The developer of the children’s online game Moshi Monsters is in talks to extend loan repayments after revenues almost halved last year, potentially putting the future of the company in doubt.
Mind Candy, which claims 100 million people have at some point registered to play Moshi Monsters online, sustained a 46% fall in revenues from £13.2m to £7.2m in 2015.
The British firm, which reported a pre-tax loss of £10.9m, was due to start paying down a £6.5m loan taken from technology startup specialist TriplePoint in 2014 in July. However, Mind Candy said it was instead forced to negotiate “reduced capital repayments” from July to December.
Full repayments are due to be made from January, but the company has said it cannot afford to pay at the high level of interest.
The terms of the original loan – Mind Candy took out a further £684,000 loan last year – is for full payment by next June.
“Management has prepared cash flow projections for the 2016 and 2017 financial years. These projections indicate that the company requires an extension to the payment terms of the existing long-term loan,” Mind Candy said in Companies House filings.
“The company has a good relationship with the lender and will look to renegotiate the repayment schedule towards the end of 2016. In the event that the negotiations are not successful, or that the company cannot generate sufficient revenues, then there exists a material uncertainty which may cast significant doubt over the company’s ability to continue as a going concern.”
Mind Candy’s directors said they were confident they could secure further financial support if necessary but there were “no binding agreements in place”.
The company, which makes most of its money from subscriptions to the online game and licensed toys, has struggled to diversify its business after a “rapid softening” of the popularity of Moshi Monsters on the web as children shift to new technology and platforms such as apps and mobiles.
Mind Candy, which relaunched Moshi Monsters this year, is trying to build the product into an “evergreen children’s entertainment brand”.
Last year, subscription and membership card revenue halved from £5.7m to £2.8m and licensing revenue plummeted from £3m to £855,000. Product revenue from the sale of merchandise based on its games dived from £2.3m to £189,000. Mobile revenue rose from £2m to £3m.
The company also makes World of Warriors and Petlandia, “where pets and pop culture collide”.
“Mobile gaming is an extremely competitive space and is particularly challenging for an under-13-year-old audience as the dominant business model, in app purchase, is not suitable for children,” the company said.
“Children’s brands can grow extremely quickly but they can come down just as fast. To counter some of these challenges we have been developing brands and products that appeal to a broader family audience.”
