1095565--3/30/2007--HEALTHSTREAM

related topics

{system, service, information}

{customer, product, revenue}

{regulation, government, change}

{property, intellectual, protect}

{product, market, service}

{personnel, key, retain}

{competitive, industry, competition}

{acquisition, growth, future}

{tax, income, asset}

{control, financial, internal}

{stock, price, operating}

We may not be able to maintain our competitive position against current and potential competitors, especially those with significantly greater financial, technical, marketing, and other resources. Growth in courseware subscription revenues depend, in part, on our obtaining proper distribution rights from our content partners. We may not be able to develop enhancements to our existing products and services or achieve widespread acceptance of new features or keep pace with technological developments. Within the healthcare industry, our customer channels are focused on two segments: healthcare organizations and pharmaceutical/ medical device companies. We rely on spending within these two segments and our business may suffer if financial pressures cause our potential or existing customers to cut back on our services. Our product and service offerings include third party technology, the loss of which could materially harm our business. Errors in third party software or our inability to license this software in the future could increase our costs and decrease our revenues. A significant portion of our revenue is generated from a relatively small number of customers. A significant portion of our business is subject to renewal each year, therefore, renewals have a more significant impact on our revenue and operating results. The timing of our revenue recognition from sales activity is dependent upon achievement of certain events or performance milestones, and our inability to accurately predict them will harm our operating results. Because we recognize revenue from subscriptions for our products and services over the term of the subscription period, downturns or upturns in sales may not be immediately reflected in our operating results. We may not be able to meet our strategic business objectives unless we obtain additional financing, which may not be available to us on favorable terms or at all. Our relatively short operating history may prevent us from forecasting our results of operations accurately. We have significant goodwill and identifiable intangible assets recorded on our balance sheet that may be subject to impairment losses that would reduce our reported assets and earnings. Our stock price is likely to be volatile. Risks Related to Sales, Marketing and Competition We continue to refine our pricing and our products and services and cannot predict whether the ongoing changes will be accepted. Difficulties in the release and transition to the new version of our Internet-based HLC platform could harm our business. We may be unable to adequately develop our systems, processes and support in a manner that will enable us to meet the demand for our services. Our business operations could be significantly disrupted if we lose members of, or fail to integrate, our management team. We may not be able to hire and retain a sufficient number of qualified employees and, as a result, we may not be able to grow as we expect or maintain the quality of our services. We must continue to upgrade our technology infrastructure, both hardware and software, to effectively meet demand for our services. Our network infrastructure and computer systems and software may fail. We may lose users and lose revenues if our security measures fail. Risks Related to Government Regulation, Content and Intellectual Property Government regulation may require us to change the way we do business. Any reduction or change in the regulation of continuing education and training in the healthcare industry may adversely affect our business. New regulations may reduce our business activity with pharmaceutical and medical device customers. We may be liable to third parties for content that is available from our online library. Protection of certain proprietary intellectual property may be difficult and costly. We may be unable to protect our intellectual property, and we may be liable for infringing the intellectual property rights of others.

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1095565--3/30/2007--HEALTHSTREAM_INC