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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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31-1455414
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
¨
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Accelerated filer
x
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Non-accelerated filer
¨
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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TABLE OF CONTENTS
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||
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Page
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Part I.
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FINANCIAL INFORMATION
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|
Item 1.
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Financial Statements
|
|
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Condensed Consolidated Balance Sheets at July 31, 2014 and January 31, 2014
|
|
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Condensed Consolidated Statements of Operations for the
three and six months ended July 31, 2014 and 2013
|
|
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Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended July 31, 2014 and 2013
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|
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Condensed Consolidated Statements of Cash Flows for the
six months ended July 31, 2014 and 2013
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|
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Notes to Condensed Consolidated Financial Statements
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 4.
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Controls and Procedures
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Part II.
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OTHER INFORMATION
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Item 1.
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Legal Proceedings
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Item 1A.
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Risk Factors
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Item 6.
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Exhibits
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|
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Signatures
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Item 1.
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FINANCIAL STATEMENTS
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|
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||||
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July 31, 2014
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January 31, 2014
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||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
5,155,774
|
|
|
$
|
17,924,886
|
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Accounts receivable, net of allowance for doubtful accounts of $247,835 and $267,264, respectively
|
10,583,258
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|
|
7,999,571
|
|
||
Contract receivables
|
411,796
|
|
|
1,181,606
|
|
||
Prepaid hardware and third-party software for future delivery
|
31,155
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|
|
25,640
|
|
||
Prepaid client maintenance contracts
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886,231
|
|
|
909,464
|
|
||
Other prepaid assets
|
1,849,982
|
|
|
1,407,515
|
|
||
Deferred income taxes
|
95,498
|
|
|
95,498
|
|
||
Other current assets
|
91,461
|
|
|
144,049
|
|
||
Total current assets
|
19,105,155
|
|
|
29,688,229
|
|
||
Non-current assets:
|
|
|
|
||||
Property and equipment:
|
|
|
|
||||
Computer equipment
|
5,207,741
|
|
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3,769,564
|
|
||
