As filed with the Securities and Exchange Commission on May 2, 2002
Registration No. 333-84368
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
AMENDMENT NO. 1
TO
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
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(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
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(Name, address and telephone number of agent for service)
Copy to:
Joel A. Yunis, Esq.
Katten Muchin Zavis Rosenman
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
Title of each class of Proposed maximum Proposed maximum Amount of
security to be registered Amount to be registered aggregate price per unit aggregate offering price registration fee
- ------------------------- ----------------------- ------------------------ ------------------------ ----------------
Common Stock, par value
$0.02 per share ............... 8,714,395(1)(2) $5.22 $45,489,141 $4,185
(1) To be offered from time to time by selling stockholders based upon
prevailing market prices.
(2) This Registration Statement covers the offer and sale by the selling
stockholders of (i) 7,166,667 shares of common stock issued in a February
2002 private placement to certain qualified institutional buyers and
accredited investors; (ii) 1,250,000 shares issuable upon the exercise of
warrants granted to certain officers and directors of the issuer in
connection with their providing collateral to the issuer's primary lender;
and (iii) 297,728 shares issuable upon the exercise of warrants granted to
the issuer's primary lender in connection with the waiver of certain debt
covenants and certain amendments to the issuer's credit facility. This
Registration Statement also covers an indeterminate number of shares of
Acclaim Entertainment, Inc. common stock that may be issuable by reason of
stock splits, stock dividends, or other adjustments in accordance with Rule
416 under the Securities Act of 1933.
(3) The proposed maximum aggregate price per unit was estimated pursuant to
Rule 457(c) promulgated under the Securities Act of 1933, solely for the
purpose of determining the registration fee, based on the average of high
and low prices of the registrant's common stock as quoted on The Nasdaq
SmallCap Market System on April 30, 2002. This amount has been 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.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED MAY 2, 2002
PROSPECTUS
--------------------------------
ACCLAIM ENTERTAINMENT, INC.
8,714,395 SHARES OF COMMON STOCK
This prospectus covers the resale of 8,714,395 shares of Acclaim's common
stock by the selling stockholders named in this prospectus. Acclaim will
not receive any proceeds from the sale of any shares by the selling
stockholders. See "Selling Stockholders" and "Plan of Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 1 FOR A DISCUSSION OF INVESTMENT
RISK FACTORS THAT YOU SHOULD CONSIDER BEFORE YOU INVEST IN THE COMMON
STOCK OFFERED AND SOLD BY THIS PROSPECTUS.
Our common stock is traded on The Nasdaq SmallCap Market System under
the symbol "AKLM." On April 30, 2002, the last reported sale price of
the common stock was $5.36 per share.
NEITHER THE 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.
________ __, 2002
TABLE OF CONTENTS
Page Number
RISK FACTORS................................................................. 1
INFORMATION ABOUT ACCLAIM.................................................... 10
USE OF PROCEEDS.............................................................. 13
SELLING STOCKHOLDERS......................................................... 14
PLAN OF DISTRIBUTION......................................................... 20
LEGAL PROCEEDINGS............................................................ 22
LEGAL MATTERS................................................................ 22
EXPERTS...................................................................... 22
FORWARD-LOOKING STATEMENTS................................................... 23
WHERE YOU CAN FIND MORE INFORMATION.......................................... 23
RISK FACTORS
Our future operating results depend upon many factors and are subject
to various risks and uncertainties. The known material risks and uncertainties
which may cause our operating results to vary from anticipated results or which
may negatively affect our operating results and profitability are as follows:
OUR ABILITY TO MEET CASH REQUIREMENTS AND MAINTAIN NECESSARY LIQUIDITY RESTS IN
PART ON THE COOPERATION OF OUR PRIMARY LENDER AND VENDORS, AND OUR ABILITY TO
ACHIEVE OUR PROJECTED REVENUE LEVELS
We rely on our primary lender to assist us in meeting our cash needs on
an ongoing basis. We also rely on our vendors to provide us with favorable
payment terms. If we do not substantially achieve our projected revenue levels
for fiscal 2002, fail to operate within our projected expense levels, or do not
receive the ongoing support of our lender and our vendors, we may be unable to
meet our cash and operating requirements for the next twelve months, which would
require additional financing to fund operations and/or the implementation of
expense reductions, and which may result in a default under our North American
credit agreement. Some of these measures would require third-party consents or
approvals, including that of our lender, and there can be no such assurance that
those consents or approvals, or additional financing, could be obtained. Based
on the interim support provided by our lender, from time to time, in the form of
advances against receivables and inventory and periodic discretionary
supplemental loans, our recent repayment in full of our 10% convertible
subordinated notes, our February 2002 private placement of common stock for net
proceeds of $19.8 million, the ongoing support of our vendors and anticipated
positive cash flow from operations, we expect to meet our currently projected
cash and operating requirements for the next twelve months, although this is not
assured.
If a default were to occur under our credit agreement and is not timely
cured or waived by our lender or if this were to happen and our debt could not
be refinanced or restructured, our lender could pursue its remedies, including:
(1) penalty rates of interest; (2) demand for immediate repayment of the debt;
and/or (3) the foreclosure on any of our assets securing the debt. If this were
to happen and we were liquidated or reorganized, after payment to the creditors,
there would likely be insufficient assets remaining for any distribution to our
stockholders.
In March 2002, we amended certain provisions of our credit agreement
and factoring agreements with our lender, and we are currently negotiating with
our lender to amend and restate those agreements. Although we currently comply
with the financial covenants contained in the agreement with our lender, in the
past we have received waivers for noncompliance with such covenants. We cannot
make any assurances that we will continue to be able to comply with the
financial covenants, or that if we do not comply, that such noncompliance will
be waived.
The actions we have taken have contributed to returning our annual
operations to profitability in fiscal 2001 and the first half of fiscal 2002,
and we currently anticipate no need to implement further expense reductions.
However, we cannot assure our stockholders and investors that we will achieve
the overall projected sales levels based on our planned product
release schedule, achieve profitability or achieve the cash flows necessary to
avoid further expense reductions in fiscal 2002. See "Industry Trends, Console
Transitions and Technological Change May Adversely Affect Our Revenues and
Profitability".
GOING CONCERN CONSIDERATION
At August 31, 2001, our independent auditors' report, as prepared by
KPMG LLP and dated October 23, 2001, which appears in our 2001 Form 10-K,
includes an explanatory paragraph relating to substantial doubt as to our
ability to continue as a going concern, due to our working capital and
stockholders' deficits at August 31, 2001 and the recurring use of cash in
operating activities.
Since the date of this auditors' report, we have retired $12.7 million
and converted $4.3 million in principal amount of our convertible subordinated
notes in exchange for common stock and repaid the remaining $12.2 million
principal amount in full on March 1, 2002, completed a private placement for net
proceeds of $19.8 million, and maintained profitable operations. These factors
have improved our working capital position and eliminated our stockholders'
deficit. We believe our improved working capital position and stockholders'
equity have contributed to our ability to continue as a going concern.
REVENUES AND LIQUIDITY ARE DEPENDENT ON TIMELY INTRODUCTION OF NEW TITLES
The timely shipment of a new title depends on various factors,
including the development process, debugging, approval by hardware licensors,
and approval by third-party licensors. It is likely that some of our titles will
not be released in accordance with our operating plans. Because net revenues
associated with the initial shipments of a new product generally constitute a
high percentage of the total net revenues associated with the life of a product,
a significant delay in the introduction of one or more new titles would
negatively affect or limit sales (as was the case in the first quarter of fiscal
2002) and have a negative impact on our financial condition, liquidity and
results of operations, as was the case in fiscal 2000 and 2001. We cannot assure
stockholders that our new titles will be released in a timely fashion in
accordance with our business plan.
