Atari Inc · POS AM · On 5/1/97

Filed On 5/1/97   ·   SEC File 333-14441   ·   Accession Number 950123-97-3772

Post-Effective Amendment
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: POS AM      Gt Interactive Software Corp.                         31    203K 
 2: EX-23.1     Consent of Arthur Andersen Llp                         1      5K 
 3: EX-23.2     Consent of Ernst & Young Llp                           1      5K 

POS AM   ·   Gt Interactive Software Corp.
Document Table of Contents

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1997 

                                                      REGISTRATION NO. 333-14441
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------

Post-Effective Amendment

No. 1 on Form S-3 

to

Form S-1

REGISTRATION STATEMENT
UNDER THE 
SECURITIES ACT OF 1933
------------------------------------

GT INTERACTIVE SOFTWARE CORP. 

(Exact name of registrant as specified in its charter)

                                                                · Download Table
                                                                                  
           DELAWARE                          7372                  13-3689915     
(State or other jurisdiction of  (Primary Standard Industrial   (I.R.S. Employer  
incorporation or organization)    Classification Code Number)  Identification No.)

16 EAST 40TH STREET,
NEW YORK, NEW YORK 10016
(212) 726-6500

(Address, including zip code, and telephone number, including area code, of 
registrant's principal executive offices) 

RONALD CHAIMOWITZ,
16 EAST 40TH STREET,
NEW YORK, NEW YORK 10016
(212) 726-6500

(Name, address, including zip code, and telephone number, including area code,
of agent for service) 
------------------------------------

COPIES TO:

DAVID P. LEVIN, ESQ.
KRAMER, LEVIN, NAFTALIS & FRANKEL 
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 715-9100
------------------------------------

     Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.            

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following 
box: [ ]                                                                        

     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of  
1933, as amended (the "Securities Act"), check the following box: [X]           
 If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier        
effective registration statement for the same offering: [ ]                     
  If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act   
registration statement number of the earlier effective registration statement   
for the same offering: [ ]                                                      
   If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box: [ ]                   
------------------------------------

  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION       
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF  
THE SECURITIES ACT, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE 
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE. 

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

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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A 
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
  SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
    MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
     BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
  THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
  SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE    
SECURITIES LAWS OF ANY SUCH JURISDICTION.                             

SUBJECT TO COMPLETION, DATED MAY 1, 1997. 

[LOGO]  
3,458,375 SHARES

COMMON STOCK

The 3,458,375 shares (the "Shares") of Common Stock offered hereby are
being sold by the holders thereof (the "Selling Stockholders"). GT Interactive  
Software Corp. ("GTIS" or the "Company") has agreed to pay the expenses of this 
offering but will not receive any of the proceeds from the sale of the Shares   
offered hereby. The aggregate proceeds to the Selling Stockholders will be the  
purchase price of the Shares sold, less the aggregate brokers' and dealers'     
discounts, commissions and concessions, and other expenses of issuance and      
distribution not borne by the Company. See "Plan of Distribution" and "Selling  
Stockholders." The Common Stock is listed on the Nasdaq National Market under   
the symbol "GTIS." On April 30, 1997, the last reported sale price for the      
Common Stock, as reported on the Nasdaq National Market, was $6 7/16 per share. 

The Shares were originally issued as consideration to the Selling     
Stockholders in connection with the acquisition by the Company of Humongous     
Entertainment, Inc. The Shares may be sold from time to time by the Selling     
Stockholders in transactions in the over-the-counter market or otherwise at     
prices and on terms then prevailing at the time of sale, at prices related to   
the then-current market price or in negotiated transactions. The Selling        
Stockholders and any dealers, brokers or agents that participate with the       
Selling Stockholders in the distribution of the Shares may be deemed to be      
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). Any commissions or discounts received by any such dealers,   
brokers or agents may be deemed to be underwriting commissions or discounts     
under the Securities Act. The Company has agreed to indemnify the Selling       
Stockholders against certain liabilities, including certain liabilities under   
the Securities Act, or to contribute to payments which the Selling Stockholders 
may be required to make in respect thereof. See "Plan of Distribution."         

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

     THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.

     SEE "RISK FACTORS" AT PAGE 5.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE 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                , 1997. 

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    NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS     
OFFERING 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 OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT 
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY          
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER 
TO, OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR   
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY 
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT 
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR 
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO   
THE DATE HEREOF.                                                                
------------------------------

  The Company was incorporated in Delaware in September 1992 and commenced
operations in February 1993. Unless the context otherwise provides, as used in  
this Prospectus "GTIS" or the "Company" refers to GT Interactive Software Corp. 
and its wholly owned subsidiaries. The Company's principal executive offices are
located at 16 East 40th Street, New York, New York 10016, and its telephone     
number is (212) 726-6500. The Company's home page can be accessed on the World  
Wide Web at http://www.gtinteractive.com. Information contained in the Company's
Web site shall not be deemed to be part of this Prospectus.                     

The mark "GT" in stylized form is a trademark of the Company. This    
Prospectus also includes product names, trademarks and trade names of companies 
other than GTIS which are the property of their respective companies. Humongous 
Entertainment, Inc. products are not in any manner affiliated with Putt-Putt    
Golf Courses of America, Inc.                                                   

ADDITIONAL INFORMATION

The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance         
therewith files reports and other information with the Securities and Exchange  
Commission (the "Commission"). The Common Stock is quoted for trading on the    
Nasdaq National Market, and such reports and registration statements filed by   
the Company with the Commission and other information concerning the Company may
be inspected at the offices of the Nasdaq Stock Market located at 1735 K Street,
N.W., Washington, D.C. 20006.                                                   

     The Company has filed with the Commission, a Registration Statement on Form
S-3 under the Securities Act with respect to the Common Stock offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus omits 
certain information, exhibits, schedules and undertakings set forth in the      
Registration Statement. For further information pertaining to the Company and   
the Common Stock, reference is made to such Registration Statement and the      
exhibits and schedules thereto. Statements contained in this Prospectus as to   
the contents of any contract or other document are not necessarily complete and,
with respect to any contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such reference
to such exhibit. Copies of the Registration Statement and exhibits may be       
inspected without charge at the Commission at 450 Fifth Street, N.W.,           
Washington, D.C. 20549, and copies of all or any part thereof may be obtained   
from such office upon payment of fees prescribed by the Commission, and at the  
Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York, New
York 10048 and at Northwestern Atrium Center, 500 West Madison Street, Suite    
1400, Chicago, Illinois 60661. The Registration Statement, including all        
exhibits and schedules, and such reports and other information may also be      
accessed electronically by means of the Commission's site on the World Wide Web 
at http://www.sec.gov. The Company has been an electronic filer since the filing
of its Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.      

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are by this reference incorporated in  
and made a part of this Prospectus: (i) the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 (File No. 0-27338); and (ii) the    

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description of the Company's capital stock set forth in its Registration        
Statement under the Exchange Act on Form 8-A filed with the Commission on       
November 30, 1995.                                                              

    All reports and other documents subsequently filed by the Company pursuant
to Section 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 Shares offered   
hereby shall be deemed to be incorporated by reference herein and to be part of 
this Prospectus from their respective dates of filing. Any statement contained  
in a document incorporated or deemed to be incorporated by reference herein     
shall be deemed to be modified or superseded to the extent that a statement     
contained herein or in any other document subsequently filed which also is or is
deemed to be incorporated by reference herein modifies or supersedes such       
statement. Any statement so modified or superseded shall not be deemed, except  
as so modified or superseded, to constitute a part of this Prospectus.          

   The Company hereby undertakes to provide without charge to each person to
whom this Prospectus is delivered, upon a written or oral request, a copy of any
or all of the documents that are incorporated herein by reference (other than   
exhibits to such documents, unless such exhibits are specifically incorporated  
by reference into such documents). Requests should be directed to GT Interactive
Software Corp., Attention: Chief Financial Officer, 16 East 40th Street, New    
York, New York 10016. Telephone Number: (212) 726-6500.                         

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SUMMARY 

 The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" appearing elsewhere in this Prospectus or 
incorporated herein by reference and Consolidated Financial Statements and notes
thereto incorporated herein by reference. This Prospectus contains forward-     
looking statements which involve risks and uncertainties. The Company's actual  
results may differ significantly from the results discussed in the              
forward-looking statements. Factors that might cause such a difference include, 
but are not limited to, those discussed in "Risk Factors."                      

THE COMPANY 

GT Interactive Software Corp. creates, publishes and merchandises     
interactive entertainment, edutainment and value-priced consumer software for a 
variety of platforms on a world-wide basis. Similar to major film studios and   
record companies, the Company employs a portfolio approach to achieve a broad   
base of products across most major consumer software categories. Recognizing    
that software distribution capabilities attract software publishing content, the
Company has used its strong distribution foundation to build its current        
position as a leader in the consumer software publishing business. According to 
PC Data, in 1996 the Company achieved the industry's second highest market share
in number of units sold in the personal computer ("PC") software game category  
and the industry's highest market share in number of units sold in the PC       
software budget/value-priced category. The Company has experienced significant  
growth in its published front-line titles, growing from 5 titles released in    
1994 to 24 titles released in 1995 to 67 titles released in 1996.               

