes non-cash charges of $625,000 and $1,726,000, respectively, related to the amortization of capitalized software. The Company expects margins related to SaaS solutions to increase in the future from clients currently in the process of implementation. Certain costs included in cost of SaaS, such as labor and third-party content providers, negatively impact gross margin before a client is fully implemented and revenue is recognized.

Cost of maintenance and support – The cost of maintenance and support includes compensation and benefits for client support personnel required to provide product support for clients on our CDI and Abstracting software licenses. For the three and nine months ended October 31, 2024, the cost of maintenance and support decreased by $87,000 and $123,000, respectively, compared to the prior year periods.

Cost of professional fees and licenses – The cost of professional fees and licenses includes the cost of software licenses, the cost of professional services and the cost of audit and coding services. The aggregate cost of professional fees and licenses decreased by $241,000 and $644,000, respectively, for the three and nine months ended October 31, 2024, compared to the prior year periods.

The cost of professional fees includes compensation and benefits for personnel and related expenses. For the three and nine months ended October 31, 2024, professional services costs decreased by approximately $52,000 and $115,000, respectively, compared to the prior year periods. This decrease was driven by a reduction in staff resulting in lower personnel and third-party contractor costs. The costs of professional fees are expected to remain relatively flat throughout the remainder of fiscal year 2024.

The cost of audit services includes compensation and benefits for internal audit services personnel, and related expenses. The costs for the three and nine months ended October 31, 2024, decreased by approximately $203,000 and $568,000, respectively, compared to the prior year periods. The reduction of personnel and related expenses is a response to matching the shifting demand for the Company's audit services.

The cost of software licenses for the three and nine months ended October 31, 2024, increased by $14,000 and $39,000, respectively, compared to the prior year periods due to the amortization of development costs related to the Company’s coding/CDI product. The Company expects the remaining capitalized Coding and CDI software license costs to be fully amortized by the end of fiscal 2024.

General and administrative expenses comprise various costs including compensation and associated benefits, reimbursable travel and entertainment expenses related to our executive and administrative staff, general corporate expenditures, amortization of intangible assets, and occupancy costs. For the three and nine months ended October 31, 2024, the general and administrative expenses decreased by $711,000 and $2,128,000, respectively, compared to the prior year periods. The decrease was driven primarily by lower compensation and related benefits, severance and contractor expense of approximately $687,000 and $1,713,000 for the three and nine months ended October 31, 2024, respectively. The Company saw an increase in director fees and audit financial fees for the nine months ended October 31, 2024, compared to the prior year period.

Sales and marketing expenses primarily encompass compensation, associated benefits, travel and entertainment costs for our sales and marketing personnel. Additionally, sales and marketing expenses include costs from third parties related to advertising, marketing and trade show attendance. For the three and nine months ended October 31, 2024, sales and marketing expenses decreased by $531,000 and $891,000, respectively, compared to the prior year periods. This decrease is primarily related to the Strategic Restructuring and is net of any severance expense incurred in the period.

Research and development expenses consist primarily of compensation and related benefits and the use of independent contractors for specific near-term development projects. Research and development expenses for the three and nine months ended October 31, 2024, decreased by $170,000 and $741,000, respectively, compared to the prior year periods. The nine months ended October 31, 2024, includes cost savings related to outside staff augmentation and headcount related expenses. The Company continues to focus research and development activities and make certain strategic investments on eValuator and RevID, its flagship SaaS solutions.

Capitalized research and development costs for the three and nine months ended October 31, 2024, decreased by $299,000 and $918,000, respectively, compared to the prior year period.

Based on the 2023 Triggering Events and in conjunction with its preparation of its financial statements for the three and nine months ended October 31, 2023, the Company tested the reporting unit’s goodwill for possible impairment as of October 31, 2023. Refer to the Goodwill section of Note 10 — Goodwill and Intangible Assets of the unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements” for more information on the goodwill impairment testing.

The Company concluded that goodwill was impaired based on the weighted combination of the DCF and MCM value estimates which resulted in a calculated fair value lower than its carrying value. The Company recorded an impairment of goodwill in the amount of $9,813,000 for the three and nine-month periods ended October 31, 2023, with no goodwill impairments reported in the three and nine-month periods ended October 31, 2024.

Based on the 2023 Triggering Events and in conjunction with its preparation of its financial statements for the three and nine months ended October 31, 2023, the Company tested long-lived assets, including intangible assets, for recoverability that, if failed, would indicate impairment. The Company, in reviewing long-lived assets to define asset group(s), identified an abandoned asset. A separate long-lived asset for “client relationships” related to Avelead was no longer going to be used following the Company’s determination that these services were not part of its core offerings going forward. The Company adjusted the abandoned asset’s carrying value to its salvage value which would be zero given no future cash flows.

