FORIAN INC.
(formerly known as MEDICAL OUTCOMES RESEARCH ANALYTICS, LLC)
CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Par Value @
$0.001 per
share
|
|
|
Shares
|
|
|
Par Value @
$0.001 per
share
|
|
|
Additional
Paid In
Capital
|
|
|
Accumulated
Other Comprehensive
Loss
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’
Equity
|
|
Balance at December 31, 2020
|
|
|
|
|
$
|
—
|
|
|
|
21,233,039
|
|
|
$
|
21,233
|
|
|
$
|
17,514,907
|
|
|
|
—
|
|
|
$
|
(6,269,025
|
)
|
|
$
|
11,267,115
|
|
Issuance of Forian Common stock in Helix Acquisition
|
|
|
|
|
|
|
|
|
|
8,408,383
|
|
|
|
8,408
|
|
|
|
18,446,376
|
|
|
|
|
|
|
|
|
|
|
|
18,454,784
|
|
Forian Restricted Stock Vesting from MOR unvested restricted stock
|
|
|
|
|
|
|
|
|
|
172,835
|
|
|
|
173
|
|
|
|
2,570
|
|
|
|
|
|
|
|
|
|
|
|
2,743
|
|
Forian shares issued upon exercise of MOR Class B options
|
|
|
|
|
|
|
|
|
|
10,167
|
|
|
|
10
|
|
|
|
292,820
|
|
|
|
|
|
|
|
|
|
|
|
292,830
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,491,647
|
)
|
|
|
(4,491,647
|
)
|
Stock based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
863,883
|
|
|
|
|
|
|
|
|
|
|
|
863,883
|
|
Issuance of common stock warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
389,976
|
|
|
|
|
|
|
|
|
|
|
|
389,976
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,006
|
)
|
|
|
|
|
|
|
(24,006
|
)
|
Balance at March 31, 2021
|
|
|
—
|
|
|
$
|
—
|
|
|
|
29,824,424
|
|
|
$
|
29,824
|
|
|
$
|
37,510,532
|
|
|
$
|
(24,006
|
)
|
|
$
|
(10,760,672
|
)
|
|
$
|
26,755,678
|
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Par Value @
$0.001 per
share
|
|
|
Shares
|
|
|
Par Value @
$0.001 per
share
|
|
|
Additional
Paid In
Capital
|
|
|
Accumulated
Other
Comprehensive
Income
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’
Equity
(Deficit)
|
|
Balance at December 31, 2019
|
|
|
|
|
$
|
—
|
|
|
|
7,713,528
|
|
|
$
|
7,714
|
|
|
$
|
1,000,097
|
|
|
|
—
|
|
|
$
|
(1,288,842
|
)
|
|
$
|
(281,031
|
)
|
Issuance of MOR Series S Units in March 2020
|
|
|
|
|
|
|
|
|
|
5,316,284
|
|
|
|
5,316
|
|
|
|
3,310,384
|
|
|
|
|
|
|
|
|
|
|
|
3,315,700
|
|
Conversion of Promissory notes for MOR Series S Units in March 2020
|
|
|
|
|
|
|
|
|
|
295,501
|
|
|
|
296
|
|
|
|
184,005
|
|
|
|
|
|
|
|
|
|
|
|
184,300
|
|
Vested MOR Class B Profit Interest Units
|
|
|
|
|
|
|
|
|
|
329,438
|
|
|
|
329
|
|
|
|
4,899
|
|
|
|
|
|
|
|
|
|
|
|
5,228
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(675,136
|
)
|
|
|
(675,136
|
)
|
Balance at March 31, 2020
|
|
|
—
|
|
$
|
—
|
|
|
|
13,654,750
|
|
|
$
|
13,655
|
|
|
$
|
4,499,384
|
|
|
$
|
—
|
|
|
$
|
(1,963,978
|
)
|
|
$
|
2,549,061
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements
FORIAN INC.
(formerly known as MEDICAL OUTCOMES RESEARCH ANALYTICS, LLC)
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
|
|
For the Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,491,647
|
)
|
|
$
|
(675,136
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
187,584
|
|
|
|
454
|
|
Realized and unrealized gain on marketable securities
|
|
|
(2,156
|
)
|
|
|
(4,951
|
)
|
Provision for doubtful accounts
|
|
|
14,632
|
|
|
|
—
|
|
Stock-based compensation expense
|
|
|
863,883
|
|
|
|
5,228
|
|
Change in fair value of warrant liability
|
|
|
(623,627
|
)
|
|
|
—
|
|
Non-cash transaction expenses
|
|
|
389,976
|
|
|
|
—
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(4,610
|
)
|
|
|
(200,000
|
)
|
Contract assets
|
|
|
|
|
|
|
—
|
|
Prepaid expenses
|
|
|
(235,486
|
)
|
|
|
(84,007
|
)
|
Right of use assets and lease liabilities, net
|
|
|
(8,657
|
)
|
|
|
—
|
|
Deposits and other assets
|
|
|
(301,208
|
)
|
|
|
—
|
|
Accounts payable and accrued expense
|
|
|
|
|
|
|
166,361
|
|
Deferred revenues
|
|
|
|
)
|
|
|
333,333
|
|
Other long-term liabilities
|
|
|
(2
|
)
|
|
|
—
|
|
Net cash used in operating activities
|
|
|
(3,584,794
|
)
|
|
|
(458,718
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Additions to property and equipment
|
|
|
(64,041
|
)
|
|
|
(2,350
|
)
|
Purchase of marketable securities
|
|
|
—
|
|
|
|
(2,888,648
|
)
|
Sale of marketable securities
|
|
|
4,000,000
|
|
|
|
569,452
|
|
Cash acquired as part of business combination
|
|
|
|
|
|
|
—
|
|
Net cash provided by (used in) investing activities
|
|
|
|
|
|
|
(2,321,546
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of MOR Series S units
|
|
|
—
|
|
|
|
3,315,700
|
|
Proceeds from exercise of MOR Class B options
|
|
|
292,830
|
|
|
|
—
|
|
Payments on notes payable and financing arrangements
|
|
|
(682
|
)
|
|
|
—
|
|
Net cash provided by financing activities
|
|
|
292,148
|
|
|
|
3,315,700
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash
|
|
|
(24,006
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
1,930,284
|
|
|
|
535,436
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
665,463
|
|
|
|
494
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
2,595,747
|
|
|
$
|
535,930
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash and non-cash transactions:
|
|
|
|
|
|
|
|
|
Cash paid for interest and taxes
|
|
$
|
724
|
|
|
$
|
—
|
|
Conversion of promissory notes to Series S units
|
|
$
|
—
|
|
|
$
|
184,300
|
|
Non-cash consideration for Helix acquisition
|
|
$
|
18,454,784
|
|
|
$
|
—
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements
Forian Inc.
