10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended January 31, 2022

OR

☐ 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	(I.R.S. Employer
incorporation or organization)	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	Name of each exchange on which registered
Common Stock, $0.01 par value per share	STRM	Nasdaq Capital Market

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 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. (Check one):

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, computed using the closing price as reported by The NASDAQ Stock Market, Inc. for the Registrant’s Common Stock on July 31, 2021, the last business day of the Registrant’s most recently completed second fiscal quarter, was $47,822,381.

The number of shares outstanding of the Registrant’s Common Stock, $.01 par value per share, as of April 18, 2022 was 48,104,880.

Documents incorporated by reference:

Information required by Part III is incorporated by reference from the Registrant’s Proxy Statement for its 2022 annual meeting of stockholders or an amendment to this Annual Report on Form 10-K, which will be filed with the Securities and Exchange Commission within 120 days after the end of its fiscal year ended January 31, 2022.

FORWARD-LOOKING STATEMENTS

We make forward-looking statements in this Annual Report on Form 10-K (the “Report”) and in other materials we file with the Securities and Exchange Commission (“SEC”) or otherwise make public. These statements about future events and expectations are “forward-looking” within the meaning of Sections 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In this Report, both Part I, Item 1, “Business,” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contain forward-looking statements. 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, customer 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 in Part I, Item 1A, “Risk Factors” herein, and the other cautionary statements in other documents we file with the SEC, including the following:

● competitive products and pricing;

● product demand and market acceptance;

● entry into new markets;

● the extent to which health epidemics and other outbreaks of communicable diseases, including the ongoing coronavirus, or COVID-19, pandemic and the efforts to mitigate it, could disrupt our operations and/or materially and adversely affect our business and financial conditions;

● the possibility that any of the anticipated benefits of the acquisition of Avelead Consulting, LLC (“Avelead”) will not be realized or will not be realized within the expected time period, the businesses of the Company and the Avelead segment may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, or revenues following the Avelead acquisition may be lower than expected;

● 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;

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● fluctuations in operating results;

● our future cash needs;

● 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;

● 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”).

Some of these factors and risks have been, and may further be, exacerbated by the COVID-19, pandemic.

Most of these 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.

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PART I

Item 1. Business

Company Overview

Incorporated in 1989, Streamline Health Solutions, Inc. is a provider of solutions and services in the middle of the revenue cycle for healthcare providers throughout the United States and Canada. Streamline Health’s technology helps hospitals improve their financial performance by moving later revenue cycle interventions earlier in the process to optimize their coding accuracy for every patient encounter prior to bill submission. By improving coding accuracy before billing, providers can reduce revenue leakage, mitigate the risk of overbilling, and reduce days in accounts receivable. This enables providers to achieve more predictable revenue streams using technology rather than manual intervention.

The Company provides computer software-based solutions, professional consulting and auditing and coding services, which capture, aggregate, and translate structured and unstructured data to deliver intelligently organized, easily accessible predictive insights to its customers. Hospitals and physician groups use the knowledge generated by Streamline Health to help them improve their financial performance.

The Company’s software solutions are delivered to customers either by access to the Company’s data center systems through a secure connection in a software as a service (“SaaS”) delivery method or by a fixed-term or perpetual license, where such software is installed locally in the customer’s data center.

The Company operates exclusively in one segment as a provider of health information technology solutions and associated services that improve healthcare processes and information flows within a healthcare facility. The Company sells its solutions and services in North America to hospitals and health systems through its direct sales force and its reseller partnerships.

As part of the Company’s strategic expansion into the revenue cycle management, acute-care healthcare space, the Company acquired all of the equity interests of Avelead Consulting, LLC on August 16, 2021 on a cash- and debt-free basis.

Unless the context requires otherwise, references to “Streamline Health,” the “Company,” “we,” “us” and “our” in this Report are intended to mean Streamline Health Solutions, Inc. and its wholly-owned subsidiaries. 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.

Solutions

The Company offers solutions and services to assist its customers in revenue cycle management including its two flagship technologies eValuator^TM and Avelead Rev ID™. eValuator provides 100% automated coding analysis prior to billing. Rev ID offers reconciliation of clinical activity to patient billing records prior to billing. In addition, the Company offers an array of professional services, including system implementation and coding audit solutions and other software solutions such as Coding and Clinical Documentation Improvement (CDI), Avelead Compare and Financial Management. The Company’s solutions and services are designed to improve the flow of critical patient information throughout the enterprise. The solutions and services help to transform and structure information between disparate information technology systems into actionable data, giving the end user comprehensive access to clinical and business intelligence to enhance billing accuracy and decision-making. Solutions can be accessed securely through SaaS or delivered either by a perpetual license or by a fixed-term license installed locally.

eValuator Coding Analysis Platform - This technology is a cloud-based SaaS analytics solution that delivers the capability of fully automated analysis on 100% of billing codes entered by a healthcare provider’s coding team. This is done on a pre-bill basis, enabling providers to identify and address their highest-impact cases prior to bill drop. Rule sets are enabled for inpatient, outpatient and pro-fee cases. With eValuator, providers can add an audit function on a pre-bill basis to all cases, allowing the provider to better optimize reimbursements and mitigate risk on its billing practices.

Avelead RevID Automated Revenue Reconciliation – RevID is a cloud-based SaaS automated charge reconciliation tool. RevID identifies discrepancies between a provider’s clinical and billing departments and ensures that every medical service is tracked, accounted for, and ultimately accurately billed thereby reducing revenue leakage. RevID functions on a pre-bill basis, allowing providers to catch mistakes and discrepancies prior to bill-drop.

Avelead Data Comparison Engine (“DCE”, “Avelead Compare”) – Avelead Compare is a cloud-based SaaS system synchronization module that compares different software hospitals use within their daily operations. Avelead Compare operates continuously and automates the comparison of multiple software systems to identify any discrepancies or errors occurring across all systems on a daily basis. Additionally, the Avelead Compare module can be utilized as a maintenance check when a hospital adds additional content or hires new physicians. It can also be utilized when a hospital converts to a new system within the hospital enabling transparent, continuous, up-to-date notifications as to what has been built and what needs to be built.

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Coding & CDI Solutions - These solutions provide an integrated cloud-based software suite that enhances the productivity of CDI and Coding staff and enables the seamless sharing of patient data. This suite of solutions includes workflows such as CDI, Abstracting and Physician Query.

Financial Management Solutions - These solutions enable financial staff across the healthcare enterprise to drill down quickly and deeply into actionable and real-time financial data and key performance indicators to improve revenue realization and staff efficiency. This suite of solutions includes individual workflows such as accounts receivable management, denials management, claims processing, spend management and audit management.

Patient Care Solution – Outside the Company’s primary focus of solutions in the middle of the revenue cycle for healthcare providers, the Company’s Clinical Analytics solution enables customers to improve their patient care via cohort building and data visualization, fostering an open, continuous learning culture inside a healthcare organization. Providers using Clinical Analytics are empowered with real-time, on-demand predicative insight for improved patient outcomes. The last customer on this product did not renew in June 2020, and accordingly, the Company has no revenue or cost associated with Patient Care Solutions since that date.

Services

Audit and Coding Services — The Company provides technology-enabled audit and coding services to help customers review and optimize their internal clinical documentation and coding functions across the applicable segment of the customer’s enterprise. The Company provides these services using experienced auditors and its eValuator proprietary software to improve the targeting of records with the highest likelihood of requiring an audit. The audit services are provided for inpatient DRG coding auditing, outpatient APC auditing, HCC auditing and Physician/Pro-Fee services coding and auditing.

Software Services – Software services relates to implementation of our core software modules, including data collection, configuration of the software based on the customers’ needs, training and support. Support services include non-specified upgrades to the software.

Professional Services – The Company’s professional services are typically associated with hospital revenue cycle assistance and include troubleshooting, staff augmentation and “adhoc” services. Services may include, but are not limited to, review of workflow processes, development and optimization of new workflows, optimization of interfaces, performance of audits and reconciliations, interim resources and project management of system implementations or conversions

Cerner Command Language (CCL) Reporting – CCL writers provide reports that offer visibility into the revenue cycle from patient access through collections. CCL is a programming language that is designed to streamline the query process in Cerner databases utilized by healthcare systems. CCL reports provide data necessary for compliance and efficiency.

Custom Integration Services for CDI/Abstracting — The Company’s professional services team works with customers to design custom integrations that integrate data to or from virtually any clinical, financial, or administrative system. By taking data and documents from multiple, disparate systems and bringing them into one system, customers are able to maximize efficiencies and increase operational performance. The Company’s professional services team also creates custom integrations that transfer data from the Company’s solutions into the customer’s external or internal systems.

Discontinued Operations

Enterprise Content Management (“ECM Assets”) – This legacy technology product has existed since the inception of the Company. This product assists hospitals with workflow on electronic health records. Historically, this has been one of the largest products, in terms of revenue, for the Company. This ECM Assets were sold on February 24, 2020 to Hyland Software in a transaction accounted for as a sale of assets. See Note 13 – Discontinued Operations to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data”. For purposes of the financial information that is contained herein, this business is accounted for as Discontinued Operations.

Custom Integration Services, Electronic Imaging and Database Monitoring for ECM Assets — The Company’s professional services team works with customers to design custom integrations that integrate data to or from virtually any clinical, financial, or administrative system. These services were sold to Hyland Software on February 24, 2020 in a transaction accounted for as sale of assets. See Note 13 – Discontinued Operations to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data”. For purposes of the financial information that is contained herein, this business is accounted for as Discontinued Operations.

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Customers and Strategic Partners

The Company continues to provide transformational data-driven solutions to some of the finest, most well-respected healthcare enterprises in the United States and Canada. Customers are geographically dispersed throughout North America. The Company provides these solutions through a combination of direct sales and relationships with strategic channel partners.

During fiscal 2021, one individual customer accounted for 10% or more of our continuing operations revenue and represented approximately $2.6 million of total continuing operations revenue. During fiscal 2020, no one individual customer accounted for 10% or more of our continuing operations revenue. Three customers represented 24%, 16%, and 15%, respectively, of continuing operations accounts receivable as of January 31, 2022 and four customers represented 31%, 16%, 14% and 13%, respectively, of continuing operations accounts receivable as of January 31, 2021. Many of our customers are invoiced on an annual basis.

For more information regarding our major customers, please see “Risks Relating to Our Business - Our sales have been concentrated in a small number of customers” in Part 1, Item 1A, “Risk Factors” herein.

Acquisitions and Divestitures

The Company regularly evaluates opportunities for acquisitions and divestitures for portions of the Company that may not align with current growth strategies.

The Company acquired all of the equity interests of Avelead as part of the Company’s strategic expansion into the revenue cycle management, acute-care healthcare space. 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) $12.5 million in cash, net of cash acquired, (ii) $6.5 million in common stock, and (iii) approximately $10.7 million in contingent consideration. The Company issued 5,021,972 shares of its restricted common stock to Avelead equity holders in connection with the acquisition. See Note 3 - Business Combination and Divestiture to our consolidated financial statements included in Part II Item 8, “Financial Statements and Supplementary Data” for additional information regarding the acquisition.

The Company divested its legacy ECM Assets, effective February 24, 2020, in a transaction accounted for as a sale of assets. This sale of assets is consistent with the Company’s efforts to offer and invest in products that serve the middle of the revenue cycle, primarily for acute care healthcare organizations. 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 the standard of ASC 205-20-1 to ascertain the timing of accounting for 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. Accordingly, the Company did not present the ECM Assets as held for sale in previously filed financial statements. 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 consolidated statements of operations, cash flows and balance sheets for the current and comparative prior periods. See Note 13 – Discontinued Operations to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data”.

Business Segments

We manage our business as one single business segment. Under ASC 280-10-50-11, two or more operating segments may be aggregated into a single operating segment if they are considered to be similar. Operating segments are considered to be similar if they can be expected to have essentially the same economic characteristics and future prospects. Using the aggregation guidance, the Company determined that it has one operating segment due to the similar economic characteristics of the Company’s products, product development, distribution, regulatory environment and customer base as a provider of computer software-based solutions and services for acute-care healthcare providers. The Company has two reporting units for evaluation of intangible assets, Streamline Solutions and Avelead Solutions. For our total assets at January 31, 2022 and 2021 and total revenue and net loss for the fiscal years ended January 31, 2022 and 2021, see our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” herein.

Contracts, License and Services Fees

The Company enters into agreements with its customers that specify the scope of the system to be installed and/or services to be provided by the Company, as well as the agreed-upon pricing, applicable term duration and the timetable for the associated licenses and services.

For customers purchasing software to be installed locally or provided on a SaaS model, these are multi-element arrangements that include either a perpetual or term license and right to access the applicable software functionality (whether installed locally at the customer site or the right to use the Company’s solutions as a part of SaaS services), terms regarding maintenance and support services, and professional services for implementation, integration, process engineering, optimization and training, as well as fees and payment terms for each of the foregoing. If the customer purchases solutions on a perpetual license model, the customer is billed the license fee up front. Maintenance and support is provided on a term basis for separate fees, with an initial term typically from one to five years in length. The maintenance and support fee is charged annually in advance, commencing either upon contract execution or deployment of the solution in live production. If the customer purchases solutions on a term-based model, the customer is billed periodically a combined access fee for a specified term, typically from one to seven years in length. The access fee includes the access rights along with all maintenance and support services.

The Company also generally provides software and SaaS customers professional services for implementation, integration, process engineering, optimization and training. These services and the associated fees are separate from the license, maintenance and access fees. Professional services are provided on either a fixed-fee or hourly arrangements billable to customers based on agreed-to payment milestones (fixed fee) or monthly payment structure on hours incurred (hourly). These services can either be included at the time the related locally installed software or SaaS solution is licensed as part of the initial purchase agreement or added as an addendum to the existing agreement for services required after the initial implementation. The Company recognizes revenue for implementation for certain of its eValuator SaaS solution over the contract term, as it has been determined that those implementation services are not a distinct performance obligation, whereas for other SaaS and Software solutions such as CDI, RevID and Compare, it has been determined that its implementation services are a distinct performance obligation and, accordingly, are recognized separately as professional services.

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For coding audit services customers, these review services are provided either through a stand-alone services agreement or services addendum to an existing master agreement with the customer. These review services are available as either a one-time service or recurring monthly, quarterly or annual review structure. These services are typically provided on a per reviewed account/chart basis. Monthly minimums are required where material discounts have been offered. Payment typically occurs upon completion of the applicable review project.

The commencement of revenue recognition varies depending on the size and complexity of the system and/or services involved, the implementation or performance schedule requested by the customer and usage by customers of SaaS for software-based components. The Company’s agreements are generally non-cancellable but provide that the customer may terminate its agreement upon a material breach by the Company and/or or may delay certain aspects of the installation or associated payments in such events. The Company does allow for termination for convenience in certain situations. Therefore, it is difficult for the Company to accurately predict the revenue it expects to achieve in any particular period, and a termination or installation delay of one or more phases of an agreement, or the failure of the Company to procure additional agreements, could have a material adverse effect on the Company’s business, financial condition, and results of operations, as further discussed in Part 1, Item 1A, “Risk Factors” herein. Historically, the Company has not experienced a material amount of contract cancellations; however, the Company sometimes experiences delays in the course of contract performance and the Company accounts for them accordingly.

Third-Party License Fees

The Company incorporates software licensed from various third-party vendors into its proprietary software. The Company licenses these software products and pays the required license fees when such software is delivered to customers.

Associates

As of January 31, 2022, the Company had 134 employees; a net increase of 67 employees during fiscal 2021. Of this increase in employees, 59 were part of the Avelead acquisition. All employees are full-time employees. The Company utilizes independent contractors to supplement its staff, as needed. None of the Company’s associates are represented by a labor union or subject to a collective bargaining agreement. The Company has never experienced a work stoppage and believes that its employee relations are good. The Company’s success depends, to a significant degree, on its management, sales and technical personnel.

For more information on contracts, backlog, acquisitions and research and development, see also Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Competition

The eValuator product has little direct competition. The Company believes it is an industry leader in pre-bill auditing technology. We have seen competition on similar products that are being utilized by customers as a pre-bill auditing tool, such as PwC Smart and 3M, however, these similar products are intended to be utilized for post-bill auditing which is a different workflow than what is necessary for pre-bill auditing. We expect to have competition in the pre-bill technology industry. Customer processes dictates that correcting errors prior to billing is much more efficient and effective than having an audit after billing. There will be larger and more sophisticated competitors than our Company. Accordingly, using the time we have without direct competition is critical to the Company’s success.

The RevID product has little direct competition. The Company believes RevID’s automated charge reconciliation technique, and the frequency of charge reconciliation RevID enables are unique in the industry. There are products that purport to provide similar services, including nThrive’s Charge Capture Audit Tool and CloudMed’s ReVint Tool set. The Company anticipates that additional competition may develop as pre-bill, daily charge reconciliation becomes a standard within the industry.

The Avelead DCE product has little direct competition. The Company believes that few engines exist that can accurately compare the various software systems used by hospitals, examples of other products include Vitalware, Craneware and nThrive’s Chargemaster toolkit. DCE is unique in that it can be easily tuned to work with a wide array of hospital systems to create a bespoke offering for specific clients, easing transitions to new platforms or as an ongoing maintenance check tool.

Regarding our Coding and CDI Solutions, eValuator Coding Analysis Platform, and Financial Management Solutions, several companies historically have dominated the clinical information system software market. The industry is undergoing consolidation and realignment as companies position themselves to compete more effectively. Strategic alliances between vendors of other healthcare systems are increasing. Barriers to entry to this market include technological and application sophistication, the ability to offer a proven product, creating and utilizing a well-established customer base and distribution channels, brand recognition, the ability to operate on a variety of operating systems and hardware platforms, the ability to integrate with pre-existing systems and capital for sustained development and marketing activities. The Company has many competitors including clinical information system vendors that are larger, more established and have substantially more resources than the Company.

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Regarding our Audit Services, there are numerous medium and small companies and independent consultants who offer these services. Barriers to entry to this market include creating and utilizing a well-established customer base and distribution channels, brand recognition, establishing differentiators for our services and capital for sustained development and marketing activities.

The Company believes that these obstacles taken together represent a moderate to high-level barrier to entry. The Company believes that the principal competitive factors in its market are customer recommendations and references, company reputation, system reliability, system features and functionality (including ease of use), technological advancements, customer service and support, breadth and quality of the systems, the potential for enhancements and future compatible products, the effectiveness of marketing and sales efforts, price, and the size and perceived financial stability of the vendor. In addition, the Company believes that the speed with which companies in its market can anticipate the evolving healthcare industry structure and identify unmet needs are important competitive factors.

Additional Intellectual Property Rights

In addition to the software licenses described in other sections of this Item 1, “Business”, the Company also holds registered trademarks for its Streamline Health® and other key trademarks used in selling its products. These marks are currently active, with registrations being valid for a period of 3 years each. The Company actively renews these marks at the end of each registration period.

Regulation

Our customers derive a substantial portion of their revenue from third-party private and governmental payors, including through Medicare, Medicaid and other government-sponsored programs. Our customers also have express handling and retention obligations under information-based laws such as the Health Insurance Portability and Accountability Act of 1996. There are no material regulatory proposals of which the Company is aware that we believe currently have a high likelihood of passage that we anticipate would have a material impact on the operation or demand of the Company’s products and services. However, the Company acknowledges there is currently great uncertainty in the U.S. healthcare market, generally, from a regulatory perspective. In addition, there is regulatory uncertainty in the data and technology sectors as it relates to information security regulations. Material changes could have unanticipated impact on demand or usability of the Company’s solutions, require the Company to incur additional development and/or operating costs (on a one-time or recurring basis) or cause customers to terminate their agreements or otherwise be unable to pay amounts owed to the Company, as further discussed in Part 1, Item 1A, “Risk Factors” herein.

Environmental Matters

We believe we are compliant in all material aspects with all applicable environmental laws. We do not anticipate that such compliance will have a material effect on capital expenditures, earnings or the competitive position of our operations.

Code of Business Conduct and Ethics

We have a Code of Business Conduct and Ethics that guides and binds each of our employees, officers and directors which is available on the “Investor Relations” page of our website, www.streamlinehealth.net, under the “Corporate Governance” tab. We use an anonymous compliance hotline for employees and outside parties to report potential instances of noncompliance.

Available Information

Copies of documents filed by the Company with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and all amendments to those reports and statements, if any, can be found at the website http://investor.streamlinehealth.net as soon as practicable after such material is electronically filed with, or furnished to, the SEC. The information contained on the Company’s website is not part of, or incorporated by reference into, this Report. Copies can be downloaded free of charge from the Company’s website or directly from the SEC website, https://www.sec.gov. Also, copies of the Company’s annual report on Form 10-K will be made available, free of charge, upon written request to the Company, attention: Corporate Secretary, 2400 Old Milton Pkwy, Box 1353, Alpharetta, GA 30009.

Item 1A. Risk Factors

An investment in our common stock or other securities involves a number of risks. You should carefully consider each of the risks described below before deciding to invest in our common stock or other securities. If any of the following risks develops 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.

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Risks Relating to Our Business

Our sales have been concentrated in a small number of customers.

Our revenues have been concentrated in a relatively small number of large customers, and we have historically derived a substantial percentage of our total continuing operations revenue from a few customers. For fiscal years ended January 31, 2022 and 2021, our five largest customers accounted for 40% and 39%, respectively, of our total continuing operations revenue. If one or more customers terminate all or any portion of a master agreement, delay installations or if we fail to procure additional agreements, there could be a material adverse effect on our business, financial condition and results of operations. See Note 9 - Major Customers to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data”, herein for further information regarding representation of the Company’s largest individual major customers.

The ongoing COVID-19 pandemic and resulting adverse economic conditions has had and will likely continue to have an adverse effect on our business, results of operations and financial condition.

The global outbreak of the coronavirus disease (COVID-19), which the World Health Organization characterized as a “pandemic” in March 2020, has resulted in a crisis affecting economies and financial markets worldwide. The pandemic, and its attendant economic damage, has had an adverse impact on our revenue and may continue to adversely affect our business, results of operations and financial condition. The ultimate extent of its impact on us will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and actions taken to contain COVID-19 or treat its impact, among others. These and other potential impacts of COVID-19 could therefore continue to materially and adversely affect our business, results of operations and financial condition.

Prolonged unfavorable economic conditions which arose in response to COVID-19, by local, state and federal and numerous non-U.S. governmental authorities imposing, among other restrictions, travel bans, business closures and other quarantine measures to practice social distancing, and other factors such as recession or slowed economic growth, may continue to result in considerable uncertainty regarding the impact the pandemic will have on our workforce and continued operations.

We have adjusted our business practices to combat the effects of COVID-19 by closing the Company’s primary corporate office, restricting employee travel, implementing social distancing and additional sanitary measures. These actions are being taken in response to recommendations issued by local, state and national government authorities. There has been no further reduction in the Company’s workforce as a result of the COVID-19 pandemic since these initial adjustments, but we are not certain as to whether any additional reductions may be necessary in order to combat the effects of COVID-19-related closures or economic downturns. We continue to closely monitor the events and impacts relating to the on-going COVID-19 pandemic, which has impacted and could further adversely impact the Company’s business, results of operations and financial condition.

Over the last several years, we have completed acquisitions, including the acquisition of Avelead in the third quarter of 2021, and may undertake additional acquisitions in the future. Any failure to adequately integrate past and future acquisitions into our business could have a material adverse effect on us.

Acquisitions will require that we integrate into our existing operations separate companies that historically operated independently or as part of another, larger organization, and had different systems, processes and cultures. Acquisitions may require integration of finance and administrative organizations and involve exposure to different legal and regulatory regimes in jurisdictions in which we have not previously operated.

Over the last several years, we have completed acquisitions of businesses through asset and stock purchases, including the acquisition of Avelead in the third quarter of 2021. We expect that we will make additional acquisitions in the future.

Acquisitions involve a number of risks, including, but not limited to:

● the potential failure to achieve the expected benefits of the acquisition, including the inability to generate sufficient revenue to offset acquisition costs, or the inability to achieve expected synergies or cost savings;

● unanticipated expenses related to acquired businesses or technologies and their integration into our existing businesses or technology;

● the diversion of financial, managerial and other resources from existing operations;

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● the risks of entering into new markets in which we have little or no experience or where competitors may have stronger positions;

● potential write-offs or amortization of acquired assets or investments;

● the potential loss of key employees, customers or partners of an acquired business;

● delays in customer purchases due to uncertainty related to any acquisition;

● potential unknown liabilities associated with an acquisition; and

● the tax effects of any such acquisitions.

If we fail to successfully integrate Avelead or any other acquired businesses or fail to implement our business strategies with respect to acquisitions, we may not be able to achieve projected results or support the amount of consideration paid for such acquired businesses, which could have an adverse effect on our business and financial condition.

Finally, if we finance acquisitions by issuing equity or convertible or other debt securities, our existing stockholders may be diluted, or we could face constraints related to the terms of and repayment obligations related to the incurrence of indebtedness. This could adversely affect the market price of our securities.

We could consume resources in researching acquisitions, business opportunities or financings and capital market transactions that are not ultimately consummated, which could materially adversely affect our financial condition and subsequent attempts to locate and acquire or invest in another business.

We anticipate that the investigation of each specific acquisition or business opportunity and the negotiation, drafting, and execution of relevant agreements, disclosure documents, and other instruments with respect to such transaction will require substantial management time and attention and substantial costs for financial advisors, accountants, attorneys and other advisors. If a decision is made not to consummate a specific acquisition, business opportunity or financing and capital market transaction, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, even if an agreement is reached relating to a specific acquisition, investment target or financing, we may fail to consummate the investment or acquisition for any number of reasons, including those beyond our control. Any such event could consume significant management time and result in a loss to us of the related costs incurred, which could adversely affect our financial position and our ability to consummate other acquisitions and investments.

A significant increase in new SaaS contracts could reduce near-term profitability and require a significant cash outlay, which could adversely affect near term cash flow and financial flexibility.

If new or existing customers purchase significant amounts of our SaaS services, we may have to expend a significant amount of initial setup costs and time before those new customers are able to begin using such services, and we cannot begin to recognize revenues from those SaaS agreements until the commencement of such services. Accordingly, we anticipate that our near-term cash flow, revenue and profitability may be adversely affected by significant incremental setup costs from new SaaS customers that would not be offset by revenue until new SaaS customers go into production. While we anticipate long-term growth in profitability through increases in recurring SaaS subscription fees and significantly improved profit visibility, any inability to adequately finance setup costs for new SaaS solutions could result in the failure to put new SaaS solutions into production and could have a material adverse effect on our liquidity, financial position and results of operations. In addition, this near-term cash flow demand could adversely impact our financial flexibility and cause us to forego otherwise attractive business opportunities or investments.

We may not see the anticipated market interest or growth in our eValuator platform. In addition, coding audit services and associated software and technologies represent a new market for the Company, and we may not see the anticipated market interest or growth due to being a new player in the industry.

The Company is currently investing in the eValuator platform as well as new software-based technologies relating to high automation and machine-based analytics regarding a customer’s coding audit process. The return on this investment requires that the product developments continue to be defined and completed in a timely and cost-effective manner, there remains general interest in the marketplace (for both existing and future customers) for this technology, the demand for the product generates sufficient revenue in light of the development costs and that the Company is able to execute a successful product launch for these technologies. If the Company is unable to meet these requirements when launching these technologies, or if there is a delay in the launch process, the Company may not see an increase in revenue to offset the current development costs or otherwise translate to added growth and revenue for the Company.

Customers may exercise termination rights within their contracts, which may cause uncertainty in anticipated and future revenue streams.

The Company generally does not allow for termination of a customer’s agreement except at the end of the agreed upon term or for cause. However, certain of the Company’s customer contracts provide that the customer may terminate the contract without cause prior to the end of the term of the agreement by providing written notice, sometimes with relatively short notice periods. The Company also provides trial or evaluation periods for certain customers, especially for new products and services. Furthermore, there can be no assurance that a customer will not cancel all or any portion of an agreement, even without an express early termination right, and the Company may face additional costs or hardships collecting on amounts owed if a customer terminates an agreement without such a right. Whether resulting from termination for cause or the limited termination for convenience rights discussed above, the existence of contractual relationships with these customers is not an assurance that we will continue to provide services for our customers through the entire term of their respective agreements. If customers representing a significant portion of our revenue terminated their agreements unexpectedly, we may not, in the short-term, be able to replace the revenue and income from such contracts and this would have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows. In addition, customer contract terminations could harm our reputation within the industry, especially any termination for cause, which could negatively impact our ability to obtain new customers.

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Changes in healthcare regulations impacting coding, payers and other aspects of the healthcare regulatory cycle could have substantial impact on our financial performance, growth and operating costs.

Our sales and profitability depend, in part, on the extent to which coverage of and reimbursement for medical care provided is available from governmental health programs, private health insurers, managed care plans and other third-party payors. Unanticipated regulatory changes could materially impact the need for and/or value of our solutions. For example, if governmental or other third-party payors materially reduce reimbursement rates or fail to reimburse our customers adequately, our customers may suffer adverse financial consequences. Changes in regulations affecting the healthcare industry, such as any increased regulation by governmental agencies of the purchase and sale of medical products, or restrictions on permissible discounts and other financial arrangements, could also directly impact the capabilities our solutions and services provide and the pricing arrangements we are required to offer to be competitive in the market. Similarly, the U.S. Congress may adopt legislation that may change, override, conflict with or pre-empt the currently existing regulations and which could restrict the ability of customers to obtain, use or disseminate patient health information and/or impact the value of the functionality our products and services provide.

These situations would, in turn, reduce the demand for our solutions or services and/or the ability for a customer to purchase our solutions or services. This could have a material impact on our financial performance. In addition, the speed with which the Company can respond to and address any such changes when compared with the response of other companies in the same market (especially companies who may accurately anticipate the evolving healthcare industry structure and identify unmet needs) are important competitive factors. If the Company is not able to address the modifications in a timely manner compared with our competition, that may further reduce demand for our solutions and services.

The potential impact on us of new or changes in existing federal, state and local regulations governing healthcare information could be substantial.

Healthcare regulations issued to date have not had a material adverse effect on our business. However, we cannot predict the potential impact of new or revised regulations that have not yet been released or made final, or any other regulations that might be adopted. The U.S. Congress may adopt legislation that may change, override, conflict with or pre-empt the currently existing regulations and which could restrict the ability of customers to obtain, use or disseminate patient health information. Although the features and architecture of our existing solutions can be modified, it may be difficult to address the changing regulation of healthcare information.

The healthcare industry is highly regulated. Any material changes in the political, economic or regulatory healthcare environment that affect the group purchasing business or the purchasing practices and operations of healthcare organizations, or that lead to consolidation in the healthcare industry, could require us to modify our services or reduce the funds available to providers to purchase our solutions and services.

Our business, financial condition and results of operations depend upon conditions affecting the healthcare industry generally and hospitals and health systems particularly. Our ability to grow will depend upon the economic environment of the healthcare industry, as well as our ability to increase the number of solutions that we sell to our customers. The healthcare industry is highly regulated and is subject to changing political, economic and regulatory influences. Factors such as changes in reimbursement policies for healthcare expenses, consolidation in the healthcare industry, regulation, litigation and general economic conditions affect the purchasing practices, operation and, ultimately, the operating funds of healthcare organizations. In particular, changes in regulations affecting the healthcare industry, such as any increased regulation by governmental agencies of the purchase and sale of medical products, or restrictions on permissible discounts and other financial arrangements, could require us to make unplanned modifications to our solutions and services, or result in delays or cancellations of orders or reduce funds and demand for our solutions and services.

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Our customers derive a substantial portion of their revenue from third-party private and governmental payors, including through Medicare, Medicaid and other government-sponsored programs. Our sales and profitability depend, in part, on the extent to which coverage of and reimbursement for medical care provided is available from governmental health programs, private health insurers, managed care plans and other third-party payors. If governmental or other third-party payors materially reduce reimbursement rates or fail to reimburse our customers adequately, our customers may suffer adverse financial consequences, which in turn, may reduce the demand for and ability to purchase our solutions or services.

We face significant competition, including from companies with significantly greater resources.

We currently compete with many other companies for the licensing of similar software solutions and related services. Several companies historically have dominated the clinical information systems software market and several of these companies have either acquired, developed, or are developing their own analytics and coding/clinical documentation improvement solutions, as well as the resultant workflow technologies. The industry is undergoing consolidation and realignment as companies position themselves to compete more effectively. Many of these companies are larger than us and have significantly more resources to invest in their business. In addition, information and document management companies serving other industries may enter the market. Suppliers and companies with whom we may establish strategic alliances also may compete with us. Such companies and vendors may either individually, or by forming alliances excluding us, place bids for large agreements in competition with us. A decision on the part of any of these competitors to focus additional resources in any one of our three solutions stacks (coding audit solutions, analytics and coding/clinical documentation improvement), workflow technologies and other markets addressed by us could have a material adverse effect on us.

The healthcare industry is evolving rapidly, which may make it more difficult for us to be competitive in the future.

The U.S. healthcare system is under intense pressure to improve in many areas, including modernization, universal access and controlling skyrocketing costs of care. We believe that the principal competitive factors in our market are customer recommendations and references, company reputation, system reliability, system features and functionality (including ease of use), technological advancements, customer service and support, breadth and quality of the systems, the potential for enhancements and future compatible solutions, the effectiveness of marketing and sales efforts, price and the size and perceived financial stability of the vendor. In addition, we believe that the speed with which companies in our market can anticipate the evolving healthcare industry structure and identify unmet needs is an important competitive factor. If we are unable to keep pace with changing conditions and new developments, we will not be able to compete successfully in the future against existing or potential competitors.

Rapid technology changes and short product life cycles could harm our business.

The market for our solutions and services is characterized by rapidly changing technologies, regulatory requirements, evolving industry standards and new product introductions and enhancements that may render existing solutions obsolete or less competitive. As a result, our position in the healthcare information technology market could change rapidly due to unforeseen changes in the features and functions of competing products, as well as the pricing models for such products. Our future success will depend, in part, upon our ability to enhance our existing solutions and services and to develop and introduce new solutions and services to meet changing requirements. Moreover, competitors may develop competitive products that could adversely affect our operating results. We need to maintain an ongoing research and development program to continue to develop new solutions and apply new technologies to our existing solutions but may not have sufficient funds with which to undertake such required research and development. If we are not able to foresee changes or to react in a timely manner to such developments, we may experience a material, adverse impact on our business, operating results and financial condition.

Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our solutions and services.

Our intellectual property, which represents an important asset to us, has some protection against infringement through copyright and trademark law. We generally have little patent protection on our software. We rely upon license agreements, employment agreements, confidentiality agreements, nondisclosure agreements and similar agreements to maintain the confidentiality of our proprietary information and trade secrets. Notwithstanding these precautions, others may copy, reverse engineer or independently design technology similar to our solutions. If we fail to protect adequately our intellectual property through trademarks and copyrights, license agreements, employment agreements, confidentiality agreements, nondisclosure agreements or similar agreements, our intellectual property rights may be misappropriated by others, invalidated or challenged, and our competitors could duplicate our technology or may otherwise limit any competitive technology advantage we may have. It may be necessary to litigate to enforce or defend our proprietary technology or to determine the validity of the intellectual property rights of others. Any litigation, successful or unsuccessful, may result in substantial cost and require significant attention by management and technical personnel.

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Due to the rapid pace of technological change, we believe our future success is likely to depend upon continued innovation, technical expertise, marketing skills and customer support and services rather than on legal protection of our intellectual property rights. However, we have aggressively asserted our intellectual property rights when necessary and intend to do so in the future.

We could be subjected to claims of intellectual property infringement that could be expensive to defend.

While we do not believe that our solutions and services infringe upon the intellectual property rights of third parties, the potential for intellectual property infringement claims continually increases as the number of software patents and copyrighted and trademarked materials continues to rapidly expand. Any claim for intellectual property right infringement, even if not meritorious, could be expensive to defend. If we were held liable for infringing third party intellectual property rights, we could incur substantial damage awards, and potentially be required to cease using the technology, produce non-infringing technology or obtain a license to use such technology. Such potential liabilities or increased costs could be material to us.

If we are unable to maintain effective internal control over financial reporting, we may fail to prevent or detect material misstatements in our financial statements, in which case investors may lose confidence in the accuracy and completeness of our financial statements.

We are in the process of integrating our internal control over financial reporting and our other control environments with those of Avelead. In the course of integration, we may encounter difficulties and unanticipated issues combining our respective accounting systems due to the complexity of our financial reporting processes. We may also identify errors or misstatements that could require accounting adjustments. If we are unable to integrate and maintain effective internal control over financial reporting of the combined company, timely or at all, we may fail to prevent or detect material misstatements in our financial statements, in which case investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities may decline.

Third party products are essential to our software.

Our software incorporates software licensed from various vendors into our proprietary software. In addition, third-party, stand-alone software is required to operate some of our proprietary software modules. The loss of the ability to use these third-party products, or ability to obtain substitute third-party software at comparable prices, could have a material adverse effect on our ability to license our software.

Our solutions may not be error-free and could result in claims of breach of contract and liabilities.

Our solutions are very complex and may not be error-free, especially when first released. Although we perform extensive testing, failure of any solution to operate in accordance with its specifications and documentation could constitute a breach of the license agreement and require us to correct the deficiency. If such deficiency is not corrected within the agreed-upon contractual limitations on liability and cannot be corrected in a timely manner, it could constitute a material breach of a contract allowing the termination thereof and possibly subjecting us to liability. Also, we sometimes indemnify our customers against third-party infringement claims. If such claims are made, even if they are without merit, they could be expensive to defend. Our license and SaaS agreements generally limit our liability arising from these types of claims, but such limits may not be enforceable in some jurisdictions or under some circumstances. A significant uninsured or under-insured judgment against us could have a material adverse impact on us.

We could be liable to third parties from the use of our solutions.

Our solutions provide access to patient information used by physicians and other medical personnel in providing medical care. The medical care provided by physicians and other medical personnel are subject to numerous medical malpractice and other claims. We attempt to limit any potential liability of ours to customers by limiting the warranties on our solutions in our agreements with our customers (i.e., healthcare providers). However, such agreements do not protect us from third-party claims by patients who may seek damages from any or all persons or entities connected to the process of delivering patient care. We maintain insurance, which provides limited protection from such claims, if such claims result in liability to us. Although no such claims have been brought against us to date regarding injuries related to the use of our solutions, such claims may be made in the future. A significant uninsured or under-insured judgment against us could have a material adverse impact on us.

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Our SaaS and support services could experience interruptions.

We provide SaaS for many customers, including the storage of critical patient, financial and administrative data. In addition, we provide support services to customers through our customer support organization. We have redundancies, such as backup generators, redundant telecommunications lines and backup facilities built into our operations to prevent disruptions. However, complete failure of all generators, impairment of all telecommunications lines or severe casualty damage to the primary building or equipment inside the primary building housing our hosting center or customer support facilities could cause a temporary disruption in operations and adversely affect customers who depend on the application hosting services. Any interruption in operations at our data center or customer support facility could cause us to lose existing customers, impede our ability to obtain new customers, result in revenue loss, cause potential liability to our customers, and increase our operating costs.

Our business and operations would suffer in the event of computer system failures, cyber-attacks or a deficiency in our cybersecurity. Our SaaS solutions are provided over an internet connection and any breach of security or confidentiality of protected health information could expose us to significant expense and harm our reputation.

Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from a variety of causes, including computer viruses, malware, intentional or accidental mistakes or errors by users with authorized access to our computer systems, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, or attachments to emails. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusions, including by computer hackers, non-U.S. governments, extra-state actors and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

We provide remote SaaS solutions for customers, including the storage of critical patient, financial and administrative data. We have security measures in place to prevent or detect misappropriation of protected health information. We must maintain facility and systems security measures to preserve the confidentiality of data belonging to customers, as well as their patients, that resides on computer equipment in our data center, which we handle via application hosting services, or that is otherwise in our possession. Notwithstanding efforts undertaken to protect data, it can be vulnerable to infiltration as well as unintentional lapse. If any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could face claims for contract breach, penalties and other liabilities for violation of applicable laws or regulations, significant costs for remediation and re-engineering to prevent future occurrences and serious harm to our reputation.

In the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, employee malfeasance and human or technological error. High-profile security breaches at other companies and in government agencies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyber-attacks targeting businesses such as ours. Computer hackers and others routinely attempt to breach the security of technology products, services and systems, and to fraudulently induce employees, customers, or others to disclose information or unwittingly provide access to systems or data. We can provide no assurance that our current IT systems, software, or third-party services, or any updates or upgrades thereto will be fully protected against third-party intrusions, viruses, hacker attacks, information or data theft or other similar threats.

Legislative or regulatory action in these areas is also evolving, and we may be unable to adapt our IT systems to accommodate these changes. We have experienced and expect to continue to experience sophisticated attempted cyber-attacks of our IT networks. Although none of these attempted cyber-attacks has had a material adverse impact on our operations or financial condition, we cannot guarantee that any such incidents will not have such an impact in the future.

The loss of key personnel could adversely affect our business.

