Forian(FORA) - 2022 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements for Forian Inc. for the three months ended March 31, 2022, including balance sheets, statements of operations, statements of stockholders' equity, and statements of cash flows, along with accompanying notes detailing accounting policies, business combination impact, and segment performance Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Forian Inc. for the three months ended March 31, 2022 It includes the balance sheets, statements of operations, statements of stockholders' equity, and statements of cash flows The accompanying notes provide detailed explanations of accounting policies, the impact of the Helix business combination, segment performance, and other financial details Condensed Consolidated Financial Statements The core financial statements show a significant increase in revenue alongside a widening net loss for the first quarter of 2022 compared to the prior year Total assets decreased slightly from year-end 2021, while total liabilities increased The company used $3.2 million in cash from operations during the quarter Condensed Consolidated Statements of Operations (Q1 2022 vs Q1 2021) | Financial Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total Revenues | $6,391,279 | $1,620,609 | | Total Costs and Expenses | $18,305,560 | $6,737,124 | | Loss From Operations | $(11,914,281) | $(5,116,515) | | Net Loss | $(11,854,088) | $(4,515,653) | | Basic and Diluted Net Loss per Share | $(0.37) | $(0.19) | Condensed Consolidated Balance Sheets (As of March 31, 2022) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $33,333,137 | $35,985,766 | | Total Assets | $54,421,566 | $56,842,361 | | Total Current Liabilities | $8,176,054 | $6,799,125 | | Total Liabilities | $33,199,805 | $31,671,096 | | Total Stockholders' Equity | $21,221,761 | $25,171,265 | Condensed Consolidated Statements of Cash Flows (Q1 2022 vs Q1 2021) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,229,774) | $(3,608,800) | | Net cash (used in) provided by investing activities | $(667,515) | $5,246,936 | | Net cash (used in) provided by financing activities | $(13,122) | $292,148 | | Net change in cash | $(3,910,411) | $1,930,284 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's formation through a reverse acquisition of Helix Technologies in March 2021 They outline revenue recognition policies, showing a significant increase in remaining performance obligations to $25.9 million The company operates in three segments, with Information & Software being the largest revenue contributor Details on convertible notes, stock-based compensation, and significant legal proceedings are also provided - The company was formed through a business combination with Helix Technologies, Inc. on March 2, 2021, accounted for as a reverse acquisition where MOR Analytics, LLC is deemed the accounting acquirer[16][17][18] Disaggregated Revenue by Category | Revenue Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Healthcare Information | $3,534,861 | $573,836 | | Software Subscriptions | $2,274,233 | $835,142 | | Services | $428,706 | $96,311 | | Other | $153,479 | $115,320 | | Total | $6,391,279 | $1,620,609 | - Total remaining performance obligations, representing contracted revenue not yet recognized, increased to $25.9 million as of March 31, 2022, from $20.0 million at year-end 2021[53] - The company recorded $5.6 million in separation expenses in Q1 2022, including $5.4 million in accelerated stock compensation for two departing advisors and severance costs from restructuring its Engeni SA subsidiary[79][80] - As of March 31, 2022, the company had $24 million in principal outstanding on 3.5% Convertible Promissory Notes due 2025[104] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 294% year-over-year revenue growth in Q1 2022 to the inclusion of the Helix acquisition and strong performance in healthcare information products The increased net loss is explained by higher operating expenses related to scaling the business, including R&D, sales & marketing, G&A, and significant one-time separation costs The company's liquidity remains strong with $27.1 million in cash and marketable securities - Revenue for Q1 2022 increased by $4.77 million compared to Q1 2021 This growth was driven by the inclusion of revenues from the Helix acquisition (contributing 38% of the increase) and higher revenues from the company's healthcare information products (contributing 62% of the increase)[163] - Operating expenses rose significantly due to investments in scaling the business R&D expenses increased by $1.7 million, Sales & Marketing by $0.8 million, and General & Administrative by $3.3 million, with stock-based compensation being a major driver of the G&A increase[165][166][167] Reconciliation of Net Loss to Adjusted EBITDA | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net loss | $(11,854,088) | $(4,515,653) | | Stock based compensation expense | $7,904,584 | $863,883 | | Depreciation & amortization | $605,674 | $187,584 | | Transaction related expenses | $0 | $1,210,279 | | Other adjustments | $(129,538) | $(600,862) | | Adjusted EBITDA | $(3,411,368) | $(2,854,769) | - As of March 31, 2022, the company's principal source of liquidity was $27.1 million in cash and marketable securities, primarily funded by equity issuances and the sale of $24 million in convertible notes in September 2021[187] Item 3. Quantitative and Qualitative Disclosures About Market Risk This disclosure is not required for the company, as it qualifies as a smaller reporting company - The company has indicated that this item is not required[200] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were ineffective as of March 31, 2022 This conclusion is based on material weaknesses in internal controls over financial reporting previously identified in the 2021 Form 10-K The company is actively implementing remediation measures, including hiring additional personnel, engaging consultants, and upgrading accounting systems - Due to material weaknesses identified in the 2021 Annual Report, the CEO and CFO concluded that disclosure controls and procedures remained ineffective as of March 31, 2022[202] - Remediation efforts are underway, including hiring additional accounting personnel, engaging an outside consulting firm to evaluate and document controls, and upgrading accounting and finance systems[204][205] PART II OTHER INFORMATION This section covers other information not included in the financial statements, such as legal proceedings, risk factors, unregistered sales of equity securities, and a list of exhibits filed with the report Item 1. Legal Proceedings The company discloses several legal proceedings The most significant is a lawsuit by five former Helix employees seeking over $27.5 million in damages related to claims of promised equity and compensation Another case involves a claim of 10% ownership in a subsidiary A third negligence case has been settled in principle and is expected to be dismissed - In the case of Grant Whitus et al. v. Forian Inc., five former Helix employees are seeking over $27.5 million in damages for claims including breach of contract and fraudulent misrepresentation related to promised equity or compensation The company intends to defend vigorously against these claims[212] - In Audet v. Green Tree International, a plaintiff claims 10% ownership of a subsidiary and seeks unspecified monetary damages The company believes the lawsuit is without merit[209] - The Nykiah Thomas v. Security Consultants Group case, alleging negligence in security services, has reached a settlement in principle and is anticipated to be dismissed during the second quarter of 2022[211] Item 1A. Risk Factors This disclosure is not required for the company in this quarterly report - The company has indicated that this item is not required[213] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the quarter - The company reported "None" for this item[214] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, primarily consisting of certifications from the CEO and CFO as required by the Sarbanes-Oxley Act, and Inline XBRL documents for financial reporting - The exhibits filed with this report include the CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, along with the company's financial data in Inline XBRL format[221]