Atari Inc – ‘10-Q’ for 3/31/97

As of:  Thursday, 5/15/97   ·   For:  3/31/97   ·   Accession #:  950123-97-4388   ·   File #:  0-27338

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Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Gt Interactive Software Corp. Quarterly Report        15     60K 
 2: EX-27       Financial Data Schedule                                1      6K 

10-Q   —   Gt Interactive Software Corp. Quarterly Report
Document Table of Contents

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------

 FORM 10-Q
QUARTERLY REPORT
 PURSUANT TO SECTION 13 OR 15 (d) OF THE
 SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1997        Commission File No. 0-27338

----------

 GT INTERACTIVE SOFTWARE CORP.
(Exact name of registrant as specified in its charter)

     DELAWARE                                             13-3689915
(State or other jurisdiction of                              (I.R.S. employer   
 incorporation or organization)                              identification no.)

16 EAST 40TH STREET, NEW YORK, NY                                 10016     
(Address of principal executive offices)                         (Zip code)     

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 726-6500

----------

         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 May 1, 1997, there were 66,398,458 shares of the registrant's Common
Stock outstanding.                                                              

Page    of    
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 GT INTERACTIVE SOFTWARE CORP.
1997 QUARTERLY REPORT ON FORM 10-Q
 TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION                                                  

                                                        [Enlarge/Download Table]

                                                                                           Page
                                                                                               
Item 1.   Financial Statements (Unaudited):                                                    

          Consolidated Balance Sheets as of December 31, 1996  and March 31, 1997            3 

          Consolidated Statements of Income for the three months ended March 31, 1996 and      
          1997                                                                               4 

          Consolidated Statements of Cash Flows for the three months ended March 31, 1996      
          and 1997                                                                           5 

          Notes to Consolidated Financial Statements                                         6 

Item 2.   Management's Discussion and Analysis of Financial Condition and Results of           
          Operations                                                                         8 

PART II - OTHER INFORMATION                                                                    

Item 6.   Exhibits and Reports on Form 8-K                                                  13 

Signatures                                                                                  14 

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PART I.  FINANCIAL INFORMATION                                                  
Item 1.  Financial Statements (Unaudited)                                       

GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS

                                                                [Download Table]

                                                          December 31,    March 31, 
                                                             1996           1997    
                                                          -----------     --------  
                                                           (audited)     (unaudited)
                                                                (in thousands)      
                                                                                    
ASSETS                                                                              
Current assets:                                                                     
  Cash and cash equivalents                                 $ 71,867       $ 16,640 
  Short-term investments                                       4,717            105 
  Receivables, net                                            95,941        115,254 
  Inventories, net                                            60,457         67,475 
  Royalty advances                                            69,202         70,344 
  Deferred income taxes                                       15,283         20,678 
  Prepaid expenses and other current assets                    6,510          9,503 
                                                            --------       -------- 
     Total current assets                                    323,977        299,999 
Property and equipment, net                                   10,082         11,290 
Goodwill, net                                                 21,003         21,924 
Investments                                                    9,829          9,759 
Other assets                                                   2,220          1,635 
                                                            --------       -------- 
     Total assets                                           $367,111       $344,607 
                                                            ========       ======== 

LIABILITIES AND STOCKHOLDERS' EQUITY                                                
Current liabilities:                                                                
  Accounts payable                                          $107,842       $ 87,832 
  Accrued liabilities                                         52,812         48,461 
  Royalties payable                                           33,378         29,934 
  Deferred income                                              4,783          6,963 
  Income taxes payable                                         9,575         13,658 
  Current portion of long-term liabilities                     1,334             87 
  Due to related party                                           601          1,028 
                                                            --------       -------- 
     Total current liabilities                               210,325        187,963 
Other long-term liabilities                                    4,648          1,158 
                                                            --------       -------- 
     Total liabilities                                       214,973        189,121 
                                                            --------       -------- 

Commitments and contingencies                                                       

Stockholders' equity:                                                               
  Common stock, $.01 par, 150,000,000 shares authorized,                            
     66,398,458 shares issued and outstanding                    664            664 
  Cumulative translation adjustment                              813           (223)
  Additional paid-in capital                                 118,220        118,221 
  Retained earnings                                           32,441         36,824 
                                                            --------       -------- 
     Total stockholders' equity                              152,138        155,486 
                                                            --------       -------- 

