<PAGE>
As filed with the Securities and Exchange Commission on March 3, 2000
Registration No. 333-72503
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
AMENDMENT NO. 2
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 incorporation or (IRS Employer
organization) Identification No.)
---------------------------------
One Acclaim Plaza
Glen Cove, New York 11542
(516) 656-5000
(Address and telephone number of registrant's principal executive offices)
---------------------------------
Gregory E. Fischbach
Chief Executive Officer
Acclaim Entertainment, Inc.
One Acclaim Plaza
Glen Cove, New York 11542
(516) 656-5000
(Name, address and telephone number of agent for service)
--------------------------------------------------
Copy to:
Eric M. Lerner, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
Telephone: (212) 940-8800
---------------------------------
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box./X/
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering./ /
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of each class Proposed maximum Proposed maximum
of security to be Amount to be aggregate price aggregate Amount of
registered registered per unit offering price registration fee(3)
<S> <C> <C> <C> <C>
Common Stock, par
value $0.02 per
share .............. 988,259 (1) (2) (2) $ 1,030
</TABLE>
(1) Of the 988,259 shares of common stock, 688,259 shares are
issuable upon the exercise of warrants and 300,000 shares are to be offered
from time to time by a selling stockholder based upon prevailing market
prices.
(2) With respect to 688,259 shares of common stock, the proposed maximum
aggregate price per unit is estimated pursuant to Rule 457(o) under the
Securities Act of 1933, solely for the purpose of determining the
registration fee, based on the exercise price per share ($ 3.61) for the
shares underlying the warrants determined in accordance with the Stipulation
and Agreement of Compromise and Settlement, dated February 25, 1998, between
the registrant and the participants in such settlement. With respect to the
300,000 shares of common stock offered by the selling stockholder, 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 Stock Market
National Market System on February 28, 2000.
[front page continued]
<PAGE>
(3) Such amount was previously 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.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 3, 2000
PROSPECTUS
--------------------------------
ACCLAIM ENTERTAINMENT, INC.
988,259 SHARES OF COMMON STOCK
Acclaim is offering and selling This prospectus also covers the
688,259 shares of its common resale of 300,000 shares of
stock. These shares are issuable Acclaim's common stock by the
upon the exercise of outstanding selling stockholder named in this
common stock purchase warrants. See prospectus. Acclaim will not
"Issuance of Warrants; receive any proceeds from the sale
Determination of Exercise Price." of any of the 300,000 shares by the
selling stockholder. See "Selling
Stockholder" and "Plan of
Distribution."
The warrants are exercisable until
March 16, 2003, unless extended.
Each warrant entitles the holder to
purchase one share of common stock
from Acclaim at an exercise price of
$ 3.61 per share. Any proceeds from
the exercise of the warrants will be
added to Acclaim's working capital.
See "Risk Factors" beginning on page 3 for a discussion of investment
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 Stock Market National Market
System under the symbol "AKLM." On March 1, 2000, the last reported sale
price of the common stock was $5.281 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.
March __, 2000
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
TABLE OF CONTENTS
Page Number
Risk Factors............................................... 3
Information About Acclaim.................................. 10
Use of Proceeds............................................ 14
Issuance of Warrants; Determination of Exercise Price...... 14
Selling Stockholder........................................ 14
Plan of Distribution....................................... 14
Legal Proceedings.......................................... 15
Legal Matters.............................................. 16
Experts.................................................... 16
Forward-Looking Statements................................. 16
Where You Can Find More Information........................ 17
-------------------------
<PAGE>
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:
Revenues Are Dependent on Timely Introduction of New Titles
The life cycle of a new title generally ranges from less than three
months to upwards of 12 months, with the majority of sales occurring in the
first 30 to 120 days after release. Therefore, Acclaim is constantly required to
introduce new titles in order to generate revenues and/or to replace declining
revenues from older titles. In the past and in the first quarter of fiscal 2000,
we have experienced delays in the introduction of new titles, which has had a
negative impact on our results of operations. If we do not introduce titles in
accordance with our operating plans for a period, our results of operations and
profitability in that period could be negatively affected.
The timely shipment of a new title depends on various factors
including:
o the development process;
o bug testing;
o approval by hardware licensors; and
o approval by third-party licensors.
It is likely that some of Acclaim's titles will not be released in
accordance with our operating plans. A significant delay in the introduction of
one or more new titles could negatively affect sales and have a negative impact
on our financial condition and results of operations, as was the case in the
first quarter of fiscal 2000.
We cannot assure stockholders that our new titles will be released in a
timely fashion. 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.
