<SUBMISSION>
<ACCESSION-NUMBER>0001299933-08-003553
<TYPE>8-K
<PUBLIC-DOCUMENT-COUNT>2
<PERIOD>20080722
<ITEMS>2.02
<ITEMS>7.01
<ITEMS>9.01
<FILING-DATE>20080723
<DATE-OF-FILING-DATE-CHANGE>20080722
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>HEALTHSTREAM INC
<CIK>0001095565
<ASSIGNED-SIC>7370
<IRS-NUMBER>621443555
<STATE-OF-INCORPORATION>TN
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>8-K
<ACT>34
<FILE-NUMBER>000-27701
<FILM-NUMBER>08964134
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>209 10TH AVE SOUTH STE 450
<CITY>NASHVILLE
<STATE>TN
<ZIP>37203
<PHONE>6153013100
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>209 10TH AVE SOUTH STE 450
<CITY>NASHVILLE
<STATE>TN
<ZIP>37203
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>htm_28195.htm
<DESCRIPTION>LIVE FILING
<TEXT>
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<TITLE> HealthStream, Inc. (Form: 8-K) </TITLE>
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		UNITED STATES<BR>
	SECURITIES AND EXCHANGE COMMISSION
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	WASHINGTON, D.C. 20549
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	FORM 8-K
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	CURRENT REPORT
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	Pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934
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	Date of Report (Date of Earliest Event Reported):
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	&nbsp;
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	July 22, 2008
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	HealthStream, Inc.
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<BR>__________________________________________<BR>
	(Exact name of registrant as specified in its charter)
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	Tennessee
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	000-27701
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	621443555
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_____________________<BR>
	(State or other jurisdiction
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	(Commission
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	of incorporation)
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	File Number)
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	Identification No.)
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	209 10th Ave. South, Suite 450, Nashville, Tennessee
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	37203
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_________________________________<BR>
	(Address of principal executive offices)
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	&nbsp;
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___________<BR>
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	Registrant&#146;s telephone number, including area code:
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	615-301-3100
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	Not Applicable
<BR>______________________________________________<BR>
	Former name or former address, if changed since last report
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	&nbsp;
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<!-- CoverPageRegistrant END --><P><FONT SIZE="2">
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:</FONT>
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[&nbsp;&nbsp;]&nbsp;&nbsp;Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))<br>
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<B>
	Item 2.02 Results of Operations and Financial Condition.
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On July 22, 2008, HealthStream, Inc. (the "Company") issued a press release announcing results of operations for the second quarter ended June 30, 2008, the text of which is set forth in Exhibit 99.1.
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	Item 7.01 Regulation FD Disclosure.
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On July 22, 2008, HealthStream, Inc. (the "Company") issued a press release announcing results of operations for the second quarter ended June 30, 2008, the text of which is set forth in Exhibit 99.1.
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	Item 9.01 Financial Statements and Exhibits.
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(d)	Exhibits<br><br>99.1	Press release dated July 22, 2008.<br>
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	SIGNATURES
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	Pursuant to the requirements of the Securities Exchange Act of 1934, the
	registrant has duly caused this report to be signed on its behalf by the
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	HealthStream, Inc.
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	July 22, 2008
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	By:
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<I>
	Gerard M. Hayden, Jr.
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	Name: Gerard M. Hayden, Jr.
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	Title: Chief Financial Officer
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	Exhibit&nbsp;Index
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	99.1
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Press release dated July 22, 2008.
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<P align="right" style="font-size: 10pt"><FONT style="font-size: 12pt">EXHIBIT 99.1</FONT>




<P align="left" style="margin-left:25%; font-size: 12pt"><FONT style="font-size: 10pt">Contact:
<BR>
Gerard M. Hayden, Jr.
<BR>
Chief Financial Officer
<BR>
(615)&nbsp;301-3163
<BR>
ir@healthstream.com
</FONT>


<P align="left" style="margin-left:25%; font-size: 10pt">Media:
<BR>
Mollie Elizabeth Condra
<BR>
Communications, Research, &#038; Investor Relations
<BR>
(615)&nbsp;301-3237
<BR>
mollie.condra@healthstream.com


<P align="left" style="font-size: 10pt"><FONT style="font-size: 14pt"><B>HEALTHSTREAM ANNOUNCES SECOND QUARTER 2008 RESULTS</B>
</FONT>

