updated 12/6/2010 3:45:43 PM ET 2010-12-06T20:45:43

LANGHORNE, Pa., Dec. 6, 2010 (GLOBE NEWSWIRE) -- eGames, Inc. (Pink Sheets:EGAM), a developer and publisher of casual games for the leading social networks, PC, Nintendo DS and Wii, iPhone and the Internet, today released financial results for its fiscal first quarter ended September 30, 2010.


"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," stated Jerry Klein, eGames President and CEO. "We continue to forge ahead with our social game development and distribution strategy, with the launch of our next two social games, Satisfashion and Coffee Central, expected by the end of this year 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.


Fiscal First Quarter ended September 30, 2010 – Financial Summary:

Net revenues increased by $163,000, or 23.4%, to $859,000 for the fiscal quarter ended September 30, 2010, compared to $696,000 for the similar fiscal quarter a year ago. This $163,000 increase in net revenues resulted from an increase in our traditional product revenues traceable to an improvement in retail distribution of our titles at the major North American retailers compared to the prior year's quarter.

Net loss was $350,000, or $0.03 per diluted share, for the fiscal quarter ended September 30, 2010 compared to a net loss of $162,000, or $0.01 per diluted share, for the fiscal quarter ended September 30, 2009. This $188,000 increase in our net loss for the quarter ended September 30, 2010 was due to a $132,000 increase in operating expenses, along with a $56,000 decline in gross profit due to a 17.9% lower gross profit margin.

The 17.9% decline in gross profit margin was traceable to increases, as a percentage of net revenues, in:

  • Product cost due to a greater proportion of total net revenues relating to physical product shipments of our PC games as compared to licensing and Internet revenues having no related product cost; and
  • Provision for inventory obsolescence due to writing off the value of excess print inventory for our PC game titles discontinued at North American retailers.

The $132,000 increase in operating expenses resulted from: 

  • $168,000 in increased product development expenses related to having four games under development for the Latin American social networks and one game under development for the iPhone during the current quarter compared to last year's first quarter only having two titles under development; and
  • $36,000 in decreased operating expenses across various categories.

The following table represents eGames' net revenues by distribution channel for the fiscal quarters ended September 30, 2010 and 2009, respectively:

Net Revenues by Distribution Channel
  (rounded to the nearest thousand)
  Quarters Ended

September 30,
Distribution Channel






Traditional product revenues $503,000 59% $286,000 41% $217,000 76%
Licensing revenues 98,000 11% 189,000 27% (91,000) (48%)
Internet revenues 204,000 24% 212,000 31% (8,000) (4%)
Liquidation product revenues 54,000 6% 9,000 1% 45,000 500%
Totals $859,000 100% $696,000 100% $163,000 23%

Liquidity Condition:

At September 30, 2010, eGames had $301,000 in cash compared to $627,000 at June 30, 2010. Considering our net losses for the most recent quarter and the last six 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

September 30,


June 30,

Current assets:    
Cash and cash equivalents $ 301,318 $ 626,748
Accounts receivable, net 292,171 310,931
Inventory, net 616,634 595,000
Prepaid and other expenses 94,031 99,233
Total current assets 1,304,154 1,631,912
Furniture and equipment, net 4,399 5,866
Intangibles 24,089 24,089
Total assets $ 1,332,642 $ 1,661,867
Current liabilities:    
Accounts payable $ 737,579 $ 591,868
Unearned revenues 550,474 597,266
Accrued expenses 312,118 409,043
Total current liabilities 1,600,171 1,598,177
Stockholders' equity (deficit):    
Convertible preferred stock 704,568 704,568
Common stock 9,179,827 9,179,827
Additional paid-in capital 3,284,532 3,254,781
Accumulated deficit  (12,883,519)  (12,522,549)
Treasury stock, as cost (552,937) (552,937)
Total stockholders' equity (deficit) (267,529) 63,690
Total liabilities and stockholders' equity (deficit) $ 1,332,642 $ 1,661,867
eGames, Inc.
Statements of Operations
  Quarters Ended