Industry Trends, Platform Transitions and Technological Change May Adversely
Affect Our Revenues and Profitability
The life cycle of existing game consoles and the market acceptance and
popularity of new game consoles 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 game console. If we:
o do not develop software for game consoles that achieve significant
market acceptance;
o discontinue development of software for a game console that has a
longer-than-expected life cycle;
o develop software for a game console that does not achieve a
significant installed base; or
o continue development of software for a game console that has a
shorter-than-expected life cycle,
we may experience losses from operations, as we did in fiscal 1996 and
1997, and/or lower-than expected revenues, as was the case in the first quarter
of fiscal 2000. See "Information About Acclaim
3
<PAGE>
- ---Historical Results" for a discussion of the industry transition to 32-bit and
64-bit game consoles and the related negative effects on our results of
operations in fiscal 1996 and 1997.
In addition, the cyclical nature of the video and computer games
industry requires Acclaim continually to adapt its software development efforts
to emerging hardware systems. We believe that the market for N64 and PlayStation
hardware and software has peaked. Sega has introduced a 128-bit game console,
Dreamcast, and both Sony and Nintendo have announced plans to introduce 128-bit
game consoles. No assurance can be given that these new game consoles or online
gaming will achieve commercial success similar to and/or installed bases
comparable to that of the 32-bit PlayStation or 64-bit N64, or as to the timing
of such success. In addition, we cannot guarantee that we will be successful in
developing and publishing software for new game consoles.
Our Future Success Is Dependent on Our Ability to Release "Hit" Titles
The market for software is "hits" driven. Therefore, Acclaim's future
success depends on developing, publishing and distributing "hit" titles for game
consoles with significant installed bases. If we do not publish "hit" titles in
the future, our financial condition, results of operations and profitability
could be negatively affected, as they were in fiscal 1996 and 1997. However, it
is difficult to predict consumer preferences for titles, and few titles achieve
sustained market acceptance. Sales of our then top three titles accounted for
approximately 69% of gross revenues in the first quarter of fiscal 1999 and for
approximately 52% of gross revenues in the first quarter of fiscal 2000. We
cannot assure stockholders that we will be able to publish "hit" titles in the
future.
If Product Returns, Price Protection and Concessions Exceed Allowances, We
May Incur Losses
Acclaim is not contractually obligated to accept returns except for
defective product. However, we may permit customers to return or exchange
products and may provide price protection or concessions on products unsold by
the customer. If our allowances for returns, exchanges and price protection and
concessions are exceeded, our financial condition and results of operations will
be negatively impacted, as they were in fiscal 1996.
Management makes significant estimates and assumptions regarding
allowances for estimated product returns, price protection and concessions in
preparing our financial statements. We establish allowances taking into account
the potential for product returns, price protection and concessions based
primarily on:
o market acceptance of products in retail inventories;
o level of retail inventories;
o seasonality; and
o historical return and price concession rates.
We believe that, at November 30, 1999, our allowances for future
returns, exchanges and price protection and concessions are adequate. However,
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 Game Consoles
Acclaim is substantially dependent on each hardware developer:
4
<PAGE>
o as the sole licensor of the specifications needed to develop
software for its game consoles;
o as the sole manufacturer (as to Nintendo and Sony software) of the
software developed by Acclaim for its game consoles;
o to protect the intellectual property rights to its game consoles
and technology; and
o to discourage unauthorized persons from producing software for its
game consoles.
Substantially all of our revenues have historically been derived from
sales of software for game consoles. See "Information About Acclaim --
Historical Information." In the quarters ended November 30, 1999 and 1998, we
derived:
o approximately 32% and 62%, respectively, of gross revenues from the
sale of Nintendo-compatible software;
o approximately 38% and 31%, respectively, of gross revenues from the
sale of PlayStation software; and
o approximately 23% and less than 1%, respectively, of gross revenues
from the sale of Sega-compatible software.
If Acclaim cannot obtain licenses to develop software from developers
of new game consoles or if any of our existing license agreements are
terminated, then we will not be able to release software for game consoles,
which would have a negative impact on our results of operations and
profitability. We cannot assure stockholders that, at the end of their current
terms, we will be able to obtain extensions or that we will be successful in
negotiating definitive license agreements with developers of new game consoles.
Our revenue growth may also be dependent on the hardware developers. In
the past, some of our license agreements have limited the number of titles we
could release in a given period. This limitation restricted our sales growth,
revenues and profitability. If new license agreements contain similar
limitations, our revenues and profitability will be negatively impacted.
Increased Product Development Costs May Adversely Affect Profitability
Our research and development expenses increased from $11.2 million
(approximately 11% of net revenues) for the quarter ended November 30, 1998 to
$15.1 million (approximately 15% of net revenues) for the quarter ended November
30, 1999. We anticipate that our future research and development expenses will
continue to increase due to our planned release of a higher number of titles. If
these expenses are not carefully monitored, our profitability will be negatively
impacted.
