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Atari Inc · 10-Q · For 6/30/97

Filed On 8/14/97 · SEC File 0-27338 · Accession Number 950123-97-6949

  As Of               Filer                 Filing     On/For/As Docs:Pgs              Issuer               Agent

 8/14/97  Atari Inc                         10-Q        6/30/97    5:76                                     950123

Quarterly Report · Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      16     74K 
 2: EX-10.1     Amendment to the Credit Agreement                     13     46K 
 3: EX-10.2     Employment Agreement                                  14     70K 
 4: EX-10.3     The 1997 Stock Incentive Plan                         32     76K 
 5: EX-27.1     Financial Data Schedule                                1      6K

10-Q · Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Changes in Securities Exhibits and Reports on Form 8-K Management's Discussion and Analysis of Financial Condition and Results of Operations Submission of Matters to a Vote of Security Holders
1	1st Page
8	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
13	Item 2. Changes in Securities
"	Item 4. Submission of Matters to a Vote of Security Holders
14	Item 6. Exhibits and Reports on Form 8-K

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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 June 30, 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                                     10016         
(Address of principal                                       (Zip code)  
executive offices)                                                  

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 August 1, 1997, there were 67,005,218 shares of the registrant's
Common Stock outstanding.                                                       

Page 1 of 16  

Exhibit index begins on page 16   

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

Part I - Financial Information                                                  

                                                                      Page
Item 1.   Financial Statements (Unaudited):                                     

     Consolidated Balance Sheets as of December 31, 1996             3
(audited) and June 30, 1997                                 

Consolidated Statements of Income for the three months      
     and the six months ended June 30, 1996 and 1997                 4

Consolidated Statements of Cash Flows for the six           
     months ended June 30, 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 2.   Changes in Securities                                           13    

Item 4.   Submission of Matters to a Vote of Security Holders             13    

Item 6.   Exhibits and Reports on Form 8-K                                14    

Signatures                                                                15    

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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,  June 30, 
                                                             1996        1997   
                                                         ----------- -----------
                                                          (audited)  (unaudited)
                                                              (in thousands)    
                                                                                
ASSETS                                                                          
Current assets:                                                                 
  Cash and cash equivalents                                 $ 71,867    $  4,041
  Short-term investments                                       4,717         105
  Receivables, net                                            95,941     131,072
  Inventories, net                                            60,457      62,334
  Royalty advances                                            69,202      83,591
  Deferred income taxes                                       15,283      16,325
  Prepaid expenses and other current assets                    6,510      10,045
                                                            --------    --------
     Total current assets                                    323,977     307,513
Property and equipment, net                                   10,082      16,680
Goodwill, net                                                 21,003      21,209
Investments                                                    9,829       9,867
Other assets                                                   2,220       1,494
                                                            --------    --------
     Total assets                                           $367,111    $356,763
                                                            ========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY                                            
Current liabilities:                                                            
  Accounts payable                                          $107,842    $ 83,116
  Accrued liabilities                                         52,812      41,391
  Royalties payable                                           33,378      29,320
  Deferred income                                              4,783       5,148
  Income taxes payable                                         9,575       9,319
  Current portion of long-term liabilities                     1,334          80
  Due to related party                                           601         909
                                                            --------    --------
     Total current liabilities                               210,325     169,283
Long-term debt                                                     -      23,200
Other long-term liabilities                                    4,648       1,972
                                                            --------    --------
     Total liabilities                                       214,973     194,455
                                                            --------    --------

Commitments and contingencies                                                   

Stockholders' equity:                                                           
  Common stock, $.01 par, 150,000,000 shares                                    
     authorized, 67,005,218 shares issued and                                   
     outstanding                                                 664         670
  Additional paid-in capital                                 119,033     120,470
  Retained earnings                                           32,441      41,168
                                                            --------    --------
     Total stockholders' equity                              152,138     162,308
                                                            --------    --------

     Total liabilities and stockholders' equity             $367,111    $356,763
                                                            ========    ========

The accompanying footnotes are an integral part of these financial statements.

