Proxy Statement - Merger or Acquistion (definitive) (defm14a)

Date : 01/21/2020 @ 11:11AM
Source : Edgar (US Regulatory)
Stock : Streamline Health Solutions Inc (STRM)
Quote : 1.36  0.0095 (0.70%) @ 11:00PM

Proxy Statement - Merger or Acquistion (definitive) (defm14a)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934


 

 

Filed by the Registrant

Filed by a party other than the Registrant

Check the appropriate box:

 

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a‑6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a‑12

 

PICTURE 1

STREAMLINE HEALTH SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

 

No fee required.

 

 

Fee computed on table below per Exchange Act Rules 14a‑6(i)(1) and 0‑11.

 

 

(1)

Title of each class of securities to which transaction applies: Not Applicable

 

 

(2)

Aggregate number of securities to which transaction applies: Not Applicable

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0‑11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

(5)

Total fee paid:

 

 

Fee paid previously with preliminary materials.

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0‑11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

 

 

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 

 

 

 

STREAMLINE HEALTH SOLUTIONS, INC.

1175 Peachtree Street, NE, 10th Floor

Atlanta, Georgia 30361

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

Dear Fellow Stockholder:

On behalf of the Board of Directors (the “Board”) of Streamline Health Solutions, Inc. (the “Company”), you are cordially invited to attend a special Meeting of Stockholders (the “Special Meeting”) to be held on February 21, 2020 at 10:00 a.m. Eastern Time at the offices of Troutman Sanders LLP, 600 Peachtree Street, NE, Suite 3000, Atlanta, Georgia 30308.

Information Concerning Solicitation and Voting

The Board is soliciting proxies for the Special Meeting to be held on February 21, 2020. This Proxy Statement contains information for you to consider when deciding how to vote on the matters brought before the Special Meeting.

Voting materials, which include the Proxy Statement and the Proxy Card, are being mailed to stockholders on or about January 21, 2020. The executive office of our Company is located at 1175 Peachtree Street NE, 10th Floor, Atlanta, Georgia 30361.

As previously announced, on December 17, 2019, the Company, along with Streamline Health, Inc., the Company’s wholly-owned subsidiary, entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) providing for the sale to Hyland Software, Inc. (“Buyer”) of our enterprise content management business (the “ECM Business”), including the customer base relating to the ECM Business (including all license, services and maintenance contracts with such customers), the intellectual property used in connection with the ECM Business, the accounts receivables associated with the ECM Business, and certain equipment and systems used in connection with the ECM Business, all on the terms and subject to the conditions set forth in the Asset Purchase Agreement (such sale, the “Asset Sale Transaction”). We do not believe that the sale of the ECM Business, under Delaware law, would be deemed a sale of all, or substantially all, of our assets, to the Buyer on the terms and subject to the conditions set forth in the Asset Purchase Agreement, but are seeking stockholder approval regarding the sale of the ECM Business because the Board considered the action appropriate, and strongly desired the input of the Company’s stockholders, given the historical significance of the line of business. As consideration for the Asset Sale Transaction, Buyer has agreed to pay the Company $16 million in cash, subject to certain adjustments as set forth in the Asset Purchase Agreement.

At the Special Meeting, stockholders will be asked to:

1.Approve the Asset Purchase Agreement, the Asset Sale Transaction and the other transactions contemplated by the Asset Purchase Agreement (the “Asset Sale Proposal”);

2.Approve a proposal to adjourn or postpone the Special Meeting, if necessary or appropriate, for the purpose of soliciting additional votes for the approval of the Asset Sale Proposal (the “Adjournment Proposal”); and

3.Transact such other business that may properly come before the meeting.

Stockholders are referred to the Proxy Statement accompanying this notice for more detailed information with respect to the matters to be considered at the Special Meeting.  After careful consideration, the Board has unanimously determined that the Asset Purchase Agreement and the transactions contemplated thereby, including the Asset Sale Transaction, are advisable, fair to and in the best interests of the Company and its stockholders and recommends that you vote “FOR” the Asset Sale Proposal (Proposal One); and “FOR” the Adjournment Proposal (Proposal Two); and, in the proxy holder’s best judgment, as to any other matters that may properly come before the Special Meeting.

All stockholders are invited to attend the Special Meeting. The close of business on January 2, 2020 is the record date for determining stockholders entitled to notice of, and to vote at, the Special Meeting. Consequently, only stockholders whose

 

names appear on our books as owning our common stock at the close of business on January 2, 2020 will be entitled to notice of, and to vote at, the Special Meeting and any adjournment or postponement thereof.

YOUR VOTE AND PARTICIPATION IN THE COMPANY’S AFFAIRS ARE IMPORTANT.

If your shares are registered in your name, even if you plan to attend the Special Meeting or any adjournment or postponement of the Special Meeting in person, we request that you vote by telephone, over the Internet, or complete, sign and mail your proxy card to ensure that your shares will be represented at the Special Meeting.

If your shares are held in the name of a broker, bank or other nominee, and you receive notice of the Special Meeting through your broker, bank or other nominee, please vote or complete and return the materials in accordance with the instructions provided to you by such broker, bank or other nominee or contact your broker, bank or other nominee directly in order to obtain a proxy issued to you by your nominee holder to attend the Special Meeting and vote in person. Failure to do so may result in your shares not being eligible to be voted by proxy at the Special Meeting.

The accompanying Proxy Statement contains important information concerning the Special Meeting, the transactions contemplated by the Asset Purchase Agreement and related matters, including information as to how to cast your vote. We encourage you to read the accompanying Proxy Statement and the Asset Purchase Agreement and other annexes to the Proxy Statement carefully and in their entirety.

The Asset Sale Proposal must be approved by the holders of a majority of the outstanding shares of the Company’s common stock entitled to vote at the Special Meeting.  Therefore, if you do not vote by proxy or attend the Special Meeting and vote in person or, if you hold your shares in “street name,” properly instruct your broker, bank or other nominee with respect to voting your shares, it will have the same effect as if you voted “AGAINST” the Asset Sale Proposal.

Your vote is important to us. Please complete, sign, date and promptly return the proxy card in the enclosed envelope, so that your shares will be represented whether or not you attend the Special Meeting. Returning a proxy card will not deprive you of your right to attend the Special Meeting and vote your shares in person.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL MEETING TO BE HELD ON FEBRUARY 21, 2020:

 

THIS NOTICE OF SPECIAL MEETING, PROXY STATEMENT AND PROXY CARD ARE AVAILABLE AT http://www. envisionreports.com/STRM.

 

 

 

 

By order of the Board of Directors

Dated: January 21, 2020

 

 

/s/ Thomas J. Gibson

 

Thomas J. Gibson

 

 

Atlanta, Georgia

Senior Vice President and Chief Financial Officer

January 21, 2020

 

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved of the Asset Sale Transaction, passed upon the merits or fairness of the Asset Sale Transaction or passed upon the adequacy or accuracy of the accompanying Proxy Statement. Any representation to the contrary is a criminal offense.

The accompanying Proxy Statement is dated January 21, 2020 and is first being mailed to stockholders on or about January 21, 2020.

 

 

 

 

STREAMLINE HEALTH SOLUTIONS, INC.

1175 Peachtree Street, NE, 10th Floor

Atlanta, Georgia 30361

 

 

 

SUMMARY TERM SHEET 

1

Information about the Parties 

1

The Asset Purchase Agreement 

2

The Company’s Business Following the Asset Sale Transaction 

2

Ongoing Technology-Enabled Platforms Following the Asset Sale Transaction 

3

Ongoing Professional Service Enabled Offerings Following the Asset Sale Transaction 

3

Consideration for the Asset Sale Transaction 

3

Special Meeting 

3

Stockholders of Record 

5

Recommendation of Our Board 

6

Opinion of the Financial Advisor to the Company 

6

Use of Proceeds and Future Operations 

7

Expected Timing of the Asset Sale Transaction 

7

Covenants 

7

Closing Conditions 

7

Indemnification 

8

Termination of the Asset Purchase Agreement 

8

Specific Performance 

9

No Appraisal or Dissenters’ Rights 

9

Risk Factors 

9

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING 

10

RISK FACTORS 

16

Risks Related to the Asset Sale Transaction 

16

Risks Related to Our Future Operations 

17

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 

18

THE SPECIAL MEETING 

20

Time, Date and Place 

20

Purpose of the Special Meeting 

20

Recommendation of Our Board 

20

Record Date and Voting Power 

20

Quorum 

20

Required Vote 

21

Voting by Stockholders 

21

Abstentions 

22

Broker Non-Votes 

22

Failure to Vote 

22

Revocability of Proxies 

23

Adjournments 

23

Solicitation of Proxies 

23

Questions and Additional Information 

23

PROPOSAL ONE ASSET SALE PROPOSAL 

24

Information about the Parties 

24

General Description of the Asset Sale Transaction 

24

Consideration for the Asset Sale Transaction 

25

Background of the Asset Sale Transaction

25

Reasons for the Asset Sale Transaction and Recommendation of Our Board 

27

Opinion of the Financial Advisor to the Company 

29

Financial Analyses 

32

Other Matters 

34

Forecasts 

34

i

 

Prospective Financial Information for the ECM Business 

36

Post-Asset Sale Company Prospective Financial Information (Unaudited) 

36

Use of Proceeds and Future Operations

37

No Appraisal or Dissenters’ Rights 

37

Regulatory Matters 

37

Material U.S. Federal Income Tax Consequences 

37

Anticipated Accounting Treatment 

38

Effects on our Company if the Asset Sale Transaction is Completed and the Nature of our Business following the Asset Sale Transaction 

38

SEC Reporting 

38

ASSET PURCHASE AGREEMENT 

38

Purchase and Sale of Assets 

38

Assumption and Transfer of Liabilities 

39

Consideration 

40

Representations and Warranties 

40

Covenants 

42

Closing Conditions 

44

Indemnification 

44

Termination of the Asset Purchase Agreement 

45

Specific Performance 

46

Fees and Expenses 

46

Governing Law 

46

STREAMLINE HEALTH SOLUTIONS, INC. UNAUDITED PRO FORMA FINANCIAL INFORMATION 

47

STREAMLINE HEALTH SOLUTIONS, INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET 

48

STREAMLINE HEALTH SOLUTIONS, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS 

49

STREAMLINE HEALTH SOLUTIONS, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION 

50

UNAUDITED FINANCIAL STATEMENTS OF THE ECM BUSINESS OF STREAMLINE HEALTH SOLUTIONS, INC 

53

THE ENTERPRISE CONTENT MANAGEMENT BUSINESS CONDENSED BALANCE SHEETS 

54

THE ENTERPRISE CONTENT MANAGEMENT BUSINESS CONDENSED STATEMENTS OF OPERATIONS 

55

THE ENTERPRISE CONTENT MANAGEMENT BUSINESS NOTES TO THE CONDENSED FINANCIAL STATEMENTS 

56

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 

61

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 

63

PROPOSAL TWO ADJOURNMENT PROPOSAL 

64

STOCKHOLDER PROPOSALS FOR 2020 ANNUAL MEETING OF STOCKHOLDERS 

65

HOUSEHOLDING OF PROXY MATERIALS 

65

OTHER MATTERS 

65

DOCUMENTS INCLUDED WITH THIS PROXY STATEMENT 

65

WHERE YOU CAN FIND MORE INFORMATION 

67

ANNEX A ASSET PURCHASE AGREEMENT 

A-1

ANNEX B OPINION OF OUR FINANCIAL ADVISOR 

B-1

 

 

ii

SUMMARY TERM SHEET

This summary highlights selected information contained elsewhere in this Proxy Statement and may not contain all the information that is important to you with respect to the Asset Purchase Agreement, the Asset Sale Proposal and the other transactions contemplated by the Asset Purchase Agreement and the other matters being considered at the Special Meeting of the Company’s stockholders to which this Proxy Statement relates. We urge you to read carefully the remainder of this Proxy Statement, including the attached annexes, and the other documents to which we have referred you. For additional information on the Company, see the section entitled “Where You Can Find More Information” beginning on page 67. We have included page references in this summary to direct you to a more complete description of the topics presented below.

All references in this Proxy Statement to:

“Streamline,” the “Company,” “we,” “us,” or “our” refer to Streamline Health Solutions, Inc.,

“Buyer” refers to Hyland Software, Inc., in its capacity as Buyer under the Asset Purchase Agreement,

the “Asset Purchase Agreement” refers to the Asset Purchase Agreement, dated as of December 17, 2019, by and between the Company, Streamline Health, Inc., and Buyer, as amended on January 7, 2020,

the “Asset Sale Transaction” refers to the sale of the ECM  Business, as contemplated by the Asset Purchase Agreement, together with the other transactions contemplated by the Asset Purchase Agreement,

the “ECM Business” refers to our enterprise content management business, including the customer base relating to the ECM Business (including all license, services and maintenance contracts with such customers), the intellectual property used in connection with the ECM Business, the accounts receivables associated with the ECM Business, and certain equipment and systems used in connection with the ECM Business, and

the “Ancillary Agreements” refers to the Escrow Agreement, the Bill of Sale,  the Assignment and Assumption Agreement, and the IP Assignment each by and between the Company and Buyer.

Information about the Parties (see page 24)

The Company

Incorporated in 1989, we are a leading provider of integrated solutions, technology-enabled services and analytics to support revenue cycle optimization for healthcare enterprises throughout the United States and Canada. The focus of our SaaS-based healthcare information technology is to help optimize mid-revenue cycle processes for providers, from charge capture to bill drop. We work with our clients as full-service revenue integrity partners organization-wide. Our eValuator™ pre-bill coding analysis platform enables hospitals, clinics and physician practices to analyze every coded patient record before it is billed to payors, improving revenue integrity and decreasing denials. Our comprehensive suite of solutions and services includes: enterprise content management, business analytics, integrated workflow systems, clinical documentation improvement, automated pre-bill coding analysis and pre- or post-bill manual auditing services.

We are incorporated under the laws of the State of Delaware. Our executive office is located at 1175 Peachtree Street, NE, 10th Floor, Atlanta, Georgia 30361. Our telephone number is (888) 997‑8732. Our website is http://www.streamlinehealth.net. The information contained on the Company’s website is not incorporated into this proxy statement.

Our common stock is listed on The NASDAQ Capital Market under the ticker symbol “STRM”.

1

Buyer

Hyland Software, Inc., based in Westlake, Ohio, provides connected healthcare solutions that harness unstructured content at all corners of the enterprise and link it to core clinical and business applications such as electronic medical records (EMR) and enterprise resource planning (ERP) systems. Hyland is the only technology partner that offers a full suite of content services and enterprise imaging tools, bringing documents, medical images and other clinically rich data to the healthcare stakeholders that need it most. This comprehensive view of patient information accelerates business processes, streamlines clinical workflows and improves clinical decision making. Hyland’s website is http://www.Hyland.com. The information contained on Hyland’s website is not incorporated into this proxy statement.

The Asset Purchase Agreement  (see page 38 and Annex A)

On December 17, 2019, we entered into the Asset Purchase Agreement with Buyer pursuant to which we have agreed, subject to certain conditions, including the approval of the Asset Purchase Agreement and the Asset Sale Transaction by our stockholders at the Special Meeting or any adjournment or postponement thereof (the “Stockholder Approval”), to sell to Buyer the ECM Business. Under the terms of the Asset Purchase Agreement, we will retain certain specified assets, including all of our cash and cash equivalents, certain contracts that are not expressly assumed by Buyer, all intellectual property owned by us other than intellectual property owned (in whole or in part) by or exclusively licensed to us and related to, used or held exclusively for use in connection with the ECM Business, and certain other assets specified in the Asset Purchase Agreement, and will also retain certain specified liabilities, including all liabilities with respect to taxes arising before the closing of the Asset Sale Transaction, all liabilities and obligations with respect to current and former employees of the Company based upon or arising out of the employment relationship with the Company, indebtedness, change of control bonus or severance obligations, liabilities associated with any warranties or services provided by the Company prior to the closing of the Asset Sale Transaction and other specified retained liabilities.

The Company’s Business Following the Asset Sale Transaction

We will continue to operate and manage our eValuator Coding Analysis Platform, CDI and Abstracting solutions, Financial Management solutions, Audit Services, and custom integration and training services following the closing of the Asset Sale Transaction.

The Company offers software solutions and services to assist its clients in revenue cycle management, primarily with issues they face in the middle of their revenue cycle - from initial charge capture to bill drop.  The technologies include Coding and Clinical Documentation Improvement (CDI), Health Information Management (HIM), Financial Management and eValuator™, its flagship, automated, cloud-based technology platform which enables healthcare providers to analyze the accuracy of their coding on 100% of their patient records prior to billing. This new technology represents a paradigm shift for the industry as the vast majority of healthcare providers manually audit a small, random sample of coded records well after they have been billed. 

 

The Company’s solutions are designed to improve the flow of critical patient information throughout the healthcare enterprise. The solutions and services help to transform and structure information between disparate information technology systems into actionable data, giving the end user comprehensive access to clinical and business intelligence to enable better decision-making. Solutions can be accessed securely through Software as a Service (SaaS), or delivered via on-premise equipment, although this now represents a minority of the company’s delivery methodology.  Payment methods for these solutions is either monthly (for SaaS-based solutions) or by perpetual or fixed-term license if installed locally.

 

The ongoing business for the Company following the Asset Sale Transaction will center primarily on its technologies, the eValuator platform and coding and abstracting platforms.  The Company supports the eValuator technology with its service businesses, both professional services and coding and audit services. The Company believes that the eValuator platform represents the Company’s greatest opportunity for revenue growth.

 

2

Ongoing Technology-Enabled Platforms Following the Asset Sale Transaction 

 

eValuator Automated Coding Analysis Platform - This technology is a cloud-based SaaS analytics solution that delivers the capability of fully automated analysis on 100% of coded patient records entered by a healthcare provider’s coding team. This can be done on a pre-bill (or post-bill) basis, enabling providers to identify and address the cases with the highest potential impact, both in terms of dollars and propensity to be incorrectly coded, prior to bill drop. Rule sets are currently available for both Inpatient and Outpatient records and Professional Fee cases (ProFee) automated analysis is in development. With eValuator, providers can add an audit and review function on a pre-bill basis to all cases, allowing them to better optimize its billing practices to improve its revenue integrity both in terms of receiving full reimbursement for the care provided as well as mitigating the risk of over coding or over billing.