The Company's current strategy is to obtain new software content by   
blending its in-house software development capabilities with the multi-title    
publishing relationships it has established with a variety of independent       
software design groups and content providers. To that end, the Company completed
several acquisitions of leading software companies in 1995 and 1996 which have  
increased its internal software development capabilities and publishing base. In
July 1996, the Company acquired Humongous, a premier developer and publisher of 
award-winning children's software, which has become the centerpiece of its      
edutainment business. In addition, the Company acquired WizardWorks, a developer
and publisher of value-priced software, and FormGen, a publisher of interactive 
PC shareware and software. These 1996 acquisitions supplemented the Company's   
1995 acquisition of Slash, a publisher, purchaser, repackager and distributor of
value-priced software.                                                          

   The Company has established multi-title software publishing relationships
with a wide range of leading content providers, including id Software, a        
developer of 3-D action games, such as Quake, Doom, Doom II and Hexen; 3D       
Realms, the creator of the best-selling Duke Nukem 3D; Williams, an arcade game 
developer whose titles include Mortal Kombat 3, NBA Hang Time and War Gods; and 
Scavenger, the developer of Scorcher, Amok and Into The Shadows. The Company has
also entered into multi-title relationships with edutainment content providers  
such as Mercer Mayer, a leading children's author and the creator of The Little 
Critter books, and Stan and Jan Berenstain, the creators of The Berenstain Bears
series.                                                                         

The Company believes that it is currently the largest distributor of  
consumer software to mass merchants in the United States. The Company is the    
primary supplier of its own and third party consumer software to approximately  
2,320 Wal-Mart stores and approximately 760 Target stores and supplies          
value-priced software under specially designed programs to approximately 2,150  
Kmart stores. In addition, the Company has established direct selling           
relationships for its own published software with a variety of major retailers, 
including Sam's Club, Price-Costco, CompUSA, Best Buy, Egghead and Computer     
City, among others.                                                             

The Company believes that significant growth opportunities exist in   
international markets and across a variety of next generation platforms. In     
order to exploit international markets, in January 1995, the Company established
a software publishing operation in London, England, with responsibility for     
European markets and is currently publishing, marketing and distributing its    
consumer software products in over 39 countries world-wide. The Company believes
that it is well positioned to take advantage of existing and emerging next      
generation platforms. In 1996, GTIS successfully launched Doom for the Sony     
PlayStation in Europe and Japan. In addition, the Company released Quake for PCs
in Europe in August 1996, where it was the number one selling title upon its    
release.                                                                        

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RISK FACTORS

    In addition to other information contained or incorporated by reference in
this Prospectus, the following risk factors should be considered carefully in   
evaluating the Company and its business before purchasing the Common Stock      
offered hereby. This Prospectus contains forward-looking statements which       
involve risks and uncertainties. The Company's actual results may differ        
significantly from the results discussed in the forward-looking statements.     
Factors that might cause such a difference include, but are not limited to,     
those discussed below.                                                          

CUSTOMER CONCENTRATION AND CREDIT RISK                                          

  The Company is the primary supplier of software to Wal-Mart Stores, Inc.
("Wal-Mart"), including titles published by the Company and products from other 
publishers. On a pro forma basis, giving effect to the acquisition of Slash     
Corporation ("Slash"), sales to Wal-Mart accounted for approximately 48% and 45%
of the Company's net sales for 1995 and 1996, respectively. The Company's status
as Wal-Mart's primary supplier is not based upon any written agreement or       
understanding. Accordingly, such status could be terminated at any time by      
Wal-Mart. In addition, Wal-Mart has dedicated, and the Company currently        
anticipates that Wal-Mart will continue to dedicate, the software department in 
a limited number of stores to other software distributors on a test basis. There
can be no assurance that Wal-Mart will continue to use the Company as its       
primary supplier of consumer software, or at all. The loss of Wal-Mart as a     
customer, a significant decrease in product shipments to or an inability to     
collect receivables from Wal-Mart or any other adverse change in the Company's  
relationship with Wal-Mart would have a material adverse effect on the Company's
business, operating results and financial condition. In late March 1997, the    
Company and Wal-Mart reached an understanding whereby Wal-Mart expects to begin 
testing direct purchasing of software from three publishers (CUC International, 
Electronic Arts, and Lucas Arts Entertainment) during the second half of 1997.  
Sales of products of these publishers to Wal-Mart accounted for approximately   
$20 million of the Company's net sales in 1996.                                 

RISKS ASSOCIATED WITH ACQUISITIONS                                              

    In June 1995 the Company acquired Slash, in June 1996 the Company acquired
WizardWorks Group, Inc. ("WizardWorks") and Candel Inc. ("Candel"), the parent  
company of FormGen, Inc. ("FormGen"), in July 1996 the Company acquired         
Humongous Entertainment, Inc. ("Humongous"), in November 1996 the Company       
acquired the business of Warner Interactive Entertainment Europe ("Warner       
Interactive Europe") and in January 1997 the Company acquired Premier European  
Promotion Limited, the parent company of One Stop Direct Limited ("One Stop").  
The Company undertook these acquisitions to expand its publishing and           
distribution capabilities with the assumption that the combined entity would be 
better able to take advantage of market opportunities than if each of the       
companies were operated individually. This synergy will depend in part on the   
ability of the Company to retain in-house publishing staffs and third-party     
relationships and to utilize distribution, sales and marketing capabilities. The
Company is in the process of integrating the acquired companies by consolidating
certain operations, offices and facilities, and combining administrative,       
accounting, sales and marketing and distribution functions. The integration of  
these acquired companies will involve, among other things, the opening of new   
facilities or the expansion of existing facilities, the expansion of accounting 
systems, controls and procedures, the increase in warehouse and distribution    
capabilities, the closing of redundant facilities and the elimination of        
duplicate personnel. The Company is in the early stages of integrating certain  
of the acquired companies and there can be no assurance that the integration    
will be completed without disrupting the Company's business. Should the Company 
not be able to achieve such integration in a timely manner or in a coordinated  
fashion, it could materially and adversely affect the Company's business,       
operating results or financial condition.                                       

  The Company believes that its future growth will depend, in part, on its
ability to continue to identify, acquire and integrate companies which have     
software development and publishing capabilities. While the Company reviews     
acquisition opportunities in the ordinary course of its business, some of which 
may be material and some of which are currently under investigation or          
discussion, the Company presently has no commitments or understandings with     
respect to any material acquisitions and there can be no assurance that         

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the Company will be successful in identifying and acquiring suitable acquisition
candidates. If any such acquisition candidates are identified, there can be no  
assurance that the Company will be successful in financing such acquisitions,   
negotiating terms favorable to the Company, consummating such acquisitions or   
integrating the acquired businesses into the Company's operations. Moreover, in 
connection with any such acquisitions, the Company may be required to incur     
indebtedness or assume other liabilities which could have a material adverse    
effect on the Company's operating results, liquidity and capital resources, or  
to issue shares of its capital stock which could result in dilution to          
stockholders.                                                                   

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY                        

The Company has experienced and may continue to experience significant
quarterly fluctuations in net sales and operating results due to a variety of   
factors, including fluctuations in the mix of products with varying profit      
margins sold by the Company, the size and timing of acquisitions, the size and  
growth rate of the consumer software market, market acceptance of the Company's 
products (including the Company's published and third-party distributed titles) 
and those of its competitors, development and promotional expenses relating to  
the introduction of new products or enhancements of existing products, projected
and actual changes in computing platforms, the timing and success of product    
introductions by the Company and its competitors, product returns, changes in   
pricing policies by the Company and its competitors, the accuracy of retailers' 
forecasts of consumer demand, the timing of orders from major customers, order  
cancellations and delays in shipment. In addition, delays in the introduction of
the Company's front-line titles could result in material fluctuations of the    
Company's operating results. The Company has experienced, and expects to        
experience in the future, significant fluctuations in its quarterly net sales   
and operating results as a result of such factors. In response to competitive   
pressures, the Company may take certain pricing or marketing actions that could 
materially and adversely affect the Company's business, operating results and   
financial condition. Products are generally shipped as orders are received and, 
accordingly, the Company operates with little backlog. The Company's expense    
levels are based, in part, on its expectations regarding future sales and, as a 
result, operating results would be disproportionately adversely affected by a   
decrease in sales or a failure to meet the Company's sales expectations.        
Defective front-line published products may result in higher customer support   
costs and product returns. Further, the consumer software business is seasonal. 
Net sales are typically significantly higher during the fourth calendar quarter,
due primarily to the increased demand for consumer software during the year-end 
holiday buying season. Net sales in other quarters are generally lower and vary 
significantly. Accordingly, the Company believes that period to period          
comparisons of operating results are not necessarily meaningful and should not  
be relied upon as an indication of future performance. There can be no assurance
that the Company will achieve consistent profitability on a quarterly or annual 
basis. Due to all of the foregoing factors, the Company's operating results in  
any quarter may be below the expectations of public market analysts and         
investors. In such event, the market price of the Company's Common Stock would  
likely be materially and adversely affected. See "-- Possible Volatility of     
Stock Price."                                                                   

DEPENDENCE ON NEW PRODUCT AND PRODUCT ENHANCEMENT INTRODUCTIONS; PRODUCT DELAYS 

   The Company's continued success in the publishing business depends on the
timely introduction of successful new products or enhancements of existing      
products to replace declining revenues from older products. Consumer preferences
for software products are difficult to predict, and few consumer software       
products achieve sustained market acceptance. If revenues from new products or  
enhancements were to fail to replace declining revenues from existing products, 
the Company's business, operating results and financial condition could be      
adversely affected. The process of developing software products such as those   
offered by the Company is extremely complex and is expected to become more      
complex and expensive in the future as new platforms and technologies are       
addressed. A significant delay in the introduction of one or more new products  
or enhancements could have a material adverse effect on the ultimate success of 
such products and on the Company's business, operating results and financial    
condition, particularly in view of the seasonality of the Company's business.   

     The Company's contracts with hardware licensors, which are also some of the
Company's chief competitors, often grant significant control to the licensor    
over the manufacturing of the Company's products.                               

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This fact could, in certain circumstances, leave the Company unable to get its  
products manufactured and shipped to customers. In most events, control of the  
manufacturing process by hardware companies increases both the manufacturing    
lead times and the costs to the Company over the lead times and costs that the  
Company can achieve independently. In fiscal 1996, for example, the Company     
experienced delays in the manufacturing of PlayStation products which caused    
delays in shipping those products. The results of future periods may be affected
by similar delays. Finally, the Company's contracts with its hardware licensors 
often require the Company to take significant risks in holding or prepaying for 
its inventory of products. See "-- Reliance on Third-Party Software Developers; 
Reliance on Other Publishers," "-- Fluctuations in Quarterly Operating Results; 
Seasonality" and "Business -- GTIS Publishing."                                 

RELIANCE ON THIRD-PARTY SOFTWARE DEVELOPERS; RELIANCE ON OTHER PUBLISHERS       

Although the Company substantially increased, primarily through       
acquisitions, its internal software development capabilities in 1996, a         
significant portion of the Company's published products have been licensed from,
or developed by, the Company in collaboration with independent software         
developers. Due primarily to the increased demand for consumer software         
programs, the payment of advances and guaranteed royalties to independent       
developers has increased and may continue to increase. As of December 31, 1996, 
the Company had recorded approximately $69.2 million of royalty advances on its 
balance sheet. There can be no assurance that the release of products associated
with such advances will not be delayed, which would delay the Company's ability 
to receive revenue to offset such advances or royalties, or that the sales of   
such products will be sufficient to cover the amount of such advances or royalty
prepayments. The Company's success depends in part on its continued ability to  
obtain and renew product development agreements with independent software       
developers. As independent developers are in high demand, there can be no       
assurance that independent developers, including those which have developed     
products for the Company in the past, will be available to develop products for 
the Company in the future. For instance, the Company does not currently have any
contractual agreement with id Software pursuant to which the Company has control
over, or has been promised rights to, future products to be developed by id     
Software; such rights are negotiated on a title-by-title basis. Many independent
developers have limited financial resources, which could expose the Company to  
the risk that such developers may go out of business prior to completing a      
project. In addition, because the Company's published products are often        
developed with outside developers, the Company cannot always control the timing 
of the introduction of its products. While the Company maintains production     
liaisons with independent developers, there can be no assurance that new        
products developed by third-party developers whose products are published by the
Company will be introduced on schedule or at all or within acceptable quality   
guidelines or that they will achieve market acceptance. The Company's success is
also dependent in part on its ability to obtain content for its products from   
external sources. There can be no assurance that the Company will be able to    
obtain or renew product development agreements, or to obtain such content, on   
favorable terms, or at all. Such agreements are terminable, in some cases       
without notice, upon the occurrence of one or more of the following events:     
those involving the bankruptcy or insolvency of either party to such agreements,
the cessation of operations by either of such parties or the material breach of 
specified provisions of such agreements which breach is not cured within a      
designated time frame. See "Business -- GTIS Publishing."                       

