- Fiscal 2009 Net Revenues Increased 48% to $94.5 Million - EDISON,
N.J., Jan. 14 /PRNewswire-FirstCall/ -- Majesco Entertainment
Company (NASDAQ:COOL), an innovative provider of video games for
the mass market, today reported financial results for the fourth
quarter and full year ended October 31, 2009. For the fourth
quarter ended October 31, 2009, Majesco's net revenues increased
32.8 percent to $23.9 million versus $18.0 million in the same
period a year ago. During this same period, the Company reported an
operating loss of $5.5 million, compared to operating income of
$0.4 million in the fourth quarter of 2008. Non-GAAP operating loss
was $5.0 million versus non-GAAP operating loss of $0.4 million in
2008. Net loss for the quarter was $4.5 million versus net income
of $0.4 million in 2008. On a non-GAAP basis, net loss for the
quarter was $5.4 million compared to non-GAAP net loss of $0.7
million last year. The quarter non-GAAP operating and net losses
include a $3.2 million charge for 2010 games that were cancelled or
impaired. The Company's basic and diluted net loss per share for
the quarter ended October 31, 2009 was $0.14 compared to net income
per basic and diluted share of $0.01 in the same period last year.
Non-GAAP basic and diluted net loss per share was $0.16 compared to
a net loss per share of $0.03 last year. The $0.16 non-GAAP net
loss per share for the quarter includes $0.10 from the $3.2 million
for cancelled or impaired 2010 games. Excluding these impairments,
the non-GAAP net loss was $0.06. For the twelve months ended
October 31, 2009, the Company's net revenues increased 47.8 percent
to $94.5 million versus the year ago period. During this same
period, the Company reported an operating loss of $6.6 million
compared to operating income of $2.8 million in the same 2008
period. Non-GAAP operating loss for the twelve month period was
$3.0 million compared to non-GAAP operating income of $3.2 million
for the comparable 2008 period. Net loss through the twelve months
of fiscal 2009 was $7.2 million versus net income of $3.4 million
in the comparable 2008 period. Non-GAAP net loss was $4.4 million
for fiscal 2009 compared to net income of $2.5 million in the same
2008 period. The twelve months non-GAAP operating and net losses
include a $3.2 million charge for 2010 games that were cancelled or
impaired. The Company's basic and diluted net loss per share for
the twelve months ended October 31, 2009 was $0.24 compared to net
income per share for the twelve months ended October 31, 2008 of
$0.12. The Company's non-GAAP basic and diluted net loss per share
for the twelve months ended October 31, 2009 was $0.15 compared to
net income per share of $0.09 in the comparable 2008 period. The
$0.15 non-GAAP net loss per share for the twelve months includes
$0.11 from the $3.2 million for cancelled or impaired 2010 games.
Excluding these impairments, the non-GAAP net loss was $0.04. While
the Company was able to exceed its revenue guidance of $85 million
to $90 million with $94.5 million in net sales, its non-GAAP net
loss of $0.15 per share was $0.25 per share below guidance of $0.10
to $0.14. Specifically, the EPS performance was negatively impacted
by the following: -- $0.10 per share for the quarter and $0.11 per
share for the twelve months for the cancellation or impairment of
2010 titles; -- $0.05 per share for the poor performance of Our
House: Party Wii and DS; -- $0.04 per share for the
underperformance of new IP titles; -- poor international
performance; -- higher percentage of lower margin distribution
sales. Our House: Party had worse than expected sell-in, in
addition to weak sell-through which led to higher allowances and
acceleration of amortization from 2010. In addition, our new IP
titles had weaker than expected sell-in and minimal reorders which
led to higher allowances and accelerated amortization. This was
indicative of a difficult retail environment that was especially
hard on non-branded and new IP titles. Third, the international
business suffered from a weak European packaged goods market and
had delays in the release of some of its titles. Much of the
shortfall in other titles was offset by higher sales of lower
margin product. Lastly, based on sales performance during the
holiday season, the Company evaluated its 2010 portfolio and
cancelled certain titles and wrote down others scheduled for
release in 2010. Jesse Sutton, Chief Executive Officer of Majesco,
said, "In 2009 we delivered a strong top line performance,
