Streamline Health® Reports Third Quarter 2017 Revenues of $6.4 Million; Breakeven Net Income; Adjusted EBITDA of $1.5 Million

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

Nine Months Ended

October 31,

October 31

2017

2016

2017

2016

Revenues:

  Systems sales

$

348,526

$

314,218

$

1,055,941

$

2,190,256

  Professional services

801,771

630,961

1,793,618

1,869,656

  Audit Services

280,025

234,347

919,485

234,347

  Maintenance and support

3,250,229

3,749,596

9,883,563

11,237,637

  Software as a service

1,718,748

1,706,366

4,586,532

5,144,876

        Total revenues

6,399,299

6,635,488

18,239,139

20,676,772

Operating expenses:

  Cost of systems sales

434,138

663,148

1,596,988

2,080,263

  Cost of professional services

555,815

723,358

1,814,236

1,891,146

  Cost of Audit Services

404,280

595,575

1,236,358

595,575

  Cost of maintenance and support

667,307

790,291

2,241,969

2,483,462

  Cost of software as a service

289,503

450,695

914,711

1,390,308

  Selling, general and administrative

2,819,549

3,212,350

8,983,248

10,153,140

  Research and development

932,251

1,969,415

3,985,161

5,800,169

        Total operating expenses

6,102,843

8,404,832

20,772,671

24,394,063

Operating income (loss)

296,456

(1,769,344)

(2,533,532)

(3,717,291)

Other expense:

  Interest expense

(113,078)

(98,871)

(360,723)

(380,897)

  Miscellaneous expense

(177,282)

(60,555)

(235,007)

(39,089)

Earnings (loss) before income taxes

6,096

(1,928,770)

(3,129,262)

(4,137,277)

  Income tax benefit (expense)

(2,607)

(1,702)

(7,822)

(5,104)

Net earnings (loss)

$

3,489

$

(1,930,472)

$

(3,137,084)

$

(4,142,381)

Less: deemed dividends on Series A
Preferred Shares

--

(72,710)

--

(875,935)

Net loss attributable to common
shareholders

$

3,489

$

(2,003,182)

$

(3,137,084)

$

(5,018,316)

Basic net loss per common share

$

$

(0.10)

$

(0.16)

$

(0.26)

Number of shares used in basic per
common share computation

19,645,521

19,838,691

19,477,538

Diluted net loss per common share

$

--

$

(0.10)

$

(0.16)

$

(0.26)

Number of shares used in diluted per
common share computation

23,068,423

19,645,521

19,838,691

19,477,538

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

Assets

October 31,

January 31,

2017

2017

Current assets:

  Cash and cash equivalents

$

1,892,182

$

5,654,093

  Accounts receivable, net of allowance for doubtful
    accounts of $301,773 and $198,449, respectively

2,532,941

4,489,789

  Contract receivables

283,973

466,423

  Prepaid hardware and third party software for
    future delivery

5,858

5,858

  Prepaid client maintenance contracts

587,960

595,633

  Other prepaid assets

837,649

732,496

  Other current assets

392,449

439

        Total current assets

6,533,012

11,944,731

Non-current assets:

  Property and equipment:

    Computer equipment

2,971,361

3,110,274

    Computer software

725,700

827,642

    Office furniture, fixtures and equipment

683,443

683,443

    Leasehold improvements

729,348

729,348

5,109,852

5,350,707

  Accumulated depreciation and amortization

(3,762,821)

(3,447,198)

  Property and equipment, net

1,347,031

1,903,509

 Capitalized software development costs, net of  
   accumulated amortization of $18,119,290 and  
   $16,544,797 respectively

4,346,694

4,584,245

 Intangible assets, net of accumulated amortization  
  of $6,729,799 and $5,807,338, respectively

6,074,137

6,996,599

 Goodwill

15,537,281

15,537,281

 Other

677,319

672,133

       Total non-current assets

27,982,462

29,693,767

$

34,515,474

$

41,638,498

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

Liabilities and Stockholders' Equity

October 31,

January 31,

2017

2017

Current liabilities:

