UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

[X]      ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008

                                       or

[_]      TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE  SECURITIES
         AND EXCHANGE ACT OF 1934

             For the transition period from __________ to __________

                         Commission File Number 0-24363

                          INTERPLAY ENTERTAINMENT CORP.
           (Exact name of the registrant as specified in its charter)

           DELAWARE                                             33-0102707
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

             100 N. CRESCENT DRIVE, BEVERLY HILLS, CALIFORNIA 90210
                    (Address of principal executive offices)

                                 (310) 432-1958
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12 (b) of the Act: None

          Securities registered pursuant to Section 12 (g) of the Act:

                         COMMON STOCK, $0.001 PAR VALUE

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. Yes [_] No [X].

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [_] No [X].

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. [_]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [_]     Accelerated filer          [_]
Non- accelerated filer  [X]     Smaller reporting company  [_]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes [_] No [X].

As of June 30, 2008,  the aggregate  market value of voting common stock held by
non-affiliates was approximately $12,000,000 based upon the closing price of the
Common Stock on that date.

Documents incorporated by reference

Portions of the  Registrant's  definitive  proxy statement  relating to its 2009
annual  meeting of  stockholders,  which will be filed with the  Securities  and
Exchange  Commission  pursuant to regulation 14A within 120 days of the close of
the  Registrant's  last fiscal year, are incorporated by reference into Part III
of this report.

As of March 31, 2009,  108,140,301 shares of Common Stock of the Registrant were
issued and outstanding. This includes 4,658,216 shares of Treasury Stock.


<PAGE>


             INDEX TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2008


                                                                            PAGE
                                                                            ----
PART I

    Item 1.      Business                                                      3

    Item 1A.     Risk Factors                                                  6

    Item 2.      Properties                                                   12

    Item 3.      Legal Proceedings                                            12

    Item 4.      Submission of Matters to a Vote of Security Holders          12

PART II

    Item 5.      Market for Registrant's Common Equity and Related
                 Stockholder Matters                                          13

    Item 6.      Selected Financial Data                                      15

    Item 7.      Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                          16

    Item 7A.     Quantitative and Qualitative Disclosure about
                 Market Risk                                                  25

    Item 8.      Consolidated Financial Statements and Supplementary
                 Data                                                         25

    Item 9A.(T)  Controls and Procedures                                      25

PART III

    Item 10.     Directors and Executive Officers of the Registrant           26

    Item 11.     Executive Compensation                                       26

    Item 12.     Security Ownership of Certain Beneficial Owners and
                 Management and Related Stockholder Matters                   27

    Item 13.     Certain Relationships and Related Transactions               27

    Item 14.     Principal Accounting Fees and Services                       27

PART IV

    Item 15.     Exhibits, Financial Statement Schedules.                     27

Signatures                                                                    28

Exhibit Index                                                                 29


                                       2
<PAGE>


     THIS REPORT CONTAINS CERTAIN FORWARD-LOOKING  STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE  SECURITIES  ACT OF 1933 AND SECTION 21E OF THE SECURITIES
AND EXCHANGE ACT OF 1934 AND SUCH FORWARD-LOOKING  STATEMENTS ARE SUBJECT TO THE
SAFE HARBORS CREATED THEREBY. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED IN THIS
REPORT EXCEPT FOR  HISTORICAL  INFORMATION  MAY BE DEEMED TO BE  FORWARD-LOOKING
STATEMENTS.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,  OUR USE OF WORDS
SUCH AS "PLAN,"  "MAY," "WILL,"  "EXPECT,"  "BELIEVE,"  "ANTICIPATE,"  "INTEND,"
"COULD," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR
COMPARABLE TERMINOLOGY ARE INTENDED TO HELP IDENTIFY FORWARD-LOOKING STATEMENTS.
IN ADDITION,  ANY STATEMENTS  THAT REFER TO  EXPECTATIONS,  PROJECTIONS OR OTHER
CHARACTERIZATIONS   OF  FUTURE  EVENTS  OR  CIRCUMSTANCES  ARE   FORWARD-LOOKING
STATEMENTS.

     THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT ARE BASED ON CURRENT
EXPECTATIONS  THAT  INVOLVE  A NUMBER  OF RISKS  AND  UNCERTAINTIES,  AS WELL AS
CERTAIN  ASSUMPTIONS.  FOR EXAMPLE,  ANY STATEMENTS  REGARDING FUTURE CASH FLOW,
CASH CONSTRAINTS,  FINANCING ACTIVITIES,  COST REDUCTION MEASURES,  AND MERGERS,
SALES  OR  ACQUISITIONS  ARE  FORWARD-LOOKING  STATEMENTS  AND  THERE  CAN BE NO
ASSURANCE  THAT WE WILL  AFFECT ANY OR ALL OF THESE  OBJECTIVES  IN THE  FUTURE.
ADDITIONAL  RISKS AND  UNCERTAINTIES  THAT MAY  AFFECT OUR  FUTURE  RESULTS  ARE
DISCUSSED  IN MORE  DETAIL IN THE  SECTION  TITLED  "RISK  FACTORS"  IN "ITEM 7.
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS."

     ASSUMPTIONS  RELATING TO OUR  FORWARD-LOOKING  STATEMENTS INVOLVE JUDGMENTS
WITH RESPECT TO, AMONG OTHER THINGS,  FUTURE  ECONOMIC,  COMPETITIVE  AND MARKET
CONDITIONS,  AND  FUTURE  BUSINESS  DECISIONS,  ALL OF WHICH  ARE  DIFFICULT  OR
IMPOSSIBLE  TO PREDICT  ACCURATELY  AND MANY OF WHICH ARE  BEYOND  OUR  CONTROL.
ALTHOUGH  WE  BELIEVE  THAT  THE  ASSUMPTIONS   UNDERLYING  THE  FORWARD-LOOKING
STATEMENTS ARE REASONABLE, OUR INDUSTRY,  BUSINESS AND OPERATIONS ARE SUBJECT TO
SUBSTANTIAL  RISKS, AND THE INCLUSION OF SUCH INFORMATION SHOULD NOT BE REGARDED
AS A REPRESENTATION BY MANAGEMENT THAT ANY PARTICULAR OBJECTIVE OR PLANS WILL BE
ACHIEVED. IN ADDITION, RISKS,  UNCERTAINTIES AND ASSUMPTIONS CHANGE AS EVENTS OR
CIRCUMSTANCES CHANGE. WE DISCLAIM ANY OBLIGATION TO PUBLICLY RELEASE THE RESULTS
OF ANY  REVISIONS  TO  THESE  FORWARD-LOOKING  STATEMENTS  WHICH  MAY BE MADE TO
REFLECT  EVENTS OR  CIRCUMSTANCES  OCCURRING  SUBSEQUENT  TO THE  FILING OF THIS
REPORT  WITH THE SEC OR  OTHERWISE  TO  REVISE  OR  UPDATE  ANY ORAL OR  WRITTEN
FORWARD-LOOKING  STATEMENT  THAT MAY BE MADE  FROM  TIME TO TIME BY US OR ON OUR
BEHALF.

     INTERPLAY (R), INTERPLAY  PRODUCTIONS(R),  GAMES ON LINE (R) AND CERTAIN OF
OUR OTHER PRODUCT NAMES AND PUBLISHING LABELS REFERRED TO IN THIS REPORT ARE THE
COMPANY'S TRADEMARKS. THIS REPORT ALSO CONTAINS TRADEMARKS BELONGING TO OTHERS.


                                     PART I

ITEM 1.    BUSINESS

OVERVIEW AND RECENT DEVELOPMENTS

     Interplay  Entertainment  Corp.,  which we refer to in this Report as "we,"
"us," or  "our,"  is a  publisher  and  licensor  of  interactive  entertainment
software for both core gamers and the mass market.  We were  incorporated in the
State of California in 1982 and were  reincorporated in the State of Delaware in
May  1998.  We are  most  widely  known  for our  titles  in the  action/arcade,
adventure/role  playing  game (RPG),  and  strategy/puzzle  categories.  We have
produced  and  licensed  titles  for  many  of  the  most  popular   interactive
entertainment software platforms.

     We seek to publish or license out interactive entertainment software titles
that are, or have the potential to become, franchise software titles that can be
leveraged  across  several  releases  and/or  platforms,  and have  published or
licensed many such successful franchise titles to date.

     We own the intellectual  property rights in several  recognized video games
and intend, to develop sequels to some of our most successful  games,  including
Earthworm  Jim, Dark  Alliance,  Descent and MDK, for the current  generation of
video game consoles, personal computers and mobile platforms.

     We have sold  "Fallout"  to a third  party and  entered  into,  subject  to
satisfaction  of various  conditions,  a license  back which  could  allow us to
create,  develop and exploit a "Fallout"  Massively  Multiplayer Online Game. We
are planning to exploit the license back of "Fallout" MMOG.

     During March 2009 we entered into a binding  letter of intent with Masthead
Studios to fund the development of a Massively  Multiplayer  Online Game (MMOG),
code  named  "Project:  V13." The game has been in  design  and  development  at
Interplay  since November 2007.  Masthead and Interplay teams will work together
under the  direction  and control of  Interplay to complete  development  of the
project.  As  a  part  of  the  agreement,  the  game  will  utilize  Masthead's
proprietary  tools and MMOG  technology  developed  for  Masthead's  "Earthrise"
project.


                                       3
<PAGE>


     Our business and industry has certain risks and uncertainties. For a fuller
discussion of the risk and uncertainties  relating to our financial results, our
business and our industry,  please see the section titled "Risk Factors" in Item
7.  Management's  Discussion and Analysis of Financial  Condition and Results of
Operations."

     Our  principal  activities  involve  publishing  of  video  game  products,
licensing of our intellectual property rights, online distribution, back catalog
licensing and OEM/ merchandising.

PRODUCTS

     We publish and distribute  interactive  entertainment  software titles that
provide  immersive  game  experiences  by  combining  advanced  technology  with
engaging content, vivid graphics and rich sound.

     Our  strategy is to invest in products for those  platforms,  whether PC or
video game console, that have or will have sufficient installed bases or a large
enough number of potential  subscribers  for the  investment to be  economically
viable. We are currently internally developing one new product and have four new
products in early stage of design externally.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

     We regard our software as  proprietary  and rely primarily on a combination
of patent, copyright,  trademark and trade secret laws, employee and third party
nondisclosure agreements and other methods to protect our proprietary rights. We
own or license  various  copyrights and  trademarks.  We hold  copyrights on our
products,  product  literature and  advertising  and other  materials,  and hold
trademark  rights in our name and  certain of our product  names and  publishing
labels.  We have licensed  certain products to third parties for distribution in
particular geographic markets or for particular platforms, and receive royalties
on such  licenses.  We have  also  outsourced,  from  time to time,  some of our
product  development  activities  to third party  developers.  We  contractually
retain all intellectual  property rights related to such projects.  We have also
licensed certain  products  developed by third parties and pay royalties on such
products.

     While we provide  "shrink wrap" license  agreements or  limitations  on use
with our software,  the  enforceability  of such  agreements or  limitations  is
uncertain. We are aware that unauthorized copying occurs, and if a significantly
greater amount of unauthorized copying of our interactive entertainment software
products  were to occur,  our operating  results  could be materially  adversely
affected.  We have used copy protection on selected  products and do not provide
source code to third parties unless they have signed nondisclosure agreements.

     We rely on existing copyright laws to prevent the unauthorized distribution
of our  software.  Existing  copyright  laws  afford  only  limited  protection.
Policing  unauthorized use of our products is difficult,  and we expect software
piracy to be a persistent problem,  especially in certain international markets.
Further,  the laws of  certain  countries  in which our  products  are or may be
distributed either do not protect our products and intellectual  property rights
to the same  extent  as the  laws of the  U.S.  or are  weakly  enforced.  Legal
protection  of our  rights  may be  ineffective  in  such  countries,  and as we
leverage our  software  products  using,  such as using the Internet and on-line
services,  our ability to protect our intellectual property rights, and to avoid
infringing the intellectual  property rights of others,  becomes more difficult.
In addition,  the intellectual property laws are less clear with respect to such
emerging  technologies.  There can be no assurance  that  existing  intellectual
property laws will provide our products  with adequate  protection in connection
with such emerging technologies.

     As  the  number  of  software  products  in the  interactive  entertainment
software  industry  increases  and the  features  and content of these  products
further overlap,  interactive entertainment software developers may increasingly
become subject to infringement  claims.  Although we take reasonable  efforts to
ensure that our  products do not violate  the  intellectual  property  rights of
others,  there can be no assurance that claims of infringement will not be made.
Any such claims,  with or without merit,  can be time consuming and expensive to
defend.  From time to time, we have received  communications  from third parties
asserting  that features or content of certain of our products may infringe upon
such party's  intellectual  property rights.  In some instances,  we may need to
engage in  litigation in the ordinary  course of our business to defend  against
such claims.  There can be no  assurance  that  existing or future  infringement
claims  against  us will not  result in costly  litigation  or  require  that we
license the intellectual property rights of third parties, either of which could
have a material adverse effect on our business,  operating results and financial
condition.

PRODUCT DEVELOPMENT

     We currently have four new products in early stages of development. We have
reinitiated our in-house game development studio, and have hired game developers
for this purpose.


                                       4
<PAGE>


     During the years ended December 31, 2008, 2007 and 2006, we spent $328,000,
$18,000 and $0  respectively,  on product  research and development  activities.
Those amounts represented 24%, 0.3% and 0% respectively, of net revenues in each
of those periods.

SEGMENT INFORMATION

     We operate primarily in one industry segment,  the development,  publishing
and  distribution  of  interactive   entertainment   software.  For  information
regarding the revenues associated with our geographic  segments,  see Note 13 of
the Notes to our Consolidated  Financial  Statements  included elsewhere in this
Report.

SALES AND DISTRIBUTION

     NORTH  AMERICA.  We  distribute  and  license  rights to our  products  and
intellectual  property  rights in our  video  games in North  America  and other
selected territories from our corporate offices in Beverly Hills, California.

     INTERNATIONAL.  We  distribute  and  license  rights  to our  products  and
intellectual  property  rights in our video  games in Europe and other  selected
territories thru our wholly owned subsidiary, Interplay Productions Ltd, located
in London, England.

LICENSING

     We entered into  various  licensing  agreements  during 2008 under which we
licensed others to exploit games that we have intellectual property rights to.

MARKETING

     We  assist  our  distributors  in the  development  and  implementation  of
marketing programs and campaigns for each of our titles and product groups.

COMPETITION

     The interactive  entertainment  software industry is intensely  competitive
and is  characterized  by the frequent  introduction of new hardware systems and
software  products.  Our  competitors  vary in size from small companies to very
large corporations with significantly  greater financial,  marketing and product
development resources than ours. Due to these greater resources,  certain of our
competitors are able to undertake more extensive marketing campaigns, adopt more
aggressive  pricing  policies,  pay higher fees to licensors of desirable motion
picture, television, sports and character properties and pay more to third party
software  developers than us. We believe that the principal  competitive factors
in the interactive  entertainment  software  industry include product  features,
brand name recognition,  access to distribution channels,  quality, ease of use,
price, marketing support and quality of customer service.

     We compete  primarily  with other  publishers  of PC and video game console
interactive entertainment software.  Significant competitors include Activision,
Capcom,  Eidos,  Electronic Arts,  Konami,  Lucas Arts,  Namco,  Sega,  Take-Two
Interactive,  THQ and Ubi Soft.  In  addition,  integrated  video  game  console
hardware/software  companies  such as  Sony  Computer  Entertainment,  Microsoft
Corporation,  and  Nintendo  compete  directly  with  us in the  development  of
software titles for their respective platforms.  Large diversified entertainment
companies,  such as The Walt Disney Company, and Time Warner Inc., many of which
own substantial  libraries of available content and have  substantially  greater
financial  resources  than us, also compete  directly with us or have  strategic
relationships with our competitors.

SEASONALITY

     The  interactive  entertainment  software  industry is highly seasonal as a
whole,  with the highest levels of consumer demand occurring during the year-end
holiday  buying  season.  As a  result,  our net  revenues,  gross  profits  and
operating  income have  historically  been highest during the second half of the
year. Our business and financial results may therefore be affected by the timing
of our introduction of new releases.

MANUFACTURING

     Our PC-based products consist primarily of CD-ROMs and DVDs,  manuals,  and
packaging  materials.  Substantially  all of our CD-ROM and DVD  duplication  is
performed  by third  parties.  Printing  of  manuals  and  packaging  materials,
manufacturing  of related  materials  and  assembly of  completed  packages  are
performed  to our  specifications  by  third  parties.  To  date,  we  have  not


                                       5
<PAGE>


experienced any material  difficulties or delays in the manufacture and assembly
of our CD-ROM and DVD based products,  and we have not  experienced  significant
returns due to manufacturing defects.

     Sony Computer Entertainment, Microsoft Corporation and Nintendo manufacture
and ship finished products that are compatible with their video game consoles to
our licensees for distribution.

     If we  experience  unanticipated  delays in the  delivery  of  manufactured
software products by our third party manufacturers,  our net sales and operating
results could be materially adversely affected.

BACKLOG

     We do not  carry  any  material  inventories  because  all of our sales and
distribution  efforts  are  handled  by our  licensees  under  the  terms of our
respective distribution agreements with them. We do not have any backlog orders

EMPLOYEES

     As  of  December  31,  2008,  we  had 7  employees,  including  4 in  games
development, and 3 in finance, general and administrative.

     From time to time,  we have  retained  actors and/or "voice over" talent to
perform in certain of our  products,  and we may continue  this  practice in the
future.  These  performers  are typically  members of the Screen Actors Guild or
other performers' guilds,  which guilds have established  collective  bargaining
agreements governing their members' participation in interactive media projects.
We may be  required  to  become  subject  to one or  more  of  these  collective
bargaining  agreements  in order to engage the services of these  performers  in
connection with future development projects.

ADDITIONAL INFORMATION

           We file annual,  quarterly and current reports,  proxy statements and
other information with the U.S.  Securities and Exchange  Commission or SEC. You
may  obtain  copies of these  reports  via the  Internet  at the SEC's  homepage
located  at  www.sec.gov.  You may also go to our  Internet  address  located at
www.interplay.com/investors/  and go to "SEC filings" which will link you to the
SEC's homepage for our filed reports. In addition, copies of the reports we file
with the SEC may also be obtained at the SEC's  Public  Reference  Room at 100 F
Street NE, Washington,  DC 20549. You may obtain information on the operation of
the Public Reference Room by Calling the SEC at 1-800-SEC-0330.

ITEM 1A.   RISK FACTORS

RISK FACTORS

     Our future  operating  results  depend upon many factors and are subject to
various  risks  and  uncertainties.  These  major  risks and  uncertainties  are
discussed below. There may be additional risks and uncertainties which we do not
believe are  currently  material or are not yet known to us but which may become
such in the  future.  Some of the  risks and  uncertainties  which may cause our
operating  results to vary from anticipated  results or which may materially and
adversely affect our operating results are as follows:

RISKS RELATED TO OUR FINANCIAL RESULTS

WE CURRENTLY HAVE SOME OBLIGATIONS THAT WE ARE UNABLE TO MEET WITHOUT GENERATING
ADDITIONAL  INCOME  OR  RAISING  ADDITIONAL   CAPITAL.  IF  WE  CANNOT  GENERATE
ADDITIONAL INCOME OR RAISE ADDITIONAL  CAPITAL IN THE NEAR FUTURE, WE MAY BECOME
INSOLVENT AND/OR BE MADE BANKRUPT AND/OR MAY BECOME ILLIQUID OR WORTHLESS.

     As of December 31,  2008,  our cash  balance was  approximately  $0 and our
working capital deficit totaled approximately $2.4 million. If we do not receive
sufficient  financing  or  sufficient  funds  from  our  operations  we may  (i)
liquidate  assets,  (ii) seek or be forced into bankruptcy and/or (iii) continue
operations,  but incur  material harm to our  business,  operations or financial
condition. These measures could have a material adverse effect on our ability to
continue as a going concern.  Additionally,  because of our financial condition,
our Board of Directors  has a duty to our  creditors  that may conflict with the
interests of our stockholders.  When a Delaware  corporation is operating in the
vicinity of insolvency,  the Delaware courts have imposed upon the corporation's
directors  a  fiduciary  duty  to the  corporation's  creditors.  Our  Board  of
Directors  may be  required  to make  decisions  that  favor  the  interests  of
creditors at the expense of our  stockholders to fulfill its fiduciary duty. For
instance, we may be required to preserve our assets to maximize the repayment of
debts  versus  employing  the assets to further  grow our  business and increase
shareholder  value.  If we cannot  generate enough income from our operations or
are  unable to  locate  additional  funds  through  financing,  we will not have
sufficient resources to continue operations.


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<PAGE>


WE HAVE A  HISTORY  OF  LOSSES,  AND MAY HAVE TO  FURTHER  REDUCE  OUR  COSTS BY
CURTAILING FUTURE OPERATIONS TO CONTINUE AS A BUSINESS.

