September 13, 2011

Majesco Entertainment Company Reports Third Quarter Fiscal 2011 Financial Results

Zumba(R) Fitness Surpasses 3 Million Units Worldwide

EDISON, NJ -- (MARKET WIRE) -- 09/13/11 -- Majesco Entertainment Company (NASDAQ: COOL), an innovative provider of video games for the mass market, today reported financial results for the third quarter ended July 31, 2011.

For the third quarter ended July 31, 2011, Majesco's net revenues were $19.5 million, up 61% versus $12.2 million in the same period a year ago. During the third quarter of 2011, the Company reported operating income of $0.9 million, compared to an operating loss of $1.7 million in the third quarter of 2010. Net income for the quarter was $1.9 million versus a net loss of $1.6 million in 2010. On a non-GAAP basis, net income for the quarter was $1.1 million compared to a non-GAAP net loss of $1.4 million last year. Please refer to the Reconciliation of GAAP to Non-GAAP Financial Measures table included later in this release for additional information and details on non-GAAP items.

The Company's basic and diluted net income per share for the quarter ended July 31, 2011 was $0.05, compared to a basic and diluted net loss per share of $0.04 in the same period last year. Non-GAAP diluted net income per share for the quarter ended July 31, 2011 was $0.03 compared to net loss per share of $0.04 last year. Please refer to the Reconciliation of GAAP to Non-GAAP Financial Measures table included later in this release for additional information and details on non-GAAP items.

For the nine months ended July 31, 2011, the Company's net revenues increased 92 percent to $100.2 million versus the year ago period. The Company reported operating income of $14.3 million compared to an operating loss of $0.8 million in the same 2010 period. Non-GAAP operating income for the nine month period was $15.4 million compared to $0.9 million for the comparable 2010 period. In the nine months ended July 31, 2011, net income was $10.7 million compared to net income of $0.6 million for nine months ended July 31, 2010. For the same period, Non-GAAP net income was $13.9 million this year compared to $0.2 million in 2010.

The Company's basic and diluted earnings per share for the nine months ended July 31, 2011 were $0.28 and $0.27, respectively, while basic and diluted earnings per share were $0.02 and $0.01, respectively, for the corresponding period in 2010. The Company's Non-GAAP diluted earnings per share for the nine months ended July 31, 2011 were $0.35 compared to $0.01 in the corresponding 2010 period.

Jesse Sutton, Chief Executive Officer of Majesco, said, "Despite what is normally a seasonally weak time for our business, Majesco experienced another strong quarter. Driven by strength in Europe this past quarter, Zumba® Fitness has now sold over 3 million units worldwide. The growth of the Zumba phenomenon overall has us very excited about Zumba® Fitness 2, the much anticipated sequel coming this November for Wii. We also feel great about BloodRayne: Betrayal and were ecstatic when Sony chose this fan-favorite title to be one of four games to be featured worldwide in Sony's PLAY promotion. Critics seem to agree as IGN rated this title 9/10 and Joystiq concurred with a 4.5/5. We think this may be our strongest holiday lineup yet, with Zumba® Fitness 2 complemented by two Mama titles, Hulk Hogan's Main Event for Kinect, Twister® Mania for Kinect, and Alvin and the Chipmunks: Chipwrecked for Kinect, Wii and DS, as well as a broad array of additional content for Kinect and the 3DS, the two most exciting new platforms in the marketplace today. Compared to last year's release slate of four or five key titles, we have at least 10 titles coming out this holiday based on proven, marketable brands."


