Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
HealthStream’s chief executive officer and principal financial officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the Exchange Act)) as of December 31, 2020. Based on that evaluation, the chief executive officer and principal financial officer have concluded that HealthStream’s disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and the information required to be disclosed in the reports the Company files or submits under the Exchange Act was accumulated and communicated to the Company’s management, including its principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, and for assessing the effectiveness of internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As discussed above, we completed the acquisition of ShiftWizard on October 12, 2020, completed the acquisition of ANSOS on December 2, 2020, and completed the acquisition of myClinicalExchange on December 10, 2020. We are continuing the process of analyzing the systems of internal control over financial reporting of these acquired businesses and integrating them within our broader framework of controls. In accordance with the SEC’s rules which allow us to exclude these acquired businesses from our internal controls assessment in respect of periods ending on or prior to the first anniversary of the completion of any such acquisition, and taking into account the proximity of the closing date of these acquisitions to our internal controls assessment date of December 31, 2020, we have excluded these acquired businesses from management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2020. The assets of ShiftWizard as of December 31, 2020 represented approximately 1% of our total consolidated assets as of such date, and the net revenues of the ShiftWizard during the year ended December 31, 2020 (including the period in 2020 prior to our acquisition of ShiftWizard) represented approximately 2% of our consolidated net revenues during our fiscal year ended December 31, 2020. The assets of ANSOS as of December 31, 2020 represented approximately 3% of our total consolidated assets as of such date, and the net revenues of ANSOS during the year ended December 31, 2020 (including the period in 2020 prior to the acquisition of ANSOS) represented approximately 11% of our consolidated net revenues during our fiscal year ended December 31, 2020. The assets of myClinicalExchange as of December 31, 2020 represented less than 1% of our total consolidated assets as of such date, and the net revenues of myClinicalExchange during the year ended December 31, 2020 (including the period in 2020 prior to our acquisition of myClinicalExchange) represented less than 1% of our consolidated net revenues during our fiscal year ended December 31, 2020. We plan to complete the integration of these acquired businesses within our broader framework of internal controls during 2021 and include these acquired businesses within management’s assessment of our internal control over financial reporting in our next annual report on Form 10-K.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational
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effectiveness of our internal control over financial reporting. Management believes that, as of December 31, 2020 , the Company’s internal control over financial reporting was effective based on those criteria. The Company’s independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on the Company’s internal control over financial reporting, which appears in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in HealthStream’s internal control over financial reporting that occurred during the fourth quarter of 2020 that have materially affected, or that are reasonably likely to materially affect, HealthStream’s internal control over financial reporting.
Item 9B. Other Information
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information as to directors of the Company and corporate governance is incorporated by reference from the information to be contained in our proxy statement for the 2021 Annual Meeting of Shareholders (2021 Proxy Statement) that we will file with the Securities and Exchange Commission within 120 days of the end of the fiscal year to which this report relates. Pursuant to General Instruction G(3), certain information concerning executive officers of the Company is included in Part I of this Form 10-K, under the caption Information about our Executive Officers.
Item 11. Executive Compensation
Incorporated by reference from the information to be contained in the Company’s 2021 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Incorporated by reference from the information to be contained in the Company’s 2021 Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Incorporated by reference from the information to be contained in the Company’s 2021 Proxy Statement.
Item 14. Principal Accounting Fees and Services
Incorporated by reference from the information to be contained in the Company’s 2021 Proxy Statement.
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PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)(1) Financial Statements
Reference is made to the financial statements included in Item 8 to this Report on Form 10-K.
(a)(2) Financial Statement Schedules
All schedules are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or the notes thereto.
(a)(3) Exhibits
Number
Description
2.1 (1)
Membership Interest Purchase Agreement, by and between HealthStream, Inc. and Press Ganey Associates, Inc., dated February 12, 2018.
2.2 (2)
Equity Purchase Agreement, dated November 25, 2020, by and among HSTM Max Holdings, Inc., Change Healthcare Holdings, LLC, Change Healthcare Technologies, LLC and Change Healthcare Ireland Limited.
3.1*
Fourth Amended and Restated Charter of HealthStream, Inc.
3.2 (3) *
Second Amended and Restated Bylaws of HealthStream, Inc.
4.1*
Form of certificate representing the common stock, no par value per share, of HealthStream, Inc.
4.2*
Reference is made to Exhibits 3.1 and 3.2.
4.3 (4)
Description of Capital Stock of HealthStream, Inc.
10.1^ (5)
2010 Stock Incentive Plan, effective as of May 27, 2010
10.2^*
Form of Indemnification Agreement
10.3^ (6)
Executive Employment Agreement, dated July 21, 2005, between HealthStream, Inc. and Robert A. Frist, Jr.
10.4 (7)
Revolving Credit Agreement, dated November 24, 2014, by and among HealthStream, Inc., the several banks and other financial institutions and lenders from time to time party thereto and SunTrust Bank, as administrative agent, issuing bank, and swingline lender
10.5^
Summary of Director and Executive Officer Compensation
10.6^ (8)
Letter Agreement, dated as of September 24, 2015, between HealthStream, Inc. and Michael Sousa.
10.7^ (9)
2016 Omnibus Incentive Plan.
10.8^ (10)
Form of HealthStream, Inc. Restricted Share Unit Agreement (Officers) under 2016 Omnibus Incentive Plan.
10.9^ (10)
Form of HealthStream, Inc. Restricted Share Unit Agreement (Non-Employee Director) under 2016 Omnibus Incentive Plan.
