As filed with the Securities and Exchange Commission on January 26, 1999
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
FORM S-3
Registration Statement
Under
The Securities Act of 1933
---------------------------------
ACCLAIM ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
---------------------------------
Delaware 38-2698904
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
---------------------------------
One Acclaim Plaza
Glen Cove, New York 11542
(516) 656-5000
(Address and telephone number of registrant's principal executive offices)
---------------------------------
Gregory E. Fischbach
Chief Executive Officer
Acclaim Entertainment, Inc.
One Acclaim Plaza
Glen Cove, New York 11542
(516) 656-5000
(Name, address and telephone number of agent for service)
---------------------------------
Copy to:
Eric M. Lerner, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Telephone: (212) 940-8800
---------------------------------
Approximate date of commencement of proposed sale to the public:
From time to time 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, other than securities offered only in connection with
dividend or interest reinvestment plans, 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, please 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, please check the following box. / /
CALCULATION OF REGISTRATION FEE
Proposed maximum Proposed maximum
Title of each class of Amount to be aggregate price per aggregate offering
security to be registered registered(1) unit (1) price (1) Amount of registration fee
Common Stock, par value
$0.02 per share,
underlying certain
warrants............... 216,014 $10.03 $2,167,268 $603
(1) Estimated pursuant to Rule 457(o) under the Securities Act of 1933,
solely for the purpose of determining the registration fee,
based on the estimated pro forma value of the shares underlying the
warrants including an estimated exercise price per share for the shares
underlying the warrants determined in accordance with the Stipulation and
Agreement of Compromise and Settlement, dated April 15, 1998, between
Acclaim and the participants in such settlement. Pursuant to such
agreement, the exercise price and the number of shares of Common Stock
underlying the warrants to be issued by the Company cannot be calculated
at this time and have been estimated. The Company will file a
pre-effective amendment setting forth the actual number of shares of
Common Stock underlying the warrants issued and the exercise price per
share, and if the maximum dollar value being registered increases, an
additional filing fee will be paid.
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 of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JANUARY 26, 1999
ACCLAIM ENTERTAINMENT, INC.
216,014 SHARES OF COMMON STOCK
The Business
Acclaim Entertainment, Inc. is a worldwide developer, publisher and mass
marketer of interactive entertainment software for use with dedicated
interactive entertainment hardware platforms and multimedia personal computer
systems. We own and operate four software development studios located in the
U.S. and the U.K., and publish and distribute our software directly in North
America, the U.K., Germany, France and Australia.
Common Stock
The shares offered by this prospectus are issuable upon exercise of certain
common stock purchase warrants we will issue in connection with the settlement
of a previously pending class action lawsuit. The warrants will be issued by
us without compliance with the registration and prospectus requirements of
Section 5 of the Securities Act of 1933 in accordance with the exemption
provided under Section 3(a)(10) thereof. The warrants will have an aggregate
value of $750,000 computed in accordance with a formula agreed upon in
connection with the settlement of the lawsuit.
The common stock purchase warrants may be exercised at any time for a period
of three years after the date this prospectus becomes effective (March ___,
1999). The warrants entitle the holder to purchase from us one share of our
common stock for each warrant, at a purchase price calculated in accordance
with the settlement agreement. The proceeds, if any, from the exercise of the
warrants will be added to our working capital.
This prospectus covers the offer and sale by Acclaim to the warrant holders of
up to that number of shares of its common stock sufficient to permit the
exercise in full of all outstanding warrants in accordance with the settlement
agreement.
See "Risk Factors" beginning on page 6 for a discussion of certain factors
that you should consider before you invest in the common stock being sold with
this prospectus.
Our common stock is traded on The Nasdaq Stock Market National Market System
under the symbol "AKLM." On January 25, 1999, the last reported sale price of
the common stock was $10.50 per share. Acclaim intends to list the warrants on
the "over-the-counter" market. The proposed trading symbol is _____.
The offering is subject to withdrawal and cancellation at any time, without
notice.
Neither the Securities and Exchange Commission (SEC) nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
March ___, 1999
TABLE OF CONTENTS
Page No.
The Company 4
Risk Factors 6
Use of Proceeds 16
Determination of Offering Price 16
Plan of Distribution 16
Legal Proceedings 17
Legal Matters 17
Experts 17
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DEFINED TERMS
As used in this prospectus, (a) "Acclaim" or "we" means Acclaim
Entertainment, Inc., (b) "Common Stock" means Acclaim's common stock, par value
$0.02 per share, (c) "Warrants" mean the common stock purchase warrants to be
issued by Acclaim in connection with the settlement of a class action lawsuit,
and (d) "Stipulation" means that certain Stipulation and Agreement of Compromise
and Settlement, dated April 15, 1998, between Acclaim and the participants in
such settlement.
-------------------------
Forward-Looking Statements
Some of the statements contained in this prospectus discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. Those statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements, including those risks and uncertainties discussed in the "Risk
Factors" section of this prospectus. In light of the significant risks and
uncertainties inherent in the forward-looking statements included in this
prospectus, the inclusion of such statements should not be regarded as a
representation by us or any other person that our objectives and plans will be
achieved.
Incorporation of Certain Documents by Reference
The following documents filed by us with the SEC pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), are
incorporated herein by reference:
o Annual Report on Form 10-K for the fiscal year ended August 31, 1998
filed on November 6, 1998 (File No. 0-16986);
o Quarterly Report on Form 10-Q for the period ended November 30, 1998
filed on January 14, 1999 (File No. 0-16986); and
o The information in respect of the Common Stock under the caption
"Description of Registrant's Securities to be Registered" contained
in the Registration Statement on Form 8-A, filed on June 8, 1988
(File No. 0-16986), as amended by the Current Report on Form 8-K,
filed on August 25, 1989 (File No. 33-9460-C), relating to the
one-for-two reverse stock split effected by Acclaim.
In addition, all documents filed by us with the SEC pursuant to
Sections 13(a), 14 or 15(d) of the Exchange Act subsequent to the date of
this prospectus and prior to the termination of this offering shall be
deemed to be incorporated by reference into this prospectus. In addition, if
we revise or update a document included in this prospectus or incorporate a
document by reference into this prospectus, then the document contained
herein (or incorporated by reference herein) shall be considered revised or
updated upon our filing of such updated or revised document.
We will provide, without charge, to each person, including any
beneficial owner, to whom this prospectus is delivered, upon the written or
oral request of such person, a copy of any and all of the documents
incorporated herein by reference (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference herein).
Requests for such documents should be directed to the Secretary of Acclaim
Entertainment, Inc., One Acclaim Plaza, Glen Cove, New York 11542. Telephone
requests for such copies should be directed to the Secretary at (516)
656-5000.
