Streamline Health® Reports Second Quarter 2017 Revenues Of $5.9 Million; ($1.1 Million) Net Loss; Adjusted EBITDA Of $0.5 Million

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

Six Months Ended

July 31,

July 31,

2017

2016

2017

2016

Revenues:

  Systems sales

$

328,692

$

1,364,771

$

707,415

$

1,876,038

  Professional services

571,812

548,080

991,847

1,238,695

  Audit Services

291,441

--

639,460

--

  Maintenance and support

3,278,562

3,732,488

6,633,334

7,488,041

  Software as a service

1,442,652

1,728,724

2,867,784

3,438,510

        Total revenues

5,916,159

7,374,063

11,839,840

14,041,284

Operating expenses:

  Cost of systems sales

596,799

671,631

1,162,850

1,417,115

  Cost of professional services

543,206

529,024

1,258,421

1,167,788

  Cost of Audit Services

391,439

--

832,078

--

  Cost of maintenance and support

768,140

835,353

1,574,662

1,693,171

  Cost of software as a service

285,832

455,370

625,208

939,613

  Selling, general and administrative

2,790,171

3,341,949

6,163,699

6,940,790

  Research and development

1,495,972

2,108,567

3,052,910

3,830,754

        Total operating expenses

6,871,559

7,941,894

14,669,828

15,989,231

Operating loss

(955,400)

(567,831)

(2,829,988)

(1,947,947)

Other expense (income):

  Interest expense

(120,377)

(120,014)

(247,645)

(282,026)

  Miscellaneous income (expenses)

(19,681)

(44,756)

(57,725)

21,466

Loss before income taxes

(1,095,458)

(732,601)

(3,135,358)

(2,208,507)

  Income tax benefit (expense)

(2,607)

(1,701)

(5,215)

(3,402)

Net loss

$

(1,098,065)

$

(734,302)

$

(3,140,573)

$

(2,211,909)

Less: deemed dividends on Series A
Preferred Shares

--

(418,506)

--

(803,225)

Net loss attributable to common
shareholders

$

(1,098,065)

$

(1,152,808)

$

(3,140,573)

$

(3,015,134)

Basic net loss per common share

$

$

(0.06)

$

(0.16)

$

(0.16)

Number of shares used in basic per
common share computation

19,791,805

19,765,125

19,393,547

Diluted net loss per common share

$

(0.06)

$

(0.06)

$

(0.16)

$

(0.16)

Number of shares used in diluted per
common share computation

19,834,859

19,791,805

19,765,125

19,393,547

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

Assets

July 31,

January 31,

2017

2017

Current assets:

  Cash and cash equivalents

$

2,916,459

$

5,654,093

  Accounts receivable, net of allowance for doubtful
    accounts of $286,084 and $198,449, respectively

4,621,331

4,489,789

  Contract receivables

69,625

466,423

  Prepaid hardware and third party software for
    future delivery

5,858

5,858

  Prepaid client maintenance contracts

710,309

595,633

  Other prepaid assets

861,300

732,496

  Other current assets

665

439

        Total current assets

9,185,547

11,944,731

Non-current assets:

  Property and equipment:

    Computer equipment

3,081,856

3,110,274

    Computer software

831,242

827,642

    Office furniture, fixtures and equipment

683,443

683,443

    Leasehold improvements

729,348

729,348

5,325,889

5,350,707

  Accumulated depreciation and amortization

(3,814,938)

(3,447,198)

  Property and equipment, net

1,510,951

1,903,509

 Capitalized software development costs, net of  
   accumulated amortization of $17,688,421 and  
   $16,544,797 respectively

4,285,069

4,584,245

 Intangible assets, net of accumulated amortization  
  of $6,473,451 and $5,807,338, respectively

6,330,485

6,996,599

 Goodwill

15,537,281

15,537,281

 Other

636,232

672,133

       Total non-current assets

28,300,018

29,693,767

$

37,485,565

$

41,638,498

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

Liabilities and Stockholders' Equity

July 31,

January 31,

2017

2017

Current liabilities:

  Accounts payable

$

1,566,454

$

1,116,525

  Accrued compensation

481,528

496,706

  Accrued other expenses

188,172

484,391

  Current portion of term loan

596,980

655,804

  Deferred revenues

9,298,192

9,916,454

  Current portion of capital lease obligations

23,188

91,337

        Total current liabilities

12,155,214

12,761,217

Non-current liabilities:

  Term loan, net of deferred financing cost of $181,477 and

    $199,211, respectively

4,164,381

4,883,286

  Warrants liability

360

46,191

  Royalty liability

2,423,602

2,350,754

  Lease incentive liability

311,585

339,676

 Deferred revenues, less current portion

363,910

568,515

        Total non-current liabilities

7,263,838

8,188,422

        Total liabilities

19,419,052

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, 19,962,672 and 19,695,391 shares issued and
    outstanding, respectively

