x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 31-1455414 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company x | |||
(Do not check if a smaller reporting company) | ||||||
Emerging growth company ¨ |
• | competitive products and pricing; |
• | product demand and market acceptance; |
• | entry into new markets; |
• | new product and services development and commercialization; |
• | key strategic alliances with vendors and channel partners that resell our products; |
• | uncertainty in continued relationships with clients due to termination rights; |
• | our ability to control costs; |
• | availability, quality and security of products produced and services provided by third-party vendors; |
• | the healthcare regulatory environment; |
• | potential changes in legislation, regulation and government funding affecting the healthcare industry; |
• | healthcare information systems budgets; |
• | availability of healthcare information systems trained personnel for implementation of new systems, as well as maintenance of legacy systems; |
• | the success of our relationships with channel partners; |
• | fluctuations in operating results; |
• | critical accounting policies and judgments; |
• | changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other standard-setting organizations; |
• | changes in economic, business and market conditions impacting the healthcare industry and the markets in which we operate; and |
• | our ability to maintain compliance with the terms of our credit facilities. |
• | the potential failure to achieve the expected benefits of the acquisition, including the inability to generate sufficient revenue to offset acquisition costs, or the inability to achieve expected synergies or cost savings; |
• | unanticipated expenses related to acquired businesses or technologies and their integration into our existing businesses or technology; |
• | the diversion of financial, managerial and other resources from existing operations; |
• | the risks of entering into new markets in which we have little or no experience or where competitors may have stronger positions; |
• | potential write-offs or amortization of acquired assets or investments; |
• | the potential loss of key employees, clients or partners of an acquired business; |
• | delays in client purchases due to uncertainty related to any acquisition; |
• | potential unknown liabilities associated with an acquisition; and |
• | the tax effects of any such acquisitions. |
• | General economic and market conditions; |
• | Actual or anticipated variations in annual or quarterly operating results; |
• | Lack of or negative research coverage by securities analysts; |
• | Conditions or trends in the healthcare information technology industry; |
• | Changes in the market valuations of other companies in our industry; |
• | Announcements by us or our competitors of significant acquisitions, strategic partnerships, divestitures, joint ventures or other strategic initiatives; |
• | Announced or anticipated capital commitments; |
• | Ability to maintain listing of our common stock on The Nasdaq Stock Market; |
• | Additions or departures of key personnel; and |
• | Sales and repurchases of our common stock by us, our officers and directors or our significant stockholders, if any. |
Location | Area (Sq. Feet) | Principal Business Function | End of Term | Renewal Option | ||||
Atlanta, GA | 24,335 | Corporate Office | November 30, 2022 | None | ||||
New York, NY | 10,350 | Satellite Office | November 29, 2019 | None |
Fiscal Year 2017 | High | Low | |||||
4th Quarter (November 1, 2017 through January 31, 2018) | $ | 1.85 | $ | 1.25 | |||
3rd Quarter (August 1, 2017 through October 31, 2017) | 2.69 | 0.97 | |||||
2nd Quarter (May 1, 2017 through July 31, 2017) | 1.45 | 0.99 | |||||
1st Quarter (February 1, 2017 through April 30, 2017) | 1.48 | 0.93 |
Fiscal Year 2016 | High | Low | |||||
4th Quarter (November 1, 2016 through January 31, 2017) | $ | 1.84 | $ | 1.20 | |||
3rd Quarter (August 1, 2016 through October 31, 2016) | 2.11 | 1.36 | |||||
2nd Quarter (May 1, 2016 through July 31, 2016) | 1.78 | 1.08 | |||||
1st Quarter (February 1, 2016 through April 30, 2016) | 1.82 | 1.15 |
2018 | 2017 | $ Change | % Change | |||||||||||
System sales | $ | 1,343 | $ | 2,513 | $ | (1,170 | ) | (47 | )% | |||||
Professional services | 2,744 | 2,396 | 348 | 15 | % | |||||||||
Audit services | 1,216 | 628 | 588 | 94 | % | |||||||||
Maintenance and support | 13,171 | 14,810 | (1,639 | ) | (11 | )% | ||||||||
Software as a service | 5,864 | 6,713 | (849 | ) | (13 | )% | ||||||||
Total revenues | 24,338 | 27,060 | (2,722 | ) | (10 | )% | ||||||||
Cost of sales | 10,174 | 11,527 | (1,353 | ) | (12 | )% | ||||||||
Selling, general and administrative | 11,434 | 13,088 | (1,654 | ) | (13 | )% | ||||||||
Product research and development | 5,352 | 7,454 | (2,102 | ) | (28 | )% | ||||||||
Gain on sale of business | — | (238 | ) | 238 | (100 | )% | ||||||||
Total operating expenses | 26,960 | 31,831 | (4,871 | ) | (15 | )% | ||||||||
Operating loss | (2,622 | ) | (4,771 | ) | 2,149 | (45 | )% | |||||||
Other income (expense), net | (561 | ) | (403 | ) | (158 | ) | 39 | % | ||||||
Income tax benefit (expense) | 84 | 12 | 72 | 600 | % | |||||||||
Net loss | $ | (3,099 | ) | $ | (5,162 | ) | $ | 2,063 | (40 | )% | ||||
Adjusted EBITDA(1) | $ | 2,798 | $ | 2,921 | $ | (123 | ) | (4 | )% |
(1) | Non-GAAP measure meaning net earnings (loss) before net interest expense, tax expense (benefit), depreciation, amortization, stock-based compensation expense, transactional and other expenses that do not relate to our core operations. See “Use of Non-GAAP Financial Measures” below for additional information and reconciliation. |
Fiscal Year | |||||
2017 | 2016 | ||||
System sales | 5.5 | % | 9.3 | % | |
Professional services | 11.3 | 8.9 | |||
Audit services | 5.0 | 2.3 | |||
Maintenance and support | 54.1 | 54.7 | |||
Software as a service | 24.1 | 24.8 | |||
Total revenues | 100.0 | % | 100.0 | % | |
Cost of sales | 41.8 | 42.6 | |||
Selling, general and administrative | 47.0 | 48.4 | |||
Product research and development | 22.0 | 27.5 | |||
Gain on sale of business | — | (0.9 | ) | ||
Total operating expenses | 110.8 | 117.6 | |||
Operating loss | (10.8 | ) | (17.6 | ) | |
Other income (expense), net | (2.3 | ) | (1.5 | ) | |
Income tax benefit | 0.3 | — | |||
Net loss | (12.7 | )% | (19.1 | )% | |
Cost of Sales to Revenues ratio, by revenue stream: | |||||
Systems sales | 144.9 | % | 107.9 | % | |
Services, maintenance and support | 40.3 | % | 39.5 | % | |
Software as a service | 22.5 | % | 26.3 | % |
(1) | Because a significant percentage of the operating costs are incurred at levels that are not necessarily correlated with revenue levels, a variation in the timing of systems sales and installations and the resulting revenue recognition can cause significant variations in operating results. As a result, period-to-period comparisons may not be meaningful with respect to the past results nor are they necessarily indicative of the future results of the Company in the near or long-term. The data in the table is presented solely for the purpose of reflecting the relationship of various operating elements to revenues for the periods indicated. |
Fiscal Year | 2017 to 2016 Change | |||||||||||||
(in thousands): | 2017 | 2016 | $ | % | ||||||||||
System Sales: | ||||||||||||||
Proprietary software | $ | 277 | $ | 1,059 | $ | (782 | ) | (74 | )% | |||||
Term license | 998 | 1,167 | (169 | ) | (14 | )% | ||||||||
Hardware and third-party software | 68 | 287 | (219 | ) | (76 | )% | ||||||||
Professional services | 2,744 | 2,396 | 348 | 15 | % | |||||||||
Audit services | 1,216 | 628 | 588 | 94 | % | |||||||||
Maintenance and support | 13,171 | 14,810 | (1,639 | ) | (11 | )% | ||||||||
Software as a service | 5,864 | 6,713 | (849 | ) | (13 | )% | ||||||||
Total Revenues | $ | 24,338 | $ | 27,060 | $ | (2,722 | ) | (10 | )% |
Fiscal Year | 2017 to 2016 Change | |||||||||||||
(in thousands): | 2017 | 2016 | $ | % | ||||||||||
Cost of system sales | $ | 1,946 | $ | 2,713 | $ | (767 | ) | (28 | )% | |||||
Cost of professional services | 2,401 | 2,724 | (323 | ) | (12 | )% | ||||||||
Cost of audit services | 1,604 | 1,100 | 504 | 46 | % | |||||||||
Cost of maintenance and support | 2,904 | 3,227 | (323 | ) | (10 | )% | ||||||||
Cost of software as a service | 1,319 | 1,764 | (445 | ) | (25 | )% | ||||||||
Total cost of sales | $ | 10,174 | $ | 11,528 | $ | (1,354 | ) | (12 | )% |
Fiscal Year | 2017 to 2016 Change | |||||||||||||
(in thousands): | 2017 | 2016 | $ | % | ||||||||||
General and administrative expenses | $ | 7,121 | $ | 8,282 | $ | (1,161 | ) | (14 | )% | |||||
Sales and marketing expenses | 4,313 | 4,806 | (493 | ) | (10 | )% | ||||||||
Total selling, general, and administrative | $ | 11,434 | $ | 13,088 | $ | (1,654 | ) | (13 | )% |
Fiscal Year | 2017 to 2016 Change | |||||||||||||
(in thousands): | 2017 | 2016 | $ | % | ||||||||||
Research and development expense | $ | 5,352 | $ | 7,454 | $ | (2,102 | ) | (28 | )% | |||||
Capitalized software development cost | 1,836 | 1,979 | (143 | ) | (7 | )% | ||||||||
Total research and development cost | $ | 7,188 | $ | 9,433 | $ | (2,245 | ) | (24 | )% |
Fiscal Year | 2017 to 2016 Change | |||||||||||||
(in thousands): | 2017 | 2016 | $ | % | ||||||||||
Gain on sale of business | $ | — | $ | (238 | ) | $ | 238 | (100 | )% |
Fiscal Year | 2017 to 2016 Change | |||||||||||||
(in thousands): | 2017 | 2016 | $ | % | ||||||||||
Interest expense | $ | (475 | ) | $ | (509 | ) | $ | 34 | (7 | )% | ||||
Miscellaneous (expense) income | (87 | ) | 106 | (193 | ) | (182 | )% | |||||||
Total other income | $ | (562 | ) | $ | (403 | ) | $ | (159 | ) | 39 | % |
January 31 | |||||||
2018 | 2017 | ||||||
Company proprietary software | $ | 984,000 | $ | 11,504,000 | |||
Third-party hardware and software | — | 150,000 | |||||
Professional services | 2,048,000 | 4,068,000 | |||||
Audit services | 1,293,000 | 1,847,000 | |||||
Maintenance and support | 15,420,000 | 19,193,000 | |||||
Software as a service | 13,048,000 | 13,861,000 | |||||
Total | $ | 32,793,000 | $ | 50,623,000 |
• | EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; |
• | EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
• | EBITDA does not reflect the interest expense, or the cash requirements to service interest or principal payments under our credit agreement; |
• | EBITDA does not reflect income tax payments that we may be required to make; and |
• | Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements. |
(amounts in thousands, except per share data) | Fiscal Year | ||||||
Adjusted EBITDA Reconciliation | 2017 | 2016 | |||||
Net loss | $ | (3,099 | ) | $ | (5,162 | ) | |
Interest expense | 475 | 509 | |||||
Tax expense (benefit) | (84 | ) | (12 | ) | |||
Depreciation | 774 | 1,100 | |||||
Amortization of capitalized software development costs (1) | 2,113 | 2,771 | |||||
Amortization of intangible assets | 1,161 | 1,345 | |||||
Amortization of other costs | 270 | 254 | |||||
EBITDA | 1,610 | 805 | |||||
Stock-based compensation expense | 1,109 | 1,787 | |||||
Gain on sale of business (2) | — | (238 | ) | ||||
Loss (gain) on disposal of fixed assets | (16 | ) | 1 | ||||
Non-cash valuation adjustments to assets and liabilities (3) | 95 | (65 | ) | ||||
Transaction related professional fees, advisory fees, and other internal direct costs | — | 392 | |||||
Associate severances and other costs relating to transactions or corporate restructuring | — | 239 | |||||
Adjusted EBITDA | $ | 2,798 | $ | 2,921 | |||
Adjusted EBITDA Margin (4) | 11 | % | 11 | % | |||
Adjusted EBITDA per Diluted Share Reconciliation | 2017 | 2016 | |||||
Loss per share — diluted | $ | (0.16 | ) | $ | (0.31 | ) | |
Adjusted EBITDA per adjusted diluted share (5) | $ | 0.12 | $ | 0.13 | |||
Diluted weighted average shares | 19,876,383 | 19,528,341 | |||||
Includable incremental shares — adjusted EBITDA (6) | 3,244,825 | 3,327,130 | |||||
Adjusted diluted shares | 23,121,208 | 22,855,471 |
(1) | Fiscal 2017 includes $1,705,000 relating to internally-developed legacy software, $395,000 relating to internally-developed software acquired from Meta, and $13,000 relating to internally-developed software acquired from Opportune IT. Fiscal 2016 includes $1,429,000 relating to internally-developed legacy software, $272,000 relating to acquired internally-developed software from Interpoint, $729,000 relating to internally-developed software acquired from Meta, $336,000 relating to internally-developed software acquired from Unibased, and $5,000 relating to internally-developed software acquired from Opportune IT. For more information regarding our acquisitions, please see Note 3 - Acquisitions and Divestitures to our consolidated financial statements included in Part II, Item 8 herein. |
(2) | Fiscal 2016 gain relates to the sale of our Streamline Health® Patient Engagement suite of solutions. |
(3) | Fiscal 2017 and 2016 include valuation adjustments for warrants liability of $(46,000) and $(159,000), respectively. |
(4) | Adjusted EBITDA as a percentage of GAAP net revenues. |
(5) | 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. |
(6) | 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. |
• | Persuasive evidence of an arrangement exists, |
• | Delivery has occurred or services have been rendered, |
• | The arrangement fees are fixed or determinable, and |
• | Collection is considered probable. |
• | significant under-performance relative to historical or projected future operating results; |
• | significant changes in the manner of use of the acquired assets or the strategy for the overall business; |
• | identification of other impaired assets within a reporting unit; |
• | disposition of a significant portion of an operating segment; |
• | significant negative industry or economic trends; |
• | significant decline in the Company’s stock price for a sustained period; and |
• | a decline in the market capitalization relative to the net book value. |
(in thousands) | Fiscal Year | ||||||
2017 | 2016 | ||||||
Term loans | $ | 4,626 | $ | 5,738 | |||
Capital lease | — | 91 | |||||
Royalty liability | 2,469 | 2,351 |
(in thousands) | Fiscal Year | ||||||
2017 | 2016 | ||||||
Net loss | $ | (3,099 | ) | $ | (5,162 | ) | |
Non-cash adjustments to net loss | 5,811 | 7,147 | |||||
Cash impact of changes in assets and liabilities | (681 | ) | (977 | ) | |||
Net cash provided by operating activities | $ | 2,031 | $ | 1,008 |
(in thousands) | Fiscal Year | ||||||
2017 | 2016 | ||||||
Purchases of property and equipment | $ | (49 | ) | $ | (506 | ) | |
Proceeds from sales of property and equipment | 20 | — | |||||
Capitalized software development costs | (1,836 | ) | (1,979 | ) | |||
Payment for acquisitions, net of cash acquired | — | (1,400 | ) | ||||
Proceeds from sale of business | $ | — | $ | 2,000 | |||
Net cash used in investing activities | $ | (1,865 | ) | $ | (1,885 | ) |
(in thousands) | Fiscal Year | ||||||
2017 | 2016 | ||||||
Principal repayments on term loans | $ | (1,112 | ) | $ | (2,797 | ) | |
Principal payments on capital lease obligations | (91 | ) | (569 | ) | |||
Proceeds from exercise of stock options and stock purchase plan | 45 | 26 | |||||
Other | (42 | ) | (11 | ) | |||
Net cash used in financing activities | $ | (1,200 | ) | $ | (3,351 | ) |
January 31 | |||||||
2018 | 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 4,619,834 | $ | 5,654,093 | |||
Accounts receivable, net of allowance for doubtful accounts of $349,058 and $198,449, respectively | 3,001,170 | 4,489,789 | |||||
Contract receivables | 223,791 | 466,423 | |||||
Prepaid hardware and third party software for future delivery | 5,858 | 5,858 | |||||
Prepaid client maintenance contracts | 506,911 | 595,633 | |||||
Other prepaid assets | 742,232 | 732,496 | |||||
Other current assets | 546,885 | 439 | |||||
Total current assets | 9,646,681 | 11,944,731 | |||||
Non-current assets: | |||||||
Property and equipment: | |||||||
Computer equipment | 2,852,776 | 3,110,274 | |||||
Computer software | 730,950 | 827,642 | |||||
Office furniture, fixtures and equipment | 683,443 | 683,443 | |||||
Leasehold improvements | 729,348 | 729,348 | |||||
4,996,517 | 5,350,707 | ||||||
Accumulated depreciation and amortization | (3,834,153 | ) | (3,447,198 | ) | |||
Property and equipment, net | 1,162,364 | 1,903,509 | |||||
Capitalized software development costs, net of accumulated amortization of $18,658,183 and $16,544,797, respectively | 4,307,351 | 4,584,245 | |||||
Intangible assets, net | 5,835,151 | 6,996,599 | |||||
Goodwill | 15,537,281 | 15,537,281 | |||||
Other non-current assets | 642,226 | 672,133 | |||||
Total non-current assets | 27,484,373 | 29,693,767 | |||||
$ | 37,131,054 | $ | 41,638,498 |
January 31, | |||||||
2018 | 2017 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 421,425 | $ | 1,116,525 | |||
Accrued compensation | 342,351 | 496,706 | |||||
Accrued other expenses | 609,582 | 484,391 | |||||
Current portion of term loan | 596,984 | 655,804 | |||||
Deferred revenues | 9,481,807 | 9,916,454 | |||||
Current portion of capital lease obligations | — | 91,337 | |||||
Total current liabilities | 11,452,149 | 12,761,217 | |||||
Non-current liabilities: | |||||||
Term loan, net of current portion and deferred financing cost of $128,275 and $199,211, respectively | 3,901,353 | 4,883,286 | |||||
Warrants liability | — | 46,191 | |||||
Royalty liability | 2,469,193 | 2,350,754 | |||||
Lease incentive liability, less current portion | 274,128 | 339,676 | |||||
Deferred revenues, less current portion | 332,645 | 568,515 | |||||
Total non-current liabilities | 6,977,319 | 8,188,422 | |||||
Total liabilities | 18,429,468 | 20,949,639 | |||||
Series A 0% Convertible Redeemable Preferred Stock, $.01 par value per share, $8,849,985 redemption and liquidation value, 4,000,000 shares authorized, 2,949,995 issued and outstanding | 8,849,985 | 8,849,985 | |||||
Stockholders’ equity: | |||||||
Common stock, $.01 par value per share, 45,000,000 shares authorized; 20,005,977 and 19,695,391 shares issued and outstanding, respectively | 200,060 | 196,954 | |||||
Additional paid in capital | 81,776,606 | 80,667,771 | |||||
Accumulated deficit | (72,125,065 | ) | (69,025,851 | ) | |||
Total stockholders’ equity | 9,851,601 | 11,838,874 | |||||
$ | 37,131,054 | $ | 41,638,498 |
Fiscal Year | |||||||
2017 | 2016 | ||||||
Revenues: | |||||||
Systems sales | $ | 1,343,288 | $ | 2,512,579 | |||
Professional services | 2,744,070 | 2,395,987 | |||||
Audit services | 1,216,285 | 627,919 | |||||
Maintenance and support | 13,170,644 | 14,809,935 | |||||
Software as a service | 5,863,788 | 6,713,485 | |||||
Total revenues | 24,338,075 | 27,059,905 | |||||
Operating expenses: | |||||||
Cost of systems sales | 1,946,347 | 2,712,663 | |||||
Cost of professional services | 2,400,534 | 2,724,078 | |||||
Cost of audit services | 1,603,572 | 1,100,154 | |||||
Cost of maintenance and support | 2,904,181 | 3,226,511 | |||||
Cost of software as a service | 1,318,628 | 1,763,705 | |||||
Selling, general and administrative | 11,434,276 | 13,088,074 | |||||
Research and development | 5,352,189 | 7,453,638 | |||||
Gain on sale of business | — | (238,103 | ) | ||||
Total operating expenses | 26,959,727 | 31,830,720 | |||||
Operating loss | (2,621,652 | ) | (4,770,815 | ) | |||
Other income (expense): | |||||||
Interest expense | (474,657 | ) | (508,859 | ) | |||
Miscellaneous (expense) income | (86,735 | ) | 106,084 | ||||
Loss before income taxes | (3,183,044 | ) | (5,173,590 | ) | |||
Income tax benefit | 83,830 | 12,024 | |||||
Net loss | (3,099,214 | ) | (5,161,566 | ) | |||
Less: deemed dividends on Series A Preferred Shares | — | (875,935 | ) | ||||
Net loss attributable to common shareholders | $ | (3,099,214 | ) | $ | (6,037,501 | ) | |
Net loss per common share - basic and diluted | $ | (0.16 | ) | $ | (0.31 | ) | |
Weighted average number of common shares - basic and diluted | 19,876,383 | 19,528,341 |
Common stock shares | Common stock | Additional paid in capital | Accumulated deficit | Total stockholders’ equity | ||||||||||||||
Balance at January 31, 2016 | 18,783,540 | $ | 187,836 | $ | 79,700,577 | $ | (63,864,285 | ) | $ | 16,024,128 | ||||||||
Stock issued pursuant to Employee Stock Purchase Plan | 67,667 | 676 | 75,906 | — | 76,582 | |||||||||||||
Restricted stock issued | 858,225 | 8,582 | (8,582 | ) | — | — | ||||||||||||
Surrender of stock upon vesting of restricted stock to satisfy tax withholding obligations | (8,241 | ) | (82 | ) | (11,620 | ) | — | (11,702 | ) | |||||||||
Restricted stock forfeited | (5,800 | ) | (58 | ) | 58 | — | — | |||||||||||
Share-based compensation expense | — | — | 1,787,367 | — | 1,787,367 | |||||||||||||
Deemed dividends on Series A Preferred Stock | — | — | (875,935 | ) | — | (875,935 | ) | |||||||||||
Net loss | — | — | — | (5,161,566 | ) | (5,161,566 | ) | |||||||||||
Balance at January 31, 2017 | 19,695,391 | $ | 196,954 | $ | 80,667,771 | $ | (69,025,851 | ) | $ | 11,838,874 | ||||||||
Stock issued pursuant to Employee Stock Purchase Plan | 47,282 | 473 | 44,040 | — | 44,513 | |||||||||||||
Restricted stock issued | 295,337 | 2,953 | (2,953 | ) | — | — | ||||||||||||
Surrender of stock upon vesting of restricted stock to satisfy tax withholding obligations | (32,033 | ) | (320 | ) | (41,493 | ) | — | (41,813 | ) | |||||||||
