More Bad News For Acclaim: Closure Charge, Cash Crunch

Yesterday Acclaim filed a quarterly report with the U.S. Securities and Exchange Commission, which revealed that it will take a $4.5 million charge for job cuts as it works with its primary lender to renegotiate its credit terms.
The report cited the December 4 closure of Acclaim's development studios in Salt Lake City, Utah, which consolidated its domestic internal product development at its Austin, Texas studio. That closure affected 79 employees, and the $4.5 million charge for shutting down the studio will be recorded in fiscal Q2 2003 (the current quarter). That charge, coupled with the company's slow sales and bloated operating expenses, are proving to be a dangerous mix for Acclaim. The company revealed that its own internal auditor expressed concern over Acclaim's ability to continue operations with its current cash flow, given that the company had $10.1 million in cash as of December 1, but had a working capital deficit of $18.5 million. The independent auditor questioned Acclaim's ability to continue as a "going concern" due to the current revenue shortfall. Compounding the financial problems is investor pessimism, which has sent the company's stock to the lowest level in over two years -- 60 cents per share. At that level it fails to meet Nasdaq's minimum listing requirements.

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