Filed Pursuant to Rule 424(b)(3)
Registration No. 333-85385
204,448 Shares
ACTIVISION, INC.
Common Stock
-----------------------
The stockholders of Activision, Inc. listed in this prospectus
under the section entitled "Selling Stockholders" are offering and selling up
to 204,448 shares of Activision's common stock under this prospectus.
All of the selling stockholders acquired their shares of Activision
common stock in connection with Activision's acquisition on June 29, 1999 of
Elsinore Multimedia, Inc., a Florida based software development company. The
selling stockholders were all of the stockholders of Elsinore.
Activision will not receive any of the proceeds from the sale of shares
being offered by the selling stockholders.
Activision's common stock is traded in the NASDAQ National Market System
under the symbol "ATVI." On August 10, 1999, the last sale price for the
common stock as reported on the NASDAQ National Market System was $12.875 per
share.
No underwriting is being used in connection with this offering of common
stock. The shares of common stock are being offered without underwriting
discounts. The expenses of this registration will be paid by Activision.
Normal brokerage commissions, discounts and fees will be payable by the
selling stockholders.
For a discussion of certain matters that should be considered by
prospective investors, see "Risk Factors" starting on page 2 of this
Prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the shares of common stock offered
or sold under this prospectus or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
The information in this prospectus is not complete and may be changed.
Activision 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.
The date of this Prospectus is September 16, 1999.
RISK FACTORS
Before purchasing any of the shares of Common Stock being offered,
prospective investors should carefully consider the following factors in
addition to the other information contained in this Prospectus or
incorporated by reference into it.
We caution you to be aware of the speculative nature of "forward-looking
statements" made by, or on behalf of, our employees and representatives. Such
statements:
- - are defined by the Private Securities Litigation Reform Act of 1995;
- - may be oral or written;
- - do not include recitations of historical facts;
- - can be identified by the use of forward-looking terminology (e.g. "may,"
"expect," "anticipate," "estimate" or "continue") or the negative of
such terminology.
We further caution you that there are numerous risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements. The discussion
below highlights some of the more important risks identified by management,
but you should not assume them to be the only factors that could affect
future performance. We caution that we do not have a policy of updating or
revising forward-looking statements and therefore silence by management over
time does not mean that actual events are occurring as anticipated in such
forward-looking statements.
Fluctuations in our quarterly net revenues and operating results make future
predictions uncertain.
Our quarterly operating results have varied in the past and can be
expected to vary in the future. These variations are caused by a number of
different factors, many of which are beyond our control. Such factors
include:
- - demand for our products;
- - the size and rate of growth of the interactive entertainment and leisure
markets;
- - development and promotional expenses relating to the introduction of new
products;
- - changes in computer operating systems and video game platforms;
- - product returns;
- - the timing of orders from major customers;
- - delays in product shipments;
- - the level of price competition;
- - the timing of product introductions by Activision and its competitors;
- - product life cycles;
- - product defects and other quality problems;
- - the level of our international revenues; and
- - personnel changes.
As a result of the above-mentioned factors, revenues and operating results
for any future quarter cannot be predicted with any significant degree of
accuracy. Thus, Activision advises that period-to-period comparisons of its
operating results are not necessarily meaningful and should not be relied
upon as indications of future performance.
Our business has experienced, and is expected to continue to experience,
significant seasonality. Typically, our net revenues are significantly
higher during the fourth calendar quarter because of increased demand for
consumer software during the year-end holiday buying season. Net revenues
and net income in other calendar quarters are generally lower and vary
significantly as a result of new product introductions and other factors.
Our revenues and our competitive position could be negatively affected if our
new products are not successful or timely introduced.
Our future success depends in part on the timely introduction of
successful new products as well as sequels or enhancements of existing
products. These products are necessary to replace declining revenues from
older products. A significant delay in the release of products or the
failure of new products to replace declining revenues from older products
could materially and negatively affect our business, operating results and
financial condition. In addition, competitive factors in the entertainment
and leisure software industry create the need for higher quality, distinctive
products with increasingly sophisticated effects. This in turn makes it
difficult to produce and release such products on a timely basis and results
in higher development, acquisition and marketing costs. The seasonality of
Activision's business further highlights this problem. Moreover, because a
large portion of a product's revenue generally is associated with initial
shipments, the delay of a product introduction expected near the end of a
fiscal quarter may have a material negative effect on operating results for
that quarter. Activision does not assure that new products will be
introduced on schedule, or at all, or that they will achieve market
acceptance or generate significant revenues.
We rely in part on external developers, over whom we have less control than
internal staff.
