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

	31-Oct-21		31-Jan-21
	As of
	31-Oct-21		31-Jan-21
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	10,409,000	$	2,409,000
Accounts receivable, net of allowance for doubtful accounts of $99,000 and $65,000, respectively		3,287,000		2,929,000
Contract receivables		581,000		174,000
Assets held in escrow		—		800,000
Prepaid and other current assets		876,000		416,000
Current assets of discontinued operations		—		587,000
Total current assets		15,153,000		7,315,000
Non-current assets:
Property and equipment, net of accumulated depreciation of $176,000 and $452,000, respectively		116,000		104,000
Right-of use asset for operating lease		262,000		391,000
Capitalized software development costs, net of accumulated amortization of $4,937,000 and $3,507,000, respectively		5,563,000		5,945,000
Intangible assets, net of accumulated amortization of $5,494,000 and $4,773,000, respectively		17,323,000		624,000
Goodwill		23,089,000		10,712,000
Other		908,000		873,000
Long-term assets of discontinued operations		—		13,000
Total non-current assets		47,261,000		18,662,000
Total assets	$	62,414,000	$	25,977,000

See accompanying notes to condensed consolidated financial statements.

~~Index~~

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(rounded to ~~Financial Statements~~

STREAMLINE HEALTH SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

As of
October 31, 2017 January 31, 2017
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 807,778
$ 1,116,525
Accrued compensation 593,510
496,706
Accrued other expenses 587,209
484,391
Current portion of term loan 596,984
655,804
Deferred revenues 6,130,259
9,916,454
Current portion of capital lease obligations —
91,337
Total current liabilities 8,715,740
12,761,217
Non-current liabilities:
Term loan, net of deferred financing cost of $146,009 and $199,211, respectively 4,032,865
4,883,286
Warrants liability 150,857
46,191
Royalty liability 2,456,233
2,350,754
Lease incentive liability 293,322
339,676
Deferred revenues, less current portion 487,832
568,515
Total non-current liabilities 7,421,109
8,188,422
Total liabilities 16,136,849
20,949,639
Series A 0% Convertible Redeemable Preferred Stock, $.01 par value per share, $8,849,985 redemption value, 4,000,000 shares authorized, 2,949,995 shares issued and outstanding, net of unamortized preferred stock discount of $0 8,849,985
8,849,985
Stockholders’ equity:
Common stock, $.01 par value per share, 45,000,000 shares authorized; 19,984,743 and 19,695,391 shares issued and outstanding, respectively 199,847
196,954
Additional paid in capital 81,491,728
80,667,771
Accumulated deficit (72,162,935 ) (69,025,851 )
Total stockholders’ equity 9,528,640
11,838,874
$ 34,515,474
$ 41,638,498

the nearest thousand dollars, except share and per share information)

	As of
	31-Oct-21			31-Jan-21
	(Unaudited)

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	689,000		$	272,000
Accrued expenses		2,024,000			908,000
Current portion of term loan, less deferred financing cost		125,000			1,534,000
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
Total current liabilities		7,435,000			7,369,000
Non-current liabilities:
Term loan, less current portion		9,759,000			767,000
Deferred revenue, less current portion		156,000			130,000
Acquisition earnout liability		11,101,000			—
Operating lease obligation, less current portion		82,000			222,000
Other Non-Current Liabilities		280,000			—
Total non-current liabilities		21,378,000			1,119,000
Total liabilities		28,813,000			8,488,000

Stockholders’ equity:
Common stock, $.01 par value per share, 65,000,000 shares authorized; 47,639,650 and 31,597,975 shares issued and outstanding, respectively		476,000			316,000
Additional paid in capital		118,754,000			96,290,000
Accumulated deficit		(85,629,000	)		(79,117,000	)
Total stockholders’ equity		33,601,000			17,489,000
Total liabilities and stockholders' equity	$	62,414,000		$	25,977,000

See accompanying notes to condensed consolidated financial statements.

~~Index to Financial Statements~~

STREAMLINE HEALTH SOLUTIONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~(Unaudited)~~

Three Months Ended October 31 Nine Months Ended October 31
2017 2016 2017 2016
Revenues:
Systems sales $ 348,526
$ 314,218
$ 1,055,941
$ 2,190,256
Professional services 801,771
630,961
1,793,618
1,869,656
Audit services 280,025
234,347
919,485
234,347
Maintenance and support 3,250,229
3,749,596
9,883,563
11,237,637
Software as a service 1,718,748
1,706,366
4,586,532
5,144,876
Total revenues 6,399,299
6,635,488
18,239,139
20,676,772
Operating expenses:
Cost of systems sales 434,138
663,148
1,596,988
2,080,263
Cost of professional services 555,815
723,358
1,814,236
1,891,146
Cost of audit services 404,280
595,575
1,236,358
595,575
Cost of maintenance and support 667,307
790,291
2,241,969
2,483,462
Cost of software as a service 289,503
450,695
914,711
1,390,308
Selling, general and administrative 2,819,549
3,212,350
8,983,248
10,153,140
Research and development 932,251
1,969,415
3,985,161
5,800,169
Total operating expenses 6,102,843
8,404,832
20,772,671
24,394,063
Operating income (loss) 296,456
(1,769,344 ) (2,533,532 ) (3,717,291 )
Other expense:
Interest expense (113,078 ) (98,871 ) (360,723 ) (380,897 )
Miscellaneous expense (177,282 ) (60,555 ) (235,007 ) (39,089 )
Earnings (loss) before income taxes 6,096
(1,928,770 ) (3,129,262 ) (4,137,277 )
Income tax expense (2,607 ) (1,702 ) (7,822 ) (5,104 )
Net earnings (loss) $ 3,489
$ (1,930,472 ) $ (3,137,084 ) $ (4,142,381 )
Less: deemed dividends on Series A Preferred Shares —
(72,710 ) —
(875,935 )
Net earnings (loss) attributable to common stockholders $ 3,489
$ (2,003,182 ) $ (3,137,084 ) $ (5,018,316 )
Basic net earnings (loss) per common share $ —
$ (0.10 ) $ (0.16 ) $ (0.26 )
Number of shares used in basic per common share computation 19,985,822
19,645,521
19,838,691
19,477,538
Diluted net earnings (loss) per common share $ —
$ (0.10 ) $ (0.16 ) $ (0.26 )
Number of shares used in diluted per common share computation 23,068,423
19,645,521
19,838,691
19,477,538

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

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

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

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

See accompanying notes to condensed consolidated financial statements.

~~Index to Financial Statements~~

STREAMLINE HEALTH SOLUTIONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~

~~(Unaudited)~~

Nine Months Ended October 31
2017 2016
Operating activities:
Net loss $ (3,137,084 ) $ (4,142,381 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 595,866
895,438
Amortization of capitalized software development costs 1,574,493
2,146,374
Amortization of intangible assets 922,462
976,338
Amortization of other deferred costs 229,780
192,947
Valuation adjustment for warrants liability 104,666
(36,875 )
Share-based compensation expense 844,960
1,342,513
Other valuation adjustments 124,423
120,912
(Gain) loss on disposal of property and equipment (14,871 ) 567
Provision for accounts receivable 181,859
136,693
Changes in assets and liabilities, net of effects of acquisitions:
Accounts and contract receivables 1,957,439
1,679,810
Other assets (671,254 ) 130,875
Accounts payable (308,747 ) (78,320 )
Accrued expenses 134,324
(814,707 )
Deferred revenues (3,866,878 ) (3,793,603 )
Net cash used in operating activities (1,328,562 ) (1,243,419 )
Investing activities:
Purchases of property and equipment (24,517 ) (501,148 )
Capitalization of software development costs (1,336,942 ) (1,420,678 )
Payment for acquisition, net of cash received —
(1,400,000 )
Net cash used in investing activities (1,361,459 ) (3,321,826 )
Financing activities:
Principal repayments on term loan (962,443 ) (2,243,624 )
Principal payments on capital lease obligation (91,337 ) (535,896 )
Proceeds from exercise of stock options and stock purchase plan 23,703
14,793
Payments related to settlement of employee shared-based awards (41,813 ) (11,702 )
Net cash used in financing activities (1,071,890 ) (2,776,429 )
Net decrease in cash and cash equivalents (3,761,911 ) (7,341,674 )
Cash and cash equivalents at beginning of period 5,654,093
9,882,136
Cash and cash equivalents at end of period $ 1,892,182
$ 2,540,462

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

Balance at January 31, 2021		31,597,975		$	316,000		$	96,290,000		$	(79,117,000	)	$	17,489,000
Restricted stock issued		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	)
Share-based compensation		—			—			565,000			—			565,000
Issuance of Common Stock		10,062,500			101,000			15,999,000			—			16,100,000
Offering Expenses		—			—			(1,293,000	)		—			(1,293,000	)
Net loss		—			—			—			(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
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.

~~Index to 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

See accompanying notes to condensed consolidated financial statements.

STREAMLINE HEALTH SOLUTIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(Unaudited)~~

October 31, ~~2017~~

2021

NOTE 1 — BASIS OF PRESENTATION

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

The accompanying unaudited ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements have been prepared by ~~Streamline Health Solutions, Inc. (“we”, “us”, “our”, “Streamline”, or the “Company”),~~us pursuant to the rules and regulations applicable to quarterly reports on Form 10-Q of the U.S. Securities and Exchange ~~Commission.~~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 ~~our~~the Company’s management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements have been included. These ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in ~~our~~the Company’s most recent annual report on Form ~~10-K, Commission File Number 0-28132.~~10-K. Operating results for the nine months ended October 31, ~~2017~~2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, ~~2018.~~2022.

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

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.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~Our~~

The Company’s significant accounting policies are presented in “Note 2 – Significant Accounting Policies” in the fiscal year ~~2016~~2020 Annual Report on Form 10-K. Users of financial information for interim periods are encouraged to refer to the footnotes to the consolidated financial statements contained in the Annual Report on Form 10-K when reviewing interim financial results.

Use of Estimates

The preparation of financial statements in conformity with ~~U.S. generally accepted accounting principles (“GAAP”)~~GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates and judgments, including those related to the recognition of revenue, share-based compensation, capitalization of software development costs, intangible assets, the allowance for doubtful accounts, and income taxes. Actual results could differ from those estimates.

The Company wrote-off fully depreciated fixed assets during the first nine months of fiscal 2021 of $225,000. 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, and expands disclosure about fair value measurements.~~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~~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 ~~our~~the Company’s long-term debt approximates fair value since the variable interest rates being paid on the amounts approximate the market interest rate. The WSJ prime interest rate did not go below the “Floor” rate as described in the loan agreement. Accordingly, the interest rates charged were market rate. Long-term debt is classified as Level 2.

There were no transfers of assets or liabilities between Levels 1, 2, or 3 during the nine months ended October 31, 2021 and 2020.

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

~~Index to Financial Statements~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Total Fair Value
Quoted Prices in Active Markets
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
At October 31, 2017
Warrants liability (1) $ 151,000
$ —
$ —
$ 151,000
Royalty liability (2) 2,456,000
—
—
2,456,000

At January 31, 2017
Warrants liability (1) $ 46,000
$ —
$ —
$ 46,000
Royalty liability (2) 2,351,000
—
—
2,351,000

~~_______________~~

of our liabilities:

SCHEDULE OF FAIR VALUE OF LIABILITIES

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

(1)
~~(1)~~	The initial fair value of warrants liability was determined by management with the assistance of an independent third-party valuation specialist, and by management thereafter. Changes in fair value of the warrants are recognized within miscellaneous expense in the condensed consolidated statements of operations.


~~(2)~~	~~The initial fair value of royalty liability was determined by management with the assistance of an independent third-party valuation specialist, and by management thereafter.~~ The fair value of the ~~royalty~~acquisition earnout liability is based upon a probability-weighted discounted cash flow that was completed at the date of acquisition and updated as of October 31, 2021. The change in the valuation of the acquisition earnout liability was $417,000 from the date of closing of the Avelead acquisition, August 16, 2021 to the end of the quarter, October 31, 2021. The valuation adjustment 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 ~~probability-weighted revenue scenarios~~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 ~~Streamline Health® Clinical Analytics~~^TM ~~solution (“Clinical Analytics”) licensed from Montefiore Medical Center (discussed~~impact of the fair value adjustment on the PPP loan would have resulted in ~~Note 3 - Acquisitions and Divestitures). Fair~~a lower fair value ~~adjustments are included within miscellaneous expense in~~of $2,231,000 as compared to the ~~condensed consolidated statements~~book value of ~~operations.~~$2,301,000, a reduction of $70,000.

Revenue Recognition

We derive revenue from the sale of internally-developed software, either by licensing for local installation or by ~~software as~~ a ~~service (“SaaS”)~~SaaS delivery model, through ~~our~~the Company’s direct sales force or through third-party resellers. Licensed, locally-installed ~~clients~~customers on a perpetual model utilize ~~our~~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 ~~clients~~customers review their internal coding audit processes. ~~Additional revenues are also derived from reselling third-party software and hardware components.~~

We recognize revenue in accordance with ~~Accounting Standards Codification (ASC) 985-605,~~ ~~Software-Revenue Recognition,~~ASC ~~605-25,~~ 606, Revenue ~~Recognition — Multiple-Element Arrangements~~from Contracts with Customers (“ASC 606”), ~~and ASC 605-10-S99.~~

under the core principle of recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

We ~~commence~~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 ~~when all of~~and represent the ~~following criteria have been met:~~

~~Persuasive evidence of an arrangement exists,~~

~~Delivery has occurred~~distinct goods or services ~~have been rendered,~~

~~The arrangement fees~~that are ~~fixed or determinable,~~promised to the customer. Revenue is recognized net of any taxes collected from customers and

~~Collectibility is reasonably assured.~~

subsequently remitted to governmental authorities.

If we determine that ~~any of the above criteria~~we have not ~~been met,~~satisfied a performance obligation, we ~~will~~ defer recognition of the revenue until ~~all~~ the ~~criteria have been met.~~performance obligation is satisfied. Maintenance and support and SaaS agreements are generally non-cancelable or contain significant penalties for early cancellation, although ~~clients~~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 ~~are required,~~exist, revenue ismay not be recognized ~~upon~~until the satisfaction of such ~~criteria, as applicable.~~criteria.

~~Multiple Element Arrangements~~

~~We follow~~

The transaction price is allocated to the ~~accounting revenue guidance under Accounting Standards Update (ASU) 2009-13,~~ ~~Multiple-Deliverable Revenue Arrangements — a consensus~~unit of account based on the ~~FASB Emerging Issues Task Force~~.

~~Terms used in evaluation are as follows:~~

~~VSOE (vendor-specific objective evidence) — the price at which an element is sold as a separate stand-alone transaction~~

~~TPE (third-party evidence) — the price of an element charged by another company that is largely interchangeable in any particular transaction~~

~~ESP (estimated selling price) — our best estimate of the~~standalone selling price of ~~an element~~the performance obligations in the contract. Significant judgment is required to determine the standalone selling price (“SSP”) for each performance obligation and whether the amount allocated to each performance obligation depicts the amount that the Company expects to receive in exchange for the related product and/or service. As the selling prices of the ~~transaction~~

~~Index to Financial Statements~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~We follow accounting guidance~~Company’s software licenses are highly variable, the Company estimates the SSP of its software licenses using the residual approach when the software license is sold with other services and observable SSPs exist for ~~revenue recognition of multiple-element arrangements to determine whether such arrangements contain~~the other services. The Company estimates the SSP for maintenance, professional services, and audit services based on observable standalone sales.

