10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended October 31, 2009
or
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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 |
(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
10200 Alliance Road, Suite 200
Cincinnati, Ohio 45242-4716
(Address of principal executive offices) (Zip Code)
(513) 794-7100
(Registrants telephone number, including area code)
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 whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o
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 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
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Smaller reporting company þ |
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
Number of shares of Registrants Common Stock ($.01 par value per share) issued and
outstanding, as of December 10, 2009: 9,426,744.
PART I. FINANCIAL INFORMATION
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Item 1. |
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CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
STREAMLINE HEALTH SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Assets
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(Unaudited) |
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(Audited) |
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October 31, |
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January 31, |
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2009 |
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2009 |
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Current assets: |
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Cash and cash equivalents |
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$ |
793,025 |
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$ |
3,128,801 |
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Accounts receivable, net of allowance for doubtful
accounts of $100,000 |
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1,447,951 |
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1,328,508 |
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Contract receivables |
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702,726 |
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502,373 |
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Prepaid hardware and third party software for future delivery |
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244,462 |
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681,540 |
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Prepaid other, including prepaid customer maintenance contracts |
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1,239,887 |
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802,951 |
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Deferred income taxes |
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247,000 |
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247,000 |
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Total current assets |
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4,675,051 |
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6,691,173 |
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Property and equipment: |
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Computer equipment |
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2,674,352 |
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2,475,928 |
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Computer software |
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1,563,297 |
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1,405,407 |
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Office furniture, fixtures and equipment |
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745,544 |
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737,344 |
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Leasehold improvements |
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574,257 |
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574,257 |
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5,557,450 |
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5,192,936 |
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Accumulated depreciation and amortization |
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(4,146,616 |
) |
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(3,625,408 |
) |
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1,410,834 |
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1,567,528 |
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Contract receivables, less current portion |
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321,500 |
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Capitalized software development costs, net of accumulated
amortization of $9,779,879 and $8,311,760, respectively |
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7,892,241 |
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6,481,360 |
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Other, including deferred income taxes of $1,628,000 |
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1,646,086 |
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1,670,891 |
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$ |
15,624,212 |
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$ |
16,732,452 |
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See Notes to Condensed Consolidated Financial Statements.
3
STREAMLINE HEALTH SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Liabilities and Stockholders Equity
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(Unaudited) |
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(Audited) |
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October 31, |
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January 31, |
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2009 |
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2009 |
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Current liabilities: |
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Accounts payable |
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$ |
462,365 |
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$ |
759,577 |
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Accrued compensation |
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326,121 |
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299,000 |
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Accrued other expenses |
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465,181 |
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472,113 |
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Deferred revenues |
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4,629,364 |
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5,941,837 |
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Total current liabilities |
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5,883,031 |
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7,472,527 |
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Long Term Liabilities: |
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Line of Credit |
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1,900,000 |
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800,000 |
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Deferred revenues, less current portion |
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766,487 |
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1,313,977 |
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Other |
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48,842 |
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Total Liabilities |
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8,549,518 |
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9,635,346 |
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Stockholders equity: |
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Convertible redeemable preferred stock, $.01 par value per share
5,000,000 shares authorized, no shares issued |
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Common stock, $.01 par value per share, 25,000,000 shares
authorized, 9,426,744 and 9,354,782 shares issued, respectively |
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94,267 |
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93,548 |
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Additional paid in capital |
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36,089,857 |
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35,820,417 |
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Accumulated other comprehensive income |
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4,808 |
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Accumulated deficit |
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(29,114,238 |
) |
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(28,816,859 |
) |
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Total stockholders equity |
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7,074,694 |
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7,097,106 |
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$ |
15,624,212 |
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$ |
16,732,452 |
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See Notes to Condensed Consolidated Financial Statements.
4
STREAMLINE HEALTH SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended October 31,
(Unaudited)
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Three Months |
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Nine Months |
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2009 |
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2008 |
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2009 |
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2008 |
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Revenues: |
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Systems sales |
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$ |
169,801 |
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$ |
1,343,112 |
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$ |
957,384 |
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$ |
2,938,131 |
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Services, maintenance and support |
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3,006,002 |
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2,547,962 |
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8,522,975 |
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7,655,614 |
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Application-hosting services |
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930,242 |
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517,277 |
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2,445,978 |
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2,315,703 |
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Total revenues |
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4,106,045 |
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4,408,351 |
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11,926,337 |
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12,909,448 |
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Operating expenses: |
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Cost of systems sales |
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658,294 |
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950,340 |
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2,091,989 |
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2,622,485 |
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Cost of services, maintenance and support |
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1,317,619 |
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1,083,040 |
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3,697,735 |
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3,342,377 |
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Cost of application-hosting services |
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407,953 |
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286,471 |
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1,203,606 |
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883,710 |
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Selling, general and administrative |
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1,540,745 |
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1,698,829 |
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4,010,877 |
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5,181,322 |
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Product research and development |
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466,455 |
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364,002 |
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1,196,645 |
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2,094,371 |
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Total operating expenses |
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4,391,066 |
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4,382,682 |
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12,200,852 |
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14,124,265 |
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Operating income (loss) |
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(285,021 |
) |
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25,669 |
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(274,515 |
) |
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(1,214,817 |
) |
Other income (expense): |
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Interest income |
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64 |
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7,823 |
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Interest expense |
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(12,137 |
) |
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(7,658 |
) |
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(30,254 |
) |
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(8,543 |
) |
Other income (expense) |
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1,387 |
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20,390 |
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Income (Loss) before taxes |
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(295,771 |
) |
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18,075 |
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(284,379 |
) |
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(1,215,537 |
) |
Income taxes |
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(3,500 |
) |
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(13,000 |
) |
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(13,500 |
) |
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Net (loss) income |
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$ |
(295,771 |
) |
|
$ |
14,575 |
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$ |
(297,379 |
) |
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$ |
(1,229,037 |
) |
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Basic net (loss) per common share |
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$ |
(0.03 |
) |
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$ |
0.00 |
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$ |
(0.03 |
) |
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$ |
(0.13 |
) |
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Diluted net (loss) per common share |
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$ |
(0.03 |
) |
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$ |
0.00 |
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$ |
(0.03 |
) |
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$ |
(0.13 |
) |
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Number of shares used in per common share computations: |
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Basic |
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9,423,211 |
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9,302,956 |
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9,385,969 |
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9,279,677 |
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Diluted |
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9,423,211 |
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9,342,130 |
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9,385,969 |
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9,279,677 |
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See Notes to Condensed Consolidated Financial Statements.