<P align="left" style="font-size: 14pt"><FONT style="font-size: 11pt"><B>NASHVILLE, Tenn. (July&nbsp;22, 2008)</B>&#151;HealthStream, Inc. (NASDAQ: HSTM), a leading provider of
learning and research solutions for the healthcare industry, announced today results for the second
quarter ended June&nbsp;30, 2008.
</FONT>

<P align="left" style="font-size: 11pt"><B>Highlights:</B>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 11pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><FONT style="font-size: 10pt">&#149;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><FONT style="font-size: 10pt">Revenues of $13.0&nbsp;million in the second quarter of 2008, up 8% over the second
quarter of 2007</FONT></TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Net income of $739,000 in the second quarter of 2008, up from $425,000 in the second
quarter of 2007</TD>
</TR>

</TABLE>


<P>
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Adjusted EBITDA of $2.2&nbsp;million in the second quarter of 2008, up from $1.9&nbsp;million in
the second quarter of 2007</TD>
</TR>

</TABLE>


<P>
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1,639,000 healthcare professional subscribers fully implemented on our Internet-based
learning network at June&nbsp;30, 2008, up from 1,422,000 at June&nbsp;30, 2007</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Approximately $1.0&nbsp;million invested in stock repurchase plan during the second quarter,
ending the quarter with a cash balance of $5.8&nbsp;million, up from $3.6&nbsp;million at December
31, 2007.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><FONT style="font-size: 11pt"><B>Financial Results:</B>
<BR>
<B>Second Quarter 2008 Compared to Second Quarter 2007</B>
<BR>
Revenues for the second quarter of 2008 increased $966,000, or 8&nbsp;percent, to $13.0&nbsp;million,
compared to $12.0&nbsp;million for the second quarter of 2007. The Company&#146;s revenue mix during the
second quarter of 2008 was comprised of 63&nbsp;percent of revenues from HealthStream Learning and 37
percent from HealthStream Research. This compares to 54&nbsp;percent from HealthStream Learning and 46
percent from HealthStream Research during the second quarter of 2007.
</FONT>

<P align="left" style="font-size: 11pt">Revenues from HealthStream Learning increased by $1.7&nbsp;million when compared to the second quarter
of 2007. Of this increase, $1.6&nbsp;million was derived from our Internet-based subscription learning
products, which includes revenue increases from the HealthStream Learning Center&#174; (HLC)&nbsp;of $900,000
and from courseware subscriptions and online training services of $666,000. Revenues from these
products increased 30&nbsp;percent over the prior year quarter and approximated $6.8&nbsp;million for the
second quarter of 2008. Revenues associated with implementation, development, and consulting
services increased $481,000 over the prior year quarter. Our increase in revenues was partially
offset by a decrease in revenues from live events, study guides, and association activities, which
collectively declined $328,000 from the prior year quarter, primarily due to lack of customer
demand for such services.


<P align="left" style="font-size: 11pt">Revenues from HealthStream Research decreased $708,000 when compared to the second quarter of 2007.
Revenue mix changes over the prior year quarter included an increase of $232,000 from patient
surveys. This increase was offset by revenue declines of $333,000 from employee surveys, $325,000
from community surveys, and $282,000 from physician surveys as a result of fewer survey projects
being completed during the second quarter of 2008 as compared to the same quarter in the prior
year.


<P align="left" style="font-size: 11pt">Gross margin, which we define as revenues less cost of revenues (excluding depreciation and
amortization) divided by revenues, declined to 63&nbsp;percent for the second quarter of 2008 from 64
percent for the second quarter of 2007. The decline in gross margin resulted from changes in
revenue mix and related cost of revenues. In HealthStream Research, we experienced lower gross
margins as a result of lower revenues from physician and employee surveys, which have higher gross
margins than patient and community surveys. In HealthStream Learning, gross margins improved
slightly compared to the prior year quarter due to the increase in HLC revenues, but were somewhat
offset by increased personnel expenses and increased royalties paid by us associated with increased
revenues from a portion of our courseware subscription products.


