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Dynamic quotes 
OFFON

HEALTHCARE TRIANGLE, INC.

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HEALTHCARE TRIANGLE, INC. Management's discussion and analysis of financial condition and results of operations. (form 10-Q)

11/23/2021 | 04:52pm EST
The following discussion summarizes the significant factors affecting the
operating results, financial condition, liquidity, and cash flows of our Company
as of and for the periods presented below. The following discussion and analysis
should be read in conjunction with the condensed consolidated financial
statements and the related notes thereto, and the consolidated financial
statements and the related notes thereto all included elsewhere in this
prospectus. The statements in this discussion regarding industry outlook, our
expectations regarding our future performance, liquidity, and capital resources,
and all other non-historical statements in this discussion are forward-looking
statements and are based on the beliefs of our management, as well as
assumptions made by, and information currently available to, our management.
Actual results could differ materially from those discussed in or implied by
forward-looking statements as a result of various factors, including those
discussed below and elsewhere in this report, and in the sections entitled
"Special Note Regarding Forward-Looking Statements" and "Risk Factors" contained
in the Company's final prospectus for its initial public offering filed with the
Securities and Exchange Commission ('SEC").

Overview


Healthcare Triangle, Inc. is a leading healthcare information technology company
focused on advancing innovative, industry-transforming solutions in the areas of
cloud services, data science, professional and managed services for the
Healthcare and Life Sciences industry.

The Company was formed on October 29, 2019, as a Nevada corporation and then
converted into a Delaware corporation on April 24, 2020, to provide IT and data
services to the Healthcare and Life Sciences ("HCLS") industry. The business
commenced on January 1, 2020, after the Parent transferred its s Life Sciences
business to us. As of September 30, 2021, we had a total of 69 full time
employees, 142 sub-contractors, including 67 certified cloud, 16 Epic Certified
EHR experts and 14 MEDITECH Certified EHR experts. Many of the senior management
team and the members of our board of directors hold advanced degrees and some
are leading experts in software development, regulatory science, and market
access. During the nine months ended September 30, 2021, we generated revenues
of approximately $26.1 million when compared to revenue of $22.3 million for the
nine months ended September 30, 2020 from the sale of our products and services
which represents an increase of $3.7 million amounting to 17% increase when
compared to the previous year.

Our approach leverages our proprietary technology platforms, extensive industry
knowledge, and healthcare domain expertise to provide solutions and services
that reinforce healthcare progress. Through our platform, solutions, and
services, we support healthcare delivery organizations, healthcare insurance
companies, pharmaceutical, and Life Sciences, biotech companies, and medical
device manufacturers in their efforts to improve data management, develop
analytical insights into their operations, and deliver measurable clinical,
financial, and operational improvements.

We offer a comprehensive suite of software, solutions, platforms, and services
that enables some of the world's leading healthcare and pharma organizations to
deliver personalized healthcare, precision medicine, advances in drug discovery,
development and efficacy, collaborative research and development, respond to
real-world evidence, and accelerate their digital transformation. We combine our
expertise in the healthcare technology domain, cloud technologies, DevOps and
automation, data engineering, advanced analytics, AI/ML, IoT, security,
compliance, and governance to deliver platforms and solutions that drive
improved results in the complex workflows of Life Sciences, biotech, healthcare
providers, and payers. Our differentiated solutions, enabled by our intellectual
property and delivered as a service, provide advanced analytics, data science
applications, and data aggregation in these highly regulated environments in a
more compliant, secure, and cost-effective manner to our customers.

Our deep expertise in healthcare allows us to reinforce our clients' progress by
accelerating their innovation. Our healthcare IT services include Electronic
Health Records (EHR) and software implementation, optimization, extension to
community partners, as well as application managed services, and backup and
disaster recovery capabilities on public cloud. Our 24x7 managed services are
used by hospitals and health systems, payers, Life Sciences, and biotech
organizations in their effort to improve health outcomes and deliver deeper,
more meaningful patient and consumer experiences. Through our services, our
customers achieve a return on investment in their technology by delivering
measurable improvements. Combined with our software and solutions, our services
provide clients with an end-to-end partnership for their technology innovation.

24





Our Business Model

The majority of our revenue is generated by our full-time employees who provide
software services and Managed Services and Support to our clients in the
Healthcare and Life Sciences industry. Our software services include strategic
advisory, implementation and development services and Managed Services and
Support include post implementation support and cloud hosting. Our CloudEz and
DataEz platforms became commercially available to deploy under solution delivery
model in 2019 and Readabl.AI platform from last quarter of 2020. While these
platforms are commercially available, we continue to develop and upgrade them on
a regular basis.

We are in the early stages of marketing CloudEz, DataEz and Readabl.AI as our
SaaS offerings on a subscription basis, which we expect will provide us with
recurring revenues. We do not yet have enough information about our competition
or customer acceptance of the proposed SaaS offerings to determine whether or
not recurring subscription revenue will have a material impact on our revenue
growth. Our SaaS offerings are expected to become commercially available in the
first quarter of 2022.

Impacts of the COVID-19 Pandemic

The COVID-19 pandemic has had, and is likely to continue to have, a severe and
unprecedented impact on the world and on our business. Measures to prevent its
spread, including government-imposed restrictions on large gatherings, closures
of face-to-face events, "shelter in place" health orders and travel restrictions
have had a significant effect on certain of our business operations. In response
to these business disruptions, which include a transition to remote working,
reducing certain of our discretionary expenditures and eliminating non-essential
travel particularly with respect to COVID-19 impacted operation and complying
with health and safety guidelines to protect employees, contractors, and
customers.

The Company reported sequential growth in revenue in 2020; the healthcare
revenue was lower in the second and third quarters of 2020 due to COVID-19 as
many hospitals delayed investments in new projects or upgrade; however, the
Company witnessed strong growth in Life Sciences revenue due to investments in
research and development for drug discovery to address COVID-19 challenges and
healthcare revenues have returned to pre-COVID-19 levels in the fourth quarter
2020. We have obtained necessary funding to manage our short-term working
capital requirements. We have not altered any credit terms with our customers
and the realization from the customers have generally been on time. We have been
able to service our debt and other obligations on time. There has been no
material impact on our operational liquidity and capital resources on account of
COVID-19.