5
STREAMLINE HEALTH SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended October 31,
(Unaudited)
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2009 |
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2008 |
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Operating activities: |
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Net loss |
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$ |
(297,379 |
) |
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$ |
(1,229,037 |
) |
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities: |
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Loss (gain) on disposal of fixed assets |
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4,308 |
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Depreciation and amortization |
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2,039,232 |
|
|
|
2,080,345 |
|
Equity award expense |
|
|
204,259 |
|
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|
118,922 |
|
Long-term lease incentive |
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(48,842 |
) |
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(73,263 |
) |
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Changes in assets and liabilities: |
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Accounts and contract receivables |
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1,704 |
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|
500,056 |
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Other current assets |
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4,950 |
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(740,261 |
) |
Accounts payable and accrued expenses |
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(231,355 |
) |
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(115,657 |
) |
Deferred revenues |
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|
(1,859,963 |
) |
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|
(227,740 |
) |
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Net cash (used in) provided by operating activities |
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(183,086 |
) |
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|
313,365 |
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Investing activities: |
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Purchases of property and equipment |
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(464,395 |
) |
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|
(596,877 |
) |
Capitalization of software development costs |
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(2,879,000 |
) |
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|
(2,628,000 |
) |
Other |
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24,805 |
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(4,547 |
) |
|
|
|
|
|
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Net cash (used in) investing activities |
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(3,318,590 |
) |
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|
(3,229,424 |
) |
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Financing activities: |
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Proceeds from stock purchase plan and exercise of stock options |
|
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65,900 |
|
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|
67,443 |
|
Net change in bank line of credit |
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1,100,000 |
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|
2,000,000 |
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|
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Net cash provided by financing activities |
|
|
1,165,900 |
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|
|
2,067,443 |
|
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|
|
|
|
|
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|
|
|
|
|
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Decrease in cash and cash equivalents |
|
|
(2,335,776 |
) |
|
|
(848,616 |
) |
Cash and cash equivalents at beginning of period |
|
|
3,128,801 |
|
|
|
2,189,010 |
|
|
|
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Cash and cash equivalents at end of period |
|
$ |
793,025 |
|
|
$ |
1,340,394 |
|
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|
|
|
|
|
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Supplemental cash flow disclosures: |
|
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|
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Interest paid |
|
$ |
24,899 |
|
|
$ |
3,958 |
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
10,584 |
|
|
$ |
8,740 |
|
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements.
6
STREAMLINE HEALTH SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by
Streamline Health Solutions, Inc. (Streamline Health® or the Company), pursuant to the
rules and regulations applicable to quarterly reports on Form 10-Q of the U. S. Securities and
Exchange Commission. Certain information and note disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to those rules and regulations, although the Company believes that
the disclosures made are adequate to make the information not misleading. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation of the Condensed Consolidated Financial Statements have been included. These
Condensed Consolidated Financial Statements should be read in conjunction with the financial
statements and notes thereto included in the most recent Streamline Health Solutions, Inc. Annual
Report on Form 10-K, Commission File Number 0-28132. Operating results for the three months and
nine months ended October 31, 2009, are not necessarily indicative of the results that may be
expected for the fiscal year ending January 31, 2010.
The Company has evaluated subsequent events through December 10, 2009, the date the financial
statements were issued.
Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Companys significant accounting policies is presented beginning on page 52 of its
fiscal year 2008 Annual Report on Form 10-K. Users of financial information for interim periods
are encouraged to refer to the footnotes contained in the Annual Report when reviewing interim
financial results. There has been no material change in the accounting policies followed by the
Company during fiscal year 2009.
Note 3 CHANGES IN BALANCE SHEET ACCOUNT BALANCES
The decrease in cash and cash equivalents during the first nine months results primarily from cash
used in operating activities and investing activities, namely expenditures relating to software
development costs and purchases of equipment. This is offset by cash provided by financing
activities, which is primarily the balance of the Companys line of credit.
The decrease in prepaid hardware and third party software for future delivery is primarily due to
the recognition of the cost of sale expense associated with revenue recorded during the current
fiscal year.
The decrease in contracts receivable, including current and long-term portions, is the result of
the decrease in the sales of customer contracts where revenue was recorded prior to the associated
contractual customer invoicing milestones. The long term portion of the balance at January 31, 2009
was reclassified to current during the current fiscal year.
7
The increase in prepaid other, including prepaid customer maintenance contracts is the result of
new prepaid maintenance contracts that are amortized over their service period along with increases
in prepaid commissions on new application-hosting services contracts which are amortized over their
contract periods.
The decrease in net property and equipment is primarily the result of depreciation and amortization
further offset by purchases of equipment upgrades for internal operations and application hosting
services and a small amount of fully depreciated assets written off due to obsolescence.
The increase in capitalized software development costs, net, is the result of certain projects
reaching technological feasibility for which development cost began being capitalized relating to
the development of the next generation of core software solutions and expanded work flow module
development offset by amortization expense.
The decrease in accounts payable results from the timing of vendor payments at quarter end.
The increase in accrued compensation results from the increase in the accrual of commissions to be
paid in subsequent periods for significant sales made, or earned portions of variable employee
compensation plans in the first nine months of fiscal 2009.
The amount shown for the line of credit represents total borrowings under the line.
The decrease in deferred revenues reflects the amortization of prepaid maintenance during fiscal
2009, net of any additional payments received in 2009, along with the timing of any payments
received.
Note 4 EQUITY AWARDS
Compensation expense is recognized over the requisite service period for awards of equity
instruments to employees based on the grant-date fair value of those awards expected to ultimately
vest (with limited exceptions). Forfeitures are estimated on the date of the grant and revised if
actual or expected forfeiture activity differs materially from original estimates.
During the first nine months of the current fiscal year, the Company granted 29,000 options with a
weighted average exercise price of $2.09 per share. During the same period 10,000 options expired
with an average exercise price of $1.95 per share, and 11,000 options were exercised under all
plans at an average exercise price of $1.50 per share.
On June 25, 2009 the Company granted restricted stock shares subject to the 2005 Incentive
Compensation Plan as amended, to certain independent members of the Board of Directors. The shares
have an approximate one-year vesting period. A total of 25,422 shares were issued with an average
fair value of $2.95 per share.
8
During fiscal year 2006, the Company began expensing the fair value of equity awards using the
modified-prospective-transition method, which requires the Company to expense unvested awards or
new awards, subsequent to the adoption of the standard. The expense relating to the fair value of
equity awards included in the third quarter and first nine months of fiscal year 2009 and 2008
operating expenses amounted to $74,083 and $38,111 for the quarter and $204,259 and $118,922 for
the first nine months, respectively. The increase reflects the amortization of new grants and the
cumulative effect of the amortization of option grants over the past three years. The assumptions
used to calculate the fair value of equity awards granted are evaluated and revised, as necessary,
to reflect current market conditions and prior experience.
The fair value of the stock-based compensation as of October 31, 2009 was estimated at the date of
the grants using a Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rate of 2.50%, a dividend yield of zero percent; and a current
weighted average volatility factor of the expected market price of Streamline Healths Common Stock
of 0.563 in 2009. The weighted average expected life of stock options are five years and have a
forfeiture rate of zero.
Note 5 INCOME TAXES
Deferred income tax assets and liabilities are provided for temporary differences between the tax
basis and reported basis of assets and liabilities that will result in taxable or deductible
amounts in future years. 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. Therefore, no reserves for uncertain tax positions have been recorded.
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, 2004.
Income tax expense reflects various state income taxes in which the Company does business.
Note 6 EARNINGS PER SHARE
The basic earnings (loss) per common share are calculated using the weighted average number of
common shares outstanding during the period.
The 2009 diluted net (loss) per common share calculation, excludes the effect of the common stock
equivalents (stock options), as the inclusion thereof would be antidilutive. The Company had
515,882 equity award shares outstanding at October 31, 2009 that were not included in the diluted
net (loss) per share calculation as the inclusion thereof would be antidilutive.
The 2008 diluted net (loss) per common share calculation, excludes the effect of the common stock
equivalents (stock options), as the inclusion thereof would be antidilutive. The Company had
424,500 equity award shares outstanding at October 31, 2008 that were not included in the diluted
net (loss) per share calculation as the inclusion thereof would be antidilutive.
