0001493152-20-023278 | 10-Q | XBRL Viewer | Streamline Health Solutions INC

Cost of professional services

$ 2,641,000

$ 3,519,000

$ 8,372,000

$ 9,172,000

Operating expenses:

Cost of system sales

183,000

455,000

385,000

547,000

295,000

374,000

852,000

1,262,000

Cost of audit services

425,000

325,000

1,158,000

949,000

Cost of maintenance and support

160,000

201,000

528,000

504,000

Cost of software as a service

416,000

226,000

1,177,000

472,000

Selling, general and administrative expense

2,283,000

2,762,000

6,859,000

7,585,000

Research and development

753,000

501,000

1,946,000

1,750,000

Executive transition cost

481,000

621,000

Loss on exit of membership agreement

105,000

Total operating expenses

4,515,000

5,325,000

13,010,000

13,690,000

Operating loss

(1,874,000)

(1,806,000)

(4,638,000)

(4,518,000)

Other income (expense):

Interest expense

(12,000)

(91,000)

(39,000)

(239,000)

Miscellaneous income (expense)

14,000

(80,000)

(68,000)

(199,000)

Loss from continuing operations before income taxes

(1,872,000)

(1,977,000)

(4,745,000)

(4,956,000)

Income tax benefit

803,000

454,000

1,536,000

1,134,000

Loss from continuing operations

(1,069,000)

(1,523,000)

(3,209,000)

(3,822,000)

Income from discontinued operations:

Gain on sale of discontinued operations

6,013,000

Income from discontinued operations

64,000

1,825,000

305,000

4,513,000

Income tax expense

(50,000)

(466,000)

(1,626,000)

(1,150,000)

Income from discontinued operations, net of tax

14,000

1,359,000

4,692,000

3,363,000

Net (loss) income

^[1]

(1,055,000)

(164,000)

1,483,000

(459,000)

Add: Redemption of Series A Preferred Stock

4,894,000

Net (loss) income from continuing operations attributable to common shareholders

$ (1,069,000)

$ 3,371,000

$ (3,209,000)

$ 1,072,000

Basic Earnings Per Share:

Continuing operations

$ (0.04)

$ 0.16

$ (0.11)

$ 0.05

Discontinued operations

0.06

0.16

0.15

Net income

$ (0.04)

$ 0.22

$ 0.05

$ 0.2

Weighted average number of common shares - basic

^[2]

30,286,197

21,598,146

30,026,890

20,435,055

Diluted Earnings Per Share:

Continuing operations

^[3]

$ (0.04)

$ (0.07)

$ (0.11)

$ (0.19)

Discontinued operations

0.06

0.15

0.14

Net loss per common share - diluted

$ (0.04)

$ (0.01)

$ 0.04

$ (0.05)

Weighted average number of common shares - diluted

30,892,526

24,334,221

30,450,572

23,412,022

System Sales [Member]

Revenues:

Professional Services [Member]

$ 19,000

$ 636,000

$ 234,000

$ 968,000

Revenues:

180,000

444,000

540,000

1,102,000

Audit Services [Member]

Revenues:

Maintenance and Support [Member]

491,000

517,000

1,498,000

1,266,000

Revenues:

Software as a Service [Member]

1,070,000

1,328,000

3,556,000

4,053,000

Revenues:

Balance, shares at Jan. 31, 2019

$ 881,000

$ 594,000

$ 2,544,000

$ 1,783,000

[1]	Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of July 31, 2020 and 2019, there were 1,421,825 and 760,978 unvested restricted shares of common stock outstanding, respectively.
[2]	Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of October 31, 2020 and 2019, there were 1,166,325 and 1,185,918 unvested restricted shares of common stock outstanding, respectively.
[3]	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 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

20,767,708

$ 1,000

(1,000)

140,000

(5,367)

269,000

Balance, shares at Apr. 30, 2019

313,000

Balance at Apr. 30, 2019

$ 209,000

82,812,000

(76,237,000)

6,784,000

20,902,341

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

Balance, shares at Oct. 31, 2019

^[1]

(459,000)

Balance at Oct. 31, 2019

$ 308,000

94,970,000

(77,009,000)

18,269,000

30,767,439

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

$ 2,000

(2,000)

222,518

$ (3,000)

3,000

(318,750)

Stock issued pursuant to ESPP

160,000

4,000

Stock issued pursuant to ESPP, shares

5,072

(31,000)

(21,780)

Capital contribution

16,000

Balance, shares at Jul. 31, 2019

(608,000)

Balance at Jul. 31, 2019

$ 208,000

82,962,000

(76,845,000)

6,325,000

20,789,473

$ 5,000

(6,000)

(1,000)

550,000

1,000

(32,060)

290,000

(37,000)

Issuance of common stock, net of $681,000 offering expenses

(13,665)

$ 95,000

88,870,000

8,982,000

Issuance of common stock, net of $681,000 offering expenses, shares

9,473,691

Redemption of Series A Preferred Stock

2,873,000

Balance, shares at Oct. 31, 2019

(164,000)

^[1]

Balance at Oct. 31, 2019

$ 308,000

94,970,000

(77,009,000)

18,269,000

30,767,439

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

$ 4,000

(4,000)

440,000

(34,790)

263,000

(22,000)

(21,027)

Balance, shares at Apr. 30, 2020

3,673,000

Balance at Apr. 30, 2020

$ 309,000

95,350,000

(75,740,000)

19,919,000

30,914,826

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

Balance, shares at Oct. 31, 2020

^[1]

1,483,000

Balance at Oct. 31, 2020

$ 316,000

95,989,000

(77,930,000)

18,375,000

31,577,692

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

$ 9,000

(9,000)

855,543

$ (1,000)

1,000

(100,000)

349,000

$ (1,000)

(35,000)

(36,000)

(33,704)

Balance, shares at Jul. 31, 2020

(1,135,000)

Balance at Jul. 31, 2020

$ 316,000

95,656,000

(76,875,000)

19,097,000

31,636,665

7,331

(10,000)

442,000

(109,000)

(56,304)

Balance, shares at Oct. 31, 2020

(1,055,000)

^[1]

Balance at Oct. 31, 2020

$ 316,000

$ 95,989,000

$ (77,930,000)

$ 18,375,000

31,577,692

[1]	Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of July 31, 2020 and 2019, there were 1,421,825 and 760,978 unvested restricted shares of common stock outstanding, respectively.

