Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jul. 31, 2015 | Aug. 26, 2015 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | STREAMLINE HEALTH SOLUTIONS INC. | |
Entity Central Index Key | 1,008,586 | |
Document Type | 10-Q | |
Document Period End Date | Jul. 31, 2015 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --01-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 18,773,540 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jul. 31, 2015 | Jan. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 6,031,129 | $ 6,522,600 |
Accounts receivable, net of allowance for doubtful accounts of $597,811 and $665,962, respectively | 9,034,755 | 6,935,270 |
Contract receivables | 143,114 | 191,465 |
Prepaid hardware and third-party software for future delivery | 8,201 | 55,173 |
Prepaid client maintenance contracts | 870,274 | 935,858 |
Other prepaid assets | 1,185,770 | 1,437,680 |
Deferred income taxes | 220,004 | 220,004 |
Other current assets | 63,932 | 207,673 |
Total current assets | 17,557,179 | 16,505,723 |
Property and equipment: | ||
Computer equipment | 2,425,547 | 2,381,923 |
Computer software | 750,532 | 964,857 |
Office furniture, fixtures and equipment | 683,443 | 683,443 |
Leasehold improvements | 727,654 | 724,015 |
Property and equipment, gross | 4,587,176 | 4,754,238 |
Accumulated depreciation and amortization | (1,992,646) | (1,617,423) |
Property and equipment, net | 2,594,530 | 3,136,815 |
Contract receivables, less current portion | 26,132 | 43,553 |
Capitalized software development costs, net of accumulated amortization of $13,404,226 and $11,846,468, respectively | 7,639,360 | 9,197,118 |
Intangible assets, net of accumulated amortization of $4,001,143 and $3,326,683, respectively | 8,825,857 | 9,500,317 |
Deferred financing costs, net of accumulated amortization of $49,063 and $13,677, respectively | 305,615 | 387,199 |
Goodwill | 16,184,667 | 16,184,667 |
Other | 963,587 | 823,723 |
Total non-current assets | 36,539,748 | 39,273,392 |
Total assets | 54,096,927 | 55,779,115 |
Current liabilities: | ||
Accounts payable | 2,682,679 | 2,298,851 |
Accrued compensation | 953,619 | 865,865 |
Accrued other expenses | 210,478 | 563,838 |
Current portion of long-term debt | 577,530 | 500,000 |
Deferred revenues | 10,695,093 | 9,289,076 |
Current portion of capital lease obligations | 749,291 | 781,961 |
Total current liabilities | 15,868,690 | 14,299,591 |
Non-current liabilities: | ||
Term loans | 8,431,964 | 9,500,000 |
Warrants liability | 566,296 | 1,834,380 |
Royalty liability | 2,446,493 | 2,385,826 |
Lease incentive liability | 360,030 | 342,129 |
Capital lease obligations | 211,880 | 582,911 |
Deferred revenues, less current portion | 1,318,748 | 964,933 |
Deferred income tax liabilities | 220,005 | 229,579 |
Total non-current liabilities | 13,555,416 | 15,839,758 |
Total liabilities | 29,424,106 | 30,139,349 |
Series A 0% Convertible Redeemable Preferred Stock, $.01 par value per share, $8,849,985 redemption value, 4,000,000 shares authorized, 2,949,995 shares issued and outstanding, net of unamortized preferred stock discount of $1,591,332 and $2,212,007, respectively | 7,258,653 | 6,637,978 |
Stockholders’ equity: | ||
Common stock, $.01 par value per share, 45,000,000 shares authorized; 18,746,469 and 18,553,389 shares issued and outstanding, respectively | 187,465 | 185,534 |
Additional paid in capital | 79,231,085 | 78,390,424 |
Accumulated deficit | (62,004,382) | (59,574,170) |
Total stockholders’ equity | 17,414,168 | 19,001,788 |
Total liability and stockholders' equity | $ 54,096,927 | $ 55,779,115 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | 6 Months Ended | 12 Months Ended |
Jul. 31, 2015 | Jan. 31, 2015 | |
Allowance for doubtful accounts | $ 597,811 | $ 665,962 |
Accumulated amortization of capitalized software development costs | 13,404,226 | 11,846,468 |
Accumulated amortization | 4,001,143 | 3,326,683 |
Deferred financing costs, accumulated amortization | $ 49,063 | $ 13,677 |
Common stock, par value (dollars per share) | $ 0.01 | $ 0.01 |
Number of authorized shares of common stock | 45,000,000 | 45,000,000 |
Common stock, shares issued | 18,746,469 | 18,553,389 |
Common stock, shares outstanding | 18,746,469 | 18,553,389 |
Series A Preferred Stock | ||
Preferred stock dividend rate | 0.00% | 0.00% |
Convertible redeemable preferred stock, par value (dollars per share) | $ 0.01 | $ 0.01 |
Convertible redeemable preferred stock, redemption value | $ 8,849,985 | $ 8,849,985 |
Convertible redeemable preferred stock, shares authorized | 4,000,000 | 4,000,000 |
Convertible redeemable preferred stock, shares issued | 2,949,995 | 2,949,995 |
Convertible redeemable preferred stock, shares outstanding | 2,949,995 | 2,949,995 |
Unamortized preferred stock discount | $ 1,591,332 | $ 2,212,007 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jul. 31, 2015 | Jul. 31, 2014 | Jul. 31, 2015 | Jul. 31, 2014 | |
Revenues: | ||||
Systems sales | $ 1,941,601 | $ 314,085 | $ 2,240,217 | $ 653,291 |
Professional services | 659,372 | 674,999 | 1,010,331 | 1,283,950 |
Maintenance and support | 3,627,118 | 4,177,165 | 7,281,183 | 8,348,977 |
Software as a service | 2,391,008 | 2,075,823 | 4,256,810 | 3,907,025 |
Total revenues | 8,619,099 | 7,242,072 | 14,788,541 | 14,193,243 |
Operating expenses: | ||||
Cost of systems sales | 694,794 | 834,324 | 1,421,585 | 1,669,792 |
Cost of professional services | 647,569 | 778,691 | 1,419,065 | 1,765,116 |
Cost of maintenance and support | 714,273 | 836,526 | 1,531,178 | 1,796,712 |
Cost of software as a service | 702,769 | 571,464 | 1,441,600 | 1,343,043 |
Selling, general and administrative | 3,779,114 | 4,054,794 | 8,285,288 | 8,695,250 |
Research and development | 2,233,356 | 2,225,120 | 4,457,549 | 4,575,564 |
Total operating expenses | 8,771,875 | 9,300,919 | 18,556,265 | 19,845,477 |
Operating loss | (152,776) | (2,058,847) | (3,767,724) | (5,652,234) |
Other income (expense): | ||||
Interest expense | (248,175) | (173,539) | (492,116) | (343,017) |
Miscellaneous income (expense) | (159,814) | (41,481) | 1,829,160 | 1,051,290 |
Loss before income taxes | (560,765) | (2,273,867) | (2,430,680) | (4,943,961) |
Income tax benefit (expense) | (3,414) | (1,145) | 468 | (2,290) |
Net loss | (564,179) | (2,275,012) | (2,430,212) | (4,946,251) |
Less: deemed dividends on Series A Preferred Shares | (325,018) | (252,583) | (620,675) | (482,349) |
Net loss attributable to common shareholders | $ (889,197) | $ (2,527,595) | $ (3,050,887) | $ (5,428,600) |
Basic net loss per common share, dollars per share | $ (0.05) | $ (0.14) | $ (0.16) | $ (0.30) |
Number of shares used in basic per common share computation (shares) | 18,628,288 | 18,174,193 | 18,614,622 | 18,160,213 |
Diluted net loss per common share, dollars per share | $ (0.05) | $ (0.14) | $ (0.16) | $ (0.30) |
