Streamline Health Solutions, Inc. 10-K
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
January 31, 2008
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File
Number: 0-28132
Streamline Health Solutions,
Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
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31-1455414
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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10200
Alliance Road, Suite 200
Cincinnati, OH
45242-4716
(Address
of principal executive offices) (Zip Code)
(513) 794-7100
(Registrants
telephone number, including area code)
Securities registered pursuant to Section 12 (b) of
the Act:
Common Stock, $.01 par value
( Title of Class )
The NASDAQ Stock Market
(Name of exchange on which
listed)
Securities
registered pursuant to Section 12 (g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of the registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K,
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting
company þ
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The aggregate market value of the voting stock held by
nonaffiliates of the registrant, computed using the closing
price as reported by The NASDAQ Stock Market, Inc. for the
Registrants Common Stock on July 31, 2007, was
$20,371,017.
The number of shares outstanding of the Registrants Common
Stock, $.01 par value, as of April 2, 2008: 9,260,320.
DOCUMENTS
INCORPORATED BY REFERENCE
Certain portions of the Registrants Definitive Proxy
Statement for the Annual Meeting of Stockholders to be held on
May 21, 2008 are incorporated by reference into
Part III of this
Form 10-K
to the extent stated herein. Except with respect to information
specifically incorporated by reference in this
Form 10-K,
the Definitive Proxy Statement is not deemed to be filed as a
part hereof.
TABLE OF CONTENTS
FORWARD-LOOKING
STATEMENTS
In addition to historical information contained herein, this
Annual Report on
Form 10-K
contains forward-looking statements relating to the
Companys plans, strategies, expectations, intentions, etc.
and are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The
forward-looking statements contained herein are no guarantee of
future performance and are subject to certain risks and
uncertainties that are difficult to predict and actual results
could differ materially from those reflected in the
forward-looking statements. These risks and uncertainties
include, but are not limited to, the timing of contract
negotiations and executions 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 products and
pricing, product demand and market acceptance, new product
development, key strategic alliances with vendors that resell
Streamline Health products, the ability of Streamline Health to
control costs, availability of products obtained from
third-party vendors, the healthcare regulatory environment,
healthcare information system budgets, availability of
healthcare information systems trained personnel for
implementation of new systems, as well as maintenance of legacy
systems, fluctuations in operating results and other risk
factors that might cause such differences including those
discussed herein, including, but not limited to, discussions in
the sections entitled Part I, Item 1
Business, Item 1A Risk Factors,
Part II, Item 7 Managements Discussion and
Analysis of Financial Condition and Results of Operations
and Item 8 Financial Statements and Supplemental
Data. In addition, other written or oral statements that
constitute forward-looking statements may be made by or on
behalf of the Company. Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect
managements analysis only as of the date thereof. The
Registrant undertakes no obligation to publicly revise these
forward-looking statements, to reflect events or circumstances
that arise after the date hereof. Readers should carefully
review the risk factors described in this and other documents
Streamline Health Solutions, Inc. files from time to time with
the Securities and Exchange Commission, including the Quarterly
Reports on
Form 10-Q
and any Current Reports on
Form 8-K.
PART I
General
Streamline Health Solutions, Inc. (Streamline
Health®
or the Company) is a healthcare information
technology company, which is focused on developing and licensing
proprietary software solutions that improve document-centric
information flows and complement and enhance existing
transaction-centric hospital healthcare information systems. The
Companys workflow and document management solutions bridge
the gap between current, predominantly paper-based processes and
transaction-based healthcare information systems by
1) electronically capturing document-centric information
from disparate sources, 2) electronically directing that
information through vital business processes, and
3) providing access to the information to authenticated
users (such as physicians, nurses, administrative and financial
personnel and payers) across the continuum of care. Streamline
Healths systems are designed for enterprise wide
deployment to seamlessly connect disparate departmental systems,
or silos of independent technologies which create Friction
PointsTM,
in a common interoperable document management workflow solution.
The Companys workflow-based products and services offer
solutions to specific healthcare business processes within the
Health Information Management (HIM) and revenue cycle, such as:
remote coding, abstracting and chart completion, remote
physician order processing, pre-admission registration scanning,
insurance verification, secondary billing services, explanation
of benefits processing, release of information processing and
other departmental workflow processes.
The Companys products and services also create an
integrated document-centric repository of historical health
information that is complementary to, and can be seamlessly
bolted on to existing transaction-centric clinical,
financial and management information systems, allowing
healthcare providers to aggressively move toward fully
Electronic Medical Record (EMR) processes while improving
service levels and convenience for all stakeholders. These
integrated systems allow providers and administrators to
dramatically improve the availability
1
of patient information while decreasing direct costs associated
with document retrieval,
work-in-process,
chart completion, document retention and archiving.
The Companys software solutions can be provided on a
subscription basis via remote application-hosting services or
licensed and installed locally. Streamline Health provides
ASPeNSM,
Application Service Provider-based remote hosting services to,
The University Hospital, a member of the Health Alliance of
Greater Cincinnati, M.D. Anderson Cancer Center, and
Childrens Medical Center of Columbus, OH, among others. In
addition, Streamline Health has licensed its workflow and
document management solutions, which are installed at leading
healthcare providers including Stanford Hospital and Clinics,
the Albert Einstein Healthcare Network, Beth Israel Medical
Centers, the Medical University Hospital Authority of South
Carolina, and Memorial Sloan-Kettering Cancer Center, among
others.
The Companys applications allow authenticated users, such
as physicians, nurses, administrative and financial personnel,
and payers with access to patient healthcare information that
exists in disparate systems across the continuum of care and
improve operational efficiencies through business process
re-engineering and automating labor-intensive and demanding
paper environments. Streamline Healths applications and
services are complementary to existing clinical and financial
systems, and use document imaging and advanced workflow tools to
ensure users can electronically access both
structured (transaction-centric) and
unstructured (document-centric) patient data and all
the various forms of clinical and financial healthcare
information from a single permanent and secure repository,
including clinicians handwritten notes, laboratory
reports, photographs, insurance cards, etc.
The Companys workflow solutions offer value to all of the
constituents in the healthcare delivery process by enabling them
to simultaneously access and utilize Streamline Healths
advanced technological workflow applications to process
information, on a real-time basis from virtually any location,
including the Physicians desktop, using web-based
technology. Streamline Healths solutions integrate its own
proprietary imaging platform, application workflow modules and
image and web-enabling tools that allow for the seamless merger
of back office functionality with existing Clinical
and Financial Information Systems at the desktop.
The Company offers its own document imaging/management
infrastructure (Foundation Suite) that is built for high volume
transaction processing and is specifically designed for the
healthcare industry. In addition to providing access to
information not previously available at the desktop, Streamline
Healths applications fulfill the administrative and
regulatory needs of the Health Information Management, Patient
Financial Services and other hospital departments. Furthermore,
these systems have been specifically designed to integrate with
other Clinical Information Systems. For example, Streamline
Health has integrated its products with selected systems from
Siemens Medical Solutions USA Inc. (Siemens), Cerner
Corporation, and GE Medical Systems applications, (see below)
thus enabling customers to use our solutions without the expense
of replacing entire software systems to gain the benefits of our
software functionality. By offering electronic access to all the
patient information components of the medical record, this
integration completes one of the most difficult tasks necessary
to provide a true Electronic Medical Record. Streamline
Healths systems deliver on-line enterprise wide access to
fully updated patient information, which historically was
maintained on a variety of media, including paper, magnetic
disk, optical disk, and microfilm.
The Company operates in one segment as a provider of health
information technology solutions that streamline healthcare
information flows within a healthcare facility. The financial
information required by Items 101(b) of
Regulation S-K
is contained in Item 6 Selected Financial Information of
this
Form 10-K.
Historically, Streamline Health has derived most of its revenues
from recurring application-hosting services, recurring
maintenance fees, professional services and system sales
involving the licensing, either directly or through remarketing
partners, of its Health Information Management Workflow and
Revenue Cycle Management Workflow solutions to Integrated
Healthcare Delivery Networks (IDN). In a typical transaction,
Streamline Health, or its remarketing partners, enter into a
perpetual license or fee-for-service subscription agreement for
Streamline Healths software applications and may license
or sell other third-party software and hardware components to
the IDN. Additionally, Streamline Health provides, as necessary,
professional services, including implementation, training, and
product support.
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Streamline Health earns its highest margins on proprietary
Streamline Health software and application-hosting services and
the lowest margins on third-party hardware and software. Sales
to customers may include different configurations of Streamline
Health software, hardware, third party software, and
professional services, resulting in varying margins among
contracts. The margins on professional services revenues
fluctuate based upon the negotiated terms of the agreement with
each customer and Streamline Healths ability to fully
utilize its professional services, maintenance, and support
services staff.
Beginning in 1998, Streamline Health began offering customers
the ability to obtain its workflow solutions on an
application-hosting basis as an Application Service Provider
(ASP). Streamline Health established a hosting data center and
installed Streamline Healths suite of workflow products,
called ASPeN (Application Service Provider eHealth
Network) within the hosting data center. Under this arrangement,
customers electronically capture information and securely
transmit the data to the hosting data center. The
ASPeN services store and manage the data using
Streamline Healths suite of applications, and customers
can view, print, fax, and process the information from anywhere
using the Streamline Health web-based applications. Streamline
Health charges and recognizes revenue for these
ASPeN services on a per transaction or
subscription basis as information is captured, stored, retrieved
and processed.
The decisions by a healthcare provider to replace, substantially
modify, or upgrade its information systems are a strategic
decision and often involve a large capital commitment requiring
an extended approval process. Since inception, Streamline Health
has experienced extended sales cycles. It is not uncommon for
sales cycles to take six to eighteen months from initial contact
to the execution of an agreement. As a result, the sales cycles
can cause significant variations in quarter-to-quarter operating
results. These agreements cover the licensing, implementation
and maintenance of the system, which typically takes place in
one or more phases. The licensing agreements generally provide
for the licensing of Streamline Healths proprietary
software and third-party software with a perpetual or term
license fee on either an unlimited number of users (site
license) or a specific number of users (concurrent users
license) that is adjusted upward depending on the number of
concurrent users using the software. Site-specific
customization, interfaces with existing customer systems and
other consulting services are sold on a fixed fee or a time and
materials basis. Alternatively, with Streamline Healths
ASP services solution, the application-hosting services
agreements generally provide for utilizing Streamline
Healths software and third-party software on a fee per
transaction or recurring subscription basis.
The ASPeN services were designed to overcome
obstacles in the buying decision such as large capital
commitment, length of implementation, and the scarcity of time
for Healthcare Information Systems personnel to implement new
systems. Streamline Health believes that large IDNs and
smaller healthcare providers are looking for this type of ASP
application because of the ease of implementation and lower
entry-level costs. Streamline Health believes its business model
is especially well suited for the medium to small acute care
facility marketplace as well as the ambulatory marketplace and
is actively pursuing remarketing agreements, in addition to
those discussed below, with other Healthcare Information Systems
and staff outsourcing providers to distribute Streamline
Healths workflow solutions.
Generally, revenues from systems sales are recognized when an
agreement is signed and products are made available to
end-users. Revenue recognition related to routine installation,
integration and project management are deferred until the work
is performed. Revenues from consulting, training, and
application-hosting services are recognized as the services are
performed. Revenues from short-term support and maintenance
agreements are recognized ratably over the term of the
agreements. Billings to customers recorded prior to the
recognition of the revenue are classified as deferred revenues.
Revenues recognized prior to progress billings to customers are
recorded as contract receivables.
In 2002, Streamline Health entered into a five year Remarketing
Agreement with IDX Information Systems Corporation, which was
subsequently acquired by GE Medical Systems, a unit of the
General Electric Company in January 2006. Under the terms of the
Remarketing Agreement, IDX/GE was granted a non-exclusive
worldwide license to distribute all Streamline Health workflow
software including
accessANYwareTM,
Coding Workflow, and ASPeN application-hosting
services to its customers and prospective customers, as defined
in the Remarketing Agreement. The Agreement has an automatic
annual renewal provision and, after the initial five year term,
which
3
ended January 30, 2007, can be cancelled by IDX/GE upon
90 days written notice to the Company. The Company has no
reason to believe that the agreement will not continue to be
renewed annually or will be terminated.
Under the terms of the Remarketing Agreement, Streamline Health
records this revenue when the products are made available to
end-users. Royalties are remitted to Streamline Health based
upon GE sublicensing Streamline Healths software to its
customers. Thirty percent of the royalty is due 45 days
following the end of the month in which GE executes an end-user
license agreement with its customer. The remaining seventy
percent of the royalty is due from GE, in varying amounts based
on specific milestones, 45 days following the end of the
month in which a milestone occurs.
In December 2007, Streamline Health entered into an agreement
with Emergis, Inc. under which Emergis is integrating Streamline
Healths
accessANYwareTM
document management repository and document workflow
applications into its Oacis Electronic Medical Record (EMR)
solution. To date, no revenues have been recorded for this new
reseller.
Streamline Healths quarterly operating results have varied
in the past and will continue to do so in the future because of
various reasons including: demand for Streamline Healths
products and services, long sales cycles, and extended
installation and implementation cycles based on customers
schedules. Sales are often delayed because of customers
budgets and competing capital expenditure needs as well as
personnel resource constraints within an integrated delivery
network.
Delays in anticipated sales or installations have a significant
impact on Streamline Healths quarterly revenues and
operating results, because substantial portions of the operating
expenses are fixed.
The U.S. Department of Health and Human Services, in its
National Health Expenditure Projections released in January
2003, believes that health spending expenditures will reach $3.1
trillion in 2012, growing at an average annual rate of 7.3%
during the forecasted period
2002-2012.
As a share of the Gross Domestic Product, health spending is
projected to reach 17.7% by 2012 up from its 2002 level of
14.1%. Total spending on healthcare was $1.9 trillion in 2004,
over four times the amount spent on defense (source: National
Coalition on Health Care). Hospital spending accounted for 28%
of the growth in personal health spending between 1997 and 2000
and increased to 38% by 2002 2004. The federal
Centers for Medicare and Medicaid Services projections indicate
that by 2015, health spending will account for 20% of the gross
domestic product, up from 16% in 2005 and the growth in spending
is projected to average 7.2% a year. In response to this growth,
the healthcare industry is undergoing significant change as
competition and cost-containment measures imposed by
governmental and private payers have created significant
pressures on healthcare providers to control healthcare costs
while providing quality patient care. At the same time, the
healthcare delivery system is experiencing a shift from a highly
fragmented group of non-allied healthcare providers to
integrated healthcare networks, which combine all of the
services, products and equipment necessary to address the needs
of healthcare customers. As a result, healthcare providers are
seeking to cut costs, increase productivity and enhance the
quality of patient care through improved access to information
throughout the entire hospital or integrated healthcare network.
In 2004, President Bush called for all Americans to have
electronic health records by 2014. Since then he has emphasized
health-care information technology in some very high-profile
speeches, including his 2007 State of the Union address, calling
it critical to making the United States health-care system more
efficient, affordable, and safe.
Today, the majority of the patient records are paper-based. The
inefficiencies of paper-based records increase the cost of
patient care. Physicians often cannot gain access to medical
records at the time of patient visits, and multiple users cannot
simultaneously access the record when only a single copy of the
paper-based patient record is available. Based upon Streamline
Healths experience in installing its systems, a typical
500 bed hospital can produce 15,000 to 20,000 pages of new
patient information each day even with computerized admission,
billing, laboratory and radiology systems, and individual
physician document retrieval requests can be as high as
100 documents per physician per day. The volume of medical
images in the patient record is expanding as well. In addition
to images such as x-rays and CAT scans, MRIs, new image
forms such as digitized slides, videos and photographs
proliferate. Thus, the ability to store and retrieve images of
voluminous paper records and medical images on a timely basis is
a critical feature of a complete Computerized Patient Record.
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In order to simultaneously reduce costs and enhance the level of
patient care, hospitals and other healthcare providers are
requiring comprehensive, cost-effective information systems that
deliver rapid access to fully updated and complete patient
information. Traditional Healthcare Information Systems are
inadequate because: (i) they do not capture large amounts
of the patient records which are paper-based and stored in
various sites throughout the enterprise; (ii) computerized
patient data is generated using a variety of disparate systems
which cannot share information; and (iii) multimedia
medical information such as x-rays, CAT scans, MRIs, video
and audio information are frequently inaccessible at the point
of patient care. Accordingly, hospitals and other healthcare
providers have begun to increase their information systems
expenditures. In 2007, the Medical Records Institute Survey of
Electronic Medical Record Trends and Usage reported that the top
priority for strategic decisions in Information Technology was
the need to improve clinical processes or workflow efficiencies
and the major factor driving Electronic Medical Record adoption
in the hospital segment was patient safety considerations
Streamline Health believes that the HIPAA regulations are an
additional impetus for IDNs to embrace Streamline Health
products and services as a means of ensuring compliance with
Federal Regulations.
Document imaging and workflow (management) technologies are
essential elements of a complete EMR because they allow for the
storage of unstructured data (i.e., patient record elements
other than data or text, such as hand written physician or
nursing notes and physician orders, photographs, images of a
document) and they enable digitized x-rays, CAT scans,
MRIs, video and audio information to be accessed and
delivered to the caregiver at the point of patient care.
Streamline Health believes the demand for its Health Information
Management Workflow solutions, which can supply document-imaging
capabilities to the EMR, will increase in future years.
In addition to mandated HIPAA regulations, the healthcare
industry is being strongly encouraged by many professional
medical organizations to make greater use of information
technology. A report by the Institute of Medicine (IOM) of the
National Academies, entitled To Err is Human: Building a
Better Health System, envisioned a revamped system that,
among other things, makes greater use of information technology
to enable providers and institutions to move away from
paper-based medical record systems to take advantage of new
information technology. The American Medical Association,
American Academy of Family Physicians, American College of
Physicians, American Society of Internal Medicine, and the
American College of Surgeons, issued a joint statement
supporting the IOM recommendations.
Regulatory
Matters
The U.S. Department of Health and Human Services (HSS)
asked the Institute of Medicine of the National Academy of
Sciences to design a standardized model of an electronic health
record, in a move that may help spur nationwide acceptance of
EMRs. The impact of such a change, if implemented by HSS,
on current Streamline Health products and services is unknown at
this time. However, Streamline Health believes that its software
and systems are sufficiently flexible to accommodate changing
regulatory requirements. Also, in 2004, President Bush put forth
the goal of establishing EMRs for most Americans within
10 years. A national health-technology coordinator has been
appointed who reports to the Secretary of HSS. His
responsibility is specifically to create a plan to guide the
highly fragmented industry toward an interoperable electronic
medical records system. As noted in a Wall Street Journal
article dated July 21, 2004, Putting such a system in
place can cost a major hospital $20 million or more. HSS
estimated then that in the U.S., only about 13% of hospitals had
adopted electronic health records for patients. As a result, the
health-care industry lags far behind most other industries in
using computers. In 2005, President Bush appointed a
national coordinator for Health Information Technology in the
Health and Human Services Department. His task is to give
every American an electronic medical record of their health care
by 2014, and link all the records into one giant medical
Internet, called the National Health Information Network.
HHS will build the networks backbone and set the
standards for swapping data. Physicians and hospitals will
have to pay for the computers, software, and other
infrastructure, which according to HSS is estimated at up
to $150 billion over five years.
Presidents
Information Technology Advisory Committee
In 2004, the Presidents Information Technology Advisory
Committee issued its report entitled Revolutionizing Health
Care Through Information Technology, which focused on the
most fundamental and pervasive problem of healthcare
delivery: the paper-based medical record. In the report,
they stated the potential of
5
information technology to reduce the number of medical errors,
reduce cost, and improve patient care is enormous. The essence
of our recommendations is a framework for 21st century
health care information infrastructure that revolutionizes
medical records systems. The four core elements of this
framework are:
(1) Electronic health records for all Americans that
provide every patient and his or her caregivers the necessary
information required for optimal care while reducing costs and
administrative overhead.
(2) Computer-assisted clinical decision support to increase
the ability of health care providers to take advantage of
state-of-the-art medical knowledge as they make treatment
decisions (enabling the practice of evidenced-based medicine).
(3) Computerized provider order entry such as
for tests, medicine, and procedures both for
outpatient care and within the hospital environment.
(4) Secure, private, interoperable, electronic health
information exchange, including both highly specific standards
for capturing new data and tools for capturing
non-standard-compliant electronic information from legacy
systems.
Streamline Healths current products and services can
currently be used to implement some of the recommendations or
provide interim solutions to some of the aspects recommended in
items 1, 3 & 4 above, especially with regard to
legacy, paper based, medical information, order
entry systems, other than medication, and security of exchanging
health information.
Based on the Federal initiatives noted above, Streamline Health
believes that its product and services are able to support these
and other similar initiatives, and its products are currently
available and installed at leading healthcare facilities
throughout the U.S.
Regulations
Relating to Confidentiality
Federal and state laws regulate the confidentiality of patient
records and the circumstances under which such records may be
released. These regulations govern both the disclosure and use
of confidential patient health information. Regulations
governing electronic health data privacy are continuing to
evolve. The Health Insurance Portability and Accountability Act
of 1996, enacted August 22, 1996, is designed to improve
the efficiency of healthcare by standardizing the interchange of
specified electronic data, and to protect the security and
confidentiality of Protected Health Information (PHI). The
legislation requires that covered entities comply with national
standards for certain types of electronic health information
transactions and the data elements used in such transactions,
and adopt policies and practices to ensure the integrity and
confidentiality of PHI.
Regulations adopted pursuant to HIPAA include rules addressing
several areas. The final Privacy Rule also extended the scope of
enforcement to PHI residing on non-electronic media, such as
paper, as well as to email, oral and written communications.
Streamline Health cannot predict the potential impact of new or
revised regulations that have not yet been released or made
final, or any other regulations that might be adopted. Congress
may adopt legislation that may change, override, conflict with,
or preempt the currently issued regulations. Additionally,
legislation governing the dissemination of patient health
information is also from time to time proposed and debated at
the state level. These laws or regulations, when adopted, could
restrict the ability of customers to obtain, use, or disseminate
patient health information. Streamline Health believes that the
features and architecture of Streamline Healths products
are such that it currently supports or should be able to make
the necessary modifications to its products, if required, to
ensure support of the HIPAA regulations, and other legislation
or regulations.
However, if the regulations are unduly restrictive, this could
cause delays in the delivery of new versions of products and
adversely effect the licensing of Streamline Healths
products. Overall, Streamline Health believes the HIPAA
regulations will continue to stimulate healthcare organizations
to purchase computer-based EMR systems that automate the
collection, use, and disclosure of patient health information,
while maintaining appropriate security and audit controls over
the information. However, there can be no assurance that an
increase in the purchase of new systems or additional use of
Streamline Health application-hosting services will occur.
6
Rapid
Technological Change and Evolving Market
The market for Streamline Healths products and services is
characterized by rapidly changing technologies, regulatory
requirements, evolving industry standards and new product
introductions and enhancements that may render existing products
obsolete or less competitive. As a result, Streamline
Healths position in the healthcare information technology
market could change rapidly due to unforeseen changes in the
features and functions of competing products, as well as the
pricing models for such products. Streamline Healths
future success will depend, in part, upon Streamline
Healths ability to enhance its existing products and
services and to develop and introduce new products and services
to meet changing requirements.
Changes
and Consolidation in the Healthcare Industry
Streamline Health derives substantially all of its revenues from
the licensing of software, providing professional services and
maintenance services and providing application-hosting services
within the healthcare industry. Accordingly, the success of
Streamline Health is dependent upon the regulatory and economic
conditions in the healthcare industry. Many healthcare providers
are consolidating to establish integrated delivery networks to
take advantage of economies of scale, greater marketing power
and greater leverage in negotiating with vendors who supply the
industry with the goods and services they require. The impact of
such consolidations, Streamline Health believes, will benefit
Streamline Health as more healthcare organizations investigate
methods to streamline operations, including outsourcing non-core
services to reduce costs and improve the quality of patient care
through the use of information technology, especially in the
paper intensive area of Patient Medical Records and Patient
Financial Services.
Key
Personnel
Streamline Healths success depends, to a significant
degree, on its management, sales and technical personnel.
Streamline Health must recruit, motivate and retain highly
skilled managers, sales force, consulting and technical
personnel, including application programmers, database
specialists, consultants and system architects skilled in the
technical environments in which Streamline Healths
products operate. Competition for such technical expertise is
intense. Our failure to attract and retain qualified personnel
could have a material adverse impact on the Company.
Limited
Protection of Proprietary Technology
The success of Streamline Health depends on the protection of
its intellectual property rights relating to its proprietary
technology. Streamline Health relies on a combination of
confidentiality, nondisclosure, license, and employment
agreements, trade secret laws, copyrights, and restrictions on
the disclosure of its intellectual property. Notwithstanding
these precautions, others may copy, reverse engineer or design
independently, technology similar to Streamline Healths
products. It may be necessary to litigate to enforce or defend
Streamline Healths proprietary technology or to determine
the validity of the intellectual property rights of others.