Refer to the Intangible Assets section of Note 10 — Goodwill and Intangible Assets of the unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements” for more information on the long-lived asset impairment testing.

For the three and nine-month periods ended October 31, 2023, the Company recorded $963,000 representing the impairment of the Abandoned Asset with no other long-lived impairments reported in the three and nine-month periods ended October 31, 2024.

Interest expense consists of interest associated with the term loan, notes payable, and their respective deferred financing costs, less interest related to capitalization of software. For the three and nine months ended October 31, 2024, interest expense increased by $230,000 and $676,000, respectively. The increase was primarily attributable to interest accrued on the $4,400,000 of notes payable (Refer to Note 5 – Debt).

Valuation adjustments (Refer to Note 2 – Summary of Significant Accounting Policies) are related to the liabilities associated with the Avelead acquisition and the common stock underlying the Warrants. For the nine months ended October 31, 2024, the Company recorded a valuation gain of $44,000, for the Warrants. The valuation adjustments for the nine months ended October 31, 2024, are attributable to the decrease in the value of the stock to be transferred to the holders and the corresponding effect on the Black Scholes pricing model for purposes of valuing the Warrants. There were no Warrant valuation adjustments in the three and nine months ended October 31, 2023 and, 2024, respectively. For the nine months ended October 31, 2024, the Company recorded a valuation loss of $159,000 related to the Avelead earnout liability, with no adjustment recorded in the three months ended October 31, 2024. For the three and nine months ended October 31, 2023, the Company recorded valuation gains of $1,182,000 and 1,905,000, respectively, related to the Avelead earnout liability.

There was no miscellaneous income for the three and nine months ended October 31, 2024. Miscellaneous income for the nine months ended October 31, 2023, is primarily from the sublease of the Alpharetta location (Refer to Note 4 – Operating Leases of the unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements”).

We recorded an income tax expense of $0 and income tax benefit of $59,000 for the nine months ended October 31, 2024 and 2023, respectively, which is comprised of estimated federal, state and local income tax provisions. The Company has a substantial amount of net operating losses for federal and state income tax purposes. The effective income tax rate on continuing operations of approximately 0% differs from our combined federal and state statutory rate of 24% primarily due to the full valuation allowance the Company currently maintains on its net deferred tax asset.

In order to provide investors with greater insight and allow for a more comprehensive understanding of the information used by management and the Board in its financial and operational decision-making, the Company has supplemented the condensed consolidated financial statements presented on a GAAP basis in this Report with the following non-GAAP financial measures: EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin.

These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of Company results as reported under GAAP. The Company compensates for such limitations by relying primarily on our GAAP results and using non-GAAP financial measures only as supplemental data. We also provide a reconciliation of non-GAAP to GAAP measures used. Investors are encouraged to carefully review this reconciliation. In addition, because these non-GAAP measures are not measures of financial performance under GAAP and are susceptible to varying calculations, these measures, as defined by us, may differ from and may not be comparable to similarly titled measures used by other companies.

We define: (i) EBITDA as net earnings (loss) before net interest expense, income tax expense (benefit), depreciation and amortization; (ii) Adjusted EBITDA as net earnings (loss) before net interest expense, income tax expense (benefit), depreciation, amortization, share-based compensation expense, valuation adjustments, restructuring charges, transaction related expenses and other expenses that do not relate to our core operations such as severances and impairment charges; and (iii) Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of GAAP net revenue. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are used to facilitate a comparison of our operating performance on a consistent basis from period to period and provide for a supplemental understanding of factors and trends affecting our business than GAAP measures alone. These measures assist management and the Board, and may be useful to investors in comparing our operating performance consistently over time as they remove the impact of our capital structure (primarily interest charges), asset base (primarily depreciation and amortization), items outside the control of the management team (taxes) and expenses that do not relate to our core operations including: transaction-related expenses (such as professional and advisory services), corporate restructuring expenses (such as severances) and other operating costs that are expected to be non-recurring. Adjusted EBITDA removes the impact of share-based compensation expense, which is another non-cash item.

The Board and management also use these measures (i) as one of the primary methods for planning and forecasting overall expectations and for evaluating, on at least a quarterly and annual basis, actual results against such expectations; and (ii) as a performance evaluation metric in determining achievement of certain executive and associate incentive compensation programs.