On May 5, 2020, we received a PPP loan pursuant to the Coronavirus Aid, Relief,
and Economic Security Act (the "CARES Act") amounting to $1.5 million. The
principal and interest on the PPP loans are forgivable after eight weeks as long
as the borrower uses the loan proceeds for eligible purposes, including payroll,
benefits, rent and utilities, and maintains its payroll levels. The amount of
loan forgiveness will be reduced if the borrower terminates employees or reduces
salaries during the eight-week period. The unforgiven portion of the PPP loan is
payable over five years at an interest rate of 1%, with a deferral of payments
for the first six months.  The Company has been notified by its lender that the
Company's PPP loan will be forgiven in whole on account of fulfilling the
eligibility criteria and therefore this amount has been recognized by us as
other income.

Because of COVID-19, healthcare and Life Sciences organizations are accelerating
research, rethinking patient care, and maintaining clinical and operational
continuity during this unprecedented time for the global health system. COVID-19
has necessitated the adoption of digital communication channels and remote
working technology within the Healthcare and Life Sciences industry at a rapid
pace.

We believe our proprietary platforms and solutions address these challenges. Our
business is focused on providing digital platform solutions to healthcare
organizations and it is our mission to adequately address COVID-19 challenges
for the benefit of our customers and society in general. As a result, consumers
have better personal care, convenience, and value. We believe that COVID-19 is
expected to drive increased utilization of technology during and after the
pandemic, and such shift to a virtual approach creates a unique opportunity for
our business to shape the new virtual-oriented experiences of businesses through
our cloud technology and services.

                             Key Factors of Success

We believe that our future growth, success, and performance are dependent on
many factors, including those mentioned below. While these factors present
significant opportunities for us, they also represent the challenges that we
must successfully address in order to grow our business and improve our results
of operations.

25




Investment in scaling the business


We need to continuously invest in research and development to build new
solutions, sales, and marketing to promote our solutions to new and existing
customers in various geographies, and other operational and administrative
functions in systems, controls and governance to support our expected growth and
our transition to a public company. We anticipate that our employee strength
will increase because of these investments.

Adoption of our solutions by new and existing customers

We believe that our ability to increase our customer base will enable us to
drive growth. Most of our customers initially deploy our solutions within a
division or geography and may only initially deploy a limited set of our
available solutions. Our future growth is dependent upon our existing customers'
continued success and renewals of our solutions agreements, deployment of our
solutions to additional divisions or geographies and the purchase of
subscriptions to additional solutions. Our growth is also dependent on the
adoption of our solutions by new customers. Our customers are large
organizations who typically have long procurement cycles which may lead to
declines in the pace of our new customer additions.

Subscription services adoption


The key factor to our success in generating substantial recurring subscription
revenues in future will be our ability to successfully market and persuade new
customers to adopt our SaaS offerings. We are in the early stages of marketing
our SaaS offerings such as DataEz, CloudEz and Readabl.AI, which are not yet
commercially available, and do not yet have enough information about our
competition or customer acceptance to determine whether or not recurring
subscription revenue from these offerings will have a material impact on our
revenue growth. Our SaaS offerings are expected to become available in the first
quarter of 2022.

Mix of solutions and software services revenues.


Another factor to our success is the ability to sell our solutions to the
existing software services customers. During the initial period of deployment by
a customer, we generally provide a greater number of services including
advisory, implementation and training. At the same time, many of our customers
have historically purchased our solutions after the deployment. Hence, the
proportion of total revenues for a customer associated with software services is
relatively high during the initial deployment period. While our software
services help our customers achieve measurable improvements and make them
stickier, they have lower gross margins than solution-based revenue. Over time,
we expect the revenues to shift towards recurring and subscription-based
revenues.

26





Liquidity

The current debt equity ratio measures a company's ability to pay off its
current liabilities (payable within one year) with its total current assets such
as cash, accounts receivable, and inventories. The higher the ratio, the better
the company's liquidity position.

The Company's current debt equity ratio, based on the nine months ended
September 30, 2021 financial statement is 1.98, compared to 0.38 for the
financial year ended December 31, 2020. A good current ratio is between 1.2 to
2, which means that a business has 2 times more current assets than liabilities
to covers its debts. A debt to equity ratio below 1 means that a company doesn't
have enough liquid assets to cover its short-term liabilities.

The Company does not have inventory and hence the quick ratio is the same as current ratio.


                      Components of Results of Operations

Revenues

We provide our services and manage our business under these operating segments:

  • Software Services




  • Managed Services and Support




  • Platform Services




Software Services

The Company earns revenue primarily through the sale of software services that
is generated from providing strategic advisory, implementation, and development
services. The Company enters into Statement of Work (SOW) which provides for
service obligations that need to be fulfilled as agreed with the customer. The
majority of our software services arrangements are billed on a time and
materials basis and revenues are recognized over time based on time incurred and
contractually agreed upon rates. Certain software services revenues are billed
on a fixed fee basis and revenues are typically recognized over time as the
services are delivered based on time incurred and customer acceptance. We
recognize revenue when we have the right to invoice the customer using the
allowable practical expedient under ASC 606-10-55-18 since the right to invoice
the customer corresponds with the performance obligations completed.

Managed Services and Support

Managed Services and Support include post implementation support and cloud
hosting. Managed Services and Support are a distinct performance obligation.
Revenue for Managed Services and Support is recognized ratably over the life of
the contract.

Platform Services

Platform Services from CloudEz, DataEz and Readabl.AI are offered as a solution
delivery model and will be offered as Software as a Service (SaaS) which is a
subscription model. Our SaaS offerings are expected to become available in
the
first quarter of 2022.

27




The revenue from solutions delivery model contains a series of separately identifiable and distinct services that represent performance obligations that are satisfied over time. During the periods presented the company generated Platform revenue on solution delivery model only, which is non-recurring revenue.


