Published: September 11, 2008
Majesco Entertainment Company Announces Third Quarter Fiscal 2008 Financial Results
EDISON, N.J., Sept. 11 /PRNewswire-FirstCall/ -- Majesco Entertainment
Company Inc. (Nasdaq: COOL), an innovative provider of video games for the
mass market, today reported financial results for the fiscal third quarter
ended July 31, 2008.
For the third quarter ended July 31, 2008, Majesco's net revenues
increased 44 percent to $14.5 million versus the year ago period. During this
same period, the Company reported operating income of $0.3 million compared to
an operating loss of $1.3 million in the third quarter of 2007. Net income
for the quarter was $0.5 million versus a net loss of $1.5 million in 2007.
The Company's basic and diluted earnings per share for this quarter were $0.02
compared to a loss of $0.06 in the same period last year. As discussed below,
the Company's net income included a $0.4 million gain in the change of the
fair value of warrants in the quarter.
For the nine months ended July 31, 2008, Majesco's net revenues increased
17 percent to $46 million versus the year ago period. During this same
period, the Company reported operating income of $2.4 million compared to an
operating loss of $2.3 million. Net income through nine months was $3.0
million versus a net loss of $3.8 million in 2007. The Company's basic and
diluted earnings per share for the first nine months of fiscal 2008 were $0.11
compared to a loss of $0.16 in 2007. As discussed below, the Company's net
income included a $1.0 million gain in the change of the fair value of
warrants year to date.
Jesse Sutton, Chief Executive Officer of Majesco Entertainment, said, "We
are extremely pleased with our execution during the quarter as we exceeded all
of our expectations. Our third quarter results highlight our ability to
execute and deliver on our mass market, family friendly strategy and the
growth potential that is inherent in our business model. Further, our
financial results demonstrate the significant progress we have made in regards
to profitability as we drive revenues and continue to prudently manage our
costs. For the third quarter 2008, net sales increased 44 percent to $14.5
million, while gross margin grew to 43 percent. The growth in both net sales
and margin is attributable to the 87 percent increase in our domestic sales
driven by the continued success of our 'Cooking Mama' franchise, our newly
released 'Wonderworld Amusement Park' for Wii, and strong demand for 'Cake
Mania 2' for DS. Looking ahead to the remainder of fiscal 2008, we have
raised our fiscal year revenue guidance to a range of $58 million to $60
million. In addition, we expect to be profitable for fiscal 2008. This
performance is despite the move of our Cooking Mama sequel for Wii closer to
the December holiday sales season and into our fiscal first quarter 2009.
"We remained focused on delivering titles targeted toward the mass market,
casual gamer as we launched four new titles in the third quarter, bringing the
number of titles released in the first nine months of fiscal 2008 to 14. Two
titles shipped in the quarter were for Nintendo's Wii system and two were for
Nintendo's DS handheld," continued Sutton. "We are making significant
progress in developing our intellectual property portfolio, as our studio is
on schedule to release its first title 'Our House' for DS and recently
announced its second title 'Wonderworld Amusement Park' for DS, both of which
are set for release in fiscal 2009. We remain poised to further improve our
financial position as we continue to deliver on our strategy, expand our
revenue base and build our intellectual property assets."
Financial Highlights
-- Third quarter 2008, domestic revenue increased 87 percent
-- Third quarter 2008 gross margin was 42.5 percent, compared to 29.5
percent in 2007
-- For the first nine months of fiscal 2008 net income was $3.0 million,
an improvement of $6.8 million from the year ago period
-- For the first nine months of fiscal 2008 the Company's interest and
financing costs fell to $0.4 million from $1.5 million in the same
period one-year ago
-- Through nine months, basic and diluted EPS increased to $0.11 from a
loss of $0.16 in the same period
Generally Accepted Accounting Principles (GAAP) and Non-GAAP Metrics
To facilitate a comparison between the three and nine months ended July
31, 2008 and 2007, the Company has presented both GAAP and Non-GAAP financial
results. GAAP financial measures, including operating income, net income, and
basic and diluted earnings/loss per share, have been adjusted to report
Non-GAAP financial measures which exclude gains due to changes in the value of
our common stock to be issued in settlement of the class action litigation and
related charges, net, and the change in the fair value of warrants issued in
connection with our September 2007 equity financing. These Non-GAAP measures
are provided to enhance investors' overall understanding of the Company's
current financial performance and the Company's prospects for the future.