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (Parenthetical) - USD ($)	3 Months Ended	9 Months Ended
	Oct. 31, 2019	Oct. 31, 2020	Oct. 31, 2019
Statement of Stockholders' Equity [Abstract]
Offering expenses	$ 681,000		$ 681,000

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)

9 Months Ended

Oct. 31, 2020

Oct. 31, 2019

Statement of Cash Flows [Abstract]

Net Income (loss)

^[1]

$ 1,483,000

$ (459,000)

LESS: Income from discontinued operations, net of tax

(4,692,000)

(3,363,000)

Loss from continuing operations, net of tax

(3,209,000)

(3,822,000)

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation

35,000

33,000

Amortization of capitalized software development costs

1,128,000

834,000

Amortization of intangible assets

370,000

424,000

Amortization of other deferred costs

242,000

208,000

Valuation adjustments

31,000

48,000

Provision for income taxes

(1,536,000)

(1,134,000)

Loss on exit of membership agreement

105,000

Benefit for accounts receivable allowance

1,004,000

719,000

(15,000)

(125,000)

Changes in assets and liabilities:

Accounts and contract receivables

1,151,000

320,000

Other assets

(514,000)

(520,000)

Accounts payable

(489,000)

(593,000)

Accrued expenses and other liabilities

(386,000)

(398,000)

Deferred revenues

(1,600,000)

(1,286,000)

Net cash used in operating activities - continuing operations

(3,683,000)

(5,292,000)

Net cash from operating activities - discontinued operations

(2,319,000)

4,317,000

Cash flows from investing activities:

Proceeds from sale of ECM Assets

11,288,000

Purchases of property and equipment

(42,000)

(51,000)

Capitalization of software development costs

(1,495,000)

(2,139,000)

Net cash provided by (used in) investing activities - continuing operations

9,751,000

(2,190,000)

Net cash from investing activities - discontinued operations

(591,000)

Cash flows from financing activities:

Repayment of bank term loan

(4,000,000)

Proceeds from term loan payable

2,301,000

Proceeds from issuance of common stock

9,663,000

Payments for costs directly attributable to the issuance of common stock

(681,000)

Principal payments on term loan

(448,000)

(168,000)

(50,000)

Redemption of Series A Convertible Preferred Stock

(5,791,000)

Fees paid for redemption of Series A Convertible Preferred Stock

(22,000)

Payment of deferred financing costs

(73,000)

Payment on royalty liability

(500,000)

Other

2,000

Net cash (used in) provided by financing activities - continuing operations

(2,367,000)

2,600,000

Net increase (decrease) in cash and cash equivalents

1,382,000

(1,156,000)

Cash and cash equivalents at beginning of period

1,649,000

2,376,000

Cash and cash equivalents at end of period

$ 3,031,000

$ 1,220,000

[1]	Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of July 31, 2020 and 2019, there were 1,421,825 and 760,978 unvested restricted shares of common stock outstanding, respectively.

Basis of Presentation

9 Months Ended

Oct. 31, 2020

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 of healthcare information technology solutions and associated services. The Company provides these capabilities through the licensing of its CDI, Abstracting and eValuator coding analysis platform, and financial management solutions through both licensing arrangements and software as a service (“SaaS”) contracts. The Company also provides audit and coding services to help clients optimize their internal clinical documentation and coding functions, as well as implementation and consulting services to complement its software solutions. The Company’s software and services enable hospitals and integrated healthcare delivery systems in the United States and Canada to capture, store, manage, route, retrieve and process patient clinical, financial and other healthcare provider information related to the patient revenue cycle.

The accompanying unaudited condensed consolidated financial statements have been prepared by us pursuant to the rules and regulations applicable to quarterly reports on Form 10-Q of the U.S. Securities and Exchange Commission. 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 nine months ended October 31, 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, 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 to ascertain the timing of accounting for the discontinued operations. Based on ASC 205-20-1, the Company determined that it did not have the authority to sell the assets until the date of the shareholder vote which was February 21, 2020. Accordingly, the Company did not present the ECM Assets as held for sale in previously filed financial statements. On February 21, 2020, the Company having the authority and ability to consummate the sale of the ECM Assets, met the criteria to present discontinued operations as described in ASC 205-20-1. Accordingly, the Company is reporting the results of operations and cash flows, and related balance sheet items associated with the ECM Assets in discontinued operations in the accompanying condensed consolidated statements of operations, cash flows and balance sheets for the current and comparative prior periods. Refer to Note 8 – Discontinued Operations for details of our discontinued operations.

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 Accounting Policies

9 Months Ended

Oct. 31, 2020

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 and nine months ended October 31, 2020, resulted in reclassifications of the three and nine months ended October 31, 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 October 31, 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 nine months ended October 31, 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 October 31, 2020
Royalty liability (1)	$	500,000	$	—	$	—	$	500,000

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 (“ASC 606”), under the core principle of recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

We commence revenue recognition (Step 5 below) in accordance with that core principle after applying the following steps:

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

	●	Step 2: Identify the performance obligations in the contract

	●	Step 3: Determine the transaction price

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

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

Often contracts contain more than one performance obligation. Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.

If we determine that we have not satisfied a performance obligation, we defer recognition of the revenue until the performance obligation is satisfied. Maintenance and support and SaaS agreements are generally non-cancellable or contain significant penalties for early cancellation, although 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:

	Nine-Months Ended October 31, 2020
	Recurring Revenue		Non-recurring Revenue		Total
Systems sales	$	—	$	234,000	$	234,000
Professional services		—		540,000		540,000
Audit services		—		1,498,000		1,498,000
Maintenance and support		3,556,000		—		3,556,000
Software as a service		2,544,000		—		2,544,000
Total revenue:	$	6,100,000	$	2,272,000	$	8,372,000

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 nine months ended October 31, 2020, we recognized approximately $3.5 million in revenue from deferred revenues outstanding as of January 31, 2020. Revenue allocated to remaining performance obligations was $9.5 million as of October 31, 2020, of which the Company expects to recognize approximately 53.3% 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 October 31, 2020, and January 31, 2020, we had deferred costs of $188,000 and $144,000, respectively, net of accumulated amortization of $89,000 and $332,000, respectively. Amortization expense of these costs was $27,000 and $45,000 for the three months ended October 31, 2020 and 2019 respectively and $89,000 and $150,000 for the nine months ended October 31, 2020 and 2019, respectively. There were no impairment losses for these capitalized costs for the fiscal years 2020 and 2019.

