Majesco Entertainment Company Reports Third Quarter 2009 Financial Results
- Third Quarter Net Revenues Increased 19% to $17.2M -
- Increases Fiscal 2009 Revenue Guidance -
- Press Release
- Source: Majesco Entertainment Company
- On 4:05 pm EDT, Monday September 14, 2009
EDISON, N.J., Sept. 14 /PRNewswire-FirstCall/ -- Majesco Entertainment Company (Nasdaq: COOL - News), an innovative provider of video games for the mass market, today reported financial results for the third quarter ended July 31, 2009.
Related Quotes
| Symbol | Price | Change |
|---|---|---|
| COOL | 0.87 | 0.00 |
For the third quarter ended July 31, 2009, Majesco's net revenues increased 18.9 percent to $17.2 million versus $14.5 million in the same period a year ago. During this same period, the Company reported an operating loss of $4.2 million, compared to operating income of $0.3 million in the third quarter of 2008. Non-GAAP operating loss was $3.3 million versus non-GAAP operating income of $0.7 million in 2008. Net loss for the quarter was $5.2 million versus a net income of $0.5 million in 2008. On a non-GAAP basis, net loss for the quarter was $3.5 million compared to non-GAAP net income of $0.6 million last year.
The Company's basic and diluted net loss per share for the quarter ended July 31, 2009 was $0.18 compared to net income per basic and diluted share of $0.02 in the same period last year. Non-GAAP basic and diluted net loss per share was $0.12 compared to net income per share of $0.02 last year.
For the nine months ended July 31, 2009, the Company's net revenues increased 53.7 percent to $70.6 million versus the year ago period. During this same period, the Company reported an operating loss of $1.1 million compared to operating income of $2.4 million in the same 2008 period. Non-GAAP operating income for the nine month period was $2.0 million compared to $3.6 million for the comparable 2008 period. Net loss through the first nine months of fiscal 2009 was $2.7 million versus net income of $3.0 million in the comparable 2008 period. Non-GAAP net income was $1.1 million for the first nine months of fiscal 2009 compared to $3.2 million in the same 2008 period.
The Company's basic and diluted net loss per share for the nine months ended July 31, 2009 was $0.10 compared to net income per share for the nine months ended July 31, 2008 of $0.11. The Company's non-GAAP basic and diluted earnings per share for the nine months ended July 31, 2009 was $0.04 compared to $0.12 in the comparable 2008 period.
Jesse Sutton, Chief Executive Officer of Majesco, said, "We delivered another quarter of solid top line growth, generating revenue of $17.2 million, an increase of 19% over last year, on the continued strength of our Cooking Mama franchise, especially the recently released Gardening Mama. Profitability in the quarter was impacted by a soft retail performance from our Go Play line and Night at the Museum: Battle of the Smithsonian. In addition, our bottom line reflects the impact of our discretionary marketing investments, specifically in support of the launch of Go Play, as well as the lower margin associated with Night at the Museum, which was an opportunistic pick up in the quarter. We enter the fourth quarter with our strongest product line-up as we plan to launch SKUs in our two biggest franchises--Cooking Mama and Jillian Michaels. Cooking Mama 3: Shop and Chop for DS is the third iteration in the best-selling cooking franchise and Jillian Michaels Fitness Ultimatum 2010 for Wii is the sequel to last year's holiday hit and will launch in conjunction with a DS sku for the first time. As a result, we have increased our revenue guidance and reiterated our profitability expectations for the full fiscal year.
"Overall our business continues to evolve positively. We are executing on our strategy of franchise development with a singles and doubles approach. Our pipeline continues to develop and we are seeing an increasing number of higher quality new business opportunities which meet our financial criteria and fit our core strategy. We have a strong release slate for the holiday, which we believe is one of our strongest ever, and are looking forward to the successful release of these titles. We remain focused on prudently managing our costs and are committed to delivering profitable growth."
Financial Highlights
-- Third quarter 2009 net revenues for the U.S. were $15.3 million, an increase of $2.1 million or 15.9 percent compared to the same quarter last year. Third quarter 2009 international sales were $1.9 million, an increase of $0.6 million or 51.1 percent compared to the same period of 2008.