Our SaaS agreements will be generally non-cancelable during the term, although
customers typically will have the right to terminate their agreements for cause
in the event of material breach.

SaaS revenues will be recognized ratably over the respective non-cancelable
subscription term because of the continuous transfer of control to the customer.
Our subscription arrangements will be considered service contracts, and the
customer will not have the right to take possession of the software Segment
wise
revenue breakup.

Cost of Revenue



Cost of revenue consists primarily of employee-related costs associated with the
rendering of our services, including salaries, benefits and stock-based
compensation expense, the cost of subcontractors, travel costs, cloud hosting
charges and allocated overhead the cost of providing professional services is
significantly higher as a percentage of the related revenues than for our
subscription services due to the direct labor costs and costs of subcontractors.

Our business and operational models are designed to be highly scalable and
leverage variable costs to support revenue-generating activities. While we may
grow our headcount overtime to capitalize on our market opportunities, we
believe our increased investment in automation, electronic health record
integration capabilities, and economies of scale in our operating model, will
position us to grow our platform solutions revenue at a greater rate than our
cost of revenue.

Operating Expenses

Research and Development

Research and development expense (majorly our investment in innovation) consists
primarily of employee-related expenses, including salaries, benefits,
incentives, employment taxes, severance, and equity compensation costs for our
software developers, engineers, analysts, project managers, and other employees
engaged in the development and enhancement of our cloud-based platform
applications. Research and development expenses also include certain third-party
consulting fees. Our research and development expense excludes any depreciation
and amortization.

We expect to continue our focus on developing new product offerings and
enhancing our existing product offerings. As a result, we expect our research
and development expense to increase in absolute dollars, although it may vary
from period to period as a percentage of revenue.

Sales and Marketing


Sales and marketing expense consists primarily of employee-related expenses,
including salaries, benefits, commissions, travel, discretionary incentive
compensation, employment taxes, severance, and equity compensation costs for our
employees engaged in sales, sales support, business development, and marketing.
Sales and marketing expense also includes operating expenses for marketing
programs, research, trade shows, and brand messages, and public relations costs.

We expect our sales and marketing expenses to continue to increase in absolute
dollar terms as we strategically invest to expand our business, although it may
vary from period to period as a percentage of total revenues.

28





General and Administrative

Our general and administrative expenses consist primarily of employee-related
expenses including salaries, benefits, discretionary incentive compensation,
employment taxes, severance, and stock-based compensation expenses , for
employees who are responsible for management information systems,
administration, human resources, finance, legal, and executive management. The
general and administrative expenses also include occupancy expenses (including
rent, utilities, and facilities maintenance), professional fees, consulting
fees, insurance, travel, contingent consideration, transaction costs,
integration costs, and other expenses. Our general and administrative expenses
exclude depreciation and amortization.

In the nearest future, we expect our general and administrative expenses to continue to increase to support business growth. Over the long term, we expect general and administrative expenses to decrease as a percentage of revenue.

Depreciation and Amortization Expenses


Our depreciation and amortization expense consists primarily of depreciation of
fixed assets, amortization of Customer relationship and capitalized software
development costs, and amortization of intangible assets. We expect our
depreciation and amortization expense to increase as we expand our business
organically and through acquisitions.

Other Income (Expense), Net

Other income (expense), net consists of finance cost and gains or losses on foreign currency.

Deferred revenues

Advanced billings to clients in excess of revenue earned are recorded as deferred revenue until the revenue recognition criteria are met.

Unbilled accounts receivable

Unbilled accounts receivable is a contract asset related to the delivery of our professional services for which the related billings will occur in a future period. Unbilled receivables are classified as accounts receivable on the consolidated balance sheet.

Although we believe that our approach to estimates and judgments regarding revenue recognition is reasonable, actual results could differ and we may be exposed to increases or decreases in revenue that could be material.

Provision for Income Taxes


Provision for income taxes consists of federal and state income taxes in the
United States, including deferred income taxes reflecting the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes.

Paycheck Protection Program


On February 9, 2021, we received a PPP loan pursuant to the Coronavirus Aid,
Relief, and Economic Security Act (the "CARES Act") amounting to $1.06 million.
The PPP, established as part of the Coronavirus Aid, Relief and Economic
Security Act ("CARES Act"), provides for loans to qualifying businesses for
amounts up to 2.5 times of the average monthly payroll expenses of the
qualifying business. The loans and accrued interest are forgivable after eight
weeks as long as the borrower uses the loan proceeds for eligible purposes,
including payroll, benefits, rent and utilities, and maintains its payroll
levels. The amount of loan forgiveness will be reduced if the borrower
terminates employees or reduces salaries during the eight-week period.

29





The unforgiven portion of the PPP loan is payable over five years at an interest
rate of 1%, with a deferral of payments for the first six months.  The Company
has utilized the proceeds for purposes in line with the terms of the PPP. The
Company has received communication from the bank for forgiveness of the loan, in
whole on account of fulfilling the criteria and hence this amount has been
considered under other income.

Results of Operations




The following tables set forth selected consolidated statements of operations
data and such data as a percentage of total revenues for each of the periods
indicated:

                                                        Three Months Ended                                             Nine Months Ended
                                                          September 30,                                                  September 30,
                                          2021         % Sales         2020         % Sales          2021          % of Sales          2020         % of Sales
Revenue                              $  8,078,348         100 %    $ 7,360,560          100 %   $  26,080,914          100 %      $ 22,344,093           100 %
Cost of Revenue (exclusive of
depreciation /amortization)             5,351,748          66 %      5,358,695           73 %      17,828,791           68 %        16,162,776            72 %
Research & Development                  2,204,030          27 %        550,167            7 %       3,774,712           14 %         1,469,416             7 %
Sales and Marketing                     1,328,399          16 %        476,650            6 %       2,801,188           11 %         1,103,486             5 %
General and Administrative                753,338           9 %        582,874            8 %       3,061,785           12 %         2,326,341            10 %
Depreciation and Amortization             211,328           3 %        200,864            3 %         633,290            2 %           603,567             3 %
Other income ( PPP loan
forgiveness)                                   -            0 %             -             0 %              -             0 %                -              0 %
Interest expense                          220,634           3 %          1,161            0 %         479,849            2 %            24,920             0 %
Income tax expense                            942           0 %         51,340            1 %           4,759            0 %           176,605             1 %
Net income                           ($ 1,992,071 )       (25 %)   $   138,808            2 %   ($  2,503,460 )        (10 %)     $    476,981             2 %