Inability to Procure Commercially Valuable Intellectual Property Licenses May
Prevent Product Releases or Result in Reduced Product Sales
Our titles often embody trademarks, tradenames, logos or copyrights
licensed to us by third parties, such as the NBA, the NFL or their respective
players' associations, and South Park. We may not be successful in acquiring or
renewing licenses to property rights with significant commercial value. The loss
of one or more of these licenses could prevent our release of a title or limit
our economic success. For example, our license for the WWF properties expired in
November 1999 and was not renewed. Sales of titles using WWF properties
aggregated 25% of gross revenues in the quarter ended November 30, 1999. In
addition, we cannot assure stockholders that these licenses will be available on
reasonable terms or at all.
5
<PAGE>
License agreements relating to these rights generally extend for a term
of two to three years. The agreements are terminable upon the occurrence of a
number of factors, including our:
o material breach of the agreement;
o failure to pay amounts due to the licensor in a timely manner; or
o bankruptcy or insolvency.
If We Do Not Compete Successfully, Demand for Our Products May be Reduced
The video, computer and portable 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 interactive entertainment software industry is based
primarily upon:
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.
Acclaim's chief competitors are the developers of game consoles, to
whom we pay royalties and/or manufacturing charges, as well as a number of
independent software publishers. 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 than us, such as Nintendo, Sega and Sony. Our competitors
also include a number of independent software publishers licensed by the
hardware developers.
As each hardware cycle matures, significant price competition and
reduced profit margins may result and we anticipate this in fiscal 2000. In
addition, competition from new technologies may reduce demand in markets in
which we have traditionally competed. If there is prolonged price competition or
reduced demand as a result of competing technologies, our operations and
liquidity could be negatively impacted.
Revenues Vary Due to the Seasonal Nature of Video and Computer Games Software
Purchases
The video, computer and portable 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. However, 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.
6
<PAGE>
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 earnings 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, our revenues and
earnings will be negatively affected in that quarter. In addition, because a
majority of the unit sales for a title typically occur in the first 30 to 120
days following its introduction, earnings may increase significantly in a period
in which a major title is introduced and may decline in the following period or
in periods in which there are no major title introductions.
Quarterly operating results also may be materially impacted by factors
including (1) the level of market acceptance or demand for titles and (2) the
level of development and/or promotion expenses for a title. Consequently, if net
revenues in a period are below expectations, our net income and financial
position in that period are likely to be affected negatively, as occurred in the
first quarter of fiscal 2000.
If Cash Flows from Operations Are Not Sufficient to Meet Our Needs, We May be
Forced to Sell Assets, Refinance Debt or Downsize Operations
We generally experienced negative cash flows from operations in fiscal
1996 and 1997. As a result, in those years, we sold assets, refinanced debt and
downsized operations. Insufficient liquidity in the future may require us to
take similar actions. We believe that our cash, cash equivalents and projected
cash flows from operations in fiscal 2000 will be sufficient to cover our
operating expenses and the current obligations we must pay in fiscal 2000. See "
- -- Industry Trends, Platform Transitions and Technological Change May Adversely
Affect Our Revenues and Profitability" above. However, we cannot assure
investors that our operating expenses and current obligations will be
significantly less than the cash flows available in fiscal 2000 or thereafter.
Ability to Service Debt and Prior Rights of Creditors May Adversely Affect
Holders of Common Stock
We believe that our cash, cash equivalents and projected cash flows
from operations in fiscal 2000 will be sufficient to make all interest and
principal payments on a timely basis. However, if our cash, cash equivalents and
projected cash flow from operations in fiscal 2000 or beyond is insufficient to
make interest and principal payments when due, we may have to restructure our
indebtedness. We cannot guarantee that we will be able to restructure or
refinance our debt on satisfactory terms. In addition, restructuring or
refinancing may not be permitted by the terms of our existing indebtedness. We
cannot assure investors that our future operating cash flows will be sufficient
to meet our debt service requirements or to repay our indebtedness at maturity.
If Acclaim violates the financial or other covenants contained in its
bank agreements or in the indenture governing its outstanding convertible notes,
it will be in default under its loan agreements and/or the indenture. If a
default occurs and is not waived by the lender, the lender could seek remedies
against us, including:
o penalty rates of interest;
o immediate repayment of the debt; and/or
o the foreclosure on any assets securing the debt.
We expect to comply with our covenants but cannot guarantee that we
will be able to do so. In addition, factors beyond our control may result in
future covenant defaults or a payment default. We may not be able to obtain
waivers of any future default. If we become insolvent, are liquidated or
7
<PAGE>
reorganized, after payment to the creditors, there may be insufficient assets
remaining for a distribution to stockholders.
