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Tuesday April 20, 8:39 am Eastern Time
Company Press Release
SOURCE: eGames, Inc.
eGames, Inc. Announces Results for Third Quarter
and First Nine-Months Of Fiscal 1999
Key 3Q Operating Highlights: -- Company changes name from RomTech to eGames -- Company enters into new distribution and marketing agreement with Digital River for Electronic Software Delivery (ESD) -- Hits to www.eGames.com web page increase online sales by 240% -- Company
repurchases 201,900 shares of eGames' stock at an average price of $1.94
LANGHORNE, Pa., April 20 /PRNewswire/ -- eGames, Inc. (Nasdaq: EGAM - news), the leading provider of Family Friendly(TM), value-priced computer software games for players of all ages, today announced results for the third fiscal quarter and nine months ended March 31, 1999. These results are consistent with the Company's announcement of April 5th.
Net sales for the quarter ended March 31, 1999 were $2,521,715 versus sales of $2,953,543 for the comparable quarter a year earlier, a decrease of 14.6%. Net income for the third fiscal quarter was $75,254, or $0.01 per diluted share versus $607,318, or $0.06 per diluted share for the third quarter a year earlier.
The Company's results for its third fiscal quarter of 1999 reflect a reduction in sales stemming from the transition associated with the launch of eGames' new sales strategy. This strategy is primarily designed to increase the Company's sales directly to retailers and is expected to improve the Company's operating margins and expand its North American retail distribution going forward.
NINE MONTH RESULTS
Sales for the nine months ended March 31, 1999 increased 17.6% to $8,639,041, versus sales of $7,344,727 for the same period a year earlier. Net income for the first nine-months of fiscal 1999 was $1,325,589, or $0.13 per diluted share, versus net income of $1,269,067, or $0.13 per diluted share, for the comparable nine month period of fiscal 1998. Of note, bottom-line results for the first nine months of fiscal 1999 reflect a significantly increased tax rate over that of the first nine months of fiscal 1998.
Diluted earnings per share for the first nine months of fiscal 1999 have already exceeded the $0.12 diluted per share earnings reported for full-year fiscal 1998, reflecting the effective implementation of the Company's focused business strategy. Management remains comfortable with its previously revised earnings' goal of between $0.18 and $0.20 for the 1999 fiscal year.
As of March 31, 1999, the Company's balance sheet remained strong with $1.8 million in cash and cash equivalents and $367,000 in long-term debt. Long-term debt is down slightly from approximately $415,000 at March 31, 1998. As of March 31, 1999, the Company's long-term debt to equity ratio was 8.6%.
REVISED SALES STRATEGY
On April 5, eGames announced that it had revised its exclusive North American distribution relationship with GT Interactive Software Corporation's Value Products Division (''GT Value Products,'' a division of GT Interactive Software Corporation, (Nasdaq: GTIS - news)). Under the revised distribution relationship, GT Value Products will continue to serve as the Company's exclusive distributor for WalMart, Target and Kmart stores. The former distribution agreement between the Company and GT Value Products, which had required that all of the Company's products in North America be distributed to
retail outlets through GT Value Products, has been terminated.
As a result of the change in the Company's relationship with GT Value Products, the Company will be able to pursue relationships with other distribution partners as well as direct sales to retailers.
MANAGEMENT'S COMMENTS
''We are optimistic regarding the Company's new sales strategy and the anticipated effect it will have on our ability to continue to grow both our top and bottom line going forward. We expect that our new distribution strategy will enable us to increase our operating margins while maintaining our low price points. Since a large percentage of our margins traditionally went to our distribution partner, we expect that we will begin realizing a significant portion of the benefits of this new arrangement in the near future,'' stated Jerry Klein, President and Chief Executive Officer of eGames.
''Our commitment to the value-priced, family-friendly software gaming market combined with the increasing popularity of our Galaxy Software brand are key elements of our focused, long-term business strategy. Going forward, we seek to expand our domestic and international reach, both by creating new strategic relationships and aggressively implementing our e-commerce strategy,'' continued Mr. Klein.
''With respect to the progress of our e-commerce strategy, the number of hits registered to our egames.com web site has significantly increased since last quarter, resulting in a 240% increase in online sales over the past three months. In January we announced a distribution and marketing agreement with Digital River, the leader in electronic software delivery (ESD), which has greatly enhanced our presence on the Internet. This means that consumers can now purchase any of our games online and begin playing them within minutes,'' concluded Mr. Klein.
