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Majesco Entertainment Company Reports Third Quarter Fiscal 2013 Financial Results

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EDISON, NJ -- (Marketwired) -- 09/09/13 -- Majesco Entertainment Company (NASDAQ: COOL), an innovative provider of video games for the mass market, today reported financial results for the third quarter of fiscal 2013 ended July 31, 2013.

For the third quarter ended July 31, 2013, Majesco's net revenues were $4.0 million, down 56 percent versus $9.1 million in the same period a year ago. During the third quarter of fiscal 2013, the Company reported an operating loss of $3.6 million, compared to operating loss of $3.6 million in the third quarter of fiscal 2012. Net loss for the third quarter was $3.6 million compared to net loss of $3.1 million in the third quarter of fiscal 2012. The Company's basic and diluted net loss per share for the quarter ended July 31, 2013 was $(0.09), compared to basic and diluted net loss per share of $(0.08) in the same period last year.

On a non-GAAP basis, the net loss for the third quarter ended July 31, 2013 was $3.3 million compared to non-GAAP net loss of $3.2 million in the third quarter of last year. The non-GAAP diluted net loss per share for the quarter ended July 31, 2013 was $(0.08) compared to diluted net loss per share of $(0.09) in the same period last year. Please refer to the Reconciliation of GAAP to non-GAAP Financial Measures table included later in this release for additional information and details on non-GAAP items.

For the nine months ended July 31, 2013, the Company's net revenues were $37.2 million versus $105.7 million in the year ago period, a decline of 65 percent. The Company reported an operating loss of $7.8 million compared to operating income of $6.7 million in the same period of 2012. For the nine months ended July 31, 2013, net loss was $8.1 million compared to net income of $7.3 million for the nine months ended July 31, 2012. Included in nine month fiscal 2013 operating results is a charge of $0.8 million for severance expenses from the strategic realignment implemented in January 2013. The Company's basic and diluted net loss per share for the nine months ended July 31, 2013 was $(0.20), compared to basic and diluted net income per share of $0.18 for the corresponding period in 2012.

Non-GAAP operating loss for the nine month period was $6.0 million compared to non-GAAP net income of $8.0 million for the comparable period in 2012. For the same period, non-GAAP net loss was $6.3 million in 2013 compared to non-GAAP net income of $7.1 million in 2012. The Company's non-GAAP basic and diluted net loss per share for the nine months ended July 31, 2013 was $(0.15) compared to diluted net income per share of $0.17 in the corresponding period of 2012. Please refer to the Reconciliation of GAAP to non-GAAP Financial Measures table included later in this release for additional information and details on non-GAAP items.

Management Commentary

"Consistent with the first half of 2013, our third quarter results reflect the ongoing industry transition to next generation console gaming," said Jesse Sutton, Chief Executive Officer of Majesco Entertainment. "We believe that our holiday release slate, which is focused on high-profile branded games based on popular characters or franchises, is the right approach for the current environment. We are excited about our releases based on Phineas and Ferb, Agent P Doofendash, Barbie and others as well as the evolution of our Zumba franchise that includes the upcoming Zumba Kids and Zumba Fitness World Party releases and the well-received Zumba Dance, the first ever motion-based fitness experience for mobile tablets, which launched in July."

"In light of the current market transition, we're finding innovative ways to leverage Majesco's core competencies including our industry relationships, distribution reach and sales and marketing prowess. We recently announced an online casino games strategy through a 50% stake in GMS Entertainment that will acquire the operations of two established players in this emerging gaming segment. We have also formed a new division to focus on the growing independent games market by offering services and support to independent game developers for digital distribution platforms. We are excited about the growth prospects of these two new focus areas for Majesco. With over $18 million in cash and no debt on our balance sheet, we continue to have the financial flexibility necessary to invest in growth areas of the gaming market."

Fiscal 2013 Outlook
Given the decline in revenue in the Company's first nine months of fiscal 2013, management continues to expect that revenue for fiscal 2013 will be significantly below fiscal 2012, and that this will result in a loss for the full year of fiscal 2013.

