As filed with the Securities and Exchange Commission on July 16, 1999
Registration No. 333-_____
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U.S. 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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Take-Two Interactive Software, Inc.
(Name of registrant as specified in its charter)
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575 Broadway
New York, New York 10012
(212) 334-6633
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Delaware 51-0350842
(State or jurisdiction (I.R.S. employer
of incorporation or identification
organization) number)
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Ryan A. Brant, Chairman
Take-Two Interactive Software, Inc.
575 Broadway
New York, New York 10012
(212) 334-6633
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Robert J. Mittman, Esq.
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Telephone: (212) 885-5000
Telecopier: (212) 885-5001
Approximate date of commencement of proposed sale to the public: As soon as
practicable 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 |_|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier registration
statement for the same offering. |_| ____
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| ____
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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<TABLE>
<CAPTION>
Calculation of Fee.
=========================================================================================================
Proposed Maximum Proposed Maximum
Title of Shares Amount to be Offering Aggregate Offering Amount of
to be Registered Registered(1) Price Per Share(2) Price Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, $.01 260,509 $7.75 2,018,944.75 561.27
par value
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(1) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(c) of the Securities Act of 1933, as amended, the
registration fee has been calculated based upon the average of the high and
low prices as reported by Nasdaq for the registrant's Common Stock on July
9, 1999.
(2) Pursuant to Rule 416 of the Securities Act of 1933, there are also being
registered such additional shares as may be issued to the selling
stockholders because of future stock dividends, stock distributions, stock
splits or similar capital readjustments or, in the case of holders of
warrants, the operation of any anti-dilution provisions.
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 the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
Take-Two Interactive Software, Inc.
260,509 Shares
Common Stock
This prospectus relates to the resale of up to 260,509 shares of common
stock of Take-Two Interactive Software, Inc. by certain stockholders.
The selling stockholders may sell these shares from time to time through
ordinary brokerage transactions in the over-the-counter markets, in negotiated
transactions or otherwise, at market prices prevailing at the time of sale, at
negotiated prices and in certain other ways, as described under "Plan of
Distribution" on page 14. We will not receive any of the proceeds from the sale
of these shares.
Our common stock is traded on the Nasdaq National Market under the symbol
TTWO. On July 12, 1999, the closing sale price of our common stock as reported
by Nasdaq was $7.938.
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Investing in our common stock is speculative and involves a high degree of
risk. See "Risk Factors" beginning on page 4.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is __ , 1999.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this
prospectus or in documents incorporated by reference into this prospectus. You
should read the entire prospectus carefully, including our financial statements
and related notes contained in our Annual Report on Form 10-KSB for the fiscal
year ended October 31, 1998, and especially the risks described under "Risk
Factors."
The Company
We are a leading developer, publisher and distributor of interactive
entertainment software. Our software operates on multimedia personal computers,
video game console platforms manufactured by Sony, Nintendo and Sega and
Nintendo's GameBoy Color hand-held gaming system. Through internal expansion and
several strategic acquisitions, we have become one of the largest distributors
of interactive entertainment software in the United States and one of the top
ten publishers of interactive entertainment software in Europe.
Our software is developed internally by our five design studios, created by
third-party developers on our behalf and licensed from third-party developers.
Our relationships with third-party developers include Gathering of Developers, a
group of six premier interactive entertainment software development studios, DMA
Design and Z-Axis. We publish software globally under the Rockstar Games,
Talonsoft, Mission Studios, Gathering of Developers and Take-Two labels. We have
released a variety of popular titles in significant interactive entertainment
genres, including Grand Theft Auto, Railroad Tycoon II and the Jetfighter
series, and expect to release various new titles, including versions of Fly!,
Monster Truck Madness, Earthworm Jim 3-D and Grand Theft Auto II.
We distribute our software as well as software of third parties worldwide
through our subsidiary Jack of All Games. We distribute interactive
entertainment software to over 20,000 retail outlets in the United States
through third-party distributors and through direct relationships with large
retail customers. Our U.S. customers include WalMart, Toys R Us, Electronics
Boutique, Babbage's, Best Buy and Ames Department Stores as well as leading
national and regional drug store, supermarket and discount store chains and
specialty retailers.
We have significantly expanded our international presence through the
acquisition of publishing and distribution operations in the United Kingdom,
France, Germany, Norway, Sweden, Denmark and Australia. We distribute
interactive entertainment software to over 19,000 retail outlets in Europe
through third-party distributors and through direct relationships with retail
customers in the United Kingdom, France and Germany. Our Joytech subsidiary is a
leading manufacturer of video game hardware accessories in Europe. Sales in
foreign markets have accounted for an increasing portion of our revenues.
We were incorporated in the state of Delaware in September 1993. Our
principal executive offices are located at 575 Broadway, New York, New York
10012, and our telephone number is (212) 334-6633.
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The Offering
Securities offered .....................260,509 shares by certain selling
stockholders.
Common Stock outstanding ...............22,868,386 shares of common stock are
outstanding as of July 6, 1999. This
does not include 3,870,166 shares
issuable upon the exercise of options
and warrants as of July 6, 1999
Use of Proceeds ........................We will not receive any of the proceeds
from the sale of shares by the selling
stockholders.
Risk Factors ...........................Investing in our common stock is
speculative and involves a high degree
of risk. See "Risk Factors" beginning on
page 4.