Three Months Ended September 30, 2021 and 2020

Revenue from operations

                   Three Months Ended
                      September 30,                 Changes
                  2021            2020          Amount        %
  Revenue     $ 8,078,348     $ 7,360,560     $ 717,788       10 %


Revenue increased by $0.7 million, or 10% to $8 million for the quarter ended
September 30, 2021, as compared to $7.3 million for the quarter ended September
30, 2020. Revenue from Managed Services and Support has increased more than the
decrease in the revenue from Software Services which resulted in net increase in
revenue. The Software Services are typically short-term engagements to provide
software consulting and development services, which do not require continual
third-party maintenance. Managed Services and Support such as IT cloud hosting
and support call for services on a continuous basis and allow for strengthening
of client relationships which can lead to additional engagements from the
client. Therefore, the Company is determined to focus on increasing the Managed
Services & Support and Platform Services revenue to enhance our relationship and
long-term engagement with our customers. We have made additional investments in
Sales & Marketing and Research & Development to grow Managed Services & Support
and Platform Services revenue. We expect this trend to continue and have a net
positive impact on overall results of the operations.

Our top 5 customers accounted for 79% in quarter ended September 30, 2021 and 88% in during quarter ended September 30, 2020, respectively.

30




The following table has the breakdown of our revenues for the quarter ended
September 30, 2021 and 2020 for each of our top 5 customers. Several of the top
5 customers in 2021 are not the same for 2020. However, F. Hoffmann-La Roche
Ltd, a Swiss multinational healthcare company ("Customer 1") and Customer 5 held
those positions for both Quarter ended September 30, 2021 and 2020.

Top Five Customers Revenue for three months ended September 30, 2021 and 2020

2021



Customer          Amount        % of Revenue
Customer 1     $ 2,004,478             25 %
Customer 2       1,630,000             20 %
Customer 3       1,400,000             17 %
Customer 4         753,991              9 %
Customer 5     $   623,665              8 %




2020

Customer          Amount        % of Revenue
Customer 1     $ 4,448,401             60 %
Customer 2         638,651              9 %
Customer 3         628,437              9 %
Customer 4         443,544              6 %
Customer 5     $   295,366              4 %


Significance of Customer 1

We have been engaged by Customer since 2017 in their cloud transformation
projects pursuant to an IT Master Procurement Agreement ("MSA") effective as of
May 1, 2017 between Customer 1 and the Parent. All of Parent's rights and
obligations under the MSA were transferred to us under the Asset Transfer
Agreement. Initially we started with their cloud assessment and expanded to
their cloud transformation journey. Our revenues are consistently growing with
this customer as we continue to grow in our Managed Services and Support. While
we are dependent on Customer 1 for a majority of our revenues, our revenues are
from multiple projects within various divisions of Customer 1. In addition, we
are continuously adding new customers and growing other existing customers to
reduce our dependency on Customer 1.

Terms of Customer 1 Agreements

The MSA establishes the terms and conditions under which we supply Customer 1
with our services on each project, including, but not limited to, Customer 1's
intellectual property ownership rights, data privacy rights, representations and
warranties and indemnification. The term of the MSA commences on the MSA
Effective Date and continues until terminated by either party. Customer 1 may
terminate the MSA for any reason with 30 days' notice and we may terminate the
MSA for cause with 30 days' notice. The scope of work for each project and the
compensation we receive is governed by a Statement of Work ("SOW"). Depending on
the SOW, Customer 1 may terminate such SOW with either 30 days' or 24 hour
notice.

The summaries of the MSA and SOW are not complete descriptions of the provisions of the MSA and any particular SOW and are qualified in their entirety by reference to the MSA and form of SOW, each filed as an exhibit to the registration statement of which this prospectus is a part.

31





The following table provides details of Customer 1 revenue by operating
segments:

                                    Three Months Ended
                                       September 30,                    Changes
                                   2021            2020            Amount           %
Software Services              $ 1,164,970     $ 3,209,105     $ (2,044,135 )      (64 %)
Managed Services and Support       839,508         415,066          424,442        102 %
Platform Services                       -          824,230         (824,230 )     (100 %)
Total Revenue                  $ 2,004,478     $ 4,448,401     $ (2,443,923 )      (55 %)

Revenue from Customer 1 decreased by $2.4 million, or 55% to $2 million for the
quarter ended September 30, 2021, as compared to $4.4 million for the quarter
ended September 30, 2020. Software services revenue decreased by $2 million or
64% to $1.2 million for the quarter ended September 30, 2021, as compared to
$3.2 million for the quarter ended September 30, 2020. Managed Services and
Support revenue increased by $0.4 million, or 102% to $0.8 million for the
quarter ended September 30, 2021, as compared to $0.4 million for the quarter
ended September 30, 2020. Revenue from Platform Services decreased by $0.8
million, or 100% to nil for the quarter ended September 30, 2021, as compared to
$0.8 million for the quarter ended September 30, 2020.

Cost of Revenue (exclusive of depreciation /amortization)

                                           Three Months Ended
                                              September 30,                     Changes
                                          2021            2020           Amount           %
Cost of Revenue (exclusive of
depreciation /amortization)           $ 5,351,748     $ 5,358,695     $   (6,947 )            0 %


Cost of revenue, excluding depreciation and amortization decreased by $0.01 million, or 0%, to $5.3 million for the quarter ended September 30, 2021, as compared to $5.3 million for the quarter ended September 30, 2020..

