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8-K/A - FORM 8-K/A - STREAMLINE HEALTH SOLUTIONS INC.d305078d8ka.htm
EX-99.2 - EXHIBIT 99.2 - STREAMLINE HEALTH SOLUTIONS INC.d305078dex992.htm
EX-99.3 - EXHIBIT 99.3 - STREAMLINE HEALTH SOLUTIONS INC.d305078dex993.htm
EX-23.1 - EXHIBIT 23.1 - STREAMLINE HEALTH SOLUTIONS INC.d305078dex231.htm

Exhibit 99.4

Pro Forma Condensed Combined Balance Sheet and Statement of Operations

for Streamline Health Solutions, Inc.

and Interpoint Partners, LLC, as of October 31, 2011 and January 31, 2011

The following unaudited pro forma condensed financial statements are presented to illustrate the effect on the historical financial position and operating results as a result of the acquisition of Interpoint Partners, LLC (“Interpoint” or ”IPP”) by Streamline Health Solutions, Inc. (“the Company”). The unaudited pro forma condensed financial statements also give effect to events that are directly attributable to the acquisition and are factually supportable, including the debt financing transaction with Fifth Third Bank, used, in part, to finance the acquisition.

The following two unaudited pro forma condensed combined statements of operations are presented using the Company’s results for the year ended January 31, 2011 and the nine months ended October 31, 2011, and Interpoint’s results for the year ended December 31, 2010 and the nine months ended September 30, 2011. The unaudited condensed combined pro forma statements of operations presents the pro forma adjustments as if the acquisition had occurred on February 1, 2010 and the unaudited pro forma condensed balance sheet is presented on a pro forma basis as to give effect to the completed acquisition as if it had occurred on October 31, 2011.

The following unaudited pro forma condensed combined balance sheet is presented using the Company’s condition as of October 31, 2011 and IPP’s as of September 30, 2011. There have been no unusual events of transactions related to IPP for the one month period ended October 31, 2011 which would require disclosure in the pro forma condensed combined financial statements.

The pro forma financial statements have been prepared using the acquisition method of accounting under GAAP, which is subject to change and interpretation. Streamline Health Solutions, Inc. has been treated as the acquirer in the completed acquisition for accounting purposes. Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the pro forma financial statements.

Acquisition accounting is dependent upon certain valuations and other studies that have not yet been completed. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of preparing the pro forma financial statements and are based on preliminary information available at the time of the preparation of this Form 8K/A. Differences between these preliminary estimates and the final acquisition accounting could occur and these differences could have a material impact on the pro forma financial statements and the combined company’s future results of operations and financial position.

The pro forma financial statements do not reflect any cost savings or other synergies that the combined company may achieve as a result of the completed acquisition or the costs to integrate the operations of Streamline Health Solutions, Inc. and Interpoint or the costs necessary to achieve these cost savings and other synergies. The effects of the foregoing items could, individually or in the aggregate, materially impact the pro forma financial statements.

The following unaudited pro forma condensed combined financial statements, or the “pro forma financial statements” were derived from and should be read in conjunction with:

(i) the annual report on Form 10-K of Streamline Health Solutions, Inc. for the fiscal year ended January 31, 2011;

(ii) the quarterly report on Form 10-Q of Streamline Health Solutions, Inc. for the quarter and nine months ended October 31, 2011:

(iii) the Interpoint Partners, LLC audited financial statements for the year ended December 31, 2010, including the notes therein;

(iv) the Interpoint Partners, LLC unaudited balance sheets as of September 30, 2011 and 2010, the related statement of operations for the nine month periods and the cash flow statements for the nine months ended September 30, 2011 and 2010, including the notes therein.


UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of October 31, 2011

 

September 30, September 30, September 30, September 30,
       (A)      (B)     (C)         
       Streamline      Interpoint            (A) + (B) +(C)  
       Health, Inc.      Partners, LLC     IPP      Pro Forma  
       As Reported      As Reported     Pro Forma      Combined  
       Oct 31, 2011      Sept 30, 2011     Adjustments      (D)  

Assets

            

Current assets:

            
             (b)    $ 2,212,500      

Cash and cash equivalents

     $ 300,438       $ 38,492 (a)      (1,848,725    $ 702,705   

Accounts receivable

       2,563,203         174,031        —           2,737,234   

Unbilled accounts receivable

       411,753         —          —           411,753   

Allowance for doubtful accounts

       (140,000      —          —           (140,000

Prepaid hardware and third party software for future delivery

       34,365         —          —           34,365   

Prepaid customer maintenance contracts

       776,253         —          —           776,253   

Other prepaid assets

       205,269         —          —           205,269   

Deferred income taxes

       167,000         —          —           167,000   
    

 

