Stephanie Prince - Investor Relations, LHA Jesse Sutton - Chief Executive Officer, Director Mike Vesey - Chief Financial Officer

Ed Woo - Ascendiant Capital

Good afternoon, and welcome to the Majesco Entertainment third quarter fiscal 2014 earnings conference call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Stephanie Prince from LHA. Please go ahead. Stephanie Prince - Investor Relations, LHA: Thank you, Amy, and good afternoon, everyone. Welcome to Majesco Entertainment's third quarter fiscal 2014 earnings conference call for the quarter ended July 31, 2014. With me on today's call are Jesse Sutton, Chief Executive Officer and Mike Vesey, Chief Financial Officer. Before we get started, I would like to remind you that this call is being recorded and an audio broadcast and replay of the teleconference will be available in the Investor Relations section of the company's website after the conclusion of this call. As a reminder, this call may contain forward-looking statements, including statements regarding management's intention, hope, expectations, representations, plans or predictions about the future. Such statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results or actual future results to differ materially from the expectation set forth in the forward-looking statements. Factors that could cause actual results to differ materially are specified in the company's Annual Report on Form 10-K for the fiscal year ended October 31, 2013 and other filings with the SEC. The company does not undertake and specifically disclaims any obligation to release publicly the results of any revision that may be made to any forward-looking statements to reflect the occurrences of the anticipated or unanticipated events or circumstances after the date of such statements. In addition, in order to facilitate a comparison between the reported periods, the company has presented both GAAP and non-GAAP financial measures. GAAP financial measures include expenses related to non-cash compensation, changes in the fair value of warrants, severance costs and the benefits from the sale of certain state income tax benefits derived from net operating losses. Operating income, net income and income per share have been adjusted to report non-GAAP financial measures that exclude these items. 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 as substitute or superior to GAAP results. Reconciliation between GAAP and non-GAAP financial measures is included in the earnings press release issued earlier this afternoon. I would now like to turn the call over to Jesse Sutton. Jesse?

Thanks, Stephanie. I am going to open with some brief comments before turning the call over to Mike to review our third quarter results. I will then briefly review our current strategy before commenting on our upcoming releases. We will then open up the call for questions. In the third quarter, Majesco began distributing Bound by Flame under an agreement with Focus Entertainment for next-gen consoles. This release helped to offset continuing decline in Zumba catalog sales during the quarter. However, as many of you know, the videogame software market for Nintendo console and handheld systems into which Majesco has historically sold many of its games, remains weak, impacting our revenue. In the past, we were able to capitalize on and derive a substantial amount of revenue from a thriving casual game software market on Nintendo handheld and console systems. However, more recently the shift of the casual gamer from dedicated platforms to smartphones, tablets and social networks, as well as declining sales of our fitness games based on the Zumba fitness brand has resulted in lower revenue and operating losses. We are continuing to focus on diversifying our revenue streams from higher growth business segments, such as online, digital and casino. However, revenue from our new business units Pariplay, and Midnight City have not been material to our operations to-date. We are releasing several online and console games for the holiday season during our fourth fiscal quarter, which I will detail in a few minutes and we are optimistic about the potential in real money gaming. However, given our current rate of operating losses, we will be exploring strategic initiatives to stabilize and increased company value, including expense reductions, strategic investments and other strategic alternatives such as an asset sale or merger. I will now pass the call to Mike Vesey, our Chief Financial Officer to provide a financial review of our third quarter. Mike?