Research and Development

                             Three Months Ended
                                September 30,                  Changes
                             2021           2020          Amount          %

Research & Development $ 2,204,030 $ 550,167 $ 1,653,863 301 %

Research & Development expenses increased by $1.6 million, or 301% to $2.2 million for the quarter ended September 30, 2021, as compared to $0.6 million for the quarter ended September 30, 2020, this is primarily due to higher investments in Platform Development.

Sales and Marketing

                          Three Months Ended
                             September 30,                 Changes
                          2021           2020         Amount         %
Sales and Marketing   $ 1,328,399     $ 476,650     $ 851,749       179 %


Sales and Marketing expenses increased by $0.8 million, or 179% to $1.3 million
for the quarter ended September 30, 2021, as compared to $0.5 million for the
quarter ended September 30, 2020, this is primarily due to additional
investments in Sales and Marketing.

32





General and Administrative

                                Three Months Ended
                                   September 30,               Changes
                                2021          2020         Amount        %
General and Administrative   $ 753,338     $ 582,874     $ 170,464       29 %


General and Administrative expenses increased by $0.2 million, or 29 % to $0.8
million for the quarter ended September 30, 2021, as compared to $0.6 million
for the quarter ended September 30, 2020, this is primarily due to increase in
stock-based compensation expenses.

Depreciation and amortization


                                   Three Months Ended
                                      September 30,              Changes
                                   2021          2020         Amount       %

Depreciation and amortization $ 211,328 $ 200,864 $ 10,464 5 %

Depreciation and amortization expenses increased by $0.01 million, or 5% to $0.2
million for the quarter ended September 30, 2021, as compared to $0.2 million
for the quarter ended September 30, 2020.

Interest expense


                      Three Months Ended
                        September 30,                 Changes
                       2021            2020     Amount          %

Interest expense $ 220,634 $ 1,161 $ 219,473 18903 %

Interest expenses increased by $0.2 million, or 18903% to $0.2 million for the
quarter ended September 30, 2021, as compared to $0.01 million for the quarter
ended September 30, 2020, this is primarily due to interest on convertible
note.

33





Provision for Income Taxes
                        Three Months Ended
                          September 30,                Changes
                        2021          2020        Amount         %
Income tax expense   $   942       $ 51,340     $ (50,398 )     (98 %)

Income tax expenses decreased by $0.05 million, or 98% to $0.01 million for the
quarter ended September 30, 2021, as compared to $0.05 million for the quarter
ended September 30, 2020, this is primarily due to lower income before tax for
nine months ended September 30, 2021.

Revenue, Cost of Revenue and Operating Profit by Operating Segment


We currently provide our services and manage our business under three operating
segments which are Software Services, Managed Services and Support and Platform
Services.

                                    Three Months Ended
                                       September 30,                   Changes
                                   2021            2020           Amount         %
Software Services              $ 2,307,055     $ 2,560,460     $ (253,405 )     (10 %)
Managed Services and Support     4,673,173       3,975,870        697,303        18 %
Platform Services                1,098,120         824,230        273,890        33 %
Revenue                        $ 8,078,348     $ 7,360,560     $  717,788        10 %


Revenue from Software Services decreased by $0.2 million, or 10% to $2.3 million
for the quarter ended September 30, 2021, as compared to $2.5 million for the
quarter ended September 30, 2020. We faced delays in closing deals in the
Software Services segment as customers optimized the cost of supporting legacy
systems during the pandemic. The total customers serviced during the quarter
ended September 30, 2021, dropped to 26 from 32 for the quarter ended September
30, 2020. Revenue from Managed Services and Support increased by $0.7 million,
or 18% to $4.7 million for the quarter ended September 30, 2021, as compared to
$4 million for the quarter ended September 30, 2020. The growth in Managed
Services and Support revenue reflected our existing customers' continued
adoption and acceleration in the demand for cloud technology. Revenue from
Managed Services and Support include Cloud hosting revenue of $0.4 million and
$2.4 million for the quarter ended September 30, 2021, and 2020, respectively.
Revenue from Platform Services increased by $0.3 million, or 33% to $1.1 million
for the quarter ended September 30, 2021, as compared to $0.8 million for the
quarter ended September 30, 2020. Revenue from Platform Services increased due
to increase in the number of customers to 3 for the quarters ended September 30,
2021 as compared to 1 for the quarter ended September 30, 2020.

Factors affecting revenues of Software Services, Managed Services and Support and Platform Services


Our strategy is to achieve meaningful long-term revenue growth through sales of
Managed Services and Support and Platform Services to existing and new clients
within our target market. In order to increase our cross-selling opportunity
between our operating segments and realize long time revenue growth, our focus
has shifted more towards Managed Services and Support and Platform Services
which is of recurring nature when compared to Software Services segment which is
of non-recurring nature. This also helps in retaining existing customers by
leveraging our Managed Services and Support and Platform Services as a growth
agent. This renewed focus on driving demand for subscription and platform-based
model will help us in expanding our customer base and enhance customer retention
which is a challenge for our existing Software Services segment. Software
Services contracts are driven by Time and Material and on site employees
delivering services at customers location. This has been impacted due to
COVID-19 restrictions in employee's travel.

34




Our CloudEz and DataEz platforms are getting more traction, and this led to increase in Managed Services and Support revenue. We have made additional investments in Sales & Marketing and Research & Development to grow Managed Services & Support and Platform Services revenue. We expect this trend to continue and have a net positive impact on overall results of operations.