Our lender uses a measurement that is similar to the Adjusted EBITDA measurement described herein to assess our operating performance. The lender under our Second Amended and Restated Loan Agreement requires delivery of compliance reports certifying compliance with financial covenants, certain of which are based on a measurement that is similar to the Adjusted EBITDA measurement reviewed by our management and Board.

EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin are not measures of liquidity under GAAP or otherwise and are not alternatives to cash flow from continuing operating activities, despite the supplemental information provided by these measures regarding the use and analysis of these measures as mentioned above. EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin, as disclosed in this Report have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP; nor are these measures intended to be measures of liquidity or free cash flow for our discretionary use. Some of the limitations of EBITDA and its variations are:

Adjusted EBITDA has all the inherent limitations of EBITDA. To properly and prudently evaluate our business, the Company encourages readers to review the GAAP financial statements included elsewhere in this Report, and not rely on any single financial measure to evaluate our business. We also strongly urge readers to review the reconciliation of these non-GAAP financial measures to the most comparable GAAP measure in this section, along with the condensed consolidated financial statements included above.

The following table reconciles EBITDA and Adjusted EBITDA to net loss for the three and nine months ended October 31, 2024 and 2023 (amounts in thousands). All of the items included in the reconciliation from EBITDA and Adjusted EBITDA to net loss are either recurring non-cash items, or items that management does not consider in assessing our on-going operating performance. In the case of the non-cash items, management believes that investors may find it useful to assess the Company’s comparative operating performance because the measures without such items are less susceptible to variances in actual performance resulting from depreciation, amortization and other expenses that do not relate to our core operations and are more reflective of other factors that affect operating performance. In the case of items that do not relate to our core operations, management believes that investors may find it useful to assess our operating performance if the measures are presented without these items because their financial impact does not reflect ongoing operating performance.

The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Management considers an accounting policy to be critical if the accounting policy requires management to make particularly difficult, subjective, or complex judgments about matters that are inherently uncertain. A summary of our critical accounting policies is included in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024. There have been no material changes to the critical accounting policies disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024.

The Company completed its annual goodwill assessment for fiscal year 2024 and 2023 as of October 31, 2024, and October 31, 2023, respectively. The Company used a weighted sum of income and market approaches to determine the fair value of the Company’s goodwill. Under the income approach, the fair value was based on the present value of the estimated debt-free, discounted cash flows that the reporting unit is expected to generate. Cash flow projections were based on management’s estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate was based on the weighted average cost of capital appropriate for the Company.

During the quarter ended October 31, 2024, the Company's market capitalization fell below the Company's carrying value of equity for a prolonged period of time. Based on the 2024 Triggering Event, the Company identified indicators of possible impairment and initiated testing using a valuation date of October 31, 2024. The impairment test was conducted under guidance of ASC 360 for certain long-lived assets, including capitalized contract costs, developed technology, client relationships and trade names, and in accordance with ASC 350 with respect to the reporting unit’s goodwill. The results of the impairment test showed the fair value of the reporting unit was approximately 20% higher than the equity carrying value, resulting in no goodwill impairment.

In the third quarter of fiscal 2023, the Company received notice from a significant SaaS client of its intent not to renew its contract following the expiration of the then-current term on December 31, 2023. The Company also announced the acceleration of the Strategic Restructuring to reduce costs while maintaining the Company’s ability to expand its SaaS business. Following these announcements, the Company's share price declined significantly. Based on the 2023 Triggering Events, the Company identified indicators of possible impairment and initiated testing using a valuation date of October 31, 2023. The impairment test was conducted under guidance of ASC 360 for certain long-lived assets, including capitalized contract costs, developed technology, client relationships and trade names, and in accordance with ASC 350. The results of the impairment test showed the fair value of the reporting unit was lower than the carrying value, resulting in a $9.8 million goodwill impairment charge. As of January 31, 2024, no further impairment was required for goodwill. The remaining goodwill balance of the Company after recording the goodwill impairment charge is $13.3 million.

During the third quarter of fiscal 2023, the Company also assessed whether the carrying amounts of the Company’s long-lived assets may not be recoverable and, therefore, impaired. The Company's assessment resulted in an impairment charge of $1.0 million, primarily attributable to client relationships related to a subset of consulting related services the Company expects will not be a core part of its business going forward. The impairment charge was calculated using the asset’s salvage value as it was considered no longer held for use.

The fair value of the Company's reporting unit and intangible assets is subjective in nature and involves the use of significant estimates and assumptions, particularly related to future operating results and cash flows. These estimates and assumptions include, but are not limited to, revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, and future economic and market conditions. If the Company does not achieve its forecasts or the Company’s share price declines further, it is possible the goodwill of the Company could be deemed to be impaired in a future period.