Nasdaq National Market Symbol ..........TTWO
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<PAGE>
RISK FACTORS
The shares offered hereby are speculative and involve a high degree of
risk. Each prospective investor should carefully consider the following risk
factors before making an investment decision.
Many of our titles have short lifecycles and fail to generate significant
revenues.
The market for our interactive entertainment software is characterized by
short product lifecycles and frequent introduction of new products. Many
software titles do not achieve sustained market acceptance or do not generate a
sufficient level of sales to offset the costs associated with product
development. A significant percentage of the sales of new titles generally
occurs within the first three months following their release. Therefore, our
continued profitability depends upon our ability to develop and sell new,
commercially successful titles and to replace revenues from titles in the later
stages of their lifecycles. Any competitive, financial, technological or other
factor which delays or impairs our ability to introduce and sell our software
could adversely affect our future operating results.
A significant portion of our revenues are derived from a limited number of
titles.
For the year ended October 31, 1998, ten titles accounted for approximately
31.3% of our revenues, with Grand Theft Auto, Three Lions Soccer and Silicon
Valley accounting for 7.6%, 4.0% and 3.7% of our revenues. For the six-month
period ended April 30, 1999, ten titles accounted for approximately 30.1% of our
revenues. Our future titles may not be commercially viable. We also may not be
able to release new titles within scheduled release times or at all. If we fail
to continue to develop and sell new, commercially successful titles, our
revenues and profits may decrease substantially.
Our business is dependent on licensing and publishing arrangements with third
parties.
Our success depends on our ability to identify and exploit new titles on a
timely basis. We have entered into agreements with third parties to acquire the
rights to publish and distribute interactive entertainment software. These
agreements typically require us to make advance payments, pay royalties and
satisfy other conditions. Our advance payments may not be sufficient to permit
developers to develop new software successfully. In addition, software
development costs, promotion and marketing expenses and royalties payable to
software developers have increased significantly in recent years and reduce the
potential revenues derived from sales of our software. Future sales of our
titles may not be sufficient to recover advances to software developers, and we
may not have adequate financial and other resources to satisfy our contractual
commitments. If we fail to satisfy our obligations under these license
agreements, the agreements may be terminated or modified in ways that may be
burdensome to us.
Our profitability depends upon our ability to continue to license popular
properties on commercially feasible terms. Numerous companies compete intensely
for properties, and we may not be able to license popular properties on
favorable terms or at all in the future.
We continually need to develop new interactive entertainment software for
various operating systems.
We depend on third-party software developers and our internal development
studios to develop new interactive entertainment software within anticipated
release schedules and cost projections. Most of our titles are externally
developed. If developers experience financial difficulties, additional costs or
unanticipated development delays, we will not be able to release titles
according to our schedule and may incur losses.
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The development of new interactive entertainment software is lengthy,
expensive and uncertain. Considerable time, effort and resources are required to
complete development of our proposed titles. We have in the past and may in the
future experience delays in introducing new titles. Delays, expenses, technical
problems or difficulties could force the abandonment of or material changes in
the development and commercialization of our proposed titles. In addition, the
costs associated with developing titles for use on new or future platforms may
increase our development expenses.
The software incorporated into our titles may contain defects or errors
which become apparent until after commercial introduction. Remedying such errors
may delay our plans, cause us to incur additional costs and adversely affect our
operations.
We are subject to various distribution risks.
Our distribution business accounts for a substantial portion of our
revenues. Our distribution operations require us to:
o maintain our operating margins;
o secure adequate supplies of currently popular software and
hardware on a timely and competitive basis;
o continually turn our inventories; and
o maintain effective inventory and cost controls.
We are dependent on third-party software and hardware manufacturers,
developers, distributors and dealers, including our competitors, to provide
adequate inventories of popular interactive entertainment software to our retail
customers when needed and on favorable pricing terms. We generally do not
maintain agreements with suppliers. Suppliers may sell their software directly
to our retail customers, rather than through us, on more favorable terms than
those provided to us. We have historically purchased a significant portion of
our titles from a limited number of suppliers. If suppliers do not provide us
with competitive titles on favorable terms without delays, we will be unable to
deliver titles on competitive terms to our retail customers when they require
them.
We may fail to anticipate changing consumer preferences.
Our business is speculative and is subject to all of the risks generally
associated with the interactive entertainment software industry, which has been
cyclical in nature and has been characterized by periods of significant growth
followed by rapid declines. Our future operating results will depend on numerous
factors beyond our control, including:
o the popularity, price and timing of new interactive entertainment
software being released and distributed by us and our
competitors;
o international, national and regional economic conditions,
particularly economic conditions adversely affecting
discretionary consumer spending;
o changes in consumer demographics;
o the availability of other forms of entertainment; and
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<PAGE>
o critical reviews and public tastes and preferences, all of which
change rapidly and cannot be predicted.
In order to plan for acquisition and promotional activities, we must
anticipate and respond to rapid changes in consumer tastes and preferences. A
decline in the popularity of interactive entertainment software or particular
platforms could cause sales of our titles to decline dramatically. The period of
time necessary to develop new game titles, obtain approvals of manufacturers and
produce CD-ROMs or game cartridges is unpredictable. During this period,
consumer appeal of a particular title may decrease, causing projected sales to
decline.
Rapidly changing technology and potential obsolescence of software and platforms
could harm our operating results.