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 $637,000 and $421,000, respectively, as of October 31, 2020 and January 31, 2020. Amortization expense associated with sales commissions included in selling, general and administrative expenses on the consolidated statements of operations was $58,000 and $95,000 for the three months ended October 31, 2020 and 2019, respectively, and $133,000 and $150,000 for the nine months ended October 31, 2020 and 2019, respectively. There were no impairment losses for these capitalized costs for these periods.

Capitalized Software Development Costs

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

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

The Company recognized an impairment of $57,000 for cancelled or abandoned enhancement projects during the quarter ended October 31, 2020 that has been recognized within amortization expense. During the three and nine-month periods ended October 31, 2020, the Company capitalized $13,000 and $51,000 of non-employee stock compensation to capitalized software development cost reflecting the earned stock awards to 180 Consulting – See Note 9 – Related Party Transactions.

Equity Awards

The Company accounts for share-based payments based on the grant-date fair value of the awards with compensation cost recognized as expense over the requisite service period. For awards to non-employees, the Company recognizes compensation expense in the same manner as if the entity had paid cash for the goods or services. The Company incurred total compensation expense related to stock-based awards of $442,000 and $290,000 for the three months ended October 31, 2020 and 2019, respectively, and $1,054,000 and $719,000 for the nine months ended October 31, 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 carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing net deferred tax assets, the Company considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The Company establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. Refer to Note 6 - Income Taxes for further details.

The Company provides for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether certain tax positions are more likely than not to be sustained upon examination by tax authorities. At October 31, 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 (“ASC 260”) which means the security may participate in undistributed earnings with common stock. The holders of the Series A Convertible Preferred Stock were entitled to share in dividends, on an as-converted basis, if the holders of common stock were to receive dividends, other than dividends in the form of common stock. In accordance with ASC 260, the Company is required to use the two-class method when computing EPS. The two-class method is an earnings allocation formula that determines EPS for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. In determining the amount of net earnings to allocate to common stockholders, earnings are allocated to both common and participating securities based on their respective weighted-average shares outstanding for the period (with the exception of the gain on the redemption of our Series A Convertible Preferred Stock, which was allocated in its entirety to the common stock).

Our unvested restricted stock awards are considered non-participating securities because holders are not entitled to non-forfeitable rights to dividends or dividend equivalents during the vesting term. In accordance with ASC 260, securities are deemed not to be participating in losses if there is no obligation to fund such losses. 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						Nine-Months Ended
	October 31, 2020			October 31, 2019			October 31, 2020			October 31, 2019
Basic earnings (loss) per share:
Continuing operations
Loss from continuing operations, net of tax	$	(1,069,000	)	$	(1,523,000	)	$	(3,209,000	)	$	(3,822,000	)
Add: Redemption of Series A Preferred Stock		-			4,894,000			-			4,894,000
Net (loss) income from continuing operations		(1,069,000	)		3,371,000			(3,209,000	)		1,072,000
Basic net (loss) income per share of common stock from continuing operations	$	(0.04	)	$	0.16			(0.11	)		0.05

Discontinued operations
Gain from discontinued operations, net of tax	$	14,000		$	1,359,000		$	4,692,000		$	3,362,000
Less: Allocation of earnings to participating securities		-			(139,000	)		-			(399,000	)
Income available to common shareholders from discontinued operations	$	14,000		$	1,220,000			4,692,000			2,963,000
Basic net earnings per share of common stock from discontinued operations	$	-		$	0.06		$	0.16		$	0.15

Diluted earnings (loss) per share (2):
Continuing operations
Income available to common shareholders from continuing operations	$	(1,069,000	)	$	(1,523,000	)		(3,209,000	)		(3,822,000	)
Diluted net loss per share of common stock from continuing operations	$	(0.04	)	$	(0.07	)		(0.11	)		(0.19	)

Discontinued operations
Income available to common shareholders from discontinued operations	$	14,000		$	1,359,000			4,692,000			3,362,000
Diluted net earnings per share of common stock from discontinued operations	$	-		$	0.06		$	0.15		$	0.14

Net (loss) income	$	(1,055,000	)	$	(164,000	)	$	1,483,000		$	(459,000	)
Weighted average shares outstanding - Basic (1)		30,286,197			21,598,146			30,026,890			20,435,055
Effect of dilutive securities - Stock options, Restricted stock and Series A Convertible Preferred Stock (3)		606,329			2,736,075			423,682			2,976,967
Weighted average shares outstanding – Diluted		30,892,526			24,334,221			30,450,572			23,412,022
Basic net (loss) income per share of common stock	$	(0.04	)	$	(0.01	)	$	0.05		$	(0.02	)
Diluted net (loss) income per share of common stock	$	(0.04	)	$	(0.01	)	$	0.05		$	(0.02	)

	(1)	Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of October 31, 2020 and 2019, there were 1,166,325 and 1,185,918 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.
	(3)	Diluted net loss per share excludes the effect of shares that are anti-dilutive. For the three and nine months ended October 31, 2020, diluted EPS excludes 624,330 outstanding stock options and 1,166,325 unvested restricted shares of common stock for purposes of calculating income (loss) from continuing operations. For the three and nine months ended October 31, 2019, diluted EPS excludes 2,895,464 shares of Series A Convertible Preferred Stock, 938,671 outstanding stock options and 1,185,918 unvested restricted shares of common stock.

Other Operating Costs

Loss on Exit of Membership Agreement

As of October 31, 2020, minimum fees due under the shared office arrangement totaled approximately $32,000. The Company recorded an expense for the minimum future commitment under the agreement and accrued the cost to the accompanying consolidated balance sheet in the first nine months ended October 31, 2020 to reflect the liability at the time it abandoned the space. 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:

	October 31,
	2020		2019
Escrowed funds from sale of ECM Assets	$	800,000	$	—
Right-of Use Assets from operating lease		540,000		—
Capitalized software purchased with stock (Note 9)		51,000		—

Recent Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which removes Step 2 from the goodwill impairment test. The standard became effective for us on February 1, 2020. The adoption of this ASU did not have a significant impact on our condensed consolidated financial statements.

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, to remove, modify, and add certain disclosure requirements within Topic 820 in order to improve the effectiveness of fair value disclosures in the notes to financial statements. The standard became effective for us on February 1, 2020. The adoption of this ASU did not have a significant impact on our condensed consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The standard will become effective for us on February 1, 2021. We are currently evaluating the impact of the new standard on our condensed consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which amends the impairment model to utilize an expected loss methodology in place of the current incurred loss methodology, which will result in the more timely recognition of losses. For smaller reporting entities, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. The ASU, including the subsequently issued codification improvements update (“Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” ASU 2019-04) and the targeted transition relief update (“Financial Instruments-Credit Losses (Topic 326),” ASU 2019-05), is not expected to have a significant impact on the consolidated condensed financial statements.