 

    

 

 

   

 

 

    

 

 

 

Total current assets

       4,318,281         212,523        363,775         4,894,579   
    

 

 

    

 

 

   

 

 

    

 

 

 

Property and equipment:

            

Computer Equipment

       2,824,153         3,925        —           2,828,078   

Computer Software

       2,037,063         —          —           2,037,063   

Office furniture, fixtures and equipment

       747,867         10,349        —           758,216   

Leasehold improvements

       639,864         29,970        —           669,834   
    

 

 

    

 

 

   

 

 

    

 

 

 
       6,248,947         44,244        —           6,293,191   

Accumulated depreciation and amortization

       (5,057,977      (7,599     —           (5,065,576
    

 

 

    

 

 

   

 

 

    

 

 

 

Total property and equipment

       1,190,970         36,645        —           1,227,615   
    

 

 

    

 

 

   

 

 

    

 

 

 

Contract receivables, less current portion

       248,121         —          —           248,121   

Capitalized software development, net of accumulated amortization of $14,287,329

       8,090,082         —   (a)      1,628,000         9,718,082   

Deferred loan costs

       —              (b)      157,500         157,500   

Intangible assets

       —              (a)      420,000         420,000   

Goodwill and indefinite intangible assets

       —              (a)      4,060,100         4,060,100   

Other assets, including deferred income taxes of $711,000

       874,169         12,975           887,144   
    

 

 

    

 

 

   

 

 

    

 

 

 

Total other assets

       9,212,372         12,975        6,265,600         15,490,947   
    

 

 

    

 

 

   

 

 

    

 

 

 

Total assets

     $ 14,721,623       $ 262,143      $ 6,629,375       $ 21,613,141   
    

 

 

    

 

 

   

 

 

    

 

 

 

Liabilities and Stockholders’ Equity

            

Current liabilities:

            

Accounts payable

     $ 726,861       $ 268,798        —         $ 995,659   

Accrued compensation

       800,544         —          —           800,544   
             (a)      (229,148   

Accrued other expenses

       279,563         249,148 (c)      164,384         463,947   

Capital lease obligation

       27,017         —          —           27,017   

Line of credit

       —           301,222 (a)      (301,222      —     

Notes payable related parties

       —           996,040 (a)      (996,040      —     

Notes payable

       —           404,764 (a)      (404,764      —     

Deferred revenues

       3,862,154         84,399 (a)      (84,399      3,862,154   
    

 

 

    

 

 

   

 

 

    

 

 

 

Total current liabilities

       5,696,139         2,304,371        (1,851,189      6,149,321   
    

 

 

    

 

 

   

 

 

    

 

 

 

Long-term liabilities:

            

Line of credit, less current portion

       1,750,000         —   (b)      (1,750,000      —     

Term loan

             (b)      4,120,000         4,120,000   

Contingent consideration for earn-out

       —              (a)      1,232,720         1,232,720   

Lease incentive liability, less current portion

       51,179         29,915 (a)      (29,915      51,179   

Convertible subordinated note payable

       —              (a)      3,000,000         3,000,000   

Deferred revenues, less current portion

       —           184,496 (a)      (184,496      —     

Capital lease obligation, less current portion

       —           —             —     
    

 

 

    

 

 

   

 

 

    

 

 

 

Total liabilities

       7,497,318         2,518,782        4,537,120         14,553,220   
    

 

 

    

 

 

   

 

 

    

 

 

 

Stockholders’ equity:

            

Preferred stock, $.01 par value; 5,000,000 shares authorized, no shares issued

       —           —          —           —     

Common stock, $.01 par value; 25,000,000 shares authorized; 10,053,980 shares issued and outstanding

       100,540         —          —           100,540   

Additional paid in capital

       37,595,082         —             37,595,082   
             (c)      (164,384   

Accumulated ( deficit )

       (30,471,317      (2,256,639 )(a)      2,256,639         (30,635,701
    

 

 

    

 

 

   

 

 

    

 

 

 

Total stockholders’ equity

       7,224,305         (2,256,639     2,092,255         7,059,921   
    

 

 

    

 

 

   

 

 

    

 

 

 

Total liabilities and stockholder’s equity

     $ 14,721,623       $ 262,143      $ 6,629,375       $ 21,613,141   
    

 

 

    

 

 

   

 

 

    