The risks and potential impacts on the fair value of the Company's goodwill and long-lived assets are included in the risk factor disclosures referenced under “Item 1A. Risk Factors”.

The Company’s liquidity is dependent upon numerous factors including: (i) the timing and amount of revenue and collection of contractual amounts from customers, (ii) amounts invested in research and development and capital expenditures, and (iii) the level of operating expenses, all of which can vary significantly from quarter to quarter. The Company’s primary cash requirements include regular payment of payroll and other business expenses, principal and interest payments on debt and capital expenditures, which generally include computer hardware. Operations are funded with cash generated by operations and borrowings under credit facilities. Information concerning the Company’s assessment as a going concern is included in Note 1 – Basis of Presentation in our unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements.” Cash and cash equivalent balances at October 31, 2024 and January 31, 2024, were approximately $754,000 and $3,190,000, respectively.

The Company has liquidity through its Second Amended and Restated Loan Agreement (as amended and modified, the "Second Amended and Restated Loan Agreement") described in more detail in Note 5 – Debt in our unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements." Under the Second Amended and Restated Loan Agreement, the Company has a term loan facility with an initial, maximum, principal amount of $10,000,000. Amounts outstanding under the Second Amended and Restated Loan Agreement bear interest at a per annum rate equal to the Prime Rate (as published in The Wall Street Journal) plus 1.5%, with a Prime “floor” rate of 3.25%. The Company executed a Second Modification to Second Amended and Restated Loan Agreement (the “Second Modification”) on November 29, 2022, which amended the covenants under the Second Amended and Restated Loan Agreement expanded the Company’s total borrowing to include a $2,000,000 non-formula revolving line of credit. The revolving line of credit will be co-terminus with the term loan and matures on August 26, 2026. The Company executed the Third Modification and Fourth Modification on February 7, 2024 and April 5, 2024, respectively (collectively, the “Third and Fourth Modifications”). The Third Modification and Fourth Modification reestablished certain customary financial covenants for the Second Amended and Restated Loan Agreement. Refer to Note 5 – Debt for information regarding the Second Amended and Restated Loan Agreement, Second Modification, Third Modification and Fourth Modification.

The Second Amended and Restated Loan Agreement includes customary financial covenants, including the requirements that the Company achieve certain EBITDA levels and ratios, ARR net leverage ratios, and fixed charge coverage ratios. The Second Amended and Restated Loan 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 a cross default provision with the Second Amended and Restated Loan Agreement and a change of control default provision. For the period ended October 31, 2024, the Company was not in compliance with the covenants under the Second Amended and Restated Loan and Security Agreement. Subsequent to the period ended October 31, 2024, the Company entered into the Fifth Modification whereby certain covenants were modified. As a result, the Company was in compliance with all modified debt covenants. However, the Company's current forecast projects the Company may not be able to maintain compliance with certain of its financial covenants under the Second Amended and Restated Loan Agreement in the future. We have been dependent on sales of our equity securities and debt financing to meet our ongoing cash requirements. There can be no assurances that we would be able to obtain debt or equity financing when needed, on terms acceptable to the Company, or at all, and our failure to raise additional capital in amounts and on terms sufficient to fund our operations could limit our ability to continue operations. Refer to Note 1 – Basis of Presentation for detail regarding the Company’s assessment as a going concern.

On November 13, 2024, the Company executed the Fifth Modification to Second Amended and Restated Loan and Security Agreement. Refer to Note 11 – Subsequent Events for additional information regarding the Fifth Modification.

The net cash used in operating activities increased during the nine months ended October 31, 2024, compared to the prior year comparable period. The timing of invoices and collections offset by the recognition of deferred revenues in the nine months ended October 31, 2024 contributed to the increase in cash used in operating activities.

The cash used in investing activities for the nine months ended October 31, 2024 and October 31, 2023, includes capitalized software development costs. The Company expects continued capitalizable projects associated with the Company’s flagship products, and we expect it to remain constant at this rate.

The cash used in financing activities for the nine months ended October 31, 2024 and October 31, 2023, includes principal payments on the term loan related to the Second Amended and Restated Loan Agreement, repayment on the line of credit, payments of acquisition earnout liabilities, and the repurchase of common shares to satisfy employee tax withholding. The cash provided by financing activities for the nine months ended October 31, 2024, includes proceeds received in connection with the issuance of the Notes in the Debt Private Placement, which closed in February 2024.

As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, we are not required to provide this information.