Streamline Health could also be required to defend itself
against claims made by third parties for intellectual property
right infringement. Any litigation, could be successful or
unsuccessful, may result in substantial cost and require
significant attention by management and technical personnel.
Warranties
and Indemnities
Streamline Healths products are very complex and may not
be error free, especially when first released. Failure of any
Streamline Health product to operate in accordance with its
specifications and documentation could constitute a breach of
the license agreement and require Streamline Health to correct
the deficiency. If such deficiency is not corrected within the
agreed upon contractual limitations on liability and cannot be
corrected in a timely manner, it could constitute a material
breach of a contract allowing the termination thereof and
possibly subjecting Streamline Health to a financial liability.
Also, Streamline Health indemnifies its customers against
third-party infringement claims. If such claims are made, even
if they are without merit, they could be expensive to defend. If
Streamline Health becomes liable to a third-party for
infringement of their intellectual property,
7
Streamline Health could be required to pay substantial amounts
as damages, obtain a license to use the infringing technologies,
develop its own noninfringing technologies, or cease using the
infringing intellectual property.
Competition
Several companies historically have dominated the Healthcare
Clinical Information System software market and several of these
companies have either acquired, developed or are developing
their own document imaging and workflow technologies. The
industry is undergoing consolidation and realignment as
companies position themselves to compete more effectively.
Strategic alliances between vendors offering Health Information
Management Workflow and document imaging technologies and
vendors of other healthcare systems are increasing. Barriers to
entry to this market include technological and application
sophistication, the ability to offer a proven product, a
well-established customer base and distribution channels, brand
recognition, the ability to operate on a variety of operating
systems and hardware platforms, the ability to integrate with
pre-existing systems and capital for sustained development and
marketing activities. Streamline Health believes that these
barriers taken together represent a moderate to high level
barrier to entry. Foreign competition has not been a significant
factor in the market, to date.
Streamline Health has many competitors including Clinical
Information System vendors that are larger and more established
and have substantially more resources than Streamline Health. In
addition, information and document management companies serving
other industries may enter the market. Suppliers and companies
with whom Streamline Health may establish strategic alliances
may also compete with Streamline Health. Such companies and
vendors may either individually, or by forming alliances
excluding Streamline Health, place bids for large agreements in
competition with Streamline Health. A decision on the part of
any of these competitors to focus additional resources in the
image-enabling, workflow, and other markets addressed by
Streamline Health could have a material adverse effect on
Streamline Health.
Streamline Health believes that the principal competitive
factors in its market are customer recommendations and
references, company reputation, system reliability, system
features and functionality (including ease of use),
technological advancements, customer service and support,
breadth and quality of the systems, the potential for
enhancements and future compatible products, the effectiveness
of marketing and sales efforts, price and the size and perceived
financial stability of the vendor. In addition, Streamline
Health believes that the speed with which companies in its
market can anticipate the evolving healthcare industry structure
and identify unmet needs are important competitive factors.
There can be no assurance that Streamline Health will be able to
compete successfully in the future against existing or potential
competitors.
Streamline Health believes that its principal competitors are:
American Management Systems, Incorporated; Cerner Corporation;
Eclipsys Corporation; Hyland Software, Inc.; McKesson HBOC,
Inc.; MedPlus, Inc. (a subsidiary of Quest Diagnostics
Incorporated); Perceptive Vision, Inc.; Siemens Medical
Solutions USA, Inc. (a subsidiary of Siemens AG); and
SoftMed Systems, Inc., (a unit of 3M).
The
Streamline Health Solution
Streamline Healths products and services streamline
information flows and provide Health Information Management
Workflow, Patient Financial Services and other departmental
Workflow solutions for the patient and other information access
needs of hospitals and integrated healthcare delivery networks.
Streamline Healths systems enable medical and
administrative personnel to rapidly and efficiently capture,
store, manage, route, retrieve and process vast amounts of
clinical, financial, patient and other information.
Streamline Healths systems: (i) capture
and store electronic data from disparate hospital information
systems through real-time, computerized interfaces;
(ii) provide applications for efficiently scanning and
automatically indexing paper-based records; (iii) allow
storage of a patients lifetime medical record on secure
media which also provides rapid access to high volumes of data
enterprise wide; (iv) provide technologically advanced
workflow automation software to facilitate the re-engineering of
business processes; and (v) incorporate physician-oriented
interfaces that allow the user to easily locate and retrieve
patient information in the hospital or clinical setting,
including the point of patient care.
8
Streamline Healths Health Information Management Workflow
and Patient Financial Services Workflow solutions provide
financial, administrative, and clinical benefits to the
healthcare provider and facilitate more effective patient care.
These benefits include: (i) improved access to patient
information to assist in making informed clinical and financial
decisions; (ii) reduced costs for administrative personnel
due to increased workflow efficiency, as data can be routed
within an organization to all users who need to process that
information simultaneously or in sequence as required;
(iii) increased productivity through the elimination of
file contention by providing multiple users simultaneous access
to patient medical records;(iv) reduced costs and improved care
through the reduction of unnecessary testing and admissions;
(v) improved cash flow through accelerated account
receivable collections and reductions in technical
denials (which occur when a third-party payer refuses
payment because of the providers inability to substantiate
billing claims due to loss of portions or all of the patient
record); (vi) expedited treatment decisions, and fewer
redundant tests as a result of timely access to complete
information; (vii) fewer medical record errors by
minimizing misfiled, lost and improperly completed records; and
(viii) increased security of patient information through
improved controls on access to confidential data and the
creation of audit trails that identify the persons who accessed
or even tried to access such information.
The
Streamline Health Strategy
Streamline Healths objective is to continue to be a
leading provider of Health Information Management and Patient
Financial Services Workflow solutions to the healthcare
industry. Important elements of Streamline Healths
business strategy include:
Expand
Distribution Channels
Streamline Health estimates the total market for Streamline
Healths document management products and services could be
in excess of $16 billion, and the market is less than 15%
penetrated. A 2001 healthcare industry report stated that in
order to comply with the HIPAA healthcare information electronic
transmission regulations, healthcare systems will need to adjust
existing systems or purchase new Information Technology systems,
hire and retrain staff, and make significant changes to the
current processes associated with maintaining patient privacy,
the cost of which is estimated to be an amount in excess of
$25 billion. Streamline Health strongly believes its highly
evolved, secure and technologically advanced web browser-based
ASP solutions will position Streamline Health to take advantage
of, what it continues to believe will be, significantly
increasing market opportunities for Streamline Health and its
distribution partners in the future.
In 2002, Streamline Health entered into a five-year Remarketing
Agreement with IDX (now GE Medical Systems), which offers a wide
variety of patient care products to integrated delivery
networks, group practices, academic medical centers,
radiological centers, and hospitals nationwide. At that time,
IDX had installed its products at more than 2,600 customer sites
with systems deployed to serve over 120,000 physicians. Under
the terms of the Agreement, IDX/GE was granted a non-exclusive
worldwide license to distribute all Streamline Health
applications and ASPeN services to its customers
and prospective customers, as defined in the Agreement. GE sells
Streamline Healths Health Information Management and
enterprise document management and document Workflow solutions
as an integrated component of the GE
Centricity®
Enterprise clinical and financial information systems. The
Agreement has an automatic annual renewal provision after the
initial five year period, and can be cancelled by GE upon
90 days written notice to the Company.
It is Streamline Healths intention to develop additional
remarketing alliances with other Healthcare Information Systems,
Medical Records management, and Medical Records outsourcing
vendors and to explore other means of expanding Streamline
Healths distribution channels.
Application
Service Provider Application-hosting Services
In 1998, Streamline Health began offering customers the ability
to obtain its workflow solutions on an application-hosting basis
as an ASP. Streamline Health established a hosting data center
and installed Streamline Healths suite of workflow
products, called ASPeN within the hosting data
center, which utilizes Streamline Healths web
browser-based applications across an Internet/Intranet, to
deliver high quality, transaction-based services to healthcare
providers from a centrally located data center.
ASPeN enables its healthcare customers to
9
achieve enhanced patient care, improved security, and
accessibility to patient records at significant cost savings
with minimal up-front capital investment, maintenance, and
support costs. Customers realize benefits more quickly with less
economic risk. Customers are charged on a per transaction or
subscription basis, which is an attractive alternative to
purchasing an in-house system. This service is made possible
through the advancement of web browser-based technology,
state-of-the-art communication technology and advanced software
design.
Streamline Healths largest application hosting client has
informed us that it is in the process of internally developing
its own software application using a third party tool kit, which
software the client intends to use in place of our ASP services.
We believe that the clients ability to develop substitute
software that would have the same robust functionality as
Streamline Healths current ASP offering will be a major
software development undertaking. Therefore, we are unable to
determine if or when this client will discontinue the use of our
ASP services. The current agreement with this client expired on
March 31, 2008, and the Company has agreed to extend that
agreement on a month to month basis for up to one additional
year ending March 31, 2009. The client continues to use the
services and has not provided the Company with a projected
termination date for the month to month extension. If the
revenues, in excess of $1,750,000 per year, from this client can
not be replaced, the termination of this agreement will have a
material adverse impact on the results of operations.
Maintain
Technological Leadership Through the Development of New Software
Applications and Increased Functionality of Existing
Applications
Streamline Health intends to continue its product development
efforts and increase the functionality of existing applications
along with the development of new applications using workflow
technologies. In particular, Streamline Health intends to
increase the functionality of its web-based applications.
Streamline Health has continued to add new features,
functionality and workflow applications to its suite of
products, including revenue cycle management solutions such as
remote coding, remote physician order processing, pre-admission
registration scanning, insurance verification, explanation of
benefits processing, etc. (See A brief description of
Streamline Healths products below.)
Streamline Health has released its latest generation product,
accessANYware, a web-based application with a user interface
that includes the best features of Streamline Healths
entire product portfolio. The accessANYware application utilizes
a common database for medical records and patient financial
services, thereby improving system administration and
eliminating redundant data entry.
Streamline Health believes only the most robust, flexible,
dependable products will survive in the healthcare market, and
Streamline Health has attempted to establish itself as a leader
in document imaging/management and workflow applications through
strong product development.
Image-Enable
Clinical Data Repositories and Other Applications
Software
Today, healthcare information is often stored on numerous
dissimilar host-based and departmental systems that are spread
throughout an enterprise and are not integrated. Additionally,
these current systems do not address the data stored on paper or
the increasing volume of medical images such as CAT scans,
MRIs, digitized slides, exploratory scopes, photographs,
audio, etc. Streamline Health believes the efficiencies and
productivity of hospitals and integrated healthcare delivery
networks can be greatly enhanced by seamlessly integrating their
historical information systems with document imaging and
workflow applications. Physicians, clinicians, and other
healthcare users then have access to the complete patient
medical record, including the structured data, such as
laboratory results, and related unstructured data, or a
doctors hand written notes. Streamline Health has
image-enabled many popular Clinical Data Repositories, such as
those offered by Oacis Healthcare Holdings Corp., GE Medical
Systems, and Cerner Corporation. Streamline Health is marketing
image-enabling technology through its accessANYware and the
Streamline Health Integration Tools. Streamline Health intends
to continue to aggressively market its unique image-enabling
solutions to end-users and other third-party software
application providers. Streamline Health has several large
scale, enterprise wide image enabled sites, including Memorial
Sloan-Kettering Cancer Center, which utilizes Streamline
Healths solution on over 7,000 workstations and over 1,150
simultaneous users at any point in time.
10
Systems
and Services
Streamline Healths systems employ an open architecture
that supports a variety of operating systems, including
Microsoft Windows XP, Windows 2003, and UNIX. Streamline
Healths systems can be configured with various hardware
platforms, including INTEL-compatible personal computers.
Streamline Healths systems include a user interface
designed specifically by Streamline Health for physicians and
other medical and administrative personnel in hospitals and
integrated healthcare networks. Streamline Healths systems
operate on multiple imaging platforms, including Siemens and
FileNet in addition to its own proprietary document imaging
platform. Streamline Healths Health Information Management
Workflow solutions incorporate advanced features, including
workflow and security features, which allow customers to
restrict direct access to confidential patient information,
secure patient data from unauthorized indirect access and have
audit trail features.
A brief description of Streamline Healths products follows:
Streamline Health products and services are built using advanced
document imaging/management and workflow automation technologies
to create robust Health Information Management (Medical Records)
and Revenue Cycle Workflow solutions. Document imaging
technology makes paper-based information, as well as medical
images, sound and video information as readily available and
easy to process as traditional electronic data. In addition to
intelligent electronic routing of documents, workflow automation
offers sophisticated management tools and reporting to increase
efficiency and support of business process re-engineering
efforts.
Streamline Healths products and services were designed to
be complementary with existing third-party HIS and ASP-based
services, providing value-added functionality to these
third-party applications, including the following:
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The ability to gain seamless electronic access to medical
records, business office documents and medical images
(unstructured data);
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Workflow-based automated chart deficiency analysis and
completion;
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Workflow-based automated release of information and billing;
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Workflow-based remote coding and seamless integration to
third-party encoder and abstracter software;
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Workflow-based physician order routing for scheduling;
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Workflow-based financial screening and routing of patient
financial ability to pay information;
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Computer-aided data extraction solutions using OCR technology to
scan, extract, verify, and input into existing information
systems data;
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Streamline Health has developed innovative application tool sets
to image and web-enable existing HIS clinical and
patient financial services applications, thereby allowing users
to have a common graphical user interface on a universal
workstation. Streamline Health has also developed its own
document imaging middleware to efficiently provide the
object-oriented business processes common to all of its
applications, such as scanning/indexing, faxing/printing, data
archiving migration, security and auditing. Through its
application software, document imaging middleware, and its
workflow, image and web-enabling tools, Streamline Health allows
the seamless merging of its Medical Record and Patient Financial
Services department back office functionality with
existing clinical information systems at the desktop.
For maximum flexibility, accessANYware, the current Streamline
Health product portfolio, is packaged into four distinct
offerings: (i) the Health Information Management (HIM)
Suite, (ii) the Patient Financial Services (PFS) Suite,
(iii) the Enterprise Suite; and (iv) a set of
Productivity Tools.
The accessANYware family of products is Streamline Healths
fifth-generation document-centric repository of historical
health information that is complementary to and can be
seamlessly bolted on to existing transaction-centric
clinical, financial and management information systems, allowing
healthcare providers to aggressively move toward a true EMR. It
allows authorized users to perform document searching,
retrieval, viewing, processing, printing and faxing, as well as
report generation all from a single login.
11
HEALTH
INFORMATION MANAGEMENT Suite
The HIM Suite includes accessANYware Patient
Folders, Completion Workflow, Release Workflow, Coding Workflow
and Chart Tracking Workflow.
accessANYware
Patient Folders
accessANYware Patient Folders is a web-based
application that provides hospital organizations the ability to
electronically store, search and retrieve medical records from
any location within the facility, physician offices, off-site
clinics and even from home. In addition,
accessANYware Patient Folders provides a complete
web-based chart deficiency management system that includes
analysis, electronic signature and management
reports all from a single login.
accessANYware Patient Folders allows the user to
securely view the entire medical record from a visit view or a
category-based longitudinal view of historical patient
information.
Completion
Workflow
The Completion Workflow application is a chart deficiency
management workflow that provides management reporting along
with providing analysts and clinicians the ability to remotely
analyze, electronically sign and complete deficient records. In
addition to a single login, accessANYware delivers a single user
interface and integrated database. Therefore, from a single
system login, users with appropriate security have the ability
to search and retrieve information regarding patients and cases
(for chart analysis), view, print and fax patient documents, as
well as analyze or complete deficient documents. The functions
presented to the user vary with the users security. For
example, if the user is a clinician,
he/she is
presented with an inbox function that displays a list of
incomplete charts (awaiting completion) and a list of
linked patients assigned to them. The clinician then
has the option to complete deficient charts or retrieve patient
information via searching or by clicking on the
linked patients within their inbox. This access may
occur from any workstation within the facility, the
physicians office, or some other remote site. With proper
security, the user is able to view, print and fax patient
information.
Release
Workflow
The release workflow module fulfills internal and external
requests for patient information and allows for automatic
invoicing capability. It also provides the ability to
electronically search for, print, mail or fax information to
third parties that request copies of patient records.
Coding
Workflow
Due to an acute shortage of available coding personnel, there
currently exists a great demand for solutions to attract and
retain qualified coders and to make the coding process more
efficient. The Coding Workflow module provides workflow
automation of the coding and abstracting process by allowing
hospital personnel to electronically access documents to be
coded and abstracted from remote locations, including the
employees home. It may also be integrated with third-party
encoding or abstracting software, avoiding redundant data entry.
Chart
Tracking Workflow
Chart Tracking Workflow provides the ability to manage requests
for and track the physical location of paper records. This
workflow also allows the user to define the retention and
destruction of these paper records.
12
PATIENT
FINANCIAL SERVICES Suite
The PFS Suite includes accessANYware Non Patient
Folders, Referral Order Workflow, Peri-Operative Workflow,
Financial Screening Workflow and Cash Management Workflow.
accessANYware
Non Patient Folders
accessANYware Non Patient Folders is a web-based
application that allows any department of a healthcare
organization the ability to store, retrieve and process
document-centric information using a site-defined electronic
folder hierarchy with a user-friendly interface.
accessANYware Non Patient Folders provides document
imaging and workflow capabilities for a hospital
organizations enterprise-wide departmental needs, such as
Patient Financial Services, Business Office, Human Resources,
Materials Management, Medical Staff Office, Purchasing and
virtually any other department that has document intensive
storage, retrieval and processing needs.
Cash
Management Workflow
Cash Management Workflow focuses on improving and enhancing the
cash posting, including the researching and follow up functions
within the business office for received non-standard paper
remittances. By scanning the documents into the workflow, the
manual posting is done from the image, allowing the page to be
captured and stored to the account level in the clients
accounting system.
Referral
Order Workflow
Referral Order Workflow ensures automated capture routing and
tracking of faxed orders from physicians offices into
client scheduling and pre-registration areas that allow
increasing volumes without adding additional staff. The saves
time spent processing paper faxes.
Financial
Screening Workflow
Financial Screening Workflow manages the rising number of
self-pay accounts that healthcare providers are experiencing by
forwarding the financial documents at the time of receipt to
insurance specialists to expedite charity care program analysis.
Peri-Operative
Workflow
Peri-Operative Workflow manages the patient documents and
reduces cancelled/rescheduled surgeries by proactively providing
required document sets for the scheduled surgery facilitating
those that are missing.
Enterprise
Suite
The Enterprise Suite is a full offering of Streamline Health
products including the HIM Suite, the PFS Suite, and the
Streamline Health Integration Tools.
The
Streamline Health Integration Tools
(STRM-ITTM)
STRM-IT supports powerful image-enabling and workflow technology
that allows healthcare users to immediately and simultaneously
access any patient information, including multimedia and
paper-based information, through their existing third-party
clinical or billing applications. STRM-IT also supports direct,
secure access to the entire patient chart and physician inbox
via integration. As a result, any application across the entire
enterprise can be image-enabled, including the host Healthcare
Information Systems, Patient Billing Systems, Clinical Data
Repositories and others. When the Clinical Data Repository is
image-enabled, users can access any piece of information on the
same workstation and from the same screen display, including the
point of patient care. This means users can view traditional
electronic data and images simultaneously on the same screen
without signing in and out of multiple applications.
13
ASPeN...Application
Service Provider eHealth Network
Streamline Healths Hosting Services (ASPeN) offers
healthcare organizations an ever increasing, cost-effective
solution to manage its information. Through the use of the
Internet and private line telecommunications, Streamline Health
provides its healthcare customers with fast and secure access to
its data stored at Streamline Healths data center, for a
monthly subscription fee. The hosted pricing model helps its
healthcare customers to overcome the barriers of high capital
and start-up
costs as well as the technological burdens of implementing and
managing a document workflow system.
Professional
Services
Streamline Health provides a full complement of professional
services to implement its software applications. Streamline
Health believes that high quality consulting and professional
implementation services are important to attracting new
customers and maintaining existing customer satisfaction. These
services include implementation and training, project
management, business process re-engineering, and custom software
development. The implementation and training services include
equipment and software installation, system integration and
comprehensive training. The project management services include
needs and cost/benefit analysis, hardware and software
configuration and business process re-engineering. The custom
software development services include interface, workflow and
report development.
Research
and Development
Streamline Health continues to focus its research and
development efforts to develop new application software and
increase the functionality of existing applications. Customer
requirements and desires significantly influence Streamline
Healths research and development efforts.
Product research and development expense was $3,132,809,
$2,716,163, and $2,733,293 in 2007, 2006 and 2005, respectively.
In addition, Streamline Health also capitalized approximately
$2,652,000, $2,130,000, and $1,450,000 of software development
expenditures in 2007, 2006, and 2005, respectively.
Existing
Customers
Streamline Healths customers include healthcare providers
located throughout the United States. Streamline Health has
implemented or is in the process of implementing one or more of
its systems in the following representative list of healthcare
institutions:
Albert Einstein Healthcare Network, Philadelphia, PA
Beth Israel Medical Center, New York, NY
Childrens Medical Center of Dallas, Dallas, TX
Christiana Care Health Services, New Castle, DE
Medical University Hospital Authority:
Medical University of South Carolina, Columbia,
SC
Memorial Sloan-Kettering Cancer Center, New York, NY
ProMedica Health Systems, Toledo, OH
Sarasota Memorial Hospital, Sarasota, FL
Stanford Hospital and Clinics, Palo Alto, CA
Texas Health Resources, Inc., Arlington, TX
ASPeN Application-hosting Customers include:
Nationwide Childrens Hospital, Columbus, OH
Health Alliance of Greater Cincinnati, Cincinnati, OH
M. D. Anderson Cancer Center, Houston, TX
University of California, School of Medicine,
San Francisco, CA
Pattie A. Clay Regional Medical Center, Richmond, KY
RevenueMed, Inc., Alpharetta, GA
14
GE Medical Systems has also sublicensed Streamline Healths
suite of products or its ASPeN Services to thirteen healthcare
organizations.
In fiscal year 2007, GE Medical Systems, M. D. Anderson Cancer
Center and Texas Health Resources, Inc., accounted for 38%, 12%
and 7%, respectively, of Streamline Healths total revenues.
In fiscal year 2006, GE Medical Systems, M. D. Anderson Cancer
Center and Texas Health Resources, Inc., accounted for 28%, 11%
and 8%, respectively, of Streamline Healths total revenues.
In fiscal year 2005, Texas Health Resources, Inc., GE Medical
Systems, and M. D. Anderson Cancer Center, accounted for 18%,
12% and 11%, respectively, of Streamline Healths total
revenues
The small number of customers, the dependence on remarketing
partner GE Medical Systems, and extended sales cycles has
contributed to variability in quarterly and annual operating
results. Streamline Health expects that as its customer base
continues to increase and sales through its Remarketing
Agreements increase, the actions of any one customer will have
less of an effect on its quarterly and annual operating results.
The loss of a major customer or the remarketing partner GE
Medical Systems could have a material adverse effect on
Streamline Health.
Signed
Agreements Backlog
See also ITEM 7, MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Backlog, for an explanation of the current year backlog compared
with the prior year backlog.
Streamline Health enters into master agreements with its
customers to specify the scope of the system to be installed
and/or
services to be provided by Streamline Health, the agreed upon
aggregate price and the timetable for implementation. The master
agreement typically provides that Streamline Health will deliver
the system in phases, thereby allowing the customer flexibility
in the timing of its receipt of systems and to make adjustments
that may arise based upon changes in technology or changes in
customer needs. The master agreement also allows the customer to
request additional components as the installation progresses,
which additions are then separately negotiated as to price and
terms. Historically, customers have ultimately purchased systems
and services in addition to those originally contemplated by the
master agreement, although there can be no assurance that this
trend will continue in the future.
At January 31, 2008, Streamline Health has master
agreements and purchase orders from remarketing partners for
systems and related services (excluding support and maintenance,
and transaction-based revenues for the application-hosting
services) that have not been delivered, and or installed which,
if fully performed, will generate future revenues of
approximately $8,018,000. The related products and services are
expected to be delivered over the next two to three years.
Furthermore, Streamline Health has entered into
application-hosting agreements, which are expected to generate
revenues in excess of $3,028,000 through their respective
renewal dates in fiscal years 2008 through 2012.
Streamline Healths master agreements also generally
provide for a limited initial maintenance period and require the
customer to subscribe for maintenance and support services on a
monthly, quarterly, or annual basis. Maintenance and support
revenues for fiscal years 2007, 2006, and 2005 were
approximately $6,740,000, $5,617,000, and $5,104,000,
respectively. Maintenance and support revenues are expected to
increase in the future. At January 31, 2008, Streamline
Health had Maintenance Agreements and purchase orders from
remarketing partners for maintenance, which if fully performed,
will generate future revenues of approximately $4,921,000,
through their respective renewal dates in fiscal year 2008 and
2009.