Our success depends, to a significant degree, on our management, sales force and technical personnel. We must recruit, motivate and retain highly skilled managers, sales, consulting and technical personnel, including solution programmers, database specialists, consultants and system architects who have the requisite expertise in the technical environments in which our solutions operate. Competition for such technical expertise is intense. Our failure to attract and retain qualified personnel could have a material adverse effect on us.

Our future success depends upon our ability to grow, and if we are unable to manage our growth effectively, we may incur unexpected expenses and be unable to meet our customers’ requirements.

We will need to expand our operations if we successfully achieve greater demand for our products and services. We cannot be certain that our systems, procedures, controls and human resources will be adequate to support expansion of our operations. Our future operating results will depend on the ability of our officers and employees to manage changing business conditions and to implement and improve our technical, administrative, financial control and reporting systems. We may not be able to expand and upgrade our systems and infrastructure to accommodate these increases. Difficulties in managing any future growth, including as a result of integrating any prior or future acquisition with our existing businesses, could cause us to incur unexpected expenses or render us unable to meet our customers’ requirements, and consequently have a significant negative impact on our business, financial condition and operating results.

We may not have access to sufficient or cost-efficient capital to support our growth, execute our business plans and remain competitive in our markets.

As our operations grow and as we implement our business strategies, we expect to use both internal and external sources of capital. In addition to cash flow from normal operations, we may need additional capital in the form of debt or equity to operate and support our growth, execute our business plans and remain competitive in our markets. We may have no or limited availability to such external capital, in which case our future prospects may be materially impaired. Furthermore, we may not be able to access external sources of capital on reasonable or favorable terms. Our business operations could be subject to both financial and operational covenants that may limit the activities we may undertake, even if we believe they would benefit the Company.

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Potential disruptions in the credit markets may adversely affect our business, including the availability and cost of short-term funds for liquidity requirements and our ability to meet long-term commitments, which could adversely affect our results of operations, cash flows and financial condition.

If internally generated funds are not available from operations, we may be required to rely on the banking and credit markets to meet our financial commitments and short-term liquidity needs. Our access to funds under our revolving credit facility or pursuant to arrangements with other financial institutions is dependent on the financial institution’s ability to meet funding commitments. Financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience high volumes of borrowing requests from other borrowers within a short period of time.

We must maintain compliance with the terms of our existing credit facilities or receive a waiver for any non-compliance. The failure to maintain compliance could have a material adverse effect on our ability to finance our ongoing operations and we may not be able to find an alternative lending source if a default occurs.

On August 26, 2021, the Company and its subsidiaries entered into the Second Amended and Restated Loan and Security Agreement with Bridge Bank. Pursuant to the Second Amended and Restated 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. Amounts outstanding under the term loan of the Second Amended and Restated Loan and Security 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%. Pursuant to the Second Amended and Restated Loan and Security Agreement, the Company discontinued the existing $3,000,000 revolving credit facility with Bridge Bank. At the time of the discontinuance, there was no outstanding balance on the revolving credit facility.

The Second Amended and Restated 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 and Restated 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 and Restated Loan and Security Agreement requires principal repayments of $500,000 in the second year, $1,000,000 in the third year, $2,000,000 in the fourth year, and $3,000,000 in the fifth year, respectively, with the remaining outstanding principal balance and all accrued but unpaid interest due in full on the maturity date. The Second Amended and Restated Loan and Security Agreement may also require early repayments if certain conditions are met. The Second Amended and Restated Loan and Security Agreement is secured by substantially all of the assets of the Company, its subsidiaries, and certain of its affiliates.

If we do not maintain compliance with all of the continuing covenants and other terms and conditions of our existing credit facilities or secure a waiver for any non-compliance, we could be required to repay outstanding borrowings on an accelerated basis, which could subject us to decreased liquidity and other negative impacts on our business, results of operations and financial condition. Furthermore, if we needed to do so, it may be difficult for us to find an alternative lending source. In addition, because our assets are pledged as a security under our credit facilities, if we are not able to cure any default or repay outstanding borrowings, our assets are subject to the risk of foreclosure by our lenders. Without a sufficient credit facility, we would be adversely affected by a lack of access to liquidity needed to operate our business. Any disruption in access to credit could force us to take measures to conserve cash, such as deferring important research and development expenses, which measures could have a material adverse effect on us.

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Economic conditions in the U.S. and globally may have significant effects on our customers and suppliers that could result in material adverse effects on our business, operating results and stock price.

Economic conditions in the U.S. and globally could deteriorate and cause the worldwide economy to enter into a stagnant period that could materially adversely affect our customers’ access to capital or willingness to spend capital on our solutions and services or their levels of cash liquidity with which to pay for solutions that they will order or have already ordered from us. In addition, the ongoing conflict between Russia and Ukraine could lead to disruption, instability and volatility in global markets and industries that could negatively impact our operations. The U.S. government, and other governments in jurisdictions in which we operate, have imposed severe sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is currently unknown and they could adversely affect our business, partners or customers. Challenging economic conditions also would likely negatively impact our business, which could result in: (1) reduced demand for our solutions and services; (2) increased price competition for our solutions and services; (3) increased risk of collectability of cash from our customers; (4) increased risk in potential reserves for doubtful accounts and write-offs of accounts receivable; (5) reduced revenues; and (6) higher operating costs as a percentage of revenues.

All of the foregoing potential consequences of a deterioration of economic conditions are difficult to forecast and mitigate. As a consequence, our operating results for a particular period are difficult to predict, and, therefore, prior results are not necessarily indicative of future results. Any of the foregoing effects could have a material adverse effect on our business, results of operations, and financial condition and could adversely affect the market price of our common stock and other securities.

The variability of our quarterly operating results can be significant.

Our operating results have fluctuated from quarter-to-quarter in the past, and we may experience continued fluctuations in the future. Future revenues and operating results may vary significantly from quarter-to-quarter as a result of a number of factors, many of which are outside of our control. These factors include: the relatively large size of customer agreements; unpredictability in the number and timing of software licenses and sales of application hosting services; length of the sales cycle; delays in installations; changes in customers’ financial conditions or budgets; increased competition; the development and introduction of new products and services; the loss of significant customers or remarketing partners; changes in government regulations, particularly as they relate to the healthcare industry; the size and growth of the overall healthcare information technology markets; any liability and other claims that may be asserted against us; our ability to attract and retain qualified personnel; national and local general economic and market conditions; and other factors discussed in this Report and our other filings with the SEC.

The preparation of our financial statements requires the use of estimates that may vary from actual results.

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make significant estimates that affect the financial statements. One of our most critical estimates is the capitalization of software development costs. Due to the inherent nature of these estimates, we may be required to significantly increase or decrease such estimates upon determination of the actual results. Any required adjustments could have a material adverse effect on us and our results of operations.

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Failure to improve and maintain the quality of internal control over financial reporting and disclosure controls and procedures or other lapses in compliance could materially and adversely affect our ability to provide timely and accurate financial information about us or subject us to potential liability.

In connection with the preparation of the consolidated financial statements for each of our fiscal years, our management conducts a review of our internal control over financial reporting. We are also required to maintain effective disclosure controls and procedures. Any failure to maintain adequate controls or to adequately implement required new or improved controls could harm operating results, or cause failure to meet reporting obligations in a timely and accurate manner.

Risks Relating to our Common Stock

The market price of our common stock is likely to be highly volatile as the stock market in general can be highly volatile.

The public trading of our common stock is based on many factors that could cause fluctuation in the price of our common stock. These factors may include, but are not limited to:

● General economic and market conditions;

● Actual or anticipated variations in annual or quarterly operating results;

● Lack of or negative research coverage by securities analysts;

● Conditions or trends in the healthcare information technology industry;

● Changes in the market valuations of other companies in our industry;

● Announcements by us or our competitors of significant acquisitions, strategic partnerships, divestitures, joint ventures or other strategic initiatives;

● Announced or anticipated capital commitments;

● Ability to maintain listing of our common stock on Nasdaq;

● Additions or departures of key personnel; and

● Sales and repurchases of our common stock by us, our officers and directors or our significant stockholders, if any.

Most of these factors are beyond our control. Further, as a result of our relatively small public float, our common stock may be less liquid, and the trading price for our common stock may be more affected by relatively small volumes of trading than is the case for the common stock of companies with a broader public ownership. These factors may cause the market price of our common stock to decline, regardless of our operating performance or financial condition.

If equity research analysts do not publish research reports about our business or if they issue unfavorable commentary or downgrade our common stock, the price of our common stock could decline.

The trading market for our common stock may rely in part on the research and reports that equity research analysts publish about our business and us. We do not control the opinions of these analysts. The price of our stock could decline if one or more equity analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about our business or us. Furthermore, if no equity research analysts conduct research or publish reports about our business and us, the market price of our common stock could decline.

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All of our debt obligations and any preferred stock that we may issue in the future will have priority over our common stock with respect to payment in the event of a bankruptcy, liquidation, dissolution or winding up.

In any bankruptcy, liquidation, dissolution or winding up of the Company, our shares of common stock would rank in right of payment or distribution below all debt claims against us and all of our outstanding shares of preferred stock, if any. As a result, holders of our shares of common stock will not be entitled to receive any payment or other distribution of assets in the event of a bankruptcy or upon a liquidation or dissolution until after all of our obligations to our debt holders and holders of preferred stock have been satisfied. Accordingly, holders of our common stock may lose their entire investment in the event of a bankruptcy, liquidation, dissolution or winding up of the Company. Similarly, holders of our preferred stock would rank junior to our debt holders and creditors in the event of a bankruptcy, liquidation, dissolution or winding up of the Company.

There may be future sales or other dilution of our equity, which may adversely affect the market price of our common stock.

We are generally not restricted from issuing in public or private offerings additional shares of common stock or preferred stock, and other securities that are convertible into or exchangeable for, or that represent a right to receive, common stock or preferred stock or any substantially similar securities. Such offerings represent the potential for a significant increase in the number of outstanding shares of our common stock. The market price of our common stock could decline as a result of sales of common stock, preferred stock or similar securities in the market made after an offering or the perception that such sales could occur.

The issuance of preferred stock could adversely affect holders of shares of our common stock, which may negatively impact your investment.

Our Board of Directors is authorized to issue classes or series of preferred stock without any action on the part of the stockholders. The Board of Directors also has the power, without stockholder approval, to set the terms of any such classes or series of preferred stock that may be issued, including rights and preferences over the shares of common stock with respect to dividends or upon our dissolution, winding-up or liquidation, and other terms. If we issue preferred stock in the future that has a preference over the shares of our common stock with respect to the payment of dividends or upon our dissolution, winding up or liquidation, or if we issue preferred stock with voting rights that dilute the voting power of the shares of our common stock, the rights of the holders of shares of our common stock or the market price of our common stock could be adversely affected.

As of January 31, 2022, we had no shares of preferred stock outstanding.

We do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend solely on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in its value. The trading price of our common stock could decline and you could lose all or part of your investment.

Sales of shares of our common stock or securities convertible into our common stock in the public market may cause the market price of our common stock to fall.

The issuance of shares of our common stock or securities convertible into our common stock in an offering from time to time could have the effect of depressing the market price for shares of our common stock. In addition, because our common stock is thinly traded, resales of shares of our common stock by our largest stockholders or insiders could have the effect of depressing market prices for our common stock.

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If we are unable to maintain compliance with Nasdaq listing requirements, our stock could be delisted, and the trading price, volume and marketability of our stock could be adversely affected.

Our common stock is listed on Nasdaq. We cannot assure you that we will be able to maintain compliance with Nasdaq’s current listing standards, or that Nasdaq will not implement additional listing standards with which we will be unable to comply. Failure to maintain compliance with Nasdaq listing requirements could result in the delisting of our shares from Nasdaq, which could have a material adverse effect on the trading price, volume and marketability of our common stock. Furthermore, a delisting could adversely affect our ability to issue additional securities and obtain additional financing in the future or result in a loss of confidence by investors or employees.

Note Regarding Risk Factors

The risk factors presented above are all of the ones that we currently consider material. However, they are not the only ones facing the Company. Additional risks not presently known to us, or which we currently consider immaterial, may also adversely affect us. There may be risks that a particular investor views differently from us, and our analysis might be wrong. If any of the risks that we face actually occur, our business, financial condition and operating results could be materially adversely affected and could differ materially from any possible results suggested by any forward-looking statements that we have made or might make. In such case, the market price of our common stock or other securities could decline and you could lose all or part of your investment. 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.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

In March 2020, the Company moved its principal offices to a subleased office space at 11800 Amber Park Drive, Suite 125, Alpharetta, Georgia 30009. The office space totals 7,409 square feet and the sublease expires on March 31, 2023. In October 2021, we subleased this space to a third party for the remaining lease period.

On August 16, 2021, contemporaneous with the acquisition of Avelead, the Company assumed a lease of office space at 1172 Satellite Boulevard NW, Office Suite 100, Suwannee, Georgia 30024. The lease expires on February 28, 2022. The lease was renewed in February 2022 for one year at substantially the same terms. The tenant of the lease is an entity controlled by the former owner and current President and Chief Executive Officer of Avelead.

Prior to occupying the subleased office space located in Alpharetta, Georgia, the Company occupied shared office space under a membership agreement which provides for membership fees based on the number of contracted seats.

The Company believes that its space is adequate for its current needs and that suitable alternative space is available to accommodate expansion of the Company’s operations.

Item 3. Legal Proceedings

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.

Item 4. Mine Safety Disclosures

Not applicable.

19

PART II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s common stock trades on the NASDAQ Capital Market under the symbol STRM.

According to the Company’s stock transfer agent’s records, the Company had 228 stockholders of record as of April 18, 2022. Because brokers and other institutions on behalf of stockholders hold many of such shares, the Company is unable to determine with complete accuracy the current total number of stockholders represented by these record holders. The Company estimates that it has approximately 249   stockholders, based on information provided by the Company’s stock transfer agent from its search of individual participants in security position listings.

The Company has never declared or paid any cash dividends on its common stock and does not currently intend to do so for the foreseeable future. The Company currently intends to invest its future earnings, if any, to fund its growth.

For the fiscal year ended January 31, 2022, we issued an aggregate of 205,374 shares of common stock to 180 Consulting (as defined below) as compensation for services provided pursuant to the Master Services Agreement, effective March 19, 2020, by and between the Company and 180 Consulting and related statements of work. The shares were issued in a series of private placements in reliance on the exemption from registration available under Section 4(a)(2) of the Securities Act, including Regulation D promulgated thereunder and the certificates representing such shares have a legend imprinted on them stating that the shares have not been registered under the Securities Act and cannot be transferred until properly registered under the Securities Act or pursuant to an exemption from such registration.

180 Consulting has earned, cumulatively, through the Master Services Agreement, 521,077 shares of common stock through January 31, 2022. 78,031 shares of common stock were earned but not issued as of the end of our fiscal year ended January 31, 2022. In May 2021, the Company filed a Registration Statement on Form S-3 to register 248,424 shares of stock that were previously issued to 180 Consulting pursuant to Rule 416 of the Securities Act of 1933. See Note 12 – Commitments and Contingencies to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data”.

The following table sets forth information with respect to our repurchases of common stock during the three months ended January 31, 2022:

	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs
November 1 - November 30		—		—		—		—
December 1 - December 31		39,016	$	1.49		—		—
January 1 - January 31		20,891		1.37		—		—
Total		59,907	$	1.45		—		—

(1) Amount represents shares surrendered by employees to satisfy tax withholding obligations resulting from restricted stock that vested during the three months ended January 31, 2022.

Item 6. [Reserved]

.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

The Company has determined it could best assist healthcare providers in improving their revenue cycle management by providing solutions and services in the middle portion of the revenue cycle, that is, the revenue cycle operations from initial charge capture to bill drop. We continue to make decisions supporting our focus in the middle of the revenue cycle. Our healthcare provider customers are acute-care hospitals and related clinics.

In late fiscal 2017, the Company introduced a new product for the middle of the revenue cycle, eValuator. This product has significant implications to the timing and accuracy of our customers’ invoicing through rules that are created to review the accuracy of invoicing prior to the physical invoices being released. This is a notable change to existing processes of our customers. The development activities continued through the end of fiscal 2018. There are continued development efforts planned for eValuator in fiscal 2022, generally, in the same levels as fiscal 2021.

In August 2021, the Company acquired Avelead, a national provider of consulting services and software solutions focused on the middle of the revenue cycle. Avelead’s flagship RevID software solution is a unique automated charge reconciliation tool that identifies discrepancies between a provider’s clinical and billing departments, ensuring that every medical service is tracked, accounted for, and ultimately accurately billed, thereby reducing revenue leakage. RevID’s 24-hour charge reconciliation is a significant improvement over legacy charge reconciliation methods in use today. There are significant development activities planned for RevID, and other Avelead solutions in fiscal 2022.

With the focus on the middle of the revenue cycle, the Company is committed to leading an industry movement to improve hospitals’ financial performance by moving billing interventions upstream, to improve coding accuracy before billing, enabling our customers to reduce revenue leakage, mitigate both under-billing and over-billing risk, and reduce denials and days in accounts receivable.

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By narrowing our focus to the middle of the revenue cycle, we believe there is a distinct and compelling value proposition that can help us attract more customers. By innovating new technologies, we have been able to expand our target markets beyond just hospitals and into outpatient centers, clinics and physician practices. Our revenue cycle solutions like eValuator, CDI, Abstracting, RevID, and Avelead Compare are competitive in the market and enabled us to engage eight significant new customers in fiscal 2021. These eight new customers are some of the largest names in healthcare as we have focused our salesforce on industry-leading customers whose processes are often duplicated by smaller facilities.

Acquisitions and Divestitures:

The Company divested its ECM Assets on February 24, 2020. As discussed above, such divestiture is consistent with the Company’s efforts to focus on the middle of the revenue cycle and its pre-bill technology, eValuator. Management believes that the revenue cycle technology platforms have higher growth opportunities than its legacy products, including the ECM Assets. The Company accounted for the sale of the ECM Assets as a sale of assets. See Note 13 – Discontinued Operations to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data”.

On August 16, 2021, the Company completed an acquisition of Avelead, a recognized leader in providing solutions and services to improve Revenue Integrity for healthcare providers nationwide. The Company believes Avelead’s solutions will complement and extend the value the Company can deliver to its customers. Refer to Note 3 – Business Combination and Divestiture in our consolidated financial statements included in Part I, Item I, “Financial Statements” for further information on the Avelead acquisition.

Macro-Economic Conditions:

Regardless of the state of the Affordable Care Act, the healthcare industry continues to face sweeping changes and new standards of care that are putting greater pressure on healthcare providers to be more efficient in every aspect of their operations. We believe these changes represent ongoing opportunities for our Company to work with our direct customers and various resellers to provide information technology solutions to help providers meet these new requirements.

Near the end of the Company’s fiscal year ended January 31, 2020, the COVID-19 pandemic emerged globally, and it continued through the Company’s fiscal year ended January 31, 2022. The pandemic, and its attendant economic damage, has had an adverse impact on our revenue and may continue to adversely affect our business, results of operations and financial condition. The ultimate extent of its impact on us will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and actions taken to contain COVID-19 or treat its impact among others. These and other potential impacts of COVID-19 could therefore continue to materially and adversely affect our business, results of operations and financial condition.

In addition, the U.S. government, and other governments in jurisdictions in which we operate, have imposed severe sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls. The impact of these measures, as well as potential responses to them by Russia, is currently unknown and they could adversely affect our business, partners or customers.

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Results of Operations

Statements of Operations for the fiscal years ended January 31 (in thousands):

	2022 (2)			2021			$ Change			% Change
Software licenses	$	1,057		$	590			467			79	%
Professional services		2,026			618			1,408			228	%
Audit services		1,896			1,891			5			0	%
Maintenance and support		4,323			4,586			(263	)		(6	)%
Software as a service		8,077			3,661			4,416			121	%
Total revenues		17,379			11,346			6,033			53	%
Cost of sales		8,577			5,689			2,888			51	%
Selling, general and administrative		11,931			8,565			3,366			39	%
Research and development		4,782			2,933			1,849			63	%
Non-routine costs		2,856			—			2,856			100	%
Loss on exit of operating lease		—			105			(105	)		(100	)%
Total operating expenses		28,146			17,292			10,854			63	%
Operating loss		(10,767	)		(5,946	)		(4,821	)		81	%
Other income (expense), net		3,959			(113	)		4,072			(3,604	)%
Income tax (expense) benefit		(109	)		1,260			(1,369	)		(109	)%
Loss from continuing operations	$	(6,917	)	$	(4,799	)		(2,118	)		44	%
Adjusted EBITDA(1)	$	(2,037	)	$	(1,893	)		(143	)		8	%

(1) Non-GAAP measure meaning net earnings (loss) before net interest expense, tax expense (benefit), depreciation, amortization, stock-based compensation expense, transactional and other expenses that do not relate to our core operations. See “Use of Non-GAAP Financial Measures” below for additional information and reconciliation.

(2) We acquired all of the equity interests of Avelead on August 16, 2021. All of the revenue and expenses associated with Avelead are included from that date to the end of the Company’s fiscal year ended January 31, 2022.

The following table sets forth, for each fiscal year indicated, certain operating data as percentages of total revenues:

Statements of Operations (1)

	Fiscal Year
	2021			2020
Software licenses		6.1	%		5.2	%
Professional services		11.7			5.4
Audit services		10.9			16.7
Maintenance and support		24.9			40.4
Software as a service		46.5			32.3
Total revenues		100.0	%		100.0	%
Cost of sales		49.4	%		50.1	%
Selling, general and administrative		68.7			75.5
Research and development		27.5			25.9
Non-Routine costs		16.4			—
Loss on exit of operating lease		—			0.9
Total operating expenses		162.0	%		152.4	%
Operating loss		(62.0	)%		(52.4	)%
Other expense, net		22.8			(1.0	)
Income tax (expense) benefit		(0.6	)		11.1
Loss from continuing operations		(39.8	)%		(42.3	)%
Cost of Sales to Revenues ratio, by revenue stream:
Software licenses		45.9	%		84.9	%
Services, maintenance and support		56.7	%		46.3	%
Software as a service		42.3	%		52.1	%

(1) Because a significant percentage of the operating costs are incurred at levels that are not necessarily correlated with revenue levels, a variation in the timing of software licenses and installations and the resulting revenue recognition can cause significant variations in operating results. As a result, period-to-period comparisons may not be meaningful with respect to the past results nor are they necessarily indicative of the future results of the Company in the near or long-term. The data in the table is presented solely for the purpose of reflecting the relationship of various operating elements to revenues for the periods indicated.

22

Comparison of Fiscal 2021 with 2020

Revenues

	Fiscal Year				2021 to 2020 Change
(in thousands):	2021		2020		$			%
Software licenses:
Proprietary software - perpetual license	$	582	$	437	$	145			33	%
Term license		475		153		322			210	%
Professional services		2,026		618		1,408			228	%
Audit services		1,896		1,891		5			0	%
Maintenance and support		4,323		4,586		(263	)		(6	)%
Software as a service		8,077		3,661		4,416			121	%
Total Revenues	$	17,379	$	11,346	$	6,033			53	%

Proprietary software and term licenses — Proprietary software revenues recognized in fiscal 2021 were $582,000, as compared to $437,000 in fiscal 2020. The Company is experiencing a shift in business from perpetual software licenses to software as a service. The increase in fiscal 2021 revenues as compared to fiscal 2020 revenues was mainly driven by 3 larger perpetual license sales of our CDI & Abstracting that signed late in fiscal 2021. The software license sales come primarily from our channel partners. The Company has the ability to influence sales of these products; however, the timing is difficult to manage as sales are essentially the result of these channel partners. Term license revenue for fiscal 2021 increased $322,000 from fiscal 2020, to $475,000 as one large customers’ multi-year term license renewed during fiscal 2021.

Professional services — Revenues from professional services in fiscal 2021 were $2,026,000 as compared to $618,000 in fiscal 2020. The increase in professional services included $1,735,000 of Avelead professional services revenue recorded since the date of acquisition. The addition of Avelead professional services revenue was offset by a decline in the legacy professional services revenue of $327,000. This decrease was due to a slower sales cycle coupled with delays in ongoing implementation projects due to COVID-19. We anticipate an increase in professional services revenue in fiscal 2022 as a result of contracts signed at the end of fiscal 2021 in addition to expected fiscal 2022 bookings.

Audit services — Audit services revenue for fiscal 2021, as compared to fiscal 2020 revenue, remained flat. Looking ahead to fiscal 2022, the Company continues to see demand for on-shore, technically proficient auditors in the marketplace. The Company believes it has a competitive advantage utilizing eValuator for these professional services. The Company expects modest growth for its audit services business during fiscal 2022.

Maintenance and support — Revenues from maintenance and support in fiscal 2021 were $4,323,000 as compared to $4,586,000 in fiscal 2020. The decrease in maintenance and support revenue in fiscal 2021 was primarily driven by a decrease of $345,000 related to the Company’s sunsetting of the clinical analytics software and a customer cancellation. This decrease was partially offset by maintenance revenue on new contracts. The Company expects a slight decrease for the maintenance and support revenue for fiscal 2022 from pricing pressure and terminations offset with new sales.

23

Software as a service (SaaS) — Revenues from SaaS in fiscal 2021 were $8,077,000, as compared to $3,661,000 in fiscal 2020. The increases in SaaS revenue in fiscal 2021 include $2,790,000 of Avelead SaaS revenue recorded since the date of acquisition. The remaining increase in fiscal 2021 revenue was primarily attributable to growth associated with the Company’s eValuator product. The Company’s eValuator product had five significant sales during fiscal 2020 that resulted in full year revenue for fiscal 2021 compared to partial year revenue in fiscal 2020 resulting in an increase to revenue of 1,278,000 year over year. The Company’s eValuator product had five new significant sales during fiscal 2021 that resulted in an increase to fiscal 2021 revenue of $834,000 We experienced one customer termination during Fiscal 2021 resulting in an impact to fiscal 2021 revenue. The Company expects substantial growth in its SaaS business, year-over-year, and sequentially, in each quarter of fiscal 2022.

Cost of Sales

	Fiscal Year				2021 to 2020 Change
(in thousands):	2021		2020		$			%
Cost of software licenses	$	485	$	501	$	(16	)		(3	)%
Cost of professional services		2,782		1,040		1,742			168	%
Cost of audit services		1,559		1,558		1			0	%
Cost of maintenance and support		334		684		(350	)		(51	)%
Cost of software as a service		3,417		1,906		1,511			79	%
Total cost of sales	$	8,577	$	5,689	$	2,888			51	%

Total cost of sales includes personnel directly affiliated with earning the revenue, amortization of capitalized software expenditures, and royalties on third-party licensing of products used by the Company to deliver its solutions and services. The increase in total cost of sales includes $2,563,000 of Avelead cost of sales recorded since the date of acquisition. We incurred total amortization expense on internally developed software of $2,173,000 and $1,662,000 in fiscal 2021 and fiscal 2020, respectively.

Cost of software licenses consists of costs associated with amortization of capitalized software costs for our CDI & Abstracting Solutions. The change from fiscal 2020 to fiscal 2021 remained relatively flat due to lower capitalization rates for these software solutions.

The cost of professional services includes compensation and benefits for personnel and related expenses. The increase in cost of professional services for fiscal 2021 includes $1,517,000 related to Avelead Consulting since the date of acquisition. The remaining increase is attributable to an increase in employee costs related to compensation and benefits.

The cost of audit services includes compensation and benefits for audit services personnel, and related expenses. These costs remained consistent, similar to revenue, from fiscal 2020 to fiscal 2021.

The cost of maintenance and support includes compensation and benefits for customer support personnel. Total cost of maintenance and support for fiscal 2021 includes $40,000 related to Avelead since the date of acquisition. The addition of expense from the Avelead acquisition was offset by a decrease in cost of maintenance and support from fiscal 2020 to fiscal 2021 resulting from a reduction of salary and salary related expenses for employees that were terminated or reassigned to other products. The Company was able to redeploy existing resources to mitigate costs on certain legacy products.

The cost of SaaS solutions consists of costs (i) associated with amortization of capitalized software costs for our eValuator, Financial Management, Avelead RevID and Avelead Compare Solutions, (ii) royalties payable to third-parties for use of their coding related content, and (iii) personnel and network related expenses to provision the application for each customer. The increase in cost of SaaS for fiscal 2021 includes $1,006,000 related to Avelead since the date of acquisition. The number of eValuator projects placed into service in fiscal 2021 compared to fiscal 2020, in addition to the increased investment in eValuator during fiscal 2021, resulted in an increase in related amortization expense of $195,000. The royalty and network related agreements are becoming variable as the cost is derived by attributes of the customer’s accessing the system. The royalties payable to third parties increased by $247,000 for fiscal 2021 compared to fiscal 2020. The growth in royalties payable is directly attributable to new customers beginning to use the system and triggering fees owed to the third-party coding content providers. The remaining year over year increase was driven by personnel related and infrastructure related expenses. The Company invested in additional personnel to support SaaS solutions as the customer base has been expanding. The Company anticipates the costs in these categories will continue to rise in fiscal 2022 as the Company continues to invest in eValuator and as new customers begin to use the system.

24

Selling, General and Administrative Expense

	Fiscal Year				2021 to 2020 Change
(in thousands):	2021		2020		$		%
General and administrative expenses	$	7,896	$	5,550	$	2,346		42	%
Sales and marketing expenses		4,035		3,015		1,020		34	%
Total selling, general, and administrative expense	$	11,931	$	8,565	$	3,366		39	%

General and administrative expenses consist primarily of compensation and related benefits, reimbursable travel and entertainment expenses related to our executive and administrative staff, general corporate expenses, amortization of intangible assets, and occupancy costs. The increase in general and administrative expenses for fiscal 2021 as compared to fiscal 2020 is primarily attributed to the Avelead acquisition, resulting in an additional $1,178,000 expense for fiscal 2021. There was also an increase of professional fees of $464,000 primarily attributable to the Avelead acquisition, along with expenses related to the Special Meeting of Stockholders held in connection with the Avelead acquisition. Further, share-based compensation was approximately $429,000 higher in the fiscal 2021 as compared to the prior year. The Company has previously announced an initial accelerated vesting schedule of granted equity awards for its executives in lieu of cash bonuses. These accelerated equity awards are causing a near-term increase in amortization of share-based compensation for fiscal 2021. The remaining increase is primarily driven by salaries and benefits associated with the Company’s increase in executive and administrative personnel.

Sales and marketing expenses consist primarily of compensation and related benefits and reimbursable travel and entertainment expenses related to our sales and marketing staff, as well as advertising and marketing expenses, including trade shows. Sales and marketing expenses for fiscal 2021 increased by approximately $647,000, as compared to fiscal 2020, due to the Avelead acquisition. The remaining increases are primarily due to an increase in salaries and benefits associated with the Company’s expansion and upgrade of its direct and indirect sales personnel. The Company has had limited travel as a result of the COVID-19 pandemic. The Company has been productive using web-based meeting media to continue its sales and customer service processes. As hospitals open themselves up to visitors, the Company looks forward to resuming travel and meeting its customers and prospects face-to-face.

Research and Development

	Fiscal Year				2021 to 2020 Change
(in thousands):	2021		2020		$			%
Research and development expense	$	4,782	$	2,933	$	1,849			63	%
Plus: Capitalized research and development cost		1,431		1,825		(394	)		(22	)%
Total research and development cost	$	6,213	$	4,758	$	1,455			31	%

Research and development expenses consist primarily of compensation and related benefits, the use of independent contractors for specific near-term development projects and an allocated portion of general overhead costs, including occupancy costs, if material. Total research and development costs for fiscal 2021 include $865,000 related to Avelead since the date of acquisition. The remaining increase was related to increased spend with our development partner. The Company continues to focus on and be more efficient in research and development activities on those products with its highest growth prospects, primarily eValuator. The Company expects fiscal 2022 total research and development spend to continue at approximately the same level as fiscal 2021. For fiscal 2021, as a percentage of revenue, total research and development costs were 36%. In fiscal 2021, the Company was awarded $39,000 from the State of Georgia for its annual research and development tax credit. At the end of fiscal 2021, the cumulative balance of unused research and development credits was $125,000. These research and development tax credits can be applied to current Georgia payroll taxes due. The fiscal 2022 and future research and development tax credits are expected to be higher than fiscal 2021 due to the acquisition of Avelead.

25

Non-Routine Costs

	Fiscal Year				2021 to 2020 Change
(in thousands):	2021		2020		$		%
Non-routine costs	$	2,856	$	—	$	2,856		100	%

Refer to Note 2 – Summary of Significant Accounting Policies - Other Operating Costs – Non-routine costs – in the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for further details with respect to Non-routine costs. The Non-routine costs for fiscal 2021 are primarily related to the transaction costs of Avelead acquisition and executive bonuses that were transactional in nature.

Loss on Exit of Operating Lease

	Fiscal Year				2021 to 2020 Change
(in thousands):	2021		2020		$			%
Loss on exit of operating lease	$	—	$	105	$	(105	)		(100	)%

Refer to Note 4 – Operating Leases in our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for further details with respect to the Company’s former shared office arrangement in Atlanta. In fiscal 2020, we recorded $105,000 in cost related to the remaining payments required under the agreement with the landlord on shared office space in Atlanta that was abandoned when the Company entered a new lease for office space in Alpharetta, Georgia.

Other Income (Expense)

	Fiscal Year						2021 to 2020 Change
(in thousands):	2021			2020			$			%
Interest expense	$	(236	)	$	(51	)	$	(185	)		(363	)%
Loss on early extinguishment of debt		(43	)		—			(43	)		(100	)%
Other		1,911			(62	)		1,973			3,182	%
PPP Loan Forgiveness		2,327			—			2,327			100	%
Total other income (expense)	$	3,959		$	(113	)	$	4,072			3604	%

Interest expense consists of interest associated with the term loan, deferred financing costs, and less interest related to capitalization of software. Interest expense increased for fiscal 2021 from the prior year primarily due to the $10,000,000 term loan with Bridge Bank (Refer to Note 5 – Debt in the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data”).

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. This revolving credit facility was replaced with the Second Amended and Restated Loan and Security Agreement that was put in place on August 26, 2021. Accordingly, the Company wrote off $43,000 of deferred financing costs from this loan as a loss on extinguishment of debt

Other income for fiscal year includes a valuation adjustment of $1,851,000, related to the earnout liabilities associated with the Avelead acquisition (Refer to Note 3 – Business Combination and Divestiture of the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data”), and $64,000 related to the sublease of the Alpharetta location (Refer to Note 4 – Operating Leases of the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data”). Other expense for fiscal 2020 includes valuation adjustments on the Montefiore minimum royalty liability and certain foreign exchange transaction losses. Refer to Note 12 – Commitments and Contingencies to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for further information concerning the resolution of the Montefiore liability.

PPP Loan Forgiveness for fiscal 2021 reflects the financial impact of the $2,301,000 PPP loan along with the accrued interest of $26,000 being forgiven.

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Provision for Income Taxes

For continuing operations for the fiscal 2021 and 2020, we recorded income tax expense of $109,000 and income tax benefit of $1,260,000, respectively, which is comprised of estimated federal, state, and local income tax provisions. The income tax benefit from continuing operations was netted with the income tax provision on discontinued operations as disclosed in prior filings resulting in $0 federal tax expense in fiscal 2020. The Company has a substantial amount of net operating losses for federal and state income tax purposes. For fiscal 2021, the net income tax expense is reported under continuing operations. Refer to Note 7 – Income Taxes – in the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for more information on the Company’s adoption of ASU 2019-12.    

Use of Non-GAAP Financial Measures

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

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 us, may differ from and may not be comparable to similarly titled measures used by other companies.

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EBITDA per diluted share

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, transaction related expenses, and other expenses that do not relate to our core operations such as severance and impairment charges; (iii) Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of GAAP net revenue; and (iv) Adjusted EBITDA per diluted share as Adjusted EBITDA divided by adjusted diluted shares outstanding. EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EBITDA per diluted share are used to facilitate a comparison of our operating performance on a consistent basis from period to period and provide for a more complete 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 in nature. Adjusted EBITDA removes the impact of share-based compensation expense, which is another non-cash item. Adjusted EBITDA per diluted share includes incremental shares in the share count that are considered anti-dilutive in a GAAP net loss position.

The Board of Directors 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 and Security 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 of Directors.

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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 advantages regarding the use and analysis of these measures as mentioned above. EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EBITDA per diluted share, 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:

● 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 and Security 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.

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 consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data”.

The following table reconciles EBITDA and Adjusted EBITDA to net loss from continuing operations, and Adjusted EBITDA per diluted share to loss per diluted share for the fiscal years ended January 31, 2022 and 2021 (amounts in thousands, except for share data). All of the items included in the reconciliation from EBITDA and Adjusted EBITDA to net loss from continuing operations and the related per share calculations 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.

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	Fiscal Year
In thousands, except per share data	2021			2020
Adjusted EBITDA Reconciliation
Loss from continuing operations	$	(6,917	)	$	(4,799	)
Interest expense		236			51
Income tax expense (benefit)		109			(1,260	)
Depreciation		68			64
Amortization of capitalized software development costs		1,848			1,662
Amortization of intangible assets		1,281			491
Amortization of other costs		449			359
EBITDA		(2,926	)		(3,432	)
Share-based compensation expense		2,216			1,403
Non-cash valuation adjustments to assets and liabilities		(1,851	)		31
Non-routine Costs		2,856			—
Forgiveness of PPP Loan and accrued interest		(2,327	)		—
Other non-recurring expenses		(48	)		—
Loss on early extinguishment of debt		43			—
Loss on exit of operating lease		—			105
Adjusted EBITDA	$	(2,037	)	$	(1,893	)
Adjusted EBITDA margin (1)		(12	)%		(17	)%
Adjusted EBITDA per Diluted Share Reconciliation
Loss from continuing operations per common share — diluted	$	(0.16	)	$	(0.16	)
Net (loss) income per common share — diluted (3)	$	(0.15	)	$	0.01
Adjusted EBITDA per adjusted diluted share (2)	$	(0.05	)	$	(0.06	)
Diluted weighted average shares (3)		42,815,239			30,152,383
Includable incremental shares — adjusted EBITDA (4)		458,335			488,359
Adjusted diluted shares		43,273,574			30,640,742

(1)	Adjusted EBITDA as a percentage of GAAP net revenues.
(2)	Adjusted EBITDA per adjusted diluted share for the Company’s common stock is computed using the treasury stock method.
(3)	Diluted weighted average shares and diluted EPS for our common stock method was computed using the treasury stock method.
(4)	The number of incremental shares that would be dilutive under an assumption that the Company is profitable during the reported period, which is only applicable for a period in which the Company reports a GAAP net loss. If a GAAP profit is earned in the reported periods, no additional incremental shares are assumed.

Application of Critical Accounting Policies

The following is a summary of the Company’s most critical accounting policies. Refer to Note 2 - Significant Accounting Policies to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for a complete discussion of the significant accounting policies and methods used in the preparation of our consolidated financial statements.

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Revenue Recognition

The Company derives revenue from the sale of internally developed software, either by licensing for local installation or by a SaaS delivery model, through our direct sales force or through third-party resellers. Licensed, locally installed customers on a perpetual model utilize our support and maintenance services for a separate fee, whereas term-based locally installed license fees and SaaS fees include support and maintenance. The Company also derives revenue from professional services that support the implementation, configuration, training and optimization of the applications, as well as audit services and consulting services The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer. If we determine that we have not satisfied a performance obligation, we will defer recognition of the revenue until the performance obligation is deemed to be satisfied. Maintenance and support and SaaS agreements are generally non-cancellable 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 right of refund terms are required, revenue is recognized upon the satisfaction of such criteria. Significant judgment is required to determine the standalone selling price (“SSP”) for each performance obligation, the amount allocated to each performance obligation and whether it depicts the amount that the Company expects to receive in exchange for the related product and/or service. The Company recognizes revenue for implementation for certain of its eValuator SaaS solution over the contract term, as it has been determined that those implementation services are not a distinct performance obligation. Services for other SaaS and Software solutions such as CDI, RevID and Compare, have been determined as a distinct performance obligation. For these agreements, the Company estimates 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, software as a service and audit services based on observable standalone sales.

Refer to Note 2 - Significant Accounting Policies to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for additional information regarding our revenue recognition policies.

Allowance for Doubtful Accounts

Accounts and contract receivables are comprised of amounts owed the Company for solutions and services provided. Contracts with individual customers and resellers determine when receivables are due and payable. In determining the allowances for doubtful accounts, the unpaid receivables are reviewed periodically to determine the payment status based upon the most currently available information. During these periodic reviews, the Company determines the required allowances for doubtful accounts for estimated losses to reduce total receivables reported to reflect only the amounts expected to be paid.