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Where You Can Find More Information
Acclaim has filed with the SEC a registration statement on Form S-3
under the Securities Act of 1933, as amended (the "Securities Act") covering
the Common Stock underlying the Warrants to be issued in this offering. This
prospectus does not contain all of the information included in the
registration statement. Any statement made in this prospectus concerning the
contents of any documents are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
registration statement. You should read the exhibit for a more complete
understanding of the document or matter involved. Each statement regarding a
document is qualified in its entirety by reference to the actual document.
Acclaim is required to file periodic reports and other information
with the SEC under the Exchange Act. You may read and copy the registration
statement, including the attached exhibits, and any reports, statements or
other information that we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. Acclaim's SEC filings are also available to the public
on the SEC Internet site (http://www.sec.gov).
You should rely only on the information provided in this prospectus
or that to which we have referred you. No person has been authorized to
provide you with different information.
This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
The information in this prospectus is accurate as of the date on the
front cover. You should not assume that the information contained in this
prospectus is accurate as of any other date.
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The Company
Acclaim is a worldwide developer, publisher and mass marketer of
interactive entertainment software for use with dedicated interactive
entertainment hardware platforms ("Platforms") and multimedia personal
computer systems (PCs). Acclaim owns and operates four software development
studios located in the U.S. and the U.K., and publishes and distributes its
software directly in North America, the U.K., Germany, France and Australia.
Acclaim's operating strategy is to develop and maintain a core of key
brands and franchises (e.g., Turok, NFL Quarterback Club and All Star
Baseball) to support the various Platforms and PCs that dominate the
interactive entertainment market at a given time or which it perceives as
having the potential for achieving mass market acceptance. Acclaim emphasizes
sports simulation and arcade-style software for Platforms, and
fantasy/role-playing, real-time simulation, adventure and sports simulation
software for PCs.
Acclaim also engages, to a lesser extent, in the distribution of
software developed by third-party software publishers and the development and
publication of comic book magazines and strategy guides relating to its
software.
The software industry is driven by the size of the installed base of
Platforms (such as those manufactured by Nintendo Co., Ltd. (Japan) (Nintendo
Co., Ltd. and its subsidiary, Nintendo of America, Inc., are collectively
referred to as "Nintendo"), Sony Corporation (Sony Corporation and its
affiliate, Sony Computer Entertainment America, are collectively referred to
as "Sony") and Sega Enterprises Ltd. ("Sega")), and PCs dedicated for home
use. The industry is characterized by rapid technological change, as evidenced
by the successive introductions of hardware systems from Nintendo, Sega and
Sony (e.g., the 8-bit cartridge system from Nintendo in 1985; 16-bit cartridge
systems from Sega in 1990 and Nintendo in 1991; 32-bit CD systems from Sega
and Sony in 1995; the 64-bit cartridge system from Nintendo in 1996; and the
introduction by Sega in November 1998 of Dreamcast, a new 64-bit CD system, in
Japan). These successive introductions have resulted in Platform and related
software product cycles. To date, no single Platform or system has achieved
long-term dominance in the interactive entertainment market. Accordingly,
Acclaim must continually anticipate and adapt its software to emerging
Platforms.
Based on information available in 1994 and based on its historical
experience with respect to the transition from 8- to 16-bit Platforms, Acclaim
believed that software sales for 16-bit Platforms would, although continuing
to decrease overall, remain substantial through the 1996 holiday season.
Accordingly, it anticipated that sales of its 32-bit and PC software in fiscal
1996 would grow as compared to fiscal 1995 but that the majority of its
revenues in fiscal 1996 would still be derived from 16-bit software sales.
However, the 16-bit software market matured much more rapidly than anticipated
by Acclaim, its Christmas 1995 16-bit software sales were substantially lower
than anticipated and, by April 1996, Acclaim derived minimal profits from
software sales and made the decision to exit the 16-bit and portable software
markets.
In connection with the decision to exit the 16-bit and portable
software markets in April 1996, Acclaim recorded a special cartridge video
charge of approximately $48.9 million in the second quarter of fiscal 1996,
consisting of provisions of approximately $28.8 million (reflected in net
revenues), and approximately $20.1 million (reflected in cost of revenues) to
adjust accounts receivable and inventories at February 29, 1996 to their
estimated net realizable values.
Acclaim recorded a loss from operations of $274.5 million and a net
loss (on an after-tax basis) of $221.4 million for fiscal 1996. The net loss
for the year reflected (1) write-offs of receivables, (2) the establishment of
additional receivables and inventory reserves, (3) severance charges incurred
in connection with a company downsizing, (4) the reduction of certain deferred
costs, and (5) an operating
4
loss for the year resulting primarily from price protection and similar
concessions granted to retailers at greater than anticipated levels in
connection with its 16- and 32-bit software.
Acclaim recorded a loss from operations of $150.9 million and a net
loss (on an after-tax basis) of $159.2 million for fiscal 1997. The net loss
for the year reflected, among other things, (1) a charge for certain claims
and litigations for which the settlement obligation was probable and estimable
of $23.6 million, (2) a write-down of goodwill of $25.2 million to reduce the
carrying value of the goodwill associated with its subsidiary, Acclaim Comics,
Inc., to its estimated undiscounted cash flows and (3) downsizing charges of
$10 million.
As a result of the acquisitions of the development studios in 1995
(two of which were completed in fiscal 1996), Acclaim's fixed costs relating
to the development of software and its general and administrative expenses
substantially increased in fiscal 1996. These expenses in the aggregate had a
negative impact on Acclaim's liquidity and profitability in fiscal 1996 and
fiscal 1997.
The rapid technological advances in game systems have significantly
changed the look and feel of software as well as the software development
process. According to our estimates, the average development cost for a title
for Platforms approximately three years ago was approximately $300,000 to
$400,000, while the average development cost for a title for Platforms and PCs
is currently between $1 million and $2 million. Approximately 75% of our gross
revenues in the first quarter of fiscal 1999 was derived from software
developed by our studios. The process of developing software is extremely
complex and is expected to become more complex and expensive in the future as
new platforms and technologies are introduced.
Acclaim recorded earnings from operations of $24.7 million and net
earnings (on an after-tax basis) of $20.7 million for fiscal 1998. The
improved results for fiscal 1998 primarily resulted from increased sales in
the U.S. of its 64-bit and, to a lesser extent, 32-bit software. They also
reflect significantly reduced operating expenses, resulting primarily from (1)
a reduction in personnel, (2) the sale or discontinuance of certain
non-profitable businesses, (3) the consolidation of certain of the development
studio operations to reduce overhead expenses and (4) various other cost
reductions.
