Current Report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 8, 2009
MAJESCO
ENTERTAINMENT COMPANY
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
|
Delaware
|
001-32404 | 06-1529524 | ||
|
(State or other jurisdiction
|
(Commission File Number) | (IRS Employer | ||
|
of incorporation)
|
Identification No.) |
160 Raritan Center Parkway,
Edison, New Jersey
(Address of principal executive offices and zip code)
Edison, New Jersey
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (732) 225-8910
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (
see
General Instruction
A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The information set forth under this “Item 2.02 Results of Operations and Financial
Condition”, including the exhibit attached hereto, shall not be deemed “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated
by reference into any filing under the Securities Act of 1933, as amended, except as shall be
expressly set forth by specific reference in such filing.
Attached as Exhibit 99.1 is a copy of a press release of Majesco Entertainment Company, dated
January 13, 2009, announcing certain financial results for its fiscal fourth quarter and fiscal
year ended October 31, 2008.
ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF
CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.
(e) On
January 8, 2009, Majesco Entertainment Company (the “Company”) entered into an employment
agreement (the “Agreement”) with Jesse Sutton, the Company’s Chief Executive Officer. Under the
Agreement, Mr. Sutton will retain his current base salary of $363,000 per calendar year
(the “Base Salary”). In addition, he will be eligible to (i) receive an annual cash bonus in an
amount up to 100% of the Base Salary based on the achievement of the objectives set forth as part
of the Company’s bonus plan for executives (the “Annual Cash Bonus”), and (ii) participate in any
incentive compensation program(s) (including any long-term incentive programs) provided by the
Company. It is expected that such incentive programs will include compensation in the form of
equity awards, and have an annual aggregate grant value worth approximately 100% of the Base
Salary, which amount may be adjusted by the Board of Directors in its discretion.
In the
event that Mr. Sutton’s employment is terminated without Cause
or he resigns for Good Reason (both as defined in the Agreement), the Company shall continue to pay Mr.
Sutton’s Base Salary then in effect for twelve months following the date of termination on a
regular payroll basis (the “Severance Payment”). In addition, the Company shall pay Mr. Sutton, in
a lump sum within thirty days of his termination, two payments: (1) a payment equal to the average
of the percentages used to calculate Mr. Sutton’s Annual Cash Bonus in each of the previous three
fiscal years multiplied by Mr. Sutton’s then-current Base Salary (the “Severance Bonus”) and (2) a
payment for accrued but untaken vacation days. Further, all unvested restricted stock, stock
options and other equity awards held by Mr. Sutton at the time of such termination shall accelerate
and fully vest as of the date of termination. Further still, during the twelve-month severance
period, the Company shall continue its contributions toward Mr. Sutton’s health care, dental,
disability and life insurance benefits on the same basis as immediately prior to the date of
termination. In the event that such termination or resignation occurs within twenty-four months
following a Change of Control (as defined in the Agreement), then Mr. Sutton shall be entitled to
receive, within thirty days of his termination: (1) a payment in an amount equal to two years Base
Salary; (2) the Severance Bonus; and (3) a payment for accrued but untaken vacation days.
In the event of a termination upon death or for disability, the Company shall have no further
obligations other than to pay to Mr. Sutton (or to his estate) the compensation and benefits
through the last day of his actual employment by the Company. In addition, in the event of a
termination upon Mr. Sutton’s death all unvested restricted stock, stock options and other equity
awards then held by him shall accelerate and fully vest as of the date of termination. In
addition, in the event of a termination for disability, any unvested restricted stock, stock
options and other equity awards held by Mr. Sutton that would have vested (without the occurrence
of any other events) over the twelve-month period immediately following the date of termination for
disability, shall accelerate and vest as of the date of termination.
The Agreement contains standard confidentiality and non-compete provisions.
The foregoing description of the Agreement is qualified in its entirety by reference to the full
text of the Agreement, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and
incorporated in this Item 5.02 by reference.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibits
Exhibit No.
Description
10.1
Employment Agreement between the Company and Jesse Sutton, dated January 8, 2009.
*99.1
Press Release dated January 13, 2009.
*
This exhibit is furnished with this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.
MAJESCO ENTERTAINMENT
COMPANY
Dated: January 13, 2009
/s/ Jesse Sutton
Chief Executive Officer
Exhibit 10.1
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made this 8
th
day of January 2009
(the “Commencement Date”), between Jesse Sutton (“Executive”) and Majesco Entertainment Company, a
Delaware corporation (the “Company”).
1.
Employment
.
1.1
Nature of Employment.
The Company hereby agrees to continue to employ Executive,
and Executive hereby accepts such continued employment with the Company, upon the terms set forth
in this Agreement, as the Company’s Chief Executive Officer. Executive shall devote Executive’s
full business time and reasonable best efforts in the performance of the foregoing services,
provided that Executive may, with the specific written permission of the Company’s Board of
Directors (the “Board”), accept other corporate board memberships. In addition, Executive may
participate in charitable organizations, including accepting board memberships at such charitable
organizations, provided that such participation is not in conflict with Executive’s primary
responsibilities and obligations to the Company.
1.2
Reporting.
Executive will directly report to the Company’s Board.
1.3
Term.
The initial term of employment shall be for the period commencing on the
8th day of January, 2009 and ending on the third anniversary thereof
(“Initial Term”)
. Unless
earlier terminated in accordance with the provisions of Section 3 herein, upon the third
anniversary and upon each anniversary date thereafter, the term shall automatically extend for an
additional period of one year upon the terms and conditions set forth herein unless written
notice of non-renewal is given by the Company at least sixty (60) days prior to the relevant
anniversary date
(“Extended Term”)
.
2.
Compensation and Benefits
.
2.1
Salary
.
The Company shall pay Executive a base salary of $363,000 per year,
payable in accordance with the Company’s customary payroll practices (the “Base Salary”). The Base
Salary thereafter shall be subject to annual review and adjustment as determined by the
Compensation Committee of the Board in its discretion each year. However, Executive’s Base Salary
shall not be reduced during the term of this Agreement, unless a proportional reduction is made to
the base salaries of other top-level executive employees.
2.2
Annual Incentive
. Executive will be eligible to receive an annual cash bonus in
an amount up to 100% of Executive’s Base Salary based on Executive’s achievement of the objectives
set forth as part of the Company’s bonus plan for executives (“Annual Incentive Cash Bonus”). The
Annual Incentive Cash Bonus shall be paid to Executive the later of: (1) within ninety (90) days
after the end of the Company’s fiscal year, or (2) upon the filing of the Company’s Annual Report
on Form 10-K, but in no event shall such payment be made to
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Executive later than February 15
th
of the year following the close of the Company’s fiscal year. Moreover, in order
to be eligible to receive an Annual Incentive Cash Bonus, Executive must have been a Company
employee and on working status with the Company through the last day of the fiscal year for which
such payment is being made. In addition, Executive shall be
entitled to participate in any incentive compensation program(s) (including any long-term incentive
programs) provided by the Company. It is expected that such programs will (i) include compensation
in the form of restricted shares and/or stock options, and (ii) have an annual aggregate grant
value worth approximately 100% of Executive’s Base Salary (except that Executive agrees that the
Board may in its discretion reduce the amount of his grants in any given year).
2.3
Fringe Benefits
. Executive shall be entitled to participate in all benefit
programs that the Company establishes and makes available to its executive employees, if any, to
the extent that Executive’s position, tenure, salary, age, health and other qualifications make
Executive eligible to participate, including, but not limited to, health care plans, life insurance
plans, disability insurance, retirement plans, and all other benefit plans from time to time in
effect. Executive shall also be entitled to take four (4) weeks of fully paid vacation in
accordance with Company policy.