-- For the nine months year-to-date, net revenues for the U.S. were $67.3 million, an increase of $24.3 million or 56.5 percent compared to the same period last year. International sales for the same period increased $0.3 million or 12.2 percent compared to the same period last year.
-- Net Sales for Wii increased $0.8 million, or 15.7 percent, to $6.2 million for the third quarter of fiscal 2009. Nintendo DS sales for the same period increased 18.0 percent, from $ 8.1 million to $9.6 million.
-- For the nine months year-to-date, Wii sales increased $25.5 million, or 209.3 percent, to $37.6 million. Nintendo DS sales for the same period declined 7.0 percent from $31.7 million to $29.5 million.
-- In the third quarter of 2009 the majority of the increase in selling and marketing compared to the year ago period was the result of discretionary advertising in support of the Go Play brand and Night at the Museum.
-- For the nine months ended July 31, 2009 the majority of the increase in selling and marketing compared to the year ago period was the result of discretionary advertising in the third quarter and in support of Cooking Mama and Gardening Mama in earlier quarters of this year. The period also includes a loss on impairment of development costs of $0.3 million (included in general and administrative) due to the cancellation of titles in development.
-- In the third quarter of 2009 the decrease in gross profit percentage was particularly impacted by the release of Night at the Museum: Battle at the Smithsonian.
Announced Product Line-up
Fourth Quarter 2009 Ending October 31, 2009:
To date, the Company has announced the following titles that are expected to be released during its fiscal fourth quarter 2009:
-- Our House: Party! for Wii turns the Wii Remote into the ultimate home renovation tool that lets up to four players compete party style to build their own personalized trophy home that they can then share with friends via WiiConnect24.
-- Our House for DS is a companion game to the Wii version. The title lets players work as contractors and then use their work-for-hire earnings to design, build and decorate their own personalized home.
-- A Boy and His Blob for Wii is IGN's Best of E3 runner-up in the Wii Platformer category. The game is a rebirth of the NES classic that expands upon the original platform adventure and features groundbreaking hand drawn and painted animation technology. By feeding the blob jelly beans, players can activate his special abilities to transform him into tools that help the pair solve puzzles, defeat monsters and escape danger.
-- Go Play City Sports for Wii is the third game in Majesco's new Go Play line. This compilation of urban sports lets players compete against the best neighborhood athletes in six classic games, including stickball, kickball, handball, rooftop hockey, shootout soccer and jump rope. The game also features four player gameplay and support for the Wii Balance Board accessory.
-- Serious Sam HD: The First Encounter for Xbox Live Arcade is re-tooled and re-vamped in high definition with an all-new version of the CroTech engine. Based on the original indie arcade shooter sensation Serious Sam: The First Encounter, Serious Sam HD features stunningly redesigned visuals, over the top action and intense online co-op for up to four players.
-- Shorts for DS is based on the theatrical release of the same name in which a magical rainbow rock that grants wishes falls from the sky and brings chaos to the peaceful suburbs. Players take on the role of one of four characters from the movie to save the town and defeat the greedy and evil Mr. Black.
-- Hot and Cold: A 3D Hidden Object Adventure for DSiWare is inspired by the classic children's game in which players use temperature cues to indicate proximity to an item. Players will search through 50 multi-room levels using the Hot and Cold Meter as a guide for discovering hundreds of items with real world physics.
-- Marker Man Adventures for DS is a unique game based on drawing and physics challenges in which players maneuver the charming stick figure, Marker Man, through 170 scrolling world puzzles as he tries to find his canine friend Doodles.
-- Cake Mania 3 for DS features the best-selling series' addictive resource management gameplay along with all-new levels, kitchen upgrades, customers and cake themed mini-games.
-- Jillian Michaels Fitness Ultimatum 2010 for Wii and DS features the celebrity fitness trainer, life coach, and star of the popular television series The Biggest Loser as she leads players through high-intensity, one-on-one workouts while providing direct feedback and motivation to help players reach their personal fitness goals.
