ACCLAIM ENTERTAINMENT INC
8-K, 1996-08-01
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                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549

                                   FORM 8-K

                                CURRENT REPORT


                    Pursuant to Section 13 or 15(d) of the

                        Securities Exchange Act of 1934


        Date of Report (Date of earliest event reported) July 25, 1996


                          ACCLAIM ENTERTAINMENT, INC.
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)

                                   Delaware
                ----------------------------------------------
                (State or other jurisdiction of incorporation)

         0-16986                                               38-2698904 
- ------------------------                                 ----------------------
(Commission File Number)                                     (IRS Employer
                                                         Identification Number)

          One Acclaim Plaza, Glen Cove, New York                  11542
          ----------------------------------------             ----------
          (Address of Principal Executive Offices)             (Zip Code)


       Registrant's telephone number, including area code (516) 656-5000

===============================================================================


<PAGE>


ITEM 4.  CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS


         On July 24, 1996, at the recommendation of its Audit Committee (the
"Audit Committee"), the Board of Directors of Acclaim Entertainment, Inc. (the
"Registrant" or the "Company") adopted a resolution (i) not to retain Grant
Thornton LLP ("GT") as the Registrant's independent auditors for the fiscal year
ending August 31, 1996 and (ii) to engage KPMG Peat Marwick LLP ("KPMG") as the
Registrant's independent auditors for the fiscal year ending August 31, 1996. GT
was so advised on July 25, 1996. A copy of the Registrant's press release in
respect of, among other things, such matters is filed as Exhibit 1 hereto.

         The reports of GT on the Registrant's consolidated financial
statements as of and for the two years ended August 31, 1995 and 1994 did not
contain an adverse opinion or a disclaimer of opinion nor were they qualified
or modified as to uncertainty, audit scope or accounting principles, except
that the report of GT on the Registrant's financial statements for the fiscal
year ended August 31, 1995 contains a modification as to uncertainty relating
to the eventual outcome of certain class action lawsuits in which the
Registrant and certain of its officers and directors have been named as
defendants, as described in Note 19 to the Registrant's consolidated financial
statements for such fiscal year.

         During the Registrant's two most recent fiscal years ended August 31,
1995 and in the interim period from September 1, 1995 through July 24, 1996,
there were no disagreements with GT on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of GT, would have
caused them to make reference thereto in their report(s) on the Registrant's
financial statements for such fiscal year(s) or for such interim period,
except:

                  (a)  A matter, which was resolved to GT's satisfaction, in
         respect of the timing of the recognition of certain revenues from
         nonrefundable, recoupable exclusivity fees, which had been included in
         revenues for the fourth quarter of fiscal 1995 in the October 1995
         announcement by the Registrant of its financial results for fiscal
         1995. The Audit Committee and/or senior management of the Registrant,
         on the one hand, and GT, on the other hand, had several discussions in
         respect of such matter. The matter was resolved by the Registrant
         revising such announced financial results to exclude such revenues
         from its financial results for fiscal 1995.

                  (b)  A matter, which was resolved to GT's satisfaction,
         in respect of the balance sheet presentation of a $19
         million loan from Midland Bank PLC.  As of August 31, 1995,
         the Registrant did not meet a financial ratio covenant in
         the loan agreement relating to such loan.  The Registrant's


<PAGE>

         senior management and GT discussed this matter, which was resolved by
         the Registrant reclassifying the $19 million loan from long term debt
         to current liabilities. This matter has been resolved with the bank
         and the loan is currently reflected as a long term debt.

         In addition, GT proposed several audit adjustments that were not
recorded by the Registrant because they were considered by the Registrant and
GT to be immaterial to the Registrant's consolidated financial statements for
fiscal 1995 taken as a whole.

         On July 31, 1996, the Registrant received a leter from GT, a copy of
which is filed as Exhibit 2 hereto, in which GT claimed for the first time that,
in connection with their review of the Registrant's Form S-3, certain matters
"may have resulted in additional disagreements and/or reportable events had
[they] completed their review procedures."