These measures should be considered in addition to results prepared in
accordance with GAAP, but should not be considered a substitute for, or
superior to GAAP results.
In the fiscal year ended October 31, 2007, the Company recorded a $2.8
million charge in connection with the expected settlement of class action
litigation. The charge was comprised of $2.5 million, representing the fair
value, on the date the agreement was executed, of the common stock expected to
be distributed when the settlement becomes effective and $0.3 million
representing a change in the value of the shares from that date through
October 31, 2007.
The Company will adjust the fair value of the liability to the fair value
of the shares expected to be distributed at each balance sheet date and record
the resulting change as a non-cash charge, or gain, to earnings in each period
until the shares are distributed. Due to fluctuations in the Company's stock
price, this resulted in a non-cash gain of $0.3 million during the nine months
ended July 31, 2008. The settlement provides that if the fair value of the
stock falls below $2.5 million, the Company will issue additional shares,
subject to certain limitations, with a fair market value equal to the amount
of the decrease. Therefore, the liability will not be adjusted below $2.5
million.
During the fourth quarter of 2007, the Company raised $5.9 million in an
equity financing. As part of that transaction, the Company issued warrants
that contain a provision that under certain circumstances in which the Company
is sold, merged, or otherwise enters into a "fundamental transaction," as
defined in the warrant agreement, with a company that is not publicly traded,
the warrants may be settled by a cash payment. As a result, the warrants were
recorded as a liability at their fair value of $2.1 million, in accordance
with FASB statement No. 150, Accounting For Certain Financial Instruments with
Characteristics of Both Liabilities and Equity, and FASB Staff position 150-1
Issuers Accounting for Freestanding Financial Instruments Composed of More
Than One Option or Forward Contract Embodying Obligations under FASB Statement
150. In addition, the Company will measure the fair value of the warrants at
each balance sheet date, and record the change in fair value as a non-cash
charge or gain to earnings each period. Changes in the Company's stock price
resulted in a non-cash gain of $0.4 million during the quarter ended July 31,
2008 and $1.0 million during the nine months ended July 31, 2008. The
warrants were valued at $0.5 million at July 31, 2008.
Comparison of Three Months Ended July 31, 2008 to July 31, 2007
-- Net revenue was $14.5 million in 2008 compared to $10.0 million in
2007. The increase is primarily due to strong sales of "Wonderworld Amusement
Park" for Wii, strong demand for "Cake Mania 2" for DS and continued success
of our "Cooking Mama" franchise.
-- In the third quarter of 2008, 92 percent of revenue came from domestic
sales with only 8 percent from international. This compares to the third
quarter of 2007 when 71 percent of revenue came from domestic sales with 29
percent from international.
-- Gross margin was 42.5 percent, compared to 29.5 percent in 2007. The
increase was primarily attributable to two new releases for the Nintendo Wii
console in 2008, and the strong performance of our domestic products.
Additionally, our margin benefited from the final payment stemming from a
minimum purchase order for our 2007 agreement to distribute Dance, Dance
Revolution.
-- GAAP operating income was $0.3 million compared to 2007 operating loss
of $1.3 million. Non-GAAP 2008 operating loss was $0.3 million, compared to
Non-GAAP operating loss of $1.4 million in 2007.
-- GAAP net income was $0.5 million, or $0.02 per share, which included a
$0.4 million non-cash gain in the fair value of warrants issued, compared to
third quarter 2007 GAAP net loss of $1.5 million, or $0.06 per share. Non-GAAP
net income was $0.1 million, or $0.01 per share, compared to a Non-GAAP net
loss of $1.6 million, or $0.07 per share in 2007.
-- Interest expense and financing costs were $0.1 million in 2008 versus
$0.3 million in 2007, as the Company benefited from the ability to self
finance operations due to the capital raised last fall and lower factoring
fees.
-- At July 31, 2008, the Company had cash and cash equivalents of $7.8
million.