Share-based compensation expense | — | — | 1,109,241 | — | 1,109,241 | |||||||||||||
Net loss | — | — | — | (3,099,214 | ) | (3,099,214 | ) | |||||||||||
Balance at January 31, 2018 | 20,005,977 | $ | 200,060 | $ | 81,776,606 | $ | (72,125,065 | ) | $ | 9,851,601 |
Fiscal Year | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (3,099,214 | ) | $ | (5,161,566 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities, net of effect of acquisitions: | |||||||
Depreciation | 774,074 | 1,099,957 | |||||
Amortization of capitalized software development costs | 2,113,385 | 2,771,437 | |||||
Amortization of intangible assets | 1,161,448 | 1,344,980 | |||||
Amortization of other deferred costs | 340,502 | 324,496 | |||||
Valuation adjustment for warrants liability | (46,191 | ) | (158,922 | ) | |||
Other valuation adjustments | 141,038 | 94,009 | |||||
Gain on sale of business | — | (238,103 | ) | ||||
Loss (gain) on disposal of fixed assets | (15,947 | ) | 567 | ||||
Share-based compensation expense | 1,109,241 | 1,787,367 | |||||
Provision for accounts receivable | 233,550 | 121,025 | |||||
Changes in assets and liabilities, net of assets acquired: | |||||||
Accounts and contract receivables | 1,497,701 | (344,445 | ) | ||||
Other assets | (695,444 | ) | 449,673 | ||||
Accounts payable | (695,100 | ) | (51,071 | ) | |||
Accrued expenses | (117,311 | ) | (690,094 | ) | |||
Deferred revenues | (670,517 | ) | (341,008 | ) | |||
Net cash provided by operating activities | 2,031,215 | 1,008,302 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (48,616 | ) | (506,040 | ) | |||
Proceeds from sales of property and equipment | 19,959 | — | |||||
Capitalization of software development costs | (1,836,491 | ) | (1,978,946 | ) | |||
Payment for acquisition | — | (1,400,000 | ) | ||||
Proceeds from sale of business | — | 2,000,000 | |||||
Net cash used in investing activities | (1,865,148 | ) | (1,884,986 | ) | |||
Cash flows from financing activities: | |||||||
Principal repayments on term loans | (1,111,689 | ) | (2,796,590 | ) | |||
Payments related to settlement of employee shared-based awards | (41,813 | ) | (11,702 | ) | |||
Principal payments on capital lease obligations | (91,337 | ) | (569,189 | ) | |||
Proceeds from exercise of stock options and stock purchase plan | 44,513 | 26,122 | |||||
Net cash used in financing activities | (1,200,326 | ) | (3,351,359 | ) | |||
Decrease in cash and cash equivalents | (1,034,259 | ) | (4,228,043 | ) | |||
Cash and cash equivalents at beginning of year | 5,654,093 | 9,882,136 | |||||
Cash and cash equivalents at end of year | $ | 4,619,834 | $ | 5,654,093 |
Fiscal Year | |||||||
2017 | 2016 | ||||||
Supplemental cash flow disclosures: | |||||||
Interest paid | $ | 418,058 | $ | 441,951 | |||
Income taxes paid | $ | 7,594 | $ | 5,290 | |||
Supplemental disclosure of non-cash financing activities: | |||||||
Deemed dividends on Series A Preferred Stock | $ | — | $ | 875,935 |
2017 | 2016 | ||||||
Bad debt expense | $ | 234,000 | $ | 121,000 |
Computer equipment and software | 3-4 years |
Office equipment | 5 years |
Office furniture and fixtures | 7 years |
Leasehold improvements | Term of lease or estimated useful life, whichever is shorter |
Fiscal Year | |||||||
Amortization expense on internally-developed software included in: | 2017 | 2016 | |||||
Cost of systems sales | $ | 1,914,000 | $ | 2,495,000 | |||
Cost of software as a service | 186,000 | 271,000 | |||||
Cost of audit services | 13,000 | 5,000 | |||||
Total amortization expense on internally-developed software | $ | 2,113,000 | $ | 2,771,000 |
Total Fair Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
At January 31, 2018 | |||||||||||||||
Warrants liability (1) | $ | — | $ | — | $ | — | $ | — | |||||||
Royalty liability (2) | 2,469,000 | — | — | 2,469,000 | |||||||||||
At January 31, 2017 | |||||||||||||||
Warrants liability (1) | $ | 46,000 | $ | — | $ | — | $ | 46,000 | |||||||
Royalty liability (2) | 2,351,000 | — | — | 2,351,000 |
(1) | The initial fair value of warrants liability was determined by management with the assistance of an independent third-party valuation specialist, and by management thereafter. The Company issued common stock warrants in conjunction with the private placement investment, which were exercisable for up to 1,200,000 of the Company's common stock at an exercise price of $3.99 per share in whole or in part until February 16, 2018. See Note 4 - Derivative Liabilities and Note 14 - Private Placement Investment for further details. Changes in fair value of the warrants are recognized within miscellaneous (expense) income in the consolidated statements of operations. |
(2) | The initial fair value of royalty liability was determined by management with the assistance of an independent third-party valuation specialist, and by management thereafter. The fair value of the royalty liability is determined based on the probability-weighted revenue scenarios for the Streamline Health® Clinical Analytics solution licensed from Montefiore Medical Center (discussed in Note 3 - Acquisitions and Divestitures). Fair value adjustments are included within miscellaneous (expense) income in the consolidated statements of operations. |
• | Persuasive evidence of an arrangement exists, |
• | Delivery has occurred or services have been rendered, |
• | The arrangement fees are fixed or determinable, and |
• | Collectibility is reasonably assured. |
• | VSOE (vendor-specific objective evidence) — the price at which an element is sold as a separate stand-alone transaction |
• | TPE (third-party evidence) — the price of an element, charged by another company that is largely interchangeable in any particular transaction |
• | ESP (estimated selling price) — our best estimate of the selling price of an element of the transaction |
• | significant underperformance relative to historical or projected future operating results; |
• | significant changes in the manner of use of the acquired assets or the strategy for the overall business; |
• | identification of other impaired assets within a reporting unit; |
• | disposition of a significant portion of an operating segment; |
• | significant negative industry or economic trends; |
• | significant decline in the Company's stock price for a sustained period; and |
• | a decline in the market capitalization relative to the net book value. |
Fiscal Year | |||||||
2017 | 2016 | ||||||
Net loss | $ | (3,099,214 | ) | $ | (5,161,566 | ) | |
Less: deemed dividends on Series A Preferred Stock | — | (875,935 | ) | ||||
Net loss attributable to common shareholders | $ | (3,099,214 | ) | $ | (6,037,501 | ) | |
Weighted average shares outstanding - Basic | 19,876,383 | 19,528,341 | |||||
Stock options and restricted stock | — | — | |||||
Weighted average shares outstanding - Diluted | 19,876,383 | 19,528,341 | |||||
Basic net loss per share of common stock | $ | (0.16 | ) | $ | (0.31 | ) | |
Diluted net loss per share of common stock | $ | (0.16 | ) | $ | (0.31 | ) |
Balance at September 8, 2016 | |||
Assets purchased: | |||
Accounts and contracts receivable | $ | 792,000 | |
Other assets | 32,000 | ||
Internally-developed software | 350,000 | ||
Intangible assets | 650,000 | ||
Total assets purchased | 1,824,000 | ||
Liabilities assumed: | |||
Accounts payable and accrued liabilities | 424,000 | ||
Net assets acquired | $ | 1,400,000 | |
Cash paid | $ | 1,400,000 |
Facilities | Equipment | Fiscal Year Totals | |||||||||
2018 | $ | 1,039,000 | $ | 11,000 | $ | 1,050,000 | |||||
2019 | 967,000 | 11,000 | 978,000 | ||||||||
2020 | 504,000 | 11,000 | 515,000 | ||||||||
2021 | 519,000 | 2,000 | 521,000 | ||||||||
2022 | 445,000 | — | 445,000 | ||||||||
Total | $ | 3,474,000 | $ | 35,000 | $ | 3,509,000 |
For the four-quarter period ending | Minimum EBITDA | |||
July 31, 2017 | $ | (1,250,000 | ) | |
October 31, 2017 | (1,000,000 | ) | ||
January 31, 2018 | (700,000 | ) | ||
April 30, 2018 | (35,869 | ) | ||
July 31, 2018 | 414,953 | |||
October 31, 2018 | 1,080,126 | |||
January 31, 2019 | 1,634,130 | |||
April 30, 2019 | 1,842,610 | |||
July 31, 2019 | 2,657,362 | |||
October 31, 2019 and each fiscal quarter thereafter | 3,613,810 |
January 31, 2018 | January 31, 2017 | |||||||
Senior term loan | $ | 4,626,000 | $ | 5,738,000 | ||||
Capital lease | — | 91,000 | ||||||
Total | 4,626,000 | 5,829,000 | ||||||
Deferred financing cost | (128,000 | ) | (199,000 | ) | ||||
4,498,000 | 5,630,000 | |||||||
Less: Current portion | (597,000 | ) | (747,000 | ) | ||||
Non-current portion of long-term debt | $ | 3,901,000 | $ | 4,883,000 |
Senior Term Loan (1) | ||||
2018 | $ | 597,000 | ||
2019 | 4,029,000 | |||
Total repayments | $ | 4,626,000 |
Goodwill | |||
Balance at January 31, 2016 | $ | 16,185,000 | |
Adjustments to goodwill related to sale of business during fiscal 2016 | (648,000 | ) | |
Balance at January 31, 2017 and January 31, 2018 | $ | 15,537,000 |
January 31, 2018 | |||||||||||||
Estimated Useful Life | Gross Assets | Accumulated Amortization | Net Assets | ||||||||||
Finite-lived assets: | |||||||||||||
Client relationships | 5-15 years | $ | 5,805,000 | $ | 3,308,000 | $ | 2,497,000 | ||||||
Covenants not to compete | 0.5-15 years | 986,000 | 823,000 | 163,000 | |||||||||
Supplier agreements | 5 years | 1,582,000 | 1,582,000 | — | |||||||||
License agreement | 15 years | 4,431,000 | 1,256,000 | 3,175,000 | |||||||||
Total | $ | 12,804,000 | $ | 6,969,000 | $ | 5,835,000 |
January 31, 2017 | |||||||||||||
Estimated Useful Life | Gross Assets | Accumulated Amortization | Net Assets | ||||||||||
Finite-lived assets: | |||||||||||||
Client relationships | 5-15 years | 5,805,000 | 2,692,000 | 3,113,000 | |||||||||
Covenants not to compete | 0.5-15 years | 986,000 | 744,000 | 242,000 | |||||||||
Supplier agreements | 5 years | 1,582,000 | 1,411,000 | 171,000 | |||||||||
License agreement | 15 years | 4,431,000 | 960,000 | 3,471,000 | |||||||||
Total | $ | 12,804,000 | $ | 5,807,000 | $ | 6,997,000 |
Annual Amortization Expense | |||
2018 | $ | 937,000 | |
2019 | 885,000 | ||
2020 | 823,000 | ||
2021 | 786,000 | ||
2022 | 500,000 | ||
Thereafter | 1,904,000 | ||
Total | $ | 5,835,000 |
Fiscal Year | |||||||
2017 | 2016 | ||||||
Current tax (expense) benefit: | |||||||
Federal | $ | — | $ | 15,000 | |||
State | (11,573 | ) | (2,976 | ) | |||
Total current provision | (11,573 | ) | 12,024 | ||||
Deferred tax benefit: | |||||||
Federal | 95,403 | — | |||||
State | — | — | |||||
Total Deferred tax benefit | 95,403 | — | |||||
Current and deferred tax benefit | $ | 83,830 | $ | 12,024 |
Fiscal Year | |||||||
2017 | 2016 | ||||||
Federal tax benefit at statutory rate of 32.9 percent | $ | 1,047,221 | $ | 1,771,675 | |||
State and local taxes, net of federal benefit (expense) | 195,117 | 84,402 | |||||
Change in valuation allowance | 4,504,875 | (2,134,096 | ) | ||||
Permanent items: | |||||||
Incentive stock options | (112,349 | ) | (361,245 | ) | |||
Change in fair value of warrants liability | 15,197 | 54,033 | |||||
Goodwill basis difference recognized upon asset sale | — | (220,112 | ) | ||||
Section 162(m) disallowance | — | (22,647 | ) | ||||
Other | (24,673 | ) | (23,272 | ) | |||
Reserve for uncertain tax position | (18,509 | ) | (262,525 | ) | |||
R&D Credit (Federal) | 219,305 | 1,045,453 | |||||
R&D Credit (State) | (129,111 | ) | 267,172 | ||||
Tax Cuts and Jobs Act | (5,827,034 | ) | — | ||||
Other | 213,791 | (186,814 | ) | ||||
Income tax benefit | $ | 83,830 | $ | 12,024 |
January 31, | |||||||
2018 | 2017 | ||||||
Deferred tax assets: | |||||||
Allowance for doubtful accounts | $ | 91,360 | $ | 72,886 | |||
Deferred revenue | 154,574 | 282,112 | |||||
Accruals | 71,286 | 120,165 | |||||
Net operating loss carryforwards | 10,617,120 | 15,141,861 | |||||
Stock compensation expense | 235,920 | 501,120 | |||||
Property and equipment | 108,537 | 132,934 | |||||
AMT credit | — | 102,144 | |||||
R&D credit | 1,144,058 | 1,050,100 | |||||
Other | 116,603 | 106,833 | |||||
Total deferred tax assets | 12,539,458 | 17,510,155 | |||||
Valuation allowance | (11,812,860 | ) | (16,318,124 | ) | |||
Net deferred tax assets | 726,598 | 1,192,031 | |||||
Deferred tax liabilities: | |||||||
Definite-lived intangible assets | (726,598 | ) | (1,192,031 | ) | |||
Total deferred tax liabilities | (726,598 | ) | (1,192,031 | ) | |||
Net deferred tax liabilities | $ | — | $ | — |
2017 | 2016 | ||||||
Beginning of fiscal year | $ | 290,000 | $ | — | |||
Additions for tax positions for the current year | 62,000 | 59,000 | |||||
Additions for tax positions of prior years | 3,000 | 231,000 | |||||
Subtractions for tax positions of prior years | (60,000 | ) | — | ||||
End of fiscal year | $ | 295,000 | $ | 290,000 |
Options | Weighted Average Exercise Price | Remaining Life in Years | Aggregate intrinsic value | |||||||||
Outstanding as of February 1, 2017 | 2,100,480 | $ | 4.16 | |||||||||
Granted | 265,000 | 1.17 | ||||||||||
Exercised | — | — | ||||||||||
Expired | (133,323 | ) | 4.73 | |||||||||
Forfeited | (59,001 | ) | 2.24 | |||||||||
Outstanding as of January 31, 2018 | 2,173,156 | $ | 3.42 | (1) | 7.11 | $ | 3,868,218 | |||||
Exercisable as of January 31, 2018 | 1,626,404 | $ | 3.98 | (2) | 6.67 | $ | 2,894,999 | |||||
Vested or expected to vest as of January 31, 2018 | 2,102,078 | $ | 3.47 | 7.07 | $ | 3,741,699 |
(1) | The exercise prices range from $1.06 to $8.10, of which 677,499 shares are between $1.06 and $2.00 per share, 525,240 shares are between $2.19 and $4.00 per share, and 970,417 shares are between $4.02 and $8.10 per share. |
(2) | The exercise prices range from $1.18 to $8.10, of which 254,332 shares are between $1.18 and $2.00 per share, 442,155 shares are between $2.19 and $4.00 per share, and 929,917 shares are between $4.02 and $8.10 per share. |
2017 | 2016 | ||||
Expected life | 6 years | 6 years | |||
Risk-free interest rate | 2.65 | % | 2.10 | % | |
Weighted average volatility factor | 0.65 | 0.58 | |||
Dividend yield | — | — | |||
Forfeiture rate | 13 | % | 22 | % |
Non-vested Number of Shares | Weighted Average Grant Date Fair Value | |||||
Non-vested balance at January 31, 2016 | 112,380 | $ | 2.62 | |||
Granted | 858,225 | 1.59 | ||||
Vested | (112,380 | ) | 2.56 | |||
Forfeited | — | — | ||||
Non-vested balance at January 31, 2017 | 858,225 | $ | 1.59 | |||
Granted | 295,337 | 1.17 | ||||
Vested | (331,975 | ) | 1.47 | |||
Forfeited | — | — | ||||
Non-vested balance at January 31, 2018 | 821,587 | $ | 1.59 |
Fair Value at August 16, 2012 | Proceeds Allocation at August 16, 2012 | ||||||||
Instruments: | |||||||||
Series A Preferred Stock | $ | 9,907,820 | $ | 6,546,146 | (1) | ||||
Convertible subordinated notes payable | 5,699,577 | 3,765,738 | (2) | ||||||
Warrants | 2,856,000 | 1,688,116 | (3) | ||||||
Total investment | $ | 18,463,397 | $ | 12,000,000 |
(1) | The Series A Preferred Stock convert on a 1:1 basis into common stock, but differ in value from common stock due to the downside protection relative to common stock in the event the Company liquidates, and the downside protection, if, after four years, the holder has not converted and the stock is below $3.00. The fair value of Series A Preferred Stock was determined using a Monte-Carlo simulation following a Geometric Brownian Motion, using the following assumptions: annual volatility of 75%, risk-free rate of 0.9% and dividend yield of 0.0%. The model also utilized the following assumptions to account for the conditions within the agreement: after four years, if the simulated common stock price fell below a price of $3.00 per share, the convertible preferred stock would automatically convert to common stock on a 1:1 basis moving forward at a price of $3.00 per share and a forced conversion if the simulated stock price exceeded $8.00 per share. |
(2) | The fair value of convertible subordinated notes payable was determined based on its current yield as compared to that of those currently outstanding in the marketplace. Management reviewed the convertible note agreement and determined that the note's interest rate is a reasonable representative of a market rate; therefore the face or principal amount of the loan is a reasonable estimate of its fair value. |
(3) | The fair value of the common stock warrants was determined using a Monte-Carlo simulation following a Geometric Brownian motion, using the following assumptions: annual volatility of 75%, risk-free rate of 0.9%, dividend yield of 0.0% and expected life of 5 years. Because the dilutive down-round financing was subject to stockholder approval, which had not happened at the time of the valuation, the model utilized the assumption that the down-round financing would not occur within the simulation. |
Number of Shares Issuable | Weighted Average Exercise Price | |||||
Warrants - private placement | 1,200,000 | $ | 3.99 | |||
Warrants - placement agent | 200,000 | 4.06 | ||||
Total | 1,400,000 | $ | 4.00 |
Additions | |||||||||||||||||||
Description | Balance at Beginning of Period | Charged to Costs and Expenses | Charged to Other Accounts | Deductions | Balance at End of Period | ||||||||||||||
(in thousands) | |||||||||||||||||||
Year ended January 31, 2018: | |||||||||||||||||||
Allowance for doubtful accounts | $ | 198 | $ | 234 | $ | — | $ | (83 | ) | $ | 349 | ||||||||
Year ended January 31, 2017: | |||||||||||||||||||
Allowance for doubtful accounts | $ | 155 | $ | 121 | $ | 17 | $ | (95 | ) | $ | 198 |
• | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company. |
• | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that receipts and expenditures of the Company are being made in accordance with authorization of our management and our Board of Directors. |
• | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements. |
Certificate of Incorporation of Streamline Health Solutions, Inc. f/k/a/ LanVision Systems, Inc., as amended through August 19, 2014 (Incorporated by reference from Exhibit 3.1 of the Form 10-Q, as filed with the SEC on September 15, 2014). | |
Bylaws of Streamline Health Solutions, Inc., as amended and restated through March 28, 2014, (Incorporated by reference from Exhibit 3.1 of Form 8-K, as filed with the Commission on April 3, 2014). | |
Certificate of Designation of Preferences, Rights and Limitations of Series A 0% Convertible Preferred Stock of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 10.1 of the Form 8-K, as filed with the Commission on November 1, 2012). | |
4.1 | Specimen Common Stock Certificate of Streamline Health Solutions, Inc. (Incorporated by reference from the Registration Statement on Form S-1, File Number 333-01494, as filed with the Commission on April 15, 1996). |
10.1# | Streamline Health Solutions, Inc. 1996 Employee Stock Purchase Plan, as amended and restated effective July 1, 2013 (Incorporated by reference from the Registration Statement on Form S-8, File Number 333-188763, as filed with the Commission on May 22, 2013). |
10.2# | 2005 Incentive Compensation Plan of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 10.1 of the Form 8-K, as filed with the Commission on May 26, 2005). |
Amendment No. 1 to 2005 Incentive Compensation Plan of Streamline Health Solutions, Inc.(Incorporated by reference to Annex 1 of Definitive Proxy Statement on Schedule 14A, as filed with the Commission on April 13, 2011). | |
Amendment No. 2 to 2005 Incentive Compensation Plan of Streamline Health Solutions, Inc. (Incorporated by reference to Exhibit 4.3 of Registration Statement on Form S-8, as filed with the Commission on November 15, 2012). | |
10.3# | Streamline Health Solutions, Inc. Second Amended and Restated 2013 Stock Incentive Plan (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed on May 2, 2017) |
Form of Restricted Stock Award Agreement for Non-Employee Directors (Incorporated by reference from Exhibit 10.2 of the Form 8-K, as filed with the Commission August 25, 2014). | |
Form of Restricted Stock Award Agreement for Executives (Incorporated by reference from Exhibit 10.3 of the Form 8-K, as filed with the Commission August 25, 2014). | |
Form of Stock Option Agreement for Executives (Incorporated by reference from Exhibit 10.4 of the Form 8-K, as filed with the Commission August 25, 2014). | |
10.4# | Employment Agreement dated September 10, 2014 by and between Streamline Health Solutions, Inc. and David W. Sides (Incorporated by reference from Exhibit 10.1 of the Form 10-Q, as filed with the Commission on December 9, 2014). |
Amendment to Employment Agreement dated January 8, 2015 by and between Streamline Health Solutions, Inc. and David W. Sides (Incorporated by reference from Exhibit 10.2 of the Form 8-K, as filed with the Commission on January 9, 2015). | |
Amendment No. 2 to Employment Agreement dated April 19, 2016 by and between Streamline Health Solutions, Inc. and David W. Sides (Incorporated by reference from Exhibit 10.4(b) of the Form 10-K, as filed with the Commission on April 20, 2016). | |
10.5# | Employment Agreement among Streamline Health Solutions, Inc., Streamline Health, Inc. and Nicholas A. Meeks effective May 22, 2013 (Incorporated by reference from Exhibit 10.2 of the Form 8-K, as filed with the Commission on May 20, 2013). |
Amendment No. 1 to Employment Agreement dated June 4, 2015 between Streamline Health Solutions, Inc. and Nicholas A. Meeks (Incorporated by reference from Exhibit 10.1 of the Form 10-Q, as filed with the Commission on June 9, 2015). | |
