Shares of video game maker Acclaim Entertainment are down 25% to $0.25 each this afternoon after the company reported earnings for the fourth quarter and fiscal year ended March 31. The real item of interest, however, wasn't yet another shoddy earnings report, but the sticky situation surrounding the company's finances.
The series of actions is a little complicated. But basically, after a waiver and amendment agreement, and a subsequent extension, Acclaim must pay down its debt owed to GMAC Commercial Finance by Aug. 4. Unable to do so with the paltry $1.15 million in cash it had as of March 31, Acclaim entered a letter of intent on May 4 with a different lender for a new $30 million credit facility, with which it would be able to repay GMAC.
However, that deal has not yet been completed. And without such a deal, Acclaim would be forced into bankruptcy, or worse, giving up the game altogether.
Moreover, Acclaim revealed that it is already in default on the $11.9 million in 16% convertible notes it sold just last fall. Sometime after March 31, $5.5 million of those had been converted into shares, but get this: Due to a delay in registering those shares, Acclaim owes interest on those notes, which of course it cannot pay without the new credit facility. ...more at Yahoo News