Although we intend to continue to rely in part on products that are
developed by our own employees, over the last several fiscal years the
percentage of products published by Activision that are developed by
independent third party developers has increased significantly. Also,
occasionally we use independent contractors for certain aspects of our
internal product development and production. Naturally, we have less control
over the timing and the quality of work of these independent contractors and
third party developers, as compared to our own employees. A delay in the work
performed by independent contractors and third party developers may result in
delays in the release of products. In addition, if our independent
contractors and third party developers produce poor quality work, there is a
greater chance that our products will not be successful.
In addition, our future success will depend, in significant part, on our
continued ability to maintain relationships and obtain development agreements
on favorable terms with skilled independent contractors and third party
developers. We cannot assure you that we will be able to establish or
maintain relationships with independent contractors and third party
developers.
Failure of our new products to achieve or sustain market acceptance may have
a material negative effect on our business.
The market for entertainment and leisure systems and software has been
characterized by shifts in consumer preferences and short product life
cycles. Consumer preferences for entertainment and leisure software products
are difficult to predict and few products achieve sustained market
acceptance. We cannot assure that our newly introduced products will achieve
any significant degree of market acceptance, nor can we assure that any such
market acceptance will continue for any significant period of time. Finally,
we cannot assure that product life cycles will be sufficient to permit us to
recover our development, marketing and other related costs. In addition, if
market acceptance is not achieved, we could be forced to accept substantial
product returns to maintain relationships with retailers. Failure of new
products to achieve or sustain market acceptance or product returns in excess
of our expectations would have a material negative effect on our business,
operating results and financial condition.
We depend on a limited number of hit products to produce a large portion of
our revenues. The failure of any of these products to achieve anticipated
results may negatively affect our business.
A significant portion of our revenues are derived from a relatively
small number of products we release each year. In addition, many of these
products have substantial production or acquisition costs and marketing
budgets. For example, during fiscal 1998, one product accounted for
approximately 10.2% of Activision's consolidated net revenues. All other
products were individually less than 10% of Activision's consolidated net
revenues. During fiscal 1999, no single product accounted for greater than
10% of Activision's consolidated net revenues. However, we expect that a
limited number of products will continue to produce a disproportionate amount
of our revenues. Due to this dependence on a limited number of products, the
failure of one or more of these products to achieve anticipated results may
have a material negative effect on Activision's business, operating results
and financial results.
Another key component of our business strategy is publishing titles that
have franchise value, so that sequels, enhancements and add-on products can
be released over time. Focusing on franchise properties, if successful, both
extends the life of the product in the market and results in dependence on a
limited number of titles for our revenues. We make no assurance that existing
franchise titles will continue to be as successful as they have been in the
past. Also, new products that we believe will have potential value as
franchise properties may not achieve market acceptance and therefore may not
become a basis for future releases.
Significant competition in our industry could negatively affect our business.
The interactive entertainment and leisure software industries are highly
competitive. Competition in these industries is largely based on:
- - product quality and features;
- - compatibility of products with popular platforms;
- - company or product line brand name recognition;
- - access to distribution channels;
- - effectiveness of marketing campaign;
- - reliability and ease of use;
- - price; and
- - technical support.
The level of financial resources of a publisher has also become a
competitive factor in these industries. This is mainly due to the substantial
cost of product development and marketing required to support best-selling
titles. In addition, competitors with broad product lines and popular titles
typically have greater influence with distributors. Thus, distributors and
other customers may be willing to promote titles with less consumer appeal in
return for access to such competitor's most popular titles.
Activision's competitors range from small companies with limited
resources to large companies with substantially greater financial, technical
and marketing resources than those of Activision. Activision's competitors
currently include:
- - Acclaim;
- - Eidos
- - Electronic Arts;
- - GT Interactive;
- - Hasbro;
- - Havas;
- - Infogrames;
- - LucasArts;
- - Microsoft;
- - Nintendo;
- - Sega; and
- - Sony, among many others.
Increased competition may result in price reductions, increased
production costs and reduced profit margins. Prolonged price competition or
reduced demand would have a material negative effect on our business,
operating results and financial condition. We make no assurances that we will
be able to compete successfully against current or future competitors. We
also warn that competitive pressures facing Activision may have a material
negative effect on our business, operating results and financial condition.
There also exists intense competition among entertainment and leisure
software producers over the limited amount of "shelf space" available at
retail stores and the promotional support that can be obtained from these
retailers. As the number of interactive entertainment and leisure products
has increased, the competition for shelf space has intensified. This has
resulted in greater power for retailers and distributors in negotiating terms
of sale, including price discounts and product return policies. Our products
constitute a relatively small percentage of a retailer's sales volume. Thus,
there are no assurances that retailers will continue to purchase Activision's
products or promote Activision's products with adequate levels of shelf space
and promotional support.
Our dependence on certain principal distributors and retailers exposes us to
risks of retailers' business failures and product returns.
