Attached files
| file | filename |
|---|---|
| EX-99.3 - EXHIBIT 99.3 - STREAMLINE HEALTH SOLUTIONS INC. | tm2010900d1_ex99-3.htm |
| EX-99.2 - EXHIBIT 99.2 - STREAMLINE HEALTH SOLUTIONS INC. | tm2010900d1_ex99-2.htm |
| 8-K - FORM 8-K - STREAMLINE HEALTH SOLUTIONS INC. | tm2010900-1_8k.htm |
Exhibit 99.1
STREAMLINE HEALTH SOLUTIONS, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial data gives effect to the sale of the ECM Business. The unaudited pro forma balance sheet as of October 31, 2019 has been prepared assuming the sale of the ECM Business was consummated as of that date. The unaudited pro forma statements of operations for the nine months ended October 31, 2019, the twelve months ended January 31, 2019 and the twelve months ended January 31, 2018, have been prepared in accordance with the SEC’s pro forma rules under S-X Article 11 assuming that the sale of the ECM Business occurred as of February 1, 2017, the first day of the first year presented. All material adjustments required to reflect the consummation of the sale of the ECM Business are set forth in the columns labeled “Pro Forma Adjustments.” The data contained in the columns labeled “Streamline Health Solutions, Inc. As Reported”, is derived from the Company’s historical unaudited consolidated balance sheet as of October 31, 2019 and consolidated statements of operations for the nine months ended October 31, 2019, the twelve months ended January 31, 2019 and the twelve months ended January 31, 2018. The unaudited pro forma financial data is presented for informational purposes only and is not necessarily indicative of the results of future operations or future financial position of the Company or the actual results of operations or financial position that would have occurred had the sale of the ECM Business been consummated as of the dates indicated above.
The pro forma adjustments were based upon available information at the date of this filing and upon certain assumptions as described in the notes to the unaudited pro forma condensed financial statements that our management believes are reasonable under the circumstances.
The unaudited pro forma financial statements and accompanying notes should be read in conjunction with our historical financial statements and accompanying notes thereto, and our “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in our Quarterly Report on Form 10-Q for the nine months ended October 31, 2019 and Annual Report on Form 10-K for the year ended January 31, 2019 and January 31, 2018.
STREAMLINE HEALTH SOLUTIONS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(rounded to the nearest thousand dollars, except share information)
(Unaudited)
| As of | ||||||||||||||||
| October 31, 2019 | Disposition of | Pro Forma | As | |||||||||||||
| As Reported | ECM Business | Adjustments | Adjusted | |||||||||||||
| ASSETS | (Note 2) | |||||||||||||||
| Current assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 1,220,000 | $ | - | $ | 6,500,000 | $ | 7,720,000 | ||||||||
| Accounts receivable, net | 2,214,000 | (454,000 | ) | - | 1,760,000 | |||||||||||
| Contract receivables | 704,000 | (65,000 | ) | - | 639,000 | |||||||||||
| Prepaid and other current assets | 1,285,000 | (534,000 | ) | - | 751,000 | |||||||||||
| Total current assets | 5,423,000 | (1,053,000 | ) | 6,500,000 | 10,870,000 | |||||||||||
| Non-current assets: | ||||||||||||||||
| Property and equipment, net | 175,000 | (68,000 | ) | - | 107,000 | |||||||||||
| Contract receivables, less current portion | 355,000 | - | - | 355,000 | ||||||||||||
| Capitalized software development costs, net | 7,785,000 | (2,002,000 | ) | - | 5,783,000 | |||||||||||
| Intangible assets, net | 1,245,000 | - | - | 1,245,000 | ||||||||||||