The commencement of revenue recognition varies depending on the
size and complexity of the system, the implementation schedule
requested by the customer and usage by customers of the
application-hosting services. Therefore, Streamline Health is
unable to accurately predict the revenue it expects to achieve
in any particular period. Streamline Healths master
agreements generally provide that the customer may terminate its
agreement upon a material breach by Streamline Health, or may
delay certain aspects of the installation. There can be no
assurance that a customer will not cancel all or any portion of
a master agreement or delay installations. A termination or
installation delay of one or more phases of an agreement, or the
failure of Streamline Health to
15
procure additional agreements, could have a material adverse
effect on Streamline Healths business, financial
condition, and results of operations.
Royalties
and license fees
Streamline Health incorporates software licensed from various
vendors into its proprietary software. In addition, third-party,
stand-alone software is required to operate Streamline
Healths proprietary software. Streamline Health licenses
these software products, and pays the required royalties
and/or
license fees when such software is delivered to Streamline
Healths customers.
Employees
As of January 31, 2008, Streamline Health had
111 full-time employees, an increase of 6 during the fiscal
year. In addition, Streamline Health utilizes independent
contractors to supplement its staff, as needed. None of
Streamline Healths employees are represented by a labor
union or subject to a collective bargaining agreement.
Streamline Health has never experienced a work stoppage and
believes that its employee relations are good.
Copies of documents filed by Streamline Health Solutions, Inc.
with the Securities and Exchange Commission, including annual
reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
etc., and all amendments to those reports, if any, can be found
at the web site www.streamlinehealth.net as soon as
practicable after such material is electronically filed with, or
furnished to, the Securities and Exchange Commission. Copies can
be downloaded free of charge from the Streamline Health web site
or directly from the Securities and Exchange Commission web
site,
http://www.sec.gov/cgi-bin/srch-edgar.
Also, copies of Streamline Healths annual report on
Form 10-K
will be made available, free of charge, upon written request to
the Company.
See also, PART I, ITEM 1, BUSINESS.
The following is a list of risk factors that affect the Company.
They are not listed in any particular order or relative
importance and no inferences should be given to the listing
order.
The
variability of quarterly operating results can be
significant.
The Companys future revenues and operating results may
vary significantly from quarter-to-quarter as a result of a
number of factors, many of which are outside the control of the
Company. These factors include the relatively large size of
customer agreements, unpredictability in the number and timing
of system sales, length of the sales cycle, delays in
installations and changes in customers financial condition
or budgets.
The
Company needs to manage its costs while planning for
growth.
The Company is currently experiencing a period of growth and
expansion which has placed, and could continue to place, a
significant strain on the Companys services and support
operations, sales and administrative personnel and other
resources. Streamline Health believes that it must expand the
workforce to develop new products enhance existing products and
serve the needs of its existing and anticipated customer base.
The Companys ability to successfully expand its operations
will depend, in large part, upon its ability to attract and
retain highly qualified employees. The Companys ability to
manage its planned growth effectively also will require the
Company to continue to improve its operational, management, and
financial systems and controls, to train, motivate, and manage
its employees and to increase its operating expenses in
anticipation that such growth will increase future revenues.
The
Company could be less profitable than
expected.
Because of the relatively fixed operating expenses and overhead,
the future profitability of the Company is dependent on
increasing revenues which may not materialize as anticipated.
16
Sales
have been concentrated in a small number of
customers.
The Companys revenues have been concentrated in a
relatively small number of large customers, and the Company has
historically derived a substantial percentage of its total
revenues from a few customers. There can be no assurance that a
customer will not cancel all or any portion of a master
agreement or delay installations. A termination or installation
delay of one or more phases of an agreement, or the failure of
Streamline Health to procure additional agreements, could have a
material adverse effect on Streamline Healths business,
financial condition, and results of operations. The
Companys major reseller could choose to discontinue
reselling Streamline Health products, and significant customers
could elect to discontinue using our products. The Company needs
to ensure that it expands the distribution channels to reduce
the reliance on a single major reseller and expand the customer
base to ensure that the loss of a customer is not a significant
loss in total revenues.
Streamline
Health faces significant competition, including from companies
with significantly greater
resources.
The Company currently competes with many other companies for the
licensing of similar software products and related services.
Many of these companies are larger than Streamline Health and
have significantly more resources to invest in their business.
Streamline
Healths intellectual property rights are valuable, and any
inability to protect
them
could reduce the value of Streamline Healths products
and
services.
The Company trademarks and copyrights its intellectual property,
which represents an important asset to the Company. Streamline
Health does not have any patent protection on any of its
software. The Company relies upon license agreements, employment
agreements, confidentiality, nondisclosure agreements, etc. to
maintain the confidentiality of Streamline Healths
proprietary information and trade secrets. If the Company fails
to adequately protect the intellectual property through
trademarks and copyrights, license agreements, employment
agreements, confidentiality, nondisclosure agreements, etc., the
intellectual property rights may be misappropriated by others,
invalidated, or challenged, and our competitors could duplicate
the Companys technology or may otherwise limit any
competitive technology advantage the Company may have. Also, the
Company could be subject to intellectual property infringement
claims as the number of software patents and copyrighted and
trademarked materials are produced as our software functionality
is expanded. Any claim, even if not meritorious, would be
expensive to defend, and if the Company were to become liable
for infringing third party intellectual property rights, the
Company could be liable for substantial damage awards, and
potentially be required to cease using the technology, produce
noninfringing technology or obtain a license to use such
technology.
Due to the rapid pace of technology change, the Company believes
its future success is likely to depend upon continued
innovation, technical expertise, marketing skills and customer
support and services rather than on legal protection of our
property rights. However, the Company has in the past, and
intends in the future, to aggressively assert its intellectual
property rights when necessary.
Rapid
technology changes and short product life cycles could harm
Streamline Healths
business.
The technology underlying Streamline Healths product is
subject to rapid change including the potential introduction of
new products and technologies, which may have a material,
adverse impact on its business, operating results, and financial
condition. The Company needs to maintain an ongoing research and
development program to continue to develop new products and
apply new technologies to the existing products.
The
impact of new or changes in existing federal, state, and local
regulations governing healthcare information
Healthcare regulations issued to date have not had a material
adverse affect on business. However, the Company cannot predict
the potential impact of new or revised regulations that have not
yet been released or made final, or any other regulations that
might be adopted. Congress may adopt legislation that may
change, override, conflict with, or preempt the currently issued
regulations. Additionally, legislation governing the
dissemination of patient health information is also from
time-to-time proposed and debated at the state level. These laws
or
17
regulations, when adopted, could restrict the ability of
customers to obtain, use, or disseminate patient health
information. Streamline Health believes that the features and
architecture of Streamline Healths products are such that
it currently supports or should be able to make the necessary
modifications to its products, if required, to ensure support of
the HIPAA regulations, and other legislation or regulations.
The
loss of key personnel could adversely affect Streamline
Healths
business.
Streamline Healths success depends, to a significant
degree, on its management, sales force and technical personnel.
The Company must recruit, motivate, and retain highly skilled
managers, sales, consulting and technical personnel, including
application programmers, database specialists, consultants, and
system architects who have the requisite expertise in the
technical environments in which our products operate.
Competition for such technical expertise is intense.
Streamline
Health software may not be error free and could result in claims
of breach of contract and
liabilities.
Streamline Health software products are very complex and may not
be error free, especially when first released. Although the
Company performs extensive testing, failure of any product to
operate in accordance with its specifications and documentation
could constitute a breach of the license agreement and require
Streamline Health to correct the deficiency. If such deficiency
is not corrected within the agreed upon contractual limitations
on liability and cannot be corrected in a timely manner, it
could constitute a material breach of a contract allowing the
termination thereof and possibly subjecting the Company to
liability. Streamline Healths license agreement generally
limits the Companys liability arising from such claims but
such limits may not be enforceable in some jurisdictions or
under some circumstances. A significant uninsured or
under-insured judgment against the Company could have a material
adverse impact on the Company.
The
application-hosting services and support services could
experience
interruptions.
The Company provides hosting services for certain clients,
including the storage of critical patient and administrative
data. In addition, it provides support services to clients
through the client support facility. The Company has
redundancies, such as backup generators and redundant
telecommunications lines, built into its operations to prevent
disruptions. However, complete failure of all generators or
impairment of all telecommunications lines or severe casualty
damage to the building or equipment inside the buildings housing
our data center or client support facilities could cause a
disruption in operations and adversely affect clients who depend
on the application hosting services. Any interruption in
operations at its data center or client support facility could
cause the Company to lose existing clients, impede our ability
to obtain new clients, result in revenue loss, cause potential
liability to our clients, and increase our operating costs.
Third
party products are essential to Streamline Healths
software.
Streamline Health software incorporates software licensed from
various vendors into its proprietary software. In addition,
third-party, stand-alone software is required to operate some of
the Companys proprietary software modules. The loss of the
ability to use these third party products, or ability to obtain
substitute third party software at comparable prices, could have
a material adverse affect on the ability to license Streamline
Health software.
The
Company could be liable to customers or third
parties.
The Companys systems provide access to patient information
used by physicians and other medical personnel in providing
medical care. The medical care provided by physicians and other
medical personnel are subject to numerous medical malpractice
and other claims. The Company attempts to limit any potential
liability of the Company to customers by limiting the warranties
on its systems in the Companys agreements with healthcare
provider. However, such agreements do not protect the Company
from third party claims by patients who may seek damages from
any or all persons or entities connected to the process of
delivering patient care. The Company maintains insurance, which
provide limited protection from such claims, if they are
successfully litigated. Although no such claims have been
brought against the Company to date regarding injuries related
to the use of our software
18
solutions, such claims may be made in the future. A significant
uninsured or under-insured judgment against the Company could
have a material adverse impact on the Company.
The
Company needs to continuously anticipate future events, such as
changes in regulations that could affect its products, and the
probability of natural disasters, catastrophes, war, or
terrorism
etc.
The Company may not correctly anticipate such future events
which could have a material adverse impact on the Company.
Access
to Capital
Streamline Health may need additional capital in the form of
loans or equity in order to operate. The Company may be limited
to the availability of such capital or may not have any
availability.
In addition, risks and uncertainties not currently known to the
Company or that the Company currently deems to be immaterial
also may materially adversely affect the Company, its financial
condition
and/or
operating results.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None
Streamline Healths principal offices are located at 10200
Alliance Road, Suite 200, Cincinnati,
OH 45242-4716.
The offices consist of approximately 21,700 square feet of
space under a lease that expires in July 2010. In addition,
Streamline Health leases dedicated collocation high security
data center space in the Cincinnati, OH area, for its
ASPeN Services, application-hosting data center
operations, which lease expires in June 2008, but has automatic
renewal provisions. The current rental expense for all of these
facilities approximates $393,000 annually.
Streamline Health believes that its facilities are adequate for
its current needs and that suitable alternative space is
available to accommodate expansion of Streamline Healths
operations.
|
|
Item 3.
|
Legal
Proceedings
|
Streamline Health is, from time to time, a party to various
legal proceedings and claims, which arise, in the ordinary
course of business. Streamline Health is not aware of any legal
matters that will have a material adverse effect on Streamline
Healths consolidated results of operations or consolidated
financial position.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
Not applicable.
19
EXECUTIVE
OFFICERS OF THE REGISTRANT
The names, ages, and positions held by the Executive Officers of
Streamline Health on April 2, 2008 are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elected to
|
Name
|
|
Age
|
|
Position(1)
|
|
Present Position(2)
|
|
J. Brian Patsy
|
|
|
57
|
|
|
Chairman of the Board, President, Chief Executive Officer, and
Director
|
|
|
1989
|
|
Gary M. Winzenread
|
|
|
43
|
|
|
Vice President Product Development and Strategy
|
|
|
2007
|
|
Joseph O. Brown, II
|
|
|
47
|
|
|
Vice President Client Services and Chief Information Officer
|
|
|
2007
|
|
Paul W. Bridge, Jr.
|
|
|
64
|
|
|
Chief Financial Officer, Treasurer and Corporate Secretary
|
|
|
2001
|
|
Donald E. Vick, Jr.
|
|
|
44
|
|
|
Controller, Assistant Treasurer and Assistant Secretary
|
|
|
2002
|
|
|
|
|
(1) |
|
All current officers of Streamline Health hold office until
their successors are elected and qualified or until any removal
or resignation. Officers of Streamline Health are elected by the
Board of Directors and serve at the discretion of the Board. For
purposes of the descriptions of the background of Streamline
Healths Executive Officers, the term Company
refers to both Streamline Health Solutions, Inc. and its
predecessors LanVision Systems, Inc. and LanVision, Inc. |
|
(2) |
|
Represents date of election to Registrant or its predecessor. |
J. Brian Patsy is a founder of the Company and has served
as the President and a Director since Streamline Healths
inception in October 1989. Mr. Patsy was appointed Chairman
of the Board and Chief Executive Officer in March 1996.
Mr. Patsy has over 34 years of experience in the
information technology industry.
Gary M. Winzenread joined the company in 2007 as the Director of
Product Strategy and has recently assumed responsibility for
Product Development as well. Mr. Winzenread was a
consultant to Streamline Health in 2007, and prior to that spent
8 years as the President and CEO of Praxis Solutions, the
software development consultancy he founded in 1998. As CEO of
Praxis he led the company through many years of growth over 50%
per annum to a 40 person consultancy he successfully sold
in 2004 to Number Six Software of McLean, VA, with whom he
stayed in executive capacities through 2006.
Joseph O. Brown, II joined the company in 1991 as Director
of Information Technology. In 1998 Mr. Brown assumed
responsibility for the formation and operation of the
Application Hosting Operations known as ASPeN. In 2000 he was
appointed Chief Information Officer, and in 2007 was elected a
Vice President with responsibility for ASPeN, as well as
assuming responsibility for Product Support and Client
Professional Services. Prior to joining Streamline Health,
Mr. Brown served with the U.S. Marine Corp as a Data
Systems Officer. Mr. Brown has over 20 years of
experience in the information technology industry.
Paul W. Bridge, Jr. joined the Company in 1996, as
Controller. In January 2001, he was appointed Chief Financial
Officer. From 1993 until he joined Streamline Health,
Mr. Bridge served as Controller of Cincom Systems, Inc., an
international software development and marketing company.
Mr. Bridge is a Certified Public Accountant (inactive).
Donald E. Vick, Jr. joined the Company in 1997, as
Assistant Controller. In 2002, he was appointed Controller and
Assistant Treasurer. In 2005 he was also appointed Assistant
Secretary. Prior to joining Streamline Health, Mr. Vick
served as Assistant Controller of Cincom Systems, Inc., an
international software development and marketing company.
Mr. Vick is a Certified Public Accountant.
There are no family relationships between any Director or
Executive Officer and any other Director or Executive Officer of
the Registrant.
20
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
(a) The Companys Common Stock trades on The NASDAQ
Capital Market under the symbol STRM. The table below sets forth
the high and low sales prices for Streamline Health Solutions,
Inc. Common Stock for each of the quarters in fiscal years 2007
and 2006, as reported by The NASDAQ Stock Market, Inc.
|
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|
|
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|
|
|
|
Fiscal Year 2007
|
|
High
|
|
|
Low
|
|
|
4th Quarter (November 1, 2007 through January 31,
2008)
|
|
$
|
4.00
|
|
|
$
|
1.75
|
|
3rd Quarter (August 1, 2007 through October 31, 2007)
|
|
|
3.88
|
|
|
|
2.57
|
|
2nd Quarter (May 1, 2007 through July 31, 2007)
|
|
|
5.00
|
|
|
|
3.30
|
|
1st Quarter (February 1, 2007 through April 30, 2007)
|
|
|
5.80
|
|
|
|
3.54
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2006
|
|
High
|
|
|
Low
|
|
|
4th Quarter (November 1, 2006 through January 31,
2007)
|
|
$
|
6.00
|
|
|
$
|
4.91
|
|
3rd Quarter (August 1, 2006 through October 31, 2006)
|
|
|
5.81
|
|
|
|
4.78
|
|
2nd Quarter (May 1, 2006 through July 31, 2006)
|
|
|
7.49
|
|
|
|
4.51
|
|
1st Quarter (February 1, 2006 through April 30, 2006)
|
|
|
8.70
|
|
|
|
6.55
|
|
The market price of the Common Stock could be subject to
significant fluctuations based on factors such as announcements
of new products or customers by Streamline Health or its
competitors, quarterly fluctuations in Streamline Healths
financial results or other competitors financial results,
changes in analysts estimates of Streamline Healths
financial performance, general conditions in the healthcare
information technology industry and conditions in the financial
markets. In addition, the stock market, in general, has
experienced price and volume fluctuations which have
particularly affected the market price of high technology
companies and which have been often unrelated to the operating
performance of a specific company. Many technology companies,
including Streamline Health, experience significant fluctuations
in the market price of their equity securities. There can be no
assurance that the market price of the Common Stock will not
decline, or otherwise continue to experience significant
fluctuations in the future.
(b) According to the stock transfer agent records,
Streamline Health had 136 stockholders of record as of
April 1, 2008. Because brokers and other institutions on
behalf of stockholders hold many of such shares, Streamline
Health is unable to determine with complete accuracy the current
total number of stockholders represented by these record
holders. Streamline Health estimates that it has approximately
3,000 stockholders, based on information provided by the
Companys stock transfer agent from their search of
individual participants in security position listings.
(c) Streamline Health has not paid any cash dividends on
its Common Stock since its inception and does not intend to pay
any cash dividends in the foreseeable future.
21
MARKET
PRICE OF AND DIVIDENDS ON THE REGISTRANTS COMMON EQUITY
AND RELATED STOCK MATERS
The graph below compares the cumulative total stockholder return
on Common Stock with the cumulative total return on the NASDAQ
US Total Return Index and on the NASDAQ Computer and Data
Processing Services Stock Index for the period commencing
January 31, 2003 and ending January 31, 2008, assuming
an investment of $100 and the reinvestment of any dividends.
The comparison in the graph below is based upon historical data
and is not indicative of, nor intended to forecast the future
performance of Common Stock.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/031
|
|
|
1/31/041
|
|
|
1/31/051
|
|
|
1/31/061
|
|
|
1/31/071
|
|
|
1/31/081
|
|
|
Streamline Health Solutions, Inc. Common Stock
|
|
$
|
100.00
|
|
|
$
|
105.48
|
|
|
$
|
105.14
|
|
|
$
|
239.73
|
|
|
$
|
193.15
|
|
|
$
|
90.75
|
|
NASDAQ US Total Return Index
|
|
$
|
100.00
|
|
|
$
|
155.64
|
|
|
$
|
155.94
|
|
|
$
|
175.41
|
|
|
$
|
188.17
|
|
|
$
|
180.70
|
|
NASDAQ Computer and Data Processing Services Stock Index
|
|
$
|
100.00
|
|
|
$
|
138.42
|
|
|
$
|
142.90
|
|
|
$
|
160.19
|
|
|
$
|
177.83
|
|
|
$
|
186.30
|
|
|
|
|
1 |
|
Assumes that $100.00 was invested on January 31, 2003 in
Common Stock at the closing price of $2.92 per share and at the
closing sales price of each index on that date and that all
dividends were reinvested. No dividends have been declared on
Common Stock. Stockholder returns over the indicated period
should not be considered indicative of future stockholder
returns. |
The information required above by Item 201(e) of
Regulation S-K
is not considered filed with the Securities and Exchange
Commission, and should not be deemed to be incorporated by
reference into any filing under the Securities Act or the
Securities Exchange Act, except to the extent that the Company
specifically incorporates it by reference.
22
|
|
Item 6.
|
Selected
Financial Data
|
The following table sets forth consolidated financial data with
respect to Streamline Health for each of the five years in the
period ended January 31, 2008. The information set forth
below should be read in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of
Operations and the Consolidated Financial Statements and
related notes included elsewhere in this
Form 10-K.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year(1)
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(In thousands, except per share data)
|
|
|
INCOME STATEMENT DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
16,563
|
|
|
$
|
15,867
|
|
|
$
|
16,127
|
|
|
$
|
12,751
|
|
|
$
|
12,804
|
|
Total operating expenses
|
|
|
17,267
|
|
|
|
15,685
|
|
|
|
14,389
|
|
|
|
11,815
|
|
|
|
10,450
|
|
Operating profit (loss)(2)
|
|
|
(704
|
)
|
|
|
182
|
|
|
|
1,738
|
|
|
|
936
|
|
|
|
2,354
|
|
Net earnings (loss)(2) & (3)
|
|
|
(736
|
)
|
|
|
96
|
|
|
|
2,551
|
|
|
|
558
|
|
|
|
1,019
|
|
Basic net earnings (loss) per share of Common stock
|
|
|
(.08
|
)
|
|
|
.01
|
|
|
|
.28
|
|
|
|
.06
|
|
|
|
.11
|
|
Diluted net earnings (loss) per share of Common stock
|
|
|
(.08
|
)
|
|
|
.01
|
|
|
|
.27
|
|
|
|
.06
|
|
|
|
.11
|
|
Shares used in computing basic per share data
|
|
|
9,234
|
|
|
|
9,195
|
|
|
|
9,121
|
|
|
|
9,068
|
|
|
|
8,997
|
|
Shares used in computing diluted per share data
|
|
|
9,234
|
|
|
|
9,722
|
|
|
|
9,425
|
|
|
|
9,233
|
|
|
|
9,207
|
|
BALANCE SHEET DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,189
|
|
|
$
|
3,317
|
|
|
$
|
4,634
|
|
|
$
|
4,181
|
|
|
$
|
6,227
|
|
Working capital
|
|
|
267
|
|
|
|
2,748
|
|
|
|
3,347
|
|
|
|
3,892
|
|
|
|
1,901
|
|
Total assets
|
|
|
16,099
|
|
|
|
15,301
|
|
|
|
16,433
|
|
|
|
11,993
|
|
|
|
15,290
|
|
Long-term debt, including current portion
|
|
|
|
|
|
|
1,000
|
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
1,000
|
|
Total stockholders equity
|
|
|
8,193
|
|
|
|
8,644
|
|
|
|
8,351
|
|
|
|
5,712
|
|
|
|
5,079
|
|
Cash dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All references to a fiscal year refer to the fiscal year of
Streamline Health commencing February 1 of that calendar year
and ending on January 31 of the following year. |
|
(2) |
|
Operating profit and net earnings in 2003 include reimbursement
of $230,000 in legal expenses upon settlement of Streamline
Health proprietary technology claims and a $290,000 favorable
change in the estimate for certain franchise tax liabilities as
a result of the tax authority audit of certain prior years
tax returns. Operating profit and net earnings in 2004 include a
$300,000 reduction in reserves due to changes in estimates, in
2006, $100,000 reduction in reserves due to changes in estimates
and in 2007, $100,000 reduction in reserves due to changes in
estimates. |
|
(3) |
|
Net earnings in 2005, 2004 and 2003 include a tax benefit of
$897,000, $420,000 and $558,000, respectively, relating to the
reduction in the valuation allowances for the deferred tax
assets relating to the net operating loss carry forward based
upon reasonable future earnings before income tax projections. |
23
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
See also PART 1, ITEM 1, BUSINESS for general and
specific descriptions of Streamline Healths business.
See also PART 1, ITEM 1A RISK FACTORS for a general
description of factors that affect Streamline Healths
business.
Application
of Critical Accounting Policies (See also Notes to Consolidated
Financial Statements)
Streamline Healths discussion and analysis of its
financial condition and results of operations are based upon its
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements
requires Streamline Health to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues,
and expenses, and related disclosure of contingent liabilities.
On an on-going basis, Streamline Health evaluates its estimates,
including those related to product revenues, bad debts,
capitalized software development costs, income taxes, warranty
obligations, support contracts, contingencies and litigation.
Streamline Health bases its estimates on historical experience
and on various other assumptions that Streamline Health believes
are reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of
assets and liabilities and revenue recognition. Actual results
may differ from these estimates under different assumptions or
conditions.
Streamline Health believes the following critical accounting
policies affect its more significant judgments and estimates
used in the preparation of its consolidated financial statements.
Revenue
Recognition
Streamline Health records revenues for customer contracts,
including special payment agreements and royalties from
third-party resellers in accordance with Statement of Position
97-2,
Software Revenue Recognition, as amended by Statement of
Position
98-9,
SAB 104 Revenue Recognition and EITF Issue
No. 00-21,
Revenue Arrangements with Multiple Deliverables. Revenue
is derived from: (i) the licensing and sale of systems,
either directly to end-users or through third-party resellers,
comprising internally developed software, third-party software
and hardware components; (ii) product support, maintenance
and professional services; and, (iii) application-hosting
services that provide high quality, transaction or subscriptions
based document imaging/management workflow services from a
central data center. Generally, revenues from software license
fees and hardware sales to end-users are recognized when a
master agreement is signed and products are made available to
end-users. Revenues from agreements that contain
multiple-element arrangements are allocated to the various
elements based on the fair value of the elements. Revenues
related to routine installation and integration and project
management are deferred until the work is performed. Revenues
from consulting, education, and application-hosting services are
recognized as the services are performed. Revenues from
short-term support and maintenance agreements are recognized
ratably over the term of the agreements. Billings to customers
recorded prior to the recognition of revenue are classified as
deferred revenues. Revenues recognized prior to progress
billings to customers are recorded as contract receivables.