 

 

 

See Accompanying Introduction and Notes to Unaudited Pro Forma Condensed Combined Balance Sheet


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of October 31, 2011

Description of Transaction

On December 7, 2011 the Company signed a definitive asset purchase agreement to purchase substantially all of the assets of Interpoint for $2,000,000 in cash and a $3,000,000 convertible note, prior to earn-out adjustments, at $2.00 per share. Additionally, the Agreement provides for a contingent earn-out payment in convertible subordinated notes based on Interpoint’s financial performance for the 12 month period beginning six months after closing and ended 12 months thereafter. The earn-out payment is calculated as 2 times current IPP client revenue and revenue for client contracts signed during the earn-out period plus one times revenue for the Company clients who signed a contract for IPP services during that period. As part of the acquisition, the Company assumed certain accounts payable and accrued liabilities as of the closing date.

Basis of Presentation

The pro forma financial statements were prepared using the acquisition method of accounting in accordance with Financial Accounting Standards Board’s Accounting Standards Codification (ASC) 805, Business Combinations, and uses the fair value concepts defined in ASC 820, Fair Value Measurements and Disclosures. ASC 805 requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair value as of the date the acquisition was completed. ASC 820 defines the term “fair value” and sets forth the valuation requirements for any asset or liability measured at fair value, expands related disclosure requirements and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures. Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” This is an exit price concept for valuation of the asset or liability. In addition, market participants are assumed to be buyers and sellers in the principal (or the most advantageous) market for the asset or liability. Fair value measurements for an asset assume the highest and best use by these market participants. As a result of these standards, Streamline Health Solutions, inc. may be required to record assets which are not intended to be used or sold and/or to value assets at fair value measures that do not reflect the Company’s intended use of those assets. Many of these fair value measurements can be highly subjective and it is also possible that other professionals, applying reasonable judgement to the same facts and circumstances, could develop and support a range of alternative estimated amounts.

Under ASC 805 acqusition-related transaction costs (e.g., advisory, legal, valuation, other professional fees) and certain acquisition-related restructuring charges impacting the target company are not included as a component of consideration transferred but are accounted for as expenses in the periods in which the costs are incurred. Total advisory, legal, regulatory and valuation costs expected to be incurred by the Company are estimated to be approximately $174,000. None of these amounts have been paid in the nine months ended October 31, 2011, and therefore, all of these costs for the Company are reflected in the unaudited pro forma condensed combined balance sheet as an accrual and a reduction to retained earnings.

 

(a) To reflect the allocation of purchase consideration for the IPP acquisiton and elimination of historical equity accounts.

 

September 30,

Purchase price includes:

    

Cash, at closing

     $ 1,848,725   

Convertible subordinated note

       3,000,000   

Estimated Earnout

       1,232,720   
    

 

 

 

Total purchase price

     $ 6,081,445   
    

 

 

 

The following reconciles the net assets of Interpoint at September 30, 2011, to the amount acquired in the completed acqusiiton:

 

September 30, September 30, September 30,
       Historical BV      Adjustment      Assumed  

Cash

     $ 38,492       $ —         $ 38,492   

Accounts Receivable

       174,031         —           174,031   

Property and equipment

       36,645         —           36,645   

Security deposits

       12,975         —           12,975   

Accounts payable

       268,798         —           268,798   

Accrued liabilities

       249,148         (229,148      20,000   

Deferred rent liability

       29,915         (29,915      —     

Deferred revenue

       268,895         (268,895      —     

Lines of credit

       301,222         (301,222      —     

Convertible notes payable—related parties

       996,040         (996,040      —     

Convertible notes payable, net of discount

       153,989         (153,989      —     

Notes payable—related parties

       250,775         (250,775      —     
    

 

 

    

 

 

    

 

 

 

Total

     $ (2,256,639    $ 2,229,984       $ (26,655
    

 

 

    

 

 

    

 

 

 
September 30, September 30,

 

Net working capital

       (76,275   

PP&E

       36,645      

Deposit

     $ 12,975      

Cust. Relationships

       413,000      

Non-compete

       7,000      

Software

       1,628,000      

Tradename

       21,000      

Goodwill

       4,039,100      
    

 

 

    

Consideration to be transferred

     $ 6,081,445      

 


As part of the purchase agreement, the Company only assumes current accounts payable and accrued liabilities of $20,000 whereby the sellers must leave $75,000 in net working capital. The purchase agreement provides for an adjustment to the purchase price for working capital less than $75,000.