Coding & CDI Solutions - These technology solutions provide an integrated cloud-based software suite that enhances the productivity of CDI and Coding staff and enables the seamless sharing of patient data.  The Company’s technology includes CDI, Abstracting and Physician Query.

Ongoing Professional Service Enabled Offerings Following the Asset Sale Transaction:

 

Audit Services — The Company provides technology-enabled coding audit services through the use of its eValuator platform, to help clients review and optimize their internal clinical documentation and coding functions across the applicable segment of the client’s enterprise. The Company provides these services using experienced auditors and its eValuator proprietary software to improve the targeting of records with the highest likelihood of change, thereby requiring an audit. The audit services are provided for inpatient DRG coding, Outpatient APC auditing, HCC auditing and Physician/Pro-Fee services coding auditing.

 

Training Services — Training courses are offered to help clients quickly learn to use our solutions in the most efficient manner possible. Training sessions are available on-site or off-site for multiple staff members or as few as one person.]

A copy of the Asset Purchase Agreement is attached as Annex A to this Proxy Statement. You are encouraged to read the Asset Purchase Agreement carefully and in its entirety.

Consideration for the Asset Sale Transaction (see page 25)

As consideration for the Asset Sale Transaction, Buyer has agreed to pay us $16 million in cash at closing, subject to certain adjustments as set forth in the Asset Purchase Agreement.

Special Meeting (see page 20)

Purpose

At our Special Meeting, stockholders will act upon the matters outlined in the notice, including the following:

a proposal to approve the Asset Purchase Agreement and the Asset Sale Transaction (the “Asset Sale Proposal”);

a proposal to adjourn or postpone the Special Meeting, if necessary or appropriate, for the purposes of soliciting additional votes for the approval of the Asset Sale Proposal (the “Adjournment Proposal”); and

such other business that may properly come before the meeting

Our stockholders must vote to approve the Asset Sale Proposal as a condition for the Asset Sale Transaction to occur. If the Company’s stockholders fail to approve the Asset Sale Proposal, the Asset Sale Transaction will not occur.

3

Stockholders Entitled to Notice and to Vote

All holders of record of our common stock at the close of business on January 2, 2020 (the “Record Date”), will be entitled to notice of and to vote at the Special Meeting.

At the close of business on the Record Date, we had 30,744,847 shares of common stock outstanding and entitled to vote. Holders of common stock are entitled to one vote for each share of our common stock held. No other shares of common stock were outstanding on the Record Date.

Quorum

Our bylaws provide that the holders of a majority of all of the shares of our common stock issued, outstanding, and entitled to vote, whether present in person or represented by proxy, shall constitute a quorum for the transaction of business at the Special Meeting. Shares that are voted FOR, AGAINST, or ABSTAIN, as applicable, with respect to a matter are treated as being present at the meeting for purposes of establishing a quorum.

Distinction between Holding Shares as a Stockholder of Record and as a Beneficial Owner

Some of our stockholders hold their shares through a broker, trustee, or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those shares owned beneficially.

Stockholder of Record. If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., then you are considered, with respect to those shares, the “stockholder of record.”  As the stockholder of record, you have the right to grant your voting proxy directly to us or to a third party, or to vote in person at the Special Meeting.

Beneficial Owner. If your shares are held in a brokerage account, by a trustee or by another nominee, then you are considered the “beneficial owner” of those shares. As the beneficial owner of those shares, you have the right to direct your broker, trustee, or nominee how to vote and you also are invited to attend the Special Meeting. However, because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Special Meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the Special Meeting.

If you are not a stockholder of record, please understand that we do not know that you are a stockholder, or how many shares you own.

Required Vote

For Proposal One, the approval of the Asset Sale Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock as of the close of business on the Record Date.

For Proposal Two, regardless of whether a quorum is present at the Special Meeting, the affirmative vote of a majority of the votes cast by stockholders present in person or represented by proxy at the Special Meeting is required to approve the Adjournment Proposal.

Abstentions and broker non-votes are counted to determine whether a quorum is present at the Special Meeting but are not counted as a vote in favor of or against a particular matter.

Voting

Your vote is very important to us and we hope that you will attend the Special Meeting. However, whether or not you plan to attend the Special Meeting, please vote by proxy in accordance with the instructions on your proxy card or voting

4

instruction card (from your broker, bank or other nominee). Below are descriptions of how you may vote your shares depending on whether or not you are a stockholder of record or a beneficial owner.

Stockholders of Record

By Mail. Registered stockholders may vote their shares by signing, dating and mailing the enclosed proxy card using the enclosed postage pre-paid envelope. We strongly encourage you, however, to consider using the Internet or telephone voting options described below because these voting methods are faster and less costly than voting by mailing your signed and dated proxy card. If you vote via the Internet or telephone, you do not need to mail your proxy card.

By Internet. Registered stockholders may vote on the Internet at http://www.envisionreports.com/STRM. Please have your proxy card in hand when going online and follow the online instructions. Stockholders that vote by Internet must bear all costs associated with electronic access, including Internet access fees. Internet voting for registered stockholders is available up until 1:00 a.m., Eastern Time, on February 21, 2020, the day of the Special Meeting. The Internet voting procedures are designed to authenticate each stockholder by use of a control number to allow stockholders to vote their shares and to confirm that their instructions have been properly recorded. The control number can be found on the enclosed proxy card.

By Telephone. Registered stockholders also may vote by telephone calling 800-652-VOTE (8683) (toll-free) and using any touch-tone telephone to transmit their votes up to 1:00 a.m., Eastern Time, on February 21, 2020, the day of the Special Meeting. Please have your proxy card in hand when you call and then follow the instructions. The control number necessary to vote your shares by telephone can be found on the enclosed proxy card.

By Attending the Special Meeting. If you attend the Special Meeting and wish to vote in person, you may request a ballot when you arrive. Alternatively, if you are a registered stockholder and attend the Special Meeting, you may deliver your signed and dated proxy card in person. You must present a valid photo identification for admission to the Special Meeting.

Beneficial Owners

If your shares are held of record in the name of a bank, broker or other nominee you should follow the separate instructions that the nominee provides to you. Although most banks and brokers now offer Internet and telephone voting, availability and specific processes will depend on their voting arrangements.

If your shares are held of record in the name of your bank, broker or other nominee and you would like to vote in person at the Special Meeting, you must bring to the Special Meeting a letter from the nominee indicating that you were the beneficial owner of the shares on the Record Date and have been granted a proxy by your bank, broker or nominee to vote the shares. You also must present a valid photo identification for admission to the Special Meeting.

Treatment of Voting Instructions

If you provide specific voting instructions, your shares will be voted as instructed.

If you hold shares as the stockholder of record and provide a proxy without giving specific voting instructions, then your shares will be voted in accordance with the recommendations of the Board set forth below.

You may have granted to your broker, trustee, or other nominee discretionary voting authority over your account. Your broker, trustee, or other nominee may be able to vote your shares depending on the terms of the agreement you have with your broker, trustee, or other nominee.

The persons identified as having the authority to vote the proxies granted by the proxy card will have discretionary authority to vote, in their discretion, to the extent permitted by applicable law, on such other business as may properly

5

come before the Special Meeting and any postponement or adjournment. The Board is not aware of any other matters that are likely to be brought before the Special Meeting.

Solicitation of Proxies

We are soliciting proxies on behalf of the Board. The solicitation of proxies will be conducted by telephone or mail, and we will bear all attendant expenses. These expenses will include the expense of preparing and mailing proxy materials for the Special Meeting. Brokerage firms and other custodians, nominees and fiduciaries will be requested to forward the proxy materials to beneficial owners and to obtain authorization for the execution of proxies, and we will reimburse such brokerage firms, other custodians, nominees and fiduciaries for reasonable expenses incurred in sending proxy materials to beneficial owners of our common stock. We may conduct further solicitation personally or telephonically through our directors, officers, and employees, none of whom will receive additional compensation for assisting with the solicitation.

Recommendation of Our Board (see page 20)

After careful consideration, our Board unanimously recommends that you vote:

Proposal One - FOR the Asset Sale Proposal; and

Proposal Two - FOR the Adjournment Proposal.

In reaching its decision to approve the Asset Purchase Agreement and the Asset Sale Transaction and to recommend that you vote in the manner noted above, our Board considered a wide range of material factors relating to the Asset Purchase Agreement and the Asset Sale Transaction and consulted with management and outside financial and legal advisors. For more information on these factors, see “Proposal One: Asset Sale Proposal - Reasons for the Asset Sale Transaction and Recommendation of Our Board” beginning on page 27 below.

Opinion of the Financial Advisor to the Company (see page 29)  

On December 14, 2019, Houlihan Lokey Capital, Inc. (“Houlihan Lokey”) rendered its oral opinion to the Board (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the Board dated the same date) as to, as of December 14, 2019, the fairness, from a financial point of view, to the Company of the consideration to be received by the Company and Streamline Health, Inc. (collectively, “Seller”) in the Asset Sale Transaction pursuant to the Asset Purchase Agreement in exchange for the assets as described in the Asset Purchase Agreement relating to the ECM Business (the “Purchased Assets”), subject to certain liabilities of Seller as described in the Asset Purchase Agreement to be assumed by Buyer in the Asset Sale Transaction (the “Assumed Liabilities”).

Houlihan Lokey’s opinion was directed to the Board (in its capacity as such), and only addressed the fairness, from a financial point of view, to the Company of the consideration to be received by Seller in exchange for the Purchased Assets subject to the Assumed Liabilities in the Asset Sale Transaction pursuant to the Asset Sale Agreement and did not address any other aspect or implication of the Asset Sale Transaction, any related transaction or any other agreement, arrangement or understanding entered into in connection therewith or otherwise. The summary of Houlihan Lokey's opinion in this Proxy Statement is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex B to this Proxy Statement and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. However, neither Houlihan Lokey's written opinion nor the summary of its opinion and the related analyses set forth in this Proxy Statement is intended to be, and they do not constitute, a recommendation to the Board, any security holder of the Company or any other person as to how such person should vote or act with respect to any matter relating to the Asset Sale Transaction or otherwise.

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Use of Proceeds and Future Operations (see page 37)

The Company, and not its stockholders, will receive the proceeds from the Asset Sale Transaction.  The Company plans to use the proceeds of the sale to pay off its term loan with Bridge Bank and to fund the continuing development and incremental investment in sales and marketing in support of its eValuator™ cloud-based pre- or post-bill coding analysis platform. We will continue to operate and manage our eValuator Coding Analysis Platform, CDI and Abstracting solutions, Financial Management solutions, Audit Services, and custom integration and training services following the closing of the Asset Sale Transaction. Our Board will evaluate alternatives for the use of the cash proceeds to be received at closing to continue to maximize stockholder value with a goal of returning value to our stockholders. The amounts and timing of our actual expenditures, however, will depend upon numerous factors, and we may find it necessary or advisable to use portions of the proceeds from the Asset Sale Transaction for different or presently non-contemplated purposes.

Expected Timing of the Asset Sale Transaction

We expect to complete the Asset Sale Transaction promptly following the Special Meeting if we obtain Stockholder Approval and the various other conditions to closing are satisfied or waived. However, there can be no assurance that the Asset Sale Transaction will be completed as currently anticipated. Certain factors, including factors outside of our control and the control of Buyer, could result in the Asset Sale Transaction being delayed or not occurring at all.

Covenants (see page 42)

Pursuant to the Asset Purchase Agreement, the Company has agreed to certain covenants with respect to, among other things, the following:

delivery of required consents related to the Asset Sale Transaction;

non-competition and non-solicitation;

transition services to be provided by the Company;

employment of certain Company employees;

access to information;

 

acquisition proposals; and

certain software platform upgrades.

 

 

 

 

Closing Conditions (see page 44)

The completion of the Asset Sale Transaction is dependent upon the satisfaction of a number of conditions, including:

No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any order which is in effect and has the effect of making the transactions contemplated by the Asset Sale Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof;

receipt of Stockholder Approval;

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the accuracy of the parties’ representations and warranties in the Asset Purchase Agreement as of closing, subject, in certain circumstances, to certain materiality and other thresholds;

the performance by the parties of their obligations and covenants under the Asset Purchase Agreement;

the delivery by the parties of executed counterpart signature pages to each of the Ancillary Agreements referenced in the Asset Purchase Agreement;

the delivery by each party of certain certificates and other documentation;

the delivery by the Company of certain signed letters or other documents from persons holding liens with respect to assets used to conduct the ECM Business releasing all such liens and authorizing the Company to file the appropriate terminations of any financing statements evidencing such liens or any other documents or filings necessary to evidence termination of such liens;

receipt of authorizations, consents, orders and approvals set forth in the Asset Purchase Agreement; and

the absence of any event, fact or development since the signing of the Asset Purchase Agreement that has had or would reasonably be expected to have a material adverse effect on the ECM Business.

Indemnification (see page 44)

Under certain circumstances specified in the Asset Purchase Agreement, the Company and Buyer have agreed to indemnify each other for certain Losses (see page 44 for the definition of “Losses”). See “The Asset Purchase Agreement - Indemnification” beginning on page 44 for a discussion of the circumstances under which such indemnification provisions shall apply.

Termination of the Asset Purchase Agreement (see page 45)

The Asset Purchase Agreement may be terminated at any time prior to the closing of the Asset Sale Transaction by mutual written consent of Buyer and the Company.

Either party may terminate the Asset Purchase Agreement if:

there is any law that makes consummation of the Asset Sale Transaction illegal or otherwise prohibited; or

any Governmental Authority issues an order restraining or enjoining the Asset Sale Transaction, and such order has become final and non-appealable.

Buyer may terminate the Asset Purchase Agreement by written notice to the Company if:

Buyer is not in material breach of the Asset Purchase Agreement, and there has been a material breach of the Asset Purchase Agreement by the Company that would give rise to a failure of any of the conditions to consummate the Asset Sale Transaction and such breach cannot be cured by the Company by March 31, 2020 (the “Drop-Dead Date”);

the Company does not obtain Stockholder Approval of the Asset Sale Transaction (unless such failure is due to the failure of the Buyer to perform or comply with any of the covenants, agreements or conditions of the Asset Purchase Agreement to be performed or complied with by the Buyer prior to the closing); or

any of the conditions to Buyer’s performance of the Asset Purchase Agreement have not been fulfilled by the Drop-Dead Date, including, among other things, that (i) all of the Company’s representations and warranties of the Company are true and correct in all material respects as of the closing date of the Asset Sale Transaction,

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(ii) the Company has performed and complied with all agreements covenants and conditions required by the Asset Purchase Agreement and the Ancillary Agreements by or on the closing date of the Asset Sale Transaction, (iii) the Company has delivered certain certificates and consents and approvals to Buyer, (iv) the Company has delivered certain signed letters or other documents from persons holding liens with respect to assets used to conduct the ECM Business releasing all such liens and authorizing the Company to file the appropriate terminations of any financing statements evidencing such liens or any other documents or filings necessary to evidence termination of such liens, and (v) there has not been a material adverse effect with respect to the ECM Business or the Company’s ability to consummate the Asset Sale Transaction.

The Company may terminate the Asset Purchase Agreement by written notice to Buyer if:

Company is not in material breach of the Asset Purchase Agreement, and there has been a material breach of the Asset Purchase Agreement by the Buyer that would give rise to a failure of any of the conditions to consummate the Asset Sale Transaction and such breach cannot be cured by the Company by the Drop-Dead Date;

·

the Company does not obtain Stockholder Approval of the Asset Sale Transaction (unless such failure is due to the failure of the Company to perform or comply with any of the covenants, agreements or conditions of the Asset Purchase Agreement to be performed or complied with by the Company prior to the closing); or

any of the conditions to Company’s performance of the Asset Purchase Agreement have not been fulfilled by the Drop-Dead Date, including, among other things, that (i) Stockholder Approval of the Asset Sale Transaction is obtained; (ii) all of the Buyer’s representations and warranties of the Buyer are true and correct in all material respects as of the closing date of the Asset Sale Transaction, (iii) the Buyer has performed and complied with all agreements covenants and conditions required by the Asset Purchase Agreement and the Ancillary Agreements by or on the closing date of the Asset Sale Transaction, and (iv) the Buyer has delivered certain certificates and consents and approvals to Company.

In the event that the Asset Purchase Agreement is validly terminated pursuant to the termination rights above, the Asset Purchase Agreement will become void without liability or obligation (with certain limited exceptions) on the part of Buyer or the Company, except that if the Asset Purchase Agreement is terminated due to a failure of the Company to convene the Special Meeting by the Drop Dead Date or to have obtained Stockholder Approval, the Company must reimburse Buyer for all costs and expenses of Buyer incurred in connection with the Asset Sale Transaction, up to a maximum amount of $75,000.

Specific Performance (see page 46)

The Asset Purchase Agreement provides that, if any party breaches its covenants under the Asset Purchase Agreement, the non-breaching party may, in addition to any other available rights or remedies, may sue in equity for specific performance, and each party expressly waives the defense that a remedy in damages will not be adequate.

No Appraisal or Dissenters’ Rights (see page 37)

No appraisal rights or dissenters’ rights are available to our stockholders under Delaware law or our articles of incorporation or bylaws in connection with the Asset Sale Transaction.

Risk Factors (see page 16)

In evaluating the Asset Sale Proposal, in addition to the other information provided elsewhere in this Proxy Statement and the annexes hereto, you should carefully consider the risk factors relating to the Asset Sale Transaction and our future operations that are discussed beginning on page 16 below.