     Total liabilities and stockholders' equity             $367,111       $344,607 
                                                            ========       ======== 

The accompanying footnotes are an integral part of these financial statements.
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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION
 (UNAUDITED)

                                                                [Download Table]

                                                    For The Three Months   
                                                       Ended March 31,     
                                                   ----------------------  
                                                      1996          1997   
                                                    -------       -------  
                                                  (in thousands, except per
                                                         share data)       
                                                                           
Net sales                                           $70,757       $93,381  
Cost of goods sold                                   41,071        57,883  
Selling and distribution expenses                    15,132        17,265  
General and administrative expenses                   7,070        10,391  
Merger and other costs                                   --           185  
Amortization of goodwill                                273           347  
                                                    -------       -------  
     Operating income                                 7,211         7,310  
Interest and other income, net                        1,368           247  
                                                    -------       -------  
     Income before income taxes                       8,579         7,557  
Provision for income taxes                            4,186         3,103  
                                                    -------       -------  
     Net income                                     $ 4,393       $ 4,454  
                                                    =======       =======  

Net income per share                                $  0.07       $  0.07  

Weighted average number of shares outstanding        66,145        66,395  

The accompanying footnotes are an integral part of these financial statements.
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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                                                                           Three Months Ended    
                                                                                March 31,        
                                                                         ----------------------- 
                                                                          1996            1997   
                                                                         -------        -------- 
                                                                              (in thousands)     
                                                                                                 
OPERATING ACTIVITIES:                                                                            
  Net income                                                             $ 4,393        $  4,454 
  Adjustments to reconcile net income to net cash provided by operating                          
     activities:                                                                                 
       Depreciation and amortization                                         648             955 
       Deferred income taxes                                              (3,021)         (5,395)
       Deferred income                                                     1,584          (1,672)
       Changes in operating assets and liabilities:                                              
          Receivables, net                                                 9,392         (18,189)
          Inventories, net                                                 2,153          (6,528)
          Royalty advances                                                (5,429)         (1,142)
          Due to related party, net                                       (1,359)            428 
          Prepaid expenses and other current assets                       (1,442)         (2,798)
          Accounts payable                                               (13,909)        (21,696)
          Accrued liabilities                                              3,955          (4,351)
          Royalties payable                                                 (626)         (3,444)
          Income taxes payable                                             5,715           4,051 
          Other                                                           (1,054)            (92)
                                                                         -------        -------- 
             Net cash provided by (used in) operating activities           1,000         (55,419)
                                                                         -------        -------- 

INVESTING ACTIVITIES:                                                                            
  Purchase of One Stop                                                        --            (846)
  Purchase of property and equipment                                      (1,381)         (1,659)
  Purchases of investments                                                    --              70 
  Purchases (sales) of short-term investments, net                          (140)          4,612 
                                                                         -------        -------- 
             Net cash provided by (used in) investing activities          (1,521)          2,177 
                                                                         -------        -------- 

FINANCING ACTIVITIES:                                                                            
  Proceeds from exercise of stock options                                     --               1 
  Long-term liabilities                                                     (240)           (950)
                                                                         -------        -------- 
             Net cash used in financing activities                          (240)           (949)
                                                                         -------        -------- 

Effect of exchange rates on cash and cash equivalents                        (88)         (1,036)
Net decrease in cash and cash equivalents                                   (849)        (55,227)
Cash and cash equivalents - beginning of year                             84,069          71,867 
                                                                         -------        -------- 
Cash and cash equivalents - end of period                                $83,220        $ 16,640 
                                                                         =======        ======== 

The accompanying footnotes are an integral part of these financial statements.
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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)

NOTE -1 - SIGNIFICANT ACCOUNTING POLICIES                                       

Basis of Presentation                                                           

  The accompanying interim consolidated financial statements of GT
Interactive Software Corp. and Subsidiaries (the "Company") are unaudited but in
the opinion of management reflect all adjustments, consisting of normal         
recurring accruals, necessary for a fair presentation of the results for the    
interim period in accordance with instructions for Form 10-Q. Accordingly, they 
do not include all information and footnotes required by generally accepted     
accounting principles for complete financial statements. These interim          
consolidated financial statements should be read in conjunction with the        
consolidated financial statements and footnotes thereto included in the         
Company's Annual Report on Form 10-K for the year ended December 31, 1996.      