2.4
Reimbursement of Certain Expenses
. Executive shall be reimbursed for such
reasonable business expenses as Executive documents in writing to the Company on a regular basis
and in accordance with Company policy.
3.
Early Termination of Employment
. Executive’s employment shall terminate early upon
the occurrence of any of the following:
3.1
Termination for Cause
. At the election of the Company, for Cause upon written
notice by the Company to Executive. For the purposes of this Section, “Cause” for termination
shall be deemed to exist upon the occurrence of any of the following:
(a) a good faith finding by the Company that Executive has engaged in dishonesty, gross
negligence or misconduct that is injurious to the Company which, if curable, has not been cured by
Executive within 10 business days after he shall have received written notice from the Company
stating with reasonable specificity the nature of such conduct;
(b) a good faith finding by the Company that Executive has willfully failed to perform his
duties hereunder which, if curable, has not been cured by Executive within 10 business days after
he shall have received written notice from the Company stating with reasonable specificity the
nature of such conduct;
(c) Executive’s failure to follow a specific written directive of the Company’s Board, which
is business justified and issued in good faith. In the event that Executive disagrees with the
written directive he shall request, in writing within five (5) business days of his receipt of the
Board’s written directive, a meeting with the Board to discuss his
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concerns with the directive. The decision of the Board following such meeting shall be final and binding ;
(d) Executive’s conviction or entry of nolo contendere to any felony or crime involving moral
turpitude, fraud, theft or embezzlement of Company property;
(e) Executive’s material breach of this Agreement which, if curable, has not been cured by
Executive within 10 business days after he shall have received written notice from the Company
stating with reasonable specificity the nature of such breach; or
(f) Executive’s willful disclosure of confidential information or trade secrets and/or his
breach of any confidentiality and non-disclosure agreements he may have executed and/or does
execute during the term of his employment with the Company.
3.2
Voluntary Termination by the Company or for Good Reason
. At the election of the
Company, without Cause, at any time upon 30 days prior written notice by the Company to Executive
or by Executive for Good Reason (as defined below).
3.3
Death or Disability
. Executive’s employment shall terminate thirty days after his
death or the determination of his disability. As used in this Agreement, the determination of
“disability” shall occur when Executive, due to a physical or mental disability, for a period of 90
consecutive days, or 180 days in the aggregate whether or not consecutive, during any 360-day
period, is unable to perform the services contemplated under this Agreement. A determination of
disability shall be made by a physician satisfactory to both Executive and the Company,
provided
that
if Executive and the Company do not agree on a physician, Executive
and the Company shall each select a physician and these two together shall select a third
physician, whose determination as to disability shall be binding on all parties.
3.4
Voluntary Termination by Executive
. At the election of Executive upon not less
than 30 days prior written notice by him to the Company.
4.
Effect of Early Termination
.
4.1
Termination for Cause or at the Election of Executive Without Good Reason.
In the
event that Executive’s employment is terminated for Cause or at the election of Executive without
good reason, the Company shall have no further obligations under this Agreement other than to pay
to Executive the compensation and benefits through the last day of Executive’s actual employment by
the Company and payment for accrued but untaken vacation days.
4.2
Voluntary Termination by the Company or at the Election of Executive for Good
Reason
. In the event that Executive’s employment is terminated without Cause or at the
election of Executive for Good Reason, beginning immediately after the date of such termination,
the Company shall have no further obligations under this Agreement other than to pay Executive the
compensation and benefits through the last day of Executive’s actual
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employment by the Company and
continue to pay to Executive the annual Base Salary then in effect for twelve (12) months following
the date of termination on a regular payroll basis (the “Severance Payment”). In addition, the
Company shall pay Executive in a lump sum, within 30 days of Executive’s termination, two payments:
(1) a payment equal to the average of the percentages used to calculate Executive’s Annual
Incentive Cash Bonus in each of the previous three (3) fiscal years times Executive’s then current
Base Salary (the “Severance Bonus”) and (2) a payment for accrued but untaken vacation days. In
addition, all unvested restricted stock, stock options and other equity awards held by the
Executive at the time of such termination shall accelerate and fully vest as of the date of termination.
In addition, the Company shall continue
its contributions toward Executive’s health care, dental, disability and life insurance benefits on
the same basis as immediately prior to the date of termination, except as provided below, for
twelve months following the date of termination. Notwithstanding the foregoing, the Company shall
not be required to provide any health care, dental, disability or life insurance benefit otherwise
receivable by Executive if Executive is actually covered or becomes covered by an equivalent
benefits (at the same cost to Executive, if any) from another source. Any such benefit made
available to Executive shall be reported to the Company. Nothing shall be payable under this
provision unless Executive executes a release in favor of the Company relating to all claims
arising out of the employment relationship and/or termination thereof that is satisfactory to the
Company. The amounts payable to Executive shall not be subject to any reduction as a result of
future payments made to Executive by any future employers.
4.3
Termination in Event of Change of Control
. In the event that Executive’s
employment is terminated without Cause, or due to Executive’s resignation for Good Reason, and such
event occurs within twenty-four (24) months following a Change of Control as such term is defined
below, then the Company shall pay to Executive (in lieu of all other severance programs/amounts),
within 30 days of Executive’s termination: (1) a payment in an amount equal to two (2) years Base
Salary; (2) the Severance Bonus; and (3) a payment for accrued but untaken vacation days. In
addition, all unvested restricted stock, stock options and other equity awards held by the
Executive at the time of such termination shall accelerate and fully vest as of the date of
termination. In addition, the Company shall continue its contributions toward Executive’s health
care, dental, disability and life insurance benefits on the same basis as immediately prior to the
date of termination, except as provided below, for twelve (12) months following the date of
termination. Notwithstanding the foregoing, the Company shall not be required to provide any
health care, dental, disability or life insurance benefit otherwise receivable by Executive if
Executive is actually covered or becomes covered by an equivalent benefit (at the same cost to
Executive, if any) from another source. Any such benefit made available to Executive shall be
reported to the Company. Nothing shall be payable under this provision unless Executive executes
a release in favor of the Company relating to all claims arising out of the employment relationship
and/or termination thereof that is satisfactory to the Company. The amounts payable to Executive
shall not be subject to any reduction as a result of future payments made to Executive by any
future employers.
4.4
Termination Upon Death or for Disability
. In the event of a termination upon
death or for disability, the Company shall have no further obligations under this Agreement other
than to pay to Executive (or to his estate) the compensation and benefits through the last day of
Executive’s actual employment by the Company and payment for accrued but untaken
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vacation days. In addition, in the event of a termination upon Executive’s death all unvested restricted stock, stock
options and other equity awards then held by Executive shall accelerate and fully vest as of the
date of termination. In addition, in the event of a termination for disability, any unvested
restricted stock, stock options and other equity awards held by Executive that would have vested
(without the occurrence of any other events) over the twelve (12) month period immediately
following the date of termination for disability, shall accelerate and vest as of the date of
termination.
4.5. Notwithstanding any other provision with respect to the timing of payments under Sections
4.2 or 4.3, if, at the time of the Executive’s termination, the Executive is deemed to be a
“specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code,
and any successor statute, regulation and guidance thereto) of the Company, then only to the extent
necessary to comply with the requirements of Section 409A of the Code, any payments to which the
Executive may become entitled under Section 4.2 which are subject to Section 409A of the Code (and
not otherwise exempt from its application) will be withheld until the first business day of the
seventh month following the date of termination, at which time the Executive shall be paid an
aggregate amount equal to six months of payments otherwise due to the Executive under the terms of
Section 4.2 or the full payment as set forth in Section 4.3, as applicable. After the first
business day of the seventh month following the date of termination and continuing each month
thereafter, the Executive shall be paid the regular payments otherwise due to the Executive in
accordance with the terms of Section 4.2, as thereafter applicable.