Thank you, Jesse. I will begin by recapping our results for the third quarter of fiscal 2014 before closing with some comments about our balance sheet and liquidity position. As is our custom, I will use non-GAAP results when discussing our financial operations. As a reminder, all per-share information I discuss reflects the effects of a one-for-seven reverse stock split effected on June 13, 2014. Net revenue for the three months ended July 31 was $2.9 million, a $1.1 million decrease from the $4 million reported in the third quarter of last year. Decrease is primarily attributable to lower sales of our Zumba titles. This was partially offset by fees we received from the initial distribution of Bound by Flame, a game published in Europe and distributed by Majesco in North America. Zumba sales were lower in Europe as well. Net revenue in the European market was $257,000 during the quarter compared to $436,000 in the third quarter of last year. Overall, Zumba sales accounted for 13% of our revenue in the current third quarter compared to 66% in last year's third quarter. Gross margin was 39% for the third quarter compared to 31% for the comparable period last year. The increase reflects a greater mix of distribution fees compared to last year's third quarter, when distribution fee revenue was immaterial. Distribution fees are recognized on a net of cost basis and flow almost straight to the bottomline. This is because when we distribute, but not publish a game, we are acting as an agent. On a non-GAAP basis, operating expenses were $3.2 million in the quarter compared to $4.5 million last year. The decline primarily reflects lower product development costs as well as lower personnel and compensation costs compared to the 2013 third quarter. As you may remember, we realigned our business model to a more variable cost model in fiscal 2013 in order to enable us to be more flexible and better allocate our resources in reaction to the changing market conditions. During the third quarter, we recorded a loss from equity method investments of approximately $1.5 million, representing a charge of $1.3 million for an estimated loss in value of the investment that was considered to be other than temporary and our 50% share of losses incurred by GMS during the period. GMS began operations in the fourth quarter of fiscal 2013. Accordingly, there was no effect of GMS operations on the prior year period. GMS Pariplay was in need of additional funding during the quarter. Accordingly, we advanced approximately $200,000 in short-term advances as of July 31, and then an additional $200,000 during August and September. These advances are currently in the form of short-term notes payable from GMS. During the three months ended July 31, 2014, the company recognized a gain on extinguishment of liabilities of $1.2 million. The company determined that certain accounts payable balances and claims for license fees and services would never be paid because they were no longer being pursued for payment and had passed the statue limitations. There was no such activity in the prior year period. Our non-GAAP net loss was $3.6 million for the third quarter compared to a non-GAAP net loss of $3.3 million during the same quarter of last year. Non-GAAP net loss per share for the quarter was $0.58 compared to $0.57 net loss in last year's third quarter. For the first nine months of fiscal 2014, net revenues were $28.1 million compared to $37.2 million in the year ago period. Gross margin was 16% compared to 31% last year. Decrease primarily reflects lower average net selling prices and higher fixed development costs and license fees in the current period as a percentage of sales. The non-GAAP net loss was $11.1 million, or $1.73 per share, compared to non-GAAP net loss of $6.3 million pr $1.08 per share in 2013. The year-over-year change is primarily due to equity method losses from Pariplay discussed above. Overall, Zumba sales accounted for 62% of our net revenues during the nine months ended July 31, 2014 compared to 66% for the same period in the prior year. Now turning to our balance sheet. We ended the third quarter with $10.9 million in cash and equivalents. Our total working capital was $7.9 million. We continue to have no long-term debt. We have recorded a liability of approximately $2 million at July 31, 2014, reflecting proceeds due to the publisher on games we released under distribution agreements during the third quarter. As I said earlier, we distribute these titles in the United States under a distribution agreement and we recorded sales on a net basis. Net cash used in operating activities for the nine months ended July 31 was $115,000, compared to net cash provided by operating activities of $1.1 million in the comparable period last year. The change was primarily due to a larger net loss during the current year, partially offset by a lower investment in game development and other changes in working capital accounts. As of July 31, we have approximately $2.3 million invested in capitalized software and prepaid license fees. This reflects unamortized cost that we have incurred for the development of games to be released later in the year. We ended the quarter with $1.6 million in inventory compared to $4.9 million at the end of the third quarter last year, reflecting our smaller release slate. We plan to invest a significant portion of our available cash balance in the development and in inventory purchases necessary to release a number of games which Jesse will describe in a few minutes between now and the end of our fiscal year. Therefore, our ability to fund operations beyond that date through revenues is dependent on the performance of those titles. If the titles do not perform as planned, we will need to reduce operating expenses or seek additional sources of finance. Since we have posted almost 2 years of operating losses, we are also evaluating other strategic alternatives in order to maximize company value. The Board has retained Bond Lane Partners, a media and technology focused merchant bank to assist us in these prospects. I will now turn it back over to Jesse to review our strategy and upcoming product releases. Jesse?