Comparison of Nine Months Ended July 31, 2008 to July 31, 2007
-- Net revenue was $45.9 million in 2008 compared to $39.1 million in
2007.
-- In the nine months of fiscal 2008, 94 percent of revenue came from
domestic sales with 6 percent from International. This compares to 87 percent
domestic and 13 percent international in the same period last year. Domestic
sales increased 26.9 percent over 2007, which included $2.9 million from the
sale of Dance Dance Revolution products.
-- Gross margin was 39.4 percent compared to 34.8 percent in the same
period during 2007.
-- GAAP operating income was $2.4 million in 2008, which included a $0.3
million gain for the "class action" litigation. This was compared to an
operating loss of $2.3 million during the same period in 2007, which included
a $2.5 million charge for the "class action" litigation. Non-GAAP operating
income for the nine months of 2008 was $2.1 million, compared to Non-GAAP
operating loss of $0.1 million for the same period in 2007.
-- GAAP net income was $3.0 million, or $0.11 per share, compared to a
2007 net loss of $3.8 million, or $0.16 per share, which included a $2.5
million charge for the "class action" litigation. Non-GAAP net income was
$1.7 million, or $0.06 per share, compared to Non-GAAP net loss of $1.6
million, or $0.07 per share, in 2007.
-- Interest expense and financing costs were $0.4 million for the nine
months of 2008 versus $1.5 million during the same period in 2007. The
reduction was attributable to the Company's ability to self-finance most of
its purchasing requirements following a financing of $5.9 million in September
2007, in addition to reduced fees.
Announced Product Line-up
Third Quarter 2008 ending July 31, 2008:
All of the following titles were released inNorth America during the
Company's third quarter:
-- Nancy Drew: The Mystery of the Clue Bender Society for DS is the follow
up to The Deadly Secret of Olde World Park and offers mystery buffs and Nancy
Drew fans a fresh interactive caper with new gameplay elements including
snowmobiling and boating.
-- Blast Works: Build, Trade, Destroy for Wii is an innovative
interpretation of a geometric shooter that lets players build their own
personalized game experiences and then share their creations with friends via
WiiConnect24.
-- Wonder World Amusement Park for Wii brings to life a fully 3D world of
boardwalk games, rides and prizes across multiple themed areas that players
can explore with personalized avatars.
-- Cake Mania(R) 2 for DS is the sequel to the best-selling DS game based
on Sandlot Games' award-winning downloadable title. Players lead Jill Evans
through more than 200 different levels of baking and frosting madness with an
all-new customer base, exotic locations, kitchen upgrades and multiple
endings.
Fiscal 2008
To date, the Company has announced the following titles that have been
released or are expected to be released during the rest of fiscal 2008:
-- Three Wii games that are part of the award-winning Humongous adventure
game series that has sold nearly 15 million units and earned more than 400
awards for excellence: Freddi Fish, Pajama Sam and Spy Fox. Freddi Fish: Kelp
Seed Mystery for Wii lets young players help underwater detective Freddi Fish
solve the case of Grandma Grouper's missing kelp seeds before all of the sea
creatures go hungry. The easy point-and-click interface allows players to
earn a reaction from just about everything and a variety of mini-games helps
players solve the mystery, develop hand-eye coordination and increase
learning. Pajama Sam in Don't Fear the Dark for Wii allows players to join
Sam as he embarks on his journey to capture Darkness in a land of talking
trees, hilarious carrots and non-stop adventure. Explore a world of secrets
and slumber in this motion-based adventure that creates a fun learning
environment to encourage critical thinking while fostering listening and
memory skills. Spy Fox in Dry Cereal for Wii teams players up with super-
sleuth Spy Fox, Monkey Penny and Professor Quack as they take on tough
assignments through 100 levels of spy-speeding fun, arcade-style games.
-- Babysitting Mania for DS is based on the hit online PC simulation from
Gogii Games that challenges players to manage unruly kids, lists of chores and
out-of-control houses without losing their cool.
-- Zoo Hospital for Wii, a wholly-owned IP for Majesco, is the first Wii
game of its kind that lets players experience a veterinarian's job by
performing various surgical procedures on 48 different animals that they can
then care for in their enclosures to ensure a healthy recovery.