     For the year ended  December 31,  2008,  our net loss was  $493,000.  As of
December 31, 2008 we had an accumulated deficit of $2.4 million.  Our ability to
fund our capital  requirements out of our available cash and cash generated from
our operations depends on a number of factors. Some of these factors include the
progress of our product  distributions and licensing,  the rate of growth of our
business,  and our products'  commercial success. If we cannot generate positive
cash flow from  operations,  we will have to  continue  to reduce  our costs and
raise working  capital from other sources.  These measures could include selling
or  consolidating  certain  operations  or assets,  and  delaying,  canceling or
further scaling back  operations.  These measures could materially and adversely
affect our ability to publish successful titles, and may not be enough to permit
us to operate profitability, or at all.

OUR  ABILITY TO EFFECT A  FINANCING  TRANSACTION  TO FUND OUR  OPERATIONS  COULD
ADVERSELY AFFECT THE VALUE OF YOUR STOCK.

     If we are not  acquired  by or merge with  another  entity or if we are not
able to raise additional capital by sale or license of certain of our assets, we
may need to consummate a financing  transaction to receive additional liquidity.
This  additional  financing  may  take the form of  raising  additional  capital
through public or private equity  offerings or debt financing.  To the extent we
raise additional capital by issuing equity securities, we cannot be certain that
additional  capital  will  be  available  to  us  on  favorable  terms  and  our
stockholders will likely  experience  substantial  dilution.  Our certificate of
incorporation  provides for the issuance of preferred stock however we currently
do not  have  any  preferred  stock  issued  and  outstanding.  Any  new  equity
securities  issued may have greater  rights,  preferences or privileges than our
existing common stock. Material shortage of capital may require us to take steps
such as  reducing  our  level  of  operations,  disposing  of  selected  assets,
effecting  financings on less than favorable terms or seeking  protection  under
federal bankruptcy laws.

RISKS RELATED TO OUR BUSINESS

FINANCIAL  PLANNING  AND  DEVELOPMENT  S.A.  ("FPD")  CONTROLS A MAJORITY OF OUR
VOTING STOCK AND CAN ELECT A MAJORITY OF OUR BOARD OF  DIRECTORS  AND PREVENT AN
ACQUISITION  OF US THAT IS FAVORABLE TO OUR OTHER  STOCKHOLDERS.  ALTERNATIVELY,
FPD CAN ALSO CAUSE A SALE OF CONTROL OF OUR COMPANY THAT MAY NOT BE FAVORABLE TO
OUR OTHER STOCKHOLDERS.

     FPD owns approximately 58 million shares of common stock. As a consequence,
FPD can  control  substantially  all  matters  requiring  stockholder  approval,
including the election of  directors,  subject to our  stockholders'  cumulative
voting  rights,  and the  approval  of  mergers  or other  business  combination
transactions.  This  concentration of voting power could discourage or prevent a
change in control that  otherwise  could result in a premium in the price of our
common stock.  Further,  FPD can cause a sale of control of our Company that may
not be favorable to our  stockholders.  Such a sale,  including if it involves a
dispersion of shares to multiple stockholders,  further could have the effect of
making any business combination, or a sale of all of our shares as a whole, more
difficult.

WE MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP A "FALLOUT" MMOG.

     We need to satisfy  various  conditions  to maintain  our  license  back of
"Fallout"  MMOG.  If we have  failed  or fail  to do so (see  Legal  Proceedings
below),  our license back may be terminated and we will not be able to develop a
"Fallout" MMOG.

THE LACK OF ANY CREDIT AGREEMENT HAS RESULTED IN A SUBSTANTIAL  REDUCTION IN THE
CASH AVAILABLE TO FINANCE OUR OPERATIONS.

     We are currently  operating  without a credit agreement or credit facility.
There  can be no  assurance  that we will be  able to  enter  into a new  credit
agreement  or that if we do enter  into a new  credit  agreement,  it will be on
terms favorable to us.

WE CONTINUE TO OPERATE WITHOUT A CHIEF FINANCIAL  OFFICER,  WHICH MAY AFFECT OUR
ABILITY TO MANAGE OUR FINANCIAL OPERATIONS.

     We are  presently  without a CFO,  and Mr. Caen has assumed the position of
interim-CFO and continues as CFO to date until a replacement can be found.


                                       7
<PAGE>


OUR BUSINESS AND INDUSTRY IS BOTH SEASONAL AND  CYCLICAL.  IF WE FAIL TO DELIVER
OUR PRODUCTS AT THE RIGHT TIMES, OUR SALES WILL SUFFER.

     Our business is highly seasonal, with the highest levels of consumer demand
occurring in the fourth  quarter.  Our industry is also cyclical.  The timing of
hardware  platform  introduction is often tied to the year-end season and is not
within our control.  As new  platforms are being  introduced  into our industry,
consumers often choose to defer game software purchases until such new platforms
are available,  which would cause sales of our products on current  platforms to
decline.  This decline may not be offset by increased  sales of products for the
new platform.

THE  UNPREDICTABILITY  OF FUTURE  RESULTS  MAY  CAUSE OUR STOCK  PRICE TO REMAIN
DEPRESSED OR TO DECLINE FURTHER.

     Our operating  results have fluctuated in the past and may fluctuate in the
future due to several  factors,  some of which are  beyond  our  control.  These
factors include:

     o    demand for our products and our competitors' products;

     o    the  size  and  rate  of  growth  of  the   market   for   interactive
          entertainment software;

     o    changes in personal computer and video game console platforms;

     o    the timing of  announcements of new products by us and our competitors
          and the number of new products and product enhancements released by us
          and our competitors;

     o    changes in our product mix;

     o    the number of our products that are returned; and

     o    the level of our  international  and original  equipment  manufacturer
          royalty and licensing net revenues.

     Many factors make it difficult to  accurately  predict the quarter in which
we will ship our products. Some of these factors include:

     o    the  uncertainties  associated  with  the  interactive   entertainment
          software development process;

     o    approvals required from content and technology licensors; and

     o    the timing of the release and market  penetration of new game hardware
          platforms.

THERE ARE HIGH FIXED COSTS TO DEVELOPING OUR PRODUCTS.  IF OUR REVENUES  DECLINE
BECAUSE  OF  DELAYS  IN  THE  DISTRIBUTION  OF OUR  PRODUCTS,  OR IF  THERE  ARE
SIGNIFICANT DEFECTS OR DISSATISFACTION WITH OUR PRODUCTS,  OUR BUSINESS COULD BE
HARMED.

       Our losses in the past have stemmed partly from the significant  costs we
incurred to develop our  entertainment  software  products,  product returns and
price concessions.  Moreover, a significant portion of our operating expenses is
relatively fixed, with planned expenditures based largely on sales forecasts. At
the same time, most of our products have a relatively  short life cycle and sell
for a limited period of time after their initial release,  usually less than one
year.

     Relatively  fixed costs and short  windows in which to earn  revenues  mean
that  sales  of new  products  are  important  in  enabling  us to  recover  our
development costs, to fund operations and to replace declining net revenues from
older products.  Our failure to accurately assess the commercial  success of our
new products,  and our delays in licensing  existing  products  could reduce our
earnings.

IF OUR PRODUCTS DO NOT ACHIEVE BROAD MARKET  ACCEPTANCE,  OUR BUSINESS  COULD BE
HARMED SIGNIFICANTLY.

     Consumer  preferences  for  interactive  entertainment  software are always
changing and are extremely difficult to predict.  Historically,  few interactive
entertainment  software  products have  achieved  continued  market  acceptance.
Instead,  a limited number of releases have become "hits" and have accounted for
a substantial  portion of revenues in our industry.  Further,  publishers with a
history of producing hit titles have enjoyed a significant  marketing  advantage
because of their heightened brand  recognition and consumer  loyalty.  We expect
the  importance of introducing  hit titles to increase in the future.  We cannot
assure you that our  licensing  of  products  will  achieve  significant  market
acceptance, or that we will be able to sustain this acceptance for a significant
length of time if we achieve it.

     We believe that our future revenue will depend on the successful production
of hit titles on a continuous  basis. The failure of one or more new products to
achieve market acceptance could cause material harm to our business. Further, if
our  products do not  achieve  market  acceptance,  we could be forced to accept
substantial product returns or grant significant pricing concessions to maintain
our relationship with retailers and our access to distribution  channels.  If we
are forced to accept  significant  product returns or grant significant  pricing
concessions, our business and financial results could suffer material harm.


                                       8
<PAGE>


WE HAVE A LIMITED NUMBER OF KEY MANAGEMENT AND OTHER PERSONNEL.  THE LOSS OF ANY
SINGLE  MEMBER OF  MANAGEMENT OR KEY PERSON OR THE FAILURE TO HIRE AND INTEGRATE
CAPABLE NEW KEY PERSONNEL COULD HARM OUR BUSINESS.

     Our business  requires  extensive  time and creative  effort to produce and
market.  Our future  success  also will  depend  upon our  ability  to  attract,
motivate and retain qualified employees and contractors,  particularly  software
design and development  personnel.  Competition for highly skilled  employees is
intense, and we may fail to attract and retain such personnel. Alternatively, we
may incur increased costs in order to attract and retain skilled employees.  Our
executive management team currently consists solely of CEO and interim CFO Herve
Caen. Our failure to recruit or retain the services of key personnel,  including
competent executive  management,  or to attract and retain additional  qualified
employees could cause material harm to our business.

OUR  INTERNATIONAL  SALES  EXPOSE  US TO RISKS OF  UNSTABLE  FOREIGN  ECONOMIES,
DIFFICULTIES  IN  COLLECTION  OF  REVENUES,  INCREASED  COSTS  OF  ADMINISTERING
INTERNATIONAL BUSINESS TRANSACTIONS AND FLUCTUATIONS IN EXCHANGE RATES.

     Our net revenues from  international  sales accounted for approximately 17%
and 4% of our total net  revenues  for years ended  December  31, 2008 and 2007,
respectively. To the extent our resources allow, we intend to continue to expand
our direct and indirect  sales,  marketing and product  localization  activities
worldwide.

     Our  international  sales  are  subject  to a  number  of  inherent  risks,
including the following:

     o    recessions in foreign economies may reduce purchases of our products;

     o    translating and localizing products for international  markets is time
          consuming and expensive;  o accounts  receivable are more difficult to
          collect  and when  they are  collectible,  they  may  take  longer  to
          collect;

     o    regulatory requirements may change unexpectedly; o it is difficult and
          costly to staff and manage foreign operations;

     o    fluctuations  in foreign  currency  exchange  rates;  o political  and
          economic instability; and

     o    delays in market penetration of new platforms in foreign territories.

     These factors may cause material  declines in our future  international net
revenues and, consequently, could cause material harm to our business.

     A significant,  continuing  risk we face from our  international  sales and
operations  stems from currency  exchange rate  fluctuations.  Because we do not
engage in currency hedging  activities,  fluctuations in currency exchange rates
have caused significant reductions in our past earnings from international sales
and licensing due to the loss in value upon conversion into U.S. Dollars. We may
suffer similar losses in the future.

SOME OF OUR  CUSTOMERS  HAVE THE  ABILITY TO RETURN OUR  PRODUCTS  OR TO RECEIVE
PRICING  CONCESSIONS  AND SUCH  RETURNS  AND  CONCESSIONS  COULD  REDUCE OUR NET
REVENUES AND RESULTS OF OPERATIONS.

     We are exposed to the risk of product returns and pricing  concessions with
respect  to  our  distributors.  Our  distributors  allow  retailers  to  return
defective,  shelf-worn and damaged products in accordance with negotiated terms,
and also offer a 90-day limited warranty to our end users that our products will
be free from  manufacturing  defects.  In  addition,  our  distributors  provide
pricing  concessions to our customers to manage our customers'  inventory levels
in the  distribution  channel.  Our  distributors  could  be  forced  to  accept
substantial  product  returns and provide  pricing  concessions  to maintain our
relationships with retailers and their access to distribution channels.

RISKS RELATED TO OUR INDUSTRY

INADEQUATE  INTELLECTUAL PROPERTY PROTECTIONS COULD PREVENT US FROM ENFORCING OR
DEFENDING OUR PROPRIETARY TECHNOLOGY.

     We regard our software as proprietary  and rely on a combination of patent,
copyright,   trademark   and  trade  secret  laws,   employee  and  third  party
nondisclosure agreements and other methods to protect our proprietary rights. We
own or license  various  copyrights and  trademarks,  and hold the rights to one
patent application related to one of our titles. While we provide  "shrink-wrap"
license  agreements or limitations on use with our software,  it is uncertain to
what extent these agreements and limitations are enforceable.  We are aware that
some unauthorized copying occurs within the computer software industry, and if a
significantly   greater  amount  of  unauthorized  copying  of  our  interactive
entertainment  software  products were to occur, it could cause material harm to
our business and financial results.


                                       9
<PAGE>


     Policing unauthorized use of our products is difficult, and software piracy
can be a persistent problem,  especially in some international markets. Further,
the laws of some countries  where our products are or may be distributed  either
do not protect our products and intellectual  property rights to the same extent
as the laws of the United States,  or are weakly  enforced.  Legal protection of
our rights may be ineffective in such countries, and as we leverage our software
products using emerging  technologies  such as the Internet and online services,
our ability to protect our intellectual  property rights and to avoid infringing
others'  intellectual  property  rights may diminish.  We cannot assure you that
existing  intellectual  property laws will provide  adequate  protection for our
products in connection  with these emerging  technologies.  We lack resources to
defend proprietary technology.

WE MAY UNINTENTIONALLY  INFRINGE ON THE INTELLECTUAL  PROPERTY RIGHTS OF OTHERS,
WHICH COULD EXPOSE US TO SUBSTANTIAL DAMAGES OR RESTRICT OUR OPERATIONS.

     As the number of interactive  entertainment software products increases and
the  features  and  content of these  products  continue  to  overlap,  software
developers  increasingly may become subject to infringement claims.  Although we
believe  that we make  reasonable  efforts to ensure  that our  products  do not
violate the  intellectual  property rights of others,  it is possible that third
parties   still  may  claim   infringement.   From  time  to  time,  we  receive
communications  from third  parties  regarding  such claims.  Existing or future
infringement  claims against us, whether valid or not, may be time consuming and
expensive to defend.  Intellectual  property litigation or claims could force us
to do one or more of the following:

     o    cease  selling,  incorporating  or using  products  or  services  that
          incorporate the challenged intellectual property;

     o    obtain  a  license  from  the  holder  of the  infringed  intellectual
          property,  which license, if available at all, may not be available on
          commercially favorable terms; or

     o    redesign our interactive entertainment software products,  possibly in
          a manner that reduces their commercial appeal.

     Any of these actions may cause  material harm to our business and financial
results.

OUR BUSINESS IS INTENSELY  COMPETITIVE AND PROFITABILITY IS INCREASINGLY  DRIVEN
BY A FEW KEY  TITLE  RELEASES.  IF WE ARE  UNABLE TO  DELIVER  KEY  TITLES,  OUR
BUSINESS MAY BE HARMED.

     Competition  in  our  industry  is  intense.  New  videogame  products  are
regularly  introduced.  Increasingly,  profits and  revenues in our industry are
dominated  by certain  key product  releases  and are  increasingly  produced in
conjunction  with the latest consumer and media trends.  Many of our competitors
may have more finances and other resources for the development of product titles
than we do. If our competitors develop more successful products, or if we do not
continue  to  develop  consistently  high-quality  products,  our  revenue  will
decline.

IF WE FAIL TO ANTICIPATE  CHANGES IN VIDEO GAME  PLATFORMS AND  TECHNOLOGY,  OUR
BUSINESS MAY BE HARMED.

  The  interactive   entertainment   software  industry  is  subject  to  rapid
technological  change.  New  technologies  could render our current  products or
products in development obsolete or unmarketable. Some of these new technologies
include:

     o    operating systems;

     o    new media formats

     o    releases of new video game consoles;

     o    new video game systems by Sony, Microsoft, Nintendo and others.

     We must  continually  anticipate  and assess the  emergence  of, and market
acceptance of, new interactive  entertainment software platforms well in advance
of the time the platform is introduced to consumers. Because product development
cycles are difficult to predict,  we must make substantial  product  development
and other  investments in a particular  platform well in advance of introduction
of the platform.  If the platforms for which we develop new software products or
modify  existing  products  are not  released on a timely basis or do not attain
significant  market  penetration,  or if we  develop  products  for a delayed or
unsuccessful  platform, our business and financial results could suffer material
harm.

     New interactive  entertainment software platforms and technologies also may
undermine  demand for  products  based on older  technologies.  Our success will
depend in part on our  ability  to adapt our  products  to those  emerging  game
platforms that gain widespread consumer  acceptance.  Our business and financial
results may suffer material harm if we fail to:


                                       10
<PAGE>


     o    anticipate  future  technologies  and platforms and the rate of market
          penetration of those technologies and platforms;

     o    obtain  licenses to develop  products for those platforms on favorable
          terms; or

     o    create software for those new platforms on a timely basis.

OUR SOFTWARE MAY BE SUBJECT TO GOVERNMENTAL RESTRICTIONS OR RATING SYSTEMS.

     Legislation is  periodically  introduced at the state and federal levels in
the United  States and in foreign  countries to establish a system for providing
consumers with information about graphic violence and sexually explicit material
contained in interactive  entertainment  software  products.  In addition,  many
foreign  countries  have laws that  permit  governmental  entities to censor the
content  of  interactive  entertainment  software.  We  believe  that  mandatory
government-run  rating systems eventually will be adopted in many countries that
are  significant  markets  or  potential  markets  for our  products.  We may be
required  to modify our  products to comply  with new  regulations,  which could
delay the release of our products in those countries.

     Due to the  uncertainties  regarding such rating systems,  confusion in the
marketplace  may occur,  and we are unable to predict what effect,  if any, such
rating  systems  would have on our  business.  In addition to such  regulations,
certain  retailers  have in the  past  declined  to stock  some of our  products
because they believed that the content of the packaging  artwork or the products
would be offensive to the retailer's  customer base. While to date these actions
have not caused material harm to our business, we cannot assure you that similar
actions by our  distributors or retailers in the future would not cause material
harm to our business.

RISKS RELATED TO OUR STOCK

SOME PROVISIONS OF OUR CHARTER DOCUMENTS MAY MAKE TAKEOVER  ATTEMPTS  DIFFICULT,
WHICH COULD  DEPRESS THE PRICE OF OUR STOCK AND INHIBIT OUR ABILITY TO RECEIVE A
PREMIUM PRICE FOR YOUR SHARES.

     Our  Certificate  of  Incorporation,  as amended,  provides  for  5,000,000
authorized  shares of Preferred Stock. Our Board of Directors has the authority,
without  any  action by the  stockholders,  to issue up to  4,280,576  shares of
preferred  stock  and to fix the  rights  and  preferences  of such  shares.  In
addition, our certificate of incorporation and bylaws contain provisions that:

     o    eliminate the ability of stockholders to act by written consent and to
          call a special meeting of stockholders; and

     o    require  stockholders  to give advance notice if they wish to nominate
          directors or submit proposals for stockholder approval.

     These provisions may have the effect of delaying, deferring or preventing a
change in control,  may  discourage  bids for our common stock at a premium over
its market price and may adversely  affect the market price,  and the voting and
other rights of the holders, of our common stock.

OUR COMMON STOCK MAY BE SUBJECT TO THE "PENNY STOCK" RULES WHICH COULD ADVERSELY
AFFECT THE MARKET PRICE OF OUR COMMON STOCK.

     "Penny stocks"  generally  include equity  securities  with a price of less
than $5.00 per share,  which are not traded on a national  stock  exchange or on
Nasdaq,  and are issued by a company  that has  tangible net assets of less than
$2,000,000  if the company has been  operating  for at least  three  years.  The
"penny  stock" rules  require,  among other  things,  broker  dealers to satisfy
special sales practice  requirements,  including making  individualized  written
suitability  determinations and receiving a purchaser's written consent prior to
any transaction. In addition, additional disclosure in connection with trades in
the common stock are required,  including the delivery of a disclosure  schedule
prescribed by the SEC relating to the "penny  stock"  market.  These  additional
burdens   imposed  on   broker-dealers   may  discourage   them  from  effecting
transactions  in our  common  stock,  which  may make it more  difficult  for an
investor  to sell their  shares  and  adversely  affect the market  price of our
common stock.


                                       11
<PAGE>


OUR STOCK IS VOLATILE

     The trading price of our common stock has  previously  fluctuated and could
continue  to  fluctuate  in  response  to factors  that are  largely  beyond our
control,  and  which  may  not  be  directly  related  to the  actual  operating
performance of our business, including:

     o    general conditions in the computer, software, entertainment,  media or
          electronics industries;

     o    changes in earnings estimates or buy/sell recommendations by analysts;

     o    investor  perceptions and expectations  regarding our products,  plans
          and strategic position and those of our competitors and customers; and

     o    price and trading  volume  volatility of the broader  public  markets,
          particularly the high technology sections of the market.