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Information Concerning Solicitation and Voting

Our Board is soliciting proxies for the 2020 Special Meeting of Stockholders (the “Special Meeting”) to be held at 10:00 a.m. Eastern Time on February 21, 2020 at the offices of Troutman Sanders LLP, 600 Peachtree Street, NE, Suite 3000, Atlanta, Georgia 30308. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters brought before the Special Meeting.

Voting materials, which include the Proxy Statement and Proxy Card, are being mailed to stockholders on or about January 21, 2020. Our executive office is located at 1175 Peachtree Street NE, 10th Floor, Atlanta, Georgia 30361.

We will bear the expense of soliciting proxies. These expenses will include the expense of preparing and mailing proxy materials for the Special Meeting. We will reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable charges and expenses incurred in forwarding soliciting materials to their clients. We may conduct further solicitation personally or telephonically through our directors, officers, and employees, none of whom will receive additional compensation for assisting with the solicitation.

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING

The following questions and answers are intended to briefly address commonly asked questions as they pertain to the Special Meeting, the Asset Purchase Agreement and the Asset Sale Transaction. These questions and answers may not address all questions that may be important to you as a stockholder. Please refer to the “Summary” beginning on page 1 and the more detailed information contained elsewhere in this Proxy Statement and the annexes to this Proxy Statement, each of which you should read carefully.

WHAT IS A PROXY?

A proxy is another person that you legally designate to vote your stock. If you designate someone as your proxy in a written document, that document is also called a “proxy” or a “proxy card.” If you are a street name holder, you must obtain a proxy from your broker, bank or other nominee in order to vote your shares in person at the Special Meeting.

WHAT IS A PROXY STATEMENT?

A proxy statement is a document that regulations of the United States Securities and Exchange Commission (the “SEC”) require that we give to you when we ask you to sign a proxy card to vote your stock at the Special Meeting.

WHO IS SOLICITING YOUR VOTE?

The Board is soliciting your vote for the Special Meeting being held at 10:00 a.m. Eastern Time on February 21, 2020, at the offices of Troutman Sanders LLP, 600 Peachtree Street, NE, Suite 3000, Atlanta, Georgia 30308.

WHAT WILL YOU BE VOTING ON?

(1)  Approval of the Asset Purchase Agreement, the Asset Sale Transaction and the other transactions contemplated by the Asset Purchase Agreement; (2) approval of a proposal to adjourn or postpone the Special Meeting, if necessary or appropriate, for the purposes of soliciting additional votes for the approval of the Asset Sale Proposal; and (3) any other matters which may properly come before the meeting.

WHAT IS THE ASSET SALE PROPOSAL (PROPOSAL ONE)?

The Asset Sale Proposal is a proposal to sell the ECM Business to Buyer pursuant to the terms, and subject to certain conditions, of the Asset Purchase Agreement. Following the closing of the Asset Sale Transaction, we will continue to operate and manage our eValuator Coding Analysis Platform, CDI and Abstracting solutions, Financial Management solutions, Audit Services, and custom integration and training services.

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WILL OUR COMMON STOCK STILL BE PUBLICLY TRADED IF THE ASSET SALE TRANSACTION IS COMPLETED?

Our common stock is currently traded on The NASDAQ Capital Market under the ticker symbol “STRM.” Following the completion of the Asset Sale Transaction, we expect that the common stock will continue to be traded on The NASDAQ Capital Market under the same ticker symbol. It is not possible to predict the trading price of our common stock following the closing of the Asset Sale Transaction. Accordingly, you may find it more difficult to dispose of your shares of common stock, and you may not be able to sell some or all of your shares of common stock when you desire. See “Risk Factors” on page 16 for a further discussion of some of these risks.

DID THE BOARD APPROVE AND RECOMMEND THE ASSET PURCHASE AGREEMENT?

Yes. The Board: (a) determined that it is fair to and in the best interests of the Company and its stockholders, and declared it advisable, to enter into the Asset Purchase Agreement and the Ancillary Agreements and to consummate the transactions contemplated thereby, including the Asset Sale Transaction, (b) approved the execution, delivery and performance of the Asset Purchase Agreement and the Ancillary Agreements and the closing of the transactions contemplated by the Asset Purchase Agreement and the Ancillary Agreements in accordance with Delaware law, and (c) resolved, subject to the terms and conditions set forth in the Asset Purchase Agreement, to recommend approval of the Asset Purchase Agreement by the stockholders of the Company.

WHAT HAPPENS IF THE ASSET SALE PROPOSAL (PROPOSAL ONE) IS NOT APPROVED?

If stockholders do not approve the Asset Sale Proposal, the Asset Sale Transaction will not occur. Instead, the Company will retain the assets and liabilities proposed to be sold in the Asset Sale Transaction and will not receive the $16 million cash consideration from Buyer, subject to certain adjustments as set forth in the Asset Purchase Agreement.

IF THE ASSET SALE PROPOSAL (PROPOSAL ONE) IS APPROVED, WHEN WILL THE ASSET SALE TRANSACTION CLOSE?

We currently anticipate that the Asset Sale Transaction will close promptly after the Special Meeting if the Asset Sale Proposal is approved, subject to the satisfaction or waiver of the closing conditions discussed elsewhere in this Proxy Statement.

WHAT IS THE ADJOURNMENT PROPOSAL (PROPOSAL TWO)?

The Adjournment Proposal is a proposal to adjourn or postpone the Special Meeting, if necessary or appropriate, to allow us to solicit additional votes for the approval of the Asset Sale Proposal.

WHAT IS THE RECORD DATE AND WHAT DOES IT MEAN?

The Record Date to determine the stockholders entitled to notice of and to vote at the Special Meeting is the close of business on January 2, 2020. The Record Date was established by the Board as required by Delaware law. On the Record Date, 30,744,847 shares of common stock were issued and outstanding.

HOW MANY VOTES DO STOCKHOLDERS HAVE?

Holders of common stock at the close of business on the Record Date may vote at the Special Meeting. You will have one vote for every share of common stock you owned of record on the Record Date.

There is no cumulative voting.

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HOW MANY VOTES MUST BE PRESENT TO HOLD THE MEETING?

A majority of the outstanding shares of common stock entitled to vote represented in person or by proxy constitute a quorum. Abstentions and broker non-votes will count for purposes of determining whether a quorum exists, but not for voting purposes.

HOW MAY I VOTE MY SHARES?

You can vote either in person at the Special Meeting or by proxy without attending the Special Meeting. We urge you to vote by proxy even if you plan to attend the Special Meeting so that we will know as soon as possible that enough votes will be present for us to hold the meeting.

(a)           How may I vote my shares in person at the meeting?

If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., on the Record Date, you are considered, with respect to those shares, the stockholder of record, and the proxy materials and proxy card are being sent directly to you by the Company. As the stockholder of record, you have the right to vote in person at the Special Meeting. If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name, and the proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you are also invited to attend the Special Meeting. Since you are a beneficial owner and not the stockholder of record, you may not vote these shares in person at the Special Meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares in its name, giving you the right to vote the shares at the Special Meeting.

(b)           How can I vote my shares without attending the meeting?

Whether you hold shares directly as a registered stockholder of record or beneficially in street name, you may vote without attending the Special Meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your broker or nominee. In most cases, you will be able to do this by telephone, by using the Internet or by mail. Please refer to the summary instructions included with proxy materials and on your proxy card. For shares held in street name, the voting instruction card will be included in the materials forwarded by the broker or nominee. If you have telephone or Internet access, you may submit your proxy by following the instructions with your proxy materials and on your proxy card. You may submit your proxy by mail by signing your proxy card or, for shares held in street name, by following the voting instructions with your proxy materials and on your proxy card. You may submit your proxy by mail by signing your proxy card or, for shares held in street name, by following the voting instruction card included in the materials forwarded by your stockbroker or nominee and mailing it in the enclosed, postage paid envelope. If you provide specific voting instructions, your shares will be voted as you have instructed.

WHAT ARE THE BOARD’S RECOMMENDATIONS ON HOW I SHOULD VOTE MY SHARES?

The Board unanimously recommends that you vote your shares as follows:

Proposal One - FOR the Asset Sale Proposal; and

Proposal Two - FOR the Adjournment Proposal.

WHAT IF I DO NOT SPECIFY HOW I WANT MY SHARES VOTED?

If you are a record holder who returns a completed proxy card that does not specify how you want to vote your shares on one or more proposals, the designated proxies will vote your shares for each proposal as to which you provide no voting instructions, and such shares will be voted in the following manner:

Proposal One - FOR the Asset Sale Proposal; and

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Proposal Two - FOR the Adjournment Proposal.

If you are a “street name” holder and do not provide voting instructions on one or more proposals, your bank, broker or other nominee may be able to vote those shares.

HOW MANY VOTES ARE NEEDED TO APPROVE EACH PROPOSAL?

For Proposal One, the Asset Sale Proposal requires the affirmative vote of holders of at least a majority of our issued and outstanding shares of common stock that are entitled to vote at the Special Meeting. Stockholders may vote “for”,  “against” or “abstain” for the Asset Sale Proposal. If you “abstain” from voting on the Asset Sale Proposal, your abstention will have the same effect as a vote “against” the Asset Sale Proposal.

For Proposal Two, the affirmative vote of the majority of the votes cast by stockholders present in person or represented by proxy at the Special Meeting is required to approve the Adjournment Proposal.

WHAT IS THE QUORUM REQUIREMENT?

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding at least a majority of the common stock issued, outstanding and entitled to vote are present at the Special Meeting in person or represented by proxy. On the Record Date, there were 30,744,847 shares of common stock issued and outstanding and entitled to vote. Thus, the holders of 15,372,424 shares of common stock must be present in person or represented by proxy at the Special Meeting to have a quorum.

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the Special Meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the holders of a majority of shares of common stock present at the Special Meeting in person or represented by proxy may adjourn the Special Meeting to another date.

CAN YOU CHANGE YOUR VOTE?

Yes, a stockholder of record who has given a proxy may revoke it at any time prior to its exercise at the Special Meeting by (i) giving written notice of revocation to our Secretary, (ii) properly submitting a duly executed proxy bearing a later date, or (iii) appearing in person at the Special Meeting and voting in person.

If you are the beneficial owner of shares held through a broker, trustee, or other nominee, you must follow the specific instructions provided to you by your broker, trustee, or other nominee to change or revoke any instructions you already have provided to your broker, trustee, or other nominee.

Attendance at the Special Meeting, in and of itself, will not constitute a revocation of a proxy.

WHAT IF YOU VOTE “ABSTAIN”?

A vote to “abstain” on any matter indicates that your shares will not be voted for such matter and will have the effect of a vote against the proposal. Abstentions are considered as being present for quorum purposes.

CAN YOUR SHARES BE VOTED IF YOU DO NOT RETURN YOUR PROXY AND DO NOT ATTEND THE SPECIAL MEETING?

A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. Broker non-votes count for quorum purposes but not for voting purposes.

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If you do not attend and vote your shares which are registered in your name or if you do not otherwise fill out the proxy card and vote by proxy, your shares will not be voted.

WHAT HAPPENS IF THE MEETING IS POSTPONED OR ADJOURNED?

Your proxy will still be valid and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy until it is actually voted.

WHAT IS HOUSEHOLDING OF SPECIAL MEETING MATERIALS?

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statement and annual reports. This means that only one copy of our Proxy Statement to Stockholders may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of either document to you if you contact the Secretary at the following address or telephone number: 1175 Peachtree Street NE, 10th Floor, Atlanta, Georgia 30361 Tel: (888) 997‑8732. If you want to receive separate copies of this Proxy Statement in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker or other nominee record holder, or you may contact the Company at the above address or telephone number.

DO STOCKHOLDERS HAVE DISSENTER’S RIGHTS?

Stockholders do not have dissenter’s rights of appraisal with respect to any of the proposals being voted on.

WHAT SHOULD I DO IF I RECEIVE MORE THAN ONE SET OF VOTING MATERIALS?

You may receive more than one set of voting materials, including multiple copies of the Notice of Special Meeting or this Proxy Statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. Similarly, if you are a stockholder of record and hold shares in a brokerage account, you will receive a notice for shares held in your name and a notice or voting instruction card for shares held in street name. Please follow the directions provided in the notice and each additional notice or voting instruction card you receive to ensure that all your shares are voted.

WILL I RECEIVE ANY PROCEEDS FROM THE ASSET SALE TRANSACTION?

No. The Company, and not its stockholders, will receive the proceeds from the Asset Sale Transaction.

HOW WILL THE COMPANY USE THE PROCEEDS FROM THE ASSET SALE TRANSACTION?

The Company, and not its stockholders, will receive the proceeds from the Asset Sale Transaction. The Company plans to use the proceeds of the sale to pay off its term loan with Bridge Bank and to fund the continuing development and incremental investment in sales and marketing in support of its eValuator™ cloud-based pre- or post-bill coding analysis platform. Following the closing of the Asset Sale Transaction, we will continue to operate and manage our eValuator Coding Analysis Platform, CDI and Abstracting solutions, Financial Management solutions, Audit Services, and custom integration and training services. Our Board will evaluate alternatives for the use of the cash proceeds to be received at closing to commercialize the foregoing business segments and to continue to maximize stockholder value with a goal of returning value to our stockholders. The amounts and timing of our actual expenditures, however, will depend upon numerous factors, and we may find it necessary or advisable to use portions of the proceeds from the Asset Sale Transaction for different or presently non-contemplated purposes.

WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE ASSET SALE TRANSACTION TO U.S. STOCKHOLDERS?

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The Asset Sale Transaction is a corporate action. Our stockholders will not realize any gain or loss for U.S. federal income tax purposes as a result of the Asset Sale Transaction. See “Proposal One: Asset Sale Proposal - Material U.S. Federal Income Tax Consequences” beginning on page 37.

WHAT ARE THE SOLICITATION EXPENSES AND WHO PAYS THE COST OF THIS PROXY SOLICITATION?

Our Board is asking for your proxy and we will pay all of the costs of asking for stockholder proxies. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation material to the beneficial owners of common stock and collecting voting instructions. We may use our officers and employees to ask for proxies, as described below.

WHERE CAN I FIND VOTING RESULTS?

The Company expects to publish the voting results in a Current Report on Form 8‑K, which it expects to file with the SEC within four business days following the Special Meeting.

WHO CAN HELP ANSWER MY QUESTIONS?

The information provided above in this “Question and Answer” format is for your convenience only and is merely a summary of the information contained in this Proxy Statement. We urge you to carefully read this entire Proxy Statement, including the documents we refer to herein. If you have any questions, need additional material, or require assistance in voting your shares, please feel free to contact Computershare Trust Company, N.A.. Stockholders may call Computershare Trust Company, N.A. toll-free at 800-368-5948.  

 

 

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RISK FACTORS

Risks Related to the Asset Sale Transaction

The announcement and pendency of the Asset Sale Transaction, whether or not consummated, may adversely affect our business.

The announcement and pendency of the Asset Sale Transaction, whether or not consummated, may adversely affect the trading price of our common stock, our business or our relationships with customers, suppliers and employees. In addition, pending the completion of the Asset Sale Transaction, we may be unable to attract and retain key personnel and the focus and attention of our management and employee resources may be diverted from operational matters during the pendency of the Asset Sale Transaction.

We cannot be sure if or when the Asset Sale Transaction will be completed.

The closing of the Asset Sale Transaction is subject to the satisfaction or waiver of various conditions, including Stockholder Approval. We cannot guarantee that the closing conditions set forth in the Asset Purchase Agreement will be satisfied. If we are unable to satisfy the closing conditions in Buyer’s favor or if other mutual closing conditions are not satisfied, Buyer will not be obligated to complete the Asset Sale Transaction. In the event that the Asset Sale Transaction is not completed, the announcement of the termination of the Asset Purchase Agreement may adversely affect the trading price of our common stock, our business and operations or our relationships with customers, suppliers and employees.

In addition, if the Asset Sale Transaction is not completed, our Board, in discharging its fiduciary obligations to our stockholders, may evaluate other strategic alternatives that may be available, which alternatives may not be as favorable to the Company and our stockholders as the Asset Sale Transaction.

The Asset Purchase Agreement limits our ability to pursue alternatives to the Asset Sale Transaction.

The Asset Purchase Agreement contains provisions that make it more difficult for us to sell our assets or engage in another type of acquisition transaction with a party other than Buyer. These provisions include a non-solicitation provision. These provisions could discourage a third party that might have an interest in acquiring all of, or substantially all of, our assets or our common stock from considering or proposing such an acquisition, even if that party were prepared to pay consideration with a higher value than the consideration to be paid by Buyer.

Our stockholders may not receive any of the proceeds of the Asset Sale Transaction

The proceeds from the Asset Sale Transaction will be paid directly to the Company and not our stockholders. As discussed elsewhere in this Proxy Statement, our Board will evaluate different alternatives for the use of the proceeds from the Asset Sale Transaction. The Company intends to use substantially all of the proceeds to pay transaction and other expenses of approximately $2.4 million; to repay its term loan with Bridge Bank; and to fund the continuing development and incremental investment in sales and marketing in support of its eValuator™ cloud-based pre- or post-bill coding analysis platform. The Board does not currently expect to declare a special dividend of any such proceeds to our stockholders.

We will incur significant expenses in connection with the Asset Sale Transaction, regardless of whether the Asset Sale Transaction is completed.

We expect to incur significant expenses related to the Asset Sale Transaction. These expenses include, but are not limited to, financial advisory and opinion fees and expenses, legal fees, accounting fees and expenses, certain employee expenses, filing fees, printing expenses and other related fees and expenses. Many of these expenses will be payable by us regardless of whether the Asset Sale Transaction is completed.

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Risks Related to Our Future Operations

Our operations will be curtailed and we will have reduced sources of revenue following the Asset Sale Transaction, which may negatively impact the value and liquidity of our common stock.

Upon the closing of the Asset Sale Transaction, our operations will be curtailed as our sources of revenue will be limited to our non-ECM Business related operations. Although our Board intends to use the proceeds from the Asset Sale Transaction to pay off its term loan with Bridge Bank and to fund the continuing development and incremental investment in sales and marketing in support of its eValuator™ cloud-based pre- or post-bill coding analysis platform, there can be no assurance that we will be successful at carrying out such alternatives or that they will be successful at generating revenue. A failure by us to secure additional sources of revenue following the closing of the Asset Sale Transaction could negatively impact the value and liquidity of our common stock.

