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As Filed With the Securities and Exchange Commission on November 17, 2000
Registration No. 333-________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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INTERPLAY ENTERTAINMENT CORP.
(Exact name of registrant as specified in its charter)
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Delaware 33-0102707
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
16815 Von Karman Avenue, Irvine, California 92606
(949) 553-6655
(Address, including zip code, and telephone number, including area code of registrant's principal executive offices)
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Brian Fargo
Interplay Entertainment Corp.
16815 Von Karman Avenue
Irvine, California 92606
(949) 553-6655
(Name, address, including zip code, and telephone number, including area code of agent for service)
Copy to:
K.C. Schaaf, Esq.
Jeffrey B. Coyne, Esq.
Stradling Yocca Carlson & Rauth,
A Professional Corporation
660 Newport Center Drive
Newport Beach, California 92660
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Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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Title of securities to be Amount to be registered Proposed maximum aggregate Amount of registration fee
registered offering price/(1)/
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Common Stock, $0.001 par value 13,336,511 $48,761,618 $12,873
shares
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(1) The offering price is estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) using the average of the
high and low price reported by the Nasdaq National Market for the Common
Stock on November 15 2000, which was approximately $3.65625 per share.
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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PROSPECTUS Dated November 17, 2000
INTERPLAY ENTERTAINMENT CORP.
13,336,511 Shares of Common Stock
($0.001 par value)
_________
This prospectus relates to the offer and sale from time to time of up to
13,336,511 shares of our Common Stock that are held by certain of our current
stockholders named in this prospectus for their own benefit or by donees,
transferees, pledgees or other successors in interest of such stockholders that
receive such shares as a gift or other non-sale related transfer. The shares of
our Common Stock offered pursuant to this prospectus were originally issued to
the selling stockholders in connection with private placements of our shares to
those stockholders pursuant to stock purchase agreements we entered into with
each of those stockholders.
The prices at which such stockholders may sell the shares in this offering
will be determined by the prevailing market price for the shares or in
negotiated transactions. We will not receive any of the proceeds from the sale
of the shares. We will bear all expenses of registration incurred in connection
with this offering. The stockholders whose shares are being registered hereby
will bear all selling and other expenses.
Our Common Stock is traded on the Nasdaq National Market under the symbol
"IPLY." On November 15, 2000, the last reported sale price of our Common Stock
was $3.7188 per share.
See "Risk Factors" beginning on page 2 to read about the risks you should
consider carefully before buying shares of our Common Stock.
_________
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement containing this
prospectus, which has been filed with the Securities and Exchange Commission, is
declared effective. This prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
_________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
_________
The date of this Prospectus is November 17, 2000.
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TABLE OF CONTENTS
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Page
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About Interplay............................................................ 2
Risk Factors............................................................... 2
Where You Can Find Additional Information.................................. 15
Use of Proceeds............................................................ 16
Selling Stockholders....................................................... 16
Plan of Distribution....................................................... 18
Legal Matters.............................................................. 18
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SOME OF THE STATEMENTS CONTAINED IN THIS PROSPECTUS DISCUSS FUTURE EXPECTATIONS,
CONTAIN PROJECTIONS OF RESULTS OF OPERATIONS OR FINANCIAL CONDITION OR STATE
OTHER "FORWARD-LOOKING" INFORMATION. SUCH STATEMENTS CAN BE IDENTIFIED BY THE
USE OF "FORWARD-LOOKING" TERMINOLOGY, SUCH AS "MAY," "WILL," "EXPECT,"
"ANTICIPATE," "ESTIMATE," "CONTINUE" OR OTHER SIMILAR WORDS. THESE STATEMENTS
ARE SUBJECT TO KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES AND OTHER FACTORS THAT
COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY
THE STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" ON PAGE 2.
ABOUT INTERPLAY
Interplay Entertainment Corp. (sometimes referred to in this prospectus as
the "Company") is a leading developer, publisher and distributor of interactive
entertainment software for both core gamers and the mass market. We were
incorporated in the State of California in 1982 and reincorporated in the State
of Delaware in May 1998. We are most widely known for our titles in the
action/arcade, adventure/role-playing games and strategy/puzzle categories. We
have produced titles for many of the most popular interactive entertainment
software platforms, and currently balance our development efforts by publishing
interactive entertainment software for PCs and video game consoles such as the
Sony PlayStation. We release products through Interplay, Shiny Entertainment,
Digital Mayhem, Black Isle Studios, 14 degrees East, our distribution partners
and our wholly owned subsidiary Interplay OEM, Inc. We seek to publish
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 we have published many such successful franchise titles to
date. In addition, we secure licenses to use popular intellectual properties,
such as Star Trek, Caesars Palace and Advanced Dungeons & Dragons, for
incorporation into certain of our products. Our executive offices are located at
16815 Von Karman Avenue, Irvine, California 92606, and our telephone number is
(949) 553-6655.
RISK FACTORS
In evaluating an investment in our Common Stock, you should carefully
consider the following risk factors and other information contained in or
incorporated by reference into this prospectus. Some information in this
prospectus may contain "forward looking" statements that discuss future
expectations of our financial condition and results of operations. The risk
factors noted in this section and other factors could cause our actual results
to differ materially from those contained in any forward-looking statements.
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Liquidity; Future Capital Requirements
We used net cash in operations of $16.6 million and $26.4 million during the
nine months ended September 30, 2000 and the year ended December 31, 1999,
respectively. At September 30, 2000, our working capital was $5 million. We
cannot assure you that we will ever generate positive cash flow from operations.
Our ability to fund our capital requirements out of our available cash, lines of
credit and cash generated from our operations depends on a number of factors.
Some of these factors include the progress of our product development programs,
the rate of growth of our business, and our products' commercial success. Our
principal line of credit expires in April 2001, and our lender has informed us
that it does not intend to renew that line of credit. If we are unable to
replace our line of credit or obtain alternative financing, our lender could
foreclose on its security interest in our assets, and certain of our
stockholders could suffer significant dilutions (see "Control by Titus", below).
We have been notified by Titus Interactive SA ("Titus"), our principal
stockholder, that they believe they are no longer obligated to fund the $5
million line of credit they extended to us in April 2000. Under the
circumstances, we will likely have to seek additional funds through debt or
equity financings, product licensing or distribution transactions or other
sources of financing in order to provide ourselves with enough working capital.
