FRV Média Inc.
TSX VENTURE : FRV

FRV Média Inc.

August 31, 2005 15:24 ET

FRV Media Reports Results for Quarter Ended June 30, 2005

MONTREAL, QUEBEC--(CCNMatthews - Aug. 31, 2005) - All amounts are expressed in Canadian dollars unless otherwise indicated.

The Board of Directors of FRV MEDIA ("FRV" or the "Company") (TSX VENTURE:FRV) approved the Company's audited financial statements for the quarter ended June 30, 2005.

Recent events:



- Cite-Amerique delivers L'Audition, a $4 million feature film
written and directed by Luc Picard, to be released in September,
2005.

- FRV Media acquires the library and operations of Distribution La
Fete, providing it with a catalogue of over 100 titles and a top-
notch team with expertise in the acquisition/export of rights and
content.

KEY FIGURES, FIRST QUARTER

(In thousands of dollars, except amounts per share. Amounts per share
are fully diluted)

June 30, 2005 June 30, 2004
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Revenues $608 $2,045
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Gross profit (loss) 548 904
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Net loss (336) (176)
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Net loss per share ($) (0.01) (0.01)
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In the first quarter of fiscal 2006, ended June 30, 2005, FRV Media achieved revenues of $608,334, delivering products with a gross value of $4,690,334, compared with revenues of $2,045,550 in the comparable year-ago period and a gross production value of $9,995,257

For the quarter ended June 30, 2005, FRV Media recorded a net loss of $336,043, compared to a loss of $176,197 in the same year-ago period.

"The quarter's revenues are in line with our expectations, given that revenues are recognized when the license comes into effect", said FRV Media's president and CEO Richard Laferriere. "Most of the revenue stemming from delivered productions will be recognized during the current fiscal year."

ANALYSIS OF FIRST QUARTER RESULTS

Revenues

In the first quarter of fiscal 2006, ended June 30, 2005, FRV Media achieved revenues of $608,334, delivering products with a gross value of $4,139,803, compared with revenues of $2,045,550 in the comparable year-ago period and a gross production value of $9,995,257. Most of the gross production value in the first quarter, i.e., $4.1 million, stems from L'Audition, delivered by Cite-Amerique during the period and which will be released in Quebec theatres this fall. The remainder consists of distribution and event coverage revenues. Last year in the first quarter, we recorded $7.4 million for the film Monica la mitraille.



TABLE 1
ADDITIONAL INFORMATION
(in thousands of dollars)

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QUARTERS ENDED
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June 30, 2005 June 30, 2004
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Revenues 608 $ 2,045 $
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Government assistance 3,532 $ 7,950 $
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Gross value of products 4,140 $ 9,995 $
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The quarter's revenues are in line with management's expectations, given that revenues are recognized when the license comes into effect. Most of the revenue stemming from delivered productions will be recognized during the current fiscal year.

In line with the seasonality of its activities, INEO recorded no revenue during the quarter ended June 30.

Gross profit

Gross profit was $548,148 or 90.1% of sales, against $981,107 or 44.1% of sales a year ago.

The gross margin rate this quarter is exceptionally high because almost all of the quarter's revenues are attributable to L'Audition, a film whose value was substantially defrayed by government assistance, which is not recognized as revenue.

Operating expenses

FRV Media's consolidated operating expenses comprise those of FRV Media and its subsidiaries. For the quarter ended June 30, 2005, these expenses amounted to $854,802, compared to $981,107 in the same year-ago quarter. The 12.8% decrease ($126,305) is due to the deferral of certain expenses to later quarters and the synergies created by the integration of some of the administrative functions of the subsidiaries acquired since FRV Media's creation, i.e., Cite-Amerique in October 2003, Altau.tv in August 2003, and INEO in January 2004.

Interest, depreciation and amortization, and unusual item
Financial expenses, net of interest income, were $1,053, against $72,360 in the year-ago period. Investment income explains the decrease.

Depreciation and amortization remained stable at $27, 726, versus $26,721 at June 30, 2004.

