<PAGE> 1
As filed with the Securities and Exchange Commission on March 15, 2000
Registration No. 333-
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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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THQ INC.
(Exact name of Registrant as specified in its Charter)
Delaware 13-3541686
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
27001 Agoura Road, Suite 325
Calabasas Hills, California 91301
(818) 871-5000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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BRIAN J. FARRELL
President and Chief Executive Officer
THQ Inc.
27001 Agoura Road, Suite 325
Calabasas Hills, California 91301
(818) 871-5000
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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with a copy to:
CATHERINE E. ALBRIGHT, ESQ.
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE 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 Section 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 this prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
PROPOSED MAXIMUM
TITLE OF SHARES AGGREGATE PRICE PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED AMOUNT TO BE REGISTERED PER UNIT(1) AGGREGATE OFFERING PRICE(1) REGISTRATION FEE(1)
===================================================================================================================================
<S> <C> <C> <C> <C>
===================================================================================================================================
Common Stock, par value $.01
per share......................... 110,020 $18.96875 $2,086,942 $551
===================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 and was
based on the average of the high and low prices of the Common Stock
on the NASDAQ National Market on March 13, 2000 as reported by the
National Association of Securities Dealers Automated Quotation
System.
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, AS AMENDED, OR UNTIL THIS
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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<PAGE> 2
PRELIMINARY, SUBJECT TO COMPLETION
DATED MARCH 15, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS 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.
PROSPECTUS
THQ INC.
27001 Agoura Road, Suite 325
Calabasas Hills, California 91301
(818) 571-5000
110,020 SHARES OF COMMON STOCK
This prospectus relates to the resale, from time to time, by the selling
shareholders named in this prospectus of up to 110,020 shares of our common
stock. We will not receive any of the proceeds from the sale of the shares sold
pursuant to this prospectus. The price to the public for the shares and the
proceeds to the selling shareholders will depend upon the market price of such
securities when sold.
-----------------------
SEE "RISK FACTORS" ON PAGE 4 FOR CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
YOU BEFORE YOU INVEST IN OUR COMMON STOCK.
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 March [___], 2000.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
Where You Can Find More Information.....................................3
Cautionary Statement Regarding Forward-Looking Statements...............4
Risk Factors............................................................4
The Company............................................................10
Use of Proceeds........................................................11
Selling Shareholders...................................................11
Plan of Distribution...................................................12
Legal Matters..........................................................13
Experts................................................................13
</TABLE>
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 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 shares are
sold:
- - Annual Report on Form 10-K for the fiscal year ended December 31, 1998;
- - Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
June 30, and September 30, 1999;
- - Current Reports on Form 8-K dated January 8 and May 24, 1999 and Current
Report on Form 8-K/A filed March 10, 1999; and
- - The description of the common stock contained in the Registration
Statement on Form 8-A filed on September 23, 1991.
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: 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 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.
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<PAGE> 4
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.
RISK FACTORS
You should carefully consider the following risk factors before
deciding to acquire shares of our common stock:
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. 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
produce the initial order of cartridges or CD-ROMs. During the development
cycle, the market appeal of a title may decline.
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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.
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 have established reserves for slow-moving or obsolete inventory.
An unsuccessful title would require that we increase the reserve for that title
or 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
accomplish, especially for games for the Nintendo platforms, since there is a 30
to 60-day manufacturing cycle for these cartridge-based products.
OVER 58% OF OUR 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
58% of our gross sales in 1999. Our largest single customer is Wal-Mart.
Wal-Mart accounted for 17% of our net sales in 1999, as compared to 19% in 1998.
We have no written agreements or other understandings with any of
our customers that relates 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.
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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 Dreamcast, PlayStation, Game Boy Color and Nintendo 64 require that
we obtain approval for the publication of new games on a title-by-title basis.
We expect that 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 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 OFF PREPAID ROYALTIES OR CAPITALIZED DEVELOPMENT COSTS IN
EXCESS OF THE AMOUNTS WE HAVE RESERVED, 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. We cannot assure you that the sales of
products for which such royalties are paid will be sufficient to cover the
amount of these required royalty 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.
