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Filed Pursuant to
Rule 424(b)(1)
Registration No. 333-47914
PROSPECTUS
THQ INC.
27001 Agoura Road, Suite 325
Calabasas Hills, California 91301
(818) 871-5000
1,000,000 SHARES OF COMMON STOCK
1,000,000 PREFERRED STOCK PURCHASE RIGHTS
This prospectus relates to the resale, from time to time, by the selling
shareholders named in this prospectus of up to 1,000,000 shares of our common
stock and the attached rights to purchase our Series A Junior Participating
Preferred Stock. We will not receive any of the proceeds from the sale of the
securities sold pursuant to this prospectus. The price to the public for the
securities and the proceeds to the selling shareholders will depend upon the
market price of such securities when sold.
SEE "RISK FACTORS" ON PAGE 3 FOR CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
YOU BEFORE YOU INVEST IN OUR SECURITIES.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus is dated November 22, 2000.
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TABLE OF CONTENTS
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PAGE
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Where You Can Find More Information.........................................2
Cautionary Statement Regarding Forward-Looking Statements...................3
The Company.................................................................3
Risk Factors................................................................3
Use of Proceeds............................................................10
Selling Shareholders.......................................................10
Plan of Distribution.......................................................11
Legal Proceedings..........................................................12
Legal Matters..............................................................13
Experts ...................................................................13
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC allows us to "incorporate by reference" the documents we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The documents incorporated by reference
contain important business and financial information about us that is not
included in this prospectus. Information that we file with the SEC after the
date we file the initial registration statement and prior to the effectiveness
of the registration statement as well as after the date of this prospectus will
automatically update and supersede that information. Accordingly, we incorporate
by reference the documents listed below and any future filings made by us with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934 until all of the securities are sold:
- Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2000,
June 30, 2000 and September 30, 2000.
- Annual Report on Form 10-K/A for the fiscal year ended December 31, 1999.
- Current Reports on Form 8-K dated March 21, 2000, June 22, 2000, September
15, 2000, and November 13, 2000;
- The description of the common stock contained in the Registration Statement
on Form 8-A filed on September 23, 1991; and
- The description of the preferred stock purchase rights contained in the
Registration Statement on 8-A12B filed on June 22, 2000.
You may request a copy of these filings, at no cost to you, by writing
or telephoning us at the following address:
THQ Inc.
27001 Agoura Road, Suite 325
Calabasas Hills, California 91301
Attention: Senior Vice President -
Finance and Administration
(818) 871-5000
You should rely only on the information provided or incorporated by
reference in this prospectus or in any prospectus supplement. We
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have not authorized anyone else to provide you with different information. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other that than the date on the front of
those documents.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 define the concept of "forward-looking
statements." Our filings with the SEC, our press releases and our other public
statements may include, or may incorporate by reference, certain statements that
may be deemed "forward-looking statements." This may include all statements
relating to our objectives, strategies, plans, intentions and expectations. It
also may include all statements, other than statements of historical facts, that
address actions, events or circumstances that we expect, believe or intend will
occur in the future.
We make no promise to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
All forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially from historical results or those implied by
the forward-looking statements.
THE COMPANY
We develop, publish and distribute interactive entertainment software
for the leading hardware platforms in the home video game market. We currently
publish titles for Sony's PlayStation, Nintendo's 64, Game Boy Color, and Game
Boy Advance, Sega's Dreamcast, Microsoft's X-Box, and PC's in most software
genres, including action, adventure, driving, fighting, puzzle, role playing,
simulation, sports and strategy. Our customers include Wal-Mart, Toys "R" Us,
Kay Bee Toys, Target, Electronics Boutique, Best Buy and other national and
regional retailers, discount store chains and specialty retailers.
Our titles are developed both internally and under contract with
independent developers, and are typically based on properties licensed from
third parties. We continually seek to identify and develop titles based on
entertainment projects, sports and entertainment personalities, or popular
sports, trends or concepts that have high public visibility or recognition or
that reflect the trends of popular culture. Other than titles that we may
release on CD-ROM for use on PC's, all of our products consist of cartridges and
CD-ROMs manufactured for us by Nintendo, Sony, Sega, and Microsoft.
