LANGHORNE, Pa., May 14, 2007 (PRIME NEWSWIRE) -- eGames, Inc. (Pink Sheets:EGAM), a developer and publisher of games for the PC and the Internet, today announced its financial results for the three and nine months ended March 31, 2007.
Three Months Ended March 31, 2007:
Net sales decreased by $477,000, or 38%, to $788,000 for the three months ended March 31, 2007, compared to $1,265,000 for the three months ended March 31, 2006. This $477,000 decrease in quarterly net sales resulted from a 47% reduction in net product sales to traditional software distributors and retailers, caused by the reduction in retail distribution of our game titles that has continued to negatively impact our financial results over recent periods.
For the three months ended March 31, 2007, the Company recognized a net loss of $434,000, or $0.04 per diluted share, compared to a net loss of $248,000, or $0.02 per diluted share, for the three months ended March 31, 2006. The $186,000 increase in the quarterly net loss was traceable to a 38% decrease in net sales combined with a 3.0% reduction in the gross profit margin that were partially offset by a $52,000 net cost savings in operating expenses. The $52,000 net cost savings in operating expenses resulted from:
-- $191,000 in operating expense cost savings traceable primarily to
the reduction-in-force that was effected earlier this fiscal year
along with reductions in public relations and promotional
expenses, that was partially offset by
-- $139,000 in increased product development costs incurred in
conjunction with the Company's development of future game titles
for retail and Internet distribution.
Nine Months Ended March 31, 2007:
Net sales decreased by $771,000, or 21%, to $2,942,000 for the nine months ended March 31, 2007, compared to $3,713,000 for the similar nine month period a year earlier. This $771,000 decrease in the nine-month period net sales resulted from decreases of $594,000 in net product sales to traditional software distributors and retailers, $101,000 in liquidation product sales, $62,000 in Internet revenues, and $14,000 in licensing revenues.
For the nine months ended March 31, 2007, the Company recognized a net loss of $1,015,000, or $0.09 per diluted share, compared to the nine months ended March 31, 2006 in which the Company reported a net loss of $535,000, or $0.05 per diluted share. The $480,000 increase in the net loss for this nine-month period was due primarily to a $341,000 decrease in gross profit on lower net sales combined with a $125,000 increase in operating expenses. The $125,000 increase in operating expenses resulted from:
-- $425,000 in increased product development costs incurred by the
Company to develop future game titles for retail and Internet
distribution, that was partially offset by
-- $300,000 in other operating expense cost savings related mainly
to the reduction-in-force that was effected earlier this fiscal
year, in addition to decreases in public relations and
promotional expenses.
The following table represents the Company's net sales by distribution channel for the three and nine months ended March 31, 2007 and 2006, respectively:
Net Sales by Distribution Channel
---------------------------------
(rounded to the nearest thousand)
---------------------------------
Three Months Ended
March 31,
---------------------------------
Distribution Increase %
Channel 2007 % 2006 % (Decrease) Change
---------------------------------------------------------------------
Traditional
product
sales $531,000 67% $1,007,000 80% ($ 476,000) (47%)
Licensing
revenues 147,000 19% 157,000 12% (10,000) (6%)
Internet
revenues 62,000 8% 68,000 5% (6,000) (9%)
Liquidation
product
sales 48,000 6% 33,000 3% 15,000 45%
---------------------------------------------------------------------
Totals $788,000 100% $1,265,000 100% ($ 477,000) (38%)
======== ==== ========== ==== ========== ===
Nine Months Ended
March 31,
----------------------------------
Distribution Increase %
Channel 2007 % 2006 % (Decrease) Change
---------------------------------------------------------------------
Traditional
product
sales $2,222,000 76% $2,816,000 76% ($ 594,000) (21%)
Licensing
revenues 480,000 16% 494,000 13% (14,000) (3%)
Internet
revenues 150,000 5% 212,000 6% (62,000) (29%)
Liquidation
product
sales 90,000 3% 191,000 5% (101,000) (53%)
---------------------------------------------------------------------
Totals $2,942,000 100% $3,713,000 100% ($ 771,000) (21%)
========== ==== ========== ==== ========== ===
Comments:
"With the recent Internet launch of Burger Island(tm) and Defender of the Crown: Heroes Live Forever(r), we believe eGames is now poised to begin realizing the benefits from our investment in the development of our own game titles. The $480,000 increase in our net loss for the nine months ended March 31, 2007 compared to the same period a year earlier closely approximates the $425,000 increase in product development expenses incurred during this same period. The strategy of investing in the development of our own titles, utilizing both the compelling intellectual property acquired in the Cinemaware acquisition and the product development expertise we are creating with a talented group of game developers, is the cornerstone of our fundamental efforts to return to profitability and create greater value for our shareholders," commented Jerry Klein, President and CEO of eGames.
