CMGE Reports Second Quarter 2013 Unaudited Financial Results

CMGE Reports Second Quarter 2013 Unaudited Financial Results

HONG KONG, Aug. 28, 2013 (GLOBE NEWSWIRE) -- China Mobile Games and
Entertainment Group Limited ("CMGE" or the "Company") (Nasdaq:CMGE), a leading
mobile game company inChina, today reported its unaudited financial results
for the second quarter ended June 30, 2013.

Second Quarter 2013 Financial Highlights

  *Revenues were RMB72.0 million (US$11.7 million^1), 18.6% and 97.3%
    increases compared with RMB60.7 million in the second quarter of 2012 and
    RMB36.5 million in the first quarter of 2013, respectively. The sequential
    quarterly growth in revenue was largely a result of increased revenue from
    mobile social games and the expansion of the Company's third-party game
    publishing business as well as an increase in the number of subscriptions
    to the Company's single-player game bundles.
  *Net loss was RMB12.6 million (US$2.1 million), compared with net income of
    RMB23.4 million in the second quarter of 2012 and net loss of RMB21.6
    million in the first quarter of 2013.
  *Non-GAAP^2 net loss, excluding (1)share-based compensation expenses and
    (2)intangible assets impairment loss, was RMB3.9 million (US$0.6
    million), compared with non-GAAP net income of RMB26.6 million in the
    second quarter of 2012 and non-GAAP net loss of RMB13.2 million in the
    first quarter of 2013.
  *Basic and diluted loss per American Depositary Share^3 ("ADS") was RMB0.66
    (US$0.11), compared with an earning of RMB0.92 in the second quarter of
    2012 and a loss of RMB1.01 in the first quarter of 2013.

^1 This announcement contains translations of certain Renminbi (RMB) amounts
into U.S. dollars (US$) at specified rates solely for the convenience of the
reader. Unless otherwise noted, all translations from RMB to U.S. dollars are
made at a rate of RMB6.1374 to US$1.00, the effective noon buying rate as of
June28, 2013 in The City of New York for cable transfers of RMB as set forth
in H.10 weekly statistical release of the Federal Reserve Board.

^2Non-GAAP measures and related reconciliations to GAAP measures are
described in the accompanying sections titled "About Non-GAAP Financial
Measures" and "Reconciliations of Non-GAAP Financial Measures to Comparable
GAAP Measures" at the end of this press release.

^3One ADS represents 14 ClassA ordinary shares of the Company.

Second Quarter Select Operating Data

  *Total paying user accounts for social games were 1.4million, compared
    with 158,795 in the second quarter of 2012 and 308,039 in the first
    quarter of 2013. ARPU for social games was RMB20.84, compared with
    RMB75.54 in the second quarter of 2012 and RMB23.81 in the first quarter
    of 2013.
  *Total subscriptions^4 for single-player game bundles were 2.0million in
    the second quarter of 2013, compared with 1.7million in the second
    quarter of 2012 and 1.5million in the first quarter of 2013. Average
    revenue per subscription for single-player game bundles was RMB5.18,
    compared with RMB4.79 in the second quarter of 2012 and RMB4.73 in the
    first quarter of 2013.
  *Total paying user accounts^5for single-player games (excluding
    single-player game bundles) were 3.9million, compared with 12.7million
    in the second quarter of 2012 and 4.3million in the first quarter of
    2013. Average revenue per paying user account ("ARPU") for single-player
    games (excluding single-player game bundles) was RMB3.28, compared with
    RMB3.03 in the second quarter of 2012 and RMB3.38 in the first quarter of
    2013.

^4 Total subscriptions represents the total number of monthly subscriptions to
our game bundles offered through mobile network operators. A user who pays two
subscription fees during one month to subscribe to different game bundles
would be counted as two subscriptions.

^5 Total paying user accounts represents (i) the number of user accounts that
have purchased in-game items for the relevant period, adjusted to eliminate
double-counting of the same user accounts, and (ii) the total number of games
downloaded through application stores.