  • Third quarter 2011 net revenues were $19.5 million, an increase of $7.4 million, or 61 percent, compared to the same quarter last year. Growth was driven by the continued success of Zumba® Fitness, which has now sold over 3 million units worldwide.
  • Gross margin for the third quarter 2011 was 40.7 percent, compared to 22.9 percent in 2010. The expansion in gross margin was driven by the premium price points of Zumba® Fitness, compared with lower priced titles a year ago.
  • At the end of the quarter ending July 31, 2011, the Company had $19.7 million in cash and cash equivalents, compared with $8.0 million at October 31, 2010.
  • Zumba® Fitness has achieved yet another sales milestone, surpassing the 3 million unit threshold worldwide as it has risen to the top of the charts in Europe. Through late August, Zumba® Fitness for Wii held the #1 spot in the UK all formats sales charts for 10 consecutive weeks, according to Chart-Track. Zumba® Fitness for Wii is distributed in Europe by a licensing partner of Majesco. The game is also the #1 Wii fitness game of 2011 in the United States based on NPD data.
  • In August, the Nielsen Video Game Tracking survey polled gamers and found Zumba® Fitness to be one of the industry's "Top 10 Games to Buy Next," showing the continued demand that exists for this best-selling product.
  • The Company teamed up with industry-leading toy creator Hasbro™ to bring the classic board game Twister® to Kinect this November with Twister® Mania.
  • Based on the hit A&E series, Parking Wars 2 for Facebook® launched and adds to Majesco's growing social game portfolio.
  • Majesco announced in June that it was selected to join the Russell Microcap® Index as part of its annual reconstitution of U.S. indexes. The Russell Microcap® Index measures the performance of the microcap segment of the U.S. equity market. It includes 1000 of the smallest securities in the small-cap Russell 2000® Index based on a combination of their market cap and current index membership and it includes the next 1,000 securities.

Announced Product Line-up

Fourth Quarter Fiscal 2011 Ending October 31, 2011

To date, the Company has announced the following titles that were, or are expected to be, released during its fiscal fourth quarter 2011:

Console/Handheld Titles:

  • Hulk Hogan's Main Event is the first motion-based wrestling game on Kinect for Xbox 360 that lets players train with mentor Hulk Hogan as they build their own wrestling personalities and learn the art of showmanship to win over the crowd. In Hulk Hogan's Main Event, players will learn the ropes from wrestling icon Hulk Hogan as he schools them on delivering the best show for the crowd by emulating famous Hulk poses and performing more than 50 punishing combos and over-the-top stunts. The Kinect sensor tracks players' every move; the more dynamic the motion, the more high impact the wrestler's performance.
  • Motion Explosion! on Kinect for Xbox 360 lets you fire up the fun and get your body moving. Challenge your reflexes, timing, and coordination by using your entire body to dodge, jump, kick, juggle and balance. Don't hold back in this explosively entertaining family-friendly game for 4 players that throws it all at you and makes you think fast on your feet!
  • Camping Mama: Outdoor Adventures for Nintendo DS was chosen as a "Favorite of E3 2011" by, and is the latest brand extension of the Mama franchise which has sold more than 8.5 million units in North America. Both girls and boys can enjoy fun outdoor activities like rock climbing, spelunking, rowing and tree climbing as they navigate 38 different levels that span forests, mountains and seas. Would-be campers can choose to play as either the son or daughter with Mama or Papa providing guidance depending on the challenge. With customization options and collectible play, Camping Mama lets everyone go wild in the great outdoors!
  • Pet Zombies for Nintendo 3DS lets players reanimate their very own zombies with a range of customizations and then care for (or torment!) their pets as they play with them in creepy 3D environments.
  • The Hidden for Nintendo 3DS™ is an augmented reality ghost hunting adventure that turns your handheld into a portal to the astral plane. Players will become paranormal investigators as they hunt through real-world environments with the Nintendo 3DS camera, searching, capturing and destroying supernatural entities hidden within their own surroundings. In addition, this location-based adventure lets players reveal the full game storyline by bringing their Nintendo 3DS with them as they travel in the real world, finding hidden spirits in new locations.
  • Face Racers: Photo Finish for Nintendo 3DS literally puts YOU in the driver's seat of an arcade style kart racer; players take photos of their face with their Nintendo 3DS camera and use them as avatars for their custom 3D racers, billboards and power-ups.
  • Sudoku Premier Edition for Nintendo 3DS features more than 1,000 number puzzles and 4 player support so you can compete against friends. Give your mind a work out with 8 different types of puzzle play packed into one fantastic collection!