If we issue additional equity securities, our existing stockholders could suffer
a large amount of dilution in their ownership. In the event we have to raise
additional working capital from other sources, we cannot assure you that we will
be able to raise additional working capital on acceptable terms, if at all. In
the event we cannot raise additional working capital, we would have to take
additional actions to continue to reduce our costs, including selling or
consolidating certain operations, delaying, canceling or scaling back product
development and marketing programs and other actions. These measures could
materially and adversely affect our ability to publish successful titles, and
these measures may not be enough to generate operating profits. We might have
to get the approval of other parties, including our financial lender and/or
Titus, for some of these measures, and we cannot assure you that we would be
able to obtain those approvals. In addition, there is a risk that our Common
Stock may be delisted from the Nasdaq National Market (see "Continued Listing on
the Nasdaq National Market," below). If such delisting were to occur, our
ability to raise equity capital could be significantly impaired.
Fluctuations in Operating Results; Uncertainty of Future Results; Seasonality
Our operating results have fluctuated a great deal in the past and will
probably continue to fluctuate significantly in the future, both on a quarterly
and an annual basis. Many factors may cause or contribute to these
fluctuations, and many of these factors are beyond our control. Some of these
factors include the following:
. delays in shipping our products
. demand for our products
. demand for our competitors' products
. the size and rate of growth of the market for interactive entertainment
software
. changes in PC and video game console platforms
. the number of new products and product enhancements released by us and our
competitors
. changes in our product mix
. the number of our products that are returned
. the timing of orders placed by our distributors and dealers
. the timing of our development and marketing expenditures
. price competition
. the level of our international and OEM, 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:
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. the uncertainties associated with the interactive entertainment software
development process
. long manufacturing lead times for Nintendo-compatible products
. possible production delays
. the approval process for products compatible with the Sony Computer
Entertainment, Nintendo and Sega video game consoles
. approvals required from other licensors
. the timing of the release and market penetration of new game hardware
platforms.
Because of the limited number of products we introduce in any particular
quarter, a delay in the introduction of a product may materially and adversely
affect our operating results for that quarter, and may not be recaptured in
later quarters. Such delays have had a significant adverse effect on our
operating results in certain past quarters. A significant portion of our
operating expenses is relatively fixed, and planned expenditures are based
largely on sales forecasts. If net revenues do not meet our expectations in any
given quarter, operating results may be materially adversely affected. The
interactive entertainment software industry is highly seasonal, 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. Revenues are also
materially affected by new product releases. Our failure or inability to
introduce products on a timely basis to meet these seasonal increases in demand
may have a material adverse effect on our business, operating results and
financial condition.
We may over time become increasingly affected by the industry's seasonal
patterns. Although we seek to reduce the effect of such seasonal patterns on
our business by distributing our product release dates more evenly throughout
the year, we cannot assure you that these efforts will be successful. We cannot
assure you that we will be profitable in any particular period given the
uncertainties associated with software development, manufacturing, distribution
and the impact of the industry's seasonal patterns on our net revenues.
As a result of the foregoing factors it is likely that our operating results
in one or more future periods will fail to meet or exceed the expectations of
securities analysts or investors. In that event, the trading price of our
Common Stock would likely be materially adversely affected.
Significant Recent Losses
We have experienced significant net losses in recent periods, including
losses of $7.3 million and $41.7 million for the nine months ended September 30,
2000 and the year ended December 31, 1999, respectively. These losses resulted
largely from delays in the completion of certain products, a higher than
expected level of product returns and markdowns on products released during the
year, and the cost of restructuring our operations, including international
distribution arrangements. These losses also resulted from lower than expected
worldwide sales of certain releases, as well as from operating expense levels
that were high relative to our revenue level. We may experience similar problems
in current or future periods and we may not be able to generate sufficient net
revenues or adequate working capital, or bring our costs into line with
revenues, so as to attain or sustain profitability in the future.
Dependence on New Product Introductions; Risk of Product Delays and Product
Defects
Our products typically have short life cycles, and we depend on the timely
introduction of successful new products to generate net revenues, to fund
operations and to replace declining net revenues from older products. These new
products include enhancements of or sequels to our existing products and
conversions of previously released products to additional platforms. If in the
future, for any reason, net revenues from new products fail to replace declining
net revenues from existing products, our business, operating results and
financial condition could be materially adversely affected. The timing and
success
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of new interactive entertainment software product releases remains unpredictable
due to the complexity of product development, including the uncertainty
associated with new technology. The development cycle of new products is
difficult to predict but typically ranges from 12 to 24 months with six to 12
months for adapting a product to a different technology platform. The success of
any particular software product can also be negatively impacted by delays in the
introduction, manufacture or distribution of the platform for which the product
was developed (see "Rapidly Changing Technology; Platform Risks"). In the past,
we have frequently experienced significant delays in the introduction of new
products, including certain products currently under development. Because net
revenues associated with the initial shipments of a new product generally
constitute a high percentage of the total net revenues associated with a
product, any delay in the introduction of, or the presence of a defect in, one
or more new products expected in a period could have a material adverse effect
on the ultimate success of these products and on our business, operating results
and financial condition. The cost of developing and marketing new interactive
entertainment software has increased in recent years due to such factors as the
increasing complexity and content of interactive entertainment software, the
increasing sophistication of hardware technology and consumer tastes and the
increasing costs of obtaining licenses for intellectual properties. We expect
this trend to continue. We cannot assure you that our new products will be
introduced on schedule, if at all, or that, if introduced, these products will
achieve significant market acceptance or generate significant net revenues for
us. In addition, software products as complex as the ones we offer may contain
undetected errors when first introduced or when new versions are released. We
cannot assure you that, despite testing prior to release, errors will not be
found in new products or releases after shipment, resulting in loss of or delay
in market acceptance. This loss or delay could have a material adverse effect on
our business, operating results and financial condition.
Uncertainty of Market Acceptance; Dependence on Hit Titles
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 new 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 also cannot assure you that product life cycles will be
sufficient to permit us to recover product development and other associated
costs. 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.
We believe that these trends will continue in our industry and that our future
revenue will continue to be dependent on the successful production of hit titles
on a continuous basis. Because we introduce a relatively limited number of new
products in a given period, the failure of one or more of these products to
achieve market acceptance could have a material adverse effect on our business,
operating results and financial condition. Further, if we do not achieve market
acceptance, we could be forced to accept substantial product returns or grant
significant markdown allowances to maintain our relationship with retailers and
our access to distribution channels. For example, we had significantly higher
than expected product returns and markdowns during the year ended December 31,
1999 and we cannot assure you that higher than expected product returns and
markdowns will not continue in the future. In the event that we are forced to
accept significant product returns or grant significant markdown allowances, our
business, operating results and financial condition could be materially
adversely affected.