<P align="left" style="font-size: 11pt">Overall, other operating expenses, which include product development, sales and marketing,
depreciation and amortization, and other general and administrative expenses increased over the
prior year quarter. Product development grew by $230,000, which was primarily associated with
maintenance and support of our HealthStream Learning products, as well as a reclassification of
personnel to product development from general and administrative expenses within HealthStream
Research. Sales and marketing decreased by $127,000, partly due to a $421,000 decrease associated
with our Annual Learning Summit. That event occurred in last year&#146;s second quarter but will take
place in this year&#146;s third quarter. Additions of sales personnel to both HealthStream Learning and
HealthStream Research accounted for the offsetting increases in sales and marketing expenses. The
depreciation and amortization and other general and administrative categories increased modestly
over the same quarter of last year.


<P align="left" style="font-size: 11pt">Net income for the second quarter of 2008 was $739,000, or $0.03 per share (diluted), up from
$425,000, or $0.02 per share (diluted), for the second quarter of 2007.


<P align="left" style="font-size: 11pt">Adjusted EBITDA (which we define as net income before interest, income taxes, share-based
compensation, and depreciation and amortization) was $2.2&nbsp;million for the second quarter of 2008,
compared to $1.9&nbsp;million for the second quarter of 2007. This improvement is consistent with the
factors mentioned above. Our reconciliation of this calculation to measures under generally
accepted accounting principles is attached in the Summary Financial Data.


<P align="left" style="font-size: 11pt"><B>Other Financial Indicators</B>
<BR>
At June&nbsp;30, 2008, the Company had cash and related interest receivable of $5.8&nbsp;million, compared to
$4.8&nbsp;million at March&nbsp;31, 2008. The increase in cash primarily resulted from improved cash receipts
from customers, but was partially offset by $1.0&nbsp;million of cash used during the quarter to
repurchase shares of our common stock pursuant to our stock repurchase plan. Capital expenditures
and capitalized feature enhancement development totaled approximately $0.4&nbsp;million for the second
quarter of 2008.


<P align="left" style="font-size: 11pt">Our days sales outstanding (DSO), which we calculate by dividing the accounts receivable balance,
excluding unbilled and other receivables, by average daily revenues for the quarter, approximated
48&nbsp;days for the second quarter of 2008 compared to 57&nbsp;days for the second quarter of 2007. The
improvement over the prior year quarter is associated with improved collections from customers
during the quarter.


<P align="center" style="font-size: 10pt; display: none">1
<!-- PAGEBREAK -->

<P align="left" style="font-size: 11pt"><B>Stock Repurchase Plan Update</B>
<BR>
During the second quarter of 2008, we purchased approximately $1.0&nbsp;million of our common stock
through the open market. Our board of directors authorized the repurchase of up to $3.0&nbsp;million
during the twelve-month period ending on September&nbsp;20, 2008, of which we have invested
approximately $1.1&nbsp;million as of June&nbsp;30, 2008.


<P align="left" style="font-size: 11pt"><B>HealthStream Learning Update</B>
<BR>
HealthStream supports healthcare organizations in delivering quality patient care, creating safer
hospitals, meeting regulatory training requirements, and developing professional skills through our
innovative learning solutions. To this end, we provide a range of learning solutions that include:
the HLC&#151;our Internet-based learning platform, a wide range of professional, clinical, and
regulatory content subscriptions, an online authoring/self-publishing tool, and learning activities
for healthcare professionals sponsored by pharmaceutical and medical device companies.


<P align="left" style="font-size: 11pt">In collaboration, HealthStream Research and HealthStream Learning launched the HealthStream HCAHPS
Preparation and Improvement Library Courseware in the second quarter of 2008. Four multi-facility
health systems contracted to receive this library for their employees during the second quarter.
<BR>
This online course of study, which focuses hospital staffs at all levels and functions on behaviors
that improve how patients perceive their hospital experience, correlates directly to the HCAHPS
(Hospital Consumer Assessment of Health Plan Survey) of patient perspectives on hospital care. The
Centers for Medicare and Medicaid (CMS)&nbsp;require hospitals to institute and publicly report results
of this survey as a condition for full reimbursement.


<P align="left" style="font-size: 11pt">At June&nbsp;30, 2008, approximately 1,639,000 healthcare professionals were fully implemented to use
our Internet-based HLC for training and education. This number is up from approximately 1,594,000
at March&nbsp;31, 2008. The total number of contracted subscribers at June&nbsp;30, 2008 was approximately
1,758,000, up from 1,530,000 at June&nbsp;30, 2007. &#147;Contracted subscribers&#148; include both those already
implemented (1,639,000) and those in the process of implementation (119,000). Revenue recognition
commences when a contract is fully implemented.