Acclaim recorded net earnings of $8.0 million and $10.3 million in
the first quarter of fiscal 1998 and 1999, respectively. The fiscal 1999
period results primarily reflect increased sales in the United States of
Acclaim's 32- and 64-bit software. Although revenues from the sale of N64 and
PlayStation software are anticipated to continue to grow in the second quarter
of fiscal 1999 and for fiscal 1999 as a whole, we do not anticipate that, for
fiscal 1999 as a whole, we will achieve our fiscal 1998 growth rate. No
assurance can be given as to the future growth of the installed base of 32-
and 64-bit Platforms, the future growth of the software market therefor or of
our results of operations and profitability in future periods. The results for
the first quarter of fiscal 1998 and 1999 also reflect our significantly
reduced operating expenses as compared to prior periods. See "Risk Factors."
Acclaim's ability to generate sales growth and profitability will be
materially dependent on (1) the growth of the software market for 32- and
64-bit Platforms and PCs and (2) the ability to identify, develop and publish
"hit" software for Platforms with significant installed bases.
A Delaware corporation, Acclaim was founded in 1987. Acclaim's
principal executive offices are located at One Acclaim Plaza, Glen Cove, New
York 11542, and its telephone number is (516) 656-5000. Its Internet site is:
"http://www.acclaim.net."
5
RISK FACTORS
Our future operating results depend upon many factors and are subject
to various risks and uncertainties. Some of the risks and uncertainties which
may cause our operating results to vary from anticipated results or which may
materially and adversely affect our operating results are as follows:
Recent Operating Results
Our net revenues increased from $161.9 million in fiscal 1996 to
$165.4 million in fiscal 1997 and to $326.6 million in fiscal 1998 and
increased from $92.3 million for the quarter ended November 30, 1997 to $104.8
million for the quarter ended November 30, 1998. We incurred a net loss of
$221.4 million in fiscal 1996, a net loss of $159.2 million in fiscal 1997 and
net earnings of $20.7 million in fiscal 1998, and net earnings of $8.0 million
and $10.3 million in the quarters ended November 30, 1997 and 1998,
respectively. For the most part, the increase in revenues and earnings in
fiscal 1998 and the fiscal 1999 period reflects increased sales in the U.S. of
our software for Nintendo's N64 and Sony's PlayStation Platforms. Charges for
litigation settlements and other claims of $23.6 million, a writedown of the
goodwill associated with our subsidiary, Acclaim Comics, Inc., of $25.2
million and downsizing charges of $10 million are included in the loss for
fiscal 1997. Special charges relating to our exit from the 16-bit and portable
software business aggregating approximately $114 million are included in the
loss for fiscal 1996.
Our revenues and operating results in fiscal 1996 and 1997 were
affected principally by the industry transition from 16-bit to 32- and 64-bit
Platforms. We had anticipated that sales of software for the older Platforms
would dominate Christmas 1995 sales and would be material in Christmas 1996.
Therefore, we focused our development efforts on 16-bit software for fiscal
1996 and 1997. However, sales of 16-bit software decreased much more rapidly
than we anticipated in calendar 1996, which resulted in reduced revenues and
net losses in fiscal 1996 and 1997.
In 1998, the interactive entertainment hardware market was
characterized by the growth of the installed base of N64 and PlayStation units
worldwide. This growth had a positive impact on our operating results for
fiscal 1998 and in the first quarter of fiscal 1999. Although N64 and
PlayStation have achieved significant market acceptance worldwide and we
anticipate that the installed base of N64 and PlayStation units will continue
to grow in the short term, we cannot assure investors that the installed base
of either or both will grow at the present rate, if at all. Also, there is no
assurance that revenues from sales of software for these Platforms will
increase as the installed base increases.
In fiscal 1997 and 1998, we took various actions to reduce our
operating expenses. See "--Liquidity and Bank Relationships" below for a
description of these actions. As a result, operating expenses in fiscal 1997
and 1998 were substantially lower than in prior comparable periods. Although
we anticipate that operating expenses will increase in dollar terms in fiscal
1999, we intend to monitor our operating expenses closely and do not
anticipate they will increase materially as a percentage of net revenues.
However, we cannot assure stockholders that operating expenses will not
increase as a percentage of net revenues in the remainder of fiscal 1999 and
beyond. Any such increase could negatively impact our profits in fiscal 1999
and beyond.
Liquidity and Bank Relationships
We generally experienced negative cash flow from operations in fiscal
1996 and 1997 which, for the most part, was a result of net losses in these
periods. We used net cash in operations of approximately $38.3 million in
fiscal 1996 and approximately $29.2 million in fiscal 1997 and derived net
cash from operations of approximately $23.3 million in fiscal 1998. We derived
net cash from operations of
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approximately $7.1 million and $11.4 million in the first quarter of fiscal 1998
and 1999, respectively. A tax refund of approximately $54.0 million had a
positive impact on net cash from operating activities in fiscal 1997.
We believe that the cash flows from operations in fiscal 1999 will be
sufficient to cover our operating expenses and those current obligations that
we must pay in the remainder of fiscal 1999. Our belief is based on the
anticipated continued growth of the installed base of 32- and 64- bit
Platforms, the anticipated success of our software for those Platforms and the
resulting continued growth of our net revenues. However, we cannot assure
investors that our operating expenses and current obligations will be
significantly less than the cash flows available from operations in fiscal
1999 or in the future. Our long-term liquidity depends mainly on our
publishing "hit" software for the dominant Platforms.
In order to provide liquidity, in fiscal 1997 and 1998, we took a
number of actions including (1) significantly reducing the number of our
employees, (2) consolidating our development studio operations and (3)
eliminating certain operations, such as the coin-operated video game
subsidiary. In addition, in February 1997, we completed an offering of $50
million of 10% Convertible Subordinated Notes (the "Notes"). Of the net
proceeds of the offering, we used approximately $16 million to retire a term
loan from Midland Bank plc and $2 million to pay down a portion of a mortgage
loan from Fleet Bank. In March 1997, we sold substantially all of the assets
and certain liabilities of Acclaim Redemption Games, Inc. (formerly,
Lazer-Tron Corporation) for $6 million in cash.
Due to our financial performance in the first three quarters of
fiscal 1998, we were unable to comply with financial covenants under our
revolving credit facility with BNY Financial Corporation (BNY), our lead
institutional lender. BNY waived the resulting defaults at the end of each of
the first three quarters of fiscal 1998. We have negotiated new financial
covenants as of and for the period ended August 31, 1998 and future periods.
