Streamline Health® Reports Fourth Quarter And Fiscal Year 2016 Financial Performance

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

January 31,

Fiscal Year Ended

2017

2016

2017

2016

Revenues:

  Systems sales

$

322,323

$

378,594

$

2,512,579

$

2,946,304

  Professional services

526,331

580,124

2,395,987

2,212,002

  Audit Services

393,572

--

627,919

--

  Maintenance and support

3,572,298

3,829,816

14,809,935

15,145,480

  Software as a service

1,568,609

1,582,314

6,713,485

8,010,672

        Total revenues

6,383,133

6,370,848

27,059,905

28,314,458

Operating expenses:

  Cost of systems sales

632,400

660,632

2,712,663

2,778,041

  Cost of professional services

832,932

894,852

2,724,078

3,143,881

  Cost of audit services

504,579

--

1,100,154

--

  Cost of maintenance and support

743,049

738,778

3,226,511

3,036,550

  Cost of software as a service

373,397

389,385

1,763,705

2,442,143

  Selling, general and administrative

2,934,934

2,806,429

13,088,074

13,442,799

  Research and development

1,653,469

2,377,712

7,453,638

9,093,353

  Gain on sale of business

(238,103)

--

(238,103)

--

        Total operating expenses

7,436,657

7,867,788

31,830,720

33,936,767

Operating loss

(1,053,524)

(1,496,940)

(4,770,815)

(5,622,309)

Other income (expense):

  Interest expense

(127,962)

(185,824)

(508,859)

(884,226)

  Miscellaneous income (expenses)

145,173

284,880

106,084

2,224,423

Loss before income taxes

(1,036,313)

(1,397,884)

(5,173,590)

(4,282,112)

  Income tax (expense) benefit

17,128

(5,358)

12,024

(8,003)

Net loss

$

(1,019,185)

$

(1,403,242)

$

(5,161,566)

$

(4,290,115)

Less: deemed dividends on Series A Preferred Shares

--

(369,058)

(875,935)

(1,336,072)

Net loss attributable to common shareholders

$

(1,019,185)

$

(1,772,300)

$

(6,037,501)

$

(5,626,187)

Basic net loss per common share

$

$

(0.09)

$

(0.31)

$

(0.30)

Number of shares used in basic per common share computation

18,783,539

19,528,341

18,689,854

Diluted net loss per common share

$

(0.05)

$

(0.09)

$

(0.31)

$

(0.30)

Number of shares used in diluted per common share computation

19,680,751

18,783,539

19,528,341

18,689,854

STREAMLINE HEALTH SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

Assets

January 31,

2017

2016

Current assets:

  Cash and cash equivalents

$

5,654,093

$

9,882,136

  Accounts receivable, net of allowance for doubtful
    accounts of $198,449 and $155,407, respectively

4,489,789

4,199,315

  Contract receivables

466,423

119,697

  Prepaid hardware and third party software for
    future delivery

5,858

5,858

  Prepaid client maintenance contracts

595,633

956,913

  Other prepaid assets

732,496

941,532

  Other current assets

439

97,986

        Total current assets

11,944,731

16,203,437

Non-current assets:

  Property and equipment:

  Computer equipment

3,110,274

2,647,135

  Computer software

827,642

801,895

  Office furniture, fixtures and equipment

683,443

683,443

  Leasehold improvements

729,348

729,348

5,350,707

4,861,821

  Accumulated depreciation and amortization

(3,447,198)

(2,407,746)

  Property and equipment, net

1,903,509

2,454,075

 Contract receivables, less current portion

--

8,711

 Capitalized software development costs, net of  
   accumulated amortization of $16,544,797 and  
   $14,919,948 respectively

4,584,245

6,123,638

 Intangible assets, net

6,996,599

8,155,325

 Goodwill

15,537,281

16,184,667

 Other non-current assets

672,133

746,018

       Total non-current assets

29,693,767

33,672,434

$

41,638,498

$

49,875,871

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

Liabilities and Stockholders' Equity

January 31,

2017

Current liabilities:

  Accounts payable

$

1,116,525

$

1,136,779

  Accrued compensation

496,706

935,324

  Accrued other expenses

484,391

328,551

  Current portion of long-term debt

655,804

673,807

  Deferred revenues

9,916,454

10,447,280

  Current portion of capital lease obligations

91,337

592,642

        Total current liabilities

12,761,217

14,114,383

Non-current liabilities:

  Term loan, net of deferred financing cost of $199,211 and $270,147, respectively

4,883,286

7,590,937

  Warrants liability

46,191

205,113

  Royalty liability

2,350,754

2,291,888

  Lease incentive liability, less current portion

339,676

369,406

  Capital lease obligations

--

93,257

  Deferred revenues, less current portion

568,515

1,212,709

        Total non-current liabilities

8,188,422

11,763,310

        Total liabilities

20,949,639

25,877,693

Series A 0% Convertible Redeemable Preferred stock, $.01 par value per share, $8,849,985 redemption value, 4,000,000 shares authorized, 2,949,995 issued and outstanding, net of unamortized preferred stock discount of $0 and $875,935, respectively

8,849,985

7,974,050

Stockholders' equity:

  Common stock, $.01 par value per share, 45,000,000 shares
    authorized, 19,695,391 and 18,783,540 shares issued and
    outstanding, respectively

196,954

187,836

  Additional paid in capital

80,667,771

79,700,577

  Accumulated deficit

(69,025,851)

(63,864,285)

        Total stockholders' equity

11,838,874

16,024,128

$

41,638,498

$

49,875,871

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Fiscal Year

2016

2015

Operating activities:

  Net loss

$

(5,161,566)

$

(4,290,115)

  Adjustments to reconcile net loss to net cash provided by (used in)

     operating activities, net of acquisitions:

     Depreciation

1,099,957

1,245,400

Amortization of capitalized software development costs

2,771,437

3,073,479

Amortization of intangible assets

1,344,980

1,344,992

    Amortization of other deferred costs

324,496

206,881

    Valuation adjustment for warrants liability

(158,922)

(1,629,267)

    Deferred tax expense (benefit)

--

(9,575)

    Other valuation adjustments

94,009

(39,299)

    Gain from early extinguishment of lease liability

--

(33,059)

    Gain on sale of business

(238,103)

--

    Loss on disposal of fixed assets

567

92,448

    Share-based compensation expense

1,787,367

2,386,490

    Provision for accounts receivable

121,025

124,235

  Changes in assets and liabilities, net of assets acquired:

Accounts and contract receivables

(344,445)

2,718,330

Other assets

449,673

575,774

Accounts payable

(51,071)

(1,117,986)

Accrued expenses

(690,094)

(174,133)

Deferred revenues

(341,008)

1,405,980

  Net cash provided by (used in) operating activities

1,008,302

5,880,575

Investing activities:

Purchases of property and equipment

(506,040)

(518,254)

Capitalization of software development costs

(1,978,946)

--

Payment for acquisition

(1,400,000)

--

Proceeds from sale of business

2,000,000

--

  Net cash used in investing activities

(1,884,986)

(518,254)

Financing activities:

Principal repayments on term loan

(2,796,590)

(1,465,109)

Payments related to settlement of employee share-based awards

(11,702)

--

Principal payments on capital lease obligations

(569,189)

(815,826)

Recovery of deferred financing costs

--

2,111

Proceeds from exercise of stock options and stock purchase plan

26,122

276,039

  Net cash used in financing activities

(3,351,359)

(2,002,785)

Increase (decrease) in cash and cash equivalents

(4,228,043)

3,359,536

Cash and cash equivalents at beginning of year

9,882,136

6,522,600

Cash and cash equivalents at end of year

$

5,654,093

$

9,882,136

STREAMLINE HEALTH SOLUTIONS, INC.

Backlog

(Unaudited)

Table A

January 31,
2017

October 31,
2016

January 31,
2016

Streamline Health Software Licenses

$

11,504,000

$

15,551,000

$

21,586,000

Hardware and Third Party Software

150,000

200,000

200,000

Professional Services

4,068,000

4,973,000

5,803,000

Audit Services

1,847,000

1,849,000

Maintenance and Support

19,193,000

19,413,000

23,292,000

Software as a Service

13,861,000

12,929,000

16,264,000

    Total

$

50,623,000

$

54,915,000

$

67,145,000

STREAMLINE HEALTH SOLUTIONS, INC.