Capitalized Software Development Costs

Software development costs for software to be sold, leased, or marketed are accounted for in accordance with Accounting Standards Codification (“ASC”) 985-20, Software — Costs of Software to be Sold, Leased or Marketed. Costs associated with the planning and design phase of software development are classified as research and development costs and are expensed as incurred. Once technological feasibility has been established, a portion of the costs incurred in development, including coding, testing and quality assurance, are capitalized until available for general release to customers, and subsequently reported at the lower of unamortized cost or net realizable value. Amortization is calculated on a solution-by-solution basis and is included in Cost of software licenses on the consolidated statements of operations. Annual amortization is measured at the greater of a) the ratio of the software product’s current gross revenues to the total of current and expected gross revenues or b) straight-line over the remaining economic life of the software (typically two years). Unamortized capitalized costs determined to be in excess of the net realizable value of a solution are expensed at the date of such determination.

Internal-use software development costs are accounted for in accordance with ASC 350-40, Internal-Use Software. The costs incurred in the preliminary stages of development are expensed as research and development costs as incurred. Once an application has reached the development stage, internal and external costs incurred to develop internal-use software are capitalized and amortized on a straight-line basis over the estimated useful life of the software (typically three to four years). Maintenance and enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful life of the software. The Company reviews the carrying value for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Amortization expense related to capitalized internal-use software development costs is included in Cost of software as a service on the consolidated statements of operations.

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Goodwill and Intangible Assets

Goodwill and other intangible assets were recognized in conjunction with the acquisitions of Interpoint Partners, LLC (“Interpoint”), Meta Health Technology, Inc. (“Meta”), Clinical Looking Glass® (“CLG”), Opportune IT, Unibased Systems Architecture, Inc. (“Unibased”), and Avelead. Identifiable intangible assets include purchased intangible assets with finite lives, which primarily consist of internally-developed software, customer relationships, non-compete agreements and license agreements. Finite-lived purchased intangible assets are amortized over their expected period of benefit, which generally ranges from one month to 15 years, using the straight-line method.

We assess the useful lives and possible impairment of existing recognized goodwill on at least an annual basis, and goodwill and intangible assets when an event occurs that may trigger such a review. Factors considered important which could trigger a review include:

● significant under-performance relative to historical or projected future operating results;

● significant changes in the manner of use of the acquired assets or the strategy for the overall business;

● identification of other impaired assets within a reporting unit;

● disposition of a significant portion of an operating segment;

● significant negative industry or economic trends;

● significant decline in the Company’s stock price for a sustained period; and

● a decline in the market capitalization relative to the net book value.

Determining whether a triggering event has occurred involves significant judgment by the Company.

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 credits 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, we consider whether it is more likely than not that some or all of the deferred tax assets will not be realized. We establish 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 7 - Income Taxes to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for further details.

Liquidity and Capital Resources

The Company’s liquidity is dependent upon numerous factors including: (i) the timing and amount of revenues 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 minor amounts of capital expenditures. Capital expenditures generally include computer hardware and computer software to support internal development efforts or SaaS data center infrastructure. Operations are funded with cash generated by operations and borrowings under the bank credit facilities. The Company believes that cash flows from operations and available credit facilities are adequate to fund current obligations for twelve months from the date of issuance of the audit report on the Company’s consolidated financial statements. Cash and cash equivalent balances at January 31, 2022 and 2021 were $9,885,000 and $2,409,000, respectively.

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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 shares of the Company’s common stock, par value $0.01 per share, which included 1,312,500 shares of common stock sold pursuant to the underwriter’s exercise of an option to purchase additional shares of common stock to cover over-allotments (the “Offering”). The price to the public in the Offering was $1.60 per share of common stock. The gross proceeds to the Company from the Offering were approximately $16.1 million, before deducting underwriting discounts, commissions, and estimated offering expenses. The Offering closed on March 2, 2021. The Company believes that cash flows from operations, the cash from the Offering and available credit facilities are adequate to fund current obligations for the next twelve months from issuance of the financial statements included in this report. Continued expansion may require the Company to take on additional debt or raise capital through issuance of equities, or a combination of both. There can be no assurance the Company will be able to raise the capital required to fund further expansion.

Authorized Shares Amendment

On May 24, 2021, the Company amended its Certificate of Incorporation, as amended, to increase the total number of authorized shares of the Company’s common stock from 45,000,000 shares to 65,000,000 shares (the “Charter Amendment”). The Charter Amendment was initially approved by the board of directors of the Company, subject to stockholder approval, approved by the Company’s stockholders at the 2021 Annual Meeting of Stockholders of the Company, held on May 20, 2021 (the “2021 Annual Meeting”), and ratified by the Company’s stockholders on July 29, 2021 at the Special Meeting (as defined and described in further detail below).

Also, at the 2021 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 shares, from 6,223,246 shares to 8,223,246 shares (the “Third Amended 2013 Plan Amendment”).

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.

Credit Facility

The Company has liquidity through the Second Amended and Restated Loan and Security Agreement described in more detail in Note 5 – Debt in our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data”. The Company has a new term loan facility with an initial, maximum, principal amount of $10,000,000. Amounts outstanding under the Second Amended and Restated Loan and Security 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%. Pursuant to the Second Amended and Restated Loan and Security Agreement, the Company’s prior $3,000,000 revolving credit facility with Bridge Bank was terminated. At the time of the discontinuance, there was no outstanding balance on the revolving credit facility.

The Second Amended and Restated Loan and Security Agreement includes customary financial covenants as follows:

a.	Minimum Cash. Borrowers shall, at all times, maintain unrestricted cash 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. Borrowers’ Maximum Debt to ARR Ratio, measured on a quarterly basis as of the last day of each fiscal quarter, shall not be greater than the amount set forth under the heading “Maximum Debt to ARR Ratio” as of, and for each of the dates appearing adjacent to such “Maximum Debt to ARR Ratio”.

Quarter Ending	Maximum Debt to ARR Ratio
October 31, 2021	0.80 to 1.00
January 31, 2022	0.75 to 1.00
April 30, 2022	0.65 to 1.00
July 31, 2022	0.55 to 1.00
October 31, 2022	0.50 to 1.00
January 31, 2023	0.45 to 1.00

c. Maximum Debt to Adjusted EBITDA Ratio. Commencing with the quarter ending April 30, 2023, Borrowers’ Maximum Debt to Adjusted EBITDA Ratio, measured on a quarterly basis as of the last day of each fiscal quarter for the trailing four (4) quarter period then ended, shall not be greater than the amount set forth under the heading “Maximum Debt to Adjusted EBITDA Ratio” as of, and for each of the dates appearing adjacent to such “Maximum Debt to Adjusted EBITDA Ratio”.

Quarter Ending	Maximum Debt to Adjusted EBITDA Ratio
April 30, 2023	11.30 to 1.00
July 31, 2023	4.15 to 1.00
October 31, 2023	2.50 to 1.00
January 31, 2024 and on the last day of each quarter thereafter	2.00 to 1.00

d. Fixed Charge Coverage Ratio. Commencing with the quarter ending April 30, 2023, Borrowers shall maintain a Fixed Charge Coverage Ratio of not less than 1.20 to 1.00, measured on a quarterly basis as of the last day of each fiscal quarter for the trailing four (4) quarter period then ended.

The Second Amended and Restated 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 January 31, 2022, the Company was in compliance with the Second Amended and Restated Loan and Security Agreement covenants.

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PPP Loan

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 through the SBA under the PPP. These funds were utilized by the Company to fund payroll expenses and avoid staffing reductions during the slowdown resulting from COVID-19. The loan required principal payments, beginning after the seventh monthly anniversary, and was required to be paid in two years. The PPP loan bore an interest rate of 1.0% per annum. In June 2021, the Company received notification that the PPP loan principal amount of $2,301,000 and accrued interest of $26,000 had been forgiven in full.

Significant cash obligations

	As of January, 31
(in thousands)	2022		2021
Term loan (1)	$	9,904	$	2,301

(1) Term loan balance is reported net of deferred financing costs of $96,000 and $0 as of January 31, 2022 and 2021, respectively. Refer to Note 5 - Debt to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for additional information. The term loan balance as of January 31, 2022 was bank term debt under the Second Amended and Restated Loan and Security Agreement. The term loan payable as of January 31, 2021 is the Company’s PPP loan.

Operating cash flow activities

	Fiscal Year
(in thousands)	2021			2020
Loss from continuing operations	$	(6,917	)	$	(4,799	)
Non-cash adjustments to net loss		1,884			2,810
Cash impact of changes in assets and liabilities		1,149			(1,504	)
Net cash used in operating activities	$	(3,884	)	$	(3,493	)

The use of cash from operating activities was relatively consistent between fiscal 2021 and 2020. The Company had a higher net loss from operations and lower impact of changes in assets and liabilities in fiscal 2021 compared to fiscal 2020. Within non-cash adjustments to net loss, the Company excluded the PPP loan and related interest of $2,327,000 that was forgiven in fiscal 2021 as well as the valuation adjustment of $1,851,000 on the acquisition earnout liability. Net cash used in operating activities was adversely impacted by certain severance cost in 2019 that were paid in 2020 and certain non-routine costs paid in 2021 associated with the acquisition.

The Company’s customers are well-established hospitals, medical facilities or major health information system companies that resell the Company’s solutions, which have good credit histories, and payments have been received within normal time frames for the industry. However, some healthcare organizations have experienced significant operating losses as a result of limits on third-party reimbursements from insurance companies and governmental entities. Agreements with clients often involve significant amounts and contract terms typically require customers to make progress payments. Adverse economic events, as well as uncertainty in the credit markets, may adversely affect the liquidity for some of our clients.

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Investing cash flow activities

	Fiscal Year
(in thousands)	2021			2020
Investment in Avelead, net of cash	$	(12,470	)	$	—
Purchases of property and equipment		(41	)		(44	)
Proceeds from sale of ECM Assets		800			11,288
Capitalized software development costs		(1,458	)		(1,784	)
Net cash (used in) provided by investing activities	$	(13,169	)	$	9,460

The cash used in investing activities for fiscal 2021 included the cash used to acquire Avelead, capitalized software development costs, off-set by the release of escrowed funds in fiscal 2021 from the sale of the ECM Assets. Refer to Note 3 – Business Combination and Divestiture to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for further details on Avelead and the sale of the ECM Assets. The proceeds from the sale of the ECM Assets in fiscal 2020 are net of direct transaction expenses. Refer to Note 13 – Discontinued Operations to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for further details on the sale of the ECM Assets. Operationally, the Company has a focused effort on the spend for software development projects that will result in in increasing its revenue. See discussion and analysis in “Research and development costs” above.

Financing cash flow activities

	Fiscal Year
(in thousands)	2021			2020
Proceeds from issuance of common stock	$	16,100		$	—
Payments for costs directly attributable to the issuance of common stock		(1,313	)		—
Repayment of bank term loan		—			(4,000	)
Proceeds from term loan payable		10,000			2,301
Payments related to settlement of employee shared-based awards		(464	)		(256	)
Payment of deferred financing costs		(168	)		—
Payment on royalty liability		—			(1,000	)
Other		(6	)		12
Net cash provided by (used in) financing activities	$	24,149		$	(2,943	)

The cash provided by financing activities for fiscal 2021 was primarily from the public Offering of the Company’s common stock, which closed on March 2, 2021. Refer to Note 8 – Equity to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for further details. Additionally, the Company received proceeds of $10,000,000 as a result of the Second Amended and Restated Loan and Security Agreement entered into on August 26, 2021. Refer to Note 5 – Debt to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for further details. The cash used in financing activities for fiscal 2020 was primarily the result of the repayment of the Company’s term loan on February 24, 2020, upon the closing of the sale of the ECM Assets. The Company was required to repay the term loan at close and funding of the sale of the ECM Assets. Additionally, the Company filed for, and received, a PPP loan in the amount of $2,301,000.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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

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Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE COVERED BY REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

Report of Independent Registered Public Accounting Firm	36
Consolidated Balance Sheets at January 31, 2022 and 2021	38
Consolidated Statements of Operations for the two years ended January 31, 2022	40
Consolidated Statements of Changes in Stockholders’ Equity for the two years ended January 31, 2022	41
Consolidated Statements of Cash Flows for the two years ended January 31, 2022	42
Notes to Consolidated Financial Statements	43
Schedule II — Valuation and Qualifying Accounts	69

All other financial statement schedules are omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto.

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Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

Streamline Health Solutions, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Streamline Health Solutions, Inc. and its subsidiaries (the “Company”) as of January 31, 2022 and 2021 and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the two years in the period ended January 31, 2022, and the related notes and financial statement schedule II (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended January 31, 2022, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters 

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Capitalized Software Development Costs

As described in Note 2 to the financial statements, the Company develops software within the scope of both ASC 350-40, Internal-Use Software (“Topic 350”) and ASC 985-20, Software – Costs of Software to be Sold, Leased or Marketed (“Topic 985”).

Internal-use software development costs are accounted for in accordance with Topic 350. Costs associated with the preliminary stages of development are classified as research and development costs and expensed as incurred. Costs associated with the application development stage are capitalized. Maintenance and enhancement costs, including costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements that result in added functionality, in which case the costs are capitalized. Capitalized amounts are amortized on a straight-line basis over the estimated useful life of the software.

Development costs for software to be sold, leased, or marketed are accounted for in accordance with Topic 985. Costs associated with the planning and design phase of software development are classified as research and development costs and expensed as incurred. Once technological feasibility has been established, a portion of the costs incurred in development, including coding, testing and quality assurance, are capitalized until available for general release to clients, and subsequently reported at the lower of unamortized cost or net realizable value.

We identified capitalized software development costs as a critical audit matter. Our principal considerations for this determination were the high degree of auditor judgment and subjectivity required in evaluating management’s determination of the activities and costs that qualify for capitalization and the relevant software development guidance to be applied under the applicable accounting standards.  

36

The primary procedures we performed to address this critical audit matter included:

● We obtained an understanding of the Company’s process for determining the activities and costs that qualify for capitalization and the relevant software development guidance to be applied under the applicable accounting standards.

● We tested the mathematical accuracy of the roll forward of capitalized software and related amortization expense. We also tested the completeness and accuracy of applicable system-generated reports, including reconcilements of details to associated sub-ledgers.

● For a sample of capitalized costs, we evaluated the relevance of the software development guidance applied, by performing the following:

○	We inspected underlying documentation and assessed the eligibility of costs for capitalization, to the application of the correct guidance, and whether during the application development stage or after the attainment of technological feasibility, as applicable.
○	We recalculated the capitalized amount based on hours incurred and direct payroll related costs or associated vendor contracts and invoices for work performed by third parties.
○	We evaluated the software implementation timelines and related underlying documentation supporting the capitalization periods for implementation and development amounts as well as the date the costs were placed in service.
○	We inquired of project managers for significant projects to assess the nature of the costs, the time devoted to capitalizable activities and the underlying documentation.

● For eligible costs within the scope of Topic 985, we assessed whether amortization was the greater of amortization derived from either a straight-line basis or the ratio of current revenues to total current and anticipated revenues.

Valuation of Contingent Consideration and Acquired Intangible Assets

As described in Note 3 to the financial statements, on August 16, 2021, the Company acquired Avelead Consulting, LLC, which included contingent consideration and acquired intangible assets. The contingent consideration was recorded at fair value on the acquisition date and is revalued each reporting period until final settlement with changes in the fair value recognized within the consolidated statement of operations.

The Company estimated the fair value of the customer relationship intangible assets using the multi-period excess earnings method, which required management to make significant estimates and assumptions related to forecasted revenue and earnings, attrition rates, and the selection of discount rates. The Company estimated the fair value of the trade name and developed software technology intangible assets using the relief from royalty method, which required management to make significant estimates and assumptions related to forecasted revenue and earnings, the obsolescence rate, and the selection of discount rates. The Company estimated the fair value of the contingent consideration using a Monte Carlo simulation. The method required management to make significant estimates and assumptions related to forecasted revenue, discount rates and revenue volatility.

We identified the valuation of contingent consideration and acquired intangible assets as a critical audit matter. Our principal consideration for this determination included the high degree of auditor judgement and subjectivity in evaluating management’s valuation methodologies, particularly as it related to evaluating the inputs and significant assumptions used to develop the fair value measurements.

The primary procedures we performed to address this critical audit matter included:

● We obtained an understanding of management’s process for determining the fair value measurements of the contingent consideration and acquired intangible assets.

● We evaluated forward-looking assumptions, such as forecasted revenue and earnings and attrition rates used by management by performing procedures that included, but not limited to, comparisons to industry and historical performance data, and sensitivity analysis to assess their reasonableness.

● Utilizing a valuation specialist, we evaluated the significant assumptions and methods utilized in developing the fair value of the contingent consideration and acquired intangible assets, including:

○	We evaluated the reasonableness of the Company’s third-party valuation models and methodologies, expected cash flow calculations, and reviewed significant assumptions.
○	We developed an independent calculation of the discount rates used and compared our rates to those used by management.
○	We prepared an independent calculation of the fair value of the contingent consideration and the intangible assets to test the accuracy of management’s valuation models.

/s/ Dixon Hughes Goodman LLP

We have served as the Company’s auditor since 2019.

Atlanta, GA

April 28, 2022

37

STREAMLINE HEALTH SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

	January 31,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	9,885,000	$	2,409,000
Accounts receivable, net of allowance for doubtful accounts of $76,000 and $65,000, respectively		3,823,000		2,929,000
Contract receivables		843,000		174,000
Assets held in escrow		—		800,000
Prepaid and other current assets		568,000		416,000
Current assets of discontinued operations		—		587,000
Total current assets		15,119,000		7,315,000
Non-current assets:
Property and equipment, net of accumulated amortization of $192,000 and $452,000 respectively		123,000		104,000
Right-of use asset for operating lease		218,000		391,000
Capitalized software development costs, net of accumulated amortization of $5,202,000 and $3,507,000, respectively		5,555,000		5,945,000
Intangible assets, net of accumulated amortization of $5,121,000 and $4,773,000, respectively		16,763,000		624,000
Goodwill		23,089,000		10,712,000
Other		948,000		873,000
Long-term assets of discontinued operations		—		13,000
Total non-current assets		46,696,000		18,662,000
Total assets	$	61,815,000	$	25,977,000

See accompanying notes to consolidated financial statements.

38

	January 31,
	2022			2021
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	778,000		$	272,000
Accrued expenses		1,803,000			908,000
Current portion of term loan, net of deferred financing costs		250,000			1,534,000
Deferred revenues		5,794,000			3,862,000
Current portion of operating lease obligation		204,000			198,000
Current portion of acquisition earnout liability		4,672,000			—
Current liabilities of discontinued operations		—			595,000
Total current liabilities		13,501,000			7,369,000
Non-current liabilities:
Term loan, net of current portion and deferred financing costs		9,654,000			767,000
Deferred revenues, less current portion		136,000			130,000
Operating lease obligations, less current portion		33,000			222,000
Acquisition earnout liability, less current portion		4,161,000			—
Other non-current liabilities		286,000			—
Total non-current liabilities		14,270,000			1,119,000
Total liabilities		27,771,000			8,488,000
Stockholders’ equity:
Common stock, $0.01 par value per share, 65,000,000 shares authorized; 47,840,950 and 31,597,975 shares issued and outstanding, respectively		478,000			316,000
Additional paid in capital		119,225,000			96,290,000
Accumulated deficit		(85,659,000	)		(79,117,000	)
Total stockholders’ equity		34,044,000			17,489,000
Total liabilities and stockholders’ equity	$	61,815,000		$	25,977,000

See accompanying notes to consolidated financial statements.

39

STREAMLINE HEALTH SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

		Fiscal Year
		2021			2020
Revenues:
Software licenses	$	1,057,000		$	590,000
Professional services		2,026,000			618,000
Audit services		1,896,000			1,891,000
Maintenance and support		4,323,000			4,586,000
Software as a service		8,077,000			3,661,000
Total revenues		17,379,000			11,346,000
Operating expenses:
Cost of software licenses		485,000			501,000
Cost of professional services		2,782,000			1,040,000
Cost of audit services		1,559,000			1,558,000
Cost of maintenance and support		334,000			684,000
Cost of software as a service		3,417,000			1,906,000
Selling, general and administrative expense		11,931,000			8,565,000
Research and development		4,782,000			2,933,000
Non-routine costs		2,856,000			—
Loss on exit of membership agreement		—			105,000
Total operating expenses		28,146,000			17,292,000
Operating loss		(10,767,000	)		(5,946,000	)
Other expense:
Interest expense		(236,000	)		(51,000	)
Loss on early extinguishment of debt		(43,000	)		—
Other		1,911,000			(62,000	)
PPP Loan Forgiveness		2,327,000			—
Loss from continuing operations before income taxes		(6,808,000	)		(6,059,000	)
Income tax (expense) benefit		(109,000	)		1,260,000
Loss from continuing operations		(6,917,000	)		(4,799,000	)
Income from discontinued operations:
Gain on sale of discontinued operations		—			6,013,000
Income from discontinued operations		401,000			356,000
Income tax expense		(26,000	)		(1,274,000	)
Income from discontinued operations, net of tax		375,000			5,095,000
Net income (loss)	$	(6,542,000	)	$	296,000
Basic Earnings Per Share:
Continuing operations	$	(0.16	)	$	(0.16	)
Discontinued operations		0.01			0.17
Net income	$	(0.15	)	$	0.01
Weighted average number of common shares - basic		42,815,239			30,152,383
Diluted Earnings Per Share:
Continuing operations	$	(0.16	)	$	(0.16	)
Discontinued operations		0.01			0.17
Net income (loss) per common share - diluted	$	(0.15	)	$	0.01
Weighted average number of common shares - diluted		43,273,574			30,640,742

See accompanying notes to consolidated financial statements.

40

STREAMLINE HEALTH SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

	Common						Additional						Total
	stock			Common			paid in			Accumulated			stockholders’
	shares			stock			capital			deficit			equity
Balance at January 31, 2020		30,530,643		$	305,000		$	95,113,000		$	(79,413,000	)	$	16,005,000
Restricted stock issued		1,395,917			14,000			(14,000	)		—			—
Restricted stock forfeited		(166,490	)		(2,000	)		2,000			—			—
Surrender of stock		(162,095	)		(1,000	)		(255,000	)		—			(256,000	)
Share-based compensation expense		—			—			1,444,000			—			1,444,000
Net income		—			—			—			296,000			296,000
Balance at January 31, 2021		31,597,975			316,000			96,290,000			(79,117,000	)		17,489,000
Exercise of Stock Options		3,300			—			4,000			—			4,000
Restricted stock issued		1,462,874			14,000			(14,000	)		—			—
Issuance of Common Stock		15,084,472			151,000			22,503,000			—			22,654,000
Offering Expenses								(1,313,000	)		—			(1,313,000	)
Restricted stock forfeited		(50,100	)		—			—			—			—
Surrender of stock		(257,571	)		(3,000	)		(461,000	)		—			(464,000	)
Share-based compensation expense		—			—			2,216,000			—			2,216,000
Net loss		—			—			—			(6,542,000	)		(6,542,000	)
Balance at January 31, 2022		47,840,950		$	478,000		$	119,225,000		$	(85,659,000	)	$	34,044,000

See accompanying notes to consolidated financial statements.

41

STREAMLINE HEALTH SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

		Fiscal Year
		2021			2020
Cash flows from operating activities:
Net income (loss)	$	(6,542,000	)	$	296,000
LESS: Income from discontinued operations, net of tax		375,000			5,095,000
Loss from continuing operations, net of tax		(6,917,000	)		(4,799,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		68,000			64,000
Amortization of capitalized software development costs		1,848,000			1,662,000
Amortization of intangible assets		1,281,000			491,000
Amortization of other deferred costs		449,000			359,000
Amortization of Deferred Financing Costs		51,000			—
Valuation adjustments		(1,851,000	)		31,000
Loss on early extinguishment of debt		43,000			—
Provision (benefit) for income taxes		95,000			(1,274,000	)
Loss on exit of operating lease		—			105,000
Share-based compensation expense		2,216,000			1,403,000
Provision (benefit) for accounts receivable allowance		11,000			(31,000	)
Forgiveness of PPP Loan		(2,327,000	)		—
Changes in assets and liabilities:
Accounts and contract receivables		(129,000	)		(253,000	)
Other assets		(346,000	)		(519,000	)
Accounts payable		17,000			(484,000	)
Accrued expenses and other liabilities		533,000			(592,000	)
Deferred revenues		1,074,000			344,000
Net cash used in operating activities – continuing operations		(3,884,000	)		(3,493,000	)
Net cash provided by (used in) operating activities – discontinued operations		380,000			(2,264,000	)
Cash flows from investing activities:
Investment in Avelead, net of cash acquired		(12,470,000	)		—
Purchases of property and equipment		(41,000	)		(44,000	)
Proceeds from sale of ECM assets		800,000			11,288,000
Capitalization of software development costs		(1,458,000	)		(1,784,000	)
Net cash (used in) provided by investing activities – continuing operations		(13,169,000	)		9,460,000
Cash flows from financing activities:
Proceeds from issuance of common stock		16,100,000			—
Payments for costs directly attributable to the issuance of common stock		(1,313,000	)		—
Repayment of bank term loan		—			(4,000,000	)
Proceeds from term loan payable		10,000,000			2,301,000
Payments related to settlement of employee shared-based awards		(464,000	)		(256,000	)
Payment of deferred financing costs		(168,000	)		—
Payment on royalty liability		—			(1,000,000	)
Other		(6,000	)		12,000
Net cash provided by (used in) financing activities – continuing operations		24,149,000			(2,943,000	)
Net increase in cash and cash equivalents		7,476,000			760,000
Cash and cash equivalents at beginning of period		2,409,000			1,649,000
Cash and cash equivalents at end of period	$	9,885,000		$	2,409,000
Supplemental cash flow disclosures:
Interest paid, net of amounts capitalized	$	153,000		$	17,000
Income taxes paid	$	21,000		$	—

See accompanying notes to consolidated financial statements.

42

STREAMLINE HEALTH SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2022 and 2021

NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS

Streamline Health Solutions, Inc. and each of its wholly-owned subsidiaries, Streamline Health, LLC, Avelead Consulting, LLC, Streamline Consulting, LLC and Streamline Pay & Benefits, LLC, (collectively, unless the context requires otherwise, “we”, “us”, “our”, “Streamline”, or the “Company”) operates 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, RevID, and other workflow software applications and the use of such applications by software as a service (“SaaS”). The Company also provides audit 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.

Fiscal Year

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.

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of Streamline Health Solutions, Inc. and its wholly-owned subsidiaries, Streamline Health, LLC, Avelead Consulting, LLC, Streamline Consulting Solutions, LLC and Streamline Pay & Benefits, LLC. All significant intercompany transactions and balances are eliminated in consolidation. All amounts in the consolidated financial statements, notes and tables have been rounded to the nearest thousand dollars, except share and per share amounts, unless otherwise indicated.

Refer to Note – 3 Business Combination and Divestiture. Under ASC 280-10-50-11, two or more operating segments may be aggregated into a single operating segment if they are considered to be similar. Operating segments are considered to be similar if they can be expected to have essentially the same economic characteristics and future prospects. Using the aggregation guidance, the Company determined that it has one operating segment due to the similar economic characteristics of the Company’s products, product development, distribution, regulatory environment and customer base as a provider of computer software-based solutions and services for acute-care healthcare providers. The Company has two reporting units for evaluation of intangible assets. These two reporting units are the legacy Streamline business and Avelead.

On February 24, 2020, the Company sold a portion of its business (the ECM Assets). We applied the standard of ASC 205-20-1 to ascertain the timing of accounting for the discontinued operations. Based on ASC 205-20-1, the Company determined that upon receiving stockholder approval, which occurred February 21, 2020, it was authorized to sell the ECM assets. By the Company having the authority and ability to consummate the sale of the ECM Assets, it 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 consolidated statements of operations, cash flows and balance sheets for the current and comparative prior periods. Refer to Note 13 – Discontinued Operations for further details.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“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, stock-based compensation, capitalization of software development costs, intangible assets, the allowance for doubtful accounts, contingent consideration and income taxes. Actual results could differ from those estimates.

Cash and Cash Equivalents

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash demand deposits. Cash deposits are placed in Federal Deposit Insurance Corporation (“FDIC”) insured financial institutions. Cash deposits may exceed FDIC insured levels from time to time. For purposes of the consolidated balance sheets and consolidated statements of cash flows, the Company considers all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents.

43

Non-Cash Items

The Company had the following items that were non-cash items related to the consolidated statements of cash flows:

		Fiscal Year
		2021		2020
Forgiveness of PPP loan and accrued interest	$	2,327,000	$	—
Escrowed funds from sale of ECM Assets		—		800,000
Right-of Use Assets from operating lease		—		540,000
Capitalized software purchased with stock (Note 12)		—		41,000

Receivables

Accounts and contract receivables are comprised of amounts owed to the Company for licensed software, professional services, including coding audit services, consulting services, maintenance services, and software as a service and are presented net of the allowance for doubtful accounts. The timing of revenue recognition may not coincide with the billing terms of the customer contract, resulting in unbilled receivables or deferred revenues; therefore, certain contract receivables represent revenues recognized prior to customer billings. Individual contract terms with customers or resellers determine when receivables are due. Accounts receivable represent amounts that the entity has an unconditional right to consideration. For billings where the criteria for revenue recognition have not been met, deferred revenue is recorded until the Company satisfies the respective performance obligations.

Allowance for Doubtful Accounts

The Company adjusts accounts receivable down to net realizable value with its allowance methodology. In determining the allowance for doubtful accounts, aged receivables are analysed periodically by management. Each identified receivable is reviewed based upon the most recent information available and the status of any open or unresolved issues with the customer preventing the payment thereof. Corrective action, if necessary, is taken by the Company to resolve open issues related to unpaid receivables. During these periodic reviews, the Company determines the required allowances for doubtful accounts for estimated losses resulting from the unwillingness of its customers or resellers to make required payments. The allowance for doubtful accounts was approximately $76,000 and $65,000 at January 31, 2022 and 2021, respectively. The Company believes that its reserve is adequate, however, results may differ in future periods.

Bad debt (benefit) expense for fiscal years 2021 and 2020 was as follows:

	2021		2020
Bad debt expense (benefit)	$	11,000	$	(31,000	)

Concessions Accrual

In determining the concessions accrual, the Company evaluates historical concessions granted relative to revenue. The Company records a provision, reducing revenue, each period for the estimated amount of concessions incurred on the revenue recorded. The Company evaluates the amount of the provision and the concession accrual each period. The concession accrual included in accrued other expenses on the Company’s consolidated balance sheets was $152,000 and $99,000 as of January 31, 2022 and 2021, respectively.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method, over the estimated useful lives of the related assets. Estimated useful lives are as follows:

Computer equipment and software	3-4 years
Office equipment	5 years
Office furniture and fixtures	5-7 years
Leasehold improvements	Term of lease or estimated useful life, whichever is shorter

Depreciation expense for property and equipment in fiscal 2021 and 2020 was $68,000 and $64,000, respectively.

Normal repairs and maintenance are expensed as incurred. Replacements are capitalized and the property and equipment accounts are relieved of the items being replaced or disposed of, if no longer of value. The related cost and accumulated depreciation of the disposed assets are eliminated and any gain or loss on disposition is included in the results of operations in the year of disposal.

The Company wrote-off fully depreciated fixed assets during fiscal 2021 of $198,000. There was no impact to the consolidated statements of operations as this eliminated the asset and accumulated depreciation of the fully depreciated fixed assets.

44

Leases

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. 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. Since our lease arrangements do not provide an implicit rate, we use our estimated incremental borrowing rate for the expected remaining lease term at commencement date in determining the present value of future lease payments. We recognize operating lease cost on a straight-line basis by aggregating any rent abatement with the total expected rental payments and amortizing the expense ratably over the term of the lease. Sublease income is recognized as other income over the period of the lease, as the sublease is outside of the Company’s normal business operations. See Note 4 – Operating Leases for further details.

Debt Issuance Costs

For fiscal 2021, costs of $130,000 related to the issuance of the Second Amended and Restated Loan and Security Agreement were capitalized as a reduction to the carrying value of debt and are being accreted to interest expense over the term of the loan using the effective interest rate method. The Company will also incur $200,000 in financing costs at the earlier of the term date of the loan, or pre-payment. These costs are being accreted, through interest expense, to the full value of the $200,000 over the term of the loan.

Cost related to the issuance of the Loan and Security Agreement and Second Amended and Restated Loan and Security Agreement were capitalized and amortized to interest expense on a straight-line basis, which is not materially different from the effective interest method, over the term of the related debt, and presented on the Company’s consolidated balance sheets as a direct deduction from the carrying amount of the non-current portion of our term loan.

Impairment of Long-Lived Assets

The Company reviews the carrying value of long-lived assets for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Among the factors the Company considers in making the evaluation are changes in market position and profitability. If facts and circumstances are present which may indicate that the carrying amount of the assets may not be recoverable, the Company will prepare a projection of the undiscounted cash flows of the specific asset or asset group and determine if the long-lived assets are recoverable based on these undiscounted cash flows. If impairment is indicated, an adjustment will be made to reduce the carrying amount of these assets to their fair values.

Capitalized Software Development Costs

Software development costs for software to be sold, leased, or marketed are accounted for in accordance with ASC 985-20, Software — Costs of Software to be Sold, Leased or Marketed. Costs associated with the planning and design phase of software development are classified as research and development costs and are expensed as incurred. Once technological feasibility has been established, a portion of the costs incurred in development, including coding, testing and quality assurance, are capitalized until available for general release to customers, and subsequently reported at the lower of unamortized cost or net realizable value. Amortization is calculated on a solution-by-solution basis and is included in Cost of software licenses on the consolidated statements of operations. Annual amortization is measured at the greater of a) the ratio of the software product’s current gross revenues to the total of current and expected gross revenues or b) straight-line over the remaining economic life of the software (typically two years). Unamortized capitalized costs determined to be in excess of the net realizable value of a solution are expensed at the date of such determination. Capitalized software development costs for software to be sold, leased, or marketed, net of accumulated amortization, totalled $846,000 and $1,103,000 as of January 31, 2022 and 2021, respectively.

Internal-use software development costs are accounted for in accordance with ASC 350-40, Internal-Use Software. The costs incurred in the preliminary stages of development are expensed as research and development costs as incurred. Once an application has reached the development stage, internal and external costs incurred to develop internal-use software are capitalized and amortized on a straight-line basis over the estimated useful life of the software (typically three to four years). Maintenance and enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful life of the software. The Company reviews the carrying value for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Amortization expense related to capitalized internal-use software development costs is included in Cost of software as a service on the consolidated statements of operations. Capitalized software development costs for internal-use software, net of accumulated amortization, totaled $4,709,000 and $4,842,000 as of January 31, 2022 and 2021, respectively.

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The estimated useful lives of software (including software to be sold and internal-use software) are reviewed frequently and adjusted as appropriate to reflect upcoming development activities that may include significant upgrades and/or enhancements to the existing functionality. The Company reviews, on an on-going basis, the carrying value of its capitalized software development expenditures, net of accumulated amortization.

Amortization expense on all capitalized software development cost was $2,173,000 and $1,662,000 in fiscal 2021 and 2020, respectively. Further, the Company recognized an impairment of approximately $84,000 and $164,000 in fiscal 2021 and fiscal 2020, respectively, related to cancelled or abandoned enhancement projects during fiscal 2021 and fiscal 2020 that has been recognized within amortization expense. Additionally, in fiscal 2021, approximately $154,000 of fully amortized and abandoned assets, including previously acquired assets, were cleared from their corresponding capitalization and accumulated amortization balance sheet accounts.

The Company uses the “carry-over” method for amortizing capitalized software development costs. Under the “carry-over” method, the costs of the enhancements are added to the unamortized costs of the previous version of the product and the combined amount is amortized over the remaining useful life of the product. Including unamortized cost of the original product with the cost of the enhancement for purposes of applying the net realizable value test and amortization provisions is consistent with accounting guidance for software companies that improve their software and discontinue selling or marketing the older versions.

		Fiscal Year
		2021		2020
Amortization expense on internally-developed software included in:
Cost of software licenses	$	485,000	$	501,000
Cost of audit services		13,000		13,000
Cost of software as a service		1,675,000		1,148,000
Total amortization expense on internally-developed software	$	2,173,000	$	1,662,000

Interest capitalized to software development cost in fiscal 2021 and 2020 was $27,000 and $13,000, respectively. The interest capitalized to software development cost reduces the Company’s interest expense recognized in the consolidated statements of operations.

Research and development expense was $4,782,000 and $2,933,000 in fiscal 2021 and 2020, respectively.

Fair Value of Financial Instruments

The FASB’s authoritative guidance on fair value measurements establishes a framework for measuring fair value, and expands disclosure about fair value measurements. 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. For fiscal years 2021 and 2020, there were no transfers of assets or liabilities between Levels 1, 2, or 3.

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The table below provides information on our liabilities that are measured at fair value on a recurring basis:

			Quoted Prices in		Significant Other		Significant
	Total Fair		Active Markets		Observable Inputs		Unobservable Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
At January 31, 2022
Acquisition earnout liability (1)	$	8,833,000	$	–	$	–	$	8,833,000

(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 January 31, 2022. The decrease in the valuation of the acquisition earnout liability was $1,851,000 from the date of closing of the Avelead acquisition, August 16, 2021 to the end of the fiscal year, January 31, 2022. The valuation adjustment is recognized in “other income” in the accompanying consolidated statement of operations.

The fair value of the Company’s term loan under its Second Amended and Restated Loan and Security Agreement was determined through an analysis of the interest rate spread from the date of closing the loan (August 2022) to the date of the most recent balance sheet, January 31, 2022. The term loan bears 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 prime rate is variable and, thus accommodates changes in the market interest rate. However, the interest rate spread (the 1.5% added to the Prime Rate) is fixed. We estimated the impact of the changes in the interest rate spread by analogizing the effect of the change in the Corporate bond rates, reduced for any changes in the market interest rate. This provided us with an estimated change to the interest rate spread of approximately 0.5% from the date we entered the debt agreement to the end of the fiscal year, January 31, 2022. The discount to the value of the debt as of January 31, 2022 was estimated to be $9,798,000, or a discount to book value $202,000. Long-term debt is classified as Level 2.

The fair value of the PPP loan was determined based on discounting the loan amount as of January 31, 2021. The fair value using market rates the Company believes would be available for similar types of financial instruments would have resulted in a lower fair value of $2,231,000 as compared to the book value of $2,301,000, a reduction of $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 our direct sales force or through third-party resellers. Licensed, locally-installed customers on a perpetual model utilize our 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 and consulting services.

We recognize revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (“ASC 606”), under the core principle of recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

We commence revenue recognition (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

Often contracts contain more than one performance obligation. Performance obligations are the unit of accounting for revenue recognition and generally 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-cancellable 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 right of refund terms are required, revenue is recognized upon the satisfaction of such criteria.

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The determined transaction price is allocated based on the standalone selling price of the performance obligations in contract. Significant judgment is required to determine the standalone selling price (“SSP”) for each performance obligation, the amount allocated to each performance obligation and whether it depicts the amount that the Company expects to receive in exchange for the related product and/or service. The Company recognizes revenue for implementation for certain of its eValuator SaaS solution over the contract term, as it has been determined that those implementation services are not a distinct performance obligation. Services for other SaaS and Software solutions such as CDI, RevID and Compare, have been determined as a distinct performance obligation. For these agreements, the Company estimates 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, software as a service 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 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.

The Company has utilized the portfolio approach as the practical expedient. We have applied the revenue model to a portfolio of contracts with similar characteristics where we expected that the financial statements would not differ materially from applying it to the individual contracts within that portfolio.

Software Licenses

The Company’s software license arrangements 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 is recognized at a point in time. Typically, this is upon shipment of components or electronic download of software.

Maintenance and Support Services

Our maintenance and support obligations include multiple discrete performance obligations, with the two largest being unspecified product upgrades or enhancements, and technical support, which can be offered at various points during a contract period. We believe that the multiple discrete performance obligations within our overall maintenance and support obligations can be viewed as a single performance obligation since both the unspecified upgrades and technical support are activities to fulfill the maintenance performance obligation and are rendered concurrently. Maintenance and support agreements entitle customers to technology support, version upgrades, bug fixes and service packs. We recognize maintenance and support revenue over the contract term.

Software-Based Solution Professional Services

The Company provides various professional services to customers with software licenses. These include project management, software implementation and software modification services. Revenues from arrangements to provide professional services are generally distinct from the other promises in the contract and are recognized as the related services are performed. Consideration payable under these arrangements is either fixed fee or on a 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 of the Company’s platform and support which represent a single promise to provide continuous access to its software solutions. Implementation services for the Company’s eValuator product are 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. Implementation services for other SaaS products are deemed to be separate performance obligations.

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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 customer’s enterprise. Audit services are a separate performance obligation. We recognize revenue over time as the services are performed.

Disaggregation of Revenue

The following table provides information about disaggregated revenue by type and nature of revenue stream:

		Fiscal Year
		2021		2020
Recurring Revenue	$	12,400,000	$	8,247,000
Non-Recurring Revenue		4,979,000		3,099,000
Total revenue	$	17,379,000	$	11,346,000

The Company includes revenue categories of (i) maintenance and support and (ii) software as a service as recurring revenue for fiscal years ended January 31, 2021 and January 31, 2020. The Company includes revenue categories of (i) software licenses, (ii) professional services, and (iii) audit services as non-recurring revenue for the fiscal years ended January 31, 2021 and January 31, 2020. Avelead makes up $2,790,000 of the Recurring Revenue for fiscal 2021 and $1,735,000 of the Non-Recurring Revenue for fiscal 2021.

