" In February 2003, we amended our license agreement with the holder of the
interactive entertainment rights to DUNGEONS & DRAGONS ("D&D"). This license
allows us to publish the BALDUR'S GATE, BALDUR'S GATE: DARK ALLIANCE, and
ICEWIND DALE titles. Pursuant to this amendment, among other things, we (i)
extended the license term for approximately an additional two years to December
31, 2008 for an advance payment on future royalties of approximately $200,000
and (ii) extended our rights with respect to certain of the D&D properties. The
amendment terminated our rights to certain titles in the event we are unable to
obtain certain third-party waivers in accordance with the terms of the
amendment. We were unable to obtain the required waivers within the permitted
time period and as a result have lost rights to publish BALDUR'S GATE 3 and its
sequels on the PC. Subsequently, we relinquished the rights to publish any
future titles using the D&D license in exchange for the DARK ALLIANCE trademark.
We intend to publish future titles using the DARK ALLIANCE trademark name.
On or about February 23, 2004, we received correspondence from the holder
of the D&D license alleging that we had failed to pay royalties due under the
D&D license as of February 15, 2004. If we are unable to cure this alleged
breach of the license agreement, we may lose our remaining rights under the
license, including the rights to continued distribution of BALDUR'S GATE: DARK
ALLIANCE II. The loss of the remaining rights to distribute games created under
the D&D license could have a significant negative impact on our future operating
results."
Snipped for brevity - future titles go here
"We are currently in default of the settlement agreement with Warner and
have entered into a payment plan, of which we are in default, for the balance of
the $0.32 million owed payable in one remaining installment. On or about
February 23, 2004, we received correspondence from Atari Interactive alleging
that Interplay had failed to pay royalties due under the D&D license as of
February 15, 2004. If we are unable to cure this alleged breach of the license
agreement, we may lose our remaining rights under the license, including the
rights to continued distribution of BALDUR'S GATE: DARK ALLIANCE II. The loss of
the remaining rights to distribute games created under the D&D license could
have a significant negative impact on our future operating results."