| Goodwill | 15,537,000 | (4,928,000 | ) | - | 10,609,000 | |||||||||||
| Other | 756,000 | (12,000 | ) | 800,000 | 1,544,000 | |||||||||||
| Total non-current assets | 25,853,000 | (7,010,000 | ) | 800,000 | 19,643,000 | |||||||||||
| Total assets | $ | 31,276,000 | $ | (8,063,000 | ) | $ | 7,300,000 | $ | 30,513,000 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Accounts payable | $ | 629,000 | $ | (121,000 | ) | $ | - | $ | 508,000 | |||||||
| Accrued expenses | 1,407,000 | (89,000 | ) | - | 1,318,000 | |||||||||||
| Current portion of term loan | 3,472,000 | - | (3,472,000 | ) | - | |||||||||||
| Deferred revenues | 6,310,000 | (3,469,000 | ) | - | 2,841,000 | |||||||||||
| Royalty liability | 953,000 | - | - | 953,000 | ||||||||||||
| Other | 94,000 | (22,000 | ) | - | 72,000 | |||||||||||
| Total current liabilities | 12,865,000 | (3,701,000 | ) | (3,472,000 | ) | 5,692,000 | ||||||||||
| Non-current liabilities: | ||||||||||||||||
| Deferred revenues, less current portion | 123,000 | (92,000 | ) | - | 31,000 | |||||||||||
| Other | 19,000 | (18,000 | ) | - | 1,000 | |||||||||||
| Total non-current liabilities | 142,000 | (110,000 | ) | - | 32,000 | |||||||||||
| Total liabilities | 13,007,000 | (3,811,000 | ) | (3,472,000 | ) | 5,724,000 | ||||||||||
| Common stock | 308,000 | - | - | 308,000 | ||||||||||||
| Additional paid in capital | 94,970,000 | - | - | 94,970,000 | ||||||||||||
| Accumulated deficit | (77,009,000 | ) | (4,252,000 | ) | 10,772,000 | (70,489,000 | ) | |||||||||
| Total stockholders’ equity | 18,269,000 | (4,252,000 | ) | 10,772,000 | 24,789,000 | |||||||||||
| Total liabilities and stockholders’ equity | $ | 31,276,000 | $ | (8,063,000 | ) | $ | 7,300,000 | $ | 30,513,000 | |||||||
STREAMLINE HEALTH SOLUTIONS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(rounded to the nearest thousand dollars, except share information)
(Unaudited)
| Nine Months | Fiscal Year | Fiscal Year | ||||||||||||||||||||||||||||||||||
| Ended | Ended | Ended | ||||||||||||||||||||||||||||||||||
| October 31, 2019 | Pro Forma | As | January 31, 2019 | Pro Forma | As | January 31, 2018 | Pro Forma | As | ||||||||||||||||||||||||||||
| As Reported | Adjustments | Adjusted | As Reported | Adjustments | Adjusted | As Reported | Adjustments | Adjusted | ||||||||||||||||||||||||||||
| (Note 1) | (Note 2) | (Note 2) | (Note 2) | |||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||
| System sales | $ | 1,046,000 | $ | (78,000 | ) | $ | 968,000 | $ | 2,472,000 | $ | (662,000 | ) | $ | 1,810,000 | $ | 1,343,000 | $ | (166,000 | ) | $ | 1,177,000 | |||||||||||||||
| Professional services | 1,615,000 | (513,000 | ) | 1,102,000 | 1,336,000 | (468,000 | ) | 868,000 | 2,744,000 | (982,000 | ) | 1,762,000 | ||||||||||||||||||||||||
| Audit Services | 1,266,000 | - | 1,266,000 | 1,118,000 | - | 1,118,000 | 1,216,000 | - | 1,216,000 | |||||||||||||||||||||||||||
| Maintenance and support | 8,537,000 | (4,507,000 | ) | 4,030,000 | 12,586,000 | (5,965,000 | ) | 6,621,000 | 13,171,000 | (6,506,000 | ) | 6,665,000 | ||||||||||||||||||||||||
| Software as a service | 3,474,000 | (1,636,000 | ) | 1,838,000 | 4,853,000 | (2,632,000 | ) | 2,221,000 | 5,864,000 | (2,759,000 | ) | 3,105,000 | ||||||||||||||||||||||||
| Total revenues | 15,938,000 | (6,734,000 | ) | 9,204,000 | 22,365,000 | (9,727,000 | ) | 12,638,000 | 24,338,000 | (10,413,000 | ) | 13,925,000 | ||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||||
| Cost of system sales | 391,000 | 227,000 | 618,000 | 942,000 | (852,000 | ) | 90,000 | 1,946,000 | (904,000 | ) | 1,042,000 | |||||||||||||||||||||||||