The interactive entertainment software market and the PC and video game
industries in general are associated with rapidly changing technology, which
leads to software and platform obsolescence and significant price erosion of
interactive entertainment software. Our titles have been developed primarily for
multimedia PCs and video game consoles, including Nintendo 64 and Sony's
PlayStation game console. Sony has recently announced the creation of the next
generation of the PlayStation. Sega has introduced its Dreamcast system in Japan
and plans to introduce it in the U.S. and Europe later this year. Nintendo has
stated that it is in the process of developing a new video game platform. If the
sales rates of multimedia PCs or video game consoles level off or decline as a
result of the anticipated release of new platforms or other technological
changes, sales of our titles developed for these platforms may decrease.
We need to anticipate technological changes and continually adapt our new
titles to emerging platforms to remain competitive in terms of price and
performance. Our success depends upon our ability and the ability of third-party
developers to adapt software to operate on and to be compatible with the
products of original equipment manufacturers and to function on various hardware
platforms and operating systems. If we design titles to operate on new
platforms, we may be required to make substantial development investments well
in advance of platform introductions, and we will be subject to the risks that
any new platform may not achieve initial or continued market acceptance. In
addition, our software designed for PCs must maintain compatibility with
computers, their operating software and their hardware accessories. If we are
unable to develop or adapt titles to operate on and be compatible with future
platforms that achieve market acceptance or to maintain compatibility with new
platforms as needed, we will be unable to offer titles that may appeal to
consumers in the future.
The introduction of new platforms and technologies can render existing
interactive entertainment software obsolete and unmarketable. We expect that as
more advanced platforms are introduced, consumer demand for software for older
platforms will decline. As a result, our titles developed for such platforms may
not generate sufficient sales to make such titles profitable. Obsolescence of
software or platforms could leave us with increased inventories of unsold titles
and limited amounts of new titles to sell to consumers.
A number of software publishers who compete with us have developed or are
currently developing software for use by consumers over the Internet. Future
increases in the availability of such software or technological advances in such
software or the Internet could result in a decline in platform-based software
and impact our sales. Direct sales of software by major manufacturers over the
Internet would adversely affect our distribution business.
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Returns of our titles may adversely affect our operating results.
Our arrangements with retailers for published titles require us to accept
returns for stock balancing, markdowns or defects. We establish a reserve for
future returns of published titles at the time of sales, based primarily on
these return policies and historical return rates, and we recognize revenues net
of returns. We have historically experienced a return rate of approximately 10%
of gross publishing revenues.
Our distribution arrangements with retailers generally do not give them the
right to return titles to us or to cancel firm orders, although we do accept
returns for stock balancing, markdowns and defects. We sometimes negotiate
accommodations to retailers, including price discounts, credits and returns,
when demand for specific titles falls below expectations. Historically, less
than 1% of distribution revenues represent write-offs for returns.
Our sales returns and allowances for the years ended October 31, 1997 and
1998 and the six months ended April 30, 1999 were $8,330,705, $13,672,432 and
$8,735,701. If return rates significantly exceed our estimates, our operating
results will be materially adversely affected.
Our quarterly operating results may vary significantly.
We have experienced and may continue to experience wide fluctuations in
quarterly operating results as a result of:
o delays in the introduction of new titles;
o the size and timing of acquisitions;
o variations in sales of titles designed to operate on particular
platforms;
o development and promotional expenses relating to the introduction
of new titles, sequels or enhancements of existing titles;
o projected and actual changes in platforms;
o the timing and success of title introductions by our competitors;
o product returns;
o the accuracy of retailers' forecasts of consumer demand; and
o the timing of orders from major customers.
Sales of our titles are seasonal, with peak shipments typically occurring
in the fourth calendar quarter (our fourth and first fiscal quarters) as a
result of increased demand for interactive entertainment software during the
year-end holiday season.
The interactive entertainment software industry is highly competitive.
We compete for both licenses to properties and the sale of interactive
entertainment software with Sony, Nintendo and Sega, each of which is the
largest developer and marketer of software for its
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platforms. Sony and Nintendo currently dominate the industry and have the
financial resources to withstand significant price competition and to implement
extensive advertising campaigns, particularly for prime-time television. These
companies may also increase their own software development efforts.
In addition, we compete with domestic public and private companies,
international companies, large software companies and media companies. Many of
our competitors have far greater financial, technical, personnel and other
resources than we do, and many are able to carry larger inventories, adopt more
aggressive pricing policies and make higher offers to licensors and developers
for commercially desirable properties than we can. Our titles also compete with
other forms of entertainment such as motion pictures, television and audio and
video cassettes featuring similar themes, on-line computer programs and forms of
entertainment which may be less expensive or provide other advantages to
consumers.
Retailers typically have limited shelf space and promotional resources, and
competition is intense among an increasing number of newly introduced
interactive entertainment software titles for adequate levels of shelf space and
promotional support. Competition for retail shelf space is expected to increase,
which may require us to increase our marketing expenditures just to maintain
current levels of sales of our titles. Competitors with more extensive lines and
popular titles frequently have greater bargaining power with retailers.
Accordingly, we may not be able to achieve the levels of support and shelf space
that such competitors receive. Similarly, as competition for popular properties
increases, our cost of acquiring licenses for such properties is likely to
increase, possibly resulting in reduced margins. Prolonged price competition,
increased licensing costs or reduced operating margins would cause our profits
to decrease significantly.
We depend on console manufacturers for supplies of our games.
