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 ANNOUNCES SETTLEMENT OF HASBRO LITIGATION
Fiscal Fourth Quarter Results Revised to Account for Settlement Costs
LANGHORNE, PA, September 1, 2000 -- eGames, Inc. (Nasdaq: EGAM), a leading
provider of Family Friendly(TM) value-priced computer software games for players
of all ages, today announced that it has settled the trademark and copyright
infringement suit filed by Hasbro Interactive, Atari Interactive and Elorg in
the U.S. District Court in Boston, Massachusetts by entering into an agreement
by consent judgment.
Under the terms of the settlement agreement, eGames will incur a non-recurring
expense of $205,000 charged against the Company's fiscal 2000 fourth quarter,
ended June 30, 2000. As a result, this charge will reduce the Company's
previously reported earnings per share by $0.02 for the fiscal 2000 fourth
quarter and full-year periods.
The settlement does not require the recall of any eGames products and also does
not admit to any infringement by eGames of the games named in the suit. Also,
under the terms of the settlement, eGames will continue to sell certain games
alleged to infringe on Hasbro's copyrights through September 30, 2000, at which
point these products will be discontinued. The settlement involves the following
eGames' titles: Intergalactic Exterminator, 3D Astro Blaster, Missile Launch.,
Missile Launch 2000, TetriMania, TetriMania Master, 3D TetriMania, 3D Maze Man,
3D Chomper, 3D Frogman, 3D Ms. Maze and Tunnel Blaster. Discontinuing these
titles is not expected to have a material impact on the Company's fiscal 2001
revenue expectations.
Jerry Klein, President and CEO of eGames commented, "We are pleased to put this
issue behind the Company, enabling us to return 100% of our attention to the
successful implementation of our business model. Although we believe that we had
substantial defenses to the claims in the lawsuit and that the claims were
ultimately without merit, we also believe that this settlement is in the best
interest of our shareholders. Not only does it allow the Company to avoid the
expense of ongoing litigation, but it enables us to focus on doing what we do
best - providing high-quality, value-priced computer software games to the
casual game player market. We remain excited about the products we currently
have on the market and about a number of new products that are scheduled to be
launched later this year."
<PAGE>
eGames, Inc., headquartered in Langhorne, PA, develops, publishes and markets a
diversified line of personal computer software primarily for consumer
entertainment and personal productivity. More information about eGames products,
as well as free downloadable product demos, are available at the company's
website at http://www.egames.com.
This press release contains certain forward-looking statements, including
without limitation, statements that the discontinuance of the Company's
Intergalactic Exterminator, 3D Astro Blaster, Missile Launch, Missile Launch
2000, TetriMania, TetriMania Master, 3D TetriMania, 3D Maze Man, 3D Chomper, 3D
Frogman, 3D Ms. Maze and Tunnel Blaster titles (the "Discontinued Titles") is
not expected to have a material impact on the Company's fiscal 2001 revenue
expectations; statements regarding the amount of the non-recurring expense
related to the Hasbro settlement to be charged against the Company's fiscal 2000
fourth quarter ended June 30, 2000 and the resulting reduction to the Company's
earnings per share for the fiscal 2000 fourth quarter and full-year periods; and
statements regarding the Company's new products that are scheduled to be
launched later this year. 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 ability of the
Company to sell the remaining inventory of products containing the Discontinued
Titles prior to September 30, 2000; the amount of returns of the Company's
products containing the Discontinued Titles after September 30, 2000; successful
sell-through results for the Company's products at retail stores and the
Company's ability to accurately estimate sell-through volume when an order is
shipped; 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.
-Revised fiscal 2000 fourth quarter and year-end financial tables follow-
<PAGE>
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 $10,022,305
Cost of sales 1,304,025 642,182 5,301,828 3,596,982
----------- ----------- ----------- -----------
Gross profit 1,773,570 741,082 8,338,332 6,425,323
Operating expenses:
Product development 195,259 233,772 860,330 936,938
Selling, general and administrative 1,422,029 1,350,073 6,772,136 4,814,345
Litigation and settlement costs 281,458 - 0 - 360,568 - 0 -
----------- ----------- ----------- -----------
Total operating expenses 1,898,746 1,583,845 7,993,034 5,751,283
Operating income (loss) (125,176) (842,763) 345,298 674,040
Interest expense (income), net 256 (666) 11,967 31,761
----------- ----------- ----------- -----------
Income (loss) before income taxes (125,432) (842,097) 333,331 642,279
Provision for income taxes 2,454 20,937 80,750 179,724
----------- ----------- ----------- -----------
Net income (loss) ($ 127,886) ($ 863,034) $ 252,581 $ 462,555
=========== =========== =========== ===========
Net income (loss) per common share:
- Basic ($ 0.01) ($ 0.09) $ 0.03 $ 0.05
=========== =========== =========== ===========
- Diluted ($ 0.01) ($ 0.09) $ 0.03 $ 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 - 0 - - 0 - 290,200 344,453
----------- ----------- ----------- -----------
Weighted average common shares
outstanding - Diluted 9,749,975 9,600,935 9,997,013 9,839,441
=========== =========== =========== ===========
</TABLE>
<PAGE>
eGames, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
As of
June 30,
ASSETS 2000
--------
<S> <C>
Current assets:
Cash and cash equivalents $ 1,139,178
Accounts receivable, net of allowances - $1,329,098 2,742,414
Inventory 2,145,142
Prepaid expenses 263,595
-----------
Total current assets 6,290,329
Furniture and equipment, net 336,135
Other assets 295,043
-----------
Total assets $ 6,921,507
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 59,487
Accounts payable 2,073,076
Accrued expenses 798,189
Convertible subordinated debt 150,000
Capital lease obligations 18,971
-----------
Total current liabilities 3,099,723
Capital lease obligations, net of current portion 984
Notes payable, net of current portion 124,220
-----------
Total liabilities 3,224,927
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 (6,015,588)
Treasury stock, at cost - 231,900 shares (501,417)
Accumulated other comprehensive loss (69,199)
-----------
Total stockholders' equity 3,696,580
-----------
Total liabilities and stockholders' equity $ 6,921,507
===========
</TABLE>