Computer software
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2,320,557
|
|
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2,239,654
|
|
||
Office furniture, fixtures and equipment
|
1,262,820
|
|
|
889,080
|
|
||
Leasehold improvements
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1,216,534
|
|
|
697,570
|
|
||
|
10,007,652
|
|
|
7,595,868
|
|
||
Accumulated depreciation and amortization
|
(6,805,817
|
)
|
|
(6,676,824
|
)
|
||
Property and equipment, net
|
3,201,835
|
|
|
919,044
|
|
||
Contract receivables, less current portion
|
60,974
|
|
|
78,395
|
|
||
Capitalized software development costs, net of accumulated amortization of $9,999,105 and $7,949,352, respectively
|
10,790,039
|
|
|
10,238,357
|
|
||
Intangible assets, net
|
12,143,683
|
|
|
12,175,634
|
|
||
Deferred financing costs, net of accumulated amortization of $104,301 and $98,102, respectively
|
38,699
|
|
|
44,898
|
|
||
Goodwill
|
15,871,713
|
|
|
11,933,683
|
|
||
Other
|
926,854
|
|
|
500,634
|
|
||
Total non-current assets
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43,033,797
|
|
|
35,890,645
|
|
||
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$
|
62,138,952
|
|
|
$
|
65,578,874
|
|
|
|
|
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||||
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July 31, 2014
|
|
January 31, 2014
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
2,819,803
|
|
|
$
|
1,796,418
|
|
Accrued compensation
|
1,366,920
|
|
|
1,782,599
|
|
||
Accrued other expenses
|
614,585
|
|
|
554,877
|
|
||
Current portion of long-term debt
|
1,214,280
|
|
|
1,214,280
|
|
||
Deferred revenues
|
10,080,860
|
|
|
9,658,232
|
|
||
Current portion of note payable
|
300,000
|
|
|
300,000
|
|
||
Current portion of capital lease obligation
|
119,116
|
|
|
105,573
|
|
||
Total current liabilities
|
16,515,564
|
|
|
15,411,979
|
|
||
Non-current liabilities:
|
|
|
|
||||
Term loans
|
6,378,225
|
|
|
6,971,767
|
|
||
Warrants liability
|
2,893,318
|
|
|
4,117,725
|
|
||
Royalty liability
|
2,335,941
|
|
|
2,264,000
|
|
||
Swap contract
|
110,369
|
|
|
111,086
|
|
||
Note payable
|
600,000
|
|
|
600,000
|
|
||
Lease incentive liability
|
100,993
|
|
|
74,434
|
|
||
Capital lease obligation
|
1,124,237
|
|
|
121,089
|
|
||
Deferred revenues, less current portion
|
194,099
|
|
|
—
|
|
||
Deferred income tax liabilities
|
825,677
|
|
|
816,079
|
|
||
Total non-current liabilities
|
14,562,859
|
|
|
15,076,180
|
|
||
Total liabilities
|
31,078,423
|
|
|
30,488,159
|
|
||
Series A 0% Convertible Redeemable Preferred Stock, $.01 par value per share, $8,849,985 and $8,849,985 redemption value, 4,000,000 shares authorized, 2,949,995 and 2,949,995 shares issued and outstanding, net of unamortized preferred stock discount of $2,767,968 and $3,250,317, respectively
|
6,082,017
|
|
|
5,599,668
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Common stock, $.01 par value per share, 25,000,000 shares authorized; 18,189,595 and 18,175,787 shares issued and outstanding, respectively
|
181,896
|
|
|
181,758
|
|
||
Additional paid in capital
|
77,415,949
|
|
|
76,983,088
|
|
||
Accumulated deficit
|
(52,508,964
|
)
|
|
(47,562,713
|
)
|
||
Accumulated other comprehensive loss
|
(110,369
|
)
|
|
(111,086
|
)
|
||
Total stockholders’ equity
|
24,978,512
|
|
|
29,491,047
|
|
||
|
$
|
62,138,952
|
|
|
$
|
65,578,874
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Systems sales
|
$
|
314,085
|
|
|
$
|
2,233,668
|
|
|
$
|
653,291
|
|
|
$
|
2,558,314
|
|
Professional services
|
674,999
|
|
|
1,039,240
|
|
|
1,283,950
|
|
|
1,958,591
|
|
||||
Maintenance and support
|
4,177,165
|
|
|
3,620,446
|
|
|
8,348,977
|
|
|
7,001,046
|
|
||||
Software as a service
|
2,075,823
|
|
|
1,880,007
|
|
|
3,907,025
|
|
|
3,728,748
|
|
||||
Total revenues
|
7,242,072
|
|
|
8,773,361
|
|
|
14,193,243
|
|
|
15,246,699
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of systems sales