September 30,
  2010 2009
Net revenues $858,576 $696,306
Cost of revenues 494,244 276,664
Gross profit 364,332 419,642
Operating expenses:    
Product development 330,664 162,767
Selling, general and administrative 383,795 418,539
Total operating expenses 714,459 581,306
Operating loss (350,127) (161,664)
Interest income, net 95 13
Loss before income taxes (350,032) (161,651)
Income taxes  - 0 -   - 0 - 
Net loss ($350,032) ($161,651)
Net loss per common share:     
- Basic ($0.03) ($0.01)
- Diluted ($0.03) ($0.01)
Weighted average common shares outstanding – Basic 13,575,025 12,119,499
Dilutive effect of common share equivalents  - 0 -   - 0 - 
Weighted average common shares outstanding - Diluted  13,575,025 12,119,499
eGames, Inc.
Statements of Cash Flows
  Three Months Ended

September 30,
  2010 2009
Net loss ($350,032) ($161,651)
Adjustments to reconcile net loss to net cash used in operating activities:     
Stock-based compensation 18,813 27,101
Depreciation and amortization  1,467 3,211
Changes in operating assets and liabilities:    
Accounts receivable, net 18,760 (67,067)
Inventory, net (21,634) 23,912
Prepaid and other expenses 5,202 (88)
Accounts payable 145,711 35,312
Unearned revenues (46,792) (1,853)
Accrued expenses (96,925) (47,153)
Net cash used in operating activities (325,430) (188,276)
Purchase of furniture and equipment - 0 - (582)
Net cash used in investing activities - 0 - (582)
Net cash used in financing activities - 0 - - 0 -
Net decrease in cash and cash equivalents (325,430) (188,858)
Cash and cash equivalents:    
Beginning of period 626,748 344,432
End of period $301,318 $155,574
eGames, Inc.
Statements of Stockholders' Equity (Deficit)

Preferred Stock


Treasury Stock




Additional Paid-in






Equity (Deficit)
Balances at June 30, 2009 875,000 $704,568 12,331,040 $9,179,827 $2,562,142 ($12,135,189) (277,900) ($552,937) ($241,589)
Net loss           (343,608)     (343,608)
Common stock options issued to employees and directors         81,940       81,940
Dividends declared on preferred stock     210,533   43,752 (43,752)     - 0 -
Common stock shares issued in connection with consulting agreement     225,000   19,391       19,391
Common stock shares and warrant issued in connection with private placement financing     1,000,000   497,280       497,280
Common stock shares issued in connection with consulting agreement     75,000   50,276       50,276
Balances at June 30, 2010 875,000 $704,568 13,841,573 $9,179,827 $3,254,781 ($12,522,549) (277,900) ($552,937) $63,690
Net loss           (350,032)     (350,032)
Common stock options issued to employees and directors         18,813       18,813
Dividends declared on preferred stock     15,526   10,938 (10,938)     - 0 -
Balances at September 30, 2010 875,000 $704,568 13,857,099 $9,179,827 $3,284,532 ($12,883,519) (277,900) ($552,937) ($267,529)

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. Additional information regarding eGames, Inc. can be found at http://www.egames.com.

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

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 2010 and 2009, as well as press releases containing quarterly financial information for fiscal 2011, 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 plans to continue with its social game development and distribution strategy; the expected launch dates of the Company's next two social games, Satisfashion and Coffee Central, on the major Latin American social networks; the expected launch dates of two additional social games currently in development; 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, achieve retail placement or generate revenues on social networks from advertising or virtual goods sales; 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 .

CONTACT:  eGames, Inc.
          Jerry Klein, President & CEO
            (215) 750-6606 (Ext. 118)
          Tom Murphy, Vice President & CFO
            (215) 750-6606 (Ext. 113)

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