LANGHORNE, Pa., Sept. 3, 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 fourth quarter and year ended June 30, 2008.
COMMENTS:
Commenting on fiscal 2008 results, Jerry Klein, President and CEO of eGames said, "While we enjoyed significant progress in many areas of our business in 2008 we also suffered the frustrations of falling short of some expectations, especially in regards to increasing our revenues at a greater rate than we experienced. We have been very pleased with the continued improvement in our gross profit margin and increased Internet-related revenues. Both the gross profit margin and Internet-related revenues are benefiting from the increasing revenue contributions of our proprietary titles and we anticipate that trend continuing throughout fiscal 2009. Traditional product revenues (North American retail distribution) and licensing revenues continue to fall short of our expectations despite our best efforts."
Klein continued, "During fiscal 2008 our development resources focused on serving the casual game market on the Internet and the PC. As expected, development of our proprietary titles has created opportunities on other popular gaming platforms such as the Nintendo DS and Wii. We have announced publishing relationships with third parties that will bring Puzzle City and Burger Island to the Nintendo DS in time for the holiday selling season and Burger Island to the very popular Nintendo Wii platform soon after Christmas. We are confident the same opportunities will occur for our soon to be released PC title, Satisfashion. Developing and publishing our proprietary titles on as many popular gaming platforms as possible will contribute to increasing our revenues which is our primary objective today. During fiscal 2008, we incurred approximately $500,000 in development expense for products that will be released in fiscal 2009. Our ability to deliver those products successfully and increase our net revenues will ultimately enable us to achieve profitability."
"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. Those are our challenges and expectations in fiscal 2009," Klein said.
FINANCIAL DISCUSSION:
Fiscal Fourth Quarter ended June 30, 2008 - Recap:
Net revenues increased by $170,000, or 21.1%, to $975,000 for the fiscal quarter ended June 30, 2008, compared to $805,000 for the comparative fiscal quarter a year earlier. Net loss was $467,000, or $0.04 per diluted share, for the fiscal quarter ended June 30, 2008, compared to a net loss of $496,000, or $0.04 per diluted share, for the same fiscal quarter a year ago.
Fiscal Year ended June 30, 2008 - Recap:
Net revenues increased by $209,000, or 5.6%, to $3,956,000 for the fiscal year ended June 30, 2008, compared to $3,747,000 for fiscal year 2007. Net loss was $902,000, or $0.08 per diluted share, for the fiscal year ended June 30, 2008, compared to a net loss of $1,511,000, or $0.13 per diluted share, for the prior fiscal year.
Fiscal Year 2008 - Financial Summary:
The $209,000 increase in net revenues resulted from a $614,000 increase in Internet revenues traceable to increased sales of top selling casual games on www.egames.com; greater revenues generated from consumer installations of the eGames toolbar (which is now available on all eGames published game titles), and increased sales of our own proprietary casual games distributed on major Internet gaming portals. Partially offsetting this net revenue increase were decreases in traditional product revenues of $316,000 and licensing revenues of $95,000.
For the fiscal year ended June 30, 2008, the Company recognized a net loss of $902,000 compared to the fiscal year ended June 30, 2007 in which the Company reported a net loss of $1,511,000. This $609,000 decrease in the net loss for the fiscal year ended June 30, 2008 was due primarily to an $848,000 increase in gross profit traceable to a 19.3% improvement in the Company's gross profit margin on greater net revenues. The 19.3% gross profit margin improvement was attributable to cost savings, as a percentage of net revenues, of 9.3% in product cost and 1.7% in other cost of revenues, in addition to an 8.3% reduction in our inventory provision.
The positive impact on the net loss from the gross profit improvement was partially offset by a $221,000 increase in operating expenses related to:
* $342,000 in increased product development costs incurred to develop additional Company owned PC, Nintendo DS and Wii game titles with worldwide rights for retail and Internet distribution and licensing; partially offset by * $121,000 in operating expense savings traceable to salary related costs and advertising fees.