Contract Combination

The Company may execute more than one ~~unit~~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 ~~accounting. Multiple-element arrangements require~~consideration to be paid in one agreement depends on the ~~delivery~~ price and/or performance of ~~multiple solutions,~~another agreement, or whether the goods or services ~~and/or right-to-use assets. To qualify as~~promised in the agreements represent a ~~separate unit of accounting,~~single performance obligation. The conclusions reached can impact the delivered item must have value to the client on a stand-alone basis. An item has stand-alone value to a client when it can be sold separately by any vendor or the client could resell the item on a stand-alone basis. Additionally, if the arrangement includes a general right of return relative to the delivered item, delivery or performanceallocation of the ~~undelivered item or items must be considered probable~~transaction price to each performance obligation and ~~substantially in~~ the ~~control~~timing of ~~the vendor.~~

We have a defined pricing methodology for all elements of the arrangement and proper review of pricing to ensure adherence to our policies. Pricing decisions include cross-functional teams of senior management, which use market conditions, expected contribution margin, size of the client’s organization and pricing history for similar solutions when establishing the selling price.

~~Software as a Service~~

We use ESP to determine the value for a software-as-a-service arrangement as we cannot establish VSOE, and TPE is not a practical alternative due to differences in functionality from our competitors. Similar to proprietary license sales, pricing decisions rely on the relative size of the client purchasing the solution and include calculating the equivalent value of maintenance and support on a present value basis over the term of the initial agreement period. Typically, revenue recognition ~~commences once the client goes live on the system and is recognized ratably over the contract term.~~

~~Systems Sales~~

~~We use the residual method~~related to determine fair value for proprietary perpetual software licenses sold in a multi-element arrangement. Under the residual method, we allocate the total value of the arrangement first to the undelivered elements based on their VSOE and allocate the remainder to the proprietary perpetualthose arrangements.

Software Licenses

The Company’s software license ~~fees.~~

~~Typically, pricing decisions for proprietary~~agreements provide the customer with the right to use functional intellectual property. Implementation, support, and other services are typically considered distinct performance obligations when sold with a software rely on the relative size and complexity of the client purchasing the solution. Third-party components are resold at prices based on a cost-plus margin analysis. The proprietary software and third-party components do not need any significant modification to achieve their intended use. Whenlicense unless these ~~revenues meet all criteria for revenue recognition, and~~services are determined to ~~be separate units of accounting, revenue~~significantly modify the software. Revenue for software licenses is ~~recognized. Typically, this~~recognized at a point in time, typically, when the software is ~~upon shipment of components or~~made available for electronic ~~download of software. Proprietary licenses are perpetual in nature, and license fees do not include rights to version upgrades, bug fixes or service packs.~~

download.

Maintenance and Support Services

The Company’s maintenance and support ~~components are not essential~~obligations include multiple performance obligations, with the two largest being rights to unspecified product upgrades or enhancements, and technical support for software licenses. We believe that the ~~functionality of~~multiple performance obligations within the software, and clients renew maintenance contracts separately from software purchases at renewal rates materially similar to the initial rate charged for maintenance on the initial purchase of software. We use VSOE of fair value to determine fair value ofCompany’s overall maintenance and support ~~services. Rates are set based on market rates for these types of~~ services ~~and our rates are comparable to rates charged by our competitors, which are based on the knowledge of the marketplace by senior management. Generally, maintenance and support is calculated~~can be viewed as a ~~percentage~~single performance obligation since both the unspecified upgrades and technical support are comprised of promises to stand ready to fulfill the ~~list price of~~various underlying activities during the proprietary license being purchased by a client. Clients have the option of purchasing additional annual maintenance service renewals each year for which rates are not materially different from the initial rate but typically include a nominal rate increase based on the consumer price index. Annual maintenancecontract term. Maintenance and support agreements entitle ~~clients~~customers to technology support, version upgrades, bug fixes and service packs.

~~Term Licenses~~

We ~~cannot establish VSOE fair value of the undelivered element in term license arrangements. However, as the only undelivered element is post-contract customer~~recognize maintenance and support ~~the entire fee is recognized~~revenue ratably over the contract term. ~~Typically, revenue recognition commences once the client goes live on the system. Similar~~

Professional Services

The Company provides various professional services to ~~proprietary license sales, pricing decisions rely on the relative size of the client purchasing the solution. The~~customers with software ~~portion of our Streamline Health® Coding & CDI~~^TM ~~(“CDI”) products generally does not require material~~licenses. These include project management, software implementation, consulting, and software modification services. Revenue from agreements to ~~achieve its contracted function.~~

~~Software-Based Solution Professional Services~~

~~Professional services components that are not essential to the functionality of the software, from time to time, are sold separately by us. Similar~~provide professional services are ~~sold by~~generally distinct from the other ~~vendors,~~promises in the contract and ~~clients can elect to perform similar services in-house. When professional services revenues are a separate unit of accounting, revenues~~ are recognized as the related services are performed. Avelead’s SaaS-based contracts have implementation services that are a distinct performance obligation, and, accordingly, are recognized separately as professional services. Consideration payable under these agreements is either on a fixed fee or time-and-materials basis and is recognized over time as the services are performed.

Software as a Service

SaaS-based contracts include a right to use the Company’s platform, support, and other services which represent a single promise to provide continuous access to its software solutions. Additionally, implementation for the Company’s eValuator product is included as part of the single promise for its respective contracts. The Company recognizes revenue for implementation of the eValuator product over the contract term as it is determined that the implementation on eValuator is not a distinct performance obligation.

~~Professional~~

Audit Services

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

Disaggregation of Revenue

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

SCHEDULE OF DISAGGREGATION OF REVENUE


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

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

Business Combinations

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

Contract Receivables and Deferred Revenues

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

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

The Company defers the direct costs, which include salaries and benefits, for professional services related to ~~coding compliance, recovery audit contractor consulting, and ICD-10 readiness are considered~~SaaS contracts as a ~~single unit of accounting where we recognize revenue using proportional performance over the service period when all applicable revenue recognition criteria have been met.~~

~~Index~~cost to ~~Financial Statements~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~Professional services components related to SaaS and term licenses that are essential to the functionality of the software and are not considered~~fulfill a separate unit of accounting are recognized in revenue ratably over the life of the client, which approximates the duration of the initial contract term. We defer the associated direct costs for salaries and benefits expense for professional services contracts.contract. These deferred costs will be amortized on a straight-line basis over the ~~identical term as~~period of expected benefit which is the ~~associated revenues.~~contractual term. As of October 31, ~~2017~~2021 and January 31, ~~2017, we~~2021, the Company had deferred costs of ~~$506,000~~$135,000 and ~~$500,000,~~$168,000, respectively, net of accumulated amortization of ~~$283,000~~$95,000 and ~~$370,000,~~$126,000, respectively. Amortization expense of these costs was ~~$51,000~~$22,000 and ~~$36,000~~$27,000 for the three months ended October 31, ~~2017~~2020 and ~~2016,~~2021, respectively, and ~~$177,000~~$90,000 and ~~$80,000~~$89,000 for the nine months ended October 31, ~~2017~~2021 and ~~2016, respectively.~~

~~Professional service components that~~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 ~~essential to the functionality of perpetually licensed software~~deferred and ~~are not considered~~then amortized on a ~~separate unit of accounting are recognized using the percentage-of-completion method~~straight-line basis over the ~~professional service period.~~

~~If services~~contract term. As a practical expedient, the Company expenses sales commissions as incurred when the amortization period of related deferred commission costs is expected to be one year or less.

As of October 31, 2021 and January 31, 2021, deferred commission costs paid and payable, which are ~~sold with perpetually licensed software, we use VSOE of fair value based~~included on the ~~hourly rate charged when services are sold separately to determine fair value~~consolidated balance sheets within other non-current assets totaled $756,000 and $666,000, respectively, net of ~~professional services. We typically sell professional services on an hourly or fixed fee basis. We monitor projects to assure that the expected~~accumulated amortization of $467,000 and ~~historical rate earned remains within a reasonable range to the established selling price.~~

~~Audit Services~~

Professional services relating to audit services are provided separately from software solutions, even those that may relate to coding and coding audit processes. These services are not essential to any software offering and are a separate unit of accounting. Accordingly, the revenues are recognized as the services are performed.

~~Severance~~

From time to time, we enter into termination agreements with associates that may include supplemental cash payments, as well as contributions to health and other benefits for a specific time period subsequent to termination.$285,000, respectively. For the three months ended October 31, ~~2017~~2021 and ~~2016, we incurred zero~~2020, $88,000 and ~~$110,000 in severance expenses,~~$58,000, respectively, and ~~$58,000 and $227,000~~ for the nine months ended October 31, ~~2017~~2021 and ~~2016, respectively. At October 31, 2017~~2020, $248,000 and ~~January 31, 2017, we had accrued severance~~$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 ~~zero and $9,000, respectively.~~operations. There were no impairment losses for these capitalized costs for these periods.

Equity Awards

~~We account~~

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 ~~vesting~~service period. WeFor 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 ~~stock-based~~share-based awards of ~~$290,000~~$537,000 and ~~$432,000~~$442,000 for the three months ended October 31, ~~2017~~2021 and ~~2016,~~2020, respectively, and ~~$845,000~~$1,659,000 and ~~$1,343,000 for~~$1,054,000 in the nine months ended October 31, ~~2017~~2021 and ~~2016,~~2020, respectively.

The fair value of the stock options granted iswas estimated at the date of grant using a Black-Scholes option pricing model. ~~The option~~Option pricing model ~~inputs (such~~input assumptions such as expected term, expected volatility and risk-free interest ~~rate)~~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) ~~data.~~. Future grants of equity awards accounted for as ~~stock-based~~share-based compensation could have a material impact on reported expenses depending upon the number, value and vesting period of future awards.

~~We issue~~

The Company issues restricted stock awards in the form of ~~our~~Company common stock. The fair value of these awards is based on the market ~~closing~~close price per share on the ~~date of grant. We expense~~grant date. The Company expenses the compensation cost of these awards as the restriction period lapses, which is typically a ~~one-year~~one- to four-year service period to the Company. In the nine months ended October 31, 2017, 32,033 shares of common stock were surrendered to the Company to satisfy tax withholding obligations totaling $42,000 in connection with the vesting of restricted stock awards. Shares surrendered by the restricted stock award recipients in accordance with the applicable plan are deemed canceled, and therefore are not available to be reissued. In the nine months ended October 31, 2017, the Company awarded 220,337 shares of restricted stock to directors of the Company.

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 ~~basis~~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, ~~we consider~~the Company considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. ~~We establish~~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.

~~Index~~ Refer to ~~Financial Statements~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~We provide~~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. ~~We believe we have~~At October 31, 2021, the Company believes it has appropriately accounted for any uncertain tax positions. ~~The Company has recorded $262,000 and $263,000 in reserves for uncertain tax positions and corresponding interest and penalties as of October 31, 2017 and January 31, 2017, respectively.~~

Net Earnings (Loss) Per Common Share

~~We present~~

The Company presents basic and diluted earnings per share (“EPS”) data for ~~our~~the Company’s common stock. Basic EPS is calculated by dividing the net earnings (loss) attributable to common stockholders of the Company by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is calculated based on the profit or loss attributable to common stockholders and the weighted average number of shares of common stock outstanding, adjusted for the effects of all potential dilutive common stock issuances related to options, unvested restricted stock, warrants and convertible preferred stock. Potential common stock dilution related to outstanding stock options, unvested restricted stock and warrants is determined using the treasury stock method, while potential common stock dilution related to Series A Convertible Preferred Stock is determined using the “if converted” method.

~~Our unvested restricted stock awards and Series A Convertible Preferred Stock are considered participating securities under ASC 260,~~ ~~Earnings Per Share, which means the security may participate in undistributed earnings with common stock. Our~~

The Company’s unvested restricted stock awards are considered ~~participating~~non-participating securities because ~~they entitle~~ holders are not entitled to non-forfeitable rights to dividends or dividend equivalents during the vesting term. The holders of the Series A Convertible Preferred Stock would be entitled to share in dividends, on an as-converted basis, if the holders of common stock were to receive dividends, other than dividends in the form of common stock. In accordance with ASC 260, a company is required to use the two-class method when computing EPS when a company has a security that qualifies as a “participating security.” The two-class method is an earnings allocation formula that determines EPS for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. In determining the amount of net earnings to allocate to common stockholders, earnings are allocated to both common and participating securities based on their respective weighted-average shares outstanding for the period. Diluted EPS for our common stock is computed using the more dilutive of the two-class method or the if-converted method.

In accordance with ASC 260, securities are deemed not to be participating in losses if there is no obligation to fund such losses. ~~As of October 31, 2017, there were 2,949,995 shares of preferred stock outstanding, each of which is convertible into one share of our common stock. For~~Diluted EPS for the three and nine months ended October 31, 2017 and 2016, the Series A Convertible Preferred Stock would have an anti-dilutive effect if included in diluted EPS and therefore, was not included in the calculation. For the three months ended October 31, 2016 and the nine months ended October 31, 2017 and 2016, 821,587 and 828,225, respectively, unvested restricted shares ofCompany’s common stock ~~were excluded from~~is computed using the ~~diluted EPS calculation as their effect would have been anti-dilutive. For the three months ended October 31, 2017, the effect of unvested restricted~~treasury stock ~~awards and the Series A Convertible Preferred Stock to the earnings per share calculation was immaterial.~~method.

~~Index to Financial Statements~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

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

Three Months Ended
October 31, 2017 October 31, 2016
Net earnings (loss) $ 3,489
$ (1,930,472 )
Less: deemed dividends on Series A Preferred Stock —
(72,710 )
Net earnings (loss) attributable to common stockholders $ 3,489
$ (2,003,182 )
Weighted average shares outstanding used in basic per common share computations 19,985,822
19,645,521
Restricted stock and Series A Convertible Preferred Stock 3,082,601
—
Number of shares used in diluted per common share computation 23,068,423
19,645,521
Basic net earnings (loss) per share of common stock $ 0.00
$ (0.10 )
Diluted net earnings (loss) per share of common stock $ 0.00
$ (0.10 )

Nine Months Ended
October 31, 2017 October 31, 2016
Net loss $ (3,137,084 ) $ (4,142,381 )
Less: deemed dividends on Series A Preferred Stock —
(875,935 )
Net loss attributable to common stockholders $ (3,137,084 ) $ (5,018,316 )
Weighted average shares outstanding used in basic per common share computations 19,838,691
19,477,538
Restricted stock and Series A Convertible Preferred Stock —
—
Number of shares used in diluted per common share computation 19,838,691
19,477,538
Basic net loss per share of common stock $ (0.16 ) $ (0.26 )
Diluted net loss per share of common stock $ (0.16 ) $ (0.26 )

~~Diluted net earnings (loss) per share excludes the effect of outstanding stock options that relate to 2,203,156 and 2,172,480 shares of common~~ stock for the three and nine months ended October 31, ~~2017~~2021 and ~~2016, respectively. The inclusion of these stock options would have been~~2020:

SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE OF COMMON STOCK


	Three Months Ended						Nine Months Ended
	October 31, 2021			October 31, 2020			October 31, 2021			October 31, 2020
Basic earnings (loss) per share:
Continuing operations
Loss from continuing operations, net of tax	$	(4,379,000	)	$	(1,069,000	)	$	(6,913,000	)	$	(3,209,000	)
Basic net loss per share of common stock from continuing operations	$	(0.10	)	$	(0.04	)	$	(0.17	)	$	(0.11	)

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

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

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

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

(1)

Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of October 31, 2021 and 2020, there were 1,030,600 and 1,166,325 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, diluted EPS excludes 1,146,963 outstanding stock options and 1,030,600 unvested restricted shares of common stock For the three and- nine months ended October 31, 2020, diluted EPS excludes 624,330 outstanding stock options and 1,166,325 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

For the three and nine months ended October 31, ~~2017~~2021, the Company incurred certain non-routine costs totaling $1,933,000 and ~~2016,~~$2,710,000, respectively. The Company incurred transaction costs related to the ~~warrants~~acquisition of Avelead consisting of a separation agreement, broker fees and professional services. For the three and nine months ended October 31, 2021, the Company paid certain executive bonuses for the successful capital raise and closing of the Avelead acquisition. Finally, the Company subleased its Alpharetta office to ~~purchase~~ ~~1,400,000~~ ~~shares~~a third-party effective October 1, 2021. The Company retains certain obligations, and accordingly, will continue to report the Right of ~~common stock would have~~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 ~~anti-dilutive effect if included in diluted net earnings (loss) per share,~~expense for the minimum future commitment under the agreement and ~~therefore were not included~~accrued the cost to the accompanying consolidated balance sheet in the ~~calculation.~~nine months ended October 31, 2020 to reflect the liability at the time it abandoned the space. Refer to Note 4 – Operating Leases.

