LANGHORNE, Pa., Aug. 27, 2007 (PRIME NEWSWIRE) -- eGames, Inc. (Pink Sheets:EGAM), a developer and publisher of games for the PC and the Internet, today released financial results for its fiscal fourth quarter and year ended June 30, 2007.
Fiscal Fourth Quarter ended June 30, 2007:
Net revenues decreased by $238,000, or 23%, to $805,000 for the fiscal quarter ended June 30, 2007, compared to $1,043,000 for the same fiscal quarter a year earlier. Net loss was $496,000, or $0.04 per diluted share, for the fiscal quarter ended June 30, 2007, compared to a net loss of $504,000, or $0.04 per diluted share, for the same fiscal quarter a year ago.
Fiscal Year ended June 30, 2007:
Net revenues decreased by $1,009,000, or 21%, to $3,747,000 for the fiscal year ended June 30, 2007, compared to $4,756,000 for fiscal year 2006. Net loss was $1,511,000, or $0.13 per diluted share, for the fiscal year ended June 30, 2007, compared to a net loss of $1,039,000, or $0.09 per diluted share, for the prior fiscal year.
Fiscal Year 2007 - Summary:
The $1,009,000 decrease in the net revenues resulted from decreases of $689,000 in traditional product revenues, $187,000 in liquidation product revenues, $86,000 in licensing revenues, and $47,000 in Internet revenues.
For the fiscal year ended June 30, 2007, the Company recognized a net loss of $1,511,000 compared to the fiscal year ended June 30, 2006 in which the Company reported a net loss of $1,039,000. This $472,000 increase in the net loss for the fiscal year ended June 30, 2007 compared to the year ended June 30, 2006 was due primarily to a $557,000 decline in gross profit that resulted from the combination of lower net revenues and a 3% decline in gross profit margin. The 3% gross profit margin decrease was traceable to an increased inventory provision writing down the carrying values of various end-of-lifecycle titles and writing off the carrying values of certain consignment inventory units at retail locations that were determined to be non-recoverable.
The impact on the net loss from the gross profit decline was mitigated by a $102,000 reduction in operating expenses that resulted from the combination of:
* $697,000 in operating expense savings related mainly to the reduction-in-force that was effected earlier this fiscal year, in addition to decreased advertising, public relations and professional service expenses, and * $595,000 in increased product development costs incurred to develop the Company's own PC game titles with worldwide rights for retail and Internet distribution and licensing.
The following tables represent the Company's net revenues by distribution channel for the fiscal quarters and years ended June 30, 2007 and 2006, respectively:
Net Revenues by Distribution Channel
(rounded to the nearest thousand)
Quarters Ended
June 30,
-----------------------------------
Distribution Increase %
Channel 2007 % 2006 % (Decrease) Change
---------------------------------------------------------------------
Traditional
product
revenues $ 567,000 71% $ 689,000 66% $ (122,000) (18%)
Licensing
revenues 92,000 11% 164,000 16% (72,000) (44%)
Internet
revenues 97,000 12% 82,000 8% 15,000 18%
Liquidation
product
revenues 49,000 6% 108,000 10% (59,000) (55%)
---------------------------------------------------------------------
Totals $ 805,000 100% $ 1,043,000 100% $ (238,000) (23%)
=========== ==== =========== ==== ============ =====
Years Ended
June 30,
-----------------------------------
Distribution Increase %
Channel 2007 % 2006 % (Decrease) Change
---------------------------------------------------------------------
Traditional
product
revenues $ 2,789,000 74% $ 3,478,000 73% $ (689,000) (20%)
Licensing
revenues 572,000 15% 658,000 14% (86,000) (13%)
Internet
revenues 247,000 7% 294,000 6% (47,000) (16%)
Liquidation
product
revenues 139,000 4% 326,000 7% (187,000) (57%)
---------------------------------------------------------------------
Totals $ 3,747,000 100% $ 4,756,000 100% $(1,009,000) (21%)
=========== ==== =========== ==== ============ =====
Liquidity Condition:
The Company ended fiscal 2007 with $645,000 in cash compared to $1.5 million in cash at June 30, 2006. Additionally, the Company's net working capital (current assets minus current liabilities) decreased to $938,000 at June 30, 2007 compared to $2.4 million at June 30, 2006. Considering these trends, our net losses for fiscal 2007 and 2006, and the fact that we do not currently have access to a credit facility, the Company is evaluating its options to fund future operations if it does not become cash flow positive from operations during the upcoming quarters. The Company's funding options range from securing a credit facility from a bank to obtaining other outside financing.
Comments:
Jerry Klein, President and CEO of eGames, commented, "Fiscal 2007 proved to be another difficult year for the retail segment of the market that we serve. Two dominant factors that negatively affected our net revenues in fiscal 2007 were further declines in shelf space retailers allocated to PC games and major changes in our distribution relationships with North American retailers. While it is our intention and hope that such distribution changes will ultimately be beneficial to our business, these changes have been disruptive to our revenues this fiscal year."