OUTLOOK

The Company will continue to pursue both its organic and external growth.

Some productions delivered in the first quarter but whose revenues were not recognized due to the start date of the exploitation rights, which is after the quarter end, will be recorded later in the year, thus reducing quarterly variations.

Cite-Amerique has a number of projects underway. The largest, Dragon II, is the second series of 26 12-minute cartoon episodes geared to preschoolers and co-produced with German and South Korean partners. Still on the animation front, Cite-Amerique is in discussions to produce a second series of Station X, a 3-D cartoon that will begin airing on Teletoon in September. And finally, Cite-Amerique has begun filming Termites, la tour infernale, a full length documentary scheduled for completion in early 2006.

Altau produced and delivered a few episodes of two renewed series: Projet Tuning, a 13-episode TV reality show hosted by Marc Gagnon and broadcast on Canal Z and Marc Gagnon rencontre, a talk show series airing on Radio-Canada and RDI. Altau is also wrapping up discussions for various productions for Ztele, Canal Vie and RDS.

Our development plan has four thrusts:



- Increase deliveries to mainstream and specialty broadcasters in
Quebec, Canada and abroad;
- Increase international co-productions; we already have solid
achievements to our credit in this regard (Dragon, Isabelle Boulay,
Dice, etc.) and new and ongoing projects are underway with French
co-producers;
- Step up distribution and export activities through our subsidiary
FRV Media International by leveraging the recently acquired library
and by adding production acquisitions with high commercial value in
the family-youth market;
- Make timely acquisitions that will not only increase business
volume and profits but also help create a coherent ensemble of
operating units that complement each other by their respective
focus and expertise.


FRV will continue to back the development of its subsidiaries and enhance their complementarity and potential synergy in a profitable manner and at a pace commensurate with its financial capacity.

FORWARD LOOKING INFORMATION

This press release contains forward-looking statements reflecting the objectives, estimates and expectations of FRV management. These statements are identified by the use of verbs such as "believe," "anticipate," "estimate" and "expect" as well as the use of the future or conditional tense. By their very nature, these types of statements involve risk and uncertainty. Consequently, results could differ materially from the Company's projections or expectations. For information on the nature of the risk factors not specifically mentioned in this press release, the reader can consult FRV's MD&A for the fiscal year ended March 31, 2005, under the heading "Risks and Uncertainties", page 18.

ADDITIONAL INFORMATION

The complete interim management's analysis and discussion of operating results and financial position for the quarter ended June 30, 2005 can be found on the SEDAR Web site at the address www.sedar.com. Moreover the Company regularly discloses information pertaining to its operations through press releases, quarterly financial statements and its annual information form. This information is available on the SEDAR Web site at www.sedar.com.

ABOUT FRV MEDIA

FRV Media Inc. is a producer, exporter and integrator of quality content deployed across multiple platforms: television, cinema, multimedia and publishing. Through its wholly owned subsidiaries Cite-Amerique, Altau.tv, FRV Media International and INEO, the Company creates and distributes dramatic content (TV series, made-for-TV movies and feature films), youth programs, children's programs, documentaries, variety shows, magazine-style series and education, training and career-planning information. It is also involved in dubbing and event coverage and recording.



FRV Media Inc.

Consolidated Financial Statements
as at June 30, 2005 and 2004

(unaudited)


The consolidated financial statements of FRV Media
as at June 30, 2005 and 2004 have not been
reviewed by the company's auditors



FRV Media Inc.
Consolidated earnings (unaudited)

THREE-MONTH PERIOD ENDED
JUNE 30
2005 2004
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$ $

Revenue 608,334 2,045,550
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Production costs 41,256 1,137,429
Distribution direct costs 18,930 4,130
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60,186 1,141,559
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Gross profit 548,148 903,991
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Operating expenses 854,802 981,107
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Profit (Loss) before interest,
amortization, unusual item and taxes (306,654) (77,116)
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Interest income (29,047) (11,327)
Interest and bank charges 30,100 83,687
Loss on disposition of fixed assets 611
Amortization of property, plant and
equipment 27,726 26,721
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29,389 99,081
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Profit (Loss) before unusual item and
taxes (336,043) (176,197)

