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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB/A
|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended October 31, 1998
OR
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
0-29230
(Commission File No.)
TAKE-TWO INTERACTIVE SOFTWARE, INC.
(Exact name of Small Business Issuer as specified in its charter)
Delaware 51-0350842
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
575 Broadway, New York, New York 10012
(Address of principal executive offices including zip code)
Small Business Issuer's telephone number, including area code: (212) 941-2988
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Check whether the Small Business Issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days. Yes |X| No |_|
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of Small Business Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB/A or any
amendment to this Form 10-KSB/A. |X|
The Small Business Issuer's revenues for the fiscal year ended October 31, 1998
were $191,071,672.
The aggregate market value of the Small Business Issuer's Common Stock held by
non-affiliates as of January 22, 1999 was approximately $192,680,000. As of
January 22, 1999 there were 18,351,924 shares of the Small Business Issuer's
Common Stock outstanding.
Documents Incorporated by Reference:
None
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<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant.
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Ryan A. Brant....................................... 27 Chief Executive Officer and Director
Kelly Sumner........................................ 37 Vice President of International Operations and
Director
Anthony R. Williams................................. 40 Chief Operating Officer and Director
Larry Muller........................................ 41 Chief Financial Officer
Barbara A. Ras...................................... 36 Chief Accounting Officer and Secretary
Oliver R. Grace, Jr................................. 45 Director
Neil S. Hirsch...................................... 51 Director
Robert Flug......................................... 51 Director
Robert Alexander.................................... 29 Director
</TABLE>
Ryan A. Brant has been Chief Executive Officer and a director of the
Company since its inception. Mr. Brant received a B.S. degree in Economics from
the University of Pennsylvania's Wharton School of Business.
Kelly Sumner has been a director of the Company since December 1997. Mr.
Sumner has been President of Take-Two Interactive Software Europe Limited since
July 1997. Prior thereto, from April 1993 to July 1997, Mr. Sumner was President
and Chief Operating Officer of Gametek, Inc. From June 1979 to April 1993, Mr.
Sumner was Managing Director of the UK subsidiary of Commodore Business
Machines.
Anthony R. Williams has been a director of the Company since March 1998.
Mr. Williams has been Chief Operating Officer of the Company since February
1998. Prior to joining the Company, Mr. Williams was employed in various
position at Acclaim Entertainment from April 1988 to February 1998, most
recently as Executive Vice President, Mergers and Acquisitions. Mr. Williams
also serves as a director of the Near East Foundation. Mr. Williams received a
B.A. in economics from Cambridge University.
Larry Muller has been Chief Financial Officer of the Company since January
1999 and Chief Financial Officer and Chief Operating Officer of Alliance
Inventory Management, Inc. since December 1997. Mr. Muller co-founded Alliance
Distributors in 1989 and served as its Chairman and Chief Financial Officer
until Alliance Distributors was acquired by the Company in December 1997. Mr.
Muller received a B.A. in economics from Stonybrook University in 1979.
Barbara A. Ras, CPA, has served as the Chief Accounting Officer of the
Company since October 1998 and Secretary of the Company since April 1997. From
October 1994 to October 1998, Ms. Ras served as Controller of the Company. Prior
to joining the Company, Ms. Ras was employed as a tax accountant from September
1992 to September 1994, and as an internal auditor with The New York Times
Company from March 1988 to June 1991. Ms. Ras holds a B.S. degree in Accounting
from St. John's University, and a Masters degree in Taxation from the State
University of New York at Albany.
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<PAGE>
Oliver R. Grace, Jr. has been a director of the Company since April 1997.
Mr. Grace, a private investor, has been the Chairman of the Board of Andersen
Group, Inc., a dental products and video broadcasting equipment manufacturing
company, since 1990. Mr. Grace has also been a director of Republic Automotive
Parts, Inc., a distributor of replacement parts for the automotive aftermarket,
since 1982. Mr. Grace is a general partner of Anglo American Security Fund,
L.P., a private investment fund.
Neil S. Hirsch has been a director of the Company since May 1995. Mr.
Hirsch has been the President and Chief Executive Officer of Loanet, Inc., a
worldwide communications network managing securities lending transactions of
banks and brokerage firms since March 1994. From 1969 to January 1990, Mr.
Hirsch was Chairman, Chief Executive Officer and President of Telerate, Inc., a
financial information provider, which was acquired by Dow Jones & Co. Inc. Mr.
Hirsch served as a consultant to Telerate, Inc. until September 1993. Mr. Hirsch
served on the Board of Directors of Dow Jones & Co. Inc. from 1990 to May 1993.
Mr. Hirsch was elected to the Information Industry Hall of Fame in 1985.
Robert Flug has been a director of the Company since February 1998. Mr.
