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Take-Two Restates Financial Results, CFO Resigns, SEC Investigates
Last night Take-Two finally let the world in on what's been going on behind the scenes with the company's finances, and the results were apparently enough to prompt the CFO to resign and the SEC to investigate.
In December, the company announced it was going to restate its financial results for 2000 and the first three quarters of fiscal 2001 to correct accounting errors in which sales of products were recognized as revenue and later returned or purchased by the company. Take-Two lowered its reported fiscal 2000 revenues by $23 million, to $364 million. The company eliminated $3.8 million in net sales for unshipped products and $2.6 million in license revenue in 2000, and took a charge of $19.2 million for losses incurred by Gathering of Developers, which Take-Two acquired in April 2000. However, the company also increased revenues for the first three quarters of fiscal 2001 by $19 million, to $328 million. That leaves a descrepancy of about $4.3 million between the two periods' restatements, which the accountants will have to figure out. Shortly after releasing the revised numbers, the company said announced it was being investigated by the Securities and Exchange Commission, and announced that its Chief Financial Officer, Albert Pastino, resigned for "personal reasons." Take-Two said Pastino will be replaced by Karl Winters, who served as CFO of United Auto Group and worked for 10 years in Coopers & Lybrand's auditing unit. Today the company announced its Q4 2001 results, which ended October 31, and reported a loss of $5.3 million (15 cents per share). Last year Take-Two posted a net profit $8.7 million (27 cents per share). Sales were $123.3 million, up from $108.1 million a year earlier. There were some other nuggets about the company's business operations in its 10-K, which aren't frequently found in SEC filings:
In connection with its acquisition of the Duke Nukem' franchise in December 2000, Take-Two is obligated to pay $6 million in cash upon delivery of the final PC version of Duke Nukem' Forever.
The April 2000 acquisition of the remaining 80.1% of the stock of Gathering of Developers was purchased with 1,060,000 shares of common stock. At the time, the stock price was fluctuating between $9-$12 per share.
The acquisition of PopTop Software in July 2000, was purchased for 559,100 shares of common stock. At the time, the stock price was fluctuating between $10-$13 per share.
In July 2001, Take-Two sold Jack of All Games UK, a video game distributor, to Jay Two Limited for approximately $215,000. In connection with the sale, Jay Two Limited assumed net liabilities of $436,000.