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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10 -Q
/X/ Quarterly report under Section 13 or 15(d) of the Securities and Exchange
Act of 1934.
For the quarterly period ended June 30, 2004
/ / Transition Report under Section 13 or 15(d) of the Exchange Act.
For the transition period from __________________ to __________________
0-23697
(Commission file number)
NEW FRONTIER MEDIA, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-1084061
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
7007 Winchester Circle, Suite 200, Boulder, Co 80301
(Address of principal executive offices)
(303) 444-0900
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes / / No /X/
As of August 2, 2004, 21,963,508 shares of Common Stock, par value $.0001, were
outstanding.
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FORM 10-Q
NEW FRONTIER MEDIA, INC.
Index
PAGE
NUMBER
--------------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2004 (Unaudited) and
March 31, 2004.................................................... 3-4
Consolidated Statements of Operations for the quarter ended June
30, 2004 and 2003 (Unaudited)..................................... 5
Consolidated Statements of Cash Flows for the quarter ended June
30, 2004 and 2003 (Unaudited)..................................... 6
Notes to Consolidated Financial Statements (Unaudited)............ 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk........ 20
Item 4. Controls and Procedures........................................... 20
PART II.OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................. 21
SIGNATURES................................................................ 22
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN 000S)
ASSETS
(UNAUDITED)
JUNE 30, MARCH 31,
2004 2004
------------ ---------
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 18,999 $15,352
Investments................................................... 2,946 1,478
Accounts receivable, net of allowance for doubtful accounts of
$68 and $68, respectively.................................. 6,148 6,872
Prepaid expenses.............................................. 479 497
Other......................................................... 284 236
-------- -------
TOTAL CURRENT ASSETS..................................... 28,856 24,435
-------- -------
FURNITURE AND EQUIPMENT, net.................................... 3,742 3,727
-------- -------
OTHER ASSETS:
Prepaid distribution rights, net.............................. 10,823 11,627
Goodwill...................................................... 3,743 3,743
Other identifiable intangible assets, net..................... 292 356
Deposits...................................................... 155 156
Deferred tax asset............................................ 165 --
Other......................................................... 619 718
-------- -------
TOTAL OTHER ASSETS....................................... 15,797 16,600
-------- -------
TOTAL ASSETS.................................................... $ 48,395 $44,762
======== =======
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
3
NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN 000S)
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
JUNE 30, MARCH 31,
2004 2004
------------ ---------
CURRENT LIABILITIES:
Accounts payable............................................. $ 1,242 $ 1,767
Current portion of obligations under capital leases.......... 306 356
Deferred revenue............................................. 959 1,304
Current portion of notes payable............................. 273 653
Taxes payable................................................ 115 --
Accrued restructuring expenses............................... 1,022 1,026
Accrued compensation......................................... 846 952
Accrued liabilities.......................................... 1,176 1,259
-------- ---------
TOTAL CURRENT LIABILITIES............................... 5,939 7,317
-------- ---------
LONG-TERM LIABILITIES:
Obligations under capital leases, net of current portion..... 100 154
Notes payable, net of current portion........................ 205 275
-------- ---------
TOTAL LONG-TERM LIABILITIES............................. 305 429
-------- ---------
TOTAL LIABILITIES.................................... 6,244 7,746
-------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.0001 par value, 50,000,000 shares authorized,
21,954,458 and 22,386,008 respectively, shares issued and
outstanding............................................... 2 2
Preferred stock, $.10 par value, 5,000,000 shares authorized:
Class A, no shares issued and outstanding................. -- --
Class B, no shares issued and outstanding................. -- --
Additional paid-in capital................................... 51,997 49,590
Accumulated deficit.......................................... (9,848) (12,576)
-------- ---------
TOTAL SHAREHOLDERS' EQUITY.............................. 42,151 37,016
-------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..................... $ 48,395 $ 44,762
======== =========
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
4
NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN 000S)
(UNAUDITED)
QUARTER ENDED
JUNE 30,
-------------------
2004 2003
------- -------
NET SALES............................................................. $11,476 $10,081
COST OF SALES......................................................... 3,945 3,893
------- -------
GROSS MARGIN.......................................................... 7,531 6,188
------- -------
OPERATING EXPENSES:
Sales and marketing................................................. 1,079 1,507
General and administrative.......................................... 2,553 2,423
------- -------
TOTAL OPERATING EXPENSES....................................... 3,632 3,930
------- -------
OPERATING INCOME...................................................... 3,899 2,258
------- -------
OTHER INCOME (EXPENSE):
Interest income..................................................... 33 11
Interest expense.................................................... (34) (310)
Other income........................................................ -- 63
------- -------
TOTAL OTHER EXPENSES........................................... (1) (236)
------- -------
NET INCOME BEFORE PROVISION FOR INCOME TAXES.......................... 3,898 2,022
------- -------
Provision for income taxes.......................................... (1,170) --
------- -------
NET INCOME............................................................ $ 2,728 $ 2,022
------- -------
Basic/Diluted income per share........................................ $ 0.12 $ 0.10
======= =======
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
5
NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN 000S)
(UNAUDITED)
QUARTER ENDED
JUNE 30,
-------------------------
2004 2003
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................ $ 2,728 $ 2,022
Adjustments to reconcile net income to net cash provided by operating
activities:
Warrants issued/amortized for services and financing.................. -- 212
Amortization of deferred debt offering costs.......................... -- 58
Depreciation and amortization......................................... 1,481 1,584
Tax benefit from option/warrant exercise.............................. 1,269 --
(Increase) Decrease in operating assets
Accounts receivable.............................................. 724 (804)
Receivables and prepaid expenses................................. 24 41
Prepaid distribution rights...................................... (289) (360)
Deferred tax asset............................................... (216) --
Other assets..................................................... (5) 211
Increase (Decrease) in operating liabilities
Accounts payable................................................. (463) (469)
Deferred revenue, net............................................ (346) (144)