-- Air Traffic Chaos for DS lets players take charge as an air traffic
controller at the world's busiest airports so they can safely maintain an
efficient flight schedule and order on the runways.
-- Orchard for online and retail PC is a simulation that challenges
players to manage all facets of a retail business, including planting and
harvesting crops, developing new recipes, buying ingredients and hiring a
workforce.
-- Away: Shuffle Dungeon for DS is a premier role playing game that
features creative contributions from renowned industry visionaries: RPG
creator Hironobu Sakaguchi, character designer Naoto Oshima and composer Nobuo
Uematsu. Players take control of the young hero "Sword," who must rescue as
many kidnapped townsfolk as possible from a mysterious unknown that has been
slowly "spiriting them away."
-- Jillian Michaels' Fitness Ultimatum 2009 for Wii is the first game of
its type to combine a celebrity fitness trainer with the Wii and innovative
Wii Fit Balance Board(TM) accessory to offer players a fun and entertaining
way to get in shape.
-- Bananagrams for Facebook is an anagram game based on the popular board
game of the same name. This free Facebook application ignores all of the rules
of traditional board games in favor of an every-player-for-themselves approach
that delivers lighting-fast puzzle play guaranteed to get the mind moving and
drive players "bananas."
First Quarter 2009 ending January 31, 2009:
To date, the Company has announced the following titles that are expected
for release during the fiscal first quarter of 2009:
-- Cooking Mama: World Kitchen for Wii is the sequel to the best-selling
Cooking Mama Cook Off game that has sold nearly half a million units and
challenges players to use the Wii Remote as the ultimate cooking utensil.
-- Major Minor's Majestic March for Wii marks the return of the creative
team behind the renowned PaRappa the Rapper franchise-legendary game designer
and multimedia musician Masaya Matsuura and famedNew York artist Rodney Alan
Greenblat. The game turns the Wii Remote into a "special" baton the bandleader
Major Minor uses to keep tempo, recruit new band members and pick up valuable
items, while marching through whimsical locations.
-- Cake Mania: In the Mix! for Wii marks the first introduction of Sandlot
Games' best-selling PC title on the Wii system. The game integrates
motion-based control with the series' signature cake-baking multi-tasking
gameplay style.
-- Rollin' Rascals for DS challenges players to roll adorable round pets
around obstacles and into identical twos to clear them from the game board in
this addictive puzzler.
-- Wonder World Amusement Park for DS is the second game from Majesco
Studios Santa Monica. This companion game to the Wii version that launched in
July lets players experience a complete day at the park in the palm of their
hands. Using the Touch Screen, players can toss, drive, shoot, whack, fish and
spin in more than two dozen mini-games throughout six themed zones.
-- Escape the Museum for Wii is based on the popular hidden object online
game from Gogii Games. A devastating earthquake has rocked the foundations of
the National Museum of History and players must help Susan Anderson escape
from the crumbling building to the safety outside. Players wander through the
museum's maze of 12 different hunt and find areas and 25 action-packed
adventure scenes, using the Wii Remote to uncover hidden exits and save
priceless archaeological artifacts.
-- Marker Man Adventures for DS is a unique game based on drawing and
physics challenges as players maneuver the charming stick figure, Marker Man,
through 150 scrolling world puzzles in his attempt to find his best friend,
Doodle Dog.
-- PowerBike for DS is an intense motorcycle racer that features
death-defying stunts, intense police chases and competitive multiplayer modes.
-- Math Blaster in the Prime Adventure for DS is inspired by the original
hit PC game from Knowledge Adventure that makes learning fun by combining a
variety of adventure-based learning games with challenging mathematic puzzles
and the unique capabilities of Nintendo DS.
Fiscal 2008 Outlook
The Company is increasing its fiscal 2008 full year net revenue guidance
to a range of $58 million to $60 million from its previous expectation of $53
million to $58 million. The revised guidance also reflects the change in the
release date of Cooking Mama: World Kitchen for Wii from fiscal 2008 to fiscal
2009. The Company also expects to be profitable for 2008. The Company believes
that its mix of international revenues for the year will approximate 10 to 15
percent of worldwide revenues, a slight decline from previous years' range of
15 to 20 percent. The Company expects full-year 2008 gross margins to show
modest improvement over the 33.9 percent reported in 2007. The Company's
guidance assumes the release of approximately 24 titles in 2008 with
approximately 9 Wii, 12 DS titles and 3 other. This compares to 19 titles in
2007, comprised of 2 Wii, 13 DS and 4 other. The Company's results are
impacted by seasonality from the December holiday period and variability based
on release schedules.