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 revenues include payments received in advance of performance under the contract. Our 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 year ended January 31, 2022, we recognized approximately $3,702,000 in revenue from deferred revenues outstanding as of January 31, 2021. Revenue allocated to remaining performance obligations was $19,112,000 as of January 31, 2022, of which 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)

We defer 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 contractual term. As of January 31, 2022, and 2021, we had deferred costs of $125,000 and $168,000, respectively, net of accumulated amortization of $93,000 and $126,000, respectively. Amortization expense of these costs was $110,000 and $125,000 in fiscal 2021 and 2020, respectively. There were no impairment losses for these capitalized costs for the fiscal years 2021 and 2020. In fiscal 2021, the deferred cost to fulfill a contract and the associated accumulated amortization accounts were reduced by $143,000 for projects with fully amortized costs.

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, we expense sales commissions as incurred when the amortization period of related deferred commission costs would have been one year or less.

Deferred commissions costs paid and payable, which are included on the consolidated balance sheets within other non-current assets totalled $806,000 and $666,000, respectively, as of January 31, 2022 and 2021. In fiscal 2021 and 2020, $339,000 and $206,000, respectively, in amortization expense associated with deferred sales commissions was included in selling, general and administrative expenses on the consolidated statements of operations. There were no impairment losses for these capitalized costs for fiscal years 2021 and 2020.

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Concentrations

Financial instruments, which potentially expose the Company to concentrations of credit risk, consist primarily of accounts receivable. The Company’s accounts receivable are concentrated in the healthcare industry. However, the Company’s customers typically are well-established hospitals, medical facilities or major health information systems companies with good credit histories that resell the Company’s solutions. Payments from customers have been received within normal time frames for the industry. However, some hospitals and medical facilities have experienced significant operating losses as a result of limits on third-party reimbursements from insurance companies and governmental entities and extended payment of receivables from these entities is not uncommon.

To date, the Company has relied on a limited number of customers and remarketing partners for a substantial portion of its total revenues. The Company expects that a significant portion of its future revenues will continue to be generated by a limited number of customers and its remarketing partners.

Goodwill and Intangible Assets

Goodwill and other intangible assets were recognized in conjunction with the Avelead Consulting, Interpoint, Meta, CLG and Opportune IT acquisitions, as well as the Unibased acquisition (prior to divestiture of such assets). Identifiable intangible assets include purchased intangible assets with finite lives, which primarily consist of internally-developed software and customer relationships. Finite-lived purchased intangible assets are amortized over their expected period of benefit, which generally ranges from one to 15 years, using the straight-line method.

The Company assesses the useful lives and possible impairment of intangible assets when an event occurs that may trigger such a review. Factors considered important which could trigger a review include:

● significant underperformance relative to historical or projected future operating results;

● significant changes in the manner of use of the acquired assets or the strategy for the overall business;

● identification of other impaired assets within a reporting unit;

● disposition of a significant portion of an operating segment;

● significant negative industry or economic trends;

● significant decline in the Company’s stock price for a sustained period; and

● a decline in the market capitalization relative to the net book value.

Determining whether a triggering event has occurred involves significant judgment by the Company.

The Company assesses goodwill annually (as of November 1), or more frequently when events and circumstances, such as the ones mentioned above, occur indicating that the recorded goodwill may be impaired. During the years ended January 31, 2022 and 2021, the Company did not note any of the above qualitative factors, which would be considered a triggering event for goodwill impairment. In assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of a reporting unit. The identification of relevant events and circumstances and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments by management. These judgments include the consideration of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, events which are specific to the Company and trends in the market price of the Company’s common stock. Each factor is assessed to determine whether it impacts the impairment test positively or negatively, and the magnitude of any such impact.

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Reporting units are determined based on the organizational structure the entity has in place at the date of the impairment test. A reporting unit is an operating segment or component business unit with the following characteristics: (a) it has discrete financial information, (b) segment management regularly reviews its operating results (generally an operating segment has a segment manager who is directly accountable to and maintains regular contact with the chief operating decision maker to discuss operating activities, financial results, forecasts or plans for the segment), and (c) its economic characteristics are dissimilar from other units (this contemplates the nature of the products and services, the nature of the production process, the type or class of customer for the products and services and the methods used to distribute the products and services). The Company determined that it has one operating segment and two reporting units.

The Company estimates the fair value of its reporting unit using the income approach, via discounted cash flow valuation models which include, but are not limited to, assumptions such as a “risk-free” rate of return on an investment, the weighted average cost of capital of a market participant and future revenue, operating margin, working capital and capital expenditure trends. Determining the fair value of reporting units and goodwill includes significant judgment by management, and different judgments could yield different results.

The Company performed its annual assessment of goodwill during the fourth quarter of fiscal 2021, using the approach described above. Based on the analysis performed, the fair value of the reporting units exceeded the carrying amount of the reporting unit, including goodwill, and, therefore, a goodwill impairment loss was not recognized.

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 annual compensation expense related to stock-based awards of $2,216,000 in fiscal 2021, and $1,444,000 in fiscal 2020 which includes $41,000 of capitalized non-employee stock compensation.

The fair value of the stock options granted are 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. Effective fiscal 2021, the Company changed its accounting to recognize forfeitures as they occur, which was determined to be an immaterial change from its historical practice. 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 stock-based compensation could have a material impact on reported expenses depending upon the number, value and vesting period of future awards.

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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 to the Company. In fiscal 2021 and 2020, 257,571 and 162,095 shares of common stock were surrendered to the Company to satisfy tax withholding obligations totaling $464,000 and $256,000, respectively, in connection with the vesting of restricted stock awards. Shares surrendered by the restricted stock award recipients in accordance with the applicable plan are deemed cancelled, and therefore are not available to be reissued. The Company awarded 562,500 and 748,245 shares of restricted stock to Section 16 officers and directors of the Company in fiscal 2021 and 2020, respectively.

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. See Note 7 - 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 January 31, 2022, 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 our common stock.

Our 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 our common stock is computed using the treasury stock method.

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The following is the calculation of the basic and diluted net loss per share of common stock:

		Fiscal Year
		2021			2020
Basic earnings (loss) per share:
Continuing operations
Loss from continuing operations, net of tax	$	(6,917,000	)	$	(4,799,000	)
Basic net loss per share of common stock from continuing operations	$	(0.16	)	$	(0.16	)
Discontinued operations
Income available to common stockholders from discontinued operations	$	375,000		$	5,095,000
Basic net earnings per share of common stock from discontinued operations	$	0.01		$	0.17
Diluted earnings (loss) per share (1):
Continuing operations
Loss available to common stockholders from continuing operations	$	(6,917,000	)	$	(4,799,000	)
Diluted net loss per share of common stock from continuing operations	$	(0.16	)	$	(0.16	)
Discontinued operations
Income available to common stockholders from discontinued operations	$	375,000		$	5,095,000
Diluted net earnings per share of common stock from discontinued operations	$	0.01		$	0.17
Net (loss) income	$	(6,542,000	)	$	296,000
Weighted average shares outstanding - Basic (1)		42,815,239			30,152,383
Effect of dilutive securities - Stock options and Restricted stock (2)		458,335			488,359
Weighted average shares outstanding – Diluted		43,273,574			30,640,742
Basic net (loss) income per share of common stock	$	(0.15	)	$	0.01
Diluted net (loss) income per share of common stock	$	(0.15	)	$	0.01

(1)	Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of January 31, 2022 and 2021, there were 1,043,350 and 931,125 unvested restricted shares of common stock, respectively.
(2)	Diluted net loss per share excludes the effect of shares that are anti-dilutive. As of January 31, 2022, there were 1,062,130 outstanding stock options and 1,043,350 unvested restricted shares of common stock. As of January 31, 2021, there were 625,830 outstanding stock options and 931,125 unvested restricted shares of common stock.

Other Operating Costs

Non-routine Costs

	Fiscal Year 2021
Separation agreement expense	$	706,000
Broker Fees		553,000
Professional Fees		850,000
Executive Bonuses		705,000
Loss on exit from operating lease		42,000
Total	$	2,856,000

For fiscal 2021, the Company incurred certain non-routine costs totalling $2,856,000. The Company incurred transaction costs related to the acquisition of Avelead consisting of a separation agreement, broker fees and professional services. The Company paid certain executive bonuses for the successful capital raise and closing of the Avelead acquisition. Finally, the Company subleased its Alpharetta office to a third-party effective October 1, 2021. The Company retains certain obligations, and accordingly, will continue to report the Right of Use Asset (see Note 4 – Operating Leases). The Company incurred certain fees and expenses associated with the sublease.

Loss on Exit of Membership Agreement

For fiscal 2020, minimum fees due under the Company’s former shared office arrangement totaled approximately $105,000. The Company recorded an expense for the minimum future commitment under the agreement and accrued the cost to the accompanying consolidated balance sheet in fiscal 2020 to reflect the liability at the time it abandoned the space. Refer to Note 4 – Operating Leases.

Loss Contingencies

We are subject to the possibility of various loss contingencies arising in the normal course of business. We consider the likelihood of the loss or impairment of an asset or the incurrence of a liability as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired, and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether to accrue for a loss contingency and adjust any previous accrual.

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Accounting Pronouncements Recently Adopted

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The standard became effective for us on February 1, 2021. The adoption of this ASU did not have a material impact on our consolidated financial statements or disclosures. Refer to Note 7 – Income Taxes – in the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for more information on the Company’s adoption of ASU 2019-12 for further details.

In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities From Contracts With Customers (“ASU 2021-08”), which amends the accounting for contract assets acquired and contract liabilities assumed from contracts with customers in business combinations (“acquired contract balances”). The amendment results in a shift from previous guidance which required similar assets and liabilities to be accounted for at fair value at the acquisition date. The amendments in the Update require that an entity (acquirer) recognize, and measure acquired contract balances in accordance with ASC Topic 606. For instance, at the acquisition date, the acquirer would account for the related revenue contracts acquired under ASC 606, as if it had originated the contracts. The Company elected to early adopt ASU 2021-08 in the quarter ended October 31, 2021 (which includes retroactive adoption for any acquisitions in the current fiscal year). The impact of adopting the new standard is that it eliminated the need to discount deferred revenue acquired from Avelead of $236,000. As a result of the Company not discounting deferred revenue upon acquiring Avelead, revenues are higher and net loss is lower in the post-acquisition period of the same amount.

Recent Accounting Pronouncements Not Yet Adopted

In November 2019, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which improves guidance around accounting for financial losses on accounts receivable. For smaller reporting entities, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. We do not anticipate that the adoption of this ASU will have a material impact on our consolidated financial statements.

In July 2021, the FASB issued ASU 2021-05, Lessors - Certain Leases with Variable Lease Payments to ASC Topic 842, Leases (“ASC 842”)(“ASU 2021-05”). ASU 2021-05 provides additional ASC 842 classification guidance as it relates to a lessor’s accounting for certain leases with variable lease payments. ASU 2021-05 requires a lessor to classify a lease with variable payments that do not depend on an index or rate as an operating lease if either a sales-type lease or direct financing lease classification would trigger a day-one loss. ASU 2021-05 is effective for reporting periods beginning after December 15, 2021, with early adoption permitted. We do not anticipate that the adoption of this ASU will have a material impact on our consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):Disclosures by Business Entities about Government Assistance (“ASU 2021-10”), which aims to provide increased transparency by requiring business entities to disclose information about certain types of government assistance they receive in the notes to the financial statements. Entities are required to provide the new disclosures prospectively for all transactions with a government entity that are accounted for under either a grant or a contribution accounting model and are reflected in the financial statements at the date of initially applying the new amendments, and to new transactions entered into after that date. Retrospective application of the guidance is permitted. The guidance in ASU 2021-10 is effective for financial statements of all entities, including private companies, for annual periods beginning after December 15, 2021, with early application permitted. We do not anticipate that the adoption of this ASU will have a material impact on our consolidated financial statements.

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NOTE 3 — BUSINESS COMBINATION AND DIVESTITURE

Avelead Acquisition

The Company acquired all of the equity interests of Avelead as part of the Company’s strategic expansion into the revenue cycle management, acute-care healthcare space (the “Transaction”). The Transaction 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, which was paid to sellers during the fourth fiscal quarter of 2021 (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 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 as of 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 equity interests of Avelead, effective August 16, 2021, pursuant to 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 million. Additionally, the Company paid $285,000 of the Sellers’ closing costs, $285,000 related to the working capital adjustment as defined in the UPA. Finally, at closing, the Company issued the Acquisition Restricted Common Stock with a fair value of approximately $6.5 million, based on a 30-day average of the closing price of the Company’s common stock prior to the closing date. The SaaS Contingent Consideration and the Renewal Contingent Consideration described in more detail below were included in the UPA as potential future consideration for the Transaction. These are reflected on the Company’s balance sheet as “Acquisition earnout liability.”

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. The Company will pay the SaaS Contingent Consideration as follows: (i) 50% in cash and (ii) 50% in shares of Company common stock valued at the time the earnout is paid subject to a collar, as described below.

● 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, 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.

● 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, 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.

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.

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● 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 Renewal Contingent Consideration is either earned or not earned based upon the renewal of the specified customer at the minimum amount of contracted revenue. There is no pro-ration of the underlying Renewal Contingent Consideration.

The components of the total consideration are as follows:

(in thousands)
Components of total consideration, net of cash acquired:
Cash	$	11,900
Cash, seller expenses		285
Cash, working capital adjustment		285
Restricted Common Stock		6,554
Acquisition earnout liabilities		10,684	(a)
Total consideration	$	29,708

(a) Acquisition earnout liabilities represent 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, $4,672,000 of the acquisition earnout liability is shown as a short-term liability and $4,161,000 is shown as a long-term liability as of January 31, 2022.

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 consolidated statements of operations. The valuation adjustment recorded for the period ended January 31, 2022, was $1,851,000. A range of possible outcomes is not available under the specific valuation method that was used in determining fair value of the acquisition earnout liability.

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:

(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 Company determined the fair value of the customer relationship intangible assets and the trade name and developed software technology intangible assets using the multi-period excess earning method and the relief from royalty method, respectively. The intangible assets   recorded as a result of the Avelead acquisition, and their related estimated useful lives are as follows:

	Estimated Useful Lives
Goodwill	Indefinite
Customer Relationships (SaaS)	10 years
Customer Relationships (Consulting)	8 years
Internally Developed Software	9 years
Trademarks and Tradenames	15 years

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The Company’s unaudited pro forma revenues and (loss) income 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 earnings reflected below (unaudited):

(UNAUDITED)	Year Ended January 31,
	2022			2021
Revenues	$	22,631,000		$	19,707,000
Operating expenses		(31,278,000	)		(25,164,000	)
Non-routine costs		(4,284,000	)		—
Loss on exit from membership agreement		—			(105,000	)
Operating loss		(12,931,000	)		(5,562,000	)
Other expenses		1,312,000			(710,000	)
PPP loan forgiveness		3,059,000			712,000
Income tax (expense) benefit		(109,000	)		1,370,000
Loss from continuing operations	$	(8,669,000	)	$	(4,190,000	)

Non-routine costs are primarily costs associated with the acquisition. Included in the pro forma schedule (above) for the fiscal year ended January 31, 2022 are $1,428,000 of expenses paid by the Sellers in the transaction.

Included in the accompanying consolidated statement of operations for the year ended January 31, 2022 (since the closing of the Avelead acquisition) are $4,524,000 and $(1,506,000) of Avelead revenue and loss from continuing operations.

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. 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 expense for the employment agreement is recognized ratably over the service period customary with other employment agreements within selling, general, and administrative expense.

The Company granted options to purchase 583,333 shares of the Company’s common stock to the Sellers at Closing. 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 $6,000 and are recorded in non-routine cost in the accompanying consolidated statement of operations. The 500,000 options have a grant-date fair value of approximately $395,000 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”). 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 consolidated statements of operations, cash flows and balance sheets for the current and comparative prior periods. Refer to Note 13 – Discontinued Operations for details of the Company’s discontinued operations.

NOTE 4 — OPERATING LEASES

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 and 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.

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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 months which coincides with the Company’s underlying lease (see below). The Company expects to receive $292,000 from the sublessee over the term of the sublease. The sublease did not relieve the Company of its original obligation under the lease, and therefore the Company did not adjust the operating lease right-of-use asset and related liability. The Company incurred an amount of fees and expenses to enter into the Sublease Agreement that were recorded as “non-routine” for fiscal 2021. As of January 31, 2022, the Company recorded $64,000 as other income related to the sublease.

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, and related current and long-term operating lease obligation in the accompanying consolidated balance sheet. As of January 31, 2022, operating lease right-of use assets totaled $218,000, and the associated lease liability is included in both current and long-term liabilities of $204,000 and $33,000, respectively. The Company used a discount rate of 6.5% to the determine the lease liability. As of January 31, 2022 and 2021, the Company had lease operating costs of approximately $194,000 and $178,000, respectively. The Company paid cash of approximately $203,000 and $132,000 for the lease in 2021 and 2020, respectively.

Maturities of operating lease liabilities associated with the Company’s operating lease as of January 31, 2022 are as follows for payments due based upon the Company’s fiscal year:

2022	$	210,000
2023		35,000
Total Lease Payments		245,000
Less present value adjustment		(8,000	)
Present value of lease liabilities	$	237,000

Upon signing the Alpharetta lease in March 2020, the Company abandoned its shared office space in Atlanta and recorded an expense and related liability of $105,000 for the minimum remaining payments required under the agreement with the landlord. The associated expense is recorded in “Loss on exit of membership agreement” in the accompanying statements of operations and is recorded in “accrued expenses” in the accompanying balance sheet. The membership agreement did not qualify as a lease as the owner had substantive substitution rights.

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 36-month term lease commenced March 1, 2019 and expires on February 28, 2022. As of January 31, 2022, the Company recorded $40,000 in rent expense. The lessor is an entity controlled by one of the Sellers that is employed by the Company. In February 2022, the Company renewed the lease for twelve months. The Company will make monthly lease payments of $5,998.67 for a total of $71,984 over the term of the lease. The lease will automatically renew at the end of the lease unless a 90-day written cancellation is given by either party.

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 and Restated Loan and Security Agreement with Bridge Bank. Pursuant to the Second Amended and Restated 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. Amounts outstanding under the term loan of the Second Amended and Restated Loan and Security 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%. Pursuant to the Second Amended and Restated Loan and Security Agreement, the Company discontinued the existing $3,000,000 revolving credit facility with Bridge Bank. At the time of the discontinuance, there was no outstanding balance on the revolving credit facility.

The Second Amended and Restated 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 and Restated 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 and Restated Loan and Security Agreement requires principal repayments on the anniversary date of the closing of the debt agreement of $500,000 in the second year, $1,000,000 in the third year, $2,000,000 in the fourth year, and $3,000,000 in the fifth year, respectively, with the remaining outstanding principal balance and all accrued but unpaid interest due in full on the maturity date. The Second Amended and Restated Loan and Security Agreement may also require early repayments if certain conditions are met. The Second Amended and Restated Loan and Security Agreement is secured by substantially all of the assets of the Company, its subsidiaries, and certain of its affiliates.

The Company recorded $130,000 in deferred financing costs related to the Second Amended and Restated Loan and Security Agreement. These deferred financing costs are being amortized over the term of the loan. The Company will also incur $200,000 in financing costs at the earlier of the term date of the loan, or pre-payment. These costs are being accreted, through interest expense, to the full value of the $200,000 over the term of the loan.

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The Second Amended and Restated 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. Borrowers’ Maximum Debt to ARR Ratio, measured on a quarterly basis as of the last day of each fiscal quarter, shall not be greater than the amount set forth under the heading “Maximum Debt to ARR Ratio” as of, and for each of the dates appearing adjacent to such “Maximum Debt to ARR Ratio”.

	Maximum Debt to
Quarter Ending	ARR Ratio
October 31, 2021	0.80 to 1.00
January 31, 2022	0.75 to 1.00
April 30, 2022	0.65 to 1.00
July 31, 2022	0.55 to 1.00
October 31, 2022	0.50 to 1.00
January 31, 2023	0.45 to 1.00

c. Maximum Debt to Adjusted EBITDA Ratio. Commencing with the quarter ending April 30, 2023, Borrowers’ Maximum Debt to Adjusted EBITDA Ratio, measured on a quarterly basis as of the last day of each fiscal quarter for the trailing four (4) quarter period then ended, shall not be greater than the amount set forth under the heading “Maximum Debt to Adjusted EBITDA Ratio” as of, and for each of the dates appearing adjacent to such “Maximum Debt to Adjusted EBITDA Ratio”.

	Maximum Debt to
	Adjusted EBITDA
Quarter Ending	Ratio
April 30, 2023	11.30 to 1.00
July 31, 2023	4.15 to 1.00
October 31, 2023	2.50 to 1.00
January 31, 2024 and on the last day of each quarter thereafter	2.0 to 1.00

d. Fixed Charge Coverage Ratio. Commencing with the quarter ending April 30, 2023, Borrowers shall maintain a Fixed Charge Coverage Ratio of not less than 1.20 to 1.00, measured on a quarterly basis as of the last day of each fiscal quarter for the trailing four (4) quarter period then ended.

The Second Amended and Restated 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 January 31, 2022, the Company was in compliance with the Second Amended and Restated 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 revolving credit facility (the “Amended Loan and Security Agreement”). This revolving credit facility was replaced with the Second Amended and Restated Loan and Security Agreement (above) that was put in place on August 26, 2021. Accordingly, the Company wrote-off $43,000 of deferred financing costs from this loan as a loss on extinguishment of debt in the accompanying consolidated statement of operations. The Amended Loan and Security Agreement had a two-year term and included customary financial covenants including the requirements that the Company achieve certain EBITDA levels and certain recurring revenue levels. The Company could not deviate by more than twenty percent its recurring revenue projections over a trailing three-month basis. 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%. The Amended Loan and Security agreement was secured by substantially all of our assets.

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 term loan and a $2,000,000 revolving credit facility. The proceeds from the term loan were used to repay all outstanding balances under the Company’s then existing term loan with Wells Fargo Bank. In February 2020, the Company repaid the $4,000,000 outstanding term loan with Bridge Bank in full, with proceeds from the sale of the ECM Assets, as required under the Loan and Security Agreement.

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 through the SBA under the PPP. These funds were utilized by the Company to fund payroll expenses and avoid further staffing reductions during the slowdown resulting from COVID-19.

The PPP loan carried an interest rate of 1.0% per annum. Principal and interest payments were due, beginning on the tenth month from the effective date, sufficient to satisfy the loan on the second anniversary date. However, under certain criteria, the loan could be forgiven.

In June 2021, the Company was notified that the full $2,301,000 of the PPP loan and accrued interest of $26,000 had been forgiven. The loan amount and accrued interest were recognized as an extinguishment of debt and has been recorded as other income on the consolidated statement of operations.

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Outstanding principal balances on debt consisted of the following at:

	January 31, 2022(a)			January 31, 2021(b)
Term loan	$	10,000,000		$	2,301,000
Deferred financing cost		(96,000	)		—
Total		9,904,000			2,301,000
Less: Current portion		(250,000	)		(1,534,000	)
Non-current portion of debt	$	9,654,000		$	767,000

(a)	The term loan as of January 31, 2022 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 21, 2021 is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021.

NOTE 6 — GOODWILL AND INTANGIBLE ASSETS

The goodwill activity is summarized as follows:

	Goodwill
Balance at January 31, 2021		10,712,000
Acquisition of Avelead		12,377,000
Balance at January 31, 2022		23,089,000

Intangible assets consist of the following:

	January 31, 2022
	Estimated			Accumulated
	Useful Life	Gross Assets		Amortization		Net Assets
Finite-lived assets:
Customer relationships	8-10 years	$	14,164,000	$	4,755,000	$	9,409,000
Internally Developed Software	9 years		6,380,000		325,000		6,055,000
Trademarks and Tradenames	15 years		1,340,000		41,000		1,299,000
Total			21,884,000		5,121,000		16,763,000

	January 31, 2021
	Estimated			Accumulated
	Useful Life	Gross Assets		Amortization		Net Assets
Finite-lived assets:
Customer relationships	5-10 years	$	5,397,000	$	4,773,000	$	624,000

The Company recognized amortization expense on intangible assets of $1,281,000 and $491,000 for fiscal years 2021 and 2020, respectively.

Amortization over the next five fiscal years for intangible assets is estimated as follows:

	Annual Amortization Expense
2022	$	1,971,000
2023		1,801,000
2024		1,801,000
2025		1,801,000
2026		1,801,000
Thereafter		7,588,000
Total	$	16,763,000

The Company wrote-off fully amortized intangible assets during fiscal 2021 of $933,000. There was no impact to the consolidated statements of operations as this eliminated the asset and accumulated amortization of the fully amortized intangible assets.

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NOTE 7 — INCOME TAXES

For fiscal 2021 and 2020, income taxes for continuing operations consist of the following:

		Fiscal Year
		2021			2020
Current tax (expense) benefit:
Federal	$	—		$	—
State		(14,000	)		(14,000	)
Total current tax expense	$	(14,000	)	$	(14,000	)
Deferred tax (expense) benefit:
Federal	$	(80,000	)	$	1,274,000
State		(15,000	)		—
Total deferred tax (expense) benefit	$	(95,000	)	$	1,274,000
Total provision	$	(109,000	)	$	1,260,000

The Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 removes the exception to the basic intraperiod model in ASC 740-20-45-7. The benefit from income taxes from continuing operations, reported for fiscal year 2020, are offset by taxes on the gain on sale and taxes from operations of discontinued operations.

During fiscal year 2020, the Company had a loss from continuing operations and income from discontinued operations. The Company did not elect to early adopt ASU 2019-12 for the 2020 fiscal year; therefore, the income from discontinued operations was considered a source of taxable income to realize a partial tax benefit for the loss generated by continuing operations. As such, the financial statements for the 2020 fiscal year reflects tax expense in discontinued operations and a tax benefit in continuing operations. Applying the change on a prospective basis, this did not occur during the 2021 fiscal year and as such created a difference in the effective tax rate presentation for continuing operations between fiscal years 2020 and 2021.

The income tax benefit differs from the amount computed using the federal statutory income tax rates of 21% for fiscal 2021 and 2020 continuing operations as follows:

	Fiscal Year
	2021			2020
Federal tax benefit at statutory rate	$	(1,430,000	)	$	(1,272,000	)
State and local tax expense, net of federal		26,000			11,000
Increase in valuation allowance		1,950,000			419,000
Permanent items:
PPP Loan		(483,000	)		—
Other		3,000			5,000
Reserve for uncertain tax position		(24,000	)		35,000
R&D Credit (Federal)		120,000			(174,000	)
Expiring carryforwards		—			5,000
Stock-based compensation		(45,000	)		(305,000	)
Other		(8,000	)		16,000
Income tax expense	$	109,000		$	(1,260,000	)

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The Company provides deferred income taxes for temporary differences between assets and liabilities recognized for financial reporting and income tax purposes. The income tax effects of these temporary differences and credits are as follows:

	January 31,
	2022			2021
Deferred tax assets:
Allowance for doubtful accounts	$	24,000		$	16,000
Deferred revenue		60,000			12,000
Accruals		168,000			47,000
Net operating loss carryforwards		10,908,000			8,651,000
Stock compensation expense		510,000			367,000
Property and equipment		(6,000	)		(5,000	)
R&D credit		1,334,000			1,431,000
Other		23,000			7,000
Total deferred tax assets		13,021,000			10,526,000
Valuation allowance		(12,318,000	)		(9,992,000	)
Net deferred tax assets		703,000			534,000
Deferred tax liabilities:
Finite-lived intangible assets		(798,000	)		(534,000	)
Total deferred tax liabilities		(798,000	)		(534,000	)
Net deferred tax liabilities	$	(95,000	)	$	—

At January 31, 2022, the Company had U.S. federal net operating loss carry forwards of $46,250,000 and $29,083,000 of these net operating losses expire at various dates through fiscal 2038. The remaining $17,167,000 of these net operating losses can be carried forward indefinitely under the provisions of the Tax Cuts and Jobs Act (TCJA). The TCJA also eliminated the ability to carry back net operating losses. The Company also had state net operating loss carry forwards of $21,318,000 and Federal R&D credit carry forwards of $1,575,000 and Georgia R&D credit carry forwards of $94,000, all of which expire at various dates through fiscal 2041.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company established a valuation allowance of $12,318,000 and $9,992,000 at January 31, 2022 and 2021, respectively. The increase in the valuation allowance of $2,326,000 was driven primarily by federal net operating losses.

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, 2018. All material state and local income tax matters have been concluded for years through January 31, 2017. The Company is no longer subject to IRS examination for periods prior to the tax year ended January 31, 2018; however, carry forward losses that were generated prior to the tax year ended January 31, 2018 may still be adjusted by the IRS if they are used in a future period.

The Company has recorded a reserve, including interest and penalties, for uncertain tax positions of $315,000 and $339,000 as of January 31, 2022 and 2021, respectively. As of January 31, 2022 and 2021, the Company had no accrued interest and penalties associated with unrecognized tax benefits.

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A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest and penalties) is as follows:

	2021			2020
Beginning of fiscal year	$	339,000		$	304,000
Additions for tax positions for the current year		4,000			33,000
Additions for tax positions of prior years		—			2,000
Subtractions for tax positions of prior years		(28,000	)		—
End of fiscal year	$	315,000		$	339,000

NOTE 8 — 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 shares of the Company’s common stock, par value $0.01 per share, which included 1,312,500 shares of common stock sold pursuant to the underwriter’s exercise of an option to purchase additional shares of common stock to cover over-allotments (the “Offering”). The price to the public in the Offering was $1.60 per share of common stock. The gross proceeds to the Company from the Offering were approximately $16.1 million, before deducting underwriting discounts, commissions and estimated offering expenses. The Offering closed on March 2, 2021.

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 shares of common stock issued to 180 Consulting, LLC (“180 Consulting”). The Registration Statement was declared effective by the SEC on July 14, 2021.

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 shares to 65,000,000 shares (the “Charter Amendment”). The Charter Amendment was previously approved by the board of directors of the Company, subject to stockholder approval, approved by the Company’s stockholders at the 2021 Annual Meeting of Stockholders of the Company, held on May 20, 2021 (the “Annual Meeting”), and ratified by the Company’s stockholders on July 29, 2021 at the Special Meeting (as defined and described in further detail below).

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 shares, from 6,223,246 shares to 8,223,246 shares (the “Third Amended 2013 Plan Amendment”).

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.

NOTE 9 — MAJOR CUSTOMERS

During fiscal 2021, one individual customer accounted for 10% or more of our continuing operations revenue. This customer accounted for 15% of total continuing operations revenue for fiscal 2021. During fiscal 2020, no one individual customer accounted for 10% or more of our continuing operations revenue. Three customers represented 24%, 16%, and 15%, respectively, of continuing operations accounts receivable as of January 31, 2022 and 4 customers represented 31%, 16%, 14% and 13%, respectively, of continuing operations accounts receivable as of January 31, 2021. Many of our customers are invoiced on an annual basis.

NOTE 10 — EMPLOYEE RETIREMENT PLAN

The Company has established a 401(k) retirement plan that covers all associates. Company contributions to the plan may be made at the discretion of the board of directors. The Company’s matched amount is 50% up to the first 4% of compensation deferred by each associate. The total compensation expense for this matching contribution was $188,000 and $164,000 in fiscal 2021 and 2020, respectively.

NOTE 11 — STOCK-BASED COMPENSATION

Stock Option Plans

The Company’s Third Amended and Restated 2013 Stock Incentive Plan (the “2013 Plan”) replaced the 2005 Incentive Compensation Plan (the “2005 Plan”). The 2005 Plan expired based upon its terms. Accordingly, all the outstanding awards and any unallocated pool of un-issued options under the 2005 Plan were re-characterized to the 2013 Plan. Under these plans, the Company is authorized to issue equity awards (stock options, stock appreciation rights or “SARs”, and restricted stock) to directors and associates of the Company. Under the 2013 Plan, as amended, the Company is authorized to issue a number of shares not to exceed 8,223,246. The options granted under the 2013 Plan have terms of ten years or less, and typically vest and become fully exercisable ratably over three years of continuous service to the Company from the date of grant. At January 31, 2022 and 2021, options to purchase 937,130 and 500,830 shares of the Company’s common stock, respectively, had been granted and were outstanding under these plans. There are no SARs outstanding.

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Inducement grants are approved by the Company’s compensation committee pursuant to NASDAQ Marketplace Rule 5635(c)(4). The terms of the grants were nearly identical to the terms and conditions of the Company’s stock incentive plans in effect at the time of each inducement grant. For the year ended January 31, 2021 and 2020, with regard to inducement grants, no stock options were issued, no options expired, no options were forfeited, and no stock options were exercised. As of January 31, 2022 and 2021, there were 125,000 options outstanding, respectively, under inducement grants.

A summary of stock option activity follows:

				Weighted
				Average		Remaining		Aggregate
	Options			Exercise Price		Life in Years		intrinsic value
Outstanding as of January 31, 2021		625,830		$	3.45
Granted		583,333			1.53
Exercised		(3,300	)		1.35
Expired		(137,033	)		1.65
Forfeited		(6,700	)		1.35
Outstanding as of January 31, 2022		1,062,130		$	2.65		6.11	$	21,000
Exercisable as of January 31, 2022		628,854		$	3.42		3.75	$	20,000
Vested or expected to vest as of January 31, 2022		1,061,307		$	2.65		6.11	$	21,000

583,333 options were granted in fiscal 2021, with a weighted average grant date fair value of $1.53. No options were granted or exercised in fiscal 2020.

The fiscal 2021 and 2020 stock-based compensation was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for each fiscal year:

	2021			2020
Expected life		5.01 years			—
Risk-free interest rate		0.75	%		—
Weighted average volatility factor		0.72			—
Dividend yield		—			—
Forfeiture rate		—			—

At January 31, 2022, there was $335,000 of unrecognized compensation cost related to non-vested stock-option awards. That cost is expected to be recognized over a remaining weighted average period of 2.54 years. The expense associated with stock option awards was $69,000 and $22,000, respectively, for fiscal 2021 and 2020. Cash received from the exercise of options was $5,000 in fiscal 2021. No options were exercised during fiscal 2020.

The 2013 Plan contains change in control provisions whereby any outstanding equity awards under the plans subject to vesting, which have not fully vested as of the date of the change in control, shall automatically vest and become immediately exercisable. One of the change in control provisions is deemed to occur if there is a change in beneficial ownership, or authority to vote, directly or indirectly, of securities representing 20% or more of the total of all of the Company’s then-outstanding voting securities, unless through a transaction arranged by or consummated with the prior approval of the Board of Directors. Other change in control provisions relate to mergers and acquisitions or a determination of change in control by the Company’s Board of Directors.

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Restricted Stock

The Company is authorized to grant restricted stock awards to associates and directors under the 2013 Plan. The Company has also issued restricted stock as inducement grants to certain new employees. The restrictions on the shares granted generally lapse over a one- to four-year term of continuous employment from the date of grant. On March 4, 2021, our CEO was awarded 150,000 shares of restricted stock that will vest in four substantially equal quarterly installments commencing on the first anniversary of the date of grant. On June 17, 2020, our CEO was awarded 150,000 shares of restricted stock that will vest in four substantially equal quarterly installments commencing on the first anniversary of the date of grant. On October 17, 2019, our CEO was awarded 250,000 shares of restricted stock: 50,000 of which vested upon grant, 100,000 shares that vested in four substantially equal quarterly installments commencing on the first anniversary of the date of grant, and 100,000 shares that were subject to performance-based vesting based upon the achievement of certain growth rates of revenue specified in agreement. However, performance was not achieved by July 31, 2020, resulting in the grants being forfeited. The grant date fair value per share of restricted stock, which is based on the closing price of our common stock on the grant date, is expensed on a straight-line basis as the restriction period lapses. The shares represented by restricted stock awards are considered outstanding at the grant date, as the recipients are entitled to voting rights. A summary of restricted stock award activity for fiscal 2021 and 2020 is presented below:

				Weighted
	Non-vested			Average
	Number of			Grant Date
	Shares			Fair Value
Non-vested balance at January 31, 2020		803,498		$	1.22
Granted		1,158,245			1.07
Vested		(864,128	)		1.18
Forfeited		(166,490	)		1.16
Non-vested balance at January 31, 2021		931,125		$	1.09
Granted		1,257,000			1.71
Vested		(1,095,175	)		1.33
Forfeited		(50,100	)		1.48
Non-vested balance at January 31, 2022		1,043,000		$	1.57

At January 31, 2022, there was $1,024,000 of unrecognized compensation cost related to restricted stock awards. That cost is expected to be recognized over a remaining period of 2.03 years.

The expense associated with restricted stock awards for associates and directors was $1,667,000 and $1,075,000, respectively, for fiscal 2021 and 2020.

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NOTE 12— 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-year license of Montefiore’s proprietary clinical analytics platform solution, Clinical Looking Glass® (“CLG”), now known as our Clinical Analytics solution. In addition, Montefiore assigned to us the existing license agreement with a customer using CLG. As consideration under the Royalty Agreement, we paid Montefiore a one-time initial base royalty fee of $3,000,000. Additionally, we originally committed that Montefiore would receive at least an additional $3,000,000 of on-going royalty payments related to future sublicensing of CLG by us within the first nine and one-half years of the license term. On July 1, 2018, we entered into a joint amendment to the Royalty Agreement and the existing Software License and Support Agreement with Montefiore to modify the payment obligations of the parties under both agreements. According to the modified provisions, our obligation to pay on-going royalties under the Royalty Agreement was replaced with the obligation to (i) provide maintenance services for 24 months and waive associated maintenance fees, and (ii) pay $1,000,000 in cash by October 31, 2020. As a result of the commitment to fulfill a portion of our obligation by providing maintenance services at no cost, the royalty liability was significantly reduced, with a corresponding increase to deferred revenues.

On October 1, 2020, the Company agreed with Montefiore that it would pay, in cash, (i) $500,000 upon signing a settlement and release agreement, and (ii) $490,000 on November 1, 2020. The difference between the $990,000 in cash payment and the $1,000,000 payment obligation was due to the settlement of outstanding costs made on behalf of the Company for Montefiore. The Company executed the settlement and release agreement shortly after October 1, 2020 and made the scheduled payments. The Company retains the exclusive licensing rights for the underlying software through the term of the original agreement (2028).

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 January 31, 2022 totaling 521,077, and 272,653 shares for the year ended January 31, 2022. For services rendered by 180 Consulting during fiscal 2021, the Company incurred fees of $1,439,000. In addition, on February 22, 2022, the Company issued to 180 Consulting an aggregate of 78,031 shares as compensation for services previously rendered during the three-months ended January 31, 2022. Such 78,031 shares were issued in a private placement in reliance on the exemption from registration available under Section 4(a)(2) of the Securities Act, including Regulation D promulgated thereunder. During fiscal 2020, the Company incurred fees to 180 Consulting totaling $701,000. Of those fees, approximately $75,000 was related to capitalized software development, and the remaining was operating cost. The MSA includes a termination clause upon a 90-day written notice. While no related party has a direct or indirect material interest in this MSA or the related SOWs, individuals providing services to us under the MSA and the SOWs may share workspace and administrative costs with 121G Consulting (as defined and further discussed in Note 14 – Related Party Transactions).

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 January 31, 2022, the Company has entered into one SOW under the Avelead MSA. For services rendered by 180 Consulting during fiscal 2021, the Company incurred fees totaling $288,000.

Litigation

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 the Company’s consolidated results of operations, financial position or cash flows.

NOTE 13 – 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 million, subject to certain adjustments for customer prepayments as set forth in the Asset Purchase Agreement.

At closing, the Company received approximately $5.4 million in net proceeds after (i) repaying the Company’s $4.0 million term loan with Bridge Bank, (ii) adjusting for certain customer prepayments, (iii) recording the escrow funds of $800,000 and (iv) incurring certain transaction costs. The gain on the sale of assets is summarized as follows: 

Net Proceeds, including escrowed funds	$	12,088,000
Net tangible assets sold:
Accounts Receivable		(1,130,000	)
Prepaid Expenses		(576,000	)
Deferred Revenues		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 costs and costs of legal and accounting to effect the transaction. The Company allocated $4,825,000 in goodwill to the sale of the ECM Assets using a valuation of the ECM Assets and the remaining, go-forward business, to bifurcate its existing goodwill as of February 24, 2020. The amount of goodwill to be included in that carrying amount was based on the relative fair values of the business to be disposed of and the portion of the reporting unit that will be retained using our fair value approach as outlined in Note 2. Further, in accordance ASC 350-20-35-3A, when only a portion of goodwill is allocated to a business to be disposed of, the remaining portion of the goodwill associated with the reporting unit to be retained was tested for impairment and no impairment was recognized.