exceeding our revenue guidance, despite a challenging economic
environment and a difficult period for our industry overall. Our
top line was driven by the Cooking Mama franchise, Jillian
Michaels' titles and strong distribution revenue. However, we were
disappointed in our inability to translate this strong growth to
the bottom line. While our top titles performed well, and we
successfully maintained costs and reduced marketing expenditures,
we had a soft retail performance from new IP titles in the fourth
quarter. Based on our experience this holiday season, and our view
of the video game retail environment, we carefully reviewed our
2010 title slate and either cancelled or took impairment charges
against a number of titles planned for release during 2010,
primarily for Wii(TM). This charge was approximately $3.2 million
or $0.10 per share in the quarter." "In 2010 we must translate our
revenue into profitability and this is the key focus for our
management team. We are taking a number of steps to better position
the Company for 2010 and beyond. We are well capitalized and in
that regard, in better financial position than we've been in recent
years. We are looking to focus our resources on our best
opportunities, publishing fewer, but stronger titles than we
initially planned and driving additional efficiencies across our
operations by reducing our cost structure. We recently implemented
personnel reductions in both the U.S. and Europe, lowering
headcount by 17 percent. These personnel changes will leave our
worldwide headcount 30 percent below the end of fiscal 2008. In
addition, we made a number of other cost improvements during the
year, including lowering the cost of our rent and some outside
services that will provide further savings as we move into 2010.
Including the elimination of costs of our studio, the reductions in
international and reductions in overhead in the U.S., we've reduced
costs by in excess of $3 million. We believe our efforts will
result in profitability on a lower revenue base, which is reflected
in our fiscal 2010." "Our product focus in 2010 will also include
leveraging our success with the Cooking Mama franchise. During this
holiday season we launched the third Nintendo DS(TM) SKU in the
Cooking Mama series. The title performed well, extending the reign
of Mama as the most successful third party franchise on the DS and
reinforcing its position as an evergreen brand. In addition, in
2009 we introduced our first line extension, in Gardening Mama,
which was very successful, and we are presently working on two
additional extensions for 2010. We also continue to explore
opportunities to expand the reach of the Mama brand to her fans
through new media channels." Financial Highlights -- Fourth quarter
2009 net revenues for the U.S. were $23.1 million, an increase of
$8.2 million or 55 percent compared to the same quarter last year.
Fourth quarter 2009 international sales were $0.8 million, a
decrease of $2.3 million or 74 percent compared to the same period
of 2008. -- For the twelve months of fiscal 2009, net revenues for
the U.S. were $90.4 million, an increase of $32.5 million or 56
percent compared to the same period last year. International sales
for the same period decreased $1.9 million or 32 percent compared
to the same period last year. -- Net Sales for Wii increased $2.3
million, or 24.5 percent, to $11.6 million for the fourth quarter
of fiscal 2009. Nintendo DS(TM) sales for the same period increased
43.5 percent, from $8.4 million to $12.0 million. -- For the twelve
months of fiscal 2009, Wii sales increased $28.3 million, or 130.2
percent, to $50.1 million. Nintendo DS sales for the same period
increased 2.7 percent from $39.4 million to $40.5 million. -- For
the twelve months ended October 31, 2009, the majority of the
increase in selling and marketing compared to the same period a
year ago was the result of variable selling and marketing expenses
related to higher revenues. -- In the fourth quarter of 2009, the
decrease in gross profit percentage was particularly impacted by
Our House: Party, soft sales of new IP titles, and weak
international performance which impacted results $0.05 per share,
$0.04 per share and $0.03 per share, respectively. The difficult
retail environment resulted in lower initial orders, lower or no
re-orders on new IP titles and higher promotional costs and
allowances. The international business was impacted by industry
wide softness in Europe and the slippage of some titles into 2010.