We have discretion in the use of the net proceeds from the Asset Sale and may not use them effectively.

If the Asset Sale Transaction is consummated, the purchase price for the ECM Business will be paid directly to the Company. Our management will have discretion in the application of the net proceeds from the Asset Sale Transaction and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business and cause the price of our common stock to decline. Pending their use, we may invest the net proceeds in a manner that does not produce income or that loses value. Although our Board will evaluate various alternatives regarding the use of the proceeds from the Asset Sale Transaction, it has made no decision with respect to the specific use of proceeds other than as described above and has not committed to making any such decision by a particular date. This uncertainty may negatively impact the value and liquidity of our common stock.

We will continue to incur the expense of complying with public company reporting requirements following the closing of the Asset Sale Transaction.

After the Asset Sale Transaction, we will continue to be required to comply with the applicable reporting requirements of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), even though compliance with such reporting requirements is economically burdensome.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

We make forward-looking statements in this Proxy Statement and in other materials we file with the SEC or otherwise make public. In addition, our senior management makes forward-looking statements to analysts, investors, the media and others. Statements with respect to expected revenue, income, receivables, backlog, client attrition, acquisitions and other growth opportunities, sources of funding operations and acquisitions, the integration of our solutions, the performance of our channel partner relationships, the sufficiency of available liquidity, research and development, and other statements of our plans, beliefs or expectations are forward-looking statements. These and other statements using words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” and similar expressions also are forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement. The forward-looking statements we make are not guarantees of future performance, and we have based these statements on our assumptions and analyses in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such statements. Management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or historical earnings levels.

Among the factors that could cause actual future results to differ materially from our expectations are the risks and uncertainties described under “Risk Factors” set forth herein, and the other cautionary statements in other documents we file with the SEC, including the following:

·

the occurrence of any event, change or other circumstances that could give rise to the termination of the Asset Purchase Agreement;

·

our stockholders failing to approve the Asset Sale Proposal;

·

the failure of one or more conditions to the closing of the Asset Sale Transaction to be satisfied or waived by the applicable party;

·

an increase in the amount of costs, fees, expenses and other charges related to the Asset Purchase Agreement or Asset Sale Transaction;

·

risks arising from the diversion of management’s attention from our ongoing business operations;

·

risks associated with our ability to identify and realize business opportunities following the Asset Sale Transaction;

·

competitive products and pricing;

·

product demand and market acceptance;

·

entry into new markets;

·

new product and services development and commercialization;

·

key strategic alliances with vendors and channel partners that resell our products;

·

uncertainty in continued relationships with clients due to termination rights;

·

our ability to control costs;

·

availability, quality and security of products produced and services provided by third-party vendors;

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·

the healthcare regulatory environment;

·

potential changes in legislation, regulation and government funding affecting the healthcare industry;

·

healthcare information systems budgets;

·

availability of healthcare information systems trained personnel for implementation of new systems, as well as maintenance of legacy systems;

·

the success of our relationships with channel partners;

·

fluctuations in operating results;

·

our future cash needs;

·

the consummation of resources in researching acquisitions, business opportunities or financings and capital market transactions;

·

the failure to adequately integrate past and future acquisitions into our business;

·

critical accounting policies and judgments;

·

changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other standard-setting organizations;

·

changes in economic, business and market conditions impacting the healthcare industry and the markets in which we operate;

·

our ability to maintain compliance with the terms of our credit facilities;

·

our ability to maintain compliance with the continued listing standards of The NASDAQ Capital Market; and

·

the other factors discussed under the heading “Risk Factors” in this Proxy Statement.

Most of these factors are beyond our ability to predict or control. Any of these factors, or a combination of these factors, could materially affect our future financial condition or results of operations and the ultimate accuracy of our forward-looking statements. There also are other factors that we may not describe (generally because we currently do not perceive them to be material) that could cause actual results to differ materially from our expectations.

We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

19

THE SPECIAL MEETING

Time, Date and Place

The Special Meeting is scheduled to be held on February 21, 2020 at 10:00 a.m. Eastern Time at the offices of Troutman Sanders LLP, 600 Peachtree Street, NE, Suite 3000, Atlanta, Georgia 30308.

Purpose of the Special Meeting

At our Special Meeting, stockholders will act upon the matters outlined in the notice, including the following:

the Asset Sale Proposal; and

the Adjournment Proposal

Other than the proposals noted above, we do not expect a vote to be taken on any other matters at the Special Meeting or any adjournment or postponement thereof. However, if any other matters are properly presented at the Special Meeting or any adjournment or postponement thereof for consideration, the holders of the proxies solicited by this Proxy Statement will have discretion to vote on such matters in accordance with applicable law and their judgment.

Recommendation of Our Board

After careful consideration, our Board unanimously recommends that you vote:

Proposal One - FOR the Asset Sale Proposal; and

Proposal Two - FOR the Adjournment Proposal.

In reaching its decision to approve the Asset Purchase Agreement and the Asset Sale Transaction and to recommend that you vote in the manner noted above, our Board considered a wide range of material factors relating to the Asset Purchase Agreement and the Asset Sale Transaction and consulted with management and outside financial and legal advisors. For more information on these factors, see “Proposal One: Asset Sale Proposal - Reasons for the Asset Sale Transaction and Recommendation of Our Board” beginning on page 27 below.

Record Date and Voting Power

Only holders of our common stock as of the close of business on the Record Date will be entitled to receive notice of, and vote at, the Special Meeting or any adjournments or postponements of the Special Meeting, unless a new record date is fixed in connection with any such adjournment or postponement. At the close of business on the Record Date, there were 30,744,847 shares of our common stock outstanding and entitled to vote at the Special Meeting. No other shares of common stock were outstanding on the Record Date.

Each holder of our common stock issued and outstanding as of the close of business on the Record Date is entitled to one vote.

Quorum

The presence, in person or by proxy, of the holders of a majority of the shares of the stock issued, outstanding and entitled to vote at the Special Meeting is necessary to constitute a quorum to transact business. There must be a quorum for business to be conducted at the Special Meeting. However, even if a quorum does not exist, pursuant to the Adjournment Proposal, a majority of the shares on common stock present, in person or by proxy, at the Special Meeting may act to postpone or adjourn the Special Meeting to another place, date and time.

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Once a share of common stock is represented in person or by proxy at the Special Meeting, it will be counted for purposes of determining whether a quorum exists at the Special Meeting and any adjournment or postponement of the Special Meeting. However, if a new record date is set for the adjourned or postponed Special Meeting, a new quorum will have to be established. For purposes of determining the presence of a quorum, abstentions will be counted as present at the Special Meeting.

Required Vote

Proposal One: Asset Sale Proposal

The approval of the Asset Sale Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock as of the close of business on the Record Date.

Holders of our common stock may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the Asset Sale Proposal.

Proposal Two: Adjournment Proposal

The Adjournment Proposal will be approved, regardless of whether a quorum is present at the Special Meeting, by the affirmative vote of a majority of the shares of our common stock present, in person or by proxy, at the Special Meeting.

Holders of our common stock may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the Adjournment Proposal.

Abstentions and broker non-votes are counted to determine whether a quorum is present at the Special Meeting but are not counted as a vote in favor of or against a particular matter.

Voting by Stockholders

Your vote is very important to us and we hope that you will attend the Special Meeting. However, whether or not you plan to attend the Special Meeting, please vote by proxy in accordance with the instructions on your proxy card or voting instruction card (from your broker, bank or other nominee). Below are descriptions of how you may vote your shares depending on whether or not you are a stockholder of record or a beneficial owner.

Stockholders of Record

·

By Mail. Registered stockholders may vote their shares by signing, dating and mailing the enclosed proxy card using the enclosed postage pre-paid envelope. We strongly encourage you, however, to consider using the Internet or telephone voting options described below because these voting methods are faster and less costly than voting by mailing your signed and dated proxy card. If you vote via the Internet or telephone, you do not need to mail your proxy card.

·

By Internet. Registered stockholders may vote on the Internet at http://www.envisionreports.com/STRM. Please have your proxy card in hand when going online and follow the online instructions. Stockholders that vote by Internet must bear all costs associated with electronic access, including Internet access fees. Internet voting for registered stockholders is available up until 1:00 a.m., Eastern Time, on February 21, 2020, the day of the Special Meeting. The Internet voting procedures are designed to authenticate each stockholder by use of a control number to allow stockholders to vote their shares and to confirm that their instructions have been properly recorded. The control number can be found on the enclosed proxy card.

·

By Telephone. Registered stockholders also may vote by telephone by calling 800-652-VOTE (8683) (toll-free) and using any touch-tone telephone to transmit their votes up to 1:00 a.m., Eastern Time, on February 21, 2020, the day of the Special Meeting. Please have your proxy card in hand when you call and then follow the instructions. The control number necessary to vote your shares by telephone can be found on the enclosed proxy card.

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·

By Attending the Special Meeting. If you attend the Special Meeting and wish to vote in person, you may request a ballot when you arrive. Alternatively, if you are a registered stockholder and attend the Special Meeting, you may deliver your signed and dated proxy card in person. You must present a valid photo identification for admission to the Special Meeting.

Beneficial Owners

If your shares are held of record in the name of a bank, broker or other nominee you should follow the separate instructions that the nominee provides to you. Although most banks and brokers now offer Internet and telephone voting, availability and specific processes will depend on their voting arrangements.

If your shares are held of record in the name of your bank, broker or other nominee and you would like to vote in person at the Special Meeting, you must bring to the Special Meeting a letter from the nominee indicating that you were the beneficial owner of the shares on the Record Date and have been granted a proxy by your bank, broker or nominee to vote the shares. You also must present a valid photo identification for admission to the Special Meeting.

Abstentions

Abstentions will have the same effect as a vote “AGAINST” the Asset Sale Proposal.

Abstentions will have no effect on the outcome of the Adjournment Proposal.

For purposes of determining the presence of a quorum, abstentions will be counted as present at the Special Meeting.

Broker Non-Votes

Brokers, banks or other nominees who hold shares in “street name” for their customers have authority to vote those shares on “routine” proposals when they have not received instructions from the beneficial owners of such shares. However, brokers, banks or other nominees do not have the authority to vote shares they hold for their customers on “non-routine” proposals when they have not received instructions from the beneficial owners of such shares.

Broker non-votes occur when shares are held in “street name” through a broker, bank or other intermediary on behalf of a beneficial owner, and the broker submits a proxy but does not vote for a matter because the broker has not received voting instructions from the beneficial owner and (i) the broker does not have discretionary voting authority on the matter or (ii) the broker chooses not to vote on a matter for which it has discretionary voting authority. The Asset Sale Proposal and the Adjournment Proposal are considered “non-routine” matters. Therefore, if you do not provide voting instructions to your broker regarding the Asset Sale Proposal or the Adjournment Proposal, your broker will not be permitted to exercise voting authority to vote your shares on such proposals and will result in a broker non-vote.

Failure to Vote

If you are a stockholder of record and you do not vote at the Special Meeting in person or properly return your proxy card or vote over the Internet or by phone, your shares will not be voted at the Special Meeting, will not be counted as present in person or by proxy at the Special Meeting and will not be counted for purposes of determining whether a quorum exists.

As discussed above, brokers, banks and other nominees do not have discretionary voting authority with respect the Asset Sale Proposal. Accordingly, if you are the beneficial owner of shares held in “street name” and you do not issue voting instructions to your broker, bank or other nominee with respect to the Asset Sale Proposal, your shares will not be voted at the Special Meeting and will not be deemed present for any purpose at the Special Meeting related to such proposals, including for purposes of determining whether a quorum exists.

A failure to vote will have the same effect as a vote “AGAINST” the approval of the Asset Sale Proposal but will have no effect on the outcome of the Adjournment Proposal.

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Revocability of Proxies

A stockholder of record who has given a proxy may revoke it at any time prior to its exercise at the Special Meeting by (i) giving written notice of revocation to our Secretary, (ii) properly submitting a duly executed proxy bearing a later date, or (iii) appearing in person at the Special Meeting and voting in person.

If you are the beneficial owner of shares held through a broker, trustee, or other nominee, you must follow the specific instructions provided to you by your broker, trustee, or other nominee to change or revoke any instructions you already have provided to your broker, trustee, or other nominee.

Attendance at the Special Meeting, in and of itself, will not constitute a revocation of a proxy.

Adjournments

The Special Meeting may be adjourned for any purpose, including for the purpose of obtaining a quorum or soliciting additional votes if there are insufficient votes to authorize the Asset Sale Proposal. Any adjournment may be made without notice (if the adjournment is not for more than 30 days and a new record date is not fixed for the adjourned meeting), by an announcement made at the Special Meeting of the time, date and place of the adjourned meeting. Any adjournment will allow stockholders of record who have already sent in proxies to revoke them at any time prior to their use at the Special Meeting, as adjourned.

Solicitation of Proxies

Our Board is soliciting proxies for the Special Meeting of Stockholders (the “Special Meeting”) to be held at 10:00 a.m. Eastern Time on February 21, 2020 at the offices of Troutman Sanders LLP, 600 Peachtree Street, NE, Suite 3000, Atlanta, Georgia 30308. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters brought before the Special Meeting.

We will bear the expense of soliciting proxies. These expenses will include the expense of preparing and mailing proxy materials for the Special Meeting. We will reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable charges and expenses incurred in forwarding soliciting materials to their clients. We may conduct further solicitation personally or telephonically through our directors, officers, and employees, none of whom will receive additional compensation for assisting with the solicitation.

Questions and Additional Information

If you have any questions, need additional material, or require assistance in voting your shares, please feel free to contact Computershare Trust Company, N.A.. Stockholders may call Computershare Trust Company, N.A. toll-free at 800-368-5948.  

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PROPOSAL ONE: ASSET SALE PROPOSAL

Information about the Parties

The Company

Incorporated in 1989, we are a leading provider of integrated solutions, technology-enabled services and analytics to support revenue cycle optimization for healthcare enterprises throughout the United States and Canada. The focus of our SaaS-based healthcare information technology is to help optimize mid-revenue cycle processes for providers, from charge capture to bill drop. We work with our clients as full-service revenue integrity partners organization-wide. Our eValuator™ pre-bill coding analysis platform enables hospitals, clinics and physician practices to analyze every coded patient record before it is billed to payors, improving revenue integrity and decreasing denials. Our comprehensive suite of solutions and services includes: enterprise content management, business analytics, integrated workflow systems, clinical documentation improvement, automated pre-bill coding analysis and pre- or post-bill manual auditing services.

We are incorporated under the laws of the State of Delaware. Our executive office is located at 1175 Peachtree Street, NE, 10th Floor, Atlanta, Georgia 30361. Our telephone number is (888) 997‑8732. Our website is http://www.streamlinehealth.net. The information contained on the Company’s website is not incorporated into this proxy statement.

Our common stock is listed on The NASDAQ Capital Market under the ticker symbol “STRM”.

Buyer

Hyland Software, Inc., based in Westlake, Ohio, provides connected healthcare solutions that harness unstructured content at all corners of the enterprise and link it to core clinical and business applications such as electronic medical records (EMR) and enterprise resource planning (ERP) systems. Hyland is the only technology partner that offers a full suite of content services and enterprise imaging tools, bringing documents, medical images and other clinically rich data to the healthcare stakeholders that need it most. This comprehensive view of patient information accelerates business processes, streamlines clinical workflows and improves clinical decision making. Hyland’s website is http://www.Hyland.com. The information contained on Hyland’s website is not incorporated into this proxy statement.

General Description of the Asset Sale Transaction

On December 17, 2019, we entered into the Asset Purchase Agreement with Buyer pursuant to which we have agreed, subject to certain terms conditions contained in the Asset Purchase Agreement, including Stockholder Approval, to sell to Buyer the ECM Business. We do not believe that the sale of the ECM Business, under Delaware law, would be deemed a sale of all, or substantially all, of our assets, to the Buyer on the terms and subject to the conditions set forth in the Asset Purchase Agreement, but are seeking stockholder approval regarding the sale of the ECM Business because the Board considered the action appropriate, and strongly desired the input of the Company’s stockholders, given the historical significance of the line of business. Under the terms of the Asset Purchase Agreement, we will retain certain specified assets, including all of our cash and cash equivalents, certain contracts that are not expressly assumed by Buyer, all intellectual property owned by us other than intellectual property owned (in whole or in part) by or exclusively licensed to us and related to, used or held exclusively for use in connection with the ECM Business, and certain other assets specified in the Asset Purchase Agreement, and will also retain certain specified liabilities, including all liabilities with respect to trade and other accounts payable, indebtedness, taxes arising before the closing of the Asset Sale Transaction, change of control bonus or severance obligations as well as any liabilities related to the acceleration of vesting of equity awards awarded under our incentive compensation plans, bulk sales laws, and warranties and services provided by us.

We are retaining, and will continue to operate and manage our eValuator Coding Analysis Platform, CDI and Abstracting solutions, Financial Management solutions, Audit Services, and custom integration and training services following the closing of the Asset Sale Transaction.

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For more information on the above, please see “Proposal One: Asset Sale Proposal - Asset Purchase Agreement - Purchase and Sale of Assets” and “Proposal One: Asset Sale Proposal - Asset Purchase Agreement - Assumption and Transfer of Liabilities” beginning on pages 38 and 39 respectively.

A copy of the Asset Purchase Agreement is attached as Annex A to this Proxy Statement. You are encouraged to read the Asset Purchase Agreement carefully and in its entirety.

Consideration for the Asset Sale Transaction

As consideration for the Asset Sale Transaction, Buyer has agreed to pay us $16 million in cash at closing, subject to certain adjustments as set forth in the Asset Purchase Agreement.

