Take-Two Interactive Software, Inc.

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2,866,553 Shares

Common Stock

This Prospectus relates to 1,840,000 shares of Common Stock issuable
upon exercise of warrants (the "Public Warrants") issued in connection with the
Company's initial public offering in April 1997. Each Public Warrant entitles
the holder thereof to purchase one share of Common Stock at a price of $5.50
(subject to adjustment) at any time until April 14, 2002. The public warrants
are redeemable by the Company at any time upon notice of not less than 30 days,
at a price of $.10 per warrant, provided that the closing bid quotation of the
Common Stock on all 20 trading days ending on the third trading day prior to the
day on which the Company gives notice (the "Call Date") has been at least 150%
(currently $8.25 of the then effective price of the Public Warrants and the
Company obtains the written consent of Whale Securities Co., L.P. ("Whale") to
such redemption prior to the Call Date. See "Description of Securities - Public
Warrants."

This Prospectus also relates to an offering by certain persons (the
"Selling Stockholders") of (i) 320,000 shares issuable upon the exercise of
warrants (the "Underwriter's Warrants") and the warrants included therein issued
to Whale in connection with the Company's initial public offering; (ii) 250,000
shares issuable upon the exercise of warrants (the "Fund Warrants") issued to
Infinity Investors Limited, Infinity Emerging Opportunities Limited, Glacier
Capital Limited and Alpine Capital Partners, Inc. (collectively, the "Funds");
(iii) 50,000 shares held by the Funds; (iv) 5,000 shares held by Whale and an
affiliate of Whale; (v) 20,000 shares issuable upon the exercise of warrants
issued to Whale; and (vi) 381,553 shares held by Educational Information, Inc.
and Ocean Bank. The Company will not receive any of the proceeds from the sale
of the Common Stock by the Selling Stockholders. See "Selling Stockholders" and
"Description of Securities."

The Common Stock is traded on the National SmallCap Market under the
symbol "TTWO." On May 22, 1998, the closing sale price of the Common Stock as
reported by NASDAQ was $7.625.
----------------------

THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE
A HIGH DEGREE OF RISK AND SHOULD NOT BE PURCHASED BY
INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS"
ON PAGE 6.
-------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------

The date of this Prospectus is May 26, 1998

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission located at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at 500 West Madison Street, Suite 1400 Chicago, Illinois 60661 and 7 World Trade
Center, New York, New York 10048. Copies of such material can also be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates and may be accessed electronically
by means of the Commission's site on the Worldwide Web at http:/www.sec.gov.

INFORMATION INCORPORATED BY REFERENCE

The following documents filed by the Company with the Securities and
Exchange Commission are incorporated herein by reference:

(a) Current Report on Form 8-K dated July 29, 1997;

(b) Current Report on Form 8-K/A dated July 29, 1997;

(d) Current Report on Form 8-K dated December 24, 1997;

(e) Current Report on Form 8-K/A dated December 24, 1997;

(f) Annual Report on Form 10-KSB for the fiscal year ended October 31,
1997;

(g) Quarterly Report on Form 10-QSB for the three month period ended
January 31, 1998;

(h) Current Report on Form 8-K dated March 18, 1998; and

(i) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A.

All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the Common Stock offered hereby shall be
deemed to be incorporated by reference herein and to be a part hereof on the
date of filing of such documents.

The Company will furnish without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents incorporated herein by reference, except for the
exhibits to such documents. Requests should be directed to Anthony R. Williams,
Chief Financial Officer, Take-Two Interactive Software, Inc., 575 Broadway, New
York, New York 10012, telephone: (212) 941-2988.

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, contained in
the Company's Annual Report on Form 10-KSB for the fiscal year ended October 31,
1997 and the Company's Quarterly Report on Form 10-QSB for the three months
ended January 31, 1998 and the Company's Current Reports on Form 8-K
incorporated by reference in this Prospectus. Prospective investors are urged to
read this Prospectus in its entirety.

The Company

Take-Two Interactive Software, Inc. (the "Company") designs, develops,
markets and distributes high quality interactive software games. Since its
initial public offering in April 1997, the Company has shifted its focus from
engaging primarily in software development to publishing and distributing
software products. During this period, the Company has achieved rapid growth by
making selective acquisitions of products, businesses and distribution rights
which the Company believes have significantly enhanced its prospects.

o GameTek Acquisition: In July 1997, the Company acquired all of the
outstanding capital stock of GameTek (UK) Limited, now known as Take-Two
Interactive Software Europe Limited ("TTE"), and Alternative Reality
Technologies, Inc. ("ART") from GameTek FL. TTE distributes computer software
games in Europe and other international markets and ART is a developer of
software games. The Company also acquired certain software games from GameTek
FL, including Dark Colony, The Quivering and The Reap.

o Wheel of Fortune(R) and Jeopardy!(R) Distribution Rights: The Company
entered into two agreements with GameTek, Inc. ("GameTek"), the parent of
GameTek FL, pursuant to which GameTek granted the Company the exclusive right to
distribute Wheel of Fortune - German Edition, Pinball Deluxe, Race Days and
Humans for use on the Nintendo Gameboy portable console in certain European
countries and the exclusive worldwide rights to distribute the Wheel of Fortune
and Jeopardy! games for use on Nintendo 64 console systems.

o Inventory Management Systems Acquisition: In July 1997, the Company
acquired all of the outstanding capital stock of Inventory Management Systems,
Inc. ("IMSI") and Creative Alliance Group, Inc. ("CAG"). IMSI and CAG are
engaged in the wholesale distribution of interactive software games in the
United States.

o Monty Python Series Distribution Rights: In November 1997, the
Company entered into a Master Distribution Agreement with 7th Level Inc. ("7th
Level"), pursuant to which 7th Level granted the Company the exclusive worldwide
right to distribute Monty Python's Complete Waste of Time, Monty Python and the
Quest for the Holy Grail, Monty Python's Desktop Pythonizer and Monty Python's
The Meaning of Life games designed for PC platforms, and a right of first
refusal to distribute And Now for Something Completely Different, if and when
developed by 7th Level. In November 1997, the Company entered into an agreement
with Panasonic Interactive Media ("Panasonic") which provides for Panasonic to
distribute these products in North America.

