Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Apr. 30, 2020 | Jun. 08, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | STREAMLINE HEALTH SOLUTIONS INC. | |
Entity Central Index Key | 0001008586 | |
Document Type | 10-Q | |
Document Period End Date | Apr. 30, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --01-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 31,246,011 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Apr. 30, 2020 | Jan. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 6,560,000 | $ 1,649,000 |
Accounts receivable, net of allowance for doubtful accounts of $80,000 and $96,000, respectively | 688,000 | 2,016,000 |
Contract receivables | 867,000 | 803,000 |
Prepaid and other current assets | 525,000 | 501,000 |
Current assets of discontinued operations | 168,000 | 1,585,000 |
Total current assets | 8,808,000 | 6,554,000 |
Non-current assets: | ||
Property and equipment, net | 84,000 | 98,000 |
Right-of use asset for operating lease | 513,000 | |
Capitalized software development costs, net of accumulated amortization of $7,572,000 and $7,283,000, respectively | 5,972,000 | 5,782,000 |
Intangible assets, net of accumulated amortization of $4,405,000 and $4,282,000, respectively | 992,000 | 1,115,000 |
Goodwill | 10,712,000 | 10,712,000 |
Other | 1,377,000 | 611,000 |
Long-term assets of discontinued operations | 48,000 | 6,826,000 |
Total non-current assets | 19,698,000 | 25,144,000 |
Total assets | 28,506,000 | 31,698,000 |
Current liabilities: | ||
Accounts payable | 289,000 | 756,000 |
Accrued expenses | 848,000 | 1,395,000 |
Accrued income taxes | 935,000 | |
Current portion of term loan, less deferred financing cost | 686,000 | 3,872,000 |
Deferred revenues | 2,262,000 | 3,593,000 |
Royalty liability | 986,000 | 969,000 |
Current portion of operating lease obligation | 177,000 | |
Current liabilities of discontinued operations | 398,000 | 5,053,000 |
Total current liabilities | 6,581,000 | 15,638,000 |
Non-current liabilities: | ||
Term loan payable, less current portion | 1,615,000 | |
Deferred revenues, less current portion | 39,000 | 55,000 |
Operating lease obligation, less current portion | 352,000 | |
Total non-current liabilities | 2,006,000 | 55,000 |
Total liabilities | 8,587,000 | 15,693,000 |
Stockholders' equity: | ||
Common stock, $.01 par value per share, 45,000,000 shares authorized; 30,914,826 and 30,530,643 shares issued and outstanding, respectively | 309,000 | 305,000 |
Additional paid in capital | 95,350,000 | 95,113,000 |
Accumulated deficit | (75,740,000) | (79,413,000) |
Total stockholders' equity | 19,919,000 | 16,005,000 |
Total liabilities and stockholders' equity | $ 28,506,000 | $ 31,698,000 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Apr. 30, 2020 | Jan. 31, 2020 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 80,000 | $ 96,000 |
Accumulated amortization, capitalized software development costs | 7,572,000 | 7,283,000 |
Accumulated amortization, intangible assets | $ 4,405,000 | $ 4,282,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 45,000,000 | 45,000,000 |
Common stock, shares issued | 30,914,826 | 30,530,643 |
Common stock, shares outstanding | 30,914,826 | 30,530,643 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | ||
Revenues: | |||
Total revenues | $ 2,844,000 | $ 3,164,000 | |
Operating expenses: | |||
Cost of system sales | 77,000 | 64,000 | |
Cost of professional services | 265,000 | 426,000 | |
Cost of audit services | 360,000 | 303,000 | |
Cost of maintenance and support | 186,000 | 127,000 | |
Cost of software as a service | 382,000 | 107,000 | |
Selling, general and administrative expense | 2,291,000 | 2,421,000 | |
Research and development | 684,000 | 589,000 | |
Loss on exit of membership agreement | 105,000 | ||
Total operating expenses | 4,350,000 | 4,037,000 | |
Operating loss | (1,506,000) | (873,000) | |
Other expense: | |||
Interest expense | (14,000) | (78,000) | |
Miscellaneous expense | (18,000) | (16,000) | |
Loss from continuing operations before income taxes | (1,538,000) | (967,000) | |
Income tax benefit | 561,000 | 325,000 | |
Loss from continuing operations | (977,000) | (642,000) | |
Income from discontinued operations: | |||
Gain on sale of discontinued operations | 6,009,000 | ||
Income from discontinued operations | 137,000 | 1,282,000 | |
Income tax expense | (1,496,000) | (327,000) | |
Income from discontinued operations, net of tax | 4,650,000 | 955,000 | |
Net income | $ 3,673,000 | $ 313,000 | |
Basic Earnings Per Share: | |||
Continuing operations | $ (0.03) | $ (0.03) | |
Discontinued operations | 0.16 | 0.04 | |
Net income | $ 0.13 | $ 0.01 | |
Weighted average number of common shares - basic | [1] | 29,767,814 | 19,793,361 |
Diluted Earnings Per Share: | |||
Continuing operations | [2] | $ (0.03) | $ (0.03) |
Discontinued operations | 0.15 | 0.04 | |
Net income | $ 0.12 | $ 0.01 | |
Weighted average number of common shares - diluted | 30,037,716 | 22,825,037 | |
System Sales [Member] | |||
Revenues: | |||
Total revenues | $ 221,000 | ||
Professional Services [Member] | |||
Revenues: | |||
Total revenues | 181,000 | 455,000 | |
Audit Services [Member] | |||
Revenues: | |||
Total revenues | 544,000 | 395,000 | |
Maintenance and Support [Member] | |||
Revenues: | |||
Total revenues | 1,258,000 | 1,452,000 | |
Software as a Service [Member] | |||
Revenues: | |||
Total revenues | $ 861,000 | $ 641,000 | |
[1] | Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of April 30, 2020 and 2019, there were 1,124,708 and 1,104,766 unvested restricted shares of common stock outstanding, respectively. | ||
[2] | Diluted EPS for our common stock was computed using the if-converted method, which yields the same result as the two-class method. The two-class method has not been used in the current period as a result of the redemption of the participating securities, See Note 5. |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Jan. 31, 2019 | $ 208,000 | $ 82,544,000 | $ (76,550,000) | $ 6,202,000 |
Balance, shares at Jan. 31, 2019 | 20,767,708 | |||
Restricted stock issued | $ 1,000 | (1,000) | ||
Restricted stock issued, shares | 140,000 | |||
Restricted stock forfeited | ||||
Restricted stock forfeited, shares | (5,367) | |||
Share-based compensation | 269,000 | 269,000 | ||
Net income | 313,000 | 313,000 | ||
Balance at Apr. 30, 2019 | $ 209,000 | 82,812,000 | (76,237,000) | 6,784,000 |
Balance, shares at Apr. 30, 2019 | 20,902,341 | |||
Balance at Jan. 31, 2020 | $ 305,000 | 95,113,000 | (79,413,000) | 16,005,000 |
Balance, shares at Jan. 31, 2020 | 30,530,643 | |||
Restricted stock issued | $ 4,000 | (4,000) | ||
Restricted stock issued, shares | 440,000 | |||
Restricted stock forfeited | ||||
Restricted stock forfeited, shares | (34,790) | |||
Share-based compensation | 263,000 | 263,000 | ||
Surrender of shares | (22,000) | (22,000) | ||
Surrender of shares, shares | (21,027) | |||
Net income | 3,673,000 | 3,673,000 | ||
Balance at Apr. 30, 2020 | $ 309,000 | $ 95,350,000 | $ (75,740,000) | $ 19,919,000 |
Balance, shares at Apr. 30, 2020 | 30,914,826 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Apr. 30, 2020 | Apr. 30, 2019 | |
Statement of Cash Flows [Abstract] | ||
Net Income | $ 3,673,000 | $ 313,000 |
Income from continuing operations, net of tax | 4,650,000 | 955,000 |
Loss from continuing operations, net of tax | (977,000) | (642,000) |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Depreciation | 14,000 | 8,000 |
Amortization of capitalized software development costs | 289,000 | 126,000 |
Amortization of intangible assets | 123,000 | 143,000 |
Amortization of other deferred costs | 75,000 | 66,000 |
Valuation adjustments | 17,000 | 15,000 |
Benefit for income taxes | (561,000) | (325,000) |
Loss on exit of membership agreement | 105,000 | |
Share-based compensation expense | 263,000 | 269,000 |
Benefit for accounts receivable allowance | (15,000) | (277,000) |
Changes in assets and liabilities: | ||
Accounts and contract receivables | 1,279,000 | (249,000) |
Other assets | (49,000) | (122,000) |
Accounts payable | (467,000) | 111,000 |
Accrued expenses and other liabilities | (652,000) | (593,000) |
Deferred revenues | (1,347,000) | (14,000) |
Net cash used in operating activities | (1,903,000) | (1,484,000) |
Net cash from operating activities - discontinued operations | (2,270,000) | 2,277,000 |
Cash flows from investing activities: | ||
Proceeds from sale of ECM Assets | 11,284,000 | |
Purchases of property and equipment | (38,000) | |
Capitalization of software development costs | (479,000) | (790,000) |
Net cash provided by (used in) investing activities | 10,805,000 | (828,000) |
Net cash from investing activities - discontinued operations | (180,000) | |
Cash flows from financing activities: | ||
Repayment of bank term loan | (4,000,000) | (149,000) |
Proceeds from term loan payable | 2,301,000 | |
Other | (22,000) | (3,000) |
Net cash used in financing activities | (1,721,000) | (152,000) |
Net increase (decrease) in cash and cash equivalents | 4,911,000 | (367,000) |
Cash and cash equivalents at beginning of period | 1,649,000 | 2,376,000 |
Cash and cash equivalents at end of period | $ 6,560,000 | $ 2,009,000 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Apr. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | NOTE 1 — BASIS OF PRESENTATION Streamline Health Solutions, Inc. and its subsidiary (“we”, “us”, “our”, “Streamline”, or the “Company”) operates in one segment as a provider The accompanying unaudited condensed consolidated financial statements have been prepared by us pursuant to the rules and regulations applicable to quarterly reports on Form 10-Q of the U.S. Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles 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 its wholly-owned subsidiary, Streamline Health, Inc. In the opinion of our management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the condensed consolidated financial statements have been included. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent annual report on Form 10-K, Commission File Number 0-28132. Operating results for the three months ended April 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2021. The Company determined that it has one operating segment and one reporting unit due to the single nature of our products, product development and distribution process, and customer base as a provider of computer software-based solutions and services for healthcare providers. On February 24, 2020, the Company sold a portion of its business (the ECM Assets). The Company signed the definitive agreement in December 2019 and prepared and filed a proxy statement to obtain shareholder vote on the transaction. We applied the standard of ASC 205-20-1 ASC 205-20-1 ASC 205-20-1 All amounts in the condensed consolidated financial statements, notes and tables have been rounded to the nearest thousand dollars, except share and per share amounts, unless otherwise indicated. All references to a fiscal year refer to the fiscal year commencing February 1 in that calendar year and ending on January 31 of the following calendar year. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Apr. 30, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Our significant accounting policies are presented in “Note 2 – Significant Accounting Policies” in the fiscal year 2019 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”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates and judgments, including those related to the recognition of revenue, stock-based compensation, capitalization of software development costs, intangible assets, the allowance for doubtful accounts, and income taxes. Actual results could differ from those estimates. Reclassification Certain amounts in the preparation of financial statements for the three months ended April 30, 2020, resulted in reclassifications of the three months ended April 30, 2019 and balance sheet as of January 31, 2020. A total of $47,000 for deferred financing cost related to the revolving credit agreement was reclassified from debt to other assets in the accompanying condensed consolidated balance sheet as of January 31, 2020 to be consistent with the presentation as of April 30, 2020. The Company paid the term loan on February 24, 2020, and accordingly wrote-off the portion of deferred financing cost related to the term loan through discontinued operations. Fair Value of Financial Instruments The Financial Accounting Standards Board’s (“FASB”) authoritative guidance on fair value measurements establishes a framework for measuring fair value. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. Under this guidance, assets and liabilities carried at fair value must be classified and disclosed in one of the following three categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. Cash and cash equivalents are classified as Level 1. The carrying amount of our long-term debt approximates fair value since the variable interest rates being paid on the amounts approximate the market interest 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 three months ended April 30, 2020 and 2019. The table below provides information on our liabilities that are measured at fair value on a recurring basis: Quoted Prices Significant Other Significant Total Fair in Active Markets Observable Inputs Unobservable Inputs Value (Level 1) (Level 2) (Level 3) At April 30, 2020 Royalty liability (1) $ 986,000 $ — $ — $ 986,000 At January 31, 2020 Royalty liability (1) $ 969,000 $ — $ — $ 969,000 (1) The fair value of the royalty liability was determined based on discounting the portion of the modified royalty commitment payable in cash (refer to Note 7 – Commitments and Contingencies for additional information on our royalty liability). Fair value adjustments are included within miscellaneous expense in the condensed consolidated statements of operations. Revenue Recognition We derive revenue from the sale of internally-developed software, either by licensing for local installation or by a software as a service (“SaaS”) delivery model, through our direct sales force or through third-party resellers. Licensed, locally-installed clients on a perpetual model utilize our support and maintenance services for a separate fee, whereas term-based locally installed license fees and SaaS fees include support and maintenance. We also derive revenue from professional services that support the implementation, configuration, training and optimization of the applications, as well as audit services provided to help clients 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) 606, Revenue from Contracts with Customers We commence revenue recognition (Step 5 below) in accordance with that core principle after applying the following steps: ● Step 1: Identify the contract(s) with a customer ● Step 2: Identify the performance obligations in the contract ● Step 3: Determine the transaction price ● Step 4: Allocate the transaction price to the performance obligations in the contract ● Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation Often contracts contain more than one performance obligation. Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities. If we determine that we have not satisfied a performance obligation, we defer recognition of the revenue until the performance obligation is satisfied. Maintenance and support and SaaS agreements are generally non-cancelable or contain significant penalties for early cancellation, although clients typically have the right to terminate their contracts for cause if we fail to perform material obligations. However, if non-standard acceptance periods, non-standard performance criteria, or cancellation or right of refund terms are required, revenue is recognized upon the satisfaction of such criteria. The determined transaction price is allocated based on the standalone selling price of the performance obligations in contract. Significant judgment is required to determine the standalone selling price (“SSP”) for each performance obligation, the amount allocated to each performance obligation and whether it depicts the amount that the Company expects to receive in exchange for the related product and/or service. As the selling prices of the Company’s software licenses are highly variable, the Company estimates SSP of its software licenses using the residual approach when the software license is sold with other services and observable SSPs exist for the other services. The Company estimates the SSP for maintenance, professional services, and audit services based on observable standalone sales. Contract Combination The Company may execute more than one contract or agreement with a single customer. The Company evaluates whether the agreements were negotiated as a package with a single objective, whether the amount of consideration to be paid in one agreement depends on the price and/or performance of another agreement, or whether the goods or services promised in the agreements represent a single performance obligation. The conclusions reached can impact the allocation of the transaction price to each performance obligation and the timing of revenue recognition related to those arrangements. The Company has utilized the portfolio approach as the practical expedient. We have applied the revenue model to a portfolio of contracts with similar characteristics where we expected that the financial statements would not differ materially from applying it to the individual contracts within that portfolio. Systems Sales The Company’s software license arrangements provide the customer with the right to use functional intellectual property. Implementation, support, and other services are typically considered distinct performance obligations when sold with a software license unless these services are determined to significantly modify the software. Revenue is recognized at a point in time. Typically, this is upon shipment of components or electronic download of software. Maintenance and Support Services Our maintenance and support obligations include multiple discrete performance obligations, with the two largest being unspecified product upgrades or enhancements, and technical support, which can be offered at various points during a contract period. We believe that the multiple discrete performance obligations within our overall maintenance and support obligations can be viewed as a single performance obligation since both the unspecified upgrades and technical support are activities to fulfill the maintenance performance obligation and are rendered concurrently. Maintenance and support agreements entitle clients to technology support, version upgrades, bug fixes and service packs. We recognize maintenance and support revenue over the contract term. Software-Based Solution Professional Services The Company provides various professional services to customers with software licenses. These include project management, software implementation and software modification services. Revenues from arrangements to provide professional services are generally distinct from the other promises in the contract and are recognized as the related services are performed. Consideration payable under these arrangements is either fixed fee or on a time-and-materials basis, and is recognized over time as the services are performed Software as a Service SaaS-based contracts include use of the Company’s platform, implementation, support and other services which represent a single promise to provide continuous access to its software solutions. The Company recognizes revenue over the term of the life of the contract. Audit Services The Company provides technology-enabled coding audit services to help clients 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: Three Months Ended April 30, 2020 Recurring Revenue Non-recurring Revenue Total Systems sales $ — $ — $ — Professional services — 181,000 181,000 Audit services — 544,000 544,000 Maintenance and support 1,258,000 — 1,258,000 Software as a service 861,000 — 861,000 Total revenue: $ 2,119,000 $ 725,000 $ 2,844,000 Contract Receivables and Deferred Revenues The Company receives payments from customers based upon contractual billing schedules. Contract receivables include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Deferred revenues include payments received in advance of performance under the contract. Our contract receivables and deferred revenue are reported on an individual contract basis at the end of each reporting period. Contract receivables are classified as current or noncurrent based on the timing of when we expect to bill the customer. Deferred revenue is classified as current or noncurrent based on the timing of when we expect to recognize revenue. In the year first three months ended April 30, 2020, we recognized approximately $1,687,000 in revenue from deferred revenues outstanding as of January 31, 2020. Revenue allocated to remaining performance obligations was $12.5 million as of April 30, 2020, of which the Company expects to recognize approximately 52% over the next 12 months and the remainder thereafter. Deferred costs (costs to fulfill a contract and contract acquisition costs) We defer the direct costs, which include salaries and benefits, for professional services related to SaaS contracts as a cost to fulfill a contract. These deferred costs will be amortized on a straight-line basis over the contractual term. As of April 30, 2020 and January 31, 2020, we had deferred costs of $152,000 and $144,000, respectively, net of accumulated amortization of $317,000 and $332,000, respectively. Amortization expense of these costs was $33,000 and $50,000 in first quarter ended April 30, 2020 and 2019, respectively. There were no impairment losses for these capitalized costs for the fiscal years 2019 and 2018. Contract acquisition costs, which consist of sales commissions paid or payable, is considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial and renewal contracts are deferred and then amortized on a straight-line basis over the contract term. As a practical expedient, we expense sales commissions as incurred when the amortization period of related deferred commission costs would have been one year or less. Deferred commissions costs paid and payable, which are included on the consolidated balance sheets within other non-current assets totaled $407,000 and $421,000, respectively, as of April 30, 2020 and January 31, 2020. In the first three months ended April 30, 2020 and 2019, $31,000 and $18,000, respectively, in amortization expense associated with deferred sales commissions was included in selling, general and administrative expenses on the consolidated statements of operations. There were no impairment losses for these capitalized costs for these periods. Equity Awards The Company accounts for share-based payments based on the grant-date fair value of the awards with compensation cost recognized as expense over the requisite service period. The Company incurred total compensation expense related to stock-based awards of $263,000 and $269,000 in the first three months ending April 30, 2020 and 2019, respectively. The fair value of the stock options granted was estimated at the date of grant using a Black-Scholes option pricing model. Option pricing model input assumptions such as expected term, expected volatility and risk-free interest rate impact the fair value estimate. Further, the forfeiture rate impacts the amount of aggregate compensation. These assumptions are subjective and are generally derived from external (such as, risk-free rate of interest) and historical data (such as, volatility factor, expected term and forfeiture rates). Future grants of equity awards accounted for as stock-based compensation could have a material impact on reported expenses depending upon the number, value and vesting period of future awards. The Company issues restricted stock awards in the form of Company common stock. The fair value of these awards is based on the market close price per share on the grant date. The Company expenses the compensation cost of these awards as the restriction period lapses, which is typically a one- to four-year service period to the Company. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax credit and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing net deferred tax assets, the Company considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The Company establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. Refer to Note 6 - Income Taxes for further details. The Company provides for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether certain tax positions are more likely than not to be sustained upon examination by tax authorities. At April 30, 2020, the Company believes it has appropriately accounted for any uncertain tax positions. Net Earnings (Loss) Per Common Share The Company presents basic and diluted earnings per share (“EPS”) data for our common stock. Our Series A Convertible Preferred Stock were considered participating securities under ASC 260, Earnings Per Share Our unvested restricted stock awards are considered non-participating securities because holders are not entitled to non-forfeitable rights to dividends or dividend equivalents during the vesting term. In accordance with ASC 260, securities are deemed not to be participating in losses if there is no obligation to fund such losses. The Series A Convertible Preferred Stock does not participate in losses, and as a result, the Company does not allocate losses to these securities in periods of loss. Diluted EPS for our common stock is computed using the more dilutive of the two-class method or the “if-converted” and treasury stock methods. Refer to Note 5 – Convertible Preferred Stock for further discussion of the redemption of our Series A Convertible Preferred Stock. The following is the calculation of the basic and diluted net earnings (loss) per share of common stock: Three Months Ended April 30, 2020 April 30, 2019 Basic earnings (loss) per share: Continuing operations Loss from continuing operations, net of tax $ (977,000 ) $ (642,000 ) Basic net loss per share of common stock from continuing operations $ (0.03 ) $ (0.03 ) Discontinued operations Gain from discontinued operations, net of tax $ 4,650,000 $ 955,000 Less: Allocation of earnings to participating securities - (127,000 ) Income available to common shareholders from discontinued operations $ 4,650,000 $ 828,000 Basic net earnings per share of common stock from discontinued operations $ 0.16 $ 0.04 Diluted earnings (loss) per share (2): Continuing operations Income available to common shareholders from continuing operations $ (977,000 ) $ (642,000 ) Diluted net loss per share of common stock from continuing operations $ (0.03 ) $ (0.03 ) Discontinued operations Income available to common shareholders from discontinued operations $ 4,650,000 $ 955,000 Diluted net earnings per share of common stock from discontinued operations $ 0.15 $ 0.04 Weighted average shares outstanding - Basic (1) 29,767,814 19,793,361 Effect of dilutive securities - Stock options, Restricted stock and Series A Convertible Preferred Stock 269,902 3,031,676 Weighted average shares outstanding – Diluted 30,037,716 22,825,037 (1) Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of April 30, 2020 and 2019, there were 1,124,708 and 1,104,766 unvested restricted shares of common stock outstanding, respectively. (2) Diluted EPS for our common stock was computed using the if-converted method, which yields the same result as the two-class method. The two-class method has not been used in the current period as a result of the redemption of the participating securities, See Note 5. Other Operating Costs Loss on Exit of Membership Agreement As of April 30, 2020, minimum fees due under the shared office arrangement totaled $105,000. Accordingly, we recorded an expense for the minimum future commitment under the agreement and accrued the cost to the accompanying consolidated balance sheet. Refer to Note 3 – Operating Leases. Non-Cash Items The Company had the following items that were non-cash items related to the condensed consolidated statements of cash flows: April 30, 2020 2019 Escrowed funds from sale of ECM Assets $ 800,000 $ — Right-of Use Assets from operating lease 540,000 — Recent Accounting Pronouncements In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments |
Operating Leases
Operating Leases | 3 Months Ended |
Apr. 30, 2020 | |
Leases [Abstract] | |
Operating Leases | NOTE 3 — OPERATING LEASES We determine whether an arrangement is a lease at inception. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since our lease arrangements do not provide an implicit rate, we use our incremental borrowing rate for the expected remaining lease term at commencement date for new 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 new 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 April 30, 2020, operating lease right-of use assets totaling $513,000, and the associated lease liability is included in both current and long-term liabilities of $177,000 and $352,000, respectively. The Company used a discount rate of 6.5% to the determine the lease liability. For the three months ended April 30, 2020, the Company had operating cost of approximately $32,000. In addition, there were 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 has 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 April 30, 2020 are as follows: 2020 $ 132,000 2021 204,000 2022 210,000 Thereafter 35,000 Total lease payments 581,000 Less present value adjustment 52,000 Present value of lease liabilities $ 529,000 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 of membership agreement” in the accompanying statements of operations and is accrued in “accrued expenses” in the accompanying balance sheet. The membership agreement did not qualify as a lease as the owner had substantive substitution rights. During fiscal year 2019, we had one operating lease related to our New York office sublease, which expired in November 2019. In the second quarter of fiscal 2018, we closed our New York office and subleased the office space for the remaining period of the original lease term. As a result of vacating and subleasing the office, we recorded a $472,000 loss on exit of the operating lease in fiscal 2018. The associated lease liability reduced the right-of-use asset upon adoption of ASC 842. As of November 2019, the lease had expired and there was no minimum rentals due to our lessor or amounts to be received by us from our sublessee. As of April 30, 2019, operating lease right-of use assets totaling $122,000 are recorded in Prepaid and other current assets, and the associated lease liability of $329,000 is included in Accrued expenses within the condensed consolidated balance sheets. The Company used a discount rate of 8.0% to the determine the lease liability. In the three months ended April 30, 2019, the Company had operating cost, and cash operating cash flows, associated the New York lease of $72,000, offset by operating lease income of $60,000. |
Debt
Debt | 3 Months Ended |
Apr. 30, 2020 | |
Debt Disclosure [Abstract] | |
Debt | NOTE 4 — DEBT Term Loan and Line of Credit with Wells Fargo 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, pursuant to the terms of the amendment to the Credit Agreement entered into as of April 15, 2015, the applicable LIBOR rate margin varies from 4.25% to 6.25%, and the applicable base rate margin varies from 3.25% to 5.25%, plus, after the effective date of the amendment to the Credit Agreement entered into as of September 11, 2019, a “paid in kind” rate, or PIK Rate, of 2.75%. Amendments to the Credit Agreement reduced the Company’s capacity on the existing revolving credit from $5,000,000 to $1,500,000 and extended the original term loan and line of credit maturity date to August 21, 2020. The senior term loan principal balance was payable in quarterly installments, which started in March 2015 and would continue through the maturity date, with the full remaining unpaid principal balance due at maturity. Financing costs associated with the new credit facility were being amortized over its term on a straight-line basis, which is not materially different from the effective interest method. The Credit Agreement included customary financial covenants, including the requirements that the Company maintain minimum liquidity and achieve certain minimum EBITDA levels (as defined in the Credit Agreement). In addition, the Credit Agreement prohibited the Company from paying dividends on the common and preferred stock. In connection with entering into the Loan and Security Agreement with Bridge Bank on December 11, 2019, as discussed below, the Company terminated the Credit Agreement and repaid all outstanding amounts due thereunder. Term Loan and Revolving Credit Facility with Bridge Bank On December 11, 2019, the Company entered into a new Loan and Security Agreement (the “Loan and Security Agreement”) with Bridge Bank, a division of Western Alliance Bank, consisting of a $4,000,000 term loan and a $2,000,000 revolving credit facility. The proceeds from the term loan were used to repay all outstanding balances under its existing term loan with Wells Fargo Bank. Amounts outstanding under the new term loan shall bear interest at a per annum rate equal to the higher of (a) the Prime Rate (as published in The Wall Street Journal) plus 1.50% or (b) 6.50%. Under the terms of the Loan and Security Agreement the Company shall make interest-only payments through the twelve-month anniversary date after which the Company shall repay the new term loan in thirty-six equal and consecutive installments of principal, plus monthly payments of accrued interest. The term loan and revolving credit facility provide support for working capital, capital expenditures and other general corporate purposes, including permitted acquisitions. The outstanding term loan is secured by substantially all of our assets. Financing costs associated with the Loan and Security Agreement are being amortized over its term on a straight-line basis, which is not materially different from the effective interest method. The new revolving credit facility has a maturity date of twenty-four months and advances shall bear 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 can be advanced based upon 80% of eligible accounts receivable, as defined in the Loan and Security Agreement. The Loan and Security Agreement, as amended, includes financial covenants, including requirements that the Company maintain a minimum asset coverage ratio and certain other financial covenants, including requirements that the Company shall not deviate by more than fifteen percent its revenue projections over a trailing three-month basis