| Tennessee | 62-1443555 | |
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
| incorporation or organization) |
| 209 10th Avenue South, Suite 450 | ||
| Nashville, Tennessee | 37203 | |
| (Address of principal executive offices) | (Zip Code) |
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Table of Contents
Three Months Ended September 30,
2005
2004
$
6,830,640
$
5,032,233
2,392,075
1,776,017
719,930
659,155
1,340,084
1,100,944
373,697
344,426
278,496
192,087
1,244,556
1,202,174
6,348,838
5,274,803
481,802
(242,570
)
81,914
69,116
(9,958
)
(3,818
)
71,956
65,298
$
553,758
$
(177,272
)
$
0.03
$
(0.01
)
$
0.02
$
(0.01
)
21,212,310
20,655,825
22,356,561
20,655,825
Table of Contents
Nine Months Ended September 30,
2005
2004
$
19,319,462
$
14,631,438
6,887,196
5,417,062
2,099,549
1,940,236
4,131,547
3,462,475
1,183,808
987,809
846,674
540,751
3,687,579
3,568,000
18,836,353
15,916,333
483,109
(1,284,895
)
259,854
172,103
(21,842
)
(12,423
)
238,012
159,680
$
721,121
$
(1,125,215
)
$
0.03
$
(0.05
)
$
0.03
$
(0.05
)
20,984,144
20,561,141
21,962,594
20,561,141
Table of Contents
NINE MONTHS ENDED SEPTEMBER 30, 2005
Common Stock
Total Shareholders’
Shares
Amount
Accumulated Deficit
Equity
20,667,515
$
91,642,383
$
(69,912,719
)
$
21,729,664
—
—
721,121
721,121
83,742
159,445
—
159,445
479,234
1,343,149
—
1,343,149
338,038
646,349
—
646,349
21,568,529
$
93,791,326
$
(69,191,598
)
$
24,599,728
Table of Contents
Table of Contents
UNAUDITED
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three months ended
Nine months ended
September 30,
September 30,
September 30,
September 30,
2005
2004
2005
2004
$
6,830,640
$
6,320,355
$
20,729,665
$
18,105,012
$
553,758
$
106,028
$
1,194,482
$
(347,139
)
$
0.03
$
0.01
$
0.06
$
(0.02
)
$
0.02
$
0.00
$
0.05
$
(0.02
)
Three Months Ended
September 30, 2005
September 30, 2004
$
553,758
$
(177,272
)
—
—
(111,339
)
(93,608
)
$
442,419
$
(270,880
)
$
0.03
$
(0.01
)
$
0.02
$
(0.01
)
$
0.02
$
(0.01
)
$
0.02
$
(0.01
)
Nine Months Ended
September 30, 2005
September 30, 2004
$
721,121
$
(1,125,215
)
—
—
(475,897
)
(458,543
)
$
245,224
$
(1,583,758
)
$
0.03
$
(0.05
)
$
0.01
$
(0.08
)
$
0.03
$
(0.05
)
$
0.01
$
(0.08
)
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three Months Ended
Nine Months Ended
September 30,
September 30,
September 30,
September 30,
2005
2004
2005
2004
$
553,758
$
(177,272
)
$
721,121
$
(1,125,215
)
21,212,310
20,655,825
20,984,144
20,561,141
1,144,250
—
978,450
—
22,356,561
20,655,825
21,962,594
20,561,141
$
0.03
$
(0.01
)
$
0.03
$
(0.05
)
$
0.02
$
(0.01
)
$
0.03
$
(0.05
)
Three months ended
Nine months ended
September 30,
September 30,
September 30,
September 30,
2005
2004
2005
2004
$
5,553,391
$
3,650,153
$
14,793,345
$
10,097,854
1,277,249
1,382,080
4,526,117
4,533,584
$
6,830,640
$
5,032,233
$
19,319,462
$
14,631,438
$
2,286,189
$
1,370,927
$
5,636,286
$
3,583,337
7,222
68,122
325,930
180,808
(1,811,609
)
(1,681,619
)
(5,479,107
)
(5,049,040
)
$
481,802
$
(242,570
)
$
483,109
$
(1,284,895
)
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Nine months ended
September 30,
September 30,
2005
2004
$
17,719,923
$
6,026,379
4,408,647
4,195,566
10,906,605
17,711,068
$
33,035,175
$
27,933,013
*
Segment assets include restricted cash, accounts and unbilled receivables, certain
prepaid and other current assets, other assets, certain property and equipment, and
intangible assets. Cash and cash equivalents, investments in marketable securities and
related interest receivable are not allocated to individual segments.
