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): October 20, 1999
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)
<PAGE>
Item 5. Other Events.
On October 20, 1999, eGames, Inc. (the "Company") issued a press
release announcing the Company's unaudited results for the first quarter ended
September 30, 1999, as described in the press release attached as Exhibit 99.1
and incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a. None.
b. None.
c. Exhibits.
99.1 Press release dated October 20, 1999.
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/ Gerald W. Klein
------------------------------
Gerald W. Klein, President and
Chief Executive Officer
Dated: October 20, 1999
EXHIBIT 99.1
At eGames, Inc. At The Financial Relations Board:
- --------------- ---------------------------------
Jerry Klein Glenn Sapadin (212) 661-8030 (General Inquiries)
President and CEO Jean Young (212) 661-8030 (Investor Inquiries)
(215) 750-6606 (Ext. 118) Deanne Eagle (212) 661-8030 (Media Inquiries)
For Immediate Release
eGAMES ANNOUNCES RECORD FISCAL 2000
FIRST QUARTER RESULTS
Fiscal 2000 1Q Highlights
o Net sales increase 64%, to $4.1 million
o Net income grows 43% to $577,000, or $0.06 per diluted share
o Enters new relationship with OfficeMax to carry complete line of Game
Master(TM) products
o Achieves new distribution relationships with Office Depot, Circuit City,
Babbages, Musicland and more than a dozen other retail chains
o Expands international distribution into five new countries
o Builds strategic partnership with Conducent, Inc. to enable advertising on its
entertainment software
Langhorne, PA - October 20, 1999 - eGames, Inc. (Nasdaq: EGAM), a leading
publisher and developer of Family Friendly(TM), value-priced computer software
games for players of all ages, today announced record results for the first
quarter of fiscal 2000, ended September 30, 1999.
Record First Quarter Results
For the first quarter of fiscal 2000, the Company's net sales increased 64% to
$4.1 million, compared to $2.5 million for the first quarter of fiscal 1999.
This increase in sales reflects both increased shipments to certain existing
customers and first-time shipments to new customers, both domestically and
abroad. Of note, international sales for the first three months of fiscal 2000
grew approximately 44% to $649,000, compared to $451,000 for the same
three-month period of fiscal 1999. The Company's international sales were
particularly strong in Germany and the United Kingdom.
Net income for the fiscal 2000 first quarter rose 43% to $577,000, or $0.06 per
diluted share, compared to net income of $403,000, or $0.04 per diluted share
for the fiscal 1999 first quarter.
The Company's fiscal 2000 first quarter gross and operating margins were 61.1%
and 16.3%, respectively, compared to 64.9% and 17.6% for the fiscal 1999 first
quarter. This decrease in margins reflects increased freight costs associated
with the Company's expansion into new retail outlets and higher royalty costs
associated with the Company's shift to 100% "full-release" products, in contrast
to shareware products that were still part of the Company's product line in the
fiscal 1999 first quarter. Management anticipates that the Company's margins
will benefit in subsequent quarters from improved economies of scale as it more
deeply penetrates its newer markets leading to increased unit sales volumes.
Importantly, eGames' operating expenses were down as a percentage of net sales,
reflecting management's ability to effectively manage the Company's SG&A and
product development expenses during the quarter.
<PAGE>
Building New Relationships
Among the Company's new retail partnerships established during the first three
months of fiscal 2000 are relationships with Office Max, Office Depot, Staples,
Circuit City, Sam's Club, Babbages, Hastings, Musicland, Boscov's, Fry's,
Nationwide Computers, BJ's Wholesale and AAFES. AAFES is the military Army/Air
Force Exchange Stores.
Also of note, in July the Company announced a new partnership with Conducent,
Inc., which will enable eGames to incorporate advertising and Internet
functionality (search, e-commerce buttons) into the eGames software. Conducent's
technology is expected to generate valuable end-user data for eGames' market
research efforts and has the potential to provide incremental advertising
revenue. In addition, Conducent's relationships with leading Internet portals,
including Lycos, have provided a means for increasing the visibility of the
eGames brand. As previously announced, visitors to the Lycos.com web site can
now download and play many of the eGames demos and hyperlink to the eGames web
site via Lycos.com to shop in the eGames superstore.
Comments From Management
According to Jerry Klein, President and Chief Executive Officer of eGames,
"Fiscal 2000 has started off to be a very exciting year for eGames. Our
significantly improved profitability reflects our ability to more deeply
penetrate our existing retail base and build new retail relationships as we
continue to implement our direct-to-market strategy. Over the past three months
alone we have entered into new distribution relationships with more than a dozen
major retail chains. These relationships are in addition to last quarter's
announcement of new relationships with Rite Aid, Toys R Us and Electronics
Boutique. Importantly, 19 of the top 20 retail chains nationwide are now our
customers.
"In addition to these new domestic retail relationships, we have also expanded
our international distribution over the past three months into five new
countries, bringing our overall total retail distribution to more than 35
countries. Moreover, we are now publishing our titles in six different
languages: French, German, Spanish, Italian, Portuguese, and English," said Mr.