-- Cooking Mama 3: Shop and Chop for DS is the latest version of the best-selling franchise that has entertained 4 and a half million people to date. Mama's newest game features a brand new shopping feature along with fresh recipes, ingredient combination, multiplayer chef challenges and Gardening Mama connectivity.
-- Sideswiped for DS is an all new arcade style racing game where players go city-to-city earning cash for causing the maximum amount of damage and destruction.
First Quarter Fiscal 2010 Ending January 31, 2010
To date, the Company has announced the following titles that are expected to be released during its fiscal first quarter 2010, which includes the holiday sales period:
-- Alvin and the Chipmunks: The Squeakquel for Wii and DS launches in advance of the theatrical release of the same name that opens on Christmas Day. Featuring songs from the Grammy and American Music Award-winning Alvin and The Chipmunks library, this rhythm action game challenges players' timing and musical skills as they perform in a variety of concert locations around the world.
-- Flip's Twisted World for Wii, a Gamespot E3 '09 Editor's Choice award finalist, is a unique puzzle platformer that stars Flip, a magician's apprentice who mistakenly gets sucked into a cubed world where up and down are only a matter of perspective. Players will help Flip escape his cube prison by rotating the environment 90 degrees in any direction with a simple twist of the Wii Remote.
-- Dawn of Heroes for DS is a tactical role playing game that combines classic RPG concepts--including character development, epic combat, quests and puzzles--with a humorous style.
-- The Daring Game for Girls for Wii and DS is based upon the bestselling how-to-book, The Daring Book for Girls, the ultimate can-do, how-to 'manual' that celebrates the female spirit. The games guide adventurous girls in a range of daring and practical activities from building a campfire to exploring caves, tending a garden, crafting items, playing sports and games, and making new friends.
Fiscal 2009 Outlook
The Company increased its outlook for fiscal 2009 full year net revenue to $85 to $90 million from its previous outlook provided on June 15, 2009 of full year net revenue of $80 to $85 million. The Company expects non-GAAP earnings per share to be between $0.10 and $0.14 for the fiscal 2009 full year. The Company's guidance assumes the release of approximately 37 SKUs in 2009, including 18 DS and 12 Wii. The Company's results are also impacted by seasonality from the December holiday period and variability based on release schedules.
Conference Call
At 4:30 PM ET today, management will host an earnings conference call. To access the call in the U.S., please dial 1-800-860-2442 and international callers please dial 1-412-858-4600. The access code for the call is "Majesco". 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 Web site at http://www.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 433523.
Generally Accepted Accounting Principles (GAAP) and Non-GAAP Metrics
To facilitate a comparison between the three and nine months ended July 31, 2009 and 2008, 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 unaudited condensed consolidated statements of operations:
- Expenses related to non-cash compensation
- Net proceeds from sale of income tax net operating loss carryforwards
- Settlement charges related to the settlement of class action litigation
- Change in fair value of warrants
- Expenses for the California studio which will be closed in the fourth quarter fiscal 2009
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 leading console and portable systems. Product highlights include Cooking Mama(TM) and Cake Mania®2 for Nintendo DS(TM), and Cooking Mama World Kitchen and Jillian Michaels' Fitness Ultimatum 2009 for Wii(TM). The company's shares are traded on the Nasdaq Stock Market under the symbol: COOL. Majesco is headquartered in Edison, NJ and has an international office in Bristol, UK. More information about Majesco can be found online at www.majescoentertainment.com. @Majesco is on twitter or at www.twitter.com/majesco.
Safe Harbor
Some statements set forth in this release, including the estimates under the headings "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(TM) 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, 2008. We do 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.
MAJESCO ENTERTAINMENT FISCAL 2009 & 2010 RELEASE SCHEDULE*
2009 GAMES
----------
--------- --------- --------- ---------
Quarter 1 Quarter 2 Quarter 3 Quarter 4
--------- --------- --------- ---------
Our House:
Cooking Mama Go Play Party!