Operating Leases

9 Months Ended

Oct. 31, 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 October 31, 2020, operating lease right-of use assets totaling $432,000, and the associated lease liability is included in both current and long-term liabilities of $196,000 and $266,000, respectively. The Company used a discount rate of 6.5% to the determine the lease liability. For the three- and nine-month periods ended October 31, 2020, the Company had operating cost of approximately $48,000 and $129,000. In addition, there was $83,000 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 October 31, 2020 are as follows for payments due based upon the Company’s fiscal year:

2020	$	50,000
2021		204,000
2022		210,000
2023		35,000
Total lease payments		499,000
Less present value adjustment		(37,000	)
Present value of lease liabilities	$	462,000

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 October 31, 2019, operating lease right-of use assets totaling $17,000 are recorded in Prepaid and other current assets, and the associated lease liability of $48,000 is included in Accrued expenses within the condensed consolidated balance sheets. The Company used a discount rate of 8% to the determine the lease liability. In the nine months ended October 31, 2019, the Company had operating cost, and cash operating cash flows, associated the New York lease of $171,000, offset by operating lease income of $216,000.

Debt

9 Months Ended

Oct. 31, 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 instalments, 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 instalments 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 covenant requirements that the Company requirements that it shall not deviate by more than fifteen percent of 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 projections. In addition, 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 was in compliance with the foregoing loan covenants at October 31, 2020. Based upon the borrowing base formula set forth in the Credit Agreement, as of October 31, 2020, the Company had access to $1,400,000 of the full $2,000,000 revolving line of credit. As of October 31, 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, other than the PPP loan described below, consisted of the following at:

	October 31, 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 $1,480,000, and $820,000 in the next two twelve-month periods from October 31, 2020, respectively.

Convertible Preferred Stock

9 Months Ended

Oct. 31, 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 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

9 Months Ended

Oct. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 6 — INCOME TAXES

Income taxes consist of the following:

	October 31,
	2020		2019
Current tax benefit (expense):
Federal	$	997,000	$	1,150,000
State		539,000		(16,000	)
Total current income tax provision	$	1,536,000	$	1,134,000

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 nine months of October 31, 2020, will generate benefits in the future quarters of fiscal 2020 such that the Company will have no full-year tax payable.

The effective tax rates for income tax rates on continuing operations for nine months ending October 31, 2020 and 2019 were approximately 32.3%% and 22.9%, respectively. The Company maintains a full valuation allowance against the deferred tax assets.

The Company has recorded $337,000 and $304,000 in reserves for uncertain tax positions as of October 31, 2020 and 2019, respectively.

The Company and its subsidiary are subject to U.S. federal income tax as well as income taxes in multiple state and local jurisdictions. The Company has concluded all U.S. federal tax matters for years through January 31, 2016. All material state and local income tax matters have been concluded for years through January 31, 2015. The Company is no longer subject to IRS examination for periods prior to the tax year ended January 31, 2016; however, carryforward losses that were generated prior to the tax year ended January 31, 2016 may still be adjusted by the IRS if they are used in a future period.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Commitments and Contingencies

9 Months Ended

Oct. 31, 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 October 31, 2020, minimum fees due under the shared office arrangement totaled $32,000. 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^® (“CLG”), now known as our Clinical Analytics solution. In addition, Montefiore assigned to us the existing license agreement with a customer using CLG. As consideration under the Royalty Agreement, we paid Montefiore a one-time initial base royalty fee of $3,000,000. Additionally, we originally committed that Montefiore would receive at least an additional $3,000,000 of on-going royalty payments related to future sublicensing of CLG by us within the first six and one-half years of the license term. On July 1, 2018, we entered into a joint amendment to the Royalty Agreement and the existing Software License and Support Agreement with Montefiore to modify the payment obligations of the parties under both agreements. According to the modified provisions, our obligation to pay on-going royalties under the Royalty Agreement was replaced with the obligation to (i) provide maintenance services for 24 months and waive associated maintenance fees, and (ii) pay $1,000,000 in cash by October 31, 2020. As a result of the commitment to fulfill a portion of our obligation by providing maintenance services at no cost, the royalty liability was significantly reduced, with a corresponding increase to deferred revenues. As of October 31, 2020 and January 31, 2020, we had $-0- and $345,000, respectively, in deferred revenues associated with this modified royalty liability. The fair value of the royalty liability was determined based on the amount payable in cash. As of October 31, 2020 and January 31, 2020, the present value of this royalty liability was $500,000 and $969,000, respectively.

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

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.

Discontinued Operations

9 Months Ended

Oct. 31, 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	$	12,088,000
Net tangible assets sold:
Accounts Receivable		(1,130,000	)
Prepaid Expenses		(576,000	)
Deferred Revenues		4,010,000
Net tangible assets sold		2,304,000
Capitalized software development costs		(1,772,000	)
Goodwill		(4,825,000	)
Transaction cost		(1,782,000	)
Gain on sale of discontinued operations	$	6,013,000

The transaction costs were primarily broker 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.

The Company recorded the following into discontinued operations on the accompanying consolidated balance sheets:

	As of
	October 31, 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	$	28,000	$	54,000
Capitalized software development cost, net		—		1,816,000
Goodwill		—		4,825,000
Other		—		131,000
Long-term assets of discontinued operations	$	28,000	$	6,826,000
Current liabilities of discontinued operations:
Accounts payable	$	—	$	514,000
Accrued expenses		40,000		142,000
Deferred revenues		168,000		4,397,000
Current liabilities of discontinued operations	$	208,000	$	5,053,000

For the three- and nine- months ended October 31, 2020 and 2019, the Company recorded the following into discontinued operations in the accompanying consolidated statements of operations:

	Three Months Ended				Nine Months Ended
	October 31, 2020		October 31, 2019		October 31, 2020		October 31, 2019
Revenues:
System sales	$	-	$	32,000	$	-	$	78,000
Professional services		-		182,000		-		513,000
Maintenance and support		-		1,499,000		412,000		4,484,000
Software as a service		-		556,000		138,000		1,691,000
Transition service fees		121,000		-		278,000		-
Total revenues	$	121,000	$	2,269,000	$	828,000	$	6,766,000

Expenses:
Cost of Sales		2,000		181,000		292,000		1,433,000
Selling, general and administrative expenses		-		38,000		-		160,000
Research and development		-		225,000		-		635,000
Transition service cost		55,000		-		103,000		-
Deferred financing cost		-		-		128,000		-
Other expenses		-		-		-		25,000
Total expenses		57,000		444,000		523,000		2,253,000

Income from discontinued operations	$	64,000	$	1,825,000	$	305,000	$	4,513,000

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. 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

9 Months Ended

Oct. 31, 2020

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. There were no amounts outstanding as of October 31, 2020.