The average life cycle of a new title generally ranges from less than
three months to upwards of twelve to eighteen months, with the majority of sales
occurring in the first 30 to 120 days after release. Factors such as competition
for access to retail shelf space, consumer preferences and seasonality could
result in the shortening of the life cycle for older titles and increase the
importance of our ability to release new titles on a timely basis. Therefore, we
are constantly required to introduce new titles in order to generate revenues
and/or to replace declining revenues from older titles. In the past, we
experienced delays in the introduction of new titles, which have had a negative
impact on our results of operations. The complexity of next-generation systems
has resulted in higher development expenditures, longer development cycles, and
the need to carefully monitor and plan the product development process. If we do
not introduce titles in accordance with our operating plans for a period, our
results of operations, liquidity and profitability in that period could be
negatively affected.
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INDUSTRY TRENDS, CONSOLE TRANSITIONS AND TECHNOLOGICAL CHANGE MAY ADVERSELY
AFFECT OUR REVENUES AND PROFITABILITY
The life cycle of existing game systems and the market acceptance and
popularity of new game systems significantly affects the success of our
products. We cannot guarantee that we will be able to predict accurately the
life cycle or popularity of each system. If we (1) do not develop software for
games consoles that achieve significant market acceptance; (2) discontinue
development of software for a system that has a longer-than-expected life cycle;
(3) develop software for a system that does not achieve significant popularity;
or (4) continue development of software for a system that has a
shorter-than-expected life cycle, our revenues and profitability may be
negatively affected and we could experience losses from operations.
In addition, the cyclical nature of the video and computer games
industry requires us to continually adapt software development efforts to
emerging hardware systems. The industry recently completed a hardware transition
from 32-bit and 64-bit to 128-bit game consoles such as Sony's PlayStation 2,
Nintendo's GameCube and Microsoft's Xbox. Although the initial launch of the
Xbox in the U.S. and the GameCube in the U.S. and Japan appears to have been
successful, no assurance can be given that these new game consoles will achieve
commercial success worldwide similar to and/or consistent with the previous
level of installed bases of the 32-bit PlayStation or 64-bit N64, nor can any
assurances be made as to the timing of their success. For example, in early
2001, Sega announced its plans to exit the hardware business, cease distribution
and sales of its Dreamcast console and re-deploy its resources to develop
software for multiple consoles. In addition, we cannot guarantee that we will be
successful in developing and publishing software for these new systems. Further,
we have no control over the release dates of new game systems or the number of
units that will be shipped upon release. It is difficult to ensure that our
schedule for releasing new titles will coincide with the release of the
corresponding game systems. Additionally, if fewer than expected units of a new
game system are produced or shipped, such as occurred in early fiscal 2001 with
Sony's PlayStation 2, we may experience lower-than-expected sales. Although the
number of consoles produced and shipped during the initial introduction of
Microsoft's Xbox in the U.S. and Nintendo's GameCube in the U.S. and Japan met
expectations, there can be no assurance that the introduction of the Xbox in
Europe and Japan and the GameCube in Europe will be as successful.
OUR FUTURE SUCCESS IS DEPENDENT ON OUR ABILITY TO RELEASE "HIT" TITLES
The market for software is "hits" driven. Therefore, our future success
depends on developing, publishing and distributing "hit" titles for popular
systems. If we do not publish "hit" titles in the future, our financial
condition, results of operations and profitability could be negatively affected,
as has occurred in the past. It is difficult to predict consumer preferences for
titles, and few titles achieve sustained market acceptance. We cannot assure
stockholders that we will be able to publish "hit" titles in the future.
IF PRODUCT RETURNS, PRICE CONCESSIONS AND ADJUSTMENTS EXCEED ALLOWANCES, WE MAY
INCUR LOSSES
In the past, particularly during platform transitions, we have had to
increase our price concessions granted to our retail customers. Coupled with
more competitive pricing, if our
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allowances for returns and price concessions are exceeded, our financial
condition and results of operations will be negatively impacted, as has occurred
in the past. We grant price concessions to our key customers who are major
retailers that control market access to the consumer, when those concessions are
necessary to maintain our relationships with the retailers and access to our
retail channel customers. If the consumers' demand for a specific title falls
below expectations or significantly declines below previous rates of sale, then,
a price concession or credit may be requested by our customers to spur further
sales.
Management makes significant estimates and assumptions regarding
allowances for estimated product returns and price concessions in preparing the
financial statements. Management establishes allowances at the time of product
shipment, taking into account the potential for product returns and price
concessions based primarily on: market acceptance of products in retail and
distributor inventories; level of retail inventories and product retail
sell-through rates; seasonality; and historical return and price adjustment
rates. Management monitors and adjusts these allowances quarterly to take into
account actual developments and results in the marketplace. We believe that at
March 3, 2002, our allowances for returns and price concessions were adequate,
but we cannot guarantee the adequacy of our current or future allowances.
IF WE ARE UNABLE TO OBTAIN OR RENEW LICENSES FROM HARDWARE DEVELOPERS, WE WILL
NOT BE ABLE TO RELEASE SOFTWARE FOR POPULAR SYSTEMS
We are substantially dependent on each hardware developer (1) as the
sole licensor of the specifications needed to develop software for its game
system; (2) as the sole manufacturer (Nintendo and Sony software) of the
software developed by us for its game systems; (3) to protect the intellectual
property rights to their game consoles and technology; and (4) to discourage
unauthorized persons from producing software for its game systems.
Substantially all of our revenues have historically been derived from
sales of software for game systems. If we cannot obtain licenses to develop
software from developers of popular interactive entertainment game consoles or
if any of our existing license agreements are terminated, we will not be able to
release software for those systems, which would have a negative impact on our
results of operations and profitability. Although we cannot assure stockholders
that when the term of existing license agreements end we will be able to obtain
extensions or that we will be successful in negotiating definitive license
agreements with developers of new systems, to date we have always been able to
obtain extensions or new agreements with the hardware companies.
Our revenue growth may also be dependent on constraints the hardware
companies impose. If new license agreements contain product quantity
limitations, our revenue, cash flows and profitability may be negatively
impacted.
In addition, when we develop software titles for systems offered by
Sony and Nintendo, the products are manufactured exclusively by that hardware
manufacturer. Since each of the manufacturers is also a publisher of games for
its own hardware systems, a manufacturer may give priority to its own products
or those of our competitors in the event of insufficient
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manufacturing capacity. We could be materially harmed by unanticipated delays in
the manufacturing and delivery of products.
PROFITABILITY IS AFFECTED BY RESEARCH AND DEVELOPMENT EXPENDITURE FLUCTUATIONS
DUE TO CONSOLE TRANSITIONS AND DEVELOPMENT FOR MULTIPLE CONSOLES
Our cash outlays for product development for the first half of fiscal
2002 (a portion of which were expensed and the remainder of which were
capitalized) were higher than the same period last year, and our product
development cash outlays may increase in the future as a result of releasing
more games across multiple platforms, delayed attainment of technological
feasibility and the complexity of developing games for the new 128-bit game
consoles, among other reasons. We anticipate that our profitability will
continue to be impacted by the levels of research and development expenditures
relative to revenues, and by fluctuations relating to the timing of development
in anticipation of future platforms.
