LANGHORNE, Pa., Nov. 23, 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 first quarter ended September 30, 2009.
COMMENTS:
Jerry Klein, President and CEO of eGames commented on eGames' fiscal 2010 first quarter results, stating, "Our first fiscal quarter was one of the toughest we have experienced in some time, caused mainly by continued declines in distribution of our titles at major North American retailers compared to previous periods. Our revenue results continue to be negatively impacted by the very difficult economic conditions facing so many companies today, and specifically less retail store traffic, decreased consumer spending and declining revenues 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 $293,000 compared to the year ago quarter and focusing our resources on our strongest product development projects, this strategy did not offset the difficulty we have experienced in gaining additional North American retail distribution for our titles or obtaining working capital financing to fund continued development and expansion of our proprietary product line. We are hoping that with the holiday selling season approaching, and the recent placement of some of our top titles at the largest North American retailers, we can look for the beginning of an improvement in our financial results."
"As we announced last week, we are optimistic about the prospects for our titles that have recently been placed in the top three North American retailers, including Mystery Legends(TM): Sleepy Hollow, which heads a strong lineup of eGames-branded hidden object and puzzle games available at retail for the holidays, including 4 Elements(TM), Adventures of Robinson Crusoe, and Liong: The Lost Amulets," Klein said.
FINANCIAL DISCUSSION:
Fiscal First Quarter ended September 30, 2009 - Financial Summary:
Net revenues decreased by $188,000, or 21.3%, to $696,000 for the fiscal quarter ended September 30, 2009, compared to $884,000 for the similar fiscal quarter a year ago. This $188,000 decrease in net revenues resulted from a reduction in our traditional product revenues traceable to a decline in retail distribution of our titles at major North American retailers compared to the prior year's quarter and overall weak consumer demand at retail for discretionary items such as PC games during the current quarter.
Net loss was $162,000, or $0.01 per diluted share, for the fiscal quarter ended September 30, 2009 compared to a net loss of $460,000, or $0.04 per diluted share, for the fiscal quarter ended September 30, 2008. This $298,000 reduction in our net loss for the quarter ended September 30, 2009 was due to a $368,000 decrease in operating expenses, which was partially offset by a $69,000 decline in gross profit, which resulted from lower net revenues and a 5.0% increase in the gross profit margin on those revenues.
The 5.0% gross profit margin improvement related to a decrease in royalty costs, as a percentage of net revenues, attributable to lower contractual and effective royalty rates on the game titles sold during the current quarter compared to the similar quarter a year earlier.
The $368,000 decrease in operating expenses resulted from various cash conservation and cost cutting measures implemented by management in an effort to return eGames to profitability and a positive cash flow position in the near future. During the current quarter, these initiatives resulted in:
-- A $293,000 decline in product development expense due to
reducing the number of proprietary titles under development to
two titles during the current quarter compared to last year's
similar quarter, when nine titles were in development; and
-- A $75,000 decrease in other operating expenses such as
professional services, sales promotions and salary related
costs.
The following table represents eGames' net revenues by distribution channel for the fiscal quarters ended September 30, 2009 and 2008, respectively:
Net Revenues by Distribution Channel
------------------------------------
(rounded to the nearest thousand)
-------------------------------
Quarters Ended
September 30,
------------------------------
Distribution Increase %
Channel 2009 % 2008 % (Decrease) Change
---------------------------------------------------------------------
Traditional
product
revenues $286,000 41% $471,000 53% ($ 185,000) (39%)
Licensing
revenues 189,000 27% 154,000 18% 35,000 23%
Internet
revenues 212,000 31% 224,000 25% (12,000) (5%)
Liquidation
product
revenues 9,000 1% 35,000 4% (26,000) (74%)
---------------------------------------------------------------------
Totals $696,000 100% $884,000 100% ($ 188,000) (21%)
======== ==== ======== ==== =========== ====
Liquidity Condition:
At September 30, 2009, eGames had $156,000 in cash compared to $344,000 in cash at June 30, 2009. Considering our net losses for the most recent quarter and the last five fiscal years, 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
At At
September 30, June 30,
ASSETS 2009 2009
------ ------------- -------------
Current assets:
Cash and cash equivalents $ 155,574 $ 344,432
Accounts receivable, net 346,894 279,827
Inventory, net 527,640 551,552
Prepaid and other expenses 101,032 88,017
------------- -------------
Total current assets 1,131,140 1,263,828
Furniture and equipment, net 15,849 18,478
Intangibles 24,089 24,089
------------- -------------
Total assets $ 1,171,078 $ 1,306,395
============= =============
LIABILITIES AND
---------------
STOCKHOLDERS' EQUITY (DEFICIT)
-----------------------------
Current liabilities:
Accounts payable $ 592,761 $ 557,449
Unearned revenues 628,689 630,542
Accrued expenses 312,840 359,993
------------- -------------
Total current liabilities 1,534,290 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 2,613,108 2,562,142
Accumulated deficit (12,307,778) (12,135,189)
Treasury stock, as cost (552,937) (552,937)
------------- -------------
Total stockholders' equity
(deficit) (363,212) (241,589)
------------- -------------
Total liabilities and
stockholders' equity
(deficit) $ 1,171,078 $ 1,306,395
============= =============
eGames, Inc.