o Alliance Distributors Acquisition: In December 1997, the Company
acquired all of the issued and outstanding capital stock of L&J Marketing, Inc.
d/b/a Alliance Distributors ("Alliance"), now known as Alliance Inventory
Management, Inc. ("AIM"). AIM is engaged in the wholesale distribution of
computer and video game software and hardware in the United States.

o BMG Acquisition: In March 1998, the Company acquired all of the
assets of BMG Interactive, a division of BMG Entertainment North America
("BMG"), including direct distribution, sales and marketing offices in France
and Germany; a product publishing and distribution group in the United

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Kingdom; distribution, publishing and certain sequel rights to twelve upcoming
video game and PC game product releases; and various back catalogue publishing
and distribution rights. Among the publishing and distribution rights acquired
were: (1) The worldwide publishing and distribution rights and copyright to
Grand Theft Auto for personal computer ("PC") and the Sony PlayStation
platforms. (2) The worldwide publishing and distribution rights and copyright to
Space Station: Silicon Valley for the Nintendo 64 gaming system. (3) The
European distribution rights to PC recreational software products including
Berkley Systems' After Dark screen saver series, You Don't Know Jack trivia
series, gaming franchises such as Crystal Dynamic's Gex and Pandemonium series
for the Sony PlayStation, and ASC Games' One for the Sony PlayStation. (4) The
worldwide publishing and distribution rights to a series of sales region
customized World Cup soccer games for the Sony PlayStation. (5) The worldwide
publishing, distribution and sequel rights to the role-playing game Monkey Hero
for the Sony PlayStation and PC platforms. (6) The worldwide publishing,
distribution and sequel rights to the military combat game Special Ops for the
Sony PlayStation and PC platforms.

In April 1998, the Company consummated a private placement pursuant to
which it issued 158,333 shares of Common Stock and received proceeds of
approximately $950,000. The Company is currently seeking additional equity
financing which, if obtained, will result in dilution to the interests of the
Company's stockholders.

The Company's principal executive offices are located at 575 Broadway,
New York, New York 10012, and its telephone number is (212) 941-2988. Unless the
context otherwise requires, all references herein to the "Company" include the
operations of the Company's subsidiaries, Mission Studios, Inc.
("Mission"), TTE, ART, IMSI, CAG and AIM.

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The Offering

Securities offered .................2,891,553 shares

Common Stock outstanding............10,120,376 shares (1)

Use of Proceeds.....................Assuming that all of the Public Warrants are
exercised, as to which there can be no
assurance, the Company will realize proceeds
of $10,120,000. Assuming that the warrants
held by the Selling Stockholders are
exercised, as to which there can be
assurance, the Company will realize proceeds
of $4,338,600. Proceeds will be used for
working capital and general corporate
purposes. The Company will not receive any
of the proceeds from the sale of the Common
Stock by the Selling Stockholders. See "Use
of Proceeds."

Risk Factors........................The shares offered hereby are speculative
and involve a high degree of risk and should
not be purchased by investors who cannot
afford the loss of their entire investment.
See "Risk Factors."

NASDAQ SmallCap Market Symbol.......TTWO

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(1) As of May 22, 1998. Does not include (i) 1,840,000 shares issuable the upon
exercise of the Public Warrants; (ii) 320,000 shares issuable upon exercise of
the Underwriter's Warrants and the warrants included therein; (iii) 659,676
shares issuable upon the exercise of options issued under the Company's 1994
Employee Stock Option Plan; (iv) 370,000 shares (net of forfeitures) issuable
upon the exercise of options issued under the Company's 1997 Employee Stock
Option Plan; (v) 217,108 shares issuable upon the exercise of non-plan options;
(vi) 661,199 shares issuable upon the exercise of warrants (including the
warrants held by the Selling Shareholders); and (vii) 1,850,000 shares issuable
upon the conversion of Series A Preferred Stock).

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RISK FACTORS

The shares offered hereby are speculative and involve a high degree of
risk. Prospective investors should carefully consider the following risk factors
before making an investment decision.

Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995: The statements contained herein which are not historical facts are
forward looking statements that involve risks and uncertainties, including but
not limited to, risks associated with the Company's future growth and operating
results, the ability of the Company to successfully integrate the businesses and
personnel of newly acquired entities into its operations, the shift in business
focus from software development to distribution, changes in consumer preferences
and demographics, technological change, competitive factors, unfavorable general
economic conditions and other factors described below. Actual results may vary
significantly from such forward looking statements.

Liquidity; Qualified Report of Independent Accountants; Need for
Additional Financing. The Company has been dependent on the issuance of debt and
equity securities and borrowings to implement its expansion plans and to finance
its short-term working capital requirements. The Company's independent
accountants have included an explanatory paragraph in their report for the year
ended October 31, 1997 stating that the Company's working capital deficiency,
recurring negative cash flow from operations and the potential need for
additional financing to fund the Company's operations, raise substantial doubt
about the Company's ability to continue as a going concern. The Company will be
required to seek additional financing in the foreseeable future to fund
continuing expansion activities, including those relating to product
development, manufacturing and marketing, or curtail its expansion activities.
There can be no assurance that additional financing will be available to the
Company on commercially reasonable terms, or at all. Failure to obtain
additional financing will have a material adverse effect on the Company.

Historical Losses; Future Operating Results; Early Stage of
Development. The Company incurred a loss of $4,499,591 for the fiscal year ended
October 31, 1997. At January 31, 1998, the Company had an accumulated deficit of
$4,540,026. Operating expenses have increased and will increase significantly in
connection with product acquisition, manufacturing and distribution activities.
Any competitive, financial, technical or other factor adversely affecting the
acquisition, development or sale of software products could have a material
adverse effect on operating results. There can be no assurance that future
operations will be profitable. The Company released its first software title in
September 1994 and is subject to risks typically encountered in the
establishment of a new business enterprise, as well as risks associated with an
evolving business model and the management of both internal and acquisition
based growth.