Number of shares used in diluted per common share computation (shares) | 18,628,288 | 18,174,193 | 18,614,622 | 18,160,213 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Loss Statement - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jul. 31, 2015 | Jul. 31, 2014 | Jul. 31, 2015 | Jul. 31, 2014 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (564,179) | $ (2,275,012) | $ (2,430,212) | $ (4,946,251) |
Other comprehensive loss, net of tax: | ||||
Fair value of interest rate swap liability | 0 | 22,431 | 0 | 717 |
Other comprehensive loss | 0 | 22,431 | 0 | 717 |
Comprehensive loss | $ (564,179) | $ (2,252,581) | $ (2,430,212) | $ (4,945,534) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) | 6 Months Ended | |
Jul. 31, 2015 | Jul. 31, 2014 | |
Operating activities: | ||
Net loss | $ (2,430,212) | $ (4,946,251) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation | 625,239 | 360,986 |
Amortization of capitalized software development costs | 1,557,758 | 1,830,628 |
Amortization of intangible assets | 674,460 | 704,952 |
Amortization of other deferred costs | 83,868 | 102,095 |
Valuation adjustment for warrants liability | (1,268,084) | (1,224,407) |
Share-based compensation expense | 1,283,459 | 865,142 |
Other valuation adjustments | 94,351 | 78,970 |
Loss on disposal of property and equipment | 34,228 | 83,236 |
Gain on early extinguishment of lease liability | (33,059) | 0 |
Provision for accounts receivable | 89,002 | 13,692 |
Deferred tax benefit | (9,574) | 0 |
Changes in assets and liabilities, net of effects of acquisitions: | ||
Accounts and contract receivables | (2,122,715) | (1,264,184) |
Other assets | 319,862 | (853,586) |
Accounts payable | 427,914 | 936,731 |
Accrued expenses | (276,301) | (781,283) |
Deferred revenues | 1,759,832 | (180,110) |
Net cash provided by (used in) operating activities | 810,028 | (4,273,389) |
Investing activities: | ||
Purchases of property and equipment | (117,182) | (1,635,952) |
Capitalization of software development costs | 0 | (351,316) |
Payment for acquisition, net of cash received | 0 | (5,890,402) |
Net cash used in investing activities | (117,182) | (7,877,670) |
Financing activities: | ||
Principal repayments on term loan | (990,506) | (505,950) |
Principal payments on capital lease obligation | (403,701) | (49,509) |
Recovery (payment) of deferred financing costs | 2,111 | (112,800) |
Proceeds from exercise of stock options and stock purchase plan | 207,779 | 50,206 |
Net cash used in financing activities | (1,184,317) | (618,053) |
Decrease in cash and cash equivalents | (491,471) | (12,769,112) |
Cash and cash equivalents at beginning of period | 6,522,600 | 17,924,886 |
Cash and cash equivalents at end of period | $ 6,031,129 | $ 5,155,774 |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Jul. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by Streamline Health Solutions, Inc. (“we”, “us”, “our”, or the “Company”), pursuant to the rules and regulations applicable to quarterly reports on Form 10-Q of the U.S. Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In the opinion of our management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Condensed Consolidated Financial Statements have been included. These Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent annual report on Form 10-K, Commission File Number 0-28132. Operating results for the six months ended July 31, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2016 . |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jul. 31, 2015 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Our significant accounting policies are presented in “Note 2 – Significant Accounting Policies” in the fiscal year 2014 Annual Report on Form 10-K. Users of financial information for interim periods are encouraged to refer to the footnotes to the consolidated financial statements contained in the Annual Report on Form 10-K when reviewing interim financial results. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Fair Value of Financial Instruments The Financial Accounting Standards Board’s (“FASB”) 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 our long-term debt approximates fair value since the interest rates being paid on the amounts approximate the market interest rate. Long-term debt is and, prior to its termination, the interest rate swap was classified as Level 2. The initial fair value of royalty liability and warrants liability was determined by management with the assistance of an independent third-party valuation specialist, and by management thereafter. The fair value of warrants liability as of January 31, 2015 was also determined by management with the assistance of an independent third-party valuation specialist using a binomial model. We used the Black-Scholes option pricing model to estimate the fair value of warrants liability as of July 31, 2015. The fair value of the royalty liability is determined based on the probability-weighted revenue scenarios for the Looking Glass® Clinical Analytics solution licensed from Montefiore Medical Center (discussed below). The contingent consideration for royalty liability and warrants liability are classified as Level 3. Revenue Recognition We derive revenue from the sale of internally-developed software either by licensing or by software as a service (“SaaS”), through the direct sales force or through third-party resellers. Licensed, locally-installed clients utilize our support and maintenance services for a separate fee, whereas SaaS fees include support and maintenance. We also derive revenue from professional services that support the implementation, configuration, training, and optimization of the applications. 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, and ASC 605-25, Revenue Recognition — Multiple-element arrangements . We commence revenue recognition when all of the following criteria have been met: • 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. 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. Revenues from resellers are recognized gross of royalty payments to resellers. Multiple Element Arrangements We follow the accounting revenue guidance under Accounting Standards Update (ASU) 2009-13, Multiple-Deliverable Revenue Arrangements — a consensus of the FASB Emerging Issues Task Force . Terms used in evaluation are as follows: • 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 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 rights 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. Stand-alone value to a client is defined in the guidance as those that can be sold separately by any vendor or the client could resell the item on a stand-alone basis. Additionally, if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item or items must be considered probable and substantially in the control of the vendor. 