    The Company also distributes products on behalf of other publishers. There
can be no assurance that the Company will obtain or renew any rights to         
distribute such products. Failure to retain or obtain such rights could have a  
material adverse effect on the Company's business, operating results and        
financial condition. See "Business -- The GTIS Merchandising and Distribution   
Approach" and "-- GTIS Publishing."                                             

CHANGING PRODUCT PLATFORMS                                                      

The consumer software market is characterized by rapidly changing     
technology, particularly with respect to product platforms. The Company must    
continually anticipate the emergence of, and adapt its products to, popular     
platforms for consumer software. When the Company chooses to publish or develop 
a product for a new platform, it may be required to make a substantial          
development investment one to two years in advance of shipments of products on  
that platform. If the Company invests in the development of a product for a     
platform                                                                        

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that does not achieve significant market penetration, the Company's planned     
revenues from that product will be adversely affected and it may not recover its
development investment. If the Company does not choose to publish or co-develop 
for a platform that achieves significant market success, the Company's revenue  
growth may also be adversely affected. See "Business -- Industry Background" and
"-- GTIS Publishing."                                                           

INTERNATIONAL SALES                                                             

   The Company began to broaden its international sales efforts in late 1994
by establishing relationships with software publishers and distributors in      
leading international markets. The Company expects that international sales will
account for a significant portion of its net sales in the future. International 
sales are subject to inherent risks, including unexpected changes in regulatory 
requirements, tariffs and other barriers, fluctuating exchange rates, potential 
political instability, difficulties installing and managing foreign operations  
and difficulty in collection of accounts receivable. In addition, acceptance of 
the Company's products in certain markets has required, and may in the future   
require extensive, time-consuming and costly modifications to localize the      
products for use in particular markets. Software piracy presents a particularly 
acute problem in certain international markets such as South America, the Middle
East, the Pacific Rim and the Far East, and the laws of foreign jurisdictions   
may not protect the Company's proprietary rights to the same extent as the laws 
of the United States. There can be no assurance that these or other factors will
not have a material adverse effect on the Company's future international sales  
and, consequently, on the Company's business, operating results and financial   
condition. See "Business -- GTIS Publishing" and "-- International."            

RELIANCE ON HIT TITLES                                                          

   A significant percentage of the Company's net sales has been attributable
to a limited number of hit titles. For example, sales of the Company's top five 
titles during 1995 and 1996 accounted for approximately 10% and 12% of the      
Company's net sales for such periods, respectively, and approximately 34% and   
35% of the Company's published front-line product sales for such periods,       
respectively. The Company's business, operating results and financial condition 
could be materially and adversely affected if the Company does not publish an   
adequate number of hit titles in each fiscal quarter. See "Business -- GTIS     
Publishing."                                                                    

COMPETITION                                                                     

 The market for consumer software products is highly competitive. Only a
small percentage of products introduced in the consumer software market achieve 
any degree of sustained market acceptance. Competition is based primarily upon  
price, access to retail shelf space, product enhancements, ability to operate on
popular platforms, availability of titles, new product introductions, marketing 
support and distribution systems. Many of the companies with which the Company  
currently competes or may compete in the future have comparable or greater      
financial, technical, marketing, sales and customer support resources, larger   
and more seasoned internal development teams, greater name recognition and a    
larger customer base, than the Company. In addition, the Company believes that  
large software companies, media companies and film studios are increasing their 
focus on the interactive entertainment and edutainment software markets and, as 
a result of their financial and other resources, name recognition and customer  
base, may become significant competitors of the Company. Moreover, in a number  
of geographic markets, certain of the titles offered by the Company, including  
various hit titles, are offered on a limited number of platforms and compete    
with the same titles offered by the Company's competitors on other platforms.   
Current and future competitors with greater financial resources than the Company
may be able to carry larger inventories, undertake more extensive marketing     
campaigns, adopt more aggressive pricing policies and make higher offers or     
guarantees to software developers and licensors than the Company. The market is 
also extremely competitive with respect to access to third party developers and 
content providers. This competition is based primarily on breadth of            
distribution, development funding, reputation and royalty rates. To the extent  
that competitors maintain or achieve greater title portfolio breadth, title     
rights for popular platforms, or access to third party developers and content   
providers, or price, shelf access, marketing support, distribution or other     
selling advantages, the Company could be materially and adversely affected. In  
addition, several competitors of the Company have recently                      

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sought to expand their distribution capabilities. New hardware platforms and    
electronic delivery systems may be introduced into the software market and      
potential new competitors may enter the software development and distribution   
market, resulting in greater competition for the Company. There can be no       
assurance that the Company will have the resources required to respond          
effectively to market or technological changes or to compete successfully with  
current or future competitors or that competitive pressures faced by the Company
will not materially and adversely affect its business, operating results and    
financial condition. In addition, as part of its value-added distribution       
program, the Company seeks to provide its mass merchant customers with a wide   
variety of popular titles. Achieving such a product mix requires the Company to 
supplement the distribution of its published products with certain third party  
software products, including products published by the Company's competitors.   
There can be no assurance that such competitors will continue to provide such   
products to the Company for distribution at the Company's mass merchant         
customers. The failure to obtain software titles developed or published by one  
or more of the Company's competitors, and not being able to obtain these        
products from other distributors could have a material adverse effect on the    
Company's relationships with such mass merchant customers, which in turn would  
have a material adverse effect on the Company's business, operating results and 
financial condition. In late March 1997, the Company and Wal-Mart reached an    
understanding whereby Wal-Mart expects to begin testing direct purchasing of    
software from three publishers during the second half of 1997. See "-- Customer 
Concentration and Credit Risk" and "Business -- Competition."                   

DEPENDENCE ON KEY PERSONNEL                                                     

   The continued success of the Company depends to a significant extent upon
the continued performance and contribution of its senior management and on its  
ability to continue to attract, motivate and retain highly qualified employees. 
In particular, the Company is highly dependent on the management services of    
Joseph J. Cayre, the Chairman of the Board of Directors, Ronald Chaimowitz, the 
President and Chief Executive Officer of the Company and Charles F. Bond,       
President of the Company's Slash Division. The loss of the services of any of   
the Company's senior management could have a material adverse effect on the     
Company's business, operating results and financial condition. Competition for  
highly skilled employees with technical, management, marketing, sales, product  
development and other specialized training is intense, and there can be no      
assurance that the Company will be successful in attracting and retaining such  
personnel. Specifically, the Company may experience increased costs in order to 
attract and retain skilled employees. In addition, while the Company has entered
into employment agreements with Messrs. Chaimowitz and Bond, there can be no    
assurance that such employees will not leave or compete with the Company. The   
Company's failure to attract additional qualified employees or to retain the    
services of key personnel could materially and adversely affect the Company's   
business, operating results and financial condition.                            

POSSIBLE VOLATILITY OF STOCK PRICE                                              

     The market prices for the Common Stock have been, and may in the future be,
volatile. Market prices for the Company's Common Stock will be influenced by a  
number of factors, including quarterly variations in the financial results of   
the Company and its competitors, acquisitions, changes in earnings estimates by 
analysts and conditions in the computer software industry, the overall economy  
and the financial markets. These and other factors may adversely affect the     
market price of the Common Stock.                                               

PRODUCT RETURNS                                                                 

    The Company accepts product returns or provides markdowns or other credits
on varying terms in the event that the customer holds excess inventory of the   
Company's products. Software products as complex as those published by the      
Company may contain undetected errors when first introduced or when new versions
are released. It is the Company's practice to accept returns of defective or    
damaged products at any time. At the time of product shipment, the Company      
establishes a return reserve which covers expected future returns and, if       
necessary, price protection, the Company's policies for stock balancing and     
returns of defective or damaged products. This estimate of the potential for    
future returns of products is based on historical return rates, seasonality of  
sales, retailer inventories of the Company's products and other factors. The    
Company has                                                                     

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historically experienced, and reserved for, product returns at a rate of        
approximately 30% of gross sales. Product returns that exceed the Company's     
reserves, or loss of or delay in market acceptance of a new product as a result 
of software failures or otherwise, could materially and adversely affect the    
Company's business, operating results and financial condition. Although the     
Company maintains reserves which it believes to be adequate with respect to     
product returns and price reductions, there can be no assurance that actual     
returns to the Company will not exceed the reserves established.                

RAPID EXPANSION                                                                 

 The Company has experienced significant and rapid sales growth since it
commenced operations. There can be no assurance that the Company will be able to
maintain its present level of sales or continue to experience sales growth.     
There can be no assurance that, if the Company continues to experience sales    
growth, it can do so without adversely affecting its profitability.             

   The Company's ability to manage its growth effectively will require it to
continue to attract, train, motivate, manage and retain key employees and to    
improve its operational, financial and management information systems. If the   
Company's management becomes unable to manage growth effectively, the Company's 
business, operating results and financial condition could be adversely affected.
See "Business -- Facilities" and "-- Business Strategy".                        

RELIANCE ON MERCHANDISING SERVICES                                              

    The Company relies upon REPS, a company controlled by certain of the Cayre
Family Stockholders (as defined below), as the primary source of the field sales
representative services provided by the Company to Wal-Mart and to other of its 
retail customers. The Company believes that the quality of the field sales      
representative services provided by REPS is an important aspect of the Company's
merchandising strength. REPS has agreed to continue to perform such services, at
its cost, pursuant to an agreement expiring in 1997, which agreement may be     
terminated only by the Company. The Company believes that the terms of this     
agreement are as fair to the Company as the terms obtainable from an            
unaffiliated third party. In the event that the Company is unable to extend such
agreement on terms that are favorable to the Company, or REPS ceases to provide 
such services for any other reason, and the Company is not able to obtain       
comparable services from another source, the Company's business, operating      
results and financial condition could be materially and adversely affected.     