Flug has been the President and Chief Operating Officer of S.L. Danielle, a
women's apparel company, since September 1987. Mr. Flug received a B.S. in
Business Administration from New York University.
Robert Alexander has been a director of the Company since August 1998 and
has been President of Jack of All Games, Inc. since August 1996. From July 1993
to August 1996, Mr. Alexander was a Vice President of sales for Electro Source,
Inc.
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<PAGE>
Item 10. Executive Compensation.
The following table sets forth the cash compensation paid by the Company
during the fiscal years ended October 31, 1996, 1997 and 1998 to its Chief
Executive Officer and its four most highly compensated executive officers (the
"Named Executives"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Award
--------------------------------------------------------------------- ------------
Securities
Year Ended Other Annual Underlying
Name and Principal Position October 31, Salary($) Bonus($) Compensation(1) Options(#)
- --------------------------- ----------- --------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Ryan A. Brant
Chief Executive Officer............. 1998 158,667 218,785 -- --
1997 125,000 -- -- 50,000(2)
1996 119,319 -- -- --
Larry Muller
Chief Financial Officer(3).......... 1998 161,933 25,122 -- 20,000(2)
Anthony R. Williams
Chief Operating Officer(4).......... 1998 164,039(5) -- -- 150,000(6)
Barbara A. Ras
Chief Accounting Officer
and Secretary..................... 1998 114,167 -- -- 30,000(2)
1997 100,000 10,000 -- 25,000(2)
1996 82,233 -- -- --
Kelly Sumner
Vice President of International
Operations(7)....................... 1998 166,220 119,175 -- 125,000(8)
1997 43,447 51,016 -- --
</TABLE>
- ------------
(1) The aggregate value of benefits to be reported under the "Other Annual
Compensation" column did not exceed the lesser of $50,000 or 10% of the
total of annual salary and bonus reported for the Named Executives.
(2) Represents options granted under the Company's 1997 Stock Option Plan.
(3) Mr. Muller joined the Company in December 1997.
(4) Mr. Williams joined the Company in February 1998.
(5) Includes $15,200 paid as consulting fees prior to employment with the
Company.
(6) Represents options to purchase 120,000 shares granted under the Company's
1997 Stock Option Plan and non-plan options to purchase 30,000 shares.
(7) Mr. Sumner joined the Company in July 1997.
(8) Represents options to purchase 85,000 shares granted under the Company's
1997 Stock Option Plan and non-plan options to purchase 40,000 shares.
-4-
<PAGE>
The following table sets forth information concerning options granted in
the year ended October 31, 1998 to the Named Executives:
Option Grants in Fiscal Year Ended October 31, 1998
<TABLE>
<CAPTION>
Individual Grants
--------------------------------
Number of Potential Realizable
Securities Percent of Total Value at Assumed
Underlying Options Granted Exercise Annual Rates of Stock
Options to Employees in Price Expiration Price Appreciation for
Name Granted (#) Fiscal Year(%) ($/Sh) Date Option Term (1)
- ---- ----------- ---------------- -------- ---------- ----------------------
5%($) 10%($)
----- ------
<S> <C> <C> <C> <C> <C> <C>
Ryan A. Brant............ -- -- -- -- -- --
Larry Muller............. 20,000 1.2 5.1875 8/31/2003 28,600 63,400
Anthony R. Williams...... 30,000 2.50 8/31/2003 20,700 45,900
120,000 9.1 5.1875 8/31/2003 171,600 380,400
Barbara A. Ras........... 30,000 1.8 5.1875 8/31/2003 42,900 95,100
Kelly Sumner............. 40,000 5.00 12/31/2002 55,200 122,000
85,000 7.6 5.1875 12/31/2002 121,550 269,450
</TABLE>
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(1) The potential realizable value columns of the table illustrate values that
might be realized upon exercise of the options immediately prior to their
expiration, assuming the Company's Common Stock appreciates at the compounded
rates specified over the term of the options. These numbers do not take into
account provisions of certain options providing for termination of the option
following termination of employment or nontransferability of the options and do
not make any provision for taxes associated with exercise. Because actual gains
will depend upon, among other things, future performance of the Common Stock,
there can be no assurance that the amounts reflected in this table will be
achieved.
The following table sets forth information concerning the value of options
exercised during the year ended October 31, 1998 and the value of unexercised
stock options held by the Named Executives as of October 31, 1998:
Aggregated Option Exercises and Year End Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Shares Value at October 31, 1998 (#) at October 31, 1998 ($)*
Acquired on Realized ---------------------------- -----------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ryan A. Brant .................. 112,000 642,960 391,880 30,000 2,095,090 30,000
Larry Muller ................... -- -- -- 20,000 -- 26,250
Anthony R. Williams ............ -- -- -- 150,000 -- 277,500
Barbara A. Ras ................. -- -- 70,243 25,000 205,844 35,625
Kelly Sumner ................... -- -- 10,000 115,000 15,000 156,563
</TABLE>
- ----------
* Year-end values for unexercised in-the-money options represent the positive
spread between the exercise price of such options and the fiscal year-end market
value of the Common Stock, which was $6.50 on October 31, 1998.
