LANGHORNE, Pa., May 12, 2010 (GLOBE NEWSWIRE) -- eGames, Inc. (Pink Sheets:EGAM), a developer and publisher of casual games for leading social networks, the PC, game consoles and the Internet, today released financial results for its three and nine months ended March 31, 2010.
Comments:
"The solid performance of our titles at North American retail stores led by Mystery Legends®: Sleepy Hollow, Hidden Relics, 4 Elements™, and Adventures of Robinson Crusoe, combined with an improved gross profit and reduced operating expenses, are factors that we continued to build upon during the third quarter of the fiscal year," said Jerry Klein, President and CEO. "While we continued to reduce development expenses during the third quarter compared to the year ago period, we have now been focusing our development efforts towards games aimed at the fastest-growing segment of the video game market, the social network market," Klein said.
"We recently launched our first social game application, Burger Island®, on Sonico, the Latin American social network that helps people organize their lives online, and on the Orkut® online community, the leading social network in Brazil. In the coming weeks we also expect to launch Burger Island on Latin America-targeted MySpace and hi5 websites, both leading Latin American social networks. Burger Island was developed in conjunction with our partner, Brazil-based Techfront Studios. Burger Island is the first of five social network games we plan to release in calendar 2010 and we are excited about the possibilities these new markets represent for eGames. Burger Island is based on the award-winning downloadable casual game of the same name. Our recent retail success and private placement completed in March has enabled us to fund the expansion of our games into the social network markets, and we are hopeful the combination of a strong retail presence and an aggressive online strategy will strengthen our outlook for the future," Klein stated.
FINANCIAL DISCUSSION:
Three Months ended March 31, 2010:
Net revenues increased by $252,000, or 29%, to $1,124,000 for the quarter ended March 31, 2010, compared to $872,000 for the comparative quarter a year earlier. The $252,000 increase in net revenues resulted from increases in North American traditional product revenues, product liquidation revenues and licensing revenues, which revenue increases were partially offset by a decrease in Internet revenues.
Net income was $20,000, or nil per diluted share, for the quarter ended March 31, 2010, compared to a net loss of $217,000, or $0.02 per diluted share, for the comparative quarter a year earlier. This $237,000 improvement in profitability for the quarter ended March 31, 2010 resulted from:
- a $130,000 increase in gross profit due to a 29% improvement in net revenues, partially offset by a 2% decline in gross profit margin traceable to increased low-margin product liquidation shipments, and
- a $107,000 decrease in operating expenses related to:
- an $84,000 reduction in product development expenses; and
- a $23,000 decrease in other operating expenses.
Nine Months ended March 31, 2010:
Net revenues increased by $140,000, or 5%, to $2,862,000 for the nine months ended March 31, 2010, compared to $2,722,000 for the similar nine-month period a year earlier. This $140,000 increase in net revenues resulted from increases in North American traditional product revenues and licensing revenues, which revenue increases were partially offset by decreases in Internet revenues and product liquidation revenues.
Net income was $36,000, or nil per diluted share, for the nine months ended March 31, 2010, compared to a net loss of $1,071,000, or $0.09 per diluted share, for the nine months ended March 31, 2009. This $1,107,000 improvement in profitability for the nine months ended March 31, 2010 was due to:
- a $169,000 increase in gross profit due to a 3% improvement in gross profit margin on higher net revenues,
- an $893,000 decrease in operating expenses related to:
- $637,000 of reductions in product development expenses;
- $150,000 in expense recovery associated with previously written down game properties; and
- $106,000 in other operating expense savings;
- a $47,000 federal income tax benefit, and
- a $2,000 reduction in interest income.