| Cost of professional services | 1,616,000 | (354,000 | ) | 1,262,000 | 2,657,000 | (593,000 | ) | 2,064,000 | 2,401,000 | (909,000 | ) | 1,492,000 | ||||||||||||||||||||||||
| Cost of audit services | 949,000 | - | 949,000 | 1,373,000 | - | 1,373,000 | 1,604,000 | - | 1,604,000 | |||||||||||||||||||||||||||
| Cost of maintenance and support | 1,275,000 | (731,000 | ) | 544,000 | 2,173,000 | (1,179,000 | ) | 994,000 | 2,904,000 | (1,084,000 | ) | 1,820,000 | ||||||||||||||||||||||||
| Cost of software as a service | 936,000 | (464,000 | ) | 472,000 | 992,000 | (947,000 | ) | 45,000 | 1,319,000 | (1,302,000 | ) | 17,000 | ||||||||||||||||||||||||
| Selling, general and administrative expense | 7,745,000 | (191,000 | ) | 7,554,000 | 10,554,000 | (235,000 | ) | 10,319,000 | 11,434,000 | (375,000 | ) | 11,059,000 | ||||||||||||||||||||||||
| Research and development | 2,385,000 | (634,000 | ) | 1,751,000 | 4,261,000 | (317,000 | ) | 3,944,000 | 5,352,000 | (629,000 | ) | 4,723,000 | ||||||||||||||||||||||||
| Executive transition cost | 621,000 | - | 621,000 | 3,681,000 | - | 3,681,000 | - | - | - | |||||||||||||||||||||||||||
| Loss on exit of operating lease | - | - | - | 1,034,000 | - | 1,034,000 | - | - | - | |||||||||||||||||||||||||||
| Total operating expenses | 15,918,000 | (2,147,000 | ) | 13,771,000 | 27,667,000 | (4,379,000 | ) | 23,544,000 | 26,960,000 | (5,203,000 | ) | 21,757,000 | ||||||||||||||||||||||||
| Operating (loss) income | 20,000 | (4,587,000 | ) | (4,567,000 | ) | (5,302,000 | ) | (5,348,000 | ) | (10,906,000 | ) | (2,622,000 | ) | (5,210,000 | ) | (7,832,000 | ) | |||||||||||||||||||
| Other expense: | ||||||||||||||||||||||||||||||||||||
| Interest expense | (239,000 | ) | (239,000 | ) | (384,000 | ) | - | (384,000 | ) | (474,000 | ) | - | (474,000 | ) | ||||||||||||||||||||||
| Miscellaneous expense | (224,000 | ) | 25,000 | (199,000 | ) | (179,000 | ) | 7,000 | (172,000 | ) | (87,000 | ) | (14,000 | ) | (101,000 | ) | ||||||||||||||||||||
| Loss before income taxes | (443,000 | ) | (4,562,000 | ) | (5,005,000 | ) | (5,865,000 | ) | (5,341,000 | ) | (11,462,000 | ) | (3,183,000 | ) | (5,224,000 | ) | (8,407,000 | ) | ||||||||||||||||||
| Income tax expense | (16,000 | ) | - | (16,000 | ) | - | - | - | 84,000 | 84,000 | ||||||||||||||||||||||||||
| Net loss | (459,000 | ) | (4,562,000 | ) | (5,021,000 | ) | (5,865,000 | ) | (5,341,000 | ) | (11,462,000 | ) | (3,099,000 | ) | (5,224,000 | ) | (8,323,000 | ) | ||||||||||||||||||
| Add: Redemption of Series A Preferred Stock | 4,894,000 | - | 4,894,000 | - | - | - | - | - | ||||||||||||||||||||||||||||
| Net income (loss) attributable to common shareholders | $ | 4,435,000 | $ | (4,562,000 | ) | $ | (127,000 | ) | $ | (5,865,000 | ) | $ | (5,341,000 | ) | $ | (11,462,000 | ) | $ | (3,099,000 | ) | $ | (5,224,000 | ) | $ | (8,323,000 | ) | ||||||||||
| Net loss per common share – basic | $ | 0.22 | $ | (0.01 | ) | $ | (0.30 | ) | $ | (0.59 | ) | $ | (0.16 | ) | $ | (0.44 | ) | |||||||||||||||||||
| Weighted average number of common shares – basic | 20,435,055 | 20,435,055 | 19,540,980 | 19,540,980 | 19,090,899 | 19,090,899 | ||||||||||||||||||||||||||||||
| Net loss per common share – diluted | $ | (0.02 | ) | $ | (0.25 | ) | $ | (0.30 | ) | $ | (0.59 | ) | $ | (0.16 | ) | $ | (0.44 | ) | ||||||||||||||||||
| Weighted average number of common shares – diluted | 20,435,055 | 20,435,055 | 19,540,980 | 19,540,980 | 19,090,899 | 19,090,899 | ||||||||||||||||||||||||||||||
STREAMLINE HEALTH SOLUTIONS, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(rounded to the nearest thousand dollars)
(Unaudited)
| NOTE 1. | Basis of Pro Forma Presentation |