Notes to Condensed Consolidated Financial Statements
Note 1
|
BUSINESS ORGANIZATION AND NATURE OF OPERATIONS
|
Forian Inc. (the “Company” or “Forian”), was incorporated in Delaware on October 15, 2020 as a wholly owned subsidiary of Medical Outcomes Research Analytics, LLC (“MOR”) for the purpose of effecting the Business
Combination (as defined below). All activity of the Company through March 2, 2021 relates only to MOR. MOR was established on May 6, 2019 in Delaware. MOR Analytics, LLC and COR Analytics, LLC are wholly owned subsidiaries of MOR. The Company
provides innovative software solutions, proprietary data and predictive analytics to optimize the operational, clinical and financial performance of its customers within the healthcare and cannabis industries. The Company’s mission is to provide
its customers with the best-in-class critical technology services through a single integrated platform that enables its customers to operate their businesses more safely, efficiently and profitably and to serve its customers and its customers’
stakeholders and constituencies more comprehensively. The Company represents the unique convergence of proprietary healthcare and consumer data, innovative data management capabilities and intelligent data science with a leading cannabis technology
platform yielding the combined power to drive innovation and transparency across the industries it serves.
On March 2, 2021 (the “Merger Closing Date”), pursuant to the Agreement and Plan of Merger, dated as of October 16, 2020, as amended by Amendment to Agreement and Plan of Merger, dated as of December 30, 2020, as
further amended by Amendment No. 2 to Agreement and Plan of Merger, dated February 9, 2021 (together, the “Merger Agreement”), by and among Helix Technologies, Inc. (“Helix”), the Company and DNA Merger Sub, Inc., a wholly owned subsidiary of the
Company (“Merger Sub”), Merger Sub merged with and into Helix, with Helix being the surviving corporation as a wholly owned subsidiary of the Company (the “Merger”). Each share of Helix common stock was exchanged for 0.05 shares of Company common
stock in the Merger. Helix provides tracking and point of sale technology, analytics solutions and other products to customers within each vertical of the cannabis industry to help them improve the performance of their business.
Immediately prior to the Merger Closing Date, pursuant to the Equity Interest Contribution Agreement, dated March 2, 2021 (the “Contribution Agreement”), by and among the Company, MOR and each equity holder of MOR,
such equity holders contributed their interests in MOR to the Company in exchange for shares of Company common stock (the “Contribution” and, together with the Merger, the “Business Combination”). Upon the closing of the Contribution, MOR became a
wholly owned subsidiary of the Company. Each unit of MOR was exchanged for 1.7776 shares of Company common stock in the Merger, subject to adjustments pursuant to the Contribution Agreement.
Pursuant to the Merger Agreement, while the Company is the legal acquirer, the Merger was accounted for as a reverse acquisition using the acquisition method of accounting in accordance with Accounting Standards
Codification (“ASC”) Topic 805, “Business Combinations” (“ASC 805”). As such, MOR is deemed to be the accounting acquirer for financial reporting purposes.
Note 2
|
BASIS OF PRESENTATION
|
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain footnotes and other
financial information normally required by U.S. GAAP have been condensed or omitted in accordance with instructions to Form 10-Q and Article 8 of Resolution S-X. In the opinion of management, such statements include all adjustments which are
considered necessary for a fair presentation of the consolidated financial statements of the Company as of March 31, 2021. The operating results presented herein are not necessarily an indication of the results that may be expected for the year.
The condensed consolidated financial statements should be read in conjunction with the Company’s audited Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2020, as filed on March 31,
2021.
The Contribution was completed on March 2, 2021 and the combination of MOR and Forian was accounted for as a transaction between entities under common control pursuant to ASC 805-50. Accordingly, the combination of
Forian and MOR results in a change in reporting entity and the financial statements are presented as though the combination of Forian and MOR occurred as of the beginning of the periods presented. Additionally, the results of Helix are included in
the accompanying condensed consolidated financial statements beginning on March 2, 2021, the Merger Closing Date, through the 29-day period ended March 31, 2021.
Note 3
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Principles of Consolidation
The condensed consolidated financial statements of the Company include the accounts of (i) Medical Outcomes Research Analytics, LLC and its wholly owned subsidiaries COR Analytics, LLC and MOR Analytics, LLC, and
(ii) Helix Technologies, Inc. and its wholly owned subsidiaries Helix TCS, LLC, Security Consultants Group, LLC, Boss Security Solutions, LLC, Security Grade Protective Services, Ltd., Bio-Tech Medical Software, Inc, Engeni LLC (including Engeni
S.A., which is 99% owned by Engeni LLC) and Green Tree International, Inc. All intercompany transactions have been eliminated in consolidation. The financial results of Helix and its subsidiaries are included in the condensed consolidated financial
statements only for the 29-day period ended March 31, 2021.
Use of Estimates
Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses
together with amounts disclosed in related notes to the financial statements. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is possible that
the external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.
Fair Value of Financial Instruments
The Company measures the fair value of financial assets and liabilities based on the guidance of Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” (“ASC 820”) which defines fair
value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an
ordinary transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities;
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable; and
Level 3 — inputs that are unobservable.
The carrying value of the Company’s financial instruments, such as cash, marketable securities, accounts receivable and accrued liabilities and other liabilities approximate fair values due to the short-term nature
of these instruments.
Cash and Cash Equivalents and Credit Risk
The Company considers all cash accounts that are not subject to withdrawal restrictions and highly liquid investments with a maturity of three months or less, when purchased, as cash and cash equivalents.
The Company maintains cash with major financial institutions. Cash held at U.S. bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution. The
portion of deposits in excess of FDIC coverage is not protected by such insurance and represents a credit risk to the Company. At times, the Company’s deposits exceed this coverage.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company determines the allowance for doubtful accounts based on historical write-off experience, customer
specific facts and economic conditions.
Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts
receivable. Allowance for doubtful accounts was $280,176 and $0 at March 31, 2021 and December 31, 2020, respectively.
Management charges account balances against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Long-Lived Assets, Including Definite Lived Intangible Assets
Long-lived assets, other than goodwill and other indefinite-lived intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be
recoverable through the estimated undiscounted future cash flows derived from such assets. Definite-lived intangible assets primarily consist of customer relationships, software technology and trade names. For long-lived assets used in operations,
impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and
the estimated fair value. When an impairment exists, the related assets are written down to fair value.
Goodwill
Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by
applying a fair value-based test. The Company reviews goodwill for possible impairment annually during the fourth quarter, or whenever events or circumstances indicate that the carrying amount may not be recoverable.
The impairment model prescribes a two-step method for determining goodwill impairment. However, an entity is permitted to first assess qualitative factors to determine whether the two-step goodwill impairment test is
necessary.
The qualitative factors considered by Forian may include, but are not limited to, general economic conditions, the Company’s outlook, market performance of the Company’s industry and recent and forecasted financial performance. Further testing
is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. Otherwise, no further impairment testing is required. In the
first step, the Company determines the fair value of its reporting unit using a discounted cash flow analysis. If the net book value of the reporting unit exceeds its fair value, the Company then performs the second step of the impairment test,
which requires allocation of the reporting unit’s fair value to all of its assets and liabilities using the acquisition method prescribed under authoritative guidance for business combinations with any residual fair value being allocated to
goodwill. An impairment charge is recognized when the implied fair value of the Company’s goodwill is less than its carrying amount. No impairment losses have been recognized during the periods presented.