|
834,324
|
|
|
661,124
|
|
|
1,669,792
|
|
|
1,299,722
|
|
||||
Cost of professional services
|
778,691
|
|
|
1,266,744
|
|
|
1,765,116
|
|
|
2,241,206
|
|
||||
Cost of maintenance and support
|
836,526
|
|
|
795,476
|
|
|
1,796,712
|
|
|
1,780,065
|
|
||||
Cost of software as a service
|
571,464
|
|
|
514,075
|
|
|
1,343,043
|
|
|
1,093,154
|
|
||||
Selling, general and administrative
|
4,054,794
|
|
|
3,408,153
|
|
|
8,695,250
|
|
|
6,989,020
|
|
||||
Research and development
|
2,225,120
|
|
|
1,160,147
|
|
|
4,575,564
|
|
|
2,257,157
|
|
||||
Total operating expenses
|
9,300,919
|
|
|
7,805,719
|
|
|
19,845,477
|
|
|
15,660,324
|
|
||||
Operating income (loss)
|
(2,058,847
|
)
|
|
967,642
|
|
|
(5,652,234
|
)
|
|
(413,625
|
)
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(173,539
|
)
|
|
(587,808
|
)
|
|
(343,017
|
)
|
|
(1,154,373
|
)
|
||||
Miscellaneous income (expense)
|
(41,481
|
)
|
|
(1,064,163
|
)
|
|
1,051,290
|
|
|
(1,806,428
|
)
|
||||
Loss before income taxes
|
(2,273,867
|
)
|
|
(684,329
|
)
|
|
(4,943,961
|
)
|
|
(3,374,426
|
)
|
||||
Income tax expense
|
(1,145
|
)
|
|
(143,874
|
)
|
|
(2,290
|
)
|
|
(163,624
|
)
|
||||
Net loss
|
$
|
(2,275,012
|
)
|
|
$
|
(828,203
|
)
|
|
$
|
(4,946,251
|
)
|
|
$
|
(3,538,050
|
)
|
Less: deemed dividends on Series A Preferred Shares
|
(252,583
|
)
|
|
(15,510
|
)
|
|
(482,349
|
)
|
|
(357,146
|
)
|
||||
Net loss attributable to common shareholders
|
$
|
(2,527,595
|
)
|
|
$
|
(843,713
|
)
|
|
$
|
(5,428,600
|
)
|
|
$
|
(3,895,196
|
)
|
Basic net loss per common share
|
$
|
(0.14
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.31
|
)
|
Number of shares used in basic per common share computation
|
18,174,193
|
|
|
12,861,715
|
|
|
18,160,213
|
|
|
12,698,094
|
|
||||
Diluted net loss per common share
|
$
|
(0.14
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.31
|
)
|
Number of shares used in diluted per common share computation
|
18,174,193
|
|
|
12,861,715
|
|
|
18,160,213
|
|
|
12,698,094
|
|
||||
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Net loss
|
$
|
(2,275,012
|
)
|
|
$
|
(828,203
|
)
|
|
$
|
(4,946,251
|
)
|
|
$
|
(3,538,050
|
)
|
Other comprehensive gain, net of tax:
|
|
|
|
|
|
|
|
||||||||
Fair value of interest rate swap liability
|
22,431
|
|
|
—
|
|
|
717
|
|
|
—
|
|
||||
Comprehensive loss
|
$
|
(2,252,581
|
)
|
|
$
|
(828,203
|
)
|
|
$
|
(4,945,534
|
)
|
|
$
|
(3,538,050
|
)
|
|
Six Months Ended
|
||||||
|
2014
|
|
2013
|
||||
Operating activities:
|
|
|
|
||||
Net loss
|
$
|
(4,946,251
|
)
|
|
$
|
(3,538,050
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation
|
360,986
|
|
|
338,039
|
|
||
Amortization of capitalized software development costs
|
1,830,628
|
|
|
1,396,050
|
|
||
Amortization of intangible assets
|
704,952
|
|
|
628,977
|
|
||
Amortization of other deferred costs
|
102,095
|
|
|
186,018
|
|
||
Valuation adjustment for warrants liability
|
(1,224,407
|
)
|
|
1,670,354
|
|
||
Share-based compensation expense
|
865,142
|
|
|
825,531
|
|
||
Other valuation adjustments
|
78,970
|
|
|
39,163
|
|
||
Loss on disposal of fixed assets
|
83,236
|
|
|
—
|
|
||
Provision for accounts receivable
|
13,692
|
|
|
—
|
|
||
Deferred tax expense
|
—
|
|
|
133,324
|
|
||
Changes in assets and liabilities, net of assets acquired:
|
|
|
|
||||
Accounts and contract receivables
|
(1,264,184
|
)
|
|
(2,092,868
|
)
|
||
Other assets
|
(853,586
|
)
|
|
(227,263
|
)
|
||
Accounts payable
|
936,731
|
|
|
89,856
|
|
||
Accrued expenses
|
(781,283
|
)
|
|
(1,045,618
|
)
|
||
Deferred revenues
|
(180,110
|
)
|
|
229,563
|
|
||
Net cash used in operating activities
|
(4,273,389
|
)
|
|
(1,366,924
|
)
|
||
Investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(1,635,952
|
)
|
|
(94,240
|
)
|
||
Capitalization of software development costs
|
(351,316
|
)
|
|
(797,794
|
)
|
||
Payment for acquisition, net of cash received
|
(5,890,402