MANUFACTURING RISKS                                                             

 The production of the Company's published products involves duplicating
software programs onto CD-ROM disks and floppy diskettes, printing user manuals 
and product packaging materials, and packaging finished products. Each of the   
foregoing activities is performed for the Company by third parties in accordance
with the Company's specifications, including, in some cases, entities controlled
by the Cayre Family Stockholders. While these services are available from       
multiple parties and at multiple sites, there can be no assurance that an       
interruption in the manufacture of the Company's products will not occur and, if
it does occur, that it could be remedied without undue delay and without        
materially and adversely affecting the Company's business, operating results or 
financial condition. In addition, as consumer demand for CD-ROM based software  
increases, the Company must compete for CD-ROM duplication services with its    
competitors, as well as publishers of music and video CDs. An inability to      
secure adequate CD-ROM stamping capacity could have a material adverse effect on
the Company's business, operating results and financial condition. While the    
Company engages in ongoing efforts to ensure an adequate and timely supply of   
CD-ROMs from a number of suppliers, and to date has incurred no difficulty in   
securing its required supply, there can be no assurance that the future supply  
of CD-ROMs will be sufficient to meet the Company's requirements.               

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS                                    

 The Company sells a significant portion of its published software under
licenses from independent developers and, in such cases, does not acquire the   
copyrights for the underlying work. The Company relies                          

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primarily on a combination of patent, trademark, copyright, trade secret and    
other proprietary rights laws, license agreements, employee and third-party     
nondisclosure agreements and other methods to protect its proprietary rights and
the rights of its co-developers. Unauthorized copying occurs within the software
industry, and if a significant amount of unauthorized copying of the Company's  
published products or products distributed by it were to occur, the Company's   
business, operating results and financial condition could be materially and     
adversely affected. Also, as the number of software products in the industry    
increases and the functionality of these products further overlaps, software    
developers and publishers may increasingly become subject to infringement       
claims. There can be no assurance that third parties will not assert            
infringement claims against the Company in the future with respect to current or
future products. There has been substantial litigation in the industry regarding
copyright, trademark and other intellectual property rights. Any such claims or 
litigation, with or without merit, could be costly and cause a diversion of     
management's attention, which could have a material adverse effect on the       
Company's business, operating results and financial condition. See              
"Business -- Intellectual Property and Proprietary Rights" for the description  
of the Company's litigation against Micro Star Software.                        

RISK OF CUSTOMER BUSINESS FAILURE                                               

     Sales are typically made on credit, with terms that vary depending upon the
customer and the nature of the product. The Company does not hold collateral to 
secure payment. Retailers and distributors compete in a volatile industry and   
are subject to the risk of business failure. For example, the Company currently 
has an uninsured receivable in the amount of approximately $1.6 million from    
Neostar, a retailer currently engaged in Chapter 11 bankruptcy proceedings. A   
motion to convert the proceedings to Chapter 7 liquidation proceedings has been 
made, but no decision in respect thereto had been made as of March 28, 1997. The
Company believes its existing reserves are adequate to cover its exposure with  
respect to such receivable. Although the Company maintains a reserve for        
uncollectible receivables that it believes to be adequate, there can be no      
assurance that such reserve is adequate or that additional payment defaults on  
significant sales would not materially and adversely affect its business,       
operating results and financial condition.                                      

CONCENTRATION OF SHARE OWNERSHIP                                                

    The Common Stock entitles its holders to one vote per share on all matters
submitted to a vote of the holders of the Company's Common Stock. As of February
28, 1997, Joseph J. Cayre, Kenneth Cayre, Stanley Cayre, the various trusts for 
the benefit of their respective children, and Jack J. Cayre (collectively, the  
"Cayre Family Stockholders") collectively held approximately 53.2% of the       
combined voting power of the outstanding shares of Common Stock. Accordingly,   
the Cayre Family Stockholders have the voting power required to elect all       
directors and to approve other matters required to be voted upon by the         
stockholders of the Company.                                                    

ANTI-TAKEOVER PROVISIONS                                                        

The Company's Board of Directors has the authority to issue shares of 
Preferred Stock and to determine the designations, preferences and rights and   
the qualifications or restrictions of those shares without any further vote or  
action by the stockholders. The rights of the holders of Common Stock will be   
subject to, and may be adversely affected by, the rights of the holders of any  
Preferred Stock that may be issued in the future. The issuance of Preferred     
Stock, while providing desirable flexibility in connection with possible        
acquisitions and other corporate actions, could have the effect of making it    
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. In addition, the Company is subject to the anti-takeover  
provisions of Section 203 of the Delaware General Corporation Law (the "DGCL"). 
In general, this statute prohibits a publicly held Delaware corporation from    
engaging in a "business combination" with an "interested stockholder" for a     
period of three years after the date of the transaction in which the person     
became an interested stockholder, unless the business combination is approved in
a prescribed manner. Furthermore, certain other provisions of the Company's     
Amended and Restated Certificate of Incorporation and Amended and Restated      
Bylaws, such as the provision for a staggered Board of Directors, may have the  

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effect of discouraging, delaying or preventing a merger, tender offer or proxy  
contest, which could adversely affect the market price of the Company's Common  
Stock.                                                                          

SHARES ELIGIBLE FOR FUTURE SALE                                                 

  As of February 28, 1997, the Company had a total of 66,398,458 shares of
Common Stock outstanding. As of such date, approximately 48,270,000 shares of   
Common Stock were "restricted" securities within the meaning of Rule 144 under  
the Securities Act. Generally, under Rule 144, a person who has held restricted 
shares for a year may sell such shares, subject to certain volume limitations   
and other restrictions, without registering them under the Securities Act. As of
the date of this Prospectus, 2,566,953 shares of Common Stock are covered by an 
effective registration statement (Registration No. 333-19435) under the         
Securities Act for sale on a delayed or continuous basis by certain stockholders
of the Company. In addition and subject to certain limitations, holders of      
approximately 45,910,000 shares of the Company's Common Stock (including Common 
Stock issuable upon the exercise of warrants) have contractual rights to require
the Company to register such shares for future sale and holders of approximately
3,050,000 additional shares of Common Stock (including Common Stock issuable    
upon the exercise of warrants) have contractual rights to include such shares in
future Registration Statements filed by the Company under the Securities Act.   
Further, the Company has registered on a registration statement on Form S-8     
(Registration No. 333-428), the shares of Common Stock subject to outstanding   
options or reserved for issuance under the Company's 1995 Stock Incentive Plan. 
As of December 31, 1996, options to purchase approximately 5,458,000 shares of  
Common Stock were outstanding, of which approximately 1,041,000 option shares   
were exercisable as of such date. In connection with licensing and distribution 
arrangements and acquisitions of other companies, the Company has issued and may
continue to issue Common Stock or securities convertible into Common Stock. Any 
such sales, or future sales of substantial amounts of Common Stock, could       
adversely affect prevailing market prices for the Common Stock and could        
adversely affect the Company's ability to raise needed capital.                 

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BUSINESS

  The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ      
materially from those anticipated in these forward-looking statements as a      
result of certain factors, including those set forth under "Risk Factors" and   
elsewhere in this Prospectus.                                                   

GENERAL                                                                         

GT Interactive Software Corp. creates, publishes and merchandises     
interactive entertainment, edutainment and value-priced consumer software for a 
variety of platforms on a world-wide basis. Similar to major film studios and   
record companies, the Company employs a portfolio approach to achieve a broad   
base of products across most major consumer software categories. The Company    
obtains new software content by blending its internal software development      
capabilities with the multi-title publishing relationships it has established   
with a variety of independent software design groups and content providers.     
Recognizing that software distribution capabilities attract software publishing 
content, the Company has used its strong distribution foundation to build its   
current position as a leader in the consumer software publishing business.      
According to PC Data, in 1996 the Company achieved the industry's second highest
market share in number of units sold in the PC software game category and the   
industry highest market share in number of units sold in the PC software        
budget/value-priced category. The Company has experienced significant growth in 
its published front-line titles, growing from 5 titles released in 1994 to 24   
titles released in 1995 to 67 titles released in 1996.                          

INDUSTRY BACKGROUND                                                             

  The world-wide consumer software market has grown dramatically in recent
years, driven by the increasing installed base of multimedia PCs in the home,   
the introduction of new dedicated game systems from Sony, Sega, Nintendo and    
others, the proliferation of software titles, and the development of new and    
expanding distribution channels. Recent improvements in computer technology have
presented an opportunity to fundamentally change the user's PC experience by    
introducing an interactive element to audio and visual entertainment. Multimedia
PCs, generally configured with enhanced memory, high-resolution color monitors, 
sound boards, stereo speakers and high-capacity CD-ROM drives, provide          
interactive entertainment and learning environments that combine text, realistic
sound, advanced graphics and animation. Rapidly declining prices of             
microprocessors and CD-ROM drives have made these computers more affordable.    

 The world-wide consumer software industry has also recently undergone a
number of profound changes with the introduction of new hardware platforms and  
new technologies, such as on-line networks and the Internet. The "next          
generation" of game systems are based on 32- and 64-bit microprocessors that    
incorporate dedicated graphics chipsets. The Sony PlayStation ("PlayStation")   
and Sega Saturn ("Saturn") hardware systems began shipping in Japan in the last 
quarter of 1994 and in North America in 1995. The Nintendo 64 ("N64") system    
began shipping in Japan in June 1996 and began shipping in North America in late
1996. Historically, sales of console software titles have exceeded sales of PC  
titles in both units and dollars. In addition, the proliferation of on-line     
networks and the Internet has created new opportunities for the consumer        
software industry, including on-line game playing by users in various locations,
additional promotional techniques including on-line distribution of shareware,  
and direct on-line marketing, sales and distribution to end users.              

  Growth in the installed base of multimedia PCs and in other powerful and
functional platforms has created a mass market for consumer software products.  
The development of a mass market for software products has been characterized by
the rise in importance of mass merchant software sales as a distribution        
channel, increasing price pressure as well as competition for limited retail    
shelf space to accommodate the abundance of new titles. This abundance has      
resulted in the increased importance of brand name recognition in a hit driven  
market. Faced with the challenges of marketing and distribution, many           
independent software developers and content providers are pursuing relationships
with publishing companies with broader distribution capabilities, including     
enhanced access to mass market retailers and greater merchandising, marketing   

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and promotional support. At the same time, retailers are faced with the         
challenge of managing the increasing number of new titles with limited shelf    
space. Another result of these market pressures is the trend in the industry    
toward the consolidation of software companies and the diversification of       
products offered by such companies.                                             

     The Company believes that success in the industry will be achieved by those
companies that are able to create significant brand name recognition or hits,   
establish strong retail relationships and consistently offer a diversified      
high-quality software portfolio providing significant sell-through opportunities
for retailers of all kinds.                                                     

BUSINESS STRATEGY                                                               

  The Company's objective is to become one of the world's leading consumer
software companies. GTIS' initial business strategy was to establish a strong   
distribution capability as a foundation to build its current position as a      
leader in the consumer software publishing business.                            

