IPLYs liquidation sale?

K

kumquatq3

Where'd That 6th Toe Come From?
Is the company being liquidated intentionally by it's majority shareholder?:::

It is interesting to note just how much money Titus has sucked out of Interplay this year and how many jobs that would have saved.
Here's what can be found from Interplay's third quarter
SEC filing:
http://www.sec.gov/Archives/edgar/data/1057232/000117091803000601/iec10q093003.txt)

Receivables/Payables
At the end of the third quarter, the amounts that Titus and its
wholely owned subsidiaries (most notably Avalon) owed Interplay were sharply up, while the amounts that Interplay owed Titus and Avalon was way down from the end of last year. That means that while Interplay has been paying what it owes Titus and Avalon, Titus and Avalon have only been accumulating more debt with Interplay.


Code: 
                                      SEPTEMBER 30, 2003      
DECEMBER31, 2002
                                        ------------------      
-------------

(Dollars in thousands) 

Receivables from related parties:
Avalon .......................  $           4,689       $2,050 
Vivendi ......................              1,163            487
Titus ........................                305                200
Return allowance .............         (3,702)           (231)
                      ---------------------------------
Total ........................  $           2,455       $     2,506
     ===============================

Payables to related parties:
Avalon .......................  $             491      $1,797
Vivendi ......................              2,859        5,322
Titus ........................                  -                321
                      ---------------------------------
Total ........................  $           3,350      $ 7,440
=================================

If Interplay had received payment from Titus and Avalon at the same level that it has been paying those companies, this is how much more income they would have...

Titus: IPLY paid Titus 100% of payables. If Titus had paid Interplay
100% of receivables, Interplay would have $305,000 more in the bank.

Avalon: Interplay reduced payables to Avalon in 2003 by 72.7%. If
Avalon had done the same for what they owed Interplay, Interplay would have a whopping $3,407,000 more in the bank.

The Titus Promissary Note
In 2002, Titus gave Interplay a promissary note worth $3.5 million
plus 6% annual interest in exchange for the rights to a bunch of old titles
and a guarantee to cover up to $2 million in sales on those properties. In
2003, Titus gave back those titles (worth little to Interplay because they
have no intent to use them in the near future) and the guarantee in exchange for the cancellation of the promissary note. That was an insanely bad deal for Interplay in the situation that it's in, because, even if they would have had to pay the $2 million guarantee, which I doubt, they essentially paid 3,500,000 * 1.06 - 2,000,000 = $1,710,000 for a bunch of worthless titles. If Caen hadn't made that deal (obviously good for Titus and bad forInterplay) and Titus had paid what it owed Interplay and vice versa,Interplay would have at least $1,710,000 more in the bank.

In April 2002, the Company entered into an agreement with
Titus, pursuant to which, among other things, the Company sold to Titus all right, title and interest in the games "EarthWorm Jim", "Messiah", "Wild 9", "R/C Stunt Copter", "Sacrifice", "MDK", "MDK II", and "Kingpin", and Titus licensed from the Company the right to develop, publish, manufacture and distribute the games "Hunter I", "Hunter II", "Icewind Dale I", "Icewind Dale II", and "BG: Dark
Alliance II" solely on the Nintendo Advance GameBoy game system for the life of the games. As consideration for these rights, Titus issued to the Company a promissory note in the principal amount of $3.5 million, which bears interest at 6 percent per annum. The promissory note was due on August 31, 2002, and was to be paid, atTitus' option, in cash or in shares of Titus common stock with a per share value equal to 90 percent of the average trading price of Titus' common stock over the 5 days immediately preceding the payment date. The Company provided Titus with aguarantee under this agreement, which provided that in the event Titus did not achieve gross sales from the underlying properties of at least $3.5 million by June 25, 2003, and the shortfall was not the result of Titus' failure to use best commercial efforts, the Company was to pay to Titus the difference between $3.5 million and the actual gross sales achieved by Titus, not to exceed $2.0 million. In April 2003, the Company entered into a rescission agreement with Titus to repurchase these assets for a purchase price payable by canceling the $3.5 million promissory note, and any unpaid accrued interest thereon. Concurrently, the Company and Titus terminated all executory obligations including, without limitation, the Company's obligation to pay Titus up to the $2 million guarantee.
Click to expand...

The Note Receivable

This debt was so ridiculous that Interplay's board actually stepped in
and overruled Caen. If Caen hadn't pulled this money out of Interplay,
they'd have another $227,000 in the bank right now.