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(7,877,670
|
)
|
|
(892,034
|
)
|
||
Financing activities:
|
|
|
|
||||
Principal repayments on term loan
|
(505,950
|
)
|
|
(625,001
|
)
|
||
Principal payments on capital lease obligation
|
(49,509
|
)
|
|
—
|
|
||
Payment of deferred financing costs
|
(112,800
|
)
|
|
—
|
|
||
Proceeds from exercise of stock options and stock purchase plan
|
50,206
|
|
|
739,376
|
|
||
Net cash (used in) provided by financing activities
|
(618,053
|
)
|
|
114,375
|
|
||
Decrease in cash and cash equivalents
|
(12,769,112
|
)
|
|
(2,144,583
|
)
|
||
Cash and cash equivalents at beginning of period
|
17,924,886
|
|
|
7,500,256
|
|
||
Cash and cash equivalents at end of period
|
$
|
5,155,774
|
|
|
$
|
5,355,673
|
|
•
|
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 — the price at which an element is sold as a separate stand-alone transaction
|
•
|
TPE — the price of an element, charged by another company that is largely interchangeable in any particular transaction
|
•
|
ESP — our best estimate of the selling price of an element of the transaction
|
|
Three Months Ended
|
||||||
|
July 31, 2014
|
|
July 31, 2013
|
||||
Net loss
|
$
|
(2,275,012
|
)
|
|
$
|
(828,203
|
)
|
Less: deemed dividends on Series A Preferred Stock
|
(252,583
|
)
|
|
(15,510
|
)
|
||
Net loss attributable to common shareholders
|
$
|
(2,527,595
|
)
|
|
$
|
(843,713
|
)
|
Weighted average shares outstanding used in basic per common share computations
|
18,174,193
|
|
|
12,861,715
|
|
||
Stock options and restricted stock
|
—
|
|
|
—
|
|
||
Number of shares used in diluted per common share computation
|
18,174,193
|
|
|
12,861,715
|
|
||
Basic net loss per share of common stock
|
$
|
(0.14
|
)
|
|
$
|
(0.07
|
)
|
Diluted net loss per share of common stock
|
$
|
(0.14
|
)
|
|
$
|
(0.07
|
)
|
|
Six Months Ended
|
||||||
|
July 31, 2014
|
|
July 31, 2013
|
||||
Net loss
|
$
|
(4,946,251
|
)
|
|
$
|
(3,538,050
|
)
|
Less: deemed dividends on Series A Preferred Stock
|
(482,349
|
)
|
|
(357,146
|
)
|
||
Net loss attributable to common shareholders
|
$
|
(5,428,600
|
)
|
|
$
|
(3,895,196
|
)
|
Weighted average shares outstanding used in basic per common share computations
|
18,160,213
|
|
|
12,698,094
|
|
||
Stock options and restricted stock
|
—
|
|
|
—
|
|
||
Number of shares used in diluted per common share computation
|
18,160,213
|
|
|
12,698,094
|
|
||
Basic net loss per share of common stock
|
$
|
(0.30
|
)
|
|
$
|
(0.31
|
)
|
Diluted net loss per share of common stock
|
$
|
(0.30
|
)
|
|
$
|
(0.31
|
)
|
|
Balance at October 25, 2013
|
||
Assets purchased:
|
|
||
License agreement
|
$
|
4,431,000
|
|
Existing customer relationship
|
408,000
|
|
|
Covenant not to compete
|
129,000
|
|
|
Working capital
|
124,000
|
|
|
Other assets
|
25,000
|
|
|
Goodwill (1)
|
108,000
|
|
|
Total assets purchased
|
$
|
5,225,000
|
|
Consideration:
|
|
||
Cash paid
|
3,000,000
|
|
|
Future royalty commitment
|
2,225,000
|
|
|
Total consideration
|
$
|
5,225,000
|
|
(1)
|
Goodwill represents the excess of purchase price over the estimated fair value of net tangible and intangible assets acquired, which is not deductible for tax purposes.
|
|
Balance at February 3, 2014
|
||
Assets purchased:
|
|
||
Cash
|
$
|
59,000
|
|
Accounts receivable
|
487,000
|
|
|
Other assets
|
90,000
|
|
|
Deferred income taxes
|
1,332,000
|
|
|
Internally-developed software
|
2,017,000
|
|
|
Client relationships
|
647,000
|
|
|
Trade name
|
26,000
|
|
|
Goodwill (1)
|
2,656,000
|
|
|
Total assets purchased
|
7,314,000
|
|
|
Liabilities assumed:
|
|
||
Accounts payable and accrued liabilities
|
356,000
|
|
|
Deferred revenue obligation, net
|
840,000
|
|
|
Net assets acquired
|
$
|
6,118,000
|
|
Cash paid
|
$
|
6,118,000
|
|
(1)
|
Goodwill represents the excess of purchase price over the estimated fair value of net tangible and intangible assets acquired, which is not deductible for tax purposes.