On March 19, 2020, 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 entered into two more, SOW #4 and SOW #2A on June 8, 2020 and July 21, 2020, respectively. 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 nine-month period ended October 31, 2020, the Company incurred total fees of $425,000 under the terms of the MSA related to 180 Consulting. Of those fees, approximately $75,000 was related to capitalized software development, and the remaining $375,000 was operating cost. In addition to the cash compensation, under these agreements with 180 Consulting, the Company issued 7,331 shares of restricted stock during the quarter and 73,043 shares subsequent to the end of the quarter. Cumulatively, the Company has issued an aggregate of 237,672 shares of common stock to 180 Consulting during the nine months ended October 31, 2020 and in the period subsequent to October 31, 2020. Accordingly, the Company recognized approximately $225,000 in non-employee stock compensation during the nine months ended October 31, 2020, of which $51,000 was reported in capitalized software development cost. Of the 237,672 shares issued under the MSA, the Company has recognized stock compensation expense for 174,583 shares. The remaining shares will be recognized into stock compensation as the work is performed (work is expected to be completed by January 31, 2021).

Subsequent Events

9 Months Ended

Oct. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

NOTE 10 — SUBSEQUENT EVENTS

We have evaluated subsequent events occurring after October 31, 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.

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Oct. 31, 2020

Fair Value of Financial Instruments

Use of Estimates

Use of Estimates

Reclassification

Reclassification

Fair Value of Financial Instruments

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 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 October 31, 2020
Royalty liability (1)	$	500,000	$	—	$	—	$	500,000

At January 31, 2020
Royalty liability (1)	$	969,000	$	—	$	—	$	969,000

(1)

Revenue Recognition

Revenue Recognition

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

Contract Combination

Systems Sales

Maintenance and Support Services

Software-Based Solution Professional Services

Software as a Service

Audit Services

Disaggregation of Revenue

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

	Nine-Months Ended October 31, 2020
	Recurring Revenue		Non-recurring Revenue		Total
Systems sales	$	—	$	234,000	$	234,000
Professional services		—		540,000		540,000
Audit services		—		1,498,000		1,498,000
Maintenance and support		3,556,000		—		3,556,000
Software as a service		2,544,000		—		2,544,000
Total revenue:	$	6,100,000	$	2,272,000	$	8,372,000

Contract Receivables and Deferred Revenues

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

Capitalized Software Development Costs

Capitalized Software Development Costs

Equity Awards

Equity Awards

Income Taxes

Income Taxes

Net Earnings (Loss) Per Common Share

Net Earnings (Loss) Per Common Share

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

	Three-Months Ended						Nine-Months Ended
	October 31, 2020			October 31, 2019			October 31, 2020			October 31, 2019
Basic earnings (loss) per share:
Continuing operations
Loss from continuing operations, net of tax	$	(1,069,000	)	$	(1,523,000	)	$	(3,209,000	)	$	(3,822,000	)
Add: Redemption of Series A Preferred Stock		-			4,894,000			-			4,894,000
Net (loss) income from continuing operations		(1,069,000	)		3,371,000			(3,209,000	)		1,072,000
Basic net (loss) income per share of common stock from continuing operations	$	(0.04	)	$	0.16			(0.11	)		0.05

Discontinued operations
Gain from discontinued operations, net of tax	$	14,000		$	1,359,000		$	4,692,000		$	3,362,000
Less: Allocation of earnings to participating securities		-			(139,000	)		-			(399,000	)
Income available to common shareholders from discontinued operations	$	14,000		$	1,220,000			4,692,000			2,963,000
Basic net earnings per share of common stock from discontinued operations	$	-		$	0.06		$	0.16		$	0.15

Diluted earnings (loss) per share (2):
Continuing operations
Income available to common shareholders from continuing operations	$	(1,069,000	)	$	(1,523,000	)		(3,209,000	)		(3,822,000	)
Diluted net loss per share of common stock from continuing operations	$	(0.04	)	$	(0.07	)		(0.11	)		(0.19	)

Discontinued operations
Income available to common shareholders from discontinued operations	$	14,000		$	1,359,000			4,692,000			3,362,000
Diluted net earnings per share of common stock from discontinued operations	$	-		$	0.06		$	0.15		$	0.14

Net (loss) income	$	(1,055,000	)	$	(164,000	)	$	1,483,000		$	(459,000	)
Weighted average shares outstanding - Basic (1)		30,286,197			21,598,146			30,026,890			20,435,055
Effect of dilutive securities - Stock options, Restricted stock and Series A Convertible Preferred Stock (3)		606,329			2,736,075			423,682			2,976,967
Weighted average shares outstanding – Diluted		30,892,526			24,334,221			30,450,572			23,412,022
Basic net (loss) income per share of common stock	$	(0.04	)	$	(0.01	)	$	0.05		$	(0.02	)
Diluted net (loss) income per share of common stock	$	(0.04	)	$	(0.01	)	$	0.05		$	(0.02	)

	(1)	Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of October 31, 2020 and 2019, there were 1,166,325 and 1,185,918 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.
	(3)	Diluted net loss per share excludes the effect of shares that are anti-dilutive. For the three and nine months ended October 31, 2020, diluted EPS excludes 624,330 outstanding stock options and 1,166,325 unvested restricted shares of common stock for purposes of calculating income (loss) from continuing operations. For the three and nine months ended October 31, 2019, diluted EPS excludes 2,895,464 shares of Series A Convertible Preferred Stock, 938,671 outstanding stock options and 1,185,918 unvested restricted shares of common stock.