ITEM 2.    PROPERTIES

     The Company's headquarters are located in Beverly Hills, California,  where
we lease approximately 3,100 square feet of office space. The facility is leased
on a month to month basis since April 2008. The Company's  development studio is
located in Irvine, California, where we lease approximately 1,700 square feet of
office space. We also have a representation office in France.

ITEM 3.    LEGAL PROCEEDINGS

     The  Company  may be involved in various  legal  proceedings,  claims,  and
litigation  arising  in the  ordinary  course of  business,  including  disputes
arising  over the  ownership  of  intellectual  property  rights and  collection
matters. In the opinion of management,  the outcome of known routine claims will
not  have a  material  adverse  effect  on  the  Company's  business,  financial
condition, or results of operations.

     The litigation  with Glutton  Creeper was settled in April 2009.

     Interplay   recently   received   notice  that  Bethesda   Softworks,   LLC
("Bethesda")  intends to  terminate  the  trademark  license  agreement  between
Bethesda and Interplay  which was entered into April 4, 2007 for the development
of FALLOUT MMOG.  Despite the fact that no formal  action is currently  pending,
Bethesda claims that Interplay is in breach of the trademark  license  agreement
for failure to commence fill scale  development  of same by April 4, 2009 and to
secure certain funding for the MMOG.  Interplay adamantly disputes these claims.
Although the potential  damages are currently  unknown,  if Bethesda  ultimately
prevails and cancels the trademark license  agreement,  Interplay would lose its
license  back of the  "Fallout"  MMOG and any damages  resulting  therefrom  are
unknown at this time.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None


                                       12
<PAGE>


                                     PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

           The Company  trades on the  NASD-operated  Over-the-Counter  Bulletin
Board.   Our   common   stock  is   currently   traded   on  the   NASD-operated
Over-the-Counter  Bulletin  Board  under the symbol  "IPLY." At March 30,  2009,
there were 97 holders of record of our common stock.

           The following table sets forth the range of high and low sales prices
for our common stock for the periods indicated.

FOR THE YEAR ENDED DECEMBER 31, 2008                      HIGH               LOW
------------------------------------                      ----              ----

First Quarter ..............................              $.08              $.07
Second Quarter .............................               .20               .07
Third Quarter ..............................               .17               .12
Fourth Quarter .............................               .13               .07

FOR THE YEAR ENDED DECEMBER 31, 2007                      HIGH               LOW
------------------------------------                      ----              ----

First Quarter ..............................              $.17              $.05
Second Quarter .............................               .15               .06
Third Quarter ..............................               .09               .05
Fourth Quarter .............................               .12               .06

DIVIDEND POLICY

     It is not currently our policy to pay dividends.

STOCK COMPENSATION PLANS

     The  following  table sets forth certain  information  regarding our equity
compensation plans as of December 31, 2008:

<TABLE>
<CAPTION>
                                                                                Number of securities
                                                                              remaining available for
                           Number of securities to     Weighted-average        future issuance under
                           be issued upon exercise     exercise price of     equity compensation plans
                           of outstanding options,   outstanding options,      (excluding securities
      Plan Category          warrants and rights      warrants and rights     reflected in column (a))
-------------------------- ------------------------- ---------------------- -----------------------------
                                     (a)                      (b)                        (c)
<S>                                      <C>                         <C>                       <C>
Equity compensation
plans approved by
security holders                          3,160,000                  0.074                     6,840,000

Issuance of Warrants for
services and other
compensation not
approved by security
holders                                   9,150,298                  0.290                            --
                           ------------------------- ---------------------- -----------------------------
Total                                    12,310,298                                            6,840,000
                           ========================= ====================== =============================
</TABLE>


     We have one stock option plan currently  outstanding.  Under the 1997 Stock
Incentive  Plan,  as amended  (the "1997  Plan"),  we may grant up to 10 million
options to our employees,  consultants and directors,  which generally vest from
three to five years.

     There were  differences  between the exercise  price and the estimated fair
market  value  which was  recorded  as  compensation  expense  in the  amount of
$199,000, $12,000 and $38,000, respectively, for financial reporting purposes.


                                       13
<PAGE>


PERFORMANCE GRAPH

     The following graph compares the cumulative 5-year total return attained by
shareholders  on  Interplay   Entertainment  Corp.'s  common  stock  versus  the
cumulative  total returns of the NASDAQ Composite index, and two customized peer
groups of nine companies and eleven  companies  respectively,  whose  individual
companies  are listed in footnotes 1 and 2 below.  An  investment  of $100 (with
reinvestment  of all  dividends),  if any,  is  assumed to have been made in the
Company's common stock, in each of the peer groups,  and the index on 12/31/2003
and its relative performance is tracked through 12/31/2008.

     (1.) The Company's old customized  peer group includes nine companies which
are:  Activision  Blizzard Inco,  Electronic  Arts Inc,  Futuremedia  PLC, Giant
Interactive  Group  Inc,  Majesco  Entertainment  Company,   Shanda  Interactive
Entertainment  Limited,  Take Two  Interactive  Software Inc, THQ Inc and Webzen
Inc.

     (2.) There are eleven  Companies  included in the company's new  customized
peer group which are: Activision Blizzard Inco, Electronic Arts Inc, Futuremedia
PLC, Giant Interactive Group Inc, GLU Mobile Inc, Majesco Entertainment Company,
Shanda Interactive Entertainment Limited,  Southpeak Interactive Corp., Take Two
Interactive Software Inc, THQ Inc and Webzen Inc.


                           [PERFORMANCE GRAPH OMITTED]

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
                                     12/03       12/04       12/05       12/06       12/07       12/08
-------------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>         <C>         <C>         <C>         <C>
INTERPLAY ENTERTAINMENT CORP.       100.00       18.67       10.67      180.00      106.67      106.67
NASDAQ COMPOSITE                    100.00      109.96      112.90      126.64      138.40       80.76
OLD PEER GROUP                      100.00      130.63      110.98      116.38      146.35       59.51
NEW PEER GROUP                      100.00      130.63      110.98      116.38      146.35       59.31
</TABLE>

     The stock  price  performance  included  in this  graph is not  necessarily
indicative of future stock price performance.

     In any of our filings under the  Securities  Act of 1933, as amended or the
Securities  Exchange Act of 1934, as amended that  incorporate  this performance
graph and the data related thereto by reference, this performance graph and data
related thereto will be considered  excluded from the incorporation by reference
and will not be deemed a part of any such other filing unless we expressly state
that the performance graph and the data related thereto is so incorporated.


                                       14
<PAGE>


ITEM 6.    SELECTED FINANCIAL DATA

     The selected consolidated statements of operations data for the years ended
December 31, 2008,  2007 and 2006 and the selected  consolidated  balance sheets
data as of December 31, 2008 and 2007 are derived from our audited  consolidated
financial  statements  included elsewhere in this Report. Our historical results
are not necessarily indicative of the results that may be achieved for any other
period.  The  following  data  should  be  read in  conjunction  with  "Item  7.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations" and the Consolidated Financial Statements included elsewhere in this
Report.

<TABLE>
<CAPTION>
                                                                       YEARS ENDED DECEMBER 31,
                                                          -----------------------------------------------
                                                             2008         2007        2006         2005
                                                          ---------    ---------   ---------    ---------
                                                                (Dollars in thousands, except share
                                                                      and per share amounts)
<S>                                                       <C>          <C>         <C>          <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues ..........................................   $   1,378    $   6,001   $     967    $   7,158
Cost of goods sold ....................................          12            8         167          478
                                                          ---------    ---------   ---------    ---------
Gross profit ..........................................       1,366        5,993         800        6,680
Operating expenses ....................................       1,820        1,538       2,069        3,197
                                                          ---------    ---------   ---------    ---------
Operating (income) loss ...............................        (454)       4,455      (1,269)       3,483
Other income (expense) ................................         (39)       1,401       4,348        2,445
                                                          ---------    ---------   ---------    ---------
Income (loss) before income taxes .....................        (493)       5,856       3,079        5,928
Provision (benefit) for income taxes ..................        --           --          --           --
                                                          ---------    ---------   ---------    ---------
Net income (loss) .....................................   $    (493)   $   5,856   $   3,079    $   5,928
                                                          =========    =========   =========    =========

Cumulative dividend on participating preferred stock ..   $    --      $    --     $    --      $    --
Accretion of warrant ..................................        --           --          --           --
                                                          ---------    ---------   ---------    ---------
Net income (loss) available to common stockholders ....   $    (493)   $   5,856   $   3,079    $   5,928
                                                          =========    =========   =========    =========
Net income (loss) per common share:
     Basic ............................................   $  (0.042)   $   0.059   $   0.030    $   0.063
     Diluted ..........................................   $  (0.042)   $   0.057   $   0.030    $   0.063
Shares used in calculating net income (loss) per common
     share - basic ....................................     103,482       99,197     100,513       93,856
Shares used in calculating net income (loss) per common
     share - diluted ..................................     103,482      102,028     102,603       93,856
SELECTED OPERATING DATA:
Net revenues by geographic region:
     North America ....................................   $      89    $       5   $     203    $   2,885
     International ....................................         239          246         632        4,056
     OEM, royalty and licensing .......................        --           --           132          217
     Other ............................................       1,050        5,750        --           --

Net revenues by platform:
     Personal computer ................................   $     261    $     222   $     456    $     631
     Video game console ...............................          67           29         379          971
     OEM, royalty and licensing .......................        --           --           132          217
     Recognition of Revenue from expired contracts ....        --           --          --          4,574
     Other ............................................       1,050        5,750        --           --
     Online licensing .................................        --           --          --            768
                                                                             DECEMBER 31,
                                                          -----------------------------------------------
                                                             2008         2007        2006         2005
                                                          ---------    ---------   ---------    ---------
BALANCE SHEETS DATA:                                                   (Dollars in thousands)
Working capital (deficiency) ..........................   $  (2,415)   $  (2,279)  $  (8,098)   $ (11,497)
Total assets ..........................................         163        1,201         323          673
Total debt ............................................       2,520        3,480       8,410       12,163
Stockholders' equity  (deficit) .......................      (2,357)      (2,279)     (8,087)     (11,490)
</TABLE>


                                       15
<PAGE>


ITEM 7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS OF OPERATIONS

     You should read the following  discussion and analysis in conjunction  with
the Consolidated  Financial  Statements and notes thereto and other  information
included or incorporated by reference herein.

EXECUTIVE OVERVIEW AND SUMMARY

     Interplay  Entertainment  Corp. is a publisher and licensor of  interactive
entertainment  software  for both core gamers and the mass  market.  We are most
widely known for our titles in the  action/arcade,  adventure/role  playing game
(RPG), and strategy/puzzle  categories. We have produced and licensed titles for
many of the most popular interactive entertainment software platforms.

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming  that we will  continue  as a going  concern,  which  contemplates  the
realization of assets and the  satisfaction  of liabilities in the normal course
of business.  The carrying  amounts of assets and  liabilities  presented in the
financial  statements  do not  purport to  represent  realizable  or  settlement
values.  The  Report of our  Independent  Auditors  for the  December  31,  2008
consolidated  financial statements includes an explanatory  paragraph expressing
substantial doubt about our ability to continue as a going concern.

     We entered into  various  licensing  agreements  during 2008 under which we
licensed others to exploit games that we have  intellectual  property rights to.
We expect in 2009 to enter into similar  license  arrangements  to generate cash
for the Company's operations.

     During 2007 we sold  "Fallout" to a third party and entered into subject to
satisfaction  of  various  conditions  a license  back which  could  allow us to
create,  develop and exploit a "Fallout"  Massively  Multiplayer Online Game. We
are planning to exploit the license back of "Fallout" MMOG.

     We have entered into a binding  letter of intent with  Masthead  Studios to
fund the development of a Massively  Multiplayer Online Game (MMOG),  code named
"Project:  V13." The game has been in design and  development at Interplay since
November  2007.  Masthead  and  Interplay  teams  will work  together  under the
direction and control of Interplay to complete  development of the project. As a
part of the agreement,  the game will utilize  Masthead's  proprietary tools and
MMOG technology developed for Masthead's "Earthrise" project.

     We are now focused on a two-pronged  growth strategy.  While we are working
on the development of a MMOG code named: "Project:V13",  we are at the same time
exploring ways to leverage our portfolio of gaming  properties  through  sequels
and various  development  and publishing  arrangements.  We are planning,  if we
enter into adequate  transactions,  to develop or have developed sequels to some
of our most successful games,  including  Earthworm Jim, Dark Alliance,  Descent
and MDK. We have  reinitiated  our in-house  game  development  studio,  and are
hiring game developers.

     We continue to seek external sources of funding,  including but not limited
to,  incurring  debt, the selling of assets or securities,  licensing of certain
product rights in selected territories, selected distribution agreements, and/or
other  strategic  transactions  sufficient to provide  short-term  funding,  and
achieve our long-term strategic objectives.

     Our  products  were  either  designed  and created by our  employees  or by
external software  developers.  When we used external  developers,  we typically
advanced  development funds to the developers in installment payments based upon
the completion of certain milestones.  These advances were typically  considered
advances against future  royalties.  We currently have no product in development
with external developers.

     Our operating  results will  continue to be impacted by economic,  industry
and business  trends  affecting  the  interactive  entertainment  industry.  Our
industry  is  highly  seasonal,  with the  highest  levels  of  consumer  demand
occurring  during the year-end  holiday buying  season.  With the release of new
console systems by Sony, Nintendo and Microsoft, our industry has entered into a
new cycle that could affect marketability of new products, if any.

     Our operating results have fluctuated  significantly in the past and likely
will fluctuate  significantly  in the future,  both on a quarterly and an annual
basis.  A number of factors may cause or  contribute to such  fluctuations,  and
many of such factors are beyond our control.


                                       16
<PAGE>


MANAGEMENT'S DISCUSSION OF CRITICAL ACCOUNTING POLICIES

     Our  discussion  and  analysis of our  financial  condition  and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses,   and  related  disclosure  of  contingent  assets  and
liabilities.  On an on-going basis,  we evaluate our estimates,  including those
related to revenue  recognition,  prepaid  licenses and  royalties  and software
development costs. We base our estimates on historical experience and on various
other  assumptions that are believed to be reasonable  under the  circumstances,
the  results  of which form the basis for making  judgments  about the  carrying
values of assets  and  liabilities  that are not  readily  apparent  from  other
sources.  Actual  results  may  differ  from  these  estimates  under  different
assumptions or conditions. We believe the following critical accounting policies
affect our more  significant  judgments and estimates used in preparation of our
consolidated financial statements.

REVENUE RECOGNITION

     We record revenues when we deliver products to customers in accordance with
Statement of Position  ("SOP") 97-2,  "Software  Revenue  Recognition."  and SEC
Staff Accounting Bulletin No. 104, Revenue Recognition.

     We recognize revenue from sales by distributors,  net of sales commissions,
only  as  the  distributor   recognizes  sales  of  the  Company's  products  to
unaffiliated third parties.  For those agreements that provide the customers the
right to  multiple  copies of a product  in  exchange  for  guaranteed  amounts,
revenue is recognized as earned.  Guaranteed  minimum royalties on sales,  where
the guarantee is not  recognized  upon  delivery,  are recognized as the minimum
payments come due. The Company  recognizes revenue on expired contracts when the
termination date of the contract is reached because guaranteed minimum royalties
are not reimbursable and are recorded as revenue.

     We generally are not contractually  obligated to accept returns, except for
defective,   shelf-worn  and  damaged  products.   However,  on  a  case-by-case
negotiated  basis,  we permit  customers to return or exchange  products and may
provide price concessions to our retail distribution customers on unsold or slow
moving products.  In accordance with Statement of Financial Accounting Standards
("SFAS") No. 48,  "Revenue  Recognition  when Right of Return Exists," we record
revenue net of a provision for estimated returns,  exchanges,  markdowns,  price
concessions, and warranty costs. We record such reserves based upon management's
evaluation  of  historical  experience,  current  industry  trends and estimated
costs. The amount of reserves ultimately required could differ materially in the
near term from the amounts provided in the accompanying  consolidated  financial
statements.

     We also engage in the sale of  licensing  rights on certain  products.  The
terms of the licensing rights differ,  but normally include the right to develop
and distribute a product on a specific video game platform. We recognize revenue
when the rights have been transferred and no other obligations exist.

PREPAID LICENSES AND ROYALTIES

     Prepaid licenses and royalties consist of license fees paid to intellectual
property rights holders for use of their trademarks or copyrights. Also included
in prepaid  royalties are prepayments  made to independent  software  developers
under developer  arrangements that have alternative  future uses. These payments
are contingent  upon the successful  completion of milestones,  which  generally
represent specific deliverables.  Royalty advances are recoupable against future
sales based upon the contractual royalty rate. We amortize the cost of licenses,
prepaid royalties and other outside  production costs to cost of goods sold over
six months  commencing  with the initial  shipment in each region of the related
title.  We  amortized  these  amounts at a rate based upon the actual  number of
units shipped with a minimum  amortization  of 75% in the first month of release
and a minimum of 5% for each of the next five months after release. This minimum
amortization rate reflects our typical product life cycle. Our management relies
on forecasted  revenue to evaluate the future  realization of prepaid  royalties
and  charges to cost of goods sold any  amounts  they deem  unlikely to be fully
realized  through  future  sales.  Such  costs are  classified  as  current  and
noncurrent  assets based upon estimated product release date. If actual revenue,
or revised sales forecasts,  fall below the initial forecasted sales, the charge
may be larger than  anticipated in any given  quarter.  Once the charge has been
taken,  that amount will not be expensed in future quarters when the product has
shipped.

SOFTWARE DEVELOPMENT COSTS

     SOFTWARE  DEVELOPMENT  COSTS.  Software  development costs include payments
made to independent software developers under development agreements, as well as
direct costs incurred for internally developed products.


                                       17
<PAGE>


     We account for software  development  costs in accordance with Statement of
Financial  Accounting  Standard  ("SFAS") No. 86,  "Accounting  for the Costs of
Computer  Software  to  Be  Sold,  Leased,  or  Otherwise   Marketed."  Software
development  costs  are  capitalized  once the  technological  feasibility  of a
product  is  established  and  such  costs  are  determined  to be  recoverable.
Technological  feasibility  of  a  product  encompasses  both  technical  design
documentation  and  game  design   documentation.   For  products  where  proven
technology exists, this may occur early in the development cycle.  Technological
feasibility  is evaluated on a  product-by-product  basis.  Prior to a product's
release,  we  expense,  as part of  "cost of sales  --  software  royalties  and
amortization,"   capitalized   costs  when  we  believe  such  amounts  are  not
recoverable.  Capitalized  costs  for  those  products  that  are  cancelled  or
abandoned  are  charged  to  product   development  expense  in  the  period  of
cancellation.  Amounts related to software development which are not capitalized
are charged immediately to product  development  expense. We evaluate the future
recoverability of capitalized  amounts on a quarterly basis. The  recoverability
of capitalized  software  development  costs is evaluated  based on the expected
performance of the specific  products for which the costs relate.  Criteria used
to evaluate  expected product  performance  include:  historical  performance of
comparable products using comparable technology; orders for the product prior to
its  release;  and  estimated  performance  of a  sequel  product  based  on the
performance of the product on which the sequel is based.

     Commencing upon product release, capitalized software development costs are
amortized to "cost of sales -- software royalties and amortization" based on the
ratio of current revenues to total projected revenues, generally resulting in an
amortization  period of six months or less. For products that have been released
in prior periods,  we evaluate the future  recoverability of capitalized amounts
on  a  quarterly  basis.  The  primary  evaluation  criterion  is  actual  title
performance.

     Significant   management  judgments  and  estimates  are  utilized  in  the
assessment of when technological  feasibility is established,  as well as in the
ongoing assessment of the recoverability of capitalized costs. In evaluating the
recoverability  of  capitalized   costs,  the  assessment  of  expected  product
performance  utilizes forecasted sales amounts and estimates of additional costs
to be incurred.  If revised  forecasted  or actual  product  sales are less than
and/or  revised  forecasted  or  actual  costs  are  greater  than the  original
forecasted  amounts  utilized in the initial  recoverability  analysis,  the net
realizable  value may be lower than  originally  estimated in any given quarter,
which could result in an impairment charge.

OTHER SIGNIFICANT ACCOUNTING POLICIES

     Other  significant  accounting  policies  not  involving  the same level of
measurement  uncertainties as those discussed above, are nevertheless  important
to an  understanding  of the  financial  statements.  The  policies  related  to
consolidation  and loss  contingencies  require  difficult  judgments on complex
matters that are often subject to multiple  sources of  authoritative  guidance.
Certain of these  matters are among  topics  currently  under  reexamination  by
accounting  standards setters and regulators.  Although no specific  conclusions
reached by these standard  setters  appear likely to cause a material  change in
our accounting  policies,  outcomes cannot be predicted with confidence.  Please
see Note 2 of Notes to Consolidated Financial Statements, Summary of Significant
Accounting  Policies,  which discusses accounting policies that must be selected
by management when there are acceptable alternatives.


