LANGHORNE, Pa., Sept. 16, 2009 (GLOBE NEWSWIRE) -- eGames, Inc. (Pink Sheets:EGAM), a developer and publisher of games for the PC, game consoles and the Internet, today released financial results for its fiscal fourth quarter and year ended June 30, 2009.
COMMENTS:
Commenting on fiscal 2009 results, Jerry Klein, President and CEO of eGames said, "While we were able to achieve many of our product development and distribution goals during this fiscal year, our sales results have been negatively affected by economic conditions, and specifically less retail store traffic, decreased consumer spending and decreased sales in the videogame sector overall. While we were able to minimize our net loss during the current quarter by reducing our product development expenses by $261,000 compared to the year ago quarter and focusing our resources on our strongest product development projects, this strategy has not offset the difficulty we have experienced in collecting accounts receivable or obtaining working capital financing to fund continued development and expansion of our proprietary product line."
"We remain hopeful that the success of the titles we expect to release shortly, including (The Dracula Files, 4 Elements, G.H.O.S.T. Chronicles, First Class Flurry and Mystery Legends: Sleepy Hollow) will drive revenues in the coming fiscal quarters, but our challenge remains getting through the holiday selling season with enough working capital to fund the production and distribution of inventory to customers," Klein said. "With video-game industry analysts predicting a positive turnaround in videogame sales during the next 12 months, our primary goal at this time is to achieve positive cash flow and obtain working capital funding to enable us to take advantage of that potential turnaround while riding out the current difficult economic conditions and retail environment."
FINANCIAL DISCUSSION:
Fiscal Fourth Quarter ended June 30, 2009:
Net revenues decreased by $136,000, or 14%, to $839,000 for the fiscal quarter ended June 30, 2009, compared to $975,000 for the comparative fiscal quarter a year earlier.
Net loss was $636,000, or $0.05 per diluted share, for the fiscal quarter ended June 30, 2009, compared to a net loss of $467,000, or $0.04 per diluted share, for the same fiscal quarter a year ago. Included in the net loss for the quarter ended June 30, 2009 were two non-cash expenses:
* $420,000 in operating expense traceable to the write-off of intangibles related to the Cinemaware game properties due to our assessment of impairment; and * $54,000 tax expense related to the write-off of the Company's alternative minimum tax related deferred tax asset.
Fiscal Year ended June 30, 2009:
Net revenues decreased by $394,000, or 10%, to $3,562,000 for the fiscal year ended June 30, 2009, compared to $3,956,000 for fiscal year 2008. The $394,000 decrease in net revenues resulted from a decline in traditional product revenues of $622,000 (traceable to a reduction in retail distribution and lower consumer demand for the Company's PC game titles) and a reduction in liquidation product revenues of $27,000.
Partially offsetting these revenue decreases were increases in Internet revenues of $180,000 (related to greater toolbar and egames.com revenues) and in licensing revenues of $75,000 (related to proprietary titles developed for the Nintendo DS and Wii game consoles).
Net loss was $1,707,000, or $0.14 per diluted share, for the fiscal year ended June 30, 2009, compared to a net loss of $902,000, or $0.08 per diluted share, for the prior fiscal year. This $805,000 increase in the net loss for the fiscal year ended June 30, 2009 resulted from three main factors:
* $420,000 in operating expense traceable to the non-cash write-off of intangibles related to the Cinemaware game properties due to our assessment of impairment; * $335,000 decrease in gross profit traceable to lower net revenues along with a 2.8% decline in gross profit margin (due to higher contractual royalty rates for 3rd party developed PC game titles sold during the year); and * $54,000 tax expense related to the non-cash write-off of the Company's alternative minimum tax related deferred tax asset.
Liquidity Condition Update:
At August 31, 2009, the Company had approximately $170,000 in cash, compared to $344,000 at June 30, 2009 and $874,000 at June 30, 2008. Considering the Company's net losses for the most recent quarters in fiscal 2009 and for fiscal years 2008, 2007 and 2006, and the fact that it does not currently have access to a credit facility, the Company continues to evaluate its options to fund future operations.