Amendment No. 2 to Employment Agreement dated April 19, 2016 between Streamline Health Solutions, Inc. and Nicholas A. Meeks (Incorporated by reference from Exhibit 10.5(b) of the Form 10-K, as filed with the Commission on April 20, 2016). |
10.6# | Employment Agreement dated February 3, 2014 by and between Streamline Health Solutions, Inc. and Randolph W. Salisbury (Incorporated by reference from Exhibit 10.24 of the Form 10-K, as filed with the Commission on June 13, 2014). |
Amendment No. 1 to Employment Agreement dated June 4, 2015 between Streamline Health Solutions, Inc. and Randolph W. Salisbury (Incorporated by reference from Exhibit 10.2 of the Form 10-Q, as filed with the Commission on June 9, 2015). | |
10.7# | Employment Agreement dated March 15, 2016 between Streamline Health Solutions, Inc. and Shaun L. Priest (Incorporated by reference from Exhibit 10.8 of the Form 10-K, as filed with the Commission on April 20, 2016). |
10.8# | Form of Indemnification Agreement for all directors and officers of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 10.1 of the Form 8-K, as filed with the Commission on June 7, 2006). |
Reseller Agreement between IDX Information Systems Corporation and Streamline Health Solutions, Inc. entered into on January 30, 2002 (Incorporated by reference from Exhibit 10.11 of the Form 10-K for the fiscal year ended January 31, 2002, as filed with the Commission on April 29, 2002). | |
First Amendment to the Reseller Agreement between IDX Information Systems Corporation and Streamline Health Solutions, Inc. entered into on May 3, 2002 (Incorporated by reference from Exhibit 10 of the Form 10-Q for the quarter ended April 30, 2002, as filed with the Commission on June 4, 2002). | |
Software License and Royalty Agreement dated October 25, 2013 between Streamline Health, Inc. and Montefiore Medical Center (Incorporated by reference from Exhibit 10.2 of the Form 10-Q, as filed with the Commission on December 17, 2013). | |
Credit Agreement dated as of November 21, 2014 by and among Wells Fargo Bank, N.A., the lenders party thereto, Streamline Health Solutions, Inc. and Streamline Health, Inc. (Incorporated by reference from Exhibit 10.2 of the Form 10-Q, as filed with the Commission on December 9, 2014). | |
Subordination and Intercreditor Agreement dated as of November 21, 2014 by and among each subordinated creditor signatory thereto, Streamline Health Solutions, Inc. and Wells Fargo Bank, N.A (Incorporated by reference from Exhibit 10.12(a) of the Form 10-K, as filed with the Commission on April 20, 2016). | |
Waiver and First Amendment to Credit Agreement dated as of April 15, 2015 by and among Wells Fargo Bank, N.A., the lenders party thereto, Streamline Health Solutions, Inc. and Streamline Health, Inc. (Incorporated by reference from Exhibit 10.13(a) of the Form 10-K, as filed with the Commission on April 16, 2015). | |
Second Amendment to Credit Agreement dated as of April 29, 2016 by and among Wells Fargo Bank, N.A., the lenders party thereto, Streamline Health Solutions, Inc. and Streamline Health, Inc. (Incorporated by reference from Exhibit 10.1 of the Form 10-Q, as filed with the Commission on June 8, 2016). | |
Third Amendment to Credit Agreement dated as of June 19, 2017 by and among Wells Fargo Bank, N.A., the lenders party thereto, Streamline Health Solutions, Inc. and Streamline Health, Inc. (Incorporated by reference from Exhibit 10.1 of the Form 10-Q, as filed with the Commission on September 13, 2017). | |
Settlement Agreement and Mutual Release dated as of November 20, 2013 by and among Streamline Health Solutions, Inc., IPP Acquisition, LLC, IPP Holding Company, LLC, W. Ray Cross, as seller representative, and each of the members of IPP Holding Company, LLC named therein (Incorporated by reference from Exhibit 10.3 of the Form 10-Q, as filed with the Commission on December 17, 2013). | |
Subordinated Promissory Note dated November 20, 2013 made by IPP Acquisition, LLC and Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 10.4 of the Form 10-Q, as filed with the Commission on December 17, 2013). | |
Securities Purchase Agreement, among Streamline Health Solutions, Inc, and each purchaser identified on the signature pages thereto, dated August 16, 2012 (Incorporated by reference from Exhibit 10.4 of the Form 8-K, as filed with the Commission on August 21, 2012). | |
Code of Business Conduct and Ethics (Incorporated by reference from Exhibit 14.1 of the Form 10-K, as filed with the Commission on April 16, 2015). |
21.1* | Subsidiaries of Streamline Health Solutions, Inc. |
23.1* | Consent of Independent Registered Public Accounting Firm - RSM US LLP |
31.1* | Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* | Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1* | Certification by Chief Executive Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2* | Certification by Chief Financial Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101 | The following financial information from Streamline Health Solutions, Inc.'s Annual Report on Form 10- K for the fiscal year ended January 31, 2018 filed with the SEC on April 25, 2018, formatted in XBRL includes: (i) Consolidated Balance Sheets at January 31, 2018 and 2017, (ii) Consolidated Statements of Operations for the two years ended January 31, 2018, (iii) Consolidated Statements of Changes in Stockholders' Equity for the two years ended January 31, 2018, (iv) Consolidated Statements of Cash Flows for the two years ended January 31, 2018, and (v) the Notes to Consolidated Financial Statements. |
* | Filed herewith. |
# | Management Contracts and Compensatory Arrangements. |
STREAMLINE HEALTH SOLUTIONS, INC. | ||
By: | /S/ DAVID W. SIDES | |
David W. Sides Chief Executive Officer |
/S/ DAVID W. SIDES | Chief Executive Officer and Director (Principal Executive Officer) | April 25, 2018 |
David W. Sides | ||
/s/ JONATHAN R. PHILLIPS | Director | April 25, 2018 |
Jonathan R. Phillips | ||
/s/ MICHAEL K. KAPLAN | Director | April 25, 2018 |
Michael K. Kaplan | ||
/s/ ALLEN S. MOSELEY | Director | April 25, 2018 |
Allen S. Moseley | ||
/s/ MICHAEL G. VALENTINE | Director | April 25, 2018 |
Michael G. Valentine | ||
/s/ JUDITH E. STARKEY | Director | April 25, 2018 |
Judith E. Starkey | ||
/s/ KENAN H. LUCAS | Director | April 25, 2018 |
Kenan H. Lucas | ||
/s/ NICHOLAS A. MEEKS | Chief Financial Officer (Principal Financial and Accounting Officer) | April 25, 2018 |
Nicholas A. Meeks |
Name | Jurisdiction of Incorporation | % Owned | |
Streamline Health, Inc. | Ohio | 100% |
April 25, 2018 | /s/ David W. Sides |
Chief Executive Officer and President |
April 25, 2018 | /s/ Nicholas A. Meeks |
Chief Financial Officer |
Document and Entity Information - USD ($) |
12 Months Ended | ||
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Jan. 31, 2018 |
Mar. 23, 2018 |
Jul. 31, 2017 |
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Document and Entity Information [Abstract] | |||
Entity Registrant Name | STREAMLINE HEALTH SOLUTIONS INC. | ||
Entity Central Index Key | 0001008586 | ||
Document Type | 10-K | ||
Document Period End Date | Jan. 31, 2018 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2017 | ||
Document Fiscal Period Focus | FY | ||
Current Fiscal Year End Date | --01-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 18,743,172 | ||
Entity Common Stock, Shares Outstanding | 19,984,703 |
Organization and Description of Business |
12 Months Ended |
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Jan. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | ORGANIZATION AND DESCRIPTION OF BUSINESS Streamline Health Solutions, Inc. and its subsidiary (“we”, “us”, “our”, “Streamline”, or the “Company”) operates in one segment as a provider of healthcare information technology solutions and associated services. The Company provides these capabilities through the licensing of its HIM, Coding & CDI, eValuatorTM Coding Analysis Platform, Financial Management and Patient Care solutions and other workflow software applications and the use of such applications by software as a service (“SaaS”). The Company also provides audit services to help clients optimize their internal clinical documentation and coding functions, as well as implementation and consulting services to complement its software solutions. The Company’s software and services enable hospitals and integrated healthcare delivery systems in the United States and Canada to capture, store, manage, route, retrieve and process patient clinical, financial and other healthcare provider information related to the patient revenue cycle. Fiscal Year All references to a fiscal year refer to the fiscal year commencing February 1 in that calendar year and ending on January 31 of the following calendar year. |
Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES | SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements include the accounts of Streamline Health Solutions, Inc. and its wholly-owned subsidiary, Streamline Health, Inc. All significant intercompany transactions and balances are eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates and judgments, including those related to stock-based compensation, capitalization of software development costs, intangible assets, allowance for doubtful accounts, and income taxes. Actual results could differ from those estimates. Cash and Cash Equivalents Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash demand deposits. Cash deposits are placed in Federal Deposit Insurance Corporation (“FDIC”) insured financial institutions. Cash deposits may exceed FDIC insured levels from time to time. For purposes of the consolidated balance sheets and consolidated statements of cash flows, the Company considers all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents. Receivables Accounts and contract receivables are comprised of amounts owed to the Company for licensed software, professional services, including coding audit and maintenance services, and software as a service and are presented net of the allowance for doubtful accounts. The timing of revenue recognition may not coincide with the billing terms of the client contract, resulting in unbilled receivables or deferred revenues; therefore certain contract receivables represent revenues recognized prior to client billings. Individual contract terms with clients or resellers determine when receivables are due. For billings where the criteria for revenue recognition have not been met, deferred revenue is recorded until all revenue recognition criteria have been met. Allowance for Doubtful Accounts In determining the allowance for doubtful accounts, aged receivables are analyzed monthly by management. Each identified receivable is reviewed based upon the most recent information available and the status of any open or unresolved issues with the client preventing the payment thereof. Corrective action, if necessary, is taken by the Company to resolve open issues related to unpaid receivables. During these monthly reviews, the Company determines the required allowances for doubtful accounts for estimated losses resulting from the unwillingness or inability of its clients or resellers to make required payments. The allowance for doubtful accounts was approximately $349,000 and $198,000 at January 31, 2018 and 2017, respectively. The Company believes that its reserve is adequate, however results may differ in future periods. Bad debt expense for fiscal years 2017 and 2016 was as follows:
Concessions Accrual In determining the concessions accrual, the Company evaluates historical concessions granted relative to revenue. The concession accrual included in accrued other expenses on the Company's consolidated balance sheet was $48,000 and $52,000 as of January 31, 2018 and 2017, respectively. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method, over the estimated useful lives of the related assets. Estimated useful lives are as follows:
Depreciation expense for property and equipment in fiscal 2017 and 2016 was $774,000 and $1,100,000, respectively. Normal repair and maintenance is expensed as incurred. Replacements are capitalized and the property and equipment accounts are relieved of the items being replaced or disposed of, if no longer of value. The related cost and accumulated depreciation of the disposed assets are eliminated and any gain or loss on disposition is included in the results of operations in the year of disposal. Leases On December 13, 2013, the Company entered into an amended lease obligation to lease 24,335 square feet of office space in Atlanta, Georgia. The lease commenced upon taking possession of the space and ends in November 2022. The provisions of the lease provided for rent abatement for the first eight months of the lease term. Upon taking possession of the premises, the rent abatement and the unamortized balance of deferred rent associated with the previously leased premises were aggregated with the total expected rental payments and are being amortized on a straight-line basis over the term of the lease. In fiscal 2014, the Company entered into a lease obligation to lease 10,350 square feet of office space in New York, New York. The lease commenced upon taking possession of the space and ends in November 2019. The lease agreement provided for rent abatement for the first two months of the lease term. Upon taking possession of the premises, the rent abatement was aggregated with the total expected rental payments, and is being amortized on a straight-line basis over the term of the lease. The Company had capital leases to finance office equipment purchases that continued into the third quarter of fiscal 2017. The amortization expense of the leased equipment is included in depreciation expense. As of January 31, 2018 and 2017, the Company had capital lease obligations outstanding totaling zero and $91,000, respectively Debt Issuance Costs Costs related to the issuance of debt are capitalized and amortized to interest expense on a straight-line basis, which is not materially different from the effective interest method, over the term of the related debt. Deferred financing costs are presented on the Company’s consolidated balance sheets as a direct deduction from the carrying amount of the non-current portion of our term loan. Impairment of Long-Lived Assets The Company reviews the carrying value of long-lived assets whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Among the factors the Company considers in making the evaluation are changes in market position and profitability. If facts and circumstances are present which may indicate impairment is probable, the Company will prepare a projection of the undiscounted cash flows of the specific asset or asset group and determine if the long-lived assets are recoverable based on these undiscounted cash flows. If impairment is indicated, an adjustment will be made to reduce the carrying amount of these assets to their fair value. Capitalized Software Development Costs Software development costs associated with the planning and designing phase of software development, including coding and testing activities necessary to establish technological feasibility, are classified as research and development and are expensed as incurred. Once technological feasibility has been determined, a portion of the costs incurred in development, including coding, testing and quality assurance, are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. The Company capitalized such costs, including interest, of $1,836,000 and $1,979,000 in fiscal 2017 and 2016, respectively. The Company assumed $350,000 in internally-developed software costs in 2016 through the acquisition of Opportune IT, which is described in Note 3 - Acquisitions and Divestitures. Amortization for the Company's legacy software systems is provided on a solution-by-solution basis over the estimated economic life of the software, typically three to five years, using the straight-line method. Amortization commences when a solution is available for general release to clients. Acquired internally-developed software from acquisitions is amortized using the straight-line method. Amortization expense on all internally-developed software was $2,113,000 and $2,771,000 in fiscal 2017 and 2016, respectively, and was included in the consolidated statements of operations as follows:
Research and development expense was $5,352,000 and $7,454,000 in fiscal 2017 and 2016, respectively. Fair Value of Financial Instruments The FASB’s authoritative guidance on fair value measurements establishes a framework for measuring fair value, and expands disclosure about fair value measurements. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. Under this guidance, assets and liabilities carried at fair value must 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 that are not corroborated by market data. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. Cash and cash equivalents are classified as Level 1. The carrying amount of the Company’s long-term debt approximates fair value since the variable interest rates being paid on the amounts approximate the market interest rate. Long-term debt is classified as Level 2. The table below provides information on our liabilities that are measured at fair value on a recurring basis:
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Revenue Recognition We derive revenue from the sale of internally-developed software, either by licensing for local installation or by software as a service (“SaaS”) delivery model, through our direct sales force or through third-party resellers. Licensed, locally-installed clients on a perpetual model utilize our support and maintenance services for a separate fee, whereas term-based locally installed license fees and SaaS fees include support and maintenance. We also derive revenue from professional services that support the implementation, configuration, training and optimization of the applications, as well as audit services provided to help clients review their internal coding audit processes. Additional revenues are also derived from reselling third-party software and hardware components. We recognize revenue in accordance with Accounting Standards Codification (ASC) 985-605, Software-Revenue Recognition, ASC 605-25, Revenue Recognition — Multiple-Element Arrangements, and ASC 605-10-S99. We commence revenue recognition when all of the following criteria have been met:
If we determine that any of the above criteria have not been met, we will defer recognition of the revenue until all the criteria have been met. Maintenance and support and SaaS agreements are generally non-cancelable or contain significant penalties for early cancellation, although clients typically have the right to terminate their contracts for cause if we fail to perform material obligations. However, if non-standard acceptance periods, non-standard performance criteria or cancellation or right of refund terms are required, revenue is recognized upon the satisfaction of such criteria, as applicable. Multiple Element Arrangements We follow the accounting revenue guidance under Accounting Standards Update (ASU) 2009-13, Revenue Recognition (Topic 605), Multiple-Deliverable Revenue Arrangements — a consensus of the FASB Emerging Issues Task Force. Terms used in evaluation are as follows:
We follow accounting guidance for revenue recognition of multiple-element arrangements to determine whether such arrangements contain more than one unit of accounting. Multiple-element arrangements require the delivery or performance of multiple solutions, services and/or right-to-use assets. To qualify as a separate unit of accounting, the delivered item must have value to the client on a stand-alone basis. An item has stand-alone value to a client when it can be sold separately by any vendor or the client could resell the item on a stand-alone basis. We have a defined pricing methodology for all elements of the arrangement and proper review of pricing to ensure adherence to our policies. Pricing decisions include cross-functional teams of senior management, which use market conditions, expected contribution margin, size of the client’s organization and pricing history for similar solutions when establishing the selling price. Software as a Service We use ESP to determine the value for a software-as-a-service arrangement as we cannot establish VSOE, and TPE is not a practical alternative due to differences in functionality from our competitors. Similar to proprietary license sales, pricing decisions rely on the relative size of the client purchasing the solution. Typically, revenue recognition commences once the client goes live on the system and is recognized ratably over the contract term. Systems Sales We use the residual method to determine fair value for proprietary perpetual software licenses sold in a multi-element arrangement. Under the residual method, we allocate the total value of the arrangement first to the undelivered elements based on their VSOE and allocate the remainder to the proprietary perpetual software license fees. Typically, pricing decisions for proprietary software rely on the relative size and complexity of the client purchasing the solution. Third-party components are resold at prices based on a cost-plus margin analysis. The proprietary software and third-party components do not need any significant modification to achieve their intended use. When these revenues meet all criteria for revenue recognition, and are determined to be separate units of accounting, revenue is recognized. Typically, this is upon shipment of components or electronic download of software. Maintenance and Support Services The maintenance and support components are not essential to the functionality of the software, and clients renew maintenance contracts separately from software purchases at renewal rates materially similar to the initial rate charged for maintenance on the initial purchase of software. We use VSOE of fair value to determine fair value of maintenance and support services. Rates are set based on market rates for these types of services, and our rates are comparable to rates charged by our competitors, which are based on the knowledge of the marketplace by senior management. Generally, maintenance and support is calculated as a percentage of the list price of the proprietary license being purchased by a client. Clients have the option of purchasing additional annual maintenance service renewals each year for which rates are not materially different from the initial rate but typically include a nominal rate increase based on the consumer price index. Annual maintenance and support agreements entitle clients to technology support, version upgrades, bug fixes and service packs. Term Licenses We cannot establish VSOE fair value of the undelivered element in term license arrangements. However, as the only undelivered element is post-contract customer support, the entire fee is recognized ratably over the contract term. Typically, revenue recognition commences once the client goes live on the system. Similar to proprietary license sales, pricing decisions rely on the relative size of the client purchasing the solution. Software-Based Solution Professional Services Professional services components that are not essential to the functionality of the software, from time to time, are sold separately by us. Similar services are sold by other vendors, and clients can elect to perform similar services in-house. When professional services revenues are a separate unit of accounting, revenues are recognized as the services are performed. We use VSOE of fair value based on the hourly rate charged when services are sold separately, to determine fair value of professional services. We typically sell professional services on an hourly or fixed fee basis. We recognize hourly fees in revenue as services are rendered and fixed fee projects are recognized using the percentage-of-completion method or upon acceptance based on the contract language. We monitor projects to assure that the expected and historical rate earned remains within a reasonable range to the established selling price. Professional services components related to SaaS are essential to the functionality of the software and are not considered a separate unit of accounting . We recognize revenue ratably over the life of the client, which approximates the duration of the initial contract term. We defer the associated direct costs for salaries and benefits expense for professional services contracts. These deferred costs will be amortized over the identical term as the associated revenues. As of January 31, 2018 and 2017, we had deferred costs of $471,000 and $500,000, respectively, net of accumulated amortization of $312,000 and $370,000, respectively. Amortization expense of these costs was $270,000 and $254,000 in fiscal 2017 and 2016, respectively. Audit Services Professional services relating to audit services are provided separately from software solutions, even those that may relate to coding and coding audit processes. These services are not essential to any software offering and are a separate unit of accounting. Accordingly, the revenues are recognized as the services are performed. Concentrations Financial instruments, which potentially expose the Company to concentrations of credit risk, consist primarily of accounts receivable. The Company’s accounts receivable are concentrated in the healthcare industry. However, the Company’s clients typically are well-established hospitals, medical facilities or major health information systems companies that resell the Company’s solutions that have good credit histories. Payments from clients have been received within normal time frames for the industry. However, some hospitals and medical facilities have experienced significant operating losses as a result of limits on third-party reimbursements from insurance companies and governmental entities and extended payment of receivables from these entities is not uncommon. To date, the Company has relied on a limited number of clients and remarketing partners for a substantial portion of its total revenues. The Company expects that a significant portion of its future revenues will continue to be generated by a limited number of clients and its remarketing partners. The Company currently buys all of its hardware and some major software components of its healthcare information systems from third-party vendors. Although there are a limited number of vendors capable of supplying these components, management believes that other suppliers could provide similar components on comparable terms. Business Combinations The assets acquired, liabilities assumed and contingent consideration are recorded at their fair value on the acquisition date with subsequent changes recognized in earnings. These estimates are inherently uncertain and are subject to refinement. Management develops estimates based on assumptions as a part of the purchase price allocation process to value the assets acquired and liabilities assumed as of the business combination date. As a result, the Company may recognize adjustments to provisional amounts of assets acquired or liabilities assumed in operating expenses in the reporting period in which the adjustments are determined. The Company records acquisition and transaction related expenses in the period in which they are incurred. Acquisition and transaction-related expenses primarily consist of legal, banking, accounting and other advisory fees of third parties associated with potential acquisitions. Goodwill and Intangible Assets Goodwill and other intangible assets were recognized in conjunction with the Interpoint, Meta, CLG and Opportune IT acquisitions, as well as the Unibased acquisition (prior to divestiture of such assets). Identifiable intangible assets include purchased intangible assets with finite lives, which primarily consist of internally-developed software, client relationships, supplier agreements, non-compete agreements, customer contracts and license agreements. Finite-lived purchased intangible assets are amortized over their expected period of benefit, which generally ranges from one to 15 years, using the straight-line and undiscounted expected future cash flows methods. See Note 3 - Acquisitions and Divestitures for information on the sale of our Streamline Health® Patient Engagement suite of solutions in fiscal 2016, which the Company obtained in connection with its acquisition of Unibased in February 2014. The Company assesses the useful lives and possible impairment of intangible assets when an event occurs that may trigger such a review. Factors considered important which could trigger a review include:
Determining whether a triggering event has occurred involves significant judgment by the Company. The Company assesses goodwill annually (as of November 1), or more frequently when events and circumstances, such as the ones mentioned above, occur indicating that the recorded goodwill may be impaired. During the years ended January 31, 2018 and 2017, the Company did not note any of the above qualitative factors, which would be considered a triggering event for impairment. In assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of a reporting unit. The identification of relevant events and circumstances and how these may impact a reporting unit's fair value or carrying amount involve significant judgments by management. These judgments include the consideration of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, events which are specific to the Company and trends in the market price of the Company's common stock. Each factor is assessed to determine whether it impacts the impairment test positively or negatively, and the magnitude of any such impact. The two-step goodwill impairment test requires the Company to identify its reporting units and to determine estimates of the fair values of those reporting units as of the impairment testing date. Reporting units are determined based on the organizational structure the entity has in place at the date of the impairment test. A reporting unit is an operating segment or component business unit with the following characteristics: (a) it has discrete financial information, (b) segment management regularly reviews its operating results (generally an operating segment has a segment manager who is directly accountable to and maintains regular contact with the chief operating decision maker to discuss operating activities, financial results, forecasts or plans for the segment), and (c) its economic characteristics are dissimilar from other units (this contemplates the nature of the products and services, the nature of the production process, the type or class of customer for the products and services and the methods used to distribute the products and services). The Company determined that it has one operating segment and one reporting unit. To conduct a quantitative two-step goodwill impairment test, the fair value of the reporting unit is first compared to its carrying value. If the reporting unit's carrying value exceeds its fair value, the Company performs the second step and records an impairment loss to the extent that the carrying value of goodwill exceeds its implied fair value. The Company estimates the fair value of its reporting unit using a blend of market and income approaches. The market approach consists of two separate methods, including reference to the Company's market capitalization, as well as the guideline publicly traded company method. The market capitalization valuation method is based on an analysis of the Company's stock price on and around the testing date, plus a control premium. The guideline publicly traded company method was made by reference to a list of publicly traded software companies providing services to healthcare organizations, as determined by management. The market value of common equity for each comparable company was derived by multiplying the price per share on the testing date by the total common shares outstanding, plus a control premium. Selected valuation multiples are then determined and applied to appropriate financial statistics based on the Company's historical and forecasted results. The Company estimates the fair value of its reporting unit using the income approach, via discounted cash flow valuation models which include, but are not limited to, assumptions such as a “risk-free” rate of return on an investment, the weighted average cost of capital of a market participant and future revenue, operating margin, working capital and capital expenditure trends. Determining the fair value of reporting unit and goodwill includes significant judgment by management, and different judgments could yield different results. The Company performed its annual assessment of goodwill during the fourth quarter of fiscal 2017, using the two-step approach described above. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. Based on the analysis performed for step one, the fair value of the reporting unit exceeded the carrying amount of the reporting unit, including goodwill, and, therefore, an impairment loss was not recognized. As the Company passed step one of the analysis, step two was not required. Severances From time to time, we will enter into termination agreements with associates that may include supplemental cash payments, as well as contributions to health and other benefits for a specific time period subsequent to termination. In fiscal 2017 and 2016, we incurred $58,000 and $360,000 in severance expenses, respectively. At January 31, 2018 and 2017, we had accrued for zero and $9,000 in severances, respectively. Equity Awards The Company accounts for share-based payments based on the grant-date fair value of the awards with compensation cost recognized as expense over the requisite service period. The Company incurred total annual compensation expense related to stock-based awards of $1,109,000 and $1,787,000 in fiscal 2017 and 2016, respectively. The fair value of the stock options granted in fiscal 2017 and 2016 was estimated at the date of grant using a Black-Scholes option pricing model. Option pricing model input assumptions such as expected term, expected volatility and risk-free interest rate impact the fair value estimate. Further, the forfeiture rate impacts the amount of aggregate compensation. These assumptions are subjective and are generally derived from external (such as, risk-free rate of interest) and historical data (such as, volatility factor, expected term and forfeiture rates). Future grants of equity awards accounted for as stock-based compensation could have a material impact on reported expenses depending upon the number, value and vesting period of future awards. The Company issues restricted stock awards in the form of Company common stock. The fair value of these awards is based on the market close price per share on the grant date. The Company expenses the compensation cost of these awards as the restriction period lapses, which is typically a one-year service period to the Company. In fiscal 2017 and 2016, 32,033 and 8,241 shares of common stock were surrendered to the Company to satisfy tax withholding obligations totaling $42,000 and $12,000, respectively, in connection with the vesting of restricted stock awards. Shares surrendered by the restricted stock award recipients in accordance with the applicable plan are deemed canceled, and therefore are not available to be reissued. The Company awarded 220,337 and 828,225 shares of restricted stock to officers and directors of the Company in fiscal 2017 and 2016, respectively. Common Stock Warrants As of January 31, 2018 and 2017, the fair value of the common stock warrants was computed using the Black-Scholes option pricing model based on assumptions regarding annual volatility, risk-free rate, dividend yield and expected life. The model also includes assumptions to account for anti-dilutive provisions within the warrant agreement. The warrants expired on February 16, 2018. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax credit and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing net deferred tax assets, the Company considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The Company establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. See Note 8 - Income Taxes for further details. The Company provides for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether certain tax positions are more likely than not to be sustained upon examination by tax authorities. At January 31, 2018, the Company believes it has appropriately accounted for any uncertain tax positions. The Company has recorded $286,000 and $263,000 in reserves for uncertain tax positions and corresponding interest and penalties, respectively, as of January 31, 2018 and January 31, 2017. Net Loss Per Common Share The Company presents basic and diluted earnings per share (“EPS”) data for its common stock. Basic EPS is calculated by dividing the net loss attributable to common stockholders of the Company by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is calculated based on the profit or loss attributable to common stockholders and the weighted average number of shares of common stock outstanding adjusted for the effects of all potential dilutive common stock issuances related to options, unvested restricted stock, warrants and convertible preferred stock. Potential common stock dilution related to outstanding stock options, unvested restricted stock and warrants is determined using the treasury stock method, while potential common stock dilution related to Series A Convertible Preferred Stock is determined using the “if converted” method. The Company's unvested restricted stock awards and Series A Convertible Preferred Stock are considered participating securities under ASC 260, Earnings Per Share, which means the security may participate in undistributed earnings with common stock. The Company's unvested restricted stock awards are considered participating securities because they entitle holders to non-forfeitable rights to dividends or dividend equivalents during the vesting term. The holders of the Series A Convertible Preferred Stock would be entitled to share in dividends, on an as-converted basis, if the holders of common stock were to receive dividends, other than dividends in the form of common stock. In accordance with ASC 260, a company is required to use the two-class method when computing EPS when a company has a security that qualifies as a “participating security.” The two-class method is an earnings allocation formula that determines EPS for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. In determining the amount of net earnings to allocate to common stockholders, earnings are allocated to both common and participating securities based on their respective weighted-average shares outstanding for the period. Diluted EPS for the Company's common stock is computed using the more dilutive of the two-class method or the if-converted method. In accordance with ASC 260, securities are deemed not to be participating in losses if there is no obligation to fund such losses. For the years ended January 31, 2018 and 2017, the unvested restricted stock awards and the Series A Preferred Stock were deemed not to be participating since there was a net loss from operations. As of both January 31, 2018 and 2017, there were 2,949,995 shares of preferred stock outstanding, each share being convertible into one share of the Company's common stock. For the years ended January 31, 2018 and 2017, 293,568 and 377,135, respectively, unvested restricted shares of common stock were excluded from the diluted EPS calculation as their effect would have been anti-dilutive. The following is the calculation of the basic and diluted net loss per share of common stock:
Diluted net loss per share excludes the effect of 2,173,156 and 2,100,480 outstanding stock options in fiscal 2017 and 2016, respectively. The inclusion of these shares would have been anti-dilutive. For fiscal 2017 and 2016, the outstanding common stock warrants of 1,400,000 would have an anti-dilutive effect if included in Diluted EPS and, therefore, were not included in the calculation. Loss Contingencies We are subject to the possibility of various loss contingencies arising in the course of business. We consider the likelihood of the loss or impairment of an asset or the incurrence of a liability as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether to accrue for a loss contingency and adjust any previous accrual. Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 defines a five-step process to achieve this principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2016, the FASB delayed the effective date by one year and the guidance became effective for us on February 1, 2018. The new revenue recognition guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application as an adjustment to retained earnings (modified retrospective method). We have decided to adopt the standard effective February 1, 2018 using the modified retrospective method. We have completed our assessment of our systems, available data and processes that will be affected by the implementation of this new revenue recognition guidance. The Company’s formal accounting policies have been established. As a result of the implementation of this standard, the Company expects to record an adjustment to increase retained earnings as of February 1, 2018. At this time, we estimate this increase to be approximately $1.4 million, related primarily to the timing of revenue. The most significant impact relates to our accounting for term software license revenue. We expect revenue related to SaaS-based offerings, hardware sales, maintenance and support, and audit services to remain substantially unchanged. For arrangements which include both software license and maintenance and support components, we expect to recognize the revenue attributed to license upfront at a point in time rather than over the term of the contract. We also expect to recognize license revenues upfront rather than be restricted to payment amounts due under extended payment term contracts as required under the previous guidance. Due to the complexity of certain of our license contracts, the actual revenue license recognition treatment will be dependent on contract-specific terms and may vary in some instances from upfront recognition and be delayed until acceptance from the client is obtained and documented. Additionally, the new revenue recognition guidance requires the capitalization of all incremental costs of obtaining a contract with a customer that an entity expects to recover. We currently already capitalize sales commissions associated with new and renewal contracts. As part of our implementation efforts, we did not identify any other costs that would be eligible for capitalization under the new guidance. As result, we do not expect to record any deferral for such costs upon adoption of the new guidance on February 1, 2018. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The update will be effective for us on February 1, 2019. Early adoption of the update is permitted. We are currently evaluating the impact of the adoption of this update on our consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to clarify how certain cash receipts and cash payments should be presented and classified in the statement of cash flows. The ASU should be applied using a retrospective transition method to each period presented. The standard became effective for us on February 1, 2018. Early adoption of this update is permitted. We are currently evaluating the impact of the adoption of this new standard on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, to clarify the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard became effective for us on February 1, 2018. We do not expect that the adoption of this ASU will have a significant impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which removes Step 2 from the goodwill impairment test. The standard will be effective for us on February 1, 2020. Early adoption of this update is permitted. We do not expect that the adoption of this ASU will have a significant impact on our consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting, to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The update became effective for us on February 1, 2018. We do not expect that the adoption of this ASU will have a significant impact on our consolidated financial statements. |
