Narrowstep(TM) Inc Reports First Quarter Fiscal 2007 Financial Results

Narrowstep(TM) Inc Reports First Quarter Fiscal 2007 Financial Results

Quarterly Revenue Rose 192 Percent Year-over-year; Significant Inroads Made in the US, the World's Largest Media Market

LONDON and NEW YORK, June 28 /PRNewswire-FirstCall/ -- Narrowstep(TM) Inc (BULLETIN BOARD: NRWS) , the TV on the Internet Company, announced its financial results for the first quarter fiscal 2007 ended May 31, 2006. Annual revenue increased 192 percent year-over-year, to $1,145,000, from $392,000 for the quarter ended May 31, 2005. Consecutively, quarterly revenue increased 40 percent, from the $820,000 reported in the fourth quarter of fiscal 2006. The quarter's revenue included $837,000 from narrowcasting and related activities, versus $228,000 for the fiscal first quarter ended May 31, 2005, an increase of 266 percent. Revenue for the first quarter ended May 31, 2006, included one-time revenue of approximately $112,000 from recovery of a debt previously included in bad debt provision.

The Company made noteworthy progress during the quarter, announcing several new customers, including Land Rover (Go Beyond), Martial Arts TV, Tourism Massachusetts, Country Channel, MAC Experience, and JWTwo, the entertainment division of JWT, the United States' largest advertising agency.

"We are following through on the statements we made in our year-end release. Not only do we continue to expand rapidly in Europe, where we already have a solid customer base and market recognition, but we added customers in the United States, the world's largest media market," said Steve Beaumont, Narrowstep CEO. "Acceptance in the marketplace is the truest bellwether a Company can have, and the recognition of our Television Operating System(TM), or telvOS(TM) -- our proprietary broadband television solution, among marketers as the most powerful, sophisticated and viable offering on the market today only continues to gain momentum.

He continued, "Our revenue from narrowcasting and related activities for this past quarter is more than half of the total revenue of $1.5 million for the fiscal 2006 year. Managing our own growth is as important as growing our customer base. We recently upgraded our facilities in London, and added sales and support staff to both our European and United States operations."

The Company's gross profit was $767,000 for the quarter ended May 31, 2006, from $16,000 over the same period last year. The net loss for the first quarter of fiscal 2007 was $1,170,000, or $0.03 per share, versus a net loss of $1,236,000, or $0.04 per share, for the quarter ended May 31, 2005.

Results Conference Call

At 11:00 AM EDT today (4:00 PM BST and 8:00 AM PST) management will host its first ever conference call to discuss its quarterly results. This call will be broadcast live over the Internet. Those interested in listening to the live webcast may do so by going to the Company's website at www.narrowstep.com or www.vcall.com. Web participants are encouraged to go to either website at least 15 minutes prior to the start of the call to register, download, and install any necessary audio software. The online archive will be available shortly after the conclusion of the call and continue for seven days.

About Narrowstep(TM) Inc

Narrowstep(TM) Inc (BULLETIN BOARD: NRWS) is a leading global provider of broadband TV services (TV over IP). Narrowstep's offering empowers content owners, such as national broadcast/cable networks, niche program producers, and small start-up businesses, with a cost-effective platform to manage sophisticated commercial video and audio channels over the Internet. The Narrowstep system, telvOS(TM) (Television Operating System(TM)), is the most comprehensive solution that controls all aspects from encoding to playout, all from an easy-to-use, centrally-operated, web-based solution. 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.

For further information please contact:

Steve Crowther, CFO
Narrowstep(TM) Inc
Tel: + 1 609 951 2221
Email: scrowther@narrowstep.com

or

Jesse Deal (investors)
Allen & Caron
Tel: + 1 949 474 4300
Email: jesse@allencaron.com

NARROWSTEP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)

May 31, 2006 February 28, 2006
(unaudited)
$ $
ASSETS
Current assets:
Cash and cash equivalents 2,471,539 2,232,854
Short-term investments 2,529,403 2,500,000
Accounts receivable, net of allowance
for doubtful accounts of $103,820
(unaudited) on May 31, 2006 and
$201,715 on February 28, 2006 1,063,473 418,394
Prepaid expenses and other current
assets 222,776 135,542
Total current assets 6,287,191 5,286,790
Property and equipment, net of
accumulated depreciation 524,040 289,148
Software development costs, net of
accumulated amortization 156,958 146,166
Goodwill 1,157,581 1,157,581
Intangible assets, net of accumulated
amortization 102,594 113,173
TOTAL ASSETS 8,228,364 6,992,858

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable 734,688 504,919
Net obligations under capital leases,
current 47,621 58,113
Accrued expenses and other liabilities 810,566 600,732
Total current liabilities 1,592,875 1,163,764

Net obligations under capital leases -
long-term 41,223 43,997
Total liabilities 1,634,098 1,207,761

STOCKHOLDERS' EQUITY:
Common stock, $0.000001 par value
450,000,000 shares authorized with
45,248,974 (unaudited) issued at
May 31, 2006 and 45,136,474 issued
at February 28, 2006 45 45
Additional paid-in capital 16,512,153 16,443,374
Stock compensation 3,731,428 3,267,997
Stock subscription receivable (1,410,000)
Accumulated deficit (13,663,864) (12,494,059)
Accumulated other comprehensive
income (loss) 14,504 (22,260)
Total stockholders' equity 6,594,266 5,785,097

TOTAL LIABILITIES AND STOCKHOLDER EQUITY 8,228,364 6,992,858

NARROWSTEP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Three months Three months
ended ended
May 31, 2006 May 31, 2005
(unaudited) (unaudited)
$ $
Revenue:
Narrowcasting and other 836,513 228,461
Production services 308,010 163,790
Total revenue 1,144,523 392,251

Cost of revenue:
Direct costs 345,297 343,570
Software amortization 32,237 32,282
Total costs of revenue 377,534 375,852
Gross profit 766,989 16,399

Operating expenses:
Selling, general and administrative
(including non-cash stock-based
compensation expense of $463,431 for
the three months ended May 31, 2006
and $389,328 for the three months
ended May 31, 2005.) 1,980,304 1,229,349
Total operating expenses 1,980,304 1,229,349
Loss from operations (1,213,315) (1,212,950)

Interest income, net 44,099 279
Currency exchange loss (589) (23,398)
Net loss (1,169,805) (1,236,069)

Net loss per common share - basic
and diluted (0.03) (0.04)
Weighted-average number of shares
outstanding, basic and diluted 43,730,360 30,517,499

Source: Narrowstep(TM) Inc

CONTACT: Steve Crowther, CFO of Narrowstep(TM) Inc, +1-609-951-2221,
scrowther@narrowstep.com; or investors, Jesse Deal of Allen & Caron,
+1-949-474-4300, jesse@allencaron.com, for Narrowstep(TM) Inc

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

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