Retailers in the computer industry have from time to time experienced
significant fluctuations in their businesses and there have been a number of
business failures among these retailers. The loss of, or significant
reduction in sales attributable to, any of our principal distributors or
retailers could materially negatively effect our business, operating results
and financial condition.
Certain mass market retailers have established an exclusive buying
relationship with an intermediary whereby the retailers will buy our products
only from the intermediary. Where this is the case, the price or other terms
on which we may sell to these retailers may be negatively effected by the
terms imposed by the intermediary. Further, if the terms imposed by the
intermediary are unacceptable to us, we may be unable to sell to certain
retailers at all.
Customer sales are typically made on credit, with terms that vary
depending upon the customer and the nature of the product. We do not hold
collateral to secure payment, but we do have insurance to protect against any
bankruptcy, insolvency, or liquidation of our customers. This insurance,
however, contains a significant deductible as well as a co-payment
obligation, and the policy does not cover all instances of customer non-
payment. In addition, we maintain a reserve for uncollectible receivables
that we believe to be adequate, but it may not be sufficient in every
circumstance. Thus, a payment default by a significant customer could have a
material negative effect on our business, operating results and financial
condition.
We are also exposed to the risk of product returns from retailers and
other wholesale purchasers. Although we provide reserves for returns that we
believe are adequate, and although limits are placed on certain product
returns, we may be forced to accept substantial product returns to maintain
our relationships with retailers and our access to distribution channels.
Product returns that exceed our reserves could have a material negative
effect on our business, operating results and financial condition.
Our business may be negatively affected if we are unable to anticipate and
respond timely and effectively to rapidly changing technology and industry
standards.
The consumer software industry is undergoing rapid changes, including
evolving industry standards, frequent new platform introductions and changes
in consumer requirements and preferences. The introduction of new
technologies, including new console systems such as Sega's Dreamcast and
Sony's PlayStation 2, new technologies that support multi-player games, and
new media formats such as on-line delivery and digital video disks, could
cause our previously released products to become obsolete or unmarketable.
The development cycle for products using new technology may be significantly
longer than our current development cycle for products using existing
technology and may require us to invest resources in products that may not
become profitable. We cannot assure that our future mix of products will keep
pace with technological changes or satisfy evolving consumer preferences. We
also cannot assure that we will be successful in developing and marketing
products for any future operating system or format. Failure to develop and
introduce new products and product enhancements in a timely fashion could
result in significant product returns and inventory obsolescence, which in
turn could have a material negative effect on our business, operating results
and financial condition.
We have substantial indebtedness that exposes us to certain risks.
As of June 30, 1999, we had outstanding $60,000,000 of 6 3/4% convertible
subordinated notes due 2005. In June 1999, we obtained a term loan and
revolving credit facility composed of a $25 million term loan and up to $100
million of revolving credit loans and letters of credit. The proceeds of the
term loan, which is due in June 2002, were used to complete the acquisition
of Expert Software, Inc. and to pay expenses associated with the acquisition
and the financing transaction. The revolving credit facility will be used
for working capital and general corporate purposes.
The term loan and the revolving credit facility are secured by a pledge
of substantially all of the assets of Activision and of its US subsidiaries.
The credit facility contains various financial and other promises with which
we and our subsidiaries must comply. If we were to default under the terms
of the credit facility, either as a result of a failure to pay principal or
interest when due or as a result of a breach of a financial or other promise,
the lenders could stop providing funds and letters of credit to us.
Additionally, the lenders could declare an event of default and foreclose on
the collateral. This could also result in an acceleration of the convertible
subordinated notes. A default by Activision under the revolving credit and
term loan facility would materially negatively effect Activision's business
and could result in Activision declaring bankruptcy.
Our operations and those of our key suppliers and service providers may be
subject to year 2000 issues which could affect our business or that of our
suppliers.
The year 2000 date issue arises from the fact that many computer systems
and applications currently use only two digits to identify the year in date
fields. As a result, date-sensitive systems may recognize the year 2000 as
1900, or may not recognize the year 2000 at all. This could result in either
miscalculations or system failures. If our internal computer and embedded
systems do not correctly recognize date information when the year changes to
2000, there could be an adverse impact on our operations. We have begun to
prepare our internal computer and embedded systems for the year 2000 and are
currently implementing changes to ease potential year 2000 problems. As a
result, we have purchased software programs that have been independently
developed by third parties which will test year 2000 compliance for the
majority of our systems.
All of our products currently being shipped have been tested for year
2000 compliance and have passed these tests. In addition, all products
currently in development are being tested as part of the normal quality
assurance testing process and are scheduled to be released fully year 2000
compliant. However, if the computer system on which a consumer uses our
products is not year 2000 compliant, it could affect the consumer's ability
to use some of our products.
