EX-99.1 2 f8k111408ex99_hss.htm PRESS RELEASE f8k111408ex99_hss.htm
 
Exhibit 99.1
 

 
Health Systems Solutions Announces Third Quarter 2008 Financial Results; Revenue more than doubles over previous year’s period
 
 
Revenue of $3.02 million for Q3 2008, a 106% increase compared to Q3 2007
  
Gross profit of $1.33 million for Q3 2008, a 337% increase compared to Q3 2007
  
Principal shareholder, Stanford International Bank, agrees to provide additional $5 million in equity and $85 million in convertible securities for acquisitions and working capital
  
HSS executes acquisition strategy by agreeing to acquire Emageon Inc., a leading provider of radiology and cardiology imaging technology for $62 million.
 
New York  –  November 14, 2008 – Health Systems Solutions, Inc. (OTCBB: HSSO), a provider of advanced software and technology solutions for the healthcare industry, today announced financial results for the third quarter ended September 30, 2008. The Company reported total revenue of $3.02 million, compared to $1.46 million for the third quarter of 2007, an increase of $1.56 million, or 106%.

“Having achieved another strong quarter, we continue to demonstrate our ability to deliver results while working on a broader strategic plan consisting of organic initiatives and acquisition opportunities which will target larger markets, achieve economies of scale, and further augment our management team.” stated Stan Vashovsky, Chairman and Chief Executive Officer of Health Systems Solutions.  “We will continue to use the growth of our revenues to fund investments in leadership and technology. We believe the weak economic environment, while challenging for all companies, offers HSS incredible opportunities to attract world-class talent and to acquire strategic assets at historically low valuations.“

Third Quarter 2008 Financial Results
Revenues were $3.02 million for the quarter ended September 30, 2008, compared to $1.46 million for the same period of 2007, an increase of $1.56 million, or 106%. The increase in revenue is primarily the result of the addition of our Technology Solutions group.

Gross profit was $1.33 million for the quarter ended September 30, 2008, compared to $305,000 for the same period of 2007, an increase of $1.03 million or 337%. For the quarter ended September 30, 2008, gross margin was 44%, up from 21%, an improvement of 23 percentage points over the third quarter of 2007. The increase in gross margin was the result of an increase in sales of higher-margin Technology Solutions services and a reduction in software amortization costs.

Research and development costs decreased $311,000, or 73%, to $115,000 for the quarter ended September 30, 2008 compared to the same period in 2007.  The decrease in research and development costs was primarily attributable to greater efficiencies and management’s cost-cutting initiatives.

Selling expenses were $372,000 for the quarter ended September 30, 2008, compared to $512,000 in the third quarter of 2007, a decrease of $140,000 or 27%.  The decrease in selling expenses was primarily attributable to reductions in the sales force while leveraging key personnel in other functions to concentrate on acquiring larger customers.

General and administrative expenses were $1.39 million for the quarter ended September 30, 2008, compared with $659,000 for the same period of 2007, an increase of $731,000, or 111%. The increase in general and administrative expenses was primarily attributable to wages and other benefits related to the building of the management team and other corporate employees as well as rent, communications and recruiting expenses, partially offset by a decrease in bad debt.

Adjusted EBITDA(1), which is a non-GAAP term, was negative $249,000 for the quarter ended September 30, 2008 compared with negative $1.06 million for the same period of 2007, an improvement of $808,000.  The components of Adjusted EBITDA, defined as earnings before interest, taxes, depreciation, amortization, impairment, stock-based compensation, and other non-recurring items, are broken out in footnote #1 below.

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Net loss was $850,000 for the quarter ended September 30, 2008, compared with a net loss of $1.34 million for the same period of 2007.  Net loss applicable to common shareholders was $3.11 million, or $0.42 per share, for the quarter ended September 30, 2008, compared with a net loss applicable to common shareholders of $2.77 million, or $0.40 per share, for the same period of 2007.  The difference between net loss and net loss applicable to common shareholders was the deemed dividend of preferred stock of $2.26 million and $1.43 million for the quarters ended September 30, 2008 and 2007, respectively.  The deemed preferred dividend represents the fair market value of the cost of the warrants related to the issuance of preferred stock.

“Stanford’s funding of HSS during the current global capital markets crisis demonstrates their continued confidence in our strategic plan and our management team.  This availability of financing allowed us to negotiate the acquisition of Emageon Inc., a leading provider of radiology and cardiology imaging and technology,” Mr. Vashovsky stated.  “We appreciate Stanford’s support and will keep working diligently to execute our growth strategy and to enhance our capital markets presence with the goal of listing on a larger stock exchange and increasing shareholder liquidity.”

About Health Systems Solutions, Inc.
HSS is a technology and services company dedicated to bringing innovation to the healthcare industry. Our objective is to leverage current and next-generation technologies to offer value-added products and services which will generate improved clinical, operational and financial outcomes for our clients. The HSS portfolio of products and services extends across many segments of healthcare including acute and post-acute facilities, telehealth/telemedicine, and home healthcare, grouped into two segments: technology solutions and software. For more information, please visit www.hssglobal.com.

