Activision Blizzard (ATVI)

On July 9, 2008, a business combination by and among Activision, Inc., Sego Merger Corporation, a wholly-owned subsidiary of Activision, Inc., Vivendi S.A. (“Vivendi”), VGAC LLC, a wholly-owned subsidiary of Vivendi, and Vivendi Games, Inc., a wholly-owned subsidiary of VGAC LLC, was consummated.  As a result of the consummation of the business combination, Activision, Inc. was renamed Activision Blizzard, Inc.  For accounting purposes, the business combination is treated as a “reverse acquisition,” with Vivendi Games, Inc. deemed to be the acquirer.  The historical financial statements of Activision Blizzard, Inc. prior to July 9, 2008 are those of Vivendi Games, Inc. (see Note 1 of Condensed Consolidated Financial Statements for more details).

EXPLANATORY NOTE

        On July 9, 2008, a business combination (the "Business Combination") by and among Activision, Inc., Sego Merger Corporation, a wholly-owned subsidiary of Activision, Inc., Vivendi S.A., ("Vivendi"), VGAC LLC, a wholly-owned subsidiary of Vivendi S.A., and Vivendi Games, Inc. ("Vivendi Games"), a wholly-owned subsidiary of VGAC LLC, was consummated. As a result of the consummation of the Business Combination, Activision, Inc. was renamed Activision Blizzard, Inc. For accounting purposes, the Business Combination is treated as a "reverse acquisition," with Vivendi Games, Inc. deemed to be the acquirer. The historical financial statements of Activision Blizzard, Inc. prior to July 9, 2008 are those of Vivendi Games, Inc. (see Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K).

EXPLANATORY NOTE

        On July 9, 2008, a business combination (the "Business Combination") by and among
Activision, Inc., Sego Merger Corporation, a wholly-owned subsidiary of Activision, Inc., Vivendi S.A., ("Vivendi"), VGAC LLC, a wholly-owned subsidiary of
Vivendi S.A., and Vivendi Games, Inc. ("Vivendi Games"), a wholly-owned subsidiary of VGAC LLC, was consummated. As a result of the consummation of the Business Combination,
Activision, Inc. was renamed Activision Blizzard, Inc. For accounting purposes, the Business Combination is treated as a "reverse acquisition," with Vivendi Games, Inc. deemed to
be the acquirer. The historical financial statements of Activision Blizzard, Inc. prior to July 9, 2008 are those of Vivendi Games, Inc. (see Note 1 of the Notes to
Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K).

Explanatory Note

This Form 8-K/A is being submitted to add a transcript of portions of the conference call conducted by Activision Blizzard, Inc. (the “Company”) on November 5, 2008 in conjunction with the press release referred to below.

The text of the Form 8-K originally submitted on November 5, 2008 is amended and restated as follows:

On November 5, 2008, the Company issued a press release announcing results for the Company for the fiscal quarter ended September 30, 2008. A copy of the press release is attached hereto as Exhibit 99.1.  As previously announced, the Company hosted a conference call and Webcast in conjunction with that release.  A transcript of portions of the conference call relating to the Company’s results of operations and financial condition for the three and nine months ended September 30, 2008 is attached hereto as Exhibit 99.2.

Certain Information Not Filed.  The information in this Item 2.02 and Exhibits 99.1 and 99.2 attached to this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall this Item 2.02 or such Exhibits 99.1 or 99.2 or any of the information contained therein be deemed incorporated by reference in any filing under the Securities Exchange Act of 1934 or the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

*     No changes have been made to Exhibit 99.1 from the version originally included in the Form 8-K submitted by the Company on November 5, 2008.

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EXPLANATORY NOTE

On July 9, 2008, a business combination by and among Activision, Inc., Sego Merger Corporation, a wholly-owned subsidiary of Activision, Inc., Vivendi S.A., (“Vivendi”) VGAC LLC, a wholly-owned subsidiary of Vivendi S.A., and Vivendi Games, Inc., a wholly-owned subsidiary of VGAC LLC, was consummated.  As a result of the consummation of the business combination, Activision, Inc. was renamed Activision Blizzard, Inc.  For accounting purposes, the business combination is treated as a “reverse acquisition,” with Vivendi Games, Inc. deemed to be the acquirer.  The historical financial statements of Activision Blizzard, Inc. prior to July 9, 2008 are those of Vivendi Games, Inc. (see Note 1 of consolidated financial statement for more details).