Page 3

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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)

                                                                · Download Table

                                     For the Three Months   For The Six Months  
                                         Ended June 30,       Ended June 30,    
                                     --------------------   --------------------
                                        1996      1997        1996        1997  
                                     ---------  ---------   --------    --------
                                         (in thousands, except per share data)  
                                                                                
Net sales                              $73,526  $ 102,737   $144,283  $ 196,118 
Cost of goods sold                      41,477     60,163     82,548    118,046 
Selling and distribution expenses       18,162     21,764     33,294     39,028 
General and administrative                                                      
expenses                                 7,615     11,991     14,685     22,567 
Amortization of goodwill                   273        283        546        631 
                                       -------  ---------   --------  --------- 
     Operating income                    5,999      8,536     13,210     15,846 
Interest and other income, net             884       (625)     2,252       (378)
                                       -------  ---------   --------  --------- 
     Income before income taxes          6,883      7,911     15,462     15,468 
Provision for income taxes               3,381      3,442      7,567      6,545 
                                       -------  ---------   --------  --------- 
     Net income                        $ 3,502  $   4,469   $  7,895  $   8,923 
                                       =======  =========   ========  ========= 

Net income per share                   $  0.05  $    0.07   $   0.12  $    0.13 

Weighted average shares                                                         
outstanding                             66,145     66,779     66,145     66,587 

The accompanying footnotes are an integral part of these financial statements.

Page 4

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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)

                                                                · Download Table

                                                             For the Six Months 
                                                               Ended June 30,   
                                                             -------------------
                                                               1996       1997  
                                                             --------  ---------
                                                                (in thousands)  
                                                                                
OPERATING ACTIVITIES:                                                           
  Net income                                                $  7,895   $  8,923 
  Adjustments to reconcile net income to net cash                               
    used in operating activities:                                               
       Depreciation and amortization                           1,341      2,134 
       Deferred income taxes                                  (1,451)    (1,042)
       Deferred income                                           115     (2,898)
       Changes in operating assets and liabilities:                             
          Receivables, net                                    20,934    (34,008)
          Inventories, net                                     3,886     (1,387)
          Royalty advances                                   (19,300)   (14,389)
          Due to related party, net                             (796)       309 
          Prepaid expenses and other current assets           (2,295)    (3,337)
          Accounts payable                                   (21,965)   (26,401)
          Accrued liabilities                                 (8,752)   (11,423)
          Royalties payable                                    2,079     (4,058)
          Income taxes payable                                  (306)      (288)
          Other                                                 (364)       353 
                                                            --------   -------- 
             Net cash used in operating activities           (18,979)   (87,512)
                                                            --------   -------- 

INVESTING ACTIVITIES:                                                           
  Purchase of One Stop                                            --       (846)
  Purchase of property and equipment                          (2,551)    (7,944)
  Purchases of investments                                    (2,794)       (38)
  Sales (purchases) of short-term investments, net              (142)     4,613 
  Proceeds from disposal of property and equipment                32         -- 
                                                            --------   -------- 
             Net cash used in investing activities            (5,455)    (4,215)
                                                            --------   -------- 

FINANCING ACTIVITIES:                                                           
  Proceeds from exercise of warrants and stock options            --      2,109 
  Long-term debt                                                  --     23,200 
  Long-term liabilities                                          724       (731)
                                                            --------   -------- 
             Net cash provided by financing activities           724     24,578 
                                                            --------   -------- 

Effect of exchange rates on cash and cash equivalents             --       (677)
Net decrease in cash and cash equivalents                    (23,710)   (67,149)
Cash and cash equivalents - beginning of year                 84,069     71,867 
                                                            --------   -------- 
Cash and cash equivalents - end of period                   $ 60,359   $  4,041 
                                                            ========   ======== 

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 fiscal year ended December 31,     
1996.                                                                           

NOTE 2 - Acquisitions                                                           

     In June 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 2.4 million shares of the Company's common stock, par 
value $.01 per share ("Common Stock").                                          

     In June 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 1.0 million shares of the         
Company's Common Stock.                                                         

     In July 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 3.5 million 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 ("Warner")for $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.  

      In January 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 publisher, for $.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.                                                                    

Page 6

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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,   June 30,
                                                      1996          1997  
                                                   -----------  ----------
                                                       (in thousands)     

                                                                          
Finished goods                                      $ 58,464      $58,342 
Raw materials                                          1,993        3,992 
                                                    --------      ------- 
                                                    $ 60,457      $62,334 
                                                    ========      ======= 

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 was amended on June 30, 1997 to increase the facility from $40 million
to a maximum of $65 million to be used for borrowings and letters of credit.    
Borrowing is limited to fifty percent of adjusted, as defined, consolidated     
accounts receivable, and is secured by these receivables. 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.                                                              

 At June 30, 1997, the Company had outstanding long-term debt of $23.2
million, representing borrowings under the Credit Agreement, and letters of     
credit amounting to $6.9 million.                                               

