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Atari Inc – ‘10-Q’ for 9/30/96

As of: Thursday, 11/14/96 · For: 9/30/96 · Accession #: 950123-96-6646 · File #: 0-27338

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/14/96  Atari Inc                         10-Q        9/30/96    3:77K                                    RR Donnelley/FA

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      14     65K 
 2: EX-10.1     Lease Agreement                                       16     56K 
 3: EX-27.1     Financial Data Schedule                                1      6K

10-Q — Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Exhibits and Reports on Form 8-K Management's Discussion and Analysis of Financial Condition and Results of Operations
1	1st Page - Filing Submission
2	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
12	Item 6. Exhibits and Reports on Form 8-K

10-Q 1st Page of 14 TOC ↑Top Previous Next ↓Bottom Just 1st
 
================================================================================

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 September 30, 1996   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 November 1, 1996, there were 66,304,499 shares of the registrant's
Common Stock outstanding.                                                       

Page __ of ___

 Exhibit index begins on page ____

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 GT INTERACTIVE SOFTWARE CORP.
1996 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, 1995 (audited) 
          and September 30, 1996                                             3

Consolidated Statements of Income for the three months and    
the nine months ended September 30, 1995 and 1996         
                                                                             4

 Consolidated Statements of Cash Flows for the nine months ended
September 30, 1995 and 1996                               
                                                                             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                                   12 

Signatures                                                                   13 

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

GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS

                                                        [Enlarge/Download Table]


                                                          December 31,   September 30,
                                                              1995           1996     
                                                            --------       --------   
                                                           (audited)      (unaudited) 
                                                               (in thousands)         
                                                                                      
ASSETS                                                                                
Current assets:                                                                       
  Cash and cash equivalents                                 $ 84,069       $ 16,016   
  Short-term investments                                       9,625          4,895   
  Receivables, net                                            84,810         95,594   
  Inventories, net                                            49,145         63,057   
  Royalty advances                                            29,577         57,357   
  Deferred income taxes                                       14,014         13,543   
  Prepaid expenses and other current assets                    1,996          7,079   
                                                            --------       --------   
     Total current assets                                    273,236        257,541   
Property and equipment, net                                    6,087          8,079   
Goodwill, net                                                 21,286         20,466   
Investments                                                       --          9,521   
Other assets                                                   1,032          2,119   
                                                            --------       --------   
     Total assets                                           $301,641       $297,726   
                                                            ========       ========   

LIABILITIES AND STOCKHOLDERS' EQUITY                                                  
Current liabilities:                                                                  
  Accounts payable                                          $ 87,518       $ 68,655   
  Accrued liabilities                                         45,306         40,179   
  Royalties payable                                           23,509         29,354   
  Deferred income                                              4,091          5,481   
  Income taxes payable                                         4,696          4,673   
  Current portion of long-term liabilities                     1,413          1,324   
  Due to related party                                           955            245   
                                                            --------       --------   
     Total current liabilities                               167,488        149,911   
Other long-term liabilities                                    8,113          5,332   
                                                            --------       --------   
     Total liabilities                                       175,601        155,243   
                                                            --------       --------   

Commitments and contingencies                                                         

Stockholders' equity:                                                                 
  Common stock, $.01 par, 150,000,000 shares authorized,                              
     66,304,499 shares issued and outstanding                    661            663   
  Additional paid-in capital                                 117,919        117,811   
  Retained earnings                                            7,460         24,009   
                                                            --------       --------   
     Total stockholders' equity                              126,040        142,483   
                                                            --------       --------   

     Total liabilities and stockholders' equity             $301,641       $297,726   
                                                            ========       ========   

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 OPERATION

                                                        [Enlarge/Download Table]

                                                 For the Three Months              For The Nine Months   
                                                 Ended September 30,               Ended September 30,   
                                              -------------------------         -------------------------
                                                1995             1996             1995             1996  
                                              --------         --------         --------         --------
                                                                      (unaudited)                        
                                                           (in thousands, except per share data)         
                                                                                                         
