SouthPeak Interactive Corporation Reports Results for Fiscal Year Ended June 30, 2009

SouthPeak Interactive Achieves Record Sales of $47.4 Million in 2009

MIDLOTHIAN, Va.--(BUSINESS WIRE)--SouthPeak Interactive Corporation (OTCBB:SOPK), one of the fastest growing videogame publishers, today announced financial results for the fiscal year ended June 30, 2009.

SouthPeak reported net revenues of $47.4 million in the fiscal year 2009, as compared to $40.2 million for the fiscal year 2008. Net loss in fiscal year 2009 was $12.1 million compared to net income of $1.5 million in fiscal year 2008. SouthPeak’s fiscal year 2009 figures include: i) approximately $3.9 million of non-cash charges relating to write-downs on software values and sequel right values to certain Gamecock titles (see Supplemental Information for further detail); ii) approximately $740,000 of stock-based compensation expense; iii) $1.6 million of expenses relating to the Gamecock acquisition and our reverse acquisition with Global Services; and, iv) approximately $4.0 million in marketing expenses for products being shipped in future periods and significant investment in the creation of the brand for the “My Baby” franchise. Additionally, SouthPeak incurred increased expenses related to its first year as a public company.

During the past year SouthPeak invested heavily in its infrastructure by developing and strengthening its core systems, processes and hiring of key personnel. This allowed the company to expand in both domestic markets and around the world. In this period SouthPeak established international operations in Leicester, England, which has proved to be a successful marketing venue as the company continues to penetrate European and Asian territories with its products.

These investments in SouthPeak’s infrastructure also allowed the company, for the first time, to launch several global titles on multiple next-gen platforms simultaneously. Along with these expanded capabilities, system-wide flexibility has increased, allowing SouthPeak to reposition its product pipeline and release schedule in order to take advantage of recent changes in consumer demand and preferences of videogame products.

“This past year SouthPeak achieved several impressive metrics and made investments in its groundwork and foundation for our further sales growth,” said Melanie Mroz, CEO of SouthPeak. “Although 2009 proved to be a challenging year, SouthPeak’s overall game sales increased by over one million units compared to fiscal year 2008 as we continue to take advantage of strong consumer demand for games on portable devices. In fiscal year 2009 we invested and expensed approximately $4 million in marketing programs creating strong brand recognition for several of our IPs, of which we expect to see increasing returns in the future. As we move forward, our fiscal year 2010 lineup is anchored by product extensions of several of our key brands, including a sequel to our highly successful title: Two Worlds II, which will be released on both the Xbox 360® and PLAYSTATION®3, in addition to My Baby First Steps on the Nintendo DS™ and Wii™, and a highly anticipated sequel to Dementium on the Nintendo DS™.”

Melanie Mroz added, “As a further example of SouthPeak’s continued innovation, we will soon be launching our first Nintendo DSi™ product, entitled Sushi Go Round (Nintendo DSi™, Wii™ and iPhone™), which takes advantage of the DSi’s interactive camera. This title has strong brand-name recognition, having been downloaded over 60 million times through the online game portal Miniclip.com.”

Fiscal Year 2009 Highlights

• Increased revenue to $47.4 million, an 18% increase from $40.2 million in fiscal year 2008.
   
• New titles released in fiscal year 2009, such as My Baby (Nintendo DS), X-Blades (PC, Xbox 360, PS3) Legendary (PC, Xbox 360, PS3), and Big Bang Mini (Nintendo DS) highlighted the year.
   
• Strong demand for My Baby (Nintendo DS) makes it one of the best-selling titles on the Nintendo DS. Highly anticipated product extensions of this title expected to hit stores this holiday season.
   
• Videogame units sold were roughly 2.4 million units in fiscal year 2009, an increase of 1.2 million units compared to fiscal year 2008.
   
• At June 30, 2009, SouthPeak had approximately $12.5 million invested in game development and intellectual property for future title releases.
   
• SouthPeak currently has over 30 intellectual properties under development for all platforms including the PLAYSTATION®3, PSP® (PlayStation®Portable), Xbox 360®, Wii™, Nintendo DS™, PC and iPhone™.
   
