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): April 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 April 20, 1999, eGames, Inc. (the "Company") issued a press release
announcing the Company's unaudited results for the third quarter ended March 31,
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 April 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,
Chief Executive Officer and
Chief Financial Officer
Dated: April 21, 1999
EXHIBIT 99.1
At eGames: AT FINANCIAL RELATIONS BOARD:
- ---------- -----------------------------
Jerry Klein Glenn Sapadin (212) 661-8030 (General Inquiries)
President and CEO Elisa Mailman (212) 661-8030 (Investor Inquiries)
(215) 750-6606 ext. 118 Deanne Eagle (212) 661-8030 (Media Inquiries)
[email protected]
For Immediate Release
eGames Inc. Announces Results For Third Quarter And First Nine Months of
Fiscal 1999
Key 3Q Operating Highlights:
- ----------------------------
o Company Changes Name From RomTech to eGames
o Company enters into new distribution and marketing agreement with Digital
River for Electronic Software Delivery (ESD)
o Hits to www.eGames.com web page increase online sales by 240%
o Company repurchases 201,900 shares of eGames' stock at an average price of
$1.94
LANGHORNE, Pa., April 20, 1999 -- eGames, Inc. (Nasdaq:EGAM), 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%.
<PAGE>
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). 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.
eGames, Inc.'s press releases are available free-of-charge by fax by calling
1-800-PRO-INFO and entering ticker symbol EGAM or at Company News at
http:/www.prnewswire.com.
<PAGE>
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.
-Financial Tables Follow-
<PAGE>
eGames, Inc.
Consolidated Statements of Operations
(Un-audited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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 tax ............................ 74,520 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
</TABLE>
<PAGE>
eGames, Inc.
Consolidated Balance Sheet
(Un-audited)
<TABLE>
<CAPTION>
As of
March 31,
ASSETS 1999
-----------
<S> <C>
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
===========
</TABLE>