Short Product Lifecycles; Dependence on Limited Product Line. The
markets for interactive software games are characterized by short product
lifecycles and frequent introduction of new products, most of which do not
achieve sustained market acceptance or do not generate a sufficient level of
sales to offset the costs associated with product acquisition or development.
Significant sales of new products generally occur within the first three months
following their release. The Company's success will depend upon the acquisition
and/or development of new, commercially successful products and on its ability
to replace revenues from products at the later stages of their lifecycles. A
substantial portion of the Company's revenues are derived from a limited number
of products. For the year ended October 31, 1996, Advanced Dungeons & Dragons:
Iron & Blood, Ripper and Battlecruiser 3000 A.D. accounted for approximately
32.0%, 28.7% and 14.2%, respectively of the Company's revenues. For the year
ended October 31, 1997, the JetFighter series and Dark Colony accounted for
approximately 41.6% and 11.0%, respectively, of the Company's revenues. Wheel of
Fortune, Jeopardy! and JetFighter: Full Burn are expected to account for a
significant portion of the Company's revenues for the year ending October 31,
1998. There can be no assurance that any new product

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will be commercially viable. Failure to continue to acquire, develop and
introduce new, commercially successful products would have a material adverse
effect on the Company.

Risks Associated with Expansion and Acquisitions. The Company has
expanded its operations through internal growth and acquisitions, which has
placed and is expected to continue to place a significant strain on its
management, administrative, operational, financial and other resources. The
Company has released additional products on new platforms, expanded its
publishing and distribution operations, increased its development and product
manufacturing expenditures, expanded its work force and expanded its presence in
international markets. To successfully manage growth, the Company will be
required to continue to implement and improve its operating systems, hire, train
and manage an increasing number of management and other personnel, monitor its
operations and control costs. The Company has limited experience in effectuating
rapid expansion and in managing operations which are geographically dispersed,
and there can be no assurance that the Company will be able to successfully
expand its operations or manage growth. Since April 1997, the Company has made
acquisitions of products and distribution businesses and intends to continue to
pursue opportunities by making acquisitions of products or businesses which the
Company believes will enhance its prospects. There can be no assurance that the
Company will be able to successfully integrate into its operations any
personnel, product or business of that the Company will not incur significant
charges relating to any acquisition or retain acquired key personnel. Any
inability to successfully integrate acquired personnel, products or businesses
into its operations could have a material adverse effect on the Company.

The Company may determine to seek additional debt or equity financing
to fund the cost of continuing expansion. In the event the Company finances an
acquisition with equity securities, any issuance would result in dilution to the
interests of the Company's stockholders. Additionally, if the Company incurs
indebtedness or issues debt securities in connection with an acquisition, the
Company will be subject to the risks that interest rates may fluctuate and cash
flow may be insufficient to pay principal and interest on any such indebtedness.

Shift in Business Focus. Since April 1997, the Company has shifted its
focus from engaging primarily in software development to publishing and
distributing software products. The Company recently acquired certain publishing
and distribution rights to software products from BMG and is currently seeking
to acquire distribution rights to certain additional products from software
developers. Publishing and distribution activities require significant up-front
capital expenditures to acquire, manufacture and market software products. There
can be no assurance that the Company will have adequate financial and other
resources to successfully manufacture and market these products. In addition,
the Company's newly-acquired wholesale distribution operations will require the
Company to maintain operating margins; continue to secure an adequate supply of
currently popular software products on a timely and competitive basis;
continually turn its inventories and maintain effective inventory and cost
controls. The Company's distribution subsidiaries are dependent on third-party
software manufacturers, developers, distributors and dealers to provide adequate
inventories of popular software games on a timely basis and on favorable pricing
terms. The Company's subsidiaries do not maintain agreements with any suppliers.
AIM has historically been dependent on a limited number of suppliers for a
significant portion of product purchases. Failure or delay by suppliers in
providing competitive products to the Company on favorable terms would adversely
affect the Company's ability to deliver products on a timely and competitive
basis.

Significant Outstanding Indebtedness; Security Interest. The Company
has incurred substantial indebtedness in order to finance its expanded
operations. Of the Company's total outstanding indebtedness of $8,611,155 at
January 31, 1998, $4,882,621 is outstanding under a line of credit with
NationsBank, N.A. (the "Bank"). Borrowings under the line of credit are secured
by a lien on accounts receivable and inventory of IMSI and AIM and are
guaranteed by the Company. The loan agreement limits or prohibits IMSI and AIM,
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. The line of credit was increased to $7,000,000 and expires on May
31, 1999. In

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the event of a default by the Company in its obligations to the Bank, such
lender could elect to declare the Company's indebtedness to be due and payable
and foreclose on the Company's assets, which would have a material adverse
effect on the Company.

Industry Factors; Changing Consumer Preferences. The Company's business
is speculative and is subject to all of the risks generally associated with the
entertainment software industry, which is an evolving business with a relatively
limited operating history. Accordingly, the ultimate level of demand and market
acceptance for the Company's newly introduced products is subject to a high
degree of uncertainty. Software acquisition costs, as well as promotion and
marketing expenses, royalties and third-party participations payable to software
developers, creative personnel, actors, musicians and others, which reduce
potential revenues derived from software sales, have increased significantly in
recent years. The Company's future operating results will depend on numerous
factors beyond its control, including the popularity, price and timing of new
entertainment software products being released and distributed, international,
national, regional and local economic conditions (particularly economic
conditions adversely affecting discretionary consumer spending), changes in
consumer demographics, the availability of other forms of entertainment,
critical reviews and public tastes and preferences, all of which change rapidly
and cannot be predicted. The Company's ability to plan for product development
and promotional activities will be significantly affected by its ability to
anticipate and respond to relatively rapid changes in consumer tastes and
preferences. A decline in the popularity of software games or in the software
industry generally or in particular market segments could adversely affect the
Company's business and prospects.

Dependence on Third-Party Distributors; Distribution Risks. Sales to a
limited number of distributors have historically accounted for a substantial
portion of the Company's revenues. For the year ended October 31, 1996, sales of
the Company's products to Acclaim Entertainment, Inc. ("Acclaim") and GameTek UK
(now TTE) accounted for approximately 58.9% and 13.3%, respectively, of the
Company's revenues. For the year ended October 31, 1997, sales of the Company's
products to Interplay Productions, Inc. ("Interplay") accounted for
approximately 40.4% of the Company's revenues. In November 1997, the Company
entered into an agreement with Interplay pursuant to which the Company granted
to Interplay the exclusive right to distribute certain products. The agreement
obligates Interplay to make scheduled advances in the aggregate amount of
$1,700,000 (which is subject to reduction under certain circumstances). The
Company's success will be dependent in part upon the marketing efforts of its
distributors and upon sales of the Company's products to their principal
accounts. The Company may also be dependent on advances made by distributors to
fund product development and upon the ability of management to establish
satisfactory relationships with additional distributors. The loss of principal
distributors, a significant reduction in advances or sales attributable to such
distributors or a decline in the economic prospects of any such distributor
could have a material adverse effect on the Company.