Thanks, Mike. Our strategy in fiscal 2014 has been focused on a smaller, more diverse game slate that we believe limits our downside risk on any one game during the ongoing industry transitions. These businesses include Majesco's traditional retail console publishing and distribution division, digital publishing and distribution under Midnight City label and our 50% ownership of Pariplay, which focuses on online lottery and online gambling. We remain optimistic about our partnership with Pariplay. We are close to launching our recently announced project aimed for the real money gaming market in Europe, specifically our Three Stooges slots game, as well as our Atari themed slots games. We also anticipate broader distribution of our slots games across the 888games slots website. These games are anticipated to launch over the next few months. As for the iLottery business, we believe that our partnership with Intralot in the digital lottery space will begin to show better results in the coming months. As we continue development of our real money gaming business, we have put the social casino product on a rebuild mode in order to better analyze the game play and monetization mechanics. We are doing this because the game, Crazy Cash Slots, available on Facebook, has not proven to return more revenues per daily user than the cost per install. As we have previously discussed, Midnight City Games, our independent game publishing and distribution division was formed to leverage Majesco's traditional core competencies that include our sales and marketing expertise, strong industry relationships and broad distribution reach. Midnight City's high visibility partnerships have helped to raise the profile of the Midnight City brand in the marketplace as well as within the indie game community, which is opening up additional opportunities with up and coming developers. For Halloween, Midnight City will publish Costume Quest 2 on PC and digital consoles. This game is being developed by Tim Schafer's Double Fine Productions and stars candy-crazed crusaders Wren and Reynold who must save Halloween by traveling through time to battle a legion of dental soldiers. The characters come armed with a new batch of costumes that they wear to transform into giant superpowered Hallowarriors. Fans of the original Costume Quest can look forward to a sweet upgraded battle system and a story that is unmistakably Double Fine. Later in the year, Midnight City will publish Gone Home, one of the best games of 2013 on digital consoles. The Fullbright Company's runaway hit brings the explorative Greenbriar family experience to a whole new audience. Gone Home extends an invitation into an ordinary family's mysterious past as a young woman discovers an empty house that is much more than it seems. In our retail console business, we are continuing to be opportunistic and financially conservative in publishing or distributing products for new and legacy consoles, as we believe that there is still a place for innovative and well-timed games. In mid-September, we are launching Cooking Mama 5: Bon Appetit! on Nintendo 3DS. As the newest title in the best-selling franchise, the game features over 60 mouthwatering recipes from classic fare to exotic cultural dishes and sweet treats. Players will also keep busy with new household activities and games set within Mama's bustling burger shop. In October, we will be launching Shadow Warrior on PlayStation 4 and Xbox One as part of a retail distribution partnership with Devolver Digital. The game is a bold new vision of the 1997 cult classic, reimagined with a blend of modern design, inventive combat mechanics and a contemporary retelling of Lo Wang's comical rise to legend. Two additional games will be released in November, Hello Kitty and Sanrio Friends 3D Racing will release on Nintendo 3DS. The game stars the global icon in a fun rainbow race to the finish line with her super cute friends. Players can customize outfits and vehicles to race across a variety of tracks peppered with power ups and unlock 20 additional mini games. The second November title is Shadows: Heretic Kingdoms on PC. This is the next chapter of the Heretic Kingdoms saga. Players are caught up in a terrible conspiracy and propelled on a journey through a world of dark fantasy as they try to take control of the Devourer, a demon that swallows the souls of the dead and brings them back into the mortal realm as puppets. But is the demon their master or their servant? Epic battles and unexpected plot twists await those brave enough to rise to the challenge We are also continuing to market Zumba World Party, which was built with all the latest next-gen technology throughout the holiday season. In closing, while our current release slate offers a promise for a successful holiday season, we are continuing to explore all options and opportunities for online, digital and social platforms. We will now open the call up for questions. Operator?

(Operator Instructions). Our first question comes from Ed Woo at Ascendiant Capital. Ed Woo - Ascendiant Capital: Yes. Thank you for taking my question. I had a question in terms of the timing of your evaluation of strategic alternatives. When do you think you would have that wrapped up? And also the other question I have is, what is your overall outlook for the videogame market for the holiday? I know you mentioned that your outlook for Nintendo products have been weak. Do you see that continuing into the holidays?

So I will take the questions in reverse. I will respond to the questions in reverse order. When you look at the market as a whole right now, (inaudible) results just came out or came out probably recently and it looks like the PlayStation 4 and Xbox One are having a very strong install base process with all of the top games coming out in the next coming months. I would anticipated that given that they are the hard-core gamer systems that those platforms will continue to succeed and lead the race in the immediate term. Of course, Nintendo is going to be launching their Amiibo product and that remains to be seen as a potential game changer for them. We hope so and of course, the previous platforms are going to continue to sell as some of the big games come out this year, they are going to be coming out on old platforms. That's going to drive sales for their 360, Wii, and the PlayStation 3. So as far as the strategic process or the timeframe, we have no specific timeframe to talk about this time. And as these develop, we will report them. Ed Woo - Ascendiant Capital: Great. Well, thank you, and good luck.

Thank you, Ed.

We have no other questions at this time. I would like to turn the conference back to Jesse Sutton for closing remarks.

Thank you. Thank you all for joining us today. We look forward to reporting back to you on our fourth quarter and year-end call in mid-January. Have a great day.

The conference has now concluded. Thank you for attending. You may now disconnect.