199,627

196,954

  Additional paid in capital

81,183,325

80,667,771

  Accumulated deficit

(72,166,424)

(69,025,851)

        Total stockholders' equity

9,216,528

11,838,874

$

37,485,565

$

41,638,498

STREAMLINE HEALTH SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended July 31,

2017

2016

Operating activities:

  Net loss

$

(3,140,573)

$

(2,211,909)

  Adjustments to reconcile net loss to net cash

provided by (used in) operating activities:

Depreciation

403,090

630,706

Amortization of capitalized software development costs

1,143,624

1,425,962

Amortization of intangible assets

666,114

650,892

Amortization of other deferred costs

161,064

115,113

Valuation adjustment for warrants liability

(45,831)

(61,856)

Share-based compensation expense

555,229

909,411

Other valuation adjustments

86,192

83,937

    Loss on disposal of property and equipment

(720)

567

    Provision for accounts receivable

166,170

88,472

  Changes in assets and liabilities, net of assets acquired:

Accounts and contract receivables

99,086

357,774

Other assets

(333,401)

(214,327)

Accounts payable

449,929

(403,600)

Accrued expenses

(352,132)

(472,420)

Deferred revenues

(822,867)

(759,411)

  Net cash (used in) provided by operating activities

(965,026)

139,311

Investing activities:

Purchases of property and equipment

(9,812)

(60,518)

Capitalization of software development costs

(844,448)

(936,560)

  Net cash used in investing activities

(854,260)

(997,078)

Financing activities:

Principal repayments on term loan

(813,197)

(2,075,172)

Principal payments on capital lease obligation

(68,149)

(438,962)

Proceeds from exercise of stock options and stock purchase plan

--

14,793

Payments related to settlement of employee shared-based awards

(37,002)

(11,702)

  Net cash used in financing activities

(918,348)

(2,511,043)

Decrease in cash and cash equivalents

(2,737,634)

(3,368,810)

Cash and cash equivalents at beginning of period

5,654,093

9,882,136

Cash and cash equivalents at end of period

$

2,916,459

$

6,513,326

STREAMLINE HEALTH SOLUTIONS, INC.

Backlog

(Unaudited)

Table A

July 31,
2017

January 31,
2017

July 31,

2016

Company Proprietary Software

$

11,458,000

$

11,504,000

$

15,133,000

Third Party Hardware and Software

50,000

150,000

200,000

Professional Services

3,517,000

4,068,000

5,563,000

Audit Services

1,454,000

1,847,000

--

Maintenance and Support

16,583,000

19,193,000

19,569,000

Software as a Service

13,300,000

13,861,000

13,177,000

    Total

$

46,362,000

$

50,623,000

$

53,642,000

STREAMLINE HEALTH SOLUTIONS, INC.

New Bookings

 (Unaudited)

Table B

Three Months Ended

July 31, 2017

Value

Streamline Health Software licenses

$

59,000

5%

Software as a service

47,000

4%

Maintenance and support

122,000

11%

Audit Services

108,000

10%

Professional services

777,000

70%

Hardware & third party software

--

0%

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 severances and related restructuring expenses, associate inducements, professional and advisory fees, and internal direct costs incurred to complete transactions.

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

Adjusted EBITDA Reconciliation

Three Months Ended,

Six Months Ended,

July 31,
2017

July 31,
2016

July 31,
2017

July 31,
2016

Net loss

$

(1,098)

$

(734)

$

(3,134)

$

(2,212)

    Interest expense

120

120

248

282

    Income tax expense

3

2

5

3

    Depreciation

200

310

403

631

    Amortization of capitalized software 
development costs

572

710

1,144

1,426

    Amortization of intangible assets

333

325

666

651

    Amortization of other costs

43

36

126

80

EBITDA

173

769

(549)

861

    Share-based compensation expense

288

432

555

909

    (Gain) Loss on disposal of fixed assets

--

—

(1)

1

    Associate severances and other costs         
relating to transactions or corporate
restructuring

--

110

--

110

   Non-cash valuation adjustments to
assets and liabilities

23

14

40

22

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

--

236

--

255

Adjusted EBITDA

$

484

$

1,561

$

45

$

2,158

Adjusted EBITDA Margin⁽¹⁾

8%

21%

--%

15%

Adjusted EBITDA per diluted share

Loss per share – diluted

$

(0.06)

$

(0.06)

$

(0.16)

$

(0.16)

Adjusted EBITDA per adjusted diluted
share ⁽²⁾

$

0.02

$

0.07

$

--

$

0.10

Diluted weighted average shares

19,834,859

19,791,805

19,765,125

19,393,547

    Includable incremental shares —
adjusted EBITDA ⁽³⁾

3,378,484

3,376,285

3,322,319

3,313,870

Adjusted diluted shares

23,213,343

23,168,090

23,087,444

22,707,417

(1)

Adjusted EBITDA as a percentage of GAAP revenues.

(2)

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

(3)

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