NOTE 5 - Supplemental Cash Flow Information                                     

                                                                · Download Table

                                                     For the Six Months   
                                                       Ended June 30,     
                                                   -----------------------
                                                      1996        1997    
                                                   -----------  ----------
                                                       (in thousands)     

                                                                          
Cash paid for income taxes                           $ 9,073      $ 8,118 
Cash paid for interest                                   119          352 

Page 7

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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.                                                    

The world-wide consumer software industry has undergone a number of 
profound changes with the introduction of new hardware platforms. The "next     
generation" of game systems are based on 32- and 64-bit microprocessors that    
incorporate dedicated graphics chipsets. The Company began shipping Doom for the
Sony PlayStation ("PlayStation") internationally in the first quarter of 1996.  
Domestically, shipments of Doom and Hexen for the Sega Saturn, and Tigershark   
for the PlayStation began shipping in the first quarter of 1997. Shipments of   
Hexen for the Nintendo 64 System ("N64") and PlayStation began shipping in the  
current quarter. As evidenced by the strong initial sales of these platforms,   
the Company believes that significant growth opportunities exist in both        
domestic and international markets and across a variety of next generation      
hardware platforms, including PlayStation, Sega Saturn, and N64, for which the  
Company is creating software products.                                          

In June 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 2.4       
million newly issued shares of the Company's common stock, par value $.01 per   
share ("Common Stock"). WizardWorks develops, publishes and distributes consumer
software for Windows, DOS and Macintosh formats.                                

     In June 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 1.0 million newly issued shares of the   
Company's Common Stock.                                                         

     In July 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 3.5 million newly issued shares of the Company's Common Stock.     

Page 8

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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 $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.                          

      In January 1997, the Company acquired all of the outstanding capital stock
of Premier Promotion Limited, the parent company of One Stop, a leading European
value software distributor and publisher, for $.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.            

     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       For the Six    
                                        Months              Months      
                                    Ended June 30,      Ended June 30,  
                                    ----------------   -----------------
                                     1996     1997      1996     1997   
                                    -------   ------   -------   ------ 

                                                                        
Net sales                            100.0 %  100.0 %   100.0 %  100.0 %
Cost of goods sold                    56.4     58.6      57.2     60.2  
Selling and distribution expenses     24.7     21.2      23.1     19.9  
General and administrative                                              
expenses                              10.3     11.6      10.1     11.5  
Amortization of goodwill               0.4      0.3       0.4      0.3  
                                    -------   ------   -------   ------ 
     Operating income                  8.2      8.3       9.2      8.1  
Interest  and other income, net        1.2     (0.5)      1.5     (0.3) 
                                    -------   ------   -------   ------ 
     Income before income taxes        9.4      7.8      10.7      7.8  
Provision for income taxes             4.6      3.4       5.2      3.3  
                                    -------   ------   -------   ------ 
     Net income                        4.8 %    4.4 %     5.5 %    4.5 %
                                    =======   ======   =======   ====== 

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Net sales for the three months and six months ended June 30, 1997   
increased approximately $29.2 million, or 40%, and $51.8 million, or 36%,       
respectively, as compared to the three and six months ended June 30, 1996. This 
growth in net sales for the three and six months ended June 30, 1997 was        
primarily attributable to the release of Hexen for N64 and the PlayStation,     
Mortal Kombat Trilogy for N64, the introduction of Blood, a newly published     
title, the continuing strong sales of Duke Nukem 3D and Quake and an increase in
royalty income. In addition, 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 contributed to the sales growth.           
Additionally, during the six months ended June 30, 1997, the Company released   
Doom and Hexen for Sega Saturn and Tigershark for PlayStation.                  

 Cost of goods sold primarily includes costs of purchased products and
royalties paid to software developers. Cost of goods sold for the three and six 
months ended June 30, 1997 increased approximately $18.7 million, or 45%, and   
$35.5 million, or 43%, respectively, as compared to the three and six months    
ended June 30, 1996. Cost of goods sold as a percentage of net sales for the    
three and six months increased to 58.6% and 60.2%, respectively, compared to    
56.4% and 57.2% during the three and six months ended June 30, 1997. The        
increases were primarily due to the increase in sales of lower margin N64 titles
and the decline in the average wholesale price of the Company's value priced    
products. The increase for the three months ended June 30, 1997, was partially  
offset by a shift in the Company's overall sales mix toward its published and   
value priced products which increased to approximately 63% of net revenue       
compared to approximately 52% during the prior period.                          