10.10 (11)
Lease Agreement, dated April 3, 2017, by and between HealthStream, Inc. and Capitol View Joint Venture.
10.11 (12)
First Amendment to Revolving Credit Agreement, dated November 13, 2017, by and between HealthStream, Inc. and SunTrust Bank.
10.12 (13)
Second Amendment to Revolving Credit Agreement, dated as of December 31, 2018, by and between HealthStream, Inc. and SunTrust Bank.
10.13 (14)
Third Amendment to Revolving Credit Agreement, dated as of October 28, 2020, by and between HealthStream, Inc. and SunTrust Bank.
10.14^ (15)
Form of HealthStream, Inc. Restricted Share Unit Agreement (Performance) under 2016 Omnibus Plan between HealthStream, Inc. and J. Edward Pearson
10.15^ (15)
Form of HealthStream, Inc. Restricted Share Unit Agreement (Performance) under 2016 Stock Incentive Plan between HealthStream, Inc. and Michael Sousa
10.16^
HealthStream, Inc. Amended 2020 Executive and Corporate Management Cash Incentive Bonus Plan
10.17^
HealthStream, Inc. Amended 2020 Provider Solutions Cash Incentive Bonus Plan
10.18^ (16)
Contribution Agreement dated as of June 26, 2019 between HealthStream, Inc. and Robert A. Frist, Jr.
10.19^
Form of HealthStream, Inc. Non-Qualified Stock Option Agreement under 2016 Omnibus Incentive Plan.
21.1
Subsidiaries of HealthStream, Inc.
23.1
Consent of Independent Registered Public Accounting Firm
31.1
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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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
101.1 INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.1 SCH
Inline XBRL Taxonomy Extension Schema
101.1 CAL
Inline XBRL Taxonomy Extension Calculation Linkbase
101.1 DEF
Inline XBRL Taxonomy Extension Definition Linkbase
101.1 LAB
Inline XBRL Taxonomy Extension Label Linkbase
101.1 PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
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Cover Page Interactive Data File (formatted in Inline XBRL and included in Exhibit 101.1)
*
Incorporated by reference to Registrant’s Registration Statement on Form S-1, as amended (Reg. No. 333-88939).
^
Management contract or compensatory plan or arrangement
(1)
Incorporated by reference from exhibit filed on our Current Report on Form 8-K, dated February 12, 2018.
(2)
Incorporated by reference from exhibit filed on our Current Report on Form 8-K, dated November 30, 2020.
(3)
Incorporated by reference from exhibit filed on our Current Report on Form 8-K, dated October 23, 2015.
(4)
Incorporated by reference from exhibit filed on our Annual Report on Form 10-K, for the year ended December 31, 2019, filed with the SEC on February 26, 2020.
(5)
Incorporated by reference to Appendix B of the Company’s Definitive Proxy Statement filed with the SEC on April 29, 2010.
(6)
Incorporated by reference from exhibit filed on our Current Report on Form 8-K, dated July 25, 2005.
(7)
Incorporated by reference from exhibit filed on our Current Report on Form 8-K, dated November 25, 2014.
(8)
Incorporated by reference from exhibit filed on our Quarterly Report on Form 10-Q, for the quarterly period ended September 30, 2015, filed with the SEC on October 30, 2015.
(9)
Incorporated by reference from exhibit filed on our Current Report on Form 8-K, dated May 31, 2016.
(10)
Incorporated by reference from exhibit filed on our Quarterly Report on Form 10-Q, for the quarterly period ended March 31, 2017, filed with the SEC on May 1, 2017.
(11)
Incorporated by reference from exhibit filed on our Quarterly Report on Form 10-Q, for the quarterly period ended June 30, 2017, filed with the SEC on July 31, 2017.
(12)
Incorporated by reference from exhibit filed on our Current Report on Form 8-K, dated November 14, 2017.
(13)
Incorporated by reference from exhibit filed on our Current Report on Form 8-K, dated January 2, 2019.
(14)
Incorporated by reference from exhibit filed on our Current Report on Form 8-K, dated October 28, 2020.
(15)
Incorporated by reference from exhibit filed on our Current Report on Form 8-K, dated May 16, 2018.
(16)
Incorporated by reference from exhibit filed on our Quarterly Report on Form 10-Q, for the quarterly period ended June 30, 2019, filed with the SEC on July 26, 2019.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 25th day of February 2021.
HEALTHSTREAM, INC.
By: /s/ ROBERT A. FRIST, JR.
Robert A. Frist, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title(s)
Date
/s/ ROBERT A. FRIST, JR.
Chief Executive Officer and
February 25, 2021
Robert A. Frist, Jr.
Chairman (Principal Executive Officer)
/s/ SCOTT A. ROBERTS
Chief Financial Officer and Senior Vice President
February 25, 2021
Scott A. Roberts
(Principal Financial and Accounting Officer)
/s/ THOMPSON DENT
Director
February 25, 2021
Thompson Dent
/s/ FRANK GORDON
Director
February 25, 2021
Frank Gordon
/s/ C. MARTIN HARRIS
Director
February 25, 2021
C. Martin Harris
/s/ JEFFREY L. MCLAREN
Director
February 25, 2021
Jeffrey L. McLaren
/s/ LINDA REBROVICK
Director
February 25, 2021
Linda Rebrovick
/s/ MICHAEL SHMERLING
Director
February 25, 2021
Michael Shmerling
/s/ WILLIAM STEAD
Director
February 25, 2021
William Stead
/s/ DEBORAH TAYLOR TATE
Director
February 25, 2021
Deborah Taylor Tate
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