The following tables represent eGames' net revenues by distribution channel for the three and nine months ended March 31, 2010 and 2009, respectively:
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Net Revenues by Distribution Channel (rounded to the nearest thousand) |
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Three Months Ended March 31, |
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| Increase | % | |||||
| Distribution Channel | 2010 | % | 2009 | % | (Decrease) | Change |
| Traditional product revenues | $759,000 | 68% | $453,000 | 52% | $306,000 | 68% |
| Licensing revenues | 112,000 | 10% | 79,000 | 9% | 33,000 | 42% |
| Internet revenues | 201,000 | 18% | 335,000 | 38% | (134,000) | (40%) |
| Product liquidation revenues | 52,000 | 4% | 5,000 | 1% | 47,000 | n/a |
| Totals | $1,124,000 | 100% | $872,000 | 100% | $252,000 | 29% |
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Nine Months Ended March 31, |
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| Increase | % | |||||
| Distribution Channel | 2010 | % | 2009 | % | (Decrease) | Change |
| Traditional product revenues | $1,705,000 | 60% | $1,448,000 | 53% | $257,000 | 18% |
| Licensing revenues | 421,000 | 15% | 375,000 | 14% | 46,000 | 12% |
| Internet revenues | 659,000 | 23% | 803,000 | 30% | (144,000) | (18%) |
| Product liquidation revenues | 77,000 | 2% | 96,000 | 3% | (19,000) | (20%) |
| Totals | $2,862,000 | 100% | $2,722,000 | 100% | $140,000 | 5% |
Liquidity Condition:
At March 31, 2010, eGames had $859,000 in cash compared to $344,000 in cash at June 30, 2009. Additionally, at March 31, 2010 our net working capital (current assets minus current liabilities) was $341,000 compared to a net working capital deficit of $284,000 at June 30, 2009.
The Company completed a private placement on March 19, 2010 in which eGames received a total of $500,000 in gross cash proceeds in exchange for 1,000,000 shares of restricted eGames Common Stock and a three-year Warrant to purchase 1,000,000 shares of eGames Common Stock at an exercise price of $0.80 per share. The Company is using the net cash proceeds from the private placement to fund product development of new game titles for social networks and for general working capital requirements.
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eGames, Inc. Balance Sheets |
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| At | At | |
| March 31, | June 30, | |
| ASSETS | 2010 | 2009 |
| Current assets: | ||
| Cash and cash equivalents | $ 859,268 | $ 344,432 |
| Accounts receivable, net | 395,450 | 279,827 |
| Inventory, net | 564,275 | 551,552 |
| Prepaid and other expenses | 70,196 | 88,017 |
| Total current assets | 1,889,189 | 1,263,828 |
| Furniture and equipment, net | 9,882 | 18,478 |
| Intangibles | 24,089 | 24,089 |
| Total assets | $ 1,923,160 | $ 1,306,395 |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||
| Current liabilities: | ||
| Accounts payable | $ 589,075 | $ 557,449 |
| Unearned revenues | 585,287 | 630,542 |
| Accrued expenses | 373,525 | 359,993 |
| Total current liabilities | 1,547,887 | 1,547,984 |
| Stockholders' equity (deficit): | ||
| Convertible preferred stock | 704,568 | 704,568 |
| Common stock | 9,179,827 | 9,179,827 |
| Additional paid-in capital | 3,176,258 | 2,562,142 |
| Accumulated deficit | (12,132,443) | (12,135,189) |
| Treasury stock, as cost | (552,937) | (552,937) |
| Total stockholders' equity (deficit) | 375,273 | (241,589) |
| Total liabilities and stockholders' equity (deficit) | $ 1,923,160 | $ 1,306,395 |
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eGames, Inc. Statements of Operations |
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Three Months Ended March 31, |
Nine Months Ended March 31, |
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| 2010 | 2009 | 2010 | 2009 | |
| Net revenues | $ 1,123,636 | $ 871,629 | $ 2,862,035 | $ 2,722,422 |
| Cost of revenues | 448,229 | 326,464 | 1,136,137 | 1,165,164 |
| Gross profit | 675,407 | 545,165 | 1,725,898 | 1,557,258 |
| Operating expenses: | ||||
| Product development | 213,789 | 297,929 | 589,150 | 1,226,346 |
| Selling, general and administrative | 441,205 | 464,448 | 1,298,103 | 1,403,586 |
| Intangibles impairment (recovery) | - 0 - | - 0 - | (150,000) | - 0 - |
| Total operating expenses | 654,994 | 762,377 | 1,737,253 | 2,629,932 |
| Operating income (loss) | 20,413 | (217,212) | (11,355) | (1,072,674) |
| Interest income, net | 67 | 105 | 104 | 1,497 |
| Income (loss) before income taxes | 20,480 | (217,107) | (11,251) | (1,071,177) |
| Income tax benefit | - 0 - | - 0 - | 46,811 | - 0 - |
| Net income (loss) | $ 20,480 | ($ 217,107) | $ 35,560 | ($ 1,071,177) |
| Net income (loss) per common share: | ||||
| - Basic | $ 0.00 | ($ 0.02) | $ 0.00 | ($ 0.09) |
| - Diluted | $ 0.00 | ($ 0.02) | $ 0.00 | ($ 0.09) |