~~Recent~~

Non-Cash Items

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

SCHEDULE OF NON-CASH ITEMS RELATED TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW


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

Accounting Pronouncements

Recently Adopted

In ~~May 2014,~~December 2019, the FASB issued ASU ~~2014-09,~~ ~~Revenue from Contracts with Customers~~No. 2019-12, Income Taxes (Topic ~~606), which supersedes~~740): Simplifying the ~~revenue recognition requirements~~Accounting for Income Taxes (“ASU 2019-12”). This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in ~~ASC 605, Revenue Recognition. The core principle~~Topic 740 and clarifying certain aspects of the current guidance ~~is that an entity should recognize 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. The~~promote consistency among reporting entities. ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2016, the FASB delayed the effective date by one year and the guidance will now be effective for us on February 1, 2018. Early adoption of the update is permitted. The guidance is to be applied using one of two retrospective application methods. We are in the process of applying the five-step model of the new standard to customer contracts and will compare the results to our current accounting practices. We plan to adopt ASU 2014-09, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard, on February 1, 2018. We elected the modified retrospective transition method, which would result in an adjustment to retained earnings for the cumulative effect, if any, of applying the standard to contracts in process as of the adoption date. Under this method, we would not restate the prior financial statements presented. Therefore, the new standard requires additional disclosures of the amount by which each financial statement line item is affected in the fiscal year 2018 reporting period. We are currently in the process of assessing the impact of the new standard and have not yet determined the effect of the standard on our consolidated financial statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~ (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU2019-12 is effective for annual periods beginning after December 15, ~~2018, including~~2020 and interim periods within those ~~fiscal years. The update will be effective for us on February 1, 2019. Early~~annual periods, with early adoption ofpermitted. An entity that elects early adoption must adopt all the ~~update is permitted. We are currently evaluating the impact of the adoption of this update on our consolidated financial statements and related disclosures.~~

~~Index to Financial Statements~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation - Stock Compensation~~ (Topic 718), to improve the accounting for employee share-based payments. The guidance simplifies the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classificationamendments in the ~~statement of cash flows.~~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 ~~guidance is effective for annual and interim periods beginning after December 15, 2016, and early adoption is permitted. The update~~standard became effective for us on February 1, ~~2017.~~2021. The adoption of this ASU did not have a ~~significant~~material impact on ~~our~~the Company’s consolidated financial ~~statements.~~

statements or disclosures.

In ~~August 2016,~~October 2021, the FASB issued ASU ~~2016-15,~~ ~~Statement of Cash Flows(Topic 230): Classification of Certain Cash Receipts~~No. 2021-08, Accounting for Contract Assets and ~~Cash Payments~~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 ~~clarify how certain cash receipts and cash payments should~~ be ~~presented and classified~~accounted for at fair value at the acquisition date. The amendments in the ~~statement of cash flows.~~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 ~~should be applied using a retrospective transition method to each period presented.~~2021-08 in the quarter ended October 31, 2021 (which includes retroactive adoption for any acquisitions in the current fiscal year). The ~~standard will be effective for us on February 1, 2018. Early adoption of this update is permitted. We are currently evaluating the~~ impact of adopting the ~~adoption of this~~ new standard ~~on our consolidated financial statements~~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 ~~related disclosures.~~

net loss is lower in the post-acquisition period of the same amount.

Recent Accounting Pronouncements Not Yet Adopted

In ~~January 2017,~~November 2019, the FASB issued ASU ~~2017-01,~~ ~~Business Combinations~~No. 2016-13, Financial Instruments—Credit Losses (Topic ~~805)~~326): ~~Clarifying the Definition~~Measurement of ~~a Business~~Credit Losses on Financial Instruments (“ASU 2016-13”), ~~to clarify the definition of a business to assist~~which improves guidance around accounting for financial losses on accounts receivable. For smaller reporting entities, ~~with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard will be~~ASU 2016-13 is effective for ~~us on February 1, 2018. We do~~annual periods beginning after December 15, 2022, including interim periods within those fiscal years. The Company does not ~~expect~~anticipate that the adoption of this ASU will have a ~~significant~~material impact on ~~our~~the Company’s consolidated financial statements.

NOTE 3 — BUSINESS COMBINATION AND DIVESTITURE

Avelead Acquisition

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

The aggregate consideration for the purchase of Avelead was approximately $29.7 million (at fair value) consisting of (i) $12.4 million in cash, net of cash acquired, (ii) $0.1 million in holdback, (iii) $6.5 million in common stock, and (iv) approximately $10.7 million in contingent consideration (see below). The Company issued 5,021,972 shares of its restricted common stock (the “Acquisition Restricted Common Stock”). The Acquisition Restricted Common Stock has a fair value as of the closing date of the acquisition of $6.5 million. Additionally, the Company contracted two types of contingent consideration; the first is referred to herein as “SaaS Contingent Consideration” and the second is referred to herein as “Renewal Contingent Consideration.” The SaaS Contingent Consideration and Renewal Contingent Consideration have an aggregate value of approximately $10.7 million at the date of closing.The owners of Avelead are also referred to herein as “Sellers” and are enumerated in the UPA (as defined below).

~~In January 2017,~~

The Company acquired all of the ~~FASB~~outstanding units of Avelead, effective August 16, 2021, under a Unit Purchase Agreement (hereafter referred to as the “UPA”). The UPA stated that the purchase price for Avelead at closing included a cash payment of $11.9 million. Additionally, the Company paid $285,000 of the Sellers’ closing costs, $169,000 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 ~~ASU 2017-04,~~ ~~Intangibles—Goodwill~~the Acquisition Restricted Common Stock with a fair value of $6.5 million, based on a 30-day average of the closing price of the Company’s common stock prior to the closing date. The SaaS Contingent Consideration and ~~Other (Topic 350): Simplifying~~ the ~~Test~~Renewal Contingent Consideration described in more detail below were included in the UPA as potential future consideration for ~~Goodwill Impairment~~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), ~~which removes Step 2 from~~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 ~~impairment test.~~is tax deductible. The ~~standard~~gross deferred tax assets and liabilities will be ~~effective for us~~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% in cash and (ii) 50% in shares of Company common stock valued at the time the earnout is paid subject to a collar, as described below.

	●	The first year of SaaS Contingent Consideration is calculated as 75% of Avelead’s recognized SaaS revenue from September 1, 2021 to August 31, 2022. The first-year payment is subject to a deduction of $665,000 spread equally between the cash and common stock portion of the earnout consideration. The first year earnout will be paid on or about October 15, 2022, subject to a dispute and resolution period. Assuming that Avelead is within 80% of its forecasted SaaS revenue in the first year 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.
	●	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.

If Avelead does not achieve 80% of its forecasted revenue, the price per share will revert back to the Company’s market price based upon a 30-day average.

●

The Renewal Contingent Consideration is tied directly to a successful renewal of a specific customer of Avelead. To meet the definition of a renewal, Avelead must achieve a minimum threshold of contracted revenue in an updated, annual, renewed contract with the specified customer. The renewal occurs on or about June 1, 2022 and June 1, 2023. The Company will remit the Renewal Contingent Consideration on or about each of October 15, 2022 and 2023, respectively. The Renewal Contingent Consideration is payable in shares of Company restricted common stock valued as of the date of Closing. Accordingly, upon achieving the Renewal Contingent Consideration, the Company will issue 627,747 shares of restricted common stock on or about each of October 15, 2022 and October 15, 2023, subject to a dispute and resolution period. The Renewal Contingent Consideration is either earned or not earned based upon the renewal of the specified customer at the minimum amount of contracted revenue. There is no pro-ration of the underlying Renewal Contingent Consideration.

The components of the total consideration are as follows:

COMPONENTS OF TOTAL CONSIDERATION

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

(a)

Acquisition earnout liabilities represents the net present value and risk adjusted probability of the required future payments underlying the Company’s SaaS Contingent Consideration and Renewal Contingent Consideration as described above. Due to the dates that the Company is required to measure, report and agree on the calculations, all amounts of the acquisition earnout liability are shown as long-term as of October 31, 2021.

The acquisition earnout liability is re-measured on a quarterly basis and the change to the liability is recorded as a valuation adjustment recorded through “other expenses” in the accompanying condensed consolidated statements of operations. The valuation adjustment recorded for the three months ended October 31, 2021 was $417,000. A range of possible outcomes is not available under the specific valuation method that was used in determining fair value of the acquisition earnout liability.

The Company is presenting the allocation of the total consideration to net tangible and intangible assets as of the date of the closing of Avelead as follows.:

SCHEDULE OF ALLOCATION OF THE TOTAL CONSIDERATION

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

The intangible assets recorded as a result of the Avelead acquisition, and their related estimated useful lives are as follows:

SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES

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

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

SCHEDULE OF PRO FORMA REVENUE AND NET EARNINGS


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

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

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

Included in the accompanying condensed consolidated statement of operations for the three and nine months ended October 31, 2021 (since the closing of the Avelead acquisition) are $2,045,000 and $(975,000) of Avelead revenue and loss from continuing operations.

Refer to Note 2 – Summary of Significant Accounting Policies – Other operating costs -Non-routine costs. Costs related to the acquisition of Avelead are expensed as incurred.

The Company entered into one employment agreement and one separation agreement with each of the two Sellers. Included in the transaction costs of Avelead is the cost of a two-year separation agreement with one Seller. This separation agreement was expensed at the closing of the transaction as there were no material future obligations of the Seller to the Company within Non-routine costs. 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 have a grant-date fair value of approximately $4,000 and are recorded in Non-routine cost in the accompanying condensed consolidated statement of operations. The 500,000 options have a grant-date fair value of approximately $333,000 and are expensed over the vesting period within selling, general, and administrative expense.

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

ECM Assets Divestiture

On February 24, 2020, the Company sold a portion of its business (the “ECM Assets”). The Company signed the definitive agreement with respect to the sale of the ECM Assets in December 2019 and prepared and filed a proxy statement to obtain stockholder approval of the transaction. We applied Accounting Standards Codification (“ASC”) 205-20-1 (“ASC 205-20-1”) to determine the timing to begin reporting the discontinued operations. Based on ASC 205-20-1, the Company determined that it did not have the authority to sell the assets until the date of the stockholder approval, which was February 21, 2020. ~~Early adoption~~On February 21, 2020, the Company having the authority and ability to consummate the sale of ~~this update~~the ECM Assets, met the criteria to present discontinued operations as described in ASC 205-20-1. Accordingly, the Company is ~~permitted.~~ 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

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 the three months ended October 31, 2021.

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 ~~expect~~provide an implicit rate, we use our incremental borrowing rate for the expected remaining lease term at commencement date for new leases and for existing leases, in determining the present value of future lease payments. Operating lease expense is recognized on a straight-line basis over the lease term. The Company has made the accounting policy election for building leases to not separate non-leases components.

The Company entered into a lease for office space in Alpharetta, Georgia, on March 1, 2020. The lease terminates on March 31, 2023. At inception, the Company recorded a right-of use asset of $540,000, and related current and long-term operating lease obligation in the accompanying consolidated balance sheet. As of October 31, 2021, operating lease right-of use assets totaled $262,000, and the associated lease liability is included in both current and long-term liabilities of $202,000 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, 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.

Maturities of operating lease liabilities associated with the Company’s operating lease as of October 31, 2021 are as follows for the fiscal years ended January 31:

SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES


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

Upon signing the new lease in March 2020, the Company abandoned its shared office space in Atlanta and recorded an expense and related liability of $105,000 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.

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.

NOTE 5 — DEBT

Term Loan Agreement and Discontinuance of Revolving Credit Facility

On August 26, 2021, the Company and its subsidiaries entered into the Second Amended Loan and Security Agreement with Bridge Bank. Pursuant to the Second Amended Loan and Security Agreement, Bridge Bank agreed to provide the Company and its subsidiaries with a new term loan facility in the maximum principal amount of $10,000,000. Amounts outstanding under the term loan of the Second Amended 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 discontinued the existing $3,000,000 revolving credit facility with Bridge Bank. At the time of the discontinuance, there was 0 outstanding balance on the revolving credit facility.

The Second Amended Loan and Security Agreement has a five-year term, and the maximum principal amount was advanced in a single-cash advance on or about the closing date. Interest accrued under the Second Amended Loan and Security Agreement is due monthly, and the Company shall make monthly interest-only payments through the one-year anniversary of the closing date. From the first anniversary of the closing date through the maturity date, the Company shall make monthly payments of principal and interest that increase over the term of the agreement. The Second Amended Loan and Security Agreement requires principal repayments of $500,000 in the second year, $1,000,000 in the third year, $2,000,000 in the fourth year, and $3,000,000 in the fifth year, respectively, with the remaining outstanding principal balance and all accrued but unpaid interest due in full on the maturity date. The Second Amended Loan and Security Agreement may also require early repayments if certain conditions are met. The Second Amended Loan and Security Agreement is secured by substantially all of the assets of the Company, its subsidiaries, and certain of its affiliates.

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

The Second Amended 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

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

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

The Second Amended Loan and Security Agreement also includes customary negative covenants, subject to exceptions, which limit transfers, capital expenditures, indebtedness, certain liens, investments, acquisitions, dispositions of assets, restricted payments and the business activities of the Company, as well as customary representations and warranties, affirmative covenants and events of default, including cross defaults and a change of control default. The line of credit also is subject to customary prepayment requirements. For the period ended October 31, 2021, the Company was in compliance with the Second Amended Loan and Security Agreement covenants.

Term Loan and Revolving Credit Facility with Bridge Bank

On March 2, 2021, the Company entered into an Amended and Restated Loan and Security Agreement, which replaced and superseded the Loan and Security Agreement, consisting of a $3,000,000 revolving credit facility (the “Amended Loan and Security Agreement”). This revolving credit facility was replaced with the Second Amended and Security Agreement (above) that was put in place on August 26, 2021. Accordingly, the Company wrote-off $43,000 of deferred financing costs from this loan as a loss on extinguishment of debt in the accompanying condensed consolidated statement of operations. The Amended Loan and Security Agreement had a two-year term and included customary financial covenants including the requirements that the ~~adoption of this ASU will have~~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 ~~significant impact~~trailing three month basis. Additionally, the Company’s Bank EBITDA, measured on ~~our consolidated financial statements.~~

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation - Stock Compensation(Topic 718), Scope of Modification Accounting, to clarify which changes~~a monthly basis over a trailing three month period then ended, could not deviate by more than 30% or $300,000. The Amended Loan and Security Agreement facility bore interest at a per annum rate equal to the ~~terms or conditions~~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 ~~share-based payment award require~~$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 ~~entity~~interest rate of 1.0% per annum. Principal and interest payments were due, beginning on the tenth month from the effective date, sufficient to ~~apply modification accounting in Topic 718. The update will~~satisfy the loan on the second anniversary date. However, under certain criteria, the loan could be ~~effective for us on February 1, 2018. We do not expect~~forgiven.