RISK FACTORS
You should carefully consider the following risk factors before deciding
to acquire our securities:
WE MUST CONTINUE TO DEVELOP AND SELL NEW TITLES IN ORDER TO REMAIN PROFITABLE.
Our historical profitability has directly resulted from our ability to
timely develop and sell successful new titles for use on various platforms. We
cannot assure you that we will be able to secure the rights to new titles at a
rate that will maintain our current development and release schedule, that we
will be able to release new titles by the dates we have scheduled, or that all
of our scheduled titles will ever be released. If the revenues from our new
titles fail to replace declining revenues from existing titles, our revenues and
profits would be materially and adversely affected.
While we develop a limited number of games for which no license is
required, the development of most of our new games is dependent upon our ability
to identify and license desirable properties.
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Examples of properties that we seek to license are entertainment projects, such
as movies, television programs and arcade games; sports and entertainment
personalities; and popular sports, fads or concepts that have high public
visibility or recognition or that reflect the trends of popular culture. The
inability to renew successful licenses could limit our economic success.
Consumer preferences for games are difficult to predict, and even the
most successful titles remain popular for only limited periods of time, often
less than six months. The life cycle of a game generally consists of a
relatively high level of sales during the first few months after introduction,
followed by a decline in sales. Accordingly, substantially all of our net sales
for a particular year are generated by titles released in that year and in the
latter part of the prior year. In some instances, a sales decline may also be
accompanied by decreasing sales prices, which may result in credits or
allowances to our customers.
In addition, the development cycle for new titles is long, typically
ranging from nine to 24 months. In order to distribute a product, we must
develop the necessary game software, obtain approval from the manufacturer and
licensor, if required, and produce the initial order of cartridges, DVDs or
CD-ROMs. During the development cycle, the market appeal of a title may decline.
WE RELY ON EXTERNAL DEVELOPERS FOR THE DEVELOPMENT OF MANY OF OUR TITLES.
Although we have several titles in development by our internal studios,
many of our titles are developed by third party developers. A delay in the work
performed by third party developers may result in delays in product releases.
The future success of many of our titles will depend on our continued ability to
maintain proven relationships and obtain developer agreements on favorable terms
with skilled third party developers. We cannot guarantee that we will be able to
establish or maintain relationships with third party developers.
OUR FAILURE TO TIMELY DEVELOP TITLES FOR NEW PLATFORMS THAT ACHIEVE SIGNIFICANT
MARKET ACCEPTANCE, OR TO MAINTAIN NET SALES THAT ARE COMMENSURATE WITH PRODUCT
DEVELOPMENT COSTS, WOULD HAVE A MATERIAL ADVERSE EFFECT ON US.
The interactive entertainment industry has experienced periods of
significant growth in consumer interest, followed by periods in which growth has
substantially declined. Our sales are dependent, among other factors, on the
popularity and unit sales of the game platforms of the various manufacturers.
The popularity of the game platforms marketed by the manufacturers has
experienced wide fluctuations. Unexpected declines in the popularity of a
particular platform can be expected to have a material adverse effect on
consumer demand for titles released or scheduled for release for that platform.
The interactive entertainment industry is characterized by rapid
technological change. As a result, we must continually anticipate and adapt our
offerings to emerging platforms and evolving consumer preferences. The
development of titles for new platforms requires substantial investment.
Generally, these development efforts must occur well in advance of the release
of new platforms in order to introduce titles on a timely basis following the
release of such platforms. The development and marketing of titles for new
platforms may require greater financial and technical resources than have prior
development and marketing efforts. Additionally, during periods of new
technology introductions, forecasting our revenues and earnings is more
difficult than in more stable or rising product markets.
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The introduction of new technologies, including new platforms such as
Sega's Dreamcast, Sony's PlayStation 2, Nintendo's Gamecube and Game Boy Advance
and Microsoft's X-Box, could materially affect our business. The new platforms
for which we develop titles may not achieve market acceptance. Further, we have
no control over the release dates of the new platforms nor the number of units
that will be shipped upon such release. It is difficult to ensure that our
schedule for releasing new titles will coincide with the release of the
corresponding platforms. We anticipate it will be more costly to develop titles
for the new platforms. Our development efforts with respect to such new
platforms may not lead to marketable titles or titles that generate sufficient
revenues to recover their development and marketing costs, especially if a new
platform does not reach an expected level of acceptance. This risk can be
expected to increase in the future, as continuing increases in development costs
require corresponding increases in net sales in order for us to maintain
profitability.
