updated 10/13/2010 3:15:17 PM ET 2010-10-13T19:15:17

LANGHORNE, Pa., Oct. 13, 2010 (GLOBE NEWSWIRE) -- eGames, Inc. (Pink Sheets:EGAM), a developer and publisher of casual games for leading social networks, the PC, game consoles and the Internet, today released financial results for its fiscal fourth quarter and year ended June 30, 2010.

COMMENTS:

"We are encouraged by the continued increases in our traditional product revenues due to strong sales of our physical products at the large national retail chain stores in North America but we are also challenged by the general market conditions and trends in our industry that have decreased our Internet-related revenues as well as our licensing revenues from the publishing of our products on non-PC platforms such as the Wii and Nintendo DS," stated Jerry Klein, eGames President and CEO. "We continue to forge ahead with our social game development and distribution strategy, with a particular focus on Latin America, which has slowly but steadily been growing with one game, Burger Island®, launched to date. The launch of our next two social games, Satisfashion and Coffee Central, are expected later this fall on the major Latin American social networks. We have two additional social games currently in development which are expected to be released during our 2011 fiscal year," Klein said.

"The free-to-play micro-transaction model used for social games has been substantiated as a sustainable and profitable business model while social games continue to grow in popularity. Our plan is to maintain our focus on this segment of the market and develop top-performing games," added Klein.

FINANCIAL DISCUSSION:

Fiscal Fourth Quarter ended June 30, 2010:

Net revenues decreased by $99,000, or 12%, to $740,000 for the fiscal quarter ended June 30, 2010, compared to $839,000 for the comparative fiscal quarter a year earlier. This decrease in net revenues was traceable to a decline in the Company's licensing revenues resulting from less Company owned titles being developed for licensing to third-party PC and game console publishers compared to the similar period a year ago.

Net loss was $379,000, or $0.03 per diluted share, for the fiscal quarter ended June 30, 2010, compared to a net loss of $635,000, or $0.05 per diluted share, for the same fiscal quarter a year ago. This $256,000 decrease in the quarterly net loss resulted from:

  • $282,000 in decreased operating expenses traceable to last year's quarter reflecting a $420,000 write-off of intangibles related to the Cinemaware game properties, partially offset by an increase in product development costs related to games being developed for various social networks;
  • $54,000 in decreased tax expense related to the prior year's quarter write-off of the Company's alternative minimum tax related deferred tax asset; which expense savings were partially offset by
  • $80,000 in decreased gross profit due to declines in net revenues and gross profit margin.

Fiscal Year ended June 30, 2010:

Net revenues increased by $40,000, or 1%, to $3,602,000 for the fiscal year ended June 30, 2010, compared to $3,562,000 for fiscal year 2009. This increase in net revenues was generated from increased distribution of the Company's PC games to the major North American retailers.

Net loss was $344,000, or $0.03 per diluted share, for the fiscal year ended June 30, 2010 compared to a net loss of $1,707,000, or $0.14 per diluted share, for the prior fiscal year. This $1,363,000 decrease in the net loss for the fiscal year ended June 30, 2010 resulted from:

  • $640,000 in decreased operating expense traceable to:
    -- $420,000 non-cash write-off in fiscal 2009 of intangibles related to the Cinemaware game properties, combined with a $150,000 cost recovery of the Cinemaware game properties received in cash during fiscal 2010; and
    -- $70,000 in savings across various expense categories;
  • $535,000 in decreased product development expense traceable to the reduction in overall games developed in fiscal 2010 (five games in development in fiscal 2010 versus twelve games in fiscal 2009), along with a decrease in the average cost per game in fiscal 2010;
  • $101,000 improvement in income tax expense due to changes in IRS rules governing net operating loss carry-forwards that became effective during fiscal 2010, in addition to fiscal 2009's non-cash write-off of the Company's alternative minimum tax related deferred tax asset;
  • $88,000 in increased gross profit traceable to a 1.8% improvement in gross profit margin; and
  • $1,000 in decreased interest income.

Liquidity Condition Update:

At September 30, 2010, the Company had approximately $300,000 in cash, compared to $627,000 at June 30, 2010 and $344,000 at June 30, 2009. Considering the Company's net losses for fiscal years 2010, 2009, 2008, 2007 and 2006, and the fact that it does not currently have access to a credit facility, the Company is continuing to evaluate its options to fund future operations.

The following tables represent the Company's net revenues by distribution channel for the fiscal quarters and years ended June 30, 2010 and 2009, respectively:

                                                    


                           

                           

                                                  

About eGames, Inc.

eGames, Inc., headquartered in Langhorne, Pennsylvania, develops and publishes casual games for leading Social Networks, the PC, Nintendo DS and Wii, iPhone, and the Internet including The Dracula Files, Burger Island®, Burger Island 2: The Missing Ingredient, Satisfashion®, 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 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 2009 annual report, as well as fiscal 2010 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 .

The eGames Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7123

Forward-Looking Statement Safe Harbor 

This press release contains certain forward-looking statements, including without limitation, statements regarding: increases in our traditional product revenues due to strong sales of our physical products at large national retail chain stores in North America; general market conditions and trends in our industry that have decreased Internet-related revenues as well as licensing revenues; our continued focus on our social game development and distribution strategy, with a particular focus on Latin America; the expected launch of our next two social games, Satisfashion and Coffee Central, later this fall on the major Latin American social networks; the expected release of two additional social games currently in development during our 2011 fiscal year; the continued growth and sustainability of the free-to-play micro-transaction model used for social games; the continued growth in popularity of social games; our plan to maintain our focus on this segment of the market and develop top-performing games; and our continued evaluation of options to fund future operations. 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; competition in the social gaming market; the failure of new titles to sell well or be used by consumers on social networks; our inability to enter into and maintain commercially successful publishing, licensing and distribution relationships; and an increase in worldwide competition in the overall videogame market; 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.

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