|
|
Facilities
|
|
Equipment
|
|
Fiscal Year Totals
|
||||||
2014 (six months remaining)
|
$
|
320,000
|
|
|
$
|
3,000
|
|
|
$
|
323,000
|
|
2015
|
1,030,000
|
|
|
2,000
|
|
|
1,032,000
|
|
|||
2016
|
969,000
|
|
|
2,000
|
|
|
971,000
|
|
|||
2017
|
1,007,000
|
|
|
—
|
|
|
1,007,000
|
|
|||
2018
|
1,039,000
|
|
|
—
|
|
|
1,039,000
|
|
|||
Thereafter
|
2,435,000
|
|
|
—
|
|
|
2,435,000
|
|
|||
Total
|
$
|
6,800,000
|
|
|
$
|
7,000
|
|
|
$
|
6,807,000
|
|
|
|
July 31, 2014
|
|
January 31, 2014
|
||||
Senior term loan (1)
|
|
$
|
7,792,000
|
|
|
$
|
8,298,000
|
|
Note payable
|
|
900,000
|
|
|
900,000
|
|
||
Capital lease
|
|
1,243,000
|
|
|
227,000
|
|
||
Total
|
|
9,935,000
|
|
|
9,425,000
|
|
||
Less: Current portion
|
|
1,633,000
|
|
|
1,620,000
|
|
||
Non-current portion of debt
|
|
$
|
8,302,000
|
|
|
$
|
7,805,000
|
|
(1)
|
Amount represents total principal due, therefore, it is not reduced by the debt discount of $
199,000
and $
112,000
as of
July 31, 2014
and
January 31, 2014
, respectively. In the condensed consolidated balance sheets, the term loan is presented net of this discount.
|
|
|
Senior Term Loan
|
|
Note Payable
|
|
Capital Lease (1)
|
|
Total
|
||||||||
2014
|
|
$
|
708,000
|
|
|
$
|
300,000
|
|
|
$
|
676,000
|
|
|
$
|
1,684,000
|
|
2015
|
|
1,214,000
|
|
|
300,000
|
|
|
687,000
|
|
|
2,201,000
|
|
||||
2016
|
|
1,214,000
|
|
|
300,000
|
|
|
—
|
|
|
1,514,000
|
|
||||
2017
|
|
1,214,000
|
|
|
—
|
|
|
—
|
|
|
1,214,000
|
|
||||
2018 and thereafter
|
|
3,442,000
|
|
|
—
|
|
|
—
|
|
|
3,442,000
|
|
||||
Total repayments
|
|
$
|
7,792,000
|
|
|
$
|
900,000
|
|
|
$
|
1,363,000
|
|
|
$
|
10,055,000
|
|
(1)
|
Future minimum lease payments include principal plus interest.