The distribution channels through which consumer software products are
sold have been characterized by rapid change, including consolidations and
financial difficulties of certain distributors and retailers and the emergence
of new channels for distribution of consumer software products such as mass
merchandisers and other retail outlets and the Internet. In addition, there are
an increasing number of companies and new market entrants competing for access
to these channels. Retailers of the Company's products typically have limited
shelf space and promotional resources, and competition is intense among an
increasing number of newly introduced entertainment software titles for adequate
levels of shelf space and promotional support. Competitors with extensive
product lines and popular titles frequently have greater bargaining power with
distributors and retailers and, accordingly, the Company may not be able to
achieve the levels of support and shelf space that such competitors receive.

Product Returns. The Company's products are subject to return if not
sold to consumers. The Company accepts product returns for stock balancing,
price protection, or defective products and upon termination of a distribution
agreement. At the time of product sales, the Company establishes a reserve for

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future returns based primarily on its return policies and historical return
rates and recognizes revenues net of product returns. The Company has
historically experienced a product return rate of 10% of gross revenues. Product
returns which significantly exceed the Company's reserves would materially
adversely affect the Company's operating results.

Fluctuations in Operating Results; Seasonality. The Company's operating
results vary significantly from period to period as a result of purchasing
patterns of potential customers, the timing of new product introductions by the
Company and its competitors, product returns, marketing, manufacturing and
research and development expenditures and pricing. Orders are generally shipped
upon receipt and backlog is not material to the Company. Sales of the Company's
products are seasonal, with peak product shipments typically occurring in the
fourth calendar quarter (the Company's first fiscal quarter), depending on the
timing of product releases, as a result of increased demand for products during
the year-end holiday season. Unanticipated events, including delays in planned
product introductions past the time of peak sales or significant decreases in
sales during such period, could result in material losses which would not be
easily reversed before the following year. There can be no assurance that the
foregoing factors will not have an adverse effect on the Company's future
operating results.

Intense Competition. The Company faces intense competition for a finite
amount of consumer discretionary spending from numerous other businesses in the
consumer software industry, including certain of the Company's distributors,
ranging from small companies with limited resources to large companies with
substantially greater financial, technical, distribution, marketing and other
resources than those of the Company. The Company considers its primary
competitors in the entertainment software market to be Activision, Inc.,
Electronic Arts, Inc., GT Interactive, Inc., Maxis, Inc. and Sony Entertainment
Corporation of America, Inc., among others. These and other companies with
significantly greater financial resources than the Company may be able to carry
larger inventories, adopt more aggressive pricing policies, make higher offers
to high-profile Hollywood talent, licensors and developers for commercially
desirable properties and implement more extensive advertising campaigns, both
generally and in response to efforts by additional competitors seeking to enter
into new markets and market new products. In addition, new competitors,
including large software companies, media companies and film studios, are
increasing their focus on the interactive entertainment software market.
Competition for the Company's products is influenced by the timing of
competitive product releases and the similarity of such products to those of the
Company, which may result in significant price competition, reduced operating
margins, loss of shelf space or a reduction in sell-through of the Company's
products at retail stores. The Company's products also compete with numerous
other products and services which provide similar entertainment value, such as
motion pictures, television and audio and video cassettes featuring similar
themes, on-line computer programs and various other forms of entertainment which
may be less expensive or provide other advantages to consumers. There can be no
assurance that the Company will be able to continue to compete successfully,
particularly as it seeks to enter into new markets and market new products.

Rapid Technological Change; Product and Platform Obsolescence. The
consumer software market and the personal computer and video game industries in
general are characterized by rapidly changing technology, resulting in product
and platform obsolescence and significant price erosion over the life of a
product. The Company's success is dependent upon its ability to anticipate
technological changes and to continually identify, acquire, develop and
successfully market new products and remain competitive in terms of price and
performance. Historically, the Company's products have been produced for, and
most of its development efforts have been directed toward, multimedia PCs. The
Company has increasingly emphasized the acquisition of software products
designed to operate on new platforms, such as the Nintendo 64 and Sony
PlayStation video consoles. A leveling off or a decline in the sales rate of
multimedia PCs or Nintendo or Sony gaming consoles could have a material adverse
effect on the Company's results of operations. To the extent the Company
continues to acquire products designed to operate on new platforms, the Company
will be subject to the risks that any new platform may not achieve initial or
continued market acceptance. There

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can be no assurance that the Company will be able to adapt its products or
technologies to emerging hardware platforms or successfully acquire or develop
software titles for such platforms or that product or platform obsolescence will
not result in increased inventories of unsold products.

Dependence on Third-Party Licensors and Manufacturers. The Company has
entered into various agreements with third parties to license the rights to
products and properties incorporated into its products. These license agreements
generally require the Company to make advance payments and pay royalties and
satisfy other conditions. There can be no assurance that sales of any such
products will be sufficient to recover the amount of such advances. Failure by
the Company to satisfy its obligations under license agreements may result in
modification of the terms or termination of the relevant agreement which would
adversely affect the Company. The Company's success depends upon its ability to
acquire or license products or properties on terms deemed commercially feasible.
There is intense competition for products and properties among numerous
companies, and there can be no assurance that the Company will be able to
license quality products and properties on favorable terms, or at all. In
addition, the Company relies on third parties to manufacture and ship finished
goods. The Company currently relies on Nintendo for product manufacturing,
packaging and shipping. The Company has not entered into agreements with any
manufacturer and purchases finished products pursuant to purchase orders placed
from time to time in the ordinary course of business. The Company will be
dependent on the ability of Nintendo, Interplay and other manufacturers to
provide adequate supplies of high quality disks and video game cartridges on a
timely basis and on favorable terms. There can be no assurance that
manufacturers will have sufficient production capacity to satisfy the Company's
product and scheduling requirements during any period of sustained demand or
that the Company will not be subject to the risk of price fluctuations and
periodic delays. Failure or delay by manufacturers in supplying finished
products to the Company on favorable terms could result in material
interruptions in its operations and adversely affect the Company's operating
results.