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 uses 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 and include calculating the equivalent value of maintenance and support on a present value basis over the term of the initial agreement period. Typically revenue recognition commences upon client go live on the system and is recognized ratably over the contract term. System Sales We use the residual method to determine fair value for proprietary 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 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. Proprietary licenses are perpetual in nature, and license fees do not include rights to version upgrades, fixes or service packs. 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, 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. The software portion of our Looking Glass® Coding & CDI products generally does not require material modification to achieve their contracted function. 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. Professional services components that are essential to the functionality of the software and are not considered a separate unit of accounting are recognized in 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 July 31, 2015 and January 31, 2015 , we had deferred costs of $709,000 and $570,000 , respectively, net of accumulated amortization of $178,000 and $275,000 , respectively. Amortization expense of these costs was $48,000 and $71,000 for the six months ended July 31, 2015 and 2014 , respectively. 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-fee basis. We monitor projects to assure that the expected and historical rate earned remains within a reasonable range to the established selling price. Severances From time to time, we 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. For the three months ended July 31, 2015 and 2014 , we incurred $2,000 and $126,000 in severance expenses, respectively, and $9,000 and $576,000 for the six months ended July 31, 2015 and 2014 , respectively. At July 31, 2015 and January 31, 2015 , we had accrued severances of zero and $159,000 , respectively. Equity Awards We account for share-based payments based on the grant-date fair value of the awards with compensation cost recognized as expense over the requisite vesting period. We incurred total compensation expense related to stock-based awards of $631,000 and $422,000 for the three months ended July 31, 2015 and 2014 , respectively, and $1,283,000 and $865,000 for the six months ended July 31, 2015 and 2014 , respectively. The fair value of the stock options granted is estimated at the date of grant using a Black-Scholes option pricing model. The option pricing model inputs (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 (such as volatility factor, expected term, and forfeiture rates) data. 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. We issue restricted stock awards in the form of our common stock. The fair value of these awards is based on the market close price per share on the day of grant. We expense the compensation cost of these awards as the restriction period lapses, which is typically a one -year service period to the Company. 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 basis 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, we consider whether it is more likely than not that some or all of the deferred tax assets will not be realized. We establish a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. We provide 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. We believe we have appropriately accounted for any uncertain tax positions. Net Loss Per Common Share We present basic and diluted earnings per share (“EPS”) data for our 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 determined by adjusting 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 dilutive potential common shares comprised of options granted, unvested restricted stock, warrants and convertible preferred stock. Potential common stock equivalents that have been issued by us related to outstanding stock options, unvested restricted stock and warrants are determined using the treasury stock method, while potential common stock issuable upon conversion of Series A Convertible Preferred Stock are determined using the “if converted” method. Our 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. Our 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 our 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 to not be participating in losses if there is no obligation to fund such losses. For the six months ended July 31, 2015 and 2014 , the unvested restricted stock awards and the Series A Convertible Preferred Stock were not deemed to be participating since there was a net loss from operations. As of July 31, 2015 , there were 2,949,995 shares of preferred stock outstanding, each share is convertible into one share of our common stock. For the six months ended July 31, 2015 and 2014 , the Series A Convertible Preferred Stock would have an anti-dilutive effect if included in diluted EPS and therefore, was not included in the calculation. As of July 31, 2015 and 2014 , there were 118,180 and zero , respectively, unvested restricted shares of common stock outstanding that 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: Three Months Ended July 31, 2015 July 31, 2014 Net loss $ (564,179 ) $ (2,275,012 ) Less: deemed dividends on Series A Preferred Stock (325,018 ) (252,583 ) Net loss attributable to common shareholders $ (889,197 ) $ (2,527,595 ) Weighted average shares outstanding used in basic per common share computations 18,628,288 18,174,193 Stock options and restricted stock — — Number of shares used in diluted per common share computation 18,628,288 18,174,193 Basic net loss per share of common stock $ (0.05 ) $ (0.14 ) Diluted net loss per share of common stock $ (0.05 ) $ (0.14 ) Six Months Ended July 31, 2015 July 31, 2014 Net loss $ (2,430,212 ) $ (4,946,251 ) Less: deemed dividends on Series A Preferred Stock (620,675 ) (482,349 ) Net loss attributable to common shareholders $ (3,050,887 ) $ (5,428,600 ) Weighted average shares outstanding used in basic per common share computations 18,614,622 18,160,213 Stock options and restricted stock — — Number of shares used in diluted per common share computation 18,614,622 18,160,213 Basic net loss per share of common stock $ (0.16 ) $ (0.30 ) Diluted net loss per share of common stock $ (0.16 ) $ (0.30 ) Diluted net loss per share excludes the effect of 2,978,344 and 2,507,335 outstanding stock options for the six months ended July 31, 2015 and 2014 , respectively. The inclusion of these shares would be anti-dilutive. For the six months ended July 31, 2015 and 2014 , the warrants to purchase 1,400,000 shares of common stock would have an anti-dilutive effect if included in diluted net loss per share and therefore were not included in the calculation. Recent Accounting Pronouncements In August 2014, the FASB issued an accounting standard update relating to disclosures of uncertainties about an entity’s ability to continue as a going concern. The update provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in the event that there is such substantial doubt. The update will be effective for us on February 1, 2017. 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. 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 2015, the FASB delayed the effective date by one year and the guidance will now be effective for us on February 1, 2018. Early adoption is permitted. The guidance is to be applied using one of two retrospective application methods. We are currently evaluating the impact of the adoption of this accounting standard update on our internal processes, operating results, and financial reporting. In April 2015, the FASB issued an accounting standard update relating to simplifying the presentation of debt issuance costs. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The update will be effective for us on February 1, 2016. |