"While the positive effects are not yet reflected in our financial results, during fiscal 2007 we made significant progress towards transitioning our business model which we initiated in fiscal 2006. During the first quarter of fiscal 2007 we launched our internal product development efforts under the direction of Lars Furhken-Batista, our vice president of development, in Brazil. Our first internally developed titles, Defender of the Crown(r) and Burger Island(tm), were released late in the fourth quarter of fiscal 2007. Burger Island has already achieved recognition as a top selling, award-winning casual game and is currently available on the top Internet game portals including MSN(r), Real Arcade(r), and Yahoo(r). Through its award-winning game play, Burger Island has established eGames as a developer capable of creating games that stack up with the best the industry has to offer," Klein said.
"Our other new casual titles due for release during the first quarter of fiscal 2008 include Puzzle City(tm), Pet Shop(tm), and Rubik's(r) Cube Challenge. Based on the feedback we've received from some of the industry's top game portals, these new games, when released, should highlight our development capabilities to the casual gaming community. During the remainder of fiscal 2008 we plan to release approximately ten to twelve additional new game properties."
Klein continued, "Another element of our internal development strategy is to release web playable versions of our internally developed game properties, along with utilizing our extensive library of Cinemaware(r) titles, and bring many of the Cinemaware classic mini-games to a new audience of casual gamers. Web playable games are a powerful tool for increasing brand awareness, promoting trial use of games, and generating advertising revenues from highly recognized brands. Today our development resources are focused on serving the casual game market on the Internet and the PC. During fiscal 2008 we intend to continue to fill our production pipeline, produce additional top-performing games, and explore development opportunities for today's popular handheld, mobile, and console platforms."
eGames, Inc.
Balance Sheets
(Audited)
As of As of
June 30, June 30,
ASSETS 2007 2006
------ -------------- --------------
Current assets:
Cash and
cash equivalents $ 644,524 $ 1,526,629
Accounts receivable, net 326,005 521,086
Inventory, net 596,976 973,735
Prepaid and other expenses 253,626 299,661
-------------- --------------
Total current assets 1,821,131 3,321,111
Furniture and equipment, net 33,995 49,595
Goodwill 420,000 420,000
Intangible assets 24,089 24,089
-------------- --------------
Total assets $ 2,299,215 $ 3,814,795
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 226,020 $ 343,283
Unearned revenues 42,500 - 0 -
Accrued expenses 614,277 614,668
-------------- --------------
Total current liabilities 882,797 957,951
-------------- --------------
Stockholders' equity:
Common stock 9,179,827 9,179,827
Additional paid-in capital 2,205,242 2,135,168
Accumulated deficit (9,467,234) (7,956,734)
Treasury stock (501,417) (501,417)
-------------- --------------
Total stockholders' equity 1,416,418 2,856,844
-------------- --------------
Total liabilities and
stockholders' equity $ 2,299,215 $ 3,814,795
============== ==============
eGames, Inc.
Statements of Operations
(Unaudited) (Audited)
Quarters Ended Years Ended
June 30, June 30,
------------------------- --------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
Net revenues $ 805,448 $ 1,043,224 $ 3,747,219 $ 4,756,187
Cost of
revenues 543,154 564,927 2,207,221 2,658,574
------------ ------------ ------------ ------------
Gross profit 262,294 478,297 1,539,998 2,097,613
Operating
expenses:
Product
development 355,487 185,313 1,156,433 561,621
Selling,
general and
administrative 406,823 804,946 1,917,207 2,614,723
------------ ------------ ------------ ------------
Total
operating
expenses 762,310 990,259 3,073,640 3,176,344
------------ ------------ ------------ ------------
Operating loss (500,016) (511,962) (1,533,642) (1,078,731)
Interest
income, net 4,289 8,256 23,141 40,033
------------ ------------ ------------ ------------
Loss before
income taxes (495,727) (503,706) (1,510,501) (1,038,698)
Benefit for
income taxes - 0 - - 0 - - 0 - - 0 -
------------ ------------ ------------ ------------
Net loss $ (495,727) $ (503,706) $(1,510,501) $(1,038,698)
------------ ------------ ------------ ------------
Net loss per
common share:
- Basic $ (0.04) $ (0.04) $ (0.13) $ (0.09)
============ ============ ============ ============
- Diluted $ (0.04) $ (0.04) $ (0.13) $ (0.09)
============ ============ ============ ============
Weighted
average
common
shares
outstanding
- Basic 11,724,193 11,724,193 11,724,193 11,493,464
Dilutive
effect
of common
share
equivalents - 0 - - 0 - - 0 - - 0 -
------------ ------------ ------------ ------------
Weighted
average
common
shares
outstanding
- Diluted 11,724,193 11,724,193 11,724,193 11,493,464
============ ============ ============ ============
eGames, Inc.