In June 2021, the Company was notified that the ~~adoption~~full $2,301,000 of ~~this~~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.

Outstanding principal balances on debt consisted of the following at:

SCHEDULE OF OUTSTANDING DEBT, OTHER THAN PPP LOAN

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

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

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

NOTE 6 — INCOME TAXES

Income taxes consist of the following:

SCHEDULE OF COMPONENTS OF INCOME TAX (EXPENSE) BENEFIT


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

The Company adopted ASU ~~will~~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, the Company had U.S. federal net operating loss carry forwards of $37,554,000. The Company also had state net operating loss carry forwards of $12,519,000 and Federal R&D credit carry forwards of $1,356,000, and Georgia R&D credit carry forwards of $94,000, all of which expire through fiscal 2039.

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

The Company has recorded $365,000 and $339,000 in reserves for uncertain tax positions as of October 31, 2021 and January 31, 2021, 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. All material state and local income tax matters have been concluded for years through January 31, 2016. The Company is no longer subject to IRS examination for periods prior to the tax year ended January 31, 2017; however, carryforward losses that were generated prior to the tax year ended January 31, 2017 may still be adjusted by the IRS if they are used in a ~~significant impact~~future period.

NOTE 7 — EQUITY

Capital Raise

Registration of Shares Issued to 180 Consulting

On May 3, 2021, the Company filed a Registration Statement on Form S-3 (Registration No. 333-255723), which was subsequently amended on June 23, 2021, for purposes of registering for resale 248,424 shares of common stock issued to 180 Consulting, LLC (“180 Consulting”). The Registration Statement was declared effective by the SEC on July 14, 2021.

Authorized Shares Increase

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

At the Annual Meeting, the Company’s stockholders approved an amendment to the Streamline Health Solutions, Inc. Third Amended and Restated 2013 Stock Incentive Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder by 2,000,000 shares, from 6,223,246 shares to 8,223,246 shares (the “Third Amended 2013 Plan Amendment”).

As described in the Company’s definitive proxy statement on Schedule 14A filed with the SEC on July 6, 2021, because there may have been uncertainty regarding the validity or effectiveness of the prior approval of the Charter Amendment, the authorized shares increase effected thereby and the Third Amended 2013 Plan Amendment at the Annual Meeting, the board of directors of the Company asked the Company’s stockholders to ratify the approval, filing and effectiveness of the Charter Amendment and the approval and effectiveness of the Third Amended 2013 Plan Amendment at a special meeting of the stockholders held on July 29, 2021 in order to eliminate such uncertainty (the “Special Meeting”). At the Special Meeting, the Company’s stockholders ratified the approval, filing and effectiveness of the Charter Amendment and the approval and effectiveness of the Third Amended 2013 Plan Amendment.

NOTE 38 — ~~ACQUISITIONS~~COMMITMENTS AND ~~DIVESTITURES~~

~~Acquisition of a Montefiore Medical Center Solution~~

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~~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, and~~$3,000,000. Additionally, we ~~are obligated to pay~~originally committed that Montefiore would receive at least an additional $3,000,000 of on-going ~~quarterly~~ royalty ~~amounts~~payments related to future sublicensing of CLG by ~~us. Additionally, we have committed that Montefiore will receive at least an additional $3,000,000 of on-going royalty payments~~us within the first ~~six~~nine and one-half years of the license term. AsOn 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, ~~2017 and January 31, 2017,~~2020. As a result of the ~~present value~~commitment to fulfill a portion of ~~this~~our obligation by providing maintenance services at no cost, the royalty liability was ~~$2,456,000~~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 ~~$2,351,000, respectively.~~

~~Acquisition~~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 ~~Unibased Systems Architecture, Inc.~~outstanding costs made on behalf of the Company for Montefiore. The Company executed the settlement and ~~Related Divestiture~~

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 ~~February 3, 2014, we completed~~March 19, 2020 the ~~acquisition of Unibased Systems Architecture, Inc. (“Unibased”),~~Company entered into a ~~provider of patient access solutions, including enterprise scheduling and surgery management software, for healthcare organizations throughout the United States,~~Master Services Agreement (the “MSA”) with 180 Consulting, pursuant to ~~an Agreement~~which 180 Consulting has provided and ~~Plan~~will continue to provide a variety of ~~Merger dated January 16, 2014 (the “Merger Agreement”~~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 ~~total purchase price for Unibased was $6,500,000, subject to net working capital and other customary adjustments.~~

~~On December 1, 2016, we received a cash payment of $2,000,000 for~~Company has entered into ten SOWs under the sale of our Patient Engagement suite of solutions (“Patient Engagement”), which is based upon the legacy ForSite2020 solution acquired from Unibased in February 2014. As a result, we recognized a gain on sale of business of $238,000 in the fourth quarter of fiscal 2016, which represents the amount by which the sale proceeds exceeded net assets associated with Patient Engagement operations, including accounts receivable, intangible assets and deferred revenue. We used the proceeds to make two prepayments of $500,000 on our term loan with Wells Fargo, one in the fourth quarter of fiscal 2016 and another in the second quarter of fiscal 2017.

~~Acquisition of Opportune IT Healthcare Solutions, Inc.~~

~~On September 8, 2016, we completed the acquisition of substantially all~~MSA. Some of the ~~assets of Opportune IT Healthcare Solutions, Inc. (“Opportune IT”),~~SOWs include the ability to earn stock at a ~~provider of coding compliance, recovery audit contractor consulting, and ICD-10 readiness and training~~conversion rate to ~~hospitals, physicians and medical groups. As consideration under~~be calculated 20 days after the ~~asset purchase agreement, we made a cash~~

~~Index to Financial Statements~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

payment for the total purchase price of $1,400,000. The Company also assumed certain current operating liabilities of Opportune IT. The purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values asexecution of the ~~acquisition date as follows, pending final valuation~~related SOW. 180 Consulting earned a cumulative number of ~~internally-developed software~~shares through October 31, 2021 totaling 443,046, and ~~intangible assets:~~

Balance at September 8, 2016
Assets purchased:
Accounts and contracts receivable 792,000
Other assets 32,000
Internally-developed software 350,000
Intangible assets 650,000
Total assets purchased 1,824,000
Liabilities assumed:
Accounts payable and accrued liabilities 424,000
Net assets acquired $ 1,400,000
Cash paid $ 1,400,000

~~The operating results of Opportune IT are not material for purposes of proforma disclosure.~~

~~NOTE 4 — LEASES~~

We rent office space and equipment under non-cancelable operating leases that expire at various times through fiscal year 2022. Future minimum lease payments under non-cancelable operating leases for the next five fiscal years are as follows:

Facilities Equipment Fiscal Year Totals
2017 (three months remaining) $ 256,000
$ 3,000
$ 259,000
2018 1,039,000
11,000
1,050,000
2019 967,000
11,000
978,000
2020 504,000
11,000
515,000
2021 519,000
2,000
521,000
Thereafter 445,000
—
445,000
Total $ 3,730,000
$ 38,000
$ 3,768,000

~~Rent and leasing expense for facilities and equipment was $295,000 and $309,000~~ for the three ~~months~~and nine month period ended October 31, ~~2017~~2021, 66,207 and ~~2016, respectively, and $920,000 and $955,000 for~~194,662 shares, respectively. For services rendered by 180 Consulting during the nine months ended October 31, ~~2017 and 2016, respectively.~~

The Company had capital leases to finance office equipment purchases that continued into the third quarter of fiscal 2017. The amortization expense of the leased equipment was included in depreciation expense. As of October 31, 2017,2021, the Company ~~had no capital lease obligations outstanding.~~

~~NOTE 5 — DEBT~~

~~Term Loan and Line~~incurred fees of ~~Credit~~

On November 21, 2014, we entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, N.A., as administrative agent, and other lender parties thereto. Pursuant to the Credit Agreement, the lenders agreed to provide a $10,000,000 senior term loan and a $5,000,000 revolving line of credit to our primary operating subsidiary. Amounts outstanding under the Credit Agreement bear interest at either LIBOR or the base rate, as elected by the Company, plus an applicable margin. Subject to the Company’s leverage ratio, under the terms of the original Credit Agreement, the applicable LIBOR rate margin varied from 4.25% to 5.25%, and the applicable base rate margin varied from 3.25% to 4.25%. Pursuant to the terms of the amendment to the Credit Agreement entered into as of April 15, 2015, the applicable LIBOR rate margin was amended to vary from 4.25% to 6.25%, and the applicable base rate margin was amended to vary from 3.25% to 5.25%. The term loan and line of credit mature on November 21, 2019 and provide support for working capital, capital expenditures and other general corporate purposes, including permitted acquisitions. The outstanding senior term loan is secured by substantially all of our assets. The senior term loan principal balance is payable in quarterly installments, which started in March 2015 and

~~Index to Financial Statements~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

will continue through the maturity date, with the full remaining unpaid principal balance due at maturity. In November 2014, the Company repaid indebtedness under its prior credit facility using approximately $7,400,000 of the proceeds provided by the term loan. The prior credit facility with Fifth Third Bank was terminated concurrent with the entry into the Credit Agreement. Financing costs of $355,000 associated with the new credit facility are being amortized over its term on a straight-line basis, which is not materially different from the effective interest method.

The Credit Agreement includes customary financial covenants, including the requirements that the Company maintain minimum liquidity and achieve certain minimum EBITDA levels (as defined in the Credit Agreement)$1,092,000. In addition, ~~the Credit Agreement prohibits~~on October 5, 2021, the Company ~~from paying dividends~~issued to 180 Consulting an aggregate of 128,415 shares as compensation for services previously rendered during the six-months ended July 31, 2021. Such 128,415 shares were issued in a private placement in reliance on the ~~common and preferred stock. Pursuant to the terms~~exemption from registration available under Section 4(a)(2) of the ~~third amendment to~~Securities Act, including Regulation D promulgated thereunder. During the ~~Credit Agreement entered into as of June 19, 2017,~~nine month period ended October 31, 2020, the Company ~~is required~~incurred fees to ~~maintain minimum liquidity of at least (i) $5,000,000 through January 31, 2018, (ii) $4,000,000 from February 1, 2018 through~~180 Consulting totaling $449,000. Of those fees, approximately $75,000 was related to capitalized software development, and ~~including January 31, 2019, and (iii) $3,000,000 from February 1, 2019 through and including~~ the ~~maturity date of the credit facility.~~

~~The following table shows our minimum trailing four quarter period EBITDA covenant thresholds, as modified by the third amendment to the Credit Agreement:~~

For the four-quarter period ending Minimum EBITDA
July 31, 2017 $ (1,250,000 )
October 31, 2017 (1,000,000 )
January 31, 2018 (700,000 )
April 30, 2018 (35,869 )
July 31, 2018 414,953
October 31, 2018 1,080,126
January 31, 2019 1,634,130
April 30, 2019 1,842,610
July 31, 2019 2,657,362
October 31, 2019 and each fiscal quarter thereafter

3,613,810

~~The Company~~remaining $374,000 was ~~in compliance with the applicable loan covenants at October 31, 2017.~~

As of October 31, 2017, the Company had no outstanding borrowings under the revolving line of credit, and had accrued $12,000 in unused line fees. Based upon the borrowing base formula set forth in the Credit Agreement, as of October 31, 2017, the Company had access to the full amount of the $5,000,000 revolving line of credit.

~~Outstanding principal balances on debt consisted of the following at:~~

October 31, 2017 January 31, 2017
Senior term loan $ 4,630,000
$ 5,539,000
Capital lease —
91,000
Total 4,630,000
5,630,000
Less: Current portion (597,000 ) (747,000 )
Non-current portion of debt $ 4,033,000
$ 4,883,000

In May 2016, as a result of excess cash flows achieved as of January 31, 2016 and as required pursuant to the mandatory prepayment provisions of the Credit Agreement, we made a $1,738,000 payment of principal towards the term loan with Wells Fargo. We used the proceeds from the sale of our Patient Engagement suite of solutions to make two prepayments on our term loan with Wells Fargo, one in December 2016 and one in June 2017, each in the amount of $500,000. As a result of these prepayments, the schedule of future principal payments was revised to reduce each future principal payment on a pro rata basis.

~~Future principal repayments of debt consisted of the following at~~ ~~October 31, 2017~~:

~~Index to Financial Statements~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Senior Term Loan (1)
2017 $ 149,000
2018 597,000
2019 4,030,000
Total repayments $ 4,776,000

~~_______________~~


~~(1)~~	~~Term loan balance on the condensed consolidated balance sheet is reported net of deferred financing costs of $146,000.~~

~~NOTE 6 — CONVERTIBLE PREFERRED STOCK~~

~~Series A Convertible Preferred Stock~~

~~At October 31, 2017, we had 2,949,995~~operating cost. 180 Consulting earned 167,937 shares of Series A Convertible Redeemable Preferred Stock (the “Preferred Stock”) outstanding. Each share of the Preferred Stock is convertible into one share of the Company's common stock. The Preferred Stock does not pay a dividend; however, the holders are entitled to receive dividends equal (on an as-if-converted-to-common-stock basis) to and in the same formstock as dividends (other than dividends in the form of common stock) actually paid on shares of the common stock. The Preferred Stock has voting rights on a modified as-if-converted-to-common-stock-basis. The Preferred Stock has a non-participating liquidation right equal to the original issue price plus accrued unpaid dividends, which are senior to the Company’s common stock. The Preferred Stock can be converted to common shares at any time by the holders, or at the option of the Company if the arithmetic average of the daily volume weighted average price of the common stockcompensation for the 10 day period prior to the measurement date is greater than $8.00 per share, and the average daily trading volume for the 60 day period immediately prior to the measurement date exceeds 100,000 shares. The conversion price is $3.00 per share, subject to certain adjustments.

At any time following August 31, 2016, subject to the terms of the Subordination and Intercreditor Agreement among the preferred stockholders, the Company and Wells Fargo, which prohibits the redemption of the Preferred Stock without the consent of Wells Fargo, each share of Preferred Stock is redeemable at the option of the holder for an amount equal to the initial issuance price of $3.00 (adjusted to reflect stock splits, stock dividends or similar events) plus any accrued and unpaid dividends thereon. The Preferred Stock is classified as temporary equity as the securities are redeemable solely at the option of the holder.

~~NOTE 7 — INCOME TAXES~~

~~Income tax expense consists of federal, state and local tax provisions. For the nine months ended~~ ~~October 31, 2017~~ ~~and~~ ~~2016, we recorded federal tax expense of zero. For~~services rendered during the nine months ended October 31, ~~2017~~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 ~~2016,~~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, the Company has entered into one SOW under the Avelead MSA. For services rendered by 180 Consulting during the three and nine month periods ending October 31, 2021, the Company incurred fees totaling $62,000.

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

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 and nine months ended October 31, 2021 and 2020, the Company recorded the following into discontinued operations in the accompanying condensed consolidated statements of operations:


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

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

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

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

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 ~~recorded state~~entered into a consulting agreement with 121G Consulting, LLC (“121G Consulting”), to provide an assessment of the Company’s innovation and ~~local tax expense~~growth teams and strategies and to develop a set of ~~$8,000~~prioritized recommendations to be consolidated into a strategic plan for the Company’s leadership team. Mr. Green is a “member” of 121G Consulting, and, ~~$5,000, respectively.~~

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 the acquisition date to the period ended October 31, 2021, the Company incurred approximately $39,000 in research and development services provided by AscendTek.