9
Note 7 CONTRACTUAL OBLIGATIONS
The following table details the remaining obligations, by fiscal year, as of the end of the
quarter. There are no capitalized leases or other commitments. Lease obligations beyond fiscal
year 2012 are $4,758. There are no other contractual obligations beyond fiscal year 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
Line of Credit |
|
$ |
1,900,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,900,000 |
|
|
$ |
|
|
Operating leases |
|
|
453,822 |
|
|
|
128,953 |
|
|
|
262,297 |
|
|
|
43,540 |
|
|
|
19,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,353,822 |
|
|
$ |
128,953 |
|
|
$ |
262,297 |
|
|
$ |
1,943,540 |
|
|
$ |
19,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 8 DEBT
On October 21, 2009, Streamline Health entered into an amended and restated revolving note with
Fifth Third Bank, Cincinnati, OH. The terms of the loan remain the same as set forth in the
revolving note entered into on July 31, 2008, as amended on January 6, 2009, except as follows: (i)
the maximum principal amount that can be borrowed has increased to $2,750,000 from the prior
maximum amount of $2,000,000; (ii) the maturity date of the loan has been extended to October 1,
2011 from August 1, 2010; and (iii) the interest rate on the outstanding principal balance will
accrue at an annual floating rate of interest equal to the Adjusted Libor Rate (as defined in the
revolving note) plus 3.25% and will no longer be based upon the ratio of the Companys funded
indebtedness to its trailing twelve months EBITDA.
The loan continues to be guaranteed by the Company. In connection with the entering into of the
revised revolving note, the Company also entered into an amended and restated continuing guaranty
agreement. The terms of the continuing guarantee agreement remain the same as set forth in the
guarantee agreement entered into on July 31, 2008, as amended on January 6, 2009, except that the
covenant that formerly required the Company to maintain certain levels of minimum tangible net
worth has been eliminated.
The loan also continues to be secured by a first lien on all of the assets of the Company pursuant
to security agreements entered into by the Company.
The Company believes that the terms of the revised loan documents are favorable to the Company.
The Company was not in default of, or out of compliance with, any terms of its credit facility
prior to entering into the revised loan documents. The Company was in full compliance with the
terms of its credit facility with Fifth Third Bank and there were no defaults at October 31, 2009.
10
NOTE 9 FINANCIAL INSTRUMENTS
The Company uses foreign currency hedge instruments to partially offset its business exposure to
foreign exchange risk of the Canadian dollar for the Companys transactions with a current Canadian
customer. The Company may enter into foreign currency forward and option contracts to offset some
of the foreign exchange risk of expected future cash flows on certain forecasted revenue and cost
of sales, and on certain existing accounts receivable and payable. However, the Company
may choose not to hedge certain foreign exchange exposures for a variety of reasons, including but
not limited to immateriality. The fair value of foreign currency forward contracts is $4,730 at
October 31, 2009.
The Company accounts for derivative financial instruments by recognizing derivative instruments as
either assets or liabilities in the balance sheet at fair value and recognizing the resulting gains
or losses as adjustments to earnings or other comprehensive earnings. The Company does not hold or
issue derivative financial instruments for trading or speculative purposes.
NOTE 10 FAIR VALUE MEASUREMENTS
Accounting guidance on fair value measurement for certain financial assets and liabilities requires
that assets and liabilities carried at fair value be classified and disclosed in one of the
following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs reflecting the reporting entitys own assumptions or external inputs
from inactive markets
The following table presents the Companys assets and liabilities measured at fair value on a
recurring basis as of October 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2009 |
|
|
|
Quoted |
|
|
|
|
|
|
|
|
|
|
|
|
Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
Active |
|
|
Significant |
|
|
|
|
|
|
|
|
|
Markets for |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
Identical |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
|
|
Instruments |
|
|
Inputs |
|
|
Inputs |
|
|
|
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Total (a) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Hedges |
|
$ |
|
|
|
$ |
4,730 |
|
|
$ |
|
|
|
$ |
4,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value |
|
$ |
|
|
|
$ |
4,730 |
|
|
$ |
|
|
|
$ |
4,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The total fair value amounts for assets and liabilities also represent the related carrying amounts. |
11
The Companys foreign currency hedges were valued using the observable changes in fair values
of hedged assets or liabilities due to the change in foreign exchange rates during the quarter
ended October 31, 2009 (Level 2).
NOTE 11 COMPREHENSIVE INCOME
Comprehensive income consists of two components, net income and other comprehensive income. Other
comprehensive income refers to revenue, expenses, gains, and losses that under generally accepted
accounting principles are recorded as an element of shareholders equity but are excluded from net
income. The Companys other comprehensive income consists of the effective portion of foreign
currency hedge instruments.
The following table summarizes the components of accumulated other comprehensive income, net of
taxes, as of October 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Nine Months |
|
|
|
Ended October 31, |
|
|
Ended October 31, |
|
|
|
2009 |
|
|
2009 |
|
Net loss |
|
$ |
(295,771 |
) |
|
$ |
(297,379 |
) |
Net unrecognized (losses) gains on foreign currency hedges |
|
|
(3 |
) |
|
|
4,808 |
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
$ |
(295,774 |
) |
|
$ |
(292,571 |
) |
|
|
|
|
|
|
|
12
|
|
|
Item 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
In addition to historical information contained herein, this Report on Form 10-Q 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 solutions, the
ability of Streamline Health to control costs, availability of products obtained from third-party
vendors, the healthcare regulatory environment, potential changes in legislation, regulatory and
government funding affecting the healthcare industry, 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, and including, effects of
critical accounting policies and judgments, changes in accounting policies or procedures as may be
required by the Financial Accounting Standards Board or other similar entities, changes in
economic, business and market conditions impacting the healthcare industry, the markets in which
the Company operates and nationally, and the Companys ability to maintain compliance with the
terms of its credit facilities, but not limited to, discussions in the most recent Form 10-K, 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 future Quarterly Reports on
Form 10-Q and any Current Reports on Form 8-K.
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 ongoing basis, Streamline Health evaluates its estimates, including those
related to product revenues, bad debts, capitalized software development costs, income taxes,
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 and expense recognition. Actual results
may differ from these estimates under different assumptions or conditions.
13
RESULTS OF OPERATIONS
GENERAL
Streamline Health Solutions, Inc. 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 solutions and services 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 of patient information
while decreasing direct costs associated with document retrieval, work-in-process, chart
completion, document retention and archiving.
The Companys applications allow authenticated users, such as physicians, nurses, administrative
and financial personnel, and payers with access to patient healthcare information (PHI) 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, financial and administrative systems, and use document management 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, financial
and administrative healthcare information from a single permanent and secure repository, including
clinicians handwritten notes, laboratory reports, photographs, insurance cards, human resource
documents, etc.
The Companys workflow-based solutions 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.
14
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
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 document management platform, application workflow modules and image
and web-enabling tools that allow for the seamless merger of back office functionality with
existing Hospital Information Systems at the desktop.
The Companys software solutions can be provided on a subscription basis via Software as a
Service (also referred to as SaaS, hosting, or Cloud Computing) which is remotely hosted, or
alternatively, licensed and installed locally. SaaS is the provision of dynamically scalable
remote software, infrastructure and resources as a subscription service over a dedicated data
communications line or virtual private line (VPN) via the Internet. Users of Software as a Service
need not have knowledge of, expertise in, or control over the technology infrastructure in the
hosting center that supports them. Under these arrangements, customers electronically
capture document-centric information at the healthcare facility and securely transmit the data to
the Companys established hosting center. The hosting service center stores and manages the
document-centric data using Streamline Healths suite of applications, and customers can view,
print, fax, route and process the information from anywhere using the Streamline Health web-enabled
applications. Streamline Health pioneered this offering in 1998 to give customers the
ability to obtain its solutions on an application-hosting basis as an Application Service Provider
(ASP).