-- In the fourth quarter, selling and marketing expenditures were
12.8 percent of sales, up from 10.7 percent last year. As expected,
selling and marketing expenditures were down 128 basis points from
third quarter 2009 levels, resulting from lower marketing
expenditures. -- The results also include a $3.2 million expense
for 2010 titles which were cancelled or for which the Company took
an impairment charge. This impacted results by $0.10 per share in
the quarter and by $0.11 per share for the twelve months. -- At the
end of the fourth quarter, the Company had in excess of $11.8
million in cash and cash equivalents. As expected, during the
quarter the Company built its inventory in anticipation of the
holiday sales period. This inventory has subsequently sold through
in the first quarter of 2010 and the Company expects to have a
stronger cash position at the end of the first quarter. Announced
Product Line-up First Quarter Fiscal 2010 Ending January 31, 2010
To date, the Company has announced the following titles that were
or are expected to be released during its fiscal first quarter
2010, which includes the holiday sales period: -- Alvin and the
Chipmunks: The Squeakquel for Wii and Nintendo DS launched in
advance of the theatrical release of the same name that opened on
December 24, 2009. Featuring songs from the Grammy and American
Music Award-winning Alvin and The Chipmunks library, this rhythm
action game lets players star as The Chipmunks, their girl-group
counterparts The Chipettes, or both as they rock out on the
ultimate worldwide tour. -- My Hero: Firefighter and My Hero:
Doctor for Nintendo DS let players experience firsthand the heroic
acts of the role models they look up to. In My Hero: Firefighter,
players use the stylus as a fire hose, ladder and ax as they
complete 13 varied missions relating to fire emergencies and
courageous rescues. In My Hero: Doctor, players take on the role of
a doctor's apprentice as they manage 10 major medical emergencies
by utilizing the microphone and stylus as an all-in-one medical
tool. -- Hello Kitty Party for Nintendo DS lets players help Hello
Kitty and SANRIO® friends - including Keroppi®, Badtz-Maru®, My
Melody® and others - plan and throw a party in 25 different
mini-games. After sending out personalized party invitations,
players will design and iron the perfect dress; shop for party
fare; play puzzles and match games; cook food; and dress Hello
Kitty in a variety of outfits and accessories. -- Serious Sam HD:
The First Encounter for Xbox LIVE Arcade is re-tooled and re-vamped
in high definition with an all-new version of the CroTech engine.
Based on the original indie arcade shooter sensation Serious Sam:
The First Encounter, Serious Sam HD features stunningly redesigned
visuals, over the top action and intense online co-op for up to
four players. Fiscal 2010 To date, the Company has announced the
following titles that are expected to be released during the rest
of fiscal 2010: -- The Daring Game for Girls for Wii and Nintendo
DS is based upon the best-selling how-to-book, The Daring Book for
Girls, the ultimate can-do, how-to 'manual' that celebrates the
female spirit. The games guide adventurous girls in a range of
daring and practical activities from building a campfire to
exploring caves, tending a garden, crafting items, playing sports
and games, and making new friends. -- Flip's Twisted World for Wii,
a Gamespot E3 '09 Editor's Choice award finalist, is a unique
puzzle platformer that stars Flip, a magician's apprentice who
mistakenly gets sucked into an alternate universe where up and down
are only a matter of perspective. Players will help Flip navigate
his puzzling world by rotating the environment 90 degrees in any
direction with a simple twist of the Wii Remote. -- Attack of the
Movies 3-D is the first-ever 3-D shooter designed exclusively for
Wii(TM). The game transports players into six fantastic
movie-themed worlds and features classic enemies culled from the
annals of film history. The game also comes packaged with four
pairs of 3-D glasses to support four-player multiplayer action. --
Dance Sensation! for Wii is the only game that lets players train
and perform routines in four different styles: Hip-Hop, Jazz,
Ballet, and Latin Ballroom. Players use the Wii Remote and Nunchuk
to control their on-screen dancer as she perfects more than 160
real motion-captured dance moves in recitals ranging from local
auditoriums to the Broadway stage. -- Pizza Delivery Boy for Wii
lets players use the Wii Remote as an all-in-one kitchen utensil
and driving wheel to cook and deliver pizzas to hungry customers in
three bustling towns. Players must beware, though, as a number of
obstacles stand between them and the coveted title of Pizza Boy of
the Year. -- Pirates Plundarrr for Wii is a fun and frantic
beat-'em-up that lets players hunt the high seas for the renegade
captain Rudebelly who has stolen the Scepter of Power and unleashed
an army of cursed dead and menacing bosses. Would-be pirates will
fight through 45 creature-filled levels to retrieve their stolen
treasure, and four mates can even plunder together in a party
style, battle royale. -- Super Speed Machines for Nintendo DS lets
players kick it into high gear in this frantic arcade racer that
delivers super speed and dangerous conditions at every turn. --
Dawn of Heroes for Nintendo DS is a tactical role playing game that
combines classic RPG concepts--including character development,
epic combat, quests and puzzles--with a humorous style. -- Let's
Draw for Nintendo DS is based on the popular Japanese book series
that teaches kids how to draw by combining basic shapes. With more
than 100 objects to draw and fun art related mini games that let
young players animate their creations, kids can learn to draw
anywhere, at any time. -- Data East Arcade Classics for Wii lets
players re-live their arcade marathons with 15 nostalgic titles
including BurgerTime and its sequel, Peter Pepper's Ice Cream
Factory, Bad Dudes vs. Dragon Ninja, Burnin' Rubber, Heavy Barrel,
Caveman Ninja, and many others. Featuring special updates for
modern gamers, all titles also support single player and 2-player
head-to-head or co-operative multiplayer play. -- Tetris® Party
Deluxe for Wii and Nintendo DS represents a strategic partnership
with Tetris Online, Inc. to support the North American launch and
distribution of the two newest additions to the Tetris franchise.
