Majesco Reports Large Losses

Majesco announces large losses for its third quarter.

Majesco today announced results for its third quarter and nine months ended July 31, 2005.

Majesco reported third quarter net revenues of $4.6 million, compared to $34.0 million for the same period in 2004. The decrease is reflective of weak sales of the Company's products compared to the strong sales around the introduction of its Game Boy Advance Video product in the prior year quarter. In addition, net revenues for the 2005 quarter were impacted by increased provisions for price protection, changes in market conditions, and soft demand for the Majesco products.

The operating loss was $38.6 for the 2005 quarter, versus operating income of $3.1 million for the same period last year. The decrease in operating income is attributable to the weaker than expected sales of Majesco's premium game releases as well as its other products. As a result Majesco was unable to recoup development and marketing costs related to the premium games. The loss also includes provisions for impairment of capitalized software costs, severence costs and a loss on a proposed settlement.

For the quarter, Majesco generated a net loss of $37.5 million, or $1.69 per share, compared to net income of $20.5 million, or $1.06 per share for the third quarter of last year.

For the nine-month period ended July 31, 2005, Majesco reported net revenues of $55.1 million, down from the $75.6 million reported in the same period during 2004. The operating loss was $35.8 million versus an operating income of $6.5 million in the comparable 2004 period. Net loss for the 2005 nine-month period was $37.8 million or $1.87 per share, compared to net loss of $29.0 million or $3.98 per share for the same period of last year.

As of July 31, 2005, Majesco had $10.3 million in cash and cash equivalents. To satisfy its liquidity needs, Majesco factors its receivables, and utilizes purchase order financing to provide funding for the manufacture of its products. Recently, the factor imposed a limitation of $7.5 million on cash advances, and a maximum of $2.0 million for letters of credit. Previously, Majesco availability was $30.0 to $35.0 million in the aggregate. Management is negotiating with the factor to increase the level of availability and is also in the process of evaluating alternatives to its current factoring arrangement.

Although management believes it will be successful in either increasing the availability from its current factor or obtaining alternative financing, there can be no assurance that it will be successful in these efforts, or at terms acceptable to Majesco. Failure to obtain such financing or obtaining it with unfavorable terms could have an adverse effect on future operating prospects and continued growth.

Jesse Sutton, Majesco's President, said, "The lower than expected sales of some of our key products combined with the effects of the upcoming console transition and overall industry softness have made this a very challenging year."

Sutton continued, "As a result of our disappointing results, we are re-evaluating our business model. In the meantime, we will maintain our focus on digital entertainment with an emphasis on video games. Our value product line will remain a core part of our business and we will selectively publish frontline titles. Additionally, our strategy includes pursuing low-risk opportunities in the mobile and online markets with our existing intellectual properties as well as new products."

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