The net working capital as of 9/30/11 would be as follows:

 

September 30, September 30,

Cash

     $ 38,492      

Accounts receivable

       174,031      

Accounts payable

       (268,798   

Accrued liabilities

       (20,000   
       

Net working capital

       (76,275   
    

 

 

    

Required net working capital

       75,000      
    

 

 

    

Adjustment to purchase price

     $ 151,275       Adjustment to cash at closing
    

 

 

    

 

(b) To record term loan used to finance the cash portion of the IPP acquisition. The term loan required the Company to pay down it’s revolving line of credit as part of the transaction.

 

September 30,

Term loan cash proceeds

     $ 4,120,000   

Less: Line of credit pay-off

       (1,750,000

Loan fees

       (157,500
    

 

 

 

Net cash proceeds from term loan

     $ 2,212,500   
    

 

 

 

The deferred costs associated with the term loan are as follows:

 

September 30,

Commitment fee

     $ 120,000   

Closing costs

       10,000   

Underwriter fees

       27,500   
    

 

 

 

Total deferred loan costs

     $ 157,500   
    

 

 

 

These cost will be amortized over the two year term of the loan.

 

(c) To reflect the non-recurring costs associated with the IPP acquisiton:

 

September 30,

Legal fees

     $ 100,360   

Accounting/audit fees

       37,024   

Other advisor fees

       36,000   
    

 

 

 

Total

       173,384   
    

 

 

 

Less amount accrued

       (9,000

Total

     $ 164,384   
    

 

 

 


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

For the Twelve Months Ended January 31, 2011

 

September 30, September 30, September 30, September 30,
       (A)      (B)     (C)         
       Streamline      Interpoint            (A) + (B) +(C)  
       Health, Inc.      Partners, LLC     IPP      Pro Forma  
       As Reported      As Reported     Pro Forma      Combined  
       Jan 31, 2011      Dec 31, 2010     Adjustments      (D)  

Revenue

     $ 17,605,991       $ 1,153,791        —         $ 18,759,782   

Operating expenses:

            

Cost of sales

       11,291,412         400,963        —           11,692,375   
             (g)      78,750      
             (f)      359,356      

Selling, general and administrative

       6,406,190         1,101,258 (e)      150,000         8,095,554   

Product research and development

       1,759,694         204,794        —           1,964,488   
    

 

 

    

 

 

   

 

 

    

Total operating expenses

       19,457,296         1,707,015        588,106         21,752,417   
    

 

 

    

 

 

   

 

 

    

 

 

 

Operating profit (loss)

       (1,851,305      (553,224     (588,106      (2,992,635

Interest income

       —           —          —           —     
             (d)      (240,000   
             (c)      (494,400   
             (b)      74,734      

Interest Expense

       (116,392      (15,970 )(a)      15,970         (776,058

Other Income (expense), net

       34,080         —          —           34,080   

Tax (provision) benefit

       (1,017,000      —          —           (1,017,000
    

 

 

    

 

 

   

 

 

    

 

 

 

Net earnings (loss)

     $ (2,950,617    $ (569,194   $ (1,231,802    $ (4,751,613
    

 

 

    

 

 

   

 

 

    

 

 

 

Basic Loss per common share

     $ (0.31         $ (0.50
    

 

 

         

 

 

 

Number of shares used in Basic per share computation

       9,504,986              9,504,986   
    

 

 

         

 

 

 

Diluted Loss per common share

     $ (0.31         $ (0.50
    

 

 

         

 

 

 

Number of shares used in Diluted per share computation

       9,504,986              9,504,986   
    

 

 

         

 

 

 


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

For the Nine Months Ended October 31, 2011

 

September 30, September 30, September 30, September 30,
       (A)      (B)     (C)         
       Streamline      Interpoint            (A) + (B) +(C)  
       Health, Inc.      Partners, LLC     IPP      Pro Forma  
       As Reported      As Reported     Pro Forma      Combined  
       Oct 31, 2011      Sept 30, 2011     Adjustments      (D)  

Revenue

     $ 12,598,046       $ 990,430        —         $ 13,588,476   

Operating expenses:

            

Cost of sales

       6,662,009         346,651        —           7,008,660   
             (h)      (9,000   
             (g)      59,063      
             (f)      333,056      

Selling, general and administrative

       4,742,084         1,915,338 (e)      37,500         7,078,041   

Product research and development

       1,063,903         —          —           1,063,903   
    

 

 

    

 

 

   

 

 

    

 

 

 

Total operating expenses

       12,467,996         2,261,989        420,619         15,150,604   
    

 