"I am pleased to report a strong quarter of revenue growth sequentially
demonstrating the strong recovery of our overall financial and operational
performance since the end of 2012," commented Mr.Ken Jian Xiao, CMGE's Chief
Executive Officer. "Revenue increased by 97% sequentially as we started to
benefit from the execution of our long-term strategy of both self-developing
and publishing third-party smartphone social games. Our operational and
financial results are representative of the progress that we have been making.
I believe we are in the early stages of a renewed growth period and that
momentum will continue to accelerate.

"Our existing game portfolio has now expanded to contain over 500 single
player games and 60 social games. Our self-developed social game Joyful Zha
Jin Hua, the first social poker game in our Joyful poker game series, reached
almost RMB 10million in gross revenue in the month of June of 2013 even
though it was only launched in February 2013. The number of monthly paying
users for Joyful Zha Jin Hua has grown from approximately 295,000 in April to
approximately 595,000 in June. We plan to introduce the iOS version of this
game during the third quarter of this year. During the second quarter of 2013,
we also launched Joyful Dou Di Zhu, Joyful Niuniu, Joyful Mahjong for two and
Joyful Mahjong-tuidaohu, all of which we believe will contribute to the
success of our Joyful poker game series. In addition, we launched War Valley
in mid-July and it has performed well with a paying user conversion rate of
around 10% and over 50,000 registrations during the first day of its launch.
We believe these results indicate the potential of our proprietary social
games. As of 30 June 2013, in addition to the six self-developed social games
(two out of six are still under beta testing, namely Joyful Niuniu and Xiang
Mo Shen Hua) we have already launched during 2013, we are on track to launch
an additional nine such games before the end of the year, such as Immortal
Wind (Xian Feng), Dazzling Dance (Xuan Wu Pai) and Che Che Bomb (Che Che Dan).

"Our third-party game publishing business has also expanded significantly.
Since the launch of this business in the fourth quarter of 2012, we have
published a total of 50 third-party social games, including over 15 games
which we have exclusive licensing agreements. Many of the games that we
publish have been ranked in the top 10 in terms of total downloads on major
app stores and gaming platforms, such as Qihoo360, 91.com and Android Market.

"We have established strong capabilities in publishing, operating, sales and
technology to support and help further expand our third-party publishing
business. For publishing, CMGE runs one of China's strongest and most
extensive mobile distribution channels. We are on target to pre-install our
Game Center application or games on more than 60million smartphones by the
end of 2013. We have entered into pre-installation arrangements with a number
of well-respected mobile brands in China, including Coolpad, K-touch, Eton,
Haier, Zopo and Hedy. We have entered into an exclusive cooperation agreement
with KuGuo, one of the largest mobile advertising platforms in China. In terms
of operating games, CMGE has established strong teams that provide data
analysis, product testing as well as around-the-clock customer support
service, which allows us to continuously refine the games to help us meet our
targeted operating performance. To enhance our sales and marketing, we have
recruited top talent to promote our products on consumer- and
business-oriented platforms innovatively and efficiently. In terms of
technology, we have established strong SDK support and operating capabilities,
and we are able to quickly connect our games onto many app stores or social
networking platforms, as well as many major third-party payment gateways.

"We are proud of what we have achieved during the second quarter of 2013, and
believe we have just begun to see the benefits of the transition that we
initiated in late 2012 on the implementation of our long term strategy of
focusing on developing and publishing smartphone games. We are confident that
the strategy we have implemented and the investments we have made will deliver
the long-term sustainable growth we are seeking."

Mr.Ken Chang, CMGE's Chief Financial Officer, added, "I am pleased to see the
further acceleration of revenue growth in the second quarter of 2013,
particularly in our games segment, which increased by a strong 87.2% compared
to the first quarter. Our operating performance for social games is on a good
path, with paying users increasing by 361.4%, from over 308,000 users during
the first quarter of 2013 to 1.4million users in the second quarter, driven
by our proprietary game Joyful Zha Jin Hua, as well as third-party games that
we are publishing. During the second quarter, third-party game publishing
revenue represents 19% of our game revenue, demonstrating the significant
progress we have made since starting this business segment in late 2012. With
respect to the game bundles, the number of subscriptions on China Mobile's
platform increased by 29.8% sequentially, largely because of our good quality
game selection and China Mobile's increase in promotion efforts."