Acquisitions and Strategic Agre
Acquisitions and Strategic Agreements | 6 Months Ended |
Jul. 31, 2015 | |
Business Combinations [Abstract] | |
ACQUISITIONS AND STRATEGIC AGREEMENTS | ACQUISITIONS AND STRATEGIC AGREEMENTS On October 25, 2013, we entered into a Software License and Royalty Agreement (the “Royalty Agreement”) with Montefiore Medical Center (“Montefiore”) pursuant to which Montefiore granted us an exclusive, worldwide 15 -year license of Montefiore’s proprietary clinical analytics platform solution, Clinical Looking Glass® (“CLG”), now known as our Looking Glass® 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 July 31, 2015 and January 31, 2015 , the present value of this royalty liability was $2,446,000 and $2,386,000 , respectively 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”) for a total purchase price of $6,500,000 , subject to net working capital and other customary adjustments. A portion of the total purchase price was withheld in escrow as described in the Merger Agreement for indemnification of claimed damages. In April 2015, the Company received $750,000 from the cash withheld in escrow, which is included in miscellaneous income. Pursuant to the Merger Agreement, we acquired all of the issued and outstanding common stock of Unibased, and Unibased became a wholly-owned subsidiary of Streamline. Under the terms of the Merger Agreement, Unibased stockholders received cash for each share of Unibased common stock held. The purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date as follows: Balance at February 3, 2014 Assets purchased: Cash $ 59,000 Accounts receivable 221,000 Other assets 61,000 Internally-developed software 2,017,000 Client relationships 647,000 Trade name 26,000 Goodwill (1) 4,251,000 Total assets purchased 7,282,000 Liabilities assumed: Accounts payable and accrued liabilities 362,000 Deferred revenue obligation, net 793,000 Deferred income taxes 9,000 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. The operating results of Unibased are not material for proforma disclosure. |
Leases
Leases | 6 Months Ended |
Jul. 31, 2015 | |
Leases [Abstract] | |
LEASES | LEASES We rent 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: Facilities Equipment Fiscal Year Totals 2015 (six months remaining) $ 477,000 $ 1,000 $ 478,000 2016 969,000 2,000 971,000 2017 1,007,000 — 1,007,000 2018 1,039,000 — 1,039,000 2019 967,000 — 967,000 Thereafter 1,468,000 — 1,468,000 Total $ 5,927,000 $ 3,000 $ 5,930,000 Rent and leasing expense for facilities and equipment was $325,000 and $458,000 for the three months ended July 31, 2015 and 2014 , respectively, and $632,000 and $837,000 for the six months ended July 31, 2015 and 2014 , respectively. The Company has a capital lease to finance office equipment purchases. The balance of fixed assets acquired under these capital leases was $1,515,000 as of July 31, 2015 and January 31, 2015 , and the balance of accumulated depreciation was $825,000 and $494,000 as of July 31, 2015 and January 31, 2015 , respectively. The amortization expense of leased equipment is included in depreciation expense. |
Debt
Debt | 6 Months Ended |
Jul. 31, 2015 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Term Loan and Line of Credit In December 2013, we amended and restated our previously outstanding senior credit agreement and amended the subordinated credit agreement with Fifth Third Bank to increase the senior term loan to $8,500,000 , reduce the interest rates, and extend the maturity of the senior term loan and the revolving line of credit to December 1, 2018 and December 1, 2015, respectively. In January 2014, we paid the subordinated term loan in full. The outstanding senior term loan was secured by substantially all of our assets. The senior term loan principal balance was payable in monthly installments of $101,000 , which started in January 2014 and would have continued through the maturity date, with the full remaining unpaid principal balance due at maturity. Borrowings under the senior term loan bore interest at a rate of LIBOR plus 5.25% . However, as a result of our interest rate swap, the interest rate was fixed at 6.42% until October 27, 2014, when the interest rate swap agreement was terminated. Accrued and unpaid interest on the senior term loan was due monthly through maturity. We paid $116,000 in closing fees in connection with this senior term loan, which was recorded as a debt discount and was being amortized to interest expense over the term of the loan using the effective interest method. Borrowings under the revolving line of credit bore interest at a rate equal to LIBOR plus 3.50% . A commitment fee of 0.40% was incurred on the unused revolving line of credit balance, and was payable quarterly. 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, 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 changed to vary from 4.25% to 6.25% , and the applicable base rate margin was changed 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. At closing, 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 of the Credit Agreement and unamortized debt financing costs and discount of $315,000 associated with the terminated debt was included in loss on early extinguishment of debt. 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. In addition, the credit facility prohibits the Company from paying dividends on the common and preferred stock. In April 2015, the Credit Agreement was amended to increase the applicable LIBOR rate margin, which will vary from 4.25% to 6.25% , and to reset the financial covenants. As such, the Company is required to maintain minimum liquidity of at least (i) $5,000,000 through April 15, 2015, (ii) $6,500,000 from April 16, 2015 through and including July 30, 2015, (iii) $7,000,000 from July 31, 2015 through and including January 30, 2016, and (iv) $7,500,000 from January 31, 2016 through and including the maturity date of the credit facility. The following table shows our future minimum trailing twelve months EBITDA covenant thresholds, as modified by the amendment to the Credit Agreement: For the four-quarter period ending Minimum EBITDA April 30, 2015 $ (2,500,000 ) July 31, 2015 (1,750,000 ) October 31, 2015 (750,000 ) January 31, 2016 500,000 For the four-quarter period ending April 30, 2016, and fiscal quarters