Atari had noticed the financial troubles and tried to renegotiate the contract between Atari, Interplay, and Shiny Entertainment, but failed to strike a new deal on royalty payments. By this time, Interplay was facing financial trouble as they were also working on a Fallout MMO and had to pay royalties to Shiny Entertainment. This port of Earthworm Jim was being developed by Interplay. By August of 2006, it was reported that the game was 80% complete and would be ready for an early 2007 release. At E3 2006, Atari had announced that they had acquired the rights for Earthworm Jim and were planning to port the game to the PlayStation Portable.
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