Announced Product Line-up

To date, the Company has announced the following titles that are expected to be released for the upcoming holiday season:

Zumba Dance, the first ever motion-based fitness experience for mobile tablets (Launched in July) •Phineas and Ferb: Quest for Cool Stuff on the Xbox 360® games and entertainment system from Microsoft, Wii U™, Wii™, Nintendo 3DS™ and DS™, is based on the top-rated Emmy Award-winning hit series from Disney. Join Phineas and Ferb as they travel to out-of-this-world places in their newest invention, the All-Terrain Transformatron, an upgradeable, customizable, ultra-cool amphibious ride that lets the boys collect treasures to display in their backyard Museum of Cool. (Launched in August) •Agent P DoofenDASH on iOS and Android, focuses on Perry the Platypus, the breakout star from Disney's Phineas and Ferb. Play as Agent P and his fellow O.W.C.A. agents as they battle Dr. Doofenshmirtz, stop his evil plot, and save the town of Danville. Players will experience unique gameplay every time they play and can challenge friends for the top secret agent score. (Launches in October) •Monster High™13 Wishes Shadow Secrets (distributed by Majesco, published by Little Orbit) on Wii U™, Wii™, Nintendo 3DS™ and DS™ whisks fans away on an amazing adventure with their favorite freaky-fab ghouls who jump, climb and swing through multiple magical levels to save Monster High™. (Launches in October) •Young Justice: Legacy (distributed by Majesco, published by Little Orbit) on PlayStation®3, Xbox 360 and Wii U™ is based on the acclaimed Cartoon Network animated series inspired by the DC Comics characters. Players assemble their Young Justice team from 12 heroes including NightWing, Kid Flash, Robin and more. Track down notorious villains and be mentored by powerful superheroes as you explore, customize and battle in this action-packed, RPG styled game. (Launches in November during first quarter of fiscal 2014) •Zumba® Fitness World Party on Xbox One®, the all-in-one games and entertainment system from Microsoft, Kinect™ for Xbox 360®, Wii U™ and Wii™ is the latest game in the successful dance fitness franchise that has sold more than 9 million units worldwide. This fun, freeing fitness journey embodies Zumba's global reach of over 185 countries by taking your work out to exotic locations around the world. Burn up to 1,000 calories per hour with new modes, dance styles and 40 high-energy new routines set to a world-class soundtrack featuring Lady Gaga, Daddy Yankee and Pitbull. (Launches in November during first quarter of fiscal 2014 and later in 2013 on Xbox One) •Zumba® Kids on Kinect™ for Xbox 360® and Wii™ is the first brand extension of the best-selling Zumba franchise that is custom-designed for younger players. Featuring a range of dance styles, creative mini-games, customization and chart-topping hits from Justin Bieber and Willow Smith, this engaging interactive experience is packed with gameplay to keep kids moving! (Launches in November during first quarter of fiscal 2014) •Barbie™ Dreamhouse Party™ (distributed by Majesco, published by Little Orbit) on Wii U™, Wii™, Nintendo 3DS™ and DS™ takes fans behind the pink doors into the fantastic world of the Barbie® Dreamhouse® mansion. (Launches in November during first quarter of fiscal 2014)

Conference Call

At 4:30 p.m. (EDT) today, September 9, 2013, management will host an earnings conference call. To access the call in the U.S., please dial 1-800-860-2442. 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 website at http://ir.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 #10033443.

Generally Accepted Accounting Principles (GAAP) and Non-GAAP Metrics

To facilitate a comparison between the three and nine months ended July 31, 2013 and 2012, 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 consolidated statements of operations:

•Expenses related to non-cash compensation •Expenses related to workforce reduction •Change in fair value of warrants

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 to 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 video games on all leading console and handheld platforms as well as mobile devices. Product highlights include Zumba® Fitness and Cooking Mama™. Majesco is headquartered in Edison, NJ and the company's shares are traded on the Nasdaq Stock Market under the symbol: COOL. More info can be found online at majescoent.com or on Twitter at twitter.com/majesco.