Taxes payable.................................................... 115 --
Accrued restructuring cost....................................... (4) (206)
Other accrued liabilities........................................ (189) 471
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................... 4,829 2,616
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment................................... (399) (163)
Purchase of investments............................................... (1,368) --
-------- --------
NET CASH USED IN INVESTING ACTIVITIES............................ (1,767) (163)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations................................. (103) (324)
Increase (decrease) in note payable................................... (400) 400
Issuance of common stock.............................................. 1,138 100
Retirement of common stock............................................ -- (1,500)
Issuance of redeemable preferred stock................................ -- 750
Decrease in other financing obligations............................... (50) --
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.............. 585 (574)
-------- --------
NET INCREASE IN CASH...................................................... 3,647 1,879
CASH AND CASH EQUIVALENTS, beginning of period............................ 15,352 4,264
-------- --------
CASH AND CASH EQUIVALENTS, end of period.................................. $ 18,999 $ 6,143
======== ========
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
6
NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The accompanying financial statements have been prepared without audit pursuant
to the rules and regulations of the United States Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles in the United States of America have been condensed or omitted
pursuant to such rules and regulations. Management believes these statements
include all adjustments considered necessary for a fair presentation of
financial position and results of operations. The financial statements included
herein should be read in conjunction with the financial statements and notes
thereto included in the latest annual report on Form 10-K.
The results of operations for the three-month period ended June 30, 2004 are not
necessarily indicative of the results to be expected for the full year.
BUSINESS
New Frontier Media, Inc. ("New Frontier Media"), is a publicly traded holding
company for its operating subsidiaries.
Colorado Satellite Broadcasting, Inc. ("CSB"), d/b/a The Erotic Networks,
("TEN") is a leading provider of adult programming to multi-channel television
providers and low-powered direct-to-home households. Through its VOD service and
its networks -- Pleasure, TEN, TEN*Clips, TEN*Xtsy, TEN*Blue, TEN*Blox, and
TEN*Max -- TEN is able to provide a variety of editing styles and programming
mixes that appeal to a broad range of adult consumers. Ten Sales, Inc., formed
in April 2003, is responsible for selling TEN's services.
Interactive Gallery, Inc. ("IGI") aggregates and resells adult content over the
Internet. IGI sells content to monthly subscribers through its broadband site,
www.TEN.com, partners with third-party gate-keepers for the distribution of
www.TEN.com and wholesales pre-packaged content to various webmasters.
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of New
Frontier Media, Inc. and its majority owned subsidiaries (collectively
hereinafter referred to as New Frontier Media or the Company). All intercompany
accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Estimates have been made by management in several areas,
including, but not limited to, the realizability of accounts receivable, accrued
restructuring expenses, the valuation of chargebacks and reserves, the valuation
allowance associated with deferred income tax assets and the expected useful
life and valuation of our prepaid distribution rights. Management bases its
estimates and judgments on historical experience and on various other factors
that are believed to be reasonable under the circumstances, the results of which
form the basis
7
NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results could differ
materially from these estimates.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the current
period presentation.
STOCK-BASED COMPENSATION
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB Opinion No. 25") and related interpretations
in accounting for its plans and complies with the disclosure provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). Under APB Opinion No. 25, compensation expense
is measured as the excess, if any, of the fair value of the Company's common
stock at the date of the grant over the amount a grantee must pay to acquire the
stock. The Company's stock option plans enable the Company to grant options with
an exercise price not less than the fair value of the Company's common stock at
the date of the grant. Accordingly, no compensation expense has been recognized
in the accompanying consolidated statements of operations for its stock-based
compensation plans.
Pro forma information regarding net income and income per share is required by
SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of SFAS No. 123. The fair
value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for the quarter ended June 30, 2004: risk free interest rate of
3.85%; dividend yield of 0%, expected lives of 2 to 4 years; and expected
volatility of 82%. No options were granted during the quarter ended June 30,
2003.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options vesting period. Adjustments are made
for options forfeited prior to vesting. The effect on compensation expense, net
income, and net income per common share had compensation costs for the Company's
stock option plans been determined based on fair value at the date of grant
consistent with the provisions of SFAS No. 123 for the quarters ended June 30,
2004 and 2003 are as follows (in thousands, except share data):
(UNAUDITED)
QUARTER ENDED
JUNE 30,
-----------------
2004 2003
------ ------
Net income
As reported........................................................... $2,728 $2,022
------ ------
Deduct:
Total stock-based employee compensation expense determined under fair
value based method for awards granted, modified, or settled, net of
tax................................................................... (70) (71)
------ ------
Pro Forma............................................................. $2,658 $1,951
====== ======
Basic income per common share
As reported........................................................... $ 0.12 $ 0.10
Pro Forma............................................................. $ 0.12 $ 0.10
Diluted income per common share
As reported........................................................... $ 0.12 $ 0.10
Pro Forma............................................................. $ 0.11 $ 0.10
8
NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- INCOME PER SHARE
The components of basic and diluted income per share are as follows (in
thousands):
(UNAUDITED)
QUARTER ENDED
JUNE 30,
-------------------
2004 2003
------- -------
Net income............................................................ $ 2,728 $ 2,022
======= =======
Average outstanding shares of common stock............................ 22,101 19,750
Dilutive effect of stock based compensation........................... 855 236
Incremental shares for assumed conversion of debt..................... -- 205
------- -------
Common stock and common stock equivalents............................. 22,956 20,191
======= =======
Basic/Diluted income per share........................................ $ 0.12 $ 0.10
======= =======
Options and warrants which were excluded from the calculation of diluted
earnings per share because the exercise price of the options and warrants were
greater than the average market price of the common shares were approximately
471,000 and 5,961,000 for the quarters ended June 30, 2004 and 2003,
respectively. Inclusion of these options and warrants would be antidilutive.
