Majesco Entertainment Company Reports First Quarter Fiscal 2014 Financial Results

Majesco Entertainment Company Reports First Quarter Fiscal 2014 Financial  Results  EDISON, NJ -- (Marketwired) -- 03/12/14 --  Majesco Entertainment Company (NASDAQ: COOL), an innovative provider of video games for the mass market, today reported financial results for the first quarter of fiscal 2014 ended January 31, 2014.  For the first quarter ended January 31, 2014, the Company's net revenues were $21.9 million versus $23.5 million in the year ago period, a decline of 7 percent. The Company reported an operating loss of $4.1 million compared to operating loss of $2.0 million in the same period of 2013. Included in first quarter fiscal 2013 operating results is a charge of $0.8 million for severance expenses from the strategic realignment implemented in January 2013.  Net loss for the first quarter ended January 31, 2014 was $4.5 million compared to net loss of $2.1 million for first quarter ended January 31, 2013. The Company's net loss per share for the quarter ended January 31, 2014 was $(0.10), compared to net loss per share of $(0.05), for the corresponding period in 2013.  Non-GAAP operating loss for the quarter ended January 31, 2014 was $3.7 million compared to non-GAAP operating loss of $0.9 million for the comparable period in 2013. For the first quarter of fiscal 2014, non-GAAP net loss was $4.1 million in 2014 compared to non-GAAP net loss of $1.1 million in 2013. The Company's non-GAAP net loss per share for the quarter ended January 31, 2014 was $(0.09) compared to net loss per share of $(0.02) in the corresponding period of 2013. 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   "The transition to next generation console gaming continues to impact our financial performance," said Jesse Sutton, Chief Executive Officer of Majesco Entertainment. "Holiday sales reflect the expected slow build of the casual gaming installed base on the newest console systems. This ongoing transition, coupled with now entrenched digital platforms which have fragmented the market, have led us to develop opportunities for additional revenue streams. We recently made two strategic investments in GMS Entertai nment for online casino games and digital lotteries, and Midnight City, publisher and distributor of digital games for independent developers. We will build our 2014 release slate with a judicious use of resources and, even though we anticipate a loss for the full fiscal year, we are confident that we have the resources necessary to fund our operations and invest for future growth."  Announced Product Line-up   To date, the Company has announced the following titles for launch during its fiscal second quarter 2014 and the remainder of the year:      --  Double Dragon Neon on Steam builds on the highly successful console     release with exclusive support for online cooperative play. Iconic     arcade brothers Billy and Jimmy Lee are back in this reboot of the     classic side-scrolling beat-em-up that fueled a generation of gamers.     Available now. --  Gardening Mama 2: Forest Friends on Nintendo 3DS(TM) celebrates     Mama's return to the garden in a brand new stylus-based experience     that challenges players to grow 50 fresh flowers, fruits and     vegetables for animal friends to sell in their woodland shops.     Launching this April. --  Cooking Mama 5: Bon Appetit! on Nintendo 3DS(TM) stars Mama from the     best-selling franchise that defined the cooking genre. Create 60+     mouth-watering recipes, from classic fare to exotic cultural dishes     and sweet treats. Players will keep busy with new household activities     and games set within Mama's bustling Burger Shop. Launching this     holiday. --  Costume Quest 2 on PC and digital consoles is being published under     the Midnight City label. Developed by Tim Schafer's Double Fine     Productions, the game stars candy-crazed crusaders Wren and Reynold     who must once again protect Halloween from untold horrors, and     grown-ups! Your favorite trick-or-treaters come armed with a new batch     of costumes they wear to transform into giant super-powered fantasy     Hallowarriors. Fans of the original can look forward to a sweet     upgraded battle system and a story that is unmistakably Double Fine.     Costume Quest 2 is slated for PC and digital console release later     this year. --  Bound by Flame (distributed by Majesco) for consoles and PC puts     players in the role of mercenary possessed by a flame demon in a     desperate world ravaged by seven Ice Lords and their Dead-Army. In     this RPG where all your choices lead to consequences, you must choose     between unleashing the powers of the beast within and rejecting the     demonic influence that wants to claim your humanity. Freely develop     your abilities and combat style through three skill trees: swing the     heavy weapons of the Fighter, wield the sneaky dual daggers of the     Ranger, or use the devastating flame spells of the Pyromancer. Recruit     companions who will live, love, hate and fight alongside you against     the dreadful creatures of Vertiel, in real-time epic battles based on     tactics and reaction. Bound by Flame is slated to release this spring.     The Company expects to announce additional titles in its 2014 product lineup in the coming months.  Conference Call  At 4:30 p.m. ET today, March 12, 2014, 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 #10042324.  Generally Accepted Accounting Principles (GAAP) and Non-GAAP Metrics  To facilitate a comparison between the three months ended January 31, 2014 and 2013, 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 an innovative developer, marketer, publisher and distributor of interactive entertainment for consumers around the world. Building on  more than 25 years of operating history, the company develops and publishes a wide range of video games on console, handheld and mobile platforms, as well as digital networks through its Midnight City label. Majesco also owns 50% of GMS Entertainment, the parent company of online gaming company Pariplay, which specializes in iGaming, iLottery and social gaming. 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 2014 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, 2013. 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                                            (Unaudited, in thousands)                                                                                                                                       Three Months Ended January 31,                                     -------------------------------------------                                   2014        %          2013        %                                  -----------  -------   -----------  -------                               (thousands)            (thousands)           Nintendo Wii/WiiU            $     9,355       43%  $    12,584       54% Microsoft Xbox 360/Xbox One        8,346       38%        5,594       24% Nintendo DS/3DS                    2,584       12%        4,740       20% Sony Playstation 3                   892        4%          172        1% Accessories and other                757        3%          382        1%                              -----------  -------   -----------  -------  TOTAL                        $    21,934      100%  $    23,472      100%                              ===========  =======   ===========  =======                                                                                                                                                                      MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY                                    CONDENSED CONSOLIDATED BALANCE SHEETS                                  (in thousands, except share and per share