Streamline Health® Reports Fourth Quarter And Fiscal Year 2017 Financial Performance

STREAMLINE HEALTH SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

January 31,

Fiscal Year Ended

January 31,

2018

2017

2018

2017

Revenues:

  Systems sales

$

287,347

$

322,323

$

1,343,288

$

2,512,579

  Professional services

950,452

526,331

2,744,070

2,395,987

  Audit Services

296,800

393,572

1,216,285

627,919

  Maintenance and support

3,287,081

3,572,298

13,170,644

14,809,935

  Software as a service

1,277,256

1,568,609

5,863,788

6,713,485

        Total revenues

6,098,936

6,383,133

24,338,075

27,059,905

Operating expenses:

  Cost of systems sales

349,359

632,400

1,946,347

2,712,663

  Cost of professional services

586,298

832,932

2,400,534

2,724,078

  Cost of audit services

367,214

504,579

1,603,572

1,100,154

  Cost of maintenance and support

662,212

743,049

2,904,181

3,226,511

  Cost of software as a service

403,917

373,397

1,318,628

1,763,705

  Selling, general and administrative

2,451,028

2,934,934

11,434,276

13,088,074

  Research and development

1,367,028

1,653,469

5,352,189

7,453,638

  Gain on sale of business

--

(238,103)

--

(238,103)

        Total operating expenses

6,187,056

7,436,657

26,959,727

31,830,720

Operating loss

(88,120)

(1,053,524)

(2,621,652)

(4,770,815)

Other income (expense):

  Interest expense

(113,934)

(127,962)

(474,657)

(508,859)

  Miscellaneous income (expenses)

148,272

145,173

(86,735)

106,084

Loss before income taxes

(53,782)

(1,036,313)

(3,183,044)

(5,173,590)

  Income tax benefit

91,652

17,128

83,830

12,024

Net Income (Loss)

$

37,870

$

(1,019,185)

$

(3,099,214)

$

(5,161,566)

Less: deemed dividends on Series A Preferred Shares

--

--

--

(875,935)

Net Gain (Loss) attributable to common shareholders

$

37,870

$

(1,019,185)

$

(3,099,214)

$

(6,037,501)

Basic net loss per common share

$

$

(0.05)

$

(0.16)

$

(0.31)

Number of shares used in basic per common share computation

19,680,751

19,876,383

19,528,341

Diluted net loss per common share

$

0.00

$

(0.05)

$

(0.16)

$

(0.31)

Number of shares used in diluted per common share computation

23,241,521

19,680,751

19,876,383

19,528,341

January 31,

2018

2017

Current assets:

Cash and cash equivalents

$

4,619,834

$

5,654,093

Accounts receivable, net of allowance for doubtful accounts of $349,058 and $198,449, respectively

3,001,170

4,489,789

Contract receivables

223,791

466,423

Prepaid hardware and third-party software for future delivery

5,858

5,858

Prepaid client maintenance contracts

506,911

595,633

Other prepaid assets

742,232

732,496

Other current assets

546,885

439

Total current assets

9,646,681

11,944,731

Non-current assets:

  Property and equipment:

  Computer equipment

2,852,776

3,110,274

  Computer software

730,950

827,642

  Office furniture, fixtures and equipment

683,443

683,443

  Leasehold improvements

729,348

729,348

4,996,517

5,350,707

  Accumulated depreciation and amortization

(3,834,153)

(3,447,198)

  Property and equipment, net

1,162,364

1,903,509

 Capitalized software development costs, net of accumulated amortization of $18,658,183 and $16,544,797, respectively

4,307,351

4,584,245

 Intangible assets, net

5,835,151

6,996,599

 Goodwill

15,537,281

15,537,281

 Other non-current assets

642,226

672,133

 Total non-current assets

27,484,373

29,693,767

$

37,131,054

$

41,638,498

STREAMLINE HEALTH SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

Liabilities and Stockholders' Equity

January 31,

2018

2017

Current liabilities:

  Accounts payable

$

421,425

$

1,116,525

  Accrued compensation

342,351

496,706

  Accrued other expenses

609,582

484,391

  Current portion of long-term debt

596,984

655,804

  Deferred revenues

9,481,807

9,916,454

  Current portion of capital lease obligations

-

91,337

        Total current liabilities

11,452,149

12,761,217

Non-current liabilities:

Term loan, net of deferred financing cost of $128,275 and $199,211, respectively

3,901,353

4,883,286

  Warrants liability

--

46,191

  Royalty liability

2,469,193

2,350,754

  Lease incentive liability, less current portion

274,128

339,676

  Deferred revenues, less current portion

332,645

568,515

        Total non-current liabilities

6,977,319

8,188,422

        Total liabilities

18,429,468

20,949,639

Series A 0% Convertible Redeemable Preferred Stock, $.01 par value per share, $8,849,985 redemption and liquidation value, 4,000,000 shares authorized, 2,949,995 issued and outstanding

8,849,985

8,849,985

Stockholders' equity:

  Common stock, $.01 par value per share, 45,000,000 shares authorized; 20,005,977 and 19,695,391 shares issued and outstanding, respectively

200,060

196,954

  Additional paid in capital

81,776,606

80,667,771

  Accumulated deficit

(72,125,065)

(69,025,851)

        Total stockholders' equity

9,851,601

11,838,874

$

37,131,054

$

41,638,498

STREAMLINE HEALTH SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal Year

2017

2016

Operating activities:

  Net loss

$

(3,099,214)

$

(5,161,566)

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

     operating activities, net of acquisitions:

     Depreciation

774,074

1,099,957

Amortization of capitalized software development costs

2,113,385

2,771,437

Amortization of intangible assets

1,161,448

1,344,980

    Amortization of other deferred costs

340,502

324,496

    Valuation adjustment for warrants liability

(46,191)

(158,922)

    Other valuation adjustments

141,038

94,009

    Gain on sale of business

--

(238,103)

    Loss (Gain) on disposal of fixed assets

(15,947)

567

    Share-based compensation expense

1,109,241

1,787,367

    Provision for accounts receivable

233,550

121,025

  Changes in assets and liabilities, net of assets acquired:

Accounts and contract receivables

1,497,701

(344,445)

Other assets

(695,444)

449,673

Accounts payable

(695,100)

(51,071)

Accrued expenses

(117,311)

(690,094)

Deferred revenues

(670,517)

(341,008)

  Net cash provided by (used in) operating activities

2,031,215

1,008,302

Investing activities:

Purchases of property and equipment

(48,616)

(506,040)

Proceeds from sales of property and equipment

19,959

--

Capitalization of software development costs

(1,836,491)

(1,978,946)

Payment for acquisition

--

(1,400,000)

Proceeds from sale of business

--

2,000,000

  Net cash used in investing activities

(1,865,148)

(1,884,986)

Financing activities:

Principal repayments on term loan

(1,111,689)

(2,796,590)

Payments related to settlement of employee share-based awards

(41,813)

(11,702)

Principal payments on capital lease obligations

(91,337)

(569,189)

Proceeds from exercise of stock options and stock purchase plan

44,513

26,122

  Net cash used in financing activities

(1,200,326)

(3,351,359)

Increase (decrease) in cash and cash equivalents

(1,034,259)

(4,228,043)

Cash and cash equivalents at beginning of year

5,654,093

9,882,136

Cash and cash equivalents at end of year

$

4,619,834

$

5,654,093

STREAMLINE HEALTH SOLUTIONS, INC.

Backlog

(Unaudited)

Table A

January 31,
2018

October 31,
2017

January 31,
2017

Company Proprietary Software

$

984, 000

$

10,892,000

$

11,504,000

Third-Party Hardware and Software

--

--

150,000

Professional Services

2,048,000

2,824,000

4,068,000

Audit Services

1,293,000

1,454,000

1,847,000

Maintenance and Support

15,420,000

18,256,000

19,193,000

Software as a Service

13,048,000

14,242,000

13,861,000

    Total

$

32,793,000

$

47,668,000

$

50,623,000

STREAMLINE HEALTH SOLUTIONS, INC.

New Bookings

 (Unaudited)

Table B

Fiscal Year Ended

January 31, 2018

Value

Streamline Health Software licenses

$

463,000

10%

Software as a service

2,056,000

43%

Maintenance and support

315,000

7%

Professional services

1,388,000

29%

Audit Services

534,000

11%

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, 2018

  January
  31, 2017

  January
  31, 2018

  January
  31, 2017

Net Income (loss)

$

38

$

(1,020)

$

(3,099)

$

(5,162)

    Interest expense

114

128

475

509

    Income tax benefit

(92)

(17)

(84)

(12)

    Depreciation

178

205

774

1,100

    Amortization of capitalized software development costs

539

625

2,113

2,771

    Amortization of intangible assets

239

369

1,161

1,345

    Amortization of other costs

93

114

270

254

EBITDA

1,109

404

1,610

805

    Share-based compensation expense

264

444

1,109

1,787

    Gain on sale of business

--

(238)

--

(238)

    Loss (Gain) on disposal of fixed assets

(1)

--

(16)

1

    Non-cash valuation adjustments to assets and liabilities

(134)

(149)

95

(65)

    Transaction related professional fees, advisory fees and

      other internal direct costs

--

34

--

392

    Associate severances and other costs relating to

      transactions or corporate restructuring

--

40

--

239

Adjusted EBITDA

$

1,238

$

535

$

2,798

$

2,921

Adjusted EBITDA per diluted share

Loss per share – diluted

$

0.00

$

(0.05)

$

(0.16)

$

(0.31)

Adjusted EBITDA per adjusted diluted share ⁽¹⁾

$

0.05

$

0.02

$

0.12

$

0.13

Diluted weighted average shares

23,241,521

19,680,751

19,876,383

19,528,341

    Includable incremental shares — Adjusted EBITDA ⁽²⁾

--

3,340,390

3,244,825

3,327,130

Adjusted diluted shares

23,241,521

23,021,141

23,121,208

22,855,471

(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.