Statements of Cash Flows
(Audited)
Years Ended June 30,
-----------------------------
2007 2006
----------- -----------
OPERATING ACTIVITIES:
---------------------
Net loss $(1,510,501) $(1,038,698)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Stock-based compensation 70,074 79,024
Depreciation and
amortization 32,847 34,464
Changes in operating
assets and liabilities:
Accounts receivable, net 195,081 (251,918)
Inventory, net 376,759 (79,969)
Prepaid and other expenses 46,035 14,023
Accounts payable (117,263) 186,691
Unearned revenues 42,500 - 0 -
Accrued expenses (391) 205,028
----------- -----------
Net cash used in operating
activities (864,859) (851,355)
INVESTING ACTIVITIES:
--------------------
Purchase of furniture
and equipment (17,246) (34,178)
----------- -----------
Net cash used in investing
activities (17,246) (34,178)
FINANCING ACTIVITIES:
--------------------
Proceeds from credit facility - 0 - 250,000
Repayments of credit facility - 0 - (250,000)
----------- -----------
Net cash used in financing
activities - 0 - - 0 -
----------- -----------
Net decrease in cash and
cash equivalents (882,105) (885,533)
Cash and cash equivalents:
Beginning of period 1,526,629 2,412,162
----------- -----------
End of period $ 644,524 $ 1,526,629
=========== ===========
Supplemental cash flow
information: 2007 2006
---------------------- ----------- -----------
Cash paid (refunds received)
for income taxes $ - 0 - $ (31,315)
=========== ===========
eGames, Inc.
Statements of Stockholders' Equity
(Audited)
Common Stock Additional
------------------------- Paid-in
Shares Amount Capital
--------------------------------------------------------------------
Balances as of
June 30, 2005 11,138,654 $ 9,179,827 $ 1,636,144
========== =========== ===========
Common stock
warrants
issued to
shareholders of
Cinemaware, Inc. 120,000
Common stock
shares issued to
shareholders of
Cinemaware, Inc. 817,439 300,000
Common stock
options issued
to employees
and directors 79,024
--------------------------------------------------------------------
Balances as of
June 30, 2006 11,956,093 $ 9,179,827 $ 2,135,168
========== =========== ===========
Common stock
options issued
to employees
and directors 70,074
--------------------------------------------------------------------
Balances as of 11,956,093 $ 9,179,827 $ 2,205,242
June 30, 2007 ========== =========== ===========
Treasury Stock
Accumulated ---------------------- Stockholders'
Deficit Shares Amount Equity
---------------------------------------------------------------------
Balances as of
June 30, 2005 $(6,918,036) (231,900) $(501,417) $ 3,396,518
=========== ======= ========= ===========
Net loss (1,038,698) (1,038,698)
Common stock
warrants
issued to
shareholders of 120,000
Cinemaware, Inc.
Common stock
shares issued to
shareholders of 300,000
Cinemaware, Inc.
Common stock
options issued 79,024
to employees
and directors
--------------------------------------------------------------------
Balances as of
June 30, 2006 $(7,956,734) (231,900) $(501,417) $ 2,856,844
=========== ======= ========= ===========
Net loss (1,510,501) (1,510,501)
Common stock
options issued
to employees
and directors 70,074
Rounding 1 1
--------------------------------------------------------------------
Balances as of
June 30, 2007 $(9,467,234) (231,900) $(501,417) $ 1,416,418
=========== ======= ========= ===========
About eGames, Inc.
eGames, Inc., headquartered in Langhorne, Pennsylvania, develops and publishes games for the PC and the Internet which now include the eGames(tm), Cinemaware(r) and Cinemaware Marquee(tm) brands. Additional information regarding eGames, Inc. can be found at http://www.egames.com.
Accessing Our Financial Information
Shareholders now 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 2006 financial statements, as well as press releases containing quarterly financial information for fiscal 2007, 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 eGames, Inc. 2000 Cabot Boulevard, 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.egamesonline.com/egames/investors/alert.asp.
Forward-Looking Statement Safe Harbor:
This press release contains certain forward-looking statements, including without limitation, statements regarding: the possibility that the Company will need to secure outside financing to fund future operations if it does not become cash flow positive from operations during the upcoming quarters; the Company's intention that changes in its distribution relationships with North American retailers will ultimately benefit the Company's business; the new casual titles due for release during the first quarter of fiscal 2008; the Company's expectations regarding the performance of these new titles once they are released; the Company's expectation that, during the remainder of fiscal 2008, the Company plans to release approximately ten to twelve additional new game properties; the Company's plans to release web playable versions of the Company's internally developed game properties, along with utilizing its library of Cinemaware(r) titles in order to increase brand awareness, promote trial use of games, and generate advertising revenues; the Company's plans during fiscal 2008 to continue to fill our production pipeline, produce additional top-performing games, and explore development opportunities for today's popular handheld, mobile, and console platforms; as well as the risks and uncertainties discussed under the heading "Factors Affecting Future Performance" in the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 2006 as filed with the Securities and Exchange Commission.