SOURCE: Silverstar Holdings

November 14, 2007 15:24 ET

Silverstar Holdings Reports First Quarter 2008 Results

Q1 Revenues Total $3.9 Million vs. $279,000 Year-Ago Quarter

BOCA RATON, FL--(Marketwire - November 14, 2007) - Silverstar Holdings Ltd. (NASDAQ: SSTR), an international publisher and developer of interactive entertainment software, reported record financial results for its first quarter 2008 ended September 30, 2007.

Financial Results

First Quarter Fiscal 2008 as compared to the same period a year ago:

--  Revenues for the quarter totaled $3.9 million, a 1291% increase from
    $279,000 a year ago. The increase over the year-ago quarter is primarily
    due to the acquisition of Empire Interactive, which occurred in December
    2006.
    
--  Net loss totaled $4.4 million or ($0.35) per share, compared to a loss
    of $941,000 or ($0.10) per share a year ago.
    
--  Adjusted EBITDA (earnings before interest, taxes, depreciation,
    amortization, and stock-based compensation), a non-GAAP measure, totaled a
    loss of $1.2 million or ($0.09) per share, as compared to a loss of $0.5
    million or ($0.05) per share a year ago. The company recorded depreciation
    and amortization charges of approximately $2.7 million in the first
    quarter, compared to $50,000 in the same period last year. A reconciliation
    of adjusted EBITDA to operating income is included at the end of this
    release.
    

"For a first fiscal quarter, this was a new record for revenue for our company," said Clive Kabatznik, CEO of Silverstar Holdings Ltd. "As expected and previously discussed, Q1 will by far represent the low water mark as compared to our plans and projections for the balance of the year, particularly in terms of the release of our high-profile titles. We remain on target for our 2008 revenue and earnings forecast."

Operational Highlights

--  Released six SKUs during the first quarter: Project Fashion (PC); Full
    Metal Alchemist (DS); Enemy Engaged 2 (PC); GODS: Lands of Infinity (PC);
    1914 Shells of Fury (PC); and Ducati World Championship (PC).
    
--  Empire introduced Animal Paradise, a fun and engaging virtual pet SIM
    for the Nintendo DS.
    
--  Empire Interactive granted five-year, exclusive worldwide licensing
    rights to XENDEX Holding GmbH, a global mobile entertainment company, to
    develop, publish and distribute a selection of Empire's leading titles on
    the mobile platform.
    
--  Strengthened executive management team with the addition of Lawrence
    R. Litowitz as the company's new chief financial officer, Karim Farghaly as
    new head of North American sales, and Vipul Patel as new head of European
    sales.
    

Continued Kabatznik, "During the quarter, we continued to leverage our large back catalog and transition our most popular offerings to next-gen game platforms, like Xbox 360, Nintendo DS and Wii. We also executed on our forecasted annual release schedule, releasing six smaller SKUs in the first quarter, and continued to build on Empire's international presence and unique European distribution network. The release schedule for this fiscal year continues to look strong, with at least 16 SKUs planned for release in fiscal Q2 and another 26 in the pipeline for release in the second half of the fiscal year."

Based on this schedule, the company continues to anticipate revenues will exceed $40 million for the full fiscal year ending June 30, 2008, with adjusted EBITDA in the range of 17.5% to 25.0% or $7 million to $10 million. Due to a structured release schedule designed to enhance sales and profitability, the company continues to anticipate that 110% of its adjusted EBITDA will occur in the final three quarters of the fiscal year.

The 16 SKUs planned for release in the second quarter include: Jackass (PS2, PSP), Animal Paradise (DS), Speedball II: Brutal Deluxe (Xbox 360) and International Cricket Captain (PS2, PSP).

Conference Call

Silverstar will host a conference call today at 4:30 p.m. Eastern Time. A brief presentation by management will be followed by a question and answer period. To participate in the call, dial the appropriate number 5-10 minutes prior to the start time, request the Silverstar Holdings conference call and provide the conference ID.

Domestic callers: 1-888-200-2794
International callers: 1-973-935-8766
Conference ID#: 9358330
Internet Simulcast: http://viavid.net/dce.aspx?sid=000046C9

The call will be available for replay starting at 7:30 p.m. Eastern Time until December 13, 2007:

Toll-Free Replay number: 1-877-519-4471
International Replay number: 1-973-341-3080
Replay PIN #: 9358330

If you have any difficulty connecting with the conference call or webcast, please contact the Liolios Group at 949-574-3860.

About Silverstar Holdings

Silverstar Holdings Ltd. is an international publisher and developer of interactive entertainment software. It currently owns Empire Interactive, PLC and Strategy First, Inc. Empire Interactive (www.empireinteractive.com) is a leading developer and publisher of interactive entertainment software games, including Starsky & Hutch, Big Mutha Truckers, Ford Racing and FlatOut. Empire's products are delivered on both console and PC platforms. Strategy First (www.strategyfirst.com) is a developer and worldwide publisher of entertainment software for the PC. For more information about Silverstar Holdings visit http://www.silverstarholdings.com.

The statements which are not historical facts contained in this press release are forward-looking statements that involve certain risks and uncertainties, including but not limited to risks associated with the uncertainty of future financial results, additional financing requirements, development of new products, regulatory approval processes, the impact of competitive products or pricing, technological changes, the effect of economic conditions and other uncertainties detailed in the company's filings with the Securities and Exchange Commission.