Acquisitions and Divestitures |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS AND DIVESTITURES | ACQUISITIONS AND DIVESTITURES Acquisition of Interpoint Partners, LLC On December 7, 2011, the Company completed the acquisition of substantially all of the assets of Interpoint Partners, LLC (“Interpoint”) for a total initial purchase price of $5,124,000, consisting of cash of $2,124,000 and issuance of a convertible subordinated note for $3,000,000. The note was converted into 1,529,729 shares of common stock on June 15, 2012 at a price of $2.00 per share. All consideration was paid prior to fiscal year 2016. Acquisition of Meta Health Technology, Inc. On August 16, 2012, the Company acquired substantially all of the outstanding stock of Meta Health Technology, Inc., a New York corporation (“Meta”) for a total purchase price of approximately $14,790,000, consisting of cash payment of $13,288,000 and the issuance of 393,086 shares of our common stock at an agreed upon price of $4.07 per share. As of October 31, 2012 the Company had acquired 100% of Meta’s outstanding shares, and the Company merged Meta with and into the Company on January 30, 2014. All consideration was paid prior to fiscal year 2016. Acquisition of a Montefiore Medical Center Solution On October 25, 2013, we entered into a Software License and Royalty Agreement (the “Royalty Agreement”) with Montefiore Medical Center (“Montefiore”) pursuant to which it entered into an agreement for an exclusive, worldwide 15-year license of Montefiore’s proprietary clinical analytics platform solution, Clinical Looking Glass® (“CLG”), now known as our Clinical Analytics solution. In addition, Montefiore assigned to us the existing license agreement with a customer using CLG. As consideration under the Royalty Agreement, Streamline paid Montefiore a one-time initial base royalty fee of $3,000,000, and we are obligated to pay on-going quarterly royalty amounts related to future sublicensing of CLG by Streamline. Additionally, Streamline has committed that Montefiore will receive at least an additional $3,000,000 of on-going royalty payments within the first six and one-half years of the license term. As of January 31, 2018 and 2017, the present value of this royalty liability was $2,469,000 and $2,351,000, respectively. Acquisition of Unibased Systems Architecture, Inc. and Related Divestiture On February 3, 2014, we completed the acquisition of Unibased Systems Architecture, Inc. (“Unibased”), a provider of patient access solutions, including enterprise scheduling and surgery management software, for healthcare organizations throughout the United States, pursuant to an Agreement and Plan of Merger dated January 16, 2014 (the “Merger Agreement”). The total purchase price for Unibased was $6,500,000, subject to net working capital and other customary adjustments. On December 1, 2016, we received a cash payment of $2,000,000 for the sale of our Streamline Health® Patient Engagement suite of solutions, which is based upon the legacy ForSite2020 solution acquired from Unibased in February 2014. As a result, we recognized a gain on sale of business of $238,000 in fiscal 2016, which represents the amount by which the sale proceeds exceeded net assets associated with Patient Engagement operations, including accounts receivable, intangible assets and deferred revenue. We used the proceeds to make two prepayments of $500,000 on our term loan with Wells Fargo, one in the fourth quarter of fiscal 2016 and another in the second quarter of fiscal 2017. Acquisition of Opportune IT Healthcare Solutions, Inc. On September 8, 2016, we completed the acquisition of substantially all of the assets of Opportune IT Healthcare Solutions, Inc. (“Opportune IT”), a provider of coding compliance, recovery audit contractor consulting and ICD-10 readiness and training services to hospitals, physicians and medical groups. As consideration under the asset purchase agreement, we made a cash payment for the total purchase price of $1,400,000. The Company also assumed certain current operating liabilities of Opportune IT. The purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date as follows:
The operating results of Opportune IT are not material for purposes of proforma disclosure. |
Derivative Liabilities |
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Other Liabilities Disclosure [Abstract] | |
DERIVATIVE LIABILITIES | DERIVATIVE LIABILITIES As discussed further in Note 14 - Private Placement Investment, in conjunction with the 2012 private placement investment, the Company issued common stock warrants exercisable for up to 1,200,000 shares of common stock at an exercise price of $3.99 per share until February 16, 2018. The warrants were initially classified in stockholders' equity as additional paid-in capital at the allocated amount, net of allocated transaction costs of $1,425,000. Effective October 31, 2012, upon stockholder approval of anti-dilution provisions that reset the warrants’ exercise price if a dilutive issuance occurs, the warrants were reclassified as non-current derivative liabilities. The fair value of the warrants was $4,139,000 at October 31, 2012, with the difference between the fair value and carrying value recorded to additional paid-in capital. Effective as of the reclassification as derivative liabilities, the warrants are re-valued at each reporting date, with changes in fair value recognized in earnings each reporting period as a credit or charge to miscellaneous income (expense). The fair value of the warrants at January 31, 2018 and 2017 was zero and $46,000, respectively. The change in fiscal 2017 and 2016 reflects $46,000 and $159,000, respectively, of miscellaneous income recognized in the consolidated statements of operations as a result of decreases in the fair value of the warrants. The estimated fair value of the warrants liabilities as of January 31, 2017 was computed using the Black-Scholes option pricing model based on the following assumptions: annual volatility of 62.6%, risk-free rate of 0.5%, dividend yield of 0.0% and expected life of one year. The estimated fair value of the warrants liabilities as of January 31, 2018 was computed using the Black-Scholes option pricing model based on the following assumptions: annual volatility of 57.4%, risk-free rate of 0.0%, dividend yield of 0.0% and expected life of zero years. |
Operating Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OPERATING LEASES | OPERATING LEASES The Company rents office space and equipment under non-cancelable operating leases that expire at various times through fiscal year 2022. Future minimum lease payments under non-cancelable operating leases for the next five fiscal years are as follows:
Rent and leasing expense for facilities and equipment was $1,234,000 and $1,271,000 for fiscal years 2017 and 2016, respectively. |
Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT | DEBT Term Loan and Line of Credit On November 21, 2014, we entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, N.A., as administrative agent, and other lender parties thereto. Pursuant to the Credit Agreement, the lenders agreed to provide a $10,000,000 senior term loan and a $5,000,000 revolving line of credit to our primary operating subsidiary. Amounts outstanding under the Credit Agreement bear interest at either LIBOR or the base rate, as elected by the Company, plus an applicable margin. Subject to the Company’s leverage ratio, under the terms of the original Credit Agreement, the applicable LIBOR rate margin varied from 4.25% to 5.25%, and the applicable base rate margin varied from 3.25% to 4.25%. Pursuant to the terms of the amendment to the Credit Agreement entered into as of April 15, 2015, the applicable LIBOR rate margin was amended to vary from 4.25% to 6.25%, and the applicable base rate margin was amended to vary from 3.25% to 5.25%. The term loan and line of credit mature on November 21, 2019 and provide support for working capital, capital expenditures and other general corporate purposes, including permitted acquisitions. The outstanding senior term loan is secured by substantially all of our assets. The senior term loan principal balance is payable in quarterly installments, which started in March 2015 and will continue through the maturity date, with the full remaining unpaid principal balance due at maturity. In November 2014, the Company repaid indebtedness under its prior credit facility using approximately $7,400,000 of the proceeds provided by the term loan. The prior credit facility with Fifth Third Bank was terminated concurrent with the entry into the Credit Agreement. Financing costs of $355,000 associated with the new credit facility are being amortized over its term on a straight-line basis, which is not materially different from the effective interest method. The Credit Agreement includes customary financial covenants, including the requirements that the Company maintain minimum liquidity and achieve certain minimum EBITDA levels (as defined in the Credit Agreement). In addition, the Credit Agreement prohibits the Company from paying dividends on the common and preferred stock. Pursuant to the terms of the third amendment to the Credit Agreement entered into as of June 19, 2017, the Company is required to maintain minimum liquidity of at least (i) $5,000,000 through January 31, 2018, (ii) $4,000,000 from February 1, 2018 through and including January 31, 2019, and (iii) $3,000,000 from February 1, 2019 through and including the maturity date of the credit facility. The following table shows our minimum trailing four quarter period EBITDA covenant thresholds, as modified by the third amendment to the Credit Agreement:
The Company was in compliance with the applicable financial loan covenants at January 31, 2018. As of January 31, 2018, the Company had no outstanding borrowings under the revolving line of credit, and had accrued $18,000 in unused line fees. Based upon the borrowing base formula set forth in the Credit Agreement, as of January 31, 2018, the Company had access to the full amount of the $5,000,000 revolving line of credit. Outstanding principal balances on debt consisted of the following at:
In May 2016, as a result of excess cash flows achieved as of January 31, 2016 and as required pursuant to the mandatory prepayment provisions of the Credit Agreement, we made a $1,738,000 payment of principal towards the term loan with Wells Fargo. We used the proceeds from the sale of our Patient Engagement suite of solutions to make two prepayments on our term loan with Wells Fargo, one in December 2016 and one in June 2017, each in the amount of $500,000. As a result of these prepayments, the schedule of future principal payments was revised to reduce each future principal payment on a pro rata basis. Future principal repayments of debt consisted of the following at January 31, 2018:
_______________ (1) Term loan balance on the consolidated balance sheet is reported net of deferred financing costs of $128,000. |
Goodwill and Intangible Assets |
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GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS The goodwill activity is summarized as follows:
Intangible assets, net, consist of the following:
Amortization over the next five fiscal years for intangible assets is estimated as follows:
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | INCOME TAXES Income taxes consist of the following:
The income tax benefit differs from the amount computed using the federal statutory income tax rate of 32.9 percent as follows:
The Company provides deferred income taxes for temporary differences between assets and liabilities recognized for financial reporting and income tax purposes. The income tax effects of these temporary differences and credits are as follows:
At January 31, 2018, the Company had U.S. federal net operating loss carry forwards of $45,973,000, which expire at various dates through fiscal 2037. The Company also had state net operating loss carry forwards of $18,230,000, which expire through fiscal 2037. Federal and state R&D credit carry forwards will expire through fiscal 2037 and 2027, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company established a valuation allowance of $11,813,000 and $16,318,000 at January 31, 2018 and 2017, respectively. The decrease in the valuation allowance of $4,505,000 was driven primarily by the federal tax rate change from the passage of the Tax Cuts and Jobs Act. 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, 2013. All material state and local income tax matters have been concluded for years through January 31, 2012. The Company is no longer subject to IRS examination for periods prior to the tax year ended January 31, 2013; however, carryforward losses that were generated prior to the tax year ended January 31, 2013 may still be adjusted by the IRS if they are used in a future period. The Company has recorded a reserve, including interest and penalties, for uncertain tax positions of $286,000 and $263,000 as of January 31, 2018 and 2017, respectively. As of January 31, 2018 and 2017, the Company had no accrued interest and penalties associated with unrecognized tax benefits. A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest and penalties) is as follows:
Impact of the Tax Cuts and Jobs Act The Tax Act was signed into law on December 22, 2017. Among other things, the Tax Act reduces the U.S. federal corporate tax rate from 34.0 percent to 21.0 percent effective January 1, 2018 and allows for 100 percent expensing of certain fixed assets placed in service after September 27, 2017. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations where a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to finalize the calculations for certain income tax effects of the Tax Cuts and Jobs Act. In accordance with SAB 118, the Company has determined that the net tax expense of $5.8 million recorded in connection with the tax effect of the Tax Act is a provisional amount and a reasonable estimate as of January 31, 2018. Additional work is necessary to finalize the calculation for certain income tax effects of the Tax Cuts and Jobs Act, which we expect to complete with the filing of our 2017 U.S. federal income tax return. |
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Segment Reporting [Abstract] | |
MAJOR CLIENTS | MAJOR CLIENTS During fiscal year 2017, no individual client accounted for 10% or more of our total revenues. Two clients represented 12% and 11%, respectively, of total accounts receivable as of January 31, 2018. During fiscal year 2016, one individual client accounted for 10% or more of our total revenues. Three clients each represented 11% of total accounts receivable as of January 31, 2017. |
Employee Retirement Plan |
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Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |
EMPLOYEE RETIREMENT PLAN | EMPLOYEE RETIREMENT PLAN The Company has established a 401(k) retirement plan that covers all associates. Company contributions to the plan may be made at the discretion of the board of directors. The Company matches 100% up to the first 4% of compensation deferred by each associate in the 401(k) plan. The total compensation expense for this matching contribution was $524,000 and $541,000 in fiscal 2017 and 2016, respectively. |
Employee Stock Purchase Plan |
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Jan. 31, 2018 | |
Employee Stock Ownership Plan (ESOP), Shares in ESOP [Abstract] | |
EMPLOYEE STOCK PURCHASE PLAN | EMPLOYEE STOCK PURCHASE PLAN The Company has an Employee Stock Purchase Plan under which associates may purchase up to 1,000,000 shares of common stock. Under the plan, eligible associates may elect to contribute, through payroll deductions, up to 10% of their base pay to a trust during any plan year, i.e., January 1 through December 31 of the same year. Semi-annually, typically in January and July of each year, the plan issues, for the benefit of the employees, shares of common stock at the lesser of (a) 85% of the fair market value of the common stock on the first day of the vesting period (January 1 or July 1), or (b) 85% of the fair market value of the common stock on the last day of the vesting period (June 30 or December 31 of the same year). At January 31, 2018, 455,265 shares remain that can be purchased under the plan. The Company recognized compensation expense of $19,000 and $5,000 for fiscal years 2017 and 2016, respectively, under this plan. During fiscal 2017, 21,234 shares were purchased at the price of $0.98 per share and 26,048 shares were purchased at the price of $0.91 per share; during fiscal 2016, 25,617 shares were purchased at the price of $1.02 per share. The cash received for shares purchased from the plan was $45,000 and $26,000 in fiscal 2017 and 2016, respectively. The purchase price at June 30, 2018 will be 85% of the lower of (a) the closing price on January 2, 2018 ($1.68) or (b) the closing price on June 30, 2018. |
Stock-Based Compensation |
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Employee Stock Ownership Plan (ESOP), Shares in ESOP [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION Stock Option Plans The Company’s Second Amended and Restated 2013 Stock Incentive Plan (the “2013 Plan”) replaced the 2005 Incentive Compensation Plan (the “2005 Plan”). Under these plans, the Company is authorized to issue equity awards (stock options, stock appreciation rights or “SARs”, and restricted stock) to directors and associates of the Company. Outstanding awards under the 2005 Plan continue to be governed by the terms of the 2005 Plan until exercised, expired or otherwise terminated or canceled, but no further equity awards are allowed to be granted under the 2005 Plan. Under the 2013 Plan, the Company is authorized to issue a number of shares not to exceed (i) 2,300,000 plus (ii) the number of shares remaining available for issuance under the 2005 Plan as of the date the 2005 Plan was replaced, plus (iii) the number of shares that become available under the 2005 Plan pursuant to forfeiture, termination, lapse, or satisfaction of a 2005 Plan award in cash or property other than shares of common stock. The options granted under the 2013 Plan and 2005 Plan have terms of ten years or less, and typically vest and become fully exercisable ratably over three years of continuous service to the Company from the date of grant. At January 31, 2018 and 2017, options to purchase 1,873,156 and 1,800,480 shares of the Company’s common stock, respectively, have been granted and are outstanding. There are no SARs outstanding. In fiscal 2016 and 2014, inducement grants were approved by the Company’s Board of Directors pursuant to NASDAQ Marketplace Rule 5635(c)(4). The terms of the grants were nearly identical to the terms and conditions of the Company’s stock incentive plans in effect at the time of each inducement grant. For the year ended January 31, 2018, with regard to inducement grants, no stock options were issued, no options expired, no options were forfeited and no stock options were exercised. For the year ended January 31, 2017, with regard to inducement grants, 75,000 stock options were issued, no options expired, no options were forfeited and no stock options were exercised. As of both January 31, 2018 and 2017, there were 300,000 options outstanding. Please see “Restricted Stock” section for information on the restricted shares. A summary of stock option activity follows:
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For fiscal 2017 and 2016, the weighted average grant date fair value of options granted during the year was $0.65 and $0.79, respectively, and the total intrinsic value of options exercised during the year was zero for both fiscal years. The fiscal 2017 and 2016 stock-based compensation was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for each fiscal year:
At January 31, 2018, there was $320,000 of unrecognized compensation cost related to non-vested stock-option awards. That cost is expected to be recognized over a remaining weighted average period of 1.2 years. The expense associated with stock option awards was $563,000 and $1,321,000, respectively, for fiscal 2017 and 2016. Cash received from the exercise of options was zero in both fiscal 2017 and 2016. Cash received from purchases pursuant to the Employee Stock Purchase Plan was $45,000 and $26,000, respectively, in fiscal 2017 and 2016. The 2005 Plan and the 2013 Plan contain change in control provisions whereby any outstanding equity awards under the plans subject to vesting, which have not fully vested as of the date of the change in control, shall automatically vest and become immediately exercisable. One of the change in control provisions is deemed to occur if there is a change in beneficial ownership, or authority to vote, directly or indirectly, of securities representing 20% or more of the total of all of the Company’s then-outstanding voting securities, unless through a transaction arranged by or consummated with the prior approval of the Board of Directors. Other change in control provisions relate to mergers and acquisitions or a determination of change in control by the Company’s Board of Directors. Restricted Stock The Company is authorized to grant restricted stock awards to associates and directors under the 2013 Plan. The Company has also issued restricted stock as inducement grants to certain new employees. The restrictions on the shares granted generally lapse over a one- to four-year term of continuous employment from the date of grant. The grant date fair value per share of restricted stock, which is based on the closing price of our common stock on the grant date, is expensed on a straight-line basis as the restriction period lapses. The shares represented by restricted stock awards are considered outstanding at the grant date, as the recipients are entitled to voting rights. A summary of restricted stock award activity for fiscal 2017 and 2016 is presented below:
At January 31, 2018, there was $741,000 of unrecognized compensation cost related to restricted stock awards. That cost is expected to be recognized over a remaining period of 1.3 years. The expense associated with restricted stock awards was $546,000 and $466,000, respectively, for fiscal 2017 and 2016. |
Commitments and Contingencies |
12 Months Ended |
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Jan. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Litigation We are, from time to time, a party to various legal proceedings and claims, which arise in the ordinary course of business. We are not aware of any legal matters that could have a material adverse effect on the Company’s consolidated results of operations, financial position or cash flows. |
Private Placement Investment |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRIVATE PLACEMENT INVESTMENT | PRIVATE PLACEMENT INVESTMENT On August 16, 2012, the Company completed a $12,000,000 private placement investment (“private placement investment”) with affiliated funds and accounts of Great Point Partners, LLC, Noro-Moseley Partners VI, L.P., and another investor. The investment consisted of the following instruments: issuance of 2,416,785 shares of a new Series A 0% Redeemable Convertible Preferred Stock (“Series A Preferred Stock”) at $3.00 per share, common stock warrants (“warrants”) exercisable for up to 1,200,000 shares of the Company's common stock at an exercise price of $3.99 per share and convertible subordinated notes payable in the aggregate principal amount of $5,699,577, which upon stockholder approval, converted into 1,583,210 shares of Series A Preferred Stock. The proceeds were allocated among the instruments based on their relative fair values as follows:
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The Company incurred legal, placement and other adviser fees of $1,894,000, including $754,000 in costs for warrants issued to placement agents. The total transaction costs were allocated among the instruments of the private placement investment based on their relative fair values as follows: $611,000 to subordinated convertible notes as deferred financing costs, $1,020,000 to Series A Preferred Stock as discount on Series A Preferred Stock and $263,000 to warrants as a charge to additional paid in capital. Series A Convertible Preferred Stock In connection with the private placement investment, the Company issued 2,416,785 shares of Series A Preferred Stock at $3.00 per share. Each share of the Series A Preferred Stock is convertible into one share of the Company's common stock. The price per share of Series A Preferred Stock and the conversion price for the common stock was less than the “market value” of the common stock of $3.82 (as defined in the rules of the Nasdaq Stock Market) on the date of execution of the definitive agreements. The Series A Preferred Stock does not pay a dividend, however, the holders are entitled to receive dividends on shares of Preferred Stock equal (on an as-if-converted-to-common-stock basis) to and in the same form as dividends (other than dividends in the form of common stock) actually paid on shares of the common stock. The Series A Preferred Stock has voting rights on a modified as-if-converted-to-common-stock-basis. The Series A Preferred Stock has a non-participating liquidation right equal to the original issue price plus accrued unpaid dividends, which are senior to the Company’s common stock. The Series A Preferred Stock can be converted to common shares at any time by the holders or, at the option of the Company, if the arithmetic average of the daily volume weighted average price of the common stock for the ten day period prior to the measurement date is greater than $8.00 per share and the average daily trading volume for the sixty day period immediately prior to the measurement date exceeds 100,000 shares. The conversion price is $3.00 per share, subject to certain adjustments. The allocation of the proceeds and transaction costs based on relative fair values of the instruments resulted in recognition of a discount on the Series A Preferred Stock of $4,410,000, including a discount attributable to a beneficial conversion feature of $2,686,000, which was fully amortized from the date of issuance to the earliest redemption date in fiscal 2016. For the years ended January 31, 2018 and 2017, the Company recognized zero and $876,000, respectively, of amortization of the discount on Series A Preferred Stock as deemed dividends charged to additional paid in capital, computed under the effective interest rate method. The value of the beneficial conversion feature is calculated as the difference between the effective conversion price of the Series A Preferred Stock and the fair market value of the common stock into which the Series A Preferred Stock are convertible at the commitment date. On November 1, 2012, upon shareholder approval, the convertible subordinated notes were converted into shares of Series A Convertible Preferred Stock. The convertible subordinated notes had an aggregate principal amount of $5,699,577 and converted into an aggregate of 1,583,210 shares of Preferred Stock. The Company recorded a loss upon conversion of $5,913,000, which represented the difference between the aggregate fair value of the Preferred Stock issued of $9,183,000, based on a $5.80 fair value per share, and the total of carrying value of the notes and unamortized deferred financing cost of $3,270,000. The shares of Series A Preferred Stock issued for the conversion of notes payable are recorded at their aggregate redemption value of $4,750,000 with the difference between the fair value and redemption value of $4,433,000 recorded as additional paid in capital. The fair value of the Preferred Stock was determined using a Monte-Carlo simulation based on the following assumptions: annual volatility of 75%, risk-free rate of 0.8% and dividend yield of 0.0%. The model also utilized the following assumptions to account for the conditions within the agreement: after four years, if the simulated common stock price fell below a price of $3.00 per share, the convertible preferred stock would automatically convert to common stock on a 1:1 basis moving forward at a price of $3.00 per share and a forced conversion if the simulated stock price exceeded $8.00 per share. At any time following August 31, 2016, subject to the Subordination and Intercreditor Agreement among the preferred stockholders, the Company and Wells Fargo, each share of Series A Preferred Stock is redeemable at the option of the holder for an amount equal to the initial issuance price of $3.00 (adjusted to reflect stock splits, stock dividends or like events) plus any accrued and unpaid dividends thereon. The Series A Preferred Stock are classified as temporary equity as the securities are redeemable solely at the option of the holder. In fiscal 2013, 1,050,000 shares of the Company's Series A Convertible Preferred Stock were converted into Common Stock. As a result, Series A Convertible Preferred Stock was reduced by $3,150,000, with the offsetting increase to Common Stock and Additional Paid-in Capital. As of January 31, 2018 and 2017, 2,949,995 shares of Series A Convertible Preferred Stock remained outstanding. Common Stock Warrants In conjunction with the private placement investment, the Company issued common stock warrants exercisable for up to 1,200,000 of the Company's common stock at an exercise price of $3.99 per share. The warrants expired on February 16, 2018. On October 19, 2012, the Company also issued 200,000 warrants to its placement agents as a portion of the fees for services rendered in connection with the private placement investment. The warrants are exercisable through April 30, 2018 at a stated exercise price of $4.06 per share and can be exercised in whole or in part. The warrants also include a cashless exercise option that allows the holder to receive a number of shares of common stock based on an agreed upon formula in exchange for the warrants rather than paying cash to exercise. The warrants have no reset provisions. The warrants had a grant date fair value of $754,000, and are classified as equity on the consolidated balance sheet. The estimated fair value of the warrants was determined by using Monte-Carlo simulations based on the following assumptions: annual volatility of 75%, risk-free rate of 0.9%, dividend yield of 0.0% and expected life of five years. The following table sets forth the warrants issued and outstanding as of January 31, 2018:
The fair value of the private placement warrants was zero and $46,000 at January 31, 2018 and 2017, respectively. No warrants were exercised or canceled during fiscal 2017 and 2016. |
Subsequent Events |
12 Months Ended |
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Jan. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS We have evaluated subsequent events through April 25, 2018 and have determined that there are no subsequent events after January 31, 2018 for which disclosure is required. |
Schedule II - Valuation and Qualifying Accounts and Reserves |
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Schedule II - Valuation and Qualifying Accounts and Reserves | Schedule II Valuation and Qualifying Accounts and Reserves Streamline Health Solutions, Inc. For the two years ended January 31, 2018
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Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation The consolidated financial statements include the accounts of Streamline Health Solutions, Inc. and its wholly-owned subsidiary, Streamline Health, Inc. All significant intercompany transactions and balances are eliminated in consolidation. |
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates and judgments, including those related to stock-based compensation, capitalization of software development costs, intangible assets, allowance for doubtful accounts, and income taxes. Actual results could differ from those estimates. |
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Cash and Cash Equivalents | Cash and Cash Equivalents Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash demand deposits. Cash deposits are placed in Federal Deposit Insurance Corporation (“FDIC”) insured financial institutions. Cash deposits may exceed FDIC insured levels from time to time. For purposes of the consolidated balance sheets and consolidated statements of cash flows, the Company considers all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents. |
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Receivables and Allowance for Doubtful Accounts | Receivables Accounts and contract receivables are comprised of amounts owed to the Company for licensed software, professional services, including coding audit and maintenance services, and software as a service and are presented net of the allowance for doubtful accounts. The timing of revenue recognition may not coincide with the billing terms of the client contract, resulting in unbilled receivables or deferred revenues; therefore certain contract receivables represent revenues recognized prior to client billings. Individual contract terms with clients or resellers determine when receivables are due. For billings where the criteria for revenue recognition have not been met, deferred revenue is recorded until all revenue recognition criteria have been met. Allowance for Doubtful Accounts In determining the allowance for doubtful accounts, aged receivables are analyzed monthly by management. Each identified receivable is reviewed based upon the most recent information available and the status of any open or unresolved issues with the client preventing the payment thereof. Corrective action, if necessary, is taken by the Company to resolve open issues related to unpaid receivables. During these monthly reviews, the Company determines the required allowances for doubtful accounts for estimated losses resulting from the unwillingness or inability of its clients or resellers to make required payments. |
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Concessions Accrual | Concessions Accrual In determining the concessions accrual, the Company evaluates historical concessions granted relative to revenue. The concession accrual included in accrued other expenses on the Company's consolidated balance sheet was $48,000 and $52,000 as of January 31, 2018 and 2017, respectively |
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Property and Equipment | Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method, over the estimated useful lives of the related assets. Estimated useful lives are as follows:
Depreciation expense for property and equipment in fiscal 2017 and 2016 was $774,000 and $1,100,000, respectively. Normal repair and maintenance is expensed as incurred. Replacements are capitalized and the property and equipment accounts are relieved of the items being replaced or disposed of, if no longer of value. The related cost and accumulated depreciation of the disposed assets are eliminated and any gain or loss on disposition is included in the results of operations in the year of disposal. |
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Leases | Leases On December 13, 2013, the Company entered into an amended lease obligation to lease 24,335 square feet of office space in Atlanta, Georgia. The lease commenced upon taking possession of the space and ends in November 2022. The provisions of the lease provided for rent abatement for the first eight months of the lease term. Upon taking possession of the premises, the rent abatement and the unamortized balance of deferred rent associated with the previously leased premises were aggregated with the total expected rental payments and are being amortized on a straight-line basis over the term of the lease. In fiscal 2014, the Company entered into a lease obligation to lease 10,350 square feet of office space in New York, New York. The lease commenced upon taking possession of the space and ends in November 2019. The lease agreement provided for rent abatement for the first two months of the lease term. Upon taking possession of the premises, the rent abatement was aggregated with the total expected rental payments, and is being amortized on a straight-line basis over the term of the lease. The Company had capital leases to finance office equipment purchases that continued into the third quarter of fiscal 2017. The amortization expense of the leased equipment is included in depreciation expense. As of January 31, 2018 and 2017, the Company had capital lease obligations outstanding totaling zero and $91,000, respectively |
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Debt Issuance Costs | Debt Issuance Costs Costs related to the issuance of debt are capitalized and amortized to interest expense on a straight-line basis, which is not materially different from the effective interest method, over the term of the related debt. Deferred financing costs are presented on the Company’s consolidated balance sheets as a direct deduction from the carrying amount of the non-current portion of our term loan. |
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Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company reviews the carrying value of long-lived assets whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Among the factors the Company considers in making the evaluation are changes in market position and profitability. If facts and circumstances are present which may indicate impairment is probable, the Company will prepare a projection of the undiscounted cash flows of the specific asset or asset group and determine if the long-lived assets are recoverable based on these undiscounted cash flows. If impairment is indicated, an adjustment will be made to reduce the carrying amount of these assets to their fair value. |
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Capitalized Software Development Costs | Capitalized Software Development Costs Software development costs associated with the planning and designing phase of software development, including coding and testing activities necessary to establish technological feasibility, are classified as research and development and are expensed as incurred. Once technological feasibility has been determined, a portion of the costs incurred in development, including coding, testing and quality assurance, are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. The Company capitalized such costs, including interest, of $1,836,000 and $1,979,000 in fiscal 2017 and 2016, respectively. The Company assumed $350,000 in internally-developed software costs in 2016 through the acquisition of Opportune IT, which is described in Note 3 - Acquisitions and Divestitures. Amortization for the Company's legacy software systems is provided on a solution-by-solution basis over the estimated economic life of the software, typically three to five years, using the straight-line method. Amortization commences when a solution is available for general release to clients. Acquired internally-developed software from acquisitions is amortized using the straight-line method. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments The FASB’s authoritative guidance on fair value measurements establishes a framework for measuring fair value, and expands disclosure about fair value measurements. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. Under this guidance, assets and liabilities carried at fair value must 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 that are not corroborated by market data. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. Cash and cash equivalents are classified as Level 1. The carrying amount of the Company’s long-term debt approximates fair value since the variable interest rates being paid on the amounts approximate the market interest rate. Long-term debt is classified as Level 2. |
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Revenue Recognition | Revenue Recognition We derive revenue from the sale of internally-developed software, either by licensing for local installation or by software as a service (“SaaS”) delivery model, through our direct sales force or through third-party resellers. Licensed, locally-installed clients on a perpetual model utilize our support and maintenance services for a separate fee, whereas term-based locally installed license fees and SaaS fees include support and maintenance. We also derive revenue from professional services that support the implementation, configuration, training and optimization of the applications, as well as audit services provided to help clients review their internal coding audit processes. Additional revenues are also derived from reselling third-party software and hardware components. We recognize revenue in accordance with Accounting Standards Codification (ASC) 985-605, Software-Revenue Recognition, ASC 605-25, Revenue Recognition — Multiple-Element Arrangements, and ASC 605-10-S99. We commence revenue recognition when all of the following criteria have been met:
If we determine that any of the above criteria have not been met, we will defer recognition of the revenue until all the criteria have been met. Maintenance and support and SaaS agreements are generally non-cancelable or contain significant penalties for early cancellation, although clients typically have the right to terminate their contracts for cause if we fail to perform material obligations. However, if non-standard acceptance periods, non-standard performance criteria or cancellation or right of refund terms are required, revenue is recognized upon the satisfaction of such criteria, as applicable. Multiple Element Arrangements We follow the accounting revenue guidance under Accounting Standards Update (ASU) 2009-13, Revenue Recognition (Topic 605), Multiple-Deliverable Revenue Arrangements — a consensus of the FASB Emerging Issues Task Force. Terms used in evaluation are as follows:
We follow accounting guidance for revenue recognition of multiple-element arrangements to determine whether such arrangements contain more than one unit of accounting. Multiple-element arrangements require the delivery or performance of multiple solutions, services and/or right-to-use assets. To qualify as a separate unit of accounting, the delivered item must have value to the client on a stand-alone basis. An item has stand-alone value to a client when it can be sold separately by any vendor or the client could resell the item on a stand-alone basis. We have a defined pricing methodology for all elements of the arrangement and proper review of pricing to ensure adherence to our policies. Pricing decisions include cross-functional teams of senior management, which use market conditions, expected contribution margin, size of the client’s organization and pricing history for similar solutions when establishing the selling price. Software as a Service We use ESP to determine the value for a software-as-a-service arrangement as we cannot establish VSOE, and TPE is not a practical alternative due to differences in functionality from our competitors. Similar to proprietary license sales, pricing decisions rely on the relative size of the client purchasing the solution. Typically, revenue recognition commences once the client goes live on the system and is recognized ratably over the contract term. Systems Sales We use the residual method to determine fair value for proprietary perpetual software licenses sold in a multi-element arrangement. Under the residual method, we allocate the total value of the arrangement first to the undelivered elements based on their VSOE and allocate the remainder to the proprietary perpetual software license fees. Typically, pricing decisions for proprietary software rely on the relative size and complexity of the client purchasing the solution. Third-party components are resold at prices based on a cost-plus margin analysis. The proprietary software and third-party components do not need any significant modification to achieve their intended use. When these revenues meet all criteria for revenue recognition, and are determined to be separate units of accounting, revenue is recognized. Typically, this is upon shipment of components or electronic download of software. Maintenance and Support Services The maintenance and support components are not essential to the functionality of the software, and clients renew maintenance contracts separately from software purchases at renewal rates materially similar to the initial rate charged for maintenance on the initial purchase of software. We use VSOE of fair value to determine fair value of maintenance and support services. Rates are set based on market rates for these types of services, and our rates are comparable to rates charged by our competitors, which are based on the knowledge of the marketplace by senior management. Generally, maintenance and support is calculated as a percentage of the list price of the proprietary license being purchased by a client. Clients have the option of purchasing additional annual maintenance service renewals each year for which rates are not materially different from the initial rate but typically include a nominal rate increase based on the consumer price index. Annual maintenance and support agreements entitle clients to technology support, version upgrades, bug fixes and service packs. Term Licenses We cannot establish VSOE fair value of the undelivered element in term license arrangements. However, as the only undelivered element is post-contract customer support, the entire fee is recognized ratably over the contract term. Typically, revenue recognition commences once the client goes live on the system. Similar to proprietary license sales, pricing decisions rely on the relative size of the client purchasing the solution. Software-Based Solution Professional Services Professional services components that are not essential to the functionality of the software, from time to time, are sold separately by us. Similar services are sold by other vendors, and clients can elect to perform similar services in-house. When professional services revenues are a separate unit of accounting, revenues are recognized as the services are performed. We use VSOE of fair value based on the hourly rate charged when services are sold separately, to determine fair value of professional services. We typically sell professional services on an hourly or fixed fee basis. We recognize hourly fees in revenue as services are rendered and fixed fee projects are recognized using the percentage-of-completion method or upon acceptance based on the contract language. We monitor projects to assure that the expected and historical rate earned remains within a reasonable range to the established selling price. Professional services components related to SaaS are essential to the functionality of the software and are not considered a separate unit of accounting . We recognize revenue ratably over the life of the client, which approximates the duration of the initial contract term. We defer the associated direct costs for salaries and benefits expense for professional services contracts. These deferred costs will be amortized over the identical term as the associated revenues. As of January 31, 2018 and 2017, we had deferred costs of $471,000 and $500,000, respectively, net of accumulated amortization of $312,000 and $370,000, respectively. Amortization expense of these costs was $270,000 and $254,000 in fiscal 2017 and 2016, respectively. Audit Services Professional services relating to audit services are provided separately from software solutions, even those that may relate to coding and coding audit processes. These services are not essential to any software offering and are a separate unit of accounting. Accordingly, the revenues are recognized as the services are performed. |
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Concentrations | Concentrations Financial instruments, which potentially expose the Company to concentrations of credit risk, consist primarily of accounts receivable. The Company’s accounts receivable are concentrated in the healthcare industry. However, the Company’s clients typically are well-established hospitals, medical facilities or major health information systems companies that resell the Company’s solutions that have good credit histories. Payments from clients have been received within normal time frames for the industry. However, some hospitals and medical facilities have experienced significant operating losses as a result of limits on third-party reimbursements from insurance companies and governmental entities and extended payment of receivables from these entities is not uncommon. To date, the Company has relied on a limited number of clients and remarketing partners for a substantial portion of its total revenues. The Company expects that a significant portion of its future revenues will continue to be generated by a limited number of clients and its remarketing partners. The Company currently buys all of its hardware and some major software components of its healthcare information systems from third-party vendors. Although there are a limited number of vendors capable of supplying these components, management believes that other suppliers could provide similar components on comparable terms. |
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Business Combinations | Business Combinations The assets acquired, liabilities assumed and contingent consideration are recorded at their fair value on the acquisition date with subsequent changes recognized in earnings. These estimates are inherently uncertain and are subject to refinement. Management develops estimates based on assumptions as a part of the purchase price allocation process to value the assets acquired and liabilities assumed as of the business combination date. As a result, the Company may recognize adjustments to provisional amounts of assets acquired or liabilities assumed in operating expenses in the reporting period in which the adjustments are determined. The Company records acquisition and transaction related expenses in the period in which they are incurred. Acquisition and transaction-related expenses primarily consist of legal, banking, accounting and other advisory fees of third parties associated with potential acquisitions. |
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Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill and other intangible assets were recognized in conjunction with the Interpoint, Meta, CLG and Opportune IT acquisitions, as well as the Unibased acquisition (prior to divestiture of such assets). Identifiable intangible assets include purchased intangible assets with finite lives, which primarily consist of internally-developed software, client relationships, supplier agreements, non-compete agreements, customer contracts and license agreements. Finite-lived purchased intangible assets are amortized over their expected period of benefit, which generally ranges from one to 15 years, using the straight-line and undiscounted expected future cash flows methods. See Note 3 - Acquisitions and Divestitures for information on the sale of our Streamline Health® Patient Engagement suite of solutions in fiscal 2016, which the Company obtained in connection with its acquisition of Unibased in February 2014. The Company assesses the useful lives and possible impairment of intangible assets when an event occurs that may trigger such a review. Factors considered important which could trigger a review include:
Determining whether a triggering event has occurred involves significant judgment by the Company. The Company assesses goodwill annually (as of November 1), or more frequently when events and circumstances, such as the ones mentioned above, occur indicating that the recorded goodwill may be impaired. During the years ended January 31, 2018 and 2017, the Company did not note any of the above qualitative factors, which would be considered a triggering event for impairment. In assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of a reporting unit. The identification of relevant events and circumstances and how these may impact a reporting unit's fair value or carrying amount involve significant judgments by management. These judgments include the consideration of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, events which are specific to the Company and trends in the market price of the Company's common stock. Each factor is assessed to determine whether it impacts the impairment test positively or negatively, and the magnitude of any such impact. The two-step goodwill impairment test requires the Company to identify its reporting units and to determine estimates of the fair values of those reporting units as of the impairment testing date. Reporting units are determined based on the organizational structure the entity has in place at the date of the impairment test. A reporting unit is an operating segment or component business unit with the following characteristics: (a) it has discrete financial information, (b) segment management regularly reviews its operating results (generally an operating segment has a segment manager who is directly accountable to and maintains regular contact with the chief operating decision maker to discuss operating activities, financial results, forecasts or plans for the segment), and (c) its economic characteristics are dissimilar from other units (this contemplates the nature of the products and services, the nature of the production process, the type or class of customer for the products and services and the methods used to distribute the products and services). The Company determined that it has one operating segment and one reporting unit. To conduct a quantitative two-step goodwill impairment test, the fair value of the reporting unit is first compared to its carrying value. If the reporting unit's carrying value exceeds its fair value, the Company performs the second step and records an impairment loss to the extent that the carrying value of goodwill exceeds its implied fair value. The Company estimates the fair value of its reporting unit using a blend of market and income approaches. The market approach consists of two separate methods, including reference to the Company's market capitalization, as well as the guideline publicly traded company method. The market capitalization valuation method is based on an analysis of the Company's stock price on and around the testing date, plus a control premium. The guideline publicly traded company method was made by reference to a list of publicly traded software companies providing services to healthcare organizations, as determined by management. The market value of common equity for each comparable company was derived by multiplying the price per share on the testing date by the total common shares outstanding, plus a control premium. Selected valuation multiples are then determined and applied to appropriate financial statistics based on the Company's historical and forecasted results. The Company estimates the fair value of its reporting unit using the income approach, via discounted cash flow valuation models which include, but are not limited to, assumptions such as a “risk-free” rate of return on an investment, the weighted average cost of capital of a market participant and future revenue, operating margin, working capital and capital expenditure trends. Determining the fair value of reporting unit and goodwill includes significant judgment by management, and different judgments could yield different results. The Company performed its annual assessment of goodwill during the fourth quarter of fiscal 2017, using the two-step approach described above. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. Based on the analysis performed for step one, the fair value of the reporting unit exceeded the carrying amount of the reporting unit, including goodwill, and, therefore, an impairment loss was not recognized. As the Company passed step one of the analysis, step two was not required. |
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Severances | Severances From time to time, we will enter into termination agreements with associates that may include supplemental cash payments, as well as contributions to health and other benefits for a specific time period subsequent to termination |
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Equity Awards | Equity Awards The Company accounts for share-based payments based on the grant-date fair value of the awards with compensation cost recognized as expense over the requisite service period. The Company incurred total annual compensation expense related to stock-based awards of $1,109,000 and $1,787,000 in fiscal 2017 and 2016, respectively. The fair value of the stock options granted in fiscal 2017 and 2016 was estimated at the date of grant using a Black-Scholes option pricing model. Option pricing model input assumptions such as expected term, expected volatility and risk-free interest rate impact the fair value estimate. Further, the forfeiture rate impacts the amount of aggregate compensation. These assumptions are subjective and are generally derived from external (such as, risk-free rate of interest) and historical data (such as, volatility factor, expected term and forfeiture rates). Future grants of equity awards accounted for as stock-based compensation could have a material impact on reported expenses depending upon the number, value and vesting period of future awards. The Company issues restricted stock awards in the form of Company common stock. The fair value of these awards is based on the market close price per share on the grant date. The Company expenses the compensation cost of these awards as the restriction period lapses, which is typically a one-year service period to the Company. In fiscal 2017 and 2016, 32,033 and 8,241 shares of common stock were surrendered to the Company to satisfy tax withholding obligations totaling $42,000 and $12,000, respectively, in connection with the vesting of restricted stock awards. Shares surrendered by the restricted stock award recipients in accordance with the applicable plan are deemed canceled, and therefore are not available to be reissued. The Company awarded 220,337 and 828,225 shares of restricted stock to officers and directors of the Company in fiscal 2017 and 2016, respectively. |
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Common Stock Warrants | Common Stock Warrants As of January 31, 2018 and 2017, the fair value of the common stock warrants was computed using the Black-Scholes option pricing model based on assumptions regarding annual volatility, risk-free rate, dividend yield and expected life. The model also includes assumptions to account for anti-dilutive provisions within the warrant agreement. |
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Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax credit and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing net deferred tax assets, the Company considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The Company establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. See Note 8 - Income Taxes for further details. The Company provides for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether certain tax positions are more likely than not to be sustained upon examination by tax authorities. At January 31, 2018, the Company believes it has appropriately accounted for any uncertain tax positions. |
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Net Loss Per Common Share | Net Loss Per Common Share The Company presents basic and diluted earnings per share (“EPS”) data for its common stock. Basic EPS is calculated by dividing the net loss attributable to common stockholders of the Company by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is calculated based on the profit or loss attributable to common stockholders and the weighted average number of shares of common stock outstanding adjusted for the effects of all potential dilutive common stock issuances related to options, unvested restricted stock, warrants and convertible preferred stock. Potential common stock dilution related to outstanding stock options, unvested restricted stock and warrants is determined using the treasury stock method, while potential common stock dilution related to Series A Convertible Preferred Stock is determined using the “if converted” method. The Company's unvested restricted stock awards and Series A Convertible Preferred Stock are considered participating securities under ASC 260, Earnings Per Share, which means the security may participate in undistributed earnings with common stock. The Company's unvested restricted stock awards are considered participating securities because they entitle holders to non-forfeitable rights to dividends or dividend equivalents during the vesting term. The holders of the Series A Convertible Preferred Stock would be entitled to share in dividends, on an as-converted basis, if the holders of common stock were to receive dividends, other than dividends in the form of common stock. In accordance with ASC 260, a company is required to use the two-class method when computing EPS when a company has a security that qualifies as a “participating security.” The two-class method is an earnings allocation formula that determines EPS for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. In determining the amount of net earnings to allocate to common stockholders, earnings are allocated to both common and participating securities based on their respective weighted-average shares outstanding for the period. Diluted EPS for the Company's common stock is computed using the more dilutive of the two-class method or the if-converted method. In accordance with ASC 260, securities are deemed not to be participating in losses if there is no obligation to fund such losses. |