NOTE 3 -- SEGMENT INFORMATION
The Company has adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes reporting and disclosure standards for an enterprise's operating
segments. Operating segments are defined as components of an enterprise for
which separate financial information is available and regularly reviewed by the
Company's senior management.
The Company has the following two reportable segments:
* Pay TV Group -- distributes branded adult entertainment programming
networks and Video-on-Demand ("VOD") content through electronic
distribution platforms including cable television, C-Band, and Direct
Broadcast Satellite ("DBS")
* Internet Group -- aggregates and resells adult content via the Internet.
The Internet Group sells content to monthly subscribers through its
broadband site, www.ten.com, partners with third-party gatekeepers for
the distribution of www.ten.com, and wholesales pre-packaged content to
various webmasters.
The accounting policies of the reportable segments are the same as those
described in the summary of accounting policies. Segment profit (loss) is based
on income (loss) before income taxes. The reportable segments are distinct
business units, separately managed with different distribution channels.
9
NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following tables represent financial information by reportable segment (in
thousands):
(UNAUDITED)
QUARTER ENDED
JUNE 30,
---------------------
2004 2003
------- ---------
NET SALES
Pay TV Group...................................................... $10,788 $ 9,083
Internet Group.................................................... 688 998
------- -------
Total........................................................ $11,476 $10,081
======= =======
SEGMENT PROFIT (LOSS)
Pay TV Group...................................................... $ 5,279 $ 3,407
Internet Group.................................................... (64) 132
Corporate Administration.......................................... (1,317) (1,517)
------- -------
Total........................................................ $ 3,898 $ 2,022
======= =======
INTEREST INCOME
Internet Group.................................................... $ -- $ 3
Corporate Administration.......................................... 33 8
------- -------
Total........................................................ $ 33 $ 11
======= =======
INTEREST EXPENSE
Pay TV Group...................................................... $ 25 $ 34
Internet Group.................................................... 7 46
Corporate Administration.......................................... 2 230
------- -------
Total........................................................ $ 34 $ 310
======= =======
DEPRECIATION AND AMORTIZATION
Pay TV Group...................................................... $ 1,396 $ 1,480
Internet Group.................................................... 83 101
Corporate Administration.......................................... 2 3
------- -------
Total........................................................ $ 1,481 $ 1,584
======= =======
(UNAUDITED)
---------------------
JUNE
30, MARCH 31,
2004 2004
------- ---------
IDENTIFIABLE ASSETS
Pay TV Group...................................................... $40,260 $36,232
Internet Group.................................................... 3,439 2,790
Corporate Administration.......................................... 25,040 20,008
Eliminations...................................................... (20,344) (14,268)
------- -------
Total........................................................ $48,395 $44,762
======= =======
During the quarter ended June 30, 2004, the Company moved certain prepaid
distribution rights, totaling $1 million, from the Pay TV Group to the Internet
Group. The Company determined that these certain prepaid distribution rights
will be used exclusively by the Internet Group and have, therefore, reclassified
them accordingly.
Expenses related to corporate administration include all costs associated with
the operation of the public holding company, New Frontier Media, Inc., that are
not directly allocable to the Pay TV and Internet operating segments. These
costs include, but are not limited to, legal and accounting expenses, insurance,
registration and filing fees with NASDAQ and the SEC, investor relation costs,
and printing costs associated with the Company's public filings.
10
NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- MAJOR CUSTOMER
The Company's major customers (revenues in excess of 10% of total sales) are
EchoStar Communications Corporation ("EchoStar") and Time Warner, Inc. ("Time
Warner"). EchoStar and Time Warner are included in the Pay TV Group. Revenue
from Echostar's DISH Network and Time Warner as a percentage of total revenue
for each of the quarters ended June 30 are as follows:
2004 2003
----- -----
EchoStar............................................... 34% 35%
Time Warner............................................ 20% 13%
At June 30, 2004 and March 31, 2004, accounts receivable from EchoStar was
approximately $2,638,000 and $3,333,000, respectively. At June 30, 2004 and
March 31, 2004, accounts receivable from Time Warner was approximately $986,000
and $880,000, respectively. The loss of its major customers could have a
materially adverse effect on the Company's business, operating results and/or
financial condition.
NOTE 5 -- STOCK OPTIONS
During the quarter ended June 30, 2004, the Company granted 330,000 options to
certain employees from the 1999 Incentive Stock Option Plan.
NOTE 6 -- STOCK RETIREMENT
During the quarter ended June 30, 2004, the Company cancelled 929,250 shares of
common stock. The Company acquired these shares in exchange for certain domain
names as part of a legal settlement with a former officer in April 2003.
