UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  December 10, 2018

 

Streamline Health Solutions, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

0-28132

 

31-1455414

(State or other jurisdiction of incorporation)

 

(Commission File Number)

 

(I.R.S. Employer Identification No.)

 

1175 Peachtree Street NE, 10th Floor

Atlanta, GA 30361

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (404) 446-2052

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o                                    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o                                    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                                    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                                    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company               o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 

 


 

Item 2.02.                                        Results of Operations and Financial Condition.

 

On December 10, 2018, Streamline Health Solutions, Inc. (the “Company”) issued a press release announcing third quarter 2018 financial results.  A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

The information contained in this Item 2.02, as well as Exhibit 99.1 referenced herein, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor incorporated by reference in any filing under the Securities Act of 1933, as amended, unless the Company expressly so incorporates such information by reference.

 

Item 9.01.             Financial Statements and Exhibits.

 

(d)  Exhibits.

 

EXHIBIT

 

 

NUMBER

 

DESCRIPTION

 

 

 

99.1

 

Press release, dated December 10, 2018, regarding Third Quarter 2018 Financial Results.

 

2


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Streamline Health Solutions, Inc.

 

 

 

 

 

Date:      December 10, 2018

By:

/s/ David Sides

 

Name:

David Sides

 

Title:

President and Chief Executive Officer

 

3


Exhibit 99.1

 

 

News Release

 

STREAMLINE HEALTH® REPORTS THIRD QUARTER 2018 REVENUES OF $5.4 MILLION; ($0.7 MILLION) NET LOSS; ADJUSTED EBITDA OF $0.8 MILLION

 

Atlanta, GA — December 10, 2018 — Streamline Health Solutions, Inc. (NASDAQ: STRM), provider of integrated solutions, technology-enabled services and analytics supporting revenue cycle optimization for healthcare enterprises, today announced financial results for the third quarter of fiscal 2018, which ended October 31, 2018.

 

Revenues for the three-month period ended October 31, 2018 decreased approximately 16% to $5.4 million as compared to revenues of $6.4 million for the quarter ended October 31, 2017.  Recurring revenue comprised 82% of total revenue in the quarter ended October 31, 2018.

 

Net loss for the third quarter was approximately ($0.7 million) as compared to break even in the same period a year ago.   The net loss of ($0.7 million) includes the cost of the Atlanta operating lease assignment of $0.6 million, with a considerable amount of the cost being non-cash from the write-off of leasehold improvements and furniture and fixtures.

 

Adjusted EBITDA for the third quarter 2018 was $0.8 million, down from $1.5 million in the third quarter of 2017.

 

Our third quarter performance was very solid, as we continued to sharpen our focus on helping healthcare providers with the many challenges they face in the middle of their revenue cycle — from charge capture to bill drop,” stated David Sides, President and Chief Executive Officer, Streamline Health. “We have invested materially in eValuator to expand the number of rules for In-Patient use, and to accelerate the development and deployment of eValuator for Out-Patient use and for Pro-Fee for Physician Practices.  Going forward, we will make additional investments in sales and marketing to help us accelerate our revenue growth rate — primarily with eValuator, but also with our CDI and Abstracting solutions.

 

“We are starting to see the impact of eValuator sales in our contracted revenue as our bookings growth has improved by 200% year-over-year, and we have produced quarterly, sequential growth in our backlog of 13%.  We believe that these leading indicators point to our Company turning from lower revenue to a period of revenue growth in 2019 and beyond.  The impact of the operational improvements we made over the past couple of years — including the many cost-containment measures we have implemented — will have a positive impact on our fourth quarter adjusted EBITDA.  But the bulk of the effect will be reported next year when we expect to generate $5 million in Adjusted EBITDA with the same level of revenue as this year, although we anticipate marginal growth in our revenue base in 2019.  We will provide specific guidance for fiscal year 2019 during our fourth quarter and fiscal year end earnings call.”