Under the terms of a Remarketing Agreement with GE Medical
Systems, Streamline Health records this revenue when the
products are made available to end-users. Royalties are remitted
to Streamline Health based upon GE sublicensing Streamline
Healths software to its customers. Thirty percent of the
royalty is due 45 days following the end of the month in
which GE executes an end-user license agreement with its
customer. The remaining seventy percent of the royalty is due,
in varying amounts based on specific milestones, 45 days
following the end of the month in which a milestone occurs.
Each contract is reviewed quarterly with the appropriate
Streamline Health Client Manager to determine the
appropriateness of the revenue recognition criteria applied to
the individual contracts based upon the most currently available
information as to the status of the contract, the customer
comments, if any, and the status of any open or unresolved
issues with the customer.
24
Bad
Debts
Accounts and contract receivables are comprised of amounts owed
Streamline Health for licensed software, professional services,
including maintenance services and application-hosting
activities. Contracts with individual customers and resellers
determine when receivables are due and payable. In determining
the allowance for doubtful accounts, each unpaid receivable is
reviewed quarterly with the appropriate Streamline Health Client
Manager to determine the payment status based upon the most
currently available information as to the status of the
receivables, the customer comments, if any, and the status of
any open or unresolved issues with the customer preventing the
payment thereof. Corrective action, if necessary, is taken by
Streamline Health to resolve open issues related to unpaid
receivables. During these quarterly reviews, Streamline Health
determines the required allowances for doubtful accounts for
estimated losses resulting from the unwillingness or inability
of its customers or resellers to make required payments. If the
financial condition of Streamline Healths customers or
resellers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be
required. Streamline Healths customers typically have been
well-established hospitals, medical facilities, or major
Healthcare Information Systems companies that resell Streamline
Healths products, which have good credit histories, and
payments have been received within normal time frames for the
industry. However, some healthcare facilities have experienced
significant operating losses and limited cash resources as a
result of limits on third-party reimbursements from insurance
companies and governmental entities. Extended payment of
Streamline Health receivables is not uncommon.
Capitalized
Software Development Costs
Software development costs are accounted for in accordance with
Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Software to be Sold, Leased or
Otherwise Marketed. Costs associated with the planning and
designing phase of software development, including coding and
testing activities necessary to establish technological
feasibility are classified as product research and development
and are expensed as incurred. Once technological feasibility has
been determined, a portion of the costs incurred in development,
including coding, testing, and product quality assurance, are
capitalized and subsequently reported at the lower of
unamortized cost or net realizable value. Streamline Health
capitalized approximately $2,652,000, $2,130,000, and $1,450,000
in 2007, 2006 and 2005, respectively.
Research and development expense, net of capitalized software
development expenditures, was $3,132,809, $2,716,163, and
$2,733,293 in 2007, 2006 and 2005, respectively.
Amortization is provided on a
product-by-product
basis over the estimated economic life of the software, not to
exceed three years, using the straight-line method. Amortization
commences at the beginning of the year following when a product
is available for general release to customers. Unamortized
capitalized costs determined to be in excess of the net
realizable value of a product are expensed at the date of such
determination. Amortization expense was approximately
$1,527,000, $1,083,000, and $800,000 in 2007, 2006, and 2005,
respectively.
Streamline Health reviews, on an on-going basis, the carrying
value of its capitalized software development expenditures, net
of accumulated amortization. Streamline Health believes that to
replicate the existing software would cost significantly more
than the stated net book value of $4,878,694 at January 31,
2008. Over the last three years, Streamline Health has spent
approximately $14,814,000 in research and development, of which
$6,232,000, or 42%, has been capitalized. Amortization of
capitalized software expenditures during the last three years
has amounted to approximately $3,410,000 or a net increase in
capitalized software of approximately $2,822,000 during the last
three years. Many of the programs related to capitalized
software development continue to have great value to Streamline
Healths current products and those under development, as
the concepts, ideas, and software code are readily transferable
and are incorporated into new products.
Equity
Awards Stock-Based Compensation
The Company was required to adopt the revised standards of
Statement of Financial Accounting Standards No. 123(R),
Accounting for Stock-Based Compensation, which requires
the expensing the fair value of the equity award effective the
first quarter of fiscal year 2006. Future grants of equity
awards could have a material impact on reported expenses
depending upon the number, value and vesting period of future
awards.
25
Income
Taxes
In June, 2006, the Financial Accounting Standards Board issued
Interpretation No, 48, Accounting for Uncertainties in Income
Taxes (FIN 48), an interpretation of Financial
Accounting Standards Board Statement No. 109, Accounting
for Income Taxes, to create a single model to address
accounting for uncertainty in tax positions. FIN 48
clarifies the accounting for income taxes, by prescribing a
minimum recognition threshold a tax position is required to meet
before being recognized in the financial statements. FIN 48
also provides guidance on derecognition, measurement,
classification, interest and penalties, accounting in interim
periods, disclosure and transition. FIN 48 is effective for
fiscal years beginning after December 15, 2006. The Company
adopted FIN 48 as of February 1, 2007, as required. As
a result of the implementation of FIN 48, the changes to
the Companys reserve for uncertain tax positions was
accounted for as a $27,791 adjustment to increase the beginning
balance of retained earnings on the Companys balance
sheet. The Company believes that its income tax positions and
deductions will be sustained on audit and does not anticipate
adjustments that will result in a material change to its
financial position during the next twelve months. Therefore, no
reserves for uncertain tax positions have been recorded pursuant
to FIN 48 as of January 31, 2008.
The Company and its subsidiary are subject to U.S. Federal
income tax as well as income taxes in multiple state and local
jurisdictions. The Company has concluded all U.S. Federal
tax matters for years through January 31, 2006. All
material state and local income tax matters have been concluded
for years through January 31, 2003.
The net income tax expense was $11,400 in 2007, $31,180 in 2006
and a tax benefit of $867,361, in 2005. The net current deferred
tax asset was $185,000 and the non-current deferred tax asset
was $1,690,000 at January 31, 2008 and the net current
deferred tax asset was $625,000 and the non current deferred tax
asset was $1,250,000 at January 31, 2007. A key assumption
in the determination of the book tax benefit or (provision) is
the amount of the valuation allowance required to reduce the
related deferred tax assets. A valuation allowance reduces the
deferred tax assets to a level which will, more likely than not,
be realized. Whether the deferred tax assets will be realized
depends on the generation of future taxable income during the
periods in which the deferred tax asset become deductible. The
net deferred tax assets reflect managements estimate of
the amount which will, more likely than not, reduce future
taxable income.
As of January 31, 2008, Streamline Health believes that a
valuation allowance is required to reduce a portion of the
deferred tax assets, primarily relating to certain net operating
loss carry forwards, for the following reasons:
Although Streamline Health generated approximately $1,087,000 of
earnings before income taxes during the three-year period ended
January 31, 2008, there can be no assurance that Streamline
Health will be able to achieve consistent profitability on a
quarterly or annual basis or be able to sustain or increase its
revenue growth in future periods and believes historical
operating results may not be indicative of the future
performance of Streamline Health in the near or long-term.
Streamline Health has incurred net losses as indicated by the
carry forwards of approximately $29,000,000.
Based on the expenses associated with current and planned
staffing levels, continued profitability and utilization of
carry forwards to be evaluated as more likely than
not is dependent upon increasing revenues.
As of January 31, 2008, Streamline Health estimates that a
valuation allowance of approximately $8,566,000 was required to
reduce the deferred tax assets, primarily relating to loss carry
forwards, to a level Streamline Health currently believes
will be utilized to offset future earnings before income taxes
based on the current backlog and forecasts over the next two
years. The valuation allowance is required due to the inability
to predict on a longer term basis that Streamline Health will
more likely than not attain levels of profitability
required to utilize additional carry forwards.
Contractual
Obligations
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments by Fiscal Year
|
|
|
|
Total
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Operating leases
|
|
$
|
984,445
|
|
|
$
|
426,769
|
|
|
$
|
380,738
|
|
|
$
|
176,938
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
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|
|
|
|
26
Working
Capital Facility
On January 7, 2008, Streamline Health, Inc., a wholly owned
subsidiary of Streamline Health Solutions, Inc., entered into a
new revolving loan agreement with the Fifth Third Bank,
Cincinnati, OH, in the principal amount of $500,000. The
interest rate on amounts borrowed will accrue at a variable rate
from the Prime Rate to the Prime Rate plus 3%, (or an effective
rate of 9% at January 31, 2008) based on the ratio of
the funded indebtedness to the trailing twelve months earnings
before interest, taxes, depreciation and amortization (EBITDA).
The agreement contains other covenants including; Minimum
Tangible Net Worth, Fixed Charge Coverage Ratio and Funded
Indebtedness to EBITDA. The loan is guaranteed by the Registrant
and is secured by a first lien on all of the assets of the
Registrant and its subsidiary. The Company was in compliance
with all of the covenants at January 31, 2008 and had the
ability to borrow up to $500,000 on the facility. This new
temporary facility expires on April 30, 2008, and replaces
the previous Revolving Loan Facility entered into in January
2007 with the Fifth Third Bank. Currently the Company is
soliciting proposals from additional lenders, and expects to
enter into a new longer term agreement prior to April 30,
2008.
In connection with the issuance of the long-term debt in 1998,
Streamline Health issued Warrants to purchase
750,000 shares of Common Stock of Streamline Health at
$3.87 per share at any time through July 16, 2008. The
Warrants are subject to customary antidilution and registration
rights provisions.
Operating
Leases
Streamline Health rents office, data center space and equipment
under noncancelable operating leases that expire, at various
times, during the next three fiscal years. The minimum payments,
by year, are detailed in the Contractual Obligations table above.
Warranties
and Indemnities
Streamline Health provides for the estimated cost of the product
warranties at the time revenue is recognized. Should products
fail to meet certain performance standards for an initial
warranty period, Streamline Healths estimated warranty
liability might need to be increased. Streamline Health bases
its warranty estimates on the nature of any performance
complaint, the effort necessary to resolve the issue, customer
requirements and any potential concessions which may be required
to be granted to a customer which result from performance
issues. Streamline Healths ASPeN
application-hosting services guarantees specific
up-time and response time performance
standards, which, if not met may result in reduced revenues, as
a penalty, for the month in which the standards are not met.
Streamline Healths standard agreements with its customers
also usually include intellectual property infringement
indemnifications provisions to indemnify them from and against
third-party claims, and for liabilities, damages, and expenses
arising out of Streamline Healths operation of its
business or any negligent act or omission of Streamline Health.
To date Streamline Health has always maintained the
ASPeN performance standards and has not been
required to make any material penalty payments to customers or
indemnify any customers for any material third-party claims. At
January 31, 2008 and 2007, Streamline Health has a warranty
reserve in the amount of $196,000 and $250,000, respectively.
Each contract is reviewed quarterly with the appropriate
Streamline Health Client Manager to determine the need for a
warranty reserve based upon the most currently available
information as to the status of the contract, the customer
comments, if any, and the status of any open or unresolved
issues with the customer.
Off
Balance Sheet Arrangements
Streamline Health does not have any off balance sheet
arrangements.
27
Results
of Operations
The following table sets forth, for each fiscal year indicated,
certain operating data as percentages:
Consolidated
Statements of Income(1)
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|
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|
|
|
|
|
|
Fiscal Year(2)
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Systems sales
|
|
|
18.2
|
%
|
|
|
27.0
|
%
|
|
|
37.9
|
%
|
Services, maintenance and support
|
|
|
60.4
|
|
|
|
52.4
|
|
|
|
43.1
|
|
Application-hosting services
|
|
|
21.4
|
|
|
|
20.6
|
|
|
|
19.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
Cost of sales
|
|
|
48.8
|
|
|
|
45.2
|
|
|
|
39.9
|
|
Selling, general and administrative
|
|
|
36.5
|
|
|
|
36.6
|
|
|
|
32.4
|
|
Product research and development
|
|
|
18.9
|
|
|
|
17.1
|
|
|
|
16.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
104.2
|
|
|
|
98.9
|
|
|
|
89.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)(3)
|
|
|
(4.2
|
)
|
|
|
1.1
|
|
|
|
10.8
|
|
Other income (expense), net
|
|
|
(.2
|
)
|
|
|
(.5
|
)
|
|
|
(0.3
|
)
|
Income tax net benefit(4)
|
|
|
|
|
|
|
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings(loss)(3 & 4)
|
|
|
(4.4
|
)%
|
|
|
0.6
|
%
|
|
|
15.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of systems sales
|
|
|
96.3
|
%
|
|
|
56.7
|
%
|
|
|
36.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services, maintenance and support
|
|
|
41.0
|
%
|
|
|
43.4
|
%
|
|
|
45.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of application-hosting services
|
|
|
30.6
|
%
|
|
|
34.5
|
%
|
|
|
34.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Because a significant percentage of the operating costs are
expensed as incurred, a variation in the timing of systems sales
and installations and the resulting revenue recognition can
cause significant variations in operating results. As a result,
period-to-period comparisons may not be meaningful with respect
to the past operations nor are they necessarily indicative of
the future operations of Streamline Health in the near or
long-term. The data in the table is presented solely for the
purpose of reflecting the relationship of various operating
elements to revenues for the periods indicated. |
|
(2) |
|
All references to a fiscal year refer to the fiscal year
commencing on February 1 of that calendar year and ending on
January 31 of the following year. |
|
(3) |
|
Operating profit and net earnings in 2007 and 2006, include a
$100,000 reduction in reserves due to changes in estimates. |
|
(4) |
|
Net earnings in 2005 includes a tax benefit of $897,000 relating
to the reduction in the valuation allowances for the deferred
tax assets relating to the net operating loss carry forward
based upon reasonable future earnings before income tax
projections. |
Comparison
of fiscal year 2007 with 2006
The $2,481,000 decrease in working capital resulted primarily
from the following.
The decrease in cash resulted primarily from the retirement of
long-term debt of $1,000,000 during the year.
The increase of $373,060 in accounts and contract receivables,
net, both current and non-current is due to significantly higher
invoicing on new contracts during the final month of the fourth
quarter of 2007 compared with the fourth quarter of 2006.
28
The $899,321 increase in accounts payable is due to a large
purchase of third party software related to a sale of third
party software in the last few days of the current fiscal year,
which were not paid for until the first quarter fiscal 2008.
The $1,489,665 increase in deferred revenues results primarily
from the recording of license fees on a software license that
can not be recognized as revenue until such time as site
specific integration of our standard software required by the
customer is completed.
Revenues. Total revenues for fiscal year 2007
were $16,563,300 compared with revenues of $15,866,973 in fiscal
year 2006, an increase of approximately $696,000, or 4%. The
increase was primarily due to an approximately 20% or $1,689,000
increase in service, maintenance and support revenues and an 8%
or $270,000 increase in application hosting services revenues,
offset by an approximately $1,263,000, decrease in system sales.
Because software revenues generate the highest margins the lower
software revenues contributed to a significantly reduced
operating profit for the fiscal year when compared to the prior
year.
Revenues from systems sales in fiscal year 2007 were $3,016,095,
a decrease of $1,262,697, or 30% of systems sales in fiscal year
2006 primarily resulting from the significant decrease in
software licensing revenues as discussed above.
Revenues from services, maintenance, and support in fiscal year
2007 were $10,004,138, an increase of $1,689,159, or 20% over
fiscal year 2006. Professional services revenues in fiscal year
2007 were $3,264,621, an increase of $566,694, of the
professional services revenues in fiscal year 2006. Maintenance
and support revenues in fiscal year 2007 were $6,739,517, an
increase of $1,122,465, or 20%, over maintenance and support
revenues in fiscal year 2006. The increase in professional
services revenues was due to increased customer installations.
The increase in maintenance and support results from the
addition of new customers and expansion of existing systems by
customers who pay annual maintenance.
Revenues from application-hosting services were $3,543,067 or an
increase of $269,865, or 8% over fiscal year 2006. The increase
was due primarily to increased revenues from new customers.
Application-hosting services revenues at some locations are
usage based and fluctuations in admissions, length of stay,
return patient visits, etc. affect the system usage and the
corresponding application-hosting services revenues.
In fiscal year 2007, three customers accounted for 24% of the
total revenues compared with 26% in fiscal year 2006, exclusive
of our remarketing partners.
Total revenues from GE were $6,240,592 in fiscal year 2007,
($1,412,102 was hardware and third party software sales,
$1,390,991 was Streamline Health software, $1,427,922 was
professional services and $1,787,344 in maintenance and support
revenues, plus $222,233 of Application Hosting Revenues).
Total Revenues from GE were $4,395,189 in fiscal year 2006,
($1,003,000 was hardware sales, $919,000 was software,
$1,051,744 was professional services and $1,421,415 in
maintenance and support revenues).
The increase in GE revenues in 2007 included increased software
revenues, significantly increased hardware and third party
software sales and increased services and maintenance revenues.
A substantial portion of fiscal year total 2007 revenues came
from fulfillment of backlog and add-on business, primarily
expansion and upgrades and two new clients in the fourth quarter
of fiscal 2007.
Cost of Sales. Cost of sales consists of cost
of systems sales, cost of services, maintenance and support, and
cost of application-hosting services. Cost of systems sales
includes amortization of capitalized software expenditures,
royalties, and the cost of third-party hardware and software.
Cost of systems sales, as a percentage of systems sales, varies
from period-to-period depending on hardware and software
configurations of the systems sold. The cost of systems sales as
a percentage of associated revenues in fiscal year 2007 and 2006
were 96% and 57%, respectively. The higher costs in 2007 reflect
a significantly lower volume of Streamline Health software, with
high margins and a significantly higher volume of hardware and
third party software with significantly lower margins, when
compared with 2006 when a greater portion of system sales
included more software and less hardware and third party
software. Cost of services, maintenance, and support includes
salaries and benefits for support and professional services
personnel and the cost of third-party maintenance contracts.
Cost of services, maintenance and support as a percentage of
services, maintenance and support revenues in 2007 and 2006 were
41% and 43%,
29
respectively. The lower relative cost reflects increased
professional services revenues without a corresponding increase
in expenses. The cost of application-hosting services in 2007
and 2006 as a percentage of revenues was 30% and 34%,
respectively, and represents primarily salaries and benefits,
depreciation and the cost of the collocation high security
application hosting data center. The lower relative cost
reflects increased revenues without a corresponding increase in
expenses.
Selling, General and Administrative. Selling,
general and administrative expenses consist primarily of
personnel and related costs, travel and living expenses,
tradeshows, etc. for selling and marketing activities and
general corporate and administrative activities. In fiscal year
2007, selling, general, and administrative expenses were
$6,048,214 compared with $5,802,656 in fiscal year 2006. The
year-to-year increase is primarily attributable to increased
sales and marketing staff as the Company expanded its staff to
respond to increasing inquiries and sales opportunities,
additional expenses for tradeshows, marketing collateral and
costs associated with the focus on new market opportunities
involving business process improvement via workflow automation
technologies.
Product Research and Development. Product
research and development expenses in fiscal year 2007 were
$3,132,809 compared with $2,716,163 in fiscal year 2006. During
2007, Streamline Health increased its technical staff and added
additional contractors to concentrate its development efforts
primarily on its new products and new workflow technologies.
Streamline Health capitalized approximately $2,652,000 in
software development expenditures in fiscal year 2007, compared
with $2,130,000 in 2006. The increase in capitalized software in
2007 reflects the increased 2007 development activities related
to new products or enhancements to existing products.
Operating Profit (loss). Operating loss in
fiscal year 2007 was ($703,687) compared with an operating
profit of $181,590 in fiscal year 2006. The $885,277 decrease,
results primarily from an approximately $1,263,000 decrease in
high margin software licensing revenues discussed above and
increased expenses during the fiscal year.
Other Income (Expense). Interest income
consists primarily of interest on cash balances. The interest
income declined during 2007 because of lower cash balances.
Interest expense in 2007 was related to the working capital
facility fee and capitalized leases. The decrease in the
interest expense in 2007 results primarily from the reduction of
the outstanding debt at the beginning of the year.
Provision for Income Taxes. Streamline Health
is in a tax loss carry forward position. The tax loss carry
forward approximates $29,000,000, which begins to expire in
2013. Streamline Health also has an Alternative Minimum Tax
credit carry forwards of approximately $74,000, which has an
unlimited carry forward period. The tax provisions in 2007 and
2006 are primarily state provisions.
Net Earnings (loss). The net loss in fiscal
year 2007 was ($735,562) compared with net earnings of $96,461
in fiscal year 2006. The decrease results primarily from
decreased software revenues, and the related gross margin and
higher operating expenses as noted above.
Comparison
of fiscal year 2006 with 2005
Revenues. Total revenues for fiscal year 2006
were $15,866,973 compared with revenues of $16,126,808 in fiscal
year 2005, a decrease of approximately $260,000, or 2%. The
decrease was primarily due to an approximately 47% or $2,100,000
decrease in software licensing revenues, offset by an
approximately $1,840,000, increase in all other revenue
categories other than software. Because software revenues
generate the highest margins this lower revenues resulted in
significantly reduced operating profits for the fiscal year when
compared to the prior year.
Revenues from systems sales in fiscal year 2006 were $4,278,792,
a decrease of $1,833,935, or 30% of systems sales in fiscal year
2005 primarily resulting from the significant decrease in
software licensing revenues as discussed above.
Revenues from services, maintenance, and support in fiscal year
2006 were $8,314,979, an increase of $1,364,797, or 20% over
fiscal year 2005. Professional services revenues in fiscal year
2006 were $2,697,927, an increase of $852,505, of the
professional services revenues in fiscal year 2005. Maintenance
and support revenues in fiscal year 2006 were $5,617,052, an
increase of $512,292, or 10%, over maintenance and support
revenues in fiscal year 2005. The increase in professional
services revenues was due to increased customer installations.
The increase in maintenance and support results from the
addition of new customers who pay annual maintenance.
30
Revenues from application-hosting services were $3,273,202 or an
increase of $209,303, or 7% over fiscal year 2005. The increase
was due primarily to increased revenues from existing customers.
Application-hosting services revenues at some locations are
usage based and fluctuations in admissions, length of stay,
return patient visits, etc. affect the system usage and the
corresponding application-hosting services revenues.
In fiscal year 2006, three customers accounted for 26% of the
total revenues compared with 38% in fiscal year 2005, exclusive
of our remarketing partners. Total revenues from GE were
$4,395,189 in fiscal year 2006, ($1,003,000 was hardware sales,
$919,000 was software, 1,051,774 was professional services and
$1,421,415 in maintenance and support revenues) compared with
$1,988,412 in fiscal 2005. The increase in GE revenues included
increased software revenues, significantly increased hardware
and third party software sales and increased professional
services and maintenance revenues. A substantial portion of
fiscal year total 2006 revenues came from fulfillment of backlog
and add-on business, primarily expansion and upgrades of systems
for Streamline Healths existing customers.
Cost of Sales. Cost of sales consists of cost
of systems sales, cost of services, maintenance and support, and
cost of application-hosting services. Cost of systems sales
includes amortization of capitalized software expenditures,
royalties, and the cost of third-party hardware and software.
Cost of systems sales, as a percentage of systems sales, varies
from period-to-period depending on hardware and software
configurations of the systems sold. The cost of systems sales as
a percentage of associated revenues in fiscal year 2006 and 2005
were 57% and 37%, respectively. The higher costs in 2006 reflect
a significantly lower volume of Streamline Health software, with
high margins and a significantly higher volume of hardware and
third party software with significantly lower margins, when
compared with 2005 when a greater portion of system sales
included more software and less hardware and third party
software. Cost of services, maintenance, and support includes
salaries and benefits for support and professional services
personnel and the cost of third-party maintenance contracts.
Cost of services, maintenance and support as a percentage of
services, maintenance and support revenues in 2006 and 2005 were
43% and 45%, respectively. The lower relative cost reflects
increased professional services revenues without a corresponding
increase in expenses. The cost of application-hosting services
in 2006 and 2005 as a percentage of revenues was 34% and 34%,
respectively, and represents primarily salaries and benefits,
depreciation and the cost of the collocation high security
application hosting data center.