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<PAGE>
Director Compensation
Non-employee directors currently receive no cash compensation for serving
on the Board of Directors other than reimbursement of reasonable expenses
incurred in attending meetings. In December 1998, the Company issued to Mr. Flug
options to purchase 10,000 shares of Common Stock at a price of $5.875 per
share.
Employment Agreements
Ryan A. Brant entered into an employment agreement with the Company for a
five-year term commencing August 1, 1998. Pursuant to the employment agreement,
Mr. Brant agreed to devote his full time to the business of the Company as its
Chief Executive Officer. The employment agreement provides that Mr. Brant is
entitled to receive a base salary of $233,000 and a bonus equal to $20,000 per
fiscal quarter in the event the Company achieves certain earnings levels. The
Company also agreed to issue to Mr. Brant options to purchase 100,000 shares of
Common Stock at an exercise price of $6.25 per share. In the event the
employment agreement is terminated under certain circumstances (including in the
event of a change of control), Mr. Brant will be entitled to receive 2.99 times
his annualized compensation. The employment agreement contains covenants
restricting Mr. Brant from engaging in any activities competitive with the
business of the Company during the term of the agreement and for a period of one
year thereafter.
Anthony R. Williams entered into an employment agreement with the Company
which provides for Mr. Williams to devote his full time to the business of the
Company as its Chief Operating Officer. The agreement provides that Mr. Williams
is entitled to receive a base salary of $205,000 and a bonus based on the
Company's financial performance. The Company and Mr. Williams are currently
negotiating an amendment to such agreement.
Larry Muller entered into an employment agreement with the Company for a
three-year term commencing January 29, 1998. Mr. Muller agreed to devote his
full time to the business of the Company as its Chief Financial Officer. The
agreement provides that Mr. Muller is entitled to receive a base salary of
$233,000 and a bonus based on the Company's financial performance. The Company
also agreed to issue to Mr. Muller options to purchase 10,000 shares of Common
Stock at an exercise price of $5.875 per share. In the event the employment
agreement is terminated under certain circumstances (including in the event of a
change of control), Mr. Muller will be entitled to receive 2.99 times the total
salary and bonus received during the 12 months prior to termination. Mr.
Muller's employment agreement contains confidentiality and non-compete
provisions.
Kelly Sumner, Vice President of International Operations and a director of
the Company, entered into an employment agreement (as amended) with Take-Two
Interactive Software Europe Limited ("TTE"), a wholly-owned subsidiary of the
Company, in July 1997, pursuant to which Mr. Sumner agreed to devote his full
time as President and Managing Director of TTE for a three-year term. The
agreement provides that Mr. Sumner is entitled to an annual salary of
(pound)100,000 ($168,000), and a bonus equal to $15,000 per fiscal quarter in
the event TTE achieves certain earnings levels. Mr. Sumner agreed not to engage
in any business which is a competitor of TTE in either England or Wales during
the term of the employment agreement and for a period of six months after
termination of his employment with TTE (or an affiliate or subsidiary of TTE).
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<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of February 16, 1999,
relating to the beneficial ownership of shares of Common Stock by (i) each
person or entity who is known by the Company to own beneficially 5% or more of
the outstanding Common Stock, (ii) each of the Company's directors, (iii) each
of the Named Executives and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Number of Shares Percentage of Outstanding
of Common Stock Common Stock
Name and Address of Beneficial Owner(1) Beneficially Owned(2) Beneficially Owned
- --------------------------------------- --------------------- ------------------
<S> <C> <C>
Peter M. Brant(3)............................... 3,048,749 16.4%
BMG Entertainment............................... 1,850,000 9.9
Robert Alexander................................ 1,375,000 7.4
David Rosenbaum(4).............................. 1,252,500 6.7
Oliver R. Grace, Jr.(5)......................... 781,338 4.2
Ryan A. Brant(6)................................ 718,563 3.8
Neil S. Hirsch(7)............................... 222,276 1.2
Larry Muller(8)................................. 164,167 *
Robert Flug(9).................................. 110,000 *
Anthony R. Williams(10)......................... 100,000 *
Barbara A. Ras(11).............................. 70,243 *
Kelly Sumner(12)................................ 62,500 *
All directors and executive officers as a
group (nine persons)(13)........................ 3,604,087 18.9
</TABLE>
- ----------
* Less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner is 575
Broadway, New York, New York 10012.