         During the Registrant's two most recent fiscal years ended August 31,
1995 and the interim period from September 1, 1995 through July 24, 1996, there
were no "reportable events" as defined in Item 304(a)(1)(v) of Regulation S-K
("Regulation S-K") promulgated under the Securities Exchange Act of 1934,
except as follows:

                  By letter dated April 15, 1996, GT advised the Registrant
         that they had noted certain internal control structure matters that
         related to significant deficiencies in the design or operation of the
         Registrant's internal control structure, relating to the quality and
         depth of financial management, analysis of significant estimates, lack
         of internal audit function and accounting for capitalized software 
         costs, that, in their judgment, could adversely affect the 
         Registrant's ability to record, process, summarize and report 
         financial data consistent with the assertions of management in the 
         Registrant's financial statements.

         In May 1996, KPMG was retained to conduct an internal controls review
audit to identify and assist the Registrant to implement any additional 
necessary steps to strengthen its internal controls.

         A member of the Audit Committee and/or senior management has discussed
the subject matter of each item described above with GT, and the Registrant has
authorized GT to respond fully to all inquiries of KPMG concerning the subject
matter thereof.

         On July 26, 1996, the Registrant provided GT with a copy of the
disclosures made herein (other than the Company's response to GT's letter as set
forth in the following paragraph). The Registrant requested that GT furnish it
with a letter addressed to the Securities and Exchange Commission (the
"Commission") stating whether it agreed with the statements made by the
Registrant in response to Item 304(a) of Regulation S-K and, if not, stating the
respects in which it did not agree. A copy of GT's letter, dated July 31, 1996,
is filed as Exhibit 2 hereto.

          In response to GT's letter, the Company notes the following:

          (a)  Notwithstanding the fact that GT was not retained to perform
               formal reviews of the Company's first, second and third quarter
               financial statements, GT provided the Company with extensive
               advice and consultation regarding the appropriate presentation of
               such quarterly financial statements and also advised on the
               accounting theories and methodologies applied; and


          (b)  In connection with GT's review of the Company's quarterly
               financial statements for each of the first three quarters of
               fiscal 1996 in respect of the Company's Registration Statement on
               Form S-3, GT advised the Company on Tuesday, July 23, 1996, that
               it had completed its review procedures, that there were no
               outstanding issues for further discussion and that GT would
               release its consent in connection with the Form S-3.  In
               addition, on Tuesday, July 23, 1996, the Registrant delivered to
               GT its management representation letter, which generally
               signifies the completion of the review procedure.  The Company
               delivered to GT a copy of the Proxy Statement relating to its
               annual meeting of stockholders to be held on August 7, 1996. On
               July 24, 1996, the Company was advised by GT that, upon review of
               the Proxy  Statement, GT noted that auditors had not yet been
               retained for fiscal 1996 and accordingly, GT would not release
               its consent unless they were appointed as the Registrant's
               auditors for fiscal 1996. GT subsequently raised the matters
               discussed in GT's letter, which are disputed by the Company as
               indicated above.
         


                                       2

<PAGE>


ITEM 7.  FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
         AND EXHIBITS

      Exhibits:

         (1)      Acclaim Entertainment, Inc. press release, dated
                  July 29, 1996.

         (2)      Letter of Grant Thornton LLP with respect to certain matters
                  set forth herein.

                                       3


<PAGE>


                                  SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                           ACCLAIM ENTERTAINMENT, INC. 



