SHOAL GAMES ANNOUNCES Q2 2018 RESULTS

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ANGUILLA, B.W.I., August 14, 2018 – Shoal Games Ltd. (TSXV: SGW) (OTCQB: SGLDF) (“the Company”), mobile software developer, owner, and publisher of Rooplay, the EdTech games platform (www.rooplay.com) and the Rooplay Originals games featuring Garfield, Moomin, Mr. Men & Little Miss, Pororo, Peter Rabbit and Mr. Bean today announced its unaudited financial results for the second quarter ended June 30, 2018. All amounts are presented in United States dollars and are in accordance with United States Generally Accepted Accounting Principles.

Recent Shoal Games Ltd. highlights include:

  • Settled the outstanding $605,358 promissory notes in exchange for the exercise of 1,200,000 warrants
  • Revenue increase of 7% to $24,343 over second quarter of fiscal 2017
  • Added 200,000+ downloads of Rooplay in the quarter
  • Launched new “common account” feature on Rooplay Android to enable OTT multi-platform logins

“The development of a global OTT platform requires the combination of a strong technical foundation, the content relationships to populate the system, and the distribution partners to bring the platform into millions of homes,” said Jason Williams, Shoal Games CEO.  “At Shoal Games we are fulfilling these requirements and preparing to launch a harmonized Rooplay OTT platform on Apple, Android, Web, and TV shortly.  We have secured more than 600,000 downloads of Rooplay Android which has allowed us to test a wide range of features, prices, and offerings.  During our tests, we have refined the Rooplay brand position, launched more than 30 Rooplay Original exclusive games, grown our subscriber lifetime value, and reduced our cost of securing new subscribers.  The improvements that we’ve completed to Rooplay since its initial launch have put the system on the path to becoming a leading games platform for the market of 1.9 billion kids globally.  Rooplay’s mix of hundreds of curated educational and entertainment games is unique in the market and we continue to erect competitive barriers to entry with our innovative Shoal.js content production toolset.”

“OTT systems are growing in all parts of the world and Rooplay offers a new content type for broadcasters and mobile operators to feature as part of their own subscription offerings.  Educational games are used in the classroom, in the home, and while on-the-go as kids love to play and parents love their kids to learn.  Rooplay is a single solution in a fragmented market for families to provide a safe and engaging games catalog where no solution currently exists.  Netflix, YouTube, and Hulu are the leading OTT solutions for video content.  Spotify, Pandora and Soundcloud are the leading OTT solutions for audio.  Rooplay is in a strong position to become the leading OTT gaming solution for children.  Building an OTT system of any content type is a large endeavor that requires time, investment, and strong partners.  However, the rewards for establishing an OTT platform as the leader of a content type are large and we are confident that our strategy and technology will enable us to be successful.”

Second Quarter Financial Results

During the quarter ended June 30, 2018, the promissory notes of $605,358 were settled in exchange for the exercise of 1,200,000 share purchase warrants at CAD$0.65 (approximately US$0.50) per share and the outstanding promissory notes were extinguished.

Total revenue, net of platform fees to Apple, Google and Amazon, for the quarter ended June 30, 2018, increased to $24,343, an increase of 7% from revenue of $22,776 for second quarter of 2017 and revenue of $24,351, in the first quarter of 2018. The increase in total revenue compared to the second quarter of fiscal 2017, is due to greater exposure of Rooplay in the marketplace.

Sales and marketing expenses were $115,508 for the quarter ended June 30, 2018, a decrease of 27% from sales and marketing expenses of $157,184 in the first quarter of fiscal 2018 and an increase of 129% over expenses of $50,531 in the second quarter of fiscal 2017. The decrease in sales and marketing expenses in the quarter ended June 30, 2018, compared to the first quarter of fiscal 2018 was due to a larger marketing campaign in the first quarter of fiscal 2018, which was reduced in the second quarter of fiscal 2018 due to delays in launching Rooplay on additional platforms. Selling and marketing expenses principally include publishing services and user acquisition costs to acquire players.

General and administrative expenses consist primarily of premises costs for our office, legal and professional fees, and other general corporate and office expenses. General and administrative expenses decreased to $66,282 for the quarter ended June 30, 2018, a decrease of 21% from costs of $83,708 in the first quarter of 2018 and a decrease of 7% from costs of $71,089 for the second quarter of fiscal 2017. The decrease in general and administrative expenses compared to the second quarter of fiscal 2017 and the first quarter of fiscal 2018, is due to the legal expenses and filing fees incurred in preparing the private placements completed in those periods.