Second Quarter 2013 Results

Revenues

Total net revenues were RMB72.0 million (US$11.7 million), compared with
RMB60.7 million in the second quarter of 2012 and RMB36.5 million in the prior
quarter.

  *Mobile phone game revenues were RMB54.3 million (US$8.9 million), a
    decrease of 6.8% from RMB58.3 million during the same period last year and
    an increase of 87.2% from RMB29.0million in the prior quarter. The
    sequential quarterly growth in revenue is largely a result of the strong
    growth in social games and game bundles. The number of paying users for
    social games increased by 361.4% over the prior quarter, mainly driven by
    the success in Joyful Zha Jin Hua and the increase in the number of
    third-party social games that we publish. The number of subscriptions for
    game bundles increased by 29.8% sequentially to 2.0million as a result of
    our good quality game selection and China Mobile's increase in promotion
    efforts, while ARPU increased from RMB4.73 to RMB5.18 because of an
    increase in contributions from game bundle with a higher ARPU. The decline
    in revenue from the same period last year was a result of the Company's
    transition as it focused its developing and publishing efforts on a new
    generation of Android and iOS-based social games. The transition from
    feature phone to smartphone games led to a significant decrease
    year-over-year in the total playing user accounts for single player games
    (excluding single-player game bundles), which are mainly composed of
    feature phone games.
  *Handset design revenues were RMB17.6 million (US$2.9 million), compared
    with RMB2.4 million during the corresponding period in 2012 and RMB7.5
    million during the prior quarter. The significant sequential increase was
    primary due to a pick up of demand in smartphone handset after Chinese New
    Year. The year-over-year increase in revenue was primarily due to
    increased revenue from smartphone handset design.

Cost of Revenues

Cost of revenues was RMB39.1 million (US$6.4 million) during the second
quarter of 2013, an increase of 62.5% from RMB24.0million in the second
quarter of 2012 and an increase of 77.9% from RMB22.0 million in the first
quarter of 2013. The sequential quarterly and year-over-year increases were
primarily due to an increase in the amount paid for payment related services,
and an increase in handset sales volume which resulted in higher component
costs.

  *Cost of revenue for mobile phone games was RMB22.3 million (US$3.6
    million), compared with RMB21.6 million during the second quarter in 2012
    and RMB14.7 million during the prior quarter. The sequential quarterly and
    year-over-year increases were primarily due to an increase in the amount
    paid for payment related services, particular for our proprietary game
    Joyful Zha Jin Hua. In addition, the Company increased spending to promote
    its game bundles.
  *Cost of revenue for handset design was RMB16.8 million (US$2.7 million),
    compared with RMB2.4 million during the second quarter of 2012 and RMB7.2
    million during the prior quarter. The sequential and year-over-year
    increases were largely due to higher component costs as sales orders for
    smartphone designs increased.

The Company's overall gross margin was 45.7% during the second quarter of
2013, compared with 60.4% in the second quarter of 2012 and 40.0% in the first
quarter of 2013.

  *Gross margin for mobile phone games was 58.9% during the second quarter of
    2013, compared with 63.0% during the second quarter of 2012 and 49.3% in
    the first quarter of 2013. The sequential increase was primarily due to an
    increase in revenues compared with fixed costs, which mainly consist of
    the amortization of intangible assets. The year-over-year decline was
    primarily due to higher amounts paid for payment related services.
  *Gross margin for handset design was 5.1% during the second quarter of
    2013, compared with -0.6% during the second quarter of 2012 and 4.3% in
    the first quarter of 2013. The sequential and year-over-year increases
    were due to an increase in sales revenues generated relative to fixed
    costs and no amortization of customer relationship recorded during the
    second quarter of 2013.

Operating Expenses

Operating expenses were RMB46.1 million (US$7.5 million) during the second
quarter of 2013, compared with RMB19.3 million in the second quarter of 2012
and RMB32.8 million in the first quarter of 2013. The increases were largely
because the Company increased spendings on distributing its game platform and
promoting new games, for both self-developed and third-party social games and
increase in staff cost for research and development.

Selling expenses as a percentage of net revenue were 24.0% in the second
quarter of 2013, compared with 8.1% in the second quarter of 2012 and20.7% in
the first quarter of 2013. The sequential and year-over-year increases were
primarily due to the expansion of the third party publishing business, and the
increase in promotion cost for third party as well as self-developed games on
various app stores and SNS platforms.