Unusual item

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Profit (Loss) before taxes (336,043) (176,197)
Income taxes recovered

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Net Profit (Net loss) (336,043) (176,197)
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Basic and diluted profit (loss) per
class A and C share (0.01) (0.01)

Basic and diluted weighted average
number of class A and C shares 32,587,110 26,974,758



FRV Media Inc.
Consolidated Deficits (unaudited)

THREE-MONTH PERIOD ENDED
JUNE 30
2005 2004
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Deficit, beginning of period (4,828,949) (1,691,115)


Accounting changes (501,158)
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Restated deficit, beginning of period (4,828,949) (2,192,273)


Net Profit (Net loss) (336,043) (176,197)
Share Issue Costs (5,184)

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Deficit, end of period (5,170,176) (2,368,470)
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FRV Media Inc.
Consolidated Balance Sheets


June 30, March 31,
2005 2005
(audited)

ASSETS
Cash 706,154 687,440
Short-term investments 871,402 1,071,402
Restricted cash and investments 1,794,893 2,519,893
Accounts receivable 5,413,901 6,603,518
Income taxes receivable 2,280 2,280
Prepaid expenses 200,630 181,453
Deferred transaction costs 61,912
Television and film productions 4,099,736 3,593,449
Distribution rights and costs 780,020 159,914
Balance of sale 150,000 150,000
Property and equipment 479,926 379,722
Future income taxes 499,325 499,325
Goodwill 2,168,938 2,168,938
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17,167,203 18,079,246
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Liabilities
Short-term loans 4,645,486 5,223,009
Accounts payable and accrued liabilities 2,428,289 2,461,148
Deferred revenue 4,302,647 4,531,771
Long-term debts 611,916 650,233

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11,988,338 12,866,161
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SHAREHOLDER'S EQUITY
Capital stock
Class "A" shares and warrents 10,156,648 9,856,648
Deficit (5,170,176) (4,828,949)

Contributed surplus 192,393 185,386
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5,178,865 5,213,085
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17,167,203 18,079,246
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The accompanying notes are an integral part of these consolidated
financial statements



FRV Media Inc.
Consolidated Cash Flows (unaudited)

THREE-MONTH PERIOD ENDED
JUNE 30
2005 2004
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OPERATING ACTIVITIES
Net loss (336,043) (176,197)
Non-cash items:
Amortization of television and film
productions 41,256 1,137,429
Stock-based compensation 7,007 4,881
Amortization of property, plant and
equipment 27,726 26,721
Loss on disposition of fixed assets 611
Amortization of deferred charges 1,314
Amortization of distribution costs 10,283
Interest premium capitalized to convertible
debenture 6,155 5,460
Interest allocated to liability component
of class C shares 37,069

Changes in assets and liabilities:
Accounts receivable 935,592 3,101,068
Prepaid expenses (19,177) 15,170
Productions in process and production
under development (293,518) 6,476,737
Accounts payable and accrued liabilities (32,859) (226,104)
Progress advances on productions in
process (229,124) (8,311,337)
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Cash flows from operating activities 117,909 2,092,211
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INVESTING ACTIVITIES
Recoverable distribution direct costs (630,389)
Deferred transaction costs 61,912
Redemption of short-term investments 200,000 907,362
Restricted investment 725,000
Purchase of property and equipment (128,541) (25,031)
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Cash flows from investing activities 227,982 882,331
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FINANCING ACTIVITIES
Short-term loans (577,523) (3,443,663)
Share Issue Costs (5,184)
Repayment of long-term debt (44,470) (49,828)
Issue of Class A shares 300,000 5,550
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Cash flows from financing activities (327,177) (3,487,941)
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Net increase (decrease) in cash 18,714 (513,399)

Cash, beginning of period 687,440 1,426,162
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Cash, end of period 706,154 912,763
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The accompanying notes are an integral part of these consolidated
financial statements


FRV Media Inc.
Notes to Financial Statements of June 30, 2005 (unaudited)


1. GOVERNING STATUTES AND NATURE OF OPERATIONS

The Company was incorporated on October 20, 1998 under the Canada Business Corporations Act.

