EXHIBIT 99.1
At eGames, Inc. At The Financial Relations Board:
--------------- ---------------------------------
Jerry Klein Glenn Sapadin (212) 661-8030
President and CEO
(215) 750-6606 (Ext. 118)
Tom Murphy
VP, Finance and CFO
(215) 750-6606 (Ext. 113)
For Immediate Release
EGAMES REPORTS FISCAL FOURTH QUARTER EPS OF $0.01
ON NET SALES INCREASE OF 123%
Record Fourth Quarter and Full-Year Net Sales Benefit From Expanding
Distribution Channels
Langhorne, PA - July 27, 2000 - 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 financial results for the fiscal fourth
quarter and year ended June 30, 2000.
Net sales for the fiscal 2000 fourth quarter increased 123% to $3.1 million,
compared to $1.4 million for the same period a year earlier. The Company's gross
profit for the fiscal 2000 fourth quarter more than doubled to $1,804,000, or
58.6% of net sales, compared to $741,000, or $53.6% of net sales, in the
Company's fiscal 1999 fourth quarter. This $1,063,000 increase in gross profit,
or 143% improvement, represents higher net sales and gross profits achieved
through the expansion of the Company's retail distribution network and the
Company's corresponding increase in market share within the value-priced
software category.
Net income for the fiscal 2000 fourth quarter was $77,000, or $0.01 per diluted
share, compared to a net loss of $863,000, or $0.09 per diluted share, for the
fourth quarter of 1999, representing the Company's first-ever profitable fiscal
fourth quarter. The Company's improved bottom-line performance reflects a
significant increase in net sales combined with management's ability to
effectively manage fixed expenses.
Net sales for the fiscal 2000 year-end were $13.6 million, an increase of 36%,
compared to net sales of $10 million for the fiscal 1999 year-end. Net income
for the 2000 fiscal year was $458,000, or $0.05 per diluted share, compared to
net income of $463,000, or $0.05 per diluted share, for the 1999 fiscal year.
Jerry Klein, President and Chief Executive Officer of eGames, said, "We are very
pleased with our strong fourth quarter performance as demand for our product
increased, reflecting our focus on delivering high-quality Family Friendly games
to the value-priced segment of the home computer market. This in turn has
enabled us to more than double our market share over the past year, from 2% in
May 1999 to 4.6% in May 2000 according to independent research by both PC Data
and the NPD Group.
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"eGames' business model is significantly different today than what it was when
we entered fiscal 2000. As a result of our direct-to-market sales strategy
launched in March 1999, 32% of the Company's fiscal 2000 net sales came from
direct sales to North American retailers, versus only 5% for fiscal 1999.
Moreover, eGames made significant inroads into the food and drug retail markets,
resulting in 13.5% of fiscal 2000 revenues being generated through these
retailers, versus only 3.4% in fiscal 1999," continued Mr. Klein.
"Whereas almost 70% of our net sales were generated through third-party
distributors in 1999, we have brought that number down to 48% in fiscal 2000.
This was made possible by our ability to successfully develop direct
relationships with more than a dozen major retail chains including Walgreen's,
Staples and CompUSA," said Mr. Klein.
"While our direct-to-market strategy is working very well, we continue to see
significant sales generated through our third-party distributors. Our
relationships with GT Interactive, Navarre, Merisel and Beamscope, in
particular, have been very fruitful as sales via each of these distributors grew
significantly, compared to both fourth quarter and full-year fiscal 1999
results. Meanwhile, sales made through our e-commerce superstore, launched in
January 1999, have more than tripled to $177,000 in fiscal 2000, compared to
$51,000 in fiscal 1999. We believe that the www.egames.com web site has also
helped to promote offline sales, as gaming enthusiasts can sample our games
online before buying them at their favorite store," added Mr. Klein.
"Our Store-In-A-Store program is another strategy intended to increase sales
going forward. The Store-In-A-Store concept seeks to market high-quality,
value-priced games from a variety of leading publishers in one display unit,
including eGames and other leading game publishers. Initial interest from
retailers has been strong as we prepare to roll-out the program later this
summer in time for the back-to-school selling season. This program is intended
to further expand our market share and contribute to improved top and
bottom-line results in fiscal 2001," concluded Mr. Klein.
eGames, Inc., headquartered in Langhorne, PA, develops, publishes and markets a
diversified line of personal computer software primarily for consumer
entertainment and personal productivity. The Company promotes the eGames(TM),
Game Master Series(TM), Multi-Pack and Galaxy of Home Office Help(TM) brand
names 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.