Conference Call
At 4:30 PM ET today, management will host an earnings conference call. To
access the call in the U.S., please dial 1-877-317-6701 and international
callers please dial 1-412-317-6701. The access code for the call is 4881586.
Please dial in approximately 10 minutes prior to the start of the conference
call. The conference call will also be broadcast live over the Internet and
available for replay for 90 days from the "Investor Relations" section of the
Company's Web site at http://www.majescoentertainment.com. In addition, a
replay of the call will be available via telephone for seven business days
beginning two hours after the call. To listen to the telephone replay in the
U.S., please dial 1-877-344-7529 and for international callers, dial
1-412-317-0088. Enter access code 4881586.
About Majesco Entertainment Company
Majesco Entertainment Company is a provider of video games for the mass
market. Building on 20 years of operating history, the Company is focused on
developing and publishing a wide range of casual and family oriented video
games on leading console and portable systems. Product highlights include
Nancy Drew(TM), Cooking Mama(TM) and Cake Mania(R) 2 for Nintendo DS(TM) and
Cooking Mama: Cook Off for Wii(TM). The Company's shares are traded on the
Nasdaq Stock Market under the symbol: COOL. Majesco is headquartered in
Edison, NJ and has an international office inBristol, UK. More information
about Majesco can be found online at www.majescoentertainment.com.
Use of Non-GAAP Financial Information
To supplement the Company's unaudited condensed consolidated financial
statements presented in accordance with GAAP, Majesco Entertainment uses
certain Non-GAAP measures of financial performance. The presentation of these
Non-GAAP financial measures is not intended to be considered in isolation
from, as a substitute for, or superior to, the financial information prepared
and presented in accordance with GAAP, and may be different from Non-GAAP
financial measures used by other companies. In addition, these Non-GAAP
measures have limitations in that they do not reflect all of the amounts
associated with the Company's results of operations as determined in
accordance with GAAP. The Non-GAAP financial measures used by Majesco include
Non-GAAP operating income (loss), Non-GAAP net income (loss), and Non-GAAP
basic and diluted earnings (loss) per share. These Non-GAAP financial
measures exclude the following items from the Company's unaudited condensed
consolidated statements of operations:
-- Settlement charges related to the settlement of class action litigation
-- Change in fair value of warrants
-- Gain on settlements of liabilities and other gains
For more information on these Non-GAAP financial measures, please see the
tables in this release captioned "Reconciliation of GAAP and Non-GAAP
Financial Measures" which includes a reconciliation of the Non-GAAP to the
GAAP results.
Safe Harbor
Some statements set forth in this release, including the estimates under
the headings "Outlook" contain forward-looking statements that are subject to
change. Statements including words such as "anticipate", "believe",
"estimate" or "expect" and statements in the future tense are forward-looking
statements. These forward-looking statements are subject to risks and
uncertainties that could cause actual events or actual future results to
differ materially from the expectations set forth in the forward-looking
statements. Some of the factors which could cause our results to differ
materially from our expectations include the following: consumer demand for
our products, the availability of an adequate supply of, current-generation
and next-generation gaming hardware, including but not limited to Nintendo's
DS and Wii(TM) platforms; our ability to predict consumer preferences among
competing hardware platforms; consumer spending trends; the seasonal and
cyclical nature of the interactive game segment; timely development and
release of our products; competition in the interactive entertainment
industry; developments in the law regarding protection of our products; our
ability to secure licenses to valuable entertainment properties on favorable
terms; our ability to manage expenses; our ability to attract and retain key
personnel; adoption of new accounting regulations and standards; adverse
changes in the securities markets; our ability to comply with continued
listing requirements of the Nasdaq stock exchange; the availability of and
costs associated with sources of liquidity; final resolution of the class
action and other litigation on terms acceptable to the Company, and other
factors described in our filings with the SEC, including our Annual Report on
Form 10-K for the year ended October 31, 2007. We do not undertake, and
specifically disclaim any obligation, to release publicly the results of any
revisions that may be made to any forward-looking statements to reflect the
occurrence of anticipated or unanticipated events or circumstances after the
date of such statements.
