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 15, 2006
eGames, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-27102 23-2694937
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2000 Cabot Blvd. West, Suite 110, Langhorne, PA 19047-1833
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 750-6606
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(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 15, 2006, eGames, Inc. (the "Company") issued a press release announcing
its financial results for the third fiscal quarter ended March 31, 2006. The
full text of the press release is set forth in Exhibit 99.1 hereto.
In accordance with General Instruction B.2 of Form 8-K, the information in this
Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be
"filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or otherwise subject to the liability of that
section, and shall not be incorporated by reference into any registration
statement or other document filed under the Securities Act of 1933, as amended,
or the Exchange Act, except as shall be expressly set forth by specific
reference in such filing.
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 15, 2006.
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
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Thomas W. Murphy, Vice President and
Chief Financial Officer
Dated: May 15, 2006
EXHIBIT 99.1
eGames Announces Third Quarter Fiscal 2006 Financial Results
LANGHORNE, Pa., - May 15, 2006 (PRIMEZONE) - eGames, Inc. (OTCBB: EGAM), a
publisher of consumer entertainment PC software games, today announced financial
results for the three and nine months ended March 31, 2006.
Quarter ended March 31, 2006:
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Net sales decreased by $195,000, or 13%, to $1,265,000, for the quarter ended
March 31, 2006, compared to $1,460,000 for the year ago quarter. The $195,000
decrease in net sales resulted from a $172,000 decrease in net sales to North
American software distributors and related primarily to declining distribution
of eGames' value-priced line of PC games due to substantial reductions in retail
shelf space allocated to PC games at the $9.99 price point compared to the year
ago period.
Net loss was $248,000, or $0.02 per diluted share, for the quarter ended March
31, 2006, compared to net income of $46,000, or nil per diluted share, for the
comparable quarter a year earlier. This decline in profitability resulted from a
$260,000 reduction in gross profit due to the impact from the $195,000 decrease
in net sales and an 11.9% decline in gross profit margin compared to last year's
comparative quarter. The decline in gross profit margin was due to continued
downward pricing pressures on value priced titles distributed to certain mass
merchant retailers, along with incremental sales of end-of-life titles to
various discount retailers. The gross profit margin was also reduced by higher
product costs per unit on sales of titles containing multiple CD's and other
value-added materials such as posters, manuals and novelty items relating to
themes of individual games. We also experienced a $50,000 increase in operating
expenses due to greater product development and promotional efforts related to
our new higher priced Cinemaware Marquee titles.
Nine Months ended March 31, 2006:
- ---------------------------------
Net sales decreased by $837,000, or 18%, to $3,713,000, for the nine months
ended March 31, 2006, compared to $4,550,000 for the nine months ended March 31,
2005. Net loss was $535,000, or $0.05 per diluted share, for the nine months
ended March 31, 2006, compared to net income of $157,000, or $0.01 per diluted
share, for the similar nine month period a year earlier.
The following table represents the Company's net sales by distribution channel
for the three and nine months ended March 31, 2006, respectively:
Net Sales by Distribution Channel
(rounded to the nearest thousand)
Three Months Ended
March 31,
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Increase %
Distribution Channel 2006 % 2005 % (Decrease) Change
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Software Distributors $ 845,000 67% $ 1,017,000 70% ($ 172,000) (17%)
Software Retailers 162,000 13% 135,000 9% 27,000 20%
Licensing 157,000 12% 176,000 12% (19,000) (11%)
Internet 68,000 5% 96,000 7% (28,000) (29%)
Inventory Liquidators 33,000 3% 36,000 2% (3,000) (8%)
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Totals $ 1,265,000 100% $ 1,460,000 100% ($ 195,000) (13%)
=========== ==== =========== ==== ========= ===
Nine Months Ended
March 31,
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Increase %
Distribution Channel 2006 % 2005 % (Decrease) Change
- ------------------------------------------------------------------------------------------
Software Distributors $ 2,306,000 62% $ 3,274,000 72% ($ 968,000) (30%)
Software Retailers 510,000 14% 433,000 10% 77,000 18%
Licensing 494,000 13% 423,000 9% 71,000 17%
Internet 212,000 6% 242,000 5% (30,000) (12%)
Inventory Liquidators 191,000 5% 178,000 4% 13,000 7%
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Totals $ 3,713,000 100% $ 4,550,000 100% ($ 837,000) (18%)
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Comments:
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Jerry Klein, President and CEO of eGames, commented "During the third quarter of
fiscal 2006, we experienced continuing unfavorable sales trends from the effects
of retail shelf space erosion for our core line of value-priced PC games at the
$9.99 retail price point, compared to the same period last year. To combat these
trends for value-priced PC games, during this quarter we released three premium
quality PC games under our new brand "Cinemaware Marquee." These higher-priced
titles included: "Space Rangers 2: Rise of the Dominators" priced at $29.99, a
game that has garnered significant media acclaim and received critical praise in
the crowded space combat genre; "Buccaneers Bounty" and "Neighbors From Hell: On
Vacation"; both priced at $19.99. We are committed to growing the Cinemaware
Marquee brand of high quality games for PC gamers looking for innovative games
at great values. As we proceed with this new higher-priced strategy, we will
support these new titles with both traditional and Internet advertising to help
generate consumer awareness and future demand for this brand of titles."