Net sales                                     $ 63,755         $ 86,192         $130,401         $230,475
Cost of goods sold                              41,093           47,684           77,832          130,232
Selling and distribution expenses               10,438           17,769           23,542           51,063
General and administrative expenses              5,695            7,432           13,876           21,089
Merger costs                                        --            1,120               --            2,694
                                              --------         --------         --------         --------
     Operating income                            6,529           12,187           15,151           25,397
Interest and other income, net                     281              575              535            2,827
                                              --------         --------         --------         --------
     Income before income taxes                  6,810           12,762           15,686           28,224
Provision for income taxes                       3,053            4,032            3,316           11,599
                                              --------         --------         --------         --------
     Net income                               $  3,757         $  8,730         $ 12,370         $ 16,625
                                              ========         ========         ========         ========

Pro forma adjustment to income tax provision                                      4,569                  
                                                                                -------                  

Pro forma net income                                                            $ 7,801                  
                                                                                =======                  

Net income per share                                           $   0.13                           $  0.24

Weighted average shares outstanding                              69,217                            68,903


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

                                                        [Enlarge/Download Table]

                                                                               Nine Months Ended      
                                                                                 September 30,        
                                                                         ---------------------------- 
                                                                           1995                1996   
                                                                         --------            -------- 
                                                                                  (unaudited)         
                                                                                 (in thousands)       
                                                                                                      
OPERATING ACTIVITIES:                                                                                 
  Net income                                                             $ 12,370            $ 16,625 
  Adjustments to reconcile net income to net                                                          
     cash provided by operating activities:                                                           
       Depreciation and amortization                                          986               2,089 
       Deferred income taxes                                               (8,910)                471 
       Deferred income                                                      1,492              (1,119)
       Changes in operating assets and liabilities:                                                   
          Receivables, net                                                (22,481)            (10,784)
          Inventories, net                                                (12,549)            (13,912)
          Royalty advances                                                (12,390)            (27,780)
          Due to related party, net                                        (1,460)               (710)
          Prepaid expenses and other current assets                          (929)             (5,083)
          Accounts payable                                                 27,700             (18,862)
          Accrued liabilities                                              11,220              (5,126)
          Royalties payable                                                   974               5,844 
          Income taxes payable                                              4,462               1,173 
          Other                                                              (176)               (904)
                                                                         --------            -------- 
             Net cash provided by (used in) operating activities              309             (58,078)
                                                                         --------            -------- 

INVESTING ACTIVITIES:                                                                                 
  Purchases of investments                                                     --              (9,521)
  Purchase of property and equipment                                       (4,334)             (3,518)
  Purchases of short-term investments, net                                     --               4,730 
  Purchases of Slash Corporation, net of cash acquired of approximately                               
    $516,000                                                                  218                  -- 
                                                                         --------            -------- 
             Net cash used in investing activities                         (4,116)             (8,309)
                                                                         --------            -------- 

FINANCING ACTIVITIES:                                                                                 
  Repurchase of warrants                                                       --              (1,935)
  Proceeds from exercise of stock options                                      --                 632 
  Issuance of preferred stock and warrants                                 15,015                  -- 
  Proceeds from issuance of note to a related party                        15,056                  -- 
  Repayment of notes                                                      (10,471)                 -- 
  Distributions to stockholders                                            (6,000)                 -- 
  Long-term liabilities                                                      (779)               (363)
                                                                         --------            -------- 
             Net cash provided by (used in) financing activities           12,821              (1,666)
                                                                         --------            -------- 

 Net increase (decrease) in cash and cash equivalents                       9,014             (68,053)
Cash and cash equivalents - beginning of year                               4,496              84,069 
                                                                         --------            -------- 
Cash and cash equivalents - end of period                                $ 13,510            $ 16,016 
                                                                         ========            ======== 

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,     
1995.                                                                           

Net Income Per Share For The Three and Nine Months Ended September 30, 1996     

 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.                                                                         

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 on January 1, 1994.                                                    

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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,   September 30,
                                   1995           1996      
                                 -------         -------    
                                     (in thousands)         
                                                            
Finished goods                   $52,144         $67,197    
Raw materials                      4,067           3,179    
                                 -------         -------    
                                  56,211          70,376    
Less: reserve for obsolescence     7,066           7,319    
                                 -------         -------    
                                 $49,145         $63,057    
                                 =======         =======    

NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION                                     

                                                                [Download Table]

                                                           For the Nine Months  
                                                           Ended September 30,  
                                                         -----------------------
                                                           1995           1996  
                                                         -------         -------
                                                             (in thousands)     
                                                                                