Our contingency plans include adding network operating systems to back-
up our current network server and developing back-up plans for
telecommunications with external offices and customers. In addition, we have
a staffing plan to handle orders manually should there be a failure of
electronic data interchange connections with its customers and suppliers.
Management believes that the items mentioned above constitute our greatest
risk of exposure and that the plans developed by us will be adequate for
handling these items.
We have also taken steps to verify that the products and services of our
critical suppliers are year 2000 compliant. In response to a questionnaire
we distributed, all of our critical suppliers and trading partners have
confirmed our expectation that they will continue to be able to provide
services and products through the change to 2000.
We have completed year 2000 compliance testing on substantially all of
our critical systems. Any corresponding changes are anticipated to be
completed by August 1999. The testing and modification process has cost us
less than $100,000 thus far. We do not expect the total cost of our year
2000 compliance plan to exceed $200,000. The total estimated cost does not
include potential costs related to any systems used by our customers, any
third party claims, or the costs of the replacement of internal software and
hardware which occurs in the normal course of our business. The overall cost
of our year 2000 compliance plan is a minor portion of our total information
technology budget and is not expected to materially delay the implementation
of any other unrelated projects that we have planned to undertake. In some
instances, the installation schedule of new software and hardware in the
normal course of business has been accelerated to afford a solution to year
2000 compatibility issues. The total cost estimate for our year 2000
compliance plan may change as the projects progress.
The above-mentioned year 2000 issues should not have a material negative
impact on our financial condition or results of operations. However, the
specific extent to which we may be affected by such matters is not certain.
In addition, we make no assurances that the failure by a supplier or another
third party to ensure year 2000 compatibility would not have a material
negative effect on us.
The impact of the EURO conversion on our operations will not be significant.
On January 1, 1999, eleven of the fifteen member countries of the
European Union adopted the "euro" as their common currency. From January 1,
1999 through January 1, 2002 the participating countries will be able to use
their sovereign currencies or the euro. Beginning January 1, 2002, the
participating countries will issue new euro-denominated bills and coins for
use in cash transactions. No later than July 1, 2002, the participating
countries will withdraw all bills and coins denominated in the sovereign
currencies, so that the sovereign currencies will no longer be legal tender
for any transactions, making conversion to the euro complete.
After conducting an internal analysis, we have determined that the
impact of the conversion will not be significant to our overall operations.
Our wholly owned subsidiaries operating in participating countries
represented 24.1% and 22.1% of Activision's consolidated net revenues for the
fiscal years ended March 31, 1999 and 1998, respectively.
We may not be able to protect our proprietary rights and may infringe on the
proprietary rights of others.
We hold copyrights on the products, manuals, advertising and other
materials we own. We also maintain trademark rights in the Activision name,
the Activision logo, and the names of the products we own. We regard our
software as proprietary and rely primarily on a combination of trademark,
copyright and trade secret laws, employee and third-party nondisclosure
agreements, and other methods to protect our proprietary rights. Unauthorized
copying commonly occurs within the software industry. If a significant
amount of unauthorized copying of our products were to occur, our business,
operating results and financial condition could be negatively effected.
There can be no assurance that third parties will not assert
infringement claims against us in the future with respect to current or
future products. As is common in the industry, we sometimes receive notices
from third parties claiming infringement of intellectual property rights of
such parties. We investigate these claims and respond as we deem
appropriate. Any claims or litigation, with or without merit, could be
costly and could result in a diversion of management's attention, which could
have a material negative effect on our business, operating results and
financial condition. Negative determinations in such claims or litigation
could also have a material negative effect on our business, operating results
and financial condition.
Software piracy (the unauthorized use of its products) exists and will
likely remain a persistent problem. Activision is unable to determine the
extent to which piracy of its software products exists. In selling our
products, we rely primarily on "shrink wrap" licenses that are not signed by
licensees and, therefore, may be unenforceable under the laws of certain
jurisdictions. Further, we enter into transactions in countries where
intellectual property laws are not well developed or are poorly enforced.
Thus, legal protections of our intellectual property rights may be
ineffective in those countries.
Our failure to retain or failure to hire qualified key personnel could have a
material negative effect on our business.
Our success depends to a significant extent on the performance and
continued service of our senior management and certain key employees.
Competition for highly skilled employees with technical, management,
marketing, sales, product development and other specialized training is
intense, and we may not be successful in attracting and retaining such
personnel. As a result, we may experience increased costs to attract and
retain skilled employees. There is no guarantee that key employees will not
leave Activision or compete against Activision, despite the fact such
employees have entered into term employment agreements. Our failure to
attract or retain qualified employees could have a material negative effect
on our business, operating results and financial condition.
Our significant international operations subjects us to certain economic and
political risks which could materially negatively effect our business.