  Accounts payable

$

807,778

$

1,116,525

  Accrued compensation

593,510

496,706

  Accrued other expenses

587,209

484,391

  Current portion of term loan

596,984

655,804

  Deferred revenues

6,130,259

9,916,454

  Current portion of capital lease obligations

--

91,337

        Total current liabilities

8,715,740

12,761,217

Non-current liabilities:

  Term loan, net of deferred financing cost of $146,009 and

    $199,211, respectively

4,032,865

4,883,286

  Warrants liability

150,857

46,191

  Royalty liability

2,456,233

2,350,754

  Lease incentive liability

293,322

339,676

 Deferred revenues, less current portion

487,832

568,515

        Total non-current liabilities

7,421,109

8,188,422

        Total liabilities

16,136,849

20,949,639

Series A 0% Convertible Redeemable Preferred stock, $.01 par
value per share, $8,849,985 redemption value, 4,000,000 shares
authorized, 2,949,995 issued and outstanding, net of unamortized
preferred stock discount of $0

8,849,985

8,849,985

Stockholders' equity:

  Common stock, $.01 par value per share, 45,000,000 shares
    authorized, 19,984,743 and 19,695,391 shares issued and
    outstanding, respectively

199,847

196,954

  Additional paid in capital

81,491,728

80,667,771

  Accumulated deficit

(72,162,935)

(69,025,851)

        Total stockholders' equity

9,528,640

11,838,874

$

34,515,474

$

41,638,498

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended
October 31,

2017

2016

Operating activities:

  Net loss

$

(3,137,084)

$

(4,142,381)

  Adjustments to reconcile net loss to net cash

     provided by (used in) operating activities:

Depreciation

595,866

895,438

Amortization of capitalized software development costs

1,574,493

2,146,374

Amortization of intangible assets

922,462

976,338

Amortization of other deferred costs

229,780

192,947

Valuation adjustment for warrants liability

104,666

(36,875)

Share-based compensation expense

844,960

1,342,513

Other valuation adjustments

124,423

120,912

    (Gain) Loss on disposal of property and equipment

(14,871)

567

    Provision for accounts receivable

181,859

136,693

  Changes in assets and liabilities, net of assets acquired:

Accounts and contract receivables

1,957,439

1,679,810

Other assets

(671,254)

130,875

Accounts payable

(308,747)

(78,320)

Accrued expenses

134,324

(814,707)

Deferred revenues

(3,866,878)

(3,793,603)

  Net cash used in operating activities

(1,328,562)

(1,243,419)

Investing activities:

Purchases of property and equipment

(24,517)

(501,148)

Capitalization of software development costs

(1,336,942)

(1,420,678)

Payment for acquisition, net of cash received

--

(1,400,000)

  Net cash used in investing activities

(1,361,459)

(3,321,826)

Financing activities:

Principal repayments on term loan

(962,443)

(2,243,624)

Principal payments on capital lease obligation

(91,337)

(535,896)

Proceeds from exercise of stock options and stock purchase plan

23,703

14,793

Payments related to settlement of employee shared-based awards

(41,813)

(11,702)

  Net cash used in financing activities

(1,071,890)

(2,766,429)

Net decrease in cash and cash equivalents

(3,761,911)

(7,341,674)

Cash and cash equivalents at beginning of period

5,654,093

9,882,136

Cash and cash equivalents at end of period

$

1,892,182

$

2,540,462

STREAMLINE HEALTH SOLUTIONS, INC.

Backlog

(Unaudited)

Table A

October 31,
2017

January 31,
2017

October 31,

2016

Company Proprietary Software

$

10,892,000

$

11,504,000

$

15,551,000

Third Party Hardware and Software

--

150,000

200,000

Professional Services

2,824,000

4,068,000

4,973,000

Audit Services

1,454,000

1,847,000

1,849,000

Maintenance and Support

18,256,000

19,193,000

19,413,000

Software as a Service

14,242,000

13,861,000

12,929,000

    Total

$

47,668,000

$

50,623,000

$

54,915,000

STREAMLINE HEALTH SOLUTIONS, INC.