We were in compliance with the new financial covenants at November 30, 1998.
Although we expect to continue to comply with these new covenants, we cannot
make any guarantee of compliance. In addition, factors beyond our control may
result in future covenant defaults or a payment default. We may not be able to
obtain waivers of any future default(s). If such defaults occur and are not
waived by the lender, the lender could accelerate the loan or exercise other
remedies. Such actions would have a negative impact on our liquidity and
operations.
Substantial Leverage and Ability to Service Debt
Our debt level could have important consequences to our stockholders
because a portion of cash flow from operations must be set aside to pay down
debt, including the outstanding Notes, and existing bank obligations.
Therefore, these funds are not available for other purposes. Additionally, a
high debt level limits our ability to obtain additional debt financing in the
future, or to pursue possible expansion of our business or acquisitions. Also,
high debt levels could limit our flexibility in reacting to changes in the
interactive entertainment industry and economic conditions generally. These
limitations make us more vulnerable to adverse economic conditions and
restrict our ability to withstand competitive pressures or take advantage of
business opportunities. Some of our competitors currently have a lower debt
level, and are likely to have significantly greater operating and financing
flexibility, than us.
Based upon current levels of operations, we believe we can meet our
interest obligations on the Notes, and interest and principal obligations
under bank agreements, when due. However, if cash flow from operations is not
enough to meet debt obligations when due, we may have to restructure our
indebtedness. We cannot guarantee that we will be able to restructure or
refinance our debt on satisfactory terms. In addition, restructuring or
refinancing may not be permitted by the terms of the indenture governing the
Notes (the "Indenture"), or existing indebtedness. We cannot assure
stockholders that our operating cash flows will be sufficient to meet debt
service requirements. Also, we cannot
7
guarantee stockholders that future operating cash flows will be sufficient to
repay the Notes, or that we will be able to refinance the Notes or other
indebtedness at maturity. See "--Prior Rights of Creditors" below.
Prior Rights of Creditors
We have outstanding long-term debt (including current portions) of
$52.2 million at November 30, 1998. Certain of the indebtedness is secured by
liens on substantially all of our assets. If we do not timely pay interest or
principal on indebtedness when due, we will be in default under loan
agreements and the Indenture.
In addition, the Indenture provides that, upon the occurrence of
certain events, we may be obligated to repurchase all or a portion of the
outstanding Notes. If such a repurchase event occurs and we do not have, or
are unable to obtain, sufficient financial resources to repurchase the Notes,
we would be in default under the Indenture. In addition, the occurrence of
certain repurchase events would constitute a default under some of our current
loan agreements.
Further, we depend on dividends and other advances and transfers of
funds from our subsidiaries to meet some debt service obligations. State and
foreign law regulate the payment of dividends by our subsidiaries, which is
also subject to the terms of existing bank agreements and the Indenture. A
significant portion of assets, operations, trade payables and other
indebtedness is located at our subsidiaries. The creditors of the subsidiaries
would generally recover from these assets on the obligations owed to them by
the subsidiaries before any recovery by our creditors and before any assets
are distributed to our stockholders.
If we are unable to meet current bank obligations, a default would
occur under existing bank agreements. Such default, if not waived, could
result in acceleration of our obligations under the bank agreements. Moreover,
default could result in a demand by the lenders for immediate repayment and
would entitle any secured creditor in respect of such debt to proceed against
the collateral securing the defaulted loan. Additionally, an event of default
under the Indenture may result in actions by IBJ Schroder Bank & Trust
Company, as trustee, on behalf of the holders of the Notes. In the event of
such acceleration by creditors or action by the trustee, holders of
indebtedness would be entitled to payment out of our assets. If we become
insolvent, are liquidated or reorganized, it is possible that there would be
insufficient assets remaining after payment to the creditors for any
distribution to our stockholders.
Industry Trends; Platform Transition; Technological Change
The interactive entertainment industry is characterized by rapid
technological change due in large part to:
o the introduction of Platforms incorporating more advanced processors and
operating systems;
o the impact of technological changes embodied in PCs;
o the development of electronic and wireless delivery systems; and the
o entry and participation of new companies in the industry.
These factors, among others, have resulted in Platform and software
life cycles.
No single Platform has achieved long-term dominance. Accordingly, we
must continually anticipate and adapt our software to emerging Platforms and
systems. The process of developing software is extremely complex and is
expected to become more complex and expensive in the future as new platforms
and technologies are introduced.
8
Development of software currently requires substantial investment in
research and development in the areas of graphics, sound, digitized speech,
music and video. We cannot guarantee that we will be successful in developing
and marketing software for new platforms.
Substantially all of our revenues in fiscal 1998 and the first
quarter of fiscal 1999 were derived from the sale of software designed for
N64, PlayStation and PCs. In the past, we expended significant development and
marketing resources on product development for Platforms that have not
achieved the results we anticipated. If we (1) do not develop software for
Platforms that achieve significant market acceptance, (2) discontinue
development of software for a Platform that has a longer than expected life
cycle, (3) develop software for a Platform that does not achieve a significant
installed base or (4) continue development of software for a Platform that has
a shorter than expected life cycle, we may experience losses from operations.
We cannot guarantee that we will be able to predict accurately such matters,
and failure to do so would negatively affect us.
Results of operations and cash flows were negatively affected during
fiscal 1996 and 1997 by the significant decline in sales of 16-bit software
and the transition to the new Platforms. Because (1) there were a significant
number of titles competing for limited shelf space and (2) the new Platforms
had not achieved market penetration similar to that of the 16-bit Platforms in
prior years, the number of units of each title sold for the newer Platforms
was significantly less than the number of units of a title generally sold in
prior years for 16-bit Platforms. In fiscal 1998, the interactive
entertainment hardware market was characterized by the worldwide growth of the
installed base of N64 and PlayStation units and related software. Although we
anticipate that the installed base of these Platforms will continue to grow in
the short term and that the market for software for these Platforms will also
continue to grow, we cannot guarantee that the hardware or software market
will continue to grow at the current rate.
Revenue and Earnings Fluctuations; Seasonality
Historically, we have derived substantially all of our revenues from
the publication and distribution of software for the then dominant Platforms.
Revenues are subject to fluctuation during transition periods, as in fiscal
1996 and 1997, when new Platforms have been introduced but none has achieved
mass-market penetration. In addition, the timing of release of new titles
impacts earnings in any given period. Earnings also may be materially impacted
by other factors including (1) the level and timing of market acceptance of
titles, (2) increases or decreases in development and/or promotion expenses
for new titles, and (3) the timing of orders from major customers.