The following tables represent the Company's net revenues by distribution channel for the fiscal quarters and years ended June 30, 2009 and 2008, respectively:
Net Revenues by Distribution Channel
------------------------------------
(rounded to the nearest thousand)
---------------------------------
Quarters Ended
June 30,
------------------------------------
Distribution Increase %
Channel 2009 % 2008 % (Decrease) Change
---------------------------------------------------------------------
Traditional
product
revenues $ 402,000 48% $ 603,000 62% ($201,000) (33%)
Licensing
revenues 177,000 21% 91,000 9% 86,000 95%
Internet
revenues 238,000 28% 225,000 23% 13,000 6%
Liquidation
product
revenues 22,000 3% 56,000 6% (34,000) (61%)
--------------------------------------------------------------------
Totals $ 839,000 100% $ 975,000 100% ($136,000) (14%)
========== === ========== === ======== ===
Years Ended
June 30,
------------------------------------
Distribution Increase %
Channel 2009 % 2008 % (Decrease) Change
---------------------------------------------------------------------
Traditional
product
revenues $1,850,000 52% $2,472,000 62% ($622,000) (25%)
Licensing
revenues 553,000 16% 478,000 12% 75,000 16%
Internet
revenues 1,041,000 29% 861,000 22% 180,000 21%
Liquidation
product
revenues 118,000 3% 145,000 4% (27,000) (19%)
--------------------------------------------------------------------
Totals $3,562,000 100% $3,956,000 100% ($394,000) (10%)
========== === ========== === ======== ===
eGames, Inc.
Balance Sheets
(Audited)
As of As of
June 30, June 30,
2009 2008
------------ ------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 344,432 $ 874,188
Accounts receivable, net 279,827 467,506
Inventory, net 551,552 590,601
Prepaid and other expenses 88,017 284,380
------------ ------------
Total current assets 1,263,828 2,216,675
Furniture and equipment, net 18,478 27,548
Intangibles 24,089 444,089
------------ ------------
Total assets $ 1,306,395 $ 2,688,312
============ ============
LIABILITIES AND
---------------
STOCKHOLDERS' EQUITY (DEFICIT)
------------------------------
Current liabilities:
Accounts payable $ 557,449 $ 591,494
Unearned revenues 630,542 248,454
Accrued expenses 359,993 439,208
------------ ------------
Total current liabilities 1,547,984 1,279,156
------------ ------------
Stockholders' equity (deficit):
Convertible preferred stock 704,568 704,568
Common stock 9,179,827 9,179,827
Additional paid-in capital 2,562,142 2,462,406
Accumulated deficit (12,135,189) (10,384,708)
Treasury stock (552,937) (552,937)
------------ ------------
Total stockholders' equity
(deficit) (241,589) 1,409,156
------------ ------------
Total liabilities and
stockholders' equity (deficit) $ 1,306,395 $ 2,688,312
============ ============
eGames, Inc.
Statements of Operations
(Unaudited) (Audited)
Quarters Ended Years Ended
June 30, June 30,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Net revenues $ 839,185 $ 975,342 $ 3,561,607 $ 3,956,204
Cost of
revenues 343,757 418,504 1,508,921 1,567,693
----------- ----------- ----------- -----------
Gross profit 495,428 556,838 2,052,686 2,388,511
Operating
expenses:
Product
development 239,287 499,930 1,465,633 1,498,027
Selling,
general
and
administrative 417,667 525,117 1,821,253 1,796,861
Intangibles
impairment 420,000 - 0 - 420,000 - 0 -
----------- ----------- ----------- -----------
Total
operating
expenses 1,076,954 1,025,047 3,706,886 3,294,888
----------- ----------- ----------- -----------
Operating loss (581,526) (468,209) (1,654,200) (906,377)
Interest income,
net 99 1,571 1,596 4,127
----------- ----------- ----------- -----------
Loss before
income taxes (581,427) (466,638) (1,652,604) (902,250)
Income tax
expense 54,126 - 0 - 54,126 - 0 -
----------- ----------- ----------- -----------
Net loss ($635,553) ($466,638) ($1,706,730) ($902,250)
=========== =========== =========== ===========
Net loss per
common share:
- Basic ($0.05) ($0.04) ($0.14) ($0.08)
=========== =========== =========== ===========
- Diluted ($0.05) ($0.04) ($0.14) ($0.08)
=========== =========== =========== ===========
Weighted average
common shares
outstanding
- Basic 12,022,224 11,906,526 11,973,451 11,821,489
Dilutive effect
of common
share
equivalents - 0 - - 0 - - 0 - - 0 -
----------- ----------- ----------- -----------
Weighted average
common shares
outstanding
- Diluted 12,022,224 11,906,526 11,973,451 11,821,489
=========== =========== =========== ===========
eGames, Inc.
