-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SrXg4ei4JRsI3a9pLqfqgb0J7o02HsZ1VqZS3qJGZ4FRRFzeCQHS+NefwA9iuUiE OOad8nCYOd7/rsR+x3KWYA== 0000948703-05-000001.txt : 20050201 0000948703-05-000001.hdr.sgml : 20050201 20050201091337 ACCESSION NUMBER: 0000948703-05-000001 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20050201 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050201 DATE AS OF CHANGE: 20050201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EGAMES INC CENTRAL INDEX KEY: 0000948703 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 232694937 STATE OF INCORPORATION: PA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27102 FILM NUMBER: 05563940 BUSINESS ADDRESS: STREET 1: 2000 CABOT BLVD STREET 2: SUITE 110 CITY: LANGHORNE STATE: PA ZIP: 19047-1833 BUSINESS PHONE: 2157506606 MAIL ADDRESS: STREET 1: 2000 CABOT BLVD SUITE 110 CITY: LANGHORNE STATE: PA ZIP: 19047-1833 8-K 1 form8kq2-05earn.txt FORM 8K - Q2-2005 EARNINGS RELEASE SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 1, 2005 eGames, Inc. (Exact name of registrant as specified in its charter) Pennsylvania 0-27102 23-2694937 - ------------ ------- ---------- (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 2000 Cabot Blvd. West, Suite 110, Langhorne, PA 19047-1833 - ----------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (215) 750-6606 ----------------------------------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02 Results of Operations and Financial Condition. On February 1, 2005, eGames, Inc. (the "Company") issued a press release announcing its results for the second quarter ended December 31, 2004. The full text of the press release is set forth in Exhibit 99.1 hereto. Item 9.01 Financial Statements and Exhibits. (c) Exhibits. The following document is filed as an exhibit to this report. 99.1 Press Release dated February 1, 2005. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. eGames, Inc. By: /s/ Thomas W. Murphy -------------------------------- Thomas W. Murphy, Vice President and Chief Financial Officer Dated: February 1, 2005 EXHIBIT 99.1 For Immediate Release eGames Announces Fiscal 2005 Second Quarter Financial Results - Quarterly Cash Dividend Declared by Board of Directors Langhorne, PA. - February 1, 2005 - eGames, Inc. (OTCBB: EGAM), a publisher of Family Friendly(TM), affordable consumer entertainment PC software games, today announced financial results for the three and six months ended December 31, 2004. The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.015 per share to be paid on February 22, 2005 to shareholders of record on February 15, 2005. Financial Results: - ------------------ For the three months ended December 31, 2004, net sales decreased by $203,000, or 10%, to $1,913,000, compared to $2,116,000 in net sales for the three months ended December 31, 2003. For the quarter ended December 31, 2004, the Company earned net income of $295,000, or $0.03 per diluted share, compared to net income of $471,000, or $0.04 per diluted share, for the quarter ended December 31, 2003. For the six months ended December 31, 2004, net sales decreased by $1,078,000, or 26%, to $3,090,000 compared to $4,168,000 for the same year ago period. For the six months ended December 31, 2004, net income was $111,000, or $0.01 per diluted share, compared to $950,000, or $0.09 per diluted share, for the same six-month period a year earlier. Quarterly Cash Dividend: - ------------------------ The Company's Board of Directors has authorized the payment of a quarterly cash dividend of $0.015 per common share, in lieu of pursuing the Company's previously announced stock repurchase program. The quarterly cash dividend is payable on February 22, 2005 to shareholders of record on February 15, 2005. It is the Company's intention to continue paying a comparable quarterly cash dividend to shareholders of its common stock. However, the payment of any further cash dividends depends entirely upon the discretion of the Company's Board of Directors and may be discontinued at any time, for any reason. Second Quarter Fiscal 2005 - Summary: - ------------------------------------- The $203,000 decrease in overall net sales was caused primarily by a $214,000 decline in net sales to software distributors that serve North American mass-merchants and other major retailers, driven by a $422,000 decrease in net sales to the Company's primary software distributor within the United States. This software distributor's reduced purchasing requirements during the current quarter were impacted by a major retailer's reduction in its retail shelf space allotment for PC software games at the $9.99 retail price point. This decrease in net sales to software distributors was partially offset by a $194,000 increase in net sales to Canadian software distributors due to increased product distribution of the Company's titles at various Canadian retailers during this period. Additionally, net sales decreased to certain smaller retailers by $58,000 and to Internet customers by $17,000. These net sales decreases were partially offset by a $36,000 increase in licensing revenues and a $50,000 increase in inventory liquidation sales. The Company earned