LANGHORNE, Pa., Jan. 5, 2012 (GLOBE NEWSWIRE) -- Entertainment Games, Inc. (OTC Markets: EGAM), a developer and publisher of casual games for leading social networks, the PC, game consoles and the Internet, today released financial results for the fiscal first quarter ended September 30, 2011.
COMMENTS:
"Our first quarter results continue to reflect the challenges in the traditional videogame segment of the market," commented Jerry Klein, CEO of Entertainment Games. "Overall our revenues were down 37% this year compared to the same quarter last year, reflecting the continually shifting consumer behavior away from the traditional distribution channels for videogames to the digital distribution of videogames. This shift continues to underscore the importance of last year's fourth quarter acquisition of Heyday Games and the dramatic change underway at our Company as a result. Our first quarter loss evidenced our commitment to spending to support this important acquisition," added Klein.
"On November 8, 2011 we launched our new social gaming platform, Retro World, with the original episode of The OWL Files in beta test. The OWL Files – Monkey Business, was released on December 16, 2011 along with the Retro Boulevard Game Arcade, also in beta test mode," stated Klein.
FINANCIAL DISCUSSION:
Fiscal First Quarter ended September 30, 2011:
Net revenues decreased by $321,000, or 37%, to $538,000 for the fiscal quarter ended September 30, 2011, compared to $859,000 for the comparative fiscal quarter a year earlier. This decrease in net revenues was traceable to decreases in all of our distribution channels.
Net loss was $1,385,000, or $0.08 per diluted share, for the fiscal quarter ended September 30, 2011, compared to a net loss of $350,000, or $0.03 per diluted share, for the year ago quarter. This $1,035,000 increase in the quarterly net loss resulted from:
- $883,000 in increased operating expenses (traceable to increased product development expense relating to our new social network game – Retro World);
- $128,000 decline in gross profit due to lower net revenues; and
- $24,000 in increased interest expense.
Liquidity Condition Update:
At December 15, 2011, the Company had approximately $85,000 in cash, compared to $328,000 at June 30, 2011. Considering the Company's net losses for fiscal years 2011, 2010, 2009, 2008, 2007 and 2006, and the fact that it does not currently have access to a credit facility, the Company is continuing to evaluate its options to fund future operations.
The following tables represent the Company's net revenues by distribution channel for the fiscal quarters ended September 30, 2011 and 2010, respectively:
| Net Revenues by Distribution Channel | ||||||
| (rounded to the nearest thousand) | ||||||
| Quarters Ended | ||||||
| September 30, | ||||||
| Increase | % | |||||
| Distribution Channel | 2011 | % | 2010 | % | (Decrease) | Change |
| Traditional product revenues | $333,000 | 62% | $503,000 | 59% | ($170,000) | (34%) |
| Licensing revenues | 66,000 | 12% | 98,000 | 11% | (32,000) | (33%) |
| Internet revenues | 137,000 | 26% | 204,000 | 24% | (67,000) | (33%) |
| Product liquidation revenues | 2,000 | -0-% | 54,000 | 6% | (52,000) | (96%) |
| Totals | $538,000 | 100% | $859,000 | 100% | ($321,000) | (37%) |
| Entertainment Games, Inc. | ||
| Balance Sheets | ||
| As of | As of | |
| ASSETS | September 30, 2011 | September 30, 2010 |
| Current assets: | ||
| Cash | $ 35,913 | $ 301,318 |
| Accounts receivable, net | 118,477 | 292,171 |
| Financing receivable | 878,750 | - 0 - |
| Inventory, net | 457,674 | 616,634 |
| Prepaid and other current assets | 121,383 | 94,031 |
| Total current assets | 1,612,197 | 1,304,154 |
| Furniture and equipment, net | 8,951 | 4,399 |
| Intangibles | 1,497,346 | 24,089 |
| Goodwill | 680,000 | - 0 - |
| Total assets | $ 3,798,494 | $ 1,332,642 |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||
| Current liabilities: | ||
| Note payable, current portion | $ 138,549 | $ - 0 - |
| Accounts payable | 892,814 | 737,579 |
| Unearned revenues | 398,228 | 550,474 |
| Accrued expenses | 492,920 | 312,118 |
| Total current liabilities | 1,922,511 | 1,600,171 |
| Note payable, long-term portion | 230,915 | - 0 - |