thereafter, the minimum EBITDA will be determined within 30 days following delivery of, and based upon, the projections then most recently delivered by the Company. As of July 31, 2015 , the Company had no outstanding borrowings under the revolving line of credit, and had accrued $2,000 in unused line fees. Outstanding principal balances on debt consisted of the following at: July 31, 2015 January 31, 2015 Senior term loan $ 9,009,000 $ 10,000,000 Capital lease 961,000 1,365,000 Total 9,970,000 11,365,000 Less: Current portion 1,327,000 1,282,000 Non-current portion of debt $ 8,643,000 $ 10,083,000 In May 2015, we used the proceeds received from the Unibased escrow fund to make a $750,000 payment of principal towards the senior term loan with Wells Fargo. As a result of this prepayment, 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 July 31, 2015 : Senior Term Loan Capital Lease (1) Total 2015 $ 231,000 $ 412,000 $ 643,000 2016 693,000 511,000 1,204,000 2017 924,000 93,000 1,017,000 2018 924,000 — 924,000 2019 6,237,000 — 6,237,000 Total repayments $ 9,009,000 $ 1,016,000 $ 10,025,000 _______________ (1) Future minimum lease payments include principal plus interest. Note Payable In November 2013, as part of the settlement of the earn-out consideration in connection with the Interpoint acquisition, we issued an unsecured, subordinated three -year note in the amount of $ 900,000 that was originally scheduled to mature on November 1, 2016 and accrued interest on the unpaid principal amount actually outstanding at a per annum rate equal to 8% . The promissory note had annual principal payments of $ 300,000 due on November 1, 2014, 2015 and 2016. At closing of the Credit Agreement with Wells Fargo described above, we repaid our indebtedness under this note using approximately $600,000 of the proceeds provided by the term loan. |
Convertible Preferred Stock
Convertible Preferred Stock | 6 Months Ended |
Jul. 31, 2015 | |
Equity [Abstract] | |
CONVERTIBLE PREFERRED STOCK | CONVERTIBLE PREFERRED STOCK Series A Convertible Preferred Stock At July 31, 2015 , we had 2,949,995 shares of Series A Convertible Redeemable Preferred Stock (the “Preferred Stock”) outstanding. Each share of the Preferred Stock is convertible into one share of the Company's common stock. The Preferred Stock does not pay a dividend; however, the holders are entitled to receive dividends 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 Preferred Stock has voting rights on a modified as-if-converted-to-common-stock-basis. The 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 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 10 day period prior to the measurement date is greater than $8.00 per share, and the average daily trading volume for the 60 day period immediately prior to the measurement date exceeds 100,000 shares. The conversion price is $3.00 per share, subject to certain adjustments. At any time following August 31, 2016, each share of 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 similar events) plus any accrued and unpaid dividends thereon. The Preferred Stock are classified as temporary equity as the securities are redeemable solely at the option of the holder. |
Income Taxes
Income Taxes | 6 Months Ended |
Jul. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Income tax expense consists of federal, state and local tax provisions. For the six months ended July 31, 2015 and 2014 , we recorded federal tax benefit of $8,000 and zero , respectively. For the six months ended July 31, 2015 and 2014 , we recorded state and local tax expense of $8,000 and $2,000 , respectively. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jul. 31, 2015 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS We have evaluated subsequent events for recognition or disclosure in the condensed consolidated financial statements filed on Form 10-Q with the SEC and no events have occurred that require disclosure, except for the following. In August 2015, we settled a dispute with FTI Consulting, Inc. (“FTI”) relating to a certain License and Services Agreement (the “LSA”), under which FTI contracted to license certain of our software and to engage us to provide services in connection with FTI’s provision of consulting services to its clients. Under the terms of the settlement, FTI agreed to pay us $250,000 concurrently with the execution of a settlement agreement, and each party released the other of all claims relating to the LSA. Neither we nor FTI admitted any liability to any person or entity in connection with the settlement. |
Summary of Significant Accoun15
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jul. 31, 2015 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Financial Accounting Standards Board’s (“FASB”) 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 our long-term debt approximates fair value since the interest rates being paid on the amounts approximate the market interest rate. Long-term debt is and, prior to its termination, the interest rate swap was classified as Level 2. The initial fair value of royalty liability and warrants liability was determined by management with the assistance of an independent third-party valuation specialist, and by management thereafter. The fair value of warrants liability as of January 31, 2015 was also determined by management with the assistance of an independent third-party valuation specialist using a binomial model. We used the Black-Scholes option pricing model to estimate the fair value of warrants liability as of July 31, 2015. The fair value of the royalty liability is determined based on the probability-weighted revenue scenarios for the Looking Glass® Clinical Analytics solution licensed from Montefiore Medical Center (discussed below). The contingent consideration for royalty liability and warrants liability are classified as Level 3. |
Revenue Recognition | Revenue Recognition We derive revenue from the sale of internally-developed software either by licensing or by software as a service (“SaaS”), through the direct sales force or through third-party resellers. Licensed, locally-installed clients utilize our support and maintenance services for a separate fee, whereas SaaS fees include support and maintenance. We also derive revenue from professional services that support the implementation, configuration, training, and optimization of the applications. 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, and ASC 605-25, Revenue Recognition — Multiple-element arrangements . We commence revenue recognition when all of the following criteria have been met: • 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. 