Digital titles

  • BloodRayne: Betrayal for PlayStation®Network and Xbox LIVE® Arcade was selected as one of four titles to be promoted worldwide as part of Sony's global PLAY promotion, its first ever global launch program for digital titles. Additionally, it has received rave reviews from some of the top gaming publications, receiving a 9/10 by IGN and a 4.5 from Joystiq, and won a "Best of E3 2011" award from Electric Playground. Based on the best-selling vampire game franchise, BloodRayne: Betrayal stars the beautiful yet lethal dhampir anti-heroine as she fights and feeds in a bloody new hack 'n slash adventure. Developed by WayForward, the award-winning team known for bringing franchise favorites back to audiences in exciting new ways, BloodRayne: Betrayal delivers stylish 2D side-scrolling action with a deadly dose of bloodshed. BloodRayne: Betrayal stays true to the fan-favorite vampire game franchise while incorporating challenging new enemies and surprises specifically designed for mature audiences.
  • Parking Wars 2 for Facebook® is based on the hit A&E series and lets players build an impressive fleet of vehicles and then park them illegally across the world. Players can purchase almost every kind of imaginable vehicle (from motorcycles to monster trucks) and building storefronts (from taco stands to banks), but ticketing is the real fun. The longer players keep cars parked on their friends' streets -- legally or illegally -- the more money they'll earn, but be careful.... The parking signs change frequently and your friends are waiting to steal your cash with another parking violation!

Fiscal 2012 / Holiday 2011

  • Zumba® Fitness 2 for Wii is making an encore appearance this November! The sequel to the #1 Wii fitness game of 2011, Zumba® Fitness 2 features 32 all new electrifying routines and contagious music tracks, including hot music from Pitbull and Nicole Scherzinger. With 20 different dance styles, a calorie tracker and custom workout feature, players can party their way into shape with a proven fitness program that lets up to 4 players dance together.
  • Twister Mania! on Kinect for Xbox 360 combines the colorful, expressive and cooperative gameplay of the original Twister® board game and updates it for the digital generation. Twist into fun with friends and family in this light-hearted, fast-paced game that supports up to eight players with deep gameplay across three game modes with 16 variations and over 1800 shapes to play! This outrageous party game provides over-the-top hilarity -- so don't hold back as you duck, squeeze, contort and move your body to match your opponent's silhouette, knock down blocks against the clock and fill in thousands of crazy shapes of all sizes and themes!
  • Alvin and the Chipmunks: Chipwrecked on Kinect for Xbox 360, Wii and Nintendo DS is based upon the third installment of the blockbuster animated feature film franchise. The video game lets you sing and dance along with the film's stars Alvin, Simon, Theodore and The Chipettes (Brittany, Eleanor and Jeanette), in an immersive motion-based experience. The Kinect™ for Xbox 360® version tracks full body dance moves as players control their Chipmunk on stage, and plays back their "Alvin-ized" voice as they sing along.
  • Cooking Mama 4: Kitchen Magic for Nintendo 3DS lets players cook in brand new ways with the Nintendo 3DS gyroscope: crack eggs, flip pans, balance plates and much more by moving the 3DS itself. The game also features brand new kitchen activities like setting the table, washing dishes, organizing and more as surprising 3D events unfold during meal preparation. With 60 recipes including new additions like designer cupcakes and cherry pie, the iconic kitchen cutie has some tricks up her sleeve that will magically transform kitchen newbies into master culinary artists!
  • Jaws: Ultimate Predator for Nintendo 3DS and Wii puts you in control of Nature's deadliest predator -- the great white shark. Thirty-five years after the events of the iconic movie, JAWS: Ultimate Predator is an action-packed experience that lets players relive scenarios in environments straight from the classic film.
  • Jillian Michaels' Fitness Adventure on Kinect for Xbox 360 lets you work out in a bold new way with the renowned health and wellness expert herself. Take your fitness routine beyond the basic workout and turn it into a real adventure through a mission-based, thrill-seeking journey set in a lush jungle temple environment.
  • Winter Stars on Kinect for Xbox 360, PlayStation®Move and Wii lets you gather your team and face the challenge with a motion-based, wintry sports collection that includes 11 exhilarating events.
  • Nano Assault for Nintendo 3DS is a fast-paced shooter that leaps off the screen with stunning 3D graphics that resemble electron microscope imagery. It's within this dangerous microscopic world that players will navigate a Nanite ship through a cellular system, maneuvering through alien cell clusters, fighting off infections, and analyzing and destroying the virus' core to ultimately save humanity.