  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 $3.6      
million, or 19.8%, and $5.7 million, or 17.2%, during the three and six months  
ended June 30, 1997, respectively, compared to the comparable periods of the    
prior year. The increase is attributable to the overall increase in sales       
volume. Selling and distribution expenses as a percentage of net sales for the  
three and six months ended June 30, 1997 decreased to 21.2% and 19.9%,          
respectively, compared to 24.7% and 23.1% during the three and six months ended 
June 30, 1996, respectively, due to the Company realizing greater economies of  
scale.                                                                          

     General and administrative expenses primarily include personnel expenses,
facilities costs, professional expenses and other overhead charges. These       
expenses for the three and six months ended June 30, 1997 increased             
approximately $4.3 million, or 57.5%, and $7.9 million, or 53.7%, respectively, 
as compared to the three and six months ended June 30, 1996. The increase was   
due primarily to additional personnel required to support the expansion of the  
Company's research and development and publishing operations. General and       
administrative expenses as a percentage of net sales for the three and six      
months ended June 30, 1997 increased to 11.6% and 11.5%, respectively, from     
10.3% and 10.1% for the three and six months ended June 30, 1996, respectively. 

   Interest and other income, net decreased approximately $1.5 million and
$2.6 million for the three and six months ended June 30, 1997, respectively, as 
compared to the comparable periods of the prior year. This is primarily         
attributable to the decrease in short-term investments and cash balances and the
interest costs associated with borrowings under the Revolving Credit Agreement  
(the "Credit Agreement").                                                       

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Liquidity and Capital Resources                                                 

 Resources used to finance significant expenditures for the six months
ended June 30, 1997 and 1996 are reflected in the following table:              

                                                                · Download Table

                                                     Six Months Ended June 30,
                                                     -------------------------
                                                         1996       1997      
                                                        ------     ------     
                                                          (in millions)       
                                                                              
Resources used:                                                               
   Payables and accrued liabilities                     $(28.9)    $(42.2)    
   Receivables, net                                       20.9      (34.0)    
   Inventories, net                                        3.9       (1.4)    
   Purchase of One Stop                                     --       (0.8)    
   Purchase of property and equipment                     (2.6)      (7.9)    
   Royalty advances                                      (19.3)     (14.4)    
   Other, net                                             (5.5)      (3.1)    
                                                        ------     ------     
                                                         (31.5)    (103.8)    
                                                        ------     ------     

Financed by:                                                                  
  Net income                                               7.9        8.9     
  Long-term debt                                            --       23.2     
  Sales (purchases) of short-term investments, net        (0.1)       4.6     
                                                        ------     ------     
                                                           7.8       36.7     
                                                        ------     ------     
    Cash and cash equivalents balance decrease          $(23.7)    $(67.1)    
                                                        ======     ======     

  As of June 30, 1997, the Company's working capital increased to $138.2
million compared to $113.7 million at December 31, 1996. Cash and cash          
equivalents decreased for the six months ended June 30, 1997 by approximately   
$67.1 million. The primary sources of cash during the six months ended June 30, 
1997 were bank borrowings of $23.2 million under the Credit Agreement and net   
income of $8.9 million. These externally and internally generated funds were    
primarily used to fund payables and accrued liabilities (which includes accounts
payable, royalties payable, income taxes payable and accrued liabilities) of    
$42.2 million, receivables of $34.0 million, property and equipment of $7.9     
million and royalty advances of $14.4 million. The decrease in payables is      
primarily attributable to payment of the seasonally high balance of December 31,
1996, the shift in sales toward published titles versus third party products,   
which on average have higher costs than published products and that Nintendo,   
Sega and Sony products require cash payments on most purchases. The Company     
utilizes its Credit Agreement to fund these purchases when required. The        
receivable balance increase reflected higher sales at the end of the quarter.   
The increase in property and equipment is primarily due to the investment in    
computer hardware and software to support the Company's growth. Royalty advances
of $83.6 million as of June 30, 1997 represent advances to approximately 110    
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.                                                                     

   On January 21, 1997, the Company entered into the Credit Agreement with
banks expiring on December 31, 1998. The Credit Agreement was amended on June   
30, 1997 to increase the facility from $40 million to a maximum of $65 million  
to be used for borrowings and letters of credit. At June 30, 1997, the Company  
had outstanding, under the Credit Agreement, long-term debt and letters of      
credit issued of approximately $23.2 million and $6.9 million, respectively.    

General Atlantic Partners II, L.P., an affiliate of various General 
Atlantic Partners entities which are stockholders of the Company, exercised its 
warrants to purchase an aggregate of 504,000 shares of Common Stock on May 2,   
1997 for approximately $2.1 million in cash.                                    

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

    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.                    