Tetris is one of the leading and most distinctive video game brands
and franchises in the world. In the game's 25-year history, over
125 million units have been sold. Loved globally by people of all
ages and all cultures, the Tetris game continues to be one of the
most widely recognized video games of all time. -- Ghostwire: Link
to the Paranormal for Nintendo DSi turns your handheld into a
portal to the astral plane. Coupled with the DSi camera, this
detection and communication tool lets you find, summon, capture and
interact with ghosts living amongst us. Ultimately you can help
them find peace as you develop your own paranormal prowess within
an augmented reality that promises to change your perspective
forever. -- Zumba® Fitness for to be announced systems is a
one-of-a-kind exercise program that pairs Latin rhythms with
red-hot international dance steps so you can have a blast as you
party your way into shape. Through invigorating, high
calorie-burning fitness classes, Zumba® Fitness has helped melt the
pounds and inches off more than five million Zumba-enthusiasts in
more than 75 countries. Fiscal 2010 Outlook The Company expects
fiscal 2010 full year net revenue of approximately $80 million. The
Company expects non-GAAP earnings per share to be approximately
$0.05 for the fiscal 2010 full year. The Company's guidance assumes
the release of approximately 37 SKUs in 2010, including 14 DS and
16 Wii. The Company's results are also 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 1-412-858-4600. The access code for the call is
"Majesco". 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 Info" 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 days beginning
approximately 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
436567. Generally Accepted Accounting Principles (GAAP) and
Non-GAAP Metrics To facilitate a comparison between the three and
twelve months ended October 31, 2009 and 2008, the Company has
presented both GAAP and Non-GAAP financial results. GAAP financial
measures, including operating income, net income, and basic and
diluted earnings per share, have been adjusted to report certain
Non-GAAP financial measures. These Non-GAAP financial measures
exclude the following items from the Company's condensed
consolidated statements of operations: -- Expenses related to
non-cash compensation -- Net proceeds from sale of certain state
income tax net operating loss carryforwards -- Settlement charges
related to the settlement of class action litigation -- Change in
fair value of warrants -- Expenses for the California studio which
was closed in the fourth quarter fiscal 2009 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.
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". About Majesco Entertainment
Company Majesco Entertainment Company is a provider of video games
for the mass market. Building on more than 20 years of operating
history, the company is focused on developing and publishing a wide
range of casual and family oriented video games on Wii(TM),
Nintendo DS(TM) and other leading systems. Product highlights
include Cooking Mama(TM), Tetris® Party Deluxe, Alvin and the
Chipmunks: The Squeakquel and Jillian Michaels' Fitness Ultimatum.
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 in Bristol, UK. More information about Majesco
can be found online at http://www.majescoentertainment.com/.