Outstanding Accounts Receivable; Collection and Credit Risks. The
Company's accounts receivable, less allowance for doubtful accounts and product
returns, at January 31, 1998, were $7,226,898, as compared to $4,666,862 at
October 31, 1997. Delays in collection or uncollectibility of accounts
receivable could have a material adverse effect on the Company's liquidity and
working capital position. The Company is subject to credit risks, particularly
in the event that any of its receivables represent sales to a limited number of
distributors or are concentrated in foreign markets. Failure to properly assess
such risks could require the Company to continually increase its allowance for
doubtful accounts.

Lengthy Production Cycle; Product Development Risks. The development of
new software products is lengthy, expensive and uncertain and product
development typically requires 18 months to complete from the time a new concept
is approved. Certain of the Company's proposed products are in early stages of
development and the Company will be required to commit considerable time, effort
and resources to complete development of its proposed products. The introduction
of new products is subject to the inherent risks of development delays. The
Company has in the past and may in the future experience delays in introducing
its products. Unanticipated delays, expenses, technical problems or difficulties
could cause the Company to miss an important selling season with a corresponding
negative impact on revenues and net income or result in abandonment or material
changes in product commercialization. There can be no assurance that the Company
will be able to successfully develop any new products on a timely basis or that
technical or other problems will not occur which would result in increased costs
or material delays. The Company's success may also be dependent upon its ability
to adapt its products to operate on and to be compatible with the products of
original equipment manufacturers ("OEMs") and to function on various hardware
platforms. There can be no assurance that the Company will be able to adapt its
products to operate on and be compatible with the products of OEMs or to
function on any particular platform on a timely basis, or at all. In addition,
software and other technology as complex as that incorporated into the Company's
products may contain defects or errors which become apparent subsequent to
commercial introduction. Remedying such errors may delay the Company's plans,
cause it to incur additional costs and adversely affect its reputation.

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International Trade Risks. Product sales in international markets,
primarily in the United Kingdom and other countries in Europe and the Pacific
Rim, have accounted for a significant portion of the Company's revenues. For the
years ended October 31, 1996 and 1997, sales of products in international
markets accounted for approximately 24.2% and 16.6%, respectively, of the
Company's revenues. The Company is subject to risks inherent in foreign trade,
including credit risks, fluctuations in foreign currency exchange rates,
shipping delays and international political, regulatory and economic
developments, all of which could have a significant impact on the Company.
Product sales by TTE in France and Germany are made in local currencies. The
Company does not engage in foreign currency hedging transactions.

Limited Protection of Proprietary Rights. The Company regards certain
of its software and production techniques as proprietary and attempts to protect
such software and techniques under copyright, trademark and trade secret laws as
well as through contractual restrictions on disclosure, copying and
distribution. The Company does not hold any patents or registered copyrights.
Software products are susceptible to unauthorized copying. It may be possible
for unauthorized third parties to copy or to reverse engineer the Company's
products to obtain and use programming or production techniques that the Company
regards as proprietary. In addition, there can be no assurance that the
Company's competitors will not independently develop technologies that are
substantially equivalent or superior to the Company's technologies. As the
number of interactive software products in the market increases and the
functionality of these products further overlaps, the Company believes that
interactive software will increasingly become the subject of claims that such
software infringes the copyrights or patents of others. Although the Company
believes that its products and technologies do not and will not infringe or
violate proprietary rights of others, it is possible that infringement of
proprietary rights of others may occur. The Company has received correspondence
from the holder of a patent relating to the animation of living beings in
computer graphics alleging that the Company's products infringe such patent. The
Company is aware that the holder of such patent has claimed that other companies
involved in the entertainment software industry have also infringed such patent.
There can be no assurance that the holder of such patent will not institute an
action against the Company. Any such claims, with or without merit, can be time
consuming and difficult to defend and, if successful, could have a material
adverse effect on the Company.

Regulatory Factors; Possible Consumer Opposition to Violence. The home
video game industry requires software publishers to provide consumers with
information relating to graphic violence or sexually explicit material contained
in software products. Certain countries have also recently established similar
rating systems as prerequisites for software sales in such countries. The
Company seeks to comply with such rating systems and displays the ratings
received for its products. The Company's software titles have generally received
a rating of "T" (age 13 and over), although certain of its products received a
rating of "M" (age 18 and over). While the Company has developed different
versions of such products for rating purposes, product ratings could limit the
potential markets for the Company's products. Consumer advocacy groups have in
the past opposed sales of entertainment products containing graphic violence and
sexually explicit material by pressing for legislation in these areas and by
engaging in public demonstrations and media campaigns. There can be no assurance
that such groups will not target the Company's products, which could possibly
require the Company to significantly change or discontinue a particular product.
In addition, certain retailers, such as Kmart, Sears and Target Stores, have
declined to sell software products containing graphic violence or sexually
explicit material which could also limit the potential markets for the Company's
products.

Dependence Upon Key Personnel. The success of the Company is largely
dependent on the personal efforts of Ryan A. Brant, its founder and Chief
Executive Officer, and other key personnel. Although the Company has entered
into an employment agreement with Mr. Brant, the loss of his services could have
a material adverse effect on the Company's business and prospects. The Company
has obtained "key man" life insurance on the life of Mr. Brant in the amount of
$2,000,000. The success of the Company is also dependent upon its ability to
hire and retain additional qualified operating, marketing, technical and
financial

-11-

personnel. Competition for qualified personnel in the computer software industry
is intense and there can be no assurance that the Company will be able to hire
or retain necessary personnel.