General and administrative expenses were RMB17.4 million (US$2.8 million) in
the second quarter of 2013, compared with RMB7.1 million in the second quarter
of 2012 and RMB 13.8 million in the first quarter of 2013. The sequential and
year-over-year increases could be largely explained by the increases in
share-based compensation and number of employees over the respective periods.

Share-based compensation expenses totaled RMB8.6 million (US$1.4 million)
during the second quarter of 2013, compared with RMB3.2 million in the second
quarter of 2012 and RMB5.8 million in the first quarter of 2013. The
sequential and year-over-year increases were primarily due to the options and
warrants granted to the Company's employees and consultants in 2013 and the
fair value change of the unvested warrants which were granted to a Company's
consultant of RMB3.6 million during the second quarter of 2013.

Research and development expenses as a percentage of net revenue were 15.8% in
the second quarter of 2013, compared with 12.1% in the second quarter of 2012
and 24.0% in the first quarter of 2013. The sequential decrease was primarily
due to the significant increase in the Company's revenue during the second
quarter of 2013.

Operating Income (Loss)

As a result of the above factors, the Company had an operating loss of RMB13.2
million (US$2.1 million) during the second quarter of 2013, compared with
operating income of RMB17.4 million in the second quarter of 2012 and
operating loss of RMB18.2 million in the first quarter of 2013.

Operating loss excluding (1)share-based compensation and (2)intangible
assets impairment loss (non-GAAP) was RMB4.5 million (US$0.7 million) during
the second quarter of 2013, compared with operating income (non-GAAP) of
RMB20.6 million in the second quarter of 2012 and operating loss (non-GAAP) of
RMB9.7 million in the first quarter of 2013.

Contingently Returnable Consideration Assets

Changes in the fair value of contingently returnable consideration assets
resulted in a loss of RMB0.8 million (US$0.1 million) during the second
quarter of 2013, compared with losses of RMB3.2 million in the second quarter
of 2012 and RMB2.8 million in the first quarter of 2013. The loss was
primarily due to a decrease in the fair value of the consideration shares to
be returned to VODone pursuant to the contingent conditions related to the
acquisition of the 3GUU Group.

Income Tax

The Company had an income tax expense of RMB0.5 million (US$0.1 million)
during the second quarter of 2013, compared with an income tax benefit of
RMB8.8 million in the second quarter of 2012 and an income tax expense of
RMB1.1 million in first quarter of 2013. The year-over-year decrease was due
to the reversal of a tax provision caused by a tax exemption that Guangzhou
Yitongtianxia Software Development Co., Ltd received in the second quarter of
2012.

Net Income/Loss

Net loss during the second quarter of 2013 was RMB12.6 million (US$2.1
million), compared with net income of RMB23.4million in the second quarter of
2012 and net loss of RMB21.6 million in the first quarter of 2013.

Net loss excluding (1)share-based compensation and (2)intangible assets
impairment loss (non-GAAP) was RMB3.9 million (US$0.6 million) during the
second quarter of 2013, compared with net income (non-GAAP) of RMB26.6 million
in the second quarter of 2012 and net loss (non-GAAP) of RMB13.2 million in
the first quarter of 2013.

Basic and Diluted Earnings/Loss per ADS

Basic and diluted loss per ADS were RMB0.66 (US$0.11) during the second
quarter of 2013, compared with earnings per ADS of RMB0.92 in the second
quarter of 2012 and a loss per ADS of RMB1.01 in the first quarter of 2013.
Basic and diluted loss per ADS excluding (1)share-based compensation and
(2)intangible assets impairment loss (non-GAAP) were RMB0.26 (US$0.04) during
the second quarter of 2013, compared with earnings per ADS of RMB1.05 in the
second quarter of 2012 and loss per ADS of RMB0.62 in the first quarter of
2013.

Cash and Cash Equivalents

As of June30, 2013, the Company had cash and cash equivalents of RMB103.3
million (US$16.8 million) and short-term investments were RMB51.4 million
(US$8.4 million). Operating cash flow for the second quarter of 2013 was a net
outflow of RMB5.8 million (US$0.9 million).