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Control by Titus
Titus currently owns 12,817,255 shares, or approximately 43 percent, of our
outstanding Common Stock, and 719,424 shares of our Series A Preferred Stock
that have voting power equivalent to up to 7,619,047 shares of Common Stock, and
are convertible into at least 7,194,240 shares of Common Stock at any time after
May 2001 if not previously redeemed by the Company. As such, Titus currently
holds approximately 54% of the total voting power of our stock. Titus also
holds warrants for up to 500,000 shares of our Common Stock. In addition, if we
default on our line of credit and Titus is obligated to pay on their $20 million
corporate guarantee of our line of credit, the Series A Preferred Stock could
become convertible into, and have voting rights equal to, up to 42.8 million
shares of our Common Stock, which would constitute approximately 75 percent of
our Common Stock as of the date hereof. In connection with Titus' investment,
Herve Caen, Titus' chairman and chief executive officer, serves as our president
and as a member of our Board of Directors, and Herve Caen's brother Eric Caen,
who is president and a director of Titus, also serves on our Board of Directors.
As a consequence, Titus holds significant voting power with respect to the
election of our Board of Directors and the right of approval of certain
significant corporate actions, and Herve Caen and Eric Caen have substantial
authority over our operations. As the Company's capital structure currently
stands, in the event that the Stockholder Agreement pursuant to which our Board
of Directors is currently nominated terminates, Titus would be able to elect 4
of 7 members of the Board of Directors. In such event, Titus would be able to
set our dividend policy and otherwise exercise substantial control over our
management. This control could prevent or hinder a sale of the Company on terms
that are not acceptable to Titus. Moreover, Titus holds interests that may vary
from those of the Company and its other stockholders, and Titus may exercise its
control of the Company in the furtherance of such outside interests (see the
subsections entitled "Liquidity; Future Capital Requirements" and "Distribution
Agreement".)
Continued Listing on the NASDAQ National Market
Our Common Stock is currently quoted on the Nasdaq National Market under the
symbol "IPLY." For continued inclusion on the Nasdaq National Market, a company
must meet certain tests, including a minimum bid price of $1.00 and net tangible
assets of at least $4 million. As of December 31, 1999, we were not in
compliance with the minimum net tangible assets requirement, and did not return
to compliance with that requirement until April 14, 2000. We were subject to a
hearing before a Nasdaq Listing Qualifications Panel, which determined to
continue the listing of our Common Stock on the Nasdaq National Market subject
to certain conditions, all of which we have fulfilled. If we fail to satisfy the
listing standards on a continuous basis, our Common Stock may be removed from
listing on the Nasdaq National Market. If our Common Stock were delisted from
the Nasdaq National Market, trading of our Common Stock, if any, would be
conducted on the Nasdaq Small Cap Market, in the over-the-counter market on the
so-called "pink sheets" or, if available, the NASD's "Electronic Bulletin
Board." In any of those cases, investors could find it more difficult to buy or
sell, or to obtain accurate quotations as to the value of, our Common Stock.
The trading price per share of our Common Stock would most likely be reduced as
a result.
Distribution Agreement
In connection with our acquisition of a 43.9 percent membership interest in
Virgin Interactive Entertainment Limited's ("Virgin") parent entity in February
1999, we signed an International Distribution Agreement with Virgin. Under this
Agreement, we appointed Virgin as our exclusive distributor for substantially
all of our products in Europe, the CIS, Africa and the Middle East, subject to
certain reserved rights, for a seven-year period. We pay Virgin a distribution
fee for marketing and distributing our products, as well as certain direct costs
and expenses. Virgin has been inconsistent in
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meeting its obligations to deliver to us the proceeds obtained from their
distribution of our products. Because of the exclusive nature of the Agreement,
if Virgin were to continue to be inconsistent in meeting its obligations to
deliver to us proceeds from distribution, or were to experience problems with
its business, or otherwise to fail to perform under the Agreement, our business,
operating results and financial condition could be materially and adversely
affected.
Virgin is in the process of recapitalizing its business. In September 2000,
Titus advanced certain amounts to Virgin in anticipation of converting this
advance into equity in Virgin's parent entity. Titus and the Company are
negotiating the terms of such a conversion whereby it is anticipated that the
Company's 43.9% membership interest in Virgin's parent entity would be reduced.
In June 2000, we amended the International Distribution Agreement with Virgin
to, among other things, eliminate the overhead fees and minimum commissions
payable by us. Virgin has disputed the validity of this amendment, and claims
that the Company is obligated, among other things, to pay a contribution to
their overhead of up to approximately $9.3 million annually, subject to decrease
by the amount of commissions earned by Virgin on its distribution of our
products. We believe that the amendment is legally binding and we will
vigorously defend our position. However, we cannot assure you that we will be
successful in our defense.
Virgin has earned approximately $2.5 million in commissions through September
30, 2000, and our forecasts indicate that Virgin may earn $2.0 million in
additional commissions for the period of October 1, 2000, through December 31,
2000. If we are unable to successfully defend our position against Virgin's
claims, we estimate that our maximum exposure would be $4.8 million.
Dependence on Third Party Software Developers
We rely on third party interactive entertainment software developers for the
development of a significant number of our interactive entertainment software
products. As there continues to be high demand for reputable and competent
third party developers, we cannot assure you that third party software
developers that have developed products for us in the past will continue to be
available to develop products for us in the future. Many third party software
developers have limited financial resources, which could expose us to the risk
that such developers may go out of business prior to completing a project. In
addition, due to our limited control over third party software developers, we
cannot assure you that such developers will complete products for us on a timely
basis or within acceptable quality standards, if at all. Due to increased
competition for skilled third party software developers, we have had to agree to
make advance payments on royalties and guaranteed minimum royalty payments to
intellectual property licensors and game developers, and we expect to continue
to enter into these kinds of arrangements. If the products subject to these
arrangements do not have sufficient sales volumes to recover these royalty
advances and guaranteed payments, we would have to write-off unrecovered
portions of these payments, which could have a material adverse effect on our
business, operating results and financial condition. Further, we cannot assure
you that third party developers will not demand renegotiation of their
arrangements with the Company.
Rapidly Changing Technology; Platform Risks
The interactive entertainment software industry is subject to rapid
technological change. New technologies, including operating systems such as
Microsoft Windows 98 and 2000, technologies that support multi-player games, new
media formats such as on-line delivery and digital video disks ("DVDs") and
planned releases in the near future of new video game platforms such as the Sony
Playstation 2, the Nintendo Gamecube and the Microsoft X-Box could render our
current products or products in development obsolete or unmarketable. 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
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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 software are not released on a
timely basis or do not attain significant market penetration, our business,
operating results and financial condition could be materially adversely
affected. Alternatively, if we fail to develop products for a platform that does
achieve significant market penetration, then our business, operating results and
financial condition could also be materially adversely affected.