The Company believes that significant growth opportunities exist in   
international markets and across a variety of next generation hardware          
platforms, including PlayStation, Saturn and N64, for which the Company is      
creating software products. Key elements of its strategy are to:                

  Continue to expand and diversify the publishing business.  The Company's
current strategy is to obtain new software content by blending its in-house     
software development capabilities with the multi-title publishing relationships 
it has established with independent software developers and content providers.  
To that end, the Company completed several acquisitions of leading software     
companies in 1995 and 1996 which have substantially increased its internal      
development capabilities and its publishing base. The Company acquired          
Humongous, a premier developer and publisher of award-winning children's        
software which has become the centerpiece of its edutainment business. In       
addition, the Company acquired WizardWorks, a developer and publisher of        
value-priced software, and FormGen, a publisher of interactive PC shareware and 
software. These 1996 acquisitions supplemented the Company's 1995 acquisition of
Slash, a publisher, purchaser, repackager and distributor of value-priced       
software. On an ongoing basis, GTIS intends to evaluate potential acquisitions  
of or investments in other software publishers or developers which it believes  
will complement or enhance its existing business.                               

With the acquisitions of Slash and WizardWorks, the Company has       
significantly enhanced its presence in the value-priced software market.        
WizardWorks' internal development capabilities have enabled the Company to      
create original lines of value-priced software. The Company's value-priced      
software marketing operations give the Company the flexibility to offer a       
particular product at various price points in response to market pricing        
pressures. This enables the Company to manage the entire life-cycle of its      
published product from the initial release of the product through the final     
closeout sale.                                                                  

The Company intends to seek additional ways to deepen and broaden its 
software product lines, including exploring new genres and platforms. Pursuant  
to this goal, the Company's strategies include attracting and retaining top     
developers and content providers, such as id Software, Williams, 3D Realms,     
Mercer Mayer, Stan and Jan Berenstain and Scavenger, as well as developing its  
own titles. Similar to the music industry, GTIS employs its own "A&R" (Artists &
Repertoire) group whose sole responsibilities are to identify, attract and      
retain independent software developers.                                         

Develop a leading position in the 32- and 64-bit game platforms.  The 
Company is leveraging its strength in the PC software market to build a leading 
position in the emerging 32- and 64-bit game software market. To that end, the  
Company has become an approved licensee of PlayStation and Saturn in North      
America. Nintendo has approved the Company as a licensee of its products, and   
they are in the process of finalizing a definitive agreement which will cover   
N64 products. In addition, the Company has entered into multi-title             
relationships with id Software, Williams, 3D Realms and other content providers 
and software developers for the publishing of titles for use on these game      
systems. As additional platforms that are suited to the Company's products      
emerge, the Company intends to publish products that it believes will have the  
greatest sales potential in the consumer software market.                       

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Broaden its international presence.  The Company believes that markets
outside the United States present significant growth opportunities. The Company 
began to broaden its international sales efforts in late 1994 by establishing   
relationships with software publishers and distributors in the largest          
international markets. In January 1995, the Company established a publishing    
operation in the United Kingdom with responsibility for European markets. That  
operation was expanded in November 1996 when the Company acquired the business  
of Warner Interactive Europe, a subsidiary of Warner Music Group, and in January
1997 when the Company acquired One Stop. In 1996, GTIS successfully launched    
Doom for PlayStation in Europe and in Japan. In addition, the Company released  
Quake for PCs in Europe, where it was the number one selling title upon its     
release.                                                                        

   In September 1995, the Company entered into joint venture agreements with
SOFTBANK, the leading distributor of PC software in Japan, and Roadshow         
Entertainment PTY LTD, a leading entertainment company in Australia, for the    
publishing and distribution of the Company's products in Japan and Australia,   
respectively. It was pursuant to the SOFTBANK arrangement that Doom was launched
in Japan. The Company is aggressively seeking new opportunities to form         
alliances with local publishers and distributors in other foreign markets.      

 Develop new brands and leverage hit titles.  The Company believes that,
with the proliferation of software titles and the competition for shelf space,  
brand name recognition of its published products, whether created internally or 
by third parties, is an important component of its success as a publisher. For  
example, the Company has licensed titles from Mercer Mayer in order to          
capitalize on the popularity of Mercer Mayer's multi-million selling The Little 
Critter book series. In addition, the popularity of Doom has resulted in the    
success of Doom-related products which have sold over 4.0 million copies.       
Further, Humongous has built significant brand name recognition in the          
edutainment area with its critically acclaimed software titles and identifiable 
characters. The Company intends to further build its characters and other       
properties to which the Company has exclusive rights through licensing and      
merchandising across various media, including books, television and films.      

  Pursue the Internet and on-line network opportunities.  The Internet and
on-line networks are an integral element of all GTIS marketing and promotional  
efforts. The Company generates awareness through its Web site for its software  
titles prior to their market debut. The wide acceptance of the Internet into    
consumers' homes has created new opportunities for the consumer software        
industry. The Company intends to further explore these opportunities, including 
on-line game playing by users in various locations, additional promotional      
techniques including on-line distribution of shareware, and direct on-line      
marketing, sales and distribution to end users.                                 

   Maintain its leadership position as a distributor and merchandiser.  GTIS
believes that it is the largest distributor of third party computer software to 
mass merchants in the United States and intends to maintain its position in this
area. The Company believes that its distribution capabilities have served as a  
foundation upon which it has built its current position as a leader in the      
consumer software publishing business. The Company's proprietary                
state-of-the-art distribution and point-of-sale replenishment system, as well as
its experienced management team, enable it to handle efficiently high sales     
volumes, manage and replenish inventory on a store by store basis and assemble  
for its customers regional and store by store data based on product             
sell-through. GTIS intends to continue to invest in and upgrade that system and 
seeks to explore innovative value-added programs to establish and strengthen    
retail relationships.                                                           

    There can be no assurance that the Company will successfully implement all
or any part of its strategy.                                                    

GTIS PUBLISHING                                                                 

    The Company publishes high quality consumer software, developed internally
or in collaboration with independent developers, which is available in various  
formats for use on multiple platforms. Like major film studios and record       
companies, GTIS employs a portfolio approach to achieve a broad base of products
across all major consumer software categories. The Company combines its internal
software development capabilities with relationships with a variety of          
independent software design groups, such as id Software, a leading developer of 
3-D action games (Quake, Final Doom, Doom II and Hexen); Williams, the home     
entertainment                                                                   

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division of leading arcade company WMS Industries (Mortal Kombat 3, NBA Hang    
Time and War Gods); 3D Realms, the creator of the best selling Duke Nukem 3D;   
Scavenger, designers of Scorcher, Amok and Into the Shadows; and Cybersites,    
creators of the popular Internet game, S.P.Q.R.                                 

     During 1996, the Company has consummated a number of strategic acquisitions
and investments that have significantly increased its internal development      
capabilities and added to its expanding publishing base. In July 1996, the      
Company acquired Humongous, a premier developer and publisher of original       
interactive children's entertainment software. Humongous' award-winning software
line features popular characters such as Putt-Putt, Freddi Fish, Fatty Bear and 
Buzzy the Knowledge Bug. USA Today (December 26, 1995) listed Humongous as one  
of "Six Firms Worth Watching in '96," and Fortune magazine (July 10, 1995) named
Humongous one of "25 Cool Companies." Humongous, which has become the           
centerpiece of the Company's edutainment business, joins the Company's existing 
popular children's titles, strengthening the Company's presence in the growing  
children's software category.                                                   

The Company further increased its internal software development       
capabilities in June 1996 when it acquired WizardWorks, a developer and         
publisher of a wide variety of consumer software products. The WizardWorks      
product line includes GameWizards, a series of gaming strategy, hint and tip    
guides on CD-ROM that incorporate full-motion video game segments, cheat codes  
and detailed maps. WizardWorks also offers the !Zone line of add-on levels that 
complement the industry's most popular entertainment titles, including GTIS     
titles such as Doom, Heretic, Hexen and Duke Nukem 3D. Through the CompuWorks   
line, WizardWorks offers a line of home office productivity software that       
includes such well-known titles as CompuWorks Publisher and CompuWorks Draw.    
Also included in the acquisition of WizardWorks was MacSoft, a leading publisher
of entertainment, edutainment and productivity software for the Macintosh. GTIS 
is consolidating all of its Macintosh offerings under the MacSoft brand,        
strengthening its position in this segment of the market.                       

     In June 1996, the Company also acquired FormGen, a publisher of interactive
PC shareware and software. Foremost among FormGen's current titles is the       
best-selling Duke Nukem 3D for PCs, published under license from 3D Realms.     
Independent of its acquisition of FormGen, the Company has secured the rights to
publish Duke Nukem 3D world-wide directly from 3D Realms for all next generation
platforms.                                                                      

  In November 1996, the Company invested in convertible preferred stock of
Off World Entertainment, Inc. (also known as "OddWorld Inhabitants" or          
"OddWorld"), which is convertible into 50% of the common equity. OddWorld's     
principal developers have extensive experience in the ground-breaking           
application of computer-generated images in film, commercials and theme park    
rides. OddWorld is currently developing "StoryDwellings" -- a game series that  
combines life-like character motion with intuitive controller interfaces inside 
highly rendered backgrounds, bringing players into a rich, deeply developed     
world that is more like a film than a game.                                     

The Company has also pursued strategic relationships with independent 
developers of software products. GTIS believes it has been successful in        
identifying talented developers and establishing mutually beneficial            
relationships with those developers. The Company's early publishing success was 
based in large part on the Doom series of software titles. These products have  
sold an aggregate of over 4.0 million copies since the introduction of the      
series in 1994 and have been the Company's most popular titles. The Doom series,
which includes Doom II, Doom-related products, Heretic and Hexen, is licensed to
the Company from, and developed by, id Software. Another id Software title,     
Quake, is currently being published by the Company in the U.S. and Europe.      

    The Company believes that its success with the Doom-related titles and its
software distribution capabilities have enabled it to attract and retain        
additional quality independent software developers and content providers.       
Consequently, the Company has experienced significant growth in its published   
titles, growing from 5 front-line titles released in 1994 to 24 titles released 
in 1995 to 67 titles released in 1996.                                          

    The Company has entered into several multi-title publishing contracts with
Williams, pursuant to which the Company has acquired the rights to publish      
software products based on virtually all of Williams' coin-operated video games,
for use on a number of platforms world-wide, excluding Japan and North America. 
The                                                                             

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Company has acquired similar rights to games developed by Atari Games           
Corporation ("Atari"), which was recently acquired by Williams.                 

