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November 14, 2000 05:15am
New Frontier Media Reports 2nd Quarter Revenue Gains
Source: New Frontier Media, Inc.
by: Company Press Release

BOULDER, CO) -- Summary: - New Frontier Media reports revenue increase of 23% year-over-year. - Pay TV subsidiary posts 48% revenue gain, year-over-year. Leverage in broadcast operations key contributor to improved cost of sales. EBITDA increases to $880,000 from $8,000 a year ago. - Internet Content subsidiary's content/sale of traffic revenue jumped 129%; membership revenue remained relatively flat, as expected. Cost of sales improved to 55% of sales compared to 73% of sales last year. EBITDA up 273%. - $10 million reserve taken pending court judgment in lawsuit. - One-time charge of $507,500 taken relating to Metro Global Media, Inc. stock. - Tax Benefit of $7.2 million booked, excluding nonrecurring charges. - Fiscal 2001 guidance issued forecasting $60-$65 million in annual revenue and $7-$8 million in annual EBITDA. - Brad Weber named CEO of the Internet Subsidiaries (IGallery, ITN and CTI).

New Frontier Media, Inc. (Nasdaq: NOOF - news), a leader in the electronic distribution of adult entertainment, announced its second fiscal quarter results for the quarter ended September 30, 2000. The Company reported revenue of $14.6 million for the quarter compared to $11.9 million a year ago, an increase of 23%. Gross profit for the quarter was reported as $6.8 million compared to $3.7 million, an increase of 84%. Net income was reported as a loss of $3.9 million for the quarter, including $10.5 million of one-time charges and a tax benefit of $7.2 million, compared to net income of $25,000 for the prior year period. Earnings per share were reported as a loss of $0.19 per common share compared to $0.00 per common share a year ago.

The net loss from continuing operations for the quarter reflect the inclusion of two material nonrecurring items: 1) a $10 million reserve as a result of the jury verdict issued in Lipson v. New Frontier Media, Inc. et. al. (``Lipson lawsuit'') and, 2) a $507,500 loss for the write down to market of the Metro Global Media, Inc. stock held by the company due to the impairment in value of this asset. With regard to the Lipson lawsuit, the plaintiff has not elected his remedies as between the contract and fraud claims, and as a result, the court has not entered any judgment to date. The Company intends to appeal any judgment that may be entered against it. New Frontier Media also booked a tax benefit of $7.2 million during the quarter as a result of the recognition of its deferred tax asset which the Company believes will be offset by future income.


The Erotic Networks(TM), the Company's Subscription/Pay-Per-View TV subsidiary, reported revenue of $5.9 million for the quarter compared to $4.0 million a year ago, an increase of 48%. Cost of sales was reported as $2.8 million compared to $2.6 million a year ago, or 47% of revenue compared to 65% of revenue a year ago. EBITDA for the quarter was reported as $880,000 compared to $8,000 a year ago.


IGallery, the Company's Internet Content Provider subsidiary, reported revenue of $8.5 million for the quarter compared to $7.3 million a year ago, an increase of 16%. Revenue from content/sale of traffic increased 129% to $3.2 million for the quarter just ended compared to $1.4 million a year ago. This increase offset the 7% decline in membership revenue which was reported as $5.3 million compared to $5.7 million a year ago. IGallery reported cost of sales as $4.7 million for the quarter compared to $5.4 million a year ago, or 55% of revenue compared to 73% of revenue last year. IGallery generated $2.4 million in EBITDA compared to $644,000 a year ago, an increase of 273%.

``As part of our ongoing effort to comply with the stricter charge back requirements initiated by Visa and Mastercard, our more conservative approach to our membership business has contributed to the overall improvement in our cost of sales,'' stated Brad Weber, CEO of IGallery. While the Company anticipates that credit card pressures will continue, revenue is expected to improve as a result of faster growing international market demand. ``We've also made a concerted effort to focus our attention on non-membership revenue opportunities. We have superb sales and marketing departments that have been aggressive in developing new affiliate relationships and in enhancing our content products and marketing programs,'' Weber said.


``With an extraordinary amount of technology contained within our ISP (ITN) and our payment service provider (CTI), we were exploring our options of developing these subsidiaries further to support a non-adult customer base, and in fact, had devoted resources to that end,'' explained Mark H. Kreloff, Chairman and CEO of New Frontier Media. ``Given, however, the increasing opportunities developing in the market, we believe that the expertise these subsidiaries offer can create more value to our shareholders in their support of IGallery, and contribute to our efforts to become the global leader in the electronic distribution of adult entertainment,'' he said.