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The Company reclassified the following assets and liabilities for discontinued operations in the accompanying consolidated balance sheets:

	As of
	January 31, 2022		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 fiscal 2021 and 2020, the Company recorded the following into discontinued operations in the accompanying consolidated statements of operations:

		Fiscal Year
		2021		2020
Revenues:
Maintenance and support	$	—	$	412,000
Software as a service		—		138,000
Transition service fees		498,000		394,000
Total revenues	$	498,000	$	944,000
Expenses:
Cost of Sales		5,000		294,000
Transition service cost		92,000		166,000
Deferred financing cost		—		128,000
Total expenses	$	97,000	$	588,000
Income from discontinued operations	$	401,000	$	356,000

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 of fiscal 2021.

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NOTE 14 - 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 fees were incurred from 121G for fiscal 2021. For fiscal 2020, 121G Consulting fees totaled $107,000.

Refer to Note 3 – Business Combination and Divestiture. The Company acquired Avelead on August 16, 2021. In addition, 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 year ended January 31, 2022, the Company incurred approximately $64,000 in research and development services provided by AscendTek. Additionally, we assumed a lease for corporate office space from a Seller that is now employed by the Company. See Note 4 – Operating Leases.

NOTE 15 — SUBSEQUENT EVENTS

We have evaluated subsequent events occurring after January 31, 2021, and based on our evaluation we did not identify any events that would have required recognition or disclosure in these consolidated financial statements, except for the following:

Departure and Appointment of Certain Officers

We have previously disclosed by way of current reports on Form 8-K filed with the SEC that on February 14, 2022, William G. Garvis, the Company’s Senior Vice President and Chief Operating Officer, departed effective February 14, 2022. The Company also announced effective March 22, 2022, Randolph “Randy” Salisbury will depart effective April 15, 2022. Mr. Salisbury previously served as the Company’s Senior Vice President and Chief Sales and Marketing Officer. Mr. Salisbury is entitled to receive the severance accorded to him in his employment agreement for a separation without cause.

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Schedule II

Valuation and Qualifying Accounts and Reserves

Streamline Health Solutions, Inc and Subsidiaries.

For the two years ended January 31, 2022

	Balance at Beginning		Charged to Costs and			(1)		Balance at End of
Description	of Period		Expenses			Deductions		Period
Year ended January 31, 2022:
Allowance for doubtful accounts	$	65	$	11		$	—	$	76
Year ended January 31, 2021:
Allowance for doubtful accounts	$	96	$	(31	)	$	—	$	65

(1) Uncollectible accounts written off, net of recoveries.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our President and Chief Executive Officer (who serves as our principal executive officer) and our Senior Vice President and 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©) as of the end of the period covered by this Report (January 31, 2022). Based on that evaluation, our President and Chief Executive Officer and Senior Vice President and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of January 31, 2022. Avelead, which was acquired on August 16, 2021, was excluded from the scope of assessment of the effectiveness of our disclosure controls and procedures as of January 31, 2022.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed by, and under the supervision of, our President and Chief Executive Officer and Senior Vice President and Chief Financial Officer and effected by our management and our Board of Directors to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

An internal control material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the consolidated financial statements will not be prevented or detected.

Our management, including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of January 31, 2022, and concluded that our internal control over financial reporting was effective as of January 31, 2022. In making the assessment of internal control over financial reporting, management used the criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Changes in Internal Control Over Financial Reporting

On August 16, 2021, the Company completed the acquisition of Avelead (Refer to Note 3 – Business Combination and Divestiture in our consolidated financial statements included in Part II, Item 8, “Financial Statements” for further information on the Avelead acquisition). In accordance with the general guidance issued by the staff of the SEC, Avelead have been excluded from the scope of management’s report on internal control over financial reporting for the year ended January 31, 2022. As part of the ongoing integration of Avelead, we are in the process of incorporating the controls and related procedures. Other than incorporating the Avelead controls, 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 year ended January 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We have performed additional analyses and other procedures to enable management to conclude that our consolidated financial statements included in this report fairly, in all material respects, our financial condition and results of operations as of the year ended January 31, 2022.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information regarding directors, executive officers and corporate governance will be set forth in the proxy statement for our 2022 annual meeting of stockholders, which will be filed with the SEC within 120 days after the end of the fiscal year covered by this Report and is incorporated herein by reference.

Item 11. Executive Compensation

Information regarding executive compensation will be set forth in the proxy statement for our 2022 annual meeting of stockholders, which will be filed with the SEC within 120 days after the end of the fiscal year covered by this Report and is incorporated herein by reference.

Item 12. Securities Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding security ownership of certain beneficial owners and management and related stockholder matters will be set forth in the proxy statement for our 2022 annual meeting of stockholders, which will be filed with the SEC within 120 days after the end of the fiscal year covered by this Report and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions and Directors Independence

Information regarding certain relationships and related transactions and director independence will be set forth in the proxy statement for our 2022 annual meeting of stockholders, which will be filed with the SEC within 120 days after the end of the fiscal year covered by this Report and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The Independent Registered Public Accounting Firm is Dixon Hughes Goodman LLP (PCAOB Firm ID No. 57) located in Atlanta, Georgia. Information regarding principal accountant fees and services will be set forth in the proxy statement for our 2022 annual meeting of stockholders, which will be filed with the SEC within 120 days after the end of the fiscal year covered by this Report and is incorporated herein by reference.

PART IV

(32) Item 15. Exhibits and Financial Statement Schedulesa) See Index to Consolidated Financial Statements and Schedule Covered by Reports of Registered Public Accounting Firms included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Report. See Index to Exhibits contained in this Report.

(b) Exhibits

See Index to Exhibits contained in this Report.

Item 16. Form 10-K Summary

None.

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INDEX TO EXHIBITS

EXHIBITS
2.1	Asset Purchase Agreement, dated December 17, 2019, by and among the Company, Streamline Health, Inc., and Hyland Software, Inc. (Incorporated by reference from Exhibit 2.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on December 18, 2019).
2.2	Amendment No. 1 to the Asset Purchase Agreement, dated January 7, 2020, by and among the Company, Streamline Health, Inc., and Hyland Software, Inc. (Incorporated by reference from Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on January 7, 2020).
2.3	Unit Purchase Agreement, dated August 16, 2021, by and among Streamline Health Solutions, Inc., Avelead Consulting, LLC, Jawad Shaikh and Badar Shaikh (Incorporated by reference from Exhibit 2.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 18, 2021).
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 Company’s Quarterly Report on Form 10-Q, as filed with the SEC on 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 Company’s Current Report on Form 8-K, as filed with the SEC on May 24, 2021).
3.2	Amended and Restated Bylaws of Streamline Health Solutions, Inc., as amended and restated through March 28, 2014 (Incorporated by reference from Exhibit 3.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on April 3, 2014).
4.1	Specimen Common Stock Certificate of Streamline Health Solutions, Inc. (Incorporated by reference from the Company’s Registration Statement on Form S-1, File Number 333-01494, as filed with the SEC on April 15, 1996).
4.2*	Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.

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10.1#	Streamline Health Solutions, Inc. 1996 Employee Stock Purchase Plan, as amended and restated effective July 1, 2013 (Incorporated by reference from the Registration Statement on Form S-8, File Number 333-188763, as filed with the Commission on May 22, 2013).
10.2#	2005 Incentive Compensation Plan of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on May 26, 2005).
10.2(a)#	Amendment No. 1 to 2005 Incentive Compensation Plan of Streamline Health Solutions, Inc.(Incorporated by reference from Annex 1 of the Company’s Definitive Proxy Statement on Schedule 14A, as filed with the SEC on April 13, 2011).
10.2(b)#	Amendment No. 2 to 2005 Incentive Compensation Plan of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 4.3 of the Company’s Registration Statement on Form S-8, as filed with the SEC on November 15, 2012).
10.2(c)#	Amendment No. 3 to 2005 Incentive Compensation Plan of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 10.2(c) of the Company’s Current Report on Form 8-K, as filed with the SEC on October 20, 2020).
10.3#	Streamline Health Solutions, Inc. Third Amended and Restated 2013 Stock Incentive Plan (Incorporated by reference from Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A, as filed with the SEC on April 22, 2019).
10.3(a)#	Amendment No. 1 to Streamline Health Solutions, Inc. Third Amended and Restated 2013 Stock Incentive Plan (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on May 24, 2021).
10.3(b)#	Form of Restricted Stock Award Agreement for Non-Employee Directors (Incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 25, 2014).
10.3(c)#	Form of Restricted Stock Award Agreement for Executives (Incorporated by reference from Exhibit 10.3 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 25, 2014).
10.3(d)#	Form of Stock Option Agreement for Executives (Incorporated by reference from Exhibit 10.4 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 25, 2014).
10.4#	Employment Agreement, dated October 17, 2019, by and between the Company and Wyche T. “Tee” Green, III (Incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K, as filed with the SEC on October 18, 2019).
10.5#	Employment Agreement dated September 10, 2018 by and between Streamline Health Solutions, Inc. and Thomas J. Gibson (Incorporated by reference from Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on September 12, 2018).
10.6#	Employment Agreement dated February 5, 2020 by and between Streamline Health Solutions, Inc. and Randolph W. Salisbury (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on February 6, 2020).
10.7#	Employment Agreement dated August 1, 2019 by and between Streamline Health Solutions, Inc. and William G. Garvis (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 6, 2019).
10.8#	Employment Agreement, dated as of August 16, 2021, by and between Avelead Consulting, LLC and Jawad Shaikh (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 18, 2021).
10.9#	Restricted Stock Agreement by and between Streamline Health Solutions, Inc. and Jawad Shaikh, dated as of August 16, 2021 (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 18, 2021).
10.10#	Restricted Stock Agreement by and between Streamline Health Solutions, Inc. and Badar Shaikh, dated as of August 16, 2021 (Incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 18, 2021).
10.11#	Form of Indemnification Agreement for all directors and officers of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on June 7, 2006).
10.12	Software License and Royalty Agreement dated October 25, 2013 between Streamline Health, Inc. and Montefiore Medical Center (Incorporated by reference from Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on December 17, 2013).
10.12(a)	Joint Amendment dated July 1, 2018, to the Software License and Support Agreement and the Software License and Royalty Agreement by and between Streamline Health, Inc. and Montefiore Medical Center (Incorporated by reference from Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on September 12, 2018).

73

10.13	Loan and Security Agreement dated as of December 11, 2019 by and among Bridge Bank, a division of Western Alliance Bank, Streamline Health Solutions, Inc. and Streamline Health, Inc. (Incorporated by reference from Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on January 7, 2020).
10.13(a)	Amended and Restated Loan and Security Agreement dated as of March 2, 2021 by and among Western Alliance Bank, Streamline Health Solutions, Inc. and Streamline Health, Inc. (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on March 2, 2021).
10.13(b)	Second Amended and Restated Loan and Security Agreement, dated August 26, 2021, by and among Streamline Health Solutions, Inc., Streamline Health, Inc., Streamline Pay & Benefits, LLC, Streamline Consulting Solutions, LLC, Avelead Consulting, LLC and Western Alliance Bank (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 30, 2021.
10.14	Securities Purchase Agreement, dated October 10, 2019, between the Company and each purchaser identified on the signature pages thereto (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on October 11, 2019).
10.15	Registration Rights Agreement, dated October 10, 2019, between the Company and each of the several purchasers signatory thereto (Incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K, as filed with the SEC on October 11, 2019).
10.16	Master Services and Non-Disclosure Agreement, dated as of March 18, 2020, by and between Streamline Health Solutions, Inc. and 180 Consulting, LLC (Incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on March 25, 2020).
10.16(a)	Statement of Work #1 to the Master Services and Non-Disclosure Agreement, dated as of March 18, 2020, by and between Streamline Health Solutions, Inc. and 180 Consulting, LLC (Incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K, as filed with the SEC on March 25, 2020).
10.16(b)	Statement of Work #2 to the Master Services and Non-Disclosure Agreement, dated as of March 18, 2020, by and between Streamline Health Solutions, Inc. and 180 Consulting, LLC (Incorporated by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K, as filed with the SEC on March 25, 2020).
10.16(c)	Statement of Work #3 to the Master Services and Non-Disclosure Agreement, dated as of March 18, 2020, by and between Streamline Health Solutions, Inc. and 180 Consulting, LLC (Incorporated by reference from Exhibit 10.4 to the Company’s Current Report on Form 8-K, as filed with the SEC on March 25, 2020).
10.16(d)	Statement of Work #4 to the Master Services and Non-Disclosure Agreement, dated as of March 18, 2020, by and between Streamline Health Solutions, Inc. and 180 Consulting, LLC (Incorporated by reference from Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on September 10, 2020).
10.17	Sublease Agreement (Incorporated by reference from Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on June 11, 2020).
21.1*	Subsidiaries of Streamline Health Solutions, Inc.
23.1*	Consent of Independent Registered Public Accounting Firm - Dixon Hughes Goodman LLP
24	Power of Attorney (included in signature page)
31.1*	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification by Chief Executive Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification by Chief Financial Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial information from Streamline Health Solutions, Inc.’s Annual Report on Form 10-K for the fiscal year ended January 31, 2022 filed with the SEC on April 28, 2022, formatted in XBRL includes: (i) Consolidated Balance Sheets at January 31, 2022 and 2021, (ii) Consolidated Statements of Operations for the two years ended January 31, 2022, (iii) Consolidated Statements of Changes in Stockholders’ Equity for the two years ended January 31, 2022, (iv) Consolidated Statements of Cash Flows for the two years ended January 31, 2022, and (v) the Notes to Consolidated Financial Statements.
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	Filed herewith.
#	Management Contracts and Compensatory Arrangements.
	Our SEC file number reference for documents filed with the SEC pursuant to the Exchange Act, is 000-28132.

74

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	STREAMLINE HEALTH SOLUTIONS, INC.
By:	/S/ WYCHE T. “TEE” GREEN, III
	Wyche T. “Tee” Green, III
	Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints Wyche T. “Tee” Green, III and Thomas J. Gibson, and each of them, his attorneys-in-fact, each with the power of substitution, for him and in his name, place and stead, in any and all capacities, to sign this annual report on Form 10-K and any and all amendments to this annual report on Form 10-K, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

DATE: April 28, 2022

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the date indicated.

/S/ WYCHE T. “TEE” GREEN, III	Chief Executive Officer and Director	April 28, 2022
Wyche T. “Tee” Green, III	(Principal Executive Officer)
/s/ JONATHAN R. PHILLIPS	Director	April 28, 2022
Jonathan R. Phillips
/s/ JUSTIN FERAYORNI	Director	April 28, 2022
Justin Ferayorni
/s/ JUDITH E. STARKEY	Director	April 28, 2022
Judith E. Starkey
/s/ KENAN H. LUCAS	Director	April 28, 2022
Kenan H. Lucas
/s/ THOMAS J. GIBSON	Chief Financial Officer	April 28, 2022
Thomas J. Gibson	(Principal Financial Officer and Principal Accounting Officer)

75

EX-4.2

Exhibit 4.2

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

Streamline Health Solutions, Inc. (the “Company,” “we,” “our,” and “us”) has authority to issue 70,000,000 shares of all classes of stock, consisting of 65,000,000 shares of Common Stock, par value $0.01 per share (the “Common Stock”), and 5,000,000 shares of Preferred Stock, par value $0.01 per share (the “Preferred Stock”). The following summary describes the Common Stock of the Company, which is the only class of securities of the Company registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.

The following description is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to (i) our Certificate of Incorporation, as amended through May 24, 2021 (as so amended, the “Certificate of Incorporation”), and (ii) our Amended and Restated Bylaws, as amended and restated through March 28, 2014 (as so amended, the “Bylaws”), each of which is incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit 4.2 is a part. We encourage you to read our Certificate of Incorporation, our Bylaws and the applicable provisions of the Delaware General Corporation Law (the “DGCL”), for additional information.

Common Stock

Voting. Holders of Common Stock are entitled to one vote per share for the election of directors and on all other matters that require stockholder approval, subject in all cases to the rights of any outstanding Preferred Stock, if any. Holders of our Common Stock do not have cumulative voting rights.

Our Bylaws provide that the holders of a majority of all of the shares of our capital stock issued, outstanding and entitled to vote shall constitute a quorum for the transaction of business. When a quorum is present, the affirmative vote of the majority of shares of our capital stock present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the question is one upon which by express provisions of an applicable law, our Certificate of Incorporation or our Bylaws a different vote is required, in which case such express provision shall govern and control the decision of such question. Our Bylaws provide that, when a quorum is present at a meeting of stockholders at which directors are to be elected, directors are elected by a plurality of the votes of the shares of capital stock present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Our Certificate of Incorporation provides that the affirmative vote of the holders of not less than 66 2/3% of the outstanding shares of Common Stock entitled to vote upon the election of directors shall be required to effect: (1) an amendment to the Certificate of Incorporation, (2) a merger or consolidation of the Company with or into another corporation, or the sale or transfer of all or substantially all of the assets of the Company to another entity; or (3) the removal of a member of the Board of Directors.

Dividends and Other Distributions. Subject to the rights of holders of any then outstanding shares of our Preferred Stock, our holders of Common Stock are entitled to receive such dividends as may be declared from time to time by our Board of Directors from funds legally available therefor. We do not currently pay cash dividends on our Common Stock, and we currently intend to retain any future earnings for use in our business. Any future determination as to the declaration of dividends on our Common Stock will be made at the discretion of the Board of Directors and will depend on our earnings, operating and financial condition, capital requirements and other factors deemed relevant by the Board of Directors, including the applicable requirements of the DGCL, which provides that dividends are payable only out of surplus or net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. The payment of dividends on our Common Stock may be restricted by the provisions of credit agreements or other financing documents that we may enter into or the terms of securities that we may issue from time to time.

Merger, Consolidation or Sale of Assets. Subject to any preferential rights of any outstanding Preferred Stock, if any, holders of our Common Stock shall be entitled to receive all cash, securities and other property received by us pro rata on the basis of the number of shares of Common Stock held by each of them in any of the following situations: (1) our merger or consolidation with or into another corporation in which we do not survive, (2) the sale or transfer of all or substantially all of our assets to another entity or (3) a merger or consolidation in which we are the surviving entity but the Common Stock shall be exchanged for stock, securities or property of another entity.

Distribution on Dissolution. After payment or provision for all liabilities, and subject to any preferential rights of any outstanding Preferred Stock, if any, in the event of our liquidation, dissolution or winding up, holders of our Common Stock are entitled to receive a portion of the remaining funds to be distributed. Such funds shall be paid to the holders of our Common Stock pro rata on the basis of the number of shares of Common Stock held by each of them.

Other Rights. The shares of our Common Stock are not subject to any redemption provisions and are not convertible. Holders of our Common Stock do not have any preemptive rights enabling such holders to purchase, subscribe for or receive shares of any class of our Common Stock or any other securities convertible into shares of any class of our Common Stock or any redemption rights. Holders of Common Stock have no sinking fund rights.

All outstanding shares of our Common Stock are fully paid and non-assessable. All shares of Common Stock have equal rights and preferences.

The rights, preferences and privileges of holders of our Common Stock are subject to, and may be adversely affected by, those of the holders of Preferred Stock, and will be subject to those of the holders of any shares of our Preferred Stock that we may issue in the future. As of April 28, 2022, we had no shares of Preferred Stock outstanding.

Listing

Our Common Stock is listed on the NASDAQ Capital Market under the symbol “STRM.”

Transfer Agent and Registrar

The transfer agent and registrar for our Common Stock is Computershare Inc., 250 Royall Street, Canton, Massachusetts 02021.

Delaware Anti-Takeover Law and Provisions of our Certificate of Incorporation and Bylaws

Delaware Anti-Takeover Law. We are subject to Section 203 of the DGCL. Section 203 generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:

● prior to the date of such business combination, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

● upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also officers of the corporation and (b) shares issued under employee stock plans under which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

● on or subsequent to the date of such business combination, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.

Section 203 defines a business combination to include:

● any merger or consolidation involving the corporation and the interested stockholder or any merger or consolidation involving the corporation and another entity that is caused by the interested stockholder;

● any sale, lease, exchange, mortgage, pledge, transfer or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;

● subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;

● any transaction involving the corporation that has the effect of increasing the proportionate share of its stock owned by the interested stockholder; or

● any receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any affiliate or associate of such entity or person.

Our Certificate of Incorporation and Bylaws. Provisions of our Certificate of Incorporation and Bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our Common Stock. Among other things, our Certificate of Incorporation and Bylaws:

● permit our Board of Directors to issue up to 5,000,000 shares of Preferred Stock, with such designations, powers, preferences and rights as our Board of Directors may authorize (including the right to approve an acquisition or other change in control);

● provide that the authorized number of directors may be changed only by the Board of Directors;

● provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; and

● do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of capital stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose).

The amendment or repeal of any of these provisions of our Certificate of Incorporation would require approval of holders of not less than 66 2/3% of the outstanding shares of Common Stock entitled to vote upon the election of directors. Our Bylaws may be amended by an affirmative vote of a majority of the entire Board of Directors.

EX-21.1

Exhibit 21.1

STREAMLINE HEALTH SOLUTIONS, INC.

SUBSIDIARIES OF STREAMLINE HEALTH SOLUTIONS, INC.

Name	Jurisdiction of Incorporation	% Owned
Streamline Health, LLC	Delaware		100	%
Avelead Consulting, LLC	Delaware		100	%
Streamline Consulting, LLC	Delaware		100	%
Streamline Pay & Benefits, LLC	Delaware		100	%

EX-23.1

Exhibit 23.1

 

EX-31.2

Exhibit 31.2

STREAMLINE HEALTH SOLUTIONS, INC.

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas J. Gibson, certify that:

I have reviewed this annual report on Form 10-K of Streamline Health Solutions, Inc.

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.

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.

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;

● 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;

● designed such internal controls over financial reporting, or caused such internal controls 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;

● 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

● 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 (the registrant’s fourth fiscal quarter in the case on an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

● 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

● 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.

April 28, 2022	/s/ THOMAS J. GIBSON
	Chief Financial Officer

EX-32.1

Exhibit 32.1

STREAMLINE HEALTH SOLUTIONS, INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Wyche T. “Tee” Green, Chief Executive Officer and President of Streamline Health Solutions, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

● The annual report on Form 10-K of the Company for the annual period ended January 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

● The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /S/ WYCHE T. “TEE” GREEN, III

Chief Executive Officer and President

April 28, 2022

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

STREAMLINE HEALTH SOLUTIONS, INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas J. Gibson, Chief Financial Officer of Streamline Health Solutions, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

● The annual report on Form 10-K of the Company for the annual period ended January 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

● The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ THOMAS J. GIBSON

Chief Financial Officer

April 28, 2022

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover - USD ($)	12 Months Ended
	Jan. 31, 2022	Apr. 18, 2022	Jul. 31, 2021
Cover [Abstract]
Document Type	10-K
Amendment Flag	false
Document Annual Report	true
Document Transition Report	false
Document Period End Date	Jan. 31, 2022
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2021
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	2400 Old Milton Pkwy.
Entity Address, Address Line Two	Box 1353
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 Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
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 Public Float			$ 47,822,381
Entity Common Stock, Shares Outstanding		48,104,880
Documents Incorporated by Reference	Information required by Part III is incorporated by reference from the Registrant’s Proxy Statement for its 2022 annual meeting of stockholders or an amendment to this Annual Report on Form 10-K, which will be filed with the Securities and Exchange Commission within 120 days after the end of its fiscal year ended January 31, 2022.
ICFR Auditor Attestation Flag	false
Auditor Name	Dixon Hughes Goodman LLP
Auditor Location	Atlanta, GA
Auditor Firm ID	57

XML

Consolidated Balance Sheets - USD ($)	Jan. 31, 2022		Jan. 31, 2021
Current assets:
Cash and cash equivalents	$ 9,885,000		$ 2,409,000
Accounts receivable, net of allowance for doubtful accounts of $76,000 and $65,000, respectively	3,823,000		2,929,000
Contract receivables	843,000		174,000
Assets held in escrow			800,000
Prepaid and other current assets	568,000		416,000
Current assets of discontinued operations			587,000
Total current assets	15,119,000		7,315,000
Non-current assets:
Property and equipment, net of accumulated amortization of $192,000 and $452,000 respectively	123,000		104,000
Right-of use asset for operating lease	218,000		391,000
Capitalized software development costs, net of accumulated amortization of $5,202,000 and $3,507,000, respectively	5,555,000		5,945,000
Intangible assets, net of accumulated amortization of $5,121,000 and $4,773,000, respectively	16,763,000		624,000
Goodwill	23,089,000		10,712,000
Other	948,000		873,000
Long-term assets of discontinued operations			13,000
Total non-current assets	46,696,000		18,662,000
Total assets	61,815,000		25,977,000
Current liabilities:
Accounts payable	778,000		272,000
Accrued expenses	1,803,000		908,000
Current portion of term loan, net of deferred financing costs	250,000	[1]	1,534,000	[2]
Deferred revenues	5,794,000		3,862,000
Current portion of operating lease obligation	204,000		198,000
Current portion of acquisition earnout liability	4,672,000
Current liabilities of discontinued operations			595,000
Total current liabilities	13,501,000		7,369,000
Non-current liabilities:
Term loan, net of current portion and deferred financing costs	9,654,000		767,000
Deferred revenues, less current portion	136,000		130,000
Operating lease obligations, less current portion	33,000		222,000
Acquisition earnout liability, less current portion	4,161,000
Other non-current liabilities	286,000
Total non-current liabilities	14,270,000		1,119,000
Total liabilities	27,771,000		8,488,000
Stockholders’ equity:
Common stock, $0.01 par value per share, 65,000,000 shares authorized; 47,840,950 and 31,597,975 shares issued and outstanding, respectively	478,000		316,000
Additional paid in capital	119,225,000		96,290,000
Accumulated deficit	(85,659,000)		(79,117,000)
Total stockholders’ equity	34,044,000		17,489,000
Total liabilities and stockholders’ equity	$ 61,815,000		$ 25,977,000

[1] The term loan as of January 31, 2022 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 21, 2021 is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021.

XML

Consolidated Balance Sheets (Parenthetical) - USD ($)	Jan. 31, 2022	Jan. 31, 2021
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 76,000	$ 65,000
Accumulated amortization, property and equipment	192,000	452,000
Accumulated amortization, capitalized software development costs	5,202,000	3,507,000
Accumulated amortization, intangible assets	$ 5,121,000	$ 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	47,840,950	31,597,975
Common stock, shares outstanding	47,840,950	31,597,975

XML

Consolidated Statements of Operations - USD ($)		12 Months Ended
		Jan. 31, 2022	Jan. 31, 2021
Revenues:
Total revenues		$ 17,379,000	$ 11,346,000
Operating expenses:
Cost of software licenses		485,000	501,000
Cost of professional services		2,782,000	1,040,000
Cost of audit services		1,559,000	1,558,000
Cost of maintenance and support		334,000	684,000
Cost of software as a service		3,417,000	1,906,000
Selling, general and administrative expense		11,931,000	8,565,000
Research and development		4,782,000	2,933,000
Non-routine costs		2,856,000
Loss on exit of membership agreement			105,000
Total operating expenses		28,146,000	17,292,000
Operating loss		(10,767,000)	(5,946,000)
Other expense:
Interest expense		(236,000)	(51,000)
Loss on early extinguishment of debt		(43,000)
Other		1,911,000	(62,000)
PPP Loan Forgiveness		2,327,000
Loss from continuing operations before income taxes		(6,808,000)	(6,059,000)
Income tax (expense) benefit		(109,000)	1,260,000
Loss from continuing operations		(6,917,000)	(4,799,000)
Income from discontinued operations:
Gain on sale of discontinued operations			6,013,000
Income from discontinued operations		401,000	356,000
Income tax expense		(26,000)	(1,274,000)
Income from discontinued operations, net of tax		375,000	5,095,000
Net income (loss)		$ (6,542,000)	$ 296,000
Basic Earnings Per Share:
Continuing operations		$ (0.16)	$ (0.16)
Discontinued operations		0.01	0.17
Net income		$ (0.15)	$ 0.01
Weighted average number of common shares - basic	[1]	42,815,239	30,152,383
Diluted Earnings Per Share:
Continuing operations	[1]	$ (0.16)	$ (0.16)
Discontinued operations		0.01	0.17
Net income (loss) per common share - diluted		$ (0.15)	$ 0.01
Weighted average number of common shares - diluted		43,273,574	30,640,742
Software Licenses [Member]
Revenues:
Total revenues		$ 1,057,000	$ 590,000
Professional Services [Member]
Revenues:
Total revenues		2,026,000	618,000
Audit Services [Member]
Revenues:
Total revenues		1,896,000	1,891,000
Maintenance and Support [Member]
Revenues:
Total revenues		4,323,000	4,586,000
Software Service [Member]
Revenues:
Total revenues		$ 8,077,000	$ 3,661,000

[1] Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of January 31, 2022 and 2021, there were 1,043,350 and 931,125 unvested restricted shares of common stock, respectively.

XML

Consolidated Statements of Changes in Stockholders' Equity - 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	$ 14,000	(14,000)
Restricted stock issued, shares	1,395,917
Restricted stock forfeited	$ (2,000)	2,000
Restricted stock forfeited, shares	(166,490)
Surrender of stock	$ (1,000)	(255,000)		(256,000)
Surrender of stock, shares	(162,095)
Share-based compensation expense		1,444,000		1,444,000
Net income (loss)			296,000	296,000
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	$ 14,000	(14,000)
Restricted stock issued, shares	1,462,874
Restricted stock forfeited
Restricted stock forfeited, shares	(50,100)
Surrender of stock	$ (3,000)	(461,000)		(464,000)
Surrender of stock, shares	(257,571)
Share-based compensation expense		2,216,000		2,216,000
Net income (loss)			(6,542,000)	(6,542,000)
Exercise of Stock Options		4,000		$ 4,000
Exercise of Stock Options, shares	3,300			3,300
Issuance of Common Stock	$ 151,000	22,503,000		$ 22,654,000
Issuance of Common Stock, shares	15,084,472
Offering Expenses		(1,313,000)		(1,313,000)
Balance at Jan. 31, 2022	$ 478,000	$ 119,225,000	$ (85,659,000)	$ 34,044,000
Balance, shares at Jan. 31, 2022	47,840,950

XML

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Cash flows from operating activities:
Net income (loss)	$ (6,542,000)	$ 296,000
LESS: Income from discontinued operations, net of tax	375,000	5,095,000
Loss from continuing operations	(6,917,000)	(4,799,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	68,000	64,000
Amortization of capitalized software development costs	1,848,000	1,662,000
Amortization of intangible assets	1,281,000	491,000
Amortization of other deferred costs	449,000	359,000
Amortization of Deferred Financing Costs	51,000
Valuation adjustments	(1,851,000)	31,000
Loss on early extinguishment of debt	43,000
Provision (benefit) for income taxes	95,000	(1,274,000)
Loss on exit of operating lease		105,000
Share-based compensation expense	2,216,000	1,403,000
Provision (benefit) for accounts receivable allowance	11,000	(31,000)
Forgiveness of PPP Loan	(2,327,000)
Changes in assets and liabilities:
Accounts and contract receivables	(129,000)	(253,000)
Other assets	(346,000)	(519,000)
Accounts payable	17,000	(484,000)
Accrued expenses and other liabilities	533,000	(592,000)
Deferred revenues	1,074,000	344,000
Net cash used in operating activities – continuing operations	(3,884,000)	(3,493,000)
Net cash provided by (used in) operating activities – discontinued operations	380,000	(2,264,000)
Cash flows from investing activities:
Investment in Avelead, net of cash acquired	(12,470,000)
Purchases of property and equipment	(41,000)	(44,000)
Proceeds from sale of ECM assets	800,000	11,288,000
Capitalization of software development costs	(1,458,000)	(1,784,000)
Net cash (used in) provided by investing activities – continuing operations	(13,169,000)	9,460,000
Cash flows from financing activities:
Proceeds from issuance of common stock	16,100,000
Payments for costs directly attributable to the issuance of common stock	(1,313,000)
Repayment of bank term loan		(4,000,000)
Proceeds from term loan payable	10,000,000	2,301,000
Payments related to settlement of employee shared-based awards	(464,000)	(256,000)
Payment of deferred financing costs	(168,000)
Payment on royalty liability		(1,000,000)
Other	(6,000)	12,000
Net cash provided by (used in) financing activities – continuing operations	24,149,000	(2,943,000)
Net increase in cash and cash equivalents	7,476,000	760,000
Cash and cash equivalents at beginning of period	2,409,000	1,649,000
Cash and cash equivalents at end of period	9,885,000	2,409,000
Supplemental cash flow disclosures:
Interest paid, net of amounts capitalized	153,000	17,000
Income taxes paid	$ 21,000

XML

ORGANIZATION AND DESCRIPTION OF BUSINESS

12 Months Ended

Jan. 31, 2022

Accounting Policies [Abstract]

ORGANIZATION AND DESCRIPTION OF BUSINESS

NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS

Streamline Health Solutions, Inc. and each of its wholly-owned subsidiaries, Streamline Health, LLC, Avelead Consulting, LLC, Streamline Consulting, LLC and Streamline Pay & Benefits, LLC, (collectively, unless the context requires otherwise, “we”, “us”, “our”, “Streamline”, or the “Company”) operates 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, RevID, and other workflow software applications and the use of such applications by software as a service (“SaaS”). The Company also provides audit 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.

Fiscal Year

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.

XML

SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Jan. 31, 2022

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of Streamline Health Solutions, Inc. and its wholly-owned subsidiaries, Streamline Health, LLC, Avelead Consulting, LLC, Streamline Consulting Solutions, LLC and Streamline Pay & Benefits, LLC. All significant intercompany transactions and balances are eliminated in consolidation. All amounts in the consolidated financial statements, notes and tables have been rounded to the nearest thousand dollars, except share and per share amounts, unless otherwise indicated.

Refer to Note – 3 Business Combination and Divestiture. Under ASC 280-10-50-11, two or more operating segments may be aggregated into a single operating segment if they are considered to be similar. Operating segments are considered to be similar if they can be expected to have essentially the same economic characteristics and future prospects. Using the aggregation guidance, the Company determined that it has one operating segment due to the similar economic characteristics of the Company’s products, product development, distribution, regulatory environment and customer base as a provider of computer software-based solutions and services for acute-care healthcare providers. The Company has two reporting units for evaluation of intangible assets. These two reporting units are the legacy Streamline business and Avelead.

On February 24, 2020, the Company sold a portion of its business (the ECM Assets). We applied the standard of ASC 205-20-1 to ascertain the timing of accounting for the discontinued operations. Based on ASC 205-20-1, the Company determined that upon receiving stockholder approval, which occurred February 21, 2020, it was authorized to sell the ECM assets. By the Company having the authority and ability to consummate the sale of the ECM Assets, it 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 consolidated statements of operations, cash flows and balance sheets for the current and comparative prior periods. Refer to Note 13 – Discontinued Operations for further details.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“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, stock-based compensation, capitalization of software development costs, intangible assets, the allowance for doubtful accounts, contingent consideration and income taxes. Actual results could differ from those estimates.

Cash and Cash Equivalents

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash demand deposits. Cash deposits are placed in Federal Deposit Insurance Corporation (“FDIC”) insured financial institutions. Cash deposits may exceed FDIC insured levels from time to time. For purposes of the consolidated balance sheets and consolidated statements of cash flows, the Company considers all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Non-Cash Items

The Company had the following items that were non-cash items related to the consolidated statements of cash flows:

		Fiscal Year
		2021		2020
Forgiveness of PPP loan and accrued interest	$	2,327,000	$	—
Escrowed funds from sale of ECM Assets		—		800,000
Right-of Use Assets from operating lease		—		540,000
Capitalized software purchased with stock (Note 12)		—		41,000

Receivables

Accounts and contract receivables are comprised of amounts owed to the Company for licensed software, professional services, including coding audit services, consulting services, maintenance services, and software as a service and are presented net of the allowance for doubtful accounts. The timing of revenue recognition may not coincide with the billing terms of the customer contract, resulting in unbilled receivables or deferred revenues; therefore, certain contract receivables represent revenues recognized prior to customer billings. Individual contract terms with customers or resellers determine when receivables are due. Accounts receivable represent amounts that the entity has an unconditional right to consideration. For billings where the criteria for revenue recognition have not been met, deferred revenue is recorded until the Company satisfies the respective performance obligations.

Allowance for Doubtful Accounts

The Company adjusts accounts receivable down to net realizable value with its allowance methodology. In determining the allowance for doubtful accounts, aged receivables are analysed periodically by management. Each identified receivable is reviewed based upon the most recent information available and the status of any open or unresolved issues with the customer preventing the payment thereof. Corrective action, if necessary, is taken by the Company to resolve open issues related to unpaid receivables. During these periodic reviews, the Company determines the required allowances for doubtful accounts for estimated losses resulting from the unwillingness of its customers or resellers to make required payments. The allowance for doubtful accounts was approximately $76,000 and $65,000 at January 31, 2022 and 2021, respectively. The Company believes that its reserve is adequate, however, results may differ in future periods.

Bad debt (benefit) expense for fiscal years 2021 and 2020 was as follows:

	2021		2020
Bad debt expense (benefit)	$	11,000	$	(31,000	)

Concessions Accrual

In determining the concessions accrual, the Company evaluates historical concessions granted relative to revenue. The Company records a provision, reducing revenue, each period for the estimated amount of concessions incurred on the revenue recorded. The Company evaluates the amount of the provision and the concession accrual each period. The concession accrual included in accrued other expenses on the Company’s consolidated balance sheets was $152,000 and $99,000 as of January 31, 2022 and 2021, respectively.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method, over the estimated useful lives of the related assets. Estimated useful lives are as follows:

Computer equipment and software	3-4 years
Office equipment	5 years
Office furniture and fixtures	5-7 years
Leasehold improvements	Term of lease or estimated useful life, whichever is shorter

Depreciation expense for property and equipment in fiscal 2021 and 2020 was $68,000 and $64,000, respectively.

Normal repairs and maintenance are expensed as incurred. Replacements are capitalized and the property and equipment accounts are relieved of the items being replaced or disposed of, if no longer of value. The related cost and accumulated depreciation of the disposed assets are eliminated and any gain or loss on disposition is included in the results of operations in the year of disposal.

The Company wrote-off fully depreciated fixed assets during fiscal 2021 of $198,000. There was no impact to the consolidated statements of operations as this eliminated the asset and accumulated depreciation of the fully depreciated fixed assets.

Leases

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. 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. Since our lease arrangements do not provide an implicit rate, we use our estimated incremental borrowing rate for the expected remaining lease term at commencement date in determining the present value of future lease payments. We recognize operating lease cost on a straight-line basis by aggregating any rent abatement with the total expected rental payments and amortizing the expense ratably over the term of the lease. Sublease income is recognized as other income over the period of the lease, as the sublease is outside of the Company’s normal business operations. See Note 4 – Operating Leases for further details.

Debt Issuance Costs

For fiscal 2021, costs of $130,000 related to the issuance of the Second Amended and Restated Loan and Security Agreement were capitalized as a reduction to the carrying value of debt and are being accreted to interest expense over the term of the loan using the effective interest rate method. The Company will also incur $200,000 in financing costs at the earlier of the term date of the loan, or pre-payment. These costs are being accreted, through interest expense, to the full value of the $200,000 over the term of the loan.

Cost related to the issuance of the Loan and Security Agreement and Second Amended and Restated Loan and Security Agreement were capitalized and amortized to interest expense on a straight-line basis, which is not materially different from the effective interest method, over the term of the related debt, and presented on the Company’s consolidated balance sheets as a direct deduction from the carrying amount of the non-current portion of our term loan.

Impairment of Long-Lived Assets

The Company reviews the carrying value of long-lived assets for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Among the factors the Company considers in making the evaluation are changes in market position and profitability. If facts and circumstances are present which may indicate that the carrying amount of the assets may not be recoverable, the Company will prepare a projection of the undiscounted cash flows of the specific asset or asset group and determine if the long-lived assets are recoverable based on these undiscounted cash flows. If impairment is indicated, an adjustment will be made to reduce the carrying amount of these assets to their fair values.

Capitalized Software Development Costs

Software development costs for software to be sold, leased, or marketed are accounted for in accordance with ASC 985-20, Software — Costs of Software to be Sold, Leased or Marketed. Costs associated with the planning and design phase of software development are classified as research and development costs and are expensed as incurred. Once technological feasibility has been established, a portion of the costs incurred in development, including coding, testing and quality assurance, are capitalized until available for general release to customers, and subsequently reported at the lower of unamortized cost or net realizable value. Amortization is calculated on a solution-by-solution basis and is included in Cost of software licenses on the consolidated statements of operations. Annual amortization is measured at the greater of a) the ratio of the software product’s current gross revenues to the total of current and expected gross revenues or b) straight-line over the remaining economic life of the software (typically two years). Unamortized capitalized costs determined to be in excess of the net realizable value of a solution are expensed at the date of such determination. Capitalized software development costs for software to be sold, leased, or marketed, net of accumulated amortization, totalled $846,000 and $1,103,000 as of January 31, 2022 and 2021, respectively.