                                       18
<PAGE>


RESULTS OF OPERATIONS

     The  following  table  sets  forth  certain   consolidated   statements  of
operations  data  and  segment  and  platform  data  for the  periods  indicated
expressed as a percentage of net revenues:

<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31,
                                                         ---------------------------
                                                          2008       2007      2006
                                                         ------     ------    ------
<S>                                                        <C>        <C>       <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues .........................................      100%       100%      100%
Cost of goods sold ...................................     --         --          17
                                                         ------     ------    ------
Gross margin .........................................      100        100        83
Operating expenses:
     Marketing and sales .............................     --            4        52
     General and administrative ......................      108         21       161
     Product development .............................       24       --        --
                                                         ------     ------    ------
     Total operating expenses ........................      132         25       213
                                                         ------     ------    ------
Operating income (loss) ..............................      (32)        75      (130)
Other income (expense) ...............................       (3)        25       449
                                                         ------     ------    ------
Income (loss) before provision for  income taxes .....      (35)       100       319
Provision for income taxes ...........................     --         --        --
                                                         ------     ------    ------
Net income (loss) ....................................      (35)%      100%      319%
                                                         ======     ======    ======
SELECTED OPERATING DATA:
Net revenues by segment:
     North America ...................................        6%        96%       21%
     International ...................................       17          4        66
     OEM, royalty and licensing ......................        0       --          13
     Other ...........................................       76       --        --
                                                         ------     ------    ------
                                                            100%       100%      100%
                                                         ======     ======    ======
Net revenues by platform:
     Personal computer ...............................       19%         4%       47%
     Video game console ..............................        5       --          39
     OEM, royalty and licensing ......................     --         --          14
     Other ...........................................       76         96      --
                                                         ------     ------    ------
                                                            100%       100%      100%
                                                         ======     ======    ======
</TABLE>


     Geographically,  our net revenues for the years ended December 31, 2008 and
2007 breakdown as follows: (in thousands)

                                      2008       2007      Change     % Change
                                    --------   --------   --------    --------
North America ...................   $  1,139   $  5,755   $ (4,616)     (80.20)%

International ...................        239        246         (7)         (3)%

OEM, Royalty & Licensing ........          0          0          0           0%
                                    --------   --------   --------
Net Revenues ....................   $  1,378   $  6,001   $ (4,623)        (77)%
                                    ========   ========   ========

     Geographically,  our net revenues for the years ended December 31, 2007 and
2006 breakdown as follows: (in thousands)

                                      2007       2006      Change     % Change
                                    --------   --------   --------    --------
North America ...................   $  5,755   $    203   $  5,552       2,734%

International ...................        246        632       (386)      (61.1)%

OEM, Royalty & Licensing ........          0        132       (132)        100%
                                    --------   --------   --------
Net Revenues ....................   $  6,001   $    967   $  5,034         520%
                                    ========   ========   ========


                                       19
<PAGE>


NORTH AMERICAN, INTERNATIONAL AND OEM, ROYALTY AND LICENSING NET REVENUES

     Net  revenues  for the year ended  December  31,  2008 were  $1,378,000,  a
decrease of 77% compared to the same period in 2007.  The Company had $1,050,000
in revenue from Atari  Interactive  exercising  an existing  option to purchase,
from the Company intellectual  property rights developed by the Company with the
Dungeon  &  Dragons  games,  with the  balance  due from  the  Company  to Atari
Interactive  under a Note of $1,050,000 being cancelled.  This decrease resulted
from a  80.2%  decrease  significantly  effected  by the non  recurring  Fallout
transaction  in 2007  in  North  American  net  revenue,  and a 3%  decrease  in
International net revenue,  royalty and licensing  revenues and a 0% decrease in
OEM net revenue.

     Net  revenues  for the year ended  December  31, 2007 were  $6,001,000,  an
increase of 520% compared to the same period in 2006. The Company had $5,750,000
in income from recognition of the sale of "Fallout" and $5,000 in North American
royalties  earned.  This  increase  resulted  from a  2,734%  increase  in North
American  net  revenue  due to the sale of  "Fallout"  and a 61.1%  decrease  in
International net revenue, royalty and licensing revenues and a 100% decrease in
OEM net revenue.

     North  American  net  revenues  for the year ended  December  31, 2008 were
$1,139,000 as compared to $5,755,000  for the year ended  December 31, 2007. The
Company had $1,050,000 from Atari Interactive  exercising an existing option and
$89,000 in North American royalties earned in 2008.

     North  American  net  revenues  for the year ended  December  31, 2007 were
$5,755,000  as compared to $203,000 for the year ended  December  31, 2006.  The
Company had  $5,750,000 in income from  recognition of the sale of "Fallout" and
$5,000 in North American royalties earned in 2007.

     International  net  revenues  for the year  ended  December  31,  2008 were
$239,000, a decrease of $7,000 as compared to International net revenues for the
year ended  December  31,  2007.  The  decrease in  International  net  revenues
compared to the year ended  December 31, 2007 was mainly due to a 3.0%  decrease
in back catalog sales.

     International  net  revenues  for the year  ended  December  31,  2007 were
$246,000,  a decrease of $386,000 as compared to International  net revenues for
the year ended  December 31, 2006.  The decrease in  International  net revenues
compared to the year ended  December 31, 2006 was mainly due to a 61.1% decrease
in back catalog sales.

     OEM,  royalty and licensing  net revenues for the years ended  December 31,
2008 were $0, no change from the year ended December 31, 2007.

     OEM,  royalty and licensing  net revenues for the years ended  December 31,
2007 were $0, a decrease of $132,000 as compared to the same period in 2006. The
decrease in OEM business was mainly attributable to our reorganization.

PUBLISHING NET REVENUES BY PLATFORM, ATARI OPTION EXERCISE AGREEMENT", CONTRACTS
AND LICENSING DEALS NET REVENUES

     Our publishing net revenues by platform,  contracts and licensing deals net
revenues for the years ended  December  31, 2008 and 2007  breakdown as follows:
(in thousands)

                                      2008       2007      Change     % Change
                                    --------   --------   --------    --------
Personal Computer ...............   $    261   $    222   $     39        17.4%
Video Game Console ..............         67         29         38         131%
OEM, Royalty & Licensing ........          0          0          0           0
Other ...........................      1,050(1)   5,750(2)   4,700       (82.0)%
                                    --------   --------   --------
Net Revenues ....................   $  1,378   $  6,001   $ (4,623)        (77)%
                                    ========   ========   ========

     (1)  Recognition of Revenue of Atari Option Exercise Agreement.
     (2)  Recognition of Revenue on the sale of "Fallout" transaction.

     PC net revenues  for PC net revenues the year ended  December 31, 2008 were
$261,000, an increase of 17.4% compared to the same period in 2007. The increase
in PC net  revenues in 2008 was  primarily  due to an  increase in back  catalog
sales.

     Our video game console net  revenues  for the year ended  December 31, 2008
were $67,000 an increase of 131% compared to the same period in 2007, mainly due
to an increase in back catalog sales.


                                       20
<PAGE>


     The Company had $1,050,000 in income from Atari  Interactive  exercising an
existing option as a onetime non-recurring event.

     Our  publishing net revenues by platform,  sale of "Fallout"  contracts and
licensing  deals net  revenues  for the years ended  December  31, 2007 and 2006
breakdown as follows: (in thousands)

                                      2007       2006      Change     % Change
                                    --------   --------   --------    --------
Personal Computer ...............   $    222   $    456   $   (234)      (51.3%)
Video Game Console ..............         29        379       (350)      (92.3%)
OEM, Royalty & Licensing ........          0        132       (132)       (100%)
Recognition of revenue on
  the sale of "Fallout" .........      5,750          0      5,750         100%
                                    --------   --------   --------
Net Revenues ....................   $  6,001   $    967   $  5,034         520%
                                    ========   ========   ========


     PC net  revenues  for the year ended  December  31, 2007 were  $222,000,  a
decrease of 51.3 % compared to the same period in 2006.  The  decrease in PC net
revenues in 2007 was primarily due to lower back catalog sales.

     Our video game console net  revenues  for the year ended  December 31, 2007
were $29,000 a decrease of 92.3% compared to the same period in 2006, mainly due
to lower back catalog sales.

     In 2007 the Company had  $5,750,000 in income from  recognition of the sale
of "Fallout" as a onetime non- recurring event

COST OF GOODS SOLD; GROSS MARGIN

     Cost of goods  sold  related  to PC and video  game  console  net  revenues
represents  the  manufacturing  and related costs of  interactive  entertainment
software products,  including costs of media,  manuals,  duplication,  packaging
materials,  assembly,  freight and royalties paid to  developers,  licensors and
hardware manufacturers. Cost of goods sold related to royalty-based net revenues
primarily  represents  third  party  licensing  fees and  royalties  paid by us.
Typically,  cost of goods sold as a  percentage  of net  revenues for video game
console  products  are  higher  than cost of goods sold as a  percentage  of net
revenues for PC based products due to the relatively  higher  manufacturing  and
royalty costs  associated  with video game console and affiliate label products.
We also include in the cost of goods sold the  amortization  of prepaid  royalty
and license fees we pay to third party software  developers.  We expense prepaid
royalties over a period of six months  commencing  with the initial  shipment of
the title at a rate based upon the numbers of units  shipped.  We  evaluate  the
likelihood  of  future   realization  of  prepaid  royalties  and  license  fees
quarterly, on a product-by-product  basis, and charge the cost of goods sold for
any amounts that we deem unlikely to realize through future product sales.

     Our net  revenues,  cost of goods sold and gross margin for the years ended
December 31, 2008 and 2007 breakdown as follows: (in thousands)

                                      2008       2007      Change     % Change
                                    --------   --------   --------    --------
Net Revenues ....................   $  1,378   $  6,001   $ (4,623)      (77.0)%
Cost of Goods Sold ..............         12          8         (4)      (50.0)%
                                    --------   --------   --------
Gross Margin ....................   $  1,366   $  5,993   $ (4,627)      (77.2)%
                                    ========   ========   ========

     Our cost of goods sold  increased to $12,000 in the year ended December 31,
2008 compared to $8,000 in the same period in 2007.  Our gross margin  decreased
to $1,366,000 for the twelve months ended  December 31, 2008 from  $5,993,000 in
the  comparable  period  in 2007.  The  decrease  in  gross  margin  was  mainly
attributable to our sale of " Fallout" in 2007.

     Our net  revenues,  cost of goods sold and gross margin for the years ended
December 31, 2007 and 2006 breakdown as follows: (in thousands)

                                      2007       2006      Change     % Change
                                    --------   --------   --------    --------
Net Revenues ....................   $  6,001   $    967   $  5,034)      520.5%
Cost of Goods Sold ..............          8        167       (159)      (95.2%)
                                    --------   --------   --------    --------
Gross Margin ....................   $  5,993   $    800   $ (5,193)      649.1%)
                                    ========   ========   ========    ========


                                       21
<PAGE>


     Our cost of goods sold  decreased to $8,000 in the year ended  December 31,
2007  compared to  $167,000  in the same  period in 2006.  We expect our cost of
goods sold to increase in 2007 as compared  to 2006  because we  anticipate  new
product releases.

     Our gross  margin  increased  to  $5,993,000  for the twelve  months  ended
December 31, 2007 from $800,000 in the  comparable  period in 2006. The increase
in gross margin was mainly attributable to our sale of "Fallout".

MARKETING AND SALES

     Our marketing and sales  expenses for the years ended December 31, 2008 and
2007 breakdown as follows: (in thousands)

                                      2008       2007      Change     % Change
                                    --------   --------   --------    --------

Marketing and Sales ............    $      0   $    245   $   (245)        100%


     Marketing and sales expenses  primarily  consist of advertising  and retail
marketing support,  sales commissions,  marketing and sales personnel,  customer
support  services and other  related  operating  expenses.  Marketing  and sales
expenses  for the  twelve  months  ended  December  31,  2008 were $0, a 100.00%
decrease as compared to the same period in 2007.

     Our marketing and sales  expenses for the years ended December 31, 2007 and
2006 breakdown as follows: (in thousands)

                                      2007       2006      Change     % Change
                                    --------   --------   --------    --------

Marketing and Sales ............    $    245   $    509   $   (264)      (51.9%)


     Marketing and sales  expenses for the twelve months ended December 31, 2007
were  $245,000,  a  51.9%  decrease  as  compared  to  the  2006  period  due to
discontinuing of the business of Interplay Japan.

GENERAL AND ADMINISTRATIVE

     Our general and  administrative  expenses for the years ended  December 31,
2008 and 2007 breakdown as follows: (in thousands)

                                        2008       2007      Change     % Change
                                      --------   --------   --------    --------

General and Administrative ........   $  1,492   $  1,275   $    217         17%


     General and  administrative  expenses  primarily  consist of administrative
personnel  expenses,  facilities  costs,  professional  fees,  and other related
operating  expenses.  General  and  administrative  expenses  for the year ended
December  31,  2008 were $1.5  million,  a 17%  increase as compared to the same
period in 2007.

     Our general and  administrative  expenses for the years ended  December 31,
2007 and 2006 breakdown as follows: (in thousands)

                                      2007       2006      Change     % Change
                                    --------   --------   --------    --------

General and Administrative ........ $  1,274   $  1,560   $   (286)     (18.34%)


     General and  administrative  expenses for the year ended  December 31, 2007
were $1.3 million,  a 18.3% decrease as compared to the same period in 2006. The
decrease is mainly due to decreases in personnel costs and general expenses as a
result of a  reduction  in the  administrative  personnel  and CEO  compensation
during 2007.

PRODUCT DEVELOPMENT

     Our product development  expenses for the years ended December 31, 2008 and
2007 breakdown as follows: (in thousands)

                                        2008       2007      Change     % Change
                                      --------   --------   --------    --------

Product Development ...............   $    328   $     18   $    310      172.2%


                                       22
<PAGE>


     Product  development  expenses for the year ended  December 31, 2008 were $
328,000, a 172.2% increase as compared to the same period in 2007. This increase
was mainly due to the hiring of a software development team in the first quarter
of 2008.

     Our product development  expenses for the years ended December 31, 2007 and
2006 breakdown as follows: (in thousands)

                                       2007       2006      Change     % Change
                                     --------   --------   --------    --------

Product Development ..............   $     18   $      0   $     18     (100.0%)


     Product  development  expenses for the year ended  December 31, 2007 were $
18,000,  a 100%  increase as compared to the same period in 2006.  This increase
was mainly due to the hiring of a software  developer  in the fourth  quarter of
2007.

OTHER EXPENSE (INCOME), NET

     Our other expense for the years ended  December 31, 2008 and 2007 breakdown
as follows: (in thousands)

                                        2008       2007      Change     % Change
                                      --------   --------   --------    --------

Other Expense (Income) ...........    $     39   $ (1,401)  $  1,440      1,027%


     Other income consists  primarily of interest  expense on debt in the amount
of $35,000,  California  Franchise  Tax  (Alternative  Minimum Tax) for the year
ended 2007 in the amount of $39,000,  bad debt expenses in the amount of $6,000,
litigation  reserve  in  the  amount  of  $31,000,   foreign  currency  exchange
transactions gains of($9,000), reversal of bad debts ($34,000), rental income in
the  amount of  ($24,000)  and  interest  income in the amount of  ($7,000)  and
additional miscellaneous adjustments of $2,000.

     Our other expense for the years ended  December 31, 2007 and 2006 breakdown
as follows: (in thousands)

                                      2007        2006       Change     % Change
                                    --------    --------    --------    --------

Other Expense (Income) ..........   $ (1,401)   $ (4,348)   $ (2,947)    (67.8%)


     Other income  consists  primarily of reversal  and  adjustments  to certain
accrual and accounts  payables in the amount of $1,425,000,  interest expense on
debt in the amount of $59,000,  foreign currency exchange transactions gains and
losses, and rental income in the amount of $73,000 and bad debts of $38,000. The
decrease  is  attributable  to  reversals  of a  smaller  amount  of prior  year
accruals.

PROVISION (BENEFIT) FOR INCOME TAXES

     We recorded no tax  provision for the years ended  December 31, 2008,  2007
and 2006.

LIQUIDITY AND CAPITAL RESOURCES

     As of December 31, 2008, we had a working capital deficit of  approximately
 $2,400,000,  and our cash balance was approximately $0. In any event, we cannot
 continue to fund our current operations without obtaining  additional financing
 or income.

     We sold "Fallout" to a third party and entered into subject to satisfaction
of various  condition  the license back which could allow us to create,  develop
and exploit a "Fallout"  MMOG.  We are  planning to exploit the license  back of
"Fallout" MMOG.

     We have entered into a binding  letter of intent with  Masthead  Studios to
fund the development of a Massively  Multiplayer Online Game (MMOG),  code named
"Project:  V13." The game has been in design and  development at Interplay since
November  2007.  Masthead  and  Interplay  teams  will work  together  under the
direction and control of Interplay to complete  development of the project. As a
part of the agreement,  the game will utilize  Masthead's  proprietary tools and
MMOG technology developed for Masthead's "Earthrise" project

     We are  exploring  ways to  leverage  our  portfolio  of gaming  properties
through  sequels and various  development  and publishing  arrangements.  We are
planning,  if we can obtain  financing,  to develop  sequels to some of our most
successful games,  including  Earthworm Jim, Dark Alliance,  Descent and MDK. We
have  reinitiated  our in-house  game  development  studio,  and have hired game
developers.  Initial  funding  for  these  steps was l mainly  derived  from the
remaining proceeds from the sale of "Fallout".


                                       23
<PAGE>


     We have entered into a Game  Production  Agreement  with  Interactive  Game
Group which provides for the financing of the development of games under certain
conditions.

     We continue to seek external sources of funding,  including but not limited
to,  incurring  debt, the selling of assets or securities,  licensing of certain
product rights in selected territories, selected distribution agreements, and/or
other  strategic  transactions  sufficient to provide  short-term  funding,  and
achieve our long-term strategic objectives.

     If we do not receive  sufficient  financing or income we may (i)  liquidate
assets, (ii) sell the company (iii) seek protection from our creditors including
the  filing  of  voluntary  bankruptcy  or  being  the  subject  of  involuntary
bankruptcy,  and/or (iv)  continue  operations,  but incur  material harm to our
business,  operations or financial conditions.  These conditions,  combined with
our historical  operating  losses and our deficits in  stockholders'  equity and
working  capital,  raise  substantial  doubt  about our ability to continue as a
going concern.

     Our  primary   capital  needs  have   historically   been  working  capital
requirements  necessary to fund our  operations.  Our operating  activities used
cash of  $1,162,000  during the twelve  months ended  December  31, 2008.  Atari
Interactive  exercised  an  existing  option  to  purchase,   from  the  Company
intellectual  property  rights  developed  by the  Company  in  connection  with
Dungeons & Dragons  games and the balance of all amounts due from the Company to
Atari  Interactive  under a note of  approximately  $1,050,000 was cancelled and
terminated..

     We entered into  various  licensing  agreements  during 2008 under which we
licensed others to exploit games that we have  intellectual  property rights to.
We expect in 2009 to enter into similar  license  arrangements  to generate cash
for the Company's operations.

     No assurance  can be given that funding can be obtained by us on acceptable
terms, or at all. These conditions,  combined with our deficits in stockholders'
equity  and  working  capital,  raise  substantial  doubt  about our  ability to
continue as a going concern.

OFF-BALANCE SHEET ARRANGEMENTS

     We do not have  any  off-balance  sheet  arrangements  under  which we have
obligations  under a  guaranteed  contract  that has any of the  characteristics
identified in paragraph 3 of FASB Interpretation 3 of FASB Interpretation No. 45
Guarantors  Accounting and Disclosure  Requirements  for  Guarantees,  Including
Indirect  Guarantees of Indebtedness  of Others.  We do not have any retained or
contingent interest in assets transferred to an unconsolidated entity or similar
arrangement  that serves as credit,  liquidity  or market  risk  support to such
entity  for  such  assets.  We also do not  have  any  obligation,  including  a
contingent  obligation,  under a  contract  that  would  be  accounted  for as a
derivative instrument. We have no obligations, including a contingent obligation
arising out of a variable interest (as referenced in FASB Interpretation No. 46,
Consolidation of Variable  Interest  Entities (January 2003), as may be modified
or supplemented) in an  unconsolidated  entity that is held by, and material to,
the registrant, where such entity provides financing,  liquidity, market risk or
credit  risk  support  to, or  engages  in  leasing,  hedging  or  research  and
development services with the registrant.

CONTRACTUAL OBLIGATIONS

     The following table summarizes certain of our contractual obligations under
non-cancelable  contracts and other  commitments  at December 31, 2008,  and the
effect such  obligations  are expected to have on our liquidity and cash flow in
future periods (in thousands).

