-----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, Tc52613R9xzdPlC+njsSbBWLcrgk9bpROAlmlojSZNupAcdEfgg90YQABjOaTDjr sn8l4qjuBDz7c7R81kN+sA== 0000948703-05-000015.txt : 20050502 0000948703-05-000015.hdr.sgml : 20050502 20050502090837 ACCESSION NUMBER: 0000948703-05-000015 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050331 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050502 DATE AS OF CHANGE: 20050502 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: 033-95122 FILM NUMBER: 05788446 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 form8kq3-05earn.txt Q3-2005 EARNINGS ANNOUNCEMENT 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): May 2, 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 May 2, 2005, eGames, Inc. (the "Company") issued a press release announcing its results for the third quarter ended March 31, 2005. 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 May 2, 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: May 2, 2005 EX-99 2 ex991q3-05earn.txt Q3-2005 EARNINGS PRESS RELEASE EXHIBIT 99.1 eGames Announces Fiscal 2005 Third Quarter Financial Results Langhorne, Pa., - May 2, 2005 (PRIMEZONE) - eGames, Inc. (OTCBB: EGAM), a publisher of Family Friendly(TM), affordable consumer entertainment PC software games, today announced financial results for the three and nine months ended March 31, 2005. Financial Results: - ------------------ For the three months ended March 31, 2005, net sales decreased by $693,000, or 32%, to $1,460,000, compared to $2,153,000 in net sales for the three months ended March 31, 2004. For the quarter ended March 31, 2005, net income was $46,000, or $0.00 per diluted share, compared to net income of $528,000, or $0.05 per diluted share, for the quarter ended March 31, 2004. For the nine months ended March 31, 2005, net sales decreased by $1,771,000, or 28%, to $4,550,000 compared to $6,321,000 for the same year ago period. For the nine months ended March 31, 2005, net income was $157,000, or $0.01 per diluted share, compared to $1,478,000, or $0.14 per diluted share, for the same nine-month period a year earlier. Third Quarter Fiscal 2005 - Summary: - ------------------------------------ The $693,000 decrease in overall net sales was caused by a $752,000 decline in net sales to software distributors that serve North American mass-merchants and other major retailers, driven by a $651,000 decrease in net sales to Atari, the Company's primary software distributor within the United States. Atari's reduced purchasing requirements during the current quarter continued to reflect the reduction in overall retail shelf space being allotted for PC software games at the $9.99 retail price point. This decrease in net sales to software distributors was partially offset by a $94,000 increase in worldwide licensing revenues and a $17,000 increase in Internet related sales. The Company earned net income of $46,000 during the quarter ended March 31, 2005 compared to the year ago quarter in which the Company earned $528,000 in net income. This $482,000 decrease in profitability for the quarter ended March 31, 2005 compared to the year ago quarter was primarily a result of a $465,000 decline in gross profit, combined with a $35,000 increase in operating expenses that was traceable to increased legal fees incurred in enforcing the Company's intellectual property rights. The $465,000 decline in gross profit resulted from a 32% decrease in net sales, combined with a 3.7% reduction in the gross profit margin that was caused by cost increases, as a percentage of net sales, of: o 4.1% in royalty expense resulting from the write-down of advance royalty payments for certain game titles that did not achieve expected consumer demand, combined with the impact from product mix changes; and o 1.7% in freight expense resulting from increased product shipments of smaller per order deliveries of box titles to retailers, combined with decreased product shipments to Atari that are more cost effective due to covering shorter distances and including larger unit requirements per delivery. These cost increases, as a percentage of net sales, were partially offset by a cost decrease, as a percentage of net sales, of 2.7% in product costs driven by an increase in worldwide licensing revenues, along with a decrease in inventory liquidation sales. The following table represents the Company's net sales by distribution channel for the three and nine months ended March 31, 2005 and 2004, respectively: Net Sales by Distribution Channel --------------------------------- (rounded to the nearest thousand) ---------------------------------
Three Months Ended March 31, --------------------------------------- Increase % Distribution Channel 2005 % 2004 % (Decrease) Change - --------------------------------------------------------------------------------------------- Software Distributors $ 1,017,000 70% $ 1,769,000 82% ($ 752,000) (43%) Software Retailers 135,000 9% 166,000 8% (31,000) (19%) Licensing 176,000 12% 82,000 4% 94,000 115% Internet 96,000 7% 79,000 4% 17,000 22% Inventory Liquidators 36,000 2% 57,000 2% (21,000) (37%) - --------------------------------------------------------------------------------------------- Totals $ 1,460,000 100% $ 2,153,000 100% ($ 693,000) (32%) =========== ==== =========== ==== ========== ===
Nine Months Ended March 31, ------------------------------------- Increase % Distribution Channel 2005 % 2004 % (Decrease) Change - --------------------------------------------------------------------------------------------- Software Distributors $ 3,274,000 72% $ 5,169,000 82% ($ 1,895,000) (37%) Software Retailers 433,000 10% 532,000 8% (99,000) (19%) Licensing 423,000 9% 292,000 5% 131,000 45% Internet 242,000 5% 217,000 3% 25,000 12% Inventory Liquidators 178,000 4% 111,000 2% 67,000 60% - --------------------------------------------------------------------------------------------- Totals $ 4,550,000 100% $ 6,321,000 100% ($ 1,771,000) (28%) =========== ==== =========== ==== =========== ===