4.6
Definition of Change of Control
. “Change of Control” means the
occurrence of any of the following events:
(a) any consolidation or merger of the Company with or into any other corporation
or other entity or person, or any other corporate reorganization, in which the stockholders of the
Company immediately prior to such consolidation, merger or reorganization, own less than 50% of the
voting power of the surviving entity immediately after such consolidation, merger or
reorganization; or
(b) any transaction or series of related transactions to which the Company is a party in which
in excess of fifty percent (50%) of the Company’s voting power is transferred;
(c) a sale, lease or other disposition of all or substantially all of the assets of the
Company in accordance with Delaware Law; or
(d) A change in the composition of the Board, as a result of which fewer than a majority of
the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A)
are directors of the Company as of January 8, 2009 or (B) are elected, or nominated for election,
to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the
time of such election or nomination (but shall not include an
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individual whose election or
nomination is in connection with an actual or threatened proxy contest relating to the election of
directors to the Company).
Notwithstanding any provision to the contrary, it is acknowledged and agreed that a Change of
Control must also meet the requirements of a change in ownership of the Company or a change in
ownership of a substantial portion of the assets of the Company in accordance with Section
409A(a)(2)(A)(v) of the Code and the applicable provisions of Treasury Regulations § 1.409A-3, and
that a Change of Control shall not include (1) any consolidation or merger effected exclusively to
change the domicile of the Company, (2) the event of any “Person” (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becoming
the “Beneficial Owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing 50% or more of the total voting power represented by the
Company’s then outstanding voting securities (excluding for this purpose any such voting securities
held by the Company or its affiliates or by any employee benefit plan of the Company) pursuant to a
transaction or a series of related transactions which the Board of Directors does not approve; or
(3) any transaction or series of transactions principally for bona fide equity financing purposes
in which cash is received by the Company or indebtedness of the Company is cancelled or converted
or a combination thereof.
4.7 As used in this Agreement, “
Good Reason
” means, without Executive’s written
consent,
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(a) a material diminution in the Executive’s base compensation; or
(b) the material diminution in the Executive’s authority, duties or responsibilities,
including no longer directly reporting to the Board; provided that such shall not constitute Good
Reason if the Executive continues to be employed in one of the top three positions in the Company;
or
(c) a change in geographic location at which the Executive must regularly perform services
of more than fifty (50) miles;
(d) the Company’s decision not to renew this Agreement at the conclusion of the Initial Term
(as defined in Section 1.3) and/or at the conclusion of an Extended Term (as defined in Section
1.3); or
(e) any other action or inaction that constitutes a material breach by the Company under this
Employment Agreement.
None of the foregoing events shall constitute Good Reason unless (i) the Executive gives notice to
the Company of the occurrence or existence of one of the events and the Company has not cured the
condition within thirty (30) days following receipt of such written notice and (ii) the Executive
terminates employment within one hundred and twenty (120) days following the occurrence of such
event.
5.
Protection of Confidential Information
. In view of the fact that the Executive’s
work for the Company will bring him into close contact with confidential information and plans for
future developments, the Executive agrees to the following:
5.1
Secrecy
. To keep secret and retain in the strictest confidence all confidential
matters of the Company, including, without limitation: all information regarding customers,
employees, contractors, and the industry not generally known to the public; strategies, methods,
books, records, and documents; technical information concerning development and design of video
and/or computer games, products, potential new product introductions, equipment, services, and
processes; procurement procedures and pricing techniques; the names of and other information,
concerning customers, investors, and business affiliates (such as contact name, service provided,
pricing for that customer, type and amount of services used, credit and financial data,
and/or other information related to Company’s relationship with that
customer); pricing strategies and price curves; positions; plans and strategies for expansion or
acquisition; budgets; customer lists; research; communications and electronic commerce information;
weather data; financial and sales data; trading methodologies and terms; evaluations, opinions, and
interpretations of information and data; marketing and merchandising techniques and data;
prospective customers’ names and marks; grids and maps; electronic databases; models;
specifications; computer programs; internal business records; contracts benefiting or obligating
Company; bids or proposals submitted to any third party; technologies and methods; training methods
and training processes; organizational structure; personnel information including salaries;
performance etc.,; payment amounts or rates paid to consultants or other service providers; and
other such confidential or proprietary information learned by him heretofore or hereafter, and not
to disclose them to anyone inside or outside of the Company
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except (i) in the course of performing
his duties hereunder or with the express written consent of the Board, (ii) to the extent
information is already known within the industry, or (iii) to the extent the Executive is required
to do so by a lawful court order.
5.2
Return Memoranda, etc
. To deliver promptly to the Company on termination of his
employment, or at any other time as the Board may so request, all memoranda, notes, records,
reports, manuals, drawings, blueprints and other documents (and all copies thereof) relating to the
Company’s business and all property associated therewith, which he may then possess or have under
his control.
5.3
Non-competition
. The Executive agrees that at all times while he is employed by
the Company and for a period of one (1) year after the termination of his employment for any
reason, he will not, as a principal, agent, employee, employer, consultant, stockholder, investor,
director or co-partner of any person, firm, corporation or business entity other than the Company,
or in any individual representative capacity whatsoever, directly or indirectly, without the
express prior written consent of the Company:
(a) engage or participate in any business whose products or services are competitive with
those of the Company;
(b) aid or counsel any other person, firm, corporation or business entity to do any of the
above;
(c) approach, solicit business from, or otherwise do business or deal with any person,
partnership, firm, corporation or other entity that at the time of the Executive’s termination is a
present customer or client of the Company or which has been a customer or client of the Company
during the Executive’s employment by the Company in connection with any product or service
competitive to any provided by the Company.
Executive agrees that during the term of his employment hereunder, and for a period of one (1)
year after the termination of his employment for any reason, he will not, as a principal, agent,
employee, employer, consultant, director or partner of any person, firm, corporation or business
entity other than the Company, or in any individual representative capacity whatsoever, directly or
indirectly, without the prior express written consent of the Company, approach, counsel or attempt
to induce any person who is then in the employ of the Company to leave the employ of the Company,
as the case may be, or employ or attempt to employ any such person or persons who at any time
during the preceding six months was in the employ of the Company.
Executive acknowledges (i) that his position, with the Company requires the performance of
services which are special, unique, and extraordinary in character and places him in a position of
confidence and trust with the customers, clients and employees of the Company, through which, among
other things, he shall obtain knowledge of the Company and become acquainted with its customers, in
which matters the Company, as the case may be, has substantial proprietary interests, (ii) that the
restrictive covenants set forth above are reasonable and necessary in order to protect and maintain
such proprietary interests and other legitimate business interests of the Company and that such
restrictive covenants, to the extent stated, shall survive the termination of this Agreement, and
(iii) that the Company would not have entered into this Agreement unless such covenants were
included herein.
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If any of the provisions of this Section 5, or any part thereof, is hereinafter construed to
be invalid or unenforceable, the same shall not affect the remainder of such provisions or
provisions, which shall be given full effect, without regard to the invalid portions. If any of
the provisions of this Section 5, or any part thereof, is held to be unenforceable because of the
duration of such provision, the area covered thereby or the type of conduct restricted therein, the
parties agree that the court making such determination shall have the power to modify the duration,
geographic area and/or other terms of such provision and, as so modified, said provisions(s) shall
then be enforceable. In the event that the courts of any one or more jurisdictions shall hold such
provisions wholly or partially unenforceable by reason of the scope thereof or otherwise, it is the
intention of the parties hereto that such determination not bar or in any way affect the Company’s
right to the relief provided for herein in the courts of any other jurisdictions, the above
provisions as they relate to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
The provisions of this Section 5 shall be construed as an agreement on the part of the
Executive independent of any other part of this Agreement or any other agreement, and the existence
of any claim or cause of action of the Executive against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the
provisions of this Section 5.