Subsequent to this, these shares were encumbered as security for a note payable.
This note was repaid during the quarter ended June 30, 2004, and the company
cancelled the shares.
NOTE 7 -- FINANCIAL ARRANGEMENTS
During the quarter ended June 30, 2004, the company obtained a $3 million line
of credit from an outside financial institution. The line of credit expires in
June of 2005 and is secured by the Pay TV Group's trade accounts receivable. The
interest rate applied on the line of credit is variable based on the current
prime rate. The line of credit requires that the Company maintain certain
restrictive financial covenants and ratios. The Company had not drawn down on
the line of credit during and as of the quarter ended June 30, 2004.
NOTE 8 -- INCOME TAXES
The Company's effective tax rate of 30% reflects the use of net operating losses
("NOLs") in the current year as well as establishing deferred tax assets for all
temporary differences other than net operating losses which may expire due to
the statutory limitations imposed by the IRS. Because the statutory maximum
percentage of taxable income subject to Alternative Minimum Tax ("AMT") exceeded
the NOLs, the Company anticipates paying AMT for the current year. The Company
also anticipates paying certain State Income taxes in jurisdictions for which
there are not enough NOLs to offset the Company's taxable income.
During the quarter ended June 30, 2004, the Company recorded a deferred tax
benefit of $1,269,000 related to the tax deductions in connection with stock
option exercises as a component of Additional Paid-In Capital.
11
NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD LOOKING STATEMENTS
This quarterly report on Form 10-Q includes forward-looking statements. These
are subject to certain risks and uncertainties, including those identified
below, which could cause actual results to differ materially from such
statements. The words "believe", "expect", "anticipate", "optimistic", "intend",
"will", and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date on which they are made. The Company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, or otherwise.
Factors that could cause actual results to differ materially from the
forward-looking statements include, but are not limited to: 1) our ability to
retain our two major customers that account for approximately 34% and 20% of our
total revenue, respectively; 2) our ability to compete effectively for quality
content with our Pay TV Group's primary competitor who has significantly greater
resources than us; 3) our ability to compete effectively with our Pay TV Group's
major competitor or any other competitors that may distribute adult content to
Cable MSOs, DBS providers, or to the Hotel industry; 4) our ability to retain
our key executives; 5) our ability to successfully manage our credit card
chargeback and credit percentages in order to maintain our ability to accept
credit cards as a form of payment for our products and services; and 6) our
ability to attract market support for our stock. The foregoing list of important
factors is not exclusive.
EXECUTIVE SUMMARY
Our goal is to be the leading provider in the electronic distribution of
high-quality adult entertainment via Cable, Satellite and Broadband platforms.
We operate our Company in two different segments -- Pay TV and Internet. Our
core business resides within the Pay TV segment and this is where the majority
of our financial and human resources are concentrated.
PAY TV SEGMENT
Our Pay TV segment is focused on the distribution of its seven PPV networks and
its Video-on-Demand ("VOD") service to cable multiple system operators ("MSOs")
and direct broadcast satellite ("DBS") providers. In addition, the Pay TV Group
has had success in delivering its VOD service to hotel rooms through its current
distribution arrangement with On Command Corporation ("On Command"). The Pay TV
Group earns a percentage of revenue on each pay-per-view ("PPV"), subscription,
or VOD transaction related to its services. Revenue growth occurs as the Pay TV
Group launches its services to new cable MSOs or DBS providers, experiences
growth in the number of digital subscribers for systems where its services are
currently distributed ("on-line growth"), and launches additional services to
its existing cable/DBS partners. Revenue growth also occurs as the Pay TV Group
experiences new and on-line growth for its VOD service, is able to effect
increases in the retail price of its products, and is able to increase the buy
rates for its products. The Pay TV Group seeks to achieve distribution for at
least four of its services on every digital platform in the U.S. Based on the
current market of 22.4 million DBS households and 22.9 million digital cable
households, the Pay TV Group currently has 37% of its defined market share.
Revenue growth for the Pay TV Group for the quarter ended June 30, 2004 was
driven primarily by:
* Growth in revenue from its VOD service
12
NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
* Growth in its PPV revenue primarily attributable to its most recent
agreement with Time Warner, Inc.
Revenue from the Pay TV Group's VOD service became a significant part of its
overall revenue mix during the fiscal year ended March 31, 2004, as cable
operators upgraded their systems to deliver content in this manner. The Pay TV
Group currently delivers its VOD content to 13.2 million cable network
households as compared to 7.0 million a year ago, as well as to 900,000 hotel
rooms through its distribution arrangement with On Command. The Company expects
cable operators to continue to upgrade their systems to allow for the delivery
of VOD content to the home. VOD can only be delivered in a digital, cable
environment. Currently, per the National Cable and Television Association
("NCTA"), there are 22.9 million digital cable households in the U.S. We
estimate that 15.4 million digital cable households are VOD enabled and, of this
amount, 14.2 million provide adult content to their VOD customers. We anticipate
that by the end of calendar year 2004 over 85% of digital cable households will
be VOD enabled. We expect that our VOD cable revenue will increase as MSOs
continue the deployment of this technology to their digital cable subscribers
and as they increase the amount of space allocated on their VOD servers to the
adult category (currently we provide 75 hours of programming each month). Today,
we are the sole provider of adult VOD content to the two largest U.S. cable
MSOs. However, we can give no assurances that we will continue to remain the
exclusive provider of adult VOD content to these two cable MSOs, and we do
expect to share the VOD platform with our major competitor during this fiscal
year on at least one of these two major platforms.