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
CONTRACTUAL OBLIGATIONS       TOTAL         LESS THAN       1 - 3       3 - 5     MORE THAN
                                             1 YEAR         YEARS       YEARS      5 YEARS
----------------------------------------------------------------------------------------------
<S>                             <C>            <C>            <C>         <C>         <C>
Lease Commitments (1)           22             14             8           0           0
----------------------------------------------------------------------------------------------
</TABLE>

(1)  We had a lease  commitment at the Beverly Hills office  through April 2008.
     The  Company  is  presently  in  negotiations  to extend  that lease but no
     commitments  have been made. We also have a lease  commitment in Irvine for
     our new  development  offices  through March 31, 2009. We also have a lease
     commitment at the French  representation  office through  February 28, 2011
     with an option for an additional 3 years.


                                       24
<PAGE>


RECENT ACCOUNTING PRONOUNCEMENTS

     In February 2007, the FASB issued  Statement No. 159, THE FAIR VALUE OPTION
FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES -- INCLUDING AN AMENDMENT OF FASB
STATEMENT NO. 115 ("SFAS No. 159").  SFAS No. 159 permits  entities to choose to
measure many  financial  instruments  and certain other items at fair value that
are not currently required to be measured at fair value.  Subsequent  unrealized
gains and losses on items for which the fair value  option has been elected will
be  reported in  earnings.  The  provisions  of SFAS No. 159 are  effective  for
financial  statements issued for fiscal years beginning after November 15, 2007.
We are  evaluating  if we will adopt SFAS No. 159 and what  impact the  adoption
will have on our Consolidated Financial Statements if we adopt.

     In July 2006,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Interpretation  No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES (FIN 48). FIN
48 clarifies the  accounting for  uncertainty  in income taxes  recognized in an
enterprise's  financial  statements in accordance with SFAS 109,  ACCOUNTING FOR
INCOME  TAXES.  FIN  48  prescribes  a  recognition  threshold  and  measurement
attribute for the  financial  statement  recognition  and  measurement  of a tax
position  taken or expected to be taken in a tax  return.  FIN 48 also  provides
guidance on derecognition, classification, interest and penalties, accounting in
interim  periods,  disclosure  and  transition.  FIN 48 is  effective  for years
beginning after December 15, 2006. We will adopt FIN 48 as of December 30, 2006,
as required.  Currently, we are not able to estimate the impact FIN 48 will have
on our financial statements.

     In September 2006, the FASB issued SFAS 157, FAIR VALUE MEASUREMENTS, which
defines fair value,  creates a framework for  measuring  fair value in generally
accepted accounting  principles (GAAP), and expands disclosures about fair value
measurements.  SFAS 157 is effective for financial  statements issued for fiscal
years beginning after November 15, 2007. We will adopt SFAS 157 on its effective
date.  The  Company  has  not yet  determined  the  effect,  if  any,  that  the
application of SFAS No. 157 will have on its consolidated financial statements.

     In September  2006, the Securities and Exchange  Commission  ("SEC") issued
SAB No. 108,  Topic 1-N,  "Considering  the Effects of Prior Year  Misstatements
when Quantifying  Misstatements  in Current Year Financial  Statements." SAB No.
108 requires companies to evaluate the materiality of current year misstatements
using both the rollover approach and the iron curtain  approach.  SAB No. 108 is
effective for  statements  covering the first fiscal year ending after  November
15,  2006.  The  adoption  of SAB No. 108 did not have a material  impact on the
Company's consolidated financial position and results of operations.

     Other recent  accounting  pronouncements  issued by the FASB (including its
Emerging  Issues  Task  Force),  the  American  Institute  of  Certified  Public
Accountants  and  the  Securities  and  Exchange  Commission  did not or are not
believed by  management to have a material  impact on the  Company's  present or
future consolidated financial statements.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We do not have any  derivative  financial  instruments  as of December  31,
2008.  However, we are exposed to certain market risks arising from transactions
in the normal course of business,  principally  the risk associated with foreign
currency fluctuations. We do not hedge our risk associated with foreign currency
fluctuations.

FOREIGN CURRENCY RISK

     Our  earnings  are  affected  by  fluctuations  in the value of our foreign
subsidiary's  functional  currency,  and by  fluctuations  in the  value  of the
functional currency of our foreign receivables.

     We recognized a $9,000 gain,  $60,000 loss and $9,000 loss during the years
ended December 31, 2008,  2007 and 2006,  respectively,  primarily in connection
with  foreign  exchange  fluctuations  in the  timing of  payments  received  on
accounts receivable from foreign distributors or licensees.

ITEM 8.   CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Our Consolidated Financial Statements begin on page F-1 of this report.

ITEM 9A.(T) CONTROLS AND PROCEDURES

     As of the end of the period  covered  by this  report,  we  carried  out an
evaluation,  under  the  supervision  and with the  participation  of our  Chief
Executive  Officer and interim Chief Financial  Officer of the  effectiveness of


                                       25
<PAGE>


the design and operation of our disclosure  controls and procedures.  Based upon
this evaluation, our Chief Executive Officer and interim Chief Financial Officer
concluded that our disclosure  controls and procedures  were  effective,  at the
reasonable  assurance  level,  in  ensuring  that  information  required  to  be
disclosed  is  recorded,  processed,  summarized  and  reported  within the time
periods  specified  by the SEC rules and  forms  and in timely  alerting  him to
material information required to be included in this report.

     There  were  no  changes  made  in our  internal  controls  over  financial
reporting  that occurred  during the quarter  ended  December 31, 2008 that have
materially affected or reasonably likely to materially affect these controls.

     Our  management,  including  the CEO,  does not expect that our  disclosure
controls and procedures or our internal  control over  financial  reporting will
necessarily  prevent all fraud and material errors.  An internal control system,
no matter how well  conceived and  operated,  can provide only  reasonable,  not
absolute, assurance that the objectives of the control system are met.

     Further,  the design of a control  system must  reflect the fact that there
are  resource  constraints,  and the  benefits  of controls  must be  considered
relative to their  costs.  Because of the inherent  limitations  on all internal
control  systems,  our  internal  control  system can  provide  only  reasonable
assurance of achieving its  objectives and no evaluation of controls can provide
absolute  assurance  that all control  issues and  instances  of fraud,  if any,
within our Company have been detected.  These inherent  limitations  include the
realities that judgments in  decision-making  can be faulty, and that breakdowns
can occur  because of simple  error or mistake.  Additionally,  controls  can be
circumvented by the individual acts of some persons, by collusion of two or more
people,  and/or by management override of the control.  The design of any system
of internal  control is also based in part upon  certain  assumptions  about the
likelihood  of future  events,  and can provide only  reasonable,  not absolute,
assurance  that any design will succeed in achieving  its stated goals under all
potential future conditions.  Over time,  controls may become inadequate because
of changes in  circumstances,  and/or the degree of compliance with the policies
and procedures may deteriorate.

         MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     The Company's management, including our Chief Executive Officer and interim
Chief  Financial  Officer,  is  responsible  for  establishing  and  maintaining
adequate  internal control over financial  reporting (as such term is defined in
Exchange Act Rule 13a-15(f) and 15d-15(f)) for Interplay Entertainment Corp. and
its  subsidiaries  (the  "Company").  The Company's  internal control system was
designed to provide reasonable  assurance to the Company's  management and Board
of  Directors  regarding  the  preparation  and fair  presentation  of published
consolidated  financial  statements in  accordance  with  accounting  principles
generally accepted in the United States of America.

     Because of its  inherent  limitations,  a system of internal  control  over
financial reporting can provide only reasonable assurance and may not prevent or
detect misstatements.  Further, because of changing conditions, effectiveness of
internal  control over  financial  reporting  may vary over time.  The Company's
processes contain self-monitoring  mechanisms,  and actions are taken to correct
deficiencies as they are identified.

     Management has assessed the effectiveness of the Company's internal control
over  financial  reporting as of December  31,  2008,  based on the criteria for
effective internal control described in Internal Control -- Integrated Framework
issued by the Committee of Sponsoring  Organizations of the Treadway Commission.
Based  on its  assessment,  management  concluded  that the  Company's  internal
control over financial reporting was effective as of December 31, 2008.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  information  in Item10 is  incorporated  herein  by  reference  to the
section  entitled  "Proposal One ----  Election of  Directors"  contained in the
Proxy  Statement ( the "Proxy  Statement")  for the 2009  annual  meeting of the
stockholders to be filed with the Securities and Exchange  Commission within 120
days of the close of the fiscal year ended December 31, 2008.

ITEM 11.  EXECUTIVE COMPENSATION

     The  information  in Item 11 is  incorporated  herein by  reference  to the
section  entitled  "Proposal One ----  Election of  Directors"  contained in the
Proxy Statement.


                                       26
<PAGE>


ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

     The  information  in Item12 is  incorporated  herein  by  reference  to the
section  entitled  "General  Information"  ----  Security  Ownership  of Certain
Beneficial  Owners and Management" and "Proposal One ---- Election of Directors"
contained in the Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  in Item 13 is  incorporated  herein by  reference  to the
section entitled "Proposal One --- Election of Directors" contained in the Proxy
Statement.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

     The  information  in Item 14 is  incorporated  herein by  reference  to the
section  entitled  by  reference  to the  section  entitled  "Proposal  Two  ---
Ratification  of the  Appointment of Independent  Registered  Public  Accountant
Firm" contained in the Proxy Statement.


                                     PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)  The following  documents,  except for exhibit 32.1 which is being furnished
     herewith, are filed as part of this report:

     (1)  Financial Statements

          The list of financial  statements  contained in the accompanying Index
          to  Consolidated  Financial  Statements  covered  by  the  Reports  of
          Independent Auditors is herein incorporated by reference.

     (2)  Financial Statement Schedules

          The  list  of   financial   statement   schedules   contained  in  the
          accompanying Index to Consolidated Financial Statements covered by the
          Reports of Independent Auditors is herein incorporated by reference.

          All other schedules are omitted because they are not applicable or the
          required  information  is  included  in  the  Consolidated   Financial
          Statements or the Notes thereto.

     (3)  Exhibits

          The list of  exhibits  on the  accompanying  Exhibit  Index is  herein
          incorporated by reference.


                                       27
<PAGE>


                                   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  Beverly  Hills,
California this 31st day of April, XX 2009.

                          INTERPLAY ENTERTAINMENT CORP.


                               /s/ Herve Caen
                          By:___________________________________
                              Herve Caen
                              Its:  Chief Executive Officer and
                              Interim Chief Financial Officer
                              (Principal Executive and
                              Financial and Accounting Officer)

                                                                    Exhibit 24.1
                                POWER OF ATTORNEY

     The undersigned directors and officers of Interplay  Entertainment Corp. do
hereby  constitute  and appoint Herve Caen with full power of  substitution  and
resubstitution, as their true and lawful attorneys and agents, to do any and all
acts and  things  in our name and  behalf in our  capacities  as  directors  and
officers and to execute any and all  instruments  for us and in our names in the
capacities indicated below, which said attorney and agent, may deem necessary or
advisable to enable said corporation to comply with the Securities  Exchange Act
of  1934,  as  amended  and  any  rules,  regulations  and  requirements  of the
Securities  and Exchange  Commission,  in connection  with this Annual Report on
Form 10-K, including specifically but without limitation, power and authority to
sign for us or any of us in our names in the capacities indicated below, any and
all amendments  (including  post-effective  amendments) hereto, and we do hereby
ratify and confirm all that said attorneys and agents,  or either of them, shall
do or cause to be done by virtue hereof.

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended, this Annual Report and Form 10-K has been signed below by the following
persons  on  behalf of the  Registrant  and in the  capacities  and on the dates
indicated.

SIGNATURE                    TITLE                                DATE
---------                    -----                                ----

   /s/ Herve Caen
_________________________    Chief Executive Officer, Interim     April 15, 2009
Herve Caen                   Chief Financial Officer and
                             Director (Principal Executive
                             and Financial and Accounting
                             Officer)

   /s/ Eric Caen
_________________________    Director                             April 15, 2009
Eric Caen

   /s/ Michel Welter
_________________________    Director                             April 15, 2009
Michel Welter

   /s/ Alberto Haddad
_________________________    Director                             April 15, 2009
   Alberto Haddad

   /s/ Xavier de Portal
_________________________    Director                             April 15, 2009
Xavier de Portal


                                       28
<PAGE>


                                  EXHIBIT INDEX

EXHIBIT
NO.                                   DESCRIPTION
-------                               -----------

3.1      Amended and  Restated  Certificate  of  Incorporation  of the  Company;
         (incorporated  herein by  reference  to  Exhibit  3.1 to the  Company's
         Annual Report on Form 10-K for the year ended December 31, 2003).

3.2      Certificate of Designation of Preferences of Series A Preferred  Stock,
         as filed  with the  Delaware  Secretary  of  State on April  14,  2000;
         (incorporated  herein by  reference to Exhibit  10.32 to the  Company's
         Annual Report on Form 10-K for the year ended December 31, 1999).

3.3      Certificate  of  Amendment of  Certificate  of  Designation  of Rights,
         Preferences,  Privileges and  Restrictions of Series A Preferred Stock,
         as filed with the  Delaware  Secretary  of State on October  30,  2000;
         (incorporated  herein by  reference  to  Exhibit  3.3 to the  Company's
         Annual Report on Form 10-K for the year ended December 31, 2003).

3.4      Certificate  of  Amendment  of  Amended  and  Restated  Certificate  of
         Incorporation of the Company,  as filed with the Delaware  Secretary of
         State on November 2, 2000; (incorporated herein by reference to Exhibit
         3.4 to the  Company's  Annual  Report on Form  10-K for the year  ended
         December 31, 2003).

3.5      Certificate  of  Amendment  of  Amended  and  Restated  Certificate  of
         Incorporation of the Company,  as filed with the Delaware  Secretary of
         State on January 21, 2004; (incorporated herein by reference to Exhibit
         3.5 to the  Company's  Quarterly  Report on Form  10-Q for the  Quarter
         ended March 31, 2008).

3.6      Certificate  of  Amendment  of  Amended  and  Restated  Certificate  of
         Incorporation of the Company,  as filed with the Delaware  Secretary of
         State on July 1, 2008; (incorporated herein by reference to Exhibit 3.6
         to the  Company's  Quarterly  Report on Form 10-Q for the Quarter ended
         September 30, 2008).

3.7      Certificate  of  Amendment  of  Amended  and  Restated  Certificate  of
         Incorporation of the Company,  as filed with the Delaware  Secretary of
         State on July 1, 2008; (incorporated herein by reference to Exhibit 3.7
         to the  Company's  Quarterly  Report on Form 10-Q for the Quarter ended
         September 30, 2008).

3.8      Amended and  Restated  Bylaws of the Company;  (incorporated  herein by
         reference to Exhibit 3.8 to the Company's Quarterly Report on Form 10-Q
         for the Quarter ended September 30, 2008).

4.1      Specimen  form of stock  certificate  for Common  Stock;  (incorporated
         herein by reference to Exhibit 4.1 to the Form S-1)

10.01    Third Amended and Restated 1997 Stock Incentive Plan (the "1997 Plan");
         (incorporated herein by reference to Appendix A of the Definitive Proxy
         Statement filed on August 20, 2002).

10.02    Form  of  Stock  Option   Agreement   pertaining   to  the  1997  Plan;
         (incorporated herein by reference to exhibit 10.2 to the form S-1).

10.03    Form of  Restricted  Stock  Purchase  Agreement  pertaining to the 1997
         Plan;  (incorporated  herein by  reference  to Exhibit 10.3 to the Form
         S-1).

10.04    Form of  Indemnification  Agreement  for Officers and  Directors of the
         Company; (incorporated herein by reference to Exhibit 10.11 to the Form
         S-1).

10.05    Employment  Agreement between the Company and Herve Caen dated November
         9, 1999;  (incorporated  herein by  reference  to  Exhibit  10.3 to the
         Company's Quarterly Report on Form 10-Q for the quarter ended September
         30, 1999).

10.06    Trademark License  Agreement by and between Bethesda  Softworks LLC and
         the  Company  dated  as of  April  4,  2007;  (incorporated  herein  by
         reference  to  exhibit  10.49 to the  Company's  8-K filed on April 12,
         2007).


                                       29
<PAGE>


10.07    Form of Option  exercise  agreement  dated July 24,2008  between  Atari
         Interactive Inc. and the Company.; (incorporated herein by reference to
         exhibit  10.08 to the Company's  Quarterly  Report on Form 10-Q for the
         quarter ended September 30, 2008.

14.1     Code of Ethics of the  Company;  (incorporated  herein by  reference to
         Exhibit 14.1 to Amendment No. 1 to the Company's  Annual Report on Form
         10-K for the year ended December 31, 2003 filed on April 27, 2004).

21.1     Subsidiaries of the Company.

23.1     Consent of Jeffrey S. Gilbert, Independent Registered Public Accounting
         firm

24.1     Power of Attorney (included on signature page to this Form 10-K)

31.1     Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and
         Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.

31.2     Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and
         Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.

32.1     Certification  of Chief  Executive  Officer and interim Chief Financial
         Officer  pursuant  to 18 U.S.C.  Section  1350 as Adopted  Pursuant  to
         Section 906 of the Sarbanes-Oxley Act of 2002 by Herve Caen.


                                       30
<PAGE>


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                 INTERPLAY ENTERTAINMENT CORP. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                        AND REPORT OF INDEPENDENT AUDITOR



                                                                            PAGE
                                                                            ----

Reports of Independent Registered Public Accounting Firm                     F-2

Consolidated Balance Sheets at December 31, 2008 and 2007                    F-3

Consolidated Statements of Operations for the years ended
     December 31, 2008 2007 and 2006                                         F-4

Consolidated Statements of Stockholder's Equity (Deficit) and
     Comprehensive Income (loss) for the years ended
     December 31, 2008, 2007, 2006                                           F-5

Consolidated Statements of Cash Flows for the years ended
     December 31, 2008, 2007 and 2006                                        F-6

Notes to Consolidated Financial Statements                                   F-7

Schedule II - Valuation and Qualifying Accounts                              S-1


                                       F-1
<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Interplay Entertainment Corp.

     I have audited the consolidated  balance sheets of Interplay  Entertainment
Corp. (a majority-owned  subsidiary of Financial Planning and Development S.A. )
and  Subsidiaries  (the  "Company")  as of  December  31,  2008 and 2007 and the
related  consolidated  statements of operations,  stockholders' equity (deficit)
and comprehensive income(loss)and cash flows each of the years in the three year
period ending December 31, 2008. My audit included the schedule of valuation and
qualifying  accounts  for the years ended  December  31, 2008 and 2007and  2006.
These consolidated  financial statements are the responsibility of the Company's
management.  My  responsibility  is to express an opinion on these  consolidated
financial statements and the schedule based on my audit.

     I conducted my audit in  accordance  with  standards Of the Public  Company
Accounting Oversight Board (United States).  Those standards require that I plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  consideration of internal control over financial  reporting as a basis
for designing audit  procedures that are appropriate in the  circumstances,  but
not for the  purpose  of  expressing  an  opinion  on the  effectiveness  of the
Company's internal control over financial reporting.  Accordingly,  I express no
such  opinion.  An audit also  includes  examining,  on a test  basis,  evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting  principles used and significant
estimates  made by  management  as  well as  evaluating  the  overall  financial
statement  presentation.  I believe my audit provides a reasonable  basis for my
opinion.

     In my opinion,  the  consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
Interplay  Entertainment Corp. and Subsidiaries as of December 31, 2008 and 2007
and the results of their  operations  and their cash flows for each of the years
in the three year period ending December 31, 2008, in conformity with accounting
principles  generally  accepted  in the United  States of America.  Also,  in my
opinion the related  financial  statement  schedule for the years ended December
31,  2008,  2007 and 2006 when  considered  in relation  to the basic  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming the Company will continue as a going concern. As discussed in Note 1 to
the consolidated financial statements, the Company has limited liquid resources,
a history of losses,  negative  working capital of $2,405,000 and  stockholders'
deficit of $2,302,000. These matters raise substantial doubt about the Company's
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also discussed in Note 1. The consolidated  financial  statements do
not  include  any  adjustment  that  might  result  from the  outcomes  of these
uncertainties.

