eGames Announces First Quarter Fiscal 2011 Financial Results

/ Source: GlobeNewswire

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.

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," 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.

FINANCIAL DISCUSSION:

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:

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.

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

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 , 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 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: .

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 .

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