In order to meet our debt service obligations, from time to time we
also depend on dividends, advances and transfers of funds from our subsidiaries.
State and foreign law regulate the payment of dividends by these subsidiaries,
which are also subject to the terms of existing bank agreements and the
indenture governing our outstanding convertible notes. A significant portion of
our assets, operations, trade payables and indebtedness is located at these
subsidiaries. The creditors of the subsidiaries would generally recover from
these assets on the obligations owed to them by the subsidiaries before any
recovery by Acclaim's creditors and before any assets are distributed to
stockholders.
Prevalence of Illegal Copying of Software Could Adversely Affect Sales
In order to protect our software and proprietary rights, we rely mainly
on a combination of:
o copyrights;
o trade secret laws;
o patent and trademark laws; and
o nondisclosure agreements.
However, existing U.S. and international laws afford only limited
protection. An unauthorized person may be able to copy our software or otherwise
obtain and use our proprietary information. If a significant amount of illegal
copying of software published or distributed by us occurs, our product sales
could be adversely impacted. Policing illegal use of software is extremely
difficult, and software piracy is expected to persist. In addition, the laws of
some foreign countries in which our software is distributed do not protect us
and our intellectual property rights to the same extent as the laws of the U.S.
We cannot guarantee that our attempts to protect our proprietary rights will be
adequate.
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. However, as the number of titles in the industry
increases, we believe that claims and lawsuits with respect to software
infringement will also increase. From time to time, third parties have asserted
that some of our titles infringed upon their intellectual property 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 we expect that international sales will 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
8
<PAGE>
different consumer preferences. International sales are also subject to
fluctuating exchange rates and may be affected by the recent adoption of a
single currency in much of Europe. These and other factors specific to
international sales may result in reduced revenues and/or increased costs.
Loss of Key Employees May Negatively Impact Our Success
Our success depends on our ability to identify, hire and retain skilled
personnel. The software industry is characterized by a high level of employee
mobility and aggressive recruiting among competitors for personnel with
technical, marketing, sales, product development and management skills. We may
not be able to attract and retain skilled personnel or may incur significant
costs in order to do so.
In particular, we are highly dependent upon the management services of
Gregory Fischbach, co-chairman of the board and chief executive officer, and
James Scoroposki, co-chairman of the board and senior executive vice president.
If we were to lose either of their services, our business would be negatively
impacted. Although we have employment agreements with Messrs. Fischbach and
Scoroposki through August 2000, they may leave or compete with us in the future.
If we are unable to attract additional qualified employees or retain the
services of key personnel, our business could be negatively impacted.
Charter and Anti-Takeover Provisions Could Negatively Affect Rights of
Holders of Common Stock
The board of directors has the authority to issue shares of preferred
stock and to determine their characteristics without stockholder approval. This
authority is limited by the indenture governing the convertible notes. If
Acclaim issues preferred stock, the rights of common stockholders may be
negatively affected by the rights of preferred stockholders. Moreover, if we
issue preferred stock, it could become more difficult for a third party to
acquire a majority of our outstanding voting stock.
Acclaim is 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.
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.
9
<PAGE>
INFORMATION ABOUT ACCLAIM
General
We develop, publish, market and distribute video and PC games software
for use with game consoles and PCs on a worldwide basis. We own and operate six
software development studios located in the U.S. and the U.K. where we develop,
or create, our own software. From time to time, we hire independent developers
to create software for us. We publish, or release to the public under our brand
names, software developed by us as well as by those third-party developers. We
distribute our software directly in North America, the U.K., Germany, France,
Spain and Australia. We also distribute software developed and published by
third parties and develop and publish (1) strategy guides relating to our
software and (2) comic book magazines.
Our operating strategy is to develop and maintain a core of "key"
brands of software titles, such as Turok, Shadow Man, South Park, NFL
Quarterback Club and All Star Baseball. We focus on developing and publishing
software for the game consoles that are popular at a given time or which we
believe will become popular. Currently, we are focused on developing software
for:
o Sony's PlayStation game console;
o Sony's PlayStation 2;
o Sega's Dreamcast game console, which has been available in Japan
since late 1998 and in the U.S. and Europe since the fall of 1999;
o Nintendo's Dolphin;
o Nintendo's portable GameBoy Color console;
o Nintendo's portable GameBoy Color Advanced;
o Nintendo's N64 game console; and
o PCs.
Our console titles are primarily sports simulation and arcade-style performance
games, and our PC titles are primarily fantasy/role-playing, real-time
simulation, adventure and sports simulation games.