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This press release contains certain forward-looking statements, including
without limitation, statements regarding the ability of the Company's
Store-in-a-Store program to increase sales in the future; the success of the
roll-out of the Company's Store-in-a-Store program and the timing of this
roll-out; the ability of the Store-in-a-Store Program to increase the Company's
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market share and improve top and bottom-line results for fiscal 2001; and the
continued success of the Company's business strategy to generate positive
financial performance. 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 following important
factors, among others, could cause the Company's actual results to differ
materially from those expressed in this press release: the Company's ability to
sell the Store-in-a-Store program to retailers on commercially acceptable terms
and the timely implementation of the program; successful sell-through results
for the Company's products at retail stores; the ability of the Company to
accurately estimate sell-through volume when an order is shipped; the amount of
unsold product that is returned to the Company by retail stores; the Company's
ability to accurately predict the amount of product returns that will occur and
the adequacy of the reserves established for such returns; the Company's ability
to continue to enter into new distribution and direct sales relationships on
commercially acceptable terms as well as the ability to generate continued sales
within existing retail and distribution relationships; the ability of the
Company to continue to increase its market share; increased selling, general and
administrative costs, including increased legal expenses, costs and charges; the
allocation of adequate shelf space for the Company's products in major chain
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 Company's
products; and various other risk factors described in the Company's reports,
including Form 10-KSB for the year ended June 30, 1999 and Form 10-QSB for the
quarter ended March 31, 2000, filed by the Company with the Securities and
Exchange Commission.
-financial tables follow-
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eGames, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Years ended
June 30, June 30,
------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 3,077,595 $ 1,383,264 $13,640,160 $10,022,305
Cost of sales 1,274,025 642,182 5,271,828 3,596,982
----------- ----------- ----------- -----------
Gross profit 1,803,570 741,082 8,368,332 6,425,323
Operating expenses:
Product development 195,256 233,772 860,327 936,938
Selling, general and administrative 1,528,490 1,350,073 6,957,707 4,814,345
----------- ----------- ----------- -----------
Total operating expenses 1,723,746 1,583,845 7,818,034 5,751,283
Operating income (loss) 79,824 (842,763) 550,298 674,040
Interest expense (income), net 256 (666) 11,967 31,761
----------- ----------- ----------- -----------
Income (loss) before income taxes 79,568 (842,097) 538,331 642,279
Provision for income taxes 2,454 20,937 80,750 179,724
----------- ----------- ----------- -----------
Net income (loss) $ 77,114 ($ 863,034) $ 457,581 $ 462,555
=========== =========== =========== ===========
Net income (loss) per common share:
- Basic $ 0.01 ($ 0.09) $ 0.05 $ 0.05
=========== =========== =========== ===========
- Diluted $ 0.01 ($ 0.09) $ 0.05 $ 0.05
=========== =========== =========== ===========
Weighted average common shares
outstanding - Basic 9,749,975 9,600,935 9,706,813 9,494,988
Dilutive effect of common stock equivalents 50,744 - 0 - 290,200 344,453
----------- ----------- ----------- -----------
Weighted average common shares
outstanding - Diluted 9,800,719 9,600,935 9,997,013 9,839,441
=========== =========== =========== ===========
</TABLE>
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eGames, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
As of
June 30,
2000
--------
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 1,139,178
Accounts receivable, net of allowances - $1,329,098 2,742,414
Inventory 2,175,142
Prepaid expenses 263,595
-----------
Total current assets 6,320,329
Furniture and equipment, net 336,135
Other assets 295,043
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Total assets $ 6,951,507
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 59,487
Accounts payable 2,073,076
Accrued expenses 623,189
Convertible subordinated debt 150,000
Capital lease obligations 18,971
-----------
Total current liabilities 2,924,723
Capital lease obligations, net of current portion 984
Notes payable, net of current portion 124,220
------------------------------------- -----------
Total liabilities 3,049,927
Stockholders' equity:
Common stock, no par value (40,000,000 shares authorized;
9,981,875 issued and 9,749,975 outstanding) 9,134,234
Additional paid-in capital 1,148,550
Accumulated deficit (5,810,588)
Treasury stock, at cost - 231,900 shares (501,417)
Accumulated other comprehensive loss (69,199)
-----------
Total stockholders' equity 3,901,580
-----------
Total liabilities and stockholders' equity $ 6,951,507
===========
</TABLE>