| Total liabilities | 2,153,426 | 1,600,171 |
| Stockholders' equity (deficit) | ||
| Preferred stock, no par value (10,000,000 authorized; 875,000 shares of Convertible Preferred issued and outstanding) | 704,568 | 704,568 |
| Common stock, no par value (40,000,000 shares authorized; 20,530,428 and 13,857,099 issued respectively and 20,252,528 and 13,579,199 outstanding respectively) | 14,476,006 | 10,518,661 |
| Additional paid-in capital | 2,136,651 | 1,945,698 |
| Accumulated deficit | (15,119,220) | (12,883,519) |
| Treasury stock, 277,900 shares, at cost | (552,937) | (552,937) |
| Total stockholders' equity (deficit) | 1,645,068 | (267,529) |
| Total liabilities and stockholders' equity (deficit) | $ 3,798,494 | $ 1,332,642 |
| Entertainment Games, Inc. | ||
| Statements of Operations | ||
| Quarters Ended September 30, | ||
| 2011 | 2010 | |
| Net revenues | $ 538,456 | $ 858,576 |
| Cost of revenues | 302,146 | 494,244 |
| Gross profit | 236,310 | 364,332 |
| Operating expenses: | ||
| Product development | 566,209 | 330,664 |
| Selling, general and administrative | 1,031,132 | 383,795 |
| Total operating expenses | 1,597,341 | 714,459 |
| Operating loss | (1,361,031) | (350,127) |
| Interest income (expense), net | (23,613) | 95 |
| Loss before income taxes | (1,384,644) | (350,032) |
| Income tax expense (benefit) | - 0 - | - 0 - |
| Net loss | ($ 1,384,644) | ($ 350,032) |
| Net loss per common share: | ||
| - Basic | ($ 0.08) | ($ 0.03) |
| - Diluted | ($ 0.08) | ($ 0.03) |
| Weighted average common shares outstanding - Diluted | 18,400,326 | 13,575,025 |
| Entertainment Games, Inc. | ||
| Statements of Cash Flows | ||
| Three Months Ended September 30, | ||
| 2011 | 2010 | |
| OPERATING ACTIVITIES: | ||
| Net loss | ($ 1,384,644) | ($ 350,032) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Stock-based compensation | 140,240 | 25,098 |
| Loss on retirement of accounts payable through issuance of common stock | 170,174 | - 0 - |
| Bad debt expense (recovery) | - 0 - | (23,270) |
| Provision for product returns and price markdowns | 29,360 | 35,443 |
| Provision for inventory obsolescence | 85,068 | 95,479 |
| Depreciation and amortization | 40,190 | 1,467 |
| Changes in operating assets and liabilities: | ||
| Accounts receivable, net | (4,440) | (16,683) |
| Inventory, net | (72,871) | (117,113) |
| Prepaid and other current assets | (2,692) | (1,083) |
| Accounts payable | 308,753 | 145,711 |
| Unearned revenues | (34,353) | (46,792) |
| Accrued expenses | 115,441 | (73,655) |
| Net cash used in operating activities | (609,774) | (325,430) |
| INVESTING ACTIVITIES: | ||
| Purchase of internet domain | (10,757) | - 0 - |
| Purchase of furniture and equipment | (876) | - 0 - |
| Net cash used in investing activities | (11,633) | - 0 - |
| FINANCING ACTIVITIES: | ||
| Net proceeds from common stock private placement | 350,000 | - 0 - |
| Repayments of note payable | (21,047) | - 0 - |
| Net cash provided by financing activities | 328,953 | - 0 - |
| Net decrease in cash and cash equivalents | (292,454) | (325,430) |
| Cash: | ||
| Beginning of period | 328,367 | 626,748 |
| End of period | $ 35,913 | $ 301,318 |
| Supplemental cash flow information: | ||
| Cash paid for interest | $ 23,470 | $ - 0 - |
| Summary of Noncash Investing and Financing Activities: | ||
| Preferred dividends paid through issuance of common stock shares | $ 10,938 | $ 10,938 |
| Retirement of accounts payable through issuance and utilization of common stock shares | $ 257,576 | $ - 0 - |
| Financing receivable | $ 878,750 | $ - 0 - |
| Entertainment Games, Inc. | |||||||||
| Statements of Stockholders' Equity (Deficit) | |||||||||
|
Convertible Preferred Stock |
Common Stock |
Additional Paid-in |
Accumulated | Treasury Stock | Stockholders' | ||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Shares | Amount | Equity (Deficit) | |
| Balances at June 30, 2010 | 875,000 | $ 704,568 | 13,841,573 | $ 10,507,723 | $ 1,926,885 | ($ 12,522,549) | (277,900) | ($ 552,937) | $ 63,690 |
| Net loss | (1,157,337) | (1,157,337) | |||||||
|
Stock-based compensation for common stock options issued to employees and directors |
75,252 | 75,252 | |||||||
