Interplay 3Q 2004 Results & Publishing Deal

There isn’t any good news for RPG fans, but it looks like Interplay is dead set on pursuing a massively multiplayer market share:

Interplay Announces Third Quarter 2004 Operating Results and Publishing Deal

IRVINE, Calif., Dec. 23 /PRNewswire-FirstCall/ — Interplay Entertainment Corp. (OTC Bulletin Board: IPLY) today reported operating results for the third quarter of 2004.

For the third quarter ended September 30, 2004, Interplay reported a net loss of $1.5 million, or $.02 per basic and diluted common share, compared to a net loss of $2.2 million, or $.02 per basic and diluted common share, in the
same period last year. Net revenues for the third quarter 2004 were $.9 million versus $4.7 million in the same period a year ago, a decrease of 80%.

The decrease in net revenues was mainly a result of delivering zero new title gold masters in North America in the 2004 period compared to delivering one new title gold master in North America in the 2003 period. Additionally the Company delivered zero new title gold masters internationally in the 2004 period as compared to releasing three titles, two of which had previously been released only in North America, in Europe in the 2003 period.

Additionally, the Company announced it has signed an agreement with Majorem, an Israeli game developer, to exclusively publish and distribute “Ballerium,” the massively multiplayer online strategy game. The game, currently in beta testing, is expected to be commercially launched by summer 2005.

Commenting on the earnings and the Majorem agreement, Interplay Chairman and Chief Executive Officer Herve Caen said, “We continue to operate in a difficult transition period. This alliance with Majorem represents an important first step in executing the Company’s strategy announced earlier this year to migrate to the massively multiplayer online gaming market, not only with our own properties like ‘Fallout’ but also with third party content. ‘Ballerium’ has generated strong buzz online already, and we look forward to leveraging this title.”

For the nine-month period ended September 30, 2004, Interplay reported a net loss of $4.3 million, or $.05 per basic and diluted common share, compared to a net loss of $2.0 million, or $.02 per basic and diluted common share, in the same period last year. Net revenues for the nine-month period ended September 30, 2004 were $12.5 million versus $24.8 million in the same period a year ago, a decrease of 50%. Net revenues during the nine-month period ended September 30, 2004 included the $1.175 million sale of the rights to develop “Fallout 3” and $.3 million in revenue from the sale of the rights to “Redneck Rampage.” Net revenues during the nine-month period ended September 30, 2003 included $15 million in revenue related to the sale of all future interactive entertainment publishing rights to the “Hunter: The Reckoning” franchise. Finally, operating loss increased 21% to $2.3 million in the nine-month period ended September 30, 2004 as compared to a $1.9 million operating loss in the 2003 period.

Gross profit margin for the third quarter 2004 was 74%, compared to 61% in the third quarter of 2003. Gross profit margin was higher in the third quarter this year as compared to last year mainly due to the sale of the rights to “Redneck Rampage,” which yielded approximately a 100% profit margin. 2003 did not have a comparable sale. 2003 was also negatively impacted by higher amortization of prepaid royalties on externally developed products including approximately $2.3 million in fiscal 2003 in write-offs of cancelled development projects or on titles that were not expected to meet the Company’s desired profit requirements. Total operating expenses decreased 80% to $.96 million from $5.0 million in the third quarter of this year as compared to the same period last year. The decrease in operating expenses is a result of lower personnel costs and general expenses.

Gross profit margin for the nine-month period ended September 30, 2004 was 46%, compared to 60% in the same period of 2003. Gross profit margin was lower in the 2004 period as compared to the same period last year mainly due to the $15 million in revenue related to the sale of the “Hunter: The Reckoning” license, which yielded approximately an 80% profit margin in 2003 partially offset by the sale of the rights to develop “Fallout 3” in 2004 and the sale of “Redneck Rampage.” Total operating expenses decreased 51% to $8.1 million from $16.7 million in the first nine months of 2004 as compared to the same period last year. The decrease in operating expenses is a result of lower personnel costs and general expenses.

About Majorem

Majorem’s mission is to become the leading developer and operator of interactive online games over network-enabled platforms. For more information on “Ballerium,” visit http://www.ballerium.com .

About Interplay Entertainment Corp.

Interplay Entertainment is a leading developer, publisher and distributor of interactive entertainment software for both core gamers and the mass market. Interplay develops games for personal computers as well as video game consoles, many of which have garnered industry accolades and awards. Interplay releases products through Interplay, Black Isle Studios and its distribution partners.