NRWS Narrowstep Inc (CE)

Narrowstep� Inc. (OTCBB:NRWS), the TV on the Internet company, announced its results for the third quarter of fiscal year 2008, ended November 30, 2007. Operating Highlights for the third quarter: Narrowcasting revenue increased 49% over the same quarter of the previous year Operating costs decreased by 19% quarter over quarter Completed upgrade to content distribution network Roll out of upgraded platform with Player 2.7 Completed phase I of Microsoft Silverlight integration Formed strategic relationship with TSS Cross Media Group Strategic focus changed to larger enterprise customers Narrowcasting and other revenues for the three months ended November 30, 2007 increased by $571,571, or 49%, to $1,735,539 as compared to $1,163,968 for the three months ended November 30, 2006. Narrowcasting revenues for the nine months ended November 30, 2007 increased by $1,252,193, or 41%, to $4,294,654 as compared to $3,042,461 for the nine months ended November 30, 2006. The increase in quarter-to-date and year-to-date revenue resulted primarily from the addition of new customers while focusing on retaining its larger and more profitable customers. Operating costs for the three months ended November 30, 2007 decreased by 19% to $4,555,711,�compared to $5,594,024�for the previous quarter. This reduction in operating costs resulted from headcount and other cost reductions due to�the Company�s previously announced�change in strategic focus. While these�reductions contributed to an increase in severance expense during the quarter,�the Company has recently made various additional cuts in its operating expenses as a result of streamlining the sales support process. These additional�reductions will be reflected gradually over the next two quarters. Total operating expenses for the nine months ended November 30, 2007 were $14,819,900, compared to $8,399,571 for the nine months ended November 30, 2006 reflecting the Company�s investment in its video delivery platform and content distribution network over the last nine months. As of November 30, 2007, the Company had $6,558,875 in cash. �Now that the investment phase in our platform is behind us, we will continue to focus on driving revenue," said David C. McCourt, Chairman and Interim Chief Executive Officer. �We are excited about our pipeline of deals headed into 2008 and look forward to communicating the addition of new enterprise customers that fit our new strategic focus.� The Company reported a net loss of $2,791,190 or $0.02 loss per share for the three months ended November 30, 2007, compared to a loss of $1,477,404 or $0.03 loss per share for the three months ended November 30, 2006. The Company reported a loss of $10,973,591 or $0.14 loss per share for the nine months ended November 30, 2007, compared to a loss of $3,932,796 or $0.09 loss per share for the nine months ended November 30, 2006. For additional information please contact, Jesse Case at jcase@narrowstep.com or visit http://www.narrowstep.com. PART 1 - FINANCIAL INFORMATION Item 1 - Financial Statements NARROWSTEP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS � � November 30,2007 � February 28,2007 (Unaudited) � � $ � $ Assets Current assets: Cash and cash equivalents 6,558,875 466,870 Accounts receivable, net of allowance for doubtful accounts of $1,344,892 and $940,534, respectively 1,261,836 1,403,779 Prepaid expenses and other current assets � 458,308 � � 332,192 � Total current assets � 8,279,019 � � 2,202,841 � Property and equipment, net 3,118,601 1,234,557 Software development costs, net 508,213 149,080 Restricted cash � security deposit � 281,790 � � - � Total Assets � 12,187,623 � � 3,586,478 � � Liabilities and Stockholders' Equity Liabilities Current liabilities: Unearned revenue 158,070 384,295 Accounts payable 675,367 960,580 Net obligations under capital leases, current 162,320 88,110 Accrued expenses and other current liabilities � 901,573 � � 977,948 � Total current liabilities 1,897,330 2,410,933 Net obligations under capital leases, long-term 186,246 135,470 Other long term liabilities � 6,237 � � - � Total Liabilities � 2,089,813 � � 2,546,403 � Commitments and Contingencies Stockholders' Equity Common stock, $0.000001 par value 450,000,000 shares authorized, 124,944,487 issued and outstanding at November 30, 2007 and 45,348,974 issued and outstanding at February 28, 2007 125 45 Additional paid-in capital 40,449,648 