Net Income Per Share                                                            

         Net income per share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding during the    
period. Common equivalent shares are shares issuable upon the exercise of stock 
options and warrants, net of shares assumed to have been purchased using the    
treasury stock method.                                                          

NOTE 2 - ACQUISITIONS                                                           

      On June 24, 1996, the Company acquired all of the outstanding common
stock of WizardWorks Group, Inc. ("WizardWorks"), a developer and publisher of  
consumer software, in exchange for 2,350,000 shares of the Company's common     
stock.                                                                          

      On June 28, 1996, the Company acquired all of the outstanding common
stock of Candel Inc., the parent company of FormGen Corp. ("FormGen"), a        
publisher of multimedia consumer software, in exchange for 1,032,777 shares of  
the Company's common stock.                                                     

     On July 9, 1996, the Company acquired all of the outstanding common
stock of Humongous Entertainment, Inc., ("Humongous") a premier developer and   
publisher of quality children's software, in exchange for 3,458,375 shares of   
the Company's common stock.                                                     

WizardWorks, FormGen and Humongous (collectively the "Acquired
Companies") have been accounted for as pooling of interests and accordingly are 
included in the Company's Consolidated Financial Statements as if the           
acquisitions had occurred as of the beginning of the periods presented.         

In November 1996, the Company acquired the business of Warner 
Interactive Europe for approximately $6.3 million in cash, including acquisition
costs. Warner's financial results have been included in the Company's           
Consolidated Financial Statements on a purchase basis for the period since the  
acquisition.                                                                    

  On January 13, 1997, the Company acquired all of the outstanding
capital stock of Premier Promotion Limited, the parent company of One Stop      
Direct Limited, a leading European value software publisher, for approximately  
$.8 million in cash. One Stop's financial results have been included in the     
Company's Consolidated Financial Statements on a purchase basis for the period  
since the acquisition.                                                          

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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 (UNAUDITED)

NOTE 3 - INVENTORIES, NET                                                       

Inventories consist of the following:                         

                                                                [Download Table]

                      December 31,      March 31,
                         1996             1997   
                      ------------      ---------
                            (in thousands)       
                                                 
Finished goods          $58,464          $64,571 
Raw materials             1,993            2,904 
                        -------          ------- 
                        $60,457          $67,475 
                        =======          ======= 

NOTE 4 - COMMITMENTS AND CONTINGENCIES                                          

  On January 21, 1997, the Company entered into a Revolving Credit
Agreement (the "Credit Agreement") with banks expiring on December 31, 1998. The
Credit Agreement provides for a maximum of $40,000,000 to be used for borrowings
and letters of credit. The borrowings under this agreement bear interest at     
either the banks reference rate (which is generally equivalent to the published 
prime rate) or the LIBOR rate plus 1 1/4%. The Company pays a commitment fee of 
1/4% based on the unused portion of the line. The Credit Agreement requires     
maintenance of certain financial ratios and net income levels.                  

 The Company had outstanding letters of credit at March 31, 1997
amounting to approximately $2,505,000.                                          

NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION                                     

                                                                [Download Table]

                                    For the Three Months
                                       Ended March 31,  
                                    --------------------
                                     1996          1997 
                                    ------        ------
                                       (in thousands)   
                                                        
Cash paid for income taxes          $2,239        $4,192
Cash paid for interest                  40            36

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Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations                                                   

 The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements which   
involve risks and uncertainties. The Company's actual results or future events  
could differ materially from those anticipated in these forward-looking         
statements as a result of certain factors, including, but not limited to,       
world-wide business and industry conditions, adoption of new hardware systems,  
product delays, software development requirements and their impact on product   
launches, company customer relations and other risks and factors detailed, from 
time to time, in the Company's SEC filings including, but not limited to, the   
factors described on pages 10-15 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996.                                        

OVERVIEW                                                                        

The Company creates, publishes, merchandises and distributes  
interactive entertainment, edutainment and value-priced consumer software for a 
variety of platforms on a world-wide basis. Since it commenced operations in    
February 1993, the Company has experienced rapid revenue growth and its product 
and customer mix have changed substantially.                                    