Concentration of Ownership; Possible Conflicts of Interest. As of the
date of this Prospectus, Bridgehampton Investors, L.P. ("Bridgehampton"), a
Connecticut limited partnership beneficially owns approximately 37.8% of the
outstanding Common Stock of the Company. Ryan A. Brant, Chief Executive Officer
of the Company, and an entity controlled by Neil S. Hirsch, a director of the
Company, the general partners of Bridgehampton, have voting control of
Bridgehampton and, accordingly, will be able, through Bridgehampton, to exercise
significant influence over the affairs of the Company. In addition, the Company
has entered into certain transactions or arrangements with its affiliates, which
could result in conflicts of interest. Although the Company believes that all
such transactions or arrangements were on terms no less favorable to the Company
than could have been obtained from unaffiliated third parties, there can be no
assurance that conflicts of interest will not arise with respect to future
transactions or arrangements or that they will be resolved in a manner favorable
to the Company.

No Dividends. The Company has never paid any dividends on its Common
Stock and does not anticipate paying cash dividends in the foreseeable future.

Authorized Preferred Stock. The Company's Certificate of Incorporation
authorizes the Company's Board of Directors to issue "blank check" Preferred
Stock and to fix the rights, preferences, privileges and restrictions, including
voting rights, of these shares, without further stockholder approval. The rights
of the holders of Common Stock will be subject to and may be adversely affected
by the rights of holders of any Preferred Stock that may be issued in the
future. The ability to issue Preferred Stock without stockholder approval could
have the effect of making it more difficult for a third party to acquire a
majority of the voting stock of the Company thereby delaying, deferring or
preventing a change in control of the Company. In March 1998, the Company issued
1,850,000 shares of Series A Convertible Preferred Stock to BMG.

Possible Adverse Effect of Outstanding Warrants and Options. There are
a substantial number of shares reserved for issuance upon the exercise of
options and warrants. To the extent that any outstanding warrants or options are
exercised, dilution of the interests of the holders of the Company's Common
Stock will occur and any sales in the public market of the shares underlying
such warrants and options may adversely affect prevailing market prices for the
Common Stock and the Warrants. Moreover, the terms upon which the Company will
be able to obtain additional equity may be adversely affected since the holders
of the outstanding warrants and options can be expected to exercise them at a
time when the Company would, in all likelihood, be able to obtain capital on
terms more favorable to the Company than those provided by such securities.

Shares Eligible for Future Sale; Registration Rights. A substantial
number of shares of Common Stock outstanding are, and a substantial number of
shares of Common Stock will be, eligible for sale, pursuant to Rule 144. The
Company granted the holders of 1,434,586 shares (including 590,000 shares
issuable upon the exercise of warrants) certain registration rights and has
agreed to include 1,026,553 shares (including 590,000 shares issuable upon
exercise of warrants) in the registration statement of which this Prospectus
forms a part. The Company has also granted BMG certain registration rights with
respect to 1,850,000 shares of common stock issuable upon the conversion of the
Series A Preferred Stock and expects to grant additional registration rights in
the future. No prediction can be made as to the effect, if any, that sales of
shares of Common Stock or even the availability of such shares for sale will
have on the market prices prevailing from time to time. The possibility that
substantial amounts of Common Stock may be sold in the

-12-

public market may adversely affect the prevailing market price for the Common
Stock and could impair the Company's ability to raise capital through the sale
of its equity securities.

Anti-Takeover Provisions. The Company is subject to the State of
Delaware's "business combination" statute, which prohibits a publicly-traded
Delaware corporation from engaging in various business combination transactions
with any 15% stockholder for a period of three years after the date of the
transaction in which the person became an "interested stockholder," unless
certain approvals are obtained or other events occur. The statute could prohibit
or delay mergers or other attempted takeovers or changes in control with respect
to the Company and, accordingly, may discourage attempts to acquire the Company.

Litigation. In January 1997, Navarre Corporation filed a lawsuit in the
District Court of Hennepin County, Minnesota against the Company alleging that
the Company breached a distribution agreement by failing to remit monies for
product returns and marketing charges. The Plaintiff is seeking $317,209 in
damages. There can be no assurance that such action will be resolved in a manner
favorable to the Company.

Possible Volatility of Market Price of Common Stock. The market price
of the Common Stock following this offering may be highly volatile. Factors such
as the Company's operating results, announcements by the Company or its
competitors and new products and services affecting the computer software
industry may have a significant impact on the market price of the Company's
securities. In addition, in recent years, the stock market has experienced a
high level of price and volume volatility and the market price for the stock of
many companies have experienced a high level of price and volume volatility and
the market price for the stock of many companies have experienced wide price
fluctuations which have not necessarily been related to the operating
performance of such companies.

Possible Delisting of Common Stock from Nasdaq SmallCap Market; Risks
Relating to Low-Priced Stocks. The Common Stock is quoted on the Nasdaq SmallCap
Market. For the Common Stock to remain eligible for continued quotation on the
Nasdaq SmallCap Market, the Company must maintain net tangible assets in the
minimum amount of $2,000,000, a market value of the public float in the minimum
amount of $1,000,000, two market makers and a minimum bid price of $1.00 per
share. Failure to meet these maintenance criteria may result in the delisting of
the Common Stock from the Nasdaq SmallCap Market, and trading, if any, in the
Common Stock would thereafter be conducted in the non-Nasdaq over-the-counter
market. As a result of such delisting, an investor would find it more difficult
to dispose of, or to obtain accurate quotations as to the market value of, the
Common Stock. In addition, if the Common Stock were to become delisted from
quotation on the Nasdaq SmallCap Market and the trading price of the Common
Stock were to fall below $5.00 per share on the date the Common Stock was
delisted, trading in the Common Stock would also be subject to the requirements
of certain rules promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which require additional disclosure by
broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any non-Nasdaq equity security that has a market price
of less than $5.00 per share, subject to certain exceptions). Such rules require
the delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors (generally
institutions). For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. The additional
burdens imposed upon broker-dealers by such requirements may discourage
broker-dealers from effecting transactions in the Common Stock, which could
adversely effect the market price and severely limit liquidity of the Common
Stock and the ability of purchasers in this offering to sell Common Stock in the
secondary market.

