Zoo Entertainment, Inc. Reports Second Quarter FY 2009 Results

Three Month Revenues Total $7.7 Million, A 40% Increase Over Q2 2008 Six Months Revenues Total $21.6 million, A 49% Increase Over First Six Months of 2008 Balance Sheet Significantly Improved through Settlement of Seller Notes. End Quote

(1888PressRelease) August 18, 2009 - New York - Zoo Entertainment, Inc., (ZOOE.OB), a leading international publisher and developer of interactive entertainment software reported financial results for the second quarter of fiscal 2009.

Second Quarter Fiscal 2009 Financial Results:
As compared to the previous quarter and same period a year ago:
• Revenues for the quarter totaled $7.7 million, an increase of 40% from $5.5 million a year ago. Exclusive of distribution fees which we recorded in revenue, quarterly revenues were $8.5 million, a 56% increase over 2008.
• Net income totaled $2,000 or $0.0 per share, compared to a loss from continuing operations of $2.8 million or ($0.15) per share a year ago. The current period includes a gain on legal settlement of $4.3 million.
• Operating EBITDA (Earnings before Interest Taxes Depreciation and Amortization and non-cash compensation), a non-GAAP measure, totaled a loss of $2.9 million or ($0.08) per share, as compared to an operating EBITDA loss of $2.9 million or ($0.15) per share a year ago. A reconciliation of operating EBITDA to operating income is included at the end of this release.

Six Months Fiscal 2009 Financial Results:
● Revenues for the six months ended June 30, 2009 totaled a record $21.6 million, an increase of 49% from $14.5 million in the same period of 2008. Exclusive of distribution fees which we recorded in revenue, quarterly revenues were $24 million a 65% increase over 2008.
• Net loss totaled $1.4 million or ($0.04) per share compared to a loss from continuing operations of $6.3 million or ($0.35) per share in 2008. The current period includes a gain on legal settlement of $4.3 million.
• Operating EBITDA, a non-GAAP measure, totaled a loss of $2.8 million or ($0.08) per share, as compared to an operating EBITDA loss of $5.5 million or ($0.31) per share a year ago. A reconciliation of operating EBITDA to operating income is included at the end of this release.

“Our operating results for the quarter and six months are in line with our fiscal year business plan,” said Mark Seremet, CEO of Zoo Entertainment, Inc. “Revenues, operating EBITDA and net income improved dramatically as our new business model took hold. Our focus on producing high quality casual games coupled with lower development and operating costs has resulted in higher sales and lower operating costs. As we continue to expand our gross margins through higher quality products, we expect our operating results to continue to improve commensurately.

Our focus on higher margin products led us to discontinue lower margin games. We took a one-time non-cash amortization charge of approximately $400,000 in connection with such discontinued games. We more than doubled our units sold in this quarter to approximately 1.1 million units from approximately 500,000 units in the comparable period in 2008. Finally, we licensed the rights to the extensive catalog and intellectual property of Empire Interactive Europe Ltd., adding great franchises, such as Hello Kitty, Animal Paradise, and certain rights to the Big Mutha Truckers and FlatOut titles to our portfolio. As we anticipate releasing 25 new SKUs before the end of the year, we, therefore, enter the back-to-school and holiday selling seasons with a strong lineup and tremendous momentum.”

Other Q2 Highlights:
• Shifted product mix in accordance with market demands from 33% Wii™ product in 2008 to 61% Wii product in 2009.
• Launch of 2BeeGames.com a unique community led site where independent developers from around the world submit their games, competing for cash prizes and the right to have their game published by Zoo.
• Broadened international reach by opening a direct European sales office staffed by the former Empire Interactive sales team.
• Significantly strengthened Balance Sheet by eliminating over $4.3 million of notes payable and other liabilities at face value as well as obtaining the agreement of convertible bond holders, subject to certain conditions, to convert debt into equity.

About Zoo Entertainment, Inc.:
Zoo Entertainment, Inc. is focused on licensing, developing, and publishing a wide variety of casual and family-friendly video games for Wii™, Nintendo DS™, Playstation®2 system, PSP (PlayStation®Portable) system, iPhone™, and PC through their wholly owned subsidiaries, Zoo Games, Inc., Zoo Publishing, Inc. and Zoo Entertainment Europe Ltd. It sells its products primarily to retail chains, video game rental outlets, specialty retail stores, domestic and international distributors. Zoo Entertainment, Inc. has offices in New York, NY, Cincinnati, OH and Hertfordshire, England. The company was founded in 2007.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Zoo Entertainment, Inc. Forward-looking statements are statements that are not historical facts. Such forward-looking statements, based upon the current beliefs and expectations of Zoo Entertainment, Inc.'s management, are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: general economic conditions; geopolitical events and regulatory changes; requirements or changes adversely affecting the businesses in which Zoo Games is engaged; demand for the products and services that Zoo Games provides, as well as other relevant risks detailed in Zoo Entertainment, Inc.'s filings with the Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Zoo Entertainment, Inc. assumes no obligation to update the information contained in this press release.

Company Contact:
Zoo Entertainment, Inc.
Mark E. Seremet, Chief Executive Officer
Telephone: 513-278-0111
mseremet ( @ ) zoogamesinc dot com

http://www.zoogamesinc.com

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