Common Shares

CMGE had 331.1million common shares outstanding as of June30, 2013, or the
equivalents of 23.6million ADSs outstanding.

Subsequent Events

Subsequent to the second quarter of 2013, the Company announced that it had
issued and sold an aggregate of 2,500,000 ADSs at US$10.00 per ADS, for gross
proceeds of US$25 million before deducting offering expenses, to Champion Plus
Group Limited, a subsidiary of Zennon Capital Partners, L.P., and Grand
Synergy Limited, a subsidiary of New World Strategic Investment Limited, in a
private placement. Champion Plus Group Limited also received warrants to
purchase up to an aggregate of 100,000 ADSs that are exercisable at any time
commencing six months after the closing date and over a two year period. The
transaction closed on August 5, 2013.

Conference Call

CMGE's management will host a conference call to discuss the results at 8:00
a.m. Eastern Daylight Time on August28, 2013 (8:00p.m. Beijing time on the
same day).

The dial-in details for the live conference call are:

U.S.TollFreeDial-In +1 855-500-8701
Hong Kong Dial-In      +852 3051-2745
China Dial-In          400-120-0654
International Dial-In  +65 6723-9385
Conference ID          CMGE

A telephone replay of the call will be available after the conclusion of the
conference call at 10:00 a.m. Eastern Daylight Time on August28, 2013 through
11:59 p.m. Eastern Daylight Time on September4, 2013. The dial-in details for
the replay are:

U.S.TollFreeDial-In +1 855-452-5696
International Dial In: +61 2-8199-0299
Conference ID          35879536

A live webcast of the conference call will be available on the investor
relations section of CMGE's website at: http://ir.cmge.com/.

About CMGE

CMGE is a leading mobile game company in China with the largest market share
among mobile game developers in terms of revenues in 2010, 2011 and 2012,
according to Analysys International, an independent market research firm. CMGE
has integrated capabilities in the development, operation, sale and
distribution of mobile games in China. Its mobile handset design business
complements its game development business as it pre-installs CMGE's mobile
games and game platforms in the handsets it designs, and enhances CMGE's
knowledge of user habits and preferences and industry trends. CMGE has a large
and diversified portfolio of games, and it has strong game development,
operation and sale and distribution capabilities in China.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are
made under the "safe harbor" provisions of the U.S. Private Securities
Litigation Reform Act of 1995. These forward-looking statements can be
identified by terminology such as "will," "expects," "anticipates," "future,"
"intends," "plans," "believes," "estimates," "confident" and similar
statements. CMGE may also make written or oral forward-looking statements in
its periodic reports to the U.S. Securities and Exchange Commission, in its
annual report to shareholders, in press releases and other written materials
and in oral statements made by its officers, directors or employees to third
parties. Statements that are not historical facts, including statements about
CMGE's beliefs and expectations, are forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties. A number
of factors could cause actual results to differ materially from those
contained in any forward-looking statement, including but not limited to the
following: our growth strategies as well as our business plans; our future
development, results of operations and financial condition; our ability to
continue to develop new and attractive products and services; our ability to
continue to develop new technologies or upgrade our existing technologies; our
ability to attract and retain users and customers and further enhance our
brand recognition; the expected growth of and trends in the mobile game
industry in China; PRC governmental policies and regulations relating to the
mobile game industry in China; competition in the mobile game industry; and
general economic and business conditions in China. Further information
regarding these and other risks is included in our registration statement on
Form F-1 and other documents filed with the Securities and Exchange
Commission. CMGE does not undertake any obligation to update any
forward-looking statement, except as required under applicable law. All
information provided in this press release and in the attachments is as of the
date of the press release, and CMGE undertakes no duty to update such
information, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement CMGE's financial results presented in accordance with U.S. GAAP,
the Company uses non-GAAP financial measures, which are adjusted from results
based on U.S. GAAP to exclude share-based compensation expenses and intangible
assets impairment loss. Reconciliations of non-GAAP financial measures to U.S.
GAAP financial measures are set forth in tables at the end of this earnings
release, which provide more details on the non-GAAP financial measures.