amounts)                                                                                                                                              January 31,  October 31,                                                         2014         2013                                                        -----------  -----------                                                     (unaudited)               ASSETS                                                                       Current assets:                                                                Cash and cash equivalents                        $    12,349  $    13,385    Due from factor, net                                   1,597        2,134    Accounts and other receivables                         1,485        1,169    Inventory                                              3,003        4,859    Advance payments for inventory                           160        1,064    Capitalized software development costs and                                    license fees                                          2,121        7,825    Prepaid expenses and other current assets                248        2,827                                                     -----------  -----------      Total current assets                                20,963       33,263  Property and equipment, net                              1,025          817  Investment in GMS Entertainment Limited                  3,316        3,500  Other assets                                                69           69                                                     -----------  -----------      Total assets                                   $    25,373  $    37,649                                                     ===========  ===========  LIABILITIES AND STOCKHOLDERS' EQUITY                                         Current liabilities:                                                           Accounts payable and accrued expenses            $     9,369  $     8,994    Inventory financing                                        -        1,764    Advances from customers and deferred revenue              30        6,838                                                     -----------  -----------      Total current liabilities                            9,399       17,596  Commitments and contingencies                                                Stockholders' equity:                                                          Common stock -- $.001 par value; 250,000,000                                  shares authorized; 46,374,302 and 46,295,969                                 shares issued and outstanding at January 31,                                 2014 and October 31, 2013, respectively                  46           46    Additional paid-in capital                           124,521      124,148    Accumulated deficit                                 (108,042)    (103,530)   Accumulated other comprehensive loss                    (551)        (611)                                                    -----------  -----------      Net stockholders' equity                            15,974       20,053                                                     -----------  -----------      Total liabilities and stockholders' equity     $    25,373  $    37,649                                                     ===========  ===========                                                                                                                                                                            MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY                               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                       (Unaudited, in thousands, except share and per share amounts )                                                                                                                                            Three Months Ended                                                               January 31                                                            ------------------------                                                         2014         2013                                                        -----------  -----------  Net revenues                                       $    21,934  $    23,472                                                     -----------  -----------  Cost of sales                                                                  Product costs                                          7,542        8,414    Software development costs and license fees           11,003        7,906                                                     -----------  -----------      Total cost of sales                                 18,545       16,320                                                     -----------  -----------  Gross profit                                             3,389        7,152                                                     -----------  -----------  Operating costs and expenses                                                   Product research and development                       1,246        2,082    Selling and marketing                                  4,056        3,729    General and administrative                             2,107        2,251    Workforce reduction                                        -          776    Loss on impairment of capitalized software                                    development costs and license fees - cancelled                               games                                                     -          175    Depreciation and amortization                             81          111                                                     -----------  -----------      Total operating costs and expenses                   7,490        9,124                                                     -----------  -----------  Operating loss                                          (4,101)      (1,972) Other expenses (income)                                                        Interest and financing costs                             162          183    Loss from equity method investment                       247            -    Change in fair value of warrant liability                  -          (17)                                                    -----------  -----------  Loss before income taxes                                (4,510)      (2,138)   Income taxes                                               2            3                                                     -----------  -----------  Net loss                                           $    (4,512) $    (2,141)                                                    ===========  ===========  Net loss per share:                                                            Basic                                            $     (0.10) $     (0.05)                                                    ===========  ===========    Diluted                                          $     (0.10) $     (0.05)                                                    ===========  ===========  Weighted average shares outstanding:                                           Basic                                             44,695,611   40,482,898                                                     ===========  ===========    Diluted                                           44,695,611   40,482,898                                                     ===========  ===========                                                                                                                                                                            MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY                               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                         (Unaudited, in