<P align="left" style="font-size: 11pt">Customers representing approximately 86&nbsp;percent of subscribers that were up for renewal did renew
in the second quarter of 2008, while our renewal rate based on the annual contract value was
approximately 88&nbsp;percent. The renewal rates for the second quarter of 2008 compare to a subscriber
renewal rate of 98&nbsp;percent and an annual contract value renewal rate of 113&nbsp;percent during the
second quarter of 2007. During the second quarter of 2008, quarterly renewal rates were negatively
impacted, in part, due to the decision of one non-acute care customer, representing approximately
9,000 subscribers, or 10&nbsp;percent of the subscribers up for renewal, who chose not to renew due to
its acquisition by a company using another learning system.


<P align="left" style="font-size: 11pt"><B>HealthStream Research Update</B>
<BR>
We support healthcare organizations with research solutions that provide valuable insight about
patients&#146; experiences, workforce engagement, physician relations, and community perceptions of
hospital services. This insight, in turn, provides data-driven roadmaps for organizational and
workforce development&#151;which can be achieved through HealthStream&#146;s learning solutions. Our primary
research solutions include physician, employee, patient, and community surveys that deliver
insight, analyses, and industry benchmarks to healthcare organizations.


<P align="left" style="font-size: 11pt">During the second quarter of 2008, HealthStream Research contracted with several new healthcare
organization customers, including Banner Health System, Rockdale Hospital &#038; Health System, and
Pikeville Medical Center.


<P align="left" style="font-size: 11pt">A couple of factors during the second quarter 2008 affected our performance in HealthStream
Research, compared to the second quarter of 2007. One customer elected to not repeat an interim
survey conducted in the same quarter last year and a few of our larger customers delayed&#151;until
later this year&#151;certain research projects originally scheduled for completion during the second
quarter. Although we have increased our sales team for HealthStream Research by approximately
one-third during the first half of the year, sales production is behind schedule&#151;which we expect to
continue through the remainder of 2008.


<P align="left" style="font-size: 11pt"><B>Financial Expectations</B>
<BR>
Revenues for the third quarter of 2008 are expected to range between $13.0 and $13.5&nbsp;million, an
increase of approximately $1.2 to $1.7&nbsp;million, or 10 to 14&nbsp;percent, over the same quarter in the
prior year. We expect revenues from HealthStream Learning to increase between 13 and 16&nbsp;percent
over the third quarter of the prior year resulting from continued growth in our HLC subscriber base
and courseware subscriptions, which we anticipate will be partially offset by continued declines in
several of our project-based products. We expect revenues from HealthStream Research to increase
between seven and 10&nbsp;percent, compared to the third quarter of 2007.


<P align="left" style="font-size: 11pt">We anticipate gross margins for the third quarter of 2008 to be down slightly compared to the same
quarter in the prior year, but be comparable to the second quarter of 2008. Product development
expenses are expected to be comparable to the second quarter of 2008 but increase in amount and as
a percentage of revenue compared to the prior year third quarter. Sales and marketing expenses are
also expected to increase in amount and as a percentage of revenue compared to both the second
quarter of 2008 and the prior year third quarter.&nbsp;A significant portion of this increase is
expected to occur from our Annual Summit to be held in September&nbsp;2008. Depreciation and
amortization are expected to remain comparable to both the second quarter of 2008 and the prior
year third quarter. General and administrative expenses are expected to increase in amount but
decrease as a percentage of revenues compared to the third quarter of 2007. We expect net income
for the third quarter of 2008 to range between $0.03 and $0.04 per diluted share.


<P align="left" style="font-size: 11pt">Primarily as a result of slower than anticipated sales acitivity in HealthStream Research, we are
revising our full year 2008 revenue growth expectation to range between 16 and 20&nbsp;percent over
2007. We expect revenues to increase in each remaining quarter of 2008 over the same quarter from
the prior year. Revenues from HealthStream Learning are expected to increase for the full year&nbsp;2008
over the full year 2007. Revenues from HealthStream Research are expected to increase for the full
year 2008 over the full year 2007 on an as reported basis but remain comparable to 2007 on a pro
forma basis (as if revenues from The Jackson Organization were included&nbsp;in our operating results as
of January&nbsp;1, 2007). We are also revising our expectation of net income per diluted share for the
full year of 2008 to be in the range between $0.11 and $0.13. Our estimates for the third quarter
and full year of 2008 do not reflect an income tax benefit associated with the realization of
additional deferred tax assets. We will continue to evaluate the need for a valuation allowance on
our remaining deferred tax assets based on whether they will more likely than not be realized in
the future.