    An important element of the Company's financial performance is its
product mix, which has varied over time as the Company has built its business.  
The Company's product mix has been composed of two broad product categories:    
published software and third-party software. Because each of these product      
categories has different associated costs, the Company's margins have depended  
and will depend, in part, on the percentage of net sales attributable to each   
category. In addition, the Company's margins may vary significantly from quarter
to quarter depending on the timing of its new published product releases. To the
extent that mass merchants require greater proportions of third party software  
products, some of which may yield lower margins, the Company's operating results
may be impacted accordingly.                                                    

        On June 24, 1996, the Company acquired all of the outstanding stock of
WizardWorks, a leading developer and publisher of value-priced interactive      
entertainment, edutainment and productivity software, in exchange for 2,350,000 
newly issued shares of the Company's Common Stock. WizardWorks develops,        
publishes and distributes consumer software for Windows, DOS and Macintosh      
formats.                                                                        

        On June 28, 1996, the Company acquired all of the outstanding stock of
Candel Inc., the parent company of FormGen, a leading publisher of interactive  
PC shareware and software in exchange for 1,032,777 newly issued shares of the  
Company's Common Stock.                                                         

     On July 9, 1996, the Company acquired all of the outstanding common
stock of Humongous, a premier developer and publisher of quality children's     
software, in exchange for 3,458,375 newly issued shares of the Company's Common 
Stock.                                                                          

WizardWorks, FormGen and Humongous (collectively the "Acquired
Companies"), have each been accounted for as a pooling of interests.            
Accordingly, the Company's historical Financial Statements have been restated to
include the results of the Acquired Companies.                                  

In November 1996, the Company acquired the business of Warner 
Interactive Europe for approximately $6.3 million in cash, including acquisition
costs. Warner's financial results have been included in the Company's           
Consolidated Financial Statements on a purchase basis for the period since the  
acquisition.                                                                    

  On January 13, 1997, the Company acquired all of the outstanding
capital stock of Premier Promotion Limited, the parent company of One Stop      
Direct Limited ("One Stop"), a leading European value software distributor and  
publisher, for approximately $.8 million in cash. One Stop's financial results  
have been included in the Company's Consolidated Financial Statements on a      
purchase basis for the period since the acquisition.                            

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      Sales are recorded net of expected future returns which historically
have been experienced and reserved for at approximately 30% of gross sales.     

     The consumer software industry is seasonal. Net sales are typically
highest during the fourth calendar quarter. This seasonality is primarily a     
result of the increased demand for consumer software during the year-end holiday
buying season.                                                                  

RESULTS OF OPERATIONS                                                           

  The following table sets forth certain consolidated statement of
operations data as a percentage of net sales for the periods indicated:         

                                                                [Download Table]

                                     FOR THE THREE MONTHS ENDED
                                             MARCH 31,         
                                     --------------------------
                                       1996              1997  
                                       -----             ----  
                                                               
Net sales                              100.0%            100.0%
Cost of goods sold                      58.0              62.0 
Selling and distribution expenses       21.4              18.5 
General and administrative expenses     10.0              11.1 
Merger and other costs                    --               0.2 
Amortization of goodwill                 0.4               0.4 
                                       -----             ----- 
Operating income                        10.2               7.8 
Interest  and other income, net          1.9                .3 
                                       -----             ----- 
Income before income taxes              12.1               8.1 
Provision for income taxes               5.9               3.3 
                                       -----             ----- 
Net income                               6.2%              4.8%
                                       =====             ===== 

THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996 

        Net sales for the three months ended March 31, 1997 ("1997") increased
approximately $22.6 million or 32% as compared to the three months ended March  
31, 1996 ("1996"). This growth in net sales was primarily attributable to an    
increase in sales from its existing mass merchant shelf space and an increase in
the number of mass merchant stores supplied and serviced by the Company.        
Additionally, the introduction of newly published titles such as Doom and Hexen 
for the Sega Saturn and Tigershark for the Sony PlayStation, continuing strong  
sales of Duke Nukem 3D, Quake, Doom and Doom-related products and increased     
royalty income contributed to the growth in net sales.                          

