NEW YORK, Nov. 10, 2005 (PRIMEZONE) -- Enigma Software Group, Inc. (OTCBB:ENGM) ("Enigma") today announced its financial results for the third quarter of fiscal 2005, which ended September 30, 2005 and also for the nine-month period then ended. Enigma, which formerly had been known as Maxi Group, Inc., ("Maxi") is a developer of an Internet-based search network and downloadable security software products.
Summary Financial Results
-------------------------
Quarter Quarter Nine Months Nine Months
($ in thousands, Ended Ended Ended Ended
except per share Sept. 30, Sept. 30, Sept. 30, Sept. 30,
data) 2005 2004 2005 2004
------- ------- -------- -------
Total Revenue $ 251 $ 2 $ 21,721 $ 11
Operating (Loss)
Income ($241) ($1,510) $ 19,385 ($11,420)
Net Income (Loss) ($197) ($1,572) $ 10,500 ($11,627)
Net (Loss) Income
Per Share ($0.01) ($ 0.11) $ 0.66 ($ 0.79)
Net Cash (Used in)
Provided by
Operating
Activities ($ 4) ($ 295) ($ 160) $ 2,199
Total revenue for the third quarter of fiscal 2005 was $251,000, compared to $2,000 for the third quarter of fiscal 2004. For the nine month period of fiscal 2005, total revenue was $21.7 million, compared to $11,000 for the comparable prior year period. These increases of $249,000 and $21.710 million are almost entirely a result of our accounting policy for revenue recognition with respect to license fees generated from the sales of downloadable software products.
Revenue recognition requirements in the software industry are very complex and require us to make some estimates. Generally cash is received at the time of sale, but recognition of the revenue from the sale is deferred. For a full understanding of our accounting policy, the reader is urged to review our public filings, which are available online at http://www.sec.gov.
Net cash used in operating activities was $4,000 for the third quarter of fiscal 2005, compared to $295,000 for the third quarter of fiscal 2004. For the nine month period, net cash used in operating activities was $160,000 as compared to net cash provided by operating activities of $2.2 million for the prior year period. Cash at September 30, 2005 totaled $443,000. This compares to $2.7 million at September 30, 2004, which included $1.0 million of restricted cash. At December 31, 2004, cash and restricted cash totaled $1.6 million, of which $1.0 million was restricted. The decrease in restricted cash from December 31, 2004 to September 30, 2005 contributed substantially to funding operations for the first nine months of fiscal 2005, without which Enigma would have reported net cash used in operating activities of approximately $1.2 million.
For the third quarter of fiscal 2005 there was an operating loss $241,000, compared to an operating loss of $1.5 million for the third quarter of fiscal 2004. For the nine month period of fiscal 2005, operating income was $19.4 million, compared to an operating loss of $11.4 million for the comparable prior year period. The increases in operating income for each period resulted from both our accounting policy for revenue recognition (referred to above), as well substantial decreases in operating expenses, as we have both decreased our marketing costs and restructured our company.
The net loss for the third quarter of fiscal 2005 was $197,000, equivalent to $0.01 per common share, which compares to a net loss of $1.6 million for the third quarter of fiscal 2004, which was equivalent to $(0.11) per common share. For the nine month period of fiscal 2005, net income was $10.5 million, equivalent to $0.66 per common share and as compared to a net loss of $11.6 million for the comparable prior year period, which was equivalent to $(0.79) per common share.
ABOUT ENIGMA SOFTWARE GROUP, INC.
Enigma develops and markets digital products and services for the consumer market. Enigma is known mostly for its Anti Spyware software product SpyHunter. SpyHunter is distributed exclusively over the Internet by download. Enigma owns and operates several websites, including the Internet search engine www.adorons.com. Enigma Software operates within the United States with a worldwide customer base.
This release contains forward-looking statements relating to the development of Enigma Software Group, Inc.'s products and services and future operating results, including statements regarding Enigma Software Group's software, that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The words "believe," "expect," "intend," "anticipate," variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Factors that could affect Enigma Software Group Inc.'s actual results include the progress and costs of the development of our products and services and the timing of market acceptance of those products and services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Enigma Software Group, Inc. undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.
Enigma Software Group, Inc.
