SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 28, 2003
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 0-16986
ACCLAIM ENTERTAINMENT, INC.
(Exact name of the registrant as specified in its charter)
| Delaware | 38-2698904 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) | |
| One Acclaim Plaza, Glen Cove, New York | 11542 | |
| (Address of principal executive offices) | (Zip Code) | |
(516) 656-5000
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
| Title of Each Class |
Name of Each Exchange on Which Registered | |
| Common Stock, par value $0.02 per share |
Nasdaq Small-Cap Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
As of February 5, 2004, 113,403,810 shares of common stock of the registrant were issued and outstanding.
ACCLAIM ENTERTAINMENT, INC.
FORM 10-Q QUARTERLY REPORT
| Page No. | ||||
| 1 | ||||
| Item 1. |
Consolidated financial statements (Unaudited, except where otherwise noted) |
1 | ||
| Consolidated Balance Sheets—December 28, 2003 and March 31, 2003 (Audited) |
1 | |||
| 2 | ||||
| 3 | ||||
| Consolidated Statements of Cash Flows—Nine months ended December 28, 2003 and December 1, 2002 |
5 | |||
| 7 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
30 | ||
| Item 3. |
63 | |||
| Item 4. |
63 | |||
| 65 | ||||
| Item 1. |
65 | |||
| Item 6. |
68 | |||
Item 1. Consolidated financial statements
ACCLAIM ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
| December 28, 2003 |
March 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets |
||||||||
| Cash and cash equivalents |
$ | 5,833 | $ | 4,495 | ||||
| Accounts receivable, net |
17,072 | 24,303 | ||||||
| Other receivables |
386 | 3,360 | ||||||
| Inventories |
5,226 | 7,711 | ||||||
| Prepaid expenses and other current assets |
6,149 | 7,076 | ||||||
| Capitalized software development costs, net |
125 | 6,944 | ||||||
| Building held for sale |
6,186 | 5,424 | ||||||
| Total Current Assets |
40,977 | 59,313 | ||||||
| Fixed assets, net |
16,103 | 19,731 | ||||||
| Other assets |
1,101 | 893 | ||||||
| Total Assets |
$ | 58,181 | $ | 79,937 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities |
||||||||
| Short-term borrowings |
$ | 20,690 | $ | 30,799 | ||||
| Trade accounts payable |
31,459 | 28,477 | ||||||
| Accrued expenses |
33,180 | 28,751 | ||||||
| Accrued selling expenses |
18,941 | 26,649 | ||||||
| Accrued stock-based expenses |
3,465 | — | ||||||
| Accrued restructuring costs |
929 | 2,299 | ||||||
| Mortgage payable |
— | 4,600 | ||||||
| Income taxes payable |
1,216 | 1,234 | ||||||
| Total Current Liabilities |
109,880 | 122,809 | ||||||
| Long-Term Liabilities |
||||||||
| Obligations under capital leases |
375 | 632 | ||||||
| Convertible notes |
9,164 | — | ||||||
| Other long-term liabilities |
2,654 | 2,654 | ||||||
| Total Liabilities |
122,073 | 126,095 | ||||||
| Stockholders’ Deficit |
||||||||
| Preferred stock, $0.01 par value; 1,000 shares authorized; none issued |
— | — | ||||||
| Common stock, $0.02 par value; 200,000 shares authorized; 109,404 and 96,621 shares issued and outstanding |
2,188 | 1,932 | ||||||
| Additional paid-in capital |
327,272 | 313,616 | ||||||
| Accumulated deficit |
(390,959 | ) | (359,911 | ) | ||||
| Accumulated other comprehensive loss |
(2,393 | ) | (1,795 | ) | ||||
| Total Stockholders’ Deficit |
(63,892 | ) | (46,158 | ) | ||||
| Total Liabilities and Stockholders’ Deficit |
$ | 58,181 | $ | 79,937 | ||||
See notes to consolidated financial statements.
