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DWANGO WIRELESS ANNOUNCES SECOND QUARTER RESULTS;
NAMES INTERIM CHIEF EXECUTIVE OFFICER
Conference Call and Webcast Scheduled for Today at 1:30 Pacific Time
SEATTLE, Wash. -- August 15, 2005 -- Dwango(R) Wireless, (OTCBB:DWGN), a leading
developer and publisher of mobile entertainment content for top lifestyle
brands, today reported financial results for the second quarter ended June 30,
2005.
Additionally, Dwango announced that the Board of Directors has named Alexander
U. Conrad, currently President, Chief Operating Officer, Secretary and a
Director of Dwango, to the additional position of interim Chief Executive
Officer. Mr. Conrad succeeds Rick J. Hennessey, who resigned as the Chief
Executive Officer and a member of the Board of Directors, effective today.
Mr. Conrad, 35, has been an executive of Dwango since May 2003, and was named
President, Chief Operating Officer, Secretary and a Director of the Company in
March 2004. He served as Vice President of Business Development for Over-the-Air
Wireless, Inc. until its acquisition by Dwango in February 2004. Prior to
joining Over-the-Air Wireless, Mr. Conrad was a senior product management
executive of eFunds Corporation and DocuTouch Corporation.
Second Quarter Results
Dwango reported total revenues of $885,000 for the second quarter ended June 30,
2005, a decrease of 17% from $1,060,000 in the first quarter of this year.
Cost of revenues increased 55% to $880,000 in the second quarter, from $567,000
in the first quarter. As a result, gross margin was $5,000 for the second
quarter, compared with $493,000 in the first quarter. The Company's net loss
attributable to common stockholders for the second quarter of 2005 was $5.56
million, or $0.64 per fully diluted share, compared to a net loss of $4.85
million, or $0.58 per fully diluted share, for the first quarter of this year.
Because Dwango launched its first significant commercialized mobile content
products late in the second quarter of 2004, and therefore experienced minimal
revenues during that period, sequential comparisons to the first quarter of 2005
are more meaningful than year-over-year comparisons.
The decrease in total revenues for the second quarter of 2005 was due primarily
to a decrease in revenues from Rolling Stone downloads as compared with the
first quarter of 2005. Additionally, cost of revenues increased due primarily to
a non-recurring charge relating to a contract with a major carrier for premium
deck placement and the straight-line amortization of contract minimums for
Rolling Stone and Beliefnet.
At June 30, 2005, cash and short-term investments totaled $9,100,000, compared
to $82,000 at December 31, 2004, reflecting the approximately $15,000,000 in
gross proceeds received in connection with the February 2005 financing.
Operational Highlights
Dwango launched two new products, Napster Ringtones for the U.S. and Canadian
market and Beliefnet for the U.S. market, toward the close of the second quarter
of 2005. The Company also made progress on its Playboy product, which it expects
to launch during the second half of 2005.
Company Comment
Victor A. Cohn, Chairman of the Board of Directors, stated, "We are not
satisfied with the results for the 2005 second quarter and are committed to
improving Dwango's financial performance. We believe that the Company's
high-profile brands, compelling content and broad distribution provide a base
upon which to build a successful business going forward. Alex Conrad has played
a key role in the development of the Company, and we are confident in his
ability to focus the Dwango team on the execution of our business objectives."
Alex Conrad added, "Our top priority near-term is to enhance revenue generation
from our established products while preparing for the launch of our Playboy
brand. To accomplish this goal, we will focus on expanding our distribution by
introducing `short codes' that allow consumers to purchase content directly from
Dwango. At the same time, we will employ additional creative marketing and
promotional strategies to drive usage. Going forward, we will look to maximize
the value of our existing brand and carrier relationships, selectively pursue
new high-value initiatives, and manage expenses in a disciplined manner. "
Conference Call and Webcast Scheduled for Today at 1:30pm PT
Dwango Wireless will hold a conference call today at 1:30 pm PT (4:30 ET) on the
results of second quarter and six months ended June 30, 2005.
The event will be webcast live on the company's website, www.dwango.com, and
will be archived at that site for one year following the live event. A
transcript will be made available on the site at
http://www.dwango.com/inside_dwango/news_events.php.
A replay of the event will be available via phone shortly following its
conclusion and will remain available until Monday, August 22, 2005 at midnight
EDT. Dial (800) 642-1687 or (706) 645-9291 and enter the passcode 8257189.
To participate in the call, dial 800-399-7907 five to ten minutes prior to the
event (to allow time for participant registration). International callers should
dial 706-679-0614. No passcode is necessary.
About Dwango(R) Wireless
Dwango(R) Wireless (OTCBB: DWGN) offers a comprehensive approach for bringing
lifestyle and affiliate brands to the wireless arena through customized
entertainment content, ringtones, games and applications for mobile phones. A
key player in the wireless industry, Dwango Wireless provides unique content for
some of today's hottest lifestyle brands, including Napster, Playboy and Rolling
Stone. Dwango North America corporate information can be found at
www.dwango.com. Dwango(R) is a trademark of Dwango Co. Ltd., and used by Dwango
Wireless pursuant to an exclusive license.