During fiscal 2001, we focused our development efforts and costs on
N64, PlayStation, PlayStation 2, Xbox and Dreamcast, while incurring incremental
costs in the development of tools and engines necessary for the new platforms.
Our fiscal 2002 release schedule is developed around PlayStation 2, GameCube,
Xbox, Game Boy Advance and PCs. The release schedule for fiscal 2002 will also
continue to support certain legacy systems, such as PlayStation, on a limited
basis, as development for such systems is carried out by a select group of
independent software developers.
INABILITY TO PROCURE COMMERCIALLY VALUABLE INTELLECTUAL PROPERTY LICENSES MAY
PREVENT PRODUCT RELEASES OR RESULT IN REDUCED PRODUCT SALES
Our titles often embody trademarks, trade names, logos, or copyrights
licensed by third parties, such as the National Basketball Association, the
National Football League and Major League Baseball and their respective players'
associations, or individual athletes or celebrities. The loss of one or more of
these licenses would prevent us from releasing a title or limit our economic
success. We cannot assure stockholders that our licenses will be extended on
reasonable terms or at all, or that we will be successful in acquiring or
renewing licenses to property rights with significant commercial value.
License agreements relating to these rights generally extend for a term
of two to three years and are terminable upon the occurrence of a number of
factors, including the material breach of the agreement by either party, failure
to pay amounts due to the licensor in a timely manner, or a bankruptcy or
insolvency by either party.
COMPETITION FOR MARKET ACCEPTANCE AND RETAIL SHELF SPACE, PRICING COMPETITION,
AND COMPETITION WITH THE HARDWARE MANUFACTURERS AFFECTS OUR REVENUE AND
PROFITABILITY
The video and computer games market is highly competitive. Only a small
percentage of titles introduced in the market achieve any degree of sustained
market acceptance. If our titles are not successful, our operations and
profitability will be negatively impacted. We cannot guarantee that our titles
will compete successfully.
Competition in the video and computer games industry is based primarily
upon:
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o availability of significant financial resources;
o the quality of titles;
o reviews received for a title from independent reviewers who publish
reviews in magazines, websites, newspapers and other industry
publications;
o publisher's access to retail shelf space;
o the success of the game console for which the title is written;
o the price of each title;
o the number of titles then available for the system for which each
title is published; and
o the marketing campaign supporting a title at launch and through its
life.
Our chief competitors are the developers of games consoles, to whom we
pay royalties and/or manufacturing charges, as well as a number of independent
software publishers licensed by the hardware developers, such as Electronic
Arts, Activision and Konami.
The hardware developers have a price, marketing and distribution
advantage with respect to software marketed by them. Our competitors vary in
size from very small companies with limited resources to very large corporations
with greater financial, marketing and product development resources, such as
Sony, Nintendo and Microsoft.
As each game system cycle matures, significant price competition and
reduced profit margins result as we experienced in fiscal 2000. In addition,
competition from new technologies may reduce demand in markets in which we have
traditionally competed. As a result of prolonged price competition and reduced
demand as a result of competing technologies, our operations and liquidity have
in the past been, and in the future may be, negatively impacted.
REVENUES VARY DUE TO THE SEASONAL NATURE OF VIDEO AND COMPUTER GAMES SOFTWARE
PURCHASES
The video and computer games industry is highly seasonal. Typically,
net revenues are highest in the last calendar quarter, 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 and the reduced
demand for software during the summer months. Our earnings vary significantly
and are materially affected by releases of "hit" titles and, 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. See "Fluctuations in Quarterly Operating Results Lead to
Unpredictability of Revenues and Income" below.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS LEAD TO UNPREDICTABILITY OF REVENUES
AND INCOME
The timing of release of new titles can cause material quarterly
revenues and earning fluctuations. A significant portion of revenues in any
quarter is often 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, as has been the case in
the past (including the third and fourth quarters of fiscal 2001, and the first
quarter of fiscal 2002), our revenues and earnings will be negatively affected
in that period. In addition,
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because a majority of the unit sales for a title typically occur in the first 30
to 120 days following its introduction, revenues and earnings may increase
significantly in a period in which a major title is introduced and may decline
in the following period or in a period in which there are no major title
introductions.
Quarterly operating results also may be materially impacted by factors,
including the level of market acceptance or demand for titles and the level of
development and/or promotion expenses for a title. Consequently, if net revenues
in a period are below expectations, our operating results and financial position
in that period are likely to be negatively affected, as has occurred in the
past.
We moved our quarterly closing dates from the Saturday closest to the
last calendar day of the quarter to the Sunday closest to the last calendar day
of the quarter effective for the first quarter of fiscal 2002. This change
resulted in approximately $2.5 million of additional gross revenue in the first
half of fiscal 2002, but will have no effect on our gross revenue or net
earnings for the year ending August 31, 2002. Our fiscal year-end date (August
31) remains unchanged.
STOCK PRICE IS VOLATILE AND STOCKHOLDERS MAY NOT BE ABLE TO RECOUP THEIR
INVESTMENT
There is a history of significant volatility in the market prices of
companies engaged in the software industry, including Acclaim. Movements in the
market price of our common stock from time to time have negatively affected
stockholders' ability to recoup their investment in the stock. The price of our
common stock is likely to continue to be highly volatile, and stockholders may
not be able to recoup their investment. If our future revenues, profitability or
product releases do not meet expectations, the price of our common stock may be
negatively affected.
IF OUR SECURITIES WERE DELISTED FROM THE NASDAQ SMALLCAP MARKET, IT MAY
NEGATIVELY IMPACT THE LIQUIDITY OF OUR COMMON STOCK
In the fourth quarter of fiscal 2000, our securities were delisted from
quotation on The Nasdaq National Market. Our common stock is currently trading
on The Nasdaq SmallCap Market. Although we meet the current listing criteria for
The Nasdaq SmallCap Market, no assurance can be given as to our ongoing ability
to meet The Nasdaq SmallCap Market maintenance requirements. In order to obtain
relisting of our common stock on The Nasdaq National Market, we must satisfy
certain quantitative designation criteria. No assurance can be given that we
will be able to meet such relisting criteria for The Nasdaq National Market in
the near future.
If our common stock was to be delisted from trading on The Nasdaq
SmallCap Market, trading, if any, in the common stock may continue to be
conducted on the OTC Bulletin Board or in the non-Nasdaq over-the-counter
market. Delisting of the common stock would result in, among other things,
limited release of the market price of the common stock and limited company news
coverage and could restrict investors' interest in the common stock as well as
materially adversely affect the trading market and prices for the common stock
and our ability to issue additional securities or to secure additional
financing.
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INFRINGEMENT COULD LEAD TO COSTLY LITIGATION AND/OR THE NEED TO ENTER INTO
LICENSE AGREEMENTS, WHICH MAY RESULT IN INCREASED OPERATING EXPENSES
Existing or future infringement claims by or against us may result in
costly litigation or require us to license the proprietary rights of third
parties, which could have a negative impact on our results of operations,
liquidity and profitability.
We believe that our proprietary rights do not infringe on the
proprietary rights of others. 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 some of our
titles infringed their proprietary rights. We have also asserted that third
parties have likewise infringed our proprietary rights. These infringement
claims have sometimes resulted in litigation by and against us. To date, none of
these claims has negatively impacted our ability to develop, publish or
distribute our software. We cannot guarantee that future infringement claims
will not occur or that they will not negatively impact our ability to develop,
publish or distribute our software.