We depend on non-exclusive licenses with Sony, Nintendo and Sega both for
the right to publish titles for their platforms and for the manufacture of our
software designed for use on their platforms. Our licenses for the PlayStation,
Nintendo 64, Nintendo GameBoy and Sega Dreamcast platforms require that we
obtain approval for the publication of new titles on a title-by-title basis. As
a result, the number of titles we are able to publish for these platforms may be
limited. If any of these licenses were terminated, we would lack alternative
sources for the manufacture of titles for these platforms and would be unable to
develop and publish software developed for these platforms.
Each of Sony, Nintendo and Sega is the sole manufacturer of the titles we
publish under license from such manufacturer. Each platform license provides
that the manufacturer may raise prices for the titles at any time and grants the
manufacturer substantial control over the release of new titles. The relatively
long manufacturing cycle for cartridge-based titles for the Nintendo platform
(from 30 to 45 days) requires us to accurately forecast retailer and consumer
demand for our titles far in advance of sales. Nintendo cartridges are also more
expensive to manufacture than CD-ROMs, resulting in greater inventory risks for
those titles. Each of these manufacturers also publishes software for its own
platforms and manufactures titles for all of its other licensees and may choose
to give priority to its own titles or those of other publishers if it has
insufficient manufacturing capacity or if there is increased demand.
These manufacturers may not have sufficient production capacity to
satisfy our scheduling requirements during any period of sustained demand. If
manufacturers do not supply us with finished titles on favorable terms without
delays, our operations could be materially interrupted, and our operating
results could be adversely affected.
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<PAGE>
We may not be able to protect our proprietary rights or avoid claims that we
infringe on the proprietary rights of others.
We develop proprietary software and technologies and have obtained the
rights to publish and distribute software developed by third parties. We attempt
to protect our software and production techniques under copyright, trademark and
trade secret laws as well as through contractual restrictions on disclosure,
copying and distribution. We do not hold any patents or registered copyrights.
Interactive entertainment software is susceptible to unauthorized copying.
Unauthorized third parties may be able to copy or to reverse engineer our
software to obtain and use programming or production techniques that we regard
as proprietary. In addition, our competitors could independently develop
technologies substantially equivalent or superior to our technologies.
As the amount of interactive entertainment software in the market increases
and the functionality of this software further overlaps, we believe that
interactive entertainment software will increasingly become the subject of
claims that such software infringes the copyrights or patents of others. From
time to time, we receive notices from third parties alleging infringement of
their proprietary rights. Although we believe that our software and technologies
and the software and technologies of third-party developers and publishers with
whom we have contractual relations do not and will not infringe or violate
proprietary rights of others, it is possible that infringement of proprietary
rights of others may occur. Any claims of infringement, with or without merit,
could be time-consuming, costly and difficult to defend.
Our rapid expansion and acquisitions may strain our operations.
We have expanded through internal growth and acquisitions, which have
placed and may continue to place a significant strain on our management,
administrative, operational, financial and other resources. We have released a
significant number of titles on new platforms, expanded our publishing and
distribution operations, increased our advances to developers and manufacturing
expenditures, enlarged our work force and expanded our presence in international
markets. To successfully manage this growth, we must continue to implement and
improve our operating systems as well as hire, train and manage a substantial
and increasing number of management, technical, marketing, administrative and
other personnel. We may be unable to effectively manage rapidly expanded
operations which are geographically dispersed.
We have acquired rights to various properties and businesses, and we intend
to continue to pursue opportunities by making selective acquisitions consistent
with our business strategy. We may be unable to successfully integrate any new
personnel, property or business into our operations. If we are unable to
successfully integrate future personnel, properties or businesses into our
operations, we may incur significant charges.
Our publishing and distribution activities require significant amounts of
capital. We may seek to obtain additional debt or equity financing to fund the
cost of continuing expansion. The issuance of equity securities would result in
dilution to the interests of our stockholders.
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A limited number of customers may account for a significant portion of our
sales.
Sales to our five largest customers accounted for approximately 36.2%,
22.4% and 20.5% of our revenues for the years ended October 31, 1997 and 1998
and the six months ended April 30, 1999. The loss of our relationships with
principal customers or a decline in sales to principal customers could harm our
operating results. We have significant outstanding indebtedness and have granted
security interests to debtholders.
We have incurred substantial indebtedness in order to finance our expanded
operations. As of April 30, 1999, $31,169,276 was outstanding under a line of
credit agreement between our subsidiary Jack of All Games, Inc. and NationsBank,
N.A. The line of credit with NationsBank provides for borrowings of up to
$35,000,000 through September 30, 1999 and $45,000,000 thereafter. Borrowings
under the line of credit with NationsBank are collateralized by liens on
accounts receivable and inventory of our subsidiary, Jack of All Games, and are
guaranteed by us. The loan agreement contains certain financial covenants and
limits or prohibits Jack of All Games, subject to certain exceptions, from
declaring or paying cash dividends, merging or consolidating with another
corporation, selling assets (other than in the ordinary course of business),
creating liens and incurring additional indebtedness. If we default on our
obligations, NationsBank could elect to declare our indebtedness to be due and
payable and foreclose on our assets.
We are dependent upon our key executives and personnel.
