The suspension of a crucial contract has pushed games developer Bits further into the red for the year to March and prompted it to launch an emergency fundraising to cover immediate working capital requirements. Leslie Copeland reports.

The Aim company confirmed today that its increased loss of £1.7 million in 2002 (on sales reduced from £1.6 million to £994,000) was mostly due to the collapse of a publishing and distribution contract for one of its games with a key publishing group.

The contract collapsed due to 'fundamental differences' between the companies. Although a portion of the development expenditure has been reimbursed to Bits, chairman John Corp admits the firm has taken a substantial hit.

For instance, almost £500,000 of accrued revenue recorded in prior years has been reversed, as well as revenue that would have been recorded in the recent results. Corp says the company has got back the rights to the game and is looking for another publisher to release it.

Compounding Bits' woes were Corp's comments that the signing of two 'Gameboy Advance' titles, which he flagged up at the interim period, had taken much longer than expected. The sale of both titles has still not been completed.

The net result of all the above is that the company is hoping to hastily conclude a placing of 9.75 million shares at 4p to raise the £390,000 it believes it needs to tide it over until it is able to conclude more publishing deals.

Bits launched onto Aim less than two years ago, raising £4 million at 60p per share. Today's news sent the shares plunging 47 per cent to 5.25p in early trading.