In the past three years our international revenues have accounted for a
significant portion of our total revenues. International sales and licenses
accounted for 65% of our total revenues in the fiscal year 1997, 71% of our
total revenues in the fiscal year 1998, and 66% of our total revenues in the
fiscal year 1999. We expect that international revenues will continue to
account for a significant portion of our total revenues in the future. We
intend to continue to expand our direct and indirect sales, marketing and
localization activities worldwide. This expansion will require significant
management time and attention and financial resources in order to develop
adequate international sales and support channels. However, in addition to
the possibility that we may not be able to maintain or increase international
market demand for our products, international sales are subject to certain
inherent risks, including:
- - the impact of possible recessionary environments in economies outside
the United States;
- - the costs of transferring and localizing products for foreign markets;
- - longer receivable collection periods and greater difficulty in
collecting accounts receivable;
- - unexpected changes in regulatory requirements, tariffs and other
barriers;
- - difficulties and costs of staffing and managing foreign operations; and
- - political and economic instability.
There can be no assurance that we will be able to sustain or increase
our international revenues or that the foregoing factors will not have a
material negative effect on our future international revenues and,
consequently, on our business, operating results and financial condition.
Presently, we do not engage in currency hedging activities. Although exposure
to currency fluctuations to date has been insignificant, fluctuations in
currency exchange rates may in the future have a material negative impact on
revenues from international sales and licensing and thus our business,
operating results and financial condition.
Our products may contain errors or defects, which may result in a loss of or
delay in market acceptance of the products.
The type of products we offer frequently contains errors or defects.
Despite extensive product testing, in the past we have released products with
defects and have discovered errors in our products after their introduction.
In particular, personal computer ("PC") hardware is characterized by a wide
variety of non-standard peripherals (such as sound cards and graphics cards)
and configurations that make pre-release testing for programming or
compatibility errors very difficult and time-consuming. Despite testing by
Activision, errors could nonetheless be found in new products after
commercial shipments begin. This may result in a loss of or delay in market
acceptance, which could have a material negative effect on our business,
operating results and financial condition.
We may be at a competitive disadvantage if we are unable to successfully
integrate our recently acquired subsidiaries or find suitable additional
acquisition opportunities.
We are currently integrating the operations of our recently acquired
subsidiaries, Head Games, CD Contact, Expert Software, Inc. ("Expert") and
Elsinore Multimedia, Inc. with our previously existing operations. This
process, as well as the process of managing these significant new operations,
requires substantial management time and effort and diverts the attention of
management from other matters. In addition, there is a risk of loss of key
employees, customers and vendors of the recently acquired operations as well
as existing operations as this process is implemented. There is a risk we may
not be successful in integrating these operations.
Consistent with our strategy of enhancing our distribution and product
development capabilities, we intend to continue to pursue acquisitions of
companies, properties and other assets that can be purchased or licensed on
acceptable terms and which we believe can be operated or exploited
profitably. Some of these transactions could be material in size and scope.
While we will continually be searching for additional acquisition
opportunities, we may not be successful in identifying suitable acquisitions.
We may not be able to consummate potential acquisitions or an acquisition may
not enhance our business or be maximizing to our earnings. As the interactive
entertainment and leisure businesses continue to consolidate, we face
significant competition in seeking and consummating acquisition
opportunities. Future acquisitions could also divert substantial management
time and result in short term reductions in earnings or special transaction
or other charges. In addition, future acquisitions may be difficult to
integrate with existing operations or assets.
In the future, we may issue additional shares of common stock in
connection with one or more acquisitions, which may dilute our existing
shareholders. Our shareholders may not have the opportunity to review, vote,
or evaluate future acquisitions.
Failure to maintain our distribution relationships with certain key vendors
could have a material negative effect on us.
Our CD Contact subsidiary performs software distribution services in
Belgium, The Netherlands and Luxembourg. Our CentreSoft subsidiary performs
software distribution services in the United Kingdom and, via export, in
other European territories. Each of CD Contact and CentreSoft performs these
services for a variety of entertainment software publishers, many of whom are
competitors of ours. These services are generally performed under limited
term contracts, some of which provide for cancellation in the event of a
change of control. Despite our reasonable efforts to retain these vendors,
we may not be successful in this regard. The cancellation or non-renewal of
one or more of these contracts could have a material negative effect on our
business, operating results and financial condition. Three of CD Contact's
vendors accounted for 50%, 11% and 11%, respectively, of CD Contact's net
revenues in fiscal year 1999. The net revenues from these vendors represent
6%, 1% and 1%, respectively, of our consolidated net revenues. Two of
CentreSoft's vendors accounted for 30% and 11%, respectively, of CentreSoft's
net revenues in fiscal year 1999. The net revenues from these vendors
represented 11% and 4%, respectively, of our consolidated net revenues. All
other vendors contributed less than 10% individually to the respective
subsidiary's net revenues.