NOTE 811 — SUBSEQUENT EVENTS

We have evaluated subsequent events occurring after October 31, ~~2017,~~2021 and based on our evaluation we did not identify any events that would have required recognition or disclosure in these condensed consolidated financial statements.

~~Index to Financial Statements~~

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 ~~Securities and Exchange Commission (“SEC”)~~SEC or otherwise make public. ~~In this~~This Report, ~~Part I, Item 2, “Management’s Discussion~~therefore, contains statements about future events and ~~Analysis~~expectations which are forward-looking statements within the meaning of ~~Financial Condition~~Sections 27A of the Securities Act, as amended, and ~~Results~~21E of ~~Operations,” contains forward-looking statements.~~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” ~~set forth~~and elsewhere in ~~Part II, Item 1A,~~our Annual Report on Form 10-K for the fiscal year ended January 31, 2021 and ~~the other cautionary statements~~ in ~~other documents we file~~our subsequent filings with the SEC, ~~including~~and include among others, the following:

~~competitive products and pricing;~~

~~product demand and market acceptance;~~

~~entry into new markets;~~

~~new product and services development and commercialization;~~

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

~~uncertainty in continued relationships with clients due to termination rights;~~

~~our ability to control costs;~~

~~availability of products produced 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;~~

~~critical accounting policies and judgments;~~

	●	competitive products and pricing;

	●	product demand and market acceptance;

	●	entry into new markets;

	●	new product and services development and commercialization;

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

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

	●	our ability to control costs;

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

	●	the healthcare regulatory environment;

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

	●	healthcare information systems budgets;

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

	●	the success of our relationships with channel partners;

	●	fluctuations in operating results;

	●	our future cash needs;

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

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

	●	critical accounting policies and judgments;

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

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

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

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

Some of these factors and risks have been, and may further be, exacerbated by the ~~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; and~~

~~our ability to maintain compliance with the terms of our credit facilities.~~

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.

~~Index~~

On August 16, 2021, the Company entered into a Purchase Agreement to ~~Financial Statements~~

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

Software licenses	$	285	$	234	$	51			22	%
Professional services		1,052		473		579			122	%
Audit services		1,460		1,498		(38	)		(3	)%
Maintenance and support		3,226		3,556		(330	)		(9	)%
Software as a service		5,310		2,611		2,699			103	%
Total Revenues	$	11,333	$	8,372	$	2,961			35	%

~~Revenues~~

Three Months Ended
(in thousands): October 31, 2017 October 31, 2016 Change % Change
Systems Sales:
Proprietary software - perpetual license $ 79
$ 20
$ 59
295 %
Term license 257
269
(12 ) (4 )%
Hardware and third-party software 13
25
(12 ) (48 )%
Professional services 802
631
171
27 %
Audit Services 280
234
46
20 %
Maintenance and support 3,250
3,750
(500 ) (13 )%
Software as a service 1,718
1,706
12
1 %
Total Revenues $ 6,399
$ 6,635
$ (236 ) (4 )%

Nine Months Ended
(in thousands): October 31, 2017 October 31, 2016 Change % Change
System Sales:
Proprietary software - perpetual license $ 249
$ 1,040
$ (791 ) (76 )%
Term license 736
905
(169 ) (19 )%
Hardware and third-party software 71
245
(174 ) (71 )%
Professional services 1,794
1,870
(76 ) (4 )%
Audit Services 919
234
685
293 %
Maintenance and support 9,884
11,238
(1,354 ) (12 )%
Software as a service 4,586
5,145
(559 ) (11 )%
Total Revenues $ 18,239
$ 20,677
$ (2,438 ) (12 )%

~~Proprietary software and term~~

Software licenses — Proprietary software license revenue recognized for the three ~~months~~and nine month periods ended October 31, ~~2017~~2021 increased by ~~$59,000 over the~~$131,000 and $51,000 from their respective prior comparable ~~period due~~periods. The Company is experiencing a shift in business from perpetual software licenses to ~~improved~~software as a service. The software license sales come primarily from our channel partners. The Company has the ability to influence sales of ~~our CDI solution in~~these products; however, the ~~third quarter~~timing is difficult to manage as sales are primarily the result of ~~fiscal 2017. Proprietary~~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 ~~revenue recognized for~~licenses.

Professional services — For the three and nine ~~months~~month period ended October 31, ~~2017 decreased~~2021, revenue from professional services increased by ~~$791,000 over the~~$783,000 and $579,000 from their respective prior comparable ~~period. This decrease is attributable~~periods. The increases in professional services include $814,000 of Avelead professional services revenue recorded since the date of acquisition (August 16, 2021). The Company continues to ~~a larger perpetual license sale~~be unable to estimate the timing or extent of ~~our Streamline Health® Abstracting™ solution in~~ the ~~second quarter~~impact of ~~fiscal 2016. The $169,000 decrease in term license~~COVD-19 on the Company’s ongoing performance relative to professional services.

Audit services — Audit services revenue for the nine months ended October 31, 2017 over the prior comparable period is primarily due to the expiration of one Clinical Analytics contract and the reduction of license fees on a separate Clinical Analytics contract.

~~Hardware and third-party software~~ ~~— Revenue from hardware and third-party software sales~~ for the three and nine months ended October 31, ~~2017 decreased by $12,000~~2021 remained relatively consistent

Maintenance and ~~$174,000, respectively,~~support — Revenue from maintenance and support for the three month period ended October 31, 2021 increased over the prior comparable ~~periods. Fluctuations~~period by $12,000. The increase is related to the maintenance of the new software licenses sold. Revenue from ~~period to period are a function of client demand.~~

~~Professional services~~ ~~— For~~maintenance and support for the ~~three-month~~nine month period ended October 31, ~~2017, revenues from professional services increased~~2021 decreased by ~~$171,000 from~~$330,000. This decrease is attributable to the ~~prior comparable period. This increase is primarily due to a software version upgrade by a customer~~sunset of our ~~Streamline Health® Enterprise Content Management™ (“ECM”) solution~~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. Refer to Note 8 – Commitments and ~~partially offsets~~Contingencies “Royalty Liability” included in Part I, Item I, “Financial Statements” for further information on the ~~decrease in revenues for the nine-month period ended October 31, 2017, which resulted primarily~~clinical analytics product.

Software as a Service (SaaS) — Revenue from the sale of our Patient Engagement suite of solutions in the fourth quarter of fiscal 2016, as well as cancellations by two customers of our Streamline Health® Financial Management™ solution (“Financial Management”).

~~Audit services~~ ~~— Audit services revenue recognized~~SaaS for the three and nine months ended October 31, ~~2017~~2021 increased by ~~$46,000~~$1,925,000 and ~~$685,000, respectively, over the prior comparable periods. The Company began offering audit services in September 2016, following the acquisition of Opportune IT.~~

~~Maintenance and support~~ — Revenue from maintenance and support for the three and nine months ended October 31, 2017 decreased by $500,000 and $1,354,000, respectively, from the prior comparable periods. These decreases were primarily

~~Index to Financial Statements~~

~~the result of the sale of our Patient Engagement suite of solutions in the fourth quarter of fiscal 2016, as well as cancellations by two customers of our ECM solution.~~

~~Software as a Service (SaaS)~~ ~~— Revenue from SaaS for the nine months ended October 31, 2017 decreased by $559,000~~$2,699,000 from the prior comparable period. ~~This decrease resulted primarily~~These increases include $1,231,000 of SaaS revenue from ~~cancellations by~~Avelead recorded since the date of acquisition. The remaining increase in SaaS revenue is due to new customers on the Company’s eValuator product plus approximately $230,000 related to a ~~few customers~~customer that did not renew. The non-renewal related to a customer that ended their contract early but paid the fees through the end of ~~our~~their contract. Because there were no future performance obligations, the Company recognized all the contracted fees in the period. The Company’s legacy product, Financial Management ~~and ECM solutions,~~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 ~~the sale of our Patient Engagement suite of solutions~~slower contracting is expected to result in lower 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 ~~fiscal 2016.~~

COVID-19 on future contracting processes with our customers.

Cost of Sales

Three Months Ended
(in thousands): October 31, 2017 October 31, 2016 Change % Change
Cost of systems sales $ 434
$ 663
$ (229 ) (35 )%
Cost of professional services 556
723
(167 ) (23 )%
Cost of audit services 404
596
(192 ) (32 )%
Cost of maintenance and support 667
790
(123 ) (16 )%
Cost of software as a service 290
451
(161 ) (36 )%
Total cost of sales $ 2,351
$ 3,223
$ (872 ) (27 )%

Nine Months Ended
(in thousands): October 31, 2017 October 31, 2016 Change % Change
Cost of systems sales $ 1,597
$ 2,080
$ (483 ) (23 )%
Cost of professional services 1,814
1,891
(77 ) (4 )%
Cost of audit services 1,236
596
640
107 %
Cost of maintenance and support 2,242
2,483
(241 ) (10 )%
Cost of software as a service 915
1,390
(475 ) (34 )%
Total cost of sales $ 7,804
$ 8,440
$ (636 ) (8 )%

	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
(in thousands):	October 31, 2021		October 31, 2020		Change			% Change
Cost of software licenses	$	412	$	385	$	27			7	%
Cost of professional services		1,411		779		632			81	%
Cost of audit services		1,174		1,158		16			1	%
Cost of maintenance and support		223		528		(305	)		(58	)%
Cost of software as a service		2,276		1,250		1,026			82	%
Total cost of sales	$	5,496	$	4,100	$	1,396			34	%

The ~~decrease~~increase in overall cost of sales for the three and nine months ended October 31, 2017 from the comparable prior periods is primarily due to the reduction in amortization of capitalized software costs as a result of a few assets becoming fully amortized, as well as the sale of our Patient Engagement suite of solutions in the fourth quarter of fiscal 2016. In addition, the decrease in overall cost of sales for the three months ended October 31, 20172021 from the comparable prior period is ~~further attributed~~primarily due to Avelead which was $1,117,000 of the ~~reduction in audit services personnel costs following the acquisition of Opportune IT in September 2016.~~increase for both comparable periods.

Cost of ~~systems sales includes~~software licenses reflect amortization ~~and impairment~~ of capitalized software ~~expenditures, royalties,~~expenditures. The amounts for each of the three and ~~the cost of third-party hardware and software. The decrease in expense for the three- and nine-month~~nine month periods ended October 31, 2017 was primarily due to the reduction in amortization of capitalized software costs as a result of the sale of our Patient Engagement suite of solutions in the fourth quarter of fiscal 2016, as well as the internally-developed software acquired from Meta Health Technology, Inc. in 2012 reaching the end of its assigned economic life in the third quarter of fiscal 2017.

2021 are generally consistent.

The cost of professional services includes compensation and benefits for personnel and related expenses. ~~The decrease in expense for the three- and nine-month periods from the prior comparable periods is primarily due to~~Avelead comprises $636,000 of the increase ~~in professional services related to SaaS~~for each of the three and ~~term licenses, for which costs are deferred and amortized ratably over the initial contract term, as well as the decrease in personnel costs.~~

nine months ended October 31, 2021.

The cost of audit services includes compensation and benefits for audit services personnel, and related expenses. ~~The increase in expense~~These costs remained consistent for the ~~nine-month~~three and nine month period ended October 31, ~~2017 is due~~2021 as compared to the Company beginning to offer audit services in September 2016, following the acquisition of Opportune IT. The decrease in expense for the three-month period ended October 31, 2017 is attributed to the reduction in associate and contractor costs from synergies resulting from the full integration of the acquired business.

respective comparable periods.

The cost of maintenance and support includes compensation and benefits for client support personnel and the cost of third-party ~~maintenance~~content provider contracts. The decrease in expense for the ~~three-~~three and ~~nine-month periods~~nine month period ended October 31, 2021 from the comparable period in the prior year was primarily due to a ~~decrease in third-party maintenance contracts~~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 ~~and personnel costs, and is in line with the decrease in the associated maintenance and support revenue.~~

on certain legacy products.

The cost of SaaS solutions is ~~relatively fixed, subject to inflation~~comprised of salaries, amortization of capitalized software development, and third-party content provider costs. Avelead comprises $481,000 of the increase for both comparable periods. The primary driver of the remaining increase in expense for the ~~goods~~three and ~~services it requires. The decrease in the three- and nine-month periods~~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 ~~periods was primarily related to a reduction in personnel costs, as~~

~~Index to Financial Statements~~

well as in depreciation and amortization expense as several assets, including the internally-developed software acquired from Interpoint Partners, LLC in 2011, reached the end of their assigned economic lives.

prior periods.

Selling, General and Administrative Expense

Three Months Ended
(in thousands): October 31, 2017 October 31, 2016 Change % Change
General and administrative expenses $ 1,681
$ 1,980
$ (299 ) (15 )%
Sales and marketing expenses 1,139
1,232
(93 ) (8 )%
Total selling, general, and administrative expense $ 2,820
$ 3,212
$ (392 ) (12 )%

Nine Months Ended
(in thousands): October 31, 2017 October 31, 2016 Change % Change
General and administrative expenses $ 5,673
$ 6,668
$ (995 ) (15 )%
Sales and marketing expenses 3,310
3,485
(175 ) (5 )%
Total selling, general, and administrative expense $ 8,983
$ 10,153
$ (1,170 ) (12 )%

	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
($ in thousands):	October 31, 2021		October 31, 2020		Change		% Change
General and administrative expenses	$	5,669	$	4,609	$	1,060		23	%
Sales and marketing expenses		2,838		2,250		588		26	%
Total selling, general, and administrative expense	$	8,507	$	6,859	$	1,648		24	%

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 ~~decrease~~increase in general and administrative expenses for the three and nine months ended October 31, ~~2017~~2021 from the comparable prior ~~periods~~period is primarily attributed to the Avelead acquisition, resulting in an additional $553,000 in expenses for each period. Further, share- based compensation was ~~primarily due~~approximately $324,000 higher in the nine months ended October 31, 2021 as compared to the same period of the prior year. The Company has previously announced accelerated equity awards for its executives in lieu of cash bonuses. These accelerated equity awards are causing a ~~reduction~~near-term increase in ~~personnel costs, stock~~amortization of share-based compensation ~~and severance expense, as well as a reduction in professional fees~~ for ~~accounting and legal services.~~

fiscal year 2021.

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. ~~The decrease in sales~~Sales and marketing expense for the three and nine months ended October 31, ~~2017 from~~2021 increased by approximately $267,000 due to the ~~comparable prior periods was~~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 ~~reduction in stock compensation~~result of the COVID-19 virus. The Company has been productive using web-based meeting media to continue its sales and ~~severance expense.~~customer service processes. As hospitals open themselves up to visitors, the Company looks forward to resuming travel and meeting its customers and prospects face-to-face.

~~Product~~

Research and Development

Three Months Ended
(in thousands): October 31, 2017 October 31, 2016 Change % Change
Research and development expense $ 932
$ 1,969
$ (1,037 ) (53 )%
Plus: Capitalized research and development cost 493
484
9
2 %
Total research and development cost $ 1,425
$ 2,453
$ (1,028 ) (42 )%

Nine Months Ended
(in thousands): October 31, 2017 October 31, 2016 Change % Change
Research and development expense $ 3,985
$ 5,800
$ (1,815 ) (31 )%
Plus: Capitalized research and development cost 1,337
1,421
(84 ) (6 )%
Total research and development cost $ 5,322
$ 7,221
$ (1,899 ) (26 )%

~~Product research~~

	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
($ in thousands):	October 31, 2021		October 31, 2020		Change			% Change
Research and development expense	$	3,280	$	1,946	$	1,334			69	%
Plus: Capitalized research and development cost		1,048		1,545		(497	)		(32	)%
Total research and development cost	$	4,328	$	3,491	$	837			24	%

Research and development cost consists primarily of compensation and related benefits and the use of independent contractors for specific near-term development ~~projects,~~projects. The increase in research and ~~an allocated portion~~development expenses for the three and nine months ended October 31, 2021 from the comparable prior period includes $345,000 in expenses for each period related to the Avelead acquisition. The overall increase in cost is related to extending work 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 ~~general overhead costs, including occupancy.~~ $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.