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<PAGE> 7
WE HAVE RECENTLY EXPANDED OUR FOREIGN DISTRIBUTION ACTIVITIES THROUGH THE
ACQUISITION OF RUSHWARE. 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.
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.
Rushware has a license for the exclusive right to continue
distributing, through August 1, 2000, the PC and PlayStation products developed
and published by LucasArts in German-speaking Europe.
Rushware's license agreement with LucasArts has contributed a
substantial portion of Rushware's sales in the past and is expected to do so in
2000. The termination or non-renewal of Rushware's license agreement with
LucasArts would have a material effect on Rushware's sales and profitability.
As a result of this acquisition and our other 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 Rushware will generally be denominated in
Deutsche marks or 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;
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<PAGE> 8
- 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 officers with whom we have employment agreements are
Brian J. Farrell, our President and Chief Executive Officer, Jeffrey C. Lapin,
our Vice Chairman, C. Noah Davis, our Chief Technology Officer, Don Traeger,
President of Pacific Coast Power & Light Company, Dennis Harper, Vice President
- - Product Development of Pacific Coast Power & Light Company, and Shawn
Broderick, President of Genetic Anomalies, Inc.
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 consoles 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.
The introduction of new technologies, including new platforms
such as Sega's Dreamcast, Sony's Playstation 2, and the newly announced
DVD-based next generation Nintendo console, could materially affect our
business. The new platforms for which we develop titles may not achieve market
acceptance. 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
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<PAGE> 9
to recover their development and marketing costs. 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 will be releasing
our first on-line game, which is currently in development by our recently
acquired studio, Genetic Anomalies, Inc., in mid-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 COULD BE ADVERSELY AFFECTED BY THE UNAUTHORIZED COPYING OF OUR GAMES.
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
CD-ROM products to occur, we could be materially and adversely affected.
THE INTERACTIVE ENTERTAINMENT INDUSTRY IS CONSOLIDATING. IN MAKING ACQUISITIONS,
WE FACE SIGNIFICANT COMPETITION FROM OTHER COMPANIES WITH GREATER FINANCIAL
RESOURCES.
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, such as Microsoft
Corporation and Hasbro Inc., have significant financial and other resources.
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.
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<PAGE> 10
- 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 large toy companies and large software
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
- General market or economic conditions.
Because of these and other factors affecting our operating results and financial
condition, past financial performance should not be considered a reliable
indicator of future performance, and investors should not use historical trends
to anticipate results or trends in future periods.
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 64, Nintendo Game Boy
and Game Boy Color, 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.
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<PAGE> 11
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 and Sony.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares
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 shares offered pursuant to this prospectus.
Mr. Broderick is the President of Genetic Anomalies, Inc., which
we acquired on December 13, 1999. Mr. Johnson is the Vice President -
Engineering and Mr. Margil is the Vice President - Product Development of
Genetic Anomalies, Inc.
The shares being offered by each of the selling shareholders
constitutes less than one percent of the aggregate number of shares of common
stock outstanding as of the date of this prospectus. The number of shares
indicated as beneficially owned by each selling shareholder includes shares
underlying options exercisable by such selling shareholder within 60 days.