The Pay TV Group also provides its two least-edited services to the C-Band
market on a direct-to-the-consumer basis. C-Band customers contact the Pay TV
Group's in-house call center directly to purchase the networks on a one-month,
three-month or six-month subscription basis or PPV basis. The Pay TV Group
retains 100% of the revenue from these customers and over 95% of the sales are
made via credit cards. This market has been declining for several years as these
consumers convert from C-Band "big dish" analog satellite systems to smaller,
18-inch digital DBS satellite systems. The Pay TV Group has been able to
decrease its transponder, uplinking and call center costs related to this
business over the years in order to maintain its margins. The Pay TV Group
expects continued declines in revenue from this segment of its business during
2005.
INTERNET SEGMENT
The Internet Group generates revenue by selling monthly memberships to its
website, TEN.com, by earning a percentage of revenue from third-party
gatekeepers like On Command for the distribution of TEN.com to their customer
base, and by selling pre-packaged video and photo content to webmasters for a
monthly fee.
During the 2002 and 2003 fiscal years, we significantly restructured our
Internet business. The decision to restructure our Internet business was based
on a number of factors including: the large number of adult websites competing
for web surfers, the lack of barriers to entry into the adult web business, the
increased regulation from VISA and MasterCard, and the amount of free adult
content available on the Internet.
Once the restructuring was completed, we shifted our focus to forming long-term
revenue sharing partnerships with third-party gatekeepers, such as cable
companies, hospitality providers and portals for the distribution of TEN.com,
whereby we could gain direct access to consumers in search of adult
entertainment and leverage the gatekeepers' billing platform. We completed one
such agreement with On Command for the distribution of TEN.com through their
digitally wired hotel rooms, and we expect to create additional revenue sharing
arrangements in the near-term with select cable operators. The success we
achieve with these cable operators will dictate the revenue potential for this
segment in the longer term and will serve as justification for larger MSO's to
adopt this business model.
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NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
Currently we do not generate a material amount of revenue from these third-party
arrangements (less than 5% of our total Internet revenue).
Over 75% of our revenue from the Internet Group continues to be generated from
monthly memberships to TEN.com. However, we have seen this revenue erode over
the past several years since the traffic volume to TEN.com has not generated
enough new monthly sign-ups to offset the cancellations in our membership base.
The decline in membership revenue has slowed over the past several quarters as
new marketing efforts have increased traffic to TEN.com, generating monthly
sign-ups that are close to or slightly exceeding our monthly cancellation rate.
We will continue to focus on ways to generate profitable traffic during the 2005
fiscal year in order to reverse the decline in membership revenue from TEN.com.
We have also seen a decrease in revenue generated from selling pre-packaged
content to webmasters. This decrease in revenue from the sale of content is due
to a softening in demand for content by third-party webmasters. Webmasters are
decreasing their reliance on outside sources for content and demanding lower
prices for the content that they do purchase. In addition, we have not allocated
any significant resources towards a sales effort for these content products in
recent quarters. We expect to contract with a third-party marketing company
during the 2005 fiscal year to sell our products on our behalf to the webmaster
community in an attempt to gain more exposure in the marketplace and increase
the revenue from this business.
We view our Internet Group as an investment in the future, and we do not
anticipate any significant revenue growth from this segment during the 2005
fiscal year. As technology advances, we expect to leverage our existing Internet
infrastructure to take advantage of new distribution opportunities such as
interactive TV applications, wireless distribution, and digital subscriber line
("DSL") delivery to the set-top box. Until then, the Internet Group will focus
its efforts on deriving monthly subscription revenue from traffic directed
toTEN.com through advertising on the Pay TV Group's networks and affiliate
webmaster programs, as well as to completing new revenue sharing partnerships
through which we can gain access to captive adult consumers of the Cable MSOs.
PAY TV GROUP
The following table outlines the current distribution environment and network
households for each network:
ESTIMATED NETWORK HOUSEHOLDS(2)
-----------------------------------
(IN THOUSANDS)
AS OF AS OF
JUNE 30, JUNE 30,
NETWORK DISTRIBUTION METHOD 2004 2003 % CHANGE
- ----------------- ------------------- -------- -------- ---------
Pleasure Cable/DBS 7,900 8,700 (9%)
TEN Cable/DBS 15,800 11,600 36%
TEN*Clips Cable/DBS 14,300 10,300 39%
Video On Demand Cable 13,200 7,000 89%
TEN*Xtsy C-band/Cable/DBS 10,400 9,000 16%(1)
TEN*Blue Cable 2,600 620 319%
TEN*Blox Cable 2,900 600 383%
TEN*Blue Plus (3) C-band/Cable 0 570 N/A
TEN*Max C-band/Cable 400 570 (30%)(1)
------ ------
TOTAL NETWORK HOUSEHOLDS 67,500 48,960
====== ======
(1) Percentage change gives effect to a 33% decline in the C-band market's
total addressable households. Total addressable C-Band households
declined from 500,000 as of June 30, 2003 to 335,000 as of June 30,
2004.
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NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
(2) The above table reflects network household distribution. A household
will be counted more than once if the home has access to more than one
of the Pay TV Group's channels, since each network represents an
incremental revenue stream. The Group estimates its unique household
distribution as 16.9 million and 11.6 million digital cable homes as of
June 30, 2004 and 2003, respectively, and 9.8 million and 8.3 million
DBS homes as of June 30, 2004 and 2003, respectively.