In March 2003, the Company entered into a note receivable
with Titus Software Corp. ("TSC"), a subsidiary of Titus, for $226,000. The note earns interest at 8 percent per annum and is due in February 2004. In May 2003, the Company's board of directors rescinded the note receivable and demanded repayment of the $226,000 from TSC. The balance on the note receivable, with accrued interest, at September 30, 2003 was $227,000.
Click to expand...

Swiping Interplay's Cash for Titus Legal Fees
Another $60,000 that was aggregious enough for Interplay's board to
call for an investigation...

In May 2003, the Company's Chief Executive Officer instructed
the Company to pay TSC $60,000 to cover legal fees in connection with a lawsuit against Titus. As a result of the payment, the CEO requested that the Company credit the $60,000 to amounts owed to him by the Company arising from expenses incurred in connection with providing services to the Company. The Company's management is in the process of investigating the details of the transaction, including independent counsel review as appropriate, in order to properly record the transaction.
Click to expand...

More Funny Business
These things look really fishy, but I can't say for certain whether
they were a way for Titus to leech money out of Interplay...

In April 2003, the Company paid Europlay I, LLC ("Europlay"),
a financial advisor originally retained by Titus, and subsequently retained by the Company, $448,000 in connection with services provided by Europlay to the Company.
Click to expand...

In June 2003, the Company entered into a representation agreement with Titus Japan K.K. ("Titus Japan"), a majority-controlled subsidiary of Titus, pursuant to which Titus Japan represents the Company as an agent in regards to certain sales transactions in Japan. This representation agreement has not been approved by our Board and is currently being reviewed by the Board. As of September 30, 2003, the Company has received approximately $50,000 in income and incurred approximately $10,000 in commission fees pursuant to thisagreement.
Click to expand...


The Grand Total
The grand total that Interplay would have saved had those transactions
this year between Interplay and Titus (and its subsidiaries) not taken
place asthey did...

$305,000 + $3,407,000 + $1,710,000 + $227,000 + $60,000 = $5,709,000

If we say that the average developer makes $50,000 per year (including
benefits), that's worth 114 developer jobs for one year....and on top of all that, Caen actually lined up a six-figure raise for himself from Interplay this year. Sweet deal for him and Titus, eh

::: A merry X-mas for Caen, and to the rest of IPLYS shareholders, goodnight
 
I'm still getting my mind around all this.
It's a shame that someone would be so greedy as to destroy a company and hurt it's employees for their own self profit...
 
Welcome to corporate America.

Where the CEO is given leeway to fleece the shareholders and employees with impunity.

When't the last time anyone heard anything about Ken Lay (ex-CEO of Enron)?
 
Looks like a bit of fancy debt movement to save one company at the expense of another.

I'd be curious to see how much one company is the parent of the other. Move your debt from a parent to a subsidiary and then bankrupt the subsidiary, taking advantages of the bankruptcy to shield yourself from credits.

Smells like bad fish.

If I were an interplay stock holder I would be genuinely pissed off. I would think about speaking to an attorney.
 
They Should be. This stinks. The questions of whether Caen played fast and loose with finances, whether the company got screwed by a larger parent company, of the CEO is playing fast and loose with company assets is troubling.

Derivitive Shareholder liability suits could be born from this.

However, to win they would have to beat the business judgment rule. So I think we could use more info on this.
 
Hypothetical scenario:

Ineptlay gets sued successfully for its current actions by the shareholders whose stock is now worth less than the paper it's printed on.

Ineptlay files for bankruptcy, closes doors for good.

Does the parent company assume responsibility for fulfilling the terms of the legal settlement or does the legal settlement disappear into the bankruptcy drain?

I have no knowledge of financial laws and am curious.
 
Well a quick read from above, it seems that the sway between Titus and interplay was a cash swap. Essentially a lot of those deals were for cash, which Titus could use for anything, while eating Titus's debts.

However, it might be possible for a company, once bankrupt, to be bought out, and then after reorganization try to obtain payment on debts. But that's a long way down the pipe. Bankruptcy protects you from creditors while you reorganize. But it doesn't mean that those who owe you debts are off the hook.

That promissory note looks especially troublesome. You by something for X dollars, then you trade it back in for less? Makes little sense and seems to be little more than a move to bring Titus in a little more cash then they should have.

Caen's dance with the legal fees- well it's not unusual for a company to indemnify a officer or ceo for legal fees incurred in the performance of work. Often a CEO, as the head of the company, is sued in his personal capacity as officer of the company. However, I would be concerned if there was a breach of his power as officer of the corp to get this money. Note that he could be indemnified after-the-fact.

Curious stuff though.

Kumquatq- more details?
 
You must log in or register to reply here.
Back
Top