Fiscal 2011 Outlook

The Company expects fiscal 2011 full year net revenue in a range of $120 to $130 million, up from the prior range of $110 to $120 million, and non-GAAP earnings per share of $0.35 to $0.38, up from $0.30 to $0.35. This outlook is based on an estimated fully diluted share count of approximately 40 million, and assumes non-cash compensation of approximately $0.04 to $0.05 per share for fiscal 2011. The Company has not provided a reconciliation of forward-looking GAAP and Non-GAAP financial measures due to the potential effects that changes in its stock price may have on the fair value of outstanding warrants.



    Quarter 1          Quarter 2          Quarter 3          Quarter 4



Babysitting Mama   Monster Tale DS,    Cake Mania Main    Betrayal, XBLA,

   Wii, $49.99          $29.99           Street DS,        PSN, $14.99,

                                           $19.99              (9/6)


 Zumba® Fitness

 for Kinect, Wii    Zumba® Fitness,     Spy Kids: All      Camping Mama

and Move, $49.99       Wii, Move       the Time in the        Outdoor

 Kinect, $39.99        (Europe)          World, DS,       Adventures, DS,

  Wii and Move                             $19.99         $29.99, (9/13)


                                                           Hulk Hogan's

 Zumba® Fitness    Left Brain Right     Greg Hastings       Main Event;

   for Kinect        Brain iPhone,    Paintball 2 PSN,    Kinect, $49.99

    (Europe)             $0.99             $19.99             (10/11)


  Cooking Mama

  Friends' Café                        Parking Wars 2,   The Hidden, 3DS,

    Facebook;                             Facebook;       $39.99 (10/11)

    freemium                              freemium


                                                           Pet Zombies,

                                                            3DS, $29.99





                                                          Kinect, $39.99



                                                           Face Racers:

                                                           Photo Finish,

                                                            3DS, $29.99



                                                          Sudoku Premier

                                                           Edition, 3DS





                                  Quarter 1


                        Zumba Fitness 2, Wii, $39.99


                         Cooking Mama 4, 3DS, $39.99


                        Twister Mania, Kinect, $49.99


           Alvin & the Chipmunks, Kinect, $39.99, Wii, DS, $29.99


              Jaws: Ultimate Predator, 3DS, $39.99 Wii, $29.99


             Jillian Michaels Fitness Adventure, Kinect, $39.99


                          Nano Assault, 3DS, $29.99


               Winter Stars, Kinect, $39.99, Wii, Move, $29.99


Conference Call

At 4:30 p.m. (EDT) today, 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 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 10004000.

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

To facilitate a comparison between the three and nine months ended July 31, 2011 and 2010, 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
  • Net proceeds from sale of certain state income tax net operating loss carryforwards
  • Change in fair value of warrants
  • Severance costs for workforce reduction

These non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance and the Company's prospects for the future. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.

For more information on these non-GAAP financial measures, please see the tables in this release captioned "Reconciliation of GAAP and Non-GAAP Financial Measures."

