LANGHORNE, Pa., Feb. 10, 2010 (GLOBE NEWSWIRE) -- Casual games publisher and developer eGames, Inc. (Pink Sheets:EGAM), today released financial results for its three and six months ended December 31, 2009.
COMMENTS:
"We continue to be encouraged by the strong sell-through of our latest titles at North American retail stores during the fiscal quarter ended December 31, 2009, driven by Mystery Legends™: Sleepy Hollow, which leads a strong lineup of eGames-branded hidden object and puzzle games now available at retail," said Jerry Klein, President and CEO of eGames. "The solid performance of our titles at retail stores, combined with an improved gross profit margin and reduced operating expenses, are promising factors that we hope to build upon during the second half of the fiscal year. While we have continued to reduce our development expenses, we have now redirected our development efforts towards games aimed at the fastest-growing segment of the video game market, the social network market," Klein said.
"As we had announced at the end of 2009, our plans for the development of games for the social networks are well underway, as we expect to launch a social network version of our popular game Burger Island® on the leading Latin American social networks later this month. We are truly excited about the possibilities that these new markets represent for eGames. Our recent retail success has enabled us to fund our progress in expanding our games into the social networking markets, and we are hopeful that the combination of a strong retail presence and an aggressive online strategy will strengthen our Company's outlook for the future."
"Our games, including Burger Island, Satisfashion®, Purrfect Pet Shop®, and Puzzle City®, are ideally suited for the social network environment, as well as the micro-transaction monetization strategies that have proven successful on social networks to date. Our plan to launch social games in the Latin American social network market will put us in the forefront of development of the social game market in that region while leveraging our development relationships and capacity in Brazil," Klein stated.
FINANCIAL DISCUSSION:
Three Months ended December 31, 2009:
Net revenues increased by $75,000, or 8%, to $1,042,000 for the quarter ended December 31, 2009, compared to $967,000 for the comparative quarter a year ago. The $75,000 increase in net revenues resulted from an increase in North American traditional product revenues, which was partially offset by decreases in licensing revenues and product liquidation revenues.
Net income was $177,000, or $0.01 per diluted share, for the quarter ended December 31, 2009, compared to a net loss of $394,000, or $0.03 per diluted share, for the comparative quarter a year earlier. This $571,000 improvement in profitability for the quarter ended December 31, 2009 resulted from:
-
a $107,000 increase in gross profit due to higher revenues and a 6% improvement in gross profit margin due to reduced product and royalty costs per unit,
- a $417,000 decrease in operating expenses related to:
- $260,000 of reductions in product development expenses;
- $150,000 in expense recovery associated with previously written down game properties; and
- a $7,000 decrease in other operating expenses; and a
- $47,000 federal income tax benefit traceable to tax law changes relating to net operating loss carry-back rules.
Six Months ended December 31, 2009:
Net revenues decreased by $113,000, or 6%, to $1,738,000 for the six months ended December 31, 2009, compared to $1,851,000 for the similar six-month period a year earlier. This $113,000 decrease in net revenues resulted from decreases in product liquidation revenues, North American traditional product revenues and Internet revenues, which were partially offset by increased licensing revenues.
Net income was $15,000, or nil per diluted share, for the six months ended December 31, 2009, compared to a net loss of $854,000, or $0.07 per diluted share, for the six months ended December 31, 2008. This $869,000 improvement in profitability for the six months ended December 31, 2009 was due to:
-
a $38,000 increase in gross profit due to a 6% improvement in gross profit margin,
- a $784,000 decrease in operating expenses related to:
- $553,000 of reductions in product development expenses;
- $150,000 in expense recovery associated with previously written down game properties; and
- $81,000 in other operating expense savings; and a
- $47,000 federal income tax benefit.
