Narrowstep(TM) Inc. Reports Substantial Year-Over-Year Increases in Revenue for Its Fiscal 2006 Second Quarter and Six Months

Narrowstep(TM) Inc. Reports Substantial Year-Over-Year Increases in Revenue for Its Fiscal 2006 Second Quarter and Six Months

LONDON and NEW YORK, Oct. 13 /PRNewswire-FirstCall/ -- Narrowstep(TM) Inc. (BULLETIN BOARD: NRWS) , the TV on the Internet Company, today reported results for its fiscal 2006 second quarter and six months ended August 31, 2005. Total revenues for the fiscal 2006 second quarter and first six months were up more than 70 percent and 65 percent, respectively, from total revenue in the comparable periods in fiscal year 2005 driven by increases in both license sales and related production services revenues. During August, the Company's shares of common stock began trading on the Over-the-counter Bulletin Board under the symbol "NRWS."

For the first six months of fiscal year 2006 total revenue was $1.1 million, with a net loss of $1.9 million, or $0.06 loss per share, versus $788,500 in total revenue with a net loss, also of $1.9 million, or $0.07 loss per share, for the fiscal 2005 six-month period. Revenue for the fiscal 2006 second quarter was $717,985, with a net loss of $741,243, or 0.02 loss per share, compared to revenue of $449,468, with a net loss of $807,482, or $0.03 loss per share, for the fiscal 2005 second quarter.

Narrowstep Inc. CEO Iolo Jones said, "We are satisfied to report across-the-board increases in revenue, however, these results do not reflect the actual strength of our products and our business model. Momentum is just now pushing us towards critical mass, exemplified by the rate at which we are adding new channels. This is demonstrated further by some very important trials currently underway. For example, during September, ITV, the UK's largest commercial network, announced that it was testing a new service in two markets called ITV Local, to be launched on the 17th of October.

"In addition, a number of major media content and distribution companies are currently evaluating the use of our technology platform: Television Operating System -- or TelVOS(TM). It remains the only technology commercially available for the universal distribution of television services using Internet protocol on mobile, wireless, broadband and broadcast services. In fact, TelVOS won a 2005 Best of IBC Award, presented for the very best new product innovations in the world's premier television marketplace." The award was given to technology that showed clear potential to make or save money for end users, rather than to technology that was simply clever.

The Company also announced that TelVOS will support Apple's new video iPod, enabling any content held on the Narrowstep Network to be available for download to a video iPod.

About Narrowstep(TM) Inc.

Narrowstep(TM) Inc. (BULLETIN BOARD: NRWS) is a leading provider of internet-based video content delivery (TV on IP). Narrowstep's product and service offerings enable customers to distribute channels of video-based content and provide related services over the internet. The Narrowstep system, TelVOS(TM), enables comprehensive delivery of video content and television-like programming to mobile, wireless, internet, broadband and broadcast services. The Narrowstep system enables owners and users of video content to reach audiences by "narrowcasting" -- targeting delivery of specific content to interested groups. Narrowstep provides services to clients in the United Kingdom, the United States, and various other countries throughout the world, including Germany, Sweden and the Netherlands. To learn more, visit www.narrowstep.com.

Forward-Looking Statement

Certain statements in this news release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known or unknown risks, including those detailed in the Company's filings with the Securities and Exchange Commission, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

Contact: Narrowstep Inc. Jesse Deal (investors)
Iolo Jones, CEO Allen & Caron
ijones@narrowstep.comjesse@allencaron.com
+44 781 682 0745 212 691 8087

NARROWSTEP(TM) INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)

Six Six Three Three
months months months months
ended ended ended ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
2005 2004 2005 2004
(unaudited) (unaudited)(unaudited) (unaudited)
$ $ $ $
Revenue:
Production services 626,471 396,829 462,681 283,676
Narrowcasting and
other (including
related party
transactions of $0
in the three and six
months ended August 31,
2005 and $72,888 in the
three months and
$166,355 in the
six months ended
August 31, 2004) 483,765 391,762 255,304 165,792
Total revenue 1,110,236 788,591 717,985 449,468

Cost of revenue:
Direct costs 463,163 335,643 294,457 156,866
Software amortization 64,730 47,599 32,448 26,623
Total costs of revenue 527,893 383,242 326,905 183,489
Gross profit 582,343 405,349 391,080 265,979

Operating expenses:
Selling, general and
administrative
(including
non-cash stock
compensation
expense of $13,524
for the three months
and $402,852 for
the six months ended
August 31, 2005
and $285,067
for the three months
and $865,598 for
the six months ended
August 31, 2004) 2,537,115 2,364,241 1,132,902 1,086,671

Total operating
expenses 2,537,115 2,364,241 1,132,902 1,086,671
Loss from operations (1,954,772) (1,958,892) (741,822) (820,692)

Other income 350 748 71 64
Exchange (losses)/profits (22,890) (1,895) 508 13,146
Net loss (1,977,312) (1,960,039) (741,243) (807,482)

Net loss per share
- basic and diluted (0.06) (0.07) (0.02) (0.03)
Weighted-average number
of shares outstanding,
basic and diluted 30,878,929 27,329,750 31,809,656 27,939,310

NARROWSTEP(TM) INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)

August 31, February 28,
2005 2005
ASSETS
Current assets:
Cash and cash equivalents 561,837 58,791
Accounts receivable, net of
allowance for doubtful accounts of
$43,305 at February 28, 2005 and $25,144
at August 31, 2005 454,836 378,774
Amounts receivable from related parties,
net of allowance for doubtful accounts of
$238,851 at February 28, 2005 and
$231,707 at August 31, 2005 -- --
Prepaid expenses and other current assets 71,206 87,207
Total current assets 1,087,879 524,772
Property and equipment, net of accumulated
depreciation 350,826 551,499
Software development costs, net of accumulated
amortization 188,787 187,333
Goodwill 1,157,581 1,157,581
Intangible assets, net 134,331 155,488
Total assets 2,919,404 2,576,673

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable 580,599 447,381
Net obligations under capital leases 78,618 109,569
Accrued expenses and other liabilities 560,493 845,705
Total current liabilities 1,219,710 1,402,655

Net obligations under capital leases
- greater than 1 year 8,059 40,284
Total liabilities 1,227,769 1,442,939

STOCKHOLDERS' EQUITY:
Common stock, $0.000001 par value
450,000,000 shares authorized with
30,375,740 issued at
February 28, 2005
and 32,462,796 issued at
August 31, 2005 32 30
Additional paid-in capital 9,941,256 8,111,046
Deferred stock compensation 1,937,513 1,212,531
Accumulated deficit (10,181,594) (8,204,282)
Accumulated other comprehensive
(loss)/income (5,572) 14,409
Total stockholders' equity 1,691,635 1,133,734

Total liabilities and stockholders' equity 2,919,404 2,576,673

Source: Narrowstep Inc.

CONTACT: Iolo Jones, CEO of Narrowstep Inc., +44 781 682 0745,
ijones@narrowstep.com; or Investors, Jesse Deal of Allen & Caron for
Narrowstep Inc., +1-212-691-8087, jesse@allencaron.com

Web site: http://www.narrowstep.com/

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