HCO
PMD
Total
$
1,982,961
$
1,323,727
$
3,306,688
6,999,869
—
6,999,869
$
8,982,830
$
1,323,727
$
10,306,557
HCO
PMD
Total
$
1,982,961
$
1,323,727
$
3,306,688
—
—
—
$
1,982,961
$
1,323,727
$
3,306,688
As of September 30, 2005
As of December 31, 2004
Accumulated
Accumulated
Gross Amount
Amortization
Net
Gross Amount
Amortization
Net
$
3,500,000
$
(3,500,000
)
$
—
$
3,500,000
$
(3,350,000
)
$
150,000
6,340,000
(3,170,195
)
3,169,805
2,940,000
(2,940,000
)
—
672,142
(464,751
)
207,391
422,142
(405,922
)
16,220
$
10,512,142
$
(7,134,946
)
$
3,377,196
$
6,862,142
$
(6,695,922
)
$
166,220
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
$
112,624
508,333
508,333
445,148
425,000
1,377,758
$
3,377,196
Table of Contents
-
our ability to effectively implement our growth strategy, as well as manage
growth of our operations and infrastructure, including effective identification and
integration of acquisitions;
-
variability and length of our sales cycle;
-
our ability to accurately forecast results of operations due to certain revenue
components being subject to significant fluctuations;
-
an increase in the percentage of our business subject to renewal. We are
in discussions regarding a revised long-term agreement with HCA, Inc. (HCA). On October
1, 2005 our agreement with HCA automatically renewed for one year in accordance with the
terms of our agreement, but may be terminated by either party upon forty-five days
notice to the other party. Our agreement with Tenet Healthcare Corporation (Tenet),
which expires at the end of the fourth quarter of 2005, includes a provision to extend
the contract through a series of four annual renewable periods. Our agreement
automatically renews if Tenet does not provide sixty days notice of their intent not to
renew. Tenet did not provide notice of intent to terminate the agreement, therefore the
first annual renewal period will commence January 1, 2006. Our agreement with HCA
represented approximately 11% of our revenues in the nine months ended September 30,
2005. No assurance can be given that these contracts will be renewed for extended terms,
and if renewed, that the terms will be the same as those in the existing agreements;
-
our ability to adequately address our customers’ needs in products and services;
-
the pressure on healthcare organizations and pharmaceutical/medical device
companies to reduce costs to their customers could result in financial pressures on our
customers to cut back on our services;
-
our ability to maintain our competitive position against current and potential
competitors;
-
our ability to develop enhancements to our existing products and services,
achieve widespread acceptance of new features, and keep pace with technological
developments;
-
our ability to obtain proper distribution rights from content partners to support
growth in courseware subscriptions;
-
our ability to achieve profitability on a consistent basis;
-
fluctuations in quarterly operating results caused by a variety of
factors including the timing of sales, subscription revenue
recognition and customer subscription renewals;
-
loss of a significant customer and concentration of a significant portion of our
revenue with a relatively small number of customers;
-
our ability to adequately develop and maintain our network infrastructure,
computer systems, software and related security;
-
the effect of governmental regulation on us, our business partners and our
customers, including, without limitation, changes in federal, state and international
laws or other regulations regarding education, training and Internet transactions; and
-
other risk factors detailed in our Annual Report on Form 10-K and other filings
with the Securities and Exchange Commission.
Table of Contents
o
Revenue recognition
o
Product development costs and related capitalization
o
Goodwill, intangibles, and other long-lived assets
o
Allowance for doubtful accounts
Table of Contents
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Table of Contents
HEALTHSTREAM, INC.
By:
/s/
Arthur E. Newman
Arthur E. Newman
Chief Financial Officer
November 14, 2005
Table of Contents
31.1
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2
Certification of the Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
32.2
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 31.1
I, Robert A. Frist, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of HealthStream, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 14, 2005 /s/ ROBERT A. FRIST, JR.
--------------------------
Robert A. Frist, Jr.
Chief Executive Officer
|
Exhibit 31.2
I, Arthur E. Newman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of HealthStream, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 14, 2005 /s/ ARTHUR E. NEWMAN
--------------------------
Arthur E. Newman
Chief Financial Officer
|
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of HealthStream, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Robert A. Frist, Jr., Chief Executive Officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ ROBERT A. FRIST, JR. ------------------------------ Robert A. Frist, Jr. Chief Executive Officer November 14, 2005 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of HealthStream, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Arthur E. Newman, Chief Financial Officer of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ ARTHUR E. NEWMAN ----------------------------- Arthur E. Newman Chief Financial Officer November 14, 2005 |