The ~~decrease in total~~capitalized research and development cost for the ~~three- and nine-month periods~~three month period ended October 31, ~~2017~~2021 is lower than that from the prior comparable ~~periods is primarily due to a reduction in development personnel headcount and consultant fees and $366,000 in~~period as the Company had several significant releases during the first half of fiscal year 2021 that consumed more capitalized time. The Company expects total research and development ~~tax credits awarded by the State~~expenses will continue to increase, primarily from increased capitalizable projects for Avelead plus ongoing expansion of ~~Georgia in fiscal 2017. Research and~~work with development ~~expenses for~~partners on eValuator. For the nine months ended October 31, ~~2017~~2021 and ~~2016,~~2020, as a percentage of revenues, total research and development costs were ~~22%~~38% and ~~28%~~42%, respectively.

This percentage is expected to normalize back to historical levels as Avelead development resources are ramped up to enhance its products.

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
($ in thousands):	October 31, 2021		October 31, 2020		Change		% Change
Non-routine costs	$	2,710	$	—	$	2,710		100	%

Refer to Note 2 – Summary of Significant Accounting Policies - Other ~~Income (Expense)~~

Three Months Ended
(in thousands): October 31, 2017 October 31, 2016 Change % Change
Interest expense $ (113 ) $ (99 ) $ (14 ) 14 %
Miscellaneous expense (177 ) (61 ) (116 ) 190 %
Total other expense $ (290 ) $ (160 ) $ (130 ) 81 %

~~Index~~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 ~~Financial Statements~~

Nine Months Ended
(in thousands): October 31, 2017 October 31, 2016 Change % Change
Interest expense $ (361 ) $ (381 ) $ 20
(5 )%
Miscellaneous expense (235 ) (39 ) (196 ) 503 %
Total other expense $ (596 ) $ (420 ) $ (176 ) 42 %

~~Interest expense consists~~Non-routine costs. The Non-routine costs for the three and nine months ended October 31, 2021 are primarily related to the transaction costs of ~~interest~~Avelead acquisition and ~~commitment fees~~executive bonuses that were transactional in nature.

Loss on Exit from Membership Agreement

	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 ~~line of credit, interest on the term loans, and is inclusive of deferred financing cost amortization expense. Interest expense decreased for~~Company’s former shared office arrangement in Atlanta. In the nine months ended October 31, ~~2017~~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.

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
($ in thousands):	October 31, 2021			October 31, 2020			Change			% Change
Interest expense	$	(107	)	$	(39	)	$	(68	)		174	%
Loss on Extinguishment of Debt		(43	)		—			(43	)		100	%
Other		(421	)		(68	)		(353	)		519	%
Forgiveness of PPP loan and accrued interest		2,327			—			2,327			100	%
Total other income (expense)	$	1,756		$	(107	)	$	1,863			(1,741	)%

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 from the prior comparable period primarily due to the ~~expiration~~$10,000,000 term loan with Bridge Bank (See Note 5 – Debt).

Other expense for the three and nine month periods ended October 31, 2021 reflects a valuation adjustment of ~~two capital lease arrangements. The increase~~$417,000 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 ~~interest~~Part I, Item I, “Financial Statements”). Other expense for the nine month period ended October 31, 2020 includes each of (i) a $37,000 impact for 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.

Provision for Income Taxes

For the three months ended October 31, ~~2017 from the prior comparable period is attributed to an increase in interest rate on our term loan. Fluctuation in miscellaneous expense for the three-~~2021 and nine-month periods ended October 31, 2017 from the prior comparable periods is primarily due to revaluation adjustments to our warrant liability, which were driven by the fluctuations in the Company’s stock price.

~~Provision for Income Taxes~~

We2020 we recorded income tax expense of ~~$3,000~~$4,000 and ~~$2,000, respectively, for the three months ended October 31, 2017 and 2016, and $8,000 and $5,000, respectively, for~~income tax benefit of $803,000, respectively. For the nine months ended October 31, ~~2017~~2021 and ~~2016,~~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.

~~Backlog~~

October 31, 2017 October 31, 2016
Company proprietary software $ 10,892,000
$ 15,551,000
Third-party hardware and software —
200,000
Professional services 2,824,000
4,973,000
Audit services 1,454,000
1,849,000
Maintenance and support 18,256,000
19,413,000
Software as a service 14,242,000
12,929,000
Total $ 47,668,000
$ 54,915,000

At The income tax benefit for the nine months ended October 31, ~~2017, we had contracts~~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 purchase orders from clients and remarketing partners for systems and related services that have not been delivered or installed, which if fully performed, would generate future revenues of $47,668,000 compared with $54,915,000 atstate income tax purposes. For the nine months ended October 31, ~~2016.~~

~~The Company’s proprietary software backlog consists of signed agreements~~2021, the net income tax expense is reported under continuing operations. Refer to purchase either perpetual software licenses or term licenses. Typically, perpetual licenses included in backlog are either not yet generally available or the software is generally available and the client has not taken possession of the software. Term licenses included in backlog consist of signed agreements where the client has already taken possession, but the paymentNote 6 – Income Taxes for the software is bundled with maintenance and support fees over the life of the contract. The decrease in backlog is primarily due to the sale of our Patient Engagement suite of solutions in the fourth quarter of fiscal 2016.

Third-party hardware and software backlog consists of signed agreements to purchase third-party hardware or third-party software licenses that have not been delivered to the client. These are products that we resell as components of the solution a client purchases and are expected to be delivered in the next twelve months as implementations commence.

Professional services backlog consists of signed contracts for services that have yet to be performed. Typically, backlog is recognized within twelve months of the contract signing. The decrease in professional services backlog is a result of several large projects nearing their completion. Professional services backlog was further reduced by the sale of our Patient Engagement suite of solutions in the fourth quarter of fiscal 2016. Our new eValuator solution requires less in terms of professional services efforts, and thusly the SaaS backlog increase does not result in a corresponding effect in our professional services backlog.

Audit services backlog consists of signed contracts for audit services that have yet to be performed. Typically, backlog is recognized within twelve months of the contract signing. The Company began offering audit services in September 2016, following the acquisition of Opportune IT. As we became more familiar with the changing nature of some audit services engagements, we adjusted the backlog calculation to only include agreements that have clearly definable service periods. The decrease in audit services backlog is primarily due this adjustment.

~~Index to Financial Statements~~

Maintenance and support backlog consists of maintenance agreements for perpetual licenses and/or third-party software or hardware, in each case consisting of signed agreements to purchase such services but that represent future performance for the contracted maintenance and support term. Clients typically prepay maintenance and support fees on an annual basis with some monthly pre-payment arrangements existing. Maintenance and support fees are generally billed 30-60 days prior to the beginning of the maintenance period. The Company does not expect any significant client attrition over the next 12 months outside of the ordinary course of business. Maintenance and support backlog at October 31, 2017 was $18,256,000 as compared to $19,413,000 at October 31, 2016. The decrease in maintenance and support backlog is primarily a result of the sale of our Patient Engagement suite of solutions in the fourth quarter of fiscal 2016.

Relating specifically to SaaS-model client agreements signed as of October 31, 2017, the Company expects to generate revenues of $14,242,000 from such SaaS agreements through their respective renewal dates in fiscal years 2017 through 2022. The commencement of revenue recognition for SaaS varies depending on the size and complexity of the system, the implementation schedule requested by the client and ultimately the official go-live on the system. Therefore, it is difficult for the Company to accurately predict the revenue it expects to recognize in any particular period. The increase in SaaS backlog is primarily due to a sale of our CDI solution in the fourth quarter of fiscal 2016 and sale of multiple Streamline Health® eValuator™ software contracts in the third quarter of fiscal 2017. The increase in SaaS backlog resulting from these sales was partially offset by the sale of our Patient Engagement suite of solutions in the fourth quarter of fiscal 2016.

~~Additional commentary regarding the average duration of client contracts and risks relating to termination can be found in Part II, Item 1A, “Risk Factors” herein.~~

Termination rights in the Company’s master agreements are generally limited to termination for cause, except for select exceptions. However, there can be no assurance that a client will not cancel all or any portion of an agreement or delay portions of an agreement, as further discussed in Part II, Item 1A, “Risk Factors” herein. Such events could have a material adverse effectinformation on the Company’s ~~ability to recognize amounts and the Company’s financial condition and results~~adoption of ~~operations.~~

~~Index to Financial Statements~~

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~~condensed consolidated financial statements presented on a GAAP basis in this ~~quarterly report on Form 10-Q~~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.

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, ~~stock-based~~share-based compensation expense, transaction related expenses and other expenses that do not relate to our core ~~operations;~~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 ~~(i)~~ 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 ~~Credit~~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 ~~quarterly report on Form 10-Q,~~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 credit 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.

~~Index to Financial Statements~~

	●	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, ~~we encourage~~the Company encourages readers to review the GAAP financial statements included elsewhere in this ~~quarterly report on Form 10-Q,~~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~~condensed consolidated financial statements included ~~elsewhere in this quarterly report on Form 10-Q.~~above.

The following table ~~sets forth a reconciliation of~~reconciles EBITDA and Adjusted EBITDA to net loss ~~a comparable GAAP-based measure, as well as~~from continuing operations, and Adjusted EBITDA per diluted share to loss per diluted ~~share.~~share for the three and nine months ended October 31, 2021 and 2020 (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 ~~our~~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
In thousands, except per share data October 31, 2017 October 31, 2016 October 31, 2017 October 31, 2016
Net earnings (loss) $ 3
$ (1,930 ) $ (3,137 ) $ (4,142 )
Interest expense 113
99
361
381
Income tax expense 3
2
8
5
Depreciation 193
265
596
895
Amortization of capitalized software development costs 431
720
1,574
2,146
Amortization of intangible assets 256
325
922
976
Amortization of other costs 51
60
177
140
EBITDA 1,050
(459 ) 501
401
Share-based compensation expense 290
433
845
1,343
(Gain) loss on disposal of fixed assets (14 ) —
(15 ) 1
Associate severance and other costs relating to transactions or corporate restructuring —
89
—
199
Non-cash valuation adjustments to assets and liabilities 188
62
229
84
Transaction related professional fees, advisory fees, and other internal direct costs —
103
—
358
Adjusted EBITDA $ 1,514
$ 228
$ 1,560
$ 2,386
Adjusted EBITDA margin (1) 24 % 3 % 9 % 12 %

Earnings (loss) per share — diluted $ —
$ (0.10 ) $ (0.16 ) $ (0.26 )
Adjusted EBITDA per adjusted diluted share (2) $ 0.07
$ 0.01
$ 0.07
$ 0.10
Diluted weighted average shares 23,068,423
19,645,521
19,838,691
19,477,538
Includable incremental shares — adjusted EBITDA (3) —
3,340,390
3,242,413
3,322,710
Adjusted diluted shares 23,068,423
22,985,911
23,081,104
22,800,248

~~_______________~~

	Three Months Ended						Nine Months Ended
In thousands, except per share data	October 31, 2021			October 31, 2020			October 31, 2021			October 31, 2020
Adjusted EBITDA Reconciliation
Loss from continuing operations	$	(4,379	)	$	(1,069	)	$	(6,913	)	$	(3,209	)
Interest expense		85			12			107			39
Income tax (benefit)/ expense		4			(803	)		9			(1,536	)
Depreciation		16			4			53			35
Amortization of capitalized software development costs		446			477			1,430			1,128
Amortization of intangible assets		490			123			721			370
Amortization of other costs		110			89			338			242
EBITDA	$	(3,228	)	$	(1,167	)	$	(4,255	)	$	(2,931	)
Share-based compensation expense		537			442			1,659			1,054
Non-cash valuation adjustments		417			—			417			31
Loss on exit of operating lease		—			—			—			105
Non-routine costs		1,933			—			2,710			—
Forgiveness of PPP loan and accrued interest		—			—			(2,327	)		—
Other					—			16			—
Loss on early extinguishment of debt		43			—			43
Adjusted EBITDA	$	(298	)	$	(725	)	$	(1,737	)	$	(1,741	)
Adjusted EBITDA margin (1)		(5	)%		(27	)%		(15	)%		(21	)%

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

Diluted weighted average shares (3)		45,709,952			30,286,197			41,498,873			30,026,890
Includable incremental shares — adjusted EBITDA (4)		353,851			606,329			496,393			423,682
Adjusted diluted shares		46,063,803			30,892,526			41,995,266			30,450,572

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

	revenue.
~~(2)~~
(2)	Adjusted EBITDA per adjusted diluted share for our common stock is computed using the ~~more dilutive of the two-class method or the if-converted~~treasury stock method.


~~(3)~~
(3)	Diluted EPS for our common stock was computed using the treasury stock method.

(4)	The number of incremental shares that would be dilutive under an assumption that the Company is profitable during the reported period, which is only applicable for a period in which the Company reports a GAAP net loss. If a GAAP profit is earned in the reported periods, no additional incremental shares are assumed.

~~Index to Financial Statements~~

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, ~~2017.~~2021. During the period ended October 31, 2021, the Company adopted ASU 2019-12. Refer to Note 6 – Income Taxes for more information. 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, ~~2017.~~

2021.

Liquidity and Capital Resources

~~Our~~

The Company’s liquidity is dependent upon numerous factors including: (i) the timing and amount of ~~revenues~~revenue and collection of contractual amounts from ~~clients,~~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. Our~~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 ~~infrastructure in the~~ SaaS data ~~center.~~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, 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.~~months from issuance of these financial statements. Cash and cash equivalent balances at October 31, ~~2017~~2021 and January 31, ~~2017~~2021 were ~~$1,892,000~~approximately $10,409,000 and ~~$5,654,000,~~$2,409,000, respectively. ~~The decrease in cash during the current fiscal period was primarily the result of significant payments made towards our debt and interest thereon, as well as payroll and accounts payable.~~ 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.

The Company has liquidity through the ~~Credit~~Second Amended Loan and Security Agreement described in more detail in Note 5 to– Debt in our condensed consolidated financial statements included herein. The Company’s primary operating subsidiary has a $5,000,000 revolving line of credit that has not been drawn upon as of the date of this report. In order to draw upon the revolving line of credit, the Company’s primary operating subsidiary must comply with customary financial covenants, including the requirement that the Company maintain minimum liquidity of at least (i) $5,000,000 through January 31, 2018, (ii) $4,000,000 from February 1, 2018 through and including January 31, 2019, and (iii) $3,000,000 from February 1, 2019 through and including the maturity date of the credit facility. Pursuant to the Credit Agreement’s definition, the liquidity of the Company’s primary operating subsidiary as of October 31, 2017 was $6,892,000, which satisfies the minimum liquidity financial covenant in the Credit Agreement.

The Credit Agreement also requires the Company to achieve certain minimum EBITDA levels, calculated pursuant to the Credit Agreement and measured on a quarter-end basis, of at least the required amounts in the relevant table set forth in Note 5 to ourunaudited condensed consolidated financial statements included in Part I, ~~Item1 herein for~~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 ~~applicable period set forth therein. Our lender uses~~Second Amended Loan and Security Agreement bear interest at a ~~measurement~~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.

The Second Amended 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 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 ~~similar~~subject to ~~Adjusted EBITDA, a non-GAAP financial measure described above. The required minimum EBITDA level for~~customary prepayment requirements. For the ~~four-quarter~~ period ended October 31, ~~2017 was $(1,000,000).~~

~~The~~2021, the Company was in compliance with the ~~applicable~~Second Amended Loan and Security Agreement covenants.

