LANGHORNE, Pa., May 20, 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 three and nine months ended March 31, 2009.
COMMENTS:
"We continue to focus our product development efforts and spending on our most promising titles, while expanding our product offerings on www.egames.com, and entering into licensing deals with distributors and Internet portals around the world to expand our product distribution," commented Jerry Klein, President and CEO of eGames. "The imminent release of Puzzle City for the Nintendo DS(tm), which follows the recent release of Burger Island for the Wii(tm) and iPhone, are evidence of our continuing efforts to expand our successful PC game franchises onto other platforms. The expected launch of our newest title, Dracula Files, in early fall is our latest offering that targets the popular hidden object genre, and we anticipate expanding this title onto other platforms as well," he continued.
"Our plan is to maintain our focus in order to ride out the current economic and retail conditions, while positioning ourselves for growth when these conditions improve," Klein said. "The fact that we are debt free, and a relatively lean organization, gives us an opportunity to capitalize on future growth opportunities in the video game sector."
FINANCIAL DISCUSSION:
Three Months ended March 31, 2009:
Net revenues decreased by $212,000, or 20%, to $872,000 for the quarter ended March 31, 2009, compared to $1,084,000 for the year ago quarter. The $212,000 decrease in net revenues resulted from decreases in traditional product revenues of $177,000, licensing revenues of $43,000 and liquidation product revenues of $51,000. These revenue decreases were related to declines in consumer demand for PC games at many of the major retailers as well as to worldwide economic conditions. Our net revenues benefited from a $59,000 increase in Internet revenues due to increased consumer installations of the eGames toolbar (available on all eGames published PC games) and greater PC game sales on www.egames.com.
Net loss was $217,000, or $0.02 per diluted share, for the quarter ended March 31, 2009, compared to a net loss of $165,000, or $0.01 per diluted share, for the comparable quarter a year earlier. This $52,000 increase in the net loss for the quarter ended March 31, 2009 was comprised of an $84,000 decrease in gross profit (related to lower net revenues and a 4.4% improvement in the gross profit margin), along with a $33,000 decrease in operating expenses.
The 4.4% gross profit margin improvement related to a:
* 9.0% decrease in product cost, as a percentage of net revenues,
due to a reduction in liquidation product revenues (carrying a
high product cost percentage) and an increase in Internet
revenues with no associated product costs, which was partially
offset by a
* 4.6% increase in other cost of revenues, as a percentage of net
revenues, attributable to a higher inventory provision for raw
materials determined to no longer have value.
The $33,000 decrease in operating expenses related to a $96,000 decrease in product development expense, due to our more focused product development plan, partially offset by a $63,000 increase in other operating expenses related primarily to a bad debt provision for a North American licensee who filed for bankruptcy during this reporting period.
Nine Months ended March 31, 2009:
Net revenues decreased by $259,000, or 9%, to $2,722,000 for the nine months ended March 31, 2009, compared to $2,981,000 for the similar nine-month period a year earlier. This $259,000 decrease in net revenues resulted from net revenue declines of $421,000 in traditional product revenues and $12,000 in licensing revenues, which were partially offset by net revenue increases of $167,000 in Internet revenues and $7,000 in liquidation product revenues.
Net loss was $1,071,000, or $0.09 per diluted share, for the nine months ended March 31, 2009, compared to a net loss of $436,000, or $0.04 per diluted share, for the nine months ended March 31, 2008. This $635,000 increase in the net loss resulted from a $275,000 decrease in gross profit and a $360,000 increase in operating expenses, primarily related to product development costs during the nine months ended March 31, 2009.