World Kitchen KarmaStar iPhone, Lumberjacks Wii,
Wii, $49.99 Price Varies Wii, $29.99 $39.99
-------------- ----------------- ------------ ----------
Major Minor's
Majestic March Go Play Circus Our House
Orchard PC, Wii, Star Wii, DS,
Price Varies $39.99 $29.99 $19.99
------------- ------------------ -------------- ---------
FusionFall: A Boy and
Cartoon Network Ultimate Game His Blob
Universe Gardening Mama DS, Room DS, Wii,
PC, $19.99 $29.99 $19.99 $39.99
---------------- ------------------ ------------- ---------
Go Play
Left Brain Right Puffins Island City Sports
Brain 2 DS, Escape the Museum Adventure DS, Wii,
$19.99 Wii, $19.99 $19.99 $29.99
---------------- ----------------- -------------- ------------
Serious Sam
HD: The
First
Wonder World Math Blaster in the Rollin' Encounter
Amusement Park Prime Adventure Rascals DS, XBLA,
DS, $19.99 DS, $19.99 $19.99 Price TBA
--------------- ------------------- ------------ -----------
Hot and
Cold: A 3D
Hidden Object
Cake Mania: Adventure
In the Mix! Wii, Drama Queens DSiWare,
$29.99 DS, $19.99 Price TBA
---------------- ----------- -----------
Bananagrams Powerbike DS, Shorts DS,
Facebook, Free $19.99 $19.99
---------------- ---------- -----------
Night at the Museum:
Battle of the Smithsonian Marker Man
Wii and Xbox 360 Adventures
($39.99), DS DS,
($29.99) PC ($19.99) $19.99
----------- -----------
Cake Mania
Mad Dog McCree 3 DS,
Wii, $19.99 $19.99
----------- ----------
Jillian
Michaels
Fitness
Ultimatum
2010
Wii ($39.99)
and DS
($29.99)
------------
Cooking
Mama 3:
Shop and
Chop
DS, $29.99
----------
Sideswiped
DS,
$19.99
----------
2010 GAMES
----------
--------- --------- --------- ---------
Quarter 1 Quarter 2 Quarter 3 Quarter 4
--------- --------- --------- ---------
Alvin and the Chipmunks:
The Squeakquel Wii Tetris Wii and Zumba,
($39.99) DS, System and
and DS ($29.99) Price TBA Price TBA
-------------- ------------ ----------
Flip's Twisted World Wii,
Price TBA
--------------
Dawn of Heroes DS,
$29.99
--------------
The Daring Game for
Girls Wii ($29.99) and
DS ($19.99)
--------------
*Includes all released and announced titles to date. Prices subject to
change for unreleased titles.
MAJESCO ENTERTAINMENT COMPANY
UNAUDITED SUPPLEMENTARY PRODUCT DATA
Net Revenue by Platform - Yearly
FY09 FY08 FY07 FY06
Estimate Actual Actual Actual
======== ====== ====== ======
CONSOLE:
Wii 53.4% 34.0% 19.7% 0.0%
PS2 0.0% 1.0% 6.8% 18.7%
Xbox 1.2% 0.2% 3.2% 15.7%
--- --- --- ----
54.6% 35.2% 29.7% 34.4%
HANDHELD:
DS 42.6% 61.7% 55.5% 24.4%
GBA 0.0% 0.1% 5.6% 28.0%
PSP 0.0% 1.1% 3.0% 3.4%
--- --- --- ---
42.6% 62.9% 64.1% 55.8%
OTHER 2.8% 1.9% 6.2% 9.8%
TOTAL 100.0% 100.0% 100.0% 100.0%
Net sales by Platform for three and nine months
Three Months Ended July 31,
---------------------------
2009 % 2008 %
---- - ---- -
Nintendo Wii 6,223 36.2% 5,379 37.2%
Nintendo DS 9,582 55.8% 8,119 56.2%
Other 1,378 8.0% 958 6.6%
----- --- --- ---
TOTAL 17,183 100.0% 14,456 100.0%
====== ====== ====== ======
Nine Months Ended July 31,
--------------------------
2009 % 2008 %
---- - ---- -
Nintendo Wii 37,636 53.3% 12,170 26.5%
Nintendo DS 29,467 41.8% 31,675 69.0%
Other 3,448 4.9% 2,050 4.5%
----- --- ----- ---
TOTAL 70,551 100.0% 45,895 100.0%
====== ====== ====== ======
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share amounts)
Three Months Ended Nine Months Ended
July 31, July 31,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Net revenues $17,183 $14,456 $70,551 $45,895
------- ------- ------- -------
Cost of sales
Product costs 7,549 5,849 27,196 19,546
Software development
costs and license fees 6,105 2,457 21,251 8,254
----- ----- ------ -----
13,654 8,306 48,447 27,800
------ ----- ------ ------