<P align="left" style="font-size: 11pt">Capital expenditures and content purchases are expected to approximate $4.5&nbsp;million in 2008.


<P align="left" style="font-size: 11pt">&#147;We delivered $739,000 of net income and an adjusted EBITDA of $2.2&nbsp;million on a record $13.0
million of revenues in the second quarter of 2008. Our balance sheet strengthened as our&nbsp;cash
balance improved to $5.8&nbsp;million&#151;even while increasing investment in our sales teams for both
Research and Learning and executing $1.0&nbsp;million of our share repurchase program during the second
quarter,&#148; said Robert A. Frist, Jr., chairman and chief executive officer, HealthStream.


<P align="center" style="font-size: 10pt; display: none">2
<!-- PAGEBREAK -->

<P align="left" style="font-size: 11pt">A conference call with Robert A. Frist, Jr., chief executive officer, Gerard M. Hayden, Jr., senior
vice president and chief financial officer, and Mollie Condra, senior director of communications,
research, and investor relations will be held on Wednesday, July&nbsp;23, at 9:00 a.m. (EST). To listen
to the conference, please dial 877-440-5796 (no passcode needed) if you are calling within the
domestic U.S or Canada. If you are an international caller, please dial 719-325-4886 (no passcode
needed). The conference may also be accessed by going to
<U>http://ir.healthstream.com/events.cfm</U> for the simultaneous Webcast of the call, which will
subsequently be available for replay. The replay telephone numbers are 888-203-1112 (passcode
#5424932) for U.S. and Canadian callers and 719-457-0820 (passcode #5424932) for international
callers.


<P align="left" style="font-size: 11pt"><B>About HealthStream</B>
</FONT><BR>
<FONT style="font-size: 10pt">HealthStream (NASDAQ: HSTM) is a leading provider of research and learning solutions for the
healthcare industry, transforming <I>insight into action </I>to deliver outcomes-based results for
healthcare organizations. Through HealthStream&#146;s learning solutions&#151;which have been contracted by
over 1.7&nbsp;million hospital-based healthcare professionals&#151;healthcare organizations create safer
environments for patients, increase clinical competencies of their workforces, and facilitate the
rapid transfer of the latest knowledge and technologies. Through our research products, executives
from healthcare organizations gain valuable insight about patients&#146; experiences, workforce
challenges, physician relations, and community perceptions of their services. Based in Nashville,
Tennessee, HealthStream has two satellite offices. For more information about HealthStream&#146;s
learning and research solutions, visit <U>www.healthstream.com</U> or call us at 800-933-9293.
</FONT>

<P align="center" style="font-size: 10pt; display: none">3
<!-- PAGEBREAK -->

<P align="center" style="font-size: 10pt"><FONT style="font-size: 11.5pt"><B>HEALTHSTREAM, INC.<BR>
Summary Financial Data<BR>
(In thousands, except per share data)</B></FONT>


<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Six Months Ended</B></TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>June 30,</B></TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">24,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,148</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cost of revenues (excluding
depreciation and amortization)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,274</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Product development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,179</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Sales and marketing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,054</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,769</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,831</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">478</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income tax provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">469</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income per share, basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income per share, diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Weighted average shares outstanding:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,953</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,692</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt; display: none">4
<!-- PAGEBREAK -->


<P align="center" style="font-size: 11pt"><FONT style="font-size: 11.5pt"><B>Summary Financial Data &#151; Continued<BR>
(In thousands, except per share data)</B></FONT>



<P align="left" style="font-size: 11.5pt"><B>Income before interest, taxes, share-based compensation, depreciation and amortization, or adjusted
EBITDA</B><sup><B>(1)</B></sup><B>:</B>