Selling, General and Administrative. Selling,
general and administrative expenses consist primarily of
personnel and related costs, travel and living expenses,
tradeshows, etc. for selling and marketing activities and
general corporate and administrative activities. In fiscal year
2006, selling, general, and administrative expenses were
$5,802,656 compared with $5,218,303 in fiscal year 2005. The
year-to-year increase is primarily attributable to increased
sales and marketing staff as the Company expanded its staff to
respond to increasing inquiries and sales opportunities,
additional expenses for tradeshows, marketing collateral and
market costs associated with the re-branding of the Company as
Streamline Health to strengthen the focus on new
market opportunities involving business process improvement via
workflow automation technologies.
Product Research and Development. Product
research and development expenses in fiscal year 2006 were
$2,716,163 compared with $2,733.293 in fiscal year 2005. During
2006, Streamline Health increased its technical staff and added
additional contractors to concentrate its development efforts
primarily on its new products and new workflow technologies.
Streamline Health capitalized approximately $2,130,000 in
software development expenditures in fiscal year 2006, compared
with $1,450,000 in 2005. The increase in capitalized software in
2006, reflects the increased 2006 development activities related
to new products or enhancements to existing products.
Operating Profit. Operating profit in fiscal
year 2006 was $181,590 compared with $1,738,322 in fiscal year
2005. The $1,556,732, or 90% decrease, results primarily from an
approximately $1,834,000 decrease in high margin software
licensing revenues discussed above and increased expenses during
the fiscal year.
Other Income (Expense). Interest income
consists primarily of interest on cash balances. The interest
income declined during 2006 because of lower cash balances.
Interest expense in 2006 was related to the then current term
loan and capitalized leases. The decrease in the interest
expense in 2006 results primarily from the reduction of the
outstanding debt during the year.
31
Provision for Income Taxes. The income tax
provision in fiscal years 2005 includes the Alternative Minimum
Tax paid by the Company, as all income could not be offset
against the Alternative Minimum Tax loss carry forward. In
fiscal year 2005, Streamline Health recorded a tax benefit in
the amount of $897,000, as a result of a reduction in the
valuation allowance on the deferred tax assets relating
primarily to the tax loss carry forward based on future earnings
before income tax projections.
Net Earnings. Net earnings in fiscal year 2006
were $96,461 compared with net earnings of $2,551,072 in fiscal
year 2005. The decrease results primarily from decreased
software revenues and higher operating expenses.
Backlog
At January 31, 2008 Streamline Health has master agreements
and purchase orders from customers and remarketing partners for
systems and related services (excluding support and maintenance,
and transaction-based application-hosting revenues), which have
not been delivered or installed which, if fully performed, would
generate future revenues of approximately $8,018,000 compared
with $5,226,000 at January 31, 2007. The related products
and services are expected to be delivered over the next two to
three years. The increase in the backlog is the result of
signing new agreements with new and existing customers late in
the fourth quarter of 2007 and the signing of a contract for an
expansion of a system at an existing customer which requires
some site specific customization and which have not been fully
implemented. In addition, customers contract for maintenance and
support services on a monthly, quarterly, or annual basis. At
January 31, 2008, Streamline Health had maintenance
agreements, purchase orders, from remarketing partners for
maintenance, which if fully performed, will generate future
revenues of approximately $4,921,000, compared with $4,469,000
at January 31, 2007, through their respective renewal dates
in fiscal year 2008 and 2009. The increase results from the
addition of new customers or expansion of systems with existing
customers. In 2007, maintenance and support revenues
approximated $6,740,000 compared with $5,617,000 in 2006 and are
expected to increase in fiscal year 2008. At January 31,
2008, Streamline Health has entered into application-hosting
agreements, which are expected to generate revenues in excess of
$3,028,000 through their respective renewal dates in fiscal
years 2008 through 2012. The application-hosting backlog is
lower than the $5,256,000 in 2006 as Streamline Healths
largest application hosting client has informed us that it is in
the process of internally developing its own software
application using a third party tool kit, which software the
client intends to use in place of our ASP services. We believe
that the clients ability to develop substitute software
that would have the same robust functionality as Streamline
Healths current ASP offering will be a major software
development undertaking. Therefore, we are unable to determine
if or when this client will discontinue the use of our ASP
services. The current agreement with this client is scheduled to
expire on March 31, 2008, and the Company has agreed to
extend that agreement on a month to month basis for up to one
additional year ending March 31, 2009.
Revenues from the GE Medical Systems Remarketing Agreement for
the last three years amounted to approximately $12,624,000, or
26% of the total revenues for the last three fiscal years.
Streamline Health relies on GE Medical Systems for a significant
amount of its revenues, the loss of which would have a material
adverse affect on future results of operations.
Streamline Health believes a greater percentage of its future
revenues will come from remarketing agreements with, GE Medical
Systems, and other HIS related vendors such as the Emergis, Inc.
agreement that was entered into in December 2007. Streamline
Health continues to actively pursue remarketing agreements with
other companies.
Streamline Health believes the large HIS vendors, hospitals and
integrated healthcare delivery networks now have a better
understanding of the valuable role the document management and
workflow technologies play in providing truly computerized
information and the benefits of such systems in utilizing
advanced workflow solutions. As more healthcare providers become
aware of and better understand the significant economic and
operating benefits of utilizing document management and workflow
applications, Streamline Health believes the future demand for
its products and services will increase.
Many companies have emerged to provide healthcare applications
through private Intranets or secure applications on the
Internet. Additionally, the traditional HIS companies have
developed clinical information systems for the Internet.
Streamline Healths applications are well suited for
integration with such clinical systems and are optimized for use
on the Internet and private Intranets. Through Streamline
Healths ASPeN Services,
32
application-hosting customers can rapidly deploy and access
healthcare information using web browser-based technology from a
central data center on a per transaction or subscription basis
thereby minimizing up-front capital expenditures. Streamline
Health believes healthcare organizations will continue to
increase their use of healthcare applications through the
Internet, and Streamline Healths products are an integral
part of providing a complete EMR across the Internet. Streamline
Health continues to actively pursue strategic relationships with
other healthcare Application Service Providers.
Management believes that revenue growth can be fueled by: the
expansion of our sales force and marketing efforts, an increase
in incremental revenue from existing and new strategic
distribution partners, an increase in interest by healthcare
organizations in Streamline Health products and services to
assist in compliance with the Federal HIPAA standards as they
relate to the confidentiality and security of medical records,
and incremental new revenues derived from new lines of business
for Streamline Health in the remote coding, revenue cycle and
other workflows for the hospital marketplace. The revenue cycle
workflows are a logical extension of the product line because of
the ability of the Financial Services departments of hospitals
to access and process patient information from the EMR. Due to
an acute shortage of available coding personnel, there currently
exists a great demand for solutions to attract and retain
qualified coders and to make the coding process more efficient.
Since commencing operations in 1989, Streamline Health has
incurred substantial cumulative operating losses. Although
Streamline Health achieved operating profitability during six of
the last seven years, Streamline Health incurred net losses in
most fiscal years prior to fiscal year 2000 and in the current
fiscal year. Based upon the expenses associated with current and
planned staffing levels, profitability is dependent upon
increasing revenues. Although the Company believes that it can
return to profitability, there can be no assurance that
Streamline Health will be able to achieve consistent
profitability on a quarterly or annual basis nor be able to
sustain or increase its revenue growth in future periods and
believes historical operating results may not be indicative of
the future performance of Streamline Health in the near or
long-term.
Liquidity
and Capital Resources
During the last five fiscal years, Streamline Health has funded
its operations, working capital needs, and capital expenditures
primarily from a combination of cash generated by operations,
and a $3,500,000 bank loan in 2004. Streamline Healths
liquidity is dependent upon numerous factors including:
(i) the timing and amount of revenues and collection of
contractual amounts from customers, (ii) amounts invested
in research and development, capital expenditures, and
(iii) the level of operating expenses, all of which can
vary significantly from quarter-to-quarter.
Streamline Healths customers typically have been
well-established hospitals or medical facilities or major HIS
companies that resell Streamline Health products, which
have good credit histories and payments have been received
within normal time frames for the industry. However, some
healthcare organizations have experienced significant operating
losses as a result of limits on third-party reimbursements from
insurance companies and governmental entities. Agreements with
customers often involve significant amounts and contract terms
typically require customers to make progress payments.
Streamline Health has no significant obligations for capital
resources, other the noncancelable operating leases of
approximately $984,000 payable over the next three years.
Capital expenditures for property and equipment in 2008 are not
expected to exceed $800,000.
During the last three years, Streamline Health has expended
approximately $2,193,000 for capital expenditures, increased its
sales and marketing expenses, product research and development
and support and consulting expenses, and made net debt
repayments of approximately $3,000,000. This resulted in
significant net cash outlays over the last three years.
Accordingly, to position the Company to achieve increasing
revenues and profitability it was necessary for the Company to
significantly increase the sales and marketing expenses in
fiscal 2005, 2006 and 2007. The Company believes that this
strategic initiative to expand sales and marketing should
produce improved results in 2008 and beyond as the expanded
sales and marketing efforts begin to produce results. However,
there can be no assurance Streamline Health will be able to do
so.
At January 31, 2008, Streamline Health had cash on hand of
$2,189,010.
33
Notwithstanding the current levels of revenues and expenses, for
the foreseeable future, Streamline Health will need to
continually assess its revenue prospects compared to its then
current expenditure levels. If it does not appear likely that
revenues will increase, it may be necessary to reduce operating
expenses or raise cash through additional borrowings, the sale
of assets, or other equity financing. Certain of these actions
will require current lender approval. However, there can be no
assurance Streamline Health will be successful in any of these
efforts. If it is necessary to significantly reduce operating
expenses, this could have an adverse effect on future operating
performance.
Streamline Health believes that its present cash position,
combined with cash generation currently anticipated from
operations and the availability of the revolving credit facility
will be sufficient to meet anticipated cash requirements for the
next twelve months. However, continued expansion of the Company
will require additional resources. The Company may need to incur
debt, obtain an additional infusion of capital, or a combination
of both, depending on the extent of the expansion of the Company
and future revenues and expenses. However, there can be no
assurance Streamline Health will be able to do so.
To date, inflation has not had a material impact on Streamline
Healths revenues or expenses.
Net cash provided by operations in fiscal 2007 exceeded
$3,200,000, an increase of approximately $700,000 from
approximately $2,500,000 in the prior fiscal year. The increase
resulted primarily from an increase in Accounts Payable and
Accrued Expenses of $2,356,705 offset by increased Accounts,
Contracts and Installment Receivables of $1,294,375. See the
Consolidated Statements of Cash Flows for the individual
components comprising the net cash provided by operating
activities.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Streamline Health currently invests its cash balances, in excess
of its current needs in an interest bearing checking account.
Streamline Health does not invest for the purposes of trading in
securities. Additionally, Streamline Health does not have any
significant market risk exposure at January 31, 2008.
34
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE COVERED BY
REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
|
|
|
|
|
|
|
Page
|
|
Managements Report in Internal Control over Financial
Reporting
|
|
|
36
|
|
Reports of Independent Registered Public Accounting Firms
|
|
|
37
|
|
Consolidated Balance Sheets at January 31, 2008 and 2007
|
|
|
39
|
|
Consolidated Statements of Income for the three years ended
January 31, 2008
|
|
|
40
|
|
Consolidated Statements of Changes in Stockholders Equity
for the three years ended January 31, 2008
|
|
|
41
|
|
Consolidated Statements of Cash Flows for the three years ended
January 31, 2008
|
|
|
42
|
|
Notes to Consolidated Financial Statements
|
|
|
43
|
|
Schedule II Valuation and Qualifying Accounts
|
|
|
56
|
|
All other financial statement schedules are omitted because they
are not applicable or the required information is included in
the consolidated financial statements or notes thereto.
35
MANAGEMENTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining
adequate internal control over financial reporting of Streamline
Health Solutions, Inc. (as defined in
Rule 13a-15(f)
under the Securities Exchange Act of 1934, as amended). Our
internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles in the United States of America.
Strong internal controls is an objective that is reinforced
through our Code of Conduct and Ethics, which sets forth
our commitment to conduct business with integrity, and within
both the letter and the spirit of the law. The Companys
internal control over financial reporting includes a Control
Self-Assessment Program that is conducted annually. Management
takes the appropriate action to correct any identified control
deficiencies. Because of its inherent limitations, any system of
internal control over financial reporting, no matter how well
designed, may not prevent or detect misstatements due to the
possibility that a control can be circumvented or overridden or
that misstatements due to error or fraud may occur that are not
detected. Also, because of changes in conditions, internal
control effectiveness may vary over time.
Management assessed the effectiveness of the Companys
internal control over financial reporting as of January 31,
2008, using criteria established in Internal Control
Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) and concluded that the Company maintained effective
internal control over financial reporting as of January 31,
2008, based on these criteria.
This annual report does not include an attestation report of the
Companys independent registered public accounting firm
regarding internal control over financial reporting.
Managements report was not subject to attestation by the
Companys independent registered public accounting firm
pursuant to temporary rules (Item 308T of
Regulation S-K)
of the Securities and Exchange Commission that permits the
Company to provide only managements report in this annual
report.
This report shall not be deemed to be filed for purposes of
Section 18 of the Exchange Act or otherwise subject to the
liabilities of that section, unless the registrant specifically
states that the report is to be considered filed
under the Exchange Act or incorporates it by reference into a
filing under the Securities Act or the Exchange Act.
36
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Streamline Health Solutions, Inc.
Cincinnati, Ohio
We have audited the accompanying consolidated balance sheet of
Streamline Health Solutions, Inc. and the related consolidated
statements of income, stockholders equity and cash flows
for the year ended January 31, 2008. In connection with our
audit of the financial statements, we also audited the financial
statement schedule listed in the accompanying index. The
financial statements and schedule are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform an audit of the internal
control over financial reporting. Our audit included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purposes of expressing an opinion
on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall presentation of the financial statements and
schedule. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Streamline Health Solutions, Inc. at
January 31, 2008, and the results of operations and its
cash flows for the year ended January 31, 2008, in
conformity with accounting principles generally accepted in the
United States of America.
Also, in our opinion, the financial statements and schedule when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
Chicago, Illinois
March 31, 2008
/s/ BDO
Seidman, LLP
37
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Streamline Health Solutions, Inc.
We have audited the accompanying consolidated balance sheet of
Streamline Health Solutions, Inc. as of January 31, 2007,
and the related consolidated statements of income, changes in
stockholders equity, and cash flows for each of the two
years in the period ended January 31, 2007. Our audits also
included the financial statement schedule of Streamline Health
Solutions, Inc. listed in item 15(a). These financial
statements and schedule are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Companys internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Streamline Health Solutions, Inc. at
January 31, 2007, and the consolidated results of its
operations and its cash flows for each of the two years in the
period ended January 31, 2007, in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth herein.
Cincinnati, Ohio
March 27, 2007
/s/ Ernst
& Young LLP
38
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,189,010
|
|
|
$
|
3,316,614
|
|
Accounts receivable, net of allowance for doubtful accounts of
$100,000 and $200,000, respectively
|
|
|
2,832,852
|
|
|
|
2,281,313
|
|
Contract receivables
|
|
|
1,833,842
|
|
|
|
1,357,433
|
|
Prepaid hardware and third party software for future delivery
|
|
|
484,247
|
|
|
|
182,716
|
|
Prepaid other, including prepaid customer maintenance contracts
|
|
|
501,803
|
|
|
|
362,714
|
|
Deferred taxes
|
|
|
185,000
|
|
|
|
625,000
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
8,026,754
|
|
|
|
8,125,790
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
Computer equipment
|
|
|
2,235,104
|
|
|
|
2,132,853
|
|
Computer software
|
|
|
1,086,691
|
|
|
|
847,328
|
|
Office furniture, fixtures and equipment
|
|
|
731,346
|
|
|
|
733,320
|
|
Leasehold improvements
|
|
|
574,257
|
|
|
|
568,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,627,398
|
|
|
|
4,281,599
|
|
Accumulated depreciation and amortization
|
|
|
(3,153,675
|
)
|
|
|
(2,704,329
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
1,473,723
|
|
|
|
1,577,270
|
|
Contract receivables
|
|
|
|
|
|
|
554,888
|
|
Capitalized software development costs, net of accumulated
|
|
|
|
|
|
|
|
|
amortization of $6,643,235 and $5,116,568, respectively
|
|
|
4,878,694
|
|
|
|
3,753,361
|
|
Other, including deferred taxes of $1,690,000 and $1,250,000,
respectively
|
|
|
1,720,114
|
|
|
|
1,289,536
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,099,285
|
|
|
$
|
15,300,845
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,518,682
|
|
|
$
|
619,362
|
|
Accrued compensation
|
|
|
536,599
|
|
|
|
432,142
|
|
Accrued other expenses
|
|
|
521,210
|
|
|
|
541,904
|
|
Deferred revenues
|
|
|
5,183,333
|
|
|
|
3,693,668
|
|
Current portion of capitalized leases
|
|
|
|
|
|
|
91,002
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
7,759,824
|
|
|
|
5,378,078
|
|
Capitalized leases, less current portion
|
|
|
|
|
|
|
56,049
|
|
Long-term debt
|
|
|
|
|
|
|
1,000,000
|
|
Other
|
|
|
146,525
|
|
|
|
222,484
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Convertible redeemable preferred stock, $.01 par value per
share,
5,000,000 shares authorized, no shares issued
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value per share,
25,000,000 shares authorized,
9,260,320 and 9,211,399 shares issued, respectively
|
|
|
92,603
|
|
|
|
92,114
|
|
Capital in excess of par value
|
|
|
35,542,222
|
|
|
|
35,286,238
|
|
Accumulated (deficit)
|
|
|
(27,441,889
|
)
|
|
|
(26,734,118
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
8,192,936
|
|
|
|
8,644,234
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,099,285
|
|
|
$
|
15,300,845
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
39
CONSOLIDATED
STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Systems sales
|
|
$
|
3,016,095
|
|
|
$
|
4,278,792
|
|
|
$
|
6,112,727
|
|
Services, maintenance and support
|
|
|
10,004,138
|
|
|
|
8,314,979
|
|
|
|
6,950,182
|
|
Application-hosting services
|
|
|
3,543,067
|
|
|
|
3,273,202
|
|
|
|
3,063,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
16,563,300
|
|
|
|
15,866,973
|
|
|
|
16,126,808
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of systems sales
|
|
|
2,904,077
|
|
|
|
2,426,595
|
|
|
|
2,256,046
|
|
Cost of services, maintenance and support
|
|
|
4,098,746
|
|
|
|
3,609,386
|
|
|
|
3,130,374
|
|
Cost of application-hosting services
|
|
|
1,083,141
|
|
|
|
1,130,583
|
|
|
|
1,050,470
|
|
Selling, general and administrative
|
|
|
6,048,214
|
|
|
|
5,802,656
|
|
|
|
5,218,303
|
|
Product research and development
|
|
|
3,132,809
|
|
|
|
2,716,163
|
|
|
|
2,733,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
17,266,987
|
|
|
|
15,685,383
|
|
|
|
14,388,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(703,687
|
)
|
|
|
181,590
|
|
|
|
1,738,322
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
22,256
|
|
|
|
77,337
|
|
|
|
93,322
|
|
Interest expense
|
|
|
(26,221
|
)
|
|
|
(131,286
|
)
|
|
|
(147,933
|
)
|
Other income (expenses)
|
|
|
(16,510
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
|
|
(724,162
|
)
|
|
|
127,641
|
|
|
|
1,683,711
|
|
Income tax benefit (expense)
|
|
|
(11,400
|
)
|
|
|
(31,180
|
)
|
|
|
867,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(735,562
|
)
|
|
$
|
96,461
|
|
|
$
|
2,551,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings (loss) per common share
|
|
$
|
(.08
|
)
|
|
$
|
.01
|
|
|
$
|
.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares used in basic per common share computation
|
|
|
9,234,313
|
|
|
|
9,195,415
|
|
|
|
9,121,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings (loss) per common share
|
|
$
|
(.08
|
)
|
|
$
|
.01
|
|
|
$
|
.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares used in diluted per common share computation
|
|
|
9,234,313
|
|
|
|
9,722,346
|
|
|
|
9,425,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
40
CONSOLIDATED
STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
Capital in
|
|
|
|
|
|
Total
|
|
|
|
redeemable
|
|
|
Common
|
|
|
excess of
|
|
|
Accumulated
|
|
|
stockholders
|
|
|
|
preferred stock
|
|
|
stock
|
|
|
par value
|
|
|
(deficit)
|
|
|
equity
|
|
|
Balances at January 31, 2005
|
|
$
|
|
|
|
$
|
90,845
|
|
|
$
|
35,002,961
|
|
|
$
|
(29,381,651
|
)
|
|
$
|
5,712,155
|
|
Stock issued to Employee Stock Purchase Plan and exercise of
stock options
|
|
|
|
|
|
|
750
|
|
|
|
87,341
|
|
|
|
|
|
|
|
88,091
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,551,072
|
|
|
|
2,551,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at January 31, 2006
|
|
|
|
|
|
|
91,595
|
|
|
|
35,090,302
|
|
|
|
(26,830,579
|
)
|
|
|
8,351,318
|
|
Stock issued to Employee Stock Purchase Plan and exercise of
stock options
|
|
|
|
|
|
|
519
|
|
|
|
84,799
|
|
|
|
|
|
|
|
85,318
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
111,137
|
|
|
|
|
|
|
|
111,137
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,461
|
|
|
|
96,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at January 31, 2007
|
|
|
|
|
|
|
92,114
|
|
|
|
35,286,238
|
|
|
|
(26,734,118
|
)
|
|
|
8,644,234
|
|
Stock issued to Employee Stock Purchase Plan and exercise of
stock options
|
|
|
|
|
|
|
489
|
|
|
|
113,342
|
|
|
|
|
|
|
|
113,831
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
142,642
|
|
|
|
|
|
|
|
142,642
|
|
FIN 48 tax adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,791
|
|
|
|
27,791
|
|
Net (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(735,562
|
)
|
|
|
(735,562
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at January 31, 2008
|
|
$
|
|
|
|
$
|
92,603
|
|
|
$
|
35,542,222
|
|
|
$
|
(27,441,889
|
)
|
|
$
|
8,192,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
41
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(735,562
|
)
|
|
$
|
96,461
|
|
|
$
|
2,551,072
|
|
Adjustments to reconcile net earnings to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
2,189,981
|
|
|
|
1,819,233
|
|
|
|
1,470,659
|
|
Loss on sale of fixed assets
|
|
|
16,510
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
|
|
142,642
|
|
|
|
111,137
|
|
|
|
|
|
Net deferred income taxes
|
|
|
|
|
|
|
|
|
|
|
(897,000
|
)
|
Change in allowance for doubtful accounts
|
|
|
(100,000
|
)
|
|
|
|
|
|
|
|
|
Cash provided by (used for) assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts, contract and installment receivables
|
|
|
(373,060
|
)
|
|
|
921,315
|
|
|
|
(1,808,739
|
)
|
Other assets
|
|
|
(440,620
|
)
|
|
|
(178,699
|
)
|
|
|
10,385
|
|
Accounts payable
|
|
|
899,320
|
|
|
|
(436,177
|
)
|
|
|
169,449
|
|
Accrued expenses
|
|
|
111,555
|
|
|
|
(909,653
|
)
|
|
|
888,272
|
|
Deferred revenues
|
|
|
1,489,665
|
|
|
|
1,076,484
|
|
|
|
385,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
3,200,431
|
|
|
|
2,500,101
|
|
|
|
2,769,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(715,053
|
)
|
|
|
(610,353
|
)
|
|
|
(867,620
|
)
|
Proceeds from disposal of property and equipment
|
|
|
138,775
|
|
|
|
|
|
|
|
|
|
Capitalization of software development costs
|
|
|
(2,652,000
|
)
|
|
|
(2,130,000
|
)
|
|
|
(1,450,000
|
)
|
Other
|
|
|
(66,537
|
)
|
|
|
(77,720
|
)
|
|
|
116,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used for) investing activities
|
|
|
(3,294,815
|
)
|
|
|
(2,818,073
|
)
|
|
|
(2,201,429
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from revolving credit facility
|
|
|
|
|
|
|
1,000,000
|
|
|
|
|
|
Repayment of long-term debt and revolving credit facility
|
|
|
(1,000,000
|
)
|
|
|
(2,000,000
|
)
|
|
|
|
|
Payment of capitalized leases
|
|
|
(147,051
|
)
|
|
|
(84,951
|
)
|
|
|
(203,356
|
)
|
Exercise of stock options and stock purchase plan
|
|
|
113,831
|
|
|
|
85,318
|
|
|
|
88,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used for) financing activities
|
|
|
(1,033,220
|
)
|
|
|
(999,633
|
)
|
|
|
(115,265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in cash and cash equivalents
|
|
|
(1,127,604
|
)
|
|
|
(1,317,605
|
)
|
|
|
453,146
|
|
Cash and cash equivalents at beginning of year
|
|
|
3,316,614
|
|
|
|
4,634,219
|
|
|
|
4,181,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
2,189,010
|
|
|
$
|
3,316,614
|
|
|
$
|
4,634,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
27,832
|
|
|
$
|
129,674
|
|
|
$
|
148,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid (refund)
|
|
$
|
9,202
|
|
|
$
|
66,537
|
|
|
$
|
(27,972
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold improvements (included in property and equipment) paid
for by the landlord as a lease inducement
|
|
$
|
|
|
|
$
|
|
|
|
$
|
326,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease
|
|
$
|
|
|
|
$
|
|
|
|
$
|
267,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
42
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
1.
|
Organization
and Summary of Significant Accounting Policies
|
Streamline Health Solutions, Inc. (Streamline Health or the
Company) operates in one segment as a provider of Healthcare
Information Workflow Technology through the licensing of its
Electronic Health Information Management, Patient Financial
Services and other Workflow software applications and the use of
such applications through its application-hosting services as an
Application Service Provider. Streamline Healths products
enable hospitals and integrated healthcare delivery systems in
the United States to capture, store, manage, route, retrieve,
and process vast amounts of patient clinical, financial and
other healthcare provider information.
