SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Fiscal Year ended December 31, 2001 OR
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-24363
INTERPLAY ENTERTAINMENT CORP.
(Exact name of Registrant as specified in its charter)
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Delaware 33-0102707
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
16815 Von Karman Avenue, Irvine, California 92606
(Address of principal executive offices)
Registrant's telephone number, including area code: (949) 553-6655
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of April 15, 2002, 93,060,857 shares of Common Stock of the Registrant
were issued and outstanding and the aggregate market value of voting common
stock held by non-affiliates was $3,032,659.
DOCUMENTS INCORPORATED BY REFERENCE
None.
AMENDMENT NO. 2
TO THE ANNUAL REPORT ON FORM 10-K FILED BY
INTERPLAY ENTERTAINMENT CORP. ON APRIL 15, 2002
The following Items amend the Annual Report on Form 10-K filed by Interplay
Entertainment Corp. (the "Company") on April 15, 2002, as amended by the Form
10-K/A filed on April 30, 2002 (the "Form 10-K"), as permitted by rules and
regulations promulgated by the Securities Exchange Commission. Items 12 and 13
of the Form 10-K inadvertently misstated the percentage ownership of the
Company's common stock by certain beneficial owners, officers and directors of
the Company. The following Items 12 and 13 amend and replace the previously
filed Items 12 and 13 of the Form 10-K. All capitalized terms used herein but
not defined shall have the meanings ascribed to them in the Form 10-K.
PART III
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following sets forth certain information concerning the beneficial
ownership of the Company's outstanding common stock as of April 15, 2002, for
(i) each person (or group of affiliated persons) who is known by the Company to
own beneficially five percent or more of the Company's common stock, (ii) each
director of the Company, (iii) each of the Named Executive Officers, and (iv)
all directors and executive officers of the Company as a group. The address of
each person listed is in care of the Company, 16815 Von Karman Avenue, Irvine,
California 92606, unless otherwise set forth below such person's name.
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) SHARES OWNED(2)
- ------------------------------------ --------------- ---------------
Titus Interactive SA 67,449,021(3) 72.1%
20432 Corisco Street
Chatsworth, CA 91311
Herve Caen 67,449,021(3) 72.1%
Eric Caen 67,449,021(3) 72.1%
Universal Studios, Inc. 4,658,216 5.0%
100 Universal City Plaza
Universal City, CA 91608
Brian Fargo 4,004,378(4) 4.3%
Manuel Marrero 0 *
Jeff Gonzalez 0 *
Nathan Peck 0 *
Michel Vulpillat (5) 0 *
Maren Stenseth 0 *
R. Parker Jones 0 *
All Directors and Executive Officers
as a Group (9 persons) 71,453,399(6) 76.0%
<FN>
- ----------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Shares of common stock subject to options currently
exercisable, or exercisable within 60 days of April 15, 2001, are deemed
outstanding for computing the percentage of the person holding such options
but are not deemed outstanding for computing the percentage of any other
person. Except as indicated by footnote and subject to community property
laws where applicable, the
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persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them.
(2) Based on 93,060,857 shares of common stock outstanding as of April 15,
2002.
(3) Includes 460,298 shares subject to warrants exercisable within 60 days of
April 15, 2002. Messrs. Herve Caen and Eric Caen are officers, directors
and principal shareholders of Titus Interactive SA. In such capacities
Messrs. Herve Caen and Eric Caen may be deemed to beneficially own shares
of common stock beneficially held by Titus, but disclaim such beneficial
ownership, except to the extent of their economic interest in these shares.
(4) Includes 500,000 shares subject to warrants exercisable within 60 days of
April 15, 2002.
(5) Mr. Vulpillat is currently director of Titus and owns less than 0.1% of the
outstanding capital stock of Titus. Mr. Vulpillat disclaims beneficial
ownership of the Company's shares held by Titus.
(6) Includes 960,298 shares subject to warrants exercisable within 60 days of
April 15, 2002.
</FN>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our operations involve significant transactions with Titus Interactive S.A.
("Titus"), our majority stockholder, Virgin Interactive Entertainment Limited
("Virgin"), a wholly-owned subsidiary of Titus, and Vivendi Universal Games,
Inc. ("Vivendi"), an owner of approximately 5% percent of our common stock. In
addition, we obtained financing from the former Chairman of the Company.
EVENTS WITH TITUS INTERACTIVE S.A.