5.4
Injunctive Relief
. Executive acknowledges and agrees that, because of the unique
and extraordinary nature of these services, any breach or threatened breach of the provisions of
Sections 5.1, 5.2., or 5.3 hereof will cause irreparable injury and incalculable harm to the
Company. The Company shall, accordingly, be entitled to injunctive and other equitable relief for
such breach or threatened breach and that resort by the Company to such injunctive or other
equitable relief shall not be deemed to waive or to limit in any respect any right or remedy which
the Company may have with respect to such breach or threatened breach.
6.
Entire Agreement
. This Agreement, together with all confidentiality and
nondisclosure agreements executed by Executive, constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written or oral relating to
the subject matter of this Agreement.
7.
Dispute Resolution and Jury Waiver
. Except for claims arising under Section 5 of
this Agreement, in the event of a dispute arising out of or relating to this Agreement, Executive
and the Company agree first to utilize the mediation procedures with the JAMS/Endispute
organization, as to which each party shall bear equal costs. In the event the JAMS/Endispute
mediation procedure is unsuccessful, an action may be commenced in court, which action shall be
filed in a federal court in the State of New Jersey. Executive and the Company agree to waive
trial by jury with respect to any claims arising out of or relating to this Agreement or
Executive’s employment by the Company.
8.
Amendment
. This Agreement may be amended or modified only by a written instrument
executed by both the Company and Executive.
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9.
Governing Law
. This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of New Jersey without regard to principles of conflicts of
laws thereunder.
10.
Notices
. Any notice or other communication required or permitted by this
Agreement to be given to a party shall be in writing and shall be deemed given if delivered
personally or by commercial messenger or courier service, or mailed by U.S. registered or certified
mail (return receipt requested), or sent via facsimile (with receipt of confirmation of complete
transmission) to the party at the party’s last known address or facsimile number or at such other
address or facsimile number as the party may have previously specified by like notice. If by mail,
delivery shall be deemed effective 3 business days after mailing in accordance with this Section.
11.
Successors and Assigns
.
11.1
Assumption by Successors
. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise and whether or not after a
Change of Control) to all or substantially all of the business or assets of the Company to assume
in writing prior to such succession and to agree to perform its obligations under this Agreement in
the same manner and to the same extent that the Company would be required to perform it if no such
succession had taken place. Successions by virtue of the sale of stock shall be governed by
operation of law.
11.2
Successor Benefits
. This Agreement shall be binding upon and inure to the
benefit of both parties and their respective successors and assigns, including any corporation into
which the Company may be merged or which may succeed to its assets or business,
provided
,
however
, that the obligations of Executive are personal and shall not be assigned by him.
12.
Miscellaneous
.
12.1
No Waiver
. No delay or omission by the Company in exercising any right under
this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by
the Company on any one occasion shall be effective only in that instance and shall not be construed
as a bar or waiver of any right on any other occasion.
12.2
Severability
. In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions
shall in no way be affected or impaired thereby.
12.3
Counterparts
. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute one and the same
instrument.
10
Exhibit 99.1
MAJESCO ENTERTAINMENT COMPANY ANNOUNCES FOURTH QUARTER
AND YEAR-END FISCAL 2008 FINANCIAL RESULTS
AND YEAR-END FISCAL 2008 FINANCIAL RESULTS
- Exceeds Revenue Guidance and Achieves Profitability in Fiscal 2008 -
- Fiscal 2008 Net Revenues Increased More Than 25% to $63.9M -
- Fiscal
2008 Net Income of $2.1M or $0.08 per share versus Fiscal 2007 Net Loss of $4.8M or $0.20 per share -
EDISON, N.J. — January 13, 2009 — Majesco Entertainment Company (NASDAQ: COOL), an innovative
provider of video games for the mass market, today reported financial results for the fourth
quarter and full-year ended October 31, 2008.
For the
fourth quarter ended October 31, 2008, Majesco’s net
revenues increased 51.2 percent to
$18.0 million versus the same period a year ago. During this same period, the Company reported an
operating loss of $0.9 million compared to an operating loss of $1.5 million in the fourth quarter
of 2007. Net loss for the quarter was $0.9 million versus a net loss of $1.0 million in 2007. The
Company’s basic and diluted loss per share for this quarter was $0.03 compared to a loss of $0.04
in the same period last year.
Results for the fourth quarter of 2008 include $0.4 million of non-cash compensation and a gain of
$0.3 million related to a change in the fair value of warrants. Results for the fourth quarter of
2007 include $0.5 million in non-cash compensation; $0.6 million for a gain in the fair value of
warrants; and a $0.3 million charge related to settlement of litigation. Non-GAAP Operating loss
for the fourth quarter of 2008 was $0.5 million and $0.7 million for 2007. Non-GAAP Net loss was
$0.7 million for the fourth quarter of 2008, and $0.8 million for the same period in 2007.
For the
twelve months ended October 31, 2008, the Company’s net
revenues increased 25.3 percent
to $63.9 million versus the year ago period. During this same period, the Company reported
operating income of $1.5 million compared to an operating loss of $3.8 million in 2007. Net income
through the
twelve months of fiscal 2008 was $2.1 million versus a net loss of $4.8 million in
2007. The Company’s basic and diluted earnings per share for the twelve months of fiscal 2008 were
$0.08 compared to a loss of $0.20 in 2007.
Results for the 12 months ended October 31, 2008 include: $1.6 million in non-cash compensation; a
gain of $0.3 million related to settlement of litigation and a $1.3 million gain for the change in
fair value of warrants. For the same period in 2007, results included $1.5 million in non-cash
compensation; $2.8 million in charges related to settlement of litigation; a $0.6 million gain
related to the change in fair value of warrants; and a $0.3 million gain on settlement of
liabilities. Non-GAAP Operating income for the fiscal 2008 year was $2.8 million and $0.2 million
for 2007. Non-GAAP Net income was $2.1 million for fiscal 2008 versus a $1.3 million loss in fiscal
2007. The Company’s non-GAAP basic and diluted earnings per share for the twelve months of fiscal
2008 were $0.08 compared to a loss of $0.06 in 2007.
Jesse Sutton, Chief Executive Officer of Majesco Entertainment, said, “Our strong financial
performance in 2008 reflects the successful execution of our plan and confirms we’re on the right
path. For the year we exceeded our updated guidance on revenue, and achieved profitability.
Revenue for the full year increased over 25 percent to $63.9 million. Our combined Wii and DS
business, which is at the heart of our strategy, was up
86 percent for the quarter, and 64 percent
for the year when compared to 2007. As we grow our business, we are increasingly converting our revenue growth
into bottom-line returns allowing us to achieve profitability ahead of schedule. For the full
year, operating income was $1.5 million and net income was $2.1 million. Our non-GAAP results
showed a $2.5 million improvement in operating income to $2.8 million, and our non-GAAP net income
improved to $2.1 million from a $1.3 million loss last year. Our progress in driving profitability
reflects our operating discipline, improved product selection, and focused effort towards bringing
reasonably priced product to mass market consumers.”
“We expect to further build on our success in 2009. We believe we are well positioned to benefit
from consumer trends given our focus on the fastest growing segment of the gaming industry. We
have a proven and disciplined business model and a management team that is committed to growing the
company in a profitable manner.”