Our President and Chief Executive Officer (who serves as our principal executive officer) and our Chief Financial Officer (who serves as our principal financial officer) have evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(c)) as of October 31, 2024. Based on that evaluation, our President and Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of October 31, 2024, due to the material weaknesses described below.

While the Company has improved its organizational capabilities, the Company’s remediation efforts are ongoing. Management is committed to maintaining a strong internal control environment. In response to the identified material weaknesses in the overall control environment, management is currently implementing additional measures which include:

The Company will consider the material weaknesses remediated after the applicable controls operate for a sufficient period of time and are tested. We can provide no assurance that our remediation efforts described herein will be successful and that we will not have material weaknesses in the future. However, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

Except for the material weaknesses described above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended October 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are, from time to time, a party to various legal proceedings and claims, which arise in the ordinary course of business. We are not aware of any legal matters that could have a material adverse effect on our consolidated results of operations, financial position, or cash flows.

An investment in our common stock or other securities involves a number of risks. You should carefully consider each of the risks described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024 which Annual Report includes a detailed discussion of the Company’s risk factors. If any of the risks develop into actual events, our business, financial condition, or results of operations could be negatively affected, the market price of our common stock or other securities could decline, and you may lose all or part of your investment.

Except as described below, there have been no material changes to the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 31, 2024.

We may not be able to generate sufficient cash flows or raise additional debt and equity capital to fund our ongoing operations. We will need to raise additional funding, which may not be available on acceptable terms, if at all. If we are unable to raise additional capital in amounts and on terms sufficient to fund our ongoing operations, our lack of additional capital and results of operations could limit our ability to continue operations.

Our ability to continue as a going concern is dependent upon generating sufficient cash flow from operations and obtaining additional debt and equity financing. If our ability to generate cash flow from operations is curtailed or delayed, our financial condition and results of operations could be materially impacted. We have been dependent on sales of our equity securities and debt financing to meet our ongoing cash requirements. There can be no assurances that we would be able to obtain debt or equity financing when needed, on terms acceptable to the Company, or at all, and our failure to raise additional capital in amounts and on terms sufficient to fund our operations could limit our ability to continue operations.

If we do not meet the continued listing standards of The Nasdaq Capital Market, our common stock could be delisted from trading, which could limit investors’ ability to make transactions in our common stock and subject us to additional trading restrictions.

Our common stock is currently listed on The Nasdaq Capital Market which imposes continued listing requirements with respect to listed shares. On October 24, 2023, we received a letter from the Listing Qualifications Department (the “Staff”) of Nasdaq, indicating that our common stock was subject to potential delisting from The Nasdaq Capital Market because, for a period of thirty (30) consecutive business days, the bid price of our common stock had closed below the minimum $1.00 per share requirement for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was initially provided 180 calendar days, or until April 22, 2024, to regain compliance with the Minimum Bid Price Requirement.

On April 23, 2024, the Company received a letter from the Staff informing the Company that, while the Company has not regained compliance with the Bid Price Requirement, the Staff has determined that the Company is eligible for an additional 180 calendar day period, or until October 21, 2024 (the “Second Compliance Period”), to regain compliance.

In order to regain compliance with the Bid Price Requirement, the Company implemented a 1-for-15 reverse stock split pursuant to which each 15 shares of the Company’s issued and outstanding common stock immediately prior to the effective time, which was 12:01 am Eastern Daylight Time on October 4, 2024, were combined into one share of the Company’s common stock (the “Reverse Stock Split”). The Company’s common stock began trading on a split-adjusted basis when the market opened on October 4, 2024. On October 18, 2024, the Company received a letter from the Staff information the Company that the Company had regained compliance with the Bid Price Requirements.

There can be no assurance that the market price of our common stock will be maintained for any period of time.

In the event that our common stock is delisted from The Nasdaq Capital Market and is not eligible for quotation or listing on another market or exchange, trading of our common stock could be conducted only in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it could become more difficult to dispose of, or obtain accurate price quotations for, our common stock, and there would likely also be a reduction in our coverage by securities analysts and the news media, which could cause the price of our common stock to decline further. Also, it may be difficult for us to raise additional capital if we are not listed on a major exchange.

Such a delisting would also likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we may take actions to restore our compliance with The Nasdaq Capital Market listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Bid Price Requirement or prevent future non-compliance with The Nasdaq Capital Market listing requirements.