A significant portion of revenues in any quarter is generally derived
from sales of new titles introduced in that quarter or in the immediately
preceding quarter. If we are unable to begin volume shipments of a significant
new title during the scheduled quarter, revenues and earnings will be
negatively affected in that quarter. In addition, because a majority of the
unit sales for a title typically occur in the first 90 to 120 days following
the introduction of the title, earnings may increase significantly in a period
in which a major title is introduced and may decline in the following period
or in periods in which there are no major title introductions. Also, certain
operating expenses are fixed and do not vary directly in relation to revenue.
Consequently, if net revenue is below expectations, operating results are
likely to be negatively affected.
The interactive entertainment industry is highly seasonal. Typically,
net revenues are highest during the last calendar quarter (which includes the
holiday selling season), decline in the first calendar quarter, are lower in
the second calendar quarter and increase in the third calendar quarter. The
seasonal pattern is due primarily to the increased demand for software during
the year-end holiday selling season. However, earnings vary significantly and
are largely dependent on releases of major new titles and,
9
accordingly, may not necessarily reflect the seasonal patterns of the industry
as a whole. We expect that operating results will continue to fluctuate
significantly in the future.
Dependence on Entertainment Platform Manufacturers; Need for License Renewals
The following table shows the percent of gross revenues for fiscal
1996, 1997 and 1998 and for the quarters ended November 30, 1997 and 1998,
respectively, derived from sales of software for the indicated Platforms:
Fiscal Year ended August 31, Quarter ended November 30,
-------------------------------- --------------------------
Title 1996 1997 1998 1997 1998
- ----- ---- ---- ---- ---- ----
Nintendo-compatible 29% 41% 60% 75% 62%
Sega-compatible 36% 12% 1% * *
Sony-compatible 19% 28% 30% 15% 31%
- ---------------------
* represents less than 1%
We are substantially dependent on the entertainment platform
manufacturers as the sole manufacturers of the Platforms marketed by them, as
the sole licensors of the proprietary information and technology needed to
develop software for those Platforms and, in the case of Nintendo and Sony, as
the sole manufacturers of the software developed by us for the compatible
Platform. The entertainment platform manufacturers have in the past and may in
the future limit the number of titles we can release in any year, which may
limit any future growth in sales.
In the past, we have been able to renew and/or negotiate extensions
of our software license agreements with the entertainment platform developers.
However, we cannot assure stockholders that, at the end of their current
terms, we will be able to obtain extensions or that we will be successful in
negotiating definitive license agreements with developers of new Platforms.
If we cannot obtain licenses from developers of new Platforms or if
our existing license agreements are terminated, our financial position and
results of operations will be materially adversely affected. In addition, the
termination of any one of the license agreements or other arrangements could
negatively affect our financial position and results of operations.
In addition to licensing arrangements, we depend on the entertainment
platform manufacturers for the protection of the intellectual property rights
to their respective Platforms and technology and their ability to discourage
unauthorized persons from producing software for the Platforms developed by
each of them. We also rely upon the entertainment platform manufacturers for
the manufacture of certain cartridge and CD-based read-only memory (ROM)
software.
Reliance on New Titles; Product Delays
Our ability to maintain favorable relations with retailers and to
receive the maximum advantage from advertising expenditures depends on our
ability to provide retailers with a timely and continuous flow of product. The
life cycle of a title generally ranges from less than three months to upwards
of 12
10
months, with the majority of sales occurring in the first 90 to 120 days
after release. We actively market our current releases while simultaneously
supporting our back catalogue with pricing and sales incentives. We are
constantly required to develop, introduce and sell new titles in order to
generate revenue and/or to replace declining revenues from previously released
titles. In addition, it is difficult to predict consumer preferences for
titles, and few titles achieve sustained market acceptance. We cannot assure
stockholders that our new titles will be released in a timely fashion, will
achieve any significant degree of market acceptance, or that such acceptance
will be sustained for any meaningful period. Competition for retail shelf
space, consumer preferences and other factors could result in the shortening
of the life cycle for older titles and increase the importance of our ability
to release titles on a timely basis.
The timely shipment of a title depends on various factors, including
quality assurance testing by us and the manufacturers. We generally submit new
titles to the entertainment platform manufacturers and other intellectual
property licensors for approval prior to development and/or manufacture. Since
we are required to engage Nintendo or Sony, as the case may be, to manufacture
titles developed by us for the Platforms marketed by them, our ability to
control our supply of Nintendo or Sony titles and the timing of their delivery
is limited.
If the title is rejected by the manufacturer as a result of bugs in
software or if there is a substantial delay in the approval of a product by an
entertainment platform manufacturer or licensor, our financial condition and
results of operations could be negatively impacted. In the past, we have
experienced significant delays in the introduction of certain new titles and
such delays may occur in the future. Moreover, it is likely that in the future
certain new titles will not be released in accordance with our internal
development schedule or the expectations of public market analysts and
investors. A significant delay in the introduction of, or the presence of a
defect in, one or more new titles could negatively affect the ultimate success
of our titles. If we do not develop, introduce and sell new competitive titles
on a timely basis, results of operations and profitability will be negatively
affected.
Reliance on "Hit" Titles
The market for software is "hits" driven. Therefore, our future
success depends on developing and marketing "hit" titles for Platforms with
significant installed bases. Sales of our top four titles accounted for
approximately 53% of gross revenues for fiscal 1998 and sales of our top title
accounted for approximately 33% of gross revenues for fiscal 1997. Sales of
our top three titles accounted for approximately 69% of gross revenues for the
first quarter of fiscal 1999 and sales of our top three titles accounted for
approximately 71% of gross revenues for the first quarter of fiscal 1998. We
cannot assure stockholders that we will be able to publish "hit" titles in the
future. If we do not publish "hit" titles in the future, our financial
condition, results of operations and profitability could be negatively
affected, as they were in fiscal 1996 and 1997.
Inventory Management; Risk of Product Returns
Generally, we are not contractually obligated to accept returns,
except for defective product. However, we may permit customers to return or
exchange product and may provide price protection or other concessions on
products unsold by the customer. Accordingly, management must make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Also, management must make estimates and assumptions that affect
the reported amounts of revenues and expenses during the reporting periods.
Among the more significant of such estimates are allowances for
estimated returns, price concessions and other discounts. At the time of
shipment, we establish reserves in respect of such estimates taking into
account the potential for product returns and other discounts based on
historical
11
return rates, seasonality, level of retail inventories, market acceptance of
products in retail inventories and other factors. In fiscal 1996, price
allowances, returns and exchanges were significantly higher than reserves.
