Streamline Health® Reports Third Quarter 2016 Revenues Of $6.6 Million; Adjusted EBITDA Of $.2 Million; Net Loss Of $1.9 Million

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

Nine Months Ended

October 31,

October 31,

2016

2015

2016

2015

Revenues:

  Systems sales

$

314,218

$

327,493

$

2,190,256

$

2,567,710

  Professional services

865,308

621,547

2,104,003

1,631,878

  Maintenance and support

3,749,596

4,034,481

11,237,637

11,315,664

  Software as a service

1,706,366

2,171,548

5,144,876

6,428,358

        Total revenues

6,635,488

7,155,069

20,676,772

21,943,610

Operating expenses:

  Cost of systems sales

663,148

695,824

2,080,263

2,117,409

  Cost of professional services

1,318,933

829,964

2,486,721

2,249,029

  Cost of maintenance and support

790,291

766,594

2,483,462

2,297,772

  Cost of software as a service

450,695

611,158

1,390,308

2,052,758

  Selling, general and administrative

3,212,350

2,351,082

10,153,140

10,636,370

  Research and development

1,969,415

2,258,092

5,800,169

6,715,641

        Total operating expenses

8,404,832

7,512,714

24,394,063

26,068,979

Operating loss

(1,769,344)

(357,645)

(3,717,291)

(4,125,369)

Other expense (income):

  Interest expense

(98,871)

(206,286)

(380,897)

(698,402)

  Miscellaneous income (expenses)

(60,555)

110,383

(39,089)

1,939,543

Loss before income taxes

(1,928,770)

(453,548)

(4,137,277)

(2,884,228)

  Income tax benefit (expense)

(1,702)

(3,113)

(5,104)

(2,645)

Net loss

$

(1,930,472)

$

(456,661)

$

(4,142,381)

$

(2,886,873)

Less: deemed dividends on Series A Preferred Shares

(72,710)

(346,339)

(875,935)

(967,014)

Net loss attributable to common shareholders

$

(2,003,182)

$

(803,000)

$

(5,018,316)

$

(3,853,887)

Basic net loss per common share

$

$

(0.04)

$

(0.26)

$

(0.21)

Number of shares used in basic per common share computation

18,746,632

19,477,538

18,658,626

Diluted net loss per common share

$

(0.10)

$

(0.04)

$

(0.26)

$

(0.21)

Number of shares used in diluted per common share computation

19,645,521

18,746,632

19,477,538

18,658,626

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

Assets

October 31,

2016

January 31,

2016

Current assets:

  Cash and cash equivalents

$

2,540,462

$

9,882,136

  Accounts receivable, net of allowance for doubtful

    accounts of $214,117 and $155,407, respectively

2,956,880

4,199,315

  Contract receivables

360,876

119,697

  Prepaid hardware and third-party software for

    future delivery

5,858

5,858

  Prepaid client maintenance contracts

710,395

956,913

  Other prepaid assets

925,992

941,532

  Other current assets

18,323

97,986

        Total current assets

7,518,786

16,203,437

Non-current assets:

Property and equipment:

  Computer equipment

3,128,865

2,647,135

  Computer software

827,642

801,895

  Office furniture, fixtures and equipment

683,443

683,443

  Leasehold improvements

729,348

729,348

5,369,298

4,861,821

  Accumulated depreciation and amortization

(3,266,162)

(2,407,746)

Property and equipment, net

2,103,136

2,454,075

 Contract receivables, less current portion

—

8,711

 Capitalized software development costs, net of

   accumulated amortization of $17,066,321 and

   $14,919,948, respectively

5,835,305

6,123,638

Intangible assets, net of accumulated amortization of

   $5,648,013 and $4,671,675, respectively

7,726,910

8,155,325

Deferred financing costs, net of accumulated

   amortization of zero and $84,531, respectively

—

270,147

Goodwill

16,184,667

16,184,667

Other

779,726

746,018

       Total non-current assets

32,629,744

33,942,581

$

40,148,530

$

50,146,018

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

Liabilities and Stockholders' Equity

October 31,

2016

January 31,

2016

Current liabilities:

  Accounts payable

$

1,089,276

$

1,136,779

  Accrued compensation

660,244

935,324

  Accrued other expenses

175,713

328,551

  Current portion of long-term debt

842,258

673,807

  Deferred revenues

7,076,812

10,447,280

  Current portion of capital lease obligation

124,630

592,642

        Total current liabilities

9,968,933

14,114,383

Non-current liabilities:

  Term loans

5,232,064

7,861,084

  Warrants liability

168,238

205,113

  Royalty liability

2,385,315

2,291,888

  Lease incentive liability

352,545

369,406

  Capital lease obligation

—

93,257

  Deferred revenues, less current portion

789,574

1,212,709

        Total non-current liabilities

8,927,736

12,033,457

        Total liabilities

18,896,669

26,147,840

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 zero and $875,935, respectively

8,849,985

7,974,050

Stockholders' equity:

  Common stock, $.01 par value per share, 45,000,000 shares

    authorized, 19,684,284 and 18,783,540 shares issued and    

    outstanding, respectively

196,843

187,836

  Additional paid in capital

80,211,699

79,700,577

  Accumulated deficit

(68,006,666)