1
ACCLAIM ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| December 28, 2003 |
December 1, 2002 |
December 28, 2003 |
December 1, 2002 |
|||||||||||||
| Net revenue |
$ | 39,273 | $ | 63,142 | $ | 113,688 | $ | 180,060 | ||||||||
| Cost of revenue |
19,943 | 32,701 | 60,320 | 92,614 | ||||||||||||
| Gross profit |
19,330 | 30,441 | 53,368 | 87,446 | ||||||||||||
| Operating expenses |
||||||||||||||||
| Marketing and selling |
9,089 | 20,420 | 21,908 | 52,045 | ||||||||||||
| General and administrative |
9,087 | 10,365 | 26,503 | 32,258 | ||||||||||||
| Research and development |
8,777 | 11,699 | 27,492 | 36,994 | ||||||||||||
| Stock-based compensation |
(305 | ) | — | 945 | — | |||||||||||
| Restructuring |
22 | — | 227 | — | ||||||||||||
| Total operating expenses |
26,670 | 42,484 | 77,075 | 121,297 | ||||||||||||
| Loss from operations |
(7,340 | ) | (12,043 | ) | (23,707 | ) | (33,851 | ) | ||||||||
| Other income (expense) |
||||||||||||||||
| Interest expense, net |
(1,481 | ) | (1,449 | ) | (3,516 | ) | (3,592 | ) | ||||||||
| Non-cash financing expense |
703 | (193 | ) | (3,085 | ) | (579 | ) | |||||||||
| Other expense |
(876 | ) | (314 | ) | (740 | ) | (1,423 | ) | ||||||||
| Total other expense |
(1,654 | ) | (1,956 | ) | (7,341 | ) | (5,594 | ) | ||||||||
| Loss before income taxes |
(8,994 | ) | (13,999 | ) | (31,048 | ) | (39,445 | ) | ||||||||
| Income tax (benefit) provision |
— | (128 | ) | — | 121 | |||||||||||
| Net loss |
$ | (8,994 | ) | $ | (13,871 | ) | $ | (31,048 | ) | $ | (39,566 | ) | ||||
| Net loss per share data: |
||||||||||||||||
| Basic |
$ | (0.08 | ) | $ | (0.15 | ) | $ | (0.30 | ) | $ | (0.43 | ) | ||||
| Diluted |
$ | (0.08 | ) | $ | (0.15 | ) | $ | (0.30 | ) | $ | (0.43 | ) | ||||
See notes to consolidated financial statements.
2
ACCLAIM ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands)
| Preferred Stock Issued |
Common Stock Issued |
Additional Paid-In |
Notes Receivable |
|||||||||||||||
| Shares |
Amount |
|||||||||||||||||
| Balance at August 31, 2002 |
$ | — | 92,471 | $ | 1,849 | $ | 318,405 | $ | (6,947 | ) | ||||||||
| Net loss |
— | — | — | — | — | |||||||||||||
| Exercise of stock options and warrants |
— | 10 | — | 11 | — | |||||||||||||
| Issuance of common stock under employee stock purchase plan |
— | 140 | 3 | 118 | — | |||||||||||||
| Issuance of common stock to executive officers for providing collateral for credit agreement |
— | 4,000 | 80 | 1,480 | — | |||||||||||||
| Warrants issued to executive officers for providing collateral for credit agreement |
— | — | — | 305 | — | |||||||||||||
| Warrant modification charges in connection with common stock issuance to executive officers |
— | — | — | 165 | — | |||||||||||||
| Stock option compensation |
— | — | — | 79 | — | |||||||||||||
| Foreign currency translation gain |
— | — | — | — | — | |||||||||||||
| Balance at March 31, 2003 |
— | 96,621 | 1,932 | 320,563 | (6,947 | ) | ||||||||||||
| Net loss |
— | — | — | — | — | |||||||||||||
| Exercise of stock options and warrants |
— | 245 | 5 | 106 | ||||||||||||||