The Company offers its own document imaging/management infrastructure
(accessANYwareTM) 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 administrative departments. Furthermore, these systems have been
specifically designed to integrate with any Clinical Information System through various means,
including our proprietary software integration tool, STRM-ITSM. For example, Streamline
Health has integrated its solutions with selected systems from Telus Health (a Telus company)
(Oacis Electronic Medical Record), Siemens Medical Solutions USA Inc. (Siemens), Cerner
Corporation, Eclipsys Corporation, Lawson Software, and GE Healthcare (see below) applications,
thus enabling customers to use our solutions without the expense of replacing entire software
systems to gain the 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.
Historically, the Company has derived most of its revenues from recurring hosting services,
recurring maintenance fees, professional services and system sales involving the licensing, either
directly or through remarketing partners, of its workflow and document management solutions to
healthcare organizations. In a typical transaction, Streamline Health, or its remarketing partners,
enter into a fee-for-service SaaS subscription agreement or a perpetual license agreement for
Streamline Healths software applications and may license to sell other third-party software and
hardware components to the healthcare organization. Additionally, Streamline Health provides
professional services, including implementation, training, and product support, as well as Business
Process Management Services (BPM) consulting for customer document workflow applications.
15
Streamline Health earns its highest margins on proprietary Streamline Health software and hosting
services and the lowest margins on third-party hardware and software. Sales to customers may
include different configurations of Streamline Health software, third party components (hardware
and 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.
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 for licensed solutions can cause significant variations in
quarter-to-quarter operating results.
The Company operates primarily 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 Item 101(b) of Regulation S-K is contained in Item 6 Selected Financial
Information of the Companys January 31, 2009 Form 10-K.
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.
HEALTHCARE INFORMATION TECHNOLOGY MARKETPLACE
The turbulence in the worldwide economy has impacted almost all industries. While healthcare is not
immune to economic cycles, the Company has observed that it is generally more resilient than most
segments of the economy. The impact of the current economic conditions on our existing and
prospective clients has been mixed. We continue to see some organizations doing fairly well
operationally, but many are dealing with a reduction in available capital, or an overall spending
decrease. In addition, organizations with a large dependency on Medicaid populations are being
impacted by the challenging financial condition of many state governments. However, we believe that
our solutions are well suited for this environment.
The decisions by a healthcare provider to replace, substantially modify, or upgrade its information
systems are a strategic decision and may involve a large capital commitment requiring an extended
approval process for licensed and locally installed solutions. The Company believes that these
challenges are outweighed by the need for healthcare organizations to implement modern systems.
Organizations are becoming more selective of where they invest capital, and our solutions are able
to help organizations gain a quick return on their investment by improving safety, increasing
efficiency, and therefore reducing costs. The Company has been successful in demonstrating to
current and prospective customers the return on investment that
our solutions produce over the short and long term. In addition, current legislation by the U.S.
Federal Government favors the implementation of systems, such as ours, that fully realize the
benefits of the electronic medical record (EMR). We feel our products, which are tailored for
hospitals and physician practices alike, are positioned well to take advantage of the modernization
and wide-spread use of EMR solutions.
16
The Companys SaaS-based hosting services were especially designed to overcome these obstacles in
the buying decision such as large capital commitment, length of implementation, and the scarcity of
time for healthcare organization personnel to implement new systems. The Company believes that
large healthcare organizations and smaller healthcare providers are looking for this type of
subscription-based solution because of the ease of implementation and lower entry-level costs.
Streamline Health is focused on its SaaS model of delivery and believes this business model is
especially well suited for the medium to small acute care facility marketplace as well as the
ambulatory marketplace. The Company is actively pursuing remarketing agreements, in addition to
those discussed below, with other Healthcare Information Systems and staff outsourcing providers to
distribute Streamline Healths SaaS-based document workflow solutions. The Company also continues
to market system sales as appropriate to match customer needs.
Streamline Health provides hosted SaaS to The Health Alliance of Greater Cincinnati, Catholic
Healthcare West, T. J. Sampson Community Hospital, Bronx Lebanon Hospital Center, Patty A. Clay
Medical Center, Marion General Medical Center, the University of California San Francisco (UCSF),
Massena Medical Center, Columbus Ohio Vital Statistics, 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 Parkview
Health, Pro Health Care, Peace Health, Texas Health Resources, Sarasota Memorial Hospital, the
Albert Einstein Healthcare Network, Beth Israel Medical Center, and Memorial Sloan-Kettering
Cancer Center, among others.
In 2009, Streamline Health launched its Business Process Management Services (BPM) group, which is
a dedicated consulting department focused on delivering custom document workflow solutions for our
existing installed base of customers and new customers who have a need for stand-alone document
workflow applications to improve departmental business processes. BPM services include custom
workflow development, business process management, strategic planning, and custom reporting, among
other consulting services. These new services will complement our existing professional services,
which focus primarily on installation of our standard off-the-shelf software solutions.
CONTRACTS OVERVIEW
Contractual agreements typically cover the licensing, hosting, or implementation and maintenance of
the system, which 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
facilities (annual operating expense model) or the number of concurrent users (concurrent use
model) 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 SaaS-based hosting services solutions, the hosting
services agreements generally provide for utilizing Streamline Healths software and third-party
software on a recurring subscription or, for smaller departmental solutions, a fee per transaction
basis.
17
Generally, revenues from licensed, locally installed systems sales are recognized when an agreement
is signed and solutions 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 and training services are recognized as the services are performed.
Revenues from SaaS-based hosting services are recognized on a subscription or per transaction basis
as information is captured, stored, retrieved and processed. 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.
To supplement its direct sales force, the Company has remarketing agreements with large healthcare
industry partners. Contracts which have been recently entered into are detailed below:
In 2002, Streamline Health entered into a five year Remarketing Agreement with IDX Information
Systems Corporation, which was subsequently acquired by GE Healthcare, 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 document workflow and
document management software including accessANYwareTM, Coding Workflow, and SaaS-based
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 ended January 30, 2007, can be cancelled by IDX/GE upon 90 days written notice to
the Company. This automatic annual renewal provision now extends the agreement through January 30,
2011. The Company has no reason to believe that the agreement will not continue to be renewed
annually or will be terminated.
As to licensed, locally installed software, under the terms of the Remarketing Agreement,
Streamline Health records this revenue when the solutions 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., which was
subsequently acquired by Telus, a large international telecommunications corporation based in
Canada, in January 2008, under which Telus Health (formerly Emergis) is integrating Streamline
Healths accessANYwareTM document management repository and document workflow
applications into its Oacis (Open Architecture Clinical Information System) Electronic Medical
Record (EMR) solution.
18
In May 2008, Streamline Health and Telus Health announced their agreement to provide their
integrated document management and workflow solution at the eight hospitals representing the Centre
hospitalier de lUniversité de Montréal (CHUM) and the McGill University Health Centre (MUHC).
Telus Health integrated Streamline Healths accessANYware document management and chart completion
workflow solution into its Oacis electronic medical record solution. The integrated solution
addresses clinicians need for immediate access to patient records in hybrid environments, where
electronic health records still coexist with paper. CHUM and MUHC will be among the first sites in
Canada to deploy the integrated solution.
In May 2009, Streamline Health in collaboration with Telus Health announced that, consistent with
its international expansion plans, the Companys document workflow solutions will be integrated
into the electronic medical records solution for multiple facilities within an additional leading
Canadian healthcare region. Streamline Health has now secured two large international contracts for
implementation of its solutions at a total of over 18 healthcare facilities. As a result, pending
General Availability status for its multi-lingual product release, the Company expects to recognize
approximately $1.6 million in software licensing revenues plus additional implementation services
in the Companys fourth fiscal quarter of 2009. In addition, the Company expects its backlog will
increase several million dollars as a result of anticipated installation and maintenance services
fees over the term of the agreements. To date, no software revenues have been recorded for these
transactions because the contracts call for Streamline Health to deliver a French language version
of its software. A beta version of this software was delivered to Telus in July, 2009 as part of
the process to achieve the products General Availability status as planned later this fiscal year.