Explanatory Note

On July 9, 2008, a business combination (the “Business Combination”) by and among Activision, Inc., Sego Merger Corporation, a wholly-owned subsidiary of Activision, Inc., Vivendi S.A. (“Vivendi”), VGAC LLC, a wholly-owned subsidiary of Vivendi (“VGAC”) and Vivendi Games, Inc., a wholly-owned subsidiary of VGAC (“Vivendi Games”) was consummated.  As a result of the consummation of the Business Combination, Activision, Inc. was renamed Activision Blizzard, Inc. (the “Company”).

For accounting purposes, the Business Combination is treated as a “reverse acquisition,” with Vivendi Games deemed to be the acquirer.  The historical financial statements of the Company prior to July 9, 2008 are those of Vivendi Games.

The Company is filing this Current Report on Form 8-K in order to recast the presentation of the historical consolidated financial statements of Vivendi Games that were previously filed with the Securities and Exchange Commission to reflect a change in accounting principle, as well as file the historical consolidated financial statements of Vivendi Games for the six month period ended June 30, 2008 and to report an organizational change resulting from the Business Combination.

We are amending our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2006 as filed with the Securities and Exchange Commission (the “SEC”) on August 8, 2006 (the “Original Filing”) to restate our consolidated financial statements as of June 30, 2006 and for the three months ended June 30, 2006 and 2005 and the related disclosures.  See Note 2, “Restatement of Unaudited Consolidated Financial Statements,” of the Notes to the Consolidated Financial Statements for a detailed discussion of the effect of the restatement.  The impacts of the restatement adjustments extend to periods from the fiscal year ended March 31, 1994 through the fiscal quarter ended June 30, 2006.  We have restated our consolidated financial statements for the year ended March 31, 2006 and we filed an Amended Annual Report on Form 10-K/A with the SEC on May 25, 2007.  In these restated consolidated financial statements, the cumulative compensation expense, including the related income tax impacts, as of March 31, 2003, is recognized as a net decrease to beginning retained earnings as of March 31, 2003. All share and per share information presented in this report has been adjusted to reflect splits and dividends of our common stock.

The restatement reflects the findings of a special subcommittee of independent members of our Board of Directors, which was established in July 2006 to review our historical stock option granting practices (the “Special Subcommittee”).  The Special Subcommittee conducted its investigation with the assistance of Munger Tolles & Olson LLP as its independent counsel and Deloitte & Touche USA LLP (“Deloitte”) as forensic accounting experts retained by counsel.  The Special Subcommittee found that 3,450 of the option grants reviewed, covering 148,747,202 shares, required measurement date corrections.  As a result, we recorded approximately $66.7 million in additional pre-tax $45.4 million after-tax non-cash stock-based compensation expense over the thirteen year period from April 1, 1993 through March 31, 2006 in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and $0.6 million in additional pre-tax non-cash stock-based compensation expense during the quarter ended June 30, 2006 in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment”.  More than 80% or $55.4 million of the $66.7 million relates to periods through March 31, 2003 and 4% or $2.6 million of the non-cash pre-tax expense relates to the fiscal year 2006. Separately, the restatement reflects an additional $1.7 million pre-tax charge ($1.1 million after-tax) related to recently identified insufficient payroll tax withholdings in fiscal 2005.

In connection with the restatement of stock-based compensation expense, we are also restating the pro forma disclosures for stock-based compensation expense required under SFAS No. 123, “Accounting for Stock—Based Compensation” included in Note 2 of the Notes to the Consolidated Financial Statements.

The Special Subcommittee reviewed 4,849 option grants covering 204,230,604 shares and found that 3,450 grants covering 148,747,202 shares required measurement date corrections. A majority of the grants requiring measurement date corrections (measured by number of shares) occurred on 16 dates over the 15-year period.  The need for these measurement date corrections arose from failure to understand and apply the correct accounting rules, failure to establish and maintain adequate procedures and controls, failure on certain occasions to appreciate the implications of available information, and insufficient finality and documentation.  As a result, the exercise prices

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for certain options were affected by selection of grant dates with hindsight, which led to errors in the determination of measurement dates, and we did not correctly account for modifications and repricings after initial grant dates.

The Special Subcommittee found that four individuals — former heads of human resources, finance and legal, and a senior partner of our former outside corporate law firm who sat on and acted as secretary to our Board — bore significant responsibility, in varying degrees, for measurement date inaccuracies by virtue of their positions and/or involvement in the option granting process at varying times.  The Special Subcommittee made no finding as to intentional wrongdoing by these individuals.

