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 7, 2016

 

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.)

 

1230 Peachtree Street, NE, Suite 600

Atlanta, GA 30309

(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))

 

 

 



 

Item 2.02.                                        Results of Operations and Financial Condition.

 

On December 7, 2016, Streamline Health Solutions, Inc. (the “Company”) issued a press release announcing third quarter 2016 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 7, 2016, regarding Third Quarter 2016 Financial Results.

 

1



 

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 7, 2016

By:

/s/ Nicholas A. Meeks

 

Name:

Nicholas A. Meeks

 

Title:

Senior Vice President,

 

 

Chief Financial Officer and Secretary

 

2



 

INDEX TO EXHIBITS

 

EXHIBIT

 

 

 

NUMBER

 

DESCRIPTION

 

 

 

99.1

 

Press release, dated December 7, 2016, regarding Third Quarter 2016 Financial Results.

 

3


Exhibit 99.1

 

 

News Release

 

STREAMLINE HEALTH® REPORTS THIRD QUARTER 2016 REVENUES OF $6.6 MILLION; ADJUSTED EBITDA OF $.2 MILLION; NET LOSS OF $1.9 MILLION

 

Bookings Improve to $3.2 Million in the Third Quarter

 

Atlanta, GA — December 7, 2016 — Streamline Health Solutions, Inc. (NASDAQ: STRM), provider of the Looking Glass® platform of integrated solutions, technology-enabled services and analytics supporting revenue cycle optimization for healthcare enterprises in the new value-based world today announced financial results for the third quarter of fiscal 2016, which ended October 31, 2016.

 

Revenues for the three-month period ended October 31, 2016 were $6.6 million, down approximately 10% compared to $7.4 million in Q2 2016, but up approximately 4% when excluding the $1 million in perpetual license revenue in that quarter.  Revenue was down approximately 7% as compared to $7.2 million in the same quarter year ago. Recurring revenue comprised 84% of total revenue in the quarter.

 

Adjusted EBITDA for the third quarter 2016 was approximately $.2 million, down from $1.6 million in Q2 2016, and $1.7 million in Q3 2015 due primarily to the acquisition of Opportune IT during the quarter and the many attendant one-time costs that were associated with the transaction.  Net loss for the third quarter of 2016 was $1.9 million.

 

“Our third quarter financial performance, although down from Q2 2016 levels, was as expected given that we did not close a perpetual license revenue contract in the quarter as we had in the previous quarter.  Additionally, along with the incremental expense from the Opportune IT acquisition, we made additional investments to accelerate the roadmap of the acquired technologies, which also impacted our Adjusted EBITDA performance,” stated David Sides, President and Chief Executive Officer, Streamline Health.  “However, we are very excited about the opportunities for growth both with our new Coding Audit Services and the benefits of integrating our existing coding technology with the new software.  Additionally, as we had projected, our bookings improved substantially over the first half of this year as many of the investments in sales have started to gain traction.”

 

Highlights for the third quarter ended October 31, 2016 included:

 

·                  Revenue for the third quarter 2016 was $6.6 million;

 

·                  Adjusted EBITDA for the third quarter 2016 was $.2 million;

 

·                  Net loss for the third quarter 2016 was $1.9 million;

 

·                  New sales bookings for the quarter were $3.2 million; and

 

·                  Backlog at the end of the quarter was $54.9 million.

 



 

Conference Call Information

 

The Company will conduct a conference call to review the results on Wednesday, December 7, 2016 at 5:00 PM ET. Interested parties can access the call by joining the live webcast: click here to register. You can also join by phone by dialing 888-256-1030 and then entering passcode 3605504.

 

A replay of the conference call will be available from Wednesday, December 7, 2016 at 8:00 PM ET to Monday, December 12, 2016 at 8:00 PM ET by dialing 888-203-1112 and entering passcode 3605504.

 

*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) before net interest expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, transaction expenses and other expenses that do not relate to Streamline Health’s core operations. 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.   Our Looking Glass® platform delivers 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 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, 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.

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

 

$

(0.10

)

$

(0.04

)

$

(0.26

)

$

(0.21

)

Number of shares used in basic per common share computation

 

19,645,521

 

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

 

 

 

Value

 

% of Total
Bookings

 

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

 

$

3,161,000

 

100

%

 



 

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)

 

 

 

Three Months Ended,

 

Nine Months Ended,

 

Adjusted EBITDA Reconciliation

 

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.