Issuance of Common Stock in connection with the                                 
  acquisition of Slash Corporation                       $20,000         $    --
Cash paid for income taxes                                 7,242           9,360
Cash paid for interest                                       442             660


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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 7-10 of the Annual Report on Form 10-K for the fiscal year ended       
December 31, 1995 and the risk factors set forth on pages 6-12 of the           
Registration Statement on Form S-1 (Registration No. 333-14441) filed October   
18, 1996, as amended.                                                           

OVERVIEW                                                                        

    The Company creates, publishes and merchandises 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.                                                    

     Through February 28, 1995, the Company was an S corporation for Federal and
New York state income tax purposes. The income tax provision for the nine months
ended September 30, 1995 includes a deferred tax benefit of approximately $3.5  
million due to the Company's change in tax status.                              

On June 23, 1995, the Company acquired all of the outstanding stock of
Slash Corporation ("Slash"), a leading publisher, purchaser, repackager and     
distributor of value-priced software in exchange for 2,793,000 newly issued     
shares of the Company's Common stock and a nominal amount of cash. Historically,
Slash purchased excess inventory from major publishers and sublicensed catalog  
titles. It sold these products at lower price points or repackaged these and    
other products into compilation boxes, such as five-packs and ten-packs, for    
volume sales primarily to mass merchants. Slash's sales of purchased excess     
inventory have traditionally occurred at lower margins than its sales of        
sublicensed catalog products. The Company's value-priced software business      
primarily consists of sublicensed catalog titles which are sold largely to mass 
merchant customers. Slash's financial results have been included in the         
Company's Consolidated Financial Statements on a purchase basis for the period  
since the acquisition.                                                          

On June 24, 1996, the Company acquired all of the outstanding stock of
WizardWorks Group, Inc. ("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, Inc. ("FormGen"), a leading         
publisher of interactive personal computer ("PC") shareware and software in     
exchange for 1,032,777 newly issued shares of the Company's Common Stock.       

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   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 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.                                              

   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:                    

                                                        [Enlarge/Download Table]


                                              For the Three                       For the Nine            
                                              Months Ended                        Months Ended            
                                              September 30,                       September 30,           
                                     -------------------------------     -------------------------------- 
                                         1995               1996            1995                1996      
                                     -------------       -----------     ------------        -----------  
                                                                                                          
Net sales                                   100.0  %          100.0  %         100.0  %           100.0  %
Cost of goods sold                           64.5              55.3             59.7               56.5   
Selling and distribution expenses            16.4              20.6             18.1               22.2   
General and administrative expenses           8.9               8.6             10.6                9.2   
Merger costs                                   --               1.3               --                1.2   
                                     ------------       -----------     ------------        -----------   
Operating income                             10.2              14.1             11.6               11.0   
Interest  and other income, net                .5                .7               .4                1.2   
                                     ------------       -----------     ------------        -----------   
Income before income taxes                   10.7              14.8             12.0               12.2   
Provision for income taxes                    4.8               4.7              2.5                5.0   
                                     ------------       -----------     ------------        -----------   
Net income                                    5.9  %           10.1  %           9.5  %             7.2  %
                                     ============       ===========     ============        ===========   

 Net sales for the three months and nine months ended September 30, 1996
increased approximately $22.4 million or 35% and $100.1 million or 77% ,        
respectively, as compared to the three and nine months ended September 30, 1995.
In the third quarter of 1995, Microsoft(R) Windows(R) 95 was introduced. This   
one time event added net sales of approximately $13.2 million; without these    
sales, net sales for the three and nine months ended September 30, 1996 would   
have increased 71% and 97%, respectively. This growth in net sales for the three
months ended September 30, 1996 was primarily attributable to the introduction  
of newly published titles such as Quake (full version in Europe, shareware      
version in North America), Area 51, Final Doom for the Sony PlayStation, Bedlam,
"9" and Just Me & My Mom, the continuing strong sales of Doom and Doom-related  
products and Duke Nukem 3D and increased royalty income. During the nine months 
ended September 30, 1996, the growth in net sales was attributable to such      
releases as well as the initial release of Duke Nukem 3D, Heretic: Shadow of the
Serpent Rider and Just Me & My Dad. Additionally, the expansion of the Company's
value-priced line of software, an increase in the shelf space available from its
existing mass merchant customers, an increase in the number of mass merchant    
stores supplied and serviced by the Company and an increase in sales from its   
existing mass merchant shelf space contributed to the growth in net sales during
the nine month period. The purchase of Slash by the Company effective June 23,  
1995 and the increase in the distribution of third party software also          
contributed to the growth in net sales during such period.                      