The introduction of new platforms and technologies can render existing
titles obsolete and unmarketable. More commonly, as more advanced platforms are
introduced, consumer demand for titles for older platforms diminishes. We cannot
assure you that, as a result of such reduced consumer demand for titles on older
platforms, our titles for such platforms will generate sufficient sales to make
such titles profitable.
A number of our competitors have developed or are currently developing
games for use by consumers over the Internet. We plan to release our first
on-line game, which is currently in development by our in-house studio, Genetic
Anomalies, Inc., in the fourth quarter of 2000. We cannot be assured that our
approach to on-line games will meet with customer acceptance. While we believe
that the market for these games has not had a material effect on the sales of
our products, future increases in the availability of such games or
technological advances in these games or the Internet could result in a decline
in platform-based games and thus have a material adverse effect on us. We also
are developing games for other mobile platforms, including cellular telephones
and mobile handheld devices, under a recently signed agreement with Siemens AG
of Germany. Because we are less experienced in developing games for these
devices and such platforms present additional and different risks than those
related to traditional console games, we cannot predict with any degree of
certainty the financial impact of our alliance with Siemens.
CUSTOMER ACCOMMODATIONS OR UNSALEABLE INVENTORY COULD ADVERSELY AFFECT OUR
EARNINGS.
We sometimes negotiate accommodations to retailers or distributors when
demand for specific games falls below expectations, in order to maintain our
relationships with our customers. These accommodations include our not requiring
that all booked orders be filled. We also negotiate price discounts, credits
against future orders and the return of products with our customers.
Although we believe that the reserves that we have established for
customer accommodations are adequate, there is the possibility that actual
customer accommodations could exceed our reserves. The effect of this would be a
reduction in our earnings. We cannot predict the amount or nature of
accommodations that will be provided to our customers in future periods.
We write down slow-moving or obsolete inventory to net realizable value.
An unsuccessful title requires that we write down the inventory for that title
to its estimated net realizable value. We work to minimize this risk by
communicating frequently with our customers and by attempting to accurately
forecast retailer and consumer demand for each of our titles. However, this can
be often difficult to
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accomplish, especially for games for the Nintendo platforms, since there is a 30
to 60-day manufacturing cycle for these cartridge-based products.
OVER 54% OF OUR GROSS SALES ARE MADE TO OUR TEN LARGEST CUSTOMERS. WE COULD BE
ADVERSELY AFFECTED IF ANY OF THEM REDUCED OR TERMINATED THEIR PURCHASES FROM US
OR DID NOT PAY THEIR OBLIGATIONS TO US.
Sales to our ten largest customers collectively accounted for
approximately 67% of our gross sales in 1997, 65% of our gross sales in 1998 and
54% of our gross sales in 1999. Our largest single customer is Wal-Mart.
Wal-Mart accounted for 15% of our gross sales in 1999, as compared to 19% in
1998.
We have no written agreements or other understandings with any of our
customers that relate to future purchases, so purchases by these customers or
any others could be reduced or terminated at any time. A substantial reduction
or a termination of purchases by any of our largest customers would have a
material adverse effect on us.
Our sales are typically made on credit, with terms that vary depending
upon the customer and other factors. Normally we do not hold any collateral to
secure payment by our customers, and currently we do not factor any of our
receivables. While we attempt to carefully monitor the creditworthiness of our
customers and distributors, we bear the risk of their inability to pay our
receivables and of any delay in payment. A business failure by any of our
largest customers would have a material adverse effect on us, as could a
business failure by any of our distributors or other retailers.
THE DEVELOPMENT AND MARKETING OF PC TITLES DIFFER FROM CONSOLE TITLES AND ENTAIL
ADDITIONAL RISKS.
We have less experience developing and marketing PC titles than games
for consoles. The development and marketing of PC games subjects us to some
different risks than those we encounter in connection with console games. These
risks include the ability to accurately predict which titles have appeal to the
purchasers of games for PC's, greater reliance on distributors in order to
obtain retail distribution, and higher retailer returns experienced for PC
games. We cannot assure you that we will be able to successfully develop and
market titles for the PC market.