Business Combinations
The Company accounts for its business combinations under the provisions of Accounting Standards Codification (“ASC”) Topic 805-10, Business Combinations (“ASC 805-10”), which requires that the purchase method of
accounting be used for all business combinations. Assets acquired and liabilities assumed, including non-controlling interests, are recorded at the date of acquisition at their respective fair values. ASC 805-10 also specifies criteria that
intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a
business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred. If the business combination provides for contingent consideration, the Company records the contingent
consideration at fair value at the acquisition date and any changes in fair value after the acquisition date are accounted for as measurement-period adjustments. Changes in fair value of contingent consideration resulting from events after the
acquisition date, such as earn-outs, are recognized as follows: 1) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or 2) if the
contingent consideration is classified as a liability, the changes in fair value are recognized in earnings.
Revenue Recognition
The Company recognizes revenue in accordance with FASB Topic 606 - Revenue from Contracts with Customers (“ASC 606”).
Under ASC 606, the Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods
or services. The Company recognizes revenue following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv)
allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenues when (or as) the Company satisfies a performance obligation. ASC 606-10-32-32 requires the determination of the price at which the Company
would sell individual products or services to a customer. The Company does not always have sufficient data or experience related to the terms and pricing for products and services when components are sold on a standalone basis. In instances where
insufficient data exists, the Company recognizes the contractual fees ratably over the term of the arrangement. In instances where a customer has limited operating history or the customer has recently been formed, management may determine that it
is prudent to recognize only the first year’s fees ratably over the first year of the term, more often than not resulting in the recognition of a lower amount of revenue during the first year. Performance obligations that are distinct and remain
undelivered would not be recognized until the end of the contract provided that the consideration is guaranteed. No significant judgements affect the determination of the amount and timing of revenue.
The Company generates revenue from three categories of product offerings: Information and Software, Services and Other.
In 2020, the revenue generated by the Company was exclusively from Information and Software relating to MOR. In 2021, the Company also began to recognize Information and Software, Services and Other revenues related
to its acquisition of Helix on March 2, 2021.
In most Information and Software contracts, payments are scheduled throughout the term and the contract may include one or more of the following performance obligations: (i) the provision of historical and/or current
information as agreed upon, (ii) access to the information through a hosting provider, (iii) access to and use of software products (iv) installation and training and (v) access to the Company’s analytical team throughout the term of the agreement,
as agreed upon.
Information and Software contracts do not always have distinct pricing assigned to each performance obligation; rather, the price is bundled and the total bundled pricing is invoiced throughout the term of the
agreement, with the exception of contracts for software products which provide separate pricing for implementation and training of such products.
The Company recognizes revenue resulting from Information and Software pursuant to agreements under which the Company receives payments for providing the customer access to its products over the contract period. The
Company satisfies its performance obligations throughout the term of the contract. Any payments received prior to satisfying performance obligations are deferred and recognized as the performance obligations are satisfied. There are no variable
considerations or financing component under such contracts. Prices are typically fixed, but certain contracts can also include royalties in excess of fixed fees. There were $62,500 of royalties in excess of fixed fees for the three months ended
March 31, 2021. Invoicing under contracts is set forth in an invoicing schedule as part of the contract and payments are typically due within 30 days.
Services Revenue are primarily from contracts with government agencies and revenue is recognized upon completion of the various milestones within the contract. In the event that a contract does not specifically
allocate revenue to the satisfaction of specific performance obligations or milestones, the purchase price of the contracts is allocated based on the percentage of time spent, or expected to be spent, to meet each performance obligation. Initial
customization of the software to meet state specific requirements and the training to appropriately utilize the software are generally recognized upon completion of the customization and acceptance by the state agency. Support and service revenues
are then recognized over a predetermined period of time as defined in the contract. Contract renewals may include an annual service fee that is recognized over the time period defined in the contract.
Other revenues are primarily from security monitoring services offerings and the provision of web marketing services. Contracts for these services have a stated transaction price for monthly services and are
recognized as the services are provided.
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. $8,298 and $53,784 of such costs were capitalized as of March 31, 2021 and December 31, 2020, respectively. There are no significant judgements affecting the
determination of the amount and timing of the related revenue.
In the event the Company has not satisfied all performance obligations on its contracts with customers, any amounts of unbilled revenue or excess costs are recorded as contract assets and contract liabilities.
Contract assets result when the cumulative revenue recognized exceeds the cumulative invoicing under a contract. The value of the differential is reflected in Contract assets and represents the value of the revenue
that was not billed to customers as of the balance sheet date.
Contract liabilities (“Deferred Revenue”) result when cumulative receipts under a contract for the same performance obligation exceeds the total revenue recognition and such excess is reflected in Deferred Revenue
and represents the value of the performance obligations to be satisfied after March 31, 2021.
The following are the contract balances as of and for the three months ended March 31, 2021:
Contract assets
|
|
|
|
Balance at January 1, 2021
|
|
$
|
196,701
|
|
Contract assets acquired from Helix
|
|
|
|
|
Add: Revenue recognized from related contract assets
|
|
|
218,333
|
|
Less: Contract acquisition costs amortized during the three months ended March 31, 2021
|
|
|
(45,486
|
)
|
Less: Payments received during the three months ended March 31, 2021
|
|
|
(206,349
|
)
|
Balance at March 31, 2021
|
|
$
|
426,954
|
|
|
|
|
|
|
Contract liabilities (Deferred Revenue)
|
|
|
|
|
Balance at January 1, 2021
|
|
$
|
158,884
|
|
Contract liabilities assumed from Helix
|
|
|
636,910
|
|
Add: Payments received during the three months ended March 31, 2021
|
|
|
378,533
|
|
Less: Revenue recognized during the three months ended March 31, 2021
|
|
|
(503,143
|
)
|
Balance at March 31, 2021
|
|
$
|
671,184
|
|
Segment Information
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are
defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing
performance. The Company’s chief operating decision maker is the chief executive officer, who reviews the financial performance and the results of operations of the segments prepared in accordance with U.S. GAAP when making decisions about
allocating resources and assessing performance of the Company.
Customer Concentration
For the three months ended March 31, 2021, the Company had a single customer that accounted for $237,500 of revenue, which represented 15% of revenues generated from customer sales. The Company believes that this
customer is ultimately replaceable, and any disruption associated with this customer would only have a short-term impact on the business. The contract assets balance for this customer at March 31, 2021 was $125,000.
Concentration of Vendors
The Company has licensed certain information assets from a third party as a key input to certain of the Company’s Information and Software Products. Licensing fees to this vendor represented 29% and 43% of the
Company’s operating expenses for the three months ended March 31, 2021 and 2020, respectively. This vendor is critical to the business. The Company believes that while this vendor is ultimately replaceable, any disruption associated with this
vendor could have a material short-term impact on the business.