Possible Inability to Exercise Warrants. The Company initially
qualified the sale of the Public Warrants in California, Colorado, Connecticut,
Delaware, Florida, Hawaii, Georgia, Illinois, Louisiana, Maryland, Nevada, New
Jersey, New York, Rhode Island, Washington and Washington, D.C. Although

-13-

certain exemptions in the securities laws of certain states might permit the
Warrants to be transferred to purchasers in states other than those in which the
Warrants are initially qualified, the Company may be prevented from issuing
Common Stock in such states upon the exercise of the Public Warrants unless an
exemption from qualification is available or unless the issuance of Common Stock
upon exercise of the Public Warrants is qualified. The Company may decide not to
seek or may not be able to obtain qualification of the issuance of such Common
Stock in all of the states in which the holders of the Public Warrants reside.
In such a case, the Public Warrants held by purchasers will expire and have no
value if such Public Warrants cannot be sold. Accordingly, the market for the
Public Warrants may be limited because of these restrictions. Further, a current
prospectus covering the Common Stock issuable upon exercise of the Public
Warrants must be in effect before the Company may accept Public Warrant
exercises. There can be no assurance that the Company will be able to have a
current prospectus in effect notwithstanding the Company's commitment to use it
best efforts to do so. See "Description of Securities - Public Warrants."

Potential Adverse Effect of Warrant Redemption. The Public Warrants are
redeemable by the Company at any time upon notice of not less than 30 days, at a
price of $.10 per Public Warrant, provided that the closing bid quotation of the
Common Stock on all 20 trading days ending on the third trading day prior to the
day on which the Company gives notice has been at least 150% (currently $8.25,
subject to adjustment) of the then effective exercise price of the Public
Warrants and the Company obtains the written consent of Whale to such redemption
prior to the Call Date. Redemption of the Public Warrants could force the
holders to exercise the Public Warrants and pay the exercise price at a time
when it may be disadvantageous for the holders to do so, to sell the Public
Warrants at the then current market price when they might otherwise wish to hold
the Public Warrants, or to accept the redemption price, which is likely to be
substantially less than the market value of the Public Warrants at the time of
redemption. See "Description of Securities - Public Warrants."

-14-

USE OF PROCEEDS

In the event that the Public Warrants are exercised, as to which there
can be no assurance, the Company would realize up to approximately $10,120,000
in net proceeds. In the event that the warrants held by the Selling Stockholders
are exercised, as to which there can be no assurance, the Company will realize
proceeds of $4,338,600. Any such proceeds will be used by the Company for
working capital and general corporate purposes. The Company has agreed to pay
certain expenses in connection with this offering, currently estimated to be
approximately $25,000. The Company will not receive any proceeds from the sale
of Common Stock by the Selling Stockholders.

SELLING STOCKHOLDERS

The Company has agreed to register the shares beneficially owned by the
Selling Stockholders under the Securities Act and to pay all expenses in
connection therewith. Except as set forth below, none of the Selling
Stockholders has ever held any position or office within the Company or had any
other material relationship with the Company. The following table sets forth
certain information with respect to the Selling Stockholders:

Beneficial Ownership
Shares of Common Stock Shares to be Sold Shares Owned After Percentage of Shares
Selling Stockholder Prior to Sale in the Offering(1) the Offering(1) Owned After the Offering
- ------------------- --------------------- ------------------ ------------------ ------------------------

Whale Securities Co., L.P.(2) 332,500 332,500 -- --
Lori Kritzer(3) 12,500 12,500 -- --
Infinity Investors Limited(4) 121,500 121,500 -- --
Alpine Capital Partners, Inc.(5) 75,000 75,000 -- --
Glacier Capital Limited(6) 51,750 51,750 -- --
Infinity Emerging Opportunities Limited(7) 51,750 51,750 -- --
Educational Information, Inc. 359,296 359,296 -- --
Ocean Bank 22,257 22,257

- --------------

(1) Assumes the exercise of all of the warrants and sale of all of the shares.
(2) Includes (i) 320,000 shares underlying the Underwriter's Warrants and the
warrants included therein; 10,000 shares underlying warrants and (iii)
2,500 shares of Common Stock. Whale acted as underwriter of the Company's
initial public offering in April 1998. Includes securities held in the
name of Whale for the account of certain equity owners and employees of
Whale.
(3) Includes (i) 10,000 shares underlying warrants and (ii) 2,500 shares of
Common Stock.
(4) Includes (i) 94,500 underlying warrants and (ii) 27,000 shares
of Common Stock.
(5) Represents 75,000 shares underlying warrants.
(6) Includes (i) 40,250 shares underlying warrants and (ii) 11,500 shares of
Common Stock.
(7) Includes (i) 40,250 shares underlying warrants and (ii) 11,500 shares of
Common Stock.

-15-

PLAN OF DISTRIBUTION

Sales of the shares may be made from time to time by the Selling
Stockholders. Such sales may be made on the NASDAQ SmallCap Market in another
over-the-counter market, on a national securities exchange (any of which may
involve crosses and block transactions), in privately negotiated transactions or
otherwise or in a combination of such transactions at prices and at terms then
prevailing or at prices related to the then current market price, or at
privately negotiated prices. 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. 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 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 hereunder 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 hereunder, which the broker-dealer may resell pursuant to this
Prospectus. The Selling Stockholders may also pledge the shares registered
hereunder 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 the sale. Such brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales and any such commission, discount or concession may be deemed to be
underwriting discounts or commissions under the Securities Act. Compensation to
be received by broker-dealers 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 a supplement to any person who purchases any of the shares from or
through such dealer or broker.

The Company has advised the Selling Stockholders that during such time as
they may be engaged in a distribution of the shares included herein they 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 the Common Stock.

-16-

It is possible that a significant number of shares may be sold hereunder
and, accordingly, such sales or the possibility thereof may have a depressive
effect on the market price of the Company's Common Stock.

DESCRIPTION OF SECURITIES

Public Warrants

Each Public Warrant entitles the holder thereof to purchase one share of
Common Stock at a price of $5.50 per share, subject to adjustment in certain
circumstances, until April 14, 2002.

The Public Warrants are redeemable by the Company, at any time, upon
notice of not less than 30 days, at a price of $.10 per Public Warrant, provided
that the closing bid price of the Common Stock on all 30 of the trading days
ending on the third day prior to the day on which the company gives notice has
been at least 150% (currently $8.25, subject to adjustment) of the then
effective exercise price of the Public Warrants and the Company obtains the
written consent of Whale prior to the Call Date. All warrantholders have
exercise rights until the close of business on the date fixed for redemption.