WE CANNOT PUBLISH OR MANUFACTURE TITLES WITHOUT MANUFACTURERS' APPROVAL. OUR
ABILITY TO CONTINUE TO DEVELOP AND MARKET SUCCESSFUL CONSOLE TITLES IS DEPENDENT
ON THE MANUFACTURERS CONTINUING TO DO BUSINESS WITH US.
We are wholly dependent on the manufacturers and our non-exclusive
licenses with them, both for the right to publish titles for their platforms and
for the manufacture of our products for their platforms. Our existing platform
licenses for Sega's Dreamcast, Sony's PlayStation and PlayStation 2, Nintendo's
Game Boy Color and Nintendo 64, and our pending licenses for Nintendo's Gamecube
and Game Boy Advance and Microsoft's X-Box, require that we obtain approval for
the publication of new games on a title-by-title basis. We expect that our
pending licenses for the next generation of platforms will contain similar
provisions. As a result, the number of titles we are able to publish for these
platforms, and thus our revenues from titles for these platforms, may be
limited.
We currently have good relationships with the manufacturers. However,
should any manufacturer choose not to renew or extend our license agreement at
the end of its current term, or if any manufacturer
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were to terminate our license for any reason, we would be unable to publish
additional titles for that manufacturer's platform.
Each of the manufacturers is the sole source for the fabrication of the
products we publish for that manufacturer's platforms. Each platform license
provides that the manufacturer may change prices for products at any time and
includes other provisions that give the manufacturer substantial control over
our release of new titles.
Since each of the manufacturers is also a publisher of games for its own
platforms, and also manufactures products for all of its other licensees, a
manufacturer may give priority to its own products or those of other publishers
in the event of insufficient manufacturing capacity. We could be materially and
adversely affected by unanticipated delays in the delivery of products.
IF WE NEEDED TO WRITE DOWN PREPAID ROYALTIES OR CAPITALIZED DEVELOPMENT COSTS
BELOW THE CURRENT RECORDED VALUE, OUR RESULTS OF OPERATIONS COULD BE ADVERSELY
AFFECTED.
We typically enter into agreements with licensors of properties and
developers of titles that require advance payments of royalties and/or
guaranteed minimum royalty payments; in addition, the THQ/JAKKS Pacific, LLC
Agreement requires minimum guaranteed payments to JAKKS Pacific, Inc. We cannot
assure you that the sales of products for which such royalties are paid or
guaranteed payments are made will be sufficient to cover the amount of these
required payments.
We capitalize our advances to developers on our balance sheet as a part
of "prepaid royalties." We analyze all of our capitalized costs quarterly, and
we take write-offs when, based on our estimates, future individual product
contribution will not be sufficient to recover our investment.
WE HAVE RECENTLY EXPANDED OUR FOREIGN DISTRIBUTION ACTIVITIES THROUGH THE
ACQUISITION OF RUSHWARE AND THE OPENING OF OFFICES IN FRANCE AND AUSTRALIA.
INCREASED DISTRIBUTION ACTIVITIES AND FOREIGN OPERATIONS SUBJECTS US TO CERTAIN
RISKS.
In December 1998, we acquired Rushware Microhandelsgesellschaft GmbH and
its subsidiaries, Softgold Computerspiele GmbH and ABC Spielspass GmbH. Rushware
is a leading German distributor of interactive entertainment software for PC's,
and will serve as our distributor and publisher in Germany and other
German-speaking countries. We believe this acquisition will significantly
increase both the proportion of our business that consists of the distribution
of products published by other companies and the proportion of our foreign sales
that are made in German-speaking countries.
We recently opened offices in France and Australia. Our French office
will serve as our distributor in France and other French-speaking countries. The
Australian office will be our distributor in Australia and the general
Asian-Pacific region.
The increase in our distribution activities and foreign operations
subject us to the following risks, and may entail other risks:
- The distribution business generally operates on lower gross margins
than the publishing business, and thus may require a greater level of
sales in order to cover overhead.
- We will have to maintain inventories of other companies' products.
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As a result of our efforts to increase our foreign sales, foreign sales
accounted for a greater portion of our net sales in 1999 than in the past.
Foreign sales are subject to inherent risks, including unexpected changes in
regulatory requirements, tariffs and other barriers, difficulties in staffing
and managing foreign operations, and possible difficulties collecting foreign
accounts receivable. These factors or others could have an adverse effect on our
future foreign sales or the profits generated from these sales.