FACTORS SPECIFIC TO INTERNATIONAL SALES MAY RESULT IN REDUCED REVENUES AND/OR
INCREASED COSTS
International sales have historically represented material portions of
our revenues and are expected to continue to account for a significant portion
of our revenues in future periods. Sales in foreign countries may involve
expenses incurred to customize titles to comply with local laws. In addition,
titles that are successful in the domestic market may not be successful in
foreign markets due to different consumer preferences. We continue to evaluate
our international product development and release schedule to maximize the
delivery of products that appeal specifically to that marketplace. International
sales are also subject to fluctuating exchange rates. The recent adoption of the
euro as the single currency of most European Union member nations may reduce our
exposure to fluctuating exchange rates within the European Union if the price of
the euro remains tied to that of the U.S. dollar; however, consumers in the
European Union may face slight price increases as a result of the transition as
retailers round up the price of goods calculated in euros. These and other
factors specific to international sales may result in reduced revenues and/or
increased costs.
CHARTER AND ANTI-TAKEOVER PROVISIONS COULD NEGATIVELY AFFECT RIGHTS OF HOLDERS
OF COMMON STOCK
Our Board of Directors has the authority to issue shares of preferred
stock and to determine their characteristics without stockholder approval. In
this regard, in June 2000, the board of directors approved a stockholder rights
plan. If the Series B junior participating preferred stock is issued it would be
more difficult for a third party to acquire a majority of our voting stock.
In addition to the Series B preferred stock, the Board of Directors may
issue additional preferred stock and, if this is done, the rights of common
stockholders may be additionally negatively affected by the rights of those
preferred stockholders.
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We are also subject to anti-takeover provisions of Delaware corporate
law, which may impede a tender offer, change in control or takeover attempt that
is opposed by the Board. In addition, employment arrangements with some members
of management provide for severance payments upon termination of their
employment if there is a change in control.
SHARES ELIGIBLE FOR FUTURE SALE
As of April 18, 2002, we had 91,477,564 shares of common stock issued
and outstanding, of which 24,397,082 are "restricted" securities within the
meaning of Rule 144 under the Securities Act. Generally, under Rule 144, a
person who has held restricted shares for one year may sell such shares, subject
to certain volume limitations and other restrictions, without registration under
the Securities Act.
As of April 18, 2002, 48,562,710 shares of common stock are covered by
effective registration statements under the Securities Act for resale on a
delayed or continuous basis by certain of our security holders, of which 592,953
shares of common stock are issuable upon the exercise of warrants issued in
settlement of litigation. In addition, once the registration statement of which
this prospectus forms a part is declared effective by the SEC, the 8,714,395
shares covered by it will be available for future sale.
As of April 18, 2002, a total of 3,911,111 shares of common stock are
issuable upon the exercise of warrants to purchase our common stock (not
including warrants issued in settlement of litigation).
We have also registered on Form S-8 a total of 24,236,000 shares of
common stock (issuable upon the exercise of options) under our 1988 Stock Option
Plan and our 1998 Stock Incentive Plan, and a total of 2,448,425 shares of
common stock under our 1995 Restricted Stock Plan. As of March 3, 2002, options
to purchase a total of 10,345,134 shares of common stock were outstanding under
the 1988 Stock Option Plan and the 1998 Stock Incentive Plan, of which 6,629,957
were exercisable.
In connection with licensing and distribution arrangements,
acquisitions of other companies, the repurchase of notes and financing
arrangements, we have issued and may continue to issue common stock or
securities convertible into common stock. Any such issuance or future issuance
of substantial amounts of common stock or convertible securities could adversely
affect prevailing market prices for the common stock and could adversely affect
our ability to raise capital.
9
INFORMATION ABOUT ACCLAIM
We develop, publish, distribute and market under our brand name video
and computer games on a worldwide basis for popular interactive entertainment
consoles, such as Sony's PlayStation and PlayStation 2, Nintendo's Game Boy
Advance and GameCube and Microsoft's Xbox, and, to a lesser extent, PCs. In
fiscal 2001, we released a total of thirty-five titles for PlayStation,
PlayStation 2, Game Boy Color, Dreamcast and PCs. In the first quarter of fiscal
2002, we released a total of thirteen titles for PlayStation2, Game Boy Advance,
GameCube, Xbox and PCs. In the second quarter of fiscal 2002, we released a
total of 9 titles for PlayStation2, Game Boy Advance, GameCube and Xbox. We plan
to release a total of approximately fifty titles for PlayStation, PlayStation 2,
Game Boy Advance, GameCube, Xbox and PCs during fiscal 2002. We develop our own
software in our 6 development studios located in the U.S. and the U.K., which
includes a motion capture studio and a recording studio in the U.S., and we
contract with independent software developers to create software for us. We
distribute our software directly through our subsidiaries in North America, the
U.K., Germany, France, Spain and Australia. We use regional distributors
throughout the rest of the world. We also distribute software developed and
published by third parties, develop and publish strategy guides relating to our
software and issue "special edition" comic magazines from time to time to
support our time valued brands, Turok and Shadow Man.
Our operating strategy is to develop and publish video and computer
game software for each of the major video game consoles and PCs. We use a brand
structure and operate our business under 4 separate strategic business groups or
key brands: Acclaim Games, Acclaim Sports, Acclaim Max Sports, and Club Acclaim.
The video and computer games industry currently is characterized by
rapid technological changes mostly due to the introduction of new hardware
systems, which incorporate the latest in chip design approximately every 4 to 5
years, by Sony, Nintendo and Microsoft. Approximately every 4 to 5 years the new
game consoles are replaced by more technologically powerful systems, and the
software published for these new systems generally has better sound and
graphics. This is especially true for simulation games such as sports, driving,
shooting and role-playing games.
These and other factors have resulted in successive introductions of
increasingly advanced game consoles and PCs, since their first introduction in
the late 1970s with the Atari 2600. As a result of the rapid technological
shifts, no single game console or PC system has achieved long-term dominance in
the video and computer games market, although Nintendo has continued as a major
publisher and game console manufacturer since the introduction of the Nintendo
Entertainment System during the Christmas season of 1985, and Sony has been a
major publisher and game console manufacturer since the introduction of
PlayStation, in fiscal 1997. Therefore, we must continually anticipate game
console cycles and our research and development group must develop software
programming tools and engines for emerging hardware systems. The video and
computer games industry began to shift systems with the introduction of Sega's
Dreamcast in the fall of fiscal 2000, and the introduction of Sony's PlayStation
2 in the fall of fiscal 2001. In the second half of fiscal 2001, Nintendo
10
introduced its new handheld system, Game Boy Advance. In the U.S., in November
2001, Nintendo introduced its next-generation game console, GameCube, and
Microsoft introduced its first game console, Xbox.
We invest in the creation and development of software programming tools
that are used in the design and development of our software. We have used these
programming tools to create game engines for each of the next-generation
hardware systems. We believe that these tools and engines give us a competitive
advantage in the creation of state-of-the-art software.
Fiscal 2001 was a transition year for us; approximately 24% of our
gross revenues in fiscal 2001 were derived from software developed in our
studios. The balance was contracted through third-party software developers. In
fiscal 2002 and beyond, we anticipate that the majority of our revenues will be
derived from software developed in our own studios, through the release of our
major franchise titles, All Star Baseball, Legends of Wrestling, Extreme G 3,
VEXX and Turok, amongst others. We believe that our long-term success depends on
our ability to design and develop innovative interactive entertainment products.
