Majesco Entertainment Company has a market cap of $104.61 million; its shares were traded at around $2.66 with a P/E ratio of 44.33 and P/S ratio of 1.38.
Highlight of Business Operations:Gross Profit. Gross profit for the three months ended January 31, 2011 was $19.6 million compared to a gross profit of $8.7 million in the same quarter last year. The increase in gross profit was primarily attributable to increased net revenues for the three months ended January 31, 2011, as discussed above. Gross profit as a percentage of net sales was 41% for the three months ended January 31, 2011, compared to 30% for the three months ended January 31, 2010. The increase in gross profit as a percentage of sales was primarily due to higher pricing on some of our products when compared to the same period in the prior year, particularly Zumba Fitness for the Microsoft Kinect the Xbox 360. This product was released in the launch window for Microsofts release of the Kinect platform accessory, and was sold at a retail price of $49.99. In addition, the three months ended January 31, 2010 were affected by $0.9 million of losses on impairment of software development costs and license fees.
General and Administrative Expenses. For the three-month period ended January 31, 2011, general and administrative expenses were $3.3 million, an increase of $1.2 million from $2.1 million in the comparable period in 2010. The increase was primarily due to an increase in profit-based bonus compensation recognized in the current period.
Operating Income. Operating income for the three months ended January 31, 2011 was approximately $8.0 million, an increase of $5.5 million from $2.5 million in the comparable period in 2010. As discussed above, increased revenues and gross profits during the three months ended January 31, 2011 more than offset increased marketing and other operating expenses during the same period.
As of January 31, 2011, our cash and cash equivalents balance was $7.9 million and funds available to us under our factoring and purchase order financing agreements were $8.7 million and $10.0 million, respectively. We expect continued fluctuations in the use and availability of cash due to the seasonality of our business, timing of receivables collections and working capital needs necessary to finance our business.
To satisfy our liquidity needs, we factor our receivables. Under our factoring agreement, we have the ability to take cash advances against accounts receivable and inventory of up to $20.0 million, and the availability of up to $2.0 million in letters of credit. The factor, in its sole discretion, can reduce the availability of financing at any time. We had outstanding advances against accounts receivable of approximately $11.3 million under our factoring agreement at January 31, 2011. We also utilize financing to provide funding for the manufacture of our products. Under an agreement with a finance company, we have up to $10.0 million of availability for letters of credit and purchase order financing. In connection with these arrangements, the finance company and the factor have a security interest in substantially all of our assets.
Cash and cash equivalents were $7.9 million as of January 31, 2011 compared to $8.0 million at October 31, 2010. Working capital as of January 31, 2011 was $19.0 million compared to $11.6 million at October 31, 2010.
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