The Special Subcommittee also determined that Robert A.  Kotick (chairman of the board and chief executive officer), Brian G.  Kelly (co-chairman of the board), Ronald Doornink (director and senior advisor), and George Rose (senior vice president, general counsel and secretary) did not engage in intentional wrongdoing with respect to our stock option granting practices.

For more information on these matters, please refer to Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; Item 4, “Controls and Procedures”; and Note 2 of the Notes to the Consolidated Financial Statements.

We have not amended, and we do not intend to amend, any of our other previously filed Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q for the periods affected by the restatement other than our Annual Report on Form 10-K/A for the year ended March 31, 2006 and our Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2006 originally filed with the SEC on August 8, 2006.  For this reason, the Consolidated Financial Statements and related financial information contained in any related previously filed financial reports should no longer be relied upon.

For the convenience of the reader, this Form 10-Q/A sets forth the Original Filing in its entirety, as amended by, and to reflect, the restatement.  This Form 10-Q/A also reflects certain corrections to the exhibit index of the Original Filing that came to our attention in the course of preparing this Form 10-Q/A and other pending filings.  The following sections of this Form 10-Q/A have been amended to reflect the restatement and exhibit index corrections.

Part I — Item 1 — Financial Statements (Restated);

Part I — Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations, as to matters related to the restatement;

 Part I — Item 4 — Controls and Procedures;

Part II — Item 1A — Risk Factors as to matters related to the restatement; and

 Part II — Item 6 — Exhibits.

In addition, in accordance with applicable rules and regulations promulgated by the SEC, this Form 10-Q/A includes updated certifications from our Chief Executive Officers and Chief Financial Officer as Exhibits 31.1, 31.2, 31.3, 32.1, 32.2, and 32.3.

Other than as stated above, this Form 10-Q/A continues to speak as of June 30, 2006 or (where applicable) as of the date of the Original Filing, and the information in this Form 10-Q/A does not modify or update any other item or disclosure in the Original Filing or reflect any other events occurring after the Original Filing.

This Amended Quarterly Report on Form 10-Q/A should be read in conjunction with our Amended Annual Report on Form 10-K/A for the year ended March 31, 2006, filed with the SEC on May 25, 2007, and our current reports on Form 8-K that have been filed subsequent to the date of the Original Filing.

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We are amending our Annual Report on Form 10-K for the fiscal year ended March 31, 2006 as filed with the Securities and Exchange Commission (the “SEC”) on June 9, 2006 (the “Original Filing”) to restate our consolidated financial statements as of and for the fiscal years ended March 31, 2006, 2005 and 2004 and the related disclosures.  This amended Annual Report on Form 10-K/A also includes the restatement of our selected consolidated financial data as of and for the fiscal years ended March 31, 2006, 2005, 2004, 2003 and 2002, which is included in Item 6, and our unaudited quarterly financial data for each of the quarters in the fiscal years ended March 31, 2006 and 2005, which is included in Item 7.  See Note 2, “Restatement of Consolidated Financial Statements,” of the Notes to the Consolidated Financial Statements for a detailed discussion of the effect of the restatement.  The impacts of the restatement adjustments extend to periods from the fiscal year ended March 31, 1994 through the fiscal quarter ended June 30, 2006.  Our consolidated financial statements for the three months ended June 30, 2006 are also being restated and a Form 10-Q/A is expected to be filed shortly after this Form 10-K/A.  In these restated consolidated financial statements, the cumulative compensation expense, including the related income tax impacts, as of March 31, 2003, is recognized as a net decrease to beginning retained earnings as of March 31, 2003. All share and per share information presented in this report has been adjusted to reflect splits and dividends of our common stock.

The restatement reflects the findings of a special subcommittee of independent members of our Board of Directors, which was established in July 2006 to review our historical stock option granting practices (the “Special Subcommittee”).  The Special Subcommittee conducted its investigation with the assistance of Munger Tolles & Olson LLP as its independent counsel and Deloitte & Touche USA LLP (“Deloitte”) as forensic accounting experts retained by counsel.  The Special Subcommittee found that 3,450 of the option grants reviewed, covering 148,747,202 shares, required measurement date corrections.  As a result, we recorded approximately $66.7 million in additional pre-tax ($45.4 million after-tax) non-cash stock-based compensation expense over the thirteen year period from April 1, 1993 through March 31, 2006 in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and $0.6 million in additional pre-tax non-cash stock-based compensation expense during the quarter ended June 30, 2006 in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment”.  More than 80%, or $55.4 million of the $66.7 million, relates to periods through March 31, 2003 and 4% or $2.6 million of the non-cash pre-tax expense relates to the most recent fiscal year covered by this report.  Separately, the restatement reflects an additional $1.7 million pre-tax charge ($1.1 million after-tax) related to recently identified insufficient payroll tax withholdings in fiscal 2005.