The emergence of new interactive entertainment software platforms and
technologies and the increased popularity of new products and technologies may
materially and adversely affect the demand for products based on older
technologies. The broad range of competing and incompatible emerging
technologies may lead consumers to postpone buying decisions with respect to
products until one or more emerging technologies gain widespread acceptance.
This postponement could have a material adverse effect on our business,
operating results and financial condition. We are currently developing products
for Microsoft Windows 98 and 2000, and Sony PlayStation 2. We are also planning
to develop product for new platforms expected to be introduced in 2001 by
Microsoft and Nintendo. Our success will depend in part on our ability to
anticipate technological changes and to adapt our products to emerging game
platforms. We cannot assure you that we will be able to anticipate future
technological changes, to obtain licenses to develop products for those
platforms on favorable terms or to create software for those new platforms. Any
failure to do so could have a material adverse effect on our business, operating
results and financial condition.
Industry Competition; Competition for Shelf Space
The interactive entertainment software industry is intensely competitive and
new interactive entertainment software programs and software platforms are
regularly introduced. Our competitors vary in size from small companies to very
large corporations with significantly greater financial, marketing and product
development resources than we have. Due to these greater resources, certain of
our competitors can 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 we can. We believe that the main 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:
. Electronic Arts Inc.
. Activision, Inc.
. Infogrames Entertainment
. Microsoft Corporation
. LucasArts Entertainment Company
. Midway Games Inc.
. Acclaim Entertainment, Inc.
. Havas Interactive
. Hasbro, Inc.
. The 3DO Company
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. Take Two Interactive Software, Inc.
. Eidos PLC
. THQ Inc.
In addition, integrated video game console hardware/software companies such
as Sony Computer Entertainment, Nintendo and Sega compete directly with us in
the development of software titles for their respective platforms. Large
diversified entertainment companies, such as The Walt Disney Company, many of
which own substantial libraries of available content and have substantially
greater financial resources, may decide to compete directly with us or to enter
into exclusive relationships with our competitors. We also believe that the
overall growth in the use of the Internet and on-line services by consumers may
pose a competitive threat if customers and potential customers spend less of
their available home PC time using interactive entertainment software and more
using the Internet and on-line services.
Retailers of our products typically have a limited amount of shelf space and
promotional resources, and there is intense competition among consumer software
producers, and in particular interactive entertainment software products, for
high quality retail shelf space and promotional support from retailers. To the
extent that the number of consumer software products and computer platforms
increases, competition for shelf space may intensify and may require us to
increase our marketing expenditures. Due to increased competition for limited
shelf space, retailers and distributors are in an increasingly better position
to negotiate favorable terms of sale, including price discounts, price
protection, marketing and display fees and product return policies. Our
products constitute a relatively small percentage of any retailer's sale volume,
and we cannot assure you that retailers will continue to purchase our products
or to provide our products with adequate levels of shelf space and promotional
support. A prolonged failure in this regard may have a material adverse effect
on our business, operating results and financial condition.
Dependence on Distribution Channels; Risk of Customer Business Failures; Product
Returns
We currently sell our products directly through our own sales force to mass
merchants, warehouse club stores, large computer and software specialty chains
through catalogs in the U.S. and Canada, as well as to certain distributors.
Outside North America, we generally sell products to third party distributors.
Our sales are made primarily on a purchase order basis, without long-term
agreements. The loss of, or significant reduction in sales to, any of our
principal retail customers or distributors could materially adversely affect our
business, operating results and financial condition.
The distribution channels through which publishers sell consumer software
products evolve continuously through a variety of means, including
consolidation, financial difficulties of certain distributors and retailers, and
the emergence of new distributors and new retailers such as warehouse chains,
mass merchants and computer superstores. As more consumers own PCs, the
distribution channels for interactive entertainment software will likely
continue to change. Mass merchants have become the most important distribution
channels for retail sales of interactive entertainment software. A number of
these mass merchants have entered into exclusive buying arrangements with other
software developers or distributors, which arrangements could prevent us from
selling certain of our products directly to that mass merchant. If the number
of mass merchants entering into exclusive buying arrangements with our
competitors were to increase, our ability to sell to such merchants would be
restricted to selling through the exclusive distributor. Because sales to
distributors typically have a lower gross profit than sales to retailers, this
would have the effect of lowering our gross profit. This trend could have a
material adverse impact on our business, operating results and financial
condition. In addition, emerging methods of distribution, such as the Internet
and on-line services, may become more important in the future, and it will be
important for us to maintain access to these channels of distribution.
9
<PAGE>
We cannot assure you that we will maintain access or that our access will allow
us to maintain our historical sales volume levels.
Distributors and retailers in the computer industry have from time to time
experienced significant fluctuations in their businesses, and a number have
failed. The insolvency or business failure of any significant distributor or
retailer of our products could have a material adverse effect on our business,
operating results and financial condition. We typically make sales to
distributors and retailers on unsecured credit, with terms that vary depending
upon the customer and the nature of the product. Although we have insolvency
risk insurance to protect against our customers' bankruptcy, insolvency or
liquidation, this insurance contains a significant deductible and a co-payment
obligation, and the policy does not cover all instances of non-payment. In
addition, while we maintain 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 have a material adverse effect on our business,
operating results and financial condition.
We are exposed to the risk of product returns and markdown allowances with
respect to our distributors and retailers. We allow distributors and 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, we provide
markdown allowances to our customers to manage our customers' inventory levels
in the distribution channel. Although we maintain a reserve for returns and
markdown allowances, and although our agreements with certain of our customers
place certain limits on product returns and markdown allowances, we could be
forced to accept substantial product returns and provide markdown allowances to
maintain our relationships with retailers and our access to distribution
channels. Product return and markdown allowances that exceed our reserves could
have a material adverse effect on our business, operating results and financial
condition. In this regard, our results of operations for the year ended
December 31, 1999 were adversely affected by a higher than expected level of
product returns and markdown allowances, which reduced our net revenues. We may
continue to experience such high levels of product returns and markdown
allowances in future periods, which could have a material adverse effect on our
business, operating results and financial condition.
Shares Eligible for Future Sale
In 1999, we entered into two Stock Purchase Agreements with Titus, pursuant
to which Titus purchased 10,795,455 shares of our Common Stock from us for an
aggregate purchase price of $35 million. As part of the agreements, Titus'
chairman and chief executive officer became our president, and our chairman and
chief executive officer exchanged 2 million personal shares of our Common Stock
for an agreed upon number of Titus shares. As a result of these transactions,
Titus currently owns approximately 43 percent of our outstanding common stock.