@Majesco is on twitter or at http://www.twitter.com/majesco. 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; and other factors described in our filings with the SEC,
including our Annual Report on Form 10-K for the year ended October
31, 2008. 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 2010
RELEASE SCHEDULE 2010 GAMES ---------- Quarter 1 Alvin and the
Chipmunks: The Squeakquel Wii ($39.99) and DS ($29.99) My Hero:
Firefighter DS, $19.99 My Hero: Doctor DS, $19.99 Hot and Cold: A
3D Hidden Object Adventure DSiWare, 800 points A Boy and His Blob:
Trouble on Blobolonia, Virtual Console, 500 Wii Points Hello Kitty
Party, DS, $29.99 Serious Sam HD: The First Encounter XBLA, 1200
points Quarter 2 Pirates Plundarrr Wii, Price TBA Flip's Twisted
World Wii, Price TBA The Daring Game for Girls Wii ($29.99) and DS
($19.99) Pizza Delivery Boy Wii, $29.99 Dance Sensation! Wii,
$29.99 Let's Draw DS, $19.99 Super Speed Machines DS, $19.99 Dawn
of Heroes DS, $29.99 Data East Arcade Classics Wii, $19.99 Quarter
3 Tetris Party Deluxe Wii and DS, Price TBA Attack of the Movies
3-D Wii, $29.99 Quarter 4 Zumba Fitness, System and Price TBA
Ghostwire DSi, Price TBA MAJESCO ENTERTAINMENT COMPANY UNAUDITED
SUPPLEMENTARY PRODUCT DATA Net Revenue by Platform - Yearly FY09
FY08 FY07 Actual Actual Actual ====== ====== ====== CONSOLE: Wii
53.0% 34.0% 19.6% PS2 0.0% 1.0% 6.9% Xbox 1.1% 0.2% 3.2% --- ---
--- 54.1% 35.2% 29.7% HANDHELD: DS 42.8% 61.7% 55.5% GBA 0.0% 0.1%
5.6% PSP 0.1% 1.1% 3.0% --- --- --- 42.9% 62.9% 64.1% OTHER 3.0%
1.9% 6.2% TOTAL 100.0% 100.0% 100.0% Net sales by Platform for
three and twelve months (Unaudited, in thousands) Three Months
Ended October 31, ------------------------------ 2009 % 2008 % ----
--- ---- --- Nintendo Wii 11,562 48.4% 9,284 51.6% Nintendo DS
12,000 50.2% 8,365 46.5% Other 339 1.4% 343 1.9% --- --- --- ---
TOTAL 23,901 100.0% 17,992 100.0% ====== ===== ====== ===== Twelve
Months Ended October 31, ------------------------------- 2009 %
2008 % ---- --- ---- --- Nintendo Wii 50,062 53.0% 21,746 34.0%
Nintendo DS 40,472 42.8% 39,390 61.7% Other 3,918 4.2% 2,751 4.3%
----- --- ----- --- TOTAL 94,452 100.0% 63,887 100.0% ====== =====
====== ===== MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share
amounts) Three Months Ended Twelve Months Ended October 31, October
31, ----------- ----------- 2009 2008 2009 2008 ---- ---- ---- ----
Net revenues $23,901 $17,992 $94,452 $63,887 ------- -------
------- ------- Cost of sales Product costs 12,504 9,335 39,699
28,881 Software development costs and license fees 8,077 3,663
29,329 11,917 Loss on impairment of software development costs -
future releases 2,515 - 2,515 - ----- --- ----- --- 23,096 12,998
71,543 40,798 ------ ------ ------ ------ Gross profit 805 4,994
22,909 23,089 --- ----- ------ ------ Operating costs and expenses
Product research and development 767 694 4,672 3,306 Selling and
marketing 3,070 1,921 14,618 8,628 General and administrative 1,742
3,098 8,557 9,549 Depreciation and amortization 54 78 263 300 Loss
on impairment of software development costs - cancelled games 635
101 966 101 Settlement of litigation and related charges, net -
(1,250) 404 (1,572) --- ------ --- ------ 6,268 4,642 29,480 20,312
----- ----- ------ ------ Operating (loss) income (5,463) 352
(6,571) 2,777 Other expenses (income) Interest and financing costs,
net 435 232 1,318 649 Change in fair value of warrants (1,443)
(293) 415 (1,250) ------ ---- --- ------ (Loss) income before
income taxes (4,455) 413 (8,304) 3,378 Income taxes - 26 (1,115) 26
--- --- ------ --- Net (loss) income $(4,455) $387 $(7,189) $3,352
======= ==== ======= ====== Net (loss) income per share: Basic
$(0.14) $0.01 $(0.24) $0.12 ====== ===== ====== ===== Diluted
$(0.14) $0.01 $(0.24) $0.12 ====== ===== ====== ===== Weighted
average shares outstanding: Basic 32,956,761 26,893,386 29,770,382
27,547,211 ========== ========== ========== ========== MAJESCO