Background of the Asset Sale Transaction

The Board and senior management of the Company, with the assistance of the Company’s outside legal and financial advisors, regularly review the Company’s long-term strategic plan with the goal of maximizing stockholder value.  From time to time, the Board has explored the disposition of the Company’s ECM Business as it continued to promote and invest in the development of its newer products and solutions.  Furthermore, the Board has considered that the sale of the ECM Business would enable the Company to focus its resources on growing and developing its eValuator product, which the Company believes has greater long-term market potential.  While the Company has explored the sale of the ECM Business to other potential parties, the Buyer has been the party that has continually expressed the greatest interest in this business and the Board believes that the Buyer is the most logical purchaser for these assets and will be able to derive better synergies from this business due to its related portfolio of products.

 

The Company and the Buyer have engaged in discussions regarding the sale of the ECM Business for several years.  In late 2017, Hyland delivered a non-binding indication of interest to the Company to purchase the ECM Business.  While the parties engaged in negotiations regarding a proposed transaction and exchanged information regarding the business, the parties were unable to agree on a valuation of the business and the negotiations paused in the spring of 2018.

 

Throughout the course of the next year, the parties continued to remain in contact with one another.  In August and September 2019, the parties once again resumed negotiations. On September 9, 2019, the Company and the Buyer entered into a new confidentiality agreement and the Buyer was provided access to certain confidential information about the Company.  At a meeting held on September 6, 2019 and again at its regularly scheduled meeting on September 19, 2019, the Board considered the sale of the ECM Business as one of several strategic alternatives.  In late September 2019, the Company received a non-binding letter of intent from the Buyer with a proposed purchase price for the ECM Business of $15 million with a holdback of 10% of the purchase price to satisfy any potential claims.  At this time, the Company was also engaged in discussions regarding a potential equity raise using its common stock and negotiations with the holders of its Series A Convertible Preferred Stock regarding a possible redemption.  After evaluating the various alternatives, the Board decided to move forward with its equity raise and was able to raise $9.7 million in a private placement through the sale of its common stock, the proceeds of which were used to redeem all of the Company’s outstanding preferred stock and provide additional working capital for the Company.

 

With an improved balance sheet and a simpler capital structure, the Board turned its attention to the interest of the Buyer to purchase the ECM Business.  At its meeting held on October 16, the Board discussed various strategic alternatives and authorized management to resume negotiations with the Buyer and authorized the hiring of a financial advisor to assist in the negotiations of the transaction and to provide a fairness opinion on the transaction, if successful in reaching terms with the Buyer.  The Board was familiar with Houlihan Lokey through prior experience with the ECM Business, specifically, and engaged Houlihan Lokey to serve as its financial advisor with respect to the sale of the ECM Business on October 17, 2019.  Following its engagement and at the request of the Board, representatives of Houlihan Lokey engaged in discussions with representatives of the Buyer regarding the proposed purchase price of the ECM Business, the contingencies related to a closing, including seeking stockholder approval, the Buyer’s due diligence process and a proposed timeline for a transaction.

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On October 24, 2019, the Buyer delivered an updated non-binding letter of intent with a revised purchase price of $16 million.  The proposed letter of intent also provided for an escrow account equal to 5% of the purchase price as opposed to a holdback, a 15-month survival period for the representations and warranties, other customary conditions, including completion of satisfactory due diligence, and approval of the transaction by the Company’s stockholders.  Following discussion with the assistance of its outside advisors, Houlihan Lokey and Troutman Sanders LLP, its outside counsel, the Board approved the execution of the letter of intent with Hyland on October 24, 2019.

   

The Buyer immediately commenced due diligence, which continued over the course of the next several weeks.  On November 1, 2019, the Buyer delivered a draft of the Asset Purchase Agreement.  Over the course of the next few weeks, the parties and their respective counsel (Troutman Sanders for the Company and Baker & Hostetler LLP (“BakerHostetler”) for the Buyer) exchanged drafts of the Asset Purchase Agreement and worked on the preparation of the disclosure schedules to the agreement.  The management teams of the parties held several meetings during this time. Although information was exchanged on a continuous basis, and conversations were had among the Company, Houlihan Lokey, and the Buyer on a regular (daily) basis, the Company notes the following meetings due to their length, management team engagement and critical nature of the topics discussed:

 

·

On November 4, 2019, members of the Company’s management team met with members of the Buyer’s management team with respect to both (i) open research and development efforts, and (ii) open technology projects for customers;

 

·

On November 6, 2019, members of the Company’s management team met with members of the Buyer’s management team with respect to technology and accounting matters;

 

·

On November 21, 2019, members of the Company’s management team met with members of the Buyer’s management team to discuss open matters, including operating, accounting and reporting, and transitional services matters; and

 

·

On December 5, 2019, members of the Company’s management met with members of the Buyer’s management team to discuss (i) open technology projects for customers, (ii) status of servers in the Company’s data room, and (iii) third party vendors embedded in the Company’s software,

 

On November 22, 2019, the parties’ respective legal counsel attended a conference call in which various issues relating to the Asset Purchase Agreement and the disclosure schedules were discussed.  The parties’ counsel discussed the Company’s indemnification obligations, transition services to be provided by the Company following closing, the timeline for stockholder approval, the representations and warranties and various matters related to the customer contracts to be assigned.  A revised draft of the Asset Purchase Agreement was provided by BakerHostetler on November 26, 2019.

   

At its regular quarterly Board meeting on December 10, 2019, management and Troutman Sanders discussed the transaction with the Board and provided an overview of the material terms of the transaction.  On December 13, 2019, the parties and their counsel participated in an all hands call during which the parties attempted to resolve the outstanding remaining business issues in order to proceed to a signing of a definitive agreement.

 

On December 14, 2019, the Board convened a special telephonic meeting. Supporting materials, including a substantially final version of the Asset Purchase Agreement and Houlihan Lokey’s financial analyses relating to the ECM Business and a draft of Houlihan Lokey’s opinion, as to the fairness, from a financial point of view, to the Company of the consideration to be received by Seller in the proposed Asset Sale Transaction, were distributed prior to the meeting. At the December 14, 2019 meeting, management reviewed with the Board the material terms of, and principal business issues relating to, the transaction.  Representatives of Troutman Sanders then reviewed with the Board the material legal terms in the asset purchase agreement as well as other legal considerations, including a proposed timeline for obtaining stockholder approval, and answered questions from the Board.

   

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At the request of the Board, Houlihan Lokey then reviewed and discussed its financial analyses with respect to the ECM Business and the proposed Asset Sale Transaction. Thereafter, at the request of the Board, Houlihan Lokey orally rendered its opinion to the Board (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the Board dated December 14, 2019), as to, as of such date, the fairness, from a financial point of view, to the Company of the consideration to be received by Seller in exchange for the ECM Business.

Following discussion, the Board called for a vote on the approval of, among other matters, the Asset Sale Transaction and the transactions contemplated by the Asset Purchase Agreement and adopted resolutions (a) determining that the Asset Purchase Agreement and the transactions contemplated by Asset Purchase Agreement are fair to and in the best interests of the Company and its stockholders, (b) declaring it advisable to enter into the Asset Purchase Agreement and approving the execution, delivery, and performance of the Asset Purchase Agreement, (c) approving and declaring advisable the transactions contemplated by the Asset Purchase Agreement, and (d) resolving to recommend approval by the Company’s stockholders of the transactions contemplated by the Asset Purchase Agreement.  The transaction was approved unanimously by the Company’s Board.

 

On December 16, 2019, the parties exchanged substantially final drafts of the Asset Purchase Agreement, the ancillary agreements and disclosure schedules.

 

On December 17, 2019, the Buyer’s Board of Directors met to review and approve the transaction. On December 17, 2019, following approval by the Buyer’s Board, the Company and the Buyer finalized and executed the Asset Purchase Agreement, and the parties publicly announced the Asset Sale Transaction prior to the market opening on December 18, 2019.

 

Reasons for the Asset Sale Transaction and Recommendation of Our Board

In reaching its decision to approve the Asset Purchase Agreement and the Asset Sale Transaction, and to recommend that our stockholders vote to approve the Asset Sale Proposal, the Board consulted with management and outside financial and legal advisors. The Board considered a wide range of material factors relating to the Asset Purchase Agreement and the proposed Asset Sale Transaction, many of which the Board believed supported its decision, including the following:

·

the value of the consideration to be received by us pursuant to the Asset Purchase Agreement;

·

our Board’s belief that the Asset Sale Transaction was more favorable to our stockholders than any other alternative reasonably available to the Company and our stockholders, including the alternatives of retaining our current business based upon:

o

the Board’s knowledge of the current and prospective environment in which the Company operates, the competitive environment, the Company’s overall strategic position, and the challenges attendant to improving the Company’s financial performance in order to maximize stockholder value and the likely effect of these factors on the Company’s sustainability as a public company and strategic options;

o

the Board’s understanding of our business, operations, management, financial condition, earnings and prospects;

·

the consideration we receive in the Asset Sale Transaction would provide us with substantial cash to provide liquidity and certainty of value to the Company immediately upon the closing of the Asset Sale Transaction, which will permit us to continue to invest in and expand our eValuator Coding Analysis Platform, CDI and Abstracting solutions, Financial Management solutions, Audit Services, and custom integration and training services;

·

the Asset Sale Transaction provides substantial working capital without diluting existing stockholders;

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·

the financial analysis reviewed by Houlihan Lokey with the Board as well as the oral opinion of Houlihan Lokey rendered to the Board on December 14, 2019 (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the Board dated December 14, 2019), as to, as of such date, the fairness, from a financial point of view, to the Company of the consideration to be received by Seller in exchange for the Purchased Assets subject to the Assumed Liabilities in the Asset Sale Transaction pursuant to the Asset Sale Agreement;

·

the anticipated time to close the Asset Sale Transaction and the risk that if we did not accept Buyer’s offer at the time that we did, the Board might not have had another opportunity to do so;

·

the Asset Sale Transaction will be subject to the approval of the holders of a majority of our outstanding shares of common stock;

·

our stockholders will continue to own stock in our company and potentially benefit from future earnings; and

·

the terms of the Asset Purchase Agreement were negotiated at arms-length and believed by our Board to be fair to us and our stockholders.

Our Board also considered and balanced against the potential benefits of the Asset Sale Transaction a number of potentially adverse factors concerning the Asset Sale Transaction, including the following:

·

the fact that, although the Company will continue to exercise control and supervision over its operations prior to closing, the Asset Purchase Agreement prohibits the Company from taking a number of actions relating to the conduct of its business prior to the closing without Buyer’s consent, which may delay or prevent the Company from undertaking business opportunities that may arise during the pendency of the Asset Sale Transaction, whether or not the Asset Sale Transaction is completed;

·

the conditions placed on our ability to solicit or respond to Acquisition Proposals as described under “Proposal One: Asset Sale Proposal - Asset Purchase Agreement - Covenants - No Solicitation” beginning on page 42;

·

the risk that there is no assurance that all conditions to the parties’ obligations to complete the Asset Sale Transaction will be satisfied or waived, and as a result, it is possible that the Asset Sale Transaction could be delayed or might not be completed;

·

the risks and costs to the Company if the Asset Sale Transaction does not close, including the diversion of management and employee attention, potential employee attrition and the potential effect on business and customer relationships;

·

the risk of disruption to our business and customer reaction as a result of the public announcement of the Asset Sale Transaction; and

·

the risk that accompanies being a public company with relatively low revenues while we continue to try to grow our other lines of business without the income associated with the ECM Business.

The foregoing discussion of the factors considered by our Board is not intended to be exhaustive, but does set forth the principal factors considered by the Board. The Board collectively reached the conclusion to approve the Asset Purchase Agreement and the Asset Sale Transaction in light of the various factors described above, as well as other factors that the Board felt were appropriate. In view of the wide variety of factors considered by the Board in connection with its evaluation of the Asset Sale Transaction and the complexity of these matters, the Board did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision. Rather, the Board made its recommendation based on the totality of the information presented to, and the investigation conducted by, the Board. In considering the factors discussed above, individual directors may have given different weights to different factors.

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After evaluating these factors and consulting with its outside legal counsel and financial advisor, all members of the Board approved the Asset Purchase Agreement and the Asset Sale Transaction and determined that the Asset Sale Transaction is advisable, fair to and in the best interests of the Company and our stockholders.

Accordingly, our Board recommends that stockholders vote “FOR” the Asset Sale Proposal.

Opinion of the Financial Advisor to the Company

On December 14, 2019, Houlihan Lokey Capital, Inc. (“Houlihan Lokey”) rendered its oral opinion to the Board (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the Board dated the same date) as to, as of December 14, 2019, the fairness, from a financial point of view, to the Company of the consideration to be received by the Company and Streamline Health, Inc. (collectively, “Seller”) in the Asset Sale Transaction pursuant to the Asset Purchase Agreement in exchange for the  assets as described in the Asset Purchase Agreement (the “Purchased Assets”) relating to the ECM Business, subject to certain liabilities of Seller as described in the Asset Purchase Agreement to be assumed by Buyer in the Asset Sale Transaction (the “Assumed Liabilities”).

 

Houlihan Lokey’s opinion was directed to the Board (in its capacity as such), and only addressed the fairness, from a financial point of view, to the Company of the consideration to be received by Seller in exchange for the Purchased Assets subject to the Assumed Liabilities in the Asset Sale Transaction pursuant to the Asset Sale Agreement and did not address any other aspect or implication of the Asset Sale Transaction, any related transaction or any other agreement, arrangement or understanding entered into in connection therewith or otherwise. The summary of Houlihan Lokey's opinion in this Proxy Statement is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex B to this Proxy Statement and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. However, neither Houlihan Lokey's written opinion nor the summary of its opinion and the related analyses set forth in this Proxy Statement is intended to be, and they do not constitute, a recommendation to the Board, any security holder of the Company or any other person as to how such person should vote or act with respect to any matter relating to the Asset Sale Transaction or otherwise.

 

In connection with its opinion, Houlihan Lokey made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances.  Among other things, Houlihan Lokey:

 

1. reviewed a draft, received by Houlihan Lokey on December 13, 2019, of the Asset Purchase Agreement;

 

2.

reviewed certain publicly available business and financial information relating to the ECM Business that Houlihan Lokey deemed to be relevant;

 

3.

reviewed certain information relating to the historical, current and future operations, financial condition and prospects of the ECM Business made available to Houlihan Lokey by Seller, including financial projections prepared by the management of Seller relating to the ECM Business for the fiscal years ending January 31, 2020, through January 31, 2025 (the “Projections”);

 

4.

spoke with certain members of the management of Seller and certain of its representatives and advisors regarding the business, operations, financial condition and prospects of the ECM Business, the Asset Sale Transaction and related matters;

 

5.

compared the financial and operating performance of the ECM Business with that of companies with publicly traded equity securities that Houlihan Lokey deemed to be relevant; and

 

6.

conducted such other financial studies, analyses and inquiries and considered such other information and factors as Houlihan Lokey deemed appropriate.

 

For purposes of its analyses and opinion, with the Company’s consent, Houlihan Lokey evaluated the fairness, from a financial point of view, to the Company of the consideration being received by Seller in the Asset Sale Transaction pursuant

29

to the Asset Purchase Agreement as though all of the Purchased Assets and Assumed Liabilities were being transferred, and all of the consideration was being received, by the Company. 

 

Houlihan Lokey relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to it, discussed with or reviewed by it, or publicly available, and did not assume any responsibility with respect to such data, material and other information.  In addition, management of Seller advised Houlihan Lokey, and Houlihan Lokey assumed, that the Projections were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of the ECM Business.  At the Company’s direction, Houlihan Lokey assumed that the Projections provided a reasonable basis on which to evaluate the ECM Business and the Asset Sale Transaction and Houlihan Lokey, at the Company’s direction, used and relied upon the Projections for purposes of its analyses and opinion.  Houlihan Lokey expressed no view or opinion with respect to the Projections or the assumptions on which they were based.  Houlihan Lokey relied upon and assumed, without independent verification, that there had been no change in the businesses, assets, liabilities, financial condition, results of operations, cash flows or prospects of the ECM Business since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Houlihan Lokey that would be material to its analyses or opinion, and that there was no information or any facts that would make any of the information reviewed by Houlihan Lokey incomplete or misleading.  In addition, for purposes of its analyses and opinion, Houlihan Lokey with the Company’s agreement assumed that the Purchased Assets included all of the assets or rights necessary and sufficient to achieve the Projections subject to the Assumed Liabilities in the amounts and at the times contemplated thereby and did not include any assets or rights that Seller or any of its affiliates required to own or operate any other businesses or operations of Seller or such affiliates (the “Retained Businesses”) as currently conducted or as contemplated by Seller and its affiliates would be conducted by Seller and its affiliates in the future, that upon the consummation of the Asset Sale Transaction, neither Seller nor any of its affiliates would retain or otherwise be responsible for the Assumed Liabilities and that the Asset Sale Transaction would not otherwise impair the ability of Seller and its affiliates to own and operate the Retained Businesses as currently conducted, or as contemplated by management of Seller and its affiliates would be conducted in the future. 

 

Houlihan Lokey relied upon and assumed, without independent verification, that (a) the representations and warranties of all parties to the Asset Purchase Agreement and all other related documents and instruments referred to therein were true and correct, (b) each party to the Asset Purchase Agreement and such other related documents and instruments would fully and timely perform all of the covenants and agreements required to be performed by such party, (c) all conditions to the consummation of the Asset Sale Transaction would be satisfied without waiver thereof, and (d) the Asset Sale Transaction would be consummated in a timely manner in accordance with the terms described in the Asset Purchase Agreement and such other related documents and instruments, without any amendments or modifications thereto. Houlihan Lokey relied upon and assumed, without independent verification, that (i) the Asset Sale Transaction would be consummated in a manner that complies in all respects with all applicable federal and state statutes, rules and regulations, and (ii) all governmental, regulatory and other consents and approvals necessary for the consummation of the Asset Sale Transaction would be obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would have an effect on the Asset Sale Transaction, the ECM Business, Seller or Buyer or any expected benefits of the Asset Sale Transaction that would be material to Houlihan Lokey’s analyses or opinion. Houlihan Lokey expressed no view or opinion as to any adjustments to the consideration pursuant to the Asset Purchase Agreement or the amount or allocation of the payments (“Prepayments”) received by Seller prior to the date of the Asset Purchase Agreement as advance payments for maintenance and support services and relied upon and assumed, without independent verification, on Seller’s evaluation and assessment of the Prepayments, the allocation thereof and the adjustment to the consideration pursuant to the Asset Purchase Agreement in respect thereof.  Houlihan Lokey also relied upon and assumed, without independent verification, at the Company’s direction, that any other adjustments to the consideration pursuant to the Asset Purchase Agreement or otherwise would not be material to its analyses or opinion.  In addition, Houlihan Lokey relied upon and assumed, without independent verification, that the final form of the Asset Purchase Agreement would not differ in any respect material to Houlihan Lokey’s financial analyses or opinion from the draft of the Asset Purchase Agreement identified above. 