Gross profit 3,529 6,150 22,104 18,095
----- ----- ------ ------
Operating costs and expenses
Product research and
development 1,201 970 3,906 2,612
Selling and marketing 4,226 2,420 11,559 6,708
General and administrative 2,272 2,423 7,133 6,451
Depreciation and
amortization 71 59 209 221
Settlement of litigation
and related charges, net - - 404 (322)
-- -- --- -----
7,770 5,872 23,211 15,670
----- ----- ------ ------
Operating (loss) income (4,241) 278 (1,107) 2,425
Other expenses (income)
Interest and financing
costs, net 204 121 884 417
Change in fair value
of warrants 843 (363) 1,858 (957)
--- ----- ----- -----
(Loss) income before
income taxes (5,288) 520 (3,849) 2,965
Income taxes (88) - (1,115) -
---- -- ------- --
Net (loss) income $(5,200) $520 $(2,734) $2,965
======= ==== ======= ======
Net (loss) income per
share:
Basic $(0.18) $0.02 $(0.10) $0.11
====== ===== ====== =====
Diluted $(0.18) $0.02 $(0.10) $0.11
====== ===== ====== =====
Weighted average
shares outstanding:
Basic 29,331,882 27,476,286 28,644,914 27,415,009
========== ========== ========== ==========
Diluted 29,331,882 27,476,286 28,644,914 27,482,498
========== ========== ========== ==========
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
July 31, October 31,
2009 2008
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $6,267 $5,505
Accounts and other receivables 1,236 3,032
Inventory 2,949 5,619
Capitalized software development costs and
license fees 8,313 6,812
Prepaid expenses 1,880 1,956
----- -----
Total current assets 20,645 22,924
Property and equipment - net 474 563
Other assets 93 83
-- --
Total assets $21,212 $23,570
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $10,976 $10,697
Accrued litigation settlement - 1,250
Due to factor 736 983
Customer billings due under distribution
agreement 266 1,487
Inventory financing payable - 1,540
Deferred income and advances from customers 108 265
--- ---
Total current liabilities 12,086 16,222
Warrant liability 2,068 211
Commitments and contingencies
Stockholders' equity:
Common stock - $.001 par value; 250,000,000
shares authorized; 31,407,237 and 30,127,950
issued and outstanding at July 31, 2009 and
October 31, 2008, respectively 31 30
Additional paid-in capital 104,388 101,722
Accumulated deficit (96,906) (94,172)
Accumulated other comprehensive loss (455) (443)
----- -----
Total stockholders' equity 7,058 7,137
----- -----
Total liabilities and stockholders' equity $21,212 $23,570
======= =======
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Nine Months Ended
July 31,
--------
2009 2008
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(2,734) $2,965
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 209 221
Change in fair value of warrants 1,858 (957)
Share-based litigation settlement 404 (322)
Fair value of common stock purchase warrants
issued for services - 77
Non-cash compensation expense 1,255 1,118
Provision for price protection and customer
allowances 3,088 2,500
Amortization of software development costs and
prepaid license fees 8,902 3,684
Changes in operating assets and liabilities:
Due to factor (3,065) (4,800)
Other receivables 1,498 606
Inventory 2,706 1,850
Capitalized software development costs and prepaid
license fees (10,396) (7,341)
Prepaid expenses and other 83 835
Accounts payable and accrued expenses 46 179
Advances from customers and deferred revenue (1,365) (339)
------- -----
Net cash provided by operating activities 2,489 276
----- ---
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (119) (252)
----- -----
Net cash used in investing activities (119) (252)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance cost on equity financing - (40)
Inventory financing (repayments) (1,540) 572