THE COMPANY
Activision, Inc. is a leading international publisher, developer and
distributor of interactive entertainment and leisure products. The Company's
products span a wide range of product genres (including action, adventure,
strategy and simulation) and target markets (including game enthusiasts,
value buyers and children). In addition to its genre and market diversity,
Activision publishes, develops and distributes products for a variety of game
platforms, including personal computers ("PCs"), the Sony PlayStation console
system and the Nintendo 64 console system.
Activision's objective is to be a worldwide leader in the development,
publishing and distribution of quality interactive entertainment and leisure
products that deliver, at each point of the value spectrum, a highly
satisfying experience. The Company's strategy includes the following
elements:
Create and maintain a balanced and diversified portfolio of operations.
The Company has assembled a large diversified portfolio of development,
publishing and distribution operations and relationships which are
complementary and, at the same time, reduce the Company's risk of
concentration on any one developer, brand, platform, customer or market. The
Company has focused historically on the development and publishing of premium
games which provide the most sophisticated game play and entertainment
experience at the top price point. While the Company will continue to take
advantage of its expertise in this area, it has recently diversified its
business operations and product and audience mix, and plans on continuing
such diversification in the future. For example, the Company acquired
several separate companies in the last two years in order to establish the
distribution business. Additionally, the Company believes that its recent
acquisition of Expert Software Inc., along with the Company's acquisition in
June 1998 of Head Games, positions the Company as a leading publisher of
"value" products for the PC, which are characterized by less sophisticated
game play and lower price points. Further, the Company publishes and
distributes titles that run on a variety of platforms (PC, Sony PlayStation
and Nintendo 64). This diversification significantly reduces the risk of
downturn or underperformance in any of the Company's individual operations.
Create and maintain strong brands. The Company focuses its development
and publishing activities principally on titles that are, or have the
potential to become, franchise properties with sustainable consumer appeal
and brand recognition. These titles can thereby serve as the basis for
sequels, prequels, mission packs and other add-ons and related new titles
that can be released over an extended period of time. The Company believes
that the publishing and distribution of products based in large part on
franchise properties enhances revenue predictability and the probability of
high unit volume sales and operating profits. In addition, the Company has
entered into a series of strategic partnerships with the owners of
intellectual property pursuant to which the Company has acquired the rights
to publish titles based on franchises such as Star Trek, various Disney films
such as Toy Story 2, A Bug's Life and Tarzan, and Spiderman.
Focus on on-time delivery. The success of the Company's publishing
business is dependent, in significant part, on its ability to develop games
that will generate high unit volume sales that can be completed in accordance
with planned budgets and schedules. In order to increase its ability to
achieve this objective, the Company's publishing units have implemented a
formal control process for the development of the Company's products. This
process includes three key elements: (i) in-depth reviews are conducted for
each project at five intervals during the development process by a team that
includes several of the Company's highest ranking operating managers; (ii)
each project is led by a small team which is heavily incentivized to deliver
a high-quality product, on-schedule and within budqet; and (iii) day-to-day
progress is monitored by a dedicated process manager in order to insure that
issues, if any, are promptly identified and addressed in a timely manner.
Leverage infrastructure and organization. The Company is continually
striving to reduce its risk and increase its operating leverage and
efficiency through the variabilization of expenses. For example, the Company
has significantly increased its product making capabilities by allocating a
larger portion of its product development investments to experienced
independent development companies. These companies generally are small firms
focused on a particular product type, run and owned by individuals willing to
take development risk by accepting payments based on the completion of fixed
performance milestones in exchange for a royalty on the revenue stream of the
game after the Company recoups its development costs. The Company has also
broadly instituted objective-based reward programs that provide incentives to
management and staff to produce results that meet the Company's financial
objectives.
Grow through continued strategic acquisitions. The interactive
entertainment and leisure industries are consolidating, and the Company
believes that success in these industries will be driven in part by the
ability to take advantage of scale. Specifically, smaller companies are more
capital constrained, enjoy less predictability of revenues and cashflow, lack
product diversity and must spread fixed costs over a smaller revenue base.
Several industry leaders are emerging that combine the entrepreneurial and
creative spirit of the industries with professional management, the ability
to access the capital markets and the ability to maintain favorable
relationships with strategic developers, property owners, and retailers.
Through seven completed acquisitions since 1997, the Company believes that it
has successfully diversified its operations, its channels of distribution and
its library of titles and has emerged as one of the industry's leaders.
The Company's principal executive offices are located at 3100 Ocean Park
Blvd., Santa Monica, California 90405, and its telephone number is (310) 255-
2000. The Company also maintains offices in the United Kingdom, France,
Germany, Japan, Australia, Belgium, The Netherlands, Madison, Wisconsin, St.
