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CMGE Reports Fourth Quarter And Full Year 2012 Unaudited Financial Results

Mr. Ken Chang, CMGE's Chief Financial Officer, added, "Financially, 2012 was largely a transitional year for us as we have been investing and positioning ourselves to capture the significant growth opportunities in smartphone games. Our mobile game revenues decreased mainly because we directed significant resources towards developing our new generation of Android and iOS-based social games, and our social game pipeline contains nearly twice the number of games than it has at any time prior. Our non-core handset design business advanced in successfully transitioning from feature phone to smartphone design, but decreased significantly throughout most of 2012 because of this transition, though compared to third quarter it rebounded with growth during the fourth quarter. The migration to smartphone games from feature phone games, which historically provided a majority of our revenue, affected our overall revenue. Nevertheless, we believe that after this transitional year, we will see a significant portion of our future revenue coming from smartphone games, which will be the driver for both revenue and earnings going forward.

"In terms of expenses, we had a few large expense items during 2012. First, we expensed a one-off listing expense of RMB17.3 million (US$2.8 million), related to our successful listing on the Nasdaq Global Market on September 25, 2012, during the third quarter of 2012. Second, we incurred a RMB14.1 million (US$2.3 million) share-based compensation expense relating to share options we issued in February 2012 to incentivize management and research and development personnel and restricted share units. Third, we have incurred RMB44.4 million impairment loss related to our handset design business. Fourth, we continued to devote substantial resources towards product research and development and human resources for developing our new generation of smartphone social games, enhancements to our social game platform and our mobile handset design business, causing R&D as a percentage of revenue to increase to 18.7% during 2012, from 10.1% during 2011. We expect to see returns from these investments starting in 2013."

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