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THQ lists how things could go wrong


Every year, THQ files form 10-K (an annual company report) with the Securities and Exchange Commission, and includes a detailed list of "risk factors," or potential problems that could be of detriment to the company. This year's list features a few new items that reflect the vulnerable state of the company.

"We have incurred operating losses during the last five fiscal years," reads the very first item on the list. "We have restructured our business operations in order to adjust our cost structure to better align with our expected future business; however, we may continue to incur losses in the future."

Another serious, and new, risk factor: "We may require additional capital to fund our planned business operations." In the explanation for this factor, the company notes that "We believe we have adequate resources to execute on our product plan and deliver our multi-year pipeline of games; however, there can be no assurance that we will be able to do so without additional capital." Should net sales or costs vary from plan, THQ "may need to defer and/or curtail currently-planned expenditures, cancel projects currently in development, and/or pursue additional funding or additional external sources of liquidity, which may not be available on financially attractive terms, if at all, to meet our cash needs."

The company also notes its precarious position on the Nasdaq market, and the inherent risk in depending on a small number of franchises (THQ's lineup for the current fiscal year is just six games). "Due to this dependence on a limited number of franchises, the failure to achieve anticipated results by one or more products based on these franchises may significantly impact our business and financial results."

These are among the issues that new president Jason Rubin must keep in mind as he attempts to bring the company back.

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