At year-end 2001, Nashville-based HealthStream's national, Internet-based learning network of healthcare organizations increased to include a total of approximately 500 hospital facilities, up from 228 at the start of 2001. In the fourth quarter, a quarterly record 96 hospital facilities selected HealthStream's Internet-based Healthcare Learning Center. Forty-nine of the 96 new contracts were derived from HealthStream customers who transitioned from its installed learning management system (currently used by over 800 hospital facilities) to the Internet-based learning network including, Stanford Health System, Greenville Hospital System, and the University of Utah Hospitals and Clinics. The remaining 47 new contracts represent a diverse range of healthcare organizations, including Boston Medical Center, United States Air Force Academy-10th Medical Group, and Emerson Hospital.

Approximately 300,000 healthcare professionals now use HealthStream's Internet-based Healthcare Learning Center for training and education. Concurrent with the growth of healthcare facilities, the rate of course completions by both clinical and non-clinical employees grew 910 percent during 2001; approximately 10,200 courses were completed in the month of December 2000 while approximately 103,000 were completed during December 2001.

Since the Internet-based Healthcare Learning Center is an application service provider (ASP) based product, services are contracted for an average of two years and the associated revenues are recognized over the life of the contract. For the fourth quarter 2000, approximately 20 percent of revenues were derived from this learning network. For the fourth quarter 2001, the proportion increased to approximately 33 percent, representing predictable, recurring revenue streams for the Company.

Revenues for the year ended December 31, 2001 are expected to be approximately $13.5 million, as compared with $9.7 million for the year ended December 31, 2000, an increase of 40 percent. Fourth quarter 2001 revenues are expected to be $3.8 million, as compared with $3.1 million for the third quarter 2001, an increase of 25 percent.

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