In connection with the restatement of stock-based compensation expense, we are also restating the pro forma disclosures for stock-based compensation expense required under SFAS No. 123, “Accounting for Stock—Based Compensation” included in Note 1 of the Notes to the Consolidated Financial Statements.

The Special Subcommittee reviewed 4,849 option grants covering 204,230,604 shares and found that 3,450 grants covering 148,747,202 shares required measurement date corrections. A majority of the grants requiring measurement date corrections (measured by number of shares) occurred on 16 dates over the 15-year period.  The need for these measurement date corrections arose from failure to understand and apply the correct accounting rules,

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failure to establish and maintain adequate procedures and controls, failure on certain occasions to appreciate the implications of available information, and insufficient finality and documentation.  As a result, the exercise prices for certain options were affected by selection of grant dates with hindsight, which led to errors in the determination of measurement dates, and we did not correctly account for modifications and repricings after initial grant dates.

The Special Subcommittee found that four individuals – former heads of human resources, finance and legal, and a senior partner of our former outside corporate law firm who sat on and acted as secretary to our Board - bore significant responsibility, in varying degrees, for measurement date inaccuracies by virtue of their positions and/or involvement in the option granting process at varying times.  The Special Subcommittee made no finding as to intentional wrongdoing by these individuals.

The Special Subcommittee also determined that Robert A.  Kotick (chairman of the board and chief executive officer), Brian G. Kelly (co-chairman of the board), Ronald Doornink (director and senior advisor), and George Rose (senior vice president, general counsel and secretary) did not engage in intentional wrongdoing with respect to our stock option granting practices.

For more information on these matters, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; Item 9A, “Controls and Procedures”; and Note 2 of the Notes to the Consolidated Financial Statements.

We have not amended, and we do not intend to amend, any of our other previously filed Annual Reports on Form 10-K for the periods affected by the restatement other than this Annual Report on Form 10-K/A for the year ended March 31, 2006.  As part of our review, we also determined that we need to amend our Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 originally filed with the SEC on August 8, 2006, and an amended Quarterly Report on Form 10-Q/A for that period is expected to be filed shortly after this Form 10-K/A.  We have not amended and we do not intend to amend any of our other Quarterly Reports on Form 10-Q as a result of our restatement.  For this reason, the Consolidated Financial Statements and related financial information contained in any related previously filed financial reports should no longer be relied upon.

For the convenience of the reader, this Form 10-K/A sets forth the Original Filing in its entirety, as amended by, and to reflect, the restatement.  This Form 10-K/A also reflects certain corrections to the exhibit index of the Original Filing that came to our attention in the course of preparing this Form 10-K/A and other pending filings. The following sections of this Form 10-K/A have been amended to reflect the restatement and exhibit index corrections.

Part I—Item 1A—Risk Factors, as to risk factors related to stock options;

Part I—Item 3—Legal Proceedings, as to legal proceedings related to stock options;

Part II—Item 5—Market for Our Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities;

Part II—Item 6—Selected Consolidated Financial Data;

Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations, as to matters related to the restatement;

Part II—Item 8—Financial Statements and Supplementary Data;

Part II—Item 9A—Controls and Procedures; and

Part IV—Item 15—Exhibits and Financial Statement Schedule.

In addition, in accordance with applicable rules and regulations promulgated by the SEC, this Form 10-K/A includes updated certifications from our Chief Executive Officers and Chief Financial Officer as Exhibits 31.1, 31.2, 31.3, 32.1 32.2, and 32.3.

Other than as stated above, this Form 10-K/A continues to speak as of March 31, 2006 or (where applicable) as of the date of the Original Filing, and the information in this Form 10-K/A does not modify or update any other item or disclosure in the Original Filing or reflect any other events occurring after the Original Filing.

This amended Form 10-K/A should be read in conjunction with any current reports that have been filed on Form 8-K subsequent to the date of the Original Filing.  Additionally, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 should no longer be relied upon.

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