Property and Equipment, Net
Property and equipment are stated at cost, net of accumulated depreciation which is recorded commencing at the in-service date using the straight-line method at rates sufficient to charge the cost of depreciable
assets to operations over their estimated useful lives, which are 3 years. Maintenance and repairs are charged to operations as incurred.
The Company reviews for the impairment of long-lived assets annually and whenever events and or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would
be recognized when the present value of estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than the carrying value. There were no impairment losses recognized during the three months ended
March 31, 2021 and 2020.
Software Development Costs
The Company accounts for costs incurred in the development of computer software in accordance with ASC Subtopic 350-40, Intangibles – Goodwill and Other – Internal-Use Software. Costs incurred in the application
development stage are subject to capitalization and subsequent amortization and possible impairment. Application development stage costs were not material for the Company. Product development costs are primarily personnel related to activities for
design and evaluating software development, testing, bug fixes, and other maintenance activities. Product development costs are expensed as incurred. The company capitalized software development costs of $50,228 and $0, respectively, for the three
months ended March 31, 2021 and 2020.
Contingencies
Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable
that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed consolidated financial statements.
Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.
Advertising
Advertising costs are expensed as incurred and included in sales and marketing expenses and amounted to $4,935 and $0 for the three months ended March 31, 2021 and 2020, respectively.
Foreign Currency
The local currency is the functional currency for one entity’s operations outside the United States. Assets and liabilities of these operations are translated to U.S. dollars at the exchange rate in effect at the end
of each period. Income statement accounts are translated at the average exchange rate prevailing during the period. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of other
comprehensive loss within stockholders’ equity. Gains and losses from foreign currency transactions are included in net loss for the period.
Net Loss per Share
Net loss per share of common stock is computed by dividing net loss by the weighted average number of common shares outstanding during the period. At March 31, 2021, the Company had potentially dilutive securities
that could be exercised or converted into common stock. Refer to Note 13 for the Company’s disclosure on such potential dilution. Further, as the Company has incurred net losses for the three months ended March 31, 2021 and 2020, the diluted loss
per share is the same as basic loss per share for the periods presented.
Distinguishing Liabilities from Equity
The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and
Hedging: Contracts in Entity’s Own Equity to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the
liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its
equity shares.
Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the
equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise,
the Company accounts for the financial instrument as permanent equity.
Initial Measurement
The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received.
Subsequent Measurement – Financial instruments classified as liabilities
The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are
recorded as other expense/income.
Stock-based Compensation
The Company’s 2020 Equity Incentive Plan (“2020 Plan”) permits the grant of stock options, restricted stock awards and/or restricted stock units. Stock options represent the right to purchase the Company’s common
stock at the exercise price on the date of grant of the stock option at a future date. Restricted stock awards are grants of shares of our common stock. Restricted stock units represent the right to receive shares of our common stock on future
specified dates. Stock options, restricted stock awards and units granted contain restrictions that cause them to be subject to substantial risk of forfeiture and restrict their exercise, sale or other transfer by the grantee until they vest. The
terms of the stock options, restricted stock awards and units granted under the 2020 Plan are determined by the Board of Directors in the agreement evidencing the award, including the number of shares, period of restriction or vesting schedule and
other terms. The fair value of the stock options, restricted stock awards and units is based on the underlying grant date fair value of the Company’s common stock. The fair value is then expensed over the requisite service periods of the awards,
net of forfeitures, which is generally the service period and the related amount is recognized in the condensed consolidated statements of operations.
Income Taxes
MOR was organized as an LLC and became a wholly owned subsidiary of the Company upon completion of the Merger with Helix on March 2, 2021. As a result, the Company was treated as a partnership for federal and state
income tax purposes through March 2, 2021. Accordingly, the Company’s taxable income, deductions, assets and liabilities are reported by the members on their respective income tax returns. Therefore, no provision for federal or state income tax has
been made by the Company for all business activity from its inception through March 2, 2021.
After March 2, 2021, the Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has an incurred net operating loss
for financial-reporting and tax-reporting purposes. Accordingly, for federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset for
the period since March 2, 2021.
Tax contingencies are recorded, if needed, to address potential exposure involving tax positions the Company has taken that could be challenged by tax authorities. These potential exposures could result from
applications of various statutes, rules, regulations and interpretations. Any estimates of tax contingencies contain assumptions and judgments about potential actions by taxing jurisdictions. Any interest and penalties related to uncertain tax
positions would be included as part of the income tax provision. The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analysis of or changes in tax laws, regulations
and interpretations thereof as well as other factors.
Recent Accounting Pronouncements
The Company has considered all recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.
Note 4
|
BUSINESS COMBINATION
|
On March 2, 2021, pursuant to the Merger and the Merger Agreement, Forian acquired 100% of the issued and outstanding capital stock, options and warrants of Helix.
The total purchase consideration for the Merger was $18,454,784. The purchase consideration is equal to the product of (i) the total outstanding Helix common shares and common share equivalents for in the money
warrants to purchase Helix common stock and vested stock options multiplied by the merger exchange ratio of 0.05 shares of Company common stock for 1 share of Helix common stock and (ii) $2.158 per share which represented the fair value of Company
common stock on the acquisition date.
The Merger is being accounted for as a business combination in accordance with ASC 805. The Company has determined preliminary fair values of the assets acquired and liabilities assumed in the Merger. These values
are subject to change as the Company completes its determination of the fair value of assets acquired and liabilities assumed.
The following table summarizes the preliminary purchase price allocations relating to the Merger:
Total purchase price
|
|
$
|
18,454,784
|
|
|
|
|
|
|
Assets acquired:
|
|
|
|
|
Cash
|
|
|
1,310,977
|
|
Accounts receivable, net
|
|
|
488,453
|
|
Prepaid expenses and other current assets
|
|
|
228,397
|
|
Contract assets
|
|
|
263,755
|
|
Other receivables
|
|
|
450,000
|
|
Property and equipment, net
|
|
|
146,559
|
|
Software Technology
|
|
|
5,279,000
|
|
Trade Names and Trademarks
|
|
|
386,000
|
|
Customer Relationships
|
|
|
5,243,000
|
|
Deposits and other assets
|
|
|
1,083,266
|
|
Total assets acquired
|
|
$
|
14,879,407
|
|
|
|
|
|
|
Liabilities assumed:
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
2,755,341
|
|
Deferred revenues
|
|
|
636,910
|
|
Warrant liability
|
|
|
1,247,715
|
|
Notes payable and financing arrangements
|
|
|
20,801
|
|
Other long-term liabilities
|
|
|
780,742
|
|
Total liabilities assumed
|
|
$
|
5,441,509
|
|
Estimated fair value of net assets acquired:
|
|
$
|
9,437,898
|
|
|
|
|
|
|
Goodwill
|
|
$
|
9,016,886
|
|
The preliminary estimates for useful lives of the identified intangibles are 8 years for Trade Names and Trademarks, 5 years for Customer Relationships and 2 and 7 years for Software Technology Intangibles with a weighted average useful life of
5.47 years.