Sales generated by our European and Australian offices will generally be
denominated in the currency denomination of the country in which the sales are
made or, if made in Europe, European Currency Units ("euros"). To the extent our
foreign sales are not denominated in U.S. dollars, our sales and profits could
be materially and adversely affected by foreign currency fluctuations.
OUR REVENUES FLUCTUATE DUE TO SEASONAL DEMAND AND THE NATURE OF THE INTERACTIVE
ENTERTAINMENT BUSINESS.
We have experienced, and may continue to experience, significant
quarterly fluctuations in net sales and operating results. The interactive
entertainment market is highly seasonal, with sales typically significantly
higher during the fourth quarter, due primarily to the increased demand for
games during the year-end holiday buying season. Other factors that cause
fluctuations include:
- the timing of our release of new titles;
- the popularity of both new titles and titles released in prior
periods;
- changes in the mix of titles with varying profit margins;
- the timing of customer orders;
- the timing of shipments by the manufacturers;
- fluctuations in the size and rate of growth of consumer demand for
titles for different platforms; and
- the timing of the introduction of new platforms and the accuracy of
retailers' forecasts of consumer demand.
We may not be able to maintain consistent profitability on a quarterly
or annual basis.
THE INTERACTIVE ENTERTAINMENT INDUSTRY GENERATES SIGNIFICANT COMPETITION FOR
EMPLOYEES. WE MUST ATTRACT AND RETAIN KEY EMPLOYEES TO IMPLEMENT OUR BUSINESS
STRATEGY.
We rely to a substantial extent on the management, marketing, sales,
technical and software development skills of a limited number of employees to
formulate and implement our business plan, including the development of our
titles. Our success depends upon, to a significant extent, our ability to
attract and retain key personnel. Competition for employees can be intense and
the process of locating key personnel with the right combination of skills is
often lengthy. The loss of services of key personnel could have a material
adverse effect on us. The employees with whom we have employment agreements are
Brian J. Farrell, our President and Chief Executive Officer, Jeffrey C. Lapin,
our Vice
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Chairman and Chief Operating Officer, Don Traeger, President of Pacific Coast
Power & Light Company, Dennis Harper, Vice President - Product Development of
Pacific Coast Power & Light Company, Shawn Broderick, President of Genetic
Anomalies, Inc., Steve Gray, General Manager of Heavy Iron Studios, Michael
Kulas, President of Volition, Inc., Philip Holt, Vice President of Volition,
Inc., Adam Pletcher, Art Director of Volition, Inc. and John Slagel, Senior
Programmer of Volition, Inc.
WE COULD BE ADVERSELY AFFECTED BY THE UNAUTHORIZED COPYING OF OUR GAMES OR BY
INFRINGEMENT CLAIMS BROUGHT BY OR AGAINST US.
As a result of the proprietary rights of the manufacturers and the
efforts taken by the manufacturers to protect their rights, we do not believe
that there is a material amount of unauthorized copying of our products.
However, unauthorized production occurs in the computer software industry
generally, and were a significant amount of unauthorized production of our DVD
or CD-ROM products to occur, we could be materially and adversely affected.
We hold copyrights on the products, manuals, advertising and other
materials owned by us and we maintain trademark rights in the THQ name and logo,
and the names of products owned by us. We regard our titles, including the
underlying software, as proprietary and rely on a combination of trademark,
copyright and trade secret laws, employee and third-party nondisclosure and
confidentiality agreements, among other methods to protect our rights. However,
we cannot be assured that third parties will not infringe our rights or that
third parties will not assert infringement claims against us. We investigate any
such claims and respond as we deem appropriate. Any such occurrences could be
costly and could result in a diversion of management's attention. Further,
adverse determinations in any claims or litigation could also have a material
adverse effect on our business, operating results and financial condition.
THE INTERACTIVE ENTERTAINMENT INDUSTRY IS CONSOLIDATING. IN MAKING ACQUISITIONS,
WE FACE SIGNIFICANT COMPETITION FROM OTHER COMPANIES WITH GREATER FINANCIAL
RESOURCES. WE ALSO FACE INTEGRATION CHALLENGES WITH THE COMPANIES THAT WE
SUCCESSFULLY ACQUIRE.