Klein.
"Behind this success, our exceptional sales and marketing team continues to
demonstrate its ability to build strong relationships with buyers. This was
further demonstrated by our being nominated by retail buyers at the September
Retail Vision Trade Show for the Best Merchandising Program and Best Product in
the Edutainment/Entertainment category.
"Our eGames brand has been experiencing strong sell though at many retail
outlets, which has led to a number of our existing retail partners expanding the
number of eGames' titles they carry. As a case in point, during the past three
months Wal-Mart has added six new eGames' titles to their in-store display. This
has been made possible by our continued focus on delivering high-quality games
to the rapidly growing family friendly, value-priced segment of the home
computer market," continued Mr. Klein.
<PAGE>
"Six months ago we embarked on an aggressive new distribution strategy which has
enabled us to emerge as a stronger company with a significantly broader reach. I
am very pleased with the results of that decision given our current market
position and where we see ourselves heading as we proceed farther along into
fiscal 2000. Specifically, for the remainder of fiscal 2000 we plan to maintain
our sharp focus on building relationships, delivering quality product and
growing the eGames brand," concluded Mr. Klein.
As of September 30, 1999, the Company's balance sheet remains strong with a
current ratio of 2.2 and a long-term debt to total capitalization ratio of less
than 5%.
eGames, Inc., headquartered in Langhorne, Pa., develops, publishes and markets a
diversified line of personal computer software primarily for consumer
entertainment and personal productivity. eGames promotes the eGames(TM), Game
Master Series(TM), Multi-Pack and Galaxy of Home Office Help(TM) brand names
(the "eGames Series") in order to generate customer loyalty, encourage repeat
purchases and differentiate the eGames Software products to retailers and
consumers.
Additional information regarding eGames, Inc. can be found on the Company's web
site at www.egames.com.
This press release contains certain forward-looking statements, including
without limitation, statements regarding improvements to eGames' gross profit
and operating margins, eGames' ability to successfully integrate the Conducent,
Inc. advertising technology into its products; eGames' ability to generate
advertising revenue as a result of its partnership with Conducent, Inc.; eGames
ability to continue to expand the distribution of its products into retail
markets; and the success of eGames' new sales and distribution strategy. 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: eGames'
ability to continue to enter into new distribution and direct sales
relationships on commercially acceptable terms; 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;
fluctuating costs of developing, producing and marketing the Company's products;
the Company's ability to license or develop quality content for its products;
the timeliness and success of developing and selling products; the acceptance by
the market of the eGames products; 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, 1999, filed by eGames
(formerly RomTech) with the Securities and Exchange Commission.
-financial tables follow-
<PAGE>
eGames, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales $ 4,117,575 $ 2,506,200
Cost of sales 1,603,308 880,577
----------- -----------
Gross profit 2,514,267 1,625,623
Operating expenses:
Product development 242,847 205,667
Selling, general and administrative 1,600,406 979,642
----------- -----------
Total operating expenses 1,843,253 1,185,309
----------- -----------
Operating income 671,014 440,314
Interest expense, net 5,100 10,649
----------- -----------
Income before income taxes 665,914 429,665
Provision for income taxes 89,295 26,300
----------- -----------
Net income $ 576,619 $ 403,365
=========== ===========
Net income per common share:
- Basic $ 0.06 $ 0.04
=========== ===========
- Diluted $ 0.06 $ 0.04
=========== ===========
Weighted average common shares outstanding - Basic 9,633,973 9,442,329
Dilutive effect of common stock equivalents 503,569 164,508
----------- -----------
Weighted average common shares outstanding - Diluted 10,137,542 9,606,837
=========== ===========
</TABLE>
<PAGE>
eGames, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
As of
September 30,
ASSETS 1999
----
<S> <C>
Current assets:
Cash and cash equivalents $ 549,964
Accounts receivable, net of allowances totaling $1,007,949 4,581,159
Inventory 1,104,617
Prepaid expenses 74,129
-----------
Total current assets 6,309,869
Furniture and equipment, net 358,714
Other assets 435,754
-----------
Total assets $ 7,104,337
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable $ 51,283
Accounts payable 1,698,920
Accrued expenses 1,073,005
Capital lease obligations 22,025
-----------
Total current liabilities 2,845,233
Capital lease obligations, net of current portion 18,284
Note payable, net of current portion 161,434
Convertible subordinated debt 150,000
-----------
Total liabilities 3,174,951
Stockholders' equity:
Common stock, no par value (40,000,000 shares authorized;
9,893,390 issued and 9,661,490 outstanding) 8,984,889
Additional paid in capital 1,148,550
Accumulated deficit (5,691,550)
Treasury stock, at cost - 231,900 shares (501,417)
Accumulated other comprehensive loss (11,086)
-----------
Total stockholders' equity 3,929,386
-----------
Total liabilities and stockholders' equity $ 7,104,337
===========
</TABLE>