Financial Highlights
| • | Fourth quarter 2008, domestic revenue increased 55 percent and international revenue increased 40 percent. | ||
| • | For the twelve months of fiscal 2008: |
2
| o | Revenue increased 25.3% to $63.9 million. | ||
| o | Gross profit margin increased to 36.1 percent from 33.9 percent in fiscal 2007. | ||
| o | Non-GAAP operating income reached $2.8 million. | ||
| o | The Company’s interest and financing costs fell to $0.6 million from $1.6 million in the same period one-year ago. | ||
| o | Non-GAAP net income was $2.1 million. | ||
| o | Non-GAAP basic and diluted EPS increased to $0.08 from a loss of $0.06 last year. |
Generally Accepted Accounting Principles (GAAP) and Non-GAAP Metrics
To facilitate a comparison between the three and twelve months ended October 31, 2008 and 2007, the
Company has presented both GAAP and Non-GAAP financial results. GAAP financial measures, including
operating income, net income, and basic and diluted earnings/loss per share, have been adjusted to
report Non-GAAP financial measures which exclude expenses related to non-cash compensation, gains
due to changes in the value of our common stock to be issued in settlement of the class action
litigation and related charges, net, gains related to the settlements of liabilities and other
gains, and the change in the fair value of warrants issued in connection with our September 2007
equity financing. 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.
During the fiscal year ended October 31, 2007, the Company recorded a $2.8 million charge in
connection with the expected settlement of class action litigation. The charge was comprised of
$2.5 million, which represented the fair value, on the date the agreement was executed, of the
common stock expected to be distributed when the settlement becomes effective and $0.3 million
which represented the increase in the value of the shares since that date through October 31, 2007.
The Company will adjust the fair value of the liability to the fair value of the common stock
expected to be distributed at each balance sheet date and record the resulting change as a non-cash
charge, or gain, to earnings in each period until the common stock is distributed. Due to
fluctuations in the Company’s stock price, this resulted in a non-cash gain of $0.3 million during
the twelve months ended October 31, 2008. The settlement provides that if the fair value of the
stock falls below $2.5 million, the Company will issue additional shares of common stock, subject
to certain limitations, with a fair market value equal to the amount of the decrease. Therefore,
the liability will not be adjusted below $2.5 million.
3
During the fourth quarter of 2007, the Company raised $5.9 million in an equity financing. As part
of that transaction, the Company issued warrants that contain a provision that under certain
circumstances in which the Company is sold, merged, or otherwise enters into a “fundamental
transaction”, as defined in the warrant agreement, with a company that is not publicly traded, the
warrants may be settled by a cash
payment. As a result, the warrants were recorded as a liability at their fair value of $2.1
million, in accordance with FASB statement No. 150, Accounting For Certain Financial Instruments
with Characteristics of Both Liabilities and Equity, and FASB Staff position 150-1 Issuers
Accounting for Freestanding Financial Instruments Composed of More Than One Option or Forward
Contract Embodying Obligations under FASB Statement 150. In addition, the Company will measure the
fair value of the warrants at each balance sheet date, and record the change in fair value as a
non-cash charge, or gain, to earnings each period. Changes in the Company’s stock price resulted
in a non-cash gain of $0.3 million during the quarter ended October 31, 2008 and $1.3 million
during the twelve months ended October 31, 2008. The warrants were valued at $0.2 million at
October 31, 2008.
Comparison of Three Months Ended October 31, 2008 to October 31, 2007
— Net revenue was $18.0 million in 2008, compared to $11.9 million in 2007. The increase
was due primarily to strong sales of the
Cooking Mama
franchise,
Jillian Michaels’ Fitness
Ultimatum
and a strong value program.
— In the fourth quarter of 2008, 83 percent of revenue came from domestic sales with 17
percent from international. This compares to the fourth quarter of 2007 when 81 percent of
revenue came from domestic sales with 19 percent from international.
— Gross margin was 27.8 percent, compared to 30.9 percent in 2007. Gross margin for the
period was impacted by holiday value programs that, while profitable, were at a lower
margin.
— The GAAP operating loss was $0.9 million, compared to a 2007 operating loss of $1.5
million. Non-GAAP 2008 operating loss was $0.5 million, compared to a non-GAAP operating
loss of $0.7 million in 2007.
— The GAAP operating loss for 2008 included $0.4 million of non-cash compensation expense,
compared to $0.5 million in 2007. The 2008 loss also included the impact of a $0.3 million
expense in association with one of our customer’s filing for bankruptcy.
— The GAAP net loss was $0.9 million or $0.03 per share, compared to 2007 net loss of $1.0
million, or $0.04 per share. Non-GAAP net loss was $0.7 million, or $0.03 per share,
compared to a non-GAAP net loss of $0.8 million, or $0.03 per share.
Comparison of Year Ended October 31, 2008 to October 31, 2007
— Net revenue was $63.9 million, exceeding the Company’s guidance. This compares to $51.0
million in 2007. The increase was primarily attributable to a 33 percent increase in
domestic revenue; sales across our
Cooking Mama
franchise, the performance of
Jillian
4
Michaels’ Fitness Ultimatum,
as well as a number of other titles including
Wild Earth
and
Wonder World.
— In the twelve months of fiscal 2008, 90.7 percent of revenue came from domestic sales
with 9.3 percent from International. This compares to 85.5 percent domestic and 14.5 percent
international in the same period last year. The decline in international was the result of
unfavorable foreign exchange and a delay in a number of releases.
— Gross margin was 36.1 percent, compared to 33.9 percent in 2007.
— Including the aforementioned litigation charges, the GAAP operating income was $1.5
million. This compares to 2007 GAAP operating loss of $3.8 million. Non-GAAP 2008 operating
income was $2.8 million, compared to a non-GAAP operating income of $0.2 million in 2007.
— GAAP net income was $2.1 million, or $0.08 per share, compared to a GAAP net loss of $4.8
million, or $0.20 per share in 2007. Non-GAAP net income was $ 2.1 million, or $0.08 per
share, compared to a non-GAAP net loss of $1.3 million, or $0.06 per share in 2007.
— Interest expense and financing costs decreased 58 percent in 2008 to $0.6 million from
$1.6 million in 2007. The reduction was attributable to the Company’s ability to self-
finance most of its purchasing requirements following a financing of $5.9 million in
September 2007, lower factoring fees and improved cash management.
— At October 31, 2008, the company had cash and equivalents of $5.5 million.
Announced Product Line-up
First Quarter 2009 ending January 31, 2009:
All of the following titles have, or are expected to be released in North America during the
Company’s first quarter:
—
Cooking Mama: World Kitchen
for Wii is the sequel to the best-selling
Cooking Mama Cook
Off
game that has sold 700,000 units and challenges players to use the Wii Remote as the
ultimate cooking utensil.
—
Left Brain Right Brain 2
for DS is the follow up to the original hit that features
all-new challenges to train both hemispheres of the brain and help players become truly
ambidextrous.
—
Cake Mania: In the Mix!
for Wii marks the first introduction of Sandlot Games’
best-selling PC title on the Wii system. The game integrates motion-based control with the
series’ signature cake-baking, multi-tasking gameplay style.
—
Wonder World Amusement Park
for DS is the first game from Majesco Studios Santa Monica.
This companion game to the Wii version lets players experience a complete day at the park in
the palm of their hands. Using the Touch Screen, players can toss, drive, shoot, whack and
spin in more than two dozen mini-games throughout six themed zones.
—
Orchard
for online and retail PC is a simulation that
challenges players to manage all facets of a retail business,
including planting and harvesting crops, developing new recipes,
buying ingredients and hiring a workforce.