This shortfall had a negative impact on results of operations and liquidity in
fiscal 1996. We believe that, at November 30, 1998, we have established
adequate reserves for future price protection, returns, exchanges and other
concessions. However, we cannot guarantee the adequacy of our reserves. If the
reserves are exceeded, our financial condition and results of operations will
be negatively impacted.
In addition, we offer stock-balancing programs for our PC software.
We have established reserves for such programs, which have not been material
to date. Future stock-balancing programs may become material and/or exceed
reserves for such programs. If so exceeded, results of operations and
financial condition could be negatively impacted.
Increased Product Development Costs
As a result of the calendar 1995 acquisitions of the development
studios, beginning in fiscal 1996, our fixed software development and overhead
costs were significantly higher as compared to historical levels. These costs
negatively impacted results of operations and profitability in fiscal 1996 and
1997. In fiscal 1998, we consolidated our development studio operations to
reduce overhead expenses. Due to our planned release of a higher number of
software titles and increasing software development costs, we anticipate that
our future research and development expenses will continue to increase as a
percentage of net revenues as compared to fiscal 1998.
Competition
The market for software is highly competitive. Only a small
percentage of titles introduced in the software market achieve any degree of
sustained market acceptance. Competition is based primarily upon:
o quality of titles;
o the publisher's access to retail shelf space;
o product features;
o the success of the Platform for which the software is written;
o price of titles;
o the number of titles available for the Platform for which the software
is written; and
o marketing support.
We compete with a variety of companies that offer products that
compete directly with one or more of our titles. Typically, the chief
competitor on a Platform is the developer of that Platform, to whom we pay
royalties and, in some cases, manufacturing charges. Accordingly, the
developers have a price, marketing and distribution advantage with respect to
software marketed by them. This advantage is particularly important in a
mature or declining market which supports fewer full-priced titles and is
characterized by customers who make purchasing decisions on titles based
primarily on price, unlike developing markets with limited titles, when price
has been a less important factor in software sales. Our competitors vary in
size from very small companies with limited resources to very large
corporations with greater financial, marketing and product development
resources than us, such as Nintendo, Sega and Sony. Our competitors also
include a number of independent software publishers licensed by the hardware
developers.
Additionally, the entry and participation of new companies, including
diversified entertainment companies, in markets in which we compete may
adversely impact our performance in these markets.
12
The availability of significant financial resources has become a
major competitive factor in the software industry, primarily as a result of
the costs associated with developing and marketing software. As competition
increases, significant price competition and reduced profit margins may
result. In addition, competition from new technologies may reduce demand in
markets in which we have traditionally competed. Prolonged price competition
or reduced demand as a result of competing technologies would negatively
impact our business. We may not be able to compete successfully.
Intellectual Property Licenses and Proprietary Rights
Some of our software embodies trademarks, tradenames, logos or
copyrights licensed to us by third parties (such as the NBA, the NFL or their
respective players' associations), the loss of which could prevent the release
of a title or limit its economic success. License agreements generally extend
for a term of two to three years and are terminable in the event of our
material breach (including our failure to pay amounts due to the licensor in a
timely manner) or our bankruptcy or insolvency and certain other events. Since
competition is intense, we may not be successful in the future in acquiring
intellectual property rights with significant commercial value. In addition,
we cannot assure stockholders that these licenses will be available on
reasonable terms or at all.
In order to protect our titles and proprietary rights, we rely mainly
on a combination of:
o copyrights;
o trade secret laws;
o patent and trademark laws;
o nondisclosure agreements; and
o other copy protection methods.
It is our policy that all employees and third-party developers sign
nondisclosure agreements. These measures may not be sufficient to protect our
intellectual property rights against infringement. Additionally, we have
"shrinkwrap" license agreements with the end users of our PC titles, but rely
on the copyright laws to prevent unauthorized distribution of other software.
Existing copyright laws afford only limited protection.
Notwithstanding our rights to our software, it may be possible for third
parties to copy illegally our titles or to reverse engineer or otherwise
obtain and use our proprietary information. Illegal copying occurs within the
software industry, and if a significant amount of illegal copying of our
published titles or titles distributed by us occurs, our business could be
adversely impacted. Policing illegal use of our titles is difficult, and
software piracy is expected to persist. Further, the laws of certain countries
in which our titles are distributed do not protect us and our intellectual
property rights to the same extent as the laws of the U.S.
We believe that our titles, trademarks and other proprietary rights
do not infringe on the proprietary rights of others. However, as the number of
titles in the industry increases, we believe that claims and lawsuits with
respect to software infringement will also increase. From time to time, third
parties have asserted that features or content of certain of our titles may
infringe upon intellectual property rights of such parties. We have asserted
that third parties have likewise infringed our proprietary rights. Some of
these claims have resulted in litigation by and against us. To date, no such
claims have had a negative effect on our ability to develop, market or sell
our titles. Existing or future infringement claims by or against us may result
in costly litigation or require us to license the intellectual property rights
of third parties.
The owners of intellectual property licensed by us generally reserve
the right to protect such intellectual property against infringement.
13
International Sales
International sales represented approximately 41% of net revenues in
fiscal 1996, 50% of net revenues in fiscal 1997, 34% of net revenues in fiscal
1998 and 41% and 30% of net revenues in the first quarter of 1998 and 1999,
respectively. We expect that international sales will continue to account for
a significant portion of net revenues in future periods. International sales
are subject to the following inherent risks:
o unexpected changes in regulatory requirements;
o tariffs and other economic barriers;
o fluctuating exchange rates;
o difficulties in staffing and managing foreign operations; and
o the possibility of difficulty in accounts receivable collection.
Because we believe that exposure to foreign currency losses is not
currently material, we do not hedge against foreign currency risks.
In some markets, localization of our titles is essential to achieve
market penetration. As a result of the inherent risks, we may incur
incremental costs and experience delays in localizing our titles. These risk
factors or other factors could have a negative effect on future international
sales and, consequently, on our business.
Dependence on Key Personnel and Employees
The software industry is characterized by a high level of employee
mobility and aggressive recruiting among competitors for personnel with
technical, marketing, sales, product development and management skills.
Successful operations depend on our ability to identify, hire and retain such
personnel. We may not be able to attract and retain such personnel or may
incur significant costs in order to do so.
In particular, we are highly dependent upon the management services
of Gregory Fischbach, Co-Chairman of the Board and Chief Executive Officer,
and James Scoroposki, Co-Chairman of the Board and Senior Executive Vice
President. The loss of the services of either of these two could have a
negative impact on our business. Although we have employment agreements with
Messrs. Fischbach and Scoroposki, they may leave or compete with us in the
future. If we are unable to attract additional qualified employees or retain
the services of key personnel, our business could be negatively impacted.