Fiscal
Year
All references to a fiscal year refer to the fiscal year
commencing February 1 in that calendar year and ending on
January 31 of the following year.
Consolidation
The consolidated financial statements include the accounts of
Streamline Health Solutions, Inc. and its subsidiary, Streamline
Health, Inc. All significant intercompany transactions are
eliminated.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates. In the third quarter of fiscal 2007, Streamline
Health recorded a $100,000 favorable change in the estimate for
the reserve for doubtful accounts. In the fourth quarter of
fiscal year 2006, Streamline Health recorded a $100,000
favorable change in the estimate for miscellaneous reserves. In
fiscal years 2005, 2006 and 2007, the Company made certain
estimates of its future earnings before income taxes in
determining the amount of the valuation allowance required for
the deferred income tax assets relating to the net operating
loss carry forward (See Note 4).
Revenue
Recognition
Revenue is derived from: the licensing and sale of systems,
either directly to end-users or through third-party resellers,
comprising internally developed software, third-party software
and hardware components; product support, maintenance and
professional services; and application-hosting services that
provide high quality, transaction or subscription based document
imaging/management services from a central data center.
Streamline Healths revenue recognition policies conform to
Statement of Position
97-2,
Software Revenue Recognition, as amended by Statement of
Position
98-9,
SAB 104 Revenue Recognition and EITF Issue
No. 00-21,
Revenue Arrangements with Multiple Deliverables.
Generally, revenue from software license fees and hardware sales
to end-users is recognized when a master agreement is signed and
products are made available to end-users. Revenues from
agreements that contain multiple-element arrangements are
allocated to the various elements based on the fair value of the
specific elements. Revenues related to routine installation and
integration and project management are deferred until the work
is performed. Streamline Health follows this method since
reasonably dependable estimates of the revenues and costs
applicable to various stages of a contract can be made. Revenues
from consulting, education, and application-hosting services are
recognized as the services are performed. Revenues from
short-term support and maintenance agreements are recognized
ratably over the term of the agreements. Billings to customers
recorded prior to the recognition of revenues are classified as
deferred revenues. Revenues recognized prior to progress
billings to customers are recorded as contract receivables.
Cash
Cash includes demand deposits.
43
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Receivables
Accounts and contract receivables are comprised of amounts owed
Streamline Health for licensed software, professional services,
including maintenance services and application-hosting
activities and are net of an allowance for doubtful accounts of
$100,000 at January 31, 2008 and $200,000 at
January 31, 2007. Contracts with individual customers and
resellers determine when receivables are due. In determining the
allowance for doubtful accounts, each unpaid receivable is
reviewed quarterly with the appropriate Streamline Health Client
Manager to determine the payment status based upon the most
currently available information as to the status of the
receivables, the customer comments, if any, and the status of
any open or unresolved issues with the customer preventing the
payment thereof. Corrective action, if necessary, is taken by
Streamline Health to resolve open issues related to unpaid
receivables. During these quarterly reviews, Streamline Health
determines the required allowances for doubtful accounts for
estimated losses resulting from the unwillingness or inability
of its customers or resellers to make required payments.
Concentrations
Financial instruments, which potentially expose Streamline
Health to concentrations of credit risk, as defined by Statement
of Financial Accounting Standards No. 105, Disclosure of
Information about Financial Instruments with Off-Balance-Sheet
Risk and Financial Instruments with Concentrations of Credit
Risk, consist primarily of accounts receivable. Streamline
Healths accounts receivable are concentrated in the
healthcare industry. However, Streamline Healths customers
typically have been well-established hospitals, medical
facilities, or major Health Information Systems companies that
resell Streamline Healths products that have good credit
histories and payments have been received within normal time
frames for the industry. However, some hospitals and medical
facilities have experienced significant operating losses as a
result of limits on third-party reimbursements from insurance
companies and governmental entities and extended payment of
receivables from these entities is not uncommon.
To date, Streamline Health has relied on a limited number of
customers and remarketing partners for a substantial portion of
its total revenues. Streamline Health expects that a significant
portion of its future revenues will continue to be generated by
a limited number of customers and its remarketing partners. The
failure to obtain new customers or expand sales through
remarketing partners, the loss of existing customers or
reduction in revenues from existing customers could materially
and adversely affect Streamline Healths operating results
(See Note 6).
Streamline Health currently buys all of its hardware and some
major software components of its Healthcare Information Systems
from third-party vendors. Although there are a limited number of
vendors capable of supplying these components, management
believes that other suppliers could provide similar components
on comparable terms. A change in suppliers, however, could cause
a delay in system implementations and a possible loss of
revenues, which could adversely affect operating results.
Other
Current Assets
Other current assets are primarily: prepaid insurance,
commissions, maintenance, deposits, deferred Federal income tax
assets and prepaid expenses related to future revenues (See
Note 4).
Property
and Equipment
Property and equipment are stated at cost. Depreciation is
computed using the straight-line method, over the estimated
useful lives of the related assets. Estimated useful lives are
as follows:
|
|
|
|
|
Computer equipment and software
|
|
|
3-4 years
|
|
Office equipment
|
|
|
5 years
|
|
Office furniture and fixtures
|
|
|
7 years
|
|
Leasehold improvements
|
|
|
Life of lease
|
|
44
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In 2005, Streamline Health entered into a sixty-six month
operating lease for office space. In connection with the lease,
the property owner provided certain lease inducements to the
Company, including a $326,000 build out allowance and use of the
premises for six months rent free. The Company has accounted for
the value of these inducements by recording the build out
allowance as a leasehold improvement with a corresponding lease
incentive liability. The total amount of the lease payments are
amortized as rent expense on a straight line basis over the term
of the lease. The leasehold improvement asset and the lease
incentive liability are each amortized on a straight line basis
over the term of the lease to depreciation and as an offset to
rent expense, respectively. Any timing differences between the
actual monthly lease payments and the straight line rent expense
is recorded as an adjustment to the lease incentive liability.
Depreciation expense for property and equipment in 2007, 2006,
and 2005 was $663,314, $735,897, and $670,655, respectively.
Leased computer equipment and software meeting certain criteria
are capitalized and the present value of the related lease
payments is recorded as a liability. Depreciation of the
capitalized lease assets is computed on the straight-line method
over the term of the lease.
Normal repair and maintenance is expensed as incurred.
Replacements are capitalized and the property and equipment
accounts are relieved of the items being replaced or disposed
of, or if no longer of value. The related cost and accumulated
deprecation of the disposed assets are eliminated and any gain
or loss on disposition is included in the results of operations
in the year of disposal.
Capitalized
Software Development Costs
Software development costs are accounted for in accordance with
Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Software to be Sold, Leased or
Otherwise Marketed. Costs associated with the planning and
designing phase of software development, including coding and
testing activities necessary to establish technological
feasibility are classified as product research and development
and are expensed as incurred. Once technological feasibility has
been determined, a portion of the costs incurred in development,
including coding, testing, and product quality assurance, are
capitalized and subsequently reported at the lower of
unamortized cost or net realizable value. Streamline Health
capitalized approximately $2,652,000, $2,130,000, and $1,450,000
in 2007, 2006 and 2005, respectively.
Research and development expense, net of capitalized amounts,
was $3,132,809, $2,716,163, and $2,733,293 in 2007, 2006 and
2005, respectively.
Amortization is provided on a
product-by-product
basis over the estimated economic life of the software, not to
exceed three years, using the straight-line method. Amortization
commences at the beginning of the year following when a product
is available for general release to customers. Unamortized
capitalized costs determined to be in excess of the net
realizable value of a product are expensed at the date of such
determination. Amortization expense was approximately
$1,527,000, $1,083,000, and $800,000 in 2007, 2006, and 2005,
respectively.
Other
non-current assets
Other non-current assets at January 31, 2008 and 2007
consist primarily of deferred tax assets (See Note 4).
Accrued
Other Expenses
The accrued other expenses at January 31, 2008, and 2007
include warranty reserves, accrued franchise and property taxes,
professional fees and other liabilities.
Income
Taxes
The provisions for income taxes are accounted for in accordance
with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. Under the asset and
liability method of Statement 109, deferred
45
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The Company
must then assess the likelihood that the deferred tax asset will
be recovered from future taxable income and to the extent that
the Company believes recovery is not likely; the Company must
establish a valuation allowance. To the extent the Company
establishes a valuation allowance in the period; the Company
must include an expense within the tax provision in the
statement of operations. The Company considered future taxable
income in assessing the need for this valuation allowance.
The Company adopted Financial Accounting Standards Board
Interpretation No, 48, Accounting for Uncertainties in Income
Taxes (FIN 48), an interpretation of Financial
Accounting Standards Board Statement No. 109, Accounting
for Income Taxes (SFAS 109) on February 1,
2007. FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in the financial statements in
accordance with SFAS 109 and prescribes a recognition
threshold of more-likely-than-not to be sustained upon
examination.
Stock
Options and Stock Appreciation Rights
Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, establishes a
fair value method of financial accounting and reporting for
stock-based compensation plans. Streamline Health elected to
continue to account for stock options under the intrinsic value
method prescribed by Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees
and, accordingly, adopted the disclosure only provisions of
Statement 123 in fiscal year 2005. No stock-based compensation
cost is reflected in the net earnings for fiscal year 2005, as
all options granted under the plans had exercise prices equal to
the fair market value of the underlying common stock on the date
of grant. The table below illustrates the effect on net earnings
and earnings per share as if Streamline Health had applied the
fair value recognition provisions of Statement of Financial
Accounting Standards No. 123, to stock-based employee
compensation.
The Company adopted the revised standards of Statement of
Financial Accounting Standards No. 123(R), Accounting
for Stock-Based Compensation, effective the first quarter of
fiscal year 2006, which requires expensing the fair value of the
equity awards. The Company elected to adopt the
Modified-Prospective Transition method. Under this method, the
Company is required to recognize compensation cost for
share-based payments based on their grant-date fair value from
the beginning of the fiscal period in which the recognition
provisions are first applied. As a result of adopting Statement
123(R) on February 1, 2006, the Company incurred total
additional annual compensation expense of $142,642 in 2007 and
$111,137 in 2006, respectively. The fair value of the 2007 and
2006 stock-based compensation was estimated at the date of
grants using a Black-Scholes option pricing model with the
following weighted average assumptions for both fiscal years:
risk-free interest rate of 4.25%, a dividend yield of zero
percent; a weighted average volatility factor of the expected
market price of Streamline Healths Common Stock of .793
(in 2007) and .823 (in 2006), and a weighted average
expected life of stock options of five years and a forfeiture
rate of zero. Future grants of equity awards accounted for as
stock-based compensation could have a material impact on
reported expenses depending upon the number, value and vesting
period of future awards.
At January 31, 2008 Streamline Health had two stock-based
compensation plans, which are more fully disclosed in
Note 7 of the Notes to Consolidated Financial Statements.
Pro forma information regarding the net earnings and net
earnings per common share is required by Statement 123 for
fiscal year 2005 and has been determined as if Streamline Health
had accounted for its stock options under the fair value method
of that Statement. The fair value of these options was estimated
at the date of grant using a Black-Scholes option-pricing model
with the following weighted average assumptions for fiscal year
2005: risk-free interest rate of 4.25%; a dividend yield of zero
percent; a volatility factor of the expected market price of
Streamline Healths Common Stock of .842, and a weighted
average expected life of the options of five years.
46
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because Streamline Healths stock options have
characteristics significantly different from those of traded
options and because changes in the subjective input assumptions
can materially affect the fair value estimate, in Streamline
Healths opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its stock
options.
|
|
|
|
|
2005 Net earnings, as reported
|
|
$
|
2,551,072
|
|
Deduct: Total stock based compensation expense determined under
the fair value based method for all awards, net of related tax
effects
|
|
|
(74,227
|
)
|
|
|
|
|
|
Pro forma net earnings
|
|
$
|
2,476,845
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
Basic as reported
|
|
$
|
.28
|
|
|
|
|
|
|
Basic pro forma
|
|
$
|
.27
|
|
|
|
|
|
|
Diluted as reported
|
|
$
|
.27
|
|
|
|
|
|
|
Diluted pro forma
|
|
$
|
.26
|
|
|
|
|
|
|
Net
Earnings (loss) Per Common Share
The net earnings (loss) per common share are computed in
accordance with Statement of Financial Accounting Standards
No. 128, Earnings per Share. The basic net earnings
(loss) per common share are computed based on the weighted
average number of common shares outstanding during each period.
The diluted net earnings per common share reflects the potential
dilution that could occur if Stock Options, Stock Purchase Plan
commitments and Warrants were exercised into Common Stock, under
certain circumstances, that then would share in the earnings of
Streamline Health.
The following is the calculation of the basic and diluted net
earnings per share of common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Net earnings (loss)
|
|
$
|
(735,562
|
)
|
|
$
|
96,461
|
|
|
$
|
2,551,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding used in basic per common share
computations
|
|
|
9,234,313
|
|
|
|
9,195,415
|
|
|
|
9,121,369
|
|
Stock options
|
|
|
|
|
|
|
428,976
|
|
|
|
631,271
|
|
Warrants assumed converted
|
|
|
|
|
|
|
750,000
|
|
|
|
750,000
|
|
Assumed treasury stock buyback
|
|
|
|
|
|
|
(652,045
|
)
|
|
|
(1,077,590
|
)
|
Convertible redeemable preferred stock assumed converted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of average shares used in diluted per common share
computation
|
|
|
9,234,313
|
|
|
|
9,722,346
|
|
|
|
9,425,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings (loss) per share of common stock
|
|
$
|
(.08
|
)
|
|
$
|
.01
|
|
|
$
|
.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings (loss) per share of common stock
|
|
$
|
(.08
|
)
|
|
$
|
.01
|
|
|
$
|
.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The diluted earnings per share for the fiscal year 2007, exclude
the effect of all outstanding Stock Options and Warrants because
the inclusion would be antidilutive.
The diluted earnings per share for the fiscal year 2006, exclude
the effect of 32,524 outstanding Stock Options because the
inclusion would be antidilutive.
47
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The diluted earnings per share for the fiscal year 2005, exclude
the effect of 40,000 outstanding Stock Options because the
inclusion would be antidilutive.
Recent
Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board
(FASB) issued SFAS No. 141(R),
Business Combinations which replaces
SFAS No. 141, Business Combinations. This
Statement retains the fundamental requirements in
SFAS No. 141 that the acquisition method of accounting
(formerly referred to as purchase method) is to be used for all
business combinations and that an acquirer is identified for
each business combination. This Statement defines the acquirer
as the entity that obtains control of one or more businesses in
the business combination and establishes the acquisition date as
of the date that the acquirer achieves control. This Statement
requires an acquirer to recognize the assets acquired, the
liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values.
This Statement requires the acquirer to recognize
acquisition-related costs and restructuring costs separately
from the business combination as period expense. This Statement
is effective for business combinations for which the acquisition
date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The Company
will implement SFAS No. 141(R) for any business
combinations occurring at or subsequent to February 1, 2009.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements, an Amendment of ARB No. 51,
Consolidated Financial Statements. SFAS 160
establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a
noncontrolling interest in a subsidiary is an ownership interest
in the consolidated entity that should be reported as equity in
the consolidated financial statements. This statement is
effective as of the beginning of an entitys first fiscal
year that begins after December 15, 2008 with retrospective
application. The Company has determined there should be no
impact on its financial statements by adopting
SFAS No. 160.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities. SFAS No. 159 permits entities to
choose to measure, at fair value, many financial instruments and
certain other items that are not currently required to be
measured at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related
assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS No. 159
establishes presentation and disclosure requirements designed to
facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and
liabilities. The statement will be effective as of the beginning
of the first quarter of fiscal 2008, although earlier adoption
is permitted. The Company does not anticipate the adoption of
SFAS No. 159 will have a material impact on the
Companys consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements. SFAS No. 157
defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements.
SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007.
In February of 2008, the FASB issued FASB Staff position
157-2 which
delays the effective date of SFAS 157 for non-financial
assets and liabilities which are not measured at fair value on a
recurring basis (at least annually) until fiscal years beginning
after November 15, 2008. The Company does not anticipate
the adoption of SFAS No. 157 will have a material
impact on the Companys consolidated financial statements.
In July 2006, FASB issued Interpretation No. 48, Accounting
for Uncertainty in Income Taxes, an interpretation of FASB
Statement No. 109 (FIN 48). FIN 48
clarifies the accounting for income taxes by prescribing the
minimum recognition threshold a tax position is required to meet
before being recognized in the financial statements. FIN 48
also provides guidance on derecognition, measurement,
classification, interest and penalties, accounting in interim
periods, disclosure and transition. FIN 48 applies to all
tax positions related to income taxes subject to
SFAS Statement No. 109, Accounting for Income
Taxes (SFAS No. 109). FIN 48 is
effective for fiscal years beginning after December 15,
2006. Differences between the amounts recognized in the
statements of financial position prior to the adoption of
FIN 48 and the amounts reported after adoption should be
accounted for as
48
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
a cumulative-effect adjustment recorded to the beginning balance
of retained earnings. As a result of the implementation of
FIN 48, the Company recognized a $27,791 adjustment to
increase the beginning balance of retained earnings on the
Companys balance sheet. For further information on the
Companys income taxes see Note 4 of Notes to
Consolidated Financial Statements.
Streamline Health rents office and data center space and
equipment under noncancelable operating leases that expire at
various times through fiscal year 2010. Future minimum lease
payments under noncancelable operating leases for the next three
fiscal years are as follows: 2008, $426,769; 2009, $380,738;
2010, $176,938 each year. Rent expense was approximately
$415,000, $350,000, and $287,000 for fiscal years 2007, 2006,
and 2005, respectively. In February 2005, Streamline Health
entered into a sixty-six month lease for office space. In
connection with the lease, the property owner provided a
$326,000 build out allowance. As a further inducement to rent
the facilities, the owner provided the Company with the use of
the premises for six months rent free. The Company pays a base
rent and a proportional amount of the building operating
expenses, currently estimated at approximately $332,000 per
year. The lease has no renewal provisions and predetermined
increases in the base rent in 2009.
|
|
3.
|
Long-term
Debt and Capitalized Leases
|
On January 7, 2008, Streamline Health, Inc., a wholly owned
subsidiary of Streamline Health Solutions, Inc., entered into a
new temporary revolving loan agreement with the Fifth Third
Bank, Cincinnati, OH, in the principal amount of $500,000. The
interest rate on amounts borrowed will accrue at a variable rate
from the Prime Rate to the Prime Rate plus 3%, (or an effective
rate of 9% at January 31, 2008) based on the ratio of
the funded indebtedness to the trailing twelve months earnings
before interest, taxes, depreciation and amortization (EBITDA).
The agreement contains other covenants including; Minimum
Tangible Net Worth, Fixed Charge Coverage Ratio and Funded
Indebtedness to EBITDA. The Company was in compliance with all
of the covenants at January 31, 2008 and had the ability to
borrow up to $500,000 on the facility. The loan is guaranteed by
the Registrant and is secured by a first lien on all of the
assets of the Registrant and its subsidiary. This new temporary
facility expires on April 30, 2008, and replaces the
previous Revolving Loan Facility entered into in January 2007
with the Fifth Third Bank. Currently the Company is soliciting
proposals from additional lenders, and expects to enter into a
new longer term agreement prior to April 30, 2008.
At January 31, 2008, the Company had the ability to utilize
$500,000 of the line of credit. The Company pays a commitment
fee on the unused portion of the facility of .35%. The Company
has to date, not borrowed any funds under its working capital
facility.
In 1998, Streamline Health issued a $6,000,000 note. In
connection with the issuance of the note, Streamline Health
issued Warrants to purchase 750,000 shares of Common Stock
of Streamline Health at $3.87 per share at any time through
July 16, 2008. The Warrants are subject to customary
antidilution and registration rights provisions.
During fiscal year 2005, Streamline Health acquired computer
equipment for the application-hosting services data center,
which are accounted for as capitalized leases. The amount of the
computer equipment leased assets was $267,237. The lease was
payable monthly in installments of $8,192, through August 2008.
The capitalized lease was paid in full during fiscal year 2007.
Total depreciation and amortization expense on assets under
capital leases was $27,837 in 2007, $66,809 in 2006, and
$164,646 in 2005.
In 2005, Streamline Health was subject to Alternative Minimum
Taxes.
The Company adopted FIN 48 as of February 1, 2007, as
required. As a result of the implementation of FIN 48, the
changes to the Companys reserve for uncertain tax
positions was accounted for as a $27,791 adjustment to increase
the beginning balance of retained earnings on the Companys
balance sheet.
49
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The income tax benefit (provision) for income taxes differs from
the Federal statutory rate as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Federal tax (expense) benefit at Statutory rate
|
|
$
|
246,215
|
|
|
$
|
(43,398
|
)
|
|
$
|
(572,461
|
)
|
Current state and local taxes, net of federal benefit
|
|
|
7,527
|
|
|
|
(28,224
|
)
|
|
|
(2,673
|
)
|
Change in valuation allowance
|
|
|
(256,800
|
)
|
|
|
37,943
|
|
|
|
1,384,351
|
|
Other
|
|
|
(8,342
|
)
|
|
|
2,499
|
|
|
|
58,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(11,400
|
)
|
|
$
|
(31,180
|
)
|
|
$
|
867,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Federal tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(25,589
|
)
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
881,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
856,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
(11,400
|
)
|
|
|
(31,180
|
)
|
|
|
(4,050
|
)
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
15,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,400
|
)
|
|
|
(31,180
|
)
|
|
|
11,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal and state income tax (expense) benefit
|
|
$
|
(11,400
|
)
|
|
$
|
(31,180
|
)
|
|
$
|
867,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Streamline Health provides deferred income taxes for temporary
differences between assets and liabilities recognized for
financial reporting and income tax purposes. The income tax
effects of these temporary differences are as follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2007
|
|
|
2006
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
10,092,028
|
|
|
$
|
9,826,988
|
|
Accounts payable and accrued liabilities
|
|
|
202,622
|
|
|
|
243,571
|
|
Property and equipment
|
|
|
72,536
|
|
|
|
39,811
|
|
Other
|
|
|
73,565
|
|
|
|
73,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,440,751
|
|
|
|
10,183,951
|
|
Less valuation allowance
|
|
|
(8,565,751
|
)
|
|
|
(8,308,951
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
1,875,000
|
|
|
|
1,875,000
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
1,875,000
|
|
|
$
|
1,875,000
|
|
|
|
|
|
|
|
|
|
|
As of January 31, 2008, Streamline Health increased the
valuation allowance for the deferred tax assets primarily
related to the carry forward by $256,800 based upon reasonable
future earnings before income tax projections. A valuation
allowance of $8,565,751 is still required to reduce the deferred
tax assets, primarily relating to loss carry forwards, to a
level currently believed will be utilized to offset future
earnings before income taxes based upon the current backlog and
forecasts over the next two years. The valuation allowance is
required due to the inability to predict on a longer term basis
that Streamline Health will more likely than not
attain levels of profitability required to utilize additional
loss carry forwards.
50
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At January 31, 2008, Streamline Health had a net operating
loss carry forward of approximately $29,000,000, which begins to
expire in 2013. Streamline Health also has an Alternative
Minimum Tax credit carry forward of approximately $74,000, which
has an unlimited carry forward period. Certain changes in stock
ownership can result in a limitation on the amount of net
operating loss carry forward that can be utilized each year.
Streamline Health has established a 401(k) retirement plan that
covers all employees. Company contributions to the plan may be
made at the discretion of the Board of Directors. Effective
February 1, 2006, the Company began to match 100% up to the
first 4% of compensation deferred by each employee in the 401(k)
plan. The total compensation expense for this matching
contribution was $322,536 in 2007 and $291,719 in 2006.