   GTIS is also leveraging its strength in the PC software market to build a
leading position in the emerging 32- and 64-bit video game software market. To  
that end, the Company has become an approved licensee of PlayStation and Saturn 
in North America. Nintendo has approved the Company as a licensee of its        
products, and they are in the process of finalizing a definitive agreement which
will cover N64 products. In addition, the Company has entered into relationships
with id Software, Williams, 3D Realms and other content providers and software  
developers for the publishing of next generation titles, such as Doom II, Quake,
Duke Nukem 3D and Mortal Kombat 3.                                              

Edutainment                                                                     

In July 1996, the Company acquired Humongous, a premier developer and 
publisher of original interactive children's entertainment software. Humongous  
software features popular characters such as Putt-Putt, Freddi Fish, Fatty Bear 
and Buzzy the Knowledge Bug. Humongous titles, such as Putt-Putt Saves The Zoo, 
Freddi Fish and the Case of the Missing Kelp Seeds and Fatty Bear's Birthday    
Surprise, have won dozens of awards in the past few years.                      

     Humongous has become the centerpiece of the Company's edutainment business.
Current Humongous titles join GTIS' existing popular children's properties,     
including those from award-winning children's author Mercer Mayer (Just Me and  
My Dad and Just Me and My Mom), strengthening the Company's presence in the     
growing children's software category. Among the edutainment software products to
be published by the Company are software titles based on the Berenstain Bears   
series, created by Stan and Jan Berenstain.                                     

Value-Priced Software                                                           

     In addition to publishing front-line software, GTIS also creates, publishes
and distributes a variety of value-priced products. The Company believes that   
the value-priced segment of the consumer software market affords a growth       
opportunity as a result of the proliferation of software titles which cannot    
find front-line shelf space and the demand by many PC owners for moderately     
priced products. The Company's value-priced marketing operations give the       
Company the flexibility to offer a particular product at various price points in
response to market pricing pressures. This enables the Company to manage the    
entire life-cycle of its published product from the initial release of the      
product through the final closeout sale.                                        

     In early 1995, the Company began to repackage and offer for distribution to
mass merchants five- and ten-pack boxes of value-priced software titles. These  
generally include previously top-selling software titles whose popularity had   
peaked at higher retail price points or titles that never realized substantial  
popular recognition. The Company's acquisition in June 1995 of Slash, a leading 
publisher, purchaser, repackager and distributor of value-priced software,      
solidified the Company's presence in the value-priced market. Through its Slash 
Division, the Company licenses catalog titles, purchases excess inventory       
(primarily in the CD-ROM format) from major publishers and may repackage the    
titles into compilation boxes, such as five-packs and ten-packs.                

  The Company further expanded its value-priced product line in June 1996,
when it acquired WizardWorks, a leading developer and publisher of value-priced 
interactive entertainment, edutainment and productivity software. The           
WizardWorks value-priced product line includes the GameWizards, a series of     
gaming strategy, hint and tip guides; the !Zone line of add-on level software   
for complementing the industry's most popular entertainment titles; and the     
CompuWorks line of home office productivity software. The Company believes that 
the recent consolidation of the Slash Division and WizardWorks into one distinct
value-priced division will serve to strengthen its position in the value-priced 
market.                                                                         

In 1995, the Company commenced supplying value-priced software under  
specially designed fixture-based programs to Kmart and Wal-Mart. These programs 
utilize sophisticated distribution and point of sale replenishment systems      
similar to those already in use by the Company for front-line products.         

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International                                                                   

    In January 1995, the Company established a publishing operation in London,
England, with responsibility for European markets. The Company is currently     
publishing, marketing and distributing its consumer software products in over 39
countries world-wide, including Quake which was the number one selling PC title 
in Europe upon its release. The Company distributes its products direct to      
retail merchants in most of the U.K., through a sub-distribution agreement with 
Virgin Interactive Entertainment plc in French- and German-speaking countries   
and through wholesalers in most of the rest of the European market.             

The Company believes that the European market for 32- and 64-bit game 
systems software represents a significant growth opportunity. In late 1995, the 
Company successfully launched Doom for PlayStation in Europe and, in Spring     
1996, in Japan. Through its strategic alliance with Williams, the Company has   
acquired the exclusive right to publish and distribute, in most major markets   
excluding North America and Japan, 32-and 64-bit software products based on     
virtually all of Williams' coin-operated video games, as well as games developed
by Atari, which was recently acquired by Williams. These titles include NBA Hang
Time, based on the popular arcade basketball game, NHL Open Ice, an arcade-style
hockey brawl, Robotron X, the sequel to the arcade classic, Mortal Kombat       
Trilogy, based on the record-setting martial arts arcade series, and Area 51,   
based on the popular arcade game.                                               

   In November 1996, the Company acquired the business of Warner Interactive
Europe, a European subsidiary of Warner Music Group. The acquisition established
direct GTIS operations in France and Germany, as well as Australia. As part of  
the transaction, the Company also acquired an internal product development team 
based in Manchester, England. In addition, in January 1997 the Company acquired 
One Stop, a leading value-priced software publisher based in Wimbledon, England.

   The Company has also entered into joint venture agreements with SOFTBANK,
the leading distributor of personal computer software in Japan, and Roadshow    
Entertainment PTY LTD, a leading entertainment company in Australia, under which
the Company and each of the other parties publish and distribute the Company's  
titles in Japan and Australia, respectively. In October 1995, the Company and   
SOFTBANK further strengthened their relationship through the purchase from the  
Company and certain stockholders, by an affiliate of SOFTBANK, of an equity     
interest in the Company. Additionally, in June 1996, the Company purchased a    
9.9% interest in, and entered into a multi-title publishing agreement with,     
Mirage, a U.K. developer of entertainment software. The Company is aggressively 
seeking new opportunities to form strategic alliances with local publishers and 
distributors in other foreign markets.                                          

THE GTIS MERCHANDISING AND DISTRIBUTION APPROACH                                

The Company believes that it is the only software publisher that sells
directly to substantially all of the major retailers of computer software in the
U.S. and that it is the largest distributor of computer software to mass        
merchants in the U.S. GTIS sells its own published titles to specialty retailers
and distributes its own products, as well as those of other publishers, to      
certain mass merchants. The Company is the primary supplier of its own and      
third-party consumer software to approximately 2,320 Wal-Mart stores and        
approximately 760 Target stores and supplies value-priced software under        
specially designed fixture-based programs to approximately 2,150 Kmart stores.  
In addition, the Company sells its own published products to a variety of major 
retailers, including Sam's Club, Price-Costco, CompUSA, Best Buy, Egghead and   
Computer City, among others.                                                    

    The Company believes that its merchandising and distribution capability is
an important element of its success and gives it a competitive advantage. The   
Company's distribution approach is based on direct sales to a significant number
of specialty, multi-purpose and mass merchant retailers of computer software.   
This approach includes shipment of software directly to individual stores or    
warehouse locations for each of its retail accounts, in-store merchandising     
programs for a variety of its retail accounts and value-added distribution      
programs employing a proprietary point-of-sale inventory replenishment system   
for certain of its mass merchant accounts.                                      

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GTIS initially designed its merchandising and distribution program in 
collaboration with Wal-Mart. Under this program currently executed for certain  
mass merchants, the Company typically manages substantially all of a store's    
software inventory, by designing, supplying and restocking displays of software 
according to a program plan devised in concert with the customer specifically   
for each individual store. Drawing upon its regional and store specific data    
base, the Company updates each store plan on a continual basis. This            
store-specific program plan, together with the Company's proprietary            
point-of-sale replenishment system, enables the Company to ensure that the mass 
merchants' shelves will remain fully stocked with a tailored mix of titles      
designed to maximize the sales volume per square foot of shelf space.           

Utilizing its point-of-sale replenishment systems and electronic data 
interchange (EDI) links with its largest mass merchant accounts, the Company is 
able to efficiently handle high sales volumes to those customers, manage and    
replenish inventory on a store-by-store basis and assemble for its customers    
regional and store-by-store data based on product sell-through. The Company     
utilizes state-of-the-art technology systems for order processing, inventory    
management, purchasing and tracking of shipments thereby increasing the         
efficiency and accuracy of order processing and payments and shortening order   
turnaround time. These systems automatically track software orders from order   
processing to point-of-sale, thereby enhancing customer satisfaction through    
prompt delivery of the desired software titles.                                 

Based on the strength of its current consumer software distribution   
operation, GTIS has successfully attracted other publishers to utilize its mass 
merchant distribution services for their products. Such products are generally  
distributed by GTIS under the name of the publisher who is, in turn, responsible
for the publishing, packaging, marketing and customer support of such products. 
GTIS believes that its program of distributing other publishers' products       
leverages the Company's distribution capabilities and adds a source of revenue  
that does not require additional product development expenditures. The Company's
agreements with other publishers typically provide for certain retail           
distribution rights in designated territories for a specific period of time,    
after which those rights are subject to negotiated renewal.                     

MARKETING                                                                       

    GTIS believes that marketing is critically important to the success of its
products. The Company employs a wide range of sophisticated marketing techniques
including (i) in-store promotions that utilize display towers and endcaps, (ii) 
direct mailings, (iii) advertising in computer and general consumer publications
and (iv) on-line marketing to promote sales of its products. The Company        
monitors and measures the effectiveness of its marketing strategies throughout  
the product lifecycle.                                                          

 The Internet is an integral element of GTIS' marketing efforts used, in
part, to generate awareness for its titles months prior to their market debut.  
GTIS incorporates the Internet into its marketing programs through the creation 
of product-dedicated mini-sites, on-line promotions and news group seedings.    

 To capitalize on the innovative nature of its products, the Company has
developed a public relations program that has resulted in coverage for the      
Company by trade journals and also by well-recognized publications such as The  
New York Times, Entertainment Weekly, Newsweek and USA Today. Among the         
marketing strategies the Company utilizes is the creation of special press      
events to coincide with the launch of a new product.                            