Our industry is characterized by rapid technological changes mostly due
to:
o the introduction of game consoles incorporating more powerful
processors and operating systems;
o the impact of technological changes embodied in PCs;
o the development of electronic and wireless delivery systems; and
o the entry and participation of new companies in the industry.
These and other factors have resulted in successive introductions of
increasingly advanced game consoles and PCs. To date, no single game console or
PC system has achieved long-term dominance in the console and PC games market.
Therefore, we must continually anticipate hardware product cycles and adapt our
software development processes for emerging hardware. The process of developing
software is extremely complex and we expect it to become more complex and
expensive in the future as more powerful and complex hardware is introduced.
10
<PAGE>
The following table shows the gross revenues derived from our sales of
software for the indicated product categories:
<TABLE>
<CAPTION>
Three Months ended
Fiscal Year ended August 31, November 30,
---------------------------- ------------
Title 1999 1998 1997 1999 1998
- ----- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Portable software 5.0% 2.0% 2.0% 4.0% 2.0%
16-bit software -- -- 9.0% -- --
32-bit software 27.0% 30.0% 37.0% 38.0% 31.0%
64-bit software 59.0% 57.0% 33.0% 28.0% 60.0%
128-bit software -- -- -- 23.0% --
Computer games
software 8.0% 10.0% 15.0% 5.0% 5.0%
Other 1.0% 1.0% 4.0% 2.0% 2.0%
</TABLE>
- ---------------------
* The numbers in this chart do not give effect to sales credits and allowances
granted by us since we do not track credits and allowances by product category.
Accordingly, the numbers presented may vary materially from those that would be
disclosed if we were able to present this information as a percentage of net
revenues.
Our future sales growth and profitability are mostly dependent on:
o the growth of the video and PC games software market; and
o our ability to identify, develop and publish software that performs
well in the market place.
Historical Results
In 1994, Acclaim believed that software sales for Nintendo's and Sega's
16-bit game consoles would continue to decrease overall, but would remain
substantial through the 1996 holiday season. This belief was based on:
o then-available information; and
o Acclaim's historical experience with the transition from 8-bit to
16-bit consoles, the forerunners to the 32-bit and 64-bit consoles
available today.
Acclaim anticipated that, while sales of its 32-bit and PC software in fiscal
1996 would grow as compared to fiscal 1995, the majority of its revenues in
fiscal 1996 would still be derived from 16-bit software sales. However, 16-bit
software sales decreased much more rapidly than anticipated. Acclaim's holiday
1995 16-bit software sales were substantially lower than anticipated and, by
April 1996, Acclaim decided to exit the 16-bit software market. In connection
with that decision, Acclaim recorded a charge of approximately $48.9 million in
the second quarter of fiscal 1996 to adjust accounts receivable and inventories
at February 29, 1996 to their estimated net realizable values.
11
<PAGE>
Acclaim recorded a loss from operations of $274.5 million and a net
loss of $221.4 million for fiscal 1996. The net loss for the year included:
o write-offs of receivables;
o the establishment of additional receivables and inventory reserves;
o severance charges incurred in connection with a company downsizing;
o the reduction of prepaid royalties to their net realizable value;
and
o an operating loss for the year.
Acclaim recorded a loss from operations of $150.9 million and a net
loss of $159.2 million for fiscal 1997. The net loss for the year included:
o a charge for claims and litigations;
o a write-down of goodwill to reduce the carrying value of the
goodwill associated with our subsidiary, Acclaim Comics, to its
estimated undiscounted cash flows; and
o downsizing charges.
Acclaim's liquidity and profitability in fiscal 1996 were negatively
impacted by increased software development costs and increased general and
administrative expenses. Acclaim's fixed costs relating to the development of
software and its general and administrative expenses substantially increased in
this period due to the acquisitions of development studios in 1995, two of which
were completed in fiscal 1996.
Acclaim used net cash in operations of approximately $38.3 million in
fiscal 1996 and approximately $29.2 million in fiscal 1997. A tax refund of
approximately $54.0 million had a positive impact on net cash from operating
activities in fiscal 1997.
In order to provide liquidity, we took a number of actions in fiscal
1997 and 1998, including:
o significantly reducing the number of our employees;
o consolidating our development studio operations;
o selling most of the net assets of our subsidiary, Acclaim
Redemption Games;
o eliminating our coin-operated games operations; and
o completing an offering of $50 million of 10% convertible
subordinated notes.
We used approximately $16 million of the net proceeds from the notes offering to
retire a term loan from Midland Bank plc and $2 million to pay down a portion of
a mortgage loan from Fleet Bank.
