Here we are nearly a year into our new marketing strategy of direct sales and the question I must answer is: How is it going? I'll ke the first to point out that all I can talk about is the short term effects, those wondering about long term issues will have to wait until a long term has passed--since neither I nor they can predict what will happen in 5 or 10 years (regardless of the track chosen).

I can say that we have many indications that their concerns about long term ill-effects of our decision are baseless, the indications just haven't been around long enough to prove anything about what they mean to the deep future (I'm speaking here of efforts to locate new customers, effects of the internet and so on).

For comparison purposes, I've arrayed the tvo years side by side. When looking at 1995, be sure to keep in mind that an amazing amount of our business in both units and dollars were done in the last few months of the year when we asked for your help--that period makes the year look better than it really should.

The conversion looks very good and we are quite happy with our new position in this decidedly niche market. I think all our competitors who rubbed their hands with glee, (thinking we'd be dead, and, if not, wel1 they'll soak up all those "great" retail sales we're missing out on), are finding that they were stuck with a system incapable of moving the goods. Look for more firms joining the ranks of either direct mail (like US) or trying of strangulation in a collapsed retail market in the cog ! ear. Things sure are green on our side ot the fence anyway...thanks to all of you who made it happen. You are the key to our success. Thank you!

Games Released:

1995:7
1996:4

Game Units Sold:

1995 17932 (per release2,562)
1996: 8996 (per release 2,249)

Customer List:

Jan 95: 4,250
Jan 96: 5,100
Jan 97: 6,250

Cash Revenues:

1995: $366,509 (per release 52,385)
1996: $288,799 (per release 72,199)

Keep in mind that of the four game releases in 1996, two were "wasted" on distributors and brought in all of $48,494. So the other $240,305 we made last year was due to direct efforts with two releases publishing all the weight after not flushed about 3,000 units down the distributor hole. Also, it is interesting to note that the distributor copies made a whopping $16 per unit, while the direct sales brought over $40...more than twice as much.

Cost of actually Manufacturing Games (i.e. Cash put into Inventory)

1995: $186,571 (per release 26,653)
1996: $49,830 (per release 12,450)

Cash Expenses:

1995: $424,137
1996: $255,636

Lest anyone be naive enough to think that that is whet I make (i.e. a person who has no clue as to how expensive it is to run a business), my salary is $24,000 per year .and Sara makes $12,000. No trips to the Bahamas for us. Simple Cash Flow is the difference between the two years that is the most telling. In 1995 we registered a net cash outflow of $57,628 (very, very negative), while in 1996 we saw money flowing inward (the right direction) to the tune of $33,163 (no thanks to the two games expended on distribution) which redressed over half the problem caused last year.

Most interesting is the fact that Hube's Pocket (our first direct only game) sold not quite as many units as Champion Hill (our last distribution game), yet in dollars earned, Champion Hill is dead last of all our games ever released ($25,189) vs Hube Pocket ($49,236).

Also interesting is that as of this writing (early February), GD'41 released late last year has only moved 946 units in 3 months and has greater earnings ($29,122) than the entire sol-out print run of Perryville (2328 units and $25,462).

1997 looks to be an especially good year for us. the line up of games is, in my opinion, our best ever and the five planned releases (all direct only) should allow us to limb completely ot of the hole our attempts to support retailers dug us in. I hope our many fine gaming company running mates figure this out before that anchor they are tied to takes them under the waves.

See you next year!

Game Unit Sales

Stalingrad Pocket II: 1,903
Champion Hill: 1,476
Hube's Pocket: 1,260
GD '41: 892
Tunisia: 412
Marengo: 327
Black Wednesday: 305
Ardennes: 300
Leros: 289
In Their Quiet Fields II: 274
Enemy at the Gates: 270
GD '40: 208
April's Harvest: 202
Yom Kippur: 197
No Better Place to Die: 190
Hunters from the Sky: 185
Matanikau: 153
Force Eagle's War: 88
Austerlitz: 64