UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~October 31, 2021~~April 30, 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

incorporation or organization)

(I.R.S. Employer

Identification No.)

11800 Amber Park Drive, Suite 125

Alpharetta, GA 30009

(Address of principal executive offices) (Zip Code)

(888) 997-8732

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

Emerging growth company ☐

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

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

The number of shares outstanding of the Registrant’s Common Stock, $.01 par value per share, as of ~~December 08, 2021~~June 07, 2022 was ~~47,600,634~~48,559,793.

TABLE OF CONTENTS

		Page
Part I.	FINANCIAL INFORMATION	2
Item 1.	~~Financial Statements~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	2
	Condensed Consolidated Balance Sheets at ~~October 31, 2021~~April 30, 2022 (unaudited) and January 31, ~~2021~~2022	2
	Unaudited Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~October 31,~~April 30, 2022 and 2021 ~~and 2020~~	4
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three ~~and nine~~ months ended ~~October 31,~~April 30, 2022 and 2021 ~~and 2020~~	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~October 31,~~April 30, 2022 and 2021 ~~and 2020~~	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
Part II.	OTHER INFORMATION	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 6.	Exhibits	40
	Signatures	41

PART I. FINANCIAL INFORMATION

Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

	31-Oct-21		31-Jan-21			30-Apr-22		31-Jan-22
	As of				As of
	31-Oct-21		31-Jan-21		April 30, 2022		January 31, 2022
	(Unaudited)				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	10,409,000	$	2,409,000	$	7,955,000	$	9,885,000
Accounts receivable, net of allowance for doubtful accounts of $99,000 and $65,000, respectively		3,287,000		2,929,000
Accounts receivable, net						4,660,000		3,823,000
Contract receivables		581,000		174,000		671,000		843,000
Assets held in escrow		—		800,000
Prepaid and other current assets		876,000		416,000		423,000		568,000
Current assets of discontinued operations		—		587,000
Total current assets		15,153,000		7,315,000		13,709,000		15,119,000

Non-current assets:
Property and equipment, net of accumulated depreciation of $176,000 and $452,000, respectively		116,000		104,000
Right-of use asset for operating lease		262,000		391,000
Capitalized software development costs, net of accumulated amortization of $4,937,000 and $3,507,000, respectively		5,563,000		5,945,000
Intangible assets, net of accumulated amortization of $5,494,000 and $4,773,000, respectively		17,323,000		624,000
Property and equipment, net						109,000		123,000
Right of use asset						173,000		218,000
Capitalized software development costs, net						5,645,000		5,555,000
Intangible assets, net						16,235,000		16,763,000
Goodwill		23,089,000		10,712,000		23,089,000		23,089,000
Other		908,000		873,000		1,002,000		948,000
Long-term assets of discontinued operations		—		13,000
Total non-current assets		47,261,000		18,662,000		46,253,000		46,696,000
Total assets	$	62,414,000	$	25,977,000	$	59,962,000	$	61,815,000

See accompanying notes to condensed consolidated financial statements.

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

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

	As of
	31-Oct-21			31-Jan-21			As of
	(Unaudited)						April 30, 2022			January 31, 2022
							(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	689,000		$	272,000		$	1,013,000		$	778,000
Accrued expenses		2,024,000			908,000			2,655,000			1,803,000
Current portion of term loan, less deferred financing cost		125,000			1,534,000
Deferred revenue		4,395,000			3,862,000
Current portion of operating lease obligation		202,000			198,000
Current liabilities of discontinued operations		—			595,000
Current portion of term loan								375,000			250,000
Deferred revenues								6,060,000			5,794,000
Current portion of lease obligation								188,000			204,000
Acquisition earnout liability								4,715,000			4,672,000
Total current liabilities		7,435,000			7,369,000			15,006,000			13,501,000
Non-current liabilities:
Term loan, less current portion		9,759,000			767,000
Deferred revenue, less current portion		156,000			130,000
Acquisition earnout liability		11,101,000			—
Operating lease obligation, less current portion		82,000			222,000
Other Non-Current Liabilities		280,000			—
Term loan, net of current portion and DFC								9,549,000			9,654,000
Deferred revenues, less current portion								141,000			136,000
Lease obligations, less current portion								-			33,000
Acquisition earnout liability, less current portion								3,618,000			4,161,000
Other non-current liabilities								206,000			286,000
Total non-current liabilities		21,378,000			1,119,000			13,514,000			14,270,000
Total liabilities		28,813,000			8,488,000			28,520,000			27,771,000

Stockholders’ equity:
Common stock, $.01 par value per share, 65,000,000 shares authorized; 47,639,650 and 31,597,975 shares issued and outstanding, respectively		476,000			316,000
Common stock								481,000			478,000
Additional paid in capital		118,754,000			96,290,000			119,407,000			119,225,000
Accumulated deficit		(85,629,000	)		(79,117,000	)		(85,659,000	)		(79,117,000	)
Net loss								(2,787,000	)		(6,542,000	)
Total stockholders’ equity		33,601,000			17,489,000			31,442,000			34,044,000
Total liabilities and stockholders' equity	$	62,414,000		$	25,977,000
Total liabilities and stockholders’ equity							$	59,962,000		$	61,815,000

See accompanying notes to condensed consolidated financial statements.

STREAMLINE HEALTH SOLUTIONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

	2021			2020			2021			2020				2022			2021
	Three Months Ended October 31,						Nine Months Ended October 31,						Three Months Ended April 30,
	2021			2020			2021			2020			2022			2021
Revenue:
Software licenses	$	150,000		$	19,000		$	285,000		$	234,000		$	71,000		$	135,000
Professional services		944,000			161,000			1,052,000			473,000			1,244,000			78,000
Audit services		513,000			491,000			1,460,000			1,498,000			679,000			504,000
Maintenance and support		1,082,000			1,070,000			3,226,000			3,556,000			1,110,000			1,057,000
Software as a service		2,825,000			900,000			5,310,000			2,611,000			2,831,000			1,177,000
Total revenue		5,514,000			2,641,000			11,333,000			8,372,000			5,935,000			2,951,000
Operating expenses:
Cost of software licenses		133,000			183,000			412,000			385,000			101,000			137,000
Cost of professional services		936,000			268,000			1,411,000			779,000			1,126,000			214,000
Cost of audit services		409,000			425,000			1,174,000			1,158,000			439,000			389,000
Cost of maintenance and support		57,000			160,000			223,000			528,000			46,000			87,000
Cost of software as a service		1,088,000			443,000			2,276,000			1,250,000			1,497,000			610,000
Selling, general and administrative expense		3,439,000			2,283,000			8,507,000			6,859,000			4,501,000			2,551,000
Research and development		1,339,000			753,000			3,280,000			1,946,000			1,312,000			977,000
Non-routine costs		1,933,000			—			2,710,000			—			90,000			441,000
Loss on exit from membership agreement		—			—			—			105,000
Total operating expenses		9,334,000			4,515,000			19,993,000			13,010,000			9,112,000			5,406,000
Operating loss		(3,820,000	)		(1,874,000	)		(8,660,000	)		(4,638,000	)		(3,177,000	)		(2,455,000	)
Other income (expense):
Interest expense		(85,000	)		(12,000	)		(107,000	)		(39,000	)		(132,000	)		(13,000	)
Loss on Extinguishment of Debt		(43,000	)		—			(43,000	)		—
Other		(427,000	)		14,000			(421,000	)		(68,000	)		533,000			15,000
Forgiveness of PPP loan and accrued interest		—			—			2,327,000			—
Loss from continuing operations before income taxes		(4,375,000	)		(1,872,000	)		(6,904,000	)		(4,745,000	)		(2,776,000	)		(2,453,000	)
Income tax benefit (expense)		(4,000	)		803,000			(9,000	)		1,536,000
Income tax expense														(11,000	)		(9,000	)
Loss from continuing operations		(4,379,000	)		(1,069,000	)		(6,913,000	)		(3,209,000	)		(2,787,000	)		(2,462,000	)
Income from discontinued operations:
Gain on sale of discontinued operations		—			—			—			6,013,000
Income from discontinued operations		69,000			64,000			401,000			305,000			—			320,000
Income tax expense		—			(50,000	)		—			(1,626,000	)
Income from discontinued operations, net of tax		69,000			14,000			401,000			4,692,000			—			320,000
Net (loss) income	$	(4,310,000	)	$	(1,055,000	)	$	(6,512,000	)	$	1,483,000
Net loss													$	(2,787,000	)	$	(2,142,000	)

Basic Earnings Per Share:
Continuing operations	$	(0.10	)	$	(0.04	)	$	(0.17	)	$	(0.11	)	$	(0.06	)	$	(0.07	)
Discontinued operations		—			—			0.01			0.16			—			0.01
Net (loss) income per share	$	(0.10	)	$	(0.04	)	$	(0.16	)	$	0.05
Net loss per share													$	(0.06	)	$	(0.06	)
Weighted average number of common shares – basic		45,709,952			30,286,197			41,498,873			30,026,890			47,028,463			37,497,958

Diluted Earnings Per Share:
Continuing operations	$	(0.10	)	$	(0.04	)	$	(0.17	)	$	(0.11	)	$	(0.06	)	$	(0.07	)
Discontinued operations		—			—			0.01			0.15			—			0.01
Net (loss) income per share	$	(0.10	)	$	(0.04	)	$	(0.16	)	$	0.04
Net loss per share													$	(0.06	)	$	(0.06	)
Weighted average number of common shares – diluted		46,063,803			30,892,526			41,995,266			30,450,572			47,285,961			38,184,765

See accompanying notes to condensed consolidated financial statements.

STREAMLINE HEALTH SOLUTIONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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

	Common stock shares			Common Stock			Additional paid in capital			Accumulated deficit			Total stockholders’ equity				Common stock shares			Common Stock			Additional paid in capital			Accumulated deficit			Total stockholders’ equity
	Common stock shares			Common Stock			Additional paid in capital			Accumulated deficit			Total stockholders’ equity			Common stock shares			Common Stock			Additional paid in capital			Accumulated deficit			Total stockholders’ equity

Balance at January 31, 2022																	47,840,950		$	478,000		$	119,225,000		$	(85,659,000	)	$	34,044,000
Restricted stock issued																	408,031			4,000			(4,000	)		—			—
Restricted stock forfeited																	(63,900	)		—			—			—			—
Surrender of shares																	(95,701	)		(1,000	)		(140,000	)		—			(141,000	)
Share-based compensation																	—			—			326,000			—			326,000
Net loss																	—			—			—			(2,787,000	)		(2,787,000	)
Balance at April 30, 2022																	48,089,380		$	481,000		$	119,407,000		$	(88,446,000	)	$	31,442,000

Balance at January 31, 2021		31,597,975		$	316,000		$	96,290,000		$	(79,117,000	)	$	17,489,000			31,597,975		$	316,000		$	96,290,000		$	(79,117,000	)	$	17,489,000
Restricted stock issued		740,752			7,000			(7,000	)		—			—			740,752			7,000			(7,000	)		—			—
Restricted stock forfeited
Restricted stock forfeited, shares
Exercise of Stock Options
Exercise of Stock Options, shares
Surrender of shares		(78,562	)		(1,000	)		(160,000	)		—			(161,000	)		(78,562	)		(1,000	)		(160,000	)		—			(161,000	)
Share-based compensation		—			—			565,000			—			565,000			—			—			565,000			—			565,000
Issuance of Common Stock		10,062,500			101,000			15,999,000			—			16,100,000			10,062,500			101,000			15,999,000			—			16,100,000
Offering Expenses		—			—			(1,293,000	)		—			(1,293,000	)		—			—			(1,293,000	)		—			(1,293,000	)
Net loss		—			—			—			(2,142,000	)		(2,142,000	)		—			—			—			(2,142,000	)		(2,142,000	)
Balance at April 30, 2021		42,322,665		$	423,000		$	111,394,000		$	(81,259,000	)	$	30,558,000			42,322,665		$	423,000		$	111,394,000		$	(81,259,000	)	$	30,558,000
Restricted stock issued		112,500			1,000			(1,000	)		—			—
Restricted stock forfeited		(10,000	)		—			—			—			—
Surrender of shares		(69,289	)		—			(130,000	)		—			(130,000	)
Share-based compensation		—			—			557,000			—			557,000
Offering Expenses		—			—			(25,000	)		—			(25,000	)
Net loss		—			—			—			(60,000	)		(60,000	)
Balance at July 31, 2021		42,355,876			424,000			111,795,000			(81,319,000	)		30,900,000
Exercise of Stock Options		3,300			—			4,000			—			4,000
Restricted stock issued		348,415			3,000			(3,000	)		—			—
Restricted stock forfeited		(40,100	)		—			—			—			—
Surrender of shares		(49,813	)		(1,000	)		(88,000	)		—			(89,000	)
Share-based compensation		—			—			537,000			—			537,000
Issuance of Common Stock		5,021,972			50,000			6,504,000			—			6,554,000
Offering Expenses		—			—			5,000			—			5,000
Net loss		—			—			—			(4,310,000	)		(4,310,000	)
Balance at October 31, 2021		47,639,650			476,000			118,754,000			(85,629,000	)		33,601,000

Balance at January 31, 2020		30,530,643		$	305,000		$	95,113,000		$	(79,413,000	)	$	16,005,000
Restricted stock issued		440,000			4,000			(4,000	)		—			—
Restricted stock forfeited		(34,790	)		—			—			—			—
Surrender of shares		(21,027	)		—			(22,000	)		—			(22,000	)
Share-based compensation		—			—			263,000			—			263,000
Net income		—			—			—			3,673,000			3,673,000
Balance at April 30, 2020		30,914,826		$	309,000		$	95,350,000		$	(75,740,000	)	$	19,919,000
Restricted stock issued		855,543			9,000			(9,000	)		—			—
Restricted stock forfeited		(100,000	)		(1,000	)		1,000			—			—
Surrender of shares		(33,704	)		(1,000	)		(35,000	)		—			(36,000	)
Share-based compensation		—			—			349,000			—			349,000
Net loss		—			—			—			(1,135,000	)		(1,135,000	)
Balance at July 31, 2020		31,636,665		$	316,000		$	95,656,000		$	(76,875,000	)	$	19,097,000
Balance		31,636,665		$	316,000		$	95,656,000		$	(76,875,000	)	$	19,097,000
Restricted stock issued		7,331			—			—			—			—
Restricted stock forfeited		(10,000	)		—			—			—			—
Surrender of shares		(56,304	)		—			(109,000	)		—			(109,000	)
Share-based compensation		—			—			442,000			—			442,000
Net loss		—			—			—			(1,055,000	)		(1,055,000	)
Balance at October 31, 2020		31,577,692		$	316,000		$	95,989,000		$	(77,930,000	)	$	18,375,000
Balance		31,577,692		$	316,000		$	95,989,000		$	(77,930,000	)	$	18,375,000

See accompanying notes to condensed consolidated financial statements.