During fiscal year 2007, three customers, exclusive of our
remarketing partners, accounted for 12%, 7%, and 5% of total
revenues. During fiscal year 2006, three customers, exclusive of
our remarketing partners, accounted for 11%, 8%, and 7% of total
revenues. During fiscal year 2005, three customers, exclusive of
our remarketing partners, accounted for 18%, 11%, and 10% of
total revenues.
During fiscal years 2007, 2006 and 2005 our major remarketing
partner accounted for 38%, 28% and 12%, respectively of out
total revenues.
At January 31, 2008 and 2007, 48% and 38%, respectively, of
Streamline Healths accounts receivable were due from three
customers excluding remarketing partners. At January 31,
2008 and 2007 approximately, 29% and 20%, respectively, of
Streamline Healths accounts receivables were due from
remarketing partners.
|
|
7.
|
Stock-based
Compensation Plans
|
As discussed in note 1, effective February 1, 2006,
the Company adopted the provisions of Statement of Financial
Accounting Standards No. 123(R), Accounting for
Stock-Based Compensation. Streamline Healths 1996
Employee Stock Option Plan authorized the grant of options to
employees for Streamline Healths Common Stock. The options
granted have terms of ten years or less and generally vest and
become fully exercisable ratably over three years of continuous
employment from the date of grant. At January 31, 2008,
options to purchase 269,000 shares of Streamline
Healths Common Stock have been granted and are outstanding
under the Plan. No more options can be granted under this Plan.
Streamline Healths 1996 Non-Employee Directors Stock
Option Plan authorized the grant of options for shares of
Streamline Healths Common Stock. The options granted have
terms of ten years or less, and vest and become fully
exercisable ratably over three years of continuous service as a
Director from the date of grant. At January 31, 2008,
options to purchase 15,000 shares of Streamline Health
Common Stock have been granted and are outstanding under the
Plan. No more options can be granted under this Plan.
In May 2005, the shareholders approved the 2005 Incentive
Compensation Plan which authorizes the Company to issue up to
1,000,000 equity awards (Stock Options, Stock Appreciation
Rights (SARs), and Restricted Stock) to
directors and employees of the Company. At January 31,
2008, Options to purchase 125,000 shares of Streamline
Health Common Stock have been granted and are outstanding under
the Plan.
SARs are settled in Common Stock of the Company. Upon
exercise of the SAR, the holder is entitled to receive shares of
Common Stock equal to an amount determined by multiplying:
(a) The difference between the fair market value of a share
of common stock of the Company on the date of exercise over the
price at the date of grant; by
(b) The number of shares with respect to which the SAR is
exercised.
There are no SARs outstanding under the plan.
51
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of Streamline Healths stock option activity and
related information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
|
|
average
|
|
|
|
|
|
average
|
|
|
|
|
|
|
exercise
|
|
|
|
|
|
exercise
|
|
|
|
|
|
exercise
|
|
|
|
Options
|
|
|
price
|
|
|
Options
|
|
|
price
|
|
|
Options
|
|
|
price
|
|
|
Outstanding beginning of year
|
|
|
461,500
|
|
|
$
|
2.50
|
|
|
|
476,167
|
|
|
$
|
2.76
|
|
|
|
536,942
|
|
|
$
|
3.01
|
|
Granted
|
|
|
40,000
|
|
|
|
3.79
|
|
|
|
45,000
|
|
|
|
5.74
|
|
|
|
50,000
|
|
|
|
2.91
|
|
Exercised
|
|
|
(31,500
|
)
|
|
|
1.64
|
|
|
|
(24,667
|
)
|
|
|
.97
|
|
|
|
(63,000
|
)
|
|
|
.97
|
|
Expired
|
|
|
(61,000
|
)
|
|
|
4.04
|
|
|
|
(35,000
|
)
|
|
|
11.61
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47,775
|
)
|
|
|
8.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding end of year
|
|
|
409,000
|
|
|
|
2.46
|
|
|
|
461,500
|
|
|
|
2.50
|
|
|
|
476,167
|
|
|
|
2.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable end of year
|
|
|
322,334
|
|
|
$
|
1.97
|
|
|
|
373,169
|
|
|
$
|
2.04
|
|
|
|
430,833
|
|
|
$
|
2.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate intrinsic value of outstanding options at year end
|
|
$
|
1,083,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate intrinsic value of exercisable options at year end
|
|
$
|
854,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value of options granted during year
|
|
$
|
2.51
|
|
|
|
|
|
|
$
|
3.31
|
|
|
|
|
|
|
$
|
2.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intrinsic value of Options exercised during the year
|
|
$
|
83,475
|
|
|
|
|
|
|
$
|
139,122
|
|
|
|
|
|
|
$
|
441,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the options as of
January 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
Weighted average
|
|
|
Approximate
|
|
Outstanding
|
|
|
Exercisable
|
|
|
exercise price
|
|
|
remaining life in years
|
|
|
|
409,000
|
|
|
|
322,334
|
|
|
$
|
1.97
|
(1)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The exercise prices range from $0.53 to $6.03, of which
201,500 shares are between $0.53 and $1.95 per share,
162,500 shares are between $2.09 and $4.42 per share, and
45,000 shares are between $5.17 and $6.03 per share. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
Grant-date
|
|
Nonvested Shares
|
|
Shares
|
|
|
Fair Value
|
|
|
Balance Beginning of year
|
|
|
88,331
|
|
|
|
3.00
|
|
Granted
|
|
|
40,000
|
|
|
|
2.51
|
|
Vested
|
|
|
(41,665
|
)
|
|
|
2.80
|
|
Forfeited
|
|
|
|
|
|
|
|
|
Balance End of year
|
|
|
86,666
|
|
|
|
2.82
|
|
At January 31, 2008, there was approximately $182,000 of
compensation cost that has not yet been recognized related to
nonvested stock-based awards. That cost is expected to be
recognized over a remaining weighted average period of three
years.
52
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of Streamline Healths Stock Appreciation Rights
(SARs) is as follows:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Outstanding beginning of year
|
|
|
|
|
|
|
25,000
|
|
Granted
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
(25,000
|
)
|
|
|
|
|
|
|
|
|
|
Outstanding end of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average grant price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The SARs vest when certain performance criteria are met.
The performance objectives are such that the recipient earns
100% or 0% of the number of SARs granted. Performance
based SAR expense is recognized over the performance period
based on the stock price at each reporting date, when
satisfaction of the performance criteria is deemed probable. As
the performance criteria as of January 31, 2007 was not
achieved, no expense was recognized in 2006.
Cash received from exercise of options and the employee stock
purchase plan was $113,831, $85,318 and $88,091, respectively,
in 2007, 2006 and 2005.
The 1996 Employee Stock Option Plan and the 2005 Incentive
Compensation Plan contains change of control provisions whereby
any outstanding equity awards under the plans subject to
vesting, which have not fully vested as of the date of the
change in control, shall automatically vest and become
immediately exercisable. One of the change in control provisions
is deemed to occur if there is a change in beneficial ownership,
or authority to vote, directly or indirectly, securities
representing 20% or more of the total of all of Streamline
Healths then outstanding voting securities, unless through
a transaction arranged by, or consummated with the prior
approval of the Board of Directors. Other change in control
provisions relate to mergers and acquisitions or a determination
of change in control by Streamline Healths Board of
Directors.
|
|
8.
|
Employee
Stock Purchase Plan
|
Streamline Health has an Employee Stock Purchase Plan under
which employees may purchase up to 500,000 shares of Common
Stock. Under the plan, eligible employees may elect to
contribute, through payroll deductions, up to 10% of their base
pay to a trust during any plan year, July 1 through
June 30, of the following year. At June 30 of each year,
the plan issues for the benefit of the employees shares of
Common Stock at the lesser of (a) 85% of the Fair Market
Value of the Common Stock on July 1, of the prior year, or
(b) 85% of the Fair Market Value of the Common Stock on
June 30, of the current year. At January 31, 2008,
321,909 shares remain that can be purchased under the plan.
During fiscal year 2007, 17,421 shares were purchased at
the price of $3.56 per share; 2006, 27,191 shares were
purchased at the price of $2.26 per share; 2005,
12,006 shares were purchased at the price of $2.26 per
share.
The purchase price at June 30, 2008, will be 85% of the
lower of (a) the closing price on July 2, 2007 ($4.07)
or (b) 85% of the closing price on June 30, 2008.
|
|
9.
|
Commitments
and Contingencies
|
Maintenance
Agreements, Warranties, and Indemnities
Streamline Health warrants to customers that its software will
meet certain performance requirements for an initial limited
warranty period. Streamline Health has maintenance agreements to
provide services in future periods after the expiration of the
initial limited warranty period. Streamline Health invoices
customers in accordance with the agreements and records the
invoicing as deferred revenues and recognizes the revenues
ratably over the term of the maintenance agreements. Streamline
Healths standard agreements with its customers usually
include
53
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
intellectual property infringement indemnification provisions to
indemnify them from and against third-party claims, and for
liabilities, damages, and expenses arising out of Streamline
Healths operation of its business or any negligent act or
omission of Streamline Health. At January 31, 2008 and
2007, Streamline Health has a warranty reserve in the amount of
$196,000 and $250,000, respectively.
Application-hosting
Services
Streamline Health enters into long-term agreements to provide
document imaging/management and workflow services to its
healthcare customers on an outsourced basis from a central data
center. Streamline Health guarantees specific
up-time and response time performance
standards, which, if not met may result in reduced revenues, as
a penalty, for the month in which the standards are not met.
Employment
Agreements
Streamline Health has entered into employment agreements with
its officers and employees that generally provide annual salary,
a minimum bonus, discretionary bonus, stock incentive
provisions, and severance arrangements.
Reserved
Common Stock
Streamline Health has reserved 1,605,909 shares of the
Common Stock authorized for issuance in connection with various
Equity Award Plans and the Employee Stock Purchase Plan, and
750,000 shares for the Warrants issued in connection with
the 1998 long-term debt, which warrants will expire, if not
exercised, on July 16, 2008.
Litigation
There are, from time to time, claims pending against Streamline
Health Solutions, Inc. and its subsidiary. Based on a review of
such litigation with legal counsel, Streamline Health believes
any resulting liability would not have a material affect on
Streamline Healths consolidated financial position or
results of operations.
|
|
10.
|
Quarterly
Results of Operations (Unaudited)
|
The following sets forth selected quarterly financial
information for fiscal years 2007, 2006, and 2005. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
of the Condensed Consolidated Financial Information have been
included.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
2007
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
$
|
3,779
|
|
|
$
|
3,203
|
|
|
$
|
3,944
|
|
|
$
|
5,637
|
|
|
$
|
16,563
|
|
Gross profit
|
|
|
1,777
|
|
|
|
1,299
|
|
|
|
2,137
|
|
|
|
3,264
|
|
|
|
8,477
|
|
Operating profit (loss) (f) (g)
|
|
|
(447
|
)
|
|
|
(1,054
|
)
|
|
|
16
|
|
|
|
781
|
|
|
|
(704
|
)
|
Net earnings (loss) (f) (g)
|
|
|
(443
|
)
|
|
|
(1,071
|
)
|
|
|
3
|
|
|
|
776
|
|
|
|
(736
|
)
|
Basic net (loss) earnings per share (a)
|
|
|
(.05
|
)
|
|
|
(.12
|
)
|
|
|
.00
|
|
|
|
.08
|
|
|
|
(.08
|
)
|
Diluted net (loss) earnings per share (a)
|
|
|
(.05
|
)
|
|
|
(.12
|
)
|
|
|
.00
|
|
|
|
.08
|
|
|
|
(.08
|
)
|
Weighted average shares outstanding outstanding
|
|
|
9,211
|
|
|
|
9,225
|
|
|
|
9,245
|
|
|
|
9,254
|
|
|
|
9,234
|
|
Stock Price (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
5.80
|
|
|
$
|
5.00
|
|
|
$
|
3.88
|
|
|
$
|
4.00
|
|
|
$
|
5.80
|
|
Low
|
|
$
|
3.54
|
|
|
$
|
3.30
|
|
|
$
|
2.57
|
|
|
$
|
1.75
|
|
|
$
|
1.75
|
|
Quarter and year-end close
|
|
$
|
4.72
|
|
|
$
|
3.80
|
|
|
$
|
2.94
|
|
|
$
|
2.65
|
|
|
$
|
2.65
|
|
Cash dividends declared (c)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
2006
|
|
|
Revenues
|
|
$
|
3,848
|
|
|
$
|
4,583
|
|
|
$
|
3,592
|
|
|
$
|
3,844
|
|
|
$
|
15,867
|
|
Gross profit
|
|
|
2,104
|
|
|
|
2,502
|
|
|
|
1,864
|
|
|
|
2,230
|
|
|
|
8,700
|
|
Operating profit (loss) (e) (f)
|
|
|
(71
|
)
|
|
|
240
|
|
|
|
(297
|
)
|
|
|
310
|
|
|
|
182
|
|
Net earnings (loss) (e) (f)
|
|
|
(80
|
)
|
|
|
214
|
|
|
|
(334
|
)
|
|
|
296
|
|
|
|
96
|
|
Basic net (loss) earnings per share (a)
|
|
|
(.01
|
)
|
|
|
.02
|
|
|
|
(.04
|
)
|
|
|
.03
|
|
|
|
.01
|
|
Diluted net (loss) earnings per share (a)
|
|
|
(.01
|
)
|
|
|
.02
|
|
|
|
(.04
|
)
|
|
|
.03
|
|
|
|
.01
|
|
Weighted average shares outstanding outstanding
|
|
|
9,168
|
|
|
|
9,190
|
|
|
|
9,211
|
|
|
|
9,211
|
|
|
|
9,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Price (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
8.70
|
|
|
$
|
7.49
|
|
|
$
|
5.81
|
|
|
$
|
6.00
|
|
|
$
|
8.70
|
|
Low
|
|
$
|
6.55
|
|
|
$
|
4.51
|
|
|
$
|
4.78
|
|
|
$
|
4.91
|
|
|
$
|
4.51
|
|
Quarter and year-end close
|
|
$
|
6.95
|
|
|
$
|
5.71
|
|
|
$
|
5.13
|
|
|
$
|
5.64
|
|
|
$
|
5.64
|
|
Cash dividends declared (c)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
2005
|
|
|
Revenues
|
|
$
|
2,697
|
|
|
$
|
4,066
|
|
|
$
|
3,164
|
|
|
$
|
6,200
|
|
|
$
|
16,127
|
|
Gross profit
|
|
|
1,404
|
|
|
|
2,419
|
|
|
|
1,664
|
|
|
|
4,203
|
|
|
|
9,690
|
|
Operating profit (loss)
|
|
|
(254
|
)
|
|
|
547
|
|
|
|
(463
|
)
|
|
|
1,908
|
|
|
|
1,738
|
|
Net earnings (loss) (d)
|
|
|
(277
|
)
|
|
|
519
|
|
|
|
(454
|
)
|
|
|
2,763
|
|
|
|
2,551
|
|
Basic net (loss) earnings per share (a)
|
|
|
(.03
|
)
|
|
|
.06
|
|
|
|
(.05
|
)
|
|
|
.30
|
|
|
|
.28
|
|
Diluted net (loss) earnings per share (a)
|
|
|
(.03
|
)
|
|
|
.06
|
|
|
|
(.05
|
)
|
|
|
.29
|
|
|
|
.27
|
|
Weighted average shares outstanding outstanding
|
|
|
9,087
|
|
|
|
9,108
|
|
|
|
9,131
|
|
|
|
9,153
|
|
|
|
9,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Price (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
5.18
|
|
|
$
|
3.25
|
|
|
$
|
6.38
|
|
|
$
|
7.00
|
|
|
$
|
7.00
|
|
Low
|
|
$
|
2.62
|
|
|
$
|
2.65
|
|
|
$
|
2.53
|
|
|
$
|
3.51
|
|
|
$
|
2.53
|
|
Quarter and year-end close
|
|
$
|
3.29
|
|
|
$
|
2.90
|
|
|
$
|
4.26
|
|
|
$
|
7.00
|
|
|
$
|
7.00
|
|
Cash dividends declared (c)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Quarterly amounts may not be additive. |
|
(b) |
|
Obtained from The NASDAQ Stock Market, Inc. |
|
(c) |
|
Streamline Health has not paid a dividend on its Common Stock
since its inception and does not intend to pay any cash
dividends in the foreseeable future. |
|
(d) |
|
Includes, in the fourth quarter of fiscal year 2005, an $897,000
favorable change in a reduction of the valuation allowance for
deferred taxes. |
|
(e) |
|
Includes in the fourth quarter of fiscal year 2006, a $100,000
favorable change in the estimate for miscellaneous reserves. |
|
(f) |
|
As a result of adopting Statement 123(R) on February 1,
2006, the Company incurred total additional annual compensation
expense of $142,642 in 2007 and $111,137 in 2006, respectively. |
|
(g) |
|
Includes in the third quarter of fiscal year 2007, a $100,000
favorable change in the allowance for doubtful accounts. |
55
Schedule II
Valuation and Qualifying Accounts and Reserves
Streamline
Health Solutions, Inc.
For the three years ended January 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged to
|
|
|
Charged to
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
costs and
|
|
|
Other
|
|
|
|
|
|
Balance at
|
|
Description
|
|
of Period
|
|
|
Expenses
|
|
|
Accounts
|
|
|
Deductions
|
|
|
End of Period
|
|
|
|
(In thousands)
|
|
|
Year ended January 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
200
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(100
|
)
|
|
$
|
100
|
|
Warranty reserve
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
(54
|
)
|
|
|
196
|
|
Year ended January 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200
|
|
Warranty reserve
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250
|
|
Year ended January 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200
|
|
Warranty reserve
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250
|
|
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosures
|
By letter dated November 13, 2007, Ernst & Young
LLP informed the Chairman of the Audit Committee of the Company
that Ernst & Young LLP would resign as the independent
registered public accounting firm for the Company upon the
completion of its review of the Companys financial
statements for the interim period ended October 31, 2007
and the services of Ernst & Young LLP to the Company
would cease at that time.
The reports of Ernst & Young LLP on the Companys
consolidated financial statements for the fiscal years ended
January 31, 2007 and 2006 contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to
any uncertainty, audit scope or accounting principle.
In connection with the Companys audits for the fiscal
years ended January 31, 2007 and 2006, the Company has had
no disagreements with Ernst & Young LLP on any matter
of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreement,
if not resolved to the satisfaction of Ernst & Young
LLP would have caused it to make reference thereto in its report
on the consolidated financial statements of the Company for such
years.
During the Companys fiscal years ended January 31,
2007 and 2006 and through the date of the resignation of
Ernst &Young, LLP, the Company has had no reportable
events as defined in Item 304(a)(1)(v) of
Regulation S-K.
The Company provided a copy of the above disclosures to
Ernst & Young LLP. Ernst & Young LLP
furnished the Company with a letter dated November 16, 2007
addressed to the Securities and Exchange Commission stating that
it agrees with the above statements
Prior to the resignation of Ernst & Young LLP, the
Companys Audit Committee had initiated a process of
soliciting proposals from independent registered public
accounting firms, including Ernst & Young LLP, for the
audit of the January 31, 2008 Financial Statements to be
included in the
Form 10-K
for the fiscal year then ended.
Subsequent to the termination of Ernst & Young, LLP,
the Company engaged BDO Seidman, LLP as its new Independent
Registered Public Accounting Firm effective January 7, 2008.
During the Companys two most recent fiscal years and
through the date of this report, the Company has not consulted
with BDO Seidman, LLP regarding either (i) the application
of accounting principles to a specific transaction, either
completed or proposed; or the type of audit opinion that might
be rendered on the Companys financial statements, and
neither a written report nor oral advice was provided to the
Company that BDO Seidman, LLP concluded was an important factor
considered by the Company in reaching a decision as to the
accounting,
56
auditing or financial reporting issue; or (ii) any matter
that was either the subject of a disagreement, as that term is
defined in Item 304(a)(1)(iv) of
Regulation S-K
and the related instructions to Item 304 of
regulation S-K,
or a reportable event, as that term is defined in
Item 304(a)(1)(v) of
Regulation S-K.
|
|
Item 9A
|
Controls
and Procedures
|
Streamline Health maintains disclosure controls and procedures
that are designed to ensure that there is reasonable assurance
that the information required to be disclosed in Streamline
Healths Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the
SECs rules and forms, and that such information is
accumulated and communicated to Streamline Healths
management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure based on the definition of
disclosure controls and procedures in Exchange Act
Rules 13a-15(e)
and
15d-15(e).
In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired
control objectives, and management necessarily was required to
apply its judgment in evaluating the cost-benefit relationship
of possible controls and procedures.
As of the end of the period covered by this report, an
evaluation was performed under the supervision and with the
participation of Streamline Healths senior management,
including the Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of
Streamline Healths disclosure controls and procedures to
provide reasonable assurance of achieving the desired objectives
of the disclosure controls and procedures. Based on that
evaluation, Streamline Healths management, including the
Chief Executive and Chief Financial Officer, concluded that
there is reasonable assurance that Streamline Healths
disclosure controls and procedures were effective as of the end
of the period covered by this report and there have been no
material changes in Streamline Healths internal control or
in the other controls during the quarter ended January 31,
2008 that could materially affect, or is reasonably likely to
materially affect, internal controls over financial reporting.
Managements Report on Internal Controls over Financial
Reporting is incorporated herein from Item 8 of this report.
|
|
Item 9B
|
Other
Information
|
None
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Goverance
|
The information required by Items 401, 405 and
407(c)(3),(d)(4) and (d)(5) of
Regulation S-K
is incorporated herein by reference from Streamline
Healths Definitive Proxy Statement for its Annual
Stockholders Meeting to be held on May 21, 2008 from
the information appearing under the captions Election of
Directors, Board of Directors meetings and
Committees Stock Ownership by Certain Beneficial
Owners and Management, and Compliance with
Section 16(a) of the Exchange Act. Certain
information regarding Streamline Healths Executive
Officers is set forth in Part I, of this
Form 10-K
under the caption Executive Officers of the
Registrant.
The information relating to the Code of Ethics required by
Items 406 of
Regulation S-K
is included herein by reference to Exhibit 14.1 to this
Form 10-K.
Streamline Health has adopted the Code of Ethics that applies to
all of its directors, officers (including its chief executive
officer, chief financial officer, chief accounting officer,
controller and any person performing similar functions) and
employees. Streamline Health has also made the Code of Ethics
available on its website at www.streamlinehealth.net and will
provide a copy, free of charge, upon request.
|
|
Item 11.
|
Executive
Compensation
|
The information required by Items 402 and 407(e)(4) and
(e)(5) of
Regulation S-K
is incorporated herein by reference from Streamline
Healths Definitive Proxy Statement for its Annual
Stockholders Meeting to be held on May 21, 2008 from
the information appearing under the captions Executive
Compensation, except that the information required by
Item 407(e)(5) of
Regulation S-K
which appears within such caption under the subheading
Compensation Committee Report is specifically not
incorporated herein by reference into this
Form 10-K
or into any other filing by Streamline Health under the
Securities Act of 1933 or the Securities Exchange Act of 1934.
57
|
|
Item 12.
|
Securities
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by Item 403 of
Regulation S-K
is incorporated herein by reference from Streamline
Healths Definitive Proxy Statement for its Annual
Stockholders Meeting to be held on May 21, 2008 from
the information appearing under the caption Stock
Ownership by Certain Beneficial Owners and Management.
Securities authorized for issuance under equity compensation
plans required by Item 201(d) of
Regulation S-K
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of securities
|
|
|
|
|
|
|
securities to be
|
|
|
|
|
|
remaining available
|
|
|
|
|
|
|
issued upon
|
|
|
Weighted-average
|
|
|
for future issuance
|
|
|
|
|
|
|
exercise of
|
|
|
exercise price of
|
|
|
under equity
|
|
|
|
|
|
|
outstanding
|
|
|
outstanding
|
|
|
compensation plans
|
|
|
|
|
|
|
options, warrants
|
|
|
options, warrants
|
|
|
(excluding securities
|
|
|
|
|
Plan category
|
|
and rights
|
|
|
and rights
|
|
|
reflected in column (a))
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
|
409,000(1, 2 & 3
|
)
|
|
$
|
2.46
|
|
|
|
875,000(3 & 4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
409,000(1, 2 & 3
|
)
|
|
$
|
2.46
|
|
|
|
875,000(3 & 4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes 15,000 options that can be exercised under the 1996
non-employee Directors Stock Option Plan and 269,000
options that can be exercised under the 1996 Employee Stock
Option Plan. |
|
(2) |
|
Includes 125,000 options that can be exercised by directors
under the 2005 Incentive Compensation Plan. |
|
(3) |
|
Excludes 321,909 shares that can be issued under the 1996
Employee Stock Purchase Plan, which is more fully described in
footnote 8 of the enclosed Notes to Consolidated Financial
Statements. |
|
(4) |
|
Excludes Warrants issued in connection with the 1998 Long-term
debt to acquire 750,000 shares at $3.87, which is more
fully described in footnote 3 of the enclosed Notes to
Consolidated Financial Statements. See ITEM 7,
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS Long-term Debt for
additional information. |
|
(5) |
|
The Company does not have any equity compensation plans that
have not been approved by the Companys Stockholders. |
|
|
Item 13.
|
Certain
Relationships, Related Transactions and Directors
Independence
|
The information required by Item 404 and 407(a) of
Regulation S-K
is incorporated herein by reference from Streamline
Healths Definitive Proxy Statement for its Annual
Stockholders Meeting to be held on May 21, 2008 from
the information appearing under the captions Transactions
with relates persons, promoters, and certain control
persons and Board of Directors Meetings and
Committees.
|
|
Item 14.
|
Principal
Accounting Fees and Services
|
The following table sets forth the aggregate fees for the
Company for the fiscal years 2007 and 2006 for audit and other
services provided by Streamline Health by, BDO Seidman, LLP and
Ernst & Young LLP, respectively.