 

Furthermore, in connection with its opinion, Houlihan Lokey was not requested to, and did not, make any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of the ECM Business, Seller, Buyer or any other party, and Houlihan Lokey was not

30

provided with any such appraisal or evaluation.  Houlihan Lokey did not estimate, and expressed no opinion regarding, the liquidation value of any entity or business. Houlihan Lokey did not undertake any independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which the ECM Business, Seller or Buyer was or may have been a party or was or may have been subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which the ECM Business, Seller or Buyer was or may have been a party or was or may have been subject.    

 

Houlihan Lokey’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Houlihan Lokey as of, the date of its opinion.  Houlihan Lokey did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to its attention after the date of its opinion.

 

Houlihan Lokey’s opinion was furnished for the use of the Board (in its capacity as such) in connection with its evaluation of the Asset Sale Transaction and may not be used for any other purpose without Houlihan Lokey’s prior written consent. Houlihan Lokey’s opinion was not intended to be, and does not constitute, a recommendation to the Board, any security holder or any other party as to how to act or vote with respect to any matter relating to the Asset Sale Transaction or otherwise.

 

Houlihan Lokey’s opinion only addressed whether the consideration to be received by Seller in the Asset Sale Transaction pursuant to the Asset Purchase Agreement was fair, from a financial point of view, to the Company in the manner set forth in the opinion and did not address any other aspect or implication of the Asset Sale Transaction or any aspect or implication of any action, agreement, arrangement or understanding entered into in connection therewith or otherwise.  Houlihan Lokey was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the Board, Seller, its security holders or any other party to proceed with or effect the Asset Sale Transaction, (ii) the terms of any arrangements, understandings, agreements or documents related to, or the form, structure or any other portion or aspect of, the Asset Sale Transaction or otherwise (other than the consideration to the extent expressly specified in the opinion), (iii) the fairness of any portion or aspect of the Asset Sale Transaction to the holders of any class of securities, creditors or other constituencies of the ECM Business, Seller, Buyer or to any other party, (iv) the relative merits of the Asset Sale Transaction as compared to any alternative business strategies or transactions that might have been available for the ECM Business, Seller, Buyer or any other party, (v) the fairness of any portion or aspect of the Asset Sale Transaction to any one class or group of Seller’s, Buyer’s or any other party’s security holders or other constituents vis-à-vis any other class or group of Seller’s, Buyer’s or such other party’s security holders or other constituents  (including, without limitation, the allocation of any consideration amongst or within such classes or groups of security holders or other constituents), (vi) whether or not the ECM Business, Seller, Buyer, their respective security holders or any other party is receiving or paying reasonably equivalent value in the Asset Sale Transaction, (vii) the solvency, creditworthiness or fair value of the ECM Business, Seller, Buyer or any other participant in the Asset Sale Transaction, or any of their respective assets, under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, or (viii) the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation to or consideration payable to or received by any officers, directors or employees of any party to the Asset Sale Transaction, any class of such persons or any other party, relative to the consideration or otherwise. Furthermore, Houlihan Lokey did not express any opinion, counsel or interpretation regarding matters that require legal, environmental, regulatory, accounting, insurance, tax or other similar professional advice.  Houlihan Lokey assumed that such opinions, counsel or interpretations had been or would be obtained from the appropriate professional sources. Furthermore, Houlihan Lokey relied, with the consent of the Board, on the assessments by the Board, Seller, Buyer and their respective advisors, as to all legal, environmental, regulatory, accounting, insurance, tax and other similar matters with respect to the ECM Business, Seller, Buyer and the Asset Sale Transaction or otherwise.

 

In preparing its opinion to the Board, Houlihan Lokey performed a variety of analyses, including those described below.  The summary of Houlihan Lokey’s analyses is not a complete description of the analyses underlying Houlihan Lokey’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytical methods employed and the adaptation and application of these methods to the unique facts and circumstances presented.  As a consequence, neither Houlihan Lokey’s opinion nor its underlying analyses is readily susceptible to summary description.  Houlihan Lokey arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation,

31

conclusions from or with regard to any individual analysis, methodology or factor. While the results of each analysis were taken into account in reaching Houlihan Lokey’s overall conclusion with respect to fairness, Houlihan Lokey did not make separate or quantifiable judgments regarding individual analyses. Accordingly, Houlihan Lokey believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, methodologies and factors, without considering all analyses, methodologies and factors, could create a misleading or incomplete view of the processes underlying Houlihan Lokey’s analyses and opinion.

In performing its analyses, Houlihan Lokey considered general business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. No company or business used in Houlihan Lokey’s analyses for comparative purposes is identical to the ECM Business, and an evaluation of the results of those analyses is not entirely mathematical.    The estimates contained in the Projections and the implied reference range values indicated by Houlihan Lokey’s analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond the control of the Company.  Much of the information used in, and accordingly the results of, Houlihan Lokey’s analyses are inherently subject to substantial uncertainty.

   

Houlihan Lokey’s opinion was only one of many factors considered by the Board in evaluating the Asset Sale Transaction.  Neither Houlihan Lokey’s opinion nor its analyses were determinative of the consideration or of the views of the Board with respect to the Asset Sale Transaction or the consideration.  The type and amount of consideration payable in the Asset Sale Transaction pursuant to the Asset Purchase Agreement were determined through negotiation between the Company and the other parties to the Asset Sale Transaction, and the decision to enter into the Asset Purchase Agreement was solely that of the Board. 

Financial Analyses

 

The following is a summary of the material financial analyses performed by Houlihan Lokey in connection with the preparation of its opinion and reviewed with the Board on December 14, 2019. The order of the analyses does not represent relative importance or weight given to those analyses by Houlihan Lokey.  The analyses summarized below include information presented in tabular format.  The tables alone do not constitute a complete description of the analyses.  Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying, and the assumptions, qualifications and limitations affecting, each analysis, could create a misleading or incomplete view of Houlihan Lokey’s analyses.

For purposes of its analyses, Houlihan Lokey reviewed a number of financial metrics, including:

·

Enterprise Value — generally, the value as of a specified date of the relevant company’s outstanding equity securities (taking into account outstanding options and other securities convertible, exercisable or exchangeable into or for equity securities of the company) plus the amount of debt outstanding, preferred stock and non-controlling interests, and less the amount of cash and cash equivalents on its balance sheet.

·

Adjusted EBITDA — generally, the amount of the relevant company’s earnings before interest, taxes, depreciation and amortization for a specified time period, as adjusted for certain non-recurring items. 

Unless the context indicates otherwise, enterprise values used in the selected companies analysis described below were calculated using the closing price of the common stock of the selected companies listed below as of December 12, 2019.  The estimates of future financial performance of the ECM Business relied upon for the financial analyses described below were based on the Projections, and the estimates of the future financial performance of the selected companies listed below were based on publicly available research analyst estimates for those companies. 

 

Selected Companies Analysis.  Houlihan Lokey reviewed certain financial data for selected companies with publicly traded equity securities that Houlihan Lokey deemed relevant.   The financial data reviewed included: 

 

32

·

Enterprise value as a multiple of estimated revenue for the next fiscal year (as of the date of the Houlihan Lokey’s analysis and opinion), or “NFY Revenue”;

·

Enterprise value as a multiple of estimated adjusted EBITDA for the next fiscal year (as of the date of the Houlihan Lokey’s analysis and opinion), or “NFY Adjusted EBITDA”;

·

Enterprise value as a multiple of estimated revenue for the year following the next fiscal year (as of the date of the Houlihan Lokey’s analysis and opinion), or “NFY + 1 revenue”; and

·

Enterprise value as a multiple of estimated adjusted EBITDA for the year following the next fiscal year (as of the date of the Houlihan Lokey’s analysis and opinion), or “NFY + 1 Adjusted EBITDA.”

The selected companies and resulting low, high median and mean multiples were:

 

 

Allscripts Healthcare Solutions, Inc.

Cerner Corporation

CompuGroup Medical Societas Europaea

Computer Programs and Systems, Inc.

HealthStream, Inc.

HMS Holdings Corp.

NextGen Healthcare, Inc.

R1 RCM Inc.

 

 

 

 

Enterprise Value /

 

 

NFY Revenue

 

NFY

Adj. EBITDA

 

NFY+1 Revenue

 

NFY+1

Adj. EBITDA

Low

 

1.36x

 

8.1x

 

1.30x

 

7.4x

High

 

4.51x

 

17.7x

 

4.31x

 

15.1x

Median

 

2.46x

 

13.0x

 

2.42x

 

10.4x

Mean

 

2.81x

 

13.0x

 

2.68x

 

11.0x

 

 

Taking into account the results of the selected companies analysis, Houlihan Lokey applied selected multiple ranges of 1.00x to 1.25x to the ECM Business’ estimated NFY revenue, 4.0x to 5.0x to the ECM Business’ estimated NFY Adjusted EBITDA, 1.00x to 1.25x to the ECM Business’ estimated NFY+1 revenue and 4.0x to 5.0x to the ECM Business’ estimated NFY+1 Adjusted EBITDA.

 

To take into account the adjustment to the Consideration pursuant to the Asset Purchase Agreement for the Prepayments, Houlihan Lokey added approximately $2.8 million to each of the implied enterprise value reference ranges indicated by the selected companies analysis.  Inclusive of such addition, the selected companies analysis indicated implied adjusted enterprise value reference ranges of the ECM Business of approximately $11.7 million to $13.9 million based on estimated NFY revenue, approximately $13.0 million to $15.6 million based on estimated NFY Adjusted EBITDA, approximately $11.4 million to $13.6 million based on estimated NFY+1 revenue, and approximately $12.8 million to $15.4 million based on estimated NFY+1 Adjusted EBITDA, as compared to the consideration of $16 million in the Asset Sale Transaction pursuant to the Asset Purchase Agreement. 

Discounted Cash Flow Analysis.  Houlihan Lokey performed a discounted cash flow analysis of the ECM Business based on the Projections.  Houlihan Lokey applied perpetual growth rates ranging from -2.0% to 2.0% and discount rates ranging from 15.0% to 16.0%.  To take into account the adjustment to the Consideration pursuant to the Asset Purchase Agreement for the Prepayments, Houlihan Lokey added approximately $2.8 million to the implied enterprise value reference range indicated by the discounted cash flow analysis.  Inclusive of such addition, the discounted cash flow analysis indicated an

33

implied adjusted enterprise value reference range of the ECM Business of approximately $8.1 million to $9.0 million, as compared to the consideration of $16 million in the Asset Sale Transaction pursuant to the Asset Purchase Agreement.

Other Matters

The Company engaged Houlihan Lokey as its financial advisor based on Houlihan Lokey’s experience and reputation.  Houlihan Lokey is regularly engaged to provide investment banking and financial advisory services in connection with mergers and acquisitions, financings, and financial restructurings.  Pursuant to Houlihan Lokey’s engagement by the Company, Houlihan Lokey will be entitled to a transaction fee currently estimated to be approximately $1.5 million upon the consummation of the Asset Sale Transaction.  Houlihan Lokey became entitled to fees of $25,000 per month commencing on October 1, 2019, half of which fees are creditable to the extent previously paid on a timely basis against the transaction fee, and an opinion fee of $400,000 upon the rendering of its opinion to the Board, which opinion fee is fully creditable to the extent previously paid against the transaction fee.  In addition, the Company also agreed to reimburse Houlihan Lokey for certain expenses and to indemnify Houlihan Lokey and certain related parties for certain potential liabilities and arising out of Houlihan Lokey’s engagement.

 

In the ordinary course of business, certain of Houlihan Lokey’s employees and affiliates, as well as investment funds in which they may have financial interests or with which they may co-invest, may acquire, hold or sell, long or short positions, or trade, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, the ECM Business, Seller, Buyer or any other party that may be involved in the Asset Sale Transaction and their respective affiliates or security holders or any currency or commodity that may be involved in the Asset Sale Transaction.

 

Houlihan Lokey and/or certain of its affiliates in the past provided and are currently providing investment banking, financial advisory and/or other financial or consulting services to Thoma Bravo, LLC (“Thoma Bravo”), an affiliate of Buyer, or one or more security holders or affiliates of, and/or portfolio companies of investment funds affiliated or associated with, Thoma Bravo (collectively, with Thoma Bravo, the “Thoma Bravo Group”).  Houlihan Lokey and certain of its affiliates may provide investment banking, financial advisory and/or other financial or consulting services to Seller, Buyer, members of the Thoma Bravo Group, other participants in the Asset Sale Transaction or certain of their respective affiliates or security holders in the future, for which Houlihan Lokey and its affiliates may receive compensation. In addition, Houlihan Lokey and certain of its affiliates and certain of its and their respective employees may have committed to invest in private equity or other investment funds managed or advised by Thoma Bravo, other participants in the Asset Sale Transaction or certain of their respective affiliates or security holders, and in portfolio companies of such funds, and may have co-invested with members of the Thoma Bravo Group, other participants in the Asset Sale Transaction or certain of their respective affiliates or security holders, and may do so in the future. Furthermore, in connection with bankruptcies, restructurings, distressed situations and similar matters, Houlihan Lokey and certain of its affiliates may have in the past acted, may currently be acting and may in the future act as financial advisor to debtors, creditors, equity holders, trustees, agents and other interested parties (including, without limitation, formal and informal committees or groups of creditors) that may have included or represented and may include or represent, directly or indirectly, or may be or have been adverse to, Seller, Buyer, members of the Thoma Bravo Group, other participants in the Asset Sale Transaction or certain of their respective affiliates or security holders, for which advice and services Houlihan Lokey and its affiliates have received and may receive compensation.  In addition, as disclosed to the Board, a member of the board of directors of Houlihan Lokey, Inc., Houlihan Lokey’s parent company, currently serves as an operating partner of Thoma Bravo.

Forecasts

The Company does not as a matter of course publicly disclose long-term forecasts or internal projections as to future performance, revenues, earnings, financial condition or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, in connection with its consideration of the Asset Sale Transaction, Company management prepared unaudited prospective financial information with respect to the ECM Business being sold to Buyer in the Asset Sale and the business lines being retained by the Company. The Company is electing to provide the unaudited prospective financial information in this Proxy Statement to provide the stockholders of the Company access to certain unaudited prospective financial information that was made available to the Board in connection with its consideration of the Asset Sale Transaction and provided to the Company’s financial advisor, who was authorized to use

34

and rely upon such information for purposes of providing advice to the Board. The unaudited prospective financial information was not prepared with a view toward public disclosure and the inclusion of this information should not be regarded as an indication that the Company or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results. Neither the Company, its financial advisors, nor any of their affiliates assumes any responsibility for the accuracy of this information. Readers of this Proxy Statement are cautioned not to place undue reliance on the unaudited prospective financial information. No one has made or makes any representation to any stockholder of the Company regarding the information included in the unaudited prospective financial information or the ultimate performance of the ECM Business or the Company compared to the information included in the unaudited prospective financial information.

The unaudited prospective financial information was not prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants with respect to the preparation or presentation of prospective financial information. Certain of the unaudited prospective financial information presents financial metrics that were not prepared in accordance with GAAP including EBITDA. The Company defines EBITDA for these purposes as earnings before interest, taxes, depreciation and amortization after Company management’s allocation of corporate overhead attribute to the ECM Business. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies. The Company has not prepared, and neither the Board nor the Company’s financial advisors have considered, a reconciliation of these non-GAAP financial measures to applicable GAAP financial measures. Neither our independent registered public accounting firm nor any other independent accountants, has compiled, examined or performed any procedures with respect to the unaudited prospective financial and operating information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The report of our independent registered public accounting firm contained in its Annual Report on Form 10–K for the year ended January 31, 2019 relates to our historical financial information.

There can be no assurance that the assumptions made in preparing such information will prove accurate or that the projected results reflected therein will be realized. Neither the Company’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the unaudited prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for the unaudited prospective financial information and disclaim any association with, the prospective financial information. Furthermore, the unaudited prospective financial information does not take into account any circumstance or event occurring after the date it was prepared or which may occur in the future, and, in particular, does not take into account any revised prospects of the Company’s business, changes in general business, regulatory or economic conditions, competition or any other transaction or event that has occurred since the date on which such information was prepared or which may occur in the future.

 

While presented with numeric specificity, the unaudited prospective financial information reflects numerous estimates and assumptions made by Company management with respect to industry performance and competition, general business, economic, market and financial conditions and matters specific to the Company’s business, all of which are difficult to predict and many of which are beyond the Company’s control. As a result, the unaudited prospective financial information reflects numerous assumptions and estimates as to future events and there can be no assurance that these assumptions will accurately reflect future conditions, that the unaudited prospective financial information will be realized or that actual results will not be significantly higher or lower than estimated. Since the unaudited prospective financial information covers multiple years, such information by its nature becomes less predictive with each successive year.