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Cost of goods sold primarily includes costs of purchased products and 
royalties paid to software developers. Cost of goods sold for the three and nine
months ended September 30, 1996 increased approximately $6.6 million or 16% and 
$52.4 million or 67%, respectively, as compared to the three and nine months    
ended September 30, 1995. Cost of goods sold as a percentage of net sales for   
the three and nine months ended September 30, 1996 decreased to 55.3% and 56.5%,
respectively, compared to 64.5% and 59.7% during the three and nine months ended
September 30, 1995. This decrease was primarily due to a change in product mix  
toward the Company's higher margin published products, which increased to       
approximately 63% and 57% of net sales during the three and nine months ended   
September 30, 1996, respectively, as compared to approximately 48% and 47%      
during the three and nine months ended September 30, 1995.                      

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 $7.3      
million or 70% and $27.5 million or 117% during the three and nine months ended 
September 30, 1996, respectively, compared to the comparable periods of the     
prior year. The increase was due to the additional advertising costs of         
approximately $1.3 million and $6.9 million for the three and nine months ended 
September 30, 1996, respectively, to support the growth of the Company's        
published products and an increase in shipping costs of approximately $.8       
million and $3.6 million for the three and nine months ended September 30, 1996,
respectively, attributable to the overall increase in sales volume. In addition,
costs associated with the expansion of the Company's sales and distribution     
staff and distribution center increased approximately $4.8 million and $11.5    
million for the three and nine months ended September 30, 1996, respectively, to
support its growth. Selling and distribution expenses as a percentage of net    
sales for the three and nine months ended September 30, 1996 increased to 20.6% 
and 22.2%, respectively, compared to 16.4% and 18.1% for the three and nine     
months ended September 30, 1995, respectively.                                  

   General and administrative expenses primarily include personnel expenses,
facilities costs, professional expenses and other overhead charges. These       
expenses for the three and nine months ended September 30, 1996 increased       
approximately $1.7 million or 31% and $7.2 million or 52%, respectively, as     
compared to the three and nine months ended September 30, 1995. The increase was
due primarily to the expansion of the Company's operations. General and         
administrative expenses as a percentage of net sales for the three and nine     
months ended September 30, 1996 decreased to 8.6% and 9.2%, respectively, from  
8.9% and 10.6% for the three and nine months ended September 30, 1995,          
respectively, due to certain economies of scale.                                

Merger costs consist of legal, accounting and other professional fees 
incurred by the Company to complete the acquisitions of WizardWorks, FormGen and
Humongous.                                                                      

     Operating income and operating margins for the three months ended September
30, 1996 increased from approximately $6.5 million and 10.2% to $12.2 million   
and 14.1%. For the nine months ended September 30, 1996 operating income        
increased from approximately $15.2 million to approximately $25.4 million, while
operating margins remained relatively consistent. Excluding merger costs,       
operating income and operating margins would have been approximately $13.3      
million and 15.4% and $28.1 million and 12.2%, respectively, for the three and  
nine months ended September 30, 1996.                                           

     Interest and other income, net increased approximately $.3 million and $2.3
million for the three and nine months ended September 30, 1996, respectively, as
compared to the comparable periods of the prior year. This is primarily         
attributable to greater short-term investments and cash balances.               

The Company's provision for income taxes for the three and nine months
ended September 30, 1996 includes the reversal of a valuation allowance relating
to a net operating loss carry-forward of one of the Acquired Companies.         
Additionally, had the Company been a C Corporation for the entire nine months   
ended September 30, 1995, the Company's provision for income taxes would have   
been approximately $7.9 million and 6.0% of net sales for the period.           

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   Net income and net income as a percentage of net sales, on a tax adjusted
basis, for the three and the nine months ended September 30, 1996 increased from
$3.8 million and 5.9% and $7.8 million and 6.0%, respectively, to $8.7 million  
and 10.1% and $16.6 million and 7.2%. Excluding merger costs after taxes, net   
income and net income as a percentage of net sales, on a pro forma basis, would 
have been $9.4 million and 10.9% and $18.2 million and 7.9%, respectively, for  
the three and nine months ended September 30, 1996.                             