    GTIS' marketing programs have continued to expand along with the Company's
publishing business. For example, to launch Just Me and My Mom, an interactive  
storybook based on the popular Mercer Mayer book, GTIS unveiled a multi-tiered  
marketing campaign which included cross-promotions with Family PC magazine and  
Scholastic Software Clubs, the showcasing of the game at an EPCOT Center exhibit
and magazine subscriber invoice inserts, as well as game demos sent to          
approximately 750,000 educators.                                                

As of December 31, 1996, the Company's staff included 105 employees in
domestic sales and marketing and 84 employees in international marketing and    
distribution. The Company expects to increase its sales and marketing staff to  
provide greater penetration into the retail market and increased marketing      
support for its products. The Company also uses independent field sales         
representative organizations to assist in the sales of software products and    
customer support.                                                               

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COMPETITION                                                                     

The market for consumer software products is highly competitive and is
characterized by rapidly changing technology, evolving industry standards and   
frequent new product introductions. A number of competitors offer products that 
compete with one or more of the Company's products, and some of those           
competitors have recently attempted to increase their focus on the distribution 
business. Only a small percentage of products introduced in the consumer        
software market achieve any degree of sustained market acceptance. Principal    
competitive factors in marketing consumer software include content, price,      
access to retail shelf space, product enhancements, the ability to operate on   
popular platforms, the availability of hit titles, new product introductions,   
marketing support and distribution systems. GTIS believes that it competes      
effectively in these areas, particularly in the areas of quality content,       
platform support, a breadth of titles, price, access to retail shelf space,     
marketing support and distribution systems. Moreover, in a number of geographic 
markets, certain of the titles offered by the Company, including various hit    
titles, are offered on a limited number of platforms and compete with the same  
titles offered by the Company's competitors on other platforms. Many of the     
Company's current and potential competitors, however, have comparable or greater
financial, technical, marketing, sales and customer support resources, larger   
and more seasoned internal development teams, greater name recognition and a    
larger customer base, than the Company. In addition, the Company believes that  
large software companies, media companies and film studios are increasing their 
focus on the interactive entertainment and edutainment software markets and, as 
a result of their financial and other resources, name recognition and customer  
base, may become significant competitors of the Company. The market is also     
extremely competitive with respect to access to third party developers and      
content providers. This competition is based primarily on breadth of            
distribution, development funding, reputation and royalty rates. The Company    
believes that it competes favorably with respect to each of these factors. To   
the extent that competitors maintain or achieve greater title portfolio breadth,
title rights for popular platforms or access to third party developers and      
content providers, or price, shelf access, marketing support, distribution or   
other selling advantages, the Company could be materially and adversely         
affected. There can be no assurance that the Company will have the resources    
required to respond to market or technological changes or to compete            
successfully in the future.                                                     

     The market for the Company's products is characterized by significant price
competition, and the Company expects that it will face increasing pricing       
pressures from its current competitors. There can be no assurance that the      
Company will be able to provide products that compare favorably with the        
products of the Company's competitors or that competitive pressures will not    
require the Company to reduce its prices. Any material reduction in the price of
the Company's products would negatively affect operating income as a percentage 
of net revenue and would require the Company to increase unit sales in order to 
maintain net revenue.                                                           

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS                                    

     The Company generally sells a significant portion of its published software
under licenses from independent developers and, in such cases, does not acquire 
the copyrights for the underlying work. The Company relies primarily on a       
combination of trademark, copyright, trade secret and other proprietary rights  
laws, license agreements, employee and third-party nondisclosure agreements and 
other methods to protect its proprietary rights and the rights of its           
developers. United States copyright law, international conventions and          
international treaties, however, may not provide meaningful protection against  
unauthorized duplication or infringement of the Company's software.             

    Policing unauthorized use of an easily duplicated and broadly disseminated
product such as computer software is very difficult. Software piracy is expected
to be a persistent problem for the software industry. These problems are        
particularly acute in certain international markets such as South America, the  
Middle East, the Pacific Rim and the Far East. If a significant amount of       
unauthorized copying of the Company's products were to occur, the Company's     
business, operating results and financial condition could be adversely affected.

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Software developers and publishers are subject to infringement claims.
There can be no assurance that third parties will not assert infringement claims
against the Company in the future with respect to current or future products.   

    There has been substantial litigation in the industry regarding copyright,
trademark and other intellectual property rights. Any such claims or litigation,
with or without merit, could be costly and a diversion of management's          
attention, which could have a material adverse effect on the Company's business,
operating results and financial condition. Adverse determinations in such claims
or litigation could have a material adverse effect on the Company's business,   
operating results and financial condition. The Company is presently in          
litigation against Micro Star Software ("Micro Star"), the publisher of a       
product entitled "Nuke It" comprised largely of additional levels of play for   
Duke Nukem 3D which are created by game users and available over the Internet   
("Player Created Levels"). The Company contends that the sale of Nuke It        
infringes the copyright on Duke Nukem 3D (which the Company publishes under     
license with the owner of 3D Realms) and violates the Lanham Act's trademark,   
unfair competition and false advertising provisions. On September 26, 1996, the 
Company obtained a preliminary injunction in federal court in San Diego,        
California ordering the recall of all copies of Nuke It then in the stores,     
based on the use of Duke Nukem 3D's protected expression on Nuke It's packaging 
and in some copies of the Nuke It CD-ROM. The Court also held as a preliminary  
matter that the Player Created Levels contained in Nuke It did not themselves   
contain expression from the Duke Nukem 3D game in protectable form. Because the 
Company believes that this holding is erroneous, it is pursuing an appeal to the
U.S. Court of Appeals for the Ninth Circuit, seeking an injunction halting the  
sale of Nuke It and any subsequent Micro Star product containing additional     
levels of play for Duke Nukem 3D. Micro Star has appealed the Court's decision  
granting the injunction. The Company intends vigorously to pursue this          
litigation to protect its intellectual property rights.                         

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USE OF PROCEEDS 

The Company will not receive any of the proceeds from the sale of the 
Shares.                                                                         

SELLING STOCKHOLDERS

     The following table provides certain information with respect to the Shares
held by each Selling Stockholder, which information has been furnished to the   
Company by the Selling Stockholders and other sources and which information the 
Company has not verified. Each Selling Stockholder is hereby offering all of the
shares of Common Stock held by such Selling Stockholder, but ten percent of the 
shares held by such Selling Stockholder is held in escrow, and may not be sold, 
transferred, pledged or assigned by such Selling Stockholder until July 9, 1997.
The Shares offered by this Prospectus may be offered from time to time in whole 
or in part by the persons or entities named below or by their transferees. See  
"Plan of Distribution."                                                         

 Ms. Shelley M. Day and Mr. Ronald D. Gilbert are President and Creative
Director, respectively, of Humongous, a wholly-owned subsidiary of the Company. 
The Shares were originally issued as consideration to the Selling Stockholders  
in connection with the acquisition by the Company of Humongous (the             
"Acquisition"). In connection with the Acquisition, the Company agreed to       
register the Shares under the Securities Act. Prior to the Acquisition, Hummer  
Winblad Venture Partners, L.P., Hummer Winblad Venture Partners II, L.P. and    
Hummer Winblad Technology Fund II, L.P., as a group, and Random House, Inc. each
appointed a member to the Board of Directors of Humongous.                      

                                                        · Enlarge/Download Table

                                                                SHARES BENEFICIALLY                  
                                                                       OWNED                         
                                                               PRIOR TO THE OFFERING                 
                                                               ----------------------                
                                                               NUMBER OF    PERCENT     SHARES THAT  
                             NAME                               SHARES    OF CLASS(1)  MAY BE OFFERED
-------------------------------------------------------------- ---------  -----------  --------------
                                                                                                     
Shelley M. Day................................................ 1,134,294      1.7         1,134,294  
Ronald D. Gilbert............................................. 1,134,294      1.7         1,134,294  
Wayne Smith...................................................   113,429        *           113,429  
Dev Madan.....................................................     9,452        *             9,452  
Megan Folsom..................................................       284        *               284  
Susan Klamert.................................................       827        *               827  
Michelle Cooper...............................................       591        *               591  
Hummer Winblad Venture Partners, L.P. ........................   283,573        *           283,573  
Hummer Winblad Venture Partners II, L.P. .....................   272,230        *           272,230  
Hummer Winblad Technology Fund II, L.P. ......................    11,343        *            11,343  
Random House, Inc. ...........................................   498,058        *           498,058  

---------------                                                                 
* Less than 1%                                                                  

(1) Based on 66,307,064 shares of the Company's Common Stock outstanding as of  
November 15, 1996.                                                      

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PLAN OF DISTRIBUTION

The Company will not receive any of the proceeds from the sale of the 
Shares offered hereby. The Shares may be sold from time to time by or for the   
account of any of the Selling Stockholders or by their pledgees, donees,        
distributees or transferees or other successors in interest to the Selling      
Stockholders. Such persons may choose to sell all or any of the Shares in the   
over-the-counter market or otherwise at prices and on terms then prevailing at  
the time of sale, at prices related to the then-current market price or in      
negotiated transactions. Brokers or dealers involved in the sale may receive    
commissions or discounts in connection with such sale in amounts to be          
negotiated (and, if such broker-dealer acts as agent for the purchaser of such  
Shares, from such purchaser).                                                   

The Company has agreed with the Selling Stockholders to keep the      
Registration Statement, of which this Prospectus constitutes a part, effective  
until July 10, 1997.                                                            

LEGAL MATTERS 

  The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Kramer, Levin, Naftalis & Frankel, New York, New York.  
Certain members of, and persons associated with, such firm own an aggregate of  
26,357 shares of Common Stock.                                                  

EXPERTS 

   The Consolidated Financial Statements and schedule of the Company for the
years ended December 31, 1994, December 31, 1995 and December 31, 1996,         
incorporated by reference in this Prospectus and elsewhere in this Registration 
Statement have been audited by Arthur Andersen LLP, independent public          
accountants, as indicated in their report with respect thereto, and are         
incorporated by reference herein in reliance upon the authority of said firm as 
experts in accounting and auditing in giving said report.                       

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[GT INTERACTIVE SOFTWARE LOGO]

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PART II 

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.                          

The Registrant estimates that expenses payable by the Registrant in   
connection with the offering described in this Registration Statement will be as
follows:                                                                        

                                                        · Enlarge/Download Table

                                                                                  TOTAL  
                                                                                 --------
                                                                                         
SEC registration fee (actual)................................................... $108,031
Accounting fees and expenses....................................................   50,000
Legal fees and expenses.........................................................   50,000
Printing and engraving expenses.................................................  120,000
Miscellaneous expenses..........................................................   21,969
                                                                                 --------
  Total......................................................................... $350,000
                                                                                 ========

ITEM 15.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.                            

    Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), which permits a corporation in its certificate of             
incorporation or an amendment thereto to eliminate or limit the personal        
liability of a director for violations of the director's fiduciary duty, except 
(i) for any breach of the director's fiduciary duty of loyalty to the           
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)       
pursuant to Section 174 of the DGCL (providing for liability of directors for   
unlawful payment of dividends or unlawful stock purchases or redemptions), or   
(iv) for any transaction from which the director derived an improper personal   
benefit. The Registrant's Amended and Restated Certificate of Incorporation     
contains provisions permitted by Section 102(b)(7) of the DGCL.                 