|
|
Three Months Ended
|
|
|
|
|
|||||||||
(in thousands):
|
July 31, 2014
|
|
July 31, 2013
|
|
Change
|
|
% Change
|
|||||||
Cost of systems sales
|
$
|
834
|
|
|
$
|
661
|
|
|
$
|
173
|
|
|
26
|
%
|
Cost of professional services
|
779
|
|
|
1,267
|
|
|
(488
|
)
|
|
(39
|
)%
|
|||
Cost of maintenance and support
|
837
|
|
|
795
|
|
|
42
|
|
|
5
|
%
|
|||
Cost of software as a service
|
571
|
|
|
514
|
|
|
57
|
|
|
11
|
%
|
|||
Total cost of sales
|
$
|
3,021
|
|
|
$
|
3,237
|
|
|
$
|
(216
|
)
|
|
(7
|
)%
|
|
Six Months Ended
|
|
|
|
|
|||||||||
(in thousands):
|
July 31, 2014
|
|
July 31, 2013
|
|
Change
|
|
% Change
|
|||||||
Cost of systems sales
|
$
|
1,670
|
|
|
$
|
1,300
|
|
|
$
|
370
|
|
|
28
|
%
|
Cost of professional services
|
1,765
|
|
|
2,241
|
|
|
(476
|
)
|
|
(21
|
)%
|
|||
Cost of maintenance and support
|
1,797
|
|
|
1,780
|
|
|
17
|
|
|
1
|
%
|
|||
Cost of software as a service
|
1,343
|
|
|
1,093
|
|
|
250
|
|
|
23
|
%
|
|||
Total cost of sales
|
$
|
6,575
|
|
|
$
|
6,414
|
|
|
$
|
161
|
|
|
3
|
%
|
|
Three Months Ended
|
|
|
|
|
|||||||||
(in thousands):
|
July 31, 2014
|
|
July 31, 2013
|
|
Change
|
|
% Change
|
|||||||
General and administrative expenses
|
$
|
3,073
|
|
|
$
|
2,633
|
|
|
$
|
440
|
|
|
17
|
%
|
Sales and marketing expenses
|
982
|
|
|
775
|
|
|
207
|
|
|
27
|
%
|
|||
Total selling, general, and administrative
|
$
|
4,055
|
|
|
$
|
3,408
|
|
|
$
|
647
|
|
|
19
|
%
|
|
Six Months Ended
|
|
|
|
|
|||||||||
(in thousands):
|
July 31, 2014
|
|
July 31, 2013
|
|
Change
|
|
% Change
|
|||||||
General and administrative expenses
|
$
|
6,655
|
|
|
$
|
5,476
|
|
|
$
|
1,179
|
|
|
22
|
%
|
Sales and marketing expenses
|
2,040
|
|
|
1,513
|
|
|
527
|
|
|
35
|
%
|
|||
Total selling, general, and administrative
|
$
|
8,695
|
|
|
$
|
6,989
|
|
|
$
|
1,706
|
|
|
24
|
%
|
|
Three Months Ended
|
|
|
|
|
|||||||||
(in thousands):
|
July 31, 2014
|
|
July 31, 2013
|
|
Change
|
|
% Change
|
|||||||
Research and development expense
|
$
|
2,225
|
|
|
$
|
1,160
|
|
|
$
|
1,065
|
|
|
92
|
%
|
Plus: Capitalized research and development cost
|
158
|
|
|
338
|
|
|
(180
|
)
|
|
(53
|
)%
|
|||
Total research and development cost
|
$
|
2,383
|
|
|
$
|
1,498
|
|
|
$
|
885
|
|
|
59
|
%
|
|
Six Months Ended
|
|
|
|
|
|||||||||
(in thousands):
|
July 31, 2014
|
|
July 31, 2013
|
|
Change
|
|
% Change
|
|||||||
Research and development expense
|
$
|
4,576
|
|
|
$
|
2,257
|
|
|
$
|
2,319
|
|
|
103
|
%
|
Plus: Capitalized research and development cost
|
351
|
|
|
798
|
|
|
(447
|
)
|
|
(56
|
)%
|
|||
Total research and development cost
|
$
|
4,927
|
|
|
$
|
3,055
|
|
|
$
|
1,872
|
|
|
61
|
%
|
|
July 31, 2014
|
|
July 31, 2013
|
||||
Company proprietary software
|
$
|
1,955,000
|
|
|
$
|
2,873,000
|
|
Hardware and third-party software
|
238,000
|
|
|
25,000
|
|
||
Professional services
|
6,774,000
|
|
|
7,765,000
|
|
||
Maintenance and support
|
25,608,000
|
|
|
24,094,000
|
|
||
Software as a service
|
26,908,000
|
|
|
17,123,000
|
|
||
Total
|
$
|
61,483,000
|
|
|
$
|
51,880,000
|
|
•
|