(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities which may be acquired by such person within
60 days from the date of this report upon the exercise of options, warrants
or convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that options that are held by such person (but not
those held by any other person) and which are exercisable within 60 days of
the date of this report, have been exercised.
(3) Includes 1,941,930 shares of Common Stock held by Brant Allen Industries
Incentive Profit Sharing Plan.
(4) Includes 15,000 shares of Common Stock issuable upon the exercise of
options granted under the 1997 Plan which are currently exercisable.
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<PAGE>
(5) Includes: (i) 653,678 shares of Common Stock owned of record by Anglo
American Security Fund, L.P. ("Anglo American"), of which Mr. Grace is a
general partner, (ii) 17,960 shares of Common Stock issuable upon the
exercise of options owned by Anglo American, (iii) 88,913 shares of Common
Stock owned by an affiliated entity and (iv) 20,787 shares of Common Stock
issuable upon the exercise of options owned by Mr. Grace.
(6) Includes (i) 371,880 shares of Common Stock issuable upon the exercise of
options granted under the 1994 Plan which are currently exercisable and
(iii) 80,000 shares of Common Stock issuable upon the exercise of options
granted under the 1997 Plan which are currently exercisable. Does not
include 25,000 shares of Common Stock held by Mr. Brant's wife, as to which
Mr. Brant disclaims beneficial ownership.
(7) Represents shares of Common Stock held by Bridgehampton Holdings, Inc., an
entity controlled by Mr. Hirsch.
(8) Includes 16,667 shares of Common Stock issuable upon the exercise of
options granted under the 1997 Plan which are currently exercisable.
(9) Includes 48,500 shares of Common Stock held by S.L. Danielle, Inc. and
10,000 shares of Common Stock issuable upon the exercise of options granted
under the 1997 Plan which are currently exercisable.
(10) Represents 60,000 shares of Common Stock issuable upon the exercise of
options granted under the 1997 Plan which are currently exercisable and
15,000 shares of Common Stock issuable upon the exercise of non-plan
options which are currently exercisable.
(11) Includes 40,000 shares of Common Stock issuable upon the exercise of
options granted under the 1997 Plan, which are currently exercisable.
(12) Represents 62,500 shares of Common Stock issuable upon the exercise of
options.
(13) Includes currently exercisable options to purchase an aggregate of 694,794
shares of Common Stock.
-8-
<PAGE>
Item 12. Certain Relationships and Related Transactions.
In connection with a private financing in September 1996, Peter M. Brant, a
principal stockholder of the Company, Neil Hirsch, a director of the Company,
and Anglo American, of which Oliver R. Grace, Jr., a director of the Company, is
a general partner, purchased $1,565,180, $72,228 and $212,867, respectively,
principal amount of notes and received five-year warrants to purchase 312,339,
14,413 and 42,387 shares, respectively, at an exercise price of $.01 per share.
In April 1997, the Company repaid $212,867 principal amount of such notes to
Anglo American. In January 1997, Peter M. Brant agreed to extend the repayment
of his portion of such notes until May 14, 1998, in consideration for which
extension, the interest rate on the note held by Mr. Brant was increased to 14%
per annum. In October 1998, the Company repaid $72,228 principal amount of such
notes to Mr. Hirsch. In August 1997, the Company repaid $750,000 principal
amount of such indebtedness to Mr. Brant and, in September 1997, obtained bank
financing to repay the balance of $815,180 principal amount of such
indebtedness.
The Company leases its office space in New York from 575 Broadway
Corporation, a corporation controlled by Peter M. Brant.
In February 1997, Anglo American, of which Oliver R. Grace, Jr., a director
of the Company, is a general partner, agreed to convert shares of Series B
Convertible Preferred Stock into 409,791 shares of Common Stock. As an
inducement to enter into such agreement, the Company issued to Anglo American
options to purchase 38,746 shares of Common Stock at an exercise price of $2.41
per share. In addition, the Company entered into a three-year consulting
agreement with an affiliate of Anglo American, pursuant to which such affiliate
agreed to provide management consulting services to the Company in consideration
of the payment of $100,000 over the term of the agreement, of which $33,333 was
paid in April 1997 and $16,667 was paid in fiscal 1998. The Company also paid
$35,000 to Anglo American in dividends on the Series B Preferred Stock in fiscal
1997.
The Company believes that all of such transactions and arrangements were
advantageous to the Company and were on terms no less favorable to the Company
than could have been obtained from unaffiliated third parties.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly signed this report on its behalf
by the undersigned, thereunto duly authorized on the 23rd day of February 1999.
TAKE-TWO INTERACTIVE SOFTWARE, INC.
By: /s/ Ryan A. Brant
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Ryan A. Brant, Chief Executive Officer
By: /s/ Larry Muller
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Larry Muller, Chief Financial Officer
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