Non-GAAP financial information is provided as additional information to help
investors compare business trends among different reporting periods on a
consistent basis and to enhance investors' overall understanding of the
historical and current financial performance of the Company's continuing
operations and prospects for the future. Non-GAAP financial information should
not be considered a substitute for or superior to U.S. GAAP results. In
addition, calculations of this non-GAAP financial information may be different
from calculations used by other companies, and therefore comparability may be
limited.

                                      

CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"), except for
number of shares)
                                                     
                                         As of
                                          December31, As of June30,
                                         2012*      2013      2013
                                         RMB          RMB         US$
                                                     (Unaudited) (Unaudited)
ASSETS                                                           
Current assets:                                                  
Cash and cash equivalents                 128,736     103,306    16,832
Short-term investments                    45,000      51,427     8,379
Accounts receivable                       41,726      54,748     8,920
Inventories                               2,359       3,858      629
Prepayment and other current assets       37,386      44,721     7,287
Deferred tax assets                       262         361        59
Total current assets                      255,469     258,421    42,106
Non-current assets:                                              
Property and equipment, net               4,814       5,753      937
Goodwill                                  564,841     564,841    92,033
Intangible assets, net                    42,998      44,902     7,316
Prepayments                               28,600      25,800     4,204
Deferred tax assets                       129         68         11
Other non-current assets                  343         518        84
Total non-current assets                  641,725     641,882    104,585
TOTAL ASSETS                              897,194     900,303    146,691
LIABILITIES, MEZZANINE EQUITY AND                                
SHAREHOLDERS' EQUITY
Current liabilities:                                             
Accounts payable                          3,689       16,733     2,726
Accrued expenses and other liabilities    19,597      23,251     3,788
Deferred revenue                          1,697       6,401      1,043
Income tax payable                        76          1,451      236
Amounts due to related parties            991         1,037      169
Total current liabilities                 26,050      48,873     7,962
Non-current liabilities:                                         
Unrecognized tax benefits                 21,944      9,135      1,488
Deferred tax liabilities                  7,844       6,565      1,070
Other non-current liabilities             2,150       16,991     2,769
Total non-current liabilities             31,938      32,691     5,327
Total liabilities                         57,988      81,564     13,289
Mezzanine equity                                                 
Contingently redeemable ordinary shares
(US$0.001 par value, 26,485,961 shares
authorized; 26,485,961 and 26,485,961
shares issued and outstanding as of
December31, 2012 and June30, 2013,      76,858      76,866     12,524
respectively. Aggregate liquidation
preference and redemption amount were
RMB75,899 and RMB 76,866 as of June30,
2013, respectively)
Shareholders' equity                                             
ClassA ordinary shares (US$0.001 par
value, 750,000,000 shares authorized;
113,577,208 and 113,577,208 shares issued 727         727        118
and outstanding as of December31, 2012
and June30, 2013, respectively)
Class B ordinary shares (US$0.001 par
value, 250,000,000 shares authorized;
189,617,092 and 189,617,092 shares issued 1,213       1,213      198
and outstanding as of December31, 2012
and June30, 2013, respectively)
Additional paid-in capital                726,200     737,568    120,176
Retained earnings (Accumulated deficit)   34,563      (1,506)    (245)
Accumulated other comprehensive (loss)    (420)       91         15
income
Total China Mobile Games and              762,283     738,093    120,262
Entertainment Group Limited's equity
Noncontrolling interests                  65          3,780      616
Total shareholders' equity                762,348     741,873    120,878
TOTAL LIABILITIES, MEZZANINE EQUITY AND   897,194     900,303    146,691
SHAREHOLDERS' EQUITY
                                                                
*Amounts for the year ended December31, 2012 were derived from December31,
2012 audited consolidated financial statements.


CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands of Renminbi ("RMB") and U.S.Dollars ("US$"),
except for number of shares and per share data)
                                                             
              For the Three Months Ended                    For the Six Months Ended
              June30,    March31,   June30,    June 30,    June 30,    June 30,    June 30,
               2012       2013      2013        2013      2012      2013      2013
              RMB         RMB         RMB         US$         RMB         RMB         US$
              (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Revenues                                                                     
Games          58,301     29,019     54,319     8,850      109,833    83,338     13,579
Handset design 2,430      7,528      17,649     2,876      5,231      25,177     4,102
Total net      60,731     36,547     71,968     11,726     115,064    108,515    17,681
revenues
Cost of                                                                          
revenues
Games          (21,591)   (14,746)   (22,302)   (3,634)    (43,142)   (37,048)   (6,036)
Handset design (2,444)    (7,205)    (16,757)   (2,730)    (5,224)    (23,962)   (3,905)
Total cost of  (24,035)   (21,951)   (39,059)   (6,364)    (48,366)   (61,010)   (9,941)
revenues
Gross profit   36,696     14,596     32,909     5,362      66,698     47,505     7,740
Operating                                                                        
expenses:
Selling        (4,894)    (7,563)    (17,257)   (2,812)    (7,054)    (24,820)   (4,044)
expenses
General and
administrative (7,068)    (13,818)   (17,430)   (2,840)    (12,975)   (31,248)   (5,091)
expenses
Research and
development    (7,364)    (8,775)    (11,394)   (1,856)    (15,961)   (20,169)   (3,286)
expenses
Impairment of
intangible     —         (2,613)    —         —         —         (2,613)    (426)
assets
Operating      17,370     (18,173)   (13,172)   (2,146)    30,708     (31,345)   (5,107)
income (loss)
Interest       273        405        782        127        565        1,187      193
income
Other income   112        113        1,069      175        225        1,182      193
Change in fair
value of
contingently   (3,161)    (2,804)    (777)      (127)      3,970      (3,581)    (584)
returnable
consideration
assets
Income (loss)
before income
taxes and      14,594     (20,459)   (12,098)   (1,971)    35,468     (32,557)   (5,305)
noncontrolling
interests
Income tax
(expense)      8,828      (1,133)    (482)      (79)       6,775      (1,615)    (263)
benefit
Net income     23,422     (21,592)   (12,580)   (2,050)    42,243     (34,172)   (5,568)
(loss)
Accretion of
contingently
redeemable     (1,887)    (353)      (972)      (158)      (1,887)    (1,325)    (216)
ordinary
shares
Net income
(loss)
attributable   21,535     (21,945)   (13,552)   (2,208)    40,356     (35,497)   (5,784)
to
shareholders
Net income
(loss)
attributable   —         (67)       639        104        —         572        93
to
noncontrolling
interests
Net income
(loss)
attributable
to China
Mobile Games
and            21,535     (21,878)   (14,191)   (2,312)    40,356     (36,069)   (5,877)
Entertainment
Group
Limited's
ordinary
shareholders
Other
comprehensive                                                                    
income (loss):
Foreign
currency       27         (112)      623        102        20         511        84
translation
adjustment
Other
comprehensive  27         (112)      623        102        20         511        84
income (loss)
Comprehensive  21,562     (22,057)   (12,929)   (2,106)    40,376     (34,986)   (5,700)
income (loss)
Comprehensive
income (loss)
attributable   —         (67)       15         2          —         (52)       (8)
to
noncontrolling
interests
Comprehensive
income (loss)
attributable
to China
Mobile Games
and            21,562     (21,990)   (12,944)   (2,108)    40,376     (34,934)   (5,692)
Entertainment
Group
Limited's
ordinary
shareholders
Earnings
(loss) per
share for
ClassA and                                                                      
Class B
ordinary
shares:
Basic          0.07       (0.07)     (0.05)     (0.01)     0.12       (0.12)     (0.02)
Diluted        0.07       (0.07)     (0.05)     (0.01)     0.12       (0.12)     (0.02)
Weighted
average number
of ClassA and
Class B                                                                          
ordinary
shares
outstanding in
computing:
Basic          302,729,550 303,194,300 303,194,300 303,194,300 302,729,550 303,194,300 303,194,300
Diluted        302,729,550 303,194,300 303,194,300 303,194,300 309,607,120 303,194,300 303,194,300


CHINA MOBILE GAMES AND ENTERTAINMENT GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of Renminbi ("RMB") and U.S. Dollars ("US$"))
                                                           