STREAMLINE HEALTH SOLUTIONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(rounded to the nearest thousand dollars)

2021 2020
Nine months Ended October 31,
2021 2020
Net (Loss) Income (6,512,000 ) 1,483,000
LESS: Income from discontinued operations, net of tax 401,000 4,692,000
Loss from continuing operations, net of tax (6,913,000 ) (3,209,000 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation 53,000 35,000
Amortization of capitalized software development costs 1,430,000 1,128,000
Amortization of intangible assets 721,000 370,000
Amortization of other deferred costs 369,000 242,000
Valuation adjustments 417,000 31,000
Benefit for income taxes — (1,536,000 )
Loss on early extinguishment of debt 43,000 —
Loss on exit from membership agreement — 105,000
Share-based compensation expense 1,659,000 1,004,000
Provision (Benefit) for accounts receivable allowance 14,000 (15,000 )
Forgiveness of PPP loan and accrued interest (2,327,000 ) —
Changes in assets and liabilities:
Accounts and contract receivables 666,000 1,151,000
Other assets (551,000 ) (514,000 )
Accounts payable (72,000 ) (489,000 )
Accrued expenses and other liabilities 774,000 (386,000 )
Deferred revenue (305,000 ) (1,600,000 )
Net cash used in operating activities (4,022,000 ) (3,683,000 )
Net cash from (used in) operating activities – discontinued operations 406,000 (2,319,000 )
Cash flows from investing activities:
Investment in Avelead, Net of Cash (12,354,000 ) —
Proceeds from sale of ECM Assets 800,000 11,288,000
Purchases of property and equipment (18,000 ) (42,000 )
Capitalization of software development costs (1,048,000 ) (1,495,000 )
Net cash provided by investing activities (12,620,000 ) 9,751,000
Cash flows from financing activities:
Repayment of bank term loan — (4,000,000 )
Proceeds from issuance of term loan 10,000,000 2,301,000
Proceeds from issuance of common stock 16,100,000 —
Payments for costs directly attributable to the issuance of common stock (1,313,000 ) —
Payments related to settlement of employee share-based awards (380,000 ) (168,000 )
Payment for deferred financing costs (168,000 ) —
Payment on royalty liability — (500,000 )
Other (3,000 ) —
Net cash provided by (used in) financing activities 24,236,000 (2,367,000 )
Net increase in cash and cash equivalents 8,000,000 1,382,000
Cash and cash equivalents at beginning of period 2,409,000 1,649,000
Cash and cash equivalents at end of period $ 10,409,000 3,031,000
2022 2021
Three months Ended April 30,
2022 2021
Net Loss $ (2,787,000 ) $ (2,142,000 )
LESS: Income from discontinued operations, net of tax — 320,000
Loss from continuing operations, net of tax (2,787,000 ) (2,462,000 )

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 14,000 21,000
Amortization of capitalized software development costs 429,000 506,000
Amortization of intangible assets 528,000 115,000
Amortization of other deferred costs 112,000 116,000
Amortization of deferred financing costs 20,000 —
Change in fair value of acquisition earnout liability (500,000 ) —
Share-based compensation expense 326,000 565,000
Provision for accounts receivable allowance 13,000 —
Changes in assets and liabilities:
Accounts and contract receivables (678,000 ) (341,000 )
Other assets 8,000 (275,000 )
Accounts payable 235,000 (29,000 )
Accrued expenses and other liabilities 739,000 145,000
Deferred revenue 271,000 1,161,000
Net cash used in operating activities (1,270,000 ) (478,000 )
Net cash used in operating activities – discontinued operations — 560,000
Cash flows from investing activities:
Capitalization of software development costs (519,000 ) (378,000 )
Net cash used by investing activities (519,000 ) (378,000 )
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 — (1,293,000 )
Payments related to settlement of employee share-based awards (141,000 ) (161,000 )
Payment for deferred financing costs — (31,000 )
Other — (1,000 )
Net cash (used in) provided by financing activities (141,000 ) 14,614,000
Net (decrease) increase in cash and cash equivalents (1,930,000 ) 14,318,000
Cash and cash equivalents at beginning of period 9,885,000 2,409,000
Cash and cash equivalents at end of period $ 7,955,000 $ 16,727,000
See accompanying notes to condensed consolidated financial statements.
6

STREAMLINE HEALTH SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~October 31, 2021~~April 30, 2022

NOTE 1 — BASIS OF PRESENTATION

Streamline Health Solutions, Inc. and each of its wholly-owned subsidiaries, Streamline Health, LLC, Avelead Consulting, LLC, Streamline Consulting Solutions, LLC and Streamline Pay & Benefits, LLC, (collectively, unless the context requires otherwise, “we,” “us,” “our,” “Streamline,” or the “Company”), ~~operate~~operates in ~~one~~1 segment as a provider of healthcare information technology solutions and associated services. The Company provides these capabilities through the licensing of its Coding & CDI, eValuator ~~Coding Analysis Platform, Financial Management and Patient Care solutions~~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 and coding services to help customers optimize their internal clinical documentation and coding functions, as well as implementation and consulting services to complement its software solutions. The Company’s software and services enable hospitals and integrated healthcare delivery systems in the United States and Canada to capture, store, manage, route, retrieve and process patient clinical, financial and other healthcare provider information related to the patient revenue cycle.

The accompanying unaudited condensed consolidated financial statements have been prepared by us pursuant to the rules and regulations applicable to quarterly reports on Form 10-Q of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. The condensed consolidated financial statements include the accounts of Streamline Health Solutions, Inc. and each of its wholly-owned subsidiaries. In the opinion of the Company’s management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the condensed consolidated financial statements have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s most recent annual report on Form 10-K. Operating results for the ~~nine~~three months ended ~~October 31, 2021~~April 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, ~~2022.~~2023.

~~Refer to Note – 3 Business Combination and Divestiture. Under~~ ~~ASC 280-10-50-11,~~ ~~two~~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 products and Avelead Consulting, LLC.Refer to “Note 3 – Business Combination and Divestiture”.

All amounts in the condensed consolidated financial statements, notes and tables have been rounded to the nearest thousand dollars, except share and per share amounts, unless otherwise indicated. All references to a fiscal year refer to the fiscal year commencing February 1 in that calendar year and ending on January 31 of the following calendar year.
7

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~The Company’s~~Our significant accounting policies are presented in “Note 2 – Significant Accounting Policies” in the fiscal year ~~2020~~2021 Annual Report on Form 10-K. Users of financial information for interim periods are encouraged to refer to the ~~footnotes~~notes to the consolidated financial statements contained in the Annual Report on Form 10-K when reviewing interim financial results.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates and judgments, including those related to the recognition of revenue, share-based compensation, capitalization of software development costs, intangible assets, the allowance for doubtful accounts, contingent consideration, and income taxes. Actual results could differ from those estimates.
~~The Company wrote-off fully depreciated fixed assets during the first nine months of fiscal 2021 of $225,000. There was no impact to the condensed consolidated statements of operations as this eliminated the asset and accumulated depreciation of the fully depreciated fixed assets.~~
~~Reclassification~~
ASC 606-10-25-19(a) provides guidance on the presentation of revenue as it relates to identifying distinct performance obligations in contracts containing multiple deliverables. As the Company has begun to shift to a primarily SaaS solution, the professional services revenue related to implementation of SaaS contracts has grown. With this growth, and expected continued growth, of professional services which are not determined to be a distinct performance obligation for the Company’s SaaS contracts, we have reclassified SaaS professional services from professional services revenue and cost of sales on the consolidated statement of operations to Software as a Service revenue and cost of sales. For the three and nine months ended October 31, 2020, the reclassification of revenue was $~~19,000~~ ~~and $67,000, respectively. For the three and nine months ended October 31, 2020, the reclassification of cost of sales was $27,000~~ ~~and $73,000, respectively.~~

Fair Value of Financial Instruments

The Financial Accounting Standards Board’s (“FASB”) authoritative guidance on fair value measurements establishes a framework for measuring fair value. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. Under this guidance, assets and liabilities carried at fair value must be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. Cash and cash equivalents are classified as Level 1. The carrying amount of the Company’s long-term debt approximates fair value since the variable interest rates being paid on the amounts approximate the market interest rate. The WSJ prime interest rate did not go below the “Floor” rate as described in the loan agreement. Accordingly, the interest rates charged were market rate. Long-term debt is classified as Level 2. There were no transfers of assets or liabilities between Levels 1, 2, or 3 during the ~~nine~~three months ended ~~October 31, 2021~~April 30, 2022 and ~~2020.~~2021.

The table below provides information on the fair value of our liabilities:
SCHEDULE OF FAIR VALUE OFASSETS AND LIABILITIES MEASURED ON RECURRING BASIS
Quoted Prices in Significant Other
Significant
Unobservable

Total Fair Active Markets Observable Inputs Inputs
Value (Level 1) (Level 2) (Level 3)
At October 31, 2021
Acquisition earnout liability (1) $ 11,101,000 $ — $ — $ 11,101,000
At January, 31, 2021
PPP Loan (2) $ 2,301,000 $ — $ 2,301,000 $ —
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
At April 30, 2022
Acquisition earnout liability (1) $ 8,333,000 $ – $ – $ 8,333,000

(1) The fair value of the acquisition earnout liability is based upon a probability-weighted discounted cash flow that was completed at the date of acquisition and updated as of ~~October 31, 2021.~~April 30, 2022. The change in the ~~valuation~~fair value of the acquisition earnout liability was $~~417,000~~2,351,000 from the date of closing of the Avelead acquisition, August 16, 2021 to the end of the quarter, ~~October~~April 30, 2022. The change in the fair value of the acquisition earnout liability was $500,000 from the end of the previous fiscal year, January 31, ~~2021. The valuation adjustment~~2022 to the end of the quarter, April 30, 2022.The change in the fair value is recognized in “other expense” in the accompanying condensed consolidated statement of operations.
~~(2)~~ The fair value of the PPP loan was determined based on discounting the loan amount as of January 31, 2021. The fair value was determined using market interest rates that the Company believes would be available for similar types of financial instruments. The Company estimated that the impact of the fair value adjustment on the PPP loan would have resulted in a lower fair value of $~~2,231,000~~ ~~as compared to the book value of $2,301,000, a reduction of $70,000~~.
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 2021) 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.

8

Revenue Recognition

We derive revenue from the sale of internally-developed software, either by licensing for local installation or by a SaaS delivery model, through the Company’s direct sales force or through third-party resellers. Licensed, locally-installed customers on a perpetual model utilize the Company’s support and maintenance services for a separate fee, whereas term-based locally installed license fees and SaaS fees include support and maintenance. We also derive revenue from professional services that support the implementation, configuration, training and optimization of the applications, as well as audit services ~~provided to help customers review their internal coding audit processes.~~and consulting services.

We recognize revenue in accordance with ~~ASC~~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 recognize revenue (Step 5 below) in accordance with that core principle after applying the following steps:

● Step 1: Identify the contract(s) with a customer

● Step 2: Identify the performance obligations in the contract

● Step 3: Determine the transaction price

● Step 4: Allocate the transaction price to the performance obligations in the contract

● Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

Contracts may contain more than one performance obligation. Performance obligations are the unit of accounting for revenue recognition and 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-cancelable or contain significant penalties for early cancellation, although customers typically have the right to terminate their contracts for cause if we fail to perform material obligations. However, if non-standard acceptance periods, non-standard performance criteria, or cancellation or a right of refund terms exist, revenue may not be recognized until the satisfaction of such criteria.

9

The determined transaction price is allocated ~~to the unit of account~~ based on the standalone selling price of the performance obligations in the contract. Significant judgment is required to determine the standalone selling price (“SSP”) for each performance obligation, ~~and whether~~ the amount allocated to each performance obligation and whether it depicts the amount that the Company expects to receive in exchange for the related product and/or service. AsThe Company recognizes revenue for implementation for certain of its eValuator SaaS solution over the ~~selling prices of the Company’s software licenses~~contract term, as it has been determined that those implementation services are ~~highly variable,~~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 ~~the~~ SSP of its software licenses using the residual approach when the software license is sold with other services and observable SSPs exist for the other services. The Company estimates the SSP for maintenance, professional services, 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 ~~should be combined and treated as a single contract by evaluating whether they~~ were negotiated as a package with a single objective, whether the amount of consideration to be paid in one agreement depends on the price and/or performance of another agreement, or whether the goods or services promised in the agreements represent a single performance obligation. The conclusions reached can impact the allocation of the transaction price to each performance obligation and the timing of revenue recognition related to those arrangements.
 