The following tables represent eGames' net revenues by distribution channel for the three and six months ended December 31, 2009 and 2008, respectively:
| Net Revenues by Distribution Channel | |||||||
| (rounded to the nearest thousand) | |||||||
| Three Months Ended December 31, | |||||||
| Distribution Channel |
2009 |
% |
2008 |
% |
Increase (Decrease) |
% Change |
|
| Traditional product revenues | $660,000 | 63% | $524,000 | 54% | $136,000 | 26% | |
| Licensing revenues | 120,000 | 12% | 142,000 | 15% | (22,000) | (15%) | |
| Internet revenues | 246,000 | 24% | 246,000 | 25% | - 0 - | 0% | |
| Product liquidation revenues | 16,000 | 1% | 55,000 | 6% | (39,000) | (71%) | |
| Totals | $ 1,042,000 | 100% | $967,000 | 100% | $ 75,000 | 8% | |
| Six Months Ended December 31, | |||||||
| Distribution Channel |
2009 |
% |
2008 |
% |
Increase (Decrease) |
% Change |
|
| Traditional product revenues | $946,000 | 54% | $995,000 | 54% | ($ 49,000) | (5%) | |
| Licensing revenues | 309,000 | 18% | 296,000 | 16% | 13,000 | 4% | |
| Internet revenues | 458,000 | 26% | 469,000 | 25% | (11,000) | (2%) | |
| Product liquidation revenues | 25,000 | 2% | 91,000 | 5% | (66,000) | (73%) | |
| Totals | $ 1,738,000 | 100% | $ 1,851,000 | 100% | ($ 113,000) | (6%) | |
Liquidity Condition:
At December 31, 2009, eGames had $263,000 in cash compared to $344,000 in cash at June 30, 2009. Additionally, at December 31, 2009 our net working capital deficit (current assets minus current liabilities) was $203,000 compared to a net working capital deficit of $284,000 at June 30, 2009. Due to our history of net losses, combined with 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 cannot sustain positive cash flow from operations in the future.
| eGames, Inc. | |||
| Balance Sheets | |||
| At | At | ||
| December 31, | June 30, | ||
| ASSETS | 2009 | 2009 | |
| Current assets: | |||
| Cash and cash equivalents | $263,286 | $344,432 | |
| Accounts receivable, net | 550,721 | 279,827 | |
| Inventory, net | 544,890 | 551,552 | |
| Prepaid and other expenses | 56,680 | 88,017 | |
| Total current assets | 1,415,577 | 1,263,828 | |
| Furniture and equipment, net | 12,897 | 18,478 | |
| Intangibles | 24,089 | 24,089 | |
| Total assets | $1,452,563 | $1,306,395 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||
| Current liabilities: | |||
| Accounts payable | $663,670 | $557,449 | |
| Unearned revenues | 583,275 | 630,542 | |
| Accrued expenses | 371,461 | 359,993 | |
| Total current liabilities | 1,618,406 | 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 | 2,644,683 | 2,562,142 | |
| Accumulated deficit | (12,141,984) | (12,135,189) | |
| Treasury stock, as cost | (552,937) | (552,937) | |
| Total stockholders' equity (deficit) | (165,843) | (241,589) | |
| Total liabilities and stockholders' equity (deficit) | $1,452,563 | $1,306,395 |
|
eGames, Inc. |
||||
| Statements of Operations | ||||
|
Three Months Ended December 31, |
Six Months Ended December 31, |
|||
| 2009 | 2008 | 2009 | 2008 | |
| Net revenues | $1,042,093 | $967,061 | $1,738,399 | $1,850,793 |
| Cost of revenues | 411,243 | 443,829 | 687,908 | 838,699 |
| Gross profit | 630,850 | 523,232 | 1,050,491 | 1,012,094 |
| Operating expenses: | ||||
| Product development | 212,594 | 472,673 | 375,361 | 928,417 |
| Selling, general and administrative | 438,359 | 445,354 | 856 898 | 939,138 |
| Intangibles impairment (recovery) | (150,000) | - 0 - | (150,000) | - 0 - |
| Total operating expenses | 500,953 | 918,027 | 1,082,259 | 1,867,555 |
| Operating income (loss) | 129,897 | (394,795) | (31,768) | (855,461) |
| Interest income, net | 24 | 586 | 38 | 1,392 |
| Income (loss) before income taxes | 129,921 | (394,209) | (31,730) | (854,069) |
| Income tax benefit | 46,811 | - 0 - | 46,811 | - 0 - |
| Net income (loss) | $176,732 | ($394,209) | $15,081 | ($854,069) |
|
Net income (loss) per common share: |
||||
| - Basic | $ 0.01 | ($ 0.03) | $ 0.00 | ($ 0.07) |
| - Diluted | $ 0.01 | ($ 0.03) | $ 0.00 | ($ 0.07) |