<TABLE>
<CAPTION>
Name of Selling Shares Beneficially Owned Prior
Shareholder to the Offering Shares Being Offered
- ------------------------------------------ ------------------------------- ---------------------
<S> <C> <C>
Shawn Broderick 61,239 29,029
Michael Johnson 48,992 23,223
David Margil 25,049 11,612
George Moromisato 29,043 14,522
Peter Bodenheimer 145 73
Bradley Feld 5,877 2,939
Paul Bader 294 147
Infinite Ventures, Inc. 166 83
Broadway Landmarks, Inc. 353 177
David Pollack 267 134
Colby Welch 42 21
Fiscal Services: 25,163 12,582
International Limited Re
Ingram Family Trust
Jerema Wolosenko 1,476 738
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
Name of Selling Shares Beneficially Owned Prior
Shareholder to the Offering Shares Being Offered
- ------------------------------------------ ------------------------------- ---------------------
<S> <C> <C>
William Herman 10,720 5,360
Sean O'Sullivan, Trustee for Sean O'Sullivan 5,360 2,680
Revocable Living Trust
Gaumnitz Family L.P. 4,020 2,010
Anthony Baudanza 4,020 2,010
Kodiak Tech Ventures II 2,680 1,340
Gabriel Goncalves 2,680 1,340
- ------------------------------------------ ------------------------------- ---------------------
TOTAL 227,586 110,020
</TABLE>
PLAN OF DISTRIBUTION
The selling shareholders may offer the shares at various times in
one or both of the following transactions:
- 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 shares 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 common stock in the course of hedging the
positions they assume with a selling shareholder;
- sell common stock short and redeliver the shares 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 shares.
Those broker-dealers or other financial institutions may
resell the shares pursuant to this prospectus, as supplemented
or amended to reflect such transaction.
The selling shareholders may from time to time transfer shares 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.
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<PAGE> 13
In effecting sales of the shares, 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 shares 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 shares 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 shares 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 shares
through a block trade, special offering or secondary distribution or a purchase
by a broker-dealer, to the extent required by applicable law we will distribute
a supplement to this prospectus.
Shares 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 shares
and other costs and expenses incurred by the selling shareholders in connection
with the sale of the shares. 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. 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 shares
have been passed upon for us by Sidley & Austin, Los Angeles, California.
Attorneys at Sidley & Austin participating in matters for us own approximately
10,000 shares of our common stock.
EXPERTS
The financial statements incorporated in this prospectus by
reference to our Annual Report on Form 10-K for the year ended December 31, 1998
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report thereon, 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.
-13-
<PAGE> 14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemized statement of all fees and
expenses in connection with the distribution of the securities being registered
pursuant to this Registration Statement, all of which fees and expenses will be
paid by the Registrant:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee........................... $ 551
Accountants' fees and expenses................................................ $15,000
Legal fees and expenses....................................................... $25,000
Miscellaneous................................................................. $ 2,000
Total................................................................... $42,051
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Delaware General Corporation Law, directors and officers,
as well as other employees or persons, may be indemnified against judgments,
fines and amounts paid in settlement in connection with specified actions, suits
or proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation, i.e., a "derivative
action"), and against expenses (including attorney's fees) in any action
(including a derivative action), if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. However, in the case of
a derivative action, a person cannot be indemnified for expenses in respect of
any matter as to which the person is adjudged to be liable to the corporation
unless and to the extent a court determines that such person is fairly and
reasonably entitled to indemnity for such expenses.
Delaware law also provides that, to the extent a director, officer,
employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action or matter, the corporation must indemnify
such party against expenses (including attorneys' fees) actually and reasonably
incurred by such party in connection therewith.
Expenses incurred by a director or officer in defending any action
may be paid by a Delaware corporation in advance of the final disposition of the
action upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it is ultimately determined that such party is
not entitled to be indemnified by the corporation.
The Delaware General Corporation Law provides that the
indemnification and advancement of expenses provided thereby are not exclusive
of any other rights granted by bylaws, agreements or otherwise, and provides
that a corporation shall have the power to purchase and maintain insurance on
behalf of any person, whether or not the corporation would have the power to
indemnify such person under Delaware law.
Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, or otherwise, the
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<PAGE> 15
registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of 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 its 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 1933 Act and
will be governed by the final adjudication of such issue.
Brian J. Farrell, the President and Chief Executive Officer and a
director of the Company, and Jeffrey C. Lapin, the Vice Chairman and a director
of the Company have entered into employment agreements with the Company pursuant
to which the Company has agreed to indemnify Messrs. Farrell and Lapin for
losses, liabilities, damages and expenses incurred as a result of their acting
on behalf of the Company, subject to certain conditions and limitations.
ITEM 16. EXHIBITS
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
5 Opinion of Sidley & Austin.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Sidley & Austin (included in Exhibit 5).