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 ~~agreements~~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 ~~for software licenses~~ is recognized at a point in ~~time, typically, when the software~~time. Typically, this is ~~made available for~~upon shipment of components or electronic ~~download.~~download of software.
Maintenance and Support Services

~~The Company’s~~Our maintenance and support obligations include multiple discrete performance obligations, with the two largest being ~~rights to~~ unspecified product upgrades or enhancements, and technical support, ~~for software licenses.~~which can be offered at various points during a contract period. We believe that the multiple discrete performance obligations within ~~the Company’s~~our overall maintenance and support ~~services~~obligations can be viewed as a single performance obligation since both the unspecified upgrades and technical support are ~~comprised of promises to stand ready~~activities to fulfill the ~~various underlying activities during the contract term.~~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 ~~ratably~~ 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 ~~consulting,~~ and software modification services. ~~Revenue~~Revenues from ~~agreements~~arrangements to provide professional services are generally distinct from the other promises in the contract and are recognized as the related services are performed. ~~Avelead’s SaaS-based contracts have implementation services that are a distinct performance obligation, and, accordingly, are recognized separately as professional services.~~ Consideration payable under these ~~agreements~~arrangements is either ~~on a~~ 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 ~~support,~~ and ~~other services~~support which represent a single promise to provide continuous access to its software solutions. ~~Additionally, implementation~~Implementation services for the Company’s eValuator product isare 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.

10

Audit Services

The Company provides technology-enabled coding audit services to help customers review and optimize their internal clinical documentation and coding functions across the applicable segment of the client’s enterprise. Audit services are a separate performance obligation. We recognize revenue as the services are performed.

Disaggregation of Revenue

The following table provides information about disaggregated revenue by type and nature of revenue stream:
SCHEDULE OF DISAGGREGATION OF REVENUE
April 30, 2022 April 30, 2021
Three Months Ended Nine Months Ended Three Months Ended
October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 April 30, 2022 April 30, 2021
Recurring revenue $ 3,907,000 $ 1,970,000 $ 8,536,000 $ 6,167,000 $ 3,941,000 $ 2,234,000
Non-recurring revenue 1,607,000 671,000 2,797,000 2,205,000 1,994,000 717,000
Total revenue: $ 5,514,000 $ 2,641,000 $ 11,333,000 $ 8,372,000 $ 5,935,000 $ 2,951,000

The Company includes revenue categories of (i) maintenance and support and (ii) software as a service as recurring ~~revenue for the three and nine months ended October 31, 2021 and 2020.~~revenue. The Company includes revenue categories of (i) software licenses, (ii) professional services, and (iii) audit services as non-recurring ~~revenue for the three and nine months ended October 31, 2021 and 2020.~~revenue.

Business Combinations

Acquisitions have been accounted for as business combinations, using the acquisition method and, accordingly, the results of operations of the acquired businesses have been included in the condensed consolidated financial statements since their dates of acquisition. The assets and liabilities assumed of these businesses were recorded in the financial statements at their respective estimated fair values as of the acquisition date. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions as a part of the purchase price allocation process to accurately value the assets acquired, including intangible assets, and the liabilities assumed at the acquisition date, the Company’s estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair values of the assets acquired and the liabilities assumed, with a corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or the liabilities assumed, whichever comes first, any subsequent adjustments are reflected in our consolidated statements of operations.

Contract Receivables and Deferred Revenues

The Company receives payments from customers based upon contractual billing schedules. Contract receivables include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Deferred revenue includes payments received in advance of performance under the contract. The Company’s contract receivables and deferred revenue are reported on an individual contract basis at the end of each reporting period. Contract receivables are classified as current or noncurrent based on the timing of when we expect to bill the customer. Deferred revenue is classified as current or noncurrent based on the timing of when we expect to recognize revenue. In the ~~nine~~three months ended ~~October 31, 2021,~~April 30, 2022, the Company recognized approximately $~~3,267,000~~2,288,000 in revenue from deferred revenues outstanding as of January 31, ~~2021.~~2022. Revenue allocated to remaining performance obligations was $~~18,788,000~~21,092,000 as of ~~October 31, 2021,~~April 30, 2022, of which the Company expects to recognize approximately ~~66%~~62% over the next 12 months and the remainder ~~thereafter.~~thereafter.

Deferred costs (costs to fulfill a contract and contract acquisition costs)

The Company defers the direct costs, which include salaries and benefits, for professional services related to SaaS contracts as a cost to fulfill a contract. These deferred costs will be amortized on a straight-line basis over the period of expected benefit which is the contractual term. As of ~~October 31, 2021~~April 30, 2022 and January 31, ~~2021,~~2022, the Company had deferred costs of $~~135,000~~129,000 and $~~168,000~~125,000 , respectively, net of accumulated amortization of $~~95,000~~112,000 and $~~126,000~~93,000, respectively. Amortization expense of these costs was $~~22,000~~19,000 and $~~27,000~~39,000 for the three months ended ~~October 31, 2020~~April 30, 2022 and 2021, ~~respectively, and $90,000~~ ~~and $89,000~~ ~~for the nine months ended October 31, 2021 and 2020,~~ respectively, and is included in various costs of revenue in the condensed consolidated statements of operations. ~~The nine month period ended October 31, 2021 includes $121,000~~ ~~netted between capitalized cost to fulfill a contract and the accumulated amortization for fully amortized projects.~~

Contract acquisition costs, which consist of sales commissions paid or payable, is considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial and renewal contracts are deferred and then amortized on a straight-line basis over the contract term. As a practical expedient, the Company expenses sales commissions as incurred when the amortization period of related deferred commission costs is expected to be one year or less.

As of ~~October 31, 2021~~April 30, 2022 and January 31, ~~2021,~~2022, deferred commission costs paid and payable, which are included on the consolidated balance sheets within other non-current assets totaled $~~756,000~~872,000 and $~~666,000~~806,000, respectively, net of accumulated amortization of $~~467,000~~501,000 and $~~285,000~~408,000, respectively. For the three months ended ~~October 31,~~April 30, 2022 and 2021, ~~and 2020,~~ $~~88,000~~93,000 and $~~58,000~~70,000~~, respectively, and for the nine months ended October 31, 2021 and 2020, $248,000~~ ~~and $133,000~~, respectively, in amortization expense associated with deferred sales commissions was included in selling, general and administrative expenses in the condensed consolidated statements of operations. There were no impairment losses for these capitalized costs for these periods.
11

Equity Awards

The Company accounts for share-based payments based on the grant-date fair value of the awards with compensation cost recognized as expense over the requisite service period. For awards to non-employees, the Company recognizes compensation expense in the same manner as if the entity had paid cash for the goods or services. The Company incurred total compensation expense related to share-based awards of $~~537,000~~326,000 and $~~442,000~~565,000 for the three months ended ~~October 31,~~April 30, 2022 and 2021, ~~and 2020, respectively, and $1,659,000~~ ~~and $1,054,000~~ ~~in the nine months ended October 31, 2021 and 2020,~~ respectively.

The fair value of the stock options granted was estimated at the date of grant using a Black-Scholes option pricing model. Option pricing model input assumptions such as expected term, expected volatility and risk-free interest rate impact the fair value estimate. ~~Further, the forfeiture rate impacts the amount of aggregate compensation.~~ These assumptions are subjective and are generally derived from external (such as, risk-free rate of interest) and historical data (such as, volatility factor, expected term and forfeiture rates). Future grants of equity awards accounted for as share-based compensation could have a material impact on reported expenses depending upon the number, value and vesting period of future awards.

The Company issues restricted stock awards in the form of Company common stock. The fair value of these awards is based on the market close price per share on the grant date. The Company expenses the compensation cost of these awards as the restriction period lapses, which is typically a one- to four-year service period.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax credit and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing net deferred tax assets, the Company considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The Company establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. Refer to Note 6 – Income Taxes for further details.

The Company provides for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether certain tax positions are more likely than not to be sustained upon examination by tax authorities. At ~~October 31, 2021,~~April 30, 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 the Company’s common stock.

The Company’s unvested restricted stock awards are considered non-participating securities because holders are not entitled to non-forfeitable rights to dividends or dividend equivalents during the vesting term. ~~In accordance with ASC 260, securities are deemed not to be participating in losses if there is no obligation to fund such losses.~~ Diluted EPS for the Company’s common stock is computed using the treasury stock method.

12

The following is the calculation of the basic and diluted net earnings (loss) per share of common stock for the three ~~and nine~~ months ended ~~October 31, 2021~~April 30, 2022 and ~~2020:~~2021:
SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE OF COMMON STOCK
April 30, 2022 April 30, 2021
Three Months Ended Nine Months Ended Three Months Ended
October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 April 30, 2022 April 30, 2021
Basic earnings (loss) per share:
Continuing operations
Loss from continuing operations, net of tax $ (4,379,000 ) $ (1,069,000 ) $ (6,913,000 ) $ (3,209,000 ) $ (2,787,000 ) $ (2,462,000 )
Basic net loss per share of common stock from continuing operations $ (0.10 ) $ (0.04 ) $ (0.17 ) $ (0.11 ) $ (0.06 ) $ (0.07 )

Discontinued operations
Income available to common stockholders from discontinued operations $ 69,000 $ 14,000 $ 401,000 4,692,000 $ — $ 320,000
Basic net earnings per share of common stock from discontinued operations $ — $ — $ 0.01 $ 0.16 $ — $ 0.01

Diluted earnings (loss) per share:
Diluted earnings (loss) per share (1):
Continuing operations
Loss available to common stockholders from continuing operations(1) $ (4,379,000 ) $ (1,069,000 ) $ (6,913,000 ) $ (3,209,000 ) $ (2,787,000 ) $ (2,462,000 )
Diluted net loss per share of common stock from continuing operations(1) $ (0.10 ) $ (0.04 ) $ (0.17 ) $ (0.11 ) $ (0.06 ) $ (0.07 )

Discontinued operations
Income available to common stockholders from discontinued operations $ 69,000 $ 14,000 $ 401,000 $ 4,692,000 $ — $ 320,000
Diluted net earnings per share of common stock from discontinued operations $ — $ — $ 0.01 $ 0.15 $ — $ 0.01

Net (loss) earnings $ (4,310,000 ) $ (1,055,000 ) $ (6,512,000 ) $ 1,483,000
Net loss $ (2,787,000 ) $ (2,142,000 )
Weighted average shares outstanding – Basic (1) 45,709,952 30,286,197 41,498,873 30,026,890 47,028,463 37,497,958
Effect of dilutive securities – Stock options and Restricted stock (2) 353,851 606,329 496,393 423,682 257,498 686,807
Weighted average shares outstanding – Diluted 46,063,803 30,892,526 41,995,266 30,450,572 47,285,961 38,184,765
Basic net (loss) earnings per share of common stock $ (0.10 ) $ (0.04 ) $ (0.16 ) $ 0.05
Diluted net (loss) earnings per share of common stock $ (0.10 ) $ (0.04 ) $ (0.16 ) $ 0.04
Basic net loss per share of common stock $ (0.06 ) $ (0.06 )
Diluted net loss per share of common stock $ (0.06 ) $ (0.06 )

(1)
~~Excludes~~Includes the effect of vested and excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of ~~October 31,~~April 30, 2022 and 2021, ~~and 2020,~~ there were ~~1,030,600~~1,025,800 and ~~1,166,325~~1,387,325 unvested restricted shares of common stock outstanding, respectively.
(2) Diluted net loss per share excludes the effect of shares that are anti-dilutive. For the three ~~and nine~~ months ended ~~October 31, 2021,~~April 30, 2022, diluted EPS excludes ~~1,146,963~~1,062,130 outstanding stock options and ~~1,030,600~~1,025,800 unvested restricted shares of common stock For the three ~~and- nine~~ months ended ~~October 31, 2020,~~April 30, 2021, diluted EPS excludes ~~624,330~~573,630 outstanding stock options and ~~1,166,325~~1,387,325 unvested restricted shares of common stock.

Other Operating Costs

Non-routine Costs
SCHEDULE OF NON ROUTINE COSTS

Three Months ended
October 31, 2021

Nine Months
ended
October 31, 2021

Separation agreement expense $ 706,000 $ 706,000
Broker Fees 508,000 553,000
Professional Fees 358,000 740,000
Executive bonuses 355,000 705,000
Loss on exit from operating lease 22,000 22,000
Other (16,000 ) (16,000 )
Total non-routine costs $ 1,933,000 $ 2,710,000

Three Months
ended
April 30, 2022 Three Months
ended
April 30, 2021
Professional fees
$ 90,000 $ 91,000
Executive bonuses — 350,000
Total non-routine costs $ 90,000 $ 441,000
For the three ~~and nine~~ months ended ~~October 31,~~April 30, 2022 and 2021, the Company incurred certain non-routine costs, ~~totaling $1,933,000~~ ~~and $2,710,000, respectively. The Company incurred transaction~~which include transactions costs related to the acquisition of Avelead totaling $90,000 and $91,000, respectively, consisting of ~~a separation agreement, broker fees and~~ professional services. For the three ~~and nine~~ months ended ~~October 31,~~April 30, 2021, the Company also paid $350,000 for 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 from Membership Agreement~~
~~As of October 31, 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 the nine months ended October 31, 2020 to reflect the liability at the time it abandoned the space. Refer to Note 4 – Operating Leases.
13

Non-Cash Items

The Company ~~had the following items that were~~did not have any non-cash ~~items related~~investing or financing activities to disclose supplementally with the condensed consolidated statements of cash ~~flows:~~flows for the three-months ended April 30, 2022 and 2021.
~~SCHEDULE OF NON-CASH ITEMS RELATED TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW~~

October 31,
2021 2020
Forgiveness of PPP loan and accrued interest $ 2,327,000 $ —
Working capital accrual 116,000 —
Escrowed funds from sale of ECM Assets — 800,000
Right-of Use Assets from operating lease — 540,000
Capitalized software purchased with stock (Note 8 – Commitments and Contingencies) — 51,000

Accounting Pronouncements Recently Adopted

In ~~December 2019,~~July 2021, the FASB issued ASU ~~No. 2019-12,~~2021-05, ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~Lessors - Certain Leases with Variable Lease Payments to ASC Topic 842, Leases (“ASC 842”) (“ASU ~~2019-12”~~2021-05”). ~~This~~ ASU ~~is intended~~2021-05 provides additional ASC 842 classification guidance as it relates to ~~simplify various aspects related to~~a lessor’s accounting for ~~income taxes by removing~~ certain ~~exceptions~~leases with variable lease payments. ASU 2021-05 requires a lessor to ~~the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities.~~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 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 standard2021-05 became effective for usthe Company on February 1, ~~2021.~~2022. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements or disclosures.
~~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 has 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 No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), 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. The Company does not anticipate that the adoption of this ASU will have a material impact on the Company’s consolidated financial statements.