New Bookings

 (Unaudited)

Table B

Three Months Ended

October 31, 2017

Value

Streamline Health Software licenses

$

94,000

5%

Software as a service

1,505,000

78%

Maintenance and support

79,000

4%

Professional services

197,000

10%

Audit services

57,000

3%

Total bookings

$

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

Table C

This press release contains a non-GAAP financial measure under the rules of the U.S. Securities and Exchange Commission for adjusted EBITDA. This non-GAAP information supplements and is not intended to represent a measure of performance in accordance with disclosures required by generally accepted accounting principles. Non-GAAP financial measures are used internally to manage the business, such as in establishing an annual operating budget. Non-GAAP financial measures are used by Streamline Health's management in its operating and financial decision-making because management believes these measures reflect ongoing business in a manner that allows meaningful period-to-period comparisons. Accordingly, the Company believes it is useful for investors and others to review both GAAP and non-GAAP measures in order to (a) understand and evaluate current operating performance and future prospects in the same manner as management does and (b) compare in a consistent manner the Company's current financial results with past financial results. The primary limitations associated with the use of non-GAAP financial measures are that these measures may not be directly comparable to the amounts reported by other companies and they do not include all items of income and expense that affect operations. The Company's management compensates for these limitations by considering the Company's financial results and outlook as determined in accordance with GAAP and by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in the tables attached to this press release. Streamline Health defines "adjusted EBITDA" as net earnings (loss) plus interest expense, tax expense, depreciation and amortization expense of tangible and intangible assets, stock-based compensation expense, significant non-recurring operating expenses, and transactional related expenses including: gains and losses on debt and equity conversions, associate severance and related restructuring expenses, associate inducements, professional and advisory fees, and internal direct costs incurred to complete transactions.

Reconciliation of net income (loss) to non-GAAP adjusted EBITDA (in thousands)

Adjusted EBITDA Reconciliation

Three Months Ended,

Nine Months Ended,

October 31,
2017

October 31,
2016

October 31,
2017

October 31,
2016

Net income (loss)

$

3

$

(1,930)

$

(3,137)

$

(4,142)

    Interest expense

113

99

361

381

    Income tax expense

3

2

8

5

    Depreciation

193

265

596

895

    Amortization of capitalized software  development costs

431

720

1,574

2,146

    Amortization of intangible assets

256

325

922

976

    Amortization of other costs

51

60

177

140

EBITDA

1,050

(459)

501

401

    Share-based compensation expense

290

433

845

1,343

    (Gain) Loss on disposal of fixed assets

(14)

--

(15)

1

    Associate severance and other costs 
relating to transactions or corporate
restructuring

--

89

--

199

   Non-cash valuation adjustments to assets and liabilities

188

62

229

84

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

--

103

--

358

Adjusted EBITDA

$

1,514

$

228

$

1,560

$

2,386

Adjusted EBITDA Margin⁽¹⁾

24%

3%

9%

12%

Adjusted EBITDA per diluted share

Loss per share – diluted

$

--

$

(0.10)

$

(0.16)

$

(0.26)

Adjusted EBITDA per adjusted diluted share ⁽²⁾

$

0.07

$

0.01

$

0.07

$

0.10

Diluted weighted average shares

23,068,423

19,645,521

19,838,691

19,477,538

    Includable incremental shares — adjusted EBITDA ⁽³⁾

--

3,340,390

3,242,413

3,322,710

Adjusted diluted shares

23,068,423

22,985,911

23,081,104

22,800,248

Adjusted EBITDA as a percentage of GAAP revenues.

(2)

Adjusted EBITDA per adjusted diluted share for the Company's common stock is computed using the more dilutive of the two-class method or the if-converted method.

(3)

The number of incremental shares that would be dilutive under profit assumption, only applicable under a GAAP net loss. If GAAP profit is earned in the current period, no additional incremental shares are assumed.