Titus, the Company's largest stockholder, recently gained a majority of the
Company's stockholders' voting power, providing Titus with the ability to
control the outcome of votes on proposals presented to the Company's
stockholders, as well as the ability to elect a majority of the Company's
directors. The events relating to Titus' gaining of majority voting power are as
follows:
o On September 5, 2001, the Company entered into a Support Agreement
with Titus providing for the nomination to the Company's Board of
Directors a slate of six individuals mutually acceptable to Titus and
the Company for election as directors at the Company's 2001 annual
meeting of stockholders, and appointing a Chief Administrative Officer
("CAO") to the Company. Also on September 5, 2001, as part of the
Support Agreement, three of the existing directors resigned and three
new directors acceptable to Titus were appointed by the remaining
directors to fill the three vacancies. As a consequence, from
September 6, 2001 until the 2001 annual meeting on September 18, 2001,
the Board of Directors consisted of five individuals nominated by
Titus, and two directors previously nominated by management.
o On September 13, 2001, the Company's Board of Directors established an
Executive Committee, consisting of the Company's President and CAO, to
administer and oversee all aspects of the Company's day-to-day
operations, including, without limitation, (a) the relationship with
lenders, including LaSalle Business Credit, Inc.; (b) relations with
Europlay I, LLC ("Europlay"), consultants retained to effect a
restructuring of the Company; (c) capital raising efforts; (d)
relationships with vendors and licensors; (e) employment of officers
and employees; (f) retaining and managing outside professionals and
consultants; and (g) directing management.
o The Company's 2001 annual meeting was held on September 18, 2001. At
the annual meeting, the five Titus nominees and one of the directors
previously nominated by management were elected to continue to serve
as directors. Subsequent to September 18, 2001, two additional
independent directors were elected to the Board of Directors.
In September 2001, Titus retained Europlay as consultants to assist with
the restructuring of the Company. Because the arrangement with Europlay is with
Titus and Europlay's services have a direct benefit to the Company,
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the Company has recorded an expense and a capital contribution by Titus of
$75,000 for the year ended December 31, 2001 in accordance with the SEC's Staff
Accounting Bulletin No. 79 "Accounting for Expenses and Liabilities Paid by
Principal Stockholders." Beginning in October 2001, the Company agreed to
reimburse Titus for consulting expense incurred on behalf of the Company. As of
December 31, 2001, the Company owed Titus $450,000 as a result of this
arrangement. The Company has also entered into a commission-based agreement with
Europlay where Europlay will assist the Company with strategic transactions,
such as debt financing or equity financing, the sale of assets or an acquisition
of the Company.
In March 2002, Titus converted its remaining 383,354 shares of Series A
Preferred Stock into approximately 47.5 million shares of our common stock.
Titus now owns approximately 67 million shares of common stock, which represents
approximately 72.1% of our outstanding common stock, our only voting security,
immediately following the conversion.
TRANSACTIONS WITH TITUS
In connection with the equity investments by Titus, the Company performs
distribution services on behalf of Titus for a fee. In connection with such
distribution services, we recognized fee income of $21,000, $435,000 and
$200,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
During the year ended December 31, 2000, the Company recognized $3 million
in licensing revenue under a multi-product license agreement with Titus for the
technology underlying one title and the content of three titles for multiple
game platforms, extended for a maximum period of twelve years, with variable
royalties payable to us from five to ten percent, as defined. We earned a $3
million non-refundable fully-recoupable advance against royalties upon signing
and completing all of our obligations under the agreement. During the year ended
December 31, 1999, the Company executed publishing agreements with Titus for
three titles. As a result of these agreements, the Company recognized revenue of
$2.6 million for delivery of these titles to Titus.
On September 13, 2001, the Company orally agreed to sell to Titus
distribution rights to its products in the territories of Australia, New Zealand
and Asia. Because of Titus' relationship with the Company, the sale of the
properties was conditional upon approval of the transaction by a committee of
our Board of Directors comprised of disinterested directors. The transaction was
also conditional upon the completion by Titus of its due diligence on the
properties. Titus advanced $1.0 million to the Company to be held as a good
faith deposit against the purchase price pending approval by the Board committee
and completion by Titus of its due diligence. If the agreement was not
consummated, Titus would be entitled to a breakup fee of 0.25 percent per week
that we held the $1.0 million deposit. The Board committee did not approve the
transaction, and Titus elected not to purchase the properties following
completion of its due diligence. As a consequence, the Company terminated the
agreement and on September 26, 2001 the $1.0 million deposit was returned to
Titus and Titus waived the breakup fee.
As of December 31, 2001 and 2000, Titus owed the Company $260,000 and
$280,000, respectively, and the Company owed Titus $1.3 million and $1.1
million, respectively. Amounts due to Titus at December 31, 2001 include
dividends payable of $740,000 and $450,000 for services rendered by Europlay.
Amounts due to Titus at December 31, 2000 include borrowings of $1.0 million
under the supplemental line of credit. In March 2002, Titus paid the outstanding
balance due to the Company.
TRANSACTIONS WITH VIRGIN, A WHOLLY OWNED SUBSIDIARY OF TITUS
In February 1999, the Company entered into an International Distribution
Agreement with Virgin, which provides for the exclusive distribution of
substantially all of our products in Europe, Commonwealth of Independent States,
Africa and the Middle East for a seven-year period, cancelable under certain
conditions, subject to termination penalties and costs. Under this agreement, we
pay Virgin a monthly overhead fee, certain minimum operating charges, a
distribution fee based on net sales, and Virgin provides certain market
preparation, warehousing, sales and fulfillment services on our behalf.