NOTE 3 — BUSINESS COMBINATION AND DIVESTITURE

Avelead Acquisition

The Company acquired all of the ~~units~~equity interests of Avelead as part of the Company’s strategic expansion into the acute-care health care revenue cycle management ~~acute-care healthcare space~~industry on August 16, 2021 (the “Transaction”). The acquisition was completed on August 16, 2021.
14

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 quarter of fiscal 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 the acquisition of $6.5 million. Additionally, the Company contracted two types of contingent consideration; the first is referred to herein as “SaaS Contingent Consideration” and the second is referred to herein as “Renewal Contingent Consideration.” The SaaS Contingent Consideration and Renewal Contingent Consideration ~~have~~had an aggregate value of approximately $10.7 million atas of the date of ~~closing.~~closing. The owners of Avelead are also referred to herein as “Sellers” and are enumerated in the UPA (as defined below).

14
The Company acquired all of the ~~outstanding units~~equity interests of Avelead, effective August 16, 2021, ~~under~~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 $11.9million. Additionally, the Company paid $285,000of the Sellers’ closing costs, and $~~169,000~~285,000 related to the ~~estimated working capital adjustment, and accrued $116,000~~ ~~for the anticipated payment of the holdback and the final~~ 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 $6.5million, 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 following the acquisition. The Company will pay the SaaS Contingent Consideration as follows: (i) ~~50%~~50% in cash and (ii) ~~50%~~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 earnout¹, the Company agreed to a floor and ceiling on the value of the Company’s restricted common stock issued as consideration for the earnout. That collar has a floor of $3.50 per share and a ceiling of $5.50 per share for the first year ~~earnout.~~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 earnout¹, the Company agreed to a floor and ceiling on the Company’s restricted common stock issued as consideration for the earnout. That collar has a floor of $4.50 per share and a ceiling of $6.50 per share for the second year ~~earnout.~~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.~~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.~~Consideration.
15

The components of the total consideration are as follows:
SCHEDULE OF COMPONENTS OF TOTAL CONSIDERATION
(in thousands)
Components of total consideration, net of cash acquired:
Cash $ 11,900 $ 11,900
Cash, seller expenses 285 285
Cash, estimated net working capital adjustment 169 285
Payable, holdback and final working capital adjustment 116
Restricted Common Stock 6,554 6,554
Acquisition earnout liabilities 10,684 (a) 10,684 (a)
Total consideration $ 29,708 $ 29,708

(a)
Acquisition earnout liabilities represents the net present value and risk adjusted probability of the required future payments underlying the Company’s SaaS Contingent Consideration and Renewal Contingent Consideration as described above. Due to the dates that the Company is required to measure, report and agree on the calculations, ~~all amounts of the acquisition earnout liability are~~$4,715,000 is shown as a short-term liability and $3,618,000 is shown as a long-term liability as of ~~October 31, 2021.~~April 30, 2022.

The acquisition earnout liability is re-measured at fair value on a ~~quarterly~~recurring basis and the change to the liability is recorded as a valuation adjustment recorded through “other ~~expenses”~~expenses or income” in the accompanying condensed consolidated statements of operations. The ~~valuation adjustment~~change in the fair value recorded for the three months ended ~~October 31, 2021~~April 30, 2022 was $~~417,000~~500,000. 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.

15
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.:~~follows:
SCHEDULE OF ALLOCATION OF THE TOTAL CONSIDERATION
(in thousands)
Net tangible assets:
Net tangible assets (liabilities):
Accounts receivable $ 1,246 $ 1,246
Unbilled revenue 200 200
Prepaid expenses 178 178
Fixed assets 37 37
Accounts payable (490 ) (490 )
Accrued expenses (397 ) (397 )
Deferred revenues (863 ) (863 )
Net tangible assets (89 )
Net tangible assets (liabilities) (89 )
Goodwill 12,377 12,377
Customer Relationships (SaaS) 8,370 8,370
Customer Relationships (Consulting) 1,330 1,330
Internally Developed Software 6,380 6,380
Trademarks and Tradenames 1,340 1,340
Net assets acquired and liabilities assumed $ 29,708 $ 29,708

The intangible assets recorded as a result of the Avelead acquisition, and their related estimated useful lives are as follows:
SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES

Estimated
Useful Lives
Goodwill Indefinite
Customer Relationships (SaaS) 10 years
Customer Relationships (Consulting) 8 years
Internally Developed Software 9 years
Trademarks and Tradenames 15 years
16

The Company’s pro forma revenues and loss from continuing operations for the three-month period ending April 30, 2021, assuming Avelead was acquired on February 1, ~~2020,~~2021, are as follows. The unaudited pro forma information is not necessarily indicative of the results of operations that the Company would have reported had the acquisition ~~actually~~ occurred at the beginning of these periods nor is it ~~necessarily~~ indicative of future results. The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, including, but not limited to, anticipated costs savings from synergies or other operational improvements. ~~The nature and amount of any material, nonrecurring pro forma adjustments directly attributable to the business combination are included in the pro forma revenue and net loss reflected below:~~
SCHEDULE OF PRO FORMA REVENUE AND NET EARNINGS

Three Months Ended Nine Months Ended
October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020
Revenues $ 6,064,000 $ 5,198,000 $ 16,585,000 $ 14,066,000
Operating expenses (7,787,000 ) (6,707,000 ) (23,271,000 ) (18,559,000 )
Non-routine costs (3,196,000 ) — (4,138,000 ) —
Loss on exit from membership agreement — — — (105,000 )
Operating loss (4,919,000 ) (1,509,000 ) (10,824,000 ) (4,598,000 )

Other expenses (572,000 ) (150,000 ) (891,000 ) (556,000 )
PPP loan forgiveness 732,000 — 3,059,000 —
Income tax (expense) benefit (4,000 ) 803,000 (9,000 ) 1,536,000
Loss from continuing operations $ (4,763,000 ) $ (856,000 ) $ (8,665,000 ) $ (3,618,000 )

16
~~Non-routine costs are primarily costs associated with the acquisition. Included in the pro forma schedule (above) for the three and nine months ended October 31, 2021 are $1,263,000~~ ~~and $1,428,000~~, ~~respectively, of expenses paid by the Sellers in the transaction.~~
April 30, 2022 April 30, 2021

Three Months Ended
April 30, 2021

Actual
Pro Forma

Revenues $ 2,951,000 $ 5,482,000
Loss from continuing operations $ (2,462,000 ) $ (2,606,000 )

Included in the accompanying ~~condensed consolidated~~unaudited pro forma statement of operations for the three ~~and nine~~ months ended ~~October 31,~~April 30, 2021 ~~(since the closing of the Avelead acquisition)~~ are $~~2,045,000~~2,531,000 ~~and $(975,000)~~of Avelead revenue and $(144,000), of loss from continuing operations. For the three-months ended April 30, 2022, Avelead contributed $2,561,000
~~Refer to Note 2 – Summary of Significant Accounting Policies – Other operating costs -Non-routine costs. Costs related~~ to the ~~acquisition of Avelead are expensed as incurred.~~Company’s consolidated revenues and $(544,000) to the Company’s consolidated continuing operations loss.

The Company entered into one employment agreement and one separation agreement with each of the two Sellers. Included in the transaction costs ofrelated to the Avelead acquisition 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~~non-routine costs. See Note 2 – Summary of Significant Accounting Policies. The employment agreement is a two-year employment agreement that entitles the Seller to a six-month separation pay in the case of termination without cause. The 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 the closing of the Transaction. These options have a strike price of $1.53 per share, the closing stock price on the trading date immediately preceding the closing. 500,000 options were awarded to one Seller that will vest, monthly, over a three (3) year service period. The remaining 83,333 options were awarded to another Seller and vested immediately upon issuance. The Company utilized the Black-Scholes method to determine the grant-date fair value of these options. The 83,333 options were not exercised prior to their expiration date of November 15, 2021. The 500,000 options have a grant-date fair value of approximately $~~4,000~~ ~~and are recorded in Non-routine cost in the accompanying condensed consolidated statement of operations. The 500,000 options have a grant-date fair value of approximately $333,000~~395,000 and are expensed over the vesting period within selling, general, and administrative ~~expense~~expense..

Additionally, the Company granted 100,000 restricted stock awards (RSAs) to certain Avelead employees as of the closing date.

17
ECM Assets Divestiture

On February 24, 2020, the Company sold a portion of its business (the “ECM Assets”). The Company signed the definitive agreement with respect to the sale of the ECM Assets in December 2019 and prepared and filed a proxy statement to obtain stockholder approval of the transaction. We applied Accounting Standards Codification (“ASC”) 205-20-1 (“ASC 205-20-1”) to determine the timing to begin reporting the discontinued operations. Based on ASC 205-20-1, the Company determined that it did not have the authority to sell the assets until the date of the stockholder approval, which was February 21, 2020. On February 21, 2020, the Company having the authority and ability to consummate the sale of the ECM Assets, met the criteria to present discontinued operations as described in ASC 205-20-1. Accordingly, the Company is reporting the results of operations and cash flows, and related balance sheet items associated with the ECM Assets in discontinued operations in the accompanying condensed consolidated statements of operations, cash flows and balance sheets for the current and comparative prior periods. Refer to Note 9 – Discontinued Operations for details of the Company’s discontinued operations.

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” in~~For the three months ended ~~October 31, 2021.~~April 30, 2022, the Company recorded $48,000
~~We determine whether an arrangement is a lease at inception. Right-of-use assets represent our right~~ as other income related to ~~use an underlying asset for~~ the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since our lease arrangements do not provide an implicit rate, we use our incremental borrowing rate for the expected remaining lease term at commencement date for new leases and for existing leases, in determining the present value of future lease payments. Operating lease expense is recognized on a straight-line basis over the lease term. The Company has made the accounting policy election for building leases to not separate non-leases components.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 ~~October 31, 2021,~~April 30, 2022, operating lease right-of use assets totaled $~~262,000~~173,000, and the associated lease liability is included in ~~both~~ current ~~and long-term~~ liabilities of $~~202,000~~188,000 ~~and $82,000, respectively.~~. The Company used a discount rate of 6.5% to the determine the lease liability. For the three ~~and nine~~ months ended ~~October 31,~~April 30, 2022 and 2021, the Company had lease operating costs of approximately $48,000 ~~and $145,000, respectively. In addition, there was no cash paid~~ for amounts included in the measurement of operating cash flows from operating leases as a result of lease incentives and previous pre-paid rent that had been included as an adjustment to the right-of-use asset at lease inception.each period.

1718

Maturities of operating lease liabilities associated with the Company’s operating lease as of ~~October 31, 2021~~April 30, 2022 are as follows for payments due based upon the Company’s fiscal ~~years ended January 31:~~year:
SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES

2021 $ 51,000
2022 210,000
2023 35,000
Total lease payments 296,000
Less present value adjustment (12,000 )
Present value of lease liabilities $ 284,000

~~Upon signing the new lease in March 2020, the Company abandoned its shared office space in Atlanta and recorded an expense and related liability of $105,000~~ for the minimum remaining payments required under the agreement with the landlord. The associated expense is recorded in “Loss on exit from membership agreement” in the accompanying statements of operations for the nine months ended October 31, 2020. The membership agreement did not qualify as a lease as the owner had substantive substitution rights.

2022 $ 158,000
2023 35,000
Total lease payments 193,000
Less present value adjustment (5,000 )
Present value of lease liabilities $ 188,000

Suwanee Office Lease

Upon acquiring Avelead on August 16, 2021 (refer to Note 3 – Business Combination and Divestiture), the Company assumed an operating lease agreement for the corporate office space of Avelead. The ~~term of the lease expires on~~ ~~February 28, 2022. The monthly rent expense for the office space is approximately $7,000. The~~ lessor is an entity controlled by one of the Sellers that is employed by the ~~Company.~~Company The 36-month term lease commenced March 1, 2019 and expired on February 28, 2022. In February 2022, the Company renewed the lease for twelve months with monthly payments totaling $71,984 over the term of the lease. For the three months ended April 30, 2022, the Company recorded rent expense of $19,000.

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 $3,000,000revolving credit facility with Bridge Bank. At the time of the discontinuance, there was 0no outstanding balance on the revolving credit facility.

18
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 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 $500,000in the second year, $1,000,000in the third year, $2,000,000in the fourth year, and $3,000,000in 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 $130,000in 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 $200,000in 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 $200,000over the term of the loan.

19
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”.
SCHEDULE OF 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”.
SCHEDULE OF 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.