Acclaim recorded earnings from operations of $24.7 million and net
earnings of $20.7 million for fiscal 1998 and recorded earnings from operations
of $40.0 million and net earnings of $36.1 million for fiscal 1999. Acclaim also
derived net cash from operations of approximately $23.3 million in fiscal 1998
and approximately $29.9 million in fiscal 1999. The improved results primarily
resulted from increased sales in the U.S. of Acclaim's 64-bit and, to a lesser
extent, 32-bit software. The increase in net cash from operating activities in
fiscal 1999 and 1998 is primarily attributable to profitable operations.
Retail sales of our 32-bit and 64- bit software during the first
quarter of fiscal 2000 generally fell short of our expectations due, in large
part, to (1) the decline of the market for N64 software and lower-than-expected
sales of some of our products and (2) delays in the introduction of new titles.
In addition, we increased our sales allowances to address the current and
anticipated effects on Acclaim of industry
12
<PAGE>
wide weakness in cartridge-based hardware and software sales and
slower-than-expected sales of certain products.
Acclaim recorded earnings from operations of $10.7 million in the three
months ended November 30, 1998 and earnings from operations of $3.1 million in
the three months ended November 30, 1999. In addition to the factors discussed
above, our earnings for the first quarter of fiscal 2000 were negatively
impacted by (1) increased operating expenses, primarily marketing expenses and
research and development expenses, and (2) a payment of $5.7 million incurred in
connection with the extension of the WWF license to November 1999. Acclaim
derived net cash from operations of approximately $11.4 million during the
quarter ended November 30, 1998 and $7.7 million during the quarter ended
November 30, 1999. The decrease in net cash from operating activities in the
first quarter of fiscal 2000 is primarily attributable to decreased earnings.
Assuming timely shipment of our titles, Acclaim's fiscal 2000 revenues are
anticipated to be lower than our fiscal 1999 revenues and net income for fiscal
2000 as a whole is anticipated to be materially lower than for fiscal 1999.
However, if we do not release and sell new titles as planned in fiscal 2000, our
net revenues would be further impacted and we could incur losses from
operations.
Our revenues have traditionally been derived from sales of software for
the then popular game consoles. Accordingly, our performance has been, and is
expected in the future to be, negatively affected by platform transitions. As
discussed above, as a result of the industry transition to 32-bit and 64-bit
game consoles which commenced in 1995, our software sales during fiscal 1996,
1997 and 1998 were significantly lower than in fiscal 1994 and 1995. Our
inability to predict accurately the timing of such transition resulted in
material losses in fiscal 1996 and 1997. The video and computer games industry
is currently experiencing another platform transition from 32-bit and 64-bit to
128-bit game consoles and related software and online gaming. We believe that
sales of new 32-bit and 64-bit hardware systems and related software have peaked
and will decrease substantially in future periods. This transition has resulted
in industry-wide sales volume and pricing weakness which impacted Acclaim's
first quarter of fiscal 2000 and is anticipated to impact Acclaim for the
balance of the fiscal year. We will release fewer titles for Nintendo's N64 in
fiscal 2000 than we did in fiscal 1999 and do not anticipate releasing new N64
titles in fiscal 2001, as we shift our resources to the development of new
technologies and titles for the next generation systems. When the transition is
complete we anticipate that the installed base of 128-bit systems combined with
the potential for online gaming will provide a larger market for our software.
However, there can be no assurance that newly-introduced (for example, Sega's
Dreamcast console) or announced (for example, Sony's PlayStation 2 and
Nintendo's Dolphin) 128-bit game consoles and online gaming will achieve
commercial success similar to that of the 32-bit PlayStation or 64-bit N64 or
the timing of such success, if achieved.
---------------------
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.
---------------------
Other Information
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.net. Information contained on our website should not be
deemed part of this prospectus.
13
<PAGE>
USE OF PROCEEDS
Any proceeds from the exercise of the warrants will be added to
Acclaim's working capital.
Acclaim will not receive any proceeds from the sale of any of the
shares of its common stock by the selling stockholder.
ISSUANCE OF WARRANTS; DETERMINATION OF EXERCISE PRICE
Acclaim issued the warrants in settlement of a class action lawsuit and
pursuant to an exemption from registration under applicable U.S. securities
laws. The warrants have an aggregate value of $2,550,000 as calculated under the
agreement settling the lawsuit. The aggregate value and the $ 3.61 per share
exercise price of the warrants were determined in arm's-length negotiations
between Acclaim and counsel for the plaintiffs in the class action lawsuit.
SELLING STOCKHOLDER
The Acclaim Entertainment Employee Benefits Trust (referred to in this
prospectus as the selling stockholder) may offer and sell up to 300,000 of the
shares covered by this prospectus. The 300,000 shares were delivered to the
selling stockholder by Acclaim for distribution to one or more of its employees.