20,543,688 Accumulated deficit (30,529,123 ) (19,555,533 ) Accumulated other comprehensive income � 177,160 � � 51,875 � Total Stockholders' Equity � 10,097,810 � � 1,040,075 � Total Liabilities and Stockholders' Equity � 12,187,623 � � 3,586,478 � NARROWSTEP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) � � Three Months Ended � Nine Months Ended November 30,2007 � November 30,2006 November 30,2007 � November 30,2006 � � $ � $ $ � $ Revenue Narrowcasting and other 1,735,539 1,163,968 4,294,654 3,042,461 Production services � (20,828 ) � 485,617 � 296,707 � � 1,320,014 � Total revenue � 1,714,711 � � 1,649,585 � 4,591,361 � � 4,362,475 � Costs and Expenses Operating 1,516,689 713,176 4,104,004 1,846,479 Selling, general and administrative 2,322,616 2,161,159 8,417,442 5,742,409 Research & development � 716,406 � � 270,533 � 2,298,454 � � 810,683 � Total operating expenses � 4,555,711 � � 3,144,868 � 14,819,900 � � 8,399,571 � Operating Loss � (2,841,000 ) � (1,495,283 ) (10,228,539 ) � (4,037,096 ) Interest income (expense), net 54,674 23,005 (724,249 ) 108,270 Currency exchange income (loss) � (4,864 ) � (5,126 ) (20,803 ) � (3,970 ) Net Loss � (2,791,190 ) � (1,477,404 ) (10,973,591 ) � (3,932,796 ) Foreign currency translation adjustment � 88,850 � � 47,143 � 125,285 � � 90,126 � Comprehensive Loss � (2,702,340 ) � (1,430,261 ) (10,848,306 ) � (3,842,670 ) � Net Loss per Common Share - Basic and Diluted (0.02 ) (0.03 ) (0.14 ) (0.09 ) Weighted-Average Number of Shares Outstanding, Basic and Diluted 125,033,232 45,248,974 79,247,649 45,214,292 NARROWSTEP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) � � Nine Months Ended November 30,2007 � November 30,2006 � � $ � $ Cash Flows from Operating Activities Net Loss (10,973,591 ) (3,932,796 ) Adjustments to reconcile net loss to net cash used in operating activities: Allowance for doubtful accounts 404,358 188,975 Depreciation and amortization 676,603 407,647 Stock-based compensation expense 2,165,658 968,992 Interest on short-term investment - (57,609 ) Fair value of options and warrants granted to third party suppliers 19,625 - Interest on debt issuance 853,200 - Changes in net cash attributable to changes in operating assets and liabilities: � Accounts receivable (262,415 ) (1,154,574 ) Prepaid expenses and other current assets (126,116 ) (156,073 ) Unearned revenue (226,225 ) 101,575 Accounts payable, accrued expenses and other current liabilities � (355,351 ) � 166,188 � Net Cash Used in Operating Activities � (7,824,254 ) � (3,467,675 ) Cash Flows from Investing Activities Purchases of property and equipment (2,177,084 ) (808,131 ) Purchases of restricted cash-security deposit (281,790 ) - Payments for software development costs (435,688 ) (116,406 ) Proceeds from short-term investments � - � � 2,557,609 � Net Cash Provided by (Used in) Investing Activities � (2,894,562 ) � 1,633,072 � Cash Flows from Financing Activities Net proceeds from issuance of common stock 10,094,920 1,363,333 Proceeds from exercise of stock options and warrants - 6,250 Retirement of Narrowstep shares (177,491 ) - Payments on capital leases (71,716 ) (54,755 ) Net proceeds from issuance of debt instrument � 6,950,130 � � - � Net Cash Provided by Financing Activities � 16,795,843 � � 1,314,828 � Net Increase (Decrease) in Cash and Cash Equivalents 6,077,027 (519,775 ) Effect of exchange rates on change in cash 14,978 42,450 Cash and cash equivalents at the beginning of period � 466,870 � � 2,232,854 � Cash and Cash Equivalents at the End of the Period � 6,558,875 � � 1,755,529 � Supplemental disclosure of non-cash investing activities: Property and equipment acquired under capital leases 196,702 195,426 Supplemental disclosure of non-cash financing activities: Debt converted to equity 6,950,130 - Interest on debt issuance paid out with common shares 853,200 - About Narrowstep Narrowstep� Inc. (OTCBB:NRWS), the TV on the Internet company, is a leading provider of Internet TV services supporting over 180 channels worldwide. Narrowstep�s proprietary technology platform delivers the highest quality, TV-like experience available on the Internet. A pioneer in delivering Internet TV, Narrowstep offers the expertise and technology to move, manage and monetize video content across the Internet. For more information about Narrowstep, please visit http://www.narrowstep.com or call 609-945-1760. 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.