About Emageon Inc.
Emageon provides information technology systems for hospitals, healthcare networks and imaging facilities. Its enterprise family of solutions includes RadSuiteTM, HeartSuiteTM and other specialty suites. All Emageon solutions are built on a unified Enterprise Content Management system offering advanced visualization and infrastructure tools for the clinical analysis and management of digital medical images, reports and associated clinical content. Emageon's standards-based solutions are designed to help customers enhance patient care, automate workflow, lower costs, improve productivity and provide better service to physicians.  For more information, please visit www.emageon.com.




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(1)  Adjusted EBITDA
Adjusted EBITDA does not represent cash flows from operations as defined by generally accepted accounting principles (“GAAP”), is not a GAAP measure, is used in addition to and in conjunction with GAAP measures and should not be considered by the reader as an alternative to net income (loss) (the most comparable GAAP financial measure to Adjusted EBITDA or any other GAAP operating performance measure). Management of the Company believes that Adjusted EBITDA is helpful to investors as an indicator of the financial performance of the Company and its capacity to fund capital expenditures and working capital requirements. Due to the nature of the Company’s business and revenue recognition policies and the Company’s use of stock-based employee compensation, the Company incurs significant non-cash charges for depreciation, amortization, stock compensation expense, and non-recurring items that may not be indicative of our operating performance from a cash perspective. Therefore, the Company believes that providing the measure of Adjusted EBITDA will help investors better understand the Company’s underlying operational performance and ability to generate cash flow from operations excluding certain recurring and non-recurring items.

   
Three Months Ended
 
   
September 30,
 
   
2008
   
2007
 
Net loss
  $ (850,219 )   $ (1,337,183 )
Add:
               
  Interest
    239,771       5,122  
  Depreciation and amortization
    57,434       541,906  
  Impairment
    6,000       -  
  Capitalized software
    -       (297,230 )
  Stock-based compensation
    175,671       30,414  
  Acquisition search costs
    18,169       -  
  Severance
    104,665       -  
                 
Adjusted EBITDA
  $ (248,509 )   $ (1,056,971 )
                 

Safe Harbor
HSS makes forward-looking statements in this press release which represent our expectations or beliefs about future events and financial performance. Forward-looking statements are identifiable by words such as "believe," "anticipate," "expect," "intend," "plan," "will," "may" and other similar expressions. In addition, any statements that refer to expectations, projections, goals or other characterizations of future events or circumstances are forward-looking statements. Forward-looking statements are subject to known and unknown risks and uncertainties, including the risks described in our Annual Report on Form 10-K for the period ended December 31, 2007 and other filings we make with the Securities and Exchange Commission. In addition, actual results could differ materially from those suggested by the forward-looking statements, and therefore you should not place undue reliance on the forward-looking statements. You should not consider our past results to be an indicator of our future performance. We do not make any commitment to revise or update any forward-looking statements to reflect events or circumstances occurring or existing after the date any forward-looking statement is made, except as may be required by law.


For more information on HSS:
Michael G. Levine, Chief Financial Officer & Executive Vice President
Michael.Levine@hssglobal.com
(212) 798-9405
 
 
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HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 2008 and December 31, 2007

 ASSETS

   
(Unaudited)
September 30, 2008
   
(Audited)
December 31, 2007
 
Current assets:
           
Cash
  $ 150,722     $ 1,218,620  
Restricted cash
    327,523       -  
Accounts receivable, net of allowance for doubtful accounts of $127,914 and $234,801, respectively
    2,519,918       898,928  
Prepaids and other current assets
    173,041       138,890  
Total current assets
    3,171,254       2,256,438  
Property and equipment, net of accumulated depreciation and amortization of $803,340 and $635,459, respectively
    437,437       442,879  
Security deposits and other assets
    94,161       96,278  
Deferred financing cost, net of accumulated amortization of $301,936 and $28,332, respectively
     -        273,604  
                 
        Total assets
  $ 3,702,852     $ 3,069,199  
   
 LIABILITIES AND STOCKHOLDERS' DEFICIENCY
 
             
Current liabilities:
           
Current portion of capital lease obligation
  $ 25,407     $ 23,932  
Accounts payable
    329,582       639,881  
Accrued expenses
    1,637,931       1,404,310  
Deferred revenue
    2,261,519       962,788  
Client deposits
    88,243       96,350  
Note payable – bank
    229,000       229,000  
Total current liabilities
    4,571,682       3,356,261  
Capital lease obligation, net of current portion
    20,490       40,705  
Total liabilities
    4,592,172       3,396,966  
Stockholders’ deficiency:
               