Before October 30, 2002, the Company was in the development stage and its sole purpose was the search for business acquisitions that would qualify as an acquisition as defined by the TSX Venture Exchange.

On October 30, 2002 and August 29, 2003 the Company acquired Cite-Amerique Inc. and Altau Inc. Since then, the Company produces and distributes TV series, made-for-TV movies and feature films. In January 2004, the Company acquired Romcom Inc. (INEO), a firm operating in the organization of events and Education Training Career fairs and many Training Symposiums for corporate managers.

2. SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited financial statements are in accordance with Canadian generally accepted accounting principles applicable for interim financial statements and do not include all of the information required for complete financial statements.

These financial statements are also consistent with the accounting policies described in the Company's financial statements for the year ended March 31, 2004. The interim financial statements and notes thereto should be read in conjunction with the Company's audited consolidated financial statements for the year ended March 31, 2004.

Where necessary, the financial statements include amounts determined according to insightful estimates and management's best judgment. The results of operations for the interim periods presented are not necessarily representative of expected results for the year.

3. ACCOUNTING FOR COMPENSATION PLANS

The fair value of granted stock options was estimated with the Black-Scholes model of evaluation of the price of options using an expected life of five years, a semi-annual interest rate without risk of 4.55% and volatility of 92%. A compensation expense is charged over the option acquisition period.

The compensation expense recognized in the results for quarter ended June 30 2005 and June 30 2004 was respectively 7 007 $ and 4 881 $

4. EARNINGS PER SHARE

The following items were not included in the calculation of earnings per share dilution because these instruments would have been anti-dilutive for the periods presented.



NUMBER OF INSTRUMENTS
June June
30, 2005 30, 2004
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- Options, exercise price of $ 0.15 - 441,667
- Options, exercise price of $ 0.25 840,250 842,250
- Options, exercise price of $ 0.35 146,000 -
- Options, exercise price of $ 0.40 108,000 162,000
- Options, exercise price of $ 0.60 50,000 50,000
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1,144,250 1,495,917
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- Convertible debenture, conversion price
of 0,30$ 333,333 333,333
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- Warrants 5,319,882 1,107,143
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5. SEGMENTED INFORMATION

The Company operates exclusively in the fields of television and films since November 2002. For the semester ended September 30, 2004 and September 30, 2003, the Company has not recorded any foreign revenue.

6. NEW SHARES ISSUE & ACQUISITION

On April 29, 2005, the Company issued 600,000 units at a price of $0.50 per unit for a total of $300,000 in cash. Each unit is composed of one class "A" share and one half a class "A" share purchase warrant. Each warrant entitles the holder to purchase one class "A" share for $0.60 in cash during the 18 months following the issue and at $0.75 in cash during the next six months.

On May 25, 2005, the Company completed the acquisition of the assets of Distribution La Fete Inc. for a cash consideration of $541,521 and an additional consideration of a maximum of $500,000 over two years upon fulfilment of certain sales objectives during

7. SEGREGATED INVESTMENTS

The investment of the Fonds de solidarite FTQ (the "Solidarity Fund") and the Fonds de developpement de la CSN pour la cooperation et l'emploi ("Fondaction CSN") during the quarter, of which $3 million has already been cashed, will be used exclusively to finance the distribution and export activities of our subsidiary FRV Media International.

8. OTHER FINANCIAL INFORMATION



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FINANCIAL August. 31, June 30, March 31, March 31,
INSTRUMENTS 2005 2005 2005 2004
OUTSTANDING
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Class "A" shares 35,697,425 35,697,425 35,097,425 21,341,758
Class "C" shares - - - 5,600,000
Options 1,144,250 1,144,250 1,144,250 1,561,167
Warrants 5,319,882 5,319,882 5,319,882 1,107,143
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The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

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