Cost of Revenue

                                    Three Months Ended
                                       September 30,                   Changes
                                   2021            2020           Amount         %
Software Services              $ 1,704,616     $ 2,033,409     $ (328,793 )     (16 %)
Managed Services and Support     3,207,548       2,756,936        450,612  
     16 %
Platform Services                  439,584         568,350       (128,766 )     (23 %)
Cost of Revenue                $ 5,351,748     $ 5,358,695     $   (6,947 )       0 %

Cost of Revenue from Software Services decreased by $0.3 million, or 16% to $1.7
million for the quarter ended September 30, 2021, as compared to $2 million for
the quarter ended September 30, 2020. The drop in cost of Software Services is
due to lower Software Services revenue. Cost of Revenue from Managed Services
and Support increased by $0.5 million, or 16% to $3.2 million for the quarter
ended September 30, 2021, as compared to $2.7 million for the quarter ended
September 30, 2020. The increase is on account of increase in the Managed
Services and Support revenue driven by higher adoption of cloud hosting. Cost of
Revenue from Platform Services decreased by $0.1 million, or 23% to $0.4 million
for the quarter ended September 30, 2021, as compared to $0.5 million for the
quarter ended September 30, 2020.

Segment operating profits by reportable segment were as follows:

                                          Three Months Ended
                                             September 30,                         Changes
                                         2021             2020             Amount              %
Software Services                   $     80,775      $   158,482      $    (77,707 )           (49 %)
Managed Services and Support           1,465,626        1,218,935           246,691              20 %
Platform Services                     (1,545,495 )       (294,288 )      (1,251,207 )          (425 %)
Total segment operating profit               906        1,083,129        (1,082,223 )          (100 %)
Less: unallocated costs                1,771,401          891,820           879,581              99 %
Income from operations                (1,770,495 )        191,309        (1,961,804 )         (1025 %)
Interest expense                         220,634            1,161           219,473           18903 %
Net income (loss) before income
tax expenses                        $ (1,991,129 )    $   190,148      $ 

(2,181,277 ) (1147 %)



Operating profit from Software Services decreased by $0.1 million, or 49% to
$0.08 million for the quarter ended September 30, 2021, as compared to $0.2
million for the quarter ended September 30, 2020, mainly due to reduction in the
Software Services revenue. Operating profit from Managed Services and Support
increased by $0.2 million, or 20% to $1.5 million for the quarter ended
September 30, 2021, as compared to $1.2 million for the quarter ended September
30, 2020, mainly due to increase in revenue. Operating loss from Platform
Services increased by $1.2 million, or 425% to $(1.5) million for the quarter
ended September 30, 2021, as compared to ($0.3) million for the quarter ended
September 30, 2020 due to increase in cost from Platform Services.

35




Nine Months Ended September 30, 2021 and 2020

Revenue from operations

                 Nine Months Ended September 30,             Changes
                     2021                      2020      Amount         %
  Revenue     $     26,080,914       $ 22,344,093     $ 3,736,821       17 %




Revenue increased by $3.7 million, or 17% to $26 million for the nine months
ended September 30, 2021, as compared to $22.3 million for the nine months ended
September 30, 2020. Revenue from Managed Services and Support has increased more
than the decrease in the revenue from Software Services which resulted in net
increase in revenue. The Software Services are typically short-term engagements
to provide software consulting and development services, which do not require
continual third-party maintenance. Managed Services and Support such as IT cloud
hosting and support call for services on a continuous basis and allow for
strengthening of client relationships which can lead to additional engagements
from the client. Therefore, the Company is determined to focus on increasing the
Managed Services & Support and Platform Services revenue to enhance our
relationship and long-term engagement with our customers. We have made
additional investments in Sales & Marketing and Research & Development to grow
Managed Services & Support and Platform Services revenue. We expect this trend
to continue and have a net positive impact on overall results of the
operations.

Our top 5 customers accounted for 75% of revenue during the nine months ended September 30, 2021 and 80% during the nine months ended September 30, 2020, respectively.


The following table has the breakdown of our revenues for the nine months ended
September 30, 2021 and 2020 for each of our top 5 customers. Several of the top
5 customers in 2021 are not the same for 2020. However, Customer 1 and Customer
5 held those positions for both nine months ended September 30, 2021 and 2020.

Top Five Customers' Revenue for nine months ended September 30, 2021

Customer           Amount        % of Revenue
Customer 1     $ 11,295,093             44 %
Customer 2        2,604,726             10 %
Customer 3        2,131,360              8 %
Customer 4        1,799,010              7 %
Customer 5     $  1,630,000              6 %



Top Five Customers' Revenue for nine months ended September 30, 2020

Customer           Amount        % of Revenue
Customer 1     $ 12,912,514             58 %
Customer 2        1,798,496              8 %
Customer 3        1,445,472              6 %
Customer 4        1,032,207              5 %
Customer 5     $    768,345              3 %


36







The following table provides details of Customer 1 revenue by operating
segments:

                                      Nine Months Ended
                                        September 30,                     Changes
                                    2021             2020            Amount          %
Software Services              $  2,616,402     $  2,017,745     $    598,657        30 %
Managed Services and Support      8,161,437        8,580,934         (419,497 )      (5 %)
Platform Services                   517,254        2,313,835       (1,796,581 )     (78 %)
Total Revenue                  $ 11,295,093     $ 12,912,514     $ (1,617,421 )     (13 %)



Revenue from Customer 1 decreased by $1.6 million, or 13% to $11.3 million for
the nine months ended September 30, 2021, as compared to $12.9 million for the
nine months ended September 30, 2020. Software Services revenue increased by
$0.6 million or 30% to $2.6 million for the nine months ended September 30,
2021, as compared to $2 million for the nine months ended September 30, 2020.
Managed Services and Support revenue decreased by $0.4 million, or 5% to $8.2
million for the nine months ended September 30, 2021, as compared to $8.6
million for the nine months ended September 30, 2020. Revenue from Platform
Services decreased by $1.8 million, or 78% to $0.5 million for the nine months
ended September 30, 2021, as compared to $2.3 million for the nine months ended
September 30, 2020.

Cost of Revenue (exclusive of depreciation /amortization)

                                           Nine Months Ended
                                             September 30,                         Changes
                                         2021              2020            Amount             %

Cost of Revenue (exclusive of depreciation /amortization) $ 17,828,791 $ 16,162,776 $ 1,666,015

              10 %


Cost of revenue, excluding depreciation and amortization increased by $1.7
million, or 10%, to $17.8 million for the nine months ended September 30, 2021,
as compared to $16.1 million for the nine months ended September 30, 2020. The
increase was primarily due to increase in Managed Services and Support cost for
nine months ended September 30, 2021, as compared to the nine months ended
September 30, 2020.