About Majesco Entertainment Company

Majesco Entertainment Company is a provider of video games for the mass market. Building on more than 20 years of operating history, the company is focused on developing and publishing a wide range of casual and family oriented video games on all leading console and handheld platforms as well as online, social networks and mobile devices. Product highlights include Zumba® Fitness, Cooking Mama™, Alvin and the Chipmunks, and Hulk Hogan's Main Event. The company's shares are traded on the Nasdaq Stock Market under the symbol: COOL. Majesco is headquartered in Edison, NJ with offices in San Francisco, CA, Bristol, UK, and a social games development studio in Foxboro, MA. More info can be found online at or on Twitter at

Safe Harbor

Some statements set forth in this release, including the estimates under the headings "Fiscal 2011 Outlook" contain forward-looking statements that are subject to change. Statements including words such as "anticipate," "believe," "estimate" or "expect" and statements in the future tense are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual events or actual future results to differ materially from the expectations set forth in the forward-looking statements. Some of the factors which could cause our results to differ materially from our expectations include the following: consumer demand for our products, the availability of an adequate supply of current-generation and next-generation gaming hardware, including but not limited to Nintendo's DS and Wii™ platforms; our ability to predict consumer preferences among competing hardware platforms; consumer spending trends; the seasonal and cyclical nature of the interactive game segment; timely development and release of our products; competition in the interactive entertainment industry; developments in the law regarding protection of our products; our ability to secure licenses to valuable entertainment properties on favorable terms; our ability to manage expenses; our ability to attract and retain key personnel; adoption of new accounting regulations and standards; adverse changes in the securities markets; our ability to comply with continued listing requirements of the Nasdaq stock exchange; the availability of and costs associated with sources of liquidity; and other factors described in our filings with the SEC, including our Annual Report on Form 10-K for the year ended October 31, 2010. The Company does not undertake, and specifically disclaim any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.




                         (Unaudited, in thousands)

                   Three Months Ended July 31,   Nine Months Ended July 31,

                   ---------------------------  ---------------------------

                     2011    %      2010    %     2011     %     2010    %

                   ------- ----   ------- ----  -------- ----  ------- ----

Nintendo Wii       $14,036   72%  $ 4,624   38% $ 59,794   60% $15,275   29%

Microsoft Xbox 360   2,306   12%      218    2%   20,334   20%     395    1%

Nintendo DS          2,249   11%    7,139   59%   14,610   15%  35,396   68%

Sony PlayStation 3     637    3%        -    -%    4,438    4%       -    -%

Other                  317    2%      172    1%      978    1%   1,199    2%

                   ------- ----   ------- ----  -------- ----  ------- ----

TOTAL              $19,545  100%  $12,153  100% $100,154  100% $52,265  100%

                   ======= ====   ======= ====  ======== ====  ======= ====



                    (In thousands, except share amounts)

                                           July 31,          October 31,

                                             2011                2010

                                      ------------------  -----------------



Current assets:

  Cash and cash equivalents           $           19,674  $           8,004

  Due from factor                                  1,409              1,015

  Accounts and other receivables, net              2,788                725

  Inventory, net                                   4,607              8,418

  Advance payments for inventory                     566              5,454

  Capitalized software development

   costs and license fees                          9,417              4,903

  Prepaid expenses and other current

   assets                                            896                921

                                      ------------------  -----------------

    Total current assets                          39,357             29,440

Property and equipment, net                        1,289                520

Other assets                                         232                 69

                                      ------------------  -----------------

    Total assets                      $           40,878  $          30,029

                                      ==================  =================


Current liabilities:

  Accounts payable and accrued

   expenses                           $           12,351  $          11,375

  Inventory financing payables                         -              5,557

  Advances from customers and

   deferred revenue                                  622                945

                                      ------------------  -----------------

    Total current liabilities                     12,973             17,877

Warrant liability                                  1,187                144

Commitments and contingencies

Stockholders' equity:

  Common stock -- $.001 par value;

   250,000,000 shares authorized;

   40,952,586 and 39,326,376 shares

   issued and outstanding at July 31,

   2011 and October 31, 2010,

   respectively                                       41                 39

  Additional paid-in capital                     118,811            114,824

  Accumulated deficit                            (91,607)          (102,333)

