End of road for Interplay?

Revenues down, losses up, games slipping, French taking over, money running out. Can it get any worse?

Source - PR Newswire / Reuters / Interplay Quarterly Report

Interplay has posted results for the three months ending June 30th, with operating losses of $11.4m after revenues dropped by 41% compared to the same period last year. The poor results are largely being blamed on a lack of new releases, with just four Interplay games coming out between April and June compared to ten this time last year, all of them on the PC. This total lack of PlayStation 2 and GameBoy Advance titles meant that they didn't get the boost that many other publishers saw as the next generation consoles took hold.

"We have suffered some painful and disappointing delays on the release of major next generation console titles", CEO Brian Fargo confirmed. "Our limited resources have forced us to focus only on high-end games going forward, so we had to discontinue or suspend selected projects. We still expect to have an excellent line-up of games in our future release schedule that includes Giants and Baldur's Gate Dark Alliance on Playstation 2."

The rest of their line-up isn't likely to do them any good this year though, with Galleon, Hunter, Neverwinter Nights and the Matrix game all expected to appear some time next year. All of which may be too little too late - as of June 30th Interplay had just $677,000 in its bank account and had already chewed up $14.8m of a $15m credit line which it is now in danger of forfeiting. The company admits that it is "not in compliance" with the terms of the credit line, and if it is withdrawn it "would have a material adverse effect on the company's ability to continue as a going concern". The quarterly report mentions the possibility of Interplay being forced into bankruptcy or having to liquidate some of its assets if it can't find sufficient financing.

Just to make things even worse, the company was apparently late in filing a share registration statement back in April which has forced it to pay a $254,000 a month penalty to some of its stockholders. According to Interplay, "if the registration statement .. is not declared effective, we will continue to accrue a two percent penalty each month that [it] is not declared effective and there is no limit on the amount payable". Given the already fragile state of the publisher's finances, "we may be unable to pay the total penalty due to the investors". It's not a pretty picture.

Of course, all of this is somewhat academic as French publisher Titus has recently revealed that it now owns over half of Interplay's shares and will be taking over their board of directors at their next annual general meeting. As Interplay's quarterly report points out, "Titus could compel us to enter into agreements with Titus or its subsidiaries on terms more favorable than those we would agree to with a third party or to forego enforcement of our rights against Titus or its subsidiaries. Titus could also use its veto over mergers to prevent a merger than may be in the best interests of our stockholders as a whole or to try to negotiate more favorable merger consideration for itself".

So it looks like this could be the end of the road for Interplay. Even if Titus decides not to turn Interplay into another wholly owned subsidiary, the chances are that the American company will be bankrupt before the end of the year anyway. What this means for the future of promising (but long overdue) games like Neverwinter Nights remains to be seen.

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