       Cost of goods sold primarily includes costs of purchased products and
royalties paid to software developers. Cost of goods sold for 1997 increased    
approximately $16.8 million or 41% as compared to 1996. Cost of goods sold as a 
percentage of net sales increased to 62.0% in 1997 compared to 58.0% in 1996.   
This increase was primarily due to a change in product mix toward third party   
products, which increased to approximately 54% of net sales in 1997 compared to 
approximately 44% in 1996.                                                      

        Selling and distribution expenses primarily include shipping expenses,
sales and distribution labor expenses, advertising and promotion expenses and   
distribution facilities costs. These expenses increased approximately $2.1      
million or 14% during 1997 compared to 1996. This change is primarily due to an 
increase in the variable costs associated with the sales growth. Selling and    
distribution expenses as a percentage of net sales decreased to 18.5% for 1997  
compared to 21.4% for 1996 due to the Company realizing greater economies of    
scale.                                                                          

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 General and administrative expenses primarily include personnel
expenses, facilities costs, professional expenses and other overhead charges.   
These expenses for 1997 increased approximately $3.3 million or 47% as compared 
to 1996. The increase was due primarily to additional personnel required to     
support the expansion of the Company's publishing operations. General and       
administrative expenses as a percentage of net sales increased to 11.1% from    
10.0%.                                                                          

       Merger costs consist of legal, accounting and other professional fees
incurred by the Company to complete the acquisitions of Warner Interactive and  
One Stop and for fees associated with registering the stock associated with the 
Acquired Companies.                                                             

        Operating income for 1997 increased from approximately $7.2 million to
approximately $7.3 million, while operating margins decreased from 10.2% to     
7.8%. Excluding merger costs, operating income and operating margins would have 
been approximately $7.5 million and 8.0% for 1997.                              

         Interest and other income, net decreased approximately $1.1 million for
1997 as compared to 1996. This is primarily attributable to a decrease in       
short-term investments and cash balances.                                       

         Net income increased from $4.4 million in 1996 to $4.5 million in 1997,
while net income as a percentage of net sales decreased from 6.2% to 4.8%.      
Excluding merger costs, net income and net income as a percentage of net sales  
would have been $4.6 million and 5.0% for 1997.                                 

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LIQUIDITY AND CAPITAL RESOURCES                                                 

         Resources used to finance significant expenditures for the three months
ended March 31, 1997 and 1996 are reflected in the following table:             

                                                                [Download Table]

                                                  THREE MONTHS ENDED MARCH 31,
                                                  ----------------------------
                                                     1996         1997        
                                                     -----       ------       
                                                        (in millions)         
                                                                              
Resources used:                                                               
  Payables and accrued liabilities                   $(4.9)      $(25.4)      
  Receivables, net                                      --        (18.2)      
  Inventories, net                                      --         (6.5)      
  Purchase of One Stop                                  --          (.8)      
  Purchase of property and equipment                  (1.4)        (1.7)      
  Royalty advances                                    (5.4)        (1.1)      
  Other, net                                          (5.1)        (6.0)      
                                                     -----       ------       
                                                     (16.8)       (59.7)      
                                                     -----       ------       
Financed by:                                                                  
  Net income                                           4.4          4.5       
  Receivables, net                                     9.4           --       
  Inventories, net                                     2.1           --       
                                                     -----       ------       
                                                      15.9          4.5       
                                                     -----       ------       
    Cash and cash equivalents balance decrease       $ (.9)      $(55.2)      
                                                     =====       ======       

    As of March 31, 1997, the Company's principal sources of liquidity
included cash, cash equivalents and short-term investments of approximately     
$16.7 million. Cash and cash equivalents decreased for the three months ended   
March 31, 1997 by approximately $55.2 million. The primary source of cash during
1997 was net income of $4.5 million. These internally generated funds were used 
to fund payables and accrued liabilities (which includes accounts payable,      
royalties payable, income taxes payable and accrued liabilities) of $25.4       
million, receivables of $18.2 million and inventory of $6.5 million. The        
decrease in payables is primarily attributable to the payment for inventory sold
during the fourth quarter of 1996, which was partially offset by normal         
replenishment and purchases for the current quarter sales. Inventory and        
receivables balances increased, reflecting higher sales at the end of the       
quarter and their replenishment. Additionally, inventory increased due to       
normally higher seasonal returns. Royalty advances of $70.3 million as of March 
31, 1997 represent advances to approximately 135 entities for various products  
expected to be delivered throughout the next several years. Such advances are   
amortized to cost of goods sold on a per unit basis as licensed products are    
sold in accordance with the individual agreements. Working capital at March 31, 
1997 was $112.0 million compared to $113.7 at December 31, 1996.                