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 ~~covenants~~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 at October 31, ~~2017. Based upon~~2021. The Company believes that its cash on-hand, along with the ~~borrowing base formula set forth in the Credit Agreement, as of October 31, 2017, the Company had access~~term debt is sufficient to ~~the full amount of the $5,000,000 revolving line of credit.~~

~~The Credit Agreement expressly permits transactions between affiliates that are parties~~support its operations until it is able to the Credit Agreement, which includes the Company and its primary operating subsidiary, including loans made between such affiliate loan parties. However, the Credit Agreement prohibits the Company and its subsidiarygenerate cash from declaring or paying any dividend or making any other payment or distribution, directly or indirectly, on account of equity interests issued by the Company if such equity interests: (a) mature or are mandatorily redeemable pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the loans and all other obligations that are accrued and payable upon the termination of the Credit Agreement), (b) are redeemable at the option of the holder thereof, in whole or in part, (c) provide for the scheduled payments of dividends in cash, or (d) are or become convertible into or exchangeable for indebtedness or any other equity interests that would constitute disqualified equity interests pursuant to clauses (a) through (c) hereof, in each case, prior to the date that is 180 days after the maturity date of the Credit Agreement.

operations.

Significant cash obligations

~~Index to Financial Statements~~

(in thousands) October 31, 2017 January 31, 2017
Term loans (1) $ 4,630
$ 5,539
Capital leases (1) —
91
Royalty liability (2) 2,456
2,351

~~_______________~~

(in thousands)		October 31, 2021				January 31, 2021
Term loan (1)		$	9,884			$	2,301

(1)

~~(1)~~

~~See~~Term loan balance is reported, net of deferred financing costs, of $116,000 and $0 as of October 31, 2021 and January 31, 2021, respectively. Refer to Note 5 ~~to the condensed consolidated financial statements~~- Debt for additional information. The term loan payable as of October 31, 2021 was bank term debt. The term loan balance at January 31, 2021 is the Company’s PPP loan which was forgiven in June 2021.


~~(2)~~	~~See Note 3 to the condensed consolidated financial statements for additional information.~~

Operating cash flow activities

(in thousands) Nine Months Ended
October 31, 2017 October 31, 2016
Net loss $ (3,137 ) $ (4,142 )
Non-cash adjustments to net loss 4,564
5,775
Cash impact of changes in assets and liabilities (2,755 ) (2,876 )
Operating cash flow $ (1,328 ) $ (1,243 )

	Nine months Ended
(in thousands)	October 31, 2021			October 31, 2020
Net loss from continuing operations	$	(6,913	)	$	(3,209	)
Non-cash adjustments to net loss		2,379			1,364
Cash impact of changes in assets and liabilities		512			(1,838	)
Net cash used in operating activities	$	(4,022	)	$	(3,683	)

The ~~increase in net~~use of cash ~~used by~~from operating activities is ~~due to lower collections in~~relatively consistent between the ~~nine-month period~~nine months ended October 31, ~~2017 over the prior comparable period, primarily attributable to~~2021 and 2020. The Company had a ~~larger perpetual license sale~~higher net loss from operations and lower impact of ~~our abstracting solution~~changes in assets and liabilities in the ~~second quarter~~first nine months of fiscal ~~2016.~~

~~Our typical clients are well-established hospitals, medical facilities~~2021 compared to 2020. Within non-cash adjustments to net loss, the Company made an adjustment to exclude the PPP loan and ~~major health information system companies~~related interest that ~~resell our solutions, which generally have had good credit and payment histories for~~was forgiven in the ~~industry. However, some healthcare organizations have recently experienced significant operating losses as a result~~first nine months of limits on third-party reimbursements from insurance companies and governmental entities. Agreements with clients often involve significant amounts and contract terms typically require clients to make progress payments. Adverse economic events,fiscal 2021 as well as ~~uncertainty~~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 ~~credit markets, may adversely affect the liquidity for some of our clients.~~

acquisition.

Investing cash flow activities

(in thousands) Nine Months Ended
October 31, 2017 October 31, 2016
Purchases of property and equipment $ (25 ) $ (501 )
Capitalized software development costs (1,337 ) (1,421 )
Payments for acquisitions —
(1,400 )
Investing cash flow $ (1,362 ) $ (3,322 )

~~Cash~~

	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

The cash used ~~for~~in investing activities ~~was higher~~for the nine months ended October 31, 2021 included the cash used to acquire Avelead, capitalized software development costs, off-set by the release of escrowed funds in fiscal 2021 from the sale of the ECM Assets. Refer to Note 3 – Business Combination and Divestiture 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, ~~2016 compared~~2020 are net of direct transaction expenses. Refer to Note 9 – Discontinued Operations for more information on the ~~current year period, primarily as result~~sale of the ~~acquisition of Opportune IT~~ECM Assets. Operationally, the Company has a focused effort on the spend for software development projects that will result in ~~September 2016.~~in increasing its revenue. See discussion and analysis in “Research and development costs” above.

Financing cash flow activities

(in thousands) Nine Months Ended
October 31, 2017 October 31, 2016
Principal repayments on term loan $ (962 ) $ (2,244 )
Principal payments on capital lease obligations (91 ) (536 )
Return of shares of common stock in connection with the vesting or exercise of equity incentive awards (42 ) (12 )
Proceeds from the exercise of stock options and stock purchase plans 24
15
Financing cash flow $ (1,071 ) $ (2,777 )

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

The ~~decrease in~~ cash ~~used in~~provided by financing activities infor the nine months ended October 31, ~~2017 over~~2021, was primarily from the ~~prior year period~~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 ~~higher prepayments towards our~~the repayment of the Company’s term loan ~~in fiscal 2016, as well as~~on February 24, 2020, upon the ~~termination~~closing of ~~two capital leases, one during~~ the ~~third quarter~~sale of ~~fiscal 2016~~the ECM Assets. The Company was required to repay the term loan at close and ~~another~~funding of the sale of the ECM Assets. Additionally, the Company filed for, and received, a PPP loan in the ~~third quarter~~amount of ~~fiscal 2017.~~

~~Index to Financial Statements~~

$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

~~The Company maintains disclosure controls~~

Our President (who serves as our principal executive officer) and procedures that are designed to ensure that there is reasonable assurance that the information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer andour Chief Financial Officer (who serves as ~~appropriate, to allow timely decisions regarding required disclosure based on~~our principal financial officer) have evaluated the definition of “disclosure controls and procedures” in Exchange Act Rules 13a-15(e) and 15d-15(e). In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, projections of any evaluation of effectiveness of our disclosure controls and procedures ~~to future periods are subject to the risk that controls or procedures may become inadequate because~~(as defined in Exchange Act Rule 13a-15(e)) as of ~~changes in conditions, or that the degree of compliance with the controls or procedures may deteriorate.~~

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company’s senior management, including the Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures to provide reasonable assurance of achieving the desired objectives of the disclosure controls and procedures.October 31, 2021. Based on ~~such~~that evaluation, ~~our~~the Chief Executive Officer and Chief Financial Officer have concluded that ~~as of the end of the period covered by this report,~~ our disclosure controls and procedures were ~~effective.~~effective as of October 31, 2021. 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.

Changes in Internal Control over Financial Reporting

~~There~~

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 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 ~~material~~ 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 ~~most recently completed fiscal~~ quarter ended October 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Index~~

In connection with the acquisition, we have performed additional analyses and other procedures to ~~Financial Statements~~

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.

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 ~~the Company’s~~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 ~~below before deciding to invest~~ in our ~~common stock or~~Annual Report on Form 10-K for the year ended January 31, 2021 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 ~~securities.~~than as set forth below. 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 ~~following~~ risks ~~develops~~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.

~~Risks Relating to Our Business~~

~~Our sales have been concentrated in a small number of clients.~~

Our revenues have been concentrated in a relatively small number of large clients, and we have historically derived a substantial percentage of our total revenues from a few clients. For the fiscal years ended January 31, 2017 and 2016, our five largest clients accounted for 30% and 28% of our total revenues, respectively. If one or more clients terminate all or any portion of a master agreement, delay installations or if we fail to procure additional agreements, there could be a material adverse effect on our business, financial condition and results of operations.

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

If new or existing clients purchase significant amounts of our SaaS services, we may have to expend a significant amount of initial setup costs and time before those new clients are able to begin using such services, and we cannot begin to recognize revenues from those SaaS agreements until the commencement of such services. Accordingly, we anticipate

One factor, that our near term cash flow, revenue and profitability may be adversely affected by significant incremental setup costs from new SaaS clients that would not be offset by revenue until new SaaS clients go into production. While we anticipate long-term growth in profitability through increases in recurring SaaS subscription fees and significantly improved profit visibility, any inability to adequately finance setup costs for new SaaS solutions could result in the failure to put new SaaS solutions into production, and could have a material adverse effect on our liquidity, financial position and results of operations. In addition, this near term cash flow demand could adversely impact our financial flexibility and cause us to forego otherwise attractive business opportunities or investments.

~~Our coding audit services and associated software and technologies represent a new market for the Company, and we may not see the anticipated market interest or growth~~has arisen due to ~~being a new player~~the Avelead acquisition,(Refer to Note 3 – Business Combination and Divestiture in ~~the industry.~~

~~The Company~~our unaudited condensed consolidated financial statements included in Part I, Item I, “Financial Statements”) is currently investing in new software-based technologies relating to high automation and machine-based analytics regarding a client’s coding audit process. These technologies have previously been used solely for internal purposes and have not been commercialized. The return on this investment requires that the product developments are completed in a timely and cost-effective manner, there is general interest in the marketplace (for both existing and future clients) for this technology, the demand for the product generates sufficient revenue in light of the development costs and that the Company is able to execute and successful product launch for these technologies. If the Company is unable to meet these requirements when launching these technologies, or if there is a delay in the launch process, the Company may not see an increase in revenue to offset the current development costs or otherwise translate to added growth and revenue for the Company.

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

The Company generally does not allow for termination of a client’s agreement except at the end of the agreed upon term or for cause. However, certain of the Company’s client contracts provide that the client may terminate the contract without cause prior to the end of the term of the agreement by providing written notice, sometimes with relatively short notice periods. Furthermore, there can be no assurance that a client will not cancel all or any portion of an agreement, even without an express early termination right. And, the Company may face additional costs or hardships collecting on amounts owed if a client terminates an agreement without such a right. Whether resulting from termination for cause or the limited termination for

~~Index to Financial Statements~~

convenience rights discussed above, the existence of contractual relationships with these clients is not an assurance that we will continue to provide services for our clients through the entire term of their respective agreements. If clients representing a significant portion of our revenue terminated their agreements unexpectedly, we may not, in the short-term, be able to replace the revenue and income from such contracts and this would have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows. In addition, client contract terminations could harm our reputation within the industry, especially any termination for cause, which could negatively impact our ability to ~~obtain new clients.~~

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

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

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

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

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

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

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

Our clients derive a substantial portion of their revenue from third-party private and governmental payors, including through Medicare, Medicaid and other government-sponsored programs. Our sales and profitability depend, in part, on the extent to which coverage of and reimbursement for medical care provided is available from governmental health programs, private health insurers, managed care plans and other third-party payors. If governmental or other third-party payors materially

~~Index to Financial Statements~~

reduce reimbursement rates or fail to reimburse our clients adequately, our clients may suffer adverse financial consequences, which in turn, may reduce the demand for and ability to purchase our solutions or services.

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

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

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

The U.S. healthcare system is under intense pressure to improve in many areas, including modernization, universal access and controlling skyrocketing costs of care. We believe that the principal competitive factors in our market are client recommendations and references, company reputation, system reliability, system features and functionality (including ease of use), technological advancements, client service and support, breadth and quality of the systems, the potential for enhancements and future compatible solutions, the effectiveness of marketing and sales efforts, price and the size and perceived financial stability of the vendor. In addition, we believe that the speed with which companies in our market can anticipate the evolving healthcare industry structure and identify unmet needs is an important competitive factor. follows:

If we are unable to ~~keep pace with changing conditions and new developments, we will not be able to compete successfully in the future against existing or potential competitors.~~

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

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

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

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

Due to the rapid pace of technological change, we believe our future success is likely to depend upon continued innovation, technical expertise, marketing skills and client support and services rather than on legal protection of our

~~Index to Financial Statements~~

~~intellectual property rights. However, we have aggressively asserted our intellectual property rights when necessary and intend to do so in the future.~~

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

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

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

~~Over the last several years, we have completed several acquisitions of businesses through asset and stock purchases. We expect that we will make additional acquisitions in the future.~~

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

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

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

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

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

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

~~the potential loss of key employees, clients or partners of an acquired business;~~

~~delays in client purchases due to uncertainty related to any acquisition;~~

~~potential unknown liabilities associated with an acquisition; and~~

~~the tax effects of any such acquisitions.~~

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

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

~~Third-party products are essential to our software.~~

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

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

~~Index to Financial Statements~~

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

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

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

~~Our SaaS and support services could experience interruptions.~~

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

~~Our SaaS solutions are provided over an internet connection. Any breach of security or confidentiality of protected health information could expose us to significant expense and harm our reputation.~~

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

~~The loss of key personnel could adversely affect our business.~~

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

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

We will need to expand our operations if we successfully achieve greater demand for our products and services. We cannot be certain that our systems, procedures, controls and human resources will be adequate to support expansion of our operations. Our future operating results will depend on the ability of our officers and employees to manage changing business conditions and to implement and improve our technical, administrative, financial ~~control and reporting systems. We may not be able to expand and upgrade our systems and infrastructure to accommodate these increases. Difficulties in managing any future~~

~~Index to Financial Statements~~

growth, including as a result of integrating any prior or future acquisition with our existing businesses, could cause us to incur unexpected expenses or render us unable to meet our clients’ requirements, and consequently have a significant negative impact on our business, financial condition and operating results.

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

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

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

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

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

In November 2014, we entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, N.A., as administrative agent, and other lender parties thereto. Pursuant to the Credit Agreement, the lenders agreed to provide a $10,000,000 senior term loan and a $5,000,000 revolving line of credit to our primary operating subsidiary. The Credit Agreement includes customary financial covenants, including the requirements that the Company maintain certain minimum liquidity and achieve certain minimum EBITDA levels.

In order to draw upon its revolving line of credit, pursuant to the terms of the third amendment to the Credit Agreement entered into as of June 19, 2017, the Company is required to maintain minimum liquidity of at least (i) $5,000,000 through January 31, 2018, (ii) $4,000,000 from February 1, 2018 through and including January 31, 2019, and (iii) $3,000,000 from February 1, 2019 through and including the maturity date of the credit facility. The Company was in compliance with the applicable loan covenants at October 31, 2017.

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

Our outstanding preferred stock and warrants have significant redemption and repayment rights that could have a material adverse effect on our liquidity and available financing for our ongoing operations.

In August 2012, we completed a private offering of preferred stock, warrants and convertible notes to a group of investors for gross proceeds of $12 million. In November 2012, the convertible notes converted into shares of preferred stock. Subject to the terms of the Subordination and Intercreditor Agreement, the preferred stock is redeemable at the option of the holders thereof anytime after August 31, 2016 if not previously converted into shares of common stock. We may not achieve the thresholds required to trigger automatic conversion of the preferred stock and, alternatively, holders may not voluntarily elect to

~~Index to Financial Statements~~

convert the preferred stock into common stock. The election of the holders of our preferred stock to redeem the preferred stock could subject us to decreased liquidity and other negative impacts on our business, results of operations, and financial condition. Under the terms of the Subordination and Intercreditor Agreement among the preferred stockholders, the Company and Wells Fargo, our obligation to redeem the preferred stock is subordinated to our obligations under the senior term loan and the preferred stock may not be redeemed without the consent of Wells Fargo. For additional information regarding the terms, rights and preferences of the preferred stock and warrants, see Note 14 to our consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended January 31, 2017 and our other SEC filings.