The following tables represent eGames' net revenues by distribution channel for the three and nine months ended March 31, 2009 and 2008, respectively:
Net Revenues by Distribution Channel
------------------------------------
(rounded to the nearest thousand)
----------------------------------
Three Months Ended
March 31,
----------------------------------
Distribution Increase %
Channel 2009 % 2008 % (Decrease) Change
---------------------------------------------------------------------
Traditional
product revenues $ 453,000 52% $ 630,000 58% ($177,000) (28%)
Internet revenues 335,000 38% 276,000 26% 59,000 21%
Licensing revenues 79,000 9% 122,000 11% (43,000) (35%)
Liquidation
product revenues 5,000 1% 56,000 5% (51,000) (91%)
---------------------------------------------------------------------
Totals $ 872,000 100% $1,084,000 100% ($212,000) (20%)
========== ==== ========== ==== ========= ====
Nine Months Ended
March 31,
----------------------------------
Distribution Increase %
Channel 2009 % 2008 % (Decrease) Change
---------------------------------------------------------------------
Traditional
product
revenues $1,448,000 53% $1,869,000 63% ($421,000) (23%)
Internet revenues 803,000 30% 636,000 21% 167,000 26%
Licensing revenues 375,000 14% 387,000 13% (12,000) (3%)
Liquidation
product revenues 96,000 3% 89,000 3% 7,000 8%
---------------------------------------------------------------------
Totals $2,722,000 100% $2,981,000 100% ($259,000) (9%)
========== ==== ========== ==== ========= ====
Liquidity Condition:
At March 31, 2009, eGames had $516,000 in cash compared to $874,000 in cash at June 30, 2008. At March 31, 2009, we had a working capital deficit (current assets minus current liabilities) of $95,000 compared to positive working capital of $938,000 at June 30, 2008. Considering our net losses for the most recent quarters and for fiscal years 2008, 2007 and 2006, and the fact that we do not currently have access to a credit facility, we are continuing to evaluate our options to fund future operations if eGames does not become cash flow positive from operations in the future.
eGames, Inc.
Balance Sheets
As of As of
March 31, June 30,
ASSETS 2009 2008
------ ------------ ------------
Current assets:
Cash and cash equivalents $ 515,660 $ 874,188
Accounts receivable, net 303,984 467,506
Inventory, net 579,974 590,601
Prepaid and other expenses 173,691 284,380
------------ ------------
Total current assets 1,573,309 2,216,675
Furniture and equipment, net 24,700 27,548
Intangible assets 444,089 444,089
------------ ------------
Total assets $ 2,042,098 $ 2,688,312
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 704,118 $ 591,494
Unearned revenues 588,755 248,454
Accrued expenses 375,898 439,208
------------ ------------
Total current liabilities 1,668,771 1,279,156
------------ ------------
Stockholders' equity:
Convertible preferred stock 704,568 704,568
Common stock 9,179,827 9,179,827
Additional paid-in capital 2,530,567 2,462,406
Accumulated deficit (11,488,698) (10,384,708)
Treasury stock, at cost (552,937) (552,937)
------------ ------------
Total stockholders' equity 373,327 1,409,156
------------ ------------
Total liabilities and
stockholders' equity $ 2,042,098 $ 2,688,312
============ ============
eGames, Inc.
Statements of Operations
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Net revenues $ 871,629 $ 1,083,795 $ 2,722,422 $ 2,980,862
Cost of revenues 326,464 454,579 1,165,164 1,149,189
----------- ----------- ----------- -----------
Gross profit 545,165 629,216 1,557,258 1,831,673
Operating expenses:
Product
development 297,929 394,494 1,226,346 998,097
Selling, general
and
administrative 464,448 400,991 1,403,586 1,271,743
----------- ----------- ----------- -----------
Total operating
expenses 762,377 795,485 2,629,932 2,269,840
----------- ----------- ----------- -----------
Operating loss (217,212) (166,269) (1,072,674) (438,167)
Interest income,
net 105 1,233 1,497 2,555
----------- ----------- ----------- -----------
Loss before income
taxes (217,107) (165,036) (1,071,177) (435,612)
Provision for
income taxes - 0 - - 0 - - 0 - - 0 -
----------- ----------- ----------- -----------
Net loss ($217,107) ($165,036) ($1,071,177) ($435,612)
=========== =========== =========== ===========
Net loss per
common share:
- Basic ($0.02) ($0.01) ($0.09) ($0.04)
=========== =========== =========== ===========
- Diluted ($0.02) ($0.01) ($0.09) ($0.04)
=========== =========== =========== ===========
Weighted average
common shares
outstanding
- Basic 11,957,193 11,833,193 11,957,193 11,793,143
Dilutive effect of
common share
equivalents - 0 - - 0 - - 0 - - 0 -
----------- ----------- ----------- -----------
Weighted average
common shares
outstanding
- Diluted 11,957,193 11,833,193 11,957,193 11,793,143
=========== =========== =========== ===========
eGames, Inc.