Other Operating Costs

Other Operating Costs

Loss on Exit of Membership Agreement

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:

	October 31,
	2020		2019
Escrowed funds from sale of ECM Assets	$	800,000	$	—
Right-of Use Assets from operating lease		540,000		—
Capitalized software purchased with stock (Note 9)		51,000		—

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Oct. 31, 2020

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 October 31, 2020
Royalty liability (1)	$	500,000	$	—	$	—	$	500,000

At January 31, 2020
Royalty liability (1)	$	969,000	$	—	$	—	$	969,000

(1)

Schedule of Disaggregation of Revenue

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

	Nine-Months Ended October 31, 2020
	Recurring Revenue		Non-recurring Revenue		Total
Systems sales	$	—	$	234,000	$	234,000
Professional services		—		540,000		540,000
Audit services		—		1,498,000		1,498,000
Maintenance and support		3,556,000		—		3,556,000
Software as a service		2,544,000		—		2,544,000
Total revenue:	$	6,100,000	$	2,272,000	$	8,372,000

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						Nine-Months Ended
	October 31, 2020			October 31, 2019			October 31, 2020			October 31, 2019
Basic earnings (loss) per share:
Continuing operations
Loss from continuing operations, net of tax	$	(1,069,000	)	$	(1,523,000	)	$	(3,209,000	)	$	(3,822,000	)
Add: Redemption of Series A Preferred Stock		-			4,894,000			-			4,894,000
Net (loss) income from continuing operations		(1,069,000	)		3,371,000			(3,209,000	)		1,072,000
Basic net (loss) income per share of common stock from continuing operations	$	(0.04	)	$	0.16			(0.11	)		0.05

Discontinued operations
Gain from discontinued operations, net of tax	$	14,000		$	1,359,000		$	4,692,000		$	3,362,000
Less: Allocation of earnings to participating securities		-			(139,000	)		-			(399,000	)
Income available to common shareholders from discontinued operations	$	14,000		$	1,220,000			4,692,000			2,963,000
Basic net earnings per share of common stock from discontinued operations	$	-		$	0.06		$	0.16		$	0.15

Diluted earnings (loss) per share (2):
Continuing operations
Income available to common shareholders from continuing operations	$	(1,069,000	)	$	(1,523,000	)		(3,209,000	)		(3,822,000	)
Diluted net loss per share of common stock from continuing operations	$	(0.04	)	$	(0.07	)		(0.11	)		(0.19	)

Discontinued operations
Income available to common shareholders from discontinued operations	$	14,000		$	1,359,000			4,692,000			3,362,000
Diluted net earnings per share of common stock from discontinued operations	$	-		$	0.06		$	0.15		$	0.14

Net (loss) income	$	(1,055,000	)	$	(164,000	)	$	1,483,000		$	(459,000	)
Weighted average shares outstanding - Basic (1)		30,286,197			21,598,146			30,026,890			20,435,055
Effect of dilutive securities - Stock options, Restricted stock and Series A Convertible Preferred Stock (3)		606,329			2,736,075			423,682			2,976,967
Weighted average shares outstanding – Diluted		30,892,526			24,334,221			30,450,572			23,412,022
Basic net (loss) income per share of common stock	$	(0.04	)	$	(0.01	)	$	0.05		$	(0.02	)
Diluted net (loss) income per share of common stock	$	(0.04	)	$	(0.01	)	$	0.05		$	(0.02	)

	(1)	Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of October 31, 2020 and 2019, there were 1,166,325 and 1,185,918 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.
	(3)	Diluted net loss per share excludes the effect of shares that are anti-dilutive. For the three and nine months ended October 31, 2020, diluted EPS excludes 624,330 outstanding stock options and 1,166,325 unvested restricted shares of common stock for purposes of calculating income (loss) from continuing operations. For the three and nine months ended October 31, 2019, diluted EPS excludes 2,895,464 shares of Series A Convertible Preferred Stock, 938,671 outstanding stock options and 1,185,918 unvested restricted shares of common stock.

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:

	October 31,
	2020		2019
Escrowed funds from sale of ECM Assets	$	800,000	$	—
Right-of Use Assets from operating lease		540,000		—
Capitalized software purchased with stock (Note 9)		51,000		—

Operating Leases (Tables)

9 Months Ended

Oct. 31, 2020

Leases [Abstract]

Schedule of Maturities of Operating Lease Liabilities

Maturities of operating lease liabilities associated with the Company’s operating lease as of October 31, 2020 are as follows for payments due based upon the Company’s fiscal year:

2020	$	50,000
2021		204,000
2022		210,000
2023		35,000
Total lease payments		499,000
Less present value adjustment		(37,000	)
Present value of lease liabilities	$	462,000

Debt (Tables)

9 Months Ended

Oct. 31, 2020

Debt Disclosure [Abstract]

Schedule of Outstanding Debt, other than PPP Loan

Outstanding principal balances on debt, other than the PPP loan described below, consisted of the following at:

	October 31, 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 (Tables)

9 Months Ended

Oct. 31, 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)

9 Months Ended

Oct. 31, 2020

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax (Expense) Benefit

Income taxes consist of the following:

	October 31,
	2020		2019
Current tax benefit (expense):
Federal	$	997,000	$	1,150,000
State		539,000		(16,000	)
Total current income tax provision	$	1,536,000	$	1,134,000

Discontinued Operations (Tables)

9 Months Ended

Oct. 31, 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	$	12,088,000
Net tangible assets sold:
Accounts Receivable		(1,130,000	)
Prepaid Expenses		(576,000	)
Deferred Revenues		4,010,000
Net tangible assets sold		2,304,000
Capitalized software development costs		(1,772,000	)
Goodwill		(4,825,000	)
Transaction cost		(1,782,000	)
Gain on sale of discontinued operations	$	6,013,000

Schedule of Discontinued Operations of Consolidated Balance Sheets and Statements of Operations

The Company recorded the following into discontinued operations on the accompanying consolidated balance sheets:

	As of
	October 31, 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	$	28,000	$	54,000
Capitalized software development cost, net		—		1,816,000
Goodwill		—		4,825,000
Other		—		131,000
Long-term assets of discontinued operations	$	28,000	$	6,826,000
Current liabilities of discontinued operations:
Accounts payable	$	—	$	514,000
Accrued expenses		40,000		142,000
Deferred revenues		168,000		4,397,000
Current liabilities of discontinued operations	$	208,000	$	5,053,000

For the three- and nine- months ended October 31, 2020 and 2019, the Company recorded the following into discontinued operations in the accompanying consolidated statements of operations:

	Three Months Ended				Nine Months Ended
	October 31, 2020		October 31, 2019		October 31, 2020		October 31, 2019
Revenues:
System sales	$	-	$	32,000	$	-	$	78,000
Professional services		-		182,000		-		513,000
Maintenance and support		-		1,499,000		412,000		4,484,000
Software as a service		-		556,000		138,000		1,691,000
Transition service fees		121,000		-		278,000		-
Total revenues	$	121,000	$	2,269,000	$	828,000	$	6,766,000

Expenses:
Cost of Sales		2,000		181,000		292,000		1,433,000
Selling, general and administrative expenses		-		38,000		-		160,000
Research and development		-		225,000		-		635,000
Transition service cost		55,000		-		103,000		-
Deferred financing cost		-		-		128,000		-
Other expenses		-		-		-		25,000
Total expenses		57,000		444,000		523,000		2,253,000

Income from discontinued operations	$	64,000	$	1,825,000	$	305,000	$	4,513,000

- Definition

Tabular disclosure of information related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component.