Our success is largely dependent on the personal efforts of certain key
personnel. The loss of the services of one or more of these key employees could
adversely affect our business and prospects. Our success is also dependent upon
our ability to hire and retain additional qualified operating, marketing,
technical and financial personnel. Competition for qualified personnel in the
computer software industry is intense, and we may have difficulty hiring or
retaining necessary personnel in the future. If we fail to hire and retain
necessary personnel as needed, our business will be significantly impaired.
Rating systems for interactive entertainment software, potential legislation and
consumer opposition could inhibit sales of our products.
The home video game industry requires interactive entertainment software
publishers to provide consumers with information relating to graphic violence or
sexually explicit material contained in software titles. Certain countries have
also established similar rating systems as prerequisites for sales of
interactive entertainment software in such countries. We believe that we comply
with such rating systems and display the ratings received for our titles. Our
software titles generally receive a rating of "G" (all ages) or "T" (age 13 and
over), although certain of our titles receive a rating of "M" (age 18 and over),
which may limit the potential markets for these titles.
Several proposals have been made for federal legislation to regulate the
interactive entertainment software, motion picture and recording industries,
including a proposal to adopt a common rating system for interactive
entertainment software, television and music containing violence and sexually
explicit material. Consumer advocacy groups have also opposed sales of
interactive entertainment software containing graphic violence and sexually
explicit material by pressing for legislation in these areas and by engaging in
public demonstrations and media campaigns. If any groups were to target our
titles, we might be required to significantly change or discontinue a particular
title. In addition, certain retailers, such as WalMart, Kmart, Sears and Target
Stores, have declined to sell interactive entertainment software containing
graphic violence or sexually explicit material, which also limits the potential
markets for certain of our games.
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The market price of our common stock may be volatile.
The market price of the common stock may be highly volatile. Disclosures of
our operating results, announcements of various events by us or our competitors
and the development and marketing of new titles affecting the interactive
entertainment software industry may cause the market price of the common stock
to change significantly over short periods of time.
Future sales of shares of our common stock could affect the market price of our
common stock and our ability to raise additional capital.
We have previously issued a substantial number of shares of common stock,
which are eligible for resale under Rule 144 of the Securities Act, and may
become freely tradeable. We have also granted registration rights with respect
to a substantial number of shares of common stock, including shares issuable
upon the exercise of options and warrants. If holders of registration rights
choose to exercise such rights and sell shares of common stock in the public
market, or if holders of currently restricted shares choose to sell such shares
in the public market under Rule 144, the prevailing market price for the common
stock may decline. Future public sales of shares of common stock may adversely
affect the market price of our common stock or our future ability to raise
capital by offering equity securities.
We are subject to credit and collection risks.
Our sales are typically made on credit, with terms that vary depending upon
the customer and the demand for the particular title being sold. We do not hold
any collateral to secure payment by our customers. As a result, we are subject
to credit risks, particularly in the event that any of our receivables represent
sales to a limited number of retailers or are concentrated in foreign markets.
If we are unable to collect on accounts receivable as they become due and such
accounts are not covered by insurance, it could adversely affect our financial
condition. Our accounts receivable, less an allowance for doubtful accounts and
product returns, at April 30, 1999 were $47,381,170.
We are subject to risks and uncertainties of international trade.
Sales in international markets, primarily in the United Kingdom and other
countries in Europe and the Pacific Rim, have accounted for an increasing
portion of our revenues. For the years ended October 31, 1997 and 1998 and the
six months ended April 30, 1999, sales in international markets accounted for
approximately 5.9%, 21.6% and 27.7% of our revenues. We are subject to risks
inherent in foreign trade, including:
o increased credit risks;
o tariffs and duties;
o fluctuations in foreign currency exchange rates;
o shipping delays; and
o international political, regulatory and economic developments,
all of which can have a significant impact on our operating
results.
Sales in France and Germany are made in local currencies. We do not engage
in foreign currency hedging transactions.
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The Year 2000 risk may adversely affect us.
The inability of many existing computers to recognize and properly process
data as the Year 2000 approaches may cause many computer software applications
to fail or reach erroneous results. We have assessed potential issues that may
result from the Year 2000 and have recently upgraded our accounting and
management software for the purpose of becoming year 2000 compliant. We are in
the process of testing this upgraded software. We have contacted principal
third-party suppliers and customers to determine their Year 2000 readiness and
believe that such suppliers and customers are in the process of becoming Year
2000 compliant. However, any failure by us, our third-party suppliers or
customers to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain of our business operations. We have
not yet adopted a Year 2000 contingency plan.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of shares by the selling
stockholders.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
selling stockholders. Except as set forth below, none of the selling
stockholders has ever held any position or office with us or had any other
material relationship with us.
<TABLE>
<CAPTION>
Beneficial Ownership
of Shares of
Common Stock Shares to be Sold Shares Owned After Owned After
Selling Stockholder Prior to Offering in the Offering the Offering the Offering
- ------------------- ----------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
James F. Rose and
Barbara Rose .... 636,668 25,000 611,668 2.7%
John and Greta
Davidson ........ 430,000 25,000 405,000 1.8
John New ........ 6,500 6,500 -- --
Kevin New ....... 6,500 6,500 -- --
David Gillard ... 48,492 48,492 -- --
Interactive
Development, S.A 127,017 127,017 -- --
Anthony Shea .... 9,000 9,000 -- --
Evan Gappleburg . 6,500 6,500 -- --
Craig Schmell ... 6,500 6,500 -- --
</TABLE>
* Less than one percent.
This table assumes the sale of all of the shares offered.