/S/ JEFFREY S. GILBERT
----------------------------
JEFFREY S. GILBERT

Los Angeles, California
April 15, 2009


                                      F-2
<PAGE>


<TABLE>
                 INTERPLAY ENTERTAINMENT CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<CAPTION>
                                                                   DECEMBER 31,
                                                          ------------------------------
                          ASSETS                               2008            2007
                                                          -------------    -------------
<S>                                                       <C>              <C>
Current Assets:
     Cash .............................................   $           0    $   1,138,000
     Trade receivables, net of allowances
         of $6,000 and $37,000, respectively ..........          87,000           26,000
     Inventories ......................................           1,000            1,000
     Deposits .........................................           7,000            4,000
     Prepaid expenses .................................          11,000           10,000
     Other receivables ................................           9,000           13,000
                                                          -------------    -------------
        Total current assets ..........................         115,000        1,192,000

Property and equipment, net ...........................          48,000            9,000
                                                          -------------    -------------
          Total  assets ...............................   $     163,000    $   1,201,000
                                                          =============    =============

     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities:
     Drawings in excess of cash balances ..............   $      24,000    $           0
     Convertible note payable .........................          53,000        1,045,000
     Notes payable officer and directors ..............         469,000          729,000
     Accounts payable .................................       1,186,000          911,000
     Accrued royalties ................................          23,000          200,000
     Deferred income ..................................         710,000          595,000

                                                          -------------    -------------
        Total current liabilities .....................       2,465,000        3,480,000
                                                          -------------    -------------

Commitments and contingencies
Stockholders' Equity (Deficit):
     Preferred stock, $0.001 par value 5,000,000 shares
        authorized; no shares issued or outstanding,
        respectively,
     Common stock, $0.001 par value 300,000,000 shares
        authorized; issued and outstanding 108,140,301
        shares in 2008 and 103,855,634 shares in 2007 .         108,000          104,000
     Paid-in capital ..................................     122,309,000      121,976,000
     Accumulated deficit ..............................    (124,842,000)    (124,349,000)
     Accumulated other comprehensive income ...........         123,000          (10,000)
     Treasury stock of 4,658,216 shares at December 31,
        2008 and 2007
                                                          -------------    -------------
        Total stockholders' (deficit) .................      (2,302,000)      (2,279,000)
                                                          -------------    -------------
          Total liabilities and stockholders' (deficit)   $     163,000    $   1,201,000
                                                          =============    =============
</TABLE>

                             See accompanying notes.


                                      F-3
<PAGE>


<TABLE>
                 INTERPLAY ENTERTAINMENT CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>
                                                           YEARS ENDED DECEMBER 31,
                                           --------------------------------------------------------
                                                 2008                2007                2006
                                           ----------------    ----------------    ----------------
<S>                                        <C>                 <C>                 <C>
Revenue ................................   $      1,378,000    $     6,001,0000    $        967,000
Cost of goods sold .....................             12,000               8,000             167,000
                                           ----------------    ----------------    ----------------
   Gross profit ........................          1,366,000           5,993,000             800,000
                                           ----------------    ----------------    ----------------

Operating expenses:
   Marketing and sales .................               --               245,000             509,000
   General and administrative ..........          1,492,000           1,275,000           1,560,000
   Product development .................            328,000              18,000                --
                                           ----------------    ----------------    ----------------
      Total operating expenses .........          1,820,000           1,538,000           2,069,000
                                           ----------------    ----------------    ----------------

      Operating income (loss) ..........           (454,000)          4,455,000          (1,269,000)
                                           ----------------    ----------------    ----------------

Other income (expense):
   Interest expense ....................            (35,000)            (59,000)           (139,000)
   Other (primarily reversal in 2007
      and 2006 of prior year recorded
      liabilities and settlements) .....             (4,000)          1,460,000           4,487,000
                                           ----------------    ----------------    ----------------
      Total other income (expense) .....            (39,000)          1,401,000           4,348,000
                                           ----------------    ----------------    ----------------

Income (loss) before provision (benefit)
      for income taxes .................           (493,000)          5,856,000           3,079,000
Provision (benefit) for income taxes ...               --                  --                  --
                                           ----------------    ----------------    ----------------

Net income (loss) ......................   $       (493,000)   $      5,856,000    $      3,079,000
                                           ================    ================    ================

Net income (loss) per common share:
Basic ..................................   $         (0.004)   $          0.059    $          0.032
                                           ================    ================    ================
Diluted ................................   $         (0.004)   $          0.057    $          0.032
                                           ================    ================    ================

Weighted average number of shares used
   in calculating net income (loss) per
   common share:
Basic ..................................        103,482,000          99,197,000          95,030,000
                                           ================    ================    ================
Diluted ................................        103,482,000         102,027,000          97,120,000
                                           ================    ================    ================
</TABLE>


                                      F-4
<PAGE>


<TABLE>
                 INTERPLAY ENTERTAINMENT CORP. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                         AND COMPREHENSIVE INCOME (LOSS)
                  YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
                             (DOLLARS IN THOUSANDS)

<CAPTION>

                                            PREFERRED STOCK                   COMMON STOCK
                                     -----------------------------   -----------------------------
                                         SHARES          AMOUNT         SHARES           AMOUNT
                                     -------------   -------------   -------------   -------------
<S>                                           <C>    <C>                <C>          <C>
Balance, December 31, 2005 .......            --     $        --        93,855,634   $          94
                                     -------------   -------------   -------------   -------------
   Issuance of Stock Options .....            --              --              --              --
   Shares for Debt - Special
       Situations ................            --              --        10,000,000              10
   Treasury stock
   Net income ....................            --              --              --              --
   Other comprehensive income,
       net of income taxes:
   Foreign currency translation
       adjustment ................            --              --              --              --
                                     -------------   -------------   -------------   -------------

Balance, December 31, 2006 .......            --              --       103,855,634             104
                                                     -------------   -------------   -------------
   Net Income ....................            --              --              --              --
   Other comprehensive income,
     net of income taxes:
   Foreign currency translation
       adjustment ................            --              --              --              --
                                     -------------   -------------   -------------   -------------
Balance, December 31, 2007 .......            --              --       103,855,634   $         104

   Exercise of warrants for common
       stock by CEO ..............            --              --         4,000,000               4
   Sale of common stock ..........            --              --           284,667            --
   Issuance of Warrants for
       services ..................            --              --              --              --
   Issuance of Stock Option ......            --              --              --              --
   Treasury stock
   Net Income ....................            --              --              --              --

   Other comprehensive income,
     net of income taxes:
   Foreign currency translation
       adjustment ................            --              --              --              --
                                     =============   =============   =============   =============
Balance, December 31, 2008 .......            --     $        --       108,140,301   $         108
                                     =============   =============   =============   =============


<CAPTION>
                                                                       ACCUMULATED
                                                                          OTHER
                                        PAID-IN       ACCUMULATED     COMPREHENSIVE
                                        CAPITAL         DEFICIT       INCOME (LOSS)        TOTAL
                                     -------------   -------------    -------------    -------------
<S>                                  <C>             <C>              <C>              <C>
Balance, December 31, 2005 .......   $     121,640   $    (133,283)   $          59    $     (11,490)
                                     -------------   -------------    -------------    -------------
   Issuance of Stock Options .....              38            --               --                 38
   Shares for Debt - Special
       Situations ................             286            --               --               --
   Treasury stock
   Net income ....................            --             3,079             --              3,079
   Other comprehensive income,
       net of income taxes:
   Foreign currency translation
       adjustment ................            --                (1)              (9)             (10)
                                     -------------   -------------    -------------    -------------

Balance, December 31, 2006 .......         121,966        (130,205)              50           (8,087)
                                     -------------   -------------    -------------    -------------
   Net Income ....................            --             5,856             --              5,856
   Other comprehensive income,
     net of income taxes:
   Foreign currency translation
       adjustment ................            --              --                (60)             (60)
                                     -------------   -------------    -------------    -------------
Balance, December 31, 2007 .......   $     121,976   $    (124,349)   $         (10)   $      (2,279)

   Exercise of warrants for common
       stock by CEO ..............             107            --               --                111
   Sale of common stock ..........              27            --               --                 27
   Issuance of Warrants for
       services ..................             174            --               --                174
   Issuance of Stock Option ......              25            --               --                 25
   Treasury stock
   Net Income ....................            --              (493)            --               (493)

   Other comprehensive income,
     net of income taxes:
   Foreign currency translation
       adjustment ................            --              --                133              133
                                     =============   =============    =============    =============
Balance, December 31, 2008 .......   $     122,309   $    (124,842)   $         123    $      (2,302)
                                     =============   =============    =============    =============
</TABLE>

                             See accompanying notes.


                                      F-5
<PAGE>


<TABLE>
                             INTERPLAY ENTERTAINMENT CORP. AND SUBSIDIARIES

                                  CONSOLIDATED STATEMENTS OF CASH FLOWS


<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                             2008           2007           2006
                                                         -----------    -----------    -----------
<S>                                                      <C>            <C>            <C>
Cash flows from operating activities:
   Net income (loss) .................................   $  (493,000)   $ 5,856,000    $ 3,079,000
   Adjustments to reconcile net income (loss) to
      cash provided by (used in) operating activities:
      Depreciation and amortization ..................         9,000          2,000          4,000
      Deposit ........................................          --             --            4,000
      Issuance of stock options ......................        25,000         12,000         38,000
      Issuance of warrants for services ..............       174,000           --             --
      Exercise of warrants for common stock by CEO ...       107,000           --             --
      Shares issued for settlement of  liability .....          --             --          296,000
      Reversal of prior year recorded liabilities ....          --       (1,425,000)    (4,441,000)
      Changes in assets and liabilities:
         Trade receivables, net ......................       (61,000)       201,000        201,000
         Trade receivables from related parties ......          --             --           17,000
         Inventories .................................          --            7,000           --
         Deposits ....................................        (3,000)          --             --
         Prepaid expenses ............................        (1,000)        (4,000)        54,000
         Settlement of Atari Note ....................    (1,050,000)          --             --
         Other current assets/receivables ............         4,000          4,000         (9,000)
         Drawings in excess of cash balance ..........        24,000           --             --
         Accounts payable ............................       269,000     (3,315,000)      (367,000)
         Accrued royalties ...........................      (177,000)        30,000         (7,000)
         Note payable officer ........................      (269,000)        35,000        694,000
         Deferred Income .............................       115,000        135,000        355,000
         Accumulated other comprehensive income ......       133,000        (60,000)        10,000
                                                         -----------    -----------    -----------
             Net cash provided by (used in) operating
                activities ...........................    (1,190,000)     1,478,000        (72,000)
                                                         -----------    -----------    -----------

Cash flows from investing activities:
   Purchases of property and equipment ...............       (52,000)        (8,000)          --
                                                         -----------    -----------    -----------
             Net cash (used in) investing activities .       (52,000)        (8,000)          --
                                                         -----------    -----------    -----------

Cash flows from financing activities:
   Payment of debt ...................................          --         (382,000)          --
   Exercise of warrants for common stock by CEO ......       111,000           --             --
   Sale of common stock ..............................        27,000           --             --
   Proceeds from debt ................................        53,000           --             --
                                                         -----------    -----------    -----------
             Net cash used in financing activities ...       191,000       (382,000)          --

Net increase (decrease) in cash ......................    (1,162,000)     1,088,000        (72,000)
Cash, beginning of year ..............................     1,138,000         50,000        122,000
                                                         -----------    -----------    -----------
Cash, end of year ....................................   $   (24,000)   $ 1,138,000    $    50,000
                                                         ===========    ===========    ===========

Supplemental cash flow information:
    Cash paid during the year for interest ...........   $    33,000    $   371,000    $      --
                                                         ===========    ===========    ===========
</TABLE>

                            See accompanying notes.


                                      F-6
<PAGE>


                 INTERPLAY ENTERTAINMENT CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006


1.   DESCRIPTION OF BUSINESS AND OPERATIONS

     Interplay Entertainment Corp., a Delaware corporation, and its subsidiaries
(the  "Company"),  publish  and  license  to  others  interactive  entertainment
software.  The Company's  software is developed  for use on various  interactive
entertainment  software  platforms,  including personal computers and video game
consoles.  The Company's common stock is quoted on the NASDAQ OTC Bulletin Board
under the symbol "IPLY".

GOING CONCERN

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming the Company will continue as a going concern, which contemplates, among
other things,  the realization of assets and  satisfaction of liabilities in the
normal  course of  business.  The Company  had net loss of $493,000 in 2008.  At
December 31, 2008, the Company had a  stockholders'  deficit of $2,302,000 and a
working capital deficit of $2,405,000.  The Company has historically  funded its
operations from licensing fees, royalty and distribution fee advances,  and will
continue to exploit its existing  intellectual property rights in our videogames
to provide future funding.

     In addition,  the Company  continues to seek,  external  sources of funding
including,  but not  limited  to, a sale or  merger  of the  Company,  a private
placement  or  public  offering  of the  Company's  capital  stock,  the sale of
selected   assets,   the  licensing  of  certain   product  rights  in  selected
territories,   selected   distribution   agreements,   and/or  other   strategic
transactions  sufficient to provide short-term funding,  and potentially achieve
the Company's long-term strategic objectives.  Although the Company has had some
success  in  licensing  or sales of  certain  of its  products  in the past,  no
assurance can be given that the Company will do so in the future.

     The Company  expects  that it will need to obtain  additional  financing or
income to fund its current  operations.  However, no assurance can be given that
funding  can be obtained  on  acceptable  terms,  or at all.  These  conditions,
combined  with the  Company's  historical  operating  losses and its deficits in
stockholders'  equity and working  capital,  raise  substantial  doubt about the
Company's ability to continue as a going concern. The accompanying  consolidated
financial  statements  do not include any  adjustments  to reflect the  possible
future  effects  on  the   recoverability   and  classification  of  assets  and
liabilities that might result from the outcome of this uncertainty.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

     The accompanying  consolidated financial statements include the accounts of
Interplay  Entertainment  Corp.  and its  wholly-owned  subsidiaries,  Interplay
Productions  Limited  (U.K.),  Interplay OEM, Inc.,  Games On-line and Interplay
Japan which is inactive. All significant inter-company accounts and transactions
have been eliminated.

CASH AND CASH EQUIVALENTS

     The Company  considers all highly  liquid  investments  with  insignificant
interest  rate risks and  original  maturities  of three months or less from the
date of  purchase  to be cash  equivalents.  The carry  amounts of cash and cash
equivalents approximate their fair values.

USE OF ESTIMATES

     The  preparation  of financial  statements  in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the  consolidated  financial  statements and the reported amounts of
revenues and expenses during the reporting period. Significant estimates made in
preparing the consolidated  financial  statements include,  among others,  sales
returns and allowances,  allowances for  uncollectible  receivables,  cash flows


                                      F-7
<PAGE>


used to evaluate  the  recoverability  of prepaid  licenses  and  royalties  and
long-lived  assets,  and certain accrued  liabilities  related to  restructuring
activities and litigation. Actual results could differ from those estimates.

RISKS AND UNCERTAINTIES

     The Company  operates in a highly  competitive  industry that is subject to
intense  competition,  potential  government  regulation and rapid technological
change.   The  Company's   operations  are  subject  to  significant  risks  and
uncertainties including financial,  operational,  technological,  regulatory and
other business risks associated with such a company.

INVENTORIES

     Inventories  consist of packaged  software  ready for  shipment,  including
video  game  console  software.  Inventories  are  valued  at the  lower of cost
(first-in,  first-out) or market.  The Company regularly  monitors inventory for
excess  or  obsolete  items  and  makes  any  valuation  corrections  when  such
adjustments  are known.  Based on management's  evaluation,  the Company had not
established any valuation allowance at December 31, 2008.

     Net  realizable  value is based on  management's  forecast for sales of the
Company's  products  in the  ensuing  years.  The  industry in which the Company
operates is  characterized  by  technological  advancement  and changes.  Should
demand  for  the  Company's   products  prove  to  be  significantly  less  than
anticipated, the ultimate realizable value of the Company's inventories could be
substantially  less  than  the  amount  shown on the  accompanying  consolidated
balance sheets.

PREPAID LICENSES AND ROYALTIES

     The Company has in the past had prepaid  licenses and royalties  consisting
of fees paid to intellectual property rights holders for use of their trademarks
or  copyrights.  Also included in prepaid  royalties  were  prepayments  made to
independent  software  developers  under  development   arrangements  that  have
alternative  future uses.  These  payments were  contingent  upon the successful
completion of  milestones,  which  generally  represent  specific  deliverables.
Royalty advances were recoupable against future sales based upon the contractual
royalty rate. The Company  amortized these costs of licenses,  prepaid royalties
and  other  outside  production  costs to cost of  goods  sold  over six  months
commencing  with the initial  shipment in each region of the related title.  The
Company  amortized these amounts at a rate based upon the actual number of units
shipped with a minimum  amortization  of 75% in the first month of release and a
minimum  of 5% for each of the next five  months  after  release.  This  minimum
amortization rate reflected the Company's typical product life cycle. Management
evaluates the future  realization of such costs quarterly and charges to cost of
goods sold any amounts  that  management  deems  unlikely  to be fully  realized
through  future  sales.  Such costs were  classified  as current and  noncurrent
assets  based  upon  estimated  product  release  dates.  There  were no prepaid
licenses and royalties at December 31, 2008.

SOFTWARE DEVELOPMENT COSTS

     SOFTWARE  DEVELOPMENT  COSTS.  Software  development costs include payments
made to independent software developers under development agreements, as well as
direct costs incurred for internally developed products.

     We account for software  development  costs in accordance with Statement of
Financial  Accounting  Standard  ("SFAS") No. 86,  "Accounting  for the Costs of
Computer  Software  to  Be  Sold,  Leased,  or  Otherwise   Marketed."  Software
development  costs  are  capitalized  once the  technological  feasibility  of a
product  is  established  and  such  costs  are  determined  to be  recoverable.
Technological  feasibility  of  a  product  encompasses  both  technical  design
documentation  and  game  design   documentation.   For  products  where  proven
technology exists, this may occur early in the development cycle.  Technological
feasibility  is evaluated on a  product-by-product  basis.  Prior to a product's
release,  we  expense,  as part of  "cost of sales  --  software  royalties  and
amortization,"   capitalized   costs  when  we  believe  such  amounts  are  not
recoverable.  Capitalized  costs  for  those  products  that  are  cancelled  or
abandoned  are  charged  to  product   development  expense  in  the  period  of
cancellation.  Amounts related to software development which are not capitalized
are charged immediately to product  development  expense. We evaluate the future
recoverability of capitalized  amounts on a quarterly basis. The  recoverability
of capitalized  software  development  costs is evaluated  based on the expected
performance of the specific  products for which the costs relate.  Criteria used
to evaluate  expected product  performance  include:  historical  performance of
comparable products using comparable technology; orders for the product prior to
its  release;  and  estimated  performance  of a  sequel  product  based  on the
performance of the product on which the sequel is based.


                                      F-8
<PAGE>

     Commencing upon product release, capitalized software development costs are
amortized to "cost of sales -- software royalties and amortization" based on the
ratio of current revenues to total projected revenues, generally resulting in an
amortization  period of six months or less. For products that have been released
in prior periods,  we evaluate the future  recoverability of capitalized amounts
on  a  quarterly  basis.  The  primary  evaluation  criterion  is  actual  title
performance.

     Significant   management  judgments  and  estimates  are  utilized  in  the
assessment of when technological  feasibility is established,  as well as in the
ongoing assessment of the recoverability of capitalized costs. In evaluating the
recoverability  of  capitalized   costs,  the  assessment  of  expected  product
performance  utilizes forecasted sales amounts and estimates of additional costs
to be incurred.  If revised  forecasted  or actual  product  sales are less than
and/or  revised  forecasted  or  actual  costs  are  greater  than the  original
forecasted  amounts  utilized in the initial  recoverability  analysis,  the net
realizable  value may be lower than  originally  estimated in any given quarter,
which could result in an impairment charge.

     Research  and  development  costs,  which  consisted  primarily of software
development costs, are expensed as incurred.

ACCRUED ROYALTIES

     Accrued  royalties  consist  of  amounts  due  to  outside  developers  and
licensors based on contractual  royalty rates for sales of shipped  titles.  The
Company records a royalty expense based upon a contractual royalty rate after it
has fully recouped the royalty advances paid to the outside  developer,  if any,
prior to shipping a title.

PROPERTY AND EQUIPMENT

     Property  and  equipment  are stated at cost.  Depreciation  of  computers,
equipment, and furniture and fixtures is provided using the straight-line method
over a period of five to seven years.  Leasehold improvements are amortized on a
straight-line  basis  over  the  lesser  of the  estimated  useful  life  or the
remaining lease term. Upon the sale or retirement of property and equipment, the
accounts are relieved of the cost and the related accumulated depreciation, with
any  resulting  gain  or  loss  included  in  the  consolidated   statements  of
operations.

LONG-LIVED ASSETS

     The Company  reviews  long-lived  assets for impairment  whenever events or
changes  in  circumstances  indicate  that  their  carrying  amounts  may not be
recoverable.  If the  cost  basis of a  long-lived  asset  is  greater  than the
estimated  fair  value,  based on various  models,  including  projected  future
undiscounted net cash flows from such asset (excluding interest) and replacement
value, an impairment loss is recognized. Impairment losses are calculated as the
difference  between  the cost basis of an asset and its  estimated  fair  value.
There can be no assurance,  however,  that market  conditions will not change or
demand for the Company's  products or services will continue  which could result
in additional impairment of other long-lived assets in the future.

GOODWILL AND INTANGIBLE ASSETS

     Goodwill and  identifiable  intangible  assets that have indefinite  useful
lives  are  not be  amortized  but  rather  be  tested  at  least  annually  for
impairment,  and identifiable intangible assets that have finite useful lives be
amortized  over their useful lives.  At December 31, 2008 and 2007,  the Company
had no goodwill or intangible assets subject to amortization.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The  carrying  value of cash,  accounts  receivable  and  accounts  payable
approximates  the fair value. In addition,  the carrying value of all borrowings
approximates  fair value  based on interest  rates  currently  available  to the
Company. The fair value of trade receivable from related parties,  advances from
related party distributor, loans to/from related parties and payables to related
parties are not determinable as these transactions are with related parties.