Transaction costs incurred in connection with this business combination amounted to approximately $1,210,279 during the three months ended March 31, 2021.
Unaudited Pro Forma Results
Helix contributed revenues of $1,046,773 and income from operations of $37,484 for the period March 3, 2021 through March 31, 2021 included in the Company’s consolidated condensed statements of operations.
The following table represents the revenue, net loss and loss per share effect of the acquired company, as reported in our pro forma basis as if the acquisition occurred on January 1, 2020. These pro forma results
are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the first day of the periods presented, nor does the pro forma financial information purport to represent the results of operations for future
periods.
|
|
For the Three Months Ended March 31,
|
|
Description
|
|
2021
|
|
|
2020
|
|
Revenues
|
|
$
|
3,810,039
|
|
|
$
|
3,123,835
|
|
Net loss
|
|
|
7,137,674
|
|
|
|
3,233,906
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
Basic and diluted-as pro forma (unaudited)
|
|
$
|
0.24
|
|
|
$
|
0.14
|
|
The Pro forma financial information for all periods presented above has been calculated after adjusting the results of the Company and Helix to reflect the business combination accounting effects resulting from this
acquisition, including the amortization expense from acquired intangible assets included in the Pro forma financial information presented above. The Forian historical condensed consolidated financial statements have been adjusted in the pro forma
combined financial statements to give effect to pro forma events that are directly attributable to the business combination and factually supportable. The Pro forma financial information is for informational purposes only and is not indicative of
the results of operations that would have been achieved if the acquisition had taken place at the beginning of the periods presented.
Note 5
|
MARKETABLE SECURITIES
|
Marketable securities are stated at estimated fair value based upon current market quotes (level 1 inputs) and are classified as available-for-sale. Realized gains and losses are included in investment income.
Unrealized gains and losses are immaterial and therefore the Company has presented such amounts within Investment income in the Statement of Operations. The Company invests in short-term U.S. Treasuries and money market mutual funds. As of March
31, 2021 and 2020, the fair value of these investments approximated cost.
The Company has various agreements which require upfront and periodic payments. The Company records the expenses related to these agreements ratably over the annual terms. As of March 31, 2021 and December 31, 2020,
the Company’s balance sheet reflected other prepaid expenses of $584,862 and $120,979, respectively, relating to various software licenses and insurance policies with durations ranging from 3 months to 1 year.
Note 7
|
PROPERTY AND EQUIPMENT, NET
|
As of March 31, 2021 and December 31, 2020, property and equipment were comprised of the following:
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
|
|
Unaudited
|
|
|
|
|
Personal computing equipment
|
|
$
|
66,525
|
|
|
$
|
55,767
|
|
Furniture and equipment
|
|
|
|
|
|
|
—
|
|
Software development costs
|
|
|
50,228
|
|
|
|
—
|
|
Vehicles
|
|
|
25,876
|
|
|
|
—
|
|
Total
|
|
|
|
|
|
|
55,767
|
|
Less: Accumulated depreciation
|
|
|
(20,120
|
)
|
|
|
(9,409
|
)
|
Property and equipment, net
|
|
$
|
246,247
|
|
|
$
|
46,358
|
|
Depreciation expense for the three months ended March 31, 2021 and 2020 was $10,711 and $454, respectively.
Note 8
|
INTANGIBLE ASSETS, NET
|
The following table summarizes the Company’s intangible assets as of March 31, 2021:
|
|
Estimated
Useful Life
(Years)
|
|
|
Gross Carrying
Amount at
March 2, 2021
|
|
|
Accumulated
Amortization
|
|
|
Net Book
Value at
3/31/2021
|
|
Customer Relationships
|
|
|
5
|
|
|
$
|
5,243,000
|
|
|
$
|
(81,746
|
)
|
|
$
|
5,161,254
|
|
Software Technology
|
|
|
2
|
|
|
|
1,170,000
|
|
|
|
(45,605
|
)
|
|
|
1,124,395
|
|
Software Technology
|
|
|
7
|
|
|
|
4,109,000
|
|
|
|
(45,761
|
)
|
|
|
4,063,239
|
|
Tradenames and Trademarks
|
|
|
8
|
|
|
|
386,000
|
|
|
|
(3,761
|
)
|
|
|
382,239
|
|
|
|
|
|
|
|
$
|
10,908,000
|
|
|
$
|
(176,873
|
)
|
|
$
|
10,731,127
|
|
The Company uses the straight-line method to determine the amortization expense for its definite lived intangible assets. Amortization expense related to the purchased intangible assets was $176,873 and $0 for the
three months ended March 31, 2021 and the year ended December 31, 2020, respectively.
The estimated future amortization expense for the next five years and thereafter is as follows:
Years Ending December 31,
|
|
Future amortization expense
|
|
2021
|
|
$
|
1,701,638
|
|
2022
|
|
|
2,268,850
|
|
2023
|
|
|
1,784,495
|
|
2024
|
|
|
1,683,850
|
|
2025
|
|
|
1,683,850
|
|
Thereafter
|
|
|
1,608,444
|
|
Total
|
|
$
|
10,731,127
|
|
As of March 31, 2021 and December 31, 2020, accrued expenses were comprised of the following:
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Employee compensation
|
|
|
936,515
|
|
|
|
346,720
|
|
Accrued expenses
|
|
|
1,075,969
|
|
|
|
8,825
|
|
Transaction-related
|
|
|
|
|
|
|
125,196
|
|
Lease obligation - current
|
|
|
258,973
|
|
|
|
—
|
|
Total
|
|
$
|
2,637,442
|
|
|
$
|
480,741
|
|
Transaction-related accrued expenses are associated with the Merger. See Note 4.
Note 10
|
WARRANT LIABILITY
|
In conjunction with the Merger, outstanding warrants to purchase Helix common stock were converted to warrants to purchase Company common stock. As the warrant holders have the option to receive cash in lieu of
common stock in certain circumstances, the Company determined that the warrants require classification as a liability pursuant to ASC 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity. In accordance with the applicable accounting
guidance, the outstanding warrants are recognized as a warrant liability on the condensed consolidated balance sheet and are measured at their inception date fair value (the closing date of the Merger) and subsequently re-measured at each reporting
period with changes being recorded in the condensed consolidated statement of operations. As of March 31, 2021, the Company had 97,058 warrants outstanding classified as liabilities.