 Research and Development



                               Nine Months Ended
                                 September 30,                   Changes
                             2021            2020           Amount          %
Research & Development   $ 3,774,712     $ 1,469,416     $ 2,305,296       157 %

Research & Development expenses increased by $2.3 million, or 157% to $3.8 million for the nine months ended September 30, 2021, as compared to $1.5 million for the nine months ended September 30, 2020, this is primarily due to additional investments in Platform Development.

37





Sales and Marketing

                            Nine Months Ended
                              September 30,                   Changes
                          2021            2020           Amount          %
Sales and Marketing   $ 2,801,188     $ 1,103,486     $ 1,697,702       154 %


Sales and Marketing expenses increased by $1.6 million, or 154% to $2.8 million
for the, the nine months ended September 30, 2021, as compared to $1.1 million
for the nine months ended September 30, 2020, this is primarily due to
additional investments in Sales and Marketing.

General and Administrative

                                   Nine Months Ended
                                     September 30,                 Changes
                                 2021            2020          Amount        %
General and Administrative   $ 3,061,785     $ 2,326,341     $ 735,444       32 %

General and Administrative expenses increased by $0.7 million, or 32 % to $ 3.0
million for the nine months ended September 30, 2021, as compared to $2.3
million for the nine months ended September 30, 2020, this is primarily due to
increase in stock-based compensation expenses.

Depreciation and amortization


                                    Nine Months Ended
                                      September 30,              Changes
                                   2021          2020         Amount       %

Depreciation and amortization $ 633,290 $ 603,567 $ 29,723 5 %

Depreciation and amortization expenses increased by $0.03 million, or 5% to $0.63 million for the nine months ended September 30, 2021, as compared to $0.60 million for the nine months ended September 30, 2020.

Interest expense


                      Nine Months Ended
                        September 30,                 Changes
                      2021          2020        Amount          %

Interest expense $ 479,849 $ 24,920 $ 454,929 1,826 %



Interest expenses increased by $0.4 million, or 1826% to $0.5 million for the
nine months ended September 30, 2021, as compared to $0.02 million for the nine
months ended September 30, 2020, this is primarily due to interest on
convertible note.

38





Provision for Income Taxes

                        Nine Months Ended
                          September 30,                Changes
                       2021         2020          Amount         %

Income tax expense $ 4,759 $ 176,605 $ (171,846 ) (97 %)

Income tax expenses decreased by $0.2 million, or 97% to $0.01 million for the
nine months ended September 30, 2021, as compared to $0.2 million for the nine
months ended September 30, 2020, this is primarily due to lower income before
tax for nine months ended September 30, 2021.

Revenue, Cost of Revenue and Operating Profit by Operating Segment


We currently provide our services and manage our business under three operating
segments which are Software Services, Managed Services and Support and Platform
Services.

                                      Nine Months Ended
                                        September 30,                     Changes
                                    2021             2020            Amount          %
Software Services              $  8,248,478     $  9,715,209     $ (1,466,731 )     (15 %)
Managed Services and Support     14,203,583       10,315,049        3,888,534        38 %
Platform Services                 3,628,853        2,313,835        1,315,018        57 %
Revenue                        $ 26,080,914     $ 22,344,093     $  3,736,821        17 %




Revenue from Software Services decreased by $1.5 million, or 15% to $8.2 million
for the nine months ended September 30, 2021, as compared to $9.7 million for
the nine months ended September 30, 2020. We faced delays in closing deals in
the Software Services segment as customers optimized the cost of supporting
legacy systems during the pandemic. The total customers serviced during the nine
months ended September 30, 2021, reduced to 26 from 32 for the nine months ended
September 30, 2020. Revenue from Managed Services and Support increased by $3.9
million, or 38% to $14.2 million for the nine months ended September 30, 2021,
as compared to $10.3 million for the nine months ended September 30, 2020. The
growth in Managed Services and Support revenue reflected our existing customers'
continued adoption and acceleration in the demand for cloud technology. Revenue
from Managed Services and Support include Cloud hosting revenue of $7.3 million
and $6.8 million for the nine months ended September 30, 2021, and 2020,
respectively. Revenue from Platform Services increased by $1.3 million, or 57%
to $3.6 million for the nine months ended September 30, 2021, as compared to
$2.3 million for the nine months ended September 30, 2020. Revenue from Platform
Services increased due to increase in the number of customers to 3 for the nine
months ended September 30, 2021 as compared to 1 for the nine months ended
September 30, 2020.

Factors affecting revenues of Software Services, Managed Services and Support and Platform Services


Our strategy is to achieve meaningful long-term revenue growth through sales of
Managed Services and Support and Platform Services to existing and new clients
within our target market. In order to increase our cross-selling opportunity
between our operating segments and realize long time revenue growth, our focus
has shifted more towards Managed Services and Support and Platform Services
which is of recurring nature when compared to Software Services segment which is
of non-recurring nature. This also helps in retaining existing customers by
leveraging our Managed Services and Support and Platform Services as a growth
agent. This renewed focus on driving demand for subscription and platform-based
model will help us in expanding our customer base and enhance customer retention
which is a challenge for our existing Software Services segment. Software
Services contracts are driven by Time and Material and on site employees
delivering services at customers location. This has been impacted due to
COVID-19 restrictions in employee's travel.

39




Our CloudEz and DataEz platforms are getting more traction, and this led to increase in Managed Services and Support revenue. We have made additional investments in Sales & Marketing and Research & Development to grow Managed Services & Support and Platform Services revenue. We expect this trend to continue and have a net positive impact on overall results of the operations.