REVENUE RECOGNITION

     Revenues  are  recorded   when  products  are  delivered  to  customers  in
accordance  with  Statement  of  Position   ("SOP")  97-2,   "Software   Revenue
Recognition" and SEC Staff Accounting Bulletin No. 104, Revenue Recognition.


                                      F-9
<PAGE>


     The Company  recognizes  revenue from sales by  distributors,  net of sales
commissions,  only as the distributor recognizes sales of the Company's products
to unaffiliated  third parties.  For those agreements that provide the customers
the right to multiple  copies of a product in exchange for  guaranteed  amounts,
revenue is recognized at the delivery and acceptance of the product gold master.
Per copy  royalties on sales that exceed the guarantee are recognized as earned.
Guaranteed  minimum royalties on sales,  where the guarantee is not recognizable
upon  delivery,  are  recognized  as the minimum  payments come due. The Company
recognizes  revenue  on  expired  contracts  when  the  termination  date of the
contract is reached because  guaranteed  minimum  royalties are not reimbursable
and is therefore, recorded as revenue.

     The Company is generally  not  contractually  obligated to accept  returns,
except for  defective,  shelf-worn  and  damaged  products  in  accordance  with
negotiated  terms.  However,  on a case by case  basis,  the  Company may permit
customers to return or exchange product and may provide  markdown  allowances on
products  unsold by a customer.  Revenue is  recorded  net of an  allowance  for
estimated returns,  exchanges,  markdowns, price concessions and warranty costs.
Such allowances are based upon management's evaluation of historical experience,
current industry trends and estimated costs. Management of the Company estimated
that no allowances  were  necessary at December 31, 2008 and 2007. The amount of
allowances ultimately required could differ materially in the near term from the
amounts included in the accompanying consolidated financial statements.

     Customer  support  provided by the Company is limited to internet  support.
These costs are not significant and are charged to expenses as incurred.

     The  Company  also  engages  in the sale of  licensing  rights  on  certain
products.  The terms of the licensing  rights differ,  but normally  include the
right to develop and distribute a product on a specific video game platform. For
these  activities,  revenue is recognized when the rights have been  transferred
and no other  obligations  exist. The Company has entered into various licensing
agreements  during 2008 under which it licensed others to exploit games to which
the Company had intellectual property rights.

REVERSAL OF CERTAIN PRIOR YEAR ACCRUALS AND ACCOUNTS PAYABLE

     During the year ended  December  31, 2007 and 2006 the Company has reversed
certain accruals and accounts  payables of  approximately  $1.4 million and $4.5
million respectively. It is the Company's policy to reverse outstanding accruals
and accounts  payables that have been outstanding for over 4 years and no effort
has been made by the vendor or  claimant  for that period of time to collect the
outstanding balances.

ADVANCES FROM DISTRIBUTORS

     Deferred  income is recognized when contracts with  distributors  expire or
are terminated.

ADVERTISING COSTS

     The Company generally  expenses  advertising costs as incurred,  except for
production  costs  associated with media campaigns that are deferred and charged
to expense at the first run of the  advertising.  Cooperative  advertising  with
distributors  and retailers is accrued when revenue is  recognized.  Cooperative
advertising  credits  are  reimbursed  when  qualifying  claims  are  submitted.
Advertising  costs  approximated  $0,  $245,000 and $509,000 for the years ended
December 31, 2008, 2007 and 2006, respectively.

INCOME TAXES

     The  Company  accounts  for  income  taxes  using the  liability  method as
prescribed  by the SFAS No. 109,  "Accounting  for Income  Taxes." The statement
requires an asset and liability approach for financial  accounting and reporting
of income taxes. Deferred income taxes are provided for temporary differences in
the recognition of certain income and expense items for financial  reporting and
tax purposes given the provisions of the enacted tax laws. A valuation allowance
has been  provided  for all  deferred  tax assets  equal to the amounts of these
assets.


                                      F-10
<PAGE>


FOREIGN CURRENCY

     The  Company  follows  the  principles  of SFAS No. 52,  "Foreign  Currency
Translation,"  using the local  currency of its  operating  subsidiaries  as the
functional currency.  Accordingly, all assets and liabilities outside the United
States are translated into U.S. dollars at the rate of exchange in effect at the
balance  sheet date.  Income and expense  items are  translated  at the weighted
average exchange rate prevailing during the period. Gains or losses arising from
the translation of the foreign  subsidiaries'  financial statements are included
in the accompanying  consolidated  financial  statements as a component of other
comprehensive   loss.   Gains  and  Losses   resulting  from  foreign   currency
transactions  amounted to a $9,000 gain, $60,000 loss and $9,000 loss during the
years ended December 31, 2008, 2007 and 2006,  respectively,  and is included in
other income (expense) in the consolidated statements of operations.

NET INCOME (LOSS) PER SHARE

     Basic net income  (loss) per common  share is computed  by dividing  income
(loss)  attributable to common  stockholders  by the weighted  average number of
common  shares  outstanding.  Diluted  net income  (loss)  per  common  share is
computed by dividing income (loss)  attributable  to common  stockholders by the
weighted  average  number of common  shares  outstanding  plus the effect of any
convertible  debt,  dilutive stock options and common stock warrants if any. For
the years ended  December 31,  2008,  all options and  warrants  outstanding  to
purchase common stock were excluded from the loss per share computation as these
were  antidilutive.  For the year  ended  December  31,  2007  and 2006  certain
warrants and options were  dilutive and were  included in diluted net income per
share.

Segment Information

     The Company  discloses  information  regarding  segments in accordance with
SFAS No. 131 DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION.
SFAS No. 131 establishes  standards for reporting of financial information about
operating  segments  in  annual  financial  statements  and  requires  reporting
selected  information about operating segments in interim financial reports. The
Company is managed,  and financial  information is developed,  on a geographical
basis,  rather than a product line basis. Thus, the Company has provided segment
information on a geographical basis (see Note 13).

Allowance for Doubtful Accounts

     Management   establishes  an  allowance  for  doubtful  accounts  based  on
qualitative  and  quantitative  review  of  credit  profiles  of  the  Company's
customers,  contractual  terms  and  conditions,  current  economic  trends  and
historical payment,  return and discount experience.  Management  reassesses the
allowance  for doubtful  accounts  each period.  If  management  made  different
judgments or utilized different estimates for any period,  material  differences
in the amount and timing of revenue recognized could result. Accounts receivable
are written off when all collection attempts have failed.

Cost of Software Revenue

     Cost of software  revenue  primarily  reflects the manufacture  expense and
royalties to third party  developers,  which are recognized upon delivery of the
product.  Cost of support  incl4udes (i) sales  commissions and salaries paid to
employees  who  provide  support to clients  and (ii) fees paid to  consultants,
which are  recognized  as the  services are  performed.  Sales  commissions  are
expensed as incurred.

COMPREHENSIVE INCOME (LOSS)

     Comprehensive  income  (loss) of the  Company  includes  net income  (loss)
adjusted for the change in foreign  currency  translation  adjustments.  The net
effect of income taxes on comprehensive income (loss) is immaterial.

STOCK-BASED COMPENSATION

      The Company follows the principal of SFS No. 123(R), "SHARE-BASED PAYMENT"
("SFAS 123R"),  which requires the  measurement  and recognition of compensation
cost at fair value for all  share-based  payments,  including  stock options and
restricted stock awards.


                                      F-11
<PAGE>


RECENT ACCOUNTING PRONOUNCEMENTS

     In May 2008,  the FASB issued the final  version of Staff  Position No. APB
14-1,  Accounting for Convertible  Debt  Instruments that may be Settled in Cash
Upon Conversions  (Including Partial Cash Settlement) ("APB 14-1") that requires
the liability and equity  components of convertible debt instruments that may be
settled  in cash upon  conversion  (including  partial  cash  settlement)  to be
separately  accounted for in a manner that reflects the issuer's  nonconvertible
debt  borrowing  rate.  APB 14-1 is effective for fiscal years  beginning  after
December  15,  2008,  which for the  Company  will be fiscal  2009,  and interim
periods  within those fiscal  years and must be applied  retrospectively  to all
periods presented, which for the Company would include the comparative quarterly
presentations  for fiscal 2009.  Accordingly,  commencing  in fiscal  2010,  the
Company will present prior period  comparative  results reflecting the impact of
APB 14-1 if  determined  to apply to the  Company at that time.  The  Company is
currently evaluating the impact APB 14-1 will have on its consolidated financial
statements, if any.

     In April 2008, the FASB issued Staff Position No. FAS 142-3,  Determination
of the Useful Life of  Intangible  Assets ("FAS  142-3") that amends the factors
that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized  intangible asset under FASB Statement
No. 142,  Goodwill and Other  Intangible  Assets.  The intent of FAS 142-3 is to
improve the consistency between the useful life of a recognized intangible asset
under  Statement  142 and the period of expected  cash flows used to measure the
fair value of the asset  under SFAS No.  141 and other U.S.  generally  accepted
accounting  principles.  FAS 142-3 is  effective  for fiscal  years and  interim
periods  beginning after December 15, 2008. The Company is currently  evaluating
the impact of this pronouncement on its consolidated  financial  statements,  if
any.

     In December 2007, the FASB issued SFAS No. 160,  "Noncontrolling  Interests
in  Consolidated  Financial  Statements,"  or SFAS No. 160.  SFAS No. 160 amends
Accounting Research Bulletin 51, "Consolidated Financial Statements," or ARB 51,
and  requires  all  entities to report  noncontrolling  (minority)  interests in
subsidiaries  within  equity  in  the  consolidated  financial  statements,  but
separate from the parent  shareholders'  equity.  SFAS No. 160 also requires any
acquisitions or dispositions of noncontrolling interests that do not result in a
change of control to be accounted for as equity transactions.  Further, SFAS No.
160  requires  that a  parent  recognize  a gain or loss  in net  income  when a
subsidiary  is  deconsolidated.  SFAS No.  160 is  effective  for  fiscal  years
beginning on or after  December 15, 2008. We do not believe the adoption of SFAS
No. 160 will have a material affect on our financial statements.

     In February 2007, the FASB issued  Statement No. 159, THE FAIR VALUE OPTION
FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES -- INCLUDING AN AMENDMENT OF FASB
STATEMENT NO. 115 ("SFAS No. 159").  SFAS No. 159 permits  entities to choose to
measure many  financial  instruments  and certain other items at fair value that
are not currently required to be measured at fair value.  Subsequent  unrealized
gains and losses on items for which the fair value  option has been elected will
be  reported in  earnings.  The  provisions  of SFAS No. 159 are  effective  for
financial  statements issued for fiscal years beginning after November 15, 2007.
We are  evaluating  if we will adopt SFAS No. 159 and what  impact the  adoption
will have on our Consolidated Financial Statements if we adopt.

     In July 2006,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Interpretation  No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES (FIN 48). FIN
48 clarifies the  accounting for  uncertainty  in income taxes  recognized in an
enterprise's  financial  statements in accordance with SFAS 109,  ACCOUNTING FOR
INCOME  TAXES.  FIN  48  prescribes  a  recognition  threshold  and  measurement
attribute for the  financial  statement  recognition  and  measurement  of a tax
position  taken or expected to be taken in a tax  return.  FIN 48 also  provides
guidance on derecognition, classification, interest and penalties, accounting in
interim  periods,  disclosure  and  transition.  FIN 48 is  effective  for years
beginning after December 15, 2006. We will adopt FIN 48 as of December 30, 2006,
as required.  Currently, we are not able to estimate the impact FIN 48 will have
on our financial statements.

     In September 2006, the FASB issued SFAS 157, FAIR VALUE MEASUREMENTS, which
defines fair value,  creates a framework for  measuring  fair value in generally
accepted accounting  principles (GAAP), and expands disclosures about fair value
measurements.  SFAS 157 is effective for financial  statements issued for fiscal
years beginning after November 15, 2007. We will adopt SFAS 157 on its effective
date.  The  Company  has  not yet  determined  the  effect,  if  any,  that  the
application of SFAS No. 157 will have on its consolidated financial statements.


                                      F-12
<PAGE>


     In September  2006, the Securities and Exchange  Commission  ("SEC") issued
SAB No. 108,  Topic 1-N,  "Considering  the Effects of Prior Year  Misstatements
when Quantifying  Misstatements  in Current Year Financial  Statements." SAB No.
108 requires companies to evaluate the materiality of current year misstatements
using both the rollover approach and the iron curtain approach.  The adoption of
SAB  No.  108 did not  have a  material  impact  on the  Company's  consolidated
financial position and results of operations.

     Other recent  accounting  pronouncements  issued by the FASB (including its
Emerging  Issues  Task  Force),  the  American  Institute  of  Certified  Public
Accountants  and  the  Securities  and  Exchange  Commission  did not or are not
believed by  management to have a material  impact on the  Company's  present or
future consolidated financial statements.

3.   DETAIL OF SELECTED BALANCE SHEET ACCOUNTS

PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

                                                               DECEMBER 31,
                                                          ---------------------
                                                           2008           2007
                                                          ------         ------
                                                          (Dollars in thousands)
Computers and equipment ........................          $   38         $    9
Furniture and fixtures .........................              10              8
Web Page .......................................              17           --
                                                          ------         ------
                                                              65             17
Less: Accumulated depreciation
   and amortization ............................             (17)            (7)
                                                          ------         ------
               Net Equipment ...................          $   48         $   10
                                                          ======         ======


     For the years ended December 31, 2008, 2007 and 2006, the Company  incurred
depreciation   and   amortization   expense  of  $10,000,   $2,000  and  $4,000,
respectively.  During the years ended  December  31,  2008,  2007 and 2006,  the
Company disposed of fully  depreciated  equipment having an original cost of $0,
$14,000 and $0, respectively.

4.   NOTES PAYABLE

     The  Company  issued  on  October  2,  2006 to the  following  officer  and
directors Herve Caen, Eric Caen and Michel Welter conditional demand notes which
have since  become  demand  notes (due to the change in control  resulting  from
Financial  Planning and Development SA's acquisition of approximately 56% of the
Company's outstanding stock) bearing a 5% annual interest rate. The demand notes
were issued for the earned but unpaid directors' fees to Herve Caen for $50,000,
to Eric Caen for  $50,000,  to Michel  Welter  for  $85,000,  and for earned but
unpaid  salary to Herve Caen in the amount of  $500,000.  A total of $526,000 in
principal and interest remains outstanding under the demand notes as of December
31,  2008.  Interest  accrued on the demand  notes as of  December  31, 2008 was
$30,000.

     The Company issued on June 27, 2008 to Interactive Game Group a convertible
promissory note in the amount of $52,000 for consideration received in cash. The
unpaid  principal  balance of this Convertible Note shall bear interest at a per
annum rate equal to the three (3) months  Libor  interest  rate plus one percent
adjusted  quarterly  and due with a six month term.  (Current  interest  rate of
2.26%).  The note is  convertible  into 400,000  shares of the Company's  common
stock price as of June 30, 2008 ($0.13 per share)  which was the market price at
the date of the agreement.

     On July 24, 2008,  the Company  entered into an Option  Exercise  Agreement
(the "Agreement") with Atari Interactive, Inc. ("Atari Interactive").  Under the
Agreement,  Atari Interactive and the Company settled outstanding disputes among
them,  including in connection with an existing Promissory Note dated August 19,
2004 of the Company in favor of Atari Interactive (the "Note").  Pursuant to the
Agreement,  Atari  Interactive  exercised an existing  option to  purchase,  and
purchased,  from the  Company  intellectual  property  rights  developed  by the
Company in  connection  with the  Dungeons & Dragons  games.  The balance of all
amounts  due  from  the  Company  to  Atari   Interactive   under  the  Note  of
approximately $1,050,000.00 was cancelled and was recognized as revenue.


                                      F-13
<PAGE>


5.   ADVANCES FROM DISTRIBUTORS WHICH ARE CONSIDERED DEFERRED INCOME

                                                                 DECEMBER 31,
                                                             -------------------
                                                               2008       2007
                                                             --------   --------
                                                          (Dollars in thousands)

Non refundable advances for future distribution rights ...   $710,000   $595,000
                                                             ========   ========


6.       INCOME TAXES

     Income (loss) before provision for income taxes consists of the following:

                                            YEARS ENDED DECEMBER 31,
                             --------------------------------------------------
                                 2008                2007               2006
                             -----------         -----------        -----------
                                            (Dollars in thousands)
Domestic ............        $  (469,000)        $ 5,640,000        $ 3,624,000

Foreign .............            (24,000)            216,000           (550,000)
                             -----------         -----------        -----------
Total ...............        $  (493,000)        $ 5,856,000        $ 3,079,000
                             ===========         ===========        ===========


     The provision for income taxes is comprised of the following:

                                                 YEARS ENDED DECEMBER 31,
                                            2008           2007           2006
                                           ------         ------         ------
                                                 (Dollars in thousands)
Current:
   Federal ......................          $  --          $  --          $  --
   State ........................             --             --             --
   Foreign ......................             --             --             --
                                           ------         ------         ------
Deferred:
   Federal ......................             --             --             --
   State ........................             --             --             --
                                           ------         ------         ------
                                           $  --          $  --          $  --
                                           ======         ======         ======


     The Company files a  consolidated  U.S.  Federal  income tax return,  which
includes all of its domestic operations.  The Company files separate tax returns
for each of its foreign  subsidiaries in the countries in which they reside. The
Company's  available  net  operating  loss ("NOL") carry forward for Federal tax
reporting purposes  approximates $132 million and expires through the year 2028.
The Company's NOL for California  State tax reporting  purposes  approximate $34
million and expires  through the year 2018.  The  utilization of the federal and
state net operating losses may be limited by Internal Revenue Code.

     Due  to  changes  in  control  the   utilization   of  net  operating  loss
carryforwards  maybe  subject  to annual  limitations  under  provisions  of the
internal revenue code, such limitations  could result in the permanent loss of a
portion of the net operating loss carryforwards.


                                      F-14
<PAGE>


     A reconciliation of the statutory Federal income tax rate and the effective
tax rate as a percentage of pretax loss is as follows:

                                                   2008       2007       2006
                                                  ------     ------     ------
Statutory Federal  income tax rate ............     34.0%      34.0%      34.0%
State income tax effect, net of
   federal benefits ...........................      5.8        5.8        5.8
   Valuation allowance ........................    (39.8)     (39.5)     (39.5)
   Tax rate differentiation of
     foreign earnings
Other
                                                  ------     ------     ------
                                                     --         --         --
                                                  ======     ======     ======

     The components of the Company's net deferred  income tax asset  (liability)
are as follows:

                                                              DECEMBER 31,
                                                         ----------------------
                                                           2008          2007
                                                         --------      --------
                                                          (Dollars in thousands)
Current deferred tax asset (liability):
     Deferred Royalties ............................     $    113      $   (237)
     Accrued expenses ..............................         --              (8)
     Foreign loss and credit carryforward ..........          974         2,875
     Federal and state net operating losses ........       51,597        53,648
     Other .........................................         --            --
                                                         --------      --------
                                                           52,684        56,278
                                                         --------      --------

Non-current deferred tax asset (liability):
     Depreciation expense ..........................         --            --
     Nondeductible reserves ........................         --            --
                                                         --------      --------
                                                             --            --
                                                         --------      --------

Net deferred tax asset before
     valuation allowance ...........................       52,684        56,278
Valuation allowance ................................       52,684       (56,278)
                                                         --------      --------
Net deferred tax asset .............................     $   --        $   --
                                                         ========      ========

     The Company maintains a valuation allowance against its deferred tax assets
due  to  the  uncertainty   regarding  future  realization.   In  assessing  the
realizability  of its deferred tax assets,  management  considers  the scheduled
reversal of deferred tax liabilities,  projected future taxable income,  and tax
planning  strategies.  The valuation  allowance on deferred tax assets decreased
$3.6 million during the year ending December 31, 2008 and increased $1.8 million
during the year ending December 31, 2007.

7.   COMMITMENTS AND CONTINGENCIES

LEASES

     The  Company is  currently  on a month to month lease  arrangement  for the
Beverly  Hills  office.  During 2008 the Company was  subleasing on a short-term
basis a portion of the office space to an independent  third party. We also have
a lease  commitment in Irvine for our new development  offices through March 31,
2009.  We also  have a lease  commitment  at our  French  representation  office
through  February 28, 2011 with an option for an additional 3 years. The Company
also has a lease commitment at the French representation office through February
28, 2008 with an option for an additional 6 years.


                                      F-15
<PAGE>


     Total net rent  expense  was $ 155,000,  $83,000  and $77,000 for the years
ended December 31, 2008, 2007 and 2006, respectively.