On June 18, 1997, the Company entered into an Agreement and Plan of 
Reorganization (the "Agreement") with SingleTrac Entertainment Technologies,    
Inc. ("SingleTrac"), pursuant to which the Company agreed to acquire all the    
capital stock of SingleTrac for an aggregate purchase price of $16 million. The 
Agreement allows for up to approximately $5 million of the purchase price to be 
in cash and the balance in Common Stock of the Company. The Company anticipates 
that the acquisition will be completed in the fourth quarter, at which time it  
is expected that the Company will take a one time charge of $10 to $12 million  
for the write off of purchased in process research and development costs.       
Additionally, pursuant to the Agreement the Company has structured a one time   
retention oriented bonus pool of up to approximately $10 million in cash and    
Common Stock of the Company, which will be distributed to SingleTrac employees  
based on the achievement of certain performance goals of SingleTrac over the    
succeeding two years.                                                           

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Part II - Other Information                                                     

Item 2.  Changes in Securities                                                  

      There were no sales of unregistered securities by the Company during
the quarter ended June 30, 1997, except the issuance of an aggregate of 504,000 
shares of Common Stock to General Atlantic Partners II, L.P., upon the exercise 
on May 2, 1997 of certain of its warrants at an aggregate exercise price of     
$2,101,680. Such issuance was made in reliance upon Section 4(2) of the         
Securities Act of 1933, as amended.                                             

Item 4.  Submission of Matters to a Vote of Security Holders                    

(a)      The Company held its Annual Meeting of Stockholders on June 10, 1997.  

(b)      The directors elected at the meeting were:                             

                                                                · Download Table

                         For          Withheld        Non-Votes
                         ---          --------        ---------

                                                               
Jack J. Cayre         57,671,071       202,063          9,000  

Steven A. Denning     57,675,921       197,213          9,000  

Alvin N. Teller       57,675,921       197,213          9,000  

   Other directors whose terms of office continued after the meeting
    are as follows: Joseph J. Cayre, Stanley Cayre, Kenneth Cayre, Ron
Chaimowitz, William E. Ford and Jordan A. Levy.               

(c)      Other matters voted upon at the meeting and the results of those votes 
are as follows:                                               

                                                        · Enlarge/Download Table

                                                For      Against   Abstain  Non-Votes
                                                ---      -------   -------  ---------

                                                                                     
Approval of the Company's 1997 Stock        49,300,240  1,525,339  135,298  6,921,257
Incentive Plan                                                                       

Ratification of Arthur Andersen LLP as the  57,740,016    129,108   13,010      0    
Company's independent auditors                                                       

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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. 333-14441)).

10.1                  Amendment, dated as of June 30, 1997, to the Credit       
                     Agreement, dated as of January 21, 1997, by and among the
                    Company, the banks parties thereto and Republic National
Bank of New York, as Agent.         

10.2                  Employment Agreement between the Company and David        
Chemerow.                           

10.3                  The 1997 Stock Incentive Plan.                            

27.1                  Financial Data Schedule.                                  

(b)   Reports on Form 8-K                                                       

     No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 1997.                                          

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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, President
        and Director
                 Date: August 14, 1997

    By:      /s/ ANDREW GREGOR
                                ------------------------------------
         Andrew Gregor
                              Chief Financial Officer and Senior
                       Vice President, Finance and
          Administration
                 Date: August 14, 1997

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EXHIBIT INDEX   

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. 333-14441)).

10.1                  Amendment, date as of June 30, 1997, to the Credit        
                     Agreement, dated as of January 21, 1997, by and among the
                    Company, the banks parties thereto and Republic National
Bank of New York, as Agent.         

10.2                  Employment Agreement between the Company and David        
Chemerow.                           

10.3                  The 1997 Stock Incentive Plan.                            

27.1                  Financial Data Schedule.

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Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This 10-Q Filing	Date	First	Last	Other Filings

	12/31/95	14	16
	6/30/96	2	11	10-Q
	10/18/96	14	16	S-1
	12/31/96	6	11	10-K
	1/21/97	7	16
	5/2/97	11	13
	6/10/97	13		DEF 14A
	6/18/97	12
For The Period Ended	6/30/97	1	16
	8/1/97	1
Filed On / Filed As Of	8/14/97	15
	8/19/97
	12/31/98	7	11	10-Q

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Atari Inc · 10-Q · For 6/30/97

Filed On 8/14/97 · SEC File 0-27338 · Accession Number 950123-97-6949

Quarterly Report · Form 10-QFiling Table of Contents

10-Q · Quarterly ReportDocument Table of Contents

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