The following table sets forth information with respect to our repurchases of common stock during the three months ended October 31, 2024:

Our SEC file number reference for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 000-28132.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Page
Part I.	FINANCIAL INFORMATION	3
Item 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	3
	Condensed Consolidated Balance Sheets at October 31, 2024 (unaudited) and January 31, 2024	3
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended October 31, 2024 and 2023	5
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended October 31, 2024 and 2023	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended October 31, 2024 and 2023	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46
Part II.	OTHER INFORMATION	47
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50
	Signatures	51

	Nine-months ended
	October 31, 2024
Beginning balance	$	1,794,000
Settlement – common stock		(690,000	)
Settlement – cash		(447,000	)
Realized loss		159,000
Transfer out		(817,000	)
Ending balance	$	—

		January 31, 2023				CECL Adoption				Provision adjustments				Write-offs & Recoveries				October 31, 2023
Allowance for credit losses		$	132,000			$	(36,000	)		$	—			$	—			$	96,000

	*October 31, 2024*			*January 31, 2024*
Term loan	$	8,000,000		$	9,000,000
Financing cost payable		177,000			135,000
Less: Deferred financing cost		(44,000	)		(69,000	)
Total		8,133,000			9,066,000
Less: Current portion of term loan		(2,250,000	)		(1,500,000	)
Non-current portion of term loan	$	5,883,000		$	7,566,000

	Minimum
Quarter Ending	Adjusted EBITDA
January 31, 2024	$	(5,750,000	)
April 30, 2024		(4,560,000	)
July 31, 2024		(2,960,000	)
October 31, 2024		(1,500,000	)
January 31, 2025		430,000

	Three Months Ended				Nine Months Ended
	October 31, 2024		October 31, 2023		October 31, 2024		October 31, 2023
Over time revenue	$	4,419,000	$	6,133,000	$	13,091,000	$	17,161,000
Point in time revenue		—		—		135,000		74,000
Total revenue	$	4,419,000	$	6,133,000	$	13,226,000	$	17,235,000

		*January 31, 2024*				*CECL Adoption*				*Provision adjustments*				*Write-offs & Recoveries*				*October 31, 2024*
Allowance for credit losses		$	86,000			$	—				(58,000	)			31,000			$	59,000

	*Three Months Ended*						*Nine Months Ended*
	*October 31, 2024*			*October 31, 2023*			*October 31, 2024*			*October 31, 2023*
Basic and diluted loss per share:
Net loss	$	(2,476,000	)	$	(11,911,000	)	$	(8,018,000	)	$	(17,327,000	)
Basic and diluted net loss per share of common stock	$	(0.61	)	$	(3.15	)	$	(2.01	)	$	(4.61	)
Weighted average shares outstanding – basic and diluted (1)(2)		4,055,268			3,780,689			3,981,406			3,756,420

(1)	Includes the effect of vested and excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of October 31, 2024 and 2023, there were 220,327 and 132,013 unvested restricted shares of common stock outstanding, respectively.

(2)	Diluted net loss per share excludes the effect of shares that are anti-dilutive. For the three and nine months ended October 31, 2024, diluted earnings per share excludes 4,396 outstanding stock options, 220,327 unvested restricted shares of common stock, and 237,027 shares of common stock issuable through the exercise of warrants. For the three and nine months ended October 31, 2023, diluted earnings per share excludes 27,919 outstanding stock options and 132,013 unvested restricted shares of common stock.

	(in thousands)
										*As of October 31, 2024*
	*Accrued Balance as of*		*2024*		*2024*			*Accrued Balance as of*		*Total Costs*		*Total*
	*January 31, 2024*		*Expenses to Date*		*Cash Payments*			*October 31, 2024*		*Incurred to Date*		*Expected Costs*
Severance expense
Cost of sales	$	—	$	—	$	—		$	—	$	154	$	154
Selling, general, and administrative		74		—		(74	)		—		350		350
Research and development		—		—		—			—		227		227
Total severance expense	$	74	$	—	$	(74	)	$	—	$	731	$	731
Professional fees		—		—		—			—		28		28
Total	$	74	$	—	$	(74	)	$	—	$	759	$	759

	(in thousands)

	Accrued Balance as of		2023		2023		Accrued Balance as of
	January 31, 2023		Expenses to Date		Cash Payments		October 31, 2023
Severance expense
Cost of sales	$	—	$	154	$	—	$	154
Selling, general, and administrative		—		350		—		350
Research and development		—		227		—		227
Total severance expense	$	—	$	731	$	—	$	731
Professional fees		—		18		—		18
Total	$	—	$	749	$	—	$	749

	October 31, 2024			January 31, 2024
Notes payable and accrued interest	$	4,907,000		$	—
Less: Discount on notes payable		(642,000	)		—
Less: Deferred financing costs		(136,000	)		—
Total		4,129,000			—
Less: Current portion of notes payable		—			—
Non-current portion of notes payable	$	4,129,000		$	—