Statements of Operations
Quarters Ended
September 30,
------------------------------
2009 2008
------------- -------------
Net revenues $ 696,306 $ 883,732
Cost of revenues 276,664 394,871
------------- -------------
Gross profit 419,642 488,861
Operating expenses:
Product development 162,767 455,744
Selling, general and
administrative 418,539 493,783
------------- -------------
Total operating expenses 581,306 949,527
------------- -------------
Operating loss (161,664) (460,666)
Interest income, net 13 805
------------- -------------
Loss before income taxes (161,651) (459,861)
Income taxes - 0 - - 0 -
------------- -------------
Net loss ($ 161,651) ($ 459,861)
============= =============
Net loss per common share:
- Basic ($ 0.01) ($ 0.04)
============= =============
- Diluted ($ 0.01) ($ 0.04)
============= =============
Weighted average common shares
outstanding - Basic 12,119,499 11,957,193
Dilutive effect of common share
equivalents - 0 - - 0 -
------------- -------------
Weighted average common shares
outstanding - Diluted 12,119,499 11,957,193
============= =============
eGames, Inc.
Statements of Cash Flows
Three Months Ended
September 30,
------------------------------
2009 2008
------------- -------------
OPERATING ACTIVITIES:
---------------------
Net loss ($ 161,651) ($ 459,861)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Stock-based compensation 27,101 34,086
Depreciation and amortization 3,211 5,246
Changes in operating assets
and liabilities:
Accounts receivable, net (67,067) 67,075
Inventory, net 23,912 (13,139)
Prepaid and other expenses (88) 53,644
Accounts payable 35,312 (4,637)
Unearned revenues (1,853) 71,334
Accrued expenses (47,153) 8,749
------------- -------------
Net cash used in operating
activities (188,276) (237,503)
INVESTING ACTIVITIES:
---------------------
Purchase of furniture and
equipment (582) (14,639)
------------- -------------
Net cash used in investing
activities (582) (14,639)
FINANCING ACTIVITIES:
---------------------
Net disbursements from issuance
of preferred stock - 0 - (20,769)
Dividend payments to preferred
stockholders - 0 - (10,708)
------------- -------------
Net cash used in financing
activities - 0 - (31,477)
------------- -------------
Net decrease in cash and cash
equivalents (188,858) (283,619)
Cash and cash equivalents:
Beginning of period 344,432 874,188
------------- -------------
End of period $ 155,574 $ 590,569
============= =============
eGames, Inc.
Statements of Stockholders' Equity (Deficit)
Convertible
Preferred Stock Common Stock Additional
------------------------------------------- Paid-in
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 loss
Vesting of
Common stock
options
issued to
employees
and directors 20,637
Dividends
declared on
preferred
stock 60,100 10,938
Shares issued
to investor
relations
service
provider 225,000 19,391
---------------------------------------------------------------------
Balances at
September
30, 2009 875,000 $ 704,568 12,616,140 $ 9,179,827 $ 2,613,108
======= ========= ========== =========== ===========
Treasury Stock Stockholders'
Accumulated ------------------- Equity
Deficit Shares Amount (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 loss (161,651) (161,651)
Vesting of Common stock
options issued to
employees and directors 20,637
Dividends declared on
preferred stock (10,938) - 0 -
Shares issued to
investor relations
service provider 19,391
---------------------------------------------------------------------
Balances at
September 30, 2009 ($12,307,778) (277,900) ($552,937) ($363,212)
============ ======== ========= ===========
About eGames, Inc.
eGames, Inc., headquartered in Langhorne, Pennsylvania, develops and publishes casual games for the PC, Nintendo DS and Wii, iPhone, and the Internet including The Dracula Files, Burger Island(R), Burger Island 2: The Missing Ingredient, Defender of the Crown: Heroes Live Forever(R), Purrfect Pet Shop(R), and more. 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 2009 and 2008, as well as press releases containing quarterly financial information for fiscal 2010, 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 Company's expectation that the upcoming holiday selling season combined with the recent placement of some of its top titles at the largest North American retailers could improve the Company's financial results; and the Company's continuing evaluation of its options to fund future operations if the Company does not become cash flow positive from operations during the upcoming quarters. 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, 2009 as posted on the Company's website and on www.pinksheets.com.