Narrowstep(TM) Inc. Reports Third Quarter Results for Fiscal Year 2007

Narrowstep(TM) Inc. Reports Third Quarter Results for Fiscal Year 2007

LONDON and NEW YORK, Jan. 18 /PRNewswire-FirstCall/ -- Narrowstep(TM) Inc. (BULLETIN BOARD: NRWS) , the TV on the Internet Company, announced its financial results for the third quarter of fiscal 2007 ended November 30, 2006. Revenue for the quarter was a record $1,649,585, an increase of 112% compared to $778,737 for the third quarter of fiscal 2006 and 5.2% as compared to the second quarter. Revenue for the nine months ended November 30, 2006 was $4,362,475, an increase of 131% compared to $1,888,974 for the nine months ended November 30, 2005. The increase in revenue was primarily driven by an increase in Narrowcasting and related activities. Revenue for the three months ended November 30, 2006 for this business segment was $1,163,968, an increase of 116% compared to $539,692 for the three months ended November 30, 2005.

Gross Profit as a percentage of revenue increased to 67% in the third quarter versus 61% in the second quarter and 41% in the third quarter of the prior year. This is due primarily to the growth of the higher margin Narrowcasting business which accounted for 71% of total revenue in the quarter ended November 30, 2006, compared to 69% in the quarter ended November 30, 2005.

Net Loss for the quarter ended November 30, 2006 was $1,373,694, or $0.03 per share, versus a net loss of $1,389,187, or $0.04 per share, for the quarter ended November 30, 2005 while the net loss for the first nine months of fiscal 2007 was $3,829,086, or $0.08 per share, compared to $3,366,499, or $0.11 per share, for the same period last year.

David C. McCourt, Chairman and interim CEO of Narrowstep, commented on the earnings release, stating "Narrowstep is a solid company with what we believe is the best operating system on the market today for content owners who wish to deliver the best of TV and the best of the web. Narrowstep is committed to building the infrastructure necessary to scale our operations and technology."

Narrowstep expects to attain profitability by streamlining existing costs, growing revenue and investing in technology. Management believes that these efforts will allow the company to continue to provide what they believe is the best opportunity for customers to monetize their content, while offering a superior end-viewer experience.

Commenting on the recent changes in senior management, David McCourt stated "The Board of Directors determined that new senior management was necessary in order to enable Narrowstep to scale up its operations and achieve its longer term growth objectives. As an active investor in the company combined with my more than 25-year history in successfully growing companies at similar points in their life cycles, the Board asked me to take responsibility for the development and implementation of the Company's strategic and operational plans. I have moved quickly to install individuals with proven track records of successfully scaling companies into senior management positions. I believe that Narrowstep has world-class products. I am confident that these management changes will enable the Company to leverage those products into future growth for the ultimate benefit of our stockholders."

At this time, Narrowstep will not be conducting an investor call. For additional information please contact Jesse Deal at (212) 691-8087.

NARROWSTEP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(Unaudited)

Three months ended Nine months ended
November 30, November 30,
2006 2005 2006 2005
$ $ $ $
Operating Revenue
Narrowcasting
and other 1,163,968 539,692 3,042,461 1,023,458
Production
services 485,617 239,045 1,320,014 865,516
Total revenue 1,649,585 778,737 4,362,475 1,888,974
Costs of Revenue
Direct costs 511,691 430,371 1,442,282 1,234,258
Software
amortization 31,555 30,646 97,404 95,377
Total costs
of revenue 543,246 461,017 1,539,686 1,329,635
Gross Profit 1,106,339 317,720 2,822,789 559,339
Operating Expenses
Selling, general
and
administrative 2,497,912 1,723,608 6,756,175 3,919,999
Total operating
expenses 2,497,912 1,723,608 6,756,175 3,919,999
Operating Loss (1,391,573) (1,405,888) (3,933,386) (3,360,660)
Other income
(expense), net 23,005 199 108,270 549
Currency exchange
income (loss) (5,126) 16,502 (3,970) (6,388)
Net Loss (1,373,694) (1,389,187) (3,829,086) (3,366,499)
Foreign currency
translation
adjustment 47,143 (3,991) 90,126 (23,972)
Comprehensive Loss (1,326,551) (1,393,178) (3,738,960) (3,390,471)

Net Loss per Common
Share - Basic and
Diluted (0.03) (0.04) (0.08) (0.11)
Weighted-Average
Number of Shares
Outstanding, Basic
and Diluted 45,248,974 32,673,022 45,214,292 31,814,258

NARROWSTEP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

November 30, February 28,
2006 2006
(Unaudited)
$ $
Assets
Current assets:
Cash and cash equivalents 1,755,529 2,232,854
Short-term investments -- 2,500,000
Accounts receivable, net of allowance
for doubtful accounts of $390,690 on
November 30, 2006 and $201,715 at
February 28, 2006 1,383,992 418,394

Prepaid expenses and other current assets 291,615 135,542
Total current assets 3,431,136 5,286,790
Property and equipment, net 1,050,944 289,148
Software development costs, net 176,101 146,166
Goodwill 1,157,581 1,157,581
Intangible assets, net 81,435 113,173
Total Assets 5,897,197 6,992,858

Liabilities and Stockholders' Equity
Liabilities
Current liabilities:
Unearned revenue 278,203 176,628
Accounts payable 471,120 504,919
Net obligations under capital
leases, current 85,649 58,113
Accrued expenses and other current
liabilities 624,091 424,104
Total current liabilities 1,459,063 1,163,764
Net obligations under capital
leases - long-term 157,133 43,997
Total Liabilities 1,616,196 1,207,761
Stockholders' Equity
Common stock, $0.000001 par value
450,000,000 shares authorized,
45,248,974 (unaudited) issued and
outstanding at November 30, 2006 and
45,136,474 issued and outstanding
at February 28, 2006 45 45
Additional paid-in capital 20,536,235 19,711,371
Stock subscription receivable -- (1,410,000)
Accumulated deficit (16,323,145) (12,494,059)
Accumulated other comprehensive
income (loss) 67,866 ( 22,260)
Total Stockholders' Equity 4,281,001 5,785,097
Total Liabilities and Stockholders' Equity 5,897,197 6,992,858

About Narrowstep(TM) Inc.

Narrowstep(TM) Inc. (BULLETIN BOARD: NRWS) , the TV on the Internet Company, is a leading global provider of broadband television services. Narrowstep's proprietary technologies and customer-focused services enable TV channels to be delivered over the Internet. 100+ companies worldwide have chosen Narrowstep because it offers the most television-like and true community building broadband experience. The Company's telvOS(TM) (Television Operating System(TM)) and nBed(TM) technologies enable the most comprehensive delivery of video to mobile, wireless, Internet, broadband, video-over-IP and entirely new IP-delivered broadcast services. For more information, visit www.narrowstep.com or call 212-404-1400.

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.

First Call Analyst:
FCMN Contact: ccooper@narrowstep.com

Source: Narrowstep Inc.

CONTACT: Investors, Jesse Deal of Allen & Caron, +1-212-691-8087,
jesse@allencaron.com, for Narrowstep Inc.

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

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