Paul, Minnesota and Hollywood and Coral Gables, Florida. The Company's World
Wide Web home page is located at http://www.activision.com.
USE OF PROCEEDS
All net proceeds from the sale of the Activision shares of common stock
will go to the stockholders who offer and sell their shares. Accordingly,
the Company will not receive any of the proceeds from the sale of the common
stock being offered hereby for the account of the selling stockholders.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of shares of Activision common stock by the selling
stockholders as of July 26, 1999, and the number of shares of common stock
being offered by this prospectus.
Beneficial Ownership of Common Stock
Prior to the Offering Number of Shares
Name and --------------------- of Common
Address of Number of Percentage of Stock
Selling Stockholder Shares Class(1) Being Offered
- ------------------- --------- -------------- ----------------
Jill G. Mark 122,669 * 122,669
6595 SW 102nd Street
Miami, FL 33156
Robert N. Herrick 81,779 * 81,779
700 Mockingbird Lane
Plantation, FL 33324
All Selling Stockholders
as a group 204,448 * 204,448
- ---------------
* Less than 1%.
(1) Percentages are based on 23,531,091 shares of common stock that were
issued and outstanding as of July 26, 1999.
The Company entered into a share exchange agreement (the "Acquisition
Agreement"), dated as of June 29, 1999, with Jill G. Mark and Robert N.
Herrick. These individuals were the sole stockholders of Elsinore. Pursuant
to the Acquisition Agreement, these individuals transferred all of their
shares of Elsinore to the Company in exchange for 204,448 shares of the
Company's common stock.
In order to ensure that the representations, warranties and covenants
made by the former Elsinore stockholders under the Acquisition Agreement are
not breached, and in order to provide a source of indemnification to the
Company pursuant to such agreement, each of the former Elsinore stockholders
deposited in escrow pursuant to a warranty escrow agreement ten percent (10%)
of the total number of shares of Common Stock issued to such stockholder in
connection with the transaction, an aggregate of 20,445 shares of Common
Stock, to be held until the earlier of (i) June 29, 2000, (ii) the date on
which the first audited results of the combined enterprises' financial
statements is completed or (iii) the date set forth in a joint written
direction executed by the Company and the former Elsinore stockholders.
In addition, prior to the acquisition of Elsinore by Activision,
Elsinore was party to various licensing and distribution agreements with Head
Games Publishing, Inc., a wholly owned subsidiary of Activision. Other than
such contracts, and the fact that the selling stockholders are employees of
Elsinore, which became a wholly owned subsidiary of the Company in June, 1999
pursuant to the Acquisition Agreement, none of the selling stockholders has
had a material relationship with the Company within the past three years.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 55,000,000
shares of capital stock, $.000001 par value, consisting of 50,000,000 shares
of Common Stock and 5,000,000 shares of preferred stock. As of July 26,
1999, approximately 23,531,091 shares of Common Stock were outstanding.
Each outstanding share of Common Stock entitles the holder to one vote
on all matters submitted to a vote of stockholders, including the election of
directors. There is no cumulative voting in the election of directors, which
means that the holders of a majority of the outstanding shares of Common
Stock can elect all of the directors then standing for election. Subject to
preferences which may be applicable to any outstanding shares of preferred
stock, holders of Common Stock are entitled to such distributions as may be
declared from time to time by directors of the Company out of funds legally
available therefor. The Company has not paid, and has no current plans to
pay, dividends on its Common Stock. The Company intends to retain all
earnings for use in its business.
Holders of Common Stock have no conversion, redemption or preemptive
rights to subscribe to any securities of the Company. All outstanding shares
of Common Stock are fully paid and nonassessable. In the event of any
liquidation, dissolution or winding-up of the affairs of the Company, holders
of Common Stock will be entitled to share ratably in the assets of the
Company remaining after provision for payment of liabilities to creditors and
preferences applicable to outstanding shares of preferred stock.
The rights, preferences and privileges of holders of Common Stock are
subject to the rights of the holders of any outstanding shares of preferred
stock. At present, no shares of preferred stock are outstanding. As of July
26, 1999, the Company had approximately 5,000 stockholders of record,
excluding banks, brokers and depository companies that are stockholders of
record for the account of beneficial owners.
The transfer agent for the Common Stock of the Company is Continental
Stock Transfer & Trust Company, 2 Broadway, New York, New York 10004.