Our software development strategy is driven by:
o the long-term anticipated success of the next-generation systems
in the domestic and European market place;
o the user demographics of the hardware systems;
o consumer preferences; and
o the cost of developing software for the hardware systems and the
cost of those systems.
Our revenues in any period are generally driven by the titles we
release in that period. We have experienced delays in the introduction of new
titles, which has had a negative impact on our operations, as well as quarterly
and annual reported financial results. It is likely that some of our future
titles will not be released in accordance with our operating plans, in which
event our results of operations and profitability in that period would be
negatively affected. See "Risk Factors: Revenues and Liquidity Are Dependent on
Timely Introduction of New Titles."
In the first quarter of fiscal 2002, we moved our quarterly closing
dates from the Saturday closest to the last calendar day of the quarter to the
Sunday closest to the last calendar day of the quarter end. Acclaim's fiscal
year-end date (August 31) remains unchanged. See "Risk Factors: Fluctuations in
Quarterly Operating Results Lead to Unpredictability of Revenues and Income".
As we emerge from the recent game console transition and compete in the
software market for next-generation systems, it is necessary that we continue to
meet our product release schedule, sales projections and manage our operational
expenditures at planned levels in order to generate sufficient liquidity to fund
our operations.
Our results of operations in the future will be dependent in large part
on (1) the rate of growth of the software market for 128-bit and other emerging
game systems, and (2) our ability to identify, develop and timely publish, in
accordance with our product release schedule, software that performs well in the
marketplace.
---------------------
11
You should not use historical trends or factors affecting our operating
results and financial condition to anticipate results or trends in future
periods. See "Risk Factors" above. Also, you should not consider historic
financial performance as a reliable indicator of future performance.
---------------------
A Delaware corporation, Acclaim was founded in 1987. Our principal
executive offices are located at One Acclaim Plaza, Glen Cove, New York 11542,
and our main telephone number is (516) 656-5000. Our Internet website is:
http://www.acclaim.com. Information contained on our website should not be
deemed part of this prospectus.
12
USE OF PROCEEDS
Acclaim will not receive any proceeds from the sale of any of the
shares of its common stock by the selling stockholders. Any proceeds from the
exercise of warrants will be added to Acclaim's working capital.
13
SELLING STOCKHOLDERS
Beneficial Ownership and Other Information
The following table sets forth information with respect to the shares
of common stock beneficially held by the selling stockholders:
Shares
Beneficial Beneficially Percent Percent
Ownership Owned After Owned Owned
Prior to an Shares Being the Before After
Name Offering** Offered Offering(1)** Offering Offering
- ---- ---------- ------- --------------- -------- --------
Alexandra Global 666,667 (2) 666,667 0 * --
Investment Fund I, Ltd.(2)
Cheyne Value Fund Ltd.(3) 1,666,667 1,666,667 0 1.82% --
Deephaven Private 1,500,000 1,500,000 0 1.64% --
Placement Trading Ltd.(4)
Christian Church 16,610 2,100 14,510 * *
Foundation, Inc. (5)
First Investors Series Fund 55,620 7,600 48,020 * *
II, Inc.(5)
Hartford Equity 23,400 10,000 13,400 * *
Partnership Capital
Appreciation Fund, LLC(5)
Hartford Small Company 3,190,657 655,600 2,535,057 3.49% 2.77%
HLS Fund(5)
ITT Hartford Small 1,030,163 214,700 815,463 1.13% *
Company Fund(5)
Quissett Partners, L.P. (5) 544,900 170,000 374,900 * *
Quissett Investors 906,000 400,000 506,000 * *
(Bermuda) L.P.(5)
Raytheon Master Pension 1,170,322 420,000 750,322 1.28% *
Trust(5)
14
Shares
Beneficial Beneficially Percent Percent
Ownership Owned After Owned Owned
Prior to an Shares Being the Before After
Name Offering** Offered Offering(1)** Offering Offering
- ---- ---------- ------- --------------- -------- --------
WTC-CIF Emerging 15,108 3,100 12,008 * *
Growth Portfolio(5)
WTC-CIF Public Growth 868,400 112,800 755,600 * *
Funds Portfolio(5)
WTC-CIF All Cap Growth 33,320 4,100 29,220 * *
Portfolio(5)
Precept Capital Master 100,000 100,000 0 * --
Fund, G.P.(6)
SF Capital Partners Ltd.(7) 250,000 250,000 0 * --
RLR Partners, L.P.(8) 405,000 200,000 205,000 * *
JMG Triton Offshore 54,792 50,000 4,792 * *
Fund, Ltd. (9)
JMG Capital Partners, 50,000 50,000 0 * --
L.P.(9)
Pine Ridge Financial, 333,333 333,333 0 * --
Inc.(10)
Terry Phillips 150,000 150,000 0 * --
Seneca Ventures(11) 100,000 100,000 0 * --
Woodland Venture 100,000 100,000 0 * --
Fund(12)
GMAC Commercial Credit 597,728 297,728 300,000 * *
LLC(13)
Gregory Fischbach 9,499,487(14) 625,000 8,874,487 10.12% 9.45%
James Scoroposki 9,660,979(15) 625,000 9,035,979 10.29% 9.63%
- --------------------------
* Less than one percent.
15
(footnotes continued from previous page)
** Beneficial ownership calculated as of April 18, 2002 in accordance with
Rule 13d-3 promulgated under the Securities Exchange Act of 1934 and is
based on 91,477,564 shares of common stock outstanding.
(1) Assumes that all of the shares covered by this prospectus are sold by
the selling stockholders pursuant to this prospectus. The selling
stockholders may choose to dispose of none or only a portion of the
shares held by them pursuant to this prospectus.
(2) We have been advised that Mikhail Filimonov and Dimitri Sogoloff are the
principals of Alexandra Investment Management, LLC, the investment
adviser of Alexandra Global Investment Fund I, Ltd. Acclaim has been
advised Alexandra Global exercises investment discretion and has the
power to direct voting with respect to 666,667 shares of Acclaim's common
stock as a result of its serving as investment manager to certain
investment funds.
(3) We have been advised that Stuart Fiertz, Chief Operating Officer of
Cheyne Capital Management Ltd., has voting and dispositive control over
securities held by Cheyne Value Fund.
(4) We have been advised that Deephaven Private Placement Trading Ltd. is a
private investment fund that is managed by Deephaven Capital Management
LLC. Deephaven Capital Management LLC, of which Mr. Colin Smith is the
fund manager, has voting and investment control over the shares listed as
owned by Deephaven Private Placement Trading Ltd. Deephaven Capital
Management LLC is an indirect subsidiary of Knight Trading Group, Inc.,
which is listed on The Nasdaq National Market.
(5) We have been advised that Wellington Management Company, LLP, serves as
investment manager, investment adviser or investment sub-adviser to the
following entities: Christian Church Foundation, Inc., First Investors
Series Fund II, Inc., Hartford Equity Partnership Capital Appreciation
Fund, LLC, Hartford Small Company HLS Fund, ITT Hartford Small Company
Fund, Quissett Partners, L.P., Quissett Investors (Bermuda) L.P.,
Raytheon Master Pension Trust, WTC-CIF Emerging Growth Portfolio, WTC-CIF
Public Growth Funds Portfolio and WTC-CIF All Cap Growth Portfolio.