 

    

 

 

   

 

 

    

 

 

 

Operating profit (loss)

       130,050         (1,271,559     (420,619      (1,562,128

Interest income

       —           —          —           —     
             (d)      (180,000   
             (c)      (370,800   
             (b)      48,237      

Interest Expense

       (67,529      (359,667 )(a)      359,667         (570,092

Other Income (expense), net

       (42,155      —          —           (42,155

Tax (provision) benefit

       (12,315      —          —           (12,315
    

 

 

    

 

 

   

 

 

    

 

 

 

Net Earnings (Loss)

     $ 8,051       $ (1,631,226   $ (563,515    $ (2,186,690
    

 

 

    

 

 

   

 

 

    

 

 

 

Basic Earnings (Loss) per common share

     $ 0.00            $ (0.22
    

 

 

         

 

 

 

Number of shares used in Basic per share computation

       9,823,937              9,823,937   
    

 

 

         

 

 

 

Diluted Loss per common share

     $ 0.00            $ (0.22
    

 

 

         

 

 

 

Number of shares used in Diluted per share computation

       9,837,750              9,837,750   
    

 

 

         

 

 

 


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS

For the year ended January 31, 2011 and the nine months ended October 31, 2011

 

September 30, September 30, September 30,
               YTD 10/31/11        Y/E 1/31/11  

(a) To eliminate the historical interest expense of IPP as debt was not assumed as part of the acquisition

          $ 359,667         $ 15,970   
         

 

 

      

 

 

 
              YTD 10/31/11        Y/E 1/31/11  

(b) To eliminate historical interest expense of Streamline Health for revolving line of credit paid off as part of closing of term loan agreement

          $ 48,237         $ 74,734   
         

 

 

      

 

 

 
              YTD 10/31/11        Y/E 1/31/11  

(c) To record interest expense for term loan used to pay cash proceeds of IPP acquisition

              

$4,120,000 at 12% interest annually

          $ 370,800         $ 494,400   
         

 

 

      

 

 

 
              YTD 10/31/11        Y/E 1/31/11  

d) To record interest on convertible subordinated note issued to IPP sellers as part of purchase price

              

$3,000,000 convertible subordinated note at 8% interest annually

          $ 180,000         $ 240,000   
         

 

 

      

 

 

 
              YTD 10/31/11        Y/E 1/31/11  

(e) To adjust salaries of two IPP employees according to new employment contracts signed as part of acquisition and signing bonus of $50,000 each

              
          $ 37,500         $ 150,000   
         

 

 

      

 

 

 

 

September 30, September 30, September 30,

New contract annual salary

     $ 150,000             

Historical annual salary

       125,000             
    

 

 

           

Annual difference

     $ 25,000             
    

 

 

           

Nine month difference

     $ 18,750             
    

 

 

           

Signing bonus

     $ 50,000             
    

 

 

           


(f) To record amortization of IPP identifiable intangible assets as follows:

 

September 30, September 30,
       Amount        Useful life  

Customer relationships

     $ 413,000           10 years   

Covenants not to compete

       7,000           1/2 year   

Internally developed software

       1,628,000           5 years   

Trade name

       21,000           N/A   

Goodwill

       4,039,100           N/A   
    

 

 

      

Total

     $ 6,108,100        
    

 

 

      

The amortization of the customer relationships intangible asset and internally developed software intangible asset was calculated using the estimated economic benefit of the cash flows for those respective intangible assets over their estimated useful lives, which results in an accelerated amortization rather than amortization on a straight-line basis.

Amortization expense over the next five years is expected to be as follows:

 

September 30, September 30,

Year ended January 31,

       2012         $ 359,356   
       2013         $ 444,075   
       2014         $ 443,598   
       2015         $ 365,057   
       2016         $ 289,270   

 

September 30, September 30, September 30,
                YTD 10/31/11        Y/E 1/31/11  

Amortization expense

            333,056           359,356   
         

 

 

      

 

 

 
                YTD 10/31/11        Y/E 1/31/11  

(g) To record amortization of deferred loan costs over the two year term of the term loan

              

Deferred loan costs

     $ 157,500         $ 59,063         $ 78,750   
    

 

 

      

 

 

      

 

 

 
                YTD 10/31/11        Y/E 1/31/11  

(h) To remove transaction costs accrued as of October 31, 2011

          $ 9,000         $ —     
         

 

 

      

 

 

 

(i) The Company did not record any tax effects when estimating the impact of the acquisition due to net operating loss carryforwards.