  Accumulated other comprehensive

   loss                                             (527)              (522)

                                      ------------------  -----------------

    Net stockholders' equity                      26,718             12,008

                                      ------------------  -----------------

    Total liabilities and

     stockholders' equity             $           40,878  $          30,029

                                      ==================  =================



              (Unaudited, in thousands, except share amounts)

                            Three Months Ended         Nine Months Ended

                                  July 31                   July 31

                         ------------------------  ------------------------

                             2011         2010         2011         2010

                         -----------  -----------  -----------  -----------

Net revenues             $    19,545  $    12,153  $   100,154  $    52,265

                         -----------  -----------  -----------  -----------

Cost of sales

  Product costs                8,577        7,398       42,681       24,573

  Software development

   costs and license

   fees                        3,015        1,975       16,237       12,074

  Loss on impairment of

   software development

   costs and license

   fees-future releases            -            -            -        1,021

                         -----------  -----------  -----------  -----------

                              11,592        9,373       58,918       37,668

                         -----------  -----------  -----------  -----------

Gross profit                   7,953        2,780       41,236       14,597

                         -----------  -----------  -----------  -----------

Operating costs and


  Product research and

   development                 1,947          720        5,150        2,361

  Selling and marketing        2,313        1,641       11,952        6,225

  General and

   administrative              2,484        2,004        8,089        6,394

  Loss on impairment of

   software development

   costs and license

   fees - cancelled

   games                         150          116        1,512          276

  Depreciation and

   amortization                  121           43          223          140

                         -----------  -----------  -----------  -----------

                               7,015        4,524       26,926       15,396

                         -----------  -----------  -----------  -----------

Operating income (loss)          938       (1,744)      14,310         (799)

Other expenses (income)

  Interest and financing

   costs, net                    123           82        1,077          703

  Change in fair value

   of warrant liability       (1,258)        (183)       2,085         (412)

                         -----------  -----------  -----------  -----------

Income (loss) before

 income taxes                  2,073       (1,643)      11,148       (1,090)

  Income taxes                   184            -          421       (1,647)

                         -----------  -----------  -----------  -----------

Net income (loss)        $     1,889  $    (1,643) $    10,727  $       557

                         ===========  ===========  ===========  ===========

Net income (loss) per


  Basic                  $      0.05  $     (0.04) $      0.28  $      0.02

                         ===========  ===========  ===========  ===========

  Diluted                $      0.05  $     (0.04) $      0.27  $      0.01

                         ===========  ===========  ===========  ===========

Weighted average shares


  Basic                   38,803,090   36,934,987   38,165,521   36,838,981

                         ===========  ===========  ===========  ===========

  Diluted                 41,318,806   36,934,987   39,827,022   37,142,649

                         ===========  ===========  ===========  ===========



                         (Unaudited, in thousands)

                                                       Nine Months Ended

                                                           July 31,


                                                       2011         2010

                                                   -----------  -----------


Net income                                         $    10,727  $       557

Adjustments to reconcile net income to net cash

 provided by operating activities:

  Depreciation and amortization                            223          140

  Change in fair value of warrant liability              2,085         (412)

  Non-cash compensation expense                          1,064        1,324

  Loss on disposal of assets                                 -           19

  Provision for price protection and customer

   allowances                                            2,380        3,073

  Amortization of software development costs and

   license fees                                          3,467        3,629

  Loss on impairment of software development costs

   and license fees                                      1,512        1,297

  Inventory write-downs                                  1,612            -

  Changes in operating assets and liabilities, net

   of acquisition:

    Due from factor                                     (2,786)        (940)

    Accounts and other receivables                      (1,987)         475

    Inventory                                            2,199        2,672

    Capitalized software development costs and

     license fees                                       (9,420)      (6,705)