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. Revenues from resellers are recognized gross of royalty payments to resellers. Multiple Element Arrangements We follow the accounting revenue guidance under Accounting Standards Update (ASU) 2009-13, Multiple-Deliverable Revenue Arrangements — a consensus of the FASB Emerging Issues Task Force . Terms used in evaluation are as follows: • 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 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 rights 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. Stand-alone value to a client is defined in the guidance as those that can be sold separately by any vendor or the client could resell the item on a stand-alone basis. Additionally, if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item or items must be considered probable and substantially in the control of the vendor. 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 uses 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 and include calculating the equivalent value of maintenance and support on a present value basis over the term of the initial agreement period. Typically revenue recognition commences upon client go live on the system and is recognized ratably over the contract term. System Sales We use the residual method to determine fair value for proprietary 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 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. Proprietary licenses are perpetual in nature, and license fees do not include rights to version upgrades, fixes or service packs. 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, 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. The software portion of our Looking Glass® Coding & CDI products generally does not require material modification to achieve their contracted function. 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. Professional services components that are essential to the functionality of the software and are not considered a separate unit of accounting are recognized in 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 July 31, 2015 and January 31, 2015 , we had deferred costs of $709,000 and $570,000 , respectively, net of accumulated amortization of $178,000 and $275,000 , respectively. Amortization expense of these costs was $48,000 and $71,000 for the six months ended July 31, 2015 and 2014 , respectively. 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-fee basis. We monitor projects to assure that the expected and historical rate earned remains within a reasonable range to the established selling price. |
Severances | Severances From time to time, we 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. |
Equity Awards | Equity Awards We account for share-based payments based on the grant-date fair value of the awards with compensation cost recognized as expense over the requisite vesting period. We incurred total compensation expense related to stock-based awards of $631,000 and $422,000 for the three months ended July 31, 2015 and 2014 , respectively, and $1,283,000 and $865,000 for the six months ended July 31, 2015 and 2014 , respectively. The fair value of the stock options granted is estimated at the date of grant using a Black-Scholes option pricing model. The option pricing model inputs (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 (such as volatility factor, expected term, and forfeiture rates) data. 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. We issue restricted stock awards in the form of our common stock. The fair value of these awards is based on the market close price per share on the day of grant. We expense the compensation cost of these awards as the restriction period lapses, which is typically a one -year service period to the Company. |
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 basis 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, we consider whether it is more likely than not that some or all of the deferred tax assets will not be realized. We establish a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized. We provide 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. We believe we have appropriately accounted for any uncertain tax positions. |
Net Loss Per Common Share | Net Loss Per Common Share We present basic and diluted earnings per share (“EPS”) data for our 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 determined by adjusting 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 dilutive potential common shares comprised of options granted, unvested restricted stock, warrants and convertible preferred stock. Potential common stock equivalents that have been issued by us related to outstanding stock options, unvested restricted stock and warrants are determined using the treasury stock method, while potential common stock issuable upon conversion of Series A Convertible Preferred Stock are determined using the “if converted” method. Our 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. Our 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 our 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 to not be participating in losses if there is no obligation to fund such losses. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2014, the FASB issued an accounting standard update relating to disclosures of uncertainties about an entity’s ability to continue as a going concern. The update provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in the event that there is such substantial doubt. The update will be effective for us on February 1, 2017. 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. 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 2015, the FASB delayed the effective date by one year and the guidance will now be effective for us on February 1, 2018. Early adoption is permitted. The guidance is to be applied using one of two retrospective application methods. We are currently evaluating the impact of the adoption of this accounting standard update on our internal processes, operating results, and financial reporting. In April 2015, the FASB issued an accounting standard update relating to simplifying the presentation of debt issuance costs. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The update will be effective for us on February 1, 2016. |
Summary of Significant Accoun16
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jul. 31, 2015 | |
Accounting Policies [Abstract] | |
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: Three Months Ended July 31, 2015 July 31, 2014 Net loss $ (564,179 ) $ (2,275,012 ) Less: deemed dividends on Series A Preferred Stock (325,018 ) (252,583 ) Net loss attributable to common shareholders $ (889,197 ) $ (2,527,595 ) Weighted average shares outstanding used in basic per common share computations 18,628,288 18,174,193 Stock options and restricted stock — — Number of shares used in diluted per common share computation 18,628,288 18,174,193 Basic net loss per share of common stock $ (0.05 ) $ (0.14 ) Diluted net loss per share of common stock $ (0.05 ) $ (0.14 ) Six Months Ended July 31, 2015 July 31, 2014 Net loss $ (2,430,212 ) $ (4,946,251 ) Less: deemed dividends on Series A Preferred Stock (620,675 ) (482,349 ) Net loss attributable to common shareholders $ (3,050,887 ) $ (5,428,600 ) Weighted average shares outstanding used in basic per common share computations 18,614,622 18,160,213 Stock options and restricted stock — — Number of shares used in diluted per common share computation 18,614,622 18,160,213 Basic net loss per share of common stock $ (0.16 ) $ (0.30 ) Diluted net loss per share of common stock $ (0.16 ) $ (0.30 ) |