Reference is made to Section 145 of the DGCL which provides that a    
corporation may indemnify any persons, including directors and officers, who    
are, or are threatened to be made, parties to any threatened, pending or        
completed legal action, suit or proceeding, whether civil, criminal,            
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was a director,      
officer, employee or agent of such corporation, or is or was serving at the     
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including        
attorneys' fees), judgments, fines and amounts paid in settlement actually and  
reasonably incurred by such person in connection with such action, suit or      
proceeding, provided such director, officer, employee or agent acted in good    
faith and in a manner he reasonably believed to be in or not opposed to the     
corporation's best interests and, with respect to any criminal actions or       
proceedings, had no reasonable cause to believe that his conduct was unlawful. A
Delaware corporation may indemnify directors and/or officers in an action or    
suit by or in the right of the corporation under the same conditions, except    
that no indemnification is permitted without judicial approval if the director  
or officer is adjudged to be liable to the corporation. Where a director or     
officer is successful on the merits or otherwise in the defense of any action   
referred to above, the corporation must indemnify him or her against the        
expenses which such director or officer actually and reasonably incurred.       

     The Registrant's Amended and Restated Certificate of Incorporation provides
indemnification of directors and officers of the Registrant to the fullest      
extent permitted by the DGCL. Pursuant to the registration rights agreement     
entered into with the Company, the Selling Stockholders have agreed to indemnify
directors and officers of the Company against certain liabilities, including    
liabilities under the Securities Act.                                           

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    The Registrant maintains liability insurance for each director and officer
for certain losses arising from claims or charges made against them while acting
in their capacities as directors or officers of the Registrant.                 

ITEM 16.  EXHIBITS.                                                             

Exhibits 2.1 and 2.2 below are incorporated herein by reference to the
exhibit with the corresponding number filed as part of the Current Report on    
Form 8-K filed on July 9, 1996. Exhibit 4.1 below is incorporated herein by     
reference to the exhibit with the corresponding number filed as part of the     
Registrant's Registration Statement on Form S-1 filed on October 20, 1995, and  
all amendments thereto (Registration No. 33-98448).                             

                                                        · Enlarge/Download Table

EXHIBIT NO.                                      DESCRIPTION                                    
-----------   ----------------------------------------------------------------------------------
                                                                                                
        2.1   Agreement and Plan of Reorganization by and among the Registrant, GT Acquisition  
              Sub, Inc., WizardWorks Group, Inc. and the Stockholders of WizardWorks Group, Inc.
              dated June 24, 1996.                                                              
        2.2   Escrow Agreement by and among the Registrant, Paul D. Rinde, as the Stockholder   
              Representative of WizardWorks Group, Inc., and Republic National Bank of New York,
              as Escrow Agent, dated June 24, 1996.                                             
        4.1   Specimen form of stock certificate for Common Stock.                              
        5.1*  Opinion of Kramer, Levin, Naftalis & Frankel.                                     
       23.1** Consent of Arthur Andersen LLP.                                                   
       23.2** Consent of Ernst & Young LLP.                                                     
       23.3*  Consent of Kramer, Levin, Naftalis & Frankel (contained in the opinion filed as   
              Exhibit 5.1 hereto).                                                              
       24.1   Power of Attorney (contained on the signature page of this Registration           
              Statement).                                                                       

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

* Previously filed.                                                           

** Filed herewith.                                                              

ITEM 17.  UNDERTAKINGS.                                                         

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the          
Registrant pursuant to provisions described in Item 15 above, or otherwise, the 
Registrant has been advised that, in the opinion of the Securities and Exchange 
Commission, such indemnification is against public policy as expressed in the   
Securities Act and is, therefore, unenforceable. In the event that a claim for  
indemnification against such liabilities (other than the payment by the         
Registrant of expenses incurred or paid by a director, officer or controlling   
person of the Registrant in the successful defense of any action, suit or       
proceeding) is asserted by such director, officer or controlling person in      
connection with the Common Stock covered hereby, the Registrant will, unless in 
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such         
indemnification by it is against public policy as expressed in the Securities   
Act and will be governed by the final adjudication of such issue.               

The undersigned Registrant hereby undertakes:                         

    (1)  To file, during any period in which offers or sales are being made, a
   post-effective amendment to this Registration Statement: (i) to
        include any prospectus required by Section 10(a)(3) of the Act; (ii)
      to reflect in the prospectus any facts or events arising after the
    effective date of the Registration Statement (or the most recent
   post-effective amendment thereof) which, individually or in the
          aggregate, represent a fundamental change in the information set forth
 in this Registration Statement; (iii) to include any material
       information with respect to the plan of distribution not previously
          disclosed in the Registration Statement or any material change to such
      information in the Registration Statement, provided, however, that
       clauses (i) and (ii) do not apply if the information required to be
          included in a post-effective amendment by such clauses is contained in

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     periodic reports filed with or furnished to the Commission by the
         Registrant pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934;                                                

     (2)  That, for the purpose of determining any liability under the Act, each
          such post-effective amendment shall be deemed to be a new registration
          statement relating to the securities offered therein, and the offering
          of such securities at that time shall be deemed to be the initial bona
fide offering thereof;                                      

   (3)  To remove from registration by means of post-effective amendment any
 of the securities being registered which remain unsold at the
termination of the offering.                                

The undersigned Registrant hereby undertakes that, for purposes of    
determining any liability under the Securities Act, each filing of the          
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities 
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit 
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall be 
deemed to be a new registration statement relating to the securities offered    
therein, and the offering of such securities at that time shall be deemed to be 
the initial bona fide offering thereof.                                         

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SIGNATURES

    Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the    
requirements for filing on Form S-3 and has duly caused this registration       
statement or amendment to be signed on its behalf by the undersigned, thereto   
duly authorized, in the City of New York, State of New York, on May 1, 1997.    

                                 GT INTERACTIVE SOFTWARE CORP.

                              By: /s/  RONALD CHAIMOWITZ

                                          --------------------------------------
                           Name: Ronald Chaimowitz
                                        Title: President and Chief Executive
           Officer

POWER OF ATTORNEY 

  KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Joseph J. Cayre, Ronald Chaimowitz and   
Jack J. Cayre his true and lawful attorney-in-fact and agent, each acting alone,
with full powers of substitution and resubstitution, for him and in his name,   
place and stead, in any and all capacities, to sign any or all amendments to    
this registration statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange       
Commission, granting unto said attorneys-in-fact and agents, each acting alone, 
full power and authority to do and perform each and every act and thing         
requisite and necessary to be done in and about the premises, as fully for all  
intents and purposes as he might or could do in person, hereby ratifying and    
confirming all that said attorneys-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this      
registration statement or amendment has been signed by the following persons in 
the capacities and on the dates indicated.                                      

                                                        · Enlarge/Download Table

              SIGNATURE                                TITLE(S)                      DATE      
-------------------------------------  ---------------------------------------- ---------------
                                                                                               
        /s/  JOSEPH J. CAYRE           Chairman of the Board                    May 1, 1997    
-------------------------------------                                                          
           Joseph J. Cayre                                                                     
         /s/  ANDREW GREGOR            Senior Vice President, Finance and       May 1, 1997    
-------------------------------------  Administration, and Chief Financial                     
            Andrew Gregor              Officer (Principal Financial and                        
                                       Accounting Officer)                                     

       /s/  RONALD CHAIMOWITZ          President, Chief Executive Officer       May 1, 1997    
-------------------------------------  and Director                                            
          Ronald Chaimowitz                                                                    

         /s/  JACK J. CAYRE            Executive Vice President, Director       May 1, 1997    
-------------------------------------                                                          
            Jack J. Cayre                                                                      

         /s/  KENNETH CAYRE            Director                                 May 1, 1997    
-------------------------------------                                                          
            Kenneth Cayre                                                                      

         /s/  STANLEY CAYRE            Director                                 May 1, 1997    
-------------------------------------                                                          
            Stanley Cayre                                                                      

       /s/  STEVEN A. DENNING          Director                                 May 1, 1997    
-------------------------------------                                                          
          Steven A. Denning                                                                    

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                                                        · Enlarge/Download Table

              SIGNATURE                                TITLE(S)                      DATE      
-------------------------------------  ---------------------------------------- ---------------
                                                                                               

        /s/  WILLIAM E. FORD           Director                                 May 1, 1997    
-------------------------------------                                                          
           William E. Ford                                                                     

         /s/  JORDAN A. LEVY           Director                                 May 1, 1997    
-------------------------------------                                                          
           Jordan A. Levy                                                                      

        /s/  ALVIN N. TELLER           Director                                 May 1, 1997    
-------------------------------------                                                          
           Alvin N. Teller                                                                     

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EXHIBIT INDEX 

Exhibits 2.1 and 2.2 below are incorporated herein by reference to the
exhibit with the corresponding number filed as part of the Current Report on    
Form 8-K filed on July 9, 1996. Exhibit 4.1 below is incorporated herein by     
reference to the exhibit with the corresponding number filed as part of the     
Registrant's Registration Statement on Form S-1 filed on October 20, 1995, and  
all amendments thereto (Registration No. 33-98448).                             

                                                        · Enlarge/Download Table

                                                                                       SEQUENTIALLY
                                                                                         NUMBERED  
EXHIBIT NO.                                 DESCRIPTION                                    PAGE    
-----------   -----------------------------------------------------------------------  ------------
                                                                                                   
        2.1   Agreement and Plan of Reorganization by and among the Registrant, GT                 
              Acquisition Sub, Inc., WizardWorks Group, Inc. and the Stockholders of               
              WizardWorks Group, Inc. dated June 24, 1996.                                         
        2.2   Escrow Agreement by and among the Registrant, Paul D. Rinde, as the                  
              Stockholder Representative of WizardWorks Group, Inc., and Republic                  
              National Bank of New York, as Escrow Agent, dated June 24, 1996.                     
        4.1   Specimen form of stock certificate for Common Stock.                                 
        5.1*  Opinion of Kramer, Levin, Naftalis & Frankel.                                        
       23.1** Consent of Arthur Andersen LLP.                                                      
       23.2** Consent of Ernst & Young LLP.                                                        
       23.3*  Consent of Kramer, Levin, Naftalis & Frankel (contained in the opinion               
              filed as Exhibit 5.1 hereto).                                                        
       24.1   Power of Attorney (contained on the signature page of this Registration              
              Statement).                                                                          

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

* Previously filed.                                                           

** Filed herewith.                                                              

Dates Referenced Herein   and   Documents Incorporated By Reference

				Referenced-On Page
This POS AM Filing		Date		First		Last			Other Filings
		12/31/94		24
		7/10/95		17
		10/20/95		27		31
		11/30/95		4
		12/26/95		17
		12/31/95		24
		3/31/96		3
		6/24/96		27		31			8-K
		7/9/96		27		31			8-K
		9/26/96		22
		11/15/96		23
		12/31/96		3		24			10-K
		2/28/97		12		13			4
		3/28/97		12
		4/30/97		2					DEF 14A
Filed On / Filed As Of		5/1/97		1		30
		7/9/97		23
		7/10/97		24					POS AM
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