                                           By  /s/ Gregory E. Fischbach
                                               -------------------------------
                                               Name:  Gregory E. Fischbach
                                               Title:  Chief Executive Officer

Date:  July 31, 1996


                                       4

<PAGE>

                                   Exhibits


         1.       Press Release, dated July 29, 1996.

         2.       Letter of Grant Thornton LLP with respect to certain matters
                  set forth herein.






<PAGE>

                                                                      Exhibit 1

                             [Acclaim Letterhead]


(BW) (ACCLAIM-ENTERTAINMENT) (AKLM) ACCLAIM ENTERTAINMENT APPOINTS J.
MARK HATTENDORF AS CHIEF FINANCIAL OFFICER; NAMES PEAT MARWICK AS
ACCOUNTING FIRM

         GLEN COVE, N.Y. -- (BUSINESS WIRE) -- July 29, 1996 -- J. Mark
Hattendorf has been named Executive Vice President and Chief Financial Officer
of Acclaim Entertainment, Inc. (NASDAQ: AKLM), one of the leading interactive
entertainment corporations in the world. Hattendorf will replace Anthony
Williams who has been appointed to the new post of Executive Vice President,
Mergers and Acquisitions for Acclaim.

         The Company also announced the appointment of KPMG Peat Marwick LLP, a
global, 'big six' accounting firm, as its independent auditors for the fiscal
year ending August 31, 1996. They replace Grant Thornton LLP. The company said
it intends to file a Form 8K which will disclose two material disagreements,
since resolved, with Grant Thornton regarding the audit of its fiscal 1995
results. The decision to change accountants was recommended by the Company's
Audit Committee and approved by its Board of Directors.

         Hattendorf will oversee all of Acclaim's financial, accounting,
shareholder relations and strategic financial planning functions. Williams will
direct the company's continued diversification efforts and expansion of its
merger and acquisition activities.

         "We are excited to welcome Mark to Acclaim. His extensive financial
background in a variety of industries, especially entertainment, will play an
integral role in broadening and strengthening both Acclaim's management team
and its presence in the global marketplace," said Gregory Fischbach, Chairman
and Chief Executive Officer of Acclaim. "We are also pleased to announce that
KPMG Peat Marwick will be Acclaim's new accounting firm. Their extensive
background in entertainment accounting and their industry resources will
contribute to Acclaim's future success. Separately, we welcome Tony to his new
position. His eight-year tenure with Acclaim makes him ideally suited to this
increasingly important role."

         In his 25-year career, Hattendorf has held various senior-level posts
with such organizations as Peat Marwick Mitchell & Co., Twentieth Century Fox
Firm Corp. and Prodigy Services. As Vice President, Chief Financial Officer of
NY-based Prodigy, Hattendorf managed the financial operations for one of the
world's largest, on-line services companies.

         Hattendorf is a certified CPA and holds a bachelor of science in
Accounting, as well as a master's degree in Business Administration from
Loyola/Marymount University in Los Angeles. He currently resides in New York
City.

         Acclaim Entertainment, Inc. is a leading worldwide publisher of

software for Nintendo, Sega, Sony, personal computer and CD-ROM hardware
systems; and comic books under several imprints. Acclaim also develops
coin-operated arcade and ticket redemption games, and operates blue screen and
motion capture studios, as well as A.D.I., a global


<PAGE>


sales and distribution company for products from a variety of entertainment
software publishers, including Domark, Interplay, Marvel, Pulse Entertainment
and Take 2. Acclaim, which also entered into a joint venture with
Tele-Communications, Inc. for electronically distributed interactive
entertainment, is publicly traded on the NASDAQ National Market System under
the symbol AKLM.

                      CONTACT: Acclaim Entertainment, Inc.
                         Jayson Bernstein, 516/656-5000



<PAGE>
                                                        Exhibit 2

                  Grant Thornton LLP letterhead



July 31, 1996




Securities and Exchange Commission
Washington, D.C.  20549


Re:  Acclaim Entertainment, Inc.
     File No. 0-16986


Dear Sir or Madam:

We have read Item 4 of the Form 8-K of Acclaim Entertainment,
Inc.  We believe it should be supplemented and, in part, amended
to reflect the following:

With regard to the interim period from September 1, 1995 through
July 24, 1996, we were not engaged to perform timely reviews of
the fiscal 1996 quarterly consolidated financial statements of
the Registrant.  On July 17, 1996, however, we were engaged to
perform a review of the quarterly consolidated financial
statements of the Registrant for each of the first three quarters
of the fiscal year ending August 31, 1996 in respect of the
Registrant's filing on Form S-3 on behalf of certain selling
stockholders.  On July 25, 1996, the Registrant orally advised us
of our termination as their independent accountants.  In
connection with such review, certain matters, which were still
pending at the time of our termination, may have resulted in
additional disagreements and/or reportable events had we
completed our procedures.  These matters included the following:


     o    the recognition and/or disclosure of a settlement offer
          pertaining to the Lazer-Tron class action litigations.

     o    the recoverability assessment pertaining to excess of
          costs over net assets acquired attributable to Acclaim
          Comics, Inc.

     o    the findings of the "internal controls audit" being
          conducted by KPMG Peat Marwick.


With regard to reportable events, we had issued our Internal

Control Structure/Reportable Conditions letter dated April 15,
1996 (an initial draft of which was provided to the Registrant on
January 25, 1996) summarizing reportable conditions and
recommendations which specifically addressed the Registrant's
quality and depth of financial management, analysis of
significant estimates, lack of internal audit function and
accounting for capitalized software costs.  Further, the
reportable conditions discussed therein are those that we had
noted as of December 8, 1995 in conjunction with our audit of the
Registrant's consolidated financial statements as of and for the
year ended August 31, 1995; we have not updated our procedures
regarding such matters since that date.  We have not discussed
with the Audit Committee the subject matter of our Internal
Control Structure/Reportable Conditions letter, despite our
requests to the Registrant to meet with the Audit Committee for
that purpose.

<PAGE>
Securities and Exchange Commission                   July 31, 1996
Re: Acclaim Entertainment, Inc.                           Page Two

With regard to the subject matter of the disagreements set forth
in Item 4 which are contained in more detail in our Report to the
Audit Committee dated April 15, 1996 (an initial draft of which
was provided to the Registrant on January 18, 1996), please be
advised that we had a telephonic discussion on December 4, 1995
with the Audit Committee addressing only disagreements that had
occurred through that date.

In connection with the Registrant's filing on Form S-3 referred
to above, we requested the Proxy Statement for the upcoming
Annual Shareholders' meeting which would be incorporated by
reference in the Form S-3, thereby forming a part of the
registration statement.  Professional standards require that we
read such information.  We were informed by the Registrant as
recently as July 23, 1996 that the Proxy Statement was not
available for our review.  On July 24, 1996, through EDGAR, we
independently obtained a copy of such requested Proxy Statement
and learned that the Registrant had filed such Proxy Statement
with the Securities and Exchange Commission on July 18, 1996.  We
viewed this as a restriction placed by the Registrant on
information requested by us during the conduct of our procedures.

With regard to the Registrant's retention of KPMG Peat Marwick to
conduct an "internal controls audit," we did not discuss with the
Registrant's Audit Committee and/or senior management.  However,
as described in our Report to the Audit Committee dated April 15,
1996 (an initial part of which was provided to the Registrant on
January 18, 1996), we were informed by management that the
Registrant's legal counsel retained KPMG Peat Marwick to assist
in responding to the Securities and Exchange Commission's
Division of Enforcement.  Further, we have no knowledge as to the
specific matters on which KPMG Peat Marwick was consulted.


                        *   *   *   *   *

With regard to the following statements by the Registrant in
Item 4 of Form 8-K dated July 24, 1996, we have no basis for
agreeing or disagreeing with:

     o    the first sentence of Item 4 with respect to the July
          24, 1996 Board of Directors resolution.

     o    the last sentence to the first paragraph of Item 4 with
          respect to the Registrant's press release and any
          information contained therein.

     o    the last sentence to the second subparagraph (b) of the
          third paragraph of Item 4 with respect to the matter
          referred to in such paragraph being resolved with the
          bank.
     o    the sixth paragraph of Item 4 with respect to the May
          1996 retention of KPMG to conduct an "internal controls
          audit."


Very truly yours,

     /s/

GRANT THORNTON LLP



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