James Rose and John Davidson are employees of our subsidiary Talonsoft,
Inc., and Barbara Rose and Greta Davidson are their spouses.
-13-
<PAGE>
PLAN OF DISTRIBUTION
We are registering shares of our common stock with this prospectus on
behalf of the selling stockholders. All references to selling stockholders in
this prospectus include donees and pledgees selling shares of common stock
received from a named selling stockholder after the date of this prospectus. We
have agreed to pay all expenses in connection with the registration of the
shares of common stock. The selling stockholders will bear all brokerage
commissions and similar selling expenses, if any, attributable to sales of their
shares. Sales of shares may be effected by the selling stockholders from time to
time in one or more types of transactions, any of which may involve crosses and
block transactions, made on Nasdaq, in the over-the-counter market, on a
national securities exchange, in privately negotiated transactions or otherwise
or in a combination of such transactions at prices and at terms and market
prices prevailing at the time of sale or at privately negotiated prices. These
transactions may or may not involve brokers or dealers.
Without limiting the generality of the foregoing, the shares may be sold in
one or more of the following types of transactions: (a) a block trade in which
the broker-dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus; (c) an exchange
distribution in accordance with the rules of such exchange; (d) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (e) face-to-face transactions between sellers and purchasers without a
broker-dealer. In effecting sales, brokers or dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate in the
resale. In addition, any shares covered by this prospectus which qualify for
sale pursuant to Section 4(1) of the Securities Act or Rule 144 promulgated
thereunder may be sold under such provisions rather than pursuant to this
prospectus.
In connection with distributions of the shares or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the shares registered in this prospectus in the course of hedging the positions
they assume with selling stockholders. The selling stockholders may also sell
shares short and deliver the shares to close out such short positions. The
selling stockholders may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the shares
registered in this prospectus, which the broker-dealer may resell pursuant to
this prospectus. The selling stockholders may also pledge the shares registered
in this prospectus to a broker or dealer, and, upon a default, the broker or
dealer may effect sales of the pledged shares pursuant to this prospectus.
Brokers or dealers may receive compensation in the form of commissions,
discounts or concessions from selling stockholders in amounts to be negotiated
in connection with sales. Such brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act. In this case, any
commissions, discounts or concessions received by broker-dealers and any profit
on the resale of the shares sold by them may be deemed to be underwriting
discounts or commissions under the Securities Act. Compensation to be received
by broker-dealers and retained by the selling stockholders in excess of usual
and customary commissions, will, to the extent required, be set forth in a
supplement to this prospectus. Any dealer or broker participating in any
distribution of the shares may be required to deliver a copy of this prospectus,
including any supplements, to any person who purchases any of the shares from or
through such dealer or broker.
-14-
<PAGE>
During such time as they may be engaged in a distribution of the shares
included in this prospectus, the selling stockholders are required to comply
with Regulation M promulgated under the Exchange Act. With certain exceptions,
Regulation M precludes any selling stockholder, any affiliated purchasers and
any broker-dealer or other person who participates in such distribution from
bidding for or purchasing, or attempting to induce any person to bid for or
purchase any security which is the subject of the distribution until the entire
distribution is complete. Regulation M also prohibits any bids or purchases made
in order to stabilize the price of a security in connection with the
distribution of that security. All of the foregoing may affect the marketability
of our common stock.
It is possible that a significant number of shares may be sold under this
prospectus. Accordingly, these sales or the possibility of such sales may have a
depressive effect on the market price of our common stock.
INDEMNIFICATION
The General Corporation Law of the State of Delaware contains provisions
permitting our directors and officers to be indemnified against judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees, as the result of an action or proceeding in which they may be involved by
reason of having been a director or officer. Our Certificate of Incorporation
includes a provision that limits the personal liability of our directors to us
or our stockholders for monetary damages arising from a breach of their
fiduciary duties as directors to the fullest extent now or hereafter permitted
by the Delaware General Corporation Law. This provision does not prevent us or
our stockholders from seeking equitable remedies, such as injunctive relief or
recision. If equitable remedies are found not to be available to stockholders in
any particular case, stockholders may not have any effective remedy against
actions taken by directors that constitute negligence or gross negligence.
Our Certificate of Incorporation provides that we shall indemnify our
officers and directors to the maximum extent permitted from time to time under
the Delaware General Corporation Law and requires us to advance expenses to any
director or officer to the extent that such indemnification and advancement of
expenses is permitted under such law, as it may from time to time be in effect.
In addition, our Bylaws require us to indemnify, to the fullest extent permitted
by law, any director, officer, employee or agent for acts which such person
reasonably believes are not in violation of our corporate purposes as set forth
in our Certificate of Incorporation. At present, the Delaware General
Corporation Law provides that, in order to be entitled to indemnification, an
individual must have acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to our best interests.
Insofar as indemnification against liabilities arising under the Securities
Act may be permitted to directors, officers and persons controlling us pursuant
to the foregoing provisions or otherwise, we have been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
LEGAL MATTERS
Tenzer Greenblatt LLP of New York, New York will pass upon the validity of
the shares of common stock being offered with this prospectus.