On December 17, 2019, Streamline Health Solutions, Inc. (the “Company”) entered into an agreement with respect to the sale of its Enterprise Content Management assets and operations (the “ECM Business”) to Hyland Software, Inc. (“Hyland”). The unaudited pro forma consolidated statements of operations for the nine months ended October 31, 2019, the twelve months ended January 31, 2019 and the twelve months ended January 31, 2018, have been prepared in accordance with the SEC’s pro forma rules under S-X Article 11 assuming that the sale of the ECM Business occurred as of February 1, 2017, the first day of the first year presented. The unaudited pro forma balance sheet as of October 31, 2019 has been prepared assuming the sale of the ECM Business was consummated as of that date. All material adjustments required to reflect the consummation of the sale of the ECM Business are set forth in the columns labeled “Pro Forma Adjustments.” The data contained in the columns labeled “As Reported”, is derived from the Company’s historical unaudited balance sheet as of October 31, 2019 and consolidated statements of operations for the nine months ended October 31, 2019, the twelve months ended January 31, 2019 and the twelve months ended January 31, 2018.
The historical unaudited consolidated balance sheet as of October 31, 2019 reflects the reported assets, liabilities, and stockholders’ equity of the Company with the proposed sale of assets by the Company, consisting principally of our ECM Business, referred to as the “Purchased Assets”.
Immaterial Correction of Errors
In connection with the preparation of the Company’s financial statements for the third quarter ended October 31, 2019, the Company discovered certain errors in “Capitalized software development costs” and related amortization expense for previous periods. The errors resulted from (i) assets that did not begin to be amortized timely, and (ii) an incorrect method of amortizing the assets.
The assets that did not begin amortizing timely resulted from an administrative error, while the incorrect method of amortization was related to a misapplication of GAAP. Certain general release documentation was not prepared timely, and distributed, and, accordingly, the Company did not place certain enhancements into service and begin amortization.
Further, the Company has corrected its underlying financial records to utilize the “carry-over” method for amortizing capitalized software development cost. Under the “carry-over” method, the costs of the enhancements are added to the unamortized costs of the previous version of the product and the combined amount is amortized over the remaining useful life of the product. Including unamortized cost of the original product with the cost of the enhancement for purposes of applying the net realizable value test and amortization provisions is consistent with accounting guidance for software companies that improve their software and discontinue selling or marketing the older versions. While this method reduced amortization of the underlying assets, the Company’s evaluation of the net book value of the underlying software development assets in relation to net realizable value and future cash flows each period ensured the carrying value was not in excess of the net realizable value of a solution for any period. Further, in accordance with guidance for software companies under ASC 985, the Company ensures that amortization is the greater of (i) the ratio of the software product’s current gross revenues to the total of current and expected gross revenues or (ii) straight-line over the remaining useful economic life of the software. The Company continues to monitor its estimated useful life on the underlying products, taking into consideration the product, the market and the industry.