PLAN OF DISTRIBUTION
The Common Stock may be sold from time to time by the Selling
Stockholders, or by pledgees, donees, transferees or other successors in
interest. Such sales may be made on one or more exchanges or in the
over-the-counter market, or otherwise, at prices and at terms then prevailing
or at prices related to the then current market price, or in negotiated
transactions. The shares may be sold from time to time in one or more of the
following transactions, without limitation: (a) a block trade in which the
broker or dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction, (b) purchases by a broker or dealer as principal and resale by
such broker or dealer or for its account pursuant to the Prospectus, as
supplemented, (c) an exchange distribution in accordance with the rules of
such exchange, and (d) ordinary brokerage transactions and transactions in
which the broker solicits purchasers. In addition, any securities covered by
this Prospectus which qualify for sale pursuant to Rule 144 may be sold under
Rule 144 rather than pursuant to this Prospectus, as supplemented. From time
to time the Selling Stockholders may engage in short sales, short sales
against the box, puts and calls and other transactions in securities of the
Company or derivatives thereof, and may sell and deliver the shares in
connection therewith.
From time to time Selling Stockholders may pledge their shares pursuant
to the margin provisions of their respective customer agreements with their
respective brokers. Upon a default by a Selling Stockholder, the broker may
offer and sell the pledged shares of Common Stock from time to time as
described above.
All expenses of registration of the Common Stock (other than commissions
and discounts of underwriters, dealers or agents), estimated to be
approximately $15,800, shall be borne by the Company. As and when the
Company is required to update this Prospectus, it may incur additional
expenses in excess of this estimated amount.
LEGAL MATTERS
Certain legal matters in connection with the shares of Common Stock
offered hereby have been passed upon for the Company by Robinson Silverman
Pearce Aronsohn & Berman LLP, New York, New York.
EXPERTS
The consolidated financial statements and financial statement schedule
of the Company and its subsidiaries as of March 31, 1999 and 1998 and for
each of the years in the three year period ended March 31, 1999, have been
incorporated by reference herein and in the registration statement 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.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at its offices at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the SEC located at Seven World Trade Center, New York,
New York 10048 and at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can be
obtained by mail from the Public Reference Section of the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates,
and can also be obtained electronically through the SEC's Electronic Data
Gathering, Analysis and Retrieval system at the SEC's Web site
(http://www.sec.gov). The Company's Common Stock is listed on the Nasdaq
National Market and copies of such reports and other information can also be
inspected at the offices of the Nasdaq National Market, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the SEC a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder, with
respect to the Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto, as permitted by the rules and regulations of the SEC. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement, including the
exhibits thereto and the financial statements, notes and schedules filed as a
part thereof, which may be inspected and copied at the public reference
facilities of the SEC referred to above. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the full text
of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
The Company furnishes stockholders with annual reports containing
audited financial statements and with proxy material for its annual meetings
complying with the proxy requirements of the Exchange Act.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents which have been filed by the Company with the
SEC are incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended March
31, 1999, which contains audited consolidated balance sheets of the Company
and subsidiaries as of March 31, 1999 and 1998, and related consolidated
statements of operations, changes in shareholders' equity and cash flows for
each of the years in the three year period ended March 31, 1999.
2. Proxy Statement dated August 16, 1999, as filed with the SEC on July
29, 1999.
3. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1999.
4. The Company's Current Reports on Form 8-K filed with the Commission
on April 29, 1999 and July 12, 1999.
5. Description of the Company's Common Stock contained in the Company's
Registration Statement on Form S-3, Registration No. 333-46425.
6. All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since March 31, 1999.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in and to
be a part of this Prospectus from the date of filing of such reports and
documents.
Any statement contained herein or in a document which is incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement in any subsequently filed
document that is also deemed to be incorporated by reference herein modifies
or supersedes such prior statement.
This Prospectus incorporates documents by reference which are not
presented or delivered herewith. These documents are available upon written
or oral request from the Company, without charge, to each person to whom a
copy of this Prospectus has been delivered, other than exhibits to those
documents. Requests should be directed to the Office of the Secretary,
Activision, Inc., 3100 Ocean Park Boulevard, Santa Monica, California 90405
(telephone (310) 255-2000).
=============================================================================
No dealer, salesman or other person has been authorized to give any
information or to make representations other than those contained in this
Prospectus, and if given or made, such information or representations must
not be relied upon as having been authorized by the Company or the Selling
Stockholders. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that the
information herein is correct as of any time subsequent to its date. This
Prospectus does not constitute an offer of solicitation by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer of solicitation is not qualified to do so
or to anyone to whom it is unlawful to make such offer or solicitation.
-------------------------------
TABLE OF CONTENTS
Page
----
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 13
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Documents Incorporated by Reference. . . . . . . . . . . . . . . . . . . . 16
-------------------------------
=============================================================================
=============================================================================
204,448 Shares
ACTIVISION, INC.
Common Stock
------------------
PROSPECTUS
------------------
September 16, 1999
=============================================================================