+ References

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+ Details

Basis of Presentation (Details Narative)	9 Months Ended
Basis of Presentation (Details Narative)	Oct. 31, 2020 Segments
Accounting Policies [Abstract]
Number of operating segments	1

Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Oct. 31, 2020	Oct. 31, 2019	Oct. 31, 2020	Oct. 31, 2019	Jan. 31, 2020
Deferred financing cost					$ 128,000
Deferred revenues	3,500,000		3,500,000
Revenue of remaining performance obligations	$ 9,500,000		$ 9,500,000
Revenue of remaining performance obligations, percent	53.30%		53.30%
Revenue of remaining performance obligations description			The Company expects to recognize approximately 53.3% over the next 12 months and the remainder thereafter.
Deferred costs, net	$ 188,000		$ 188,000		144,000
Deferred costs, accumulated amortization	89,000		89,000		332,000
Deferred costs, amortization expense	27,000	$ 45,000	89,000	$ 150,000
Amortization expense with deferred sales commissions	58,000	95,000	133,000	150,000
Impairment	57,000
Non-employee stock compensation for capitalized software development cost	13,000		51,000
Compensation expense			1,004,000	719,000
Minimum fees under shared office arrangement	32,000		32,000
Stock Based Awards [Member]
Compensation expense	442,000	$ 290,000	1,054,000	$ 719,000
Other Non-current Assets [Member]
Deferred commissions costs paid and payable	$ 637,000		$ 637,000		421,000
Revolving Credit Agreement [Member]
Deferred financing cost					$ 47,000

Summary of Significant Accounting Policies - Schedule of Fair Value Assets and Liabilities Measured on Recurring Basis (Details) - USD ($)

Oct. 31, 2020

Jan. 31, 2020

Quoted Prices in Active Markets (Level 1) [Member]

^[1]

$ 500,000

$ 969,000

Significant Other Observable Inputs (Level 2) [Member]

^[1]

Significant Unobservable Inputs (Level 3) [Member]

^[1]

^[1]

$ 500,000

$ 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 Accounting Policies - Schedule of Disaggregation of Revenue (Details) - USD ($)	3 Months Ended		9 Months Ended
	Oct. 31, 2020	Oct. 31, 2019	Oct. 31, 2020	Oct. 31, 2019
Total revenue	$ 2,641,000	$ 3,519,000	$ 8,372,000	$ 9,172,000
Systems Sales [Member]
Total revenue			234,000
Professional Services [Member]
Total revenue	180,000	444,000	540,000	1,102,000
Audit Services [Member]
Total revenue	491,000	517,000	1,498,000	1,266,000
Maintenance and Support [Member]
Total revenue	$ 1,070,000	$ 1,328,000	3,556,000	$ 4,053,000
Software as a Service [Member]
Total revenue			2,544,000
Recurring Revenue [Member]
Total revenue			6,100,000
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			3,556,000
Recurring Revenue [Member] \| Software as a Service [Member]
Total revenue			2,544,000
Non-recurring Revenue [Member]
Total revenue			2,272,000
Non-recurring Revenue [Member] \| Systems Sales [Member]
Total revenue			234,000
Non-recurring Revenue [Member] \| Professional Services [Member]
Total revenue			540,000
Non-recurring Revenue [Member] \| Audit Services [Member]
Total revenue			1,498,000
Non-recurring Revenue [Member] \| Maintenance and Support [Member]
Total revenue
Non-recurring Revenue [Member] \| Software as a Service [Member]
Total revenue

- Definition

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 30
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8906-108599

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 40
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9031-108599

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 41
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9038-108599

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 4
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130543-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8736-108599

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8736-108599

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 42
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9054-108599

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130545-203045

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 924
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB Topic 11.L)
-URI http://asc.fasb.org/extlink&oid=6472922&loc=d3e499488-122856

+ Details

Summary of Significant Accounting Policies - Schedule of Basic and Diluted Net Loss Per Share of Common Stock (Details) - USD ($)

3 Months Ended

9 Months Ended

Oct. 31, 2020

Jul. 31, 2020

Apr. 30, 2020

Oct. 31, 2019

Jul. 31, 2019

Apr. 30, 2019

Oct. 31, 2020

Oct. 31, 2019

Loss from continuing operations, net of tax

$ (1,069,000)

$ (1,523,000)

$ (3,209,000)

$ (3,822,000)

Add: Redemption of Series A Preferred Stock

4,894,000

Net (loss) income from continuing operations

$ (1,069,000)

$ 3,371,000

$ (3,209,000)

$ 1,072,000

Basic net (loss) income per share of common stock from continuing operations

$ (0.04)

$ 0.16

$ (0.11)

$ 0.05

Gain from discontinued operations, net of tax

$ 14,000

$ 1,359,000

$ 4,692,000

$ 3,363,000

Less: Allocation of earnings to participating securities

(139,000)

(399,000)

Income available to common shareholders from discontinued operations

$ 14,000

$ 1,220,000

$ 4,692,000

$ 2,963,000

Basic net earnings per share of common stock from discontinued operations

$ 0.06

$ 0.16

$ 0.15

Income available to common shareholders from continuing operations

^[1]

$ (1,069,000)

$ (1,523,000)

$ (3,209,000)

$ (3,822,000)

Diluted net loss per share of common stock from continuing operations

^[1]

$ (0.04)

$ (0.07)

$ (0.11)

$ (0.19)

Income available to common shareholders from discontinued operations

$ 14,000

$ 1,359,000

$ 4,692,000

$ 3,362,000

Diluted net earnings per share of common stock from discontinued operations

$ 0.06

$ 0.15

$ 0.14

Net (loss) income

$ (1,055,000)

^[2]

$ (1,135,000)