• Additional products for fiscal year 2010 include: Section 8 (Xbox 360, PC), Raven Squad (Xbox 360, PC), Fast Food Panic (Nintendo DS, Wii), Sled Shred (Wii), Crime Scene (Nintendo DS) and Montessori Music (Nintendo DS).

Terry Phillips, Chairman of SouthPeak, added, “Our significant investment in infrastructure has increased our ability to launch product in a more timely manner, in addition to giving SouthPeak the ability to release titles on multiple next-gen platforms simultaneously, and around the globe. Our enhanced infrastructure has in turn enhanced our reputation amongst developers and presented us with exciting product opportunities at costs that allow us to achieve attractive returns on investment.”

Conference Call

SouthPeak will hold a conference call to discuss its 2009 financial results, latest game sales and prospects for the coming fiscal year at 4:30 p.m. Eastern, on Wednesday, October 14, 2009.

The teleconference can be accessed by calling 866-543-6407 and entering participant passcode # 93933849. Participants outside of the U.S. and Canada can join by calling 617-213-8898. Please dial in 5 minutes prior to the beginning of the call.

A webcast of the call will be available on SouthPeak’s Investor Relations portal www.trilogy-capital.com/autoir/sopk_autoir.html as well as the Company’s website at www.southpeakgames.com.

Supplemental Information

The approximate amount of non-cash charges presented is comprised of write-downs for advance royalty impairment ($2,017,294), write-downs for sequel game title impairment ($1,142,000), amortization related to development software ($335,394), and depreciation and amortization of non-competes and other items ($378,153). Investors are advised to carefully review and consider this information as well as the financial results that are disclosed in SouthPeak’s Securities and Exchange Commission filings, including its Form 10-K for the fiscal year ended June 30, 2009, filed with the Securities and Exchange Commission on October 13, 2009.

About SouthPeak Interactive

SouthPeak Interactive Corporation develops and publishes interactive entertainment software for all current hardware platforms including: PLAYSTATION®3 computer entertainment system, PSP® (PlayStation® Portable) system, PlayStation®2 computer entertainment system, Xbox 360® videogame and entertainment system, Wii™, Nintendo DS™ and PC. SouthPeak's games cover all major genres including action/adventure, role playing, racing, puzzle strategy, fighting and combat. SouthPeak's products are sold in retail outlets in North America, Europe, Australia and Asia. SouthPeak is headquartered in Midlothian, Virginia, and has offices in Grapevine, Texas and Leicester, England.

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For additional information, please visit SouthPeak’s corporate website: www.southpeakgames.com 

Forward-Looking Statements

This release contains “forward-looking” statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These are statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “expects,” “projects,” “anticipates,” “estimates,” “believes,” “intends,” “plans,” “should,” “seeks,” and similar expressions. This press release contains forward-looking statements relating to, among other things, SouthPeak’s expectations and assumptions concerning future financial performance. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual future results to differ materially from those projected or contemplated in the forward-looking statements. Forward-looking statements may be significantly impacted by certain risks and uncertainties described in SouthPeak’s filings with the Securities and Exchange Commission.

The risks and uncertainties referred to above include, but are not limited to, risks associated with SouthPeak’s potential inability to compete with larger businesses in its industry, the limitations of SouthPeak’s business model, SouthPeak’s potential inability to anticipate and adapt to changing technology, the possibility that SouthPeak may not be able to enter into publishing arrangements with some developers, SouthPeak’s dependence on vendors to meet its commitments to suppliers, SouthPeak’s dependence on hardware manufactures to publish new videogames, SouthPeak’s potential inability to recuperate the up-front license fees paid to console manufacturers, SouthPeak’s dependence on a limited number of customers, SouthPeak’s potential dependence on the success of a few videogames, SouthPeak’s dependence on developers to deliver their videogames on time, the potential of litigation, interference with SouthPeak’s business from the adoption of governmental regulations; and the inability to obtain additional financing to grow its business.