eGames Announces Fiscal Year 2010 Financial Results


LANGHORNE, Pa., Oct. 13, 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 fiscal fourth quarter and year ended June 30, 2010.

COMMENTS:

"We are encouraged by the continued increases in our traditional product revenues due to strong sales of our physical products at the large national retail chain stores in North America but we are also challenged by the general market conditions and trends in our industry that have decreased our Internet-related revenues as well as our licensing revenues from the publishing of our products on non-PC platforms such as the Wii and Nintendo DS," stated Jerry Klein, eGames President and CEO. "We continue to forge ahead with our social game development and distribution strategy, with a particular focus on Latin America, which has slowly but steadily been growing with one game, Burger Island®, launched to date. The launch of our next two social games, Satisfashion and Coffee Central, are expected later this fall on the major Latin American social networks. We have two additional social games currently in development which are expected to be released during our 2011 fiscal year," Klein said.

"The free-to-play micro-transaction model used for social games has been substantiated as a sustainable and profitable business model while social games continue to grow in popularity. Our plan is to maintain our focus on this segment of the market and develop top-performing games," added Klein.

FINANCIAL DISCUSSION:

Fiscal Fourth Quarter ended June 30, 2010:

Net revenues decreased by $99,000, or 12%, to $740,000 for the fiscal quarter ended June 30, 2010, compared to $839,000 for the comparative fiscal quarter a year earlier. This decrease in net revenues was traceable to a decline in the Company's licensing revenues resulting from less Company owned titles being developed for licensing to third-party PC and game console publishers compared to the similar period a year ago.

Net loss was $379,000, or $0.03 per diluted share, for the fiscal quarter ended June 30, 2010, compared to a net loss of $635,000, or $0.05 per diluted share, for the same fiscal quarter a year ago. This $256,000 decrease in the quarterly net loss resulted from:

  • $282,000 in decreased operating expenses traceable to last year's quarter reflecting a $420,000 write-off of intangibles related to the Cinemaware game properties, partially offset by an increase in product development costs related to games being developed for various social networks;
  • $54,000 in decreased tax expense related to the prior year's quarter write-off of the Company's alternative minimum tax related deferred tax asset; which expense savings were partially offset by
  • $80,000 in decreased gross profit due to declines in net revenues and gross profit margin.

Fiscal Year ended June 30, 2010:

Net revenues increased by $40,000, or 1%, to $3,602,000 for the fiscal year ended June 30, 2010, compared to $3,562,000 for fiscal year 2009. This increase in net revenues was generated from increased distribution of the Company's PC games to the major North American retailers.

Net loss was $344,000, or $0.03 per diluted share, for the fiscal year ended June 30, 2010 compared to a net loss of $1,707,000, or $0.14 per diluted share, for the prior fiscal year. This $1,363,000 decrease in the net loss for the fiscal year ended June 30, 2010 resulted from:

  • $640,000 in decreased operating expense traceable to:
    -- $420,000 non-cash write-off in fiscal 2009 of intangibles related to the Cinemaware game properties, combined with a $150,000 cost recovery of the Cinemaware game properties received in cash during fiscal 2010; and
    -- $70,000 in savings across various expense categories;
  • $535,000 in decreased product development expense traceable to the reduction in overall games developed in fiscal 2010 (five games in development in fiscal 2010 versus twelve games in fiscal 2009), along with a decrease in the average cost per game in fiscal 2010;
  • $101,000 improvement in income tax expense due to changes in IRS rules governing net operating loss carry-forwards that became effective during fiscal 2010, in addition to fiscal 2009's non-cash write-off of the Company's alternative minimum tax related deferred tax asset;
  • $88,000 in increased gross profit traceable to a 1.8% improvement in gross profit margin; and
  • $1,000 in decreased interest income.