or the Company’s recurring revenue shall not deviate by more than twenty percent over a cumulative year-to-date basis of its revenue projections. In addition, beginning on December 31, 2019, the Company’s Bank EBITDA, measured on a monthly basis over a trailing three-month period then ended, shall not deviate by the greater of thirty percent its projected Bank EBITDA or $150,000. The agreement initially required the Company to maintain a minimum Asset Coverage Ratio. However, the Asset Coverage Ratio was eliminated as a covenant under an amendment dated April 11, 2020. The Company obtained a waiver at both January 31, 2020 and April 30, 2020 against its existing covenants. The Company has not provided guidance to external parties due to the potential impacts of COVID-19 on the Company’s revenue. Accordingly, the Company has not established covenants for its fiscal year 2020. The bank has waived the covenants until guidance is provided, however, the Company is unable to draw on its line of credit facility during this time. As of April 30, 2020 and January 31, 2020, the Company had no outstanding borrowings under the revolving credit facility. As described herein, on February 24, 2020, the Company prepaid the $4.0 million 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. Accordingly, we reclassified the term loan from non-current to current on the consolidated balance sheet as of January 31, 2020. Contemporaneously with the closing of the sale and payment of the term loan, the Company wrote-off approximately $125,000 of deferred financing cost apportioned to the term loan to discontinued operations. The Company reclassified the remaining amount of deferred financing to other assets in the accompanying consolidated balance sheet. Outstanding principal balances on debt consisted of the following at: April 30, 2020 January 31, 2020 Term loan $ — $ 4,000,000 Deferred financing cost — (128,000 ) Total — 3,872,000 Less: Current portion — (3,872,000 ) Non-current portion of debt $ — $ — 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 Act (“PPP”). Qualifying companies are able to borrow, through the SBA, up to two months of payroll. We filed for and obtained $2,301,000 through the SBA for the PPP loan program. The Company finalized its agreement for the PPP Loan on April 21, 2020 and was funded on the same date. The PPP loan carries an interest rate of 1.0% per annum. Principal and interest payments are due, beginning on the seventh month from the effective date, sufficient to satisfy the loan on the second anniversary date. However, under certain criteria, the loan may be forgiven. The Company is accruing interest at 1% in the accompanying condensed consolidated financial statements. The future maturities under the loan are $68,5000 and $1,615,000 in the next two twelve month periods from April 30, 2020, respectively. |
Convertible Preferred Stock
Convertible Preferred Stock | 3 Months Ended |
Apr. 30, 2020 | |
Stockholders' Equity Note [Abstract] | |
Convertible Preferred Stock | NOTE 5 — CONVERTIBLE PREFERRED STOCK Redemption of Series A Convertible Preferred Stock On October 16, 2019, the Company issued 9,473,691 shares of common stock in consideration for aggregate proceeds of $9,663,000 in a private placement transaction. Each share of common stock was sold at $1.02 per share. The proceeds from the sale of common stock were used to redeem all 2,895,464 outstanding shares of Series A Convertible Preferred Stock at $2.00 per share for a total redemption payment of $5,813,000, which includes $22,000 in direct costs associated with the redemption. Pursuant to the guidance in ASC 260-10-S99-2 for redemptions of preferred stock, the Company compared the difference between the carrying amount of the Series A Convertible Preferred Stock, net of issuance costs, of $8,686,000 to the fair value of the consideration transferred of $5,813,000, which was reduced by the commitment date intrinsic value of the conversion option since the redemption included the reacquisition of a previously recognized beneficial conversion feature of $2,021,000, and added this difference to net income to arrive at income available to common stockholders in the calculation of basic earnings per share. As the carrying value of the Series A Convertible Preferred Stock was $8,686,000 on the date of redemption, the Company reflected the resulting return from the preferred stockholders of $4,894,000 as an adjustment to net income (loss) attributable to common stockholders in the Company’s basic and diluted EPS calculations for year ended January 31, 2020. Balance at January 31, 2019 $ 8,686,000 Redemption of Series A Convertible Preferred Stock (5,791,000 ) Fees paid for redemption of Series A Convertible Preferred Stock (22,000 ) Previously recognized beneficial conversion feature 2,021,000 Return from the preferred stockholders $ 4,894,000 Refer to Note 2 for the Company’s basic and diluted EPS calculations. |
Income Taxes
Income Taxes | 3 Months Ended |
Apr. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 6 — INCOME TAXES Income taxes consist of the following: April 30, 2020 2019 Current tax benefit: Federal $ 480,000 $ 325,000 State 81,000 — Total current provision $ 561,000 $ 325,000 The benefit from income taxes from continuing operations are off-set by taxes on the gain on sale and taxes from operations of discontinued operations. Additionally, certain tax in the first quarter of April 30, 2020, will generate benefits in the future quarters of fiscal 2020 such that the Company will have no full-year tax payable. At January 31, 2020, the Company had U.S. federal net operating loss carry forwards of $43,053,000. The Company also had state net operating loss carry forwards of $16,845,000 and Federal R&D credit carry forwards of $1,521,000, and Georgia R&D credit carry forwards of $188,000, all of which expire through fiscal 2039. The income tax rates on continuing operations of approximately 36.5% are consistent with the federal statutory rates. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Apr. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 7 — COMMITMENTS AND CONTINGENCIES Membership agreement to occupy shared office space In fiscal 2018, the Company entered into a membership agreement to occupy shared office space in Atlanta, Georgia. Our shared office arrangement commenced upon taking possession of the space and ends in November 2020. Fees due under the membership agreement are based on the number of contracted seats and the use of optional office services. The Company abandoned this shared space in March 2020. As of April 30, 2020, minimum fees due under the shared office arrangement totaled $105,000. Accordingly, we recorded an expense for the minimum future commitment under agreement and accrued the cost to the accompanying consolidated balance sheet. Refer to Note 3 – Operating Leases. Royalty Liability On October 25, 2013, we entered into a Software License and Royalty Agreement (the “Royalty Agreement”) with Montefiore Medical Center (“Montefiore”) pursuant to which Montefiore granted us an exclusive, worldwide 15-year license of Montefiore’s proprietary clinical analytics platform solution, Clinical Looking Glass ® |
Discontinued Operations
Discontinued Operations | 3 Months Ended |
Apr. 30, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | NOTE 8 – 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 has acquired the ECM Assets and assumed certain liabilities of the Seller 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 $4.0 million Company’s term loan with Bridge Bank, (ii) adjusting for certain customer prepayments, (iii) the escrow funds of $800,000 and (iv) certain transaction cost. The gain on the sale of assets is summarized as follows: Net Proceeds, including escrowed funds $ 12,084,000 Net tangible assets sold: Accounts Receivable (1,130,000 ) Prepaid Expenses (576,000 ) Deferred Revenues 4,010,000 Net tangible assets sold 2,304,000 Capitalized software development costs (1,772,000 ) Goodwill (4,825,000 ) Transaction cost (1,782,000 ) Gain on sale of discontinued operations $ 6,009,000 The transaction costs were primarily broker cost and cost of legal and accounting to affect 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. As of January 31, 2020, the Company recorded the following into discontinued operations on the accompanying consolidated balance sheets: As of April 30, 2020 January 31, 2020 Current assets of discontinued operations: Accounts receivable $ 168,000 $ 1,150,000 Contract receivables — 17,000 Prepaid Assets — 418,000 Current assets of discontinued operations $ 168,000 $ 1,585,000 Long-term assets of discontinued operations: Property and equipment, net $ 48,000 $ 54,000 Capitalized software development cost, net — 1,816,000 Goodwill — 4,825,000 Other — 131,000 Long-term assets of discontinued operations $ 48,000 $ 6,826,000 Current liabilities of discontinued operations: Accounts payable $ 177,000 $ 514,000 Accrued expenses 29,000 142,000 Deferred revenues 192,000 4,397,000 Current liabilities of discontinued operations $ 398,000 $ 5,053,000 For the three months ending April 30, 2020 and 2019, the Company recorded the following into discontinued operations in the accompanying consolidated statements of operations: April 30, 2020 April 30, 2019 Revenues: System sales $ — $ 10,000 Professional services — 126,000 Maintenance and support 412,000 1,499,000 Software as a service 138,000 559,000 Total revenues 550,000 2,193,000 Expenses: Cost of sales 285,000 620,000 Selling, general and administrative expenses — 63,000 Research and development — 203,000 Deferred financing cost 128,000 — Other expense — 25,000 Total expenses 413,000 911,000 Income from discontinued operations $ 137,000 $ 1,282,000 We entered into an agreement with the Purchaser of the ECM Assets to maintain the current data center through a transition period that is expected to be approximately seven months. The Company will continue to pay the rent and maintain the servers within the data center during the transition services period and these amounts will continue to be presented as discontinued operations in future periods throughout fiscal year 2020. In consideration of these transition services, the Company maintained rights to certain customer contracts that provides a revenue stream of approximately $40,000 per month. Therefore, during the transition period as defined the sale agreement, the Company will receive approximately $40,000 in revenue per month and have cost of approximately $30,000. The transition services does not have a finite ending date, however, the goals of both the Purchaser and the Company is to complete the transition as quickly as possible, and with a goal of ending this portion of the agreement by September 2020. The cost to maintain the data center can be eliminated upon the completion of the transition services as described in the Asset Purchase Agreement. Our on-going cost to maintain the data center includes rent, cost of the servers, certain third-party software arrangements, and depreciation of the servers. The property and equipment on the Company’s balance sheet in discontinued operations is the net book value for the related servers in the data center. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Apr. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 9 - RELATED PARTY TRANSACTIONS In the second quarter of fiscal year 2019, in connection with the appointment of Wyche T. “Tee” Green, III, Chairman of the Board of the Company and Managing Member of 121G, LLC (“121G”), as interim President and Chief Executive Officer of the Company, we entered into a consulting agreement with 121G Consulting, LLC (“121G Consulting”), to provide an assessment of the Company’s innovation and growth teams and strategies and to develop a set of prioritized recommendations to be consolidated into a strategic plan for the Company’s leadership team. Mr. Green is a “member” of 121G Consulting, and, accordingly, has a financial interest in that entity. In October 2019, Mr. Green was appointed as President and Chief Executive Officer of the Company on a full-time basis. For the year ended January 31, 2020, 121G Consulting fees totaled $276,000. Of that amount, $88,000 was included in executive transition cost and $188,000 was included in the Company’s operating cost in the accompanying consolidated statements of operations. As of January 31, 2020, consulting fees payable to 121G Consulting totaled $40,000 and are included in accounts payable in the accompanying consolidated balance sheet. For the first quarter ended April 30, 2020, the Company incurred fees totaling $70,000 to 121G Consulting. On March 19, 2020, as previously disclosed in an 8-K, the Company entered into a Master Services Agreement (the “MSA”) with 180 Consulting, LLC (“180 Consulting”), pursuant to which 180 Consulting will provide a variety of consulting services including product management, internal systems platform integration and software engineering services, among others, through separate statements of work (“SOWs”). Contemporaneously, the Company entered into three SOWs under the MSA and has contracted to enter into two more SOWs within sixty (60) days of the date of entry into the MSA. While no related person has a direct or indirect material interest in this MSA or the related SOWs, individuals providing services to us under the MSA and the SOWs may share workspace and administrative costs with 121G Consulting. During the first quarter ended April 30, 2020, the Company incurred total fees of $82,000 under the terms of the MSA related to 180 Consulting. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Apr. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 10 — SUBSEQUENT EVENTS We have evaluated subsequent events occurring after April 30, 2020, and based on our evaluation we did not identify any events that would have required recognition or disclosure in these condensed consolidated financial statements, except for the following. Novel Coronavirus (COVID-19) As reported nationally, near the end of the Company’s fiscal year ended January 31, 2020, an outbreak of a novel strain of coronavirus (COVID-19) emerged globally. Additionally, there was a number of cases in the United States by the balance sheet date, January 31, 2020. The Company serves acute care hospitals throughout the United States. These hospitals have been materially impacted by the increased rates of illness based upon the respective geography. The Company has not been materially impacted by the “shelter in place” movements of local and state governments across the United States. Although it is not possible to reliably estimate the length or severity of the pandemic, it could have an adverse financial impact on the Company’s financial condition. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Apr. 30, 2020 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates and judgments, including those related to the recognition of revenue, stock-based compensation, capitalization of software development costs, intangible assets, the allowance for doubtful accounts, and income taxes. Actual results could differ from those estimates. |
Reclassification | Reclassification Certain amounts in the preparation of financial statements for the three months ended April 30, 2020, resulted in reclassifications of the three months ended April 30, 2019 and balance sheet as of January 31, 2020. A total of $47,000 for deferred financing cost related to the revolving credit agreement was reclassified from debt to other assets in the accompanying condensed consolidated balance sheet as of January 31, 2020 to be consistent with the presentation as of April 30, 2020. The Company paid the term loan on February 24, 2020, and accordingly wrote-off the portion of deferred financing cost related to the term loan through discontinued operations. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Financial Accounting Standards Board’s (“FASB”) authoritative guidance on fair value measurements establishes a framework for measuring fair value. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. Under this guidance, assets and liabilities carried at fair value must be classified and disclosed in one of the following three categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. Cash and cash equivalents are classified as Level 1. The carrying amount of our long-term debt approximates fair value since the variable interest rates being paid on the amounts approximate the market interest 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 three months ended April 30, 2020 and 2019. The table below provides information on our liabilities that are measured at fair value on a recurring basis: Quoted Prices Significant Other Significant Total Fair in Active Markets Observable Inputs Unobservable Inputs Value (Level 1) (Level 2) (Level 3) At April 30, 2020 Royalty liability (1) $ 986,000 $ — $ — $ 986,000 At January 31, 2020 Royalty liability (1) $ 969,000 $ — $ — $ 969,000 (1) The fair value of the royalty liability was determined based on discounting the portion of the modified royalty commitment payable in cash (refer to Note 7 – Commitments and Contingencies for additional information on our royalty liability). Fair value adjustments are included within miscellaneous expense in the condensed consolidated statements of operations. |
Revenue Recognition | Revenue Recognition We derive revenue from the sale of internally-developed software, either by licensing for local installation or by a software as a service (“SaaS”) delivery model, through our direct sales force or through third-party resellers. Licensed, locally-installed clients on a perpetual model utilize our support and maintenance services for a separate fee, whereas term-based locally installed license fees and SaaS fees include support and maintenance. We also derive revenue from professional services that support the implementation, configuration, training and optimization of the applications, as well as audit services provided to help clients 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) 606, Revenue from Contracts with Customers We commence revenue recognition (Step 5 below) in accordance with that core principle after applying the following steps: ● Step 1: Identify the contract(s) with a customer ● Step 2: Identify the performance obligations in the contract ● Step 3: Determine the transaction price ● Step 4: Allocate the transaction price to the performance obligations in the contract ● Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation Often contracts contain more than one performance obligation. Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities. If we determine that we have not satisfied a performance obligation, we defer recognition of the revenue until the performance obligation is satisfied. Maintenance and support and SaaS agreements are generally non-cancelable or contain significant penalties for early cancellation, although clients typically have the right to terminate their contracts for cause if we fail to perform material obligations. However, if non-standard acceptance periods, non-standard performance criteria, or cancellation or right of refund terms are required, revenue is recognized upon the satisfaction of such criteria. The determined transaction price is allocated based on the standalone selling price of the performance obligations in contract. Significant judgment is required to determine the standalone selling price (“SSP”) for each performance obligation, the amount allocated to each performance obligation and whether it depicts the amount that the Company expects to receive in exchange for the related product and/or service. As the selling prices of the Company’s software licenses are highly variable, the Company estimates SSP of its software licenses using the residual approach when the software license is sold with other services and observable SSPs exist for the other services. The Company estimates the SSP for maintenance, professional services, and audit services based on observable standalone sales. Contract Combination The Company may execute more than one contract or agreement with a single customer. The Company evaluates whether the agreements were negotiated as a package with a single objective, whether the amount of consideration to be paid in one agreement depends on the price and/or performance of another agreement, or whether the goods or services promised in the agreements represent a single performance obligation. The conclusions reached can impact the allocation of the transaction price to each performance obligation and the timing of revenue recognition related to those arrangements. The Company has utilized the portfolio approach as the practical expedient. We have applied the revenue model to a portfolio of contracts with similar characteristics where we expected that the financial statements would not differ materially from applying it to the individual contracts within that portfolio. Systems Sales The Company’s software license arrangements provide the customer with the right to use functional intellectual property. Implementation, support, and other services are typically considered distinct performance obligations when sold with a software license unless these services are determined to significantly modify the software. Revenue is recognized at a point in time. Typically, this is upon shipment of components or electronic download of software. Maintenance and Support Services Our maintenance and support obligations include multiple discrete performance obligations, with the two largest being unspecified product upgrades or enhancements, and technical support, which can be offered at various points during a contract period. We believe that the multiple discrete performance obligations within our overall maintenance and support obligations can be viewed as a single performance obligation since both the unspecified upgrades and technical support are activities to fulfill the maintenance performance obligation and are rendered concurrently. Maintenance and support agreements entitle clients to technology support, version upgrades, bug fixes and service packs. We recognize maintenance and support revenue over the contract term. Software-Based Solution Professional Services The Company provides various professional services to customers with software licenses. These include project management, software implementation and software modification services. Revenues from arrangements to provide professional services are generally distinct from the other promises in the contract and are recognized as the related services are performed. Consideration payable under these arrangements is either fixed fee or on a time-and-materials basis, and is recognized over time as the services are performed Software as a Service SaaS-based contracts include use of the Company’s platform, implementation, support and other services which represent a single promise to provide continuous access to its software solutions. The Company recognizes revenue over the term of the life of the contract. Audit Services The Company provides technology-enabled coding audit services to