Acclaim has been advised that Wellington exercises investment discretion
with respect to 9,450,210 shares of Acclaim's common stock and has voting
power over 8,925,590 shares as a result of its serving as the investment
adviser, investment sub-adviser or investment manager of various client
accounts (including those set forth above).
(6) We have been advised that D. Blair Baker, Manager of Precept Capital
Management LP, has voting and dispositive control over the shares listed
above owned by Precept Capital Master Fund, Ltd.
(7) We have been advised that Brian Davidson, Director of Private Placement,
has voting and dispositive control over the shares listed above owned by
SF Capital Partners Ltd.
(8) We have been advised that Ronald Rotter is the General Partner of RLR
Partners, L.P.
(9) We have been advised that Johnathan Glaser, Roger Richter and Daniel
David are the principals of Pacific Capital Management Investments, LLC,
the investment adviser to JMG Triton Offshore Fund, Ltd. We are also
advised that Johnathan Glaser is the principal of JMG Capital Management
LLC, the investment adviser to JMG Capital Partners, L.P.
(footnotes continued on next page)
16
(footnotes continued from previous page)
(10) We have been advised that Avi Vigder, President of Cavallo Capital
Corp., the parent of Pine Ridge Financial, Inc., has voting and
dispositive control over the shares listed as owned by Pine Ridge
Financial, Inc.
(11) We have been advised that Barry Rubenstein is the General Partner of
Seneca Ventures.
(12) We have been advised that Barry Rubenstein is the sole shareholder of
Woodland Services Corp., the general partner of Woodland Venture Fund.
(13) GMAC Commercial Credit LLC is a subsidiary of General Motors Corporation.
(14) Includes 1,250,000 shares issuable upon the exercise of warrants and
1,141,666 shares issuable upon the exercise of options, in each case
exercisable within 60 days of the date hereof. This prospectus covers the
resale by Gregory Fischbach of the shares issuable upon exercise of the
warrant to purchase 625,000 shares of common stock issued in connection
with his providing of collateral to Acclaim's primary lender.
(15) Includes 1,250,000 shares issuable upon the exercise of warrants and
1,141,666 shares issuable upon the exercise of options, in each case
exercisable within 60 days of the date hereof. This prospectus covers the
resale by James Scoroposki of the shares issuable upon exercise of the
warrant to purchase 625,000 shares of common stock issued in connection
with his providing of collateral to Acclaim's primary lender.
February Private Placement
On February 13, 2002, we issued a total of 7,166,667 shares of our
common stock to certain of the selling stockholders (i.e., those listed above
other than Gregory Fischbach, James Scoroposki, and GMAC Commercial Credit LLC)
at a price of $3.00 per share, for an aggregate gross purchase price of
$21,500,000. This prospectus covers the offer and sale by such selling
stockholders named herein of the 7,166,667 shares issued in the February 2002
private placement. The per share price represented an approximate 10% discount
to the then-recent public trading price of the common stock. The proceeds of the
private placement are intended to be used for our working capital, the
acquisition of products and product licensing, and possible strategic
acquisitions.
The private placement was effected under the exemption from
registration provided under Section 4(2) of the Securities Act of 1933, as
amended. We agreed to file a registration statement with the SEC covering the
resale by the investors of all the common stock issued in the offering within 30
days following the closing. If the registration statement (of which this
prospectus forms a part) is not declared effective by May 14, 2002, we are
obligated to pay each investor an amount equal to 1% of the purchase price paid
for the shares purchased by that investor. Thereafter, for every 30 days that
pass without the registration statement being declared effective, we are
obligated to pay to each investor an additional amount equal to 1% of the
purchase price paid for the shares purchased by that investor.
GMAC Commercial Credit LLC
This prospectus covers the offer and sale by GMAC, our primary lender,
of 136,171 shares issuable to GMAC upon exercise of a warrant issued to GMAC by
Acclaim on October
17
31, 2001, in connection with GMAC's agreement to amend certain provisions of our
credit facility, which amount includes 36,171 shares issuable in connection with
certain anti-dilution provisions contained in such warrant. The shares are
issuable at any time or from time to time upon the exercise of the warrant by
GMAC at an exercise price of $3.00 per share and, if not exercised in full prior
to October 31, 2006, expire on that date.
In addition, this prospectus covers the offer and sale by GMAC of an
aggregate of 161,557 shares issuable to GMAC upon the exercise of two warrants
pursuant to certain anti-dilution provisions contained in such warrants. These
warrants originally represented the right to purchase 200,000 shares and 100,000
shares, and were granted by Acclaim in February 1997 and July 2000,
respectively. Both of the warrants are issuable upon exercise at an exercise
price of $1.25 per share. The February 1997 warrant (which now represents the
right to purchase 337,028 shares) expires on February 19, 2006, and the July
2000 warrant (which now represents the right to purchase 124,529 of the shares)
expires on July 31, 2005. Both warrants were issued in connection with GMAC's
waiver of various loan agreement covenant defaults by Acclaim.
The 200,000 shares originally issuable upon exercise of the first
warrant and the 100,000 shares originally issuable upon exercise of the second
warrant are covered by separate effective registration statements currently on
file with the SEC. This prospectus covers the resale of the 161,557 additional
shares issuable upon exercise of both warrants by reason of the continued effect
of the anti-dilution provisions.
All three of the warrants described above (and the underlying shares
issuable upon exercise) were originally issued by Acclaim to GMAC in
privately-negotiated transactions pursuant to the exemption from registration
provided under Section 4(2) of the Securities Act.
Warrants to Gregory Fischbach and James Scoroposki
In October 2001, each of Gregory Fischbach and James Scoroposki
received warrants to purchase 625,000 shares of common stock in connection with
providing collateral to Acclaim's primary lender. The warrants are exercisable
at a price of $2.88 per share at any time between April 3, 2002 and April 2,
2012. These warrants (and the underlying shares issuable upon exercise) were
issued to Messrs. Fischbach and Scoroposki in a privately-negotiated transaction
pursuant to the exemption from registration provided under Section 4(2) of the
Securities Act. This prospectus covers the resale of the 1,250,000 shares
issuable upon exercise of the warrants.
Any proceeds from the exercise of the warrants described above will be
added to Acclaim's working capital.
The shares issued to each of the selling stockholders are restricted
securities within the meaning of the Securities Act and cannot be offered for
sale without an effective registration statement covering such offer and sale or
pursuant to an applicable exemption from the registration requirements of the
Securities Act. Pursuant to the terms of the various agreements, Acclaim filed
the registration statement (of which this prospectus is a part) and will use its
best efforts to keep the registration statement effective until all of the
shares issued to the selling stockholders are disposed of by them or until such
shares are generally eligible for resale without volume restrictions pursuant to
applicable exemptions from registration under the Securities Act.
18
Except for the revolving credit facility provided by GMAC to Acclaim,
the participation of Hartford Small Company HLS Fund, ITT Hartford Small Company
Fund, Quissett Partners, L.P., Quissett Investors (Bermuda) L.P., Raytheon
Master Pension Trust, WTC-CIF Emerging Growth Portfolio, RLR Partners, Alexandra
Global Investment Fund I in Acclaim's July 2001 private placement and their
subsequent inclusion in a separate effective registration statement currently on
file with the SEC, the affiliation of Gregory Fischbach and James Scoroposki as
officers and directors of Acclaim and sales representation services provided to
Acclaim in the ordinary course of business by entities controlled by or
affiliated with Terry Phillips, neither Acclaim nor any of its affiliates has
had any material relationship with any of the selling stockholders within the
past three years.