Internal-use software development costs are accounted for in accordance with ASC 350-40, Internal-Use Software. The costs incurred in the preliminary stages of development are expensed as research and development costs as incurred. Once an application has reached the development stage, internal and external costs incurred to develop internal-use software are capitalized and amortized on a straight-line basis over the estimated useful life of the software (typically three to four years). Maintenance and enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful life of the software. The Company reviews the carrying value for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Amortization expense related to capitalized internal-use software development costs is included in Cost of software as a service on the consolidated statements of operations. Capitalized software development costs for internal-use software, net of accumulated amortization, totaled $4,709,000 and $4,842,000 as of January 31, 2022 and 2021, respectively.

The estimated useful lives of software (including software to be sold and internal-use software) are reviewed frequently and adjusted as appropriate to reflect upcoming development activities that may include significant upgrades and/or enhancements to the existing functionality. The Company reviews, on an on-going basis, the carrying value of its capitalized software development expenditures, net of accumulated amortization.

Amortization expense on all capitalized software development cost was $2,173,000 and $1,662,000 in fiscal 2021 and 2020, respectively. Further, the Company recognized an impairment of approximately $84,000 and $164,000 in fiscal 2021 and fiscal 2020, respectively, related to cancelled or abandoned enhancement projects during fiscal 2021 and fiscal 2020 that has been recognized within amortization expense. Additionally, in fiscal 2021, approximately $154,000 of fully amortized and abandoned assets, including previously acquired assets, were cleared from their corresponding capitalization and accumulated amortization balance sheet accounts.

The Company uses the “carry-over” method for amortizing capitalized software development costs. Under the “carry-over” method, the costs of the enhancements are added to the unamortized costs of the previous version of the product and the combined amount is amortized over the remaining useful life of the product. Including unamortized cost of the original product with the cost of the enhancement for purposes of applying the net realizable value test and amortization provisions is consistent with accounting guidance for software companies that improve their software and discontinue selling or marketing the older versions.

		Fiscal Year
		2021		2020
Amortization expense on internally-developed software included in:
Cost of software licenses	$	485,000	$	501,000
Cost of audit services		13,000		13,000
Cost of software as a service		1,675,000		1,148,000
Total amortization expense on internally-developed software	$	2,173,000	$	1,662,000

Interest capitalized to software development cost in fiscal 2021 and 2020 was $27,000 and $13,000, respectively. The interest capitalized to software development cost reduces the Company’s interest expense recognized in the consolidated statements of operations.

Research and development expense was $4,782,000 and $2,933,000 in fiscal 2021 and 2020, respectively.

Fair Value of Financial Instruments

The FASB’s authoritative guidance on fair value measurements establishes a framework for measuring fair value, and expands disclosure about fair value measurements. 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. For fiscal years 2021 and 2020, there were no transfers of assets or liabilities between Levels 1, 2, or 3.

The table below provides information on our liabilities that are measured at fair value on a recurring basis:

			Quoted Prices in		Significant Other		Significant
	Total Fair		Active Markets		Observable Inputs		Unobservable Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
At January 31, 2022
Acquisition earnout liability (1)	$	8,833,000	$	–	$	–	$	8,833,000

(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 January 31, 2022. The decrease in the valuation of the acquisition earnout liability was $1,851,000 from the date of closing of the Avelead acquisition, August 16, 2021 to the end of the fiscal year, January 31, 2022. The valuation adjustment is recognized in “other income” in the accompanying consolidated statement of operations.

The fair value of the Company’s term loan under its Second Amended and Restated Loan and Security Agreement was determined through an analysis of the interest rate spread from the date of closing the loan (August 2022) to the date of the most recent balance sheet, January 31, 2022. The term loan bears 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 prime rate is variable and, thus accommodates changes in the market interest rate. However, the interest rate spread (the 1.5% added to the Prime Rate) is fixed. We estimated the impact of the changes in the interest rate spread by analogizing the effect of the change in the Corporate bond rates, reduced for any changes in the market interest rate. This provided us with an estimated change to the interest rate spread of approximately 0.5% from the date we entered the debt agreement to the end of the fiscal year, January 31, 2022. The discount to the value of the debt as of January 31, 2022 was estimated to be $9,798,000, or a discount to book value $202,000. Long-term debt is classified as Level 2.

The fair value of the PPP loan was determined based on discounting the loan amount as of January 31, 2021. The fair value using market rates the Company believes would be available for similar types of financial instruments would have resulted in a lower fair value of $2,231,000 as compared to the book value of $2,301,000, a reduction of $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 our direct sales force or through third-party resellers. Licensed, locally-installed customers on a perpetual model utilize our 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 and consulting services.

We recognize revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (“ASC 606”), under the core principle of recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

We commence revenue recognition (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

Often contracts contain more than one performance obligation. Performance obligations are the unit of accounting for revenue recognition and generally 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-cancellable 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 right of refund terms are required, revenue is recognized upon the satisfaction of such criteria.

The determined transaction price is allocated based on the standalone selling price of the performance obligations in contract. Significant judgment is required to determine the standalone selling price (“SSP”) for each performance obligation, the amount allocated to each performance obligation and whether it depicts the amount that the Company expects to receive in exchange for the related product and/or service. The Company recognizes revenue for implementation for certain of its eValuator SaaS solution over the contract term, as it has been determined that those implementation services are not a distinct performance obligation. Services for other SaaS and Software solutions such as CDI, RevID and Compare, have been determined as a distinct performance obligation. For these agreements, the Company estimates 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, software as a service 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 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.

The Company has utilized the portfolio approach as the practical expedient. We have applied the revenue model to a portfolio of contracts with similar characteristics where we expected that the financial statements would not differ materially from applying it to the individual contracts within that portfolio.

Software Licenses

The Company’s software license arrangements 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 is recognized at a point in time. Typically, this is upon shipment of components or electronic download of software.

Maintenance and Support Services

Our maintenance and support obligations include multiple discrete performance obligations, with the two largest being unspecified product upgrades or enhancements, and technical support, which can be offered at various points during a contract period. We believe that the multiple discrete performance obligations within our overall maintenance and support obligations can be viewed as a single performance obligation since both the unspecified upgrades and technical support are activities to fulfill the maintenance performance obligation and are rendered concurrently. Maintenance and support agreements entitle customers to technology support, version upgrades, bug fixes and service packs. We recognize maintenance and support revenue over the contract term.

Software-Based Solution Professional Services

The Company provides various professional services to customers with software licenses. These include project management, software implementation and software modification services. Revenues from arrangements to provide professional services are generally distinct from the other promises in the contract and are recognized as the related services are performed. Consideration payable under these arrangements is either fixed fee or on a 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 of the Company’s platform and support which represent a single promise to provide continuous access to its software solutions. Implementation services for the Company’s eValuator product are 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. Implementation services for other SaaS products are deemed to be separate performance obligations.

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 customer’s enterprise. Audit services are a separate performance obligation. We recognize revenue over time as the services are performed.

Disaggregation of Revenue

The following table provides information about disaggregated revenue by type and nature of revenue stream:

		Fiscal Year
		2021		2020
Recurring Revenue	$	12,400,000	$	8,247,000
Non-Recurring Revenue		4,979,000		3,099,000
Total revenue	$	17,379,000	$	11,346,000

The Company includes revenue categories of (i) maintenance and support and (ii) software as a service as recurring revenue for fiscal years ended January 31, 2021 and January 31, 2020. The Company includes revenue categories of (i) software licenses, (ii) professional services, and (iii) audit services as non-recurring revenue for the fiscal years ended January 31, 2021 and January 31, 2020. Avelead makes up $2,790,000 of the Recurring Revenue for fiscal 2021 and $1,735,000 of the Non-Recurring Revenue for fiscal 2021.

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 revenues include payments received in advance of performance under the contract. Our 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 year ended January 31, 2022, we recognized approximately $3,702,000 in revenue from deferred revenues outstanding as of January 31, 2021. Revenue allocated to remaining performance obligations was $19,112,000 as of January 31, 2022, of which 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)

We defer 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 contractual term. As of January 31, 2022, and 2021, we had deferred costs of $125,000 and $168,000, respectively, net of accumulated amortization of $93,000 and $126,000, respectively. Amortization expense of these costs was $110,000 and $125,000 in fiscal 2021 and 2020, respectively. There were no impairment losses for these capitalized costs for the fiscal years 2021 and 2020. In fiscal 2021, the deferred cost to fulfill a contract and the associated accumulated amortization accounts were reduced by $143,000 for projects with fully amortized costs.

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, we expense sales commissions as incurred when the amortization period of related deferred commission costs would have been one year or less.

Deferred commissions costs paid and payable, which are included on the consolidated balance sheets within other non-current assets totalled $806,000 and $666,000, respectively, as of January 31, 2022 and 2021. In fiscal 2021 and 2020, $339,000 and $206,000, respectively, in amortization expense associated with deferred sales commissions was included in selling, general and administrative expenses on the consolidated statements of operations. There were no impairment losses for these capitalized costs for fiscal years 2021 and 2020.

Concentrations

Financial instruments, which potentially expose the Company to concentrations of credit risk, consist primarily of accounts receivable. The Company’s accounts receivable are concentrated in the healthcare industry. However, the Company’s customers typically are well-established hospitals, medical facilities or major health information systems companies with good credit histories that resell the Company’s solutions. Payments from customers have been received within normal time frames for the industry. However, some hospitals and medical facilities have experienced significant operating losses as a result of limits on third-party reimbursements from insurance companies and governmental entities and extended payment of receivables from these entities is not uncommon.

To date, the Company has relied on a limited number of customers and remarketing partners for a substantial portion of its total revenues. The Company expects that a significant portion of its future revenues will continue to be generated by a limited number of customers and its remarketing partners.

Goodwill and Intangible Assets

Goodwill and other intangible assets were recognized in conjunction with the Avelead Consulting, Interpoint, Meta, CLG and Opportune IT acquisitions, as well as the Unibased acquisition (prior to divestiture of such assets). Identifiable intangible assets include purchased intangible assets with finite lives, which primarily consist of internally-developed software and customer relationships. Finite-lived purchased intangible assets are amortized over their expected period of benefit, which generally ranges from one to 15 years, using the straight-line method.

The Company assesses the useful lives and possible impairment of intangible assets when an event occurs that may trigger such a review. Factors considered important which could trigger a review include:

● significant underperformance relative to historical or projected future operating results;

● significant changes in the manner of use of the acquired assets or the strategy for the overall business;

● identification of other impaired assets within a reporting unit;

● disposition of a significant portion of an operating segment;

● significant negative industry or economic trends;

● significant decline in the Company’s stock price for a sustained period; and

● a decline in the market capitalization relative to the net book value.

Determining whether a triggering event has occurred involves significant judgment by the Company.

The Company assesses goodwill annually (as of November 1), or more frequently when events and circumstances, such as the ones mentioned above, occur indicating that the recorded goodwill may be impaired. During the years ended January 31, 2022 and 2021, the Company did not note any of the above qualitative factors, which would be considered a triggering event for goodwill impairment. In assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of a reporting unit. The identification of relevant events and circumstances and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments by management. These judgments include the consideration of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, events which are specific to the Company and trends in the market price of the Company’s common stock. Each factor is assessed to determine whether it impacts the impairment test positively or negatively, and the magnitude of any such impact.

Reporting units are determined based on the organizational structure the entity has in place at the date of the impairment test. A reporting unit is an operating segment or component business unit with the following characteristics: (a) it has discrete financial information, (b) segment management regularly reviews its operating results (generally an operating segment has a segment manager who is directly accountable to and maintains regular contact with the chief operating decision maker to discuss operating activities, financial results, forecasts or plans for the segment), and (c) its economic characteristics are dissimilar from other units (this contemplates the nature of the products and services, the nature of the production process, the type or class of customer for the products and services and the methods used to distribute the products and services). The Company determined that it has one operating segment and two reporting units.

The Company estimates the fair value of its reporting unit using the income approach, via discounted cash flow valuation models which include, but are not limited to, assumptions such as a “risk-free” rate of return on an investment, the weighted average cost of capital of a market participant and future revenue, operating margin, working capital and capital expenditure trends. Determining the fair value of reporting units and goodwill includes significant judgment by management, and different judgments could yield different results.

The Company performed its annual assessment of goodwill during the fourth quarter of fiscal 2021, using the approach described above. Based on the analysis performed, the fair value of the reporting units exceeded the carrying amount of the reporting unit, including goodwill, and, therefore, a goodwill impairment loss was not recognized.

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 annual compensation expense related to stock-based awards of $2,216,000 in fiscal 2021, and $1,444,000 in fiscal 2020 which includes $41,000 of capitalized non-employee stock compensation.

The fair value of the stock options granted are 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. Effective fiscal 2021, the Company changed its accounting to recognize forfeitures as they occur, which was determined to be an immaterial change from its historical practice. 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 stock-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 to the Company. In fiscal 2021 and 2020, 257,571 and 162,095 shares of common stock were surrendered to the Company to satisfy tax withholding obligations totaling $464,000 and $256,000, respectively, in connection with the vesting of restricted stock awards. Shares surrendered by the restricted stock award recipients in accordance with the applicable plan are deemed cancelled, and therefore are not available to be reissued. The Company awarded 562,500 and 748,245 shares of restricted stock to Section 16 officers and directors of the Company in fiscal 2021 and 2020, respectively.

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. See Note 7 - 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 January 31, 2022, 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 our common stock.

Our 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 our common stock is computed using the treasury stock method.

The following is the calculation of the basic and diluted net loss per share of common stock:

		Fiscal Year
		2021			2020
Basic earnings (loss) per share:
Continuing operations
Loss from continuing operations, net of tax	$	(6,917,000	)	$	(4,799,000	)
Basic net loss per share of common stock from continuing operations	$	(0.16	)	$	(0.16	)
Discontinued operations
Income available to common stockholders from discontinued operations	$	375,000		$	5,095,000
Basic net earnings per share of common stock from discontinued operations	$	0.01		$	0.17
Diluted earnings (loss) per share (1):
Continuing operations
Loss available to common stockholders from continuing operations	$	(6,917,000	)	$	(4,799,000	)
Diluted net loss per share of common stock from continuing operations	$	(0.16	)	$	(0.16	)
Discontinued operations
Income available to common stockholders from discontinued operations	$	375,000		$	5,095,000
Diluted net earnings per share of common stock from discontinued operations	$	0.01		$	0.17
Net (loss) income	$	(6,542,000	)	$	296,000
Weighted average shares outstanding - Basic (1)		42,815,239			30,152,383
Effect of dilutive securities - Stock options and Restricted stock (2)		458,335			488,359
Weighted average shares outstanding – Diluted		43,273,574			30,640,742
Basic net (loss) income per share of common stock	$	(0.15	)	$	0.01
Diluted net (loss) income per share of common stock	$	(0.15	)	$	0.01

(1)	Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of January 31, 2022 and 2021, there were 1,043,350 and 931,125 unvested restricted shares of common stock, respectively.
(2)	Diluted net loss per share excludes the effect of shares that are anti-dilutive. As of January 31, 2022, there were 1,062,130 outstanding stock options and 1,043,350 unvested restricted shares of common stock. As of January 31, 2021, there were 625,830 outstanding stock options and 931,125 unvested restricted shares of common stock.

Other Operating Costs

Non-routine Costs

	Fiscal Year 2021
Separation agreement expense	$	706,000
Broker Fees		553,000
Professional Fees		850,000
Executive Bonuses		705,000
Loss on exit from operating lease		42,000
Total	$	2,856,000

For fiscal 2021, the Company incurred certain non-routine costs totalling $2,856,000. The Company incurred transaction costs related to the acquisition of Avelead consisting of a separation agreement, broker fees and professional services. The Company paid certain executive bonuses for the successful capital raise and closing of the Avelead acquisition. Finally, the Company subleased its Alpharetta office to a third-party effective October 1, 2021. The Company retains certain obligations, and accordingly, will continue to report the Right of Use Asset (see Note 4 – Operating Leases). The Company incurred certain fees and expenses associated with the sublease.

Loss on Exit of Membership Agreement

For fiscal 2020, minimum fees due under the Company’s former shared office arrangement totaled approximately $105,000. The Company recorded an expense for the minimum future commitment under the agreement and accrued the cost to the accompanying consolidated balance sheet in fiscal 2020 to reflect the liability at the time it abandoned the space. Refer to Note 4 – Operating Leases.

Loss Contingencies

We are subject to the possibility of various loss contingencies arising in the normal course of business. We consider the likelihood of the loss or impairment of an asset or the incurrence of a liability as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired, and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether to accrue for a loss contingency and adjust any previous accrual.

Accounting Pronouncements Recently Adopted

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The standard became effective for us on February 1, 2021. The adoption of this ASU did not have a material impact on our consolidated financial statements or disclosures. Refer to Note 7 – Income Taxes – in the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for more information on the Company’s adoption of ASU 2019-12 for further details.

In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities From Contracts With Customers (“ASU 2021-08”), which amends the accounting for contract assets acquired and contract liabilities assumed from contracts with customers in business combinations (“acquired contract balances”). The amendment results in a shift from previous guidance which required similar assets and liabilities to be accounted for at fair value at the acquisition date. The amendments in the Update require that an entity (acquirer) recognize, and measure acquired contract balances in accordance with ASC Topic 606. For instance, at the acquisition date, the acquirer would account for the related revenue contracts acquired under ASC 606, as if it had originated the contracts. The Company elected to early adopt ASU 2021-08 in the quarter ended October 31, 2021 (which includes retroactive adoption for any acquisitions in the current fiscal year). The impact of adopting the new standard is that it eliminated the need to discount deferred revenue acquired from Avelead of $236,000. As a result of the Company not discounting deferred revenue upon acquiring Avelead, revenues are higher and net loss is lower in the post-acquisition period of the same amount.

Recent Accounting Pronouncements Not Yet Adopted

In November 2019, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which improves guidance around accounting for financial losses on accounts receivable. For smaller reporting entities, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. We do not anticipate that the adoption of this ASU will have a material impact on our consolidated financial statements.

In July 2021, the FASB issued ASU 2021-05, Lessors - Certain Leases with Variable Lease Payments to ASC Topic 842, Leases (“ASC 842”)(“ASU 2021-05”). ASU 2021-05 provides additional ASC 842 classification guidance as it relates to a lessor’s accounting for certain leases with variable lease payments. ASU 2021-05 requires a lessor to classify a lease with variable payments that do not depend on an index or rate as an operating lease if either a sales-type lease or direct financing lease classification would trigger a day-one loss. ASU 2021-05 is effective for reporting periods beginning after December 15, 2021, with early adoption permitted. We do not anticipate that the adoption of this ASU will have a material impact on our consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):Disclosures by Business Entities about Government Assistance (“ASU 2021-10”), which aims to provide increased transparency by requiring business entities to disclose information about certain types of government assistance they receive in the notes to the financial statements. Entities are required to provide the new disclosures prospectively for all transactions with a government entity that are accounted for under either a grant or a contribution accounting model and are reflected in the financial statements at the date of initially applying the new amendments, and to new transactions entered into after that date. Retrospective application of the guidance is permitted. The guidance in ASU 2021-10 is effective for financial statements of all entities, including private companies, for annual periods beginning after December 15, 2021, with early application permitted. We do not anticipate that the adoption of this ASU will have a material impact on our consolidated financial statements.

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BUSINESS COMBINATION AND DIVESTITURE

12 Months Ended

Jan. 31, 2022

Business Combination and Asset Acquisition [Abstract]

BUSINESS COMBINATION AND DIVESTITURE

NOTE 3 — BUSINESS COMBINATION AND DIVESTITURE

Avelead Acquisition

The Company acquired all of the equity interests of Avelead as part of the Company’s strategic expansion into the revenue cycle management, acute-care healthcare space (the “Transaction”). The Transaction 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, which was paid to sellers during the fourth fiscal quarter of 2021 (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 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 as of 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 equity interests of Avelead, effective August 16, 2021, pursuant to 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 million. Additionally, the Company paid $285,000 of the Sellers’ closing costs, $285,000 related to the working capital adjustment as defined in the UPA. Finally, at closing, the Company issued the Acquisition Restricted Common Stock with a fair value of approximately $6.5 million, based on a 30-day average of the closing price of the Company’s common stock prior to the closing date. The SaaS Contingent Consideration and the Renewal Contingent Consideration described in more detail below were included in the UPA as potential future consideration for the Transaction. These are reflected on the Company’s balance sheet as “Acquisition earnout liability.”

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. The Company will pay the SaaS Contingent Consideration as follows: (i) 50% in cash and (ii) 50% in shares of Company common stock valued at the time the earnout is paid subject to a collar, as described below.

● 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, 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.

● 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, 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.

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 Renewal Contingent Consideration is either earned or not earned based upon the renewal of the specified customer at the minimum amount of contracted revenue. There is no pro-ration of the underlying Renewal Contingent Consideration.

The components of the total consideration are as follows:

(in thousands)
Components of total consideration, net of cash acquired:
Cash	$	11,900
Cash, seller expenses		285
Cash, working capital adjustment		285
Restricted Common Stock		6,554
Acquisition earnout liabilities		10,684	(a)
Total consideration	$	29,708

(a) Acquisition earnout liabilities represent 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, $4,672,000 of the acquisition earnout liability is shown as a short-term liability and $4,161,000 is shown as a long-term liability as of January 31, 2022.

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 consolidated statements of operations. The valuation adjustment recorded for the period ended January 31, 2022, was $1,851,000. A range of possible outcomes is not available under the specific valuation method that was used in determining fair value of the acquisition earnout liability.

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:

(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 Company determined the fair value of the customer relationship intangible assets and the trade name and developed software technology intangible assets using the multi-period excess earning method and the relief from royalty method, respectively. The intangible assets   recorded as a result of the Avelead acquisition, and their related estimated useful lives are as follows:

	Estimated Useful Lives
Goodwill	Indefinite
Customer Relationships (SaaS)	10 years
Customer Relationships (Consulting)	8 years
Internally Developed Software	9 years
Trademarks and Tradenames	15 years

The Company’s unaudited pro forma revenues and (loss) income 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 earnings reflected below (unaudited):

(UNAUDITED)	Year Ended January 31,
	2022			2021
Revenues	$	22,631,000		$	19,707,000
Operating expenses		(31,278,000	)		(25,164,000	)
Non-routine costs		(4,284,000	)		—
Loss on exit from membership agreement		—			(105,000	)
Operating loss		(12,931,000	)		(5,562,000	)
Other expenses		1,312,000			(710,000	)
PPP loan forgiveness		3,059,000			712,000
Income tax (expense) benefit		(109,000	)		1,370,000
Loss from continuing operations	$	(8,669,000	)	$	(4,190,000	)

Non-routine costs are primarily costs associated with the acquisition. Included in the pro forma schedule (above) for the fiscal year ended January 31, 2022 are $1,428,000 of expenses paid by the Sellers in the transaction.

Included in the accompanying consolidated statement of operations for the year ended January 31, 2022 (since the closing of the Avelead acquisition) are $4,524,000 and $(1,506,000) of Avelead revenue and loss from continuing operations.

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. 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 expense for the employment agreement is recognized ratably over the service period customary with other employment agreements within selling, general, and administrative expense.

The Company granted options to purchase 583,333 shares of the Company’s common stock to the Sellers at Closing. 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 $6,000 and are recorded in non-routine cost in the accompanying consolidated statement of operations. The 500,000 options have a grant-date fair value of approximately $395,000 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”). 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 consolidated statements of operations, cash flows and balance sheets for the current and comparative prior periods. Refer to Note 13 – Discontinued Operations for details of the Company’s discontinued operations.

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OPERATING LEASES

12 Months Ended

Jan. 31, 2022

Operating Leases

OPERATING LEASES

NOTE 4 — OPERATING LEASES

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 and 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.

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 months which coincides with the Company’s underlying lease (see below). The Company expects to receive $292,000 from the sublessee over the term of the sublease. The sublease did not relieve the Company of its original obligation under the lease, and therefore the Company did not adjust the operating lease right-of-use asset and related liability. The Company incurred an amount of fees and expenses to enter into the Sublease Agreement that were recorded as “non-routine” for fiscal 2021. As of January 31, 2022, the Company recorded $64,000 as other income related to the sublease.

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, and related current and long-term operating lease obligation in the accompanying consolidated balance sheet. As of January 31, 2022, operating lease right-of use assets totaled $218,000, and the associated lease liability is included in both current and long-term liabilities of $204,000 and $33,000, respectively. The Company used a discount rate of 6.5% to the determine the lease liability. As of January 31, 2022 and 2021, the Company had lease operating costs of approximately $194,000 and $178,000, respectively. The Company paid cash of approximately $203,000 and $132,000 for the lease in 2021 and 2020, respectively.

Maturities of operating lease liabilities associated with the Company’s operating lease as of January 31, 2022 are as follows for payments due based upon the Company’s fiscal year:

2022	$	210,000
2023		35,000
Total Lease Payments		245,000
Less present value adjustment		(8,000	)
Present value of lease liabilities	$	237,000

Upon signing the Alpharetta lease in March 2020, the Company abandoned its shared office space in Atlanta and recorded an expense and related liability of $105,000 for the minimum remaining payments required under the agreement with the landlord. The associated expense is recorded in “Loss on exit of membership agreement” in the accompanying statements of operations and is recorded in “accrued expenses” in the accompanying balance sheet. The membership agreement did not qualify as a lease as the owner had substantive substitution rights.

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 36-month term lease commenced March 1, 2019 and expires on February 28, 2022. As of January 31, 2022, the Company recorded $40,000 in rent expense. The lessor is an entity controlled by one of the Sellers that is employed by the Company. In February 2022, the Company renewed the lease for twelve months. The Company will make monthly lease payments of $5,998.67 for a total of $71,984 over the term of the lease. The lease will automatically renew at the end of the lease unless a 90-day written cancellation is given by either party.

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DEBT

12 Months Ended

Jan. 31, 2022

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 and Restated Loan and Security Agreement with Bridge Bank. Pursuant to the Second Amended and Restated 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. Amounts outstanding under the term loan of the Second Amended and Restated Loan and Security 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%. Pursuant to the Second Amended and Restated Loan and Security Agreement, the Company discontinued the existing $3,000,000 revolving credit facility with Bridge Bank. At the time of the discontinuance, there was no outstanding balance on the revolving credit facility.

The Second Amended and Restated 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 and Restated 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 and Restated Loan and Security Agreement requires principal repayments on the anniversary date of the closing of the debt agreement of $500,000 in the second year, $1,000,000 in the third year, $2,000,000 in the fourth year, and $3,000,000 in the fifth year, respectively, with the remaining outstanding principal balance and all accrued but unpaid interest due in full on the maturity date. The Second Amended and Restated Loan and Security Agreement may also require early repayments if certain conditions are met. The Second Amended and Restated Loan and Security Agreement is secured by substantially all of the assets of the Company, its subsidiaries, and certain of its affiliates.

The Company recorded $130,000 in deferred financing costs related to the Second Amended and Restated Loan and Security Agreement. These deferred financing costs are being amortized over the term of the loan. The Company will also incur $200,000 in financing costs at the earlier of the term date of the loan, or pre-payment. These costs are being accreted, through interest expense, to the full value of the $200,000 over the term of the loan.

The Second Amended and Restated 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. Borrowers’ Maximum Debt to ARR Ratio, measured on a quarterly basis as of the last day of each fiscal quarter, shall not be greater than the amount set forth under the heading “Maximum Debt to ARR Ratio” as of, and for each of the dates appearing adjacent to such “Maximum Debt to ARR Ratio”.

	Maximum Debt to
Quarter Ending	ARR Ratio
October 31, 2021	0.80 to 1.00
January 31, 2022	0.75 to 1.00
April 30, 2022	0.65 to 1.00
July 31, 2022	0.55 to 1.00
October 31, 2022	0.50 to 1.00
January 31, 2023	0.45 to 1.00

c. Maximum Debt to Adjusted EBITDA Ratio. Commencing with the quarter ending April 30, 2023, Borrowers’ Maximum Debt to Adjusted EBITDA Ratio, measured on a quarterly basis as of the last day of each fiscal quarter for the trailing four (4) quarter period then ended, shall not be greater than the amount set forth under the heading “Maximum Debt to Adjusted EBITDA Ratio” as of, and for each of the dates appearing adjacent to such “Maximum Debt to Adjusted EBITDA Ratio”.

	Maximum Debt to
	Adjusted EBITDA
Quarter Ending	Ratio
April 30, 2023	11.30 to 1.00
July 31, 2023	4.15 to 1.00
October 31, 2023	2.50 to 1.00
January 31, 2024 and on the last day of each quarter thereafter	2.0 to 1.00

d. Fixed Charge Coverage Ratio. Commencing with the quarter ending April 30, 2023, Borrowers shall maintain a Fixed Charge Coverage Ratio of not less than 1.20 to 1.00, measured on a quarterly basis as of the last day of each fiscal quarter for the trailing four (4) quarter period then ended.

The Second Amended and Restated 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 January 31, 2022, the Company was in compliance with the Second Amended and Restated 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 revolving credit facility (the “Amended Loan and Security Agreement”). This revolving credit facility was replaced with the Second Amended and Restated Loan and Security Agreement (above) that was put in place on August 26, 2021. Accordingly, the Company wrote-off $43,000 of deferred financing costs from this loan as a loss on extinguishment of debt in the accompanying consolidated statement of operations. The Amended Loan and Security Agreement had a two-year term and included customary financial covenants including the requirements that the Company achieve certain EBITDA levels and certain recurring revenue levels. The Company could not deviate by more than twenty percent its recurring revenue projections over a trailing three-month basis. 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%. The Amended Loan and Security agreement was secured by substantially all of our assets.

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 term loan and a $2,000,000 revolving credit facility. The proceeds from the term loan were used to repay all outstanding balances under the Company’s then existing term loan with Wells Fargo Bank. In February 2020, the Company repaid the $4,000,000 outstanding term loan with Bridge Bank in full, with proceeds from the sale of the ECM Assets, as required under the Loan and Security Agreement.

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 through the SBA under the PPP. These funds were utilized by the Company to fund payroll expenses and avoid further staffing reductions during the slowdown resulting from COVID-19.

The PPP loan carried an interest rate of 1.0% per annum. Principal and interest payments were due, beginning on the tenth month from the effective date, sufficient to satisfy the loan on the second anniversary date. However, under certain criteria, the loan could be forgiven.

In June 2021, the Company was notified that the full $2,301,000 of the PPP loan and accrued interest of $26,000 had been forgiven. The loan amount and accrued interest were recognized as an extinguishment of debt and has been recorded as other income on the consolidated statement of operations.

Outstanding principal balances on debt consisted of the following at:

	January 31, 2022(a)			January 31, 2021(b)
Term loan	$	10,000,000		$	2,301,000
Deferred financing cost		(96,000	)		—
Total		9,904,000			2,301,000
Less: Current portion		(250,000	)		(1,534,000	)
Non-current portion of debt	$	9,654,000		$	767,000

(a)	The term loan as of January 31, 2022 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 21, 2021 is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021.

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GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Jan. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

NOTE 6 — GOODWILL AND INTANGIBLE ASSETS

The goodwill activity is summarized as follows:

	Goodwill
Balance at January 31, 2021		10,712,000
Acquisition of Avelead		12,377,000
Balance at January 31, 2022		23,089,000

Intangible assets consist of the following:

	January 31, 2022
	Estimated			Accumulated
	Useful Life	Gross Assets		Amortization		Net Assets
Finite-lived assets:
Customer relationships	8-10 years	$	14,164,000	$	4,755,000	$	9,409,000
Internally Developed Software	9 years		6,380,000		325,000		6,055,000
Trademarks and Tradenames	15 years		1,340,000		41,000		1,299,000
Total			21,884,000		5,121,000		16,763,000

	January 31, 2021
	Estimated			Accumulated
	Useful Life	Gross Assets		Amortization		Net Assets
Finite-lived assets:
Customer relationships	5-10 years	$	5,397,000	$	4,773,000	$	624,000

The Company recognized amortization expense on intangible assets of $1,281,000 and $491,000 for fiscal years 2021 and 2020, respectively.

Amortization over the next five fiscal years for intangible assets is estimated as follows:

	Annual Amortization Expense
2022	$	1,971,000
2023		1,801,000
2024		1,801,000
2025		1,801,000
2026		1,801,000
Thereafter		7,588,000
Total	$	16,763,000

The Company wrote-off fully amortized intangible assets during fiscal 2021 of $933,000. There was no impact to the consolidated statements of operations as this eliminated the asset and accumulated amortization of the fully amortized intangible assets.

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INCOME TAXES

12 Months Ended

Jan. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 7 — INCOME TAXES

For fiscal 2021 and 2020, income taxes for continuing operations consist of the following:

		Fiscal Year
		2021			2020
Current tax (expense) benefit:
Federal	$	—		$	—
State		(14,000	)		(14,000	)
Total current tax expense	$	(14,000	)	$	(14,000	)
Deferred tax (expense) benefit:
Federal	$	(80,000	)	$	1,274,000
State		(15,000	)		—
Total deferred tax (expense) benefit	$	(95,000	)	$	1,274,000
Total provision	$	(109,000	)	$	1,260,000

The Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 removes the exception to the basic intraperiod model in ASC 740-20-45-7. The benefit from income taxes from continuing operations, reported for fiscal year 2020, are offset by taxes on the gain on sale and taxes from operations of discontinued operations.

During fiscal year 2020, the Company had a loss from continuing operations and income from discontinued operations. The Company did not elect to early adopt ASU 2019-12 for the 2020 fiscal year; therefore, the income from discontinued operations was considered a source of taxable income to realize a partial tax benefit for the loss generated by continuing operations. As such, the financial statements for the 2020 fiscal year reflects tax expense in discontinued operations and a tax benefit in continuing operations. Applying the change on a prospective basis, this did not occur during the 2021 fiscal year and as such created a difference in the effective tax rate presentation for continuing operations between fiscal years 2020 and 2021.

The income tax benefit differs from the amount computed using the federal statutory income tax rates of 21% for fiscal 2021 and 2020 continuing operations as follows:

	Fiscal Year
	2021			2020
Federal tax benefit at statutory rate	$	(1,430,000	)	$	(1,272,000	)
State and local tax expense, net of federal		26,000			11,000
Increase in valuation allowance		1,950,000			419,000
Permanent items:
PPP Loan		(483,000	)		—
Other		3,000			5,000
Reserve for uncertain tax position		(24,000	)		35,000
R&D Credit (Federal)		120,000			(174,000	)
Expiring carryforwards		—			5,000
Stock-based compensation		(45,000	)		(305,000	)
Other		(8,000	)		16,000
Income tax expense	$	109,000		$	(1,260,000	)

The Company provides deferred income taxes for temporary differences between assets and liabilities recognized for financial reporting and income tax purposes. The income tax effects of these temporary differences and credits are as follows:

	January 31,
	2022			2021
Deferred tax assets:
Allowance for doubtful accounts	$	24,000		$	16,000
Deferred revenue		60,000			12,000
Accruals		168,000			47,000
Net operating loss carryforwards		10,908,000			8,651,000
Stock compensation expense		510,000			367,000
Property and equipment		(6,000	)		(5,000	)
R&D credit		1,334,000			1,431,000
Other		23,000			7,000
Total deferred tax assets		13,021,000			10,526,000
Valuation allowance		(12,318,000	)		(9,992,000	)
Net deferred tax assets		703,000			534,000
Deferred tax liabilities:
Finite-lived intangible assets		(798,000	)		(534,000	)
Total deferred tax liabilities		(798,000	)		(534,000	)
Net deferred tax liabilities	$	(95,000	)	$	—

At January 31, 2022, the Company had U.S. federal net operating loss carry forwards of $46,250,000 and $29,083,000 of these net operating losses expire at various dates through fiscal 2038. The remaining $17,167,000 of these net operating losses can be carried forward indefinitely under the provisions of the Tax Cuts and Jobs Act (TCJA). The TCJA also eliminated the ability to carry back net operating losses. The Company also had state net operating loss carry forwards of $21,318,000 and Federal R&D credit carry forwards of $1,575,000 and Georgia R&D credit carry forwards of $94,000, all of which expire at various dates through fiscal 2041.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company established a valuation allowance of $12,318,000 and $9,992,000 at January 31, 2022 and 2021, respectively. The increase in the valuation allowance of $2,326,000 was driven primarily by federal net operating losses.

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, 2018. All material state and local income tax matters have been concluded for years through January 31, 2017. The Company is no longer subject to IRS examination for periods prior to the tax year ended January 31, 2018; however, carry forward losses that were generated prior to the tax year ended January 31, 2018 may still be adjusted by the IRS if they are used in a future period.

The Company has recorded a reserve, including interest and penalties, for uncertain tax positions of $315,000 and $339,000 as of January 31, 2022 and 2021, respectively. As of January 31, 2022 and 2021, the Company had no accrued interest and penalties associated with unrecognized tax benefits.

A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest and penalties) is as follows:

	2021			2020
Beginning of fiscal year	$	339,000		$	304,000
Additions for tax positions for the current year		4,000			33,000
Additions for tax positions of prior years		—			2,000
Subtractions for tax positions of prior years		(28,000	)		—
End of fiscal year	$	315,000		$	339,000

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EQUITY

12 Months Ended

Jan. 31, 2022

Equity [Abstract]

EQUITY

NOTE 8 — 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 shares of the Company’s common stock, par value $0.01 per share, which included 1,312,500 shares of common stock sold pursuant to the underwriter’s exercise of an option to purchase additional shares of common stock to cover over-allotments (the “Offering”). The price to the public in the Offering was $1.60 per share of common stock. The gross proceeds to the Company from the Offering were approximately $16.1 million, before deducting underwriting discounts, commissions and estimated offering expenses. The Offering closed on March 2, 2021.

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 shares of common stock issued to 180 Consulting, LLC (“180 Consulting”). The Registration Statement was declared effective by the SEC on July 14, 2021.

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 shares to 65,000,000 shares (the “Charter Amendment”). The Charter Amendment was previously approved by the board of directors of the Company, subject to stockholder approval, approved by the Company’s stockholders at the 2021 Annual Meeting of Stockholders of the Company, held on May 20, 2021 (the “Annual Meeting”), and ratified by the Company’s stockholders on July 29, 2021 at the Special Meeting (as defined and described in further detail below).

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 shares, from 6,223,246 shares to 8,223,246 shares (the “Third Amended 2013 Plan Amendment”).

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.

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MAJOR CUSTOMERS

12 Months Ended

Jan. 31, 2022

Risks and Uncertainties [Abstract]

MAJOR CUSTOMERS

NOTE 9 — MAJOR CUSTOMERS

During fiscal 2021, one individual customer accounted for 10% or more of our continuing operations revenue. This customer accounted for 15% of total continuing operations revenue for fiscal 2021. During fiscal 2020, no one individual customer accounted for 10% or more of our continuing operations revenue. Three customers represented 24%, 16%, and 15%, respectively, of continuing operations accounts receivable as of January 31, 2022 and 4 customers represented 31%, 16%, 14% and 13%, respectively, of continuing operations accounts receivable as of January 31, 2021. Many of our customers are invoiced on an annual basis.

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EMPLOYEE RETIREMENT PLAN

12 Months Ended

Jan. 31, 2022

Retirement Benefits [Abstract]

EMPLOYEE RETIREMENT PLAN

NOTE 10 — EMPLOYEE RETIREMENT PLAN

The Company has established a 401(k) retirement plan that covers all associates. Company contributions to the plan may be made at the discretion of the board of directors. The Company’s matched amount is 50% up to the first 4% of compensation deferred by each associate. The total compensation expense for this matching contribution was $188,000 and $164,000 in fiscal 2021 and 2020, respectively.

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STOCK-BASED COMPENSATION

12 Months Ended

Jan. 31, 2022

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

NOTE 11 — STOCK-BASED COMPENSATION

Stock Option Plans

The Company’s Third Amended and Restated 2013 Stock Incentive Plan (the “2013 Plan”) replaced the 2005 Incentive Compensation Plan (the “2005 Plan”). The 2005 Plan expired based upon its terms. Accordingly, all the outstanding awards and any unallocated pool of un-issued options under the 2005 Plan were re-characterized to the 2013 Plan. Under these plans, the Company is authorized to issue equity awards (stock options, stock appreciation rights or “SARs”, and restricted stock) to directors and associates of the Company. Under the 2013 Plan, as amended, the Company is authorized to issue a number of shares not to exceed 8,223,246. The options granted under the 2013 Plan have terms of ten years or less, and typically vest and become fully exercisable ratably over three years of continuous service to the Company from the date of grant. At January 31, 2022 and 2021, options to purchase 937,130 and 500,830 shares of the Company’s common stock, respectively, had been granted and were outstanding under these plans. There are no SARs outstanding.

Inducement grants are approved by the Company’s compensation committee pursuant to NASDAQ Marketplace Rule 5635(c)(4). The terms of the grants were nearly identical to the terms and conditions of the Company’s stock incentive plans in effect at the time of each inducement grant. For the year ended January 31, 2021 and 2020, with regard to inducement grants, no stock options were issued, no options expired, no options were forfeited, and no stock options were exercised. As of January 31, 2022 and 2021, there were 125,000 options outstanding, respectively, under inducement grants.