MAJESCO ENTERTAINMENT 2008-2009 RELEASE SCHEDULE*
2008 GAMES
Quarter 1 Quarter 2
Furu Furu Park Wii, $19.99 Wild Earth: African Safari Wii, $29.99
Left Brain Right Brain DS, $19.99 Eco-Creatures: Save the Forest DS,
$29.99
Mega Brain Boost DS, $19.99 Nanostray 2 DS, $29.99
Cooking Mama 2: Dinner with Blokus Portable: Steambot Championship
Friends DS, $29.99 PSP, $19.99
Pet Pals: Animal Doctor DS, $19.99
Toy Shop DS, $19.99
Quarter 3 Quarter 4
Cake Mania 2 DS, $19.99 Babysitting Mania DS, $19.99
Blast Works: Build, Trade, Spy Fox in Dry Cereal Wii,
Destroy Wii, $39.99 $19.99
Nancy Drew: Mystery of the Clue Freddi Fish: Kelp Seed Mystery
Bender Society DS, $19.99 Wii, $19.99
Wonder World Amusement Park Wii, Air Traffic Chaos DS, $19.99
$39.99
Pajama Sam in Don't Fear the
Dark Wii, $19.99
Zoo Hospital Wii, $29.99
Away Shuffle Dungeon DS, $29.99
Orchard PC, Price TBA
Bananagrams Facebook, Free
Jillian Michaels' Fitness Ultimatum
2009 Wii, $39.99
2009 GAMES
Quarter 1
Rollin' Rascals DS, $19.99
Cooking Mama World Kitchen Wii, $49.99
Math Blaster in the Prime Adventure DS, $19.99
Major Minor's Majestic March Wii, Price TBA
Wonder World Amusement Park DS, $19.99
Cake Mania In the Mix! Wii, Price TBA
Powerbike DS, $19.99
Escape the Museum Wii, $19.99
Left Brain Right Brain 2 DS, $19.99
The Clumsey's Wii, $19.99
Hot -n- Cold DS, $19.99
*Includes all released and announced titles to date. Prices subject to
change for unreleased titles.
MAJESCO ENTERTAINMENT COMPANY
UNAUDITED SUPPLEMENTARY PRODUCT DATA
Net Revenue By Platform - Yearly
FY08 FY07 FY06
Estimate* Actual Actual
================================
CONSOLE:
Wii 33.9% 19.7% 0.0%
PS2 0.9% 6.8% 18.7%
Xbox 0.2% 3.2% 15.7%
------- ------- -------
35.0% 29.7% 34.4%
HANDHELD:
DS 61.8% 55.5% 24.4%
GBA 0.0% 5.6% 28.0%
PSP 1.2% 3.0% 3.4%
------- ------- -------
63.0% 64.1% 55.8%
OTHER 2.0% 6.2% 9.8%
------- ------ ------
TOTAL 100.0% 100.0% 100.0%
*Note: Company estimate as of September 11, 2008
MAJESCO ENTERTAINMENT'S NET SALES BY PLATFORM
Three Months Ended Three Months Ended
July 31, 2008 July 31, 2007
Net Sales % Net Sales %
Console:
Wii $5,379 37.2% $984 9.8%
PS2 148 1.0% 597 6.0%
XBOX / 360 13 0.1% 239 2.4%
------ ------ ------ ------
5,540 38.3% 1,820 18.2%
38.3% 18.2%
Handheld:
DS 8,119 56.2% 6,981 69.7%
GBA 12 0.1% 350 3.5%
PSP 12 0.1% 859 8.6%
------ ------ ------ ------
8,143 56.3% 8,190 81.8%
56.3% 81.8%
Other 773 5.3% (0) 0.0%
5.3% 0.0%
------- ------ ------- ------
Total $14,456 100.0% $10,010 100.0%
------- ------ ------- ------
Nine Months Ended Nine Months Ended
July 31, 2008 July 31, 2007
Net Sales % Net Sales %
Console:
Wii $12,170 26.5% $9,030 23.1%
PS2 654 1.4% 3,078 7.9%
XBOX / 360 139 0.3% 407 1.0%
------ ------ ------ ------
12,963 28.2% 12,515 32.0%
28.2% 32.0%
Handheld:
DS 31,675 69.0% 19,158 49.0%
GBA 44 0.1% 2,209 5.6%
PSP 440 1.0% 1,323 3.4%
------ ------ ------ ------
32,159 70.1% 22,690 58.0%
70.1% 58.0%
Other 773 1.7% 3,916(a) 10.0%
1.7% 10.0%
------- ------ ------- ------
Total $45,895 100.0% $39,121 100.0%
------- ------ ------- ------
(a) DDR, 45/90 minute video.