Reconciliation of Operating Income to Adjusted EBITDA

In addition to other measures, management evaluates operating results based upon an adjusted "EBITDA," which is defined as operating income before depreciation and amortization, interest expense, income taxes, and stock based compensation, each of which is presented on the company's Consolidated Statements of Operations. The company's presentation of adjusted EBITDA, a non-GAAP measure, may not be comparable to similarly titled measures used by other companies. Any of these items could be significant to the company's financial results. The following table reconciles adjusted EBITDA to operating income for the periods indicated.

                                                   Quarters ended Sept 30
Adjusted EBITDA Reconciliation                        2007         2006
                                                  -----------  -----------
Operating Income (Loss)                           ($    4,037) ($      573)
Depreciation                                               44            8
Amortization of Intangibles                             2,112           42
Amortization of Software Development Costs                590            0
Stock Based Compensation                                  102           23
                                                  -----------  -----------
   Operating EBITDA                               ($    1,190) ($      500)
   Operating EBITDA per Share                     ($     0.09) ($     0.05)
Weighted Avg. # of Shares Outstanding                  12,783        9,149






                SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS


                                              September 30,    June 30,
                                                  2007           2007
                                              -------------  -------------
                                               (Unaudited)

Current assets:
   Cash and cash equivalents (Includes
    restricted cash of $676,023 and $590,990) $   7,408,833  $   3,693,149
   Cash restricted for foreign tax estimated
    liability                                       779,368      1,064,040
   Accounts receivable, net                       1,934,499      6,908,846
   Inventories, net                                 911,964        900,128
   Current portion of long term notes
    receivable                                      326,135        256,982
   Prepaid expenses and other current assets        396,815        669,730
   Assets available for sale                        513,727        505,650
                                              -------------  -------------
      Total current assets                    $  12,271,341  $  13,998,525
                                              =============  =============

Property, plant and equipment, net                  481,933        488,031
Software development costs, net                   5,829,673      5,183,033
Investments in non-marketable securities          1,131,066      1,143,566
Long term notes receivable                          116,464        214,222
Goodwill, net                                       949,559        890,038
Intangible assets, net                           19,116,755     20,611,189
Deferred tax asset                                  638,882        625,217
Deferred charges and other assets                   335,111        631,843
                                              -------------  -------------
      Total assets                            $  40,870,784  $  43,785,664
                                              =============  =============

Liabilities and stockholders' equity:
Current liabilities:
   Lines of credit                                2,005,674      2,875,472
   Notes payable- acquisition                     3,060,656      5,475,179
   Earn out notes payable - acquisition           3,931,521      3,847,426
   Accounts payable                               4,955,163      6,959,835
   Accrued royalty expense                        2,790,010      2,937,887
   Accrued payroll tax expense                    1,038,609      1,585,196
   Accrued expenses                               1,698,504      1,770,656
   Deposits on July 2007 private placement                -        630,403
   Estimated liability for foreign tax              321,615        616,458
                                              -------------  -------------
      Total current liabilities               $  19,801,752  $  26,698,512
                                              -------------  -------------

Convertible secured debenture                     2,067,973      4,790,779
Other long-term liabilities                         424,989        412,363
                                              -------------  -------------
      Total liabilities                       $  22,294,714  $  31,901,654
                                              =============  =============

Liabilities and stockholders' equity
Preferred stock, $0.01 par value; 5,000,000
 shares authorized; no shares issued and
 outstanding
Common stock, Class A, $0.01 par value,
 50,000,000 shares authorized; 17,589,619
 (1,496,700 shares in treasury) and 9,621,891
 shares issued and outstanding, respectively        175,895         96,218
Common stock, Class B, $0.01 par value;
 2,000,000 shares authorized; 835,260 shares
 issued and outstanding                               8,353          8,353
Common stock, FSAH Class B $0.001 par value;
 10,000,000 shares authorized; 2,671,087
 shares issued and outstanding                          600            600
Additional paid-in capital                       78,692,017     67,843,919
Accumulated deficit                             (61,243,485)   (56,796,978)
Other comprehensive income                          942,690        731,898
                                              -------------  -------------
      Total stockholders' equity              $  18,576,070  $  11,884,010
                                              -------------  -------------
      Total liabilities and stockholders'
       equity                                 $  40,870,784  $  43,785,664
                                              =============  =============




                SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF OPERATION
                                (UNAUDITED)


                                                    Three Months Ended
                                                       September 30,
                                                   2007           2006
                                              -------------  -------------
Net Revenues                                  $   3,878,677  $     278,745
Operating Expenses:
   Cost of sales                                  1,598,802        119,569
   Development costs and royalties                  613,504         68,041
   Selling, general and administrative            2,958,380        613,955
   Amortization of software development costs       590,106              -
   Amortization of acquired intangibles           2,111,666         42,361
   Depreciation                                      43,654          7,730
                                              -------------  -------------
   Total operating expenses                       7,916,112        851,656
                                              -------------  -------------
      Operating loss                             (4,037,435)      (572,911)
Other income (expense)                              (12,495)            11
Foreign currency gain (loss)                        133,798       (262,073)
Amortization of convertible debt discounts
 and issuance costs                                (431,169)      (159,107)
Interest expense                                   (168,457)      (102,826)
Interest income                                      69,249        155,468
                                              -------------  -------------
      Net loss                                ($  4,446,509) ($    941,438)
                                              =============  =============

Loss per share:
      Basic and diluted                       ($        .35) ($        .10)

Weighted average common stock outstanding:
      Basic and diluted                          12,783,366      9,149,034
                                              =============  =============

Contact Information

  • Contact:
    Silverstar Holdings Ltd.
    Clive Kabatznik
    President and CEO
    Tel 561-479-0040
    Email Contact

    Investor Relations:
    Liolios Group, Inc.
    Matt Glover or Ron Both
    Tel 949-574-3860
    Email Contact