ENTERTAINMENT COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts) October 31, ----------- 2009
2008 ---- ---- ASSETS Current assets: Cash and cash equivalents
$11,839 $5,505 Due from factor 1,172 - Accounts and other
receivables 1,145 3,032 Inventory 6,190 5,619 Prepaid inventory
3,126 242 Capitalized software development costs and license fees,
current portion 3,678 6,812 Prepaid expenses 847 1,714 --- -----
Total current assets 27,997 22,924 Property and equipment - net 447
563 Other assets 83 83 --- --- Total assets $28,527 $23,570 =======
======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable and accrued expenses $9,356 $10,697 Share-based
litigation settlement - 1,250 Due to factor - 983 Customer billings
due to distribution partner 230 1,487 Inventory financing payables
6,053 1,540 Advances from customers 543 265 --- --- Total current
liabilities 16,182 16,222 Warrant liability 626 211 Stockholders'
equity: Common stock - $.001 par value; 250,000,000 share
authorized; 38,553,740 and 30,127,950 issued and outstanding at
October 31, 2009 and October 31, 2008 respectively 38 30 Additional
paid in capital 113,484 101,722 Accumulated deficit (101,361)
(94,172) Accumulated other comprehensive loss (442) (443) ---- ----
Net stockholders' equity 11,719 7,137 ------ ----- Total
liabilities and stockholders' equity $28,527 $23,570 =======
======= MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY CONSOLIDATED
STATEMENTS OF CASH FLOWS (In thousands) 2009 2008 2007 ---- ----
---- CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) income
$(7,189) $3,352 $(4,770) Adjustments to reconcile net (loss) income
to net cash (used in) provided by operating activities: Change in
fair value of warrants 415 (1,250) (611) Depreciation and
amortization 263 315 296 Provision for price protection 5,363 2,556
1,953 Amortization of software development costs and prepaid
license fees 13,418 6,122 3,116 Non-cash compensation expense 1,730
1,558 1,505 Warrants issued for services - 77 - Write-off of
accounts receivable - 255 - Share-based litigation settlement 404
(1,572) 2,822 Gain on settlements - - (266) Loss on impairment of
software development costs 3,481 101 154 Changes in operating
assets and liabilities: Due to/from factor - net (7,186) (3,100)
763 Accounts and other receivables 1,368 (2,806) 2,433 Inventory
(412) (1,769) (1,412) Capitalized software development costs and
prepaid license fees (13,741) (10,362) (4,501) Prepaid expenses
(2,001) (833) 1,097 Other assets - (17) (18) Accounts payable and
accrued expenses (779) 3,314 (2,791) Litigation settlement (700) -
- Customer billings due to distribution partner (1,257) 1,487 -
Advances from customers 245 (126) (536) --- ---- ---- Net cash
(used in) provided by operating activities (6,578) (2,698) (766)
------ ------ ---- CASH FLOWS FROM INVESTING ACTIVITIES Purchases
of property and equipment (146) (314) (163) ---- ---- ---- Net cash
used in investing activities (146) (314) (163) ---- ---- ---- CASH
FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of stock
options - - 49 Sale of common stock 8,627 - - Treasury stock - (72)
- Inventory financing 4,514 1,540 (1,390) Proceeds from private
placement, net of expenses - (40) 5,819 --- --- ----- Net cash
provided by financing activities 13,141 1,428 4,478 ------ -----
----- Effect of exchange rates on cash and cash equivalents (83)
(188) (66) --- ---- --- Net (decrease) increase in cash and cash
equivalents 6,334 (1,772) 3,483 Cash and cash equivalents -
beginning of period 5,505 7,277 3,794 ----- ----- ----- Cash and
cash equivalents - end of year $11,839 $5,505 $7,277 ======= ======
====== SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the year
for interest $1,322 $676 $1,638 ====== ==== ====== Cash paid during
the year for income taxes $1 - - === === === SUPPLEMENTAL SCHEDULE
OF NON CASH INVESTING AND FINANCING ACTIVITIES Issuance of common
stock in payment of accounts payable $459 $- $365 ==== === ====