In addition, Titus purchased 719,424 shares of Preferred Stock from us in
April 2000. The Preferred Stock is convertible by Titus, redeemable by us, and
accrues a six percent dividend per year. Titus may convert the Preferred Stock
at any time after May 2001, at which time the Preferred Stock shares would be
convertible into at least 7,194,240 shares of our Common Stock. Titus also
received warrants to purchase up to 500,000 shares of our Common Stock. If we
default on the line of credit, and Titus is forced to pay on their corporate
guarantee, the Series A Preferred Stock may become convertible into up to 42.8
million shares of our Common Stock.
We have agreed to register all of the unregistered shares of our Common Stock
held by Titus for resale under the Securities Act of 1933, as amended. This
registration could temporarily impair our ability to raise capital through the
sale of our equity securities, and, if such registered shares are sold, could
have a material adverse effect on the market price of our Common Stock.
10
<PAGE>
Dependence upon Third Party Licenses
Many of our products, such as our Star Trek, Advanced Dungeons and Dragons
and the Caesar's Palace titles, are based on original ideas or intellectual
properties licensed from other parties. We cannot assure you that we will be
able to obtain new licenses, or renew existing licenses, on commercially
reasonable terms, if at all. For example, Viacom Consumer Products, Inc. has
granted the Star Trek license to another party upon the expiration of our rights
in 2002. If we are unable to obtain licenses for the underlying content that we
believe offers the greatest consumer appeal, we would either have to seek
alternative, potentially less appealing licenses, or release the products
without the desired underlying content, either of which could have a material
adverse effect on our business, operating results and financial condition. We
cannot assure you that acquired properties will enhance the market acceptance of
our products based on those properties. We also cannot assure you that our new
product offerings will generate net revenues in excess of their costs of
development and marketing or minimum royalty obligations, or that net revenues
from new product sales will meet or exceed net revenues from existing product
sales.
Dependence on Licenses from and Manufacturing by Hardware Companies
We are required to obtain a license to develop and distribute software for
each of the video game console platforms for which we develop products,
including a separate license for each of North America, Japan and Europe. We
have obtained licenses to develop software for the Sony PlayStation and
PlayStation 2, as well as video game platforms from Nintendo, Microsoft and
Sega. We cannot assure you that we will be able to obtain licenses from
hardware companies on acceptable terms or that any existing or future licenses
will be renewed by the licensors. In addition, Sony Computer Entertainment,
Nintendo and Sega each have the right to approve the technical functionality and
content of the Company's products for such platform prior to distribution. Due
to the nature of the approval process, we must make significant product
development expenditures on a particular product prior to the time we seek these
approvals. Our inability to obtain these approvals could have a material adverse
effect on our business, operating results and financial condition.
Hardware companies such as Sony Computer Entertainment, Nintendo, Sega and
Microsoft may impose upon their licensees a restrictive selection and product
approval process, such that those licensees are restricted in the number of
titles that will be approved for distribution on the particular platform. While
we have prepared our future product release plans taking this competitive
approval process into consideration, if we incorrectly predict its impact and
fail to obtain approvals for all products in our development plans, this failure
could have a material adverse effect on our business, operating results and
financial condition. We depend upon Sony Computer Entertainment, Nintendo and
Sega for the manufacture of our products that are compatible with their
respective video game consoles. As a result, Sony Computer Entertainment,
Nintendo, Sega and Microsoft have the ability to raise prices for supplying
these products at any time and effectively control the timing of our release of
new titles for those platforms. PlayStation and Dreamcast products consist of
CD-ROMs and are typically delivered by Sony Computer Entertainment and Sega,
respectively, within a relatively short lead time. Other media may entail
longer lead times depending on the manufacturer. If we experience unanticipated
delays in the delivery of video game console products from Sony Computer
Entertainment, Sega, Nintendo or Microsoft, or if actual retailer and consumer
demand for our interactive entertainment software differs from our forecast, our
business, operating results and financial condition could be materially
adversely affected.
Dependence on Key Personnel
Our success depends to a significant extent on the continued service of our
key product design, development, sales, marketing and management personnel, and
in particular on the leadership, strategic
11
<PAGE>
vision and industry reputation of our founder and Chief Executive Officer, Brian
Fargo. Our future success will also depend upon our ability to continue to
attract, motivate and retain highly qualified employees and contractors,
particularly key software design and development personnel. Competition for
highly skilled employees is intense, and we cannot assure you that we will be
successful in attracting and retaining such personnel. Specifically, we may
experience increased costs in order to attract and retain skilled employees. Our
failure to retain the services of Brian Fargo or other key personnel or to
attract and retain additional qualified employees could have a material adverse
effect on our business, operating results and financial condition.
Risks Associated with International Operations; Currency Fluctuations
Our international net revenues accounted for 28 and 30 percent of our total
net revenues for the nine months ended September 30, 2000 and 1999,
respectively. In February 1999, we entered into an International Distribution
Agreement with Virgin for the exclusive distribution of our products in selected
international territories. We intend to continue to expand our direct and
indirect sales, marketing and product localization activities worldwide. This
expansion will require a great deal of management time and attention and
financial resources in order to develop improved international sales and support
channels. We cannot assure you, however, that we will be able to maintain or
increase international market demand for our products. Our international sales
and operations are subject to a number of inherent risks, including the
following:
. the impact of recessions in foreign economies
. the time and financial costs associated with translating and localizing
products for international markets
. longer accounts receivable collection periods
. greater difficulty in accounts receivable collection
. unexpected changes in regulatory requirements
. difficulties and costs of staffing and managing foreign operations
. foreign currency exchange rate fluctuations
. political and economic instability
. dependence on Virgin as an exclusive distributor for Europe.
These factors may have a material adverse effect on our future international
net revenues and, consequently, on our business, operating results and financial
condition. We currently do not engage in currency hedging activities. Although
exposure to currency fluctuations to date has been insignificant, we cannot
assure you that fluctuations in currency exchange rates in the future will not
have a material adverse effect on net revenues from international sales and
licensing, and thus on our business, operating results and financial condition.
Risks Associated with New European Currency
On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing sovereign
currencies and a new European currency, the euro. These eleven countries
adopted the euro as the common legal currency on that date. We make a
significant portion of our sales to these countries. Consequently, we
anticipate that the euro conversion will, among other things, create technical
challenges to adapt information technology and other systems to accommodate
euro-denominated transactions. The euro conversion may also limit our ability
to charge different prices for our products in different markets. While we
anticipate that the conversion will not cause major disruption of our business,
the conversion may have a material effect on our business or financial
condition.