In connection with the recent reorganization of its Internet subsidiaries, the Company announced the appointment of Brad Weber as CEO of Interactive Gallery, Inc. (IGallery), Interactive Telecom Network, Inc. (ITN) and Card Transactions, Inc. (CTI). ``Brad's appointment as CEO is an important move as we become even more focused on content delivery and understanding how we can further expand our market share,'' said Kreloff. Weber had been President and COO of both ITN and CTI. He brings extensive Internet technologies and transaction processing experience to the organization. In addition, Weber is Executive Vice President and director of New Frontier Media.

The Company reported that it is forecasting that it will earn $60-$65 million in revenue and $7-$8 million in EBITDA for fiscal year 2001, excluding nonrecurring charges. The Company stated that these forecasts are based on current expectations, including, but not limited to, the expectation that the Company will continue to experience credit card pressures for its Internet member sites and that it will experience similar results in the timing of the rollout of its Pay TV services. The Company's actual results may differ materially.

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of Securities & Exchange Act. The Company intends forward-looking statements to be covered by the safe harbor provisions for forward-looking statements. All statements regarding the Company's ability to increase its Internet membership revenue; improve fraud controls; increase non-membership revenue through improved content products and marketing programs, and all statements regarding the Company's forecasts for fiscal year 2001 and any contingencies are forward-looking statements. The forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth or implied by any forward-looking statements. Factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to: 1) our ability to compete effectively with our Subscription/PPV TV Group's primary competitor who has significantly greater resources than us; 2) our ability to compete effectively with our primary Internet competitors and to increase our membership revenue both domestically and internationally; 3) our ability to retain our key executives; 4) our ability to successfully manage our credit card chargeback and credit percentage in order to maintain our ability to accept credit cards as a form of payment for our products and services; 5) our ability to generate compelling web site content for resale; 6) our ability to attract market support for our stock, and 7) our ability to prevail in our post-trial motions and appeal in the Lipson lawsuit.

Please refer to the Company's most recent Form 10-Q, Form 10-KSB and other filings with the SEC for additional information regarding risks and uncertainties, including, but not limited to, the risk factors listed from time to time in such SEC reports.

(Consolidated Operating Results Redacted)

The Condensed Statement of Operations should be read in conjunction with the Company's Form 10-Q, Form 10-KSB and other SEC filings. To obtain a copies, please contact Keely Hawk, V.P. Corporate Communications at New Frontier Media, Inc.

(1) Figure includes a $10 million legal reserve. For more details, please refer to Note 7 - Contingencies of the Company's Form 10-Q for the quarter ended September 30, 2000.


New Frontier Media, Inc. is the fastest growing distributor of adult entertainment today. The Company delivers the most extensive lineup of quality programming over the broadest range of electronic means including cable, satellite, Internet, Broadband and video-on-demand.

The Erotic Networks, the umbrella brand for the Company's subscription and pay television subsidiary, provides pay-per-view and subscription TV networks to over 23 million cable, DBS (direct broadcast satellite) and C-band households throughout North America. In addition, the Company has entered the MDU (multiple dwelling units) and hotel/motel markets. The Erotic Networks include Pleasure(TM), TeN(TM), ETC (Erotic Television Clips)(TM), Extasy(TM), True Blue(TM) and Gonzo X(TM). These networks represent the widest variety of editing standards available and are programmed without duplication to offer the most extensive selection of adult network programming under a single corporate umbrella.

IGallery, the Company's Internet subsidiary, is a leader in the adult Internet market serving both the business-to-consumer (B2C) and business-to-business (B2B) markets. IGallery designs and manages its own membership-based web sites for the B2C market. In addition, IGallery offers a wide range of products and services to the B2B market. Presently, IGallery owns over 1,300 Internet domain names and operates 29 thematically organized consumer sites. Collectively, these sites generate over 60 million visitors each month. IGallery's own Internet network infrastructure enables the delivery of live and on-demand video events to millions of Internet users.

For more information contact Keely Hawk, VP Corporate Communications at (303) 444-0900, extension 145, or visit our web site at www.noof.com.

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