  Preferred Stock - 15,000,000 shares authorized;
Series C Convertible - 4,625,000 shares issued and outstanding
    9,250,000       9,250,000  
Series D Convertible – 1,425,000 and 837,500 shares issued and outstanding, respectively
    2,850,000       1,675,000  
  Common Stock $.001 par value - 150,000,000 shares authorized;
7,570,304 and 7,365,361 issued and outstanding, respectively
    7,570       7,365  
Additional paid-in capital
    17,186,553       14,431,040  
Accumulated deficit
    (30,183,443 )     (25,691,172 )
Total stockholders' deficiency
    (889,320 )     (327,767 )
Total liabilities and stockholders' deficiency
  $ 3,702,852     $ 3,069,199  

 
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HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION
For the Three and Nine Months Ended September 30, 2008 and 2007
(Unaudited)
 
 
     
Three Months Ended 
September 30, 
     
Nine Months Ended 
September 30, 
 
     
2008 
      2007        2008        2007   
                                 
Net sales
  $ 3,022,584     $ 1,463,902     $ 9,517,662     $ 4,465,026  
Cost of sales
    1,692,334       1,159,298       5,461,193       3,516,235  
                                 
Gross profit
    1,330,250       304,604       4,056,469       948,791  
                                 
Operating expenses
                               
  Selling and marketing
    372,403       512,432       1,123,241       1,581,678  
  Research and development
    114,537       425,301       701,663       1,173,465  
  General and administrative
    1,390,324       659,100       3,938,903       1,636,737  
  Depreciation and amortization
    57,434       39,832       172,747       116,886  
  Impairment of development costs
    6,000       -       71,475       -  
  Interest
    239,771       5,122       284,751       39,129  
                                 
Total operating expenses
    2,180,469       1,641,787       6,292,780       4,547,895  
                                 
Net loss
    (850,219 )     (1,337,183 )     (2,236,311 )     (3,599,104 )
                                 
Deemed preferred stock dividend
    2,255,960       1,432,801       2,255,960       1,631,694  
                                 
Net loss applicable to common shareholders
  $ (3,106,179 )   $ (2,769,984 )   $ (4,492,271 )   $ (5,230,798 )
                                 
Basic and diluted net loss per share
  $ (0.42 )   $ (0.40 )   $ (0.61 )   $ (0.79 )
                                 
Basic and diluted weighted average shares outstanding
    7,412,938       6,953,010       7,394,759       6,645,215  
                                 

 
 
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HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2008 and 2007
(Unaudited)
   
Nine Months Ended
 
   
September 30, 2008
   
September 30, 2007
 
             
Cash flows from operating activities:
           
Net loss
  $ (2,236,311 )   $ (3,599,104 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Stock based compensation expense
    421,340       49,311  
Depreciation and amortization of property and equipment
    172,747       116,886  
Amortization of software development costs
    -       1,392,452  
Amortization of financing fees
    273,604       -  
Loss on disposal of assets
    2,095       16,047  
Impairment of software development
    71,475       -  
Changes in operating assets and liabilities:
               
Accounts receivable
    (1,514,104 )     122,417  
Allowance for doubtful accounts
    (106,887 )     (20,742 )
Royalties and referral fees receivable
            13,300  
Prepaid expenses and other current assets
    (33,163 )     (96,314 )
Security deposits
    2,177       (1,617 )
Accounts payable
    (310,299 )     145,914  
Accrued expenses
    311,894       47,550  
Deferred revenue
    1,298,731       (156,822 )
Customer deposits
    (8,106 )     10,870  
Net cash used in operating activities
    (1,654,867 )     (1,959,852 )
                 
Cash flow from investing activities:
               
Increase in restricted cash
    (327,523 )     -  
Earn out payment related to purchase of CareKeeper Software, Inc.
    -       (77,207 )
Adjustment to the purchase price of CareKeeper Software, Inc.
    -       (120,906 )
Purchase of property and equipment
    (170,388 )     (125,077 )
Increase in software development costs
    (71,475 )     (742,762 )
Net cash used in investing activities
    (569,386 )     (1,065,952 )
                 
Cash flow from financing activities:
               
Repayment of capital lease obligation
    (18,740 )     (11,142 )
Proceeds from the exercise of warrants
    145       -  
Proceeds from the issuance of Common Stock
    -       27,518  
Proceeds from the issuance of Preferred Stock
    1,175,000       2,500,000  
Net cash provided by financing activities
    1,156,405       2,516,376  
                 
Decrease in cash
    (1,067,848 )     (509,428 )
Cash, beginning of period
    1,218,620       558,764  
Cash, end of period
  $ 150,772     $ 49,336  
                 
Supplemental cash flow data:
               
Cash paid during the period for interest expense
  $ 11,147     $ 39,128  
                 
Non cash financing and investing activities:
               
Issuance of commons stock to members of acquired company
  $ 78,273     $ -  
Equipment acquired under capital lease
  $ -     $ 86,408  
Increase in software development costs as a result of an accrued
               
earn out payment to sellers of an acquired company
  $ 71,475     $ -  
Deemed dividend on issuance of preferred stock
  $ 2,255,960     $ 1,631,694  
                 

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