5
Fiscal 2009
To date, the Company has announced the following titles that are expected for release during the
rest of fiscal 2009:
—
Gardening Mama
for DS stars Mama from the multi-million selling
Cooking Mama
franchise
and is the first gardening game available on DS.
Gardening Mama
transforms the stylus into
a universal gardening tool that players will use to plant, nurture and harvest flowers,
fruits and vegetables.
—
Math Blaster in the Prime Adventure
for DS is inspired by the original hit PC game from
Knowledge Adventure that makes learning fun by combining a variety of adventure-based
learning games with challenging mathematic puzzles and the unique capabilities of Nintendo
DS.
—
Marker Man Adventures
for DS is a unique game based on drawing and physics challenges as
players maneuver the charming stick figure, Marker Man, through a myriad of scrolling world
puzzles in his attempt to find his best friend, Doodle Dog.
—
Our House Party!
for Wii turns the Wii Remote into the ultimate home renovating tool that
lets 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 the second game from Majesco Studios Santa Monica. This companion
game to the Wii version lets players work as contractors and then use their work-for-hire
earnings to design, build and decorate their own personalized home.
—
Rollin’ Rascals
for DS is an addictive puzzler that challenges players to roll adorable
round pets around obstacles and into identical twos to clear them from the game board.
—
Major Minor’s Majestic March
for Wii marks the return of the creative team behind the
renowned
PaRappa the Rapper
franchise—legendary game designer and multimedia musician Masaya
Matsuura and famed New York artist Rodney Alan Greenblat. The game turns the Wii Remote into
a “special” baton the bandleader
Major Minor
uses to keep tempo, recruit new band members
and pick up valuable items, while marching through whimsical locations.
—
Hot ‘n’ Cold
for DS is the first fully 3D hunt and find adventure game for the handheld.
Players use the innovative Hot ‘n’ Cold meter as a guide to discovery of hundreds of missing
objects.
—
Escape the Museum
for Wii is based on the popular online hidden object game that
challenges players to rescue museum artifacts and find their missing daughter in a museum
devastated by an earthquake.
—
Drama Queens
for DS tasks players with juggling their love life, career and friendships
as they compete in a popularity contest set within a virtual 3D board game.
—
Powerbike
for DS is an intense motorcycle racer that features death-defying stunts,
intense police chases and competitive multiplayer modes.
6
Fiscal 2009 Outlook
The Company expects fiscal 2009 full year net revenue to be in excess of $70.0 million and that it
will be profitable on an operating basis. The Company believes that its mix of international
revenues for fiscal 2009 will increase slightly from the previous year and that its gross margins
will be in line with fiscal 2008. The Company’s guidance assumes
the release of approximately 31 titles in 2009
with approximately 15 Wii and 16 DS titles. The Company’s results are
also impacted by seasonality from the December holiday period and variability based on release
schedules, as well as fluctuations of foreign exchange rates.
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 1-877-317-6701 and international callers please dial 1-412-317-6701. The access
code for the call is 4881586. 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 4881586.
About Majesco Entertainment Company
Majesco Entertainment Company is a provider of video games for the mass market. Building on 20
years of operating history, Majesco 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). Majesco’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
.
Use of Non-GAAP Financial Information
To supplement the Company’s unaudited condensed consolidated financial statements presented in
accordance with GAAP, the Company uses certain Non-GAAP measures of financial performance. The
presentation of these Non-GAAP financial measures is not intended to be considered in isolation
from, as a substitute for, or superior to, the financial information prepared and presented in
accordance with GAAP, and may be different from Non-GAAP financial
measures used by other
companies. In addition, these Non-GAAP measures have limitations in that they do not reflect all of
the amounts associated with the Company’s results of operations as determined in accordance with
GAAP. The Non-GAAP financial
7
measures used by the Company include Non-GAAP operating income (loss),
Non-GAAP net income (loss), and Non-GAAP basic and diluted earnings (loss) per share. These
Non-GAAP financial measures
exclude the following items from the Company’s unaudited condensed consolidated statements of
operations:
| Ø | Expenses related to non-cash compensation | ||
| Ø | Gains on settlement of liabilities and other gains | ||
| Ø | Settlement charges related to the settlement of class action litigation | ||
| Ø | Change in fair value of warrants |
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” which includes a reconciliation
of the Non-GAAP to the GAAP results.
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; final resolution of the class action and other
litigation on terms acceptable to the Company, and other factors described in our filings with the
SEC, including our Annual Report on Form 10-K for the year ended October 31, 2007. 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.
8
# # #
|
For more information, please contact:
|
||
|
John Gross
|
Mike Smargiassi/Denise Roche | |
|
Chief Financial Officer
|
Brainerd Communicators, Inc. | |
|
Majesco Entertainment Company
|
212-986-6667 | |
|
732-225-8910
|
9
MAJESCO ENTERTAINMENT 2008-2009 RELEASE SCHEDULE*
2008 GAMES
| Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | |||
| Furu Furu Park Wii, $19.99 | Wild Earth: African Safari Wii, $29.99 | Cake Mania 2 DS, $19.99 | Babysitting Mania DS, $19.99 | |||
| Left Brain Right Brain DS, $19.99 | Eco-Creatures: Save the Forest DS, $29.99 | Blast Works: Build, Trade, Destroy Wii, $39.99 | Spy Fox in Dry Cereal Wii, $19.99 | |||
| Mega Brain Boost DS, $19.99 | Nanostray 2 DS, $29.99 |
Nancy Drew: Mystery of the Clue Bender
Society DS, $19.99 |
Freddi Fish: Kelp Seed Mystery Wii, $19.99 | |||
|
Cooking Mama 2: Dinner with
Friends DS, $29.99 |
Blokus Portable: Steambot Championship
PSP, $19.99 |
Wonder World Amusement Park Wii, $39.99 | Air Traffic Chaos DS, $19.99 | |||
| Pet Pals: Animal Doctor DS, $19.99 | Pajama Sam in Don’t Fear the Dark Wii, $19.99 | |||||
| Toy Shop DS, $19.99 | Zoo Hospital Wii, $29.99 | |||||