 


 

Highlights for the third quarter ended October 31, 2018 included:

 

·                  Revenue for the third quarter 2018 was $5.4 million;

·                  Net loss for the third quarter 2018 was $(0.7 million);

·                  Adjusted EBITDA for the third quarter 2018 was $0.8 million;

·                  Backlog was up 13%, sequentially, from the second quarter 2018, to $26 million;

·                  Bookings were 200% of the YTD third quarter of 2017; up to $7.1 million.

 

Conference Call

 

The Company will conduct a conference call to review the results on Tuesday, December 11, 2018 at 9:00 AM ET. Interested parties can access the call by joining the live webcast: click here to register. You can also join by phone by dialing 877-269-7756.

 

A replay of the conference call will be available from Tuesday, December 11, 2018 at 12:00 PM ET to Monday, December 17, 2018 at 12:00 PM ET by dialing 877.660.6853 and requesting conference ID 13685656. An online replay of the presentation will also be available for six months following the presentation in the Investor Relations section of the Streamline Health website, www.streamlinehealth.net.

 

*Non-GAAP Financial Measures

 

Streamline Health reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). Streamline Health’s management also evaluates and makes operating decisions using various other measures. One such measure is adjusted EBITDA, which is a non-GAAP financial measure. Streamline Health’s management believes that this measure provides useful supplemental information regarding the performance of Streamline Health’s business operations.

 

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, and professional and advisory fees. A table illustrating this measure is included in this press release.

 

About Streamline Health

 

Streamline Health Solutions, Inc. (NASDAQ: STRM) is a healthcare industry leader in capturing, aggregating, and translating enterprise data into knowledge — actionable insights that support revenue cycle optimization for healthcare enterprises.   We deliver integrated solutions and analytics that enable providers to drive reimbursement in a value-based world. We share a common calling and commitment to advance the quality of life and the quality of healthcare — for society, our clients, the communities they serve, and the individual patient. For more information, please visit our website at www.streamlinehealth.net.

 

Safe Harbor statement under the Private Securities Litigation Reform Act of 1995

 

Statements made by Streamline Health Solutions, Inc. that are not historical facts are forward-looking statements that are subject to certain risks, uncertainties and important factors that could cause actual results to differ materially from those reflected in the forward-looking statements included herein. Forward-looking statements contained in this press release include, without limitation, statements regarding the Company’s estimates of future revenue, backlog, results of investments in sales and marketing, adjusted EBITDA, success of future products and related expectations and assumptions.  These risks and uncertainties include, but are not limited to, the timing of contract negotiations and execution of contracts and the related timing of the revenue recognition related

 


 

thereto, the potential cancellation of existing contracts or clients not completing projects included in the backlog, the impact of competitive solutions and pricing, solution demand and market acceptance, new solution development and enhancement of current solutions, key strategic alliances with vendors and channel partners that resell the Company’s solutions, the ability of the Company to control costs, the effects of cost-containment measures implemented by the Company, availability of solutions from third party vendors, the healthcare regulatory environment, potential changes in legislation, regulation and government funding affecting the healthcare industry, healthcare information systems budgets, availability of healthcare information systems trained personnel for implementation of new systems, as well as maintenance of legacy systems, fluctuations in operating results, effects of critical accounting policies and judgments, changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other similar entities, changes in economic, business and market conditions impacting the healthcare industry generally and the markets in which the Company operates and nationally, and the Company’s ability to maintain compliance with the terms of its credit facilities, and other risks detailed from time to time in the Streamline Health Solutions, Inc. filings with the U. S. Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revision to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

 

Company Contact:

Randy Salisbury

SVP, Chief Marketing Officer

(404) 229-4242

randy.salisbury@streamlinehealth.net

 


 

STREAMLINE HEALTH SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended
October 31,

 

Nine Months Ended
October 31,

 

 

 

2018

 

2017

 

2018

 

2017

 

Revenues:

 

 

 

 

 

 

 

 

 

Systems sales

 

