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 1, 2000
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
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
On May 1, 2000, eGames, Inc. (the "Company") issued a press release
announcing the Company's unaudited results for the third quarter and nine months
ended March 31, 2000, 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 May 1, 2000.
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: May 2, 2000
EXHIBIT 99.1
At eGames, Inc. At The Financial Relations Board:
- --------------- ---------------------------------
Jerry Klein, Glenn Sapadin (212) 661-8030 (General Inquiries)
President & CEO Jean Young (212) 661-8030 (Investor Inquiries)
(215) 750-6606 (Ext. 118) Deanne Eagle (212) 661-8030 (Media Inquiries)
Tom Murphy,
Vice President & CFO
(215) 750-6606 (Ext. 113)
For Immediate Release
eGames Announces Fiscal Third Quarter 2000 Financial Results
Langhorne, PA - May 1, 2000 -- eGames, Inc. (Nasdaq: EGAM), a leading publisher
and developer of Family Friendly(TM), value-priced software games for players of
all ages, today announced results for the third fiscal quarter and nine months
ended March 31, 2000. These results are consistent with the Company's
announcement of April 17th.
Net sales for the quarter ended March 31, 2000 were $1.9 million, versus net
sales of $2.5 million for the comparable quarter a year earlier, a decrease of
24%. The Company's net loss for the third fiscal quarter was $797,480, or $0.08
per diluted share, versus net income of $75,254, or $0.01 per diluted share, for
the third quarter a year earlier.
As previously announced, the decline in net sales was a result of higher than
expected product returns in the Company's new food and drug distribution
channels during the quarter combined with the challenging business conditions in
the consumer entertainment software marketplace. At the same time, eGames' entry
into new distribution channels resulted in higher selling, general and
administrative expenses associated with increased promotional expenses.
NINE-MONTH RESULTS
- ------------------
Net sales for the nine months ended March 31, 2000 increased 22% to $10.6
million, versus net sales of $8.6 million for the same period a year earlier.
Higher net sales reflect strong sell through at traditional retail outlets, both
domestically and abroad, as well as the Company's entry into more than 24 new
retail chains compared to the number of retail chains at which the Company's
products were sold as of March 31, 1999.
Net income for the first nine months of fiscal 2000 was $380,467, or $0.04 per
diluted share, versus net income of $1,325,589, or $0.13 per diluted share, for
the comparable nine-month period of fiscal 1999. Of note, bottom-line results
for the first nine months of fiscal 2000 reflect a significant increase in
selling, general and administrative expenses as a result of the Company's
announced April 1999 transition to a new distribution strategy, which involved
establishing direct selling relationships with retailers and working with a
network of non-exclusive distributors in the North American markets. According
to Jerry Klein, President and CEO of eGames, "The higher than anticipated
product returns are primarily the result of entering the non-traditional
software markets in food and drug retail stores. With a solid year of experience
in these markets, we believe that we now have a more accurate picture of the
product needs of these retail partners and will adjust our future shipping
volumes and estimates for return provisions accordingly.
<PAGE>
"We continue to aggressively implement our business strategy as we pursue our
long-term growth objectives," continued Mr. Klein. "Two of our key growth
initiatives are our branded browser promotional program and our `Store Within A
Store' strategies and we continue to focus on bringing these strategies to
market in the near term. We look at these initiatives as potential sources of
new revenue streams and as terrific branding opportunities, while maintaining
our confidence that we have the right product mix and development network to
grow our core software gaming business.
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.
This press release contains certain forward-looking statements, including
without limitation, statements regarding the anticipated product needs of food
and drug retailers and the accuracy of the Company's adjustments to future
shipping volumes and product return provisions; the Company's expectation of
bringing its branded browser promotional program and `Store Within A Store'
strategy to market in the near term and the potential for these programs to
result in new revenue streams; and the ability of the Company to grow its core
software gaming business. 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 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: successful sell-through results for the
Company's products at retail stores and 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
successfully sell its branded browser program and its "Store within a Store"
strategy on commercially acceptable terms; 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 relationships; increased selling, general and administrative
costs, including increased legal expenses; 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 December 31, 1999,
filed by eGames with the Securities and Exchange Commission.
-financial tables follow-
<PAGE>
eGames, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
-------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 1,923,600 $ 2,521,715 $10,562,565 $ 8,639,041
Cost of sales 832,858 937,492 3,997,803 2,954,800
----------- ----------- ----------- -----------
Gross profit 1,090,742 1,584,223 6,564,762 5,684,241
Operating expenses:
Product development 201,479 260,534 665,071 703,166
Selling, general and administrative 1,848,215 1,165,769 5,429,217 3,464,272
----------- ----------- ----------- -----------
Total operating expenses 2,049,694 1,426,303 6,094,288 4,167,438
----------- ----------- ----------- -----------
Operating income (loss) (958,952) 157,920 470,474 1,516,803
Interest expense, net 1,634 8,146 11,711 32,427
----------- ----------- ----------- -----------
Income (loss) before income taxes (960,586) 149,774 458,763 1,484,376
Provision (benefit) for income taxes (163,106) 74,520 78,296 158,787
----------- ----------- ----------- -----------
Net income (loss) ($ 797,480) $ 75,254 $ 380,467 $ 1,325,589
=========== =========== =========== ===========
Net income (loss) per common share:
- basic ( $ 0.08) $ 0.01 $ 0.04 $ 0.14
=========== =========== =========== ===========
- diluted ( $ 0.08) $ 0.01 $ 0.04 $ 0.13
=========== =========== =========== ===========
Weighted average common shares
outstanding - basic 9,745,820 9,467,659 9,692,426 9,459,673
Dilutive effect of common stock equivalents - 0 - 762,102 422,848 427,189
----------- ----------- ----------- -----------
Weighted average common shares
outstanding - diluted 9,745,820 10,229,761 10,115,274 9,886,862
=========== =========== =========== ===========
</TABLE>
<PAGE>
eGames, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
As of
March 31,
ASSETS 2000
------ ----
<S> <C>
Current assets:
Cash and cash equivalents $ 601,291
Accounts receivable, net of allowances totaling $2,923,980 3,179,966
Inventory 2,281,456
Prepaid expenses 128,246
-----------
Total current assets 6,190,959
Furniture and equipment, net 379,599
Other assets 347,250
-----------
Total assets $ 6,917,808
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable $ 53,610
Accounts payable 1,646,650
Revolving line of credit 500,000
Accrued expenses 540,231
Capital lease obligations 21,329
-----------
Total current liabilities 2,761,820
Capital lease obligations 6,616
Note payable 134,220
Convertible subordinated debt 150,000
-----------
Total liabilities 3,052,656
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 (5,887,701)
Treasury stock, at cost - 231,900 shares (501,417)
Accumulated other comprehensive loss (28,514)
-----------
Total stockholders' equity 3,865,152
-----------
Total liabilities and stockholders' equity $ 6,917,808
===========
</TABLE>