| Away Shuffle Dungeon DS, $29.99 | ||||||
|
Jillian Michaels’ Fitness Ultimatum 2009
Wii, $39.99 |
2009 GAMES
| Quarter 1 | Quarter 2 | Quarter 3 | ||
| Cooking Mama World Kitchen Wii, $49.99 | Rollin’ Rascals DS, $19.99 |
Our House: Party! Wii,
Price TBA |
||
| Bananagrams Facebook, Free | Math Blaster in the Prime Adventure DS, $19.99 | Our House DS, Price TBA | ||
|
FusionFall: Cartoon Network Universe
PC, $19.99 |
Gardening Mama DS, Price TBA | Powerbike DS, $19.99 | ||
| Left Brain Right Brain 2 DS, $19.99 | Major Minor’s Majestic March Wii, Price TBA | Hot -n- Cold DS, $19.99 | ||
| Wonder World Amusement Park DS, $19.99 | Escape the Museum Wii, $19.99 | |||
| Cake Mania: In the Mix! Wii, $29.99 | Drama Queens DS, $19.99 | |||
| Marker Man Adventures DS, $19.99 | ||||
| Orchard PC, Price TBA |
| * | Includes all released and announced titles to date. Prices subject to change for unreleased titles. |
10
MAJESCO ENTERTAINMENT COMPANY
UNAUDITED SUPPLEMENTARY PRODUCT DATA
UNAUDITED SUPPLEMENTARY PRODUCT DATA
Net Revenue by Platform — Yearly
| FY08 | FY07 | FY06 | ||||||||||
| Actual | Actual | Actual | ||||||||||
|
CONSOLE:
|
||||||||||||
|
Wii
|
34.0 | % | 19.6 | % | 0.0 | % | ||||||
|
PS2
|
1.0 | % | 6.8 | % | 18.7 | % | ||||||
|
Xbox
|
0.2 | % | 3.3 | % | 15.7 | % | ||||||
|
|
||||||||||||
|
|
35.2 | % | 29.7 | % | 34.4 | % | ||||||
|
|
||||||||||||
|
HANDHELD:
|
||||||||||||
|
DS
|
61.7 | % | 53.7 | % | 24.4 | % | ||||||
|
GBA
|
0.1 | % | 5.6 | % | 28.0 | % | ||||||
|
PSP
|
1.1 | % | 3.0 | % | 3.4 | % | ||||||
|
|
||||||||||||
|
|
62.9 | % | 62.3 | % | 55.8 | % | ||||||
|
|
||||||||||||
|
OTHER
|
1.9 | % | 8.0 | % | 9.8 | % | ||||||
|
|
||||||||||||
|
TOTAL
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
11
MAJESCO ENTERTAINMENT’S NET SALES BY PLATFORM
| Three Months Ended | Three Months Ended | |||||||||||||||
| October 31, 2008 | October 31, 2007 | |||||||||||||||
| Net Sales | % | Net Sales | % | |||||||||||||
|
CONSOLE:
|
||||||||||||||||
|
Wii
|
$ | 9,284 | 51.6 | % | $ | 1,214 | 10.2 | % | ||||||||
|
PS2
|
18 | 0.1 | % | 416 | 3.5 | % | ||||||||||
|
Xbox/360
|
— | 0.0 | % | 1,071 | 9.0 | % | ||||||||||
|
|
||||||||||||||||
|
|
9,302 | 51.7 | % | 2,701 | 22.7 | % | ||||||||||
|
|
||||||||||||||||
|
HANDHELD:
|
||||||||||||||||
|
DS
|
8,365 | 46.5 | % | 8,257 | 69.4 | % | ||||||||||
|
GBA
|
— | 0.0 | % | 595 | 5.0 | % | ||||||||||
|
PSP
|
325 | 1.8 | % | 250 | 2.1 | % | ||||||||||
|
|
||||||||||||||||
|
|
8,690 | 48.3 | % | 9,102 | 76.5 | % | ||||||||||
|
|
||||||||||||||||
|
OTHER
|
— | 0.0 | % | 95 | 0.8 | % | ||||||||||
|
|
||||||||||||||||
|
TOTAL
|
$ | 17,992 | 100.0 | % | $ | 11,898 | 100.0 | % | ||||||||
|
|
||||||||||||||||
|
Wii / DS
|
$ | 17,649 | 98.1 | % | $ | 9,471 | 79.6 | % | ||||||||
| Twelve Months Ended | Twelve Months Ended | |||||||||||||||
| October 31, 2008 | October 31, 2007 | |||||||||||||||
| Net Sales | % | Net Sales | % | |||||||||||||
|
CONSOLE:
|
||||||||||||||||
|
Wii
|
$ | 21,746 | 34.0 | % | $ | 10,005 | 19.6 | % | ||||||||
|
PS2
|
640 | 1.0 | % | 3,481 | 6.8 | % | ||||||||||
|
Xbox/360
|
128 | 0.2 | % | 1,651 | 3.3 | % | ||||||||||
|
|
||||||||||||||||
|
|
22,514 | 35.2 | % | 15,137 | 29.7 | % | ||||||||||
|
|
||||||||||||||||
|
HANDHELD:
|
||||||||||||||||
|
DS
|
39,390 | 61.7 | % | 27,387 | 53.7 | % | ||||||||||
|
GBA
|
64 | 0.1 | % | 2,854 | 5.6 | % | ||||||||||
|
PSP
|
704 | 1.1 | % | 1,529 | 3.0 | % | ||||||||||
|
|
||||||||||||||||
|
|
40,158 | 62.9 | % | 31,770 | 62.3 | % | ||||||||||
|
|
||||||||||||||||
|
OTHER
|
1,215 | 1.9 | % | 4,060 | 8.0 | % | ||||||||||
|
|
||||||||||||||||
|
TOTAL
|
$ | 63,887 | 100.0 | % | $ | 50,967 | 100.0 | % | ||||||||
|
|
||||||||||||||||
|
Wii / DS
|
$ | 61,136 | 95.7 | % | $ | 37,392 | 73.3 | % | ||||||||
12
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share amounts)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share amounts)
| Year Ended | Three Months Ended | |||||||||||||||
| October 31, | October 31, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
|
Net revenues
|
$ | 63,887 | $ | 50,967 | $ | 17,992 | $ | 11,898 | ||||||||
|
|
||||||||||||||||
|
Cost of sales
|
||||||||||||||||
|
Product costs
|
28,881 | 25,936 | 9,335 | 6,124 | ||||||||||||
|
Software development costs and license fees
|
11,917 | 7,746 | 3,663 | 2,061 | ||||||||||||
|
|
||||||||||||||||
|
|
40,798 | 33,682 | 12,998 | 8,185 | ||||||||||||
|
|
||||||||||||||||
|
Gross profit
|
23,089 | 17,285 | 4,994 | 3,713 | ||||||||||||
|
Operating costs and expenses
|
||||||||||||||||
|
Product research and development
|
3,306 | 2,311 | 885 | 624 | ||||||||||||
|
Selling and marketing
|
8,628 | 7,421 | 2,144 | 1,748 | ||||||||||||
|
General and administrative
|
9,549 | 8,376 | 2,684 | 2,304 | ||||||||||||
|
Depreciation and amortization
|
300 | 296 | 78 | 76 | ||||||||||||
|
Gain (loss) on settlements
|
— | (266 | ) | — | 17 | |||||||||||
|
Settlement of litigation and related charges,
net
|
(322 | ) | 2,822 | — | 322 | |||||||||||
|
Loss on impairment of software development costs
|
101 | 154 | 101 | 119 | ||||||||||||
|
|
||||||||||||||||
|
|
21,562 | 21,114 | 5,892 | 5,210 | ||||||||||||
|
|
||||||||||||||||
|
Operating income (loss)
|
1,527 | (3,829 | ) | (898 | ) | (1,497 | ) | |||||||||
|
Other expenses (income)
|
||||||||||||||||
|
Interest and financing costs, net
|
649 | 1,552 | 232 | 75 | ||||||||||||
|
Change in fair value of warrants
|
(1,250 | ) | (611 | ) | (293 | ) | (611 | ) | ||||||||
|
|
||||||||||||||||
|
Income (loss) before income taxes
|
2,128 | (4,770 | ) | (837 | ) | (961 | ) | |||||||||
|
Income taxes
|
26 | — | 26 | — | ||||||||||||
|
|
||||||||||||||||
|
Net income (loss)
|
$ | 2,102 | $ | (4,770 | ) | $ | (863 | ) | $ | (961 | ) | |||||
|
|
||||||||||||||||
|
Net income (loss) per share:
|
||||||||||||||||
|
Basic and diluted
|
$ | 0.08 | $ | (0.20 | ) | $ | (0.03 | ) | $ | (0.04 | ) | |||||
|
|
||||||||||||||||
|
Weighted average shares outstanding:
|
||||||||||||||||
|
Basic and diluted
|
27,547,211 | 23,891,860 | 26,893,386 | 24,439,973 | ||||||||||||
|
|
||||||||||||||||
13
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
| October 31, | ||||||||
| 2008 | 2007 | |||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 5,505 | $ | 7,277 | ||||
|
Accounts and other receivables
|
3,032 | 670 | ||||||
|
Inventory
|
5,619 | 3,850 | ||||||
|
Capitalized software development costs and license fees, current portion
|
6,812 | 2,171 | ||||||
|
Prepaid expenses
|
1,956 | 1,128 | ||||||
|
|
||||||||
|
Total current assets
|
22,924 | 15,096 | ||||||
|
Property and equipment — net
|
563 | 568 | ||||||
|
Capitalized software development costs and license fees, net of current portion
|
— | 549 | ||||||
|