$

309,522

 

$

348,526

 

$

1,827,071

 

$

1,055,941

 

Professional services

 

576,682

 

801,771

 

1,086,117

 

1,793,618

 

Audit Services

 

233,561

 

280,025

 

841,117

 

919,485

 

Maintenance and support

 

3,051,260

 

3,250,229

 

9,576,615

 

9,883,563

 

Software as a service

 

1,197,552

 

1,718,748

 

3,569,562

 

4,586,532

 

Total revenues

 

5,368,577

 

6,399,299

 

16,900,482

 

18,239,139

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Cost of systems sales

 

223,235

 

434,138

 

763,109

 

1,596,988

 

Cost of professional services

 

675,038

 

555,815

 

2,078,735

 

1,814,236

 

Cost of audit services

 

323,337

 

404,280

 

1,017,397

 

1,236,358

 

Cost of maintenance and support

 

505,779

 

667,307

 

1,720,366

 

2,241,969

 

Cost of software as a service

 

206,878

 

289,503

 

805,137

 

914,711

 

Selling, general and administrative

 

2,391,873

 

2,819,549

 

8,159,823

 

8,983,248

 

Research and development

 

1,026,423

 

932,251

 

3,301,587

 

3,985,161

 

Loss on exit of operating lease

 

561,898

 

 

1,368,061

 

 

Total operating expenses

 

5,914,461

 

6,102,843

 

19,214,215

 

20,772,671

 

Operating income (loss)

 

(545,884

)

296,456

 

(2,313,733

)

(2,533,532

)

Other expense:

 

 

 

 

 

 

 

 

 

Interest expense

 

(105,784

)

(113,078

)

(332,387

)

(360,723

)

Miscellaneous expenses

 

(25,128

)

(177,282

)

(118,156

)

(235,007

)

Income (loss) before income taxes

 

(676,796

)

6,096

 

(2,764,276

)

(3,129,262

)

Income tax expense

 

(1,714

)

(2,607

)

(5,141

)

(7,822

)

Net Income (loss)

 

$

(678,510

)

$

3,489

 

$

(2,769,417

)

$

(3,137,084

)

Basic Net earnings (loss) per common share

 

(0.03

)

 

(0.14

)

(0.16

)

Number of shares used in basic per common share computation

 

19,753,074

 

19,985,822

 

19,903,529

 

19,838,691

 

Diluted net earnings (loss) per common share

 

$

(0.03

)

$

 

$

(0.14

)

$

(0.16

)

Number of shares used in diluted per common share computation

 

19,753,074

 

23,068,423

 

19,903,529

 

19,838,691

 

 


 

STREAMLINE HEALTH SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

Assets

 

 

 

October 31,

 

January 31,

 

 

 

2018

 

2018

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

1,144,559

 

$

4,619,834

 

Accounts receivable, net of allowance for doubtful accounts of $307,736 and $349,058, respectively

 

1,562,074

 

3,001,170

 

Contract receivables

 

1,231,969

 

223,791

 

Prepaid hardware and third-party software for future delivery

 

 

5,858

 

Prepaid client maintenance contracts

 

469,335

 

506,911

 

Other prepaid assets

 

662,051

 

742,232

 

Other current assets

 

406,143

 

546,885

 

Total current assets

 

5,476,131

 

9,646,681

 

 

 

 

 

 

 

Non-current assets:

 

 

 

 

 

Property and equipment:

 

 

 

 

 

Computer equipment

 

1,414,876

 

2,852,776

 

Computer software

 

666,442

 

730,950

 

Office furniture, fixtures and equipment

 

 

683,443

 

Leasehold improvements

 

 

729,348

 

 

 

2,081,318

 

4,996,517

 

Accumulated depreciation and amortization

 

(1,804,305

)

(3,834,153

)

Property and equipment, net

 

277,013

 

1,162,364

 

 

 

 

 

 

 

Contract Receivables, less current portion

 

614,725

 

 