New Bookings

 (Unaudited)

Table B

Fiscal Year Ended

January 31, 2017

Streamline Health Software licenses

$

819,000

10%

Software as a service

2,359,000

28%

Maintenance and support

716,000

9%

Professional services

4,244,000

51%

Hardware & third party software

143,000

2%

Total bookings

$

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

Table C

This press release contains a non-GAAP financial measure under the rules of the U.S. Securities and Exchange Commission for Adjusted EBITDA. This non-GAAP information supplements and is not intended to represent a measure of performance in accordance with disclosures required by generally accepted accounting principles. Non-GAAP financial measures are used internally to manage the business, such as in establishing an annual operating budget. Streamline Health's management in its operating and financial decision-making uses non-GAAP financial measures because management believes these measures reflect ongoing business in a manner that allows meaningful period-to-period comparisons. Accordingly, the Company believes it is useful for investors and others to review both GAAP and non-GAAP measures in order to (a) understand and evaluate current operating performance and future prospects in the same manner as management does and (b) compare in a consistent manner the Company's current financial results with past financial results. The primary limitations associated with the use of non-GAAP financial measures are that these measures may not be directly comparable to the amounts reported by other companies and they do not include all items of income and expense that affect operations. The Company's management compensates for these limitations by considering the Company's financial results and outlook as determined in accordance with GAAP and by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in the tables attached to this press release. Streamline Health defines "Adjusted EBITDA" as net earnings (loss) plus interest expense, tax expense, depreciation and amortization expense of tangible and intangible assets, stock-based compensation expense, significant non-recurring operating expenses, and transactional related expenses including: gains and losses on debt and equity conversions, associate severances and related restructuring expenses, associate inducements, professional and advisory fees, and internal direct costs incurred to complete transactions.

Reconciliation of net earnings (loss) to non-GAAP Adjusted EBITDA (in thousands):

Adjusted EBITDA Reconciliation

Three Months Ended,

Twelve Months Ended,

January 31, 2017

January 31, 2016

January 31, 2017

January 31, 2016

Net loss

$

(1,020)

$

(1,403)

$

(5,162)

$

(4,290)

    Interest expense

128

186

509

884

    Income tax benefit

(17)

5

(12)

8

    Depreciation

205

314

1,100

1,245

    Amortization of capitalized software development costs

625

741

2,771

3,073

    Amortization of intangible assets

369

333

1,345

1,345

    Amortization of other costs

114

46

254

136

EBITDA

404

222

805

2,402

    Share-based compensation expense

444

527

1,787

2,386

    Gain on sale of business

(238)

--

(238)

--

    Loss on disposal of fixed assets

--

--

1

92

    Non-cash valuation adjustments to assets and liabilities

(149)

(317)

(65)

(1,669)

    Transaction related professional fees, advisory fees and

      other internal direct costs

34

40

392

93

    Associate severances and other costs relating to

      transactions or corporate restructuring

40

--

239

206

    Other non-recurring operating expenses

--

--

--

(750)

Adjusted EBITDA

$

535

$

472

$

2,921

$

2,761

Adjusted EBITDA per diluted share

Loss per share – diluted

$

(0.05)

$

(0.09)

$

(0.31)

$

(0.30)

Adjusted EBITDA per adjusted diluted share (1)

$

0.02

$

0.03

$

0.13

$

0.13

Diluted weighted average shares

19,680,751

18,783,539

19,528,341

18,689,854

    Includable incremental shares — Adjusted EBITDA (2)

3,340,390

2,989,571

3,327,130

3,075,278

Adjusted diluted shares

23,021,141

21,773,110

22,855,471

21,765,132

(1)

Adjusted EBITDA per adjusted diluted share for the Company's common stock is computed using the more dilutive of the two-class method or the if-converted method.

(2)

The number of incremental shares that would be dilutive under profit assumption, only applicable under a GAAP net loss. If GAAP profit is earned in the current period, no additional incremental shares are assumed.