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands, except share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
July 31, July 31,
------------------- -------------------
2008 2007 2008 2007
------- ------- ------- -------
Net revenues $14,456 $10,010 $45,895 $39,121
------- ------- ------- -------
Cost of sales
Product costs 5,849 5,421 19,546 19,813
Software development costs
and license fees 2,457 1,632 8,254 5,685
------- ------- ------- -------
8,306 7,053 27,800 25,498
------- ------- ------- -------
Gross profit 6,150 2,957 18,095 13,623
------- ------- ------- -------
Operating costs and expenses
Product research and
development 812 536 2,421 1,687
Selling and marketing 2,264 2,039 6,485 5,725
General and administrative 2,737 1,664 6,865 6,138
Gain on settlement of
liabilities and other gains - (75) - (314)
Depreciation and
amortization 59 75 221 220
Settlement of litigation
and related charges, net - - (322) 2,500
------- ------- ------- -------
5,872 4,239 15,670 15,956
------- ------- ------- -------
Operating income (loss) 278 (1,282) 2,425 (2,333)
Other expenses (income)
Interest and financing
costs, net 121 266 417 1,477
Change in fair value of
warrants (363) - (957) -
------- ------- ------- -------
Income (loss) before income
taxes 520 (1,548) 2,965 (3,810)
Income taxes - - - -
------- ------- ------- -------
Net income (loss) $520 $(1,548) $2,965 $(3,810)
======= ======= ======= =======
Net income (loss) per share:
Basic $0.02 $(0.06) $0.11 $(0.16)
======= ======= ======= =======
Diluted $0.02 $(0.06) $0.11 $(0.16)
======= ======= ======= =======
Weighted average shares
outstanding:
Basic 27,476,286 23,862,617 27,415,009 23,716,363
========== ========== ========== ==========
Diluted 27,476,286 23,862,617 27,482,498 23,716,363
========== ========== ========== ==========
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(dollars in thousands)
July 31, Oct 31,
2008 2007
----------- ----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $7,765 $7,277
Due from factor 773 -
Accounts and other receivables 65 670
Inventory 2,001 3,850
Capitalized software development costs and
license fees, current portion 6,377 2,171
Prepaid expenses 310 1,128
----------- ----------
Total current assets 17,291 15,096
Property and equipment - net 599 568
Capitalized software development costs and
license fees, net of current portion - 549
Other assets 83 100
----------- ----------
Total assets $17,973 $16,313
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $7,670 $7,488
Share based litigation settlement 2,500 2,822
Due to factor - 1,527
Inventory financing payable 572 -
Advances from customers 86 425
----------- ----------
Total current liabilities 10,828 12,262
Warrant liability 503 1,460
Stockholders' equity:
Common stock - $.001 par value; 250,000,000
shares authorized; 28,816,095 and 28,675,962
issued and outstanding at July 31, 2008 and
October 31, 2007, respectively 29 29
Additional paid in capital 101,356 100,201
Accumulated deficit (94,559) (97,524)
Accumulated other comprehensive loss (184) (115)
----------- ----------
Total stockholders' equity 6,642 2,591
----------- ----------
Total liabilities and stockholders' equity $17,973 $16,313
=========== ==========
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Nine Months Ended
July 31,
-------------------
2008 2007
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $2,965 $(3,810)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Depreciation and amortization 221 220
Change in fair value of warrants (957) -
Share based litigation settlement (322) -
Fair value of common stock purchase warrant issued
for services 77
Non-cash compensation expense 1,118 1,013
Gain on settlement of liabilities and other gains - (314)
Amortization of software development costs and prepaid
license fees 3,684 2,499
Changes in operating assets and liabilities
Due from factor - net (2,300) 1,471
Other receivables 606 2,588
Inventory 1,850 971