1920

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 ~~October 31, 2021,~~April 30, 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 $3,000,000revolving credit facility (the “Amended Loan and Security Agreement”). This revolving credit facility was replaced with the Second Amended and Restated Security Agreement (above) that was put in place on August 26, 2021. Accordingly, the Company wrote-off $43,000of deferred financing costs from this loan as a loss on extinguishment of debt in the accompanying condensed consolidated statement of operations. The Second Amended and Restated Loan and Res 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~~three-month basis. Additionally, the Company’s Bank EBITDA, measured on a monthly basis over a trailing ~~three month~~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 the novel coronavirus, or COVID-19 pandemic.
~~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 condensed consolidated statement of operations.~~
2021

Outstanding principal balances on debt related to the new term loan agreement that the Company entered into on August 16, 2021 with Bridge Bank consisted of the following at:
SCHEDULE OF OUTSTANDING DEBT, OTHER THAN PPP LOAN
October 31, 2021^(a) January 31, 2021^(b)
Term loan $ 10,000,000 $ 2,301,000
Deferred financing cost (116,000 ) —
Total 9,884,000 2,301,000
Less: Current portion (125,000 ) (1,534,000 )
Non-current portion of debt $ 9,759,000 $ 767,000

~~(a)~~ ~~The term loan, as of October 31, 2021, is related to the new term loan agreement that the Company entered into on August 26, 2021 with Bridge Bank (see description above).~~
~~(b)~~ ~~The term loan, as of January 31, 2021, is related to the Company’s PPP loan (see description above). The PPP loan was forgiven in June 2021.~~
April 30, 2022 January 31, 2022
Term loan $ 10,000,000 $ 10,000,000
Deferred financing cost (76,000 ) (96,000 )
Total 9,924,000 9,904,000
Less: Current portion (375,000 ) (250,000 )
Non-current portion of debt $ 9,549,000 $ 9,654,000

NOTE 6 — INCOME TAXES

Income taxes consist of the following:
SCHEDULE OF ~~COMPONENTS OF~~ INCOME ~~TAX (EXPENSE) BENEFIT~~TAXES

October 31,
2021 2020
Current tax benefit (expense):
Federal $ — $ 997,000
State (9,000 ) 539,000
Total current provision $ (9,000 ) $ 1,536,000

2022 2021
April 30,
2022 2021
Current tax expense:
Federal $ (7,000 ) $ -
State (4,000 ) (9,000 )
Total current tax provision $ (11,000 ) $ (9,000 )
The Company adopted 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 in the nine month period ended October 31, 2020, are off-set by taxes on the gain on sale and taxes from operations of discontinued operations.

At January 31, ~~2021,~~2022, the Company had U.S. federal net operating loss carry forwards of $~~37,554,000~~46,250,000. The Company also had state net operating loss carry forwards of $~~12,519,000~~21,318,000 and Federal R&D credit carry forwards of $~~1,356,000~~1,575,000, and Georgia R&D credit carry forwards of $94,000, all of which expire through fiscal ~~2039~~.2041.

The effective income tax rate on continuing operations of approximately (~~0.16~~21%) differs from our combined federal and state statutory rate of ~~24.56~~25.15% primarily due to the full valuation allowance the Company currently maintains on its net deferred tax asset.

The Company has recorded $~~365,000~~318,000 and $~~339,000~~315,000 in reserves for uncertain tax positions as of ~~October 31, 2021~~April 30, 2022 and January 31, ~~2021,~~2022, respectively.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income taxes in multiple state and local jurisdictions. The Company has concluded all U.S. federal tax matters for years through January 31, ~~2017.~~2018. All material state and local income tax matters have been concluded for years through January 31, ~~2016.~~2017. The Company is no longer subject to IRS examination for periods prior to the tax year ended January 31, ~~2017;~~2018; however, carryforward losses that were generated prior to the tax year ended January 31, ~~2017~~2018 may still be adjusted by the IRS if they are used in a future ~~period.~~period.

2122

NOTE 7 — EQUITY

Capital Raise

On February 25, 2021, the Company entered into an underwriting agreement with Craig-Hallum Capital Group LLC, as the sole managing underwriter, relating to the underwritten public offering of an aggregate of 10,062,500shares of the Company’s common stock, par value $0.01per share, which included 1,312,500shares 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 $1.60per share of common stock. The gross proceeds to the Company from the Offering were approximately $~~16.1~~16,100,000 ~~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.

2223

NOTE 8 — COMMITMENTS AND CONTINGENCIES
~~Royalty Liability~~
On October 25, 2013, we entered into a Software License and Royalty Agreement (the “Royalty Agreement”) with Montefiore Medical Center (“Montefiore”) pursuant to which Montefiore granted us an exclusive, worldwide 15-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~~eleven SOWs under the MSA. Some of the SOWs include the ability to earn stock at a conversion rate to be calculated 20 days after the execution of the related SOW. 180 Consulting earned a cumulative number of shares through ~~October 31, 2021~~April 30, 2022 totaling ~~443,046~~577,147, and56,070 shares for the three months ended April 30, 2022. The Company paid fees of $389,000 and ~~nine month period ended October 31, 2021,~~ $~~66,207~~380,000 ~~and~~ ~~194,662~~ ~~shares, respectively. For~~, respectively, for services rendered by 180 Consulting during the ~~nine~~three months ended ~~October 31, 2021, the Company incurred fees of $1,092,000~~.April 30, 2022 and 2021. In addition, on ~~October 5, 2021,~~February 22, 2022, the Company issued to 180 Consulting an aggregate of ~~128,415~~78,031 shares as compensation for services previously rendered during the ~~six-months~~three-months ended ~~July~~January 31, ~~2021.~~2022. Such ~~128,415~~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 the nine month period ended October 31, 2020, the Company incurred fees to 180 Consulting totaling $449,000. Of those fees, approximately $75,000~~ ~~was related to capitalized software development, and the remaining $374,000~~ ~~was operating cost. 180 Consulting earned~~ ~~167,937~~ ~~shares of stock as compensation for services rendered during the nine months ended October 31, 2020.~~ 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 10 – 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 ~~October 31, 2021,~~April 30, 2022, the Company has entered into one SOW under the Avelead MSA. For services rendered by 180 Consulting during the ~~three and nine month~~three-month periods ending ~~October 31, 2021,~~April 30, 2022, the Company incurred fees totaling $~~62,000~~260,000.
2324

NOTE 9 – DISCONTINUED OPERATIONS

On February 24, 2020, the Company consummated the ~~previously announced~~ sale of the Company’s legacy Enterprise Content Management business (the “ECM Assets”) ~~pursuant to that certain Asset Purchase Agreement, dated December 17, 2019, as amended (the “Asset Purchase Agreement”), to Hyland Software, Inc. (the “Purchaser”)~~.
~~Pursuant to the Asset Purchase Agreement, the Purchaser acquired the ECM Assets and assumed certain liabilities of the Company for a purchase price of $16.0~~ ~~million, subject to certain adjustments for customer prepayments as set forth in the Asset Purchase Agreement.~~
~~At closing, the Company realized 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:~~
~~SCHEDULE OF GAIN ON SALE OF ASSETS~~
2020
Net Proceeds, including escrowed funds $ 12,088,000
Net tangible assets sold:
Accounts Receivable (1,130,000 )
Prepaid Expenses (576,000 )
Deferred Revenue 4,010,000
Net tangible assets sold 2,304,000
Capitalized software development costs (1,772,000 )
Goodwill (4,825,000 )
Transaction cost (1,782,000 )
Gain on sale of discontinued operations $ 6,013,000
24
~~The transaction costs were primarily broker cost and cost 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. 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 recorded the following as discontinued operations on the accompanying condensed consolidated balance sheets as of October 31, 2021 and January 31, 2021:~~
~~SCHEDULE OF DISCONTINUED OPERATIONS OF CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS~~

As of
October 31, 2021 January 31,2021
Current assets of discontinued operations:
Accounts receivable $ — $ 587,000
Current assets of discontinued operations $ — $ 587,000
Long-term assets of discontinued operations:
Property and equipment, net $ — $ 13,000
Long-term assets of discontinued operations $ — $ 13,000
Current liabilities of discontinued operations:
Accrued expenses $ — $ 8,000
Deferred revenues — 587,000
Current liabilities of discontinued operations $ — $ 595,000

For the ~~three~~three-months ended April 30, 2022 and ~~nine months ended October 31,~~ 2021, ~~and 2020,~~ the Company recorded the following into discontinued operations in the accompanying condensed consolidated statements of operations:
SCHEDULE OF DISCONTINUED OPERATIONS OF CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Nine Months Ended Three Months Ended
October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 April 30, 2022 April 30, 2021
Revenues:
Maintenance and support $ — $ — $ — $ 412,000
Software as a service — — — 138,000
Transition service fees 102,000 121,000 498,000 278,000 — 352,000
Total revenues 102,000 121,000 498,000 828,000 — 352,000

Expenses:
Cost of Sales 1,000 2,000 5,000 292,000 — 2,000
Transition service cost 32,000 55,000 92,000 103,000 — 30,000
Deferred financing cost — — — 128,000
Total expenses 33,000 57,000 97,000 523,000 — 32,000

Income from discontinued operations $ 69,000 $ 64,000 $ 401,000 $ 305,000 $ — $ 320,000

25

The Company entered into an agreement with the Purchaser of the ECM Assets to maintain the current data center through a transition period. The transition services did not have a finite ending date at the signing of the agreement. However, the transition services were completed in the third quarter ~~ended October 31,~~of fiscal 2021.

NOTE 10 - RELATED PARTY TRANSACTIONS
In the second quarter of fiscal year 2019, in connection with the appointment of Wyche T. “Tee” Green, III, Chairman of the Board of the Company and Managing Member of 121G, LLC (“121G”), as interim President and Chief Executive Officer of the Company, we entered into a consulting agreement with 121G Consulting, LLC (“121G Consulting”), to provide an assessment of the Company’s innovation and growth teams and strategies and to develop a set of prioritized recommendations to be consolidated into a strategic plan for the Company’s leadership team. Mr. Green is a “member” of 121G Consulting, and, accordingly, has a financial interest in that entity. In October 2019, Mr. Green was appointed as President and Chief Executive Officer of the Company on a full-time basis. Subsequent to Mr. Green joining the Company on a full-time basis, the Company’s relationship with 121G Consulting was terminated.
~~NaN~~ ~~fees were incurred from 121G Consulting for the three and nine months ended October 31, 2021. For the three and nine months ended October 31, 2020, 121G Consulting fees totaled $70,000~~.

Refer to Note 3 – Business Combination and Divestiture. The Company acquired Avelead on August 16, 2021. In addition, ~~to the related party lease agreement (refer to Note 4 – Operating Leases),~~ the Company assumed a consulting agreement with AscendTek, LLC (“AscendTek”), a software development and system design company. AscendTek is owned by one of the Sellers of Avelead. The Company entered into a separation agreement with this Seller of Avelead on closing of the Avelead acquisition. ~~From~~For the ~~acquisition date to the period~~three-months ended ~~October 31, 2021,~~April 30, 2022, the Company incurred approximately $~~39,000~~16,000 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. This lease term ended February 2022 but was renewed for a term of 12 months (refer to Note 4 – Operating Leases).

NOTE 11 — SUBSEQUENT EVENTS

We have evaluated subsequent events occurring after ~~October 31, 2021~~April 30, 2022 and based on our evaluation we did not identify any events that would have required recognition or disclosure in these condensed consolidated financial statements.

26

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

FORWARD-LOOKING STATEMENTS

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

Among the factors that could cause actual future results to differ materially from our expectations are the risks and uncertainties described under “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2021~~2022 and in our subsequent filings with the SEC, and include among others, 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;

● 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;
27
● 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 ongoing COVID-19 pandemic.

Most of these risk factors are beyond our ability to predict or control. Any of these factors, or a combination of these factors, could materially affect our future financial condition or results of operations and the ultimate accuracy of our forward-looking statements. There also are other factors that we may not describe (generally because we currently do not perceive them to be material) that could cause actual results to differ materially from our expectations.

On August 16, 2021, the Company entered into a Purchase Agreement to acquire 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 unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements” for further information on the Avelead acquisition.

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.

Results of Operations

Revenues

Three Months Ended
($ in thousands): October 31, 2021 October 31, 2020 Change % Change

Software licenses $ 150 $ 19 $ 131 689 %
Professional services 944 161 783 486 %
Audit services 513 491 22 4 %
Maintenance and support 1,082 1,070 12 1 %
Software as a service 2,825 900 1,925 214 %
Total Revenues $ 5,514 $ 2,641 $ 2,873 109 %
Nine Months Ended Three Months Ended
($ in thousands): October 31, 2021 October 31, 2020 Change % Change April 30, 2022 April 30, 2021 Change % Change

Software licenses $ 285 $ 234 $ 51 22 % $ 71 $ 135 $ (64 ) (47 )%
Professional services 1,052 473 579 122 % 1,244 78 1,166 1,495 %
Audit services 1,460 1,498 (38 ) (3 )% 679 504 175 35 %
Maintenance and support 3,226 3,556 (330 ) (9 )% 1,110 1,057 53 5 %
Software as a service 5,310 2,611 2,699 103 % 2,831 1,177 1,654 141 %
Total Revenues $ 11,333 $ 8,372 $ 2,961 35 % $ 5,935 $ 2,951 $ 2,984 101 %

28

Software licenses — ~~Proprietary~~For the three-month period ended April 30, 2022, revenue from proprietary software license revenue ~~recognized for~~decreased by $64,000 from the ~~three and nine month periods ended October 31, 2021 increased by $131,000 and $51,000 from their~~ respective prior comparable periods. The Company is experiencing a shift in business from perpetual software licenses to a software as a ~~service.~~service model. 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 primarily the result of the efforts of these channel partners. ~~The Company continues to be unable to estimate the timing or extent of the impact of COVD-19 on the Company’s ongoing performance relative to perpetual software licenses.~~

Professional services — For the ~~three and nine month~~three-month period ended ~~October 31, 2021,~~April 30, 2022, revenue from professional services increased by ~~$783,000 and $579,000~~$1,166,000 from their respective prior comparable ~~periods.~~period. The ~~increases~~increase in professional services ~~include $814,000~~includes $1,027,000 of Avelead professional services ~~revenue recorded since the date of acquisition (August 16, 2021).~~revenue. The ~~Company continues~~remaining increase was primarily driven by services completed related to ~~be unable to estimate the timing or extent of the impact of COVD-19 on the Company’s ongoing performance relative to professional services.~~prior year software license agreements.

Audit services — ~~Audit~~For the three-month period ended April 30, 2022, revenue from audit services increased $175,000 from their respective prior comparable period. The increase includes revenue ~~for the three and nine months ended October 31, 2021 remained relatively consistent~~from four new audit service agreements.