	*Maximum*
	*ARR Net Leverage*
Quarter Ending	*Ratio*
April 30, 2024		0.50 to 1.00
July 31, 2024		0.45 to 1.00
October 31, 2024		0.40 to 1.00
January 31, 2025		0.35 to 1.00

	*Maximum*
	*Debt to Adjusted*
	*EBITDA*
Quarter Ending	*Ratio*
April 30, 2025		3.50 to 1.00
July 31, 2025		3.00 to 1.00
October 31, 2025		2.50 to 1.00
January 31, 2026 and on the last day of each quarter thereafter		2.00 to 1.00

Name of Investor	Investment Amount		Warrants Granted
121G, LLC (1)	$	1,000,000		59,829
Matthew W. Etheridge (2)		1,000,000		61,403
Jonathan R. Phillips (3)		50,000		2,991
The Ferayorni Family Trust (4)		500,000		29,914


	●	fluctuations in operating results;

	Nine Months Ended
	October 31, 2023
Balance as of January 31, 2023	$	23,089,000
Impairment		(9,813,000	)
Balance as of October 31, 2023	$	13,276,000

	Maximum
	ARR Net Leverage
Month Ending	Ratio
September 30, 2024		0.68 to 1.00
October 31, 2024		0.66 to 1.00
November 30, 2024		0.64 to 1.00
December 31, 2024		0.60 to 1.00
January 31, 2025		0.35 to 1.00
April 30, 2025		0.35 to 1.00

	●	competitive products and pricing;

	●	product demand and market acceptance;

	●	entry into new markets;

	●	new product and services development and commercialization;

	●	key strategic alliances with vendors and channel partners that resell our products;

	●	uncertainty in continued relationships with customers due to termination rights;

	●	our ability to control costs;

	●	availability, quality and security of products produced, and services provided by third-party vendors;

	●	the healthcare regulatory environment;

	●	potential changes in legislation, regulation and government funding affecting the healthcare industry;

	●	healthcare information systems budgets;

	●	availability of healthcare information systems trained personnel for implementation of new systems, as well as maintenance of legacy systems;

	●	the success of our relationships with channel partners;


	●	our ability to continue as a going concern;

	●	our future cash needs and, if and when required, our ability to obtain additional debt and/or equity financing on terms acceptable to us;

	●	the consummation of resources in researching acquisitions, business opportunities or financings and capital market transactions;

	●	the failure to adequately integrate past and future acquisitions into our business;

	●	critical accounting policies and judgments;

	●	changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other standard-setting organizations;

	●	changes in economic, business and market conditions impacting the healthcare industry and the markets in which we operate;

	●	impairment of our goodwill and other intangible assets;

	●	the extent to which health epidemics and other outbreaks of communicable diseases could disrupt our operations and/or materially and adversely affect our business and financial conditions;

	●	our ability to maintain compliance with the terms of our credit facilities; and

	●	our ability to maintain compliance with the continued listing standards of the Nasdaq Capital Market (“Nasdaq”).

	Three Months Ended
($ in thousands):	October 31, 2024		October 31, 2023		Change			% Change

Software as a service	$	2,933	$	3,924	$	(991	)		(25	)%
Maintenance and support	$	878		1,070		(192	)		(18	)%
Professional fees and licenses	$	608		1,139		(531	)		(47	)%
Total Revenues	$	4,419	$	6,133	$	(1,714	)		(28	)%

	Three Months Ended
(in thousands):	October 31, 2024		October 31, 2023		Change			% Change
Cost of software as a service	$	1,512	$	1,677	$	(165	)		(10	)%
Cost of maintenance and support		42		129		(87	)		(67	)%
Cost of professional fees and licenses		831		1,072		(241	)		(22	)%
Total cost of sales	$	2,385	$	2,878	$	(493	)		(17	)%

	●	EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

	●	EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

	●	EBITDA does not reflect the interest expense, or the cash requirements to service interest or principal payments under our Second Amended and Restated Loan Agreement;

	●	EBITDA does not reflect income tax payments that we may be required to make; and

	●	Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements.

