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| February 28, 2007 |
VIA
EDGAR
Securities
and Exchange Commission
Division
of Corporation Finance
One
Station Place
100
F
Street, NE
Washington,
D.C. 20549-4561
| Attention: |
Megan
Akst
|
| Staff Accountant |
| Re: |
Item
4.02 Form 8-K
|
| Filed on December 11, 2006 |
| File No. 000-29230 |
Dear
Ms.
Akst:
Set
forth below please find the response of Take-Two Interactive Software, Inc.
(the “Company”) to the comment of the Staff of the Securities and
Exchange Commission (the “SEC”) set forth in the letter dated December
12, 2006 from the Staff to the Company, with respect to Item 4.02 of the Form
8-K referenced above.
For
convenient reference, the Company has restated below in italics the Staff’s
comment set forth in the comment letter.
Form
8-K filed December 11, 2006
| 1. |
We
note the disclosures in your Form 8-K regarding questions over back-dating
of stock options. Please tell us the current status of your review
and
explain what consideration you have given to the accounting and disclosure
implications of SFAS No. 5, “Accounting for Contingencies” and FIN 14,
“Reasonable Estimation of the Amount of a Loss.” In this regard, tell us
what consideration you gave to including disclosure and discussion
of this
issue’s potential impact on the qualification of the Company’s stock
option plan, claims or litigation by affected option and stockholders,
and
possible legal or regulatory action by the Internal Revenue Service
or
other regulatory bodies. Further, please amend your report to include
the
time frame for filing restatements. Refer to Item 4.02(a) of Form
8-K.
|
As
the
Company notified you, and pursuant to its Form 8-K filed on January 22, 2007,
the Special Committee of the Company’s Board of Directors (the “Special
Committee”) has completed its review of the Company’s historical option granting
practices. Based on the findings and conclusions of the Special Committee,
the
Company has been working with the independent accountants retained by counsel
for the Special Committee of its Board of Directors as well as its current
and
former independent registered public accounting firms to quantify the additional
compensation charges to be taken and to prepare restated financial statements
for all appropriate periods. As our counsel explained to you, we are now
approaching the end of this process, and expect to file our Form 10-K for the
fiscal year ended October 31, 2006 (the “Form 10-K”) later today. In the Form
10-K, the Financial Statements and Supplementary data included in accordance
with Item 8 Financial
Statements and Supplementary Data will
include a restated consolidated balance sheet as of October 31, 2005, and the
related consolidated statements of operations, stockholders’ equity and cash
flows for each of the fiscal years ended October 31, 2005 and 2004, and each
of
the quarters in fiscal year 2005, and Item 6 Selected
Financial Data will
include restated financial results as of and for the fiscal years ended
October 31, 2005, 2004, 2003, and 2002, and Item 7 Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
will
include restated results for the fiscal years ended October 31, 2005 and October
31, 2004.
The
Company is including an explanatory note at the beginning of the Form 10-K,
and
in Note 2 to the financial statements contained therein, that describes the
findings and conclusions of the review as well as the process pursuant to which
the revised measurement dates for certain option grants were determined.
The
Company will also address its assessment of several contingencies in the Form
10-K based on its consideration of SFAS No. 5 and FIN 14. As previously
disclosed, the Company has been named as a defendant in a consolidated purported
class action lawsuit that alleges violations of Sections 10(b) and 20(a) of
the
Securities Exchange Act of 1934 related to allegedly improper stock option
granting practices at the Company and a consolidated purported derivative action
based on purported breaches of fiduciary duties by certain of our current and
former officers and directors in connection with, among other things, the
granting of stock options to certain officers and directors since 1997. The
Company states in the Form 10-K that it intends to defend and seek dismissal
of
these matters and, with respect to the derivative action, that it has been
advised that the individual defendants will vigorously defend such action.
However, the Company is unable to predict the outcome of these matters and,
while the Company is unable to reasonably estimate the amount of loss it would
incur, if any, if these matters are determined in a manner adverse to the
Company, it notes that such matters, either singly or in the aggregate, could
result in the imposition of significant judgments, fines and/or penalties which
could have a material adverse effect on its financial condition, cash flows
and
results from operations.
As
a
result of the errors in determining measurement dates, the Company has also
considered the impact that the errors had on the qualification of certain of
the
previously granted options as Incentive Stock Option (ISO) grants rather than
as
non-qualified options and where appropriate has recorded payroll withholding
and
other tax-related adjustments for these options. The Company has also added
a
paragraph in the Form 10-K relating to possible losses of certain previously
claimed tax deductions under Section 162(m) of the Internal Revenue Code of
1986, the fact that the Company is in discussions with the IRS to settle
uncertainties regarding additional tax liability and that there can be no
assurance that the Company can favorably settle the matter with the
IRS.
In
addition, as previously reported, the Company (i) has been informed that the
Securities and Exchange Commission is conducting an informal non-public investigation
into certain stock option grants made by the Company from January 1997 to the
present, (ii) received grand jury subpoenas issued by the District Attorney
of the County of New York requesting production of documents covering various
periods beginning on January 1, 1997 including, among other subjects, the Company’s
granting of stock-based compensation, and (iii) received a request for information
from the Internal Revenue Service that includes a request for records relating
to the grant and exercise of options and tax deductions taken by us pursuant
to Internal Revenue Code 162(m) for the period from October 31, 2000 to October
31, 2004. The Company notes that it is cooperating with each of these investigations,
cannot predict their outcome and that it has recorded its estimate of a contingent
loss associated with the taxes as described above.
We
thank
the staff for continuing to work with us throughout this process.
|
Very
truly yours,
/s/
Karl H. Winters
Karl
H. Winters
|