NEW YORK, Aug. 12, 2005 (PRIMEZONE) -- Enigma Software Group, Inc. (OTCBB:ENGM), ("Enigma"), today announced its financial results for the second quarter of fiscal 2005, which ended June 30, 2005, and also for the six-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
($ in thousands, except
per share data)
Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
-------- -------- --------- ---------
Total Revenue $16,435 $4 $21,471 $9
Operating Income (Loss) $15,597 $(5,459) $19,626 $(9,911)
Net Income (Loss) $8,442 $(5,599) $10,697 $(10,055)
Net Income (Loss) Per Share $0.52 $(0.38) $0.68 $(0.69)
Net Cash (Used in) Provided
by Operating Activities $(327) $(904) $(156) $2,494
Total revenue for the second quarter of fiscal 2005 was $16.4 million, compared to $4,000 for the second quarter of fiscal 2004. For the six month period of fiscal 2005, total revenue was $21.5 million, compared to $9,000 for the comparable prior year period. These increases of $16.431 million and $21.462 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. 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. Generally cash is received at the time of sale, but recognition of the revenue from the sale is deferred. As a result, 99% of the revenue reported for both the second quarter and six month period of fiscal 2005 represents cash from sales that were generated in prior fiscal years.
Net cash used in operating activities was $327,000 for the second quarter of fiscal 2005, compared to $904,000 for the first quarter of fiscal 2004. For the six month period, net cash used in operating activities was $156,000 as compared to net cash provided by operating activities of $2.5 million for the prior year period. Cash and restricted cash at June 30, 2005 totaled $466,000, of which approximately $10,000 was restricted. This compares to $3.1 million at June 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 of approximately $990,000 from December 31, 2004 to June 30, 2005 contributed substantially to funding operations for the first six months of fiscal 2005, without which Enigma would have reported net cash used in operating activities of approximately $1.1 million.
Operating income for the second quarter of fiscal 2005 was $15.6 million, compared to an operating loss of $5.5 million for the second quarter of fiscal 2004. For the six month period of fiscal 2005, operating income was $19.6 million, compared to an operating loss of $9.9 million for the comparable prior year period. The increases in operating income for each period resulted from both our accounting policy for revenue recognition, as well substantial decreases in operating expenses, as we have both decreased our marketing costs and restructured our company.
Net income for the second quarter of fiscal 2005 was $8.43 million, equivalent to $.52 per common share, compared to a net loss of $5.6 million for the second quarter of fiscal 2004, which was equivalent to $(.38) per common share. For the six month period of fiscal 2005, net income was $10.7 million, equivalent to $.68 per common share compared to a net loss of $10.1 million for the comparable prior year period, which was equivalent to $(.69) 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
June 30, 2005
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 456,433
Restricted cash 9,500
Accounts receivable 257,941
Prepaid expenses and other current assets 14,262
Prepaid income taxes 256,711
----------
Total current assets 994,847
Property and equipment, net 388,453
Security deposit 84,458
----------
Total Assets $ 1,467,758
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 61,612
Income taxes payable 438,901
Deferred revenue 611,730
----------
Total current liabilities 1,112,243
----------
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 394,774
----------
Total stockholders' equity 355,515
----------
Total Liabilities and
Stockholders' Equity $ 1,467,758
==========
Enigma Software Group, Inc.
Condensed Statements of Operations
For the three-month and six month periods ended June 30,
(unaudited)
Three Month Periods Six Month Periods
ended June 30, ended June 30,
2005 2004 2005 2004
----------- ---------- ----------- ----------
Revenues:
Sales of
software
products $ 16,418,139 $ -- $ 21,400,177 $ --
Commission
income and
advertising
revenues 16,817 $ 4,152 70,334 $ 9,085
----------- ---------- ----------- ----------
Total revenues 16,434,956 4,152 21,470,511 9,085
----------- ---------- ----------- ----------
Expenses:
Marketing and
selling 66,804 2,528,703 240,869 6,572,044
General and
administrative 730,843 2,912,786 1,523,592 3,304,056
Depreciation and
amortization 40,262 21,756 80,523 43,512
----------- ---------- ----------- ----------
Total costs and
expenses 837,909 5,463,245 1,844,984 9,919,612
----------- ---------- ----------- ----------
Operating income
(loss) 15,597,047 (5,459,093) 19,625,527 (9,910,527)
Other income 238 -- 238 484
Interest income 3,895 8,057 7,546 8,649
----------- ---------- ----------- ----------
Income (loss)
before income
tax provision 15,601,180 (5,451,036) 19,633,311 (9,901,394)
Income tax
provision 7,159,001 148,090 8,936,167 153,363
----------- ---------- ----------- ----------
Net income (loss) $ 8,442,179 $(5,599,126) $10,697,144 $(10,054,757)
=========== =========== =========== ============
Basic net income/
(loss) per
common share $ 0.52 $ (0.38) $ 0.68 $ (0.69)
Diluted net
income/(loss)
per common share $ 0.52 $ (0.38) $ 0.67 $ (0.69)
Weighted average
shares
outstanding:
Basic 16,243,267 14,650,001 15,838,007 14,650,001
Diluted 16,258,443 14,650,001 15,847,798 14,650,001
Enigma Software Group, Inc.
Condensed Statements of Cash Flows
For the six-month periods ended June 30,
(unaudited)
2005 2004
------------ ------------
Cash flows from operating activities:
Net Income (loss) $ 10,697,144 $(10,054,756)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Interest income on officer's loan (819) --
Depreciation and amortization 80,523 43,512
Changes in:
Restricted cash 995,140 (317,196)
Accounts receivable (245,000) 292,569
Prepaid expenses and other
current assets 139,140 (61,979)
Deferred tax asset 8,495,000 --
Accounts payable and accrued
expenses (202,968) (155,089)
Income taxes payable 438,901 --
Deferred revenue (20,552,839) 12,746,458
------------ ------------
Net cash (used in) provided
by operating activities (155,778) 2,493,519
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (3,523) (348,523)
------------ ------------
Cash flows from financing activities:
Repayment of loans by shareholders and
related parties -- 12,350
Repayment of bank overdraft -- (58,007)
------------ ------------
Net cash used in financing
activities -- (45,657)
------------ ------------
Net increase in cash and cash
equivalents (159,301) 2,099,339
Cash and cash equivalents - beginning
of period 615,734 --
------------ ------------
Cash and cash equivalents - end of
period $ 456,433 $ 2,099,339
============ ============
Non-cash transaction:
Common shares redeemed in
connection with repayment of loan
and interest by shareholder $ 123,485 $ --