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Audit Fees
|
|
$
|
112,000
|
|
|
$
|
116,000
|
|
Audit-Related Fees
|
|
|
|
|
|
|
|
|
Tax Fees
|
|
|
35,000
|
|
|
|
36,400
|
|
All Other Fees
|
|
|
|
|
|
|
45,000
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
147,000
|
|
|
$
|
197,400
|
|
|
|
|
|
|
|
|
|
|
The Company has engaged BDO Seidman, LLP and previously
Ernst & Young, LLP to provide tax consulting and
compliance services and consulting services regarding the
internal control audit related requirements of the
Sarbanes-Oxley Act, in addition to the audit of the financial
statements. The Companys Audit Committee has
58
considered whether the provision of the tax and consulting
services is compatible with maintaining the independence of BDO
Seidman, LLP and Ernst & Young LLP. All fees to BDO
Seidman, LLP and Ernst & Young LLP are pre-approved by
the Audit Committee of the Board of Directors.
PART IV
|
|
Item 15.
|
Exhibits,
Financial Statement Schedules
|
Financial
Statements
(a)1. The financial statements listed in ITEM 8 in the
Index to Consolidated Financial Statements on page 35 are
filed as part of this report.
(a)2. The Financial Statement Schedule on page 56 is filed
as part of this report.
(b). Exhibits
See Index to Exhibits on page 61 of this report.
The exhibits are filed with or incorporated by reference in this
report.
59
SIGNATURES
Pursuant to the requirements of section 13 or 15
(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Streamline Health
Solutions, Inc.
J. Brian Patsy
Chief Executive Officer
DATE: April 2, 2008
Pursuant to the requirements of the Securities and Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant in the capacities and on the
date indicated.
|
|
|
|
|
|
|
|
|
|
|
|
/s/ J.
Brian Patsy
J.
Brian Patsy
|
|
Chief Executive Officer And Director
(Principal Executive Officer)
|
|
April 2, 2008
|
|
|
|
|
|
/s/ Jonathan
R. Phillips
Jonathan
R. Phillips
|
|
Director
|
|
April 2, 2008
|
|
|
|
|
|
/s/ Edward
J. VonderBrink
Edward
J. VonderBrink
|
|
Director
|
|
April 2, 2008
|
|
|
|
|
|
/s/ Richard
C. Levy
Richard
C. Levy, M.D.
|
|
Director
|
|
April 2, 2008
|
|
|
|
|
|
/s/ Andrew
L. Turner
Andrew
L. Turner
|
|
Director
|
|
April 2, 2008
|
|
|
|
|
|
/s/ Paul
W. Bridge, Jr.
Paul
W. Bridge, Jr.
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
April 2, 2008
|
60
INDEX TO
EXHIBITS
EXHIBITS
|
|
|
Exhibit No.
|
|
Description of Exhibit
|
|
3.1(a)
|
|
Certificate of Incorporation of Streamline Health Solutions,
Inc. f/k/a/ LanVision Systems, Inc. (Previously filed with the
Commission and incorporated herein by reference from, the
Registrants (LanVision System, Inc.) Registration
Statement on Form S-1, File Number 333-01494, as filed with the
Commission on April 15, 1996.)
|
3.1(b)
|
|
Certificate of Incorporation of Streamline Health Solutions,
Inc. f/k/a LanVision Systems, Inc., amendment No. 1. (Previously
filed with the Commission and incorporated herein by reference
from the Registrants Form 10-Q, as filed with the
Commission on September 8, 2006.)
|
3.2
|
|
Bylaws of Streamline Health Solutions, Inc. (Previously filed
with the Commission and incorporated herein by reference from,
the Registrants Form 10-Q, as filed with the Commission on
June 5, 2007.)
|
3.3
|
|
Certificate of the Designations, Powers, Preferences and Rights
of the Convertible Preferred Stock (Par Value $.01 Per Share) of
Streamline Health Solutions, Inc. f/k/a/ LanVision Systems, Inc.
(Previously filed with the Commission, and incorporated herein
by reference from, the Registrants (LanVision Systems,
Inc.) Registration Statement on Form S-1, File Number
333-01494,
as filed with the Commission on April 15, 1996.)
|
4.1
|
|
Specimen Common Stock Certificate of Streamline Health
Solutions, Inc. f/k/a LanVision Systems, Inc. (Previously filed
with the Commission, and incorporated herein by reference from,
the Registrants (LanVision Systems, Inc.) Registration
Statement on Form S-1, File Number 333-01494, as filed with the
Commission on April 15, 1996.)
|
4.2
|
|
Specimen Preferred Stock Certificate of Streamline Health
Solutions, Inc. f/k/a LanVision Systems, Inc. (Previously filed
with the Commission, and incorporated herein by reference from,
the Registrants (LanVision Systems, Inc.) Registration
Statement on Form S-1, File Number 333-01494, as filed with the
Commission on April 15, 1996.)
|
4.3
|
|
Revolving Note, and associated documents, dated January 7, 2008,
between Streamline Health, Inc. (a wholly owned subsidiary of
the Registrant) and the Fifth Third Bank. (Previously filed with
the Commission, and incorporated herein by reference from,
Exhibit 10.1 and 10.2 of the Registrants Form 8-K, as
filed with the Commission on January 8, 2008.)
|
10.1#
|
|
Streamline Health Solutions, Inc. f/k/a LanVision Systems, Inc.
1996 Employee Stock Option Plan. (Previously filed with the
Commission, and incorporated herein by reference from, the
Registrants (LanVision Systems, Inc.) Registration
Statement on Form S-1, File Number
333-01494,
as filed with the Commission on April 15, 1996.)
|
10.2(a)#
|
|
Streamline Health Solutions, Inc. f/k/a LanVision Systems, Inc.
1996 Non-Employee Directors Stock Option Plan. (Previously
filed with the Commission, and incorporated herein by reference
from, the Registrants (LanVision Systems, Inc.)
Registration Statement on Form S-1, File Number 333-01494, as
filed with the Commission on April 15, 1996.)
|
10.2(b)#
|
|
First Amendment to Streamline Health Solutions, Inc.
f/k/a/LanVision Systems, Inc. 1996 Non-Employee Directors Stock
Option Plan. (Previously filed with the Commission, and
incorporated herein by reference from, Exhibit 4.1(b) of, the
Registrants (LanVision Systems, Inc.) Registration
Statement on Form S-8, file number 333-20765, as filed with the
Commission on January 31, 1997.)
|
10.2(c)#
|
|
Second Amendment to Streamline Health Solutions, Inc. f/k/a
LanVision Systems, Inc. 1996 Non-Employee Directors Stock Option
Plan. (Previously filed with the Commission, and incorporated
herein by reference from, Amendment No. 1 to the
Registrants (LanVision Systems, Inc.) Statement on Form
S-8, file number 333-20765, as filed with the Commission on
March 1, 2001.)
|
10.3#
|
|
Streamline Health Solutions, Inc. f/k/a LanVision Systems, Inc.
1996 Employee Stock Purchase Plan. (Previously filed with the
Commission, and incorporated herein by reference from, the
Registrants (LanVision Systems, Inc. ) Registration
Statement on Form S-1, File Number
333-01494,
as filed with the Commission on April 15, 1996.)
|
10.4#
|
|
2005 Incentive Compensation Plan of Streamline Health Solutions,
Inc. f/k/a LanVision Systems, Inc. (Previously filed with the
Commission, and incorporated herein by reference from, Exhibit
10.1 of the Registrants (LanVision Systems, Inc.) Form
8-K, as filed with the Commission on May 26, 2005.)
|
61
|
|
|
Exhibit No.
|
|
Description of Exhibit
|
|
10.5#
|
|
Employment Agreement between Streamline Health, Inc. f/k/a
LanVision, Inc. and Donald E. Vick effective December 3, 1996.
(Previously filed with the Commission, and incorporated herein
by reference from, Exhibit 10.5 of the Registrants
(LanVision Systems, Inc.) Form 10-K for the fiscal year ended
January 31, 2002, as filed with the Commission on April 29,
2002.)
|
10.5(a)#
|
|
Amendment No. 1 to the Employment Agreement between Streamline
Health, Inc. f/k/a LanVision, Inc. and Donald E. Vick effective
January 27, 2006 (Previously filed with the Commission, and
incorporated herein by reference from, Exhibit 10.4 of the
Registrants (LanVision Systems, Inc.) Form 8-K, as filed
with the Commission on January 31, 2006.)
|
10.6#
|
|
Employment Agreement among Streamline Health Solutions, Inc.
f/k/a LanVision Systems, Inc., Streamline Health, Inc. f/k/a
LanVision, Inc. and Paul W. Bridge, Jr., effective February 1,
2004 (Previously filed with the Commission, and incorporated
herein by reference from, Exhibit 10.1 of the Registrants
(LanVision Systems, Inc.) Form 10-Q for the fiscal quarter ended
July 31, 2004, as filed with the Commission on September 10,
2004.)
|
10.6(a)#
|
|
Amendment No. 1 to the Employment Agreement between Streamline
Health, Inc. f/k/a LanVision, Inc. and Paul W. Bridge, Jr.
effective January 27, 2006 (Previously filed with the
Commission, and incorporated herein by reference from, Exhibit
10.3 of the Registrants (LanVision Systems, Inc.) Form
8-K, as filed with the Commission on January 31, 2006.)
|
10.7#
|
|
Employment Agreement among Streamline Health, Inc. f/k/a/
LanVision Systems, Inc., Streamline Health, Inc. f/k/a
LanVision, Inc. and J. Brian Patsy effective February 1, 2003
(Previously filed with the Commission, and incorporated herein
by reference from, Exhibit 10.7 of the Registrants
(LanVision Systems, Inc.) Form 10-K for the fiscal year ended
January 31, 2004, as filed with the Commission on April 8, 2004.)
|
10.7(a)#
|
|
Amendment No. 1 dated January 27, 2005 to the Employment
Agreement among J. Brian Patsy, Streamline Health Solutions,
Inc. f/k/a LanVision Systems, Inc. and Streamline Health Inc.
f/k/a LanVision, Inc. (Previously filed with the Commission, and
incorporated herein by reference from, Exhibit 10.1 of the
Registrants (LanVision Systems, Inc.) Form 8-K, as filed
with the Commission on February 1, 2005.)
|
10.7(b)#
|
|
Amendment No. 2 dated January 27, 2006 to the Employment
Agreement among J. Brian Patsy, Streamline Health Solutions,
Inc. f/k/a LanVision Systems, Inc. and Streamline Health, Inc.
f/k/a LanVision, Inc. (Previously filed with the Commission, and
incorporated herein by reference from, Exhibit 10.1 of the
Registrants (LanVision Systems, Inc.) Form 8-K, as filed
with the Commission on January 31, 2006.)
|
10.8(a)#
|
|
Employment Agreement among Streamline Health Solutions, Inc.
f/k/a/ LanVision Systems, Inc., Streamline Health, Inc. f/k/a
LanVision, Inc. and Joseph O. Brown, II, effective February
1, 2004. (Previously filed with the Commission, and incorporated
herein by reference from, Exhibit 10.1 of the Registrants
Form 10-Q, as filed with the Commission on December 7, 2007.)
|
10.8(b)#
|
|
Amendment No. 1 dated November 27, 2007 to the Employment
Agreement among Joseph O Brown, II, Streamline Health
Solutions, Inc. f/k/a LanVision Systems, Inc. and Streamline
Health, Inc. f/k/a LanVision, Inc.***
|
10.9#
|
|
Employment agreement between Streamline Health, Inc. and Gary M.
Winzenread effective June 18, 2007. (Previously filed with the
Commission, and incorporated herein by reference from, Exhibit
10.1 of the Registrants Form 10-Q, as filed with the
Commission on December 7, 2007.)
|
10.10(a)
|
|
Lease for office space between Streamline Health, Inc. f/k/a
LanVision, Inc. (a wholly owned subsidiary) and The Western and
Southern Life Insurance Company dated July 30, 2004 (Previously
filed with the Commission, and incorporated herein by reference
from, Exhibit 10.1 of the Registrants (LanVision Systems,
Inc.) Form 10-Q for the fiscal quarter ended July 31, 2004, as
filed with the Commission on September 10, 2004.)
|
10.10(b)
|
|
Registrants Guarantee of Lease Agreement between
Streamline Health, Inc. f/k/a LanVision, Inc. and The Western
and Southern Life Insurance Company (Previously filed with the
Commission, and incorporated herein by reference from, Exhibit
10.1 of the Registrants (LanVision Systems, Inc.) Form
10-Q for the fiscal quarter ended July 31, 2004, as filed with
the Commission on September 10, 2004.)
|
62
|
|
|
Exhibit No.
|
|
Description of Exhibit
|
|
10.10(c)
|
|
First Amendment to Lease and Acceptance of Delivery to the Lease
for office space between Streamline Health, Inc. f/k/a
LanVision, Inc. (a wholly owned subsidiary) and The Western and
Southern Life Insurance Company, effective January 31, 2005.
(Previously filed with the Commission, and incorporated herein
by reference from, Exhibit 11.11(c) of the Registrants
(LanVision Systems, Inc.) Form 10-K for the fiscal year ended
January 31, 2005, as filed with the Commission on April 8, 2005.)
|
10.11(a)**
|
|
Reseller Agreement between IDX Information Systems Corporation
and Streamline Health, Inc. f/k/a LanVision, Inc. entered into
on January 30, 2002. (Previously filed with the Commission, and
incorporated herein by reference from, Exhibit 10.11 of the
Registrants (LanVision Systems, Inc.) Form 10-K for the
fiscal year ended January 31, 2002, as filed with the Commission
on April 29, 2002.)
|
10.11(b)
|
|
First Amendment to the Reseller Agreement between IDX
Information Systems Corporation and Streamline Health, Inc.
f/k/a LanVision, Inc. entered into on January 30, 2002
(Previously filed with the Commission, and incorporated herein
by reference from, Exhibit 10 of the Registrants
(LanVision Systems, Inc.) Form 10-Q for the quarter ended April
30, 2002, as filed with the Commission on June 4, 2002.).
|
10.12
|
|
Form of Indemnification Agreement for all directors and
officers. (Previously filed with the Commission, and
incorporated herein by reference from, Exhibit 10.1 of the
Registrants (LanVision Systems, Inc.) Form 8-K, as filed
with the Commission on June 7, 2006.
|
10.13#
|
|
Schedule of Directors Compensation (Previously filed with the
Commission, and incorporated herein by reference from, Exhibit
10.14 of the Registrants (LanVision Systems, Inc.)
Form 10-K
for the fiscal year ended January 31, 2005, as filed with the
Commission on April 8, 2005.)
|
11.1
|
|
Statement Regarding Computation of Per Share Earnings***
|
14.1
|
|
Code of Ethics (Previously filed with the Commission, and
incorporated herein by reference from, Exhibit 14.1 of the
Registrants (LanVision Systems, Inc.) Form 10-K for the
fiscal year ended January 31, 2004, as filed with the Commission
on April 8, 2004.)
|
21.1
|
|
Subsidiaries of the Registrant***
|
23.1
|
|
Consent of Independent Registered Public Accounting
Firm BDO Seidman, LLP***
|
23.2
|
|
Consent of Independent Registered Public Accounting
Firm Ernst & Young, LLP***
|
31.1
|
|
Certification by Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.***
|
31.2
|
|
Certification by Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.***
|
32.1
|
|
Certification by Chief Executive Officer pursuant to U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.***
|
32.2
|
|
Certification by Chief Financial Officer pursuant to U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.***
|
|
|
|
** |
|
The Company has applied for Confidential Treatment of portions
of this agreement with the Securities and Exchange Commission |
|
*** |
|
Included herein |
|
# |
|
Management Contracts and Compensatory Arrangements. |
63
EX-10.8.B
Exhibit 10.8(b)
STREAMLINE HEALTH SOLUTIONS, INC.
AMENDMENT NO 1 DATED NOVEMBER 27, 2007 TO THE EMPLOYMENT AGREEMENT AMONG JOSEPH. O. BROWN, II,
STREAMLINEHEALTH SOLUTIONS, INC F/K/A LANVISION SYSTEMS, INC. AND STREAMLINE HEALTH, INC. F/K/A
LANVISION, INC.
Amendment No. 1 to Employment Agreement
This AMENDMENT NO. 1 is entered into as of this 27 day of November, 2007 by and among
Streamline Health Solutions, Inc., a Delaware corporation (Parent), Streamline Health, Inc., an
Ohio corporation (Company) and Joseph O. Brown, II (Employee).
WHEREAS, the Company and Employee entered into an Employment Agreement dated as of February 1,
2004 (Employment Agreement), whereby Parent and the Company agreed to employ the Employee; and
WHEREAS, Parent, the Company and Employee desire to amend the Employment Agreement as set
forth herein;
NOW, THEREFORE, in consideration of the premises and the agreements contained herein, and
other good and valuable consideration, the receipt and adequacy of which the parties hereby
acknowledge, the parties agree as follows:
In consideration of the Employee responsibilities and roles, Parent and the Company agree to pay
Employee effective November 1, 2007, Employees salary for the period commencing on such date
through January 31, 2008 shall be One Hundred Sixty-five Thousand Dollars ($165,000).
Continuing Agreement. Except for the changes set forth in this Amendment No.1, the Employment
Agreement remains in full force and effect without modification.
Counterparts. This Amendment No. 1 may be signed in counterparts by Parent, the Company and
Employee.
[Signatures follow on next page]
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as of the date set forth
above.
|
|
|
|
|
|
|
|
|
Streamline Health Solutions, Inc. |
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Paul W. Bridge, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
Paul W. Bridge, Jr.
Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
Streamline Health, Inc. |
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Paul W. Bridge, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
Paul W. Bridge, Jr.
Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
Employee |
|
|
|
|
|
|
|
|
|
|
|
/s/ Joseph O, Brown, II |
|
|
|
|
|
|
|
|
|
Joseph O. Brown, II |
|
|
EX-11.1
Exhibit 11.1
STREAMLINE HEALTH SOLUTIONS, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Net earnings (loss) |
|
$ |
(735,562 |
) |
|
$ |
96,461 |
|
|
$ |
2,551,072 |
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding |
|
|
9,234,313 |
|
|
|
9,195,415 |
|
|
|
9,121,369 |
|
Stock options |
|
|
|
|
|
|
428,976 |
|
|
|
631,271 |
|
Warrants assumed converted |
|
|
|
|
|
|
750,000 |
|
|
|
750,000 |
|
Assumed treasury stock buyback |
|
|
|
|
|
|
(652,045 |
) |
|
|
(1,077,590 |
) |
Convertible redeemable preferred
stock assumed converted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares used in per
common share computation |
|
|
9,234,313 |
|
|
|
9,722,346 |
|
|
|
9,425,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings (loss) per
share of common Stock |
|
$ |
(.08 |
) |
|
$ |
.01 |
|
|
$ |
.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings (loss) per
share of common stock |
|
$ |
(.08 |
) |
|
$ |
.01 |
|
|
$ |
.27 |
|
|
|
|
|
|
|
|
|
|
|
EX-21.1
Exhibit 21.1
STREAMLINE HEALTH SOLUTIONS, INC.
SUBSIDIARIES OF THE REGISTRANT
|
|
|
|
|
|
|
Jurisdiction of |
|
|
Name
|
|
Incorporation
|
|
% Owned |
|
|
|
|
|
Streamline Health, Inc.
|
|
Ohio
|
|
100% |
EX-23.1
Exhibit 23.1
STREAMLINE HEALTH SOLUTIONS, INC.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Streamline Health Solutions, Inc.
Cincinnati, Ohio
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No.
333-28055, 333-18625, 333-20765, 333-125393) of Streamline Health Solutions, Inc. of our report
dated March 31, 2008, relating to the consolidated financial statements and financial statement
schedule, which appear in the Annual Report to Shareholders, which is incorporated by reference in
this Annual Report on
Form 10-K.
/s/ BDO Seidman, LLP
Chicago, IL
March 31, 2008
EX-23.2
Exhibit 23.2
STREAMLINE HEALTH SOLUTIONS, INC.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements of Streamline
Health Solutions, Inc. of our report dated March 27, 2007, with respect to the consolidated
financial statements and schedule of Streamline Health Solutions, Inc., included in the Annual
Report on Form 10-K for the year ended January 31, 2008 filed with the Securities and Exchange
Commission.
|
|
|
|
|
Form
|
|
Registration No.
|
|
Description |
|
|
|
|
|
S-8
|
|
333-28055
|
|
1996 Employee Stock Purchase Plan |
S-8
|
|
333-18625
|
|
1996 Employee Stock Option Plan |
S-8
|
|
333-20765
|
|
1996 Non-Employee Directors Stock Option Plan |
S-8
|
|
333-125393
|
|
2005 Incentive Compensation Plan |
|
|
|
Cincinnati, Ohio
|
|
/s/ Ernst & Young LLP |
March 31, 2008 |
|
|
EX-31.1
Exhibit 31.1
Streamline Health Solutions, Inc.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, J. Brian Patsy, certify that:
I have reviewed this annual report on Form 10-K of Streamline Health Solutions, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in this report;
The registrants other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the Registrant and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any changes in the registrants internal control over financial reporting
that occurred during the registrants most recent fiscal quarter that has materially affected or is
reasonable expected to materially affect the registrants internal control over financial
reporting; and
The registrants other certifying officer and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the registrants auditors and the audit committee
of the registrants board of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrants ability
to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrants internal controls over financial reporting.
April 2, 2008
|
|
|
|
|
|
/s/ J. Brian Patsy |
|
|
Chief Executive Officer and President |
|
|
|
|
|
|
|
|
|
|
|
EX-31.2
Exhibit 31.2
Streamline Health Solutions, Inc.
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul W. Bridge, Jr., certify that:
I have reviewed this annual report on Form 10-K of Streamline Health Solutions, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this report;
The registrants other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the Registrant and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any changes in the registrants internal control over financial reporting
that occurred during the registrants most recent fiscal quarter that has materially affected or is
reasonable expected to materially affect the registrants internal control over financial
reporting; and
The registrants other certifying officer and I have disclosed, based on our most recent evaluation
of internal control over financial reporting, to the registrants auditors and the audit committee
of the registrants board of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrants ability
to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrants internal controls over financial reporting.
April 2, 2008
|
|
|
|
|
|
/s/ Paul W. Bridge, Jr. |
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
EX-32.1
Exhibit 32.1
STREAMLINE HEALTH SOLUTIONS, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, J. Brian Patsy, Chairman of the Board, Chief Executive Officer and President of Streamline
Health Solutions, Inc. (the Company), certify, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, 18 U.S.C Section 1350, that:
The Annual Report on Form 10-K of the Company for the annual period ended January 31, 2008 (the
Report) fully complies with the requirements of section 13(a) of the Securities Exchange Act of
1934 (15 U.S.C 78m); and
The information contained in the Report fairly presents, in all material respects, the financial
condition, and results of operations of the Company.
/s/ J.
Brian Patsy
Chairman of the Board,
Chief Executive Officer and
President
April 2, 2008
A signed original of this written statement required by Section 906 has been provided to the
Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
EX-32.2
Exhibit 32.2
STREAMLINE HEALTH SOLUTIONS, INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, Paul W. Bridge, Jr., Chief Financial Officer of Streamline Health Solutions, Inc. (the
Company), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C Section
1350, that:
The Annual Report on Form 10-K of the Company for the annual period ended January 31, 2008 (the
Report) fully complies with the requirements of section 13(a) of the Securities Exchange Act of
1934 (15 U.S.C 78m); and
The information contained in the Report fairly presents, in all material respects, the financial
condition, and results of operations of the Company.
/s/ Paul
W. Bridge, Jr.
Chief Financial Officer
April 2, 2008
A signed original of this written statement required by Section 906 has been provided to the
Company and will be retained by the Company and furnished to the Securities and Exchange Commission
or its staff upon request.