24 Power of Attorney (set forth on the signature page hereto).
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes that 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 provisions described in Item 15 above, 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 of expenses
incurred or paid by a director, officer or controlling person of 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 its 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.
(b) The undersigned Registrant hereby further undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities
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<PAGE> 16
Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) (Section 230-424(b) of 17 C.F.R.) if, in the
aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) 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;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the Registrants
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference 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.
The undersigned Registrant hereby further 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) The undersigned Registrant further undertakes that:
(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
Registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(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
-16-
<PAGE> 17
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.
-17-
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Calabasas Hills, State of
California on the 14th day of March, 2000.
THQ Inc.
By:/s/ Brian J. Farrel
-----------------------------------------
Brian J. Farrell
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Brian J. Farrell and Fred A. Gysi, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, 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, and to file same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 J. Farrell Director, President and Chief March 14, 2000
- ------------------------------------ Executive Officer (Principal
Brian J. Farrell Executive Officer)
/s/ Lawrence Burstein Director March 13, 2000
- ------------------------------------
Lawrence Burstein
/s/ Bruce Jagid Director March 13, 2000
- ------------------------------------
Bruce Jagid
/s/ Jeffrey C. Lapin Director and Vice Chairman March 14, 2000
- ------------------------------------
Jeffrey C. Lapin
/s/ James L. Whims Director March 15, 2000
- ------------------------------------
James L. Whims
/s/ L. Greg Ballard Director March 15, 2000
- ------------------------------------
L. Greg Ballard
/s/ Fred A. Gysi Vice President - Finance and March 14, 2000
- ------------------------------------ Administration, Chief Financial
Fred A. Gysi Officer and Secretary (Principal
Financial Officer and Principal
Accounting Officer)
</TABLE>
-18-
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION SEQUENTIAL PAGE NUMBER
- ------ ------------------- ----------------------
<S> <C> <C>
5 Opinion of Sidley & Austin.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Sidley & Austin (included in Exhibit 5). *
24 Power of Attorney (set forth on signature page hereto) *
</TABLE>
* Not Applicable
-19-
<PAGE> 1
[SIDLEY & AUSTIN LETTERHEAD]
March 15, 2000
EXHIBIT 5
THQ Inc.
27001 Agoura Road, Suite 325
Calabasas Hills, CA 91301
Re: Registration Statement on Form S-3
Gentlemen/Ladies:
We have acted as counsel for THQ Inc., a Delaware corporation (the
"Company"), in connection with the registration under the Securities Act of
1933, as amended, pursuant to the above-captioned registration statement (the
"Registration Statement"), relating to the registration of the offer and sale
from time to time, by the selling securityholders named therein of 110,020
shares (the "Shares") of common stock, par value $.01 per share, of the Company.
In rendering this opinion, we have examined and relied upon a copy
of the Registration Statement. We have also examined originals, or copies of
originals certified to our satisfaction, of such agreements, documents,
certificates and other statements of governmental officials and other
instruments, and have examined such questions of law and have satisfied
ourselves as to such matters of fact, as we have considered relevant and
necessary as a basis for this opinion. We have assumed the authenticity of all
documents submitted to us as originals, the genuineness of all signatures, the
legal capacity of all natural persons and the conformity with the original
documents of any copies thereof submitted to us for our examination.
Based upon and subject to the foregoing, it is our opinion that the
Shares have been legally issued and are fully paid and nonassessable.
We hereby consent to the filing of this opinion letter as an exhibit
to the Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Registration Statement. In giving such consent, we do not
hereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations thereunder. The opinions expressed herein are given as of the
date hereof, and we assume no obligation to advise you of changes that may
hereafter be brought to our attention.
Very truly yours,
/s/ Sidley & Austin
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
THQ Inc. on Form S-3 of our report dated February 24, 1999 appearing in the
Annual Report on Form 10-K of THQ Inc. for the year ended December 31, 1998 and
to the reference to us under the heading "Experts" in the Prospectus, which is
part of this Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Los Angeles, California
March 14, 2000