The fair value of the Company’s warrant liability was calculated using the Black-Scholes model and the following assumptions:
|
|
As of March 31, 2021
|
|
Fair value of company’s common stock
|
|
$
|
10.11
|
|
Dividend yield
|
|
|
0
|
%
|
Expected volatility
|
|
|
85% - 168
|
%
|
Risk Free interest rate
|
|
|
0.16% - 0.26
|
%
|
Expected life (years)
|
|
|
2.58
|
|
Exercise price
|
|
$
|
8.00 - $28.00
|
|
Fair value of financial instruments - warrants
|
|
$
|
624,088
|
|
The change in fair value of the financial instruments – warrants is as follows:
|
|
Amount
|
|
Balance as of January 1, 2021
|
|
$
|
—
|
|
|
|
|
|
|
Fair value of warrant liability assumed in connection with Helix Merger
|
|
|
1,247,715
|
|
|
|
|
|
|
Change in fair value of warrant liability
|
|
|
(623,627
|
)
|
|
|
|
|
|
Balance as of March 31, 2021
|
|
$
|
624,088
|
|
Note 11
|
STOCK-BASED COMPENSATION
|
Restricted Stock Awards and Restricted Stock Units
Unvested equity interests of MOR were converted to Forian Restricted Stock Awards based upon the Exchange Ratio of 1.7776 Forian shares for each 1 MOR unit, subject to any adjustments required under the Contribution
Agreement. The information regarding the 2020 Plan below is presented as though the combination occurred as of the beginning of the periods presented.
|
|
Number of
Restricted Awards
and Units
|
|
|
Weighted Average
Grant Date Fair Value
Per Share
|
|
Unvested at January 1, 2020
|
|
$
|
1,237,396
|
|
|
$
|
0.62
|
|
Issued
|
|
|
2,191,869
|
|
|
|
1.21
|
|
Vested
|
|
|
1,729,589
|
|
|
|
0.72
|
|
Canceled
|
|
|
—
|
|
|
|
—
|
|
Unvested at December 31, 2020
|
|
|
1,699,676
|
|
|
|
1.28
|
|
Issued
|
|
|
344,000
|
|
|
|
12.18
|
|
Vested
|
|
|
172,836
|
|
|
|
0.03
|
|
Canceled
|
|
|
—
|
|
|
|
—
|
|
Unvested at March 31, 2021
|
|
$
|
1,870,840
|
|
|
$
|
2.27
|
|
The 1,870,840 unvested awards at March 31, 2021 consist of 344,000 restricted stock units and 1,526,840 restricted stock awards.
Stock Options
As part of the Merger (see Note 4), the Company assumed the Helix TCS, Inc. Omnibus Stock Incentive Plan and the Bio-Tech Medical Software, Inc. 2014 Stock Incentive Plan, each as amended, pursuant to which options
exercisable at prices between $2.00 and $51.80 per share for 456,465 shares of Company common stock were outstanding. The value attributable to service subsequent to the Merger will be recognized as compensation cost by the Company.
The fair value of the stock options was estimated using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and
involve inherent uncertainties and the application of management’s judgement. The assumptions at the inception date are as follows:
|
|
March 31,
2021
|
|
Exercise Price
|
|
$
|
2.00 to $51.80
|
|
Fair value of Company common stock
|
|
$
|
10.11 to $22.90
|
|
Dividend yield
|
|
|
0%
|
|
Expected volatility
|
|
133% to 188%
|
|
Risk Free interest rate
|
|
0.27% to 1.59%
|
|
Expected life (years) remaining
|
|
0 to 9.93
|
|
Stock option activity for the period ended March 31, 2021 is as follows:
|
|
Shares Underlying
Options
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contractual Term
(in years)
|
|
Outstanding at January 1, 2021
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
Options assumed in Helix Merger
|
|
|
456,464
|
|
|
$
|
15.151
|
|
|
|
3.96
|
|
Granted
|
|
|
2,623,664
|
|
|
$
|
14.095
|
|
|
|
9.93
|
|
Exercised
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
Forfeited and expired
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
Outstanding at March 31, 2021
|
|
|
3,080,128
|
|
|
$
|
14.251
|
|
|
|
9.05
|
|
Vested options at March 31, 2021
|
|
|
456,464
|
|
|
$
|
15.151
|
|
|
|
3.96
|
|
Stock Compensation Expense
The grant date fair value per share for the stock options granted was $13.36 and $0.02 for the three months ended March 31, 2021 and 2020, respectively.
At March 31, 2021, the total unrecognized compensation related to unvested stock option awards and restricted stock awards and units granted was $38,598,196, which the Company expects to
recognize over a weighted-average period of approximately 3.92 years. Stock Compensation Expense for the period ended March 31, 2021 and 2020 is as follows:
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cost of revenue
|
|
|
—
|
|
|
|
—
|
|
Research and development
|
|
|
54,890
|
|
|
|
2,576
|
|
Sales and marketing
|
|
|
31,744
|
|
|
|
901
|
|
General and administrative
|
|
|
|
|
|
|
1,751
|
|
Note 12
|
STOCKHOLDERS’ EQUITY
|
The Condensed Consolidated Statement of Stockholders’ Equity reflects the exchange of MOR Members Equity for Company common stock as of the beginning of the periods presented. See Note 2.
All of MOR’s Class A, Class B vested profit interests’ units, Series S, Series S-1, and vested Restricted Class B units were converted to Forian common stock on March 2, 2021 based upon the exchange ratio of 1.7776
Forian shares to 1 MOR member unit, subject to adjustment pursuant to the Contribution Agreement. Unvested Class B profit interest units, unvested restricted Class B units and options to acquire Restricted Class B Units were converted to unvested
restricted Company common stock on March 2, 2021 based upon the exchange ratio of 1.7776 Forian shares to 1 MOR member unit, subject to adjustment pursuant to the Contribution Agreement. The applicable vesting provisions of such MOR units carried
over to the restricted Company common stock.
In December 2020, MOR completed a Series S-1 financing with cash proceeds of $13,000,000 in exchange for 3,388,947 Series S-1 preferred units.
In March 2020, MOR completed a Series S financing with cash proceeds of $3,300,000 and converted a promissory note of $184,300 in exchange for 3,078,276 Series S preferred units.
In 2019 and 2020, Class B profit interest units, restricted Class B units and options to acquire Class B units were issued to employees, consultants and advisors.
In March 2021, the Company issued warrants to purchase 17,031 shares of the Company’s common stock at a per-share purchase price equal to $0.01. The warrants terminate after a period of 2 years from the issuance
date. The warrants were issued in exchange for services provided with a fair value of $389,976 included in transaction related expenses for the three months ended March 31, 2021.
See Note 4 for additional details on shares issued pursuant to the Merger.
Note 13
|
NET LOSS PER SHARE
|
The following table sets forth the computation of the basic and diluted net loss per share:
|
|
For the Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Net loss attributable to common shareholders
|
|
$
|
(4,491,647
|
)
|
|
$
|
(675,136
|
)
|
Net loss per share attributable to common shareholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.19
|
)
|
|
$
|
(0.08
|
)
|
Diluted
|
|
$
|
(0.19
|
)
|
|
$
|
(0.08
|
)
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
24,033,512
|
|
|
|
8,213,527
|
|
Diluted
|
|
|
24,033,512
|
|
|
|
8,213,527
|
|
The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive:
|
|
For the Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Potentially dilutive securities:
|
|
|
|
|
|
|
Warrants
|
|
|
124,087
|
|
|
|
—
|
|
Stock options
|
|
|
3,080,128
|
|
|
|
—
|
|
Unvested Restricted Stock Awards and Units
|
|
|
1,870,840
|
|
|
|
2,258,577
|
|
Note 14
|
RELATED PARTY TRANSACTIONS
|
On May 6, 2019, MOR entered into an arrangement with family trusts controlled by Max Wygod and Martin Wygod, directors of MOR, to issue two separate promissory notes (“Note” or “Notes”) entitling MOR to secure up to
$100,000 per Note to fund operations. The Notes had no interest rate and were due on the sooner of the initial closing of MOR’s Series S Preferred Unit financing or December 31, 2020. In March 2020, in connection with MOR’s Series S Preferred Unit
financing, the aggregate outstanding balance of the Notes of $184,300, was converted, at the option of the holders, into 295,501 shares of Company common stock.