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 we are 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.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
Adjusted EBITDA Reconciliation
|
July 31, 2014
|
|
July 31, 2013
|
|
July 31, 2014
|
|
July 31, 2013
|
||||||||
Net loss
|
$
|
(2,275
|
)
|
|
$
|
(828
|
)
|
|
$
|
(4,946
|
)
|
|
$
|
(3,538
|
)
|
Interest expense
|
174
|
|
|
588
|
|
|
343
|
|
|
1,154
|
|
||||
Income tax expense
|
1
|
|
|
144
|
|
|
2
|
|
|
164
|
|
||||
Depreciation
|
210
|
|
|
167
|
|
|
361
|
|
|
338
|
|
||||
Amortization of capitalized software development costs
|
914
|
|
|
701
|
|
|
1,831
|
|
|
1,396
|
|
||||
Amortization of intangible assets
|
346
|
|
|
315
|
|
|
705
|
|
|
629
|
|
||||
Amortization of other costs
|
43
|
|
|
17
|
|
|
71
|
|
|
28
|
|
||||
EBITDA
|
(587
|
)
|
|
1,104
|
|
|
(1,633
|
)
|
|
171
|
|
||||
Share-based compensation expense
|
422
|
|
|
358
|
|
|
865
|
|
|
826
|
|
||||
Loss on disposal of fixed assets
|
83
|
|
|
—
|
|
|
83
|
|
|
—
|
|
||||
Associate severances and other costs relating to transactions or corporate restructuring
|
126
|
|
|
—
|
|
|
576
|
|
|
383
|
|
||||
Non-cash valuation adjustments to assets and liabilities
|
(46
|
)
|
|
1,025
|
|
|
(1,145
|
)
|
|
1,710
|
|
||||
Transaction related professional fees, advisory fees, and other internal direct costs
|
11
|
|
|
152
|
|
|
175
|
|
|
226
|
|
||||
Other non-recurring operating expenses
|
489
|
|
|
43
|
|
|
1,063
|
|
|
92
|
|
||||
Adjusted EBITDA
|
$
|
498
|
|
|
$
|
2,682
|
|
|
$
|
(16
|
)
|
|
$
|
3,408
|
|
Adjusted EBITDA margin(1)
|
7
|
%
|
|
31
|
%
|
|
—
|
%
|
|
22
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Loss per share — diluted
|
$(0.14)
|
|
$(0.07)
|
|
$(0.30)
|
|
$(0.31)
|
||||||||
Adjusted EBITDA per adjusted diluted share (2)
|
$
|
0.02
|
|
|
$
|
0.15
|
|
|
$
|
—
|
|
|
$
|
0.19
|
|
Diluted weighted average shares
|
18,174,193
|
|
|
12,861,715
|
|
|
18,160,213
|
|
|
12,698,094
|
|
||||
Includable incremental shares — adjusted EBITDA(3)
|
3,614,119
|
|
|
5,122,243
|
|
|
—
|
|
|
5,167,025
|
|
||||
Adjusted diluted shares
|
21,788,312
|
|
|
17,983,958
|
|
|
18,160,213
|
|
|
17,865,119
|
|
(1)
|
Adjusted EBITDA as a percentage of GAAP revenues.
|
(2)
|
Adjusted EBITDA per adjusted diluted share for our common stock is computed using the more dilutive of the two-class method or the if-converted method.
|
(3)
|
The number of incremental shares that would be dilutive under profit assumption, only applicable under a GAAP net loss. If GAAP profit is earned in the current period, no additional incremental shares are assumed.
|
(in thousands)
|
As of July 31,
2014 |
|
As of January 31,
2014 |
||||
Term loans (1)
|
$
|
7,792
|
|
|
$
|
8,298
|
|
Note payable (1)
|
900
|
|
|
900
|
|
||
Capital leases (1)
|
1,243
|
|
|
227
|
|
||
Royalty liability (2)
|
2,336
|
|
|
2,264
|
|
(1)
|
Reference “Note 5 – Debt” in the Notes to the Condensed Consolidated Financial Statements for additional information.
|
(2)
|
Reference “Note 3 – Acquisitions and Strategic Agreements” in the Notes to the Condensed Consolidated Financial Statements for additional information.