Consistent with our strategy to enhance our distribution and product
development capabilities, we intend to continue to pursue acquisitions of
companies, intellectual property rights and other assets that can be acquired on
acceptable terms and which we believe can be operated or exploited profitably.
As the interactive entertainment industry continues to consolidate, we
face significant competition in making acquisitions, which may constrain our
ability to complete suitable transactions. This is particularly of concern for
us because many of our competitors for potential acquisitions have significant
financial and other resources.
Further, as we acquire other companies we are faced with additional
challenges. The integration of newly acquired companies' operations with our
existing operations takes management time and effort. Additionally, there is a
risk of loss of key employees, customers and vendors of the recently acquired
companies. We may not be successful in integrating operations of newly acquired
companies.
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WE MUST CONFRONT OTHER CONSEQUENCES OF THE INTENSE COMPETITION IN OUR INDUSTRY.
The interactive entertainment industry is intensely competitive.
Significant elements of this competition include the following:
- We compete, for both licenses to properties and the sale of games,
with the manufacturers. Each of the manufacturers is the largest
developer and marketer of titles for its platforms. As a result of
their commanding positions in the industry, the manufacturers
generally have better bargaining positions with respect to retail
pricing, shelf space and retailer accommodations than do any of
their licensees, including us.
- Some of our other competitors have greater name recognition among
consumers and licensors of properties; a broader product line; or
greater financial, marketing and other resources than us.
Accordingly, these competitors may be able to market their products
more effectively or make larger offers or guarantees in connection
with the acquisition of licensed properties.
- We believe that other technology and entertainment companies are
increasing their focus on the interactive entertainment market,
which might result in greater competition for us. In addition, many
of our competitors are developing on-line interactive games and
interactive networks that will be competitive with our interactive
products.
Competitive pressures could have the following effects on us:
- As competition for popular properties increases, our cost of
acquiring licenses for such properties may increase, resulting in
reduced margins.
- As competition for retail shelf space becomes more intense, we may
need to increase our marketing expenditures to maintain sales of our
games.
- We could be required to reduce the wholesale unit prices of our
games.
FLUCTUATIONS IN STOCK PRICE
The market price of our common stock has experienced and may continue to
experience wide fluctuations. Factors affecting our stock price may include:
- Actual or anticipated variations in our operating results;
- Variations in the level of market acceptance of our titles;
- Delays and timing of product introductions;
- Changes in recommendations or earning estimates by securities
analysts;
- Conditions and trends in our industry; or
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- General market or economic conditions.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the securities
offered pursuant to this prospectus. All of such proceeds will be received by
the selling shareholders.
SELLING SHAREHOLDERS
The following table sets forth the selling shareholders' beneficial
ownership of the securities offered pursuant to this prospectus and assumes that
the selling shareholders will sell all of the securities offered under this
prospectus. We are unable to determine the exact number of securities that will
actually be sold. The number of securities that each of the selling shareholders
will own after the completion of the offering described in this prospectus
constitutes less than one percent of the aggregate number of shares of our
common stock (and attached purchase rights) outstanding as of the date of this
prospectus.
Mr. Kulas is the President of Volition, Inc., which we acquired on
August 31, 2000. Mr. Slagel is a Senior Programmer, Mr. Pletcher is the Art
Director, Mr. Allender is a Senior Programmer, and Mr. Whiteside is an Artist of
Volition. Otherwise, none of the selling shareholders listed below have held any
position or office or had a material relationship with us or any of our
affiliates within the past three years other than as a result of the ownership
of shares of our securities.
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Securities Securities
Beneficially Beneficially
Name of Selling Owned Prior to Securities Owned After the
Shareholder the Offering Being Offered Offering
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<S> <C> <C> <C>
Michael J. Kulas 881,021 879,121 1,900
Adam Pletcher 43,956 43,956 0
John Slagel 43,966 43,956 10
Mark Allender 21,978 21,978 0
Jasen Whiteside 10,989 10,989 0
TOTAL 1,001,910 1,000,000 1,910
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</TABLE>
The securities being offered by Mr. Allender include 10,989 shares of
our common stock (and attached purchase rights) underlying options that are
exercisable within 60 days of the date of this prospectus. The securities being
offered by Messrs. Pletcher, Slagel and Whiteside consist entirely of shares of
our common stock (and attached purchase rights) underlying options that are
exercisable within 60 days of the date of this prospectus.