Liquidity Condition Update:

At September 30, 2010, the Company had approximately $300,000 in cash, compared to $627,000 at June 30, 2010 and $344,000 at June 30, 2009. Considering the Company's net losses for fiscal years 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 and years ended June 30, 2010 and 2009, respectively:

Net Revenues by Distribution Channel
(rounded to the nearest thousand)
               
    Quarters Ended June 30,    
  Distribution Channel    
 2010
 
%
 
 2009
 
%
Increase
(Decrease)
%
Change
Traditional product revenues   $ 467,000 63% $ 402,000 48% $ 65,000 16%
Licensing revenues   75,000 10% 177,000 21% (102,000) (58%)
Internet revenues   190,000 26% 238,000 28% (48,000) (20%)
Liquidation product revenues   8,000 1% 22,000 3% (14,000) (64%)
Totals   $ 740,000 100% $ 839,000 100% ($ 99,000) (12%)

                                                    

  Years Ended June 30,  
  Distribution Channel    
 2010
 
%
 
 2009
 
%
Increase
(Decrease)
%
Change
Traditional product revenues   $ 2,171,000 60% $ 1,850,000 52% $ 321,000 17%
Licensing revenues   497,000 14% 553,000 16% (56,000) (10%)
Internet revenues   849,000 24% 1,041,000 29% (192,000) (18%)
Liquidation product revenues   85,000 2% 118,000 3% (33,000) (28%)
Totals   $ 3,602,000 100% $ 3,562,000 100% $  40,000 1%
                 
eGames, Inc.
Balance Sheets
(Audited)
     
   As of  As of
  June 30, June 30,
ASSETS  2010  2009
Current assets:    
 Cash and cash equivalents $  626,748 $ 344,432
 Accounts receivable, net 310,931 279,827
 Inventory, net 595,000 551,552
 Prepaid and other expenses 99,233 88,017
 Total current assets 1,631,912 1,263,828
     
Furniture and equipment, net 5,866 18,478
Intangibles 24,089 24,089
 Total assets $ 1,661,867 $ 1,306,395
     
     
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)    
Current liabilities:    
 Accounts payable $ 591,868 $ 557,449
 Unearned revenues 597,266 630,542
 Accrued expenses 409,043 359,993
 Total current liabilities 1,598,177 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 3,254,781 2,562,142
 Accumulated deficit  (12,522,549)  (12,135,189)
 Treasury stock (552,937) (552,937)
 Total stockholders' equity (deficit) 63,690 (241,589)
 Total liabilities and stockholders' equity (deficit) $ 1,661,867 $ 1,306,395


eGames, Inc.
Statements of Operations
         
  (Unaudited)
Quarters Ended
June 30,
(Audited)
Years Ended
June 30,
         
   2010  2009  2010  2009
Net revenues $ 740,137 $ 839,185 $ 3,602,172 $ 3,561,607
         
Cost of revenues 324,809 343,757 1,460,945 1,508,921
         
Gross profit 415,328 495,428 2,141,227 2,052,686
         
Operating expenses:        
 Product development 341,732 239,287 930,882 1,465,633
 Selling, general and administrative  452,999  417,667 1,751,103 1,821,253
 Intangibles impairment (recovery)   - 0 -  420,000  (150,000)  420,000
         
 Total operating expenses 794,731 1,076,954 2,531,985 3,706,886
         
Operating loss (379,403) (581,526) (390,758) (1,654,200)
         
Interest income, net  234  99    339  1,596
         
Loss before income taxes (379,169) (581,427) (390,419) (1,652,604)
         
Income tax expense (benefit)  - 0 -  54,126  (46,811)  54,126
         
Net loss ($ 379,169) ($ 635,553) ($ 343,608) ($ 1,706,730)
         
         
Net loss per common share:         
 - Basic ($ 0.03) ($ 0.05) ($ 0.03) ($ 0.14)
 - Diluted ($ 0.03) ($ 0.05) ($ 0.03) ($ 0.14)
         