In July 2009, Streamline Health entered into an agreement to provide its integrated document
management and workflow solution to an existing hosted customer. This project will add
approximately $954,000 over a five year term to the current relationship. The solution will create
an online centralized repository of all requested pre-surgery documents coupled with smart software
that alerts and tracks the entire process and workflow. The solution also includes robust
compliance reporting as well as an interface to the customers surgery scheduler. The revenues for
the hosted solution, and the professional services provided by the agreement are recognized in
accordance with the Companys revenue recognition policies as described in the preceding
paragraphs.
In November 2009, Streamline Health entered into a purchase agreement to provide its integrated
document management and workflow solution to Moses Cone Health System. Streamline will implement
our enterprise document workflow solution integrated into the GE Centricity electronic medical
records solution in the five-hospital health system in Greensboro, North Carolina. The total value
of the contract is in excess of $1.0 million. The solution will transform the current paper-based
HIM department into a centralized hub for more efficient workflow between the billing department,
doctors, and coders, while assisting the hospital system in achieving its stated goal of becoming
paperless within five years.
19
SIGNED AGREEMENTS BACKLOG
Streamline Health, or its remarketing partners, enter into master agreements with customers to
specify the scope of the system to be installed and services to be provided, the agreed upon
aggregate price and the timetable for implementation. The master agreement typically provides that
the Company, or its remarketing partner, will deliver the system in phases pursuant to the
customers purchase orders, 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 customers
will continue in the future to expand their systems and purchase additional licenses and services,
Streamline Health believes, based on its past experience, that its customers will expand their
existing systems.
At October 31, 2009, Streamline Health has master agreements, purchase orders or royalty reports
from remarketing partners for systems and related services which have not been delivered, installed
and accepted which, if fully performed, will generate future revenues of approximately $22,572,000
compared with $26,179,000 and $22,844,000 at the end of the fourth and third quarter of fiscal 2008
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, |
|
|
January 31, |
|
|
October 31, |
|
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
Streamline Health Software Licenses |
|
$ |
2,036,000 |
|
|
$ |
1,027,000 |
|
|
$ |
925,000 |
|
Custom Software |
|
|
140,000 |
|
|
|
278,000 |
|
|
|
323,000 |
|
Hardware and Third Party Software |
|
|
268,000 |
|
|
|
562,000 |
|
|
|
765,000 |
|
Professional Services |
|
|
3,156,000 |
|
|
|
4,691,000 |
|
|
|
4,965,000 |
|
Application Hosting Services |
|
|
10,897,000 |
|
|
|
13,043,000 |
|
|
|
12,896,000 |
|
Recurring Maintenance |
|
|
6,075,000 |
|
|
|
6,578,000 |
|
|
|
2,970,000 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
22,572,000 |
|
|
$ |
26,179,000 |
|
|
$ |
22,844,000 |
|
|
|
|
|
|
|
|
|
|
|
The total backlog decreased 1% as compared to the backlog as of October 31, 2008, and decreased 14%
as compared to the backlog as of January 31, 2009. These decreases in backlog were due to multiple
factors, in addition to revenue recognition, as detailed below:
A hosting contract signed in the second quarter of fiscal 2009 represents an increase of
approximately $700,000 in application hosting backlog. However, in the first quarter of fiscal 2009
application hosting backlog was reduced to reflect the suspension of one small hosting client due
to economic factors. In the second quarter of fiscal 2009 application hosting backlog was further
reduced for the expected reduction in the rollout of services from a separate hosting client due to
the clients organization changes.
20
The increase in the licensed software component is due to the previously announced Canadian
software contract signed in the first quarter of this fiscal year which represents approximately
$1.1 million in new backlog.
The single largest contributor to backlog from October 31, 2008 to October 31, 2009 relates to the
approximately $3 million increase in maintenance backlog.
Streamline Healths master agreements generally provide for an initial maintenance period and give
the customer the right to subscribe for maintenance and support services on a monthly, quarterly,
or annual basis. Maintenance and support revenues for fiscal years 2008, 2007 and 2006 were
approximately $7,331,000, $6,861,000 and $5,711,000, respectively. Maintenance and support
revenues are expected to continue to increase in fiscal 2009 as existing commitments are renewed
and new customers are added.
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 predict accurately 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 procure additional agreements, could have a material adverse effect on
Streamline Healths business, financial condition, and results of operations.
UNEVEN PATTERNS OF QUARTERLY OPERATING RESULTS
The Companys revenues from systems sales have varied, and may continue to vary, significantly from
quarter-to-quarter because of the volume and timing of systems sales and delivery. Professional
services revenues also fluctuate from quarter-to-quarter because of the timing of the
implementation services, project management, customized programming provided and timing of the
recognition of revenues under generally accepted accounting principles. Conversely, revenues from
maintenance services do not fluctuate significantly from quarter-to-quarter, but have been
increasing, on an annual basis, as the number of customers increase.
The Companys revenues and operating results may also vary significantly from quarter-to-quarter
because of a number of other factors, many of which are outside the Companys control. These
factors include the relatively high purchase price of a system, unpredictability in the number and
timing of systems sales, length of the sales cycle, delays in the implementation process and
changes in the customers financial condition or budget and the sales activities of the remarketing
partners. As a result, period-to-period comparisons may not be meaningful with respect to the past
operations of the Company nor are they necessarily indicative of the future operations of the
Company.
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.
21
REVENUES
Revenues for the three months ended October 31, 2009, were $4,106,045 compared with $4,408,351 in
the comparable quarter of fiscal 2008. The quarter-over-quarter decrease was a result of a
decrease of approximately $1.17 million in system sales recognized in the third quarter. The
decrease in license software was offset by an approximate $413,000 increase in application hosting
revenues due to several hosted customer projects reaching acceptance criteria, and coupled with an
approximate increase of $458,000 in services, maintenance, and support revenues primarily relating
to the services provided to the newer hosting customers that are entering into production.
Revenues for the first nine months ended October 31, 2009, were $11,926,337, compared with
$12,909,448 reported in the comparable period of fiscal 2008. The decrease was primarily a result
of decreased systems sales revenues of approximately $1.98 million due to the revenue associated
with one large contract recorded in the second quarter, and another large contract in the third
quarter of fiscal 2008. The decrease in license revenues was offset by an increase in
application-hosting services revenues of approximately $130,000 over the comparative nine month
period. This increase in application hosting is primarily due to several newer hosted customer
projects reaching acceptance criteria by the third quarter of fiscal 2009. Revenues from new
hosted customer agreements entered into since July of fiscal 2008 continue to incrementally roll
out in fiscal 2009. The Company continues to aggressively pursue additional application-hosting
customers which are anticipated to replace the revenue decreases in purchased solutions, and create
a more consistent stream of revenues in future periods.
Additionally, the decrease in systems sales was offset by increases in maintenance and support, and
professional services revenues of approximately $867,000 for the comparative nine month period due
to normal scheduled annual increases in maintenance billing rates, and increased professional
service activity for new customers.
OPERATING EXPENSES
Cost of Systems Sales
The cost of systems sales includes amortization of capitalized software development costs on a
straight-line basis, royalties and the cost of third party software and hardware. The cost of
system sales for the three months ended October 31, 2009 was $658,294 compared with $950,340 in the
comparable prior period. The decrease in the cost of sales is primarily the result of the reduced
capitalized software amortization expense pending general release of our latest generation product
line. Cost of systems sales as a percentage of systems sales may vary from period-to-period
depending on hardware and software configurations of the systems sold or add-on sales delivered.