help clients 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: Three Months Ended April 30, 2020 Recurring Revenue Non-recurring Revenue Total Systems sales $ — $ — $ — Professional services — 181,000 181,000 Audit services — 544,000 544,000 Maintenance and support 1,258,000 — 1,258,000 Software as a service 861,000 — 861,000 Total revenue: $ 2,119,000 $ 725,000 $ 2,844,000 Contract Receivables and Deferred Revenues The Company receives payments from customers based upon contractual billing schedules. Contract receivables include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Deferred revenues include payments received in advance of performance under the contract. Our contract receivables and deferred revenue are reported on an individual contract basis at the end of each reporting period. Contract receivables are classified as current or noncurrent based on the timing of when we expect to bill the customer. Deferred revenue is classified as current or noncurrent based on the timing of when we expect to recognize revenue. In the year first three months ended April 30, 2020, we recognized approximately $1,687,000 in revenue from deferred revenues outstanding as of January 31, 2020. Revenue allocated to remaining performance obligations was $12.5 million as of April 30, 2020, of which the Company expects to recognize approximately 52% over the next 12 months and the remainder thereafter. Deferred costs (costs to fulfill a contract and contract acquisition costs) We defer the direct costs, which include salaries and benefits, for professional services related to SaaS contracts as a cost to fulfill a contract. These deferred costs will be amortized on a straight-line basis over the contractual term. As of April 30, 2020 and January 31, 2020, we had deferred costs of $152,000 and $144,000, respectively, net of accumulated amortization of $317,000 and $332,000, respectively. Amortization expense of these costs was $33,000 and $50,000 in first quarter ended April 30, 2020 and 2019, respectively. There were no impairment losses for these capitalized costs for the fiscal years 2019 and 2018. Contract acquisition costs, which consist of sales commissions paid or payable, is considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial and renewal contracts are deferred and then amortized on a straight-line basis over the contract term. As a practical expedient, we expense sales commissions as incurred when the amortization period of related deferred commission costs would have been one year or less. Deferred commissions costs paid and payable, which are included on the consolidated balance sheets within other non-current assets totaled $407,000 and $421,000, respectively, as of April 30, 2020 and January 31, 2020. In the first three months ended April 30, 2020 and 2019, $31,000 and $18,000, respectively, in amortization expense associated with deferred sales commissions was included in selling, general and administrative expenses on the consolidated statements of operations. There were no impairment losses for these capitalized costs for these periods. |
Equity Awards | Equity Awards The Company accounts for share-based payments based on the grant-date fair value of the awards with compensation cost recognized as expense over the requisite service period. The Company incurred total compensation expense related to stock-based awards of $263,000 and $269,000 in the first three months ending April 30, 2020 and 2019, respectively. The fair value of the stock options granted was estimated at the date of grant using a Black-Scholes option pricing model. Option pricing model input assumptions such as expected term, expected volatility and risk-free interest rate impact the fair value estimate. Further, the forfeiture rate impacts the amount of aggregate compensation. These assumptions are subjective and are generally derived from external (such as, risk-free rate of interest) and historical data (such as, volatility factor, expected term and forfeiture rates). Future grants of equity awards accounted for as stock-based compensation could have a material impact on reported expenses depending upon the number, value and vesting period of future awards. The Company issues restricted stock awards in the form of Company common stock. The fair value of these awards is based on the market close price per share on the grant date. The Company expenses the compensation cost of these awards as the restriction period lapses, which is typically a one- to four-year service period to the Company. |
Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax credit and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing net deferred tax assets, the Company considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The Company establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. Refer to Note 6 - Income Taxes for further details. The Company provides for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether certain tax positions are more likely than not to be sustained upon examination by tax authorities. At April 30, 2020, the Company believes it has appropriately accounted for any uncertain tax positions. |
Net Earnings (Loss) Per Common Share | Net Earnings (Loss) Per Common Share The Company presents basic and diluted earnings per share (“EPS”) data for our common stock. Our Series A Convertible Preferred Stock were considered participating securities under ASC 260, Earnings Per Share Our unvested restricted stock awards are considered non-participating securities because holders are not entitled to non-forfeitable rights to dividends or dividend equivalents during the vesting term. In accordance with ASC 260, securities are deemed not to be participating in losses if there is no obligation to fund such losses. The Series A Convertible Preferred Stock does not participate in losses, and as a result, the Company does not allocate losses to these securities in periods of loss. Diluted EPS for our common stock is computed using the more dilutive of the two-class method or the “if-converted” and treasury stock methods. Refer to Note 5 – Convertible Preferred Stock for further discussion of the redemption of our Series A Convertible Preferred Stock. The following is the calculation of the basic and diluted net earnings (loss) per share of common stock: Three Months Ended April 30, 2020 April 30, 2019 Basic earnings (loss) per share: Continuing operations Loss from continuing operations, net of tax $ (977,000 ) $ (642,000 ) Basic net loss per share of common stock from continuing operations $ (0.03 ) $ (0.03 ) Discontinued operations Gain from discontinued operations, net of tax $ 4,650,000 $ 955,000 Less: Allocation of earnings to participating securities - (127,000 ) Income available to common shareholders from discontinued operations $ 4,650,000 $ 828,000 Basic net earnings per share of common stock from discontinued operations $ 0.16 $ 0.04 Diluted earnings (loss) per share (2): Continuing operations Income available to common shareholders from continuing operations $ (977,000 ) $ (642,000 ) Diluted net loss per share of common stock from continuing operations $ (0.03 ) $ (0.03 ) Discontinued operations Income available to common shareholders from discontinued operations $ 4,650,000 $ 955,000 Diluted net earnings per share of common stock from discontinued operations $ 0.15 $ 0.04 Weighted average shares outstanding - Basic (1) 29,767,814 19,793,361 Effect of dilutive securities - Stock options, Restricted stock and Series A Convertible Preferred Stock 269,902 3,031,676 Weighted average shares outstanding – Diluted 30,037,716 22,825,037 (1) Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of April 30, 2020 and 2019, there were 1,124,708 and 1,104,766 unvested restricted shares of common stock outstanding, respectively. (2) Diluted EPS for our common stock was computed using the if-converted method, which yields the same result as the two-class method. The two-class method has not been used in the current period as a result of the redemption of the participating securities, See Note 5. |
Other Operating Costs | Other Operating Costs Loss on Exit of Membership Agreement As of April 30, 2020, minimum fees due under the shared office arrangement totaled $105,000. Accordingly, we recorded an expense for the minimum future commitment under the agreement and accrued the cost to the accompanying consolidated balance sheet. Refer to Note 3 – Operating Leases. |
Non-Cash Items | Non-Cash Items The Company had the following items that were non-cash items related to the condensed consolidated statements of cash flows: April 30, 2020 2019 Escrowed funds from sale of ECM Assets $ 800,000 $ — Right-of Use Assets from operating lease 540,000 — |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Apr. 30, 2020 | |
Accounting Policies [Abstract] | |
Schedule of Fair Value Assets and Liabilities Measured on Recurring Basis | The table below provides information on our liabilities that are measured at fair value on a recurring basis: Quoted Prices Significant Other Significant Total Fair in Active Markets Observable Inputs Unobservable Inputs Value (Level 1) (Level 2) (Level 3) At April 30, 2020 Royalty liability (1) $ 986,000 $ — $ — $ 986,000 At January 31, 2020 Royalty liability (1) $ 969,000 $ — $ — $ 969,000 (1) The fair value of the royalty liability was determined based on discounting the portion of the modified royalty commitment payable in cash (refer to Note 7 – Commitments and Contingencies for additional information on our royalty liability). Fair value adjustments are included within miscellaneous expense in the condensed consolidated statements of operations. |
Schedule of Disaggregation of Revenue | The following table provides information about disaggregated revenue by type and nature of revenue stream: Three Months Ended April 30, 2020 Recurring Revenue Non-recurring Revenue Total Systems sales $ — $ — $ — Professional services — 181,000 181,000 Audit services — 544,000 544,000 Maintenance and support 1,258,000 — 1,258,000 Software as a service 861,000 — 861,000 Total revenue: $ 2,119,000 $ 725,000 $ 2,844,000 |
Schedule of Basic and Diluted Net Loss Per Share of Common Stock | The following is the calculation of the basic and diluted net earnings (loss) per share of common stock: Three Months Ended April 30, 2020 April 30, 2019 Basic earnings (loss) per share: Continuing operations Loss from continuing operations, net of tax $ (977,000 ) $ (642,000 ) Basic net loss per share of common stock from continuing operations $ (0.03 ) $ (0.03 ) Discontinued operations Gain from discontinued operations, net of tax $ 4,650,000 $ 955,000 Less: Allocation of earnings to participating securities - (127,000 ) Income available to common shareholders from discontinued operations $ 4,650,000 $ 828,000 Basic net earnings per share of common stock from discontinued operations $ 0.16 $ 0.04 Diluted earnings (loss) per share (2): Continuing operations Income available to common shareholders from continuing operations $ (977,000 ) $ (642,000 ) Diluted net loss per share of common stock from continuing operations $ (0.03 ) $ (0.03 ) Discontinued operations Income available to common shareholders from discontinued operations $ 4,650,000 $ 955,000 Diluted net earnings per share of common stock from discontinued operations $ 0.15 $ 0.04 Weighted average shares outstanding - Basic (1) 29,767,814 19,793,361 Effect of dilutive securities - Stock options, Restricted stock and Series A Convertible Preferred Stock 269,902 3,031,676 Weighted average shares outstanding – Diluted 30,037,716 22,825,037 (1) Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of April 30, 2020 and 2019, there were 1,124,708 and 1,104,766 unvested restricted shares of common stock outstanding, respectively. (2) Diluted EPS for our common stock was computed using the if-converted method, which yields the same result as the two-class method. The two-class method has not been used in the current period as a result of the redemption of the participating securities, See Note 5. |