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<PAGE>
Protection of Proprietary Rights
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 the software engine for one of our titles. While
we provide "shrinkwrap" 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, our operating results could be materially adversely affected. While we
use copy protection on some of our products, we do not provide source code to
third parties unless they have signed nondisclosure agreements with respect to
that source code.
We rely on existing copyright laws to prevent unauthorized distribution of
our software. Existing copyright laws afford only limited protection. Policing
unauthorized use of our products is difficult, and software piracy can be a
persistent problem, especially in certain international markets. Further, the
laws of certain 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 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
emerging technologies, such as the Internet and on-line services, our ability to
protect our intellectual property rights and to avoid infringing others'
intellectual property rights may be diminished. We cannot assure you that
existing intellectual property laws will provide adequate protection for our
products in connection with these emerging technologies.
As the number of interactive entertainment software products in the industry
increases and the features and content of these products continues to overlap,
software developers may increasingly become subject to infringement claims.
Although we make reasonable efforts to ensure that our products do not violate
the intellectual property rights of others, we cannot assure you 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 receive
communications from third parties regarding such claims. We cannot assure you
that existing or future infringement claims against us will not result in costly
litigation or require us to 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.
Entertainment Software Rating System; Governmental Restrictions
Legislation is periodically introduced at the state and federal levels in the
U.S. 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. Such a system would include
procedures for interactive entertainment software publishers to identify
particular products within defined rating categories and communicate these
ratings to consumers through appropriate package labeling and through
advertising and marketing presentations. In addition, many foreign countries
have laws that permit governmental entities to censor the content of certain
works, including interactive entertainment software. In certain instances, we
may be required to modify our products to comply with the requirements of these
governmental entities, which could delay the release of those products in those
countries. Those delays could have a material adverse effect on our business,
operating results and financial condition. While we currently voluntarily
submit our products to industry-created review boards and publish their ratings
on our game packaging, we believe that mandatory government-run interactive
entertainment software products rating systems eventually will be adopted in
many countries that represent significant markets or potential markets for our
products. Due to the uncertainties inherent in the implementation of such rating
systems, confusion in the marketplace may occur, and we are unable to
13
<PAGE>
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 certain 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 had a material adverse effect on our
business, operating results or financial condition, we cannot assure you that
similar actions by our distributors or retailers in the future would not have a
material adverse effect on our business, operating results and financial
condition.
Control by Directors and Officers
Including Titus, our directors and executive officers beneficially own voting
stock with total of about 60 percent of the aggregate Common Stock voting power
in the Company. In addition, Titus holds Preferred Stock entitled to 7,619,047
votes, or approximately 20 percent of overall voting power. Together, Titus and
our directors and executive officers could, under certain circumstances, gain
substantial additional voting power. See "Factors Affecting Future Performance
- Control by Titus". These stockholders can control substantially all matters
requiring our stockholders' 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.
Development of Internet/On-Line Services or Products
We seek to establish an on-line presence by creating and supporting sites on
the Internet. Our future plans envision conducting and supporting on-line
product offerings through these sites or others. Our ability to successfully
establish an on-line presence and to offer online products will depend on
several factors outside our control. These factors include the emergence of a
robust online industry and infrastructure and the development and implementation
of technological advancements to the Internet to increase bandwidth to the point
that will allow us to conduct and support on-line product offerings. Because
global commerce and the exchange of information on the Internet and other
similar open, wide area networks are relatively new and evolving, we cannot
assure you that a viable commercial marketplace on the Internet will emerge from
the developing industry infrastructure or that the appropriate complementary
products for providing and carrying Internet traffic and commerce will be
developed. We also cannot assure you that we will be able to create or develop
a sustainable or profitable on-line presence or that we will be able to generate
any significant revenue from on-line product offerings in the near future, if at
all. If the Internet does not become a viable commercial marketplace, or if this
development occurs but is insufficient to meet our needs or if such development
is delayed beyond the point where we plan to have established an on-line
service, our business, operating results and financial condition could be
materially adversely affected.
Risks Associated with Acquisitions
As part of our strategy to enhance distribution and product development
capabilities, we intend to review potential acquisitions of complementary
businesses, products and technologies. Some of these acquisitions could be
material in size and scope. While we will continue to search for appropriate
acquisition opportunities, we cannot assure you that the Company will be
successful in identifying suitable acquisition opportunities. If we do identify
any potential acquisition opportunity, we cannot assure you that we will
consummate the acquisition, and if the acquisition does occur, we cannot assure
you that it will be successful in enhancing our business or will increase our
earnings. As the interactive entertainment software industry continues to
consolidate, we may face increased competition for acquisition opportunities,
which may inhibit our ability to complete suitable transactions or increase
their cost. Future acquisitions could also divert substantial management time,
result in short term reductions in
14
<PAGE>
earnings or special transactions or other charges and may be difficult to
integrate with existing operations or assets.
We may, in the future, issue additional shares of Common Stock in connection
with one or more acquisitions, which may dilute our stockholders. Additionally,
with respect to future acquisitions, our stockholders may not have an
opportunity to review the financial statements of the entity being acquired or
to vote on these acquisitions.
Anti-Takeover Effects; Delaware Law and Certain Charter and Bylaw Provisions
Our Certificate of Incorporation and Bylaws, as well as Delaware corporate
law, contain certain provisions that could delay, defer or prevent a change in
control and could materially adversely affect the prevailing market price of our
Common Stock. Certain of these provisions impose various procedural and other
requirements that could make it more difficult for stockholders to take certain
corporate actions.
Stock Price Volatility
The trading price of our Common Stock has been and could continue to be
subject to wide fluctuations in response certain factors, including:
. quarter to quarter variations in results of operations
. our announcements of new products
. our competitors' announcements of new products
. our product development or release schedule
. general conditions in the computer, software, entertainment, media or
electronics industries
. changes in earnings estimates or buy/sell recommendations by analysts
. investor perceptions and expectations regarding our products, plans and
strategic position and those of our competitors and customers
. other events or factors
In addition, the public stock markets experience extreme price and trading
volume volatility, particularly in high technology sectors of the market. This
volatility has significantly affected the market prices of securities of many
technology companies for reasons often unrelated to the operating performance of
the specific companies. These broad market fluctuations may adversely affect
the market price of our Common Stock.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a registration statement on Form S-3 with the SEC with
respect to the Common Stock offered by this prospectus. This prospectus, which
constitutes a part of the registration statement, does not contain all of the
information set forth in the registration statement or the exhibits and
schedules that are part of the registration statement. You may read and copy
any document we file at the SEC's public reference rooms in Washington D.C. We
refer you to the registration statement and the exhibits and schedules thereto
for further information with respect to us and our Common Stock. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
Our SEC filings are also available to the public from the SEC's website at
www.sec.gov.