Litigation
In conjunction with then pending class actions and other litigations
and claims for which the settlement obligation was then probable and
estimable, we recorded a charge of $23.6 million during the year ended August
31, 1997. During fiscal 1998, we settled substantially all such litigations
and claims for amounts approximating the accrued liabilities.
We are also party to various litigations arising in the course of our
business and certain other litigations. We may be required to record
additional material charges in future periods in conjunction with litigations
to which we are or become a party. If we have to record additional charges to
earnings from an adverse result in such litigations or from settlements which
exceed the related accrued liabilities, we may experience a negative effect on
our financial condition and results of operations. For a discussion of the
various claims and litigations to which we are currently a party, see "Legal
Proceedings."
14
Anti-Takeover Provisions
The Board of Directors has the authority (subject to certain
limitations imposed by the Indenture) to issue shares of preferred stock and
to determine their characteristics without stockholders' approval. If
preferred stock is issued, the rights of common stockholders are subject to,
and may be negatively affected by, the rights of preferred stockholders. If
preferred stock is issued, it will provide flexibility in connection with
possible acquisitions and other corporate actions; however, it could make it
more difficult for a third party to acquire a majority of our outstanding
voting stock. In addition, we are subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law, which may make it more
difficult or more expensive or discourage a tender offer, change in control or
takeover attempt that is opposed by the Board. In addition, employment
arrangements with certain members of management provide for severance payments
upon termination of their employment if there is a change in control.
Volatility of Stock Price
There is a history of significant volatility in the market prices of
companies engaged in the software industry, including Acclaim. The market
price of our Common Stock is likely to continue to be highly volatile. The
following factors may have a significant impact on the market price of the
Common Stock:
o timing and market acceptance of product introductions by us;
o the introduction of products by our competitors;
o loss of any key personnel;
o variations in quarterly operating results; or
o changes in market conditions in the software industry generally.
In the past, we have experienced significant fluctuations in
operating results and, if our future revenues or operating results or product
releases do not meet expectations, the price of our Common Stock may be
negatively affected.
Year 2000 Issue
Until recently, computer programs were generally written using two
digits rather than four to define the applicable year. Accordingly, such
programs may be unable to distinguish properly between the year 1900 and the
year 2000. In fiscal 1997, we commenced a Year 2000 date conversion project to
address necessary code changes, testing and implementation in respect of our
internal computer systems. Project completion is planned for the middle of
calendar 1999. We anticipate that our Year 2000 date conversion project as it
relates to internal systems will be completed on a timely basis. Our software
for N64, PlayStation and PCs is Year 2000 compliant. We are currently seeking
information regarding Year 2000 compliance from vendors, customers,
manufacturers, outside developers, and financial institutions associated with
us. Project completion for this phase is planned for the middle of calendar
1999. However, given the reliance on third-party information as it relates to
their compliance programs and the difficulty of determining potential errors
on the part of external service suppliers, we cannot guarantee that our
information systems or operations will not be affected by mistakes, if any, of
third parties or third-party failures to complete the Year 2000 project on a
timely basis. There can be no assurance that the systems of other companies on
which our systems rely will be timely converted or that any such failure to
convert by another company would not have a material adverse effect on our
systems.
The cost of the Year 2000 project and the date on which we believe we
will complete the necessary modifications are based on our estimates which
were derived utilizing numerous assumptions
15
of future events, including the continued availability of resources,
third-party modification plans and other factors. We presently believe that
the Year 2000 issue will not pose significant operational problems for our
internal information systems and products. However, if the anticipated
modifications and conversions are not completed on a timely basis, or if the
systems of other companies on which our systems and operations rely are not
converted on a timely basis, the Year 2000 issue could have a material adverse
effect on results of operations.
We do not currently have any contingency plans in place to address
the failure of timely conversion of our and/or third-party systems in respect
of the Year 2000 issue. Any failure by us to address any unforseen Year 2000
issues could materially adversely affect results of operations.
Euro Conversion
The January 1, 1999 adoption of the Euro has created a
single-currency market in much of Europe. For a transition period from January
1, 1999 to June 30, 2002, the existing local currencies will remain legal
tender as denominations of the Euro. Acclaim does not anticipate that its
systems will be materially adversely affected by the conversion to the Euro.
Acclaim has analyzed the impact of conversion to the Euro on its existing
systems and is implementing modifications to its current systems to handle
Euro invoicing for transactions. Acclaim anticipates that the cost of such
modifications will not have a material adverse effect on its results of
operations or liquidity in fiscal 1999. Due to numerous uncertainties, we
cannot reasonably estimate the effect that the conversion to the Euro will
have on our pricing or market strategies, and the impact, if any, that such
conversion will have on our financial condition or results of operations.
------------------
Stockholders should not use historical trends or other factors
affecting our operating results and financial condition to anticipate results
or trends in future periods because of the risk factors disclosed above. Also,
stockholders should not consider historic financial performance as a reliable
indicator of future performance.
USE OF PROCEEDS
The proceeds, if any, from the exercise of the Warrants will be added
to Acclaim's working capital.
DETERMINATION OF OFFERING PRICE
The aggregate value and the per share exercise price of the Warrants
was determined by arms-length negotiations between Acclaim and counsel for the
plaintiffs in the class action lawsuit.
PLAN OF DISTRIBUTION
The shares of Common Stock issuable upon the exercise of the Warrants
will be offered solely by Acclaim; no underwriters are participating in this
offering. The Warrants will be exercisable in accordance with a warrant
agreement between Acclaim and American Securities Transfer & Trust, Inc.
Acclaim will agree to indemnify the holders of the Warrants, their
respective officers, directors, partners, employees, agents, counsel,
Plaintiffs' Lead Counsel (as defined in the Stipulation) and each person, if
any, who controls each holder of Warrants within the meaning of Section 15 of
the Securities
16
Act or Section 20(a) of the Exchange Act against certain liabilities,
including liabilities under the Securities Act.
LEGAL PROCEEDINGS
Acclaim, Iguana Entertainment, Inc. and Gregory E. Fischbach were
sued in an action entitled Jeffery Spangenberg vs. Acclaim Entertainment,
Inc., Iguana Entertainment, Inc., and Gregory Fischbach filed in August 1998
in the District Court of Travis County, Texas (Cause No. 98-09418). The
plaintiff alleges that the defendants (i) breached their employment
obligations to the plaintiff, (ii) breached a Texas statute covering wage
payment obligations based on their alleged failure to pay bonuses to the
plaintiff; and (iii) made fraudulent misrepresentations to the plaintiff in
connection with the plaintiff's employment relationship with Acclaim, and
accordingly, seeks unspecified damages. Acclaim intends to defend this action
vigorously.