A summary of stock option activity follows:

				Weighted
				Average		Remaining		Aggregate
	Options			Exercise Price		Life in Years		intrinsic value
Outstanding as of January 31, 2021		625,830		$	3.45
Granted		583,333			1.53
Exercised		(3,300	)		1.35
Expired		(137,033	)		1.65
Forfeited		(6,700	)		1.35
Outstanding as of January 31, 2022		1,062,130		$	2.65		6.11	$	21,000
Exercisable as of January 31, 2022		628,854		$	3.42		3.75	$	20,000
Vested or expected to vest as of January 31, 2022		1,061,307		$	2.65		6.11	$	21,000

583,333 options were granted in fiscal 2021, with a weighted average grant date fair value of $1.53. No options were granted or exercised in fiscal 2020.

The fiscal 2021 and 2020 stock-based compensation was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for each fiscal year:

	2021			2020
Expected life		5.01 years			—
Risk-free interest rate		0.75	%		—
Weighted average volatility factor		0.72			—
Dividend yield		—			—
Forfeiture rate		—			—

At January 31, 2022, there was $335,000 of unrecognized compensation cost related to non-vested stock-option awards. That cost is expected to be recognized over a remaining weighted average period of 2.54 years. The expense associated with stock option awards was $69,000 and $22,000, respectively, for fiscal 2021 and 2020. Cash received from the exercise of options was $5,000 in fiscal 2021. No options were exercised during fiscal 2020.

The 2013 Plan contains change in control provisions whereby any outstanding equity awards under the plans subject to vesting, which have not fully vested as of the date of the change in control, shall automatically vest and become immediately exercisable. One of the change in control provisions is deemed to occur if there is a change in beneficial ownership, or authority to vote, directly or indirectly, of securities representing 20% or more of the total of all of the Company’s then-outstanding voting securities, unless through a transaction arranged by or consummated with the prior approval of the Board of Directors. Other change in control provisions relate to mergers and acquisitions or a determination of change in control by the Company’s Board of Directors.

Restricted Stock

The Company is authorized to grant restricted stock awards to associates and directors under the 2013 Plan. The Company has also issued restricted stock as inducement grants to certain new employees. The restrictions on the shares granted generally lapse over a one- to four-year term of continuous employment from the date of grant. On March 4, 2021, our CEO was awarded 150,000 shares of restricted stock that will vest in four substantially equal quarterly installments commencing on the first anniversary of the date of grant. On June 17, 2020, our CEO was awarded 150,000 shares of restricted stock that will vest in four substantially equal quarterly installments commencing on the first anniversary of the date of grant. On October 17, 2019, our CEO was awarded 250,000 shares of restricted stock: 50,000 of which vested upon grant, 100,000 shares that vested in four substantially equal quarterly installments commencing on the first anniversary of the date of grant, and 100,000 shares that were subject to performance-based vesting based upon the achievement of certain growth rates of revenue specified in agreement. However, performance was not achieved by July 31, 2020, resulting in the grants being forfeited. The grant date fair value per share of restricted stock, which is based on the closing price of our common stock on the grant date, is expensed on a straight-line basis as the restriction period lapses. The shares represented by restricted stock awards are considered outstanding at the grant date, as the recipients are entitled to voting rights. A summary of restricted stock award activity for fiscal 2021 and 2020 is presented below:

				Weighted
	Non-vested			Average
	Number of			Grant Date
	Shares			Fair Value
Non-vested balance at January 31, 2020		803,498		$	1.22
Granted		1,158,245			1.07
Vested		(864,128	)		1.18
Forfeited		(166,490	)		1.16
Non-vested balance at January 31, 2021		931,125		$	1.09
Granted		1,257,000			1.71
Vested		(1,095,175	)		1.33
Forfeited		(50,100	)		1.48
Non-vested balance at January 31, 2022		1,043,000		$	1.57

At January 31, 2022, there was $1,024,000 of unrecognized compensation cost related to restricted stock awards. That cost is expected to be recognized over a remaining period of 2.03 years.

The expense associated with restricted stock awards for associates and directors was $1,667,000 and $1,075,000, respectively, for fiscal 2021 and 2020.

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Jan. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 12— 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-year license of Montefiore’s proprietary clinical analytics platform solution, Clinical Looking Glass® (“CLG”), now known as our Clinical Analytics solution. In addition, Montefiore assigned to us the existing license agreement with a customer using CLG. As consideration under the Royalty Agreement, we paid Montefiore a one-time initial base royalty fee of $3,000,000. Additionally, we originally committed that Montefiore would receive at least an additional $3,000,000 of on-going royalty payments related to future sublicensing of CLG by us within the first nine and one-half years of the license term. On July 1, 2018, we entered into a joint amendment to the Royalty Agreement and the existing Software License and Support Agreement with Montefiore to modify the payment obligations of the parties under both agreements. According to the modified provisions, our obligation to pay on-going royalties under the Royalty Agreement was replaced with the obligation to (i) provide maintenance services for 24 months and waive associated maintenance fees, and (ii) pay $1,000,000 in cash by October 31, 2020. As a result of the commitment to fulfill a portion of our obligation by providing maintenance services at no cost, the royalty liability was significantly reduced, with a corresponding increase to deferred revenues.

On October 1, 2020, the Company agreed with Montefiore that it would pay, in cash, (i) $500,000 upon signing a settlement and release agreement, and (ii) $490,000 on November 1, 2020. The difference between the $990,000 in cash payment and the $1,000,000 payment obligation was due to the settlement of outstanding costs made on behalf of the Company for Montefiore. The Company executed the settlement and release agreement shortly after October 1, 2020 and made the scheduled payments. The Company retains the exclusive licensing rights for the underlying software through the term of the original agreement (2028).

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 January 31, 2022 totaling 521,077, and 272,653 shares for the year ended January 31, 2022. For services rendered by 180 Consulting during fiscal 2021, the Company incurred fees of $1,439,000. In addition, on February 22, 2022, the Company issued to 180 Consulting an aggregate of 78,031 shares as compensation for services previously rendered during the three-months ended January 31, 2022. Such 78,031 shares were issued in a private placement in reliance on the exemption from registration available under Section 4(a)(2) of the Securities Act, including Regulation D promulgated thereunder. During fiscal 2020, the Company incurred fees to 180 Consulting totaling $701,000. Of those fees, approximately $75,000 was related to capitalized software development, and the remaining was operating cost. The MSA includes a termination clause upon a 90-day written notice. While no related party has a direct or indirect material interest in this MSA or the related SOWs, individuals providing services to us under the MSA and the SOWs may share workspace and administrative costs with 121G Consulting (as defined and further discussed in Note 14 – Related Party Transactions).

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 January 31, 2022, the Company has entered into one SOW under the Avelead MSA. For services rendered by 180 Consulting during fiscal 2021, the Company incurred fees totaling $288,000.

Litigation

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 the Company’s consolidated results of operations, financial position or cash flows.

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DISCONTINUED OPERATIONS

12 Months Ended

Jan. 31, 2022

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

NOTE 13 – 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 million, subject to certain adjustments for customer prepayments as set forth in the Asset Purchase Agreement.

At closing, the Company received approximately $5.4 million in net proceeds after (i) repaying the Company’s $4.0 million term loan with Bridge Bank, (ii) adjusting for certain customer prepayments, (iii) recording the escrow funds of $800,000 and (iv) incurring certain transaction costs. The gain on the sale of assets is summarized as follows: 

Net Proceeds, including escrowed funds	$	12,088,000
Net tangible assets sold:
Accounts Receivable		(1,130,000	)
Prepaid Expenses		(576,000	)
Deferred Revenues		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 costs and costs of legal and accounting to effect the transaction. The Company allocated $4,825,000 in goodwill to the sale of the ECM Assets using a valuation of the ECM Assets and the remaining, go-forward business, to bifurcate its existing goodwill as of February 24, 2020. The amount of goodwill to be included in that carrying amount was based on the relative fair values of the business to be disposed of and the portion of the reporting unit that will be retained using our fair value approach as outlined in Note 2. Further, in accordance ASC 350-20-35-3A, when only a portion of goodwill is allocated to a business to be disposed of, the remaining portion of the goodwill associated with the reporting unit to be retained was tested for impairment and no impairment was recognized.

The Company reclassified the following assets and liabilities for discontinued operations in the accompanying consolidated balance sheets:

	As of
	January 31, 2022		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 fiscal 2021 and 2020, the Company recorded the following into discontinued operations in the accompanying consolidated statements of operations:

		Fiscal Year
		2021		2020
Revenues:
Maintenance and support	$	—	$	412,000
Software as a service		—		138,000
Transition service fees		498,000		394,000
Total revenues	$	498,000	$	944,000
Expenses:
Cost of Sales		5,000		294,000
Transition service cost		92,000		166,000
Deferred financing cost		—		128,000
Total expenses	$	97,000	$	588,000
Income from discontinued operations	$	401,000	$	356,000

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 of fiscal 2021.

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RELATED PARTY TRANSACTIONS

12 Months Ended

Jan. 31, 2022

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 14 - 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 fees were incurred from 121G for fiscal 2021. For fiscal 2020, 121G Consulting fees totaled $107,000.

Refer to Note 3 – Business Combination and Divestiture. The Company acquired Avelead on August 16, 2021. In addition, 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 year ended January 31, 2022, the Company incurred approximately $64,000 in research and development services provided by AscendTek. Additionally, we assumed a lease for corporate office space from a Seller that is now employed by the Company. See Note 4 – Operating Leases.

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SUBSEQUENT EVENTS

12 Months Ended

Jan. 31, 2022

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 15 — SUBSEQUENT EVENTS

We have evaluated subsequent events occurring after January 31, 2021, and based on our evaluation we did not identify any events that would have required recognition or disclosure in these consolidated financial statements, except for the following:

Departure and Appointment of Certain Officers

We have previously disclosed by way of current reports on Form 8-K filed with the SEC that on February 14, 2022, William G. Garvis, the Company’s Senior Vice President and Chief Operating Officer, departed effective February 14, 2022. The Company also announced effective March 22, 2022, Randolph “Randy” Salisbury will depart effective April 15, 2022. Mr. Salisbury previously served as the Company’s Senior Vice President and Chief Sales and Marketing Officer. Mr. Salisbury is entitled to receive the severance accorded to him in his employment agreement for a separation without cause.

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Valuation and Qualifying Accounts and Reserves

12 Months Ended

Jan. 31, 2022

SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract]

Valuation and Qualifying Accounts and Reserves

Schedule II

Valuation and Qualifying Accounts and Reserves

Streamline Health Solutions, Inc and Subsidiaries.

For the two years ended January 31, 2022

	Balance at Beginning		Charged to Costs and			(1)		Balance at End of
Description	of Period		Expenses			Deductions		Period
Year ended January 31, 2022:
Allowance for doubtful accounts	$	65	$	11		$	—	$	76
Year ended January 31, 2021:
Allowance for doubtful accounts	$	96	$	(31	)	$	—	$	65

(1) Uncollectible accounts written off, net of recoveries.

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Jan. 31, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The consolidated financial statements include the accounts of Streamline Health Solutions, Inc. and its wholly-owned subsidiaries, Streamline Health, LLC, Avelead Consulting, LLC, Streamline Consulting Solutions, LLC and Streamline Pay & Benefits, LLC. All significant intercompany transactions and balances are eliminated in consolidation. All amounts in the consolidated financial statements, notes and tables have been rounded to the nearest thousand dollars, except share and per share amounts, unless otherwise indicated.

Refer to Note – 3 Business Combination and Divestiture. Under ASC 280-10-50-11, two or more operating segments may be aggregated into a single operating segment if they are considered to be similar. Operating segments are considered to be similar if they can be expected to have essentially the same economic characteristics and future prospects. Using the aggregation guidance, the Company determined that it has one operating segment due to the similar economic characteristics of the Company’s products, product development, distribution, regulatory environment and customer base as a provider of computer software-based solutions and services for acute-care healthcare providers. The Company has two reporting units for evaluation of intangible assets. These two reporting units are the legacy Streamline business and Avelead.

On February 24, 2020, the Company sold a portion of its business (the ECM Assets). We applied the standard of ASC 205-20-1 to ascertain the timing of accounting for the discontinued operations. Based on ASC 205-20-1, the Company determined that upon receiving stockholder approval, which occurred February 21, 2020, it was authorized to sell the ECM assets. By the Company having the authority and ability to consummate the sale of the ECM Assets, it 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 consolidated statements of operations, cash flows and balance sheets for the current and comparative prior periods. Refer to Note 13 – Discontinued Operations for further details.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“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, stock-based compensation, capitalization of software development costs, intangible assets, the allowance for doubtful accounts, contingent consideration and income taxes. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash demand deposits. Cash deposits are placed in Federal Deposit Insurance Corporation (“FDIC”) insured financial institutions. Cash deposits may exceed FDIC insured levels from time to time. For purposes of the consolidated balance sheets and consolidated statements of cash flows, the Company considers all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Non-Cash Items

The Company had the following items that were non-cash items related to the consolidated statements of cash flows:

		Fiscal Year
		2021		2020
Forgiveness of PPP loan and accrued interest	$	2,327,000	$	—
Escrowed funds from sale of ECM Assets		—		800,000
Right-of Use Assets from operating lease		—		540,000
Capitalized software purchased with stock (Note 12)		—		41,000

Receivables

Receivables

Accounts and contract receivables are comprised of amounts owed to the Company for licensed software, professional services, including coding audit services, consulting services, maintenance services, and software as a service and are presented net of the allowance for doubtful accounts. The timing of revenue recognition may not coincide with the billing terms of the customer contract, resulting in unbilled receivables or deferred revenues; therefore, certain contract receivables represent revenues recognized prior to customer billings. Individual contract terms with customers or resellers determine when receivables are due. Accounts receivable represent amounts that the entity has an unconditional right to consideration. For billings where the criteria for revenue recognition have not been met, deferred revenue is recorded until the Company satisfies the respective performance obligations.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

The Company adjusts accounts receivable down to net realizable value with its allowance methodology. In determining the allowance for doubtful accounts, aged receivables are analysed periodically by management. Each identified receivable is reviewed based upon the most recent information available and the status of any open or unresolved issues with the customer preventing the payment thereof. Corrective action, if necessary, is taken by the Company to resolve open issues related to unpaid receivables. During these periodic reviews, the Company determines the required allowances for doubtful accounts for estimated losses resulting from the unwillingness of its customers or resellers to make required payments. The allowance for doubtful accounts was approximately $76,000 and $65,000 at January 31, 2022 and 2021, respectively. The Company believes that its reserve is adequate, however, results may differ in future periods.

Bad debt (benefit) expense for fiscal years 2021 and 2020 was as follows:

	2021		2020
Bad debt expense (benefit)	$	11,000	$	(31,000	)

Concessions Accrual

Concessions Accrual

In determining the concessions accrual, the Company evaluates historical concessions granted relative to revenue. The Company records a provision, reducing revenue, each period for the estimated amount of concessions incurred on the revenue recorded. The Company evaluates the amount of the provision and the concession accrual each period. The concession accrual included in accrued other expenses on the Company’s consolidated balance sheets was $152,000 and $99,000 as of January 31, 2022 and 2021, respectively.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method, over the estimated useful lives of the related assets. Estimated useful lives are as follows:

Computer equipment and software	3-4 years
Office equipment	5 years
Office furniture and fixtures	5-7 years
Leasehold improvements	Term of lease or estimated useful life, whichever is shorter

Depreciation expense for property and equipment in fiscal 2021 and 2020 was $68,000 and $64,000, respectively.

Normal repairs and maintenance are expensed as incurred. Replacements are capitalized and the property and equipment accounts are relieved of the items being replaced or disposed of, if no longer of value. The related cost and accumulated depreciation of the disposed assets are eliminated and any gain or loss on disposition is included in the results of operations in the year of disposal.

The Company wrote-off fully depreciated fixed assets during fiscal 2021 of $198,000. There was no impact to the consolidated statements of operations as this eliminated the asset and accumulated depreciation of the fully depreciated fixed assets.

Leases

Leases

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. 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. Since our lease arrangements do not provide an implicit rate, we use our estimated incremental borrowing rate for the expected remaining lease term at commencement date in determining the present value of future lease payments. We recognize operating lease cost on a straight-line basis by aggregating any rent abatement with the total expected rental payments and amortizing the expense ratably over the term of the lease. Sublease income is recognized as other income over the period of the lease, as the sublease is outside of the Company’s normal business operations. See Note 4 – Operating Leases for further details.

Debt Issuance Costs

Debt Issuance Costs

For fiscal 2021, costs of $130,000 related to the issuance of the Second Amended and Restated Loan and Security Agreement were capitalized as a reduction to the carrying value of debt and are being accreted to interest expense over the term of the loan using the effective interest rate method. The Company will also incur $200,000 in financing costs at the earlier of the term date of the loan, or pre-payment. These costs are being accreted, through interest expense, to the full value of the $200,000 over the term of the loan.

Cost related to the issuance of the Loan and Security Agreement and Second Amended and Restated Loan and Security Agreement were capitalized and amortized to interest expense on a straight-line basis, which is not materially different from the effective interest method, over the term of the related debt, and presented on the Company’s consolidated balance sheets as a direct deduction from the carrying amount of the non-current portion of our term loan.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The Company reviews the carrying value of long-lived assets for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Among the factors the Company considers in making the evaluation are changes in market position and profitability. If facts and circumstances are present which may indicate that the carrying amount of the assets may not be recoverable, the Company will prepare a projection of the undiscounted cash flows of the specific asset or asset group and determine if the long-lived assets are recoverable based on these undiscounted cash flows. If impairment is indicated, an adjustment will be made to reduce the carrying amount of these assets to their fair values.

Capitalized Software Development Costs

Capitalized Software Development Costs

Software development costs for software to be sold, leased, or marketed are accounted for in accordance with ASC 985-20, Software — Costs of Software to be Sold, Leased or Marketed. Costs associated with the planning and design phase of software development are classified as research and development costs and are expensed as incurred. Once technological feasibility has been established, a portion of the costs incurred in development, including coding, testing and quality assurance, are capitalized until available for general release to customers, and subsequently reported at the lower of unamortized cost or net realizable value. Amortization is calculated on a solution-by-solution basis and is included in Cost of software licenses on the consolidated statements of operations. Annual amortization is measured at the greater of a) the ratio of the software product’s current gross revenues to the total of current and expected gross revenues or b) straight-line over the remaining economic life of the software (typically two years). Unamortized capitalized costs determined to be in excess of the net realizable value of a solution are expensed at the date of such determination. Capitalized software development costs for software to be sold, leased, or marketed, net of accumulated amortization, totalled $846,000 and $1,103,000 as of January 31, 2022 and 2021, respectively.

Internal-use software development costs are accounted for in accordance with ASC 350-40, Internal-Use Software. The costs incurred in the preliminary stages of development are expensed as research and development costs as incurred. Once an application has reached the development stage, internal and external costs incurred to develop internal-use software are capitalized and amortized on a straight-line basis over the estimated useful life of the software (typically three to four years). Maintenance and enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful life of the software. The Company reviews the carrying value for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Amortization expense related to capitalized internal-use software development costs is included in Cost of software as a service on the consolidated statements of operations. Capitalized software development costs for internal-use software, net of accumulated amortization, totaled $4,709,000 and $4,842,000 as of January 31, 2022 and 2021, respectively.

The estimated useful lives of software (including software to be sold and internal-use software) are reviewed frequently and adjusted as appropriate to reflect upcoming development activities that may include significant upgrades and/or enhancements to the existing functionality. The Company reviews, on an on-going basis, the carrying value of its capitalized software development expenditures, net of accumulated amortization.

Amortization expense on all capitalized software development cost was $2,173,000 and $1,662,000 in fiscal 2021 and 2020, respectively. Further, the Company recognized an impairment of approximately $84,000 and $164,000 in fiscal 2021 and fiscal 2020, respectively, related to cancelled or abandoned enhancement projects during fiscal 2021 and fiscal 2020 that has been recognized within amortization expense. Additionally, in fiscal 2021, approximately $154,000 of fully amortized and abandoned assets, including previously acquired assets, were cleared from their corresponding capitalization and accumulated amortization balance sheet accounts.

The Company uses the “carry-over” method for amortizing capitalized software development costs. Under the “carry-over” method, the costs of the enhancements are added to the unamortized costs of the previous version of the product and the combined amount is amortized over the remaining useful life of the product. Including unamortized cost of the original product with the cost of the enhancement for purposes of applying the net realizable value test and amortization provisions is consistent with accounting guidance for software companies that improve their software and discontinue selling or marketing the older versions.

		Fiscal Year
		2021		2020
Amortization expense on internally-developed software included in:
Cost of software licenses	$	485,000	$	501,000
Cost of audit services		13,000		13,000
Cost of software as a service		1,675,000		1,148,000
Total amortization expense on internally-developed software	$	2,173,000	$	1,662,000

Interest capitalized to software development cost in fiscal 2021 and 2020 was $27,000 and $13,000, respectively. The interest capitalized to software development cost reduces the Company’s interest expense recognized in the consolidated statements of operations.

Research and development expense was $4,782,000 and $2,933,000 in fiscal 2021 and 2020, respectively.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The FASB’s authoritative guidance on fair value measurements establishes a framework for measuring fair value, and expands disclosure about fair value measurements. 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. For fiscal years 2021 and 2020, there were no transfers of assets or liabilities between Levels 1, 2, or 3.

The table below provides information on our liabilities that are measured at fair value on a recurring basis:

			Quoted Prices in		Significant Other		Significant
	Total Fair		Active Markets		Observable Inputs		Unobservable Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
At January 31, 2022
Acquisition earnout liability (1)	$	8,833,000	$	–	$	–	$	8,833,000

(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 January 31, 2022. The decrease in the valuation of the acquisition earnout liability was $1,851,000 from the date of closing of the Avelead acquisition, August 16, 2021 to the end of the fiscal year, January 31, 2022. The valuation adjustment is recognized in “other income” in the accompanying consolidated statement of operations.

The fair value of the Company’s term loan under its Second Amended and Restated Loan and Security Agreement was determined through an analysis of the interest rate spread from the date of closing the loan (August 2022) to the date of the most recent balance sheet, January 31, 2022. The term loan bears 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 prime rate is variable and, thus accommodates changes in the market interest rate. However, the interest rate spread (the 1.5% added to the Prime Rate) is fixed. We estimated the impact of the changes in the interest rate spread by analogizing the effect of the change in the Corporate bond rates, reduced for any changes in the market interest rate. This provided us with an estimated change to the interest rate spread of approximately 0.5% from the date we entered the debt agreement to the end of the fiscal year, January 31, 2022. The discount to the value of the debt as of January 31, 2022 was estimated to be $9,798,000, or a discount to book value $202,000. Long-term debt is classified as Level 2.

The fair value of the PPP loan was determined based on discounting the loan amount as of January 31, 2021. The fair value using market rates the Company believes would be available for similar types of financial instruments would have resulted in a lower fair value of $2,231,000 as compared to the book value of $2,301,000, a reduction of $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 our direct sales force or through third-party resellers. Licensed, locally-installed customers on a perpetual model utilize our 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 and consulting services.

We recognize revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (“ASC 606”), under the core principle of recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

We commence revenue recognition (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

Often contracts contain more than one performance obligation. Performance obligations are the unit of accounting for revenue recognition and generally 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-cancellable 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 right of refund terms are required, revenue is recognized upon the satisfaction of such criteria.

The determined transaction price is allocated based on the standalone selling price of the performance obligations in contract. Significant judgment is required to determine the standalone selling price (“SSP”) for each performance obligation, the amount allocated to each performance obligation and whether it depicts the amount that the Company expects to receive in exchange for the related product and/or service. The Company recognizes revenue for implementation for certain of its eValuator SaaS solution over the contract term, as it has been determined that those implementation services are not a distinct performance obligation. Services for other SaaS and Software solutions such as CDI, RevID and Compare, have been determined as a distinct performance obligation. For these agreements, the Company estimates 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, software as a service 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 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.

The Company has utilized the portfolio approach as the practical expedient. We have applied the revenue model to a portfolio of contracts with similar characteristics where we expected that the financial statements would not differ materially from applying it to the individual contracts within that portfolio.

Software Licenses

The Company’s software license arrangements 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 is recognized at a point in time. Typically, this is upon shipment of components or electronic download of software.

Maintenance and Support Services

Our maintenance and support obligations include multiple discrete performance obligations, with the two largest being unspecified product upgrades or enhancements, and technical support, which can be offered at various points during a contract period. We believe that the multiple discrete performance obligations within our overall maintenance and support obligations can be viewed as a single performance obligation since both the unspecified upgrades and technical support are activities to fulfill the maintenance performance obligation and are rendered concurrently. Maintenance and support agreements entitle customers to technology support, version upgrades, bug fixes and service packs. We recognize maintenance and support revenue over the contract term.

Software-Based Solution Professional Services

The Company provides various professional services to customers with software licenses. These include project management, software implementation and software modification services. Revenues from arrangements to provide professional services are generally distinct from the other promises in the contract and are recognized as the related services are performed. Consideration payable under these arrangements is either fixed fee or on a 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 of the Company’s platform and support which represent a single promise to provide continuous access to its software solutions. Implementation services for the Company’s eValuator product are 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. Implementation services for other SaaS products are deemed to be separate performance obligations.

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 customer’s enterprise. Audit services are a separate performance obligation. We recognize revenue over time as the services are performed.

Disaggregation of Revenue

The following table provides information about disaggregated revenue by type and nature of revenue stream:

		Fiscal Year
		2021		2020
Recurring Revenue	$	12,400,000	$	8,247,000
Non-Recurring Revenue		4,979,000		3,099,000
Total revenue	$	17,379,000	$	11,346,000

The Company includes revenue categories of (i) maintenance and support and (ii) software as a service as recurring revenue for fiscal years ended January 31, 2021 and January 31, 2020. The Company includes revenue categories of (i) software licenses, (ii) professional services, and (iii) audit services as non-recurring revenue for the fiscal years ended January 31, 2021 and January 31, 2020. Avelead makes up $2,790,000 of the Recurring Revenue for fiscal 2021 and $1,735,000 of the Non-Recurring Revenue for fiscal 2021.

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 revenues include payments received in advance of performance under the contract. Our 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 year ended January 31, 2022, we recognized approximately $3,702,000 in revenue from deferred revenues outstanding as of January 31, 2021. Revenue allocated to remaining performance obligations was $19,112,000 as of January 31, 2022, of which 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)

We defer 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 contractual term. As of January 31, 2022, and 2021, we had deferred costs of $125,000 and $168,000, respectively, net of accumulated amortization of $93,000 and $126,000, respectively. Amortization expense of these costs was $110,000 and $125,000 in fiscal 2021 and 2020, respectively. There were no impairment losses for these capitalized costs for the fiscal years 2021 and 2020. In fiscal 2021, the deferred cost to fulfill a contract and the associated accumulated amortization accounts were reduced by $143,000 for projects with fully amortized costs.

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, we expense sales commissions as incurred when the amortization period of related deferred commission costs would have been one year or less.

Deferred commissions costs paid and payable, which are included on the consolidated balance sheets within other non-current assets totalled $806,000 and $666,000, respectively, as of January 31, 2022 and 2021. In fiscal 2021 and 2020, $339,000 and $206,000, respectively, in amortization expense associated with deferred sales commissions was included in selling, general and administrative expenses on the consolidated statements of operations. There were no impairment losses for these capitalized costs for fiscal years 2021 and 2020.

Concentrations

Concentrations

Financial instruments, which potentially expose the Company to concentrations of credit risk, consist primarily of accounts receivable. The Company’s accounts receivable are concentrated in the healthcare industry. However, the Company’s customers typically are well-established hospitals, medical facilities or major health information systems companies with good credit histories that resell the Company’s solutions. Payments from customers have been received within normal time frames for the industry. However, some hospitals and medical facilities have experienced significant operating losses as a result of limits on third-party reimbursements from insurance companies and governmental entities and extended payment of receivables from these entities is not uncommon.

To date, the Company has relied on a limited number of customers and remarketing partners for a substantial portion of its total revenues. The Company expects that a significant portion of its future revenues will continue to be generated by a limited number of customers and its remarketing partners.

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill and other intangible assets were recognized in conjunction with the Avelead Consulting, Interpoint, Meta, CLG and Opportune IT acquisitions, as well as the Unibased acquisition (prior to divestiture of such assets). Identifiable intangible assets include purchased intangible assets with finite lives, which primarily consist of internally-developed software and customer relationships. Finite-lived purchased intangible assets are amortized over their expected period of benefit, which generally ranges from one to 15 years, using the straight-line method.

The Company assesses the useful lives and possible impairment of intangible assets when an event occurs that may trigger such a review. Factors considered important which could trigger a review include:

● significant underperformance relative to historical or projected future operating results;

● significant changes in the manner of use of the acquired assets or the strategy for the overall business;

● identification of other impaired assets within a reporting unit;

● disposition of a significant portion of an operating segment;

● significant negative industry or economic trends;

● significant decline in the Company’s stock price for a sustained period; and

● a decline in the market capitalization relative to the net book value.

Determining whether a triggering event has occurred involves significant judgment by the Company.

The Company assesses goodwill annually (as of November 1), or more frequently when events and circumstances, such as the ones mentioned above, occur indicating that the recorded goodwill may be impaired. During the years ended January 31, 2022 and 2021, the Company did not note any of the above qualitative factors, which would be considered a triggering event for goodwill impairment. In assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of a reporting unit. The identification of relevant events and circumstances and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments by management. These judgments include the consideration of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, events which are specific to the Company and trends in the market price of the Company’s common stock. Each factor is assessed to determine whether it impacts the impairment test positively or negatively, and the magnitude of any such impact.

Reporting units are determined based on the organizational structure the entity has in place at the date of the impairment test. A reporting unit is an operating segment or component business unit with the following characteristics: (a) it has discrete financial information, (b) segment management regularly reviews its operating results (generally an operating segment has a segment manager who is directly accountable to and maintains regular contact with the chief operating decision maker to discuss operating activities, financial results, forecasts or plans for the segment), and (c) its economic characteristics are dissimilar from other units (this contemplates the nature of the products and services, the nature of the production process, the type or class of customer for the products and services and the methods used to distribute the products and services). The Company determined that it has one operating segment and two reporting units.

The Company estimates the fair value of its reporting unit using the income approach, via discounted cash flow valuation models which include, but are not limited to, assumptions such as a “risk-free” rate of return on an investment, the weighted average cost of capital of a market participant and future revenue, operating margin, working capital and capital expenditure trends. Determining the fair value of reporting units and goodwill includes significant judgment by management, and different judgments could yield different results.

The Company performed its annual assessment of goodwill during the fourth quarter of fiscal 2021, using the approach described above. Based on the analysis performed, the fair value of the reporting units exceeded the carrying amount of the reporting unit, including goodwill, and, therefore, a goodwill impairment loss was not recognized.

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 annual compensation expense related to stock-based awards of $2,216,000 in fiscal 2021, and $1,444,000 in fiscal 2020 which includes $41,000 of capitalized non-employee stock compensation.

The fair value of the stock options granted are 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. Effective fiscal 2021, the Company changed its accounting to recognize forfeitures as they occur, which was determined to be an immaterial change from its historical practice. 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 stock-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 to the Company. In fiscal 2021 and 2020, 257,571 and 162,095 shares of common stock were surrendered to the Company to satisfy tax withholding obligations totaling $464,000 and $256,000, respectively, in connection with the vesting of restricted stock awards. Shares surrendered by the restricted stock award recipients in accordance with the applicable plan are deemed cancelled, and therefore are not available to be reissued. The Company awarded 562,500 and 748,245 shares of restricted stock to Section 16 officers and directors of the Company in fiscal 2021 and 2020, respectively.

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. See Note 7 - 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 January 31, 2022, 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 our common stock.

Our 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 our common stock is computed using the treasury stock method.

The following is the calculation of the basic and diluted net loss per share of common stock:

		Fiscal Year
		2021			2020
Basic earnings (loss) per share:
Continuing operations
Loss from continuing operations, net of tax	$	(6,917,000	)	$	(4,799,000	)
Basic net loss per share of common stock from continuing operations	$	(0.16	)	$	(0.16	)
Discontinued operations
Income available to common stockholders from discontinued operations	$	375,000		$	5,095,000
Basic net earnings per share of common stock from discontinued operations	$	0.01		$	0.17
Diluted earnings (loss) per share (1):
Continuing operations
Loss available to common stockholders from continuing operations	$	(6,917,000	)	$	(4,799,000	)
Diluted net loss per share of common stock from continuing operations	$	(0.16	)	$	(0.16	)
Discontinued operations
Income available to common stockholders from discontinued operations	$	375,000		$	5,095,000
Diluted net earnings per share of common stock from discontinued operations	$	0.01		$	0.17
Net (loss) income	$	(6,542,000	)	$	296,000
Weighted average shares outstanding - Basic (1)		42,815,239			30,152,383
Effect of dilutive securities - Stock options and Restricted stock (2)		458,335			488,359
Weighted average shares outstanding – Diluted		43,273,574			30,640,742
Basic net (loss) income per share of common stock	$	(0.15	)	$	0.01
Diluted net (loss) income per share of common stock	$	(0.15	)	$	0.01

(1)	Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of January 31, 2022 and 2021, there were 1,043,350 and 931,125 unvested restricted shares of common stock, respectively.
(2)	Diluted net loss per share excludes the effect of shares that are anti-dilutive. As of January 31, 2022, there were 1,062,130 outstanding stock options and 1,043,350 unvested restricted shares of common stock. As of January 31, 2021, there were 625,830 outstanding stock options and 931,125 unvested restricted shares of common stock.

Other Operating Costs

Other Operating Costs

Non-routine Costs

	Fiscal Year 2021
Separation agreement expense	$	706,000
Broker Fees		553,000
Professional Fees		850,000
Executive Bonuses		705,000
Loss on exit from operating lease		42,000
Total	$	2,856,000

For fiscal 2021, the Company incurred certain non-routine costs totalling $2,856,000. The Company incurred transaction costs related to the acquisition of Avelead consisting of a separation agreement, broker fees and professional services. The Company paid certain executive bonuses for the successful capital raise and closing of the Avelead acquisition. Finally, the Company subleased its Alpharetta office to a third-party effective October 1, 2021. The Company retains certain obligations, and accordingly, will continue to report the Right of Use Asset (see Note 4 – Operating Leases). The Company incurred certain fees and expenses associated with the sublease.

Loss on Exit of Membership Agreement

For fiscal 2020, minimum fees due under the Company’s former shared office arrangement totaled approximately $105,000. The Company recorded an expense for the minimum future commitment under the agreement and accrued the cost to the accompanying consolidated balance sheet in fiscal 2020 to reflect the liability at the time it abandoned the space. Refer to Note 4 – Operating Leases.

Loss Contingencies

Loss Contingencies

We are subject to the possibility of various loss contingencies arising in the normal course of business. We consider the likelihood of the loss or impairment of an asset or the incurrence of a liability as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired, and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether to accrue for a loss contingency and adjust any previous accrual.

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. This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The standard became effective for us on February 1, 2021. The adoption of this ASU did not have a material impact on our consolidated financial statements or disclosures. Refer to Note 7 – Income Taxes – in the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for more information on the Company’s adoption of ASU 2019-12 for further details.

In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities From Contracts With Customers (“ASU 2021-08”), which amends the accounting for contract assets acquired and contract liabilities assumed from contracts with customers in business combinations (“acquired contract balances”). The amendment results in a shift from previous guidance which required similar assets and liabilities to be accounted for at fair value at the acquisition date. The amendments in the Update require that an entity (acquirer) recognize, and measure acquired contract balances in accordance with ASC Topic 606. For instance, at the acquisition date, the acquirer would account for the related revenue contracts acquired under ASC 606, as if it had originated the contracts. The Company elected to early adopt ASU 2021-08 in the quarter ended October 31, 2021 (which includes retroactive adoption for any acquisitions in the current fiscal year). The impact of adopting the new standard is that it eliminated the need to discount deferred revenue acquired from Avelead of $236,000. As a result of the Company not discounting deferred revenue upon acquiring Avelead, revenues are higher and net loss is lower in the post-acquisition period of the same amount.

Recent Accounting Pronouncements Not Yet Adopted

Recent Accounting Pronouncements Not Yet Adopted

In November 2019, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which improves guidance around accounting for financial losses on accounts receivable. For smaller reporting entities, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. We do not anticipate that the adoption of this ASU will have a material impact on our consolidated financial statements.

In July 2021, the FASB issued ASU 2021-05, Lessors - Certain Leases with Variable Lease Payments to ASC Topic 842, Leases (“ASC 842”)(“ASU 2021-05”). ASU 2021-05 provides additional ASC 842 classification guidance as it relates to a lessor’s accounting for certain leases with variable lease payments. ASU 2021-05 requires a lessor to classify a lease with variable payments that do not depend on an index or rate as an operating lease if either a sales-type lease or direct financing lease classification would trigger a day-one loss. ASU 2021-05 is effective for reporting periods beginning after December 15, 2021, with early adoption permitted. We do not anticipate that the adoption of this ASU will have a material impact on our consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):Disclosures by Business Entities about Government Assistance (“ASU 2021-10”), which aims to provide increased transparency by requiring business entities to disclose information about certain types of government assistance they receive in the notes to the financial statements. Entities are required to provide the new disclosures prospectively for all transactions with a government entity that are accounted for under either a grant or a contribution accounting model and are reflected in the financial statements at the date of initially applying the new amendments, and to new transactions entered into after that date. Retrospective application of the guidance is permitted. The guidance in ASU 2021-10 is effective for financial statements of all entities, including private companies, for annual periods beginning after December 15, 2021, with early application permitted. We do not anticipate that the adoption of this ASU will have a material impact on our consolidated financial statements.

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SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Jan. 31, 2022

Accounting Policies [Abstract]

SCHEDULE OF NON-CASH ITEMS RELATED TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

The Company had the following items that were non-cash items related to the consolidated statements of cash flows:

		Fiscal Year
		2021		2020
Forgiveness of PPP loan and accrued interest	$	2,327,000	$	—
Escrowed funds from sale of ECM Assets		—		800,000
Right-of Use Assets from operating lease		—		540,000
Capitalized software purchased with stock (Note 12)		—		41,000

SCHEDULE OF BAD DEBT EXPENSES

Bad debt (benefit) expense for fiscal years 2021 and 2020 was as follows:

	2021		2020
Bad debt expense (benefit)	$	11,000	$	(31,000	)

SCHEDULE OF ESTIMATED USEFUL LIFE OF PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed using the straight-line method, over the estimated useful lives of the related assets. Estimated useful lives are as follows:

Computer equipment and software	3-4 years
Office equipment	5 years
Office furniture and fixtures	5-7 years
Leasehold improvements	Term of lease or estimated useful life, whichever is shorter

SCHEDULE OF AMORTIZATION EXPENSE FOR INTERNALLY DEVELOPED SOFTWARE

		Fiscal Year
		2021		2020
Amortization expense on internally-developed software included in:
Cost of software licenses	$	485,000	$	501,000
Cost of audit services		13,000		13,000
Cost of software as a service		1,675,000		1,148,000
Total amortization expense on internally-developed software	$	2,173,000	$	1,662,000

SCHEDULE OF FAIR VALUE ASSETS AND LIABILITIES MEASURED ON RECURRING BASIS

The table below provides information on our liabilities that are measured at fair value on a recurring basis:

			Quoted Prices in		Significant Other		Significant
	Total Fair		Active Markets		Observable Inputs		Unobservable Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
At January 31, 2022
Acquisition earnout liability (1)	$	8,833,000	$	–	$	–	$	8,833,000

(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 January 31, 2022. The decrease in the valuation of the acquisition earnout liability was $1,851,000 from the date of closing of the Avelead acquisition, August 16, 2021 to the end of the fiscal year, January 31, 2022. The valuation adjustment is recognized in “other income” in the accompanying consolidated statement of operations.

