EGames is still evaluating its “options to fund future operations” if the...

cash at the end of Q1, down from $627,000 June 30, it said. Q1 revenue grew 23.4 percent from a year earlier to $859,000. The loss widened to $350,032, 3 cents a share, from $161,651, 1 cent. EGames posted losses in its last six fiscal years and doesn’t have access to a credit facility now, it said. The company is “encouraged by the continued increases in our traditional product revenues due to strong sales of our physical products at the large national retail chain stores in North America,” said CEO Jerry Klein. The company was “challenged by the general market conditions and trends in our industry that have decreased our Internet-related revenues as well as our licensing revenues,” he said. EGames continues “to forge ahead with our social game development and distribution strategy, with the launch of our next two social games,” Satisfashion and Coffee Central, he said. Those games are “expected” to launch “by the end of this year on the major Latin American social networks,” he said. EGames has two other social games in development that it plans to release this fiscal year, he said. “The free-to-play micro-transaction model used for social games has been substantiated as a sustainable and profitable business model while social games continue to grow in popularity.” The company’s “plan is to maintain our focus on this segment of the market and develop top-performing games,” said Klein. The $163,000 increase in Q1 revenue was driven by an increase in traditional product revenue “traceable to an improvement in retail distribution of our titles at the major North American retailers compared to” Q1 of last year, the company said. The widened loss was caused by a $132,000 increase in operating expenses, as well as a $56,000 decline in gross profit due to a 17.9 percent lower gross profit margin, it said. The increased operating expenses came from $168,000 in increased product development expenses related to having four games under development for Latin American social networks and a game under development for the iPhone this year, compared to only two titles in development in the year-earlier quarter, as well as $36,000 in decreased operating expenses across various categories, it said. The company said the decline in gross profit margin was caused by a larger proportion of revenue coming from physical product shipments of PC games versus licensing and Internet revenue having no related product cost, as well as a provision for inventory obsolescence due to writing off the value of excess print inventory of PC game titles discontinued at North American retailers.