(3) The Pay TV Group discontinued providing its TEN*BluePlus network in
February 2004.
The following table sets forth certain financial information for the Pay TV
Group for the quarters ended June 30, 2004 and 2003:
(IN MILLIONS)
QUARTER ENDED PERCENT
JUNE 30, CHANGE
---------------- ------------
2004 2003 '04 VS '03
----- ----- ------------
NET REVENUE
Cable/DBS/Hotel.......................... $ 9.7 $ 7.2 35%
C-Band................................... 1.1 1.9 (42%)
----- -----
TOTAL....................................... $10.8 $ 9.1 19%
----- -----
COST OF SALES................................. $ 3.6 $ 3.5 3%
----- -----
GROSS PROFIT.................................. $ 7.2 $ 5.6 29%
===== =====
GROSS MARGIN.................................. 67% 62%
----- -----
OPERATING EXPENSES............................ 1.9 2.2 (14%)
----- -----
OPERATING INCOME (LOSS)....................... $ 5.3 $ 3.4 56%
===== =====
NET REVENUE
CABLE/DBS/HOTEL REVENUE
The 35% increase in our cable/DBS/hotel revenue year-over-year for the quarter
was attributable to the following items:
* An 80% increase in VOD revenue
* A 33% increase in our cable PPV revenue
* A 9% increase in revenues generated by our three services on the DISH
platform
The above items are described in more detail below.
Revenue from our VOD service continued to be a significant contributor to our
growth year-over-year for the quarter. Revenue from our cable and hotel VOD
service was 40% of our total cable/DBS/ hotel revenue for the quarter ended June
30, 2004, as compared to 29% for the quarter ended June 30, 2003. Our VOD
content is available through our distribution arrangements with cable MSOs to
13.2 million cable network households as of June 30, 2004, as compared to 7. 0
million cable network households for the quarter ended June 30, 2003, as well as
to 900,000 On Command hotel rooms. In addition, we have also benefited from an
increase in the acceptance of partially edited VOD content during the past year.
The use of partially edited content results in higher buy rates and higher
retail rates.
We are currently the sole provider of adult VOD content to the two largest cable
MSOs in the U.S. We expect that we will share at least one of these platforms
with our major competitor sometime during our current fiscal year. The effect of
additional competition on this platform cannot be
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NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
determined at this time, but we do not anticipate any significant change in our
VOD revenue as we have always operated in a competitive environment on cable/DBS
distribution platforms.
The 33% increase in our cable PPV revenues is primarily attributable to our new
distribution deal with Time Warner, Inc. that provides for the distribution of
up to five of our networks on their affiliated systems. Through this deal, we
have added 8.7 million new network households for our TEN, TEN*Clips, TEN*Blue
and TEN*Blox services since July 2003.
The 9% increase in revenues from our three services on the DISH platform is
attributable to the increase in the number of subscribers to the DISH platform
and to certain changes that DISH has made to the way it prices and packages its
adult programming networks.
C-BAND REVENUE
The 42% decline in C-Band revenue is a result of the continued decline in the
C-Band market as consumers convert C-Band "big dish" analog satellite systems to
smaller, 18-inch digital DBS systems. The total C-Band market declined 33% from
500,000 households as of June 30, 2003 to 335,000 households as of June 30,
2004. During the quarter ended March 31, 2004, we discontinued selling
TEN*BluePlus on the C-Band platform.
Providing our other two networks to the C-Band market continues to be profitable
for us, generating operating margins of approximately 47% for the quarter ended
June 30, 2004 as compared to margins of 51% for the quarter ended June 30, 2003.
We will continue to closely monitor this business and when margins erode to an
unacceptable level we will discontinue providing our content on this platform.
COST OF SALES
Cost of sales consists of expenses associated with our digital broadcast
facility, satellite uplinking, satellite transponder leases, programming
acquisition and conforming costs, VOD transport costs, amortization of content
licenses, and the Pay TV Group's C-Band call center operations.
The 3% increase in costs of sales is related primarily to an increase in
transport costs for the delivery of our VOD content to cable MSOs as our VOD
distribution has increased year-over-year for the quarter. The increase in this
cost was offset by a decrease in our satellite transponder lease costs, a
decrease in payroll costs related to our C-Band call center operations, and a
decrease in our programming and conforming costs. Our satellite transponder
lease costs declined year-over-year for the quarter because we terminated the
delivery of TEN*BluePlus in February 2004 resulting in the cancellation of the
transponder lease for this network. Our programming and conforming costs
declined year-over-year for the quarter because we no longer outsource these
services to a third party. We have developed in-house programming and conforming
departments that now perform these same services at much lower operating costs
for us.
We are currently renegotiating our uplink service contract with our current
provider. Our new three-year contract will save approximately $0.5 million
annually for these services.
OPERATING INCOME
Operating income increased 56% year-over-year for the quarter primarily as a
result of the 19% increase in net revenue for the same period. Gross margins
increased to 67% for the quarter ended June 30, 2004 as compared to 62% for the
quarter ended June 30, 2003. Operating expenses as a percentage of revenue
declined to 18% for the quarter ended June 30, 2004 from 24% for the same
quarter a year ago.