35

Prospective Financial Information for the ECM Business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year

 

Fiscal Year

 

Fiscal Year

 

Fiscal Year

 

Fiscal Year

 

 

Ended

 

Ended

 

Ended

 

Ended

 

Ended

 

 

January 31, 2021

 

January 31, 2022

 

January 31, 2023

 

January 31, 2024

 

January 31, 2025

Total Revenue

 

$

8,616,000

 

$

7,392,000

 

$

6,504,000

 

$

5,671,000

 

$

4,992,000

Operating Expenses

 

 

(3,078,000)

 

 

(2,827,000)

 

 

(2,588,000)

 

 

(2,404,000)

 

 

(2,250,000)

Allocated Corporate Overhead (1)

 

 

(3,024,000)

 

 

(2,876,000)

 

 

(2,433,000)

 

 

(2,117,000)

 

 

(1,912,000)

Total EBITDA

 

$

2,514,000

 

$

1,689,000

 

$

1,483,000

 

$

1,150,000

 

$

830,000

 

(1)Per Company management, represents portion of corporate overhead attributable to the ECM Business.

 

Post-Asset Sale Company Prospective Financial Information (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year

 

 

Fiscal Year

 

 

Fiscal Year

 

 

 

Ended

 

 

Ended

 

 

Ended

 

 

 

January 31, 2021

 

    

January 31, 2022

 

 

January 31, 2023

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

14,828,000

 

$

19,844,000

 

$

24,474,000

Expenses:

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

15,474,000

 

 

16,817,000

 

 

18,277,000

Other Non-EBITDA expenses

 

 

2,191,000

 

 

2,366,000

 

 

2,556,000

Total expense

 

 

17,665,000

 

 

19,183,000

 

 

20,833,000

Net (loss) income

 

 

(2,837,000)

 

 

661,000

 

 

3,641,000

Adjusted EBITDA (loss) income

 

$

(646,000)

 

$

3,027,000

 

$

6,197,000

 

The foregoing unaudited prospective financial information includes forward-looking statements and is based on estimates and assumptions that are inherently subject to factors such as industry performance, competition, general business, economic, regulatory, market and financial conditions, as well as changes to the business, financial condition or results of operations of the Company, including the factors described under “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 18, the risk factors described under “Risk Factors” beginning on page 16, and other risk factors as disclosed in the Company’s filings with the SEC that could cause actual results to differ materially from those shown below. Stockholders are urged to review the Company’s most recent SEC filings for a description of risk factors with respect to the Company’s business. See “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 16 and “Where You Can Find More Information” beginning on page 67. The unaudited prospective financial information does not take into account any of the transactions contemplated by the Asset Purchase Agreement, including the Asset Sale, which might cause actual results to differ materially.

The Company’s stockholders are urged to review the Company’s most recent SEC filings for a description of the Company’s reported results of operations, financial condition and capital resources as of, and for the fiscal year ended, January 31, 2019. See “Where You Can Find More Information” beginning on page 67.

For the foregoing reasons, as well as the bases and assumptions on which the unaudited prospective financial information was compiled, the inclusion of the Company’s unaudited prospective financial information in this Proxy Statement should not be regarded as an indication that such information will be predictive of future results or events nor construed as financial guidance, and it should not be relied on as such or for any other purpose whatsoever.

36

THE COMPANY HAS NOT UPDATED AND DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE PROSPECTIVE FINANCIAL INFORMATION SET FORTH ABOVE, INCLUDING, WITHOUT LIMITATION, TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE SUCH INFORMATION WAS PREPARED OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, INCLUDING, WITHOUT LIMITATION, CHANGES IN GENERAL ECONOMIC, REGULATORY OR INDUSTRY CONDITIONS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE PROSPECTIVE FINANCIAL INFORMATION ARE NO LONGER APPROPRIATE.

Use of Proceeds and Future Operations

The Company, and not its stockholders, will receive the proceeds from the Asset Sale. The Company plans to use the proceeds of the sale to pay off its term loan with Bridge Bank and to fund the continuing development and incremental investment in sales and marketing in support of its eValuator™ cloud-based pre- or post-bill coding analysis platform. We will continue to operate and manage our eValuator Coding Analysis Platform, CDI and Abstracting solutions, Financial Management solutions, Audit Services, and custom integration and training services following the closing of the Asset Sale Transaction. Our Board will evaluate alternatives for the use of the cash proceeds to be received at closing to commercialize the foregoing business segments and to continue to maximize stockholder value with a goal of returning value to our stockholders. The amounts and timing of our actual expenditures, however, will depend upon numerous factors, and we may find it necessary or advisable to use portions of the proceeds from the Asset Sale for different or presently non-contemplated purposes.

No Appraisal or Dissenters’ Rights

No appraisal or dissenters’ rights are available to our stockholders under Delaware law or under our certificate of incorporation or bylaws in connection with the Asset Sale Transaction.

Regulatory Matters

We are unaware of any material federal, state or foreign regulatory requirements or approvals required for the execution of the Asset Purchase Agreement or completion of the Asset Sale Transaction.

Material U.S. Federal Income Tax Consequences

The following discussion is a general summary of the anticipated material U.S. federal income tax consequences of the Asset Sale Transaction. The following discussion is based upon the Internal Revenue Code (the “Code”), its legislative history, currently applicable and proposed Treasury Regulations under the Code and published rulings and decisions, all as currently in effect as of the date of this Proxy Statement, and all of which are subject to change, possibly with retroactive effect. Tax consequences under state, local and non-U.S. laws, or federal laws other than those pertaining to income tax, are not addressed in this Proxy Statement. No rulings have been requested or received from the Internal Revenue Service (the “IRS”) as to the tax consequences of the Asset Sale Transaction and there is no intent to seek any such ruling. Accordingly, no assurance can be given that the IRS will not challenge the tax treatment of the Asset Sale Transaction discussed below or, if it does challenge the tax treatment, that it will not be successful.

 

The Asset Sale Transaction will be treated for U.S. federal income tax purposes as a taxable transaction upon which we will recognize gain or loss. The amount of gain or loss we recognize with respect to the sale of a particular asset will be measured by the difference between the amount realized by us on the sale of that asset and our tax basis in that asset. The amount realized by us on the Asset Sale Transaction will include the amount of cash received, the fair market value of any other property received, total liabilities assumed or taken by Buyer and will be reduced by the amount of selling costs. For purposes of determining the amount realized by us with respect to specific assets, the total amount realized by us will generally be allocated among the assets according to the rules set forth in Section 1060(a) of the Code. Our basis in our assets is generally equal to their cost, as adjusted for certain items, such as depreciation. The determination of whether we will recognize gain or loss will be made with respect to each of the assets to be sold. Accordingly, we may recognize gain on the sale of certain assets and loss on the sale of certain others, depending on the amount of consideration allocated to an asset as compared with the basis of that asset. To the extent the Asset Sale Transaction results in us recognizing a net

37

gain for U.S. federal income tax purposes, our available net operating loss carryforwards will offset the majority of the gain. It is anticipated that we will pay an immaterial amount of tax on the gain recognized from the Asset Sale Transaction.

Anticipated Accounting Treatment

Under generally accepted accounting principles, upon completion of the Asset Sale Transaction, we will remove the net assets sold and liabilities assumed from our consolidated balance sheet. We will record a gain, net of any applicable taxes, on the Asset Sale Transaction equal to the difference between the consideration received and the net book value of the assets sold when the transaction is completed. We also expect to reflect the results of operations of the ECM Business as discontinued operations beginning on the date of the closing of the Asset Sale Transaction for all prior periods presented.

Effects on our Company if the Asset Sale Transaction is Completed and the Nature of our Business following the Asset Sale Transaction

If the Asset Sale Transaction is completed, we will no longer have our ECM Business, including the customer base relating to the ECM Business (including all license, services and maintenance contracts with such customers), the intellectual property used in connection with the ECM Business, the accounts receivables associated with the ECM Business, and certain equipment and systems used in connection with the ECM Business, all on the terms and subject to the conditions set forth in the Asset Purchase Agreement. However, we will continue to operate and manage our eValuator Coding Analysis Platform, CDI and Abstracting solutions, Financial Management solutions, Audit Services, and custom integration and training services.

The Asset Sale Transaction will not alter the rights, privileges or nature of the issued and outstanding shares of our common stock. A stockholder who owns shares of our common stock immediately prior to the closing of the Asset Sale Transaction will continue to hold the same number of shares immediately following the closing.

SEC Reporting

Our SEC reporting obligations as a public company will not be affected as a result of the closing of the Asset Sale Transaction.

ASSET PURCHASE AGREEMENT

The following discussion sets forth the principal terms of the Asset Purchase Agreement, a copy of which is attached as Annex A to this Proxy Statement and is incorporated herein by reference. The rights and obligations of the parties are governed by the express terms and conditions of the Asset Purchase Agreement and not by this discussion, which is summary in nature. This discussion is not complete and is qualified in its entirety by reference to the complete text of the Asset Purchase Agreement. You are encouraged to read the Asset Purchase Agreement carefully and in its entirety, as well as this Proxy Statement and any documents included herewith, before making any decisions regarding the proposals being brought before the Special Meeting.

 

Purchase and Sale of Assets

Purchased Assets

Upon the terms and subject to the conditions of the Asset Purchase Agreement, we have agreed to sell to Buyer the following assets (referred to in this discussion as the “Purchased Assets”):

(a) all accounts receivable related to the ECM Business;

(b) all rights and benefits of the Company under contracts relating to the ECM Business, including specified contracts to be assigned, and all data and information related thereto (collectively, the “Assigned Contracts”);

38

(c) all rights relating to work products or deliverables resulting from works in process under any contract related to the ECM Business;

(d) all equipment, computer hardware, supplies and other tangible property relating to the ECM Business, and all warranties covering all or any part of such items to the extent such warranties are transferable;

(e) all intellectual property, software and products relating to the ECM Business, including all income, royalties, damages and payments due or payable as of the closing of the Asset Sale Transaction or thereafter and the rights to sue and collect damages for any past, present or future infringements, misappropriations or other violations thereof, and any corresponding, equivalent or counterpart rights, title or interest that now exist or may be secured hereafter anywhere in the world, and all copies and tangible embodiments of the foregoing items (collectively, the “Transferred Intellectual Property”); and

(f) the goodwill and going concern value and other intangible assets, if any, arising from or related to the ECM Business.

Excluded Assets

Under the terms of the Asset Purchase Agreement, any asset of ours that is not specifically referred to above as a Purchased Asset (referred to in this discussion as the “Excluded Assets”) will not be transferred to Buyer and will remain our assets following the closing of the Asset Sale Transaction, which include any cash and cash equivalents, bank and other similar accounts or rights in any shared contracts relating to any of our business other than the ECM Business.

Assumption and Transfer of Liabilities

Assumed Liabilities

Upon the terms and subject to the conditions of the Asset Purchase Agreement, Buyer has agreed to assume the following liabilities (referred to in this discussion as the “Assumed Liabilities”):

(a)all liabilities and obligations under the Assigned Contracts identified in the Asset Purchase Agreement; and

(b)those credits granted to customers of the ECM Business that remain unapplied as of the effective date of the Asset Sale Transaction.

Excluded Liabilities

Under the terms of the Asset Purchase Agreement, Buyer will not assume and will not be responsible to pay, perform or discharge any of our liabilities or obligations arising out of, relating to or otherwise in respect of the ECM Business or the Purchased Assets prior to the closing, including the following liabilities and obligations (referred to in this discussion as the “Excluded Liabilities”):

(a)All liabilities or obligations arising out of or relating to the Company’s ownership or operation of the ECM Business and the Purchased Assets prior to the Closing Date;

(b)all trade and other accounts payable of the Company;

(c)all indebtedness;

(d)all liabilities and obligations for taxes, including for any taxable period ending on or prior to the Closing Date;

39

(e)all liabilities and obligations with respect to current and former employees of the Company based upon or arising out of the employment relationship (or termination thereof) with the Company, whether or not such employee becomes an employee of Buyer following the Closing Date, including all liabilities and obligations relating to (i) immigration matters which are based upon or arise out of acts or omissions occurring prior to the Closing Date, (ii) stock options and other equity-based compensation, severance payable or granted to, or earned or accrued, or that should have been accrued, in respect of service performed by, employees or former employees of the Company prior to the Closing Date, (iii) any employee benefit plan, (iv) claims for wages or other benefits, bonuses, accrued paid time off, workers’ compensation, retention, termination or other payments, in each case, arising in connection with such person’s service with the Company, and (v) any sale, “stay-around,” retention, change of control, severance or similar bonuses or amounts that will or may become payable in connection with or as a result of the consummation of the transactions contemplated hereby;

(f)all liabilities and obligations relating to any bulk sales laws applicable to the Asset Sale Transaction;

(g)all liabilities or obligations relating to any warranty or services provided by the Company prior to the Closing Date;

(h)all liabilities or obligations relating to, based upon or arising out of the conduct of business by the Company prior to the Closing Date, including all liabilities and obligations (i) relating to any legal proceeding arising out of, relating to or otherwise in respect of the operation of the ECM Business or the Purchased Assets, (ii) relating to the Transferred Intellectual Property,  (iii) arising under any contract that is not an Assigned Contract or under any shared contract as it relates to any business other than the ECM Business;

(i)all liabilities and obligations related to the Excluded Assets;

(j)all liabilities or obligations that arise from any breach or default by the Company under any contract, including any Assigned Contract; and

(k)all other liabilities and obligations of the Company that are not Assumed Liabilities.

Consideration

As consideration for the Asset Sale Transaction, Buyer has agreed to pay us $16 million in cash, subject to certain adjustment payments. Prior to the closing date of the Asset Sale Transaction (the “Closing Date”), the Company will have invoiced certain customers under contracts related to the ECM Business for services to be provided on an annual basis after the date of such invoicing. If an outstanding invoice is paid after the date of the Asset Purchase Agreement and prior to the Closing Date, Buyer is entitled to receive 11/12ths of the collected invoice amount if the Closing Date occurs on or before the date that is sixty (60) days following the date that the Company’s Proxy Statement is filed with the SEC and 10/12ths of the collected invoice amount if the Closing Date on or after the date that is sixty-one (61) days following the date that the Company’s Proxy Statement is filed with the SEC.

 

Representations and Warranties

The Asset Purchase Agreement contains a number of representations and warranties made by the Company and Buyer. The statements embodied in those representations and warranties were made for purposes of the Asset Purchase Agreement between the parties and are subject to qualifications and limitations agreed to by the parties in connection with negotiating the terms of the Asset Purchase Agreement. Certain representations and warranties were made as of December 17, 2019 (or other dates specified in the Asset Purchase Agreement), may be subject to contractual standards of materiality different from those generally applicable to stockholders or which may have been used for the purpose of allocating risk between the parties rather than establishing matters of fact. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts because they are qualified as described above. Moreover, information

40

concerning the subject matter of the representations and warranties may have changed since December 17, 2019, and these changes may or may not be fully reflected in the Company’s or Buyer’s public disclosures. The Asset Purchase Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the Company and Buyer that is contained in this Proxy Statement, as well as in the filings that the Company will make and has made with the SEC. The representations and warranties contained in the Asset Purchase Agreement may or may not have been accurate as of the date they were made, and we make no assertion herein that they are accurate as of the date of this Proxy Statement.

Company Representations and Warranties

In the Asset Purchase Agreement, the Company has made a number of representations and warranties that are subject, in some cases, to specified exceptions and qualifications contained in the Asset Purchase Agreement or by information in the confidential disclosure letter the Company delivered in connection with the Asset Purchase Agreement (the “Company Disclosure Letter”). These representations and warranties relate to, among other things:

·

our corporate organization and qualification;

·

our corporate authority to enter into the Asset Purchase Agreement and each of the Ancillary Agreements, the validity and enforceability of such agreements and the Board’s approval and recommendation;

·

the absence of conflicts with our organizational documents, applicable law or certain contracts and permits, or the occurrence of defaults under or the creation of liens with respect to certain contracts or permits, as a result of the execution, delivery and performance by us of the Asset Purchase Agreement and the Ancillary Agreements;

·

the absence of a requirement to obtain consents or approvals with respect to our execution, delivery and performance under the Asset Purchase Agreement and Ancillary Agreements;

·

our title to the tangible and intangible personal property included in the Purchased Assets;

·

the sufficiency of the Purchased Assets to conduct the ECM Business following the closing of the Asset Sale Transaction in substantially the same manner as it was conducted by us prior to closing and no other person holds any right, title or interest in any of the Purchased Assets;

·

litigation and liabilities;

·

compliance with laws and permits;

·

the absence of certain changes with respect to the ECM Business;

·

labor and employment matters;

·

our material contracts;

·

our intellectual property;

·

our accounts receivable and disclosed financial information;

·

our customers and resellers;

·

compliance with various anti-bribery laws;

·

the products currently offered by the ECM Business;

41

·

privacy and data security; and

·

the accuracy of statements in this Proxy Statement.

Buyer Representations and Warranties

Buyer’s representations and warranties relate to, among other things:

·

its organization and qualification;

·

its authority to enter into the Asset Purchase Agreement and the Ancillary Agreements and the validity and enforceability of such agreements;

·

the absence of conflicts with Buyer’s organizational documents and applicable law as a result of Buyer’s execution, delivery and performance under the Asset Purchase Agreement and Ancillary Agreements;

·

having sufficient available funds as of the closing to pay us $16 million in cash, subject to certain adjustment payments, and all other necessary payments in connection with the transactions contemplated by the Asset Purchase Agreement;

·

litigation and liabilities that may prevent, enjoin or otherwise delay the Asset Sale Transaction; and

·

confirmation that Buyer has conducted its own independent investigation of the ECM Business and the Purchased Assets.

Covenants

Conduct of Business Pending Closing

Until closing, we are required to, unless otherwise consented to by Buyer:

·

conduct the ECM Business in the ordinary course of business; and

·

use commercially reasonable efforts to maintain and preserve the business organization of the ECM Business and its material rights with respect to the ECM Business, including retaining the services of the Company’s employees, contractors, representatives and any other personnel engaged in the ECM Business, maintain relationships with clients and suppliers of the ECM Business and other relationships material to the ECM Business, and maintain all of its operating assets used in the ECM Business in their current condition (normal wear and tear excepted), for the purpose of maintaining, and avoiding any material impairment of, the goodwill and ongoing business of the ECM Business.