The two corrections relating to the amortization of capitalized software development costs off-set one another in certain previous periods. Additionally, the differences between (i) the amounts calculated, as adjusted for these corrections, and (ii) the amount recorded in previous periods substantially self-corrected by the end of the third quarter, October 31, 2019.
The Company, in consultation with the Audit Committee of the Board of Directors, evaluated the effect of these adjustments on the Company’s financial statements under Accounting Standards Codification (“ASC”) 250: Accounting Changes and Error Corrections and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements and determined it was not necessary to restate its previously issued financial statements, or unaudited interim period financial statements, because the errors did not materially misstate any previously issued financial statements and the correction of the errors in the current fiscal year is also not material. The Company looked at both quantitative and qualitative characteristics of the required corrections.
The net impact of these errors resulted in a $214,000 and $532,000 understatement of amortization expense for capitalized software development costs for the three- and nine-month periods ended October 31, 2019, respectively. The Company’s previously reported amortization expense for capitalized software development costs was misstated by the following amounts:
| Overstatement / | ||||
| (Understatement) of | ||||
| Period | Amortization Expense | |||
| Prior to fiscal year ended January 31, 2019 | $ | 532,000 | ||
| Three months ended April 30, 2019 | $ | (153,000 | ) | |
| Three months ended July 31, 2019 | $ | (165,000 | ) | |
| NOTE 2. | Adjustments to Unaudited Pro Forma Consolidated Balance Sheet |
| (a) | To record as of October 31, 2019 (i) the expected net proceeds received from the sale of the ECM Business: |
| Gross consideration from the sale of ECM Business | $ | 16,000,000 | ||
| Customer Prepaid Maintenance | (3,228,000 | ) | ||
| Estimated closing and transaction costs | (2,000,000 | ) | ||
| Term loan payoff | (3,472,000 | ) | ||
| Expected net proceeds from sale of assets | 7,300,000 | |||
| Less: Escrow Funds | (800,000 | ) | ||
| Pro forma net cash proceeds from sale of assets | $ | 6,500,000 |
| (b) | To eliminate the operating activity related to the Purchased Assets which includes, revenue, cost of revenues and operating expenses: |
| Nine Months | Twelve Months | Twelve Months | ||||||||||
| Ended | Ended | Ended | ||||||||||
| October 31, 2019 | January 31, 2019 | January 31, 2018 | ||||||||||
| Revenues: | ||||||||||||
| System sales | $ | 78,000 | $ | 662,000 | $ | 166,000 | ||||||
| Professional services | 513,000 | 468,000 | 982,000 | |||||||||
| Maintenance and support | 4,507,000 | 5,965,000 | 6,506,000 | |||||||||
| Software as a service | 1,636,000 | 2,632,000 | 2,759,000 | |||||||||
| Total revenues | 6,734,000 | 9,727,000 | 10,413,000 | |||||||||
| Operating expenses: | ||||||||||||
| Cost of system sales | (227,000 | ) | 852,000 | 904,000 | ||||||||
| Cost of professional services | 354,000 | 593,000 | 909,000 | |||||||||
| Cost of maintenance and support | 731,000 | 1,179,000 | 1,084,000 | |||||||||
| Cost of software as a service | 464,000 | 947,000 | 1,302,000 | |||||||||
| Selling, general and administrative expense | 191,000 | 235,000 | 375,000 | |||||||||
| Research and development | 634,000 | 317,000 | 629,000 | |||||||||
| Total operating expenses | 2,147,000 | 4,123,000 | 5,203,000 | |||||||||
| Operating income | 4,587,000 | 5,604,000 | 5,210,000 | |||||||||
| Other expense: | ||||||||||||
| Miscellaneous (expense) income | (25,000 | ) | (7,000 | ) | 14,000 | |||||||
| Income before income taxes | 4,562,000 | 5,597,000 | 5,224,000 | |||||||||
| Income tax expense | - | - | - | |||||||||
| Net income | $ | 4,562,000 | $ | 5,597,000 | $ | 5,224,000 | ||||||