Condensed Balance Sheet
September 30, 2005
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 442,626
Accounts receivable 162,875
Tax refund receivable 240,615
Prepaid expenses and other
current assets 39,318
-----------
Total current assets 885,434
Property and equipment, net 353,788
Security deposit 84,458
------------
Total Assets $ 1,323,680
============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Accounts payable and accrued
expenses $ 69,813
Income taxes payable 397,368
Deferred revenue 698,294
-----------
Total current liabilities 1,165,475
-----------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $0.001,
100,000,000 shares authorized;
16,243,267 issued and
outstanding 16,243
Additional paid-in capital (55,502)
Retained earnings 197,464
-----------
Total stockholders' equity 158,205
-----------
Total Liabilities and
Stockholders' Equity $ 1,323,680
============
Enigma Software Group, Inc.
Condensed Statements of Operations
For the three-month and nine month periods ended September 30,
(unaudited)
Three Month Periods Nine Month Periods
ended September 30, ended September 30,
2005 2004 2005 2004
---------- ----------- ------------ ------------
Revenues:
Sales of software
products $ 231,256 -- $ 21,631,433 --
Commission
income and
advertising
revenues 19,491 $ 2,298 89,825 $ 11,383
---------- ----------- ------------ ------------
Total revenues 250,747 2,298 21,721,258 11,383
---------- ----------- ------------ ------------
Expenses:
Marketing and
selling 42,583 763,701 283,452 7,335,745
General and
administrative 408,642 726,484 1,932,234 4,030,540
Depreciation
and amortization 40,261 21,756 120,784 65,268
---------- ----------- ------------ ------------
Total costs
and expenses 491,486 1,511,941 2,336,470 11,431,553
---------- ----------- ------------ ------------
Operating income
(loss) (240,739) (1,509,643) 19,384,788 (11,420,170)
Other income -- 5,255 238 5,739
Interest income 2,427 4,837 9,973 13,486
---------- ----------- ------------ ------------
Income (loss) before
income tax
provision (238,312) (1,499,551) 19,394,999 (11,400,945)
Income tax
(benefit)
provision (41,002) 72,284 8,895,165 225,647
---------- ----------- ------------ ------------
Net (loss)
income $ (197,310) $(1,571,835) $10,499,834 $(11,626,592)
========== =========== ============ ============
Basic net (loss)
/income per common
share $ (0.01) $ (0.11) $ 0.66 $ (0.79)
Diluted net (loss)
/income per common
share $ (0.01) $ (0.11) $ 0.66 $ (0.79)
Weighted average
shares
outstanding:
Basic 16,243,267 14,650,001 15,974,578 14,650,001
Diluted 16,243,267 14,650,001 15,974,578 14,650,001
Enigma Software Group, Inc.
Condensed Statements of Cash Flows
For the nine-month periods ended September 30,
(unaudited)
2005 2004
------------ ------------
Cash flows from operating
activities:
Net Income (loss) $ 10,499,834 $(11,626,592)
Adjustments to reconcile
net income (loss) to net
cash (used in) provided
by operating activities:
Interest income on
officer's loan (819) --
Depreciation and
amortization 120,784 65,268
Write off of excess
property & equipment,
net 4,446 --
Changes in:
Restricted cash 1,004,640 (885,745)
Accounts receivable (149,934) 292,569
Prepaid expenses and
other current assets 130,180 (11,222)
Security Deposit -- (73,202)
Deferred tax asset 8,495,000 --
Accounts payable and
accrued expenses (194,767) (163,032)
Income taxes payable 397,368 --
Deferred revenue (20,466,275) 14,601,337
------------ ------------
Net cash (used in)
provided by
operating activities (159,543) 2,199,381
------------ ------------
Cash flows from investing
activities:
Purchase of property and
equipment (13,808) (348,523)
Proceeds from disposition
of property and
equipment 243 --
------------ ------------
Net cash used in
investing activities (13,565) (348,523)
------------ ------------
Cash flows from financing activities:
Loans to shareholders and
related parties net of
repayment -- (107,650)
Repayment of bank
overdraft -- (58,007)
------------
Net cash used in
financing activities -- (165,657)
------------
Net (decrease)/increase in
cash and cash equivalents (173,108) 1,685,201
Cash and cash equivalents
- beginning of period 615,734 --
------------ ------------
Cash and cash equivalents
- end of period $ 442,626 $ 1,685,201
============ ============
Non-cash transaction:
Common shares redeemed in
connection with repayment
of loan and interest by
shareholder $ 123,485 --