net income of $295,000 during the quarter ended December 31, 2004 compared to the year ago quarter in which the Company earned $471,000 in net income. This $176,000 decrease in profitability for the quarter ended December 31, 2004 compared to the year ago quarter was a result of the following factors: o A $150,000 decline in gross profit resulting from a 10% decrease in net sales, combined with a 1.7% reduction in the gross profit margin largely driven by cost increases, as a percentage of net sales, of: o 1.3% in royalty expense due to the accelerated expensing of advance royalty payments related to various game and productivity titles; and o 0.9% in freight expense resulting primarily from increased product shipments to Canadian distributors. o A $21,000 increase in operating expenses, resulting primarily from increased legal expenses incurred in enforcing the Company's intellectual property rights; and o A $5,000 increase in state income tax expense due to a higher effective state income tax rate. The following table represents the Company's net sales by distribution channel for the three and six months ended December 31, 2004 and 2003, respectively: Net Sales by Distribution Channel --------------------------------- (rounded to the nearest thousand) --------------------------------- Three Months Ended December 31, --------------------------------------
Increase % Distribution Channel 2004 % 2003 % (Decrease) Change - ----------------------------------------------------------------------------------------- Software Distributors $ 1,443,000 76% $ 1,657,000 78% ($ 214,000) (13%) Software Retailers 138,000 7% 196,000 9% (58,000) (30%) Licensing 156,000 8% 120,000 6% 36,000 30% Internet 72,000 4% 89,000 4% (17,000) (19%) Inventory Liquidators 104,000 5% 54,000 3% 50,000 93% - ----------------------------------------------------------------------------------------- Totals $ 1,913,000 100% $ 2,116,000 100% ($ 203,000) (10%) =========== ==== =========== ==== ========= ===
Six Months Ended December 31, --------------------------------------
Increase % Distribution Channel 2004 % 2003 % (Decrease) Change - ------------------------------------------------------------------------------------------- Software Distributors $ 2,257,000 73% $ 3,400,000 82% ($ 1,143,000) (34%) Software Retailers 298,000 10% 366,000 9% (68,000) (19%) Licensing 249,000 8% 217,000 5% 32,000 15% Internet 144,000 5% 131,000 3% 13,000 10% Inventory Liquidators 142,000 4% 54,000 1% 88,000 163% - ------------------------------------------------------------------------------------------- Totals $ 3,090,000 100% $ 4,168,000 100% ($ 1,078,000) (26%) =========== ==== =========== ==== ============= ===
Comments: - --------- "The second quarter of fiscal 2005 reflected our organization's ability to respond positively to the challenges of reduced product distribution in parts of the retail market place that occurred during the first quarter of this fiscal year," said Jerry Klein, President and Chief Executive Officer. "Our efforts have resulted in rebounding to profitability during the current quarter, as well as for the first six months of this fiscal year. Although we did not achieve the levels of profitability that we had during the comparable periods last year, we are committed to recouping any previously lost momentum in the retail marketplace by continuing to bring out more of our fun, familiar, easy-to-play, Family Friendly games at the affordable prices consumers have shown they want, and seeking to expand our share of the North American retail shelf space allocated to affordably priced PC software games," Mr. Klein continued. Mr. Klein further commented that, "our business strategy remains concentrated on executing viable profit and cash generating opportunities at retail and online through the Internet, while continuing to evaluate potentially profitable business development and licensing alternatives in untapped and traditional distribution channels. Our financial condition continues to be strong, as reflected by our healthy balance sheet and our return to profitability. At December 31, 2004, we had net working capital of $3.6 million, no borrowings and we continued to have full access to the $750,000 credit facility with Hudson United Bank." "As a further indication of confidence in our business plan and to provide a direct return on capital to the Company's shareholders, our Board of Directors has recently approved a quarterly cash dividend. After careful consideration of alternative uses for these funds, our Board of Directors decided that beginning to pay a quarterly cash dividend is currently the best use of this available cash. We hope this decision will increase our shareholders' value more than the previously announced stock repurchase program that we have decided not to pursue," remarked Mr. Klein. eGames, Inc. Balance Sheet (Unaudited)