Also during the third fiscal quarter, in February the Company changed its name from RomTech to eGames, Inc. and officially launched its www.eGames.com web site. This name change reflects the Company's commitment to the PC gaming market and its new Internet strategy as a means of complementing retail sales.
eGames' Board of Directors approved a $1 million stock buyback program on October 26, 1998. To date the Company has repurchased 201,900 shares at an average price of $1.94 per share.
eGames, Inc., headquartered in Langhorne, Pa., develops, publishes and markets a diversified line of personal computer software primarily for consumer entertainment and small office/home office applications. eGames promotes the Galaxy of Games(TM), Galaxy of Home Office Help(TM), Game Master Series(TM) and Galaxy of Arcade(TM) brand names
(''Galaxy Software'') in order to generate customer loyalty, encourage repeat purchases and differentiate the Galaxy Software products to retailers and consumers.
This press release contains certain forward-looking statements, including without limitation, statements regarding eGames' business strategy, the success of eGames' Galaxy branding strategy and Game Master Series product, eGames' revised sales strategy and anticipated sales and earnings' growth in 1999 and beyond. The actual results achieved by eGames and the factors that could cause actual results to differ materially from those indicated by the forward-looking statements, are in many ways beyond eGames' control. eGames cautions readers that the following important factors, among others, could cause the Company's actual results to differ materially from those expressed in this press release: the allocation of adequate shelf space for eGames' products in major chain retail stores; successful sell-through results for eGames' products at retail stores;
downward pricing pressure; the timeliness and success of developing and selling products; the acceptance by the market of the Game Master and other Galaxy products; access to and control over distribution channels; consumers' continuing demand for value-priced software; competition; the ability to create successful strategic partnerships and implement its Internet strategy; and various other factors described in eGames' reports, including Form 10-KSB, dated June 30, 1998, and Form 10-QSB dated December 31, 1998, filed by eGames (formerly RomTech) with the Securities and Exchange Commission.
eGames, Inc.
Consolidated Statements of Operations
(Un-audited)
Three months ended Nine months ended
March 31, March 31,
1999 1998 1999 1998
Net sales $2,521,715 $2,953,543 $8,639,041 $7,344,727
Cost of sales 937,492 1,115,977 2,954,800 2,752,600
Gross profit 1,584,223 1,837,566 5,684,241 4,592,127
Operating expenses:
Product development 260,534 99,553 703,166 239,833
Selling, general
and administrative 1,165,769 1,115,183 3,464,272 2,924,550
Total operating
expenses 1,426,303 1,214,736 4,167,438 3,164,383
Operating income 157,920 622,830 1,516,803 1,427,744
Interest expense, net 8,146 13,608 32,427 37,617
Income before taxes 149,774 609,222 1,484,376 1,390,127
Provision for income tax74,520 1,904 158,787 3,069
Net income 75,254 607,318 1,325,589 1,387,058
Accretion of beneficial
conversion feature
on preferred stock - 0 - - 0 - - 0 - (117,991)
Net income attributable
to common stock $75,254 $607,318 $1,325,589 $1,269,067
Net income per common
share:
- Basic $ 0.01 $ 0.07 $ 0.14 $ 0.15
- Diluted $ 0.01 $ 0.06 $ 0.13 $ 0.13
Weighted average common
shares outstanding
- Basic 9,467,659 9,283,659 9,459,673 8,498,607
Dilutive effect of
common stock
equivalents 762,102 550,280 427,189 1,119,945
Weighted average
common shares
outstanding
- diluted 10,229,761 9,833,939 9,886,862 9,618,552
eGames, Inc.
Consolidated Balance Sheet
(Un-audited)
As of
March 31,
ASSETS 1999
Current assets:
Cash and cash equivalents $1,761,414
Restricted cash 17,296
Accounts receivable, net of allowances - $915,262 2,825,503
Inventory 1,105,675
Prepaid expenses 101,178
Total current assets 5,811,066
Furniture and equipment, net 399,493
Other assets 547,413
Total assets $6,757,972
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $169,572
Accounts payable 1,126,238
Accrued expenses 837,215
Capital lease obligations 13,791
Total current liabilities 2,146,816
Capital lease obligations 28,507
Notes payable 188,408
Convertible subordinated debt 150,000
Total liabilities 2,513,731
Stockholders' equity:
Common stock, no par value
(40,000,000 shares authorized;
9,791,508 issued) 8,796,889
Additional paid in capital 1,148,550
Accumulated deficit (5,405,135)
Treasury stock, at cost --
161,900 shares (277,928)
Accumulated other comprehensive income/(loss) (18,135)
Total stockholders' equity 4,244,241
Total liabilities and stockholders' equity $6,757,972
SOURCE: eGames, Inc.
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