19
PLAN OF DISTRIBUTION
The selling stockholders have not employed an underwriter for the sale
of shares by the selling stockholders. The selling stockholders may offer shares
directly or through pledgees, donees, transferees or other successors in
interest at various times:
o on The Nasdaq SmallCap Market or in any other securities market on
which Acclaim's common stock is then listed or traded,
o in negotiated transactions,
o in a combination of any of the above transactions, or
o through any other available market transaction.
The selling stockholders may offer shares at (1) fixed prices which may
be changed, (2) prices prevailing at the time of sale, (3) prices related to
such prevailing market prices, or (4) at negotiated prices. Sales on or through
The Nasdaq SmallCap Market will be effected at such prices as may be obtainable
and as may be satisfactory to the selling stockholders. No sales or
distributions other than as disclosed in this prospectus will be effected until
after this prospectus shall have been appropriately amended or supplemented, if
required, to set forth the terms of the sale or distribution. The shares held by
the selling stockholders may be sold directly or through brokers or dealers, or
in a distribution by one or more underwriters on a firm commitment or best
efforts basis. The method by which the selling stockholders' shares may be sold
include:
o a block trade (which may involve crosses) in which the broker or
dealer so engaged will attempt to sell the securities as agent but
may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker or dealer as principal and resale by that
broker or dealer for its account under this prospectus;
o exchange distributions and/or secondary distributions in
accordance with the rules of The Nasdaq SmallCap Market;
o ordinary brokerage transactions in which the broker solicits
purchasers; and
o privately negotiated transactions.
In addition, any shares of common stock that qualify for sale under Rule 144 or
Rule 144A under the Securities Act may be sold under any such rules rather than
under this prospectus.
Brokers or dealers may receive commission or discounts from the selling
stockholders in amounts to be negotiated immediately prior to the sale.
Commission expenses and brokerage fees will be paid by the selling stockholders.
The selling stockholders and any underwriters, dealers or agents that
participate in the distribution of its shares of Acclaim's common stock may be
deemed to be "underwriters" within the meaning of the Securities Act, and any
profit on the resale of those shares by them or any
20
discounts, commissions or adjustments received by any such underwriters, dealers
or agents may be deemed to be underwriting discounts and commissions under the
Securities Act.
Acclaim has agreed to indemnify the selling stockholders, their
officers, directors, shareholders, employees, agents, counsel, and each person
who controls each selling stockholder, as determined under applicable securities
laws, against certain kinds of liability relating to this offering. Types of
liability include liability arising from any untrue statement or alleged untrue
statement in this prospectus or the registration statement of which it is a
part, any omission or alleged omission to state a material fact within this
prospectus or the registration statement of which it is a part, and any
violation under the Securities Act or any federal or state securities law or
regulation. The selling stockholders have also agreed to indemnify Acclaim and
its officers, directors, shareholders, partners, employees, agents, counsel, and
each person who controls Acclaim, as determined under applicable securities
laws, against certain kinds of liability relating to this offering. Types of
liability include liability arising from any untrue statement or alleged untrue
statement in this prospectus or the registration statement of which it is a
part, any omission or alleged omission to state a material fact within this
prospectus or the registration statement of which it is a part, and any
violation under the Securities Act or any federal or state securities law or
regulation, to the extent any of the violations occur in connection with written
information furnished by a selling stockholder in connection with this
prospectus or the registration statement of which it is a part. However, the
total amount payable in indemnity by any selling stockholder shall not exceed
net proceeds received by the selling stockholder in the registered offering out
of which the violation arises. The parties have also agreed to make contribution
in respect of any claims or damages for which indemnification is unavailable.
Expenses of this offering related to this registration statement,
estimated at $200,000, will be borne in full by Acclaim. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, or persons controlling Acclaim pursuant to the
foregoing provisions, Acclaim has been informed that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
21
LEGAL PROCEEDINGS
We and other companies in the entertainment industry were sued in an
action entitled James, et al. v. Meow Media, et al. filed in April 1999 in the
U.S. District court for the Western District of Kentucky, Paducah Division,
Civil Action No. 5:99 CV96-J. The plaintiffs alleged that the defendants
negligently caused injury to the plaintiffs as a result of, in the case of
Acclaim, its distribution of unidentified "violent" video games, which induced a
minor to harm his high school classmates, thereby causing damages to plaintiffs,
the parents of the deceased individuals. The plaintiffs seek damages in the
amount of approximately $110 million. The U.S. District Court for the Western
District of Kentucky dismissed this action; however, it is currently on appeal
to the U.S. Court of Appeals for the sixth Circuit. Oral arguments were held in
late November 2001. We intend to defend this action vigorously.
We and other companies in the entertainment industry were sued in an
action entitled Sanders et al. v. Meow Media et al., filed in April 2001 in the
U.S. District Court for the District of Colorado, Civil Action No. 01-0728. The
complaint purports to be a class action brought on behalf of all persons killed
or injured by the shooting which occurred at Columbine High School on April 20,
1999. We are a named defendant in the action along with more than ten other
publishers of computer and video games. The complaint alleges that the video
game defendants negligently caused injury to the plaintiffs as a result of their
distribution of unidentified "violent" video games, which induced two minors to
kill a teacher related to the plaintiff and to kill or harm their high school
classmates, thereby causing damages to plaintiffs. The complaint seeks:
compensatory damages in an amount not less than $15,000 for each plaintiff in
the class, but up to $20 million for some of the members of the class; punitive
damages in the amount of $5 billion; statutory damages against certain other
defendants in the action; and equitable relief to address the marketing and
distribution of "violent" video games to children. This case was dismissed on
March 4, 2002. Following dismissal, the plaintiffs moved for relief and the U.S.
District Court for the District of Colorado denied the relief sought by
plaintiffs. Plaintiffs have now noted an appeal.
We received a demand for indemnification from the defendant Lazer-Tron
corporation in a matter entitled J. Richard Oltman v. Steve Simon, No. 98 C1759
and Steve Simon v. J. Richard Oltman, J. Richard Oltman Enterprises, Inc., d/b/a
Haunted Trails Amusement Parks, and RLT Acquisitions, Inc., d/b/a Lazer-Tron,
No. A 98CA 426, consolidated as U.S. District court Northern district of
Illinois Case No. 99 C 1055. The Lazer-Tron action involves the assertion by
plaintiff Simon that defendants Oltman, Haunted Trails and Lazer-Tron
misappropriated plaintiff's trade secrets. Plaintiff alleges claims for Lanham
Action violations, unfair competition, misappropriation of trade secrets,
conspiracy, and fraud against all defendants, and seeks damages in unspecified
amounts, including treble damages for Lanham Act claims, and an accounting.
Pursuant to an asset purchase agreement made as of March 5, 1997, we sold
Lazer-Tron to RLT Acquisitions, Inc. Under the asset purchase agreement, we
assumed and excluded specific liabilities, and agreed to indemnify RLT for
certain losses, as specified in the asset purchase agreement. In an August 1,
2000 letter, counsel for Lazer-Tron in the Lazer-Tron action asserted that our
indemnification obligations in the asset purchase agreement applied to the
Lazer-Tron action, and demanded that we indemnify Lazer-Tron for any losses
which may be incurred in the Lazer-Tron. In an August 22, 2000 response, we
asserted that any losses which may result from the Lazer-Tron action are not
assumed liabilities under the asset purchase agreement for which we must
indemnify Lazer-Tron. In a November 20, 2000 letter, Lazer-Tron responded to
Acclaim's August 22 letter and reiterated its position that we must indemnify
Lazer-Tron with respect to the Lazer-Tron action. No other action with respect
to this matter has been taken to date.