Capitalized software development costs, net of accumulated amortization of $19,553,507 and $18,658,183, respectively

 

5,700,270

 

4,307,351

 

Intangible assets, net

 

5,130,311

 

5,835,151

 

Goodwill

 

15,537,281

 

15,537,281

 

Other non-current assets

 

328,843

 

642,226

 

Total non-current assets

 

27,558,443

 

27,484,373

 

 

 

$

33,064,574

 

$

37,131,054

 

 


 

STREAMLINE HEALTH SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

Liabilities and Stockholders’ Equity

 

 

 

October 31,

 

January 31,

 

 

 

2018

 

2018

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

1,469,954

 

$

421,425

 

Accrued compensation

 

941,349

 

342,351

 

Accrued other expenses

 

1,089,304

 

609,582

 

Current portion of term loan

 

596,984

 

596,984

 

Deferred revenues

 

5,845,779

 

9,481,807

 

Other

 

22,281

 

 

Total current liabilities

 

9,965,651

 

11,452,149

 

 

 

 

 

 

 

Non-current liabilities:

 

 

 

 

 

Term loan, net of deferred financing cost of $75,074 and $128,275, respectively

 

3,506,816

 

3,901,353

 

Royalty liability

 

889,654

 

2,469,193

 

Deferred revenues, less current portion

 

752,093

 

332,645

 

Other Liabilities

 

112,848

 

274,128

 

Total non-current liabilities

 

5,261,411

 

6,977,319

 

Total liabilities

 

15,227,062

 

18,429,468

 

 

 

 

 

 

 

Series A 0% Convertible Redeemable Preferred Stock, $.01 par value per share, $8,686,392 and $8,849,985 redemption value, 4,000,000 shares authorized, 2,895,464 and 2,949,995 issued and outstanding, respectively

 

8,686,392

 

8,849,985

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, $.01 par value per share, 45,000,000 shares authorized; 20,127,703 and 20,005,977 shares issued and outstanding, respectively

 

201,277

 

200,060

 

Additional paid in capital

 

82,404,377

 

81,776,606

 

Accumulated deficit

 

(73,454,534

)

(72,125,065

)

Total stockholders’ equity

 

9,151,120

 

9,851,601

 

 

 

$

33,064,574

 

$

37,131,054

 

 


 

STREAMLINE HEALTH SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended,

 

 

 

October 31,
2018

 

October 31,
2017

 

Operating activities:

 

 

 

 

 

Net loss

 

$

(2,769,417

)

$

(3,137,084

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

411,277

 

595,866

 

Amortization of capitalized software development costs

 

895,325

 

1,574,493

 

Amortization of intangible assets

 

704,840

 

922,462

 

Amortization of other deferred costs

 

347,170

 

229,780

 

Valuation adjustment for warrants liability

 

 

104,666

 

Other valuation adjustments

 

71,428

 

124,423

 

Loss on exit of operating lease

 

1,368,061

 

 

Loss (gain) on disposal of fixed assets

 

5,190

 

(14,871

)

Share-based compensation expense

 

492,298

 

844,960

 

Provision for accounts receivable

 

(23,639

)

181,859

 

Changes in assets and liabilities, net of assets acquired:

 

 

 

 

 

Accounts and contract receivables

 

590,555

 

1,957,439

 

Other assets

 

272,823

 

(671,254

)

Accounts payable

 

1,048,529

 

(308,747

)

Accrued expenses

 

53,673

 

134,324

 

Deferred revenues

 

(4,176,055

)

(3,866,878

)

Net cash provided by (used in) operating activities

 

(707,942

)

(1,328,562

)

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(21,142

)

(24,517

)

Proceeds from sales of property and equipment

 

20,408

 

 

Capitalization of software development costs

 

(2,288,244

)

(1,336,942

)

Net cash used in investing activities

 

(2,288,978

)

(1,361,459

)

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Principal repayments on term loan

 

(447,738

)

(962,443

)