Other assets
|
83 | 100 | ||||||
|
|
||||||||
|
Total assets
|
$ | 23,570 | $ | 16,313 | ||||
|
|
||||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable and accrued expenses
|
$ | 10,697 | $ | 7,488 | ||||
|
Share based litigation settlement
|
2,500 | 2,822 | ||||||
|
Due to factor
|
983 | 1,527 | ||||||
|
Customer billings due to distribution partner
|
1,487 | — | ||||||
|
Inventory financing payables
|
1,540 | — | ||||||
|
Advances from customers
|
265 | 425 | ||||||
|
|
||||||||
|
Total current liabilities
|
17,472 | 12,262 | ||||||
|
Warrant liability
|
211 | 1,460 | ||||||
|
Stockholders’ equity:
|
||||||||
|
Common stock — $.001 par value; 250,000,000 shares
authorized; 30,127,950 and 28,675,962
issued and outstanding at October 31, 2008 and
October 31, 2007 respectively
|
30 | 29 | ||||||
|
Additional paid in capital
|
101,722 | 100,201 | ||||||
|
Accumulated deficit
|
(95,422 | ) | (97,524 | ) | ||||
|
Accumulated other comprehensive loss
|
(443 | ) | (115 | ) | ||||
|
|
||||||||
|
Net stockholders’ equity
|
5,887 | 2,591 | ||||||
|
|
||||||||
|
Total liabilities and stockholders’ equity
|
$ | 23,570 | $ | 16,313 | ||||
|
|
||||||||
14
MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year
Ended October 31,
2008
2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
$
2,102
$
(4,770
)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Change in fair value of warrants
(1,250
)
(611
)
Depreciation and amortization
315
296
Amortization of capitalized software development costs and prepaid licenses fees
6,122
3,116
Non-cash compensation expense
1,558
1,505
Warrant issued for services
77
—
Write-off of accounts receivable
255
—
Share based litigation settlement
(322
)
2,822
Gain on settlements
—
(266
)
Loss on impairment of software development costs
101
154
Changes in operating assets and liabilities
Due to/from factor — net
(544
)
2,716
Accounts and other receivables
(2,806
)
2,433
Inventory
(1,769
)
(1,412
)
Capitalized software development costs and prepaid license fees
(10,362
)
(4,501
)
Prepaid expenses
(833
)
1,097
Other assets
(17
)
(18
)
Accounts payable and accrued expenses
3,314
(2,791
)
Customer billings due to distribution partner
1,487
—
Advances from customers
(126
)
(536
)
Net cash used in operating activities
(2,698
)
(766
)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
(314
)
(163
)
Net cash used in investing activities
(314
)
(163
)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options
—
49
Treasury
stock, to be retired
(72
)
—
Inventory financing
1,540
(1,390
)
Proceeds from private placement, net of expenses
(40
)
5,819
Net cash provided by financing activities
1,428
4,478
Effect of exchange rates on cash and cash equivalents
(188
)
(66
)
Net (decrease) increase in cash and cash equivalents
(1,772)
3,483
Cash and cash equivalents — beginning of year
7,277
3,794
Cash and cash equivalents — end of year
$
5,505
$
7,277
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for interest
$
676
$
1,638
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND
FINANCING ACTIVITIES
Issuance of common stock in payment of accounts payable
—
$
365
Issuance of common stock for assets
—
$
11
Warrant liability incurred on private placement
$
(1,250)
$
2,071
MAJESCO ENTERTAINMENT COMPANY
RECONCILIATION OF GAAP to Non-GAAP FINANCIAL MEASURES
(in thousands, except share amounts)
(Unaudited)
RECONCILIATION OF GAAP to Non-GAAP FINANCIAL MEASURES
(in thousands, except share amounts)
(Unaudited)
| Three Months Ended | Year Ended | |||||||||||||||
| October 31 | October 31 | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
|
GAAP operating income (loss)
|
$ | (898 | ) | $ | (1,497 | ) | $ | 1,527 | $ | (3,829 | ) | |||||
|
Settlement of litigation and related charges, net (1)
|
— | 322 | (322 | ) | 2,822 | |||||||||||
|
Non-Cash Compensation (3)
|
$ | 439 | $ | 492 | $ | 1,557 | $ | 1,505 | ||||||||
|
Gain on settlement of liabilities and other gains
|
— | — | — | (266 | ) | |||||||||||
|
|
||||||||||||||||
|
Non-GAAP operating income (loss)
|
$ | (459 | ) | $ | (683 | ) | $ | 2,762 | $ | 232 | ||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
GAAP net income (loss)
|
$ | (863 | ) | $ | (961 | ) | $ | 2,102 | $ | (4,770 | ) | |||||
|
Settlement of litigation and related charges, net (1)
|
— | 322 | (322 | ) | 2,822 | |||||||||||
|
Change in fair value of warrants (2)
|
(293 | ) | (611 | ) | (1,250 | ) | (611 | ) | ||||||||
|
Non-Cash Compensation (3)
|
$ | 439 | $ | 492 | $ | 1,557 | $ | 1,505 | ||||||||
|
Gain on settlement of liabilities and other gains
|
— | — | (266 | ) | ||||||||||||
|
|
||||||||||||||||
|
Non-GAAP net income (loss)
|
$ | (717 | ) | $ | (758 | ) | $ | 2,087 | $ | (1,320 | ) | |||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
GAAP net income (loss) per diluted share
|
$ | (0.03 | ) | $ | (0.04 | ) | $ | 0.08 | $ | (0.20 | ) | |||||
|
Settlement of litigation and related charges, net (1)
|
— | 0.01 | (0.01 | ) | 0.12 | |||||||||||
|
Change in fair value of warrants (2)
|
(0.01 | ) | (0.02 | ) | (0.05 | ) | (0.03 | ) | ||||||||
|
Non-Cash Compensation (3)
|
0.01 | 0.02 | 0.06 | 0.06 | ||||||||||||
|
Gain on settlement of liabilities and other gains
|
— | — | — | (0.01 | ) | |||||||||||
|
|
||||||||||||||||
|
Non-GAAP net income (loss) per diluted share
|
$ | (0.03 | ) | $ | (0.03 | ) | $ | 0.08 | $ | (0.06 | ) | |||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Shares used in GAAP and Non-GAAP per
diluted share amounts
|
26,893,386 | 24,439,973 | 27,547,211 | 23,891,860 | ||||||||||||
|
|
||||||||||||||||
| (1) | During the year ended October 31, 2007, we recorded charges totalling $2.8 million in connection with shares of common stock that we have agreed to issue in settlement of a class action securities litigation against the Company. The charges totalling $2.8 million represented the fair value, as of October 31, 2007, of the common stock expected to be distributed when the settlement becomes effective. The value of the shares to be issued in the settlement are revalued at each balance sheet date, and a corresponding charge or credit to earnings is recorded to earnings for the amount of the change. The value of the shares to be issued in the settlement was $2.8 million at October 31, 2007, and $2.5 million at October 31, 2008. Therefore, during the year ended October 31, 2008, we recorded a gain on litigation settlement of $0.3 million representing the decline in the value of the shares to be issued under the settlement, as if it occurred on October 31, 2008. | |
| (2) | Represents the change in the fair value of warrants, classified as a liabilty. 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. |
16