LANGHORNE, Pa., Nov. 24, 2008 (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 first quarter ended September 30, 2008.
COMMENTS:
Commenting on the fiscal 2009 first quarter results, Jerry Klein, President and CEO of eGames said, "While we are disappointed to report another quarterly loss as we begin fiscal 2009, the loss is because we have continued to increase our investment spending in the development of new titles to expand our portfolio of games for the PC and other popular gaming platforms and spending on continuing improvements to www.egames.com. So far, our revenues have not increased sufficiently to yield enough profit to offset our increased spending. Soon we will be releasing Puzzle City(r) and Burger Island(r) on the very popular Nintendo DS platform, which will be our first titles released on a platform other than the PC or the Internet. Burger Island on the Nintendo Wii will follow soon after Christmas along with a variety of Burger Island mini-games for the Apple iPhone. During December, we hope to release Satisfashion(tm) as an exclusive on the major Internet gaming portal 'www.bigfishgames.com' and then Burger Island 2:The Missing Ingredient on all the leading Internet game portals, including www.egames.com, soon after the release of Satisfashion. We have high expectations for all of our new products and especially for both Satisfashion and Burger Island 2:The Missing Ingredient."
"Casual gamers today are seeking games with compelling storylines, memorable and popular characters, appealing and pleasing visual graphics and sounds culminating in great game play. Consistently meeting those requirements is a challenge but one that we believe we are increasingly capable of meeting and even exceeding. We realize we must demonstrate our capability to create and publish great top selling games in fiscal 2009 so we can seek and obtain more customers, sell more products, increase revenues, and achieve profitability and positive cash flows. Development of our proprietary titles, like those mentioned above and others yet to come, will hopefully create the opportunities to increase our net revenues, and ultimately enable us to achieve profitability and positive cash flows. Those remain our challenges and expectations in fiscal 2009. Despite the current economic climate we remain optimistic about our plans for the remainder of the year," Klein said.
FINANCIAL DISCUSSION:
Fiscal First Quarter ended September 30, 2008 -- Financial Summary:
Net revenues increased by $183,000, or 26.1%, to $884,000 for the fiscal quarter ended September 30, 2008, compared to $701,000 for the comparative fiscal quarter a year ago. The $183,000 increase in net revenues resulted from a $95,000 increase in licensing revenues (related to international and North American distribution of our internally developed proprietary titles) combined with a $93,000 increase in Internet revenues traceable to greater revenues generated by installations of our eGames toolbar (available on all eGames published game titles) and increased sales of various popular casual games offered on our website www.egames.com.
Net loss was $460,000, or $0.04 per diluted share, for the fiscal quarter ended September 30, 2008, compared to a net loss of $328,000, or $0.03 per diluted share, for the comparative fiscal quarter a year earlier. This $132,000 increase in our net loss for the quarter ended September 30, 2008 was due to a $197,000 increase in operating expenses, which was partially offset by a $65,000 increase in gross profit generated from the combination of higher net revenues and a 5.1% lower gross profit margin.
The $197,000 increase in operating expenses related to: * $145,000 in increased product development costs incurred to develop additional company owned proprietary titles for the PC, Nintendo DS and Wii game platforms with worldwide rights for retail and Internet distribution as well as international licensing opportunities; and a * $52,000 increase in other operating expenses such as consulting and salary related costs for our sales and legal functions.
The 5.1% gross profit margin decline related to a 9.4% increase in royalty costs, as a percentage of net revenues, attributable to higher contractual and effective royalty rates on the game titles sold during the current quarter. Partially offsetting this increase in the royalty cost percentage was a decrease in our product cost, as a percentage of net revenues, due to a greater proportion of our revenues coming from licensing and internet revenues that have no associated product costs.
The following table represents eGames' net revenues by distribution channel for the fiscal quarters ended September 30, 2008 and 2007, respectively:
Net Revenues by Distribution Channel
------------------------------------
(rounded to the nearest thousand)
---------------------------------
Quarters Ended
September 30,
------------------------------
Increase %
Distribution Channel 2008 % 2007 % (Decrease) Change
---------------------------------------------------------------------
Traditional product
revenues $471,000 53% $496,000 71% ($ 25,000) (5%)
Licensing revenues 154,000 18% 59,000 8% 95,000 161%
Internet revenues 224,000 25% 131,000 19% 93,000 71%
Liquidation product
revenues 35,000 4% 15,000 2% 20,000 133%
---------------------------------------------------------------------
Totals $884,000 100% $701,000 100% $183,000 26%
======== ==== ======== ==== ========= ===
Liquidity Condition:
At September 30, 2008, eGames had $591,000 in cash compared to $874,000 in cash at June 30, 2008. Additionally, our net working capital (current assets minus current liabilities) decreased to $482,000 compared to $938,000 at June 30, 2008. Considering our net losses for the most recent quarter 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 during the upcoming quarters.
eGames, Inc.