We are subject to the information and periodic reporting requirements of
the Securities Exchange Act and, in accordance with those requirements, will
continue to file periodic reports, proxy statements and other information with
the SEC. These periodic reports, proxy statements and other information will
15
<PAGE>
be available for inspection and copying at the SEC's public reference rooms and
the SEC's website referred to above.
The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means that we can disclose important information to you by
referring to those documents. We incorporate by reference the documents listed
below and any additional documents filed by us with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this offering of
securities is terminated. The information we incorporate by reference is an
important part of this prospectus, and any information that we file later with
the SEC will automatically update and supersede this information.
The documents we incorporate by reference are:
1. our Annual Report on Form 10-K for the year ended December 31, 1999, as
amended;
2. our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
3. our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000;
4. our Quarterly Report on Form 10-Q for the quarter ended September 30,
2000;
5. the description of our capital stock contained in our Registration
Statement on Form 8-A;
6. the Current Report on Form 8-K dated May 26, 2000; and
7. all other reports filed by us pursuant to Section 13(a) or 15(d) of the
SEC Exchange Act since December 31, 1999.
You may request a copy of these filings, at no cost, by writing or calling
us at Interplay Entertainment Corp., 16815 Von Karman Avenue, Irvine, California
92606, telephone number (949) 553-6655, Attention: Victor Sze.
You should rely only on the information contained in this prospectus or any
supplement and in the documents incorporated by reference above. We have not
authorized anyone else to provide you with different information. You should
not assume that the information in this prospectus or any supplement or in the
documents incorporated by reference is accurate on any date other than the date
on the front of those documents.
USE OF PROCEEDS
The proceeds from the sale of each selling stockholder's Common Stock will
belong to that selling stockholder. We will not receive any proceeds from such
sales.
SELLING STOCKHOLDERS
In connection with the private placement of shares of Common Stock to
certain stockholders, we agreed to file a registration statement with the SEC to
register the shares of our Common Stock we issued to those stockholders for
resale by them, and to keep the registration statement effective until certain
shares registered hereunder are sold. The registration statement of which this
prospectus is a part was filed with the SEC pursuant to the stock purchase
agreements we entered into with each of the selling stockholders. The following
table sets forth: (1) the name of each of the stockholders for whom we are
registering shares under this registration statement; (2) the number of shares
of our Common Stock owned by each such stockholder prior to this offering, and
(3) the number of shares, and (if one percent or more)
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<PAGE>
the percentage of the total of the outstanding shares, of our Common Stock to be
owned by each such stockholder after this offering, assuming that all of the
shares of our Common Stock owned by each such stockholder are sold and that such
stockholders acquire no additional shares of our Common Stock prior to the
completion of this offering.
<TABLE>
<CAPTION>
Percentage
of Common
Stock Owned
Common Stock Common Stock Upon
Common Stock Owned Being Offered Owned Upon Completion
Prior to the Pursuant to this Completion of of this
Name Offering Prospectus this Offering Offering
------------------------------ ------------------ ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
RuneCraft Limited/(1)/ 484,848 484,848 0 *
Titus Interactive, SA/(2)/ 13,167,255 12,795,455 371,800 1.2
Richard S. F. Lehrberg/(3)/ 705,000 56,208 648,792 2.1
</TABLE>
____________________
* less than 1%
(1) In April 1999, we entered into a Restricted Stock Purchase Agreement with
RuneCraft Limited ("RuneCraft") pursuant to which RuneCraft purchased
484,848 shares of our Common Stock in exchange for rights to certain
products. The Restricted Stock Purchase Agreement requires us to register
the stock purchased, and provides us with rights to repurchase the stock
under certain circumstances. To our knowledge, the number of shares of
Common Stock that RuneCraft Limited owned prior to this offering consists
solely of those shares of Common Stock issued in connection with a Stock
Purchase Agreement that we entered into with RuneCraft in April 1999.
(2) In March 1999, we entered into a Stock Purchase Agreement with Titus
Interactive SA pursuant to which we sold Titus a total of 4,545,455 shares
of our Common Stock. In July 1999, we entered into another Stock Purchase
Agreement with Titus, pursuant to which we sold Titus 6,250,000 shares of
our Common Stock in November 1999. In connection with the second Stock
Purchase Agreement, Brian Fargo, our Chairman and Chief Executive Officer,
entered into an Exchange Agreement with Titus pursuant to which he
exchanged 2,000,000 shares of his own shares of our Common Stock for 96,666
shares of Titus Common Stock in November 1999. Titus currently owns
12,817,255 shares of our Common Stock, or approximately 42.5% of our
outstanding Common Stock, and 719,424 shares of our Series A Preferred
Stock constituting 100% of our outstanding Preferred Stock. Herve and Eric
Caen, both executive officers of Titus, became members of our Board of
Directors in November 1999. Herve Caen also began serving as our President
in November 1999. The number of shares of Common Stock that Titus
beneficially owned prior to this offering includes (a) the 4,545,455 shares
of Common Stock we issued Titus in connection with the March 1999 Stock
Purchase Agreement, (b) the 6,250,000 shares of Common Stock we issued
Titus in connection with the July 1999 Stock Purchase Agreement, (c) the
2,000,000 shares of Brian Fargo's Common Stock that Titus received in
November 1999 in exchange for 96,666 shares of Titus Common Stock, (d)
21,800 shares of our Common Stock that Titus purchased on the open market
in February 1999, (e) 350,000 shares of stock subject to a warrant
exercisable within sixty (60) days the date of this prospectus.
(3) Mr. Lehrberg received 56,208 shares of our Common Stock in connection with
his retirement as our Executive Vice President in 1999, and we have agreed
to register such shares of stock. To our knowledge, the number of shares
of Common Stock that Mr. Lehrberg owned prior to this offering includes
169,626 shares of our Common Stock currently held by Mr. Lehrberg, and
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options to purchase 535,374 shares of our Common Stock that are exercisable
by Mr. Lehrberg within sixty (60) days of the date of this prospectus, that
are beneficially owned by Mr. Lehrberg under federal securities laws.
PLAN OF DISTRIBUTION
The shares of our Common Stock offered pursuant to this prospectus may be
offered and sold from time to time by the selling stockholders listed in the
preceding section, or their donees, transferees, pledgees or other successors in
interest that receive such shares as a gift or other non-sale related transfer.