-15-
<PAGE>
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-KSB for the year ended October 31, 1998 have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements of Jack of All Games, Inc. as of and for the years
ended December 31, 1996 and December 31, 1997 have been included in reliance
upon the reports of Aronowitz, Chaiken & Hardesty, LLP, given upon the authority
of that firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed a registration statement with the Securities and Exchange
Commission including the shares offered by this prospectus. This prospectus
omits certain information contained in the Registration Statement as permitted
by the rules and regulations of the SEC. For further information, you should
read the registration statement, including the exhibits filed with it, which may
be examined without charge at the SEC's principal office in Washington, D.C. or
its regional offices in New York City and Chicago, Illinois. You can obtain
copies of materials at prescribed rates from the Public Reference Room of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and you can obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. Our electronic filings made through the SEC's Electronic Data
Gathering, Analysis and Retrieval System are publicly available through the
SEC's worldwide web site at http://www.sec.gov. Statements contained in this
prospectus as to the contents of any contract or other document referred to are
not complete. Where such contract or other document is an exhibit to the
registration statement, each such statement is deemed to be qualified in all
respects by the provisions of the exhibit.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended. We file reports, proxy statements and other information
with the SEC. These reports and other information can be read and copied at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, New York,
New York 10048. You can obtain information on the operation of public reference
facilities by calling the SEC at 1-800-SEC-0330. Copies of materials can also be
obtained at prescribed rates from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. Our electronic filings made through
the SEC's Electronic Data Gathering, Analysis and Retrieval System are publicly
available through the SEC's worldwide web site at http://www.sec.gov.
-16-
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
We have previously filed the following documents with the SEC. These
documents are incorporated by reference in and shall be deemed a part of this
prospectus:
(a) Annual Report on Form 10-KSB for the fiscal year ended October 31,
1998;
(b) Quarterly Report on Form 10-Q for the quarterly period ended January
31, 1999;
(c) Quarterly Report on Form 10-Q for the quarterly period ended April 30,
1999;
(d) Current Report on Form 8-K dated February 23, 1999; and
(e) The description of our common stock contained in our Registration
Statement on Form 8-A, together with any amendment or report filed
with the SEC for the purpose of updating such description.
All documents that we file pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, as amended, after the date of this
prospectus and before the termination of the offering of the securities under
this prospectus shall be deemed to be incorporated by reference in and a part of
this prospectus as of the date of filing with the SEC. Any statement
incorporated in this prospectus shall be deemed to be modified or superseded to
the extent that a statement contained in a subsequently filed document which is
deemed to be incorporated by reference in this prospectus modifies or supersedes
such statement. Any statement which has been subsequently modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this prospectus or the registration statement of which it is a part.
This prospectus incorporates by reference documents that are not presented
in or delivered with this prospectus. These documents, except for the exhibits,
are available without charge to any person, including any beneficial owner of
our securities, to whom this prospectus is delivered, upon written or oral
request. Requests should be directed to Take-Two Interactive Software, Inc., 575
Broadway, New York, New York 10012, Attention: Ryan A. Brant, telephone (212)
334-6633.
-17-
<PAGE>
================================================================================
We have not authorized any dealer, salesperson or any other person to give
any information or to make any representations other than those contained in
this prospectus. You must not rely on unauthorized information. This prospectus
does not offer to sell or solicit an offer to buy securities in any jurisdiction
in which it is unlawful. Neither the delivery of this prospectus nor any sale
made under this prospectus shall imply that the information in this prospectus
is correct as of any time after the date of this prospectus.
-----------------
TABLE OF CONTENTS
Page
Prospectus Summary...................................................... 2
Risk Factors............................................................ 4
Use of Proceeds......................................................... 13
Selling Stockholders.................................................... 13
Plan of Distribution.................................................... 14
Indemnification......................................................... 15
Legal Matters........................................................... 15
Experts................................................................. 16
Additional Information.................................................. 16
Available Information................................................... 16
Information Incorporated by Reference .................................. 17
================================================================================
================================================================================
260,509 Shares of
Common Stock
TAKE-TWO INTERACTIVE
SOFTWARE, INC.
-------------------------
PROSPECTUS
-------------------------
, 1999
================================================================================
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expenses payable in connection with the issuance and distribution of the
securities being registered (estimated except in the case of the registration
fee) are as follows:
Amount
------
Registration Fee $ 561.27
Printing 1,000.00
Legal and Accounting Fees and Expenses 10,000.00
Transfer Agents and Registrars Fees 1,000.00
Miscellaneous 2,438.73
TOTAL $15,000.00
==========
The above fees will be paid by the Company.
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("DGCL") contains
provisions entitling the Company's directors and officers to indemnification
from judgments, finds, amounts paid in settlement and reasonable expenses
(including attorneys' fees) as the result of an action or proceeding in which
they may be involved by reason of having been a director or officer of the
Company. In its Certificate of Incorporation, the Company has included a
provision that limits, to the fullest extent now or hereafter permitted by the
DGCL, the personal liability of its directors to the Company or its stockholders
for monetary damages arising from a breach of their fiduciary duties as
directors. Under the DGCL as current in effect, this provision limits a
director's liability except where such director (i) breaches his duty of loyalty
to the Company or its stockholders, (ii) fails to act in good faith or engaged
in intentional misconduct or a knowing violation of law, (iii) authorizes
payment of an unlawful dividend or stock purchase or redemption as provided in
Section 174 of the DGCL, or (iv) obtains an improper personal benefit. This
provision does not prevent the Company or its stockholders from seeking
equitable remedies, such an injunctive relief or recision. If equitable remedies
are found not to be available to stockholders in any particular case,
stockholders may not have any effective remedy against actions taken by
directors that constitute negligence or gross negligence.