As of As of December 31, June 30, ASSETS 2004 2004 - ------ ----------- ----------- Current assets: Cash and cash equivalents $ 1,691,909 $ 1,742,224 Accounts receivable, net 1,287,316 1,533,859 Inventory, net 916,742 814,286 Prepaid and other expenses 436,319 440,131 ----------- ----------- Total current assets 4,332,286 4,530,500 Furniture and equipment, net 67,438 74,859 Intangible assets 24,089 24,089 ----------- ----------- Total assets $ 4,423,813 $ 4,629,448 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable $ 375,615 $ 441,016 Accrued expenses 309,763 616,794 ----------- ----------- Total current liabilities 685,378 1,057,810 ----------- ----------- Stockholders' equity: Common stock 9,179,827 9,179,827 Additional paid-in capital 1,385,026 1,329,164 Accumulated deficit (6,325,001) (6,435,936) Treasury stock (501,417) (501,417) ----------- ----------- Total stockholders' equity 3,738,435 3,571,638 ----------- ----------- Total liabilities and stockholders' equity $ 4,423,813 $ 4,629,448 =========== ===========
eGames, Inc. Statements of Operations (Unaudited)
Three Months Ended Six Months Ended December 31, December 31, --------------------------- ---------------------------- 2004 2003 2004 2003 ------------ ------------ ------------ ------------- Net sales $ 1,912,630 $ 2,115,561 $ 3,090,459 $ 4,168,033 Cost of sales 839,234 892,630 1,410,392 1,710,815 ------------ ------------ ------------ ------------- Gross profit 1,073,396 1,222,931 1,680,067 2,457,218 Operating expenses: Product development 103,878 140,696 342,993 267,086 Selling, general and administrative 647,533 589,534 1,218,665 1,191,818 ------------ ------------ ------------ ------------- Total operating expenses 751,411 730,230 1,561,658 1,458,904 ------------ ------------ ------------ ------------- Operating income 321,985 492,701 118,409 998,314 Interest (income) expense, net (1,597) (1,466) (2,827) 3,517 ------------ ------------ ------------ ------------- Income before income taxes 323,582 494,167 121,236 994,797 Provision for income taxes 28,324 22,913 10,301 45,197 ------------ ------------ ------------ ------------- Net income $ 295,258 $ 471,254 $ 110,935 $ 949,600 ============ ============ ============ ============= Net income per common share: - Basic $ 0.03 $ 0.05 $ 0.01 $ 0.10 ====== ====== ====== ====== - Diluted $ 0.03 $ 0.04 $ 0.01 $ 0.09 ====== ====== ====== ====== Weighted average common shares outstanding - Basic 10,116,329 9,989,337 10,109,501 9,989,337 Dilutive effect of common share equivalents 502,459 831,090 869,972 684,845 ---------- ---------- ---------- ---------- Weighted average common shares outstanding - Diluted 10,618,788 10,820,427 10,979,473 10,674,182 ========== ========== ========== ==========
About eGames, Inc. - ------------------ eGames, Inc., headquartered in Langhorne, PA, publishes and markets a diversified line of Family Friendly(TM), affordable consumer entertainment PC software games. The Company promotes the eGames(TM) brand in order to generate customer loyalty, encourage repeat purchases and differentiate eGames software products to retailers and consumers. eGames also publishes and markets RealAge(R) Games & Skills, a collection of PC software activities and games designed to help build and maintain mental sharpness. Additional information regarding eGames, Inc. and RealAge Games & Skills can be found at www.egames.com and www.realagegames.com. eGames -- Where the "e" is for Everybody!(R) Forward-Looking Statement Safe Harbor: - -------------------------------------- This press release contains certain forward-looking statements, including without limitation, statements regarding: the payment of a cash dividend on February 22, 2005 and the Company's intention to continue to pay a comparable quarterly cash dividend in future periods; recouping previously lost momentum in the retail marketplace by continuing to bring out more PC games at affordable prices; seeking to expand the Company's share of North American retail shelf space allocated to affordably priced PC software games; the Company's business strategy remaining concentrated on executing viable profit and cash generating opportunities at retail and online through the Internet, while continuing to evaluate potentially profitable business development and licensing alternatives in untapped and traditional distribution channels; the Company's hope that issuing a quarterly cash dividend will increase shareholder value more than the previously announced stock repurchase program that the Company has decided not to pursue; the Company's continued access to a $750,000 credit facility with Hudson United Bank; and other statements that contain the words "believes" ,"expects", "may" "should" or "anticipates". The actual results achieved by the Company and the factors that could cause actual results to differ materially from those indicated by the forward-looking statements are in many ways beyond the Company's control. 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, those discussed under the heading "Factors Affecting Future Performance" in the Company's Quarterly Report on Form 10-QSB for the quarter ended September 30, 2004 and Annual Report on Form 10-KSB for the fiscal year ended June 30, 2004, both filed with the Securities and Exchange Commission. Contact Information at eGames, Inc. - ----------------------------------- Jerry Klein, President & CEO (215) 750-6606 (Ext. 118) Tom Murphy, Vice President & CFO (215) 750-6606 (Ext. 113) -----END PRIVACY-ENHANCED MESSAGE-----