We are also party to various litigation matters arising in the ordinary
course of business, which we believe, but cannot provide assurances, will not
have a material adverse effect on our liquidity or results of operations.
LEGAL MATTERS
Katten Muchin Zavis Rosenman, 575 Madison Avenue, New York, New York
10022 has passed upon the validity of the shares offered by this prospectus for
Acclaim.
EXPERTS
The consolidated financial statements and schedules of Acclaim
Entertainment, Inc. and subsidiaries as of August 31, 2001 and 2000 and for each
of the years in the three-year period ended August 31, 2001 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 that firm as experts in accounting and auditing.
The report of KPMG LLP, dated October 23, 2001, contains an explanatory
paragraph that states that the Company has working capital and stockholders'
deficits at August 31, 2001 and a recurring use of cash in operating activities
that raise substantial doubt about its ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
22
FORWARD-LOOKING STATEMENTS
This prospectus includes discussions of future expectations and
contains projections of results of operations or financial condition or other
"forward-looking" information. Those statements are subject to known and unknown
risks and uncertainties that could cause actual results to differ materially
from those contemplated by the statements. For a discussion of important factors
that could cause actual results to differ materially from the forward-looking
statements, see "Risk Factors." Given the significant risks and uncertainties
inherent in the forward-looking statements included in this prospectus, the
inclusion of these statements is not a representation by us or any other person
that our objectives and plans will be achieved.
WHERE YOU CAN FIND MORE INFORMATION
Acclaim is required to file periodic reports, proxy and information
statements and other information with the SEC. You may read any materials filed
by us at the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. You may obtain information about the operation of the public reference room
by calling the SEC at 1-800-SEC-0330. Acclaim's SEC filings are also available
to the public on the SEC's Internet website located at http://www.sec.gov.
Acclaim has filed with the SEC a registration statement on Form S-3
under the Securities Act covering the issuance of the common stock. This
prospectus is part of that registration statement. As allowed by SEC rules, this
prospectus does not contain all of the information included in the registration
statement or in the exhibits to the registration statement. For further
information with respect to Acclaim and the securities offered by this
prospectus, you should read the registration statement and the exhibits filed
with the registration statement. You may obtain copies of the registration
statement and exhibits from the SEC upon payment of a fee prescribed by the SEC
or examine the documents, free of charge, at the public reference facilities
referred to above. A summary in this prospectus of any document filed as an
exhibit to the registration statement, although materially complete, does not
summarize all of the information in that document. You should read the exhibit
for a more complete understanding of the document or matter involved.
Acclaim has also filed the following documents with the SEC under the
Securities Exchange Act and they are incorporated into this document by
reference:
(1) Acclaim's Annual Report on Form 10-K for the fiscal year ended
August 31, 2001 as amended on December 7, 2001;
(2) Current Report on Form 8-K, filed on December 4, 2001;
(3) Quarterly Report on Form 10-Q for the quarter ended December 2,
2001, filed on January 16, 2002;
(4) Current Report on Form 8-K, filed on February 11, 2002;
(5) Current Report on Form 8-K, filed on February 21, 2002;
23
(6) Quarterly Report on Form 10-Q for the quarter ended March 3, 2002,
filed on April 17, 2002; and
(7) The information regarding Acclaim's common stock contained in the
Registration Statement on Form 8-A, filed on June 8, 1988, as
amended by the Current Report on Form 8-K, filed on August 25,
1989, relating to the one-for-two reverse stock split effected by
Acclaim.
Any document Acclaim files with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and
before the termination of this offering will be deemed to be incorporated by
reference into this prospectus and to be a part of this prospectus from the date
it is filed.
Acclaim will provide to each person to whom this prospectus is
delivered and who makes a written or oral request, free of charge, a copy of any
document referred to above which has been incorporated into this prospectus by
reference, except exhibits to the document. Requests for these documents should
be sent to the Secretary, Acclaim Entertainment, Inc., One Acclaim Plaza, Glen
Cove, New York 11542. Telephone requests for copies should be made to the
Secretary at (516) 656-5000.
You should rely only on the information provided in this prospectus or
incorporated by reference into this prospectus. No person has been authorized to
provide you with different information and you should not rely on any
information you receive or representations made that are not contained in, or
incorporated by reference into, this prospectus.
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 after the date on the cover page.
24
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Acclaim will bear all expenses in connection with the preparation and
filing of this registration statement. Brokers or dealers may receive commission
or discounts from the selling stockholders in amounts to be negotiated
immediately prior to the sale; commission expenses and brokerage fees will be
paid by the selling stockholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Article VII of Acclaim's by-laws, which are incorporated herein
by reference, Acclaim agrees to hold harmless and indemnify any of its officers,
directors, employees and agents from and against any judgments, fines,
liabilities, or amounts paid in settlement as a result of or in connection with
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative. Such action, suit, or proceeding must
have been initiated against the indemnified party in his or her capacity as an
officer, director, employee or agent of Acclaim. However, indemnification will
only be paid if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of Acclaim
and, in the case of a criminal proceeding, had no reasonable cause to believe
such conduct was unlawful. No indemnification shall be payable under this
provision if a court having jurisdiction in the matter shall determine that such
indemnification is not lawful.
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ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
4.1 -- Specimen form of the Company's common stock certificate
(incorporated by reference to Exhibit 4 to the Company's Annual
Report on Form 10-K for the year ended August 31, 1989, as
amended)
4.2 -- Rights Agreement dated as of June 5, 2000, between the Company
and American Securities Transfer & Trust, Inc. (incorporated by
reference to Exhibit 4 of the Company's Current Report on Form
8-K, filed on June 12, 2000)
4.3 -- Form of Share Purchase Agreement between the Company and certain
purchasers relating to the February 2002 Private Placement
(incorporated by reference to Exhibit 10.28 of the Company's
Quarterly Report on Form 10-Q, filed on April 17, 2002)
4.4 -- Form of Registration Rights Agreement between the Company and
certain purchasers relating to the February 2002 Private
Placement (incorporated by reference to Exhibit 10.29 of the
Company's Quarterly Report on Form 10-Q, filed on April 17,
2002)
5 -- Opinion of Katten Muchin Zavis Rosenman (filed herewith)
23.1 -- Consent of KPMG LLP (filed herewith)
23.3 -- Consent of Katten Muchin Zavis Rosenman (included in Exhibit 5)
II-2
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to file, during any period
in which offers or sales are being made, a post-effective amendment to this
registration statement to include any material information with respect to the
plan of distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement.
The undersigned registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment 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 hereof.
The undersigned registrant hereby undertakes 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.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Glen Cove, State of New York, on May 1, 2002.
ACCLAIM ENTERTAINMENT, INC.
By /s/ Gregory E. Fischbach
-----------------------------------
Gregory E. Fischbach
Co-Chairman of the Board and
Chief Executive Officer
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/ Gregory E. Fischbach Co-Chairman of the Board and May 1, 2002
- --------------------------------------- Chief Executive Officer
Gregory E. Fischbach
May 1, 2002
/s/ Gerard F. Agoglia Chief Financial Officer and
- --------------------------------------- Executive Vice President; Chief
Gerard F. Agoglia Financial and Accounting Officer
II-4