Maintenance and support — ~~Revenue~~For the three-month period ended April 30, 2022, revenue from maintenance and support ~~for the three month period ended October 31, 2021 increased over the prior comparable period by $12,000.~~remained relatively consistent. The ~~increase is related to the maintenance of the new software licenses sold. Revenue from~~Company does not anticipate maintenance and support ~~for the nine month period ended October 31, 2021 decreased by $330,000. This decrease is attributable~~growth due to the sunset of our legacy product, clinical analytics, that was recognized until the last customers revenue ended in June 2020. There has been no further revenue recognized from clinical analytics after June 2020. ReferCompany’s shift to ~~Note 8 – Commitments and Contingencies “Royalty Liability” included in Part I, Item I, “Financial Statements” for further information on the clinical analytics product.~~software as a service products.

Software as a Service (SaaS) — Revenue from SaaS for the three ~~and nine~~ months ended ~~October 31, 2021~~April 30, 2022 increased by ~~$1,925,000 and $2,699,000~~$1,654,000 from the prior comparable period. ~~These~~The increases include ~~$1,231,000~~$1,534,000 of SaaS revenue from ~~Avelead recorded since the date of acquisition.~~Avelead. The remaining increase in SaaS revenue is due to new customers on the Company’s eValuator ~~product plus approximately $230,000 related to a customer that did not renew.~~product. The ~~non-renewal related to a customer that ended their contract early but paid the fees through the end of their contract. Because there were no future performance obligations, the~~ Company ~~recognized all the contracted fees~~expects continued growth in the period. The Company’s legacy product, Financial Management Systems, has been relatively consistent. We have experienced slower first contact to contracting timelines as a result of COVID-19. The customer non-renewal as well as slower contracting is expected to result in lowerits SaaS revenues in the fourth quarter, on a sequential basis. While we have seen some recent positive activity, we continue to be unable to estimate the impact of COVID-19 on future contracting processes with our customers.business.

Cost of Sales

Three Months Ended
(in thousands): October 31, 2021 October 31, 2020 Change % Change
Cost of software licenses $ 133 $ 183 $ (50 ) (27 )%
Cost of professional services 936 268 668 249 %
Cost of audit services 409 425 (16 ) (4 )%
Cost of maintenance and support 57 160 (103 ) (64 )%
Cost of software as a service 1,088 443 645 146 %
Total cost of sales $ 2,623 $ 1,479 $ 1,144 77 %
Nine Months Ended Three Months Ended
(in thousands): October 31, 2021 October 31, 2020 Change % Change April 30, 2022 April 30, 2021 Change % Change
Cost of software licenses $ 412 $ 385 $ 27 7 % $ 101 $ 137 $ (36 ) (26 )%
Cost of professional services 1,411 779 632 81 % 1,126 214 912 426 %
Cost of audit services 1,174 1,158 16 1 % 439 389 50 13 %
Cost of maintenance and support 223 528 (305 ) (58 )% 46 87 (41 ) (47 )%
Cost of software as a service 2,276 1,250 1,026 82 % 1,497 610 887 145 %
Total cost of sales $ 5,496 $ 4,100 $ 1,396 34 % $ 3,209 $ 1,437 $ 1,772 123 %

The increase in overall cost of sales for the three ~~and nine~~ months ended ~~October 31, 2021~~April 30, 2022 from the comparable prior period is primarily due to Avelead which ~~was $1,117,000~~represented $1,710,000 of the ~~increase for both comparable periods.~~increase.

29

~~Cost~~The cost of software licenses ~~reflect~~reflects amortization of capitalized software expenditures. The amounts for ~~each of~~ the ~~three and nine month periods~~three-month period ended ~~October 31, 2021~~April 30, 2022 are generally ~~consistent.~~consistent compared to the respective comparable period.

The cost of professional services includes compensation and benefits for personnel and related expenses. Avelead comprises ~~$636,000~~$903,000 of the increase for ~~each of~~ the ~~three and nine months~~three-month period ended ~~October 31, 2021.~~April 30, 2022. The increased cost from the Avelead business was partially offset by a decrease in employee related expenses.

The cost of audit services includes compensation and benefits for audit services personnel, and related expenses. These costs remained relatively consistent for the ~~three and nine month~~three-month period ended ~~October 31, 2021~~April 30, 2022 as compared to the respective comparable ~~periods.~~period.

The cost of maintenance and support includes compensation and benefits for client support personnel and the cost of third-party content provider contracts. The decrease in expense for the ~~three and nine month~~three-month period ended ~~October 31, 2021~~April 30, 2022 from the comparable period ~~in the prior year~~ was primarily due to a reduction of salary and salary related expenses for employees that were reassigned to ~~other products. The Company was able to redeploy existing resources to mitigate costs on certain legacy~~SaaS products.

The cost of SaaS solutions is comprised of salaries, amortization of capitalized software development, and third-party content provider costs. For the three-month period ended April 30, 2022, Avelead comprises ~~$481,000~~$807,000 of the increase for both comparable periods. The primary driver of the remaining increase in expense for the three and nine month period ended October 31, 2021 from the comparable prior year periods is an increase in amortization of capitalized software development costs Amortization of capitalized software development costs for the three and nine month periods ended October 31, 2021 were $333,000 and $1,032,000, respectively, as compared to ~~$290,000 and $733,000 for~~ the respective comparable ~~prior periods.~~period. The remaining increase was driven by personnel and infrastructure related expenses.

Selling, General and Administrative Expense

Three Months Ended
($ in thousands): October 31, 2021 October 31, 2020 Change % Change
General and administrative expenses $ 2,218 $ 1,557 $ 661 42 %
Sales and marketing expenses 1,221 726 495 68 %
Total selling, general, and administrative expense $ 3,439 $ 2,283 $ 1,156 51 %
Nine Months Ended Three Months Ended
($ in thousands): October 31, 2021 October 31, 2020 Change % Change April 30, 2022 April 30, 2021 Change % Change
General and administrative expenses $ 5,669 $ 4,609 $ 1,060 23 % $ 2,779 $ 1,732 $ 1,047 60 %
Sales and marketing expenses 2,838 2,250 588 26 % 1,722 819 903 110 %
Total selling, general, and administrative expense $ 8,507 $ 6,859 $ 1,648 24 % $ 4,501 $ 2,551 $ 1,950 76 %

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~~For the three months ended April 30, 2022, $544,000 of the increase in general and administrative expenses ~~for the three and nine months ended October 31, 2021~~ from the comparable prior period is ~~primarily~~ attributed to the Avelead acquisition, resulting in an additional $553,000 in expenses for each period. Further, share- based compensation was approximately $324,000 higher in the nine months ended October 31, 2021 as compared to the same period of the prior year.acquisition. The Company has ~~previously announced accelerated equity awards for its executives in lieu of cash bonuses. These accelerated equity awards are causing a near-term~~also experienced an increase in ~~amortization of share-based compensation for fiscal year 2021.~~employee related expenses, professional fees, and state registration fees.

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 expense for the three ~~and nine~~ months ended ~~October 31, 2021~~April 30, 2022 increased by approximately ~~$267,000~~$442,000 due to the Avelead acquisition. The remaining increases are primarily due to an increase in salaries and benefits associated with the Company’s previously announced expansion and upgrade of its direct and indirect sales personnel. The ~~increase in sales and marketing expenses related to this expansion and upgrade of its direct and indirect sales personnel is expected to be higher in the fourth quarter. The~~ Company has had limited travel as a result of the COVID-19 ~~virus.~~virus but as hospitals are opening up, we expect to see an increase in travel to customer sites as well as industry trade shows. 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~~processes and ~~meeting its customers and prospects face-to-face.~~will continue leveraging these methods were advantageous.

30

Research and Development

Three Months Ended
($ in thousands): October 31, 2021 October 31, 2020 Change % Change
Research and development expense $ 1,339 $ 753 $ 586 78 %
Plus: Capitalized research and development cost 342 414 (72 ) (17 )%
Total research and development cost $ 1,681 $ 1,167 $ 514 44 %
Nine Months Ended Three Months Ended
($ in thousands): October 31, 2021 October 31, 2020 Change % Change April 30, 2022 April 30, 2021 Change % Change
Research and development expense $ 3,280 $ 1,946 $ 1,334 69 % $ 1,312 $ 977 $ 335 34 %
Plus: Capitalized research and development cost 1,048 1,545 (497 ) (32 )% 510 378 132 35 %
Total research and development cost $ 4,328 $ 3,491 $ 837 24 % $ 1,822 $ 1,355 $ 467 34 %

Research and development cost consists primarily of compensation and related benefits and the use of independent contractors for specific near-term development projects. The increase in research and development expenses for the three ~~and nine~~ months ended ~~October 31, 2021~~April 30, 2022 from the comparable prior period includes ~~$345,000~~$393,000 in expenses ~~for each period~~ related to ~~the Avelead acquisition.~~Avelead. The ~~overall~~ increase in cost ~~is related to extending work~~from Avelead was partially offset by a decrease in spend with the Company’s development partners to create user interfaces to improve our development velocity with the eValuator product. The additional cost related to development partners includes stock compensation expense of $113,000 and $364,000 for the three and nine month periods ended October 31, 2021 as compared to $116,000 and $223,000 for the respective comparable prior periods.third party vendors.

The increase in capitalized research and development ~~cost~~costs for the ~~three month~~three-month period ended ~~October 31, 2021~~April 30, 2022 is includes $208,000 related to Avelead off-set by lower ~~than that from~~capitalization primarily related to the ~~prior comparable period as the Company had several significant releases during the first half of fiscal year 2021 that consumed more capitalized time.~~Coding & CDI product. The Company expects total research and development expenses will continue to increase, primarily from increased capitalizable projects for Avelead plus ongoing expansion of work with development partners on eValuator. For the nine months ended October 31, 2021 and 2020, as a percentage of revenues, total research and development costs were 38% and 42%, respectively. This percentage is expected to normalize back to historical levels as Avelead development resources are ramped up to enhance its products.evaluator.

Non-routine Costs

Three Months Ended
($ in thousands): October 31, 2021 October 31, 2020 Change % Change
Non-routine costs $ 1,933 $ — $ 1,933 100 %

Nine Months Ended Three Months Ended
($ in thousands): October 31, 2021 October 31, 2020 Change % Change April 30, 2022 April 30, 2021 Change % Change
Non-routine costs $ 2,710 $ — $ 2,710 100 % $ 90 $ 441 $ (351 ) (80 )%

Refer to Note 2 – Summary of Significant Accounting Policies - Other Operating Costs – Non-routine costs – in the unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements” for further details with respect to ~~Non-routine~~non-routine costs. The Non-routine costs for the ~~three and nine months~~three-months ended ~~October 31, 2021~~April 30, 2022 are primarily related to the transaction costs of Avelead ~~acquisition and~~acquisition. The non-routine costs for the three-months ended April 30, 2021 included executive bonuses that were transactional in ~~nature.~~
~~Loss on Exit from Membership Agreement~~nature in addition to other transaction costs of the Avelead acquisition.

Nine Months Ended
($ in thousands): October 31, 2021 October 31, 2020 Change % Change
Loss on exit from membership agreement $ — $ 105 $ (105 ) (100 )%
Refer to Note 4 – Operating Leases in our unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements” for further details with respect to the Company’s former shared office arrangement in Atlanta. In the nine months ended October 31, 2020, we recorded $105,000 in costs 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.
31

Other Income (Expense)

Three Months Ended
($ in thousands): October 31, 2021 October 31, 2020 Change % Change
Interest expense $ (85 ) $ (12 ) $ (73 ) 608 %
Loss on Extinguishment of Debt (43 ) — (43 ) 100 %
Other (427 ) 14 (441 ) (3,150 )%
Total other income (expense) $ (555 ) $ 2 $ (557 ) (27,850 )%
Nine Months Ended Three Months Ended
($ in thousands): October 31, 2021 October 31, 2020 Change % Change April 30, 2022 April 30, 2021 Change % Change
Interest expense $ (107 ) $ (39 ) $ (68 ) 174 % $ (132 ) $ (13 ) $ (119 ) 915 %
Loss on Extinguishment of Debt (43 ) — (43 ) 100 %
Other (421 ) (68 ) (353 ) 519 % 533 15 518 3453 %
Forgiveness of PPP loan and accrued interest 2,327 — 2,327 100 %
Total other income (expense) $ 1,756 $ (107 ) $ 1,863 (1,741 )%
Total other income $ 401 $ 2 $ 399 19,950 %

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 the three ~~and nine~~ months ended ~~October 31, 2021~~April 30, 2022 from the prior comparable period primarily due to the $10,000,000 term loan with Bridge Bank (See Note 5 – Debt).

Other ~~expense~~income for the three ~~and nine month periods~~months ended ~~October 31, 2021 reflects~~April 30, 2022 includes a valuation adjustment of ~~$417,000~~$500,000 related to the acquisition earnout liabilities associated with the Avelead acquisition (Refer to Note 3 – Business Combination and Divestiture of the unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements”). Other ~~expense~~income for the ~~nine month~~three-month period ended ~~October 31, 2020~~April 30, 2022 includes ~~each~~$48,000 related to the sublease of ~~(i) a $37,000 impact for~~the Alpharetta location (Refer to Note 4 – Operating Leases of the unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements”). Other income was offset by $15,000 currency transaction revaluation, and (ii) $31,000 for Montefiore valuation adjustment. Forgiveness of PPP loan and accrued interest for the nine month period ended October 31, 2021 reflects the financial impact of the $2,301,000 PPP loan along with the accrued interest of $26,000 being forgiven.revaluation.

Provision for Income Taxes

For the three months ended ~~October 31,~~April 30, 2022 and 2021 ~~and 2020~~ we recorded income tax expense of ~~$4,000~~$11,000 and ~~income tax benefit of $803,000, respectively. For the nine months ended October 31, 2021 and 2020 we recorded income tax expense of~~ $9,000, ~~and income tax benefit of $1,536,000,~~ respectively, which is comprised of estimated federal, state and local income tax provisions. ~~The income tax benefit for the nine months ended October 31, 2020 is partially off-set by an income tax from discontinued operations.~~ The Company has a substantial amount of net operating losses for federal and state income tax purposes. For the nine months ended October 31, 2021, the net income tax expense is reported under continuing operations. Refer to Note 6 – Income Taxes 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 condensed 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 by us, may differ from and may not be comparable to similarly titled measures used by other companies.