Adam Dublin, Chief Strategy Officer, was previously a consultant for a current vendor of MOR. Mr. Dublin’s consultancy with the vendor ended on December 11, 2020 and the parties have not agreed to renew the
agreement. Pursuant to Mr. Dublin’s consulting agreement with the vendor, Mr. Dublin received payments from the vendor for the three months ended March 31, 2021 and 2020 of $106,084 and $61,050, respectively.
On April 16, 2021, the Company raised gross proceeds of $12,000,000 resulting from the sale of Company common stock to a select group of institutional and accredited investors, which included officers and directors
of the Company. See Note 17 for additional information.
Note 15
|
COMMITMENTS AND CONTINGENCIES
|
Operating Leases
The Company accounts for leases in accordance with ASC 842. All contracts are evaluated to determine whether or not they represent a lease. A lease conveys the right to control the use of an
identified asset for a period of time in exchange for consideration. The Company has operating leases primarily consisting of facilities with remaining lease terms of one year to five years. The lease term represents the period up to the early
termination date unless it is reasonably certain that the Company will not exercise the early termination option. Certain leases include rental payments that are adjusted periodically based on changes in consumer price and other indices.
Leases are classified as finance or operating in accordance with the guidance in ASC 842. The Company does not hold any finance leases.
The Company is obligated under operating lease agreements for office facilities in (i) Florida (two), (ii) Washington, (iii) Colorado and (iv) Argentina that expire in (i)
December 2021 and 2024, (ii) December 2022, (iii) February 2026 and (iv) December 2021, respectively. The Company also has three short-term leases related to offices in Pennsylvania, Massachusetts and Virginia. These short-term leases are
currently leased on a month-to-month basis. A short-term lease is a lease with a term of 12 months or less and does not include the option to purchase the underlying asset that we would expect to exercise. The Company has elected to adopt the
short-term lease exemption in ASC 842 and as such have not recognized a “right of use” asset or lease liability for these three short-term leases.
The Company’s lease agreements generally do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease
commencement date for purposes of determining the present value of lease payments.
ROU lease assets and lease liabilities for the Company’s operating leases were recorded in the condensed consolidated balance sheet as follows:
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Operating lease expense
|
|
$
|
27,312
|
|
|
$
|
—
|
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
|
$
|
30,154
|
|
|
$
|
—
|
|
ROU assets obtained in exchange for operating lease obligations
|
|
$
|
967,493
|
|
|
$
|
—
|
|
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Deposits and other assets
|
|
$
|
967,493
|
|
|
$
|
—
|
|
Accounts payable and accrued liabilities
|
|
$
|
258,973
|
|
|
$
|
—
|
|
Other long-term liabilities
|
|
$
|
724,587
|
|
|
$
|
—
|
|
Total lease liabilities
|
|
$
|
983,560
|
|
|
$
|
—
|
|
Weighted average remaining lease term (in years)
|
|
|
3.58
|
|
|
|
—
|
|
Weighted average discount rate
|
|
|
8.50
|
%
|
|
|
0.0
|
%
|
The total rent expense for the three months ended March 31, 2021 and 2020 was $21,078 and $4,994, respectively.
Future lease payments included in the measurement of lease liabilities on the condensed consolidated balance sheet as of March 31, 2021, for the following five fiscal years and thereafter were as follows:
|
|
As of March 31, 2021
|
|
2021
|
|
$
|
250,824
|
|
2022
|
|
|
308,470
|
|
2023
|
|
|
286,670
|
|
2024
|
|
|
291,161
|
|
2025
|
|
|
85,726
|
|
Thereafter
|
|
|
14,288
|
|
Total future minimum lease payments
|
|
$
|
1,237,139
|
|
Less imputed interest
|
|
|
(253,579
|
)
|
Total
|
|
$
|
983,560
|
|
Service Agreements
The Company entered into certain service agreements that provide for future minimum payments. The term of these agreements vary in length. The following table shows the remaining payment obligations under these
licenses as of March 31, 2021:
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
|
|
Unaudited
|
|
|
|
|
Year ending December 31, 2021
|
|
$
|
272,188
|
|
|
$
|
533,488
|
|
Year ending December 31, 2022
|
|
|
272,187
|
|
|
|
272,188
|
|
|
|
$
|
544,375
|
|
|
$
|
805,676
|
|
From time to time we may be involved in claims that arise during the ordinary course of business. Regardless of the outcome, litigation can be costly and time consuming, and it can divert management’s attention from
important business matters and initiatives, negatively impacting our overall operations. Although the results of litigation and claims cannot be predicted with certainty, we do not currently have any pending litigation to which we are a party or to
which our property is subject that we believe to be material, except for:
Legal Proceedings
Kenney, et al. v. Helix TCS, Inc.
On July 20, 2017, one former employee of Helix filed a lawsuit in the United States District Court for the District of Colorado alleging violations of the Fair Labor Standards Act on behalf of himself and other
employees. The plaintiff seeks damages for Helix’s alleged failure to compensate employees appropriately for the overtime hours they worked as purported “non-exempt” employees. The matter has been conditionally certified as a collective action
and the court has authorized the plaintiff to send notice and consent forms to putative class members. Notice and consent forms have not yet been sent nor has any decision been made on the merits of the claim. Helix filed a motion to dismiss the
claim, which motion was denied. Helix, on an interlocutory basis, appealed that denial. The U.S. Court of Appeals for the Tenth Circuit affirmed the decision of the District Court and remanded the matter. The case is in the early stages of
discovery.
Audet v. Green Tree International, et. al.
On February 14, 2020, John Audet filed a complaint in 15th Judicial Circuit in and for Palm Beach County, Florida against multiple parties, including Green Tree International (“GTI”), an indirect subsidiary of
Forian, claiming that he owned 10% of GTI. We believe the lawsuit is wholly without merit and will defend ourselves from these claims vigorously. As of March 31, 2021, the case is in the process of discovery.