| Weighted average common shares outstanding – Basic | 12,398,218 | 11,957,193 | 12,258,858 | 11,957,193 |
| Dilutive effect of common share equivalents | - 0 - | - 0 - | - 0 - | - 0 - |
| Weighted average common shares outstanding - Diluted | 12,398,218 | 11,957,193 | 12,258,858 | 11,957,193 |
| eGames, Inc. | |||
|
Statements of Cash Flows |
|||
| Six Months Ended December 31, | |||
| 2009 | 2008 | ||
| OPERATING ACTIVITIES: | |||
| Net income (loss) | $15,081 | ($854,069) | |
| Adjustments to reconcile net income (loss) to net cash | |||
| used in operating activities: | |||
| Stock-based compensation | 60,665 | 63,685 | |
| Depreciation and amortization | 6,727 | 11,470 | |
| Changes in operating assets and liabilities: | |||
| Accounts receivable, net | (270,894) | 42,183 | |
| Inventory, net | 6,662 | 33,354 | |
| Prepaid and other expenses | 31,337 | 76,367 | |
| Accounts payable | 106,221 | 109,647 | |
| Unearned revenues | (47,267) | 234,370 | |
| Accrued expenses | 11,468 | (68,066) | |
| Net cash used in operating activities | (80,000) | (351,059) | |
| INVESTING ACTIVITIES: | |||
| Purchase of furniture and equipment | (1,146) | (14,639) | |
| Net cash used in investing activities | (1,146) | (14,639) | |
| FINANCING ACTIVITIES: | |||
| Net disbursements from issuance of preferred stock | - 0 - | (26,638) | |
| Dividend payments to preferred stockholders | - 0 - | (21,646) | |
| Net cash used in financing activities | - 0 - | (48,284) | |
| Net decrease in cash and cash equivalents | (81,146) | (413,982) | |
| Cash and cash equivalents: | |||
| Beginning of period | 344,432 | 874,188 | |
| End of period | $263,286 | $460,206 | |
|
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 income | |||||
| Vesting of Common stock options issued to employees and directors | 41,274 | ||||
| Dividends declared on preferred stock | 60,100 | 21,876 | |||
| Shares issued to investor relations service provider | 225,000 | 19,391 | |||
| Balances at December 31, 2009 | 875,000 | $ 704,568 | 12,616,140 | $ 9,179,827 | $ 2,644,683 |
| 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 | 15,081 | 15,081 | ||
| Vesting of Common stock options issued to employees and directors | 41,274 | |||
| Dividends declared on preferred stock | (21,876) | - 0 - | ||
| Shares issued to investor relations service provider | 19,391 | |||
| Balances at December 31, 2009 | ($ 12,141,984) | (277,900) | ($ 552,937) | ($ 165,843) |
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®, Burger Island 2: The Missing Ingredient, Defender of the Crown: Heroes Live Forever®, Purrfect Pet Shop®, 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 report for fiscal year 2009, as well as press releases containing quarterly financial information for fiscal 2009 and 2010; 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 performance of our titles at retail stores, our improved gross profit margin and reduced operating expenses being factors that we hope to build upon during the second half of the fiscal year; the redirections of our development efforts towards games aimed at the fastest-growing segment of the video game market, the social network market; our expectation of launching a social network version of our popular game Burger Island on Orkut later this month; our expectation that the combination of a strong retail presence and an aggressive online strategy will strengthen our Company's outlook for the future; our plans to launch social games in the Brazilian social network market and that will put us in the forefront of development of the social game market in that region. 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 be accepted by consumers, to sell well or achieve retail placement; our inability to enter into and maintain commercially successful publishing, licensing and distribution relationship; 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, 2009 as posted on the Company's website and on www.pinksheets.com.