32

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 severances 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. 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 Amended 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.

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 Amended 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 condensed consolidated financial statements included above.

33

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 three ~~and nine~~ months ended ~~October 31, 2021 and 2020~~April 30, 2022 (amounts in thousands, except per share data). All of the items included in the reconciliation from EBITDA and Adjusted EBITDA to net loss 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.

Three Months Ended Nine Months Ended Three Months Ended
In thousands, except per share data October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020 April 30, 2022 April 30, 2021
Adjusted EBITDA Reconciliation
Loss from continuing operations $ (4,379 ) $ (1,069 ) $ (6,913 ) $ (3,209 ) $ (2,787 ) (2,462 )
Interest expense 85 12 107 39 132 13
Income tax (benefit)/ expense 4 (803 ) 9 (1,536 )
Income tax expense 11 9
Depreciation 16 4 53 35 14 21
Amortization of capitalized software development costs 446 477 1,430 1,128 429 506
Amortization of intangible assets 490 123 721 370 528 115
Amortization of other costs 110 89 338 242 112 116
EBITDA $ (3,228 ) $ (1,167 ) $ (4,255 ) $ (2,931 ) $ (1,561 ) (1,682 )
Share-based compensation expense 537 442 1,659 1,054 326 565
Non-cash valuation adjustments 417 — 417 31
Loss on exit of operating lease — — — 105
Non-cash fair value adjustments (500 ) —
Non-routine costs 1,933 — 2,710 — 90 441
Forgiveness of PPP loan and accrued interest — — (2,327 ) —
Other — 16 —
Loss on early extinguishment of debt 43 — 43
Other non-recurring operating (income) expenses (48 ) 16
Adjusted EBITDA $ (298 ) $ (725 ) $ (1,737 ) $ (1,741 ) $ (1,693 ) (660 )
Adjusted EBITDA margin (1) (5 )% (27 )% (15 )% (21 )% (29 )% (22 )%

Adjusted EBITDA per Diluted Share Reconciliation
Loss from continuing operations per common share — diluted $ (0.10 ) $ (0.04 ) $ (0.17 ) $ (0.11 ) $ (0.06 ) (0.07 )
Net (loss) income per common share — diluted $ (0.10 ) $ (0.04 ) $ (0.16 ) $ 0.04
Net loss per common share — diluted (3) $ (0.06 ) (0.06 )
Adjusted EBITDA per adjusted diluted share (2) $ (0.01 ) $ (0.02 ) $ (0.04 ) $ (0.06 ) $ (0.04 ) (0.02 )

Diluted weighted average shares (3) 45,709,952 30,286,197 41,498,873 30,026,890
Basic weighted average shares 47,028,463 37,497,958
Includable incremental shares — adjusted EBITDA (4) 353,851 606,329 496,393 423,682 257,498 686,807
Adjusted diluted shares 46,063,803 30,892,526 41,995,266 30,450,572 47,285,961 38,184,765

(1) Adjusted EBITDA as a percentage of GAAP net revenue.

(2) Adjusted EBITDA per adjusted diluted share for ~~our~~the Company’s common stock is computed using the treasury stock method. Since the Company was in a loss position for the periods presented, adjusted EBITDA per adjusted diluted share is the same as adjusted EBITDA per adjusted share as the inclusion of all potential common shares outstanding would have been anti-dilutive.

(3) ~~Diluted EPS~~Since the Company was in a loss position for ~~our~~the periods presented, diluted net loss per common ~~stock was computed using~~share is the ~~treasury stock method.~~same as basic net loss per common share as the inclusion of all potential common shares outstanding would have been anti-dilutive.

(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.~~profit.

34

Application of Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Management considers an accounting policy to be critical if the accounting policy requires management to make particularly difficult, subjective, or complex judgments about matters that are inherently uncertain. A summary of our critical accounting policies is included in Note 2 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2021. During the period ended October 31, 2021, the Company adopted ASU 2019-12. Refer to Note 6 – Income Taxes for more information.~~2022. There have been no material changes to the critical accounting policies disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2021.~~2022.

Liquidity and Capital Resources

The Company’s liquidity is dependent upon numerous factors including: (i) the timing and amount of revenue and collection of contractual amounts from customers, (ii) amounts invested in research and development and capital expenditures, and (iii) the level of operating expenses, all of which can vary significantly from quarter to quarter. The Company’s primary cash requirements include regular payment of payroll and other business expenses, principal and interest payments on debt and capital expenditures. 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 credit facilities.

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,~~$16,100,000, 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 these financial statements. Cash and cash equivalent balances at ~~October 31, 2021~~April 30, 2022 and January 31, ~~2021~~2022 were approximately ~~$10,409,000~~$7,955,000 and ~~$2,409,000,~~9,885,000 respectively. 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.

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.
The Company has liquidity through the Second Amended and Restated Loan and Security Agreement described in more detail in Note 5 – Debt in our unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements”. 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 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.

35
The Second Amended and Restated Loan and Security Agreement includes customary financial covenants, including the requirements that the Company achieve certain EBITDA levels and fixed coverage ratios and maintain certain cash balances and certain recurring revenue levels. 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 ~~October 31, 2021,~~April 30, 2022, the Company was in compliance with the Second Amended and Restated Loan and Security Agreement covenants.
35
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 Act (“PPP”). Companies are able to borrow, through the SBA, up to two months of payroll. The Company received approximately $2,301,000 through the SBA for the PPP loan program. These funds were utilized by the Company to fund payroll during the COVID-19 pandemic and avoid further staffing reductions during the slowdown. The loan required principal payments, beginning after the seventh monthly anniversary, and was required to be fully 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.~~

The Company has cash on its balance sheet of ~~$10.4 million~~$7,955,000 at ~~October 31, 2021.~~April 30, 2022. The Company believes that its cash on-hand, along with the term debt is sufficient to support its operations until it is able to generate cash from operations.

Significant cash obligations

(in thousands) October 31, 2021 January 31, 2021 April 30, 2022 January 31, 2022
Term loan (1) $ 9,884 $ 2,301 $ 9,924 $ 9,904

(1) Term loan balance is reported net of deferred financing costs of ~~$116,000~~$76,000 and $0$96,000 as of ~~October 31, 2021~~April 30, 2022 and January 31, ~~2021,~~2022, respectively. Refer to Note 5 - Debt for additional information. The term loan payable as of ~~October 31, 2021~~April 30, 2022 was bank term ~~debt.~~debt under the Second Amended and Restated Loan and Security Agreement. The term loan balance at January 31, 2021 is the Company’s PPP loan which was forgiven in June 2021.

Operating cash flow activities

Nine months Ended Three months Ended
(in thousands) October 31, 2021 October 31, 2020 April 30, 2022 April 30, 2021
Net loss from continuing operations $ (6,913 ) $ (3,209 ) $ (2,787 ) $ (2,462 )
Non-cash adjustments to net loss 2,379 1,364 942 1,323
Cash impact of changes in assets and liabilities 512 (1,838 ) 575 661
Net cash used in operating activities $ (4,022 ) $ (3,683 ) $ (1,270 ) $ (478 )

The use of cash from operating activities is ~~relatively consistent between~~due to the ~~nine~~loss from operations for the three months ended ~~October 31, 2021 and 2020.~~April 30, 2022. The Company had a higher net loss from operations and lower impact of changes in assets and liabilities in the first ~~nine~~three months of fiscal ~~2021~~2022 compared to ~~2020.~~2021. Within non-cash adjustments to net loss, the Company made an adjustment to exclude the ~~PPP loan and related interest that was forgiven~~$500,000 change in the ~~first nine months~~fair value of ~~fiscal 2021 as well as the valuation adjustment 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.liability for April 30, 2022.

Investing cash flow activities

Nine months Ended
(in thousands) October 31, 2021 October 31, 2020
Investment in Avelead, net of cash $ (12,354 ) —
Purchases of property and equipment (18 ) $ (42 )
Proceeds from sales of ECM Assets 800 11,288
Capitalized software development costs (1,048 ) (1,495 )
Net cash (used in) provided by investing activities $ (12,620 ) $ 9,751
Three months Ended
(in thousands) April 30, 2022 April 30, 2021
Capitalized software development costs (519 ) (378 )
Net cash used in by investing activities $ (519 ) $ (378 )

The cash used in investing activities for the ~~nine~~three months ended ~~October 31,~~April 30, 2022 and April 30, 2021, ~~included the cash used to acquire Avelead,~~include capitalized software development ~~costs, off-set by~~costs. The Company expects increased capitalizable projects associated with the ~~release~~acquisition of ~~escrowed funds in fiscal 2021 from the sale~~Avelead, plus ongoing expansion of ~~the ECM Assets.~~work with development partners on evaluator. Refer to Note 3 – Business Combination and Divestiture for more information on Avelead and the sale of the ECM Assets. The proceeds from the sale of the ECM Assets in the nine months ended October 31, 2020 are net of direct transaction expenses. Refer to Note 9 – Discontinued Operations for more information 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.Avelead.

36

Financing cash flow activities

Nine months Ended Three months Ended
(in thousands) October 31, 2021 October 31, 2020 April 30, 2022 April 30, 2021
Proceeds from issuance of common stock $ 16,100 $ — $ — $ 16,100
Payments for costs directly attributable to the issuance of common stock (1,313 ) — — (1,293 )
Proceeds of term loan payable 10,000 2,301
Payments related to settlement of employee shared based awards (380 ) (168 ) (141 ) (161 )
Payment for deferred financing costs (168 ) — — (31 )
Principal repayments on term loan — (4,000 )
Payment of royalty liability — (500 )
Other (3 ) — — (1 )
Net cash provided by (used in) financing activities $ 24,236 $ (2,367 ) $ (141 ) $ 14,614

The cash provided by financing activities ~~for~~in the ~~nine~~three months ended ~~October 31,~~April 30, 2021, was ~~primarily~~ from the public Offering of the Company’s common stock, which closed on March 2, 2021. Refer to Note 7 – Equity for additional information. Additionally, the Company received proceeds of $10,000,000 as a result of the Second Amended Loan and Security Agreement entered into on August 26, 2021. Refer to Note 5 – Debt for additional information. The cash used in financing activities for the nine months ended October 31, 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 3. 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.

Item 4. 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(e)) as of ~~October 31, 2021.~~April 30, 2022. Based on that evaluation, ~~the~~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 ~~October 31, 2021.~~April 30, 2022. Avelead, which was acquired on August 16, 2021, was excluded from the scope of the assessment of the effectiveness of our disclosure controls and procedures as of ~~October 31, 2021.~~April 30, 2022.

37

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 unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements” for further information on the Avelead acquisition). In accordance with the general guidance issued by the staff of the SEC, Avelead ~~will be~~was excluded from the scope of management’s report on internal control over financial reporting for the year ending 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 quarter ended ~~October 31, 2021~~April 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In connection with the acquisition, we have performed additional analyses and other procedures to enable management to conclude that our condensed consolidated financial statements included in this report fairly, in all material respects, our financial condition and results of operations as of and for the three ~~and nine~~ months ended ~~October 31, 2021.~~April 30, 2022.

PART II. OTHER INFORMATION

Item 1. 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 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 in our Annual Report on Form 10-K for the year ended January 31, ~~2021~~2022 which Annual Report includes a detailed discussion of the Company’s risk factors. There have been no material changes to the risk factors as disclosed in our Annual ~~Report, other than as set forth below.~~Report. Nevertheless, many of the risk factors disclosed in Item 1A of our Annual Report have been, and we expect will continue to be aggravated by the impact of the ongoing COVID-19 pandemic. If any of the risks develop into actual events, our business, financial condition, or results of operations could be negatively affected, the market price of our common stock or other securities could decline, and you may lose all or part of your investment.

One factor, that has arisen due to the Avelead acquisition,(Refer to Note 3 – Business Combination and Divestiture in our unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements”) is our ability to maintain effective internal control over financial reporting, as follows:
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.
38

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

~~On October 8, 2021,~~During the three months ended April 30, 2022, the Company issued to 180 Consulting an aggregate of ~~128,415~~78,031 shares of common stock as compensation for services previously rendered during the ~~six~~three months ended ~~July~~January, 31, ~~2021.~~2022. Such shares were issued 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 private placement in reliance on the exemption from registration available under Section 4(a)(2) of the Securities Act, including Regulation D promulgated thereunder and the certificate representing such shares has a legend imprinted on it 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.

The Company also issued 5,021,972 shares of its restricted common stock (the “Acquisition Restricted Common Stock”) as a portion of the aggregate consideration for the purchase of Avelead. The Acquisition Restricted Common Stock has a fair value as of the closing date of the acquisition of $6.5 million. The 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 and the certificate representing such shares has a legend imprinted on it 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.

The following table sets forth information with respect to our repurchases of common stock during the three months ended ~~October 31, 2021:~~April 30,2022:

Total
Number of
Maximum
Number
Shares
Purchased
of Shares
that May

Total
Number of
as Part of
Publicly Yet Be
Purchased
Shares
Purchased
Average
Price Paid
Announced
Plans or
under the
Plans or

(1) per Share Programs Programs
August 1 - August 31 — $ — — —
September 1 - September 30 49,813 1.77 — —
October 1 - October 31 — — — —
Total 49,813 $ 1.77 — —
Total
Number of Maximum
Number
Shares
Purchased of Shares
that May
Total
Number of as Part of
Publicly Yet Be
Purchased
Shares
Purchased Average
Price Paid Announced
Plans or under the
Plans or
(1) per Share Programs Programs
February 1 - February 28 35,676 $ 1.44 — —
March 1 - March 31 57,320 1.38 — —
April 1 - April 30 2,705 1.60 — —
Total 95,701 $ 1.41 — —

(1) Amount represents shares surrendered by employees to satisfy tax withholding obligations resulting from restricted stock that vested during the three months ended ~~October 31, 2021.~~April 30, 2022.

39

Item 6. EXHIBITS

See Index to Exhibits.