	Three Months Ended						Nine Months Ended
In thousands, except per share data	October 31, 2024			October 31, 2023			October 31, 2024			October 31, 2023
Adjusted EBITDA Reconciliation
Net Loss	$	(2,476	)	$	(11,911	)	$	(8,018	)	$	(17,327	)
Interest expense		496			266			1,457			781
Income tax expense (benefit)		—			(120	)		—			(59	)
Depreciation and amortization		1,187			1,105			3,260			3,186
EBITDA	$	(793	)	$	(10,660	)	$	(3,301	)	$	(13,419	)
Share-based compensation expense		451			517			1,483			1,626
Impairment of goodwill		—			9,813			—			9,813
Impairment of long-lived assets		—			963			—			963
Non-cash valuation adjustments		—			(1,182	)		115			(1,905	)
Acquisition-related costs, severance, and transaction-related bonuses		16			213			372			389
Restructuring charges		—			749			—			749
Other non-recurring charges		—			—			—			(33	)
Adjusted EBITDA	$	(326	)	$	413		$	(1,331	)	$	(1,817	)
Adjusted EBITDA margin (1)		(7	)%		7	%		(10	)%		(11	)%

(in thousands)	October 31, 2024		January 31, 2024
Term loan (1)	$	8,133	$	9,066
Notes payable (2)		4,129		—
Acquisition earnout liability (3)		377		1,794
Line of credit (4)		—		1,500

(1)	Term loan balance is reported net of deferred financing costs of $44,000 and $69,000 as of October 31, 2024 and January 31, 2024, respectively, and financing cost payable of $178,000 and $135,000 as of October 31, 2024 and January 31, 2024, respectively. Refer to Note 5 – Debt for additional information. The term loan payable as of October 31, 2024 and January 31, 2024 was bank term debt under the Second Amended and Restated Loan Agreement.

(2)	Refer to Note 5 – Debt for additional information. The cash obligation is net of discounts on notes payable of $642,000 and deferred financing costs of $136,000.

(3)	The fair value of the acquisition earnout liability is based upon a probability-weighted discounted cash flow as of January 31, 2024. As of October 31, 2024, the acquisition earnout liability reflects the remaining cash balance. Refer to Note 3 – Business Combination for additional information.

(4)	Refer to Note 5 – Debt for additional information. The outstanding balance on the line of credit was paid in full as of October 31, 2024.

Exhibit No.		Description of Exhibit
3.1		Certificate of Incorporation of Streamline Health Solutions, Inc. f/k/a LanVision Systems, Inc., as amended through August 19, 2014 (Incorporated by reference from Exhibit 3.1 of the Quarterly Report on Form 10-Q, filed September 15, 2014).
3.2		Certificate of Amendment of Certificate of Incorporation of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 3.1 of the Current Report on Form 8-K, filed May 24, 2021).
3.3		Certificate of Amendment of Certificate of Incorporation of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 3.1 of the Current Report on Form 8-K, filed June 8, 2022).
3.4		Certificate of Amendment of Certificate of Incorporation of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 3.1 of the Current Report on Form 8-K, filed September 26, 2024).
3.5		Bylaws of Streamline Health Solutions, Inc., as amended and restated through March 28, 2014 (Incorporated by reference from Exhibit 3.1 of the Current Report on Form 8-K, filed April 3, 2014).
10.1		Fifth Modification to Second Amended and Restated Loan and Security Agreement, dated November 13, 2024, by and between Streamline Health Solutions, Inc. and certain of its subsidiaries party thereto, and Western Alliance Bank (Incorporated by reference from Exhibit 10.1 of the Current Report on Form 8-K, filed November 15, 2024).
31.1*		Certification by President and Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act.
31.2*		Certification by Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act.
32.1*		Certification by President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2*		Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS*		INLINE XBRL INSTANCE DOCUMENT
101.SCH*		INLINE XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
101.CAL*		INLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF*		INLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB*		INLINE XBRL TAXONOMY EXTENSION LABELS LINKBASE
101.PRE*		INLINE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
104*		COVER PAGE INTERACTIVE DATA FILE (FORMATTED AS INLINE XBRL AND CONTAINED IN EXHIBIT 101)

	STREAMLINE HEALTH SOLUTIONS, INC.

DATE: December 20, 2024	By:	/s/ Benjamin L. Stilwill
		Benjamin L. Stilwill President and Chief Executive Officer

DATE: December 20, 2024	By:	/s/ Bryant J. Reeves III
		Bryant J. Reeves III
		Chief Financial Officer

1.	I have reviewed this quarterly report on Form 10-Q of Streamline Health Solutions, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 20, 2024	/s/ Benjamin L. Stilwill
	President and Chief Executive Officer

Date: December 20, 2024	/s/ Bryant J. Reeves III
	Chief Financial Officer

	(1)	The quarterly report on Form 10-Q of the Company for the quarter ended October 31, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition, and results of operations of the Company.

/s/ Benjamin L. Stilwill
Benjamin L. Stilwill
President and Chief Executive Officer

December 20, 2024