The Public Warrants have been issued in registered form under a Warrant
Agreement between the Company and American Stock Transfer & Trust Company as
Warrant Agent. Reference is made to said Warrant Agreement for a complete
description of the terms and conditions thereof (the description herein
contained being qualified by reference thereto).

The exercise price and number of shares of Common Stock or other
securities issuable on exercise of the Public Warrants are subject to adjustment
in certain circumstances, including in the event of a stock dividend,
recapitalization, reorganization, merger or consolidation of the Company.
However, the Public Warrants are not subject to adjustment for issuances of
Common Stock at a price below the exercise price of the Public Warrants.

The Public Warrants may be exercised upon surrender of the Warrant
certificate on or prior to the expiration date of the offices of the Warrant
Agent, with the exercise form on the reverse side of the certificate completed
and executed as indicated, accompanied by full payment of the exercise price (by
certified check payable to the Company) to the Warrant Agent for the number of
Public Warrants being exercised. The warrantholders do not have the rights or
privileges of holders of Common Stock.

No Public Warrant will be exercisable unless at the time of exercise the
Company has filed a current registration statement with the Commission covering
the shares of Common Stock issuable upon exercise of the Public Warrant and such
shares have been registered or qualified or deemed to be exempt under the
securities laws of the state of residence of the holder of the Public Warrant.
The Company will use its best efforts to have all such shares so registered or
qualified and to maintain a current prospectus relating thereto until the
expiration of the Public Warrants, subject to the terms of the Warrant
Agreement. While it is the Company's intention to do so, there is no assurance
that it will be able to do so.

No fractional shares will be issued upon exercise of the Public Warrants.
However, if a warrantholder exercises all Public Warrants then owned of record
by him, the Company will pay to such warrantholder, in lieu of the issuance of
any fractional share which is otherwise issuable, an amount in cash based on the
market value of the Common Stock on the last trading day prior to the exercise
date.

-17-

Underwriter's Warrants

The Company has issued to Whale and/or its designees Underwriter's
Warrants to purchase up to 160,000 shares of Common Stock at an exercise price
of $7.00 per share and/or up to 160,000 warrants (each to purchase one share of
Common Stock at $9.075 per share) at an exercise price of $.14 per warrant. The
Underwriter's Warrants are exercisable at any time and from time to time, in
whole or in part, during the five-year period ending on April 14, 2002 (the
"Warrant Exercise Term").

Subject to certain limitations and exclusions, the Company has agreed, at
the request of the holders of a majority of the Underwriter's Warrants, at the
Company's expense, to register the Underwriter's Warrants, the shares and
warrants underlying the Underwriter's Warrants, and the shares issuable upon
exercise of the underlying warrants under the Securities Act on one occasion
during the Warrant Exercise Term and to include the Underwriter's Warrants and
all such underlying securities in any appropriate registration statement which
is filed by the Company during the seven year period ending on April 14, 2004.

Fund Warrants

In connection with a private financing in October 1997, the Company issued
(i) the Fund Warrants to purchase an aggregate of 250,000 shares of Common Stock
at an exercise price of $6.46 per share (subject to adjustment) and (ii) 50,000
shares of Common Stock. Each Fund Warrant is exercisable until October 14, 2002.

The Company has agreed to issue additional shares to the Funds in the
event that the closing bid price of the Common Stock during the period ending
thirty days from the date of this Prospectus (adjusted for certain events) does
not equal $7.75. In the event that any additional shares are issued, the
exercise price of the Fund Warrants will be adjusted.

The Company granted to the Funds registration rights covering the shares
and the shares underlying the Fund Warrants. The Company is obligated to file a
registration statement covering the sale of the securities on or prior to April
14, 1998 and use its best efforts to cause such registration statement to become
effective by June 30, 1998.

Other Warrants

In connection with the financing in October 1997, the Company also issued
to Whale and its designee warrants to purchase 20,000 shares of Common Stock.
These warrants are identical to the Fund Warrants, except that they are not
subject to adjustment in the event the Company issues additional shares to the
Funds.

INDEMNIFICATION

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

-18-

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 Bylaws
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 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.

Insofar as indemnification against liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company 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.

LEGAL MATTERS

The legality of the Common Stock offered hereby will be passed upon for
the Company by Tenzer Greenblatt LLP, New York, New York.

EXPERTS

The consolidated balance sheet as of October 31, 1997 and the consolidated
statements of income, retained earnings and cash flows for each of the two years
in the period ended October 31, 1997 incorporated by reference in this
Prospectus have been incorporated herein in reliance on the Report, which
includes an explanatory paragraph relating to the Company's ability to continue
as a going concern, of Coopers & Lybrand LLP, independent accountants, given
upon the authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission
("Commission") a Registration Statement with respect to the Securities offered
by this Prospectus. This Prospectus omits certain information contained in the
Registration Statement as permitted by the Rules and Regulations of the

-19-

Securities and Exchange Commission. For further information, reference is made
to the Registration Statement and to the Exhibits filed therewith, which may be
examined without charge at the Commission's principal office in Washington, D.C.
or its regional office in New York City, and copies of all or any part thereof
may be obtained from the Commission upon payment of certain fees prescribed by
the Commission. Statements contained in this Prospectus as to the contents of
any contract or other document referred to are not complete and 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.

-20-

================================================================================

No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or the solicitation of an offer to buy and
security other than the shares offered by this Prospectus, or an offer to sell
or a solicitation of an offer to buy any security by any person in any
jurisdiction in which such offer or solicitation would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, imply that the information in this Prospectus is correct as of
any time subsequent to the date of this Prospectus.

-----------------

TABLE OF CONTENTS
Page
----
Available Information...................................... 2
Information Incorporated by Reference..................... 2
Prospectus Summary......................................... 3
Risk Factors............................................... 6
Use of Proceeds............................................ 15
Selling Stockholders....................................... 15
Plan of Distribution....................................... 16
Description of Securities.................................. 17
Indemnification............................................ 18
Legal Matters.............................................. 19
Experts.................................................... 19
Additional Information..................................... 19

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2,866,553 Shares of

Common Stock

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TAKE-TWO INTERACTIVE SOFTWARE, INC.

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PROSPECTUS

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May 26, 1998

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