Principal payments on capital lease obligations

 

(3,714

)

(91,337

)

Proceeds from exercise of stock options, stock purchase plan, subscription and equity financing

 

35,388

 

23,703

 

Surrender of shares of common stock

 

(62,291

)

(41,813

)

Net cash used in financing activities

 

(478,355

)

(1,071,890

)

Net decrease in cash and cash equivalents

 

(3,475,275

)

(3,761,911

)

Cash and cash equivalents at beginning of year

 

4,619,834

 

5,654,093

 

Cash and cash equivalents at end of year

 

$

1,144,559

 

$

1,892,182

 

 


 

STREAMLINE HEALTH SOLUTIONS, INC.

Backlog

(Unaudited)

Table A

 

 

 

October 31

 

July 31

 

Streamline Health Software Licenses

 

$

687,000

 

$

53,000

 

Professional Services

 

1,843,000

 

1,867,000

 

Audit Services

 

1,239,000

 

1,019,000

 

Maintenance and Support

 

12,686,000

 

11,489,000

 

Software as a Service

 

9,617,000

 

8,936,000

 

Total 2018 backlog

 

$

26,072,000

 

$

23,364,000

 

Total 2017 backlog

 

$

47,668,000

 

$

46,362,000

 

 

STREAMLINE HEALTH SOLUTIONS, INC.

New Bookings

(Unaudited)

Table B

 

 

 

October 31

 

 

 

Three
Months
Ended

 

Nine
Months
Ended

 

Streamline Health Software licenses

 

$

340,000

 

$

1,795,000

 

Software as a service

 

708,000

 

1,862,000

 

Maintenance and support

 

116,000

 

1,203,000

 

Professional services

 

577,000

 

2,128,000

 

Audit Services

 

19,000

 

110,000

 

Total 2018 bookings

 

$

1,760,000

 

$

7,098,000

 

Total 2017 bookings

 

$

1,932,000

 

$

3,564,000

 

 


 

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):

 

(Unaudited)

 

 

 

Three Months Ended,

 

Nine Months Ended,

 

Adjusted EBITDA Reconciliation

 

October
31, 2018

 

October
31, 2017

 

October
31, 2018

 

October
31, 2017

 

Net Income (loss)

 

$

(679

)

$

3

 

$

(2,769

)

$

(3,137

)

Interest expense

 

106

 

113

 

332

 

361

 

Income tax expense

 

2

 

3

 

5

 

8

 

Depreciation

 

87

 

193

 

411

 

596

 

Amortization of capitalized software development costs

 

249

 

431

 

895

 

1,574

 

Amortization of intangible assets

 

235

 

256

 

705

 

922

 

Amortization of other costs

 

101

 

51

 

294

 

177

 

EBITDA

 

101

 

1,050

 

(127

)

501

 

Share-based compensation expense

 

125

 

290

 

492

 

845

 

Loss (gain) on disposal of fixed assets

 

7

 

(14

)

5

 

(15

)

Non-cash valuation adjustments to assets and liabilities

 

15

 

188

 

71

 

229

 

Associate severances and other costs relating to transactions or corporate restructuring

 

562

 

 

1,368

 

 

Adjusted EBITDA

 

$

810

 

$

1,514

 

$

1,809

 

$

1,560

 

Adjusted EBITDA per diluted share

 

 

 

 

 

 

 

 

 

Earnings (loss) per share — diluted

 

$

(0.03

)

$

 

$

(0.14

)

$

(0.16

)

Adjusted EBITDA per adjusted diluted share (1)

 

$

0.04

 

$

0.07

 

$

0.08

 

$

0.07

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares

 

19,753,074

 

23,068,423

 

19,903,529

 

19,838,691

 

Includable incremental shares — Adjusted EBITDA (2)

 

2,971,381

 

 

3,033,263

 

3,242,413

 

Adjusted diluted shares

 

22,724,455

 

23,068,423

 

22,936,792

 

23,081,104

 

 


(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.