Safe Harbor

Some statements set forth in this release, including the estimates under the headings "Fiscal 2013 Outlook" contain forward-looking statements that are subject to change. Examples of forward-looking statements include statements relating to industry prospects, our future economic performance including anticipated revenues and expenditures, results of operations or financial position, and other financial items, our business plans and objectives, including our intended product releases, and may include certain assumptions that underlie forward-looking statements. Statements including words such as "anticipate," "believe," "estimate" or "expect" and statements in the future tense are forward-looking statements. These statements are subject to business and economic risk and reflect management's current expectations, and involve subjects that are inherently uncertain and difficult to predict. Some of the risks and uncertainties 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; 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, 2012. The Company does not undertake, and specifically disclaims 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 COMPANY AND SUBSIDIARY UNAUDITED SUPPLEMENTARY PRODUCT DATA NET SALES BY PLATFORM FOR THREE AND NINE MONTHS (Unaudited, in thousands) Three months Ended Nine months Ended July 31, July 31, 2013 % 2012 % 2013 % 2012 % --------- ---- --------- ---- --------- ---- --------- ---- (thousands) (thousands) (thousands) (thousands)Nintendo Wii $ 1,720 43% $ 5,539 61% $ 18,773 50% $ 65,147 62%Microsoft Xbox 360 945 24% 2,153 24% 9,077 24% 26,491 25%Nintendo DS/3DS 605 15% 948 10% 7,353 20% 11,594 11%Sony Playstation 3 88 2% 119 1% 564 2% 809 1%Accessories and other 640 16% 386 4% 1,423 4% 1,684 1% --------- ---- --------- ---- --------- ---- --------- ----TOTAL $ 3,998 100% $ 9,145 100% $ 37,190 100% $ 105,725 100% ========= ==== ========= ==== ========= ==== ========= ==== MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) July 31, October 31, 2013 2012 ------------- ------------- (unaudited)ASSETSCurrent assets: Cash and cash equivalents $ 18,830 $ 18,038 Due from factor, net - 12,501 Accounts and other receivables, net 613 3,936 Inventory 2,362 7,762 Advance payments for inventory 858 257 Capitalized software development costs and license fees, net 7,265 3,489 Prepaid expenses and other current assets 683 1,724 ------------- ------------- Total current assets 30,611 47,707Property and equipment, net 871 1,003Other assets 569 588 ------------- ------------- Total assets $ 32,051 $ 49,298 ============= =============LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable and accrued expenses $ 8,652 $ 15,490 Advances from customers and deferred revenue - 4,454 Due to factor 1,162 - Warrant liability - 17 ------------- ------------- Total current liabilities 9,814 19,961Commitments and contingenciesStockholders' equity: Common stock - $.001 par value; 250,000,000 shares authorized; 41,846,736 and 41,862,321 shares issued and outstanding at July 31, 2013 and October 31, 2012, respectively 42 42 Additional paid-in capital 121,765 120,755 Accumulated deficit (98,944) (90,888) Accumulated other comprehensive loss (626) (572) ------------- ------------- Net stockholders' equity 22,237 29,337 ------------- ------------- Total liabilities and stockholders' equity $ 32,051 $ 49,298 ============= ============= MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except share amounts) Three Months Ended Nine Months Ended July 31 July 31 ------------------------ ------------------------ 2013 2012 2013 2012 ----------- ----------- ----------- -----------Net revenues $ 3,998 $ 9,145 $ 37,190 $ 105,725 ----------- ----------- ----------- -----------Cost of sales Product costs 1,666 2,632 13,931 35,563 Software development costs and license fees 1,097 2,997 11,837 31,461 ----------- ----------- ----------- ----------- Total cost of sales 2,763 5,629 25,768 67,024 ----------- ----------- ----------- -----------Gross profit 1,235 3,516 11,422 38,701 ----------- ----------- ----------- -----------Operating costs and expenses Product research and development 1,352 1,912 4,890 5,890 Selling and marketing 1,015 2,684 6,211 16,356 General and administrative 2,382 2,392 6,848 8,088 Workforce reduction - - 776 - Loss on impairment of capitalized software development costs and license fees - cancelled games - - 175 1,219 Depreciation and amortization 90 141 296 448 ----------- ----------- ----------- ----------- Total operating costs and expenses 4,839 7,129 19,196 32,001 ----------- ----------- ----------- -----------Operating (loss) income (3,604) (3,613) (7,774) 6,700Other expenses (income) Interest and financing costs 34 102 291 765 Change in fair value of warrant liability - (594) (17) (1,586) ----------- ----------- ----------- -----------(Loss) Income before income taxes (3,638) (3,121) (8,048) 7,521 Income taxes (benefit) 6 (34) 8 179 ----------- ----------- ----------- -----------Net (loss) income $ (3,644) $ (3,087) $ (8,056) $ 7,342 =========== =========== =========== ===========Net (loss) income per share: Basic $ (0.09) $ (0.08) $ (0.20) $ 0.18 =========== =========== =========== =========== Diluted $ (0.09) $ (0.08) $ (0.20) $ 0.18 =========== =========== =========== ===========Weighted average shares outstanding: Basic 40,616,376 39,893,133 40,547,680 39,883,365 =========== =========== =========== =========== Diluted 40,616,376 39,893,133 40,547,680 41,016,631 =========== =========== =========== =========== MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Nine months Ended July 31, ------------------------ 2013 2012 ----------- -----------CASH FLOWS FROM OPERATING ACTIVITIESNet (loss) income $ (8,056) $ 7,342Adjustments to reconcile net (loss) income to net cash provided by operating activities:Depreciation and amortization 296 448Change in fair value of warrant liability (17) (1,586)Non-cash compensation expense 1,017 1,301Provision for price protection 1,295 3,211Amortization of capitalized software development costs and license fees 2,952 11,103Loss on impairment of capitalized software development costs and license fees 175 1,219Provision for excess inventory 417 27Changes in operating assets and liabilities: Due from/to factor 12,368 (2,500) Accounts and other receivables 3,280 631 Inventory 4,983 5,526 Capitalized software development costs and license fees (6,903) (7,378) Advance payments for inventory (601) 4,467 Prepaid expenses and other assets 1,036 2,472 Accounts payable and accrued expenses (6,759) (5,769) Advances from customers and deferred revenue (4,402) (5,367) ----------- ----------- Net cash provided by operating activities 1,081 15,147 ----------- -----------CASH FLOWS FROM INVESTING ACTIVITIESPurchases of property and equipment (243) (244) ----------- ----------- Net cash used in investing activities (243) (244) ----------- -----------CASH FLOWS FROM FINANCING ACTIVITIESRepayment of inventory financing - (1,237) Restricted shares withheld for employee taxes - (27) ----------- ----------- Net cash used in financing activities - (1,264) ----------- -----------Effect of exchange rates on cash and cash equivalents (46) (36) ----------- -----------Net increase in cash and cash equivalents 792 13,603Cash and cash equivalents - beginning of period 18,038 13,689 ----------- -----------Cash and cash equivalents - end of period $ 18,830 $ 27,292 =========== ===========SUPPLEMENTAL CASH FLOW INFORMATIONCash paid during the period for interest and financing costs $ 345 $ 715 =========== ===========Cash paid during the period for income taxes $ - $ 565 =========== =========== MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY RECONCILATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (Unaudited, in thousands, except share amounts) Three months ended Nine months ended July 31, July 31, ------------------------ ------------------------ 2013 2012 2013 2012 ----------- ----------- ----------- -----------GAAP operating (loss) income $ (3,604) $ (3,613) $ (7,774) $ 6,700Non-cash compensation (1) 352 438 1,017 1,301Severance (2) - - 776 - ----------- ----------- ----------- -----------Non-GAAP operating (loss) income $ (3,252) $ (3,175) $ (5,981) $ 8,001 =========== =========== =========== ===========GAAP net (loss) income $ (3,644) $ (3,087) $ (8,056) $ 7,342Non-cash compensation (1) 352 438 1,017 1,301Severance (2) - - 776 -Change in fair value of warrants (3) - (594) (17) (1,586) ----------- ----------- ----------- -----------Non-GAAP net (loss) income $ (3,292) $ (3,243) $ (6,280) $ 7,057 =========== =========== =========== ===========GAAP net (loss) income per diluted share $ (0.09) $ (0.08) $ (0.20) $ 0.18Non-cash compensation (1) 0.01 0.01 0.03 0.03Severance (2) - - 0.02 -Change in fair value of warrants (3) - (0.02) - (0.04) ----------- ----------- ----------- -----------Non-GAAP net (loss) income per diluted share $ (0.08) $ (0.09) $ (0.15) $ 0.17 =========== =========== =========== ===========Shares used in GAAP and Non-GAAP per diluted share amounts 40,616,376 39,893,133 40,547,680 41,016,631(1) Represents expenses recorded for stock compensation expense. The Companydoes not consider stock-based compensation charges when evaluating businessperformance and management does not consider stock-based compensationexpense in evaluating its short and long-term operating plans.(2) Represents one time severance costs related to a workforce reduction.During January 2013, Company management initiated a plan of restructuring tobetter align its workforce to its revised operating plans. As part of theplan, the Company reduced its personnel count by approximately 40 employees.(3) Represents the change in the fair value of warrants classified as aliability. The fair value of the warrants is calculated at each balancesheet date with a corresponding charge or credit to earnings for the amountof the change in fair value.





For additional information, please contact:
Company Contact:
Michael Vesey
Chief Financial Officer
732.476.1956

Investor Relations Contact:
Stephanie Prince/Jody Burfening
LHA
212.838.3777
sprince@lhai.com



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