(63,864,285)

        Total stockholders' equity

12,401,876

16,024,128

$

40,148,530

$

50,146,018

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended October 31

2016

2015

Operating activities:

  Net loss

$

(4,142,381)

$

(2,886,873)

  Adjustments to reconcile net loss to net cash

provided by (used in) operating activities:

Depreciation

895,438

930,508

Amortization of capitalized software development costs

2,146,374

2,332,237

Amortization of intangible assets

976,338

1,011,690

Amortization of other deferred costs

192,947

142,764

Valuation adjustment for warrants liability

(36,875)

(1,558,466)

Share-based compensation expense

1,342,513

1,858,588

Other valuation adjustments

120,912

206,712

    Loss on disposal of property and equipment

567

92,448

    Gain on early extinguishment of lease liability

—

(33,059)

    Provision for accounts receivable

136,693

11,488

    Deferred tax benefit

—

(9,574)

  Changes in assets and liabilities, net of effects of acquisitions:

Accounts and contract receivables

1,679,810

3,569,941

Other assets

130,875

411,665

Accounts payable

(78,320)

(1,505,462)

Accrued expenses

(814,707)

(63,498)

Deferred revenues

(3,793,603)

(557,179)

  Net cash (used in) provided by operating activities

(1,243,419)

3,953,930

Investing activities:

Purchases of property and equipment

(501,148)

(243,283)

Capitalization of software development costs

(1,420,678)

—

    Payment for acquisition, net of cash received

(1,400,000)

—

  Net cash used in investing activities

(3,321,826)

(243,283)

Financing activities:

Principal repayments on term loan

(2,243,624)

(1,352,807)

Principal payments on capital lease obligation

(535,896)

(602,394)

Recovery of deferred financing costs

—

2,111

Proceeds from exercise of stock options and stock purchase plan

14,793

225,579

Payments related to settlement of employee shared-based awards

(11,702)

—

  Net cash used in financing activities

(2,776,429)

(1,727,511)

Decrease in cash and cash equivalents

(7,341,674)

1,983,136

Cash and cash equivalents at beginning of period

9,882,136

6,522,600

Cash and cash equivalents at end of period

$

2,540,462

$

8,505,736

STREAMLINE HEALTH SOLUTIONS, INC.

Backlog

(Unaudited)

Table A

October 31,
2016

January 31,
2016

October 31,

2015

Streamline Health Software Licenses

$

15,551,000

$

21,586,000

$

21,533,000

Third Party Hardware and Software

200,000

200,000

200,000

Professional Services

6,822,000

5,803,000

5,951,000

Maintenance and Support

19,413,000

23,292,000

21,057,000

Software as a Service

12,929,000

16,264,000

18,738,000

    Total

$

54,915,000

$

67,146,000

$

67,479,000

STREAMLINE HEALTH SOLUTIONS, INC.

New Bookings

(Unaudited)

Table B

Three Months Ended

October 31, 2016

Streamline Health Software licenses

$

21,000

1%

Software as a service

0

0%

Maintenance and support

3,000

0%

Professional services

3,116,000

99%

Hardware & third party software

21,000

1%

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. Non-GAAP financial measures are used by Streamline Health's management in its operating and financial decision-making 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,

Nine Months Ended,

October 31,
2016

October 31,
2015

October 31,
2016

October 31,
2015

Net loss

$

(1,930)

$

(457)

$

(4,142)

$

(2,887)

    Interest expense

99

206

381

698

    Income tax expense

2

3

5

3

    Depreciation

265

305

895

931

    Amortization of capitalized software 
    development costs

720

774

2,146

2,332

    Amortization of intangible assets

325

337

976

1,012

    Amortization of other costs

60

41

140

90

EBITDA

(459)

1,209

401

2,179

    Share-based compensation expense

433

575

1,343

1,859

    Loss on disposal of fixed assets

—

58

1

92

    Associate severances and other costs 
    relating to transactions or corporate
    restructuring

89

—

199

206

   Non-cash valuation adjustments to
    assets and liabilities

62

(178)

84

(1,352)

    Transaction related professional fees,
    advisory fees and other internal direct
    costs

103

34

358

53

    Other non-recurring income

—

—

—

(750)

Adjusted EBITDA

$

228

$

1,698

$

2,386

$

2,287

Adjusted EBITDA Margin⁽¹⁾

3%

24%

12%

10%

Adjusted EBITDA per diluted share

Loss per share – diluted

$

(0.10)

$

(0.04)

$

(0.26)

$

(0.21)

Adjusted EBITDA per adjusted diluted
share ⁽²⁾

$

0.01

$

0.08

$

0.10

$

0.11

Diluted weighted average shares

19,645,521

18,746,632

19,477,538

18,658,626

    Includable incremental shares —
    adjusted EBITDA ⁽³⁾

3,340,390

2,234,344

3,322,710

2,493,843

Adjusted diluted shares

22,985,911

20,980,976

22,800,248

21,152,469

(1)

Adjusted EBITDA as a percentage of GAAP revenues

(2)

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.

(3)

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.