SCHEDULE OF DISAGGREGATION OF REVENUE

The following table provides information about disaggregated revenue by type and nature of revenue stream:

		Fiscal Year
		2021		2020
Recurring Revenue	$	12,400,000	$	8,247,000
Non-Recurring Revenue		4,979,000		3,099,000
Total revenue	$	17,379,000	$	11,346,000

SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE OF COMMON STOCK

The following is the calculation of the basic and diluted net loss per share of common stock:

		Fiscal Year
		2021			2020
Basic earnings (loss) per share:
Continuing operations
Loss from continuing operations, net of tax	$	(6,917,000	)	$	(4,799,000	)
Basic net loss per share of common stock from continuing operations	$	(0.16	)	$	(0.16	)
Discontinued operations
Income available to common stockholders from discontinued operations	$	375,000		$	5,095,000
Basic net earnings per share of common stock from discontinued operations	$	0.01		$	0.17
Diluted earnings (loss) per share (1):
Continuing operations
Loss available to common stockholders from continuing operations	$	(6,917,000	)	$	(4,799,000	)
Diluted net loss per share of common stock from continuing operations	$	(0.16	)	$	(0.16	)
Discontinued operations
Income available to common stockholders from discontinued operations	$	375,000		$	5,095,000
Diluted net earnings per share of common stock from discontinued operations	$	0.01		$	0.17
Net (loss) income	$	(6,542,000	)	$	296,000
Weighted average shares outstanding - Basic (1)		42,815,239			30,152,383
Effect of dilutive securities - Stock options and Restricted stock (2)		458,335			488,359
Weighted average shares outstanding – Diluted		43,273,574			30,640,742
Basic net (loss) income per share of common stock	$	(0.15	)	$	0.01
Diluted net (loss) income per share of common stock	$	(0.15	)	$	0.01

(1)	Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of January 31, 2022 and 2021, there were 1,043,350 and 931,125 unvested restricted shares of common stock, respectively.
(2)	Diluted net loss per share excludes the effect of shares that are anti-dilutive. As of January 31, 2022, there were 1,062,130 outstanding stock options and 1,043,350 unvested restricted shares of common stock. As of January 31, 2021, there were 625,830 outstanding stock options and 931,125 unvested restricted shares of common stock.

SCHEDULE OF NON ROUTINE COSTS

	Fiscal Year 2021
Separation agreement expense	$	706,000
Broker Fees		553,000
Professional Fees		850,000
Executive Bonuses		705,000
Loss on exit from operating lease		42,000
Total	$	2,856,000

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BUSINESS COMBINATION AND DIVESTITURE (Tables)

12 Months Ended

Jan. 31, 2022

Business Combination and Asset Acquisition [Abstract]

COMPONENTS OF TOTAL CONSIDERATION

The components of the total consideration are as follows:

(in thousands)
Components of total consideration, net of cash acquired:
Cash	$	11,900
Cash, seller expenses		285
Cash, working capital adjustment		285
Restricted Common Stock		6,554
Acquisition earnout liabilities		10,684	(a)
Total consideration	$	29,708

(a) Acquisition earnout liabilities represent 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, $4,672,000 of the acquisition earnout liability is shown as a short-term liability and $4,161,000 is shown as a long-term liability as of January 31, 2022.

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 consolidated statements of operations. The valuation adjustment recorded for the period ended January 31, 2022, was $1,851,000. A range of possible outcomes is not available under the specific valuation method that was used in determining fair value of the acquisition earnout liability.

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:

(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

	Estimated Useful Lives
Goodwill	Indefinite
Customer Relationships (SaaS)	10 years
Customer Relationships (Consulting)	8 years
Internally Developed Software	9 years
Trademarks and Tradenames	15 years

SCHEDULE OF PRO FORMA REVENUE AND NET EARNINGS

(UNAUDITED)	Year Ended January 31,
	2022			2021
Revenues	$	22,631,000		$	19,707,000
Operating expenses		(31,278,000	)		(25,164,000	)
Non-routine costs		(4,284,000	)		—
Loss on exit from membership agreement		—			(105,000	)
Operating loss		(12,931,000	)		(5,562,000	)
Other expenses		1,312,000			(710,000	)
PPP loan forgiveness		3,059,000			712,000
Income tax (expense) benefit		(109,000	)		1,370,000
Loss from continuing operations	$	(8,669,000	)	$	(4,190,000	)

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OPERATING LEASES (Tables)

12 Months Ended

Jan. 31, 2022

Operating Leases

SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES

Maturities of operating lease liabilities associated with the Company’s operating lease as of January 31, 2022 are as follows for payments due based upon the Company’s fiscal year:

2022	$	210,000
2023		35,000
Total Lease Payments		245,000
Less present value adjustment		(8,000	)
Present value of lease liabilities	$	237,000

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DEBT (Tables)

12 Months Ended

Jan. 31, 2022

Debt Disclosure [Abstract]

SCHEDULE OF MAXIMUM DEBT TO ARR RATIO

	Maximum Debt to
Quarter Ending	ARR Ratio
October 31, 2021	0.80 to 1.00
January 31, 2022	0.75 to 1.00
April 30, 2022	0.65 to 1.00
July 31, 2022	0.55 to 1.00
October 31, 2022	0.50 to 1.00
January 31, 2023	0.45 to 1.00

SCHEDULE OF MAXIMUM DEBT TO ADJUSTED EBITDA RATIO

	Maximum Debt to
	Adjusted EBITDA
Quarter Ending	Ratio
April 30, 2023	11.30 to 1.00
July 31, 2023	4.15 to 1.00
October 31, 2023	2.50 to 1.00
January 31, 2024 and on the last day of each quarter thereafter	2.0 to 1.00

SCHEDULE OF OUTSTANDING DEBT, OTHER THAN PPP LOAN

Outstanding principal balances on debt consisted of the following at:

	January 31, 2022(a)			January 31, 2021(b)
Term loan	$	10,000,000		$	2,301,000
Deferred financing cost		(96,000	)		—
Total		9,904,000			2,301,000
Less: Current portion		(250,000	)		(1,534,000	)
Non-current portion of debt	$	9,654,000		$	767,000

(a)	The term loan as of January 31, 2022 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 21, 2021 is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021.

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GOODWILL AND INTANGIBLE ASSETS (Tables)

12 Months Ended

Jan. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

SCHEDULE OF GOODWILL ACTIVITY

The goodwill activity is summarized as follows:

	Goodwill
Balance at January 31, 2021		10,712,000
Acquisition of Avelead		12,377,000
Balance at January 31, 2022		23,089,000

SCHEDULE OF INTANGIBLE ASSETS

Intangible assets consist of the following:

	January 31, 2022
	Estimated			Accumulated
	Useful Life	Gross Assets		Amortization		Net Assets
Finite-lived assets:
Customer relationships	8-10 years	$	14,164,000	$	4,755,000	$	9,409,000
Internally Developed Software	9 years		6,380,000		325,000		6,055,000
Trademarks and Tradenames	15 years		1,340,000		41,000		1,299,000
Total			21,884,000		5,121,000		16,763,000

	January 31, 2021
	Estimated			Accumulated
	Useful Life	Gross Assets		Amortization		Net Assets
Finite-lived assets:
Customer relationships	5-10 years	$	5,397,000	$	4,773,000	$	624,000

SCHEDULE OF FUTURE AMORTIZATION EXPENSE FOR INTANGIBLE ASSETS

Amortization over the next five fiscal years for intangible assets is estimated as follows:

	Annual Amortization Expense
2022	$	1,971,000
2023		1,801,000
2024		1,801,000
2025		1,801,000
2026		1,801,000
Thereafter		7,588,000
Total	$	16,763,000

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INCOME TAXES (Tables)

12 Months Ended

Jan. 31, 2022

Income Tax Disclosure [Abstract]

SCHEDULE OF INCOME TAXES FOR CONTINUING OPERATION

For fiscal 2021 and 2020, income taxes for continuing operations consist of the following:

		Fiscal Year
		2021			2020
Current tax (expense) benefit:
Federal	$	—		$	—
State		(14,000	)		(14,000	)
Total current tax expense	$	(14,000	)	$	(14,000	)
Deferred tax (expense) benefit:
Federal	$	(80,000	)	$	1,274,000
State		(15,000	)		—
Total deferred tax (expense) benefit	$	(95,000	)	$	1,274,000
Total provision	$	(109,000	)	$	1,260,000

SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION

The income tax benefit differs from the amount computed using the federal statutory income tax rates of 21% for fiscal 2021 and 2020 continuing operations as follows:

	Fiscal Year
	2021			2020
Federal tax benefit at statutory rate	$	(1,430,000	)	$	(1,272,000	)
State and local tax expense, net of federal		26,000			11,000
Increase in valuation allowance		1,950,000			419,000
Permanent items:
PPP Loan		(483,000	)		—
Other		3,000			5,000
Reserve for uncertain tax position		(24,000	)		35,000
R&D Credit (Federal)		120,000			(174,000	)
Expiring carryforwards		—			5,000
Stock-based compensation		(45,000	)		(305,000	)
Other		(8,000	)		16,000
Income tax expense	$	109,000		$	(1,260,000	)

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

The Company provides deferred income taxes for temporary differences between assets and liabilities recognized for financial reporting and income tax purposes. The income tax effects of these temporary differences and credits are as follows:

	January 31,
	2022			2021
Deferred tax assets:
Allowance for doubtful accounts	$	24,000		$	16,000
Deferred revenue		60,000			12,000
Accruals		168,000			47,000
Net operating loss carryforwards		10,908,000			8,651,000
Stock compensation expense		510,000			367,000
Property and equipment		(6,000	)		(5,000	)
R&D credit		1,334,000			1,431,000
Other		23,000			7,000
Total deferred tax assets		13,021,000			10,526,000
Valuation allowance		(12,318,000	)		(9,992,000	)
Net deferred tax assets		703,000			534,000
Deferred tax liabilities:
Finite-lived intangible assets		(798,000	)		(534,000	)
Total deferred tax liabilities		(798,000	)		(534,000	)
Net deferred tax liabilities	$	(95,000	)	$	—

SCHEDULE OF GROSS UNRECOGNIZED TAX BENEFITS

A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest and penalties) is as follows:

	2021			2020
Beginning of fiscal year	$	339,000		$	304,000
Additions for tax positions for the current year		4,000			33,000
Additions for tax positions of prior years		—			2,000
Subtractions for tax positions of prior years		(28,000	)		—
End of fiscal year	$	315,000		$	339,000

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STOCK-BASED COMPENSATION (Tables)

12 Months Ended

Jan. 31, 2022

Share-Based Payment Arrangement [Abstract]

SCHEDULE OF STOCK OPTION ACTIVITY

A summary of stock option activity follows:

				Weighted
				Average		Remaining		Aggregate
	Options			Exercise Price		Life in Years		intrinsic value
Outstanding as of January 31, 2021		625,830		$	3.45
Granted		583,333			1.53
Exercised		(3,300	)		1.35
Expired		(137,033	)		1.65
Forfeited		(6,700	)		1.35
Outstanding as of January 31, 2022		1,062,130		$	2.65		6.11	$	21,000
Exercisable as of January 31, 2022		628,854		$	3.42		3.75	$	20,000
Vested or expected to vest as of January 31, 2022		1,061,307		$	2.65		6.11	$	21,000

SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS

The fiscal 2021 and 2020 stock-based compensation was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for each fiscal year:

	2021			2020
Expected life		5.01 years			—
Risk-free interest rate		0.75	%		—
Weighted average volatility factor		0.72			—
Dividend yield		—			—
Forfeiture rate		—			—

SCHEDULE OF RESTRICTED STOCK AWARD ACTIVITY

				Weighted
	Non-vested			Average
	Number of			Grant Date
	Shares			Fair Value
Non-vested balance at January 31, 2020		803,498		$	1.22
Granted		1,158,245			1.07
Vested		(864,128	)		1.18
Forfeited		(166,490	)		1.16
Non-vested balance at January 31, 2021		931,125		$	1.09
Granted		1,257,000			1.71
Vested		(1,095,175	)		1.33
Forfeited		(50,100	)		1.48
Non-vested balance at January 31, 2022		1,043,000		$	1.57

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DISCONTINUED OPERATIONS (Tables)

12 Months Ended

Jan. 31, 2022

Discontinued Operations and Disposal Groups [Abstract]

SCHEDULE OF GAIN ON SALE OF ASSETS

Net Proceeds, including escrowed funds	$	12,088,000
Net tangible assets sold:
Accounts Receivable		(1,130,000	)
Prepaid Expenses		(576,000	)
Deferred Revenues		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 reclassified the following assets and liabilities for discontinued operations in the accompanying consolidated balance sheets:

	As of
	January 31, 2022		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 fiscal 2021 and 2020, the Company recorded the following into discontinued operations in the accompanying consolidated statements of operations:

		Fiscal Year
		2021		2020
Revenues:
Maintenance and support	$	—	$	412,000
Software as a service		—		138,000
Transition service fees		498,000		394,000
Total revenues	$	498,000	$	944,000
Expenses:
Cost of Sales		5,000		294,000
Transition service cost		92,000		166,000
Deferred financing cost		—		128,000
Total expenses	$	97,000	$	588,000
Income from discontinued operations	$	401,000	$	356,000

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SCHEDULE OF NON-CASH ITEMS RELATED TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Details) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Accounting Policies [Abstract]
Forgiveness of PPP loan and accrued interest	$ 2,327,000
Escrowed funds from sale of ECM Assets		800,000
Right-of Use Assets from operating lease		540,000
Capitalized software purchased with stock (Note 12)		$ 41,000

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ORGANIZATION AND DESCRIPTION OF BUSINESS (Details Narrative)	12 Months Ended
	Jan. 31, 2022 Integer
Accounting Policies [Abstract]
Number of operating segments	1

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SCHEDULE OF BAD DEBT EXPENSES (Details) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2020
Accounting Policies [Abstract]
Bad debt expense (benefit)	$ 11,000	$ (31,000)

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SCHEDULE OF ESTIMATED USEFUL LIFE OF PROPERTY AND EQUIPMENT (Details)	12 Months Ended
	Jan. 31, 2022
Computer Equipment and Software [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives	3 years
Computer Equipment and Software [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives	4 years
Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives	5 years
Office Furniture and Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives	5 years
Office Furniture and Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives	7 years
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, extimated useful lives	Term of lease or estimated useful life, whichever is shorter

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SCHEDULE OF AMORTIZATION EXPENSE FOR INTERNALLY DEVELOPED SOFTWARE (Details) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Property, Plant and Equipment [Line Items]
Total amortization expense on internally-developed software	$ 2,173,000	$ 1,662,000
Cost of Software Licenses [Member]
Property, Plant and Equipment [Line Items]
Total amortization expense on internally-developed software	485,000	501,000
Cost of Audit Services [Member]
Property, Plant and Equipment [Line Items]
Total amortization expense on internally-developed software	13,000	13,000
Cost of Software as a Service [Member]
Property, Plant and Equipment [Line Items]
Total amortization expense on internally-developed software	$ 1,675,000	$ 1,148,000

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SCHEDULE OF FAIR VALUE ASSETS AND LIABILITIES MEASURED ON RECURRING BASIS (Details)	Jan. 31, 2022 USD ($)	[1]
Defined Benefit Plan Disclosure [Line Items]
Acquisition earn out liability fair value, observable inputs	$ 8,833,000
Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Acquisition earn out liability fair value, observable inputs
Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Acquisition earn out liability fair value, observable inputs
Fair Value, Inputs, Level 3 [Member]
Defined Benefit Plan Disclosure [Line Items]
Acquisition earn out liability fair value, observable inputs	$ 8,833,000

[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 January 31, 2022. The decrease in the valuation of the acquisition earnout liability was $1,851,000 from the date of closing of the Avelead acquisition, August 16, 2021 to the end of the fiscal year, January 31, 2022. The valuation adjustment is recognized in “other income” in the accompanying consolidated statement of operations.

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SCHEDULE OF FAIR VALUE ASSETS AND LIABILITIES MEASURED ON RECURRING BASIS (Details) (Parenthetical)	12 Months Ended
	Jan. 31, 2022 USD ($)
Accounting Policies [Abstract]
Acquisition earnout liability, change in valuation	$ 1,851,000

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SCHEDULE OF DISAGGREGATION OF REVENUE (Details) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total revenue	$ 17,379,000	$ 11,346,000
Fair Value, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total revenue	12,400,000	8,247,000
Fair Value, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total revenue	$ 4,979,000	$ 3,099,000

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SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE OF COMMON STOCK (Details) - USD ($)		12 Months Ended
		Jan. 31, 2022	Jan. 31, 2021
Accounting Policies [Abstract]
Loss from continuing operations, net of tax		$ (6,917,000)	$ (4,799,000)
Basic net loss per share of common stock from continuing operations		$ (0.16)	$ (0.16)
Income available to common stockholders from discontinued operations		$ 375,000	$ 5,095,000
Basic net earnings per share of common stock from discontinued operations		$ 0.01	$ 0.17
Loss available to common stockholders from continuing operations	[1]	$ (6,917,000)	$ (4,799,000)
Diluted net loss per share of common stock from continuing operations	[1]	$ (0.16)	$ (0.16)
Income available to common stockholders from discontinued operations		$ 375,000	$ 5,095,000
Diluted net earnings per share of common stock from discontinued operations		$ 0.01	$ 0.17
Net (loss) income		$ (6,542,000)	$ 296,000
Weighted average shares outstanding - Basic (1)	[1]	42,815,239	30,152,383
Effect of dilutive securities - Stock options and Restricted stock (2)	[2]	458,335	488,359
Weighted average shares outstanding – Diluted		43,273,574	30,640,742
Basic net (loss) income per share of common stock		$ (0.15)	$ 0.01
Diluted net (loss) income per share of common stock		$ (0.15)	$ 0.01

[1] Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of January 31, 2022 and 2021, there were 1,043,350 and 931,125 unvested restricted shares of common stock, respectively.

[2] Diluted net loss per share excludes the effect of shares that are anti-dilutive. As of January 31, 2022, there were 1,062,130 outstanding stock options and 1,043,350 unvested restricted shares of common stock. As of January 31, 2021, there were 625,830 outstanding stock options and 931,125 unvested restricted shares of common stock.

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SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE OF COMMON STOCK (Details) (Parenthetical) - shares	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unvested restricted shares of common stock outstanding	1,043,350	931,125
Outstanding stock options, shares	1,062,130	625,830
Restricted Stock [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Non vested outstanding stock options	1,043,350	931,125

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SCHEDULE OF NON ROUTINE COSTS (Details) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Restructuring Cost and Reserve [Line Items]
Total	$ 2,856,000
Avelead Consulting LLC [Member]
Restructuring Cost and Reserve [Line Items]
Separation agreement expense	706,000
Broker Fees	553,000
Professional Fees	850,000
Executive Bonuses	705,000
Loss on exit from operating lease	42,000
Total	$ 2,856,000

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SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	12 Months Ended
	Jan. 31, 2022		Jan. 31, 2021		Jan. 31, 2020
Property, Plant and Equipment [Line Items]
Allowance for doubtful accounts	$ 76,000		$ 65,000		$ 96,000
Concession accrual amount	152,000		99,000
Depreciation expense	68,000		64,000
Depreciation fixed asset	198,000
Financing costs	96,000	[1]		[2]
Amortization expense	2,173,000		1,662,000
Impairment charge	84,000		164,000
Amortized and abandoned assets	154,000
Interest expense	236,000		51,000
Research and development expense	4,782,000		2,933,000
Term loan	10,000,000	[1]	2,301,000	[2]
Debt instrument fair value			2,231,000
Term loan reduction amount			70,000
Non-recurring revenue	17,379,000		11,346,000
Deferred revenue	19,112,000		3,702,000
Deferred costs, net	125,000		168,000
Deferred costs, amortization expense	110,000		$ 125,000
Netted between capitalized cost and accumulated amortization	$ 143,000
Compensation expense related to stock-based award	1,062,130		625,830
Compensation expense	$ 2,216,000		$ 1,403,000
Cost of shares for tax withholding	464,000		256,000
Acquisition, non routine costs	2,856,000
Minimum fees under shared office arrangement			$ 105,000
Avelead Consulting LLC [Member]
Property, Plant and Equipment [Line Items]
Non-recurring revenue	4,524,000
Acquisition, non routine costs	2,856,000
Discount on deferred revenue eliminated	$ 236,000
Common Stock [Member]
Property, Plant and Equipment [Line Items]
Surrender of stock, shares	257,571		162,095
Number shares of restricted stock	1,462,874		1,395,917
Officers and Directors [Member]
Property, Plant and Equipment [Line Items]
Number shares of restricted stock	562,500		748,245
Equity Award [Member]
Property, Plant and Equipment [Line Items]
Compensation expense related to stock-based award	2,216,000		1,444,000
Equity Award [Member] | Non-Employee [Member]
Property, Plant and Equipment [Line Items]
Compensation expense	$ 41,000
Selling, General and Administrative Expenses [Member]
Property, Plant and Equipment [Line Items]
Amortization expense with deferred sales commissions	339,000		$ 206,000
Other Noncurrent Assets [Member]
Property, Plant and Equipment [Line Items]
Deferred commissions costs paid and payable	806,000		666,000
Services [Member]
Property, Plant and Equipment [Line Items]
Non-recurring revenue			2,790,000		$ 1,735,000
Software [Member]
Property, Plant and Equipment [Line Items]
Capitalized software development costs, net of accumulated amortization	846,000		1,103,000
Internal-Use Software [Member]
Property, Plant and Equipment [Line Items]
Capitalized software development costs, net of accumulated amortization	4,709,000		4,842,000
Software and Software Development Costs [Member]
Property, Plant and Equipment [Line Items]
Amortization expense	2,173,000		1,662,000
Interest expense	27,000		$ 13,000
Second Amended and Restated Loan and Security Agreement [Member]
Property, Plant and Equipment [Line Items]
Restated loan amount	130,000
Financing costs	200,000
Debt instrument loan amount	$ 200,000
Security Agreement [Member]
Property, Plant and Equipment [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	1.50%
[custom:PrimeInterestRatePercentage]	3.25%
Debt Agreement [Member]
Property, Plant and Equipment [Line Items]
Debt Instrument, Interest Rate During Period	50.00%
Term loan	$ 9,798,000
Debt Instrument, Face Amount	$ 202,000

[1] The term loan as of January 31, 2022 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 21, 2021 is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021.

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COMPONENTS OF TOTAL CONSIDERATION (Details) - Avelead Consulting LLC [Member]	Aug. 16, 2021 USD ($)
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, working capital adjustment	285,000
Restricted Common Stock	6,554,000
Acquisition earnout liabilities	10,684,000
Total consideration	$ 29,708,000

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COMPONENTS OF TOTAL CONSIDERATION (Details) (Parenthetical) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Business Acquisition [Line Items]
Asset acquisition contingent consideration	$ 4,672,000
Asset acquisition contingent consideration	4,161,000
Acquisition earnout liability change in valuation	1,851,000
Avelead Consulting LLC [Member]
Business Acquisition [Line Items]
Acquisition earnout liability change in valuation	$ 1,851,000

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SCHEDULE OF ALLOCATION OF THE TOTAL CONSIDERATION (Details) - USD ($)	Jan. 31, 2022	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

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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

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SCHEDULE OF PRO FORMA REVENUE AND NET EARNINGS (Details) - Avelead Consulting LLC [Member] - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Business Acquisition [Line Items]
Revenues	$ 22,631,000	$ 19,707,000
Operating expenses	(31,278,000)	(25,164,000)
Non-routine costs	(4,284,000)
Loss on exit from membership agreement		(105,000)
Operating loss	(12,931,000)	(5,562,000)
Other expenses	1,312,000	(710,000)
PPP loan forgiveness	3,059,000	712,000
Income tax (expense) benefit	(109,000)	1,370,000
Loss from continuing operations	$ (8,669,000)	$ (4,190,000)

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BUSINESS COMBINATION AND DIVESTITURE (Details Narrative) - USD ($)		3 Months Ended	12 Months Ended
	Aug. 16, 2021	Jan. 31, 2022	Jan. 31, 2022	Jan. 31, 2021
Business Acquisition [Line Items]
Total revenues			$ 17,379,000	$ 11,346,000
Income loss from continuing operations			$ 6,917,000	$ 4,799,000
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross			583,333	583,333
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding, Weighted Average Exercise Price		$ 2.65	$ 2.65	$ 3.45
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding, Intrinsic Value		$ 21,000	$ 21,000
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 as of the date of closing
Nonroutine costs paid by sellers			1,428,000
Total revenues			4,524,000
Income loss from continuing operations			$ 1,506,000
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	$ 395,000
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	$ 6,000
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	$ 285,000
Payment of SaaS contingent consideration in cash, percentage	50.00%
Payment of SaaS contingent consideration in cash, 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 earnout, 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 earnout, 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
Acquisition restricted common stock with a fair value	$ 6,500,000
Avelead Consulting LLC [Member] | Acquisition Restricted Common Stock [Member] | Unit Purchase Agreement [Member]
Business Acquisition [Line Items]
Acquisition restricted common stock with a fair value	$ 6,500,000

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SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES (Details)	Jan. 31, 2022 USD ($)
Operating Leases
2022	$ 210,000
2023	35,000
Total Lease Payments	245,000
Less present value adjustment	(8,000)
Present value of lease liabilities	$ 237,000

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OPERATING LEASES (Details Narrative) - USD ($)			1 Months Ended	12 Months Ended
	Oct. 02, 2021	Aug. 16, 2021	Feb. 28, 2022	Jan. 31, 2022	Jan. 31, 2021	Oct. 31, 2021	Mar. 31, 2020
Sublease income				$ 64,000
Operating Lease, Right-of-Use Asset				218,000	$ 391,000
[custom:CurrentPortionOfOperatingLeaseObligation-0]				204,000
Operating Lease, Cost				194,000	178,000
Operating lease				237,000
Office Space [Member]
Total minimum rentals due amount							$ 105,000
Right of Use Asset [Member]
Operating Lease, Right-of-Use Asset				218,000
[custom:NoncurrentPortionOfOperatingLeaseObligation-0]				$ 33,000
Lessee, Operating Lease, Discount Rate				6.50%
At inception [Member]
Operating Lease, Right-of-Use Asset						$ 540,000
Sublease Agreement [Member]
Sublease, term	18 months
Sublease income	$ 292,000
Alpharetta Office Lease [Member]
Operating lease, payments				$ 203,000	$ 132,000
Suwanee Office Lease [Member]
Operating lease, payments			$ 5,998.67
Lease Expiration Date		Feb. 28, 2022
Payments for Rent		$ 40,000
Operating lease			$ 71,984

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SCHEDULE OF MAXIMUM DEBT TO ARR RATIO (Details)	Jan. 31, 2022
October 31, 2021 [Member] | Minimum [Member]
Debt Instrument [Line Items]
Maximum Debt to ARR Ratio	0.80%
October 31, 2021 [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%

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SCHEDULE OF MAXIMUM DEBT TO ADJUSTED EBITDA RATIO (Details)	Jan. 31, 2022
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%

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SCHEDULE OF OUTSTANDING DEBT, OTHER THAN PPP LOAN (Details) - USD ($)	Jan. 31, 2022	[1]	Jan. 31, 2021	[2]
Debt Disclosure [Abstract]
Term loan	$ 10,000,000		$ 2,301,000
Deferred financing cost	(96,000)
Total	9,904,000		2,301,000
Current portion	(250,000)		(1,534,000)
Non-current portion of debt	$ 9,654,000		$ 767,000

[1] The term loan as of January 31, 2022 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 21, 2021 is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021.

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DEBT (Details Narrative) - USD ($)						1 Months Ended	12 Months Ended
	Aug. 26, 2021	Mar. 02, 2021	Apr. 21, 2020	Feb. 29, 2020	Dec. 11, 2019	Jun. 30, 2021	Jan. 31, 2022		Jan. 31, 2021
Line of Credit Facility [Line Items]
Loss on Extinguishment of Debt		$ 43,000					$ 43,000
Term loan							$ 10,000,000	[1]	$ 2,301,000	[2]
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
Security Agreement [Member]
Line of Credit Facility [Line Items]
Debt interest rate							1.50%
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							120.00%
Loan and Security Agreement [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Fixed charge coverage ratio							100.00%
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 January 31, 2022 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 21, 2021 is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021.

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SCHEDULE OF GOODWILL ACTIVITY (Details)	12 Months Ended
	Jan. 31, 2022 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill, Beginning Balance	$ 10,712,000
Acquisition of avelead	12,377,000
Goodwill, Ending Balance	$ 23,089,000

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SCHEDULE OF INTANGIBLE ASSETS (Details) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Finite-Lived Intangible Assets [Line Items]
Gross Assets	$ 21,884,000
Accumulated Amortization	5,121,000	$ 4,773,000
Net Assets	16,763,000
Client Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Assets	14,164,000	5,397,000
Accumulated Amortization	4,755,000	4,773,000
Net Assets	$ 9,409,000	$ 624,000
Client Relationships [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life	8 years	5 years
Client Relationships [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life	10 years	10 years
Internally Developed Software [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life	9 years
Gross Assets	$ 6,380,000
Accumulated Amortization	325,000
Net Assets	$ 6,055,000
Trademarks and Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life	15 years
Gross Assets	$ 1,340,000
Accumulated Amortization	41,000
Net Assets	$ 1,299,000

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SCHEDULE OF FUTURE AMORTIZATION EXPENSE FOR INTANGIBLE ASSETS (Details)	Jan. 31, 2022 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2022	$ 1,971,000
2023	1,801,000
2024	1,801,000
2025	1,801,000
2026	1,801,000
Thereafter	7,588,000
Total	$ 16,763,000

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GOODWILL AND INTANGIBLE ASSETS (Details Narrative) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense on intangible assets	$ 1,281,000	$ 491,000
Amortization of intangible assets Written-off	$ 933,000

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SCHEDULE OF INCOME TAXES FOR CONTINUING OPERATION (Details) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Current tax (expense) benefit:
Federal
State	(14,000)	(14,000)
Total current tax expense	(14,000)	(14,000)
Deferred tax (expense) benefit:
Federal	(80,000)	1,274,000
State	(15,000)
Total deferred tax (expense) benefit	(95,000)	1,274,000
Total provision	$ (109,000)	$ 1,260,000

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SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION (Details) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Income Tax Disclosure [Abstract]
Federal tax benefit at statutory rate	$ (1,430,000)	$ (1,272,000)
State and local tax expense, net of federal	26,000	11,000
Increase in valuation allowance	1,950,000	419,000
PPP Loan	(483,000)
Other	3,000	5,000
Reserve for uncertain tax position	(24,000)	35,000
R&D Credit (Federal)	120,000	(174,000)
Expiring carryforwards		5,000
Stock-based compensation	(45,000)	(305,000)
Other	(8,000)	16,000
Income tax expense	$ 109,000	$ (1,260,000)

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SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES (Details) - USD ($)	Jan. 31, 2022	Jan. 31, 2021
Income Tax Disclosure [Abstract]
Allowance for doubtful accounts	$ 24,000	$ 16,000
Deferred revenue	60,000	12,000
Accruals	168,000	47,000
Net operating loss carryforwards	10,908,000	8,651,000
Stock compensation expense	510,000	367,000
Property and equipment	(6,000)	(5,000)
R&D credit	1,334,000	1,431,000
Other	23,000	7,000
Total deferred tax assets	13,021,000	10,526,000
Valuation allowance	(12,318,000)	(9,992,000)
Net deferred tax assets	703,000	534,000
Finite-lived intangible assets	(798,000)	(534,000)
Total deferred tax liabilities	(798,000)	(534,000)
Net deferred tax liabilities	$ (95,000)

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SCHEDULE OF GROSS UNRECOGNIZED TAX BENEFITS (Details) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Income Tax Disclosure [Abstract]
Beginning of fiscal year	$ 339,000	$ 304,000
Additions for tax positions for the current year	4,000	33,000
Additions for tax positions of prior years		2,000
Subtractions for tax positions of prior years	(28,000)
End of fiscal year	$ 315,000	$ 339,000

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INCOME TAXES (Details Narrative) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021	Jan. 31, 2020
Operating Loss Carryforwards [Line Items]
Operating loss carry forwards	$ 46,250,000
Expire date description	expire at various dates through fiscal 2041
Valuation allowance	$ 12,318,000	$ 9,992,000
Decrease in the valuation allowance	$ 2,326,000
Income tax description	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, 2018. All material state and local income tax matters have been concluded for years through January 31, 2017. The Company is no longer subject to IRS examination for periods prior to the tax year ended January 31, 2018; however, carry forward losses that were generated prior to the tax year ended January 31, 2018 may still be adjusted by the IRS if they are used in a future period
Uncertain tax positions	$ 315,000	339,000	$ 304,000
Accrued interest and penalties	0	$ 0
Tax Cuts and Jobs Act [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carry forwards	17,167,000
State [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carry forwards	21,318,000
Federal RD [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carry forwards	1,575,000
Georgia RD [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carry forwards	94,000
Through Fiscal 2037 [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carry forwards	$ 29,083,000

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EQUITY (Details Narrative) - USD ($)		12 Months Ended
	Feb. 25, 2021	Jan. 31, 2022	Jan. 31, 2021	May 23, 2021	May 03, 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
Number of additional shares authorized to issue		2,000,000
2013 Incentive Compensation Plan [Member] | Stock Options [Member]
Subsidiary, Sale of Stock [Line Items]
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

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MAJOR CUSTOMERS (Details Narrative)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Concentration Risk [Line Items]
Concentration Risk, Customer	one individual customer accounted for 10% or more of our continuing operations revenue.	no one individual customer accounted for 10% or more of our continuing operations revenue.
Two Customer [Member] | Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	15.00%
Customer One [Member] | Customer Concentration Risk [Member] | Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	24.00%	31.00%
Customer Two [Member] | Customer Concentration Risk [Member] | Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	16.00%	16.00%
Customer Three [Member] | Customer Concentration Risk [Member] | Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	15.00%	14.00%
Customer Four [Member] | Customer Concentration Risk [Member] | Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage		13.00%

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EMPLOYEE RETIREMENT PLAN (Details Narrative) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Retirement Benefits [Abstract]
Defined contribution plan, cost recognized	$ 188,000	$ 164,000

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SCHEDULE OF STOCK OPTION ACTIVITY (Details) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Share-Based Payment Arrangement [Abstract]
Number of options, Outstanding as of January 31, 2020	625,830
Weighted average exercise price, Outstanding as of January 31, 2020	$ 3.45
Number of options, Granted	583,333	583,333
Weighted average exercise price, Granted	$ 1.53
Number of options, Exercised	(3,300)
Weighted average exercise price, Exercised	$ 1.35
Number of options, Expired	(137,033)
Weighted average exercise price, Expired	$ 1.65
Number of options, Forfeited	(6,700)
Weighted average exercise price, Forfeited	$ 1.35
Number of options, Outstanding as of January 31, 2021	1,062,130	625,830
Weighted average exercise price, Outstanding as of January 31, 2021	$ 2.65	$ 3.45
Remaining Life in Years, Outstanding as of January 31, 2020	6 years 1 month 9 days
Aggregate intrinsic value, Outstanding as of January 31, 2021	$ 21,000
Number of options, Exercisable as of January 31, 2020	628,854
Weighted average exercise price, Exercisable as of January 31, 2021	$ 3.42
Remaining Life in Years, Exercisable as of January 31, 2021	3 years 9 months
Aggregate intrinsic value, Exercisable as of January 31, 2021	$ 20,000
Number of options, Vested or expected to vest as of January 31, 2021	1,061,307
Weighted average exercise price, Vested or expected to vest as of January 31, 2021	$ 2.65
Remaining Life in Years, Vested or expected to vest as of January 31, 2021	6 years 1 month 9 days
Aggregate intrinsic value, Vested or expected to vest as of January 31, 2021	$ 21,000

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SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS (Details) - Stock Options [Member]	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Expected life	5 years 3 days
Risk-free interest rate	0.75%
Weighted average volatility factor	0.72%
Dividend yield
Forfeiture rate

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SCHEDULE OF RESTRICTED STOCK AWARD ACTIVITY (Details) - $ / shares	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of RSUs, Non vested, Outstanding, Beginning balance	931,125	803,498
Weighted Average Grant Date Fair Value, Beginning balance	$ 0.0109	$ 0.0122
Number of RSUs, Non vested, Outstanding, Ending balance	1,043,000	931,125
Weighted Average Grant Date Fair Value, Ending balance	$ 0.0157	$ 0.0109
Restricted Stock [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of RSUs, granted	1,257,000	1,158,245
Weighted Average Grant Date Fair Value, RSUs granted	$ 0.0171	$ 0.0107
Number of RSUs, vested	(1,095,175)	(864,128)
Weighted Average Grant Date Fair Value, RSUs vested	$ 0.0133	$ 0.0118
Number RSUs, forfeited	(50,100)	(166,490)
Weighted Average Grant Date Fair Value, RSUs forfeited	$ 0.0148	$ 0.0116

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STOCK-BASED COMPENSATION (Details Narrative) - USD ($)				12 Months Ended
	Mar. 04, 2021	Jun. 17, 2020	Oct. 17, 2019	Jan. 31, 2022	Jan. 31, 2021	Jan. 31, 2020
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of options outstanding				1,062,130	625,830
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Grants in Period, Gross				583,333	583,333
Weighted average grant date fair value of options granted					$ 153
Ownership Percentage				20.00%
Restricted Stock [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Cost unrecognized, remaining weighted average period				2 years 10 days
Number of restricted stocks awarded, shares				1,257,000	1,158,245
Number of restricted stocks, vested on grant				1,095,175	864,128
2013 Incentive Compensation Plan [Member] | Stock Options [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Stock options plan, description				Under these plans, the Company is authorized to issue equity awards (stock options, stock appreciation rights or “SARs”, and restricted stock) to directors and associates of the Company. Under the 2013 Plan, as amended, the Company is authorized to issue a number of shares not to exceed 8,223,246. The options granted under the 2013 Plan have terms of ten years or less, and typically vest and become fully exercisable ratably over three years of continuous service to the Company from the date of grant
Number of shares authorized to issue				8,223,246
Number of options to purchase common stock				937,130	500,830
Number of options outstanding				125,000	125,000
Unrecognized Compensation cost, stock options				$ 335,000
Stock option expense					$ 69,000	$ 22,000
Cash received from exercise options					5,000
2013 Incentive Compensation Plan [Member] | Restricted Stock [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Cost unrecognized, remaining weighted average period				2 years 6 months 14 days
Stock option expense					$ 1,667,000	$ 1,075,000
Number of restricted stocks awarded, shares			250,000
Number of restricted stocks, vested on grant			50,000
Unrecognized compensation cost, restricted stock				$ 1,024,000
2013 Incentive Compensation Plan [Member] | Restricted Stock [Member] | Vest in Four Equal Quarterly Installments [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of restricted stocks awarded, shares	150,000	150,000
Number of restricted stocks, vested on grant			100,000

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COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)					3 Months Ended		12 Months Ended
	Nov. 02, 2020	Oct. 02, 2020	Jul. 01, 2018	Oct. 25, 2013	Jan. 31, 2022	Apr. 30, 2021	Jan. 31, 2022	Jan. 31, 2021	Jan. 31, 2020	Oct. 31, 2020
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Payments to Develop Software							$ 1,458,000	$ 1,784,000
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]
Payments for cash	$ 490,000	$ 500,000				$ 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					78,031		521,077	272,653
Professional Fees							$ 1,439,000	$ 288,000	$ 701,000
Payments to Develop Software									$ 75,000
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					78,031

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SCHEDULE OF GAIN ON SALE OF ASSETS (Details) - USD ($)	Feb. 24, 2020	Jan. 31, 2022	Jan. 31, 2021
Discontinued Operations and Disposal Groups [Abstract]
Net Proceeds, including escrowed funds	$ 12,088,000
Accounts Receivable	(1,130,000)		$ (587,000)
Prepaid Expenses	(576,000)
Deferred Revenues	4,010,000
Net tangible assets sold	2,304,000
Capitalized software development costs	(1,772,000)	(5,202,000)	(3,507,000)
Goodwill	(4,825,000)	$ (23,089,000)	$ (10,712,000)
Transaction cost	(1,782,000)
Gain on sale of discontinued operations	$ 6,013,000

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SCHEDULE OF DISCONTINUED OPERATIONS OF CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS (Details) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021	Feb. 24, 2020
Accounts receivable		$ 587,000	$ 1,130,000
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	498,000	944,000
Expenses: Cost of sales	5,000	294,000
Expenses: Transition service cost	92,000	166,000
Expenses: Deferred financing cost		128,000
Total expenses	97,000	588,000
Income from discontinued operations	401,000	356,000
Maintenance and Support [Member]
Total revenues		412,000
Software Service [Member]
Total revenues		138,000
Transition Service Fees [Member]
Total revenues	$ 498,000	$ 394,000

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DISCONTINUED OPERATIONS (Details Narrative) - USD ($)	Feb. 24, 2020	Jan. 31, 2022	Jan. 31, 2021
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Escrow Deposit			$ 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	16,000,000.0
Proceed from sale of asset	5,400,000
Repayment of bank debt	4,000,000.0
Escrow Deposit	800,000
Goodwill	$ 4,825,000

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RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	12 Months Ended
	Jan. 31, 2022	Jan. 31, 2021	Jan. 31, 2020
Related Party Transaction [Line Items]
Research and development services	$ 4,782,000	$ 2,933,000
AscendTek, LLC [Member]
Related Party Transaction [Line Items]
Research and development services	$ 64,000
121G Consulting, LLC [Member]
Related Party Transaction [Line Items]
Consulting fees			$ 107,000

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Valuation and Qualifying Accounts and Reserves (Details) - USD ($)		12 Months Ended
		Jan. 31, 2022	Jan. 31, 2021
SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract]
Balance at Beginning of Period		$ 65,000	$ 96,000
Charged to Costs and Expenses		11,000	(31,000)
Deductions	[1]
Balance at End of Period		$ 76,000	$ 65,000

[1] Uncollectible accounts written off, net of recoveries.