  On January 21, 1997, the Company entered into a revolving credit
agreement (the "Credit Agreement") with banks expiring on December 31, 1998. The
Credit Agreement provides for a maximum of $40 million for borrowings and       
letters of credit. The borrowings under the Credit Agreement bear interest at   
either the banks' reference rate (which is generally equivalent to the published
prime rate) or the LIBOR rate plus 1 1/4%. The Company pays a commitment fee of 
1/4% based on the unused portion of the line. The Credit Agreement requires     
maintenance of certain financial ratios and net income levels.                  

     As of March 31, 1997, the Company had outstanding letters of credit
amounting to approximately $2.5 million.                                        

    The Company expects continued volatility in the use of cash due to
varying seasonable, receivable payment cycles and quarterly working capital     
needs to finance its growing publishing and distribution business.              

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The Company believes that existing cash, cash equivalents and 
short-term investments, together with cash expected to be generated from        
operations and cash available through the Credit Agreement, will be sufficient  
to fund the Company's anticipated operations for the next twelve months.        

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PART II.  OTHER  INFORMATION                                                    

Item 6.  Exhibits and Reports on Form 8-K                                       

(a)   Exhibits                                                                  

The following exhibits are filed as part of this report:      

Exhibit No.      Description                                                    

3.1              Amended and Restated Certificate of Incorporation (incorporated
           herein by reference to the exhibit with the corresponding
             number filed as part of the Company's Annual Report on Form
    10-K for the fiscal year ended December 31, 1995).

3.2              Amended and Restated By-laws (incorporated herein by reference 
               to the exhibit with the corresponding number filed as part of
           the Company's Registration Statement on Form S-1 filed on
                October 18, 1996, and all amendments thereto (Registration No.
33-14441)).                                   

10.1             Credit Agreement, dated as of January 21, 1997, by and among   
                 the Registrant, the banks parties thereto and Republic National
                 Bank of New York, as Agent (incorporated herein by reference to
            Exhibit number 10.31 filed as part of the Company's Annual
            Report on Form 10-K for the fiscal year ended December 31,
1996).                                        

27.1             Financial Data Schedule.                                       

------------                                                                    

(b)   Reports on Form 8-K                                                       

   A report on Form 8-K, dated February 10, 1997, was filed with the
Securities and Exchange Commission (the "Commission") on February 11, 1997      
announcing the results of operations for the quarter and the year ended December
31, 1996.                                                                       

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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 thereunto duly authorized.                                          

                   GT INTERACTIVE SOFTWARE CORP.

                  By:   /s/  RONALD CHAIMOWITZ
                                    ----------------------------------
                   Ronald Chaimowitz
                             Chief Executive Officer and
          Director
                     Date:  May 15, 1997

              By:   /s/  ANDREW GREGOR
                                    ----------------------------------
               Andrew Gregor
                                    Chief Financial Officer and Senior
                             Vice President, Finance and
                Administration
                     Date:  May 15, 1997

Page 14 

10-Q
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Exhibits

Exhibit No.      Description                                           Page     

3.1              Amended and Restated Certificate of                            
Incorporation (incorporated herein by         
reference to the exhibit with the             
corresponding number filed as part of the     
Company's Annual Report on Form 10-K for      
the fiscal year ended December 31, 1995).     

3.2              Amended and Restated By-laws (incorporated                     
herein by reference to the exhibit with the   
corresponding number filed as part of the     
Company's Registration Statement on Form      
S-1 filed on October 18, 1996, and all        
amendments thereto (Registration No.          
33-14441)).                                   

10.1             Credit Agreement, dated as of January 21,                      
1997, by and among the Registrant, the        
banks parties thereto and Republic National   
Bank of New York, as Agent (incorporated      
herein by reference to Exhibit number 10.31   
filed as part of the Company's Annual         
Report on Form 10-K for the fiscal year       
ended December 31, 1996).                     

27.1             Financial Data Schedule.                                       

------------                                                                    

Page 15 

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-Q’ Filing		Date		First		Last			Other Filings
		12/31/98		7		11			10-Q
Filed on:		5/15/97		14
		5/1/97		1					POS AM
For Period End:		3/31/97		1		11			10-K
		2/11/97		13					424B3,  8-K
		2/10/97		13					8-K
		1/21/97		7		15
		1/13/97		6		8
		12/31/96		2		15			10-K
		10/18/96		13		15			S-1
		7/9/96		6		8			8-K
		6/28/96		6		8
		6/24/96		6		8			8-K
		3/31/96		2		11
		12/31/95		13		15
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