thousands)                                                                                                                                                                Three months Ended                                                               January 31,                                                             --------------------                                                            2014       2013                                                           ---------  ---------  CASH FLOWS FROM OPERATING ACTIVITIES                                         Net loss                                               $  (4,512) $  (2,141) Adjustments to reconcile net loss to net cash provided                        by operating activities:                                                      Depreciation and amortization                               81        111    Loss from equity method investment                         247          -    Non-cash compensation expense                              373        280    Provision for price protection                           2,722        763    Amortization of capitalized software development                              costs and license fees                                  7,226      2,336    Loss on impairment of capitalized software                                    development costs and license fees                          -        175    Provision for excess inventory                              28        229    Change in fair value of warrant liability                    -        (17)   Changes in operating assets and liabilities:                                   Due from factor                                       (2,185)     7,054      Accounts and other receivables                          (316)     1,912      Inventory                                              1,828      4,226      Capitalized software development costs and license                            fees                                                 (1,522)    (2,855)     Advance payments for inventory                           904         15      Prepaid expenses and other assets                      2,579      1,311      Accounts payable and accrued expenses                    378       (204)     Advances from customers and deferred revenue          (6,808)    (4,402)                                                        ---------  ---------        Net cash provided by operating activities            1,023      8,793                                                         ---------  ---------  CASH FLOWS FROM INVESTING ACTIVITIES                                         Purchases of property and equipment                         (289)       (26)                                                        ---------  ---------      Net cash used in investing activities                   (289)       (26)                                                        ---------  ---------  CASH FLOWS FROM FINANCING ACTIVITIES                                         Repayment of inventory financing                          (1,767)         -                                                         ---------  ---------      Net cash used in financing activities                 (1,767)         -                                                         ---------  ---------  Effect of exchange rates on cash and cash equivalents         (3)       (42)                                                        ---------  ---------  Net (decrease) increase in cash and cash equivalents      (1,036)     8,725  Cash and cash equivalents -- beginning of period          13,385     18,038                                                         ---------  ---------  Cash and cash equivalents -- end of period             $  12,349  $  26,763                                                         =========  =========  SUPPLEMENTAL CASH FLOW INFORMATION                                           Cash paid during the period for interest and financing                        costs                                                 $     137  $     144                                                         =========  =========  Cash paid during the period for income taxes           $       -  $       -                                                         =========  =========                                                                                                                                                                            MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY                            RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES                           (Unaudited, in thousands, except share amounts)                                                                                                                                                   Three Months Ended                                                               January 31,                                                            ------------------------                                                         2014         2013                                                        -----------  -----------  GAAP operating loss                                $    (4,101) $    (1,972) Non-cash compensation (1)                                  373          280  Severance (2)                                                -          776                                                     -----------  -----------  Non-GAAP operating loss                            $    (3,728) $      (916)                                                    ===========  ===========                                                                               GAAP net loss                                      $    (4,512) $    (2,141) Non-cash compensation (1)                                  373          280  Severance (2)                                                -          776  Change in fair value of warrants (3)                         -          (17)                                                    -----------  -----------  Non-GAAP net loss                                  $    (4,139) $    (1,102)                                                    ===========  ===========                                                                               GAAP net loss per diluted share                    $     (0.10) $     (0.05) Non-cash compensation (1)                                 0.01         0.01  Severance (2)                                                -         0.02  Change in fair value of warrants (3)                         -        (0.00)                                                    -----------  -----------  Non-GAAP net loss per diluted share                $     (0.09) $     (0.02)                                                    ===========  ===========  Shares used in GAAP and Non-GAAP per diluted share                            amounts                                            44,695,611   40,482,898                                                     ===========  ===========                                                                               (1) Represents expenses recorded for stock compensation expense. 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.                                                                                            (2) Represents one time severance costs related to a workforce reduction.    During January 2013, Company management initiated a plan of restructuring to better align its workforce to its revised operating plans. As part of the    plan, the Company reduced its personnel count by approximately 40 employees.                                                                              (3) 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.                                                     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     
Press spacebar to pause and continue. Press esc to stop.