INDEX TO EXHIBITS

Exhibit No. Description of Exhibit
~~2.1~~ Unit Purchase Agreement by and among Streamline Health Solutions, Inc., Avelead Consulting, LLC, Jawad Shaikh and Badar Shaikh, dated as of August 16, 2021 (Incorporated by reference from Exhibit 2.1 of the Current Report on Form 8-K, filed 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 Quarterly Report on Form 10-Q, filed September 15, 2014).
3.2 Certificate of Amendment of Certificate of Incorporation of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 3.1 of the Current Report on Form 8-K, filed May 24, 2021).
3.3 Bylaws of Streamline Health Solutions, Inc., as amended and restated through March 28, 2014 (Incorporated by reference from Exhibit 3.1 of the Current Report on Form 8-K, filed April 3, 2014).
~~10.1~~ 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 Current Report on Form 8-K, filed August 18, 2021).
~~10.2~~ 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 Current Report on Form 8-K, filed August 18, 2021).
~~10.3~~ Employment Agreement, dated as of August 16, 2021, by and between Avelead Consulting, LLC and Jawad Shaikh (Incorporated by reference from Exhibit 10.3 of the Current Report on Form 8-K, filed August 18, 2021).
~~10.4~~ 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, LLC, Avelead Consulting LLC and Western Alliance Bank (Incorporated by reference from Exhibit 10.1 of the Current Report on Form 8-K, filed August 26, 2021).
31.1* Certification by Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act.
31.2* Certification by Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act.
32.1* Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2* Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS* INLINE XBRL INSTANCE DOCUMENT
101.SCH* INLINE XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
101.CAL* INLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF* INLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB* INLINE XBRL TAXONOMY EXTENSION LABELS LINKBASE
101.PRE* INLINE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
104* COVER PAGE INTERACTIVE DATA FILE (FORMATTED AS INLINE XBRL AND CONTAINED IN EXHIBIT 101)

* Filed herewith.

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

40

SIGNATURES

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

STREAMLINE HEALTH SOLUTIONS, INC.

DATE: ~~December 14, 2021~~June 9, 2022 By: /S/ WYCHE T. “TEE” GREEN, III

Wyche T. “Tee” Green, III
Chief Executive Officer

DATE: ~~December 14, 2021~~June 9, 2022 By: /S/ Thomas J. Gibson
Thomas J. Gibson
Chief Financial Officer
41

	2021			2020
	Nine months Ended October 31,
	2021			2020
Net (Loss) Income		(6,512,000	)		1,483,000
LESS: Income from discontinued operations, net of tax		401,000			4,692,000
Loss from continuing operations, net of tax		(6,913,000	)		(3,209,000	)

Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation		53,000			35,000
Amortization of capitalized software development costs		1,430,000			1,128,000
Amortization of intangible assets		721,000			370,000
Amortization of other deferred costs		369,000			242,000
Valuation adjustments		417,000			31,000
Benefit for income taxes		—			(1,536,000	)
Loss on early extinguishment of debt		43,000			—
Loss on exit from membership agreement		—			105,000
Share-based compensation expense		1,659,000			1,004,000
Provision (Benefit) for accounts receivable allowance		14,000			(15,000	)
Forgiveness of PPP loan and accrued interest		(2,327,000	)		—
Changes in assets and liabilities:
Accounts and contract receivables		666,000			1,151,000
Other assets		(551,000	)		(514,000	)
Accounts payable		(72,000	)		(489,000	)
Accrued expenses and other liabilities		774,000			(386,000	)
Deferred revenue		(305,000	)		(1,600,000	)
Net cash used in operating activities		(4,022,000	)		(3,683,000	)
Net cash from (used in) operating activities – discontinued operations		406,000			(2,319,000	)
Cash flows from investing activities:
Investment in Avelead, Net of Cash		(12,354,000	)		—
Proceeds from sale of ECM Assets		800,000			11,288,000
Purchases of property and equipment		(18,000	)		(42,000	)
Capitalization of software development costs		(1,048,000	)		(1,495,000	)
Net cash provided by investing activities		(12,620,000	)		9,751,000
Cash flows from financing activities:
Repayment of bank term loan		—			(4,000,000	)
Proceeds from issuance of term loan		10,000,000			2,301,000
Proceeds from issuance of common stock		16,100,000			—
Payments for costs directly attributable to the issuance of common stock		(1,313,000	)		—
Payments related to settlement of employee share-based awards		(380,000	)		(168,000	)
Payment for deferred financing costs		(168,000	)		—
Payment on royalty liability		—			(500,000	)
Other		(3,000	)		—
Net cash provided by (used in) financing activities		24,236,000			(2,367,000	)
Net increase in cash and cash equivalents		8,000,000			1,382,000
Cash and cash equivalents at beginning of period		2,409,000			1,649,000
Cash and cash equivalents at end of period	$	10,409,000			3,031,000

			Quoted Prices in		Significant Other		Significant Unobservable
	Total Fair		Active Markets		Observable Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
At October 31, 2021
Acquisition earnout liability (1)	$	11,101,000	$	—	$	—	$	11,101,000
At January, 31, 2021
PPP Loan (2)	$	2,301,000	$	—	$	2,301,000	$	—

(1)	The fair value of the acquisition earnout liability is based upon a probability-weighted discounted cash flow that was completed at the date of acquisition and updated as of ~~October 31, 2021.~~April 30, 2022. The change in the ~~valuation~~fair value of the acquisition earnout liability was $~~417,000~~2,351,000 from the date of closing of the Avelead acquisition, August 16, 2021 to the end of the quarter, ~~October~~April 30, 2022. The change in the fair value of the acquisition earnout liability was $500,000 from the end of the previous fiscal year, January 31, ~~2021. The valuation adjustment~~2022 to the end of the quarter, April 30, 2022.The change in the fair value is recognized in “other expense” in the accompanying condensed consolidated statement of operations.

~~(2)~~	The fair value of the PPP loan was determined based on discounting the loan amount as of January 31, 2021. The fair value was determined using market interest rates that the Company believes would be available for similar types of financial instruments. The Company estimated that the impact of the fair value adjustment on the PPP loan would have resulted in a lower fair value of $~~2,231,000~~ ~~as compared to the book value of $2,301,000, a reduction of $70,000~~.

	●	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

									April 30, 2022		April 30, 2021
	Three Months Ended				Nine Months Ended				Three Months Ended
	October 31, 2021		October 31, 2020		October 31, 2021		October 31, 2020		April 30, 2022		April 30, 2021
Recurring revenue	$	3,907,000	$	1,970,000	$	8,536,000	$	6,167,000	$	3,941,000	$	2,234,000
Non-recurring revenue		1,607,000		671,000		2,797,000		2,205,000		1,994,000		717,000
Total revenue:	$	5,514,000	$	2,641,000	$	11,333,000	$	8,372,000	$	5,935,000	$	2,951,000

	Three Months ended October 31, 2021			Nine Months ended October 31, 2021
Separation agreement expense	$	706,000		$	706,000
Broker Fees		508,000			553,000
Professional Fees		358,000			740,000
Executive bonuses		355,000			705,000
Loss on exit from operating lease		22,000			22,000
Other		(16,000	)		(16,000	)
Total non-routine costs	$	1,933,000		$	2,710,000

	Three Months ended April 30, 2022		Three Months ended April 30, 2021
Professional fees	$	90,000	$	91,000
Executive bonuses		—		350,000
Total non-routine costs	$	90,000	$	441,000


	October 31,
	2021		2020
Forgiveness of PPP loan and accrued interest	$	2,327,000	$	—
Working capital accrual		116,000		—
Escrowed funds from sale of ECM Assets		—		800,000
Right-of Use Assets from operating lease		—		540,000
Capitalized software purchased with stock (Note 8 – Commitments and Contingencies)		—		51,000

	●	The first year of SaaS Contingent Consideration is calculated as 75% of Avelead’s recognized SaaS revenue from September 1, 2021 to August 31, 2022. The first-year payment is subject to a deduction of $665,000 spread equally between the cash and common stock portion of the earnout consideration. The first year earnout will be paid on or about October 15, 2022, subject to a dispute and resolution period. Assuming that Avelead is within 80% of its forecasted SaaS revenue in the first year earnout¹, the Company agreed to a floor and ceiling on the value of the Company’s restricted common stock issued as consideration for the earnout. That collar has a floor of $3.50 per share and a ceiling of $5.50 per share for the first year ~~earnout.~~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 earnout¹, the Company agreed to a floor and ceiling on the Company’s restricted common stock issued as consideration for the earnout. That collar has a floor of $4.50 per share and a ceiling of $6.50 per share for the second year ~~earnout.~~earnout.

(in thousands)
Components of total consideration, net of cash acquired:
Cash	$	11,900		$	11,900
Cash, seller expenses		285			285
Cash, estimated net working capital adjustment		169			285
Payable, holdback and final working capital adjustment		116
Restricted Common Stock		6,554			6,554
Acquisition earnout liabilities		10,684	(a)		10,684	(a)
Total consideration	$	29,708		$	29,708

(in thousands)
Net tangible assets:
Net tangible assets (liabilities):
Accounts receivable	$	1,246		$	1,246
Unbilled revenue		200			200
Prepaid expenses		178			178
Fixed assets		37			37
Accounts payable		(490	)		(490	)
Accrued expenses		(397	)		(397	)
Deferred revenues		(863	)		(863	)
Net tangible assets		(89	)
Net tangible assets (liabilities)					(89	)
Goodwill		12,377			12,377
Customer Relationships (SaaS)		8,370			8,370
Customer Relationships (Consulting)		1,330			1,330
Internally Developed Software		6,380			6,380
Trademarks and Tradenames		1,340			1,340
Net assets acquired and liabilities assumed	$	29,708		$	29,708

		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

	April 30, 2022			April 30, 2021
	Three Months Ended April 30, 2021
	Actual			Pro Forma
Revenues	$	2,951,000		$	5,482,000
Loss from continuing operations	$	(2,462,000	)	$	(2,606,000	)


2022	$	158,000
2023		35,000
Total lease payments		193,000
Less present value adjustment		(5,000	)
Present value of lease liabilities	$	188,000

	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”.

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

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

	October 31, 2021^(a)			January 31, 2021^(b)
Term loan	$	10,000,000		$	2,301,000
Deferred financing cost		(116,000	)		—
Total		9,884,000			2,301,000
Less: Current portion		(125,000	)		(1,534,000	)
Non-current portion of debt	$	9,759,000		$	767,000

~~(a)~~	~~The term loan, as of October 31, 2021, is related to the new term loan agreement that the Company entered into on August 26, 2021 with Bridge Bank (see description above).~~

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

	2022			2021
	April 30,
	2022			2021
Current tax expense:
Federal	$	(7,000	)	$	-
State		(4,000	)		(9,000	)
Total current tax provision	$	(11,000	)	$	(9,000	)

		2020
Net Proceeds, including escrowed funds	$	12,088,000
Net tangible assets sold:
Accounts Receivable		(1,130,000	)
Prepaid Expenses		(576,000	)
Deferred Revenue		4,010,000
Net tangible assets sold		2,304,000
Capitalized software development costs		(1,772,000	)
Goodwill		(4,825,000	)
Transaction cost		(1,782,000	)
Gain on sale of discontinued operations	$	6,013,000


	As of
	October 31, 2021		January 31,2021
Current assets of discontinued operations:
Accounts receivable	$	—	$	587,000
Current assets of discontinued operations	$	—	$	587,000
Long-term assets of discontinued operations:
Property and equipment, net	$	—	$	13,000
Long-term assets of discontinued operations	$	—	$	13,000
Current liabilities of discontinued operations:
Accrued expenses	$	—	$	8,000
Deferred revenues		—		587,000
Current liabilities of discontinued operations	$	—	$	595,000

	●	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;

	●	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”).

	Three Months Ended
($ in thousands):	October 31, 2021		October 31, 2020		Change		% Change

Software licenses	$	150	$	19	$	131		689	%
Professional services		944		161		783		486	%
Audit services		513		491		22		4	%
Maintenance and support		1,082		1,070		12		1	%
Software as a service		2,825		900		1,925		214	%
Total Revenues	$	5,514	$	2,641	$	2,873		109	%

	Three Months Ended
(in thousands):	October 31, 2021		October 31, 2020		Change			% Change
Cost of software licenses	$	133	$	183	$	(50	)		(27	)%
Cost of professional services		936		268		668			249	%
Cost of audit services		409		425		(16	)		(4	)%
Cost of maintenance and support		57		160		(103	)		(64	)%
Cost of software as a service		1,088		443		645			146	%
Total cost of sales	$	2,623	$	1,479	$	1,144			77	%

	●	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 Amended 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.

(1)	Adjusted EBITDA as a percentage of GAAP net revenue.

(2)	Adjusted EBITDA per adjusted diluted share for ~~our~~the Company’s common stock is computed using the treasury stock method. Since the Company was in a loss position for the periods presented, adjusted EBITDA per adjusted diluted share is the same as adjusted EBITDA per adjusted share as the inclusion of all potential common shares outstanding would have been anti-dilutive.

(3)	~~Diluted EPS~~Since the Company was in a loss position for ~~our~~the periods presented, diluted net loss per common ~~stock was computed using~~share is the ~~treasury stock method.~~same as basic net loss per common share as the inclusion of all potential common shares outstanding would have been anti-dilutive.

(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.~~profit.

(in thousands)		October 31, 2021				January 31, 2021				April 30, 2022				January 31, 2022
Term loan (1)		$	9,884			$	2,301			$	9,924			$	9,904

					Total Number of		Maximum Number
					Shares Purchased		of Shares that May
	Total Number of				as Part of Publicly		Yet Be Purchased
	Shares Purchased		Average Price Paid		Announced Plans or		under the Plans or
		(1)		per Share		Programs		Programs
August 1 - August 31		—	$	—		—		—
September 1 - September 30		49,813		1.77		—		—
October 1 - October 31		—		—		—		—
Total		49,813	$	1.77		—		—