Statements of Cash Flows
Nine Months Ended
March 31,
------------------------
2009 2008
----------- -----------
OPERATING ACTIVITIES:
---------------------
Net loss ($1,071,177) ($435,612)
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock-based compensation 84,322 70,208
Depreciation and amortization 17,692 15,338
Changes in operating assets
and liabilities:
Accounts receivable, net 163,522 (73,958)
Inventory, net 10,627 34,088
Prepaid and other expenses 94,528 (30,813)
Accounts payable 152,890 93,082
Unearned revenues 340,301 49,188
Accrued expenses (74,248) (197,651)
----------- -----------
Net cash used in operating activities (281,543) (476,130)
INVESTING ACTIVITIES:
---------------------
Purchase of furniture and equipment (14,843) (10,640)
----------- -----------
Net cash used in investing activities (14,843) (10,640)
FINANCING ACTIVITIES:
---------------------
Net proceeds (disbursements) from
issuance of preferred stock (29,558) 778,436
Dividend payments to preferred stockholders (32,584) - 0 -
Proceeds from stock option exercises - 0 - 7,230
----------- -----------
Net cash (used in) provided
by financing activities (62,142) 785,666
----------- -----------
Net increase (decrease) in cash
and cash equivalents (358,528) 298,896
Cash and cash equivalents:
Beginning of period 874,188 644,524
----------- -----------
End of period $ 515,660 $ 943,420
=========== ===========
eGames, Inc.
Statements of Stockholders' Equity
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
=========== =========== =========== =========== ===========
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
---------------------------------------------------------------------
Balances at
June 30,
2008 875,000 $704,568 12,235,093 $9,179,827 $2,462,406
=========== =========== =========== =========== ===========
Common
stock
options
issued to
employees
and
directors 68,161
---------------------------------------------------------------------
Balances at
March 31,
2009 875,000 $704,568 12,235,093 $9,179,827 $2,530,567
=========== =========== =========== =========== ===========
Treasury Stock
Accumulated ----------------------- Stockholders'
Deficit Shares Amount Equity
---------------------------------------------------------------------
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 (1,071,177) (1,071,177)
Common stock options
issued to employees
and directors 68,161
Dividends declared on
preferred stock (32,814) (32,814)
Rounding 1 1
---------------------------------------------------------------------
Balances at
March 31, 2009 ($11,488,698) (277,900) ($552,937) $373,327
=========== =========== =========== ===========
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 our financial and other information: by going to the Investor Relations page of the eGames website at www.egames.com, where shareholders can access our annual reports for fiscal 2008 and 2007, as well as press releases containing quarterly financial information for fiscal 2009, 2008 and 2007; by going to the Pink Sheets website at www.pinksheets.com and typing in our symbol "EGAM"; or by requesting a paper copy of financial information by contacting us 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: Our product development plan of focusing spending on our most promising titles, expanding our product offerings on www.egames.com, and entering into deals to expand our product distribution; the imminent release of Puzzle City for the Nintendo DS; our continuing efforts to expand our game franchises onto other platforms; the expected launch of our newest PC game title, Dracula Files, in early fall; our expectation that we will expand this title onto other platforms; our plan to maintain our focus in order to ride out the current economic and retail conditions, and positioning ourselves for growth when these conditions improve; and our continuing efforts to evaluate our options to fund future operations if eGames does not become cash flow positive from operations in the future. eGames cautions readers that the risks and uncertainties that may affect our future results and performance include, but are not limited to: continued overall economic problems in the United States and around the world that negatively affect consumer spending and retail markets; the potential failure of business partners with which we do business, including distributors, retailers, licensees and publishers; delays in the development and release 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 our Annual Report for the fiscal year ended June 30, 2008 as posted on the Company's website and on www.pinksheets.com.
Wii and Nintendo DS are trademarks of Nintendo.