The following tables represent the Company's net revenues by distribution channel for the fiscal quarters and years ended June 30, 2008 and 2007, respectively:
Net Revenues by Distribution Channel
(rounded to the nearest thousand)
Quarters Ended
June 30,
----------------------------------
Distribution Increase %
Channel 2008 % 2007 % (Decrease) Change
---------------------------------------------------------------------
Traditional
product
revenues $ 603,000 62% $ 567,000 71% $ 36,000 6%
Licensing
revenues 91,000 9% 92,000 11% (1,000) (1%)
Internet
revenues 225,000 23% 97,000 12% 128,000 132%
Liquidation
product
revenues 56,000 6% 49,000 6% 7,000 14%
---------------------------------------------------------------------
Totals $ 975,000 100% $ 805,000 100% $ 170,000 21%
========== ==== ========== ==== ========== ====
Years Ended
June 30,
----------------------------------
Distribution Increase %
Channel 2008 % 2007 % (Decrease) Change
---------------------------------------------------------------------
Traditional
product
revenues $2,473,000 62% $2,789,000 74% ($ 316,000) (11%)
Licensing
revenues 477,000 12% 572,000 15% (95,000) (17%)
Internet
revenues 861,000 22% 247,000 7% 614,000 249%
Liquidation
product
revenues 145,000 4% 139,000 4% 6,000 4%
---------------------------------------------------------------------
Totals $3,956,000 100% $3,747,000 100% $ 209,000 6%
========== ==== ========== ==== ========== ====
Liquidity Condition:
At June 30, 2008, the Company had $874,000 in cash compared to $645,000 in cash at June 30, 2007. Additionally, the Company's net working capital (current assets minus current liabilities) remained relatively the same at $938,000 at June 30, 2008, virtually unchanged from June 30, 2007. Considering our net losses for fiscal 2008, 2007 and 2006, and the fact that we do not currently have access to a credit facility, the Company is continuing to evaluate its options to fund future operations if it does not become cash flow positive from operations during the upcoming quarters. The Company's funding options range from securing a credit facility from a bank to obtaining other outside financing.
eGames, Inc.
Balance Sheets
(Audited)
As of As of
June 30, June 30,
ASSETS 2008 2007
------------ ------------
Current assets:
Cash and cash equivalents $ 874,188 $ 644,524
Accounts receivable, net 467,506 326,005
Inventory, net 590,601 596,976
Prepaid and other expenses 284,380 253,626
------------ ------------
Total current assets 2,216,675 1,821,131
Furniture and equipment, net 27,548 33,995
Intangible assets 444,089 444,089
------------ ------------
Total assets $ 2,688,312 $ 2,299,215
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 591,494 $ 226,020
Unearned revenues 248,454 42,500
Accrued expenses 439,208 614,277
------------ ------------
Total current liabilities 1,279,156 882,797
------------ ------------
Stockholders' equity:
Convertible preferred stock 704,568 - 0 -
Common stock 9,179,827 9,179,827
Additional paid-in capital 2,462,406 2,205,242
Accumulated deficit (10,384,708) (9,467,234)
Treasury stock (552,937) (501,417)
------------ ------------
Total stockholders' equity 1,409,156 1,416,418
------------ ------------
Total liabilities and
stockholders' equity $ 2,688,312 $ 2,299,215
============ ============
eGames, Inc.
Statements of Operations
(Unaudited) (Audited)
Quarters Ended Years Ended
June 30, June 30,
------------------------ ------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Net revenues $ 975,342 $ 805,448 $3,956,204 $3,747,219
Cost of revenues 418,504 543,154 1,567,693 2,207,221
----------- ----------- ----------- -----------
Gross profit 556,838 262,294 2,388,511 1,539,998
Operating expenses:
Product
development 499,930 355,487 1,498,027 1,156,433
Selling, general
and
administrative 525,117 406,823 1,796,861 1,917,207
----------- ----------- ----------- -----------
Total operating
expenses 1,025,047 762,310 3,294,888 3,073,640
----------- ----------- ----------- -----------
Operating loss (468,209) (500,016) (906,377) (1,533,642)
Interest
income, net 1,571 4,289 4,127 23,141
----------- ----------- ----------- -----------
Loss before
income taxes (466,638) (495,727) (902,250) (1,510,501)
Benefit for
income taxes - 0 - - 0 - - 0 - - 0 -
----------- ----------- ----------- -----------
Net loss ($ 466,638) ($495,727) ($902,250) ($1,510,501)
----------- ----------- ----------- -----------
Net loss per
common share:
- Basic ($ 0.04) ($ 0.04) ($ 0.08) ($ 0.13)
=========== =========== =========== ===========
- Diluted ($ 0.04) ($ 0.04) ($ 0.08) ($ 0.13)
=========== =========== =========== ===========
Weighted average
common shares
outstanding
- Basic 11,906,526 11,724,193 11,821,489 11,724,193
Dilutive effect
of common share
equivalents - 0 - - 0 - - 0 - - 0 -
----------- ----------- ----------- -----------
Weighted average
common shares
outstanding
- Diluted 11,906,526 11,724,193 11,821,489 11,724,193
=========== =========== =========== ===========
eGames, Inc.