Schedule of Non-Cash Items Related to Condensed Consolidated Statements of Cash Flow | The Company had the following items that were non-cash items related to the condensed consolidated statements of cash flows: April 30, 2020 2019 Escrowed funds from sale of ECM Assets $ 800,000 $ — Right-of Use Assets from operating lease 540,000 — |
Operating Leases (Tables)
Operating Leases (Tables) | 3 Months Ended |
Apr. 30, 2020 | |
Leases [Abstract] | |
Schedule of Maturities of Operating Lease Liabilities | Maturities of operating lease liabilities associated with the Company’s operating lease as of April 30, 2020 are as follows: 2020 $ 132,000 2021 204,000 2022 210,000 Thereafter 35,000 Total lease payments 581,000 Less present value adjustment 52,000 Present value of lease liabilities $ 529,000 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Apr. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Outstanding Debt | Outstanding principal balances on debt consisted of the following at: April 30, 2020 January 31, 2020 Term loan $ — $ 4,000,000 Deferred financing cost — (128,000 ) Total — 3,872,000 Less: Current portion — (3,872,000 ) Non-current portion of debt $ — $ — |
Convertible Preferred Stock (Ta
Convertible Preferred Stock (Tables) | 3 Months Ended |
Apr. 30, 2020 | |
Stockholders' Equity Note [Abstract] | |
Schedule of Adjustment to Net Income (Loss) Attributable to Common Stockholders | Balance at January 31, 2019 $ 8,686,000 Redemption of Series A Convertible Preferred Stock (5,791,000 ) Fees paid for redemption of Series A Convertible Preferred Stock (22,000 ) Previously recognized beneficial conversion feature 2,021,000 Return from the preferred stockholders $ 4,894,000 |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Apr. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax (Expense) Benefit | Income taxes consist of the following: April 30, 2020 2019 Current tax benefit: Federal $ 480,000 $ 325,000 State 81,000 — Total current provision $ 561,000 $ 325,000 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 3 Months Ended |
Apr. 30, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of Gain on Sale of Assets | The gain on the sale of assets is summarized as follows: Net Proceeds, including escrowed funds $ 12,084,000 Net tangible assets sold: Accounts Receivable (1,130,000 ) Prepaid Expenses (576,000 ) Deferred Revenues 4,010,000 Net tangible assets sold 2,304,000 Capitalized software development costs (1,772,000 ) Goodwill (4,825,000 ) Transaction cost (1,782,000 ) Gain on sale of discontinued operations $ 6,009,000 |
Schedule of Discontinued Operations of Consolidated Balance Sheets and Statements of Operations | As of January 31, 2020, the Company recorded the following into discontinued operations on the accompanying consolidated balance sheets: As of April 30, 2020 January 31, 2020 Current assets of discontinued operations: Accounts receivable $ 168,000 $ 1,150,000 Contract receivables — 17,000 Prepaid Assets — 418,000 Current assets of discontinued operations $ 168,000 $ 1,585,000 Long-term assets of discontinued operations: Property and equipment, net $ 48,000 $ 54,000 Capitalized software development cost, net — 1,816,000 Goodwill — 4,825,000 Other — 131,000 Long-term assets of discontinued operations $ 48,000 $ 6,826,000 Current liabilities of discontinued operations: Accounts payable $ 177,000 $ 514,000 Accrued expenses 29,000 142,000 Deferred revenues 192,000 4,397,000 Current liabilities of discontinued operations $ 398,000 $ 5,053,000 For the three months ending April 30, 2020 and 2019, the Company recorded the following into discontinued operations in the accompanying consolidated statements of operations: April 30, 2020 April 30, 2019 Revenues: System sales $ — $ 10,000 Professional services — 126,000 Maintenance and support 412,000 1,499,000 Software as a service 138,000 559,000 Total revenues 550,000 2,193,000 Expenses: Cost of sales 285,000 620,000 Selling, general and administrative expenses — 63,000 Research and development — 203,000 Deferred financing cost 128,000 — Other expense — 25,000 Total expenses 413,000 911,000 Income from discontinued operations $ 137,000 $ 1,282,000 |
Basis of Presentation (Details
Basis of Presentation (Details Narative) | 3 Months Ended |
Apr. 30, 2020Segments | |
Accounting Policies [Abstract] | |
Number of operating segments | 1 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | Jan. 31, 2020 | |
Deferred financing cost | $ 128,000 | ||
Deferred revenues | 1,687,000 | ||
Revenue of remaining performance obligations | $ 12,500,000 | ||
Revenue of remaining performance obligations, percent | 52.00% | ||
Revenue of remaining performance obligations description | The Company expects to recognize approximately 52% over the next 12 months and the remainder thereafter. | ||
Deferred costs | $ 152,000 | 144,000 | |
Deferred costs, net of accumulated amortization | 317,000 | 332,000 | |
Deferred costs, amortization expense | 33,000 | $ 50,000 | |
Amortization expense with deferred sales comissions | 31,000 | 18,000 | |
Compensation expense | 263,000 | $ 269,000 | |
Minimum fees due under shared office arrangement | 105,000 | ||
Other Non-current Assets [Member] | |||
Deferred commissions costs paid and payable | $ 407,000 | 421,000 | |
Revolving Credit Agreement [Member] | |||
Deferred financing cost | $ 47,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Fair Value Assets and Liabilities Measured on Recurring Basis (Details) - USD ($) | Apr. 30, 2020 | Jan. 31, 2020 | |
Royalty liability | [1] | $ 986,000 | $ 969,000 |
Quoted Prices in Active Markets (Level 1) [Member] | |||
Royalty liability | [1] | ||
Significant Other Observable Inputs (Level 2) [Member] | |||
Royalty liability | [1] | ||
Significant Unobservable Inputs (Level 3) [Member] | |||
Royalty liability | [1] | $ 986,000 | $ 969,000 |
[1] | The fair value of the royalty liability was determined based on discounting the portion of the modified royalty commitment payable in cash (refer to Note 7 - Commitments and Contingencies for additional information on our royalty liability). Fair value adjustments are included within miscellaneous expense in the condensed consolidated statements of operations. |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Schedule of Disaggregation of Revenue (Details) - USD ($) | 3 Months Ended | |
Apr. 30, 2020 | Apr. 30, 2019 | |
Total revenue | $ 2,844,000 | $ 3,164,000 |
Systems Sales [Member] | ||
Total revenue | ||
Professional Services [Member] | ||
Total revenue | 181,000 | 455,000 |
Audit Services [Member] | ||
Total revenue | 544,000 | 395,000 |
Maintenance and Support [Member] | ||
Total revenue | 1,258,000 | $ 1,452,000 |
Software as a Service [Member] | ||
Total revenue | 861,000 | |
Recurring Revenue [Member] | ||
Total revenue | 2,119,000 | |
Recurring Revenue [Member] | Systems Sales [Member] | ||
Total revenue | ||
Recurring Revenue [Member] | Professional Services [Member] | ||
Total revenue | ||
Recurring Revenue [Member] | Audit Services [Member] | ||
Total revenue | ||
Recurring Revenue [Member] | Maintenance and Support [Member] | ||
Total revenue | 1,258,000 | |
Recurring Revenue [Member] | Software as a Service [Member] | ||
Total revenue | 861,000 | |
Non-recurring Revenue [Member] | ||
Total revenue | 725,000 | |
Non-recurring Revenue [Member] | Systems Sales [Member] | ||
Total revenue | ||
Non-recurring Revenue [Member] | Professional Services [Member] | ||
Total revenue | 181,000 | |
Non-recurring Revenue [Member] | Audit Services [Member] | ||
Total revenue | 544,000 | |
Non-recurring Revenue [Member] | Maintenance and Support [Member] | ||
Total revenue | ||
Non-recurring Revenue [Member] | Software as a Service [Member] | ||
Total revenue |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Schedule of Basic and Diluted Net Loss Per Share of Common Stock (Details) - USD ($) | 3 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | ||
Accounting Policies [Abstract] | |||
Loss from continuing operations, net of tax | $ (977,000) | $ (642,000) | |
Basic net loss per share of common stock from continuing operations | $ (0.03) | $ (0.03) | |
Gain from discontinued operations, net of tax | $ 4,650,000 | $ 955,000 | |
Less: Allocation of earnings to participating securities | (127,000) | ||
Income available to common shareholders from discontinued operations | $ 4,650,000 | $ 828,000 | |
Basic net earnings per share of common stock from discontinued operations | $ 0.16 | $ 0.04 | |
Income available to common shareholders from continuing operations | [1] | $ (977,000) | $ (642,000) |
Diluted net loss per share of common stock from continuing operations | [1] | $ (0.03) | $ (0.03) |
Income available to common shareholders from discontinued operations | $ 4,650,000 | $ 955,000 | |
Diluted net earnings per share of common stock from discontinued operations | $ 0.15 | $ 0.04 | |
Weighted average shares outstanding - Basic | [2] | 29,767,814 | 19,793,361 |
Effect of dilutive securities - Stock options, Restricted stock and Series A Convertible Preferred Stock | $ 269,902 | $ 3,031,676 | |
Weighted average shares outstanding - Diluted | 30,037,716 | 22,825,037 | |
[1] | Diluted EPS for our common stock was computed using the if-converted method, which yields the same result as the two-class method. The two-class method has not been used in the current period as a result of the redemption of the participating securities, See Note 5. | ||
[2] | Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of April 30, 2020 and 2019, there were 1,124,708 and 1,104,766 unvested restricted shares of common stock outstanding, respectively. |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Schedule of Basic and Diluted Net Loss Per Share of Common Stock (Details) (Parenthetical) - shares | 3 Months Ended | |
Apr. 30, 2020 | Apr. 30, 2019 | |
Accounting Policies [Abstract] | ||
Unvested restricted shares of common stock | 1,124,708 | 1,104,766 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Schedule of Non-Cash Items Related to Condensed Consolidated Statements of Cash Flow (Details) - USD ($) | 3 Months Ended | |
Apr. 30, 2020 | Apr. 30, 2019 | |
Accounting Policies [Abstract] | ||
Escrowed funds from sale of ECM Assets | $ 800,000 | |
Right-of Use Assets from operating lease | $ 540,000 |
Operating Leases (Details Narra
Operating Leases (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |||
Apr. 30, 2020 | Apr. 30, 2019 | Jan. 31, 2018 | Mar. 31, 2020 | Jan. 31, 2020 | |
Lease expired date | Mar. 31, 2023 | ||||
Right-of use asset for operating lease | $ 513,000 | ||||
Current portion of operating lease obligation | 177,000 | ||||
Non-current portion of operating lease obligation | $ 352,000 | ||||
Lease discount rate | 6.50% | 8.00% | |||
Operating cost | $ 32,000 | $ 72,000 | |||
Operating lease income | 60,000 | ||||
Prepaid Expenses and Other Current Assets [Member] | |||||
Right-of use asset for operating lease | 122,000 | ||||
Accrued Expenses [Member] | |||||
Current portion of operating lease obligation | $ 329,000 | ||||
Office Space [Member] | |||||
Total minimum rentals due amount | $ 105,000 | ||||