Capitalized software development costs and
prepaid license fees (7,341) (2,671)
Prepaid expenses and other 835 1,097
Accounts payable and accrued expenses 179 (1,394)
Advances from customers (339) (132)
-------- --------
Net cash provided by operating activities 276 1,538
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (252) (122)
-------- --------
Net cash used in investing activities (252) (122)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance cost on equity financing (40) -
Proceeds from exercise of stock options - 49
Inventory financing 572 (1,381)
-------- --------
Net cash provided by (used in) financing activities 532 (1,332)
-------- --------
Effect of exchange rates on cash and cash equivalents (68) (44)
-------- --------
Net increase in cash 488 40
Cash and cash equivalents - beginning of period 7,277 3,794
-------- --------
Cash and cash equivalents - end of period $7,765 $3,834
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Accounts payable settled through the issuance of
common stock, classified as a mandatorily redeemable
liability $- $365
======== ========
Cash paid for interest $410 $1,477
======== ========
MAJESCO ENTERTAINMENT COMPANY
RECONCILIATION OF GAAP to Non-GAAP FINANCIAL MEASURES
(In thousands, except share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
July 31, July 31,
------------------ -------------------
2008 2007 2008 2007
------- ------- ------- -------
GAAP operating income (loss) $278 $(1,282) $2,425 $(2,333)
Settlement of litigation
and related charges,
net (1) - - (322) 2,500
Gain on settlement of
liabilities and other
gains - (75) - (314)
------- ------- ------- -------
Non-GAAP operating
income (loss) $278 $(1,357) $2,103 $(147)
======= ======= ======= =======
GAAP net income (loss) $520 $(1,548) $2,965 $(3,810)
Settlement of litigation
and related charges, net (1) - - (322) 2,500
Change in fair value of
warrants (2) (363) - (957) -
Gain on settlement of
liabilities and other
gains - (75) - (314)
------- ------- ------- -------
Non-GAAP net income
(loss) $157 $(1,623) $1,686 $(1,624)
======= ======= ======= =======
GAAP net income (loss)
per diluted share $0.02 $(0.06) $0.11 $(0.16)
Settlement of litigation
and related charges,
net (1) - - (0.01) 0.11
Change in fair value of
warrants (2) (0.01) - (0.03) -
Gain on settlement of
liabilities and other
gains - (0.00) - (0.01)
------- ------- ------- -------
Non-GAAP net income
(loss) per diluted
share $0.01 $(0.07) $0.06 $(0.07)
======= ======= ======= =======
Shares used in GAAP and
Non-GAAP per diluted
share amounts 27,476,286 23,862,617 27,482,498 23,716,363
========== ========== ========== ==========
(1) During the nine months ended October 31, 2007, we recorded a $2.5
million charge in connection with shares of common stock that we have
agreed to issue in settlement of a class action securities litigation
against the Company. The charge of $2.5 million represented the fair
value, on the date the settlement agreement was executed, of the
common stock expected to be distributed when the settlement becomes
effective. The value of the shares to be issued in the settlement are
revalued at each balance sheet date, and a corresponding charge or
credit to earnings is recorded to earnings for the amount of the
change. The value of the shares to be issued in the settlement was
$2.8 million at October 31, 2007, and $2.5 million at July 31, 2008.
Therefore, during the nine months ended July 31, 2008, we recorded a
gain on litigation settlement of $0.3 million representing the decline
in the value of the shares to be issued under the settlement, as if it
occurred on July 31, 2008.
(2) Represents the change in the fair value of warrants, classified as a
liability. The fair value of the warrants is calculated at each
balance sheet date with a corresponding charge or credit to earnings
for the amount of the change in fair value.
SOURCE Majesco Entertainment Company Inc.
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