The cost of systems sales as a percentage of systems sales for the third quarter of fiscal 2009 and
2008 were 388% and 71%, respectively. The relatively fixed cost of the capitalized software
amortization compared to the variable nature of system sales each quarter causes these percentages
to vary dramatically, especially in those periods where systems sales are low. The cost of systems
sales as a percentage of systems sales for the first nine months of fiscal 2009 and 2008 were
$2,091,989 and $2,622,485; or 219% and 89% of revenues,
respectively. The increased percentage is primarily reflective of the decrease in software
licensing revenues and the relatively fixed capitalized software amortization during the current
periods, when compared to the comparable prior periods.
22
Cost of Services, Maintenance and Support
The cost of services, maintenance and support includes compensation and benefits for support and
professional services personnel and the cost of third party maintenance contracts. The cost of
services, maintenance and support for the three and nine months ended October 31, 2009 was
$1,317,619 and $3,697,735, compared with $1,083,040 and $3,342,377 in the corresponding three and
nine month period ending October 31, 2008. These increases are due to primarily the increased
professional services staffing costs and third party maintenance contract costs associated with
supporting an increased customer base, and specifically the startup costs of the BPM services over
the three and nine month periods. Additionally, previously deferred expenses relating to one
customer were recognized during the third quarter, causing a comparative increase of expenses of
approximately $142,000. As a percentage of services, maintenance and support revenues, the cost of
such services, maintenance and support was 44% and 43% for the third quarter of fiscal 2009 and
2008, respectively. As a percentage of services, maintenance and support revenues, the cost of
such services, maintenance and support was 43% and 44% for the first nine months of fiscal 2009 and
2008, respectively.
Cost of Application-hosting services
The cost of application-hosting services operations is relatively fixed, but subject to inflation
for the goods and services it requires. The cost of application-hosting services for the three and
nine months ended October 31, 2009 was $407,953 and $1,203,606 compared with $286,471 and $883,710
in the corresponding three and nine month period ending October 31, 2008. These three and nine
month increases are primarily attributable to increased depreciation and third party maintenance
expenses as a result of the growing hosting center operations. As a percentage of
application-hosting revenues, the cost of application-hosting was 44% and 55% for the third quarter
of fiscal 2009 and 2008, respectively. These decreased percentages are primarily attributable to
increased revenues from new customers relative to the increase in cost, partially offset by the
expense increases as noted. As a percentage of application-hosting revenues, the cost of
application-hosting was 49% and 38% for the first nine months of fiscal 2009 and 2008,
respectively. The increase represents a one-time expense of approximately $65,000 relating to
certain licenses which were expensed during the first quarter of fiscal 2009, more customers
meeting acceptance requirements in the second half of the year, and increases in third party
software and maintenance fees and depreciation expenses on new equipment related to operating the
data center.
23
Selling, General and Administrative
Selling, General and Administrative expenses consist primarily of compensation and related benefits
and reimbursable travel and living expenses related to the Companys sales, marketing and
administrative personnel; advertising and marketing expenses, including trade shows and similar
type sales and marketing expenses; and general corporate expenses, including occupancy costs.
Selling, General and Administrative expenses for the three months ended October 31,
2009 and 2008 were $1,540,745 and $1,698,829, respectively. Selling, General and Administrative
expenses for the nine months ended October 31, 2009 and 2008 were $4,010,877 and $5,181,322,
respectively. This decrease of 9% and 23% over the respective comparable prior periods is due to
effective cost management measures begun in the third quarter of fiscal 2008 including; planned
reductions in sales and administrative expenses, the continued suspension of bonus plans, and
strategic increase in hiring since the reduction in sales force during corresponding prior quarter.
The Company has been able to capitalize on efficiencies gained in the current three and nine month
periods by improving the allocation of resources, and reducing expenses. Commission plans for sales
personnel were not suspended and commissions were paid and will continue to be accrued. The
financial impact of efficiencies gained during the prior three quarters will continue to have a
positive effect in the remainder of fiscal 2009.
Product Research and Development
Product research and development expenses consist primarily of compensation and related benefits;
the use of independent contractors for specific near-term development projects; and an allocated
portion of general overhead costs, including occupancy. During the third quarter of fiscal 2009,
research and development expenses increased approximately $102,453 when compared with the
comparable prior quarter. This increase is primarily attributable to the final stage development
efforts of the re-architecture and internationalization of the Companys flagship product,
accessANYwareTM, in preparation of its expected general release in the fourth quarter of
fiscal 2009. The Company capitalized approximately $859,000 and $1,217,000 of product research and
development costs in the third quarter of fiscal 2009 and 2008, respectively.
During the first nine months of fiscal 2009, research and development expenses decreased
approximately $898,000 when compared with the comparable prior quarter of fiscal 2008. This
decrease is primarily attributable to the company-wide cost reductions implemented late in the
third quarter of fiscal 2008 that have continued into fiscal 2009. This $898,000 decrease is offset
by a corresponding increase of $251,000 in capitalized software cost primarily relating to the
development, re-architecture, and internationalization of the Companys flagship product noted
above. The Company capitalized approximately $2,879,000 and $2,628,000 in the first nine months of
fiscal 2009 and 2008, respectively. This increase in capitalized development costs relate
primarily to costs incurred to bring to market the next generation of accessANYwareTM
and workflow products.
Operating profit (loss)
The operating (loss) for the third quarter of fiscal 2009 was $(285,021), compared to an operating
profit of $25,669 in the third quarter of fiscal 2008. This decrease is primarily the result of
the 7%, or $303,000, decrease in revenues as noted above. The operating (loss) for the first nine
months of fiscal 2009 was ($274,515) compared with an operating (loss) of ($1,214,817) in the first
nine months of fiscal 2008. The decrease in the net loss for the nine months ended October 31, 2009
is the result of the approximate 14% decrease in operating expenses, even though total revenues
decreased 8% year-over-year.
24
The increase in interest expense for the three and nine month period ending October 31, 2009 is
because the Company had increased borrowings and amounts outstanding in more months than in the
comparable prior periods in fiscal 2008.
Net income (loss)
The net (loss) for the third quarter of fiscal 2009 was $(295,771) ($0.03 per share) compared with
net income of $14,575 ($0.00 per share) in the third quarter of fiscal 2008. The net loss for the
third quarter as compared to the net income in the comparable period is primarily due to decreased
licensed system revenues. The net (loss) for the first nine months of fiscal 2009 was $(297,379)
($0.03 per share) compared with a net (loss) of $(1,229,037) ($0.13 per share) in the first nine
months of fiscal 2008. The reduced net loss for the nine months ended October 31, 2009 is the
result of efficiencies gained from improved cost management, and increased services, maintenance
and support, application-hosting revenues offset by decreased licensed system revenues.
Management continues to believe that the healthcare document management and workflow market will
continue to grow and expects significant growth coming from the Companys hosting services.
Management believes it has made, and continues to make, significant investments in the talent and
technology necessary to establish the Company as a leader in this marketplace, and continues to
believe the Company is well positioned to experience significant revenue growth, particularly for
its SaaS hosting services.
Since commencing operations in 1989, the Company has incurred operating losses. Although the
Company achieved profitability in fiscal years 1992, 1993, and 2000 through 2006, the Company
incurred a net (loss) in fiscal years 1994 through 1999, 2007 and 2008. In view of the Companys
prior operating history, there can be no assurance that the Company will be able to achieve
consistent profitability on a quarterly or annual basis or that it will be able to sustain or
increase its revenue growth in future periods. Based upon the expenses associated with current and
planned staffing levels, profitability is dependent upon increasing revenues.