| Weighted average common shares outstanding – Basic | 12,575,933 | 11,957,193 | 12,364,550 | 11,957,193 |
| Dilutive effect of common share equivalents | 83,327 | - 0 - | - 0 - | - 0 - |
| Weighted average common shares outstanding - Diluted | 12,659,260 | 11,957,193 | 12,364,550 | 11,957,193 |
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eGames, Inc. Statements of Cash Flows |
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Nine Months Ended March 31, |
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| 2010 | 2009 | |
| OPERATING ACTIVITIES: | ||
| Net income (loss) | $ 35,560 | ($ 1,071,177) |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
| Stock-based compensation | 81,302 | 84,322 |
| Depreciation and amortization | 10,652 | 17,692 |
| Changes in operating assets and liabilities: | ||
| Accounts receivable, net | (115,623) | 163,522 |
| Inventory, net | (12,723) | 10,627 |
| Prepaid and other expenses | 17,822 | 94,528 |
| Accounts payable | 31,626 | 152,890 |
| Unearned revenues | (45,255) | 340,301 |
| Accrued expenses | 13,532 | (74,248) |
| Net cash provided by (used in) operating activities | 16,893 | (281,543) |
| INVESTING ACTIVITIES: | ||
| Purchase of furniture and equipment | (2,057) | (14,843) |
| Net cash used in investing activities | (2,057) | (14,843) |
| FINANCING ACTIVITIES: | ||
| Net proceeds (disbursements) from issuance of preferred stock | - 0 - | (29,558) |
| Dividend payments to preferred stockholders | - 0 - | (32,584) |
| Net proceeds from common stock private placement | 500,000 | - 0 - |
| Net cash provided by (used in) financing activities | 500,000 | (62,142) |
| Net increase (decrease) in cash and cash equivalents | 514,836 | (358,528) |
| Cash and cash equivalents: | ||
| Beginning of period | 344,432 | 874,188 |
| End of period | $ 859,268 | $ 515,660 |
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eGames, Inc. Statements of Stockholders' Equity (Deficit) |
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Convertible Preferred Stock |
Common Stock |
Additional Paid-in |
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| Shares | Amount | Shares | Amount | Capital | |
| Balances at June 30, 2008 | 875,000 | $ 704,568 | 12,235,093 | $ 9,179,827 | $ 2,462,406 |
| Net loss | |||||
| Vesting of 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 |
| Net income | |||||
| Vesting of Common stock options issued to employees and directors | 61,911 | ||||
| Dividends declared on preferred stock | 196,559 | 32,814 | |||
| Shares issued to investor relations service provider | 225,000 | 19,391 | |||
| Common stock shares and warrant issued in connection with private placement | 1,000,000 | 500,000 | |||
| Balances at March 31, 2010 | 875,000 | $ 704,568 | 13,752,599 | $ 9,179,827 | $ 3,176,258 |
| Accumulated | Treasury Stock | Stockholders' | ||
| Deficit | Shares | Amount | Equity (Deficit) | |
| Balances at June 30, 2008 | ($ 10,384,708) | (277,900) | ($ 552,937) | $ 1,409,156 |
| Net loss | (1,706,730) | (1,706,730) | ||
| Vesting of 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) |
| Net income | 35,560 | 35,560 | ||
| Vesting of Common stock options issued to employees and directors | 61,911 | |||
| Dividends declared on preferred stock | (32,814) | - 0 - | ||
| Shares issued to investor relations service provider | 19,391 | |||
| Common stock shares and warrant issued in connection with private placement | 500,000 | |||
| Balances at March 31, 2010 | ($ 12,132,443) | (277,900) | ($ 552,937) | $ 375,273 |
About eGames, Inc.
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.
Orkut is a registered trademark of Google, Inc. iPhone is a trademark of Apple Inc., registered in the U.S. and other countries. Nintendo DS and Wii are registered trademarks of Nintendo. Mystery Legends is a registered trademark of pixelStorm entertainment studios Inc. 4 Elements is a trademark of Playrix Entertainment. All other trademarks are the property of their respective owners.
The eGames Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7123
Forward-Looking Statement Safe Harbor
This press release contains certain forward-looking statements, including without limitation, statements regarding: the focus of our development efforts on games aimed at the social network market; our intention to use the net cash proceeds from the private placement to fund product development of future game titles for social networks and for general working capital requirements; our plan to launch Burger Island on Latin America-targeted MySpace and hi5 in the coming weeks; and our hope that the combination of a strong retail presence and an aggressive online strategy will strengthen our outlook for the future.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 consumer 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, 2009 as posted on the Company's website and on www.pinksheets.com.