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 
 
 
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