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Loss Contingencies | Loss Contingencies We are subject to the possibility of various loss contingencies arising in the course of business. We consider the likelihood of the loss or impairment of an asset or the incurrence of a liability as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether to accrue for a loss contingency and adjust any previous accrual. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 defines a five-step process to achieve this principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2016, the FASB delayed the effective date by one year and the guidance became effective for us on February 1, 2018. The new revenue recognition guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application as an adjustment to retained earnings (modified retrospective method). We have decided to adopt the standard effective February 1, 2018 using the modified retrospective method. We have completed our assessment of our systems, available data and processes that will be affected by the implementation of this new revenue recognition guidance. The Company’s formal accounting policies have been established. As a result of the implementation of this standard, the Company expects to record an adjustment to increase retained earnings as of February 1, 2018. At this time, we estimate this increase to be approximately $1.4 million, related primarily to the timing of revenue. The most significant impact relates to our accounting for term software license revenue. We expect revenue related to SaaS-based offerings, hardware sales, maintenance and support, and audit services to remain substantially unchanged. For arrangements which include both software license and maintenance and support components, we expect to recognize the revenue attributed to license upfront at a point in time rather than over the term of the contract. We also expect to recognize license revenues upfront rather than be restricted to payment amounts due under extended payment term contracts as required under the previous guidance. Due to the complexity of certain of our license contracts, the actual revenue license recognition treatment will be dependent on contract-specific terms and may vary in some instances from upfront recognition and be delayed until acceptance from the client is obtained and documented. Additionally, the new revenue recognition guidance requires the capitalization of all incremental costs of obtaining a contract with a customer that an entity expects to recover. We currently already capitalize sales commissions associated with new and renewal contracts. As part of our implementation efforts, we did not identify any other costs that would be eligible for capitalization under the new guidance. As result, we do not expect to record any deferral for such costs upon adoption of the new guidance on February 1, 2018. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The update will be effective for us on February 1, 2019. Early adoption of the update is permitted. We are currently evaluating the impact of the adoption of this update on our consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to clarify how certain cash receipts and cash payments should be presented and classified in the statement of cash flows. The ASU should be applied using a retrospective transition method to each period presented. The standard became effective for us on February 1, 2018. Early adoption of this update is permitted. We are currently evaluating the impact of the adoption of this new standard on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, to clarify the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard became effective for us on February 1, 2018. We do not expect that the adoption of this ASU will have a significant impact on our consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which removes Step 2 from the goodwill impairment test. The standard will be effective for us on February 1, 2020. Early adoption of this update is permitted. We do not expect that the adoption of this ASU will have a significant impact on our consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting, to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The update became effective for us on February 1, 2018. We do not expect that the adoption of this ASU will have a significant impact on our consolidated financial statements. |
Significant Accounting Policies (Tables) |
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Schedule of Bad Debt Expense | Bad debt expense for fiscal years 2017 and 2016 was as follows:
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Property and Equipment | Property and equipment are stated at cost. Depreciation is computed using the straight-line method, over the estimated useful lives of the related assets. Estimated useful lives are as follows:
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Schedule of Capitalized Software Development Costs | Amortization expense on all internally-developed software was $2,113,000 and $2,771,000 in fiscal 2017 and 2016, respectively, and was included in the consolidated statements of operations as follows:
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Fair Value of Liabilities on a Recurring Basis | The table below provides information on our liabilities that are measured at fair value on a recurring basis:
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Schedule of Earnings Per Share, Basic and Diluted | The following is the calculation of the basic and diluted net loss per share of common stock:
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Acquisitions and Divestitures (Tables) |
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date as follows:
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Operating Leases (Tables) |
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Schedule of Future Minimum Rental Payments for Operating Leases | Future minimum lease payments under non-cancelable operating leases for the next five fiscal years are as follows:
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Debt (Tables) |
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Schedule of Minimum EBITDA Levels | The following table shows our minimum trailing four quarter period EBITDA covenant thresholds, as modified by the third amendment to the Credit Agreement:
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Summary of Term Loan and Line of Credit | Outstanding principal balances on debt consisted of the following at:
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Schedule of Future Principal Repayments of Long-Term Debt | Future principal repayments of debt consisted of the following at January 31, 2018:
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Goodwill and Intangible Assets (Tables) |
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Schedule of Goodwill Activity | The goodwill activity is summarized as follows:
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Schedule of Intangible Asset Components | Intangible assets, net, consist of the following:
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Amortization Schedule of Intangible Assets | Amortization over the next five fiscal years for intangible assets is estimated as follows:
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Income Taxes (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Income Tax (Expense) Benefit | Income taxes consist of the following:
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Schedule of Effective Income Tax Rate Reconciliation | The income tax benefit differs from the amount computed using the federal statutory income tax rate of 32.9 percent as follows:
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Schedule of Deferred Tax Assets and Liabilities | The income tax effects of these temporary differences and credits are as follows:
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Summary of Income Tax Contingencies | A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest and penalties) is as follows:
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Stock-Based Compensation (Tables) |
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Employee Stock Ownership Plan (ESOP), Shares in ESOP [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Option Activity | A summary of stock option activity follows:
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Schedule of Weighted-Average Assumptions | The fiscal 2017 and 2016 stock-based compensation was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for each fiscal year:
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Schedule of Restricted Stock Award Activity | A summary of restricted stock award activity for fiscal 2017 and 2016 is presented below:
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Private Placement Investment (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Investment Allocation | The proceeds were allocated among the instruments based on their relative fair values as follows:
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Schedule of Warrants Issued and Outstanding | The following table sets forth the warrants issued and outstanding as of January 31, 2018:
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Organization and Description of Business (Details) |
12 Months Ended |
---|---|
Jan. 31, 2018
segment
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of operating segments | 1 |
Significant Accounting Policies - Property, Plant, and Equipment (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 31, 2018 |
Jan. 31, 2017 |
|
Property, Plant and Equipment | ||
Depreciation expense | $ 774,074 | $ 1,099,957 |
Computer equipment and software | Minimum | ||
Property, Plant and Equipment | ||
Property, plant and equipment, useful life | 3 years | |
Computer equipment and software | Maximum | ||
Property, Plant and Equipment | ||
Property, plant and equipment, useful life | 4 years | |
Office equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, useful life | 5 years | |
Office furniture and fixtures | ||
Property, Plant and Equipment | ||
Property, plant and equipment, useful life | 7 years |
Significant Accounting Policies - Capitalized Software Development Costs (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 31, 2018 |
Jan. 31, 2017 |
|
Accounting Policies [Abstract] | ||
Cost of systems sales | $ 1,914,000 | $ 2,495,000 |
Cost of software as a service | 186,000 | 271,000 |
Cost of audit services | 13,000 | 5,000 |
Total amortization expense on internally-developed software | $ 2,113,385 | $ 2,771,437 |
Significant Accounting Policies - Earnings Per Share (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 31, 2018 |
Jan. 31, 2017 |
|
Accounting Policies [Abstract] | ||
Net loss | $ (3,099,214) | $ (5,161,566) |
Less: deemed dividends on Series A Preferred Shares | 0 | (875,935) |
Net loss attributable to common shareholders | $ (3,099,214) | $ (6,037,501) |
Weighted average shares outstanding - Basic (in shares) | 19,876,383 | 19,528,341 |
Stock options and restricted stock (in shares) | 0 | 0 |
Weighted average shares outstanding - Diluted (in shares) | 19,876,383 | 19,528,341 |
Basic net loss per common stock (in dollars per share) | $ (0.16) | $ (0.31) |
Diluted net loss per common stock (in dollars per share) | $ (0.16) | $ (0.31) |
Acquisitions and Divestitures - Assets Acquired and Liabilities Assumed (Details) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Sep. 08, 2016 |
Jan. 31, 2018 |
Jan. 31, 2017 |
|
Liabilities assumed: | |||
Cash paid | $ 0 | $ 1,400,000 | |
Opportune IT | |||
Assets purchased: | |||
Accounts receivable | $ 792,000 | ||
Other assets | 32,000 | ||
Total assets purchased | 1,824,000 | ||
Liabilities assumed: | |||
Accounts payable and accrued liabilities | 424,000 | ||
Net assets acquired | 1,400,000 | ||
Cash paid | 1,400,000 | ||
Internally-developed software | Opportune IT | |||
Assets purchased: | |||
Intangible assets | 350,000 | $ 350,000 | |
Intangible assets | Opportune IT | |||
Assets purchased: | |||
Intangible assets | $ 650,000 |
Operating Leases (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jan. 31, 2018 |
Jan. 31, 2017 |
|
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | ||
2018 | $ 1,050 | |
2019 | 978 | |
2020 | 515 | |
2021 | 521 | |
2022 | 445 | |
Total | 3,509 | |
Rent and leasing expense | 1,234 | $ 1,271 |
Facilities | ||
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | ||
2018 | 1,039 | |
2019 | 967 | |
2020 | 504 | |
2021 | 519 | |
2022 | 445 | |
Total | 3,474 | |
Equipment | ||
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | ||
2018 | 11 | |
2019 | 11 | |
2020 | 11 | |
2021 | 2 | |
2022 | 0 | |
Total | $ 35 |
Debt - Minimum EBITDA Levels (Details) - Credit Agreement |
12 Months Ended |
---|---|
Jan. 31, 2018
USD ($)
| |
July 31, 2017 | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | $ (1,250,000) |
October 31, 2017 | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | (1,000,000) |
January 31, 2018 | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | (700,000) |
April 30, 2018 | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | (35,869) |
July 31, 2018 | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | 414,953 |
October 31, 2018 | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | 1,080,126 |
January 31, 2019 | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | 1,634,130 |
April 30, 2019 | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | 1,842,610 |
July 31, 2019 | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | 2,657,362 |
October 31, 2019 and each fiscal quarter thereafter | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | $ 3,613,810 |
Debt - Summary of Term Loan and Line of Credit (Details) - USD ($) |
Jan. 31, 2018 |
Jan. 31, 2017 |
---|---|---|
Debt Disclosure [Abstract] | ||
Senior term loan | $ 4,626,000 | $ 5,738,000 |
Capital lease | 0 | 91,000 |
Total | 4,626,000 | 5,829,000 |
Deferred financing cost | (128,000) | (199,000) |
Long-term debt | 4,498,000 | 5,630,000 |
Less: Current portion | (597,000) | (747,000) |
Non-current portion of long-term debt | $ 3,901,000 | $ 4,883,000 |
Debt - Schedule of Future Principal Repayments of Long-Term Debt (Details) - USD ($) $ in Thousands |
Jan. 31, 2018 |
Jan. 31, 2017 |
---|---|---|
Debt Instrument [Line Items] | ||
Deferred finance costs | $ 128 | $ 199 |
Senior Notes | ||
Debt Instrument [Line Items] | ||
Debt Payments Due by 2018 | 597 | |
Debt Payments Due by 2019 | 4,029 | |
Long-term Debt | $ 4,626 |
Goodwill and Intangible Assets - Schedule of Goodwill Activity (Details) |
12 Months Ended |
---|---|
Jan. 31, 2017
USD ($)
| |
Goodwill [Roll Forward] | |
Goodwill, beginning of period | $ 16,185,000 |
Adjustments to goodwill related to sale of business during fiscal 2016 | (648,000) |
Goodwill, end of period | $ 15,537,281 |
Goodwill and Intangible Assets - Schedule of Future Amortization Expense (Details) - USD ($) $ in Thousands |
Jan. 31, 2018 |
Jan. 31, 2017 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2018 | $ 937 | |
2019 | 885 | |
2020 | 823 | |
2021 | 786 | |
2022 | 500 | |
Thereafter | 1,904 | |
Net Assets | $ 5,835 | $ 6,997 |
Income Taxes - Components of Income Tax Expense (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 31, 2018 |
Jan. 31, 2017 |
|
Current tax (expense) benefit: | ||
Federal | $ 0 | $ 15,000 |
State | (11,573) | (2,976) |
Total current provision | (11,573) | 12,024 |
Deferred tax benefit: | ||
Federal | 95,403 | 0 |
State | 0 | 0 |
Total Deferred tax benefit | 95,403 | 0 |
Income tax benefit | $ 83,830 | $ 12,024 |
Income Taxes - Schedule of Deferred Tax Assets and Tax Carryforwards (Details) - USD ($) |
Jan. 31, 2018 |
Jan. 31, 2017 |
---|---|---|
Deferred tax assets: | ||
Allowance for doubtful accounts | $ 91,360 | $ 72,886 |
Deferred revenue | 154,574 | 282,112 |
Accruals | 71,286 | 120,165 |
Net operating loss carryforwards | 10,617,120 | 15,141,861 |
Stock compensation expense | 235,920 | 501,120 |
Property and equipment | 108,537 | 132,934 |
AMT credit | 0 | 102,144 |
R&D credit | 1,144,058 | 1,050,100 |
Other | 116,603 | 106,833 |
Total deferred tax assets | 12,539,458 | 17,510,155 |
Valuation allowance | (11,812,860) | (16,318,124) |
Net deferred tax assets | 726,598 | 1,192,031 |
Deferred tax liabilities: | ||
Definite-lived intangible assets | (726,598) | (1,192,031) |
Total deferred tax liabilities | (726,598) | (1,192,031) |
Net deferred tax liabilities | $ 0 | $ 0 |
Income Taxes - Additional Information (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 31, 2018 |
Jan. 31, 2017 |
|
Income Tax Contingency [Line Items] | ||
Valuation allowance | $ 11,812,860 | $ 16,318,124 |
Change in valuation allowance | 4,504,875 | (2,134,096) |
Reserves for uncertain tax positions and corresponding interest and penalties | 286,000 | 263,000 |
Accrued interest and penalties | 0 | $ 0 |
Tax expense | 5,800,000 | |
Internal Revenue Service (IRS) | ||
Income Tax Contingency [Line Items] | ||
Operating loss carryforwards | 45,973,000 | |
Change in valuation allowance | (4,505,000) | |
State | ||
Income Tax Contingency [Line Items] | ||
Operating loss carryforwards, subject to expire next twenty fiscal years | $ 18,230,000 |
Income Taxes - Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jan. 31, 2018 |
Jan. 31, 2017 |
|
Reconciliation of Unrecognized Tax Benefits [Roll Forward] | ||
Beginning of fiscal year | $ 290 | $ 0 |
Additions for tax positions for the current year | 62 | 59 |
Additions for tax positions of prior years | 3 | 231 |
Subtractions for tax positions of prior years | (60) | 0 |
End of fiscal year | $ 295 | $ 290 |
Major Clients - (Details) - Customer Concentration Risk - Accounts Receivable |
12 Months Ended | |
---|---|---|
Jan. 31, 2018 |
Jan. 31, 2017 |
|
Customer One | ||
Concentration Risk | ||
Concentration risk, percentage | 12.00% | |
Customer Two | ||
Concentration Risk | ||
Concentration risk, percentage | 11.00% | |
Three Customers | ||
Concentration Risk | ||
Concentration risk, percentage | 11.00% |
Employee Retirement Plan (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jan. 31, 2018 |
Jan. 31, 2017 |
|
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | ||
Matching contribution percent (up to) | 100.00% | |
Maximum contribution as a percent of participant compensation | 4.00% | |
Defined contribution plan, cost recognized | $ 524 | $ 541 |
Stock-Based Compensation - Weighted Average Assumptions (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 31, 2018 |
Jan. 31, 2017 |
|
Employee Stock Ownership Plan (ESOP), Shares in ESOP [Abstract] | ||
Expected life | 6 years | 6 years |
Risk-free interest rate | 2.65% | 2.10% |
Weighted average volatility factor | 65.00% | 58.00% |
Dividend yield | $ 0 | $ 0 |
Forfeiture rate | 13.00% | 22.00% |
Stock-Based Compensation - Schedule of Restricted Stock Award Activity (Details) - Restricted Stock - $ / shares |
12 Months Ended | |
---|---|---|
Jan. 31, 2018 |
Jan. 31, 2017 |
|
Non-vested Number of Shares | ||
Non-vested number of shares, beginning of period (in shares) | 858,225 | 112,380 |
Granted (in shares) | 295,337 | 858,225 |
Vested (in shares) | (331,975) | (112,380) |
Forfeited (in shares) | 0 | 0 |
Non-vested number of shares, end of period (in shares) | 821,587 | 858,225 |
Weighted Average Grant Date Fair Value | ||
Non-vested at beginning of period (USD per share) | $ 1.59 | $ 2.62 |
Granted (USD per share) | 1.17 | 1.59 |
Vested (USD per share) | 1.47 | 2.56 |
Forfeited (USD per share) | 0.00 | 0.00 |
Non-vested at end of period (USD per share) | $ 1.59 | $ 1.59 |
Private Placement Investment - Schedule of Warrants Issued and Outstanding (Details) - $ / shares |
Jan. 31, 2018 |
Aug. 16, 2012 |
---|---|---|
Share-based Compensation Arrangement by Share-based Payment Award | ||
Number of shares issuable (in shares) | 1,200,000 | |
Weighted average exercise price (in USD per share) | $ 3.99 | |
Common Stock Warrant | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Number of shares issuable (in shares) | 1,400,000 | |
Weighted average exercise price (in USD per share) | $ 4.00 | |
Private Placement | Common Stock Warrant | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Number of shares issuable (in shares) | 1,200,000 | |
Weighted average exercise price (in USD per share) | $ 3.99 | |
Placement Agent | Common Stock Warrant | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Number of shares issuable (in shares) | 200,000 | |
Weighted average exercise price (in USD per share) | $ 4.06 |
Schedule II - Valuation and Qualifying Accounts and Reserves (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 31, 2018 |
Jan. 31, 2017 |
|
Movement in Valuation Allowances and Reserves [Roll Forward] | ||
Balance at Beginning of Period | $ 198,449 | |
Charged to Costs and Expenses | 46,191 | $ 158,922 |
Balance at End of Period | 349,058 | 198,449 |
Allowance for doubtful accounts | ||
Movement in Valuation Allowances and Reserves [Roll Forward] | ||
Balance at Beginning of Period | 198,000 | 155,000 |
Charged to Costs and Expenses | 234,000 | 121,000 |
Charged to Other Accounts | 0 | 17,000 |
Deductions | (83,000) | (95,000) |
Balance at End of Period | $ 349,000 | $ 198,000 |
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