The SEC has issued orders directing a private investigation relating
to, among other things, Acclaim's earnings estimate for fiscal 1995 and its
decision in the second quarter of fiscal 1996 to exit the 16-bit portable and
cartridge markets. Acclaim has provided documents to the SEC, and the SEC has
taken testimony from company representatives. Acclaim intends fully to
cooperate with the SEC in its investigation. No assurance can be given as to
whether such investigation will result in any litigation or, if so, as to the
outcome of this matter.
In conjunction with then pending class actions and other litigations
and claims for which the settlement obligation was then probable and
estimable, Acclaim recorded a charge of $23.6 million during the year ended
August 31, 1997. During fiscal 1998, Acclaim settled substantially all of its
outstanding litigations and claims for amounts approximating the accrued
liabilities.
Acclaim is also party to various litigations arising in the ordinary
course of business, the resolution of none of which, Acclaim believes, will
have a material adverse effect on its liquidity or results of operations.
LEGAL MATTERS
Certain legal matters in respect of the shares offered hereby will be
passed upon for Acclaim by Rosenman & Colin LLP, 575 Madison Avenue, New York,
New York 10022.
EXPERTS
The consolidated financial statements and schedule of Acclaim and its
subsidiaries as of and for the years ended August 31, 1998 and 1997 and for
each of the years in the three-year period ended August 31, 1998 have been
incorporated by reference in this prospectus and in the registration statement
of which it forms a part in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses of issuance and distribution of the shares of Common
Stock underlying the Warrants are to be paid by the Registrant. The following
itemized list is an estimate of the expenses:
SEC registration fee................................ $ 603
Legal fees and expenses............................. 10,000
Accounting expenses................................. 10,000
Miscellaneous....................................... 4,397
-------
Total..................................... $25,000
Item 15. Indemnification of Directors and Officers
The Certificate of Incorporation of the Registrant provides that any
person may be indemnified against all expenses and liabilities to the fullest
extent permitted by the General Corporation Law of the State of Delaware (the
"GCL").
Section 145 of the GCL, the law of the state in which the Registrant
is incorporated, empowers a corporation, within certain limitations, to
indemnify any person against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with any suit or proceeding to which he is a party by reason of
the fact that he is or was a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, as long as
he acted in good faith and in a manner which he reasonably believed to be in,
or not opposed to, the best interests of the corporation. With respect to any
criminal proceeding, he must have had no reasonable cause to believe his
conduct was unlawful.
II-1
Item 16. Exhibits
Exhibit
Number Description
- ------- -----------
3.1 -- Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 to the Registrant's Registration
Statement on Form S-1, filed on April 21, 1989, as amended
(Registration No. 33-28274) (the "1989 S-1").
3.2 -- Amendment to the Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.2 to
the 1989 S-1).
3.3 -- Amendment to the Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 4(d) to
the Registrant's Registration Statement on Form S-8,
filed on May 19, 1995 (Registration No. 33-59483) (the
"1995 S-8").
3.4 -- Amended and Restated By-Laws of the Registrant
(incorporated by reference to Exhibit 4(e) to the 1995
S-8).
4.1 -- Specimen form of the Registrant's common stock certificate
(incorporated by reference to Exhibit 4.1 to the Registrant's
Annual Report on Form 10-K for the year ended August 31, 1989,
as amended (File No. 0-16986).
*4.2 -- Form of Warrant Agreement between the Registrant and
American Securities Transfer & Trust, Inc., as warrant
agent, relating to the Warrants.
*4.3 -- Form of Warrant Certificate relating to the Warrants.
*5 -- Opinion of Rosenman & Colin LLP
*23.1 -- Consent of KPMG LLP
*23.3 -- Consent of Rosenman & Colin LLP (included in Exhibit 5)
*24.1 -- Power of Attorney (included on Signature Page)
* Filed herewith.
Item 17. Undertakings
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 Securities Act of 1933 (the "Securities 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 the
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;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
II-2
herein, 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 a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) 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 Section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the SEC 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 securities being registered, 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.
II-3
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 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the County of Nassau and State of New York on
January 26, 1999.
ACCLAIM ENTERTAINMENT, INC.
By /s/
------------------------------------
Gregory E. Fischbach
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gregory E. Fischbach and James R.
Scoroposki, and each or either of them, his true and lawful attorney-in-fact
and agent, each acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all the
exhibits thereto, and other documents in connection therewith, with the SEC,
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 or
necessary to be done in and about the premises as fully, to 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 has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Co-Chairman of the Board; Chief Executive January 26, 1999
- ---------------------------------------- Officer; President; Director
Gregory E. Fischbach
/s/ Co-Chairman of the Board; Senior Executive January 26, 1999
- ---------------------------------------- Vice President; Treasurer; Secretary;
James R. Scoroposki Acting Chief Financial and Accounting
Officer; Director
/s/ Director January 26, 1999
- ----------------------------------------
Kenneth L. Coleman
/s/ Director January 26, 1999
- ----------------------------------------
Bernard J. Fischbach
/s/ Director January 26, 1999
- ----------------------------------------
Robert H. Groman
/s/ Director January 26, 1999
- ----------------------------------------
James Scibelli
/s/ Director January 26, 1999
- ----------------------------------------
Michael Tannen
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3.1 -- Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 to the Registrant's Registration
Statement on Form S-1, filed on April 21, 1989, as amended
(Registration No. 33-28274) (the "1989 S-1").
3.2 -- Amendment to the Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.2 to
the 1989 S-1).
3.3 -- Amendment to the Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 4(d) to
the Registrant's Registration Statement on Form S-8,
filed on May 19, 1995 (Registration No. 33-59483) (the
"1995 S-8").
3.4 -- Amended and Restated By-Laws of the Registrant
(incorporated by reference to Exhibit 4(e) to the 1995
S-8).
4.1 -- Specimen form of the Registrant's common stock certificate
(incorporated by reference to Exhibit 4.1 to the Registrant's
Annual Report on Form 10-K for the year ended August 31, 1989,
as amended (File No. 0-16986).
*4.2 -- Form of Warrant Agreement between the Registrant and
American Securities Transfer & Trust, Inc., as warrant
agent, relating to the Warrants.
*4.3 -- Form of Warrant Certificate relating to the Warrants.
*5 -- Opinion of Rosenman & Colin LLP
*23.1 -- Consent of KPMG LLP
*23.3 -- Consent of Rosenman & Colin LLP (included in Exhibit 5)
*24.1 -- Power of Attorney (included on Signature Page)
* Filed herewith.