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

Current economic conditions in the U.S. and globally and the concern that the worldwide economy may enter into a prolonged stagnant period could materially adversely affect our clients' access to capital or willingness to spend capital on our solutions and services or their levels of cash liquidity with which to pay for solutions that they will order or have already ordered from us. Continued challenging economic conditions also would likely negatively impact our business, which could result in: (1) reduced demand for our solutions and services; (2) increased price competition for our solutions and services; (3) increased risk of collectability of cash from our clients; (4) increased risk in potential reserves for doubtful accounts and write-offs of accounts receivable; (5) reduced revenues; and (6) higher operating costs as a percentage of revenues.

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

~~The variability of our quarterly operating results can be significant.~~

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

~~The preparation~~completeness of our financial ~~statements requires~~statements.

We are in the ~~use~~process of ~~estimates that may vary from actual results.~~

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

~~Failure to improve and maintain the quality of~~ internal control over financial reporting and ~~disclosure controls~~our other control environments with those of Avelead. In the course of integration, we may encounter difficulties and ~~procedures or other lapses in compliance could materially and adversely affect~~unanticipated issues combining our ~~ability~~respective accounting systems due to ~~provide timely and accurate financial information about us or subject us to potential liability.~~

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

~~Our operations are subject to foreign currency exchange rate risk.~~

In connection with our expansion into foreign markets, which primarily consists of Canada, we sometimes receive payment in currencies other than the U.S. dollar. Accordingly, changes in exchange rates, and in particular a strengthening of the ~~U.S. dollar, will negatively affect~~combined company, timely or at all, we may fail to prevent or detect material misstatements in our ~~net sales~~financial statements, in which case investors may lose confidence in the accuracy and ~~gross margins from our non-U.S. dollar denominated revenue, as~~

~~Index to Financial Statements~~

expressed in U.S. dollars. There is also a risk that we will have to adjust the pricing of solutions denominated in foreign currencies when there has been significant volatility in foreign currency exchange rates.

~~Risks Relating to an Investment in Our Securities~~

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

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

~~General economic~~financial reports and ~~market conditions;~~

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

~~Lack of or negative research coverage by securities analysts;~~

~~Conditions or trends in the healthcare information technology industry;~~

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

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

~~Announced or anticipated capital commitments;~~

~~Ability to maintain listing of our common stock on The Nasdaq Stock Market;~~

~~Additions or departures of key personnel; and~~

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

~~Most of these factors are beyond our control. These factors may cause~~ the market price of our ~~common stock to decline, regardless~~securities may decline.

Item 2. Unregistered Sales of ~~our operating performance or financial condition.~~

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

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

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

~~In any bankruptcy, liquidation, dissolution or winding up of~~Proceeds

On October 8, 2021, the Company ~~our~~issued to 180 Consulting an aggregate of 128,415 shares of common stock ~~would rank~~as compensation for services previously rendered during the six months ended July 31, 2021. 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 ~~right~~a private placement in reliance on the exemption from registration available under Section 4(a)(2) of ~~payment~~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 ~~distribution below all debt claims against us and all of our outstanding~~pursuant to an exemption from such registration.

The Company also issued 5,021,972 shares of ~~preferred stock, if any. As a result, holders of our shares of~~its restricted common stock ~~will not be entitled to receive any payment or other distribution of assets in the event of~~(the “Acquisition Restricted Common Stock”) as a bankruptcy or upon a liquidation or dissolution until after all of our obligations to our debt holders and holders of preferred stock have been satisfied. Accordingly, holders of our common stock may lose their entire investment in the event of a bankruptcy, liquidation, dissolution or winding up of our company. Similarly, holders of our preferred stock would rank junior to our debt holders and creditors in the event of a bankruptcy, liquidation, dissolution or winding upportion of the ~~Company.~~

~~There may be future sales or other dilution~~aggregate consideration for the purchase of ~~our equity, which may adversely affect~~Avelead. The Acquisition Restricted Common Stock has a fair value as of the ~~market price~~closing date of ~~our common stock.~~

~~We are generally~~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 ~~restricted from issuing in public or private offerings additional shares of common stock or preferred stock (except for certain restrictions~~been registered under the ~~terms of our outstanding preferred stock),~~Securities Act and ~~other securities that are convertible into~~cannot be transferred until properly registered under the Securities Act or ~~exchangeable for, or that represent a right~~pursuant to ~~receive, common stock or preferred stock or any substantially~~

~~Index to Financial Statements~~

similar securities. Such offerings represent the potential for a significant increase in the number of outstanding shares of our common stock. The market price of our common stock could decline as a result of sales of common stock, preferred stock or similar securities in the market made after an ~~offering or the perception that~~exemption from such ~~sales could occur.~~

In addition to our currently outstanding preferred stock, the issuance of an additional series of preferred stock could adversely affect holders of shares of our common stock, which may negatively impact your investment.

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

As of October 31, 2017, we had 2,949,995 shares of preferred stock outstanding. For additional information regarding the terms, rights and preferences of such stock, see Note 14 to our consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended January 31, 2017 and our other SEC filings.

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

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

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

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

~~Note Regarding Risk Factors~~

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

~~Index to Financial Statements~~

~~Item 2. ISSUER PURCHASES OF EQUITY SECURITIES~~

registration.

The following table sets forth information with respect to our repurchases of common stock during the three months ended October 31, ~~2017:~~2021:

					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		—		—

(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.

Total Number of Shares Purchased Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (1)
August 1 - August 31 3,977
$ 1.20
—
—
September 1 - September 30 —
—
—
—
October 1 - October 31 —
—
—
—
Total 3,977
$ 1.20
—
—

~~_______________~~

(1) Because the withholding of shares to pay taxes due upon vesting of restricted stock is permitted outside the scope of a board-authorized repurchase plan, these amounts exclude shares of stock returned to us by employees in satisfaction of withholding tax requirements on vested stock grants. There were 3,977 such shares returned to us during the three months ended October 31, 2017.

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.

~~Index to Financial Statements~~

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 ~~12, 2017~~14, 2021	By:	/S~~/ David W. Sides~~ S/ WYCHE T. “TEE” GREEN, III
		~~David W. Sides~~ Wyche T. “Tee” Green, III Chief Executive Officer

DATE: December ~~12, 2017~~14, 2021	By:	/S~~/ Nicholas A. Meeks~~ S/ Thomas J. Gibson
		~~Nicholas A. Meeks~~ Thomas J. Gibson
		Chief Financial Officer

~~Index to Financial Statements~~

~~INDEX TO EXHIBITS~~



~~Exhibit No.~~	~~Description of Exhibit~~
~~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~~	The following financial information from Streamline Health Solutions, Inc.’s Quarterly Report on Form 10-Q for the three-month period ended October 31, 2017 filed with the SEC on December 12, 2017, formatted in XBRL includes: (i) Condensed Consolidated Balance Sheets at October 31, 2017 and January 31, 2017, (ii) Condensed Consolidated Statements of Operations for three- and nine-month periods ended October 31, 2017 and 2016, (iii) Condensed Consolidated Statements of Cash Flows for the nine-month periods ended October 31, 2017 and 2016, and (iv) Notes to the Condensed Consolidated Financial Statements.

~~_______________~~


*	~~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.~~



¨For the quarterly period ended October 31, 2021

OR

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

For the transition period from __________ to ____________

Delaware		31-1455414

~~Delaware~~		~~31-1455414~~
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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

		Page
Part I.	FINANCIAL INFORMATION	2
~~TABLE OF CONTENTS~~Item 1.	Financial Statements	2
		~~Page~~
~~Part I.~~	~~FINANCIAL INFORMATION~~
~~Item 1.~~	~~Financial Statements~~	2
	Condensed Consolidated Balance Sheets at October 31, ~~2017~~2021 (unaudited) and January 31, ~~2017~~2021	2
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended October 31, ~~2017~~2021 and ~~2016~~2020	4
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended October 31, 2021 and 2020	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended October 31, ~~2017~~2021 and ~~2016~~2020	5 6
	Notes to Unaudited Condensed Consolidated Financial Statements	6 7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16 27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26 37
Item 4.	Controls and Procedures	26 37
Part II.	OTHER INFORMATION	38
Item 1.1A.	~~Legal Proceedings~~Risk Factors	27 38
~~Item 1A.~~	~~Risk Factors~~	27
Item 2.	~~Issuer Purchases~~Unregistered Sales of Equity Securities and Use of Proceeds	36 39
Item 6.	Exhibits	36 40
	Signatures	41


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



	As of
	October 31, 2017			January 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	1,892,182		$	5,654,093
Accounts receivable, net of allowance for doubtful accounts of $301,773 and $198,449, respectively	2,532,941			4,489,789
Contract receivables	283,973			466,423
Prepaid hardware and third-party software for future delivery	5,858			5,858
Prepaid client maintenance contracts	587,960			595,633
Other prepaid assets	837,649			732,496
Other current assets	392,449			439
Total current assets	6,533,012			11,944,731
Non-current assets:
Property and equipment:
Computer equipment	2,971,361			3,110,274
Computer software	725,700			827,642
Office furniture, fixtures and equipment	683,443			683,443
Leasehold improvements	729,348			729,348
	5,109,852			5,350,707
Accumulated depreciation and amortization	(3,762,821		)	(3,447,198		)
Property and equipment, net	1,347,031			1,903,509
Capitalized software development costs, net of accumulated amortization of $18,119,290 and $16,544,797, respectively	4,346,694			4,584,245
Intangible assets, net of accumulated amortization of $6,729,799 and $5,807,338, respectively	6,074,137			6,996,599
Goodwill	15,537,281			15,537,281
Other	677,319			672,133
Total non-current assets	27,982,462			29,693,767
	$	34,515,474		$	41,638,498



	Three Months Ended October 31						Nine Months Ended October 31
	2017			2016			2017			2016
Revenues:
Systems sales	$	348,526		$	314,218		$	1,055,941		$	2,190,256
Professional services	801,771			630,961			1,793,618			1,869,656
Audit services	280,025			234,347			919,485			234,347
Maintenance and support	3,250,229			3,749,596			9,883,563			11,237,637
Software as a service	1,718,748			1,706,366			4,586,532			5,144,876
Total revenues	6,399,299			6,635,488			18,239,139			20,676,772
Operating expenses:
Cost of systems sales	434,138			663,148			1,596,988			2,080,263
Cost of professional services	555,815			723,358			1,814,236			1,891,146
Cost of audit services	404,280			595,575			1,236,358			595,575
Cost of maintenance and support	667,307			790,291			2,241,969			2,483,462
Cost of software as a service	289,503			450,695			914,711			1,390,308
Selling, general and administrative	2,819,549			3,212,350			8,983,248			10,153,140
Research and development	932,251			1,969,415			3,985,161			5,800,169
Total operating expenses	6,102,843			8,404,832			20,772,671			24,394,063
Operating income (loss)	296,456			(1,769,344		)	(2,533,532		)	(3,717,291		)
Other expense:
Interest expense	(113,078		)	(98,871		)	(360,723		)	(380,897		)
Miscellaneous expense	(177,282		)	(60,555		)	(235,007		)	(39,089		)
Earnings (loss) before income taxes	6,096			(1,928,770		)	(3,129,262		)	(4,137,277		)
Income tax expense	(2,607		)	(1,702		)	(7,822		)	(5,104		)
Net earnings (loss)	$	3,489		$	(1,930,472	)	$	(3,137,084	)	$	(4,142,381	)
Less: deemed dividends on Series A Preferred Shares	—			(72,710		)	—			(875,935		)
Net earnings (loss) attributable to common stockholders	$	3,489		$	(2,003,182	)	$	(3,137,084	)	$	(5,018,316	)
Basic net earnings (loss) per common share	$	—		$	(0.10	)	$	(0.16	)	$	(0.26	)
Number of shares used in basic per common share computation	19,985,822			19,645,521			19,838,691			19,477,538
Diluted net earnings (loss) per common share	$	—		$	(0.10	)	$	(0.16	)	$	(0.26	)
Number of shares used in diluted per common share computation	23,068,423			19,645,521			19,838,691			19,477,538



	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At October 31, 2017
Warrants liability (1)	$	151,000	$	—	$	—	$	151,000
Royalty liability (2)	2,456,000		—		—		2,456,000

At January 31, 2017
Warrants liability (1)	$	46,000	$	—	$	—	$	46,000
Royalty liability (2)	2,351,000		—		—		2,351,000



	Three Months Ended
	October 31, 2017		October 31, 2016
Net earnings (loss)	$	3,489	$	(1,930,472	)
Less: deemed dividends on Series A Preferred Stock	—		(72,710		)
Net earnings (loss) attributable to common stockholders	$	3,489	$	(2,003,182	)
Weighted average shares outstanding used in basic per common share computations	19,985,822		19,645,521
Restricted stock and Series A Convertible Preferred Stock	3,082,601		—
Number of shares used in diluted per common share computation	23,068,423		19,645,521
Basic net earnings (loss) per share of common stock	$	0.00	$	(0.10	)
Diluted net earnings (loss) per share of common stock	$	0.00	$	(0.10	)



	Balance at September 8, 2016
Assets purchased:
Accounts and contracts receivable	792,000
Other assets	32,000
Internally-developed software	350,000
Intangible assets	650,000
Total assets purchased	1,824,000
Liabilities assumed:
Accounts payable and accrued liabilities	424,000
Net assets acquired	$	1,400,000
Cash paid	$	1,400,000



	Facilities		Equipment		Fiscal Year Totals
2017 (three months remaining)	$	256,000	$	3,000	$	259,000
2018	1,039,000		11,000		1,050,000
2019	967,000		11,000		978,000
2020	504,000		11,000		515,000
2021	519,000		2,000		521,000
Thereafter	445,000		—		445,000
Total	$	3,730,000	$	38,000	$	3,768,000



For the four-quarter period ending	Minimum EBITDA
July 31, 2017	$	(1,250,000	)
October 31, 2017	(1,000,000		)
January 31, 2018	(700,000		)
April 30, 2018	(35,869		)
July 31, 2018	414,953
October 31, 2018	1,080,126
January 31, 2019	1,634,130
April 30, 2019	1,842,610
July 31, 2019	2,657,362
October 31, 2019 and each fiscal quarter thereafter	3,613,810



	October 31, 2017			January 31, 2017
Senior term loan	$	4,630,000		$	5,539,000
Capital lease	—			91,000
Total	4,630,000			5,630,000
Less: Current portion	(597,000		)	(747,000		)
Non-current portion of debt	$	4,033,000		$	4,883,000



	Senior Term Loan (1)
2017	$	149,000
2018	597,000
2019	4,030,000
Total repayments	$	4,776,000



	October 31, 2017		October 31, 2016
Company proprietary software	$	10,892,000	$	15,551,000
Third-party hardware and software	—		200,000
Professional services	2,824,000		4,973,000
Audit services	1,454,000		1,849,000
Maintenance and support	18,256,000		19,413,000
Software as a service	14,242,000		12,929,000
Total	$	47,668,000	$	54,915,000



	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (1)
August 1 - August 31	3,977	$	1.20	—	—
September 1 - September 30	—	—		—	—
October 1 - October 31	—	—		—	—
Total	3,977	$	1.20	—	—

Large accelerated filer ¨
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Non-accelerated filer¨
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Smaller reporting company x
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~~(Do not check if a smaller reporting company)~~

Emerging growth company ¨
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