         
Weighted average common shares outstanding – Basic 13,549,636 12,022,224 12,669,436 11,973,451
         
Dilutive effect of common share equivalents  - 0 -    - 0 -    - 0 -    - 0 -  
         
Weighted average common shares outstanding - Diluted  13,549,636 12,022,224 12,669,436 11,973,451

                           

eGames, Inc.
Statements of Cash Flows
(Audited)
     
  Years Ended June 30,
   2010  2009
OPERATING ACTIVITIES:    
 Net loss ($ 343,608) ($ 1,706,730)
 Adjustments to reconcile net loss to net cash    
  used in operating activities:    
 Stock-based compensation 107,616 104,959
 Depreciation and amortization 14,669 23,914
 Intangibles impairment - 0 - 420,000
 Alternative minimum tax - 0 - 54,126
 Changes in operating assets and liabilities:    
     
 Accounts receivable, net (31,104) 187,679
 Inventory, net (43,448) 39,049
 Prepaid and other expenses 32,775 131,076
 Accounts payable 34,419 1,221
 Unearned revenues (33,276) 382,088
 Accrued expenses 49,050 (90,153)
Net cash used in operating activities (212,907) (452,771)
     
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 from common stock private placement 497,280 - 0 -
 Net payments from issuance of preferred stock - 0 - (29,558)
 Dividend payments to preferred stock shareholders - 0 - (32,584)
Net cash provided by (used in) financing activities 497,280 (62,142)
     
Net increase (decrease) in cash and cash equivalents 282,316 (529,756)
     
Cash and cash equivalents:    
 Beginning of period 344,432 874,188
 End of period $ 626,748 $ 344,432

                           

eGames, Inc.
 
Statements of Stockholders' Equity (Deficit)
(Audited)
                   
   Convertible
Preferred Stock
Common Stock     Treasury Stock  
  Shares Amount Shares Amount Additional
Paid-in Capital
Accumulated
Deficit
Shares Amount Stockholders'
Equity (Deficit)
                   
Balances at June 30, 2008 875,000 $ 704,568 12,235,093 $ 9,179,827 $ 2,462,406 ($ 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       88,798
                   
Dividends declared on preferred stock     95,947   10,938 (43,752)     (32,814)
                   
Rounding           1     1
                   
Balances at June 30, 2009 875,000 $ 704,568 12,331,040 $ 9,179,827 $ 2,562,142 ($ 12,135,189) (277,900) ($ 552,937) ($ 241,589)
                   
Net loss           (343,608)     (343,608)
                   
Common stock options issued to employees and directors         81,940       81,940
                   
Dividends declared on preferred stock     210,533   43,752 (43,752)     - 0 -
                   
Common stock shares issued in connection with consulting agreement     225,000   19,391       19,391
                   
Common stock shares and warrant issued in connection with private placement financing     1,000,000   497,280       497,280
                   
Common stock shares issued in connection with consulting agreement     75,000   50,276       50,276
                   
Balances at June 30, 2010 875,000 $ 704,568 13,841,573 $ 9,179,827 $ 3,254,781 ($ 12,522,549) (277,900) ($ 552,937) $ 63,690

                                                  

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.

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 2009 annual report, as well as fiscal 2010 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.

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: increases in our traditional product revenues due to strong sales of our physical products at large national retail chain stores in North America; general market conditions and trends in our industry that have decreased Internet-related revenues as well as licensing revenues; our continued focus on our social game development and distribution strategy, with a particular focus on Latin America; the expected launch of our next two social games, Satisfashion and Coffee Central, later this fall on the major Latin American social networks; the expected release of two additional social games currently in development during our 2011 fiscal year; the continued growth and sustainability of the free-to-play micro-transaction model used for social games; the continued growth in popularity of social games; our plan to maintain our focus on this segment of the market and develop top-performing games; and our continued evaluation of options 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, 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, 2009 as posted on the Company's website and on www.pinksheets.com.



            

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