Statements of Cash Flows
(Audited)
Years Ended June 30,
------------------------
2008 2007
----------- -----------
OPERATING ACTIVITIES:
Net loss ($ 902,250) ($1,510,501)
Adjustments to reconcile net loss
to net cash used in operating activities:
Stock-based compensation 102,216 70,074
Depreciation and amortization 21,524 32,847
Changes in operating assets and liabilities:
Accounts receivable, net (141,501) 195,081
Inventory, net 6,375 376,759
Prepaid and other expenses (14,593) 46,035
Accounts payable 325,207 (117,263)
Unearned revenues 205,954 42,500
Accrued expenses (175,069) (391)
----------- -----------
Net cash used in operating activities (572,137) (864,859)
INVESTING ACTIVITIES:
Purchase of furniture and equipment (15,077) (17,246)
----------- -----------
Net cash used in investing activities (15,077) (17,246)
FINANCING ACTIVITIES:
Net proceeds from exercise of stock options 7,230 - 0 -
Net proceeds from issuance
of preferred stock 814,163 - 0 -
Dividend payments to preferred
stock shareholders (4,515) - 0 -
----------- -----------
Net cash provided by financing activities 816,878 - 0 -
---------- ------------
Net increase (decrease) in cash
and cash equivalents 229,664 (882,105)
Cash and cash equivalents:
Beginning of period 644,524 1,526,629
----------- -----------
End of period $874,188 $644,524
=========== ===========
eGames, Inc.
Statements of Stockholders' Equity
(Audited)
Convertible
Preferred Stock Common Stock Additional
----------------------------------------------- Paid-in
Shares Amount Shares Amount Capital
---------------------------------------------------------------------
Balances
at June
30, 2006 - 0 - $ - 0 - 11,956,093 $9,179,827 $2,135,168
=========== =========== =========== =========== ===========
Net loss
Common
stock
options
issued to
employees
and
directors 70,074
Rounding
---------------------------------------------------------------------
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
=========== =========== =========== =========== ===========
Treasury Stock Stock-
Accumulated ----------------------- holders'
Deficit Shares Amount Equity
---------------------------------------------------------------------
Balances at June 30,
2006 ($7,956,734) (231,900) ($501,417) $2,856,844
=========== =========== =========== ===========
Net loss (1,510,501) (1,510,501)
Common stock options
issued to employees
and directors 70,074
Rounding 1 1
---------------------------------------------------------------------
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
=========== =========== =========== ===========
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 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 2007 annual report, as well as fiscal 2007 and 2008 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.
Forward-Looking Statement Safe Harbor
This press release contains certain forward-looking statements, including without limitation, statements regarding:
the Company's gross profit margin and Internet-related revenues continuing to benefit from increased revenue contributions of our proprietary titles throughout fiscal 2009; publishing relationships with third parties that will bring Puzzle City and Burger Island to the Nintendo DS in time for the holiday selling season and Burger Island to the Nintendo Wii platform soon after Christmas; opportunities to bring our soon to be released PC title, Satisfashion, to console platforms; developing and publishing our proprietary titles on as many popular gaming platforms as possible which will contribute to increasing our revenues; and our ability to increase revenue ultimately enabling us to achieve profitability. 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; 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, 2007 as posted on the Company's website and on www.pinksheets.com.