Restrictive Covenants

For a period of five years following the closing of the Asset Sale Transaction, we agreed not to, and to cause our affiliates not to, directly or indirectly:

·

solicit, hire or induce or attempt to hire, solicit or induce any employees of the Company who accept employment with Buyer to terminate their employment, representation or other association with Buyer, except for certain general solicitations which are not directed specifically as such employees;

·

engage in or assist others in engaging in developing, licensing, selling, reselling, maintaining, implementing or providing training, support any services related to, products or services that are substantially the same as or otherwise compete with the ECM Business (“Competing Business”); and

42

·

have an interest in a person that engages in a Competing Business.

Transition Services

For a period of time from the Closing Date until September 30, 2020, the Company agrees to provide continued operation of and a license to use and access the Company’s storage facility at 250 Williams Street NE, Atlanta, Georgia 30303 (the “Data Center”), and to provide such other services that may be reasonably requested in good faith by Buyer to ensure orderly transition of the ECM Business. The Buyer shall pay the Company a monthly fee of $15,000 for providing such services, plus any reasonable and documented out-of-pocket expenses.

Employees

Following the closing, Buyer will offer employment to certain Company employees employed in connection with the ECM Business. Immediately before the closing, all such individuals will resign from their employment or we will terminate the employment of all such individuals and be responsible for all such severance and termination obligations with respect to such employees.

Stockholders Meeting

We are required, as promptly as reasonably practicable to file a proxy statement with the SEC, and hold a meeting of stockholders for the purposes of obtaining Stockholder Approval following effectiveness of the definitive proxy statement. We are required to cooperate and consult with Buyer in connection with the preparation of the proxy statement.

Acquisition Proposals

From the earlier of the Closing Date or the date of termination of Asset Purchase Agreement, we agreed not to, directly or indirectly, except in furtherance of the Asset Purchase Transaction (a) solicit, initiate or encourage (including by way of furnishing material non-public information) submission of any proposals or offers, or any action likely to lead to the submission of such a proposal or offer, from any person relating to the acquisition by any person (other than the Buyer) of any substantial portion of the ECM Business (collectively, an “Acquisition Proposal”); (b) participate in any discussions, conversations, negotiations or other communications regarding, or furnish to any person (other than the Buyer) any information with respect to, or otherwise cooperate in any way with or assist, facilitate or encourage any Acquisition Proposal by any Person; or (c) enter into any contract with respect to any Acquisition Proposal. We also agreed to immediately cease and cause to be terminated any existing discussions, conversations, negotiations and other communications with any Person other than Purchaser with respect to an Acquisition Proposal. Seller shall notify Purchaser promptly if any such Acquisition Proposal, or any inquiry or other contact with any Person with respect to an Acquisition Proposal, is made and will, in any notice to Purchaser, indicate the identity of the Person making the Acquisition Proposal, inquiry or contact and the terms and conditions of such Acquisition Proposal, inquiry or other contact (including a copy of any written or electronic mail transmissions received).

 Certain Software Platform Upgrades

We agreed to use commercially reasonable efforts to purchase and install certain security and other upgrades with respect to hosted services for certain customers of the ECM Business using unsupported operating systems.

Access to Information

We are required to afford Buyer and its representatives with such information as Buyer may reasonably request with respect to our operations, the Purchased Assts and the Assumed Liabilities. We are also required to provide Buyer and its representatives access during regular business hours and upon reasonable notice to the books, records, offices, personnel, counsel and accountants of the ECM Business as Buyer may reasonably request.

43

Closing Conditions

The respective obligations of the parties to effect the Asset Sale Transaction are subject to satisfaction (or waiver by Buyer and the Company, if permitted by law) at or prior to the closing of the following conditions:

·

that no governmental authority shall have enacted, issued, promulgated, enforced or entered any law which is in effect and has the effect of making the Asset Sale Transaction illegal, otherwise restraining or prohibiting the consummation of such transactions or causing the Asset Sale Transaction to be rescinded;

·

receipt of Stockholder Approval;

·

the accuracy of the parties’ representations and warranties in the Asset Purchase Agreement as of closing, subject, in certain circumstances, to certain materiality and other thresholds;

·

the performance by the parties of their obligations and covenants under the Asset Purchase Agreement;

·

the delivery by the parties of executed counterpart signature pages to each of the Ancillary Agreements;

·

the delivery by each party of certain certificates and other documentation;

·

the delivery by the Company of certain signed letters or other documents from persons holding liens with respect to assets used to conduct the ECM Business releasing all such liens and authorizing the Company to file the appropriate terminations of any financing statements evidencing such liens or any other documents or filings necessary to evidence termination of such liens;

·

receipt of authorizations, consents, orders and approvals set forth in the Asset Purchase Agreement; and

·

the absence of any event, fact or development since the signing of the Asset Purchase Agreement that has had or would reasonably be expected to have a material adverse effect on the ECM Business.

Indemnification

Indemnification by the Company

The Company will indemnify Buyer and its officers, directors, employees, agents, shareholders and affiliates from and against, and hold harmless each of the foregoing from, any and all losses, damages (but excluding punitive or exemplary damages except to the extent payable to a third-party), injuries, claims, liabilities, obligations, deficiencies, demands, amounts paid in settlement, awards, judgments, fines, interest, penalties, assessments, taxes, fees (including reasonable attorneys’ and other professionals’ fees and expenses), charges, awards, costs (including court costs and reasonable costs of investigation and defense), amounts due and expenses of any type, nature or description, including any of the same that are incurred by a Party in asserting, preserving or enforcing any of its rights and remedies under this Agreement (collectively, “Losses”), suffered by any of the foregoing to the extent arising out of the following:

·

any inaccuracies in or any breach of any representation or warranty contained in the Asset Purchase Agreement;

·

any breach of any covenant or agreement of ours in the Asset Purchase Agreement;

·

any Excluded Liability;

·

any breach or inaccuracy in the certificate to be delivered by the Company prior to the Closing detailing the collected invoice amounts at closing;

44

·

the use by any Unsupported Customer of an operating system for which a Platform Upgrade had not been properly completed as of the Closing; and

·

any act or omission of the Company’s which results in a breach of data security or loss of data of a customer of the ECM Business whose data is stored at the Data Center or any claim by any such customer alleging the failure to comply with a performance standard, where such failure to comply is caused by failure in, or malfunction of, the operations of the Data Center; provided such failure or malfunction did not arise as a result of any action or any inaction of an employee of Buyer.

The Company’s indemnification obligations under the Asset Purchase Agreement will be secured by the Buyer depositing $800,000 into a third party escrow account, with a scheduled release date on the 15-month anniversary of the Closing Date.

Indemnification by Buyer

Buyer will indemnify Seller and its affiliates and the representatives, successors and assigns of each of the foregoing from and against, and hold harmless each of the foregoing from, any and all Losses suffered by any of the foregoing to the extent arising out of the following:

·

any inaccuracies in or any breach of any representation or warranty contained in the Asset Purchase Agreement;

·

any breach of any covenant or agreement of Buyer in the Asset Purchase Agreement; and

·

any Assumed Liability.

Termination of the Asset Purchase Agreement

The Asset Purchase Agreement may be terminated at any time prior to the closing of the Asset Sale Transaction by mutual written consent of Buyer and the Company.

Either party may terminate the Asset Purchase Agreement if:

·

there is any law that makes consummation of the Asset Sale Transaction illegal or otherwise prohibited; or

·

any Governmental Authority issues an order restraining or enjoining the Asset Sale Transaction, and such order has become final and non-appealable.

Buyer may terminate the Asset Purchase Agreement if:

·

Buyer is not in material breach of the Asset Purchase Agreement, and there has been a material breach of the Asset Purchase Agreement by the Company that would give rise to a failure of any of the conditions to consummate the Asset Sale Transaction and such breach cannot be cured by the Company by March 31, 2020 (the “Drop-Dead Date”);

·

the Company does not obtain Stockholder Approval of the Asset Sale Transaction (unless such failure is due to the failure of the Buyer to perform or comply with any of the covenants, agreements or conditions of the Asset Purchase Agreement to be performed or complied with by the Buyer prior to the closing); or

·

any of the conditions to Buyer’s performance of the Asset Purchase Agreement have not been fulfilled by the Drop-Dead Date, including, among other things, that (i) all of the Company’s representations and warranties of the Company are true and correct in all material respects as of the closing date of the Asset Sale Transaction, (ii) the Company has performed and complied with all agreements covenants and conditions required by the Asset Purchase Agreement and the Ancillary Agreements by or on the closing date of the Asset Sale Transaction, (iii)

45

the Company has delivered certain certificates and consents and approvals to Buyer, (iv) the Company has delivered certain signed letters or other documents from persons holding liens with respect to assets used to conduct the ECM Business releasing all such liens and authorizing the Company to file the appropriate terminations of any financing statements evidencing such liens or any other documents or filings necessary to evidence termination of such liens, and (v) there has not been a material adverse effect with respect to the ECM Business or the Company’s ability to consummate the Asset Sale Transaction.

We may terminate the Asset Purchase Agreement if:

·

Company is not in material breach of the Asset Purchase Agreement, and there has been a material breach of the Asset Purchase Agreement by the Buyer that would give rise to a failure of any of the conditions to consummate the Asset Sale Transaction and such breach cannot be cured by the Company by the Drop-Dead Date;

·

the Company does not obtain Stockholder Approval of the Asset Sale Transaction (unless such failure is due to the failure of the Company to perform or comply with any of the covenants, agreements or conditions of the Asset Purchase Agreement to be performed or complied with by the Company prior to the closing); or

·

any of the conditions to Company’s performance of the Asset Purchase Agreement have not been fulfilled by the Drop-Dead Date, including, among other things, that (i) all of the Buyer’s representations and warranties of the Buyer are true and correct in all material respects as of the closing date of the Asset Sale Transaction, (ii) the Buyer has performed and complied with all agreements covenants and conditions required by the Asset Purchase Agreement and the Ancillary Agreements by or on the closing date of the Asset Sale Transaction, and (iii) the Buyer has delivered certain certificates and consents and approvals to Company.

In the event that the Asset Purchase Agreement is validly terminated pursuant to the termination rights above, the Asset Purchase Agreement will become void without liability or obligation (with certain limited exceptions) on the part of Buyer or the Company, except that if the Asset Purchase Agreement is terminated due to a failure of the Company to convene the Special Meeting by the Drop Dead Date or obtained Stockholder Approval,  we must reimburse Buyer for all costs and expenses of Buyer incurred in connection with the Asset Sale Transaction, up to a maximum amount of $75,000.

Specific Performance

The Asset Purchase Agreement provides that, in addition to any other remedy to which they are entitled at law or in equity, the parties are entitled to specific performance of the terms of the Asset Purchase Agreement.

Fees and Expenses

Except as otherwise provided in the Asset Purchase Agreement, all fees and expenses incurred in connection with the Asset Purchase Agreement and the transactions contemplated thereby will be paid by the party incurring such fees or expenses, whether or not the Asset Sale Transaction is consummated.

Governing Law

The Asset Purchase Agreement is governed by Delaware law.

46

STREAMLINE HEALTH SOLUTIONS, INC.

UNAUDITED PRO FORMA FINANCIAL INFORMATION

We are providing the following information to aid you in your financial analysis of the proposed Asset Sale Transaction. The following unaudited pro forma financial data gives effect to the sale of the Purchased Assets. The unaudited pro forma balance sheet as of October 31, 2019 has been prepared assuming the Asset Sale Transaction was consummated as of that date. The unaudited pro forma statements of operations for the nine months ended October 31, 2019, the twelve months ended January 31, 2019 and the twelve months ended January 31, 2018, have been prepared in accordance with the SEC’s pro forma rules under S-X Article 11 assuming that the Asset Sale Transaction occurred as of February 1, 2017, the first day of the first year presented. All material adjustments required to reflect the consummation of the Asset Sale Transaction are set forth in the columns labeled “Pro Forma Adjustments.” The data contained in the columns labeled “Streamline Health Solutions, Inc. As Reported”, is derived from the Company’s historical unaudited consolidated balance sheet as of October 31, 2019 and consolidated statements of operations for the nine months ended October 31, 2019, the twelve months ended January 31, 2019 and the twelve months ended January 31, 2018. The unaudited pro forma financial data is presented for informational purposes only and is not necessarily indicative of the results of future operations or future financial position of the Company or the actual results of operations or financial position that would have occurred had the Asset Sale Transaction been consummated as of the dates indicated above.

The pro forma adjustments were based upon available information at the date of this filing and upon certain assumptions as described in the notes to the unaudited pro forma condensed financial statements that our management believes are reasonable under the circumstances.

The unaudited pro forma financial statements and accompanying notes should be read in conjunction with our historical financial statements and accompanying notes thereto, and our “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in our Quarterly Report on Form 10‑Q for the nine months ended October 31, 2019 and Annual Report on Form 10‑K for the year ended January 31, 2019 and January 31, 2018, copies of which have been provided to you as part of the proxy materials for the Special Meeting.

47

STREAMLINE HEALTH SOLUTIONS, INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

(rounded to the nearest thousand dollars, except share information)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

 

 

 

 

 

 

 

 

 

October 31, 2019

 

Disposition of

 

Pro Forma

 

As

 

 

As Reported

 

ECM Business

 

Adjustments

 

Adjusted

ASSETS

 

 

 

 

 

 

 

 

(Note 2)

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,220,000

 

$

 -

 

$

9,600,000

 

$

10,820,000

Accounts receivable, net

 

 

2,214,000

 

 

(454,000)

 

 

 -

 

 

1,760,000

Contract receivables

 

 

704,000

 

 

(65,000)

 

 

 -

 

 

639,000

Prepaid and other current assets

 

 

1,285,000

 

 

(534,000)

 

 

 -

 

 

751,000

Total current assets

 

 

5,423,000

 

 

(1,053,000)

 

 

9,600,000

 

 

13,970,000

Non-current assets:

 

 

  

 

 

 

 

 

 

 

 

  

Property and equipment, net

 

 

175,000

 

 

(68,000)

 

 

 -

 

 

107,000

Contract receivables, less current portion

 

 

355,000

 

 

 -

 

 

 -

 

 

355,000

Capitalized software development costs, net

 

 

7,785,000

 

 

(2,002,000)

 

 

 -

 

 

5,783,000

Intangible assets, net

 

 

1,245,000

 

 

 -

 

 

 -

 

 

1,245,000

Goodwill

 

 

15,537,000

 

 

(4,928,000)

 

 

 -

 

 

10,609,000

Other

 

 

756,000

 

 

(12,000)

 

 

 -

 

 

744,000

Total non-current assets

 

 

25,853,000

 

 

(7,010,000)

 

 

 -

 

 

18,843,000

Total assets

 

$

31,276,000

 

$

(8,063,000)

 

$

9,600,000

 

$

32,813,000

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

  

 

 

 

 

 

 

 

 

  

Accounts payable

 

$

629,000

 

$

(121,000)

 

$

 -

 

$

508,000

Accrued expenses

 

 

1,407,000

 

 

(89,000)

 

 

 -

 

 

1,318,000

Current portion of term loan

 

 

3,472,000

 

 

 -

 

 

(3,472,000)

 

 

 -

Deferred revenues

 

 

6,310,000

 

 

(3,469,000)

 

 

 -

 

 

2,841,000

Royalty liability

 

 

953,000

 

 

 -

 

 

 -

 

 

953,000

Other

 

 

94,000

 

 

(22,000)

 

 

 -

 

 

72,000

Total current liabilities

 

 

12,865,000

 

 

(3,701,000)

 

 

(3,472,000)

 

 

5,692,000

Non-current liabilities:

 

 

  

 

 

 

 

 

 

 

 

  

Deferred revenues, less current portion

 

 

123,000

 

 

(92,000)

 

 

 -

 

 

31,000

Other

 

 

19,000

 

 

(18,000)

 

 

 -

 

 

1,000

Total non-current liabilities

 

 

142,000

 

 

(110,000)

 

 

 -

 

 

32,000

Total liabilities

 

 

13,007,000

 

 

(3,811,000)

 

 

(3,472,000)

 

 

5,724,000

Common stock,

 

 

308,000

 

 

 -

 

 

 -

 

 

308,000

Additional paid in capital

 

 

94,970,000

 

 

 -

 

 

 -

 

 

94,970,000

Accumulated deficit

 

 

(77,009,000)

 

 

(4,252,000)

 

 

13,072,000

 

 

(68,189,000)

Total stockholders’ equity

 

 

18,269,000

 

 

(4,252,000)

 

 

13,072,000

 

 

27,089,000

Total liabilities and stockholders’ equity

 

$

31,276,000

 

$

(8,063,000)

 

$

9,600,000

 

$

32,813,000

 

48

STREAMLINE HEALTH SOLUTIONS, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(rounded to the nearest thousand dollars, except share information)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months

 

 

 

 

 

 

 

Fiscal Year

 

 

 

 

 

 

 

Fiscal Year

 

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

Ended

 

 

 

 

 

 

 

 

October 31, 2019

 

Pro Forma

 

As

 

January 31, 2019

 

Pro Forma

 

As

 

January 31, 2018

 

Pro Forma

 

As

 

 

As Reported

 

Adjustments

 

Adjusted

 

As Reported

 

Adjustments

 

Adjusted

 

As Reported

    

Adjustments

 

Adjusted

 

 

 

(Note 1)

 

 

(Note 2)

 

 

 

 

 

 

 

 

(Note 2)

 

 

 

 

 

 

 

 

(Note 2)

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

System sales

 

$

1,046,000

 

$

(78,000)

 

$

968,000

 

$

2,472,000

 

$

(662,000)

 

$

1,810,000

 

$

1,343,000

 

$

(166,000)

 

$

1,177,000

Professional services

 

 

1,615,000

 

 

(513,000)

 

 

1,102,000

 

 

1,336,000

 

 

(468,000)

 

 

868,000

 

 

2,744,000