            For the Three Months Ended                      For the Six Months Ended
            June30,    March31,   June30,    June30,    June30,    June30,    June30,
             2012        2013      2013      2013      2012      2013      2013
            RMB         RMB         RMB         US$         RMB         RMB         US$
            (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net cash
provided by
(used in)    22,255     3,473      (5,799)    (945)      34,648     (2,326)    (380)
operating
activities
Net cash
used in      (29,461)   (6,743)    (15,595)   (2,541)    (32,159)   (22,338)   (3,640)
investing
activities
Net cash
provided by  72,881     40         —         —         9,881      40         7
financing
activities
Exchange
rate effect
on cash and  27         (112)      (694)      (113)      20         (806)      (131)
cash
equivalents
Net increase
(decrease)
in cash and  65,702     (3,342)    (22,088)   (3,599)    12,390     (25,430)   (4,144)
cash
equivalents
Cash and
cash
equivalents, 133,925    128,736    125,394    20,431     187,237    128,736    20,976
beginning of
the period
Cash and
cash
equivalents, 199,627    125,394    103,306    16,832     199,627    103,306    16,832
end of the
period


Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures
(Amounts in thousands of Renminbi ("RMB") except for per ADS data)
                                                                                  
            Forthethreemonths ended          Forthethreemonthsended          Forthethreemonthsended
             June30,2012                       March31,2013                      June30,2013
            GAAP    Adjustment(a) Non-GAAP GAAP     Adjustment(a) Non-GAAP  GAAP   Adjustment(a) Non-GAAP
            RMB     RMB              RMB        RMB      RMB              RMB       RMB      RMB              RMB
Operating    19,326 (3,199)         16,127   32,769  (8,441)         24,328   46,081  (8,631)         37,450
expenses
Income
(loss) from  17,370 3,199           20,569   (18,173) 8,441           (9,732)  (13,172) 8,631           (4,541)
operations
Operating    28.6%                  33.9%     -49.7%                  -26.6%   -18.3%                  -6.3%
margin
Net income   23,422 3,199           26,621   (21,592) 8,441           (13,151) (12,580) 8,631           (3,949)
(loss)
Net margin   38.6%                  43.8%     -59.1%                  -36.0%   -17.5%                  -5.5%
Net income
(loss)       21,535 3,199           24,734   (21,878) 8,441           (13,437) (14,191) 8,631           (5,560)
attributable
to CMGE
Net margin
attributable 35.5%                  40.7%     -59.9%                  -36.8%   -19.7%                  -7.7%
to CMGE
Diluted
earnings     0.92                  1.05     -1.01                   -0.62    -0.66                   -0.26
(loss) per
ADS(b)
                                                                                                      

            ForthesixmonthsendedJune30,2012 ForthesixmonthsendedJune30,2013
            GAAP      Adjustment(a)   Non-GAAP  GAAP     Adjustment(a)  Non-GAAP
            RMB       RMB                RMB         RMB        RMB               RMB
Operating    35,990   (5,091)           30,899     78,850    (17,072)         61,778
expenses
Income
(loss) from  30,708   5,091             35,799     (31,345)  17,072           (14,273)
operations
Operating    26.7%                      31.1%      -28.9%                     -13.2%
margin
Net income   42,243   5,091             47,334     (34,172)  17,072           (17,100)
(loss)
Net margin   36.7%                      41.1%      -31.5%                     -15.8%
Net income
(loss)       40,356   5,091             45,447     (36,069)  17,072           (18,997)
attributable
to CMGE
Net margin
attributable 35.1%                      39.5%      -33.2%                     -17.5%
to CMGE
Diluted
earnings     1.71                       1.93       -1.67                      -0.88
(loss) per
ADS(b)
                                                                             
(a)Adjustment to exclude the share-based compensation expense and intangible assets
impairment loss of each period.
(b)1 ADS = 14 Ordinary Shares.

CONTACT: For investor and media inquiries, please contact:

         China Mobile Games and Entertainment Group Limited
         Tel: +852 2700 6168
         E-mail: ir@cmge.com

         Christensen
         Christian Arnell
         Tel: +86-10-5826-4939
         E-mail: carnell@ChristensenIR.com

         In the U.S.:
         Christensen
         Linda Bergkamp
         Tel: +1 480 614 3000
         E-mail: lbergkamp@ChristensenIR.com
 
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