| Dividends declared on preferred stock | 128,365 | 43,752 | (43,752) | - 0 - | |||||
|
Common stock shares issued upon warrant exercise |
35,321 | - 0 - | - 0 - | ||||||
| Common stock warrant issued | 88,746 | 88,746 | |||||||
| Common stock shares issued to acquired company | 3,706,387 | 2,180,000 | 2,180,000 | ||||||
| Balances at June 30, 2011 | 875,000 | $ 704,568 | 17,711,646 | $ 12,731,475 | $ 2,090,883 | ($ 13,723,638) | (277,900) | ($ 552,937) | $ 1,250,351 |
| Net loss | (1,384,644) | (1,384,644) | |||||||
|
Stock-based compensation for common stock options issued to employees and directors |
45,768 | 45,768 | |||||||
| Dividends declared on preferred stock | 28,597 | 10,938 | (10,938) | - 0 - | |||||
| Common stock shares issued in private placement | 700,000 | 350,000 | 350,000 | ||||||
|
Common stock shares issued in retirement of accounts payable |
1,950,000 | 1,306,500 | 1,306,500 | ||||||
|
Common stock shares issued in connection with consulting agreement |
100,000 | 57,000 | 57,000 | ||||||
|
Common stock shares issued in connection with consulting agreement |
40,185 | 20,093 | 20,093 | ||||||
| Balances at September 30, 2011 | 875,000 | $ 704,568 | 20,530,428 | $ 14,476,006 | $ 2,136,651 | ($ 15,119,220) | (277,900) | ($ 552,937) | $ 1,645,068 |
About Entertainment Games, Inc.
Entertainment Games, Inc. (formerly eGames, Inc), headquartered in Langhorne, Pennsylvania, develops and publishes casual games for leading Social Networks, the PC, Nintendo DS and Wii, iPhone, and the Internet including The Dracula Files, Burger Island®, Burger Island 2: The Missing Ingredient, Satisfashion®, Purrfect Pet Shop®, and more. Additional information regarding eGames, Inc. can be found at http://www.egames.com/">http://www.egames.com.
The Entertainment Games, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7123
Accessing Our Financial Information
Shareholders have three ways to access the Company's financial and other information: by going to the Investor Relations page of the Company's website at www.egames.com, where the Company's fiscal 2010 annual report, as well as fiscal 2011 press releases containing quarterly financial information, can be accessed; by going to the Pink Sheets website at www.pinksheets.com and typing in the Company's symbol "EGAM"; or by requesting a paper copy of financial information by contacting the Company by mail at Entertainment Games, Inc. 2000 Cabot Boulevard West, Suite 110, Langhorne, Pennsylvania 19047 to the attention of the Chief Financial Officer. Shareholders can also be placed on a list to receive press releases, as they are issued, via email by going to the following link on the eGames investor relations webpage: http://www.egames.com/investors/contact-us/email-alerts/.
Forward-Looking Statement Safe Harbor
This press release contains certain forward-looking statements, including without limitation, statements regarding: shifting consumer behavior away from the traditional distribution channels for videogames to the digital distribution of videogames; the importance of our acquisition of Heyday Games and the dramatic change underway as a result; and our goal to release at least two new interactive adventure stories, in addition to several new platform features, through February 2012, with monthly story and game features coming after that. The Company cautions readers that the risks and uncertainties that may affect the Company's future results and performance include, but are not limited to, delays in the development of future titles; inability to fund continued development of future titles; technical and other issues that may delay or halt development of future titles; competition in the social gaming market; the failure of new titles to sell well or be used by consumers on social networks; our inability to enter into and maintain commercially successful publishing, licensing and distribution relationships; and an increase in worldwide competition in the overall videogame market; as well as the risks and uncertainties discussed under the heading "Factors Affecting Future Performance" in the Company's Annual Report for the fiscal year ended June 30, 2010 as posted on the Company's website and on www.pinksheets.com.