LITIGATION

     The  Company  may be involved in various  legal  proceedings,  claims,  and
litigation  arising  in the  ordinary  course of  business,  including  disputes
arising  over the  ownership  of  intellectual  property  rights and  collection
matters. In the opinion of management,  the outcome of known routine claims will
not  have a  material  adverse  effect  on  the  Company's  business,  financial
condition, or results of operations.

     The litigation  with Glutton  Creeper was settled in April 2009 without any
material liability to the Company.

     Interplay   recently   received   notice  that  Bethesda   Softworks,   LLC
("Bethesda")  intends to  terminate  the  trademark  license  agreement  between
Bethesda and Interplay  which was entered into April 4, 2007 for the development
of FALLOUT MMOG.  Despite the fact that no formal  action is currently  pending,
Bethesda claims that Interplay is in breach of the trademark  license  agreement
for failure to commence fill scale  development  of same by April 4, 2009 and to
secure certain funding for the MMOG.  Interplay adamantly disputes these claims.
Although the potential  damages are currently  unknown,  if Bethesda  ultimately
prevails and cancels the trademark license  agreement,  Interplay would lose its
license  back of the  "Fallout"  MMOG and any damages  resulting  therefrom  are
unknown at this time.

8.   STOCKHOLDERS' EQUITY

PREFERRED STOCK AND COMMON STOCK

     The Company's articles of incorporation authorize up to 5,000,000 shares of
$0.001 par value preferred stock. Shares of preferred stock may be issued in one
or more classes or series at such time as the Board of Directors  determine.  As
of December 31, 2008, there were no shares of preferred stock outstanding.

     In August 2001, the former majority shareholder converted 336,070 shares of
Series A Preferred  Stock it  purchased in April 2000 into  6,679,306  shares of
Common Stock. This conversion did not include accumulated  dividends of $740,000
on the Preferred Stock;  these were  reclassified as an accrued  liability since
Titus had elected to receive the  dividends in cash.  In March 2002,  the former
majority  shareholder  converted  its  remaining  383,354  shares  of  Series  A
Preferred Stock into 47,492,162  shares of Common Stock. In connection with sale
of  Preferred  Stock  with the  former  majority  shareholder  in April 2000 the
Company  issued a warrant to purchase  350,000  shares of the  Company's  common
stock at $3.79 per share and another warrant to the former majority  shareholder
to purchase 50,000 shares of the Company's common stock at $3.79 per share. Both
warrants expire in April 2010.

    The  Company on June 30,  2008  amended  and  restated  its  Certificate  of
Incorporation  to  increase  the number of  authorized  shares of the  Company's
Common  Stock,  par value  $0.001 per share,  a total of  300,000,000  shares of
Common Stock.

WARRANTS ISSUED

     The Company issued a total of 5,820,000 warrants during 2008:

     On May 20,  2008  the  Company  issued  5,000,000  10 year  warrants  at an
exercise price of $0.175 to Herve Caen, the Chief Executive  officer and Interim
Chief  Financial  Officer,  in exchange for a reduction in his  compensation  to
$250,000 through May 15, 2009.

     These warrants were valued using the  Black-Scholes  Model. The amount of $
145,000 was charged to 2008 operations.

     On June 30, 2008 the  Company  issued to  Intelligence  Agency a warrant to
purchase  20,000  shares of Common  Stock of the  Company as  consideration  for
providing  a discount  for  investor  relations  services to the  Company.  Such
warrant was issued,  and any underlying  shares of Common Stock would be issued,
in a private placement exempt from registration  pursuant to section 4(2) of the
Securities Act of 1933.  Such warrant has a term of 10 years,  an exercise price
of $0.13,  is  immediately  exercisable.  These  warrants  were valued using the
Black-Scholes Model.


                                      F-16
<PAGE>


     These warrants were valued using the  Black-Scholes  Model. The amount of $
1,000 was charged to 2008 operations.

     On June 30,  2008 the  Company  issued to The  Gersh Law Firm a warrant  to
purchase  400,000  shares of Common  Stock of the Company as  consideration  for
providing a discount for legal services to the Company. Such warrant was issued,
and any  underlying  shares  of  Common  Stock  would be  issued,  in a  private
placement  exempt from  registration  pursuant to section 4(2) of the Securities
Act of 1933. Such warrant has a term of 10 years, an exercise price of $0.13, is
immediately  exercisable.  These  warrants  were valued using the  Black-Scholes
Model.

     These warrants were valued using the  Black-Scholes  Model. The amount of $
14,000 was charged to 2008 operations.

     On June 30,  2008 the  Company  issued to  Interactive  Game  Group,  LLC a
warrant to purchase  up to  2,000,000  shares of Common  Stock of the Company as
consideration  for entering into a Game  Production  Agreement with the Company.
Such  warrant was issued,  and any  underlying  shares of Common  Stock would be
issued, in a private placement exempt from registration pursuant to section 4(2)
of the Securities Act of 1933.  Such warrant has a term of 10 years, an exercise
price of $0.13, is immediately  exercisable as to 400,000 shares of Common Stock
and becomes exercisable at any time after 60 days with respect to 400,000 shares
of Common  Stock for each game up to 4 games  that  meets the  requirements  for
production and funding under the Game Production  Agreement  between the Company
and   Interactive   Game  Group,   LLC,  The  warrants  were  valued  using  the
Black-Scholes  model.  The amount of the  $14,000  for the  issuance  of 400,000
warrants was charged to 2008 operations.

     These warrants were valued using the  Black-Scholes  Model. The amount of $
14,000 was charged to 2008 operations.

     During 2006 the Company issued 6,370,000 warrants to purchase the Company's
common stock at $.0279 per share (average closing price over ten days subsequent
to the resolution  authorizing  the issuance of the warrants) to the officer and
directors.

     The   6,100,000   warrants  were  issued  to  the  officer  to  reduce  his
compensation  and to  convert  a  portion  of  his  unpaid  compensation  into a
conditional  demand note.  The  conditions  includes that such note will be paid
only if the tangible net worth of the Company exceeds $1 million or in a case of
change  in  control.  The  demand  note  will  accrue  interest  at a rate of 5%
annually. These warrants were valued using the Black-Scholes Model.

     In addition  270,000 warrants were issued to the directors to convert their
earned but unpaid  director's fees to conditional  demand notes.  The conditions
include  that  such  notes  will be paid only if the  tangible  net worth of the
Company  exceeds $1 million or in a case of change in control.  The demand notes
will accrue interest at a rate of 5% annually.  These warrants were valued using
the Black-Scholes Model.

EXERCISE OF WARRANTS

     On June 30, 2008 and  December  9, 2008  respectively,  Herve  Caen,  Chief
Executive Officer and Interim Chief Financial Officer, exercised an aggregate of
4,000,000  warrants issued in 2006 at an exercise price of 0.0279.  These shares
were  paid for by  reducing  the  balance  due from the  Company  to Herve  Caen
including accrued interest of $60,000 and principal of $52,000.


                                      F-17
<PAGE>


Outstanding Warrants

<TABLE>
<CAPTION>
                                                     YEARS ENDED DECEMBER 31,
                          -----------------------------------------------------------------------------
                                    2008                      2007                       2006
                          ------------------------   -----------------------   ------------------------
                                         WEIGHTED                  WEIGHTED                   WEIGHTED
                                         AVERAGE                   AVERAGE                    AVERAGE
                                         EXERCISE                  EXERCISE                   EXERCISE
                            SHARES        PRICE        SHARES       PRICE        SHARES         PRICE
                          ----------    ----------   ----------   ----------   ----------    ----------
<S>                        <C>          <C>           <C>         <C>          <C>           <C>
Warrants outstanding at
   beginning of year ..    7,330,000    $      .38    7,330,000   $      .38    9,587,068    $     1.84
   Granted ............    5,820,000          .175         --           --      6,370,000         .0279
   Exercised ..........   (4,000,000)         .028         --           --           --            --
   Canceled ...........         --            --           --           --     (8,626,770)         --
                          ----------                 ----------                ----------
   Warrants outstanding
     and exercisable at
     end of year ......    9,150,298    $      .41    7,330,298   $      .38    7,330,298    $      .38
                          ==========                 ==========                ==========
</TABLE>


     A detail of the warrants  outstanding  and  exercisable  as of December 31,
2008 is as follows:

                                WARRANTS OUTSTANDING AND EXERCISABLE
                           -----------------------------------------------
                                                                  WEIGHTED
                                             WEIGHTED AVERAGE     AVERAGE
  RANGE OF EXERCISE            NUMBER       REMAINING EXERCISE    EXERCISE
        PRICES              OUTSTANDING        CONTRACT LIFE       PRICE
-----------------------    --------------   ------------------   ---------
     $1.75 -   $1.75             500,000             2.33           $1.75
     $3.79 -   $3.79             460,298             2.29            3.79
    $0.175 -   $0.175          5,000,000             9.40             .175
      $.13 -   $.13              820,000             9.50             .13
    $.0279 -   $.0279          2,370,000             7.75             .0279
                           --------------
                 TOTAL         9,150,298
                           ==============

SALE OF COMMON STOCK

     On October 22, 2008 and on December 5, 2008 the Company sold to two private
investors  a total of 284,667  shares of Common  Stock of the  Company,  (84,667
shares at $0.09 and 200,000 shares at $0.10 per share) for a total consideration
of  $27,620.00.  Such shares were  issued,  in a private  placement  exempt from
registration pursuant to section 4(2) of the Securities Act of 1933.

SHARES RESERVED FOR FUTURE ISSUANCE

     Common  stock  reserved  for future  issuance  at  December  31, 2008 is as
follows:

Stock option plan:
   Outstanding ...........................................             3,160,000
   Available for future grants ...........................             6,840,000
                                                                      ----------
                                                                      10,000,000
                                                                      ----------
Warrants .................................................             9,150,298
                                                                      ----------
Total ....................................................            19,150,298
                                                                      ==========


                                      F-18
<PAGE>


TREASURY STOCK

     In December 2005,  NBC Universal  returned  their  4,658,216  shares of the
Company's  common stock at no cost to the Company.  The Company  included  these
shares as treasury stock in 2008 and 2007.

9.   NET EARNINGS (LOSS) PER COMMON SHARE

     Basic earnings  (loss) per common share is computed as net earnings  (loss)
available  to common  stockholders  divided by the  weighted  average  number of
common shares  outstanding for the period and does not include the impact of any
potentially dilutive  securities.  Diluted earnings per common share is computed
by  dividing  the net  earnings  available  to the  common  stockholders  by the
weighted  average  number of common  shares  outstanding  plus the effect of any
dilutive  stock  options  and  common  stock  warrants  and  the  conversion  of
outstanding convertible debentures.

<TABLE>
<CAPTION>
                                                                                 YEARS ENDED DECEMBER 31,
                                                                           ----------------------------------
                                                                              2008         2007        2006
                                                                           ---------    ---------   ---------
                                                                               (Amounts in thousands, except
                                                                                     per share amounts)
<S>                                                                        <C>          <C>         <C>
Net income (loss) available to common stockholders .....................   $    (493)   $   5,856   $   3,079
   Interest related to conversion of secured convertible promissory note        --           --          --
                                                                           ---------    ---------   ---------
   Dilutive net income (loss) available to common stockholders .........   $    (493)   $   5,856   $   3,079
                                                                           ---------    ---------   ---------
Shares used to compute net income (loss) per common share:
   Weighted-average common shares ......................................     103,482       99,197      95,030
   Dilutive stock equivalents ..........................................        --          2,831       2,090
                                                                           ---------    ---------   ---------
   Dilutive potential common shares ....................................     103,482      102,028      97,120
                                                                           =========    =========   =========
Net income (loss) per common share:
   Basic ...............................................................   $  (0.004)   $   0.059   $   0.032
   Diluted .............................................................   $  (0.004)   $   0.057   $   0.032
</TABLE>


     There were options and warrants  outstanding to purchase  12,310,298 shares
of common stock at December 31, 2008,  which were excluded from the earnings per
common  share  computation  as the  exercise  price was greater than the average
market price of the common shares.

     The weighted average exercise price at December 31, 2008, 2007 and 2006 was
$.41, $.38 and $.38, respectively, for the options and warrants outstanding.

     In 2008 the warrants and options were anti-dilutive.

     For the year ended December 31, 2007 and 2006 certain  warrants and options
were dilutive and were included in diluted net income per share.

10.  EMPLOYEE BENEFIT PLANS

STOCK OPTION PLANS

     The Company has one stock option plan currently outstanding. Under the 1997
Stock  Incentive  Plan,  as amended  (the "1997  Plan"),  the  Company may grant
options to its employees,  consultants and directors,  which generally vest from
three to five years.  At the Company's 2002 annual  stockholders'  meeting,  its
stockholders  voted to approve an  amendment  to the 1997 Plan to  increase  the
number of authorized  shares of common stock  available  for issuance  under the
1997 Plan from four million to 10 million. The Company's Incentive Stock Option,
Nonqualified  Stock Option and Restricted  Stock Purchase Plan- 1991, as amended
(the "1991 Plan"),  and the Company's  Incentive  Stock Option and  Nonqualified
Stock Option Plan-1994, as amended, (the "1994 Plan"), have been terminated.


                                      F-19
<PAGE>


     The  following is a summary of option  activity  pursuant to the  Company's
stock option plans:

<TABLE>
<CAPTION>
                                                    YEARS ENDED DECEMBER 31,
                         -----------------------------------------------------------------------------
                                   2008                      2007                       2006
                         ------------------------   -----------------------   ------------------------
                                       WEIGHTED                  WEIGHTED                   WEIGHTED
                                       AVERAGE                   AVERAGE                    AVERAGE
                                       EXERCISE                  EXERCISE                   EXERCISE
                           SHARES       PRICE        SHARES       PRICE        SHARES         PRICE
                         ----------   ----------   ----------    ----------   ----------   ----------
<S>                       <C>         <C>          <C>           <C>           <C>         <C>
Options outstanding at
   beginning of year .    1,410,000   $     .045    2,660,000    $     .05        70,000   $     .30
   Granted ...........    1,750,000   $     .175         --            --      2,590,000         .045
   Exercised .........         --           --           --            --           --           --
   Canceled ..........         --           --     (1,250,000)         .045         --           --
                         ----------                ----------                 ----------
   Options outstanding
     at end of year ..    3,160,000   $     .074    1,410,000    $     .045    2,660,000   $     .05
                         ==========                ==========                 ==========
   Options exercisable    3,210,000                 1,460,000                  2,640,000
                         ==========                ==========                 ==========
</TABLE>


     Black Scholes  Single  Option  approach was used to estimate the fair value
information  presented utilizing ratable amortization.  There were 1,750,000,  0
and 2,590,000 options granted in 2008, 2007 and 2006, respectively.

     A detail of the options outstanding and exercisable as of December 31, 2008
is as follows:

<TABLE>
<CAPTION>
                                   OPTIONS OUTSTANDING                 OPTIONS EXERCISABLE
                       ------------------------------------------    ----------------------
                                                         WEIGHTED                  WEIGHTED
                                      WEIGHTED AVERAGE    AVERAGE                  AVERAGE
RANGE OF EXERCISE         NUMBER         REMAINING       EXERCISE       NUMBER     EXERCISE
      PRICES           OUTSTANDING     CONTRACT LIFE       PRICE     OUTSTANDING    PRICE
------------------     -----------   -----------------   --------    -----------   --------
<C>                     <C>             <C>              <C>          <C>          <C>
$ 0.0279 - $ .68        3,160,000       4.50             $  .074      3,210,000    $ 0.074
</TABLE>


11.  CONCENTRATION OF CREDIT RISK

     The Company  typically  sells to  distributors  and  retailers on unsecured
credit,  with terms that vary  depending upon the customer and the nature of the
product. The Company has the risk of non-payment from its customers, whether due
to their  financial  inability  to pay, or  otherwise.  In  addition,  while the
Company maintains a reserve for uncollectible  receivables,  the reserve may not
be  sufficient  in every  circumstance.  As a  result,  a payment  default  by a
significant  customer  could cause  material harm to the Company's  business and
cash flow.

12.  SEGMENT AND GEOGRAPHICAL INFORMATION

     The Company operates in one principal  business  segment,  which is managed
primarily from the Company's U.S. headquarters.


                                      F-20
<PAGE>


     Net revenues by geographic regions were as follows:

<TABLE>
<CAPTION>
                                      YEARS ENDED DECEMBER 31,
                   --------------------------------------------------------------
                          2007                  2006                  2006
                   ------------------    ------------------    ------------------
                    AMOUNT    PERCENT     AMOUNT    PERCENT     AMOUNT    PERCENT
                   -------    -------    -------    -------    -------    -------
                                       (Dollars in thousands)
<S>                <C>            <C>    <C>            <C>    <C>            <C>
North America ..   $ 1,139(1)      83%   $ 5,755(2)      96%   $   203         21%
Europe .........       239         17        246          4        471         49
Rest of World ..      --         --         --         --          161         17
OEM, royalty and
   licensing ...      --         --         --         --          132         13
                   -------    -------    -------    -------    -------    -------
                   $ 1,378        100%   $ 6,001        100%   $   967        100%
                   =======    =======    =======    =======    =======    =======
</TABLE>

(1)  Included in the net revenues by geographic regions is the exercising of the
     option by Atari Interactive in the amount of $1,050,000.

(2)  Included in the net revenues by geographic regions is the sale of "Fallout"
     transaction in the amount of $5,750,000.

13.  QUARTERLY FINANCIAL DATA (UNAUDITED)

     The Company's summarized quarterly financial data is as follows:

<TABLE>
<CAPTION>
                                               MARCH 31        JUNE 30      SEPTEMBER 30    DECEMBER 31
                                             ------------    ------------   ------------   ------------
                                                   (Dollars in thousands, except per share amounts)
<S>                                          <C>             <C>            <C>            <C>
Year ended December 31, 2008:
Net revenues .............................   $         57    $         40   $      1,083   $        199
                                             ============    ============   ============   ============
Gross profit .............................   $         57    $          2   $      1,083   $        190
                                             ============    ============   ============   ============
Net income (loss) ........................   $       (344)   $       (492)  $        624   $       (281)
                                             ============    ============   ============   ============

Net income (loss) per common share basic .   $     (0.004)   $     (0.005)  $       0.01   $      (0.00)
                                             ============    ============   ============   ============
Net income (loss) per common share diluted   $     (0.004)   $     (0.005)  $       0.01   $      (0.00)
                                             ============    ============   ============   ============

Year ended December 31, 2007:
Net revenues .............................   $         79    $      5,812   $         47   $         63
                                             ============    ============   ============   ============
Gross profit .............................             75           5,810   $         32   $         76
                                             ============    ============   ============   ============
Net income (loss) ........................   $        229    $      5,467   $        497           (337)
                                             ============    ============   ============   ============

Net income (loss) per common share basic .   $      (0.00)   $      0.055   $       0.00   $      (0.00)
                                             ============    ============   ============   ============
Net income (loss) per common share diluted   $      (0.00)   $      0.055   $       0.00   $      (0.00)
                                             ============    ============   ============   ============
</TABLE>


                                      F-21
<PAGE>


14.  SUBSEQUENT EVENTS

     On March 24, 2009 the Company  sold to  Microprose,  LLC, an  affiliate  of
Interactive  Game  Group,  5,454,967  shares of Common  Stock of the Company and
issued a warrant to purchase 1,677,483 shares of Common Stock of the Company for
a total consideration of $327,298.  Such shares and warrant were issued, and any
underlying shares of Common Stock would be issued, in a private placement exempt
from  registration  pursuant to section 4(2) of the Securities Act of 1933. Such
warrant has a term of 3 years,  an exercise  price of $0.06,  and is immediately
exercisable.  Out of the  consideration  of  $327,298,  $148,000 was received in
cash, $126,000 was satisfied by the acquisition of certain intellectual property
rights by the  Company,  and $53,298 was  satisfied  by the  cancelation  of the
convertible  promissory  note (see Note 4) in the amount of $52,000  and accrued
interest thereon from Interactive Game Group.


                                      F-22
<PAGE>


<TABLE>
                 INTERPLAY ENTERTAINMENT CORP. AND SUBSIDIARIES

                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
                             (AMOUNTS IN THOUSANDS)

<CAPTION>
                                                     TRADE RECEIVABLES ALLOWANCE
                               -------------------------------------------------------------------
                                 BALANCE AT     PROVISIONS FOR
                                BEGINNING OF       RETURNS          RETURNS AND      BALANCE AT END
           PERIOD                  PERIOD        AND DISCOUNTS       DISCOUNTS         OF PERIOD
----------------------------   --------------   --------------    --------------    --------------
<S>                            <C>              <C>               <C>               <C>
Year ended December 31, 2006   $        2,190   $       (2,173)   $         --      $           17
                               ==============   ==============    ==============    ==============

Year ended December 31, 2007   $           17   $           20    $         --      $           37
                               ==============   ==============    ==============    ==============

Year ended December 31, 2008   $           37   $            6    $          (37)   $            6
                               ==============   ==============    ==============    ==============
</TABLE>


                                      S-1