------- ---
Net cash (used in) provided by financing
activities (1,540) 532
------- ---
Effect of exchange rates on cash and cash
equivalents (68) (68)
---- ----
Net increase in cash and cash equivalents 762 488
Cash and cash equivalents - beginning of period 5,505 7,277
----- -----
Cash and cash equivalents - end of period $6,267 $7,765
====== ======
SUPPLEMENTAL SCHEDULE OF CASH PAID FOR INTEREST
AND NON-CASH PAYMENTS
Cash paid for interest $871 $410
==== ====
Litigation settlement costs paid in stock $1,872 $-
====== ==
MAJESCO ENTERTAINMENT COMPANY
RECONCILIATION OF GAAP to NON-GAAP FINANCIAL MEASURES
(in thousands, except share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
July 31 July 31
--------- ---------
2009 2008 2009 2008
---- ---- ---- ----
GAAP operating (loss)
income $(4,241) $278 $(1,107) $2,425
Settlement of litigation
and related charges,
net(1) - - 404 (322)
Non-Cash Compensation(3) 450 369 1,255 1,118
California studio(4) 445 83 1,404 403
--- -- ----- ---
Non-GAAP operating
(loss) income $(3,346) $730 $1,956 $3,624
======= ==== ====== ======
GAAP net (loss) income $(5,200) $520 $(2,734) $2,965
Settlement of litigation
and related charges,
net(1) - - 404 (322)
Change in fair
value of warrants(2) 843 (363) 1,858 (957)
Non-Cash Compensation(3) 450 369 1,255 1,118
California studio(4) 445 83 1,404 403
Net proceeds from sale of
NJ state operating loss
carryforwards(5) - - (1,115) -
-- -- ------ --
Non-GAAP net (loss)
income $(3,462) $609 $1,072 $3,207
======= ==== ====== ======
GAAP net (loss) income
per diluted share $(0.18) $0.02 $(0.10) $0.11
Settlement of litigation
and related charges,
net(1) 0.00 0.00 0.01 -0.01
Change in fair value of
warrants (2) 0.03 -0.01 0.07 -0.03
Non-Cash Compensation(3) 0.02 0.01 0.04 0.04
California studio(4) 0.02 0.00 0.05 0.01
Net proceeds from sale
of NJ state operating
loss carryforwards(5) - - (0.04) -
-- -- ----- --
Non-GAAP net (loss)
income per diluted
share $(0.12) $0.02 $0.04 $0.12
====== ===== ===== =====
Shares used in GAAP and
Non-GAAP per diluted
share amounts 29,331,882 27,476,286 28,644,914 27,482,498
---------- ---------- ---------- ----------
(1) Represents charges to settle certain litigations pending in the
United States District Court, District of New Jersey: (i) a securities
class action brought on behalf of a purported class of purchasers of the
Company's securities; (ii) a private securities action filed by Trinad
Capital Master Fund, Ltd.; and (iii) a second action filed by Trinad
purportedly on behalf of the Company. All three actions are now
concluded.
(2) 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.
(3) Represents expenses recorded for stock compensation expense in
accordance with SFAS 123R. 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.
(4) Represents operating expenses related to our internal development
studio in California, which were not allocated to capitalizable projects.
After evaluation of the studio's performance, and changes in the
availability and cost of development with our third party partners, we now
believe that closing the studio and taking advantage of these external
opportunities represents a better value for the Company.
(5) In November 2008, the Company received net proceeds of approximately
$1.1 million from the sale of the rights to approximately $14.2 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. The amount represents utilization of
approximately 34% of the $41.0 million of net operating loss carryforwards
available to the company in the state of New Jersey, prior to the
transfer. The amount has been recorded as an income tax benefit during
the nine months ended July 31, 2009.
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