The Certificate of Incorporation also includes provisions to the effect
that (subject to certain exceptions) the Company shall, to the maximum extent
permitted from time to time under the law of the State of Delaware, indemnify,
and upon request shall advance expenses to, any director or officer to the
extent that such indemnification and advancement of expenses is permitted under
such law, as it may from time to time be in effect. In addition, the By-laws
require the Company to indemnify, to the fullest extent permitted by law, any
director, officer, employee or agent of the Company for acts which such person
reasonably believes
II-1
<PAGE>
are not in violation of the Company's corporate purposes as set forth in the
Certificate of Incorporation. At present, the DGCL provides that, in order to be
entitled to indemnification, an individual must have acted in good faith and in
a manner he or she reasonably believed to be in or not opposed to the Company's
best interests.
Item 16. Exhibits
(a) Exhibits
Exhibit No.
- -----------
5 Opinion of Tenzer Greenblatt LLP regarding legality of securities being
registered.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Aronowitz, Chaiken & Hardesty, LLP.
23.3 Consent of Tenzer Greenblatt LLP (included in Exhibit 5).
24 Power of Attorney (included in the signature page).
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(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; 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.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed 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.
II-2
<PAGE>
(4) For the purpose of determining any liability under the Securities
Act of 1933, each filing of an annual report pursuant to Section 13(a) or
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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the small business
issuer 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 Securities Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, in the city of New
York, state of New York, on the 12th day of July 1999.
TAKE-TWO INTERACTIVE SOFTWARE, INC.
By:/s/ Ryan A. Brant
-------------------------
Ryan A. Brant
Chief Executive Officer
Each person whose signature appears below authorizes each of Ryan A. Brant
and Barbara A. Ras or either of them as his true and lawful attorney-in-fact
with full power of substitution to execute in the name and on behalf of each
person, individually and in each capacity stated below, and to file any and all
amendments to this registration statement, including any and all post-effective
amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following person in the capacities
and on the dates stated.
Signature Title Date
- --------- ----- ----
/s/ Ryan A. Brant Chief Executive Officer and Director July 12, 1999
- --------------------------- (Principal Executive Officer)
Ryan A. Brant
/s/ Larry Muller Chief Financial Officer July 12, 1999
- --------------------------- (Principal Financial Officer)
Larry Muller
/s/ Anthony R. Williams Chief Operating Officer and Director July 12, 1999
- ---------------------------
Anthony R. Williams
/s/ Barbara A. Ras Chief Accounting Officer (Principal July 12, 1999
- --------------------------- Accounting Officer) and Secretary
Barbara A. Ras
/s/ Oliver R. Grace, Jr. Director July 12, 1999
- ---------------------------
Oliver R. Grace, Jr.
/s/ Neil S Hirsch Director July 12, 1999
- ---------------------------
Neil S. Hirsch
Vice President of International July _, 1999
- --------------------------- Operations and Director
Kelly Sumner
/s/ Robert Flug
- --------------------------- Director July 12, 1999
Robert Flug
II-4
[LETTERHEAD OF TENZER GREENBLATT LLP]
July 12, 1999
Take-Two Interactive Software, Inc.
575 Broadway
New York, New York 10012
Gentlemen:
You have requested our opinion with respect to the offer and sale by
certain selling stockholders of up to an aggregate of 260,509 shares of Common
Stock (the "Shares") of Take-Two Interactive Software, Inc. (the "Company")
pursuant to a Registration Statement (the "Registration Statement") on Form S-3,
under the Securities Act of 1933, as amended (the "Act").
We have examined originals, or copies certified or otherwise identified to
our satisfaction, of such documents and corporate and public records as we deem
necessary as a basis for the opinion hereinafter expressed. With respect to such
examination, we have assumed the genuineness of all signatures appearing on all
documents presented to us as originals, and the conformity to the originals of
all documents presented to us as conformed or reproduced copies. Where factual
matters relevant to such opinion were not independently established, we have
relied upon certificates of appropriate state and local officials, and upon
certificates of executive officers and responsible employees and agents of the
Company.
Based upon the foregoing, it is our opinion that the Shares have been duly
authorized, validly issued and fully paid and nonassessable.
We hereby consent to use of this opinion as Exhibit 5 to the Registration
Statement, and to the use of our name as counsel in connection with the
Registration Statement and in the Prospectus forming a part thereof. In giving
this consent, we do not thereby concede that we come within the categories of
persons whose consent is required by the Act or the General Rules and
Regulations promulgated thereunder.
Very truly yours,
/s/ Tenzer Greenblatt LLP
TENZER GREENBLATT LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated December 19, 1999, relating to the
financial statements and financial statement schedule of Take-Two Interactive
Software, Inc. which appear in Take-Two Interactive Software, Inc.'s Annual
Report on Form 10-KSB for the year ended October 31, 1998. We also consent to
the references to us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
July 12, 1999
1301 Avenue of the Americas
New York, New York 10019
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated February 26, 1998 relating to the
financial statements of Jack of All Games, Inc. which appears in Take-Two
Interactive Software, Inc.'s Annual Report on Form 10-KSB for the year ended
October 31, 1998. We also consent to the references to us under the headings
"Experts" in such Registration Statement.
/s/ Aronowitz, Chaiken & Hardesty, LLP
Certified Public Accountants
Cincinnati, Ohio
July 12, 1999