$ 3,673,000

$ (164,000)

^[2]

$ (608,000)

$ 313,000

$ 1,483,000

^[2]

$ (459,000)

^[2]

Weighted average shares outstanding - Basic

^[3]

30,286,197

21,598,146

30,026,890

20,435,055

Effect of dilutive securities - Stock options, Restricted stock and Series A Convertible Preferred Stock

^[4]

$ 606,329

$ 2,736,075

$ 423,682

$ 2,976,967

Weighted average shares outstanding - Diluted

30,892,526

24,334,221

30,450,572

23,412,022

Basic net (loss) income per share of common stock

$ (0.04)

$ (0.01)

$ 0.05

$ (0.02)

Diluted net (loss) income per share of common stock

$ (0.04)

$ (0.01)

$ 0.05

$ (0.02)

[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 July 31, 2020 and 2019, there were 1,421,825 and 760,978 unvested restricted shares of common stock outstanding, respectively.
[3]	Excludes the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of October 31, 2020 and 2019, there were 1,166,325 and 1,185,918 unvested restricted shares of common stock outstanding, respectively.
[4]	Diluted net loss per share excludes the effect of shares that are anti-dilutive. For the three and nine months ended October 31, 2020, diluted EPS excludes 624,330 outstanding stock options and 1,166,325 unvested restricted shares of common stock for purposes of calculating income (loss) from continuing operations. For the three and nine months ended October 31, 2019, diluted EPS excludes 2,895,464 shares of Series A Convertible Preferred Stock, 938,671 outstanding stock options and 1,185,918 unvested restricted shares of common stock.

Summary of Significant Accounting Policies - Schedule of Basic and Diluted Net Loss Per Share of Common Stock (Details) (Parenthetical) - shares	9 Months Ended
	Oct. 31, 2020	Oct. 31, 2019
Accounting Policies [Abstract]
Unvested restricted shares of common stock	1,166,325	1,185,918
Non vested Outstanding stock options	624,330	1,166,325
Vested Outstanding stock options	2,895,464	938,671

Summary of Significant Accounting Policies - Schedule of Non-Cash Items Related to Condensed Consolidated Statements of Cash Flow (Details) - USD ($)	9 Months Ended
	Oct. 31, 2020	Oct. 31, 2019
Accounting Policies [Abstract]
Escrowed funds from sale of ECM Assets	$ 800,000
Right-of Use Assets from operating lease	540,000
Capitalized software purchased with stock (Note 9)	$ 51,000

Operating Leases (Details Narrative) - USD ($)	3 Months Ended	9 Months Ended		12 Months Ended
Operating Leases (Details Narrative) - USD ($)	Oct. 31, 2020	Oct. 31, 2020	Oct. 31, 2019	Jan. 31, 2018	Mar. 31, 2020	Jan. 31, 2020
Lease expired date		Mar. 31, 2023
Operating lease, right-of use asset	$ 432,000	$ 432,000	$ 17,000
Current portion of operating lease obligation	196,000	196,000
Non-current portion of operating lease obligation	$ 226,000	$ 226,000
Lease discount rate	6.50%	6.50%	8.00%
Operating cost	$ 48,000	$ 129,000	$ 171,000
Operating leases paid		83,000
Lease liability	462,000	462,000	48,000
Operating lease income			$ 216,000
Office Space [Member]
Total minimum rentals due amount					$ 105,000
Vacating and Subleasing [Member]
Loss on exit operating lease				$ 472,000
At inception [Member]
Operating lease, right-of use asset	$ 540,000	$ 540,000

Operating Leases - Schedule of Maturities of Operating Lease Liabilities (Details) - USD ($)	Oct. 31, 2020	Oct. 31, 2019
Leases [Abstract]
2020	$ 50,000
2021	204,000
2022	210,000
2023	35,000
Total lease payments	499,000
Less present value adjustment	(37,000)
Present value of lease liabilities	$ 462,000	$ 48,000

Debt (Details Narrative) - USD ($)						9 Months Ended
Debt (Details Narrative) - USD ($)	Feb. 24, 2020	Dec. 11, 2019	Sep. 11, 2019	Apr. 15, 2015	Nov. 21, 2014	Oct. 31, 2020	Oct. 31, 2019	Mar. 17, 2020	Jan. 31, 2020
Term loan									$ 4,000,000
Revolving line of credit						2,000,000
Line of credit, maximum brrowing capacity						1,400,000
Prepaid of outstanding term loan						4,000,000
Deferred financing cost									$ 128,000
Future maturities under loan for first year						1,480,000
Future maturities under loan for second year						$ 820,000
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%

Debt - Schedule of Outstanding Debt, other than PPP Loan (Details) - USD ($)	Oct. 31, 2020	Jan. 31, 2020
Debt Disclosure [Abstract]
Term loan		$ 4,000,000
Deferred financing cost		(128,000)
Total		3,872,000
Less: Current portion	(1,480,000)	(3,872,000)
Non-current portion of debt

Convertible Preferred Stock (Details Narrative) - USD ($)		12 Months Ended
	Oct. 16, 2019	Jan. 31, 2020
Series A Convertible Preferred Stock [Member]
Number of shares redeemed	2,895,464
Redemption price per share	$ 2.00
Number of shares redeemed, value	$ 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 - Schedule of Adjustment to Net Income (Loss) Attributable to Common Stockholders (Details) - Series A Convertible Preferred Stock [Member]	Jan. 31, 2020 USD ($)
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) - USD ($)	9 Months Ended
Income Taxes (Details Narrative) - USD ($)	Oct. 31, 2020	Oct. 31, 2019
Income Tax Disclosure [Abstract]
Income tax rates on continuing operations	32.30%	22.90%
Uncertain tax position	$ 337,000	$ 304,000

Income Taxes - Schedule of Components of Income Tax (Expense) Benefit (Details) - USD ($)	9 Months Ended
	Oct. 31, 2020	Oct. 31, 2019
Income Tax Disclosure [Abstract]
Current tax benefit: Federal	$ 997,000	$ 1,150,000
Current tax benefit: State	539,000	(16,000)
Total current income tax provision	$ 1,536,000	$ 1,134,000

Commitments and Contingencies (Details Narrative) - USD ($)

Jul. 01, 2018

Oct. 25, 2013

Nov. 02, 2020

Oct. 31, 2020

Oct. 02, 2020

Jan. 31, 2020

Minimum fees due under shared office arrangement

$ 32,000

Deferred revenues associated with modified royalty liability

$ 345,000