Comments: - --------- "The third quarter of fiscal 2005 reflected our continuing challenge to compensate for the reduced amount of retail shelf space being allotted to $9.99 PC game software that has occurred since the comparable year ago periods," said Jerry Klein, President and Chief Executive Officer. "Although we did not achieve the levels of profitability that we had during the comparable periods last year, we continue seeking innovative and profitable ways to expand our share of the North American retail market for affordably priced PC software games," Mr. Klein continued. Mr. Klein further commented that, "our business strategy continues to concentrate on seeking and executing profitable cash generating opportunities at retail, as well as profitably increasing our online sales on the Internet and through potential licensing and OEM opportunities. During the fourth quarter of fiscal 2005 we will be shipping our first order to one of the larger dollar store chains. We see the dollar store market as a viable opportunity to increase our retail distribution in North America. We have an extensive back catalog of exceptional casual gaming content that can be affordably and profitably packaged for the dollar store market. We have also recently signed agreements with several widely-recognized and high traffic websites for the distribution of our products on their websites. Additionally, we have entered into agreements with two of the leaders in the direct sales marketplace. These are all licensing relationships that we expect to generate incremental revenues in future quarters. And perhaps most importantly, we have recently increased our retail distribution via a software distribution relationship for jewel case product with Microgistix, Inc. During the fourth quarter of 2005, we expect to begin realizing the benefit of this significant distribution presence. "Our financial condition remains strong, as indicated by our solid balance sheet, positive cash flow and profitability, in addition to paying our first quarterly cash dividend on February 22, 2005 and declaring our second cash dividend payable May 25, 2005 to shareholders of record as of May 17, 2005. Lastly, at March 31, 2005 we had net working capital of $3.8 million, $2.3 million of which was cash, and no bank debt." eGames, Inc. Balance Sheets (Unaudited) (Audited) As of As of March 31, June 30, ----------- ----------- ASSETS 2005 2004 - ------ ----------- ----------- Current assets: Cash and cash equivalents $ 2,275,038 $ 1,742,224 Accounts receivable, net 795,834 1,533,859 Inventory, net 932,954 814,286 Prepaid and other expenses 315,968 440,131 ----------- ----------- Total current assets 4,319,794 4,530,500 Furniture and equipment, net 59,398 74,859 Intangible assets 24,089 24,089 ----------- ----------- Total assets $ 4,403,281 $ 4,629,448 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable $ 200,082 $ 441,016 Accrued expenses 351,445 616,794 ----------- ----------- Total current liabilities 551,527 1,057,810 ----------- ----------- Stockholders' equity: Common stock 9,179,827 9,179,827 Additional paid-in capital 1,615,778 1,329,164 Accumulated deficit (6,442,434) (6,435,936) Treasury stock (501,417) (501,417) ----------- ----------- Total stockholders' equity 3,851,754 3,571,638 ----------- ----------- Total liabilities and stockholders' equity $ 4,403,281 $ 4,629,448 =========== =========== eGames, Inc. Statements of Operations (Unaudited)
Three Months Ended Nine Months Ended March 31, March 31, ---------------------------- ---------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Net sales $ 1,459,623 $ 2,152,859 $ 4,550,082 $ 6,320,892 Cost of sales 646,116 874,230 2,056,508 2,585,045 ------------ ------------ ------------ ------------ Gross profit 813,507 1,278,629 2,493,574 3,735,847 Operating expenses: Product development 101,894 119,344 444,887 386,431 Selling, general and administrative 660,969 608,454 1,879,634 1,800,271 ------------ ------------ ------------ ------------ Total operating expenses 762,863 727,798 2,324,521 2,186,702 ------------ ------------ ------------ ------------ Operating income 50,644 550,831 169,053 1,549,145 Interest (income) expense, net (2,007) (2,430) (4,834) 1,087 ------------ ------------ ------------ ------------ Income before income taxes 52,651 553,261 173,887 1,548,058 Provision for income taxes 6,483 25,137 16,784 70,335 ------------ ------------ ------------ ------------ Net income $ 46,168 $ 528,124 $ 157,103 $ 1,477,723 ============ ============ ============ ============ Net income per common share: - Basic $ 0.00 $ 0.05 $ 0.02 $ 0.15 ====== ====== ====== ====== - Diluted $ 0.00 $ 0.05 $ 0.01 $ 0.14 ====== ====== ====== ====== Weighted average common shares outstanding - Basic 10,655,108 9,989,337 10,291,370 9,989,337 Dilutive effect of common share equivalents 375,041 1,380,022 700,962 886,948 ---------- ---------- ---------- ---------- Weighted average common shares outstanding - Diluted 11,030,149 11,369,359 10,992,332 10,876,285 ========== ========== ========== ==========
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 Company's plan to continue seeking innovative and profitable ways to expand its share of the North American retail market for affordably priced PC software games; the Company's business strategy of concentrating on seeking and executing profitable cash generating opportunities at retail, and profitably increasing online sales, licensing and OEM revenues; the Company's expected shipment during the fourth fiscal quarter to one of the larger dollar store chains, and the expectation that the dollar store market is a viable opportunity to increase the Company's retail distribution in North America; the distribution of the Company's products on the websites of several widely-recognized and high traffic websites; the Company's expectation that several recent licensing relationships will generate incremental revenues in future quarters; the recent increase in retail distribution through Microgistix, Inc., and the expectation that during the fourth quarter of fiscal 2005 the Company will begin to realize the benefit of this new distribution relationship; the Company's expectation that it will pay a second cash dividend on May 25, 2005 to shareholders of record as of May 17, 2005; 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 December 31, 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: - -------- 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-----