Klein continued, "Last week we announced the launch of Cinemaware Classics, a
brand of games to be developed based on the original Cinemaware properties
employing the 'Cinemaware experience' of melding a captivating storyline with
the grand cinematic experience that differentiated the original Cinemaware game
properties in the late 1980's and early 1990's. Cinemaware Classics will be
revamped for the enjoyment of long-time fans and today's large and growing
audience of new casual game players. Cinemaware Classics will be developed from
the ground up, incorporating many of the most popular genres within each game
such as strategy, action, and role-playing and will employ the latest features
in animation and graphics presentation. The goal is to build upon these
legendary game properties by developing an almost endless catalog of new
episodes, adding logical extensions where appropriate. Developed for the
Internet and PC initially, Cinemaware Classics will each be stand-alone
experiences providing hours of enjoyment. The first two titles are planned to be
released in early 2007, and will include "Defender of the Crown" and one other
yet-to-be-named game from the Cinemaware catalog. The launch of these titles
will coincide with the introduction of our new gaming destination 'portal'."
"We will continue searching for profitable ways to increase the distribution of
our software titles at all price points to the major North American retailers.
To accomplish this goal, during this quarter we continued to successfully
transition our primary North American retail distribution accounts to Take-Two
Interactive, a company with whom we continue to have a strong distribution
relationship. We believe that Take-Two Interactive's sales and marketing force
will give us a needed improvement to our distribution to North American
retailers."
eGames, Inc.
Balance Sheet
(Unaudited)
March 31,
ASSETS 2006
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Current assets:
Cash and cash equivalents $ 1,483,306
Accounts receivable, net 1,009,662
Inventory, net 956,348
Prepaid and other expenses 339,068
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Total current assets 3,788,384
Furniture and equipment, net 30,375
Goodwill 420,000
Intangible assets 24,089
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Total assets $ 4,262,848
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Accounts payable $ 474,367
Accrued expenses 448,621
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Total current liabilities 922,988
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Stockholders' equity:
Common stock 9,179,827
Additional paid-in capital 2,114,477
Accumulated deficit (7,453,027)
Treasury stock (501,417)
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Total stockholders' equity 3,339,860
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Total liabilities and stockholders' equity $ 4,262,848
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eGames, Inc.
Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
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2006 2005 2006 2005
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Net sales $ 1,264,898 $ 1,459,623 $ 3,712,963 $ 4,550,082
Cost of sales 711,223 646,116 2,093,648 2,056,508
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Gross profit 553,675 813,507 1,619,315 2,493,574
Operating expenses:
Product development 164,788 101,894 376,308 444,887
Selling, general and
administrative 647,875 660,969 1,809,777 1,879,634
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Total operating expenses 812,663 762,863 2,186,085 2,324,521
----------- ----------- ----------- -----------
Operating income (loss) (258,988) 50,644 (566,770) 169,053
Interest income, net 11,370 2,007 31,778 4,834
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Income (loss) before income taxes (247,618) 52,651 (534,992) 173,887
Provision for income taxes - 0 - 6,483 - 0 - 16,784
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Net income (loss) ($ 247,618) $ 46,168 ($ 534,992) $ 157,103
=========== =========== =========== ===========
Net income (loss)
per common share:
- Basic ($ 0.02) $ 0.00 ($ 0.05) $ 0.02
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- Diluted ($ 0.02) $ 0.00 ($ 0.05) $ 0.01
====== ====== ====== ======
Weighted average common shares
outstanding - Basic 11,724,193 10,655,108 11,416,555 10,291,370
Dilutive effect of common share
equivalents - 0 - 375,041 - 0 - 700,962
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Weighted average common shares
outstanding - Diluted 11,724,193 11,030,149 11,416,555 10,992,332
========== ========== ========== ==========
About eGames, Inc.
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eGames, Inc., headquartered in Langhorne, PA, publishes and markets a
diversified line of Family Friendly(TM), affordably priced consumer
entertainment PC software games. The Company promotes the eGames(TM) and
Cinemaware(TM) brands in order to generate customer loyalty, encourage repeat
purchases and differentiate eGames software products to retailers and consumers.
Additional information regarding eGames, Inc. can be found at www.egames.com and
www.cinemaware.com.
eGames -- Where the "e" is for Everybody!(R)
Forward-Looking Statement Safe Harbor:
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This press release contains certain forward-looking statements, including
without limitation, statements regarding: our plans to continue to introduce new
higher-priced PC game titles under our Cinemaware Marquee brand, and to support
these new titles with both traditional and Internet advertising to help generate
consumer awareness and future demand; our plans to launch a Cinemaware Classics
brand of games based on the original Cinemaware properties, with the first two
titles planned for release in early 2007; our expectation that the first two
Cinemaware Classics titles will be Defender of the Crown and one other
yet-to-be-named game from the Cinemaware catalog; the launch of our new gaming
destination 'portal' to coincide with the release of the first two Cinemaware
Classics titles; our efforts to profitably increase the distribution of our
software titles to the major North American retailers; 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 Annual
Report on Form 10-KSB for the fiscal year ended June 30, 2005, as filed with the
Securities and Exchange Commission.
CONTACT:
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eGames, Inc.
Jerry Klein, President & CEO
(215) 750-6606 (Ext. 118)
Tom Murphy, Vice President & CFO
(215) 750-6606 (Ext. 113)