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NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
The 14% decline in operating expenses year-over-year for the quarter is related
primarily to a decrease in sales and marketing costs. Our quarterly sales and
marketing costs decreased because we discontinued using our barker channel to
market our C-Band services during the quarter ended June 30, 2003. In addition,
during the quarter ended June 30, 2004 the Company did not incur trade show
expenses that were incurred during the comparable quarter ended June 30, 2003.
INTERNET GROUP
The following table sets forth certain financial information for the Internet
Group for the quarters ended June 30, 2004 and 2003.
(IN MILLIONS)
QUARTER ENDED PERCENT
JUNE 30, CHANGE
---------------- ------------
2004 2003 '04 VS '03
----- ----- ------------
NET REVENUE
Net Membership........................... $ 0.6 $ 0.8 (25%)
Sale of Content.......................... 0.1 0.2 (50%)
----- -----
TOTAL....................................... $ 0.7 $ 1.0 (30%)
----- -----
COST OF SALES................................. $ 0.3 $ 0.4 (25%)
----- -----
GROSS PROFIT.................................. $ 0.4 $ 0.6 (33%)
===== =====
GROSS MARGIN.................................. 57% 60%
----- -----
OPERATING EXPENSES............................ $ 0.5 $ 0.5 0%
----- -----
OPERATING INCOME (LOSS)....................... $(0.1) $ 0.1 (200%)
===== =====
NET REVENUE
The 30% decrease in total net revenue for the Internet Group is related to the
following:
* A 25% decline in net membership revenue and,
* A 50% decline in revenue from the wholesale of content products created
by the Internet Group
The 25% decline in net membership revenue year-over-year for the quarter is
related to the continued erosion of the sale of monthly memberships to our
website www.TEN.com. We continue to advertise our website on the Pay TV Group's
networks in order to drive type-in traffic to the site. In addition, we are
marketing our site on select adult review sites, where it is consistently ranked
as the number one adult site on the Internet. By ensuring that our affiliate
marketing programs are more targeted, we are experiencing an increase in our
conversion rates and number of monthly sign-ups, resulting in a slowing of the
erosion of our monthly membership revenue. We are also experimenting with new
price points such as a day pass for $9.99 and a monthly membership for $29.95.
We will continue to monitor the results of our new price points and affiliate
marketing programs.
The 50% decline in revenue from the sale of content products is due to a
continued softening in demand for content by third-party webmasters. Webmasters
are decreasing their reliance on outside sources for content and demanding lower
prices for the content that they do purchase. In addition, we have not allocated
any significant resources towards a sales effort for our content products.
However, during the 2005 fiscal year, we expect to contract with a third-party
marketing company to sell our products on our behalf to the webmaster community
in an attempt to gain more exposure in the marketplace and increase the revenue
from this business.
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NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
COST OF SALES
Cost of sales consists of fixed and variable expenses associated with the
processing of credit cards, bandwidth, traffic acquisition costs, content costs
and the depreciation of assets related to our Internet infrastructure. Costs of
sales, as a percentage of revenue, was 43% and 40% for the quarters ended June
30, 2004 and 2003, respectively.
The 25% decrease in our costs of sales year-over-year for the quarter is related
to a 19% decrease in credit card processing costs as our revenue has declined, a
22% decrease in bandwidth costs related to renegotiating our bandwidth
contracts, and a 64% decrease in the depreciation of assets related to our
infrastructure as these assets are now fully depreciated. The decrease in these
costs was partially offset by an increase in content costs and traffic
acquisition costs for the quarter. Traffic acquisition costs were 4.5% of net
membership revenues for the current year quarter.
OPERATING INCOME (LOSS)
The 200% decrease in operating income year-over-year for the quarter is
primarily related to a non-recurring $0.2 million charge for the settlement of a
lawsuit during the quarter ended June 30, 2004. Excluding this charge, operating
expenses would have declined 40% from the quarter ended June 30, 2003, as a
result of a decrease in our sales and marketing costs and a decrease in property
taxes.
CORPORATE ADMINISTRATION
The following table sets forth certain financial information for Corporate
Administration expenses for the quarters ended June 30, 2004 and 2003:
(IN MILLIONS)
QUARTER ENDED PERCENT
JUNE 30, CHANGE
---------------- ------------
2004 2003 '04 VS '03
----- ----- ------------
Operating Expenses............................ $(1.3) $(1.3) 0%
===== =====
Expenses related to corporate administration include all costs associated with
the operation of the public holding company, New Frontier Media, Inc., that are
not directly allocable to the Pay TV and Internet operating segments. These
costs include, but are not limited to, legal and accounting expenses, insurance,
registration and filing fees with NASDAQ and the SEC, investor relations costs,
and printing costs associated with the Company's public filings.
We experienced no change in our corporate administration expenses year-over-year
for the quarter. Consulting fees declined by approximately $0.2 million
year-over-year for the quarter. This decline in consulting fees, which was
related to fees paid to our former Chief Executive Officer and a non-cash
expense related to the extension of his options during the quarter ended June
30, 2003, was offset by an increase in listing fees paid in connection with the
acceptance of our phase-up application to the NASDAQ National Market during the
quarter ended June 30, 2004, and an increase in payroll costs for the current
year quarter.