Cost of Revenue

                                      Nine Months Ended
                                        September 30,                     Changes
                                    2021             2020            Amount          %
Software Services              $  5,925,652     $  7,054,549     $ (1,128,897 )     (16 %)
Managed Services and Support     10,409,624        7,645,808        2,763,816        36 %
Platform Services                 1,493,515        1,462,419           31,096         2 %
Cost of Revenue                $ 17,828,791     $ 16,162,776     $  1,666,015        10 %

Cost of Revenue from Software Services decreased by $1.1 million, or 16% to $5.9
million for the nine months ended September 30, 2021, as compared to $7.1
million for the nine months ended September 30, 2020. The drop in cost of
Software Services is due to lower Software Services revenue. Cost of Revenue
from Managed Services and Support increased by $2.7 million, or 36% to $10.4
million for the nine months ended September 30, 2021, as compared to $7.6
million for the nine months ended September 30, 2020. The increase is on account
of increase in the Managed Services and Support revenue driven by higher
adoption of cloud hosting. Cost of Revenue from Platform Services increased by
$0.03 million, or 2% to $1.4 million for the nine months ended September 30,
2021, as compared to $1.4 million for the nine months ended September 30, 2020.

                                           Nine Months Ended
                                             September 30,                         Changes
                                         2021             2020             Amount              %
Software Services                   $  1,069,703      $ 1,369,035      $   (299,332 )           (22 %)
Managed Services and Support           3,793,958        2,669,241         1,124,717              42 %
Platform Services                     (1,639,374 )       (618,000 )      

(1,021,374 ) (165 %) Total segment operating profit 3,224,287 3,420,276 (195,989 )

            (6 %)
Less: unallocated costs                5,243,139        2,741,769         2,501,370              91 %
Income from operations                (2,018,852 )        678,507        (2,697,359 )          (398 %)
Interest expense                         479,849           24,920           454,929            1826 %
Net income (loss) before income
tax expenses                        $ (2,498,701 )    $   653,587      $ 

(3,152,288 ) (482 %)



Operating profit from Software Services decreased by $0.3 million, or 22% to
$1.1 million for the nine months ended September 30, 2021, as compared to $1.4
million for the nine months ended September 30, 2020, mainly due to reduction in
the Software Services revenue. Operating profit from Managed Services and
Support increased by $1.1 million, or 42% to $ 3.8 million for the nine months
ended September 30, 2021, as compared to $2.7 million for the nine months ended
September 30, 2020, mainly due to increase in Managed Services and Support
revenue. Operating loss from Platform Services increased by $1 million, or 165%
to $(1.6) million for the nine months ended September 30, 2021, as compared to
$(0.6) million for the nine months ended September 30, 2020 due to increase
in
cost from Platform Services.

40




Liquidity and Capital Resources



                                          As of December       As of September      As of September
                                             31, 2020             30, 2021              30, 2020
Cash and cash equivalents                 $   1,402,700        $   1,148,429        $    174,955
Short-term investments                               -                    -                   -
Total cash, cash equivalents and
short-term investments                    $   1,402,700        $   1,148,429        $    174,955


                                          As of December       As of September       As of September
                                             31, 2020              30, 2021              30, 2020
Cash flows provided by operating
activities                                $    (734,673 )      $  (3,877,388 )       $  (2,001,889 )
Cash flows used in investing
activities                                     (477,457 )             50,354                18,617
Cash flows provided by financing
activities                                    1,640,000            3,673,470             1,183,395
Net increase in cash and cash
equivalents                               $     427,870        $    

(254,271 ) $ (799,877 )

As of September 30, 2021, our principal sources of liquidity for working capital purposes were cash, cash equivalents and short-term investments totaling $1.1 million.


We have financed our operations primarily through financing activity and
operating cash flows. We believe our existing cash, cash equivalents and
short-term investments generated from operations will be sufficient to meet our
working capital over at least the next 12 months. Our future capital
requirements will depend on many factors including our growth rate, subscription
renewal activity, the expansion of sales and marketing activities and the
ongoing investments in platform development.

Sources of Liquidity


As of September 30, 2021, our principal sources of liquidity consisted of cash
and cash equivalents of $1.1 million which was mainly on account of raising debt
to the extent of $2.6 million during the period. We believe that our cash and
cash equivalents as of September 30, 2021, and the future operating cash flows
of the entity will provide adequate resources to fund ongoing cash requirements
for the next twelve months. If sources of liquidity are not available or if we
cannot generate sufficient cash flow from operations during the next twelve
months, we may be required to obtain additional sources of funds through
additional operational improvements, capital market transactions, asset sales or
financing from third parties, a combination thereof or otherwise. We cannot
provide assurance that these additional sources of funds will be available or,
if available, would have reasonable terms.

Operating Activities


Net cash used in operating activities was $(3.9) million for the nine months
ended September 30, 2021, and net cash used from operations was $ (2.0) million
for the nine months ended September 30, 2020.

Investing Activities

Net cash used in investing activities was $0.05 million for the nine months ended September 30, 2021, and $0.01 million for the nine months ended September 30, 2020.


Financing Activities

Cash flows from financing activities was $3.7 million for the nine months ended
September 30, 2021 and $1.2 million for the nine months ended September 30,
2020. During the year 2020, we raised an aggregate amount of $1.6 million by
issuing convertible promissory notes to various investors in a private exempted
offering.

In addition, we raised approximately $1.7 million on January 13, 2021 and $0.9
million on February 10, 2021 by issuing convertible promissory notes to various
investors in a private exempted offering and PPP loan of $1.1 million for the
nine months ended September 30, 2021. Total principal amount of convertible
promissory notes issued is $4.2 million. These notes carry an interest rate of
10% per annum payable quarterly.

41




Off-Balance Sheet Arrangements




We do not have any relationships with unconsolidated organizations or financial
partnerships, such as structured finance or special purpose entities that would
have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes as defined by
Item 303(a)(4) of SEC Regulation S-K, as of September 30, 2021.

© Edgar Online, source Glimpses

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Managers and Directors
Suresh Venkatachari Chairman & Chief Executive Officer
Keith T. Ryan President & Managing Principal
Kim Holland Chief Financial Officer
Sudish Mogli Chief Technology Officer
Vivek Prakash Independent Director
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