Losses Rise For Interplay Entertainment
Interplay Entertainment lost $4.73 million (5 cents per share) in its fiscal year ended Dec. 31 vs. a $1.31 million profit (1 cents) a year ago, the videogame publisher revealed in a 10-K SEC filing late last week. The struggling firm again said that it has “no cash reserves” left and is “unable to pay current liabilities.”
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The publisher noted that it “continued to operate under limited cash flow from operations” in 2004 and “we expect to operate under similar cash constraints during 2005.” Interplay said it’s operated without a credit facility since Oct. 2001. In 2004, operations required cash of $2.9 million, mainly to pay fees from lawsuits and other liabilities, plus “recoupment of advances received by distributors.”
Interplay also said it ended the year with a working capital deficit of about $18 million and a cash balance of only about $29,000, and admitted it “cannot continue in its current form without obtaining additional financing or income.” The company warned again that it might have to liquidate its assets or go bankrupt if it doesn’t find funding.
The filing followed a long delay. Interplay said in late March it had to put off its 10-K because it couldn’t get unspecified necessary information “without unreasonable effort or expense” (CED April 1 p10).
CEO Herve Caen is serving as interim CFO until Interplay finds another CFO, the company said. The filing said Caen was paid a salary of $260,330, while Pres. Phillip Adam received $116,276. Interplay said no other executive with the company at year-end got more than $100,000.
Although Interplay said in its March filing that there had been “a significant reduction of employees from last fiscal year from over 100 employees to less than 10” as of Dec., it said in the 10-K that as of Dec. 31 it had 12 employees, including 2 in product development, one in sales and marketing, and 9 in finance, general and administrative.
The publisher said “we believe that our relations with our employees are good.” But it noted again that it wasn’t able to meet all 2004 payroll obligations to its employees and, “as a result several employees filed claims” with the Cal. Labor Board, which fined Interplay about $10,000. Interplay said a trial is set to begin in Aug.
Avalon Interactive had been handling Interplay sales and distribution in Africa, Europe and the Middle East but that firm “ceased operations following its involuntary liquidation” in Feb., Interplay said, discounting the likelihood of receiving money “presently due us by Avalon.” It wasn’t clear Mon. how much Avalon owes. Interplay tapped wholly-owned subsidiary Interplay Productions as its European distributor in March. Most of Interplay’s sales and distribution in N. America and other select territories are handled by Vivendi Universal Games (VUG).
Interplay said its revenue tumbled 63.9% to $13.2 million in 2004 as N. American sales dropped 88%. OEM, royalties and licensing sales dropped 89%. International revenue, however, grew 53%, the company said. The company didn’t release any games in N. America during 2004 after launching 6 in 2003. It said 79.6% of 2004 revenue came from Avalon sales vs. 19.8% from VUG. Videogame sales accounted for $9.7 million in 2004 sales vs. $1.8 million from PC games and $1.7 million from OEM, royalties and licensing. Interplay expects 2005 N. American publishing revenue to be lower than 2004’s but didn’t offer specifics. The company said it expects product development expenses, however, to drop “as a result of reductions of development personnel.”
Titus Interactive -- the publisher’s majority shareholder -- went into involuntary liquidation in Jan. Interplay shut down its internal game development studio last year and has no products under development internally. Besides its Cal. Labor Board labor woes, Interplay has fielded various suits in recent years. The firm also has defaulted on settlements with Warner Bros. Entertainment and others. Interplay revealed in the latest filing it was sued Dec. 29 by law firm Piper Rudnick for “unpaid services.” The publisher said it is “evaluating the merit” of that suit.
Interplay said in Dec. it had signed an exclusive deal with Israeli developer Majorem to publish and distribute the massively multiplayer online (MMO) strategy game Ballerium (CED Dec 27 p4). It said at the time that the title was in beta testing and was “expected to be commercially launched by summer 2005.” Caen called the deal “an important first step in executing” his company’s previously announced new strategy of migrating to the MMO market with 3rd- and first-party content. The status of Ballerium’s launch plan wasn’t clear Mon.