"We are excited about the new energy that is emerging here at eGames as we create innovative and fun PC games. We intend to market our games in association with key online game portals and publishers, as well as with major North American retailers and select international licensees. While we strive to increase the development capacity for our own game titles, we also continue to license high-quality third party game content for sale at retail and online, in order to expand our offering to retailers and online game distributors. As we look to regain momentum at retail with the game titles we have begun to launch, we believe a diversified approach to marketing and selling our games is critical in this evolving marketplace for game products," Klein said.
eGames, Inc.
Balance Sheets
(Unaudited) (Audited)
As of As of
March 31, June 30,
----------- ------------
ASSETS 2007 2006
------ ----------- ------------
Current assets:
Cash and cash equivalents $ 994,114 $ 1,526,629
Accounts receivable, net of
allowances of $352,059 and
$654,076 356,056 521,086
Inventory, net 782,099 973,735
Prepaid and other expenses 214,605 299,661
----------- -----------
Total current assets 2,346,874 3,321,111
Furniture and equipment, net 42,802 49,595
Goodwill 420,000 420,000
Intangible assets 24,089 24,089
----------- -----------
Total assets $ 2,833,765 $ 3,814,795
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 204,320 $ 343,283
Accrued expenses 734,679 614,668
----------- -----------
Total current liabilities 938,999 957,951
----------- -----------
Stockholders' equity:
Common stock 9,179,827 9,179,827
Additional paid-in capital 2,187,863 2,135,168
Accumulated deficit (8,971,507) (7,956,734)
Treasury stock (501,417) (501,417)
----------- -----------
Total stockholders'
equity 1,894,766 2,856,844
----------- -----------
Total liabilities and
stockholders' equity $ 2,833,765 $ 3,814,795
=========== ===========
eGames, Inc.
Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------- -----------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
Net sales $ 787,641 $1,264,898 $2,941,771 $ 3,712,963
Cost of sales 466,496 711,223 1,664,066 2,093,648
---------- ---------- ---------- ----------
Gross profit 321,145 553,675 1,277,705 1,619,315
Operating expenses:
Product
development 303,810 164,788 800,946 376,308
Selling,
general and
administrative 457,572 647,875 1,510,384 1,809,777
---------- ---------- ---------- ----------
Total
operating
expenses 761,382 812,663 2,311,330 2,186,085
---------- ---------- ---------- ----------
Operating loss (440,237) (258,988) (1,033,625) (566,770)
Interest income,
net 5,940 11,370 18,852 31,778
---------- ---------- ---------- ----------
Loss before
income taxes (434,297) (247,618) (1,014,773) (534,992)
Provision for
income taxes -- -- -- --
---------- ---------- ---------- ----------
Net loss ($ 434,297) ($ 247,618) ($1,014,773) ($ 534,992)
========= ========= ========== =========
Net loss per
common share:
- Basic ($ 0.04) ($ 0.02) ($ 0.09) ($ 0.05)
====== ====== ====== ======
- Diluted ($ 0.04) ($ 0.02) ($ 0.09) ($ 0.05)
====== ====== ====== ======
Weighted average
common shares
outstanding -
Basic 11,724,193 11,724,193 11,724,193 11,416,555
Dilutive effect
of common share
equivalents -- -- -- --
---------- ---------- ---------- ----------
Weighted average
common shares
outstanding -
Diluted 11,724,193 11,724,193 11,724,193 11,416,555
========== ========== ========== ==========
About eGames, Inc.
eGames, Inc., headquartered in Langhorne, Pennsylvania, develops and publishes games for the PC and the Internet, which now include the eGames(tm), Cinemaware(r) and Cinemaware Marquee(tm) brands. Additional information regarding eGames, Inc. can be found at http://www.egames.com.
Forward-Looking Statement Safe Harbor:
This press release contains certain forward-looking statements, including without limitation, statements regarding: realizing the benefits from the Company's investment in the development of its own game titles; returning to profitability and creating greater value for the Company's shareholders; the Company's intention to market its games in association with key online game portals and publishers, as well as with major North American retailers and select international licensees; the Company's efforts to increase the development capacity for its own game titles; continuing to license high-quality third party game content for sale at retail and online, in order to expand the Company's offering to retailers and online game distributors; and gaining momentum at retail with the game titles the Company has begun to launch. 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; as well as the risks and uncertainties discussed under the heading "Factors Affecting Future Performance" in the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 2006 as filed with the Securities and Exchange Commission.