<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Six Months Ended</B></TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>June 30,</B></TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">469</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(40</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(34</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(86</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(182</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Share-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">488</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,054</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income before interest, taxes,
share-based compensation,
depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,858</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 11pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><FONT style="font-size: 8pt">(1)</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><FONT style="font-size: 8pt">In order to better assess the Company&#146;s financial results, management believes that
income before interest, income taxes, share-based compensation, depreciation and
amortization (&#147;adjusted EBITDA&#148;) is an appropriate measure for evaluating the operating
performance of the Company at this stage in its life cycle because adjusted EBITDA reflects
net income adjusted for non-cash and non-operating items. Adjusted EBITDA is also used by
many investors to assess the Company&#146;s results from current operations. Adjusted EBITDA is
a non-GAAP financial measure and should not be considered as a measure of financial
performance under generally accepted accounting principles. Because adjusted EBITDA is not
a measurement determined in accordance with generally accepted accounting principles, it is
susceptible to varying calculations. Accordingly, adjusted EBITDA, as presented, may not be
comparable to other similarly titled measures of other companies.</FONT></TD>
</TR>


</TABLE>

<P align="center" style="font-size: 10pt; display: none">5
<!-- PAGEBREAK -->


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 11pt">



</TABLE>


<P align="center" style="font-size: 8pt"><FONT style="font-size: 11.5pt"><B>HealthStream, Inc.<BR>
Condensed Consolidated Balance Sheets<BR>
(In thousands)</B></FONT>


<DIV align="center">
<TABLE style="font-size: 11.5pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 11.5pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 11.5pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B><sup><B>(1)</B></sup></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and related interest receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts and unbilled receivables, net <sup>(2)</sup></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,719</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Prepaid and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,969</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deferred tax assets, current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">360</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,678</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Capitalized software feature enhancements, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,459</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,383</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Goodwill and intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,851</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred tax assets, non current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">360</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">52,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">53,361</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">LIABILITIES AND SHAREHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accounts payable, accrued and other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,260</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,493</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Current portion of long-term debt and capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">831</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,584</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Long-term debt and capital lease obligations,
net of current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,064</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,648</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Shareholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,126</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(60,608</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(61,413</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,713</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11.5pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total liabilities and shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">52,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">53,361</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 11.5pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><FONT style="font-size: 10pt">(1)</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><FONT style="font-size: 10pt"></FONT><FONT style="font-size: 9pt">Derived from audited financial statements contained in the Company&#146;s filing on Form
10-K for the year ended December&nbsp;31, 2007.</FONT></TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 9pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><FONT style="font-size: 10pt">(2)</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><FONT style="font-size: 10pt"></FONT><FONT style="font-size: 9pt">Includes unbilled receivables of $1,508 and $1,051 and other receivables of $5 and
$0 at June&nbsp;30, 2008 and December&nbsp;31, 2007, respectively.</FONT></TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 9pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><FONT style="font-size: 8pt"></FONT></TD>
</TR>

</TABLE>


<P align="left" style="font-size: 8pt"><FONT style="font-size: 11.5pt">
</FONT>

<P align="center" style="font-size: 10pt; display: none">6
<!-- PAGEBREAK -->

<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 10pt"><I>This press release includes certain forward-looking statements (statements other than solely
with respect to historical fact), including statements regarding expectations for the financial
performance for 2008 that involve risks and uncertainties regarding HealthStream. These statements
are based upon management&#146;s beliefs, as well as assumptions made by and data currently available to
management. This information has been, or in the future may be, included in reliance on the &#147;safe
harbor&#148; provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned
that such results or events predicted in these statements may differ materially from actual future
events or results.</I></FONT><FONT style="font-size: 9pt"> </FONT><FONT style="font-size: 10pt"><I>The forward-looking statements are subject to significant
uncertainties and other risks referenced in the Company&#146;s Annual Report on </I><I>Form 10-K</I><I> and in the
Company&#146;s other filings with the Securities and Exchange Commission. Consequently, such
forward-looking information should not be regarded as a representation or warranty by the Company
that such projections will be realized. Many of the factors that will determine the Company&#146;s
future results are beyond the ability of the Company to control or predict. Readers should not
place undue reliance on forward-looking statements, which reflect management&#146;s views only as of the
date hereof. The Company undertakes no obligation to update or revise any such forward-looking
statements.</I>
</FONT>

<P align="left" style="font-size: 10pt; text-indent: 19%"><FONT style="font-size: 11pt"> # # # #
</FONT>


<P align="center" style="font-size: 10pt; display: none">7


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