PLAN OF DISTRIBUTION
The selling shareholders may offer the securities at various times in
one or both of the following transactions:
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- through brokers or dealers, acting as principal or agent, in
transactions on the NASDAQ National Market or on stock exchanges in
ordinary brokerage transactions, in negotiated transactions or
otherwise, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices, at negotiated
prices or otherwise; and/or
- directly, or indirectly through brokers or agents, in private sales
at negotiated prices.
This prospectus may be supplemented or amended from time to time to
describe a specific plan of distribution.
In connection with the distribution of the securities or otherwise, the
selling shareholders may:
- enter into hedging transactions with broker-dealers or other
financial institutions; in connection with such transactions,
broker-dealers or other financial institutions may engage in short
sales of the securities in the course of hedging the positions they
assume with a selling shareholder;
- sell the securities short and redeliver the securities to close out
such short positions; and/or
- enter into option or other transactions with broker-dealers or other
financial institutions that require the delivery to such
broker-dealer or other financial institution of the securities.
Those broker-dealers or other financial institutions may resell the
securities pursuant to this prospectus, as supplemented or amended
to reflect such transaction.
The selling shareholders may from time to time transfer securities to a
donee, successor or other person other than for value, and such transfers will
not be made pursuant to this prospectus. To the extent permitted by applicable
law, this prospectus covers sales by such transferee. We may in our discretion
supplement or amend this prospectus to include such transferee as an additional
named selling shareholder.
In effecting sales of the securities, brokers or dealers engaged by a
selling shareholder may arrange for other brokers or dealers to participate.
Brokers or dealers may receive compensation in the form of commissions or
discounts from a selling shareholder and may receive a commission from the
purchasers of the securities for whom such broker-dealers may act as agents, all
in amounts to be negotiated.
The selling shareholders and all dealers or agents, if any, who
participate in the distribution of the securities may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with such sales. Any profit on the sale of such securities by such shareholder,
and all discounts, commissions or concessions received by such dealers or
agents, may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933.
Upon being notified by a selling shareholder that any agreement or
arrangement has been entered into with a broker-dealer for the sale of
securities through a block trade, special offering or
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secondary distribution or a purchase by a broker-dealer, to the extent required
by applicable law we will distribute a supplement to this prospectus.
Securities that qualify for sale pursuant to Rule 144 of the Securities
Act of 1933 may be sold under Rule 144 rather than pursuant to this prospectus.
We have agreed to bear the expenses of registration of the securities
and other costs and expenses incurred by the selling shareholders in connection
with the sale of the securities. However, we will not pay any discounts,
commissions or fees of selling brokers or similar securities industry
professionals and any fees and expenses of counsel and accountants for the
selling shareholders.
LEGAL PROCEEDINGS
Two individual shareholders have filed essentially identical purported
class actions in the United States District Court for the Central District of
California (Thomas E. Wiener, et al. v. THQ Inc., et al., Case No. 00-01783 AHM
(C.D. Cal.) and John H. Cottrell, et al. v. THQ Inc., et al., Case No. 00-02264
GAF (C.D. Cal.)) alleging that we and certain of our directors and senior
officers violated Section 10(b) of the Securities and Exchange Act of 1934 and
SEC Rule 10b-5. Each case seeks class action status on behalf of all individuals
who purchased our shares of common stock between October 26, 1999 and February
10, 2000. Each complaint alleges that we issued false and misleading statements
about our financial results and prospects during the class period, and that the
individual defendant directors and officers participated in the alleged scheme
so as to sell their personal shares at inflated prices. These cases were
consolidated and recently, our Motion to Dismiss was granted with leave to
amend. On October 2, 2000 the plaintiffs amended their complaints. We believe
the claims are without merit, and intend to vigorously defend against them.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities
have been passed upon for us by Sidley & Austin, Los Angeles, California.
Attorneys at Sidley & Austin participating in matters for us own approximately
15,000 shares of the securities.
EXPERTS
The financial statements incorporated in this prospectus by reference to
our Annual Report on Form 10-K/A for the year ended December 31, 1999 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
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