The selling stockholder is directed by a trustee who may deliver the shares or
any portion of the proceeds thereof to one or more employees of Acclaim's United
Kingdom subsidiary. Acclaim has delivered a letter to the trustee requesting
that these shares be delivered to Rodney Cousens, an officer of Acclaim. The
trustee may choose the method of payment (whether in cash or in kind) and may
not necessarily comply with Acclaim's request. No individual employee has any
entitlement to the shares held by the trust until the trustee determines to
allocate the shares to an individual employee.
The following table sets forth information with respect to the shares
of common stock beneficially held by the selling stockholder:
Name Beneficial Shares Being Shares
Ownership Prior to Offered Beneficially Owned
an Offering After an
Offering(1)
Acclaim 300,000 300,000 -0-
Entertainment
Employee Benefits
Trust
(1)Assumes that all 300,000 shares of Acclaim's common stock held by the
selling stockholder are sold by the selling stockholder under this
prospectus. The selling stockholder may choose to dispose of none or only a
portion of the 300,000 shares held by it.
PLAN OF DISTRIBUTION
The shares of common stock issuable upon the exercise of the warrants
will be offered solely by Acclaim. No underwriters are participating in this
offering. The warrants are exercisable in accordance with the terms of a warrant
agreement between Acclaim and American Securities Transfer & Trust, Inc., the
warrant agent.
14
<PAGE>
Neither Acclaim nor the selling stockholder has employed an underwriter
for the sale of shares by the selling stockholder. The selling stockholder may
offer shares directly or through pledgees, donees, transferees or other
successors in interest at various times (1) on The NASDAQ Stock Market or in any
other securities market on which Acclaim's common stock is then listed or
traded, (2) in negotiated transactions, (3) in a combination of any of the above
transactions or (4) through any other available market transaction. The selling
stockholder 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 Stock
Market will be effected at such prices as may be obtainable and as may be
satisfactory to the selling stockholder. 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 stockholder
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 stockholder's shares may be sold include (1) 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; (2) purchases by a broker
or dealer as principal and resale by that broker or dealer for its account under
this prospectus; (3) exchange distributions and/or secondary distributions in
accordance with the rules of The NASDAQ Stock Market; (4) ordinary brokerage
transactions in which the broker solicits purchasers; and (5) privately
negotiated transactions. The selling stockholder may from time to time deliver
all or a portion of its shares of common stock held by it to cover a short sale
or sales or upon exercise of a put equivalent position. 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
stockholder in amounts to be negotiated immediately prior to the sale.
Commission expenses and brokerage fees will be paid by the selling stockholder.
The selling stockholder 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 discounts, commissions or
concessions 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 holders of the warrants, their
officers, directors, partners, employees, agents, counsel, plaintiffs' lead
counsel and each person who controls each holder of the warrants, as determined
under applicable securities laws, against liabilities relating to this offering,
including liabilities under the Securities Act. Expenses of this offering,
estimated at $25,000, will be borne in full by Acclaim.
LEGAL PROCEEDINGS
Acclaim and other participants 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. 5:99CV96-J. The plaintiffs allege that the defendants caused
injury to the plaintiffs as a result of, in the case of the Company, its
manufacture and/or supply of "violent" video games to Michael Carneal, then
fourteen. The plaintiffs further allege that the defendants were negligent in
such manufacture and/or supply thereby breaching a duty to Mr. Carneal and
others, including the plaintiffs (the parents of the deceased individuals). Mr.
Carneal killed three individuals and wounded five others during a shooting at
the Heath High School in McCracken County, Kentucky. The plaintiffs seek damages
in the amount of approximately $110,000,000. Acclaim intends to defend this
15
<PAGE>
action vigorously. Acclaim has entered into a joint defense agreement and is
sharing defense costs with certain of the other defendants.
Acclaim, Iguana Entertainment, Inc. and Gregory E. Fischbach were sued
in an action entitled Jeffery Spangenberg vs. Acclaim Entertainment, Inc.,
Iguana Entertainment, Inc., and Gregory Fischbach filed in August 1998 in the
District Court of Travis County, Texas (Cause No. 98-09418). The plaintiff
alleges that the defendants (1) breached their employment obligations to the
plaintiff, (2) breached a Texas statute covering wage payment obligations based
on their alleged failure to pay bonuses to the plaintiff, and (3) made
fraudulent misrepresentations to the plaintiff in connection with the
plaintiff's employment relationship with Acclaim, and accordingly, seeks
unspecified damages. Acclaim intends to defend this action vigorously.