    Advance payments for inventory                       4,888            -

    Prepaid expenses and other assets                      261        2,270

    Accounts payable and accrued expenses                  753       (2,115)

    Advances from customers and other liabilities         (376)        (676)

                                                   -----------  -----------

      Net cash provided by operating activities         16,602        4,608

                                                   -----------  -----------


Purchases of property and equipment                       (396)        (192)

Purchase of assets of Quick Hit, Inc., net of

 acquired cash                                            (800)           -

                                                   -----------  -----------

  Net cash used in investing activities                 (1,196)        (192)

                                                   -----------  -----------


Inventory financing                                     (5,557)      (5,684)

Proceeds from exercise of options and warrants           1,824            -

                                                   -----------  -----------

  Net cash used in financing activities                 (3,733)      (5,684)

                                                   -----------  -----------

Effect of exchange rates on cash and cash

 equivalents                                                (3)         (22)

                                                   -----------  -----------

Net increase (decrease) in cash and cash

 equivalents                                            11,670       (1,290)

Cash and cash equivalents -- beginning of period         8,004       11,839

                                                   -----------  -----------

Cash and cash equivalents -- end of period         $    19,674  $    10,549

                                                   ===========  ===========



Landlord-provided leasehold improvements           $       163  $         -

                                                   ===========  ===========

Warrant liability reclassified to additional paid-

 in capital upon exercise                                1,042            -

                                                   ===========  ===========


Cash paid for interest                             $     1,078  $       710

                                                   ===========  ===========



              (Unaudited, in thousands, except share amounts)

                            Three Months Ended         Nine Months Ended

                                 July 31,                  July 31,

                         ------------------------  ------------------------

                             2011         2010         2011         2010

                         -----------  -----------  -----------  -----------

GAAP operating income

 (loss)                  $       938  $    (1,744) $    14,310  $      (799)

Non-cash compensation (1)        436          393        1,063        1,326

Severance (2)                      -            -            -          403

                         -----------  -----------  -----------  -----------

Non-GAAP operating income$     1,374  $    (1,351) $    15,373  $       930

                         ===========  ===========  ===========  ===========

GAAP net income (loss)   $     1,889  $    (1,643) $    10,727  $       557

Non-cash compensation (1)        436          393        1,063        1,326

Severance (2)                      -            -            -          403

Change in fair value of

 warrants (3)                 (1,258)        (183)       2,085         (412)

Sale of NJ state

 operating loss

 carryforwards (4)                 -            -            -       (1,656)

                         -----------  -----------  -----------  -----------

Non-GAAP net income      $     1,067  $    (1,433) $    13,875  $       218

                         ===========  ===========  ===========  ===========

GAAP net income (loss)

 per diluted share       $      0.05  $     (0.04) $      0.27  $      0.01

Non-cash compensation (1)       0.01         0.01         0.03         0.04

Severance (2)                      -            -            -         0.01

Change in fair value of

 warrants (3)                  (0.03)       (0.01)        0.05        (0.01)

Sale of NJ state

 operating loss

 carryforwards (4)                 -            -            -        (0.04)

                         -----------  -----------  -----------  -----------

Non-GAAP net income per

 diluted share           $      0.03  $     (0.04) $      0.35  $      0.01

                         ===========  ===========  ===========  ===========

Shares used in GAAP and

 Non-GAAP per diluted

 share amounts            41,318,806   36,934,987   39,827,022   37,142,649

                         ===========  ===========  ===========  ===========

(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 2010, 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 16 employees, then

representing 17% of its workforce.

(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.

(4) In December 2009, we received proceeds of approximately $1.6 million

from the sale of the rights to approximately $21.2 million of New Jersey

state income tax operating loss carryforwards, under the Technology Business

Tax Certificate Program administered by the New Jersey Economic Development

Authority. Net proceeds were recorded as an income tax benefit during the

nine months ended July 31, 2010.

For additional information, please contact:

Todd Greenwald, CFA

Director of Investor Relations & Strategic Planning


Source: Majesco Entertainment Company

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