Arapaho Dispute
Zachary Venegas (“Venegas”), the former Chief Executive Officer of Helix, Scott Ogur (“Ogur”), the former Chief Financial Officer of Helix and a current board member of Forian, and Helix Opportunities, LLC, a
Delaware limited liability company (“HOF” and collectively with Venegas and Ogur, the “HOF Parties”) and stockholder of Helix were involved in a dispute involving a claim by Arapaho Foundation, LLC (“Arapaho”) alleging that Arapaho was entitled to
an ownership interest in certain shares of Helix’s common stock, which have now been converted into shares of Company common stock in connection with the Merger, currently held by one or more of the HOF Parties (the “Arapaho Dispute”). In
connection with the dispute, on February 23, 2021, the HOF Parties and Forian, Merger Sub and MOR (collectively, the “Merger Parties”) entered into an Indemnification Agreement pursuant to which the HOF Parties have agreed to indemnify the Merger
Parties for certain losses and expenses arising from the Arapaho Dispute. On April 10, 2021, the HOF Parties, Arapaho and the members of Arapaho entered into a Final Settlement Agreement and Mutual Releases (the “Settlement Agreement”) with respect
to the Arapaho Dispute. Helix Technologies, Inc. and Helix TCS, LLC were party to the Settlement Agreement for purposes of mutual releases, pursuant to which the parties to the Settlement Agreement released each other from any and all claims,
whether known or unknown, as of the date of the Settlement Agreement. The release of the Helix parties included a release of Forian, Merger Sub and MOR.
Helix Stockholder Lawsuits
Beginning on February 16, 2021, four lawsuits were filed by purported Helix stockholders (captioned Dillion v. Helix Technologies, Inc., et al., No. 1:21-cv-01365 (filed
February 16, 2021 in the United States District Court for the Southern District of New York) (the “Dillion Complaint”); Baros v. Helix Technologies, Inc., et al., No. 1:21-cv-01425 (filed February 17, 2021
in the United States District Court for the Southern District of New York) (the “Baros Complaint”); Anderson v. Helix Technologies, Inc., et al., No. 1:21-cv-00464 (filed February 17, 2021 in the United
States District Court for the District of Colorado) (the “Anderson Complaint”); and Robinson v. Helix Technologies, Inc., et al., No. 1:21-cv-00484 (filed February 18, 2021 in the United States District
Court for the District of Colorado) (the “Robinson Complaint” and, together with the Dillion Complaint, the Anderson Complaint and the Baros Complaint, the “Stockholder Complaints”)). The Stockholder Complaints were filed against (a) Helix and (b)
the members of Helix’s board of directors (the “Individual Defendants”) and the Baros Complaint was also filed against Forian, MOR and Merger Sub. The Stockholder Complaints generally allege that the defendants violated Section 14(a) of the
Exchange Act, by, among other things, failing to disclose material information in the Proxy Statement regarding the sales process, reconciliation of certain financial projections regarding Helix certain inputs underlying Management Planning, Inc.’s
financial analysis, and potential conflicts of interest of involving Helix’s insiders. The Stockholder Complaints also allege the Individual Defendants (and the Baros Complaint alleges Forian, Merger Sub and MOR) violated Section 20(a) of the
Exchange Act as controlling persons who had the ability to prevent the Proxy Statement from being materially false and misleading. The Stockholder Complaints seek, among other things, an injunction against the consummation of the transactions
contemplated by the Merger Agreement and an award of costs and expenses, including a reasonable allowance for attorneys’ and experts’ fees. Despite seeking an injunction in the complaints, none of the plaintiffs followed up with a motion to enjoin
the transactions. On March 11, 2021, the Robinson Complaint was voluntarily dismissed. The remaining three complaints have not been served, and there has been no activity on any of them since the complaints were filed.
ASC 280-10-50 requires use of the “management approach” model for segment reporting. The management approach is based on the way a company’s management organized segments within the company for making operating
decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in
deciding how to allocate resources and in assessing performance. The Company’s chief operating decision-making group is composed of the chief executive officer and the chief financial officer. The Company operates in three segments, Information
& Software, Services, and Other.
Asset information by operating segment is not presented below since the chief operating decision maker does not review this information by segment. The reporting segments follow the same accounting policies used in
the preparation of the Company’s unaudited condensed consolidated financial statements.
The following represents selected information for the Company’s reportable segments:
|
|
Three months ended March 31, 2021
|
|
|
|
2021
|
|
|
2020
|
|
Information and Software
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,408,978
|
|
|
$
|
66,667
|
|
Costs and expenses
|
|
|
3,637,602
|
|
|
|
571,553
|
|
Loss from operations
|
|
|
(2,228,624
|
)
|
|
|
(504,886
|
)
|
Total other income/(expense)
|
|
|
—
|
|
|
|
—
|
|
Net loss before income taxes
|
|
|
(2,228,624
|
)
|
|
|
(504,886
|
)
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
96,311
|
|
|
$
|
—
|
|
Costs and expenses
|
|
|
80,290
|
|
|
|
—
|
|
Loss from operations
|
|
|
16,021
|
|
|
|
—
|
|
Total other income/(expense)
|
|
|
—
|
|
|
|
—
|
|
Net loss before income taxes
|
|
|
16,021
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
115,320
|
|
|
$
|
—
|
|
Costs and expenses
|
|
|
79,887
|
|
|
|
—
|
|
Loss from operations
|
|
|
35,433
|
|
|
|
—
|
|
Total other income/(expense)
|
|
|
(88
|
)
|
|
|
—
|
|
Net income before income taxes
|
|
|
35,345
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Centrally Managed Costs
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
$
|
2,939,345
|
|
|
$
|
175,213
|
|
Loss from operations
|
|
|
(2,939,345
|
)
|
|
|
(175,213
|
)
|
Total other income/(expense)
|
|
|
624,956
|
|
|
|
4,963
|
|
Net loss before income taxes
|
|
|
(2,314,389
|
)
|
|
|
(170,250
|
)
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,620,609
|
|
|
$
|
66,667
|
|
Costs and expenses
|
|
|
6,737,124
|
|
|
|
746,766
|
|
Loss from operations
|
|
|
(5,116,515
|
)
|
|
|
(680,099
|
)
|
Total other income/(expense)
|
|
|
624,868
|
|
|
|
4,963
|
|
Net loss
|
|
$
|
(4,491,647
|
)
|
|
$
|
(675,136
|
)
|
Approximately 98% of revenues were attributable to customers in the United States for the three months ended March 31, 2021. All of the Company’s revenues were attributable to customers in the
United States for the three months ended March 31, 2020.
Note 17
|
SUBSEQUENT EVENTS
|
On April 16, 2021, the Company raised gross proceeds of $12,000,000 resulting from the sale of 1,194,743 shares of Company common stock at an average purchase price equal to $10.21 per share to a select group of
institutional and accredited investors. Investors include both unaffiliated investors as well as directors of the Company. Directors purchased 560,461 shares of common stock at a purchase price of $11.33 per share, which amount represents the
consolidated closing bid price of Company common stock as reported by the Nasdaq Stock Market LLC on April 9, 2021, the last trading day prior to execution of the securities purchase agreement. Unaffiliated investors purchased 631,282 shares of
Company common stock at a purchase price of $8.95 per share, which price was negotiated on April 9, 2021, and represents an approximately 15% discount to the preceding day’s volume weighted average price.