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The Company amended our International Distribution Agreement with Virgin
effective January 1, 2000. Under the amended Agreement, we no longer pay Virgin
an overhead fee or minimum commissions. In addition, we extended the term of the
agreement through February 2007 and implemented an incentive plan that will
allow Virgin to earn a higher commission rate, as defined. Virgin disputed the
amendment to the International Distribution Agreement with us, and claimed that
we were obligated, among other things, to pay for a portion of Virgin's overhead
of up to approximately $9.3 million annually, subject to decrease by the amount
of commissions earned by Virgin on its distribution of our products.
The Company settled this dispute with Virgin in April 2001 and further
amended the International Distribution Agreement and amended the Termination
Agreement and the Product Publishing Agreement, all of which were entered into
on February 10, 1999 when we acquired an equity interest in VIE Acquisition
Group LLC ("VIE"), the parent entity of Virgin. As a result of the April 2001
settlement, Virgin dismissed its claim for overhead fees, VIE fully redeemed our
ownership interest in VIE and Virgin paid us $3.1 million in net past due
balances owed under the International Distribution Agreement. In addition, we
paid Virgin a one-time marketing fee of $333,000 for the period ending June 30,
2001 and the monthly overhead fee was revised for us to pay $111,000 per month
for the nine month period beginning April 2001, and $83,000 per month for the
six month period beginning January 2002, with no further overhead commitment for
the remainder of the term of the International Distribution Agreement. We no
longer have an equity interest in VIE or Virgin as of April 2001.
In connection with the International Distribution Agreement, The Company
incurred distribution commission expense of $2.3 million, $4.6 million and $3.4
million for the years ended December 31, 2001, 2000 and 1999, respectively. In
addition, we recognized overhead fees of $1.0 million, zero and $3.9 million and
certain minimum operating charges to Virgin of $333,000, zero and $2.9 million
for the years ended December 31, 2001, 2000 and 1999, respectively.
The Company has also entered into a Product Publishing Agreement with
Virgin, which provides us with an exclusive license to publish and distribute
substantially all of Virgin's products within North America, Latin America and
South America for a royalty based on net sales. As part of terms of the April
2001 settlement between Virgin and us, the Product Publishing Agreement was
amended to provide for us to publish only one future title developed by Virgin.
In connection with the Product Publishing Agreement with Virgin, the Company
earned $36,000, $63,000 and $41,000 for performing publishing and distribution
services on behalf of Virgin for the years ended December 31, 2001, 2000 and
1999, respectively.
In connection with the International Distribution Agreement, the Company
subleases office space from Virgin. Rent expense paid to Virgin was $104,000,
$101,000 and $50,000 for the years ended December 31, 2001, 2000 and 1999,
respectively.
As of December 31, 2001 and 2000, Virgin owed us $7.5 million and $12.1
million, and the Company owed Virgin $5.8 million and $4.8 million,
respectively.
TRANSACTIONS WITH VIVENDI
In August 2001, the Company entered into a distribution agreement with
Vivendi (the parent company of Universal Studios, Inc., which currently owns
approximately 5 percent of our common stock at March 31, 2002 but does not have
representation on our Board of Directors) providing for Vivendi to become our
distributor in North America through December 31, 2003 for substantially all of
our products, with the exception of products with pre-existing distribution
agreements. OEM rights were not among the rights granted to Vivendi under the
distribution agreement. Under the terms of the agreement, as amended, Vivendi
earns a distribution fee based on the net sales of the titles distributed. Under
the agreement, Vivendi made four advance payments to us totaling $13.5 million.
Vivendi will recoup their advances from future sales of our products, which will
reduce our future cash in-flows. As of December 31, 2001, Vivendi has recouped
$3.4 million of the advance payments.
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In connection with the distribution agreement with Vivendi, the Company
incurred distribution commission expense of $2.2 million for the year ended
December 31, 2001. As of December 31, 2001, Vivendi owed the Company $2.4
million.
TRANSACTIONS WITH A BRIAN FARGO, A FORMER OFFICER OF THE COMPANY
In connection with our working capital line of credit obtained in April
2001, the Company obtained a $2 million personal guarantee in favor of the bank,
secured by $1.0 million in cash, from Brian Fargo, the former Chairman of the
company. In addition, Mr. Fargo provided us with a $3 million loan, payable in
May 2002, with interest at 10 percent. In connection with the guarantee and
loan, Mr. Mr. Fargo received warrants to purchase 500,000 shares of our common
stock at $1.75 per share, expiring in April 2011. In January 2002, the bank
redeemed the $1.0 million in cash pledged by Mr. Fargo in connection with his
personal guarantee, and subsequently we agreed to pay that amount back to Mr.
Fargo pursuant to a settlement agreement entered into in March 2002.
The Company had amounts due from a business controlled by Mr. Fargo. Net
amounts due, prior to reserves, at December 31, 2000 were $2.5 million. Such
amounts at December 31, 2000 are fully reserved. In 2001, the Company wrote off
this receivable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized, at Irvine, California
this 30th day of April 2002.
INTERPLAY ENTERTAINMENT CORP.
By: /S/ HERVE CAEN
---------------------------------
Herve Caen
Its: Interim Chief Executive Officer
(Principal Executive Officer)
By: /S/ JEFF GONZALEZ
---------------------------------
Jeff Gonzalez
Its: Chief Financial Officer
(Principal Financial and
Accounting Officer)
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