LIQUIDITY AND CAPITAL RESOURCES
During the last six fiscal years, Streamline Health has funded its operations, working capital
needs, and capital expenditures primarily from cash generated by operations and bank loans.
Streamline Healths liquidity is dependent upon numerous factors that include: the timing and
amount of revenues and collection of contractual amounts from customers, amounts invested in
research and development, capital expenditures, and 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 solutions 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.
25
Streamline Health has obligations for capital resources, consisting of the outstanding balance of
the $2,750,000 line of credit which expires October 1, 2011, and the non-cancelable operating
leases of $458,580 payable over the next four years. Capital expenditures for property and
equipment in fiscal 2009 are not expected to exceed $800,000. At October 31, 2009, Streamline
Health had a cash balance of $793,025.
During the five prior fiscal years, Streamline Health has made significant investments for capital
expenditures, increased its sales and marketing, product research and development and its support
and consulting expenses, and made significant debt reductions. This resulted in significant net
cash outlays over the last five fiscal years. Accordingly, to achieve increasing revenues and
profitability it was necessary for the Company to significantly increase the sales and marketing
and product development expenses over the past five years, including capitalized software in fiscal
2007, 2008 and 2009. The Company believes that a significant shift in market demand toward hosted
services is occurring as a result of better market adoption, numerous customers with a history of
hosting success, and more recently, economic developments that have created scarce capital dollars
for most hospital organizations. Our strategic initiatives to reorganize our resources to focus on
software as a service via our hosting solutions, and growth into Canada, should produce improved
results in fiscal 2009 and beyond as recurring hosted revenues are anticipated to grow. However,
there can be no assurance Streamline Health will be able to do so.
Streamline Health carefully monitors operating expenses. As a result of the current levels of
revenues and operating loss, 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 further reduce operating
expenses, which the Company initiated late in the third quarter of fiscal 2008 and into 2009
through attrition, bonus suspension, and downsizing of the staff, or raise cash through additional
borrowings, the sale of assets, or issue additional equity, or a combination thereof. 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 further reduce operating
expenses, this could have an adverse effect on future operating performance.
Streamline Health believes that its present cash position and current availability under the line
of credit, combined with cash generation currently anticipated from operations, will be sufficient
to meet anticipated cash requirements for the short term. The Company may need to incur additional
debt, obtain an additional infusion of capital, or a combination of both, depending on the extent
of the future expenses and revenues of the Company. 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.
26
RECENT ACCOUNTING PRONOUNCEMENTS
In April 2008, the Financial Accounting Standards Board (FASB) issued guidance now codified as
FASB Accounting Standards Codification (ASC) Topic 350, Goodwill Intangibles Other, which
amends previous Topic 350 guidance to require an entity to consider developing renewal or extension
assumptions for the purpose of determining the useful life of recognized intangible assets. This
new guidance applies prospectively to intangible assets that are acquired individually or with a
group of other assets in business combinations and asset acquisitions and is effective for
financial statements issued for fiscal years and interim periods beginning after December 15, 2008.
The Company adopted this guidance on February 1, 2009 and determined that it did not have a
material impact on the consolidated financial statements of the Company.
Effective January 1, 2008, the FASB issued guidance now codified as FASB ASC Topic 820, Fair Value
Measurements and Disclosures Overall, with respect to its financial assets and liabilities. In
February 2008, the FASB issued updated its guidance to provide a one year deferral of the effective
date for non-financial assets and non-financial liabilities, except those that are recognized or
disclosed in the financial statements at fair value at least annually. Therefore, the Company
adopted the provisions of FASB ASC Topic 820 for non-financial assets and non-financial liabilities
effective February 1, 2009, and such adoption did not have a material impact on the Companys
consolidated results of operations or financial condition.
In April 2009, the FASB issued guidance now codified as FASB ASC Topic 825, Financial Instruments,
which amends previous Topic 825 guidance to require disclosures about fair value of financial
instruments in interim as well as annual financial statements. This pronouncement is effective for
periods ending after June 15, 2009. Accordingly, the Company adopted the provisions of FASB ASC
Topic 825 on July 31, 2009. The adoption of this pronouncement did not have a material impact on
our consolidated financial position, results of operations or cash flows. However, these provisions
of FASB ASC Topic 825 resulted in additional disclosures with respect to the fair value of the
Companys financial instruments.
In May 2009, the FASB issued guidance now codified as FASB ASC Topic 855, Subsequent Events, which
establishes general standards of accounting for, and disclosures of, events that occur after the
balance sheet date but before financial statements are issued or are available to be issued. This
pronouncement is effective for interim or fiscal periods ending after June 15, 2009. Accordingly,
the Company adopted the provisions of FASB ASC Topic 855 for the fiscal quarter ended July 31,
2009.
27
In June 2009, the FASB issued Accounting Standards Update (ASU) 2009-01, Amendments based on
Statement of Financial Accounting Standards No. 168 The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally Accepted Accounting Principles. The FASB
ASC Topic 105, Generally Accepted Accounting Principles, establishes the FASB Accounting
Standards CodificationTM as the single source of authoritative nongovernmental U.S.
GAAP. FASB ASC Topic 105 does not change current U.S. GAAP, but is intended to simplify user access
to all authoritative U.S. GAAP by providing all authoritative literature related to a particular
topic in one place. All existing accounting standard documents will be superseded and
all other accounting literature not included in the FASB Codification will be considered
non-authoritative. These provisions of FASB ASC Topic 105 are effective for interim and annual
periods ending after September 15, 2009 and, accordingly, are effective for the Company for the
current fiscal reporting period. The adoption of this pronouncement did not have an impact on the
Companys financial condition or results of operations, but will impact our financial reporting
process by eliminating all references to pre-codification standards. On the effective date of this
Statement, the Codification superseded all then-existing non-SEC accounting and reporting
standards, and all other non-grandfathered non-SEC accounting literature not included in the
Codification became non-authoritative.
In October 2009, the FASB issued Accounting Standards Update (ASU) 2009-13 Revenue Recognition
(Topic 605), which applies to the revenue recognition of multiple element arrangements. The new
guidance states that if vendor specific objective evidence or third party evidence for deliverables
in an arrangement cannot be determined, companies will be required to develop a best estimate of
the selling price to separate deliverables and allocate arrangement consideration using the
relative selling price method. The accounting guidance will be applied prospectively and will
become effective during the first quarter of fiscal year 2011. Early adoption is allowed. The
Company is currently evaluating the impact of this accounting guidance on our consolidated
financial statements.
In October 2009, the FASB issued Accounting Standards Update (ASU) 2009-14 Software (Topic 985),
which applies to certain revenue arrangements that include software elements. Previously, companies
that sold tangible products with more than incidental software were required to apply software
revenue recognition guidance. This guidance often delayed revenue recognition for the delivery of
the tangible product. Under the new guidance, tangible products that have software components that
are essential to the functionality of the tangible product will be excluded from the software
revenue recognition guidance. The new guidance will include factors to help companies determine
what is essential to the functionality. Software-enabled products will now be subject to other
revenue guidance and will likely follow the guidance for multiple deliverable arrangements issued
by the FASB in September 2009. The new guidance is to be applied on a prospective basis for revenue
arrangements entered into or materially modified in fiscal years beginning on or after June 15,
2010, with earlier application permitted. If a company elects earlier application and the first
reporting period of adoption is not the first reporting period in the companys fiscal year, the
guidance must be applied through retrospective application from the beginning of the companys
fiscal year and the company must disclose the effect of the change to those previously reported
periods. The Company is currently evaluating the impact of this accounting guidance on our
consolidated financial statements.