Vacating and Subleasing [Member] | |||||
Loss on exit operating lease | $ 472,000 | ||||
At inception [Member] | |||||
Right-of use asset for operating lease | $ 540,000 |
Operating Leases - Schedule of
Operating Leases - Schedule of Maturities of Operating Lease Liabilities (Details) | Apr. 30, 2020USD ($) |
Leases [Abstract] | |
2020 | $ 132,000 |
2021 | 204,000 |
2022 | 210,000 |
Thereafter | 35,000 |
Total lease payments | 581,000 |
Less present value adjustment | 52,000 |
Present value of lease liabilities | $ 529,000 |
Debt (Details Narrative)
Debt (Details Narrative) - USD ($) | Feb. 24, 2020 | Dec. 11, 2019 | Sep. 11, 2019 | Apr. 15, 2015 | Nov. 21, 2014 | Apr. 30, 2020 | Apr. 30, 2019 | Mar. 17, 2020 | Jan. 31, 2020 |
Term loan | $ 4,000,000 | ||||||||
Prepaid of outstanding term loan | 4,000,000 | $ 149,000 | |||||||
Deferred financing cost | $ 128,000 | ||||||||
Future maturities under loan for first year | 685,000 | ||||||||
Future maturities under loan for second year | $ 1,615,000 | ||||||||
Credit Agreement [Member] | |||||||||
Term loan | $ 10,000,000 | ||||||||
Revolving line of credit | $ 5,000,000 | ||||||||
Line of credit facility maturity date | Aug. 21, 2020 | ||||||||
Credit Agreement [Member] | Minimum [Member] | |||||||||
Basis spread on interest rate | 3.25% | ||||||||
Credit Agreement [Member] | Maximum [Member] | |||||||||
Revolving line of credit | $ 1,500,000 | ||||||||
Basis spread on interest rate | 5.25% | ||||||||
Credit Agreement [Member] | LIBOR [Member] | Minimum [Member] | |||||||||
Basis spread on interest rate | 4.25% | ||||||||
Credit Agreement [Member] | LIBOR [Member] | Maximum [Member] | |||||||||
Basis spread on interest rate | 6.25% | ||||||||
Credit Agreement [Member] | PIK Rate [Member] | |||||||||
Basis spread on interest rate | 2.75% | ||||||||
Loan and Security Agreement [Member] | |||||||||
Term loan | $ 4,000,000 | ||||||||
Revolving line of credit | $ 2,000,000 | ||||||||
Line of credit facility description | The new term loan shall bear interest at a per annum rate equal to the higher of (a) the Prime Rate (as published in The Wall Street Journal) plus 1.50% or (b) 6.50%. Under the terms of the Loan and Security Agreement the Company shall make interest-only payments through the twelve-month anniversary date after which the Company shall repay the new term loan in thirty-six equal and consecutive installments of principal, plus monthly payments of accrued interest. The term loan and revolving credit facility provide support for working capital, capital expenditures and other general corporate purposes, including permitted acquisitions. The outstanding term loan is secured by substantially all of our assets. Financing costs associated with the Loan and Security Agreement are being amortized over its term on a straight-line basis, which is not materially different from the effective interest method.The new revolving credit facility has a maturity date of twenty-four months and advances shall bear 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 can be advanced based upon 80% of eligible accounts receivable, as defined in the Loan and Security Agreement. | ||||||||
Coverage ratio description | The Loan and Security Agreement, as amended, includes financial covenants, including requirements that the Company maintain a minimum asset coverage ratio and certain other financial covenants, including requirements that the Company shall not deviate by more than fifteen percent its revenue projections over a trailing three-month basis or the Company's recurring revenue shall not deviate by more than twenty percent over a cumulative year-to-date basis of its revenue projections. In addition, beginning on December 31, 2019, the Company's Bank EBITDA, measured on a monthly basis over a trailing three-month period then ended, shall not deviate by the greater of thirty percent its projected Bank EBITDA or $150,000. | ||||||||
Prepaid of outstanding term loan | $ 4,000,000 | ||||||||
Deferred financing cost | $ 125,000 | ||||||||
PPP Loan Program [Member] | |||||||||
Term loan | $ 2,301,000 | ||||||||
Debt interest rate | 1.00% | ||||||||
Accruing interest rate | 1.00% |
Debt - Schedule of Outstanding
Debt - Schedule of Outstanding Debt (Details) - USD ($) | Apr. 30, 2020 | Jan. 31, 2020 |
Debt Disclosure [Abstract] | ||
Term loan | $ 4,000,000 | |
Deferred financing cost | (128,000) | |
Total | 3,872,000 | |
Less: Current portion | (686,000) | (3,872,000) |
Non-current portion of debt |
Convertible Preferred Stock (De
Convertible Preferred Stock (Details Narrative) - USD ($) | Oct. 16, 2019 | Jan. 31, 2020 |
Series A Convertible Preferred Stock [Member] | ||
Number shares sale of common stock , shares | 2,895,464 | |
Sale of stock price | $ 2 | |
Redemption payment amount | $ 5,813,000 | |
Direct cost with redemption | $ 22,000 | |
Carrying amount of net of issuance costs | $ 8,686,000 | |
Fair value of consideration transferred amount | 5,813,000 | |
Beneficial conversion feature of preferred stock | 2,021,000 | |
Return from the preferred stockholders | $ 4,894,000 | |
Private Placement [Member] | ||
Number shares sale of common stock , shares | 9,473,691 | |
Number shares sale of common stock | $ 9,663,000 | |
Sale of stock price | $ 1.02 |
Convertible Preferred Stock - S
Convertible Preferred Stock - Schedule of Adjustment to Net Income (Loss) Attributable to Common Stockholders (Details) - Series A Convertible Preferred Stock [Member] | Jan. 31, 2020USD ($) |
Balance at January 31, 2019 | $ 8,686,000 |
Redemption of Series A Convertible Preferred Stock | (5,791,000) |
Fees paid for redemption of Series A Convertible Preferred Stock | (22,000) |
Previously recognized beneficial conversion feature | 2,021,000 |
Return from the preferred stockholders | $ 4,894,000 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended |
Apr. 30, 2020 | Jan. 31, 2020 | |
Operating loss carry forwards | $ 43,053,000 | |
Expire date description | Expire through fiscal 2039 | |
Income tax rates on continuing operations | 36.50% | |
State [Member] | ||
Operating loss carry forwards | $ 16,845,000 | |
Federal R&D [Member] | ||
Operating loss carry forwards | 1,521,000 | |
Georgia R&D [Member] | ||
Operating loss carry forwards | $ 188,000 |
Income Taxes - Schedule of Comp
Income Taxes - Schedule of Components of Income Tax (Expense) Benefit (Details) - USD ($) | 3 Months Ended | |
Apr. 30, 2020 | Apr. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||
Current tax benefit: Federal | $ 480,000 | $ 325,000 |
Current tax benefit: State | 81,000 | |
Total current provision | $ 561,000 | $ 325,000 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | Jul. 01, 2018 | Oct. 25, 2013 | Jul. 31, 2020 | Apr. 30, 2020 | Jan. 31, 2020 | |
Minimum fees due under shared office arrangement | $ 105,000 | |||||
Deferred revenues associated with modified royalty liability | 138,000 | $ 345,000 | ||||
Royalty liability | [1] | $ 986,000 | $ 969,000 | |||
Software License and Royalty Agreement [Member] | ||||||
Term of licensing agreement | 15 years | |||||
One-time initial base royalty fee | $ 3,000,000 | |||||
Minimum commitment for additional royalty payments | $ 3,000,000 | |||||
Royalty Agreement [Member] | ||||||
Period of time over which additional royalty payments are to be made | 6 years 6 months | |||||
Term of maintenance and service | 24 months | |||||
Royalty Agreement [Member] | Forecast [Member] | ||||||
Cash payment due per royalty agreement | $ 1,000,000 | |||||
[1] | The fair value of the royalty liability was determined based on discounting the portion of the modified royalty commitment payable in cash (refer to Note 7 - Commitments and Contingencies for additional information on our royalty liability). Fair value adjustments are included within miscellaneous expense in the condensed consolidated statements of operations. |
Discontinued Operations (Detail
Discontinued Operations (Details Narative) - USD ($) | Feb. 24, 2020 | Apr. 30, 2020 | Jan. 31, 2020 |
Goodwill | $ 4,825,000 | $ 10,712,000 | $ 10,712,000 |
Business acquisition of consideration transaction costs | 1,782,000 | ||
Asset Purchase Agreement [Member] | Enterprise Content Management Business [Member] | |||
Purchase price | 16,000,000 | ||
Proceeds from debt | 5,400,000 | ||
Repayment for debt | 4,000,000 | ||
Escrow funds | 800,000 | ||
Goodwill | 4,825,000 | ||
Business acquisition of consideration transaction costs | 40,000 | ||
Sale Agreement [Member] | Enterprise Content Management Business [Member] | |||
Business acquisition of consideration transaction costs | $ 30,000 |
Discontinued Operations - Sched
Discontinued Operations - Schedule of Gain on Sale of Assets (Details) - USD ($) | Feb. 24, 2020 | Apr. 30, 2020 | Apr. 30, 2019 | Jan. 31, 2020 |
Discontinued Operations and Disposal Groups [Abstract] | ||||
Net Proceeds, including escrowed funds | $ 12,084,000 | $ 11,284,000 | ||
Accounts Receivable | (1,130,000) | |||
Prepaid Expenses | (576,000) | |||
Deferred Revenues | 4,010,000 | |||
Net tangible assets sold | 2,304,000 | |||
Capitalized software development costs | (1,772,000) | (5,972,000) | $ (5,782,000) | |
Goodwill | (4,825,000) | (10,712,000) | $ (10,712,000) | |
Transaction cost | (1,782,000) | |||
Gain on sale of discontinued operations | $ 6,009,000 | $ (6,009,000) |
Discontinued Operations - Sch_2
Discontinued Operations - Schedule of Discontinued Operations of Consolidated Balance Sheets and Statements of Operations (Details) - USD ($) | 3 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | Jan. 31, 2020 | |
Current assets of discontinued operations: Accounts receivable | $ 168,000 | $ 1,150,000 | |
Current assets of discontinued operations: Contract receivables | 17,000 | ||
Current assets of discontinued operations: Prepaid Assets | 418,000 | ||
Current assets of discontinued operations | 168,000 | 1,585,000 | |
Long-term assets of discontinued operations: Property and equipment, net | 48,000 | 54,000 | |
Long-term assets of discontinued operations: Capitalized software development cost, net | 1,816,000 | ||
Long-term assets of discontinued operations: Goodwill | 4,825,000 | ||
Long-term assets of discontinued operations: Other | 131,000 | ||
Long-term assets of discontinued operations | 48,000 | 6,826,000 | |
Current liabilities of discontinued operations: Accounts payable | 177,000 | 514,000 | |
Current liabilities of discontinued operations: Accrued expenses | 29,000 | 142,000 | |
Current liabilities of discontinued operations: Deferred revenues | 192,000 | 4,397,000 | |
Current liabilities of discontinued operations | 398,000 | $ 5,053,000 | |
Total revenues | 550,000 | $ 2,193,000 | |
Expenses: Cost of sales | 285,000 | 620,000 | |
Expenses: Selling, general and administrative expenses | 63,000 | ||
Expenses: Research and development | 203,000 | ||
Expenses: Deferred financing cost | 128,000 | ||
Expenses: Other expense | 25,000 | ||
Total expenses | 413,000 | 911,000 | |
Income from discontinued operations | 137,000 | 1,282,000 | |
System Sales [Member] | |||
Total revenues | 10,000 | ||
Professional Services [Member] | |||
Total revenues | 126,000 | ||
Maintenance and Support [Member] | |||
Total revenues | 412,000 | 1,499,000 | |
Software as a Service [Member] | |||
Total revenues | $ 138,000 | $ 559,000 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended |
Apr. 30, 2020 | Jan. 31, 2020 | |
121G Consulting, LLC [Member] | ||
Consulting fees | $ 276,000 | |
Executive transition cost | 88,000 | |
Operating cost | 188,000 | |
Accounts payable | $ 40,000 | |
Incurred fees | $ 70,000 | |
180 Consulting, LLC [Member] | ||
Incurred fees | $ 82,000 |