Salaries, wages, consultants, and benefits increased to $168,211 for the quarter ended June 30, 2018, an increase of 4%, over salaries, wages, consultants, and benefits of $161,422 in the first quarter of 2018 and an increase of 44% compared to salaries, wages, consultants, and benefits of $116,537 in the second quarter of 2017. This increase compared to the second quarter of 2017 and first quarter of fiscal 2018, is due to higher consulting charges incurred for financing and marketing of the Company.

The Company does not capitalize its development costs. The Company expensed $265,445 in software development costs during the quarter ended June 30, 2018, a decrease of 2% in software development costs of $270,619 expensed during the first quarter of 2018 and an increase of 35% in software development costs compared to software development costs of $196,816 expensed during the second quarter of fiscal 2017. The increase compared to the second quarter of fiscal 2017 is due to higher software development expenses incurred in the development of Rooplay Originals and related technology. The decrease compared to the first quarter of fiscal 2018 is due to lower software development expenses incurred in the development of Rooplay Originals and related technology.

During the quarter ended June 30, 2018, the Company incurred non-cash incentive stock compensation expenses of $584,783 from the issuance of 2,130,000 stock options in the second quarter of fiscal 2018, an increase compared to stock-based compensation expense $3,693 in the first quarter of fiscal 2018. These options were granted to employees, consultants and directors of the Company.

The net loss, including the non-cash incentive stock compensation expenses after taxation for the quarter ended June 30, 2018, amounted to ($989,473), a loss of ($0.02) per share, compared to a net loss of ($835,368), or ($0.01) per share in the first quarter of fiscal 2018 and a net loss of ($439,042) or ($0.01) per share in the quarter ending June 30, 2017.  This increase in net loss is due to stock options granted during the second quarter of fiscal 2018.

During the quarter ended June 30, 2018, we used cash of ($657,524) in operating activities compared to using cash of ($657,412) in the first quarter of 2018 and cash used in operating activities of ($563,510) in the same period in the prior year.

Net cash used by financing activities was ($1,923) in the quarter ended June 30, 2018, which compares to cash generated by financing activities of $2,289,643 in the first quarter of 2018 and cash generated by financing activity of $785,728 in the same period in the prior year. This cash used by financing activity is due to settlement of the promissory note in exchange for shares of the Company at a warrant exercise price of CAD$0.65 per share. The cash generated in the first quarter of fiscal 2018 and second quarter of fiscal 2017 is due to the private placements closed.

We had cash of $1,439,560 and working capital of $1,424,501 at June 30, 2018.  This compares to cash of $478,397 and working capital of $345,184 at December 31, 2017.

For full details of the Company’s operations and financial results, please refer to the Securities and Exchange Commission website at www.sec.gov or the Shoal Games Ltd. corporate website at http://investor.shoalgames.com or on the www.sedar.com website.

ABOUT SHOAL GAMES LTD.
Shoal Games Ltd. (TSXV:SGW) (OTCQB:SGLDF) (www.shoalgames.com) is the owner of the EdTech Games Platform Rooplay (www.rooplay.com). Rooplay’s pioneering curated games platform brings calm, structure and accountability for children and parents in an increasingly confusing and fragmented digital world.  Empowering children with inspired play, engagement and innovative learning prepares them for success in their futures. Rooplay is available exclusively on Android and is live worldwide in the Google Play Store.  Featuring Garfield, Moomin, Mr. Men, Little Miss, Pororo and Mr. Bean, the product offers families a handpicked and growing selection of hundreds of educational games for a monthly subscription fee. The Rooplay platform uses the same subscription business model as Netflix, but substitute’s passive video content with active learning games designed to inspire children to success.
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements.  Certain information included in this press release (as well as information included in oral statements or other written statements made or to be made by the company) contains statements that are forward-looking, such as statements relating to anticipated future success of the company.  Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statements made by or on behalf of the company.  For a description of additional risks and uncertainties, please refer to the company’s filings with the Securities and Exchange Commission.  Specifically, readers should read the Company’s Annual Report on Form 10-K, filed with the SEC on March 20, 2018, and the prospectus filed under Rule 424(b) of the Securities Act on March 9, 2005 and the SB2 filed July 17, 2007, and the TSX Venture Exchange Listing Application for Common Shares filed on June 29, 2015 on SEDAR, for a more thorough discussion of the Company’s financial position and results of operations, together with a detailed discussion of the risk factors involved in an investment in Shoal Games Ltd.

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