Certain of the statements made in this press release are forward-looking
statements. Actual results or developments may differ materially from those
projected or implied in these forward-looking statements. For example, the
statements regarding the potential success of the relationship between Napster,
Rolling Stone, ESPN, Beliefnet, Playboy and Dwango Wireless, the expected launch
of the Playboy products, the plans, strategies and objectives of management and
the organizational structure, are forward-looking and actual results may differ
materially from those statements due to various risks and uncertainties. More
information about the risks and uncertainties faced by Dwango Wireless is
contained in Dwango Wireless' filings with the Securities and Exchange
Commission, including under the section entitled "Risk Factors" in Dwango's
Registration Statement on Form SB-2, as filed on June 1, 2005.
Dwango Wireless disclaims any intention or obligation to update or revise any
information in this press release, whether as a result of new information,
future events or otherwise.
Investor Relations Contact: Dwango Contact:
Edward Nebb Jared Nieuwenhuis
President Director, Marketing Communications
Comm-Counsellors, LLC Dwango Wireless
203.972.8350 206.832.0508
jared.nieuwenhuis@dwango.com
[Financial Tables Follow]
Dwango North America Corp. and Subsidiaries
Consolidated Statement of Operations
(In Thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenue $ 885 $ 177 $ 1,945 $ 237
Cost of revenues 880 87 1,447 87
-------- -------- -------- --------
Gross profit 5 90 498 150
Expenses:
Sales and marketing 573 275 1,114 291
Research and development 590 2,828 969
General and administrative 1,367 718 2,582 1,571
-------- -------- -------- --------
Operating loss (3,413) (1,493) (6,026) (2,681)
Other expenses:
Interest expense, including
amortization of debt issuance cost
and interest on convertible notes,
net of interest income 723 549 1,578 968
-------- -------- -------- --------
Net loss (4,136) (2,042) (7,604) (3,649)
Accretion and deemed dividends on
redeemable preferred stock (1,421) (6) (2,807) (6)
-------- -------- -------- --------
Net loss attributable to
common stockholders $ (5,557) $ (2,048) $(10,411) $ (3,655)
======== ======== ======== ========
Common share data:
Basic and diluted loss per share $ (0.64) $ (0.29) $ (1.21) $ (0.54)
======== ======== ======== ========
Weighted average number of
basic and diluted common
shares outstanding
8,738 6,981 8,587 6,745
======== ======== ======== ========
Dwango North America Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands Except Shares)
June 30, December 31,
2005 2004
(Unaudited)
------- -------
ASSETS
Current assets:
Cash $ 2,156 $ 82
Short-term investments 6,948 --
Accounts receivable 700 803
Prepaid royalties 973 793
Prepaid expenses 329 286
Other current assets 59 83
------- -------
Total current assets 11,165 2,047
Fixed assets, net 526 251
Leasehold improvements, net 49
-------
Deferred financing costs 565 765
Intangibles, net 26 49
Restricted cash 125 --
Prepaid license 186 288
------- -------
$12,642 $ 3,400
======= =======
(continued)
Dwango North America Corp. and Subsidiaries
Condensed Consolidated Balance Sheet, continued
(In Thousands Except Shares)
June 30, December 31,
2005 2004
(unaudited)
-------- --------
LIABILITIES AND CAPITAL DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 1,643 $ 1,335
Current portion of lease obligation 43 45
-------- --------
Total current liabilities
1,686 1,380
Long-term liabilities:
Senior convertible notes payable, net of debt
discount of $3,053 as of June 30, 2005
and of $4,070 as of December 31, 2004 2,599 1,845
Accrued interest - senior convertible notes 492 264
Long term portion of lease obligation 58 79
-------- --------
Total liabilities 4,835 3,568
-------- --------
Preferred stock $.001 par value, authorized 10,000,000 shares
Redeemable Series A Convertible Preferred stock,
$.001 par value; issued and outstanding 1,250 shares;
including $146 of accrued dividends and net of debt
discount and deferred financing of $968 as of
June 30, 2005 and $71 of accrued dividends and net
of debt discount and deferred financing of $1,122
as of December 31, 2004 428 199
Redeemable Series B Convertible Preferred stock,
$.001 par value; issued and outstanding 3,000 shares;
including $304 of accrued dividends and net of debt
discount and deferred financing of $1,921as of
June 30, 2005 and $124 of accrued dividends and net
of debt discount and deferred financing of $2,158
as of December 31, 2004 1,383 966
Redeemable Series D Convertible Preferred stock,
$.001 par value; issued and outstanding 15,703 shares;
including $458 of accrued dividends and net of debt
discount and deferred financing of $6,992 9,169 --
Stockholders' equity/(deficit):
Common stock, $.001 par value; 100,000,000 shares
authorized; shares issued and outstanding: 8,770,000 at
June 30, 2005 and 8,251,000 at December 31, 2004 9 8
Additional paid-in capital 20,232 14,469
Accumulated deficit (23,414) (15,810)
-------- --------
Total capital deficit (3,173) (1,333)
-------- --------
$ 12, 642 $ 3,400
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