These selling stockholders will act independently of us in making decisions with
respect to the timing, manner and size of each sale. All or a portion of the
Common Stock offered by this prospectus may be offered for sale from time to
time on the Nasdaq National Market or on one or more exchanges, or otherwise at
prices and terms then obtainable, or in negotiated transactions. The
distribution of these securities may be effected in one or more transactions
that may take place on the over-the-counter market, including, among others,
ordinary brokerage transactions, privately negotiated transactions or through
sales to one or more dealers for resale of such securities as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the selling
stockholders.
We will not receive any part of the proceeds from the sale of Common Stock.
The selling stockholders and intermediaries through whom such securities are
sold may be deemed "underwriters" within the meaning of the Securities Act, in
which event commissions received by such intermediary may be deemed to be
underwriting commissions under the Securities Act. We will pay all expenses of
the registration of securities covered by this prospectus. The selling
stockholders will pay any applicable underwriters' commissions and expenses,
brokerage fees or transfer taxes.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed on
by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach,
California.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 14. Other Expenses of Issuance and Distribution
-----------------------------------------------------
The following sets forth the costs and expenses, all of which shall be
borne by the Registrant, in connection with the offering of the shares of Common
Stock pursuant to this Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission Fee.. $12,873
Accounting Fees and Expenses*........... 10,000
Legal Fees and Expenses*................ 2,000
Printing Costs*......................... 1,000
Miscellaneous Expenses*................. 1,000
-------
Total.............................. $26,873
=======
* Estimated
</TABLE>
Item 15. Indemnification of Directors and Officers.
---------------------------------------------------
(a) As permitted by the Delaware law, the Registrant's amended and
restated certificate of incorporation eliminates the liability of directors to
the Registrant or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent otherwise required by Delaware law. The
Registrant also carries directors and officers liability insurance.
(b) The Registrant's amended and restated certificate of incorporation
provides that the Registrant will indemnify each person who was or is made a
party to any proceeding by reason of the fact that such person is or was its
director or officer against all expense, liability and loss reasonably incurred
or suffered by such person in connection therewith to the maximum extent
authorized by Delaware law. The Registrant's bylaws provide for a similar
indemnity to its directors and officers to the fullest extent authorized by
Delaware law.
(c) The Registrant has entered into indemnification agreements with each
of its directors and officers providing for the indemnification of its directors
and officers against any and all expenses, judgments, fines, penalties and
amounts paid in settlement, to the fullest extent permitted by law.
Item 16. Exhibits.
-------------------
5.1 Opinion of Stradling Yocca Carlson & Rauth, a Professional
Corporation.
10.1 Stock Purchase Agreement dated March 18, 1999 by and between the
Company and Titus Interactive SA (incorporated herein by reference to
Exhibit 10.24 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1998)
10.2 Restricted Stock Purchase Agreement dated April 30, 1999 by and
between the Company and Runecraft Limited.
10.3 Stock Purchase Agreement dated July 20, 1999 by and among the
Company, Titus Interactive SA and Brian Fargo (incorporated herein by
reference to Exhibit 10.1 of the Company's Quarterly Report on Form
10-Q for the three month period ended June 30, 1999).
10.4 Exchange Agreement dated July 20, 1999 by and among Titus Interactive
SA, Brian Fargo, Herve Caen and Eric Caen (incorporated herein by
reference to Exhibit 10.1 of the Company's Quarterly Report on Form
10-Q for the three month period ended June 30, 1999).
II-1
<PAGE>
10.5 Agreement and Release dated November 30, 1999 by and between the
Company and Richard S.F. Lehrberg.
23.1 Consent of Arthur Andersen LLP, independent public accountants.
23.2 Consent of Stradling Yocca Carlson & Rauth, a Professional
Corporation (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page to the registration
statement at page II-4).
Item 17. Undertakings.
----------------------
The undersigned Registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(d) (1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
II-2
<PAGE>
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it has met all of the
requirements for filing on Form S-3 and has caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Irvine, State of California, on the 15th day of November, 2000.
INTERPLAY ENTERTAINMENT CORP.
By: /s/ Brian Fargo
-------------------------------
Brian Fargo, Chairman and
Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Interplay Entertainment
Corp., do hereby constitute and appoint Brian Fargo and Manuel Marrero, and each
of them, our true and lawful attorneys-in-fact and agents with full power of
substitution and re-substitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, or any related registration
statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and to file the same, with exhibits thereto,
and other documents in connection therewith, with the SEC, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Brian Fargo Chairman of the Board and Chief November 15, 2000
--------------------------------- Executive Officer
Brian Fargo (Principal Executive Officer)
/s/ Manuel Marrero Chief Financial Officer and Chief
--------------------------------- Operating Officer (Principal November 15, 2000
Manuel Marrero Financial Officer and
Principal Accounting Officer)
/s/ R. Stanley Roach
--------------------------------- Director November 15, 2000
R. Stanley Roach
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
Signature Title Date
--------- ----- ----
/s/ James Barnett
--------------------------------- Director November 15, 2000
James Barnett
/s/ Richard S.F. Lehrberg
--------------------------------- Director November 15, 2000
Richard S.F. Lehrberg
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Number
------ ----------- -----------
<S> <C> <C>
5.1 Opinion of Stradling Yocca Carlson & Rauth, a Professional
Corporation.
10.1 Stock Purchase Agreement dated March 18, 1999 by and between the
Company and Titus Interactive SA (incorporated herein by
reference to Exhibit 10.24 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1998).
10.2 Restricted Stock Purchase Agreement dated April 30, 1999 by and
between the Company and Runecraft Limited.
10.3 Stock Purchase Agreement dated July 20, 1999 by and among the
Company, Titus Interactive SA and Brian Fargo (incorporated
herein by reference to Exhibit 10.1 of the Company's Quarterly
Report on Form 10-Q for the three month period ended June 30,
1999).
10.4 Exchange Agreement dated July 20, 1999 by and among Titus
Interactive SA, Brian Fargo, Herve Caen and Eric Caen
(incorporated herein by reference to Exhibit 10.1 of the
Company's Quarterly Report on Form 10-Q for the three month
period ended June 30, 1999).
10.5 Agreement and Release dated November 30, 1999 by and between the
Company and Richard S.F. Lehrberg.
23.1 Consent of Arthur Andersen LLP, independent public accountants.
23.2 Consent of Stradling Yocca Carlson & Rauth, a Professional
Corporation (included in the Opinion filed as Exhibit 5.1).
24.1 Power of Attorney (included on signature page to the
registration statement at page II-4).
</TABLE>
II-6