Acquisitions and Strategic Ag17
Acquisitions and Strategic Agreements(Tables) | 6 Months Ended |
Jul. 31, 2015 | |
Unibased Systems Architecture, Inc | |
Business Acquisition [Line Items] | |
Purchase price allocation of assets and liabilities | The purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date as follows: Balance at February 3, 2014 Assets purchased: Cash $ 59,000 Accounts receivable 221,000 Other assets 61,000 Internally-developed software 2,017,000 Client relationships 647,000 Trade name 26,000 Goodwill (1) 4,251,000 Total assets purchased 7,282,000 Liabilities assumed: Accounts payable and accrued liabilities 362,000 Deferred revenue obligation, net 793,000 Deferred income taxes 9,000 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. |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jul. 31, 2015 | |
Leases [Abstract] | |
Schedule of future minimum lease payment | Future minimum lease payments under non-cancelable operating leases for the next five fiscal years are as follows: Facilities Equipment Fiscal Year Totals 2015 (six months remaining) $ 477,000 $ 1,000 $ 478,000 2016 969,000 2,000 971,000 2017 1,007,000 — 1,007,000 2018 1,039,000 — 1,039,000 2019 967,000 — 967,000 Thereafter 1,468,000 — 1,468,000 Total $ 5,927,000 $ 3,000 $ 5,930,000 |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jul. 31, 2015 | |
Debt Disclosure [Abstract] | |
Schedule of Minimum EBITDA Levels | The following table shows our future minimum trailing twelve months EBITDA covenant thresholds, as modified by the amendment to the Credit Agreement: For the four-quarter period ending Minimum EBITDA April 30, 2015 $ (2,500,000 ) July 31, 2015 (1,750,000 ) October 31, 2015 (750,000 ) January 31, 2016 500,000 |
Summary of Term Loan and Line of Credit | Outstanding principal balances on debt consisted of the following at: July 31, 2015 January 31, 2015 Senior term loan $ 9,009,000 $ 10,000,000 Capital lease 961,000 1,365,000 Total 9,970,000 11,365,000 Less: Current portion 1,327,000 1,282,000 Non-current portion of debt $ 8,643,000 $ 10,083,000 |
Schedule of Future Minimum Lease Payments for Capital Leases | Future principal repayments of debt consisted of the following at July 31, 2015 : Senior Term Loan Capital Lease (1) Total 2015 $ 231,000 $ 412,000 $ 643,000 2016 693,000 511,000 1,204,000 2017 924,000 93,000 1,017,000 2018 924,000 — 924,000 2019 6,237,000 — 6,237,000 Total repayments $ 9,009,000 $ 1,016,000 $ 10,025,000 _______________ (1) Future minimum lease payments include principal plus interest. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies - (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jul. 31, 2015 | Jul. 31, 2014 | Jul. 31, 2015 | Jul. 31, 2014 | Jan. 31, 2015 | |
Class of Stock [Line Items] | |||||
Deferred professional costs | $ 709,000 | $ 709,000 | $ 570,000 | ||
Accumulated amortization | 178,000 | 178,000 | 275,000 | ||
Amortization expense | 48,000 | $ 71,000 | |||
Severance expenses | 2,000 | $ 126,000 | 9,000 | 576,000 | |
Accrued severances | 0 | $ 159,000 | |||
Share-based compensation expense | $ 631,000 | $ 422,000 | $ 1,283,459 | $ 865,142 | |
Restricted Stock | |||||
Class of Stock [Line Items] | |||||
Antidilutive securities | 118,180 | 0 | |||
Series A Preferred Stock | |||||
Class of Stock [Line Items] | |||||
Convertible redeemable preferred stock, shares outstanding | 2,949,995 | 2,949,995 | 2,949,995 | ||
Restricted Stock | |||||
Class of Stock [Line Items] | |||||
Service period | 1 year |
Summary of Significant Accoun21
Summary of Significant Accounting Policies - Earnings Per Share (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jul. 31, 2015 | Jul. 31, 2014 | Jul. 31, 2015 | Jul. 31, 2014 | |
Schedule of Earnings Per Share Basic and Diluted by Common Class [Line Items] | ||||
Net loss | $ (564,179) | $ (2,275,012) | $ (2,430,212) | $ (4,946,251) |
Less: deemed dividends on Series A Preferred Shares | (325,018) | (252,583) | (620,675) | (482,349) |
Net loss attributable to common shareholders | $ (889,197) | $ (2,527,595) | $ (3,050,887) | $ (5,428,600) |
Weighted average shares outstanding used in basic per common share computations | 18,628,288 | 18,174,193 | 18,614,622 | 18,160,213 |
Stock options and restricted stock | 0 | 0 | 0 | 0 |
Number of shares used in diluted per common share computation | 18,628,288 | 18,174,193 | 18,614,622 | 18,160,213 |
Basic net loss per common share, dollars per share | $ (0.05) | $ (0.14) | $ (0.16) | $ (0.30) |
Diluted net loss per common share, dollars per share | $ (0.05) | $ (0.14) | $ (0.16) | $ (0.30) |
Employee Stock Option | ||||
Schedule of Earnings Per Share Basic and Diluted by Common Class [Line Items] | ||||
Antidilutive securities | 2,978,344 | 2,507,335 | ||
Warrant | ||||
Schedule of Earnings Per Share Basic and Diluted by Common Class [Line Items] | ||||
Antidilutive securities | 1,400,000 | 1,400,000 |
Acquisitions and Strategic Ag22
Acquisitions and Strategic Agreements - Montefiore (Details) - Montefiore Medical Center - USD ($) | Oct. 25, 2013 | Jul. 31, 2015 | Jan. 31, 2015 |
Business Acquisition [Line Items] | |||
Proprietary lease term | 15 years | ||
Cash paid | $ 3,000,000 | ||
Periodic royalty payment, term | 6 years 6 months | ||
Royalty liability | $ 2,446,000 | $ 2,386,000 |
Acquisitions and Strategic Ag23
Acquisitions and Strategic Agreements - Unibased (Details) - USD ($) | Feb. 03, 2014 | Apr. 30, 2015 | Jul. 31, 2015 | Jan. 31, 2015 | |
Assets purchased: | |||||
Goodwill | $ 16,184,667 | $ 16,184,667 | |||
Unibased Systems Architecture, Inc | |||||
Business Acquisition [Line Items] | |||||
Total consideration transferred | $ 6,500,000 | ||||
Amount received held in escrow | $ 750,000 | ||||
Assets purchased: | |||||
Cash | 59,000 | ||||
Accounts receivable | 221,000 | ||||
Other assets | 61,000 | ||||
Goodwill | [1] | 4,251,000 | |||
Total assets purchased | 7,282,000 | ||||
Liabilities assumed: | |||||
Accounts payable and accrued liabilities | 362,000 | ||||
Deferred revenue obligation, net | 793,000 | ||||
Deferred income taxes | 9,000 | ||||
Net assets acquired | 6,118,000 | ||||
Cash paid | 6,118,000 | ||||
Internally-developed software | Unibased Systems Architecture, Inc | |||||
Assets purchased: | |||||
Intangible assets | 2,017,000 | ||||
Client relationships | Unibased Systems Architecture, Inc | |||||
Assets purchased: | |||||
Intangible assets | 647,000 | ||||
Trade name | Unibased Systems Architecture, Inc | |||||
Assets purchased: | |||||
Intangible assets | $ 26,000 | ||||
[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. |
Leases - (Details)
Leases - (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jul. 31, 2015 | Jul. 31, 2014 | Jul. 31, 2015 | Jul. 31, 2014 | Jan. 31, 2015 | |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |||||