Issuance of common stock for assets - - 11 === === === Change in
warrant liability incurred on private placement $415 $(1,250)
$2,071 ==== ======= ====== MAJESCO ENTERTAINMENT COMPANY
RECONCILIATION OF GAAP to NON-GAAP FINANCIAL MEASURES (in
thousands, except share amounts) (Unaudited) Three Months Ended
Twelve Months Ended October 31 October 31 ---------- ----------
2009 2008 2009 2008 ---- ---- ---- ---- GAAP operating (loss)
income $(5,463) $352 $(6,571) $2,777 Settlement of litigation and
related charges, net (1) - (1,250) 404 (1,572) Non-Cash
Compensation (3) 475 439 1,730 1,557 California studio (4) - 42
1,404 403 --- --- ----- --- Non-GAAP operating (loss) income
$(4,988) $(417) $(3,033) $3,165 ======= ===== ======= ====== GAAP
net (loss) income $(4,455) $387 $(7,189) $3,352 Settlement of
litigation and related charges, net(1) - (1,250) 404 (1,572) Change
in fair value of warrants (2) (1,443) (293) 415 (1,250) Non-Cash
Compensation(3) 475 439 1,730 1,557 California studio (4) - 42
1,404 403 Net proceeds from sale of NJ state operating loss
carryforwards(5) - - (1,115) - --- --- ------ --- Non-GAAP net
(loss) income $(5,423) $(675) $(4,351) $2,490 ======= ===== =======
====== GAAP net (loss) income per diluted share $(0.14) $0.01
$(0.24) $0.12 Settlement of litigation and related charges, net(1)
0.00 (0.05) 0.01 (0.06) Change in fair value of warrants (2) (0.04)
(0.01) 0.01 (0.04) Non-Cash Compensation(3) 0.01 0.02 0.06 0.06
California studio (4) 0.00 0.00 0.05 0.01 Net proceeds from sale of
NJ state operating loss carryforwards (5) - - (0.04) - --- ---
----- --- Non-GAAP net (loss) income per diluted share $(0.16)
$(0.03) $(0.15) $0.09 ====== ====== ====== ===== Shares used in
GAAP and Non- GAAP per diluted share amounts 32,956,761 26,893,386
29,770,382 27,547,211 ---------- ---------- ---------- ----------
(1) Represents charges to settle certain litigations pending in the
United States District Court, District of New Jersey: (i) a
securities class action brought on behalf of a purported class of
purchasers of the Company's securities; (ii) a private securities
action filed by Trinad Capital Master Fund, Ltd.; and (iii) a
second action filed by Trinad purportedly on behalf of the Company.
All three actions are now concluded. (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. (3) Represents expenses recorded for stock
compensation expense in accordance with SFAS 123R. The Company does
not consider stock-based compensation charges when evaluating
business performance and management does not consider stock-based
compensation expense in evaluating its short and long-term
operating plans. (4) Represents operating expenses related to our
internal development studio in California, which were not allocated
to capitalizable projects. After evaluation of the studio's
performance, and changes in the availability and cost of
development with our third party partners, we now believe that
closing the studio and taking advantage of these external
opportunities represents a better value for the Company. (5) In
November 2008, the Company received net proceeds of approximately
$1.1 million from the sale of the rights to approximately $14.2
million of New Jersey state income tax operating loss
carryforwards, under the Technology Business Tax Certificate
Program administered by the New Jersey Economic Development
Authority. The amount represents utilization of approximately 34%
of the $41.0 million of net operating loss carryforwards available
to the company in the state of New Jersey, prior to the transfer.
The amount has been recorded as an income tax benefit during the
twelve months ended October 31, 2009. DATASOURCE: Majesco
Entertainment Company CONTACT: John Gross, Chief Financial Officer,
Majesco Entertainment Company, +1-732-225-8910; or Mike Smargiassi,
or Denise Roche, both of Brainerd Communicators, Inc.,
+1-212-986-6667 Web Site: http://www.majescoentertainment.com/
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