The SEC issued orders in April 1996 directing a private investigation
relating to, among other things, Acclaim's October 1995 release of its earnings
estimate for fiscal 1995. Acclaim provided documents to the SEC, and the SEC
took testimony from company representatives. Acclaim was advised in January 2000
that the Staff of the SEC will recommend that the SEC authorize an enforcement
action against Acclaim but not any individuals currently associated with Acclaim
in connection with matters related to its release. Acclaim has previously
settled litigations relating to its October 1995 release, and the related
charges were recorded in fiscal 1997. No assurance can be given as to the
outcome of the SEC investigation.
Acclaim is also party to various litigations arising in the ordinary
course of business. Acclaim believes that the outcome of these litigations will
not have a material adverse effect on its liquidity or results of operations.
LEGAL MATTERS
Rosenman & Colin LLP, 575 Madison Avenue, New York, New York 10022 will
pass upon the validity of the shares offered by this prospectus for Acclaim.
EXPERTS
The consolidated financial statements and schedule of Acclaim
Entertainment, Inc. and subsidiaries as of August 31, 1999 and 1998 and for each
of the years in the three-year period ended August 31, 1999 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.
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.
16
<PAGE>
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 underlying
the warrants. 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) Annual Report on Form 10-K for the fiscal year ended August 31,
1999 filed on October 27, 1999 (File No. 0-16986);
(2) Acclaim's Quarterly Report on Form 10-Q for the period ended
November 30, 1999 filed on January 14, 2000 (File No. 0-16986); and
(3) The information regarding Acclaim's common stock contained in the
Registration Statement on Form 8-A, filed on June 8, 1988 (File No.
0-16986), as amended by the Current Report on Form 8-K, filed on
August 25, 1989 (File No. 33-9460-C), relating to the one-for-two
reverse stock split effected by Acclaim.
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.
17
<PAGE>
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.
18
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 16. Exhibits
Exhibit
Number Description
- ------ -----------
3.1 -- Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 to the Registrant's Registration Statement
on Form S-1, filed on April 21, 1989, as amended (Registration
No. 33-28274) (the "1989 S-1")
3.2 -- Amendment to the Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.2 to the 1989 S-1)
3.3 -- Amendment to the Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 4(d) to the Registrant's
Registration Statement on Form S-8, filed on May 19, 1995
(Registration No. 33-59483) (the "1995 S-8")
3.4 -- Amended and Restated By-Laws of the Registrant (incorporated by
reference to Exhibit 4(e) to the 1995 S-8)
4.1 -- Specimen form of the Registrant's common stock certificate
(incorporated by reference to Exhibit 4.1 to the Registrant's
Annual Report on Form 10-K for the year ended August 31, 1989, as
amended (File No. 0-16986)
4.2 -- Form of Warrant Agreement between the Registrant and American
Securities Transfer & Trust, Inc., as warrant agent, relating to
the Warrants (previously filed with this registration statement)
4.3 -- Form of Warrant Certificate relating to the Warrants
(previously filed with this registration statement)
5 -- Opinion of Rosenman & Colin LLP (previously filed with this
registration statement)
*23.1 -- Consent of KPMG LLP
23.3 -- Consent of Rosenman & Colin LLP (previously filed with this
registration statement)
24.1 -- Power of Attorney (previously filed with this registration
statement)
- --------------------
* Filed herewith.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Nassau and State of New York on March 3, 2000.
ACCLAIM ENTERTAINMENT, INC.
By /s/
----------------------------------
Gregory E. Fischbach
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Co-Chairman of the Board; March 3, 2000
- --------------------------- Chief Executive Officer;
Gregory E. Fischbach President; Director
/s/ Co-Chairman of the Board; March 3, 2000
- --------------------------- Senior Executive Vice
James R. Scoroposki President; Treasurer;
Secretary; Director
/s/ Chief Financial Officer and March 3, 2000
- --------------------------- Executive Vice President
William Sorenson (Chief Financial and
Accounting Officer)
/s/ Director March 3, 2000
- ---------------------------
Kenneth L. Coleman
/s/ Director March 3, 2000
- ---------------------------
Bernard J. Fischbach
/s/ Director March 3, 2000
- ---------------------------
Robert H. Groman
/s/ Director March 3, 2000
- ---------------------------
James Scibelli
/s/ Director March 3, 2000
- ---------------------------
Michael Tannen
</TABLE>
II-2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
Board of Directors of Acclaim Entertainment, Inc.:
We consent to the use in this registration statement on Amendment No. 2 to
Form S-3 (Reg. No. 333-72503) of Acclaim Entertainment, Inc. of our report
dated October 22, 1999, which report is included in Acclaim's 1999 Annual
Report on Form 10-K, and is incorporated by reference herein, and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG LLP
New York, New York
March 2, 2000