|
(in thousands)
|
Six Months Ended
|
||||||
July 31, 2014
|
|
July 31, 2013
|
|||||
Net loss
|
$
|
(4,946
|
)
|
|
$
|
(3,538
|
)
|
Non-cash adjustments to net loss
|
2,815
|
|
|
5,217
|
|
||
Cash impact of changes in assets and liabilities
|
(2,142
|
)
|
|
(3,046
|
)
|
||
Operating cash flow
|
$
|
(4,273
|
)
|
|
$
|
(1,367
|
)
|
(in thousands)
|
Six Months Ended
|
||||||
July 31, 2014
|
|
July 31, 2013
|
|||||
Purchases of property and equipment
|
$
|
(1,636
|
)
|
|
$
|
(94
|
)
|
Capitalized software development costs
|
(351
|
)
|
|
(798
|
)
|
||
Payments for acquisitions
|
(5,891
|
)
|
|
—
|
|
||
Investing cash flow
|
$
|
(7,878
|
)
|
|
$
|
(892
|
)
|
(in thousands)
|
Six Months Ended
|
||||||
July 31, 2014
|
|
July 31, 2013
|
|||||
Principal repayments on term loan
|
$
|
(506
|
)
|
|
$
|
(625
|
)
|
Principal payments on capital lease obligation
|
(49
|
)
|
|
—
|
|
||
Payment of deferred financing costs
|
(113
|
)
|
|
—
|
|
||
Proceeds from the exercise of stock options and stock purchase plans
|
50
|
|
|
739
|
|
||
Financing cash flow
|
$
|
(618
|
)
|
|
$
|
114
|
|
Item 1.
|
LEGAL PROCEEDINGS
|
Item 1A.
|
RISK FACTORS
|
•
|
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 its 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 Capital 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.
|
Item 6.
|
EXHIBITS
|
|
|
STREAMLINE HEALTH SOLUTIONS, INC.
|
DATE: September 15, 2014
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By:
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/
S
/ Robert E. Watson
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Robert E. Watson
Chief Executive Officer
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DATE: September 15, 2014
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By:
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/
S
/ Nicholas A. Meeks
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Nicholas A. Meeks
Chief Financial Officer
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Exhibit No.
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Description of Exhibit
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3.1*
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Certificate of Incorporation of Streamline Health Solutions, Inc. f/k/a/ LanVision Systems, Inc., as amended through August 19, 2014
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31.1*
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Certification by Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act
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31.2*
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Certification by Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act
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32.1*
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Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350
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32.2*
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Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350
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101
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The following financial information from Streamline Health Solutions, Inc.’s Quarterly Report on Form 10-Q for the three-month period ended July 31, 2014 filed with the SEC on September 15, 2014, formatted in XBRL includes: (i) Condensed Consolidated Balance Sheets at July 31, 2014 and January 31, 2014, (ii) Condensed Consolidated Statements of Operations for three- and six-month periods ended July 31, 2014 and 2013, (iii) Condensed Consolidated Statements of Comprehensive Loss for three- and six-month periods ended July 31, 2014 and 2013, (iv) Condensed Consolidated Statements of Cash Flows for the three- and six-month periods ended July 31, 2014 and 2013, and (v) Notes to the Condensed Consolidated Financial Statements.
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*
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Filed herewith.
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i)
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the dividend rate upon the shares, whether dividends shall be cumulative or partially cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends upon the shares;
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ii)
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whether shares can be redeemed or called and, if so, the redemption or call price and terms and conditions of redemption or call;
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iii)
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the amount payable upon shares in the event of dissolution, voluntary or involuntary liquidation or winding up of the affairs of the Corporation;
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iv)
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purchase, retirement or sinking fund provisions, if any, for the call, redemption or purchase of shares;
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v)
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the terms and conditions, if any, on which shares may be converted into Common Stock or any other securities; and
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vi)
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whether or not shares have voting rights, and the extent of such voting rights, if any.
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Name
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Mailing Address
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J. Brian Patsy
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c/o LanVision, Inc.
10371 Techwoods Circle
Cincinnati, OH 45242
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September 15, 2014
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/s/ Robert E. Watson
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Chief Executive Officer and
President
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September 15, 2014
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/s/ Nicholas A. Meeks
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Chief Financial Officer
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(1)
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The quarterly report on Form 10-Q of the Company for the quarter ended July 31, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition, and results of operations of the Company.
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(1)
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The quarterly report on Form 10-Q of the Company for the quarter ended July 31, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition, and results of operations of the Company.
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