28
|
|
|
Item 3. |
|
Quantitative and Qualitative Disclosures about Market Risk |
For quantitative and qualitative disclosures about market risk, see Item 7A, Quantitative and
Qualitative Disclosures About Market Risk, of the annual report on Form 10-K for the fiscal year
ended January 31, 2009. The Companys exposures to market risk have not changed materially since
January 31, 2009.
|
|
|
Item 4T. |
|
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 Interim 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-14(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 Interim 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 Interim 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 October 31, 2009 that could materially affect, or is reasonably likely to
materially affect, internal controls over financial reporting.
Part II. OTHER INFORMATION
|
|
|
Item 1. |
|
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.
29
In addition to the other information set forth in this report and the risk factors set forth below,
you should carefully consider the risk factors discussed in Part I, Item 1A, Risk Factors in the
Annual Report on Form 10-K for the fiscal year ended January 31, 2009; and in Part II, Item 1A.
Risk Factors in the Companys Quarterly Reports on Form 10-Q for the fiscal quarter ended April
30, 2009 (the 2009 First Quarter 10-Q), and July 31, 2009 (the 2009 Second Quarter 10-Q). The
risk factors in the Annual Report, the 2009 First Quarter 10-Q, and
the 2009 Second Quarter 10-Q has
not materially changed since July 31, 2009, but are not the only risks facing the Company. 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 3. |
|
DEFAULTS UPON SENIOR SECURITIES |
The Company was not in default of its existing credit facility at October 31, 2009.
30
(a) Exhibits
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3.1 |
(a) |
|
Certificate of Incorporation of Streamline Health Solutions, Inc. (*) |
|
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3.1 |
(b) |
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Certificate of Incorporation of Streamline Health Solutions, Inc., amendment No. 1 (*) |
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3.2 |
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Bylaws of Streamline Health Solutions, Inc. (*) |
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11 |
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|
Computation of earnings (loss) per common share |
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31.1 |
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|
Certification of Chief Executive Officer pursuant to Rule 13a -14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as Amended |
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31.2 |
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|
Certification of Chief Financial Officer pursuant to Rule 13a -14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as Amended |
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|
|
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32.1 |
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Certification of the Chief Executive Officer Pursuant to
18 U.S.C. 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |
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|
|
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32.2 |
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Certification of the Chief Financial Officer Pursuant to
18 U.S.C. 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 |
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(*) |
|
Incorporated herein by reference from, the Registrants SEC filings.
(See INDEX TO EXHIBITS) |
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
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STREAMLINE HEALTH
SOLUTIONS, INC.
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DATE: December 10, 2009 |
By: |
/s/ J. Brian Patsy
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|
J. Brian Patsy |
|
|
|
Chief Executive Officer |
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|
DATE: December 10, 2009 |
By: |
/s/ Donald E. Vick, Jr.
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|
|
Donald E. Vick, Jr. |
|
|
|
Interim Chief Financial Officer |
|
32
INDEX TO EXHIBITS
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|
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Exhibit No. |
|
Exhibit |
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|
|
|
|
|
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. |
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|
|
|
|
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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. |
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|
|
|
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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. |
|
|
|
|
|
|
11 |
|
|
Computation of Earnings (Loss) Per Common Share |
|
|
|
|
|
|
31.1 |
|
|
Certification of Chief Executive Officer pursuant to Rule 13a
- -14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as Amended |
|
|
|
|
|
|
31.2 |
|
|
Certification of Chief Financial Officer pursuant to Rule 13a
- -14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as Amended |
|
|
|
|
|
|
32.1 |
|
|
Certification of the Chief Executive Officer Pursuant to
18 U.S.C. 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
32.2 |
|
|
Certification of the Chief Financial Officer Pursuant to
18 U.S.C. 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002 |
33
Exhibit 11
EXHIBIT 11
STREAMLINE HEALTH SOLUTIONS, INC.
Computation of (loss) per share
|
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Three Months |
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Nine Months |
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2009 |
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2008 |
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2009 |
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|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) |
|
$ |
(295,771 |
) |
|
$ |
14,575 |
|
|
$ |
(297,379 |
) |
|
$ |
(1,229,037 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares outstanding |
|
|
9,423,211 |
|
|
|
9,302,956 |
|
|
|
9,385,969 |
|
|
|
9,279,677 |
|
Stock options & purchase
plan: |
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|
|
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Total options & purchase
plan shares |
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|
|
|
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211,818 |
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|
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Restricted stock awards |
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|
|
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Assumed treasury stock
buyback |
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(172,644 |
) |
|
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Convertible redeemable
preferred stock assumed
converted |
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|
Number of shares used in per
common share computation |
|
|
9,423,211 |
|
|
|
9,342,130 |
|
|
|
9,385,969 |
|
|
|
9,279,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
Basic net ( loss ) per
share of common stock |
|
$ |
(0.03 |
) |
|
$ |
0.00 |
|
|
$ |
(0.03 |
) |
|
$ |
(0.13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net ( loss ) per
share of common stock |
|
$ |
(0.03 |
) |
|
$ |
0.00 |
|
|
$ |
(0.03 |
) |
|
$ |
(0.13 |
) |
|
|
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|
Exhibit 31.1
Exhibit 31.1
STREAMLINE HEALTH SOLUTIONS, INC.
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as Amended
I, J. Brian Patsy, certify that:
I have reviewed this quarterly report on Form 10-Q 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)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) 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;
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, 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;
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 change in the registrants internal control over financial reporting
that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely 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 control over financial reporting.
|
|
|
|
|
December 10, 2009 |
/s/ J. Brian Patsy
|
|
|
Chief Executive Officer and President |
|
|
|
|
Exhibit 31.2
EXHIBIT 31.2
STREAMLINE HEALTH SOLUTIONS, INC.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as Amended
I, Donald E. Vick, Jr., certify that:
I have reviewed this quarterly report on Form 10-Q 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)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) 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;
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, 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;
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 change in the registrants internal control over financial reporting
that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely 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 control over financial reporting.
|
|
|
|
|
December 10, 2009 |
/s/ Donald E. Vick, Jr.
|
|
|
Interim Chief Financial Officer |
|
|
|
|
Exhibit 32.1
EXHIBIT 32.1
STREAMLINE HEALTH SOLUTIONS, INC.
Certification of the Chief Executive Officer Pursuant to
18 U.S.C. 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
I, J. Brian Patsy, 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:
|
(1) |
|
The Quarterly Report on Form 10-Q of the Company for the quarter ended October 31, 2009
(the Report) fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m); and |
|
|
(2) |
|
The information contained in the Report fairly presents, in all material respects, the
financial condition, and results of operations of the Company. |
December 10, 2009
|
|
|
/s/ J. Brian Patsy
Chief Executive Officer and President
|
|
|
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.
Exhibit 32.2
EXHIBIT 32.2
STREAMLINE HEALTH SOLUTIONS, INC.
Certification of the Chief Financial Officer Pursuant to
18 U.S.C. 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
I, Donald E. Vick, Jr., Interim 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:
|
(3) |
|
The Quarterly Report on Form 10-Q of the Company for the quarter ended October 31, 2009
(the Report) fully complies with the requirements of section 13(a) or 15 (d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m); and |
|
|
(4) |
|
The information contained in the Report fairly presents, in all material respects, the
financial condition, and results of operations of the Company. |
December 10, 2009
|
|
|
/s/ Donald E. Vick, Jr.
Interim Chief Financial Officer
|
|
|
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.