Balance Sheets
As of As of
September 30, June 30,
ASSETS 2008 2008
------ ------------ ------------
Current assets:
Cash and cash equivalents $ 590,569 $ 874,188
Accounts receivable, net 400,431 467,506
Inventory, net 603,740 590,601
Prepaid and other expenses 221,038 284,380
------------ ------------
Total current assets 1,815,778 2,216,675
Furniture and equipment, net 36,941 27,548
Intangible assets 444,089 444,089
------------ ------------
Total assets $ 2,296,808 $ 2,688,312
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 566,318 $ 591,494
Unearned revenues 319,788 248,454
Accrued expenses 447,957 439,208
------------ ------------
Total current liabilities 1,334,063 1,279,156
------------ ------------
Stockholders' equity:
Convertible preferred stock 704,568 704,568
Common stock 9,179,827 9,179,827
Additional paid-in capital 2,486,793 2,462,406
Accumulated deficit (10,855,506) (10,384,708)
Treasury stock, as cost (552,937) (552,937)
------------ ------------
Total stockholders' equity 962,745 1,409,156
------------ ------------
Total liabilities and stockholders'
equity $ 2,296,808 $ 2,688,312
============ ============
eGames, Inc.
Statements of Operations
Quarters Ended
September 30,
----------------------
2008 2007
---------- ----------
Net revenues $ 883,732 $ 701,333
Cost of revenues 394,871 277,625
---------- ----------
Gross profit 488,861 423,708
Operating expenses:
Product development 455,744 310,810
Selling, general and administrative 493,783 442,541
---------- ----------
Total operating expenses 949,527 753,351
---------- ----------
Operating loss (460,666) (329,643)
Interest income, net 805 1,205
---------- ----------
Loss before income taxes (459,861) (328,438)
Income taxes -0- -0-
---------- ----------
Net loss ($ 459,861) ($ 328,438)
---------- ----------
Net loss per common share:
- Basic ($ 0.04) ($ 0.03)
====== ======
- Diluted ($ 0.04) ($ 0.03)
====== ======
Weighted average common shares
outstanding - Basic 11,957,193 11,759,494
Dilutive effect of common share equivalents -0- -0-
---------- ----------
Weighted average common shares
outstanding - Diluted 11,957,193 11,759,494
========== ==========
eGames, Inc.
Statements of Cash Flows
Three Months Ended
September 30,
----------------------
2008 2007
---------- ----------
OPERATING ACTIVITIES:
---------------------
Net loss ($ 459,861) ($ 328,438)
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock-based compensation 34,086 19,092
Depreciation and amortization 5,246 4,386
Changes in operating assets and liabilities:
Accounts receivable, net 67,075 (49,891)
Inventory, net (13,139) 12,683
Prepaid and other expenses 53,644 (25,627)
Accounts payable (4,637) 65,050
Unearned revenues 71,334 25,000
Accrued expenses 8,749 (24,215)
---------- ----------
Net cash used in operating activities (237,503) (301,960)
INVESTING ACTIVITIES:
---------------------
Purchase of furniture and equipment (14,639) -0-
---------- ----------
Net cash used in investing activities (14,639) -0-
FINANCING ACTIVITIES:
---------------------
Net disbursements from issuance of preferred
stock (20,769) -0-
Dividend payments to preferred stockholders (10,708) -0-
Proceeds from stock option exercises -0- 7,230
---------- ----------
Net cash (used in) provided by financing
activities (31,477) 7,230
---------- ----------
Net decrease in cash and cash equivalents (283,619) (294,730)
Cash and cash equivalents:
Beginning of period 874,188 644,524
---------- ----------
End of period $ 590,569 $ 349,794
========== ==========
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
=== ==== ========== ========== ==========
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 24,387
Dividends
declared on
preferred stock
Rounding
---------------------------------------------------------------------
Balances at
September 30,
2008 875,000 $704,568 12,235,093 $9,179,827 $2,486,793
======= ======== ========== ========== ==========
Treasury Stock
Accumulated -------------------- Stockholders'
Deficit Shares Amount Equity
======================================================================
Balances at
June 30, 2007 ($ 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 (459,861) (459,861)
Common stock options
issued to employees
and directors 24,387
Dividends declared
on preferred stock (10,938) (10,938)
Rounding 1 1
----------------------------------------------------------------------
Balances at
September 30,
2008 ($10,855,506) (277,900) ($552,937) $ 962,745
=========== ======= ======== =========
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: the upcoming release of Puzzle City and Burger Island on the Nintendo DS platform, Burger Island on the Nintendo Wii and Burger Island mini-games for the Apple iPhone; the release of Satisfashion as a Big Fish Games exclusive on the Internet; the release of Burger Island 2: The Missing Ingredient on all the leading Internet game portals soon after the release of Satisfashion; our plans to create and publish top selling games in fiscal 2009 so we can seek and obtain more customers, sell more products, increase revenues, and achieve profitability and positive cash flows. eGames cautions readers that the risks and uncertainties that may affect our future results and performance include, but are not limited to, 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; declines in overall market conditions and retail store traffic in particular; 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.