2015 (six months remaining) | $ 478 | $ 478 | |||
2,016 | 971 | 971 | |||
2,017 | 1,007 | 1,007 | |||
2,018 | 1,039 | 1,039 | |||
2,019 | 967 | 967 | |||
Thereafter | 1,468 | 1,468 | |||
Total | 5,930 | 5,930 | |||
Rent expense | 325 | $ 458 | 632 | $ 837 | |
Fixed assets | 1,515 | 1,515 | $ 1,515 | ||
Accumulated depreciation | 825 | 825 | $ 494 | ||
Facilities | |||||
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |||||
2015 (six months remaining) | 477 | 477 | |||
2,016 | 969 | 969 | |||
2,017 | 1,007 | 1,007 | |||
2,018 | 1,039 | 1,039 | |||
2,019 | 967 | 967 | |||
Thereafter | 1,468 | 1,468 | |||
Total | 5,927 | 5,927 | |||
Equipment | |||||
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |||||
2015 (six months remaining) | 1 | 1 | |||
2,016 | 2 | 2 | |||
2,017 | 0 | 0 | |||
2,018 | 0 | 0 | |||
2,019 | 0 | 0 | |||
Thereafter | 0 | 0 | |||
Total | $ 3 | $ 3 |
Debt - Term Loan and Line of Cr
Debt - Term Loan and Line of Credit Narrative (Details) - USD ($) | Apr. 15, 2015 | Nov. 21, 2014 | May. 31, 2015 | Apr. 30, 2015 | Jan. 31, 2014 | Dec. 31, 2013 | Jul. 31, 2015 | Jan. 01, 2014 |
Senior Notes | ||||||||
Debt Instrument [Line Items] | ||||||||
Convertible note | $ 8,500,000 | |||||||
Installment payments due | $ 101,000 | |||||||
Accrues interest rate | 6.42% | |||||||
Closing fee | $ 116,000 | |||||||
Senior term loan | ||||||||
Debt Instrument [Line Items] | ||||||||
Repayments of debt | $ 750,000 | |||||||
Revolving Credit Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Commitment fee percentage | 0.40% | |||||||
Commitment fee in connection with the term loan | $ 2,000 | |||||||
Credit Agreement | ||||||||
Debt Instrument [Line Items] | ||||||||
Repayments of debt | $ 7,400,000 | |||||||
Debt discount | 315,000 | |||||||
Amortization of financing costs | $ 355,000 | |||||||
Credit Agreement | Revolving Credit Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Revolving line of credit | 5,000,000 | |||||||
Credit Agreement | Senior term loan | ||||||||
Debt Instrument [Line Items] | ||||||||
Revolving line of credit | $ 10,000,000 | |||||||
LIBOR | Senior Notes | ||||||||
Debt Instrument [Line Items] | ||||||||
Borrowing under the revolving loan bears interest at a rate equal to LIBOR plus | 5.25% | |||||||
LIBOR | Revolving Credit Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Borrowing under the revolving loan bears interest at a rate equal to LIBOR plus | 3.50% | |||||||
LIBOR | Credit Agreement | Minimum | ||||||||
Debt Instrument [Line Items] | ||||||||
Borrowing under the revolving loan bears interest at a rate equal to LIBOR plus | 4.25% | 4.25% | 4.25% | |||||
LIBOR | Credit Agreement | Maximum | ||||||||
Debt Instrument [Line Items] | ||||||||
Borrowing under the revolving loan bears interest at a rate equal to LIBOR plus | 6.25% | 5.25% | 6.25% | |||||
Base Rate | Credit Agreement | Minimum | ||||||||
Debt Instrument [Line Items] | ||||||||
Borrowing under the revolving loan bears interest at a rate equal to LIBOR plus | 3.25% | 3.25% | ||||||
Base Rate | Credit Agreement | Maximum | ||||||||
Debt Instrument [Line Items] | ||||||||
Borrowing under the revolving loan bears interest at a rate equal to LIBOR plus | 5.25% | 4.25% | ||||||
April 15, 2015 | Credit Agreement | ||||||||
Debt Instrument [Line Items] | ||||||||
Minimum liquidity | $ 5,000,000 | |||||||
April 16, 2015 through and including July 30, 2015 | Credit Agreement | ||||||||
Debt Instrument [Line Items] | ||||||||
Minimum liquidity | 6,500,000 | |||||||
July 31, 2015 through and including January 30, 2016 | Credit Agreement | ||||||||
Debt Instrument [Line Items] | ||||||||
Minimum liquidity | 7,000,000 | |||||||
January 31, 2016 through and including the maturity date | Credit Agreement | ||||||||
Debt Instrument [Line Items] | ||||||||
Minimum liquidity | $ 7,500,000 |
Debt - Minimum EBITDA Levels (D
Debt - Minimum EBITDA Levels (Details) - Credit Agreement $ in Thousands | 6 Months Ended |
Jul. 31, 2015USD ($) | |
April 30, 2015 | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | $ (2,500) |
July 31, 2015 | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | (1,750) |
October 31, 2015 | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | (750) |
January 31, 2016 | |
Debt Instrument [Line Items] | |
Minimum EBITDA level | $ 500 |
Debt - Summary of Term Loan and
Debt - Summary of Term Loan and Line of Credit (Details) - USD ($) $ in Thousands | Jul. 31, 2015 | Jan. 31, 2015 |
Debt Instrument [Line Items] | ||
Total | $ 9,970 | $ 11,365 |
Less: Current portion | 1,327 | 1,282 |
Non-current portion of debt | 8,643 | 10,083 |
Senior Notes | ||
Debt Instrument [Line Items] | ||
Long-term debt | 9,009 | 10,000 |
Capital Lease | ||
Debt Instrument [Line Items] | ||
Capital lease | $ 961 | $ 1,365 |
Debt - Schedule of Future Princ
Debt - Schedule of Future Principal Repayments of Long-Term Debt (Details) $ in Thousands | Jul. 31, 2015USD ($) | |
Capital Lease | ||
2,015 | [1] | $ 412 |
2,016 | [1] | 511 |
2,017 | [1] | 93 |
2,018 | [1] | 0 |
2,019 | [1] | 0 |
Capital Lease | [1] | 1,016 |
Total | ||
2,015 | 643 | |
2,016 | 1,204 | |
2,017 | 1,017 | |
2,018 | 924 | |
2,019 | 6,237 | |
Total | 10,025 | |
Senior Notes | ||
Senior Term Loan | ||
2,015 | 231 | |
2,016 | 693 | |
2,017 | 924 | |
2,018 | 924 | |
2,019 | 6,237 | |
Long-term Debt | $ 9,009 | |
[1] | Future minimum lease payments include principal plus interest. |
Debt - Note Payable Narrative (
Debt - Note Payable Narrative (Details) - USD ($) | 1 Months Ended | 6 Months Ended | |
Nov. 30, 2013 | Jul. 31, 2015 | Jul. 31, 2014 | |
Debt Instrument [Line Items] | |||
Repayments of debt | $ 990,506 | $ 505,950 | |
Subordinated Debt | |||
Debt Instrument [Line Items] | |||
Debt term | 3 years | ||
Convertible note | $ 900,000 | ||
Accrues interest rate | 8.00% | ||
Principal payments | $ 300,000 | ||
Subordinated Debt | Unsecured Subordinated Notes Due November, 2016 | |||
Debt Instrument [Line Items] | |||
Repayments of debt | $ 600,000 |
Convertible Preferred Stock (De
Convertible Preferred Stock (Details) - Jul. 31, 2015 - $ / shares | Total |
Class of Stock [Line Items] | |
Maximum period of conversion | 10 days |
Price per share at time of conversion (in dollars per share) | $ 3 |
Series A Preferred Stock | |
Class of Stock [Line Items] | |
Preferred stock, shares issued | 2,949,995 |
Minimum share price (in dollars per share) | $ 8 |
Average daily trading volume minimum shares | 100,000 |
Shares issued, price per share (in dollars per share) | $ 3 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 6 Months Ended | |
Jul. 31, 2015 | Jul. 31, 2014 | |
Income Tax Disclosure [Abstract] | ||
Federal tax provisions | $ 8,000 | $ 0 |
State and local tax provisions | $ 8,000 | $ 2,000 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Thousands | 1 Months Ended |
Aug. 31, 2015USD ($) | |
FTI | Subsequent Event | |
Subsequent Event [Line Items] | |
Settlement amount | $ 250 |