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NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FROM OPERATING ACTIVITIES AND INVESTING ACTIVITIES:
Our statements of cash flows are summarized as follows (in millions):
QUARTER ENDED
JUNE 30,
------------------
2004 2003
------ ------
Net cash provided by operating activities................. $ 4.8 $ 2.6
====== ======
Cash flows used in investing activities:
Purchases of furniture and equipment................. (0.4) (0.2)
Purchase of investments.............................. (1.4) 0.0
------ ------
Net cash used in investing activities..................... $ (1.8) $ (0.2)
====== ======
The increase in cash provided from operating activities year-over-year for the
quarter was primarily related to increased profits for the quarter ended June
30, 2004 versus the quarter ended June 30, 2003. The following items also
impacted our cash flows from operations for the quarter ended June 30, 2004:
* A $1.3 million tax benefit from the exercise of options/warrants
* Accounts receivable decreased $0.7 million
* Other accrued liabilities declined $0.2 million
The increase in cash used in investing activities year-over-year for the quarter
was primarily related to the purchase of investments during the quarter ended
June 30, 2004. These investments related to the purchase of $1.4 million in
certificates of deposits. In addition, we purchased $0.4 million in equipment
and furniture during the quarter ended June 30, 2004. These purchases related to
the final improvements made to our broadcast facility in the amount of $0.2
million, purchases of servers in the amount of $0.1 million and other equipment
and upgrades related to our broadcast facility and conforming activities in the
amount of $0.1 million.
Cash used in investing activities for the quarter ended June 30, 2003 was
primarily related to purchases by our Pay TV Group of broadcast equipment,
including descrambling equipment necessary for new cable launches and increased
storage capacity, as well as to upgrades to our broadcast facility, which was an
ongoing effort during the 2004 fiscal year.
Our cash flows provided by (used in) financing activities are as follows (in
millions):
QUARTER ENDED
JUNE 30,
----------------
2004 2003
----- -----
Cash flows provided by (used in) financing activities:
Payments on capital lease obligations.................. (0.1) (0.3)
Increase (decrease) notes payable...................... (0.4) 0.4
Stock options/warrants exercised....................... 1.1 0.1
Retirement of stock.................................... 0.0 (1.5)
Issuance of redeemable preferred stock................. 0.0 0.7
----- -----
Net cash provided by (used in) financing activities:........ 0.6 (0.6)
===== =====
During the quarter ended June 30, 2004 we repaid our $0.4 million secured note
payable which was due to an unrelated third party. Our remaining debt is
primarily related to capital leases and other financing obligations. Interest
expense is expected to be immaterial during the current fiscal year.
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NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
Cash used in financing activities for the quarter ended June 30, 2003 was
related to the purchase and subsequent retirement of 2.5 million shares of New
Frontier Media, Inc. stock acquired for $1.5 million as part of a lawsuit
settlement with one of our former officers and $0.3 million in capital lease
obligations. This cash used in financing activities was offset by an increase in
borrowings of $0.4 million and a net increase in Redeemable Preferred Stock of
$0.7 million.
We currently have a $3 million line of credit available with a bank that expires
in June 2005. The interest rate applied to the line of credit is variable based
on the current prime rate. The balance on the line of credit is $0. The line of
credit is secured by the Pay TV Group's trade accounts receivables, and it
requires that we comply with certain financial covenants and ratios.
If we were to lose our two major customers that account for 34% and 20% of our
revenue, respectively, our ability to finance our operating requirements would
be severely impaired.
We do not expect to pay any significant federal income taxes until later in the
current fiscal year, as we expect to utilize our net operating loss carryovers
for tax purposes. We continue to anticipate requiring cash of less than $1
million to satisfy our tax obligations for the current fiscal year.
We believe that cash and cash generated from operations will be sufficient to
satisfy our operating requirements, and we believe that any capital expenditures
that may be incurred can be financed through our cash flows from operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk. The Company's exposure to market risk is principally confined to
cash in the bank, money market accounts, and notes payable, which have short
maturities and, therefore, minimal and immaterial market risk.
Interest Rate Sensitivity. As of June 30, 2004, the Company had cash in checking
and money market accounts and certificates of deposits. Because of the short
maturities of these instruments, a sudden change in market interest rates would
not have a material impact on the fair value of these assets. Furthermore, the
Company's borrowings are at fixed interest rates, limiting the Company's
exposure to interest rate risk.
Foreign Currency Exchange Risk. The Company does not have any foreign currency
exposure because it currently does not transact business in foreign currencies.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in its Securities and Exchange
("SEC") reports is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, as the
Company's are designed to do, and management necessarily was required to apply
its judgment in evaluating the cost-benefit relationship of possible controls
and procedures.
As required by the SEC rules, we have evaluated the effectiveness of the design
and operation of the Company's disclosure controls and procedures as of the end
of the period covered by this Quarterly Report. This evaluation was performed
under the supervision and with the participation of the Company's management,
including the Chief Executive Officer and Chief Financial Officer. Based
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NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's controls and procedures were effective.
Subsequent to the date of this evaluation, there have been no significant
changes in the Company's internal controls or in other factors that could
significantly affect these controls, and no corrective actions were required
with regard to significant deficiencies or material weaknesses in such controls.
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NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
31.01 Certification by Chief Executive Officer Michael Weiner pursuant to
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.02 Certification by CFO Karyn Miller pursuant to U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.01 Certification by Chief Executive Officer Michael Weiner pursuant to
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.02 Certification by CFO Karyn Miller pursuant to U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
b) Reports on Form 8-K
None.
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NEW FRONTIER MEDIA, INC.
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
NEW FRONTIER MEDIA, INC.
/s/ Karyn L. Miller
Karyn L. Miller
Chief Financial Officer
(Principal Accounting Officer)
Dated: August 5, 2004
23