LIQUIDITY AND CAPITAL RESOURCES                                                 

As of September 30, 1996, the Company's principal sources of liquidity
included cash and short-term investments of approximately $20.9 million. Cash   
used for the nine months ended September 30, 1996 amounted to approximately     
$68.1 million as compared to cash provided of approximately $9.0 million for    
the nine months ended September 30, 1995. This decrease in cash and short-term  
investments during the nine months ended September 30, 1996 was used to fund    
royalty advances of $33.1 million, investments of $9.5 million, property and    
equipment of $3.5 million and the repurchase of warrants for $1.9 million, with 
the remainder, net of cash generated from operations, used for working capital  
requirements to support the Company's growth.  Working capital, funded by       
available cash and internally generated funds, grew  during the period ended    
September 30, 1996 to approximately $107.6 million. Accounts receivable         
approached seasonally high levels with sales in the third quarter of 1996       
occurring late in the quarter, while sales in the comparable quarter of the     
prior year occurred earlier in the quarter, resulting in earlier collections.   
Inventory increased $ 31.8 million during the period ended September 30, 1996   
as compared to the comparable period of the prior year primarily to fund the    
rapid sales growth. When adjusting for the one time introduction of             
Microsoft(R) Windows(R) 95 in the third quarter of 1995, net sales for the      
third quarter of 1996 increased approximately 71% when compared to the third    
quarter of 1995 and inventory increased accordingly. Royalty advances of $57.4  
million as of September 30, 1996 represents advances to over 90 developers for  
various products which are expected to be developed through the year 2001. 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. Accounts        
payable at September 30, 1996 was only 5% higher than accounts payable at       
September 30, 1995.                                                             

  The Company believes that existing cash, cash equivalents and short-term
investments together with cash expected to be generated from operations, 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:                        

                                                                [Download Table]


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 20,
               1995, and all amendments thereto (Registration No. 33-98448)).   

10.1           Lease Agreement between the Company and Plymouth 2200, LLP, dated
               September 6, 1996.                                               

27.1           Financial Data Schedule.                                         


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

(b)   Reports on Form 8-K                                                       

  A report on Form 8-K, dated July 10, 1996, was filed with the Securities
and Exchange Commission (the "Commission") on July 15, 1996 announcing the      
acquisition of Humongous Entertainment, Inc. in a stock-for-stock merger        
pursuant to the Agreement and Plan of Reorganization.                           

     A report on Form 8-K, dated June 24, 1996, was filed with the Commission on
July 9, 1996 announcing the acquisition of WizardWorks Group, Inc. and Candel   
Inc. in stock-for-stock mergers pursuant to the respective Agreements and Plans 
of Reorganization. The audited combined financial statements of WizardWorks as  
of March 31, 1996 and 1995 were filed therewith.                                

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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:  November 14, 1996

       By:  /s/    ANDREW GREGOR
                      --------------------------------
   Andrew Gregor
                        Chief Financial Officer and Senior
                 Vice President, Finance and
    Administration
              Date:  November 14, 1996

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Exhibits

                                                                [Download Table]


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 20, 1995, and all amendments                
               thereto (Registration No. 33-98448)).                        

10.1           Lease Agreement between the Company and                      
               Plymouth 2200, LLP, dated September 6, 1996.                 

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

Filed on:	11/14/96	13
	11/1/96	1
	10/18/96	8		S-1
For Period End:	9/30/96	1	11
	9/6/96	12	14
	7/15/96	12		8-K
	7/10/96	12		8-K
	7/9/96	6	12	8-K
	6/28/96	6	8
	6/24/96	6	12	8-K
	3/31/96	12
	12/31/95	2	14
	10/20/95	12	14
	9/30/95	2	11
	6/23/95	8	9
	3/31/95	12
	2/28/95	8
	1/1/94	6
				List all Filings

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Filing Submission 0000950123-96-006646 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Atari Inc – ‘10-Q’ for 9/30/96

As of: Thursday, 11/14/96 · For: 9/30/96 · Accession #: 950123-96-6646 · File #: 0-27338

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