Statements of Cash Flows
(Audited)
Years Ended June 30,
--------------------------
2009 2008
----------- -----------
OPERATING ACTIVITIES:
---------------------
Net loss ($1,706,730) ($ 902,250)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Stock-based compensation 104,959 102,216
Depreciation and amortization 23,914 21,524
Intangibles impairment 420,000 - 0 -
Alternative minimum tax 54,126 - 0 -
Changes in operating assets and
liabilities:
Accounts receivable, net 187,679 (141,501)
Inventory, net 39,049 6,375
Prepaid and other expenses 131,076 (14,593)
Accounts payable 1,221 325,207
Unearned revenues 382,088 205,954
Accrued expenses (90,153) (175,069)
----------- -----------
Net cash used in operating activities (452,771) (572,137)
INVESTING ACTIVITIES:
---------------------
Purchase of furniture and equipment (14,843) (15,077)
----------- -----------
Net cash used in investing activities (14,843) (15,077)
FINANCING ACTIVITIES:
---------------------
Net proceeds from exercise of
stock options - 0 - 7,230
Net proceeds (payments) from
issuance of preferred stock (29,558) 814,163
Dividend payments to preferred
stock shareholders (32,584) (4,515)
----------- -----------
Net cash provided by (used in)
financing activities (62,142) 816,878
----------- -----------
Net increase (decrease) in cash and
cash equivalents (529,756) 229,664
Cash and cash equivalents:
Beginning of period 874,188 644,524
----------- -----------
End of period $ 344,432 $ 874,188
=========== ===========
eGames, Inc.
Statements of Stockholders' Equity (Deficit)
(Audited)
Convertible
Preferred Stock Common Stock Additional
--------------------------------------------- Paid-in
Shares Amount Shares Amount Capital
---------------------------------------------------------------------
Balances at
June 30,
2007 -0- $-0- 11,956,093 $9,179,827 $2,205,242
=== === ========== ========== ==========
Net loss
Shares
issued
and retired
in
connection
with stock
option
exercises 95,000 58,750
Common stock
options
issued
to
employees
and
directors 79,585
Shares
issued in
connection
with
consulting
agreement 60,000 38,792
Shares
issued in
connection
with
preferred
stock
offering 875,000 875,000
Costs
incurred
and common
stock
shares and
warrant
issued in
connection
with
preferred
stock
offering (170,432) 124,000 80,037
Dividends
declared on
preferred
stock
Rounding
---------------------------------------------------------------------
Balances at
June 30,
2008 875,000 $ 704,568 12,235,093 $ 9,179,827 $ 2,462,406
======= =========== ========== =========== ===========
Net loss
Common stock
options
issued
to employees
and
directors 88,798
Dividends
declared on
preferred
stock 95,947 10,938
Rounding
---------------------------------------------------------------------
Balances at
June 30,
2009 875,000 $ 704,568 12,331,040 $ 9,179,827 $ 2,562,142
======= =========== ========== =========== ===========
Treasury Stock Stockholders'
Accumulated -------------------- Equity
Deficit Shares Amount (Deficit)
---------------------------------------------------------------------
Balances at
June 30,
2007 ($9,467,234) (231,900) ($ 501,417) $ 1,416,418
=========== ======= ========== ===========
Net loss (902,250) (902,250)
Shares
issued
and retired
in
connection
with stock
option
exercises (46,000) (51,520) 7,230
Common stock
options
issued
to employees
and
directors 79,585
Shares
issued in
connection
with
consulting
agreement 38,792
Shares
issued in
connection
with
preferred
stock
offering 875,000
Costs
incurred
and common
stock shares
and warrant
issued in
connection
with
preferred
stock
offering (90,395)
Dividends
declared on
preferred
stock (15,223) (15,223)
Rounding (1) (1)
---------------------------------------------------------------------
Balances at
June 30,
2008 ($10,384,708) (277,900) ($552,937) $ 1,409,156
=========== ======= ========= ===========
Net loss (1,706,730) (1,706,730)
Common stock
options
issued
to employees
and
directors 88,798
Dividends
declared on
preferred
stock (43,752) (32,814)
Rounding 1 1
---------------------------------------------------------------------
Balances at
June 30,
2009 ($12,135,189) (277,900) ($552,937) ($241,589)
=========== ======= ========= =========
About eGames, Inc.
eGames, Inc., headquartered in Langhorne, Pennsylvania, develops and publishes games for the PC, game consoles and the Internet which include the eGames(TM), Cinemaware(R) and Cinemaware Marquee(R) brands. Additional information regarding eGames, Inc. can be found at http://www.egames.com.
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 2008 annual report, as well as fiscal 2009 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 eGames, 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.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 Company's expectations that titles to be released shortly will drive revenues in the coming fiscal quarters; obtaining sufficient working capital to fund the production and distribution of inventory to customers during the holiday selling season; the Company's goal to achieve positive cash flow and obtain working capital funding to enable the Company to take advantage of a potential turnaround in the videogame industry; and the Company's ability to obtain financing to fund future operations.
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: the inability to obtain working capital financing to fund future operations; 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; the failure of new titles to sell well or achieve retail placement; our inability to enter into and maintain commercially successful publishing, licensing and distribution relationships; and an increase in competition; 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, 2008 as posted on the Company's website and on www.pinksheets.com.